* Q2 pretax $60.6 mln vs $52 mln analyst consensus
* Costa payout up by $24.6 mln as ILW contract triggered
* Shares up 2.2 pct, outperforming market (Add analyst, company comment, updates shares)
LONDON, July 25 (Reuters) - British insurer Lancashire said it expected to return cash to shareholders this year as it reported a 33 percent drop in its quarterly profit, blaming bigger payouts related to the Costa Concordia shipwreck and dwindling investment returns.
Lancashire, which insures heavy-duty assets such as oil rigs, ships and aircraft, made a pretax profit of $60.6 million in the three months to June, it said on Wednesday.
That was down from $91 million a year earlier, but still ahead of $52 million pencilled in by analysts in a company poll.
The decline came as Lancashire revised upwards by $24.6 million its exposure to the Costa Concordia, the cruise liner that ran aground off the Italian coast in January, taking its total estimated hit from the shipwreck to $58.7 million.
But the increase in claims was outweighed by a bigger-than-expected 35 percent increase in premium revenues as Lancashire took advantage of rising property insurance prices in Asia following last year’s Japanese earthquake and Thai floods.
The company, which has distributed $1.3 billion to investors since inception in 2005, also said it would return more capital this year unless a big increase in insurance prices opened up attractive trading opportunities.
Lancashire shares were up 2.8 percent by 0940 GMT, outperforming a flat FTSE 250 share index. The stock has risen about 7 percent since the start of the year against a 15 percent increase in the FTSE non-life insurance index .
Analysts at Peel Hunt estimated the company could pay a special dividend of about $220 million, or 16 cents per share, in the third quarter of the year.
The widening Costa Concordia loss was driven largely by a $20 million payout on an industry loss warranty, a reinsurance contract that entitles the buyer to a payout if total insured losses from a claims event exceed an agreed threshold.
The ILW was triggered when estimated overall losses from the Concordia disaster exceeded $1 billion, forcing Lancashire to pay an unnamed reinsurance counterparty $20 million, said Jonny Creagh-Cohen, Lancashire’s head of investor relations.
Lancashire was also hit by a 31 percent drop in its net investment income as bond yields fell during the second quarter.
Reporting by Myles Neligan; Editing by Catherine Evans