NEW YORK (Bloomberg) — Max Capital Group Ltd., the Bermuda-based reinsurer, said it reduced hedge fund holdings as its business expands through acquisitions and more underwriting.

"When we developed the hedge funds, we didn't have the underwriting breadth and strength that we have today," chief executive officer Marston Becker said yesterday in an interview at KBW Inc.'s Insurance Conference in New York.

"As we bought up more underwriting operations, it's only appropriate to take down the hedge funds because you don't want to take risk everywhere."

Max bought London-based Imagine Group Ltd., renamed Max at Lloyd's, last year, and expanded underwriting in the US. The reinsurer cut back alternative investments after the hedge fund industry's assets shrank by more than a fifth to $1.5 trillion at the end of 2008, according to Singapore-based data provider Eurekahedge Pte.

Max had about 8.5 percent of its holdings in alternative investments, or hedge funds, as of June 30, down from as much as 50 percent when the company was formed, Becker said in a presentation. The insurer, which went public in 2001, will further reduce its holdings to between five percent and seven percent, he said.

Gross premiums written for property and casualty increased in the second quarter to $355.5 million, compared with $275.7 million a year earlier, according to an August 4 statement.

Max rose nine cents to $20.68 in Nasdaq stock market trading yesterday. The insurer has gained 17 percent this year.

Max was rejected by IPC Holdings Ltd. shareholders in a bid for the reinsurer in June. Validus Holdings Ltd. agreed to buy IPC in July, also beating Flagstone Reinsurance Holdings Ltd. in its bid.