Max Capital Group Ltd. reported $94.1 million in net income for the second quarter, with $68.1 million of the total coming from gains on nontraditional investments.

The Bermuda-based specialty and reinsurance company, which has historically maintained a more diversified investment strategy than traditional insurers, holds roughly 23 percent of its investments in nontraditional alternatives like a fund of hedge funds.

Net income in second-quarter 2007 was nearly five times the prior-year second-quarter figure of $20.0 million, which had included $5.6 million of losses from alternative investments.

On a per-share basis, net income was 1.45 per share in second-quarter 2007, compared with only 31 cents per share in second-quarter 2006.

Although second-quarter gross written premiums for the group as a whole remained relatively flat in the quarter at $241 million, this year’s total included $10 million from a U.S. excess and surplus lines operation, Max Specialty, which commenced underwriting in second-quarter 2007, W. Marston Becker, chairman and chief executive officer of Max Capital, reported this morning.

Mr. Becker said the specialty operation is “off to a very good start and it is growing at a reasonable pace each week.” He said that in addition to the $10 million in premiums recorded for the second quarter, Max Specialty added another $10 million in the month of July, with writings principally related to E&S property business.

In response to analysts’ questions during a conference call this morning, Mr. Becker confirmed that Max Capital expects Max Specialty to record gross premiums in the ranges of $100-to-$150 million for the year. Given competitive market conditions, however, Mr. Becker suggested that the low side of this range is more realistic. “I have encouraged our folks to go slowly as they wade into this segment.”

He noted, “As we grow into this business, we continue Max’s conservative approach toward start-ups by utilizing significant third-party reinsurance support.” He added that net written premium will be 40-to-50 percent of gross for the E&S segment.

During the quarter, $7 million of the $10 million written in the E&S segment was ceded to reinsurers.

In property-casualty segments other than the new E&S segment, gross premiums fell nearly 8 percent to $104.9 million in the reinsurance segment and roughly 1 percent to $125.9 million for insurance.

Life reinsurance premiums plummeted from over $42 million in last year’s second quarter to less than $1 million in this year’s second quarter.

The p-c combined ratio ticked up a little bit–to 95.6 from 89.7 in second-quarter 2006.