Insurer Lancashire plans payout, sees weaker pricing

By Esha Vaish and Noor Zainab Hussain

(Reuters) - Insurer Lancashire Holdings (LRE.L) said on Thursday it planned $150 million in special dividends, much more than expected, sending its shares up 9 percent.

Tough competition from investment funds and others have put pressure on speciality insurers and reinsurers and Lancashire said it was likely to write less business in 2017.

Given the weak pricing outlook, it would continue to give excess capital back to shareholders, it said after reporting quarterly profits, announcing a special dividend of $0.75 per share.

Lower losses from natural disasters have also kept pricing keen, and the Lloyd's of London insurer said payouts from the most recent high-profile hurricane, Matthew, would be less than many had feared.

"We're pretty comfortable with (what) our portfolios will look like and we just don't need the earnings," Jonny Creagh-Coen, head of investor relations, told Reuters.

He said Britain's vote to leave the European Union was without doubt a "hindrance" to the firm, which writes policies for heavy-duty assets such as oil rigs, ships and aircraft.

With many London-listed insurers drawing up plans to potentially move some business to Europe if they lose their right to sell their products across the bloc due to Brexit, Cadman said Lancashire could consider underwriting some European business from its Bermuda base, if needed.

"It's too early to tell (as) we have absolutely no idea what's happening with Brexit anyway.. (but) we can write business out of Bermuda," Creagh-Coen said.

Last year, Lancashire made about 9 percent of its revenue from Europe and 31 percent from the United States and Canada.

It said insured damage from Hurricane Matthew was less than it might have been because the impact was greater in Haiti than in the United States.

Risk modelling firm RMS estimates insured losses for the United States at $1.5 billion-$5 billion. Lancashire said it would record a "just over attritional loss" that was "not big enough" to comment on.

The hurricane would contribute to the further erosion of margins and profitability across the sector, Lancashire said.

Gross premiums written fell 10.1 percent to $108.2 million in the third quarter ended Sept. 30, mainly due to challenging conditions in its energy and Lloyd's businesses.

However, pretax profit rose to $42.9 million from $32.9 million a year earlier, which brokerage RBC said was 27 percent ahead of consensus due to stronger combined ratio of 73.8 percent and around $4 million of other investment income.

(Corrects to show comments in paragraph 5, 6 and 8 were from Head of Investor Relations Jonny Creagh-Coen, not General Counsel John Cadman)

(Reporting by Esha Vaish and Noor Zainab; Hussain in Bengaluru; Editing by Gopakumar Warrier and Ruth Pitchford)