CORRECTED - UPDATE 1-XL Capital posts smaller qtly loss

(Corrects 2009 third-quarter net loss figure in paragraph 3)

* XL Capital posts smaller qtrly net loss

* Operating income per share beats expectations

* Shares rise about 7 percent after the report

NEW YORK, Oct 28 (Reuters) - XL Capital (XL.N), a large
Bermuda-based insurer, on Wednesday posted a smaller
third-quarter net loss, compared with a year ago when the
company was hurt by its ownership of a troubled bond insurer.

In the most recent quarter, results were hurt by a decline
in policy sales and net investment income, but on an operating
basis, the results were better than expected.

XL said it had a net loss of $11.4 million, or 3 cents per
share, compared with a loss of $1.6 billion, or $6.04 a share,
in the year-ago quarter.

The Hamilton, Bermuda-based reinsurer was hit hard last
year by structured-finance losses recorded by Syncora Capital,
a bond insurer in which it was the majority owner.

In the latest quarter, operating income was $306.4 million,
or 89 cents a share, compared with $107.8 million, or 39 cents
a share, in the year-ago period.

On that basis, analysts on average expected earnings of 63
cents a share, according to Thomson Reuters I/B/E/S.

A year ago, XL severed its ties to Syncora but lost
customers over the incident, leaving the company grappling with
a decline in premium sales.

Third-quarter net premiums written fell nearly 5 percent to
$1.2 billion, and net investment income fell 25 percent to
$327.1 million.

However, book value -- a key investor measure of valuation
-- rose 26 percent to $23.84 per share.

XL shares closed 2.4 percent lower on Wednesday at $16.23,
and were about 7 percent higher in after-market trade.
(Reporting by Lilla Zuill, editing by Matthew Lewis)