LONDON (Reuters) - Insurer Lancashire Holdings <LRE.L> reported a 23 percent drop in premium income in the first quarter, but said it expects to benefit from rising insurance prices in the months ahead, sending its shares higher.
Lancashire had gross written premiums for the three months to March 31 of $142.8 million (94 million pounds), down from $186.7 million a year earlier, the Bermuda-based, London-listed insurer said on Friday.
The decline came as Lancashire held off writing new business in order to benefit from higher prices later in the year, and as some customers delayed renewing their policies.
However, the company said the market had become "extremely active" since the end of the first quarter, and that prices looked set to keep rising this year.
"Lancashire's key markets are experiencing a hardening in rates and terms," the company said.
"This has been gathering pace as the year has progressed and should continue to do so in the months to come."
By 10:35 a.m., Lancashire shares were up 3.75 percent at 491.25 pence, having risen 14.5 percent since the start of the year.
"If Lancashire can find the business at these higher rates then the outlook for top line and profitability could surpass current market expectations and highlight how Lancashire sits in the sweet spot for the hard market right now," Execution analyst Joy Ferneyhough wrote in a note to clients.
Global insurance prices are rising as underwriters seek to recoup heavy claims expenses stemming from hurricanes Ike and Gustav last year.
The increases have been strongest in the market for insuring oil rigs and commercial property in the hurricane-exposed Gulf of Mexico, where Lancashire has a strong presence.
(Reporting by Myles Neligan; editing by Simon Jessop)