10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2013
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ______

Commission file number 1-10804

XL GROUP

Public Limited Company

(Exact name of registrant as specified in its charter)

Ireland	98-0665416
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

XL House, 8 St. Stephen's Green, Dublin 2, Ireland

(Address of principal executive offices and zip code)

+353 (1) 400-5500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 29, 2013, there were 282,810,509 outstanding Ordinary Shares, $0.01 par value per share, of the registrant.

XL GROUP PLC

INDEX TO FORM 10-Q

		Page No.
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Unaudited Consolidated Balance Sheets at September 30, 2013 and December 31, 2012	1
	Unaudited Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2013 and 2012	2
	Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012	3
	Unaudited Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2013 and 2012	4
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89
Item 4.	Controls and Procedures	96
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	97
Item 1A.	Risk Factors	97
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	97
Item 6.	Exhibits	98
	Signatures	99

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XL GROUP PLC

UNAUDITED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share data)	September 30, 2013		December 31, 2012
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost: 2013, $26,772,143; 2012, $26,544,806)	$	27,282,442	$	27,846,920
Equity securities, at fair value (cost: 2013, $878,679; 2012, $617,486)	974,733		649,359
Short-term investments, at fair value (amortized cost: 2013, $271,465; 2012, $322,563)	272,705		322,703
Total investments available for sale	$	28,529,880	$	28,818,982
Fixed maturities, held to maturity at amortized cost (fair value: 2013, $3,116,940; 2012, $3,262,804)	2,802,111		2,814,447
Investments in affiliates	1,362,484		1,126,875
Other investments	1,125,045		1,219,879
Total investments	$	33,819,520	$	33,980,183
Cash and cash equivalents	2,130,893		2,618,378
Accrued investment income	347,996		342,778
Deferred acquisition costs	722,151		675,653
Ceded unearned premiums	772,563		587,074
Premiums receivable	2,911,880		2,568,862
Reinsurance balances receivable	97,100		58,428
Unpaid losses and loss expenses recoverable	3,352,667		3,382,102
Receivable from investments sold	43,261		16,002
Goodwill and other intangible assets	410,933		408,527
Deferred tax asset	222,638		166,143
Other assets	794,781		582,765
Total assets	$	45,626,383	$	45,386,895
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss expenses	$	20,407,428	$	20,484,121
Deposit liabilities	1,505,180		1,551,398
Future policy benefit reserves	4,762,044		4,812,046
Unearned premiums	4,254,939		3,755,086
Notes payable and debt	1,671,062		1,672,778
Reinsurance balances payable	480,822		143,112
Payable for investments purchased	146,502		102,113
Deferred tax liability	123,244		141,803
Other liabilities	1,022,648		868,036
Total liabilities	$	34,373,869	$	33,530,493
Commitments and Contingencies
Shareholders’ Equity:
Ordinary shares, 999,990,000 authorized, par value $0.01; issued and outstanding (2013, 282,810,509; 2012, 298,681,573)	$	2,828	$	2,987
Additional paid in capital	8,129,923		8,584,752
Accumulated other comprehensive income	762,316		1,520,020
Retained earnings	1,012,829		402,318
Shareholders’ equity attributable to XL Group plc	$	9,907,896	$	10,510,077
Non-controlling interest in equity of consolidated subsidiaries	1,344,618		1,346,325
Total shareholders’ equity	$	11,252,514	$	11,856,402
Total liabilities and shareholders’ equity	$	45,626,383	$	45,386,895

See accompanying Notes to Unaudited Consolidated Financial Statements

1

XL GROUP PLC

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(U.S. dollars in thousands, except per share data)	2013			2012			2013			2012
Revenues:
Net premiums earned	$	1,625,312		$	1,548,041		$	4,717,396		$	4,471,051
Net investment income	237,921			239,481			716,935			767,354
Realized investment gains (losses):
Net realized gains (losses) on investments sold	1,229			7,136			85,733			64,703
Other-than-temporary impairments on investments	(2,388		)	(10,295		)	(7,676		)	(45,027		)
Other-than-temporary impairments on investments transferred to (from) other comprehensive income	(799		)	(2,334		)	(2,538		)	(16,760		)
Total net realized gains (losses) on investments	$	(1,958	)	$	(5,493	)	$	75,519		$	2,916
Net realized and unrealized gains (losses) on derivative instruments	880			6,254			3,660			2,656
Income (loss) from investment fund affiliates	5,079			16,049			83,843			38,555
Fee income and other	10,875			13,306			31,378			36,378
Total revenues	$	1,878,109		$	1,817,638		$	5,628,731		$	5,318,910
Expenses:
Net losses and loss expenses incurred	$	1,006,520		$	894,077		$	2,787,210		$	2,574,497
Claims and policy benefits	116,549			119,438			344,269			371,893
Acquisition costs	238,328			236,347			690,473			679,434
Operating expenses	311,506			305,745			898,497			887,210
Exchange (gains) losses	20,303			18,690			(24,463		)	13,432
Interest expense	37,926			37,907			114,830			134,564
Total expenses	$	1,731,132		$	1,612,204		$	4,810,816		$	4,661,030
Income (loss) before income tax and income (loss) from operating affiliates	$	146,977		$	205,434		$	817,915		$	657,880
Income (loss) from operating affiliates	24,590			2,763			88,413			39,473
Provision (benefit) for income tax	897			451			73,248			51,813
Net income (loss)	$	170,670		$	207,746		$	833,080		$	645,540
Non-controlling interests	35,022			35,844			73,944			75,856
Net income (loss) attributable to ordinary shareholders	$	135,648		$	171,902		$	759,136		$	569,684
Weighted average ordinary shares and ordinary share equivalents outstanding, in thousands – basic	285,393			304,199			289,957			309,675
Weighted average ordinary shares and ordinary share equivalents outstanding, in thousands – diluted	290,490			307,764			294,828			312,602
Earnings (loss) per ordinary share and ordinary share equivalent – basic	$	0.48		$	0.57		$	2.62		$	1.84
Earnings (loss) per ordinary share and ordinary share equivalent – diluted	$	0.47		$	0.56		$	2.57		$	1.82

See accompanying Notes to Unaudited Consolidated Financial Statements

2

XL GROUP PLC

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Net income (loss) attributable to ordinary shareholders	$	135,648		$	171,902		$	759,136		$	569,684
Change in net unrealized gains (losses) on investments, net of tax	66,696			456,642			(760,705		)	778,300
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(27,831		)	14,614			(2,189		)	30,997
Change in OTTI losses recognized in other comprehensive income, net of tax	7,469			25,936			27,089			52,353
Change in underfunded pension liability	1,092			(2,026		)	1,387			(2,033		)
Change in value of cash flow hedge	110			110			330			330
Foreign currency translation adjustments	4,020			17,415			(23,616		)	(19,551		)
Comprehensive income (loss)	$	187,204		$	684,593		$	1,432		$	1,410,080

See accompanying Notes to Unaudited Consolidated Financial Statements

3

XL GROUP PLC

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Ordinary Shares:
Balance - beginning of year	$	2,987		$	3,156
Issuance of ordinary shares	11			9
Buybacks of ordinary shares	(177		)	(162		)
Exercise of stock options	7			3
Balance - end of period	$	2,828		$	3,006
Additional Paid in Capital:
Balance - beginning of year	$	8,584,752		$	8,938,679
Issuance of ordinary shares	22			1,380
Buybacks of ordinary shares	(499,229		)	(350,996		)
Exercise of stock options	9,711			4,784
Share-based compensation expense	34,667			36,529
Balance - end of period	$	8,129,923		$	8,630,376
Accumulated Other Comprehensive Income (Loss):
Balance - beginning of year	$	1,520,020		$	583,065
Change in net unrealized gains (losses) on investments, net of tax	(760,705		)	778,300
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(2,189		)	30,997
Change in OTTI losses recognized in other comprehensive income, net of tax	27,089			52,353
Change in underfunded pension liability	1,387			(2,033		)
Change in value of cash flow hedge	330			330
Foreign currency translation adjustments	(23,616		)	(19,551		)
Balance - end of period	$	762,316		$	1,423,461
Retained Earnings (Deficit):
Balance - beginning of year	$	402,318		$	(113,242	)
Net income (loss) attributable to ordinary shareholders	759,136			569,684
Dividends on ordinary shares	(122,513		)	(102,236		)
Buybacks of ordinary shares	(26,112		)	—
Balance - end of period	$	1,012,829		$	354,206
Non-controlling Interest in Equity of Consolidated Subsidiaries:
Balance - beginning of year	$	1,346,325		$	1,344,472
Non-controlling interests - contribution	500			1,500
Non-controlling interests - distribution	(37		)	—
Non-controlling interests	(300		)	(62		)
Non-controlling interest share in change in accumulated other comprehensive income (loss)	(29		)	473
Non-controlling interests - deconsolidation	(1,841		)	—
Balance - end of period	$	1,344,618		$	1,346,383
Total Shareholders’ Equity	$	11,252,514		$	11,757,432

See accompanying Notes to Unaudited Consolidated Financial Statements

4

XL GROUP PLC

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Cash flows provided by (used in) operating activities:
Net income (loss)	$	833,080		$	645,540
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net realized (gains) losses on investments	(75,519		)	(2,916		)
Net realized and unrealized (gains) losses on derivative instruments	(3,660		)	(2,656		)
Amortization of premiums (discounts) on fixed maturities	127,524			119,819
(Income) loss from investment and operating affiliates	(172,256		)	(78,028		)
Share-based compensation	45,447			41,827
Depreciation	44,147			41,735
Accretion of deposit liabilities	36,779			65,585
Changes in:
Unpaid losses and loss expenses	(85,471		)	(609,175		)
Future policy benefit reserves	(128,281		)	(132,834		)
Unearned premiums	486,249			524,341
Premiums receivable	(341,520		)	(380,164		)
Unpaid losses and loss expenses recoverable	28,566			354,698
Ceded unearned premiums	(183,198		)	(121,791		)
Reinsurance balances receivable	(38,612		)	(5,146		)
Deferred acquisition costs	(47,859		)	(47,629		)
Reinsurance balances payable	338,769			413,658
Deferred tax asset - net	(3,693		)	24,058
Derivatives	14,563			49,567
Other assets	(81,148		)	(53,297		)
Other liabilities	39,645			108,067
Other	19,337			(61,079		)
Total adjustments	$	19,809		$	248,640
Net cash provided by (used in) operating activities	$	852,889		$	894,180
Cash flows provided by (used in) investing activities:
Proceeds from sale of fixed maturities and short-term investments	$	3,042,348		$	2,456,889
Proceeds from redemption of fixed maturities and short-term investments	3,142,738			3,212,626
Proceeds from sale of equity securities	95,083			212,034
Purchases of fixed maturities and short-term investments	(6,480,368		)	(5,874,664		)
Purchases of equity securities	(358,484		)	(289,553		)
Investment affiliates, net	(94,760		)	58,415
Other, net	83,575			(113,538		)
Net cash provided by (used in) investing activities	$	(569,868	)	$	(337,791	)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of ordinary shares and exercise of stock options	$	9,718		$	4,651
Buybacks of ordinary shares	(525,520		)	(351,158		)
Dividends paid on ordinary shares	(121,131		)	(101,753		)
Distributions to non-controlling interests	(42,026		)	(43,283		)
Contributions from non-controlling interests	500			1,500
Repayment of debt	—			(600,000		)
Deposit liabilities	(87,788		)	(114,376		)
Net cash provided by (used in) financing activities	$	(766,247	)	$	(1,204,419	)
Effects of exchange rate changes on foreign currency cash	(4,259		)	20,210
Increase (decrease) in cash and cash equivalents	$	(487,485	)	$	(627,820	)
Cash and cash equivalents - beginning of period	2,618,378			3,825,125
Cash and cash equivalents - end of period	$	2,130,893		$	3,197,305

See accompanying Notes to Unaudited Consolidated Financial Statements

5

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Preparation and Consolidation

Unless the context otherwise indicates, references herein to the “Company” include XL Group plc, an Irish public limited company ("XL-Ireland"), and its consolidated subsidiaries.

These unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. In the opinion of management, these unaudited financial statements reflect all adjustments considered necessary for a fair statement of financial position and results of operations at the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. For further information, see Item 8, Note 2(a), “Significant Accounting Policies – Basis of Preparation and Consolidation,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

To facilitate period-to-period comparisons, certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current period presentation.

2. Significant Accounting Policies

Recent Accounting Pronouncements

In June 2011, the FASB issued an accounting standards update concerning the presentation of comprehensive income in financial statements. This guidance allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income only as part of the statement of changes in shareholders' equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted the guidance from January 1, 2012; however, it did not have an impact on the Company's disclosure, financial condition or results of operations or cash flows. In February 2013, the FASB issued an additional accounting standards update related to this topic that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance was adopted prospectively from January 1, 2013. As this guidance is disclosure-related only and does not change the current requirements for reporting net income or other comprehensive income in financial statements, its adoption did not impact the Company's financial condition, results of operations or cash flows.

In December 2011, the FASB issued an accounting standards update requiring additional disclosures about financial instruments and derivatives that are either: (1) offset for balance sheet presentation purposes or (2) subject to an enforceable master netting arrangement or similar arrangement, regardless of whether they are offset for balance sheet presentation purposes. In January 2013, the FASB issued an additional accounting standards update related to this topic clarifying that the disclosures would apply only to derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending transactions, each to the extent that they met one of the two conditions provided in the initial accounting standards update. This guidance was adopted from January 1, 2013, on a retrospective basis for all fiscal periods presented. As this guidance is disclosure-related only and does not amend existing balance sheet offsetting guidance, its adoption did not impact the Company's financial condition, results of operations or cash flows.

6

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

Fair value is defined as the amount that would be received for the sale of an asset or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The fair values for available for sale investments are generally sourced from third parties. The fair value of fixed income securities is based upon quoted market values where available, “evaluated bid” prices provided by third party pricing services (“pricing services”) where quoted market values are not available, or by reference to broker quotes where pricing services do not provide coverage for a particular security. While the Company receives values for the majority of the investment securities it holds from pricing services, it is ultimately management’s responsibility to determine whether the values received and recorded in the financial statements are representative of appropriate fair value measurements.

The Company performs regular reviews of the prices received from its third party valuation sources to assess if the prices represent a reasonable estimate of the fair value. This process is completed by investment and accounting personnel who are independent of those responsible for obtaining the valuations. The approaches taken by the Company include, but are not limited to, annual reviews of the controls of the external parties responsible for sourcing valuations, which are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, and monthly reconciliations between the valuations provided by our external parties and valuations provided by our third party investment managers at a portfolio level.

Where broker quotes are the primary source of the valuations, sufficient information regarding the specific inputs utilized by the brokers is generally not available to support a Level 2 classification. The Company obtains the majority of broker quoted values from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value.

For further information, see Item 8, Note 2(b), “Significant Accounting Policies - Fair Value Measurements,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

7

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

(a) Fair Value Summary

The following tables set forth the Company’s assets and liabilities that were accounted for at fair value at September 30, 2013 and December 31, 2012 by level within the fair value hierarchy:

September 30, 2013 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at September 30, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,175,989	$	—	$	—		$	2,175,989
Corporate (1)	—		10,726,705		32,627		—			10,759,332
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,051,793		17,289		—			4,069,082
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		399,390		9		—			399,399
Commercial mortgage-backed securities (“CMBS”)	—		1,177,921		19,960		—			1,197,881
Collateralized debt obligations (“CDO”)	—		7,597		704,551		—			712,148
Other asset-backed securities (2)	—		1,138,681		12,454		—			1,151,135
U.S. States and political subdivisions of the States	—		1,818,098		—		—			1,818,098
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,999,378		—		—			4,999,378
Total fixed maturities, at fair value	$	—	$	26,495,552	$	786,890	$	—		$	27,282,442
Equity securities, at fair value (3)	469,857		504,876		—		—			974,733
Short-term investments, at fair value (1)(4)	—		270,647		2,058		—			272,705
Total investments available for sale	$	469,857	$	27,271,075	$	788,948	$	—		$	28,529,880
Cash equivalents (5)	1,141,559		285,318		—		—			1,426,877
Other investments (6)	—		727,289		103,856		—			831,145
Other assets (7)	—		30,579		—		(2,600		)	27,979
Total assets accounted for at fair value	$	1,611,416	$	28,314,261	$	892,804	$	(2,600	)	$	30,815,881
Liabilities
Financial instruments sold, but not yet purchased (8)	$	3,995	$	23,051	$	—	$	—		$	27,046
Other liabilities (7)	—		168,012		33,389		(2,600		)	198,801
Total liabilities accounted for at fair value	$	3,995	$	191,063	$	33,389	$	(2,600	)	$	225,847

8

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

December 31, 2012 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2012
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,034,617	$	—	$	—		$	2,034,617
Corporate (1)	—		10,451,902		30,098		—			10,482,000
RMBS – Agency	—		5,223,488		32,005		—			5,255,493
RMBS – Non-Agency	—		647,617		116		—			647,733
CMBS	—		1,051,904		25,347		—			1,077,251
CDO	—		8,080		701,736		—			709,816
Other asset-backed securities (2)	—		1,452,583		18,128		—			1,470,711
U.S. States and political subdivisions of the States	—		1,911,017		—		—			1,911,017
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,258,282		—		—			4,258,282
Total fixed maturities, at fair value	$	—	$	27,039,490	$	807,430	$	—		$	27,846,920
Equity securities, at fair value (3)	253,957		395,402		—		—			649,359
Short-term investments, at fair value (1)(4)	—		322,703		—		—			322,703
Total investments available for sale	$	253,957	$	27,757,595	$	807,430	$	—		$	28,818,982
Cash equivalents (5)	1,596,376		408,292		—		—			2,004,668
Other investments (6)	—		792,483		115,272		—			907,755
Other assets (7)	—		24,842		—		(1,327		)	23,515
Total assets accounted for at fair value	$	1,850,333	$	28,983,212	$	922,702	$	(1,327	)	$	31,754,920
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	26,235	$	—	$	—		$	26,235
Other liabilities (7)	—		30,379		36,247		(1,327		)	65,299
Total liabilities accounted for at fair value	$	—	$	56,614	$	36,247	$	(1,327	)	$	91,534

____________

(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.

9

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

(b) Level 3 Assets and Liabilities

The tables below present additional information about assets and liabilities measured at fair value on a recurring basis and for which Level 3 inputs were utilized to determine fair value. The tables present a reconciliation of the beginning and ending balances for the three and nine months ended September 30, 2013 and 2012 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at September 30, 2013 and 2012, respectively. The tables do not include gains or losses that were reported in Level 3 in prior periods for assets that were transferred out of Level 3 prior to September 30, 2013 and 2012. Gains and losses for assets and liabilities classified within Level 3 in the table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Level 1 and 2 financial instruments entered into by the Company that are either economically hedged by certain exposures to the Level 3 positions or that hedge the exposures in Level 3 positions.

In general, Level 3 assets include securities for which values were obtained from brokers where either significant inputs were utilized in determining the values that were difficult to corroborate with observable market data, or sufficient information regarding the specific inputs utilized by the broker was not available to support a Level 2 classification. Transfers into or out of Level 3 primarily arise as a result of the valuations utilized by the Company changing between those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3.

There were no significant transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2013 and 2012.

10

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Realized gains (losses)	32			(1		)	(1		)	1			584
Movement in unrealized gains (losses)	352			(11		)	(1		)	(58		)	(3,405		)
Purchases and issuances	70			—			—			—			70,552
Sales	—			—			—			—			—
Settlements	—			(913		)	(74		)	(4,406		)	(69,193		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	385		$	(12	)	$	—		$	(57	)	$	(3,681	)
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Realized gains (losses)	810			—			(5		)	1,082			—
Movement in unrealized gains (losses)	722			—			64			1,974			(4,015		)
Purchases and issuances	—			—			—			2,333			—
Sales	(15,711		)	—			—			—			—
Settlements	(906		)	—			—			(5,377		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(4	)	$	—		$	59		$	3,057		$	(4,015	)

11

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	33,511		$	52,588		$	1,596		$	—		$	642,179
Realized gains (losses)	20			4			(22		)	—			913
Movement in unrealized gains (losses)	673			106			(424		)	—			35,886
Purchases and issuances	—			34			6,821			33,369			—
Sales	(555		)	—			—			—			—
Settlements	—			(4,645		)	(59		)	—			(5,347		)
Transfers into Level 3	—			—			—			—			1,162
Transfers out of Level 3	(4,514		)	(14,230		)	(73		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	674		$	110		$	(447	)	$	—		$	35,806
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	25,248		$	—		$	—		$	117,765		$	(35,947	)
Realized gains (losses)	7,017			—			—			343			—
Movement in unrealized gains (losses)	(6,552		)	—			—			1,686			885
Purchases and issuances	8,753			—			—			982			—
Sales	—			—			—			—			—
Settlements	(16,141		)	—			—			(807		)	—
Transfers into Level 3	—			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	456		$	—		$	—		$	1,334		$	885

12

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	30,098		$	32,005		$	116		$	25,347		$	701,736
Realized gains (losses)	(39		)	10			(1		)	1			885
Movement in unrealized gains (losses)	982			(48		)	(1		)	(76		)	32,341
Purchases and issuances	10,691			—			3,326			—			75,914
Sales	—			(535		)	—			—			—
Settlements	(7,245		)	(2,678		)	(105		)	(5,312		)	(106,325		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	(11,465		)	(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,012		$	(52	)	$	(1	)	$	(75	)	$	30,597
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	18,128		$	—		$	—		$	115,272		$	(36,247	)
Realized gains (losses)	848			—			(15		)	6,869			—
Movement in unrealized gains (losses)	1,685			—			56			1,004			2,858
Purchases and issuances	21,686			—			2,017			5,240			—
Sales	(15,711		)	—			—			—			—
Settlements	(7,676		)	—			—			(24,529		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(520	)	$	—		$	41		$	7,865		$	2,858

13

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	23,818		$	32,041		$	—		$	—		$	650,851
Realized gains (losses)	4			(23		)	—			—			(523		)
Movement in unrealized gains (losses)	346			58			—			—			75,489
Purchases and issuances	8,949			103			6,821			33,369			—
Sales	(555		)	—			—			—			(32,495		)
Settlements	(181		)	(6,233		)	—			—			(18,529		)
Transfers into Level 3	1,393			22,141			1,091			—			1,162
Transfers out of Level 3	(4,639		)	(14,230		)	(73		)	—			(1,162		)
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	351		$	35		$	—		$	—		$	71,738
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	16,552		$	—		$	—		$	113,959		$	(42,644	)
Realized gains (losses)	6,748			—			—			2,782			—
Movement in unrealized gains (losses)	(2,873		)	—			—			6,206			7,582
Purchases and issuances	8,753			—			—			4,664			—
Sales	—			—			—			(7,327		)	—
Settlements	(15,867		)	—			—			—			—
Transfers into Level 3	5,012			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			(315		)	—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,652		$	—		$	—		$	2,385		$	7,582

14

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

(c) Fixed maturities and short-term investments

The Company’s Level 3 assets consist primarily of CDOs, for which non-binding broker quotes are the primary source of the valuations. Sufficient information regarding the specific inputs utilized by the brokers was not available to support a Level 2 classification. The Company obtains the majority of broker quotes for these CDOs from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value. Although the Company does not have access to the specific unobservable inputs that may have been used in the fair value measurements of the CDO securities provided by brokers, we would expect that the significant inputs considered are prepayment rates, probability of default, loss severity in the event of default, recovery rates, liquidity premium and reinvestment rates. Significant increases (decreases) in any of those inputs in isolation could result in a significantly different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

The remainder of the Level 3 assets relate primarily to private investments,alternative fund investments and certain derivative positions as described below.

(d) Other investments

Included within the Other investments component of the Company’s Level 3 valuations are private investments and alternative fund investments where the Company is not deemed to have significant influence over the investee. The fair value of these investments is based upon net asset values received from the investment manager or general partner of the respective entity. The nature of the underlying investments held by the investee that form the basis of the net asset value include assets such as private business ventures and are such that significant Level 3 inputs are utilized in the determination of the individual underlying holding values and, accordingly, the fair value of the Company’s investment in each entity is classified within Level 3. The Company has not adjusted the net asset values received; however, management incorporates factors such as the most recent financial information received, annual audited financial statements and the values at which capital transactions with the investee take place when applying judgment regarding whether any adjustments should be made to the net asset value in recording the fair value of each position. Investments in alternative funds included in Other investments utilize strategies including arbitrage, directional, event driven and multi-style. These funds potentially have lockup and gate provisions which may limit redemption liquidity. For further details regarding the nature of Other investments and related features see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(e) Derivative instruments

Derivative instruments recorded within Other liabilities and classified within Level 3 include credit derivatives sold providing protection on senior tranches of structured finance transactions where the value is obtained directly from the investment bank counterparty and sufficient information regarding the inputs utilized in such valuation was not obtained to support a Level 2 classification and guaranteed minimum income benefits embedded within one reinsurance contract. The majority of inputs utilized in the valuations of these types of derivative contracts are considered Level 1 or Level 2; however, each valuation includes at least one Level 3 input that was significant to the valuation and, accordingly, the values are disclosed within Level 3.

(f) Financial Instruments Not Carried at Fair Value

Authoritative guidance over disclosures about the fair value of financial instruments requires additional disclosure of fair value information for financial instruments not carried at fair value in both interim and annual reporting periods. Certain financial instruments, particularly insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash and cash equivalents, accrued investment income, net receivable from investments sold, other assets, net payable for investments purchased, other liabilities and other financial instruments not included below approximated their fair values. The following table includes financial instruments for which the carrying value differs from the estimated fair values at September 30, 2013 and December 31, 2012. All of these fair values estimates are considered Level 2 fair value measurements. The fair values for fixed maturities held to maturity are provided by third party pricing vendors and significant valuation inputs for all other items included were based upon market data obtained from sources independent of the Company, and are subject to the same control environment previously described.

15

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Fair Value Measurements

	September 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804
Other investments - structured transactions	293,898		291,924		312,122		293,813
Financial Assets	$	3,096,009	$	3,408,864	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,505,180	$	1,755,877	$	1,551,398	$	1,878,499
Notes payable and debt	1,671,062		1,842,597		1,672,778		1,918,134
Financial Liabilities	$	3,176,242	$	3,598,474	$	3,224,176	$	3,796,633

The Company historically participated in structured transactions. Remaining structured transactions include cash loans supporting project finance transactions, providing liquidity facility financing to structured project deals and an investment in a payment obligation with an insurance company. These transactions are carried at amortized cost. The fair value of these investments held by the Company is determined through use of internal models utilizing reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

Deposit liabilities include obligations under structured insurance and reinsurance transactions. For purposes of fair value disclosures, the Company determined the estimated fair value of the deposit liabilities by assuming a discount rate equal to the appropriate U.S. Treasury rate plus 65.2 basis points at September 30, 2013 and the appropriate U.S. Treasury rate plus 100.3 basis points at December 31, 2012. The discount rate incorporates the Company’s own credit risk into the determination of estimated fair value.

The fair values of the Company’s notes payable and debt outstanding were determined based on quoted market prices.

There are no significant concentrations of credit risk within the Company’s financial instruments as defined in the authoritative guidance over disclosures of fair value of financial instruments not carried at fair value, which excludes certain financial instruments, particularly insurance contracts.

16

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

The Company is organized into three operating segments: Insurance, Reinsurance and Life operations. The Company’s general investment and financing operations are reflected in Corporate.

The Company evaluates the performance of both the Insurance and Reinsurance segments based on underwriting profit while the Life operations segment performance is based on contribution to net income. Other items of revenue and expenditure of the Company are not evaluated at the segment level. In addition, the Company does not allocate investment assets by segment for its Property and Casualty (“P&C”) operations. Investment assets related to the Company’s Life operations segment and certain structured products included in the Insurance and Reinsurance segments and Corporate are held in separately identified portfolios. As such, net investment income from these assets is included in the contribution from the applicable segment.

The following tables summarize the segment results for the three and nine months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,259,986		$	349,854		$	1,609,840		$	82,291		$	1,692,131
Net premiums written	993,659			333,720			1,327,379			74,683			1,402,062
Net premiums earned	1,104,012			446,617			1,550,629			74,683			1,625,312
Net losses and loss expenses	762,782			243,738			1,006,520			116,549			1,123,069
Acquisition costs	136,421			95,797			232,218			6,110			238,328
Operating expenses (1)	192,936			42,055			234,991			2,659			237,650
Underwriting profit (loss)	$	11,873		$	65,027		$	76,900		$	(50,635	)	$	26,265
Net investment income							147,739			72,128			219,867
Net results from structured products (2)	4,104			2,359			6,463						6,463
Net fee income and other (3)	(2,187		)	597			(1,590		)	43			(1,547		)
Net realized gains (losses) on investments							(2,087		)	129			(1,958		)
Contribution from P&C and Life Operations							$	227,425		$	21,665		$	249,090
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													880
Net income (loss) from investment fund affiliates and operating affiliates (4)													29,669
Exchange (gains) losses													20,303
Corporate operating expenses													61,427
Interest expense (5)													26,342
Non-controlling interests													35,022
Income tax expense													897
Net income (loss) attributable to ordinary shareholders													$	135,648
Ratios – P&C operations: (6)
Loss and loss expense ratio	69.1		%	54.6		%	64.9		%
Underwriting expense ratio	29.8		%	30.8		%	30.1		%
Combined ratio	98.9		%	85.4		%	95.0		%

____________

(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.

17

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

Three Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,158,683		$	417,548		$	1,576,231		$	87,413		$	1,663,644
Net premiums written	905,056			403,209			1,308,265			79,487			1,387,752
Net premiums earned	985,625			482,929			1,468,554			79,487			1,548,041
Net losses and loss expenses	623,545			270,532			894,077			119,438			1,013,515
Acquisition costs	128,513			97,740			226,253			10,094			236,347
Operating expenses (1)	186,794			47,227			234,021			2,351			236,372
Underwriting profit (loss)	$	46,773		$	67,430		$	114,203		$	(52,396	)	$	61,807
Net investment income							148,484			73,479			221,963
Net results from structured products (2)	3,087			2,652			5,739						5,739
Net fee income and other (3)	745			656			1,401			240			1,641
Net realized gains (losses) on investments							2,258			(7,751		)	(5,493		)
Contribution from P&C and Life Operations							$	272,085		$	13,572		$	285,657
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													6,254
Net income (loss) from investment fund affiliates and operating affiliates (4)													18,812
Exchange (gains) losses													18,690
Corporate operating expenses													57,604
Interest expense (5)													26,232
Non-controlling interests													35,844
Income tax expense													451
Net income (loss) attributable to ordinary shareholders													$	171,902
Ratios – P&C operations: (6)
Loss and loss expense ratio	63.3		%	56.0		%	60.9		%
Underwriting expense ratio	32.0		%	30.0		%	31.3		%
Combined ratio	95.3		%	86.0		%	92.2		%

____________

(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.

18

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

Nine Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	4,230,161		$	1,728,765		$	5,958,926		$	236,563		$	6,195,489
Net premiums written	3,232,010			1,597,550			4,829,560			214,024			5,043,584
Net premiums earned	3,201,646			1,301,726			4,503,372			214,024			4,717,396
Net losses and loss expenses	2,134,622			652,588			2,787,210			344,269			3,131,479
Acquisition costs	405,075			267,930			673,005			17,468			690,473
Operating expenses (1)	571,447			122,098			693,545			7,460			701,005
Underwriting profit (loss)	$	90,502		$	259,110		$	349,612		$	(155,173	)	$	194,439
Net investment income							448,596			214,408			663,004
Net results from structured products (2)	11,821			5,871			17,692						17,692
Net fee income and other (3)	(5,481		)	1,749			(3,732		)	1,130			(2,602		)
Net realized gains (losses) on investments							72,860			2,659			75,519
Contribution from P&C and Life Operations							$	885,028		$	63,024		$	948,052
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													3,660
Net income (loss) from investment fund affiliates and operating affiliates (4)													172,256
Exchange (gains) losses													(24,463		)
Corporate operating expenses													163,504
Interest expense (5)													78,599
Non-controlling interests													73,944
Income tax expense													73,248
Net income (loss) attributable to ordinary shareholders													$	759,136
Ratios – P&C operations: (6)
Loss and loss expense ratio	66.7		%	50.1		%	61.9		%
Underwriting expense ratio	30.5		%	30.0		%	30.3		%
Combined ratio	97.2		%	80.1		%	92.2		%

____________

(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.

19

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

Nine Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	3,806,352		$	1,850,315		$	5,656,667		$	266,999		$	5,923,666
Net premiums written	2,885,848			1,732,922			4,618,770			243,606			4,862,376
Net premiums earned	2,878,973			1,348,448			4,227,421			243,630			4,471,051
Net losses and loss expenses	1,890,513			683,984			2,574,497			371,893			2,946,390
Acquisition costs	380,053			273,706			653,759			25,675			679,434
Operating expenses (1)	564,387			127,965			692,352			7,787			700,139
Underwriting profit (loss)	$	44,020		$	262,793		$	306,813		$	(161,725	)	$	145,088
Net investment income							492,031			223,151			715,182
Net results from structured products (2)	14,953			(17,716		)	(2,763		)				(2,763		)
Net fee income and other (3)	(1,019		)	1,979			960			330			1,290
Net realized gains (losses) on investments							25,070			(22,154		)	2,916
Contribution from P&C and Life Operations							$	822,111		$	39,602		$	861,713
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													2,656
Net income (loss) from investment fund affiliates and operating affiliates (4)													78,028
Exchange (gains) losses													13,432
Corporate operating expenses													151,926
Interest expense (5)													79,686
Non-controlling interests													75,856
Income tax expense													51,813
Net income (loss) attributable to ordinary shareholders													$	569,684
Ratios – P&C operations: (6)
Loss and loss expense ratio	65.7		%	50.7		%	60.9		%
Underwriting expense ratio	32.8		%	29.8		%	31.8		%
Combined ratio	98.5		%	80.5		%	92.7		%

____________

(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.

20

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

The following tables summarize the Company’s net premiums earned by line of business for the three months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	360,550	$	56,580	$	—	$	417,130
Casualty	362,889		76,904		—		439,793
Property catastrophe	—		120,418		—		120,418
Property	136,007		146,606		—		282,613
Marine, energy, aviation and satellite	—		22,998		—		22,998
Specialty	180,799		—		—		180,799
Other (1)	63,767		23,111		—		86,878
Total P&C Operations	$	1,104,012	$	446,617	$	—	$	1,550,629
Life Operations:
Annuity	$	—	$	—	$	30,608	$	30,608
Other Life	—		—		44,075		44,075
Total Life Operations	$	—	$	—	$	74,683	$	74,683
Total	$	1,104,012	$	446,617	$	74,683	$	1,625,312
Three Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	345,729	$	47,875	$	—	$	393,604
Casualty	294,386		81,799		—		376,185
Property catastrophe	—		113,164		—		113,164
Property	127,482		170,858		—		298,340
Marine, energy, aviation and satellite	—		33,087		—		33,087
Specialty	174,887		—		—		174,887
Other (1)	43,141		36,146		—		79,287
Total P&C Operations	$	985,625	$	482,929	$	—	$	1,468,554
Life Operations:
Annuity	$	—	$	—	$	31,961	$	31,961
Other Life	—		—		47,526		47,526
Total Life Operations	$	—	$	—	$	79,487	$	79,487
Total	$	985,625	$	482,929	$	79,487	$	1,548,041

____________

(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.

21

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Segment Information

The following tables summarize the Company’s net premiums earned by line of business for the nine months ended September 30, 2013 and 2012:

Nine Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,061,194	$	152,993	$	—	$	1,214,187
Casualty	1,028,748		230,432		—		1,259,180
Property catastrophe	—		363,421		—		363,421
Property	395,546		420,373		—		815,919
Marine, energy, aviation and satellite	—		75,423		—		75,423
Specialty	544,898		—		—		544,898
Other (1)	171,260		59,084		—		230,344
Total P&C Operations	$	3,201,646	$	1,301,726	$	—	$	4,503,372
Life Operations:
Annuity	$	—	$	—	$	90,379	$	90,379
Other Life	—		—		123,645		123,645
Total Life Operations	$	—	$	—	$	214,024	$	214,024
Total	$	3,201,646	$	1,301,726	$	214,024	$	4,717,396
Nine Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,000,424	$	156,086	$	—	$	1,156,510
Casualty	827,391		231,884		—		1,059,275
Property catastrophe	—		329,308		—		329,308
Property	365,856		451,617		—		817,473
Marine, energy, aviation and satellite	—		104,458		—		104,458
Specialty	530,930		—		—		530,930
Other (1)	154,372		75,095		—		229,467
Total P&C Operations	$	2,878,973	$	1,348,448	$	—	$	4,227,421
Life Operations:
Annuity	$	—	$	—	$	94,661	$	94,661
Other Life	—		—		148,969		148,969
Total Life Operations	$	—	$	—	$	243,630	$	243,630
Total	$	2,878,973	$	1,348,448	$	243,630	$	4,471,051

____________

(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.

22

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

(a) Fixed Maturities, Short-Term Investments and Equity Securities

Amortized Cost and Fair Value Summary

The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at September 30, 2013 and December 31, 2012 were as follows:

September 30, 2013 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	2,128,375	$	66,604	$	(18,990	)	$	2,175,989	$	—
Corporate (4) (5)	10,395,005		470,327		(106,000		)	10,759,332		(7,945		)
RMBS – Agency	4,032,158		85,282		(48,358		)	4,069,082		—
RMBS – Non-Agency	407,789		30,786		(39,176		)	399,399		(76,138		)
CMBS	1,166,285		44,867		(13,271		)	1,197,881		(2,856		)
CDO	754,897		7,074		(49,823		)	712,148		(2,106		)
Other asset-backed securities (3)	1,122,958		38,343		(10,166		)	1,151,135		(2,932		)
U.S. States and political subdivisions of the States	1,784,621		61,561		(28,084		)	1,818,098		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,980,055		90,713		(71,390		)	4,999,378		—
Total fixed maturities - AFS	$	26,772,143	$	895,557	$	(385,258	)	$	27,282,442	$	(91,977	)
Total short-term investments (2)	$	271,465	$	1,300	$	(60	)	$	272,705	$	—
Total equity securities (6)	$	878,679	$	113,075	$	(17,021	)	$	974,733	$	—
Total investments - AFS	$	27,922,287	$	1,009,932	$	(402,339	)	$	28,529,880	$	(91,977	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,712	$	946	$	—		$	11,658	$	—
Corporate	1,370,391		137,326		(1,436		)	1,506,281		—
RMBS – Non-Agency	65,542		5,580		—			71,122		—
CMBS	141,884		14,298		—			156,182		—
Other asset-backed securities (3)	104,624		9,074		—			113,698		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,108,958		150,391		(1,350		)	1,257,999		—
Total investments - HTM	$	2,802,111	$	317,615	$	(2,786	)	$	3,116,940	$	—

___________

(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.

23

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

December 31, 2012 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	1,906,044	$	131,860	$	(3,287	)	$	2,034,617	$	—
Corporate (4) (5)	9,837,962		723,028		(78,990		)	10,482,000		(11,453		)
RMBS – Agency	5,054,097		206,931		(5,535		)	5,255,493		—
RMBS – Non-Agency	678,469		46,132		(76,868		)	647,733		(93,259		)
CMBS	1,010,794		70,745		(4,288		)	1,077,251		(2,962		)
CDO	784,999		11,973		(87,156		)	709,816		(4,872		)
Other asset-backed securities (3)	1,426,483		59,663		(15,435		)	1,470,711		(6,530		)
U.S. States and political subdivisions of the States	1,767,669		146,294		(2,946		)	1,911,017		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,078,289		188,186		(8,193		)	4,258,282		—
Total fixed maturities - AFS	$	26,544,806	$	1,584,812	$	(282,698	)	$	27,846,920	$	(119,076	)
Total short-term investments (2)	$	322,563	$	192	$	(52	)	$	322,703	$	—
Total equity securities (6)	$	617,486	$	31,935	$	(62	)	$	649,359	$	—
Total investments - AFS	$	27,484,855	$	1,616,939	$	(282,812	)	$	28,818,982	$	(119,076	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,788	$	1,651	$	—		$	12,439	$	—
Corporate	1,425,320		190,871		(794		)	1,615,397		—
RMBS – Non-Agency	83,205		10,502		—			93,707		—
CMBS	12,751		2,048		—			14,799		—
Other asset-backed securities (3)	222,340		29,287		(167		)	251,460		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,060,043		216,679		(1,720		)	1,275,002		—
Total investments - HTM	$	2,814,447	$	451,038	$	(2,681	)	$	3,262,804	$	—

____________

(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.

24

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

At September 30, 2013 and December 31, 2012, approximately 2.5% and 2.9%, respectively, of the Company's fixed income investment portfolio at fair value was invested in securities that were below investment grade or not rated. Approximately 16.7% and 37.7% of the gross unrealized losses in the Company's fixed income securities portfolio at September 30, 2013 and December 31, 2012, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS and HTM fixed income securities at September 30, 2013 and December 31, 2012 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2013 (1)				December 31, 2012 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	2,105,725	$	2,121,331	$	1,939,803	$	1,952,250
Due after 1 through 5 years	9,337,994		9,589,870		8,521,090		8,877,512
Due after 5 through 10 years	5,434,814		5,516,467		4,701,391		5,065,158
Due after 10 years	2,409,523		2,525,129		2,427,680		2,790,996
	$	19,288,056	$	19,752,797	$	17,589,964	$	18,685,916
RMBS – Agency	4,032,158		4,069,082		5,054,097		5,255,493
RMBS – Non-Agency	407,789		399,399		678,469		647,733
CMBS	1,166,285		1,197,881		1,010,794		1,077,251
CDO	754,897		712,148		784,999		709,816
Other asset-backed securities	1,122,958		1,151,135		1,426,483		1,470,711
Total mortgage and asset-backed securities	$	7,484,087	$	7,529,645	$	8,954,842	$	9,161,004
Total fixed maturities - AFS	$	26,772,143	$	27,282,442	$	26,544,806	$	27,846,920
Fixed maturities - HTM
Due less than one year	$	68,015	$	69,473	$	36,515	$	37,580
Due after 1 through 5 years	202,799		215,912		195,121		205,562
Due after 5 through 10 years	344,228		374,388		377,541		420,008
Due after 10 years	1,875,019		2,116,165		1,886,974		2,239,688
	$	2,490,061	$	2,775,938	$	2,496,151	$	2,902,838
RMBS – Non-Agency	65,542		71,122		83,205		93,707
CMBS	141,884		156,182		12,751		14,799
Other asset-backed securities	104,624		113,698		222,340		251,460
Total mortgage and asset-backed securities	$	312,050	$	341,002	$	318,296	$	359,966
Total fixed maturities - HTM	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804

____________

(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.

25

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

OTTI Considerations

Under final authoritative accounting guidance, a debt security for which amortized cost exceeds fair value is deemed to be other-than-temporarily impaired if it meets either of the following conditions: (a) the Company intends to sell, or it is more likely than not that the Company will be required to sell, the security before a recovery in value, or (b) the Company does not expect to recover the entire amortized cost basis of the security. Other than in a situation in which the Company has the intent to sell a debt security or more likely than not will be required to sell a debt security, the amount of the OTTI related to a credit loss on the security is recognized in earnings, and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of OCI. The net amount recognized in earnings (“credit loss impairment”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment (“NPV”). The remaining difference between the security's NPV and its fair value is recognized in OCI. Subsequent changes in the fair value of these securities are included in OCI unless a further impairment is deemed to have occurred.

In the scenario where the Company has the intent to sell a security in which its amortized cost exceeds its fair value, or it is more likely than not it will be required to sell such a security, the entire difference between the security's amortized cost and its fair value is recognized in earnings.

The determination of credit losses is based on detailed analyses of underlying cash flows and other considerations. Such analyses require the use of certain assumptions to develop the estimated performance of underlying collateral. Key assumptions used include, but are not limited to, items such as RMBS default rates based on collateral duration in arrears, severity of losses on default by collateral class, collateral reinvestment rates and expected future general corporate default rates.

Factors considered for all securities on a quarterly basis in determining that a gross unrealized loss is not other-than-temporarily impaired include management's consideration of current and near term liquidity needs and other available sources of funds, an evaluation of the factors and time necessary for recovery and an assessment of whether the Company has the intention to sell or considers it more likely than not that it will be forced to sell a security.

Pledged Assets

Certain of the Company's invested assets are held in trust and pledged in support of insurance and reinsurance liabilities as well as credit facilities. Such pledges are largely required by the Company's 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. Also, certain deposit liabilities and annuity contracts require the use of pledged assets. At September 30, 2013 and December 31, 2012, the Company had $16.0 billion and $16.9 billion in pledged assets, respectively.

26

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

(b) Gross Unrealized Losses

The following is an analysis of how long the AFS and HTM securities at September 30, 2013 and December 31, 2012 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
September 30, 2013 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	731,583	$	(18,079	)	$	21,489	$	(929	)
Corporate	1,962,868		(51,810		)	478,878		(54,190		)
RMBS – Agency	1,457,826		(36,568		)	164,046		(11,790		)
RMBS – Non-Agency	29,777		(1,257		)	244,218		(37,919		)
CMBS	287,314		(9,216		)	38,653		(4,055		)
CDO	29,541		(175		)	622,338		(49,648		)
Other asset-backed securities	222,044		(1,821		)	96,251		(8,345		)
U.S. States and political subdivisions of the States	457,908		(27,384		)	8,812		(700		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	1,886,303		(59,159		)	153,802		(12,273		)
Total fixed maturities and short-term investments - AFS	$	7,065,164	$	(205,469	)	$	1,828,487	$	(179,849	)
Total equity securities	$	216,631	$	(17,021	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	32,424	$	(1,410	)	$	632	$	(26	)
Other asset-backed securities	—		—			—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,847		(1,350		)
Total fixed maturities - HTM	$	32,424	$	(1,410	)	$	11,479	$	(1,376	)

	Less than 12 months					Equal to or greater than 12 months
December 31, 2012 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	307,879	$	(2,847	)	$	9,951	$	(471	)
Corporate	476,454		(10,603		)	607,796		(68,387		)
RMBS – Agency	578,823		(4,541		)	11,135		(994		)
RMBS – Non-Agency	6,674		(450		)	448,555		(76,418		)
CMBS	92,899		(666		)	23,580		(3,622		)
CDO	243		(1		)	694,351		(87,155		)
Other asset-backed securities	111,431		(531		)	93,388		(14,904		)
U.S. States and political subdivisions of the States	77,273		(1,407		)	12,851		(1,539		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	355,409		(1,378		)	131,884		(6,836		)
Total fixed maturities and short-term investments - AFS	$	2,007,085	$	(22,424	)	$	2,033,491	$	(260,326	)
Total equity securities	$	615	$	(62	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	4,568	$	(31	)	$	23,005	$	(763	)
Other asset-backed securities	1,239		(167		)	—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,518		(1,720		)
Total fixed maturities - HTM	$	5,807	$	(198	)	$	33,523	$	(2,483	)

27

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

The Company had gross unrealized losses totaling $402.3 million on 2,037 securities out of a total of 7,602 held at September 30, 2013 in its AFS portfolio and $2.8 million on 5 securities out of a total of 204 held in its HTM portfolio, which it considers to be temporarily impaired or with respect to which it reflects non-credit losses on other-than-temporarily impaired assets. Individual security positions comprising this balance have been evaluated by management to determine the severity of these impairments and whether they should be considered other-than-temporary. Management believes it is more likely than not that the issuer will be able to fund sufficient principal and interest payments to support the current amortized cost.

Management, in its assessment of whether securities in a gross unrealized loss position are temporarily impaired, as described above, considers the significance of the impairments. At September 30, 2013, the Company had structured credit securities with gross unrealized losses of $13.0 million, which had a fair value of $4.2 million, and a cumulative fair value decline of greater than 50% of amortized cost. All of these securities are mortgage and asset-backed securities. These greater than 50% impaired securities include gross unrealized losses of $0.7 million on non-Agency RMBS, $11.7 million on CDOs and $0.5 million on CMBS holdings.

(c) Net Realized Gains (Losses)

The following represents an analysis of net realized gains (losses) on investments:

Net Realized Gains (Losses) on Investments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Gross realized gains	$	22,517		$	33,136		$	160,555		$	153,757
Gross realized losses on investments sold	(21,288		)	(26,000		)	(74,822		)	(89,054		)
OTTI on investments, net of amounts transferred to other comprehensive income	(3,187		)	(12,629		)	(10,214		)	(61,787		)
Net realized gains (losses) on investments	$	(1,958	)	$	(5,493	)	$	75,519		$	2,916

The main components of the net impairment charges of $3.2 million for the three months ended September 30, 2013 were:

▪ $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.

The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates or the periods indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

Credit Loss Impairments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Opening balance at beginning of indicated period	$	202,862		$	299,720		$	268,707		$	333,379
Credit loss impairment recognized in the current period on securities not previously impaired	242			2,805			769			8,683
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(17,341		)	(33,114		)	(78,960		)	(87,092		)
Credit loss impairments previously recognized on securities impaired to fair value during the period	—			—			—			(12,891		)
Additional credit loss impairments recognized in the current period on securities previously impaired	2,942			4,834			7,242			41,716
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(2,222		)	(2,773		)	(11,275		)	(12,323		)
Balance at September 30,	$	186,483		$	271,472		$	186,483		$	271,472

During the three months ended September 30, 2013 and 2012, the $17.3 million and $33.1 million, respectively, of credit loss impairments previously recognized on securities that matured, or were paid down, prepaid or sold, includes $3.1 million and $11.6 million, respectively, of non-Agency RMBS.

28

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Investments

During the nine months ended September 30, 2013 and 2012, the $79.0 million and $87.1 million, respectively, of credit loss impairments previously recognized on securities that matured, or were paid down, prepaid or sold, includes $63.3 million and $38.3 million, respectively, of non-Agency RMBS.

(d) Investments in affiliates

Investment Fund Consolidation

In May 2012, the Company invested $25.0 million to obtain an approximate 94% interest in Five Oaks Investment Corp. (“Five Oaks”), a newly formed private investment company. Five Oaks is a mortgage real estate investment trust that is focused on investing in, financing and managing a leveraged portfolio of agency and non-agency residential mortgage-backed securities, residential mortgage loans and other mortgage-related investments. At December 31, 2012, the Company had consolidated Five Oaks, resulting in the recording within its balance sheet of: RMBS securities at their fair value of $81.0 million (amortized cost: $77.3 million) within Fixed maturities, $8.4 million of derivatives, $6.0 million of Cash and cash equivalents, $63.4 million of liabilities related to obligations under repurchase agreements within Other liabilities, and $1.8 million of Non-controlling interest in equity of consolidated subsidiaries. $66.3 million of securities held by Five Oaks and consolidated by the Company were pledged as collateral under the repurchase agreements. The repurchase agreements did not provide the counterparties any recourse to assets of the Company aside from its investment in Five Oaks. Amounts recorded within the Company's consolidated statement of income related to Five Oaks were immaterial during the year ended December 31, 2012.

In March 2013, Five Oaks completed an Initial Public Offering (“IPO”) of approximately 4.0 million of its common shares for gross proceeds of approximately $61.0 million and, concurrently with its IPO, Five Oaks sold to the Company an additional 1.67 million shares for $25.0 million in a private placement. Following these transactions, and the receipt of 8,175 shares of Five Oaks distributed to the Company in respect of its investment in Oak Circle Capital Partners LLC (“Oak Circle”), the investment management company that provides portfolio management and other administrative services to Five Oaks, the Company's ownership interest in Five Oaks was reduced to 43.8%, which no longer represented a controlling financial interest. Accordingly, the Five Oaks investment was deconsolidated by the Company at the closing date of the Five Oaks IPO. The investment is accounted for under the equity method and carried as a strategic operating affiliate at September 30, 2013. We generally record the income related to strategic operating affiliates on a three-month lag based upon the availability of the information provided by the investees. A loss of $1.5 million was recorded upon deconsolidation within Realized investment gains (losses) based upon the difference between the fair value of the Company's retained interest in Five Oaks subsequent to the additional share sales and the Company's carrying value of Five Oaks' net assets at the closing date of the Five Oaks IPO. In addition, in September 2012 the Company received warrants that were priced at the time of the IPO. The warrants allow the Company to purchase an additional 3.125 million shares at $15.75 per share, which would result in a total additional investment of $49.2 million by the Company should it exercise the warrants in full in the future. The warrants expire in September 2019.

In March 2012, the Company purchased an equity interest in Oak Circle. The Company's investment in Oak Circle is included in investment manager affiliates.

29

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

The Company enters into derivative instruments for both risk management and investment purposes. The Company is exposed to potential loss from various market risks, and manages its market risks based on guidelines established by management and the Risk and Finance Committee of the Company's Board of Directors. The Company recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value, with the changes in fair value of derivatives shown in the consolidated statement of income as “Net realized and unrealized gains (losses) on derivative instruments” unless the derivatives are designated as hedging instruments. The accounting for derivatives that are designated as hedging instruments is described in Item 8, Note 2(h), “Significant Accounting Policies - Derivative Instruments,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

	September 30, 2013								December 31, 2012
(U.S. dollars in thousands)	Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)		Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	915,109	$	27,024	$	2,766,826	$	162,666	$	670,751	$	12,511	$	2,382,507	$	23,715
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	12,715	$	178	$	14,934	$	—	$	45,604	$	2,060	$	26,139	$	253
Foreign exchange exposure	69,204		2,421		13,507		471		33,007		226		54,449		1,790
Credit exposure	932		16		374,088		14,855		25,000		486		436,959		15,472
Financial market exposure	33,838		940		55,627		—		72,597		9,559		16,910		—
Financial Operations Derivatives: (2)
Credit exposure	—		—		43,482		4,190		—		—		46,903		—
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	—		—		58,179		19,219		—		—		69,051		25,396
Modified coinsurance funds withheld contract	68,226		—		—		—		76,975		—		—		—
Total derivatives not designated as hedging instruments	$	184,915	$	3,555	$	559,817	$	38,735	$	253,183	$	12,331	$	650,411	$	42,911

____________

(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".

30

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

							Gross Amounts Not Offset in the Balance Sheet
September 30, 2013 (U.S. dollars in thousands)	Gross Amounts Recognized in Balance Sheet		Gross Amounts Offset in the Balance Sheet		Net Amounts in the Balance Sheet		Financial Instruments		Cash Collateral		Net Amounts
Derivative Assets	$	30,579	$	2,600	$	27,979	$	—	$	—	$	27,979
Derivative Liabilities	$	201,401	$	2,600	$	198,801	$	—	$	113,426	$	85,375
December 31, 2012 (U.S. dollars in thousands)
Derivative Assets	$	24,842	$	1,327	$	23,515	$	—	$	—	$	23,515
Derivative Liabilities	$	66,626	$	1,327	$	65,299	$	—	$	12,130	$	53,169

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. The Company often enters into different types of derivative contracts with a single counterparty and these contracts are covered under netting agreements. At September 30, 2013 and December 31, 2012, the Company paid cash collateral related to foreign currency derivative positions and certain other derivative positions of $113.4 million and $12.1 million, respectively. The assets related to the net collateral paid were recorded as Other assets within the balance sheet as the collateral and derivative positions are not intended to be settled on a net basis.

(a) Derivative Instruments Designated as Fair Value Hedges

The Company designates certain of its derivative instruments as fair value hedges or cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivative to specific assets and liabilities. The Company assesses the effectiveness of the hedge both at inception and on an on-going basis, and determines whether the hedge is highly effective in offsetting changes in fair value or cash flows of the linked hedged item.

The Company may hedge portions of its liabilities against changes in the applicable designated benchmark interest rate. Interest rate swaps may also be used to hedge the changes in fair value of certain fixed rate liabilities and fixed income securities due to changes in the designated benchmark interest rate. In addition, the Company utilizes foreign exchange contracts to hedge the fair value of certain fixed income securities as well as to hedge certain net investments in foreign operations.

31

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the three and nine months ended September 30, 2013 and 2012:

				Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk
Derivatives Designated as Fair Value Hedges: Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Gain/(Loss) Recognized in Income on Derivative				Deposit Liabilities			Fixed Maturity Investments		Ineffective Portion of Hedging Relationship - Gain/(Loss)
Interest rate exposure	$	—
Foreign exchange exposure	(29,523		)
Total	$	(29,523	)		$	—		$	29,263	$	(260	)
Three Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(22,323		)
Total	$	(22,323	)		$	—		$	22,126	$	(197	)
Nine Months Ended September 30, 2013
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(4,280		)
Total	$	(4,280	)		$	—		$	4,989	$	709
Nine Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	1,813
Foreign exchange exposure	(30,126		)
Total	$	(28,313	)		$	(6,182	)	$	29,665	$	(4,830	)

The gains (losses) recorded on both the derivatives instruments and specific items designated as being hedged as part of the fair value hedging relationships outlined above are recorded through Net realized and unrealized gains (losses) on derivative instruments in the income statement along with any associated ineffectiveness in the relationships. In addition, the periodic coupon settlements relating to the interest rate swaps are recorded as adjustments to net investment income for the hedges of fixed maturity investments and as adjustments to interest expense for the hedges of deposit liabilities and notes payable and debt.

The periodic coupon settlements resulted in decreases to Interest expense of nil and $4.9 million for the three and nine months endedSeptember 30, 2012, respectively. There were no periodic coupon settlements in the three and nine months endedSeptember 30, 2013.

Settlement of Fair Value Hedges

A summary of the fair value hedges that have been settled and their impact on results during the three and nine months ended September 30, 2013 and 2012 is shown below:

Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Notes Payable and Debt September 30,				Fair Value Hedges - Deposit Liabilities September 30,
(U.S. dollars in thousands, except years)	2013		2012		2013		2012
Cumulative reduction to interest expense	$	17,879	$	13,973	$	33,379	$	17,060
Remaining balance	$	3,744	$	7,651	$	199,816	$	216,135
Weighted average years remaining to maturity	1.0		2.0		23.9		25.9

32

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

(b) Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation

The Company utilizes foreign exchange contracts to hedge the fair value of certain net investments in foreign operations. During the three and nine months ended September 30, 2013 and 2012, the Company entered into foreign exchange contracts that were formally designated as hedges of investments in foreign subsidiaries, the majority of which have functional currencies of either U.K. sterling or the Euro. There was no ineffectiveness in these transactions.

The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resultant gain (loss) that was recorded in the cumulative translation adjustment account within AOCI for the three and nine months ended September 30, 2013 and 2012:

Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation - Summary	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$	2,758,577		$	1,920,421		$	2,623,594		$	1,895,409
Derivative gains (losses) (1)	$	(58,852	)	$	(40,784	)	$	(4,373	)	$	(21,879	)

____________

(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.

(c) Derivative Instruments Not Formally Designated As Hedging Instruments

The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the three and nine months ended September 30, 2013 and 2012:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Investment Related Derivatives:
Interest rate exposure	$	4,334		$	243		$	4,822		$	860
Foreign exchange exposure	3,710			1,218			(578		)	1,547
Credit exposure	(956		)	(2,281		)	(2,950		)	343
Financial market exposure	1,553			2,337			4,170			312
Financial Operations Derivatives:
Credit exposure	(3,980		)	—			(2,651		)	143
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	175			885			6,178			1,971
Modified coinsurance funds withheld contract	(3,696		)	4,049			(6,040		)	2,310
Total gain (loss) recognized in income from derivatives not designated as hedging instruments	$	1,140		$	6,451		$	2,951		$	7,486
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(260		)	(197		)	709			(4,830		)
Net realized and unrealized gains (losses) on derivative instruments	$	880		$	6,254		$	3,660		$	2,656

The Company’s objectives in using these derivatives are explained below.

(d)(i) Investment Related Derivatives

The Company, either directly or through its investment managers, may use derivative instruments within its investment portfolio, including interest rate swaps, inflation swaps, commodity contracts, credit derivatives (single name and index credit default swaps), options, forward contracts and financial futures (foreign exchange, bond and stock index futures), primarily as a means of economically hedging exposures to interest rate, credit spread, equity price changes and foreign currency risk or, in limited instances, for investment purposes. When using cleared derivatives, the Company is exposed to credit risk of the applicable clearing house and the company's future commissions merchant. When using uncleared derivatives, the Company is exposed to credit risk in the event of non-performance by the counterparties under any derivatives contracts, although the company generally seeks to use credit support arrangements with counterparties to help manage this risk.

33

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

Investment Related Derivatives – Interest Rate Exposure

The Company utilizes risk management and overlay strategies that incorporate the use of derivative financial instruments, primarily to manage its fixed income portfolio duration and net economic exposure to interest rate risks, including exposure associated with assets and liabilities related to certain legacy other financial lines and structured indemnity transactions. The Company also uses interest rate swaps to convert certain liabilities from a fixed rate to a variable rate of interest and may also use them to convert a variable rate of interest from one basis to another.

Investment Related Derivatives – Foreign Exchange Exposure

The Company has exposure to foreign currency exchange rate fluctuations through its operations and in its investment portfolio. The Company uses foreign exchange contracts to manage its exposure to the effects of fluctuating foreign currencies on the value of certain of its foreign currency fixed maturities primarily within its Life operations portfolio. These contracts are not designated as specific hedges for financial reporting purposes and, therefore, realized and unrealized gains and losses on these contracts are recorded in income in the period in which they occur. These contracts generally have maturities of twelve months or less.

In addition, certain of the Company's investment managers may, subject to investment guidelines, enter into forward contracts.

Investment Related Derivatives – Credit Exposure

Credit derivatives may be purchased within the Company's investment portfolio in the form of single name and basket credit default swaps, which are used to mitigate credit exposure through a reduction in credit spread duration (i.e., macro credit strategies rather than single-name credit hedging) or exposure to selected issuers, including issuers that are not held in the underlying bond portfolio.

Investment Related Derivatives - Financial Market Exposure

Stock index futures may be purchased within the Company's investment portfolio in order to create synthetic equity exposure and to add value to the portfolio with overlay strategies where market inefficiencies are believed to exist. From time to time, the Company may enter into other financial market exposure derivative contracts on various indices including, but not limited to, inflation and commodity contracts.

(d)(ii) Financial Operations Derivatives - Credit Exposure

At September 30, 2013 and December 31, 2012, the Company held one credit derivative exposure, which was written as part of the Company's previous financial lines business and is outside of the Company's investment portfolio. This is a European project finance loan participation that benefits from a deficiency guarantee from the German state and federal governments in the current amount of 69% following the scheduled expiry of a portion of this guarantee. An aggregate summary of the credit derivative exposure at September 30, 2013 and December 31, 2012 is as follows:

Financial Operations Derivatives - Credit Exposure Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Principal outstanding	$	41,364	$	44,281
Interest outstanding	2,118		2,622
Aggregate outstanding exposure	$	43,482	$	46,903
Total liability recorded	$	4,190	$	—
Weighted average contractual term to maturity	4.0 years		4.7 years
Underlying obligations credit rating	CC		BB

At September 30, 2013 and December 31, 2012, there was no reported event of default on this obligation; however, due to the combination of the reduction in the deficiency guarantee percentage and a deterioration of the credit rating of the underlying obligations a liability of $4.2 million was recorded during the three months ended September 30, 2013. Credit derivatives are recorded at fair value based upon prices received from the investment bank counterparty and corroborated by using models developed by the Company. Although the Company does not have access to the specific unobservable inputs that may have been used in the value provided by the counterparty, it expects that the significant inputs considered would include changes in interest rates, future default rates, credit spreads, changes in credit quality, future expected recovery rates and other market factors. The change resulting from movements in credit and credit quality spreads is unrealized as the credit derivative is not traded to realize this resultant value.

34

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Derivative Instruments

(d)(iii) Other Non-Investment Derivatives

The Company also has derivatives embedded in certain reinsurance contracts. For a certain life reinsurance contract, the Company pays the ceding company a fixed amount equal to the estimated present value of the excess of the guaranteed benefit over the account balance upon the policyholder's election to take the income benefit. The fair value of this derivative is determined based on the present value of expected cash flows. In addition, the Company has modified coinsurance and funds withheld reinsurance agreements that provide for a return based on a portfolio of fixed income securities. As such, the agreements contain embedded derivatives. The embedded derivative is bifurcated from the funds withheld balance and recorded at fair value with changes in fair value recognized in earnings through Net realized and unrealized gains (losses) on derivative instruments.

(e) Contingent Credit Features

Certain derivative agreements entered into by the Company or its subsidiaries contain rating downgrade provisions that permit early termination of the agreement by the counterparty if collateral is not posted following failure to maintain certain credit ratings from one or more of the principal credit rating agencies. If the Company were required to early terminate such agreements due to a rating downgrade, it could potentially be in a net liability position at the time of settlement. The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and the collateral posted under any of these agreements as of September 30, 2013 and December 31, 2012 were as follows:

Contingent Credit Features - Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	114,502	$	20,366
Collateral posted to counterparty	$	84,935	$	5,490

35

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. Share Capital

(a) Authorized and Issued

Buybacks of Ordinary Shares

On February 27, 2012, XL-Ireland announced that its Board of Directors approved a share buyback program authorizing the Company to purchase up to $750 million of its ordinary shares (the “February 2012 Program”). During 2012, the Company purchased and canceled 18.3 million ordinary shares under the February 2012 Program for $401.6 million. Between January 1 and February 22, 2013, the Company purchased and canceled 3.8 million ordinary shares under the February 2012 Program for $98.3 million. See Item 8, Note 18, “Share Capital,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

On February 22, 2013, XL-Ireland announced that its Board of Directors approved a new share buyback program, authorizing the Company to purchase up to $850 million of its ordinary shares (the “February 2013 Program”). This authorization replaced the approximately $250 million remaining under the February 2012 Program.

During the three months ended September 30, 2013, the Company purchased and canceled 4.8 million ordinary shares for $150.0 million at an average price of $31.03 per share.

During the nine months ended September 30, 2013, the Company purchased and canceled 17.7 million ordinary shares for $523.3 million at an average price of $29.59 per share. At September 30, 2013, $425.0 million remained available for purchase under the February 2013 Program.

All share buybacks were carried out by way of redemption in accordance with Irish law and the Company's constitutional documents. All shares so redeemed were canceled upon redemption.

(b) Stock Plans

The Company's performance incentive programs provide for grants of stock options, restricted stock, restricted stock units and performance units and stock appreciation rights. Share-based compensation granted by the Company generally contains a vesting period of three or four years, and certain awards also contain performance conditions. The Company records compensation expense related to each award over its vesting period incorporating the best estimate of the expected outcome of performance conditions where applicable. Compensation expense is generally recorded on a straight line basis over the vesting period of an award. See Item 8, Note 18, “Share Capital,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for further information on the Company's performance incentive programs and associated accounting.

During the nine months ended September 30, 2013, the Company granted approximately 1.0 million stock options with a weighted-average grant date fair value of $8.34 per option. The fair value of the options issued was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:

Dividend yield	2.00	%
Risk free interest rate	1.14	%
Volatility	37.0	%
Expected lives	6.0 years

During the nine months ended September 30, 2013, the Company granted approximately 0.2 million restricted stock awards to certain employees and directors of the Company and its subsidiaries with an aggregate grant date fair value of approximately $5.3 million. The award recipients generally have the rights and privileges of a shareholder as to the restricted stock, including the right to receive dividends contingent upon the vesting of the restricted stock and the right to vote such restricted stock. The recipients are not entitled to receive delivery of a stock certificate prior to vesting nor may any restricted stock be sold, transferred, pledged, or otherwise disposed of prior to the satisfaction of all vesting requirements.

During the nine months ended September 30, 2013, the Company granted approximately 1.8 million restricted stock units to certain employees of the Company and its subsidiaries with an aggregate grant date fair value of approximately $51.5 million. Each restricted stock unit represents the Company's obligation to deliver to the holder one ordinary share upon satisfaction of the three years vesting term. Restricted stock units are granted at the closing market price on the day of grant and entitle the holder to receive dividends declared and paid in the form of additional ordinary shares contingent upon vesting.

36

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. Share Capital

During the nine months ended September 30, 2013, the Company granted approximately 0.7 million performance units (representing a potential maximum share payout of approximately 1.4 million ordinary shares) to certain employees with an aggregate grant date fair value of approximately $17.8 million. The performance units vest after three years, subject to the achievement of stated performance metrics, and entitle the holder to ordinary shares of the Company. There are no dividend rights associated with the performance units. Each grant of performance units has a target number of shares, with final payouts ranging from 0% to 200% of the grant amount depending upon a combination of corporate and business segment performance along with each employee's continued service through the vesting date. Performance targets are based on relative and absolute financial performance metrics.

8. Notes Payable and Debt and Financing Arrangements

(a) Notes Payable and Debt

All outstanding debt of the Company at September 30, 2013 and December 31, 2012 was issued by XLIT Ltd. (“XL-Cayman”), a 100% owned subsidiary of XL-Ireland and the only direct subsidiary thereof. XL-Ireland does not have significant assets or operations independent of XL-Cayman. XL-Cayman's outstanding debt is fully and unconditionally guaranteed by XL-Ireland. The ability of XL-Cayman, like that of the Company, to obtain funds from its subsidiaries to satisfy any of its obligations under guarantees is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which the Company operates, including, among others, Bermuda, the United States, Ireland, Switzerland and the United Kingdom. For details of the required statutory capital and surplus for the principal operating subsidiaries of the Company, see Item 8, Note 23, “Statutory Financial Data,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

The Company was in compliance with all covenants by significant margins at September 30, 2013, and the Company currently remains in compliance with all covenants.

(b) Letter of Credit Facilities and Other Sources of Collateral

The Company has several letter of credit and revolving credit facilities provided on a syndicated and bilateral basis from commercial banks. These facilities are utilized primarily to support non-admitted insurance and reinsurance operations in the United States and capital requirements at Lloyd's. The Company's letter of credit facilities and revolving credit facilities at September 30, 2013 and December 31, 2012 were as follows:

Letter of Credit Summary: (U.S. dollars in thousands except percentages)	September 30, 2013 (1)			December 31, 2012 (1)
Revolving credit facility (2)	$	1,000,000		$	1,000,000
Available letter of credit facilities - commitments (3)	$	4,475,000		$	4,000,000
Available letter of credit facilities - in use	$	1,859,662		$	1,757,250
Collateralized by certain assets of the Company’s investment portfolio	74.5		%	93.3		%

____________

(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.

For details regarding the March 2011 Credit Agreement and the December 2011 Credit Agreements see Item 8, Note 13(b), “Notes Payable and Debt and Financing Arrangements - Letter of Credit Facilities and Other Sources of Collateral,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. For details regarding the 2013 Credit Agreements, see Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” herein.

37

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9. Related Party Transactions

At September 30, 2013 and 2012, the Company owned minority stakes in five and four, respectively, independent investment management companies (“Investment Manager Affiliates”) that are actively managing client capital and seeking growth opportunities. The Company seeks to develop relationships with specialty investment management organizations, generally acquiring an equity interest in the business. The Company also invests in certain of the funds and limited partnerships and other legal entities managed by these affiliates and through these funds and partnerships pays management and performance fees to the Company's Investment Manager Affiliates. See Note 5(d), "Investments - Investment in Affiliates,” included herein, for further information.

In the normal course of business, the Company enters into reinsurance contracts with certain of its other strategic affiliates, or their subsidiaries. During the three and nine months ended September 30, 2013 and 2012, these contracts resulted in reported net premiums written, net reported claims and reported acquisition costs as summarized below. Management believes that these transactions are conducted at market rates consistent with negotiated arms-length contracts.

(U.S. dollars in thousands)	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Reported net premiums written	$	27,112	$	27,761	$	51,119	$	55,323
Net losses and loss expenses incurred	$	9,274	$	11,071	$	21,039	$	26,923
Reported acquisition costs	$	7,189	$	9,034	$	17,875	$	22,236

10. Variable Interest Entities

At times, the Company has utilized variable interest entities (“VIEs”) both indirectly and directly in the ordinary course of the Company's business.

The Company invests in CDOs and other investment vehicles that are issued through VIEs as part of the Company's investment portfolio. The activities of these VIEs are generally limited to holding the underlying collateral used to service investments therein. The Company's involvement in these entities is passive in nature and we are not the arranger of these entities. In addition, the Company has not been involved in establishing these entities and is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance.

The Company has a limited number of remaining outstanding credit enhancement exposures, including written financial guarantee and credit default swap contracts. The obligations related to these transactions are often securitized through VIEs. The Company is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance on the basis that management does not believe that the Company has the power to direct the activities, such as asset selection and collateral management, which most significantly impact each entity's economic performance. For further details on the nature of the obligations and the size of the Company's maximum exposure, see Note 6, “Derivative Instruments,” and Note 12 (a), “Commitments and Contingencies - Financial Guarantee Exposures.”

38

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

11. Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands, except per share amounts)	2013		2012		2013		2012
Basic earnings per ordinary share & ordinary share equivalents outstanding:
Net income (loss) attributable to ordinary shareholders	$	135,648	$	171,902	$	759,136	$	569,684
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Basic earnings per ordinary share & ordinary share equivalents outstanding	$	0.48	$	0.57	$	2.62	$	1.84
Diluted earnings per ordinary share & ordinary share equivalents outstanding:
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Impact of share-based compensation and certain conversion features	5,097		3,565		4,871		2,927
Weighted average ordinary shares outstanding - diluted	290,490		307,764		294,828		312,602
Diluted earnings per ordinary share & ordinary share equivalents outstanding	$	0.47	$	0.56	$	2.57	$	1.82
Dividends per ordinary share	$	0.14	$	0.11	$	0.42	$	0.33

For the three months ended September 30, 2013 and 2012, and for the nine months ended September 30, 2013 and 2012, ordinary shares available for issuance under share-based compensation plans of 6.0 million and 8.6 million, and 6.3 million and 8.8 million, respectively, were not included in the calculation of diluted earnings per share because the assumed exercise or issuance of such shares would be anti-dilutive.

39

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12. Commitments and Contingencies

(a) Financial Guarantee Exposures

Financial Guarantee Exposure Summary (U.S. dollars in thousands except number of contracts and term to maturity)	September 30, 2013			December 31, 2012
Opening number of financial guarantee contracts	4			4
Number of financial guarantee contracts matured, prepaid or commuted during the period	(1		)	—
Closing number of financial guarantee contracts	3			4
Principal outstanding	$	108,255		$	115,464
Interest outstanding	$	—		$	—
Aggregate exposure outstanding	$	108,255		$	115,464
Total gross claim liability recorded	$	—		$	1,399
Total unearned premiums and fees recorded	$	170		$	279
Weighted average contractual term to maturity in years	26.3			25.4

The Company's outstanding financial guarantee contracts at September 30, 2013 provide credit support for a variety of collateral types with the exposures comprised of an aggregate $108.3 million notional financial guarantee on three notes backed by zero coupon long dated bonds and bank perpetual securities, including some issued by European financials. At September 30, 2013, there were no reported events of default on these obligations.

Surveillance procedures to track and monitor credit deteriorations in the insured financial obligations are performed by the primary obligors for each transaction on the Company's behalf. Information regarding the performance status and updated exposure values is provided to the Company on a quarterly basis and evaluated by management in recording claims reserves.

(b) Litigation

The Company and its subsidiaries are subject to litigation and arbitration in the normal course of business. These lawsuits and arbitrations principally involve claims on policies of insurance and contracts of reinsurance and are typical for the Company and for the property and casualty insurance and reinsurance industry in general. Such claims proceedings are considered in connection with the Company's loss and loss expense reserves. Reserves in varying amounts may or may not be established in respect of particular claims proceedings based on many factors, including the legal merits thereof. In addition to litigation relating to insurance and reinsurance claims, the Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance or reinsurance policies. This category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct, employment claims, regulatory activity, shareholder disputes or disputes arising from business ventures. The status of these legal actions is actively monitored by management.

Legal actions are subject to inherent uncertainties, and future events could change management's assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Company discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Company's assessment at September 30, 2013, no such disclosures are considered necessary.

40

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13. Accumulated Other Comprehensive Income (Loss)

The changes in AOCI, net of tax, by component for the three months ended September 30, 2013 are as follows:

Three months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments		Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax (1)	$	796,073		$	(101,751	)	$	41,755	$	(27,211	)	$	1,894	$	710,760
OCI before reclassifications (2)	121,956			—			4,020		1,092			—		127,068
Amounts reclassified from AOCI	(5,516		)	7,474			—		—			110		2,068
Tax (benefit) expense	(77,575		)	(5		)	—		—			—		(77,580		)
Net current period OCI - net of tax	38,865			7,469			4,020		1,092			110		51,556
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775	$	(26,119	)	$	2,004	$	762,316

____________

(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.

The changes in AOCI, net of tax, by component for the nine months ended September 30, 2013 are as follows:

Nine months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments (1)			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments			Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax	$	1,597,832		$	(121,371	)	$	69,391		$	(27,506	)	$	1,674	$	1,520,020
OCI before reclassifications (1)	(667,097		)	—			(23,616		)	1,387			—		(689,326		)
Amounts reclassified from AOCI	(102,619		)	27,099			—			—			330		(75,190		)
Tax (benefit) expense	6,822			(10		)	—			—			—		6,812
Net current period OCI - net of tax	(762,894		)	27,089			(23,616		)	1,387			330		(757,704		)
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775		$	(26,119	)	$	2,004	$	762,316

____________

(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.

The reclassifications out of AOCI along with the associated income statement line items affected by component, and the total related tax (expense) benefit for the three and nine months ended September 30, 2013 and 2012 are as follows:

41

XL GROUP PLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Gross Amount Reclassified From AOCI
Details About AOCI Components (U.S. dollars in thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013			Affected Line Item in the Statement of Income
Unrealized gains and losses on investments:
	$	(7,904	)	$	(110,295	)	Net realized gains (losses) on investments sold
	2,388			7,676			OTTI on investments
	$	(5,516	)	$	(102,619	)	Total before tax
	3,352			66			Provision (benefit) for income tax
	$	(2,164	)	$	(102,553	)	Net of tax
OTTI losses recognized in OCI:
	$	6,675		$	24,562		Net realized gains (losses) on investments sold
	799			2,537			OTTI on investments transferred to (from) OCI
	$	7,474		$	27,099		Total before tax
	(5		)	(10		)	Provision (benefit) for income tax
	$	7,469		$	27,089		Net of tax
Gains and losses on cash flow hedges:
Interest rate contracts	$	110		$	330		Interest Expense
	—			—			Provision (benefit) for income tax
	$	110		$	330		Net of tax
Total reclassifications for the period, gross of tax	$	2,068		$	(75,190	)
Tax (benefit) expense	3,347			56
Total reclassifications for the period, net of tax	$	5,415		$	(75,134	)

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following is a discussion of our financial condition and liquidity and results of operations. Certain aspects of our business have loss experience characterized as low frequency and high severity. This may result in volatility from period to period in both the Company's and an individual segment's results of operations and financial condition. Unless the context otherwise indicates, references herein to “the Company,” “we,” “us,” or “our” are to XL Group plc, an Irish public limited company (“XL-Ireland”), and its consolidated subsidiaries.

This “Management's Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements that involve inherent risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based upon current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and, therefore, undue reliance should not be placed on them. See “Cautionary Note Regarding Forward-Looking Statements” for a list of additional factors that could cause actual results to differ materially from those contained in any forward-looking statement, as well as Item 1, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

This discussion and analysis should be read in conjunction with the “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the audited Consolidated Financial Statements and Notes thereto, presented under Item 7 and Item 8, respectively, of our Annual Report on Form 10-K for the year ended December 31, 2012.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. Any prospectus, prospectus supplement, Annual Report to ordinary shareholders, proxy statement, Form 10-K, Form 10-Q or Form 8-K or any other written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to us in general, and to the insurance and reinsurance sectors in particular (both as to underwriting and investment matters). Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the PSLRA or otherwise.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:

▪ 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;

43

▪ 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.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein or elsewhere. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by the federal securities laws.

EXECUTIVE OVERVIEW

See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview,” included in our Annual Report on Form 10-K for the year ended December 31, 2012. That discussion is updated with the disclosures set forth below.

RESULTS OF OPERATIONS AND KEY FINANCIAL MEASURES

Results of Operations

The following table presents an analysis of our net income (loss) attributable to ordinary shareholders and other financial measures (described below) for the three and nine months ended September 30, 2013 and 2012:

(U.S. dollars in thousands, except per share amounts)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Net income (loss) attributable to ordinary shareholders	$	135,648	$	171,902	$	759,136	$	569,684
Earnings (loss) per ordinary share – basic	$	0.48	$	0.57	$	2.62	$	1.84
Earnings (loss) per ordinary share – diluted	$	0.47	$	0.56	$	2.57	$	1.82
Weighted average number of ordinary shares and ordinary share equivalents, in thousands – basic	285,393		304,199		289,957		309,675
Weighted average number of ordinary shares and ordinary share equivalents, in thousands – diluted	290,490		307,764		294,828		312,602

44

Key Financial Measures

The following are some of the financial measures management considers important in evaluating our operating performance:

	Three Months Ended									Nine Months Ended
	September 30,						Change			September 30,						Change
(U.S. dollars in thousands, except ratios and per share amounts)	2013			2012			2013 to 2012			2013			2012			2013 to 2012
Underwriting profit (loss) - P&C operations	$	76,900		$	114,203		(32.7		)%	$	349,612		$	306,813		13.9		%
Combined ratio - P&C operations	95.0		%	92.2		%	2.8pts			92.2		%	92.7		%	(0.5)pts
Net investment income - P&C operations	$	165,793		$	166,002		(0.1		)%	$	502,527		$	544,203		(7.7		)%
Operating net income	$	154,628		$	188,038		(17.8		)%	$	656,087		$	575,213		14.1		%
Operating net income per share - diluted	$	0.53		$	0.61		$	(0.08	)	$	2.23		$	1.84		$	0.39
Annualized return on average ordinary shareholders’ equity	5.5		%	6.8		%	(1.3)pts			9.9		%	7.7		%	2.2pts
Annualized operating return on average ordinary shareholders’ equity	6.2		%	7.4		%	(1.2)pts			8.6		%	7.7		%	0.9pts
Annualized operating return on average ordinary shareholders’ equity excluding unrealized gains and losses on investments	6.8		%	8.4		%	(1.6)pts			9.6		%	8.6		%	1.0pts
(U.S. dollars)	September 30, 2013			June 30, 2013			Change (Three Months)			September 30, 2013			December 31, 2012			Change (Nine Months)
Book value per ordinary share	$	35.03		$	34.41		$	0.62		$	35.03		$	35.18		$	(0.15	)
Fully diluted tangible book value per ordinary share	$	32.96		$	32.45		$	0.51		$	32.96		$	33.35		$	(0.39	)

The following are descriptions of these key financial measures and a brief discussion of the factors influencing them:

Underwriting profit - property and casualty (“P&C”) operations

One way that we evaluate the performance of our insurance and reinsurance operations is by underwriting profit or loss. We do not measure performance based on the amount of gross premiums written. Underwriting profit or loss is calculated from premiums earned less net losses incurred and expenses related to underwriting activities.

In the following discussion as well as in the “Income Statement Analysis” section, the following ratios are used to explain the underwriting profit (loss) from our P&C operations:

▪ 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.

Our underwriting profit (loss) in the three and nine months endedSeptember 30, 2013 was consistent with the combined ratio, discussed below.

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Combined ratio - P&C operations

Our combined ratio of 95.0% for the three months ended September 30, 2013 was higher than the 92.2% combined ratio in the same period of 2012, due to an increase in the loss and loss expense ratio partially offset by a marginal decrease in the underwriting expense ratio. The loss and loss expense ratio increased primarily as a result of higher levels of natural catastrophe losses as compared to 2012. The underwriting expense ratio decreased as operating expenses remained relatively flat while net earned premium increased 5.6% compared to the same period of 2012.

Our combined ratio of 92.2% for the nine months ended September 30, 2013 was lower than the 92.7% combined ratio in the same period of 2012, due to a decrease in the underwriting expense ratio partially offset by an increase in the loss and loss expense ratio. The underwriting expense ratio decreased, as operating expenses remained relatively flat, while net premium earned increased 6.5% during nine months ended September 30, 2013 as compared to the same period of 2012. The loss and loss expense ratio increased due to higher levels of natural catastrophe and large losses in 2013, partially offset by lower levels of attritional losses. For further information on our combined ratio, see “Income Statement Analysis” below.

Net investment income - P&C operations

Net investment income related to P&C operations, which includes interest and dividend income together with the amortization of premium and discount on fixed maturities and short-term investments, net of related investment expenses, is an important measure that affects our overall profitability. Our largest liability relates to our unpaid loss reserves, and our investment portfolio provides liquidity for claims settlements of these reserves as they become due. As a result, a significant part of the investment portfolio is invested in fixed income securities. Net investment income is influenced by a number of factors, including the amounts and timing of inward and outward cash flows, the level of interest rates and credit spreads, foreign exchange rates and changes in overall asset allocation. See the segment results at “Investment Activities” below for a discussion of our net investment income for the three and nine months endedSeptember 30, 2013.

Operating net income and Operating net income per share

Operating net income is a non-GAAP financial measure defined as net income (loss) attributable to ordinary shareholders excluding: (1) our net realized gains and losses on investments, net of tax, (2) our net realized and unrealized gains and losses on derivatives, net of tax, (3) our share of items (1) and (2) for our insurance company affiliates for the periods presented, (4) goodwill impairment charges, net of tax, (5) the gains recognized on our repurchase of XL-Cayman's preference ordinary shares and (6) foreign exchange gains or losses, net of tax. We evaluate the performance of and manage our business to produce an underwriting profit. In addition to presenting net income (loss), we believe that showing operating net income (loss) enables investors and other users of our financial information to analyze our performance in a manner similar to how we analyze performance. In this regard, we believe that providing only a GAAP presentation of net income (loss) would present an incomplete picture of our financial performance, which would make it more difficult for users of our financial information to evaluate our underlying business. We also believe that equity analysts and certain rating agencies that follow us (and the insurance industry as a whole) exclude these items from their analyses for the same reasons and they request that we provide this non-GAAP financial information on a regular basis. A reconciliation of Net income (loss) attributable to ordinary shareholders to operating net income (loss) is provided at “Reconciliation of Non-GAAP Measures” included below.

Operating net income per share is derived from the non-GAAP operating net income measure by dividing operating net income by the weighted average number of ordinary shares and ordinary share equivalents outstanding for each period combined with the impact from dilution of share-based compensation and certain conversion features where dilutive.

Annualized return on average ordinary shareholders' equity (“ROE”)

ROE is another non-GAAP financial measure that we consider important in evaluating our operating performance and view as a key measure of return generated for ordinary shareholders. ROE is calculated by dividing the net income (loss) attributable to ordinary shareholders for any period by the average of the opening and closing Shareholders' equity attributable to XL-Ireland. We establish minimum target ROEs for our total operations, segments and lines of business. If our minimum ROE targets over the longer term are not met with respect to any line of business, we seek to modify and/or exit this line. In addition, among other factors, compensation of our senior officers is dependent on the achievement of our performance goals to enhance ordinary shareholder value as measured by ROE (adjusted for certain items considered to be “non-operating” in nature).

For the three months ended September 30, 2013, ROE was 5.5%, 1.3 percentage points lower than in the same period of 2012 when it was 6.8%. The decrease is due to lower underwriting income in the current quarter as a result of increased losses from natural catastrophes, partially offset by higher affiliate earnings and lower net realized losses on investments than in the prior year quarter.

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For the nine months ended September 30, 2013, ROE was 9.9%, 2.2 percentage points higher than the same period of 2012 when it was 7.7%. The increase is primarily due to improved underwriting results in the period, combined with higher affiliate earnings and net realized gains on investments and derivatives than in the prior year period.

Annualized operating return on average ordinary shareholders' equity (“Operating ROE”)

Operating ROE is another non-GAAP financial measure that we consider important in evaluating our operating performance. Operating ROE is derived by dividing non-GAAP operating net income for any period by the average of the opening and closing ordinary shareholders' equity.

For the three months ended September 30, 2013, Operating ROE was 6.2%, which was 1.2 percentage points lower than in the same period in 2012 when it was 7.4%. This was the result of the lower operating net income in 2013 due to the factors discussed above as part of ROE and as further discussed under “Significant Items Affecting the Results of Operations.”

For the nine months ended September 30, 2013, Operating ROE was 8.6%, which was 0.9 percentage points higher than in the same period in 2012 when it was 7.7%. This was the result of the higher operating net income in 2013 due to the factors discussed above as part of ROE and as further discussed under “Significant Items Affecting the Results of Operations.”

Annualized operating return on average ordinary shareholders' equity excluding unrealized gains and losses on investments (“Operating ROE ex-UGL”)

Operating ROE ex-UGL is an additional measure of our profitability that eliminates the impacts of mark to market fluctuations on our investment portfolio that have not been realized through sales, which we believe provides a consistent measure of our performance. Operating ROE ex-UGL is derived from the non-GAAP operating net income measure by dividing non-GAAP operating net income for any period by the average of the opening and closing ordinary shareholders' equity excluding unrealized gains and losses on investments.

For the three months ended September 30, 2013, Operating ROE ex-UGL was 6.8%, which was 1.6 percentage points lower than in the same period in 2012 when it was 8.4%. This was the result of the lower annualized operating net income in 2013 due to the factors discussed above as part of ROE.

For the nine months ended September 30, 2013, Operating ROE ex-UGL was 9.6%, which was 1.0 percentage points higher than in the same period in 2012 when it was 8.6%. This was the result of the higher operating net income in 2013 due to the factors discussed above as part of ROE.

Book value per ordinary share

We view the change in our book value per ordinary share as an additional measure of our performance, representing the value generated for our ordinary shareholders each period, and we believe that this measure is a key driver of our share price over time (along with the diluted measures described below). Book value per ordinary share, a non-GAAP financial measure, is calculated by dividing ordinary shareholders' equity (total shareholders' equity less non-controlling interest in equity of consolidated subsidiaries) by the number of outstanding ordinary shares at the applicable period end. Book value per ordinary share is affected primarily by net income (loss), by any changes in the net unrealized gains and losses on our investment portfolio, by currency translation adjustments and by the impact of any share buyback or issuance activity. Ordinary shareholders' equity was $9.9 billion and $10.5 billion and the number of ordinary shares outstanding was 282.9 million and 298.7 million at September 30, 2013 and December 31, 2012, respectively. Ordinary shares outstanding include all ordinary shares legally issued and outstanding (as disclosed on the face of the balance sheet) as well as all director share units outstanding.

At September 30, 2013, book value per ordinary share was $35.03, an increase of $0.62 and a decrease of $0.15 in the three and nine months endedSeptember 30, 2013 from the amounts as of June 30, 2013 and December 31, 2012, when they were $34.41 and $35.18, respectively. The increase in the three months ended September 30, 2013 was primarily due to net income attributable to ordinary shareholders, the benefit of share buyback activity and an increase in net unrealized gains on investments, partially offset by the payment of dividends to ordinary shareholders. The decrease in the nine months ended September 30, 2013 was primarily due to decreases in the net unrealized gains on investments partially offset by an increase in net income attributable to ordinary shareholders and the benefit of share buyback activity.

Fully diluted tangible book value per ordinary share

Fully diluted tangible book value per ordinary share is a non-GAAP financial measure and is calculated by dividing ordinary shareholders' equity excluding Goodwill and other intangible assets (as disclosed on the face of the balance sheet) by the number of outstanding ordinary shares at any period end combined with the impact from dilution of share-based compensation and certain conversion features where dilutive. At September 30, 2013, tangible book value per ordinary share

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was $32.96, an increase of $0.51 and a decrease of $0.39 in the three and nine months endedSeptember 30, 2013 from the amounts at June 30, 2013 and December 31, 2012, when they were $32.45 and $33.35, respectively. The fully diluted tangible book value per ordinary share movements for the three and nine months endedSeptember 30, 2013 was a result of the factors discussed above as part of book value per ordinary share.

RECONCILIATION OF NON-GAAP MEASURES

The following is a reconciliation of net income (loss) attributable to ordinary shareholders to operating net income (loss) and also includes the calculation of Operating ROE and Operating ROE ex-UGL for the three and nine months ended September 30, 2013 and 2012:

(U.S. dollars in thousands, except ratios and per share amounts)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net income (loss) attributable to ordinary shareholders	$	135,648		$	171,902		$	759,136		$	569,684
Net realized (gains) losses on investments, net of tax	5,306			5,733			(75,462		)	(3,308		)
Net realized and unrealized (gains) losses on derivatives, net of tax	(880		)	(6,253		)	(3,660		)	(2,651		)
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates	(108		)	(6		)	(363		)	(42		)
Foreign exchange (gains) losses, net of tax	14,662			16,662			(23,564		)	11,530
Operating net income (loss)	$	154,628		$	188,038		$	656,087		$	575,213
Per ordinary share results:
Net income (loss) attributable to ordinary shareholders	$	0.47		$	0.56		$	2.57		$	1.82
Operating net income (loss) - diluted	$	0.53		$	0.61		$	2.23		$	1.84
Weighted average ordinary shares outstanding, in thousands:
Basic	285,393			304,199			289,957			309,675
Diluted	290,490			307,764			294,828			312,602
Return on ordinary shareholders' equity:
Closing ordinary shareholders' equity (at period end)	$	9,907,896		$	10,411,049		$	9,907,896		$	10,411,049
Unrealized (gain) loss on investments, net of tax (at period end)	$	(810,953	)	$	(1,383,446	)	$	(810,953	)	$	(1,383,446	)
Average ordinary shareholders' equity for the period excluding unrealized gains and losses on investments	$	9,131,199		$	9,004,583		$	9,065,284		$	8,958,733
Average ordinary shareholders' equity for the period	$	9,900,233		$	10,139,433		$	10,208,987		$	9,911,354
Operating net income (loss)	$	154,628		$	188,038		$	656,087		$	575,213
Annualized operating net income (loss)	$	618,512		$	752,152		$	874,783		$	766,951
Operating ROE	6.2		%	7.4		%	8.6		%	7.7		%
Operating ROE ex-UGL	6.8		%	8.4		%	9.6		%	8.6		%

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SIGNIFICANT ITEMS AFFECTING THE RESULTS OF OPERATIONS

The Company’s net income and other financial measures as shown above for the three and nine months endedSeptember 30, 2013 have been affected by, among other things, the following significant items:

1)       The impact of significant large loss events;

2)       The current underwriting environment; and

3)       Market movement impacts on our investment portfolio.

1) The Impact of Significant Large Loss Events

Natural Catastrophe Losses

The following table outlines the underwriting losses and loss ratio impact for the Insurance and Reinsurance segments from natural catastrophes for the three and nine months endedSeptember 30, 2013:

	Three Months Ended								Nine Months Ended
	September 30,						Change		September 30,						Change
(U.S. dollars in thousands, except ratios)	2013			2012			2013 to 2012		2013			2012			2013 to 2012
Natural Catastrophe Underwriting Losses
Insurance	$	15,547		$	5,836		$	9,711	$	95,450		$	75,169		$	20,281
Reinsurance	$	69,474		$	26,155		$	43,319	$	127,638		$	37,379		$	90,259
Total P&C	$	85,021		$	31,991		$	53,030	$	223,088		$	112,548		$	110,540
Natural Catastrophe Loss Ratio Impact
Insurance	1.4		%	0.7		%	0.7pts		3.0		%	2.6		%	0.4pts
Reinsurance	15.7		%	5.5		%	10.2pts		10.3		%	2.9		%	7.4pts
Total P&C	5.5		%	2.4		%	3.1pts		5.1		%	2.7		%	2.4pts

Notable natural catastrophes for the three and nine months endedSeptember 30, 2013 were as follows:

▪ 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.

Large Loss Events

In the three and nine months endedSeptember 30, 2013 and 2012 the results from operations were impacted by significant losses from large non-natural catastrophe loss events in both the Insurance and Reinsurance segments. These large non-natural catastrophe losses were higher in the prior year periods due primarily to the impact of a single large marine loss during the first quarter of 2012 and losses recorded in relation to the severe drought conditions and crop losses in the U.S. in 2012.

See “Income Statement Analysis” herein for further information regarding these large loss events within each of the Company's operating segments.

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2) The Current Underwriting Environment

There can be no assurance that the following (re)insurance rate conditions or growth opportunities will be sustained or further materialize, or lead to improvements in our books of business. See “Cautionary Note Regarding Forward-Looking Statements.”

Insurance

During the three months ended September 30, 2013, we saw a continuation of the positive pricing trends that we have experienced in the past several quarters, with an overall rate increase of 3.4% for the Insurance segment. While rate increases slowed in our North America short-tail lines, our diversified portfolio allowed us to benefit from rate increases across most of our medium and long-tail lines. In addition to these pricing improvements, our 8.7% increase in gross premiums written in the three months ended September 30, 2013, as compared to the same period in 2012, was due largely to the continued efforts of new leadership in certain existing businesses. Growth was particularly strong in North America where our construction, property, primary casualty and excess casualty businesses experienced the largest percentage growth within the business group. International casualty, international professional and Select (which offers professional liability to small and mid-size niche professional groups in the United States) businesses also had strong growth in the quarter.

The trading environment for our core lines of insurance business remains competitive, so we continue to focus on those lines of business that we believe provide the best return on capital, including the writing of selective new business and remaining committed to the underwriting actions necessary to improve our margins.

Reinsurance

The mid-year renewals for the Reinsurance segment were generally in line with management's expectations. However, for 2014 property catastrophe renewals, there is potential for some downward pressure on U.S. pricing due to the abundant capacity available in both traditional and non-traditional forms and a benign Atlantic hurricane season. In Europe, due to the high levels of catastrophe activity during 2013, we anticipate a more stable pricing environment. Pricing on long-tail lines remains highly competitive, with the favorable pricing trends being experienced across many sectors of the primary market not showing the same level of discipline or positive pricing momentum in the reinsurance market.

The Reinsurance segment's gross premiums written decreased by 16.2% in the three months ended September 30, 2013 as compared to the same period in 2012. The premium reduction was predominantly from the non-renewal of a crop quota share program in our North America property book and from a reduction in our Latin America portfolio due to competitive market conditions.

The Reinsurance segment continues to develop new business opportunities to further build upon the strategic growth achieved in recent years, while remaining committed to its long-held focus of underwriting discipline and cycle management.

3) Market Movement Impacts on Our Investment Portfolio

During the three months ended September 30, 2013, interest rates marginally increased primarily in the United Kingdom, while credit spreads narrowed enough to offset the interest rate increase. The net impact of the market conditions on our investment portfolio resulted in a positive mark to market change of $125 million on our available for sale ("AFS") investments. This represents an approximately 0.3% appreciation in average assets for the three months ended September 30, 2013.

The following table provides further detail regarding the movements in relevant credit markets, as well as in government interest rates using selected market indices:

	Interest Rate Movement for the three months ended September 30, 2013 (1) (‘+’/‘-’ represents increases / decreases in interest rates)	Credit Spread Movement for the three months ended September 30, 2013 (2) (‘+’/‘-’ represents widening / tightening of credit spreads)
United States	-1 basis points (5 year Treasury)	-12 basis points (US Corporate A rated)
		-12 basis points (US Mortgage Master Index)
		-1 basis points (US CMBS, AAA rated)
United Kingdom	+28 basis points (10 year Gilt)	-22 basis points (UK Corporate, AA rated)
Euro-zone	+6 basis points (5 year Bund)	+10 basis points (Europe Corporate, A rated)

____________

(1) Source: Bloomberg Finance L.P.

(2) Source: Merrill Lynch Global Indices.

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Net realized losses on investments in the three months ended September 30, 2013 totaled $2.0 million, including net realized losses of approximately $3.2 million related to OTTI charges on certain of the Company’s fixed income investments. For further analysis of this, see “Income Statement Analysis - Investment Activities” below.

During the nine months ended September 30, 2013, interest rates increased in all of our major jurisdictions and credit spreads widened moderately for structured credit holdings offset by tightening in the United Kingdom. The net impact of the market conditions on our investment portfolio resulted in a negative mark to market change of $651 million on our AFS investments. This represents an approximately 1.4% depreciation in average assets for the nine months ended September 30, 2013.

The following table provides further detail regarding the movements in relevant credit markets, as well as in government interest rates using selected market indices:

	Interest Rate Movement for the nine months ended September 30, 2013 (1) (‘+’/‘-’ represents increases / decreases in interest rates)	Credit Spread Movement for the nine months ended September 30, 2013 (2) (‘+’/‘-’ represents widening / tightening of credit spreads)
United States	+66 basis points (5 year Treasury)	+2 basis points (US Corporate A rated)
		+18 basis points (US Mortgage Master Index)
		+33 basis points (US CMBS, AAA rated)
United Kingdom	+89 basis points (10 year Gilt)	-32 basis points (UK Corporate, AA rated)
Euro-zone	+50 basis points (5 year Bund)	-3 basis points (Europe Corporate, A rated)

____________

(1) Source: Bloomberg Finance L.P.

(2) Source: Merrill Lynch Global Indices.

Net realized gains on investments in the nine months ended September 30, 2013 totaled $75.5 million, including net realized losses of approximately $10.2 million related to OTTI charges on certain of the Company’s fixed income investments. For further analysis of this, see “Income Statement Analysis - Investment Activities” below.

OTHER KEY FOCUSES OF MANAGEMENT

We remain focused on, among other things, managing capital, enhancing enterprise risk management capabilities and monitoring regulatory change. Details of these initiatives are outlined below.

Capital Management

Fundamental to supporting our business model is our ability to underwrite business, which is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. As a result, in the event that we are downgraded, our ability to write business, as well as our financial condition and/or results of operations, could be adversely affected.

Buybacks of Ordinary Shares

On February 27, 2012, we announced that the XL-Ireland Board of Directors approved a share buyback program, authorizing the purchase of up to $750 million of our ordinary shares (the “February 2012 Program”). During 2012, we purchased and canceled 18.3 million ordinary shares under the February 2012 Program for $401.6 million. Between January 1 and February 22, 2013, we purchased and canceled 3.8 million ordinary shares under the February 2012 Program for $98.3 million. See Item 8, Note 18, “Share Capital,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

On February 22, 2013, we announced that the XL-Ireland Board of Directors approved a new share buyback program, authorizing the purchase of up to $850 million of our ordinary shares (the “February 2013 Program”). This authorization replaced the approximately $250 million remaining under the February 2012 Program.

During the three months ended September 30, 2013, we purchased and canceled 4.8 million ordinary shares for $150.0 million at an average price of $31.03 per share. During the nine months ended September 30, 2013, we purchased and canceled 17.7 million ordinary shares for $523.3 million at an average price of $29.59 per share. At September 30, 2013, $425.0 million remained available for purchase under the February 2013 Program.

All share buybacks were carried out by way of redemption in accordance with Irish law and the Company's constitutional documents. All shares so redeemed were canceled upon redemption.

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Risk Management

Our risk management and risk appetite framework is detailed in Item 1, “Business - Enterprise Risk Management,” included in our Annual Report on Form 10-K for the year ended December 31, 2012. The table below shows our estimated per event net 1% and 0.4% exceedance probability exposures for certain peak natural catastrophe peril regions. These estimates assume that amounts due from reinsurance and retrocession purchases are 100% collectible. There may be credit or other disputes associated with these potential receivables.

			1-in-100 Event				1-in-250 Event
(U.S. dollars in millions)	Peril	Measurement Date of In-Force Exposures (1)	Probable Maximum Loss (2)		Percentage of Tangible Shareholders’ Equity at September 30, 2013		Probable Maximum Loss (2)		Percentage of Tangible Shareholders’ Equity at September 30, 2013
Geographical Zone
North Atlantic	Windstorm	July 1, 2013	$	1,302	12.0	%	$	1,755	16.2	%
North America	Earthquake	July 1, 2013	889		8.2	%	1,481		13.7	%
Europe	Windstorm	July 1, 2013	514		4.7	%	735		6.8	%
Japan	Earthquake	July 1, 2013	241		2.2	%	285		2.6	%
Japan	Windstorm	July 1, 2013	132		1.2	%	231		2.1	%

____________

(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.

Regulatory Change

Management continues to actively monitor and assess the various regulatory initiatives and legislation that impacts us or in the future could impact us. For example, management has been focused on Solvency II, which was adopted by the European Parliament in April 2009. This is an E.U. directive covering the capital adequacy and risk management of, and regulatory reporting for, European-based (re)insurers, as well as a new supervisory regime for the insurance industry. Several steps must be taken by the European Commission, the European Parliament, the Council of Ministers and European Insurance and Occupational Pensions Authority to implement Solvency II. The final date of implementation and key elements of the framework remain under discussion, but it is widely accepted that the envisaged implementation date of January 1, 2014 will not be met. However, management currently continues to prepare for potential Solvency II implementation at a future date. See Item 1, “Business - Regulation,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

See the discussion of our Critical Accounting Policies and Estimates in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

VARIABLE INTEREST ENTITIES AND OTHER OFF-BALANCE SHEET ARRANGEMENTS

For further information, see the discussion of our variable interest entities and other off-balance sheet arrangements in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Variable Interest Entities (“VIEs”) and Other Off-Balance Sheet Arrangements,” of our Annual Report on Form 10-K for the year ended December 31, 2012 and Item 1, Note 10, “Variable Interest Entities,” to the Unaudited Consolidated Financial Statements included herein.

SEGMENTS

We are organized into three operating segments: Insurance, Reinsurance and Life operations. Our general investment and financing operations are reflected in Corporate.

We evaluate the performance of both the Insurance and Reinsurance segments based on underwriting profit and the performance of the Life operations segment based on its contribution to net income. Other items of our revenue and expenditure are not evaluated at the segment level for reporting purposes. In addition, we do not allocate investment assets by segment for our P&C operations. Investment assets related to our Life operations segment and certain structured products included in the Insurance and Reinsurance segments and in Corporate are held in separately identified portfolios. As such, net investment income from these assets is included in the contribution from each of these segments. See Item 1, Note 4, “Segment

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Information,” to the Unaudited Consolidated Financial Statements included herein for a reconciliation of segment data to our Unaudited Consolidated Financial Statements.

INCOME STATEMENT ANALYSIS

Segment Results for the three months ended September 30, 2013 compared to the three months ended September 30, 2012

Insurance

Our Insurance operations provide commercial property, casualty and specialty insurance products on a global basis. Products generally provide tailored coverages for complex corporate risks and include the following lines of business: property, casualty, professional liability, environmental liability, aviation and satellite, marine and offshore energy, equine, fine art and specie, surplus lines, political risk and trade credit, crisis management, surety and other insurance coverages, including those mentioned above, through our programs, middle market and construction businesses. We focus on those lines of business within our insurance operations that we believe provide the best return on capital over time. These lines of business are divided into the following business groups: International Property and Casualty (“IPC”), North America Property and Casualty (“NAPC”), Global Professional Lines (“Professional”) and Global Specialty Lines (“Specialty”).

The following table summarizes the underwriting profit (loss) for the Insurance segment:

	Three Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013			2012		2013 to 2012
Gross premiums written	$	1,259,986		$	1,158,683	8.7	%
Net premiums written	993,659			905,056		9.8	%
Net premiums earned	1,104,012			985,625		12.0	%
Net losses and loss expenses	762,782			623,545		22.3	%
Acquisition costs	136,421			128,513		6.2	%
Operating expenses	192,936			186,794		3.3	%
Underwriting profit (loss)	$	11,873		$	46,773	(74.6	)%
Net results – structured products	4,104			3,087		32.9	%
Net fee income and other (expense)	(2,187		)	745		N/M

____________

* N/M - Not Meaningful

Gross Premiums Written

The following table summarizes our gross premiums written by business group for the Insurance segment:

	Three Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
IPC	$	235,224	$	218,279	7.8	%
NAPC	446,834		388,894		14.9	%
Professional	360,645		337,571		6.8	%
Specialty	217,283		213,939		1.6	%
Total	$	1,259,986	$	1,158,683	8.7	%

Gross written premiums increased by 8.7%. The following is a summary of the premium movements by business group:

▪ 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.

53

▪ 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.

Foreign exchange rate movements did not significantly impact our gross premiums written.

Net Premiums Written

The increase of 9.8% resulted from the gross written premium increases outlined above offset by an increase in ceded written premiums. The increase in ceded premiums primarily relates to a modification in the reinsurance structure to one that utilizes proportional reinsurance in our Professional business group in order to take advantage of favorable market terms; an increase in global property writings that involve cessions to co-insurers and/or the captive insurance operations of our insureds; and higher reinsurer participation on certain casualty treaties, partially offset, in the prior year, by the impact of a reinsurance cover in NAPC discontinued lines.

Net Premiums Earned

The increase of 12.0% is a reflection of the overall growth in net premiums written across all business groups in recent quarters and is mainly attributable to NAPC property, NAPC primary casualty and excess casualty, NAPC construction, IPC primary casualty and Specialty marine, partially offset by lower earned premiums in aerospace and IPC property.

Net Losses and Loss Expenses

Combined Ratio

The following table presents the ratios for the Insurance segment:

	Three Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	69.1	%	63.3	%	5.8
Acquisition expense ratio	12.4	%	13.0	%	(0.6	)
Operating expense ratio	17.4	%	19.0	%	(1.6	)
Underwriting expense ratio	29.8	%	32.0	%	(2.2	)
Combined ratio	98.9	%	95.3	%	3.6

The loss and loss expense ratio includes net losses incurred for both the reported year and any favorable or adverse prior year development of loss and loss expense reserves held at the beginning of the year. The following table summarizes these components of the loss ratio for the Insurance segment for the three months ended September 30, 2013 and 2012:

	Three Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	69.1	%	63.3	%	5.8
Prior year reserve development	0.3	%	—	%	0.3
Loss ratio excluding prior year development	69.4	%	63.3	%	6.1

Loss Ratio - excluding prior year development

The 6.1 percentage point increase in the loss ratio excluding prior year development was predominantly due to the impact of medium and large loss events occurring in the three months ended September 30, 2013. Losses net of reinsurance recoveries and reinstatement premiums related to natural catastrophe events for the three months ended September 30, 2013 were $9.7 million higher than in the same period in 2012. Excluding favorable prior year development, net natural catastrophe losses and related reinstatement premiums in both quarters, the loss ratio for the three months ended September 30, 2013 compared to the same period of 2012 increased by 5.4 percentage points to 68.0% due to higher levels of non-natural catastrophe medium and large losses in IPC middle markets, IPC property, Bermuda professional, aerospace and marine and energy lines. Also, in the prior year quarter, the reported loss ratio reflected the benefit of very low levels of property losses.

For further details, see "Significant Items Affecting the Results of Operations - 1) The Impact of Significant Large Loss Events" above.

54

Prior Year Development

The following table summarizes the net (favorable) adverse prior year development by line of business relating to the Insurance segment for the three months ended September 30, 2013 and 2012:

	Three Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Property	$	(3,452	)	$	(10,283	)
Casualty	(737		)	3,314
Professional	(71		)	(200		)
Specialty	(337		)	1,290
Other (1)	1,032			5,063
Total	$	(3,565	)	$	(816	)

____________

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

Net favorable prior year reserve development of $3.6 million was primarily attributable to the property line of business and was driven by a subrogation recovery received in the quarter.

Acquisition Costs and Operating Expenses

Underwriting Expense Ratio

The decrease of 2.2 percentage points was due to both a decrease in the acquisition expense ratio of 0.6 percentage points combined with a decrease in the operating expense ratio of 1.6 percentage points, as follows:

▪ 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.

Net Results - Structured Products

Net results from structured insurance products, which increased 32.9% from the prior year quarter, includes net investment income of $9.7 million and $8.5 million and interest expense of $5.6 million and $5.4 million, respectively, for the three months ended September 30, 2013 and 2012. The increase in the net results from the prior year quarter was mainly due to higher net investment income from the investment of portfolio cash into fixed income securities.

For further information about these structured indemnity contracts that are accounted for as deposit contracts, see Item 8, Note 11, “Deposit Liabilities,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Net Fee Income and Other

The decrease in net fee income and other was largely due to lower revenues in our risk engineering services business and ancillary fee income in NAPC property compared to the prior year.

55

Reinsurance

The Reinsurance segment provides casualty, property risk, property catastrophe, marine, aviation and other specialty reinsurance on a global basis, with business being written on both a proportional and non-proportional treaty basis and also on a facultative basis. Our reinsurance operations are structured into three geographical business groups: Bermuda, North America and International. During the second quarter of 2013, the business groups were realigned to include Latin America within the International business group.

The following table summarizes the underwriting profit (loss) for the Reinsurance segment:

	Three Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
Gross premiums written	$	349,854	$	417,548	(16.2	)%
Net premiums written	333,720		403,209		(17.2	)%
Net premiums earned	446,617		482,929		(7.5	)%
Net losses and loss expenses	243,738		270,532		(9.9	)%
Acquisition costs	95,797		97,740		(2.0	)%
Operating expenses	42,055		47,227		(11.0	)%
Underwriting profit (loss)	$	65,027	$	67,430	(3.6	)%
Net results – structured products	2,359		2,652		(11.0	)%
Net fee income and other	597		656		(9.0	)%

Gross Premiums Written

The following table summarizes our gross premiums written by business group for the Reinsurance segment:

	Three Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
Bermuda	$	39,937	$	54,779	(27.1	)%
North America	189,500		219,151		(13.5	)%
International	120,417		143,618		(16.2	)%
Total	$	349,854	$	417,548	(16.2	)%

Gross written premiums decreased by 16.2%. The following is a summary of the premium movements by business group:

▪ 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.

Foreign exchange rate movements did not significantly impact our gross premiums written.

Net Premiums Written

The decrease of 17.2% resulted from the gross written premium decreases outlined above together with an increase in ceded written premiums, mainly due to a new agricultural program in North America.

Net Premiums Earned

The decrease of 7.5% is mainly attributable to the earn through of lower current and prior year premiums as a result of re-underwriting activities in the International business group on marine lines and in Latin America throughout the year, and additionally from the non-renewal of a crop quota share treaty in North America, partially offset by new business as described above.

56

Net Losses and Loss Expenses

Combined Ratio

The following table presents the ratios for the Reinsurance segment:

	Three Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	54.6	%	56.0	%	(1.4	)
Acquisition expense ratio	21.4	%	20.2	%	1.2
Operating expense ratio	9.4	%	9.8	%	(0.4	)
Underwriting expense ratio	30.8	%	30.0	%	0.8
Combined ratio	85.4	%	86.0	%	(0.6	)

The loss and loss expense ratio includes net losses incurred for both the reported year and any favorable or adverse prior year development of loss and loss expense reserves held at the beginning of the year. The following table summarizes these components of the loss ratio for the Reinsurance segment for the three months ended September 30, 2013 and 2012:

	Three Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	54.6	%	56.0	%	(1.4	)
Prior year reserve development	16.9	%	7.4	%	9.5
Loss ratio excluding prior year development	71.5	%	63.4	%	8.1

Loss Ratio - excluding prior year development

The 8.1 percentage point increase in the loss ratio excluding prior year development was predominantly due to higher levels of natural catastrophe losses occurring in the three months ended September 30, 2013. Losses net of reinsurance recoveries and reinstatement premiums related to natural catastrophe events for the three months ended September 30, 2013 were $43.3 million higher than in the same period in 2012. Excluding favorable prior year development, net natural catastrophe losses and related reinstatement premiums in both quarters, the loss ratio for the three months ended September 30, 2013 compared to the same period of 2012 decreased by 2.1 percentage points to 55.8% mainly due to lower attritional loss activity during the three months ended September 30, 2013.

For further details on natural catastrophe losses, see "Significant Items Affecting the Results of Operations - 1) The Impact of Significant Large Loss Events - Natural Catastrophe Losses" above.

Prior Year Development

The following table summarizes the net (favorable) adverse prior year development by business group relating to the Reinsurance segment for the three months ended September 30, 2013 and 2012:

	Three Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Property and other short-tail lines	$	(53,784	)	$	(21,829	)
Casualty and other long-tail lines	(21,815		)	(13,866		)
Total	$	(75,599	)	$	(35,695	)

Net favorable prior year reserve development of $75.6 million for the three months ended September 30, 2013 was mainly attributable to the following:

▪ 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.

57

▪ 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 Costs and Operating Expenses

Underwriting Expense Ratio

The marginal increase of 0.8 percentage points was due to an increase in the acquisition expense ratio of 1.2 percentage points partially offset by a decrease in the operating expense ratio of 0.4 percentage points, as follows:

▪ 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.

Net Results - Structured Products

Net results from structured reinsurance products, which decreased 11.0% from the prior year quarter, includes net investment income of $8.4 million and $9.0 million and interest expense of $6.0 million and $6.3 million, for the three months ended September 30, 2013 and 2012, respectively. The decrease in the net results from the prior year quarter was mainly due to lower net investment income, primarily from a lower asset base due to cashflows from the investment portfolio.

For further information about these structured indemnity contracts that are accounted for as deposit contracts see Item 8, Note 11, “Deposit Liabilities,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

58

Life Operations

The following table summarizes the contribution from the Life operations segment, which has been in run-off since 2009:

	Three Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013		2012			2013 to 2012
Gross premiums written	$	82,291	$	87,413		(5.9	)%
Net premiums written	74,683		79,487			(6.0	)%
Net premiums earned	74,683		79,487			(6.0	)%
Net losses and loss expenses	116,549		119,438			(2.4	)%
Acquisition costs	6,110		10,094			(39.5	)%
Operating expenses	2,659		2,351			13.1	%
Net investment income	72,128		73,479			(1.8	)%
Net fee income and other	43		240			(82.1	)%
Realized gains (losses) on investments	129		(7,751		)	N/M
Contribution from Life operations	$	21,665	$	13,572		59.6	%

____________

* N/M - Not Meaningful

Gross Premiums Written

Gross written premiums decreased by 5.9%. The following is a summary of the premium movements by business group:

	Three Months Ended
	September 30, 2013						September 30, 2012
(U.S. dollars in thousands)	Gross Premiums Written		Net Premiums Written		Net Premiums Earned		Gross Premiums Written		Net Premiums Written		Net Premiums Earned
Annuity	$	37,383	$	30,608	$	30,608	$	39,050	$	31,961	$	31,961
Other Life	44,908		44,075		44,075		48,363		47,526		47,526
Total	$	82,291	$	74,683	$	74,683	$	87,413	$	79,487	$	79,487

The 5.9% decrease was mainly driven by the Other Life lines of business which decreased 7.1%, primarily due to the finalization of a number of prior underwriting year accounts on certain European short-term business, as well as the natural run-off of the business. The annuity business decreased by 4.3% in the three months ended September 30, 2013 compared to the same period in 2012, which was a decrease in line with our run-off expectations.

Net Premiums Written and Net Premiums Earned

The 6.0% decrease in both net premium written and net earned premiums was consistent with the movements in total gross premiums written already noted.

Claims and Policy Benefits

The 2.4% decrease was largely due to the run-off nature of the Life operations business but also reflected adverse claim experience in the three months ended September 30, 2012.

Acquisition Costs

The 39.5% decrease was primarily due to release of profit commission accruals on the aforementioned finalization of prior underwriting year accounts on certain European short-term business.

Operating Expenses

The 13.1% increase in operating expenses is largely due to the timing of certain expenses year on year, together with certain one-off fees in the three months ended September 30, 2013.

59

Net Investment Income - Life Operations

Net investment income is included in the calculation of contribution from Life operations, as it relates to income earned on portfolios of separately identified and managed life investment assets and other allocated assets. The 1.8% decrease was due to lower investment yields and a lower invested asset base, reflecting the run-off nature of the Life operations business.

Investment Performance

We manage our fixed income portfolio in accordance with investment guidelines approved by the Risk and Finance Committee of the Board of Directors of XL-Ireland. The following is a summary of the investment portfolio returns, which are calculated by dividing the sum of gross investment income or net income from investment affiliates, realized gains (losses) and unrealized gains (losses) by the average market value of the portfolio, for each of our fixed income and non-fixed income portfolios, for the three months ended September 30, 2013 and 2012:

	Three Months Ended
	September 30,
	2013		2012
Total Return on Investments (1)
P&C portfolio	0.8	%	2.0	%
Life portfolio	1.4	%	4.6	%
Other Portfolios (2)
Alternative portfolio (3)	(0.6	)%	1.4	%
Equity portfolio	7.3	%	7.1	%

___________

(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.

Investment Activities

The following table illustrates the net investment income from P&C operations, net income from investment fund affiliates, net realized (losses) gains on investments and net realized and unrealized gains (losses) on investment and other derivative instruments for the three months ended September 30, 2013 and 2012:

	Three Months Ended						Percentage
	September 30,						Change
(U.S. dollars in thousands)	2013			2012			2013 to 2012
Net investment income - P&C operations (1)	$	165,793		$	166,002		(0.1	)%
Net income (loss) from investment fund affiliates (2)	5,079			16,049			(68.4	)%
Net realized gains (losses) on investments	(1,958		)	(5,493		)	(64.4	)%
Net realized and unrealized gains (losses) on investment and other derivative instruments (3)	880			6,254			(85.9	)%

____________

(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.

Net Investment Income - P&C Operations

The decrease of 0.1% was primarily due to a reduction in investment yields as a result of lower reinvestment rates.

Net Income (Loss) from Investment Fund Affiliates

Net income from investment fund affiliates includes earnings from our investments in closed-end investment funds and partnerships and similar vehicles that are accounted for under the equity method.

The decrease was attributable to weaker performance from both alternative fund affiliates and private fund affiliates in the most recent quarter. Modest alternative portfolio returns were challenged by the volatile capital markets in the quarter.

60

Private fund affiliate returns were slightly positive as a whole. Prior year alternative portfolio and private fund affiliate results were stronger due to more constructive markets and certain fund-specific events that were positive for results.

Net Realized Gains and Losses on Investments

Net realized losses on investments of $2.0 million included the following:

▪ 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.

Net realized losses on investments of $5.5 million in the three months ended September 30, 2012 included realized losses of $12.6 million related to the write-down of certain of our fixed income and equity investments with respect to which we determined that there was an other-than-temporary decline in the value of those investments, as well as net realized gains of $7.1 million.

Net Realized and Unrealized Gains and Losses on Investment and Other Derivative Instruments

Net realized and unrealized losses on derivatives of $0.9 million in the three months ended September 30, 2013 resulted from our investment strategy to manage interest rate risk, foreign exchange risk and credit risk, and to replicate permitted investments. For a further discussion, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

Other Revenues and Expenses

The following table sets forth our other revenues and expenses for the three months ended September 30, 2013 and 2012:

	Three Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
Net income (loss) from operating affiliates (1)	$	24,590	$	2,763	N/M
Exchange (gains) losses	20,303		18,690		8.6	%
Corporate operating expenses	61,427		57,604		6.6	%
Interest expense (2)	26,342		26,232		0.4	%
Income tax expense	897		451		N/M

____________

(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

61

Net Income (Loss) from Operating Affiliates

The following table sets forth the net income (loss) from operating affiliates for the three months ended September 30, 2013 and 2012:

	Three Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013		2012			2013 to 2012
Net income (loss) from investment manager affiliates	$	9,986	$	(7,409	)	N/M
Net income (loss) from strategic operating affiliates	14,604		10,172			43.6	%
Total	$	24,590	$	2,763		N/M

____________

* N/M - Not Meaningful

Net Income from Investment Manager Affiliates

The increase reflects the solid second quarter of 2013 investment performance of several investment manager affiliates and a partial sale of one of our holdings during the three months ended September 30, 2013. Positive investment performance leads to strong incentive fees for the managers, which are reported on a one quarter-lag basis in our results. Gains on any sale activity are recorded in the quarter when they occur. 2012 results were negatively impacted by weak equity markets and political uncertainty in Europe.

Net Income from Strategic Operating Affiliates

The increase of 43.6% was largely due to income from our new strategic operating affiliate, Five Oaks Investment Corp. (“Five Oaks”), combined with higher current period income related to an insurance affiliate that writes direct U.S. homeowners insurance. See Item 1, Note 5, “Investments - Investments in affiliates - Investment Fund Consolidation,” to the Unaudited Consolidated Financial Statements included herein, for further information on Five Oaks.

Exchange Gains and Losses

The foreign exchange losses of $20.3 million in the three months ended September 30, 2013 were a result of an overall weakening of the value of the U.S. dollar against most of our major currency exposures, particularly the U.K. sterling, the Euro, the Canadian dollar and the Swiss franc. In the three months ended September 30, 2012, foreign exchange losses of $18.7 million were produced as a result of an overall weakening of the value of the U.S. dollar against our major currency exposures, principally the Euro and U.K. sterling.

Corporate Operating Expenses

The increase of 6.6% was a result of increased compensation costs as well as an increase in professional fees associated with infrastructure and organizational initiatives.

Interest Expense

Debt levels during the three months ended September 30, 2013 and 2012 were relatively consistent, therefore interest expense was largely flat year on year.

For further information about our debt financing see Item 8, Note 13, “Notes Payable and Debt and Financing Arrangements,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Income Tax Expense

Tax charges of $0.9 million and $0.5 million were incurred in the three months ended September 30, 2013 and 2012, respectively. The tax charges recognized in these periods reflect our expected full year effective tax rate applicable to each of the years, applied to our ordinary income in the respective periods.

62

Segment Results for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012

Insurance

The following table summarizes the underwriting profit (loss) for the Insurance segment:

	Nine Months Ended						Percentage
	September 30,						Change
(U.S. dollars in thousands)	2013			2012			2013 to 2012
Gross premiums written	$	4,230,161		$	3,806,352		11.1	%
Net premiums written	3,232,010			2,885,848			12.0	%
Net premiums earned	3,201,646			2,878,973			11.2	%
Net losses and loss expenses	2,134,622			1,890,513			12.9	%
Acquisition costs	405,075			380,053			6.6	%
Operating expenses	571,447			564,387			1.3	%
Underwriting profit (loss)	$	90,502		$	44,020		105.6	%
Net results – structured products	11,821			14,953			(20.9	)%
Net fee income and other	(5,481		)	(1,019		)	N/M

____________

* N/M - Not Meaningful

Gross Premiums Written

The following table summarizes our gross premiums written by business group for the Insurance segment:

	Nine Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
IPC	$	1,151,651	$	1,053,885	9.3	%
NAPC	1,354,145		1,103,171		22.8	%
Professional	1,034,917		974,458		6.2	%
Specialty	689,448		674,838		2.2	%
Total	$	4,230,161	$	3,806,352	11.1	%

Gross written premiums increased by 11.1%. The following is a summary of the premium movements by business group:

▪ 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.

Foreign exchange rate movements did not significantly impact our gross premiums written.

Net Premiums Written

The increase of 12.0% resulted from the gross written premium increases outlined above, partially offset by an increase in ceded written premiums. The increase in ceded premiums primarily relates to a modification in the reinsurance structure to one that utilizes more proportional reinsurance in our Professional business group in order to take advantage of favorable market terms; an increase in global property writings that involve cessions to co-insurers and/or the captive insurance operations of our insureds; higher reinsurer participation on certain casualty treaties; and the timing of the renewals of several

63

Specialty business group non-proportional treaties, partially offset by the favorable impact of higher marine reinstatement premiums and the impact of a reinsurance cover in an NAPC discontinued line in the prior year.

Net Premiums Earned

The increase of 11.2% is a reflection of the overall growth in net premiums written across all business groups in recent quarters and is mainly attributable to the earn through of strong 2013 and 2012 production in U.S. professional, NAPC property, NAPC primary and excess casualty, NAPC construction and IPC primary casualty lines, as well as the impact of lower reinstatement premiums than in the prior year period for marine, partially offset by lower earned premiums in aerospace and IPC property.

Net Losses and Loss Expenses

Combined Ratio

The following table presents the ratios for the Insurance segment:

	Nine Months Ended				Percentage
	September 30,				Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	66.7	%	65.7	%	1.0
Acquisition expense ratio	12.7	%	13.2	%	(0.5	)
Operating expense ratio	17.8	%	19.6	%	(1.8	)
Underwriting expense ratio	30.5	%	32.8	%	(2.3	)
Combined ratio	97.2	%	98.5	%	(1.3	)

The loss and loss expense ratio includes net losses incurred for both the reported year and any favorable or adverse prior year development of loss and loss expense reserves held at the beginning of the year. The following table summarizes these components of the loss ratio for the Insurance segment for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	66.7	%	65.7	%	1.0
Prior year reserve development	1.9	%	3.4	%	(1.5	)
Loss ratio excluding prior year development	68.6	%	69.1	%	(0.5	)

Loss Ratio - excluding prior year development

The 0.5 percentage point decrease in the loss ratio excluding prior year development was due to lower non-natural catastrophe large loss activity in the nine months ended September 30, 2013 compared to the same period of 2012 as well as business mix changes and underwriting improvements, partially offset by higher levels of natural catastrophe losses occurring in the nine months ended September 30, 2013. Losses net of reinsurance recoveries and reinstatement premiums related to natural catastrophe events for the nine months ended September 30, 2013 were $20.3 million higher than in the same period in 2012. Excluding favorable prior year development, net natural catastrophe losses and related reinstatement premiums in both quarters, the loss ratio for the nine months ended September 30, 2013 compared to the same period of 2012 decreased by 0.9 percentage points to 65.6%.

For further details on large loss activity including losses from natural catastrophes, see "Significant Items Affecting the Results of Operations - 1) The Impact of Significant Large Loss Events " above.

64

Prior Year Development

The following table summarizes the net (favorable) adverse prior year development by line of business relating to the Insurance segment for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Property	$	(23,630	)	$	(30,344	)
Casualty	(4,065		)	(54,241		)
Professional	16,549			(52,820		)
Specialty	(71,045		)	(19,196		)
Other (1)	20,044			58,983
Total	$	(62,147	)	$	(97,618	)

____________

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

Details of significant components of the net favorable prior year reserve development of $62.1 million by specific line of business are as follows:

▪ 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 Costs and Operating Expenses

Underwriting Expense Ratio

The decrease of 2.3 percentage points was due to both a decrease in the acquisition expense ratio of 0.5 percentage points combined with a decrease in the operating expense ratio of 1.8 percentage points, as follows:

▪ 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.

Net Results - Structured Products

Net results from structured insurance products, which decreased 20.9% when compared with the same period of 2012, includes net investment income of $28.3 million and $24.6 million and interest expense of $16.5 million and $9.5 million, respectively, for the nine months ended September 30, 2013 and 2012. The decrease in the net results was from lower interest expense recorded in the nine months ended September 30, 2012 as a result of an accretion rate adjustment, due to changes in

65

the expected cash flows and payout patterns on certain structured indemnity contracts, partially offset by higher net investment income in the nine months ended September 30, 2013 from the investment of portfolio cash into fixed income securities.

For further information about these structured indemnity contracts that are accounted for as deposit contracts see Item 8, Note 11, “Deposit Liabilities,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Net Fee Income and Other

The decrease in net fee income and other was largely due to lower revenues in our risk engineering services business and ancillary fee income in IPC property and primary casualty compared to the prior year.

Reinsurance

The following table summarizes the underwriting profit (loss) for the Reinsurance segment:

	Nine Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013		2012			2013 to 2012
Gross premiums written	$	1,728,765	$	1,850,315		(6.6	)%
Net premiums written	1,597,550		1,732,922			(7.8	)%
Net premiums earned	1,301,726		1,348,448			(3.5	)%
Net losses and loss expenses	652,588		683,984			(4.6	)%
Acquisition costs	267,930		273,706			(2.1	)%
Operating expenses	122,098		127,965			(4.6	)%
Underwriting profit (loss)	$	259,110	$	262,793		(1.4	)%
Net results – structured products	5,871		(17,716		)	N/M
Net fee income and other	1,749		1,979			(11.6	)%

____________

* N/M - Not Meaningful

Gross Premiums Written

The following table summarizes our gross premiums written by business group for the Reinsurance segment:

	Nine Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013		2012			2013 to 2012
Bermuda	$	555,842	$	509,724		9.0	%
North America	420,405		476,906			(11.8	)%
International	752,477		866,694			(13.2	)%
Other (1)	41		(3,009		)	N/M
Total	$	1,728,765	$	1,850,315		(6.6	)%

____________

(1)    Other relates to discontinued structured indemnity.

* N/M - Not Meaningful

Gross written premiums decreased by 6.6%. The following is a summary of the premium movements by business group:

▪ 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.

Foreign exchange rate movements also impacted our gross premiums written. When evaluated in local currency, our gross written premiums decreased by 6.9%, compared to the 6.6% shown above.

66

Net Premiums Written

The decrease of 7.8% resulted from the gross written premium decreases described above in International and North America business groups, partially offset by increased whole account premiums in Bermuda.

Net Premiums Earned

The decrease of 3.5% is a reflection of the decrease in net premiums written in recent quarters from marine and Latin America business, as a result of re-underwriting activities. In addition, the non-renewal of a crop quota share program in North America contributed to the reduction. This is partially offset by the earning of higher property catastrophe and property treaty premiums written in the current and prior year in Bermuda.

Net Losses and Loss Expenses

Combined Ratio

The following table presents the ratios for the Reinsurance segment:

	Nine Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	50.1	%	50.7	%	(0.6	)
Acquisition expense ratio	20.6	%	20.3	%	0.3
Operating expense ratio	9.4	%	9.5	%	(0.1	)
Underwriting expense ratio	30.0	%	29.8	%	0.2
Combined ratio	80.1	%	80.5	%	(0.4	)

The loss and loss expense ratio includes net losses incurred for both the reported year and any favorable or adverse prior year development of loss and loss expense reserves held at the beginning of the year. The following table summarizes these components of the loss ratio for the Reinsurance segment for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended				Percentage
	September 30,				Point Change
	2013		2012		2013 to 2012
Loss and loss expense ratio	50.1	%	50.7	%	(0.6	)
Prior year reserve development	12.9	%	9.0	%	3.9
Loss ratio excluding prior year development	63.0	%	59.7	%	3.3

Loss Ratio - excluding prior year development

The 3.3 percentage point increase in the loss ratio excluding prior year development was predominantly due to higher levels of natural catastrophe losses occurring in the nine months ended September 30, 2013. Losses net of reinsurance recoveries and reinstatement premiums related to natural catastrophe events for the nine months ended September 30, 2013 were $90.3 million higher than in the same period in 2012. Excluding favorable prior year development, net natural catastrophe losses and related reinstatement premiums in both quarters, the loss ratio for the nine months ended September 30, 2013 compared to the same period of 2012 decreased by 4.1 percentage points to 52.7% mainly due to limited non-natural catastrophe large loss events in the nine months ended September 30, 2013 in contrast to the large marine loss in the International business group and adverse crop experience related to the drought conditions in the U.S. during the nine months ended September 30, 2012.

For further details on large loss activity including losses from natural catastrophes, see "Significant Items Affecting the Results of Operations - 1) The Impact of Significant Large Loss Events " above.

67

Prior Year Development

The following table summarizes the net (favorable) adverse prior year development by business group relating to the Reinsurance segment for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2013			2012
Property and other short-tail lines	$	(100,301	)	$	(62,437	)
Casualty and other long-tail lines	(66,580		)	(58,084		)
Total	$	(166,881	)	$	(120,521	)

Net favorable prior year reserve development of $166.9 million was mainly attributable to the following:

▪ 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 Costs and Operating Expenses

Underwriting Expense Ratio

The marginal increase of 0.2 percentage points was due to an increase in the acquisition expense ratio of 0.3 percentage points partially offset by a decrease in the operating expense ratio of 0.1 percentage points, as follows:

▪ 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.

Net Results - Structured Products

Net results from structured reinsurance products, which increased from the prior year period, includes net investment income of $25.6 million and $27.6 million and interest expense of $19.7 million and $45.3 million, for the nine months ended September 30, 2013 and 2012, respectively. The increase in the net results from the prior year period was wholly attributable to the larger interest expense incurred in the nine months ended September 30, 2012. This was the result of an accretion rate adjustment, due to changes in the expected cash flows and payout patterns on one of the larger structured indemnity contracts.

68

For further information about these structured indemnity contracts that are accounted for as deposit contracts see Item 8, Note 11, “Deposit Liabilities,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Life Operations

The following table summarizes the contribution from the Life operations segment, which has been in run-off since 2009:

	Nine Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013		2012			2013 to 2012
Gross premiums written	$	236,563	$	266,999		(11.4	)%
Net premiums written	214,024		243,606			(12.1	)%
Net premiums earned	214,024		243,630			(12.2	)%
Net losses and loss expenses	344,269		371,893			(7.4	)%
Acquisition costs	17,468		25,675			(32.0	)%
Operating expenses	7,460		7,787			(4.2	)%
Net investment income	214,408		223,151			(3.9	)%
Net fee income and other	1,130		330			N/M
Realized gains (losses) on investments	2,659		(22,154		)	N/M
Contribution from Life operations	$	63,024	$	39,602		59.1	%

____________

* N/M - Not Meaningful

Gross Premiums Written

Gross written premiums decreased by 11.4%. The following is a summary of the premium movements by business group:

	Nine Months Ended
	September 30, 2013						September 30, 2012
(U.S. dollars in thousands)	Gross Premiums Written		Net Premiums Written		Net Premiums Earned		Gross Premiums Written		Net Premiums Written		Net Premiums Earned
Annuity	$	110,547	$	90,379	$	90,379	$	115,869	$	94,661	$	94,661
Other Life	126,016		123,645		123,645		151,130		148,945		148,969
Total	$	236,563	$	214,024	$	214,024	$	266,999	$	243,606	$	243,630

The 11.4% decrease was driven by the Other Life lines of business, primarily due to lapse notifications on U.S. term life business. Other factors were decreases in line with the run-off expectations and the impact of unfavorable foreign exchange movements.

Net Premiums Written and Net Premiums Earned

The 12.1% decrease in net premium written and the 12.2% decrease in net premiums earned were consistent with the movements in total gross premiums written already noted.

Claims and Policy Benefits

The 7.4% decrease was largely due to the run-off nature of the Life operations business, combined with favorable foreign exchange impacts during 2013.

Acquisition Costs

The 32.0% decrease was significantly impacted by the premium reversals on U.S. term life business following lapse notifications, as well as the run-off nature of the business and foreign exchange impacts.

Operating Expenses

The 4.2% decrease in operating expenses was due to the non-recurrence of certain one-off fees.

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Net Investment Income - Life Operations

Net investment income is included in the calculation of contribution from Life operations, as it relates to income earned on portfolios of separately identified and managed life investment assets and other allocated assets. The 3.9% decrease was due to lower investment yields and a lower invested asset base, reflecting the run-off nature of the Life operations business.

Net Fee Income

A one-off payment of $1.0 million was received during the nine months ended September 30, 2013 in relation to the U.S. term life business, to compensate us for additional rights granted to the cedants.

Investment Performance

The following is a summary of the investment portfolio returns for each of our fixed income and non-fixed income portfolios for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended
	September 30,
	2013		2012
Total Return on Investments (1)
P&C portfolio	0.3	%	4.7	%
Life portfolio	(0.4	)%	9.2	%
Other Portfolios (2)
Alternative portfolio (3)	7.6	%	3.3	%
Equity portfolio	13.1	%	11.7	%

___________

(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.

Investment Activities

The following table illustrates the net investment income from P&C operations, net income from investment fund affiliates, net realized gains (losses) on investments and net realized and unrealized gains (losses) on investment and other derivative instruments for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
Net investment income - P&C operations (1)	$	502,527	$	544,203	(7.7	)%
Net income (loss) from investment fund affiliates (2)	83,843		38,555		117.5	%
Net realized gains (losses) on investments	75,519		2,916		N/M
Net realized and unrealized gains (losses) on investment and other derivative instruments (3)	3,660		2,656		37.8	%

____________

(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

Net Investment Income - P&C Operations

The decrease of 7.7% was primarily due to a reduction in investment yields as a result of lower reinvestment rates.

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Net Income (Loss) from Investment Fund Affiliates

Net income from investment fund affiliates includes earnings from our investments in closed-end investment funds and partnerships and similar vehicles that are accounted for under the equity method.

The increase was attributable to significantly better performance from both alternative fund affiliates and private fund affiliates. Prior year results were more muted, due in part to more conservative risk taking by our managers and market volatility in May 2012. Current year results have been driven by strong manager performance and generally supportive markets.

Net Realized Gains and Losses on Investments

Net realized gains on investments of $75.5 million included the following:

▪ 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.

Net realized gains on investments of $2.9 million in the nine months ended September 30, 2012 included realized losses of $61.8 million related to the write-down of certain of our fixed income, equity and other investments with respect to which we determined that there was an other-than-temporary decline in the value of those investments. These losses were offset by gains of $64.7 million due primarily to a combination of repositioning of the Agency MBS portfolio and net realized gains on sales of equity securities of $33.8 million.

Net Realized and Unrealized Gains and Losses on Investment and Other Derivative Instruments

Net realized and unrealized gains on derivatives of $3.7 million in the nine months ended September 30, 2013 resulted from our investment strategy to manage interest rate risk, foreign exchange risk and credit risk, and to replicate permitted investments. For a further discussion, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

Other Revenues and Expenses

The following table sets forth our other revenues and expenses for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended					Percentage
	September 30,					Change
(U.S. dollars in thousands)	2013			2012		2013 to 2012
Net income (loss) from operating affiliates (1)	$	88,413		$	39,473	N/M
Exchange (gains) losses	(24,463		)	13,432		N/M
Corporate operating expenses	163,504			151,926		7.6	%
Interest expense (2)	78,599			79,686		(1.4	)%
Income tax expense	73,248			51,813		41.4	%

____________

(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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Net Income (Loss) from Operating Affiliates

The following table sets forth the net income (loss) from operating affiliates for the three months ended September 30, 2013 and 2012:

	Nine Months Ended				Percentage
	September 30,				Change
(U.S. dollars in thousands)	2013		2012		2013 to 2012
Net income (loss) from investment manager affiliates	$	55,510	$	17,203	N/M
Net income (loss) from strategic operating affiliates	32,903		22,270		47.7	%
Total	$	88,413	$	39,473	N/M

____________

* N/M - Not Meaningful

Net Income from Investment Manager Affiliates

The increase reflects strong investment performance for several investment manager affiliates in the final quarter of 2012 and the first half of 2013, leading to strong incentive fees for the managers, which are reported on a one quarter-lag basis in our results. In addition,we sold a portion of our stake in one of our affiliate investment managers at a gain that is reflected in the 2013 results.

Net Income from Strategic Operating Affiliates

The 47.7% increase reflects increased returns from our U.S. homeowners affiliate and income from new strategic operating affiliates in 2013.

Exchange Gains and Losses

The foreign exchange gains of $24.5 million in the nine months ended September 30, 2013 were a result of an overall strengthening of the value of the U.S. dollar against our major currency exposures, particularly the U.K. sterling and the Canadian dollar, partially offset by a weakening of the U.S. dollar against the Euro and the Swiss franc. In the nine months ended September 30, 2012, foreign exchange losses of $13.4 million were produced as a result of an overall weakening of the value of the U.S. dollar against our major currency exposures, particularly the U.K. sterling, the Euro and the Swiss franc.

Corporate Operating Expenses

The increase of 7.6% was a result of increased compensation costs as well as an increase in professional fees associated with infrastructure and organizational initiatives.

Interest Expense

Debt levels during the nine months ended September 30, 2013 and 2012 were relatively consistent, therefore interest expense was largely flat year on year.

For further information about our debt financing, see Item 8, Note 13, “Notes Payable and Debt and Financing Arrangements,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Income Tax Expense

Tax charges of $73.2 million and $51.8 million were incurred in the nine months ended September 30, 2013 and 2012, respectively. The tax charges recognized in these periods reflect our expected full year effective tax rate applicable to each of the years, applied to our ordinary income in the respective periods. The increase in the tax charge arose principally from higher income in taxable jurisdictions in the nine months ended September 30, 2013 than in the previous year.

72

BALANCE SHEET ANALYSIS

Investments

We seek to generate book value growth and investment income from investment activities through the total returns on our investment portfolio. Our investment strategy strives to balance investment returns against market and credit risk. Our overall investment portfolio is structured to take into account a number of variables including liability profile, local regulatory requirements, business needs, collateral management and risk tolerance.

At September 30, 2013 and December 31, 2012, total investments, cash and cash equivalents, accrued investment income and net receivable/(payable) for investments sold/(purchased) were approximately $36.2 billion and $36.9 billion, respectively. The following table summarizes the composition of our invested assets at September 30, 2013 and December 31, 2012:

	September 30, 2013					December 31, 2012
(U.S. dollars in thousands)	Carrying Value (1)			Percent of Total		Carrying Value (1)			Percent of Total
Cash and cash equivalents	$	2,130,893		5.9	%	$	2,618,378		7.1	%
Net receivable/ (payable) for investments sold/ (purchased)	(103,241		)	(0.3	)%	(86,110		)	(0.2	)%
Accrued investment income	347,996			1.0	%	342,778			0.9	%
Short-term investments	272,705			0.8	%	322,703			0.9	%
Fixed maturities - AFS:
U.S. Government and Government-Related/Supported (2)	2,175,989			6.0	%	2,034,617			5.5	%
Corporate - Financials (3) (4)	3,266,363			9.0	%	3,240,399			8.8	%
Corporate - Non Financials (4)	7,492,969			20.7	%	7,241,601			19.6	%
RMBS – Agency	4,069,082			11.2	%	5,255,493			14.3	%
RMBS – Non-Agency	399,399			1.1	%	647,733			1.8	%
CMBS	1,197,881			3.3	%	1,077,251			2.9	%
CDO	712,148			2.0	%	709,816			1.9	%
Other asset-backed securities (5)	1,151,135			3.2	%	1,470,711			4.0	%
U.S. States and political subdivisions of the States	1,818,098			5.0	%	1,911,017			5.2	%
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,999,378			13.8	%	4,258,282			11.6	%
Total fixed maturities - AFS	$	27,282,442		75.3	%	$	27,846,920		75.6	%
Fixed maturities - held to maturity ("HTM"):
U.S. Government and Government-Related/Supported (2)	10,712			—	%	10,788			—	%
Corporate - Financials (3) (4)	271,368			0.7	%	266,565			0.7	%
Corporate - Non Financials (4)	1,099,023			3.0	%	1,158,755			3.1	%
RMBS – Non-Agency	65,542			0.2	%	83,205			0.2	%
CMBS	141,884			0.4	%	12,751			—	%
Other asset-backed securities (5)	104,624			0.3	%	222,340			0.6	%
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,108,958			3.1	%	1,060,043			2.9	%
Total fixed maturities - HTM	$	2,802,111		7.7	%	$	2,814,447		7.5	%
Equity securities (6)	974,733			2.7	%	649,359			1.8	%
Investments in affiliates	1,362,484			3.8	%	1,126,875			3.1	%
Other investments	1,125,045			3.1	%	1,219,879			3.3	%
Total investments and cash and cash equivalents	$	36,195,168		100.0	%	$	36,855,229		100.0	%

____________

(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.

We review our corporate debt investments on a regular basis to consider their concentration, credit quality and compliance with established guidelines. At September 30, 2013 and December 31, 2012, the average credit quality of our total fixed income portfolio (consisting of corporate debt and U.S. Agency debt and related mortgage-backed securities having and including fixed maturities, short-term investments, cash and cash equivalents and net receivable/(payable) for investment sold/(purchased)) was “Aa3/AA-” and "Aa2/AA", respectively. Included in the table below are the credit ratings of the fixed income portfolio excluding operating cash at September 30, 2013 and December 31, 2012:

	September 30, 2013				December 31, 2012
Investments by Credit Rating (1) (U.S. dollars in millions)	Carrying Value		Percent of Total		Carrying Value		Percent of Total
AAA	$	13,401	42.4	%	$	15,631	47.0	%
AA	6,497		20.5	%	5,954		17.8	%
A	7,288		23.0	%	7,436		22.3	%
BBB	3,599		11.4	%	3,317		10.0	%
BB and below	794		2.5	%	934		2.8	%
Not rated	71		0.2	%	19		0.1	%
Total	$	31,650	100.0	%	$	33,291	100.0	%

____________

(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 and Net Unrealized Gains and Losses on Investments

We had gross unrealized losses totaling $402.3 million on 2,037 securities out of a total of 7,602 held at September 30, 2013 in our AFS portfolio and $2.8 million on 5 securities out of a total of 204 held in our HTM portfolio, that we consider to be temporarily impaired. Individual security positions comprising this balance have been evaluated by management, in conjunction with our investment managers, to determine the severity of these impairments and whether they should be considered other-than-temporary.

Gross unrealized losses can be attributed to the following significant drivers:

• 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.

• 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.

At September 30, 2013, the Life operations investment portfolio had an average interest rate duration of 8.7 years, primarily denominated in U.K. sterling and Euro. As a result of the long duration, significant gross losses have arisen as the fair values of these securities are more sensitive to prevailing government interest rates and credit spreads. This portfolio is generally matched to corresponding long duration liabilities. A hypothetical parallel increase in interest rates and credit spreads of 50 and 25 basis points, respectively, would increase the unrealized

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losses related to this portfolio at September 30, 2013 by approximately $280.4 million and $107.5 million, respectively, on both the AFS and HTM Life operations investment portfolios.

Given the long-term nature of the Life operations investments portfolio, the level of credit spreads on financial institutions at September 30, 2013 relative to historical averages within the U.K. and Euro-zone, and our liquidity needs at September 30, 2013, the Company believes that it will continue to hold these assets until such time as they mature, or credit spreads on financial institutions revert to levels more consistent with historical averages.

• 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.

The following table details the security type and length of time that AFS securities were in a continual gross unrealized loss position at September 30, 2013:

(U.S. dollars in thousands)	September 30, 2013
Security Type and Length of Time in a Continual Unrealized Loss Position	Amount of Unrealized Loss			Fair Value of Securities in an Unrealized Loss Position
Fixed Maturities and Short-Term Investments
Less than 6 months	$	(153,034	)	$	6,070,841
At least 6 months but less than 12 months	(52,435		)	994,323
At least 12 months but less than 2 years	(19,908		)	310,125
2 years and over	(159,941		)	1,518,362
Total	$	(385,318	)	$	8,893,651
Equities
Less than 6 months	$	(14,844	)	$	196,856
At least 6 months but less than 12 months	(2,177		)	19,775
Total	$	(17,021	)	216,631

The following is the maturity profile of the available for sale fixed income securities that were in a continual gross unrealized loss position at September 30, 2013:

	September 30, 2013
(U.S. dollars in thousands)	Amount of Unrealized Loss			Fair Value of Securities in an Unrealized Loss Position
Maturity profile in years of AFS fixed income securities in a gross unrealized loss position
Less than 1 year remaining	$	(15,935	)	$	303,677
At least 1 year but less than 5 years remaining (1)	(57,816		)	2,439,706
At least 5 years but less than 10 years remaining (1)	(91,965		)	2,198,983
At least 10 years but less than 20 years remaining (1)	(32,301		)	406,797
At least 20 years or more remaining (1)	(26,507		)	352,480
RMBS - Agency	(48,358		)	1,621,872
RMBS - Non-Agency	(39,176		)	273,995
CMBS	(13,271		)	325,967
CDO	(49,823		)	651,879
Other asset-backed securities	(10,166		)	318,295
Total	$	(385,318	)	$	8,893,651

____________

(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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The following is the maturity profile of the HTM fixed income securities that were in a gross unrealized loss position at September 30, 2013:

	September 30, 2013
(U.S. dollars in thousands)	Amount of Unrealized Loss			Fair Value of Securities in an Unrealized Loss Position
Maturity profile in years of HTM fixed income securities in a gross unrealized loss position
At least 1 year but less than 5 years remaining	$	(149	)	$	5,703
At least 5 years but less than 10 years remaining	—			—
At least 10 years but less than 20 years remaining	(180		)	11,229
At least 20 years or more remaining	(2,457		)	26,971
Other asset-backed securities	—			—
Total	$	(2,786	)	$	43,903

Factors considered in determining that additional OTTI charges were not warranted include management's consideration of current and near term liquidity needs along with other available sources of liquidity, and in certain instances an evaluation of the factors and time necessary for recovery. For further information, see Item 1, Note 5, “Investments,” to the Unaudited Consolidated Financial Statements included herein.

As noted in Item 8, Note 2, “Significant Accounting Policies,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012, the determination of the amount of OTTI varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. We consider a wide range of factors about the securities and use our best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in our evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. We update our evaluations regularly and reflect additional impairments in net income as determinations are made. Our determination of the amount of the impairment taken on investments is highly subjective and could adversely impact our results of operations. There can be no assurance that we have accurately assessed the level of OTTI taken and reflected in our financial statements. Furthermore, additional impairments may need to be taken in the future. Historical trends may not be indicative of future impairments.

Levels of write down or OTTI are also impacted by our assessment of the intent to sell securities that have declined in value prior to recovery. If, due to changes in circumstances, we determine to reposition or realign portions of the portfolio and we determine not to hold certain securities in an unrealized loss position to recovery, we will incur OTTI charges, which could be significant. In addition, in our assessment of whether securities in a gross unrealized loss position are temporarily impaired, we consider the significance of the impairments.

At September 30, 2013, we had structured securities with gross unrealized losses of $39.3 million on non-Agency RMBS, $49.8 million on Core CDOs and $13.0 million on CMBS holdings. These securities included gross unrealized losses of $13.0 million, which had a fair value of $4.2 million and a cumulative fair value decline of greater than 50% of amortized cost. All of these are mortgage and asset-backed securities. We have evaluated each of these securities in conjunction with our investment manager service providers and believe it is more likely than not that the issuer will be able to fund sufficient principal and interest payments to support the current amortized cost.

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Net Unrealized Gains and Losses – Structured Securities

The following table details the current exposures to structured securities excluding Agency RMBS within our fixed income portfolio as well as the current net unrealized (loss) gain position at September 30, 2013 and December 31, 2012:

	September 30, 2013							December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Percent of Fixed Income Portfolio		Net Unrealized Gain (Loss)			Carrying Value		Percent of Fixed Income Portfolio		Net Unrealized Gain (Loss)
RMBS - Non-Agency:
Sub-prime first lien mortgages	$	217,861	0.7	%	$	(16,580	)	$	306,795	1.0	%	$	(35,893	)
Alt-A mortgages	81,786		0.3	%	2,221			136,965		0.4	%	(1,267		)
Second lien mortgages (including sub-prime second lien mortgages)	22,355		0.1	%	4,058			28,661		0.1	%	2,912
Prime RMBS	60,777		0.2	%	(35		)	139,974		0.5	%	1,452
Other assets	82,162		0.3	%	1,946			118,543		0.4	%	2,060
Total exposure to Non-Agency RMBS	$	464,941	1.6	%	$	(8,390	)	$	730,938	2.4	%	$	(30,736	)
CMBS	1,339,765		4.4	%	31,596			1,090,002		3.6	%	66,457
Core CDOs (1)	712,148		2.3	%	(42,749		)	709,816		2.3	%	(75,183		)
Other Structured	1,255,759		4.1	%	28,177			1,693,051		5.5	%	44,228
Total Non-Agency Structured Securities	$	3,772,613	12.4	%	$	8,634		$	4,223,807	13.8	%	$	4,766

____________

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

At September 30, 2013, our sub-prime, Alt-A and CDO exposures had adequate underlying asset characteristics and we believe at such date that the current amortized cost levels were at or below the discounted cash flow value of the holdings, based on an analysis of subordination levels relative to current expectations of prepayment rates, probability of default and loss severity in the event of default. Approximately $5.1 million of our Non-Agency RMBS were downgraded during the three months ended September 30, 2013. However, 23.8% of our holdings in Non-Agency RMBS remain rated investment grade at September 30, 2013.

Refer to “Significant Items Affecting the Results of Operations” above for further discussion surrounding the impact of credit market movements on our investment portfolio.

European Sovereign Debt Crisis

The ongoing global financial crisis has led to the deterioration of economies globally, as sovereign governments have reacted to the crisis by further increasing public expenditures in order to provide stimulus and security, which has created significant budgetary shortfalls. Several key nations within the European Union (the "EU") - particularly Greece, Italy, Ireland, Portugal and Spain (the “European Periphery Nations") - have suffered a high level of fiscal distress and economic vulnerability due to over reliance on external credit sources and imprudent borrowing and other monetary practices. This has raised doubts within the global financial community as to whether these sovereign nations will remain able to service their own debt obligations both at a national and local level and as to whether the Euro will remain the currency for the EU.

Our exposure to this European sovereign debt crisis is from direct investment in fixed maturity securities issued by national and local governments of the European Periphery Nations, as well as from fixed maturity securities issued by certain financial and non-financial corporate entities operating within the European Periphery Nations. During the past three years, we have actively reduced our exposures to these securities. We continue to monitor our financial exposure to this crisis, and continually assess the impact of a potential default by any of the European Periphery Nations on their respective debt issuances, including the associated impact on non-sovereign entities in these five nations in the event of such a default. In reaction to mounting pressure from financial markets, the EU and its members implemented several key initiatives in 2012 that helped alleviate concern over Europe's long term debt sustainability. These included: 1) ongoing measures to reduce deficits and lower debt to sustainable levels; 2) pan-European emergency funding vehicles such as the European Financial Stability Fund (“EFSF”) and later the European Stability Mechanism (“ESM”) to support new bond issuance; 3) the promise of Outright Monetary Transactions from the European Central Bank to support near-term peripheral yields; and 4) implementation of Long Term Repo Operations to provide financial institution liquidity. These events continued to calm credit markets, and sovereign yields for the European Periphery Nations remain lower than the 2012 peaks, although certain of these programs have not been finalized or implemented. Europe continues to face a challenging economic environment with ongoing cuts to public sector spending and weak overall economic growth.

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During the first quarter of 2013, inconclusive national election results in Italy led to difficulty in forming a government and expectations of another election. In addition, the bail-out of Cypriot banks included losses being borne by deposit-holders, which has raised concerns about the impact of future bailouts on deposit-holders, who had to date not borne losses in previous European bailouts.

We currently have no unfunded investment exposures or commitments to either sovereign or non-sovereign entities within the European Periphery Nations. We do invest in various alternative and private investment funds that from time to time may invest in securities or investments related to the European Periphery Nations. Currently, these are not material exposures.

The following is an analysis of our AFS and HTM fixed maturity investment exposures related to the European Periphery Nations at September 30, 2013 and December 31, 2012 and the contractual maturities of these securities. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - European Periphery Nations - AFS:
Government and government related – National Governments	$	5,020	$	4,707	$	5,350	$	4,896
Government and government related – Local Governments	—		—		—		—
Corporate investments – Financial Institutions	756		758		372		374
Corporate investments – Non-Financial Institutions	66,502		66,798		57,032		57,720
Structured Credit (1)	8,115		9,318		7,942		9,618
Total	$	80,393	$	81,581	$	70,696	$	72,608
Due less than one year	$	9,936	$	9,547	$	5,392	$	5,431
Due after 1 through 5 years	17,357		17,622		16,144		15,744
Due after 5 through 10 years	17,526		17,641		14,924		15,111
Due after 10 years	35,574		36,771		34,236		36,322
Total	$	80,393	$	81,581	$	70,696	$	72,608
Fixed maturities - European Periphery Nations - HTM:
Government and government related – National Governments	$	12,197	$	10,847	$	12,237	$	10,518
Government and government related – Local Governments	—		—		—		—
Corporate investments – Non-Financial Institutions	59,588		59,991		59,757		60,199
Structured Credit (1)	—		—		—		—
Total	$	71,785	$	70,838	$	71,994	$	70,717
Due less than one year	$	4,200	$	4,224	$	—	$	—
Due after 1 through 5 years	1,479		1,534		4,285		4,332
Due after 5 through 10 years	10,762		11,255		12,372		12,937
Due after 10 years	55,344		53,825		55,337		53,448
Total	$	71,785	$	70,838	$	71,994	$	70,717

____________

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

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The following table details the gross and net unrealized (loss) gain positions at September 30, 2013 relating to the European Periphery Nations:

	September 30, 2013
(U.S. dollars in thousands)	Greece		Italy			Ireland			Portugal		Spain			TOTAL
Gross Unrealized (Losses) - European Periphery Nations
Government and government related – National Governments	$	—	$	(1,665	)	$	—		$	—	$	—		$	(1,665	)
Government and government related – Local Governments	—		—			—			—		—			—
Corporate investments – Financial Institutions	—		—			—			—		—			—
Corporate investments – Non-Financial Institutions	—		(2,853		)	(121		)	—		(230		)	(3,204		)
Structured Credit (1)	—		—			(16		)	—		—			(16		)
Total gross unrealized gains (losses) relating to European Periphery Nations	$	—	$	(4,518	)	$	(137	)	$	—	$	(230	)	$	(4,885	)
Net Unrealized Gains (Losses) - European Periphery Nations
Government and government related – National Governments	$	—	$	(1,663	)	$	—		$	—	$	—		$	(1,663	)
Government and government related – Local Governments	—		—			—			—		—			—
Corporate investments – Financial Institutions	—		—			1			—		—			1
Corporate investments – Non-Financial Institutions	180		(1,232		)	(33		)	—		1,784			699
Structured Credit (1)	—		—			1,202			—		—			1,202
Total net unrealized gains (losses) relating to European Periphery Nations	$	180	$	(2,895	)	$	1,170		$	—	$	1,784		$	239

____________

(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.

In addition to the direct investment portfolio considerations discussed above, as an international (re)insurance company, European credit exposures may exist for us within unpaid losses and loss expenses recoverable and reinsurance balances receivable. For further details on these balances, including the names of our most significant reinsurance counterparties, see Item 8, Note 9, “Reinsurance,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. Other sources of potential exposure to European credit issues may exist within certain lines of insurance or reinsurance business written (including but not limited to lines such as surety, business interruption, and political risk), or within underlying investments held in securitized financial instruments or in structured transactions in which we have an interest. We consider these potential exposures as part of our ongoing enterprise risk management processes.

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Fair Value Measurements of Assets and Liabilities

As described in Item 1, Note 3, “Fair Value Measurements,” to the Unaudited Consolidated Financial Statements included herein, we have provided required disclosures by level within the fair value hierarchy of the Company’s assets and liabilities that are carried at fair value. As defined in the hierarchy, those assets and liabilities categorized as Level 3 have valuations determined using unobservable inputs. Unobservable inputs may include the entity’s own assumptions about market participant assumptions, applied to a modeled valuation, however, this is not the case with respect to the Company’s Level 3 assets and liabilities. The vast majority of the assets and liabilities classified as Level 3 are made up of those securities for which the values were obtained from brokers where either significant inputs were utilized in determining the values that were difficult to corroborate with observable market data, sufficient information regarding the specific inputs utilized by the broker was not obtained to support a Level 2 classification.

Controls over Valuation of Financial Instruments

We perform regular reviews of the prices received from our third party valuation sources to assess whether the prices represent a reasonable estimate of the fair value. This process is completed by investment and accounting personnel who are independent of those responsible for obtaining the valuations. The approaches we take include, but are not limited to, annual reviews of the controls of the external parties responsible for sourcing valuations that are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, comparison of executed sales prices to prior valuations, regular deep dives on a sample of securities across our major asset classes and monthly reconciliations between the valuations provided by our external parties and valuations provided by our third party investment managers at a portfolio level.

In addition, we assess the effectiveness of valuation controls performed by external parties responsible for sourcing appropriate valuations from third parties on our behalf. The approaches taken by these external parties to gain comfort include, but are not limited to, comparing valuations between external sources, completing recurring reviews of third party pricing services' methodologies and reviewing controls of the third party service providers to support the completeness and accuracy of the prices received. Where broker quotes are the primary source of the valuations, sufficient information regarding the specific inputs utilized by the brokers is generally not available to support a Level 2 classification. We obtain the majority of broker quoted values from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, we compare the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value.

Valuation Methodology of Level 3 Assets and Liabilities

Refer to Item 1, Note 3, “Fair Value Measurements,” of the Unaudited Consolidated Financial Statements included herein, for a description of the valuation methodology utilized to value Level 3 assets and liabilities, how the valuation methodology is validated as well as further details associated with various assets classified as Level 3. At September 30, 2013, we did not have any liabilities that were carried at fair value based on Level 3 inputs other than derivative instruments in a liability position at September 30, 2013.

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Fair Value of Level 3 Assets and Liabilities

At September 30, 2013, the fair value of Level 3 assets and liabilities as a percentage of our total assets and liabilities that are carried at fair value was as follows:

(U.S. dollars in thousands)	Total Assets and Liabilities Carried at Fair Value at September 30, 2013		Fair Value of Level 3 Assets and Liabilities		Level 3 Assets and Liabilities as a Percentage of Total Assets and Liabilities Carried at Fair Value, by Class
Assets
Fixed maturities, at fair value
U.S. Government and Government Agency-Related/Supported	$	2,175,989	$	—	—	%
Corporate	10,759,332		32,627		0.3	%
RMBS – Agency	4,069,082		17,289		0.4	%
RMBS – Non-Agency	399,399		9		—	%
CMBS	1,197,881		19,960		1.7	%
CDO	712,148		704,551		98.9	%
Other asset-backed securities (1)	1,151,135		12,454		1.1	%
U.S. States and political subdivisions of the States	1,818,098		—		—	%
Non-U.S. Sovereign Government, Supranational and Government-Related	4,999,378		—		—	%
Total Fixed maturities, at fair value	$	27,282,442	$	786,890	2.9	%
Equity securities, at fair value	974,733		—		—	%
Short-term investments, at fair value	272,705		2,058		0.8	%
Total investments available for sale	$	28,529,880	$	788,948	2.8	%
Cash equivalents (2)	1,426,877		—		—	%
Other investments (3)	831,145		103,856		12.5	%
Other assets (4)	27,979		—		—	%
Total assets carried at fair value	$	30,815,881	$	892,804	2.9	%
Liabilities
Financial instruments sold, but not yet purchased (5)	$	27,046	$	—	—	%
Other liabilities (6)	198,801		33,389		16.8	%
Total liabilities carried at fair value	$	225,847	$	33,389	14.8	%

____________

(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.

At September 30, 2013, our Level 3 assets represented approximately 2.9% of assets that are measured at fair value and represented approximately 2% of total assets. Our Level 3 liabilities represented approximately 14.8% of liabilities that are measured at fair value but less than 1% of total liabilities at September 30, 2013.

Changes in the Fair Value of Level 3 Assets and Liabilities

See Item 1, Note 3, “Fair Value Measurements,” to the Unaudited Consolidated Financial Statements included herein, for an analysis of the change in fair value of Level 3 Assets and Liabilities.

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Unpaid Losses and Loss Expenses

We establish reserves to provide for estimated claims, the general expenses of administering the claims adjustment process and losses incurred but not reported. These reserves are calculated using actuarial and other reserving techniques to project the estimated ultimate net liability for losses and loss expenses. Our reserving practices and the establishment of any particular reserve reflects our judgment concerning sound financial practice and do not represent any admission of liability with respect to any claims made against us.

Gross unpaid losses and loss expenses totaled $20.4 billion and $20.5 billion at September 30, 2013 and December 31, 2012, respectively. The table below represents a reconciliation of our P&C unpaid losses and loss expenses for the nine months ended September 30, 2013:

(U.S. dollars in thousands)	Gross unpaid losses and loss expenses			Unpaid losses and loss expenses recoverable			Net unpaid losses and loss expenses
Balance at December 31, 2012	$	20,484,121		$	(3,361,703	)	$	17,122,418
Losses and loss expenses incurred	3,270,311			(483,101		)	2,787,210
Losses and loss expenses (paid) / recovered	(3,352,256		)	511,426			(2,840,830		)
Foreign exchange and other	5,252			564			5,816
Balance at September 30, 2013	$	20,407,428		$	(3,332,814	)	$	17,074,614

While we regularly review the adequacy of established reserves for unpaid losses and loss expenses, no assurance can be given that actual claims made and payments related thereto will not be in excess of the amounts reserved. In the future, if such reserves develop adversely, such deficiency would have a negative impact on future results of operations. For further discussion, see Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - 1) Unpaid Loss and Loss Expenses and Unpaid Loss and Loss Expenses Recoverable,” and Item 8, Note 10, “Losses and Loss Expenses,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Unpaid Losses and Loss Expenses Recoverable and Reinsurance Balances Receivable

In the normal course of business, we seek to reduce the potential amount of loss arising from claims events by reinsuring certain levels of risk assumed in various areas of exposure with other insurers or reinsurers. While reinsurance agreements are designed to limit our losses from large exposures and permit recovery of a portion of direct unpaid losses, reinsurance does not relieve our ultimate liability to the insureds. Accordingly, the losses and loss expense reserves on the balance sheet represent our total unpaid gross losses. Unpaid losses and loss expense recoverable relates to estimated reinsurance recoveries on the unpaid loss and loss expense reserves.

Net reinsurance recoverables were $3.4 billion and $3.4 billion at September 30, 2013 and December 31, 2012, respectively. At September 30, 2013 and December 31, 2012, net reinsurance balances receivable were $97.1 million and $58.4 million, respectively. The table below presents our net paid and unpaid losses and loss expenses recoverable and reinsurance balances receivable as follows:

(U.S. dollars in thousands)	September 30, 2013			December 31, 2012
Reinsurance balances receivable	$	119,819		$	113,023
Reinsurance recoverable on future policy benefits	19,851			20,394
Reinsurance recoverable on unpaid losses and loss expenses	3,387,913			3,415,043
Bad debt reserve on unpaid losses and loss expenses recoverable and reinsurance balances receivable	(77,816		)	(107,930		)
Net paid and unpaid losses and loss expenses recoverable and reinsurance balances receivable	$	3,449,767		$	3,440,530

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of our ability to generate sufficient cash flows to meet the short and long-term cash requirements of our business operations. As a global insurance and reinsurance company, one of our principal responsibilities to clients is to ensure that we have ready access to funds with which to settle large unforeseen claims. We would generally expect that positive cash flow from operations (underwriting activities and investment income) will be sufficient to cover cash outflows under most future loss scenarios. However, there is a possibility that unforeseen demands could be placed on us due to extraordinary events and, as such, our liquidity needs may change. Such events include, among other things: several significant catastrophes occurring in a relatively short period of time resulting in material incurred losses; rating agency downgrades of our core insurance and reinsurance subsidiaries that would require posting of collateral in connection with our letter of credit and revolving credit facilities; return of unearned premiums and/or the settlement of derivative transactions and large scale uncollectible reinsurance recoverables on paid losses (as a result of coverage disputes, reinsurers' credit problems or decreases in the value of collateral supporting reinsurance recoverables). Any one or a combination of such events may cause a liquidity strain for us. In addition, a liquidity strain could also occur in an illiquid market, such as that which was experienced in 2008. Investments that may be used to meet liquidity needs in the event of a liquidity strain may not be liquid due to inactive markets, or may have to be sold at a significant loss as a result of depressed prices. Because each subsidiary focuses on a more limited number of specific product lines than is collectively available from the consolidated group of companies, the mix of business tends to be less diverse at the subsidiary level. As a result, the probability of a liquidity strain, as described above, may be greater for individual subsidiaries than when liquidity is assessed on a consolidated basis. If such a liquidity strain were to occur in a subsidiary, XL-Ireland may be required to contribute capital to the particular subsidiary and/or curtail dividends from the subsidiary to support holding company operations, which may be difficult given that XL-Ireland is a holding company and has limited liquidity.

A downgrade below “A-” of our principal insurance and reinsurance subsidiaries by either S&P or A.M. Best, which is two notches below the current S&P financial strength rating of “A” (Positive) and the A.M. Best financial strength rating of “A” (Stable) of these subsidiaries, may trigger cancelation provisions in a significant amount of our assumed reinsurance agreements and may potentially require us to return unearned premiums to cedants. In addition, due to collateral posting requirements under our letter of credit and revolving credit facilities, such a downgrade may require the posting of cash collateral in support of certain “in use” portions of these facilities. Specifically, a downgrade below “A-” by A.M. Best would constitute an event of default under our three largest credit facilities and may trigger such collateral requirements. In certain limited instances, such downgrades may require that we return cash or assets to counterparties or to settle derivative and/or other transactions with the respective counterparties. See Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Holding Company Liquidity

As holding companies, XL-Ireland and XL-Cayman have no operations of their own and their assets consist primarily of investments in subsidiaries. XL-Ireland's principal uses of liquidity are ordinary share-related transactions, including dividend payments to holders of its ordinary shares as well as share buybacks, capital investments in its subsidiaries and certain corporate operating expenses. XL-Cayman's principal uses of liquidity are preference share related transactions, including dividend payments to its preference shareholders as well as preference share buybacks from time to time, interest and principal payments on debt and certain corporate operating expenses.

XL-Ireland's and XL-Cayman's future cash flows largely depend on the availability of dividends or other permissible payments from subsidiaries to make principal and interest payments on debt, to pay operating expenses and ordinary and preferred shareholder dividends, to make capital investments in subsidiaries and to pay other obligations that may arise from time to time. The ability of our subsidiaries to pay dividends to us or return capital from shareholders' equity is limited by applicable laws and regulations of the various jurisdictions in which we operate, certain additional required regulatory approvals and financial covenants contained in our letters of credit and revolving credit facilities. The payment of dividends to the holding companies by our principal operating subsidiaries is regulated under the laws of various jurisdictions including Bermuda, the U.K., Ireland and Switzerland, certain insurance statutes of various states in the United States in which the principal operating subsidiaries are licensed to transact business, the other jurisdictions where we have regulated subsidiaries and regulations of the Society of Lloyd's. See Item 8, Note 23, “Statutory Financial Data,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion and details regarding the dividend capacity of our major operating subsidiaries. See also Item 1A, “Risk Factors - Our holding company structure and certain regulatory and other constraints affect our ability to pay dividends, make payments on our debt securities and make other payments,” included in our Annual Report on Form 10-K for the year ended December 31, 2012. No assurance can be given that our subsidiaries will pay dividends in the future to XL-Ireland and XL-Cayman.

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Under Irish law, share premium was required to be converted to “distributable reserves” for XL-Ireland to pay cash dividends and redeem and buyback shares following the redomestication transaction in which all of the ordinary shares of XL-Cayman were exchanged for all of the ordinary shares of XL-Ireland. On July 23, 2010, the Irish High Court approved XL-Ireland's conversion of share premium to $5.0 billion of distributable reserves, subject to the completion of certain formalities under Irish Company law. These formalities were completed in early August 2010. At September 30, 2013, XL-Ireland had $3.3 billion in distributable reserves.

At September 30, 2013, XL-Ireland and XL-Cayman held cash and investments, net of liabilities associated with cash sweeping arrangements, of $32.0 million and $1.1 billion, respectively, compared to $11.0 million and $1.4 billion, respectively, at December 31, 2012.

All of our outstanding debt at September 30, 2013 was issued by XL-Cayman. The ability of XL-Cayman, like that of XL-Ireland, to obtain funds from its subsidiaries to satisfy any of its debts, including obligations under guarantees, is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which we operate, including, among others, Bermuda, the United States, Ireland, Switzerland and the United Kingdom. For details of the required statutory capital and surplus for our principal operating subsidiaries, see Item 8, Note 23, “Statutory Financial Data,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

See also the Consolidated Statements of Cash Flows in Item 1, Financial Statements included herein.

Sources of Liquidity

At September 30, 2013, on a consolidated basis we had cash and cash equivalents of approximately $2.1 billion as compared to approximately $2.6 billion at December 31, 2012. We have three main sources of cash flows - those provided by operations, investing activities and financing activities:

(U.S. dollars in thousands)	September 30, 2013			September 30, 2012
Operating activities	$	852,889		$	894,180
Investing activities	$	(569,868	)	$	(337,791	)
Financing activities	$	(766,247	)	$	(1,204,419	)
Effects of exchange rate changes on foreign currency cash	$	(4,259	)	$	20,210

Operating Cash Flows

Historically, cash receipts from operations, consisting of premiums and investment income, generally have provided sufficient funds to pay losses as well as operating expenses of our subsidiaries and to fund dividends payable by our subsidiaries to XL-Ireland. Cash receipts from operations are generally derived from the receipt of investment income on our investment portfolio as well as the net receipt of premiums less claims and expenses related to our underwriting activities in our P&C and Life operations. Our operating subsidiaries provide liquidity in that premiums are generally received months or even years before losses are paid under the policies related to such premiums. Premiums and acquisition expenses are settled based on terms of trade as stipulated by an underwriting contract, and generally are received within the first year of inception of a policy when the premium is written, but can be up to three years on certain reinsurance business assumed. Operating expenses are generally paid within a year of being incurred. Claims, especially for casualty business, may take a much longer time before they are reported and ultimately settled, requiring the establishment of reserves for unpaid losses and loss expenses. Therefore, the amount of claims paid in any one year is not necessarily related to the amount of net losses incurred, as reported in the consolidated statement of income.

During the nine months ended September 30, 2013, net cash flows provided by operating activities were $852.9 million compared to net cash flows provided by operating activities of $894.2 million for the same period in 2012. Although net income was higher during the nine months ended September 30, 2013, that increase was more than offset by decreases in other components of non-cash working capital resulting in lower net cash flows from operating activities for the period.

Investing Cash Flows

Generally, positive cash flow from operations and financing activities is invested in our investment portfolio, including affiliates or the acquisition of subsidiaries.

Net cash used in investing activities was $569.9 million in the nine months ended September 30, 2013 compared to net cash used of $337.8 million for the same period in 2012. These cash flows were associated with the normal purchase and sale of portfolio investments.

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Certain of our invested assets are held in trust and pledged in support of insurance and reinsurance liabilities as well as credit facilities. Such pledges are largely required 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. Also, certain deposit liabilities and annuity contracts require the use of pledged assets. As further outlined in Item 1, Note 5, “Investments - Pledged Assets,” to the Unaudited Consolidated Financial Statements included herein, certain assets of the investment portfolio are pledged as collateral under our letter of credit facilities. At September 30, 2013 and December 31, 2012, the Company had $16.0 billion and $16.9 billion in pledged assets, respectively.

Financing Cash Flows

Cash flows related to financing activities include ordinary share-related transactions, the payment of dividends, the issue or repayment of preference ordinary shares and deposit liability transactions. During the nine months ended September 30, 2013, net cash flows used in financing activities was $766.2 million compared to net cash used of $1,204.4 million for the same period in 2012. Net cash outflows related primarily to the buybacks of our ordinary shares as described below.

During the nine months ended September 30, 2013 and 2012, financing cashflows were impacted by share buybacks. For information regarding share buyback activity, see "Other Key Focuses of Management - Buybacks of Ordinary Shares" included herein.

In addition, on January 15, 2012, the $600 million principal amount outstanding on the XLCFE Notes, which were issued by XLCFE, was repaid at maturity. For further detail, see Item 1, Note 8, “Notes Payable and Debt Financing Arrangements,” to the Unaudited Consolidated Financial Statements included herein.

In addition, the Company maintains credit facilities that provide liquidity. Details of these facilities are described below in “Capital Resources.”

Capital Resources

At September 30, 2013 and December 31, 2012, we had total shareholders' equity of $11.3 billion and $11.9 billion, respectively. In addition to ordinary share capital, we depend on external sources of financing to support our underwriting activities in the form of:

a. debt;

b. preference shares;

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

d. revolving credit facilities.

In particular, we require, among other things:

▪ 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 following risks are associated with our requirement to renew our credit facilities:

▪ 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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Consolidation within the banking industry may result in the aggregate amount of credit provided to us being reduced. We attempt to mitigate this risk by identifying and/or selecting additional banks that can participate in the credit facilities upon renewal. See Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The following table summarizes the components of our current capital resources as follows:

(U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Non-controlling interests - Series D preference ordinary shares	$	345,000	$	345,000
Non-controlling interests - Series E preference ordinary shares	999,500		999,500
Ordinary share capital	9,907,896		10,510,077
Total ordinary shares and non-controlling interests	$	11,252,396	$	11,854,577
Notes payable and debt	1,667,318		1,666,103
Total	$	12,919,714	$	13,520,680

Ordinary Share Capital

The following table reconciles the opening and closing ordinary share capital positions as follows:

(U.S. dollars in thousands)	September 30, 2013			December 31, 2012
Ordinary shareholders’ equity – beginning of period	$	10,510,077		$	9,411,660
Net income (loss) attributable to ordinary shareholders	759,136			651,128
Share buybacks	(525,518		)	(402,931		)
Share issues	9,751			6,945
Ordinary share dividends	(122,513		)	(135,572		)
Change in accumulated other comprehensive income	(757,704		)	936,955
Share-based compensation and other	34,667			41,892
Ordinary shareholders’ equity – end of period	$	9,907,896		$	10,510,077

Debt

The following tables presents our debt under outstanding securities and lenders' commitments at September 30, 2013:

						Payments Due by Period
(U.S. dollars in thousands)	Commitment/ Debt		In Use/ Outstanding		Year of Expiry	Less than 1 Year		1 to 3 Years		3 to 5 Years		After 5 Years
4-year revolver	$	1,000,000	$	—	2015	$	—	$	—	$	—	$	—
5.25% Senior Notes	600,000		599,116		2014	600,000		—		—		—
5.75% Senior Notes	400,000		396,553		2021	—		—		—		400,000
6.375% Senior Notes	350,000		348,783		2024	—		—		—		350,000
6.25% Senior Notes	325,000		322,866		2027	—		—		—		325,000
	$	2,675,000	$	1,667,318		$	600,000	$	—	$	—	$	1,075,000
Adjustment to carrying value - impact of fair value hedges			$	3,744
Total	$	2,675,000	$	1,671,062

“In Use/Outstanding” data represent September 30, 2013 accreted values. “Payments Due by Period” data represents ultimate redemption values.

In addition, see Item 8, Note 13, “Notes Payable and Debt and Financing Arrangements,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 for further information.

At September 30, 2013, banks and investors provided us with $2.7 billion of debt capacity, of which $1.7 billion was utilized. This debt capacity consists of:

▪ 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.

At September 30, 2013, $475 million of letters of credit were issued under the 2013 Credit Agreements and therefore not available as revolving credit loans.

Preferred Shares and Non-controlling Interest in Equity of Consolidated Subsidiaries

The Series D preference ordinary shares and the Series E preference ordinary shares are issued by XL-Cayman. Accordingly, these instruments represent non-controlling interests in our consolidated financial statements and are presented as non-controlling interest in equity of consolidated subsidiaries. At both September 30, 2013 and December 31, 2012, the face values of the outstanding Series D and Series E preference ordinary shares were $345.0 million and $999.5 million, respectively.

Letter of Credit Facilities and other sources of collateral

At September 30, 2013, we had seven letter of credit (“LOC”) facilities in place with total availability of $4.5 billion, of which $1.9 billion was utilized.

						Amount of Commitment Expiration by Period
(U.S. dollars in thousands)	Commitment/ Debt		In Use/ Outstanding		Year of Expiry	Less than 1 Year		1 to 3 Years		3 to 5 Years		After 5 Years
LOC Facility (1)	$	1,000,000	$	642,959	2014	$	642,959	$	—	$	—	$	—
LOC Facility (2) (3)	1,350,000		—		2015	—		—		—		—
LOC Facility (3)	650,000		360,546		2015	—		360,546				—
LOC Facility	750,000		260,118		Continuous	—		—		—		260,118
LOC Facility	250,000		121,039		Continuous	—		—		—		121,039
LOC Facility (4)	275,000		275,000		2015	—		275,000		—		—
LOC Facility (4)	200,000		200,000		2015	—		200,000		—		—
Total LOC facilities	$	4,475,000	$	1,859,662		$	642,959	$	835,546	$	—	$	381,157

____________

(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.

In 2011, we (i) entered into three new credit agreements, which provided for an aggregate amount of outstanding letters of credit and revolving credit loans up to $3 billion, subject to certain options to increase the size of the facilities, and (ii) terminated the five-year credit agreement dated June 21, 2007, which had provided for an aggregate amount of outstanding letters of credit and revolving credit loans up to $4 billion.

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On March 25, 2011, we entered into a secured credit agreement (the “March 2011 Credit Agreement”) that currently provides for the issuance of letters of credit in an aggregate amount of up to $1 billion with the option to increase the size of the facility by an additional $500 million. Concurrent with the effectiveness of the March 2011 Credit Agreement, the commitments of the lenders under the 2007 Credit Agreement were reduced from $4 billion to $3 billion. The commitments under the March 2011 Credit Agreement will expire on, and the credit facility is available on a continuous basis until, the earlier of (i) March 25, 2014 and (ii) the date of termination in whole of the commitments upon an optional termination or reduction of the commitments by the account parties or upon the occurrence certain events of default.

On December 9, 2011, we entered into (i) a secured credit agreement (the “December 2011 Secured Credit Agreement”) and (ii) an unsecured credit agreement (the “December 2011 Unsecured Credit Agreement” and together with the December 2011 Secured Credit Agreement, the “December 2011 Credit Agreements”). The March 2011 Credit Agreement continues in force, but was amended to conform certain of its terms to those of the December 2011 Secured Credit Agreement.

The December 2011 Secured Credit Agreement provides for the issuance of letters of credit in an aggregate amount of up to $650 million. The December 2011 Unsecured Credit Agreement is a $1.35 billion facility that provides for the issuance of letters of credit and revolving credit loans in an aggregate amount up to $1 billion. We have the option to increase the maximum amount of letters of credit available by an additional $500 million across the facilities under the December 2011 Credit Agreements.

The commitments under each December 2011 Credit Agreement expire on, and such credit facilities are available until, the earlier of (i) December 9, 2015 and (ii) the date of termination in whole of the commitments upon an optional termination or reduction of the commitments by the account parties or upon the occurrence of certain events of default.

The availability of letters of credit under the December 2011 Secured Credit Agreement and the March 2011 Credit Agreements is subject to a borrowing base requirement, determined on the basis of specified percentages of the face value of eligible categories of assets varying by type of collateral. In the event that such credit support is insufficient, we could be required to provide alternative security to cedants. This could take the form of insurance trusts supported by our investment portfolio or funds withheld (amounts retained by ceding companies to collateralize loss or premium reserves) using our cash resources or combinations thereof. The face amount of letters of credit required is driven by, among other things, loss development of existing reserves, the payment pattern of such reserves, the expansion of business written by us and the loss experience of such business. In addition to letters of credit, we have established insurance trusts in the United States that provide cedants with statutory credit for reinsurance under state insurance regulation in the United States.

On May 7, 2013, XL-Cayman entered into a new credit agreement with Citicorp USA, Inc., as administrative agent and issuing lender, and the lenders party thereto, and a continuing agreement for standby letters of credit with Citibank, N.A. On May 13, 2013 and May 15, 2013, XL-Cayman entered into a credit agreement first amendment and credit agreement second amendment, respectively, to such credit agreement (as amended, the “May 2013 Credit Agreement”).

Additionally, on August 6, 2013, XL-Cayman entered into a new credit agreement with Citicorp USA, Inc., as administrative agent and issuing lender, and the lenders party thereto and a continuing agreement for standby letters of credit with Citibank, N.A. On September 12, 2013, XL-Cayman entered into a credit agreement first amendment to such credit agreement (as amended, the “August 2013 Credit Agreement” and, together with the May 2013 Credit Agreement, the “2013 Credit Agreements”).

Collectively, the 2013 Credit Agreements and the continuing agreements for standby letters of credit provide for issuance of letters of credit and revolving credit loans in an aggregate amount up to $475 million. XL-Cayman has 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.

The commitments under the 2013 Credit Agreements expire on, and such credit facilities are available until, the earlier of (i) June 20, 2015 (with respect to the May 2013 Credit Agreement) and September 20, 2015 (with respect to the August 2013 Credit Agreement) and (ii) the date of termination in whole of the commitments upon an optional termination or reduction of the commitments by the account parties or upon the occurrence of certain events of default.

We review current and projected collateral requirements on a regular basis, as well as new sources of collateral. Our objective is to maintain an excess amount of collateral sources over expected uses. We also review our liquidity needs on a regular basis.

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Other

For information regarding cross-default and certain other provisions in the Company’s debt and convertible securities documents, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cross-Default and Other Provisions in Debt Instruments,” in our Annual Report on Form 10-K for the year ended December 31, 2012.

See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” below.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

The following discussion should be read in conjunction with “Quantitative and Qualitative Disclosures about Market Risk,” presented under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Market risk represents the potential for loss due to adverse changes in the fair value of financial and other instruments. We are principally exposed to the following market risks: interest rate risk, foreign currency exchange rate risk, credit risk, equity price risk and other related market risks.

The majority of our market risk arises from the investment portfolio, which consists of fixed income securities, alternative investments, public equities, private investments, derivatives, other investments and cash, denominated in both U.S. and foreign currencies, which are sensitive to changes in interest rates, credit spreads, equity prices, foreign currency exchange rates and other related market risks. Our fixed income and equity securities are generally classified as available for sale, and, as such, changes in interest rates, credit spreads on corporate and structured securities, equity prices, foreign currency exchange rates or other related market instruments will have an immediate effect on comprehensive income and shareholders' equity but will not ordinarily have an immediate effect on net income. Nevertheless, changes in interest rates, credit spreads and defaults, equity prices and other related market instruments affect consolidated net income when, and if, a security is sold or impaired.

We may enter into derivatives and other financial instruments primarily for risk management purposes. For example, we may use derivatives to hedge foreign exchange and interest rate risk related to our consolidated net exposures. From time to time, we may also use instruments such as futures, options, interest rate swaps, credit default swaps and foreign currency forward contracts to manage the risk of interest rate changes, credit deterioration, foreign currency exposures, and other market related exposures as well as to obtain exposure to a particular financial market. Historically, we entered into credit derivatives outside of the investment portfolio in conjunction with the legacy financial guarantee and financial products operations. We seek to manage the risks associated with derivative use with guidelines established by senior management. Derivative instruments are carried at fair value with the resulting changes in fair value recognized in income in the period in which they occur. For further information, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

This risk management discussion and the estimated amounts generated from the sensitivity and VaR analyses presented in this document are forward-looking statements of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from these estimated results due to, among other things, actual developments in the global financial markets and changes in the composition of our investment portfolio. The results of analysis used by us to assess and mitigate risk should not be considered projections of future events of losses. See Item 2, “Cautionary Note Regarding Forward-Looking Statements.”

Interest Rate Risk

Interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. Our fixed income portfolio is exposed to interest rate risk. Our liabilities are accrued at a static rate from an accounting standpoint. However, management considers the liabilities to have an economic exposure to interest rate risk and manages the net economic exposure to interest rate risk considering both assets and liabilities. Interest rate risk is managed within the context of our Strategic Asset Allocation ("SAA") process by specifying SAA benchmarks relative to the estimated duration of our liabilities and managing the fixed income portfolio relative to the benchmarks such that the overall economic effect of interest rate risk is within management's risk tolerance. Nevertheless, we remain exposed to interest rate risk with respect to our overall net asset position and more generally from an accounting standpoint since the assets are carried at fair value, while liabilities are accrued at a static rate. From time to time we may utilize derivative instruments to manage or optimize our duration and curve exposures.

In addition, while our debt is not carried at fair value and not adjusted for market changes, changes in market interest rates could have an impact on debt values at the time of any refinancing.

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Foreign Currency Exchange Rate Risk

Many of our non-U.S. subsidiaries maintain both assets and liabilities in local currencies; therefore, foreign exchange risk is generally limited to net assets denominated in foreign currencies.

Foreign currency exchange rate gains and losses in our consolidated Statement of Income arise for accounting purposes when net assets or liabilities are denominated in foreign currencies that differ from the functional currency of those subsidiaries. While unrealized foreign exchange gains and losses on underwriting balances are reported in earnings, the offsetting unrealized gains and losses on invested assets are recorded as a separate component of shareholders' equity, to the extent that the asset currency does not match that entity's functional currency. This results in an accounting mismatch that will result in foreign exchange gains or losses in the consolidated statements of income depending on the movement in certain currencies. We have formed several branches with Euro and U.K. sterling functional currencies and continue to focus on attempting to limit exposure to foreign exchange risk.

Foreign currency exchange rate risk in general is reviewed as part of our risk management framework. Within the asset liability framework for the investment portfolio, we pursue a general policy of holding the assets and liabilities in the same currency and, as such, we are not generally exposed to the risks associated with foreign exchange movements within the investment portfolio, as currency impacts on the assets are generally matched by corresponding impacts on the related liabilities. However, locally-required capital levels are invested in local currencies in order to satisfy regulatory requirements and to support local insurance operations and are not matched by related liabilities. Foreign exchange contracts within the investment portfolio may be utilized to manage individual portfolio foreign exchange exposures, subject to investment management service providers' guidelines established by management. Where these contracts are not designated as specific hedges for financial reporting purposes, we record realized and unrealized gains and losses in income in the period in which they occur. These contracts generally have maturities of three months or less. We may also attempt to manage the foreign exchange volatility arising on certain transactions denominated in foreign currencies. These include, but are not limited to, premiums receivable, reinsurance contracts, claims payable and investments in subsidiaries.

The principal currencies creating our foreign exchange risk are the U.K. sterling, the Euro, the Swiss franc and the Canadian dollar. The following table provides more information on our net exposures to these principal foreign currencies at September 30, 2013 and December 31, 2012:

(Foreign currency in millions)	September 30, 2013	December 31, 2012
Euro	22.2	252.2
U.K. Sterling	88.3	81.6
Swiss Franc	125.6	117.0
Canadian Dollar	163.2	129.2

Credit Risk

Credit risk relates to the uncertainty of an obligor's continued ability to make timely payments in accordance with the contractual terms of the instrument or contract. We are exposed to direct credit risk within our investment portfolio, through general counterparties, including customers and reinsurers, and through certain underwriting activities that include, but are not limited to, surety, workers compensation, environmental and political risk and trade credit.

We have an established credit risk governance process delegated to the Credit Subcommittee of the Enterprise Risk Management Committee. The governance process is designed to ensure that transactions and activities, individually and in the aggregate, are carried out within established risk tolerances. This process also recognizes the potential for clash event risk(which covers a number of substantially similar claims against multiple policyholders) that could arise from credit events owing to the identified credit risk embedded in certain underwriting businesses, as well as our investment activities and reinsurance relationships. In particular, certain of our underwriting activities expose us to indirect credit risk in that profitability of certain strategies can correlate with credit events at the issuer, industry or country level. We manage these risks through established underwriting policies that operate in accordance with established limit and escalation frameworks.

To manage our exposure to credit risk, we have established a credit risk framework that establishes tolerances for credit risk at various levels of granularity (counterparty, industry, country and underwriting business) and tolerances for credit risk arising from certain clash events. Credit risk capacity is allocated across our businesses and functional areas and regular reporting and aggregation activities are carried out to ensure compliance with our credit risk framework and related tolerances. Credit risk arising from credit sensitive underwriting activities is also managed via our underwriting limit framework. We manage credit risk within the investment portfolio through our SAA framework and established investment credit policies,

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which address quality of obligors and counterparties, industry limits, and diversification requirements. Our exposure to market credit spreads primarily relates to market price and cash flow variability associated with changes in credit spreads.

Credit Risk – Investment Portfolio

Credit risk in the investment portfolio is the exposure to adverse changes in the creditworthiness of individual investment holdings, issuers, groups of issuers, industries and countries. A widening of credit spreads will increase the net unrealized loss position, will increase losses associated with credit-based derivatives where we assume credit exposure, and, if issuer credit spreads increase significantly for an extended period of time or it is a period of increasing defaults, will also likely result in higher OTTI charges. All else held equal, credit spread tightening will reduce net investment income associated with new purchases of fixed maturities. In addition, market volatility can make it difficult to value certain of our securities if trading becomes less frequent. As such, valuations may include assumptions or estimates that may have significant period to period changes that could have a material adverse effect on our consolidated results of operations or financial condition. The credit spread duration in our fixed income portfolio, excluding the impact of the HTM election, was 3.8 years at September 30, 2013.

We manage credit risk in the investment portfolio, including fixed income, alternative and short-term investments, through the credit research performed primarily by the investment management service providers. The management of credit risk in the investment portfolio is integrated in our credit risk management governance framework and the management of credit exposures and concentrations within the investment portfolio is carried out in accordance with our risk policies, philosophies, appetites, limits and risk concentrations related to the investment portfolio. In the investment portfolio, we review on a regular basis our asset concentration, credit quality and adherence to our credit limit guidelines. Any issuer over its credit limits or experiencing financial difficulties, material credit quality deterioration or potentially subject to forthcoming credit quality deterioration is placed on a watch list for closer monitoring. Where appropriate, exposures are reduced or prevented from increasing.

The table below shows our aggregate fixed income portfolio by credit rating in percentage terms of our aggregate fixed income portfolio (consisting of corporate debt and U.S. Agency debt and related mortgage-backed securities having and including fixed maturities, short-term investments, cash and cash equivalents and net receivable/(payable) for investment sold/(purchased)) at September 30, 2013:

	Percentage of Aggregated Fixed Income Portfolio (1)
AAA	42.4	%
AA	20.5	%
A	23.0	%
BBB	11.4	%
BB or Below	2.5	%
NR	0.2	%
Total	100.0	%

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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.

At September 30, 2013, the average credit quality of our aggregate fixed income investment portfolio was “Aa3/AA-" compared to “Aa2/AA” at December 31, 2012. Our $11.7 billion portfolio of government and government related, agency, sovereign and cash holdings was rated "AA+", our $12.5 billion portfolio of corporates was rated “A", and our $7.8 billion structured securities portfolio was rated "AA+". The decline in the average credit quality of our aggregate fixed income investment portfolio during 2013 was primarily due to the downgrade of United Kingdom and France sovereign debt by Moody's Investors Service. The downgrade reduced our internal rating of securities issued or guaranteed by the United Kingdom and France, which is based on the average credit rating of Standard & Poor's, Moody's Investors Service and Fitch Ratings.

We are closely monitoring our corporate financial bond holdings given the events of the past five years. The table below summarizes our significant exposures (defined as bonds issued by financial institutions with an amortized cost in excess of $50.0 million) to corporate bonds of financial issuers including Covered Bonds held within our AFS and HTM investment portfolio holdings at September 30, 2013, representing both amortized cost and net unrealized gains (losses):

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	September 30, 2013
Issuer (by Global Ultimate Parent) (1) (U.S. dollars in millions)	Weighted Average Credit Quality (2)	Amortized Cost		Unrealized Gain/ (Loss)
JPMorgan Chase & Co.	A	$	196.7	$	(1.9	)
Rabobank Nederland Nv	AA-	182.1		5.5
Citigroup Inc.	A-	178.5		3.9
The Goldman Sachs Group, Inc.	BBB+	164.1		7.8
National Australia Bank Limited	AA-	137.3		6.3
Lloyds Banking Group Plc	AA-	133.6		6.1
Hsbc Holdings Plc	A+	124.9		(2.3		)
Wells Fargo & Company	A+	123.2		1.4
Bank of America Corporation	BBB+	123.1		4.1
Morgan Stanley	A-	115.9		2.6
The Bank of Nova Scotia	AA-	96.6		2.2
UBS AG	A+	94.3		2.8
Commonwealth Bank of Australia	AA-	85.6		4.4
Credit Suisse Group AG	A	83.1		1.2
Standard Chartered Plc	A+	76.5		3.1
H M Government Cabinet Office (RBS Group Plc)	AA-	75.0		1.0
Royal Bank of Canada	AA-	74.5		1.0
Westpac Banking Corporation	AA-	72.3		4.4
Nordea Bank AB (Publ)	AA-	65.4		1.6
ING Groep N.V.	AA	65.4		2.3
BB&T Corporation	A	60.7		(0.2		)
The Bank of New York Mellon Corporation	AA-	58.3		1.8
Government of Netherlands (ABN Amro)	AAA	55.5		5.7
American Express Company	A	53.1		1.4

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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

Within our corporate financial bond holdings, we are further monitoring exposures to hybrid securities, representing Tier One and Upper Tier Two securities of various financial institutions. The following table summarizes our top ten exposures to hybrid securities:

	September 30, 2013
Issuer (by Global Ultimate Parent) (U.S. dollars in millions)	Tier One Amortized Cost		Upper Tier Two Amortized Cost		Total Amortized Cost		Net Unrealized (Loss)
Zurich Insurance Group Ltd.	$	—	$	26.6	$	26.6	$	1.0
Barclays Plc	4.8		20.8		25.6		(2.7		)
National Australia Bank Limited	20.7		—		20.7		0.6
JPMorgan Chase & Co.	20.6		—		20.6		(4.8		)
The British United Provident Association Limited	—		20.2		20.2		0.4
Aviva Plc	5.3		14.2		19.5		(0.7		)
Mitsubishi UFJ Financial Group, Inc.	19.2		—		19.2		1.6
Legal & General Group Plc	—		18.9		18.9		0.6
The Goldman Sachs Group, Inc.	18.6		—		18.6		(0.6		)
HSBC Holdings Plc	18.2		—		18.2		(0.5		)
Total	$	107.4	$	100.7	$	208.1	$	(5.1	)

At September 30, 2013, the top 10 corporate financial holdings, which exclude government guaranteed and government sponsored enterprises, represented approximately 4.8% of the aggregate fixed income portfolio and approximately 11.9% of all corporate holdings. The top 10 corporate bond holdings listed below represent the direct exposure to the

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corporations listed below, including their subsidiaries, and exclude any securitized, credit enhanced and collateralized asset or mortgage-backed securities, cash and cash equivalents, pooled notes and any over-the-counter (“OTC”) derivative counterparty exposures, if applicable, but does include Covered Bonds:

Top 10 Corporate Financial Holdings (1)	Percentage of Aggregate Fixed Income Portfolio
JPMorgan Chase & Co.	0.6%
Rabobank Nederland Nv	0.6%
Citigroup Inc.	0.6%
The Goldman Sachs Group, Inc.	0.5%
National Australia Bank Limited	0.4%
Lloyds Banking Group Plc	0.4%
HSBC Holdings Plc	0.4%
Wells Fargo & Company	0.4%
Bank of America Corporation	0.4%
Morgan Stanley	0.4%

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(1) Corporate issuers include Covered Bonds.

At September 30, 2013, the top 5 corporate sector exposures listed below represented 30.6% of the aggregate fixed income investment portfolio and 75.8% of all corporate holdings.

Top 5 Sector Exposures (U.S. dollars in millions)	Carrying Value		Percentage of Aggregate Fixed Income Portfolio
Financials (1)	$	3,539.9	11.5	%
Consumer, non-Cyclical	2,340.9		7.6	%
Utilities	1,400.0		4.5	%
Communications	1,116.2		3.6	%
Industrial	1,038.9		3.4	%
Total	$	9,435.9	30.6	%

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

Within our fixed income portfolios, we are further monitoring our exposure to holdings in the European Periphery Nations. In particular, the fair values of our holdings representing risk in the European Periphery Nations are: government holdings of $16.9 million, corporate holdings of $127.1 million (financials $0.8 million, non-financials $126.4 million) and structured securities holdings totaling $9.3 million. The non-financial corporate holdings primarily consist of securities issued by multinational companies with low reliance on local economics and systemically important industries such as utilities and telecoms. For further detail on our exposure to the Euro-zone sovereign debt crisis, please refer to Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - European Sovereign Debt Crisis.”

We also have exposure to credit risk associated with our mortgage-backed and asset-backed securities. The table below shows the breakdown of the $7.8 billion structured securities portfolio, of which 80.8% is AAA rated:

(U.S. dollars in millions)	Carrying Value		Percentage of Structured Portfolio
Agency RMBS	$	4,069.1	51.9	%
Other ABS (1)	1,255.8		16.0	%
CMBS	1,339.8		17.1	%
Core CDO (non-ABS CDOs and CLOs)	712.1		9.1	%
Non-Agency RMBS	464.9		5.9	%
Total	$	7,841.7	100.0	%

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(1) Includes Covered Bonds.

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Credit Risk – Other

Credit derivatives are purchased within our investment portfolio and were sold through a limited number of contracts written as part of our previous financial lines business. From time to time, we may purchase credit default swaps to hedge an existing position or concentration of holdings. The credit derivatives are recorded at fair value. For further details with respect to our exposure to credit derivatives, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, alternatives and other investment funds and other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be sold or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure that is due. We also have exposure to financial institutions in the form of unsecured debt instruments, derivative transactions, revolving credit facility and letter of credit commitments and equity investments. There can be no assurance that any such losses or impairments to the carrying value of these assets would not materially and adversely affect our business and results of operations.

With regard to unpaid losses and loss expenses recoverable and reinsurance balances receivable, we have credit risk should any of our reinsurers be unable or unwilling to settle amounts due to us; however, these exposures are not marked to market. For further information relating to reinsurer credit risk, see Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Unpaid Losses and Loss Expenses Recoverable and Reinsurance Balances Receivable.”

We are exposed to credit risk in the event of non-performance by the other parties to our derivative instruments in general; however, we do not anticipate non-performance. The difference between the notional principal amounts and the associated market value is our maximum credit exposure.

Equity Price Risk

Equity price risk is the potential loss arising from changes in the market value of equities. Our equity investment portfolio is exposed to equity price risk. At September 30, 2013, our equity portfolio was approximately $885.0 million as compared to $547.1 million at December 31, 2012. This excludes fixed income fund investments of $89.7 million and $101.9 million at September 30, 2013 and December 31, 2012, respectively, that generally do not have the risk characteristics of equity investments but are treated as equity investments under U.S. GAAP. At September 30, 2013 and December 31, 2012, our direct allocation to equity securities was 2.7% and 1.5%, respectively, of the total investment portfolio (including cash and cash equivalents, accrued investment income and net payable for investments purchased). We also estimate the equity risk embedded in certain alternative and private investments. Such estimates are derived from market exposures provided to us by certain individual fund investments and/or internal statistical analyses.

Other Market Risks

Our private investment portfolio is invested in limited partnerships and other entities that are not publicly traded. In addition to normal market risks, these positions may also be exposed to liquidity risk, risks related to distressed investments and risks specific to startup or small companies. At September 30, 2013, our exposure to private investments, excluding unfunded commitments, was $259.2 million, representing 0.7% of the total investment portfolio (including cash and cash equivalents, accrued investment income and net payable for investments purchased) compared to $307.5 million at December 31, 2012

Our alternative investment portfolio, which is exposed to equity and credit risk as well as certain other market risks, had a total exposure of $1.5 billion representing approximately 4.2% of the total investment portfolio (including cash and cash equivalents, accrued investment income and net payable for investments purchased) at September 30, 2013, as compared to December 31, 2012 when we had a total exposure of $1.3 billion representing approximately 3.9% of the fixed income investment portfolio.

At September 30, 2013 and December 31, 2012, bond index futures outstanding had a net short position of $4.3 million and a net long position of $17.4 million, respectively, and stock index futures outstanding had net long positions of $47.8 million and $29.1 million, respectively. We may reduce our exposure to these futures through offsetting transactions, including options and forwards.

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As noted above, we also invest in certain derivative positions that can be impacted by market value movements. For further details on derivative instruments, see Item 1, Note 6, “Derivative Instruments,” to the Unaudited Consolidated Financial Statements included herein.

Sensitivity and Value-at-Risk Analysis

The table below summarizes our assessment of the estimated impact on the value of our investment portfolio at September 30, 2013 associated with an immediate and hypothetical: +100bps increase in interest rates, a -10% decline in equity markets, a +100bps widening in spreads and a +10% widening in spreads. The table also reports the 95%, 1-year VaRs for our investment portfolios at September 30, 2013, excluding foreign exchange.

The interest rate, spread risk, and VaR referenced in the table below include the impact of market movements on our HTM fixed maturities from our Life operations investment portfolio. While the market value of these holdings is sensitive to prevailing interest rates and credit spreads, our book value is not impacted as these holdings are carried at amortized cost. At September 30, 2013, if we were to exclude these impacts in order to present the impact of these risks to our book value, the interest rate risk would be reduced by approximately $304.6 million, absolute spread risk would be reduced by approximately $206.4 million, relative spread risk would be reduced by approximately $18.2 million, and VaR would be reduced by approximately $272.6 million.

The table below excludes the impact of foreign exchange rate risk on our investment portfolio. Our investment strategy incorporates asset-liability management, and, accordingly, any foreign exchange movements impact the assets and liabilities approximately equally. See “Foreign Currency Exchange Rate Risk,” for further details. We consider the investment portfolio VaR estimated results as well as the P&C and Life operations investment portfolios' VaR estimated results excluding foreign exchange rate risk to be the more relevant and appropriate metrics to consider when assessing the actual risk of the investment portfolio.

The estimated results below also do not include any risk contributions from our various operating affiliates (strategic, investment manager or financial operating affiliates) or certain other investments that are carried at amortized cost.

(U.S. dollars in millions)	Interest Rate Risk (1)			Equity Risk (2)			Absolute Spread Risk (3)			Relative Spread Risk (4)			VaR (5) (6)
Total Investment Portfolio (7)	$	(1,474.0	)	$	(162.6	)	$	(1,339.5	)	$	(134.1	)	$	1,631.5
A. P&C Investment Portfolio	$	(928.3	)	$	(162.6	)	$	(877.3	)	$	(76.0	)	$	1,125.7
(I) P&C Fixed Income Portfolio	(928.3		)	—			(877.3		)	(76.0		)	1,044.4
(a) Cash & Short Term Investments	(8.6		)	—			(2.2		)	(0.1		)	2.3
(b) Total Government Related	(382.3		)	—			(254.3		)	(12.2		)	421.8
(c) Total Corporate Credit	(295.9		)	—			(324.3		)	(34.4		)	344.4
(d) Total Structured Credit	(241.5		)	—			(296.4		)	(29.3		)	315.8
(II) P&C Non-Fixed Income Portfolio	—			(162.6		)	—			—			215.5
(e) Equity Portfolio	—			(90.9		)	—			—			118.1
(f) Alternative Portfolio	—			(42.7		)	—			—			89.7
(g) Private Investments	—			(29.1		)	—			—			47.2
(h) Other	—			—			—			—			7.1
B. Life Investment Portfolio	$	(539.1	)	$	—		$	(430.0	)	$	(54.6	)	$	606.1
(III) Life Fixed Income Portfolio	(539.1		)	—			(430.0		)	(54.6		)	606.1
(i) Cash & Short Term Investments	(0.1		)	—			—			—			0.1
(j) Total Government Related	(222.0		)	—			(84.5		)	(4.1		)	231.1
(k) Total Corporate Credit	(259.3		)	—			(282.2		)	(41.8		)	310.8
(l) Total Structured Credit	(57.7		)	—			(63.4		)	(8.7		)	71.1
(IV) Life Non-Fixed Income Portfolio	—			—			—			—			—

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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.

Stress Testing

VaR does not provide the means to estimate the magnitude of the loss in the 5% of occurrences when we expect the VaR level to be exceeded. To complement the VaR analysis based on normal market environments, we consider the impact on the investment portfolio in several different stress scenarios to analyze the effect of unusual market conditions. We establish certain stress scenarios that are applied to the actual investment portfolio. As these stress scenarios and estimated gains and losses are based on scenarios established by us, they will not necessarily reflect future stress events or gains and losses from such events. The results of the stress scenarios are reviewed on a regular basis to ensure they are appropriate, based on current shareholders' equity, market conditions and our total risk tolerance. It is important to note that when assessing the risk of our investment portfolio, we do not take into account either the value or risk associated with the liabilities arising from our operations.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were effective and provided reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting identified in connection with our evaluation required pursuant to Rules 13a-15 or 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to legal proceedings as described in our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material developments to such proceedings during the three months ended September 30, 2013.

We are subject to litigation and arbitration in the normal course of our business. These lawsuits and arbitrations principally involve claims on policies of insurance and contracts of reinsurance and are typical for us and for the property and casualty insurance and reinsurance industry in general. Such claims proceedings are considered in connection with our loss and loss expense reserves. Reserves in varying amounts may or may not be established in respect of particular claims proceedings based on many factors, including the legal merits thereof. In addition to litigation relating to insurance and reinsurance claims, we are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance or reinsurance policies. These types of actions typically involve, among other things, allegations of underwriting errors or misconduct, employment disputes, actions brought by or on behalf of shareholders or disputes arising from business ventures. The status of these legal actions is actively monitored by management.

Legal actions are subject to inherent uncertainties, and future events could change management's assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, we disclose an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or disclose that an estimate cannot be made. Based on our assessment at September 30, 2013, no such disclosures are considered necessary.

ITEM 1A. RISK FACTORS

Refer to Item 1A., "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2012 for further information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliate Purchasers

The following table provides information about purchases by the Company during the three months ended September 30, 2013 of its ordinary shares:

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (2)
July 1, 2013 to July 31, 2013	1,370,354	$	31.67	1,370,354	$531.6 million
August 1, 2013 to August 31, 2013	1,676,996	$	31.01	1,676,996	$479.6 million
September 1, 2013 to September 30, 2013	1,787,259	$	30.55	1,787,259	$425.0 million
Total	4,834,609	$	31.03	4,834,609	$425.0 million

____________

(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.

97

ITEM 6.	EXHIBITS
The following exhibits are filed as exhibits to this Quarterly Report:
10.1	Credit Agreement, dated as of August 6, 2013, between XLIT Ltd., Citicorp USA, Inc., as Administrative Agent and Issuing Lender, and the Lenders party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 6, 2013
10.2	Continuing Agreement for Standby Letters of Credit, dated as of August 6, 2013, between XLIT Ltd. and Citibank, N.A., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 6, 2013
10.3	Letter Agreement, dated as of August 6, 2013, between XLIT Ltd. and Citicorp USA, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on August 6, 2013
10.4	Credit Agreement First Amendment, dated as of September 12, 2013, to the Credit Agreement, dated as of August 6, 2013, between XLIT Ltd., Citicorp USA, Inc., as Administrative Agent and Issuing Lender, and the Lenders party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on September 12, 2013
10.5	Fee Letter Amendment No. 1, dated as of September 12, 2013, to the Letter Agreement, dated as of August 6, 2013, between XLIT Ltd. and Citicorp USA, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 1-10804) filed on September 12, 2013
12*	Statements regarding computation of ratios
31*	Rule 13a-14(a)/15d-14(a) Certifications
32*	Section 1350 Certification
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith.

98

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	October 31, 2013
		XL Group plc
		(Registrant)
		/s/ MICHAEL S. MCGAVICK
		Name: Michael S. McGavick
		Title: Chief Executive Officer and Director
		XL Group plc
Date:	October 31, 2013
		/s/ PETER R. PORRINO
		Name: Peter R. Porrino
		Title: Executive Vice President and Chief Financial Officer
		XL Group plc

99

EX-12

Exhibit 12

XL GROUP PLC

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS

	Nine Months Ended September 30,
(U.S. dollars in thousands, except ratios)	2013			2012
Earnings:
Pre-tax income (loss) from continuing operations	$	734,072		$	619,325
Fixed charges	196,812			218,288
Distributed income of equity investees	131,207			71,165
Subtotal	$	1,062,091		$	908,778
Less: Non-controlling interests	(300		)	(63		)
Preference share dividends	74,244			75,919
Total earnings (loss)	$	988,147		$	832,922
Fixed charges:
Interest costs	$	78,599		$	79,686
Accretion of deposit liabilities	36,231			54,878
Rental expense at 30% (1)	7,738			7,805
Total fixed charges	$	122,568		$	142,369
Preference share dividends	74,244			75,919
Total fixed charges and preference dividends	$	196,812		$	218,288
Ratio of earnings to fixed charges	8.1			5.9
Ratio of earnings to combined fixed charges and preference dividends	5.0			3.8
Deficiency - fixed charges only	N/A			N/A
Deficiency - fixed charges and preference dividends	N/A			N/A

_______________

(1) 30% represents a reasonable approximation of the interest factor.

EX-31

Exhibit 31

Certification of Chief Executive Officer

XL Group plc

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(Chapter 98, Title 15 U.S.C. 7241)

I, Michael S. McGavick, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of XL Group plc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 31, 2013
		/s/ MICHAEL S. MCGAVICK
		Michael S. McGavick
		Chief Executive Officer

Certification of Chief Financial Officer

XL Group plc

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(Chapter 98, Title 15 U.S.C. 7241)

I, Peter R. Porrino, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of XL Group plc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 31, 2013
		/s/ PETER R. PORRINO
		Peter R. Porrino
		Executive Vice President and
		Chief Financial Officer

EX-32

Exhibit 32

Certification Accompanying Form 10-Q Report of XL Group plc

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Chapter 63, Title 18 U.S.C. 1350(a) and (b))

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. 1350(a) and (b)), each of the undersigned hereby certifies that, to his knowledge, the Quarterly Report on Form 10-Q for the period ended September 30, 2012 of XL Group plc (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 31, 2013

/s/ MICHAEL S. MCGAVICK

MICHAEL S. McGAVICK

CHIEF EXECUTIVE OFFICER

XL GROUP PLC

Dated: October 31, 2013

/s/ PETER R. PORRINO

PETER R. PORRINO

EXECUTIVE VICE PRESIDENT,

CHIEF FINANCIAL OFFICER

XL GROUP PLC

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to XL Group plc and will be retained by XL Group plc and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Variable Interest Entities

9 Months Ended

Sep. 30, 2013

Variable Interest Entities Disclosure [Abstract]

Variable Interest Entities

At times, the Company has utilized variable interest entities (“VIEs”) both indirectly and directly in the ordinary course of the Company's business.

The Company invests in CDOs and other investment vehicles that are issued through VIEs as part of the Company's investment portfolio. The activities of these VIEs are generally limited to holding the underlying collateral used to service investments therein. The Company's involvement in these entities is passive in nature and we are not the arranger of these entities. In addition, the Company has not been involved in establishing these entities and is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance.

The Company has a limited number of remaining outstanding credit enhancement exposures, including written financial guarantee and credit default swap contracts. The obligations related to these transactions are often securitized through VIEs. The Company is not the primary beneficiary of these VIEs as contemplated in current authoritative accounting guidance on the basis that management does not believe that the Company has the power to direct the activities, such as asset selection and collateral management, which most significantly impact each entity's economic performance. For further details on the nature of the obligations and the size of the Company's maximum exposure, see Note 6, “Derivative Instruments,” and Note 12 (a), “Commitments and Contingencies - Financial Guarantee Exposures.”

XML

Derivative Instruments - Summary of contingent credit features (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Derivative [Line Items]
Collateral posted to counterparty	$ 113,426	$ 12,130
Contracts with downgrade provisions [Member]
Derivative [Line Items]
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	114,502	20,366
Collateral posted to counterparty	$ 84,935	$ 5,490

XML

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Net premiums earned	$ 1,625,312	$ 1,548,041	$ 4,717,396	$ 4,471,051
Net investment income	237,921	239,481	716,935	767,354
Realized investment gains (losses):
Net realized gains (losses) on investments sold	1,229	7,136	85,733	64,703
Other-than-temporary impairments on investments	(2,388)	(10,295)	(7,676)	(45,027)
Other-than-temporary impairments on investments transferred to (from) other comprehensive income	(799)	(2,334)	(2,538)	(16,760)
Net realized gains (losses) on investments	(1,958)	(5,493)	75,519	2,916
Net realized and unrealized gains (losses) on derivative instruments	880	6,254	3,660	2,656
Income (loss) from investment fund affiliates	5,079	16,049	83,843	38,555
Fee income and other	10,875	13,306	31,378	36,378
Total revenues	1,878,109	1,817,638	5,628,731	5,318,910
Expenses:
Net losses and loss expenses incurred	1,006,520	894,077	2,787,210	2,574,497
Claims and policy benefits	116,549	119,438	344,269	371,893
Acquisition costs	238,328	236,347	690,473	679,434
Operating expenses	311,506	305,745	898,497	887,210
Exchange (gains) losses	20,303	18,690	(24,463)	13,432
Interest expense	37,926	37,907	114,830	134,564
Total expenses	1,731,132	1,612,204	4,810,816	4,661,030
Income (loss) before income tax and income (loss) from operating affiliates	146,977	205,434	817,915	657,880
Income (loss) from operating affiliates	24,590	2,763	88,413	39,473
Provision (benefit) for income tax	897	451	73,248	51,813
Net income (loss)	170,670	207,746	833,080	645,540
Non-controlling interests	35,022	35,844	73,944	75,856
Net income (loss) attributable to ordinary shareholders	$ 135,648	$ 171,902	$ 759,136	$ 569,684
Weighted average ordinary shares and ordinary share equivalents outstanding - basic (in shares)	285,393	304,199	289,957	309,675
Weighted average ordinary shares and ordinary share equivalents outstanding - diluted (in shares)	290,490	307,764	294,828	312,602
Earnings (loss) per ordinary share and ordinary share equivalent - basic (in dollars per share)	$ 0.48	$ 0.57	$ 2.62	$ 1.84
Earnings (loss) per ordinary share and ordinary share equivalent - diluted (in dollars per share)	$ 0.47	$ 0.56	$ 2.57	$ 1.82

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair value is defined as the amount that would be received for the sale of an asset or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The fair values for available for sale investments are generally sourced from third parties. The fair value of fixed income securities is based upon quoted market values where available, “evaluated bid” prices provided by third party pricing services (“pricing services”) where quoted market values are not available, or by reference to broker quotes where pricing services do not provide coverage for a particular security. While the Company receives values for the majority of the investment securities it holds from pricing services, it is ultimately management’s responsibility to determine whether the values received and recorded in the financial statements are representative of appropriate fair value measurements.

The Company performs regular reviews of the prices received from its third party valuation sources to assess if the prices represent a reasonable estimate of the fair value. This process is completed by investment and accounting personnel who are independent of those responsible for obtaining the valuations. The approaches taken by the Company include, but are not limited to, annual reviews of the controls of the external parties responsible for sourcing valuations, which are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, and monthly reconciliations between the valuations provided by our external parties and valuations provided by our third party investment managers at a portfolio level.

Where broker quotes are the primary source of the valuations, sufficient information regarding the specific inputs utilized by the brokers is generally not available to support a Level 2 classification. The Company obtains the majority of broker quoted values from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value.

For further information, see Item 8, Note 2(b), “Significant Accounting Policies - Fair Value Measurements,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(a) Fair Value Summary

The following tables set forth the Company’s assets and liabilities that were accounted for at fair value at September 30, 2013 and December 31, 2012 by level within the fair value hierarchy:

September 30, 2013 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at September 30, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,175,989	$	—	$	—		$	2,175,989
Corporate (1)	—		10,726,705		32,627		—			10,759,332
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,051,793		17,289		—			4,069,082
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		399,390		9		—			399,399
Commercial mortgage-backed securities (“CMBS”)	—		1,177,921		19,960		—			1,197,881
Collateralized debt obligations (“CDO”)	—		7,597		704,551		—			712,148
Other asset-backed securities (2)	—		1,138,681		12,454		—			1,151,135
U.S. States and political subdivisions of the States	—		1,818,098		—		—			1,818,098
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,999,378		—		—			4,999,378
Total fixed maturities, at fair value	$	—	$	26,495,552	$	786,890	$	—		$	27,282,442
Equity securities, at fair value (3)	469,857		504,876		—		—			974,733
Short-term investments, at fair value (1)(4)	—		270,647		2,058		—			272,705
Total investments available for sale	$	469,857	$	27,271,075	$	788,948	$	—		$	28,529,880
Cash equivalents (5)	1,141,559		285,318		—		—			1,426,877
Other investments (6)	—		727,289		103,856		—			831,145
Other assets (7)	—		30,579		—		(2,600		)	27,979
Total assets accounted for at fair value	$	1,611,416	$	28,314,261	$	892,804	$	(2,600	)	$	30,815,881
Liabilities
Financial instruments sold, but not yet purchased (8)	$	3,995	$	23,051	$	—	$	—		$	27,046
Other liabilities (7)	—		168,012		33,389		(2,600		)	198,801
Total liabilities accounted for at fair value	$	3,995	$	191,063	$	33,389	$	(2,600	)	$	225,847

December 31, 2012 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2012
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,034,617	$	—	$	—		$	2,034,617
Corporate (1)	—		10,451,902		30,098		—			10,482,000
RMBS – Agency	—		5,223,488		32,005		—			5,255,493
RMBS – Non-Agency	—		647,617		116		—			647,733
CMBS	—		1,051,904		25,347		—			1,077,251
CDO	—		8,080		701,736		—			709,816
Other asset-backed securities (2)	—		1,452,583		18,128		—			1,470,711
U.S. States and political subdivisions of the States	—		1,911,017		—		—			1,911,017
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,258,282		—		—			4,258,282
Total fixed maturities, at fair value	$	—	$	27,039,490	$	807,430	$	—		$	27,846,920
Equity securities, at fair value (3)	253,957		395,402		—		—			649,359
Short-term investments, at fair value (1)(4)	—		322,703		—		—			322,703
Total investments available for sale	$	253,957	$	27,757,595	$	807,430	$	—		$	28,818,982
Cash equivalents (5)	1,596,376		408,292		—		—			2,004,668
Other investments (6)	—		792,483		115,272		—			907,755
Other assets (7)	—		24,842		—		(1,327		)	23,515
Total assets accounted for at fair value	$	1,850,333	$	28,983,212	$	922,702	$	(1,327	)	$	31,754,920
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	26,235	$	—	$	—		$	26,235
Other liabilities (7)	—		30,379		36,247		(1,327		)	65,299
Total liabilities accounted for at fair value	$	—	$	56,614	$	36,247	$	(1,327	)	$	91,534

____________

(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.

(b) Level 3 Assets and Liabilities

The tables below present additional information about assets and liabilities measured at fair value on a recurring basis and for which Level 3 inputs were utilized to determine fair value. The tables present a reconciliation of the beginning and ending balances for the three and nine months ended September 30, 2013 and 2012 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at September 30, 2013 and 2012, respectively. The tables do not include gains or losses that were reported in Level 3 in prior periods for assets that were transferred out of Level 3 prior to September 30, 2013 and 2012. Gains and losses for assets and liabilities classified within Level 3 in the table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Level 1 and 2 financial instruments entered into by the Company that are either economically hedged by certain exposures to the Level 3 positions or that hedge the exposures in Level 3 positions.

In general, Level 3 assets include securities for which values were obtained from brokers where either significant inputs were utilized in determining the values that were difficult to corroborate with observable market data, or sufficient information regarding the specific inputs utilized by the broker was not available to support a Level 2 classification. Transfers into or out of Level 3 primarily arise as a result of the valuations utilized by the Company changing between those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3.

There were no significant transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2013 and 2012.

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Realized gains (losses)	32			(1		)	(1		)	1			584
Movement in unrealized gains (losses)	352			(11		)	(1		)	(58		)	(3,405		)
Purchases and issuances	70			—			—			—			70,552
Sales	—			—			—			—			—
Settlements	—			(913		)	(74		)	(4,406		)	(69,193		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	385		$	(12	)	$	—		$	(57	)	$	(3,681	)
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Realized gains (losses)	810			—			(5		)	1,082			—
Movement in unrealized gains (losses)	722			—			64			1,974			(4,015		)
Purchases and issuances	—			—			—			2,333			—
Sales	(15,711		)	—			—			—			—
Settlements	(906		)	—			—			(5,377		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(4	)	$	—		$	59		$	3,057		$	(4,015	)

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	33,511		$	52,588		$	1,596		$	—		$	642,179
Realized gains (losses)	20			4			(22		)	—			913
Movement in unrealized gains (losses)	673			106			(424		)	—			35,886
Purchases and issuances	—			34			6,821			33,369			—
Sales	(555		)	—			—			—			—
Settlements	—			(4,645		)	(59		)	—			(5,347		)
Transfers into Level 3	—			—			—			—			1,162
Transfers out of Level 3	(4,514		)	(14,230		)	(73		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	674		$	110		$	(447	)	$	—		$	35,806
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	25,248		$	—		$	—		$	117,765		$	(35,947	)
Realized gains (losses)	7,017			—			—			343			—
Movement in unrealized gains (losses)	(6,552		)	—			—			1,686			885
Purchases and issuances	8,753			—			—			982			—
Sales	—			—			—			—			—
Settlements	(16,141		)	—			—			(807		)	—
Transfers into Level 3	—			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	456		$	—		$	—		$	1,334		$	885

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	30,098		$	32,005		$	116		$	25,347		$	701,736
Realized gains (losses)	(39		)	10			(1		)	1			885
Movement in unrealized gains (losses)	982			(48		)	(1		)	(76		)	32,341
Purchases and issuances	10,691			—			3,326			—			75,914
Sales	—			(535		)	—			—			—
Settlements	(7,245		)	(2,678		)	(105		)	(5,312		)	(106,325		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	(11,465		)	(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,012		$	(52	)	$	(1	)	$	(75	)	$	30,597
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	18,128		$	—		$	—		$	115,272		$	(36,247	)
Realized gains (losses)	848			—			(15		)	6,869			—
Movement in unrealized gains (losses)	1,685			—			56			1,004			2,858
Purchases and issuances	21,686			—			2,017			5,240			—
Sales	(15,711		)	—			—			—			—
Settlements	(7,676		)	—			—			(24,529		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(520	)	$	—		$	41		$	7,865		$	2,858

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	23,818		$	32,041		$	—		$	—		$	650,851
Realized gains (losses)	4			(23		)	—			—			(523		)
Movement in unrealized gains (losses)	346			58			—			—			75,489
Purchases and issuances	8,949			103			6,821			33,369			—
Sales	(555		)	—			—			—			(32,495		)
Settlements	(181		)	(6,233		)	—			—			(18,529		)
Transfers into Level 3	1,393			22,141			1,091			—			1,162
Transfers out of Level 3	(4,639		)	(14,230		)	(73		)	—			(1,162		)
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	351		$	35		$	—		$	—		$	71,738
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	16,552		$	—		$	—		$	113,959		$	(42,644	)
Realized gains (losses)	6,748			—			—			2,782			—
Movement in unrealized gains (losses)	(2,873		)	—			—			6,206			7,582
Purchases and issuances	8,753			—			—			4,664			—
Sales	—			—			—			(7,327		)	—
Settlements	(15,867		)	—			—			—			—
Transfers into Level 3	5,012			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			(315		)	—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,652		$	—		$	—		$	2,385		$	7,582

(c) Fixed maturities and short-term investments

The Company’s Level 3 assets consist primarily of CDOs, for which non-binding broker quotes are the primary source of the valuations. Sufficient information regarding the specific inputs utilized by the brokers was not available to support a Level 2 classification. The Company obtains the majority of broker quotes for these CDOs from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value. Although the Company does not have access to the specific unobservable inputs that may have been used in the fair value measurements of the CDO securities provided by brokers, we would expect that the significant inputs considered are prepayment rates, probability of default, loss severity in the event of default, recovery rates, liquidity premium and reinvestment rates. Significant increases (decreases) in any of those inputs in isolation could result in a significantly different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

The remainder of the Level 3 assets relate primarily to private investments,alternative fund investments and certain derivative positions as described below.

(d) Other investments

Included within the Other investments component of the Company’s Level 3 valuations are private investments and alternative fund investments where the Company is not deemed to have significant influence over the investee. The fair value of these investments is based upon net asset values received from the investment manager or general partner of the respective entity. The nature of the underlying investments held by the investee that form the basis of the net asset value include assets such as private business ventures and are such that significant Level 3 inputs are utilized in the determination of the individual underlying holding values and, accordingly, the fair value of the Company’s investment in each entity is classified within Level 3. The Company has not adjusted the net asset values received; however, management incorporates factors such as the most recent financial information received, annual audited financial statements and the values at which capital transactions with the investee take place when applying judgment regarding whether any adjustments should be made to the net asset value in recording the fair value of each position. Investments in alternative funds included in Other investments utilize strategies including arbitrage, directional, event driven and multi-style. These funds potentially have lockup and gate provisions which may limit redemption liquidity. For further details regarding the nature of Other investments and related features see Item 8, Note 7, “Other Investments,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(e) Derivative instruments

Derivative instruments recorded within Other liabilities and classified within Level 3 include credit derivatives sold providing protection on senior tranches of structured finance transactions where the value is obtained directly from the investment bank counterparty and sufficient information regarding the inputs utilized in such valuation was not obtained to support a Level 2 classification and guaranteed minimum income benefits embedded within one reinsurance contract. The majority of inputs utilized in the valuations of these types of derivative contracts are considered Level 1 or Level 2; however, each valuation includes at least one Level 3 input that was significant to the valuation and, accordingly, the values are disclosed within Level 3.

(f) Financial Instruments Not Carried at Fair Value

Authoritative guidance over disclosures about the fair value of financial instruments requires additional disclosure of fair value information for financial instruments not carried at fair value in both interim and annual reporting periods. Certain financial instruments, particularly insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash and cash equivalents, accrued investment income, net receivable from investments sold, other assets, net payable for investments purchased, other liabilities and other financial instruments not included below approximated their fair values. The following table includes financial instruments for which the carrying value differs from the estimated fair values at September 30, 2013 and December 31, 2012. All of these fair values estimates are considered Level 2 fair value measurements. The fair values for fixed maturities held to maturity are provided by third party pricing vendors and significant valuation inputs for all other items included were based upon market data obtained from sources independent of the Company, and are subject to the same control environment previously described.

	September 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804
Other investments - structured transactions	293,898		291,924		312,122		293,813
Financial Assets	$	3,096,009	$	3,408,864	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,505,180	$	1,755,877	$	1,551,398	$	1,878,499
Notes payable and debt	1,671,062		1,842,597		1,672,778		1,918,134
Financial Liabilities	$	3,176,242	$	3,598,474	$	3,224,176	$	3,796,633

The Company historically participated in structured transactions. Remaining structured transactions include cash loans supporting project finance transactions, providing liquidity facility financing to structured project deals and an investment in a payment obligation with an insurance company. These transactions are carried at amortized cost. The fair value of these investments held by the Company is determined through use of internal models utilizing reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

Deposit liabilities include obligations under structured insurance and reinsurance transactions. For purposes of fair value disclosures, the Company determined the estimated fair value of the deposit liabilities by assuming a discount rate equal to the appropriate U.S. Treasury rate plus 65.2 basis points at September 30, 2013 and the appropriate U.S. Treasury rate plus 100.3 basis points at December 31, 2012. The discount rate incorporates the Company’s own credit risk into the determination of estimated fair value.

The fair values of the Company’s notes payable and debt outstanding were determined based on quoted market prices.

There are no significant concentrations of credit risk within the Company’s financial instruments as defined in the authoritative guidance over disclosures of fair value of financial instruments not carried at fair value, which excludes certain financial instruments, particularly insurance contracts.

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Investments (Tables)

9 Months Ended

Sep. 30, 2013

Investments [Abstract]

Amortized cost and fair value summary

The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at September 30, 2013 and December 31, 2012 were as follows:

September 30, 2013 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	2,128,375	$	66,604	$	(18,990	)	$	2,175,989	$	—
Corporate (4) (5)	10,395,005		470,327		(106,000		)	10,759,332		(7,945		)
RMBS – Agency	4,032,158		85,282		(48,358		)	4,069,082		—
RMBS – Non-Agency	407,789		30,786		(39,176		)	399,399		(76,138		)
CMBS	1,166,285		44,867		(13,271		)	1,197,881		(2,856		)
CDO	754,897		7,074		(49,823		)	712,148		(2,106		)
Other asset-backed securities (3)	1,122,958		38,343		(10,166		)	1,151,135		(2,932		)
U.S. States and political subdivisions of the States	1,784,621		61,561		(28,084		)	1,818,098		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,980,055		90,713		(71,390		)	4,999,378		—
Total fixed maturities - AFS	$	26,772,143	$	895,557	$	(385,258	)	$	27,282,442	$	(91,977	)
Total short-term investments (2)	$	271,465	$	1,300	$	(60	)	$	272,705	$	—
Total equity securities (6)	$	878,679	$	113,075	$	(17,021	)	$	974,733	$	—
Total investments - AFS	$	27,922,287	$	1,009,932	$	(402,339	)	$	28,529,880	$	(91,977	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,712	$	946	$	—		$	11,658	$	—
Corporate	1,370,391		137,326		(1,436		)	1,506,281		—
RMBS – Non-Agency	65,542		5,580		—			71,122		—
CMBS	141,884		14,298		—			156,182		—
Other asset-backed securities (3)	104,624		9,074		—			113,698		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,108,958		150,391		(1,350		)	1,257,999		—
Total investments - HTM	$	2,802,111	$	317,615	$	(2,786	)	$	3,116,940	$	—

___________

(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.

December 31, 2012 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	1,906,044	$	131,860	$	(3,287	)	$	2,034,617	$	—
Corporate (4) (5)	9,837,962		723,028		(78,990		)	10,482,000		(11,453		)
RMBS – Agency	5,054,097		206,931		(5,535		)	5,255,493		—
RMBS – Non-Agency	678,469		46,132		(76,868		)	647,733		(93,259		)
CMBS	1,010,794		70,745		(4,288		)	1,077,251		(2,962		)
CDO	784,999		11,973		(87,156		)	709,816		(4,872		)
Other asset-backed securities (3)	1,426,483		59,663		(15,435		)	1,470,711		(6,530		)
U.S. States and political subdivisions of the States	1,767,669		146,294		(2,946		)	1,911,017		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,078,289		188,186		(8,193		)	4,258,282		—
Total fixed maturities - AFS	$	26,544,806	$	1,584,812	$	(282,698	)	$	27,846,920	$	(119,076	)
Total short-term investments (2)	$	322,563	$	192	$	(52	)	$	322,703	$	—
Total equity securities (6)	$	617,486	$	31,935	$	(62	)	$	649,359	$	—
Total investments - AFS	$	27,484,855	$	1,616,939	$	(282,812	)	$	28,818,982	$	(119,076	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,788	$	1,651	$	—		$	12,439	$	—
Corporate	1,425,320		190,871		(794		)	1,615,397		—
RMBS – Non-Agency	83,205		10,502		—			93,707		—
CMBS	12,751		2,048		—			14,799		—
Other asset-backed securities (3)	222,340		29,287		(167		)	251,460		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,060,043		216,679		(1,720		)	1,275,002		—
Total investments - HTM	$	2,814,447	$	451,038	$	(2,681	)	$	3,262,804	$	—

____________

(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.

Contractual maturities summary

The contractual maturities of AFS and HTM fixed income securities at September 30, 2013 and December 31, 2012 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2013 (1)				December 31, 2012 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	2,105,725	$	2,121,331	$	1,939,803	$	1,952,250
Due after 1 through 5 years	9,337,994		9,589,870		8,521,090		8,877,512
Due after 5 through 10 years	5,434,814		5,516,467		4,701,391		5,065,158
Due after 10 years	2,409,523		2,525,129		2,427,680		2,790,996
	$	19,288,056	$	19,752,797	$	17,589,964	$	18,685,916
RMBS – Agency	4,032,158		4,069,082		5,054,097		5,255,493
RMBS – Non-Agency	407,789		399,399		678,469		647,733
CMBS	1,166,285		1,197,881		1,010,794		1,077,251
CDO	754,897		712,148		784,999		709,816
Other asset-backed securities	1,122,958		1,151,135		1,426,483		1,470,711
Total mortgage and asset-backed securities	$	7,484,087	$	7,529,645	$	8,954,842	$	9,161,004
Total fixed maturities - AFS	$	26,772,143	$	27,282,442	$	26,544,806	$	27,846,920
Fixed maturities - HTM
Due less than one year	$	68,015	$	69,473	$	36,515	$	37,580
Due after 1 through 5 years	202,799		215,912		195,121		205,562
Due after 5 through 10 years	344,228		374,388		377,541		420,008
Due after 10 years	1,875,019		2,116,165		1,886,974		2,239,688
	$	2,490,061	$	2,775,938	$	2,496,151	$	2,902,838
RMBS – Non-Agency	65,542		71,122		83,205		93,707
CMBS	141,884		156,182		12,751		14,799
Other asset-backed securities	104,624		113,698		222,340		251,460
Total mortgage and asset-backed securities	$	312,050	$	341,002	$	318,296	$	359,966
Total fixed maturities - HTM	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804

____________

(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.

Summary of unrealized losses

The following is an analysis of how long the AFS and HTM securities at September 30, 2013 and December 31, 2012 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
September 30, 2013 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	731,583	$	(18,079	)	$	21,489	$	(929	)
Corporate	1,962,868		(51,810		)	478,878		(54,190		)
RMBS – Agency	1,457,826		(36,568		)	164,046		(11,790		)
RMBS – Non-Agency	29,777		(1,257		)	244,218		(37,919		)
CMBS	287,314		(9,216		)	38,653		(4,055		)
CDO	29,541		(175		)	622,338		(49,648		)
Other asset-backed securities	222,044		(1,821		)	96,251		(8,345		)
U.S. States and political subdivisions of the States	457,908		(27,384		)	8,812		(700		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	1,886,303		(59,159		)	153,802		(12,273		)
Total fixed maturities and short-term investments - AFS	$	7,065,164	$	(205,469	)	$	1,828,487	$	(179,849	)
Total equity securities	$	216,631	$	(17,021	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	32,424	$	(1,410	)	$	632	$	(26	)
Other asset-backed securities	—		—			—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,847		(1,350		)
Total fixed maturities - HTM	$	32,424	$	(1,410	)	$	11,479	$	(1,376	)

	Less than 12 months					Equal to or greater than 12 months
December 31, 2012 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	307,879	$	(2,847	)	$	9,951	$	(471	)
Corporate	476,454		(10,603		)	607,796		(68,387		)
RMBS – Agency	578,823		(4,541		)	11,135		(994		)
RMBS – Non-Agency	6,674		(450		)	448,555		(76,418		)
CMBS	92,899		(666		)	23,580		(3,622		)
CDO	243		(1		)	694,351		(87,155		)
Other asset-backed securities	111,431		(531		)	93,388		(14,904		)
U.S. States and political subdivisions of the States	77,273		(1,407		)	12,851		(1,539		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	355,409		(1,378		)	131,884		(6,836		)
Total fixed maturities and short-term investments - AFS	$	2,007,085	$	(22,424	)	$	2,033,491	$	(260,326	)
Total equity securities	$	615	$	(62	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	4,568	$	(31	)	$	23,005	$	(763	)
Other asset-backed securities	1,239		(167		)	—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,518		(1,720		)
Total fixed maturities - HTM	$	5,807	$	(198	)	$	33,523	$	(2,483	)

Analysis of net realized gains (losses) on investments

The following represents an analysis of net realized gains (losses) on investments:

Net Realized Gains (Losses) on Investments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Gross realized gains	$	22,517		$	33,136		$	160,555		$	153,757
Gross realized losses on investments sold	(21,288		)	(26,000		)	(74,822		)	(89,054		)
OTTI on investments, net of amounts transferred to other comprehensive income	(3,187		)	(12,629		)	(10,214		)	(61,787		)
Net realized gains (losses) on investments	$	(1,958	)	$	(5,493	)	$	75,519		$	2,916

Credit loss impairments on fixed inmcome securities rollforward

The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates or the periods indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

Credit Loss Impairments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Opening balance at beginning of indicated period	$	202,862		$	299,720		$	268,707		$	333,379
Credit loss impairment recognized in the current period on securities not previously impaired	242			2,805			769			8,683
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(17,341		)	(33,114		)	(78,960		)	(87,092		)
Credit loss impairments previously recognized on securities impaired to fair value during the period	—			—			—			(12,891		)
Additional credit loss impairments recognized in the current period on securities previously impaired	2,942			4,834			7,242			41,716
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(2,222		)	(2,773		)	(11,275		)	(12,323		)
Balance at September 30,	$	186,483		$	271,472		$	186,483		$	271,472

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Share Capital - Narrative (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	2 Months Ended	12 Months Ended	3 Months Ended	9 Months Ended
	Feb. 22, 2013 2012 Repurchase Authorization	Dec. 31, 2012 2012 Repurchase Authorization	Sep. 30, 2013 2013 Repurchase Authorization	Sep. 30, 2013 2013 Repurchase Authorization	Sep. 30, 2013 Stock options	Sep. 30, 2013 Restricted stock awards	Sep. 30, 2013 Restricted stock units	Sep. 30, 2013 Performance units	Sep. 30, 2013 Minimum [Member]	Sep. 30, 2013 Minimum [Member] Performance units	Sep. 30, 2013 Maximum [Member]	Sep. 30, 2013 Maximum [Member] Performance units
Shareholders Equity Disclosure [Line Items]
Stock Repurchase Program, Authorized Amount		$ 750,000,000		$ 850,000,000
Stock Repurchased and Retired During Period, Shares	3.8	18.3	4.8	17.7
Stock Repurchased and Retired During Period, Value	98,300,000	401,600,000	150,000,000	523,300,000
Stock Repurchase Program, Remaining Authorized Repurchase Amount	250,000,000			425,000,000
Stock Repurchase Program, Stock repurchased during period average price per share			$ 31.03	$ 29.59
Weighted Average Grant Date Fair Value Per Stock Option					$ 8.34
Number of Stock Options Granted During the Period					1.0
Number of Awards Granted During the Period						0.2	1.8	0.7
Aggregate Grant Date Fair Value of Award						$ 5,300,000	$ 51,500,000	$ 17,800,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period							3 years	3 years	3 years		4 years
Share Based Compensation Arrangement Performance Units Maximum Share Payout Number								1.4
Performance Units Final Payout Percentage Of Grant Amount										0.00%		200.00%

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Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands, except per share amounts)	2013		2012		2013		2012
Basic earnings per ordinary share & ordinary share equivalents outstanding:
Net income (loss) attributable to ordinary shareholders	$	135,648	$	171,902	$	759,136	$	569,684
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Basic earnings per ordinary share & ordinary share equivalents outstanding	$	0.48	$	0.57	$	2.62	$	1.84
Diluted earnings per ordinary share & ordinary share equivalents outstanding:
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Impact of share-based compensation and certain conversion features	5,097		3,565		4,871		2,927
Weighted average ordinary shares outstanding - diluted	290,490		307,764		294,828		312,602
Diluted earnings per ordinary share & ordinary share equivalents outstanding	$	0.47	$	0.56	$	2.57	$	1.82
Dividends per ordinary share	$	0.14	$	0.11	$	0.42	$	0.33

For the three months ended September 30, 2013 and 2012, and for the nine months ended September 30, 2013 and 2012, ordinary shares available for issuance under share-based compensation plans of 6.0 million and 8.6 million, and 6.3 million and 8.8 million, respectively, were not included in the calculation of diluted earnings per share because the assumed exercise or issuance of such shares would be anti-dilutive.

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Derivative Instruments - Derivatives Designated As Fair Value Hedges (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	$ (260)	$ (197)	$ 709	$ (4,830)
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items - amount of gain (loss) recognized in income attributable to risk	(29,523)	(22,323)	(4,280)	(28,313)
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(260)	(197)	709	(4,830)
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Interest rate contracts
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items - amount of gain (loss) recognized in income attributable to risk	0	0	0	1,813
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items - amount of gain (loss) recognized in income attributable to risk	(29,523)	(22,323)	(4,280)	(30,126)
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Deposit liabilities
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items - amount of gain (loss) recognized in income attributable to risk	0	0	0	(6,182)
Derivatives designated as hedging instruments | Fair value hedges | Net realized and unrealized gains (losses) on derivative instruments | Fixed maturity investments
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items - amount of gain (loss) recognized in income attributable to risk	$ 29,263	$ 22,126	$ 4,989	$ 29,665

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Notes Payable and Debt and Financing Arrangements (Details) (USD $)	9 Months Ended
	Sep. 30, 2013 Credit_Facilities		Dec. 31, 2012 Credit_Facilities
Line of Credit Facility [Line Items]
Percentage Ownership Of XLIT Ltd.	100.00%
Number Of Available Letter Of Credit	7		5
Revolving credit facility
Line of Credit Facility [Line Items]
Available letter of credit facilities - commitments	$ 1,000,000,000	[1],[2]	$ 1,000,000,000	[1],[2]
Number Of Available Letter Of Credit	2
Line Of Credit Facility Optional Increased Capacity	475,000,000
Letters of Credit Outstanding, Amount	475,000,000
Letter of credit facilities
Line of Credit Facility [Line Items]
Available letter of credit facilities - commitments	4,475,000,000		4,000,000,000	[1],[3]
Available letter of credit facilities - in use	1,859,662,000	[1]	1,757,250,000	[1]
Collateralized by certain assets of the Company’s investment portfolio	74.50%	[1]	93.30%	[1]
March 2011 Credit Agreement
Line of Credit Facility [Line Items]
Line Of Credit Facility Optional Increased Capacity	500,000,000
December 2011 Credit Agreement
Line of Credit Facility [Line Items]
Line Of Credit Facility Optional Increased Capacity	$ 500,000,000

[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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Segment Information - Narrative (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 segments	Sep. 30, 2012
Segment Reporting Information [Line Items]
Net results from structured products	$ 6,463	$ 5,739	$ 17,692	$ (2,763)
Number of segments			3
Total P&C
Segment Reporting Information [Line Items]
Net results from structured products	6,463	5,739	17,692	(2,763)
Net investment income | Total P&C
Segment Reporting Information [Line Items]
Net results from structured products	18,100	17,500	53,900	52,200
Interest expense | Total P&C
Segment Reporting Information [Line Items]
Net results from structured products	$ (11,600)	$ (11,700)	$ (36,200)	$ (54,900)
Alternative funds
Segment Reporting Information [Line Items]
Alternative investments, timelag for reporting			1 month	1 month
Operating affiliates
Segment Reporting Information [Line Items]
Alternative investments, timelag for reporting			3 months	3 months

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Notes Payable and Debt and Financing Arrangements (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Letter of Credit Summary

The Company's letter of credit facilities and revolving credit facilities at September 30, 2013 and December 31, 2012 were as follows:

Letter of Credit Summary: (U.S. dollars in thousands except percentages)	September 30, 2013 (1)			December 31, 2012 (1)
Revolving credit facility (2)	$	1,000,000		$	1,000,000
Available letter of credit facilities - commitments (3)	$	4,475,000		$	4,000,000
Available letter of credit facilities - in use	$	1,859,662		$	1,757,250
Collateralized by certain assets of the Company’s investment portfolio	74.5		%	93.3		%

____________

(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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Share Capital (Tables)

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Schedule of Valuation Assumptions - Stock Options

The fair value of the options issued was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:

Dividend yield	2.00	%
Risk free interest rate	1.14	%
Volatility	37.0	%
Expected lives	6.0 years

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Derivative Instruments - Gross amounts of derivative fair values contained in the consolidated balance sheet (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Derivatives, Fair Value [Line Items]
Asset derivative fair value	$ 27,979		$ 23,515
Liability derivative fair value	198,801		65,299
Derivatives designated as hedging instruments | Foreign exchange contracts
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	915,109		670,751
Asset derivative fair value	27,024	[1]	12,511	[1]
Liability derivative notional amount	2,766,826		2,382,507
Liability derivative fair value	162,666	[1]	23,715	[1]
Derivatives not designated as hedging instruments
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	184,915		253,183
Asset derivative fair value	3,555	[1]	12,331	[1]
Liability derivative notional amount	559,817		650,411
Liability derivative fair value	38,735	[1]	42,911	[1]
Derivatives not designated as hedging instruments | Investment related derivatives | Interest rate exposure
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	12,715		45,604
Asset derivative fair value	178	[1]	2,060	[1]
Liability derivative notional amount	14,934		26,139
Liability derivative fair value	0	[1]	253	[1]
Derivatives not designated as hedging instruments | Investment related derivatives | Foreign exchange contracts
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	69,204		33,007
Asset derivative fair value	2,421	[1]	226	[1]
Liability derivative notional amount	13,507		54,449
Liability derivative fair value	471	[1]	1,790	[1]
Derivatives not designated as hedging instruments | Investment related derivatives | Credit exposure
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	932		25,000
Asset derivative fair value	16	[1]	486	[1]
Liability derivative notional amount	374,088		436,959
Liability derivative fair value	14,855	[1]	15,472	[1]
Derivatives not designated as hedging instruments | Investment related derivatives | Financial market exposure
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	33,838		72,597
Asset derivative fair value	940	[1]	9,559	[1]
Liability derivative notional amount	55,627		16,910
Liability derivative fair value	0	[1]	0	[1]
Derivatives not designated as hedging instruments | Financial operations derivatives | Credit exposure
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	0	[2]	0	[2]
Asset derivative fair value	0	[1],[2]	0	[1],[2]
Liability derivative notional amount	43,482	[2]	46,903	[2]
Liability derivative fair value	4,190	[1],[2]	0	[1],[2]
Derivatives not designated as hedging instruments | Other non-investment derivatives | Guaranteed minimum income benefit contract
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	0		0
Asset derivative fair value	0	[1]	0	[1]
Liability derivative notional amount	58,179		69,051
Liability derivative fair value	19,219	[1]	25,396	[1]
Derivatives not designated as hedging instruments | Other non-investment derivatives | Modified coinsurance funds withheld contract
Derivatives, Fair Value [Line Items]
Asset derivative notional amount	68,226		76,975
Asset derivative fair value	0	[1]	0	[1]
Liability derivative notional amount	0		0
Liability derivative fair value	$ 0	[1]	$ 0	[1]

[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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Fair Value Measurements - Financial instruments not carried at fair value (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fixed maturities, held to maturity	$ 2,802,111	$ 2,814,447
Other investments - structured transactions	293,900	312,100
Deposit liabilities	1,505,180	1,551,398
Notes payable and debt	1,671,062	1,672,778
Fair value of held to maturity securities	3,116,940	3,262,804
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fixed maturities, held to maturity	2,802,111	2,814,447
Other investments - structured transactions	293,898	312,122
Financial Assets	3,096,009	3,126,569
Deposit liabilities	1,505,180	1,551,398
Notes payable and debt	1,671,062	1,672,778
Financial Liabilities	3,176,242	3,224,176
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fixed maturities, held to maturity	3,116,940	3,262,804
Other investments - structured transactions	291,924	293,813
Financial Assets	3,408,864	3,556,617
Deposit liabilities	1,755,877	1,878,499
Notes payable and debt	1,842,597	1,918,134
Financial Liabilities	$ 3,598,474	$ 3,796,633

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Investments - Contractual maturities of available for sale securities and held to maturity income securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Fixed Maturities - AFS
Due less than one year, amortized cost	$ 2,105,725	[1]	$ 1,939,803	[1]
Due less than one year, fair value	2,121,331	[1]	1,952,250	[1]
Due after 1 through 5 years, amortized cost	9,337,994	[1]	8,521,090	[1]
Due after 1 through 5 years, fair value	9,589,870	[1]	8,877,512	[1]
Due after 5 through 10 years, amortized cost	5,434,814	[1]	4,701,391	[1]
Due after 5 through 10 years, fair value	5,516,467	[1]	5,065,158	[1]
Due after 10 years, amortized cost	2,409,523	[1]	2,427,680	[1]
Due after 10 years, fair value	2,525,129	[1]	2,790,996	[1]
Subtotal - amortized cost	19,288,056	[1]	17,589,964	[1]
Subtotal - fair value	19,752,797	[1]	18,685,916
Mortgage and asset backed securities - amortized cost	7,484,087	[1]	8,954,842	[1]
Mortgage and asset backed securities - fair value	7,529,645	[1]	9,161,004	[1]
Amortized cost of Fixed maturities	26,772,143		26,544,806
Fixed maturities, at fair value	27,282,442		27,846,920
Fixed maturities - HTM
Due less than one year, amortized cost	68,015	[1]	36,515	[1]
Due less than one year, fair value	69,473	[1]	37,580	[1]
Due after 1 through 5 years, amortized cost	202,799	[1]	195,121	[1]
Due after 1 through 5 years, fair value	215,912	[1]	205,562	[1]
Due after 5 through 10 years, amortized cost	344,228	[1]	377,541	[1]
Due after 5 through 10 years, fair value	374,388	[1]	420,008	[1]
Due after 10 years, amortized cost	1,875,019	[1]	1,886,974	[1]
Due after 10 years, fair value	2,116,165	[1]	2,239,688	[1]
Subtotal - amortized cost	2,490,061	[1]	2,496,151	[1]
Subtotal - fair value	2,775,938	[1]	2,902,838	[1]
Mortgage and asset backed securities - amortized cost	312,050	[1]	318,296	[1]
Mortgage and asset backed securities - fair value	341,002	[1]	359,966	[1]
Fixed maturities, held to maturity	2,802,111		2,814,447
Fair value of held to maturity securities	3,116,940		3,262,804
RMBS - Agency
Fixed Maturities - AFS
Mortgage and asset backed securities - amortized cost	4,032,158	[1]	5,054,097	[1]
Mortgage and asset backed securities - fair value	4,069,082	[1]	5,255,493	[1]
Fixed maturities, at fair value	4,069,082		5,255,493
RMBS - Non-Agency
Fixed Maturities - AFS
Mortgage and asset backed securities - amortized cost	407,789	[1]	678,469	[1]
Mortgage and asset backed securities - fair value	399,399	[1]	647,733	[1]
Fixed maturities, at fair value	399,399		647,733
Fixed maturities - HTM
Mortgage and asset backed securities - amortized cost	65,542	[1]	83,205	[1]
Mortgage and asset backed securities - fair value	71,122	[1]	93,707	[1]
Fixed maturities, held to maturity	65,542		83,205
Fair value of held to maturity securities	71,122		93,707
CMBS
Fixed Maturities - AFS
Mortgage and asset backed securities - amortized cost	1,166,285	[1]	1,010,794	[1]
Mortgage and asset backed securities - fair value	1,197,881	[1]	1,077,251	[1]
Fixed maturities, at fair value	1,197,881		1,077,251
Fixed maturities - HTM
Mortgage and asset backed securities - amortized cost	141,884	[1]	12,751	[1]
Mortgage and asset backed securities - fair value	156,182	[1]	14,799	[1]
Fixed maturities, held to maturity	141,884		12,751
Fair value of held to maturity securities	156,182		14,799
CDO
Fixed Maturities - AFS
Mortgage and asset backed securities - amortized cost	754,897	[1]	784,999	[1]
Mortgage and asset backed securities - fair value	712,148	[1]	709,816	[1]
Fixed maturities, at fair value	712,148		709,816
Other asset-backed securities
Fixed Maturities - AFS
Mortgage and asset backed securities - amortized cost	1,122,958	[1]	1,426,483	[1]
Mortgage and asset backed securities - fair value	1,151,135	[1]	1,470,711	[1]
Fixed maturities, at fair value	1,151,135	[2]	1,470,711	[3]
Fixed maturities - HTM
Mortgage and asset backed securities - amortized cost	104,624	[1]	222,340	[1]
Mortgage and asset backed securities - fair value	113,698	[1]	251,460	[1]
Fixed maturities, held to maturity	104,624	[2]	222,340
Fair value of held to maturity securities	$ 113,698		$ 251,460

[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.

[2] 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.

[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

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Derivative Instruments - Schedule of settlement of fair value hedges (Details) (Fair value hedges, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Notes payable and debt
Derivative [Line Items]
Cumulative reduction to interest expense	$ 17,879	$ 13,973
Remaining balance	3,744	7,651
Weighted average years remaining to maturity	1 year 0 months 0 days	2 years 0 months 0 days
Deposit liabilities
Derivative [Line Items]
Cumulative reduction to interest expense	33,379	17,060
Remaining balance	$ 199,816	$ 216,135
Weighted average years remaining to maturity	23 years 10 months 24 days	25 years 10 months 24 days

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2013

Comprehensive Income Loss Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The changes in AOCI, net of tax, by component for the three months ended September 30, 2013 are as follows:

Three months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments		Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax (1)	$	796,073		$	(101,751	)	$	41,755	$	(27,211	)	$	1,894	$	710,760
OCI before reclassifications (2)	121,956			—			4,020		1,092			—		127,068
Amounts reclassified from AOCI	(5,516		)	7,474			—		—			110		2,068
Tax (benefit) expense	(77,575		)	(5		)	—		—			—		(77,580		)
Net current period OCI - net of tax	38,865			7,469			4,020		1,092			110		51,556
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775	$	(26,119	)	$	2,004	$	762,316

____________

(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.

The changes in AOCI, net of tax, by component for the nine months ended September 30, 2013 are as follows:

Nine months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments (1)			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments			Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax	$	1,597,832		$	(121,371	)	$	69,391		$	(27,506	)	$	1,674	$	1,520,020
OCI before reclassifications (1)	(667,097		)	—			(23,616		)	1,387			—		(689,326		)
Amounts reclassified from AOCI	(102,619		)	27,099			—			—			330		(75,190		)
Tax (benefit) expense	6,822			(10		)	—			—			—		6,812
Net current period OCI - net of tax	(762,894		)	27,089			(23,616		)	1,387			330		(757,704		)
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775		$	(26,119	)	$	2,004	$	762,316

____________

(1) Amounts include cumulative adjustments recorded to the value of future policy benefit reserves of $70.3 million.

Reclassification out of Accumulated Other Comprehensive Income

The reclassifications out of AOCI along with the associated income statement line items affected by component, and the total related tax (expense) benefit for the three and nine months ended September 30, 2013 and 2012 are as follows:

Gross Amount Reclassified From AOCI
Details About AOCI Components (U.S. dollars in thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013			Affected Line Item in the Statement of Income
Unrealized gains and losses on investments:
	$	(7,904	)	$	(110,295	)	Net realized gains (losses) on investments sold
	2,388			7,676			OTTI on investments
	$	(5,516	)	$	(102,619	)	Total before tax
	3,352			66			Provision (benefit) for income tax
	$	(2,164	)	$	(102,553	)	Net of tax
OTTI losses recognized in OCI:
	$	6,675		$	24,562		Net realized gains (losses) on investments sold
	799			2,537			OTTI on investments transferred to (from) OCI
	$	7,474		$	27,099		Total before tax
	(5		)	(10		)	Provision (benefit) for income tax
	$	7,469		$	27,089		Net of tax
Gains and losses on cash flow hedges:
Interest rate contracts	$	110		$	330		Interest Expense
	—			—			Provision (benefit) for income tax
	$	110		$	330		Net of tax
Total reclassifications for the period, gross of tax	$	2,068		$	(75,190	)
Tax (benefit) expense	3,347			56
Total reclassifications for the period, net of tax	$	5,415		$	(75,134	)

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Accumulated Other Comprehensive Income (Loss) - Details About AOCI Components (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains (losses) on investments sold	$ 1,229	$ 7,136	$ 85,733	$ 64,703
OTTI on investments	(2,388)	(10,295)	(7,676)	(45,027)
Total before tax	2,068		(75,190)
Provision (benefit) for income tax	(897)	(451)	(73,248)	(51,813)
Unrealized gains (losses) on investments
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains (losses) on investments sold	(7,904)		(110,295)
OTTI on investments	2,388		7,676
Total before tax	(5,516)		(102,619)
Provision (benefit) for income tax	3,352		66
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	(2,164)		(102,553)
OTTI losses recognized in AOCI
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	7,474		27,099
Cash flow hedge
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	110		330
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	2,068		(75,190)
Provision (benefit) for income tax	3,347		56
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	5,415		(75,134)
Reclassification out of Accumulated Other Comprehensive Income [Member] | OTTI losses recognized in AOCI
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains (losses) on investments sold	6,675		24,562
OTTI on investments	799		2,537
Total before tax	7,474		27,099
Provision (benefit) for income tax	(5)		(10)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	7,469		27,089
Reclassification out of Accumulated Other Comprehensive Income [Member] | Cash flow hedge
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Total before tax	110		330
Provision (benefit) for income tax	0		0
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	$ 110		$ 330

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Investments - Credit loss impairments on fixed income securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Investments, Debt and Equity Securities [Abstract]
Balance, beginning of period	$ 202,862	$ 299,720	$ 268,707	$ 333,379
Credit loss impairment recognized in the current period on securities not previously impaired	242	2,805	769	8,683
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(17,341)	(33,114)	(78,960)	(87,092)
Credit loss impairments previously recognized on securities impaired to fair value during the period	0	0	0	(12,891)
Additional credit loss impairments recognized in the current period on securities previously impaired	2,942	4,834	7,242	41,716
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(2,222)	(2,773)	(11,275)	(12,323)
Balance, end of period	$ 186,483	$ 271,472	$ 186,483	$ 271,472

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of location and gross amounts of derivative fair values

The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

	September 30, 2013								December 31, 2012
(U.S. dollars in thousands)	Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)		Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	915,109	$	27,024	$	2,766,826	$	162,666	$	670,751	$	12,511	$	2,382,507	$	23,715
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	12,715	$	178	$	14,934	$	—	$	45,604	$	2,060	$	26,139	$	253
Foreign exchange exposure	69,204		2,421		13,507		471		33,007		226		54,449		1,790
Credit exposure	932		16		374,088		14,855		25,000		486		436,959		15,472
Financial market exposure	33,838		940		55,627		—		72,597		9,559		16,910		—
Financial Operations Derivatives: (2)
Credit exposure	—		—		43,482		4,190		—		—		46,903		—
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	—		—		58,179		19,219		—		—		69,051		25,396
Modified coinsurance funds withheld contract	68,226		—		—		—		76,975		—		—		—
Total derivatives not designated as hedging instruments	$	184,915	$	3,555	$	559,817	$	38,735	$	253,183	$	12,331	$	650,411	$	42,911

____________

(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".

Summary of gross and net amounts of derivative fair values and associated collateral received or paid

The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

							Gross Amounts Not Offset in the Balance Sheet
September 30, 2013 (U.S. dollars in thousands)	Gross Amounts Recognized in Balance Sheet		Gross Amounts Offset in the Balance Sheet		Net Amounts in the Balance Sheet		Financial Instruments		Cash Collateral		Net Amounts
Derivative Assets	$	30,579	$	2,600	$	27,979	$	—	$	—	$	27,979
Derivative Liabilities	$	201,401	$	2,600	$	198,801	$	—	$	113,426	$	85,375
December 31, 2012 (U.S. dollars in thousands)
Derivative Assets	$	24,842	$	1,327	$	23,515	$	—	$	—	$	23,515
Derivative Liabilities	$	66,626	$	1,327	$	65,299	$	—	$	12,130	$	53,169

Gain (loss) recognized in income attributable to risk of hedged items

The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the three and nine months ended September 30, 2013 and 2012:

				Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk
Derivatives Designated as Fair Value Hedges: Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Gain/(Loss) Recognized in Income on Derivative				Deposit Liabilities			Fixed Maturity Investments		Ineffective Portion of Hedging Relationship - Gain/(Loss)
Interest rate exposure	$	—
Foreign exchange exposure	(29,523		)
Total	$	(29,523	)		$	—		$	29,263	$	(260	)
Three Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(22,323		)
Total	$	(22,323	)		$	—		$	22,126	$	(197	)
Nine Months Ended September 30, 2013
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(4,280		)
Total	$	(4,280	)		$	—		$	4,989	$	709
Nine Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	1,813
Foreign exchange exposure	(30,126		)
Total	$	(28,313	)		$	(6,182	)	$	29,665	$	(4,830	)

Summary of fair value hedges that have been settled and their impact on results

A summary of the fair value hedges that have been settled and their impact on results during the three and nine months ended September 30, 2013 and 2012 is shown below:

Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Notes Payable and Debt September 30,				Fair Value Hedges - Deposit Liabilities September 30,
(U.S. dollars in thousands, except years)	2013		2012		2013		2012
Cumulative reduction to interest expense	$	17,879	$	13,973	$	33,379	$	17,060
Remaining balance	$	3,744	$	7,651	$	199,816	$	216,135
Weighted average years remaining to maturity	1.0		2.0		23.9		25.9

Summary of hedges of net investment in foreign operation

The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resultant gain (loss) that was recorded in the cumulative translation adjustment account within AOCI for the three and nine months ended September 30, 2013 and 2012:

Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation - Summary	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$	2,758,577		$	1,920,421		$	2,623,594		$	1,895,409
Derivative gains (losses) (1)	$	(58,852	)	$	(40,784	)	$	(4,373	)	$	(21,879	)

____________

(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.

Summary of net realized and unrealized gains (losses) on derivative instruments

The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the three and nine months ended September 30, 2013 and 2012:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Investment Related Derivatives:
Interest rate exposure	$	4,334		$	243		$	4,822		$	860
Foreign exchange exposure	3,710			1,218			(578		)	1,547
Credit exposure	(956		)	(2,281		)	(2,950		)	343
Financial market exposure	1,553			2,337			4,170			312
Financial Operations Derivatives:
Credit exposure	(3,980		)	—			(2,651		)	143
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	175			885			6,178			1,971
Modified coinsurance funds withheld contract	(3,696		)	4,049			(6,040		)	2,310
Total gain (loss) recognized in income from derivatives not designated as hedging instruments	$	1,140		$	6,451		$	2,951		$	7,486
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(260		)	(197		)	709			(4,830		)
Net realized and unrealized gains (losses) on derivative instruments	$	880		$	6,254		$	3,660		$	2,656

Summary of credit derivative exposures

An aggregate summary of the credit derivative exposure at September 30, 2013 and December 31, 2012 is as follows:

Financial Operations Derivatives - Credit Exposure Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Principal outstanding	$	41,364	$	44,281
Interest outstanding	2,118		2,622
Aggregate outstanding exposure	$	43,482	$	46,903
Total liability recorded	$	4,190	$	—
Weighted average contractual term to maturity	4.0 years		4.7 years
Underlying obligations credit rating	CC		BB

Summary of contingent credit features

The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and the collateral posted under any of these agreements as of September 30, 2013 and December 31, 2012 were as follows:

Contingent Credit Features - Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	114,502	$	20,366
Collateral posted to counterparty	$	84,935	$	5,490

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UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands	Total	Ordinary Shares	Additional Paid in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings (Deficit)	Non-controlling Interest in Equity of Consolidated Subsidiaries
Balance, beginning of year at Dec. 31, 2011		$ 3,156	$ 8,938,679	$ 583,065	$ (113,242)	$ 1,344,472
Issuance of ordinary shares		9	1,380
Buybacks of ordinary shares		(162)	(350,996)		0
Exercise of stock options		3
Exercise of stock options			4,784
Share-based compensation expense			36,529
Change in net unrealized gains (losses) on investments, net of tax	778,300			778,300
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	30,997			30,997
Change in OTTI losses recognized in other comprehensive income, net of tax	52,353			52,353
Change in underfunded pension liability	(2,033)			(2,033)
Change in value of cash flow hedge	330			330
Foreign currency translation adjustments	(19,551)			(19,551)
Net income (loss) attributable to ordinary shareholders	569,684				569,684
Dividends on ordinary shares					(102,236)
Non-controlling interests - contribution						1,500
Non-controlling interests - distribution						0
Non-controlling interests						(62)
Non-controlling interest share in change in accumulated other comprehensive income (loss)						473
Non-controlling interests - deconsolidation						0
Balance, end of year at Sep. 30, 2012	11,757,432	3,006	8,630,376	1,423,461	354,206	1,346,383
Balance, beginning of year at Dec. 31, 2012	11,856,402	2,987	8,584,752	1,520,020	402,318	1,346,325
Issuance of ordinary shares		11	22
Buybacks of ordinary shares		(177)	(499,229)		(26,112)
Exercise of stock options		7
Exercise of stock options			9,711
Share-based compensation expense			34,667
Change in net unrealized gains (losses) on investments, net of tax	(760,705)			(760,705)
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(2,189)			(2,189)
Change in OTTI losses recognized in other comprehensive income, net of tax	27,089			27,089
Change in underfunded pension liability	1,387			1,387
Change in value of cash flow hedge	330			330
Foreign currency translation adjustments	(23,616)			(23,616)
Net income (loss) attributable to ordinary shareholders	759,136				759,136
Dividends on ordinary shares					(122,513)
Non-controlling interests - contribution						500
Non-controlling interests - distribution						(37)
Non-controlling interests						(300)
Non-controlling interest share in change in accumulated other comprehensive income (loss)						(29)
Non-controlling interests - deconsolidation						(1,841)
Balance, end of year at Sep. 30, 2013	$ 11,252,514	$ 2,828	$ 8,129,923	$ 762,316	$ 1,012,829	$ 1,344,618

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Basis of Preparation and Consolidation

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Preparation and Consolidation

Unless the context otherwise indicates, references herein to the “Company” include XL Group plc, an Irish public limited company ("XL-Ireland"), and its consolidated subsidiaries.

These unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. In the opinion of management, these unaudited financial statements reflect all adjustments considered necessary for a fair statement of financial position and results of operations at the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. For further information, see Item 8, Note 2(a), “Significant Accounting Policies – Basis of Preparation and Consolidation,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

To facilitate period-to-period comparisons, certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current period presentation.

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Segment Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Information

The Company is organized into three operating segments: Insurance, Reinsurance and Life operations. The Company’s general investment and financing operations are reflected in Corporate.

The Company evaluates the performance of both the Insurance and Reinsurance segments based on underwriting profit while the Life operations segment performance is based on contribution to net income. Other items of revenue and expenditure of the Company are not evaluated at the segment level. In addition, the Company does not allocate investment assets by segment for its Property and Casualty (“P&C”) operations. Investment assets related to the Company’s Life operations segment and certain structured products included in the Insurance and Reinsurance segments and Corporate are held in separately identified portfolios. As such, net investment income from these assets is included in the contribution from the applicable segment.

The following tables summarize the segment results for the three and nine months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,259,986		$	349,854		$	1,609,840		$	82,291		$	1,692,131
Net premiums written	993,659			333,720			1,327,379			74,683			1,402,062
Net premiums earned	1,104,012			446,617			1,550,629			74,683			1,625,312
Net losses and loss expenses	762,782			243,738			1,006,520			116,549			1,123,069
Acquisition costs	136,421			95,797			232,218			6,110			238,328
Operating expenses (1)	192,936			42,055			234,991			2,659			237,650
Underwriting profit (loss)	$	11,873		$	65,027		$	76,900		$	(50,635	)	$	26,265
Net investment income							147,739			72,128			219,867
Net results from structured products (2)	4,104			2,359			6,463						6,463
Net fee income and other (3)	(2,187		)	597			(1,590		)	43			(1,547		)
Net realized gains (losses) on investments							(2,087		)	129			(1,958		)
Contribution from P&C and Life Operations							$	227,425		$	21,665		$	249,090
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													880
Net income (loss) from investment fund affiliates and operating affiliates (4)													29,669
Exchange (gains) losses													20,303
Corporate operating expenses													61,427
Interest expense (5)													26,342
Non-controlling interests													35,022
Income tax expense													897
Net income (loss) attributable to ordinary shareholders													$	135,648
Ratios – P&C operations: (6)
Loss and loss expense ratio	69.1		%	54.6		%	64.9		%
Underwriting expense ratio	29.8		%	30.8		%	30.1		%
Combined ratio	98.9		%	85.4		%	95.0		%

____________

(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.

Three Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,158,683		$	417,548		$	1,576,231		$	87,413		$	1,663,644
Net premiums written	905,056			403,209			1,308,265			79,487			1,387,752
Net premiums earned	985,625			482,929			1,468,554			79,487			1,548,041
Net losses and loss expenses	623,545			270,532			894,077			119,438			1,013,515
Acquisition costs	128,513			97,740			226,253			10,094			236,347
Operating expenses (1)	186,794			47,227			234,021			2,351			236,372
Underwriting profit (loss)	$	46,773		$	67,430		$	114,203		$	(52,396	)	$	61,807
Net investment income							148,484			73,479			221,963
Net results from structured products (2)	3,087			2,652			5,739						5,739
Net fee income and other (3)	745			656			1,401			240			1,641
Net realized gains (losses) on investments							2,258			(7,751		)	(5,493		)
Contribution from P&C and Life Operations							$	272,085		$	13,572		$	285,657
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													6,254
Net income (loss) from investment fund affiliates and operating affiliates (4)													18,812
Exchange (gains) losses													18,690
Corporate operating expenses													57,604
Interest expense (5)													26,232
Non-controlling interests													35,844
Income tax expense													451
Net income (loss) attributable to ordinary shareholders													$	171,902
Ratios – P&C operations: (6)
Loss and loss expense ratio	63.3		%	56.0		%	60.9		%
Underwriting expense ratio	32.0		%	30.0		%	31.3		%
Combined ratio	95.3		%	86.0		%	92.2		%

____________

(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.

Nine Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	4,230,161		$	1,728,765		$	5,958,926		$	236,563		$	6,195,489
Net premiums written	3,232,010			1,597,550			4,829,560			214,024			5,043,584
Net premiums earned	3,201,646			1,301,726			4,503,372			214,024			4,717,396
Net losses and loss expenses	2,134,622			652,588			2,787,210			344,269			3,131,479
Acquisition costs	405,075			267,930			673,005			17,468			690,473
Operating expenses (1)	571,447			122,098			693,545			7,460			701,005
Underwriting profit (loss)	$	90,502		$	259,110		$	349,612		$	(155,173	)	$	194,439
Net investment income							448,596			214,408			663,004
Net results from structured products (2)	11,821			5,871			17,692						17,692
Net fee income and other (3)	(5,481		)	1,749			(3,732		)	1,130			(2,602		)
Net realized gains (losses) on investments							72,860			2,659			75,519
Contribution from P&C and Life Operations							$	885,028		$	63,024		$	948,052
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													3,660
Net income (loss) from investment fund affiliates and operating affiliates (4)													172,256
Exchange (gains) losses													(24,463		)
Corporate operating expenses													163,504
Interest expense (5)													78,599
Non-controlling interests													73,944
Income tax expense													73,248
Net income (loss) attributable to ordinary shareholders													$	759,136
Ratios – P&C operations: (6)
Loss and loss expense ratio	66.7		%	50.1		%	61.9		%
Underwriting expense ratio	30.5		%	30.0		%	30.3		%
Combined ratio	97.2		%	80.1		%	92.2		%

____________

(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.

Nine Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	3,806,352		$	1,850,315		$	5,656,667		$	266,999		$	5,923,666
Net premiums written	2,885,848			1,732,922			4,618,770			243,606			4,862,376
Net premiums earned	2,878,973			1,348,448			4,227,421			243,630			4,471,051
Net losses and loss expenses	1,890,513			683,984			2,574,497			371,893			2,946,390
Acquisition costs	380,053			273,706			653,759			25,675			679,434
Operating expenses (1)	564,387			127,965			692,352			7,787			700,139
Underwriting profit (loss)	$	44,020		$	262,793		$	306,813		$	(161,725	)	$	145,088
Net investment income							492,031			223,151			715,182
Net results from structured products (2)	14,953			(17,716		)	(2,763		)				(2,763		)
Net fee income and other (3)	(1,019		)	1,979			960			330			1,290
Net realized gains (losses) on investments							25,070			(22,154		)	2,916
Contribution from P&C and Life Operations							$	822,111		$	39,602		$	861,713
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													2,656
Net income (loss) from investment fund affiliates and operating affiliates (4)													78,028
Exchange (gains) losses													13,432
Corporate operating expenses													151,926
Interest expense (5)													79,686
Non-controlling interests													75,856
Income tax expense													51,813
Net income (loss) attributable to ordinary shareholders													$	569,684
Ratios – P&C operations: (6)
Loss and loss expense ratio	65.7		%	50.7		%	60.9		%
Underwriting expense ratio	32.8		%	29.8		%	31.8		%
Combined ratio	98.5		%	80.5		%	92.7		%

____________

(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.

The following tables summarize the Company’s net premiums earned by line of business for the three months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	360,550	$	56,580	$	—	$	417,130
Casualty	362,889		76,904		—		439,793
Property catastrophe	—		120,418		—		120,418
Property	136,007		146,606		—		282,613
Marine, energy, aviation and satellite	—		22,998		—		22,998
Specialty	180,799		—		—		180,799
Other (1)	63,767		23,111		—		86,878
Total P&C Operations	$	1,104,012	$	446,617	$	—	$	1,550,629
Life Operations:
Annuity	$	—	$	—	$	30,608	$	30,608
Other Life	—		—		44,075		44,075
Total Life Operations	$	—	$	—	$	74,683	$	74,683
Total	$	1,104,012	$	446,617	$	74,683	$	1,625,312
Three Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	345,729	$	47,875	$	—	$	393,604
Casualty	294,386		81,799		—		376,185
Property catastrophe	—		113,164		—		113,164
Property	127,482		170,858		—		298,340
Marine, energy, aviation and satellite	—		33,087		—		33,087
Specialty	174,887		—		—		174,887
Other (1)	43,141		36,146		—		79,287
Total P&C Operations	$	985,625	$	482,929	$	—	$	1,468,554
Life Operations:
Annuity	$	—	$	—	$	31,961	$	31,961
Other Life	—		—		47,526		47,526
Total Life Operations	$	—	$	—	$	79,487	$	79,487
Total	$	985,625	$	482,929	$	79,487	$	1,548,041

____________

(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.

The following tables summarize the Company’s net premiums earned by line of business for the nine months ended September 30, 2013 and 2012:

Nine Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,061,194	$	152,993	$	—	$	1,214,187
Casualty	1,028,748		230,432		—		1,259,180
Property catastrophe	—		363,421		—		363,421
Property	395,546		420,373		—		815,919
Marine, energy, aviation and satellite	—		75,423		—		75,423
Specialty	544,898		—		—		544,898
Other (1)	171,260		59,084		—		230,344
Total P&C Operations	$	3,201,646	$	1,301,726	$	—	$	4,503,372
Life Operations:
Annuity	$	—	$	—	$	90,379	$	90,379
Other Life	—		—		123,645		123,645
Total Life Operations	$	—	$	—	$	214,024	$	214,024
Total	$	3,201,646	$	1,301,726	$	214,024	$	4,717,396
Nine Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,000,424	$	156,086	$	—	$	1,156,510
Casualty	827,391		231,884		—		1,059,275
Property catastrophe	—		329,308		—		329,308
Property	365,856		451,617		—		817,473
Marine, energy, aviation and satellite	—		104,458		—		104,458
Specialty	530,930		—		—		530,930
Other (1)	154,372		75,095		—		229,467
Total P&C Operations	$	2,878,973	$	1,348,448	$	—	$	4,227,421
Life Operations:
Annuity	$	—	$	—	$	94,661	$	94,661
Other Life	—		—		148,969		148,969
Total Life Operations	$	—	$	—	$	243,630	$	243,630
Total	$	2,878,973	$	1,348,448	$	243,630	$	4,471,051

____________

(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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Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies

Recent Accounting Pronouncements

In June 2011, the FASB issued an accounting standards update concerning the presentation of comprehensive income in financial statements. This guidance allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income only as part of the statement of changes in shareholders' equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted the guidance from January 1, 2012; however, it did not have an impact on the Company's disclosure, financial condition or results of operations or cash flows. In February 2013, the FASB issued an additional accounting standards update related to this topic that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance was adopted prospectively from January 1, 2013. As this guidance is disclosure-related only and does not change the current requirements for reporting net income or other comprehensive income in financial statements, its adoption did not impact the Company's financial condition, results of operations or cash flows.

In December 2011, the FASB issued an accounting standards update requiring additional disclosures about financial instruments and derivatives that are either: (1) offset for balance sheet presentation purposes or (2) subject to an enforceable master netting arrangement or similar arrangement, regardless of whether they are offset for balance sheet presentation purposes. In January 2013, the FASB issued an additional accounting standards update related to this topic clarifying that the disclosures would apply only to derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending transactions, each to the extent that they met one of the two conditions provided in the initial accounting standards update. This guidance was adopted from January 1, 2013, on a retrospective basis for all fiscal periods presented. As this guidance is disclosure-related only and does not amend existing balance sheet offsetting guidance, its adoption did not impact the Company's financial condition, results of operations or cash flows.

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Investments - Analysis of continual unrealized loss position (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
HTM securities
Less than 12 months Fair Value	$ 32,424	$ 5,807
Less than 12 months Gross Unrealized Losses	(1,410)	(198)
Equal to or greater than 12 months Fair Value	11,479	33,523
Equal to or greater than 12 months Gross Unrealized Losses	(1,376)	(2,483)
Fixed Maturities And Short Term Investments Available For Sale [Member]
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	7,065,164	2,007,085
Less than 12 months Gross Unrealized Losses	(205,469)	(22,424)
Equal to or greater than 12 months Fair Value	1,828,487	2,033,491
Equal to greater than 12 months Gross Unrealized Losses	(179,849)	(260,326)
U.S. Government and Government - Related/Supported
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	731,583	307,879
Less than 12 months Gross Unrealized Losses	(18,079)	(2,847)
Equal to or greater than 12 months Fair Value	21,489	9,951
Equal to greater than 12 months Gross Unrealized Losses	(929)	(471)
Corporate
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	1,962,868	476,454
Less than 12 months Gross Unrealized Losses	(51,810)	(10,603)
Equal to or greater than 12 months Fair Value	478,878	607,796
Equal to greater than 12 months Gross Unrealized Losses	(54,190)	(68,387)
HTM securities
Less than 12 months Fair Value	32,424	4,568
Less than 12 months Gross Unrealized Losses	(1,410)	(31)
Equal to or greater than 12 months Fair Value	632	23,005
Equal to or greater than 12 months Gross Unrealized Losses	(26)	(763)
RMBS - Agency
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	1,457,826	578,823
Less than 12 months Gross Unrealized Losses	(36,568)	(4,541)
Equal to or greater than 12 months Fair Value	164,046	11,135
Equal to greater than 12 months Gross Unrealized Losses	(11,790)	(994)
RMBS - Non-Agency
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	29,777	6,674
Less than 12 months Gross Unrealized Losses	(1,257)	(450)
Equal to or greater than 12 months Fair Value	244,218	448,555
Equal to greater than 12 months Gross Unrealized Losses	(37,919)	(76,418)
CMBS
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	287,314	92,899
Less than 12 months Gross Unrealized Losses	(9,216)	(666)
Equal to or greater than 12 months Fair Value	38,653	23,580
Equal to greater than 12 months Gross Unrealized Losses	(4,055)	(3,622)
CDO
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	29,541	243
Less than 12 months Gross Unrealized Losses	(175)	(1)
Equal to or greater than 12 months Fair Value	622,338	694,351
Equal to greater than 12 months Gross Unrealized Losses	(49,648)	(87,155)
Other asset-backed securities
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	222,044	111,431
Less than 12 months Gross Unrealized Losses	(1,821)	(531)
Equal to or greater than 12 months Fair Value	96,251	93,388
Equal to greater than 12 months Gross Unrealized Losses	(8,345)	(14,904)
HTM securities
Less than 12 months Fair Value	0	1,239
Less than 12 months Gross Unrealized Losses	0	(167)
Equal to or greater than 12 months Fair Value	0	0
Equal to or greater than 12 months Gross Unrealized Losses	0	0
U.S. States and political subdivisions of the States
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	457,908	77,273
Less than 12 months Gross Unrealized Losses	(27,384)	(1,407)
Equal to or greater than 12 months Fair Value	8,812	12,851
Equal to greater than 12 months Gross Unrealized Losses	(700)	(1,539)
Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	1,886,303	355,409
Less than 12 months Gross Unrealized Losses	(59,159)	(1,378)
Equal to or greater than 12 months Fair Value	153,802	131,884
Equal to greater than 12 months Gross Unrealized Losses	(12,273)	(6,836)
HTM securities
Less than 12 months Fair Value	0	0
Less than 12 months Gross Unrealized Losses	0	0
Equal to or greater than 12 months Fair Value	10,847	10,518
Equal to or greater than 12 months Gross Unrealized Losses	(1,350)	(1,720)
Equities
Fixed maturities and short-term investments - AFS:
Less than 12 months Fair Value	216,631	615
Less than 12 months Gross Unrealized Losses	(17,021)	(62)
Equal to or greater than 12 months Fair Value	0	0
Equal to greater than 12 months Gross Unrealized Losses	$ 0	$ 0

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Summary of related party transactions

(U.S. dollars in thousands)	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Reported net premiums written	$	27,112	$	27,761	$	51,119	$	55,323
Net losses and loss expenses incurred	$	9,274	$	11,071	$	21,039	$	26,923
Reported acquisition costs	$	7,189	$	9,034	$	17,875	$	22,236

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Fair Value Measurements - Schedule of assets and liabilities that were accounted for at fair value (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Assets
Fixed maturities, at fair value	$ 27,282,442		$ 27,846,920
Equity securities, at fair value	974,733		649,359
Short-term investments, at fair value	272,705		322,703
Total investments available for sale	28,529,880		28,818,982
U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	2,175,989	[1]	2,034,617	[2]
Corporate
Assets
Fixed maturities, at fair value	10,759,332	[3],[4]	10,482,000	[5],[6]
RMBS - Agency
Assets
Fixed maturities, at fair value	4,069,082		5,255,493
RMBS - Non-Agency
Assets
Fixed maturities, at fair value	399,399		647,733
CMBS
Assets
Fixed maturities, at fair value	1,197,881		1,077,251
CDO
Assets
Fixed maturities, at fair value	712,148		709,816
Other asset-backed securities
Assets
Fixed maturities, at fair value	1,151,135	[7]	1,470,711	[8]
U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	1,818,098		1,911,017
Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	4,999,378	[1]	4,258,282	[2]
Recurring
Assets
Fixed maturities, at fair value	27,282,442		27,846,920
Equity securities, at fair value	974,733	[9]	649,359	[9]
Short-term investments, at fair value	272,705	[10],[11]	322,703	[10],[11]
Total investments available for sale	28,529,880		28,818,982
Cash equivalents	1,426,877	[12]	2,004,668	[12]
Other investments	831,145	[13]	907,755	[13]
Other assets	27,979	[14]	23,515	[14]
Total assets accounted for at fair value	30,815,881		31,754,920
Liabilities
Financial instruments sold, but not yet purchased	27,046	[15]	26,235	[15]
Other liabilities	198,801	[14]	65,299	[14]
Total liabilities accounted for at fair value	225,847		91,534
Recurring | U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	2,175,989		2,034,617
Recurring | Corporate
Assets
Fixed maturities, at fair value	10,759,332	[10],[16]	10,482,000	[10],[16]
Recurring | RMBS - Agency
Assets
Fixed maturities, at fair value	4,069,082		5,255,493
Recurring | RMBS - Non-Agency
Assets
Fixed maturities, at fair value	399,399		647,733
Recurring | CMBS
Assets
Fixed maturities, at fair value	1,197,881		1,077,251
Recurring | CDO
Assets
Fixed maturities, at fair value	712,148		709,816
Recurring | Other asset-backed securities
Assets
Fixed maturities, at fair value	1,151,135	[16]	1,470,711	[16]
Recurring | U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	1,818,098		1,911,017
Recurring | Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	4,999,378		4,258,282
Recurring | Quoted prices in active markets for identical assets (Level 1)
Assets
Fixed maturities, at fair value	0		0
Equity securities, at fair value	469,857	[9]	253,957	[9]
Short-term investments, at fair value	0	[10],[11]	0	[10],[11]
Total investments available for sale	469,857		253,957
Cash equivalents	1,141,559	[12]	1,596,376	[12]
Other investments	0		0
Other assets	0	[14]	0	[14]
Total assets accounted for at fair value	1,611,416		1,850,333
Liabilities
Financial instruments sold, but not yet purchased	3,995	[15]	0	[15]
Other liabilities	0	[14]	0	[14]
Total liabilities accounted for at fair value	3,995		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | Corporate
Assets
Fixed maturities, at fair value	0	[10],[16]	0	[10],[16]
Recurring | Quoted prices in active markets for identical assets (Level 1) | RMBS - Agency
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | RMBS - Non-Agency
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | CMBS
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | CDO
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | Other asset-backed securities
Assets
Fixed maturities, at fair value	0	[16]	0	[16]
Recurring | Quoted prices in active markets for identical assets (Level 1) | U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	0		0
Recurring | Quoted prices in active markets for identical assets (Level 1) | Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	0		0
Recurring | Significant other observable inputs (Level 2)
Assets
Fixed maturities, at fair value	26,495,552		27,039,490
Equity securities, at fair value	504,876	[9]	395,402	[9]
Short-term investments, at fair value	270,647	[10],[11]	322,703	[10],[11]
Total investments available for sale	27,271,075		27,757,595
Cash equivalents	285,318	[12]	408,292	[12]
Other investments	727,289	[13]	792,483	[13]
Other assets	30,579	[14]	24,842	[14]
Total assets accounted for at fair value	28,314,261		28,983,212
Liabilities
Financial instruments sold, but not yet purchased	23,051	[15]	26,235	[15]
Other liabilities	168,012	[14]	30,379	[14]
Total liabilities accounted for at fair value	191,063		56,614
Recurring | Significant other observable inputs (Level 2) | U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	2,175,989		2,034,617
Recurring | Significant other observable inputs (Level 2) | Corporate
Assets
Fixed maturities, at fair value	10,726,705	[10],[16]	10,451,902	[10],[16]
Recurring | Significant other observable inputs (Level 2) | RMBS - Agency
Assets
Fixed maturities, at fair value	4,051,793		5,223,488
Recurring | Significant other observable inputs (Level 2) | RMBS - Non-Agency
Assets
Fixed maturities, at fair value	399,390		647,617
Recurring | Significant other observable inputs (Level 2) | CMBS
Assets
Fixed maturities, at fair value	1,177,921		1,051,904
Recurring | Significant other observable inputs (Level 2) | CDO
Assets
Fixed maturities, at fair value	7,597		8,080
Recurring | Significant other observable inputs (Level 2) | Other asset-backed securities
Assets
Fixed maturities, at fair value	1,138,681	[16]	1,452,583	[16]
Recurring | Significant other observable inputs (Level 2) | U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	1,818,098		1,911,017
Recurring | Significant other observable inputs (Level 2) | Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	4,999,378		4,258,282
Recurring | Significant other unobservable inputs (Level 3)
Assets
Fixed maturities, at fair value	786,890		807,430
Equity securities, at fair value	0	[9]	0	[9]
Short-term investments, at fair value	2,058	[10],[11]	0	[10],[11]
Total investments available for sale	788,948		807,430
Cash equivalents	0	[12]	0	[12]
Other investments	103,856	[13]	115,272	[13]
Other assets	0	[14]	0	[14]
Total assets accounted for at fair value	892,804		922,702
Liabilities
Financial instruments sold, but not yet purchased	0	[15]	0	[15]
Other liabilities	33,389	[14]	36,247	[14]
Total liabilities accounted for at fair value	33,389		36,247
Recurring | Significant other unobservable inputs (Level 3) | U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	0		0
Recurring | Significant other unobservable inputs (Level 3) | Corporate
Assets
Fixed maturities, at fair value	32,627	[10],[16]	30,098	[10],[16]
Recurring | Significant other unobservable inputs (Level 3) | RMBS - Agency
Assets
Fixed maturities, at fair value	17,289		32,005
Recurring | Significant other unobservable inputs (Level 3) | RMBS - Non-Agency
Assets
Fixed maturities, at fair value	9		116
Recurring | Significant other unobservable inputs (Level 3) | CMBS
Assets
Fixed maturities, at fair value	19,960		25,347
Recurring | Significant other unobservable inputs (Level 3) | CDO
Assets
Fixed maturities, at fair value	704,551		701,736
Recurring | Significant other unobservable inputs (Level 3) | Other asset-backed securities
Assets
Fixed maturities, at fair value	12,454	[16]	18,128	[16]
Recurring | Significant other unobservable inputs (Level 3) | U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	0		0
Recurring | Significant other unobservable inputs (Level 3) | Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting
Assets
Fixed maturities, at fair value	0		0
Equity securities, at fair value	0	[9]	0	[9]
Short-term investments, at fair value	0	[10],[11]	0	[10],[11]
Total investments available for sale	0		0
Cash equivalents	0	[12]	0	[12]
Other investments	0	[13]	0	[13]
Other assets	(2,600)	[14]	(1,327)	[14]
Total assets accounted for at fair value	(2,600)		(1,327)
Liabilities
Financial instruments sold, but not yet purchased	0	[15]	0	[15]
Other liabilities	(2,600)	[14]	(1,327)	[14]
Total liabilities accounted for at fair value	(2,600)		(1,327)
Recurring | Collateral and counterparty netting | U.S. Government and Government - Related/Supported
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | Corporate
Assets
Fixed maturities, at fair value	0	[10],[16]	0	[10],[16]
Recurring | Collateral and counterparty netting | RMBS - Agency
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | RMBS - Non-Agency
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | CMBS
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | CDO
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | Other asset-backed securities
Assets
Fixed maturities, at fair value	0	[16]	0	[16]
Recurring | Collateral and counterparty netting | U.S. States and political subdivisions of the States
Assets
Fixed maturities, at fair value	0		0
Recurring | Collateral and counterparty netting | Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Assets
Fixed maturities, at fair value	$ 0		$ 0

[1] 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.

[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] 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.

[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 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.

[6] 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.

[7] 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.

[8] 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

[9] 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.

[10] 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.

[11] Short-term investments consist primarily of Corporate securities and U.S. and Non-U.S. Government and Government-Related/ Supported securities.

[12] 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.

[13] 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.

[14] 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.

[15] Financial instruments sold, but not yet purchased, represent “short sales” and are included within “Payable for investments purchased” on the balance sheet.

[16] 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.

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Segment Information - Net Premiums Earned by Line of Business (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Net premiums earned by line of business:
Life Operations	$ 74,683		$ 79,487		$ 214,024		$ 243,630
Total	1,625,312		1,548,041		4,717,396		4,471,051
Total P&C
Net premiums earned by line of business:
P&C Operations	1,550,629		1,468,554		4,503,372		4,227,421
Total	1,550,629		1,468,554		4,503,372		4,227,421
Insurance Segment
Net premiums earned by line of business:
P&C Operations	1,104,012		985,625		3,201,646		2,878,973
Total	1,104,012		985,625		3,201,646		2,878,973
Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	446,617		482,929		1,301,726		1,348,448
Total	446,617		482,929		1,301,726		1,348,448
Life Operations Segment
Net premiums earned by line of business:
Life Operations	74,683		79,487		214,024		243,630
Total	74,683		79,487		214,024		243,630
Professional | Total P&C
Net premiums earned by line of business:
P&C Operations	417,130		393,604		1,214,187		1,156,510
Professional | Insurance Segment
Net premiums earned by line of business:
P&C Operations	360,550		345,729		1,061,194		1,000,424
Professional | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	56,580		47,875		152,993		156,086
Casualty | Total P&C
Net premiums earned by line of business:
P&C Operations	439,793		376,185		1,259,180		1,059,275
Casualty | Insurance Segment
Net premiums earned by line of business:
P&C Operations	362,889		294,386		1,028,748		827,391
Casualty | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	76,904		81,799		230,432		231,884
Property catastrophe | Total P&C
Net premiums earned by line of business:
P&C Operations	120,418		113,164		363,421		329,308
Property catastrophe | Insurance Segment
Net premiums earned by line of business:
P&C Operations	0		0		0		0
Property catastrophe | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	120,418		113,164		363,421		329,308
Property | Total P&C
Net premiums earned by line of business:
P&C Operations	282,613		298,340		815,919		817,473
Property | Insurance Segment
Net premiums earned by line of business:
P&C Operations	136,007		127,482		395,546		365,856
Property | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	146,606		170,858		420,373		451,617
Marine, energy, aviation and satellite | Total P&C
Net premiums earned by line of business:
P&C Operations	22,998		33,087		75,423		104,458
Marine, energy, aviation and satellite | Insurance Segment
Net premiums earned by line of business:
P&C Operations	0		0		0		0
Marine, energy, aviation and satellite | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	22,998		33,087		75,423		104,458
Specialty | Total P&C
Net premiums earned by line of business:
P&C Operations	180,799		174,887		544,898		530,930
Specialty | Insurance Segment
Net premiums earned by line of business:
P&C Operations	180,799		174,887		544,898		530,930
Specialty | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	0		0		0		0
Other | Total P&C
Net premiums earned by line of business:
P&C Operations	86,878	[1]	79,287	[1]	230,344	[1]	229,467	[1]
Other | Insurance Segment
Net premiums earned by line of business:
P&C Operations	63,767	[1]	43,141	[1]	171,260	[1]	154,372	[1]
Other | Reinsurance Segment
Net premiums earned by line of business:
P&C Operations	23,111	[1]	36,146	[1]	59,084	[1]	75,095	[1]
Annuity
Net premiums earned by line of business:
Life Operations	30,608		31,961		90,379		94,661
Annuity | Life Operations Segment
Net premiums earned by line of business:
Life Operations	30,608		31,961		90,379		94,661
Other life
Net premiums earned by line of business:
Life Operations	44,075		47,526		123,645		148,969
Other life | Life Operations Segment
Net premiums earned by line of business:
Life Operations	$ 44,075		$ 47,526		$ 123,645		$ 148,969

[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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Share Capital Share Capital (Details) - Options valuation assumptions (Details)	9 Months Ended
	Sep. 30, 2013
Stockholders' Equity Note [Abstract]
Dividend yield	2.00%
Risk free interest rate	1.14%
Volatility	37.00%
Expected lives	6 years

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Derivative Instruments - Derivative Instruments Designated as Hedges of the net Investment In a Foreign Operation - Summary (Details) (Derivatives designated as hedging instruments, USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Derivatives designated as hedging instruments
Derivative [Line Items]
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$ 2,758,577		$ 1,920,421		$ 2,623,594		$ 1,895,409
Derivative gains (losses)	$ (58,852)	[1]	$ (40,784)	[1]	$ (4,373)	[1]	$ (21,879)	[1]

[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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Investments - Narrative (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013 positions		Sep. 30, 2012	Sep. 30, 2013 positions		Sep. 30, 2012	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Reinsurance Recoverables on Unpaid Losses	$ 3,352,667,000			$ 3,352,667,000			$ 3,382,102,000
Percentage of Gross Unrealized losses in Fixed income securities portfolio related to securities below investment grade or not rated	16.70%			16.70%			37.70%
Fixed maturities, at fair value	27,282,442,000			27,282,442,000			27,846,920,000
Investments In Structured Transactions Not Carried at Fair Value	293,900,000			293,900,000			312,100,000
Fixed maturities, held to maturity	2,802,111,000			2,802,111,000			2,814,447,000
Fair value of held to maturity securities	3,116,940,000			3,116,940,000			3,262,804,000
Amortized cost of fixed maturities	26,772,143,000			26,772,143,000			26,544,806,000
Equity securities, at fair value	974,733,000			974,733,000			649,359,000
Cost of equity securities	878,679,000			878,679,000			617,486,000
Percentage of Fixed Income Investment portfolio invested in below investment grade or not rated	2.50%			2.50%			2.90%
Pledged Assets Separately Reported, Other Debt Securities Available-for-sale or Held-for-investment	16,000,000,000			16,000,000,000			16,900,000,000
Available for sale securities, Gross unrealized losses	402,339,000			402,339,000			282,812,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	2,037			2,037
Available-for-sale Securities, Qualitative Disclosure, Number of Positions	7,602			7,602
Fixed maturites held to maturity, gross unrealized losses	2,786,000			2,786,000			2,681,000
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	5			5
Held-to-maturity Securities, Qualitative Disclosure, Number of Positions	204			204
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Reductions, Securities Sold	17,341,000		33,114,000	78,960,000		87,092,000
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities	3,187,000		12,629,000	10,214,000		61,787,000
Reinsurance Receivables	97,100,000			97,100,000			58,428,000
Government Related Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Marketable Securities Cost Or Amortized Cost	2,373,400,000			2,373,400,000			1,912,700,000
Marketable Securities	2,414,700,000			2,414,700,000			1,988,500,000
Agency Securities
Schedule of Available-for-sale Securities [Line Items]
Marketable Securities Cost Or Amortized Cost	268,700,000			268,700,000			404,300,000
Marketable Securities	290,600,000			290,600,000			446,700,000
Covered bonds
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, at fair value	560,700,000			560,700,000			647,100,000
Fixed maturities, held to maturity	8,300,000			8,300,000			8,400,000
Fair value of held to maturity securities	8,300,000			8,300,000			8,600,000
Amortized cost of fixed maturities	531,400,000			531,400,000			605,400,000
Corporate
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, at fair value	10,759,332,000	[1],[2]		10,759,332,000	[1],[2]		10,482,000,000	[3],[4]
Fixed maturities, held to maturity	1,370,391,000			1,370,391,000			1,425,320,000
Fair value of held to maturity securities	1,506,281,000			1,506,281,000			1,615,397,000
Amortized cost of fixed maturities	10,395,005,000	[1],[2]		10,395,005,000	[1],[2]		9,837,962,000	[3],[4]
Fixed maturites held to maturity, gross unrealized losses	1,436,000			1,436,000			794,000
Medium term notes
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, at fair value	150,900,000			150,900,000			194,300,000
Amortized cost of fixed maturities	150,600,000			150,600,000			194,800,000
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities	1,100,000
Tier One And Upper Tier Two Securities
Schedule of Available-for-sale Securities [Line Items]
Marketable Securities Cost Or Amortized Cost	280,200,000			280,200,000			327,600,000
Marketable Securities	271,500,000			271,500,000			308,500,000
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Accumulated In Investments	8,800,000			8,800,000			19,100,000
Fixed income funds
Schedule of Available-for-sale Securities [Line Items]
Equity securities, at fair value	89,700,000			89,700,000			101,900,000
Cost of equity securities	100,000,000			100,000,000			100,000,000
Structured Credit Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Marketable Securities	4,200,000			4,200,000
Impaired Investment Cumulative Fair Value Decline Percentage Amortized Cost	50.00%			50.00%
Marketable Securities Unrealized Loss Other Than Temporary Impairments Amount	13,000,000			13,000,000
RMBS - Non-Agency
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, at fair value	399,399,000			399,399,000			647,733,000
Fixed maturities, held to maturity	65,542,000			65,542,000			83,205,000
Fair value of held to maturity securities	71,122,000			71,122,000			93,707,000
Amortized cost of fixed maturities	407,789,000			407,789,000			678,469,000
Fixed maturites held to maturity, gross unrealized losses	0			0			0
Marketable Securities Unrealized Loss Other Than Temporary Impairments Amount	700,000			700,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Reductions, Securities Sold	3,100,000		11,600,000	63,300,000		38,300,000
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities	2,100,000
CMBS
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities, at fair value	1,197,881,000			1,197,881,000			1,077,251,000
Fixed maturities, held to maturity	141,884,000			141,884,000			12,751,000
Fair value of held to maturity securities	156,182,000			156,182,000			14,799,000
Amortized cost of fixed maturities	1,166,285,000			1,166,285,000			1,010,794,000
Fixed maturites held to maturity, gross unrealized losses	0			0			0
Marketable Securities Unrealized Loss Other Than Temporary Impairments Amount	500,000			500,000
Core Cdo Holdings
Schedule of Available-for-sale Securities [Line Items]
Marketable Securities Unrealized Loss Other Than Temporary Impairments Amount	$ 11,700,000			$ 11,700,000

[1] 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.

[2] 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.

[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 $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.

[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 $308.5 million and an amortized cost of $327.6 million at December 31, 2012.

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CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Amortized cost of fixed maturities	$ 26,772,143	$ 26,544,806
Cost of equity securities	878,679	617,486
Short-term investments, amortized cost	271,465	322,563
Fair value of held to maturity securities	$ 3,116,940	$ 3,262,804
Ordinary shares, shares authorized (in shares)	999,990,000	999,990,000
Ordinary shares, par value (in dollars per share)	$ 0.01	$ 0.01
Ordinary shares, shares issued (in shares)	282,810,509	298,681,573
Ordinary shares, shares outstanding (in shares)	282,810,509	298,681,573

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Share Capital

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Share Capital

(a) Authorized and Issued

Buybacks of Ordinary Shares

On February 27, 2012, XL-Ireland announced that its Board of Directors approved a share buyback program authorizing the Company to purchase up to $750 million of its ordinary shares (the “February 2012 Program”). During 2012, the Company purchased and canceled 18.3 million ordinary shares under the February 2012 Program for $401.6 million. Between January 1 and February 22, 2013, the Company purchased and canceled 3.8 million ordinary shares under the February 2012 Program for $98.3 million. See Item 8, Note 18, “Share Capital,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

On February 22, 2013, XL-Ireland announced that its Board of Directors approved a new share buyback program, authorizing the Company to purchase up to $850 million of its ordinary shares (the “February 2013 Program”). This authorization replaced the approximately $250 million remaining under the February 2012 Program.

During the three months ended September 30, 2013, the Company purchased and canceled 4.8 million ordinary shares for $150.0 million at an average price of $31.03 per share.

During the nine months ended September 30, 2013, the Company purchased and canceled 17.7 million ordinary shares for $523.3 million at an average price of $29.59 per share. At September 30, 2013, $425.0 million remained available for purchase under the February 2013 Program.

All share buybacks were carried out by way of redemption in accordance with Irish law and the Company's constitutional documents. All shares so redeemed were canceled upon redemption.

(b) Stock Plans

The Company's performance incentive programs provide for grants of stock options, restricted stock, restricted stock units and performance units and stock appreciation rights. Share-based compensation granted by the Company generally contains a vesting period of three or four years, and certain awards also contain performance conditions. The Company records compensation expense related to each award over its vesting period incorporating the best estimate of the expected outcome of performance conditions where applicable. Compensation expense is generally recorded on a straight line basis over the vesting period of an award. See Item 8, Note 18, “Share Capital,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for further information on the Company's performance incentive programs and associated accounting.

During the nine months ended September 30, 2013, the Company granted approximately 1.0 million stock options with a weighted-average grant date fair value of $8.34 per option. The fair value of the options issued was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:

Dividend yield	2.00	%
Risk free interest rate	1.14	%
Volatility	37.0	%
Expected lives	6.0 years

During the nine months ended September 30, 2013, the Company granted approximately 0.2 million restricted stock awards to certain employees and directors of the Company and its subsidiaries with an aggregate grant date fair value of approximately $5.3 million. The award recipients generally have the rights and privileges of a shareholder as to the restricted stock, including the right to receive dividends contingent upon the vesting of the restricted stock and the right to vote such restricted stock. The recipients are not entitled to receive delivery of a stock certificate prior to vesting nor may any restricted stock be sold, transferred, pledged, or otherwise disposed of prior to the satisfaction of all vesting requirements.

During the nine months ended September 30, 2013, the Company granted approximately 1.8 million restricted stock units to certain employees of the Company and its subsidiaries with an aggregate grant date fair value of approximately $51.5 million. Each restricted stock unit represents the Company's obligation to deliver to the holder one ordinary share upon satisfaction of the three years vesting term. Restricted stock units are granted at the closing market price on the day of grant and entitle the holder to receive dividends declared and paid in the form of additional ordinary shares contingent upon vesting.

During the nine months ended September 30, 2013, the Company granted approximately 0.7 million performance units (representing a potential maximum share payout of approximately 1.4 million ordinary shares) to certain employees with an aggregate grant date fair value of approximately $17.8 million. The performance units vest after three years, subject to the achievement of stated performance metrics, and entitle the holder to ordinary shares of the Company. There are no dividend rights associated with the performance units. Each grant of performance units has a target number of shares, with final payouts ranging from 0% to 200% of the grant amount depending upon a combination of corporate and business segment performance along with each employee's continued service through the vesting date. Performance targets are based on relative and absolute financial performance metrics.

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UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net income (loss) attributable to ordinary shareholders	$ 135,648	$ 171,902	$ 759,136	$ 569,684
Change in net unrealized gains (losses) on investments, net of tax	66,696	456,642	(760,705)	778,300
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(27,831)	14,614	(2,189)	30,997
Change in OTTI losses recognized in other comprehensive income, net of tax	7,469	25,936	27,089	52,353
Change in underfunded pension liability	1,092	(2,026)	1,387	(2,033)
Change in value of cash flow hedge	110	110	330	330
Foreign currency translation adjustments	4,020	17,415	(23,616)	(19,551)
Comprehensive income (loss)	$ 187,204	$ 684,593	$ 1,432	$ 1,410,080

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Related Party Transactions - Schedule of related party transactions activity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013 management_company	Sep. 30, 2012 management_company	Sep. 30, 2013 management_company	Sep. 30, 2012 management_company
Related Party Transaction [Line Items]
Reported net premiums written	$ 1,402,062	$ 1,387,752	$ 5,043,584	$ 4,862,376
Net losses and loss expenses incurred	1,006,520	894,077	2,787,210	2,574,497
Reported acquisition costs	238,328	236,347	690,473	679,434
Number of investment management companies	5	4	5	4
Investment manager affiliates
Related Party Transaction [Line Items]
Reported net premiums written	27,112	27,761	51,119	55,323
Net losses and loss expenses incurred	9,274	11,071	21,039	26,923
Reported acquisition costs	$ 7,189	$ 9,034	$ 17,875	$ 22,236

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UNAUDITED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Investments:
Fixed maturities, at fair value (amortized cost: 2013, $26,772,143; 2012, $26,544,806)	$ 27,282,442	$ 27,846,920
Equity securities, at fair value (cost: 2013, $878,679; 2012, $617,486)	974,733	649,359
Short-term investments, at fair value (amortized cost: 2013, $271,465; 2012, $322,563)	272,705	322,703
Total investments available for sale	28,529,880	28,818,982
Fixed maturities, held to maturity at amortized cost (fair value: 2013, $3,116,940; 2012, $3,262,804)	2,802,111	2,814,447
Investments in affiliates	1,362,484	1,126,875
Other investments	1,125,045	1,219,879
Total investments	33,819,520	33,980,183
Cash and cash equivalents	2,130,893	2,618,378
Accrued investment income	347,996	342,778
Deferred acquisition costs	722,151	675,653
Ceded unearned premiums	772,563	587,074
Premiums receivable	2,911,880	2,568,862
Reinsurance balances receivable	97,100	58,428
Unpaid losses and loss expenses recoverable	3,352,667	3,382,102
Receivable from investments sold	43,261	16,002
Goodwill and other intangible assets	410,933	408,527
Deferred tax asset	222,638	166,143
Other assets	794,781	582,765
Total assets	45,626,383	45,386,895
Liabilities:
Unpaid losses and loss expenses	20,407,428	20,484,121
Deposit liabilities	1,505,180	1,551,398
Future policy benefit reserves	4,762,044	4,812,046
Unearned premiums	4,254,939	3,755,086
Notes payable and debt	1,671,062	1,672,778
Reinsurance balances payable	480,822	143,112
Payable for investments purchased	146,502	102,113
Deferred tax liability	123,244	141,803
Other liabilities	1,022,648	868,036
Total liabilities	34,373,869	33,530,493
Commitments and Contingencies
Shareholders' Equity:
Ordinary shares, 999,990,000 authorized, par value $0.01; issued and outstanding (2013, 282,810,509; 2012, 298,681,573)	2,828	2,987
Additional paid in capital	8,129,923	8,584,752
Accumulated other comprehensive income	762,316	1,520,020
Retained earnings	1,012,829	402,318
Shareholders' equity attributable to XL Group plc	9,907,896	10,510,077
Non-controlling interest in equity of consolidated subsidiaries	1,344,618	1,346,325
Total shareholders' equity	11,252,514	11,856,402
Total liabilities and shareholders' equity	$ 45,626,383	$ 45,386,895

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Derivative Instruments - Net Realized and unrealized gains (losses) on Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative [Line Items]
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	$ (260)	$ (197)	$ 709	$ (4,830)
Net realized and unrealized gains (losses) on derivative instruments	880	6,254	3,660	2,656
Derivatives not designated as hedging instruments
Derivative [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	1,140	6,451	2,951	7,486
Derivatives not designated as hedging instruments | Investment related derivatives
Derivative [Line Items]
Interest rate exposure	4,334	243	4,822	860
Foreign exchange exposure	3,710	1,218	(578)	1,547
Credit exposure	(956)	(2,281)	(2,950)	343
Financial market exposure	1,553	2,337	4,170	312
Derivatives not designated as hedging instruments | Financial operations derivatives
Derivative [Line Items]
Credit exposure	(3,980)	0	(2,651)	143
Derivatives not designated as hedging instruments | Other non-investment derivatives
Derivative [Line Items]
Guaranteed minimum income benefit contract	175	885	6,178	1,971
Gain Loss On Modified Coinsurance Funds Withheld Contract Not Designated As Hedging Instruments	$ (3,696)	$ 4,049	$ (6,040)	$ 2,310

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Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Calculation of earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands, except per share amounts)	2013		2012		2013		2012
Basic earnings per ordinary share & ordinary share equivalents outstanding:
Net income (loss) attributable to ordinary shareholders	$	135,648	$	171,902	$	759,136	$	569,684
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Basic earnings per ordinary share & ordinary share equivalents outstanding	$	0.48	$	0.57	$	2.62	$	1.84
Diluted earnings per ordinary share & ordinary share equivalents outstanding:
Weighted average ordinary shares outstanding - basic	285,393		304,199		289,957		309,675
Impact of share-based compensation and certain conversion features	5,097		3,565		4,871		2,927
Weighted average ordinary shares outstanding - diluted	290,490		307,764		294,828		312,602
Diluted earnings per ordinary share & ordinary share equivalents outstanding	$	0.47	$	0.56	$	2.57	$	1.82
Dividends per ordinary share	$	0.14	$	0.11	$	0.42	$	0.33

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Schedule of segment reporting, by segment

The following tables summarize the segment results for the three and nine months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,259,986		$	349,854		$	1,609,840		$	82,291		$	1,692,131
Net premiums written	993,659			333,720			1,327,379			74,683			1,402,062
Net premiums earned	1,104,012			446,617			1,550,629			74,683			1,625,312
Net losses and loss expenses	762,782			243,738			1,006,520			116,549			1,123,069
Acquisition costs	136,421			95,797			232,218			6,110			238,328
Operating expenses (1)	192,936			42,055			234,991			2,659			237,650
Underwriting profit (loss)	$	11,873		$	65,027		$	76,900		$	(50,635	)	$	26,265
Net investment income							147,739			72,128			219,867
Net results from structured products (2)	4,104			2,359			6,463						6,463
Net fee income and other (3)	(2,187		)	597			(1,590		)	43			(1,547		)
Net realized gains (losses) on investments							(2,087		)	129			(1,958		)
Contribution from P&C and Life Operations							$	227,425		$	21,665		$	249,090
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													880
Net income (loss) from investment fund affiliates and operating affiliates (4)													29,669
Exchange (gains) losses													20,303
Corporate operating expenses													61,427
Interest expense (5)													26,342
Non-controlling interests													35,022
Income tax expense													897
Net income (loss) attributable to ordinary shareholders													$	135,648
Ratios – P&C operations: (6)
Loss and loss expense ratio	69.1		%	54.6		%	64.9		%
Underwriting expense ratio	29.8		%	30.8		%	30.1		%
Combined ratio	98.9		%	85.4		%	95.0		%

____________

(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.

Three Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	1,158,683		$	417,548		$	1,576,231		$	87,413		$	1,663,644
Net premiums written	905,056			403,209			1,308,265			79,487			1,387,752
Net premiums earned	985,625			482,929			1,468,554			79,487			1,548,041
Net losses and loss expenses	623,545			270,532			894,077			119,438			1,013,515
Acquisition costs	128,513			97,740			226,253			10,094			236,347
Operating expenses (1)	186,794			47,227			234,021			2,351			236,372
Underwriting profit (loss)	$	46,773		$	67,430		$	114,203		$	(52,396	)	$	61,807
Net investment income							148,484			73,479			221,963
Net results from structured products (2)	3,087			2,652			5,739						5,739
Net fee income and other (3)	745			656			1,401			240			1,641
Net realized gains (losses) on investments							2,258			(7,751		)	(5,493		)
Contribution from P&C and Life Operations							$	272,085		$	13,572		$	285,657
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													6,254
Net income (loss) from investment fund affiliates and operating affiliates (4)													18,812
Exchange (gains) losses													18,690
Corporate operating expenses													57,604
Interest expense (5)													26,232
Non-controlling interests													35,844
Income tax expense													451
Net income (loss) attributable to ordinary shareholders													$	171,902
Ratios – P&C operations: (6)
Loss and loss expense ratio	63.3		%	56.0		%	60.9		%
Underwriting expense ratio	32.0		%	30.0		%	31.3		%
Combined ratio	95.3		%	86.0		%	92.2		%

____________

(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.

Nine Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	4,230,161		$	1,728,765		$	5,958,926		$	236,563		$	6,195,489
Net premiums written	3,232,010			1,597,550			4,829,560			214,024			5,043,584
Net premiums earned	3,201,646			1,301,726			4,503,372			214,024			4,717,396
Net losses and loss expenses	2,134,622			652,588			2,787,210			344,269			3,131,479
Acquisition costs	405,075			267,930			673,005			17,468			690,473
Operating expenses (1)	571,447			122,098			693,545			7,460			701,005
Underwriting profit (loss)	$	90,502		$	259,110		$	349,612		$	(155,173	)	$	194,439
Net investment income							448,596			214,408			663,004
Net results from structured products (2)	11,821			5,871			17,692						17,692
Net fee income and other (3)	(5,481		)	1,749			(3,732		)	1,130			(2,602		)
Net realized gains (losses) on investments							72,860			2,659			75,519
Contribution from P&C and Life Operations							$	885,028		$	63,024		$	948,052
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													3,660
Net income (loss) from investment fund affiliates and operating affiliates (4)													172,256
Exchange (gains) losses													(24,463		)
Corporate operating expenses													163,504
Interest expense (5)													78,599
Non-controlling interests													73,944
Income tax expense													73,248
Net income (loss) attributable to ordinary shareholders													$	759,136
Ratios – P&C operations: (6)
Loss and loss expense ratio	66.7		%	50.1		%	61.9		%
Underwriting expense ratio	30.5		%	30.0		%	30.3		%
Combined ratio	97.2		%	80.1		%	92.2		%

____________

(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.

Nine Months Ended September 30, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Life Operations			Total
Gross premiums written	$	3,806,352		$	1,850,315		$	5,656,667		$	266,999		$	5,923,666
Net premiums written	2,885,848			1,732,922			4,618,770			243,606			4,862,376
Net premiums earned	2,878,973			1,348,448			4,227,421			243,630			4,471,051
Net losses and loss expenses	1,890,513			683,984			2,574,497			371,893			2,946,390
Acquisition costs	380,053			273,706			653,759			25,675			679,434
Operating expenses (1)	564,387			127,965			692,352			7,787			700,139
Underwriting profit (loss)	$	44,020		$	262,793		$	306,813		$	(161,725	)	$	145,088
Net investment income							492,031			223,151			715,182
Net results from structured products (2)	14,953			(17,716		)	(2,763		)				(2,763		)
Net fee income and other (3)	(1,019		)	1,979			960			330			1,290
Net realized gains (losses) on investments							25,070			(22,154		)	2,916
Contribution from P&C and Life Operations							$	822,111		$	39,602		$	861,713
Corporate & other:
Net realized & unrealized gains (losses) on derivative instruments													2,656
Net income (loss) from investment fund affiliates and operating affiliates (4)													78,028
Exchange (gains) losses													13,432
Corporate operating expenses													151,926
Interest expense (5)													79,686
Non-controlling interests													75,856
Income tax expense													51,813
Net income (loss) attributable to ordinary shareholders													$	569,684
Ratios – P&C operations: (6)
Loss and loss expense ratio	65.7		%	50.7		%	60.9		%
Underwriting expense ratio	32.8		%	29.8		%	31.8		%
Combined ratio	98.5		%	80.5		%	92.7		%

____________

(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.

Schedule of net premiums earned by line of business

The following tables summarize the Company’s net premiums earned by line of business for the three months ended September 30, 2013 and 2012:

Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	360,550	$	56,580	$	—	$	417,130
Casualty	362,889		76,904		—		439,793
Property catastrophe	—		120,418		—		120,418
Property	136,007		146,606		—		282,613
Marine, energy, aviation and satellite	—		22,998		—		22,998
Specialty	180,799		—		—		180,799
Other (1)	63,767		23,111		—		86,878
Total P&C Operations	$	1,104,012	$	446,617	$	—	$	1,550,629
Life Operations:
Annuity	$	—	$	—	$	30,608	$	30,608
Other Life	—		—		44,075		44,075
Total Life Operations	$	—	$	—	$	74,683	$	74,683
Total	$	1,104,012	$	446,617	$	74,683	$	1,625,312
Three Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	345,729	$	47,875	$	—	$	393,604
Casualty	294,386		81,799		—		376,185
Property catastrophe	—		113,164		—		113,164
Property	127,482		170,858		—		298,340
Marine, energy, aviation and satellite	—		33,087		—		33,087
Specialty	174,887		—		—		174,887
Other (1)	43,141		36,146		—		79,287
Total P&C Operations	$	985,625	$	482,929	$	—	$	1,468,554
Life Operations:
Annuity	$	—	$	—	$	31,961	$	31,961
Other Life	—		—		47,526		47,526
Total Life Operations	$	—	$	—	$	79,487	$	79,487
Total	$	985,625	$	482,929	$	79,487	$	1,548,041

____________

(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.

The following tables summarize the Company’s net premiums earned by line of business for the nine months ended September 30, 2013 and 2012:

Nine Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,061,194	$	152,993	$	—	$	1,214,187
Casualty	1,028,748		230,432		—		1,259,180
Property catastrophe	—		363,421		—		363,421
Property	395,546		420,373		—		815,919
Marine, energy, aviation and satellite	—		75,423		—		75,423
Specialty	544,898		—		—		544,898
Other (1)	171,260		59,084		—		230,344
Total P&C Operations	$	3,201,646	$	1,301,726	$	—	$	4,503,372
Life Operations:
Annuity	$	—	$	—	$	90,379	$	90,379
Other Life	—		—		123,645		123,645
Total Life Operations	$	—	$	—	$	214,024	$	214,024
Total	$	3,201,646	$	1,301,726	$	214,024	$	4,717,396
Nine Months Ended September 30, 2012 (U.S. dollars in thousands)	Insurance		Reinsurance		Life Operations		Total
P&C Operations:
Professional	$	1,000,424	$	156,086	$	—	$	1,156,510
Casualty	827,391		231,884		—		1,059,275
Property catastrophe	—		329,308		—		329,308
Property	365,856		451,617		—		817,473
Marine, energy, aviation and satellite	—		104,458		—		104,458
Specialty	530,930		—		—		530,930
Other (1)	154,372		75,095		—		229,467
Total P&C Operations	$	2,878,973	$	1,348,448	$	—	$	4,227,421
Life Operations:
Annuity	$	—	$	—	$	94,661	$	94,661
Other Life	—		—		148,969		148,969
Total Life Operations	$	—	$	—	$	243,630	$	243,630
Total	$	2,878,973	$	1,348,448	$	243,630	$	4,471,051

____________

(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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Investments - Investment Fund Consolidation (Details) (USD $)								1 Months Ended	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011	Dec. 31, 2012 Five Oaks Investment Corp [Member]	May 31, 2012 Five Oaks Investment Corp [Member]	Dec. 31, 2012 Five Oaks Investment Corp [Member] Residential Mortgage Backed Securities [Member]	Mar. 31, 2013 Five Oaks Investment Corp - Post IPO [Member]	Sep. 30, 2013 Five Oaks Investment Corp - Post IPO [Member]
Class of Warrant or Right, Outstanding								3,125,000
Investment Amount						$ 25,000,000		$ 25,000,000
Issuance of ordinary shares								8,175
Equity Method Investment, Ownership Percentage								43.80%
Percentage ownership						94.00%
Fixed maturities, at fair value	27,282,442,000	27,846,920,000					81,000,000
Amortized cost of fixed maturities	26,772,143,000	26,544,806,000					77,300,000
Asset derivative fair value	27,979,000	23,515,000			8,400,000
Cash and cash equivalents	2,130,893,000	2,618,378,000	3,197,305,000	3,825,125,000	6,000,000
Other liabilities	1,022,648,000	868,036,000			63,400,000
Non-controlling interest in equity of consolidated subsidiaries	1,344,618,000	1,346,325,000			1,800,000
Available-for-sale securities pledged as collateral					66,300,000
Class of Warrant or Right, Exercise Price of Warrants or Rights								15.75
Shares issued during IPO of subsidiary								4,000,000
Gross proceeds from IPO								61,000,000
Shares purchased during IPO of subsidiary								1,670,000
Deconsolidation, Gain (Loss), Amount								(1,500,000)
Investment Fund Accounted For As Subsidiary Additional Investment Amount									$ 49,200,000

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Derivative Instruments - Narrative (Details) (USD $)			3 Months Ended	9 Months Ended
	Sep. 30, 2013 Contracts	Dec. 31, 2012	Sep. 30, 2012 Deposit liabilities	Sep. 30, 2012 Deposit liabilities
Derivative [Line Items]
Derivatives Number of Instruments Held	1
Fair Value Hedge Cumulative Reduction To Expense			$ 0	$ 4,900,000
Collateral posted to counterparty	$ 113,426,000	$ 12,130,000
Deficiency guarantee government backing percent	69.00%

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Investments - Cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains, gross unrealized (losses), and OTTI recorded in AOCI (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
AFS securities
Cost or amortized cost of Fixed maturities	$ 26,772,143		$ 26,544,806
Gross unrealized gains on Fixed maturities	895,557		1,584,812
Gross unrealized losses on Fixed maturities	(385,258)		(282,698)
Fixed maturities, at fair value	27,282,442		27,846,920
Gross Unrealized Losses Non-credit related OTTI	(91,977)	[1]	(119,076)	[1]
Short-term investments, amortized cost	271,465		322,563
Short-term investments, gross unrealized gains	1,300	[2]	192	[3]
Short-term investments, gross unrealized losses	(60)	[2]	(52)	[3]
Short-term investments, at fair value	272,705		322,703
Cost of equity securities	878,679		617,486
Equity securities, gross unrealized gains	113,075	[4]	31,935	[5]
Equity securities, gross unrealized losses	(17,021)	[4]	(62)	[5]
Equity securities, at fair value	974,733		649,359
Available for sale securities, Cost or amortized cost	27,922,287		27,484,855
Available for sale securities, Gross unrealized gains	1,009,932		1,616,939
Available for sale securities, Gross unrealized losses	402,339		282,812
Total investments available for sale	28,529,880		28,818,982
Fixed maturities - HTM
Fixed maturities, held to maturity	2,802,111		2,814,447
Fixed maturites held to maturity, gross unrealized gains	317,615		451,038
Fixed maturites held to maturity, gross unrealized losses	(2,786)		(2,681)
Fair value of held to maturity securities	3,116,940		3,262,804
U.S. Government and Government - Related/Supported
AFS securities
Cost or amortized cost of Fixed maturities	2,128,375	[2]	1,906,044	[3]
Gross unrealized gains on Fixed maturities	66,604	[2]	131,860	[3]
Gross unrealized losses on Fixed maturities	(18,990)	[2]	(3,287)	[3]
Fixed maturities, at fair value	2,175,989	[2]	2,034,617	[3]
Gross Unrealized Losses Non-credit related OTTI	0	[1],[2]	0	[1],[3]
Fixed maturities - HTM
Fixed maturities, held to maturity	10,712	[2]	10,788	[3]
Fixed maturites held to maturity, gross unrealized gains	946	[2]	1,651	[3]
Fixed maturites held to maturity, gross unrealized losses	0	[2]	0	[3]
Fair value of held to maturity securities	11,658	[2]	12,439	[3]
Corporate
AFS securities
Cost or amortized cost of Fixed maturities	10,395,005	[6],[7]	9,837,962	[8],[9]
Gross unrealized gains on Fixed maturities	470,327	[6],[7]	723,028	[8],[9]
Gross unrealized losses on Fixed maturities	(106,000)	[6],[7]	(78,990)	[8],[9]
Fixed maturities, at fair value	10,759,332	[6],[7]	10,482,000	[8],[9]
Gross Unrealized Losses Non-credit related OTTI	(7,945)	[1],[6],[7]	(11,453)	[1],[8],[9]
Fixed maturities - HTM
Fixed maturities, held to maturity	1,370,391		1,425,320
Fixed maturites held to maturity, gross unrealized gains	137,326		190,871
Fixed maturites held to maturity, gross unrealized losses	(1,436)		(794)
Fair value of held to maturity securities	1,506,281		1,615,397
RMBS - Agency
AFS securities
Cost or amortized cost of Fixed maturities	4,032,158		5,054,097
Gross unrealized gains on Fixed maturities	85,282		206,931
Gross unrealized losses on Fixed maturities	(48,358)		(5,535)
Fixed maturities, at fair value	4,069,082		5,255,493
Gross Unrealized Losses Non-credit related OTTI	0	[1]	0	[1]
RMBS - Non-Agency
AFS securities
Cost or amortized cost of Fixed maturities	407,789		678,469
Gross unrealized gains on Fixed maturities	30,786		46,132
Gross unrealized losses on Fixed maturities	(39,176)		(76,868)
Fixed maturities, at fair value	399,399		647,733
Gross Unrealized Losses Non-credit related OTTI	(76,138)	[1]	(93,259)	[1]
Fixed maturities - HTM
Fixed maturities, held to maturity	65,542		83,205
Fixed maturites held to maturity, gross unrealized gains	5,580		10,502
Fixed maturites held to maturity, gross unrealized losses	0		0
Fair value of held to maturity securities	71,122		93,707
CMBS
AFS securities
Cost or amortized cost of Fixed maturities	1,166,285		1,010,794
Gross unrealized gains on Fixed maturities	44,867		70,745
Gross unrealized losses on Fixed maturities	(13,271)		(4,288)
Fixed maturities, at fair value	1,197,881		1,077,251
Gross Unrealized Losses Non-credit related OTTI	(2,856)	[1]	(2,962)	[1]
Fixed maturities - HTM
Fixed maturities, held to maturity	141,884		12,751
Fixed maturites held to maturity, gross unrealized gains	14,298		2,048
Fixed maturites held to maturity, gross unrealized losses	0		0
Fair value of held to maturity securities	156,182		14,799
CDO
AFS securities
Cost or amortized cost of Fixed maturities	754,897		784,999
Gross unrealized gains on Fixed maturities	7,074		11,973
Gross unrealized losses on Fixed maturities	(49,823)		(87,156)
Fixed maturities, at fair value	712,148		709,816
Gross Unrealized Losses Non-credit related OTTI	(2,106)	[1]	(4,872)	[1]
Other asset-backed securities
AFS securities
Cost or amortized cost of Fixed maturities	1,122,958	[10]	1,426,483	[11]
Gross unrealized gains on Fixed maturities	38,343	[10]	59,663	[11]
Gross unrealized losses on Fixed maturities	(10,166)	[10]	(15,435)	[11]
Fixed maturities, at fair value	1,151,135	[10]	1,470,711	[11]
Gross Unrealized Losses Non-credit related OTTI	(2,932)	[1],[10]	(6,530)	[1],[11]
Fixed maturities - HTM
Fixed maturities, held to maturity	104,624	[10]	222,340
Fixed maturites held to maturity, gross unrealized gains	9,074	[10]	29,287	[11]
Fixed maturites held to maturity, gross unrealized losses	0	[10]	(167)	[11]
Fair value of held to maturity securities	113,698		251,460
U.S. States and political subdivisions of the States
AFS securities
Cost or amortized cost of Fixed maturities	1,784,621		1,767,669
Gross unrealized gains on Fixed maturities	61,561		146,294
Gross unrealized losses on Fixed maturities	(28,084)		(2,946)
Fixed maturities, at fair value	1,818,098		1,911,017
Gross Unrealized Losses Non-credit related OTTI	0	[1]	0	[1]
Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
AFS securities
Cost or amortized cost of Fixed maturities	4,980,055	[2]	4,078,289	[3]
Gross unrealized gains on Fixed maturities	90,713	[2]	188,186	[3]
Gross unrealized losses on Fixed maturities	(71,390)	[2]	(8,193)	[3]
Fixed maturities, at fair value	4,999,378	[2]	4,258,282	[3]
Gross Unrealized Losses Non-credit related OTTI	0	[1],[2]	0	[1],[3]
Fixed maturities - HTM
Fixed maturities, held to maturity	1,108,958	[2]	1,060,043	[3]
Fixed maturites held to maturity, gross unrealized gains	150,391	[2]	216,679	[3]
Fixed maturites held to maturity, gross unrealized losses	(1,350)	[2]	(1,720)	[3]
Fair value of held to maturity securities	$ 1,257,999	[2]	$ 1,275,002	[3]

[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] 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.

[4] 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.

[5] 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.

[6] 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.

[7] 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.

[8] 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.

[9] 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.

[10] 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.

[11] 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

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Fair Value Measurements - Narrative (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	$ 27,282,442		$ 27,846,920
Amortized cost of fixed maturities	26,772,143		26,544,806
Equity securities, at fair value	974,733		649,359
Other investments - structured transactions	293,900		312,100
Spread on U.S. treasury for discounting deposit liabilities	0.652%		1.003%
Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	10,759,332	[1],[2]	10,482,000	[3],[4]
Amortized cost of fixed maturities	10,395,005	[1],[2]	9,837,962	[3],[4]
Medium term notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	150,900		194,300
Amortized cost of fixed maturities	150,600		194,800
Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,151,135	[5]	1,470,711	[6]
Amortized cost of fixed maturities	1,122,958	[5]	1,426,483	[6]
Covered bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	560,700		647,100
Amortized cost of fixed maturities	531,400		605,400
Fixed income funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, at fair value	$ 89,700		$ 101,900

[1] 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.

[2] 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.

[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 $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.

[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 $308.5 million and an amortized cost of $327.6 million at December 31, 2012.

[5] 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.

[6] 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

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Segment Information - Statement of earnings by segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting Information [Line Items]
Gross premiums written	$ 1,692,131	$ 1,663,644	$ 6,195,489	$ 5,923,666
Net premiums written	1,402,062	1,387,752	5,043,584	4,862,376
Net premiums earned	1,625,312	1,548,041	4,717,396	4,471,051
Net losses and loss expenses	1,123,069	1,013,515	3,131,479	2,946,390
Acquisition costs	238,328	236,347	690,473	679,434
Operating expenses	237,650	236,372	701,005	700,139
Underwriting profit (loss)	26,265	61,807	194,439	145,088
Net investment income	219,867	221,963	663,004	715,182
Net results from structured products	6,463	5,739	17,692	(2,763)
Net fee income and other	(1,547)	1,641	(2,602)	1,290
Net realized gains (losses) on investments	(1,958)	(5,493)	75,519	2,916
Contribution from P&C and Life Operations	249,090	285,657	948,052	861,713
Corporate & other:
Net realized and unrealized gains (losses) on derivative instruments	880	6,254	3,660	2,656
Net income (loss) from investment fund affiliates and operating affiliates	29,669	18,812	172,256	78,028
Exchange (gains) losses	20,303	18,690	(24,463)	13,432
Corporate operating expenses	61,427	57,604	163,504	151,926
Interest expense	26,342	26,232	78,599	79,686
Non-controlling interests	35,022	35,844	73,944	75,856
Income tax	897	451	73,248	51,813
Net income (loss) attributable to ordinary shareholders	135,648	171,902	759,136	569,684
Total P&C
Segment Reporting Information [Line Items]
Gross premiums written	1,609,840	1,576,231	5,958,926	5,656,667
Net premiums written	1,327,379	1,308,265	4,829,560	4,618,770
Net premiums earned	1,550,629	1,468,554	4,503,372	4,227,421
Net losses and loss expenses	1,006,520	894,077	2,787,210	2,574,497
Acquisition costs	232,218	226,253	673,005	653,759
Operating expenses	234,991	234,021	693,545	692,352
Underwriting profit (loss)	76,900	114,203	349,612	306,813
Net investment income	147,739	148,484	448,596	492,031
Net results from structured products	6,463	5,739	17,692	(2,763)
Net fee income and other	(1,590)	1,401	(3,732)	960
Net realized gains (losses) on investments	(2,087)	2,258	72,860	25,070
Contribution from P&C and Life Operations	227,425	272,085	885,028	822,111
Ratios - P&C operations
Loss and loss expense ratio	64.90%	60.90%	61.90%	60.90%
Underwriting expense ratio	30.10%	31.30%	30.30%	31.80%
Combined ratio	95.00%	92.20%	92.20%	92.70%
Insurance Segment
Segment Reporting Information [Line Items]
Gross premiums written	1,259,986	1,158,683	4,230,161	3,806,352
Net premiums written	993,659	905,056	3,232,010	2,885,848
Net premiums earned	1,104,012	985,625	3,201,646	2,878,973
Net losses and loss expenses	762,782	623,545	2,134,622	1,890,513
Acquisition costs	136,421	128,513	405,075	380,053
Operating expenses	192,936	186,794	571,447	564,387
Underwriting profit (loss)	11,873	46,773	90,502	44,020
Net results from structured products	4,104	3,087	11,821	14,953
Net fee income and other	(2,187)	745	(5,481)	(1,019)
Ratios - P&C operations
Loss and loss expense ratio	69.10%	63.30%	66.70%	65.70%
Underwriting expense ratio	29.80%	32.00%	30.50%	32.80%
Combined ratio	98.90%	95.30%	97.20%	98.50%
Reinsurance Segment
Segment Reporting Information [Line Items]
Gross premiums written	349,854	417,548	1,728,765	1,850,315
Net premiums written	333,720	403,209	1,597,550	1,732,922
Net premiums earned	446,617	482,929	1,301,726	1,348,448
Net losses and loss expenses	243,738	270,532	652,588	683,984
Acquisition costs	95,797	97,740	267,930	273,706
Operating expenses	42,055	47,227	122,098	127,965
Underwriting profit (loss)	65,027	67,430	259,110	262,793
Net results from structured products	2,359	2,652	5,871	(17,716)
Net fee income and other	597	656	1,749	1,979
Ratios - P&C operations
Loss and loss expense ratio	54.60%	56.00%	50.10%	50.70%
Underwriting expense ratio	30.80%	30.00%	30.00%	29.80%
Combined ratio	85.40%	86.00%	80.10%	80.50%
Life Operations Segment
Segment Reporting Information [Line Items]
Gross premiums written	82,291	87,413	236,563	266,999
Net premiums written	74,683	79,487	214,024	243,606
Net premiums earned	74,683	79,487	214,024	243,630
Net losses and loss expenses	116,549	119,438	344,269	371,893
Acquisition costs	6,110	10,094	17,468	25,675
Operating expenses	2,659	2,351	7,460	7,787
Underwriting profit (loss)	(50,635)	(52,396)	(155,173)	(161,725)
Net investment income	72,128	73,479	214,408	223,151
Net results from structured products
Net fee income and other	43	240	1,130	330
Net realized gains (losses) on investments	129	(7,751)	2,659	(22,154)
Contribution from P&C and Life Operations	$ 21,665	$ 13,572	$ 63,024	$ 39,602

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Derivative Instruments

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

The Company enters into derivative instruments for both risk management and investment purposes. The Company is exposed to potential loss from various market risks, and manages its market risks based on guidelines established by management and the Risk and Finance Committee of the Company's Board of Directors. The Company recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value, with the changes in fair value of derivatives shown in the consolidated statement of income as “Net realized and unrealized gains (losses) on derivative instruments” unless the derivatives are designated as hedging instruments. The accounting for derivatives that are designated as hedging instruments is described in Item 8, Note 2(h), “Significant Accounting Policies - Derivative Instruments,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

	September 30, 2013								December 31, 2012
(U.S. dollars in thousands)	Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)		Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	915,109	$	27,024	$	2,766,826	$	162,666	$	670,751	$	12,511	$	2,382,507	$	23,715
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	12,715	$	178	$	14,934	$	—	$	45,604	$	2,060	$	26,139	$	253
Foreign exchange exposure	69,204		2,421		13,507		471		33,007		226		54,449		1,790
Credit exposure	932		16		374,088		14,855		25,000		486		436,959		15,472
Financial market exposure	33,838		940		55,627		—		72,597		9,559		16,910		—
Financial Operations Derivatives: (2)
Credit exposure	—		—		43,482		4,190		—		—		46,903		—
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	—		—		58,179		19,219		—		—		69,051		25,396
Modified coinsurance funds withheld contract	68,226		—		—		—		76,975		—		—		—
Total derivatives not designated as hedging instruments	$	184,915	$	3,555	$	559,817	$	38,735	$	253,183	$	12,331	$	650,411	$	42,911

____________

(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".

The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheet at September 30, 2013 and December 31, 2012:

							Gross Amounts Not Offset in the Balance Sheet
September 30, 2013 (U.S. dollars in thousands)	Gross Amounts Recognized in Balance Sheet		Gross Amounts Offset in the Balance Sheet		Net Amounts in the Balance Sheet		Financial Instruments		Cash Collateral		Net Amounts
Derivative Assets	$	30,579	$	2,600	$	27,979	$	—	$	—	$	27,979
Derivative Liabilities	$	201,401	$	2,600	$	198,801	$	—	$	113,426	$	85,375
December 31, 2012 (U.S. dollars in thousands)
Derivative Assets	$	24,842	$	1,327	$	23,515	$	—	$	—	$	23,515
Derivative Liabilities	$	66,626	$	1,327	$	65,299	$	—	$	12,130	$	53,169

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. The Company often enters into different types of derivative contracts with a single counterparty and these contracts are covered under netting agreements. At September 30, 2013 and December 31, 2012, the Company paid cash collateral related to foreign currency derivative positions and certain other derivative positions of $113.4 million and $12.1 million, respectively. The assets related to the net collateral paid were recorded as Other assets within the balance sheet as the collateral and derivative positions are not intended to be settled on a net basis.

(a) Derivative Instruments Designated as Fair Value Hedges

The Company designates certain of its derivative instruments as fair value hedges or cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivative to specific assets and liabilities. The Company assesses the effectiveness of the hedge both at inception and on an on-going basis, and determines whether the hedge is highly effective in offsetting changes in fair value or cash flows of the linked hedged item.

The Company may hedge portions of its liabilities against changes in the applicable designated benchmark interest rate. Interest rate swaps may also be used to hedge the changes in fair value of certain fixed rate liabilities and fixed income securities due to changes in the designated benchmark interest rate. In addition, the Company utilizes foreign exchange contracts to hedge the fair value of certain fixed income securities as well as to hedge certain net investments in foreign operations.

The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the three and nine months ended September 30, 2013 and 2012:

				Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk
Derivatives Designated as Fair Value Hedges: Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Gain/(Loss) Recognized in Income on Derivative				Deposit Liabilities			Fixed Maturity Investments		Ineffective Portion of Hedging Relationship - Gain/(Loss)
Interest rate exposure	$	—
Foreign exchange exposure	(29,523		)
Total	$	(29,523	)		$	—		$	29,263	$	(260	)
Three Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(22,323		)
Total	$	(22,323	)		$	—		$	22,126	$	(197	)
Nine Months Ended September 30, 2013
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(4,280		)
Total	$	(4,280	)		$	—		$	4,989	$	709
Nine Months Ended September 30, 2012
(U.S. dollars in thousands)
Interest rate exposure	$	1,813
Foreign exchange exposure	(30,126		)
Total	$	(28,313	)		$	(6,182	)	$	29,665	$	(4,830	)

The gains (losses) recorded on both the derivatives instruments and specific items designated as being hedged as part of the fair value hedging relationships outlined above are recorded through Net realized and unrealized gains (losses) on derivative instruments in the income statement along with any associated ineffectiveness in the relationships. In addition, the periodic coupon settlements relating to the interest rate swaps are recorded as adjustments to net investment income for the hedges of fixed maturity investments and as adjustments to interest expense for the hedges of deposit liabilities and notes payable and debt.

The periodic coupon settlements resulted in decreases to Interest expense of nil and $4.9 million for the three and nine months endedSeptember 30, 2012, respectively. There were no periodic coupon settlements in the three and nine months endedSeptember 30, 2013.

Settlement of Fair Value Hedges

A summary of the fair value hedges that have been settled and their impact on results during the three and nine months ended September 30, 2013 and 2012 is shown below:

Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Notes Payable and Debt September 30,				Fair Value Hedges - Deposit Liabilities September 30,
(U.S. dollars in thousands, except years)	2013		2012		2013		2012
Cumulative reduction to interest expense	$	17,879	$	13,973	$	33,379	$	17,060
Remaining balance	$	3,744	$	7,651	$	199,816	$	216,135
Weighted average years remaining to maturity	1.0		2.0		23.9		25.9

(b) Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation

The Company utilizes foreign exchange contracts to hedge the fair value of certain net investments in foreign operations. During the three and nine months ended September 30, 2013 and 2012, the Company entered into foreign exchange contracts that were formally designated as hedges of investments in foreign subsidiaries, the majority of which have functional currencies of either U.K. sterling or the Euro. There was no ineffectiveness in these transactions.

The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resultant gain (loss) that was recorded in the cumulative translation adjustment account within AOCI for the three and nine months ended September 30, 2013 and 2012:

Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation - Summary	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$	2,758,577		$	1,920,421		$	2,623,594		$	1,895,409
Derivative gains (losses) (1)	$	(58,852	)	$	(40,784	)	$	(4,373	)	$	(21,879	)

____________

(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.

(c) Derivative Instruments Not Formally Designated As Hedging Instruments

The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the three and nine months ended September 30, 2013 and 2012:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Investment Related Derivatives:
Interest rate exposure	$	4,334		$	243		$	4,822		$	860
Foreign exchange exposure	3,710			1,218			(578		)	1,547
Credit exposure	(956		)	(2,281		)	(2,950		)	343
Financial market exposure	1,553			2,337			4,170			312
Financial Operations Derivatives:
Credit exposure	(3,980		)	—			(2,651		)	143
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	175			885			6,178			1,971
Modified coinsurance funds withheld contract	(3,696		)	4,049			(6,040		)	2,310
Total gain (loss) recognized in income from derivatives not designated as hedging instruments	$	1,140		$	6,451		$	2,951		$	7,486
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(260		)	(197		)	709			(4,830		)
Net realized and unrealized gains (losses) on derivative instruments	$	880		$	6,254		$	3,660		$	2,656

The Company’s objectives in using these derivatives are explained below.

(d)(i) Investment Related Derivatives

The Company, either directly or through its investment managers, may use derivative instruments within its investment portfolio, including interest rate swaps, inflation swaps, commodity contracts, credit derivatives (single name and index credit default swaps), options, forward contracts and financial futures (foreign exchange, bond and stock index futures), primarily as a means of economically hedging exposures to interest rate, credit spread, equity price changes and foreign currency risk or, in limited instances, for investment purposes. When using cleared derivatives, the Company is exposed to credit risk of the applicable clearing house and the company's future commissions merchant. When using uncleared derivatives, the Company is exposed to credit risk in the event of non-performance by the counterparties under any derivatives contracts, although the company generally seeks to use credit support arrangements with counterparties to help manage this risk.

Investment Related Derivatives – Interest Rate Exposure

The Company utilizes risk management and overlay strategies that incorporate the use of derivative financial instruments, primarily to manage its fixed income portfolio duration and net economic exposure to interest rate risks, including exposure associated with assets and liabilities related to certain legacy other financial lines and structured indemnity transactions. The Company also uses interest rate swaps to convert certain liabilities from a fixed rate to a variable rate of interest and may also use them to convert a variable rate of interest from one basis to another.

Investment Related Derivatives – Foreign Exchange Exposure

The Company has exposure to foreign currency exchange rate fluctuations through its operations and in its investment portfolio. The Company uses foreign exchange contracts to manage its exposure to the effects of fluctuating foreign currencies on the value of certain of its foreign currency fixed maturities primarily within its Life operations portfolio. These contracts are not designated as specific hedges for financial reporting purposes and, therefore, realized and unrealized gains and losses on these contracts are recorded in income in the period in which they occur. These contracts generally have maturities of twelve months or less.

In addition, certain of the Company's investment managers may, subject to investment guidelines, enter into forward contracts.

Investment Related Derivatives – Credit Exposure

Credit derivatives may be purchased within the Company's investment portfolio in the form of single name and basket credit default swaps, which are used to mitigate credit exposure through a reduction in credit spread duration (i.e., macro credit strategies rather than single-name credit hedging) or exposure to selected issuers, including issuers that are not held in the underlying bond portfolio.

Investment Related Derivatives - Financial Market Exposure

Stock index futures may be purchased within the Company's investment portfolio in order to create synthetic equity exposure and to add value to the portfolio with overlay strategies where market inefficiencies are believed to exist. From time to time, the Company may enter into other financial market exposure derivative contracts on various indices including, but not limited to, inflation and commodity contracts.

(d)(ii) Financial Operations Derivatives - Credit Exposure

At September 30, 2013 and December 31, 2012, the Company held one credit derivative exposure, which was written as part of the Company's previous financial lines business and is outside of the Company's investment portfolio. This is a European project finance loan participation that benefits from a deficiency guarantee from the German state and federal governments in the current amount of 69% following the scheduled expiry of a portion of this guarantee. An aggregate summary of the credit derivative exposure at September 30, 2013 and December 31, 2012 is as follows:

Financial Operations Derivatives - Credit Exposure Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Principal outstanding	$	41,364	$	44,281
Interest outstanding	2,118		2,622
Aggregate outstanding exposure	$	43,482	$	46,903
Total liability recorded	$	4,190	$	—
Weighted average contractual term to maturity	4.0 years		4.7 years
Underlying obligations credit rating	CC		BB

At September 30, 2013 and December 31, 2012, there was no reported event of default on this obligation; however, due to the combination of the reduction in the deficiency guarantee percentage and a deterioration of the credit rating of the underlying obligations a liability of $4.2 million was recorded during the three months ended September 30, 2013. Credit derivatives are recorded at fair value based upon prices received from the investment bank counterparty and corroborated by using models developed by the Company. Although the Company does not have access to the specific unobservable inputs that may have been used in the value provided by the counterparty, it expects that the significant inputs considered would include changes in interest rates, future default rates, credit spreads, changes in credit quality, future expected recovery rates and other market factors. The change resulting from movements in credit and credit quality spreads is unrealized as the credit derivative is not traded to realize this resultant value.

(d)(iii) Other Non-Investment Derivatives

The Company also has derivatives embedded in certain reinsurance contracts. For a certain life reinsurance contract, the Company pays the ceding company a fixed amount equal to the estimated present value of the excess of the guaranteed benefit over the account balance upon the policyholder's election to take the income benefit. The fair value of this derivative is determined based on the present value of expected cash flows. In addition, the Company has modified coinsurance and funds withheld reinsurance agreements that provide for a return based on a portfolio of fixed income securities. As such, the agreements contain embedded derivatives. The embedded derivative is bifurcated from the funds withheld balance and recorded at fair value with changes in fair value recognized in earnings through Net realized and unrealized gains (losses) on derivative instruments.

(e) Contingent Credit Features

Certain derivative agreements entered into by the Company or its subsidiaries contain rating downgrade provisions that permit early termination of the agreement by the counterparty if collateral is not posted following failure to maintain certain credit ratings from one or more of the principal credit rating agencies. If the Company were required to early terminate such agreements due to a rating downgrade, it could potentially be in a net liability position at the time of settlement. The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and the collateral posted under any of these agreements as of September 30, 2013 and December 31, 2012 were as follows:

Contingent Credit Features - Summary: (U.S. dollars in thousands)	September 30, 2013		December 31, 2012
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	114,502	$	20,366
Collateral posted to counterparty	$	84,935	$	5,490

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Accumulated Other Comprehensive Income (Loss) - Changes in AOCI, net of tax (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Jun. 30, 2013		Sep. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	$ 710,760,000				$ 1,520,020,000
OCI before Reclassifications	127,068,000				(689,326,000)
Amounts reclassified from AOCI	2,068,000				(75,190,000)
Tax (benefit) expense	(77,580,000)				6,812,000
Net current period OCI - net of tax	51,556,000				(757,704,000)
Ending balance, net of tax	762,316,000				762,316,000
Unrealized gains (losses) on investments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	796,073,000	[1]			1,597,832,000
OCI before Reclassifications	121,956,000	[2]			(667,097,000)	[3]
Amounts reclassified from AOCI	(5,516,000)				(102,619,000)
Tax (benefit) expense	(77,575,000)				6,822,000
Net current period OCI - net of tax	38,865,000				(762,894,000)
Ending balance, net of tax	834,938,000		796,073,000	[1]	834,938,000
AOCI Other Details [Abstract]
Cumulative adjustments recorded to the value of future policy benefit reserves	37,400,000		32,900,000		70,300,000
OTTI losses recognized in AOCI
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	(101,751,000)				(121,371,000)
OCI before Reclassifications	0				0
Amounts reclassified from AOCI	7,474,000				27,099,000
Tax (benefit) expense	(5,000)				(10,000)
Net current period OCI - net of tax	7,469,000				27,089,000
Ending balance, net of tax	(94,282,000)				(94,282,000)
Foreign currency translation adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	41,755,000				69,391,000
OCI before Reclassifications	4,020,000				(23,616,000)
Amounts reclassified from AOCI	0				0
Tax (benefit) expense	0				0
Net current period OCI - net of tax	4,020,000				(23,616,000)
Ending balance, net of tax	45,775,000				45,775,000
Underfunded pension liability
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	(27,211,000)				(27,506,000)
OCI before Reclassifications	1,092,000				1,387,000
Amounts reclassified from AOCI	0				0
Tax (benefit) expense	0				0
Net current period OCI - net of tax	1,092,000				1,387,000
Ending balance, net of tax	(26,119,000)				(26,119,000)
Cash flow hedge
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, net of tax	1,894,000				1,674,000
OCI before Reclassifications	0				0
Amounts reclassified from AOCI	110,000				330,000
Tax (benefit) expense	0				0
Net current period OCI - net of tax	110,000				330,000
Ending balance, net of tax	$ 2,004,000				$ 2,004,000

[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.

[3] 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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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Financial guarantee exposure summary

Financial Guarantee Exposure Summary (U.S. dollars in thousands except number of contracts and term to maturity)	September 30, 2013			December 31, 2012
Opening number of financial guarantee contracts	4			4
Number of financial guarantee contracts matured, prepaid or commuted during the period	(1		)	—
Closing number of financial guarantee contracts	3			4
Principal outstanding	$	108,255		$	115,464
Interest outstanding	$	—		$	—
Aggregate exposure outstanding	$	108,255		$	115,464
Total gross claim liability recorded	$	—		$	1,399
Total unearned premiums and fees recorded	$	170		$	279
Weighted average contractual term to maturity in years	26.3			25.4

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Investments - Analysis of net realized gains (losses) and the change in unrealized (losses) gains on investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net realized gains (losses): [Abstract]
Gross realized gains	$ 22,517	$ 33,136	$ 160,555	$ 153,757
Gross realized losses on investments sold	(21,288)	(26,000)	(74,822)	(89,054)
OTTI on investments, net of amounts transferred to other comprehensive income	(3,187)	(12,629)	(10,214)	(61,787)
Net realized gains (losses) on investments	$ (1,958)	$ (5,493)	$ 75,519	$ 2,916

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

At September 30, 2013 and 2012, the Company owned minority stakes in five and four, respectively, independent investment management companies (“Investment Manager Affiliates”) that are actively managing client capital and seeking growth opportunities. The Company seeks to develop relationships with specialty investment management organizations, generally acquiring an equity interest in the business. The Company also invests in certain of the funds and limited partnerships and other legal entities managed by these affiliates and through these funds and partnerships pays management and performance fees to the Company's Investment Manager Affiliates. See Note 5(d), "Investments - Investment in Affiliates,” included herein, for further information.

In the normal course of business, the Company enters into reinsurance contracts with certain of its other strategic affiliates, or their subsidiaries. During the three and nine months ended September 30, 2013 and 2012, these contracts resulted in reported net premiums written, net reported claims and reported acquisition costs as summarized below. Management believes that these transactions are conducted at market rates consistent with negotiated arms-length contracts.

(U.S. dollars in thousands)	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Reported net premiums written	$	27,112	$	27,761	$	51,119	$	55,323
Net losses and loss expenses incurred	$	9,274	$	11,071	$	21,039	$	26,923
Reported acquisition costs	$	7,189	$	9,034	$	17,875	$	22,236

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Investments

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Investments

(a) Fixed Maturities, Short-Term Investments and Equity Securities

Amortized Cost and Fair Value Summary

The cost (amortized cost for fixed maturities and short-term investments), fair value, gross unrealized gains and gross unrealized (losses), including, other-than-temporary impairments (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) of the Company’s available for sale (“AFS”) and held to maturity (“HTM”) investments at September 30, 2013 and December 31, 2012 were as follows:

September 30, 2013 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	2,128,375	$	66,604	$	(18,990	)	$	2,175,989	$	—
Corporate (4) (5)	10,395,005		470,327		(106,000		)	10,759,332		(7,945		)
RMBS – Agency	4,032,158		85,282		(48,358		)	4,069,082		—
RMBS – Non-Agency	407,789		30,786		(39,176		)	399,399		(76,138		)
CMBS	1,166,285		44,867		(13,271		)	1,197,881		(2,856		)
CDO	754,897		7,074		(49,823		)	712,148		(2,106		)
Other asset-backed securities (3)	1,122,958		38,343		(10,166		)	1,151,135		(2,932		)
U.S. States and political subdivisions of the States	1,784,621		61,561		(28,084		)	1,818,098		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,980,055		90,713		(71,390		)	4,999,378		—
Total fixed maturities - AFS	$	26,772,143	$	895,557	$	(385,258	)	$	27,282,442	$	(91,977	)
Total short-term investments (2)	$	271,465	$	1,300	$	(60	)	$	272,705	$	—
Total equity securities (6)	$	878,679	$	113,075	$	(17,021	)	$	974,733	$	—
Total investments - AFS	$	27,922,287	$	1,009,932	$	(402,339	)	$	28,529,880	$	(91,977	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,712	$	946	$	—		$	11,658	$	—
Corporate	1,370,391		137,326		(1,436		)	1,506,281		—
RMBS – Non-Agency	65,542		5,580		—			71,122		—
CMBS	141,884		14,298		—			156,182		—
Other asset-backed securities (3)	104,624		9,074		—			113,698		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,108,958		150,391		(1,350		)	1,257,999		—
Total investments - HTM	$	2,802,111	$	317,615	$	(2,786	)	$	3,116,940	$	—

___________

(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.

December 31, 2012 (U.S. dollars in thousands)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS
U.S. Government and Government-Related/Supported (2)	$	1,906,044	$	131,860	$	(3,287	)	$	2,034,617	$	—
Corporate (4) (5)	9,837,962		723,028		(78,990		)	10,482,000		(11,453		)
RMBS – Agency	5,054,097		206,931		(5,535		)	5,255,493		—
RMBS – Non-Agency	678,469		46,132		(76,868		)	647,733		(93,259		)
CMBS	1,010,794		70,745		(4,288		)	1,077,251		(2,962		)
CDO	784,999		11,973		(87,156		)	709,816		(4,872		)
Other asset-backed securities (3)	1,426,483		59,663		(15,435		)	1,470,711		(6,530		)
U.S. States and political subdivisions of the States	1,767,669		146,294		(2,946		)	1,911,017		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	4,078,289		188,186		(8,193		)	4,258,282		—
Total fixed maturities - AFS	$	26,544,806	$	1,584,812	$	(282,698	)	$	27,846,920	$	(119,076	)
Total short-term investments (2)	$	322,563	$	192	$	(52	)	$	322,703	$	—
Total equity securities (6)	$	617,486	$	31,935	$	(62	)	$	649,359	$	—
Total investments - AFS	$	27,484,855	$	1,616,939	$	(282,812	)	$	28,818,982	$	(119,076	)
Fixed maturities - HTM
U.S. Government and Government-Related/Supported (2)	$	10,788	$	1,651	$	—		$	12,439	$	—
Corporate	1,425,320		190,871		(794		)	1,615,397		—
RMBS – Non-Agency	83,205		10,502		—			93,707		—
CMBS	12,751		2,048		—			14,799		—
Other asset-backed securities (3)	222,340		29,287		(167		)	251,460		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported (2)	1,060,043		216,679		(1,720		)	1,275,002		—
Total investments - HTM	$	2,814,447	$	451,038	$	(2,681	)	$	3,262,804	$	—

____________

(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.

At September 30, 2013 and December 31, 2012, approximately 2.5% and 2.9%, respectively, of the Company's fixed income investment portfolio at fair value was invested in securities that were below investment grade or not rated. Approximately 16.7% and 37.7% of the gross unrealized losses in the Company's fixed income securities portfolio at September 30, 2013 and December 31, 2012, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS and HTM fixed income securities at September 30, 2013 and December 31, 2012 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2013 (1)				December 31, 2012 (1)
(U.S. dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Fixed maturities - AFS
Due less than one year	$	2,105,725	$	2,121,331	$	1,939,803	$	1,952,250
Due after 1 through 5 years	9,337,994		9,589,870		8,521,090		8,877,512
Due after 5 through 10 years	5,434,814		5,516,467		4,701,391		5,065,158
Due after 10 years	2,409,523		2,525,129		2,427,680		2,790,996
	$	19,288,056	$	19,752,797	$	17,589,964	$	18,685,916
RMBS – Agency	4,032,158		4,069,082		5,054,097		5,255,493
RMBS – Non-Agency	407,789		399,399		678,469		647,733
CMBS	1,166,285		1,197,881		1,010,794		1,077,251
CDO	754,897		712,148		784,999		709,816
Other asset-backed securities	1,122,958		1,151,135		1,426,483		1,470,711
Total mortgage and asset-backed securities	$	7,484,087	$	7,529,645	$	8,954,842	$	9,161,004
Total fixed maturities - AFS	$	26,772,143	$	27,282,442	$	26,544,806	$	27,846,920
Fixed maturities - HTM
Due less than one year	$	68,015	$	69,473	$	36,515	$	37,580
Due after 1 through 5 years	202,799		215,912		195,121		205,562
Due after 5 through 10 years	344,228		374,388		377,541		420,008
Due after 10 years	1,875,019		2,116,165		1,886,974		2,239,688
	$	2,490,061	$	2,775,938	$	2,496,151	$	2,902,838
RMBS – Non-Agency	65,542		71,122		83,205		93,707
CMBS	141,884		156,182		12,751		14,799
Other asset-backed securities	104,624		113,698		222,340		251,460
Total mortgage and asset-backed securities	$	312,050	$	341,002	$	318,296	$	359,966
Total fixed maturities - HTM	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804

____________

(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.

OTTI Considerations

Under final authoritative accounting guidance, a debt security for which amortized cost exceeds fair value is deemed to be other-than-temporarily impaired if it meets either of the following conditions: (a) the Company intends to sell, or it is more likely than not that the Company will be required to sell, the security before a recovery in value, or (b) the Company does not expect to recover the entire amortized cost basis of the security. Other than in a situation in which the Company has the intent to sell a debt security or more likely than not will be required to sell a debt security, the amount of the OTTI related to a credit loss on the security is recognized in earnings, and the amount of the OTTI related to other factors (e.g., interest rates, market conditions, etc.) is recorded as a component of OCI. The net amount recognized in earnings (“credit loss impairment”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment (“NPV”). The remaining difference between the security's NPV and its fair value is recognized in OCI. Subsequent changes in the fair value of these securities are included in OCI unless a further impairment is deemed to have occurred.

In the scenario where the Company has the intent to sell a security in which its amortized cost exceeds its fair value, or it is more likely than not it will be required to sell such a security, the entire difference between the security's amortized cost and its fair value is recognized in earnings.

The determination of credit losses is based on detailed analyses of underlying cash flows and other considerations. Such analyses require the use of certain assumptions to develop the estimated performance of underlying collateral. Key assumptions used include, but are not limited to, items such as RMBS default rates based on collateral duration in arrears, severity of losses on default by collateral class, collateral reinvestment rates and expected future general corporate default rates.

Factors considered for all securities on a quarterly basis in determining that a gross unrealized loss is not other-than-temporarily impaired include management's consideration of current and near term liquidity needs and other available sources of funds, an evaluation of the factors and time necessary for recovery and an assessment of whether the Company has the intention to sell or considers it more likely than not that it will be forced to sell a security.

Pledged Assets

Certain of the Company's invested assets are held in trust and pledged in support of insurance and reinsurance liabilities as well as credit facilities. Such pledges are largely required by the Company's 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. Also, certain deposit liabilities and annuity contracts require the use of pledged assets. At September 30, 2013 and December 31, 2012, the Company had $16.0 billion and $16.9 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

The following is an analysis of how long the AFS and HTM securities at September 30, 2013 and December 31, 2012 had been in a continual unrealized loss position:

	Less than 12 months					Equal to or greater than 12 months
September 30, 2013 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	731,583	$	(18,079	)	$	21,489	$	(929	)
Corporate	1,962,868		(51,810		)	478,878		(54,190		)
RMBS – Agency	1,457,826		(36,568		)	164,046		(11,790		)
RMBS – Non-Agency	29,777		(1,257		)	244,218		(37,919		)
CMBS	287,314		(9,216		)	38,653		(4,055		)
CDO	29,541		(175		)	622,338		(49,648		)
Other asset-backed securities	222,044		(1,821		)	96,251		(8,345		)
U.S. States and political subdivisions of the States	457,908		(27,384		)	8,812		(700		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	1,886,303		(59,159		)	153,802		(12,273		)
Total fixed maturities and short-term investments - AFS	$	7,065,164	$	(205,469	)	$	1,828,487	$	(179,849	)
Total equity securities	$	216,631	$	(17,021	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	32,424	$	(1,410	)	$	632	$	(26	)
Other asset-backed securities	—		—			—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,847		(1,350		)
Total fixed maturities - HTM	$	32,424	$	(1,410	)	$	11,479	$	(1,376	)

	Less than 12 months					Equal to or greater than 12 months
December 31, 2012 (U.S. dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities and short-term investments - AFS
U.S. Government and Government-Related/Supported	$	307,879	$	(2,847	)	$	9,951	$	(471	)
Corporate	476,454		(10,603		)	607,796		(68,387		)
RMBS – Agency	578,823		(4,541		)	11,135		(994		)
RMBS – Non-Agency	6,674		(450		)	448,555		(76,418		)
CMBS	92,899		(666		)	23,580		(3,622		)
CDO	243		(1		)	694,351		(87,155		)
Other asset-backed securities	111,431		(531		)	93,388		(14,904		)
U.S. States and political subdivisions of the States	77,273		(1,407		)	12,851		(1,539		)
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	355,409		(1,378		)	131,884		(6,836		)
Total fixed maturities and short-term investments - AFS	$	2,007,085	$	(22,424	)	$	2,033,491	$	(260,326	)
Total equity securities	$	615	$	(62	)	$	—	$	—
Fixed maturities -HTM
Corporate	$	4,568	$	(31	)	$	23,005	$	(763	)
Other asset-backed securities	1,239		(167		)	—		—
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		—			10,518		(1,720		)
Total fixed maturities - HTM	$	5,807	$	(198	)	$	33,523	$	(2,483	)

The Company had gross unrealized losses totaling $402.3 million on 2,037 securities out of a total of 7,602 held at September 30, 2013 in its AFS portfolio and $2.8 million on 5 securities out of a total of 204 held in its HTM portfolio, which it considers to be temporarily impaired or with respect to which it reflects non-credit losses on other-than-temporarily impaired assets. Individual security positions comprising this balance have been evaluated by management to determine the severity of these impairments and whether they should be considered other-than-temporary. Management believes it is more likely than not that the issuer will be able to fund sufficient principal and interest payments to support the current amortized cost.

Management, in its assessment of whether securities in a gross unrealized loss position are temporarily impaired, as described above, considers the significance of the impairments. At September 30, 2013, the Company had structured credit securities with gross unrealized losses of $13.0 million, which had a fair value of $4.2 million, and a cumulative fair value decline of greater than 50% of amortized cost. All of these securities are mortgage and asset-backed securities. These greater than 50% impaired securities include gross unrealized losses of $0.7 million on non-Agency RMBS, $11.7 million on CDOs and $0.5 million on CMBS holdings.

(c) Net Realized Gains (Losses)

The following represents an analysis of net realized gains (losses) on investments:

Net Realized Gains (Losses) on Investments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Gross realized gains	$	22,517		$	33,136		$	160,555		$	153,757
Gross realized losses on investments sold	(21,288		)	(26,000		)	(74,822		)	(89,054		)
OTTI on investments, net of amounts transferred to other comprehensive income	(3,187		)	(12,629		)	(10,214		)	(61,787		)
Net realized gains (losses) on investments	$	(1,958	)	$	(5,493	)	$	75,519		$	2,916

The main components of the net impairment charges of $3.2 million for the three months ended September 30, 2013 were:

▪ $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.

The following table sets forth the amount of credit loss impairments on fixed income securities held by the Company as of the dates or the periods indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

Credit Loss Impairments	Three months ended September 30,						Nine months ended September 30,
(U.S. dollars in thousands)	2013			2012			2013			2012
Opening balance at beginning of indicated period	$	202,862		$	299,720		$	268,707		$	333,379
Credit loss impairment recognized in the current period on securities not previously impaired	242			2,805			769			8,683
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(17,341		)	(33,114		)	(78,960		)	(87,092		)
Credit loss impairments previously recognized on securities impaired to fair value during the period	—			—			—			(12,891		)
Additional credit loss impairments recognized in the current period on securities previously impaired	2,942			4,834			7,242			41,716
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(2,222		)	(2,773		)	(11,275		)	(12,323		)
Balance at September 30,	$	186,483		$	271,472		$	186,483		$	271,472

During the three months ended September 30, 2013 and 2012, the $17.3 million and $33.1 million, respectively, of credit loss impairments previously recognized on securities that matured, or were paid down, prepaid or sold, includes $3.1 million and $11.6 million, respectively, of non-Agency RMBS.

During the nine months ended September 30, 2013 and 2012, the $79.0 million and $87.1 million, respectively, of credit loss impairments previously recognized on securities that matured, or were paid down, prepaid or sold, includes $63.3 million and $38.3 million, respectively, of non-Agency RMBS.

(d) Investments in affiliates

Investment Fund Consolidation

In May 2012, the Company invested $25.0 million to obtain an approximate 94% interest in Five Oaks Investment Corp. (“Five Oaks”), a newly formed private investment company. Five Oaks is a mortgage real estate investment trust that is focused on investing in, financing and managing a leveraged portfolio of agency and non-agency residential mortgage-backed securities, residential mortgage loans and other mortgage-related investments. At December 31, 2012, the Company had consolidated Five Oaks, resulting in the recording within its balance sheet of: RMBS securities at their fair value of $81.0 million (amortized cost: $77.3 million) within Fixed maturities, $8.4 million of derivatives, $6.0 million of Cash and cash equivalents, $63.4 million of liabilities related to obligations under repurchase agreements within Other liabilities, and $1.8 million of Non-controlling interest in equity of consolidated subsidiaries. $66.3 million of securities held by Five Oaks and consolidated by the Company were pledged as collateral under the repurchase agreements. The repurchase agreements did not provide the counterparties any recourse to assets of the Company aside from its investment in Five Oaks. Amounts recorded within the Company's consolidated statement of income related to Five Oaks were immaterial during the year ended December 31, 2012.

In March 2013, Five Oaks completed an Initial Public Offering (“IPO”) of approximately 4.0 million of its common shares for gross proceeds of approximately $61.0 million and, concurrently with its IPO, Five Oaks sold to the Company an additional 1.67 million shares for $25.0 million in a private placement. Following these transactions, and the receipt of 8,175 shares of Five Oaks distributed to the Company in respect of its investment in Oak Circle Capital Partners LLC (“Oak Circle”), the investment management company that provides portfolio management and other administrative services to Five Oaks, the Company's ownership interest in Five Oaks was reduced to 43.8%, which no longer represented a controlling financial interest. Accordingly, the Five Oaks investment was deconsolidated by the Company at the closing date of the Five Oaks IPO. The investment is accounted for under the equity method and carried as a strategic operating affiliate at September 30, 2013. We generally record the income related to strategic operating affiliates on a three-month lag based upon the availability of the information provided by the investees. A loss of $1.5 million was recorded upon deconsolidation within Realized investment gains (losses) based upon the difference between the fair value of the Company's retained interest in Five Oaks subsequent to the additional share sales and the Company's carrying value of Five Oaks' net assets at the closing date of the Five Oaks IPO. In addition, in September 2012 the Company received warrants that were priced at the time of the IPO. The warrants allow the Company to purchase an additional 3.125 million shares at $15.75 per share, which would result in a total additional investment of $49.2 million by the Company should it exercise the warrants in full in the future. The warrants expire in September 2019.

In March 2012, the Company purchased an equity interest in Oak Circle. The Company's investment in Oak Circle is included in investment manager affiliates.

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows provided by (used in) operating activities:
Net income (loss)	$ 833,080	$ 645,540
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net realized (gains) losses on investments	(75,519)	(2,916)
Net realized and unrealized (gains) losses on derivative instruments	(3,660)	(2,656)
Amortization of premiums (discounts) on fixed maturities	127,524	119,819
(Income) loss from investment and operating affiliates	(172,256)	(78,028)
Share-based compensation	45,447	41,827
Depreciation	44,147	41,735
Accretion of deposit liabilities	36,779	65,585
Changes in:
Unpaid losses and loss expenses	(85,471)	(609,175)
Future policy benefit reserves	(128,281)	(132,834)
Unearned premiums	486,249	524,341
Premiums receivable	(341,520)	(380,164)
Unpaid losses and loss expenses recoverable	28,566	354,698
Ceded unearned premiums	(183,198)	(121,791)
Reinsurance balances receivable	(38,612)	(5,146)
Deferred acquisition costs	(47,859)	(47,629)
Reinsurance balances payable	338,769	413,658
Deferred tax asset - net	(3,693)	24,058
Derivatives	14,563	49,567
Other assets	(81,148)	(53,297)
Other liabilities	39,645	108,067
Other	19,337	(61,079)
Total adjustments	19,809	248,640
Net cash provided by (used in) operating activities	852,889	894,180
Cash flows provided by (used in) investing activities:
Proceeds from sale of fixed maturities and short-term investments	3,042,348	2,456,889
Proceeds from redemption of fixed maturities and short-term investments	3,142,738	3,212,626
Proceeds from sale of equity securities	95,083	212,034
Purchases of fixed maturities and short term investments	(6,480,368)	(5,874,664)
Purchases of equity securities	(358,484)	(289,553)
Investment affiliates, net	(94,760)	58,415
Other, net	83,575	(113,538)
Net cash provided by (used in) investing activities	(569,868)	(337,791)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of ordinary shares and exercise of stock options	9,718	4,651
Buybacks of ordinary shares	(525,520)	(351,158)
Dividends paid on ordinary shares	(121,131)	(101,753)
Distributions to non-controlling interests	(42,026)	(43,283)
Contributions from non-controlling interests	500	1,500
Repayment of debt	0	(600,000)
Deposit liabilities	(87,788)	(114,376)
Net cash provided by (used in) financing activities	(766,247)	(1,204,419)
Effects of exchange rate changes on foreign currency cash	(4,259)	20,210
Increase (decrease) in cash and cash equivalents	(487,485)	(627,820)
Cash and cash equivalents beginning of year	2,618,378	3,825,125
Cash and cash equivalents end of year	$ 2,130,893	$ 3,197,305

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Derivative Instruments - Summary of financial operations derivatives credit exposure (Details) (Credit exposure, USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 30, 2013 Standard & Poor's, CC Rating	Dec. 31, 2012 Standard & Poor's, BB Rating
Credit Derivatives [Line Items]
Principal outstanding	$ 41,364	$ 44,281
Interest outstanding	2,118	2,622
Aggregate outstanding exposure	43,482	46,903
Total liability recorded	$ 4,190	$ 0
Weighted average contractual term to maturity	4 years 0 months 0 days	4 years 8 months 12 days

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Derivative Instruments - Balance sheet offsetting (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Derivative assets:
Gross amounts recognized in balance sheet	$ 30,579	$ 24,842
Gross amounts offset in balance sheet	2,600	1,327
Net amounts in the balance sheet	27,979	23,515
Gross amounts not offset in the balance sheet - financial instruments	0	0
Gross amounts not offset in the balance sheet - cash collateral	0	0
Derivative Asset	27,979	23,515
Derivative liabilities:
Gross amounts recognized in balance sheet	201,401	66,626
Gross amounts offset in balance sheet	2,600	1,327
Net amounts in the balance sheet	198,801	65,299
Gross amounts not offset in the balance sheet - financial instruments	0	0
Gross amounts not offset in the balance sheet - cash collateral	113,426	12,130
Derivative Liability	$ 85,375	$ 53,169

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Fair Value Measurements - Additional information about assets and liabilities measured at fair value on a recurring basis (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Corporate
Level 3 assets
Balance, beginning of period	$ 32,173	$ 33,511	$ 30,098	$ 23,818
Realized gains (losses)	32	20	(39)	4
Movement in unrealized gains (losses)	352	673	982	346
Purchases and issuances	70	0	10,691	8,949
Sales	0	(555)	0	(555)
Settlements	0	0	(7,245)	(181)
Transfers into Level 3	0	0	0	1,393
Transfers out of Level 3	0	(4,514)	(1,860)	(4,639)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	32,627	29,135	32,627	29,135
Movement in total gains (losses) above relating to instruments still held at the reporting date	385	674	1,012	351
RMBS - Agency
Level 3 assets
Balance, beginning of period	18,214	52,588	32,005	32,041
Realized gains (losses)	(1)	4	10	(23)
Movement in unrealized gains (losses)	(11)	106	(48)	58
Purchases and issuances	0	34	0	103
Sales	0	0	(535)	0
Settlements	(913)	(4,645)	(2,678)	(6,233)
Transfers into Level 3	0	0	0	22,141
Transfers out of Level 3	0	(14,230)	(11,465)	(14,230)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	17,289	33,857	17,289	33,857
Movement in total gains (losses) above relating to instruments still held at the reporting date	(12)	110	(52)	35
RMBS - Non-Agency
Level 3 assets
Balance, beginning of period	3,411	1,596	116	0
Realized gains (losses)	(1)	(22)	(1)	0
Movement in unrealized gains (losses)	(1)	(424)	(1)	0
Purchases and issuances	0	6,821	3,326	6,821
Sales	0	0	0	0
Settlements	(74)	(59)	(105)	0
Transfers into Level 3	0	0	0	1,091
Transfers out of Level 3	(3,326)	(73)	(3,326)	(73)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	9	7,839	9	7,839
Movement in total gains (losses) above relating to instruments still held at the reporting date	0	(447)	(1)	0
CMBS
Level 3 assets
Balance, beginning of period	24,423	0	25,347	0
Realized gains (losses)	1	0	1	0
Movement in unrealized gains (losses)	(58)	0	(76)	0
Purchases and issuances	0	33,369	0	33,369
Sales	0	0	0	0
Settlements	(4,406)	0	(5,312)	0
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	19,960	33,369	19,960	33,369
Movement in total gains (losses) above relating to instruments still held at the reporting date	(57)	0	(75)	0
CDO
Level 3 assets
Balance, beginning of period	706,013	642,179	701,736	650,851
Realized gains (losses)	584	913	885	(523)
Movement in unrealized gains (losses)	(3,405)	35,886	32,341	75,489
Purchases and issuances	70,552	0	75,914	0
Sales	0	0	0	(32,495)
Settlements	(69,193)	(5,347)	(106,325)	(18,529)
Transfers into Level 3	0	1,162	0	1,162
Transfers out of Level 3	0	0	0	(1,162)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	704,551	674,793	704,551	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	(3,681)	35,806	30,597	71,738
Other asset-backed securities
Level 3 assets
Balance, beginning of period	27,539	25,248	18,128	16,552
Realized gains (losses)	810	7,017	848	6,748
Movement in unrealized gains (losses)	722	(6,552)	1,685	(2,873)
Purchases and issuances	0	8,753	21,686	8,753
Sales	(15,711)	0	(15,711)	0
Settlements	(906)	(16,141)	(7,676)	(15,867)
Transfers into Level 3	0	0	0	5,012
Transfers out of Level 3	0	(1,162)	(6,506)	(1,162)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	12,454	17,163	12,454	17,163
Movement in total gains (losses) above relating to instruments still held at the reporting date	(4)	456	(520)	3,652
Non-U.S. Sovereign Government, Provincial, Supranational, and Government-Related/Supported
Level 3 assets
Balance, beginning of period	0	0	0	0
Realized gains (losses)	0	0	0	0
Movement in unrealized gains (losses)	0	0	0	0
Purchases and issuances	0	0	0	0
Sales	0	0	0	0
Settlements	0	0	0	0
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	0	0	0	0
Movement in total gains (losses) above relating to instruments still held at the reporting date	0	0	0	0
Short-term investments
Level 3 assets
Balance, beginning of period	1,999	0	0	0
Realized gains (losses)	(5)	0	(15)	0
Movement in unrealized gains (losses)	64	0	56	0
Purchases and issuances	0	0	2,017	0
Sales	0	0	0	0
Settlements	0	0	0	0
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	2,058	0	2,058	0
Movement in total gains (losses) above relating to instruments still held at the reporting date	59	0	41	0
Other investments
Level 3 assets
Balance, beginning of period	103,844	117,765	115,272	113,959
Realized gains (losses)	1,082	343	6,869	2,782
Movement in unrealized gains (losses)	1,974	1,686	1,004	6,206
Purchases and issuances	2,333	982	5,240	4,664
Sales	0	0	0	(7,327)
Settlements	(5,377)	(807)	(24,529)	0
Transfers into Level 3	0	6	0	6
Transfers out of Level 3	0	0	0	(315)
Fixed maturities to short-term investments classification change	0	0	0	0
Balance, end of period	103,856	119,975	103,856	119,975
Movement in total gains (losses) above relating to instruments still held at the reporting date	3,057	1,334	7,865	2,385
Derivative contracts - net
Level 3 liabilities
Balance, beginning of period	(29,374)	(35,947)	(36,247)	(42,644)
Realized gains (losses)	0	0	0	0
Movement in unrealized gains (losses)	(4,015)	885	2,858	7,582
Purchases and issuances	0	0	0	0
Sales	0	0	0	0
Settlements	0	0	0	0
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Balance, end of period	(33,389)	(35,062)	(33,389)	(35,062)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$ (4,015)	$ 885	$ 2,858	$ 7,582

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Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent - Computation of Basic and Diluted Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Basic earnings per ordinary share & ordinary share equivalents outstanding:
Net income (loss) attributable to ordinary shareholders	$ 135,648	$ 171,902	$ 759,136	$ 569,684
Weighted average ordinary shares outstanding - basic	285,393	304,199	289,957	309,675
Basic earnings per ordinary share & ordinary share equivalents outstanding	$ 0.48	$ 0.57	$ 2.62	$ 1.84
Diluted earnings per ordinary share & ordinary share equivalents outstanding:
Impact of share-based compensation and certain conversion features	5,097	3,565	4,871	2,927
Weighted average ordinary shares outstanding - diluted	290,490	307,764	294,828	312,602
Diluted earnings per ordinary share & ordinary share equivalents outstanding	$ 0.47	$ 0.56	$ 2.57	$ 1.82
Dividends per ordinary share	$ 0.14	$ 0.11	$ 0.42	$ 0.33

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

(a) Financial Guarantee Exposures

Financial Guarantee Exposure Summary (U.S. dollars in thousands except number of contracts and term to maturity)	September 30, 2013			December 31, 2012
Opening number of financial guarantee contracts	4			4
Number of financial guarantee contracts matured, prepaid or commuted during the period	(1		)	—
Closing number of financial guarantee contracts	3			4
Principal outstanding	$	108,255		$	115,464
Interest outstanding	$	—		$	—
Aggregate exposure outstanding	$	108,255		$	115,464
Total gross claim liability recorded	$	—		$	1,399
Total unearned premiums and fees recorded	$	170		$	279
Weighted average contractual term to maturity in years	26.3			25.4

The Company's outstanding financial guarantee contracts at September 30, 2013 provide credit support for a variety of collateral types with the exposures comprised of an aggregate $108.3 million notional financial guarantee on three notes backed by zero coupon long dated bonds and bank perpetual securities, including some issued by European financials. At September 30, 2013, there were no reported events of default on these obligations.

Surveillance procedures to track and monitor credit deteriorations in the insured financial obligations are performed by the primary obligors for each transaction on the Company's behalf. Information regarding the performance status and updated exposure values is provided to the Company on a quarterly basis and evaluated by management in recording claims reserves.

(b) Litigation

The Company and its subsidiaries are subject to litigation and arbitration in the normal course of business. These lawsuits and arbitrations principally involve claims on policies of insurance and contracts of reinsurance and are typical for the Company and for the property and casualty insurance and reinsurance industry in general. Such claims proceedings are considered in connection with the Company's loss and loss expense reserves. Reserves in varying amounts may or may not be established in respect of particular claims proceedings based on many factors, including the legal merits thereof. In addition to litigation relating to insurance and reinsurance claims, the Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance or reinsurance policies. This category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct, employment claims, regulatory activity, shareholder disputes or disputes arising from business ventures. The status of these legal actions is actively monitored by management.

Legal actions are subject to inherent uncertainties, and future events could change management's assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Company discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Company's assessment at September 30, 2013, no such disclosures are considered necessary.

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Notes Payable and Debt and Financing Arrangements

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Notes Payable and Debt and Financing Arrangements

(a) Notes Payable and Debt

All outstanding debt of the Company at September 30, 2013 and December 31, 2012 was issued by XLIT Ltd. (“XL-Cayman”), a 100% owned subsidiary of XL-Ireland and the only direct subsidiary thereof. XL-Ireland does not have significant assets or operations independent of XL-Cayman. XL-Cayman's outstanding debt is fully and unconditionally guaranteed by XL-Ireland. The ability of XL-Cayman, like that of the Company, to obtain funds from its subsidiaries to satisfy any of its obligations under guarantees is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which the Company operates, including, among others, Bermuda, the United States, Ireland, Switzerland and the United Kingdom. For details of the required statutory capital and surplus for the principal operating subsidiaries of the Company, see Item 8, Note 23, “Statutory Financial Data,” to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

The Company was in compliance with all covenants by significant margins at September 30, 2013, and the Company currently remains in compliance with all covenants.

(b) Letter of Credit Facilities and Other Sources of Collateral

The Company has several letter of credit and revolving credit facilities provided on a syndicated and bilateral basis from commercial banks. These facilities are utilized primarily to support non-admitted insurance and reinsurance operations in the United States and capital requirements at Lloyd's. The Company's letter of credit facilities and revolving credit facilities at September 30, 2013 and December 31, 2012 were as follows:

Letter of Credit Summary: (U.S. dollars in thousands except percentages)	September 30, 2013 (1)			December 31, 2012 (1)
Revolving credit facility (2)	$	1,000,000		$	1,000,000
Available letter of credit facilities - commitments (3)	$	4,475,000		$	4,000,000
Available letter of credit facilities - in use	$	1,859,662		$	1,757,250
Collateralized by certain assets of the Company’s investment portfolio	74.5		%	93.3		%

____________

(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.

For details regarding the March 2011 Credit Agreement and the December 2011 Credit Agreements see Item 8, Note 13(b), “Notes Payable and Debt and Financing Arrangements - Letter of Credit Facilities and Other Sources of Collateral,” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. For details regarding the 2013 Credit Agreements, see Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” herein.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Hierarchy

The following tables set forth the Company’s assets and liabilities that were accounted for at fair value at September 30, 2013 and December 31, 2012 by level within the fair value hierarchy:

September 30, 2013 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at September 30, 2013
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,175,989	$	—	$	—		$	2,175,989
Corporate (1)	—		10,726,705		32,627		—			10,759,332
Residential mortgage-backed securities – Agency (“RMBS - Agency”)	—		4,051,793		17,289		—			4,069,082
Residential mortgage-backed securities – Non-Agency (“RMBS - Non-Agency”)	—		399,390		9		—			399,399
Commercial mortgage-backed securities (“CMBS”)	—		1,177,921		19,960		—			1,197,881
Collateralized debt obligations (“CDO”)	—		7,597		704,551		—			712,148
Other asset-backed securities (2)	—		1,138,681		12,454		—			1,151,135
U.S. States and political subdivisions of the States	—		1,818,098		—		—			1,818,098
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,999,378		—		—			4,999,378
Total fixed maturities, at fair value	$	—	$	26,495,552	$	786,890	$	—		$	27,282,442
Equity securities, at fair value (3)	469,857		504,876		—		—			974,733
Short-term investments, at fair value (1)(4)	—		270,647		2,058		—			272,705
Total investments available for sale	$	469,857	$	27,271,075	$	788,948	$	—		$	28,529,880
Cash equivalents (5)	1,141,559		285,318		—		—			1,426,877
Other investments (6)	—		727,289		103,856		—			831,145
Other assets (7)	—		30,579		—		(2,600		)	27,979
Total assets accounted for at fair value	$	1,611,416	$	28,314,261	$	892,804	$	(2,600	)	$	30,815,881
Liabilities
Financial instruments sold, but not yet purchased (8)	$	3,995	$	23,051	$	—	$	—		$	27,046
Other liabilities (7)	—		168,012		33,389		(2,600		)	198,801
Total liabilities accounted for at fair value	$	3,995	$	191,063	$	33,389	$	(2,600	)	$	225,847

December 31, 2012 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2012
Assets
U.S. Government and Government - Related/Supported	$	—	$	2,034,617	$	—	$	—		$	2,034,617
Corporate (1)	—		10,451,902		30,098		—			10,482,000
RMBS – Agency	—		5,223,488		32,005		—			5,255,493
RMBS – Non-Agency	—		647,617		116		—			647,733
CMBS	—		1,051,904		25,347		—			1,077,251
CDO	—		8,080		701,736		—			709,816
Other asset-backed securities (2)	—		1,452,583		18,128		—			1,470,711
U.S. States and political subdivisions of the States	—		1,911,017		—		—			1,911,017
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported	—		4,258,282		—		—			4,258,282
Total fixed maturities, at fair value	$	—	$	27,039,490	$	807,430	$	—		$	27,846,920
Equity securities, at fair value (3)	253,957		395,402		—		—			649,359
Short-term investments, at fair value (1)(4)	—		322,703		—		—			322,703
Total investments available for sale	$	253,957	$	27,757,595	$	807,430	$	—		$	28,818,982
Cash equivalents (5)	1,596,376		408,292		—		—			2,004,668
Other investments (6)	—		792,483		115,272		—			907,755
Other assets (7)	—		24,842		—		(1,327		)	23,515
Total assets accounted for at fair value	$	1,850,333	$	28,983,212	$	922,702	$	(1,327	)	$	31,754,920
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	26,235	$	—	$	—		$	26,235
Other liabilities (7)	—		30,379		36,247		(1,327		)	65,299
Total liabilities accounted for at fair value	$	—	$	56,614	$	36,247	$	(1,327	)	$	91,534

____________

(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.

Level 3 Roll Forward

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	32,173		$	18,214		$	3,411		$	24,423		$	706,013
Realized gains (losses)	32			(1		)	(1		)	1			584
Movement in unrealized gains (losses)	352			(11		)	(1		)	(58		)	(3,405		)
Purchases and issuances	70			—			—			—			70,552
Sales	—			—			—			—			—
Settlements	—			(913		)	(74		)	(4,406		)	(69,193		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	385		$	(12	)	$	—		$	(57	)	$	(3,681	)
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	27,539		$	—		$	1,999		$	103,844		$	(29,374	)
Realized gains (losses)	810			—			(5		)	1,082			—
Movement in unrealized gains (losses)	722			—			64			1,974			(4,015		)
Purchases and issuances	—			—			—			2,333			—
Sales	(15,711		)	—			—			—			—
Settlements	(906		)	—			—			(5,377		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(4	)	$	—		$	59		$	3,057		$	(4,015	)

	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	33,511		$	52,588		$	1,596		$	—		$	642,179
Realized gains (losses)	20			4			(22		)	—			913
Movement in unrealized gains (losses)	673			106			(424		)	—			35,886
Purchases and issuances	—			34			6,821			33,369			—
Sales	(555		)	—			—			—			—
Settlements	—			(4,645		)	(59		)	—			(5,347		)
Transfers into Level 3	—			—			—			—			1,162
Transfers out of Level 3	(4,514		)	(14,230		)	(73		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	674		$	110		$	(447	)	$	—		$	35,806
	Level 3 Assets and Liabilities -Three Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	25,248		$	—		$	—		$	117,765		$	(35,947	)
Realized gains (losses)	7,017			—			—			343			—
Movement in unrealized gains (losses)	(6,552		)	—			—			1,686			885
Purchases and issuances	8,753			—			—			982			—
Sales	—			—			—			—			—
Settlements	(16,141		)	—			—			(807		)	—
Transfers into Level 3	—			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	456		$	—		$	—		$	1,334		$	885

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	30,098		$	32,005		$	116		$	25,347		$	701,736
Realized gains (losses)	(39		)	10			(1		)	1			885
Movement in unrealized gains (losses)	982			(48		)	(1		)	(76		)	32,341
Purchases and issuances	10,691			—			3,326			—			75,914
Sales	—			(535		)	—			—			—
Settlements	(7,245		)	(2,678		)	(105		)	(5,312		)	(106,325		)
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(1,860		)	(11,465		)	(3,326		)	—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	32,627		$	17,289		$	9		$	19,960		$	704,551
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,012		$	(52	)	$	(1	)	$	(75	)	$	30,597
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2013
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	18,128		$	—		$	—		$	115,272		$	(36,247	)
Realized gains (losses)	848			—			(15		)	6,869			—
Movement in unrealized gains (losses)	1,685			—			56			1,004			2,858
Purchases and issuances	21,686			—			2,017			5,240			—
Sales	(15,711		)	—			—			—			—
Settlements	(7,676		)	—			—			(24,529		)	—
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	(6,506		)	—			—			—			—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	12,454		$	—		$	2,058		$	103,856		$	(33,389	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(520	)	$	—		$	41		$	7,865		$	2,858

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Corporate			RMBS - Agency			RMBS - Non Agency			CMBS			CDO
Balance, beginning of period	$	23,818		$	32,041		$	—		$	—		$	650,851
Realized gains (losses)	4			(23		)	—			—			(523		)
Movement in unrealized gains (losses)	346			58			—			—			75,489
Purchases and issuances	8,949			103			6,821			33,369			—
Sales	(555		)	—			—			—			(32,495		)
Settlements	(181		)	(6,233		)	—			—			(18,529		)
Transfers into Level 3	1,393			22,141			1,091			—			1,162
Transfers out of Level 3	(4,639		)	(14,230		)	(73		)	—			(1,162		)
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	29,135		$	33,857		$	7,839		$	33,369		$	674,793
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	351		$	35		$	—		$	—		$	71,738
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2012
(U.S. dollars in thousands)	Other asset- backed securities			Non-US Sovereign Government, Provincial, Supranational and Government Related/Supported			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	16,552		$	—		$	—		$	113,959		$	(42,644	)
Realized gains (losses)	6,748			—			—			2,782			—
Movement in unrealized gains (losses)	(2,873		)	—			—			6,206			7,582
Purchases and issuances	8,753			—			—			4,664			—
Sales	—			—			—			(7,327		)	—
Settlements	(15,867		)	—			—			—			—
Transfers into Level 3	5,012			—			—			6			—
Transfers out of Level 3	(1,162		)	—			—			(315		)	—
Fixed maturities to short-term investments classification change	—			—			—			—			—
Balance, end of period	$	17,163		$	—		$	—		$	119,975		$	(35,062	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	3,652		$	—		$	—		$	2,385		$	7,582

Financial Instruments Not Carried at Fair Value

	September 30, 2013				December 31, 2012
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,802,111	$	3,116,940	$	2,814,447	$	3,262,804
Other investments - structured transactions	293,898		291,924		312,122		293,813
Financial Assets	$	3,096,009	$	3,408,864	$	3,126,569	$	3,556,617
Deposit liabilities	$	1,505,180	$	1,755,877	$	1,551,398	$	1,878,499
Notes payable and debt	1,671,062		1,842,597		1,672,778		1,918,134
Financial Liabilities	$	3,176,242	$	3,598,474	$	3,224,176	$	3,796,633

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2013

Comprehensive Income Loss Note [Abstract]

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI, net of tax, by component for the three months ended September 30, 2013 are as follows:

Three months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments		Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax (1)	$	796,073		$	(101,751	)	$	41,755	$	(27,211	)	$	1,894	$	710,760
OCI before reclassifications (2)	121,956			—			4,020		1,092			—		127,068
Amounts reclassified from AOCI	(5,516		)	7,474			—		—			110		2,068
Tax (benefit) expense	(77,575		)	(5		)	—		—			—		(77,580		)
Net current period OCI - net of tax	38,865			7,469			4,020		1,092			110		51,556
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775	$	(26,119	)	$	2,004	$	762,316

____________

(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.

The changes in AOCI, net of tax, by component for the nine months ended September 30, 2013 are as follows:

Nine months ended September 30, 2013 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments (1)			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments			Underfunded Pension Liability			Cash Flow Hedge		Total
Balance, beginning of period, net of tax	$	1,597,832		$	(121,371	)	$	69,391		$	(27,506	)	$	1,674	$	1,520,020
OCI before reclassifications (1)	(667,097		)	—			(23,616		)	1,387			—		(689,326		)
Amounts reclassified from AOCI	(102,619		)	27,099			—			—			330		(75,190		)
Tax (benefit) expense	6,822			(10		)	—			—			—		6,812
Net current period OCI - net of tax	(762,894		)	27,089			(23,616		)	1,387			330		(757,704		)
Balance, end of period, net of tax	$	834,938		$	(94,282	)	$	45,775		$	(26,119	)	$	2,004	$	762,316

____________

(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.

The reclassifications out of AOCI along with the associated income statement line items affected by component, and the total related tax (expense) benefit for the three and nine months ended September 30, 2013 and 2012 are as follows:

Gross Amount Reclassified From AOCI
Details About AOCI Components (U.S. dollars in thousands)	Three months ended September 30, 2013			Nine months ended September 30, 2013			Affected Line Item in the Statement of Income
Unrealized gains and losses on investments:
	$	(7,904	)	$	(110,295	)	Net realized gains (losses) on investments sold
	2,388			7,676			OTTI on investments
	$	(5,516	)	$	(102,619	)	Total before tax
	3,352			66			Provision (benefit) for income tax
	$	(2,164	)	$	(102,553	)	Net of tax
OTTI losses recognized in OCI:
	$	6,675		$	24,562		Net realized gains (losses) on investments sold
	799			2,537			OTTI on investments transferred to (from) OCI
	$	7,474		$	27,099		Total before tax
	(5		)	(10		)	Provision (benefit) for income tax
	$	7,469		$	27,089		Net of tax
Gains and losses on cash flow hedges:
Interest rate contracts	$	110		$	330		Interest Expense
	—			—			Provision (benefit) for income tax
	$	110		$	330		Net of tax
Total reclassifications for the period, gross of tax	$	2,068		$	(75,190	)
Tax (benefit) expense	3,347			56
Total reclassifications for the period, net of tax	$	5,415		$	(75,134	)

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 29, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	XL GROUP PLC
Entity Central Index Key	0000875159
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		282,810,509

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Recent accounting pronouncements

In June 2011, the FASB issued an accounting standards update concerning the presentation of comprehensive income in financial statements. This guidance allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income only as part of the statement of changes in shareholders' equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted the guidance from January 1, 2012; however, it did not have an impact on the Company's disclosure, financial condition or results of operations or cash flows. In February 2013, the FASB issued an additional accounting standards update related to this topic that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance was adopted prospectively from January 1, 2013. As this guidance is disclosure-related only and does not change the current requirements for reporting net income or other comprehensive income in financial statements, its adoption did not impact the Company's financial condition, results of operations or cash flows.

In December 2011, the FASB issued an accounting standards update requiring additional disclosures about financial instruments and derivatives that are either: (1) offset for balance sheet presentation purposes or (2) subject to an enforceable master netting arrangement or similar arrangement, regardless of whether they are offset for balance sheet presentation purposes. In January 2013, the FASB issued an additional accounting standards update related to this topic clarifying that the disclosures would apply only to derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending transactions, each to the extent that they met one of the two conditions provided in the initial accounting standards update. This guidance was adopted from January 1, 2013, on a retrospective basis for all fiscal periods presented. As this guidance is disclosure-related only and does not amend existing balance sheet offsetting guidance, its adoption did not impact the Company's financial condition, results of operations or cash flows.

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013 Guarantee_contracts	Dec. 31, 2012 Guarantee_contracts
Guarantor Obligations [Line Items]
Opening number of financial guarantee contracts	4	4
Number of financial guarantee contracts matured, prepaid or commuted during the period	(1)	0
Closing number of financial guarantee contracts	3	4
Principal outstanding	$ 108,255	$ 115,464
Interest outstanding	0	0
Aggregate exposure outstanding	108,255	115,464
Total gross claim liability recorded	0	1,399
Total unearned premiums and fees recorded	170	279
Financial Guarantee Insurance Contracts Outstanding Weighted Average Contract Period	26 years 3 months 18 days	25 years 4 months 24 days
Financial Guarantee Related to Securities Including Some Issued By European Financials [Member]
Guarantor Obligations [Line Items]
Closing number of financial guarantee contracts	3
Aggregate exposure outstanding	$ 108,300

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Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent - Narrative (Details) (Share-based compensation plans) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based compensation plans
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (shares)	6.0	8.6	6.3	8.8