CastlePoint Holdings Ltd. saw its profits hold up well in the face of tough economic conditions, according to its second-quarter results.

The insurer and reinsurer's net income dropped slightly from $10.5 million, or 27 cents per share for the second quarter of 2007, to $10.3 million or 27 cents per share for the same period this year.

This week it was announced CastlePoint was set to be bought out by Tower Group Inc. for $490 million, with the acquisition helping Tower diversify its business, expand in high-margin segments and streamline operations in both companies.

Operating income and operating earnings per share were both up 25.5 percent and 29.6 percent respectively during this second quarter, while operating return on average equity rose 12.6 percent over the corresponding timespan.

Net premiums written for the quarter advanced 59.1 percent from $80.5 million from the prior year period to $128.1 million, with the combined ratio down at 91.3 percent from 93 percent over the respective period.

Gross written premiums from clients other than Tower were 26 percent of the total amount, which compares to 35 percent from clients other than Tower in the first quarter of 2008. The overall investment portfolio was $764.9 million and is comprised of investments with an average credit rating of AA. The overall book yield on the investment portfolio was 5.2 percent as of June 30, 2008.

CastlePoint Re, the company's Bermuda-based reinsurance subsidiary, assumed 35 percent of Tower's brokerage business as well as 50 percent of CastlePoint Insurance Co.'s programme business in the quarter.