Hardy Underwriting Bermuda Ltd. intends to start writing business from a unit based on the Island by May this year.

Chief executive officer Barbara Merry told The Royal Gazette that the new Hardy Bermuda Ltd. operation would employ five or six people and would help to boost the company's reinsurance business in particular.

The unit will operate out of an office in Park Place, at the corner of Front Street and Par-la-Ville Road.

The Lloyd's of London specialty insurer, which changed its domicile from the UK to Bermuda early last year, on Friday announced record profits of $28 million for 2008 — up 43 percent from a year earlier.

"We're just about to take possession of our office in Hamilton and we'll have people in there by May," Ms Merry said. "We hope to write our Florida renewals through Bermuda in May and June."

The Hardy Bermuda team will write business on behalf of Lloyd's Syndicate 382 and will be led by a senior underwriter brought in from the UK and a head of office. Ms Merry said the company intended to hire Bermudians for some roles, including that of underwriting assistant. The company simultaneously said it intends to raise $57 million through issuing 16.5 million extra shares to fund growth to take advantage of rising rates for insurance.

The fully underwritten placing and open offer prices the new shares at 245 pence apiece, or ten percent less than the closing price on Thursday in London trading. The move is subject to shareholder approval on March 31.

Investors appeared supportive of the move, as Hardy's share price held its own after the news was announced on Friday and rose 0.3 percent to 264.5 pence in London trading.

Ms Merry believes the extra capacity will help to double the size of Hardy's business, as insurance rates rise across numerous lines in a hard market that she expects to peak in 2012.

"We are seeing improvements in the market month by month, " Ms Merry said. "We have seen an increase in rates of just over five percent in our renewals across the portfolio."

The industry suffered huge capital erosion last year, as large catastrophe claims combined with huge investment losses in something of a nightmare scenario. The resultant loss of capacity is one reason Ms Merry anticipates that the market will keep on hardening.

"The industry has lost about $85 billion of its capital and we don't see that coming back any time soon," Ms Merry said.

"After other big losses, like 9/11 and Hurricane Katrina, a lot of new capacity came in from private equity and hedge funds, but that's not going to happen this time. I don't think we're going to see a Class of '09."

Hardy said net income gained to £19.5 million pounds ($28 million), or 53.8 pence a share, from £13.6 million pounds, or 38.4 pence, a year earlier. Gross written premiums increased 17 percent to £172 million pounds.

Ms Merry said Hardy's results had benefited strongly from the weakness of the UK pound and also its conservative investment policy. Hardy's invested assets yielded 5.2 percent for the year.

The company was also able to revise its estimated losses from hurricane Gustav and Ike downwards from $23 million to $17.6 million. Hardy writes marine, aviation, property and specialty lines.