UPDATE 2-Volatile markets halve Brit Insurance H1 profit
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LONDON, Aug 27 (Reuters) - UK-listed Brit Insurance (BRE.L) posted a 53 percent drop in first-half pretax profit on Wednesday, broadly in line with analysts' forecasts after investment losses in volatile markets battered its bottom line.
The general insurer and reinsurer said it had seen an improvement in its closely watched UK arm, but the group pretax profit for the six months fell to 49.9 million pounds ($92.1 million). That compares with 106.8 million a year ago, but is just above a consensus forecast of 47.3 million pounds.
General insurers across the board have reported falling bottom lines, as turbulent financial markets hit investment income and pricing pressure remains high. Amlin (AML.L) reported a 26 percent drop in first-half profit last week, while Beazley (BEZG.L) published a 25 percent drop last month.
Brit said its investment return tumbled to 2.1 million pounds in the first six months from 55.9 million a year ago.
But the insurer said it expected a "much better performance" in the second half if the interest rate environment performs in line with expectations, after a "good" July and August.
Chief Executive Dane Douetil said the group had also cut its equity exposure to 6 percent from 8 percent of the portfolio.
The group also left its provision for possible subprime related losses -- mostly from its exposure through cover for executives in businesses exposed to the crunch -- unchanged.
Brit's gross written premiums grew 3.8 percent to 754.8 million pounds in the first half, and the group said it expected 3 to 5 percent growth in 2008, broadly in line with its target.
Its underwriting performance was ahead of expectations, though competitive conditions meant its combined ratio -- costs and claims as a percentage of premiums and a key measure of profitability -- worsened to 89.4 percent from 87.7 percent.
UK IMPROVES
Brit, which is more exposed to the ultra-competitive UK market than its rivals, said it had seen improvement in the UK arm and was benefitting from its focus on small and medium businesses, where pricing pressure has been less intense.
The insurer said commercial lines remained tough but said it had seen 4 percent rate increases in commercial motor -- traditionally a leading indicator of rate movememnts.
Premiums at Brit UK rose 12.8 percent, and the group said it had cut its underwriting loss there to 4.5 million for the first half from 7.7 million pounds.
Shares in Brit, which writes less reinsurance than its peers and also has a larger UK presence, have been among the sector's worst performers. Since the start of the year, the stock is down 20 percent, underperforming the UK sector by almost 14 percent.
At 0848 GMT on Wednesday, Brit was down 1.75 percent at 182.25p, broadly in line with a weak financial sector.
Douetil separately confirmed reports that the group is considering "all the options" over its domicile, after reports it could follow peers away from the UK for tax and capital reasons, as European rules change. He said the group hoped to reach a conclusion by the end of the year.
Brit maintained an interim dividend of 7.5 pence per share, and said it expected to also maintain its full-year payout.
(Reporting by Clara Ferreira-Marques; Editing by Erica Billingham and Chris Wickham)
