LONDON (Bloomberg) ? A strong performance by Bermuda-based insurer Aspen Holdings Ltd. helped boost earnings at Wellington Underwriting Plc, a Lloyd's of London insurer.

Wellington, which holds a 16.7 percent stake in Aspen, said it almost quadrupled its net income in the second half of 2003 and it now plans to to raise its dividend this year.

Net profit at the company rose to ?67 million ($122.5 million), from ?17.9 million, according to Bloomberg calculations. The company is seeking a replacement for chief executive officer Julian Avery, 58, who will retire next September.

"The results are beyond market expectations. There will be major upgrades in ratings from this." said KBC Peel Hunt analyst Charles Coyne in a telephone interview. "The Aspen performance has been so strong."

Coyne has a "buy" rating on the stock.

Lloyd's insurers have benefited from higher fees following the September 11, 2001, terrorist attacks, which triggered demand for insurance. Earlier this week Brit Insurance Holdings Plc, another Lloyd's insurer, said net profit rose more than ten times to ?57.5 million last year.

Shares of Wellington rose 2.6 percent to 99 pence, an eight-month high yesterday morning. The stock has climbed 28 percent since the beginning of the year.

Aspen contributed about ?63.1 million to Wellington's full-year operating profit of ?128.2 million. The company's operating profit was ?39.9 million in 2002.

In December, Wellington said it had a 16.7 percent holding in Bermuda-based property and casualty reinsurer Aspen whose shares began trading on the New York Stock Exchange the same month.

Aspen was set up in June 2002 by Wellington and generates its income in the US. It is backed by private equity from investors including Blackstone Group LP, Candover Investments Plc, Credit Suisse First Boston Private Equity and Bermuda-based Montpelier Re Holdings Ltd.

Wellington had a net combined ratio, or claims and expenses as a percentage of premiums, of 84 percent in 2003, up from 93 percent last year.

"The lid they kept on operating expenses had a big impact," said JP Morgan Chase & Co. analyst Gerald Farr in a telephone interview. Farr has an "overweight" rating on the stock.

Wellington expects insurance rates in 2004 "to be below 2003," Avery said.

As rates decline, the greatest challenge for the group will be "maintaining our underwriting discipline," Avery said.

Income from Lloyd's operations rose 60 percent to ?61.3 million in 2003, from 38.4 million pounds. Net profit in 2003 rose to ?82.8 million, from ?20.3 million, the company said.

Wellington will pay a final dividend of 1.65 pence, after announcing its first dividend in two years in August, bringing the full-year dividend to 2 pence per share. It plans to pay a dividend of at least 3 pence this year and 4 pence in 2005.

Bloomberg calculated second-half earnings by subtracting first-half reported results from Wellington's annual results.