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Preliminary Results Year Ended 31 December 2003

Preliminary Results Year Ended 31 December 2003. Record Underwriting Result for the Hardy Group. Barbara Merry – Chief Executive Adrian Walker –Underwriter Jamie MacDiarmid – Finance Director. Agenda. Highlights Strategic objectives Underwriter’s overview

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Preliminary Results Year Ended 31 December 2003

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  1. Preliminary Results Year Ended 31 December 2003 Record Underwriting Result for the Hardy Group Barbara Merry – Chief Executive Adrian Walker –Underwriter Jamie MacDiarmid – Finance Director

  2. Agenda • Highlights • Strategic objectives • Underwriter’s overview • Financial performance • The outlook • Questions

  3. Highlights • Market leading, specialist insurer • AM Best ‘A stable’ rating • Unparalleled record of profitability over more than 25 years • Record results • Profit more than doubled to £14.35m • Basic EPS up 77% to 28.6p • Combined ratio 81.2% • Prospects very exciting

  4. Strategic Objectives Hardy aims to achieve consistent growth in shareholder value through: • Focusing on profit not volume – rigorous approach to pricing and margins • Active capacity management, generating underwriting returns throughout the insurance cycle • Adding value through innovation and willingness to write difficult and unusual risks • Maintaining predominantly short tail book • Operating across a range of niche activities which we continually seek to enhance • Consistent and cautious reserving methodology

  5. Underwriter’s Overview

  6. Syndicate 382 • Composition of book of business:- marine (ships and their cargos)- aviation (particularly helicopters)- non-marine (catastrophe reinsurance, accident & health, crops) • Continued focus on rating and lead position • Below average risk profile • Maintenance of short tail book - fundamental to strategy • Two new classes developed - UK direct property and financial institutions • Continued search for new niche classes to complement the current portfolio and where there is less price competition

  7. Underwriter’s Overview 2001 YOA • 11.4% - more than 25 points better than market average • Includes release of prior year reserves £1.57m 2002 YOA • Forecast profit 13.5%-18.5% • Full utilisation of syndicate’s capacity • Strong progress continues 2003 YOA • Progressing well • Some disappointment on income but business underwritten performing better than anticipated

  8. Market Conditions • Reasonable profit expectations • Rates, in many cases, better than at peak of last hard market • Nadir of current cycle not yet in sight • Promising market conditions for new business lines – UK direct property and financial institutions • Need to remain flexible to changing market conditions

  9. Syndicate Capacity Capacity: 2002 £54m 2003: £100m 2004: £115m

  10. Financial Performance

  11. Group Statistics *restated

  12. Group Performance

  13. Investments

  14. Costs

  15. Outlook

  16. Future Prospects • New business lines come fully on stream in 2004 • Develop existing business lines and identify new niches • Continue to focus on performance • Batten down the cost base • Remain alert to changing market conditions Enthusiastic about future prospects

  17. Questions?

  18. Appendices

  19. Total Return Indices

  20. Investment in Atrium • Cost of Atrium investment £8.9m -cumulative gain to date recognised of £7.2m • Have continued valuation principle of applying a 30% discount to quoted mid market value to reflect illiquidity of the stock • If sold, gain would be tax free under the substantial shareholder exemption, provided that certain conditions were met at the time of disposal • Investment continues to perform well

  21. Return on Equity

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