XL Group plc last night posted second-quarter profits of $191.8 million and handily beat Wall Street estimates of its operating earnings.

The business insurer and reinsurer's profits broke down to 56 cents per share and compared to $79.9 million in the same quarter of last year.

XL, which last month moved its holding company from the Cayman Islands to Ireland, generated operating income of $242.6 million, or 71 cents per share, compared to average analysts' estimates of 64 cents.

The company was impacted by a $27.2 million loss relating to the Deepwater Horizon oil rig explosion in the Gulf of Mexico and natural catastrophe net losses of $16.8 million.

XL also booked a previously announced charge of $23.5 million to terminate all of its guarantees relating to the European Investment Bank (EIB), which were originally issued by XL's former affiliate Syncora Holdings, which was previously known as Security Capital Assurance. The charge impacted operating earnings which fell to $242.6 million from last year's $291.4 million.

Chief executive officer Mike McGavick said: " We are pleased to report another quarter of solid operating results. Our property and casualty (P&C) operations delivered a healthy combined ratio of 92.2 percent which includes 6.8 points of favourable prior period development.

"The current accident year combined ratio for our P&C operations was 99.0 percent in the quarter and our top-line remains strong.

Mr. McGavick said the termination of the ECB guarantees "continues our progress in eliminating distractions from our core P&C focus".

"We grew our book value per ordinary share for the fifth consecutive quarter, this time by five percent, driven by both investment portfolio gains and net income. Our tangible book value per ordinary share increased six percent during the quarter to $25.30. Total shareholders' equity was $10.5 billion at June 30, 2010, an increase of five percent in the quarter and 11 percent since the end of 2009.

"Our investment portfolio's favourable mark to market of $349 million this quarter was driven by interest rate declines even as corporate credit spreads widened. Our repositioned P&C portfolio weathered the turmoil in the credit markets, as we had limited exposure to the impacted Euro governments.

"Annualised operating return on ordinary shareholders' equity was 10.5 percent. Both our investment income and P&C operations contributed to these gains."

Net investment income for the quarter was $302.6 million compared to $328.3 million in the prior year quarter, a decline driven by lower US interest rates, along with the actions taken over the last two years to de-risk the portfolio.

XL's insurance segment contributed P&C net premiums earned of $868.7 million, while the reinsurance operations contributed $347.6 million

Mr. McGavick concluded: "We believe these results demonstrate our continued commitment to disciplined underwriting and vigorous risk management despite anaemic pricing conditions."

XL GROUP Q2 REPORT CARD

Net income: $191.8 million, compared to $79.9 million in 2009.

Gross premiums written: $1.51 billion compared to $1.5 billion in 2009.

Combined ratio: 92.2 percent compared to 93 percent.