LONDON (Reuters) - Bermuda-based insurer Hiscox Ltd shrugged off the effects of a weak dollar, floods in Britain and European windstorm claims to make record profits in 2007, it said yesterday.

The London-listed firm made pretax profit of £237.2 million ($470 million), well above £216.9 million forecast in a poll by Reuters Estimates and 18 percent higher than the £201.1 million made in 2006, its previous record annual profit.

High prices for reinsurance and big-ticket corporate risks written by its Lloyd's of London syndicate and Bermuda arm combined with very low hurricane claims and good investment income to boost Hiscox's earnings.

"Global Markets and Bermuda drive good results. Tougher outlook favours (Hiscox's) diversity," Numis Securities said in a note, which maintained its "hold" rating on Hiscox shares with a 280 pence price target.

The company, which is part-way through a £50 million share buy-back programme and repaying £50 million of debt, said it could use further spare capital to make acquisitions.

"I don't think there are many opportunities around at the moment," the firm's chairman Robert Hiscox told Reuters.

"It's a balance between having enough in a war chest that means one could have enough to make a reasonable acquisition should one come along and giving the capital back."

He said current high prices meant "a transformational deal of another large insurance company" is not on the firm's agenda.

"The time to do those is at the bottom of the market and we aren't anywhere near the bottom of the market yet," Hiscox said. "We have no targets at the moment."

The outlook for 2008 remains bright despite toughening market conditions, Hiscox said, as reinsurance premiums written at high rates last year feed through to the bottom line.

"I think 2008 should be a good year," said Hiscox. "But it is getting more competitive, because people have a lot more capital and they need to use it. They also have short memories."

The insurer has cut underwriting capacity in its main Global Markets division by 20 percent as a result of weakening market conditions and is reining back its Bermuda unit too.

But its regional businesses, writing small-ticket corporate risks such as liability risks for small IT and media firms in Britain, the United States and Europe, is under less competitive pressure and should grow, said Hiscox.

"The trading statement is positive in respect of Hiscox's niche and retail business where an attractive growth story is emerging," Citi analysts said in a note.

Despite the strong results, Hiscox shares fell, trading down 2.7 percent to 267.5 pence at the close in London yesterday. Markets generally across Europe moved lower on US recession and bank write-down fears.

The company set a total dividend of 12 pence per share, above the 2006 payout of 10p and said it expects to grow the payout in coming years.