XL Group’s profits fell 45 percent in the third quarter as catastrophe losses of more than $110 million took their toll.The company made net income of $42.4 million in the July through September period, or 14 cents per share, compared to $77.5 million, or 23 cents per share in the same period a year earlier.XL missed Wall Street expectations on operating income of 28 cents per share, compared to the 33 cents predicted by analysts polled by Bloomberg.However, the Dublin-based company with substantial underwriting operations in Bermuda wrote more business in the quarter, as gross premiums written rose to $1.78 billion compared to $1.53 billion a year earlier.XL CEO Mike McGavick took heart from improving market conditions.“Progress continued at XL in the quarter, and our own efforts were joined by a new factor an improving rate environment,” Mr McGavick said.“Our top line growth continued, our enterprise risk management quality continued to show through, and our growing attractiveness as the employer of choice for great complex risk underwriting was demonstrated by a number of important hires.“But by far the most important of these externally is rate. The quarter saw accelerating rate achievement in most lines. In far more parts of the market the long overdue response to unrealistic risk pricing is underway.“Taken together, I believe XL is exceptionally positioned for this phase, given our broadened and deepened team of first tier, experienced underwriters and other insurance and reinsurance professionals.”For the first nine months of the year, net income totalled $40.8 million compared to $397.3 million in the same period of 2010.The company said operating net income decreased from the prior year quarter due primarily to larger natural catastrophe losses and lower levels of positive prior-year loss development, offset somewhat by an increase in income from operating affiliates.XL’s property and casualty operations combined ratio, or the percentage of premium dollars spent on claims and expenses, was 101.6 percent, compared to 94.9 percent in the third quarter of 2010.Net investment income for the quarter was $290.1 million compared to $296.7 million in the prior year quarter. The slight decline was primarily due to lower yields as a result of lower interest rates and cash outflows from the investment portfolio.Net realised investment losses for the quarter were $62.4 million compared to $68.8 million in the prior year quarter.XL said its book value per share slipped seven cents from the prior quarter driven primarily by the settlement of the forward purchase contracts associated with the equity security units, partially offset by the benefit of share buy-backs and unrealised gains on investments.During the quarter, XL purchased 15.1 million shares for $307.7 million at an average price of $20.33 per share, which was added 46 cents per share to book value. A further $290.4 million of shares remains available for purchase under the company’s previously announced $1 billion share buy-back programme.