Preliminary Results Year ending 31 December 2005 David Mann – Chairman Barbara Merry - Chief Executive Jamie MacDiarmid - Finance Director Adrian Walker - Active Underwriter March 2006

Agenda  IntroductionDavid Mann  Key PointsBarbara Merry  Overview of BusinessBarbara Merry  Financial PerformanceJamie MacDiarmid  Catastrophe Impact Adrian Walker  Underwriting ReviewAdrian Walker  SummaryBarbara Merry  Questions 2

Key Points  A challenging year for Hardy on a number of fronts  Peter Hardy retired as Chairman; David Mann appointed  Distraction and cost of the Omega approach  Profit before tax of £7.474m (2004: £8.937m)  Overall underwriting portfolio performed well  Result marred by hurricane losses in second half  Combined ratio of 92.7% (2004: 94.3%) and excluding hurricane Katrina 82.2%  Cash flow strong: dividend of 8.25p proposed 29 years of unbroken profitability in Lloyd’s 3

Overview of Business 4

Syndicate 382 characteristics a profitable and secure long-term investment 5  Diversification of the portfolio - a balanced book: tested in 2005  Focus on profit, not volume  Management of underwriting risk: - Leading risks so as to influence price - Underwriting a predominantly short tail account - Control of exposures - Underwriting without the purchase of high levels of reinsurance  Management of reserving risk - prudence and consistency of reserving approach

6 6 first class security Business Mix

Performance Full year Atrium gain NB and 2005 values are reported under IFRS to 2003 are reported under UK GAAP. where others see risk, Hardy sees opportunity 7

Financial Performance 8

Preliminary Highlights Full Year 2005 £’000 Full year 2004 £’000 Gross written premium111,27687,281 Profit before tax7,4748,937 Claims ratio64.1%57.7% Expense ratio28.6%36.6% Combined ratio92.7%94.3% Basic earnings per share15.3p27.9p Post tax return on equity8.3%14.7% Shareholders’ funds67,59264,847 Net assets per share191p184p Net tangible assets per share164p157p Final dividend per share8.25p Special dividend-25p 9

Full Year 2005 £’000 Full Year 2004 £’000 Underwriting year 2005 (2004)(5,315)(5,688) Underwriting year 2004 (2003)6,6035,798 Underwriting years 2003 (2002) & prior4,9633,777 Total6,2513,887 Investment return5,0433,618 Return on Atrium investment-4,358 Other income Total income12,09712,810 Other charges(4,623)(3,873) Profit before tax7,4748,937 Group Performance 10

31 December 2005 £’ December 2004 £’000 Group Share Of Syndicate Assets Fixed interest 33,34321,616 Deposits 35,23029,031 TOTAL 68,57350,647 Group Assets Supporting Underwriting Fixed interest25,07216,391 Deposits 12,76312,701 TOTAL 37,83529,092 Group Free Investments Equity based investments 12,3358,936 Foreign exchange contracts Deposits 4,6628,513 TOTAL 17,06417,666 TOTAL123,47297,405 Investments and Cash Equivalents 11

2005 Catastrophe Impact 12

2005 Catastrophe Impact Hardy has a policy of robust reserving 13 Gross £’000 Net £’000 Katrina - Marine1, Cat XL10,2796,210 - Direct property2,9302,281 Total14,7948,982 Rita2,1011,779 Wilma3,9031,105 All catastrophes20,79811,866

Underwriting cycle – Relative Performance market leader where pricing can be influenced 14

Underwriting cycle – Settlement Ratios market leader where pricing can be influenced 15 Settlement Ratio as % of Net Premium Years of Account

Underwriting Overview 16

Key points  Senior Underwriter: Mervyn Sugden – 30 years’ experience at Hardy  Helicopters comprise 60% of the premium income to the aviation account  Generating good profits in niches where we have expertise  General aviation rates holding up better than airline  Acceptable profit margins achieved in 2005  Similar approach for 2006 actively managing throughout the market’s cycles Aviation 17 millions Net Premium & Ultimate Net Loss Ratios (UNLR)

Hull - Key points  Senior Underwriter: Adrian Walker  Market leader in fishing vessels, loss of hire and harbour craft  Rating scale approach to underwriting  Bluewater hull – still competitive  Brownwater satisfactory  2006 looks promising  Energy book being expanded specialist risks less prone to competitive pressures 18 Marine: Hull Net Premium & Ultimate Net Loss Ratios millions

Net Premium & Ultimate Net Loss Ratios Cargo & Specie - Key points  Senior Underwriter: Edward Barker – 13 years experience with Hardy  Core account for many years  Broad range of cargoes insured, also jewellers block, fine art and collections  Stable market since 2002  Expect to maintain profit margins without cutting back income  Team strengthened with appointment of Gary Chick, a specialist specie underwriter specialist risks less prone to competitive pressures 19 Marine: Cargo & Specie millions

Net Premium & Ultimate Net Loss Ratios Key points  Senior underwriter: Henry Glasse  Volatile market but positive returns across the cycle  2004 and 2005 suffered from hurricane experience  2006 under review and participation will depend on cost and availability of reinsurance Non-Marine: Catastrophe Excess of Loss 20 millions solutions for difficult and unusual risks

Key points  Influenced by hurricane activity in 2004/5  More diversification over the last 3 years –Direct Property (UK / Europe) – Tim Bartleet –Accident & Health – Henry Glasse –Financial Institutions – Adrian Daws –Political Risk & Trade Credit – George Doughty –Conveyancing – Roy Partington –Most recently, International Direct / Fac Property – Richard Ikin Non-Marine: All Other 21 millions solutions for difficult and unusual risks Net Premium & Ultimate Net Loss Ratios

Summary 22

2006 underwriting capacity £110m: if market changes, we will write more Operational review completed following appointment of new Chairman Continue to seek new niche lines to strengthen business and diversify underwriting portfolio - international direct and facultative property account recently added Will now also work on improving the efficiency of the existing book of business Line sizes will be increased where we have a strong market footprint Market is competitive but not irrational in pricing terms so opportunities for managed growth exist Hardy’s balance sheet is strong and will support growth Summary experts in pricing risk with focus on profit not volume 23

Executive directors Non-executive directors Strong reserves Business led by Hardy Appendices 24

Barbara Merry – Chief Executive Director of the other Hardy group companies 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 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 25

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 Peter Hardy - non-executive director Formerly active underwriter of Hardy Worked in the Lloyd's market since 1959 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 26

Strong Reserves Year 48511, Year , Year , Year Year Year Year Year Year 12105(37) Year 13(312) Current underwriting results routinely supplemented by releases of back year reserves where proven to be unnecessary Reserving approach relies on a variety of statistical methods, supplemented by underwriter judgement. In addition, the reserves which we establish are rigorously challenged by our professional actuarial advisers Our reserves are accordingly robust, at high confidence levels

Class of business% Lead Aviation51 Cargo & specie26 Marine hull67 Non-marine23 Financial institutions25 Direct property26 OVERALL 39 Business led by Hardy 28