LONDON (Reuters) - UK reinsurance broker Benfield, which is registered in Bermuda, has posted a 5.5 percent drop in first-half profit, hit by the weak dollar, declining rates and the impact of changes to Florida reinsurance provision.

The decline was marginally better than analysts had expected, but Benfield failed to confirm its start-up insurance broking arm Benfield Corporate Risk would break even this year - despite doubling revenues in the first half - and maintained a cautious outlook for the remainder of 2007.

Outlining "considerable headwinds", including the softening of the reinsurance market, the group left full-year guidance unchanged, saying it saw 2007 trading profit broadly flat on last year. The move prompted caution from analysts.

"This is a touch disappointing, given a solid first half and is perhaps testament to weaker pricing in reinsurance, which management has emphasised in the press release," Goldman Sachs said in a research note.

Benfield shares fell almost 12 percent to touch two-year lows on the FTSE All-share index.

Benfield reported £102 million ($206.4m) in first-half trading profit - operating profit from continuing operations before goodwill, depreciation of fixed assets and exceptional items - marginally above analysts' estimates and down from £107.9m a year earlier.

Its pre-tax profit for the period was £92.3m ($186.7m), down 5.6 percent from £97.8m a year ago.

Revenue fell 3.7 percent, as a jump in its start-up BCR was offset by softening reinsurance rates, legislative changes in Florida and lower revenues from its facultative division, where much of the team decamped to rival Aon last year.

Its trading margin dipped to 42 percent from 42.8 percent.

The group said its underlying business was strong but confirmed it saw headwinds for the rest of 2007 including the weak dollar, with the strong pound expected to shave £12m to £13m off its 2007 trading profit, ahead of earlier indications of up to £10m.

It said the impact of changes to the lucrative Florida catastrophe reinsurance market would remain at a previously estimated £10m. Benfield had said earlier this year that it saw "some upside" to that impact on trading profit, but it said on yesterday that the original estimate was "accurate".

Florida legislators voted in January to increase the size of its catastrophe insurance fund by $16 billion, offering insurers cheap reinsurance provided the passed these savings on to homeowners. Reinsurers have said the move deprives them of billions of dollars of business.

Benfield said BCR, its closely watched insurance broking arm, almost doubled its first-half revenue and its trading loss more than halved to £4.6m.

Chief executive Grahame Chilton declined to confirm previous indications it would break even this year but said yesterday that BCR would see a "substantial improvement".