Contact:

Jim Tabacchi/Murat Akgun
CMET Holdings LLC
(212) 803-5050

Roger R. Scotton
Media Relations, XL Capital Ltd
(441) 294-7165

For Immediate Release:

Capital Markets Engineering and Trading (CMET) expects to close its second
transaction this week, a $200 million CLO-like hybrid called South Street
Securities, which establishes a $15 billion repo trading desk for the
benefit of Daiwa Securities.

CMET’s structures combine characteristics of market value CDOs and
SIVs. Unlike typical CDOs, the resulting vehicle is an operating company
owned by CMET Financial Holdings. In this case, SSS will be an actively
run the trading activities under head trader Jason Schuit.

This is CMET’s second deal this year, and the firm is hoping to
a third before 2005. The first deal, called Three Rivers Funding, closed
in February, and its trading operations (repo) beginning in March.

CMET, established four years ago, is headed up by former Citibank bankers,
including Murat Akgun and James Tabacchi.

The proceeds from the trading operation are passed into the deal as interest
payments. While the senior notes are a natural triple-A, XLCA also participates
in the transaction as a swap counterparty, in this case providing a credit
default swap against the senior class.

Like the previous deal, HSBC purchased the triple-As, sized at $140 million.
The deal also includes $20 million in triple-B rated junior notes and
$40 million in equity investment.

The CMET transactions allow firms access to trading operations without
the capital costs of running the desk. The treatment lowers the cost of
capital (the notes approximate 1.33% of the South Street’s trading
capacity, for example), while regulatory capital requirements against
a repo desk can typically range from 4% to 6%.

Risk considerations in rating these deals include repo counterparty risk
— generally considered fairly low - and market value risk.

As an operating vehicle, South Street moves in and out of positions over
the yield curve in a way that statistically produces a reliable cashflow.
Market value triggers are embedded in the deal, however, which could cause
it to unwind if certain thresholds are breached, similar to market value
CDOs.

Repo trading desks “generate revenue through establishing positive
interest rate spreads between matching repo and reverse transactions,
and taking advantage of differences in interest rates along the yield
curve,” said Cesar Crousillat, a vice president and senior analyst
at Moody’s Investors Service, which rated both of CMET’s transactions.

CMET’s use of CLO technology provides capital relief to trading
operations and was originally envisioned by CMET’s principles while
at pre-merger Citibank. The team was exploring the idea of taking Citibank’s
entire fixed-income trading operations off-balance sheet, though the task
fell by the wayside as post-merger Citigroup realigned its strategies.
- MG

This press release contains forward-looking statements. Such statements
are based on current plans, estimates and expectations. Accordingly, forward-looking
statements involve inherent risks and uncertainties, and a number of important
factors could cause actual results to differ materially from those contained
in any forward-looking statement, including, without limitation, that
CMET’s business platform may not develop to the extent anticipated. A
non-exclusive list of other important factors that could cause actual
results to differ materially from those in such forward-looking statements
is set forth in XL Capital Ltd’s most recent reports on Form 10-K and
Form 10-Q and XL Capital Ltd’s other documents on file with the Securities
and Exchange Commission. XL Capital Ltd undertakes no duty to update publicly
or revise any forward-looking statements contained herein in light of
new information, future developments or otherwise.

Please call 212-824-0738 for more information

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