XL Capital Ltd., XL America Pool Members Ratings Placed on CreditWatch Negative

Standard & Poor’s Ratings Services placed its ‘A+’ counterparty credit, ‘A+’ senior unsecured debt, and ‘A-‘ preferred stock ratings on XL Capital Ltd. and other core holding companies and its ‘AA’ counterparty credit and financial strength ratings on the members of XL America Pool on CreditWatch with negative implications.

The rating actions follow XL Capital’s announcement of further reserve strengthening at XL Reinsurance America Inc. (formerly known as NAC Reinsurance Corp.) of $214 million in the first three quarters of 2003 (including $184 million in the third quarter). The strengthening related to additional claims development in core casualty lines that was outside of expectations and existing loss trends. Management has also announced that it will be conducting an intensive claims audit and review of ceding companies claims files, which will be completed by the end of the calendar year.

Standard & Poor’s will closely follow developments at the group as they evolve. Following the completion of further analysis and receipt of additional information, Standard & Poor’s might reconsider the status of the members of XL America Pool as core to XL Capital Group. If Standard & Poor’s revises the status, the ratings impact is not expected to exceed two notches. If the core status is not revised, the ratings on the pool members will be affirmed.
Standard & Poor’s expects XL Capital to replenish the reserve losses through capital markets activity following the completion of the study.

The debt ratings on XL Capital Ltd. were placed on CreditWatch negative because the amount and type of capital raised could lead to a widening of the notching between the financial strength ratings on the other core operating companies and the debt ratings on the holding company. Standard & Poor’s does not expect the impact on the debt ratings to be greater than one notch. If the nonstandard notching remains, the ratings will be affirmed.

Standard & Poor’s does not expect the financial strength ratings on other operating companies of the XL Group to be affected by the reserve development at XL America. Excluding the reserve strengthening, consolidated operating performance and cash flow for the group has been very strong year-to-date, and within Standard & Poor’s expectations.

The CreditWatch status of the ratings is expected to be resolved in the next three months following the completion and review of additional information.Ratings List TO FROMXL Capital Ltd. Counterparty credit rating A+/WatchNeg/– A+/Stable/– Senior unsecured debt rating A+/WatchNeg A+ Preferred stock rating A-/WatchNeg A- XL America Inc.Nac Re Corp. Counterparty credit rating A+/WatchNeg/– A+/Stable/– Senior unsecured debt rating A+/WatchNeg A+ XL Reinsurance America Inc.Greenwich Insurance Co.Indian Harbor Insurance Co.XL Insurance Co. of New York Inc.XL Specialty Insurance Co. XL Insurance America Inc.XL Select Insurance Co. Counterparty credit rating AA/WatchNeg/– AA/Stable/– Financial strength rating AA/WatchNeg AA/Stable