Insurer Hiscox Ltd reported a sharp rise in 2018 profit after taking action to exit from unprofitable areas in the London markets business.
The company, which is part of the Lloyd’s of London insurance market, said pre-tax profit jumped to US$137.4mln in the year to December 31 from US$39.7mln a year earlier when the industry faced record insurance losses from natural disasters including hurricanes and wildfires.
READ: Hiscox drops on caution over recent weather catastrophes impact after solid Q3 premiums growth
Gross written premiums increased to US$3.78bn from US$3.29bn the previous year.
"We have generated strong growth and good profits in a busy year for claims,” said chief executive Bronek Masojada.
“The tough action we took in our London Market business is paying off, and we are seeing some positive momentum in big-ticket lines, where rates, terms and conditions are improving.
“We are growing well in our chosen retail segments, and our small market shares mean the size of the opportunity in retail remains immense.”
The FTSE 100 firm said it was prepared for the UK’s departure from the European Union.
It has started a legal process to transfer some policies and associated liabilities to Hiscox SA - a new Luxembourg insurer to carry the company’s retail risks. The group said this move gave certainty to customers that it could legally pay all valid claims in the event of a disorderly Brexit.
“Our business is ready for Brexit, even if British politicians are not,” Hiscox said.
Hiscox has spent about US$15mln of Brexit preparations, most of which were carried out last year.
The company has put aside US$165mln for US hurricanes Florence and Michael, typhoons Jebi and Trami, and California wildfires.
Shares were little changed in mid-morning trading at 1,591p each.
Peel Hunt maintained a 'reduce' rating and target price of 1,055p, saying the full year results were ahead of its estimates due to lower than expected catastrophe losses.
"The company has successfully restructured its London Market book and will now look to address part of its Retail portfolio, US Casualty in particular," the broker said.
"Top line growth will be positive but slow down vs 2018 with rates providing a positive tailwind. We expect risk-adjusted underwriting margins to improve in 2019E (c93% CoR)
assuming a normalisation of catastrophe losses and RTNAV to recover back to 13-14%."