Hardy faces criticism for rejecting higher offer

Lloyd’s insurer Hardy has been criticised for accepting a 280p-a-share offer from US insurer CNA in 2012 after turning down a possible 350p offer by Beazley at the end of 2010.

However, Hardy and analysts have defended the decision, arguing that management could not have predicted the record level of natural catastrophes in 2011, which wiped about 40% off of Hardy’s book value.

The comments come after Hardy shareholders almost unanimously voted in favour of the takeover by CNA at a special general meeting on Thursday. The deal received approval from 99.99% of Hardy’s ordinary shareholders, accounting for 63.25% of Hardy’s share capital. 

One commentator criticised the company for clinging to its independence for too long and suggested this had caused shareholder frustration.  

Hardy said Beazley’s 300p-a-share bid in October 2010 “substantially undervalued” the company and Hardy rejected subsequent advances.

Shore Capital analyst Eamonn Flanagan said it was unfair to brand Hardy’s resilience as a mistake. “They and the rest of us weren’t to know that 2011 would turn out to be far worse than 2010 on the international property catastrophe book,” he said.

“That was a real body blow. Hardy recovered by bringing on additional capacity providers [Arig and Tower Group]. But in 2011 the white flag had to go up.” He added that Beazley’s offer was 1.3 times Hardy’s book value at the time, while CNA’s is 1.55 times the current book value.

A Hardy spokesman said Beazley’s 350p-a-share offer was informal and composed of shares and cash, as opposed to CNA’s all-cash deal.