* 1st-qtr pretax profit rises 70 pct to $78.9 mln
* Gross premiums written fall 8 pct
* Combined ratio 51.2 pct vs 74 pct year earlier
* Sees slight deterioration in trading conditions
By Karen Rebelo
May 2 (Reuters) - British property and casualty insurer Lancashire Holdings Ltd reported a 70 percent rise in quarterly pretax profit as it benefited from a drop in claims but forecast a slight deterioration in trading conditions.
The company's pretax profit rose to $78.9 million for the three months ended March 31 from $46.5 million a year earlier, when it was hit by claims related to the wreck of the Costa Concordia cruise ship off the Italian coast.
Gross premiums written fell 8 percent to $214.9 million but this was mainly due to the company's strategy to reduce its exposure to the property retrocession market.
Retrocession is the practice of one reinsurer insuring business that another reinsurer had agreed to underwrite.
Lancashire said renewals were performing well and that it would continue to look for opportunities ahead of the U.S. hurricane season. Overall, however, it said the outlook was mixed.
"There's a lot of talk in the U.S. that commercial rates are on the up. I don't think we really believe that," Jonny Creagh-Coen, head of investor relations, told Reuters on Thursday.
The recently announced co-insurance partnership between units of Aon Plc and Warren Buffett's Berkshire Hathaway Inc would also put pressure on the company's business, Creagh-Coen said.
However, Numis Securities analyst Nick Johnson said the Aon-Berkshire alliance was more of a risk to smaller players.
"I don't see it as a meaningful threat to Lancashire, because Lancashire is very strong in its core areas, it has more expertise than Berkshire Hathaway in its core areas," he said.
Lancashire's accident year loss ratio of 29.7 percent for the quarter did not include any significant losses, the company said. The 50.5 percent ratio for the first quarter of 2012 included 19.4 percent for losses related to Costa Concordia.
The company's combined ratio -- the percentage of revenue spent on claims and costs -- fell to 51.2 percent from 74 percent a year earlier. A figure below 100 shows an underwriter is profitable.
Lancashire's shares were down 0.3 percent at 845 pence at 0935 GMT on the London Stock Exchange.