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Full Year 2004 Net Income a Record $1.13 Billion, or $8.13 Per Ordinary Share Year End 2004 Book Value Per Ordinary Share of $51.98, Up 11% From December 31, 2003

HAMILTON, Bermuda, Feb. 9, 2005 /PRNewswire-FirstCall via COMTEX/ -- XL Capital Ltd(NYSE: XL) ("XL" or the "Company") today reported net income available toordinary shareholders for the quarter ended December 31, 2004 of$288.0 million, or $2.07 per ordinary share, compared with a net loss of$314.8 million, or a loss of $2.29 per ordinary share for the quarter endedDecember 31, 2003. Net income excluding net realized gains and losses(1) forthe 2004 fourth quarter was $194.4 million, or $1.40 per ordinary share,compared with a net loss of $349.3 million, or a loss of $2.54 per ordinaryshare, for the year ago quarter. Net income and net income excluding netrealized gains and losses for the 2004 fourth quarter included a previouslyannounced charge related to the Indian Ocean tsunami and an increase inexpected losses from the third quarter 2004 hurricanes of $138.0 million,after-tax, or $0.99 per ordinary share.

For the twelve months to December 31, 2004, net income available toordinary shareholders was a record $1,126 million, or $8.13 per ordinaryshare, compared with $371.7 million, or $2.69 per ordinary share for the prioryear. Net income excluding net realized gains and losses for the full year2004 was also a record at $816.7 million, or $5.89 per ordinary share,compared with $293.6 million, or $2.12 per ordinary share for the full year2003.

Commenting on XL's results, President and Chief Executive Officer Brian M.O'Hara said: "XL's fourth quarter results continued the solid underlyingperformance we delivered throughout the year, with a combined ratio, excludingthe impact of the Indian Ocean tsunami and an increase in expected losses fromthe third quarter 2004 hurricanes, of 87.0% and healthy year-over-yearincreases in net invested assets, cash flow from operations, net investmentincome and book value per ordinary share."

"Full year 2004 net income of $1,126 million and net income excludingrealized gains and losses of $816.7 million were both records. Taking intoconsideration the fact that we incurred over $550 million, after tax, incatastrophe-related losses during the year, these results are a testament tothe underlying earnings strength of XL."

"During 2004, we introduced a number of important strategic initiatives,including the launching of both our global whole account commercial propertyprogram and our primary Directors and Officers liability product in Europe andthe start-up of our US primary casualty operation. I believe theseinitiatives, together with our core competitive advantages of global presence,leading product expertise and financial strength, will enable us to furtherdifferentiate our performance for our customers and shareholders goingforward."

With respect to the post-closing seasoning process with Winterthur SwissInsurance Company ("Winterthur"), as contemplated in the amended sale andpurchase agreement relating to our acquisition of Winterthur International, onFebruary 3, 2005, both XL and Winterthur submitted their amounts for theindependent valuation determination process. XL's submission would result ina net payable to XL of approximately $1.45 billion in aggregate andWinterthur's submission would result in a net payable to XL of approximately$541 million in aggregate. The independent valuation determination process isa "baseball-type" process, whereby either XL's submitted number orWinterthur's submitted number will be the actual final seasoned amount,depending upon which number is closest to the number developed by theindependent actuarial valuation.

Mr. O'Hara further commented that "XL's submission was developed with thesupport of various leading, third-party actuarial and claims advisors and weare confident in our submission. We look forward to discussing this processfurther on our earnings call tomorrow."

HIGHLIGHTS (versus the equivalent prior year period, unless noted):

Fourth Quarter 2004

* Net premiums written from general operations increased 6% to $1.3 billion

* Combined ratio from general operations was 95.8%. Excluding hurricaneand tsunami losses, the combined ratio was 87.0%

* Net investment income increased 35% to $278.4 million

* Cash flow from operations was $1.3 billion. Including structured andspread transactions, cash flow was $1.85 billion.

* Annualized net income excluding net realized gains and losses return onordinary shareholders' equity was 11.0%

Full Year 2004

* Net premiums written from general operations increased 11% to$7.3 billion

* Combined ratio from general operations was 96.0%. Excluding hurricaneand tsunami losses, the combined ratio was 87.6%

* Net investment income increased 28% to $995.0 million

* Cash flow from operations was $4.37 billion. Including structured andspread transactions, cash flow was $5.9 billion

* Net income excluding net realized gains and losses return on ordinaryshareholders' equity was 12.0%

* Total net invested assets at December 31, 2004 were $32.4 billion, up28% from December 31, 2003

* Total assets at December 31, 2004 were $49.0 billion, up 19% fromDecember 31, 2003

* Book value per ordinary share was $51.98, up 11% from December 31, 2003

FOURTH QUARTER 2004 SEGMENT HIGHLIGHTSInsurance Operations

Underwriting profit for the quarter was $51.4 million, compared with anunderwriting loss of $1.9 million for the prior year quarter, and included a$110.5 million pre-tax charge related to the impact of the Indian Oceantsunami and an increase in expected losses from the third quarter 2004hurricanes. Net premiums written increased 17%, compared with the 2003 fourthquarter, to $1,031 million and the loss ratio for the quarter was 71.4%, adecrease of 6.4 points from the prior year quarter. The underwriting expenseratio of 24.5% increased 1 point compared with the prior year quarter, as a2.6 point increase in the operating expense ratio was partially offset by a1.6 point decrease in the acquisition expense ratio.

Reinsurance Operations

General Operations - Underwriting profit for the quarter was$48.7 million, compared with an underwriting loss of $483.6 million in theprior year quarter. The current quarter included a $39.5 million pre-taxcharge related to the impact of the Indian Ocean tsunami and an increase inexpected losses from the third quarter 2004 hurricanes. Net premium writtendecreased 19%, compared with the 2003 fourth quarter, to $303.5 million,primarily due to decreased participation on certain contracts, in addition tothe impact of ceded reinstatement premiums related to the increase in expectedlosses for the third quarter 2004 hurricanes. The loss ratio for the quarterwas 65.5% compared with 146.4% in the prior year quarter and the underwritingexpense ratio decreased 2.5 points compared with the prior year quarter to30.1%.

Life and Annuity Operations - Income from Life and Annuity reinsuranceoperations increased 47% compared with the 2003 fourth quarter to$5.9 million. Net premiums written in the 2004 fourth quarter were$173.5 million, compared with $457.8 million in the prior year quarter. Netpremiums written in the prior year quarter included two single premium annuitycontracts totaling $395.5 million, whereas net premiums written in the 2004fourth quarter included one $97.3 million single premium annuity transaction.Differences in the timing and size of these transactions can lead tovolatility in year-over-year premium growth rates. Net investment incomeincreased 50% to $57.9 million driven by a 52% increase in net invested assetsto $4.7 billion.

Financial Products and Services Operations

Financial Operations - Contribution in the quarter was $34.2 million, anincrease of $21.5 million compared with the 2003 fourth quarter. A$28.1 million improvement in unrealized gains from derivative exposures,primarily from financial guaranty transactions written in derivative form, inaddition to higher investment income, more than offset higher incurred lossesand operating expenses and a lower contribution from equity in net income offinancial affiliates. Net premiums written increased 28% compared with the2003 fourth quarter driven by a higher level of up-front premium transactions.

Life and Annuity Operations - Income in the quarter decreased $2.3 millioncompared with the prior year quarter to a loss of $4.7 million, as a decreasein net premiums earned more than offset higher net investment income lessrelated interest expense. The total average balance of funding agreements andmunicipal reinvestment contracts increased $2.1 billion compared with the 2003fourth quarter to $3.3 billion.

Corporate Items

Net investment income on general operations for the quarter increased 18%over the 2003 fourth quarter to $179.1 million, driven primarily by a 28%year-over-year increase in net invested assets. Net income from investmentaffiliates increased 5% over the prior year quarter to $47.3 million.

Net realized gains on investments were $65.4 million in the quarter,compared with $39.9 million in the prior year quarter. Net unrealized gainson investments, net of tax, were $769.5 million at December 31, 2004, comparedwith $488.6 million at September 30, 2004.

Total operating expenses were $288.3 million in the quarter, an increaseof 44% from the fourth quarter of 2003. This increase was driven primarily bycosts associated with continued growth in the Company's operations globally,work related to complying with Sarbanes-Oxley requirements, the impact offoreign exchange movement and costs associated with the Winterthur seasoningprocess.

(1) Defined as "net income excluding net realized gains and losses oninvestments and net realized gains and losses on credit and investmentderivatives, net of tax" (herein referred to as "net income excluding netrealized gains and losses"). Net income excluding net realized gains andlosses is a non-GAAP measure. See the schedule entitled "Reconciliation" atthe end of this release for a reconciliation of net income excluding netrealized gains and losses to net income available to ordinary shareholders.

The Company will host a conference call to discuss its fourth quarter andfull year 2004 results on Thursday, February 10, 2005 at 10:00 am EST. Theconference call can be accessed through a listen only dial-in number orthrough a live webcast. To listen to the conference call, please dial201-689-8320, password XL210. The webcast will be available athttp://www.xlgroup.com and will be archived on XL's website fromapproximately 1:00 pm EST on February 10, 2005 through midnight EST on March10, 2005. A slide presentation accompanying the Company's discussion of itsfourth quarter and full year 2004 results will also be available athttp://www.xlgroup.com approximately 15 minutes before the commencement ofthe conference call. A telephone replay of the conference call will beavailable beginning at 1:00 pm EST on February 10 until 8:00 pm EST onFebruary 17, 2005 by dialing 201-612-7415 (account number: 7716 and conferenceID number: 132799). An unaudited financial supplement relating to theCompany's fourth quarter 2004 results is available on its website athttp://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,and other enterprises on a worldwide basis. As of December 31, 2004, XLCapital Ltd had consolidated assets of approximately $49.0 billion andconsolidated shareholders' equity of approximately $7.7 billion. Moreinformation about XL Capital Ltd is available at http://www.xlgroup.com.

This presentation contains forward-looking statements that involveinherent 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 insuch forward-looking statements and therefore you should not place unduereliance on them. A non-exclusive list of the important factors that couldcause actual results to differ materially from those in such forward-lookingstatements includes the following: (a) the timely and full recoverability ofreinsurance placed by XL with third parties, or other amounts due to XL,including, without limitation, amounts due to XL from Winterthur SwissInsurance Company (i) in connection with the independent actuarial process or(ii) under other contractual arrangements; (b) the size of XL's claimsrelating to the tsunami and hurricane losses described above may change due tothe preliminary nature of some of the reports and estimates of loss and damageto date; (c) greater frequency or severity of claims and loss activity thanXL's underwriting, reserving or investment practices anticipate based onhistorical experience or industry data; (d) developments in the world'sfinancial and capital markets which adversely affect the performance of XL'sinvestments or access to such markets; (e) changes in general economicconditions, including foreign currency exchange rates, inflation and otherfactors; and (f) the other factors set forth in XL's most recent reports onForm 10-K, Form 10-Q, and other documents on file with the Securities andExchange Commission. XL undertakes no obligation to update or revise publiclyany forward-looking statement, whether as a result of new information, futuredevelopments or otherwise.

XL Capital Ltd                       SUMMARY CONSOLIDATED FINANCIAL DATA                           (U.S. dollars in thousands)                                 Three Months Ended       Twelve Months Ended    Income Statement Data:             Dec 31                   Dec 31                                    (Unaudited)              (Unaudited)                                  2004        2003        2004         2003    Revenues:    Gross premiums written:     -- general operations    $1,811,377  $1,669,382  $9,377,548   $8,624,080     -- life and annuity        operations               231,300     491,888   1,438,104      768,089     -- financial operations      84,797      71,242     276,079      313,916    Net premiums written:     -- general operations     1,334,398   1,256,889   7,267,174    6,552,280     -- life and annuity        operations               197,134     494,557   1,403,347      739,869     -- financial operations      78,592      61,193     255,524      299,240    Net premiums earned:     -- general operations     1,710,115   1,515,913   6,982,549    6,081,033     -- life and annuity        operations               197,341     498,814   1,405,699      748,495     -- financial operations      38,202      41,535     161,285      139,622    Net investment income        278,437     206,340     995,036      779,558    Net realized gains     on investments               65,432      39,864     246,547      120,195    Net realized and     unrealized gains     (losses) on derivative     instruments                  43,869      (1,432)     78,019      (27,542)    Equity in net income of     investment affiliates        47,328      45,250     124,008      119,200    Fee and other income           9,447      15,756      35,317       41,745                              $2,390,171  $2,362,040 $10,028,460   $8,002,306    Expenses:    Net losses and loss     expenses incurred        $1,190,960  $1,614,219  $4,863,940   $4,610,606    Claims and policy     benefit reserves            231,609     516,157   1,500,128      818,894    Acquisition costs            299,176     304,411   1,264,864    1,167,186    Operating expenses           288,267     200,088   1,053,135      797,826    Exchange gains               (18,030)     (8,489)    (40,678)     (38,619)    Interest expense              92,345      57,314     259,075      199,407    Amortization of     intangible assets             6,057       3,512      15,827        4,637                              $2,090,384  $2,687,212  $8,916,291   $7,559,937    Net income (loss) before     minority interest,     income tax expense and     equity in net (income)     loss of insurance and     operating affiliates       $299,787   $(325,172) $1,112,169     $442,369    Minority interest                346       3,473       8,387        9,264    Income tax expense     (benefit)                     7,651     (15,880)     84,526       30,049    Equity in net income of     operating affiliates         (6,338)     (8,016)   (147,357)      (8,923)    Net income from     operations                 $298,128   $(304,749) $1,166,613     $411,979    Preference dividend          (10,080)    (10,080)    (40,321)     (40,321)    Net income (loss)     available to ordinary     shareholders               $288,048   $(314,829) $1,126,292     $371,658    Note: Certain amounts in prior periods have been reclassified to conform          with the current year presentation.                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA               (Shares in thousands, except per share amounts)                                 Three Months Ended      Twelve Months Ended    Income Statement Data              Dec 31                   Dec 31     (continued):                    (Unaudited)              (Unaudited)                                  2004        2003        2004         2003    Weighted average number     of ordinary shares and     ordinary share equivalents:      Basic                      138,195     137,275     137,903      136,906      Diluted                    139,229     138,594     138,582      138,187    Per Share Data:    Net income (loss) available     to ordinary shareholders      $2.07      ($2.29)      $8.13        $2.69    Ratios -- General insurance     and reinsurance operations      Loss ratio                   69.0%      106.0%       68.6%        75.3%      Expense ratio                26.8%       27.2%       27.4%        27.3%      Combined ratio               95.8%      133.2%       96.0%       102.6%                       SUMMARY CONSOLIDATED FINANCIAL DATA                    (In thousands, except per share amounts)    Balance Sheet Data:                        As at             As at                                            December 31,      December 31,                                                2004              2003                                            (Unaudited)       (Unaudited)    Total investments available for sale    $27,823,828       $20,775,256    Net payable for investments purchased       273,535           523,077    Cash and cash equivalents                 2,304,303         2,829,627    Investments in affiliates                 1,936,852         1,903,341    Total assets                             49,014,632        41,190,721    Unpaid losses and loss expenses          19,598,531        16,558,788    Deposit liabilities and     policy benefit reserves                 10,273,278         7,284,179    Notes payable and debt                    2,721,431         1,905,483    Total shareholders' equity                7,738,695         6,936,915    Book value per ordinary share                $51.98            $46.74    Note: Certain amounts in prior periods have been reclassified to conform          with current presentation.    XL Capital Ltd    RECONCILIATION

The following is a reconciliation of the Company's (i) net income to 'net(loss) income excluding net realized gains and losses on investments and netrealized and unrealized gains and losses on credit and investment derivativeinstruments, net of tax' (which is a non-GAAP measure, the "Exclusions") and(ii) annualized return on shareholders' equity (based on net income minus theExclusions) to average ordinary shareholders' equity for the three and twelvemonths ended December 31, 2004 and 2003 (in millions, except per shareamounts):

Three Months Ended  Twelve Months Ended                                          December 31         December 31                                          (Unaudited)         (Unaudited)                                        2004       2003      2004      2003    Net income (loss) available to     ordinary shareholders              $288.0    $(314.8) $1,126.3    $371.7    Net realized (gains) on     investments, net of tax             (62.9)     (30.3)   (240.8)   (105.2)    Net realized and unrealized     (gains) losses on investment     derivatives, net of tax             (22.0)      (7.1)    (22.9)      0.5    Net realized and unrealized     (gains) losses on credit     derivatives, net of tax              (8.7)       2.9     (45.9)     26.6    Net income (loss) excluding net     realized gains and losses on     investments and net unrealized     gains and losses on credit and     investment derivative     instruments, net of tax            $194.4    $(349.3)   $816.7    $293.6    Per ordinary share results:    Net income (loss) available to     ordinary shareholders               $2.07     $(2.29)    $8.13     $2.69    Net income (loss) excluding net     realized gains and losses on     investments and net unrealized     gains and losses on credit and     investment derivative     instruments, net of tax             $1.40     $(2.54)    $5.89     $2.12    Weighted average ordinary     shares outstanding:     Basic                               138.2      137.3     137.9     136.9     Diluted                             139.2      138.6     138.6     138.2    Return on Ordinary     Shareholders' Equity:    Average ordinary     Shareholders' Equity             $7,037.7   $6,651.6  $6,820.3  $6,235.8    Net income (loss) excluding net     realized gains and losses on     investments and net unrealized     gains and losses on credit and     investment derivative     instruments, net of tax            $194.4    $(349.3)   $816.7    $293.6    Annualized net income (loss)     excluding net realized gains and     losses on investments and net     realized and unrealized gains     and losses on credit and     investment derivative     instruments, net of tax            $777.6  $(1,397.2)   $816.7    $293.6    Annualized Return on Ordinary     Shareholders' Equity -- Net     income excluding net realized     gains and losses on investments     and net unrealized gains and     losses on credit and investment     derivative instruments,     net of tax                          11.0%       NA       12.0%      4.7%    Comment on Regulation G

This press release contains the presentation of (i) 'net (loss) incomeexcluding net realized gains and losses on investments and net realized andunrealized gains and losses on credit and investment derivatives, net of tax'and (ii) annualized return on ordinary shareholders' equity (based on netincome minus the Exclusions) to average ordinary shareholders' equity. Theseitems are "non-GAAP financial measures" as defined in Regulation G. Thereconciliation of such measures to the most directly comparable GAAP financialmeasures in accordance with Regulation G is included above.

XL presents its operations in the way it believes will be most meaningfuland useful to investors, analysts, rating agencies and others who use XL'sfinancial information in evaluating XL's performance. This presentationincludes the use of 'net income excluding net realized gains and losses oninvestments and net realized and unrealized gains and losses on credit andinvestment derivatives, net of tax'. Investment derivatives include allderivatives entered into by XL other than weather and energy and creditderivatives (discussed further below).

Although the investment of premiums to generate income (or loss) andrealized capital gains (or losses) is an integral part of XL's operations, thedetermination to realize capital gains (or losses) is independent of theunderwriting process. In addition, under applicable GAAP accountingrequirements, losses can be created as the result of other than temporarydeclines in value without actual realization. In this regard, certain usersof XL's financial information, including certain rating agencies, evaluateearnings before tax and capital gains to understand the profitability of therecurring sources of income without the effects of these two variables.Furthermore, these users believe that, for many companies, the timing of therealization of capital gains is largely opportunistic and are a function ofeconomic and interest rate conditions. In addition, with respect to creditderivatives, because XL generally holds its financial guarantee contractswritten in credit default derivative form to maturity, the net effects of thechanges in fair value of these credit derivatives are excluded (similar withother companies in the financial guarantee business) as the changes in fairvalue each quarter are not indicative of underlying business performance ofXL's financial guarantee operations. Unlike these credit derivatives, XL'sweather and energy derivatives are actively traded (i.e., they are not held tomaturity) and are, therefore, not excluded from net income as any gains orlosses from this business are considered by management when evaluating andmanaging the underlying business.

In summary, XL evaluates the performance of and manages its business toproduce an underwriting profit. In addition to presenting net income (loss),XL believes that showing net income (loss) exclusive of the items mentionedabove enables investors and other users of XL's financial information toanalyze XL's performance in a manner similar to how management of XL analyzesperformance. In this regard, XL believes that providing only a GAAPpresentation of net income (loss) makes it much more difficult for users ofXL's financial information to evaluate XL's underlying business. Also, asstated above, XL believes that the equity analysts and certain rating agencieswho follow XL (and the insurance industry as a whole) exclude these items fromtheir analyses for the same reasons and they request that XL provide this non-GAAP financial information on a regular basis.

Return on average ordinary shareholder's equity ("ROE") minus theExclusions is a widely used measure of any company's profitability. Annualizedreturn on average ordinary shareholders' equity (minus the Exclusions) iscalculated by dividing annualized net income minus the Exclusions for anyperiod by the average of the opening and closing ordinary shareholder'sequity. XL establishes target ROE's for its total operations, segments andlines of business. If XL's ROE return targets are not met with respect to anyline of business over time, the Company seeks to re-evaluate these lines. Inaddition, XL's compensation of its senior officers is significantly dependanton the achievement of performance goals to enhance shareholder value whichinclude ROE.