Bermuda insurance giant XL Capital last night posted "strong" results with profits more than doubling for the first quarter of 2003 compared to the same period a year earlier due to the continuing hard insurance markets.

But the company's president and chief executive officer Brian O'Hara said that the poor market conditions were still a challenge for investments.

The favourable insurance and reinsurance conditions which saw prices skyrocket following September 11, took the company's profits - or net income - up to $239.9 million, or $1.74 per ordinary share and its net operating income to $250.1 million, or $1.82 per ordinary share.

Mr. O'Hara said in a statement last night: "Our general insurance and reinsurance businesses continue to see very strong pricing, most notably in casualty, professional lines and marine world-wide."

But he added: "Despite our very robust underwriting results and strong cash flow during the quarter, the investment environment continues to be challenging with reinvestment rates at extremely low levels.

"This will continue to put pressure on industry results and underscores the need to maintain underwriting discipline in the market."

Mr. O'Hara said that the company had "a very strong first quarter with excellent underwriting results" and added that this was reflected in XL's combined ratio of 86.1 percent and net earned premium growth of 42 percent in general insurance and reinsurance operations.

The company's net operating income return on ordinary shareholders' equity exceeded 16 percent and book value per ordinary share increased to $46.09, a record level for XL.

A year ago XL recorded a net income of $89.5 million, or a net income of $0.65 per ordinary share, in the first quarter of 2002.

Net operating income for the first quarter of 2003 was $250.1 million, or $1.82 per ordinary share, compared with net operating income of $207.6 million, or $1.51 per ordinary share, for the quarter. The first quarter 2003 net operating results include a write down of the company's investment in Annuity and Life Re Holdings Ltd of $40.9 million.

Total assets as of March 31, 2003 were $37.5 billion compared with $35.6 billion as of December 31, 2002. Book value per ordinary share as at March 31, 2003 increased to $46.09 compared with $44.48 as at December 31, 2002.

Gross premiums written for general operations in the first quarter of 2003 were $3.0 billion compared with $2.8 billion in the first quarter of 2002.

Net premiums written increased to $2.4 billion from $2.1 billion and net earned premiums rose to $1.5 billion from $1.0 billion in the respective quarters of 2003 and 2002.

Gross premiums written for life operations in the first quarter of 2003 were $111.3 million compared with $38.5 million in the first quarter of 2002.

Net premiums written for life operations in the first quarter of 2003 were $97.3 million compared with $37.0 million in the first quarter of 2002 and net earned premiums were $92.8 million in the first quarter of 2003 compared with $39.2 million in the first quarter of 2002.

Net investment income from general operations was $156.6 million in the first quarter of 2003, compared with $155.6 million in 2002's first quarter.

Net investment income from life operations was $35.3 million in the first quarter of 2003 compared with $15.5 million for the quarter ended March 31, 2002.

The company's equity in the net income of its investment affiliates for the first quarter of 2003 was $26.8 million versus $32.2 million in the first quarter of 2002.

XL's equity in net losses of its insurance and operating affiliates was $41.1 million in the first quarter of 2003 versus net income of $0.03 million in the first quarter of 2002.

The combined ratio for the company's general insurance and reinsurance operations was 86.1 percent in the first quarter of 2003, versus 92.1 percent in the first quarter of 2002.

The loss ratios were 60.9 percent and 63.2 percent in the quarters ended March 31, 2003 and 2002, with corresponding expense ratios of 25.2 percent and 28.9 percent for the same quarters, respectively.

A live on-line web cast of XL's call with analysts and investors to review the first quarter 2003 results will be held today at 10:00 a.m. Eastern Time at www.xlcapital.com.