Fitch rates XL Capital converts

Fitch Ratings said it expects to assign a rating of A to XL Capital Ltd.'s proposed offering of approximately $750 million of equity security units. The rating corresponds with XL's existing senior debt rating of A.

Following completion of the offering, Fitch said it expects to remove the ratings for XL's senior debt and the insurer financial strength ratings of XL's property/casualty reinsurance subsidiaries from Rating Watch negative and assign a stable outlook.

Fitch said the ratings were placed on Rating Watch following this announcement, reflecting some potential uncertainty regarding the capital raising process. The terms of the current offering of securities are within Fitch's expectations for the offering, leading to the expected change in Rating Watch status.

The newly offered securities receive considerable equity credit from Fitch due to the provision for mandatory conversion into ordinary shares in 2007. On a pro forma basis, XL's debt-to-total-capital ratio is about 21% following this issuance and adjusted for equity credit.

Fitch said the ratings continue to reflect XL's position within the global insurance and reinsurance markets, historical underwriting and earnings performance, strong operating cash flow, and adequate capital position at the parent and subsidiary level.

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