Excess liability insurer EXEL Ltd.'s operating results rose nine percent in the first quarter as a result of improved investment income, the company said yesterday.

But the company's net income dropped more than 28 percent when compared to 1994's first quarter. Net income for the three months to February 28 was $56.9 million ($1.06 per share), compared to a year ago's first quarter profit of $79.6 million ($1.46 per share).

Operating earnings, which exclude realised investment results, were $63.8 million ($1.19 a share), compared with $59.6 million ($1.09 per share).

Realised investment losses were $6.9 million ($0.13 a share), compared with gains of $20 million ($0.37 per share) in the first quarter of 1994.

President of EXEL Ltd., Mr. Brian O'Hara, said of the improved operating results: "This increase reflects improvement in net investment income resulting from repositioning our investment portfolios for better returns and our focus on underwriting for a profit.

"Insurance underwriting conditions are still competitive and it is increasingly difficult to attract new business where price is the sole determining factor.

"Although I expect good growth in premium from property and specialty reinsurance as well as our European operations, premiums in our traditional lines will remain relatively flat for the balance of the year.'' First quarter revenues are down to $179.1 million compared to $205.5 million in the same period the year before. Total assets of $3.9 billion at the end of the first quarter were similar to those at the end of the fourth quarter.

Shareholders' equity rose $100 million to $1.8 billion over the three month period. Fully diluted book value per share at the end of February increased by $2.51 to $33.96 compared with $31.45.

Gross premiums written for the first quarter were $138.1 million, down significantly from the $203.1 million the year before. The company said that decrease reflects a higher level of multi-year premiums booked in the first quarter of 1994, as well as a non-recurring loss surcharge premium of $12 million in that period. Gross premiums written on an adjusted annual basis increased seven percent to $152.4 million for the first quarter of 1995 from $141.9 million.

Net premiums written in the quarter were $138.1 million, compared with $194.2 million. After adjusting for the impact of multi-year premiums, loss surcharge premiums and the reinsurance clash cover (which cost nine million dollars in 1994 and was not renewed in 1995), net premiums written were $152.4 million and $141.9 million in the comparative first quarters of 1995 and 1994, respectively.

Net earned premiums for the first quarter of 1995 were $130.7 million compared with $137.8 million. That decline reflects the impact of a loss surcharge of $12 million booked in the first quarter of 1994. After adjusting for the loss surcharge and the non-renewal of the reinsurance clash cover, net earned premiums in the first quarter increased by $2.7 million, or 2.1 percent.

Net investment income, excluding realised losses, was up 15 percent to $50.2 million, compared with $43.5 million for the first quarter of 1994.

The company earned $5.1 million from its equity in the net earnings of Mid Ocean Ltd., compared with $4.3 million in the first quarter of 1994.

The combined ratio was 93.2 percent for the first quarter, compared with 91.1 percent for the period the year before.