Bermuda business insurer XL Capital Ltd is about three-quarters of the way through the process to "de-risk" its investment portfolio, the company's chief executive officer said yesterday.

Michael McGavick told The Royal Gazette that he could "see the confidence coming back to XL" as the company continues its efforts to stabilise after a tumultuous 2008.

On Monday, XL posted a quarterly profit of $178.4 million, or 53 cents a share, a drop of 16 percent compared to last year, as the company experienced investment losses and a drop in revenue.

Analysts consider the company's investments as being riskier than its peers in the property-and-casualty insurance industry and XL suffered substantial losses as credit-related assets plunged in value through a difficult year on the markets.

XL said net realised losses on investments were $171 million in the first quarter, part of about $1 billion in mark to market losses during the period, according to Reuters.

Mr. McGavick said the structured credit-related portion of the portfolio - which has caused most of the concern - had been reduced to $7.7 billion, around $3 billion of which was in the form of highly-rated agency and government-backed investments.

"We are pleased with our progress on de-risking," Mr. McGavick said. "It's very hard to give a precise time on when it will be completed, because it depends on how different asset classes perform." The situation was evolving as some troubled assets started to regain value, he added.

"There clearly has been a sea change in the way XL is viewed in the last couple of months," Mr. McGavick said.

"We welcome that, but there is still more to do. Our plan is one that should please shareholders and deliver the kind of return on equity that we have indicated in our guidance, as the noise of the last year recedes into the distance."

Gross written premiums fell 30 percent to $1.89 billion from to $2.7 billion in the first quarter of 2008, partly due to the fall off in economic activity and pressure on businesses' risk managers to cut their insurance bills.

"We believed that we should "We believed that we shouldfocus our book on the most profitable lines and we have written less long-term business, because rates are rising and we don't want to lock ourselves in," Mr. McGavick said.

The company was happy with its business retention, but was maintaining underwriting discipline, he added.

XL lost more than $2.5 billion last year as it bought its way out of reinsurance exposures to financial guarantor Syncora Holdings and suffered hefty investment losses.

Cost cutting measures include cutting its global workforce cut by around 10 percent through 2009. At the company's Bermuda headquarters, job cuts over the past eight months have totalled around 70.

Mr. McGavick said the company had brought its expenses in line with its operations.

In a conference call with analysts yesterday, XL Insurance CEO David Duclos said he was "comfortable" with the reserves the firm has to deal with 31 professional liability claims from clients who suffered losses linked to Bernard Madoff's Ponzi scheme.