Lancashire H1 profit jumps, Russia losses within risk tolerances

LONDON (Reuters) -Lloyd's of London insurer Lancashire posted a 44% jump in first half pre-tax profit to $78 million on Wednesday, helped by rising premium rates, and said losses in Russia from the Ukraine conflict were likely to be within its risk tolerance.

Losses in Ukraine amounted to around $22 million so far, at the lower end of Lancashire's previous $20-30 million range, it said in a trading statement.

Investors have punished Lancashire, a major aviation insurer, due to the risk of heavy losses from the conflict, including for around 400 planes worth $10 billion stuck in Russia following western sanctions and Russian counter-measures.

Insurers and aircraft leasing companies are lining up to contest those losses.

"We continue to closely monitor our exposure with regards to Russia, which remains a complex and fluid situation," chief executive Alex Maloney said.

"We believe that any potential losses would be within our risk tolerances."

Lancashire's shares have fallen more than 10% since the invasion of Ukraine, which Russia calls a "special military operation", though shares have recouped some ground from 11-year lows hit last month.

Lancashire said strong rates were at the best levels the insurer had seen for a decade and that this trend was likely to continue in the second half and into 2023.

It reported a combined ratio of 78.2%, a measure of underwriting profitability in which a level below 100% indicates a profit.

Gross written premiums increased by 34.6% year-on-year to $938 million.

However, rising U.S. interest rates led to a 3.8% drop in investment returns.

Rival Lloyd's of London insurer Beazley, a major cyber insurer, last week raised its full-year profitability guidance on an increase in cyber risk premiums.

(Reporting by Carolyn Cohn, editing by Sinead Cruise)