Companies: HDU   

Hardy Underwriting Bermuda sounds optimistic despite a 4.4 per cent first-half profits slide to £8.7 million pre-tax.

The fully-listed insurer increased gross written premiums 9.4 per cent to £97 million and earnings rose 11 per cent to 20.9p a share, helped by switching business from the UK to the lower tax regime of Bermuda.

The combined ratio of claims and expenses to premium income rose from 79.5 per cent to 83.3 per cent, as premium rates continued to weaken in many classes of business and Hardy had to reserve for two large losses, one in property.

Chairman David Mann says the company managed to achieve a slightly improved net return on equity of 17.4 per cent despite general market weakness ‘through rigorous underwriting discipline, class leadership and the benefit of new lines and teams added over the past years’.

Hardy, which is merging its two Lloyd’s syndicates for the 2009 underwriting year, says it is writing more catastrophe exposed business and highlights property treaty reinsurance as an area of unexpected resilience amid the overall rate weakening, while conveyancing, the company’s ‘only true long tail class’, is producing ‘strong profits’.

Hardy says it expects premium rates overall to start to harden in 12 to 18 months. Chief executive Barbara Merry points out that Florida hurricane rates are already ‘very good’, but suggests Hurricane Gustav would need to cause as much devastation as Hurricane Katrina three years ago to produce much of a boost in itself (and that now looks unlikely).

Hardy shares, which surged from 191p to 336.75 between 2005 and last October, have fallen back since then, in line with the inexorable insurance cycle. Now 219p, they value the company at £78.3 million and should outperform some of their sector peers.

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Hardy Underwriting Bermuda	LSE	£98.34m	275.00p	7.50p
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Other company articles:
Hardy Underwriting Bermuda			21/11/2008
Hardy hails ‘improving outlook’			17/11/2008
Interim easing at Hardy			02/09/2008
New fields for Hardy			18/03/2008
First-half growth for Hardy			12/09/2007