Max Capital Group Ltd. yesterday reported an 18 percent fall in net earnings in the first quarter and a decrease in insurance sales.

The Bermuda-based re/insurer made net income of $36.4 million, or 63 cents per share, for the first quarter, compared to $44.5 million, or 78 cents per share, for the same period in 2009.

Max, whose shareholders last week approved its planned merger with Bermuda reinsurer Harbor Point Re to create a new company called Alterra Capital Holdings Ltd., estimated losses of around $10 million from catastrophes during the quarter.

Net operating income for the first quarter of 2010 was $40.7 million, or 71 cents per share, compared to $46.9 million, or 82 cents per share, last year.

Annualised net operating return on average shareholders' equity for the first quarter of 2010 was 10.2 percent.

Marston (Marty) Becker, chairman and chief executive officer of Max, said: "The continuation of Max's very solid financial results this quarter reflects the balance, diversification and flexibility that are the cornerstones of our business model.

"Where market conditions continue to provide attractive returns, we are well positioned to expand our presence, while scaling back in areas with softer pricing. As a result, our combined ratios have been maintained at strong levels even as we have decreased gross premiums written.

"Another key factor in the quarter was our relatively low property catastrophe losses. Considering the size of the industry losses for the headline cat events during the first quarter, we believe our estimated losses of approximately $10 million illustrate our conservative underwriting strategy, which is designed to limit our exposure to property cat events."

Last year the company established underwriting operations in Latin America, something which Mr. Becker expects to start bearing fruit soon.

"Looking forward, our new Latin America team is firmly establishing itself in the market, and we expect it to make a meaningful contribution to group results before the end of this year," Mr. Becker said.

"Most importantly, our ability to write a broad mix of short- and long-tail product lines from multiple jurisdictions should be further enhanced as a result of our pending merger with Harbor Point."

Total gross premiums, which reflects insurance sold, fell 14.5 percent to $371.1 million, compared to $434.3 million in the first three months of 2009.

Combined ratio — the percentage of premium dollars outlaid on claims and expenses — was 90.5 percent, compared to 89.7 percent last year.

Total invested assets, including cash and cash equivalents, were $5.3 billion at the end of March, an increase of $85.4 million from the end of 2009.