Profits fall at Hardy
Article Date: Mar 25 2005Niche Lloyd's insurance group Hardy Underwriting blames a combination of factors, ranging from hurricanes in Florida, typhoons in Japan to a bank fraud in Italy, for a 43 per cent fall in pre-tax profits to £8 million last year on a 47 per cent increase in gross premiums. Robert Tyerman reports.
Fully-listed Hardy's earnings slid from 28.6p to 25.7p a share, but a maintained dividend of 8.25p was swollen by a special 25p-a-share payout on the sale of the company's stake in the Atrium insurance group. The year began well, but four hurricanes in Florida and the Songda typhoon in Japan cost the company £8 million, after reinsurance recoveries.
Hardy began the year hoping its financial institutions side would prove its 'flagship', writing up to £18 million of premiums. But the company's decision to reserve £2.3 million against its potential share of a £180 million Italian bank fraud claim and its cautious curbs on what business underwriters could accept meant that only £7.5 million of premiums was written – and one member of the team was made redundant.
For the current year, the division is writing 80 per cent 'short-tail' cover, which group chief executive Barbara Merry reckons should contain fewer nasty surprises. She sees 2005's income boosted to the tune of £3 million to £4 million by its recently-launched conveyancing cover service, which she says provides high margins and little competition and where reinsurance is in place to take out any tail of losses after seven years.
These results were achieved against the background of an overall three per cent decline in premiums, in line with the market cycle. Merry is bullish about current prospects, though the shares at 194.5p (down 5.5p this morning) are unlikely to perform much in the short term in the absence of some unexpected corporate move.
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