LONDON (Bloomberg) - Hardy Underwriting, the second-best stock performer this year among Lloyd's of London insurers, said first-half profit rose 59 percent and it's considering a move to Bermuda to do more US business.

Net income for the six months ended June 30 increased to £6.7 million ($13.6m), or 18.8 pence a share, from £4.2m ($8.5m), or 11.8 pence a share, a year earlier, the London-based company said yesterday in a statement.

Hardy, which started a new syndicate in January to cover property risks, is bucking the trend that led many insurers to cut capacity in London, where increased competition and a decline in destructive storms are weighing on insurance rates. Hardy may increase overall underwriting capacity by six percent to £185m ($376m) in 2008, and the move to Bermuda would help it pursue US insurance opportunities and lower taxes.

Bermuda is a "credible" insurance centre where US property and catastrophe coverage is growing, CEO Barbara Merry said in an interview yesterday. "There is business being written that will never see the light of day in London," she said.

Hardy's shares slipped 0.1 percent to 327.75 pence in early trading in London, valuing the company at £116m ($235m). The shares are up 27 percent this year, ahead of the 15-member FTSE All-Share Nonlife Insurance Index, down 5.9 percent.

Aviation rates are down and pressure is "emerging" in marine risks, Merry said. "Even though margins are thinner, it is still possible to write the business and make a positive return. We are not retreating," she said.

Lloyd's insurers including Kiln and Hiscox, both of whom have relocated to Bermuda, said they plan to reduce capacity next year to maintain profit margins.

Hardy's new syndicate may increase capacity by about £10m, she said. "We're seeing really good business."

"This is a good result driven by strong underwriting performance," said Richard Gradidge, a London-based analyst at Numis Securities, who rates the shares "hold."

Pretax profit, the figure followed most closely by UK insurance analysts, rose 49 percent to £9.08m, beating the £8.6m estimate of three analysts surveyed by the company. The insurer also benefited as it released more reserves than forecast from prior years. The release will contribute £6.7m to first-half profit.

Hardy's will pay an interim dividend, 3.3 pence a share, for the first time, it said.