UPDATE 2-Insurer Lancashire's capital return plan eclipses profit miss

Thu Jul 24, 2014 6:10am EDT

Related Topics

* Says to return most, if not all, earnings to investors

* Pretax profit falls 29 pct, missing market estimates

* To take "negligible" hit from downing of MH17

* Shares rise nearly 6 percent (Adds analyst comment, Lancashire executive comment, details; updates shares)

By Richa Naidu

July 24 (Reuters) - British property and casualty insurer Lancashire Holdings Ltd said it planned to return most - if not all - of its full-year earnings to investors later this year, taking the sting out its lower-than-expected quarterly earnings.

The company's shares rose nearly 6 percent in morning trading on the London Stock Exchange on Thursday, making them the top percentage gainer on the FTSE-250 mid cap index.

"If the situation doesn't change ... it would not be unreasonable to expect to see an announcement of a special dividend in the next quarter's results," a spokesman said.

Lancashire said in May that it would return most of its earnings to shareholders later this year. On Thursday, it said "most, if not all" could be returned.

"Given the recent falls, that's given the shares some support," Oriel Securities analyst Hari Sivakumaran told Reuters. Up to Wednesday's close, Lancashire's stock had lost 19.5 percent in the past year.

Lancashire's pretax profit fell about 29 percent to $41.5 million in the second quarter ended June 30, short of the average analyst estimate of $46.5 million, according to Thomson Reuters I/B/E/S.

"(The profit miss) wasn't that huge, probably wasn't as bad as some may have feared," Sivakumaran said.

Analysts say that given the nature of the insurance business, it is difficult to forecast results, particularly for catastrophe underwriters such as Lancashire, which focuses on insuring ships, aircraft and oil rigs.

"There were some claims in there. There was a decent-sized satellite loss, there were some claims from tornadoes in Nebraska and Iowa ...," Jonny Creagh-Coen, the company's head of investor relations, told Reuters.

Creagh-Coen said Lancashire had taken a "negligible" loss from the Malaysia Airlines plane that crashed in eastern Ukraine last week.

"We have taken a very small hit from our aviation reinsurance portfolio, very similar to what we would have taken in the first quarter of this year when, sadly, the other Malaysian plane went down," Creagh-Coen said.

The insurer paid out about $3 million in claims related to the Malaysia Airlines plane that disappeared in March.

Lancashire said net premiums earned rose 47 percent to $186.4 million in the quarter, driven mainly by its acquisition in late 2013 of Lloyd's of London insurer Cathedral Capital Ltd.

The insurer earned 0.6 percent on its investments, compared with a loss of 0.6 percent a year earlier.

Lancashire's shares were up 5.8 percent at 640.5 pence at 1009 GMT. (Reporting by Richa Naidu; Editing by Ted Kerr)

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