XL Group reported net income plunged for the third quarter, but operating income beat Wall Street expectations.

The Dublin-based business insurer, which has substantial operations in Bermuda said net income for the July through September period was $72.4 million, compared to $135.6 million in the third quarter of last year.

The decrease was primarily due to a fall in a life retrocession derivative arrangement of around $148 million.

“Net income for the current quarter was negatively impacted by the life retrocession derivative, which is offset by a movement in accumulated comprehensive income and therefore does not impact overall book value,” XL stated.

Earlier this year, XL sold its life reinsurance operations to GreyCastle Holdings for $570 million. The company booked a $621 million after-tax loss on the deal in its second quarter results.

Operating income was $187.1 million, or 70 cents per share, beat the consensus forecast of 63 cents per share of analysts tracked by Yahoo Finance.

XL chief executive officer Mike McGavick said: “While we note the relatively benign catastrophe activity so far this year, XL has produced solid across the board results with P&C underwriting profit and combined ratio well ahead of the prior year quarter.

“On a year-to-date basis as well, the third quarter continued a solid 2014, with both Insurance and Reinsurance underwriting profit exceeding last year’s results.

“We’re proud of what XL is producing, particularly given the well-documented pressure on pricing and renewals. Even with the tough market conditions, we believe we are well poised to build on this progress, relying on the drive, innovation, and skill of our underwriters and global teams.”

XL’s combined ratio — which reflects the proportion of premium dollars spent on claims and expenses — was 90.1 percent for the quarter, representing an improvement of 4.9 percentage points over the same period last year.

Net investment income for the quarter was $226.4 million, compared to $237.9 million in the prior year quarter and $232.8 million in the second quarter of 2014. Included in investment income in the current quarter is $56.5 million of income related to designated investments that support the Life Retrocession Arrangements written on a funds withheld basis.

Net income from investment fund and investment manager operating affiliates was $40.4 million in the quarter, compared to net income of $15.1 million in the prior year quarter. The increase was primarily driven by higher returns from XL’s alternative fund affiliates.

Annualised operating return on ordinary shareholders’ equity, excluding and including unrealised gains and losses on investments, were 8.6 percent and 7.5 percent, respectively, for the quarter.

Fully diluted tangible book value per share increased by 31 cents from the prior quarter to $35.40.

During the quarter, XL bought back 8.2 million of its own shares for $275 million in the aggregate at an average price of $33.35 per share.

As of September 30, $442.6 million of ordinary shares remained available for purchase under XL’s share buyback programme.