Bermuda-based insurer XL Capital Ltd. has moved past recovery mode and now it's striving to be the best in its field.

That is the clarion call from the company's chief executive officer Mike McGavick, who told The Royal Gazette yesterday that XL had made huge strides in 2009, rebounding from the worst year in its history the year before.

XL announced on Tuesday evening that it made a profit of $206.6 million for 2009, compared to a $2.6 billion net loss in 2008.

Early last year, takeover rumours swirled around the company as its share price languished in the penny stock range following a downgrades by credit rating agencies and XL trimmed its global workforce by around 10 percent.

But the firm managed to hold onto most of its clients and top managers as it returned to profitability, in the process achieving the biggest climb on the S&P 500 last year.

"I think all of us at XL are really pleased with the progress we have shown," Mr. McGavick said. "But also we aware that the ultimate mission is not to prevent failure - it's to be the best insurance and reinsurance company in the world. That's the mission now."

Mr. McGavick is overseeing the second major turnaround of his career after he helped to transform the fortunes of US insurer Safeco during his tenure there between 2001 and 2005.

He added: "At Safeco, the first couple of years were a bit like this time - people were congratulatory about the fact that we'd averted disaster. But the thing I was most proud of there was that we went on to achieve record earnings and to become the fastest-growing company in our segment."

Despite a profitable underwriting performance, XL made a net loss of $40.3 million in the fourth quarter, mostly down to costs related to further "de-risking" its investment portfolio.

Work on adjusting the portfolio, which was previously of concern to rating agencies and investors because of a higher risk profile than most of its peers, is now close to complete.

"The initial feedback I'm receiving from investors is that this was roughly in line with expectations," Mr. McGavick said. "The net loss for the quarter actually signifies another positive round of de-risking.

"During the fourth quarter, we sold $1.2 billion of those legacy assets and $5.6 billion during the year. The remainder is not threatening to the franchise and we're now 80 percent of the way to our model portfolio."

The focus was now on optimal realignment of the portfolio and not further aggressive de-risking, he added. At the end of last year, 56 percent of XL's $33.9 billion fixed-income portfolio remained in cash or government-related or government-supported securities.

XL's underwriting operations turned a profit, with a combined ratio of 93.6 percent meaning that 93.6 cents of each premium dollar was outlaid on claims and expenses.

Property and casualty gross written premiums (GWP) for the year totalled $6.11 billion, a fall of nearly one fifth from the 2008 figure of $7.57 billion. Much of that was down to targeted reductions in certain areas, including reinsurance, and turning away from inadequately priced risk.

Fourth-quarter GWP were down only slightly, to $1.15 billion, compared to $1.18 billion in 2008.

"The top line was surprisingly strong, down just three points quarter over quarter, and our operating return was strong, which reflects the quality of the underwriting going on here," the CEO said.

Last month XL announced that it intends to move its holding company from the Cayman Islands to Ireland later this year. The company has said the Bermuda operations will be unaffected by the move.