1 Preliminary Results Year ended 31 December 2006 Barbara Merry - Chief Executive Jamie MacDiarmid - Finance Director Adrian Walker - Active Underwriter S382 Patrick Gage - Active Underwriter S38Twenty

2 Agenda 2

3  IntroductionBarbara Merry  Results Overview and HighlightsBarbara Merry  Financial PerformanceJamie MacDiarmid  Underwriting ReviewAdrian Walker  Syndicate 38Twenty Patrick Gage  SummaryBarbara Merry  Questions

4 Overview and Highlights 4

5  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

6  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

7  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

8  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

9 Financials 9

10 Preliminary Highlights Full Year 2006 £’000 Full Year 2005 £’000 Gross written premium106,066111,276 Profit before tax16,8377,474 Claims ratio37.8%64.1% Expense ratio39.1%28.6% Combined ratio76.9%92.7% Basic earnings per share34.1p15.3p Post tax return on equity17.8%8.3% Shareholders’ equity76,79767,592 Net assets per share217p191p Net tangible assets per share173p164p Final dividend per share10p8.25p

11 Full Year 2006 £’000 Full Year 2005 £’000 Underwriting year 2006 (2005)1,047(5,315) Underwriting year 2005 (2004)11,2786,603 Underwriting years 2004 (2003) & prior6,1214,963 Total18,4466,251 Investment return6,0255,043 Other income Total income24,98312,097 Other operating expenses(7,506)(4,308) Finance charges(640)(315) Profit before tax16,8377,474 Group Performance

12 Full Year 2006 £’000 Full Year 2005 £’000 Expenses incurred in insurance activities31,30124,419 Foreign exchange (losses) / gains(3,501)2,471 Expenses excluding foreign exchange27,80026,890 Expense Ratio39.1%28.6% Expense ratio excluding foreign exchange34.8%31.4% Other operating expenses7,5064,308 Foreign exchange (losses) / gains(846)1,005 Other expenses excluding foreign exchange6,6605,313 Foreign Exchange

13 As at 31 Dec 2006 £’000 As at 31 Dec 2005 £’000 Absolute return bond fund3,048- Fixed interest42,09133,343 Deposits29,91935,230 Group share of syndicate assets75,05868,573 Equity based investments6,321- Absolute return bond fund2,074- Fixed interest19,71125,072 Deposits30,15112,763 Group assets supporting underwriting58,25737,835 Equity based investments-12,335 Foreign exchange contracts-67 Deposits8,6354,662 Group free investments8,63517,064 Total141,950123,472 Investment Analysis

14 Underwriting Review 14

15 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 millions Net Premium & Ultimate Net Loss Ratios (UNLR)

16 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 Marine: Hull Net Premium & Ultimate Net Loss Ratios millions

17 Net Premium & Ultimate Net Loss Ratios Key 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 millions

18 Net Premium & Ultimate Net Loss Ratios Key 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 millions

19 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 millions Net Premium & Ultimate Net Loss Ratios

20 Syndicate 38Twenty 20

21  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

22  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

23 Summary 23

24 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

25 Appendices 25

26 Structure HUG PLC HUA Patrick Gage/Adrian Walker HUL 382 AJW 3820 PG Marine Hull Cargo/specie Jewellers’ Block Aviation US & International Cat Direct Property (UK & Europe) Int’l direct & facultative property Financial Institutions Political Risks Conveyancing Int’l & US cat Int’l & US direct & facultative property Speciality lines 100% management 100% capital

27 Performance Full year Atrium gain NB 2004, 2005 and 2006 values are reported under IFRS to 2003 are reported under UK GAAP.

28 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

29 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