LONDON (Bloomberg) — Bermuda-based Lancashire Holdings Ltd., the best performer in the FTSE 350 Non-life Insurance Index in the past six months, said 2009 profit almost quadrupled as net insurance losses fell.

Net income climbed to $385.4 million from $97.5 million a year earlier, the Hamilton, Bermuda-based insurer said on Friday in a statement. That beat the $346 million median estimate of three analysts surveyed by Bloomberg. Net insurance losses fell to $98.7 million from $375.5 million a year earlier, Lancashire said.

"The outlook for 2010 looks reasonable," chief executive officer Richard Brindle said in the statement. "The reinsurance market, while modestly off its all-time highs, remains fairly disciplined.

"As expected, the specialist insurance classes are coming under some pressure, but remain relatively attractive overall."

Lancashire, which gets most of its revenue from protecting companies against windstorms, has outperformed rivals in the last six months after a benign hurricane season in the US and the Gulf of Mexico last year. The insurer announced a special dividend of $1.25 a common share when it reported its third-quarter results in November.

Mr. Brindle said he'd like to see more insurers returning capital to shareholders after a successful year for the industry.

"In the past 12 months, industry capital has recovered well, faster than expected," he said. "We are encouraged to see increasing numbers of companies returning capital, but remain concerned that insufficient efforts will be made across the broader market.

"This increased supply of capital is placing pressure on pricing in certain areas, a trend we unfortunately expect to gather pace as the year progresses. With that in mind, we actively sought to shift our renewal pattern forward for 2010, writing an increased level of well-priced property catastrophe reinsurance compared to 2009; thereby taking advantage of what we believe may be the high point of rates in the year.

"Correspondingly, we expect to write less business in later months than we did last year."

Thomas Dorner, a London-based analyst at Oriel Securities Ltd. who has a "buy" rating on the stock, said: "It's a really good set of results.".

Lancashire's combined ratio of 44.6 percent for the year was strong, he said.

The combined ratio shows claims and expenses as a percentage of premiums. The further the measure is below 100 percent, the bigger the company's underwriting profit.

Lancashire shares rose four pence, or less than one percent, to close at 480 pence in London.