With Angelique Ruzicka, finance editor

Lancashire Holding’s shares shot up 9.34% in the past week, even though its gross written premiums slumped by 23.5% in the first quarter of 2009 compared with last year.

The fall was due to Lancashire holding back capacity in the direct property, retrocession (reinsurance for reinsurers) and energy catastrophe classes which, it said, allowed it to take better advantage of improving opportunities. It felt that rate rises would significantly increase as the year progressed.

Analysts appear to agree. “While the 23% reduction may be a shock to some, on balance we think that a 20% increase target for 2009 is still achievable given that Lancashire may sit in the sweet spot for the hard market right now in terms of Cat and energy rates,” said Joy Ferneyhough, an analyst at Execution.

Its combined ratio stands at 81.2% and it reported a net operating profit of $35.8m (£23.1m).

Richard Brindle, its chief executive officer, said: “Lancashire has a reasonable quarter, growing its book value per share by 3.1%. Our underwriting and investment returns were good with an accident year loss ratio of 28.9% and an annualised total investment return of 4.6%.” He added that the results were further impacted by Lancashire’s reserve strengthening for Hurricane Ike.

Ferneyhough said that in terms of first-quarter profitability, the numbers looked solid with a positive trend in loss ratios.

“Reported net income was 6% ahead of consensus driven by a lower than expected accident loss ratio and $8m of realised gains on the investment portfolio,” she said.

Elsewhere on AIM, stocks were more or less flat.

The most dramatic tumble was at 17.86% at Resources In Insurance Group, while Jelf and Hampden Underwriting shares dropped 7.74% and 6.06% respectively.