Hardy axes dividend as losses bite

Lloyd’s insurer Hardy will not pay a dividend after reporting an after-tax loss of £34.6m in 2011 (2010: profit of £9.6m).

“The board has concluded that, in the light of the impact of the catastrophe losses on the group’s financial resources and of the ongoing strategic review, it would not be appropriate to pay a final dividend,” Hardy chairman David Mann said in a statement.

Hardy posted a loss-making combined ratio of 120.9% (2010: 94.7%) after catastrophe claims added 38.3 points to the ratio. The company was hit by the heavy burden of natural catastrophes in 2011, which included earthquakes in Japan and New Zealand, Flooding in Thailand and storms in Australia and the USA.

“2010 and 2011 have been challenging years for Hardy and we have learnt a great deal from the experience,” Mann said. “As a consequence, we believe that the underwriting portfolio is in fundamentally better shape than it has ever been. The strategic review is proceeding and we remain focused on achieving the best possible outcome for all stakeholders.”

Hardy announced in December last year that it is seeking a buyer. Fellow Lloyd’s insurer Beazley has declared its interest in the firm, while Hardy’s third-party capital providers, Bahraini reinsurer Arig and US insurer Tower Group, are rumoured to be interested.

Having announced the strategic review on 1 December 2011, we received considerable interest in the group, and a process was initiated to determine how best to realise the potential in Hardy for the benefit of shareholders and other stakeholders,” Hardy chief executive Barbara Merry said. “This review process is well under way and on track and shareholders will be advised as to the board’s recommendations as soon as possible.”

Shore Capital analyst Eamonn Flanagan expects the process of seeking a buyer to accelerate following the release of the results.

Now that the results are out of the way and that no ‘black hole’ is evident, we fully expect the bidding process for Hardy to begin in earnest,” Flanagan said in a research note. “Together with Beazley, we expect Tower Group and Arig to be interested in acquiring the group.”