XL Capital net income grew 16 percent in the first quarter of this year compared with the same 2006 period, the Bermuda-based carrier reported.
The insurer's quarterly net income was $549.7 million, or $3.06 per share, compared with $485.5 million, or $2.56 per share for the same year-ago period.
Underwriting profit for the quarter rose to $107.3 million compared with $64.7 million as losses from Windstorm Kyrill proved less than expected.
Bear Stearns analyst David Small noted that the earnings per share passed his estimate of $2.25 and the consensus of $2.13. He said the main driver of the upside was higher income from investment and operating affiliates, which included XL's hedge fund portfolio.
“This line item beat by $100 million our estimate as it appears that the hedge funds in this portfolio were on the right side of the subprime [mortgage] trade,” he said.
On the revenue side, Mr. Small said the company is apparently having difficulty putting the capital it took out of the property business to good use. “It appears management is looking to partly solve this issue by increasing retentions for certain long-tail businesses on the insurance side,” he wrote.
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