2. Mark W. Callahan, FCAS SVP, Underwriter XL Financial Solutions Capital Adequacy CAS Annual Meeting– November 2002

3. The material presented in no way represents the views or outlook of XL Capital or the panel. Please disregard any uninformed or irrational opinions of the presenter.

4. Issues Affecting Capital Adequacy Liabilities Investments Bad Management

5. Where is the Industry from an Investment Perspective?

6. Notable Credit Events Bond Defaults in 1st Half of 2002 –21 defaults > $1B –89 defaults = $76.7B –4 defaults = $4B within 12 months of IG Disclosure Source: Moody’s Clash Financial Guaranty Surety E&O

7. Source: Moody’s Higher Losses

8. Source: Moody’s Default Rates

9. Historical Recovery Rates Source: Moody’s

10. Source: contraryinvestor.com Corporate Debt Load

11. Industry Confidence in Reserves

12. Liabilities - Who Cheats? Source: Educational Testing Service Percentage of College Students Who Report Having Cheated 75% - 98%

13. Who’s Guilty 3,259 A.M. Best Rated U.S. P/C Companies 334 Rated B++ and B+ 518 Rated A- 107 Publicly Traded Companies Long Tail Lines or Latent Liabilities Source: A.M. Best, CNN Money

14. Coming to a Theater Near You... Asbestos 6000 Named Defendants Increased Claims Activity Reform $45-70B Unreserved (Not Anytime Soon) Source: Asbestos: A Moving Target (Bhagavatula, Moody, Russ); AM Bests

15. Inflation on Long Tail Lines Source: U.S. Department of Labor Bureau of Labor Statistics Medical Litigation US Workers Compensation –$35B Gross Reserve (00 & 01) –$62B Gross Reserve (99 & Prior) $372B Total Industry Reserves

16. Actuarial Bias?

17. Public Perception

18. Surplus Source: Best’s Aggregates and Averages

19. Rating Migration in 2002 Source: Standard & Poor’s

20. Top 15 Reinsurance Groups Based on Net Reinsurance Premiums Written - 2002 Source: Standard & Poor’s Reinsurance Group Standard & Poor'sMoody's January 2002October 2002January 2002October 2002 Munich Re GroupAAA AaaAa1 Swiss Re GroupAAAAA+Aaa Berkshire Hathaway Re GroupAAA Aaa Employers Re GroupAAAAA+Aaa Hannover Re GroupAA A2 Lloyd'sAA Gerling Global Re GroupAA-BBBAa3 SCOR Re GroupAA-A+A1 Allianz Re GroupAA+AAAa3 AXA Re GroupAA Aa3 Converium Re GroupA+ A1 Transatlantic Re GroupAA Aa1 PartnerRe GroupAA Aa3 XL Re GroupAA Aa2 St. Paul Re GroupAA-A+Aa3