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First Quarter 2007 Highlights

  • • "Net income excluding net realized gains and losses"1 was a record $543.4 million, or $3.03 per ordinary share
  • • Total net investment income for the quarter increased to $553.1 million
  • • Net income from investment and operating affiliates was $176.0 million
  • • The Company repurchased 3.17 million ordinary shares at an average price of $69.82 per share in connection with the recently announced share repurchase program
  • • Return on ordinary shareholders' equity, based on "net income excluding net realized gains and losses"1, was 22.4% for the quarter (annualized)
  • •  Book value per ordinary share increased 3.4% to $54.95, which includes the impact of the shares repurchased

HAMILTON, BERMUDA, April 24, 2007 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today("XL" or the "Company") XL today reported net income available toordinary shareholders for the quarter ended March 31, 2007 of $549.7 million,or $3.06 per ordinary share, compared with net income of $458.5 million, or$2.56 per ordinary share, for the quarter ended March 31, 2006. Net incomefor the quarter ended March 31, 2007 included pre-tax, net losses fromWindstorm Kyrill ("Kyrill") of $55.0 million, which is lower than theCompany's previously announced estimated range of between $60 million and$75 million. After taking into account net reinstatement premiums and taxeffects, the net income impact of this event was $42.0 million. "Net incomeexcluding net realized gains and losses"(1) for the first quarter of 2007 was$543.4 million, or $3.03 per ordinary share, compared with "net incomeexcluding net realized gains and losses" of $405.5 million, or $2.26 perordinary share, for the prior year period.

1Defined as net income/loss excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, herein referred to as "net income/loss excluding net realized gains and losses". "Net income/loss excluding net realized gains and losses" is a non-GAAP measure. See the schedule entitled "Reconciliation" at the end of this release for a reconciliation of net income/loss excluding net realized gains and losses to net income available to ordinary shareholders.

At March 31, 2007, net book value per ordinary share was $54.95 ascompared with $53.12 at December 31, 2006.

Commenting on these results, President and Chief Executive Officer BrianM. O'Hara said: "This quarter's excellent results reflect our drive to delivervalue for our shareholders. Underwriting results in Insurance were strong andReinsurance results were solid despite losses from Windstorm Kyrill. Ourother segments continued their positive contributions and our affiliatesgenerated outstanding returns again."

SEGMENT HIGHLIGHTS - FIRST QUARTER 2007 VERSUS FIRST QUARTER 2006

Insurance

Underwriting profit for the quarter ended March 31, 2007 was$107.3 million compared with $64.7 million in the prior year period. Thecurrent quarter included a foreign exchange loss of $7.3 million as comparedwith a loss of $30.7 million in the prior year quarter. These resultsincluded pre-tax, net losses related to Kyrill of $10.0 million.

    * Gross premiums written decreased marginally by 0.3%. An increase in long      term agreements and favorable foreign exchange movements was offset by      modest rate reductions on certain long tail lines and reduced property      exposures. Net premiums written increased by 6% primarily due to higher      retentions in certain long tail lines and changes in business mix.    * Net premiums earned increased 0.7% reflecting higher net premiums      written in prior periods.    * The loss ratio was 61.4% as compared with 65.7%. The current quarter      included favorable net prior year development of $20.2 million as      opposed to adverse net prior year development of $11.6 million in the      prior year quarter.    * The underwriting expense ratio was 27.7% as compared with 25.8% due      mainly to an increase in compensation costs arising from investments in      new business activities.

Reinsurance

Effective January 1, 2007, there was an internal change in executiveresponsibility for a block of European life, accident and health business("LAH"), which moved from Reinsurance to Life operations. To assistcomparability, prior period segment results have been re-presented to reflectthis change.

Underwriting profit for the quarter ended March 31, 2007, was$19.9 million compared with $82.9 million for the prior year period. Thecurrent quarter included a foreign exchange loss of $16.6 million as opposedto a loss of $3.4 million in the prior year quarter. These results alsoincluded pre-tax, net losses related to Kyrill of $45.0 million. After takinginto account reinstatement premiums for this event, the net impact on theunderwriting profit of the Reinsurance segment was a loss of $39.0 million.

    * Gross and net premiums written decreased 3.8% and 6.8% respectively,      reflecting increased retentions by cedants and segment cycle management      activities resulting in certain contract cancellations and reduced share      participations.  This was partially offset by timing adjustments mainly      on two large contracts. Excluding these timing adjustments, net premiums      written were down approximately 11.0%.    * Net premiums earned decreased 14.5% reflecting the effects of lower net      premiums written in the current and prior periods.    * The loss ratio was 63.8% compared with 61.3% in the prior year period.      The current quarter included pre-tax, net losses related to Kyrill of      $45.0 million offset by favorable net prior year development of      $53.6 million. The prior year quarter included adverse net prior year      development of $6.7 million.    * The underwriting expense ratio increased to 29.2% in the current quarter      from 25.2% in the prior year quarter, principally driven by higher      operating expenses on a lower net premium earned base and additional      acquisition costs.

Life Operations

Prior period segment results have been re-presented to reflect theinternal change in executive responsibility for the block of European LAHbusiness noted above.

Gross premiums written were $213.3 million for the current quarter, anincrease of 24.2% from the prior year quarter primarily due to new business,further growth on existing treaties and favorable foreign exchange movements.Net income from life operations was $23.1 million as compared with$18.2 million in the prior year quarter primarily reflecting growth inoperations.

Financial Operations

* Financial lines

Total contribution from the segment was $56.8 million for the currentquarter as compared with $36.0 million in the prior year quarter. During thecurrent quarter, the settlement of a contract arbitration resulted in grossand net premiums written and earned of $16.8 million and additional incurredlosses of $9.1 million. Income from investment and financial affiliatesincreased to $16.6 million from $6.4 million. The prior year quarter includeda loss reserve on a structured finance transaction.

* SCA

Net income for the segment before equity minority interest was$37.3 million for the current quarter compared with $22.8 million in the prioryear quarter. The current quarter included a 37% equity minority interestcharge of $13.8 million. Higher gross premiums written versus the prior yearquarter were due primarily to an increase in the power and utilities businessand a mix of upfront business. Net premiums earned increased over the prioryear quarter due to the growth of in-force policies. Net investment incomeincreased primarily from a higher asset base following the initial publicoffering in August 2006, but this was partially offset by higher operatingexpenses reflecting the additional costs of being a public company.

Investment Operations

Net investment income from general operations was $313.4 million in thequarter, an increase of 20.4% from the prior year quarter. This increase wasdue primarily to a continued rise in average yields and a higher investmentasset base.

Total net income from investment affiliates was $118.9 million in thequarter compared with $106.4 million in the prior year quarter, due to strongreturns in the alternative portfolio and continued contribution from privateinvestments. In addition, net income from investment manager affiliates was$37.4 million in the current quarter compared with a net loss of $9.4 millionin the prior year quarter.

Net realized gains on investments were $9.3 million in the current quartercompared with $22.8 million in the prior year quarter. Net unrealized gainson investments, net of tax, were $305.6 million and $410.5 million, at March31, 2007 and December 31, 2006 respectively. This decline is primarily due tothe effect of the rising UK interest rates on the long duration UK Sterling-denominated life portfolio.

Other Items

Total operating expenses were $280.5 million in the quarter, up from$261.6 million in the prior year quarter. The increase was due mainly to anincrease in compensation costs related to business development andperformance-based programs.

The Company received net proceeds of $983.8 million related to the issueof Series E Perpetual Non-Cumulative Preference Ordinary Shares in March 2007.In addition to the share repurchase program, the proceeds will be used forgeneral corporate purposes, in particular, to refinance debt and othercomponents of the Company's capital structure. During the quarter, theCompany repurchased 3.17 million ordinary shares at an average price of$69.82 per share.

The Company will host a conference call to discuss its first quarter 2007results on Wednesday, April 25, 2007 at 10:00 a.m. Eastern time. Theconference call can be accessed through a listen-only dial-in number orthrough a live webcast. To listen to the conference call, please dial(877) 422-4657 or (706) 679-0474, Conference ID# 2785039. 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 April 25, 2007 throughmidnight Eastern time on May 25, 2007. A slide presentation accompanying theCompany's discussion of its first quarter 2007 results will also be availableon the Company's website located at www.xlgroup.com beginning approximately15 minutes before the commencement of the conference call.

A telephone replay of the conference call will be available beginning atapproximately 1:00 p.m. Eastern time on April 25, 2007 until midnight Easterntime on May 16, 2007 by dialing (800) 642-1687 or (706) 645-9291, ConferenceID # 2785039. An unaudited financial supplement relating to the Company'sfirst quarter 2007 results is available on its website located atwww.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 March 31, 2007, XL Capital Ltdhad consolidated assets of approximately $62.1 billion and consolidatedshareholders' equity of $11.3 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) greater frequency or severity of claims and loss activity than XL'sunderwriting, reserving or investment practices anticipate based on historicalexperience or industry data; (b) trends in rates for property and casualtyinsurance and reinsurance; (c) developments in the world's financial andcapital markets that adversely affect the performance of XL's investments oraccess to such markets; (d) changes in general economic conditions, includingforeign currency exchange rates, inflation and other factors; and (e) theother factors set forth in XL's most recent reports on Form 10-K, Form 10-Q,and other documents on file with the Securities and Exchange Commission, aswell 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    Income Statement Data:                          March 31                                              2007             2006    Revenues:                                                (Note 1)    Gross premiums written:        - general operations             $ 2,911,364      $ 2,969,260          - life  operations                 213,275          171,760      - financial operations                 147,886          101,493    Net premiums written:        - general operations               2,357,322        2,370,808           - life operations                 202,938          161,824      - financial operations                 125,410           96,306    Net premiums earned:        - general operations               1,566,093        1,648,453          - life  operations                 146,994          108,636      - financial operations                  77,957           61,460    Net investment income                    553,092          463,742    Net realized gains on investments          9,292           22,765    Net realized and unrealized     gains on derivatives                      7,741           48,851    Net income from investment affiliates    118,936          106,393    Fee and other income                       3,337           12,962              Total revenues             $ 2,483,442      $ 2,473,262    Expenses:    Net losses and loss expenses incurred   $994,787      $ 1,088,505    Claims and policy benefits               188,343          151,499    Acquisition costs                        259,951          267,087    Operating expenses                       280,503          261,561    Exchange losses                           23,569           30,749    Interest expense                         142,791          127,869    Amortization of intangible assets            420            1,095              Total expenses             $ 1,890,364      $ 1,928,365      Net income before minority interest,       income tax and net income from       operating affiliates                $ 593,078        $ 544,897    Minority interest in net     income of subsidiary                     14,898            2,258    Income tax                                72,755           66,636    Net (income) loss from     operating affiliates                    (57,082)           7,420    Net income                             $ 562,507        $ 468,583    Preference share dividends               (12,789)         (10,080)    Net income available to     ordinary shareholders                 $ 549,718        $ 458,503    Note 1: Certain amounts in 2006 have been reclassified to conform with the    current period presentation                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA               (Shares in thousands, except per share amounts)                                                     Three Months Ended    Income Statement Data (continued):                    March 31                                                   2007             2006                                                                  (Note 1)    Weighted average number of ordinary     shares and ordinary share equivalents:                                      Basic     178,772          178,424                                    Diluted     179,601          179,158    Per Share Data:    Net income available to     ordinary shareholders                        $3.06            $2.56    Ratios - General insurance and     reinsurance operations:    Loss ratio                                     62.2%            64.1%    Expense ratio                                  28.2%            25.6%    Combined ratio                                 90.4%            89.7%    Note 1: Certain amounts in 2006 have been reclassified to conform with the    current period presentation                                XL Capital Ltd                     SUMMARY CONSOLIDATED FINANCIAL DATA            (U.S. dollars in thousands, except per share amounts)    Balance Sheet Data:                    As at                   As at                                       March 31, 2007        December 31, 2006                                                                 (Note 1)    Total investments     available for sale                 $39,795,888             $39,350,983    Cash and cash equivalents             3,370,799               2,223,748    Investments in affiliates             2,571,862               2,308,781    Unpaid losses and loss     expenses recoverable                 4,876,126               5,027,772    Total assets                         62,065,100              59,308,870    Unpaid losses and loss expenses      22,806,023              22,895,021    Deposit liabilities                   8,029,059               7,857,827    Future policy benefit reserves        6,522,699               6,476,057    Unearned premiums                     6,650,972               5,652,897    Notes payable and debt                3,368,615               3,368,376    Minority interest in equity     of consolidated subsidiaries           563,082                 562,121    Total shareholders' equity           11,312,547              10,131,166    Book value per ordinary share            $54.95                  $53.12    Note 1: Certain amounts in 2006 have been reclassified to conform with the    current period presentation                                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 monthsended March 31, 2007 and 2006.

    (U.S. dollars in millions, except per share amounts)                                                 Three Months Ended                                                      March 31                                                2007            2006    Net income (loss) available     to ordinary shareholders                $ 549.7         $ 458.5    Net realized losses (gains)     on investments, net of tax                (13.0)          (25.3)    Net realized and unrealized     (gains) losses on investment     derivatives, net of tax                    (4.7)          (29.6)    Net realized and unrealized (gains)     losses on credit and structured     financial derivatives, net of tax          11.4             1.9    Net income excluding net realized     gains and losses (Note 1)               $ 543.4         $ 405.5    Per ordinary share results:    Net income available to     ordinary shareholders                    $ 3.06          $ 2.56    Net income excluding net realized     gains and losses (Note 1)                $ 3.03          $ 2.26    Weighted average ordinary     shares outstanding:    Basic                                    178,772         178,424    Diluted                                  179,601         179,158    Return on Ordinary     Shareholders' Equity:    Average ordinary shareholders' equity  $ 9,704.4       $ 7,963.7    Net income excluding net realized     gains and losses (Note 1)               $ 543.4         $ 405.5    Annualized net income excluding net     realized gains and losses (Note 1)    $ 2,173.6       $ 1,622.1    Annualized Return on Ordinary     Shareholders' Equity -     Net income excluding net realized     gains and losses (Note 1)                  22.4%           20.4%    Note 1: Defined as "net income/loss excluding net realized gains and    losses on investments and net realized and unrealized gains and losses on    credit, structured financial and investment derivatives, net of tax".

Comment on Regulation G

This press release contains the presentation of (i) 'net income (loss)excluding net realized gains and losses on investments and net realized andunrealized gains and losses on credit, structured financial and investmentderivatives, net of tax' and (ii) annualized return on ordinary shareholders'equity (based on net income (loss) minus the Exclusions) to average ordinaryshareholders' equity. These items are "non-GAAP financial measures" asdefined in Regulation G. The reconciliation of such measures to the mostdirectly comparable GAAP financial measures in accordance with Regulation G isincluded 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/loss excluding net realized gains and losseson investments and net realized and unrealized gains and losses on credit,structured financial and investment derivatives, net of tax'. Investmentderivatives include all derivatives entered into by XL other than weather andenergy and credit derivatives (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 credit derivatives, because XL generallyholds its financial guaranty contracts written in credit default derivativeform to maturity, the net effects of the changes in fair value of these creditderivatives are excluded (similar with other companies in the financialguarantee business) as the changes in fair value each quarter are notindicative of underlying business performance of XL's financial guarantyoperations. Unlike these credit derivatives, XL's weather and energyderivatives are actively traded (i.e., they are not held to maturity) and are,therefore, not excluded from net income as any gains or losses from thisbusiness are considered by management when evaluating and managing theunderlying 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 agenciesthat follow XL (and the insurance industry as a whole) exclude these itemsfrom their analyses for the same reasons and they request that XL provide thisnon-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.Annualized return on average ordinary shareholders' equity (minus theExclusions) is calculated by dividing annualized net income minus theExclusions for any period by the average of the opening and closing ordinaryshareholder's equity. XL establishes target ROE's for its total operations,segments and lines of business. If XL's ROE return targets are not met withrespect to any line of business over time, XL seeks to re-evaluate theselines. In addition, XL's compensation of its senior officers is significantlydependant on the achievement of the Company's performance goals to enhanceshareholder value which include ROE.