Lancashire moves tax base to UK as profits rise

Lloyd’s insurer Lancashire set itself apart from its peers with a second quarter profit that beat market expectations, and said it was moving its tax location back to the UK from Bermuda.

Lancashire, which insures property, energy, aviation and marine business risks, said its quarterly pre-tax profit was $91m (£55.6m), 7.7 per cent higher than in the same period in 2010. That was far above the consensus forecast for $70m.

It said the change of tax location would not change its rate of corporation tax as it had been granted a temporary exemption from the government ahead of its planned reforms to the Controlled Foreign Companies Act.

Lancashire chief executive Richard Brindle said a heavy US tornado season in the past three months had had “a minimal effect” on the company.

“We were also one of the few companies to avoid reserve strengthening for recent natural catastrophes,” he said.

“The loss events of the first half of the year have led to some improved areas of pricing, and the market is now better overall than we had anticipated at the beginning of the year. Lancashire is well positioned to increase its appetite if we do see strong growth in premium rates.”

Its profits were also bolstered by the release of $46.1m of reserves held against claims that no longer materialised.

Pre-tax profit for the year to date was $94.6m, reflecting a tough first three months of the year which has wiped out first-half profits at fellow insurers Brit and Beazley.

Beazley made a a pretax loss of $24.2m over the six months of 2011, while Brit said first-half profit fell 91 per cent to just £6.8m.