Fitch Ratings has noted improvements in XL Group’s capital position and affirmed the insurer financial strength rating of A of its operating subsidiaries.The Ireland-domiciled business insurer, which has substantial operations in Bermuda, has “solid capitalisation, reasonable financial leverage and stable competitive position”, the credit rating agency said in its commentary.Fitch also affirmed the issuer default rating for XL at BBB+ and issued a stable outlook for all ratings.The ratings agency said XL’s ratings also reflected anticipated challenges in a competitive property and casualty market rate environment and the potential drag from the remaining run-off life business.XL’s capital position improved through the first three quarters of 2010, Fitch noted, with shareholders’ equity up 15 percent since year-end 2009 to $10.9 billion at September 30, 2010. This followed a significant 54 percent increase in full year 2009.The increase for the first nine months of 2010 was driven by net income of $448 million and improvement in the company’s net unrealised investment position to a gain of $0.2 billion at September 30, 2010 from a loss of $1.3 billion at December 31, 2009, as credit and investment markets continued to recover in 2010.Fitch added: “As a result of the shareholders’ equity growth, XL’s equity-credit adjusted debt-to-total capital ratio (including accumulated other comprehensive income) continued to decline to 18.5 percent at September 30, 2010, down from 20.7 percent at year-end 2009.”XL’s competitive position remained stable, Fitch added, with property and casualty net premiums written up 2.6 percent in the first nine months of 2010 due to targeted new business growth, particularly in professional, aviation, marine and upper middle market lines.There was also improved There was also improved retentions across all lines of business to historic mid to upper 80 percent levels; and the recapture of some of the previously lost business, partially offset by the continuing weak market environment that has decreased insured exposures.Fitch added: “XL’s underwriting results remain favourable, with core property and casualty operations posting a GAAP combined ratio of 95.9 percent for the first nine months of 2010 compared to 92.8 percent for the first nine months of 2009, due to higher catastrophes.“Excluding the impact of catastrophes (seven points) and favourable reserve development (6.7 points), XL’s combined ratio for the first nine months of 2010 was 95.6 percent, down 2.2 points from the first nine months of 2009.”