Max Re will cut its investments in hedge funds after it took a $31 million investment loss in the third quarter.

The investment loss cut into a strong underwriting result for the company, which last month said it would restate five years of earnings and saw its founder and chief executive officer Robert Cooney resign.

Max Re swung to a third-quarter net profit of $26.5 million, or 42 cents a share, compared to a net loss of $44.2 million, or 99 cents a share in the same period in 2005.

But the reinsurer said quarterly revenue fell to $154.6 million from $361.1 million, while net premiums written declined to $138.8 million from $253.6 million.

Max Re also said it posted "disappointing returns" on its alternative investment portfolio, which had a $31 million loss. The company added that it has reduced its target range for alternative investments to 15 percent to 20 percent of invested assets.

Investment website Marketwatch said that like other insurers and reinsurers, Max Re collects premiums in return for underwriting risks. However, the company differs from many rivals because it takes a large chunk of those premiums and invests them in hedge funds. Max Re aimed to put 20 percent to 40 percent of its investment portfolio in hedge funds, according to its latest annual report.

However, after the third-quarter hedge fund losses, Max Re chief executive Marston Becker said the company now plans to put 15 percent to 20 percent of invested assets in alternative investments.

"The underwriting results were partially offset by disappointing returns on our alternative investment portfolio," he said in a statement.

On September 20, Max Re said it expected to lose an estimated $35 million from trading losses in "certain hedge fund investments."

The company didn't identify the hedge funds, but the announcement came just days after Amaranth Advisors LLC first disclosed huge losses from natural gas trades that went awry. In the weeks that followed, Amaranth decided to shut down after losses of more than $6 billion.

Max Re also confirmed that it had appointed Mr. Becker as chairman and chief executive officer.Mr. Becker has been in charge of those two positions since October 29, when Mr. Cooney resigned.

A director since April 2004, Becker takes the reins after Cooney gave up control of the company amidst accounting errors that forced Max Re to restate 2001-2005 earnings. The company has resumed a probe into the accounting of the so-called finite-risk contracts.