XL Capital Ltd. became the latest Bermuda insurance industry player to announce record fourth-quarter profits last night.

The business insurer earned $481.1 million in the last three months of 2006, compared to a big loss in the same period a year earlier, as claims costs plunged.

Net income of $2.62 a share compared with a net loss of $811.9 million, or $5.51, in the fourth quarter of 2005, the company said.

The earlier costs stemmed from hurricane claims and the loss of a legal dispute with Credit Suisse Group.

XL president and chief executive officer Brian O’Hara said: “I am very pleased to report that we have had excellent performance from each of our businesses and our investment operations.

“They have all contributed to record net income for both the quarter and the full year. Our operating return on equity was 20.1 percent for the year which was the main driver behind the 19.9 percent increase in book value for 2006.

“As XL enters its third decade, I believe our strengths in underwriting, risk management, investment and capital management will allow us to build on this momentum for the benefit of our shareholders.”

Profit excluding changes in the value of investments was $2.86 a share, beating the $2.34 average estimate of 20 analysts compiled by Bloomberg.

XL, which gets almost half its sales from reinsuring other insurers, spent 87.5 percent of every premium dollar on claims and expenses, less than the 92.3 percent predicted by Michael Paisan, an analyst at Stifel Nicolaus & Co. in New York. A year earlier, the company spent 165.1 percent, posting an underwriting loss.

In a statement issued last night, the company said net full-year operating income for 2006 was $1.76 billion, or $9.83 per share, as compared with an operating loss of $1.53 billion, or a loss of $10.86 per share, for year 2005.

The 2005 results were hit by a net loss after tax of $1.86 billion for the third- and fourth-quarter natural catastrophes and a net loss after tax of $808.9 million associated with the Winterthur decision.

XL bought W<\h>interthur International from Winterthur Swiss in 2001 and lost a costly legal decision relating to the acquisition.

At the end of last year, net book value per ordinary share was $53.12 as compared with $44.31 at December 31, 2005.

XL shares rose 84 cents, or 1.2 percent, to $70.67 in regular trading on the New York Stock Exchange. The stock has gained 5.2 percent over the past 12 months.

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