LONDON (Reuters) - Bermuda-based insurer Lancashire Holdings said its net profit for the second quarter fell 38 percent, hit by lower investment returns and higher claims expenses.

London-listed Lancashire, which specialises in lucrative but risky lines of insurance and reinsurance, said its net income after tax for the three months to June 30 was $51.2 million, down from $82.5 million in the same period last year.

Analysts had expected a net profit of $53.2 million, according to the average of three forecasts collected by the company.

The decline in profits partly reflected the impact of weak bond and equity markets on Lancashire's investment portfolio, with second-quarter investment income falling 30.6 percent on the year to $12.9 million.

Lancashire was also hit by higher claims expenses, with total insurance losses climbing 38 percent to £73.1 million due to a series of floods and other disasters, including a fire that caused an estimated half a billion dollars in damage at Universal Studios in California in early June.

The company added that it took on less business during the second quarter because of cyclically weak insurance prices, with net written premiums falling 9.5 percent to $182.4 million.

"Between a combination of underwriting discipline, nimble repositioning of our focus, and a relatively normal loss environment, we are confident Lancashire can continue to produce healthy profits in a softening market," Lancashire chief executive Richard Brindle said in a statement.

Lancashire had a net profit of $135.8 million for the six months to June 30, down 20 percent from $170.4 million in the same period a year earlier.