Hardy profits halved during 2010 as catastrophes hit hard
Hardy Underwriting (Bermuda) Ltd.'s 2010 profits halved to £10 million as claims from catastrophes took their toll.
The company, which redomiciled to Bermuda from the UK in 2008 and which has a reinsurance underwriting unit on the Island, wrote more business, as gross premiums written rose to £279.4 million compared to £242 million the previous year.
It was an eventful 2010 for Hardy, in which it opened a new office in Singapore and rejected an unsolicited takeover bid from Lloyd's insurer Beazley plc.
Hardy chairman David Mann said: “The unprecedented level of international natural catastrophes has meant that our pure year underwriting performance has been hit to a greater extent than some of our peers with a more US-focused book.”
He also observed that a surplus of capacity across most classes had prevented any improvement in rates.
The chairman also referred to Beazley's 300p per share offer, which valued Hardy at $250 million, which the Hardy board rejected last December.
“There may well be opportunities where the combination of two entities makes both commercial sense and is capable of fully valuing the acquired business; in this instance we do not believe that either was the case,” Mr Mann said.
CEO Barbara Merry described 2010 as “the most testing of years for our catastrophe exposed accounts”.
“The geographic distribution of natural disasters in the period (notably in Chile, Australia and New Zealand, but also in central Europe and Canada) has meant that our more internationally focused property treaty account has incurred a greater frequency and severity of loss than a typical Lloyd's account,” Ms Merry stated in Hardy's financial results filing.
She added that the repositioning of Hardy's portfolio at the end of last year meant that losses from events in Australia early this year, notably the Brisbane floods and Cyclone Yasi, were not expected to have a material impact on the company.
Hardy also reduced its exposure in New Zealand at year end, which meant losses from the deadly Christchuch earthquake last month were not expected to
deadly Christchuch earthquake last month were not expected to exceed those from the much less destructive quake in the same place last September.Hardy's aim is to double revenue, profits and net tangible assets per share every five years on a continuing basis. The company is expecting “a weakening market for the foreseeable future”, but expects to see further expansion of the Bermuda underwriting platform, based in Park Place on Par-la-Ville Road, as well as those in Bahrain and Singapore.
“Our Bermuda operation continues to gain traction and, over the last 12 months, the team has been successful in developing a small portfolio of carefully-selected clients, with steady overall progress,” Hardy said. “Results, to date, have exceeded expectations.”
Ms Merry added: “We have seen good progress being made through our Bermuda office, which has expanded from its original monoline focus on property treaty business.
“We have selectively written a book of direct and facultative property risks during 2010, and have recently recruited a property underwriter to develop the account further.”
The direct and facultative book of business is likely to grow, particularly in the US, following recruitment of Ben Nicholls in Hardy's Bermuda office, the company said, helping Hardy to have the “opportunity to underwrite business which would not normally come to Lloyd's”.
The company recorded a combined ratio - the proportion of premium dollars spent on claims and expenses - of 94.7 percent, compared to 78.1 percent in 2009.
Net tangible assets grew to 270p per share, compared to 266p per share a year earlier.
Hardy writes the majority of its business through the Lloyd's of London market, but said its new office in Singapore would give it access to “the most important Asian hub for reinsurance”.
Pre-tax profit: £10 million compared to £20.1 million in 2009
Gross premiums written: £279.4 million compared to £242 million in 2009
Combined ratio: 94.7 percent compared to 78.1 percent in 200