LONDON (Bloomberg) — Bermuda-based Catlin Group Ltd., the largest insurer in the Lloyd's insurance market, said 2007 profit climbed a better-than-estimated 78 percent, helped by the acquisition of UK rival Wellington Underwriting Plc.

Net income rose to $461.7 million, or $1.74 a share, from $258.8 million, or $1.47 a share, a year earlier, the London-listed company said yesterday in a statement. That beat the $375.8 million median estimate of three analysts surveyed by Bloomberg.

Catlin bought Wellington for £591 million ($1.2 billion) in October 2006 to create the largest syndicate, or underwriting unit, in the Lloyd's insurance market. The company yesterday forecast annual revenue and cost gains of at least $125 million from the deal.

"They look like strong results and they have improved their expectation for synergies from Wellington from $100 million," said Richard Gradidge, an analyst at Numis Securities Ltd. in London who has a "hold" rating on the stock.

Catlin rose 5.6 percent to 398 pence in London trading, valuing the company at £1 billion. The company raised its total dividend nine percent to 25.1 pence a share.

"The progress in our operations outside London and the embedded growth emerging from the Wellington acquisition should enable us to maintain business volumes even in the challenging underwriting conditions anticipated during 2008," chief executive officer Stephen Catlin said in the statement. The insurer's combined ratio, or claims and expenses as a percentage of premiums, declined to 84.1 percent from 88.2 percent, indicating improved underwriting. Gross premiums more than doubled to $3.36 billion.

Premium rates charged to clients declined four percent in January and may drop by about 10 percent this year, Catlin said.

Earnings were also boosted by the company releasing $139 million that had been set aside for claims that didn't materialise in prior years.