Bermuda-based re/insurer Alterra Capital Holdings expects to make a full-year profit of around $300 million for 2010, the company announced yesterday.In a letter to shareholders, published yesterday, Alterra chief executive officer Marty Becker said the company had achieved a profitable year despite “the softest market conditions seen since 1999”.The company, which declares its fourth-quarter and full-year results on February 8, said its preliminary and unaudited accounts pointed to net income of between $290 million and $310 million for 2010.The estimated profits indicate a return on shareholders’ equity of between 11.8 percent and 12.5 percent.Alterra was created last year by the merger of Max Capital Group and Harbor Point, two Bermuda companies, who are based in what was previously Max’s headquarters at 2 Front Street. The amalgamation was effective from May 12 last year.Gross premiums writtens for Alterra, which included those contributed by Harbor Point from May 12 onwards, totalled approximately $1.4 billion last year. Overall combined ratio - which reflects the proportion of premium dollars spent on claims and expenses - was about 86 percent.Mr Becker said that gross premium (pro forma) was down six percent compared to the previous year.“The key in this stage of the cycle is to avoid temptation and making the big mistake, so that we will be in a strong position when opportunity re-emerges on the other side,” Mr Becker said.“The challenge is consistency of execution and message among our underwriting teams.”Alterra has underwriting platforms in Ireland, at the Lloyd’s of London market and in Latin America and Mr Becker believes it will be well positioned to benefit as economic conditions improve.He said there was little expectation of price rises in the market this year. “We do anticipate some improvement in economic conditions for our clients that will enhance their sales and payroll numbers, to which a good portion of our premiums are directly correlated, but this will likely benefit 2012 premiums more than 2011 premiums,” Mr Becker said.He believes reported returns on equity in the industry this year will be less than 10 percent.And Alterra is to adjust its target return on equity for the low interest rate environment, which has reduced the amount of investment income insurers can make from their normally conservatively invested portfolios.“With the changing investment world, we are modifying our business model ROE standard,” Mr Becker said.“We previously had a target of a 15 percent ROE across an underwriting cycle. Given the material decline in average investment yields, we feel a better measure today is a ‘risk free’ return plus 10 percent, which in historical investment terms approximates our previous 15 percent standard, but allows adjustment for today’s new reality of unusually low ‘risk free’ returns.“We cannot guarantee this return of course, but we continue to believe that our businesses and business mix are able to support this model.”Mr Becker said the key success drivers for Alterra in 2011 were underwriting discipline and risk management.He estimated gross premiums written for 2011 of approximately $1.7 billion for Alterra and an operating ROE for this year of approximately eight percent to nine percent, subject to frequency and severity of losses and changes in general economic and market conditions.“This result should compare well with our peer group, but would not be an outstanding historical result,” Mr Becker added.