Bermuda-based XL Capital Ltd., the business insurer that has more than tripled in New York trading this year, posted its eighth straight quarterly profit decline as policy sales dropped and investment income fell.

Second-quarter net income fell to $79.9 million, or 23 cents a share, from $237.9 million, or $1.33, in the year-earlier period, the Bermuda-based insurer said last night. Operating income, which excludes some investment results, was 47 cents a share, missing the 62-cent estimate of 13 analysts surveyed by Bloomberg.

But XL's book value, or the measure of assets minus liabilities, rocketed by 26 percent to $18.89 from $15.02 at the end of the first quarter, as the company's investments gained value in a rally on the financial markets.

That news went down well with the markets, as XL's share price rose three percent in after-hours trading to $14, as of 5.47 p.m. Eastern time.

Policy sales are falling as customers scale back purchases amid the recession. Lower prices have cut into income as insurers compete for market share. US commercial insurance rates dropped 4.9 percent in the second quarter, the Council of Insurance Agents and Brokers said last week. XL had a 15 percent decline in property and casualty revenue in the second quarter.

XL chief executive officer McGavick said the fluctuating value of the dollar had been a major factor in the decline in net income. "The income statement impact of foreign exchange movements was an after tax loss of $132.6 million and this was the principal contributor to the reduction of net income and operating income from the prior year quarter," Mr. McGavick said in the earnings statement. "Excluding this item, operating income increased from the prior year quarter reflecting the strength of our core business."

Joshua Shanker, an analyst at Citigroup Inc., said in an interview before the results were released: "XL is losing business. The marketplace in general right now is writing business at a level that is probably below necessary profitability. The combination of business leaving for any various reason and people buying less coverage in the recession, this affects XL."

The extraordinary increase in book value, a measure of assets minus liability, followed falls every quarter since September 2007.

"There has been a huge credit rally, so in general companies exposed to credit risk are going to have significant book-value growth," Shanker said. "XL is one of those."

XL started the year at $3.70 in New York Stock Exchange trading and closed regular trading at $13.59 in regular trading yesterday. It was the best performer this year among the 24 companies in the KBW Insurance Index. Rival Ace Ltd. has dropped eight percent this year, while Chubb Corp. declined 11 percent.

Ace's second-quarter net income fell 28 percent from the year earlier period to $535 million, or $1.58 a share, on investment declines, the Zurich-based insurer said on Monday.

XL's investment income fell 25 percent in the second quarter, to $328 million from $440 million in the same quarter last year, after shifting holdings to lower-yielding assets including US Treasures and cash.

Property and casualty premium revenue fell to $1.28 billion from $1.51 billion.