Bermuda insurance giant XL Capital's profits fell by more than $50 million due mainly to losses on investments during a tough third quarter period.

XL reported net income of $371.6 million for the quarter compared to $425.9 million for the same period last year, representing a drop of $54.3 million or 13 percent.

At the same time as the results were released the company annouced that CEO Brian O'Hara intends to retire in mid-2008.

He will remain with the company as chairman into the following year.

Current chairman Mike Esposito announced he would retire from the board at the same time as Mr. O'Hara.

XL's results were net realised losses on investments of $160.2 million and net realised and unrealised losses on derivative instruments of $58.2 million contributing to the downswing.

But net income, excluding net realised gains and losses for the quarter, was a record $562.8 million or $3.13 per ordinary share, up from $468.7 million or $2.61 per ordinary share.

For the first nine months of the year, net income available to ordinary shareholders was a record $1.42 billion or $7.89 per ordinary share, compared with $1.25 billion or $6.98 per ordinary share in the first nine months of 2006.

President and CEO Mr. O'Hara said: "I'm proud to report that XL has again delivered to shareholders record operating results for both the quarter and year to date.

"All of our segments contributed to these excellent results. Our investment operations, in the face of challenging market conditions, generated solid net investment income and returns from investment fund affiliates."

The insurance side of the business was up with underwriting profit of $129.7 million for the quarter compared to $110.7 million last year, largely down to new favourable prior year development of $60.7 million, a big rise from $9.5 million for the same period in 2006.

It was, however, partially offset by lower net premiums earned of $1.01 billion compared to $1.02 billion in the prior year period.

But reinsurance business was down from $117 million in the third quarter 2006 to $107.2 million this year, due mainly to lower premiums written and earned during the quarter comparison to the previous year, offset slightly by higher favourable net prior year development of $88.3 million in this quarter as compared with $24.3 million in 2006.

As of the end of September, diluted book value per ordinary share was $56.29, compared to $54.74 at the same date last year, while basic book value was $56.45 and $55.01 respectively.