"We had a very good quarter with strong underwriting results, delivering an operating return on common equity of 17 percent and increasing our book value per ordinary share to $44.48," said Brian M. O'Hara, president and chief executive officer at XL.

XL's results were generally in line with Wall Street expectations, while falling short for some. The company's operating earnings-per-share of $1.82 was a penny below what New York-based brokerage Morgan Stanley said it expected.

In underwriting, XL's overall combined ratio was 96.4 percent, higher than Morgan Stanley's expectation of 91 percent.

The company's fourth-quarter results were achieved while strengthening reserves during the quarter for prior years, Mr. O'Hara said.

"The reserve strengthening primarily occurred in our U.S. casualty reinsurance business, reflecting deterioration in the underwriting results for the 1997 to 2000 accident years," he said.

Mr. O'Hara said the reserve increase of $215 million pre-tax, including $30 million for pre-1986 asbestos exposures, was largely offset by overall favorable 1995 and prior years' loss development in other lines of business.

"The increase in the provision for asbestos exposures nearly doubles our reserves in this area, but this remains a minor exposure for XL," Mr. O'Hara said.

He also noted that the markets in which XL operates are robust and that prices are still rising in most lines, "and we are continuing to improve terms and conditions."

The company also announced that to demonstrate its commitment to transparency in financial reporting, it will expense all XL employee stock options granted in 2003 and beyond. But the company's projections for 2003, including stock option expenses, remain in line with prior earnings guidance, Mr. O'Hara said.