XL Capital Ltd. said last night its second-quarter profit plunged 57 percent on catastrophe claims and costs related to its bond insurer affiliate Security Capital Assurance (SCA).

Second-quarter net income was $237.9 million, or $1.34 a share, compared with $554.6 million, or $3 a share, in the same period a year earlier, the Bermuda-based insurer reported.

XL was hit by $98.1 million of natural catastrophe losses during a quarter in which tornadoes and floods caused widespread damage in the US.

But the company's results benefited from favourable prior-year development of $182.6 million.

Meanwhile, XL suffered an $82.4 million charge arising from guarantee and reinsurance agreements with SCA, the bond insurer in which it owns a 46-percent stake.

XL also announced it will halve its dividend payment to 19 cents per share.

Net investment income from P&C operations was $298.1 million, down from $323.0 million during the same period last year.

XL also announced the launch of a five-year "operational transformation programme" for XL Insurance.

The changes would result in the consolidation of multiple business processes, the company said, and would enhance business functions through advanced technology for global claims.

Bermuda-based global business consultancy firm Accenture has been hired on a multi-year contract to help with the transformation.