NEW YORK (Bloomberg) — XL Capital Ltd. chief executive officer Michael McGavick said he is "mystified" by other insurers' rates for coverage and will maintain disciplined underwriting rather than cut prices to unprofitable levels.

"We watch some of the behaviour and we are often mystified by what others are seeing that we are not," McGavick said in an interview after XL reported its third-quarter loss narrowed to $11.4 million. "We've been disciplined by where the market stands. As a result we are standing tough to our underwriting criteria."

XL is among companies reporting a decline in revenue as customers reduce coverage and companies compete for business. Policy sales for Bermuda-based XL's property and casualty business dropped five percent to $1.2 billion in the third quarter. US commercial insurance rates fell 5.8 percent in the period, exceeding price declines in the first half of the year, the Council of Insurance Agents and Brokers said this week. The rates have fallen every quarter since 2004.

Sales of US coverage industrywide fell 1.4 percent to $434.6 billion in 2008, the biggest drop in half a century, and the decline continued in 2009, according to the Property Casualty Insurers Association of America. McGavick didn't name any competitors when discussing lower rates, and didn't say how XL's prices differed.

"The places we've seen the market's pricing discipline at its worst is US casualty lines," McGavick said. "We thought those would be areas where we'd see some shrinkage" in sales, he said. "And we are."