Bermuda-based re/insurer Lancashire Group yesterday trounced analysts’ forecasts with a fourth-quarter net after-tax profit of $131.8 million.This compared to $129.6 million in the same period of 2009. Adjusted earnings per share were $2.08, comfortably beating the $1.56 expectation of analysts polled by Bloomberg News.Full-year profit was $330.8 million for 2010 down 14 percent from 2009’s $385.4 million.Lancashire also announced it will pay a final dividend of 10 cents per share to shareholders. In December, Lancashire paid out a previously announced special dividend of $1.40 per share the third time it has paid a special dividend in the past four years. The company’s share price closed at 616p yesterday, up 6p.The five-year-old company has a strong track record of returning capital to shareholders in the form of large dividends something not typical among Bermuda property and casualty re/insurers.Elaine Whelan, group chief financial officer, said that, including the 2010 final dividend announced yesterday, Lancashire had returned $1.135 billion, or 82 percent of comprehensive income generated, to its shareholders over the first five years of trading.The company has argued in the past that the issue of surplus capital in the industry, which has applied downward pressure on rates in many lines, could be solved if others were to follow Lancashire’s example on generous dividends.Lancashire ended 2010 with almost $100 million of capital less than it had 12 months earlier.Gross premiums written were $689.1 million in 2010, up from the $627.8 million recorded in 2009. But gross premiums written fell 9.1 percent in the fourth quarter to $94 million compared to $103.4 million in 2009, as Lancashire opted to reduce underwriting exposure in lines of business with weakening premium rates.Richard Brindle, the company’s group chief executive officer (pictured above), described the year’s results as “excellent”.“Lancashire increased book value per share by 6.4 percent in the fourth quarter, delivering a return on equity of 23.3 percent for the full year,” Mr Brindle said.“Since our inception in 2005 we have generated a compound annual return on equity of 20.3 percent. As of February 18, 2011 our original shareholders have received an annualised internal rate of return of 24.3 percent on their investment.“2010 witnessed an active claims environment. Lancashire had moderate exposure to losses from both the Deepwater Horizon disaster and the Chile Maule earthquake but minimal losses to the New Zealand earthquake in the third quarter, the Australian floods at the turn of the year and the recent unrest in Tunisia and Egypt.“Our overall premiums written fell in the fourth quarter. Premiums written increased significantly for energy but declined in other areas. This reflects the relative attractiveness of available opportunities between classes.”The bright spots in the insurance business were in offshore energy lines and the marine retrocessional sector, where premium rates have improved following the Deepwater Horizon disaster in the spring of 2010, Mr Brindle added.“We increased our sovereign risk book, contracts in the political risk class relating to sovereign or quasi-sovereign obligors, where we believe pricing remains attractive,” Mr Brindle added. “Otherwise, premium rates have continued to weaken and we have reduced our underwriting exposure accordingly.“In 2011 we believe that, whilst premium rates will tend to decline overall, our discipline, flexibility and strong and experienced team will keep our business model highly competitive.“Companies often lose their discipline at this point in the cycle. Our daily underwriting call helps us stay focused on risk selection whilst protecting our core broker and client relationships. Lancashire is well positioned both for the soft market and to quickly take advantage of the next market moving event, whenever it might occur.”Lancashire’s combined ratio the proportion of premium dollars spent on claims and expenses was 20.8 percent for the fourth quarter and 42.9 percent for the year.Fourth-quarter results benefited in a $6.8 million reduction of the estimated total net loss related to last February’s Chile earthquake, which is now put at $84.7 million. The loss of the Deepwater Horizon oil rig was the year’s other major loss event, costing Lancashire $25 million.Lancashire added that in respect of the New Zealand earthquake and Queensland floods, less than $5 million had been recorded within reserves for these events combined.