Record first quarter profits of $549.7 million have been posted by XL Capital, easily outperforming market analysts' expectations.

The Island's second-biggest insurance and reinsurance company also reported that European windstorm Kyrill made less impact on its profitability than expected with a pre-tax net loss of only $55m from the January event.

Over the same three months in 2006 the company made profits of $458.5m.

The net income equates to $3.06 per share, around 90 cents higher than experts such as analysts Thomson Financial had expected. XL also increased gross premiums written to $3.272 billion, up $30m year-on-year.

"This quarter's excellent results reflect our drive to deliver value for our shareholders. Underwriting results in insurance were strong and reinsurance results were solid despite losses from windstorm Kyrill. Our other segments continued their positive contributions and our affiliates generated outstanding returns again," said president and chief executive officer Brian O'Hara.

Favourable foreign exchange movements and an increase in long term agreements contributed to a strong improvement in the company's insurance business with underwriting profits jumping from $64.7m to $107.3m.

On the reinsurance side the company saw a $16.6m loss on foreign exchange movements and also losses as a result of windstorm Kryill, although lower than the $60m to $75m range originally estimated. Gross and net premiums decreased by 3.8 percent and 6.8 percent respectively.

In its life operations XL achieved a 24.4 percent improvement to $213.3m for the quarter, mostly due to new business and growth on existing treaties and foreign exchange movements.

There was also an improvement in the results from the company's financial operations, including financial lines up to $56.8m from $36m.

Operating costs for the company totted up to $280.5m for the quarter, which was a $18.9m rise on the same period in 2006. This increase was mainly due to compensation costs related to business development and performance-based programmes, according to the company.

The issuing of its Series E Perpetual Non-Cumulative Preference Ordinary Shares last month raised net proceeds of $983.8m for the company.