The company on Monday said it was reaping the benefits of action it had taken over the past few years to restructure its London Market business, which sells specialist commercial insurance in the City of London.
That part of the market has been facing falling prices for years. “It has been a war of attrition,” Hiscox chairman Robert Childs said.
In response, the company has cut back on less profitable lines of business. Chief executive Bronek Masojada said: “Since the end of 2016, the team has walked away from $400m of challenged business and by the end of 2018 they had succeeded in replacing it with stronger performing business.”
“This was more than a prune, it was ‘let’s take branches off the tree’,” he said.
Hiscox’s London Market business turned a loss of $47m in 2017 to a profit of $78m in 2018 on premiums that rose 17 per cent. One of the new markets the company went into was protection for marijuana sellers in Canada. The legalization of marijuana left sellers needing product recall insurance, which Hiscox provided.
“It is incredibly highly regulated with strict labeling requirements,” said Mr. Masojada. “The manufacturing process is very similar to tea processing, so we could adapt a product we already had on the shelf.”
Profits at Hiscox Retail, the group’s largest business, slipped from $142m to $136m as an improved investment performance was more than offset by the impact of volatile financial markets.
The company warned that premium growth at Hiscox Retail — which was 14 per cent in 2018 — would slow this year because of senior management changes.
Overall, the group’s pre-tax profits rose from $40m to $137m. The dividend was increased from 39.8 cents to 41.9 cents.
Mr. Masojada said: “We have generated strong growth and good profits in a busy year for claims. 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.”
Analysts said the results were slightly ahead of expectations, because costs were lower than the market had forecast and investment returns slightly better.
Hiscox’s shares rose 2 percent on Monday following the results.