Max Capital Group Ltd. reported a 90.3 percent drop in first-quarter net income, due mainly to a decline in alternative investments.

The Bermuda-based specialty insurance and reinsurance provider said it had a net income of $7.7 million for the quarter versus $80 million in the first quarter of 2007.

For its insurance operations, Max Capital reported $201.4 million in net written premiums for the quarter, compared to $137 million in 2007. The company attributed the increase to new agriculture coverage written in its property-casualty reinsurance segment, and the growth of the company's p-c U.S. specialty segment, which was not operational during the first quarter of 2007.

The company reported a combined ratio of 88.8 for the quarter, improved from the 91 figure reported in the first quarter of 2007.

In a statement, W. Marston Becker, chairman and chief executive officer of Max Capital Group, said Max had "another good underwriting quarter from all property and casualty units. Our gross written premium growth in the quarter was directly related to some of our 2007 initiatives. Max Specialty continues to develop well, and our addition of agricultural reinsurance expertise was timely given the escalating prices in the commodity markets."

Max Capital Group said net investment income was up from $42.8 million reported in the first quarter of 2007 to $49.6 million in the first quarter of 2008. The company said the increase was because of a year-over-year increase in cash and fixed maturity balances.

The company was hurt by a loss of $25.7 million on alternative investments, compared to a gain of $54.1 million in the first quarter of 2007.

In a conference call, Mr. Becker said that, historically, about one out of every five quarters has proven to be negative in this portfolio, but that annualized average results have been "quite good." He added that the portfolio has been a "consistently positive contributor to the growth of our book value per share, and we expect it to continue to be so in the future."

The return on this portfolio for the quarter was negative 2.11 percent, versus a target of 2 percent.