Bermuda-based insurer Lancashire Holdings said yesterday it made net income after tax of $390.9 million in 2007, boosted by the lack of any major US hurricanes, but warned the outlook was tougher for 2008.

The London-listed firm, which specialises in lucrative but risky lines of insurance and reinsurance, made net income after tax of $115.3 million in the fourth quarter.

The firm's profit for the year was above a market forecast of $358.5 million, in a poll of eight analysts conducted by the company.

However group chief executive officer Richard Brindle warned premiums may not be as strong going forward.

"The market is softening across the board," Mr. Brindle said. "Nonetheless there is plenty of attractive business in the majority of lines we write... However we are well positioned to write a profitable book of business in 2008," the firm said in a statement.

"As we progress through 2008, absent a sudden turn in the cycle, we expect that our premiums will decline from 2007," it added saying it had no plans to offer new types of insurance to compensate for the expected decline.

Lancashire posted a return on equity of 31.7 percent, above its own target of between 26 and 29 percent, having emerged virtually unscathed from the US hurricane season.

The company's gross written premiums for 2007 were $753.1 million, up by 20 percent from 2006. But in the fourth quarter gross premiums written fell 22.5 percent.

Mr. Brindle said Lancashire's conservative investment strategy had delivered a 6.4 percent return in 2007.

"I am very pleased to say we believe we have a zero insurance exposure from the credit crisis, a debacle that appears to have very serious financial implications for the insurance industry," Mr. Brindle said.

"Indeed the full extent of the implications are yet to be revealed."

The insurer paid a special dividend of $1.10 earlier this month to shareholders after strong trading conditions and fewer costly natural disasters left it sitting on excess cash.

It has returned around $242 million in total to investors as it generated more capital than expected during the year while insurance risk prices fell quicker than it originally envisaged.