XL’s Book Value Increased in Q2, Despite Profit Decline

Bermuda-based XL Capital Ltd. announced that its book value rose in the second quarter, lifting its stock as much as 3 percent, as unrealized losses on some assets narrowed.

Net profit fell 66 percent on foreign exchange losses and lower policy sales and investment income, but it was XL’s second consecutive quarterly profit after a $2.6 billion loss for 2008.

Net profit dropped to $79.9 million, or 23 cents a share, from $237.9 million, or $1.33 a share, in the year-ago period.

Unrealized investment gains boosted XL’s book value, a key measure for investors, by 26 percent to $18.89 per share.

“This quarter for XL marks a return to positive growth in shareholder value,” Chief Executive Michael McGavick said in the earnings statement.

Excluding net realized gains and losses, Hamilton, Bermuda-based XL had an operating profit of 47 cents a share. A foreign exchange loss of $145.2 million accounted for some of XL’s decline in quarterly profit, as the U.S. dollar fell against the British pound and other currencies.

Net investment income slid $112 million to $328.3 million, partly offset by a profit of $41.5 million from investments in hedge and private equity funds.

Helping book value rise was an $800 million improvement in the market valuation of investments held by XL, as the value of assets which had fallen in the previous two quarters started to recover.

The company had a disappointing run last year, dragged down by structured-finance losses recorded by Syncora Capital, a bond insurer of which it was the majority owner. XL last October severed its ties to Syncora, a big step in setting a path to recovery.

XL shares, which fell 1.6 percent to $13.59 in the regular session, rose as high as $14 after hours. The stock has recovered from a 52-week low of $2.56 set on Feb. 2 but is still more than 40 percent below its year-ago value.

(Reporting by Lilla Zuill; Editing by Steve Orlofsky and Richard Chang)