A.M. Best has affirmed and removed from under review XL Capital?s ratings in reflection of the Bermuda-based company?s $3.2 billion capital raising including $2.4 billion in common equity and steps taken by the group to reduce its exposure to catastrophe losses.

XL moved to raise capital this month after the group incurred $1.8 billion in hurricane losses in the last two quarters of 2005 and also received an unfavourable resolution in its dispute with Winterthur Swiss Insurance Company.

That resolution relating to its acquisition of Winterthur International in 2001 will result in a fourth quarter net charge of $830 million.

?Despite these losses, XL Capital continues to maintain a diverse earnings base, and well recognised position as a leading world-wide provider of coverage for insurance, reinsurance and financial products and services,? Best said.

It noted that the company has since has taken steps to reduce its susceptibility to shock losses through discontinuing some of its catastrophe related programs and through entering a quota share agreement for its property catastrophe business with new 2005 start-up, Cyrus Re. Best added that despite the arbitrator?s decision, the acquisition of Winterthur was of ?strategic importance for the group?s global expansion and that it has significantly benefited from the strong market conditions immediately following the acquisition?.

While Best noted the magnitude of the recently raised capital, it said that XL Capital maintains ?solid financial flexibility with strong access to both debt and equity markets? and its market capitalisation remains above its book value and well above its tangible book value. It expects XL Capital to maintain financial leverage as measured by debt and preferred-to-total capital below 35 percent and to maintain fixed charge coverage in the mid to upper single digit range.

All of the ratings including the A+ financial strength rating and issuer credit ratings of ?aa-? for XL?s operating subsidiaries have a stable outlook. Best said this reflects its belief that with the Winterthur settlement and all significant uncertainties surrounding XL Capital?s business position now behind it, the company is ?extremely well positioned to generate a level of earnings commensurate with its assigned ratings?.