PARTICIPANTS

. David Radulski, XL Capital Ltd, Director of Investor Relations . Brian O'Hara, XL Capital Ltd, President and CEO . Brian Nocco, XL Capital Ltd, EVP and CFO . Sarah Street, XL Capital Ltd, EVP and CIO . Josh Shanker, Citigroup, Analyst . Bob Glasspiegel, Langen McAlenney, Analyst . Jay Gelb, XL Capital Ltd, Lehman Brothers . Matthew Heimermann, J.P. Morgan, Analyst . David Small, Bear Stearns, Analyst . Brian Meredith, UBS, Analyst . Lane Kerrigan, Banc of America Securities, Analyst . Sam Hoffman, Adolor, Analyst . Henry Keeling, XL Capital Ltd, EVP and CEO

OVERVIEW

Management discussed 3Q07 results, reporting operating income per share of $3.13.

FINANCIAL DATA

A. Key Data From Call 1. 3Q07 operating income per share = $3.13. 2. YTD 2007 shares repurchased = $1b worth at average of $75.76. 3. 3Q07 shares repurchased = 2.31m shares at average of $76.66.

PRESENTATION SUMMARY

S1. 3Q07 Performance, Market, Succession (B.O.) 1. Highlights: 1. Dynamic time for financial industry including insurance companies. 2. Despite challenges, earned record operating income for 3Q and YTD. 3. Seventh consecutive quarter of excellent operating result for shareholders. 4. All segments contributed. 5. P&C operations continued strong, with combined ratio of 85.3%. 6. Turbulent financial markets resulted in co. recognizing some losses, investment operations contributed solid net investment income and very strong net income from investment and operating affiliates. 7. Annualized operating ROE was 22.3%. 8. Fully-diluted book value per share grew 2.8% in quarter and 13.1% over last 12 months. 9. Focus on disciplined underwriting, risk management, and investment management gives co. advantage at any stage in market cycle. 2. Market Condition: 1. Today conditions different from previous cycles. 2. Lower interest rates and discipline of highly-rated reinsurance capacity deter cash flow underwriting. 3. Rating agencies have made it clear that growing top line through rate cutting or loose terms will result in negative outlook or downgrades. 4. Many industry participants are managing down excess capital rather than exposing it through inadequate returns. 5. Changed climate in transparency has contributed to increased disclosure reserving detail. 6. In these more open and competitive conditions, co. believes it is well positioned to continue delivering value to customers and shareholders. 3. Succession: 1. CEO to retire during 2008. 2. Optimism about co.'s future has never been greater. 3. Board considers succession planning as one of its greatest obligations. 1. CEO will work closely with board over coming months to select best candidate. 1. Strong internal candidates, but co. will evaluate both internal and external candidates. 4. Meanwhile, CEO will work with executive management team on usual business.

S2. Market Conditions (H.K.) 1. Update: 1. Focusing on key strategic points discussed at investor day. 2. Simplified organizational structure. 3. Platform of insurance and reinsurance is affording greater operational flexibility. 4. Underwriting risk management strategies not seriously tested in 3Q. 1. Avoided outside exposure to numerous smaller international losses so far this year. 2. Insurance: 1. Gross premiums written were down 9.4%. 1. Run-off of ICAT portfolio, wrote less business in form of long-term agreements than in prior-year quarter, reduced marine and offshore energy writings, and continued underwriting discipline. 1. Increasingly competitive market conditions. 2. Net premiums earned were down 1.3% from last year. 1. Risk management strategies, reduced need for reinsurance, and better pricing for reinsurance co. did buy. 3. Market conditions continue to follow recent downward trends. 4. With approx. overall 7% premium rate reduction YTD, co.'s renewal experience is better than what it has seen in published surveys. 1. Validates strategy. 2. Ensures adequate returns. 5. Regarding new business, applies same underwriting criteria as for renewal business, but new business margins are becoming increasingly difficult. 3. Reinsurance: 1. Gross premiums written declined 17.7%. 1. Excluding timing differences vs. prior year, gross premiums written were down 8.7%. 2. Emerging markets group grew business YoverY. 3. Net premiums written were down 11.3% YoverY. 1. Affected by some of the same timing adjustments that impact gross premiums written. 1. Excluding these, net premiums written were down approx. 5.8%. 4. Notwithstanding Peruvian earthquake and Category 5 Caribbean hurricanes Dean and Felix, co. benefited from generally favorable CAT loss this season. 1. Exposure to July floods in UK was de minimus, and no deterioration in recorded numbers for June floods in UK and Australia. 2. Allowing for positive prior-year developments in this quarter and in prior-year 3Q, accident year loss ratio increased overall approx. 4.8 points in insurance and 4.4 points in reinsurance. 3. Events mentioned above, along with several mid-sized losses of under $10m each in aviation, property risk, casualty, and structured indemnity lines produced $27m in losses, or 2.6 loss ratio points in insurance, and $24m, or 4.1 lost ratio points in reinsurance. 1. Comparative loss activity in prior-year quarter was exceptionally benign, producing only 1.6 loss ratio points for reinsurance and nil for insurance. 2. Insurance segment also saw specific adjustments to instatements and other premiums that reduced net earned premiums by approx. $20m. 4. These items explain the majority of increase in accident year loss ratios over prior year for both segments, with competitive pressures on rate levels contributing to remaining differences. 4. Professional Lines Exposure from Sub-Prime Market Participants: 1. Monitoring exposure in insurance and reinsurance. 2. Expects losses to be contained within loss fix for this line of business. 3. Experience is that challenging market events like this can provide attractive opportunities for responsive, disciplined, and financially secure underwriters. 5. Life Operations: 1. Good performance, with continued growth in long-term regular premium business in UK and US. 2. Net income continues building, increasing over 50% in quarter and 17.5% YTD vs. prior-year periods. 6. Pursuit of Growth: 1. Earlier this month, received insurance license for Singapore, where co. has had a reinsurance branch since 1996. 1. Market is becoming an increasingly important gateway into the Asian and Middle-Eastern wholesale insurance markets. 2. Earlier this month, at FERMA European risk managers meeting, launched XL World Pass. 1. Enhanced management tool drives operational efficiencies for XL and customers and improves tax and regulatory transparency and compliance for global program clients. 1. Reinforces relationship with segment.

S3. 3Q07 Financial Details (B.N.) 1. Results: 1. Another exceptional quarter. 2. Combined ratio was 85.3% in P&C. 3. Total P&C net investment income was $326m. 4. Operating income was $3.13 per share. 5. Operating ROE was 22.3%. 6. Basic book value per share was $56.45. 7. Diluted book value per share was $56.29. 8. P&C acquisition ratio up slightly from last year to 14.7%. 1. Insurance acquisition expense ratio was down 1.1 points to 10.4%. 2. Reinsurance increased 3.4 points to 22.2%. 9. P&C loss ratios were outstanding at 62.7% for insurance and 50% for reinsurance. 1. Excluding prior year reserve releases, loss ratios would have been 68.7% and 64.6% for insurance and reinsurance respectively. 10. Actuarial reviews resulted in $144m of net favorable prior-year reserve developments, or $61m from insurance and $83m from reinsurance. 1. Net favorable development in insurance is comprised of favorable development of $83m from casualty and $21m from property, partially offset by $43m of adverse development within specialty and other lines of business. 2. Net favorable development in reinsurance is comprised of favorable development of $45m from property and other short-tail lines of business and $38m from casualty and other lines of business. 2. Life Operations: 1. Earnings were $27m. 2. Opex were $271m - in line with expectations. 3. Additional Financials: 1. Regarding accrual process for performance-based compensation, co. holds a portion of that compensation at corporate level until 4Q, when it determines if and how to distribute it among businesses. 1. Assuming current trends, expects an increase in expenses and expense ratios at segments, and corresponding decrease at corporate level in 4Q. 2. FX gain in quarter of $26.2m. 1. Decline in value of USD and revaluation of USD-liabilities for European-based subsidiaries. 3. Higher paid-to-incurred loss ratio was driven primarily by favorable prior-year reserve development and payments of approx. $135m related to 2005 hurricanes. 1. Excluding these, paid-to-incurred loss ratio was 70.6%. 4. Capital Management Initiatives: 1. Completed Series A preference share redemption. 2. Subsequent to quarter-end, announced redemption of Series B preference shares. 3. Common stock repurchase program brought back $1b worth of shares at average price of $75.76 YTD, including 2.31m shares at average price of $76.66 in 3Q. 4. Recently-announced additional authorization of $500m remains untapped. 5. Disclosure: 1. At investor day in May, committed to providing enhanced financial disclosure. 2. Last quarter, announced several improvements, which co. is pleased to continue. 3. Assets and liabilities associated with Life operations have significantly longer duration than average in P&C lines. 1. One may find them disclosed separately in financial supplement. 6. Accounting for Operating Affiliates: 1. Co. recognizes net income from operating affiliates on one-quarter lag, so 3Q results will be recognized in co.'s 4Q. 1. There is no change here. 2. Co. did change treatment of results of operating affiliates and calculation of operating income. 1. This is the first 4Q in which has co. accounted for SCA as an affiliate and is much more material than any other affiliates. 2. While SCA was a subsidiary, added back its net realized gains and losses and its profit and losses from credit, financial, and investment derivatives to derive operating income, as was case for all of co.'s consolidated businesses. 3. At that time, took entire share of affiliates' net income into operating income. 1. Believes materiality of SCA makes that no longer appropriate. 3. Excluded non-operating items reported by SCA from operating income and adopted similar treatment for other insurance company operating affiliates.

S4. Investment Results (S.S.) 1. Market Perspective: 1. From macro prospective, what started as correction in US sub-prime mortgage market quickly spread to CDOs and broader structure asset class. 2. Many investors in asset-backed commercial paper questioned every issue of exposure and significantly reduced their holdings. 3. Issuers that could no longer rely on short-term funding had to raise cash by selling higher-rated securities, which widened [bid-offer spreads] across all credit assets. 4. Meanwhile, investors in leverage loan market began demanding tighter covenants and higher rates from underwriting banks, leading to a number of large hung deals. 1. Resulting stress on banks' balance sheets reduced capacity and willingness to lend to each other. 5. Central banks intervened, injecting liquidity, raising competence and stabilizing short-term interest rates. 6. Co. has been engaged in market developments, offsetting potential impact on XL. 1. Reduced exposure to lower-rated 2005- and 2006-vintage sub-prime securities given concerns about future deterioration. 2. Will remain vigilant as co. expects volatility will stay high for foreseeable future. 7. XL is not a primary originator or insurer of mortgages, nor does it guarantee mortgages other than indirectly for activities of SCA. 8. Following discussion refers to XL's own structured credit portfolio. 2. Portfolio Position in Impacted Areas: 1. Total invested assets at September 30 were $46b, of which $41b is in fixed income and $4.3b is in risk asset portfolio. 1. Largest portion of fixed income portfolio is in structured credit portfolio, consisting of asset-backed and mortgage-backed securities, and which totals $16.2b. 1. Co. posted presentation on Website last night that gives additional granularity on overall structured credit exposures, particularly assets impacted by recent macro events. 2. Co. has spent much time analyzing underlying fundamentals of exposures. 3. Exposures: 1. Non-residential exposure of $8.8b consists of credit card, auto and other ABS receivables, CDOs and CMBS securities. 1. While these sectors have seen valuation declines due to spread widening, fundamental value of collateral backing these securities is not impacted by residential mortgages. 1. With exception of co.'s small asset-backed CDO portfolios. 2. Core CDO portfolio is 72% AA and above. 1. Underlying collateral is generally performing in line with expectations. 2. Approx. 70% of co.'s CDOs are backed by highly diversified pools of corporate loans. 3. Remains comfortable with quality of this portfolio given subordination levels available to absorb future credit events. 4. Lower-rated CDO portfolio being managed by specialist. 3. Co. has $4.5b in commercial mortgage-backed securities, a well-diversified portfolio where substantially all co.'s holdings are AAA-rated, and experiencing generally low delinquency rates. 1. Co. has high levels of credit enhancement in this portfolio. 4. Residential mortgage holdings totaled $7.4b, $2.7b of which consisted of AAA-rated agency guaranteed securities. 5. Has $2.3b of whole loan CMOs, representing fundamentally-sound issues, high-quality borrows, of which 80% are AAA-rated. 4. Four Areas of Structured Credit Holdings: 1. Co. has $1.2b exposure to non-agency residential sub-prime securities. 1. Remaining exposure to BBB and below is limited, with net realized loss for these securities at $1m. 2. Regarding characteristics on these sub-prime securities, has fairly strong pool of borrowers with average FICO scores at 655, loan-to-value is 78% in aggregate, delinquency levels below 5%, and strong subordination levels. 2. Second lein, the aggregate market value of holdings is only $128m, and approx. $77m of these securities have a component of sub-prime collateral. 1. These experienced notable valuation deterioration in quarter, and if co. had recognized these impairments, it is actually in $1m net realized gain position on these securities. 3. Regarding exposure to asset-backed CDOs, had an element of sub-prime collateral, which totaled $115m. 1. Exposures in this area are nearly entirely AA and above. 2. Exposure to lower-grade securities is de minimus. 3. Remaining unrealized loss is $7m. 4. Alt-A exposure totaled $992m, and was generally loans to prime borrowers, albeit written with lower levels of supporting documentation. 1. Exposures in this area are predominantly AA and above, and exposure to lower-grade securities is also de minimus. 2. Net unrealized losses on these securities totaled $19m. 5. Characteristics of these securities is strong, with high-quality borrowers with average FICO of 708, average subordination levels revenue above 20% and delinquencies on these securities are currently less at 2% on AA or above securities. 5. Corporate Credit: 1. Total corporate holdings at September 30, 2007 were $15b. 1. Portfolio is A-rated in aggregate. 2. Valuations on these assets during 3Q were primarily affected by wider, prevailing corporate credit spreads. 1. Co. also a large holder of high-quality financial sector paper, where credit spreads this quarter were more volatile than industrial, but where underlying fundamentals of holdings are generally very strong. 6. Valuation Methodology for Portfolio: 1. During quarter, reaffirmed pricing procedures and believes methodologies are robust and generate appropriate valuations even during market turmoil. 7. 3Q07 Financial Results: 1. Net realized losses investments was $160m, primarily driven by sub-prime related factors. 2. Realized losses of approx. $48m through sales of sub-prime securities during 3Q. 3. Further deterioration of certain lower-rated 2005- and 2006-vintage sub-prime securities likely. 1. (Indiscernible), but avoided further deterioration. which ultimately transpired. 2. Earned $90m of these lower-rated sub-prime securities at end-2Q and had less than $10m at end-3Q. 4. This quarter, recognized $111m of charges for other-than-temporary impairments. 1. Underlying fundamentals and the current conditions and valuations did not support a full recovery to cost. 2. OTTI rules require a write-down to current valuations, even in event co. considers securities ultimately less impaired than current valuations. 5. Net derivative negative mark-to-market was $58m, including net $38m on various total return and credit (indiscernible) and $24m on various interest rate swaps and currency hedging. 6. Unrealized losses before tax deteriorated by $102m. 7. Contribution from lower government rates in US, UK and Europe was more than offset by impact of wider corporate and structured credit spreads. 8. Total Mark-to-Market on Portfolio: 1. Much of negative impact from credit markets during quarter was borne by other financial lines operations. 1. Wider credit spreads have negative result. 2. Previously disclosed plans to runoff (indiscernible) JV these lines of business. 9. Earnings: 1. Total net investment income for quarter was $568m. 1. Of that, net investment income from primary P&C operations, excluding structured products, was $326m, growth of 15% from 3Q06. 2. Net income from investments (indiscernible) was $65m for quarter, driven by 3.7% return in equity-accounted portion of alternative portfolio. 3. Total alternative portfolio return, including the non-equity-accounted piece was lower at 1.9%. 1. These numbers compare June through August. 1. August loss of 50 bp, total alternative portfolio performed well vs. industry indices, with losses of 1-2.5%. 4. Net income from investment manager affiliates was $23m. 10. Summary: 1. Impact of macro events on investment results within expectations for portfolio of this size, especially given nature of spread businesses. 2. Committed to strategies for creating shareholder value. 3. Overall size and diversification of portfolio, combined with asset allocations to highly liquid areas mitigates risk of having to liquidate securities on unfavorable terms during periods of temporary market illiquidity.

QUESTION AND ANSWER SUMMARY

OPERATOR: (OPERATOR INSTRUCTIONS)

Your first question comes from the line of Josh Shanker with Citygroup.

JOSH SHANKER, ANALYST, CITIGROUP: Good morning, everyone. Regarding the other than temporary impairments, I was curious to know if you could go through some scenarios of ---

OPERATOR: Mr. Shanker, your line is open at this time.

JOSH SHANKER: I'm speaking, hello. Hello. Can you hear me? Hello?

OPERATOR: Your next question.

JOSH SHANKER: Can you hear me?

DAVID RADULSKI, DIRECTOR OF INVESTOR RELATIONS, XL CAPITAL LTD: Now.

BRIAN O'HARA, PRESIDENT AND CEO, XL CAPITAL LTD: We can hear you now.

JOSH SHANKER: You can hear me, thank you. My question is wondering if we could go through a little bit of scenario.

DAVID RADULSKI: Josh, you just cut out.

BRIAN O'HARA: Can't hear you.

OPERATOR: Your next question we'll take from Bob Glasspiegel with Langen McAlenney.

BOB GLASSPIEGEL, ANALYST, LANGEN MCALENNEY: Good morning. Brian, just a couple of questions. Do you have a sense whether the search for your successor-- and by the way, congratulations on your long run. Do you have a sense on whether the search will internal or external?

BRIAN O'HARA: Well, Bob, in our release, we said that we have several very good internal candidates, but for proper due diligence, we will also look at external candidates to make sure that we come up with the best choice, and in that regard too, when we make that decision, there will be little way of second guessing that we didn't do a full due diligence.

BOB GLASSPIEGEL: Financial Times has a story regarding [Sirius] capital -- Stanfield Capital, I guess it's been renamed, restructuring in SIV vehicles. Sorry, I don't know if that is the one you were referring to to the-- that had issues. But what is your exposure there to the situation, and are there other sort of derivative exposures to credit that we should be thinking about?

SARAH STREET, EVP AND CIO, XL CAPITAL LTD: Yes, Bob, the affiliate that has had challenging times in this market Sirius Capital, which is the manager of a structured investment vehicle, [called] Victoria Finance Limited. We do have an investment in the management company, Sirius, and we also have an interest in capital notes for Victoria, representing about 10% of all of the capital notes outstanding. Sirius, like other SIVs, is responding to the market turmoil and stress, and is looking at options at how to preserve its value for its investors. I should point out that XL is not a sponsor of Victoria, that XL's only contractual obligation to Victoria was to purchase the capital notes that we had at the time, the original issue. In terms of-- $37 million of the derivatives lost that we booked related to our markdown to the underlying NAV of the assets of the capital note.

BOB GLASSPIEGEL: What is your overall financial exposure to the situation?

SARAH STREET: Up to-- well the par value of the notes is $95 million but we taken a $37 million knock on that already.

BOB GLASSPIEGEL: Okay, and these sort of investments are in that structured credit data supplement or is that sort of additional? I'm sorry?

SARAH STREET: That would be separate but our only exposure to capital notes in the [bid] industry is this $95 million, of which we've obviously taken some [pain] already on.

BOB GLASSPIEGEL: Okay. Thank you very much.

BRIAN O'HARA: Thank you, Bob.

OPERATOR: Your next question comes from the line of Jay Gelb with Lehman Brothers.

JAY GELB, LEHMAN BROTHERS, XL CAPITAL LTD: Thanks and good morning, and Brian I want to echo my congratulations for a great string of recent results. I was hoping if you could give us a sense in terms of the search process itself. Where do you think you are in the timing of that, in terms of when you could have an announcement for a new leadership team in ?

BRIAN O'HARA: Jay, there's a succession committee of the Board who will be engaging a search firm. The CFO search we did last year it took approximately six months, so it could take that long but I could say we want to reach a conclusion at the earliest possible time after making sure that we've done a thorough search.

JAY GELB: Okay. And a separate issue, on the $500 million buyback, do you have a sense of how quickly that may be completed? We're looking at retained earnings of probably well over $1 billion in 2008, so it seems like you'll have ample opportunity to complete that.

BRIAN NOCCO, EVP AND CFO, XL CAPITAL LTD: This is Brian Nocco. Let me respond to that. We are building capital at a healthy pace, although while we're towards the end of the hurricane season, we're not through it. While the markets are appearing to begin to settle down a bit, they haven't completely settled down, so we don't have any firm plans for when we might resume those purchases but we'll be mindful of the capital we're building up and the opportunity when we think it's appropriate to get back into the market.

JAY GELB: Thanks. And then the final question is, just so I understand the negative mark to market adjustment that SCA had, w will that be flowing through XL's net income line or will it just be essentially the operating income that most of the street looks at for SCA?

BRIAN NOCCO: What we're doing with SCA, is we're picking up what they report as their operating income in our operating income and their portion of items that would be outside of operating income like the market-to-market on their portfolio, but they report outside of operating income. It will be in our net income but not in our operating income.

BRIAN O'HARA: That's actually consistent with the way we accounted for SCA when it was a subsidiary, when it was fully consolidated and we think that's a more meaningful depiction of our results.

JAY GELB: Great, thanks for the answers.

BRIAN O'HARA: And thank you Jay for your comments, but I also want to re-emphasize that as we do the process in succession, we're not distracted at all from our plans, our strategy and our execution. It's totally business as usual.

OPERATOR: Your next question comes from the line of Josh Shanker with Citigroup.

JOSH SHANKER: Hi there, sorry I missed you before, can you hear me okay?

BRIAN O'HARA: Yes.

JOSH SHANKER: Okay, great. My question was, and maybe when I was off the phone trying to get a new line, you answered this, going through the other than temporary impairments, I'm sure you've done a scenario analysis and I'm wondering if you could go through what might happen that would cause you to have to take additional impairments down the line.

SARAH STREET: We've spent a lot of time going through our portfolio and in terms of the OTTI impairments that we took through the quarter, you know it's a total of $111 million. $92 million of that was related to sub-prime, second lien or ABS CDO's, and we looked at a whole host of-- we did a very detailed review on our top [classic] classes, looking at vintages, rating, whether they're trading in the marketplace, conversations with our managers, managers doing stress tests on the underlying collateral, and it was based on all of that analysis we took the various charges out. And [suddenly] based on the end of the quarter, we think we've taken our [pain].

JOSH SHANKER: Okay, and in terms of thinking going forward, the-- what could potentially-- is there zero chance of recovery on the OTTI?

SARAH STREET: No, never such a thing as zero. I mean clearly we have had to, in some instances-- because with the OTTI rules, you have to write it down to the current valuation. Even if you think that it is not as impaired as it is currently trading at, you can't pick. It's either you hold it to par or you write it down. Clearly with a lot of the illiquidity that's been out there in the marketplace, assets have trade down lower than where we think the fundamental value is. But who knows? Which is why we took the charge because we think it's appropriate and feel comfortable with where we were at the end of the third quarter.

JOSH SHANKER: Then would it be wrong to say that accounting is tell you to take charge, but you believe you will have a recovery at some point?

SARAH STREET: I can't predict that. It will all depend [on] if we felt we were going to have a recovery and it was going to be a recovery to par, we would not have tan the charge. But given the uncertainty out there, where the delinquency rates are running, we felt it was appropriate to do what we did.

JOSH SHANKER: Okay, thank you very much.

BRIAN O'HARA: Thank you, Josh.

OPERATOR: Your next question comes from the line of Matthew Heimermann with J.P. Morgan.

MATTHEW HEIMERMANN, ANALYST, J.P. MORGAN: Hi, good morning. A couple of quick questions. One was could you just walk through maybe in more detail how your reinsurance program changed, and whether you feel you got better or worse terms than you're seeing in your own business?

BRIAN O'HARA: Henry?

HENRY KEELING, EVP AND CEO, XL CAPITAL LTD: Thanks, Brian. Interesting question. There were two primary drivers in the reduced reinsurance spend. Firstly, on our catastrophe reinsurance program for insurance, due to the risk management steps that we had taken, particularly the runoff of the ICAT program and other steps that we took, we didn't have to buy as much limit as we did in 2006. And secondly, we saw improved pricing in the program as well.

The second part was that one particular program that we have, program manager that we have, where previously we had ceded not in significance amounts of premium to the captive manager of that-- or the captive vehicle to that program, we're not ceding nearly to there. There were two factors there.

The question relative to the CAT pricing, obviously we run scenarios internally on whether we think the CAT pricing represents good value. We thought it was pretty much in line with what we would have expected to see in the market.

MATTHEW HEIMERMANN: Now, outside of CAT, where the change in retention and the like makes a lot of sense, I mean how are you thinking about reinsurance purchasing in other areas going forward? Are we at a point where you might think about perhaps buying more excess coverage or facultative coverage in some of your casualty lines?

HENRY KEELING: We look at our reinsurance programs a continual basis. We work with our brokers, who advise us on modeling as well. We haven't changed our fundamental reinsurance buying strategy at this point but we look at the programs as they come up, and that's primarily at January 1 and July 1.

MATTHEW HEIMERMANN: Okay. That's fair. And then I guess the other question for Brian, and hopefully there's a party at some point, does the fact that you're going to stay on as Chairman mean that there doesn't necessarily have to be kind of a long transition period? In other words, if this did take nine months, that's okay too because you'll be around a year as Chairman?

BRIAN O'HARA: Matthew, we want this to be as seamless as possible. We have a lot of momentum going, we have a lot of strategic development plans going, and we don't want the execution to slip at all. So, as I've said before, we want to get it done in the best practicable time allowed and, as I said, make it seamless.

MATTHEW HEIMERMANN: Okay, appreciate it. Thanks and congrats.

BRIAN O'HARA: Thank you, Matthew.

OPERATOR: Your next question comes from the line of David Small with Bear Stearns.

DAVID SMALL, ANALYST, BEAR STEARNS: Good morning. Could you give us a sense of how large your financial institution's professional lines book is, on the Insurance side, that is.

BRIAN O'HARA: Henry?

HENRY KEELING: Yes, thanks, David. We don't consider ourselves to be overweight-- I can't compare it directly with other carriers but with and our own portfolio, we have a very diversified financial lines and other lines professional book. We don't consider ourselves to be overweight at all to mortgage lenders, commercial banks, that type of entity, and in fact, our average line size on those types of entities is typically smaller than we would have overall across our portfolio.

BRIAN NOCCO: As well we are very large provider of side A only capacity, which also forth protects us from some of this turmoil.

DAVID SMALL: Okay, and then it was interesting to note that in the quarter on the insurance side you actually exempt professional lines business, and given some of the commentary we've heard on other conference calls during the season that pricing there is fairly weak, I was curious to know where you growing that, and if you're maybe experiencing different trends then others?

HENRY KEELING: Again, as I'm harking back to my initial point, we have a very diversified product line across the whole of our professional lines. We've referenced before that we're growing our private DNO book, and we're doing quite well from a small market share. We're able to grow that business. Our European book is doing well. Our select professional and design professional book is growing quite nicely as well. So it's really responding to the diversified nature of our portfolio.

MATTHEW HEIMERMANN: Just one last numbers question, in terms of KRW. Where are we in terms of the claim payments there?

HENRY KEELING: I think you saw the numbers for the quarter in Brian Nocco's piece and I think we've got the current payment, Brian?

BRIAN NOCCO: We have the data in here. We're about 72% through on a gross basis and if I recall correctly in the mid-60s on a net basis.

MATTHEW HEIMERMANN: Great, thank you.

OPERATOR: Your next question comes from the line of Brian Meredith with UBS.

BRIAN MEREDITH, ANALYST, UBS: Good morning. Two questions here for you. The first one, can you talk a little bit about recent discussions with rating agencies and what their thoughts are about the investment portfolio, and I know you made the comment that you're still in hurricane season and there's still lots of uncertainties in the financial markets, and your stock is trading at [1, 2] of book value, and I'm not sure if you see that at a attractive buying opportunity or not?

BRIAN O'HARA: I will leave the latter to you. I know I have my view. On the former, we have spoken to rating agencies. We did several weeks ago go into the rating agencies to inform them of our exposures relative to some of the volatility in the market, and took them through quite a significant amount of detail relative to sub-prime and some of the other asset classes that have experienced credit spread widening and liquidity disruptions. Fortunately, as Sarah indicated, we have relatively modest exposure to those, much of it concentrated in our funding agreement and [Unigig] businesses which we have indicated we're exiting. I believe the rating agencies are comfortable with our exposures and the disclosure that we provided them, and I think the first thing is, before you can manage those kinds of exposures, you have to understand them and know the extent to which you're exposed. Our investment management team, led by Sarah Street, has done a enormous amount of work on that, and that is not only is evident to us at the company but was also evident to the rating agencies, and so I believe that they're comfortable with where we're.

BRIAN MEREDITH: Great. If I could turn over to the investment income on structured and financial products. Just trying to get a better understanding of exactly what that number is. If I look at return or yield on your structured product portfolios, then over the last quarters, it's ramped up significantly, almost up 200 to 300 basis points, about $142 million versus $123 last year. And I know that's a short duration portfolio. Can I understand kind of the dynamics behind that? What's going into that and why has it ramped up so quickly?

SARAH STREET: It's a combination of a couple of things. Wider credit spreads, which clearly we've seen over the last couple of months that have fed through. It's also a floating rate portfolio, so it's based off LIBOR and certainly through this disruption LIBOR rates have been much, much higher. So that has fed through. So really it's a yield story.

BRIAN MEREDITH: It's a yield story? And the yield on that looks pretty high. Is it an investment grade portfolio or is it highly rated, lower rated?

SARAH STREET: It's a combination of two portfolios. I mean the large portion of it is the [Unigig] funding agreement business. And that certainly is a portfolio, given the nature of that business, that has higher BBB exposure. I think that portfolio is currently running at about 16% BBB in terms of ratings, while PNC operation is like at 6/7%. So it does have a more heavily weighted, lower rated component to it, given the nature of the fact it's a spread business and you do have lower rate of securities in those types of portfolios.

BRIAN MEREDITH: Okay, great. And one final question. Deposit liabilities kind of continue to move up here. I assume that's related to the life insurance business, not the structured products business? Is that correct?

HENRY KEELING: Not necessarily so. We did actually close a medium-sized structured product transaction in the third quarter, which was on a deposit basis.

BRIAN MEREDITH: So you're still continuing to do the structured product business?

HENRY KEELING: This is in the structured indemnity area of what we call financial solutions.

BRIAN O'HARA: They worked in league with our insurance operations.

BRIAN MEREDITH: Great, thank you.

OPERATOR: (OPERATOR INSTRUCTIONS) Your next question comes from the line of [Lane] Kerrigan with Banc of America Securities.

LANE KERRIGAN, ANALYST, BANC OF AMERICA SECURITIES: Good morning. I have several questions, and the structured credit data that you provided is quite helpful, thank you. But as has been said, I assume the ratings are as of September 30th. Have there been any downgrade since then that would affect what we're looking at in terms of the ratings that's in that package?

SARAH STREET: Yes, I can give you that data if you bear with me one moment. As you know-- you are correct in the assumption that the downgrade data in there was as of the end of September,and you will be aware there has been thousands of downgrades that have come in from the rating agency over the last two weeks. We have had 13 bonds impacted and those only have a market value of $28 million. That is principally in the subprime sector, it was one or two rating downgrades. The other area where you saw on Monday S&P review $20 billion of asset-back CDO holdings and put many of them on negative watch, in that list, we only had two tranches that were affected, and in fact it's two tranches in the same CDO, so very small though our exposure to the asset-backed CDO portfolio is pretty small at $150million anyway.

LANE KERRIGAN: $115 million, is that in these two tranches or is that the overall?

SARAH STREET: That's the aggregate. $115 million is the total, and the small tranche, I don't know the exact number but I guess it's --

LANE KERRIGAN: So it would be fair to say that credit ratings as shown in that supplemental data are fairly representative of the portfolio even today?

SARAH STREET: Right, absolutely. I would say, I mean obviously, I would expect to add delinquencies turned to default. You will see rating migrations in all sub-prime portfolios, but as the work that we have done, we do not expect to see significant rating migration to non-investment grade, which is where you would need to be concerned. The subordination levels that we have, we feel pretty comfortable with.

LANE KERRIGAN: In terms of the sub-prime portfolio, you provided us the vintages and there's a 2007 vintage of almost $400 million. Was that written in the first half of the year or in the third quarter, and if it wasn't done in the first half, what made you comfortable with it or why should we be comfortable with it?

SARAH STREET: Priced $400 million?

LANE KERRIGAN: I'm looking at the vintages in the sub-prime first lien securities $1.2 billion, and the '07 exposure is almost 400.

SARAH STREET: Okay. The breakdown. A lot of it was in the the first quarter, but if you look at the rating, it's very heavily weighted. It's $310 million of that is in AAA rated, and when we look at the subordination levels on those portfolios, it's pretty high, it's above 25%. So we feel very good about that portfolio.

LANE KERRIGAN: If I could go to the California wildfires, do you have-- if you could give us any thoughts that or especially exposure that you have to California, and I know it's early days in terms of actual losses but your thoughts on your exposure to potentials there?

HENRY KEELING: Well, it is very early days and obviously, it's on going and pretty tragic what we're seeing out there at the moment but we've also seen around Malibu, the winds have died down but it still seems to be going pretty hard around San Diego. So we don't know where it's going to go yet. We have been in contact with our major cedents through the brokers out there. At this point they're saying it's a retention loss, not going into their programs, but obviously as I say it's early days. Just for reference loss-- in 2003, we reported losses of about $12 million on the fires that happened in 2003. Since that time, retention levels have increased and so our net exposure would be down. So it's early days but at this point I don't see it being a significant reinsurance event.

LANE KERRIGAN: If I may ask the last question, sorry, on lost cost trends. What are you seeing on that and are they moderate-- are they still the same, and what are your thoughts on them going forward, [especially] in casualty lines?

HENRY KEELING: I can-- in terms of lost cost generally, if we look the professional lines market, notwithstanding what we've seen in sub-prime, the incidents of losses coming down, the severity is still there, and we've seen that through the published surveys, but we remain concerned that trend could reverse. But tort reform has been a positive impact overall. But generically, we're seeing pressure on pricing, which I think is the bigger issue rather than lost cost trends, at the moment, and as I mentioned we-- in addition to the the smaller events we had, we've also increased our loss ratio picks during 2007 in the order of 1 percentage point on insurance, if you back out all those numbers I gave you earlier, and closer to two percentage points overall in reinsurance.

LANE KERRIGAN: Thank you very much.

BRIAN O'HARA: Thanks, [Lane].

OPERATOR: And your final question comes from the line of Sam Hoffman with Adolor.

SAM HOFFMAN, ANALYST, ADOLOR: Good morning, I just wanted to ask if you could comment on how you view your investment in SCA, in the sense that if it looks like it's going to zero, will you feel the obligation to step up and put more capital into the company, and also have the rating agencies view that. Do they view it that you have an implicit obligation or likelihood to put more money into that company?

BRIAN O'HARA: We really don't want to comment for SCA's part because it's an independent company. I think scenarios of zero are very far-fetched.

BRIAN NOCCO: I think it's way oversold-- pardon me?

SAM HOFFMAN: Let's just say it they lose significant capital to the point where they need to raise capital, do the rating agencies factor that in --

BRIAN O'HARA: We have no obligation.

SAM HOFFMAN: Okay.

BRIAN O'HARA: At all, [period].

SAM HOFFMAN: Thank you. And the other question is, can you comment on your view of the prospect for tax reform in Bermuda in terms of affiliated reinsurance and corporate inversions, and what is going on in Washington right now and what you see as the options under consideration and the timing of anything that might happen?

BRIAN O'HARA: As you know, much has been written on the topic. We've seen no consensus among legislators for any particular bill or transaction, but you know we really look at this as an effort by a few companies to attempt to use Congress to obtain market advantage by placing unjustified punitive taxes on their competitors, and this is legislation that represents a solution in search of a problem, because existing law grants the IRS the authority to regulate transactions covered by this legislation, and has the enforcement power to ensure compliance, and transfer pricing does generate the appropriate income. Anyway, it's anti-competitive and to do something like this would drive up prices for policyholders, and there's a lot of reaction by consumers against this kind of legislation.

SAM HOFFMAN: So you don't think anything's going to happen this year, sounds like?

BRIAN O'HARA: It runs into a rich complexity of global free-trade realities and other factors. And things that we've seen out of reports from Congress show no agreement on anything.

SAM HOFFMAN: Okay. Thank you.

BRIAN O'HARA: Okay, thanks.

OPERATOR: And I would like to turn the conference back over to management for any closing remarks.

DAVID RADULSKI: Thank you, Janice. And now to Brian O'Hara for his closing comments.

BRIAN O'HARA: Thank you, David. We've built XL as a company as customers turn to for intelligence risk solutions delivered from a global platform,which we provide with innovation, financial strength and integrity. By delivering this customer value in a disciplined manner and by seeking to grow only through selective and profitable initiatives, I believe we can fulfill our commitment to building book value across the cycle for our shareholders. Thank you for joining us this morning.

OPERATOR: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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