officer said yesterday that the company has to improve significantly on its premiums, despite first-quarter operating profits going up 5 percent.

Brian O'Hara said, however that the company has strong overall premium growth so far in the quarter to March 31, 2000.

Net income rose marginally -- by $14 million from $209.8 million in the quarter for 1999 to $223.8 this year.

Mr. O'Hara said: "The company is experiencing strong overall premium growth, reflecting our acquisitions, new business formations and cross selling initiatives over the last two years. In addition, we are seeing rate increases in property and other short tail lines of business.'' The company's net premium rose by over $100 million, from $386.8 million to $494.5 million and net operating income rose from $154.6 million to $164.9 million.

Underwriting ratios also worsened slightly and key premium rates showed little significant improvement.

The company, which specialises in high limit liability insurance for corporations around the world and reinsures other insurers, said first-quarter operating profit rose to $150.8 million, or $1.19 per share, from $144.1 million, or $1.09, in the year-earlier quarter. First-quarter total revenues rose to $714.2 million from $593.2 a year ago.

Mr. O'Hara added: "Although we are pleased with this growth, rates for casualty insurance and reinsurance and a number of lines underwritten by our Lloyd's operations, which together represent the majority of XL's premiums, while no longer declining, have yet to improve significantly.

"Our original expectations were for more immediate increases in all lines, however in the absence of such liability rate increases, our results this year are now anticipated to be approximately 5 percent below the annualised first quarter earnings.

XL's operating profits rise 5 percent "During this transition year, we are committed to maintaining our strong balance sheet as the key to the company's long term success. By maintaining our underwriting and balance sheet integrity today, XL is well positioned to benefit from expected market improvements in the future without having to rebuild reserves. We are continuing to exert leadership by declining to write inadequately priced business and being realistic about our near term results.'' The results matched analysts' average profit forecast, as polled by research firm First Call /Thomson Financial.

XL Capital's shares closed down 25 cents $51.25 on the New York Stock Exchange yesterday. The shares have fallen 23 percent from the 52-week high of $67.19 reached in May last year, as the company's profits have been hit by low premium rates and large storm claims.

The company's combined ratio -- claims and expenses paid out as a percentage of premiums paid in -- worsened to 93.3 percent from 89.3 percent in the same period in 1999.