Bermuda-based Lancashire Holdings Ltd. is to pay out a special dividend to shareholders that amounts to nearly 15 percent of yesterday's closing share price.

The company made the announcement as it reported net operating profit of $97.4 million for the third quarter and also revealed a management shake-up.

The company said Elaine Whelan will take over as chief financial officer, with effect from 1 January 2011 from Neil McConachie.

Mr. McConachie became president of Lancashire in 2009 and will continue in that role. He will remain as CFO until Ms Whelan's formal appointment.

The special dividend of $1.40 (£0.86) per share will be paid to shareholders of record on December 10, 2010. Lancashire said the dividend would amount to an aggregate payout of $213 million.

Yesterday the company's share price on the London Stock Exchange rose 8p to 586p.

Mr. McConachie suggested that the industry, which is suffering from downward pressure on rates partly because of over-capitalisation, would benefit if other companies paid out substantial dividends.

"Given our strong profitability, and continued overall market softening, our excess capital has grown as 2010 has progressed," Mr. McConachie said.

"This has been mitigated through steady share repurchases but it is now appropriate that we supplement our repurchases with a significant special dividend.

"This will quickly bring our capital to a level we consider more appropriate for the anticipated challenging trading conditions in 2011 and Lancashire will finish the year with less capital than it started with.

"At this time we believe that the industry as a whole would also benefit from a material reduction in capacity."

Gross premiums written fell marginally to $135 million compared to $139.7 million in the same period last year.

Lancashire's combined ratio was 39.2 percent for the quarter, in line with the same period last year, indicating strong underwriting profitability.

Lancashire chief executive officer Richard Brindle said the company had increased its appetite for energy business but had scaled back its book in most other areas.

"The first half of the year saw an active claims environment and with exposure to both the Deepwater Horizon disaster and the Chile Maule earthquake, we experienced manageable losses from these events," Mr. Brindle said.

"During the third quarter, despite an active Atlantic wind season, there were very low loss levels and we have had minimal exposure to the New Zealand earthquake.

"Lancashire increased book value per share by 7.9 percent in the third quarter, delivering a return on equity of 15.9 percent for the first nine months of the year. Since our inception in 2005, we have generated a compound annual return of 20.0 percent."

Lancashire also announced the appointment of group chief underwriting officer Alex Maloney as a director of the company.