XL Capital posts higher 2nd quarter net, beats view

XL Capital Ltd. (XL.N: Quote, Profile, Research), one of the largest Bermuda insurers and reinsurers, said on Tuesday that earnings rose in the second quarter, helped by a gain on the sale of part of Security Capital Assurance Ltd.
XL Capital said net earnings were $544.5 million, or $3.00 a share, up from $377.1 million, or $2.10 a share, in the year- earlier quarter.
The Hamilton, Bermuda-based provider of backup coverage for the property casualty industry said operating earnings were $516.2 million or $2.84 a share.
Analysts, who use operating earnings to measure performance because it excludes investments, had on average expected the insurer to earn $2.47 a share, according to Reuters Estimates.
In the year ago quarter, XL earned $375.8 million, or $2.10 a share, from operations.
It closed on the New York Stock Exchange at $79, down 4.8 percent. But in the last 12 months, XL rose about 25 percent, or nearly double the gain in the Standard & Poor's insurance index (.GSPINSC: Quote, Profile, Research).
In the latest quarter, the reinsurer was able to retain more than 9 cents of each premium dollar it earned after expenses and claims, up more than 4 cents from a year earlier.
"They had good-looking underwriting profitability, but I'm concerned about their investments," said Bill Bergman, an analyst with Morningstar.
During the quarter, XL recorded a gain of $81.3 million for the sale of 16.6 percent of Security Capital Assurance Ltd., a financial guaranty company in which XL now owns a 46 percent stake.
But total net realized investments showed a loss of $63 million excluding the gain on SCA. Also, net unrealized losses on investments were $309.9 million, compared with gains of nearly that much earlier in the year.
Bergman said that could signal the company has had losses in the subprime market.
"We'll wait and see what they say on their call tomorrow," he added.