Share Capital

6 Months Ended

Jun. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

7. Share Capital

          (a) Authorized and Issued

          As described in further detail in Item 8, Note 20, “Share Capital,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, on November 2, 2010, the Company announced that its Board of Directors approved a share buyback program, authorizing the Company to purchase up to $1.0 billion of its ordinary shares. During 2010, the Company purchased and cancelled 6.9 million ordinary shares under this program for $144.0 million. During the first quarter of 2011, the Company purchased and cancelled 7.3 million ordinary shares under this program for $165.6 million. During the second quarter of 2011, the Company purchased and cancelled 4.3 million ordinary shares under this program for $92.3 million. Between July 1 and August 2, 2011, the Company purchased and cancelled an additional 7.3 million ordinary shares for $157.7 million. 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. At August 2, 2011, $440.4 million remained available to be used for purchases under this program.

          (b) Preferred shares and Non-controlling Interest in Equity of Consolidated Subsidiaries

          On July 18, 2011, XL-Cayman initiated a cash tender offer for any and all of its 2,876,000 outstanding Redeemable Series C preference ordinary shares with a liquidation preference value of $25.00 per share. Upon the terms and subject to the conditions set forth in the Offer to Purchase, XL-Cayman is offering to pay a purchase price of $25.00 for each preference share it purchases, plus an amount equal to accrued but unpaid dividends up to, but not including, the date of purchase.

          On February 16, 2011, the Company repurchased 30,000 of the outstanding Redeemable Series C preference ordinary shares with a liquidation preference value of $0.75 million for $0.65 million. In addition, the Company repurchased 500 of the outstanding Series E preference ordinary shares with a liquidation preference value of $0.50 million for $0.47 million. As a result of these repurchases, the Company recorded a reduction in Non-controlling interests of approximately $0.13 million in the first quarter of 2011.

          On February 12, 2010, the Company repurchased approximately 4.4 million Redeemable Series C preference ordinary shares with a liquidation preference value of $110.8 million for approximately $94.2 million, which was a portion of its outstanding Redeemable Series C preference ordinary shares. As a result, a book value gain of approximately $16.6 million was recorded in the first quarter of 2010 to ordinary shareholders.

          (c) 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 21, “Share Capital,” to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for further information on the Company’s performance incentive programs and associated accounting.

          During the six months ended June 30, 2011, the Company granted approximately 1.1 million stock options with a weighted-average grant date fair value of $9.82 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	1.90	%
Risk free interest rate	2.61	%
Volatility	50.0	%
Expected lives	6.0 years

          During the six months ended June 30, 2011, the Company granted approximately 1.1 million restricted stock units to officers and employees of the Company with an aggregate grant date fair value of approximately $24.6 million. Each restricted stock unit represents the Company’s obligation to deliver to the holder one ordinary share upon satisfaction of the three year 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 six months ended June 30, 2011, the Company granted 40,944 of its restricted stock awards to its directors, with an aggregate grant date fair value of approximately $1.0 million. Each restricted stock award represents the Company’s obligation to deliver to the holder one ordinary share. A Director who is granted a restricted stock award shall have all of the rights of a shareholder, including the right to vote and receive dividends. Each award vests on the date of grant, pursuant to the terms of the Directors Plan. The restricted stock awards are granted at the closing market price on the day of grant.

          During the six months ended June 30, 2011, the Company granted approximately 1.3 million performance units (representing a potential maximum share payout of approximately 2.6 million ordinary shares) to officers and employees of the Company with an aggregate grant date fair value of approximately $29.4 million. The performance units vest after three years 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 vest date. Performance targets are based on relative and absolute financial performance metrics.