Aspen Insurance Holdings Ltd’s first-quarter profit rose by nearly a third compared to the same period last year to $120.4 million, as the company trounced Wall Street’s expectations.

The Bermuda-based insurer and reinsurer, which is the subject of a $3.2 billion hostile takeover bid from Endurance Specialty Holdings, also increased its dividend by 11 percent.

Aspen said the increase in profits was driven by growth in its US insurance business, which booked 25 percent more in net earned premiums in the first quarter than in the same period of 2013.

Operating earnings broke down to $1.55 per share, easily surpassing the $1.06 consensus of analysts tracked by Yahoo Finance.

In its outlook, Aspen said it expected return on equity (ROE) of 10 percent in 2014, assuming normal loss experience, rising higher in 2015 and 2016.

In its earnings statement, Aspen said: “In the aggregate, assuming pretax catastrophe load of $200 million, normal loss experience, our expectations for rising interest rates and a less favourable insurance pricing environment, we would expect operating return on equity in 2015 to increase over 2014 on the order of 100 basis points, and beyond 2015 we expect to obtain additional continued benefits to our ROE from increasing operating leverage.”

Aspen’s chief executive officer Chris O’Kane said: “We are very pleased with our strong results this quarter, which reflect the successful execution and growing impact of our three strategic levers: capital management, enhanced investment returns and optimisation of our business portfolio. Our annualised operating return on average equity was 14.8 percent, the highest quarterly ROE since we began significant investments in our US insurance lines in 2010.

“The US Insurance teams continued their trajectory of profitable growth and International Insurance achieved a solid quarter. Our Reinsurance business had yet another strong quarter and remains a preferred trading partner for our clients.”

Underwriting was profitable, indicated by a combined ratio — the proportion of premium dollars spent on claims and expenses — of 87.6 percent for the first quarter of 2014 compared with 90.1 percent for the first quarter of 2013.

The company recorded $10.6 million, or 1.9 combined ratio points, of catastrophe losses, mostly related to US winter storms and UK floods.

It benefited from net favourable development on prior-year loss reserves of $28.2 million, or five combined ratio points.

The company wrote more business, as gross written premiums increased overall by 10.6 percent to $855.5 million in the first quarter, with reinsurance seeing an increase of 7.4 percent and the insurance business 14.8 percent.

Aspen’s board of directors declared a dividend of 20 cents per share for the quarter, up from 18 cents.

“We continue to execute on targeted growth opportunities building off of our prior investments and the strength of our teams,” Mr O’Kane said.

“Historically, we invested in both Insurance and Reinsurance to position our businesses for profitable growth. Those investments are paying dividends and driving meaningful improvements in our results.

“We expect the benefits garnered from those investments to continue to increase in the coming years and to drive premium growth faster than both expenses and allocated risk capital, which will result in continued improvement in ROE.”

Investment income for the first quarter of 2014 was $49.5 million compared with $48.3 million for the first quarter of 2013, representing a one percent total return for the three-month period.

Total shareholders’ equity increased by $87.2 million in the quarter to $3.4 billion at March 31, 2014.

During the first quarter, Aspen spent $30.9 million buying back its own shares at an average price of $40.08. The company had $193.3 million remaining under its current share repurchase authorisation as at March 31, 2014.

Diluted book value per share was $42.72 at the end of March, up 4.4 percent from the end of last year and up five percent from March 31, 2013.

Endurance’s $47.50-per-share cash and shares offer was not mentioned in the statement.