Reinsurance
Product Family

Full Year 2006 Record Net Income of $1,722.4 million, or $9.60 perordinary share

Fourth Quarter and Full Year 2006 Highlights

  • • "Net income excluding net realized gains and losses"(1) was a record $513.8 million, or $2.86 per ordinary share for the quarter, resulting in a record "net income excluding net realized gains and losses"(1) for the year of $1,763.3 million, or $9.83 per ordinary share
  • • Combined ratio from general operations was 87.5% for the quarter and 88.5% for the full year
  • • Total net investment income for the quarter increased to $522.5 million
  • •  Net income from investment and operating affiliates was $154.5 million for the quarter
  • •  Book value per ordinary share increased 19.9% for the year to $53.12
  • • Return on ordinary shareholders' equity, based on "net income excluding net realized gains and losses"(1), was 22.1% for the quarter (annualized) and 20.1% for the year

HAMILTON, Bermuda, Feb. 6 /PRNewswire-FirstCall/ -- XL Capital Ltd("XL" or the "Company") (NYSE:XL ) today reported net income available toordinary shareholders for the quarter ended December 31, 2006 of$471.1 million, or $2.62 per ordinary share, compared with a net loss of$821.9 million, or a net loss of $5.51 per ordinary share, for the quarterended December 31, 2005. "Net income excluding net realized gains andlosses"(1) for the fourth quarter of 2006 was $513.8 million, or $2.86 perordinary share, compared with a "net loss excluding net realized gains andlosses" of $868.2 million, or a net loss of $5.82 per ordinary share, for theprior year period. Included in both net income and "net income excluding netrealized gains and losses" for the quarter ended December 31, 2005, was a netloss after tax of $808.9 million related to the Winterthur Internationalindependent actuarial decision (the "Winterthur Decision") and a net lossafter tax of $390.7 million related to Hurricane Wilma and adverse developmenton the third quarter 2005 natural catastrophes.For the twelve months ended December 31, 2006, net income available toordinary shareholders was $1,722.4 million, or $9.60 per ordinary share,compared with a net loss of $1,292.3 million, or a loss of $9.14 per ordinaryshare, for the twelve months of 2005. "Net income excluding net realized gainsand losses" for the same period was $1,763.3 million, or $9.83 per ordinaryshare, as compared with a "net loss excluding net realized gains and losses"of $1,535.4 million, or a loss of $10.86 per ordinary share, for the twelvemonths ended December 31, 2005. The twelve months of 2005 included a net lossafter tax of $1,865.1 million for the third and fourth quarter 2005 naturalcatastrophes and a net loss after tax of $808.9 million associated with theWinterthur Decision.

At December 31, 2006, net book value per ordinary share was $53.12 ascompared with $44.31 at December 31, 2005.

Commenting on these results, President and Chief Executive Officer BrianM. O'Hara said: "I am very pleased to report that we have had excellentperformance from each of our businesses and our investment operations. Theyhave all contributed to record net income for both the quarter and the fullyear. Our operating return on equity was 20.1% for the year which was themain driver behind the 19.9% increase in book value for 2006. As XL enters itsthird decade, I believe our strengths in underwriting, risk management,investment and capital management will allow us to build on this momentum forthe benefit of our shareholders".

SEGMENT HIGHLIGHTS - FOURTH QUARTER 2006 VERSUS FOURTH QUARTER 2005

Insurance General Operations

Underwriting profit for the quarter ended December 31, 2006 was$34.6 million compared with a loss of $1,092.8 million in the prior yearperiod. The quarter ended December 31, 2005 included the pre-tax chargerelated to the Winterthur Decision of $834.2 million and the pre-tax netimpact of the 2005 natural catastrophes of $285.1 million. See attached tablefor further details. In addition, the current quarter included a foreignexchange loss of $39.4 million as compared to a loss of $2.4 million in theprior year quarter.

Fourth quarter 2006 as compared to fourth quarter 2005 (excluding theimpact of the natural catastrophes and Winterthur Decision in the fourthquarter 2005):

    * Gross premiums written decreased 1.1% primarily as a result of corporate      risk management initiatives and fewer long term agreements.  Net      premiums written increased by 6.6% primarily due to changes in      reinsurance structure and retention in certain lines of business as well      as timing of reinsurance cessions.    * Net premiums earned decreased 1.5% reflecting lower net premiums written      in prior periods.    * The loss ratio was 62.0% as compared with 73.8%. The current quarter      included favorable net prior year development of $20.1 million as      opposed to adverse net prior year development of $137.9 million in the      prior year quarter.    * The underwriting expense ratio was 31.1% as compared with 23.8% due      mainly to an increase in performance-based compensation costs in      contrast to a reduction in such costs in the prior year quarter.Reinsurance General Operations

Underwriting profit for the quarter ended December 31, 2006, was$158.4 million compared with an underwriting loss of $32.3 million for theprior year period which included the pre-tax net impact of catastrophes of$140.9 million. See attached table for further details. In addition, thecurrent quarter included a foreign exchange gain of $23.0 million as opposedto a loss of $2.4 million in the prior year quarter.

Fourth quarter 2006 as compared to fourth quarter 2005 (excluding theimpact of the catastrophes in the fourth quarter 2005):

    * Gross and net premiums written decreased 21.2% and 32.9% respectively,      primarily due to the timing of certain premium renewals, premium      adjustments and corporate risk management initiatives.    * Net premiums earned decreased 11.2% reflecting the effects of lower net      premiums written over the previous twenty four months.    * The loss ratio was 46.5% compared with 56.6% in the prior year period      driven primarily by favorable net prior year development of      $87.2 million in the current quarter as compared with $21.0 million in      the prior year quarter.    * The underwriting expense ratio increased to 31.3% in the current quarter      from 26.9% in the prior year quarter due mainly to an increase in      performance-based compensation costs in contrast to a reduction in such      costs in the prior year quarter.Life Operations

Gross premiums written were $200.8 million for the current quarter, anincrease of 39.5% from the prior year quarter primarily due to a singlepremium annuity contract of $79 million written in the current quarter. Netincome from life operations was $18.8 million as compared with $9.8 million inthe prior year quarter reflecting growth in the underlying business.

Financial Operations

* Financial lines

Total contribution from the segment was $17.2 million for the currentquarter as compared with $36.1 million in the prior year quarter. Net lossesincluded $20.2 million related primarily to incurred credit losses on certainstructured financing policies retained within the financial lines segmentfollowing the initial public offering of Security Capital Assurance Ltd("SCA"). Higher net spread income on structured products and net investmentincome were offset by lower income from structured derivatives.

* SCA

Net income for the segment was $23.0 million for the current quartercompared with $33.6 million in the prior year quarter. The current quarterincluded a 37% equity minority interest charge of $12.8 million. Higher grossand net premiums written versus the prior year quarter were due primarily toan increase in the volume and mix of upfront business while net premiumsearned decreased 9.1% primarily due to a reduction in premium refundings.Higher net investment income was partially offset by an increase in operatingexpenses.

Investment Operations

Net investment income from general operations was $285.2 million in thequarter, an increase of 22.4% from the prior year quarter, or 37.3% excluding$25.3 million in interest received last year related to the WinterthurDecision. This increase was due primarily to a continued rise in averageyields and a higher investment asset base.

Net income from investment affiliates was $94.4 million in the fourthquarter of 2006 compared with $38.4 million in the fourth quarter of 2005 dueto strong returns in the alternative portfolio and continued contribution fromprivate investments. In addition, net income from operating affiliates was$60.1 million in the fourth quarter of 2006 as compared with $24.9 million inthe fourth quarter of 2005, the increase being primarily due to a successfulliquidity event of one of the investment manager affiliates.

Net realized losses on investments were $63.0 million in the quarter,compared with net realized gains of $37.9 million in the prior year quarter.Net unrealized gains on investments, net of tax, were $410.5 million and$394.5 million, at December 31, 2006 and September 30, 2006, respectively.

Other Items

Total operating expenses were $365.4 million in the quarter, up from$223.6 million in the prior year quarter. The increase was due mainly to anincrease in performance-based compensation in contrast to a reduction in suchcosts in the prior year quarter.

The Company will host a conference call to discuss its fourth quarter andfull year 2006 results on Wednesday, February 7, 2007 at 10:00 a.m. Easterntime. The conference call can be accessed through a listen-only dial-in numberor through a live webcast. To listen to the conference call, please dial(877) 422-4657 or (706) 679-0474, Conference ID# 5665106. The webcast will beavailable on XL's website located at www.xlgroup.com and will be archived onthis site from approximately 1:00 p.m. Eastern time on February 7, 2007through midnight Eastern time on March 7, 2007. A slide presentationaccompanying the Company's discussion of its fourth quarter and full year 2006results will also be available on the Company's website located atwww.xlgroup.com beginning approximately 15 minutes before the commencementof the conference call.

A telephone replay of the conference call will be available beginning atapproximately 1:00 p.m. Eastern time on February 7, 2007 until midnightEastern time on February 28, 2007 by dialing (800) 642-1687 or (706) 645-9291,Conference ID # 5665106. An unaudited financial supplement relating to theCompany's fourth quarter and full year 2006 results is available on itswebsite located at www.xlgroup.com.

XL Capital Ltd, through its operating subsidiaries, is a leading providerof insurance and reinsurance coverages and financial products and services toindustrial, commercial and professional service firms, insurance companies andother enterprises on a worldwide basis. As of December 31, 2006, XL Capital GroupLtd had consolidated assets of approximately $59.3 billion and consolidatedshareholders' equity of $10.1 billion. More information about XL Capital Ltdis available at www.xlgroup.com.

This press release contains forward-looking statements. Statements thatare not historical facts, including statements about XL's beliefs, plans orexpectations, are forward-looking statements. These statements are based oncurrent plans, estimates, and expectations. Actual results may differmaterially from those included in such forward-looking statements andtherefore you should not place undue reliance on them. A non-exclusive list ofthe important factors that could cause actual results to differ materiallyfrom those in such forward-looking statements includes the following: (a)changes in the size of XL's claims relating to hurricane and other catastrophelosses in 2005; (b) greater frequency or severity of claims and loss activitythan XL's underwriting, reserving or investment practices anticipate based onhistorical experience or industry data; (c) trends in rates for property andcasualty insurance and reinsurance; (d) developments in the world's financialand capital markets that adversely affect the performance of XL's investmentsor access to such markets; (e) changes in general economic conditions,including foreign currency exchange rates, inflation and other factors; and(f) the other factors set forth in XL's most recent reports on Form 10-K, Form10-Q, and other documents on file with the Securities and Exchange Commission,as well as management's response to any of the aforementioned factors. XLundertakes no obligation to update or revise publicly any forward-lookingstatement, whether as a result of new information, future developments orotherwise.

                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA                         (U.S. dollars in thousands)                                  Three Months Ended       Twelve Months Ended    Income Statement Data:            December 31              December 31                                    2006        2005         2006        2005    Revenues:    Gross premiums written:        - general operations  $1,610,207  $1,719,650   $8,654,878  $9,196,837          - life  operations     200,796     143,893      597,025   2,274,520      - financial operations     188,767     115,306      534,344     378,140    Net premiums written:        - general operations   1,276,646   1,304,905    6,546,349   7,024,111           - life operations     190,798     134,877      558,548   2,236,903      - financial operations     170,722     107,873      512,550     356,445     Net premiums earned:        - general operations   1,625,281   1,724,479    6,691,908   6,873,638          - life  operations     191,018     135,071      559,395   2,237,721      - financial operations      95,016      93,688      318,215     254,136     Net investment income       522,539     432,741    1,978,184   1,475,039     Net realized (losses)      gains on investments       (62,963)     37,933     (116,458)    241,882     Net realized and      unrealized gains on      derivatives                 22,483      13,639      101,183      28,858     Net income from      investment affiliates       94,424      38,371      269,036     154,844     Fee and other income          8,646       3,564       31,732      19,297             Total revenues   $2,496,444  $2,479,486   $9,833,195 $11,285,415    Expenses:    Net losses and loss     expenses incurred          $981,786  $2,469,264   $4,238,638  $7,465,001    Claims and policy benefits   238,450     190,116      769,811   2,479,364    Acquisition costs            278,570     293,944    1,102,046   1,195,344    Operating expenses           365,489     223,638    1,182,939     982,059    Exchange losses               13,988       5,566       89,373      10,954    Interest expense             139,386     128,049      552,275     403,849    Amortization of     intangible assets               420       2,248        2,355      10,752             Total expenses   $2,018,089  $3,312,825   $7,937,437 $12,547,323    Net income (loss) before     minority interest,     income tax and net     income from     operating affiliates       $478,355   $(833,339)  $1,895,758 $(1,261,908)    Minority interest in     net income of subsidiary     14,403       1,445       25,016       8,210    Income tax                    42,917       1,972      219,645      49,284    Net (income) from     operating affiliates        (60,110)    (24,901)    (111,670)    (67,426)    Net income (loss)           $481,145   $(811,855)  $1,762,767 $(1,251,976)    Preference share dividends   (10,081)    (10,082)     (40,322)    (40,322)    Net income (loss)     available to ordinary     shareholders               $471,064   $(821,937)  $1,722,445 $(1,292,298)                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA               (Shares in thousands, except per share amounts)                                     Three Months Ended    Twelve Months Ended    Income Statement Data              December 31            December 31     (continued):                    2006      2005         2006      2005    Weighted average number of     ordinary shares and ordinary     share equivalents:                         Basic    179,099   149,177      178,793   141,406                       Diluted    179,832   149,177      179,450   141,406    Per Share Data:    Net income (loss) available     to ordinary shareholde         $2.62    ($5.51)       $9.60    ($9.14)    Ratios -- General insurance     and reinsurance operations:    Loss ratio                       56.3%    140.3%        60.7%    107.1%    Expense ratio                    31.2%     24.8%        27.8%     25.8%    Combined ratio                   87.5%    165.1%        88.5%    132.9%                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA            (U.S. dollars in thousands, except per share amounts)    Balance Sheet Data:                   As at                    As at                                    December 31, 2006        December 31, 2005    Total investments available     for sale                          $39,350,983              $35,724,439    Cash and cash equivalents            2,223,748                3,693,475    Investments in affiliates            2,308,781                2,046,721    Unpaid losses and loss     expenses recoverable                5,027,772                6,441,522    Total assets                        59,308,870               58,454,901    Unpaid losses and loss expenses     23,080,142               23,767,672    Deposit liabilities                  7,857,827                8,240,987    Future policy benefit reserves       6,290,936                5,606,461    Unearned premiums                    5,652,897                5,388,996    Notes payable and debt               3,368,376                3,412,698    Minority interest in equity     of consolidated subsidiaries          562,121                   54,389    Total shareholders' equity          10,131,166                8,471,811    Book value per ordinary share           $53.12                   $44.31                                XL Capital Ltd

SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES AND THE CHARGE RELATED

TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION IN THE FOURTH QUARTER 2005

                          (U.S. dollars in millions)    Three Months Ended    December 31, 2005     Gross  Reinsurance   Net   Reinstatement  Net impact                           Loss   Recoveries   Loss  Premium        Pre tax    Insurance      Hurricane Katrina  $243.7    $149.6     $94.1    $(4.3)         $98.4         Hurricane Rita   236.8     161.8      75.0     (2.1)          77.1        Hurricane Wilma   172.7      64.3     108.4     (1.2)         109.6      Winterthur charge       -    (834.2)    834.2        -          834.2                         $653.2   $(458.5) $1,111.7    $(7.6)      $1,119.3    Reinsurance      Hurricane Katrina   $48.0     $55.5     $(7.5)    $4.8         $(12.3)         Hurricane Rita    33.9      14.6      19.3      4.9           14.4        Hurricane Wilma   214.4      75.7     138.7      6.2          132.5     Other catastrophes     (Note 1)               6.3         -       6.3        -            6.3                         $302.6    $145.8    $156.8    $15.9         $140.9    Financial products     and services      Hurricane Katrina   $23.6       $ -     $23.6    $23.6            $ -    TOTAL - Pre tax      Hurricane Katrina  $315.3    $205.1    $110.2    $24.1          $86.1         Hurricane Rita   270.7     176.4      94.3      2.8           91.5        Hurricane Wilma   387.1     140.0     247.1      5.0          242.1     Wintherthur charge       -    (834.2)    834.2        -          834.2     Other catastrophes      (Note 1)              6.3         -       6.3        -            6.3                         $979.4   $(312.7) $1,292.1    $31.9       $1,260.2    Net investment income                                             $25.3               Tax impact                                              35.3         TOTAL - Post tax                                          $1,199.6    Notes    1. Includes European floods                                XL Capital Ltd

SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES AND THE CHARGE RELATED

   TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION IN FOURTH QUARTER 2005                          (U.S. dollars in millions)    GENERAL OPERATIONS  Three Months    Three Months Ended December 31, 2005                           Ended                        December 31,                           2006                                                                   Excluding                                                    Catastrophes  Catastrophes                                                        and           and                                                     Winterthur    Winterthur                          Total        As reported     charge        charge    INSURANCE    Gross premiums     written           $1,348.4          $1,364.3        $1.2        $1,363.1    Net premiums     written            1,096.9           1,021.1        (7.6)        1,028.7    Net premiums     earned             1,025.1           1,032.8        (7.6)        1,040.4    Fee and other     income                 4.0               2.9           -             2.9    Net losses and     loss expenses        635.8           1,879.3     1,111.7           767.6    Acquisition costs     129.5             128.7           -           128.7    Operating expenses    189.8             118.1           -           118.1    Exchange losses        39.4               2.4           -             2.4    Underwriting profit     (loss)               $34.6         $(1,092.8)  $(1,119.3)          $26.5    Loss ratio             62.0%            182.0%                       73.8%    Combined ratio         93.1%            206.0%                       97.5%    REINSURANCE    Gross premiums     written             $261.8            $355.3       $23.0          $332.3    Net premiums     written              179.8             283.8        15.9           267.9    Net premiums     earned               600.1             691.7        15.9           675.8    Fee and other     income                 2.4                 -           -               -    Net losses and     loss expenses        279.2             539.6       156.8           382.8    Acquisition costs     124.4             148.0           -           148.0    Operating expenses     63.5              34.0           -            34.0    Exchange (gains)     losses               (23.0)              2.4           -             2.4    Underwriting profit     (loss)              $158.4            $(32.3)    $(140.9)         $108.6    Loss ratio             46.5%             78.0%                       56.6%    Combined ratio         77.8%            104.3%                       83.6%    TOTAL    Gross premiums     written           $1,610.2          $1,719.6       $24.2        $1,695.4    Net premiums     written            1,276.7           1,304.9         8.3         1,296.6    Net premiums     earned             1,625.2           1,724.5         8.3         1,716.2    Fee and other     income                 6.4               2.9           -             2.9    Net losses and     loss expenses        915.0           2,418.9     1,268.5         1,150.4    Acquisition costs     253.9             276.7           -           276.7    Operating expenses    253.3             152.1           -           152.1    Exchange losses        16.4               4.8           -             4.8    Underwriting profit    (loss)               $193.0         $(1,125.1)  $(1,260.2)         $135.1    Loss ratio             56.3%            140.3%                       67.0%    Combined ratio         87.5%            165.1%                       92.0%                                XL Capital Ltd            SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES             AND THE CHARGE RELATED TO THE WINTERTHUR INDEPENDENT              ACTUARIAL DECISION IN YEAR ENDED DECEMBER 31, 2005                          (U.S. dollars in millions)    Twelve Months Ended     December 31, 2005     Gross  Reinsurance  Net   Reinstatement  Net impact                            Loss   Recoveries  Loss  Premium        Pre tax    Insurance      Hurricane Katrina  $1,339.7   $748.6    $591.1  $(74.6)        $665.7         Hurricane Rita     521.9    312.9     209.0   (13.3)         222.3        Hurricane Wilma     172.7     64.3     108.4    (1.2)         109.6      Winterthur charge         -   (834.2)    834.2       -          834.2     Other catastrophes     (Note 1)                40.2      1.7      38.5       -           38.5                         $2,074.5   $293.3  $1,781.2  $(89.1)      $1,870.3    Reinsurance      Hurricane Katrina  $1,128.0   $495.2    $632.8   $16.3         $616.5         Hurricane Rita     232.4     83.5     148.9     8.8          140.1        Hurricane Wilma     214.4     75.7     138.7     6.2          132.5     Other catastrophes      (Note 1)               57.5        -      57.5     3.4           54.1                         $1,632.3   $654.4    $977.9   $34.7         $943.2    Financial products     and services      Hurricane Katrina     $45.0      $ -     $45.0   $23.6          $21.4    TOTAL - Pre tax      Hurricane Katrina  $2,512.7 $1,243.8  $1,268.9  $(34.7)      $1,303.6         Hurricane Rita     754.3    396.4     357.9    (4.5)         362.4        Hurricane Wilma     387.1    140.0     247.1     5.0          242.1     Wintherthur charge         -   (834.2)    834.2       -          834.2     Other catastrophes      (Note 1)               97.7      1.7      96.0     3.4           92.6                         $3,751.8   $947.7  $2,804.1  $(30.8)      $2,834.9    Net investment income                                             $25.3               Tax impact                                             135.6         TOTAL - Post tax                                          $2,674.0    Notes

1. Includes Hurricanes Dennis, Emily, Ophelia, European and Mumbai Floodsand Typhoon Mawar.

                                XL Capital Ltd            SUMMARY FINANCIAL IMPACT OF 2005 NATURAL CATASTROPHES             AND THE CHARGE RELATED TO THE WINTERTHUR INDEPENDENT            ACTUARIAL DECISION IN THE YEAR ENDED DECEMBER 31, 2005                          (U.S. dollars in millions)    GENERAL OPERATIONS  Twelve Months    Twelve Months Ended December 31, 2005                           Ended                        December 31,                           2006                                                                   Excluding                                                    Catastrophes  Catastrophes                                                        and           and                                                     Winterthur    Winterthur                          Total        As reported     charge        charge    INSURANCE    Gross premiums     written           $5,570.1          $5,785.8         $ -        $5,785.8    Net premiums     written            4,145.2           4,248.1       (89.1)        4,337.2    Net premiums     earned             4,100.6           4,102.7       (89.1)        4,191.8    Fee and other     income                21.3               4.2           -             4.2    Net losses and     loss expenses      2,634.2           4,595.6     1,781.2         2,814.4    Acquisition costs     486.9             505.6           -           505.6    Operating expenses    638.8             517.8           -           517.8    Exchange losses     (gains)              140.1             (25.5)          -           (25.5)    Underwriting profit     (loss)              $221.9         $(1,486.6)  $(1,870.3)         $383.7    Loss ratio             64.2%            112.0%                       67.1%    Combined ratio         91.7%            137.0%                       91.6%    REINSURANCE    Gross premiums     written           $3,084.7          $3,411.1      $135.3        $3,275.8    Net premiums     written            2,401.1           2,776.0        34.7         2,741.3    Net premiums     earned             2,591.3           2,770.9        34.7         2,736.2    Fee and other     income                 3.0              (0.3)          -            (0.3)    Net losses and     loss expenses      1,426.8           2,763.4       977.9         1,785.5    Acquisition costs     537.4             600.6           -           600.6    Operating expenses    196.5             155.1           -           155.1    Exchange (gains)     losses               (43.1)             33.1           -            33.1    Underwriting profit     (loss)              $476.7           $(781.6)    $(943.2)         $161.6    Loss ratio             55.1%             99.7%                       65.3%    Combined ratio         83.4%            127.0%                       92.9%    TOTAL    Gross premiums     written           $8,654.8          $9,196.9      $135.3        $9,061.6    Net premiums     written            6,546.3           7,024.1       (54.4)        7,078.5    Net premiums     earned             6,691.9           6,873.6       (54.4)        6,928.0    Fee and other     income                24.3               3.9           -             3.9    Net losses and     loss expenses      4,061.0           7,359.0     2,759.1         4,599.9    Acquisition costs   1,024.3           1,106.2           -         1,106.2    Operating expenses    835.3             672.9           -           672.9    Exchange losses        97.0               7.6           -             7.6    Underwriting profit     (loss)              $698.6         $(2,268.2)  $(2,813.5)         $545.3    Loss ratio             60.7%            107.1%                       66.4%    Combined ratio         88.5%            132.9%                       92.1%    XL Capital Ltd    RECONCILIATION

The following is a reconciliation of the Company's (i) net income (loss)available to ordinary shareholders to 'net income (loss) excluding netrealized gains and losses on investments and net realized and unrealized gainsand losses on credit, structured financial and investment derivatives, net oftax' (which is a non-GAAP measure, the "Exclusions") and (ii) annualizedreturn on ordinary shareholders' equity (based on net income (loss) minus theExclusions) to average ordinary shareholders' equity for the three and twelvemonths ended December 31, 2006 and 2005.

    (U.S. dollars in millions,    except per share amounts)    Three Months Ended        Twelve Months Ended                                    December 31               December 31                                   2006       2005          2006       2005    Net income (loss) available     to ordinary shareholders    $471.1    $(821.9)      $1,722.4  $(1,292.3)    Net realized losses (gains)     on investments, net of tax    61.8      (34.9)         113.4     (232.7)    Net realized and unrealized     (gains) losses on investment     derivatives, net of tax      (18.7)      (4.7)         (71.6)      17.3    Net realized and unrealized     (gains) losses on credit     and structured financial     derivatives, net of tax       (0.4)      (6.7)          (0.9)     (27.7)    Net income (loss) excluding     net realized gains and     losses (Note 1)             $513.8    $(868.2)      $1,763.3  $(1,535.4)    Per ordinary share results:    Net income (loss) available     to ordinary shareholders     $2.62     $(5.51)         $9.60     $(9.14)    Net income (loss) excluding     net realized gains and     loss