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(1)

Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes had a fair value of $155.9 million and $154.6 million and an amortized cost of $143.6 million and $147.7 million at June 30, 2014 and December 31, 2013, respectively. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.

(2)	The Company invests in covered bonds (“Covered Bonds”). Covered Bonds are senior secured debt instruments issued by financial institutions and backed by over-collateralized pools of public sector or mortgage loans. At June 30, 2014 and December 31, 2013, Covered Bonds with a fair value of $763.6 million and $553.1 million, respectively, are included within Other asset-backed securities.

(3)	Included within Equity securities are investments in fixed income funds with a fair value of $92.1 million and $87.4 million at June 30, 2014 and December 31, 2013, respectively.

(4)	Short-term investments consist primarily of Corporate securities and U.S. and Non-U.S. Government and Government-Related/Supported securities.

(5)	Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to recurring fair value measurement guidance.

(6)

The Other investments balance excludes certain structured transactions including certain investments in project finance transactions, a payment obligation and liquidity financing provided to a structured credit vehicle as a part of a third party medium term note facility. These investments, which totaled $275.8 million at June 30, 2014 and $294.0 million at December 31, 2013, are carried at amortized cost. For further information, see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.

(7)

Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported on a gross basis by level with a netting adjustment presented separately in the Collateral and Counterparty Netting column. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy. For further details regarding derivative fair values and associated collateral received or paid see Note 7, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements.

(8)	Financial instruments sold, but not yet purchased, represent “short sales” and are included within “Payable for investments purchased” on the balance sheets.

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(1)	Corporate and Other includes the Company's run-off life operations.

(2)	Operating expenses exclude Corporate operating expenses, shown separately.

(3)	The net results from structured products include net investment income and interest expense (credit) of $16.9 million and $(18.2) million, respectively. Net results from structured products includes a benefit of $28.7 million from a negotiated termination of one of the Company's larger structured indemnity contracts during the second quarter of 2014, producing a net interest expense credit.

(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.

(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.

(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.

(7)	Ratios are based on net premiums earned from P&C operations.

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(1)	Corporate and Other includes the Company's run-off life operations.

(2)	Operating expenses exclude Corporate operating expenses, shown separately.

(3)	The net results from structured products include net investment income and interest expense of $18.1 million and $12.1 million, respectively.

(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.

(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.

(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.

(7)	Ratios are based on net premiums earned from P&C operations.

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(1)	Corporate and Other includes the Company's run-off life operations.

(2)	Operating expenses exclude Corporate operating expenses, shown separately.

(3)	The net results from structured products include net investment income and net interest expense (credit) of $35.7 million and $(7.4) million, respectively. Net results from structured products includes a benefit of $28.7 million from a negotiated termination of one of the Company's larger structured indemnity contracts during the second quarter of 2014, producing a net interest expense credit.

(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.

(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.

(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.

(7)	Ratios are based on net premiums earned from P&C operations.

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(1)	Corporate and Other includes the Company's run-off life operations.

(2)	Operating expenses exclude Corporate operating expenses, shown separately.

(3)	The net results from structured products include net investment income and interest expense of $35.9 million and $24.6 million, respectively.

(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.

(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.

(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.

(7)	Ratios are based on net premiums earned from P&C operations.

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(1)	Other within the Insurance segment includes: excess and surplus, programs, surety, structured indemnity and certain other discontinued lines. Other within the Reinsurance segment includes: whole account contracts, accident and health and other lines.

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(1)	Other within the Insurance segment includes: excess and surplus, programs, surety, structured indemnity and certain other discontinued lines. Other within the Reinsurance segment includes: whole account contracts, accident and health and other lines.

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(1)	Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the date an impairment was recorded.

(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $1,679.1 million and fair value of $1,721.8 million and U.S. Agencies with an amortized cost of $230.2 million and fair value of $256.8 million.

(3)

Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $155.9 million and an amortized cost of $143.6 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.

(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $28.1 million and an amortized cost of $32.6 million.

(5)	Covered Bonds with an amortized cost of $737.0 million and a fair value of $763.6 million are included within Other asset-backed securities to align the Company's classification to market indices.

(6)	Included within Total equity securities are investments in fixed income funds with a fair value of $92.1 million and an amortized cost of $92.1 million.

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(1)	Represents the non-credit component of OTTI losses, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the date an impairment was recorded.

(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments includes government-related securities with an amortized cost of $2,241.5 million and fair value of $2,275.6 million and U.S. Agencies with an amortized cost of $267.0 million and fair value of $284.3 million.

(3)

Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a fair value of $154.6 million and an amortized cost of $147.7 million. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.

(4)	Included within Corporate are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions. These securities have a fair value of $282.2 million and an amortized cost of $286.2 million.

(5)	Covered Bonds within Fixed maturities - AFS with an amortized cost of $526.4 million and a fair value of $553.1 million and Covered Bonds within Fixed maturities - HTM with an amortized cost of $8.6 million and a fair value of $8.7 million are included within Other asset-backed securities to align the Company's classification to market indices.

(6)	Included within Total equity securities are investments in fixed income funds with a fair value of $87.4 million and an amortized cost of $100.0 million.

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(1)

Included in the table above within Fixed Maturities - AFS - Excluding Life Funds Withheld Assets, are Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments, which are senior to the common and preferred equities of the financial institutions, at their fair values of $28.1 million and $282.2 million at June 30, 2014 and December 31, 2013, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $4.5 million and $4.0 million at June 30, 2014 and December 31, 2013, respectively.

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▪	$10.3 million related to certain equities as the holdings were in a loss position for more than 11 months.

▪	$12.5 million related to Other Investments.

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(1)	Derivative instruments in an asset or liability position are included within Other assets or Other liabilities, respectively, in the balance sheets on a net basis where the Company has both a legal right of offset and the intentions to settle the contracts on a net basis.

(2)	Financial operations derivatives represent interests in variable interest entities as described in Note 12, “Variable Interest Entities".

(3)

The fair value movements in derivative assets and liabilities relating to modified coinsurance funds withheld contracts are included within the the associated asset or liability at each period end on the face of the balance sheets. Notional amounts associated with reinsurance agreements under which the Company assumes reinsurance risk are recorded as asset derivative notional amounts. Notional amounts associated with the Life Retro Arrangements under which the Company cedes reinsurance risk are recorded as liability derivative notional amounts. Included in the liability derivative notional amount at June 30, 2014 is the current period net realized and unrealized loss on life retrocession embedded derivative of $17.5 million.

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(1)	At June 30, 2014 and December 31, 2013, there were seven available letter of credit facilities.

(2)

At June 30, 2014 and December 31, 2013,the revolving credit available under the November 2013 unsecured credit agreement, which provides for issuance of letters of credit and revolving credit loans up to $1 billion, was unutilized. The credit agreements entered into with Citicorp USA, Inc. in May through November 2013 (the "Citi Agreements") provide for issuance of letters of credit and revolving credit loans up to an aggregate amount of $575.0 million. At June 30, 2014, $575.0 million of letters of credit were issued under these agreements and therefore such amount is not included in the table.

(3)	The Company has the option to increase the size of the facilities under the Syndicated Credit Agreements by an additional $500 million across such facilities. The Company also has the option to increase the maximum amount of the letters of credit and revolving credit loans available under the 2013 Citi Agreements with the lender's and issuing lender's consent.

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(1)	Included in these amounts are the impact of Shadow Adjustments. During the year ended December 31, 2013, the initial impact of $44.7 million was recorded. During the six months ended June 30, 2014, additional impacts of $474.5 million were recorded, resulting in a total cumulative impact of shadow adjustments on future policy benefit reserves of $519.2 million at June 30, 2014.

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▪	changes in the size of our claims relating to natural or man-made catastrophe losses due to the preliminary nature of some reports and estimates of loss and damage to date;

▪	trends in rates for property and casualty insurance and reinsurance;

▪	the timely and full recoverability of reinsurance placed by us with third parties, or other amounts due to us;

▪	changes in ratings or rating agency policies or practices;

▪	changes in the projected amount of ceded reinsurance recoverables and the ratings and creditworthiness of reinsurers;

▪	the timing of claims payments being faster or the receipt of reinsurance recoverables being slower than we anticipated;

▪	our ability to successfully implement our business strategy;

▪	our ability to realize the value or benefits expected as a result of the Life Retro Arrangements, as defined herein;

▪	increased competition on the basis of pricing, capacity, coverage terms or other factors, which could harm our ability to maintain or increase our business volumes or profitability;

▪	greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;

▪	changes in general economic conditions, including the effects of inflation on our business, including on pricing and reserving, and changes in interest rates, credit spreads, foreign currency exchange rates and future volatility in the world's credit, financial and capital markets that adversely affect the performance and valuation of our investments or access to such markets;

▪	developments, including uncertainties related to the future of the Euro-zone, the ability of Euro-zone countries to service existing debt obligations and the strength of the Euro as a currency and to the financial condition of counterparties, reinsurers and other companies that are at risk of bankruptcy;

▪	the potential impact on us from government-mandated insurance coverage for acts of terrorism;

▪	the potential for changes to methodologies, estimations and assumptions that underlie the valuation of our financial instruments that could result in changes to investment valuations;

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▪	changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale debt securities before their anticipated recovery;

▪	the availability of borrowings and letters of credit under our credit facilities;

▪	the ability of our subsidiaries to pay dividends to XL-Ireland and XLIT Ltd., an exempted company organized under the laws of the Cayman Islands ("XL-Cayman");

▪	the potential effect of regulatory developments in the jurisdictions in which we operate, including those which could impact the financial markets or increase our business costs and required capital levels;

▪	changes in regulations or laws applicable to us or our subsidiaries, brokers or customers;

▪	acceptance of our products and services, including new products and services;

▪	changes in the availability, cost or quality of reinsurance;

▪	changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;

▪	loss of key personnel;

▪	changes in accounting standards, policies or practices or the application thereof;

▪	legislative or regulatory developments including, but not limited to, changes in regulatory capital balances that must be maintained by our operating subsidiaries and governmental actions for the purpose of stabilizing the financial markets;

▪	the effects of mergers, acquisitions and divestitures;

▪	developments related to bankruptcies of companies insofar as they affect property and casualty insurance and reinsurance coverages or claims that we may have as a counterparty;

▪	changes in applicable tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof;

▪	the effects of business disruption or economic contraction due to war, terrorism or other hostilities; and

▪	the other factors set forth in Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2013 and our other documents on file with the SEC.

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(1)	Represents Net investment income - excluding Life Funds Withheld Assets.

(2)	Represents a non-GAAP financial measure as discussed further below.

▪	The combined ratio related to the P&C operations is the sum of the loss and loss expense ratio and the underwriting expense ratio. A combined ratio under 100% represents an underwriting profit and over 100% represents an underwriting loss. In the P&C industry, the combined ratio is a widely used measure of underwriting profitability.

▪	The loss and loss expense ratio related to the P&C operations is calculated by dividing the losses and loss expenses incurred by the net premiums earned for the Insurance and Reinsurance segments.

▪	The underwriting expense ratio related to the P&C operations is the sum of acquisition costs and operating expenses for the Insurance and Reinsurance segments divided by net premiums earned for the Insurance and Reinsurance segments.

▪	The acquisition expense ratio related to the P&C operations is calculated by dividing the acquisition costs incurred by the net premiums earned for the Insurance and Reinsurance segments.

▪	The operating expense ratio related to the P&C operations is calculated by dividing the operating expenses incurred by the net premiums earned for the Insurance and Reinsurance segments.

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(1)	Source: Bloomberg Finance L.P.

(2)	Source: Merrill Lynch Global Indices.

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(1)	Source: Bloomberg Finance L.P.

(2)	Source: Merrill Lynch Global Indices.

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(1)	Detailed analyses of aggregated in-force exposures and maximum loss levels are done periodically. The measurement dates represent the date of the last completed detailed analysis by geographical zone.

(2)	Probable maximum losses, which include secondary uncertainty that incorporates variability around the expected probable maximum loss for each event, do not represent our maximum potential exposures and are pre-tax.

(3)	Adjusted Tangible Shareholders’ Equity is defined as Total Shareholders’ Equity less (i) Goodwill and Other Intangible Assets and (ii) Accumulated Other Comprehensive Income (excluding net balances associated with Life Funds Withheld Assets).

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*	N/M - Not Meaningful

▪	IPC - increase of 14.3% driven by new business in primary casualty and middle market business lines.

▪	NAPC - increase of 7.6% largely attributable to higher renewal premiums in excess casualty, surplus lines, programs and construction business lines, partially offset by a decrease in new business in global risk management.

▪	Professional - increase of 9.5% mainly attributable to the international financial lines business due to new business and higher renewed premiums.

▪	Specialty - increase of 9.8% due to new business in crisis management and political risk business lines, partially offset by lower renewed premiums in marine and aviation lines.

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▪	For property lines, net prior year development was $10.3 million favorable. This was driven by a reduction of $5.6 million in prior year catastrophe losses primarily in the 2011 accident year and by better than expected loss experience reported for the non-catastrophe exposures predominantly in the 2012 accident year.

▪	For casualty lines, net prior year development was $37.6 million unfavorable. This was driven by deterioration in pollution site claims principally in the 2010 and 2013 accident years that led to a strengthening of $37.8 million in environmental.

▪	For professional lines, net prior year development was $2.8 million unfavorable due mainly to a deterioration in unallocated loss adjustment expenses for the U.S. Select portfolio.

▪

For specialty lines, net prior year development was $44.5 million favorable. This was driven by better than expected loss experience reported for the non-catastrophe exposures principally in the 2008 to 2012 accident years that led to releases of $31.6 million in aerospace and $8.0 million in marine. It was also driven by a reduction of $5.3 million in prior year catastrophe losses related primarily to Hurricane Rita in marine.

▪	For other lines, net prior year development was $22.6 million favorable driven by the favorable settlement of a 2003 claim in one of our discontinued lines.

▪	Acquisition expense ratio - decreased largely due to the favorable impact of our modified reinsurance structure mentioned above.

▪	Operating expense ratio - increased 2.9 percentage points largely due to the unfavorable impact of our modified reinsurance structure mentioned above as well as an increase in expenses associated with business expansion, including higher compensation expense and higher professional fees for the three months ended June 30, 2014 compared to the same period of 2013.

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▪	Bermuda - decrease of 0.8% due to favorable prior year quarter premium adjustments which did not repeat in the current quarter and timing on whole accounts, partially offset by favorable renewals on property treaty business.

▪	North America - increase of 7.5% was due to timing of casualty treaty renewals and increased agricultural premiums within our property treaty business, partially offset by the non-renewal of a property facultative deal.

▪	International - increase of 15.0%, mainly driven by increased aviation premiums and increased premium estimates on treaties written in prior years in Latin America, partially offset by higher catastrophe related reinstatement premiums in the prior year quarter.

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▪	Net favorable prior year development for the short-tailed lines totaled $20.1 million. Details of the significant components are as follows:

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For property catastrophe lines, net prior year development was $9.4 million unfavorable comprised of $10.9 million unfavorable development on major catastrophe losses partially offset by $1.5 million better than expected development on attritional losses. The $10.9 million unfavorable development on major catastrophe losses is comprised of $12.8 million unfavorable development on 2013 catastrophe losses and $4.1 million unfavorable development on 2010 catastrophe losses partially offset by a $6.0 million favorable development on other catastrophe losses.

▪	For property other lines, net prior year development was $12.3 million favorable comprised of $12.7 million better than expected development on attritional losses, mainly in North America, partially offset by $0.4 million unfavorable development on catastrophe and large losses and .

▪	For marine and aviation lines, net prior year development was $17.2 million favorable comprised of $5.3 million favorable development on catastrophe and large losses and $11.9 million favorable driven by better than expected development on attritional losses, mainly in Europe.

▪	Net favorable prior year development for the long-tailed lines totaled $27.4 million. Details of the significant components are as follows:

▪	For casualty lines, net prior year development was $17.4 million favorable due to better than expected development on attritional losses mainly in the Europe and North America books.

▪	For other lines, net prior year development was $9.9 million favorable due to better than expected development on attritional losses comprised of $5.0 million from the whole accounts book in Bermuda and the remainder spread across the rest of the segment portfolio.

▪	Operating expense ratio - increased 1.7 percentage points due to higher compensation costs associated with the expansion of agriculture business in North America and capital markets business in Bermuda in 2014.

▪	Acquisition expense ratio - decreased due to changes to the structure of our agriculture business in North America, lower profit commissions in International, and the impact of ceded premiums related to whole account business written in Bermuda.

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(1)	The performance of investment portfolios is measured on a local currency basis and is not annualized. For aggregate performance calculation, respective local currency balances are translated to U.S. dollars using quarter end exchange rates to calculate composite portfolio results. Performance represents P&C operations and two months of Life operations.

(2)	Performance on Other Portfolios is included in the Total Return on Investments.

(3)	Performance on the alternative portfolio reflects the three months ended May 31, 2014 and 2013, respectively for both equity and non-equity alternative funds.

(1)	Net investment income includes: Net investment income - excluding Life Funds Withheld Assets and net investment income related to the net results from structured products.

(2)	We generally record the income related to alternative fund affiliates on a one-month lag and the private investment fund affiliates on a three-month lag based upon the availability of the information provided by the investees.

*	N/M - Not Meaningful

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▪	Net realized gains of $105.5 million resulted primarily from sales of equities and other investments.

▪	Realized losses of approximately $24.6 million related to the OTTI write-down of certain of our AFS investments. The main components of the net impairment charges were:

▪	$10.3 million related to certain equities as the holdings were in a loss position for more than 11 months.

▪	$12.5 million related to Other Investments.

(1)	The Company generally records the income related to certain operating affiliates on a three-month lag based upon the availability of the information provided by the investees.

(2)	Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products.

*	N/M - Not Meaningful

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*	N/M - Not Meaningful

▪	IPC - increase of 4.9% driven mainly by new business in primary casualty and increased renewal premiums within primary casualty and middle market business lines, partially offset by lower renewed premiums in the construction business line.

▪	NAPC - increase of 8.7% largely driven by higher renewed premiums in the excess casualty, surplus lines, programs and construction business lines, partially offset by a lower level of new business in global risk management.

▪	Professional - increase of 9.6% largely attributable to the international professional line of business due to higher renewed premiums and increases in new business.

▪	Specialty - increase of 6.3% due to new business in crisis management and political risk business lines, partially offset by lower new business and unfavorable renewed premiums in marine lines and weaker pricing in aviation.

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▪	For property lines, net prior year development was $26.0 million favorable. This was driven by better than expected loss experience reported for the non-catastrophe exposures predominantly in the 2011 to 2013 accident years. It was also driven by a reduction of $5.6 million in prior year catastrophe losses primarily in the 2011 accident year.

▪	For casualty lines, net prior year development was $39.3 million unfavorable. This was driven by deterioration in pollution site claims principally in the 2010 and 2013 accident years that led to a strengthening of $37.8 million in environmental.

▪	For professional lines, net prior year development was $1.6 million unfavorable due mainly to a deterioration in unallocated loss adjustment expenses for the U.S. Select portfolio.

▪

For specialty lines, net prior year development was $39.6 million favorable. This was driven by better than expected loss experience reported for the non-catastrophe exposures principally in the 2008 to 2012 accident years that led to a release of $31.8 million in aerospace. It was also driven by a reduction of $5.3 million in prior year catastrophe losses related primarily to Hurricane Rita in marine.

▪	For other lines, net prior year development was $20.7 million favorable driven by the favorable settlement of a 2003 claim in one of our discontinued lines.

▪	Operating expense ratio - increased 2.7 percentage points largely due to the unfavorable impact of the modification of our reinsurance structure mentioned above as well as increased compensation expenses from business expansion and higher professional fees for the six months ended June 30, 2014 compared to the same period of 2013.

▪	Acquisition expense ratio - decreased largely due to the favorable impact of the modification of our reinsurance structure mentioned above and a change in the mix of business.

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(1)	Other relates to discontinued structured indemnity.

▪	Bermuda - increase of 4.8% due to new business and favorable renewals on whole account and property treaty businesses.

▪	North America - increase of 2.7% largely due to increased agricultural premiums within our property treaty business, partially offset by the non-renewal of a property facultative deal.

▪

International - decrease of 9.4%, mainly driven by lower casualty and property treaty renewals due to decreases in shares and competitive market conditions in Europe, including the non-renewal of a U.K. motor business quota share, partially offset by increased premium estimates on treaties written in prior years in Latin America and unfavorable adjustments in the prior year on a casualty treaty that did not repeat in the current year.

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▪	Net favorable prior year development for the short-tailed lines totaled $45.6 million. Details of the significant components are as follows:

▪

For property catastrophe lines, net prior year development was $10.4 million unfavorable comprising of $16.3 million unfavorable development on major catastrophe losses and $5.9 million better than expected development on attritional losses. The $16.3 million unfavorable development on major catastrophe losses was due to $22.3 million unfavorable development on the 2013 catastrophe losses and $6.6 million unfavorable development on the 2010 catastrophe losses partially offset by $12.6 million favorable development on other catastrophe losses.

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▪	For property other lines, net prior year development was $23.8 million favorable comprised of $2.4 million favorable development on catastrophe losses and $26.2 million better than expected development on attritional losses.

▪	For marine and aviation lines, net prior year development was $32.2 million favorable comprised of $9.1 million favorable development on catastrophe and large losses and $23.1 million favorable development driven by better than expected attritional loss development mainly in Europe.

▪	Net favorable prior year development for the long-tailed lines totaled $32.3 million. Details of the significant components are as follows:

▪	For casualty lines, net prior year development was $22.3 million favorable due to better than expected development on attritional losses mainly in Europe and North America.

▪	For other lines, net prior year development was $10.1 million favorable due to better than expected development on attritional losses comprised of $6.4 million from the whole accounts book in Bermuda and the remainder spread across the rest of the segment portfolio.

▪	Operating expense ratio - increased in the six months ended June 30, 2014 compared to the same period in 2013 due to higher compensation costs associated with the expansion of agriculture business in North America and capital markets in Bermuda in 2014 .

▪	Acquisition expense ratio - decreased due to changes to the structure of our agricultural business in North America and lower profit commissions in International, partially offset by a state assessment relating to prior year premiums received in the current year in North America.

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(1)	The performance of investment portfolios is measured on a local currency basis and is not annualized. For aggregate performance calculation, respective local currency balances are translated to U.S. dollars using quarter end exchange rates to calculate composite portfolio results. Performance represents P&C operations and five months of Life operations.

(2)	Performance on Other Portfolios is included in the Total Return on Investments.

(3)	Performance on the alternative portfolio reflects the six months ended May 31, 2014 and 2013, respectively, for both equity and non-equity alternative funds.

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(1)	Net investment income includes: Net investment income - excluding Life Funds Withheld Assets and net investment income related to the net results from structured products.

(2)	We generally record the income related to alternative fund affiliates on a one-month lag and the private investment fund affiliates on a three-month lag based upon the availability of the information provided by the investees.

*	N/M - Not Meaningful

▪	Net realized gains of $128.4 million resulted primarily from sales of equities and other investments.

▪	Realized losses of approximately $28.3 million related to the OTTI write-down of certain of our AFS investments. The main components of the net impairment charges were:

▪	$10.3 million related to certain equities as the holdings were in a loss position for more than 11 months.

▪	$12.5 million related to Other Investments.

▪	$0.9 million for structured securities, principally non-Agency RMBS, where we determined that the likely recovery on these securities was below the carrying value and, accordingly, recorded an impairment of the securities to the discounted value of the cash flows expected to be received on these securities.

▪	$2.5 million related to foreign exchange losses.

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(1)	The Company generally records the income related to certain operating affiliates on a three-month lag based upon the availability of the information provided by the investees.

(2)	Interest expense includes costs related to our debt and collateral facilities and does not include deposit liability accretion, which is included in Net investment results - structured products.

*	N/M - Not Meaningful

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(1)	Carrying values represents the fair value for AFS fixed maturities and amortized cost for HTM securities.

(2)

U.S. Government and Government-Related/Supported and Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported include government-related securities with an amortized cost of $1,679.1 million and $2,241.5 million and carrying value of $1,721.8 million and $2,275.6 million at June 30, 2014 and December 31, 2013, respectively, and U.S. Agencies with an amortized cost of $230.2 million and $267.0 million and carrying value of $256.8 million and $284.3 million at June 30, 2014 and December 31, 2013, respectively.

(3)

Included in Corporate - Financials are gross unrealized losses of $4.9 million and $12.7 million on Tier One and Upper Tier Two securities of financial institutions with a carrying value of $21.8 million and $114.7 million at June 30, 2014 and December 31, 2013, respectively, as well as gross unrealized losses of $6.9 million and $9.3 million on subordinated debt (including lower Tier Two securities) with a carrying value of $66.0 million and $86.6 million at June 30, 2014 and December 31, 2013, respectively.

(4)

Included within Corporate are certain floating rate medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes have a carrying value of $155.9 million and $154.6 million and an amortized cost of $143.6 million and $147.7 million at June 30, 2014 and December 31, 2013, respectively. These securities have been allocated ratings of the underlying pool of securities. These notes allow the investor to participate in cash flows of the underlying bonds including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.

(5)	Covered Bonds within Fixed maturities - AFS with a carrying value of $763.6 million and $553.1 million at June 30, 2014 and December 31, 2013, respectively, and Covered Bonds within Fixed maturities - HTM with a carrying value of $8.6 million at December 31, 2013, are included within Other asset-backed securities to align our classification to market indices.

(6)	Included within Equity securities are investments in fixed income funds with a carrying value of $92.1 million and $87.4 million at June 30, 2014 and December 31, 2013, respectively.

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(1)

The credit rating for each asset reflected above was principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (when available). U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflect the credit quality rating of the U.S. government for the purpose of these calculations.

(2)	Excludes Life Funds Withheld Assets.

•	gross unrealized losses of $43.5 million related to Government and Government-Related holdings. Securities in a gross unrealized loss position had a fair value of $1.9 billion at June 30, 2014.

•	gross unrealized losses of $28.7 million related to Core CDO holdings (defined by the Company as investments in non-subprime CDOs), which consisted primarily of collateralized loan obligations (“CLOs”). Securities in a gross unrealized loss position had a fair value of $561.8 million at June 30, 2014.

•

gross unrealized losses of $21.2 million related to Non-Agency RMBS securities (which consists of our holdings of sub-prime Non-Agency RMBS, second liens, asset backed securities collateralized debt obligations ("ABS CDOs") with sub-prime collateral, Alt-A and Prime RMBS). Securities in an unrealized loss position had a fair value of $248.7 million at June 30, 2014. The Company has incurred realized losses, consisting of charges for OTTI and realized losses from sales, of approximately $1.4 billion since the beginning of 2007 through June 30, 2014 on these asset classes.

•	gross unrealized losses of $43.2 million related to the Corporate holdings. Securities in a gross unrealized loss position had a fair value of $1.3 billion at June 30, 2014. Of the gross unrealized losses, $17.5 million relate to financial institutions.

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(1)	Excludes Life Funds Withheld Assets.

(1)	Excludes Life Funds Withheld Assets.

(2)

Tier One and Upper Tier Two securities, representing committed term debt and hybrid instruments senior to the common and preferred equities of the financial institutions, are allocated based on the call date unless such security is not called on such date, in which case it is allocated the final or longest expected maturity. Medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage are allocated based on contractual maturity.

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(1)	Covered Bonds with a fair value of $763.6 million are included within Other asset-backed securities.

(2)	Cash equivalents balances subject to fair value measurements include certificates of deposit and money market funds.

(3)

The Other investments balances exclude certain structured transactions including certain investments in project finance transactions and a payment obligation (for further information, see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013) that has provided liquidity financing to a structured credit vehicle as a part of a third party medium term note facility. These Other investments are carried at amortized cost, which totaled $275.8 million at June 30, 2014.

(4)	Other assets include derivative instruments, reported on a gross basis.

(5)	Financial instruments sold, but not yet purchased, are included within “Payable for investments purchased” on the balance sheets.

(6)	Other liabilities include derivative instruments, reported on a gross basis.

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a.	debt;

b.	preference shares;

c.	letter of credit facilities and other sources of collateral; and

d.	revolving credit facilities.

▪	sufficient capital to maintain our financial strength and credit ratings, as issued by several ratings agencies, at levels considered necessary by management to enable our key operating subsidiaries to compete;

▪	sufficient capital to enable our regulated subsidiaries to meet the regulatory capital levels required in the United States, the U.K., Bermuda, Ireland, Switzerland and other key markets;

▪	letters of credit and other forms of collateral that are required to be posted or deposited, as the case may be, by our operating subsidiaries that are “non-admitted” under U.S. state insurance regulations in order for the U.S. cedant to receive statutory credit for reinsurance. We also use letters of credit to support our operations at Lloyd's; and

▪	revolving credit facilities to meet short-term liquidity needs.

▪	the credit available from banks may be reduced due to market conditions resulting in our need to pledge our investment portfolio to customers, which could result in a lower investment yield;

▪	we may be downgraded by one or more rating agencies, which could materially and negatively impact our business, financial condition, results of operations and/or liquidity; and

▪	the volume of business that our subsidiaries that are not admitted in the United States are able to transact could be reduced if we are unable to obtain letter of credit facilities at an appropriate amount.

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▪	a revolving credit facility of $1.0 billion; and

▪	senior unsecured notes of approximately $2.3 billion issued by XL-Cayman. These notes require XL-Cayman to pay a fixed rate of interest during their terms. At June 30, 2014, there were six outstanding issues of senior unsecured notes:

▪	$600 million senior notes due September 2014, with a fixed coupon of 5.25%. The security is publicly traded. The notes were issued in two tranches of $300 million aggregate principal amount each - one tranche at 99.432% and the other at 98.419% with aggregate net proceeds of $590.9 million. Related expenses of the offering amounted to $2.7 million.

▪	$300 million senior notes due December 2018, with a fixed coupon of 2.30%. The security is publicly traded. The notes were issued at 99.69% and net proceeds were $296.6 million. Related expenses of the offering amounted to $2.5 million.

▪	$400 million senior notes due October 2021, with a fixed coupon of 5.75%. The security is publicly traded. The notes were issued at 100.0% and net proceeds were $395.7 million. Related expenses of the offering amounted to $4.3 million.

▪	$350 million senior notes due November 2024, with a fixed coupon of 6.375%. The security is publicly traded. The notes were issued at 100.0% and net proceeds were $347.8 million. Related expenses of the offering amounted to $2.2 million.

▪	$325 million of senior notes due May 2027, with a fixed coupon of 6.25%. The security is publicly traded. The notes were issued at 99.805% and net proceeds were $321.9 million. Related expenses of the offering amounted to $2.5 million.

▪	$300 million senior notes due December 2043, with a fixed coupon of 5.25%. The security is publicly traded. The notes were issued at 99.77% and net proceeds were $296.0 million. Related expenses of the offering amounted to $3.3 million.

(1)	This letter of credit facility includes $1.0 billion that is also included in the “5-year revolver” listed under Debt. See the discussion regarding the Syndicated Credit Agreements (defined below).

(2)	We have the option to increase the size of the facilities under the Syndicated Credit Agreements by an additional $500 million across both such facilities.

(3)	We have the option to increase the maximum amount of letters of credit and revolving credit loans available under the 2013 Citi Agreements, with the lender's and issuing lender's consent.

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(1)

The credit ratings above were principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (where available). The credit ratings for U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflects the credit quality rating of the U.S. government for the purpose of these calculations.

(2)	Excludes Life Funds Withheld Assets.

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(1)	Includes Covered Bonds.

(2)	Excludes Life Funds Withheld Assets.

(3)

The credit rating for each asset reflected above was principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (where available). U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflect the credit quality rating of the U.S. government for the purpose of these calculations

(1)	Excludes Life Funds Withheld Assets.

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(1)	Corporate issuers include Covered Bonds.

(2)	Excludes Life Funds Withheld Assets.

(1)	Excludes Life Funds Withheld Assets.

(2)	Government-guaranteed securities and Covered Bonds have been excluded from the above figures.

(1)	Excludes Life Funds Withheld Assets.

(2)	Includes Covered Bonds.

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(1)	The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 bps adverse parallel shift in global bond curves.

(2)

The estimated impact on the fair value of our investment portfolio of an immediate hypothetical -10% change in the value of equity exposures in our equity portfolio, certain equity-sensitive alternative investments and private equity investments. This includes our estimate of equity risk embedded in the alternatives and private investment portfolio with such estimates utilizing market exposures provided to us by certain individual fund investments, internal statistical analyses, and/or various assumptions regarding illiquidity and concentrations.

(3)	The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +100 basis point increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our alternative investments, private investments and counterparty exposure.

(4)	The estimated impact on the fair value of our fixed income portfolio of an immediate hypothetical +10% increase in all global government related, corporate and structured security spreads to which our fixed income portfolio is exposed. This excludes exposure to credit spreads in our alternative investments, private investments and counterparty exposure.

(5)	The VaR results are based on a 95% confidence interval, with a one-year holding period, excluding foreign exchange rate risk. Our investment portfolio VaR at June 30, 2014 is not necessarily indicative of future VaR levels as these are based on statistical estimates of possible price changes and, therefore, exclude other sources of investment return such as coupon and dividend income.

(6)

The VaR results are the standalone VaRs, based on the prescribed methodology, for each component of our Total Investment Portfolio. The standalone VaRs of the individual components are non-additive, with the difference between the summation of the individual component VaRs and their respective aggregations being due to diversification benefits across the individual components. In the case of the VaR results for our Total Investment Portfolio, the results also include the impact associated with our Business and Other investments.

(7)	Our Total Investment Portfolio also includes our Business and Other investments that do not form part of our Fixed Income Portfolio or Non-Fixed Income Portfolio. The individual results reported in the above table for our Total Investment Portfolio therefore represent the aggregate impact on our Fixed Income Portfolio, Non-Fixed Income Portfolio and the majority of our Other investments.

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(1)

The credit ratings above were principally determined based on the weighted average rating of the individual securities from Standard & Poor's, Moody's Investors Service and Fitch Ratings (where available). The credit ratings for U.S. Agency debt and related mortgage-backed securities, whether with implicit or explicit government support, reflect the credit quality rating of the U.S. government for the purpose of these calculations.

(1)	Government-guaranteed securities and Covered Bonds have been excluded from the above figures.

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(1)	Shares purchased in connection with the vesting of restricted shares granted under our restricted stock plan do not represent shares purchased as part of publicly announced plans or programs. All such purchases were made in connection with satisfying tax withholding obligations of those employees. These shares were not purchased as part of our share buyback program.

(2)	For information regarding our share buyback activity see Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Key Focuses of Management - Buybacks of Ordinary Shares," included herein.

*	Filed herewith.

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