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XL Capital Ltd Reports Third Quarter 2002 Results


Net Operating Income $221.0 million, per share $1.61 Net Income $184.0 million, per share $1.34

HAMILTON, BERMUDA, October 30, 2002 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported net income available to ordinary shareholders for the quarter ended September 30, 2002 of $184.0 million, or income of $1.34 per share, compared with a net loss of $840.0 million, or a loss of $6.70 per share, in the third quarter of 2001. Net operating income for the third quarter of 2002 was $221.0 million, or $1.61 per share, compared with a net operating loss of $761.8 million, or a loss of $6.07 per share, for the quarter ended September 30, 2001. The Company's results in 2001 were severely impacted by losses related to the events of September 11, 2001.

Commenting on the third quarter 2002 results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated: "Our insurance and reinsurance businesses have enjoyed a robust third quarter, with significant rate increases and new business contributing to strong underwriting results in the quarter. I am particularly pleased with our general operations combined ratio of 91.0% in the quarter."

"However, while the managers of our investment affiliates generally outperformed their benchmarks and the overall investment markets in the third quarter, their absolute performance resulted in a small loss when compared to their strong performance a year ago," Mr. O'Hara added.

Mr. O'Hara further stated: "As we look ahead, I am confident that the property and casualty markets will remain hard for some time. XL is well positioned to capitalize on the long overdue price increases and improvements in terms and conditions currently being achieved in virtually all lines of business."

For the nine months ended September 30, 2002, net income available to ordinary shareholders was $181.8 million, or income of $1.32 per share, compared with a net loss of $492.5 million, or a loss of $3.93 per share, during the same period in 2001. Net operating income for the first nine months of 2002 was $456.4 million, or $3.32 per share, compared with a net operating loss of $445.0 million, or $3.55 per share, for the nine months ended September 30, 2001.

 Summary unaudited consolidated financial data for the three and 
nine months ended September 30, for each of 2002 and 2001, 
respectively, is set forth below (in millions except per share 
amounts):

                            Three months ended       Nine months ended
                               September 30            September 30
                                (Unaudited)            (Unaudited)

                                2002       2001          2002      2001
Gross premiums written       $2,655.5   $1,193.3      $7,052.6  $3,350.0
Net premiums written          2,123.9      537.0       5,475.6   2,098.4
Net premiums earned           2,162.3      751.5       4,313.1   1,934.7
                                
Net income (loss)               186.4     (840.0)        184.2    (492.5)
Preference dividend               2.4         --           2.4        --
Net income (loss) available to     
   ordinary shareholders.       
                                184.0     (840.0)        181.8    (492.5)
                                
Net operating income (loss) (a) 221.0     (761.8)        456.4    (445.0)
                                
Per share results:                              
Net income (loss) available
to ordinary shareholders  (b).  $1.34    $ (6.70)         $1.32   $(3.93) 
Net operating income 
(loss) (a) (b)                   1.61      (6.07)          3.32    (3.55) 
                                
Weighted average ordinary shares 
  outstanding :                         
Basic                           135.8     125.4           135.6    125.4
Diluted                         137.3     127.8           137.3    127.4

Notes: (a) Net operating income is net income available to ordinary 
shareholders, excluding net realized gains and losses on investments, 
net realized and unrealized gains and losses on derivatives, net of 
tax, and one-time charges related to the integration of Winterthur 
International in 2001.

(b) Average stock options outstanding have been excluded where 
anti-dilutive to earnings per share. Consequently, where there is a 
net loss, basic weighted average ordinary shares outstanding 
represents diluted weighted average ordinary shares outstanding. 

Results for all periods subsequent to July 1, 2001 include the results of Winterthur International, which was acquired with effect from July 1, 2001. The results also include the consolidation of Le Mans Ré, which is accounted for as a subsidiary with effect from January 1, 2002. In the quarter and nine months ended September 30, 2001, the Company's share of the net income of Le Mans Ré was included in equity in net income of insurance and operating affiliates.

Total assets as of September 30, 2002 were $34.1 billion compared with $28.0 billion as of December 31, 2001. Fully diluted book value per ordinary share as at September 30, 2002 increased to $42.10 compared with $40.35 as at December 31, 2001.

Gross premiums written for general and life operations in the third quarter of 2002 were $2.7 billion compared with $1.2 billion in the third quarter of 2001. Net premiums written increased to $2.1 billion from $537.0 million and net earned premiums rose to $2.2 billion from $751.5 million in the respective quarters of 2002 and 2001.

For the nine months ended September 30, 2002, gross premiums written were $7.1 billion compared with $3.4 billion in the year ago period. Net premiums written for the first nine months of 2002 were $5.5 billion compared with $2.1 billion a year ago. Net earned premiums were $4.3 billion for the first nine months of 2002 compared with $1.9 billion in the first nine months of 2001.

Net investment income from general operations was $161.1 million in the third quarter of 2002, compared with $152.2 million in 2001's third quarter. Net investment income from general operations was $474.6 million in the first nine months of 2002, compared with $446.5 million in 2001's first nine months.

Net investment income from life operations was $26.2 million in the third quarter of 2002 and $58.6 million for the nine months of 2002. In 2001, there was no investment income from life operations.

The Company's equity in the net losses of its investment affiliates for the third quarter of 2002 was $2.0 million versus income of $20.8 million in the third quarter of 2001. The Company's equity in the net income of its investment affiliates for the first nine months of 2002 was $38.1 million versus $64.3 million in the first nine months of 2001.

The Company's equity in net losses of its insurance and operating affiliates was $0.4 million in the third quarter of 2002 versus net losses of $13.5 million in the third quarter of 2001. The Company's equity in the net income of its insurance and other operating affiliates was $0.04 million for the first nine months of 2002 versus $0.8 million in the first nine months of 2001.

The combined ratio for the Company's general operations was 91.0% in the third quarter of 2002 compared with 233.3% in the third quarter of 2001. The loss ratios were 61.8% and 195.4% in the third quarters of 2002 and 2001, respectively, with corresponding expense ratios of 29.2% and 37.9% for the same quarters, respectively. The combined ratio for the Company's general operations was 97.1% in the first nine months of 2002 compared with 145.2% in the first nine months of 2001. The loss ratios were 67.9% and 111.0% in the first nine months of 2002 and 2001, respectively, with corresponding expense ratios of 29.2% and 34.2% for the same periods.

A live on-line webcast of XL's call with analysts and investors to review the third quarter 2002 results will be held at 10:00 a.m. Eastern Time on Thursday, October 31, 2002 at www.xlgroup.com. An unaudited financial information supplement relating to the Company's 2002 and 2001 quarterly and year-to-date results is available on its website: www.xlgroup.com.

XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products and services to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis.

This press release contains forward-looking statements that involve inherent risks and uncertainties. Statements that are not historical facts, including statements about XL's beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates, and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) rate increases and improvements in terms and conditions may not be as large or sustainable as XL is currently projecting; (b) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than XL's underwriting, reserving or investment practices anticipate based on historical experience or industry data; (c) developments in the world's financial and capital markets which adversely affect the performance of XL's investments and XL's access to such markets; (d) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; and (e) the other factors set forth in XL's most recent report on Form 10-K, Form 10-Q and XL's other documents on file with the Securities and Exchange Commission. XL undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

#    #    #
                              XL Capital Ltd
                   SUMMARY CONSOLIDATED FINANCIAL DATA
                (In thousands, except per share amounts)

                          Three Months Ended           Nine Months Ended
                             September 30                September 30
                              (Unaudited)                  (Unaudited)
                          2002          2001          2002          2001
    Income Statement Data:

    Revenues:
    Gross premiums
     written           $ 2,655,474   $ 1,193,317  $ 7,052,621   $ 3,350,009
    Net premiums
     written             2,123,875       536,972    5,475,602     2,098,378

    Net premiums
     earned - general
     operations        $ 1,375,935     $ 705,277  $ 3,477,048   $ 1,888,415
    Net premiums
     earned - life
     operations            786,383        46,247      836,073        46,247
    Net investment
     income - general
     operations            161,052       152,231      474,579       446,495
    Net investment
     income - life
     operations             26,263            --       58,606            --
    Net realized (losses)
     gains on
     investments          (23,086)      (56,081)    (239,108)      (29,644)
    Net realized and
     unrealized losses
     on derivative
     instruments           (8,898)       (8,554)     (28,811)       (5,892)
    Equity in net (loss)
     income of investment
     affiliates            (1,976)        20,776       38,140        64,346
    Fee and other income    24,104         7,990       56,424        26,552
                       $ 2,339,777     $ 867,886  $ 4,672,951   $ 2,436,519

    Expenses:
    Net losses and
     loss expenses
     incurred - general
     operations          $ 844,182   $ 1,356,572  $ 2,335,733   $ 2,073,727
    Claims and policy
     benefit reserves -
     life operations       803,741        46,473      870,320        46,473
    Acquisition costs,
     operating expenses,
    and exchange gains
     and losses            425,547       316,268    1,080,020       746,736
    Interest expense        51,815        28,339      133,576        75,764
    Amortization of
     intangible assets         875        15,045        1,500        44,216
                       $ 2,126,160   $ 1,762,697  $ 4,421,149   $ 2,986,916

    Income (loss) before
     minority interest,
     income tax expense and
     equity in net income
     of insurance
     and operating
     affiliates          $ 213,617   $ (894,811)    $ 251,802   $ (550,397)

    Net income           $ 186,436   $ (840,032)    $ 184,181   $ (492,497)
    Preference dividend      2,369            --        2,369            --
    Net income (loss)
     available to
     ordinary
     shareholders        $ 184,067   $ (840,032)    $ 181,812   $ (492,497)


    Weighted average
     number of ordinary
     shares and ordinary
     share equivalents:
     : Basic               135,790       125,431      135,551       125,358
     : Diluted             137,349       127,845      137,291       127,418

    Per Share Data:
     Net income (loss)
      available to
      ordinary shareholders $ 1.34      $ (6.70)       $ 1.32      $ (3.93)
     Net losses on
      investments, derivative
      instruments and one
      time charges,
      after tax               0.27          0.63         2.00          0.38
     Net operating income
      (loss)                $ 1.61      $ (6.07)       $ 3.32      $ (3.55)



Note: Certain reclassifications, which have no effect on net income, 
have been made to prior year results to conform to current 
presentation. 

                                 XL Capital Ltd
                     SUMMARY CONSOLIDATED FINANCIAL DATA
           (In thousands of U.S. dollars, except per share amounts)
                                  (Unaudited)

                         As at September 30,      As at December 31,
                                2002                     2001
    Balance Sheet Data:

    Total investments available
     for sale                 $15,208,627             $12,429,845

    Net payable for
     investments purchased      1,778,303               1,247,027

    Cash and cash equivalents   2,737,445               1,863,861

    Investments in insurance
     and operating affiliates   1,684,713               1,037,344

    Intangible assets           1,646,333               1,616,943

    Total assets               34,090,827              27,963,075

    Unpaid losses and
     loss expenses             12,690,974              11,825,680

    Deposit liabilities and
     policy benefit reserves    3,946,471               2,374,164

    Notes payable and debt      1,870,210               1,604,877

    Shareholders' equity        5,948,676               5,437,184

    Fully diluted book value
     per ordinary share            $42.10                  $40.35

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