XL Capital Ltd third quarter net income dropped on a $420.1 million after-tax charge related to the hurricane activity during the period.

Last night in an earnings release, the Bermuda-based company reported net income for the quarter ended September 30, 2004, of $22.5 million, or 16 cents ordinary share. This compares to the same period last year when the company recorded net income of $99 million, or 71 cents per ordinary share.

"In a quarter that witnessed unprecedented natural catastrophe activity, XL delivered solid underlying results," said Brian O'Hara, president and chief executive officer of XL in the company's third quarter earnings statement.

"The combined ratio from our general operations, excluding hurricane-related losses, was 86.7 percent reflecting the strength of our underwriting discipline and the continued generally healthy market conditions. The combination of our global presence, diversified product expertise and ratings strength allows us to continue to see attractive market opportunities, although we have selectively reduced writings in certain lines where price competition has become aggressive."

"Cash flow from operations, net invested assets and net investment income all recorded solid increases over year ago levels. Our affiliate investments also delivered particularly strong results in the quarter, benefiting from the IPOs of Admiral Group and Primus Guaranty and the sale of our 30 percent stake in Pareto Partners. These events, combined, contributed income of $100.9 million after-tax in the quarter."

Net loss excluding net realised gains and losses on investments and net realised and unrealised gains and losses on credit and investment derivative instruments, net of tax", for the quarter was $15.4 million, or a loss of $0.11 per ordinary share, compared with net income of $124.1 million, or $0.90 per ordinary share, for the year-ago quarter.

For the nine months ended September 30, 2004, net income available to ordinary shareholders increased 22 percent over the year-ago period to a record $838.2 million, or $6.05 per ordinary share.

"Net income excluding net realised gains and losses on investments and net realised and unrealised gains and losses on credit and investment derivative instruments, net of tax" for the nine-month period was $622.3 million, or $4.49 per ordinary share, a decrease of 3 percent compared with the year-ago period. Annualised return on ordinary shareholders' equity on the same basis was 12.5 percent, compared with 13.3% for the nine months to September 30, 2003.

XL Capital will hold its earnings call at 11 a.m. Bermuda time.