Bermuda reinsurer Validus Holdings Ltd. yesterday reported a 17-percent increase in net income, thanks in part to its acquisition of Lloyd's specialty insurer Talbot.

Validus said its net income for the first three months of 2008 totalled $66.5 million, or $0.85 per share, compared with $56.7 million, or $0.94 per share, for the same period of time last year.

Gross premiums written soared by 38 percent and investment income was up 95 percent, as the purchase of Talbot, completed on July 2 last year, had a positive impact on results.

But the Validus investment portfolio suffered a blow from the effects of the credit crisis, as $15 million of net unrealised losses were recorded in the first quarter. This was primarily the result of the decline in market value of AAA-rated residential mortgage-backed securities held by the company.

Validus chairman and chief executive officer Ed Noonan said: "We are pleased to report solid earnings and a 13.5 percent annualised return on average equity for the quarter.

"We benefited greatly in the quarter from our acquisition of Talbot which has allowed us to grow our gross premium written by 38 percent and more fully diversify our global short-tail underwriting platform.

"In a quarter which saw individual risk losses of over $5 billion in the global market and continued turmoil in the credit markets, reporting solid net income of $66.5 million and maintaining a conservative balance sheet is a significant achievement for our company."

Net operating income for the first quarter was $65.5 million, or $0.84 per share, compared with $53.7 million, or $0.89 per share, for the same period in 2007.

Gross premiums written increased to $521.6 million from $378.1 million, as Talbot added $201.8 million and offset reduced gross premiums written in the Validus Re segment.

Validus said it suffered $41.5 million of incurred losses relating to significant first-quarter property loss events. That was partly offset by $12.8 million of favourable prior-year loss reserve development.

Investment income increased to $36.0 million from $18.5 million, primarily due to higher investment balances resulting from funds from operations and the addition of Talbot, the 'Class of 2005' company said.

The annualised return on average equity was 13.5 percent.