Axis Capital Holdings Ltd.'s first-quarter net income tumbled 70.8% due largely to weak investment returns, but the Pembroke, Bermuda-based insurer said Wednesday that its pursuit of more attractive business is showing positive signs overall.

For the quarter, Axis reported it had $884.8 million in total revenue, an 8.0% drop from the same quarter last year. Its net income fell to $48.4 million compared with $165.8 million a year earlier.

Net written premiums increased 15.8% to $1.69 billion. Of that $1.21 billion was in reinsurance, a 19.0% jump, and $473.1 million was insurance, an 8.3% increase.

The quarter benefitted from releasing $70 million in prior-year reserves.

Its combined ratio improved to 91.9% versus 93.7% in the first quarter of last year, which Axis President and CEO Albert Benchimol cited as showing improvement in its underwriting operations.

“The strategic and tactical actions we have implemented are positively impacting our overall results, notwithstanding a competitive marketplace,” Mr. Benchimol said in a statement. “We continue to improve our overall portfolio, pursuing more attractive business, while at the same time shedding business that no longer meets profitability requirements.”

Axis said foreign currency issues and a strong U.S. dollar affected its earnings. It also said it had just $49 million in investment income during the first quarter this year, $43 million less than the same quarter last year.

During a conference call with analysts, Mr. Benchimol said the insurer is making progress in moving its investments away from hedge funds.

Axis “determined we wanted more diversification in our risk assets including more illiquid assets, private debt, mortgages, private equity and so on,” Mr. Benchimol said. “And, in fact, since 2013 we have been diligently reducing our exposures to hedge funds.”

Still, it takes time to revamp such investments, he said.

“Obviously it would've been better to have less in this quarter, but we're continuing to reposition our portfolio to one which I believe is better suited for liability mix and the conditions we expect in capital markets going forward,” Mr. Benchimol said during the conference call.

Axis last year lost out on its bid to acquire Pembroke, Bermuda-based PartnerRe in an $11 billion cash-and-stock deal. Exor S.p.A later offered a $6.9 billion, all-cash deal, which PartnerRe approved last August. Turin, Italy-based Exor said Friday that it has completed the acquisition.