Lancashire shares hit record high on special dividend

(Reuters) - Lancashire Holdings Ltd, a British property and casualty insurer, said it would return $188 million to shareholders via a special dividend, sending it shares to a record high.

Lancashire shares rose as much as 6.8 percent to 750 pence in morning trade on the London Stock Exchange, making the stock the top performer on the FTSE All Share Financials Index.

RBC Capital Markets said the special dividend of 95 cents per share was well ahead of consensus estimates of 72 cents, reflecting a market place in which Lancashire has reduced its top line 31 percent year on year.

"Whilst we believe that the special dividend will give Lancashire some near-term share price support, we believe once the company goes ex-dividend, it will look expensive on a price to book/ROE basis," RBC Capital Markets analysts wrote in a note to clients.

Shore Capital analyst Eamonn Flanagan said Lancashire remained a prized asset in an ever-dwindling sector and would make a terrific addition to a predator's portfolio if management was convinced of the strategic sense of such a deal.

The company, which writes policies for heavy-duty assets such as oil rigs, ships and aircraft, said third-quarter pretax profit fell to $32.9 million from $36.1 million a year earlier.

Gross premiums written were down 20.8 percent at $120.4 million in the third quarter, mainly due to multi-year deals written in the property and energy segments, which were not yet up for renewal.

Combined ratio improved to 70.2 percent from 82.4 percent, the company said.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier)