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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 $150.9 million and $194.3 million and an amortized cost of $150.6 million and $194.8 million at September 30, 2013 and December 31, 2012, 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 September 30, 2013 and December 31, 2012, Covered Bonds with a fair value of $560.7 million and $647.1 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 $89.7 million and $101.9 million at September 30, 2013 and December 31, 2012, 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 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 $293.9 million at September 30, 2013 and $312.1 million at December 31, 2012, 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, 2012.

(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 6, “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 sheet.

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

(2)	The net results from structured products include net investment income and interest expense of $18.1 million and $11.6 million, respectively.

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

(4)	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.

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

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

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

(2)	The net results from structured products include net investment income and interest expense of $17.5 million and $11.7 million, respectively.

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

(4)	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.

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

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

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

(2)	The net results from structured products include net investment income and interest expense of $53.9 million and $36.2 million, respectively.

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

(4)	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.

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

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

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

(2)	The net results from structured products include net investment income and interest expense of $52.2 million and $54.9 million, respectively.

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

(4)	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.

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

(6)	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, surety 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, surety 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 impairment measurement date.

(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments include government-related securities with an amortized cost of $2,373.4 million and fair value of $2,414.7 million and U.S. Agencies with an amortized cost of $268.7 million and fair value of $290.6 million.

(3)	Covered Bonds within Fixed maturities - AFS with an amortized cost of $531.4 million and a fair value of $560.7 million and Covered Bonds within Fixed maturities - HTM with an amortized cost of $8.3 million and a fair value of $8.3 million are included within Other asset-backed securities to align the Company's classification to market indices.

(4)

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 $150.9 million and an amortized cost of $150.6 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.

(5)	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 $271.5 million and an amortized cost of $280.2 million at September 30, 2013.

(6)	Included within Total equity securities are investments in fixed income funds with a fair value of $89.7 million and an amortized cost of $100.0 million at September 30, 2013.

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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 impairment measurement date.

(2)	U.S. Government and Government-Related/Supported, Non-U.S. Sovereign Government, Provincials, Supranationals and Government-Related/Supported and Total short-term investments include government-related securities with an amortized cost of $1,912.7 million and fair value of $1,988.5 million and U.S. Agencies with an amortized cost of $404.3 million and fair value of $446.7 million.

(3)	Covered Bonds within Fixed maturities - AFS with an amortized cost of $605.4 million and a fair value of $647.1 million and Covered Bonds within Fixed maturities - HTM with an amortized cost of $8.4 million and a fair value of $8.6 million are included within Other asset-backed securities to align the Company's classification to market indices.

(4)

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 $194.3 million and an amortized cost of $194.8 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.

(5)	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 $308.5 million and an amortized cost of $327.6 million at December 31, 2012.

(6)	Included within Total equity securities are investments in fixed income funds with a fair value of $101.9 million and an amortized cost of $100.0 million at December 31, 2012.

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(1)

Included in the table above 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 value of $271.5 million and $308.5 million at September 30, 2013 and December 31, 2012, respectively. These securities are reflected in the table based on their call date and have net unrealized losses of $8.8 million and $19.1 million at September 30, 2013 and December 31, 2012, respectively.

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▪	$2.1 million for structured securities, principally non-Agency RMBS, where management 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.

▪	$1.1 million related to medium term notes backed primarily by European investment grade credit. On certain notes, management concluded that expected future returns on the underlying assets were not sufficient to support the previously reported amortized cost.

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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 sheet 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 10, “Variable Interest Entities".

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(1)	Derivative gains (losses) from derivative instruments designated as hedges of the net investment in a foreign operation are recorded in the cumulative translation adjustment account within AOCI for each period.

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(1)	At September 30, 2013, there were seven available letter of credit facilities; at December 31, 2012, there were five available letter of credit facilities.

(2)

At September 30, 2013 and December 31, 2012, the revolving credit available under the December 9, 2011 unsecured credit agreement (the "December 2011 Unsecured Credit Agreement" and, together with the December 9, 2011 secured credit agreement (the "December 2011 Credit Agreements") was unutilized. The two credit agreements with Citicorp USA, Inc., as administrative agent and issuing lender, and the lenders party thereto, each as amended (collectively, the "2013 Credit Agreements"), provide for issuance of letters of credit and revolving credit loans up to an aggregate amount of $475 million. At September 30, 2013, $475 million of letters of credit were issued under the 2013 Credit Agreements and therefore such amount is not included here.

(3)

The Company has the option to increase the size of the facility under the March 25, 2011 secured credit agreement, as amended, by an additional $500 million, the size of the facilities under the December 2011 Credit Agreements by an additional $500 million across both such facilities and the maximum amount of the letters of credit and revolving credit loans available under the 2013 Credit Agreements, with the lender's and issuing lender's consent.

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(1)	Amounts include adjustments recorded to the value of future policy benefit reserves of $32.9 million. These amounts were recorded during the three months ended June 30, 2013.

(2)	Amounts include adjustments recorded to the value of future policy benefit reserves of $37.4 million. These amounts were recorded during the three months ended September 30, 2013.

(1)	Amounts include cumulative adjustments recorded to the value of future policy benefit reserves of $70.3 million. These amounts were recorded during the nine months ended September 30, 2013.

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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;

▪	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 XL-Ireland 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, 2012 and our other documents on file with the SEC.

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▪	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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▪	Three months ended September 30, 2013 - the series of hailstorms in Germany and France in late July 2013 (the “Europe Hailstorms”), Hurricane Ingrid and flooding events in the United States (Colorado) and Canada (Toronto).

▪	Nine months ended September 30, 2013 (in addition to those noted above) - flooding in Europe, Argentina and Canada (Calgary), a cyclone in Australia and tornadoes and hailstorms in the United States.

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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.

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*	N/M - Not Meaningful

▪	IPC - increase of 7.8% driven mainly by higher renewed premiums across most lines and favorable pricing across most businesses but most significantly in middle markets, partially offset by unfavorable prior year premium adjustments and by lower levels of new business in middle markets and primary casualty.

▪	NAPC - increase of 14.9% largely driven by strong renewed premiums including favorable pricing across most businesses, higher volume in excess casualty and strong new business in construction and property.

▪	Professional - increase of 6.8% driven by higher renewed premiums in international professional and in Select (which offers professional liability to small and mid-size niche professional groups in the United States), stronger pricing across U.S. and select professional, partially offset by lower new business mainly in U.S. professional.

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▪	Specialty - increase of 1.6% due to improved renewed premiums and new business in our fine art and specie and marine lines of businesses, partially offset by lower new business and weaker pricing in the aerospace business.

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▪	Acquisition expense ratio - decreased largely due to a combination of a mix of business and the favorable impact of the changes in the 2013 reinsurance structure mentioned above.

▪	Operating expense ratio - decreased 1.6 percentage points mainly due to the leveraging of the growth in net earned premiums for the three months ended September 30, 2013 compared to the same period of 2012.

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▪	Bermuda - decrease of 27.1% due to certain premium adjustments on prior year incepting policies.

▪	North America - decrease of 13.5% due to the property line of business as a result of the non-renewal of a crop quota share program and reductions in volume and shares, partially offset by a new agricultural program in North America and favorable renewals, new business and certain timing differences in the casualty line of business.

▪	International - decrease of 16.2%, due to lower renewals on Latin America property treaty business as a result of the competitive market conditions in the region.

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▪	Net favorable prior year development for the short-tailed lines totaled $53.8 million and details of the significant components are as follows:

▪	For property catastrophe lines, net prior year development was $18.9 million favorable comprised of $14.9 million favorable development driven mainly by better than expected development on 2008 and 2009 windstorm and typhoon losses as well as $4.0 million favorable due to better than expected attritional loss development.

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▪	For property other lines, net prior year development was $14.3 million favorable comprised of $7.8 million favorable development on prior year large and catastrophe losses and $6.6 million favorable development due to better than expected attritional loss development.

▪	For marine and aviation lines, net prior year development was $20.6 million favorable driven mainly by $12.0 million favorable development on a 2012 large loss in the Europe marine book, and $7.8 million favorable due to better than expected attritional loss development in Europe and Bermuda.

▪	Net favorable prior year development for the long-tailed lines totaled $21.8 million and details of the significant components are as follows:

▪	For casualty lines, net prior year development was $25.7 million favorable mainly driven by $13.0 million from the North America book, and $12.5 million from the Europe book, due to better than expected development on attritional losses. The favorable development primarily impacts underwriting years 2003 through 2007.

▪	For other lines, net prior year development was $3.9 million unfavorable mainly due to worse than expected development on attritional losses in the International discontinued book for underwriting years 2004 to 2007.

▪	Acquisition expense ratio - increased largely from an increase in profit commissions in Bermuda on property treaty lines due to to higher profit based commissions on the 2012 underwriting year.

▪	Operating expense ratio - the total operating expense amount decreased due to lower compensation expenses in the three months ended September 30, 2013 compared to the same period in 2012.

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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 at quarter end rates to calculate composite portfolio results.

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

(3)	Performance on the alternative portfolio reflects the three months ended August 31, 2013 and 2012, respectively for both equity and non-equity alternative funds.

(1)	Net investment income relating to P&C operations includes the 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.

(3)	For a summary of realized and unrealized gains and losses on all derivative instruments, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

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▪	Net realized gains of $1.2 million resulted primarily from sales of alternative investments and municipals offset by losses in Agency and non-U.S. Sovereign Government securities.

▪	Realized losses of approximately $3.2 million related to the write-down of certain of our AFS investments. The main components of the net impairment charges were:

▪	$2.1 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.

▪	$1.1 million related to medium term notes backed primarily by European investment grade credit. On certain notes, management concluded that expected future returns on the underlying assets were not sufficient to support the previously reported amortized cost.

(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 9.3% driven mainly by higher renewed premiums across all businesses and strong pricing, most notably in middle markets, and growth in new business in property, partially offset by adverse prior period premium adjustments in property.

▪	NAPC - increase of 22.8% largely driven by new business, most notably in construction, primary casualty, surety and environmental, favorable renewed premiums and pricing across most lines and higher volume primarily in property and excess casualty.

▪	Professional - increase of 6.2% driven primarily by increases in new business and renewed premiums in select and international, and strong pricing across most lines, most notably the U.S. and international businesses, partially offset by lower new business in the U.S.

▪	Specialty - increase of 2.2% due to improved renewed premiums and new business in our fine art and specie and marine lines of businesses, partially offset by lower renewed premiums and lower new business in aerospace as well as lower marine premiums from reduced exposures.

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(1)	Other includes programs, excess and surplus, surety, structured indemnity and certain discontinued lines.

▪	For property, net prior year development was $23.6 million favorable. This was driven by better than expected loss experience reported predominantly in the 2012 accident year for non-natural catastrophe exposures.

▪

For casualty, net prior year development was $4.1 million favorable. This was primarily due to favorable development of $36.2 million for the 2006 and prior accident years in the excess casualty book, partially offset by adverse development of $15.8 million for the 2007 to 2010 accident years. In addition, there was adverse development of $12.3 million in middle markets for the 2010 to 2012 accident years. In the international primary casualty book, adverse development of $54.0 million for the 2008 to 2011 accident years was mostly offset by favorable development of $50.2 million for the 2003 and prior accident years.

▪

For professional, net prior year development was $16.5 million unfavorable. In the U.S. and international books combined, reported loss experience drove a strengthening of $92.3 million across the 2009 to 2012 accident years and a release of $52.2 million across the 2006 to 2008 accident years. In addition, there was favorable development of $34.5 million for the 2002 and 2003 accident years in the core Bermuda book and the Select portfolio was strengthened by $10.8 million across the 2004 to 2012 accident years.

▪	For specialty, net prior year development was $71.0 million favorable. This was primarily driven by releases of $45.2 million, $13.1 million and $9.6 million for aerospace, specie and marine, respectively, due to the better than expected loss experience reported predominantly in the 2005 and later accident years.

▪	Other net prior year development was $20.0 million unfavorable, driven by strengthening in the 2006 accident year for the discontinued surety book and worse than expected loss experience reported in programs.

▪	Acquisition expense ratio - decreased largely from the favorable changes in the reinsurance structure during 2013 mentioned above and the impact of marine reinstatement premiums and adverse ceded earned premium adjustments, primarily in NAPC in 2012, partially offset by lower ceding income in certain casualty businesses in 2013.

▪	Operating expense ratio - decreased 1.8 percentage points due to the leveraging of the growth in net earned premiums for the nine months ended September 30, 2013 compared to the same period of 2012.

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*	N/M - Not Meaningful

*	N/M - Not Meaningful

▪	Bermuda - increase of 9.0%, due to new whole account business and favorable renewals.

▪	North America - decrease of 11.8%, primarily as a result of the non-renewal of a crop quota share program in the property line of business, partially offset by favorable renewals and new business in casualty and a new agricultural program.

▪	International - decrease of 13.2%, attributable to the non-renewal of certain marine exposures as a result of the re-underwriting of this line to manage aggregate exposures; reduced and non-renewals and certain premium adjustments in casualty; and lower renewals in Latin America as a result of re-underwriting activities and competitive market conditions in the region.

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▪	Net favorable prior year development for the short-tailed lines totaled $100.3 million and details of the significant components are as follows:

▪	For property catastrophe lines, net prior year development was $48.8 million favorable. This was driven by better than expected development on the 2005 hurricanes as well as typhoon and windstorm losses in 2009 and prior years.

▪	For property other lines, net prior year development was $35.3 million favorable. This was comprised of $17.3 million favorable development for catastrophe and large losses and $18.0 million favorable development due to better than expected attritional loss development.

▪	For marine and aviation lines, net prior year development was $16.5 million favorable, mainly driven by better than expected attritional loss development in the Europe marine book.

▪	Net favorable prior year development for the long-tailed lines totaled $66.6 million and details of the significant components are as follows:

▪

For casualty lines, net prior year development was $66.0 million favorable. This comprised of $53.2 million from the North America book and $12.1 million from the Europe book due to better than expected development on attritional losses. The favorable development primarily impacts underwriting years 2003 through 2005 for the North America book and underwriting years 2003 through 2007 for the Europe book.

▪	For other lines, net prior year development was $0.6 million favorable mainly due to better than expected development on the North America and Bermuda books, partially offset by adverse development on the International book.

▪	Acquisition expense ratio - increased largely from an increase in profit commissions in Bermuda on property treaty lines in the nine months ended September 30, 2013, due to higher profit based commissions on prior underwriting years.

▪	Operating expense ratio - the total operating expense amount decreased largely in line with the reduction in net earned premiums for the nine months ended September 30, 2013 compared to the same period of 2012.

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*	N/M - Not Meaningful

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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 at quarter end rates to calculate composite portfolio results.

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

(3)	Performance on the alternative portfolio reflects the nine months ended August 31, 2013 and 2012, respectively for both equity and non-equity alternative funds.

(1)	Net investment income relating to P&C operations includes the 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.

(3)	For a summary of realized and unrealized gains and losses on all derivative instruments, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

*	N/M - Not Meaningful

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▪	Net realized gains of $85.7 million resulted primarily from redemptions of non-equity alternative investments and sales of non-Agency RMBS, equity and non-U.S. Sovereign Government securities.

▪	Realized losses of approximately $10.2 million related to the write-down of certain of our AFS investments. The main components of the net impairment charges were:

▪	$6.9 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.

▪	$1.1 million related to medium term notes backed primarily by European investment grade credit. On certain notes, management concluded that expected future returns on the underlying assets were not sufficient to support the previously reported amortized cost.

▪	$2.2 million related to currency losses.

(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

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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 $2,373.4 million and $1,912.7 million and carrying value of $2,397.7 million and $1,988.5 million at September 30, 2013 and December 31, 2012, respectively, and U.S. Agencies with an amortized cost of $268.7 million and $404.3 million and carrying value of $289.6 million and $446.7 million at September 30, 2013 and December 31, 2012, respectively.

(3)

Included in Corporate - Financials are gross unrealized losses of $14.1 million and $23.7 million on Tier One and Upper Tier Two securities of financial institutions (“Hybrids”) with a carrying value of $126.4 million and $190.1 million at September 30, 2013 and December 31, 2012, respectively, as well as gross unrealized losses of $10.6 million and $11.8 million on subordinated debt (including lower Tier Two securities) with a carrying value of $93.4 million and $111.5 million at September 30, 2013 and December 31, 2012, respectively.

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(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 $150.9 million and $194.3 million and an amortized cost of $150.6 million and $194.8 million at September 30, 2013 and December 31, 2012, 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 $560.7 million and $647.1 million at September 30, 2013 and December 31, 2012, respectively, and Covered Bonds within Fixed maturities - HTM with a carrying value of $8.3 million and $8.6 million at September 30, 2013 and December 31, 2012, respectively, 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 $89.7 million and $101.9 million at September 30, 2013 and December 31, 2012, respectively.

(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.

•	gross unrealized losses of $49.8 million related to the P&C portfolio of 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 $651.9 million at September 30, 2013.

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gross unrealized losses of $39.3 million related to the P&C portfolio of Non-Agency RMBS portfolio (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 $278.2 million at September 30, 2013. 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 September 30, 2013 on these asset classes.

•	gross unrealized losses of $42.5 million related to our Life operations investment portfolio. Securities in a gross unrealized loss position had a fair value of $872.0 million at September 30, 2013. Of these gross unrealized losses, $10.7 million related to $164.3 million of exposures to corporate financial institutions, including $7.1 million related to Tier One and Upper Tier Two securities.

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gross unrealized losses of $80.8 million related to the Corporate holdings within our P&C portfolio. Securities in a gross unrealized loss position had a fair value of $2,036.9 million at September 30, 2013. Of the gross unrealized losses, $27.7 million relate to financial institutions. In addition, $4.3 million relate to medium term notes primarily supported by pools of European investment grade credit with varying degrees of leverage. These had a fair value of $59.1 million at September 30, 2013. Management believes that expected cash flows from these bonds over the expected holding period will be sufficient to support the remaining reported amortized cost.

(1)

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)	We define Core CDOs as investments in non-subprime collateralized debt obligations, which primarily consisted of CLOs.

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(1)	Covered Bonds are included within Other asset-backed securities under Structured Credit.

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(1)	Covered Bonds have been included within Other asset-backed securities under Structured Credit to align our classification to market indices. Prior periods have been reclassified to conform to current period presentation.

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(1)	Covered Bonds with a fair value of $560.7 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, 2012) 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 $293.9 million at September 30, 2013.

(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 sheet.

(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 renew our letter of credit facilities at an appropriate amount.

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▪	a revolving credit facility of $1.0 billion; and

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▪	senior unsecured notes of approximately $1.7 billion issued by XL-Cayman. These notes require XL-Cayman to pay a fixed rate of interest during their terms. At September 30, 2013, there were four 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.

▪	$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.

(1)	We have the option to increase the size of the March 2011 Credit Agreement by an additional $500 million.

(2)	This letter of credit facility includes $1.0 billion that is also included in the “4-year revolver” listed under Debt.

(3)	We have the option to increase the size of the facilities under the December 2011 Credit Agreements by an additional $500 million across both such facilities.

(4)	We have the option to increase the maximum amount of letters of credit and revolving credit loans available under the 2013 Credit 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.

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(1)	Includes Covered Bonds.

(2)

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. 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

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(1)	Corporate issuers include Covered Bonds.

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

(1)	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.

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(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 September 30, 2013 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 comprises our P&C Investment Portfolio and Life Operations Investment Portfolio as well as our Business and Other investments that do not form part of our P&C Investment Portfolio or Life Operations Investment Portfolio. The individual results reported in the above table for our Total Investment Portfolio therefore represent the aggregate impact on our P&C Investment Portfolio, Life Operations Investment Portfolio and the majority of our Other investments.

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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 noted below.

(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.

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*	Filed herewith.

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