Currencies blunt Hardy gains

Chief executive Barbara Merry says terms in most non-life insurance markets are still improving

05/08/2009 Robert Tyerman

Hardy Underwriting CEO Barbara Merry says the company is experiencing premium increases in new areas

Dollar weakness turned Hardy Underwriting Bermuda’s robust interim pre-tax profits increase into a ten per cent fall to £7.8 million.

The fully listed insurance company, which backs Lloyd’s Syndicate 382 and started underwriting US property treaty business from the Bermuda tax haven insurance centre this year, increased net income 40 per cent to £90.1 million in the six months to June and upped pre-tax profits 156 per cent to £18.7 million before the foreign exchange adjustment. Having increased gross written premiums 54 per cent to £150 million, Hardy says premium rate increases and new business more than compensated for a fall in insured values in some fields and has lifted its interim dividend ten per cent to 4p a share, out of a planned overall 2009 payout of 13.3p.

Chief executive Barbara Merry says terms in most non-life insurance markets are still improving thanks to a worldwide withdrawal of capital, which she does not expect to reappear for 18 months, and points out that the company is experiencing premium increases in new areas entered into after 2005/06. US property casualty rates have risen ten to 15 per cent, while accident and health is ‘beginning to achieve its potential’.

Rates are beginning to rise in political risks despite ‘a collapse in bank-generated business’, and Hardy’s terrorism book ‘continues to grow, despite continuing competition and pressure on rates’. Conveyancing cover continues to produce ‘strong profits’, though growth has slowed, leaving aviation the real dog, with no rerating as yet despite hefty market losses.

Merry says Hardy, which raised £40 million earlier this year, is considering increasing its exposure in the Middle East and Far East and in fields such as construction and terrorism, but on sensible terms. At 290p, yielding a prospective 4.5 per cent and valuing the company at £149 million, the shares should outperform several peers.