The Bermuda-based insurer XL reported that its 2004 third-quarter net income dropped to $22.5 million, down 77 percent from the $99 million it reported during the year-ago quarter in 2003. The carrier said this year's third-quarter results included a total net charge of $420.1 million related to hurricane activities during the quarter.

Excluding net realized gains and losses, XL posted a net loss of $15.4 million, down from the net income of $124.1 million reported during the year-ago quarter. XL's net premiums written from general operations for the third quarter fell 9 percent to $1.4 billion, compared to one year ago.

Mr. O'Hara said that the third quarter witnessed "an unprecedented series of natural catastrophes" with four of the top-10 most damaging hurricanes ever recorded, which made this year's hurricane season, thus far, the most costly in history for the industry?the hurricane season has still got four more weeks to go, ending on Nov. 30.

Even in this environment, Mr. O'Hara noted, "despite taking a $420 million after-tax charge related to hurricanes, we delivered solid underlying results."

Mr. O'Hara said XL's combined ratio from general operations for the third quarter was 110.6 percent, but excluding hurricane-related losses, the ratio was a solid 86.7 percent, he pointed out. This solid combined ratio, he said, shows the strength of XL's underwriting discipline and the generally healthy market conditions.

"The combination of our global presence, diversified product expertise and ratings strength allows us to continue to see attractive market opportunities," Mr. O'Hara said. At the same time, XL has selectively reduced writings in certain lines where price competition has become too aggressive and does not meet XL's own risk-reward equation.

The P-C price conditions remain attractive overall, Mr. O'Hara observed. Generally, pricing is "flat to down," he said, with "low-double-digit price falls" in property and professional lines, which are partially offset by "low-to-mid, single-digit" increases in other casualty and some specialty lines.

But this hurricane season, along with storms of another kind brought up by New York Attorney General Eliot Spitzer, could change some of the pricing environment. "We could expect the large property losses in the quarter as well as increasing directors-and-officers activities to have a moderating impact on further price decline," Mr. O'Hara said.

XL has also been involved in the ongoing investigation of the New York attorney general, having received a subpoena from Mr. Spitzer's office. Mr. O'Hara said during the conference call that XL is cooperating fully and that the company has already announced its decision to end Placement Service Agreements with brokers. Mr. O'Hara assured industry observers that XL has always upheld the highest ethical standard in its business practices.

In regard to Placement Service Agreements, XL has now discontinued all such arrangements, Mr. O'Hara emphasized. To provide some context, he disclosed that through Sept. 30, 2004, XL had net total estimated PSAs with brokers of $47 million, of which $29 million was related to Marsh Inc. Of this amount, less than $2 million was related to their U.S.-placed excess-casualty business.

"As we reported late last week, our subsidiary, XL America Inc., was subpoenaed by New York's attorney general. The request was general in scope and it sought information on the sales practices of brokers," Mr. O'Hara said. "We take these issues seriously and are cooperating fully with the investigation. I would like to emphasize that XL has always been committed to maintaining the highest standard of ethical conduct."

Mr. O'Hara added that as a matter of prudence, after learning about the civil suit against Marsh & McLennan Companies Inc. two weeks ago, XL commenced an internal review of the issues raised in the New York attorney general's complaint. "This review is in progress and it would be premature to make any comment at this point," he said.