XLIT Ltd. And Its Operating Subsidiaries

Transcription

1 XLIT Ltd. And Its Operating Subsidiaries Primary Credit Analyst: Taoufik Gharib, New York (1) ; Secondary Contact: Hardeep S Manku, Toronto (1) ; hardeep.manku@standardandpoors.com Table Of Contents Rationale Outlook Base-Case Scenario Company Description: Diversified Global Multiline Insurer Business Risk Profile Financial Risk Profile Other Assessments Factors Specific To The Holding Company Accounting Considerations Related Criteria And Research DECEMBER 29,

2 SACP* Assessments SACP* Support Ratings Anchor a+ Business Risk Very Strong + Modifiers 0 ERM and Management 0 = a+ Liquidity Group Support 0 = Holding Company Rating Financial Risk Strong Holistic Analysis 0 Sovereign Risk 0 Gov't Support 0 A-/Positive/-- *Stand-alone credit profile. See Ratings Detail for a complete list of rated entities and ratings covered by this report. Rationale Standard & Poor's Ratings Services' ratings on XLIT Ltd. and its operating subsidiaries (collectively, XL) reflect our view of the group's very strong business risk and strong financial risk profiles, built on extremely strong capital and earnings and partially offset by its high risk position. Under our criteria, these factors lead to a possible anchor of either 'a+' or 'aa-'. We assigned an 'a+' anchor because XL is still integrating Catlin Group Ltd. (Catlin), which it acquired in May Our view also reflects XL's broad diversification by product, geography, and through its dual insurance and reinsurance platform. This diversification moderates some of our concerns regarding XL's high-risk position. Business Risk Profile: Very Strong Very strong competitive position bolstered by the transformational acquisition of Catlin earlier this year, which enhanced scale and product offering XL and Catlin have each generated strong consolidated property/casualty (P/C) underwriting performance and we expect them to do so as a consolidated entity Intermediate insurance industry and country risk assessment (IICRA) reflects low country risk and moderate industry risk for P/C insurance and reinsurance Financial Risk Profile: Strong Extremely strong capital and earnings, supported by strong and diversified operating results and redundant capital adequacy at the 'AAA' level High risk position because of potential volatility of capital and earnings arising from exposure to property catastrophe and terrorism risks Predominant insurance risks, with reserving risk using the bulk of economic capital, followed by market risk and natural catastrophe risk Strong financial flexibility has improved markedly during the past few years DECEMBER 29,

3 Other Factors Strong enterprise risk management (ERM) framework plays a significant role in value-creation strategy Satisfactory management and governance with a focus on successfully integrating Catlin during the next 12 months Factors Specific to the Holding Company As we do most of its Bermuda-based peers, we rate Cayman Islands-based XLIT Ltd. two notches below its operating subsidiaries, because of structural subordination reflecting the holding company's dependence on dividends from its operating subsidiaries. XL's operating companies are domiciled in different countries with the majority of capital held in Bermuda, which provides the group with significant regulatory flexibility in upstreaming dividends to the holding company. Outlook: Positive The positive outlook means that we could raise the ratings within the next 24 months. Raising the rating would require XL to integrate Catlin successfully with minimal business loss and continue generating sustainable and strong earnings in both insurance and reinsurance while cementing its re-underwriting actions and optimizing its portfolio toward higher-margin businesses. Other contributing factors would include XL's ability to maintain 'AAA' capital redundancy, and sustainably to meet our operating performance expectations. We could affirm the current ratings if XL does not meet our performance expectations, particularly if there is a significant shortfall in underwriting results (absent a significant catastrophe, in which case we would expect XL's results to be consistent with the industry's as a whole); if the integration of Catlin faces setbacks that materially affect the consolidated group performance; or if the combined ERM program is not holistically integrated to support a more-complex risk profile. We may also consider affirming the current ratings if XL were to experience unexpected adverse events such as material-realized investment losses, large underwriting losses, or other material charges outside of the group's risk tolerances. Base-Case Scenario DECEMBER 29,

4 Macroeconomic Assumptions The risks emanating from advanced economies, such as U.S. fiscal policy and contagion from Eurozone problems, recede Real U.S. GDP growth of 2.5% in 2015, 2.7% in 2016, and 2.6% in 2017 Real Eurozone GDP growth of 1.5% in 2015, 1.8% in 2016, and 1.7% in year U.S. Treasury-note yield of 2.2% in 2015, 2.7% in 2016, and 3.6% in 2017 U.S. core consumer price index of 1.8% in 2015, 1.9% in 2016, and 2.0% in 2017, which remains low and should alleviate some concerns about inflation Company-Specific Assumptions Gross premiums written (GPW) grow to $11 billion in 2015, could reach $14 billion in 2016, and flat to up 2% in 2017 Combined ratio of 93%-96%, assuming a catastrophe load of 5% and a return on revenue (ROR) in the mid-teens in Capital adequacy remains redundant at the 'AAA' level in Financial leverage to remain in the 25%-30% range and fixed-charge coverage to be at least 5x, which we expect to strengthen further to 6x-8x Key Metrics (Bil. $) 2017* 2016* 2015* P/C gross premiums written Net income, attributable to all shareholders Return on shareholders' equity (reported) Low double digits Low double digits Low double digits P/C net combined ratio (%) Return on revenue Mid-teens Mid-teens Mid-teens Standard & Poor's capital adequacy Extremely strong Extremely strong Extremely strong Financial leverage (%) Fixed-charge coverage (x) >5 >5 >5 *Forecast data reflect Standard & Poor's base-case scenario. Company Description: Diversified Global Multiline Insurer With the acquisition of Catlin, XL has created a stronger global franchise in both insurance and reinsurance. The combined entity benefits from two recognized brands and cultures based on disciplined underwriting. This transformational acquisition has enhanced scale and product offering, growing 2014 pro-forma net premiums written to $10.1 billion from $5.8 billion in DECEMBER 29,

5 Business Risk Profile: Very Strong XL's business risk profile reflects our assessment of its market position within both the insurance and reinsurance sectors and its diversification by regions and products. Insurance industry and country risk: Globally diverse insurance and reinsurance operations in major stable economies Our overall IICRA of XL is intermediate, reflecting low country risk and moderate industry risk for its P/C insurance and reinsurance. XL's global risk exposures are mainly in major markets such as the U.S., U.K., Germany, France, and Canada, providing it with relative stability vis à vis primary re/insurers that are more exposed to specific country risks. XL is mostly exposed to developed markets that are typically characterized by low risks, including political environment, financial system, payment culture, and rule of law. Our view of the global P/C reinsurance sector stems primarily from our negative assessment of the industry's exposure to property catastrophe volatility and the relatively moderate operational barriers to entry that materially expose P/C reinsurers to competition from existing players and new entrants. Table 1 XL Group Insurance Industry And Country Risk (Re)insurance sector IICRA Business mix (%) U.S. P/C Intermediate risk 32.6 Global P/C reinsurance Intermediate risk 26.8 U.K. P/C Intermediate risk 23.6 Germany P/C Low risk 3.3 Other countries P/C N/A 13.8 Weighted average IICRA Intermediate risk N/A-Not applicable. Competitive position: Very strong with globally diversified insurance and reinsurance platforms XL has strengthened its competitive position with the acquisition of Catlin. We believe the combination of the two companies will bolster XL's specialty business by expanding its position at Lloyd's via Catlin's leadership role, and foster growth in Catlin's network via XL's greater global footprint. Through third-quarter 2015, there was minimal business loss (less than 1%) because of the XL Catlin deal. Table 2 XL Group Competitive Position --Year ended Dec (Mil. $) 2015* 2014* Gross premiums written (GPW) 8, , , , , , ,673.3 Change in GPW (%) (0.2) Net premiums written (NPW) 6, , , , , , ,381.7 Change in net premiums written NPW (%) 28.4 (6.4) (4.1) (1.3) Reinsurance utilization - premiums written (%) DECEMBER 29,

6 Table 2 XL Group Competitive Position (cont.) Business segment (% of GPW) P/C insurance P/C reinsurance Life reinsurance *Data as of Sept. 30. XL's very strong global market presence in P/C insurance and reinsurance reflects its underwriting expertise in specialized industry segments, its global scale, and its ability to provide large coverage limits, allowing it to better reach and serve its global clients than its less-diversified competitors. Insurance. XL Insurance (XLI) is a leading global provider of large corporate and specialty products. XLI transformed to a global commercial company from a niche excess player through acquisitions and organic growth. The Catlin acquisition has significantly enhanced the group's offerings, global commercial footprint, product breadth, and depth. It has also reduced its tail risk and reliance on the Americas region, with more than half of its GPW from non-u.s. operations. Based on 2015 pro-forma GPW, XLI generates 32% from casualty lines; 25% from specialty; 24% from energy, property, and construction; and 19% from professional lines. Since the Catlin deal closed, XLI is organized around four underwriting divisions and regions aligned and integrated around the global commercial market. XL has the No. 1 position in the Lloyd's market with 9% market share. Furthermore, XLI's business generated outside the top-six brokers increased to 51% in 2015 after the acquisition of Catlin, from 44% in Currently, XLI is between the fourth- and sixth-largest insurance market for Willis, Marsh, and Aon. Pricing was negative across most lines of business with the overall rate change for the segment down 2% through third-quarter 2015 as competitive market conditions persisted. Reinsurance. XL Reinsurance (XLR) is a leading specialist and a global reinsurer with a recognized brand. After the merger with Catlin, XLR strengthened its market position and became the 11th largest reinsurer in the world based on 2014 pro-forma net reinsurance premiums written, according to our 2015 Global Reinsurance Highlights. Currently, XLR is organized by region. Each of the five regions has its own underwriting, actuarial, claims, and local operating responsibilities. Based on 2015 pro-forma GPW, XLR generates 28% from property catastrophe lines of business, 25% from property treaty, 24% from casualty, 5% from crop insurance, 5% from credit surety, 4% from marine and energy, and 9% from other lines of business. In addition, the majority of its GPW are generated from outside the U.S. XLR is well positioned to increase its line size with existing clients, increase cross selling for large accounts, and becomes a strategic partner with its cedents. XLR should benefit from many cedents consolidating their reinsurance panel with a smaller group of major reinsurers. This trend will somewhat mitigate the effect of declining reinsurance rates on its business, which will help it navigate the current challenging reinsurance environment. As of Sept. 30, 2015, global property catastrophe rates fell roughly 7.5%, other excess-of-loss covers fell 5%, and ceding commissions on pro-rata treaties grew by one to 1.5 percentage points. In 2016, XL will continue to focus on the integration of Catlin, further strengthening its clients' relationships, and realizing synergies of about $250 million in expense savings on a run-rate basis. With its newfound scale, XL will DECEMBER 29,

7 become more resilient in the face of key market drivers such as globalization, changes in regulation, alternative capital, relevance and scale, and broker dynamics. We expect XL to continue focusing on underwriting profitability while integrating Catlin with a combined ratio of 93%-96%, assuming a catastrophe load of 5% and an ROR in the mid-teens in Table 3 Natural Property Catastrophe Losses Impact On The Combined Ratios (Mil. $) Five-year average Four-year average* XL standalone Net premiums earned 5, , , , ,031.1 Natural property catastrophe net losses Effect on combined ratio (%) Catlin standalone Net premiums earned 4, , , , ,219.0 Natural property catastrophe net losses Effect on combined ratio (%) *Excludes Financial Risk Profile: Strong XL's financial risk profile reflects sustained extremely strong capital adequacy, partially offset by its high-risk position. Capital and earnings: Extremely strong With the addition of Catlin, XL's capital and earnings will continue to be supported by its strong and more diversified operating results and capital adequacy that is redundant at the 'AAA' level. With a larger capital base post-merger of $16.6 billion of total reported capital as of Sept. 30, 2015, XL will be able absorb potential large losses. We expect XL's capitalization to remain extremely strong in Table 4 XL Group Capitalization Statistics --Year ended Dec (Mil. $) 2015* 2014* Common shareholders' equity 11, , , , , , ,610.8 Change in common shareholders' equity (%) 21.3 (0.7) 0.4 (4.9) 11.7 (2.1) 1.9 Total reported capital 16, , , , , , ,070.1 Change in total reported capital (%) 29.1 (0.3) (3.8) (0.3) 10.0 *Data as of Sept DECEMBER 29,

8 Table 5 XL Group Earnings Statistics --Year ended Dec (Mil. $) 2015* 2014* Total revenue 6, , , , , , ,652.1 EBIT adjusted 1, , ,202.2 EBITDA adjusted 1, , ,242.7 Net income (attributable to all shareholders) 1, , (403.9) Return on revenue (%) Return on reported shareholders' equity (%) (3.8) 6.4 P/C: net expense ratio (%) P/C: net loss ratio (%) P/C: net combined ratio (%) (Favorable)/unfavorable reserve development (%) (3.2) (3.7) (4.5) (4.8) (5.5) (5.3) (7.4) Combined ratio by segment (%) P/C insurance P/C reinsurance *Data as of Sept. 30. XL and Catlin have each generated strong underwriting performance during the past five years. Excluding 2011, which was heavily affected by industry-wide catastrophe losses, both companies operated at combined ratios of less than 100%; XL's five-year ( ) average combined ratio was 95.8% and Catlin's was 95.4%. We expect the consolidated entity to continue to generate strong underwriting results with a combined ratio in the 93%-96% range. Table 6 Standalone Combined Ratios (%) Five-year average Four-year average* XL standalone - insurance XL standalone - reinsurance XL standalone - insurance and reinsurance Catlin standalone *Excludes XL will be managing its capital actively through share buybacks. XL views share buybacks as an efficient capital-management tool, but deploying excess capital within attractive P/C opportunities remains a priority and management's preference. In our base-case scenario, we assume that XL will generate net income of $1 billion-$1.2 billion annually for XL targets a return on equity (ROE) in the mid-teens through the cycle, but we believe it's unlikely to achieve this target in Given the interest rate environment, we expect XL to generate an ROE in the low double digits. Risk position XL has a high-risk position, stemming from the potential volatility in its capital and earnings because of its exposure to property catastrophe and terrorism risks. Insurance presents the greatest risk to economic capital at various DECEMBER 29,

9 confidence levels for XL with reserving risk consuming the bulk of economic capital, followed by market risk and natural catastrophe risk. Table 7 XL Group Risk Position --Year ended Dec (Mil. $) 2015* 2014* Total invested assets (including life funds withheld assets) 42, , , , , , ,449.5 Change in total invested assets (%) (0.8) (1.1) (0.0) Net investment income , , ,198.0 Realized capital gains/(losses) (28.5) (255.0) (172.8) (253.5) Unrealized capital gains/(losses) (668.4) ,181.3 (740.1) ,166.3 Net investment yield (%) Net investment yield including realized capital gains/(losses) (%) Net investment yield including realized and unrealized gains/(losses) (%) Portfolio composition (% of general account invested assets) Cash and short-term investments Bonds Equity investments Investments in affiliates Other investments *Data as of Sept. 30. Overall, we believe XL's reserves are adequate. A prudent reserving process, conservative attitude toward reserve releases, and active monitoring of actual versus expected loss emergence contribute to our positive view. We view favorably XL's detailed appraisal of the legacy books of both XL and Catlin prior to the merger as it provides an in-depth understanding of the similarities and differences between the reserve liabilities and methodologies of both companies. Both XL and Catlin have a prudent reserving strategy that is evident from their reserve redundancies and more-favorable reserve developments as compared to their peers'. Furthermore, XL is committed to improving data quality and has set up a data-governance structure including appointment of a Chief Data Officer, which should add necessary oversight to the integration of the two companies that we expect by third-quarter Table 8 Reserve Development --Year ended Dec (Mil. $) XL standalone (Favorable)/unfavorable reserve development (255.1) (289.9) (315.9) (284.9) (372.9) Reserve development effect on combined ratio (%) (4.5) (4.8) (5.5) (5.3) (7.4) Catlin standalone (Favorable)/unfavorable reserve development (120.0) (167.0) (139.0) (103.0) (144.0) DECEMBER 29,

10 Table 8 Reserve Development (cont.) Reserve development effect on combined ratio (%) (2.9) (4.2) (3.9) (2.9) (4.5) In the first nine months of 2015, XL had $185 million in favorable reserve development or 3.2 percentage points effect on the combined ratio. The primary objectives of XL's investment strategy are to support the liabilities that arise from its operations, generate stable investment income, and build long-term book value. XL has drastically de-risked its investments and successfully brought its portfolio in line with P/C and Bermudian peers'. XL has a consistent set of risk limits informed by the organizational risk tolerance, stress testing, and well-developed risk policies around investments with escalation levels that are defined for deviations from risk limits and benchmarks. XL's strategic asset allocation involves continually monitoring the portfolio's risk profile and periodically rebalancing it to ensure that actual and intended risks are consistent under a controlled risk-management framework. This entails defining and controlling tolerance ranges within which the portfolio can operate, including concentration and aggregation, credit quality, liquidity, rate and spread duration, value at risk, and tracking error. XL's portfolio structure ensures its ability to hold assets to recovery with no forced sales to satisfy operating cash flow requirements at high confidence levels. XL has successfully integrated Catlin's assets into the legacy XL investment framework, and has leveraged the best practices from each company. As of Sept. 30, 2015, XL had $42.8 billion in invested assets with $31.9 billion (excluding $4.8 billion Life Re's funds withheld assets) invested in its fixed-maturity portfolio--mostly investment-grade bonds (97.9% of total fixed-income assets had an average rating of 'AA'). This $31.9 billion fixed-income portfolio had a duration of 3.5 years, which was shorter than its P/C loss reserves' duration. Financial flexibility: Strong and improving fixed-charge coverage ratios XL's financial flexibility is strong and has improved markedly during the past few years, especially in equity valuation and credit spreads. Better conditions in financial markets since the crisis and much-reduced risk in the investment portfolio have alleviated potential material investment write-downs and enhanced financial flexibility. In March 2015, XL issued $1 billion of subordinated unsecured notes to partially fund its acquisition of Catlin for $4.1 billion. We expect XL's financial leverage to remain between 25% and 30% and its fixed-charge coverage to be at least 5x in and further improve to 6x-8x. Table 9 XL Group Financial Flexibility --Year ended Dec * 2014* EBITDA fixed-charge coverage (x) Financial leverage (including NPV of operating leases and pension deficit as debt) (%) *Data as of Sept DECEMBER 29,

11 Other Assessments Enterprise risk management: Significant role in value-creation strategy XL's ERM program is strong, based on positive scores for all the components of our ERM evaluation (risk culture, risk controls, emerging risks management, risk models, and strategic risk management). The group's key risks are reserve and catastrophe exposure from its insurance operations and high levels of operational risk related to ongoing integration efforts following the merger. Both legacy companies cultivated strong risk cultures and commitments to improve their controls and modeling, which we expect the group to continue as it leverages the stronger processes from each company to create a more robust program. Because XL's global footprint, mix of business (insurance and reinsurance), exposure to long-tailed liabilities, and exposure to both natural and man-made catastrophic risks could lead to significant earnings volatility, we view ERM as important to the rating. We expect XL to leverage the best of both programs and continue to evolve its ERM construct not only throughout the integration process but over the long term as the company views ERM as a key driver to shareholder valuation. Management and governance: Focused on integrating Catlin during the next 12 months We view XL's management and governance as satisfactory. Management has successfully guided the company, which was under significant pressure following the 2008 financial crisis. It divested its ownership interest in Syncora (financial guarantee reinsurance and insurance business), deleveraged its balance sheet, and reduced the risk in its investment portfolio. In addition, XL announced the run-off of its life reinsurance business in 2009, of which it sold the majority through two transactions in second-quarter 2014 and fourth-quarter 2015 (see the Accounting section). We believe the sale reflects XL's management efforts to focus on its core P/C (re)insurance business and reduce risks in its run-off operations. Earlier this year, XL also significantly enhanced its franchise through the acquisition of Catlin. Given the size, complexity, and potential overlap between the two insurance and reinsurance portfolios, management could face challenges in the next 12 months, including the execution and integration risks inherent in this type of transaction. However, these risks are partially mitigated by both companies' strong management teams, which each have a strong track record in running complex companies. Furthermore, a disciplined underwriting culture and strong risk-management capabilities should put XL in a solid position to execute its strategy. Liquidity: Sufficient cash flows to meet business operations XL's liquidity is exceptional, benefiting from liquid invested assets and a highly rated fixed-income portfolio. About 5% of its investments as of Sept. 30, 2015, excluding Life Re's funds withheld assets, were in short-term investments and cash and cash equivalents. We believe XL generates sufficient cash flow to meet its short- and long-term cash requirements for its operations. XL has several credit facilities it uses to support its U.S. nonadmitted (re)insurance operations and capital requirements at Lloyd's. As of Sept. 30, 2015, the group had letter-of-credit facilities totaling $4.9 billion, of which $2.5 billion was utilized. DECEMBER 29,

12 Factors Specific To The Holding Company In July 2010, XL Group plc re-established its domicile in Ireland from the Cayman Islands, replacing XLIT as the ultimate parent company. We believe this change in corporate structure did not have much of an impact on financials or in XL's ability to receive dividends from its operating companies. After the close of Catlin's acquisition, XL maintained its domicile in Ireland and further diversified the sources of its dividends, which could be upstreamed from operating companies in multiple jurisdictions. Accounting Considerations In second-quarter 2014, XL completed the sale of its subsidiary, XL Life Reinsurance (SAC) Ltd. (XLLR), to GreyCastle Holdings Ltd. XLLR reinsured the majority of XL's life reinsurance business via 100% quota share. This transaction covers a substantial portion of XL's life reinsurance reserves. As part of the sale, XL will no longer be exposed to the majority of its life reinsurance's invested assets volatility, given that the market volatility is passed on to XLLR through the funds withheld arrangement. As a result, XL is exposed to a large collateralized reinsurance recoverable from XLLR of approximately $4.4 billion. However, the counterparty credit risk is limited, as we expect the collateral to exceed the recoverable. In 2014, the transaction resulted in an overall after-tax U.S. generally accepted accounting DECEMBER 29,

13 principles (GAAP) net loss of $621 million. On Dec. 2, 2015, XL announced that its wholly owned subsidiary, XL Life Ltd., entered into a definitive agreement to reinsure a block of U.S. term life treaties to a subsidiary of Reinsurance Group of America Inc. This transaction includes all U.S. term life reinsurance policy reserves and cedes 80% of the remaining life reinsurance premiums that were not included in XL's 2014 sale of its life reinsurance subsidiary, SAC. As of Sept. 30, 2015, XL had total U.S. GAAP policy benefit reserves related to this block of business of $258 million. XL expects to record a net GAAP loss of $34 million associated with the transaction. Ratings Score Snapshot Holding Company Rating A-/Positive/-- Anchor a+ Business Risk Profile IICRA* Competitive Position Financial Risk Profile Capital & Earnings Risk Position Financial Flexibility Very Strong Intermediate Risk Very Strong Strong Extremely Strong High Risk Strong Modifiers 0 ERM and Management 0 Enterprise Risk Management Management & Governance Strong Satisfactory Holistic Analysis 0 Liquidity Exceptional Support 0 Group Support 0 Government Support 0 *Insurance Industry And Country Risk Assessment. Related Criteria And Research Related Criteria Group Rating Methodology, Nov. 19, 2013 Insurers: Rating Methodology, May 7, 2013 Enterprise Risk Management, May 7, 2013 Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012 Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010 Use Of CreditWatch And Outlooks, Sept. 14, 2009 Hybrid Capital Handbook: September 2008 Edition, Sept. 15, DECEMBER 29,

14 Related Research Global Multiline Insurer XLIT Ltd. And Subs Outlooks Revised To Positive From Stable; 'A+' Ratings Affirmed, Dec. 18, 2015 Ratings On Insurer Catlin Affirmed At 'A' On Completed Acquisition By XL; Outlook Stable, June 2, 2015 XLIT Ltd. $1 Billion Subordinate Unsecured Notes Rated 'BBB', March 24, 2015 Ratings On Catlin Group's Core Subsidiaries Affirmed At 'A' On Announced Acquisition; Outlook Stable, Jan. 9, 2015 XLIT Ltd. And Subsidiaries Ratings Affirmed On Announced Acquisition Of Catlin Group Ltd.; The Outlook Is Stable, Jan. 9, 2015 Ratings Detail (As Of December 29, 2015) Holding Company: XLIT Ltd. Junior Subordinated Preference Stock Preferred Stock Senior Unsecured A- Subordinated Operating Companies Covered By This Report Greenwich Insurance Co. Counterparty Credit Rating Catlin Insurance Co. Inc. Catlin Insurance Co. Ltd. Preferred Stock Catlin Insurance Co. (U.K.) Ltd. Catlin Speciality Insurance Co. A-/Positive/-- BBB BBB BBB BBB A/Positive/-- A/Positive/-- A/Positive/-- A/Positive/-- BBB+ A/Positive/-- A/Positive/-- DECEMBER 29,

15 Ratings Detail (As Of December 29, 2015) (cont.) Indian Harbor Insurance Co. XL Insurance America Inc. XL Insurance (Bermuda) Ltd. Financial Enhancement Rating XL Insurance Company SE XL Insurance Co. of New York Inc. XL Insurance Switzerland XL Re Europe SE XL Reinsurance America Inc. A+/--/-- A+/Positive/NR DECEMBER 29,

16 Ratings Detail (As Of December 29, 2015) (cont.) XL Re Latin America Ltd. XL Re Ltd. XL Re Ltd. - U.K. XL Select Insurance Co. XL Specialty Insurance Co. Related Entities Catlin Re Switzerland Ltd X.L America Inc. Domicile A-/Positive/-- California *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees. DECEMBER 29,

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