Strong insurance pricing conditions are likely to continue into 2005, XL Capital Ltd.'s top executive, Brian O'Hara, said on Friday.

The top management missed out on the Cup Match holiday, with their second quarter results coming out on Thursday followed by a conference call with analysts on Friday.

During the call Mr. O'Hara, chairman and chief executive of the Bermuda insurer and reinsurer, said the demise of the hard market has been "greatly exaggerated" (A hard market is a period when the price of insurance rises).

XL Capital Ltd. reported on Thursday that it had gone from a net loss of $91.7 million during the second quarter of 2002 to a net income of $357.7 million.

Operating income was $268.6 million, or $1.94 a share - in line with Wall Street expectations. In the year-ago quarter, operating income was $26.4 million, or 19 cents a share. Second-quarter results include net realised investment gains of $93.7 million.

Mr. O'Hara said on Friday that there was still considerable dislocation in the insurance industry. He noted the lack of resolution of asbestos claims and concern among rating agencies about the industry's capital.

XL Capital's expected growth and retained earnings should be sufficient to meet its projected capital needs, Mr. O'Hara told analysts.

He also said the insurer does not expect to raise common equity or equity-linked capital in the near to medium term.

Mr. O'Hara said XL Capital's general insurance operations experienced double-digit price increases across all lines on renewal in the second quarter and prices were at or above targeted levels. Casualty and professional liability lines, which include directors and officers insurance, were particularly strong.

The property market is levelling out, but at well priced levels, and catastrophe prices fell slightly, but the business is priced attractively, he added.

Responding to an analyst's question, Mr. O'Hara said XL Capital is in a dialogue with American International Group Inc. (AIG) about collateral requirements by the insurer, which XL doesn't feel are appropriate.

He said providing casualty reinsurance to AIG is not a large business for XL Capital, which only began providing it to AIG relatively recently. However, it has the potential to be much larger.

Mr. O'Hara said he's confident the two companies can work something out. AIG Chairman M.R. (Hank) Greenberg said earlier this year that the insurer was requiring its reinsurers to post collateral in an effort to manage it as a credit risk. At the time, he also said AIG has shortened its list of trusted reinsurers.

Gross premiums written rose to $2.04 billion in the second quarter, up from $1.54 billion in the prior-year period. Net written premiums increased to $1.57 billion in the quarter, up from $1.14 billion a year ago.

"We are particularly well-placed in those lines of business which are still seeing the largest rate increases, notably professional lines and casualty worldwide which currently comprise nearly half of our general operations' portfolio," said Mr. O'Hara. "The company's life and annuity businesses and our financial operations also performed well and both areas are gaining momentum."

In general insurance operations, net premiums written rose to $1.4 billion, up from $1 billion a year ago. Net earned premiums increased to $1.47 billion, up from $1.04 billion a year earlier.

The combined ratio for its general insurance and reinsurance operations improved to 92.2 percent in the second quarter, compared with 109.2 percent in the prior-year period. Combined ratio is a measure of underwriting losses and expenses per premium dollar earned.

In its life and annuity operations, net premiums written rose to $63.7 million in the quarter, compared with $11.5 million in the prior-year period. Net premiums earned rose to $70.5 million, up from $10.5 million a year ago.

In its financial operations, net premiums written rose to $104.5 million in the second quarter, up from $73.4 million a year earlier. Net premiums earned were $35.8 million, compared with $10.8 million in the prior-year period.