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, 2017
	For the quarterly period ended March 31, 2018
	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 LTD

(Exact name of registrant as specified in its charter)



Bermuda		98-1304974
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

O'Hara House, One Bermudiana Road, Hamilton HM 08, Bermuda

(Address of principal executive offices and zip code)

(441) 292-8515

(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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

At ~~November~~May 1, ~~2017~~2018, there were ~~256~~258,~~014~~287,~~972~~127 outstanding Common Shares, $0.01 par value per share, of the registrant.

XL GROUP LTD

INDEX TO FORM 10-Q

		Page No.
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Unaudited Consolidated Balance Sheets at September 30, 2017 and December 31, 2016	1
	Unaudited Consolidated Balance Sheets at March 31, 2018 and December 31, 2017	1
	Unaudited Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016	2
	Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2018 and 2017	2
	Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016	3
	Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017	3
	Unaudited Consolidated Statements of Shareholders' Equity for the Nine Months Ended September 30, 2017 and 2016	4
	Unaudited Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2018 and 2017	4
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	5
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	56
	1. Significant Accounting Policies	6
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	92
	2. Acquisitions and Disposals	8
Item 4.	Controls and Procedures	98
	3. Segment Information	8
	4. Investments	12
	5. Derivative Instruments	17
	6. Fair Value Measurements	22
	7. Goodwill and Other Intangible Assets	28
	8. Losses and Loss Expenses	29
	9. Notes Payable and Debt and Financing Arrangements	30
	10. Related Party Transactions	32
	11. Variable Interest Entities	33
	12. Commitments and Contingencies	33
	13. Share Capital	34
	14. Computation of Earnings Per Common Share and Common Share Equivalent	35
	15. Accumulated Other Comprehensive Income (Loss)	36
	16. Guarantor Financial Information	37
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4.	Controls and Procedures	81
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	9982
Item 1A.	Risk Factors	9982
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9984
Item 5.	Other Information	~~100~~85
Item 6.	Exhibits	~~100~~86
	Signatures	~~101~~87

PART I – FINANCIAL INFORMATION



ITEM 1.		FINANCIAL STATEMENTS

XL GROUP LTD

UNAUDITED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share data)	~~September~~March 3031, ~~2017~~2018		December 31, ~~2016~~2017
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost: 2017 - $30,822,936; 2016 - $29,587,656)	$	31,675,509	$	30,256,602
Fixed maturities available for sale (''AFS''), at fair value (amortized cost: 2018 - $30,268,346; 2017 - $30,157,581)	$	30,656,628	$	30,928,988
Equity securities, at fair value (cost: 2017 - $920,130; 2016 - $996,610)	1,011,942		1,037,331
Short-term investments AFS, at fair value (amortized cost: 2018 - $500,844; 2017 - $816,638)	500,170		815,481
Short-term investments, at fair value (amortized cost: 2017 - $336,071; 2016 - $626,142)	336,054		625,193
Fixed maturities trading, at fair value (amortized cost: 2018 - $2,055,722; 2017 - $1,946,501)	2,084,251		2,006,385
Total investments available for sale	$	33,023,505	$	31,919,126
Short-term investments trading, at fair value (amortized cost: 2018 - $7,428; 2017 - $14,969)	7,425		14,965
Fixed maturities, at fair value (amortized cost: 2017 - $1,823,406; 2016 - $1,548,178)	1,866,465		1,617,014
Equity securities, at fair value (cost: 2018 - $607,427; 2017 - $638,455)	637,872		713,967
Short-term investments, at fair value (amortized cost: 2017 - $9,362; 2016 - $9,536)	9,361		9,563
Investments in affiliates	1,900,105		1,911,996
Total investments, trading	$	1,875,826	$	1,626,577
Other investments	1,186,983		1,163,863
Investments in affiliates	2,100,378		2,177,645
Total investments	$	36,973,434	$	37,555,645
Other investments	1,145,588		1,164,564
Cash and cash equivalents	3,484,763		3,435,954
Total investments	$	38,145,297	$	36,887,912
Restricted cash	155,023		157,497
Cash and cash equivalents	3,030,088		3,426,988
Accrued investment income	265,701		272,149
Restricted cash	159,627		153,504
Deferred acquisition costs and value of business acquired	1,317,797		1,102,474
Accrued investment income	270,211		284,366
Ceded unearned premiums	2,950,077		2,198,217
Deferred acquisition costs and value of business acquired	1,073,343		946,721
Premiums receivable	7,988,469		6,934,482
Ceded unearned premiums	2,311,619		1,687,864
Reinsurance balances receivable	1,210,620		930,114
Premiums receivable	7,078,700		5,522,976
Unpaid losses and loss expenses recoverable	7,271,013		7,247,723
Reinsurance balances receivable	1,079,821		577,479
Receivable from investments sold	258,084		201,515
Unpaid losses and loss expenses recoverable	6,962,787		5,491,297
Goodwill and other intangible assets	2,230,506		2,225,751
Receivable from investments sold	195,837		128,411
Deferred tax asset	356,667		332,024
Goodwill and other intangible assets	2,227,014		2,203,653
Other assets	875,809		842,691
Deferred tax asset	301,322		310,542
Total assets	$	65,337,963	$	63,436,236
Other assets	954,542		812,389
Total assets	$	63,790,208	$	58,434,102
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss expenses	$	29,~~988~~701,~~337~~568	$	2529,~~939~~696,~~571~~779
Deposit liabilities	1982,~~030,290~~963		1,~~116~~042,~~233~~677
Future policy benefit reserves	3,~~656~~680,~~859~~958		3,~~506~~610,~~047~~926
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable: 2017 - $3,221,803; 2016 - $3,072,615)	920,571		998,968
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable: 2018 - $3,261,122; 2017 - $3,191,584)	989,140		999,219
Unearned premiums	89,~~344~~687,~~536~~293		78,~~293~~307,~~028~~431
Notes payable and debt	3,~~210~~240,~~063~~461		23,~~647~~220,~~677~~769
Reinsurance balances payable	34,~~706~~432,~~120~~331		23,~~451~~706,~~717~~116
Payable for investments purchased	~~273~~317,~~449~~339		~~226~~332,~~009~~989
Deferred tax liability	~~107~~57,~~157~~995		7757,~~271~~574
Other liabilities	1,~~024~~012,~~316~~693		1,~~216~~000,~~902~~436
Total liabilities	$	5254,~~261~~102,~~698~~741	$	4551,~~473~~974,~~423~~916
Commitments and Contingencies
Shareholders' Equity:
Authorized shares, 999,990,000, par value $0.01; common shares issued and outstanding (2017 - 255,980,636; 2016 - 266,889,127)	$	2,560	$	2,669
Authorized shares, 999,990,000, par value $0.01; common shares issued and outstanding (2018 - 258,171,836; 2017 - 256,033,895)	$	2,582	$	2,560
Additional paid in capital	7,~~741~~809,~~545~~895		87,~~068~~757,~~503~~940
Accumulated other comprehensive income	~~968~~312,~~928~~255		~~715~~889,~~546~~431
Retained earnings	1,~~226~~503,~~814~~797		21,~~151~~198,~~794~~386
Shareholders' equity attributable to XL Group Ltd	$	9,~~939~~628,~~847~~529	$	109,~~938~~848,~~512~~317
Non-controlling interest in equity of consolidated subsidiaries	1,~~588~~606,~~663~~693		21,~~022~~613,~~167~~003
Total shareholders' equity	$	11,~~528~~235,~~510~~222	$	1211,~~960~~461,~~679~~320
Total liabilities and shareholders' equity	$	6365,~~790~~337,~~208~~963	$	5863,~~434~~436,~~102~~236

See accompanying Notes to Unaudited Consolidated Financial Statements

XL GROUP LTD

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
(U.S. dollars in thousands, except per share data)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Revenues:
Net premiums earned	$	2,~~620~~600,~~902~~288		$	2,~~434~~522,~~037~~791		$	~~7,660,610~~		$	~~7,320,859~~
Net investment income:
Net investment income - excluding Life Funds Withheld Assets	~~171~~188,~~983~~083			~~170~~167,~~834~~168			~~516,386~~			~~511,402~~
Net investment income - Life Funds Withheld Assets	30,~~796~~398			3833,~~937~~364			~~95,599~~			~~119,643~~
Total net investment income	$	~~202~~218,~~779~~481		$	~~209~~200,~~771~~532		$	~~611,985~~		$	~~631,045~~
Net realized gains (losses) on investments, and net unrealized gains (losses) on investments, trading:
Realized investment gains (losses):
Net realized gains (losses) on investments sold - excluding Life Funds Withheld Assets	35,387			68,414			96,858			131,568
Net realized gains (losses) on investments AFS - excluding Life Funds Withheld Assets	(31,672		)	11,092
Other-than-temporary impairments ("OTTI") on investments - excluding Life Funds Withheld Assets	(3,598		)	(10,019		)	(11,632		)	(62,379		)
Net realized and change in net unrealized gains (losses) on equity securities - excluding Life Funds Withheld Assets	(36,014		)	—
OTTI on investments transferred to (from) other comprehensive income - excluding Life Funds Withheld Assets	(63		)	—			(113		)	258
Net realized and change in net unrealized gains (losses) on other investments - excluding Life Funds Withheld Assets	8,649			—
Net realized gains (losses) on investments sold - Life Funds Withheld Assets	18,879			44,011			83,131			108,541
Other-than-temporary impairments ("OTTI") - excluding Life Funds Withheld Assets	(1,645		)	(6,874		)
OTTI on investments - Life Funds Withheld Assets	—			—			—			(2,598		)
OTTI transferred to (from) other comprehensive income - excluding Life Funds Withheld Assets	(161		)	—
Net unrealized gains (losses) on investments, trading - Life Funds Withheld Assets	(7,331		)	41,270			(31,056		)	165,653
Net realized gains (losses) on investments and change in net unrealized gains (losses) on investments, trading - Life Funds Withheld Assets	(21,309		)	33,068
Total net realized gains (losses) on investments, and net unrealized gains (losses) on investments, trading	$	43,274		$	143,676		$	137,188		$	341,043
OTTI - Life Funds Withheld Assets	(1,203		)	—
Net realized and unrealized gains (losses) on derivative instruments	(20,434		)	5,490			(28,409		)	2,774
Total realized investment gains (losses)	$	(83,355	)	$	37,286
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	(31,662		)	(225,610		)	(116,359		)	(691,432		)
Net realized and unrealized gains (losses) on derivative instruments	4,221			(7,069		)
Income (loss) from investment affiliates	57,656			12,156			126,735			20,756
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	22,921			(50,101		)
Fee income and other	11,469			8,600			35,355			27,724
Income (loss) from investment affiliates	45,669			38,261
Total revenues	$	2,883,984		$	2,588,120		$	8,427,105		$	7,652,769
Fee income and other	6,717			13,661
Expenses:
Total revenues	$	2,814,942		$	2,755,361
Net losses and loss expenses incurred	$	3,066,723		$	1,491,803		$	6,179,262		$	4,506,674
Expenses:
Claims and policy benefits	10,592			5,875			25,478			16,294
Net losses and loss expenses incurred	$	1,622,006		$	1,583,456
Acquisition costs	445,685			403,888			1,315,138			1,227,675
Claims and policy benefits	10,307			7,291
Operating expenses	409,356			508,458			1,350,172			1,546,360
Acquisition costs	463,827			435,869
Foreign exchange (gains) losses	55,017			(1,695		)	46,038			(54,614		)
Operating expenses	472,563			468,038
(Gain) Loss on sale of subsidiary	—			(3,670		)	—			(3,670		)
Foreign exchange (gains) losses	9,841			(3,336		)
Extinguishment of debt	1,582			—			1,582			—
Interest expense	53,545			50,711
Interest expense	33,919			49,445			138,648			157,486
Total expenses	$	2,632,089		$	2,542,029
Total expenses	$	4,022,874		$	2,454,104		$	9,056,318		$	7,396,205
Income (loss) before income tax and income (loss) from operating affiliates	$	182,853		$	213,332
Income (loss) before income tax and income (loss) from operating affiliates	$	(1,138,890	)	$	134,016		$	(629,213	)	$	256,564
Income (loss) from operating affiliates	10,282			13,609
Income (loss) from operating affiliates	4,872			12,410			61,185			46,478
Provision (benefit) for income tax	31,902			13,092
Provision (benefit) for income tax	(60,132		)	17,749			(18,034		)	42,511
Net income (loss)	$	161,233		$	213,849
Net income (loss)	$	(1,073,886	)	$	128,677		$	(549,994	)	$	260,531
Non-controlling interests	8,585			61,006
Non-controlling interests	(30,197		)	58,076			39,232			124,263
Net income (loss) attributable to common shareholders	$	152,648		$	152,843
Net income (loss) attributable to common shareholders	$	(1,043,689	)	$	70,601		$	(589,226	)	$	136,268
Weighted average common shares and common share equivalents outstanding, in thousands – basic	256,922			265,690
Weighted average common shares and common share equivalents outstanding, in thousands – basic	257,022			273,660			261,203			282,442
Weighted average common shares and common share equivalents outstanding, in thousands – diluted	261,176			269,767
Weighted average common shares and common share equivalents outstanding, in thousands – diluted	261,298			277,094			265,266			286,125
Earnings (loss) per common share and common share equivalent – basic	$	0.59		$	0.58
Earnings (loss) per common share and common share equivalent – basic	$	(4.06	)	$	0.26		$	(2.26	)	$	0.48
Earnings (loss) per common share and common share equivalent – diluted	$	0.58		$	0.57
Earnings (loss) per common share and common share equivalent – diluted	$	(4.06	)	$	0.25		$	(2.26	)	$	0.48

See accompanying Notes to Unaudited Consolidated Financial Statements

XL GROUP LTD

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Net income (loss) attributable to common shareholders	$	(1152,~~043,689~~648	)	$	70152,~~601~~843		$	~~(589,226~~	)	$	~~136,268~~
Change in net unrealized gains (losses) on investments - excluding Life Funds Withheld Assets, net of tax	80,446			(25,188		)	258,923			530,344
Change in net unrealized gains (losses) on investments AFS - excluding Life Funds Withheld Assets, net of tax	(330,728		)	102,622
Change in adjustments related to future policy benefit reserves, net of tax	54,~~412~~164			25,~~058~~132			~~13,981~~			~~27,820~~
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets, net of tax	(14,579		)	77,242			(46,643		)	206,480
Change in net unrealized gains (losses) on investments AFS - Life Funds Withheld Assets, net of tax	(35,754		)	(20,108		)
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(23,272		)	7,457			(15,391		)	(31,091		)
Change in net unrealized gains (losses) on affiliate investments, net of tax	2,148			(2,462		)
Change in OTTI losses recognized in other comprehensive income, net of tax	1,721			1,461			4,660			5,580
Change in net unrealized gains (losses) on other investments, net of tax	—			1,269
Change in underfunded pension liability, net of tax	(308		)	4,037			(1,241		)	3,088
Change in OTTI recognized in other comprehensive income, net of tax	3,616			1,442
Change in value of cash flow hedge	(48		)	(47		)	(144		)	(134		)
Change in underfunded pension liability, net of tax	(189		)	(357		)
Foreign currency translation adjustments, net of tax	(1,609		)	44,198			39,237			91,102
Change in value of cash flow hedge	(48		)	(48		)
Comprehensive income (loss)	$	(995,926	)	$	181,819		$	(335,844	)	$	969,457
Foreign currency translation adjustments, net of tax	(2,432		)	41,938
Comprehensive income (loss)	$	(206,575	)	$	282,271

See accompanying Notes to Unaudited Consolidated Financial Statements

XL GROUP LTD

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017
Common Shares:
Balance - beginning of year	$	2,~~669~~560		$	2,~~947~~669
Issuance of common shares	117			1610
Buybacks of common shares	~~(138~~—		)	(~~262~~51		)
Exercise of stock options	1815			39
Balance - end of period	$	2,~~560~~582		$	2,~~704~~637
Additional Paid in Capital:
Balance - beginning of year	$	87,~~068~~757,~~503~~940		$	8,~~910~~068,~~167~~503
Issuance of common shares	18			23
Buybacks of common shares	(1,191		)	(154,065		)
Buybacks of common shares	(416,609		)	(790,541		)
Exercise of stock options	48,163			23,287
Exercise of stock options	49,622			5,731
Share-based compensation and other	4,983			(3,564		)
Share-based compensation and other	40,011			39,761
Balance - end of period	$	7,809,895		$	7,934,161
Balance - end of period	$	7,741,545		$	8,165,141
Accumulated Other Comprehensive Income (Loss):
Balance - beginning of year	$	~~715~~889,~~546~~431		$	~~686~~715,~~616~~546
Change in net unrealized gains (losses) on investments - excluding Life Funds Withheld Assets, net of tax	258,923			530,344
Reclassification due to the adoption of Accounting Standards Update ("ASU") 2016-01	(221,856		)	—
Change in adjustments related to future policy benefit reserves, net of tax	13,981			27,820
Reclassification due to the adoption of ASU 2018-02	3,903			—
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets, net of tax	(46,643		)	206,480
Change in net unrealized gains (losses) on investments AFS - excluding Life Funds Withheld Assets, net of tax	(330,728		)	102,622
Change in net unrealized gains (losses) on affiliate and other investments, net of tax	(15,391		)	(31,091		)
Change in adjustments related to future policy benefit reserves, net of tax	4,164			5,132
Change in OTTI losses recognized in other comprehensive income, net of tax	4,660			5,580
Change in net unrealized gains (losses) on investments AFS - Life Funds Withheld Assets, net of tax	(35,754		)	(20,108		)
Change in underfunded pension liability, net of tax	(1,241		)	3,088
Change in net unrealized gains (losses) on affiliate investments, net of tax	2,148			(2,462		)
Change in value of cash flow hedge	(144		)	(134		)
Change in net unrealized gains (losses) on other investments, net of tax	—			1,269
Foreign currency translation adjustments, net of tax	39,237			91,102
Change in OTTI losses recognized in other comprehensive income, net of tax	3,616			1,442
Balance - end of period	$	968,928		$	1,519,805
Change in underfunded pension liability, net of tax	(189		)	(357		)
Change in value of cash flow hedge	(48		)	(48		)
Foreign currency translation adjustments, net of tax	(2,432		)	41,938
Balance - end of period	$	312,255		$	844,974
Retained Earnings (Deficit):
Balance - beginning of year	$	21,~~151~~198,~~794~~386		$	2,~~077~~151,~~349~~794
Net income (loss) attributable to common shareholders	(589,226		)	136,268
Reclassification due to the adoption of ASU 2016-01	221,856			—
Dividends on common shares	(174,762		)	(170,172		)
Reclassification due to the adoption of ASU 2018-02	(3,903		)	—
Buybacks of common shares	(154,839		)	(115,334		)
Net income (loss) attributable to common shareholders	152,648			152,843
Share-based compensation and other	(6,153		)	(3,595		)
Dividends on common shares	(57,644		)	(59,371		)
Balance - end of period	$	1,226,814		$	1,924,516
Buybacks of common shares	(471		)	(46,372		)
Share-based compensation and other	(7,075		)	(5,782		)
Balance - end of period	$	1,503,797		$	2,193,112
Non-controlling Interest in Equity of Consolidated Subsidiaries:
Balance - beginning of year	$	21,~~022~~613,~~167~~003		$	12,~~977~~022,~~384~~167
Non-controlling interests - contributions	~~49,473~~438			~~6,393~~25
Non-controlling interests - distributions	(26,092		)	(7,958		)
Non-controlling interests - other	(7,361		)	3,036
Non-controlling interests - redeemed	(431,282		)	—
Non-controlling interest share in change in accumulated other comprehensive income (loss)	613			514
Non-controlling interests - other	(25,953		)	5,916
Balance - end of period	$	1,606,693		$	2,025,742
Non-controlling interest share in change in accumulated other comprehensive income (loss)	350			(1,021		)
Total Shareholders' Equity	$	11,235,222		$	13,000,626
Balance - end of period	$	1,588,663		$	1,980,714
Total Shareholders' Equity	$	11,528,510		$	13,592,880

See accompanying Notes to Unaudited Consolidated Financial Statements

XL GROUP LTD

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017
Cash flows provided by (used in) operating activities:
Net income (loss)	$	~~(549~~161,~~994~~233	)	$	~~260~~213,~~531~~849
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Total net realized (gains) losses on investments and net unrealized (gains) losses on investments, Trading	(137,188		)	(341,043		)
Total realized investment (gains) losses	83,355			(37,286		)
Net realized and unrealized (gains) losses on derivative instruments	28(4,~~409~~221		)	(27,~~774~~069		)
Net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	~~116~~(22,~~359~~921		)	~~691~~50,~~432~~101
Amortization of premiums (discounts) on fixed maturities	~~122~~32,~~474~~298			~~143~~42,~~855~~178
(Income) loss from investment and operating affiliates	(~~135~~39,~~415~~800		)	(2528,~~915~~921		)
Loss (gain) on sale of subsidiaries	—			(3,670		)
Share-based compensation	15,448			12,694
Share-based compensation	49,545			60,514
Depreciation and amortization	22,481			19,429
Depreciation and amortization	54,109			86,014
Accretion of deposit liabilities	11,125			11,430
Accretion of deposit liabilities	17,002			33,133
Changes in:
Unpaid losses and loss expenses	3(240,~~241,151~~207		)	~~820~~290,~~938~~788
Future policy benefit reserves	(~~162~~51,~~815~~981		)	(~~156~~55,~~804~~634		)
Funds withheld on GreyCastle life retrocession arrangements, net	(~~275~~24,~~417~~578		)	(~~203~~107,~~983~~596		)
Unearned premiums	~~785~~1,~~513~~310,888			~~731~~1,~~463~~222,570
Premiums receivable	(1979,~~364,597~~464		)	(1,~~294~~152,~~936~~760		)
Unpaid losses and loss expenses recoverable	(136,~~304,544~~804		)	(~~255~~153,~~627~~063		)
Ceded unearned premiums	(~~547~~730,~~700~~516		)	(~~122~~797,~~856~~191		)
Reinsurance balances receivable	(~~478~~272,~~040~~531		)	(~~111~~59,~~238~~052		)
Deferred acquisition costs and value of business acquired	(90205,~~796~~798		)	(88205,~~261~~830		)
Reinsurance balances payable	1695,~~140,535~~220			~~587~~849,~~682~~492
Deferred tax asset - net	~~(18~~25,~~397~~190		)	~~(11~~10,~~015~~852		)
Derivatives	~~(25~~8,~~629~~162		)	4558,~~469~~104
Other assets	(~~182~~42,~~229~~006		)	(96100,~~971~~791		)
Other liabilities	(~~221~~51,~~046~~327		)	(13128,~~801~~606		)
Other	~~122~~25,~~524~~022			(549,~~355~~323		)
Total adjustments	$	~~733~~(399,~~808~~357	)	$	~~417~~(261,~~251~~346	)
Net cash provided by (used in) operating activities	$	~~183~~(238,~~814~~124	)	$	~~677~~(47,~~782~~497	)
Cash flows provided by (used in) investing activities:
Proceeds from sale of fixed maturities and short-term investments	$	114,~~354~~369,~~376~~199		$	92,~~581~~492,~~243~~005
Proceeds from redemption of fixed maturities and short-term investments	2701,~~794,515~~404			31,~~010~~228,~~158~~356
Proceeds from sale of equity securities	~~456~~78,~~889~~716			~~411~~46,~~330~~379
Purchases of fixed maturities and short-term investments	(144,~~456~~917,~~346~~191		)	(113,~~557~~633,~~045~~007		)
Purchases of equity securities	(~~314~~33,~~752~~230		)	(~~611~~47,~~086~~967		)
Proceeds from sale of affiliates	~~375~~244,~~628~~340			~~325~~168,~~050~~237
Purchases of affiliates	(~~119~~76,~~835~~014		)	(~~556~~35,~~548~~926		)
Purchase of subsidiaries, net of cash acquired	—			(92,893		)
Other	(26,782		)	23,429
Proceeds from sales of subsidiaries, net of cash sold	—			19,144
Net cash provided by (used in) investing activities	$	340,442		$	241,506
Change in restricted cash	(6,123		)	4,874
Other	(37,147		)	193,392
Net cash provided by (used in) investing activities	$	47,205		$	727,619
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common shares and exercise of stock options	$	4946,~~640~~504		$	523,~~735~~296
Buybacks of common shares	(~~571~~1,~~586~~663		)	(~~906~~200,~~137~~488		)
Repurchase of preference shares	(411,492		)	—
Employee withholding on share-based compensation	(16,696		)	(22,871		)
Employee withholding on share-based compensation	(24,156		)	(28,171		)
Dividends paid on common shares	—			(58,392		)
Dividends paid on common shares	(171,905		)	(169,346		)
Distributions to non-controlling interests	(15,946		)	(25,400		)
Distributions to non-controlling interests	(109,213		)	(93,470		)
Contributions from non-controlling interests	439			26
Contributions from non-controlling interests	49,474			6,394
Contingent consideration paid on business combination	(5,000		)	—
Proceeds from the issuance of debt	558,311			—
Deposit liabilities	(71,124		)	(7,771		)
Repayment of debt	(17,909		)	(8,248		)
Net cash provided by (used in) financing activities	$	(63,486	)	$	(291,600	)
Deposit liabilities	(34,407		)	(63,488		)
Effects of exchange rate changes on foreign currency cash	7,503			30,273
Net cash provided by (used in) financing activities	$	(683,243	)	$	(1,256,731	)
Increase (decrease) in cash, cash equivalents and restricted cash	$	46,335		$	(67,318	)
Effects of exchange rate changes on foreign currency cash	55,324			(11,629		)
Cash, cash equivalents and restricted cash - beginning of year	3,593,451			3,580,492
Increase (decrease) in cash and cash equivalents	$	(396,900	)	$	137,041
Cash, cash equivalents and restricted cash - end of period	$	3,639,786		$	3,513,174
Cash and cash equivalents - beginning of year	3,426,988			3,256,236
Cash and cash equivalents - end of period	$	3,030,088		$	3,393,277

See accompanying Notes to Unaudited Consolidated Financial Statements

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

(a) Basis of Preparation and Consolidation

OnUnless ~~July 25, 2016, XL Group plc, an Irish public limited company ("XL-Ireland"), and XL Group Ltd, a Bermuda exempted company ("XL Group"), completed a scheme of arrangement under Irish law (~~the ~~"Scheme~~context ofotherwise Arrangement") that effected a transaction (the "Redomestication") that resulted in the shareholders of XL-Ireland becoming shareholders of XL Group and XL-Ireland becoming a subsidiary of XL Group. In accordance with the terms of the Scheme of Arrangementindicates, ~~the~~references ~~following~~herein ~~steps~~to ~~simultaneously occurred at~~ the ~~effective time of the Redomestication: (i) all of the existing XL-Ireland ordinary shares, par value $0.01 per share (the~~ "~~XL-Ireland shares~~Company") ~~(other~~include ~~than XL-Ireland shares held by XL Group) were canceled; (ii)~~ the ~~reserves~~accounts ~~created on cancellation~~ of ~~the~~ XL~~-Ireland~~ ~~shares were used to issue XL-Ireland shares to XL~~ Group; ~~and (iii) in return for such issuance of XL-Ireland shares to XL Group~~Ltd, XLa ~~Group~~Bermuda ~~issued~~exempted ~~common~~company ~~shares, par value $0.01 per share~~ (~~the~~ "XL Group ~~shares~~")~~. The XL Group shares issued in connection with the Redomestication were issued in reliance upon an exemption from registration under the U.S. Securities Act of 1933~~, astogether amended (the "Securities Act"), provided under Section 3(a)(10) of the Securities Act. Upon the Redomestication, XL Group became the successor issuer to XL-Ireland and succeeded XL-Ireland's obligation to file reports, proxy statements and other information required of domestic registrants by the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the U.S. Securities and Exchange Commission. As the successor issuer, XL Group's shares were deemed to be registered under Section 12(b) of the Exchange Act. Further, XL Group is subject to the applicable listing standards of the New York Stock Exchange ("NYSE"), and reports its ~~financial~~consolidated ~~results in U~~subsidiaries.S. dollars and under accounting principles generally accepted in the United States of America ("GAAP"), in addition to any reporting requirements under Bermuda law. XL Group's shares continue in place of the XL-Ireland shares to trade on the NYSE under the ticker symbol "XL." Additionally, upon completion of the Redomestication, XL Group fully and unconditionally guaranteed the majority of the outstanding debt issued by XLIT Ltd., an exempted company incorporated under the laws of the Cayman Islands ("XLIT"). See Note 9, "Notes Payable and Debt and Financing Arrangements," for more information regarding our outstanding debt.

InThese ~~connection~~Unaudited ~~with~~Consolidated Financial Statements include the ~~Redomestication,~~accounts onof ~~August~~the 3,Company ~~2016,~~and ~~XL-Ireland~~have ~~distributed~~been ~~the~~prepared ~~ordinary~~in ~~shares~~accordance ofwith ~~XLIT,~~accounting toprinciples XLgenerally ~~Group~~accepted (in the United States of America ("~~Distribution~~GAAP"), ~~which~~for ~~was~~interim ~~recorded~~financial oninformation and with the ~~share~~instructions ~~register~~to Form 10-Q and Article 10 of ~~XLIT~~Regulation onS-X. ~~August~~Accordingly, 4they do not include all of the information and disclosures required by GAAP for complete financial statements. In addition, ~~2016~~the year-end balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. AsIn the opinion of management, these unaudited financial statements reflect all adjustments considered necessary for a ~~result~~fair statement of financial position and results of operations at the ~~Distribution,~~end ~~XLIT~~of isand ~~now~~for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a ~~direct,~~full ~~wholly~~year. All inter-~~owned~~company ~~subsidiary~~accounts ofand XLtransactions ~~Group~~have been eliminated. ItThe ispreparation ~~anticipated~~of ~~that~~financial ~~XL-Ireland~~statements ~~will~~in beconformity ~~liquidated~~with ~~(via~~GAAP arequires ~~solvent~~management ~~members'~~to ~~voluntary~~make ~~liquidation~~estimates and assumptions that ~~was~~affect ~~initiated~~the onreported ~~August~~amounts 2of assets and liabilities, ~~2016)~~the bydisclosure about contingent assets and liabilities at the ~~end~~date of ~~2018~~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 1(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, 2017.

~~Prior~~In toMay ~~July 25~~2014, ~~2016,~~the ~~unless~~Company ceded the ~~context~~majority ~~otherwise~~of ~~indicates,~~its ~~references~~life ~~herein~~reinsurance business to ~~the~~GreyCastle Life Reinsurance ("~~Company~~GCLR") orvia 100% quota share reinsurance (the "XLGreyCastle Life Retro Arrangements"). ~~are~~Under the terms of the transaction, the Company continues to own, ~~and~~on ~~these~~a ~~financial~~funds ~~statements~~withheld ~~include~~basis, assets supporting the ~~accounts~~GreyCastle Life Retro Arrangements consisting of cash, ~~XL-Ireland~~fixed maturity securities and ~~its~~accrued ~~consolidated~~interest ~~subsidiaries~~(the "Life Funds Withheld Assets"). OnThe ~~and~~Life ~~subsequent~~Funds Withheld Assets are managed pursuant to ~~July~~agreed ~~25,~~investment ~~2016,~~guidelines ~~unless~~that meet the ~~context~~contractual ~~otherwise~~commitments ~~indicates,~~of ~~references~~the ~~herein~~XL ceding companies and applicable laws and regulations. All of the investment results associated with the Life Funds Withheld Assets ultimately accrue to GCLR. Because the "Company" orno ~~"XL"~~longer ~~are~~shares ~~to,~~in the risks and ~~these~~rewards of the underlying performance of the supporting invested assets, disclosures within the financial ~~statements~~statement ~~include~~notes included herein separate the ~~accounts~~Life Funds Withheld Assets from the rest of the Company's investments. For further information, XLsee ~~Group~~Item 8, Note 1(a), "Significant Accounting Policies - Basis of Preparation and ~~its~~Consolidation," ~~consolidated~~to ~~subsidiaries~~the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

~~These~~To ~~Unaudited~~facilitate ~~Consolidated Financial Statements include the accounts of the Company and have been prepared in accordance with GAAP for interim financial information and with the instructions~~ period-to ~~Form 10~~-Qperiod ~~and Article 10 of Regulation S-X. Accordingly~~comparisons, ~~they~~certain doreclassifications 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.~~made ~~The preparation of financial statements in conformity with GAAP requires management~~ to ~~make~~prior ~~estimates~~period ~~and~~consolidated ~~assumptions that affect the reported amounts of assets and liabilities, the disclosure about contingent assets and liabilities at the date of the~~ financial ~~statements~~statement ~~and the reported~~ amounts ofto ~~revenues~~conform ~~and~~to ~~expenses~~current ~~during the reporting~~ period. ~~Actual results could differ materially from these estimates~~presentation. For further information, see Item 8, Note 1(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, 2016.

~~On May 1, 2015, the Company completed its acquisition of Catlin Group Limited and its consolidated subsidiaries~~ (~~"Catlin"~~b). ~~Catlin,~~Recent ~~through~~Accounting its wholly-owned subsidiaries, provided property, casualty and specialty insurance and reinsurance coverage on a worldwide basis. The Company's consolidated results of operations include those of Catlin from May 1, 2015. For further information, see Item 8, Note 2(f), "Acquisitions and Disposals - Catlin Acquisition," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.Pronouncements

InRecently ~~May~~Issued ~~2014,~~Accounting ~~the~~Standards ~~Company~~Adopted ~~ceded~~in the majority of its life reinsurance business to GreyCastle Life Reinsurance ("GCLR") via 100% quota share reinsurance (the "GreyCastle Life Retro Arrangements"). Under the terms of the transaction, the Company continues to own, on a funds withheld basis, assets supporting the GreyCastle Life Retro Arrangements consisting of cash, fixed maturity securities and accrued interest (the "Life Funds Withheld Assets"). The Life Funds Withheld Assets are managed pursuant to agreed investment guidelines that meet the contractual commitments of the XL ceding companies and 2018

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued an accounting standards update concerning the accounting for financial instruments. The guidance retains the basic existing framework for accounting for financial instruments under GAAP, while achieving limited convergence with IFRS in this area. The guidance: (1) requires equity investments (except consolidated entities and those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (3) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for non-public business entities; (4) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet; (5) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial statements; (7) requires separate presentation of financial assets and financial liabilities by measurement category and form of asset in the financial statements; and (8) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to AFS securities in combination with the entity's other deferred tax assets. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Adoption is required to be applied by means of a cumulative effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, except the amendments related to impairment of equity securities without readily determinable fair values. The Company adopted this guidance as of

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~applicable~~January ~~laws~~1, ~~and regulations~~2018. ~~All~~As of ~~the~~that ~~investment~~date, ~~results~~accumulated ~~associated~~unrealized ~~with~~gains ~~the~~and ~~Life~~losses ~~Funds~~relating ~~Withheld Assets ultimately accrue~~ to ~~GCLR.~~investments ~~Because~~in ~~the~~equity ~~Company~~securities noand ~~longer~~certain ~~shares~~of inour ~~the~~other ~~risks~~investments, ~~and~~net ~~rewards~~ of ~~the~~tax, ~~underlying~~which ~~performance~~were ofincluded ~~the~~in ~~supporting~~accumulated ~~invested~~other ~~assets~~comprehensive income, ~~disclosures~~were ~~within~~reclassified ~~the~~to ~~financial~~retained ~~statement~~earnings. ~~notes~~At ~~included~~January ~~herein~~1, ~~separate~~2018 the ~~Life~~amount ~~Funds~~of ~~Withheld~~the ~~Assets~~reclassification ~~from~~was ~~the~~a ~~rest~~net ofunrealized ~~the~~gain ~~Company's~~of ~~investments~~$233.8 ~~For~~million, ~~further~~less ~~information,~~deferred ~~see~~tax ~~Item~~of 8,$11.9 ~~Note~~million. ~~2(g),~~Adoption ~~"Acquisitions~~of ~~and~~this ~~Disposals~~update -has ~~Sale~~an effect on results of ~~Life~~operations ~~Reinsurance~~going ~~Subsidiary~~forward," as mark-to-market ~~the~~movements ~~Consolidated~~on ~~Financial~~equity ~~Statements~~securities ~~included~~now inimpact ~~the~~net ~~Company's~~income; ~~Annual~~however, ~~Report~~it ondoes ~~Form~~not ~~10-K~~have ~~for~~a ~~the~~material ~~year~~impact ~~ended~~on ~~December~~the ~~31,~~Company's ~~2016~~cash flows.

ToASU ~~facilitate period~~2016-~~to-period comparisons~~15, ~~certain~~Classification ~~reclassifications~~of ~~have~~Certain ~~been~~Cash ~~made~~Receipts toand ~~prior~~Cash ~~period consolidated financial statement amounts to conform to current period presentation.~~Payments

In August 2016, the FASB issued an accounting standards update concerning the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The amendments in this update are intended to address areas where GAAP is unclear and diversity in practice exists. The following areas are covered in this update: (b1) ~~Recent~~debt ~~Accounting~~prepayment ~~Pronouncements~~or debt extinguishment costs; (2) settlement of zero-coupon debt instruments; (3) contingent consideration payments following a business combination; (4) proceeds from settlement of insurance claims; (5) proceeds from settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separation of cash flows. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2018 using the retrospective transition method required by these amendments. As required in adopting this standard, the Company made a formal accounting policy election regarding classification of distributions received from equity method investees, choosing to use the Nature of Distribution approach. This approach is consistent with historical practice utilized by the Company in classifying these distributions. Overall, adoption of the guidance did not have a material impact on the Company's cash flows, and had no impact on the Company's financial position or results of operations.

~~Recently~~ASU ~~Issued~~2016-16, ~~Accounting~~Income ~~Standards~~Taxes: ~~Adopted~~Intra-Entity inTransfers ~~2017~~of Assets Other Than Inventory

~~ASU~~In October 2016, the FASB issued an accounting standards update concerning the tax effects of intra-09entity ~~Improvements~~asset transfers within a group. The guidance requires an entity to ~~Employee~~reflect ~~Share~~the income tax consequences of an intra-~~Based~~entity ~~Payment~~transfer ~~Accounting~~of an asset other than inventory when that transfer occurs. This is a departure from previous GAAP, which prohibited recognition of tax on such transfers until the asset had been sold to an external party or otherwise realized. The amendments are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. The amendments are required to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this guidance as of January 1, 2018. This guidance did not have a material impact on the Company's financial condition, results of operations, or cash flows.

InASU ~~March~~ 2016-18, asStatement ~~part~~ of ~~its~~Cash simplification initiative, the Financial Accounting Standards Board (the "FASB") issued an accounting standards update concerning the accounting for several aspects of employee share-based payment awards includingFlows: ~~income~~Restricted ~~tax~~Cash consequences, classification of awards as either equity or liabilities, classification of items in the statement of cash flows, and certain expedients that entities can now elect regarding estimates and assumptions in this area. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this guidance during the first quarter of 2017 in accordance with the following:

•In ~~All~~November ~~excess~~2016, ~~tax~~the ~~benefits~~FASB ~~and~~issued ~~tax~~an ~~deficiencies,~~accounting ~~including~~standards ~~tax~~update ~~benefits~~concerning the presentation of ~~dividends~~restricted cash within the statement of cash flows. Previous GAAP did not provide guidance on ~~share-based~~the ~~payment~~presentation ~~awards~~or classification of movements in restricted cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be ~~recognized~~included as ~~income~~a ~~tax~~component ~~expense~~of orcash ~~benefit~~and ~~(regardless~~cash equivalents when reconciling beginning-of-period ~~whether~~and end-of-period totals within the ~~benefit~~statement ~~reduces~~of ~~taxes~~cash ~~payable~~flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The guidance is required to be applied retrospectively to all periods presented in the ~~current~~statements ~~period)~~of cash flows. The Company adopted this guidance as of January 1, 2018. As result, the net amount of the change in the ~~income~~restricted ~~statement,~~cash balances during each reporting period is no longer being presented as ~~opposed~~a todiscrete ~~additional~~line ~~paid-~~item "Change in ~~capital~~restricted cash" within investing cash flows for each applicable period, as ~~previous~~was ~~GAAP~~previously ~~prescribed.~~reported ~~This~~in ~~amendment~~the ~~has~~Company's ~~been~~Unaudited ~~applied~~Consolidated ~~prospectively~~Statements ~~from~~of ~~January~~Cash 1Flows for the three months ended March 31, 2017. This guidance did not have an impact on the Company's financial position or results of operations.

•ASU ~~The~~2017-07, ~~tax~~Improving ~~effects of exercised or vested awards should be treated as discrete items in~~ the ~~reporting~~Presentation ~~period in which they occur. Adoption~~ of ~~this~~Net ~~amendment~~Periodic ~~had~~Pension noCost ~~impact~~and onNet ~~the~~Periodic ~~Company's~~Postretirement ~~financial~~Benefit ~~position or results of operations.~~Cost

•In March 2017, the FASB issued an accounting standards update concerning the presentation of costs related to defined benefit pension plans and similar plans. The ~~threshold~~amendments ~~for~~in ~~share-based~~this ~~payment~~ASU ~~awards~~principally require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by relevant employees during the period. The other components of net benefit cost are required to ~~qualify~~be ~~for~~presented ~~equity~~in ~~classification~~the ~~now~~income ~~permits~~statement ~~withholding~~separately upfrom the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to ~~maximum~~present ~~statutory~~the ~~tax~~other ~~rates~~components inof ~~applicable~~net ~~jurisdictions~~benefit cost, asthat ~~opposed~~line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to ~~employer~~present ~~minimum~~the ~~statutory~~other ~~withholding~~components ~~requirements~~of net benefit cost must be disclosed. The amendments in the update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those ~~jurisdictions~~annual periods. ~~Adoption~~The amendments relating to presentation in the income statement are required to be applied retrospectively. Disclosures of ~~this~~the ~~amendment~~nature ~~had~~of noand ~~impact~~reason onfor the ~~Company's~~change ~~financial~~in ~~position~~accounting principle are required in the first interim and annual periods of adoption. The Company

• Excess tax benefits now should be classified along with other income tax cash flows as an operating activity in the statement of cash flows. This amendment has been applied prospectively from January 1, 2017.

• Where an employer withholds shares for employee tax-withholding purposes, the resulting employee taxes paid should be classified as a financing activity as opposed to an operating activity in the statement of cash flows. This amendment was applied retrospectively. The withholding taxes are now included within the financing section of the statement of cash flows. The statement of cash flows for the nine months ended September 30, 2016 has been re-presented by $28.2 million to conform to the current year presentation.

• Companies may now make an entity-wide accounting policy election to either estimate the number of share-based payment awards expected to vest (in line with previous GAAP) or account for forfeitures as they occur. The Company elected not to change its previous accounting policy to measure forfeitures, and continues to measure the expense for share-based compensation based on the number of awards expected to vest.

ASU 2016-17 Interests Held through Related Parties That Are under Common Control

In October 2016, the FASB issued an accounting standards update concerning the evaluation of indirect interests held through related parties during the assessment of variable interest entities ("VIEs"). When identifying the primary beneficiary of a VIE, this update requires a reporting entity that acts as the single decision maker of that VIE to include, on a proportionate basis, those interests held through related parties under common control when assessing whether it holds a variable interest in that VIE. This is a change from previous GAAP, which required such indirect interests to be included in their entirety during this assessment. In the event that a reporting entity is not considered to be the primary beneficiary of the VIE following this assessment, the update does not change the requirement to assess whether the entity and its related parties under common control as a group possess the characteristics of a primary beneficiary. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in this update must be applied retrospectively to all periods since Accounting Standards Update 2015-02 was adopted, which for the Company was the first quarter of 2016. The Company adopted this guidance in 2017. There were no changes to the identified primary beneficiaries of

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~any~~adopted ~~VIEs~~this inguidance ~~which~~as of January 1, 2018. The impact of this guidance on the Company ~~holds~~is andisclosure-related ~~interest~~only, and ~~thus~~it nodoes not have an impact on the Company's financial position, results of operations or cash flows. As the impact of adopting this standard is not material, updated disclosure on the Company's defined benefit pension plans has not been provided for the current quarterly period. For the Company’s most recent disclosures, see Item 8, Note 17, "Retirement Plans" to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

ASU ~~2017~~2018-0402, ~~Simplifying~~Reclassification ~~the~~of ~~Test~~Certain ~~for~~Tax ~~Goodwill~~Effects ~~Impairment~~from Accumulated Other Comprehensive Income

In ~~January~~February ~~2017~~2018, the FASB issued an accounting standards update concerning ~~impairment~~the ~~testing~~stranded oftax ~~goodwill.~~effects ~~The~~resulting ~~main~~from ~~provision~~tax ofrate ~~this~~changes ~~guidance~~legislated ~~removes~~by the ~~existing~~U.S. ~~"Step~~Tax 2"Cuts ~~analysis~~and ~~required~~Jobs ~~under~~Act. ~~previous~~Under GAAP~~. The~~, ~~previous~~the ~~GAAP~~effects ~~required~~of anall ~~entity~~changes toin ~~perform~~tax ~~procedures~~rates toon ~~determine~~deferred ~~the~~tax ~~fair~~balances ~~value~~are atreflected in income, even if the ~~impairment~~tax ~~testing~~balances ~~date~~relate ofto ~~its~~items ~~assets~~of ~~and~~accumulated ~~liabilities~~other ~~(including~~comprehensive ~~unrecognized~~income. ~~assets~~This ~~and~~update ~~liabilities)~~permits ~~following~~companies ~~the~~to ~~procedures~~make ~~that~~an ~~would~~election beto ~~required~~reclassify infrom ~~determining~~accumulated ~~the~~other ~~fair~~comprehensive ~~value~~income ofto ~~assets~~retained ~~acquired~~earnings ~~and~~such ~~liabilities~~stranded ~~assumed~~tax ineffects aresulting ~~business~~from ~~combination~~the U. ~~Instead,~~S. ~~under~~Tax ~~the~~Cuts ~~revised~~and ~~guidance,~~Jobs anAct. ~~entity's~~Certain ~~annual~~disclosures ~~goodwill~~are ~~impairment~~also ~~review~~required ~~should~~by ~~include~~the aupdate. ~~"quantitative~~The ~~impairment~~amendments ~~test"~~are ineffective ~~which~~for itall ~~should~~entities ~~compare~~for ~~the~~fiscal ~~fair~~years ~~value~~beginning ofafter aDecember ~~reporting~~15, ~~unit~~2018, ~~with~~and ~~its~~interim ~~carrying~~periods ~~amount~~within those financial years. IfFor ~~the~~public ~~carrying~~business ~~amount~~entities, ~~exceeds~~early ~~the~~adoption ~~fair~~is ~~value~~permitted, ~~then~~including ~~the~~adoption ~~entity~~in ~~should~~any ~~record~~interim anperiod ~~impairment~~for ~~charge~~reporting periods for ~~this~~which ~~difference,~~financial ~~limited~~statements tohave ~~the~~not ~~total~~yet ~~goodwill~~been ~~allocated~~issued. toThe ~~the~~amendments ~~reporting~~should ~~unit~~be ~~(an~~applied ~~entity~~either ~~still~~in ~~has~~ the ~~option~~period toof ~~perform~~adoption ~~the~~or ~~qualitative~~retrospectively ~~assessment~~to ~~for~~each aperiod ~~reporting~~in ~~unit~~which tothe ~~determine~~effect ifof the ~~quantitative~~change ~~impairment~~in ~~test~~the ~~is necessary)~~U.S. ~~The~~Tax ~~update~~Cuts ~~should~~and beJobs ~~applied~~Act onis arecognized. The ~~prospective~~Company ~~basis.~~early-adopted ~~This~~this guidance isby ~~effective~~making ~~for~~the ~~goodwill~~permitted ~~impairment~~election ~~testing performed~~ in ~~fiscal~~the ~~years~~first ~~beginning~~quarter ~~after~~of ~~December 15~~2018, ~~2019.~~recognizing ~~Early~~a ~~adoption~~reclassification isof ~~permitted~~$3.9 ~~for~~million ~~goodwill~~from ~~impairment~~accumulated ~~tests~~other ~~performed~~comprehensive onincome ~~testing~~to ~~dates~~retained ~~after~~earnings ~~January~~in 1,the ~~2017~~period of adoption. ~~The~~In ~~Company~~general, ~~elected~~in toaccounting ~~early~~for ~~adopt~~the ~~this~~release ~~guidance~~of ~~during~~income ~~the~~tax ~~first~~effects ~~quarter~~from ofaccumulated ~~2017.~~other ~~While~~comprehensive income, the ~~guidance~~Company ~~changes~~applies the ~~Company's~~individual ~~goodwill~~item ~~impairment~~approach ~~testing~~with ~~procedures,~~respect ~~there~~to ~~was~~available-for-sale nodebt ~~impact~~securities, onand the ~~Company's~~portfolio ~~financial~~approach ~~position~~with respect to pension, ~~results~~postretirement ofbenefit ~~operations~~plan orobligations ~~cash~~and ~~flows~~currency translation matters.

ASU ~~2017~~2018-0805, ~~Premium~~Income ~~Amortization~~Taxes: onAmendments ~~Purchased~~to ~~Callable~~SEC ~~Debt~~Paragraphs ~~Securities~~Pursuant to SEC Staff Accounting Bulletin No. 118

In March ~~2017~~2018, the FASB issued an accounting standards update concerning the income tax accounting ~~for~~implications ~~premiums~~of onthe ~~purchased~~U.S. ~~callable~~Tax ~~debt~~Cuts ~~securities~~and Jobs Act. The ~~premium~~update iscodifies ~~the~~SEC-related ~~amount~~material bywithin ~~which~~ the ~~amortized~~Accounting ~~cost~~Standards ~~basis~~Codification ofpursuant to the ~~security~~issuance ~~exceeds~~of ~~the~~SEC ~~amount~~Staff ~~repayable~~Accounting byBulletin ~~the~~No. ~~issuer~~118 (‘SAB 118’). ~~For~~SAB ~~callable~~118 ~~debt~~provided ~~securities,~~clarifying ~~this~~guidance ~~ASU~~for ~~requires~~how ~~that~~a ~~the~~public ~~premium~~business beentity ~~amortized~~should toaddress the ~~earliest~~situation ~~call~~in ~~date.~~which ~~Under~~the ~~previous~~accounting ~~GAAP,~~for ~~premiums~~certain ~~were~~income ~~typically~~tax ~~amortized~~effects toof the ~~maturity~~U.S. ~~date~~Tax ofCuts aand ~~security,~~Jobs ~~except~~Act ~~where~~was annot ~~entity~~completed ~~held~~by athe ~~large~~time ~~number~~financial ofstatements ~~similar~~were ~~loans~~issued ~~and~~for ~~considered~~the ~~estimates~~reporting ofperiod ~~future~~in ~~principal~~which ~~repayments.~~the ~~The~~legislation ~~amendments~~was doenacted. ~~not~~In ~~require~~such ancircumstances, ~~accounting~~the ~~change~~incomplete ~~for~~effects ~~securities~~are ~~held~~reported atwhen a ~~discount~~reasonable estimate can be determined, based on that estimate. ~~The~~Provisional ~~update~~amounts ~~should~~can be ~~applied~~updated onduring a ~~modified~~measurement ~~retrospective~~period ~~basis~~not exceeding one year. Disclosures concerning any incomplete effects and adjustments are required. The ~~guidance~~Company iscomplied ~~effective~~with ~~for~~the ~~fiscal~~requirements ~~years~~of ~~beginning~~SAB ~~after~~118 in its Form 10-K for the year ended December 1531, ~~2019~~2017 and ~~interim~~no ~~periods~~further ~~within~~changes ~~years~~were ~~beginning~~required ~~after~~to ~~December~~comply 15with this update when adopted in the three months ended March 31, ~~2020~~2018. ~~Early~~During ~~adoption~~the isthree ~~permitted.~~months ~~The~~ended ~~Company~~March ~~elected~~31, 2018, there were no changes to ~~early~~any ~~adopt~~outstanding ~~this~~items ~~guidance~~as ~~during~~reported ~~the~~in ~~first~~Item ~~quarter~~8, ofNote ~~2017.~~23, ~~There~~"Taxation" ~~was~~to nothe ~~impact~~Consolidated onFinancial Statements included in the Company's ~~financial~~Annual ~~position,~~Report ~~results~~on ofForm ~~operations~~10-K orfor ~~cash~~the ~~flows~~year ended December 31, 2017.

Recently Issued Accounting Standards Not Yet Adopted

ASU 2017-07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB released an accounting standards update concerning the presentation of costs related to defined benefit pension plans and similar plans. The amendments in this ASU principally require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by relevant employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in the update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in the ASU relating to presentation in the income statement should be applied retrospectively. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The Company expects that adoption of this standard will be disclosure-related only and will not have an impact on its financial position, results of operations or cash flows.

ASU 2017-12 Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued an accounting standards update concerning hedge accounting. This update's targeted amendments to existing hedge accounting requirements better align an entity’s risk management activities and financial reporting for hedging relationships via updates to both designation and measurement guidance for qualifying hedges, and the presentation of those results. Regarding designation and measurement, the amendments permit broader use of identified risk components in certain cash flow and fair value hedging relationships involving nonfinancial or interest rate risk. The range of permissible fair value hedges of interest rate risk was also increased. Regarding presentation, the amendments aim to align the recognition of the effects of hedging instruments with hedged items in the financial statements in order to increase the understandability of an entity's intended hedging strategies. As a result, "hedge ineffectiveness" will no longer be separately measured and reported. The entire change in the fair value of a qualifying hedging instrument included in the assessment of

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

hedge effectiveness is either presented in the same income statement line as the hedged item for fair value hedges, or in other comprehensive income for cash flow and net investment hedges. However, in limited situations, certain components of a hedging instrument's change in fair value may be excluded from the assessment of hedge effectiveness.

The update also amends existing external disclosure requirements, while easing internal documentation requirements surrounding hedge effectiveness testing. In particular, the initial quantitative effectiveness test may now be prepared within three months of hedge designation, and subsequent tests may be performed on a qualitative basis in certain cases. For public business entities, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the update. All transition requirements should be applied to hedging relationships existing on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this guidance.

2. Acquisitions and Disposals

(a) ~~Partial~~Merger ~~Sale~~with ofAXA ~~New~~SA ~~Ocean Capital Management Limited~~("AXA")

OnThe ~~October~~Company ~~11,~~has ~~2016,~~entered ~~Fundamental~~into ~~Insurance~~a ~~Investment~~definitive ~~Ltd~~agreement and plan of merger (~~"FII"~~the “Merger Agreement”) with AXA dated March 5, a2018, ~~wholly-owned~~under ~~subsidiary~~which AXA would acquire 100% of the Company,’s ~~completed~~common ashares ~~partial~~in ~~sale~~exchange for cash proceeds of $57.60 per common share of XL Group or approximately $15.3 billion in the aggregate (the “AXA Transaction”). The Merger Agreement provides that, subject to anthe ~~unrelated~~satisfaction ~~investor,~~or waiver of ~~its~~certain ~~common~~conditions ~~and~~set ~~preference~~forth ~~shares~~therein, the Company will merge with an existing AXA subsidiary in ~~New~~accordance ~~Ocean~~with ~~Capital~~the ~~Management~~Companies ~~Limited~~Act 1981 of Bermuda (~~"New~~the ~~Ocean"~~“Merger”), anwith ~~entity~~the inCompany ~~which~~surviving itthe ~~holds~~Merger as a ~~majority~~wholly ~~voting~~owned ~~interest~~subsidiary of AXA. All preferred shares issued by subsidiaries of the Company will remain issued and outstanding upon completion of the Merger.

~~FII~~The ~~received~~Merger ~~$3.9~~is ~~million~~expected into ~~proceeds~~close ~~for~~during the ~~sale~~second half of ~~7.8%~~2018, subject to approval by the Company’s shareholders and other customary closing conditions, including the receipt of required regulatory approvals. The Merger Agreement, among other stipulations, permits: (i) the ~~common~~Company ~~shares~~to ~~held~~pay byout ~~FII~~regular ~~and~~quarterly 6cash dividends not to exceed $0.4%22 per common share per quarter, (ii) subsidiaries of ~~preference~~the Company to pay periodic cash dividends on preferred shares ~~held~~not byto ~~FII.~~exceed ~~The~~amounts ~~Company~~contemplated ~~recorded~~by athe ~~pre~~applicable bye-~~tax~~laws ~~gain~~or resolutions approving such preferred shares, and (iii) subsidiaries of $3the Company to pay dividends to XL Group and XLIT Ltd.5 ~~million~~("XLIT"), asthe aCompany’s ~~result~~holding companies, or any of ~~this~~its ~~transaction~~subsidiaries.

(b) Sale of Life Insurance Subsidiary

On September 30, 2016, X.L. America, Inc. ("XL America") and XL Life and Annuity Holding Company ("XLLAHC"), both indirect wholly-owned subsidiaries of the Company, completed the previously announced sale of the Company's wholly-owned subsidiary XL Life Insurance and Annuity Company ("XLLIAC") to Mutual of Omaha Insurance Company.

XL America and XLLAHC received a closing date payment of $20.9 million in proceeds from the transaction, which was based upon the fair market value of XLLIAC's investment assets and insurance licenses. The Company recorded a pre-tax gain of $3.7 million as a result of this transaction.

On September 30, 2016, the Company's indirect, wholly-owned subsidiary, Catlin Holdings Limited, completed the acquisition ("Brooklyn Acquisition") of Brooklyn Underwriting Pty Limited and Brooklyn IT Pty Limited (collectively “Brooklyn”). Brooklyn is a market-leading specialty underwriting agency in Australia and Lloyd's-approved coverholder, serving brokers across Australia. The Company recorded definite-lived intangible assets of $22.9 million, which will be amortized over their estimated useful lives. See Note 7, "Goodwill and Other Intangible Assets," for further information.

(d) Allied Acquisition

Overview

On February 1, 2016, the Company's indirect, wholly-owned subsidiary, XL Reinsurance America Inc. ("XLRA"), completed the acquisition ("Allied Acquisition") of Allied International Holdings, Inc. ("Allied"). Allied is the holding company of Allied Specialty Insurance, Inc. and T.H.E. Insurance Company, a leading insurer of the outdoor entertainment industry in the U.S.

Acquisition Consideration

The Company made an initial payment of $75.7 million to acquire Allied. Additional contingent consideration was to be paid based on production and underwriting profitability over a three-year-period subsequent to the acquisition date. The Company originally estimated the fair market value of these payments to be $15.0 million, resulting in total consideration of $90.7 million recorded for the acquisition. Due to an agreement reached on April 11, 2017, the target payments of contingent consideration were modified to range from $12.5 million to $20.0 million. The Company estimates the fair value of these payments to be approximately $17.0 million, resulting in an additional $2.0 million of expense recorded as "Fee income and other" in the Unaudited Consolidated Statements of Income.

Fair Value of Net Assets Acquired and Liabilities Assumed

The purchase price was allocated to the acquired assets and assumed liabilities of Allied based on estimated fair values on the acquisition date. The estimated fair value of the net assets acquired and liabilities assumed was $76.7 million, which

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

includes indefinite-lived intangible assets of $8.0 million and definite-lived intangible assets of $6.0 million, which will be amortized over their estimated useful lives. Other adjustments to the historical carrying value of acquired assets and liabilities included: the estimated fair value of net loss and loss expense reserves at the present value of expected net loss and loss adjustment expense payments plus a risk premium, the estimated value of the business acquired at the present value of expected underwriting profits with net unearned premiums plus a risk margin less policy servicing costs, and the estimated fair value of real estate assets at appraised market values. In conjunction with the transaction, the Company recognized goodwill of $14.1 million, which is primarily attributable to Allied's underwriting expertise in a niche specialty risk business. The Company allocated all of the $14.1 million of goodwill to its Insurance segment. See Note 7, "Goodwill and Other Intangible Assets," for further information.

(e) Catlin Acquisition

Overview

On May 1, 2015 (the "Acquisition Date"), XL-Ireland completed its acquisition (the "Catlin Acquisition") of the entire issued share capital of Catlin for approximately $4.1 billion. For further information, see Item 8, Note 2(f), "Acquisitions and Disposals - Catlin Acquisition," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

XL-Ireland acquired each common share of Catlin, par value $0.01 per share ("Catlin Shares"), for consideration per Catlin Share (the "Acquisition Consideration") equal to 388 pence in cash and 0.130 of an XL-Ireland share, par value $0.01 per share, subject to the mix and match facility set forth in the implementation agreement.

XL-Ireland issued approximately 49.9 million XL-Ireland shares and paid approximately £1.49 billion in cash to the holders of Catlin Shares as Acquisition Consideration.

Fair Value of Net Assets Acquired and Liabilities Assumed

The purchase price was allocated to the acquired assets and assumed liabilities of Catlin based on estimated fair values on the Acquisition Date. The Company recognized goodwill of $794.0 million, which is primarily attributable to the synergies and economies of scale expected to result from the integration of Catlin into the Company's operations, including further diversification in the geographic mix and product offerings and an increase in distribution strength. The Company allocated $466.1 million of this goodwill to its Insurance segment and $327.9 million to its Reinsurance segment. The Company also recognized indefinite lived intangible assets of $673.0 million and definite-lived intangible assets of $315.0 million, which is being amortized over their estimated useful lives. See Note 7, "Goodwill and Other Intangible Assets," for further information.

As part of the purchase price allocation, the Company adjusted the historical carrying value of the acquired assets and liabilities based on estimated fair values at the Acquisition Date. An explanation of the significant adjustments for fair value that are being amortized to net income is as follows:

• Deferred acquisition costs and value of business acquired - The adjustment consists of two components. The first adjustment is the elimination of Catlin's deferred acquisition costs asset. The second adjustment is the establishment of the value of business acquired asset, which represents the present value of the expected underwriting profit within the unearned premiums liability, net of reinsurance, less costs to service the related policies and a risk premium. This adjustment was amortized to underwriting, acquisition and insurance expenses over approximately two years, as the contracts for business in-force at the Acquisition Date expired. The Company fully amortized this balance as of June 30, 2017.

• Unpaid losses and loss adjustment expenses - Unpaid losses and loss adjustment expenses acquired includes an increase to adjust the carrying value of Catlin's historical unpaid losses and loss adjustment expenses, net of related reinsurance recoverable, to fair value at the Acquisition Date. The estimated fair value consists of the present value of the expected net loss and loss adjustment expense payments plus a risk premium. This adjustment, plus the unamortized fair value adjustment included in Catlin's historical unpaid losses and loss adjustment expenses, is being amortized to losses and loss adjustment expenses over a weighted average period of approximately 20 years, based on the estimated payout pattern of net reserves at the Acquisition Date.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Transaction-related Costs

As a part of the integration of Catlin's operations, the Company incurred costs associated with restructuring the systems, processes and workforce. The Company considered this integration complete during the second quarter of 2017 and will not incur further expenses related to this integration. These costs included such items as severance, retention, facilities and consulting and other costs. The Company separately identifies such costs and includes these expenses within "Corporate and Other" in its segment disclosure in Note 3, "Segment Information." Costs incurred and payments made for the nine months ended September 30, 2017 are:

(U.S. dollars in thousands)	Severance related costs		Retention and other compensation costs		Facilities-related costs		Consulting and other		Total
Liabilities at December 31, 2016	$	25,360	$	4,481	$	18	$	7,107	$	36,966
Costs incurred in 2017	19,794		9,561		11,051		32,661		73,067
2017 payments	32,868		13,022		3,328		23,827		73,045
Liabilities at September 30, 2017	$	12,286	$	1,020	$	7,741	$	15,941	$	36,988

3. Segment Information

The Company is organized into two operating segments: Insurance and Reinsurance.

The Company's general investment and financing operations are reflected in "Corporate and Other." Subsequent to the transaction described in Note 1, "Significant Accounting Policies," GCLR reinsures the majority of the Company's life reinsurance business through the GreyCastle Life Retro Arrangements. The results of the run-off life operations not subject to the GreyCastle Life Retro Arrangements are also reported within "Corporate and Other."8

The Company evaluates the performance of both the Insurance and Reinsurance segments based on underwriting profit. Other items of revenues and expenditures of the Company are not evaluated at the segment level. In addition, the Company does not allocate investment assets used to support its Property and Casualty ("P&C") operations to the individual segments, except as noted below. Investment assets related to the Company's run-off life operations are held in a separately identified portfolio. Net investment income from these assets is included in the contribution from "Corporate and Other." Certain structured products included in the Insurance and Reinsurance segments are also held in separately identified portfolios. As such, net investment income from these assets is included in the contribution from the applicable segment.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The ~~following~~Company's ~~tables~~general ~~summarize~~investment and financing operations are reflected in Corporate and Other. Subsequent to the ~~segment~~transaction described in Note 1(a), "Significant Accounting Policies - Basis of Preparation and Consolidation," GCLR reinsures the majority of the Company's life reinsurance business through the GreyCastle Life Retro Arrangements. The results ~~for~~of the ~~three~~run-off ~~and~~life ~~nine~~operations ~~months~~not ~~ended~~subject ~~September~~to ~~30,~~the ~~2017~~GreyCastle Life Retro Arrangements are also reported within Corporate and ~~2016:~~Other.

Three Months Ended September 30, 2017(U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	2,311,090		$	704,641		$	3,015,731		$	59,830		$	3,075,561
Net premiums written	1,660,304			665,917			2,326,221			3,146			2,329,367
Net premiums earned	1,677,189			940,567			2,617,756			3,146			2,620,902
Less: Net losses and loss expenses (2)	1,724,755			1,341,968			3,066,723			10,592			3,077,315
Less: Acquisition costs	228,188			216,371			444,559			1,126			445,685
Less: Operating expenses (3)	269,727			63,723			333,450			186			333,636
Underwriting profit (loss)	$	(545,481	)	$	(681,495	)	$	(1,226,976	)	$	(8,758	)	$	(1,235,734	)
Net investment income - excluding Life Funds Withheld Assets (4)							152,132			7,533			159,665
Net investment income - Life Funds Withheld Assets										30,796			30,796
Net results from structured products (5)	1,862			16,046			17,908			—			17,908
Net fee income and other (6)	(1,578		)	863			(715		)	(1,304		)	(2,019		)
Extinguishment of debt							—			1,582			1,582
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							32,618			(892		)	31,726
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading							—			11,548			11,548
Net realized and unrealized gains (losses) on derivative instruments							—			(20,434		)	(20,434		)
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(31,662		)	(31,662		)
Net income (loss) from investment affiliates and operating affiliates							—			62,528			62,528
Less: Foreign exchange (gains) losses							—			55,017			55,017
Less: Corporate operating expenses							—			62,232			62,232
Contribution from P&C and Corporate and Other							(1,025,033		)	(69,476		)	(1,094,509		)
Less: Interest expense (7)										39,509			39,509
Less: Non-controlling interests										(30,197		)	(30,197		)
Less: Income tax expense										(60,132		)	(60,132		)
Net income (loss) attributable to common shareholders													$	(1,043,689	)
Ratios – P&C operations: (8)
Loss and loss expense ratio	102.8		%	142.7		%	117.2		%
Underwriting expense ratio	29.7		%	29.8		%	29.7		%
Combined ratio	132.5		%	172.5		%	146.9		%

The Company evaluates the performance of both the Insurance and Reinsurance segments based on underwriting profit. Other items of revenues and expenditures of the Company are not evaluated at the segment level. In addition, the Company does not allocate investment assets used to support its Property and Casualty ("P&C") operations to the individual segments, except as noted below. Investment assets related to the Company's run-off life operations are held in a separately identified portfolio. Net investment income from these assets is included in the contribution from Corporate and Other. Certain structured products included in the Insurance and Reinsurance segments are also 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 months ended March 31, 2018 and 2017:



Three Months Ended March 31, 2018 (U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	2,866,539		$	2,060,601		$	4,927,140		$	52,595		$	4,979,735
Net premiums written	1,481,867			1,670,744			3,152,611			3,107			3,155,718
Net premiums earned	1,665,789			931,392			2,597,181			3,107			2,600,288
Less: Net losses and loss expenses (2)	1,064,992			557,014			1,622,006			10,307			1,632,313
Less: Acquisition costs	221,962			240,854			462,816			1,011			463,827
Less: Operating expenses (3)	316,380			73,539			389,919			141			390,060
Underwriting profit (loss)	$	62,455		$	59,985		$	122,440		$	(8,352	)	$	114,088
Net investment income - excluding Life Funds Withheld Assets (4)							168,253			7,519			175,772
Net investment income - Life Funds Withheld Assets										30,398			30,398
Net results from structured products (5)	2,103			1,308			3,411			—			3,411
Net fee income and other (6)	(6,703		)	892			(5,811		)	69			(5,742		)
Net realized investment gains (losses) - excluding Life Funds Withheld Assets							(60,957		)	114			(60,843		)
Net realized investment gains (losses) - Life Funds Withheld Assets							—			(22,512		)	(22,512		)
Net realized and unrealized gains (losses) on derivative instruments							—			4,221			4,221
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			22,921			22,921
Net income (loss) from investment affiliates and operating affiliates							—			55,951			55,951
Less: Foreign exchange (gains) losses							—			9,841			9,841
Less: Corporate operating expenses							—			70,043			70,043
Contribution from P&C and Corporate and Other							227,336			10,445			237,781
Less: Interest expense (7)										44,646			44,646
Less: Income tax expense										31,902			31,902
Less: Non-controlling interests										8,585			8,585
Net income (loss) attributable to common shareholders													$	152,648
Ratios – P&C operations: (8)
Loss and loss expense ratio	63.9		%	59.8		%	62.5		%
Underwriting expense ratio	32.4		%	33.8		%	32.8		%
Combined ratio	96.3		%	93.6		%	95.3		%

____________


(1)	Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes. The underwriting profit (loss) and its components within this section are predominantly driven from the Company's run-off life operations.

(2) The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Company's acquisition of Catlin Group Ltd in 2015 ("Catlin Acquisition") within the respective segments.


(3)	Operating expenses of the segments exclude Corporate operating expenses, shown separately.


(4)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.

(5) The net results from P&C structured products include net investment income and interest expense of $12.3 million and $(58.6)9 million, respectively.

(6) Net fee income and other includes operating expenses of $1312.5 million from the Company's loss prevention consulting services business.

~~(7) Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.~~9

(8) Ratios are based on net premiums earned from P&C operations.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, 2016(U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	2,153,379		$	565,541		$	2,718,920		$	64,683		$	2,783,603
Net premiums written	1,615,132			518,166			2,133,298			2,360			2,135,658
Net premiums earned	1,653,461			778,216			2,431,677			2,360			2,434,037
Less: Net losses and loss expenses (2)	1,068,268			423,535			1,491,803			5,875			1,497,678
Less: Acquisition costs (2)	221,137			181,749			402,886			1,002			403,888
Less: Operating expenses (3)	302,373			67,764			370,137			142			370,279
Underwriting profit (loss)	$	61,683		$	105,168		$	166,851		$	(4,659	)	$	162,192
Net investment income - excluding Life Funds Withheld Assets (4)							148,579			8,127			156,706
Net investment income - Life Funds Withheld Assets										38,937			38,937
Net results from structured products (5)	2,353			5,355			7,708			—			7,708
Net fee income and other (6)	(4,486		)	620			(3,866		)	595			(3,271		)
Loss (gain) on sale of subsidiary							—			(3,670		)	(3,670		)
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							60,401			(2,006		)	58,395
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading							68			85,213			85,281
Net realized and unrealized gains (losses) on derivative instruments							—			5,490			5,490
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(225,610		)	(225,610		)
Net income (loss) from investment affiliates and operating affiliates							—			24,566			24,566
Less: Foreign exchange (gains) losses							—			(1,695		)	(1,695		)
Less: Corporate operating expenses							—			126,308			126,308
Contribution from P&C and Corporate and Other							379,741			(190,290		)	189,451
Less: Interest expense (7)										43,025			43,025
Less: Non-controlling interests										58,076			58,076
Less: Income tax expense										17,749			17,749
Net income (loss) attributable to common shareholders													$	70,601
Ratios – P&C operations: (8)
Loss and loss expense ratio	64.6		%	54.4		%	61.3		%
Underwriting expense ratio	31.7		%	32.1		%	31.8		%
Combined ratio	96.3		%	86.5		%	93.1		%

____________

(1) Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes. The underwriting profit (loss) and its components within this section are predominantly driven from the Company's run-off life operations.

(2) The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.

(3) Operating expenses of the segments exclude Corporate operating expenses, shown separately.

(4) Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.

(5) The net results from P&C structured products include net investment income and interest expense of $14.1 million and $6.4 million, respectively.

(6) Net fee income and other includes operating expenses of $11.9 million from the Company's loss prevention consulting services business.


(7)	Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.


(8)	Ratios are based on net premiums earned from P&C operations.



Three Months Ended March 31, 2017 (U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	2,694,216		$	1,927,390		$	4,621,606		$	56,811		$	4,678,417
Net premiums written	1,508,591			1,471,169			2,979,760			3,310			2,983,070
Net premiums earned	1,635,315			884,166			2,519,481			3,310			2,522,791
Less: Net losses and loss expenses (2)	1,060,363			523,093			1,583,456			7,291			1,590,747
Less: Acquisition costs (2)	210,483			224,079			434,562			1,307			435,869
Less: Operating expenses (3)	285,729			71,757			357,486			233			357,719
Underwriting profit (loss)	$	78,740		$	65,237		$	143,977		$	(5,521	)	$	138,456
Net investment income - excluding Life Funds Withheld Assets (4)							146,566			7,227			153,793
Net investment income - Life Funds Withheld Assets										33,364			33,364
Net results from structured products (5)	2,269			645			2,914			—			2,914
Net fee income and other (6)	1,967			686			2,653			(438		)	2,215
Net realized investment gains (losses) - excluding Life Funds Withheld Assets							4,831			(613		)	4,218
Net realized investment gains (losses) - Life Funds Withheld Assets							—			33,068			33,068
Net realized and unrealized gains (losses) on derivative instruments							—			(7,069		)	(7,069		)
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(50,101		)	(50,101		)
Net income (loss) from investment affiliates and operating affiliates							—			51,870			51,870
Less: Foreign exchange (gains) losses							—			(3,336		)	(3,336		)
Less: Corporate operating expenses							—			98,873			98,873
Contribution from P&C and Corporate and Other							300,941			(33,750		)	267,191
Less: Interest expense (7)										40,250			40,250
Less: Income tax expense										13,092			13,092
Less: Non-controlling interests										61,006			61,006
Net income (loss) attributable to common shareholders													$	152,843
Ratios – P&C operations: (8)
Loss and loss expense ratio	64.8		%	59.2		%	62.8		%
Underwriting expense ratio	30.4		%	33.4		%	31.5		%
Combined ratio	95.2		%	92.6		%	94.3		%

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2017(U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	7,582,060		$	3,609,707		$	11,191,767		$	175,160		$	11,366,927
Net premiums written	4,910,096			3,042,326			7,952,422			9,280			7,961,702
Net premiums earned	4,964,808			2,686,522			7,651,330			9,280			7,660,610
Less: Net losses and loss expenses (2)	3,862,205			2,317,057			6,179,262			25,478			6,204,740
Less: Acquisition costs (2)	670,579			640,844			1,311,423			3,715			1,315,138
Less: Operating expenses (3)	844,137			204,915			1,049,052			697			1,049,749
Underwriting profit (loss)	$	(412,113	)	$	(476,294	)	$	(888,407	)	$	(20,610	)	$	(909,017	)
Net investment income - excluding Life Funds Withheld Assets (4)							454,257			22,917			477,174
Net investment income - Life Funds Withheld Assets										95,599			95,599
Net results from structured products (5)	6,112			17,633			23,745			—			23,745
Net fee income and other (6)	(2,437		)	2,243			(194		)	(1,607		)	(1,801		)
Extinguishment of debt							—			1,582			1,582
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							94,589			(9,476		)	85,113
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading							—			52,075			52,075
Net realized and unrealized gains (losses) on derivative instruments							—			(28,409		)	(28,409		)
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(116,359		)	(116,359		)
Net income (loss) from investment affiliates and operating affiliates							—			187,920			187,920
Less: Foreign exchange (gains) losses							—			46,038			46,038
Less: Corporate operating expenses							—			263,267			263,267
Contribution from P&C and Corporate and Other							(316,010		)	(128,837		)	(444,847		)
Less: Interest expense (7)										123,181			123,181
Less: Non-controlling interests										39,232			39,232
Less: Income tax expense										(18,034		)	(18,034		)
Net income (loss) attributable to common shareholders													$	(589,226	)
Ratios – P&C operations: (8)
Loss and loss expense ratio	77.8		%	86.2		%	80.8		%
Underwriting expense ratio	30.5		%	31.5		%	30.8		%
Combined ratio	108.3		%	117.7		%	111.6		%

____________


(1)	Corporate and Other includes other items of our revenue and expenditures that are not evaluated at the segment level for reporting purposes. The underwriting profit (loss) and its components within this section are predominantly driven from the Company's run-off life operations.


(2)	The Company has reflected the amortization of certain fair value adjustments recorded in conjunction with the Catlin Acquisition within the respective segments.


(3)	Operating expenses of the segments exclude Corporate operating expenses, shown separately.


(4)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.

(5) The net results from P&C structured products include net investment income and interest expense of $3913.24 million and $1510.5 million, respectively.

(6) Net fee income and other includes operating expenses of $3711.24 million from the Company's loss prevention consulting services business.


(7)	Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.


(8)	Ratios are based on net premiums earned from P&C operations.

1410

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2016(U.S. dollars in thousands)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	7,169,363		$	3,439,650		$	10,609,013		$	202,139		$	10,811,152
Net premiums written	4,899,258			3,018,246			7,917,504			9,032			7,926,536
Net premiums earned	4,944,055			2,367,772			7,311,827			9,032			7,320,859
Less: Net losses and loss expenses (2)	3,163,599			1,343,075			4,506,674			16,294			4,522,968
Less: Acquisition costs (2)	679,009			544,380			1,223,389			4,286			1,227,675
Less: Operating expenses (3)	922,273			215,258			1,137,531			765			1,138,296
Underwriting profit (loss)	$	179,174		$	265,059		$	444,233		$	(12,313	)	$	431,920
Net investment income - excluding Life Funds Withheld Assets (4)							446,352			24,185			470,537
Net investment income - Life Funds Withheld Assets										119,643			119,643
Net results from structured products (5)	6,340			5,397			11,737			—			11,737
Net fee income and other (6)	(12,097		)	2,705			(9,392		)	1,068			(8,324		)
Loss (gain) on sale of subsidiary							—			(3,670		)	(3,670		)
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							77,189			(7,742		)	69,447
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading							(3		)	271,599			271,596
Net realized and unrealized gains (losses) on derivative instruments							—			2,774			2,774
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(691,432		)	(691,432		)
Net income (loss) from investment affiliates and operating affiliates							—			67,234			67,234
Less: Foreign exchange (gains) losses							—			(54,614		)	(54,614		)
Less: Corporate operating expenses							—			372,003			372,003
Contribution from P&C and Corporate and Other							970,116			(538,703		)	431,413
Less: Interest expense (7)										128,371			128,371
Less: Non-controlling interests										124,263			124,263
Less: Income tax expense										42,511			42,511
Net income (loss) attributable to common shareholders													$	136,268
Ratios – P&C operations: (8)
Loss and loss expense ratio	64.0		%	56.7		%	61.6		%
Underwriting expense ratio	32.4		%	32.1		%	32.3		%
Combined ratio	96.4		%	88.8		%	93.9		%

The following tables summarize the Company's net premiums earned by product type for the three months ended March 31, 2018 and 2017:



Three Months Ended March 31, 2018 (U.S. dollars in thousands)	Insurance			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	320,717		$	64,608	$	—	$	385,325
Casualty	481,010			149,963		—		630,973
Property catastrophe	—			136,503		—		136,503
Property	406,778			258,089		—		664,867
Specialty	457,650			44,261		—		501,911
Other (1)	(366		)	277,968		—		277,602
Total P&C Operations	$	1,665,789		$	931,392	$	—	$	2,597,181
Corporate and Other:
Run-off Life operations - Other Life	—			—		3,107		3,107
Total Corporate and Other	$	—		$	—	$	3,107	$	3,107
Total	$	1,665,789		$	931,392	$	3,107	$	2,600,288

Three Months Ended March 31, 2017 (U.S. dollars in thousands)	Insurance (2)			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	305,482		$	52,926	$	—	$	358,408
Casualty	474,195			156,634		—		630,829
Property catastrophe	—			148,406		—		148,406
Property	450,503			272,346		—		722,849
Specialty	402,687			36,626		—		439,313
Other (1)	2,448			217,228		—		219,676
Total P&C Operations	$	1,635,315		$	884,166	$	—	$	2,519,481
Corporate and Other:
Run-off Life operations - Other Life	—			—		3,310		3,310
Total Corporate and Other	$	—		$	—	$	3,310	$	3,310
Total	$	1,635,315		$	884,166	$	3,310	$	2,522,791

____________

(1) ~~Corporate and~~ Other ~~includes~~within ~~other~~the ~~items~~Insurance ofsegment ~~our~~includes: ~~revenue~~surety and ~~expenditures~~certain ~~that~~discontinued ~~are~~lines. ~~not~~Other ~~evaluated~~within at the Reinsurance segment ~~level~~includes ~~for~~multiline, ~~reporting~~whole ~~purposes.~~account ~~The~~contracts, ~~underwriting~~credit ~~profit (loss)~~ and ~~its~~surety, ~~components~~accident ~~within~~and ~~this~~health ~~section~~and ~~are~~other ~~predominantly driven from the Company's run-off life operations~~lines.

(2) ~~The~~Amounts ~~Company~~from ~~has~~the ~~reflected~~prior ~~the~~year ~~amortization~~have been re-presented to reflect current mapping of ~~certain~~underlying ~~fair~~lines ~~value~~of ~~adjustments~~business ~~recorded~~to inbe ~~conjunction~~consistent with the ~~Catlin~~manner ~~Acquisition~~in ~~within~~which they are reflected in the ~~respective~~current ~~segments~~period. The most significant movements include movements out of Other are in the Insurance segment, and include: livestock business into Specialty; and credit surety into Casualty.

~~(3) Operating expenses of the segments exclude Corporate operating expenses, shown separately.~~11

(4) Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.

(5) The net results from P&C structured products include net investment income and interest expense of $40.9 million and $29.1 million, respectively.

(6) Net fee income and other includes operating expenses of $36.0 million from the Company's loss prevention consulting services business.

(7) Interest expense excludes interest expense related to structured products recorded in the Insurance and Reinsurance segments.

(8) Ratios are based on net premiums earned from P&C operations.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize the Company's net premiums earned by product type for the three and nine months ended September 30, 2017 and 2016:

Three Months Ended September 30, 2017(U.S. dollars in thousands)	Insurance			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	328,253		$	58,304	$	—	$	386,557
Casualty	522,564			136,532		—		659,096
Property catastrophe	—			221,023		—		221,023
Property	390,156			278,651		—		668,807
Specialty	437,350			53,611		—		490,961
Other (1)	(1,134		)	192,446		—		191,312
Total P&C Operations	$	1,677,189		$	940,567	$	—	$	2,617,756
Corporate and Other:
Run-off Life operations - Annuity	$	—		$	—	$	—	$	—
Run-off Life operations - Other Life	—			—		3,146		3,146
Total Corporate and Other	$	—		$	—	$	3,146	$	3,146
Total	$	1,677,189		$	940,567	$	3,146	$	2,620,902
Three Months Ended September 30, 2016(U.S. dollars in thousands)	Insurance (2)			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	287,039		$	39,029	$	—	$	326,068
Casualty	553,223			163,845		—		717,068
Property catastrophe	—			183,381		—		183,381
Property	414,888			263,324		—		678,212
Specialty	408,857			43,712		—		452,569
Other (1)	(10,546		)	84,925		—		74,379
Total P&C Operations	$	1,653,461		$	778,216	$	—	$	2,431,677
Corporate and Other:
Run-off Life operations - Annuity	$	—		$	—	$	—	$	—
Run-off Life operations - Other Life	—			—		2,360		2,360
Total Corporate and Other	$	—		$	—	$	2,360	$	2,360
Total	$	1,653,461		$	778,216	$	2,360	$	2,434,037

____________

(1) Other within the Insurance segment includes: surety, structured indemnity and certain discontinued lines. Other within the Reinsurance segment includes: whole account contracts, structured indemnity and other lines.

(2) Amounts from the prior year have been re-presented to reflect current mapping of underlying lines of business to be consistent with the manner in which they are reflected in the current period. The most significant movements include movements of certain items out of Other as follows: Programs business is now reflected in Property or Casualty, depending upon the predominant line for each program; Surplus lines is now reflected primarily in Casualty; and Accident & Health is now reflected in Specialty.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2017(U.S. dollars in thousands)	Insurance			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	939,809		$	165,534	$	—	$	1,105,343
Casualty	1,595,356			442,793		—		2,038,149
Property catastrophe	—			533,486		—		533,486
Property	1,185,946			837,490		—		2,023,436
Specialty	1,243,137			137,913		—		1,381,050
Other (1)	560			569,306		—		569,866
Total P&C Operations	$	4,964,808		$	2,686,522	$	—	$	7,651,330
Corporate and Other:
Run-off Life operations - Annuity	$	—		$	—	$	—	$	—
Run-off Life operations - Other Life	—			—		9,280		9,280
Total Corporate and Other	$	—		$	—	$	9,280	$	9,280
Total	$	4,964,808		$	2,686,522	$	9,280	$	7,660,610
Nine Months Ended September 30, 2016(U.S. dollars in thousands)	Insurance (2)			Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	884,081		$	121,982	$	—	$	1,006,063
Casualty	1,636,808			510,031		—		2,146,839
Property catastrophe	—			602,995		—		602,995
Property	1,137,609			777,993		—		1,915,602
Specialty	1,287,221			125,717		—		1,412,938
Other (1)	(1,664		)	229,054		—		227,390
Total P&C Operations	$	4,944,055		$	2,367,772	$	—	$	7,311,827
Corporate and Other:
Run-off Life operations - Annuity	$	—		$	—	$	—	$	—
Run-off Life operations - Other Life	—			—		9,032		9,032
Total Corporate and Other	$	—		$	—	$	9,032	$	9,032
Total	$	4,944,055		$	2,367,772	$	9,032	$	7,320,859

____________

4. Investments

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

Classification of Fixed Maturity Securities

In an effort to improve operational efficiency, the Company has undergone an initiative to transform its investment operations and related reporting. As a result of this initiative, the Company has simplified the classification of its fixed maturity securities by investment type to align its internal and external reporting processes. Corporate securities previously separated into two classifications have been merged into one. Residential mortgage-backed securities have also been merged into a single classification. Collateralized debt obligations are now reported under Other asset-backed securities. Comparative period amounts have been re-presented to conform to the new classification system.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 non-credit related ~~Other-Than-Temporary Impairments ("~~OTTI") recorded in accumulated other comprehensive income ("AOCI"), of the Company's ~~Available~~investments ~~for Sale ("~~AFS") ~~investments~~ at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

			Included in AOCI
September 30, 2017(U.S. dollars in thousands)	Cost orAmortizedCost		GrossUnrealizedGains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
March 31, 2018(U.S. dollars in thousands)	Cost orAmortizedCost		GrossUnrealizedGains		Gross Unrealized Losses			Fair Value		Non-credit Related OTTI (1)
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
U.S. Government and Government Agencies ("U.S. Government")	$	4,~~291~~207,~~972~~380	$	4129,~~348~~290	$	(1948,~~984~~711	)	$	4,~~313~~187,~~336~~959	$	—
U.S. States, municipalities and political subdivisions	21,~~009~~953,~~472~~202		~~102~~63,~~610~~586		(~~865~~3,626		)	2,~~111~~013,~~217~~162		—
Non-U.S. Governments	5,~~204~~260,~~769~~650		~~117~~98,~~205~~496		(6152,~~337~~495		)	5,~~260~~306,~~637~~651		—
Corporate	9,~~897~~759,~~084~~732		~~229~~131,~~162~~175		(53148,~~272~~237		)	109,~~072~~742,~~974~~670		~~(18~~—		)
Residential mortgage-backed securities ("RMBS")	4,~~907~~606,~~674~~275		5626,~~400~~883		(22103,~~372~~435		)	4,~~941~~529,~~702~~723		(108,~~092~~434		)
Commercial mortgage-backed securities ("CMBS")	1,~~277~~292,~~629~~559		92,~~407~~263		(935,~~042~~303		)	1,~~277~~259,~~994~~519		(~~802~~736		)
Other asset-backed securities	1,~~546~~588,~~625~~637		2726,~~940~~172		(76,~~050~~413		)	1,~~567~~608,~~515~~396		(3530,~~510~~764		)
Total fixed maturities - AFS - Excluding Life Funds Withheld Assets	$	2928,~~135~~668,~~225~~435	$	~~584~~377,~~072~~865	$	(~~173~~398,~~922~~220	)	$	2928,~~545~~648,~~375~~080	$	(4639,~~422~~934	)
Total short-term investments - Excluding Life Funds Withheld Assets	~~336~~500,~~071~~844		~~657~~773		(~~674~~1,447		)	~~336~~500,~~054~~170		—
Total equity securities - Excluding Life Funds Withheld Assets	920,130		94,489		(2,677		)	1,011,942		—
Total investments - AFS - Excluding Life Funds Withheld Assets	$	29,169,279	$	378,638	$	(399,667	)	$	29,148,250	$	(39,934	)
Total investments - AFS - Excluding Life Funds Withheld Assets	$	30,391,426	$	679,218	$	(177,273	)	$	30,893,371	$	(46,422	)
Fixed maturities - AFS - Life Funds Withheld Assets
U.S. Government	$	9,~~020~~420	$	2,~~070~~196	$	—		$	11,~~090~~616	$	—
Non-U.S. Governments	~~457~~432,~~936~~390		~~153~~152,~~907~~016		—			~~611~~584,~~843~~406		—
Corporate	~~981~~919,~~474~~151		~~230~~202,~~077~~052		—			1,~~211~~121,~~551~~203		—
RMBS	~~503~~455		8648		—			~~589~~503		—
CMBS	98105,~~779~~505		2324,~~444~~565		—			~~122~~130,~~223~~070		—
Other asset-backed securities	~~139~~132,~~999~~990		3227,~~839~~760		—			~~172~~160,~~838~~750		—
Total fixed maturities - AFS - Life Funds Withheld Assets	$	1,~~687~~599,~~711~~911	$	~~442~~408,~~423~~637	$	—		$	2,~~130~~008,~~134~~548	$	—
Total investments - AFS	$	3230,~~079~~769,~~137~~190	$	1787,~~121,641~~275	$	(~~177~~399,~~273~~667	)	$	3331,~~023~~156,~~505~~798	$	(4639,~~422~~934	)

____________


(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.

1812

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Included in AOCI

December 31, 2016(U.S. dollars in thousands)

Cost orAmortizedCost

GrossUnrealizedGains

Gross Unrealized Losses

Fair Value

Non-credit Related OTTI (1)

December 31, 2017(U.S. dollars in thousands)

Cost orAmortizedCost

GrossUnrealizedGains

Gross Unrealized Losses

Fair Value

Non-credit Related OTTI (1)

Fixed maturities - AFS - Excluding Life Funds Withheld Assets

U.S. Government

34,~~874~~358,~~038~~503

5337,~~172~~782

(3233,~~822~~545

)

34,~~894~~362,~~388~~740

—

U.S. States, municipalities and political subdivisions

21,~~399~~977,~~490~~796

8687,~~041~~832

(~~7,419~~988

)

2,~~478~~064,~~112~~640

—

Non-U.S. Governments

5,~~037~~135,~~482~~526

~~112~~114,~~772~~918

(~~120~~48,~~122~~863

)

5,~~030~~201,~~132~~581

—

Corporate

109,~~055~~644,~~757~~799

~~198~~207,~~082~~668

(~~119~~57,~~110~~334

)

109,~~134~~795,~~729~~133

(3618

)

RMBS

4,~~479~~717,~~722~~542

7141,~~045~~983

(5835,~~142~~123

)

4,~~492~~724,~~625~~402

(478,~~879~~795

)

CMBS

~~670~~1,~~005~~246,406

57,~~955~~468

(109,~~774~~857

)

~~665~~1,~~186~~244,017

(~~1,191~~817

)

Other asset-backed securities

1,~~252~~488,~~435~~958

1326,~~195~~877

(126,~~242~~472

)

1,~~253~~509,~~388~~363

(234,~~029~~016

)

Total fixed maturities - AFS - Excluding Life Funds Withheld Assets

2728,~~768~~569,~~929~~530

~~540~~524,~~262~~528

(~~360~~192,~~631~~182

)

2728,~~948~~901,~~560~~876

(5143,~~135~~646

)

Total short-term investments - Excluding Life Funds Withheld Assets

~~626~~816,~~142~~638

~~227~~744

(1,~~176~~901

)

~~625~~815,~~193~~481

—

Total equity securities - Excluding Life Funds Withheld Assets

~~996~~638,~~610~~455

4880,~~931~~679

(85,~~210~~167

)

1713,~~037,331~~967

—

Total investments - AFS - Excluding Life Funds Withheld Assets

2930,~~391~~024,~~681~~623

~~589~~605,~~420~~951

(~~370~~199,~~017~~250

)

2930,~~611~~431,~~084~~324

(5143,~~135~~646

)

Fixed maturities - AFS - Life Funds Withheld Assets

U.S. Government

89,~~468~~050

2,~~109~~266

—

1011,~~577~~316

—

Non-U.S. Governments

~~454~~433,~~695~~664

~~169~~150,~~982~~870

—

~~624~~584,~~677~~534

—

Corporate

1909,~~173,670~~589

~~280~~227,~~938~~624

—

1,~~454~~137,~~608~~213

—

RMBS

~~19,591~~448

~~2,789~~67

—

~~22,380~~515

—

CMBS

7797,~~762~~356

1624,~~478~~916

—

94122,~~240~~272

—

Other asset-backed securities

84137,~~541~~944

1733,~~019~~318

—

~~101~~171,~~560~~262

—

Total fixed maturities - AFS - Life Funds Withheld Assets

1,~~818~~588,~~727~~051

~~489~~439,~~315~~061

—

2,~~308~~027,~~042~~112

—

Total investments - AFS

31,~~210~~612,~~408~~674

1,~~078~~045,~~735~~012

(~~370~~199,~~017~~250

)

3132,~~919~~458,~~126~~436

(5143,~~135~~646

)

____________


(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.

The ~~cost (~~amortized cost ~~for fixed maturities~~ and ~~short-term investments) and~~ fair value of ~~the~~ trading investments at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

September 30, 2017(U.S. dollars in thousands)	AmortizedCost		Fair Value
March 31, 2018(U.S. dollars in thousands)	AmortizedCost		Fair Value
Fixed maturities - trading securities ("Trading") - Life Funds Withheld Assets
Fixed maturities trading - Life Funds Withheld Assets
U.S. Government	$	169,~~882~~729	$	159,~~815~~320
Non-U.S. Governments	~~457~~485,~~983~~495		~~465~~497,~~262~~108
Corporate	1,~~299~~507,~~270~~879		1,~~334~~525,~~783~~761
RMBS	~~886~~1,023		~~818~~893
CMBS	7,~~453~~358		7,~~581~~472
Other asset-backed securities	4044,~~932~~238		4243,~~206~~697
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,823,406	$	1,866,465
Total fixed maturities trading - Life Funds Withheld Assets	$	2,055,722	$	2,084,251
Total short-term investments - Trading - Life Funds Withheld Assets	$	9,362	$	9,361
Total short-term investments trading - Life Funds Withheld Assets	$	7,428	$	7,425
Total investments - Trading - Life Funds Withheld Assets	$	1,832,768	$	1,875,826
Total investments trading - Life Funds Withheld Assets	$	2,063,150	$	2,091,676

1913

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016(U.S. dollars in thousands)	AmortizedCost		Fair Value
December 31, 2017(U.S. dollars in thousands)	AmortizedCost		Fair Value
Fixed maturities - Trading - Life Funds Withheld Assets
Fixed maturities trading - Life Funds Withheld Assets
U.S. Government	$	1411,~~361~~640	$	1411,~~708~~042
U.S. States, municipalities and political subdivisions	~~219~~30		~~224~~31
Non-U.S. Governments	~~426~~473,~~225~~849		~~444~~485,~~944~~171
Corporate	1,~~062~~412,~~853~~846		1,~~111~~460,~~205~~292
RMBS	~~936~~1,020		~~961~~932
CMBS	57,~~242~~345		57,~~526~~580
Other asset-backed securities	3839,~~342~~771		3941,~~446~~337
Total fixed maturities - Trading - Life Funds Withheld Assets	$	1,548,178	$	1,617,014
Total fixed maturities trading - Life Funds Withheld Assets	$	1,946,501	$	2,006,385
Total short-term investments - Trading - Life Funds Withheld Assets	$	9,536	$	9,563
Total short-term investments trading - Life Funds Withheld Assets	$	14,969	$	14,965
Total investments - Trading - Life Funds Withheld Assets	$	1,557,714	$	1,626,577
Total investments trading - Life Funds Withheld Assets	$	1,961,470	$	2,021,350

At ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, approximately 3.35% and 23.53%, respectively, of the Company's fixed income investment portfolio at fair value, excluding cash and Life Funds Withheld Assets, was invested in securities that were below investment grade or not rated. Approximately 43.65% and 4.12% of the gross unrealized losses in the Company's fixed income investment portfolio, excluding cash and Life Funds Withheld Assets, at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively, related to securities that were below investment grade or not rated.

Contractual Maturities Summary

The contractual maturities of AFS fixed ~~income~~maturity securities at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 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, 2017

December 31, 2016

March 31, 2018

December 31, 2017

(U.S. dollars in thousands)

AmortizedCost

FairValue

AmortizedCost

FairValue

Fixed maturities - AFS - Excluding Life Funds Withheld Assets

Due less than one year

1,~~686~~716,~~672~~039

1,~~702~~717,~~285~~129

21,~~121~~556,~~088~~688

21,~~135~~564,~~262~~360

Due after 1 through 5 years

12,~~366~~520,~~653~~942

12,~~483~~501,~~526~~887

12,~~400~~243,~~798~~590

12,~~463~~309,~~844~~732

Due after 5 through 10 years

65,~~194~~882,~~107~~207

65,~~294~~876,~~833~~041

56,~~509~~268,~~194~~217

56,~~531~~362,~~402~~314

Due after 10 years

1,~~155~~061,~~865~~776

1,~~277~~155,~~520~~385

1,~~335~~048,~~687~~129

1,~~406~~187,~~853~~688

21,~~403~~180,~~297~~964

21,~~758~~250,~~164~~442

21,~~366~~116,~~767~~624

21,~~537~~424,~~361~~094

RMBS

4,~~907~~606,~~674~~275

4,~~941~~529,~~702~~723

4,~~479~~717,~~722~~542

4,~~492~~724,~~625~~402

CMBS

1,~~277~~292,~~629~~559

1,~~277~~259,~~994~~519

~~670~~1,~~005~~246,406

~~665~~1,~~186~~244,017

Other asset-backed securities

1,~~546~~588,~~625~~637

1,~~567~~608,~~515~~396

1,~~252~~488,~~435~~958

1,~~253~~509,~~388~~363

Total mortgage and asset-backed securities

7,~~731~~487,~~928~~471

7,~~787~~397,~~211~~638

67,~~402~~452,~~162~~906

67,~~411~~477,~~199~~782

Total fixed maturities - AFS - Excluding Life Funds Withheld Assets

2928,~~135~~668,~~225~~435

2928,~~545~~648,~~375~~080

2728,~~768~~569,~~929~~530

2728,~~948~~901,~~560~~876

Fixed maturities - AFS - Life Funds Withheld Assets

Due less than one year

3166,~~584~~237

3368,~~765~~315

7147,~~207~~143

8049,~~749~~233

Due after 1 through 5 years

~~296~~274,~~748~~247

~~323~~296,~~436~~715

~~289~~286,~~710~~524

~~318~~313,~~605~~227

Due after 5 through 10 years

~~216~~167,~~651~~949

~~258~~201,~~462~~133

~~274~~168,~~727~~897

~~324~~205,~~759~~536

Due after 10 years

~~903~~852,~~447~~528

1,~~218~~151,~~821~~062

1849,~~001,189~~739

1,~~365~~165,~~749~~067

1,~~448~~360,~~430~~961

1,~~834~~717,~~484~~225

1,~~636~~352,~~833~~303

21,~~089~~733,~~862~~063

RMBS

~~503~~455

~~589~~503

~~19,591~~448

~~22,380~~515

CMBS

98105,~~779~~505

~~122~~130,~~223~~070

7797,~~762~~356

94122,~~240~~272

Other asset-backed securities

~~139~~132,~~999~~990

~~172~~160,~~838~~750

84137,~~541~~944

~~101~~171,~~560~~262

Total mortgage and asset-backed securities

~~239~~238,~~281~~950

~~295~~291,~~650~~323

~~181~~235,~~894~~748

~~218~~294,~~180~~049

Total fixed maturities - AFS - Life Funds Withheld Assets

1,~~687~~599,~~711~~911

2,~~130~~008,~~134~~548

1,~~818~~588,~~727~~051

2,~~308~~027,~~042~~112

Total fixed maturities - AFS

30,~~822~~268,~~936~~346

3130,~~675~~656,~~509~~628

2930,~~587~~157,~~656~~581

30,~~256~~928,~~602~~988

2014

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017

December 31, 2016

March 31, 2018

December 31, 2017

(U.S. dollars in thousands)

AmortizedCost

FairValue

AmortizedCost

FairValue

Fixed maturities - Trading - Life Funds Withheld Assets

Fixed maturities trading - Life Funds Withheld Assets

Due less than one year

5766,~~208~~532

5665,~~657~~428

59,~~138~~962

59,~~553~~605

Due after 1 through 5 years

~~481~~493,~~836~~369

~~487~~495,~~343~~899

~~322~~486,~~574~~847

~~328~~492,~~997~~998

Due after 5 through 10 years

~~577~~691,~~671~~074

~~585~~690,~~182~~354

~~507~~645,~~631~~573

~~521~~657,~~505~~093

Due after 10 years

~~657~~752,~~420~~128

~~686~~780,~~678~~508

~~614~~705,~~315~~983

~~661~~746,~~026~~840

12,~~774~~003,~~135~~103

12,~~815~~032,~~860~~189

1,~~503~~898,~~658~~365

1,~~571~~956,~~081~~536

RMBS

~~886~~1,023

~~818~~893

~~936~~1,020

~~961~~932

CMBS

7,~~453~~358

7,~~581~~472

57,~~242~~345

57,~~526~~580

Other asset-backed securities

4044,~~932~~238

4243,~~206~~697

3839,~~342~~771

3941,~~446~~337

Total mortgage and asset-backed securities

4952,~~271~~619

5052,~~605~~062

4448,~~520~~136

4549,~~933~~849

Total fixed maturities - Trading - Life Funds Withheld Assets

1,823,406

1,866,465

1,548,178

1,617,014

Total fixed maturities trading - Life Funds Withheld Assets

2,055,722

2,084,251

1,946,501

2,006,385

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 to collateralize our 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 included in pledged assets are Life Funds Withheld Assets, as noted in Note 1(a), "Significant Accounting Policies - Basis of Preparation and Consolidation." Additionally, certain deposit liabilities and annuity contracts require the use of pledged assets. At ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, the Company had $1817.09 billion and $1718.18 billion in pledged assets, respectively.

(b) Gross Unrealized Losses

The following is an analysis of how long the AFS securities at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 ~~have~~had been in a continual unrealized loss position:

Less than 12 months

Equal to or greaterthan 12 months

September 30, 2017(U.S. dollars in thousands)

FairValue

GrossUnrealizedLosses

FairValue

GrossUnrealizedLosses

March 31, 2018(U.S. dollars in thousands)

FairValue

GrossUnrealizedLosses

FairValue

GrossUnrealizedLosses

Fixed maturities and short-term investments - AFS

U.S. Government

23,~~744~~080,~~113~~855

(1438,~~476~~758

)

~~319~~515,~~287~~999

(511,~~938~~350

)

U.S. States, municipalities and political subdivisions

~~116~~278,~~193~~946

(~~690~~3,222

)

1315,~~207~~869

(~~174~~404

)

Non-U.S. Governments

12,~~458~~061,~~435~~869

(1825,~~482~~703

)

~~654~~487,~~433~~103

(4326,~~097~~836

)

Corporate

15,~~860~~509,~~565~~770

(16114,~~568~~092

)

~~578~~510,~~271~~757

(3634,~~706~~148

)

RMBS

2,~~079~~973,~~510~~309

(1268,~~193~~157

)

~~412~~846,~~261~~423

(1035,~~179~~278

)

CMBS

~~569~~991,~~284~~765

(326,~~959~~681

)

~~109~~131,~~574~~116

(58,~~082~~622

)

Other asset-backed securities

~~356~~396,~~217~~287

(12,~~044~~502

)

~~118~~132,~~960~~119

(63,~~008~~914

)

Total fixed maturities and short-term investments - AFS

915,~~184~~292,~~317~~801

(67279,~~412~~115

)

2,~~205~~639,~~993~~386

(~~107~~120,~~184~~552

)

Total equity securities

38,170

(2,677

)

—



	Less than 12 months					Equal to or greater than 12 months
December 31, 2017 (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	$	2,687,083	$	(21,514	)	$	727,246	$	(13,902	)
U.S. States, municipalities and political subdivisions	88,235		(622		)	19,583		(366		)
Non-U.S. Governments	1,527,323		(14,959		)	560,648		(33,931		)
Corporate	2,959,416		(25,757		)	543,973		(31,577		)
RMBS	2,198,391		(14,030		)	925,191		(21,093		)
CMBS	583,656		(4,117		)	138,065		(5,740		)
Other asset-backed securities	256,823		(1,111		)	175,146		(5,364		)
Total fixed maturities and short-term investments - AFS	$	10,300,927	$	(82,110	)	$	3,089,852	$	(111,973	)

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Less than 12 months					Equal to or greaterthan 12 months
December 31, 2016(U.S. dollars in thousands)	FairValue		GrossUnrealizedLosses			FairValue		GrossUnrealizedLosses
Fixed maturities and short-term investments - AFS
U.S. Government	$	2,456,685	$	(30,640	)	$	43,873	$	(2,237	)
U.S. States, municipalities and political subdivisions	457,288		(6,983		)	4,287		(437		)
Non-U.S. Governments	1,797,405		(75,596		)	288,490		(45,480		)
Corporate	3,414,252		(81,594		)	264,920		(37,595		)
RMBS	2,459,545		(41,194		)	302,810		(16,948		)
CMBS	467,757		(9,470		)	9,665		(1,304		)
Other asset-backed securities	777,435		(3,888		)	37,535		(8,441		)
Total fixed maturities and short-term investments - AFS	$	11,830,367	$	(249,365	)	$	951,580	$	(112,442	)
Total equity securities	$	130,487	$	(8,210	)	$	—	$	—

The Company had gross unrealized losses totaling $399.7 million on 4,061 securities out of a total of 7,851 held at March 31, 2018 in its AFS - Excluding Life Funds Withheld Assets portfolio, which either it considers to be temporarily impaired or reflects non-credit losses on other-than-temporarily impaired assets. 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. 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.

The Company had gross unrealized losses totaling $177.3 million on 2,379 securities out of a total of 7,873 held at September 30, 2017 in its AFS - Excluding Life Funds Withheld Assets portfolio, which either it considers to be temporarily impaired or reflects non-credit losses on other-than-temporarily impaired assets. 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. 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.

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

Net Realized Gains (Losses) on Investments	Three months ended September 30,						Nine months ended September 30,
Net Realized Investment Gains (Losses)	Three months ended March 31,
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets:
Net realized gains (losses) on investments AFS - excluding Life Funds Withheld Assets: (1)
Gross realized gains	$	8019,~~313~~330		$	9839,~~452~~397		$	~~211,481~~		$	~~241,855~~
Gross realized losses on investments sold	(44,926		)	(30,038		)	(114,623		)	(110,287		)
Gross realized losses	(51,002		)	(28,305		)
OTTI on investments, net of amounts transferred to other comprehensive income	(3,661		)	(10,019		)	(11,745		)	(62,121		)
OTTI, net of amounts transferred to other comprehensive income	(1,806		)	(6,874		)
	$	31,726		$	58,395		$	85,113		$	69,447
Total	$	(33,478	)	$	4,218
Net realized gains (losses) on investments and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets:
Net realized and change in net unrealized gains (losses) on equities securities - excluding Life Funds Withheld Assets:
Gross realized gains	$	199,~~284~~693		$	~~44,183~~—		$	~~84,535~~		$	~~140,703~~
Gross realized losses on investments sold	(405		)	(172		)	(1,404		)	(32,162		)
Gross realized losses	(126		)	—
OTTI on investments, net of amounts transferred to other comprehensive income	—			—			—			(2,598		)
Change in net unrealized gains (losses) on equity securities	(45,581		)	—
Net unrealized gains (losses) on trading securities	$	(7,331	)	$	41,270		$	(31,056	)	$	165,653
Total	$	(36,014	)	$	—
	$	11,548		$	85,281		$	52,075		$	271,596
Net realized and change in net unrealized gains (losses) on other investments - excluding Life Funds Withheld Assets:
Total net realized gains (losses) on investments	$	43,274		$	143,676		$	137,188		$	341,043
Gross realized gains	$	3,004		$	—
Gross realized losses	(1,163		)	—
Change in net unrealized gains (losses) on other investments	6,808			—
Total	$	8,649		$	—
Net realized gains (losses) on investments and change in net unrealized gains (losses) on investments on trading securities - Life Funds Withheld Assets:
Gross realized gains	$	12,909		$	35,151
Gross realized losses	(2,551		)	(677		)
OTTI, net of amounts transferred to other comprehensive income	(1,203		)	—
Change in net unrealized gains (losses) on trading securities	$	(31,667	)	$	(1,406	)
Total	$	(22,512	)	$	33,068
Total realized investment gains (losses)	$	(83,355	)	$	37,286

22 ____________


(1)	AFS in the prior year includes net realized gains (losses) on equity securities and other investments. Due to the implementation of ASU 2016-01, as described in in Note 1(b), "Significant Accounting Policies - Recent Accounting Pronouncements," the net realized gains (losses) on these investments are shown separately.

The components of OTTI charges for the three months ended March 31, 2018 and 2017, as defined in Note 1(g), "Significant Accounting Policies - Other-Than-Temporary Impairments of Available for Sale," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, for investments excluding Life Funds Withheld Assets were:



	Three months ended March 31,
(U.S. dollars in thousands)	2018		2017
Fixed maturities:
Credit loss impairments	$	765	$	226
Equities and other investments:
Impaired more than 11 months or more than 50%	—		4,975
Currency Losses	1,041		1,673
OTTI, net of amounts transferred to other comprehensive income	$	1,806	$	6,874

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Credit Loss Impairments

Three months ended ~~September~~March 3031,

~~Nine months ended September 30,~~

(U.S. dollars in thousands)

~~2017~~2018

~~2016~~2017

~~2017~~

~~2016~~

Opening balance at beginning of indicated period

5443,~~437~~332

7361,~~391~~595

~~61,595~~

~~73,469~~

Credit loss impairment recognized in the current period on securities not previously impaired

—590

~~811~~124

~~124~~

~~12,049~~

Credit loss impairments previously recognized on securities that matured or were paid down, prepaid or sold during the period

(61,~~382~~156

)

(~~7,760~~836

)

~~(10,289~~

)

~~(15,579~~

)

Additional credit loss impairments recognized in the current period on securities previously impaired

~~300~~175

~~911~~102

~~564~~

~~2,014~~

Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected

(1,~~577~~475

)

(2,~~003~~357

)

~~(5,216~~

)

~~(6,603~~

)

Closing balance at end of indicated period

4641,~~778~~466

6558,~~350~~628

~~46,778~~

~~65,350~~

5. Derivative Instruments

The Company enters into derivative instruments for both risk management and ~~efficient~~investment ~~portfolio management~~purposes. The Company is exposed to potential loss from various market risks, and manages its market risks based on a comprehensive framework of investment decision authorities ("Authorities Framework") adopted by the Risk and Finance Committee of ~~the~~XL ~~Company~~Group's Board of Directors ("RFC"),. ~~which~~The Authorities Framework is intended to align the risk profile of our investment portfolio to be consistent with the Company's risk tolerance, and other guidelines established by the RFC. ~~Derivative~~The ~~instruments~~following intable ansummarizes ~~asset~~information ~~or liability position are included within "Other assets" or "Other liabilities", respectively, at fair value in the Unaudited Consolidated Balance Sheets~~ on ~~a net basis where~~ the ~~Company~~notional ~~has~~amounts ~~both a legal right of offset~~ and ~~the~~gross ~~intention~~amounts ~~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. Changes in the~~ fair values ofcontained ~~derivatives are shown~~ in the Unaudited Consolidated ~~Statements~~Balance ofSheets ~~Income~~at asMarch 31, ~~"Net~~2018 ~~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 1(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, ~~2016.~~ 2017:

The following table summarizes information on the notional amounts and gross amounts of derivative fair values contained in the Unaudited Consolidated Balance Sheets at September 30, 2017 and December 31, 2016:



	March 31, 2018										December 31, 2017
(U.S. dollars in thousands)	Asset Derivative Notional Amount		Asset Derivative Fair Value			Liability Derivative Notional Amount		Liability Derivative Fair Value			Asset Derivative Notional Amount		Asset Derivative Fair Value			Liability Derivative Notional Amount		Liability Derivative Fair Value
Derivatives designated as hedging instruments:
Foreign currency exposure	$	585,573	$	15,155		$	534,856	$	15,025		$	580,194	$	5,655		$	339,221	$	3,968
Total derivatives designated as hedging instruments	$	585,573	$	15,155		$	534,856	$	15,025		$	580,194	$	5,655		$	339,221	$	3,968
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	—	$	—		$	238,215	$	726		$	181,975	$	423		$	—	$	—
Foreign currency exposure	33,070		313			336,055		3,674			263,722		6,931			141,300		2,256
Credit exposure	5,000		128			45,000		6,262			5,000		187			45,000		6,784
Financial market exposure	—		—			40,823		3,873			30,001		1,271			6,998		42
Other Non-Investment Derivatives:
Credit exposure	20,242		334			—		—			—		—			25,526		169
Guaranteed minimum income benefit contract	35,288		17,841			35,288		17,841			36,171		18,136			36,171		18,136
Modified coinsurance and funds withheld contracts, including life retrocession embedded derivative (1)	917,921		2,132			4,230,047		—			51,653		—			5,014,284		31,541
Other	—		—			—		—			16,000		191			—		—
Total derivatives not designated as hedging instruments	$	1,011,521	$	20,748		$	4,925,428	$	32,376		$	584,522	$	27,139		$	5,269,279	$	58,928
Total derivatives			$	35,903				$	47,401				$	32,794				$	62,896
Counterparty netting			(7,239		)			(7,239		)			(3,579		)			(3,579		)
Total derivatives net of counterparty netting			28,664					40,162					29,215					59,317
Cash collateral held/paid (2)			(6,060		)			(17,338		)			(3,920		)			(1,312		)
Total derivatives as recorded in the Unaudited Consolidated Balance Sheets			$	22,604				$	22,824				$	25,295				$	58,005

____________

	September 30, 2017								December 31, 2016
(U.S. dollars in thousands)	AssetDerivativeNotionalAmount		AssetDerivativeFair Value		LiabilityDerivativeNotionalAmount		LiabilityDerivativeFair Value		AssetDerivativeNotionalAmount		AssetDerivativeFair Value		LiabilityDerivativeNotionalAmount		LiabilityDerivativeFair Value
Derivatives designated as hedging instruments:
Foreign currency exposure	$	207,028	$	3,834	$	885,957	$	30,460	$	1,396,801	$	85,175	$	583,722	$	25,750
Total derivatives designated as hedging instruments	$	207,028	$	3,834	$	885,957	$	30,460	$	1,396,801	$	85,175	$	583,722	$	25,750
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	—	$	—	$	131,674	$	34	$	—	$	—	$	—	$	—
Foreign currency exposure	64,307		1,170		316,806		3,716		10,049		190		273,767		12,137
Credit exposure	5,000		231		45,000		6,988		32,500		1,077		82,500		6,978
Financial market exposure	—		—		4,607		79		5		5		—		—

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	September 30, 2017										December 31, 2016
(U.S. dollars in thousands)	AssetDerivativeNotionalAmount		AssetDerivativeFair Value			LiabilityDerivativeNotionalAmount		LiabilityDerivativeFair Value			AssetDerivativeNotionalAmount		AssetDerivativeFair Value			LiabilityDerivativeNotionalAmount		LiabilityDerivativeFair Value
Other Non-Investment Derivatives:
Foreign currency exposure	181,300		393			—		—			181,300		1,208			—		—
Credit exposure	26,159		65			—		—			—		—			24,490		340
Guaranteed minimum income benefit contract	38,746		17,470			38,746		17,470			43,553		19,499			43,553		19,499
Modified coinsurance and funds withheld contracts (1)	52,804		—			4,679,877		19,041			59,775		—			4,048,446		—
Other	5,000		81			—		—			15,000		342			—		—
Total derivatives not designated as hedging instruments	$	373,316	$	19,410		$	5,216,710	$	47,328		$	342,182	$	22,321		$	4,472,756	$	38,954
Total derivatives			$	23,244				$	77,788				$	107,496				$	64,704
Counterparty netting			(3,681		)			(3,681		)			(17,947		)			(17,947		)
Total derivatives net of counterparty netting			19,563					74,107					89,549					46,757
Cash collateral held/paid (2)			—					(25,188		)			(36,980		)			(5,810		)
Total derivatives as recorded in the Unaudited Consolidated Balance Sheets			$	19,563				$	48,919				$	52,569				$	40,947

(1)

The fair value movements in derivative assets and liabilities relating to modified coinsurance and funds withheld contracts are included within the associated asset or liability at each period end on the face of the Unaudited Consolidated Balance Sheets. Notional amounts associated with reinsurance agreements under which the Company assumes reinsurance risk are recorded as asset derivative notional amounts. Notional amounts associated with the GreyCastle Life Retro Arrangements and other outward reinsurance contracts under which the Company cedes risk are recorded as liability derivative notional amounts. Included in the liability derivative notional amount at March 31, 2018 is the cumulative net realized and unrealized loss on the life retrocession embedded derivative of $1.1 billion.

(12) ~~The~~At ~~fair~~March ~~value~~31, ~~movements~~2018, inthe ~~derivative~~Company ~~assets~~held ~~and~~cash ~~liabilities~~collateral ~~relating~~related to ~~modified~~foreign ~~coinsurance~~currency ~~funds~~derivative ~~withheld~~positions ~~contracts~~and ~~are~~certain ~~included~~other ~~within~~derivative ~~the~~positions ~~associated~~of ~~asset~~$6.1 ormillion ~~liability~~for atderivatives ~~each~~in ~~period~~an ~~end~~asset onposition ~~the~~and ~~face~~paid ofcash ~~the~~collateral ~~Unaudited~~of ~~Consolidated~~$17.3 ~~Balance~~million ~~Sheets.~~for ~~Notional~~derivatives ~~amounts~~in ~~associated~~a ~~with~~liability ~~reinsurance~~position. ~~agreements~~At ~~under~~December ~~which~~31, 2017, the Company ~~assumes~~held ~~reinsurance~~cash ~~risk~~collateral ~~are~~related ~~recorded~~to asa ~~asset~~foreign currency derivative ~~notional~~position ~~amounts.~~and ~~Notional~~certain ~~amounts~~other ~~associated~~derivative ~~with~~positions ~~the~~of ~~GreyCastle~~$3.9 ~~Life~~million ~~Retro~~for ~~Arrangements~~derivatives ~~and~~in ~~other~~an ~~outward~~asset ~~reinsurance~~position ~~contracts~~and ~~under~~paid ~~which~~cash ~~the~~collateral ~~Company~~of ~~cedes~~$1.3 ~~risk~~million ~~are~~for ~~recorded~~derivatives asin a liability ~~derivative~~position. ~~notional~~The ~~amounts.~~assets ~~Included~~and inliabilities related to the ~~liability~~net ~~derivative~~collateral ~~notional~~paid ~~amount~~or atheld ~~September~~were ~~30,~~recorded ~~2017~~as isOther assets and Other liabilities within the ~~cumulative~~Unaudited ~~net~~Consolidated ~~realized~~Balance Sheets as the collateral and ~~unrealized~~derivative ~~loss~~positions onare ~~the~~not ~~life~~intended ~~retrocession~~to ~~embedded~~be ~~derivative~~settled ofon ~~$1.0~~a ~~billion~~net basis.

~~(2)~~Derivative Atinstruments ~~September~~in 30an asset or liability position are included within "Other assets" or "Other liabilities," ~~2017~~respectively, at fair value in the ~~Company~~Unaudited ~~held~~Consolidated ~~cash~~Balance ~~collateral~~Sheets ~~related~~on toa ~~foreign~~net ~~currency~~basis ~~derivative~~where ~~positions~~the ~~and~~Company ~~certain~~has ~~other~~both ~~derivative~~a ~~positions~~legal right of ~~nil~~offset ~~for~~and ~~derivatives~~the inintention anto ~~asset~~settle ~~position~~the ~~and~~contracts ~~paid~~on ~~cash~~a ~~collateral~~net ~~of $25~~basis.2 ~~million~~Certain ~~for~~embedded derivatives inwithin areinsurance ~~liability~~contracts ~~position.~~are Atincluded ~~December~~in ~~31,~~"Reinsurance ~~2016,~~balances ~~the~~payable." The Company ~~held~~often ~~cash~~enters ~~collateral~~into ~~related~~different totypes aof ~~foreign~~derivative ~~currency~~contracts ~~derivative~~with ~~position~~a single counterparty and ~~certain~~these ~~other~~contracts ~~derivative~~are ~~positions~~covered ofunder ~~$37~~netting agreements.0 ~~million~~Changes ~~for~~in the fair values of derivatives are shown in anthe ~~asset~~Unaudited ~~position~~Consolidated Statements of Income as "Net realized and ~~paid~~unrealized ~~cash~~gains ~~collateral~~(losses) ofon ~~$5.8~~derivative ~~million~~instruments," ~~for~~unless the derivatives inare adesignated ~~liability~~as ~~position~~hedging instruments. The ~~assets~~accounting ~~and~~for ~~liabilities~~derivatives ~~related~~that toare ~~the~~designated ~~net~~as ~~collateral~~hedging ~~paid~~instruments oris ~~held~~described ~~were~~in ~~recorded~~Item as8, ~~Other~~Note ~~assets~~1(h), ~~and~~"Significant ~~Other~~Accounting ~~liabilities~~Policies ~~within~~- ~~the~~Derivative ~~Unaudited~~Instruments," to the Consolidated ~~Balance~~Financial ~~Sheets~~Statements asincluded in the ~~collateral~~Company's ~~and~~Annual ~~derivative~~Report ~~positions~~on ~~are~~Form ~~not~~10-K ~~intended~~for tothe beyear ~~settled~~ended onDecember a31, ~~net basis~~2017.

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

The Company utilizes foreign currency contracts to hedge the fair value of certain net investments in foreign operations. During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017, the Company entered into foreign currency contracts that were formally designated as hedges of investments in foreign subsidiaries, the majority of which have functional currencies of either the British ~~Pound~~pound or ~~the~~Canadian ~~Euro~~dollars. 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 resulting derivative gain (loss) that was recorded in the foreign currency translation adjustment, net of tax, account within AOCI for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017:

Derivative Instruments Designated as Hedges of a Net Investment in a Foreign Operation - Summary

Three months ended ~~September~~March 3031,

~~Nine months ended September 30,~~

(U.S. dollars in thousands)

~~2017~~2018

~~2016~~2017

~~2017~~

~~2016~~

Weighted average of U.S. dollar equivalent of foreign denominated net assets

1,~~167~~094,~~395~~210

21,~~575~~677,~~987~~145

~~1,501,284~~

~~2,401,640~~

Derivative gains (losses) (1)

~~(15,280~~$

(2,323

)

~~1,999~~$

29,398

~~(94,047~~

)

~~35,882~~

____________

(1) Derivative gains (losses) from derivative instruments designated as hedges of anthe net investment in a foreign operation are recorded in the cumulative translation adjustment account within AOCI for each period.

As described in Note 9, "Notes Payable and Debt and Financing Arrangements," the Company has issued debt denominated in Euros that is designated and qualifies as a ~~nonderivative~~non-derivative hedging instrument against an equal amount of the Company's currency exposure to the Euro resulting from net investments in foreign operations. Accordingly, the foreign currency revaluation of this debt is recorded in ~~accumulated other comprehensive income (loss) ("~~AOCI"), offsetting the foreign currency translation adjustment of the related net investments that is also recorded in AOCI.

2418

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(b) 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~~. The impacts are all recorded through "Net realized and unrealized gains (losses) on derivative instruments" in the Unaudited Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017~~2018 and ~~2016~~2017:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments	Three months ended ~~September~~March 3031,						~~Nine months ended September 30,~~
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Investment Related Derivatives:
Interest rate exposure	$	~~(109~~997	)	$	—(214	)	$	49		$	~~781~~
Foreign currency exposure	(13,~~963~~318		)	74(745		)	~~(3,696~~		)	~~(592~~		)
Credit exposure	(~~289~~41		)	(~~812~~854		)	~~(1,668~~		)	~~(959~~		)
Financial market exposure	—(1,348		)	~~(45~~185		)	~~185~~			~~(2,866~~		)
Other Non-Investment Derivatives:
Foreign currency exposure	26—			(~~347~~1,210		)	~~(1,150~~		)	~~(1,345~~		)
Credit exposure	—615			~~4,477~~632			~~770~~			~~4,424~~
Modified coinsurance and funds withheld contracts, including life retrocession embedded derivative	~~(17~~2,~~980~~492		)	2(3,~~143~~925		)	~~(21,667~~		)	~~3,331~~
Other	~~(119~~4,824		)	—(938		)	~~(1,232~~		)	—
Net realized and unrealized gains (losses) on derivative instruments	$	~~(20~~4,~~434~~221	)	$	5(7,~~490~~069	)	$	~~(28,409~~	)	$	~~2,774~~
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	$	~~(31~~22,~~662~~921	)	$	(~~225~~50,~~610~~101	)	$	~~(116,359~~	)	$	~~(691,432~~	)

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

Investment Related Derivatives

The Company, either directly or through third -party investment managers, may use derivative instruments within its investment portfolio, including interest rate swaps and options on interest rate swaps, total return swaps, credit derivatives (including single name and index credit default swaps and options on credit default swaps), equity options, forward contracts and futures (including foreign exchange, bond and stock index, interest rate and commodity futures), primarily as a means of reducing investment risk by economically hedging exposures to interest rate, credit spread, equity price changes and foreign currency risk or, in limited instances, for efficient portfolio management. When using exchange-traded or cleared over-the-counter derivatives, the Company is exposed to the credit risk of the applicable clearing house and of the Company's futures commission merchant. When using uncleared over-the-counter derivatives, the Company is exposed to credit risk in the event of non-performance by the counterparties to such derivative contracts. To manage this risk, the Company requires appropriate legal documentation with counterparties that has been reviewed and negotiated by legal counsel on behalf of the Company and complies with the Company's documentation standards, investment guidelines and policies.

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. The Company may also use interest rate swaps to convert certain liabilities from a fixed rate to a variable rate of interest or use them to convert a variable rate of interest from one basis to another.

Investment Related Derivatives – Foreign Currency Exposure

The Company has exposure to foreign currency exchange rate fluctuations through its operations and in its investment portfolio. The Company uses foreign currency contracts to manage its exposure to the effects of fluctuating foreign currencies on the value of certain of its foreign currency fixed maturities and equities. 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.

2519

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Investment Related Derivatives – Credit Exposure

Credit derivatives may be purchased within the Company's investment portfolio in the form of single name, and basket ~~or index~~ credit default swaps and swaptions, 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 securities of selected issuers. Credit derivatives may also be used to efficiently gain exposure to credit markets, subject to guidelines that prohibit the introduction of effective leverage.

Investment Related Derivatives – Financial Market Exposure

Stock index futures may be purchased within the Company's investment portfolio to create synthetic equity exposure and to add value to the portfolio with overlay strategies where market inefficiencies are believed to exist. Stock index futures may be sold to facilitate the timely and efficient reduction of equity exposure. Equity option strategies, including both purchases and sales of options, may be used to add value or reduce exposure with overlay or other strategies. From time to time, the Company may enter into other financial market exposure derivative contracts on various indices and other underlying financial instruments including, but not limited to, equity options, total return swaps, and commodity contracts.

Other Non-Investment Derivatives

Foreign Currency Contracts

In the fourth quarter of 2016, the Company entered into an average rate option to mitigate the risk of foreign currency exposure to certain cash flows denominated in the British Pound. The option will mature in the fourth quarter of 2017. In the prior year, the Company entered into a similar average rate option.

Credit Exposure

During the year ended December 31, ~~2014~~2017, the Company entered into a non-investment related credit derivative relating to a number of reference pool mortgage tranches associated with actual mortgage loans that were securitized into agency mortgage-backed securities and sold as Structured Agency Credit Risk Notes. At ~~September~~March 3031, ~~2017~~2018, there was no reported event of default on this obligation. The credit derivative is recorded at fair value based upon models developed by the Company. Significant unobservable inputs considered in the valuation include the impact of changes in interest rates, future ~~default~~defaults, delinquency and prepayment rates, credit spreads, changes in credit quality, and other market factors.

Guaranteed Minimum Income Benefit Contract

The Company 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.

Modified Coinsurance and Funds Withheld Contracts, including Life Retrocession Embedded ~~Derivatives~~Derivative

The Company has modified coinsurance and funds withheld reinsurance agreements that provide for a return to be paid based on a portfolio of fixed income securities. As such, the agreements contain an embedded derivative. 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."

In addition, the Company entered into the GreyCastle Life Retro Arrangements, as described in Note 1(a), "Significant Accounting Policies - Basis of Preparation and Consolidation." The embedded derivative related to the GreyCastle Life Retro Arrangements is recorded at fair value with changes in fair value recognized in earnings through "Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets."

2620

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The impact of the GreyCastle Life Retro Arrangements on the Company's results was as follows:

Impact of GreyCastle Life Retro Arrangements	Three months ended ~~September~~March 3031,						~~Nine months ended September 30,~~
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Underwriting profit (loss)	$	—		$	—		$	—		$	—
Net investment income - Life Funds Withheld Assets	30,~~796~~398			3833,~~937~~364			~~95,599~~			~~119,643~~
Net realized gains (losses) on investments sold - Life Funds Withheld Assets	18,879			44,011			83,131			108,541
Net realized gains (losses) on investments, trading - Life Funds Withheld Assets	10,358			34,474
Net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets	(7,331		)	41,270			(31,056		)	165,653
Net unrealized gains (losses) on investments, trading - Life Funds Withheld Assets	(31,667		)	(1,406		)
OTTI on investments - Life Funds Withheld Assets	—			—			—			(2,598		)
OTTI - Life Funds Withheld Assets	(1,203		)	—
Foreign exchange gains (losses)	810,~~543~~719			13,~~535~~294			~~26,801~~			~~5,899~~
Other income and expenses	—(36		)	—(70		)	~~(90~~		)	~~(170~~		)
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	~~(31~~22,~~662~~921		)	(~~225~~50,~~610~~101		)	~~(116,359~~		)	~~(691,432~~		)
Net income (loss)	$	1941,~~225~~490		$	~~(99~~19,~~857~~555	)	$	~~58,026~~		$	~~(294,464~~	)
Change in net unrealized gains (losses) on investments - Life Funds Withheld Assets	(14,579		)	77,242			(46,643		)	206,480
Change in net unrealized gains (losses) on investments AFS - Life Funds Withheld Assets	(35,754		)	(20,108		)
Change in adjustments related to future policy benefit reserves	54,~~412~~164			25,~~058~~132			~~13,981~~			~~27,820~~
Change in cumulative translation adjustment - Life Funds Withheld Assets	(109,~~058~~900		)	20(4,~~557~~579		)	~~(25,364~~		)	~~60,164~~
Total changes to other comprehensive income as a result of GreyCastle Life Retro Arrangements	$	(1941,~~225~~490	)	$	99(19,~~857~~555	)	$	~~(58,026~~	)	$	~~294,464~~
Comprehensive income (loss)	$	—		$	—		$	—		$	—

As shown in the table above, although the Company's net income (loss) is subject to variability related to the GreyCastle Life Retro Arrangements, there is no net impact on the Company's comprehensive income in any period. The life retrocession embedded derivative value includes the interest income, unrealized gains and losses, and realized gains and losses from sale of the Life Funds Withheld Assets.

Other

The Company has entered into short -term weather derivative swap agreements as the fixed rate payer which provide for a return to be paid to the Company based on the occurrence of certain industry weather events. The derivatives are recorded at fair value with changes in fair value recognized in earnings through "Net realized and unrealized gains (losses) on derivative instruments."

The Company may designate certain of its derivative instruments as fair value hedges or cash flow hedges, in which case it formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the hedging derivatives 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.

Settlement of Fair Value Hedges

During the fourth quarter of 2010 and the third quarter of 2012, the Company settled ~~a total of~~ five interest rate contracts designated as fair value hedges of certain of the Company's structured indemnity contracts. The gain on settlement of these contracts, which represented the effective portion of the hedging relationship, was recorded as an increase in the carrying value of the deposit liabilities and is being amortized through interest expense over the remaining term of the structured indemnity contracts.

27A summary of the fair value hedges that have been settled and their impact on results up to the indicated periods, as well as the remaining balance of the fair value hedges and average years remaining to maturity at March 31, 2018 and 2017, are shown below:



Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Structured Indemnity Contracts March 31,
(U.S. dollars in thousands, except years)	2018		2017
Cumulative reduction to interest expense	$	124,255	$	122,118
Remaining balance	$	108,940	$	111,077
Weighted average years remaining to maturity	18.3		18.7

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A summary of the fair value hedges that have been settled and their impact on results during the indicated periods as well as the remaining balance of fair value hedges and average years remaining to maturity at September 30, 2017 and 2016 are shown below:

Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Structured Indemnity Contracts September 30,
(U.S. dollars in thousands, except years)	2017		2016
Cumulative reduction to interest expense	$	119,591	$	110,914
Remaining balance	$	113,604	$	122,282
Weighted average years remaining to maturity	19.0		20.4

(d) Contingent Credit Features

Certain derivative agreements entered into by the Company or its subsidiaries contain credit rating downgrade provisions that permit early termination of the agreements 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 terminate such agreements early due to a credit rating downgrade, it could potentially be in a net liability position at the time of settlement of such agreements. The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and any collateral posted under these agreements at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

Contingent Credit Features - Summary:(U.S. dollars in thousands)	~~September~~March 3031, ~~2017~~2018			December 31, ~~2016~~2017
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	30(7,~~197~~872	)	$	147,~~130~~464
Collateral posted to counterparty	$	326,~~400~~720		$	~~4,630~~40

6. 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 at 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 AFS 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 whether the prices represent a reasonable estimate of the fair value. 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 that are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, comparisons 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 external parties and valuations provided by third -party investment managers at a portfolio level.

In addition, the Company assesses the effectiveness of valuation controls performed by external parties responsible for sourcing appropriate valuations from third parties on its 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. 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 pricing services, which may also consist of broker quotes, to assess if the prices received represent reasonable estimates of the fair value.

28For further information about the Company's fair value measurements, see Item 8, Note 1(b), "Significant Accounting Policies - Fair Value Measurements," and Item 8, Note 8, "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, 2017.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 pricing services, which may also consist of broker quotes, to assess if the prices received represent reasonable estimates of the fair value.

For further information about the Company's fair value measurements, see Item 8, Note 1(b), "Significant Accounting Policies - Fair Value Measurements," and Item 8, Note 8, "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, 2016.

(a) Fair Value Summary

The following tables set forth the Company's assets and liabilities that were accounted for at fair value at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017 by level within the fair value hierarchy:

September 30, 2017(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting			Balance atSeptember 30, 2017
March 31, 2018(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting			Balance atMarch 31, 2018
Assets
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
U.S. Government	$	—	$	4,~~294~~182,~~540~~925	$	185,~~796~~034	$	—		$	4,~~313~~187,~~336~~959
U.S. States, municipalities and political subdivisions	—		2,~~111~~013,~~217~~162		—		—			2,~~111~~013,~~217~~162
Non-U.S. Governments	—		5,~~260~~306,~~637~~651		—		—			5,~~260~~306,~~637~~651
Corporate	—		109,~~071~~740,~~680~~542		12,~~294~~128		—			109,~~072~~742,~~974~~670
RMBS	—		4,~~941~~522,~~702~~786		—6,937		—			4,~~941~~529,~~702~~723
CMBS	—		1,~~277~~259,~~216~~519		~~778~~—		—			1,~~277~~259,~~994~~519
Other asset-backed securities	—		1,~~551~~588,~~264~~659		1619,~~251~~737		—			1,~~567~~608,~~515~~396
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value	$	—	$	2928,~~508~~614,~~256~~244	$	3733,~~119~~836	$	—		$	2928,~~545~~648,~~375~~080
Short-term investments, at fair value (1)	—		~~336~~500,~~054~~170		—		—			~~336~~500,~~054~~170
Equity securities, at fair value	844,923		167,019		—		—			1,011,942
Total investments AFS - Excluding Funds Withheld Assets	$	—	$	29,114,414	$	33,836	$	—		$	29,148,250
Total investments AFS - Excluding Funds Withheld Assets	$	844,923	$	30,011,329	$	37,119	$	—		$	30,893,371
Fixed maturities - Life Funds Withheld Assets
U.S. Government	$	—	$	11,~~090~~616	$	—	$	—		$	11,~~090~~616
Non-U.S. Governments	—		~~611~~584,~~843~~406		—		—			~~611~~584,~~843~~406
Corporate	—		1,~~211~~121,~~551~~203		—		—			1,~~211~~121,~~551~~203
RMBS	—		~~589~~503		—		—			~~589~~503
CMBS	—		~~122~~130,~~223~~070		—		—			~~122~~130,~~223~~070
Other asset-backed securities	—		~~172~~160,~~838~~750		—		—			~~172~~160,~~838~~750
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value	$	—	$	2,~~130~~008,~~134~~548	$	—	$	—		$	2,~~130~~008,~~134~~548
Total investments - AFS, at fair value	$	~~844,923~~—	$	3231,~~141~~122,~~463~~962	$	3733,~~119~~836	$	—		$	3331,~~023~~156,~~505~~798
Fixed maturities - Trading
Fixed maturities trading
U.S. Government	$	—	$	159,~~815~~320	$	—	$	—		$	159,~~815~~320
Non-U.S. Governments	—		~~465~~497,~~262~~108		—		—			~~465~~497,~~262~~108
Corporate	—		1,~~334~~525,~~783~~761		—		—			1,~~334~~525,~~783~~761
RMBS	—		~~818~~893		—		—			~~818~~893
CMBS	—		7,~~581~~472		—		—			7,~~581~~472
Other asset-backed securities	—		4243,~~206~~697		—		—			4243,~~206~~697
Total fixed maturities - Trading - Life Funds Withheld Assets, at fair value	$	—	$	1,866,465	$	—	$	—		$	1,866,465
Total fixed maturities trading - Life Funds Withheld Assets, at fair value	$	—	$	2,084,251	$	—	$	—		$	2,084,251
Short-term investments, at fair value (1)	—		9,361		—		—			9,361
Short-term investments trading, at fair value (1)	—		7,425		—		—			7,425
Total investments, Trading	$	—	$	1,875,826	$	—	$	—		$	1,875,826
Total investments trading	$	—	$	2,091,676	$	—	$	—		$	2,091,676
Cash equivalents (2)	522,096		1,409,637		—		—			1,931,733
Cash equivalents - Life Funds Withheld Assets (2)	1,514		77,938		—		—			79,452
Equity securities, at fair value	474,118		163,754		—		—			637,872
Other investments (3)	—		580,946		231,368		—			812,314
Other assets (4)	—		17,728		18,175		(7,239		)	28,664
Total assets accounted for at fair value	$	997,728	$	35,464,641	$	283,379	$	(7,239	)	$	36,738,509
Liabilities
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) (5)	$	—	$	1,085,099	$	—	$	—		$	1,085,099
Other liabilities (4)	—		29,560		17,841		(7,239		)	40,162
Total liabilities accounted for at fair value	$	—	$	1,114,659	$	17,841	$	(7,239	)	$	1,125,261

2923

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting			Balance atSeptember 30, 2017
December 31, 2017(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting			Balance atDecember 31,2017
Cash equivalents (2)	242,977		1,386,542		—		—			1,629,519
Assets
Cash equivalents - Life Funds Withheld Assets (2)	505		64,769		—		—			65,274
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
Other investments (3)	—		558,934		219,462		—			778,396
U.S. Government	$	—	$	4,344,450	$	18,290	$	—		$	4,362,740
Other assets (4)	—		5,628		17,616		(3,681		)	19,563
U.S. States, municipalities and political subdivisions	—		2,064,640		—		—			2,064,640
Total assets accounted for at fair value	$	1,088,405	$	36,033,162	$	274,197	$	(3,681	)	$	37,392,083
Non-U.S. Governments	—		5,201,581		—		—			5,201,581
Corporate	—		9,793,841		1,292		—			9,795,133
RMBS	—		4,724,402		—		—			4,724,402
CMBS	—		1,244,017		—		—			1,244,017
Other asset-backed securities	—		1,504,131		5,232		—			1,509,363
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value	$	—	$	28,877,062	$	24,814	$	—		$	28,901,876
Short-term investments, at fair value (1)	—		815,481		—		—			815,481
Equity securities, at fair value	557,510		156,457		—		—			713,967
Total investments AFS - Excluding Funds Withheld Assets	$	557,510	$	29,849,000	$	24,814	$	—		$	30,431,324
Fixed maturities - Life Funds Withheld Assets
U.S. Government	$	—	$	11,316	$	—	$	—		$	11,316
Non-U.S. Governments	—		584,534		—		—			584,534
Corporate	—		1,137,213		—		—			1,137,213
RMBS	—		515		—		—			515
CMBS	—		122,272		—		—			122,272
Other asset-backed securities	—		171,262		—		—			171,262
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value	$	—	$	2,027,112	$	—	$	—		$	2,027,112
Total investments - AFS, at fair value	$	557,510	$	31,876,112	$	24,814	$	—		$	32,458,436
Fixed maturities trading
U.S. Government	$	—	$	11,042	$	—	$	—		$	11,042
U.S. States, municipalities and political subdivisions	—		31		—		—			31
Non-U.S. Governments	—		485,171		—		—			485,171
Corporate	—		1,460,292		—		—			1,460,292
RMBS	—		932		—		—			932
CMBS	—		7,580		—		—			7,580
Other asset-backed securities	—		41,337		—		—			41,337
Total fixed maturities trading - Life Funds Withheld Assets, at fair value	$	—	$	2,006,385	$	—	$	—		$	2,006,385
Short-term investments trading, at fair value (1)	—		14,965		—		—			14,965
Total investments trading	$	—	$	2,021,350	$	—	$	—		$	2,021,350
Cash equivalents (2)	279,224		1,271,483		—		—			1,550,707
Cash equivalents - Life Funds Withheld Assets (2)	—		67,982		—		—			67,982
Other investments (3)	—		570,931		221,708		—			792,639
Other assets (4)	—		14,467		18,327		(3,579		)	29,215
Total assets accounted for at fair value	$	836,734	$	35,822,325	$	264,849	$	(3,579	)	$	36,920,329
Liabilities
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) (5)	$	—	$	1,~~037~~112,~~270~~969	$	—	$	—		$	1,~~037~~112,~~270~~969
Other liabilities (4)	—		6044,~~318~~591		1718,~~470~~305		(3,~~681~~579		)	7459,~~107~~317
Total liabilities accounted for at fair value	$	—	$	1,~~097~~157,~~588~~560	$	1718,~~470~~305	$	(3,~~681~~579	)	$	1,~~111~~172,~~377~~286

December 31, 2016(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting		Balance atDecember 31,2016
Assets
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
U.S. Government	$	—	$	3,869,637	$	24,751	$	—	$	3,894,388
U.S. States, municipalities and political subdivisions	—		2,478,112		—		—		2,478,112
Non-U.S. Governments	—		5,030,132		—		—		5,030,132
Corporate	—		10,114,644		20,085		—		10,134,729
RMBS	—		4,492,625		—		—		4,492,625
CMBS	—		665,087		99		—		665,186
Other asset-backed securities	—		1,252,257		1,131		—		1,253,388
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value	$	—	$	27,902,494	$	46,066	$	—	$	27,948,560
Short-term investments, at fair value (1)	—		625,193		—		—		625,193
Equity securities, at fair value	898,664		138,667		—		—		1,037,331
Total investments AFS - Excluding Funds Withheld Assets	$	898,664	$	28,666,354	$	46,066	$	—	$	29,611,084
Fixed maturities - Life Funds Withheld Assets
U.S. Government	$	—	$	10,577	$	—	$	—	$	10,577
Non-U.S. Governments	—		624,677		—		—		624,677
Corporate	—		1,454,608		—		—		1,454,608
RMBS	—		22,380		—		—		22,380
CMBS	—		94,240		—		—		94,240
Other asset-backed securities	—		101,560		—		—		101,560
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value	$	—	$	2,308,042	$	—	$	—	$	2,308,042
Total investments - AFS, at fair value	$	898,664	$	30,974,396	$	46,066	$	—	$	31,919,126

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016(U.S. dollars in thousands)	Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantOtherUnobservableInputs(Level 3)		CounterpartyNetting			Balance atDecember 31,2016
Fixed maturities - Trading
U.S. Government	$	—	$	14,708	$	—	$	—		$	14,708
U.S. States, municipalities and political subdivisions	—		224		—		—			224
Non-U.S. Governments	—		444,944		—		—			444,944
Corporate	—		1,111,205		—		—			1,111,205
RMBS	—		961		—		—			961
CMBS	—		5,526		—		—			5,526
Other asset-backed securities	—		39,446		—		—			39,446
Total fixed maturities - Trading - Life Funds Withheld Assets, at fair value	$	—	$	1,617,014	$	—	$	—		$	1,617,014
Short-term investments, at fair value (1)	—		9,563		—		—			9,563
Total investments, Trading	$	—	$	1,626,577	$	—	$	—		$	1,626,577
Cash equivalents (2)	573,398		1,096,254		—		—			1,669,652
Cash equivalents - Life Funds Withheld Assets (2)	—		72,798		—		—			72,798
Other investments (3)	—		493,874		205,528		—			699,402
Other assets (4)	—		87,655		19,841		(17,947		)	89,549
Total assets accounted for at fair value	$	1,472,062	$	34,351,554	$	271,435	$	(17,947	)	$	36,077,104
Liabilities
Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) (5)	$	—	$	937,721	$	—	$	—		$	937,721
Other liabilities (4)	—		44,865		19,839		(17,947		)	46,757
Total liabilities accounted for at fair value	$	—	$	982,586	$	19,839	$	(17,947	)	$	984,478

____________

(1) Short-term investments consist primarily of ~~Other asset-backed securities,~~ U.S. and Non-U.S. Government securities, Corporate securities, and ~~Corporate~~Other asset-backed securities.


(2)	Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to recurring fair value measurement guidance.

(3) Excluded from Other Investments are certain investments that are measured using net asset value as a practical expedient in the amount of $194.7 million and $322.9 million at September 30, 2017 and December 31, 2016, respectively. Under GAAP, these investments are excluded from the fair value hierarchy table. In addition, the Other investments balance excludes loans held at amortized cost. These investments, which totaled $172.5 million at September 30, 2017 and $142.3 million at December 31, 2016, are carried at amortized cost. For further information, see Item 8, Note 6, "Other Investments," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.24

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(3)

Excluded from Other Investments are certain investments that are measured using net asset value as a practical expedient in the amount of $201.8 million and $198.2 million at March 31, 2018 and December 31, 2017, respectively. Under GAAP, these investments are excluded from the fair value hierarchy table. In addition, the Other investments balance excludes loans held at amortized cost, which totaled $172.9 million at March 31, 2018 and $173.0 million at December 31, 2017. For further information, see Item 8, Note 6, "Other Investments," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

(4)

Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported gross of cash collateral by level with a counterparty netting adjustment presented separately in the 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 5, "Derivative Instruments."

(5) Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable) include balances related to the life retrocession embedded derivative, under which all investment results associated with the Life Funds Withheld Assets related to the GreyCastle Life Retro Arrangements described in Note 1(a), "Significant Accounting Policies - Basis of Preparation and Consolidation," accrue to the benefit of GCLR.

(b) Level 2 Asset Valuations

U.S. Government, Corporate and Non-U.S. Governments

Transaction activity inputs utilized in the valuation of fair value hierarchy Level 2 securities within these sub-categories include actual trades, dealer posts, results of bids-wanted, institutional secondary offerings, primary market offerings and Trade Reporting and Compliance Engine ("TRACE") trade feeds. As part of the evaluation process, transaction activity is compared to prior evaluations and necessary adjustments are made accordingly. Market-color inputs include actively quoted benchmark issues, buy-side/evaluator dialogue, sell-side/evaluator dialogue and credit derivative indices.

U.S. States, municipalities and political subdivisions

Transaction activity inputs utilized in the valuation of fair value hierarchy Level 2 securities within this sub-category include actual trades, dealer posts, results of bids-wanted, institutional secondary offerings, primary market offerings, and Municipal Securities Rulemaking trade feeds. As part of the evaluation process, transaction activity is compared to prior evaluations and necessary adjustments are made accordingly. Market-color inputs include bids, offerings, two-sided markets, buy-side/evaluator dialogue and sell-side/evaluator dialogue. Credit information inputs include issuer financial statements, default and material event notices, developer reports and liquidation and restructuring analyses.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

buy-side/evaluator dialogue and sell-side/evaluator dialogue. Credit information inputs include issuer financial statements, default and material event notices, developer reports and liquidation and restructuring analyses.

RMBS, CMBS and Other asset-backed securities

As part of the ~~process to determine~~ fair ~~value~~valuation process, Level 2 securities in these sub-categories are analyzed by collateral type, deal structure, deal performance and vintage. Market inputs into the valuation process for each sub-category include ~~actual~~reported or observed trades, results of bids-wanted, buy-side/evaluator dialogue, ~~and~~ sell-side/evaluator dialogue, dealer offerings and market research reports. Cash flow inputs into the evaluation process include conditional prepayment rates, conditional decay rates, ~~and~~ delinquency and loss severity rates. This assumptive data is reviewed and updated using third -party reported information to reflect current market convention.

Equity securities and other investments

Equity securities and other investment securities generally include investments in thinly traded equity funds and fixed income funds (including ~~Overseas~~overseas ~~Deposits~~deposits). Fair value is determined based upon prices received from ~~third~~pricing ~~party~~services ~~service providers~~ as well as from net asset values ("NAV") received from the fund administrators.

Other assets and other liabilities

Other assets and other liabilities primarily include over-the-counter ("OTC") derivatives, which are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative independent pricing sources where an understanding of the inputs utilized in arriving at the valuations is obtained. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms and specific risks inherent in the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, interest rate swaps and options, model inputs can generally be verified against observable inputs and model selection does not involve significant management judgment.

Funds withheld on GreyCastle Life Retro Arrangements (net of future policy benefit reserves recoverable)

The calculation of the change in fair value of the embedded derivative associated with the GreyCastle Life Retro Arrangements includes the interest income, realized and unrealized gains and losses on Life Funds Withheld Assets and certain expenses related to the Life Funds Withheld Assets. The fair value of the embedded derivative is included in "Funds withheld on GreyCastle life retrocession arrangements, net of future policy benefit reserves recoverable" on the Unaudited Consolidated Balance Sheets. The fair value of the embedded derivative is considered a Level 2 valuation.

~~There were no significant transfers between Level 1 and Level 2 during each of the three and nine months ended September 30, 2017 and 2016.~~ 25

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, 2017 and 2016 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at September 30, 2017 and 2016, 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, 2017 and 2016, respectively. 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 may arise as a result of the valuations utilized by the Company changing between either those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

expenses related to the Life Funds Withheld Assets. The fair value of the embedded derivative is included in "Funds withheld on GreyCastle life retrocession arrangements, net of future policy benefit reserves recoverable" on the Unaudited Consolidated Balance Sheets. The fair value of the embedded derivative is considered a Level 2 valuation.

There were no significant transfers between Level 1 and Level 2 during each of the three months ended March 31, 2018 and 2017.

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 months ended March 31, 2018 and 2017 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at March 31, 2018 and 2017, 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 March 31, 2018 and 2017, respectively. 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, the tables below 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 either those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3.

Fixed maturities and short-term investments

The Company's Level 3 assets consist primarily of U.S. Government securities, Corporates and Other asset-backed securities, 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 securities 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 pricing services, 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 these 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 premiums 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 (including funds), hedge funds and certain derivative positions as described below.

Other investments

Included within the other investments component of the Company's Level 3 valuations are private investments (including funds) and hedge funds 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 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 require significant Level 3 inputs ~~are utilized~~ in the determination of the individual underlying holding values. ~~and~~Accordingly, ~~accordingly,~~ the fair value of the Company's investment in each entity is classified within Level 3. Management reviews the values ~~received~~ and 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 received in recording the fair value of each position. Investments in hedge funds included in other investments utilize strategies including arbitrage, directional, event driven and multi-style. The funds potentially have lockup and gate provisions that may limit redemption liquidity. For further details regarding the nature of other investments and related features, see Item 8, Note 6, "Other Investments," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017.

~~Derivative instruments~~26

Derivative instruments recorded within other liabilities and classified within Level 3 include credit derivatives sold that provide 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.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Level 3 Assets and Liabilities - Three Months Ended September 30, 2017
(U.S. dollars in thousands)	Balance, beginning of period			Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3 (1)			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	19,059		$	—		$	50		$	—	$	—		$	(313	)	$	—		$	18,796	$	50
Corporate	1,184			—			1			—		—			—			109			1,294		(1		)
CMBS	78			—			4			698		—			(2		)	—			778		4
Other asset-backed securities	6,891			15			—			15,582		(3,770		)	—			(2,467		)	16,251		—
Short-term investments	3			—			—			—		—			(3		)	—			—		—
Other investments	220,348			2,571			8,047			5,464		—			(9,813		)	(7,155		)	219,462		(1,620		)
Derivative Contracts - Net	540			—			(394		)	—		—			—			—			146		(394		)
Total	$	248,103		$	2,586		$	7,708		$	21,744	$	(3,770	)	$	(10,131	)	$	(9,513	)	$	256,727	$	(1,961	)
	Level 3 Assets and Liabilities - Three Months Ended September 30, 2016
(U.S. dollars in thousands)	Balance, beginning of period			Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3 (1)			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	44,256		$	(37	)	$	116		$	—	$	—		$	(685	)	$	—		$	43,650	$	79
Corporate	45,566			(3,088		)	94			—		(30,420		)	—			(1,866		)	10,286		17
RMBS	15			—			—			—		—			—			(15		)	—		—
CMBS	—			—			(1		)	—		—			—			102			101		(1		)
Other asset-backed securities	24,649			92			1,189			124,843		—			(4,267		)	(4,095		)	142,411		333
Other investments	225,094			7,757			(62		)	9,297		(12,000		)	(14,869		)	(2,463		)	212,754		6,902
Derivative Contracts - Net	(9,836		)	—			9,879			—		—			—			—			43		55
Total	$	329,744		$	4,724		$	11,215		$	134,140	$	(42,420	)	$	(19,821	)	$	(8,337	)	$	409,245	$	7,385

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.

(1) Net transfers include both movement in and movement out of Level 3. Other asset-backed securities, for the three months ended September 30, 2017, includes $3.1 million of outgoing transfers partially offset by $0.7 million of incoming transfers.



	Level 3 Assets and Liabilities - Three Months Ended March 31, 2018
(U.S. dollars in thousands)	Balance, beginning of period		Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	18,290	$	(354	)	$	114		$	—	$	(13,016	)	$	—		$	—		$	5,034	$	(36	)
Corporate	1,292		—			43			—		—			(101		)	894			2,128		44
RMBS	—		—			—			980		—			—			5,957			6,937		—
Other asset-backed securities	5,232		—			(28		)	15,407		—			(874		)	—			19,737		—
Other investments	221,708		847			5,191			14,280		—			(10,658		)	—			231,368		5,338
Derivative Contracts - Net	22		—			312			—		—			—			—			334		312
Total	$	246,544	$	493		$	5,632		$	30,667	$	(13,016	)	$	(11,633	)	$	6,851		$	265,538	$	5,658

	Level 3 Assets and Liabilities - Three Months Ended March 31, 2017
(U.S. dollars in thousands)	Balance, beginning of period		Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	24,751	$	(19	)	$	(355	)	$	—	$	—		$	(311	)	$	(4,758	)	$	19,308	$	(373	)
Corporate	20,085		—			11			—		(10,284		)	(31		)	118			9,899		11
RMBS	—		17			(526		)	—		—			(173		)	4,063			3,381		(509		)
CMBS	99		—			2			—		—			—			—			101		2
Other asset-backed securities	1,131		30			101			—		—			(46		)	2,734			3,950		131
Short-term investments	—		—			—			11,693		—			(28		)	—			11,665		—
Other investments	205,528		(5,541		)	7,102			4,982		—			(5,397		)	(2,709		)	203,965		6,343
Derivative Contracts - Net	2		—			161			—		—			—			—			163		163
Total	$	251,596	$	(5,513	)	$	6,496		$	16,675	$	(10,284	)	$	(5,986	)	$	(552	)	$	252,432	$	5,768

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2017
(U.S. dollars in thousands)	Balance, beginning of period			Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3 (1)			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	24,751		$	(38	)	$	(224	)	$	—	$	—		$	(935	)	$	(4,758	)	$	18,796	$	227
Corporate	20,085			27			(18		)	—		(20,014		)	(31		)	1,245			1,294		5
RMBS	—			17			(526		)	—		—			(173		)	682			—		—
CMBS	99			21			(14		)	698		—			(26		)	—			778		4
Other asset-backed securities	1,131			101			1,111			22,472		(5,216		)	(286		)	(3,062		)	16,251		—
Short-term investments	—			—			—			11,693		(11,662		)	(31		)	—			—		—
Other investments	205,528			2,097			24,327			21,743		(2,207		)	(22,162		)	(9,864		)	219,462		8,581
Derivative Contracts - Net	2			—			144			—		—			—			—			146		146
Total	$	251,596		$	2,225		$	24,800		$	56,606	$	(39,099	)	$	(23,644	)	$	(15,757	)	$	256,727	$	8,963
	Level 3 Assets and Liabilities - Nine Months Ended September 30, 2016
(U.S. dollars in thousands)	Balance, beginning of period			Realized gains (losses)			Movement in unrealized gains (losses)			Purchases and Issuances		Sales			Settlements			Net transfers into (out of) Level 3 (1)			Balance, end of period		Movement in total gains (losses) relating to investments still held
U.S. Government	$	45,063		$	(112	)	$	743		$	—	$	—		$	(2,044	)	$	—		$	43,650	$	630
Corporate	53,873			(2,991		)	26			1,955		(30,420		)	(6		)	(12,151		)	10,286		48
RMBS	3,077			(3		)	7			—		—			(229		)	(2,852		)	—		—
CMBS	—			—			(1		)	—		—			—			102			101		(1		)
Other asset-backed securities	50,265			704			4,722			125,915		—			(37,220		)	(1,975		)	142,411		4,479
Other investments	264,415			14,588			(8,519		)	34,450		(12,000		)	(34,334		)	(45,846		)	212,754		5,276
Derivative Contracts - Net	(9,791		)	—			9,834			—		—			—			—			43		10
Total	$	406,902		$	12,186		$	6,812		$	162,320	$	(42,420	)	$	(73,833	)	$	(62,722	)	$	409,245	$	10,442

____________

(1) Net transfers include both movement in and movement out of Level 3. Corporate for the nine months ended September 30, 2017, includes $1.4 million of incoming transfers partially offset by $0.1 million of outgoing transfers. RMBS for the nine months ended September 30, 2017, includes $4.1 million of incoming transfers partially offset by $3.4 million of outgoing transfers. Other asset-backed securities, for the nine months ended September 30, 2017, includes $9.8 million of outgoing transfers partially offset by $6.8 million of incoming transfers. Other investments, for the nine months ended September 30, 2016, includes $61.3 million of outgoing transfers partially offset by $15.5 million of incoming transfers. Other asset-backed securities, for the nine months ended September 30, 2016, includes $5.0 million of outgoing transfers partially offset by $3.0 million of incoming transfers.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(d) 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 values differ from the estimated fair values at September 30, 2017 and December 31, 2016. All of these fair value estimates are considered Level 2 fair value measurements. 27

	September 30, 2017				December 31, 2016
(U.S. dollars in thousands)	CarryingValue		FairValue		CarryingValue		FairValue
Financial Assets - Other investments	$	172,453	$	182,454	$	142,271	$	153,173
Deposit liabilities	$	1,030,290	$	1,258,115	$	1,116,233	$	1,337,406
Notes payable and debt	3,210,063		3,476,673		2,647,677		2,813,257
Financial Liabilities	$	4,240,353	$	4,734,788	$	3,763,910	$	4,150,663

XL GROUP LTD

~~The~~NOTES ~~Company~~TO ~~historically~~UNAUDITED ~~participated~~CONSOLIDATED inFINANCIAL structured transactions, the remaining of which are largely comprised of an investment in a payment obligation with an insurance company. These transactions are carried at amortized cost. The fair values of these investments held by the Company are determined through use of internal models utilizing benchmark yields, issuer spreads and reference data.STATEMENTS

~~Deposit~~The ~~liabilities~~following ~~include~~table ~~obligations~~includes ~~under~~financial ~~structured~~instruments ~~insurance~~for ~~and~~which ~~reinsurance~~the ~~transactions.~~carrying ~~For purposes of fair~~ value ~~disclosures,~~differs ~~the~~from ~~Company determined~~ the estimated fair values ~~of the deposit liabilities by assuming a discount rate equal to the appropriate U.S. Treasury rate plus 47.9 basis points and 50.0 basis points~~ at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016, respectively~~2017. ~~The~~All ~~discount~~of ~~rate~~these ~~incorporates~~fair ~~the~~value ~~Company's~~estimates ~~own~~are ~~credit~~considered ~~risk~~Level ~~into~~2 ~~the determination of estimated~~ fair value measurements.



	March 31, 2018				December 31, 2017
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets - Other investments	$	172,879	$	181,349	$	172,982	$	182,222
Deposit liabilities	$	982,963	$	1,190,885	$	1,042,677	$	1,266,682
Notes payable and debt	3,240,461		3,483,428		3,220,769		3,507,108
Financial Liabilities	$	4,223,424	$	4,674,313	$	4,263,446	$	4,773,790

The Company historically participated in structured transactions, the remaining of which are largely comprised of an investment in a payment obligation with an insurance company. This transaction is carried at amortized cost. The fair value of this investment held by the Company is determined through use of an internal model utilizing benchmark yields, issuer spreads 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 26.3 basis points and 45.5 basis points at March 31, 2018 and December 31, 2017, respectively. 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 not carried at fair value as defined in the authoritative guidance over necessary disclosures, which excludes certain financial instruments, particularly insurance contracts.

7. Goodwill and Other Intangible Assets

The Company had goodwill and other intangible assets of $2.2 billion at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017.

InThe ~~the~~following ~~third~~table ~~quarter~~presents ofan ~~2016,~~analysis ~~as a result~~ of ~~the~~goodwill, ~~transaction~~intangible ~~described~~assets inwith ~~Note~~an ~~2(c),~~indefinite ~~"Acquisitions~~life and ~~Disposals - Brooklyn Acquisition," the Company recognized definite-lived~~ intangible assets ofwith ~~$22.9~~a ~~million.~~definite ~~The~~life ~~transaction was accounted~~ for ~~using~~ the ~~acquisition~~three ~~method~~months ~~under~~ended ~~which~~March ~~the Company recorded the identifiable assets acquired~~31, ~~including definite-lived intangible assets, at their acquisition date fair values.~~ 2018:

In the first quarter of 2016, as a result of the transaction described in Note 2(d), "Acquisitions and Disposals - Allied Acquisition," the Company recognized intangible assets of $14.0 million. The transaction was accounted for using the acquisition method under which the Company recorded the identifiable assets acquired, including indefinite-lived and definite-lived intangible assets, and liabilities assumed, at their acquisition date fair values, and recorded the excess of consideration transferred over the net assets acquired as goodwill in the amount of $14.1 million.



(U.S. dollars in thousands)	Goodwill		Intangible assets with an indefinite life		Intangible assets with a definite life			Total
Balance at December 31, 2017	$	1,234,150	$	699,014	$	292,587		$	2,225,751
Amortization	—		—		(4,944		)	(4,944		)
Foreign Currency Translation	4,850		2,916		1,933			9,699
Balance at March 31, 2018	$	1,239,000	$	701,930	$	289,576		$	2,230,506

The following table presents an analysis of intangible assets broken down between goodwill, intangible assets with an indefinite life and intangible assets with a definite life for the nine months ended September 30, 2017:28

(U.S. dollars in thousands)	Goodwill		Intangibleassets with anindefinite life		Intangibleassets with adefinite life			Total
Balance at December 31, 2016	$	1,213,524	$	682,779	$	307,350		$	2,203,653
Amortization	—		—		(16,876		)	(16,876		)
Foreign Currency Translation	18,749		14,950		6,538			40,237
Balance at September 30, 2017	$	1,232,273	$	697,729	$	297,012		$	2,227,014

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Losses and Loss Expenses

The following table represents a reconciliation of the beginning and ending balances of unpaid losses and loss expenses, including an analysis of the Company's paid and unpaid losses and loss expenses incurred for the years indicated:

(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017
Unpaid losses and loss expenses at the beginning of the year	$	2529,~~939~~696,~~571~~779		$	25,~~439~~939,~~744~~571
Unpaid losses and loss expenses recoverable at the beginning of the year (1)	57,~~480~~239,~~300~~446			5,~~248~~480,~~905~~300
Net unpaid losses and loss expenses at the beginning of the year	$	2022,~~459~~457,~~271~~333		$	20,~~190~~459,~~839~~271
Acquired reserves	—			101,315
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	61,~~272~~631,~~852~~142			41,~~702~~559,~~321~~452
Prior year	(939,~~590~~136		)	~~(195~~24,~~647~~004		)
Total net incurred losses and loss expenses	$	61,~~179~~622,~~262~~006		$	41,~~506~~583,~~674~~456
Foreign exchange and other	~~555~~262,~~350~~571			~~(263~~56,~~342~~244		)
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	~~654~~128,~~494~~691			~~695~~106,~~256~~472
Prior year	31,~~505~~774,~~086~~194			31,~~139~~222,~~995~~119
Total net paid losses	$	41,~~159~~902,~~580~~885		$	31,~~835~~328,~~251~~591
Net unpaid losses and loss expenses at September 30	23,034,303			20,700,235
Net unpaid losses and loss expenses at March 31	22,439,025			20,770,380
Unpaid losses and loss expenses recoverable at September 30 (1)	6,954,034			5,470,148
Unpaid losses and loss expenses recoverable at March 31 (1)	7,262,543			5,674,744
Unpaid losses and loss expenses at September 30	$	29,988,337		$	26,170,383
Unpaid losses and loss expenses at March 31	$	29,701,568		$	26,445,124

____________

(1) ~~Property~~ ~~and~~P&C ~~Casualty~~ business only, net of provision for uncollectible reinsurance.

The ~~three~~following ~~months~~table ~~ended~~presents ~~September 30, 2017 experienced a significant number of natural catastrophe losses. In August, Hurricane Harvey impacted~~ the ~~Western~~net ~~Gulf~~(favorable) ~~Coast~~adverse ofprior ~~the~~year ~~United~~loss ~~States.~~development ~~In September, Hurricane Irma impacted the Caribbean and the Eastern Gulf Coast~~ of the ~~United~~Company's ~~States.~~loss Also in September, Hurricane Maria impacted the Caribbean. All three hurricanes caused significant damage. In addition, there were other natural catastrophe losses in the quarter, including the Mexican Earthquakes and ~~Typhoon~~loss ~~Hato~~expense inreserves ~~Southeast~~for ~~Asia~~its ~~("Other~~P&C ~~Cats").~~operations ~~Collectively,~~by ~~Hurricanes~~operating ~~Harvey,~~segment ~~Irma,~~for ~~Maria~~each ~~and the Other Cats have had a significant impact on the Company's results~~ of ~~operations for~~ the ~~three~~years ~~and nine months ended September 30, 2017.~~indicated:

The following table presents the net (favorable) adverse prior year loss development of the Company's loss and loss expense reserves for its property and casualty operations by operating segment for each of the years indicated:



	Three Months Ended
	March 31,
(U.S. dollars in thousands)	2018			2017
Insurance segment	$	(5,295	)	$	(4,642	)
Reinsurance segment	(3,841		)	28,646
Total	$	(9,136	)	$	24,004

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2017			2016
Insurance segment	$	(30,680	)	$	(67,498	)
Reinsurance segment	(62,910		)	(128,149		)
Total	$	(93,590	)	$	(195,647	)

The significant developments in prior year loss reserve estimates for each of the years indicated within the Company's Insurance and Reinsurance segments are discussed below.

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Insurance Segment

The following table summarizes the net (favorable) adverse prior year reserve development by product type relating to the Insurance segment for the three months ended March 31, 2018 and 2017:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
(U.S. dollars in thousands)	~~2017~~2018			~~2016~~2017
Professional	$	(541,~~833~~830	)	$	(~~369~~5	)
Casualty	(745,~~443~~115		)	(454,~~230~~770		)
Property	911,~~488~~257			~~(7,356~~81		)
Specialty	~~7,108~~393			~~(14,543~~52		)
Total	$	(305,~~680~~295	)	$	(674,~~498~~642	)

Net favorable prior year reserve development was $305.73 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 for the Insurance segment. Although movements were small by product type, ~~driven~~this was a result of offsetting movements in catastrophe losses, with strengthening on recent 2017 catastrophes offset by ~~the~~releases ~~following:~~on more mature events.

•Net ~~For~~favorable ~~professional lines, net~~ prior year reserve development ~~was~~totaled $544.86 million ~~favorable.~~for ~~This~~the ~~was~~Insurance ~~driven~~segment byfor ~~better than expected loss experience in Bermuda regarding~~ the ~~2015~~three ~~and~~months ~~2016~~ended ~~accident~~March ~~years~~31, ~~partially~~2017. ~~offset~~This bydevelopment ~~strengthening~~was inmainly ~~the~~attributable ~~international~~to ~~financial~~casualty lines ~~management~~of ~~liability book to reflect significant large loss experience~~business.

• For casualty lines, net prior year development was $74.4 million favorable. This was driven by better than expected loss experience on mature years of a North America excess casualty book resulting in releases of $50.5 million, as well as reductions to reflect better than expected loss experience reported on North America construction and global risk management. This was partially offset by strengthening to reflect worse than expected loss experience reported on the excess and surplus portfolio.29

• For property lines, net prior year development was $91.5 million unfavorable. This was driven by deteriorations in the London wholesale property book which led to strengthening of $49.4 million, and significant adverse large loss experience on the energy property book resulting in strengthening of $38.3 million.

• For specialty lines, net prior year development was $7.1 million unfavorable. This was driven by worse than expected large loss experience in more recent years in the crisis management and political risk & trade credit portfolios, partially offset by better than expected attritional loss experience in the aerospace book.

Net favorable prior year reserve development totaled $67.5 million for the Insurance segment for the nine months ended September 30, 2016. Professional lines had favorable net prior year development of $0.4 million. Casualty lines favorable net prior year development of $45.2 million was driven by releases in international casualty, primarily to reflect better than expected loss experience reported on the general and professional liability books, and in discontinued casualty primarily due to our reassessment of the losses incurred but not reported provision for the U.S. Casualty risk solutions portfolio, discontinued prior to 2008, following favorable claims resolutions in recent years. For property lines, net prior year development was $7.4 million favorable driven by reflecting better than expected reported non-catastrophe loss experience. Specialty lines had $14.5 million net favorable prior year development driven by releases in discontinued specialty following the expiration of a policy, and due to better than expected loss experience on the cargo, hull and liability businesses in marine lines. This was partially offset by a strengthening in accident and health driven by deteriorations in the U.S. and Switzerland books, and in crisis management relating to deteriorations in large losses.

Reinsurance Segment

	Nine Months Ended
	September 30,
(U.S. dollars in thousands)	2017			2016
Property and other short-tail lines	$	(124,362	)	$	(69,028	)
Casualty and other long-tail lines	61,452			(59,121		)
Total	$	(62,910	)	$	(128,149	)

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Net favorable prior year reserve development was $62.9 million for the nine months ended September 30, 2017 for the~~ Reinsurance ~~segment, driven by the following:~~Segment

The following table summarizes the net (favorable) adverse prior year reserve development by line of business relating to the Reinsurance segment for the three months ended March 31, 2018 and 2017:

▪ Net favorable prior year development for the short-tail lines totaled $124.4 million. Details of the significant components are as follows:



	Three Months Ended
	March 31,
(U.S. dollars in thousands)	2018			2017
Property and other short-tail lines	$	(18,994	)	$	(54,916	)
Casualty and other long-tail lines	15,153			83,562
Total	$	(3,841	)	$	28,646

•Net ~~For~~favorable ~~property lines, net~~ prior year reserve development was $~~115~~3.08 million ~~favorable,~~for ~~primarily~~the ~~due~~three tomonths ~~better~~ended ~~than~~March ~~expected~~31, ~~experience~~2018 onfor ~~attritional~~the ~~losses~~Reinsurance ~~and~~segment, ~~favorable~~mainly ~~development~~attributable onto ~~catastrophes~~the ~~and other large losses.~~following:

•▪ ~~For~~Net ~~specialty~~favorable ~~lines, net~~ prior year development ~~was~~for the short-tail lines totaled $919.40 million ~~favorable,~~primarily ~~mainly~~ due to better than expected ~~experience~~development on attritional losses on the Property, ~~partially~~Marine ~~offset~~and byCrop ~~unfavorable~~books, ~~movement~~releases on ~~large~~older catastrophe losses inand the ~~Aviation~~general ~~book~~catastrophe IBNR held at the end of the prior year being partially offset by strengthening on Hurricane Irma, the Northern California wildfires and some older large losses.

▪ Net unfavorable prior year development for the long-tail lines totaled $6115.52 million. ~~Details~~driven ofprimarily by unfavorable experience on the ~~significant~~2014 ~~components~~underwriting ~~are~~year asfor ~~follows:~~the London professional indemnity and European motor casualty books.

▪Net ~~For~~unfavorable ~~casualty lines, net~~ prior year reserve development ~~was~~totaled $6128.06 million ~~unfavorable~~for the three months ended March 31, 2017. The net adverse prior year development was primarily due to the ~~decrease~~impact of the decrease to the discount rate used to calculate lump sum awards in U.K. bodily injury cases ~~from 2~~.5% toThis ~~negative~~adverse ~~0.75%,~~development ~~which~~was ~~impacted~~partially ~~the~~offset ~~Company's~~by ~~carried~~better ~~reserves~~than ~~for~~expected ~~relevant~~attritional ~~lines~~experience ofin ~~business~~property catastrophe, ~~primarily~~property ~~U.K.~~treaty ~~motor~~and ~~business~~specialty lines.

▪There ~~For~~is ~~other~~no ~~lines,~~assurance ~~net~~that ~~prior~~conditions ~~year~~and ~~development~~trends ~~was~~that ~~$0.5~~have ~~million~~affected ~~unfavorable~~the ~~mainly~~development ~~due~~of toliabilities ~~worse~~in ~~than~~the ~~expected~~past ~~experience~~will oncontinue. ~~attritional~~Accordingly, ~~losses~~it onmay ~~the~~not ~~whole~~be ~~account~~appropriate ~~book,~~to ~~partially~~extrapolate ~~offset~~future byredundancies aor ~~release~~deficiencies ofbased ~~large~~on ~~losses in~~ the ~~credit~~Company's ~~and~~historical ~~surety book~~results.

Net favorable prior year reserve development totaled $128.1 million for the nine months ended September 30, 2016. The short-tail lines benefited from $5.1 million in favorable development from property other lines, $54.4 million in favorable development in property catastrophe lines and $9.6 million in favorable development within specialty lines. The release in long-tail lines was due to favorable development of $50.4 million and $8.7 million in casualty and other, respectively.

There is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. Accordingly, the Company's historical results are not indicative of future releases or strengthening.

9. Notes Payable and Debt and Financing Arrangements

(a) Notes Payable and Debt

The following table presents the Company's outstanding notes payable and debt at ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017:

(U.S. dollars in thousands)	~~September~~March 3031, ~~2017~~2018		December 31, 2017		~~December 31, 2016~~
	Commitment/Debt (1)		In Use/Outstanding (2)		Commitment/Debt (1)		In Use/Outstanding (2)
	Outstanding (1)		Outstanding (1)
Debt:
Debt Issuance:
2.30% Senior Notes due December 2018	$	300,000	$	299,189	$	300,000	$	298,686
$300 million, 2.30% Senior Notes due December 2018	$	299,525	$	299,357
5.75% Senior Notes due October 2021	400,000		398,277		400,000		397,953
$400 million, 5.75% Senior Notes due October 2021	398,492		398,384
6.375% Senior Notes due November 2024	350,000		349,221		350,000		349,139
$350 million, 6.375% Senior Notes due November 2024	349,275		349,248
4.45% Subordinated Notes due March 2025	500,000		493,936		500,000		493,329
$500 million, 4.45% Subordinated Notes due March 2025	494,340		494,138
6.25% Senior Notes due May 2027	325,000		323,492		325,000		323,375
$325 million, 6.25% Senior Notes due May 2027	323,571		323,531
5.25% Senior Notes due December 2043	300,000		296,526		300,000		296,427
$300 million, 5.25% Senior Notes due December 2043	296,593		296,560
5.5% Subordinated Notes due March 2045	483,305		472,736		500,000		488,768
$500 million, 5.5% Subordinated Notes due March 2045 (2)	472,928		472,832
3.25% Subordinated Notes due June 2047	587,150		576,686		—		—
€500 million, 3.25% Subordinated Notes due June 2047 (3)	605,737		586,719
Total debt carrying value	$	3,~~245~~240,~~455~~461	$	3,~~210~~220,~~063~~769	$	~~2,675,000~~	$	~~2,647,677~~

~~_________~~____________

(1) ~~Excluded~~"Outstanding" ~~from~~data ~~the~~represent ~~table~~March ~~are certain credit facilities under which the Company was permitted to utilize up to $750.0 million at September 30~~31, ~~2017~~2018 and ~~$1.0 billion at~~ December 31, ~~2016, for revolving loans to support general operating and financing needs. At September 30,~~ 2017 ~~and~~accreted ~~December 31, 2016, $2 million and $245 million, respectively, were utilized under these facilities to issue letters of credit, leaving $748~~values.~~0 million and $755.0 million, respectively, available to support other operating and financing needs.~~

(2) ~~"In~~ ~~Use/Outstanding"~~On ~~data~~July ~~represent September 30~~7, 2017, the Company repurchased and ~~December 31,~~canceled ~~2016~~$16.7 ~~accreted~~million ~~values~~of the original debt issuance. See below for further details.

~~All~~(3) ~~outstanding~~This ~~debt~~issuance ofcarries ~~the~~a ~~Company~~fixed atcoupon ~~September 30,~~of ~~2017~~3.25% ~~and~~for ~~December 31, 2016 was issued by XLIT,~~ a ~~100%~~period ~~owned subsidiary~~ of XLten ~~Group. XLIT's outstanding debt~~years, ~~other~~then ~~than~~a ~~the~~floating ~~Senior~~rate ~~Notes~~of ~~due~~three-month ~~2024~~EURIBOR ~~and~~plus ~~due~~2.90% ~~2027,~~from ~~is fully~~ (and ~~unconditionally~~including) ~~guaranteed~~June ~~by XL Group. See Note 16~~29, ~~"Guarantor~~2027 ~~Financial~~through ~~Information,"~~maturity. ~~for~~The ~~condensed~~outstanding ~~comparative~~amount ~~financial~~is ~~information~~subject ofto XLmovement ~~Group~~due ~~and~~to ~~XLIT~~foreign ~~for the periods ended September 30, 2017 and December 31, 2016~~exchange.

39All outstanding debt of the Company at March 31, 2018 and December 31, 2017, which is identified in the table above, was issued by XLIT, a 100% owned subsidiary of XL Group. XLIT's outstanding debt, other than the Senior Notes due 2024 and due 2027, are listed on the NYSE and are fully and unconditionally guaranteed by XL Group. See Note 16, "Guarantor

XL GROUP LTD

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~The~~Financial ~~ability of XLIT~~Information," ~~like~~for ~~that~~condensed ofcomparative ~~the~~financial ~~Company,~~information ~~to obtain funds from its subsidiaries to satisfy any~~ of ~~its~~XL ~~obligations,~~Group ~~including under guarantees, is subject to certain contractual restrictions, applicable laws~~ and ~~statutory~~XLIT ~~requirements~~for of the ~~various~~periods ~~countries~~ended ~~in which the subsidiaries operate~~March 31, ~~including,~~2018 ~~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 24, "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, ~~2016~~2017.

OnThe ~~June~~ability ~~29,~~of ~~2017~~XLIT, ~~XLIT~~like ~~issued~~that ~~€500~~of ~~million~~the ~~($568.8~~Company, ~~million)~~to ofobtain ~~fixed~~funds tofrom ~~floating~~its ~~rate~~subsidiaries ~~subordinated~~to ~~notes~~satisfy ~~due~~any ~~June~~of ~~2047~~its obligations, ~~with~~including aunder ~~fixed~~guarantees, ~~coupon~~is ofsubject ~~3.25%~~to ~~for~~certain acontractual ~~period~~restrictions, ofapplicable ~~ten~~laws ~~years,~~and ~~then~~statutory arequirements ~~floating~~of ~~rate~~the ofvarious ~~three-month~~countries ~~EURIBOR~~in ~~plus~~which ~~2.90%~~the ~~thereafter.~~subsidiaries ~~The~~operate, ~~notes~~including, ~~are~~among ~~listed~~others, onBermuda, the ~~New~~United ~~York~~States, ~~Stock~~Ireland, ~~Exchange.~~Switzerland ~~The~~and ~~notes~~the ~~were~~United ~~issued~~Kingdom. atFor ~~99.054%~~details of the ~~face~~required ~~amount~~statutory capital and ~~net~~surplus ~~proceeds~~for ~~were~~the ~~$558.3~~principal ~~million.~~operating ~~Related~~subsidiaries ~~expenses~~ of the ~~offering~~Company, ~~amounted~~see toItem ~~approximately~~8, ~~$10.5~~Note ~~million.~~24, ~~These~~"Statutory ~~costs~~Financial ~~were~~Data," ~~deferred~~to ~~and~~the ~~will~~Consolidated beFinancial ~~amortized~~Statements ~~over~~included in the ~~expected~~Company's ~~life~~Annual ofReport on Form 10-K for the ~~subordinated~~year ~~notes~~ended December 31, 2017.

On ~~July~~June 729, 2017, ~~the~~XLIT ~~Company~~issued ~~repurchased~~€500 ~~through~~million a($568.8 ~~tender~~million) ~~offer~~of ~~and~~fixed ~~canceled~~to ~~outstanding~~floating ~~5.5%~~rate ~~Subordinated~~subordinated ~~Notes~~notes due ~~2045~~June ~~issued~~2047, ~~by XLIT~~ with a ~~net~~fixed ~~carrying~~coupon ~~value~~ of ~~$16.~~3.25% ~~million~~ for ~~$17.9~~a ~~million~~period of ten years, ~~inclusive~~then a floating rate of ~~transaction~~three-month ~~costs~~EURIBOR plus 2.90% Asthereafter. aThe ~~result~~notes ofwere ~~these~~issued ~~repurchases,~~at 99.054% of the ~~Company~~face ~~recorded~~amount aand ~~loss~~net ofproceeds ~~approximately~~were $1558.63 million. ~~through~~Related ~~"Extinguishment~~expenses of ~~debt"~~the ~~and~~offering ~~interest~~amounted ~~expense~~to ofapproximately $010.35 million. inThese ~~the~~costs ~~Unaudited~~were ~~Consolidated~~deferred ~~Statements~~and are being amortized over the expected life of ~~Income~~the subordinated notes.

AsXLIT aand ~~result of~~ the ~~Allied~~Company ~~Acquisition~~were ~~described~~ in ~~Note~~compliance ~~2(d),~~with ~~"Acquisitions~~all ~~and~~covenants ~~Disposals~~at ~~- Allied Acquisition~~March 31," ~~the Company assumed~~2018, and ~~subsequently~~XLIT ~~redeemed~~and onthe ~~June~~Company ~~15,~~currently ~~2016,~~remain ~~$8.2 million of trust preferred securities, due~~ in ~~2035~~compliance ~~and~~with ~~bearing~~all ~~a floating interest rate, adjustable quarterly, at three-month LIBOR plus 3~~covenants.~~75%.~~

~~XLIT~~For ~~and~~details regarding the ~~Company~~rest ~~were~~of inthe ~~compliance~~Company's ~~with~~facilities, ~~all~~see ~~covenants~~Item ~~at September 30~~8, ~~2017~~Note 14(a), "Notes Payable and ~~XLIT~~Debt and Financing Arrangements - Notes Payable and Debt," to the ~~Company~~Consolidated

Filing Compare · XL GROUP LTD