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First Quarter 2004 Net Income $452.2 million, or $3.25 per ordinary share up from $239.9 million, or $1.74 per ordinary share in First Quarter 2003.

HAMILTON, BERMUDA, May 3, 2004 -- XL Capital Ltd (“XL”or the “Company”) (NYSE: XL) today reportedrecord net income available to ordinary shareholdersfor the quarter ended March 31, 2004 of $452.2 million,or $3.25 per ordinary share, compared with $239.9 million,or $1.74 per ordinary share, for the quarterended March 31, 2003.

Net income excluding net realized gains and losseson investments and net realized and unrealized gainsand losses on credit and investment derivative instruments,net of tax, for the first quarter of 2004 was a record$328.8 million, or $2.36 per ordinary share, comparedwith $250.2 million, or $1.82 per ordinary share, forthe quarter ended March 31, 2003.

First Quarter Operating Highlights 2004 vs.2003:

  • • Net premiums written from general operations increased 19% to $2.8 billion
  • • Combined ratio from general operations was a satisfactory 88.8%
  • • Net investment income up 19% to $228 million
  • • Earnings from equity in investment affiliates up 163% to $70 million
  • • Cash flow from operations $527 million, or $752 million, including structured and spread transactions
  • • Total net invested assets exceeded $27 billion, up 30%
  • • Total assets increased 18% to a record $44 billion
  • • Book value up $2.84 from December 31, 2003 to $49.58
  • • Return on ordinary shareholders’ equity at 19.8%

Commenting on the first quarter 2004 results, BrianM. O’Hara, President and Chief Executive Officerof XL, stated: “I am pleased to announce recordfirst quarter results with all segments of our businessbeing profitable and contributing to this impressiveperformance.”

“Our general operations continue to experienceoverall premium growth and remain very profitable asevidenced by our 88.8% combined ratio in the first quarterof 2004, despite increasing competition. We also enjoyedthe benefits of our diversification strategy with verygood results from our investments in affiliates as wellas solid contributions from our Financial Products andServices segment and our Life and Annuity Reinsuranceactivities,” Mr. O’Hara noted.

Total assets as of March 31, 2004 were a record $44.2billion compared with $40.8 billion as of December 31,2003. Book value per ordinary share as at March 31,2004 increased by 6.1% to $49.58 from $46.74 as at December31, 2003.

A live on-line web cast of XL’s call with analystsand investors to review the first quarter 2004 resultswill be held at 10:00 a.m. Eastern Time on May 4, 2004at www.xlgroup.com. A telephone replay of the conferencecall will be available beginning at 1:00 p.m. EasternTime on May 4, until 8:00 p.m. Eastern Time on May 11,2004 by dialing (201) 612-7415 (account number: 7716and conference I.D. number: 100381). An unaudited financialinformation supplement relating to the Company’s2004 first quarter results is available on its website:www.xlgroup.com

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

This presentation contains forward-looking statementsthat involve inherent risks and uncertainties. Statementsthat are not historical facts, including statementsabout XL’s beliefs, plans or expectations, areforward-looking statements. These statements are basedon current plans, estimates, and expectations. Actualresults may differ materially from those projected insuch forward-looking statements and therefore you shouldnot place undue reliance on them. A non-exclusive listof the important factors that could cause actual resultsto differ materially from those in such forward-lookingstatements includes the following: (a) rate increasesand improvements in terms and conditions may not beas large or sustainable as XL is currently projecting;(b) greater frequency or severity of claims and lossactivity than XL’s underwriting, reserving orinvestment practices anticipate based on historicalexperience or industry data; (c) developments in theworld’s financial and capital markets which adverselyaffect the performance of XL’s investments oraccess to such markets; (d) changes in general economicconditions, including foreign currency exchange rates,inflation and other factors; and (e) the other factorsset forth in XL’s most recent reports on Form10-K, Form 10-Q, and other documents on file with theSecurities and Exchange Commission. XL undertakes noobligation to update or revise publicly any forward-lookingstatement, whether as a result of new information, futuredevelopments or otherwise.

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                                  XL Capital Ltd                       SUMMARY CONSOLIDATED FINANCIAL DATA                     (In thousands, except per share amounts)                                                   Three Months Ended    Income Statement Data:                              March 31                                                      (Unaudited)                                               2004                      2003    Revenues:     Gross premiums written       --general operations              $3,400,682                $2,991,049       --life and annuity operations        115,885                   111,324       --financial operations                56,889                    44,766     Net premiums written       --general operations               2,784,761                 2,347,775       --life and annuity operations        115,884                    97,313       --financial operations                52,334                    43,996     Net premiums earned       --general operations               1,574,925                 1,431,887       --life and annuity operations        116,932                    92,771       --financial operations                32,588                    26,973    Net investment income                   228,346                   191,904    Net realized gains (losses)     on investments                         115,337                    (4,663)    Net realized and unrealized     gains on derivative instruments         11,597                    14,493    Equity in net income     of investment affiliates                70,376                    26,798    Fee and other income                      6,907                    12,277                                         $2,157,008                $1,792,440    Expenses:    Net losses and     loss expenses incurred                $963,944                  $885,254    Claims and policy benefit reserves      134,063                   119,558    Acquisition costs                       277,270                   240,312    Operating expenses                      245,300                   190,519    Exchange gains                          (10,724)                   (2,702)    Interest expense                         40,057                    46,140    Amortization of intangible assets         3,257                       375                                         $1,653,167                $1,479,456    Income before minority interest,     income tax expense and equity in     net (income) loss of insurance     and financial affiliates              $503,841                  $312,984    Minority interest                         4,660                     1,862    Income tax expense                       35,357                    20,030    Equity in net loss of insurance     and financial affiliates                 1,575                    41,087    Net income                             $462,249                  $250,005    Preference dividend                     (10,080)                  (10,148)    Net income available     to ordinary shareholders              $452,169                  $239,857    Weighted average number of ordinary     shares and ordinary share equivalents     :Basic                                 137,624                   136,216     :Diluted                               139,044                   137,631    Per Share Data:    Net income available to     ordinary shareholders                    $3.25                     $1.74    Ratios -- General insurance and     reinsurance operations    Loss ratio                               61.1%                      60.9%    Expense ratio                            27.7%                      25.2%    Combined ratio                           88.8%                      86.1%                                 XL Capital Ltd                       SUMMARY CONSOLIDATED FINANCIAL DATA                    (In thousands, except per share amounts)                                             As at March 31,    As at Dec. 31,                                                   2004              2003                                               (Unaudited)       (Unaudited)    Balance Sheet Data:    Total investments available for sale       $22,161,915       $20,775,256    Net payable for investments purchased           86,577            96,571    Cash and cash equivalents                    2,646,857         2,403,121    Investments in affiliates                    2,035,727         1,903,341    Total assets                                44,170,320        40,764,215    Unpaid losses and loss expenses             16,718,056        16,558,788    Deposit liabilities and     policy benefit reserves                     7,641,086         7,284,179    Notes payable and debt                       2,736,867         1,905,483    Total shareholders' equity                   7,362,727         6,936,915    Book value per ordinary share                   $49.58            $46.74

XL Capital Ltd RECONCILIATION

The following is a reconciliation of the Company’s(i) net income to ‘net income excluding net realizedgains and losses on investments and net realized andunrealized gains and losses on credit and investmentderivative instruments, net of tax’ (which isa non-GAAP measure, the “Exclusions”) and(ii) annualized return on shareholders’ equity(based on net income minus the Exclusions) to averageordinary shareholders’ equity for the three monthsended March 31, 2004 and 2003 (in millions, except pershare amounts):

                                                        Three Months Ended                                                              March 31                                                            (Unaudited)                                                      2004              2003    Net income available to     ordinary shareholders                          $452.2            $239.9    Net realized (gains) losses on     investments, net of tax                        (107.6)             14.4    Net realized and unrealized gains on     investment derivatives, net of tax               (2.9)             (4.7)    Net realized and unrealized (gains)     losses on credit derivatives,     net of tax                                      (12.9)              0.6    Net income 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             $328.8            $250.2    Per ordinary share results:    Net income available to ordinary shareholders    $3.25             $1.74    Net income 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              $2.36             $1.82    Weighted average ordinary     shares outstanding       :Basic                                        137.6             136.2       :Diluted                                      139.0             137.6    Return on ordinary shareholders' equity:    Average ordinary shareholders' equity     (excludes preference shares of $517.5)       $6,632.3          $6,173.4    Net income 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              328.8             250.2    Annualized net income 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                       1,315.3           1,000.6    Annualized Return on Ordinary     Shareholders' Equity --    (Annualized net income 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)              19.8%             16.2%

Comment on Regulation G

This press release contains the presentation of (i)‘net income excluding net realized gains and losseson investments and net realized and unrealized gainsand losses on credit and investment derivatives, netof tax’ and (ii) annualized return on ordinaryshareholders’ equity (based on net income minusthe Exclusions) to average ordinary shareholders’equity. These items are “non-GAAP financial measures”as defined in Regulation G. The reconciliation of suchmeasures to the most directly comparable GAAP financialmeasures in accordance with Regulation G is includedabove.

XL presents its operations in the way it believes willbe most meaningful and useful to investors, analysts,rating agencies and others who use XL’s financialinformation in evaluating XL’s performance. Thispresentation includes the use of ‘net income excludingnet realized gains and losses on investments and netrealized and unrealized gains and losses on credit andinvestment derivatives, net of tax’. Investmentderivatives include all derivatives entered into byXL other than weather and energy and credit derivatives(discussed further below).

Although the investment of premiums to generate income(or loss) and realized capital gains (or losses) isan integral part of XL’s operations, the determinationto realize capital gains (or losses) is independentof the underwriting process. In addition, under applicableGAAP accounting requirements, losses can be createdas the result of other than temporary declines in valuewithout actual realization. In this regard, certainusers of XL’s financial information, includingcertain rating agencies, evaluate earnings before taxand capital gains to understand the profitability ofthe recurring sources of income without the effectsof these two variables. Furthermore, these users believethat, for many companies, the timing of the realizationof capital gains is largely opportunistic and are afunction of economic and interest rate conditions. Inaddition, with respect to credit derivatives, becauseXL generally holds its financial guarantee contractswritten in credit default derivative form to maturity,the net effects of the changes in fair value of thesecredit derivatives are excluded (similar with othercompanies in the financial guarantee business) as thechanges in fair value each quarter are not indicativeof underlying business performance of XL’s financialguarantee operations. Unlike these credit derivatives,XL’s weather and energy derivatives are activelytraded (i.e, they are not held to maturity) and are,therefore, not excluded from net income as any gainsor losses from this business are considered by managementwhen evaluating and managing the underlying business.

In summary, XL evaluates the performance of and managesits business to produce an underwriting profit. In additionto presenting net income (loss), XL believes that showingnet income (loss) exclusive of the items mentioned aboveenables investors and other users of XL’s financialinformation to analyze XL’s performance in a mannersimilar to how management of XL analyzes performance.In this regard, XL believes that providing only a GAAPpresentation of net income (loss) makes it much moredifficult for users of XL’s financial informationto evaluate XL’s underlying business. Also, asstated above, XL believes that the equity analysts andcertain rating agencies who follow XL (and the insuranceindustry as a whole) exclude these items from their analyses for the same reasons and they requestthat XL provide this non-GAAP financial informationon a regular basis.

Return on average ordinary shareholder's equity ("ROE"), excludingnet realized gains and losses on investments and netrealized and unrealized gains and losses on credit andinvestment derivative instruments, net of tax (the "Exclusions"),is a widely used measure of any company's profitability.Annualized return on average ordinary shareholders'equity (minus the Exclusions) is calculated by dividingannualized net income minus the Exclusions for any periodby the average of the opening and closing ordinary shareholder'sequity. The Company establishes target ROE's for itstotal operations, segments and lines of business. Ifthe Company's ROE return targets are not met with respectto any line of business over time, the Company seeksto re-evaluate these lines. In addition, the Company'scompensation of its senior officers is significantlydependant on the achievement of the Company's performancegoals to enhance shareholder value which include ROE.