A.M. Best Upgrades Issuer Credit Rating for XL Group plc and Its Property/Casualty Subsidiaries

A.M. Best has upgraded the issuer credit rating (ICR) to “a+” from “a” and has affirmed the financial strength ratings (FSR) of A (Excellent) of the property/casualty subsidiaries of XL Group plc (XL) (Ireland) [NYSE:XL]. Concurrently, A.M. Best has upgraded the ICR to “bbb+”from “bbb” of XL and XLIT Ltd (Cayman Islands), as well as the debt ratings of XLIT Ltd. The outlook for all aforementioned ICRs has been revised to stable from positive, while the outlook for the FSRs remains stable (See below for a detailed listing of the companies and ratings).

The ratings of XL reflect the organization’s excellent risk-adjusted capital, strong global profile in insurance and reinsurance, strong cycle management and favorable operating earnings trends. XL’s management has continued to enhance its underwriting capability within its global insurance operations to help deliver solid and stable earnings. To help execute this plan, XL has added high profile underwriting teams in recent years and continues to offer new products in an effort to provide solutions and remain relevant to its clients globally. At the same time that XL strives for strong earnings, the company continues to enhance its enterprise risk management framework in order to mitigate downside risk.

Positive rating actions could occur if XL delivers consistent, long-term profitability driven by underwriting coupled with strong risk-adjusted capitalization. Negative rating actions could occur if the organization’s operating performance experiences unfavorable trends or if there are outsized losses relative to A.M. Best’s expectations, whether they are from catastrophes or investments that call enterprise risk management into question.

A.M. Best has downgraded the FSR to B++ (Good) from A- (Excellent) and the ICR to “bbb+” from “a-” of XL Life Ltd. (XL Life) (Hamilton, Bermuda). The outlook for both ratings is stable. These rating downgrades reflect XL Life’s limited business profile following the retrocession of XL’s UK and European life reinsurance business in May 2014. XL Life continues to retain the reserves related to U.S. term, income protect and other short-term products. This transaction allows XL to focus on its core property/casualty business and provides the company with additional financial flexibility. XL Life’s remaining business continues to be in run-off. XL Life’s ratings also reflect its more than adequate risk-adjusted capitalization position relative to its investment and insurance risks.

A.M. Best believes that given XL Life’s current profile, positive rating movement is unlikely. Negative rating actions could occur if XL Life’s capitalization and operating performance fall markedly short of A.M. Best’s expectations.

The FSR of A (Excellent) has been affirmed and the ICRs have been upgraded to “a+” from “a” for the following subsidiaries of XL Group plc:

• XL Re Ltd
• Indian Harbor Insurance Company
• Greenwich Insurance Company
• XL Insurance Company of New York, Inc.

• XL Insurance America, Inc.
• XL Select Insurance Company
• XL Reinsurance America Inc.
• XL Specialty Insurance Company
• XL Insurance (Bermuda) Ltd
• XL Re Latin America Ltd
• XL Insurance Company SE
• XL Re Europe SE
• XL Insurance Switzerland Ltd

The following debt ratings have been upgraded:

XLIT Ltd.—

-- to “bbb+” from “bbb” on $350 million 6.375% senior unsecured notes, due 2024

-- to “bbb+” from “bbb” on $325 million 6.25% senior unsecured notes, due 2027

-- to “bbb-” from “bb+” on $999.5 million 6.5% Series E non-cumulative preferred securities, redeemable 2017

-- to “bbb+” from “bbb” on $400 million 5.75% senior unsecured notes, due 2021

-- to "bbb+" from "bbb" on $300 million 2.30% senior unsecured notes, due 2018 (A)

-- to "bbb+" from "bbb" on $300 million 5.25% senior unsecured notes, due 2043 (A)

-- to “bbb-” from “bb+” on $345 million Series D non-cumulative preferred securities

(A) On November 19, 2013, A.M. Best had previously assigned a “bbb” debt rating in one $600 million tranche instead of these two separate $300 million securities.

The following indicative ratings on shelf securities have been upgraded:

XLIT Ltd.—

-- to “bbb+” from “bbb” on senior unsecured debt

-- to “bbb” from “bbb-” on subordinated debt

-- to “bbb-” from “bb+” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings
• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies
• Understanding BCAR for Property/Casualty Insurers
• Understanding Universal BCAR
• Analyzing Insurance Holding Company Liquidity
• Insurance Holding Company and Debt Ratings
• Rating Run-off Insurers and Specialists

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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