XL Capital Ltd. said on Friday it was in talks to buy a controlling interest in reinsurer Le Mans Re - a joint venture it set up with French mutual insurer Les Mutuelles du Mans Assurances - in a move to increase its continental European reinsurance business.

XL said it intended to increase its stake in Le Mans Re to 67 percent. It did not disclose financial terms, but said it expected to close the deal by the beginning of next year.

XL also said it agreed to sell $500 million of its 6-3/8 percent senior notes due 2011, which are being issued by a special purpose UK finance subsidiary - XL Finance (UK) Plc.

J.P. Morgan and Salomon Smith Barney were the joint lead managers for the sale.