LONDON (Bloomberg) - Amlin, a Lloyd's of London insurer with offices in Bermuda, said first-half profit rose 57 percent, helped by higher investment returns and lower weather-related claims. The shares had their biggest gain in almost three years.

Net income increased to £148.6 million ($298.9m), or 27.5 pence a share, from £94.9m, or 17.7 pence a share, a year earlier, the London-based company said yesterday in a statement.

Amlin raised its dividend 19 percent to five pence a share and may make a "significant" return of capital to shareholders in the second half, dependent on catastrophe losses, chief executive officer Charles Philipps said on a conference call with journalists. The payout comes as the company plans to trim premium income as the prices it charges "soften" over the next 18 months.

"These were good numbers and it's difficult to fault them," said Neil Manser, an analyst at Fox-Pitt, Kelton in London, who has an "outperform" rating on the stock.

"They will also look at capital management as the year goes on," and may pay a special dividend, he added.

Amlin shares rose 6.5 percent to 305.75 pence apiece in London, valuing the company at £1.6 billion ($3.21bn). That was their biggest gain since November 18 2004.

Premium prices may improve in the UK corporate market in 2008, helping mitigate lower margins for marine, property and reinsurance, the company said.

Amlin said premium income will probably decline next year. At Lloyd's it may drop to about £850m in 2008 from £1bn this year.

Net insurance claims fell to £219.8m, from £313.1m, the company said. Investment returns rose 73 percent to £65.3m.

Property and casualty insurance stocks have come under pressure this year as premiums declined after last year's benign storm season. Amlin's shares have fallen 9.4 percent since December through Wednesday's close, in line with the 10-member FTSE 350 Non-Life Insurance Index.

Amlin's return on equity rose to 31.8 percent from 24.2 percent, Philipps said.