Mutual & Federal, the Johannesburg-based insurance group that is part of Old Mutual, saw gross premium income of R4.3 billion against R4.0 billion the year before, an increase of 8% - but H1 earnings per share declined.

The general insurance result declined from R387 million to R281 million as a result of a reduction in the underwriting surplus from 8.2% to 3.9% due to pressure on rates and an increase in the frequency and severity of claims.

The operating earnings per share for the six months reduced accordingly from 159 cents to 145 cents, and basic earnings per share from 232 cents, by 15% to 197 cents.

The company has declared an interim dividend of 40 cents per share payable on September 11, 2006. Following an ongoing review of the efficient use of capital, the board additionally announced the payment of a special dividend of 800 cents per share payable on the same day.

This represents a return of capital to shareholders of R2.3 billion or 40% of the net asset value of the company. Its stock surged on the back of the news of the payout, Reuters reports.