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Preliminary Results Year ended 31 December 2006

Barbara Merry - Chief ExecutiveJamie MacDiarmid - Finance Director

Adrian Walker - Active Underwriter S382Patrick Gage - Active Underwriter S38Twenty

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Agenda

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Agenda

Introduction Barbara Merry

Results Overview and Highlights Barbara Merry

Financial Performance Jamie MacDiarmid

Underwriting Review Adrian Walker

Syndicate 38Twenty Patrick Gage

Summary Barbara Merry

Questions

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Overview and Highlights

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Combined ratio of 76.9% (2005: 92.7%)

Gross written premium of £106.1 million (2005: £111.3 million)

Record profit before tax of £16.8 million (2005: £7.5 million)

Basic earnings per share of 34.1p (2005: 15.3p)

Post tax return on equity of 17.8% (2005: 8.3%)

Net tangible assets of 173p per share (2005: 164p)

Final dividend increased 21% to 10p per share (2005: 8.25p)

Results Overview

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Focus on underwriting excellence

Proven track record: - three decades of underwriting profits - never made an underwriting loss

Niche specialisms within broad mix of aviation, marine and non-marine - 90% of underwriting portfolio is short tail

Exclusively Lloyd’s based

Overview

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Competitive environment is challenging

Surplus capital is a global issue

Opportunities in selected lines of business remain

Bermuda is single biggest challenge to London

Lloyd’s undergoing a renaissance

Business Environment

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Launch of syndicate 38Twenty to underwrite more mainstream non- marine lines

Buy out of 9% minority on syndicate 382

Improvements to systems and M.I. infrastructure

New dividend policy as part of capital management strategy

Issue of $30m subordinate debt

On-going consideration of a move overseas

Strategic Developments

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Financials

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Preliminary Highlights

Full Year2006

£’000

Full Year2005£’000

Gross written premium 106,066 111,276

Profit before tax 16,837 7,474

Claims ratio 37.8% 64.1%

Expense ratio 39.1% 28.6%

Combined ratio 76.9% 92.7%

Basic earnings per share 34.1p 15.3p

Post tax return on equity 17.8% 8.3%

Shareholders’ equity 76,797 67,592

Net assets per share 217p 191p

Net tangible assets per share 173p 164p

Final dividend per share 10p 8.25p

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Full Year2006

£’000

Full Year2005£’000

Underwriting year 2006 (2005) 1,047 (5,315)

Underwriting year 2005 (2004) 11,278 6,603

Underwriting years 2004 (2003) & prior 6,121 4,963

Total 18,446 6,251

Investment return 6,025 5,043

Other income 512 803

Total income 24,983 12,097

Other operating expenses (7,506) (4,308)

Finance charges (640) (315)

Profit before tax 16,837 7,474

Group Performance

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Full Year2006

£’000

Full Year2005£’000

Expenses incurred in insurance activities 31,301 24,419

Foreign exchange (losses) / gains (3,501) 2,471

Expenses excluding foreign exchange 27,800 26,890

Expense Ratio 39.1% 28.6%

Expense ratio excluding foreign exchange 34.8% 31.4%

Other operating expenses 7,506 4,308

Foreign exchange (losses) / gains (846) 1,005

Other expenses excluding foreign exchange 6,660 5,313

Foreign Exchange

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As at 31 Dec 2006

£’000

As at31 Dec 2005

£’000

Absolute return bond fund 3,048 -

Fixed interest 42,091 33,343

Deposits 29,919 35,230

Group share of syndicate assets 75,058 68,573

Equity based investments 6,321 -

Absolute return bond fund 2,074 -

Fixed interest 19,711 25,072

Deposits 30,151 12,763

Group assets supporting underwriting 58,257 37,835

Equity based investments - 12,335

Foreign exchange contracts - 67

Deposits 8,635 4,662

Group free investments 8,635 17,064

Total 141,950 123,472

Investment Analysis

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Underwriting Review

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Key points Airline income negligible as rates have

fallen to almost unprecedented levels Focus on general aviation book Made a significant contribution in 2006 For 2007, portfolio expected to mirror

2006

Aviation

0

5

10

15

20

25

1993 1995 1997 1999 2001 2003 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Aviation Net Premium Aviation UNLR

mill

ion

s

Net Premium & Ultimate Net Loss Ratios (UNLR)

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Key points Portfolio comprises fishing vessels,

loss of hire and harbour craft Rating scale approach to underwriting Margins satisfactory in 2006 For 2007, competition is emerging but

new opportunities also being exploited Energy book expanded

0

1

2

3

4

5

6

7

8

9

1993 1995 1997 1999 2001 2003 2005

0%

20%

40%

60%

80%

100%

120%

140%

160%

Marine Net Premium Marine UNLR

Marine: Hull

Net Premium & Ultimate Net Loss Ratios

mill

ion

s

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Net Premium & Ultimate Net Loss RatiosKey points Broad range of cargoes insured, also

jewellers block, fine art and collections Core account expanded in recent

years Team strengthened with appointment

of a specialist specie underwriter 2006 generated steady profits Rating levels reducing in 2007 but

expect to be able to maintain income

Marine: Cargo & Specie

0

5

10

15

20

1993 1995 1997 1999 2001 2003 2005

0%

20%

40%

60%

80%

100%

120%

Cargo Net Premium Cargo UNLR

mill

ion

s

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Net Premium & Ultimate Net Loss RatiosKey points Boom or bust account 2006 likely to produce an excellent

result For 2007, opportunities remain and

account is being expanded to include a more international account

Non-Marine: Catastrophe Excess of Loss

0

1

2

3

4

5

6

7

8

9

1993 1995 1997 1999 2001 2003 2005

0%

20%

40%

60%

80%

100%

120%

140%

160%

Cat XL Net Premium Cat XL UNLR

mill

ion

s

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Key points Very well diversified portfolio includes:

– Direct Property (UK / Europe)– Accident & Health– Financial Institutions– Political Risk & Trade Credit– Conveyancing– International Direct / Facultative

Property All made a positive contribution to

2006 underwriting results 2007 market conditions are weakening

but margins are still acceptable

Non-Marine: All Other

0

5

10

15

20

25

30

1993 1995 1997 1999 2001 2003 2005

0%

20%

40%

60%

80%

100%

120%

140%

Non Marine Net Premium Non Marine UNLR

mill

ion

s

Net Premium & Ultimate Net Loss Ratios

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Syndicate 38Twenty

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Need for Hardy to grow into more mainstream non-marine lines of business, specifically direct and facultative property and property treaty

Opportunities to access business exist

Rating at good levels in those classes

Separate syndicate approach allows for structural differences

38Twenty

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Underwriting commenced with effect from 1 January 2007

£65m capacity for 2007 – going well so far

Team now largely in place: Patrick Gage, Tony Hepburn, David Carson and Henry Glasse

Some business being underwritten across both syndicates

Focus on risk selection, pricing and margins is key

Larger line size requires different approach to reinsurance

38Twenty

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Summary

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Summary

Existing business is performing very well – combined ratio confirms this

Major step forward for Hardy business following capacity buy-out,

and more importantly, establishment of syndicate 38Twenty

75% increase in 2007 underwriting capability on same capital base

Balance sheet is being managed to support further growth and new

dividend policy

Business infrastructure and management information investment will

mean Hardy is primed to do more

Market conditions will dictate pace of growth

The future looks very exciting

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Appendices

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Structure

HUG PLC

HUAPatrick Gage/Adrian Walker HUL

382AJW

3820PG

Marine HullCargo/specieJewellers’ BlockAviationUS & International CatDirect Property (UK & Europe)Int’l direct & facultative propertyFinancial InstitutionsPolitical RisksConveyancing

Int’l & US cat Int’l & US direct & facultative propertySpeciality lines

100% 100%

management 100% capital

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Performance

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2000

2001

2002

2003

2004

2005

2006

Pre-Tax Profit (£m)

Full year

Atrium gain

NB2004, 2005 and 2006 values are reported under IFRS. 2000 to 2003 are reported under UK GAAP.

0

20000

40000

60000

80000

100000

120000

2000

2001

2002

2003

2004

2005

2006

Gross Written Premiums (£m)

0

5

10

15

20

25

30

35

2000

2001

2002

2003

2004

2005

2006

Dividend

Final Special

70

75

80

85

90

95

100

2000

2001

2002

2003

2004

2005

2006

Combined Ratio %

0

5

10

15

20

25

30

35

2000

2001

2002

2003

2004

2005

2006

EPS (p)

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Barbara Merry – Chief Executive Director of the other Hardy group companies Member of Council of Lloyd’s On Board of Lloyd’s Market Association Corporation of Lloyd's - 14 years. General Manager in the

regulatory division 1984: chartered accountant

Jamie MacDiarmid – Finance Director Joined Board in 1 October 2003 Previously with KPMG: manager in insurance sector

Adrian Walker – Active Underwriter Non-executive director on Board prior to becoming active underwriter

(2001) Formerly underwriter for syndicate 902 (AJ Walker & Others)

Executive Directors

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David Mann – non-executive chairman A Board member of Hardy’s subsidiary company, Hardy (Underwriting Agencies) Ltd

since November 2004 Formerly the active underwriter of non-marine syndicate 435, which was managed by D

P Mann Ltd (“DPL”). DPL was acquired by General Re in 1998 and changed its name to Faraday Underwriting Ltd in 2001

Ian Ivory - non-executive director Founded two investment management companies (Ivory & Sime, Stewart Ivory) Member of Lloyd’s for 18 years

Barbara Thomas - non-executive director Appointed 17 March 2004 Currently deputy Chairman of Friends’ Provident plc and of Financial Reporting Council Previously a commissioner of US Securities & Exchange Commission

Non-Executive Directors

Rick Abbott – non-executive director Rick has worked in banking with Bank of America, Samuel Montagu, Deutsche Bank, Morgan Grenfell and ABN Amro. Specialist in financial institutions and particularly insurance business. Directorships include Deputy Chairman of Knight Frank Corporate Finance Limited