10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2013

Commission file number 001-13790

HCC Insurance Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0336636
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
13403 Northwest Freeway, Houston, Texas	77040-6094 (Zip Code)
(Address of principal executive offices)

(713) 690-7300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each exchange on which registered:
Common Stock, $1.00 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.

Yes þ    No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨    No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes    ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨
Non-accelerated filer ¨ (Do not  check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨    No þ

The aggregate market value on June 30, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter) of the voting stock held by non-affiliates of the registrant was approximately $4.3 billion. For purposes of the determination of the above-stated amount, only Directors and executive officers are presumed to be affiliates, but neither the registrant nor any such person concede that they are affiliates of the registrant.

The number of shares outstanding of the registrant’s Common Stock, $1.00 par value, at February 14, 2014 was 99.8 million.

DOCUMENTS INCORPORATED BY REFERENCE:

Information called for in Part III of this Form 10-K is incorporated by reference to the registrant’s definitive Proxy Statement to be filed within 120 days of the close of the registrant’s fiscal year in connection with the registrant’s annual meeting of shareholders.

HCC INSURANCE HOLDINGS, INC.

TABLE OF CONTENTS

		Page
ITEM 1.	Business	5
ITEM 1A.	Risk Factors	20
ITEM 1B.	Unresolved Staff Comments	29
ITEM 2.	Properties	29
ITEM 3.	Legal Proceedings	29
ITEM 4.	Mine Safety Disclosures	29
PART II.
ITEM 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
ITEM 6.	Selected Financial Data	32
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	64
ITEM 8.	Financial Statements and Supplementary Data	66
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
ITEM 9A.	Controls and Procedures	66
ITEM 9B.	Other Information	67
PART III.
ITEM 10.	Directors, Executive Officers and Corporate Governance	68
ITEM 11.	Executive Compensation	68
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	69
ITEM 14.	Principal Accountant Fees and Services	69
PART IV.
ITEM 15.	Exhibits and Financial Statement Schedules	69
SIGNATURES		70

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements reflect our current expectations and projections about future events and include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this Report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as growth of our business and operations, business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Generally, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably” or similar expressions indicate forward-looking statements.

Many risks and uncertainties may have an impact on the matters addressed in these forward-looking statements, which could affect our future financial results and performance, including, among other things:

• the effects of catastrophe losses,

• the cyclical nature of the insurance business,

• inherent uncertainties in the loss estimation process, which can adversely impact the adequacy of loss reserves,

• the impact of past and future potential economic or credit market downturns, including any potential ratings downgrade or impairment of the debt securities of sovereign issuers,

• the effects of emerging claim and coverage issues,

• the effects of extensive governmental regulation of the insurance industry,

• changes to the country’s health care delivery system,

• the effects of climate change on the risks we insure,

• potential risk with agents and brokers,

• the effects of industry consolidations,

• our assessment of underwriting risk,

• our retention of risk, which could expose us to potential losses,

• the adequacy of reinsurance protection,

• the ability and willingness of reinsurers to pay balances due us,

• the occurrence of terrorist activities,

• our ability to maintain our competitive position,

• fluctuations in securities markets, which may reduce the value of our investment portfolio, reduce investment income or generate realized investment losses,

• changes in our assigned financial strength ratings,

• our ability to raise capital and funds for liquidity in the future,

• attraction and retention of qualified employees,

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• our ability to successfully expand our business through the acquisition of insurance-related companies,

• impairment of goodwill,

• the ability of our insurance company subsidiaries to pay dividends in needed amounts,

• fluctuations in foreign exchange rates,

• failure of, or loss of security related to, our information technology systems,

• difficulties with outsourcing relationships, and

• change of control.

We describe these risks and uncertainties in greater detail in Item 1A, Risk Factors.

These events or factors could cause our results or performance to differ materially from those we express in our forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this Report, our inclusion of this information is not a representation by us or any other person that our objectives or plans will be achieved.

Our forward-looking statements speak only at the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this Report may not occur.

As used in this Report, unless otherwise required by the context, the terms “we,” “us” and “our” refer to HCC Insurance Holdings, Inc. and its consolidated subsidiaries and the term “HCC” refers only to HCC Insurance Holdings, Inc. All trade names or trademarks appearing in this Report are the property of their respective holders.

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PART I

Item 1. Business

Business Overview

HCC Insurance Holdings, Inc. is a leading specialty insurer with offices in the United States, the United Kingdom, Spain and Ireland. We underwrite over 100 classes of specialty insurance products in approximately 180 countries through five insurance underwriting segments. Our insurance underwriting segments are U.S. Property & Casualty, Professional Liability, Accident & Health, U.S. Surety & Credit and International. We market our insurance products through a network of independent agents and brokers, through managing general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies. Our principal executive office is located in Houston, Texas.

Our diverse portfolio of businesses is largely non-correlated and designed to generate consistent underwriting results regardless of market cycles. As a result, we have achieved an average combined ratio of 85.5% for the period 2009 – 2013, with less volatility over that period than our specialty peers. These profitable underwriting results have driven a continuing increase in shareholders’ equity over the past five years of 40%, while during the same period we paid $322.8 million in dividends to our shareholders and repurchased $665.1 million of our common stock. We generated 9.7% compounded growth in book value per share over that same period. We have been able to grow our gross written premium by 15% during the past five years as well, through a combination of organic growth, acquisitions and new underwriting teams.

We maintain financial strength ratings that are among the highest within the property and casualty insurance industry: “AA (Very Strong)” from Standard & Poor’s Corporation, “A+ (Superior)” from A.M. Best Company, Inc., “AA (Very Strong)” from Fitch Ratings, and “A1 (Good Security)” from Moody’s Investors Service, Inc. for our major domestic and international insurance companies. These ratings provide a competitive advantage in many of our lines of business.

Our Strategy

Our organization is focused on generating consistent, industry-leading combined ratios. By focusing on underwriting profitability, we are able to accomplish our primary objectives of maximizing net earnings and growing book value per share. We are aligned with this strategy through our culture and our performance incentives.

Key elements of our strategy are discussed below:

Diverse, Non-correlated Specialty Lines of Business

We concentrate our insurance writings in diverse specialty lines of business in which we believe we can achieve meaningful underwriting profits and, collectively, generate combined ratios consistently in the mid-80s. The diversity of our product lines results in our operating within five insurance underwriting segments that are largely non-correlated, meaning that insurance or economic cycles impacting one segment may not impact other segments or impact them to a lesser degree. We intentionally built the company around these non-correlated products as we believe this approach increases our chances of generating consistent underwriting results over time and through market cycles.

Our product diversity also provides operational flexibility, which permits us to shift the focus of our insurance underwriting activities among our various lines of business, emphasizing more profitable lines of business during periods of increased premium rates and de-emphasizing less profitable lines during periods of increased competition. We accomplish these shifts by increasing or decreasing the amount of gross premium written or by adjusting the amount of business reinsured.

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Experienced Underwriting Professionals Aligned with Our Strategy

Integral to our strategy is attracting, developing and retaining professionals with the requisite skills and knowledge to underwrite our diverse specialty product lines. These professionals include experienced underwriters in our chosen specialty lines with the authority to make decisions and quickly respond to our clients’ unique and rapidly changing needs. Our senior underwriters generally have more than 15 years of experience in their specialty line of business.

Our underwriters are aligned with our strategy and underwriting culture. This alignment is reinforced by our compensation practices, which are designed to reward disciplined underwriting and the generation of underwriting profit above all other measures. As a result, our underwriters have the expertise, mind-set and incentives to utilize the operational flexibility afforded by our diverse specialty lines of business.

Low Expense Ratio

Core to our overall underwriting performance is the maintenance of a low expense ratio. We accomplish this through disciplined expense management and a flat management structure. We also have a relatively small operational footprint despite the international breadth of our product offerings. We have resisted the tendency for the proliferation of branch offices in the United States and have centered our international business in London and Barcelona where we believe we have access to the lines of specialty international business that we desire.

New Lines of Business and Growth

We have historically accomplished significant growth through the successful acquisition and integration of insurance companies and underwriting agencies, making nearly 50 acquisitions since becoming a public company in 1992. In recent years, we have also actively recruited and hired new underwriting teams that we believe present opportunities for future profit and expansion of our business. We expect to continue to acquire complementary businesses and underwriting teams, while organically growing our current businesses. In considering new teams and potential acquisitions, we remain disciplined in pursuing those that meet our requirements for return on risk-adjusted capital and cultural fit. We believe our infrastructure, ratings and financial strength provide a solid operating platform for our future growth.

Effective Use of Reinsurance

Our financial strength and the profitability of our products provide significant flexibility with respect to the amount and types of reinsurance we buy. Our bias is towards retaining our business, which allows us to be flexible in our reinsurance purchases. Accordingly, the amount of reinsurance we purchase varies depending on the particular risks inherent in the policies underwritten; the pricing, coverage and terms of the reinsurance; and the competitive conditions within the relevant lines of business. Historically, we have purchased more reinsurance on new lines of business where we have less experience. As we gain experience with these new lines of business, we generally retain more of the business. When we decide to retain more underwriting risk in a particular line of business, we do so to retain more of the expected profitability of the business.

Disciplined Investment Portfolio

Our investment objective is to protect and conservatively grow the cash flows and profits generated by our insurance underwriting segments. Our investments include both highly-rated fixed maturity securities and, more recently, equity securities with attractive dividend yields. With both of these investment classes, we have a buy and hold investment philosophy that is focused on maximizing after-tax net investment income while limiting our exposure to investment losses. At all times, we are grounded in our primary organizational goal of generating the majority of our profits through our insurance operations as opposed to taking significant credit or market risk in our investment portfolio.

Segment and Geographic Information

For financial information concerning our operations by segment and geographic data, see “Segment Operations” included in Management’s Discussion and Analysis and Note 12, “Segments” to the Consolidated Financial Statements.

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Insurance Underwriting Operations

Our insurance operations are managed within our insurance underwriting segments. The following provides an overview of each of these segments.

U.S. Property & Casualty Segment

Our U.S. Property & Casualty segment includes specialty lines of insurance such as aviation, small account errors and omissions liability (E&O), public risk, disability, contingency, primary and excess casualty, technical and construction property, title and mortgage reinsurance, residual value, employment practices liability (EPLI), and brown water marine written in the U.S. The majority of the business is primary coverage, and claims are reported and settled on a short to medium-term basis. The aviation, public risk, contingency, technical and construction property, and brown water marine lines are exposed to natural peril and other catastrophic occurrences. Business is produced from wholesale and specialty retail brokers. A portion of our aviation business is written on a direct to consumer basis.

Key lines of business within this segment are described below:

Aviation

Aviation insurance has been a core business for us since 1974. In the United States, we are an industry leader, providing customized coverages for both private and commercial aircraft operators, excluding major U.S. airlines. Private coverage includes planes ranging in size from small single-engine aircraft to executive jets. With our commercial and special risk products, we provide coverage for risks such as air ambulances, vintage war birds and rotor wing aircraft. We also write aviation business internationally, including complex accounts such as national armed forces, law enforcement agencies and regional airlines. We are the lead underwriter on numerous policies in our international aviation portfolio.

Small Account E&O

Our small account E&O business consists of policies with low limits ($5.0 million or less). We provide E&O coverage to many classes of professional service providers, of which architects, engineers and related construction practices represent the largest concentration of insured professionals. Managing general agencies that we have acquired have provided insurance and risk management services for more than twenty years to these classes. We do not write a material amount of E&O coverage for the legal, medical or accounting professions. Our E&O business is produced through both wholesale and specialty retail brokers and is underwritten on both an admitted and surplus lines basis.

Public Risk

We provide insurance coverage and associated risk management services to municipal entities and special districts, mainly serving populations of less than 100,000 in the United States. Types of coverage provided include automobile physical damage, automobile liability, boiler and machinery, crime, EPLI, general liability, inland marine, law enforcement liability, public officials liability, and property. We typically write large limits (greater than $10.0 million) for property coverage, and low limits and medium limits ($5.0 million to $10.0 million) for the other types of coverage.

Disability and Contingency

We are a leading underwriter of specialty sports and entertainment disability products, providing coverage of irreplaceable human assets, such as high profile athletes, entertainers and business executives. As a leader in the contingency market, we provide weather insurance and event cancellation, covering events such as collegiate championships, All-Star Games and large musical concerts. We also write kidnap and ransom insurance, providing coverage throughout the world. We write large limits and purchase significant proportional and excess of loss reinsurance to manage our contingency exposures.

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Casualty

We began this business in 2011 with two new underwriting teams focused on writing primary general liability and excess casualty coverages. The primary casualty unit typically writes low limit policies on a surplus lines basis through wholesale brokers. The excess casualty unit also typically operates on a surplus lines basis through wholesale brokers, but these policies typically have $5.0 million to $10.0 million limits. The attachment points for excess policies are typically below $25.0 million. Due to the underlying nature of the claims associated with casualty business, the final settlement value of claims may not be determined for long periods of time.

Property

We hired a new underwriting team in 2011 to write technical property insurance. This team writes property damage, business interruption and ancillary coverages for petroleum, chemical, petrochemical and process industry companies. In 2013, we hired a new underwriting team to write construction property insurance. The construction property team writes builder’s risk coverage for large projects, such as apartments, hotels, roads and power plants. These two classes of property insurance typically insure risks with large policy limits, and we reinsure substantial portions of the construction property individual policies.

Professional Liability Segment

Our Professional Liability segment primarily consists of our directors’ and officers’ (D&O) liability business. In addition, we write related professional liability and crime business coverages, including large account E&O liability, fiduciary liability, fidelity and bankers blanket bonds, and EPLI for some D&O policyholders. The business is written for both U.S.-based and International-based policyholders from our offices in the United States, the United Kingdom and Spain. A significant amount of the business is received from major worldwide insurance brokerage companies. Along with the specialization and experience of our underwriters, HCC’s financial strength ratings help us maintain a competitive position in our D&O business.

We write both primary and excess policies for public and private companies. Our policies cover a large number of commercial classes and financial institution classes, which include investment banks, depository institutions, private equity companies, insurance companies, and brokers and investment advisors. A large amount of the public company and financial institution business is large limit that is subject to severity of loss on individual policies, as well as fluctuations in frequency of loss from changes in worldwide business and economic environments. Coverage is typically provided through “claims made” policies. However, the final settlement value of claims may not be determined for long periods of time due to the underlying nature of the claims, which involve complex litigation by third parties against our insureds.

Accident & Health Segment

Our Accident & Health segment includes medical stop-loss and short-term domestic and international medical products written in the United States. The majority of the business covers employer sponsored groups of employees, and claims are reported and settled within 12 to 15 months for each reporting year.

We are a recognized market leader in the specialty accident and health industry. Since 1996, we have achieved growth primarily through numerous acquisitions and ongoing development of innovative products. As a result of our acquisitions, we have fortified our market position and retained an experienced senior management team with an average of over 20 years of experience. Our more recent growth has been organic as we leverage our scale and relationships with brokers. Our specialized product line combined with disciplined underwriting, innovative claims management and cost-efficient operations provides a superior operating margin for this segment.

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Key lines of business within this segment are described below:

Medical Stop-Loss

Medical stop-loss insurance provides protection for catastrophic losses to employers that self-fund their employee benefit plans. We deliver this insurance to employers through insurance brokers, consultants and third party administrators. Our underwriting offices are strategically located throughout the United States, allowing us to geographically manage the business. Our highly-trained medical stop-loss claims unit exclusively deals with the complex nature of catastrophic health claims and works closely with employers and their plan administrators to control plan costs.

Short-term Domestic and International Medical

Our short-term medical insurance provides temporary coverage, up to eleven months, for individuals in the United States without primary insurance during transitional periods. Our international medical insurance plans provide health insurance and specialized travel services to individuals outside their home country. Several types of international medical products are offered, including short and long-term individual and group plans. Both the short-term domestic and international medical products are purchased through an Internet portal accessed by consumers, brokers and consultants.

U.S. Surety & Credit Segment

Our U.S. Surety & Credit segment conducts business through separate specialty surety underwriting operations and credit underwriting operations, which are described below:

Surety

Our surety business includes contract surety bonds, commercial surety bonds and bail bonds. A large amount of our contract surety book is characterized by relatively small limits and premiums. Significant classes within commercial surety are license and permit bonds, court bonds for fiduciaries as well as appeal bonds, and plug and abandonment bonds for the energy sector. Most of our commercial surety bond business is small limit and small premium business, but we also have a large commercial surety business that has higher limits. Our surety business is typically received from a large number of independent agents specializing in these coverages or from specialized units of large brokerage companies.

The surety industry has lower expected loss ratios and higher expense ratios than most areas of the property and casualty insurance industry. The lower expected loss ratios reflect the fact that the bond serves as financial protection to a third party in the event a principal is unable to honor an obligation, rather than an insurance policy that pays on behalf of a policyholder. In the event of a claim against a bond, we often receive subrogation recovery against the loss, including recovery from the bond principal. The higher expense ratios result from higher acquisition and underwriting expenses than in most property and casualty lines. The claims process can be complex, particularly on contract surety claims, and subrogation recovery frequently takes extended periods of time, resulting in medium tail business.

Credit

Our credit business provides insurance policies that insure against the risk of non-payment on trade-related transactions and financings. These policies are provided to manufacturers, banks and trading companies. Coverage is provided on a single debtor or multiple debtor basis, with multi-debtor coverage generally provided on an excess of loss basis. Political risk insurance is also provided. The business is large limit and large premium business. Underwriting includes credit quality analysis of individual transactions, as well as controlling aggregation of limits by debtor and by country. Potential claims are reported promptly. While most policies have a term of two years or less, coverage can be as long as five years. In most claims, there is the possibility of subrogation recoveries, although these can extend over several years. As a result, the business has a medium tail.

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International Segment

Our International segment includes energy, property treaty, liability, surety, credit, property (direct and facultative), ocean marine, accident and health and other smaller product lines written from operations in the United Kingdom, Spain and Ireland. A large part of the business is written in London through both our insurance company operations and our Lloyd’s syndicate and is primarily received from the major worldwide insurance brokerage companies.

Our energy, ocean marine, property treaty, property and accident and health lines are exposed to natural peril and other catastrophic occurrences. The underwriting process for these lines includes not only evaluation of individual risks but also aggregations of limits by peril by catastrophe area.

Key lines of business within this segment are described below:

Energy

We provide coverage for insureds involved in all areas of energy, ranging from upstream exploration and production, through midstream storage and transmission, to downstream refining and petrochemical activities. Offshore risks include drilling rigs, production and gathering platforms, and pipelines. We underwrite physical damage, liability, business interruption and various ancillary coverages. The business is characterized by large limits and large premiums and includes both primary and excess policies. Claims for this business are reported and settled on a medium-term basis.

Property Treaty

Our property treaty line provides reinsurance to a variety of clients worldwide, offering a range of treaty coverages including property catastrophe, property risk and engineering, which covers property risks during construction. Catastrophe excess of loss business is the largest portion of the portfolio. The business is characterized by large limits, large premiums and short to medium-tail claims reporting and settlement.

Liability

Our liability lines primarily include U.K. professional indemnity, employers’ liability and public liability coverages. Professional indemnity coverages are focused on small and medium size enterprises and cover a range of professions. The employers’ liability and public liability lines provide coverage on both a primary and excess basis for a range of companies. The business is characterized by small to medium limits and long-tail claims reporting and settlement.

Surety & Credit

Our surety business specializes in performance bonds for construction companies and also writes customs, pension, environment, auctioneer’s and other miscellaneous classes of bonds in the United Kingdom, Ireland, Spain and France. The business is written directly with the client or through insurance brokers. Our credit business is written through the U.K. specialist broker market with a focus on the construction sector. The credit business is characterized by small to medium limits and short-tail claims reporting and settlement.

Property (Direct and Facultative)

We write direct and facultative property coverage on a following basis, often with catastrophe exposure, for numerous classes including manufacturing, retail, real estate, hotels and municipalities. We provide coverage for both physical damage and business interruption on a worldwide basis to companies ranging in size from small to multinational.

Investing Segment

The Investing segment includes our consolidated investment portfolio, as well as the results from these investments, including investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments. We manage and evaluate our investments centrally as we believe this approach maximizes our investment performance and allows our underwriting segment managers to focus solely on the generation of underwriting results.

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Our investment objectives are as follows:

• Preserve and grow our shareholders’ equity,

• Maximize net investment income on an after-tax basis,

• Maintain appropriate liquidity to satisfy the requirements of current operations and insurance reserve obligations,

• Comply with all applicable regulatory requirements, and

• Effectively hedge the economic exposures of insurance liabilities in their functional currency.

For additional discussion about the composition and results of our Investing Segment, see “Investing Segment” included in Management’s Discussion and Analysis and Note 2, “Investments” to the Consolidated Financial Statements.

Enterprise Risk Management

Enterprise Risk Management (ERM) is an integral part of our business and financial management processes, from our strategic planning process to our day-to-day operations. ERM helps us identify, analyze, assess, monitor, manage and communicate material risks (both internal and external) and opportunities that may affect our performance and reputation. Our business objectives drive the company’s activities and, therefore, the key objectives of our ERM process are to support our decision making and to promote a culture of risk awareness throughout the company, thereby allowing us to preserve shareholders’ equity and grow book value.

Our ERM initiative is supported by the Enterprise Risk Oversight Committee of our Board of Directors. Our internal risk management functions are led by the Senior Vice President of our Enterprise Risk Management Department, who reports to the Chief Executive Officer. In addition, an internal Risk Committee, comprised of our senior executives, reports to the Chief Executive Officer and assists the Board in identifying and assessing risks.

We use a variety of methods and tools company-wide in our risk assessment and management efforts. Our key methods and tools include: 1) underwriting risk management, in which we set underwriting authority limits and approvals required for exceptions to established limits, 2) natural catastrophic risk management, where a variety of catastrophe modeling techniques, both internal and external, are used to monitor exposures against our stated risk tolerance, 3) a Reinsurance Security Policy Committee, which is responsible for monitoring reinsurers, reinsurance recoverable balances and changes in a reinsurer’s financial condition, 4) investment risk management, where the Investment and Finance Committee of our Board of Directors provides oversight of our capital and financial resources, as well as our investment policies, strategies, transactions and investment performance, 5) the use of our economic capital model, which we integrate into our planning, 6) the use of outside experts to perform scenario testing, where deemed beneficial and 7) a risk reporting framework, including a risk dashboard, to regularly communicate to management and the Board of Directors our risk profile related to our risk appetite and tolerances. We plan to continue to invest in resources and technology to support our ERM process.

Reserves for Insurance Claims

We underwrite insurance risks and establish actual and estimated reserves for insurance claims under the policies we have written. Our gross reserves for insurance claims, shown as loss and loss adjustment expense payable on our consolidated balance sheet, consist of reserves for reported claims (referred to herein as case reserves) and reserves for incurred but not reported losses (referred to herein as IBNR). Our IBNR reserves also cover potential movement in claims already reported. Our net reserves reflect the offset of reinsurance recoverables due to us from third party reinsurers, based upon the contractual terms of our reinsurance agreements. In the normal course of our business, we cede a portion of our premium to domestic and foreign reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge us from liability to our policyholders, we participate in reinsurance agreements to limit our loss exposure and to protect us against catastrophic losses.

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Our recorded reserves represent management’s best estimate of unpaid losses and loss adjustment expense as of each quarter end. The process of estimating our reserves is inherently uncertain and involves a considerable degree of judgment involving our management review and actuarial processes. The estimate of our reserves is increased or decreased as more information becomes known about the frequency and severity of losses for individual years. We believe our review process is effective, such that any required changes in reserves are recognized in the period of change as soon as the need for the change is evident. See “Critical Accounting Policies – Reserves” included in Management’s Discussion and Analysis for a full discussion of our reserving policies and procedures.

Loss development represents an increase or decrease in our estimates of ultimate losses related to business written in prior accident years. A redundancy, also referred to as favorable development, means our original ultimate loss estimate was higher than the current estimate. A deficiency, or adverse development, means our current ultimate loss estimate is higher than the original estimate. A loss development triangle details the subsequent years’ changes in our loss estimates from the prior loss estimates, based on experience at the end of each succeeding year.

The table below shows development of our reserves from 2003 through 2013, as of December 31, 2013. The first line shows our net reserves, including reserves for IBNR, recorded on our consolidated balance sheet at the indicated year-end. The first section of the table shows, by year, the cumulative amount of net losses and loss adjustment expenses paid at the end of each succeeding year. The second section shows the re-estimated net reserves in later years for the years indicated. The cumulative redundancy (deficiency) line represents the difference between the latest re-estimated net reserves and the originally estimated net reserves. The bottom section of the table shows our gross reserves and reinsurance recoverables, as well as re-estimated amounts at the indicated year-end.

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(in thousands)	2013		2012			2011			2010			2009			2008		2007		2006		2005		2004			2003
Reserves, net of reinsurance	$	2,779,401	$	2,749,803		$	2,683,483		$	2,537,772		$	2,555,840		$	2,416,271	$	2,342,800	$	2,108,961	$	1,533,433	$	1,059,283		$	705,200
Reserve adjustments*		-		-			14,705			20,969			32,569			59,303		70,242		46,761		21,997		6,613			-
Adjusted reserves, net of reinsurance		2,779,401		2,749,803			2,698,188			2,558,741			2,588,409			2,475,574		2,413,042		2,155,722		1,555,430		1,065,896			705,200
Cumulative paid, net of reinsurance, at:
One year later				736,351			729,335			726,445			763,140			618,699		687,675		556,096		222,336		172,224			141,677
Two years later							1,109,699			1,114,541			1,144,929			1,001,369		940,636		858,586		420,816		195,663			135,623
Three years later										1,369,086			1,432,617			1,263,091		1,177,900		1,013,122		588,659		337,330			124,522
Four years later													1,645,216			1,408,275		1,331,379		1,176,404		702,072		424,308			217,827
Five years later																1,604,167		1,392,797		1,299,663		822,133		495,642			313,315
Six years later																		1,543,849		1,375,431		927,657		581,418			376,903
Seven years later																				1,448,100		988,152		661,517			442,736
Eight years later																						1,053,879		701,979			498,399
Nine years later																								763,445			542,138
Ten years later																											592,519
Re-estimated liability, net of reinsurance, at:
End of year		2,779,401		2,749,803			2,698,188			2,558,741			2,588,409			2,475,574		2,413,042		2,155,722		1,555,430		1,065,896			705,200
One year later				2,676,061			2,628,177			2,568,888			2,565,746			2,422,050		2,330,671		2,129,325		1,548,904		1,091,290			735,678
Two years later							2,608,244			2,506,803			2,525,266			2,367,979		2,241,422		2,018,898		1,522,411		1,090,568			770,497
Three years later										2,502,208			2,482,192			2,292,210		2,184,222		1,919,507		1,434,327		1,084,585			792,099
Four years later													2,518,979			2,254,239		2,107,876		1,887,146		1,364,822		1,043,778			808,261
Five years later																2,255,310		2,017,782		1,825,976		1,342,769		1,019,071			794,740
Six years later																		2,027,316		1,797,913		1,292,149		1,019,322			792,896
Seven years later																				1,839,545		1,316,416		983,932			783,442
Eight years later																						1,389,602		1,003,117			782,921
Nine years later																								1,071,886			798,702
Ten years later																											869,994
Cumulative redundancy (deficiency), net of reinsurance			$	73,742		$	89,944		$	56,533		$	69,430		$	220,264	$	385,726	$	316,177	$	165,828	($	5,990	)	($	164,794	)
Gross reserves, end of year*	$	3,902,132	$	3,767,850		$	3,678,271		$	3,497,954		$	3,528,628		$	3,484,886	$	3,309,621	$	3,150,213	$	2,838,231	$	2,096,940		$	1,525,313
Reinsurance recoverables*		1,122,731		1,018,047			980,083			939,213			940,219			1,009,312		896,579		994,491		1,282,801		1,031,044			820,113
Net reserves, end of year*	$	2,779,401	$	2,749,803		$	2,698,188		$	2,558,741		$	2,588,409		$	2,475,574	$	2,413,042	$	2,155,722	$	1,555,430	$	1,065,896		$	705,200
Re-estimated gross reserves	$	3,902,132	$	3,877,721		$	3,823,902		$	3,680,138		$	3,706,511		$	3,471,630	$	3,075,327	$	2,881,754	$	2,716,279	$	2,191,705		$	1,869,702
Re-estimated reinsurance recoverables		1,122,731		1,201,660			1,215,658			1,177,930			1,187,532			1,216,320		1,048,011		1,042,209		1,326,677		1,119,819			999,708
Re-estimated net reserves	$	2,779,401	$	2,676,061		$	2,608,244		$	2,502,208		$	2,518,979		$	2,255,310	$	2,027,316	$	1,839,545	$	1,389,602	$	1,071,886		$	869,994
Cumulative gross redundancy (deficiency)			($	109,871	)	($	145,631	)	($	182,184	)	($	177,883	)	$	13,256	$	234,294	$	268,459	$	121,952	($	94,765	)	($	344,389	)

* Adjusted for acquisitions and dispositions.

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Most of our lines of business have historically experienced favorable development. The cumulative redundancies shown in the loss triangle table resulted from the favorable development that we reported in our financial statements from 2007 through 2013. The amounts in the table below (in thousands) exclude adverse development related to both our diversified financial products in 2011 and the Spanish surety bonds in 2011, 2012 and 2013, which are discussed following the table.

	Gross		Net
2013	$	139,968	$	144,063
2012		159,110		118,911
2011		171,617		106,830
2010		16,352		22,663
2009		90,435		53,524
2008		72,044		82,371
2007		90,621		26,397

The majority of the net favorable development in the table above related to these products: 1) D&O in our Professional Liability segment, for the 2002 – 2006 underwriting years, 2) U.K. professional liability, energy and property (including redundancy on the 2005, 2008 and 2011 catastrophe losses) in our International segment, 3) surety in our U.S. Surety & Credit segment and 4) an assumed quota share program that we wrote from 2003 to 2008 in our U.S. Property & Casualty segment.

During the past three years, we increased our reserves related to a specific class of Spanish surety bonds, the majority of which were written prior to 2006. We increased net reserves by $70.3 million in 2013, $48.9 million in 2012 and $12.8 million in 2011. See “Segment Operations – International Segment” included in Management’s Discussion and Analysis for additional discussion.

During 2011, we increased our net reserves by $104.2 million for the diversified financial products (DFP) line of business. This increase primarily affected the 2010 and 2009 accident years. See “Segment Operations – Professional Liability Segment” included in Management’s Discussion and Analysis for additional discussion.

The early years in the loss triangle table were also impacted by adverse development from a block of run-off assumed accident and health reinsurance business in our Exited Lines, recorded in the years shown in the following table (in thousands):

	Gross		Net
2006	$	15,054	$	25,097
2005		49,775		34,970
2004		127,707		27,326

This accident and health business was primarily excess coverage for large losses related to workers’ compensation policies. The adverse development affected the 2001 and prior accident years and was recorded due to our receipt of additional information and our continuing evaluation of reserves on this business. Losses tend to develop and affect excess covers considerably later than the original loss was incurred, which causes late reporting to us. Additionally, certain primary insurance companies that we reinsured experienced financial difficulties and were liquidated, leaving guaranty funds responsible for administering the business. While we have attempted to anticipate these conditions, there remains uncertainty in estimating these reserves, and there could be additional development of these reserves in the future.

A large proportion of the net adverse development on this accident and health business resulted from reinsurance commutations totaling $20.2 million in 2006 and $26.0 million in 2005. Commutations can produce adverse development since, under generally accepted accounting principles, any excess of undiscounted reserves assumed over assets received must be recorded as a loss at the time the commutation is completed. Economically, the loss generally represents the discount for the time value of money that will be earned over the payout period of the reserves. Thus, the loss may be recouped as investment income is earned on the assets received.

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Regulation

The business of insurance is extensively regulated by the government. Our business depends on our compliance with applicable laws and regulations and our ability to maintain valid licenses and approvals for our operations. Generally, regulatory authorities are vested with broad discretion to grant, renew and revoke licenses and approvals and to implement regulations governing the business and operations of insurers, insurance agents, brokers and third party administrators. In all jurisdictions, the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities.

United States

State Governments

At this time, the insurance business in the United States is regulated primarily by the individual states. Although the extent of the regulation varies, it relates to, among other things: 1) standards of solvency that must be met and maintained, 2) licensing of insurers and their agents, 3) approval of policy forms, 4) restrictions on the size of risks that may be insured under a single policy, 5) regulation of market conduct, as well as other underwriting claim practices, 6) premium rates, 7) reserves and provisions for unearned premium, losses and other obligations, 8) the nature of and limitations on investments and 9) usage of certain methods of accounting for statutory reporting purposes.

State insurance regulations are intended primarily for the protection of policyholders rather than shareholders. The state insurance departments monitor compliance with regulations through periodic reporting procedures and examinations. The quarterly and annual financial reports to the state insurance regulators utilize statutory accounting principles, which are different from generally accepted accounting principles (GAAP) that we use in our reports to shareholders. Statutory accounting principles, in keeping with the intent to assure the protection of policyholders, are generally based on a solvency concept, while GAAP is based on a going-concern concept.

The state insurance regulators utilize risk-based capital measurements, developed by the National Association of Insurance Commissioners (NAIC), to identify insurance companies that potentially are inadequately capitalized. The NAIC’s risk-based capital model is intended to establish minimum capital thresholds that vary with the size and mix of an insurance company’s business and assets. It is designed to identify companies with capital levels that may require regulatory attention. At December 31, 2013, each of our domestic insurance companies’ total adjusted capital was significantly in excess of the authorized control level risk-based capital.

In September 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment (ORSA) Model Act which, following enactment at the state level, will be effective in 2015. ORSA requires U.S. insurance companies and their group to maintain an ERM framework, perform an annual internal assessment of risk associated with the insurer’s business plan, and assess the sufficiency of capital required to support the plan. While we have an effective ERM framework, we are currently unable to predict the full impact of complying with ORSA.

The U.S. state insurance regulations also affect the payment of dividends and other distributions by insurance companies to their shareholders. Generally, insurance companies are limited by these regulations in the payment of dividends above a specified level. Dividends in excess of those thresholds are “extraordinary dividends” and are subject to prior regulatory approval. Some states require prior regulatory approval for all dividends.

Because we are an insurance holding company, we are subject to the insurance holding company system regulatory requirements of a number of states. Under these regulations, we are required to report information regarding our capital structure, financial condition and management. We are also required to provide prior notice to, or seek the prior approval of, insurance regulatory authorities of certain agreements and transactions between our affiliated companies. These agreements and transactions must satisfy certain regulatory requirements.

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Federal Government

Although the U.S. Federal government has not historically regulated the insurance industry, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), enacted in July 2010, expands the federal presence in insurance oversight. The Dodd-Frank Act’s requirements include streamlining the state-based regulation of reinsurance and non-admitted insurance. The Dodd-Frank Act also established the Federal Insurance Office (FIO) within the U.S. Department of the Treasury with powers over most lines of insurance, and the Financial Stability Oversight Council (FSOC).

The FIO is authorized to gather data and information to monitor aspects of the insurance industry, identify issues in the regulation of insurers about insurance matters, and preempt state insurance measures under certain circumstances. Although the FIO is prohibited from directly regulating the business of insurance, the FIO may also recommend enhanced regulations to state regulatory authorities or recommend to the FSOC that it designate an insurer as a “systemically important financial institution” (SIFI). An insurer designated as a SIFI could be subject to Federal Reserve supervision and heightened regulatory standards. While we do not believe that HCC or any of its companies qualify as a SIFI, it is possible the FSOC could conclude otherwise.

United Kingdom and Spain

On April 1, 2013, the United Kingdom reshaped the regulation of all financial services companies, including the insurance industry, by separating the Financial Services Authority into three separate bodies – the Financial Policy Committee (FPC), the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) – with these responsibilities:

• FPC is a committee within the Bank of England responsible for identifying emerging risks to the financial system as a whole and providing strategic direction for the entire regulatory regime.

• PRA is responsible for promoting the safety and soundness of systemically important firms, including insurers, and ensuring policyholders are protected in the event of a company’s failure.

• FCA is responsible for overseeing consumer protection, promoting effective competition and protecting the integrity of the UK financial system.

We maintain 100% participation in Lloyd’s Syndicate 4141. Under our membership agreement with Lloyd’s, we must comply with all Lloyd’s rules and regulations, as well as applicable provisions of the Lloyd’s Acts and Financial Services and Markets Act 2000. Our underwriting capacity on Syndicate 4141 must be supported by a deposit of cash, securities or letters of credit (referred to as “Funds at Lloyd’s”), which is determined annually by Lloyd’s. Lloyd’s requires annual approval of Syndicate 4141’s business plan, including maximum underwriting capacity, and may require changes to any business plan or additional capital to support the underwriting capacity. If a member of Lloyd’s is unable to pay its debts to policyholders, such debts may be payable by the Lloyd’s Central Fund. Lloyd’s has the power to assess current Lloyd’s members up to 3% of the member’s underwriting capacity in any one year as a Central Fund contribution.

In Spain, the primary regulator of our insurance operations is the Spanish General Directorate of Insurance and Pension Funds of the Ministry of the Economy and Treasury (Dirección General de Seguros y Fondos de Pensiones del Ministerio de Economía y Hacienda) (DGS). The DGS oversees compliance with periodic reporting requirements, risk and reserves assessment, and various other requirements.

In the U.K. and Spain, our insurance companies will be required to meet the requirements of the European Union’s (EU) new financial services regulatory regime known as “Solvency II,” which is built on a risk-based approach to setting capital requirements for insurers. Solvency II establishes a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements. Solvency II is effective on January 1, 2016. We have made significant progress in meeting the Solvency II requirements in our U.K. companies; however, the broader impact to us will depend on whether the U.S. insurance regulatory regime is deemed “equivalent” to Solvency II. Whether the U.S. insurance regulatory regime will be deemed “equivalent” is still under consideration by EU authorities, so we are currently unable to predict the full impact of the Solvency II implementation.

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The Financial Stability Board (FSB), consisting of representatives of national financial authorities of the G20 nations, has issued a series of frameworks and recommendations intended to produce significant changes in how financial companies should be regulated. These frameworks and recommendations address such issues as financial group supervision, capital and solvency standards, systemic economic risk, corporate governance including compensation, and related issues associated with responses to the financial crisis. The FSB has directed the International Association of Insurance Supervisors (IAIS) to create standards relative to these areas and incorporate them in that body’s Insurance Core Principles, which form the baseline for how countries’ financial services regulatory efforts are measured relative to the insurance sector. That measurement is made by periodic Financial Sector Assessment Program (FSAP) reviews conducted by the World Bank and the International Monetary Fund, and the reports thereon spur development of country-specific additional or amended regulatory changes. Lawmakers and regulatory authorities in a number of jurisdictions in which our companies conduct business have already begun implementing legislative and regulatory changes consistent with these recommendations.

Insurance Companies

The following is a list of our insurance companies that are subject to regulation:

United States

• American Contractors Indemnity Company

• Avemco Insurance Company

• HCC Life Insurance Company

• HCC Specialty Insurance Company

• Houston Casualty Company

• Perico Life Insurance Company

• United States Surety Company

• U.S. Specialty Insurance Company

United Kingdom

• HCC International Insurance Company PLC

• Houston Casualty Company-London

• Lloyd’s of London Syndicate 4141

Spain

• Houston Casualty Company Europe, Seguros y Reaseguros, S.A.

Bermuda

• HCC Reinsurance Company Limited

Agencies

The jurisdictions in which each of our underwriting agencies operate impose licensing and other requirements. These regulations relate primarily to: 1) licensing as agents, brokers, reinsurance brokers, managing general agents or third party administrators, 2) advertising and business practice rules, 3) contractual requirements, 4) limitations on authority, 5) financial security and 6) record keeping requirements.

The following is a list of our underwriting agencies that are subject to regulation:

• HCC Global Financial Products

• HCC Indemnity Guaranty Agency

• HCC Medical Insurance Services

• HCC Specialty

• HCC Underwriting Agency

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Terrorism Risk Insurance Act

The Federal Terrorism Risk Insurance Act (TRIA) was initially enacted in 2002 to ensure the availability of insurance coverage for certain acts of terrorism, as defined in the TRIA. The Terrorism Risk Insurance Program Reauthorization Act of 2007 (Reauthorization Act) extended the program through December 31, 2014 and revised the definition of “act of terrorism.” Under the Reauthorization Act, we are required to offer terrorism coverage to our commercial policyholders in certain lines of business, for which we may, when warranted, charge an additional premium. The policyholders may or may not accept such coverage. The Reauthorization Act requires a $100.0 million terrorism-related loss event to trigger coverage. The Federal government will reimburse 85% of an insurer’s losses in excess of the insurer’s deductible, up to the maximum annual Federal liability of $100.0 billion. Our deductible for 2014 is approximately $141.7 million, which we would have to meet before the Federal reimbursement would occur. It is unknown at this time if the law will be extended beyond December 31, 2014, and, if so, on what terms.

Executive Officers

The following is a list of our Executive Officers:

Name	Principal occupation during past five years	Age	Served HCC     since
William N. Burke, Jr.	Mr. Burke has served as our President and Chief Operating Officer since December 2012. He previously served as our Executive Vice President and Chief Operating Officer from March 2012 until December 2012. Prior to joining HCC, Mr. Burke served as Chief Operating Officer for Aon Risk Solutions – US Retail. He commenced his insurance career in 1977 with the Home Insurance Company and has most recently been with Aon Corporation and its successor company for almost 30 years.	58	2012
Mark W. Callahan	Mr. Callahan has served as our Executive Vice President since August 2010. During that time, he also served as our Chief Underwriting Officer from March 2011 to March 2013 and our Chief Actuary from August 2010 to March 2011. Prior to joining HCC, Mr. Callahan served as the Chief Risk, Underwriting, and Actuarial Services Officer for XL Insurance. During 12 years there, he also held the positions of Senior Vice President and Underwriter for XL Financial Solutions and Executive Vice President and Chief Actuarial Officer for XL Insurance.	43	2010
Barry J. Cook	Mr. Cook has served as our Executive Vice President of International Operations and Chief Executive Officer of HCC Insurance Holdings (International) Limited, with oversight for our international operations, since 2006. From 1992 to 2005, Mr. Cook served as Chief Executive Officer of Rattner Mackenzie Limited, which we acquired in 1999.	53	1999
Brad T. Irick	Mr. Irick has served as our Executive Vice President since May 2010 and our Chief Financial Officer since August 2010. Prior to joining HCC, Mr. Irick was with PricewaterhouseCoopers LLC for 18 years, where he served as audit and advisory partner for several multinational public insurance company clients, including HCC between 2004 and the first half of 2007. Mr. Irick is a Certified Public Accountant.	47	2010

18

Name	Principal occupation during past five years	Age	Served HCC     since
Craig J. Kelbel	Mr. Kelbel has served as our Executive Vice President of Accident & Health Operations since 2002 and President and Chief Executive Officer of HCC Life Insurance Company since 2005. Prior to joining HCC, Mr. Kelbel was the President of USBenefits Insurance Services, Inc. and Vice President of its parent company, The Centris Group, Inc., which HCC acquired in 1999. Mr. Kelbel has over 35 years of experience in the insurance industry.	59	1999
Pamela J. Penny	Ms. Penny has served as our Executive Vice President and Chief Accounting Officer since 2008. She previously served as Senior Vice President – Finance from 2004 to November 2008. Prior to joining HCC, Ms. Penny served in several financial management positions, including Senior Vice President & Controller of American General Corporation (acquired by American International Group, Inc.) and a partner in the international accounting firm KPMG LLP. Ms. Penny is a Certified Public Accountant.	59	2004
Randy D. Rinicella	Mr. Rinicella has served as our Senior Vice President, General Counsel and Secretary since 2007. Prior to joining HCC, Mr. Rinicella was Vice President, General Counsel and Secretary of Dresser-Rand Group, Inc., a publicly-traded equipment supplier to the worldwide oil, gas, petrochemical and process industries, from 2005 until 2007. Mr. Rinicella was a shareholder at the national law firm of Buchanan Ingersoll PC from 2004 until 2005, where he was a member of the firm’s corporate finance & technology practice group.	56	2007
Michael J. Schell	Mr. Schell has served as our Executive Vice President since 2002. Prior to joining HCC, Mr. Schell was with the St. Paul Companies for 25 years, most recently as President and Chief Operating Officer of St. Paul Re.	63	2002
Christopher J.B. Williams	Mr. Williams has served as our Chief Executive Officer since December 2012 and as a member of our Board of Directors since May 2007, including as Chairman of the Board from August 2008 to May 2011. He previously served as our President from May 2011 to December 2012. Before joining HCC, Mr. Williams was Chairman of Wattle Creek Winery from 2005 to May 2011. Prior to his retirement in 2005, he served as the National Director for Life, Accident & Health of Willis Re. Mr. Williams currently serves as a member of the Investment and Finance Committee and the Enterprise Risk Oversight Committee of our Board.	57	2011

Employees

At December 31, 2013, we had 1,900 employees. We are not a party to any collective bargaining agreement and have not experienced work stoppages or strikes as a result of labor disputes. We consider our employee relations to be good.

19

Available Information

The public may read and copy any materials that we file with the Securities and Exchange Commission (SEC) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains financial reports, proxy statements and other information that we file electronically with the SEC.

We maintain an Internet website at www.hcc.com. The reference to our Internet website address in this Report does not constitute the incorporation by reference of the information contained at the website in this Report. We will make available, free of charge through publication on our Internet website, a copy of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K or amendments to those reports, filed with or furnished to the SEC.

Item 1A. Risk Factors

Risks Relating to our Industry

Because we are a property and casualty insurer, our business may suffer as a result of unforeseen catastrophe losses.

Property and casualty insurers are subject to claims arising from catastrophes. Catastrophic losses have had a significant impact on our historical results. Catastrophes can be caused by various events, including hurricanes, tsunamis, tornados, windstorms, earthquakes, hailstorms, explosions, flooding, severe winter weather and fires and may include man-made events, such as terrorist attacks and systemic risks. The incidence, frequency and severity of catastrophes are inherently unpredictable. Some scientists believe that in recent years, changing climate conditions have added to the unpredictability and frequency of natural disasters.

The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. Catastrophes can cause losses in a variety of our property and casualty lines, and most of our past catastrophe-related claims have resulted from hurricanes and earthquakes; however, we experienced significant losses from the 2001 terrorist attack in the U.S. and the 2011 tsunami in Japan. A large part of our exposure to catastrophes comes from our International segment, particularly related to our property, property treaty and energy businesses.

Although we typically purchase reinsurance protection for risks we believe bear a significant level of catastrophe exposure, the nature or magnitude of losses attributed to a catastrophic event or events may result in losses that exceed our reinsurance protection. It is therefore possible that a catastrophic event or multiple catastrophic events could have a material adverse effect on our financial position, results of operations and liquidity.

The insurance and reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable premium rates, which could cause our results to fluctuate.

The insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity, as well as periods when shortages of capacity permitted an increase in pricing and, thus, more favorable premium levels. An increase in premium levels is often, over time, offset by an increasing supply of insurance and reinsurance capacity, either from capital provided by new entrants or by additional capital committed by existing insurers or reinsurers, which may cause prices to decrease. In addition, changes in the frequency and severity of losses suffered by insureds and insurers may affect the cycles of the insurance and reinsurance business significantly.

Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms and fewer opportunities to underwrite insurance risks, which could have a material adverse effect on our results of operations and cash flows. These factors may also cause the price of our common stock to be volatile.

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Our loss reserves are based on an estimate of our future liability, which may prove to be inadequate.

We maintain loss reserves to cover our estimated liability for unpaid losses and loss adjustment expenses, including legal and other fees, for reported and unreported claims incurred at the end of each accounting period. Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what we expect the ultimate settlement and administration of claims will cost. These estimates are based on our assessment of facts and circumstances then known, as well as estimates of future trends in severity of claims, frequency of claims, judicial theories of liability and other factors. These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, climate change, economic and judicial trends, and legislative changes.

Volatility in the financial markets, economic events, legal/regulatory changes and other external factors may result in an increase in the number of claims and the severity of the claims reported, particularly in lines of business such as directors’ and officers’ liability, errors and omissions liability and trade credit insurance. Many of these items are not directly quantifiable in advance. Additionally, there may be a significant reporting delay between the occurrence of the insured event and the time it is reported to us.

The inherent uncertainties of estimating reserves are greater for certain types of liabilities, particularly those in which the various considerations affecting the type of claim are subject to change and in which long periods of time may elapse before a definitive determination of liability is made. Reserve estimates are continually refined in a regular and ongoing process as experience develops and further claims are reported and settled. Adjustments to our loss and loss adjustment expenses are reflected in our results of operations in the periods in which such estimates are changed. Because setting reserves is inherently uncertain, there can be no assurance that current reserves will prove adequate in light of subsequent events. If actual claims prove to be greater than our reserves, our financial position, results of operations and liquidity may be materially adversely affected.

We may be impacted by claims relating to economic or credit market downturns.

We write corporate directors’ and officers’ liability, errors and omissions liability and other insurance coverages for financial institutions and financial services companies. We also write trade credit business for policyholders who have credit and political risk, as well as policies in certain countries that have had adverse economic conditions. The volatility in the economy and the financial markets in the past several years has had an impact on this part of the industry. As a result, this part of the industry has been the subject of heightened scrutiny and, in some cases, investigations by regulators with respect to the industry’s actions. These events may give rise to increased claims litigation, including class action suits, which may involve our insureds. To the extent that the frequency or severity of claims relating to these events exceeds our current estimates used for establishing reserves, it could increase our exposure to losses from such claims and could have a material adverse effect on our financial position and results of operations.

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended liability for claims and coverage may emerge. These changing conditions may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until considerable time after we have issued insurance or reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance or reinsurance contracts may not be known for many years after a contract is issued, and our financial position, results of operations and cash flows may be materially adversely affected.

We are subject to extensive governmental regulation.

We are subject to extensive governmental regulation and supervision. For complete information regarding the regulations to which we are subject, see Item 1, Business – Regulation. Our business depends on compliance with applicable laws and regulations and our ability to maintain valid licenses and approvals for our operations. Most insurance regulations are designed to protect the interests of policyholders rather than shareholders and other investors. In the United States, this regulation is generally administered by departments of insurance in each state in which we do business and includes a comprehensive framework of oversight of our operations and review of our financial position. U.S. Federal legislation may lead to additional federal regulation of the insurance industry in the coming years. Also, foreign governments regulate our international operations. Each foreign jurisdiction has its own unique regulatory framework that applies to our operations in that jurisdiction.

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Regulatory authorities have broad discretion to grant, renew or revoke licenses and approvals. Regulatory authorities may deny or revoke licenses for various reasons, including the violation of regulations. In some instances, we follow practices based on our interpretations of regulations, or those we believe to be generally followed by the industry, which ultimately may be different from the requirements or interpretations of regulatory authorities. If we do not have the requisite licenses and approvals and do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us. That type of action could have a material adverse effect on our results of operations. Also, changes in the level of regulation of the insurance industry (whether federal, state or foreign), or changes in laws or regulations themselves or interpretations by regulatory authorities, could have a material adverse effect on our business.

Virtually all states require insurers licensed to do business in that state to bear a portion of the loss suffered by some insureds as the result of impaired or insolvent insurance companies or to bear a portion of the cost of insurance for “high-risk” or uninsured individuals. Depending on state law, insurers can be assessed up to 2% of premium written for the relevant line of insurance in that state. In addition, states have from time to time passed legislation that has the effect of limiting the ability of insurers to manage catastrophe risk, such as legislation limiting insurers’ ability to increase rates and prohibiting insurers from withdrawing from catastrophe-exposed areas. The effect of these arrangements could materially adversely affect our results of operations.

The Dodd-Frank Act expands the U.S. Federal government’s presence in insurance oversight, streamlines state-based regulation of reinsurance and non-admitted insurance and establishes a new Federal Insurance Office with powers over most lines of insurance other than health insurance. The Federal Insurance Office is authorized to gather data and information to monitor aspects of the insurance industry, identify issues in the regulation of insurers about insurance matters, and preempt state insurance measures under certain circumstances. As the Dodd-Frank Act calls for numerous studies and contemplates further regulation, its future impact on our results of operations or financial position cannot be determined at this time.

The European Union (EU) is phasing in a new regulatory regime for the regulation of financial services known as “Solvency II,” which is built on a risk-based approach to setting capital requirements for insurers and reinsurers. Solvency II is currently expected to be implemented on January 1, 2016. The impact on us from our implementation of Solvency II will depend on the costs associated with implementation by each EU country, any increased capital requirements applicable to us, and any costs associated with adjustments to our operations. In addition, the overall impact will depend on whether the U.S. regulatory regime is deemed equivalent to Solvency II, thereby reducing the costs of implementation. As such, we are currently not able to predict the impact of Solvency II on our financial position and results of operations.

The operations of certain of our subsidiaries are subject to laws and regulations, including the USA PATRIOT Act of 2001, which requires companies to know certain information about their clients and to monitor their transactions for suspicious activities. In addition, the Department of the Treasury’s Office of Foreign Assets Control administers regulations requiring U.S. persons to refrain from doing business, or allowing their clients to do business through them, with certain organizations or individuals on a prohibited list maintained by the U.S. government or with certain countries. The United Kingdom, the European Union and other jurisdictions maintain similar laws and regulations. Although we have instituted compliance programs to address these requirements, our participation in the global market could expose us to penalties under these laws.

We participate in the Lloyd’s of London market through 100% participation in Lloyd’s Syndicate 4141. The Lloyd’s Franchise Board requires annual approval of Syndicate 4141’s business plan, including maximum underwriting capacity, and may require changes to our business plan or additional capital to support our underwriting. Lloyd’s also imposes various charges and assessments on its member companies. If Lloyd’s were to require material changes in our business plans, or if charges and assessments payable by us to Lloyd’s were to increase significantly, these events could have an adverse effect on our operations and financial results. In addition, no assurances can be given as to how much business Lloyd’s will permit us to underwrite in the future. The financial security of the Lloyd’s market is regularly assessed by three independent rating agencies. A satisfactory credit rating issued by an accredited rating agency is necessary for Lloyd’s syndicates to be able to trade in certain classes of business at current levels. We would be adversely affected if Lloyd’s current ratings were downgraded.

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Recent federal health care reform legislation may lead to additional changes in the country’s health care delivery system.

The Patient Protection and Affordable Care Act and the related amendments in the Health Care and Education Reconciliation Act (collectively, the Legislation), enacted in 2010, has led to changes in the U.S. health care delivery system. As a result of the Legislation, there have been and may continue to be numerous changes in the health care industry, including an increasing percentage of the population that is covered for health care costs. Currently, we do not believe the Legislation will have a material adverse effect on our business. However, as the Legislation contemplates further regulation, we are unable to assess with certainty the full impact the Legislation may have on our business.

We cannot predict the effect, if any, climate change may have on the risks we insure.

Various scientists, environmentalists, international organizations and regulators believe that global climate change has added, and will continue to add, to the unpredictability, frequency and severity of natural disasters (including, but not limited to, hurricanes, tornados, freezes, other storms and fires) in certain parts of the world. In response to this belief, a number of legal and regulatory measures as well as social initiatives have been introduced in an effort to reduce greenhouse gas and other carbon emissions, which may be chief contributors to global climate change. We cannot predict the impact that changing climate conditions, if any, will have on our results of operations or financial condition. Moreover, we cannot predict how legal, regulatory and social responses to concerns about global climate change will impact our business. To the extent climate change does increase the unpredictability, frequency or severity of natural disasters, we may face increased claims, which could have a material adverse effect on our financial position, results of operations and cash flows.

Our reliance on agents and brokers subjects us to risk.

In many cases, we market our insurance (and reinsurance) through insurance (and reinsurance) agents and brokers. Some of these agents and brokers provide a significant portion of our gross written premium for a particular line of business. As a result, some of these agents and brokers could demand higher payments that could put us at a competitive disadvantage and affect the way we price our products. The deterioration of our relationship with, or loss of all or a substantial portion of the business provided by, one or more agents and brokers could have a material adverse effect on our financial position, results of operations and cash flows.

In accordance with industry practice, we generally pay amounts owed on claims under our insurance and reinsurance contracts to agents and brokers, and these agents and brokers, in turn, pay these amounts to the clients that have purchased insurance or reinsurance from us. Although the law is unsettled and depends upon the facts and circumstances of the particular case, in some jurisdictions, if an agent or broker fails to make such a payment, we may remain liable to the insured or ceding insurer for the deficiency. Conversely, in certain jurisdictions, when the insured or ceding insurer pays premiums for these policies to agents and brokers, these premiums might be considered to have been paid and the insured or ceding insurer will no longer be liable to us for those amounts, whether or not we have actually received the premiums from the agent or broker. Consequently, we assume a degree of credit risk associated with agents and brokers with whom we transact business. However, due to the unsettled and fact-specific nature of the law, we are unable to quantify our exposure to this risk.

Consolidation in the insurance industry could adversely impact us.

Insurance industry participants may seek to consolidate through mergers and acquisitions. Continued consolidation within the insurance industry will further enhance the already competitive underwriting environment as we would likely experience more robust competition from larger competitors. These consolidated entities may use their enhanced market power and broader capital base to take business from us or to drive down pricing, which could adversely affect the results of our operations.

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Risks Relating to our Business

Our inability to accurately assess underwriting risk could reduce our net earnings.

Our underwriting success is dependent on our ability to accurately assess the risks associated with the business on which the risk is retained. We rely on the experience of our underwriting staff in assessing these risks. If we fail to accurately assess the risks we retain, we may fail to establish appropriate premium rates and our reserves may be inadequate to cover our losses, which could reduce our net earnings. The underwriting process is further complicated by our exposure to unpredictable developments, including earthquakes, weather-related events and other natural catastrophes, as well as war and acts of terrorism and those that may result from volatility in the financial markets, the economic downturn and systemic risks.

Retentions in various lines of business expose us to potential losses.

We retain risk for our own account on business underwritten by our insurance companies. The determination to not purchase reinsurance, or to reduce the amount of reinsurance we purchase, for a particular risk or line of business is based on a variety of factors including market conditions, pricing, availability of reinsurance, the level of our capital and our loss history. Such determinations have the effect of increasing our financial exposure to losses associated with such risks or in such lines of business and, in the event of significant losses associated with such risks or lines of business, could have a material adverse effect on our financial position, results of operations and cash flows.

If we are unable to purchase adequate reinsurance protection for some of the risks we have underwritten, we will be exposed to any resulting unreinsured losses.

We purchase reinsurance for a portion of the risks underwritten by our insurance companies, especially volatile and catastrophe-exposed risks. Market conditions beyond our control determine the availability and cost of the reinsurance protection we purchase. In addition, the historical results of reinsurance programs and the availability of capital also affect the availability of reinsurance. Our reinsurance facilities are generally subject to annual renewal. We cannot assure that we can maintain our current reinsurance facilities or that we can obtain other reinsurance facilities in adequate amounts and at favorable rates. Further, we cannot determine what effect catastrophic losses will have on the reinsurance market and on our ability to obtain adequate reinsurance at favorable rates. If we are unable to renew or to obtain new reinsurance facilities on acceptable terms, either our net exposures would increase or, if we are unwilling to bear such an increase in exposure, we would have to reduce the level of our underwriting commitments, especially in catastrophe-exposed risks. Either of these potential developments could have a material adverse effect on our financial position, results of operations and cash flows.

If the companies that provide our reinsurance do not pay all of our claims, we could incur severe losses.

We purchase reinsurance by transferring, or ceding, all or part of the risk we have assumed as a direct insurer to a reinsurance company in exchange for all or part of the premium we receive in connection with the risk. Through reinsurance, we have the contractual right to collect the amount reinsured from our reinsurers. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us of our full liability to our policyholders. Accordingly, we bear credit risk with respect to our reinsurers.

We cannot assure that our reinsurers will pay all of our reinsurance claims, or that they will pay our claims on a timely basis. Additionally, catastrophic losses from multiple direct insurers may accumulate within the more concentrated reinsurance market and result in claims that adversely impact the financial condition of such reinsurers and thus their ability to pay such claims. Further, additional adverse developments in the capital markets could affect our reinsurers’ ability to meet their obligations to us. If we become liable for risks we have ceded to reinsurers or if our reinsurers cease to meet their obligations to us, because they are in a weakened financial position as a result of incurred losses or otherwise, our financial position, results of operations and cash flows could be materially adversely affected.

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As a direct insurer, we may have significant exposure for terrorist acts.

To the extent that reinsurers have excluded coverage for terrorist acts or have priced such coverage at rates that we believe are not practical, we, in our capacity as a direct insurer, do not have reinsurance protection and are exposed for potential losses as a result of any terrorist acts. To the extent an act of terrorism is certified by authorized personnel of the U.S. government, we may be covered under the Terrorism Risk Insurance Program Reauthorization Act of 2007 for up to 85% of our losses in 2014, up to the maximum amount set out in the Reauthorization Act. However, any such coverage would be subject to a mandatory deductible of approximately $141.7 million in 2014. In some jurisdictions outside of the United States, where we also have exposure to a loss from an act of terrorism, we have limited access to other government programs that may mitigate our exposure.

The Reauthorization Act currently expires on December 31, 2014. It is unknown at this time if the law will be extended beyond December 31, 2014, and, if so, on what terms. In addition, because interpretation of this law is untested, there may be uncertainty as to how it will be applied to specific circumstances. If we become liable for risks that are not covered under the Reauthorization Act, our financial position, results of operations and cash flows could be materially adversely affected.

We may be unsuccessful in competing against larger or more well-established business rivals.

We face competition from other specialty insurance companies, standard insurance companies and underwriting agencies, as well as from diversified financial services companies that are larger than we are and that have greater financial, marketing and other resources than we do. Some of these competitors also have longer experience and more market recognition than we do in certain lines of business. In addition, it may be difficult or prohibitively expensive for us to implement technology systems and processes that are competitive with the systems and processes of these larger companies. We cannot assure that we will maintain our current competitive position in the markets in which we operate, or that we will be able to expand our operations into new markets. If we fail to do so, our results of operations and cash flows could be materially adversely affected.

We invest a significant amount of our assets in securities that have experienced market fluctuations, which may reduce the value of our investment portfolio, reduce investment income or generate realized investment losses.

At December 31, 2013, approximately 90% of our investment portfolio was invested in fixed maturity securities. The fair value of these fixed maturity securities and the related investment income fluctuate depending on general economic and market conditions, including volatility in the financial markets and the economy as a whole. For our fixed maturity securities, the fair value generally increases or decreases in an inverse relationship with fluctuations in interest rates and credit spreads, while net investment income realized by us from future investments in fixed maturity securities will generally increase or decrease with interest rates. Mortgage-backed and asset-backed securities may have different net investment income and/or cash flows from those anticipated at the time of investment. These securities have prepayment risk because the timing of cash flows that result from the repayment of principal might occur earlier than anticipated, due to declining interest rates, or extension risk when cash flows may be received later than anticipated because of rising interest rates.

Although 98% of our portfolio is investment grade, all of our fixed maturity securities are subject to credit risk. For mortgage-backed securities, credit risk exists if mortgagors default on the underlying mortgages. During an economic downturn, our state, municipal and non-U.S. sovereign bond portfolios could be subject to a higher risk of default or impairments due to declining tax bases and revenue, notwithstanding the relatively low historical rates of default on these types of obligations. If any of the issuers of our fixed maturity securities suffer financial setbacks, the ratings on the fixed maturity securities could fall (with a concurrent fall in fair value) and, in a worst case scenario, the issuer could default on its financial obligations. If the issuer defaults, we could have realized losses associated with the impairment of the securities.

The impact of fluctuations in the market prices of securities affects our financial statements. Because all of our fixed maturity and equity securities are classified as available for sale, changes in the fair value of these securities are reflected in net unrealized investment gain or loss within our other comprehensive income. Similar treatment is not available for liabilities. Therefore, an increase in market interest rates could cause a decrease in our shareholders’ equity and financial position.

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Since 2008, the financial markets and the economy have been severely affected by various events. This has impacted interest rates and has caused large writedowns in other companies’ financial instruments either due to the market fluctuations or the impact of the events on the debtors’ financial condition. Turmoil in the financial markets and the economy, particularly related to potential future ratings downgrade and/or impairment of debt securities of sovereign issuers, could adversely affect the valuation of our investments and cause us to have to record other-than-temporary impairment credit losses on our investments, which could have a material adverse effect on our financial position and results of operations.

If rating agencies downgrade our financial strength ratings, our business and competitive position in the industry may suffer.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Our insurance companies are rated by Standard & Poor’s Corporation (S&P), Fitch Ratings (Fitch), Moody’s Investors Service, Inc. (Moody’s) and/or A.M. Best Company, Inc. (A.M. Best). The financial strength ratings reflect the rating agencies’ opinions of an insurance company’s and insurance holding company’s financial strength, operating performance, strategic position and ability to meet its obligations to policyholders and are not evaluations directed to investors. Our ratings are subject to periodic review by those entities, and the continuation of those ratings at current levels cannot be assured. If our ratings are reduced from their current levels, it could affect our ability to compete for high quality business and, thus, our financial position and results of operations could be adversely affected.

We may require additional capital or funds for liquidity in the future, which may not be available or may only be available on unfavorable terms.

Our future capital and liquidity requirements depend on many factors, including our ability to write new business successfully, to establish premium rates and reserves at levels sufficient to cover losses, and to maintain our current line of credit. We may need to raise additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all in periods of stress and volatility in the financial markets, may be on terms that are not favorable to us. In the case of equity financings, dilution to our shareholders could result and, in any case, such securities may have rights, preferences and privileges that are senior to those of our common stock. If we cannot obtain adequate capital or funds for liquidity on favorable terms or at all, our business, results of operations and liquidity could be adversely affected. We may also be pre-empted from making acquisitions.

S&P, Fitch, Moody’s and A.M. Best rate our credit strength. If our credit ratings are reduced, it might significantly impede our ability to raise capital and borrow money, which could materially affect our business, results of operations and liquidity.

We may be unable to attract and retain qualified employees.

We depend on our ability to attract, retain and provide for the succession of skilled and experienced underwriting talent and other key employees (including our CEO, President/COO, CFO, senior executive officers and executives at our operating companies) who are knowledgeable about our business. Certain of our senior underwriters and other key employees have employment agreements that are for definite terms, and there is no assurance we will retain these employees beyond the current terms of their agreements. If the quality of our underwriting team and other key personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate and be unable to expand our operations into new markets, which could materially adversely affect our business.

Our strategy of acquiring other companies and underwriting teams for growth may not succeed.

Our strategy for growth includes growing through acquisitions of insurance industry related companies. This strategy presents risks that could have a material adverse effect on our business and financial performance, including: 1) the diversion of our management’s attention, 2) our ability to assimilate the operations and personnel of the acquired companies, 3) the contingent and latent risks associated with the past operations of, and other unanticipated problems arising in, the acquired companies, 4) the need to expand management, administration and operational systems and 5) increased competition for suitable acquisition opportunities and qualified employees.

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We cannot predict whether we will be able to find suitable acquisition targets, nor can we predict whether we would be able to acquire these additional companies on terms favorable to us or if we will be able to successfully integrate the acquired operations into our business. We do not know if we will realize any anticipated benefits of completed acquisitions or if there will be substantial unanticipated costs associated with new acquisitions. In addition, future acquisitions by us may result in potentially dilutive issuances of our equity securities, the incurrence of additional debt, and/or the recognition of potential impairment of goodwill and other intangible assets. Each of these factors could materially adversely affect our financial position and results of operations.

More recently, our growth has come through hiring underwriting teams focused on new lines of business. While more limited, many of the same risks above apply. Most notably, the diversion of management attention, the assimilation of new personnel and the need to expand management, administration and operational systems are present. Also, because these are new lines of business for which we have limited experience, the results of these new lines could materially adversely affect our financial position and results of operations.

We are exposed to goodwill impairment risk as part of our business acquisition strategy.

We have recorded goodwill in connection with the majority of our business acquisitions. We are required to perform goodwill impairment tests at least annually and whenever events or circumstances indicate that the carrying value of our goodwill may not be recoverable from estimated future cash flows. As a result of our annual and other periodic evaluations, we may determine that a portion of our goodwill needs to be written down to fair value, which could materially adversely affect our financial position and results of operations.

We are an insurance holding company and, therefore, may not be able to receive dividends in needed amounts from our insurance company subsidiaries.

In the past, we have had sufficient cash flow from our non-insurance company subsidiaries to meet our corporate cash flow requirements for paying principal and interest on outstanding debt obligations, dividends to shareholders and corporate expenses. More recently, we have relied on, and in the future we may rely on, dividends from our insurance companies to meet these requirements. The payment of dividends by our insurance companies is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as the regulatory restrictions. As a result, should our other sources of funds prove to be inadequate, we may not be able to receive dividends from our insurance companies at times and in amounts necessary to meet our obligations, which could materially adversely affect our financial position and liquidity.

Because we operate internationally, fluctuations in currency exchange rates may affect our assets and liabilities.

We underwrite insurance coverages that are denominated in a number of foreign currencies, and we establish and maintain our loss reserves for these policies in their respective currencies. Our principal area of exposure relates to fluctuations in exchange rates between the British pound sterling, the Euro and the U.S. dollar. Consequently, a change in the exchange rate between the U.S. dollar and the British pound sterling or the Euro could have a material adverse effect on our financial position, results of operations and cash flows. We hold assets, primarily available for sale fixed maturity securities, denominated in comparable foreign currencies that are intended to economically hedge the foreign currency risk related to these reserves denominated in foreign currencies but there can be no assurances that we will be successful in these efforts.

Our information technology systems or third-party systems that we utilize or access may fail or suffer a loss of security, which could adversely affect our business.

Our business is highly dependent upon the successful and uninterrupted functioning of our computer systems. We rely on these systems to perform actuarial and other modeling functions necessary for writing business, to process our premiums and policies, to process and make claims payments, to establish our loss reserves, and to prepare our management and external financial statements and information. The failure of these systems could interrupt our operations. In addition, in the event of a disaster such as a natural catastrophe, a blackout, a computer virus or hacking incident, a terrorist attack or war, our systems may be inaccessible for an extended period of time. These systems failures or disruptions could result in a material adverse effect on our business results. We also utilize and/or rely on computer systems developed and maintained by outsourcing relationships and key vendors. Their systems could experience the same risks, which could result in a material adverse effect on our business results.

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A security breach of our computer systems could damage our reputation or result in liability. We retain confidential information regarding our business dealings in our computer systems. We may be required to spend significant capital and other resources to protect against security breaches or to alleviate problems caused by such breaches. Despite the implementation of security measures, the infrastructure supporting our computer systems may be vulnerable to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. In addition, we could be subject to liability if hackers were able to penetrate our network security or otherwise misappropriate confidential information. Furthermore, certain of our businesses are subject to compliance with laws and regulations enacted by U.S. federal and state governments, the European Union or other jurisdictions or enacted by various regulatory organizations or exchanges relating to the privacy and security of the information of clients, employees or others. The compromise of personal, confidential or proprietary information could result in remediation costs, legal liability, regulatory action and reputational harm, which could have a material adverse effect on our results of operations or financial condition.

If we experience difficulties with outsourcing relationships, our ability to conduct our business might be negatively impacted.

We outsource certain business and administrative functions to third parties and may do so increasingly in the future. If we fail to develop and implement our outsourcing strategies or our third party providers fail to perform as anticipated, we may experience operational difficulties, increased costs and a loss of business that may have a material adverse effect on our results of operations or financial position. By outsourcing certain business and administrative functions to third parties, we may be exposed to enhanced risk of data security breaches. Any breach of data security could damage our reputation and/or result in monetary damages, which, could have a material adverse effect on our results of operations or financial condition.

We may not be able to delay or prevent an inadequate or coercive offer for change in control, and regulatory rules and required approvals might delay or deter a favorable change of control.

Our certificate of incorporation and bylaws do not have provisions that could make it more difficult for a third party to acquire a majority of our outstanding common stock. As a result, we may be more susceptible to an inadequate or coercive offer that could result in a change in control than a company whose charter documents have provisions that could delay or prevent a change in control.

Many state insurance regulatory laws contain provisions that require advance approval by state agencies of any change of control of an insurance company that is domiciled or, in some cases, has substantial business in that state. “Control” is generally presumed to exist through the ownership of 10% or more of the voting securities of a domestic insurance company or of any company that controls a domestic insurance company. We own, directly or indirectly, all of the shares of stock of insurance companies domiciled in a number of states. Any purchaser of shares of common stock representing 10% or more of the voting power of our common stock will be presumed to have acquired control of our domestic insurance subsidiaries unless, following application by that purchaser, the relevant state insurance regulators determine otherwise. Any transactions that would constitute a change in control of any of our individual insurance subsidiaries would generally require prior approval by the insurance departments of the states in which the insurance subsidiary is domiciled.

We have insurance subsidiaries domiciled in the United Kingdom, Spain and Bermuda. Insurers in those countries are also subject to change of control restrictions under their individual regulatory frameworks. These requirements may deter or delay possible significant transactions in our common stock or the disposition of our insurance companies to third parties, including transactions that could be beneficial to our shareholders.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal and executive offices are located in Houston, Texas, in buildings owned by Houston Casualty Company. We also maintain offices in approximately 50 locations elsewhere in the United States, the United Kingdom, Spain and Ireland. The majority of these additional locations are in leased facilities.

Our major office facilities, with more than 25,000 square feet, are as follows:

Segment	Location	Square feet	Termination date of lease
U.S. Property & Casualty and     Corporate headquarters	Houston, Texas	77,000	Owned
	Houston, Texas	51,000	Owned
U.S. Property & Casualty	Mount Kisco, New York	38,000	Owned
	Wakefield, Massachusetts	34,000	February 28, 2017
	Auburn Hills, Michigan	27,000	May 31, 2017
	Dallas, Texas	26,000	May 31, 2019
Accident & Health	Atlanta, Georgia	40,000	June 30, 2018
U.S. Surety & Credit	Los Angeles, California	41,000	October 31, 2016
International	London, England	30,000	December 24, 2015

Item 3. Legal Proceedings

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock trades on the New York Stock Exchange under the ticker symbol “HCC”. The intra-day high and low sales prices for quarterly periods in the last three years, as reported by the New York Stock Exchange, were as follows:

	2013				2012				2011
	High		Low		High		Low		High		Low
First quarter	$	42.11	$	37.37	$	31.71	$	26.62	$	32.00	$	29.00
Second quarter		43.69		40.81		32.69		29.91		33.12		30.73
Third quarter		46.14		41.85		34.46		30.06		31.90		24.66
Fourth quarter		46.38		42.57		37.65		33.74		30.33		25.32

On February 14, 2014, the last reported sales price of our common stock as reported by the New York Stock Exchange was $43.83 per share.

Shareholders

We have one class of authorized capital stock. On February 14, 2014, there were 125.6 million shares of common stock issued and 99.8 million shares of common stock outstanding held by 692 shareholders of record; however, we estimate there are approximately 58,000 beneficial owners.

Dividend Policy

Cash dividends declared on a quarterly basis were as follows:

	2013		2012		2011
First quarter	$	0.165	$	0.155	$	0.145
Second quarter		0.165		0.155		0.145
Third quarter		0.225		0.165		0.155
Fourth quarter		0.225		0.165		0.155

Beginning in June 1996, we announced a planned quarterly program of paying cash dividends to shareholders. Our Board of Directors may review our dividend policy from time to time, and any determination with respect to future dividends will be made in light of regulatory and other conditions at that time, including our earnings, financial condition, capital requirements, loan covenants and other related factors. Under the terms of our bank loan facility, we are prohibited from paying dividends in excess of an agreed upon maximum amount in any year. That limitation should not affect our ability to pay dividends in a manner consistent with our past practice and current expectations. During 2013, we increased our regular dividend by $0.06 per share, marking the largest increase in the quarterly cash dividend in our history. We presently intend to continue dividend payments in an amount and frequency consistent with our past practice.

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Issuer Purchases of Equity Securities

In 2012, the Board approved the purchase of up to $300.0 million of our common stock (the Plan). Purchases under the Plan may be made in the open market or in privately negotiated transactions from time-to-time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Purchases under the Plan will be made, subject to market and business conditions, the level of cash generated from our operations, cash required for acquisitions, our debt covenant compliance, and other relevant factors. The Plan does not obligate us to purchase any particular number of shares, has no expiration date, and may be suspended or discontinued at any time at the Board’s discretion. There were no purchases in the fourth quarter of 2013. As of December 31, 2013, $207.6 million of repurchase authority remains under the Plan.

Performance Graph

The following graph shows a comparison of cumulative total returns for an investment of $100.00 made on December 31, 2008 in the common stock of HCC Insurance Holdings, Inc., the Standard & Poor’s 500 Index, and the Standard & Poor’s 500 Property and Casualty Insurance Index.

Total Return to Shareholders

(includes reinvestment of dividends)

Company/Index	2008		2009		2010		2011		2012		2013
HCC Insurance Holdings, Inc.	$	100.00	$	106.66	$	112.69	$	109.30	$	150.76	$	190.28
S&P 500 Index		100.00		126.46		145.51		148.59		172.37		228.19
S&P 500 P&C Insurance Index		100.00		112.35		122.38		122.08		146.63		202.78

This performance graph shall not be deemed to be incorporated by reference into our Securities and Exchange Commission filings and should not constitute soliciting material or otherwise be considered filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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Item 6. Selected Financial Data

The selected consolidated financial data shown below has been derived from the Consolidated Financial Statements. All information contained herein should be read in conjunction with the Consolidated Financial Statements and related Notes, the Schedules, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Report.

	Years ended December 31,
	2013			2012			2011			2010			2009
	(in thousands, except per share data)
REVENUE
Net earned premium	$	2,239,240		$	2,242,625		$	2,127,170		$	2,041,924		$	2,037,235
Net investment income		220,182			222,634			212,271			203,819			191,965
Other operating income		35,452			30,448			35,590			44,832			82,669
Net realized investment gain		42,030			31,148			3,653			12,104			12,076
Other-than-temporary impairment credit losses		-			(1,028)			(4,679)			(425)			(5,429)
Total revenue		2,536,904			2,525,827			2,374,005			2,302,254			2,318,516
EXPENSE
Loss and loss adjustment expense, net		1,290,050			1,305,511			1,399,247			1,213,029			1,215,759
Policy acquisition costs, net		279,439			281,201			266,125			255,136			240,679
Other operating expense		368,495			359,060			330,557			322,914			327,363
Interest expense		26,210			25,628			23,070			21,348			16,164
Total expense		1,964,194			1,971,400			2,018,999			1,812,427			1,799,965
Earnings before income tax expense		572,710			554,427			355,006			489,827			518,551
Income tax expense		165,513			163,187			99,763			144,731			164,683
Net earnings	$	407,197		$	391,240		$	255,243		$	345,096		$	353,868
Net earnings attributable to unvested restricted stock		(6,638)			(6,982)			(3,864)			(3,926)			(1,928)
Net earnings available to common stock	$	400,559		$	384,258		$	251,379		$	341,170		$	351,940
Earnings per common share
Basic	$	4.05		$	3.84		$	2.31		$	3.00		$	3.14
Diluted	$	4.04		$	3.83		$	2.30		$	2.99		$	3.11
Weighted average shares outstanding
Basic		98,853			100,176			109,051			113,863			112,200
Diluted		99,113			100,456			109,240			114,077			113,058
Cash dividends declared, per share	$	0.78		$	0.64		$	0.60		$	0.56		$	0.52
Gross written premium	$	2,880,249		$	2,784,073		$	2,649,126		$	2,578,908		$	2,559,791
Net written premium		2,255,323			2,253,396			2,182,158			2,026,197			2,046,289
Net loss ratio (1)		57.6	%		58.2	%		65.8	%		59.4	%		59.7	%
Expense ratio (2)		25.8			25.4			25.3			25.6			24.9
Combined ratio		83.4	%		83.6	%		91.1	%		85.0	%		84.6	%

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	December 31,
	2013		2012		2011		2010		2009
	(in thousands, except per share data)
Balance sheet data
Total investments	$	6,718,692	$	6,950,398	$	6,049,750	$	5,687,095	$	5,456,229
Premium, claims and other receivables		580,107		549,725		688,732		635,867		600,332
Reinsurance recoverables		1,277,257		1,071,222		1,056,068		1,006,855		1,016,411
Ceded unearned premium		305,438		256,988		222,300		278,663		270,436
Goodwill		895,200		885,860		872,814		821,648		822,006
Total assets	$	10,344,520	$	10,267,807	$	9,597,278	$	9,036,107	$	8,806,416
Loss and loss adjustment expense payable	$	3,902,132	$	3,767,850	$	3,658,317	$	3,471,858	$	3,492,309
Reinsurance, premium and claims payable		332,985		294,621		366,499		345,730		337,257
Unearned premium		1,134,849		1,069,956		1,031,034		1,045,877		1,044,747
Notes payable		654,098		583,944		478,790		298,637		298,483
Total shareholders’ equity	$	3,674,430	$	3,542,612	$	3,273,982	$	3,278,400	$	3,013,151
Book value per share (3)	$	36.62	$	35.10	$	31.45	$	28.52	$	26.42
Shares outstanding		100,336		100,928		104,101		114,968		114,051

(1) Calculated by dividing net loss and loss adjustment expense by net earned premium.

(2) Calculated by dividing segment underwriting expense by segment revenue.

(3) Calculated by dividing total shareholders’ equity by shares outstanding.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements and related Notes.

Overview

We are a specialty insurance group with offices in the United States, the United Kingdom, Spain and Ireland, transacting business in approximately 180 countries. Our shares trade on the New York Stock Exchange and closed at $43.83 on February 14, 2014, resulting in market capitalization of $4.4 billion.

We underwrite and manage a variety of largely non-correlated specialty insurance products through five insurance underwriting segments and our Investing segment. Our insurance underwriting segments are U.S. Property & Casualty, Professional Liability, Accident & Health, U.S. Surety & Credit and International. We market our insurance products through a network of independent agents and brokers, through managing general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies.

Our organization is focused on generating consistent, industry-leading combined ratios. We concentrate our insurance writings in selected specialty lines of business in which we believe we can achieve meaningful underwriting profit. We rely on experienced underwriting personnel working within defined and monitored limits and our access to and expertise in the reinsurance marketplace to limit or reduce risk. By focusing on underwriting profitability, we are able to accomplish our primary objectives of maximizing net earnings and growing book value per share.

Key facts about our consolidated group as of and for the year ended December 31, 2013 are as follows:

• We had consolidated shareholders’ equity of $3.7 billion, with book value per share of $36.62.

• We generated net earnings of $407.2 million, or $4.04 per diluted share.

• We produced total revenue of $2.5 billion, of which 88% related to net earned premium and 9% related to net investment income.

• Our net loss ratio was 57.6% and our combined ratio was 83.4%.

• Our debt to capital ratio was 15.1%.

• We purchased $42.2 million of our common stock at an average cost of $40.02 per share. At year-end, we had $207.6 million remaining under our current $300.0 million share buyback authorization.

• We increased our regular quarterly cash dividend to $0.225 per share, marking the 17^th consecutive year of increases and the largest increase in the quarterly cash dividend in our history. We declared dividends of $0.78 per share and paid $72.0 million of dividends in 2013.

The following sections discuss our key operating results. The reason for any significant variations between 2012 and 2011 are the same as those discussed for variations between 2013 and 2012, unless otherwise noted. Amounts in tables are in thousands, except for earnings per share, percentages, ratios and number of employees.

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Results of Operations

Our results and key metrics for the past three years were as follows:

	2013			2012			2011
Net earnings	$	407,197		$	391,240		$	255,243
Earnings per diluted share	$	4.04		$	3.83		$	2.30
Net loss ratio		57.6	%		58.2	%		65.8	%
Expense ratio		25.8			25.4			25.3
Combined ratio		83.4	%		83.6	%		91.1	%

During the past three years, we recognized the following pretax net losses, including reinstatement premium, for these major catastrophic events: 1) 2013 – European floods ($15.0 million) and German hail storms ($13.0 million); 2) 2012 – Superstorm Sandy ($30.8 million); and 3) 2011 – Japan earthquake and tsunami ($46.1 million), Hurricane Irene ($23.3 million), New Zealand earthquakes ($17.7 million), United States tornados ($13.3 million), Thailand floods ($10.0 million) and Denmark storms ($7.5 million). The remaining catastrophes, which we refer to as “small catastrophes” and that primarily impacted our property treaty line of business, were not individually significant events to us. We reinsure a portion of our exposure to catastrophic events, although we incur some additional cost for reinstatement premium to continue our reinsurance coverage for future loss events. The following table summarizes our accident year catastrophe losses, as well as the impact on our net earnings and key metrics.

	2013			2012			2011
Gross losses	$	56,639		$	84,751		$	175,468
Net losses, after reinsurance	$	55,939		$	52,390		$	103,907
Reinstatement premium, net		(3,932)			401			14,008
Total net catastrophe losses	$	52,007		$	52,791		$	117,915
Impact of net catastrophe losses on:
Net earnings per diluted share	$	(0.34)		$	(0.34)		$	(0.70)
Net loss ratio (percentage points)		2.4	%		2.3	%		5.3	%
Combined ratio (percentage points)		2.3	%		2.4	%		5.4	%

We recognized net favorable loss development of $73.7 million in 2013 and $70.0 million in 2012, which included, in the respective periods, $7.3 million and $21.4 million of net favorable development related to prior year catastrophes. We recognized net adverse development of $10.1 million in 2011, which included $8.1 million of net favorable development related to prior year catastrophes. See the “Loss and Loss Adjustment Expense” and “Segment Operations” sections below for discussion of our loss activity and the “Critical Accounting Policies” section below for discussion of our policies and procedures related to establishing and reviewing loss reserves.

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Revenue

We generate our revenue from five primary sources:

• risk-bearing earned premium produced by our insurance underwriting segments,

• investment income earned on our consolidated investment portfolio by our Investing segment,

• fee and commission income received from third party insurers for premium produced for them by our underwriting agencies,

• transaction-based revenues, primarily related to residual value and mortgage reinsurance products in our U.S. Property & Casualty segment, and

• realized investment gains and losses related to our investment portfolio.

Total revenue increased $11.1 million in 2013, compared to 2012, primarily due to higher net realized investment gains. Total revenue increased $151.8 million in 2012, compared to 2011, primarily due to higher net earned premium, net investment income and net realized investment gains.

Gross written premium, net written premium and net earned premium are detailed below by segment.

	2013		2012		2011
U.S. Property & Casualty	$	670,764	$	614,694	$	540,436
Professional Liability		536,085		539,383		562,503
Accident & Health		883,055		835,796		757,097
U.S. Surety & Credit		228,930		221,468		226,312
International		548,499		531,167		517,383
Exited Lines		12,916		41,565		45,395
Total gross written premium	$	2,880,249	$	2,784,073	$	2,649,126
U.S. Property & Casualty	$	385,355	$	383,938	$	367,296
Professional Liability		359,509		378,138		412,262
Accident & Health		881,368		835,008		756,539
U.S. Surety & Credit		199,121		195,904		208,859
International		417,039		419,155		391,819
Exited Lines		12,931		41,253		45,383
Total net written premium	$	2,255,323	$	2,253,396	$	2,182,158
U.S. Property & Casualty	$	367,135	$	354,050	$	333,410
Professional Liability		368,167		394,687		410,816
Accident & Health		883,515		831,827		758,270
U.S. Surety & Credit		194,286		207,955		210,535
International		413,206		412,853		368,748
Exited Lines		12,931		41,253		45,391
Total net earned premium	$	2,239,240	$	2,242,625	$	2,127,170

The 2013 and 2012 growth in gross written premium from our insurance underwriting segments occurred primarily in: 1) the U.S. Property & Casualty segment, from new business lines started in 2011 and increased writings of our disability product, 2) the Accident & Health segment, from the growth of our medical stop-loss product and 3) the International segment, from new business and price increases in 2012 in our energy line of business. Our net written premium was flat in 2013 compared to 2012 due to increased quota share reinsurance in 2013. See the “Segment Operations” section below for further discussion of the relationship and changes in premium revenue within each insurance segment.

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Net investment income, which is included in our Investing segment, decreased 1% in 2013, primarily due to reduced reinvestment yields. Net investment income increased 5% in 2012 due to growth in our investment portfolio, partially offset by the effect of reduced reinvestment yields. The cost basis of our fixed maturity and equity securities portfolios increased 4% in 2013 and 11% in 2012, from $5.5 billion at December 31, 2011 to $6.1 billion at December 31, 2012 and $6.4 billion at December 31, 2013, primarily from cash flow from operations. Our investment expense increased in both 2012 and 2013 due to growth in the portfolio and expanded investment advisory and accounting fees.

Our other operating income primarily consists of fee and commission income related to third party agency and broker commissions and income from a financial instrument.

Loss and Loss Adjustment Expense

We incur expenses for insurance claims paid or payable to policyholders, as well as the potential liability for incurred but not reported claims, and the expense to adjust and settle all claims (collectively referred to as loss and loss adjustment expense). Our net loss ratio is the percentage of our loss and loss adjustment expense divided by our net earned premium in each year.

Loss development represents an increase or decrease in estimates of ultimate losses related to business written in prior accident years. We record such increases or decreases as loss and loss adjustment expense in the current reporting year. Favorable development means our original ultimate loss estimate was higher than the current estimate. Adverse development means the current ultimate loss estimate is higher than our original estimate. Loss development occurs as we review our loss exposure with our actuaries, increasing or decreasing estimates of our ultimate losses as a result of such reviews and as losses are finally settled or claims exposure changes.

The tables below detail our net loss and loss adjustment expense and our net loss ratios on a consolidated basis and for our segments.

	2013			2012			2011
U.S. Property & Casualty	$	175,190		$	209,286		$	201,017
Professional Liability		195,429			229,873			328,503
Accident & Health		630,210			601,076			552,292
U.S. Surety & Credit		24,143			38,535			52,206
International		249,199			189,410			233,879
Exited Lines		15,879			37,331			31,350
Net loss and loss adjustment expense	$	1,290,050		$	1,305,511		$	1,399,247
Net (favorable) adverse loss development
U.S. Property & Casualty	$	(39,363	)	$	2,321		$	(3,145	)
Professional Liability		(26,346	)		(25,897	)		47,084
Accident & Health		(18,027	)		(10,511	)		(1,324	)
U.S. Surety & Credit		(37,898	)		(25,377	)		(11,300	)
International		43,805			(10,084	)		(13,830	)
Exited Lines		4,087			(463	)		(7,338	)
Total net (favorable) adverse loss development		(73,742	)		(70,011	)		10,147
Accident year catastrophe losses		55,939			52,390			103,907
All other net loss and loss adjustment expense		1,307,853			1,323,132			1,285,193
Net loss and loss adjustment expense	$	1,290,050		$	1,305,511		$	1,399,247

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	2013			2012			2011
U.S. Property & Casualty		47.7	%		59.1	%		60.3	%
Professional Liability		53.1			58.2			80.0
Accident & Health		71.3			72.3			72.8
U.S. Surety & Credit		12.4			18.5			24.8
International		60.3			45.9			63.4
Exited Lines		122.8			90.5			69.1
Consolidated net loss ratio		57.6	%		58.2	%		65.8	%
Consolidated accident year net loss ratio		60.9	%		61.5	%		65.3	%

Loss and loss adjustment expense decreased 1% in 2013 and 7% in 2012. The 2013 decrease was primarily due to a lower accident year net loss ratio. The 2012 decrease was driven by: 1) net favorable loss development in 2012, compared to net adverse development in 2011, 2) lower accident year catastrophe losses in 2012 and 3) a slightly lower non-catastrophe accident year loss ratio in 2012. Excluding catastrophes, our accident year net loss ratio was 58.5% for 2013, 59.1% for 2012 and 60.0% for 2011. The net favorable loss development in 2013 and 2012 included adverse development of $70.3 million and $48.9 million, respectively, related to reserve increases on Spanish surety bonds in the International segment. The 2011 net adverse loss development included adverse development of $104.2 million related to our diversified financial products (DFP) line of business in the Professional Liability segment and $12.8 million related to the Spanish surety bonds. See the “Segment Operations” section below for additional discussion of the changes in net loss development and net loss ratios for each segment.

Our net paid loss ratio is the percentage of losses paid, net of reinsurance, divided by net earned premium for the year. The table below provides a reconciliation of our consolidated reserves for loss and loss adjustment expense payable, net of reinsurance ceded, the amount of our paid claims, and our net paid loss ratio.

	2013			2012			2011
Net reserves for loss and loss adjustment expense payable at beginning of year	$	2,749,803		$	2,683,483		$	2,537,772
Net reserve additions from acquired businesses		4			14,705			6,261
Foreign currency adjustment		5,544			18,449			(6,108)
Net loss and loss adjustment expense		1,290,050			1,305,511			1,399,247
Net loss and loss adjustment expense payments		(1,265,996)			(1,272,345)			(1,253,689)
Net reserves for loss and loss adjustment expense payable at end of year	$	2,779,401		$	2,749,803		$	2,683,483
Net paid loss ratio		56.5	%		56.7	%		58.9	%

The amount of claims paid fluctuates year-over-year due to the timing of claims settlement, the occurrence of catastrophic events and commutations, and the mix of our business. Our net paid loss ratio decreased slightly in both 2013 and 2012 due to offsetting changes in the amount of claims paid across our different lines of business.

Policy Acquisition Costs

Policy acquisition costs relate to direct costs we incur to issue insurance policies, including commissions, premium taxes and compensation of our underwriters. The percentage of policy acquisition costs to net earned premium was 12.5% in all three years. We record profit commissions due from reinsurers as an offset to policy acquisition costs.

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Other Operating Expense

Other operating expense increased 3% in 2013 and 9% in 2012. The 2013 increase related to higher employee compensation and benefit costs, partially offset by a benefit recorded in 2013 related to an indemnification liability. We reduced the indemnification liability, which related to a 2001 subsidiary sale, by $5.1 million due to favorable claims activity and successful subrogation recoveries. The 2012 increase was primarily due to increased compensation expense, including higher bonus expense directly related to higher pretax earnings in 2012, and the year-over-year fluctuation in foreign currency benefit/expense. We recognized foreign currency expense of $5.3 million and $6.2 million in 2013 and 2012, compared to a benefit of $1.1 million in 2011. The foreign currency benefit/expense related to changes in the value of the British pound sterling and the Euro relative to the U.S. dollar.

Excluding the indemnification benefit and foreign currency benefit/expense, other operating expense increased 4% in 2013 and 6% in 2012 mainly due to increased employee compensation and benefits expense. Approximately 64%, 61% and 62% of our other operating expense in 2013, 2012 and 2011, respectively, related to employee compensation and benefits.

Other operating expense included $16.2 million, $13.2 million and $12.4 million of stock-based compensation expense in the respective three years. Stock-based compensation expense was higher in 2013 due to the timing of vesting and forfeitures of awards. In 2013, we granted $17.2 million of restricted stock awards and units, with a weighted-average life of 3.1 years. At December 31, 2013, there was approximately $28.3 million of total unrecognized compensation expense related to unvested options, restricted stock awards and units, and our employee stock purchase plan that is expected to be recognized over a weighted-average period of 2.6 years. In 2014, we expect to recognize $11.3 million of expense for all stock-based awards outstanding at year-end 2013.

Interest Expense

Interest expense was $26.2 million, $25.6 million and $23.1 million in 2013, 2012 and 2011, respectively. Our interest expense has increased due to a higher amount of outstanding borrowings on our $600.0 million Revolving Loan Facility. Interest expense included $19.3 million per year for our Senior Notes.

Income Tax Expense

Our income taxes are due to U.S. Federal, state, local and foreign jurisdictions. Our effective income tax rate was 28.9% for 2013, compared to 29.4% for 2012 and 28.1% for 2011. Fluctuations in our effective tax rates are due to the relationship of pretax income and tax-exempt investment income. Our pretax income was substantially higher in 2013 and 2012 than in 2011, whereas our tax-exempt investment income increased slightly each year. The lower effective rate in 2011 related to the increased benefit from tax-exempt investment income relative to a lower pretax income base.

Segment Operations

Each of our insurance segments bears risk for insurance coverage written within its portfolio of insurance products. Each segment generates income from premium written by our underwriting agencies, through third party agents and brokers, or on a direct basis. Certain segments also write facultative or individual account reinsurance, as well as treaty reinsurance business. In some cases, we purchase reinsurance to limit our losses from both individual policy losses and multiple policy losses from catastrophic occurrences. Our segments maintain disciplined expense management and a streamlined management structure, which results in favorable expense ratios. The following provides operational information about our insurance underwriting segments and our Investing segment.

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U.S. Property & Casualty Segment

The following tables summarize the operations of the U.S. Property & Casualty segment.

	2013			2012			2011
Net earned premium	$	367,135		$	354,050		$	333,410
Other revenue		24,266			18,865			23,951
Segment revenue		391,401			372,915			357,361
Loss and loss adjustment expense, net		175,190			209,286			201,017
Other expense		117,910			116,398			110,184
Segment expense		293,100			325,684			311,201
Segment pretax earnings	$	98,301		$	47,231		$	46,160
Net loss ratio		47.7	%		59.1	%		60.3	%
Expense ratio		30.1			31.2			30.8
Combined ratio		77.8	%		90.3	%		91.1	%
Aviation	$	112,597		$	116,236		$	113,341
E&O		52,230			61,976			73,666
Public Risk		63,791			65,281			50,440
Other		138,517			110,557			95,963
Total net earned premium	$	367,135		$	354,050		$	333,410
Aviation		55.0	%		56.2	%		63.7	%
E&O		46.9			70.9			70.8
Public Risk		76.1			94.1			79.8
Other		29.0			34.9			37.9
Total net loss ratio		47.7	%		59.1	%		60.3	%
Aviation	$	139,673		$	144,621		$	154,903
E&O		54,871			60,639			68,846
Public Risk		70,665			85,857			73,168
Other		405,555			323,577			243,519
Total gross written premium	$	670,764		$	614,694		$	540,436
Aviation	$	111,446		$	112,712		$	117,333
E&O		48,724			58,066			67,606
Public Risk		55,666			69,081			58,096
Other		169,519			144,079			124,261
Total net written premium	$	385,355		$	383,938		$	367,296

Our U.S. Property & Casualty segment pretax earnings increased $51.1 million in 2013, compared to 2012, primarily due to: 1) net favorable loss development of $39.4 million in 2013, compared to net adverse development of $2.3 million in 2012 and 2) net catastrophe losses of $2.0 million in 2013, compared to $11.3 million in 2012.

40

The segment’s net earned premium increased in 2013, compared to 2012, due to higher writings by our new underwriting teams for the excess casualty, primary casualty and technical property lines of business, as well as for sports and entertainment disability, residual value and title reinsurance (all grouped in Other). The increase in net earned premium in 2012 primarily related to the new underwriting teams, as well as increases in aviation, public risk, contingency, residual value and other premium. In 2012 and 2013, we wrote less premium in some lines of business, particularly aviation and E&O, due to continued competition. Changes in the segment’s net written premium relative to gross written premium were primarily due to writing more of the highly ceded disability and other business in 2013.

The net (favorable) adverse loss development recognized by line of business was as follows:

	2013		2012		2011
Aviation	$	(8,041)	$	(701)	$	(3,395)
E&O		(5,795)		7,017		8,293
Public Risk		(1,303)		8,142		260
Other		(24,224)		(12,137)		(8,303)
Total net (favorable) adverse loss development	$	(39,363)	$	2,321	$	(3,145)

The net loss development resulted from our annual review of reserves for this segment, which we conducted in the third quarter of each year. The majority of the lines of business in this segment provide primary coverage, and claims are reported and settled on a short to medium-term basis. Accordingly, changes to our ultimate losses for a given underwriting year typically result from revised actuarial expectations, as compared to the prior year reserve review, with respect to the settlement value of known claims.

We recognized favorable development in 2013 in our aviation line of business primarily for treaty years 2011 and prior due to better than expected actuarially-indicated results since our prior annual review. We experienced substantially lower losses and loss ratios in our E&O line of business in 2013, due to favorable development in 2013 (primarily for underwriting years 2010 and 2011), compared to adverse development in 2012 and 2011 (both years primarily related to underwriting years 2005 – 2010).

The public risk line of business recognized adverse development in 2012 due to deteriorating results compared to actuarial expectations, particularly from large property losses, related to underwriting years 2009 and 2010. This adverse development was partially offset by favorable development from release of $2.5 million of catastrophe reserves related to Hurricane Irene (2011).

The various lines of business included in Other recognized net favorable development of $24.2 million, $12.1 million and $8.3 million in 2013, 2012 and 2011, respectively. One product line, which is a run-off assumed quota share contract for business that we wrote from 2003 – 2008, recognized favorable development of $17.0 million in 2013, $5.6 million in 2012 and $7.5 million in 2011, due to continued better than expected actuarial results since the prior annual review. The remaining net favorable development in Other was not material for any one product line in any of the years presented.

The public risk line of business incurred catastrophe losses of: 1) 2013 – Midwest tornados ($2.0 million); 2) 2012 – Superstorm Sandy ($3.8 million) and United States spring storms ($3.2 million); and 3) 2011 – Hurricane Irene ($5.0 million). Various lines of business incurred additional catastrophe losses of $4.3 million in 2012, mainly for Superstorm Sandy, and $1.2 million in 2011.

Operating expense increased in 2012 and 2013 due to increasing compensation costs, mainly related to new underwriting teams. The segment’s expense ratio was lower in 2013 primarily due to higher ceding commissions (that offset policy acquisition costs) from increased writings of our highly-ceded sports and entertainment disability product.

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Professional Liability Segment

The following tables summarize the operations of the Professional Liability segment.

	2013			2012			2011
Net earned premium	$	368,167		$	394,687		$	410,816
Other revenue		(7)			731			912
Segment revenue		368,160			395,418			411,728
Loss and loss adjustment expense, net		195,429			229,873			328,503
Other expense		66,391			66,721			59,036
Segment expense		261,820			296,594			387,539
Segment pretax earnings	$	106,340		$	98,824		$	24,189
Net loss ratio		53.1	%		58.2	%		80.0	%
Expense ratio		18.0			16.9			14.3
Combined ratio		71.1	%		75.1	%		94.3	%
U.S. D&O	$	303,278		$	332,661		$	359,178
International D&O		64,889			62,026			51,638
Total net earned premium	$	368,167		$	394,687		$	410,816
U.S. D&O		57.3	%		64.6	%		90.3	%
International D&O		33.2			24.2			8.2
Total net loss ratio		53.1	%		58.2	%		80.0	%
U.S. D&O	$	410,669		$	424,099		$	453,669
International D&O		125,416			115,284			108,834
Total gross written premium	$	536,085		$	539,383		$	562,503
U.S. D&O	$	287,391		$	311,576		$	347,834
International D&O		72,118			66,562			64,428
Total net written premium	$	359,509		$	378,138		$	412,262

Our Professional Liability segment pretax earnings increased $7.5 million in 2013, compared to 2012, due to an improved net loss ratio, primarily related to re-underwriting of our diversified financial products (DFP) line of business in U.S. D&O beginning in 2012. The segment’s pretax earnings increased $74.6 million in 2012, compared to 2011, primarily due to $25.9 million of net favorable loss development in 2012 compared to $47.1 million of net adverse development in 2011.

The segment’s premium decreased from 2011 to 2013 due to lower writings of our directors’ and officers’ liability and DFP products, mainly due to pricing competition and re-underwriting our DFP business. Net written premium and net earned premium also reflect the impact of reduced retention under our reinsurance program during the past two years.

42

The segment had net favorable loss development of $26.3 million in 2013 and $25.9 million in 2012, compared to net adverse development of $47.1 million in 2011. The development in each period resulted from our annual review of reserves for this segment, which we conducted in the third quarter of each year. The majority of the insurance coverage in this segment is provided through “claims made” policies, and the final settlement value of these claims is not expected to be determined for several years due to the underlying complex nature of the claims. Accordingly, changes to our ultimate losses for a given underwriting year typically result from management’s revised expectations, as compared to the prior year reserve review, with respect to the settlement value of known claims.

The 2013 net favorable development consisted of $15.5 million in U.S. D&O and $10.8 million in International D&O. Our 2013 review indicated better than expected experience for underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 million in underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis. Reserves for DFP performed slightly better than expected in the past year, but no changes were made to the estimated ultimate losses given the continued evaluation and re-underwriting of this line of business.

The 2012 net favorable development consisted of $9.0 million in U.S. D&O and $16.9 million in International D&O. Our 2012 review indicated that incurred loss development, primarily for underwriting years 2005 and 2006, was lower than expected as compared to our 2011 review, primarily due to actual outcomes on reported claims. This favorable development was partially offset by higher estimates of ultimate losses in the 2008 underwriting year, driven by our revised expectations with regard to the expected outcomes on outstanding claims, based upon actuarial loss development and other information available since the prior review.

The 2011 net adverse development related to our DFP line of business, which provides coverage for private equity partnerships, hedge funds, investment managers and similar groups. In 2011, DFP recorded $104.2 million of adverse development, as well as $37.3 million of additional losses related to our increase in the ultimate loss ratio for accident year 2011. These reserve changes resulted primarily from revised assumptions with regards to the frequency and severity of claims in the 2008 – 2011 accident years, with the majority of the impact in the 2009 – 2011 accident years. Our expectation prior to our third quarter 2011 review was that the frequency and severity of claims after 2008 would be more consistent with our experience prior to the worldwide financial crisis in 2007 and 2008. However, our reserve review indicated that loss experience was emerging consistent with the financial crisis period, prompting our revised assumptions at that time. Our U.S. D&O and International D&O lines of business had favorable development of $32.2 million and $24.9 million, respectively, in 2011, which partially offset the adverse development from DFP. The favorable D&O development resulted from our scheduled reserve review, which indicated lower than expected actual experience in accident years prior to 2006, resulting in greater reliance on our historical loss patterns in the actuarial estimates for these more mature years.

The fluctuations in the expense ratio primarily related to profit commissions of $6.5 million in 2013, $5.1 million in 2012 and $13.5 million in 2011, recognized in conjunction with the favorable development in those years. The profit commissions, which offset the segment’s other expense, reduced the 2013, 2012 and 2011 expense ratio by 1.8, 1.3 and 3.3 percentage points, respectively. Excluding the impact of profit commissions, the 2013 expense ratio was higher than in 2012 and 2011 due to higher compensation expense and lower net earned premium in 2013.

43

Accident & Health Segment

The following tables summarize the operations of the Accident & Health segment.

	2013			2012			2011
Net earned premium	$	883,515		$	831,827		$	758,270
Other revenue		4,932			4,918			4,684
Segment revenue		888,447			836,745			762,954
Loss and loss adjustment expense, net		630,210			601,076			552,292
Other expense		130,814			122,232			116,336
Segment expense		761,024			723,308			668,628
Segment pretax earnings	$	127,423		$	113,437		$	94,326
Net loss ratio		71.3	%		72.3	%		72.8	%
Expense ratio		14.7			14.6			15.2
Combined ratio		86.0	%		86.9	%		88.0	%
Medical Stop-loss	$	816,499		$	776,965		$	703,619
Other		67,016			54,862			54,651
Total net earned premium	$	883,515		$	831,827		$	758,270
Medical Stop-loss		72.7	%		73.7	%		74.5	%
Other		54.8			52.1			51.8
Total net loss ratio		71.3	%		72.3	%		72.8	%
Medical Stop-loss	$	817,943		$	777,351		$	703,814
Other		65,112			58,445			53,283
Total gross written premium	$	883,055		$	835,796		$	757,097
Medical Stop-loss	$	816,499		$	776,965		$	703,619
Other		64,869			58,043			52,920
Total net written premium	$	881,368		$	835,008		$	756,539

The Accident & Health segment’s pretax earnings increased 12% in 2013 and 20% in 2012 due to growth in net earned premium and the impact of net favorable loss development in 2013 and 2012. Medical stop-loss premium increased due to writing new business and rate increases on renewal business. The segment results included net favorable loss development of $18.0 million in 2013, $10.5 million in 2012 and $1.3 million in 2011.

The majority of our stop-loss business provides annual coverage for groups of employees, and claims are reported and settled within 12 to 15 months for each reporting year. We generally conducted our annual review of reserves in the fourth quarter. However, in the third quarter of 2012, we exited two lines of business that had previously been reported in this segment. As a result, we conducted our 2012 reserve review in the third quarter. Our 2013 reserve review indicated lower than expected claims activity related to the 2012 and 2011 underwriting years. The 2012 development related to lower than expected claims activity related to the 2011 underwriting year.

44

U.S. Surety & Credit Segment

The following tables summarize the operations of the U.S. Surety & Credit segment.

	2013			2012			2011
Net earned premium	$	194,286		$	207,955		$	210,535
Other revenue		1,468			843			1,247
Segment revenue		195,754			208,798			211,782
Loss and loss adjustment expense, net		24,143			38,535			52,206
Other expense		109,550			113,619			113,932
Segment expense		133,693			152,154			166,138
Segment pretax earnings	$	62,061		$	56,644		$	45,644
Net loss ratio		12.4	%		18.5	%		24.8	%
Expense ratio		56.0			54.4			53.8
Combined ratio		68.4	%		72.9	%		78.6	%
Surety	$	147,041		$	158,711		$	164,879
Credit		47,245			49,244			45,656
Total net earned premium	$	194,286		$	207,955		$	210,535
Surety		11.8	%		16.6	%		20.6	%
Credit		14.3			24.9			40.0
Total net loss ratio		12.4	%		18.5	%		24.8	%
Surety	$	165,505		$	159,159		$	169,237
Credit		63,425			62,309			57,075
Total gross written premium	$	228,930		$	221,468		$	226,312
Surety	$	147,517		$	144,573		$	158,116
Credit		51,604			51,331			50,743
Total net written premium	$	199,121		$	195,904		$	208,859

Our U.S. Surety & Credit segment pretax earnings increased 10% in 2013 and 24% in 2012, due to the increased net favorable loss development in each year. Net earned premium for our surety line of business decreased in 2013 and 2012, primarily due to competition and economic conditions impacting the construction industry. Gross written premium increased in 2013 as market conditions began to improve.

The segment had net favorable loss development of $37.9 million in 2013, $25.4 million in 2012 and $11.3 million in 2011. Our annual reserve review, which we conducted in the fourth quarter, indicated that actual loss experience for the 2011 and prior underwriting years was significantly better in 2013 than the actuarial expectations in our 2012 review. As a result, we recognized favorable development of $20.6 million for surety and $17.3 million for credit. The 2012 development included $18.0 million for surety and $7.4 million for credit, and the 2011 development included $10.0 million for surety and $1.3 million for credit. The 2012 and 2011 development related to lower than expected loss experience in underwriting years prior to 2011 and 2010, respectively.

45

International Segment

The following tables summarize the operations of the International segment.

	2013			2012			2011
Net earned premium	$	413,206		$	412,853		$	368,748
Other revenue		4,334			5,005			5,309
Segment revenue		417,540			417,858			374,057
Loss and loss adjustment expense, net		249,199			189,410			233,879
Other expense		158,869			146,807			136,750
Segment expense		408,068			336,217			370,629
Segment pretax earnings	$	9,472		$	81,641		$	3,428
Net loss ratio		60.3	%		45.9	%		63.4	%
Expense ratio		38.0			35.1			36.6
Combined ratio		98.3	%		81.0	%		100.0	%
Energy	$	79,637		$	85,764		$	66,512
Property Treaty		112,042			100,565			90,912
Liability		75,329			76,484			81,339
Surety & Credit		72,294			71,378			73,832
Other		73,904			78,662			56,153
Total net earned premium	$	413,206		$	412,853		$	368,748
Energy		30.4	%		27.1	%		35.7	%
Property Treaty		47.0			24.4			80.0
Liability		36.5			33.1			34.0
Surety & Credit		156.9			122.6			56.6
Other		42.6			36.6			121.0
Total net loss ratio		60.3	%		45.9	%		63.4	%
Energy	$	142,551		$	136,070		$	128,078
Property Treaty		139,056			138,065			128,767
Liability		82,380			75,466			89,519
Surety & Credit		90,584			84,288			84,683
Other		93,928			97,278			86,336
Total gross written premium	$	548,499		$	531,167		$	517,383
Energy	$	78,103		$	88,834		$	75,286
Property Treaty		111,334			105,442			98,370
Liability		77,097			69,546			81,855
Surety & Credit		77,857			74,977			78,418
Other		72,648			80,356			57,890
Total net written premium	$	417,039		$	419,155		$	391,819

46

Our International segment pretax earnings decreased $72.2 million in 2013, compared to 2012, primarily due to the impact of higher catastrophe losses in 2013 and net adverse loss development in 2013, compared to net favorable development in 2012. Segment earnings increased $78.2 million in 2012, compared to 2011, due to lower catastrophe losses and increased net earned premium in 2012.

The segment’s increase in gross written, net written and net earned premium in 2013 and 2012 was driven by higher writings in the energy and property treaty lines of business. Net written and net earned premium were relatively flat in 2013, compared to 2012, due to additional reinsurance on our energy line. The increase in premium in 2012 related to higher writings in the energy, property treaty and property insurance lines of business, related to the favorable pricing environment for these products, as well as lower reinstatement premium related to catastrophic events in 2012.

The segment’s pretax earnings were impacted by net catastrophe losses, including reinstatement premium, for these major catastrophic events: 1) 2013 – European floods ($15.0 million) and German hail storms ($13.0 million); 2) 2012 – Superstorm Sandy ($23.9 million); and 3) 2011 – Japan earthquake and tsunami ($39.1 million), Hurricane Irene ($18.1 million), New Zealand earthquakes ($17.6 million), United States tornados ($12.3 million) and Denmark storms ($7.5 million). The remaining losses were small catastrophes that impacted our property treaty business. The following table summarizes the segment’s accident year catastrophe losses, as well as the impact on key metrics:

	2013			2012			2011
Gross losses	$	54,639		$	61,893		$	168,100
Net losses, after reinsurance	$	53,939		$	41,063		$	97,672
Reinstatement premium, net		(3,932)			401			14,008
Total net catastrophe losses	$	50,007		$	41,464		$	111,680
Impact of net catastrophe losses (in percentage points) on:
Net loss ratio		12.6	%		10.0	%		27.8	%
Expense ratio		(0.4)			-			1.4
Combined ratio		12.2	%		10.0	%		29.2	%
The International segment recognized net adverse loss development of $43.8 million in 2013 and net favorable development of $10.1 million in 2012 and $13.8 million in 2011. The net (favorable) adverse loss development recognized by line of business was as follows:
	2013			2012			2011
Energy	$	(10,089)		$	(18,819)		$	(14,091)
Property Treaty		(1,303)			(1,116)			739
Liability		(14,618)			(20,525)			(12,204)
Surety & Credit		69,947			43,266			11,416
Other		(132)			(12,890)			310
Total net (favorable) adverse loss development	$	43,805		$	(10,084)		$	(13,830)

The totals in the above table include favorable development from prior years’ catastrophes of $6.0 million, $18.9 million and $7.6 million in 2013, 2012 and 2011, respectively, related primarily to these events: 1) 2013 – Superstorm Sandy; 2) 2012 – Hurricane Irene and the Japan earthquake and tsunami; and 3) 2011 – the 2005 hurricanes.

47

The lines of business in our International segment provide a variety of coverages, most of which are medium to long-tail lines with moderate timing for claims reporting and medium to high reserve volatility. This segment incurs most of our catastrophe losses. In energy, we insure complex, worldwide energy production facilities, oil rigs and offshore platforms that are subject to expensive business interruption claims and replacement costs. Catastrophe-related claims for energy projects may take several years to settle and can involve significant reserve volatility for coverage on both a primary and excess basis. The property and property treaty lines are short-tail with relatively fast claims reporting and lower reserve volatility.

We conducted our annual review of this segment’s reserves in the fourth quarter of 2012 and 2011. In 2013, we accelerated our review to the third quarter due to a growing actuarially-indicated redundancy in several lines of business and issues related to certain Spanish surety bonds.

The net adverse development in the surety & credit line of business in all three years was primarily related to our increase in reserves on a specific class of Spanish surety bonds, the majority of which were written prior to 2006. We recorded $12.8 million of net reserves in 2011 due to claims presented to us under these bonds. We recorded $48.9 million of additional net reserves in 2012 based on management’s evaluation of the claims and the likelihood that we would ultimately be required to pay the claims, based on information available at year-end 2012. In 2013, we revised the estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling published in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. This resulted in $70.3 million of net adverse development in 2013.

The favorable development in energy included the release of $3.0 million, $5.1 million and $5.1 million in 2013, 2012 and 2011, respectively, of reserves related to prior years’ catastrophes. The remaining 2013 development related to the 2008 – 2010 and 2012 accident years, and the remaining 2012 and 2011 development related to the 2010 and prior accident years, based on detailed review of our outstanding claims during each annual review. Our actual loss experience for energy and U.K. professional liability in 2013, 2012 and 2011 was better than our actuarial expectations in the current year reserve review compared to the prior year reserve review.

The net favorable development in liability included favorable development related to our U.K. professional liability product as follows: 1) 2013 – $16.1 million (for 2011 and prior accident years); 2) 2012 – $12.8 million (for 2010 and prior accident years); and 3) 2011 – $18.8 million (for 2010 and prior accident years). In addition, there was net (favorable) adverse development of $1.5 million in 2013, ($7.7) million in 2012 and $6.6 million in 2011, primarily related to other liability business written through our syndicate for accident years 2011 and prior. The U.K. professional liability actual loss experience in 2013, 2012 and 2011 was better than our actuarial expectations in the current year reserve review compared to the prior year reserve review.

The net favorable development of $12.9 million in 2012 in the Other category primarily related to reserve reductions related to the 2011 catastrophes in our property line of business.

The segment’s expense ratio increased in 2013 due to higher compensation and benefits expense, as well as higher technology costs related to implementation of new systems during the year.

48

Investing Segment

Our Investing segment includes our total investment portfolio, as well as all investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments. Our insurance segments generate the cash flow underlying these investments. We manage all investments and evaluate our investment results centrally and, thus, include them in a separate segment for reporting purposes.

The following tables summarize the results and certain key metrics of our Investing segment.

	2013			2012			2011
Fixed maturity securities	$	212,841		$	221,535		$	212,022
Equity securities		14,537			3,959			-
Short-term investments		160			620			537
Other investments and deposits		668			2,856			4,486
Net realized investment gain		42,030			31,148			3,653
Other-than-temporary impairment credit losses		-			(1,028)			(4,679)
Investment expenses		(8,024)			(6,336)			(4,774)
Segment pretax earnings	$	262,212		$	252,754		$	211,245
Fixed maturity securities:
Average yield *		3.6	%		3.9	%		3.9	%
Average tax equivalent yield *		4.5	%		4.7	%		4.8	%
Weighted-average life		8.2 years			8.2 years			7.6 years
Weighted-average duration		5.1 years			4.7 years			5.0 years
Weighted-average rating		AA			AA			AA

* Excluding realized and unrealized gains and losses.

In the past several years, the average yield on our fixed maturity securities has continued to decline due to persistently lower interest rates on new investments. We have addressed this issue by investing longer-term, especially in tax-exempt municipal bonds, in anticipation of a prolonged low interest rate environment and, since 2012, by investing in new classes of securities with attractive yields and low/no duration. These new classes of investments include bank loans (classified as corporate securities), collateralized loan obligations (classified as asset-backed securities) and global publicly-traded equity securities. At December 31, 2013, our investments included $144.7 million of bank loans, $88.0 million of collateralized loan obligations and $517.5 million of equity securities, compared to $132.8 million, none and $284.6 million, respectively, at December 31, 2012.

The weighted average duration of our fixed maturity securities portfolio increased from 4.7 years at December 31, 2012 to 5.1 years at December 31, 2013. The higher duration directly relates to increased prevailing interest rates and spreads, primarily in the second quarter of 2013, due to investor concerns that the U.S. Federal government would tighten its fiscal policies. In 2013, rates on 10-year U.S. Treasury notes rose 126 basis points to their highest level in two years. Duration dropped in 2012, primarily due to the impact of lower market interest rates, at that time, on our municipal securities with call options and structured securities with prepayment options.

These rising interest rates impacted the fair value of our fixed maturity securities portfolio at December 31, 2013, as described below. Conversely, the higher interest rates will result in higher anticipated yields as we invest our future cash flows.

49

The average tax equivalent yield of our fixed maturity securities portfolio was 4.5%, 4.7% and 4.8% in 2013, 2012 and 2011, respectively. These yields reflect general declines in market interest rates over the three years, partially offset by longer average duration of our new investments. Our general policy has been to hold our available for sale securities through periods of fluctuating interest rates. We sell securities and recognize realized gains and losses from these sales if we can reinvest the proceeds at a higher effective yield or if the security has credit-related issues.

This table summarizes our investments by type, substantially all of which are reported at fair value, at December 31, 2013 and 2012. The methodologies used to determine the fair value of our investments are described in Note 3, “Fair Value Measurements” to the Consolidated Financial Statements.

	December 31, 2013					December 31, 2012
	Amount		%			Amount		%
Fixed maturity securities
U.S. government and government agency securities	$	92,709		1	%	$	199,607		3	%
Fixed income securities of states, municipalities and political subdivisions		986,486		15			1,065,811		15
Special purpose revenue bonds of states, municipalities and political subdivisions		2,265,195		34			2,200,331		32
Corporate securities		1,225,238		18			1,315,170		19
Residential mortgage-backed securities		618,119		9			664,887		10
Commercial mortgage-backed securities		504,888		7			524,289		8
Asset-backed securities		182,392		3			33,275		-
Foreign government securities		147,446		2			278,411		4
Equity securities		517,466		8			284,639		4
Short-term investments		178,753		3			363,053		5
Other investments		-		-			20,925		-
Total investments	$	6,718,692		100	%	$	6,950,398		100	%
Our total investments decreased $231.7 million in 2013, principally from a $282.6 million decrease in the pretax net unrealized gain and return of $121.7 million of collateral held for our U.S. surety business, partially offset by investment of newly generated cash flow. At December 31, 2013, the net unrealized gain on our investment portfolio was $154.1 million, compared to $436.7 million at December 31, 2012. The significant decline in the net unrealized gain was due to the rise in interest rates in 2013. The ratings of our individual securities within our fixed maturity securities portfolio at December 31, 2013 were as follows:
						Amount		%
AAA						$	867,971		15	%
AA							3,442,355		57
A							1,259,517		21
BBB							303,050		5
BB and below							149,580		2
Total fixed maturity securities						$	6,022,473		100	%

50

The table below indicates the contractual or expected maturity distribution of our fixed maturity securities at December 31, 2013. In the table, we allocated the maturities of our mortgage-backed and asset-backed securities based on the expected future principal payments. The weighted-average life of our mortgage-backed and asset-backed securities is approximately 5.9 years based on expected future cash flows.

	Non-structured					Mortgage-backed and
	securities at					asset-backed securities
	amortized cost					at amortized cost					Total
	Amount		%			Amount		%			Amount		%
One year or less	$	193,107		4	%	$	21,231		2	%	$	214,338		4	%
One year to five years		1,056,510		23			406,190		31			1,462,700		25
Five years to ten years		1,425,759		31			839,699		64			2,265,458		38
Ten years to fifteen years		991,474		21			36,968		3			1,028,442		17
More than fifteen years		946,142		21			4,407		-			950,549		16
Total fixed maturity securities	$	4,612,992		100	%	$	1,308,495		100	%	$	5,921,487		100	%

At December 31, 2013, we held $2.3 billion of special purpose revenue bonds, as well as $986.5 million of general obligation bonds, which are issued by states, municipalities and political subdivisions and collectively referred to as municipal bonds in the investment market. The overall rating of our municipal bonds was AA at December 31, 2013. Within our municipal bond portfolio, we held $404.4 million of pre-refunded bonds, which are supported by U.S. government debt obligations. Our special purpose revenue bonds are secured by revenue sources specific to each security. At December 31, 2013, the percentages of our special purpose revenue bond portfolio supported by these major revenue sources were as follows: 1) education – 23%, 2) transportation – 23%, 3) water and sewer – 18% and 4) electric – 14%.

Many of our special purpose revenue bonds are insured by mono-line insurance companies or supported by credit enhancement programs of various states and municipalities. We view bond insurance as credit enhancement and not credit substitution. We base our investment decision on the strength of the issuer. A credit review is performed on each issuer and on the sustainability of the revenue source before we acquire a special purpose revenue bond and periodically thereafter. The underlying average credit rating of our special purpose revenue bond issuers, excluding any bond insurance, was AA at December 31, 2013. Although recent economic conditions in the United States may reduce the source of revenue to support certain of these securities, the majority are supported by revenue from essential sources, as indicated above, which we believe generate a stable source of revenue.

At December 31, 2013, we held a commercial mortgage-backed securities portfolio with a fair value of $504.9 million, an average rating of AA+ and an average loan-to-value ratio of 61%. We owned no collateralized debt obligations (CDOs) and we are not counterparty to any credit default swap transactions.

Some of our fixed maturity securities have call or prepayment options. In addition, mortgage-backed and certain asset-backed securities have prepayment, extension or other market-related credit risk. Calls and prepayments subject us to reinvestment risk should interest rates fall and issuers call their securities and we reinvest the proceeds at lower interest rates. Prepayment risk exists if cash flows from the repayment of principal occurs earlier than anticipated because of declining interest rates. Extension risk exists if cash flows from the repayment of principal occurs later than anticipated because of rising interest rates. Credit risk exists if mortgagees default on the underlying mortgages. Net investment income and/or cash flows from investments that have call or prepayment options and prepayment, extension or credit risk may differ from what was anticipated at the time of investment. We mitigate these risks by investing in investment grade securities with varied maturity dates so that only a portion of our portfolio will mature at any point in time. In 2014, we expect approximately 7% of our fixed maturity securities portfolio to mature, call or prepay. Assuming prevailing interest rates remain constant throughout 2014, reinvestment of these funds will be at book yields and tax-equivalent yields that are approximately 70 basis points lower than the year-end 2013 yields for these securities.

51

At December 31, 2013, we held corporate securities issued by foreign corporations with an aggregate fair value of $497.0 million. In addition, we held securities issued by foreign governments, agencies or supranational entities with an aggregate fair value of $147.4 million. The following table details our holdings of foreign debt at December 31, 2013.

	Corporate debt
	Financial institutions				Non-financial institutions				Sovereign debt and agencies
	Cost or				Cost or				Cost or				Total
	amortized		Fair		amortized		Fair		amortized		Fair		fair
Country	cost		value		cost		value		cost		value		value
United Kingdom	$	76,505	$	79,430	$	86,163	$	89,668	$	18,922	$	19,621	$	188,719
The Netherlands		26,840		27,196		51,241		52,738		18,883		19,248		99,182
Germany		10,161		10,712		21,952		23,092		49,207		50,270		84,074
France		17,134		17,540		42,090		42,608		3,551		3,783		63,931
Canada		11,911		12,010		22,966		23,530		18,295		18,332		53,872
Sweden		22,136		23,214		7,919		8,157		4,191		4,122		35,493
Switzerland		26,992		28,398		-		-		-		-		28,398
Supranational (1)		-		-		-		-		23,417		23,970		23,970
Norway		5,440		5,584		15,460		15,542		806		809		21,935
Finland		2,583		2,549		3,069		3,013		7,294		7,291		12,853
Australia		-		-		8,354		8,657		-		-		8,657
Belgium		-		-		7,485		7,991		-		-		7,991
Other (2)		3,923		4,133		11,052		11,199		-		-		15,332
Total foreign debt	$	203,625	$	210,766	$	277,751	$	286,195	$	144,566	$	147,446	$	644,407

(1) Supranational represents investments in European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, and International Bank for Reconstruction and Development.

(2) Includes all countries whose total foreign debt is individually less than $5.0 million.

Corporate & Other

Our Corporate & Other category includes operations not related to our segments, including unallocated corporate operating expenses, consolidated interest expense, foreign currency expense (benefit) and underwriting results of our Exited Lines of business.

The following table summarizes activity in the Corporate & Other category.

	2013			2012			2011
Net earned premium	$	12,931		$	41,253		$	45,391
Other revenue		459			86			(513	)
Total revenue		13,390			41,339			44,878
Loss and loss adjustment expense, net		15,879			37,331			31,350
Other expense – Exited Lines		4,506			7,713			9,080
Other expense – Corporate		54,778			61,083			53,027
Interest expense		26,038			25,132			22,494
Foreign currency expense (benefit)		5,288			6,184			(1,087	)
Total expense		106,489			137,443			114,864
Pretax loss	$	(93,099	)	$	(96,104	)	$	(69,986	)

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Net earned premium declined in 2013 as we wrote less business related to our HMO and medical excess reinsurance products, which we exited in late 2012. Premium related to the other products included in Exited Lines was insignificant in all years. The majority of the loss and loss adjustment expense relates to the HMO and medical excess reinsurance products, which had higher losses in 2012 compared to 2011. The Exited Lines had net adverse loss development of $4.1 million in 2013 and net favorable development of $0.5 million and $7.3 million in 2012 and 2011, respectively. The Exited Lines incur operating costs primarily for claims personnel and facilities.

Our Corporate expenses not allocated to the segments decreased $6.3 million in 2013, compared to 2012, principally due to a $5.1 million indemnification benefit in 2013. We reduced our indemnification liability, which related to a 2001 subsidiary sale, due to favorable claims activity and successful subrogation recoveries. Our Corporate expenses not allocated to the segments increased $8.1 million in 2012, compared to 2011, principally due to higher employee compensation and benefit costs and incremental expense related to our new technology systems. Our interest expense increased year-over-year due to a higher amount of borrowings on our $600.0 million Revolving Loan Facility.

The impact of foreign currency expense fluctuated year-over-year principally due to changes in the value of the British pound sterling and the Euro relative to the U.S. dollar. We hold available for sale securities denominated in non-functional currencies to economically hedge the currency exchange risk on our loss reserves denominated in non-functional currencies. The foreign currency benefit/expense related to loss reserves is recorded through the income statement, while the foreign currency benefit/expense related to available for sale securities is recorded through other comprehensive income within shareholders’ equity. This accounting mismatch may cause fluctuations in our reported foreign currency benefit/expense in future periods.

Liquidity and Capital Management

We believe we have sufficient sources of liquidity at both a consolidated and insurance company legal entity level at a reasonable cost to pay claims and meet our other contractual obligations and liabilities as they become due in the short-term and long-term. Our current sources of liquidity include: 1) significant operating cash flow generated by our insurance companies, 2) a $6.7 billion investment portfolio, most of which is held by our insurance companies, 3) our revolving loan and standby letter of credit facilities and 4) a $1.0 billion shelf registration. Our insurance companies have sufficient resources to pay potential claims. Based on historical payment patterns and claims history, as of year-end 2013 we project that our insurance companies will pay approximately $1.6 billion of claims and collect approximately $0.4 billion of reinsurance recoveries in 2014. In addition to expected cash flow from their 2014 operations, these companies had $6.0 billion of investments available to fund claims payments, if needed. Our sources of liquidity are discussed below.

Cash Flow

We manage the liquidity of our insurance companies such that each subsidiary’s anticipated claims payments will be met by its own current operating cash flows, cash, short-term investments or investment maturities. Our insurance companies receive substantial cash from premiums, reinsurance recoverables, surety collateral, outward commutations, proceeds from sales and redemptions of investments, and investment income. Their principal cash outflows are for the payment of claims and loss adjustment expenses, premium payments to reinsurers, return of surety collateral, inward commutations, purchases of investments, policy acquisition costs, operating expenses, taxes and dividends paid to the parent company. We report all of the insurance companies’ investing activity in our Investing segment for segment reporting purposes. Our parent company’s principal cash inflows relate to its investment portfolio and dividends paid by the insurance companies, and its principal cash outflows relate to debt service, operating expenses, dividends paid to shareholders and common stock purchases. Cash provided by operating activities can fluctuate due to timing differences in the collection of premium receivables, reinsurance recoverables and surety collateral; the payment of losses, premium payables and return of surety collateral; and the completion of commutations.

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The components of our net operating cash flows are summarized in the following table.

	2013			2012			2011
Net earnings	$	407,197		$	391,240		$	255,243
Change in premium, claims and other receivables, net of reinsurance, premium and claims payables		22,737			2,498			(68,810	)
Change in unearned premium, net		16,168			4,082			41,377
Change in loss and loss adjustment expense payable, net of reinsurance recoverables		(78,026	)		75,389			133,471
Change in accounts payable and accrued liabilities		(120,859	)		100,091			17,538
(Gain) loss on investments		(42,030	)		(30,120	)		1,026
Other, net		57,520			117,967			41,431
Cash provided by operating activities	$	262,707		$	661,147		$	421,276

Our cash provided by operating activities was $262.7 million in 2013, compared to $661.1 million in 2012 and $421.3 million in 2011. The payment of claims related to the Spanish surety bonds in the fourth quarter of 2013 reduced our 2013 cash provided by operating activities by $139.1 million. In addition, cash provided by operating activities includes collateral funds we receive or refund for our U.S. surety business, for which we record a liability within accounts payable and accrued liabilities. We refunded a net $121.7 million and $8.3 million of U.S. surety collateral in 2013 and 2011, respectively, compared to a net receipt of $96.6 million in 2012. The remaining reduction in our cash provided by operating activities in 2013 primarily related to higher income tax payments, compared to 2012, and the remaining increase in our cash provided by operating activities in 2012, compared to 2011, primarily related to additional premium collections.

The net effect of payment of claims and collection of recoverables related to the Spanish surety bonds is expected to continue to impact our cash provided by operating activities in 2014, although the amount and timing of such payments and receipts are not determinable at this time.

Investments

At December 31, 2013, we held a $6.7 billion investment portfolio, which included $178.8 million of liquid short-term investments. Our fixed maturity and equity securities portfolios are classified as available for sale. We expect to hold our fixed maturity securities until maturity, but we would be able to sell these securities, as well as our equity securities to generate cash if needed. See the “Investing Segment” section above for additional information about our investment portfolio. The parent company holds $684.6 million of cash and investments at December 31, 2013, which are available to cover the holding company’s required cash disbursements in 2014.

Revolving Loan and Standby Letter of Credit Facilities

We maintain a $600.0 million Revolving Loan Facility (Facility), of which $239.1 million of available capacity remained at December 31, 2013. During the past three years, we used the Facility primarily to fund repurchases of our common stock. We expect to continue to use the Facility to opportunistically repurchase stock in 2014. We also have a $90.0 million Standby Letter of Credit Facility (Standby Facility) that is used to guarantee our performance in our Lloyd’s of London syndicate. The Facility expires in April 2017, and the Standby Facility expires in December 2017. See Note 7, “Notes Payable” to the Consolidated Financial Statements for additional information related to the Facilities and our long-term indebtedness.

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Subsidiary Dividends

HCC’s obligations include servicing outstanding debt and interest, paying dividends to shareholders, purchasing HCC’s common stock, and paying corporate expenses. The principal assets of HCC are the shares of capital stock of its insurance company subsidiaries. A significant percentage of HCC’s profit is earned in our insurance companies, which has generated available capital in these companies. As a result, HCC receives dividends paid by our insurance companies. HCC can utilize these dividends for any purpose, including paying down debt, paying dividends to shareholders, funding acquisitions, purchasing our common stock and paying operating expenses.

In 2013, 2012 and 2011, our domestic and foreign insurance companies paid HCC dividends of $317.5 million, $262.4 million and $248.2 million, respectively. The payment of dividends by our insurance companies is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries. HCC’s direct U.S. insurance company subsidiaries can pay an aggregate of $350.8 million in dividends in 2014 without obtaining special permission from U.S. state regulatory authorities.

Share Purchases

In August 2012, the Board approved a $300.0 million stock purchase plan (the Plan). Purchases under the Plan may be made in the open market or in privately negotiated transactions from time-to-time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Purchases under the Plan will be made subject to market and business conditions, the level of cash generated from our operations, cash required for acquisitions, our debt covenant compliance, and other relevant factors. The Plan does not obligate us to purchase any particular number of shares, has no expiration date, and may be suspended or discontinued at any time at the Board’s discretion.

During 2013, we purchased 1.1 million shares of our common stock in the open market for a total cost of $42.2 million and a weighted-average cost of $40.02 per share under the Plan. Since our repurchase program began in 2008, we have purchased 25.2 million shares for $728.4 million, or $28.86 per share, through December 31, 2013. At February 14, 2014, $185.7 million of repurchase authority remains under the Plan.

Shelf Registration

We have a “Universal Shelf” registration statement that expires in March 2015. The Universal Shelf provides for the issuance of $1.0 billion of securities, which may be debt securities, equity securities, or a combination thereof. The Universal Shelf provides us the means to access the debt and equity markets relatively quickly, if we are satisfied with the current pricing in the financial markets.

Claims Payments

We maintain sufficient liquidity from our current cash, short-term investments and investment maturities, in combination with future operating cash flow, to pay anticipated policyholder claims on their expected payment dates. Each of our insurance companies pays its own claims using its own operating cash flows, cash, short-term investments or investment maturities.

The average duration of claims in many of our lines of business is relatively short. However, we write D&O, E&O and casualty insurance, all of which have a longer claims duration than our other products. We consider these different claims payment patterns in determining the duration of our investment portfolio. The weighted-average duration of all claims was approximately 2.1 years, 2.2 years and 2.5 years in 2013, 2012 and 2011, respectively. The weighted-average duration of our fixed maturity securities was 5.1 years, 4.7 years and 5.0 years in 2013, 2012 and 2011, respectively. The longer duration of our fixed maturity securities reflects the effects of the investment of our capital.

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Contractual Obligations

The following table summarizes our total contractual cash payment obligations by estimated payment date at December 31, 2013.

			Estimated payment dates
	Total		2014		2015-2016		2017-2018		Thereafter
Gross loss and loss adjustment expense payable (1):
U.S. Property & Casualty	$	665,871	$	303,480	$	247,280	$	78,731	$	36,380
Professional Liability		1,789,113		490,144		706,379		357,143		235,447
Accident & Health		258,102		258,030		72		-		-
U.S. Surety & Credit		112,916		74,099		33,189		3,317		2,311
International		853,711		412,977		308,687		72,358		59,689
Exited Lines		222,419		79,379		51,321		24,935		66,784
Total gross loss and loss adjustment expense payable		3,902,132		1,618,109		1,346,928		536,484		400,611
Life and annuity policy benefits		56,491		1,716		3,275		3,076		48,424
6.30% Senior Notes (2)		413,400		18,900		37,800		37,800		318,900
$600.0 million Revolving Loan Facility (3)		372,897		5,394		10,789		356,714		-
Operating leases		44,048		12,558		20,427		10,401		662
Earnout liabilities (4)		22,835		2,533		11,190		-		9,112
Indemnification (5)		1,937		285		893		644		115
Purchase obligations (6)		7,715		4,780		2,935		-		-
Total obligations	$	4,821,455	$	1,664,275	$	1,434,237	$	945,119	$	777,824

In preparing the contractual obligations table, we made the following estimates and assumptions:

(1) The estimated loss and loss adjustment expense payments for future periods assume that the percentage of ultimate losses paid from one period to the next by line of business will be relatively consistent over time. Actual payments will be influenced by many factors and could vary from the estimated amounts.

(2) The 6.30% Senior Notes are due in 2019. We pay interest semi-annually on May 15 and November 15, which is included in the above table.

(3) The $600.0 million Revolving Loan Facility expires in April 2017. In the above table, the outstanding borrowings of $355.0 million at December 31, 2013 are shown in 2017 with the annual interest of LIBOR plus 125 basis points on the outstanding balance and the annual commitment fee of 15 basis points on the unused balance shown in each applicable year.

(4) See Note 14, “Related Party Transactions” to the Consolidated Financial Statements for information related to our earnout liabilities.

(5) See Note 13, “Commitments and Contingencies — Indemnifications” to the Consolidated Financial Statements for information related to our indemnification.

(6) Purchase obligations primarily relate to agreements with vendors to purchase maintenance and administrative services for our technology systems and to license software.

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Impact of Inflation

Our operations, like those of other property and casualty insurers, are susceptible to the effects of inflation because premiums are established before the ultimate amounts of loss and loss adjustment expense are known.

Although we consider the potential effects of inflation when setting premium rates, our premiums, for competitive reasons, may not fully offset the effects of inflation. However, because the majority of our products have a relatively short period of time between the occurrence of an insured event, reporting of the claim to us and the final settlement of the claim, or have claims that are not significantly impacted by inflation, the effects of inflation are minimized.

A portion of our revenue is related to healthcare insurance and reinsurance products that are subject to the effects of the underlying inflation of healthcare costs. Such inflation in the costs of healthcare tends to generate increases in premiums for medical stop-loss coverage, resulting in greater revenue but also higher claims payments. Inflation also may have a negative impact on insurance and reinsurance operations by causing higher claims settlements than originally estimated, without an immediate increase in premiums to a level necessary to maintain profit margins. We do not specifically provide for inflation when setting underwriting terms and claims reserves, although we do consider market trends in our quarterly reserve reviews.

Inflation can also affect interest rates. A significant increase in interest rates could increase our net investment income related to newly invested cash flow and could also have a material adverse effect on the fair value of our investments. In addition, the interest rate payable under our Revolving Loan Facility fluctuates with market interest rates. See Item 7A., Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk for additional disclosures about the impact of changes in market interest rates on our fixed maturity securities and Revolving Loan Facility.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires us to make estimates and assumptions when applying our accounting policies. The following sections provide information about our estimation processes related to certain of our critical accounting policies.

Reserves 

Our recorded reserves represent management’s best estimate of unpaid losses and loss adjustment expenses as of each quarter end, based on information, facts and circumstances known at that time. The process of establishing reserves is complex, imprecise and inherently uncertain and, as such, involves a considerable degree of judgment involving our management review and actuarial processes. We must consider many variables that are subject to the outcome of future events. As a result, an integral component of our loss reserving process is the use of informed subjective estimates and judgments about our ultimate exposure to losses. Therefore, it is possible that management’s estimate of the ultimate liability for losses may change.

Management considers many factors in determining the ultimate losses and reserves for the various products in our five insurance underwriting segments. These factors include: 1) actuarial point estimates and the estimated ranges around these estimates, 2) information used to price the applicable policies, 3) historical loss information, where available, 4) public industry data for the product or similar products, 5) an assessment of current market conditions, 6) information on individual claims, 7) an assessment of current or potential litigation involving claims and 8) information from underwriting and claims personnel. The estimate of our reserves is increased or decreased as more information becomes known about the frequency and severity of losses for prior and current years. We believe our review process is effective, such that any required changes in reserves are recognized in the period of change as soon as the need for the change is evident.

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Our actuaries monitor the adequacy and reasonableness of our recorded reserves for over 100 specialty insurance products by accident year or underwriting year, as applicable. The table on page 60 details the characteristics for our major products in each segment. Although the duration (the time period between the occurrence of a loss and the settlement of a claim) is either short-term or medium-term for the majority of these products, approximately 50% of our total gross reserves at December 31, 2013 related to long-tail products in our U.S. Property & Casualty, Professional Liability and International segments and our Exited Lines. These long-tail products include primary and excess casualty, directors’ and officers’ liability, large account E&O liability, International accident and health, and assumed accident and health reinsurance business that we no longer write. We write many of these contracts as excess insurance, where losses in lower layers must develop first before our excess coverage attaches. Significant periods of time, ranging up to several years or more, may elapse between occurrence of the loss, reporting of the loss to us, and settlement of the claim. In addition, many of these claims are susceptible to litigation and can be affected by escalating legal defense costs, contract interpretations and the changing economic and legal environment. As a result, our long-tail products are subject to greater levels of reserve volatility, creating favorable or adverse loss development over a longer period of time.

Our actuaries perform a comprehensive review of loss reserves for each major product at least once each year. The reviews take into consideration the variety of trends that impact the ultimate settlement of claims for each product type. These reviews generally follow a pre-set schedule, which covers the product lines in each segment, as follows: 1) second quarter – Exited Lines, 2) third quarter – U.S. Property & Casualty and Professional Liability, and 3) fourth quarter – Accident & Health, U.S. Surety & Credit, and International. Management determines if additional or earlier comprehensive reviews are warranted based on significant unusual issues identified during the year. In addition to these comprehensive reviews, each quarter the actuaries review the emergence of paid and reported losses relative to expectations (established during the annual reviews) for all product lines and, if considered necessary, perform a more detailed review of the particular reserves.

Our actuaries’ loss review process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is a reasonable basis for predicting future outcomes. As part of their process, our actuaries use a variety of actuarial methods that analyze experience, trends and other relevant factors. The principal standard actuarial methods used by our actuaries for their comprehensive reviews include:

• Loss ratio method – This method uses loss ratios for prior accident years, adjusted for current trends, to determine an appropriate expected loss ratio for a given accident year.

• Loss development methods – Loss development methods assume that the losses yet to emerge for an accident year are proportional to the paid or reported loss amounts observed to-date. The paid loss development method uses losses paid to-date, while the reported loss development method uses losses reported to-date.

• Bornheutter-Ferguson method – This method is a combination of the loss ratio and loss development methods, where the loss development factor is given more weight as an accident year matures.

• Frequency/severity method – This method projects claim counts and average cost per claim on a paid or reported basis for high frequency, low severity products.

Our actuaries calculate an actuarial point estimate, as well as a high and low end of the actuarial range, for the products that they review. The actuarial point estimates represent our actuaries’ estimate of the most likely amount that will ultimately be paid to settle the net reserves we have recorded at a particular point in time. While standard actuarial techniques are utilized in making these actuarial point estimates, these techniques require a high degree of judgment, and changing conditions can cause fluctuations in the reserve estimates. From an actuarial perspective, a point estimate is considered the most likely amount to be paid. However, there is inherent uncertainty in the point estimate because it is only one value in a distribution of possible reserve estimates. The actuarial ranges represent our actuaries’ estimate of a likely lowest amount and highest amount that will ultimately be paid to settle the net reserves. There is still a possibility of ultimately paying an amount below the range or above the range. The range determinations are based on estimates and actuarial judgments and are intended to encompass reasonably likely changes in one or more of the variables that were used to determine the point estimates.

Management evaluates the adequacy of our recorded consolidated reserves at each reporting period and approves increases or decreases in reserves, as considered necessary, based on a consideration of all material facts and circumstances known at that time. The Reserve Review Committee (which includes our Chief Executive Officer, President, Chief Financial Officer, executive management, chief actuary, segment management, and key actuarial, claims and accounting personnel) meets each quarter to review our actuaries’ comprehensive review of loss reserves and assessment of the emergence of paid and reported losses relative to expectations. The Reserve Review Committee discusses factors impacting the reserves in that quarter,

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including the most recent actuarial point and range estimates for each insurance segment, to monitor the adequacy and reasonableness of the recorded reserves. If the recorded reserves vary significantly from the actuarial point estimate, management discusses the reasons for the variances. As a result of discussions during this meeting, as well as any additional meetings, the Reserve Review Committee determines whether any recorded reserves should be increased or decreased during the quarter to an amount that, in management’s judgment, is adequate based on all of the facts and circumstances considered during the meetings, including the actuarial point estimates. Historically, our consolidated net reserves at each quarter-end, which reflect management’s best estimate of unpaid losses and loss adjustment expenses, have been above the total actuarial point estimate and within the actuarial range.

Any increase or decrease in prior years’ reserves approved by the Reserve Review Committee generates favorable or adverse loss development related to our ultimate losses, which is reflected in our incurred but not reported (IBNR) reserves in the period of the reserve change. In addition, we may have loss development due to the normal claims settlement process. For our most recent accident years, recorded loss reserves are generally based on management’s establishment of ultimate loss ratios for each product line, based on historical loss trends and current market considerations. We do not recognize favorable or adverse development for these recent accident years until loss trends emerge. The time required for credible loss trends to emerge differs based on the characteristics of the product, and with long-tail products this can take several years. Over time, our recorded reserves align closer to the actuarial indications as we place additional weight on the credibility of assumptions relating to actual experience and claims outstanding.

The following table shows our recorded net reserves by segment, as well as the actuarial reserve point estimates, and the high and low ends of the actuarial reserve range as determined by our reserving actuaries, as of December 31, 2013.

	Recorded		Actuarial		Low end of		High end of
	net reserves		point estimate		actuarial range		actuarial range
Total net reserves	$	2,779,401	$	2,670,008	$	2,483,921	$	2,941,821
U.S. Property & Casualty	$	447,463	$	438,513	$	398,524	$	496,371
Professional Liability		1,235,438		1,173,001		997,051		1,407,601
Accident & Health		258,101		258,045		231,841		285,637
U.S. Surety & Credit		99,509		88,682		80,240		101,558
International		556,261		524,231		497,167		601,288
Exited Lines		182,629		187,536		166,277		230,641
Total net reserves	$	2,779,401

The excess of the total recorded net reserves over the actuarial point estimate was 3.9% of recorded net reserves at December 31, 2013, compared to 5.3% at December 31, 2012. The percentage will vary each year, in total and by segment, depending upon current economic events, the nature of the underlying products and their potential volatility, severity of claims reported in the current year, historical development patterns and management’s judgment about these factors.

The low end of the actuarial range and the high end of the actuarial range for our total net reserves will not equal the sum of the low and high ends of the actuarial ranges for our insurance segments due to the estimated effect of diversification across the products in each segment. Some of the products in our segments may be more effectively modeled by a statistical distribution that is skewed or non-symmetric, which causes the midpoint of the range to be above the actuarial point estimate or mean value of the range. Our actuarial assumptions, estimates and judgments can change based on new information and changes in conditions, and, if they change, it will affect the determination of the range amounts.

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The following table details the characteristics and key assumptions used in the determination of the actuarial point estimates and ranges for our major products in each segment. We considered all lines of business written by the insurance industry when determining the relative characteristics of claims duration, speed of claim reporting and reserve volatility. Other companies may classify their own insurance products in different segments or utilize different actuarial assumptions. Major actuarial assumptions used include historical loss payment and reporting patterns, estimates for rate changes by product line, trends impacting losses, and the effects of large losses.

Line of business	Products	Underwriting	Duration	Speed of claim reporting	Reserve volatility
U.S. Property & Casualty	Aviation	Direct and subscription	Medium	Fast	Medium
	E&O liability	Direct	Medium	Moderate	Medium
	Other liability	Direct and assumed	Medium	Moderate	Medium
	Property	Direct and assumed	Short	Fast	Low
	Casualty	Direct	Long	Moderate	High
Professional Liability	D&O liability	Direct and subscription	Medium to long	Moderate	Medium to high
	E&O liability	Direct	Medium	Moderate	Medium
Accident & Health	Medical stop-loss	Direct	Short	Fast	Low
	Other medical	Direct	Short	Fast	Low
U.S. Surety & Credit	Surety	Direct	Medium	Fast	Low
	Credit	Direct	Medium	Fast	Low
International	Energy	Subscription	Medium	Moderate	Medium
	Property	Subscription	Short	Fast	Low
	Property treaty	Assumed	Short	Fast	Medium
	Surety & credit	Direct	Medium	Fast	Medium
	Marine	Subscription	Medium	Moderate	Medium
	Accident & health	Direct and assumed	Medium to long	Moderate	Medium to high
	E&O liability	Direct	Medium	Moderate	Medium
	Other liability	Direct and assumed	Medium	Moderate	Medium to high
Exited Lines	Accident & health	Assumed	Long	Slow	High
	Medical malpractice	Direct	Medium to long	Moderate	Medium to high
	Other medical	Assumed	Short	Fast	Medium

Direct insurance is coverage that is originated by our insurance companies and brokers in return for premium. Assumed reinsurance is coverage written by another insurance company, for which we assume all or a portion of the risk in exchange for all or a portion of the premium. Assumed reinsurance represented 12% and 13% of our gross written premium in 2013 and 2012, and 13% of our gross reserves ($503.3 million of $3.9 billion) at December 31, 2013 compared to 14% at December 31, 2012. Subscription business is direct insurance or assumed reinsurance where we only take a percentage of the total risk and premium and other insurers take their proportionate percentage of the remaining risk and premium.

The property treaty reinsurance business written in our International segment covers catastrophic risks worldwide. Our internal staff underwrites the business, which is placed by major brokers. Given the nature and size of these large losses, the brokers report these claims to us quickly. We establish loss reserves ($116.3 million at December 31, 2013) for this assumed reinsurance using a combination of our internal models, external sources that independently model catastrophic losses, and estimates provided by our insureds.

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We assume facultative reinsurance business in our U.S. Property & Casualty, Professional Liability and International segments. This business includes reinsurance of a company’s captive insurance program or business that must be written through another insurance company licensed to write insurance in a particular country or locality. We establish loss reserves ($224.4 million at December 31, 2013) for this assumed reinsurance using the same methods and assumptions we use to set reserves for comparable direct business. Disputes, if any, generally relate to claims or coverage issues with insureds and are administered in the normal course of business.

We have reserves ($19.3 million at December 31, 2013) for a run-off assumed quota share surplus lines business, which we wrote from 2003 – 2008 in our U.S. Property & Casualty segment. Case reserves are reported directly to us by the cedant. We establish IBNR reserves based on our estimates using the same methods and assumptions we would use to set reserves for comparable direct business. We have not had any disputes with the cedant.

Our Exited Lines include reserves for run-off assumed accident and health reinsurance business ($135.7 million at December 31, 2013), which is primarily reinsurance that provides excess coverage for large losses related to workers’ compensation policies. This business is slow to develop and may take more than twenty years to pay out. Losses in lower layers must develop first before our excess coverage attaches. This business is subject to late reporting of claims by cedants and state guaranty associations. To mitigate our exposure to unexpected losses reported by cedants, our claims personnel review reported losses to ensure they are reasonable and consistent with our expectations. In addition, our claims personnel periodically audit the cedants’ operations to assess whether cedants are submitting timely and accurate claims reports to us. Disputes with cedants related to claims or coverage issues are negotiated to resolution or settled through arbitration. We have commuted a portion of these reserves over the past ten years to reduce our exposure to adverse development. Based on the higher risk of the underlying insurance product and the potential for late reported claims, management believes there may be greater volatility in loss development for this product than for our other product lines.

We administer the claims for medical excess products included in our Exited Lines. This business was written as excess reinsurance of HMOs, hospitals and other insurance companies. We establish loss reserves ($6.4 million at December 31, 2013) using the same methods and assumptions we would use to set reserves for comparable direct business. Disputes, if any, are administered in the normal course of business.

The case reserves for reported losses related to our direct business and certain assumed reinsurance are initially set by our claims personnel or independent claims adjusters we retain. The case reserves are subject to our review, with a goal of setting them at the ultimate expected loss amount as soon as possible when the information becomes available. Case reserves for reported losses related to other assumed reinsurance are recorded based on information supplied to us by the ceding company. Our claims personnel monitor these assumed reinsurance reserves on a current basis and audit ceding companies’ claims to ascertain that claims are being recorded currently and that net reserves are being set at levels that properly reflect the liability related to the claims.

We determine our IBNR reserves by subtracting case reserves from our total estimated loss reserves, which are based on the ultimate expected losses for each product. The level of IBNR reserves in relation to total reserves depends upon the characteristics of the specific products within each segment, particularly related to the speed with which losses are reported and outstanding claims are paid. Segments that contain products for which losses are reported moderately or slowly will have a higher percentage of IBNR reserves than segments with products that report and settle claims more quickly.

Based on our reserving techniques, estimation processes and past results, we believe that our net reserves are adequate.

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The following tables show the composition of our gross, ceded and net reserves by segment at December 31, 2013 and 2012.

								% net
								IBNR to
								net total
December 31, 2013	Gross		Ceded			Net		reserves
Case reserves:
U.S. Property & Casualty	$	278,414	$	88,712		$	189,702
Professional Liability		794,080		226,938			567,142
Accident & Health		206,435		28			206,407
U.S. Surety & Credit		26,508		6,735			19,773
International		368,779		102,120			266,659
Exited Lines		157,525		34,601			122,924
Total case reserves		1,831,741		459,134			1,372,607
IBNR reserves:
U.S. Property & Casualty		387,457		129,696			257,761		58	%
Professional Liability		995,033		326,737			668,296		54
Accident & Health		51,667		(27	)		51,694		20
U.S. Surety & Credit		86,408		6,672			79,736		80
International		484,932		195,330			289,602		52
Exited Lines		64,894		5,189			59,705		33
Total IBNR reserves		2,070,391		663,597			1,406,794		51	%
Total loss and loss adjustment expense payable	$	3,902,132	$	1,122,731		$	2,779,401
December 31, 2012
Case reserves:
U.S. Property & Casualty	$	324,064	$	106,963		$	217,101
Professional Liability		666,113		191,572			474,541
Accident & Health		184,693		58			184,635
U.S. Surety & Credit		25,226		5,247			19,979
International		377,483		132,416			245,067
Exited Lines		178,826		42,769			136,057
Total case reserves		1,756,405		479,025			1,277,380
IBNR reserves:
U.S. Property & Casualty		344,760		101,434			243,326		53	%
Professional Liability		1,088,711		326,796			761,915		62
Accident & Health		57,907		35			57,872		24
U.S. Surety & Credit		84,564		7,380			77,184		79
International		357,296		98,527			258,769		51
Exited Lines		78,207		4,850			73,357		35
Total IBNR reserves		2,011,445		539,022			1,472,423		54	%
Total loss and loss adjustment expense payable	$	3,767,850	$	1,018,047		$	2,749,803

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Reinsurance Recoverables

We retain underwriting risk in order to retain a greater proportion of expected underwriting profits. Annually, we analyze our threshold for risk in each line of business and on an overall consolidated basis, based on a number of factors, including market conditions, pricing, competition and the inherent risks associated with each business type, and then we structure our reinsurance programs. We generally purchase reinsurance to reduce our net liability on individual risks and to protect against catastrophe losses and volatility. We have chosen not to purchase any reinsurance on businesses where volatility or catastrophe risks are considered remote and limits are within our risk tolerance.

We purchase reinsurance on a proportional basis to cover loss frequency, individual risk severity and catastrophe exposure. Some of the proportional reinsurance agreements may have maximum loss limits, most of which are greater than or equal to a 200% loss ratio. We also purchase reinsurance on an excess of loss basis to cover individual risk severity and catastrophe exposure. Additionally, we may obtain facultative reinsurance protection on a single risk. The type and amount of reinsurance we purchase varies year to year based on our risk assessment, our desired retention levels based on profitability and other considerations, and on the market availability of quality reinsurance at prices we consider acceptable. Our reinsurance programs renew throughout the year, and the price changes in recent years have not been material to our net underwriting results. Our reinsurance generally does not cover war or terrorism risks.

In our proportional reinsurance programs, we generally receive a commission on the premium ceded to reinsurers. This compensates our insurance companies for the direct costs associated with production of the business, the servicing of the business during the term of the policies ceded, and the costs associated with placement of the related reinsurance. In addition, certain of our reinsurance treaties allow us to share in any net profits generated under such treaties with the reinsurers. Various reinsurance brokers arrange for the placement of this reinsurance coverage on our behalf and are compensated, directly or indirectly, by the reinsurers.

Our reinsurance recoverables represented 35% and 30% of our shareholders’ equity at December 31, 2013 and 2012, respectively. A high percentage of our reinsurance recoverables relates to our D&O business, where it takes longer for claims reserves to result in paid claims. The increase at year-end 2013 related to recoverables for the Spanish surety bonds. We paid $139.1 million of claims related to these bonds in the fourth quarter, of which approximately 60% was reinsured and in process of collection as of December 31, 2013.

In order to reduce our exposure to reinsurance credit risk, we evaluate the financial condition of our reinsurers and place our reinsurance with a diverse group of companies and syndicates, which we believe to be financially sound. Our Reinsurance Security Policy Committee carefully monitors the credit quality of our reinsurers when we place new and renewal reinsurance, as well as on an ongoing basis. The Reinsurance Security Policy Committee considers each current or potential reinsurer’s surplus or capacity level, financial strength ratings, operational criteria and other relevant information.

We continuously monitor our financial exposure to the reinsurance market and take necessary actions in an attempt to mitigate our exposure to possible credit loss. We monitor reinsurance recoverables to ensure diversification of credit risk by reinsurer. We limit our liquidity exposure for uncollected recoverables by holding funds in trust, letters of credit or other security, such that net balances due from reinsurers are significantly less than the gross balances shown in our consolidated balance sheets. We constantly monitor the collectability of our reinsurance recoverables and record a reserve for uncollectible reinsurance when we determine an amount is potentially uncollectible. Our evaluation is based on our periodic reviews of our disputed and aged recoverables, as well as our assessment of recoverables due from reinsurers known to be in financial difficulty. In some cases, we make estimates as to what portion of a recoverable may be uncollectible. Our estimates and judgment about the collectability of the recoverables and the financial condition of reinsurers can change, and these changes can affect the level of reserve required.

We maintain a reserve for potential collectability issues, including disputed amounts and associated expenses. We review the level and adequacy of our reserve at each quarter-end based on recoverable balances that are past due or in dispute. The reserve was $1.5 million at both December 31, 2013 and 2012. While we believe the year-end reserve is adequate based on information currently available, market conditions may change or additional information might be obtained that may require us to change the reserve in the future.

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Deferred Taxes

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability, taking in consideration our history of earnings, expectations for future earnings, taxable income in carryback years and the expected timing of the reversals of existing temporary differences. When we believe it is more likely than not that a deferred tax asset will not be realized, we establish a valuation allowance for that deferred tax asset. Although realization is not assured, we believe that, as of December 31, 2013, it is more likely than not that we will be able to realize the benefit of recorded deferred tax assets, with the exception of certain tax loss carryforwards for which valuation allowances have been provided. If there is a material change in the tax laws such that the actual effective tax rate changes or the time periods within which the underlying temporary differences become taxable or deductible change, we will need to reevaluate our assumptions, which could result in a change in the valuation allowance required.

Valuation of Goodwill

Goodwill is impaired when the fair value of a reporting unit is less than its carrying amount. We assess our goodwill for impairment annually, or sooner if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We conducted our annual goodwill impairment test as of June 30, 2013, which is consistent with the timeframe for our annual assessment in prior years.

In 2013, we considered three valuation approaches (market, income and cost) to determine the fair value of each reporting unit. We utilized the income and market valuation approaches and based our assumptions and inputs on market participant data, as well as our own data. For the income approach, we estimated the present value of each reporting unit’s expected cash flows to determine the fair value. We utilized estimated future cash flows of the portfolio of products included in each reporting unit, as well as a risk-appropriate rate of return specific to each reporting unit. We utilized our budgets and projection of future operations based on historical and expected industry trends to estimate our future cash flows and their probability of occurring as projected. We also determined fair value of each reporting unit based on market participant data, and used those results to test the reasonableness and validity of the income approach results. Based on our 2013 impairment test, the fair value of each of our reporting units as of June 30, 2013 exceeded its carrying amount. In addition, we had no indicators of impairment at December 31, 2013.

In years where we assess goodwill for impairment by electing to perform a qualitative assessment of our reporting units to determine whether further impairment testing would be necessary, we consider general economic conditions, industry and market conditions, our financial performance, key events and circumstances that could affect fair value using the income and market approaches, and additional factors such as significant changes in reporting unit management and regulatory factors. Based on that assessment, we would make a determination if it is more likely than not that the fair value of each of our reporting units exceeded its carrying amount.

We will conduct our next annual goodwill impairment test as of June 30, 2014, unless other events occur that indicate there is an impairment in our goodwill prior to that date.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Our principal assets and liabilities are financial instruments that are subject to the market risk of potential losses from adverse changes in market rates and prices. Our primary market risk exposures are interest rate risk on fixed maturity securities and variable rate debt, price risk on equity securities and foreign currency exchange rate risk.

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Interest Rate Risk

Substantially all of our insurance policies are short-duration contracts. To manage the exposures of our investment risks, we generally invest in investment grade securities with duration and liquidity characteristics that reflect the short-term nature of our insurance liabilities. We have not used derivatives to manage any of our investment-related market risks. The value of our portfolio of fixed maturity securities is inversely correlated to changes in the market interest rates. Some of our fixed maturity securities have call or prepayment options, which could subject us to reinvestment risk should interest rates fall or issuers call their securities and we reinvest the proceeds at lower interest rates. We attempt to mitigate prepayment risk by investing in securities with varied maturity dates, so that only a portion of the portfolio will mature, call or prepay at any point in time. Fluctuations in interest rates have a minimal effect on the value of our short-term investments due to their very short maturities and on equity securities that have no maturity date.

The fair value of our fixed maturity securities was $6.0 billion at December 31, 2013, compared to $6.3 billion at December 31, 2012. If market interest rates were to change 100 basis points, the fair value of our fixed maturity securities would have changed approximately $307.0 million at December 31, 2013. This compares to a change in fair value of approximately $295.0 million at December 31, 2012 for the same 100 basis points change in market interest rates. The change in fair value was determined using duration modeling assuming no prepayments.

Our 6.30% Senior Notes are not subject to interest rate changes. Our $600.0 million Revolving Loan Facility is subject to variable interest rates. At December 31, 2013, we had outstanding borrowings of $355.0 million under the Facility. If average interest rates increased 100 basis points during 2014, as compared to 2013, our projected 2014 interest expense would increase approximately $3.6 million. If average interest rates had increased 100 basis points during 2013, as compared to 2012, our 2013 interest expense would have increased approximately $2.9 million.

Price Risk on Equity Securities

Our portfolio of marketable equity securities is subject to price risk due to market changes. The fair value of our equity securities was $517.5 million at December 31, 2013, compared to $305.6 million at December 31, 2012. If the market price of our equity securities had changed 10%, the fair value of our equity portfolio would have changed approximately $51.7 million at December 31, 2013 and approximately $30.6 million at December 31, 2012.

Foreign Exchange Risk

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. The table below (in thousands) shows the net assets of these subsidiaries grouped by functional currency and converted to U.S. dollars at December 31, 2013 and 2012. It also shows the expected dollar change in net assets that would occur if exchange rates changed 10% from exchange rates in effect at those times.

	December 31,
	2013				2012
			Hypothetical				Hypothetical
	U.S. dollar		10% change		U.S. dollar		10% change
	equivalent		in fair value		equivalent		in fair value
Euro	$	74,044	$	7,404	$	104,762	$	10,476
British pound sterling		37,337		3,734		22,934		2,293

In 2012, we entered into a forward contract to sell 45.0 million Euros ($59.5 million at December 31, 2012 rate of exchange) for U.S. dollars in September 2013 as a hedge of a portion of our net investment in a subsidiary that has the Euro as its functional currency. No forward contract remained at December 31, 2013. The fair value of the forward contract was a $3.2 million liability at December 31, 2012. A 10% increase (decrease) in the value of the Euro relative to the U.S. dollar would have resulted in a $5.9 million decrease (increase) in the fair value of the forward contract at December 31, 2012.

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The table below (in thousands) shows, for subsidiaries with a U.S. dollar functional currency, the net amount of significant foreign currency balances converted to U.S. dollars at December 31, 2013 and 2012, most of which relate to our available for sale equity securities. It also shows the expected dollar change in fair value that would occur if exchange rates changed 10% from exchange rates in effect at those times.

	December 31,
	2013				2012
			Hypothetical				Hypothetical
	U.S. dollar		10% change		U.S. dollar		10% change
	equivalent		in fair value		equivalent		in fair value
British pound sterling	$	114,530	$	11,453	$	74,121	$	7,412
Euro		87,581		8,758		44,102		4,410
Swiss franc		45,886		4,589		24,874		2,487
Canadian dollar		31,021		3,102		15,760		1,576
Japanese yen		27,886		2,789		3,465		347

Item 8.   Financial Statements and Supplementary Data

The financial statements and supplementary financial information listed in the accompanying Index to Consolidated Financial Statements and Schedules are incorporated herein as part of this Report.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Act)) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe, as specified in rules set forth by the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013 using criteria established in the Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective in providing reasonable assurance of achieving the purposes described in Rule 13a-15(e) under the Act as of December 31, 2013.

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Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles). Internal control over financial reporting includes those policies and procedures that: 1) pertain to the maintenance of our records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets, 2) provide reasonable assurance that we have recorded transactions as necessary to permit us to prepare consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management, including our CEO and CFO, conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on criteria established in the Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the results of this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2013 and that the consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows for the years presented in accordance with generally accepted accounting principles.

The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Item 15 of this Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information

None.

67

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all employees, officers and directors of our company. The complete text of our Code of Business Conduct and Ethics is available on our website at www.hcc.com and will be provided to any person free of charge upon request made to: HCC Insurance Holdings, Inc., Investor Relations Department, 13403 Northwest Freeway, Houston, Texas 77040. Any amendments to, or waivers of, the Code of Business Conduct and Ethics that apply to the Chief Executive Officer and the Senior Financial Officers will be disclosed on our website.

The information regarding our Executive Officers required by Item 401 of Regulation S-K is incorporated by reference to the “Executive Officers” section in Item 1, Business of this Report.

The other information regarding our Directors, Executive Officers and Corporate Governance required by this Item 10 is incorporated by reference to the sections “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2013.

Item 11.   Executive Compensation

The information regarding Executive Compensation required by this Item 11 is incorporated by reference to the sections “2013 Director Compensation Table,” “Corporate Governance – Committees of the Board – Compensation Committee – Compensation Committee Interlocks and Insider Participation,” and “Executive Compensation” in our definitive proxy statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2013.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2013, with respect to compensation plans under which our equity securities are authorized for issuance. All such plans were approved by our shareholders.

		Weighted-	Number of securities
		average	remaining available
	Number of securities	exercise price of	for future issuance
	to be issued upon	outstanding	under equity
	exercise of	options,	compensation plans
	outstanding options,	warrants and	(excluding securities
	warrants and rights	rights	reflected in column (a))
Plan category	(a)	(b)	(c)
Equity compensation plans approved by shareholders	1,427,546	$29.50	3,209,643

* The total in column (a) includes 134,596 restricted stock units issued under our equity incentive plan. These restricted stock units are not included in the calculation of weighted-average exercise price in column (b).

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The other information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters required by this Item 12 is incorporated by reference to the section “Stock Ownership Information” in our definitive proxy statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2013.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information regarding Certain Relationships and Related Transactions, and Director Independence required by this Item 13 is incorporated by reference to the section “Certain Relationships and Related Party Transactions” in our definitive proxy statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2013.

Item 14.   Principal Accountant Fees and Services

The information regarding Principal Accountant Fees and Services required by this Item 14 is incorporated by reference to the sections “Corporate Governance” and “Proposal 3 – Ratification of Our Independent Registered Public Accounting Firm for 2014” in our definitive proxy statement for our Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, 2013.

PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a) Financial Statement Schedules

The financial statements and supplementary financial information listed in the accompanying Index to Consolidated Financial Statements and Schedules are filed as part of this Report.

(b) Exhibits

The exhibits listed in the accompanying Index to Exhibits on page 71 are filed as part of this Report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HCC INSURANCE HOLDINGS, INC. (Registrant)
Dated: February 28, 2014	By:	/s/ Christopher J.B. Williams
		(Christopher J.B. Williams)
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/      CHRISTOPHER J.B. WILLIAMS	Director, Chief Executive Officer	February 28, 2014
(Christopher J.B. Williams)	(Principal Executive Officer)
/s/      EMMANUEL T. BALLASES*	Director	February 28, 2014
(Emmanuel T. Ballases)
/s/      JUDY C. BOZEMAN*	Director	February 28, 2014
(Judy C. Bozeman)
/s/      FRANK J. BRAMANTI*	Director	February 28, 2014
(Frank J. Bramanti)
/s/      WALTER M. DUER*	Director	February 28, 2014
(Walter M. Duer)
/s/      JAMES C. FLAGG, PH.D.*	Director	February 28, 2014
(James C. Flagg, Ph.D.)
/s/      THOMAS M. HAMILTON*	Director	February 28, 2014
(Thomas M. Hamilton)
/s/      LESLIE S. HEISZ*	Director	February 28, 2014
(Leslie S. Heisz)
/s/      BRAD T. IRICK	Executive Vice President	February 28, 2014
(Brad T. Irick)	and Chief Financial Officer
/s/      JOHN N. MOLBECK, JR.*	Director	February 28, 2014
(John N. Molbeck, Jr.)
/s/      HANS D. ROHLF*	Director	February 28, 2014
(Hans D. Rohlf)
/s/      ROBERT A. ROSHOLT*	Director and Chairman of the Board	February 28, 2014
(Robert A. Rosholt)
/s/      J. MIKESELL THOMAS*	Director	February 28, 2014
(J. Mikesell Thomas)
/s/      PAMELA J. PENNY	Executive Vice President	February 28, 2014
(Pamela J. Penny)	and Chief Accounting Officer

*By:	/s/      PAMELA J. PENNY
	Pamela J. Penny              Attorney-in-fact

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INDEX TO EXHIBITS

Exhibit       Number
3.1	—	Restated Certificate of Incorporation and Amendment of Certificate of Incorporation of HCC Insurance Holdings, Inc., filed with Delaware Secretary of State on July 23, 1996 and May 21, 1998, respectively (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 333-61687) filed on August 17, 1998).
3.2	—	Fourth Amended and Restated Bylaws of HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 22, 2013).
4.1	—	Specimen of Common Stock Certificate, $1.00 par value, of HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1 (Registration No. 33-48737) filed on October 27, 1992).
4.2	—	Indenture, dated August 23, 2001, between HCC Insurance Holdings, Inc. and First Union National Bank related to Debt Securities (Senior Debt) (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 24, 2001).
4.3	—	Form of Fourth Supplemental Indenture, dated November 16, 2009, between HCC Insurance Holdings, Inc. and U.S. Bank National Association related to 6.30% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on November 13, 2009).
10.1	—	Loan Agreement, dated March 8, 2011, among HCC Insurance Holdings, Inc., Wells Fargo Bank, National Association, as Administrative Agent, Barclays Bank PLC and Bank of America, N.A., as Co-Syndication Agents, JPMorgan Chase Bank, N.A. and The Royal Bank of Scotland PLC, as Co-Documentation Agents, and other lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on 8-K filed on March 8, 2011).
10.2	—	First Amendment to Loan Agreement, dated September 22, 2011, among HCC Insurance Holdings, Inc., Wells Fargo Bank, National Association, as Administrative Agent, Barclays Bank PLC and Bank of America, N.A., as Co-Syndication Agents, JPMorgan Chase Bank, N.A. and The Royal Bank of Scotland PLC, as Co-Documentation Agents, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 28, 2011).
10.3	—	Second Amendment to Loan Agreement, dated April 26, 2013, among HCC Insurance Holdings, Inc., Wells Fargo Bank, National Association, as Administrative Agent, Barclays Bank PLC and Bank of America, N.A., as Co-Syndication Agents, JPMorgan Chase Bank, N.A. and The Royal Bank of Scotland PLC, as Co-Documentation Agents, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 30, 2013).
10.4	—	Amended and Restatement Agreement, dated November 25, 2013, among HCC Insurance Holdings, Inc., The Royal Bank of Scotland PLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 29, 2013).
10.5	—	Restated $90,000,000 Standby Letter of Credit Facility, dated November 25, 2013, among HCC Insurance Holdings, Inc., The Royal Bank of Scotland PLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on November 29, 2013).
10.6	—	HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 33-152897) filed on August 8, 2008).*
10.7	—	HCC Insurance Holdings, Inc. 2013 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 (Registration No. 333-190484) filed on August 8, 2013).*
10.8	—	Form of Restricted Stock Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed on November 7, 2008).*
10.9	—	Form of Nonqualified Stock Option Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on November 7, 2008).*
10.10	—	Form of Restricted Stock Unit Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed on November 7, 2008).*

71

Exhibit       Number
10.11	—	Form of Restricted Stock Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (service shares) (incorporated by reference to Exhibit 10.28 to Annual Report on Form 10-K filed on March 1, 2010).*
10.12	—	Form of Restricted Stock Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (performance shares) (incorporated by reference to Exhibit 10.29 to Annual Report on Form 10-K filed on March 1, 2010).*
10.13	—	Form of Restricted Stock Award Agreement (U.S.) under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.30 to Annual Report on Form 10-K filed on March 1, 2010).*
10.14	—	Form of Restricted Stock Unit Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.31 to Annual Report on Form 10-K filed on March 1, 2010).*
10.15	—	Form of Restricted Stock Award Agreement under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (budget performance shares) (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed on August 3, 2012).*
10.16	—	Form of Time-Vesting Restricted Stock Award Agreement (executive officers) under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 18, 2013).*
10.17	—	Form of Performance-Vesting Restricted Stock Award Agreement (executive officers) under the HCC Insurance Holdings, Inc. 2008 Flexible Incentive Plan (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on March 18, 2013).*
10.18	—	Employment Agreement, effective May 1, 2011, between Christopher J.B. Williams and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 2, 2011).*
10.19	—	Amendment to Employment Agreement, dated May 15, 2012, between Christopher J.B. Williams and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on May 15, 2012).*
10.20	—	Employment Agreement, effective May 10, 2010, between Brad T. Irick and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed on August 6, 2010).*
10.21	—	First Amendment to Employment Agreement, effective January 1, 2012, between Brad T. Irick and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K filed on February 29, 2012).*
10.22	—	Employment Agreement, dated March 21, 2012, between William N. Burke and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed March 26, 2012).*
10.23	—	Service Agreement, effective January 1, 2006, between Barry J. Cook and HCC Service Company Limited (UK) Branch (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on May 10, 2007).*
10.24	—	Renewal Letter, dated March 30, 2012, between Barry J. Cook and HCC Service Company, Inc. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on April 4, 2012).*
10.25	—	Employment Agreement, effective March 1, 2007, between Craig J. Kelbel and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed on August 10, 2007).*
10.26	—	First Amendment to Employment Agreement, effective September 1, 2009, between Craig J. Kelbel and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 28, 2009).*
10.27	—	Second Amendment to Employment Agreement, dated March 30, 2012, between Craig J. Kelbel and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 4, 2012).*
10.28	—	Employment Agreement, effective June 1, 2007 between Michael J. Schell and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on August 10, 2007).*

72

Exhibit       Number
10.29		—	First Amendment to Employment Agreement, effective December 19, 2008, between Michael J. Schell and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on December 22, 2008).*
10.30		—	Second Amendment to Employment Agreement, effective December 1, 2010, between Michael J. Schell and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 6, 2010).*
10.31	†	—	Third Amendment to Employment Agreement, effective May 22, 2013, between Michael J. Schell and HCC Insurance Holdings, Inc.*
10.32		—	Relocation Policy and Reimbursement Agreement, dated April 27, 2011, between Christopher J.B. Williams and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on May 2, 2011).*
10.33		—	HCC Insurance Holdings, Inc. Nonqualified Deferred Compensation Plan for Christopher J.B. Williams,
			effective May 1, 2011 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on May 2, 2011).*
10.34		—	HCC Insurance Holdings, Inc. Nonqualified Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.28 to Annual Report on Form 10-K filed on February 28, 2011).*
10.35		—	Form of Indemnification Agreement between HCC Insurance Holdings, Inc. and recipient (incorporated by reference to Exhibit 10.29 to Annual Report on Form 10-K filed on February 28, 2011).*
12	†	—	Statement Regarding Computation of Ratios.
21	†	—	Subsidiaries of HCC Insurance Holdings, Inc.
23	†	—	Consent of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP dated February 28, 2014.
24	†	—	Powers of Attorney.
31.1	†	—	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	†	—	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	†	—	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	†	—	The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 formatted in XBRL: 1) Consolidated Balance Sheets, 2) Consolidated Statements of Earnings, 3) Consolidated Statements of Comprehensive Income, 4) Consolidated Statements of Changes in Shareholders’ Equity, 5) Consolidated Statements of Cash Flows and 6) Notes to Consolidated Financial Statements.
† Filed herewith.
* Management contract or compensatory plan.

73

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets at December 31, 2013 and 2012	F-2
Consolidated Statements of Earnings for the three years ended December 31, 2013	F-3
Consolidated Statements of Comprehensive Income for the three years ended December 31, 2013	F-4
Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December  31, 2013	F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 2013	F-6
Notes to Consolidated Financial Statements	F-7
Schedules:
Schedule 1 — Summary of Investments other than Investments in Related Parties	S-1
Schedule 2 — Condensed Financial Information of Registrant	S-2
Schedule 3 — Supplementary Insurance Information	S-6
Schedule 4 — Reinsurance	S-7
Schedule 5 — Valuation and Qualifying Accounts	S-8

Schedules other than those listed above have been omitted because they are either not required, not applicable or the required information is shown in the Consolidated Financial Statements and related Notes or other Schedules.

74

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

HCC Insurance Holdings, Inc.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of HCC Insurance Holdings, Inc. and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework 1992 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Houston, TX

February 28, 2014

F-1

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	December 31,
	2013		2012
ASSETS
Investments
Fixed maturity securities – available for sale, at fair value (amortized cost: 2013 – $5,921,487 and 2012 – $5,856,432)	$	6,022,473	$	6,281,781
Equity securities – available for sale, at fair value (cost: 2013 – $464,388 and 2012 – $275,827)		517,466		284,639
Short-term investments, at cost (approximates fair value)		178,753		363,053
Other investments, at fair value (cost: 2012 – $18,391)		-		20,925
Total investments		6,718,692		6,950,398
Cash		58,301		71,390
Restricted cash and securities		125,777		101,480
Premium, claims and other receivables		580,107		549,725
Reinsurance recoverables		1,277,257		1,071,222
Ceded unearned premium		305,438		256,988
Ceded life and annuity benefits		56,491		58,641
Deferred policy acquisition costs		201,698		191,960
Goodwill		895,200		885,860
Other assets		125,559		130,143
Total assets	$	10,344,520	$	10,267,807
LIABILITIES
Loss and loss adjustment expense payable	$	3,902,132	$	3,767,850
Life and annuity policy benefits		56,491		58,641
Reinsurance, premium and claims payable		332,985		294,621
Unearned premium		1,134,849		1,069,956
Deferred ceding commissions		89,528		74,609
Notes payable		654,098		583,944
Accounts payable and accrued liabilities		500,007		875,574
Total liabilities		6,670,090		6,725,195
SHAREHOLDERS’ EQUITY
Common stock, $1.00 par value; 250,000 shares authorized (shares issued: 2013 – 125,577 and 2012 – 125,114; outstanding: 2013 – 100,336 and 2012 – 100,928)		125,577		125,114
Additional paid-in capital		1,073,105		1,052,253
Retained earnings		3,085,501		2,756,166
Accumulated other comprehensive income		118,651		295,271
Treasury stock, at cost (shares: 2013 – 25,241 and 2012 – 24,186)		(728,404)		(686,192)
Total shareholders’ equity		3,674,430		3,542,612
Total liabilities and shareholders’ equity	$	10,344,520	$	10,267,807

F-2

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)

	Years ended December 31,
	2013		2012		2011
REVENUE
Net earned premium	$	2,239,240	$	2,242,625	$	2,127,170
Net investment income		220,182		222,634		212,271
Other operating income		35,452		30,448		35,590
Net realized investment gain		42,030		31,148		3,653
Other-than-temporary impairment credit losses		-		(1,028)		(4,679)
Total revenue		2,536,904		2,525,827		2,374,005
EXPENSE
Loss and loss adjustment expense, net		1,290,050		1,305,511		1,399,247
Policy acquisition costs, net		279,439		281,201		266,125
Other operating expense		368,495		359,060		330,557
Interest expense		26,210		25,628		23,070
Total expense		1,964,194		1,971,400		2,018,999
Earnings before income tax expense		572,710		554,427		355,006
Income tax expense		165,513		163,187		99,763
Net earnings	$	407,197	$	391,240	$	255,243
Earnings per common share
Basic	$	4.05	$	3.84	$	2.31
Diluted	$	4.04	$	3.83	$	2.30

F-3

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Years ended December 31,
	2013		2012		2011
Net earnings	$	407,197	$	391,240	$	255,243
Other comprehensive income (loss)
Investment gains (losses):
Investment gains (losses) during year		(240,601)		135,746		195,395
Income tax charge (benefit)		(85,377)		46,779		65,618
Investment gains (losses), net of tax		(155,224)		88,967		129,777
Less reclassification adjustments for:
Gains (losses) included in net earnings		42,030		30,120		(1,022)
Income tax charge (benefit)		14,711		10,542		(358)
Gains (losses) included in net earnings, net of tax		27,319		19,578		(664)
Net unrealized investment gains (losses)		(182,543)		69,389		130,441
Foreign currency translation adjustment		6,078		(2,720)		(1,740)
Income tax charge (benefit)		155		(943)		(1,772)
Foreign currency translation adjustment, net of tax		5,923		(1,777)		32
Other comprehensive income (loss)		(176,620)		67,612		130,473
Comprehensive income	$	230,577	$	458,852	$	385,716

F-4

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years ended December 31, 2013, 2012 and 2011

(in thousands, except per share data)

	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income			Treasury stock			Total shareholders’ equity
Balance at December 31, 2010	$	120,942	$	954,332		$	2,239,863		$	97,186		$	(133,923	)	$	3,278,400
Net earnings		-		-			255,243			-			-			255,243
Other comprehensive income		-		-			-			130,473			-			130,473
Issuance of 1,458 shares for exercise of options, including tax effect		1,458		34,586			-			-			-			36,044
Purchase of 12,645 common shares		-		-			-			-			(373,600	)		(373,600	)
Stock-based compensation		320		12,390			-			-			-			12,710
Cash dividends declared, $0.60 per share		-		-			(65,288	)		-			-			(65,288	)
Balance at December 31, 2011		122,720		1,001,308			2,429,818			227,659			(507,523	)		3,273,982
Net earnings		-		-			391,240			-			-			391,240
Other comprehensive income		-		-			-			67,612			-			67,612
Issuance of 2,079 shares for exercise of options, including tax effect		2,079		57,759			-			-			-			59,838
Purchase of 5,567 common shares		-		-			-			-			(178,669	)		(178,669	)
Stock-based compensation		315		7,587			-			-			-			7,902
Cash dividends declared, $0.64 per share		-		-			(64,892	)		-			-			(64,892	)
Other		-		(14,401	)		-			-			-			(14,401	)
Balance at December 31, 2012		125,114		1,052,253			2,756,166			295,271			(686,192	)		3,542,612
Net earnings		-		-			407,197			-			-			407,197
Other comprehensive loss		-		-			-			(176,620	)		-			(176,620	)
Issuance of 381 shares for exercise of options, including tax effect		381		12,527			-			-			-			12,908
Purchase of 1,055 common shares		-		-			-			-			(42,212	)		(42,212	)
Stock-based compensation		82		8,325			-			-			-			8,407
Cash dividends declared, $0.78 per share		-		-			(77,862	)		-			-			(77,862	)
Balance at December 31, 2013	$	125,577	$	1,073,105		$	3,085,501		$	118,651		$	(728,404	)	$	3,674,430

F-5

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2013			2012			2011
Operating activities
Net earnings	$	407,197		$	391,240		$	255,243
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables		(16,584	)		61,675			(81,578	)
Change in reinsurance recoverables		(193,906	)		(6,812	)		(47,892	)
Change in ceded unearned premium		(48,284	)		(34,580	)		55,741
Change in loss and loss adjustment expense payable		115,880			82,201			181,363
Change in unearned premium		64,452			38,662			(14,364	)
Change in reinsurance, premium and claims payable		39,321			(59,177	)		12,768
Change in accounts payable and accrued liabilities		(120,859	)		100,091			17,538
Stock-based compensation expense		15,531			12,088			13,000
Depreciation and amortization expense		18,289			19,476			18,619
(Gain) loss on investments		(42,030	)		(30,120	)		1,026
Other, net		23,700			86,403			9,812
Cash provided by operating activities		262,707			661,147			421,276
Investing activities
Sales of available for sale fixed maturity securities		492,891			639,834			448,766
Sales of equity securities		146,624			14,117			-
Sales of other investments		23,719			21,736			347
Maturity or call of available for sale fixed maturity securities		627,041			697,404			573,958
Maturity or call of held to maturity fixed maturity securities		-			28,527			29,102
Cost of available for sale fixed maturity securities acquired		(1,346,498	)		(1,489,235	)		(1,550,587	)
Cost of equity securities acquired		(345,129	)		(262,528	)		-
Cost of other investments acquired		-			-			(33,060	)
Change in short-term investments		181,972			(207,403	)		355,468
Payments for purchase of businesses, net of cash received		(8,328	)		(46,627	)		(1,892	)
Other, net		(7,346	)		(14,728	)		(19,093	)
Cash used by investing activities		(235,054	)		(618,903	)		(196,991	)
Financing activities
Advances on line of credit		180,000			185,000			305,000
Payments on line of credit		(110,000	)		(80,000	)		(125,000	)
Sale of common stock		12,908			59,838			36,044
Purchase of common stock		(47,869	)		(173,028	)		(373,584	)
Dividends paid		(71,967	)		(64,345	)		(65,822	)
Other, net		(3,814	)		(2,869	)		5,770
Cash used by financing activities		(40,742	)		(75,404	)		(217,592	)
Net increase (decrease) in cash		(13,089	)		(33,160	)		6,693
Cash at beginning of year		71,390			104,550			97,857
Cash at end of year	$	58,301		$	71,390		$	104,550

F-6

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(1) General Information and Significant Accounting and Reporting Policies

HCC Insurance Holdings, Inc. (HCC) and its subsidiaries (collectively we, us or our) include domestic and foreign property and casualty and life insurance companies and underwriting agencies with offices in the United States, the United Kingdom, Spain and Ireland. We underwrite a variety of largely non-correlated specialty insurance products, including property and casualty, accident and health, surety and credit product lines, in approximately 180 countries. We market our products through a network of independent agents and brokers, through managing general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies.

Our principal domestic insurance companies are Houston Casualty Company and U.S. Specialty Insurance Company, HCC Life Insurance Company, Avemco Insurance Company, American Contractors Indemnity Company and United States Surety Company. These companies operate throughout the United States. All of our principal domestic insurance companies operate on an admitted basis, except Houston Casualty Company, which operates on a surplus lines basis in the United States and also insures international risks. Our foreign insurance companies are HCC International Insurance Company PLC; Houston Casualty Company Europe, Seguros y Reaseguros, S.A.; HCC Reinsurance Company Limited and the London branch of Houston Casualty Company. These companies operate principally from the United Kingdom and Spain. We also participate in Syndicate 4141, a Lloyd’s of London syndicate that we manage.

Our agencies underwrite insurance products and provide claims management services, primarily for our insurance companies. Our principal agencies operating in the United States are HCC Global Financial Products, HCC Specialty, HCC Medical Insurance Services, LLC, HCC Indemnity Guaranty Agency and G.B. Kenrick & Associates. Our principal foreign agencies are HCC Global Financial Products, with operations in the United Kingdom and Spain and HCC Underwriting Agency, Ltd. (UK), which manages our syndicate and operates in the United Kingdom.

Basis of Presentation

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of HCC and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Management must make estimates and assumptions that affect amounts reported in our consolidated financial statements and in disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates.

Net Earned Premium, Policy Acquisition Costs and Ceding Commissions

Substantially all of the property and casualty, surety, and accident and health policies written by our insurance companies qualify as short-duration contracts. We recognize in current earned income the portion of the premium that provides insurance protection in the period. For the majority of our insurance policies, we recognize premium, net of reinsurance, on a pro rata basis over the term of the related contract. For certain disability policies, directors’ and officers’ liability tail policies, surety bonds and construction contracts, we recognize premium, net of reinsurance, over the period of risk in proportion to the amount of insurance protection provided. Unearned premium represents the portion of premium written that relates to the unexpired period of protection. Premium for commercial title insurance and group life policies is recognized in earnings when the premium is due. When the limit under a specific excess of loss reinsurance layer has been exhausted, we effectively expense the remaining premium for that limit and defer and amortize the reinstatement premium over the remaining period of risk.

We defer our direct costs to underwrite insurance policies, less amounts reimbursed by reinsurers, and charge or credit the costs to earnings proportionate with the premium earned. These policy acquisition costs include underwriters’ salaries and bonuses attributable to successful marketing or underwriting efforts, commissions, premium taxes, fees and other incremental underwriting costs. Historical and current loss adjustment expense experience and anticipated investment income are considered in determining any premium deficiency and recoverability of related deferred policy acquisition costs.

F-7

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Premium, Claims and Other Receivables

We use the gross method for reporting receivables and payables on brokered transactions. We review the collectibility of our receivables, primarily related to premiums receivable, on a current basis and generally cancel insurance coverage if the premium is unpaid. We provide an allowance for amounts due from agents and brokers that are doubtful of collection. The allowance was $5.8 million and $3.6 million at December 31, 2013 and 2012, respectively. Our estimate of the level of the allowance could change as conditions change in the future.

Loss and Loss Adjustment Expense Payable

Loss and loss adjustment expense payable by our insurance companies is based on estimates of payments to be made for reported losses, incurred but not reported losses, and anticipated receipts from salvage and subrogation. Reserves are recorded on an undiscounted basis, except for reserves of acquired companies. The discount on those reserves is not material. Estimates for reported losses are based on all available information, including reports received from ceding companies on assumed business. Estimates for incurred but not reported losses are based both on our experience and the industry’s experience. We continually review the estimates with our actuaries, and any changes are reflected in loss and loss adjustment expense in our consolidated statements of earnings in the period of the change. While we believe that amounts included in our consolidated financial statements are adequate, such estimates may be more or less than the amounts ultimately paid when the claims are settled.

We have no material exposure to asbestos claims or environmental pollution losses in any of our segments. Policies issued by our insurance companies do not have significant environmental exposure because of the types of risks covered.

Reinsurance

We record all reinsurance recoverables and ceded unearned premium as assets, and deferred ceding commissions as liabilities. All such amounts are calculated based on the reinsurance contract terms and recorded in a manner consistent with the underlying reinsured contracts. We record a reserve for uncollectible reinsurance based on our assessment of the reinsurer’s creditworthiness and collectibility of the recorded amounts. Information utilized to calculate the reserve is subject to change, which could affect the level of the reserve in the future.

Cash and Short-term Investments

Cash consists of cash in banks, generally in operating accounts. Short-term investments, including certificates of deposit and money-market funds, are classified as investments in our consolidated balance sheets as they relate principally to our investment activities. We generally maintain our cash deposits in major banks and invest our short-term funds in institutional money-market funds and short-term financial instruments. These securities typically mature within ninety days and, therefore, bear minimal risk.

Restricted Cash and Securities

Our agencies hold funds of unaffiliated parties for the payment of claims, and our surety businesses hold funds as collateral for potential claims. These restricted fiduciary funds are shown as restricted cash and securities in our consolidated balance sheets. The corresponding liability is included within reinsurance, premium and claims payable or accounts payable and accrued liabilities in our consolidated balance sheets. Interest earned on these funds accrues to the benefit of the parties from whom the funds were withheld. Therefore, we do not include cash activity related to these funds in our consolidated statements of cash flows.

F-8

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Investments

All of our fixed maturity securities are classified as available for sale and reported at fair value. In determining fair value, we apply the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets. The change in unrealized gain or loss on available for sale securities (including the foreign exchange effect for securities denominated in currencies other than the functional currency of the subsidiary) is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders’ equity. We purchase our available for sale fixed maturity securities with the expectation that we will hold them to maturity, but we may sell them if market conditions or credit-related risk warrant earlier sales.

Our available for sale fixed maturity securities portfolio includes mortgage-backed and asset-backed securities for which we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.

Equity securities and other investment securities are carried at fair value. We classify these securities as available for sale, and the change in carrying value is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders’ equity.

Short-term investments are carried at cost, which approximates fair value.

Realized investment gains or losses are determined on an average cost basis and included in earnings on the trade date. If a structured security fails to pay the full amount of expected principal, we recognize the unpaid amount as a realized loss in the period due and permanently reduce the security’s cost basis.

Other-than-temporary Impairments

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate impaired securities for possible other-than-temporary impairment loss at each quarter end, considering various factors including:

• amount by which the security’s fair value is less than its cost,

• length of time the security has been impaired,

• whether we intend to sell the security,

• if it is more likely than not that we will sell the security before recovery of its amortized cost basis,

• whether the impairment is due to an issuer-specific event, credit issues or change in market interest rates,

• the security’s credit rating and any recent downgrades, and

• stress testing of expected cash flows under various scenarios.

For each impaired security, we determine if: 1) we do not intend to sell the security and 2) it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis. If we cannot assert these conditions, we record an other-than-temporary impairment loss through our consolidated statements of earnings in the current period. For all other impaired securities, we assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis. Such a shortfall in cash flows is referred to as a “credit loss.” For any such security, we

F-9

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

separate the impairment loss into: 1) the credit loss and 2) the amount related to all other factors, such as interest rate changes, market conditions, etc. (the “non-credit” loss). We charge the credit loss to current period earnings and the non-credit loss to other comprehensive income, within shareholders’ equity, on an after-tax basis. A security’s cost basis is permanently reduced by the amount of a credit loss. We accrete income over the remaining life of a fixed maturity security based on the interest rate necessary to discount the expected future cash flows to the new basis. If the security is non-income producing, we apply any cash proceeds as a reduction of principal when received.

Derivative Financial Instruments

We hold an interest in a long-term mortgage impairment insurance contract, denominated in British pound sterling, for which the exposure is measured based on movement in a specified U.K. housing index. The contract qualifies as a derivative financial instrument, is unhedged and is reported at fair value in other assets in our consolidated balance sheets. We record changes in fair value and any foreign exchange gain/loss on the contract within other operating income in our consolidated statements of earnings.

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. As a result, we have exposure to fluctuations in exchange rates between these currencies and the U.S. dollar. From time to time, we may use derivative instruments to protect our investment in these foreign operations by limiting our exposure to fluctuations in exchange rates.

In 2012, we entered into a forward contract to sell 45.0 million Euros for U.S. dollars in September 2013. The fair value of the forward contract was a $3.2 million liability at December 31, 2012, which was reported in accounts payable and accrued liabilities in our consolidated balance sheets. Through June 30, 2013, this transaction was designated and qualified as a hedge of a portion of our net investment in a subsidiary that has the Euro as its functional currency. There was no ineffectiveness on the forward contract during the six months ended June 30, 2013 or during 2012. Changes in the fair value of the forward contract, net of the related deferred income tax effect, totaled $1.5 million through June 30, 2013. We recognized this amount in our foreign currency translation adjustment, which is a component of accumulated other comprehensive income, effectively offsetting a portion of the effect of translating the foreign subsidiary’s assets and liabilities from Euros to U.S. dollars.

In July 2013, we entered into a forward contract to buy 45.0 million Euros for U.S. dollars in September 2013, effectively offsetting the contract entered into in 2012. Beginning in July 2013, we discontinued hedge accounting and subsequent changes in the fair value of the two forward contracts were recognized in our consolidated statements of earnings. Because the contracts offset, the combined net change in fair value and the impact on pretax earnings was immaterial. No forward contracts remained at December 31, 2013.

Other Operating Income

Fee and commission income, primarily from third party agency and broker commissions, is reported in other operating income in our consolidated statements of earnings. We recognize fee and commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered to the client. We record revenue from profit commissions based on the profitability of business written, calculated using the respective commission formula and actual underwriting results through the date of calculation. Such amounts are adjusted if and when experience changes.

When our underwriting agencies utilize one of our insurance company subsidiaries as the policy issuing company, we eliminate in consolidation the fee and commission income against the related insurance company’s policy acquisition costs and defer the policy acquisition costs of the underwriting agencies.

F-10

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Goodwill and Intangible Assets

Goodwill is impaired when the fair value of a reporting unit is less than its carrying amount. We assess our goodwill for impairment annually, or sooner if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We noted no indicators of impairment in 2013. We conducted our 2013 goodwill impairment test as of June 30, 2013, which is consistent with the timeframe for our annual assessment in prior years.

In years where we assess goodwill for impairment by determining the fair value of each reporting unit, we consider three valuation approaches (market, income and cost). We utilize the income and market valuation approaches and base our assumptions and inputs on market participant data, as well as our own data. For the income approach, we estimate the present value of each reporting unit’s expected cash flows to determine its fair value. We utilize estimated future cash flows of the portfolio of products included in each reporting unit, as well as a risk-appropriate rate of return specific to each reporting unit. We utilize our budgets and projection of future operations based on historical and expected industry trends to estimate our future cash flows and their probability of occurring as projected. We also determine fair value of each reporting unit based on market participant data, and use those results to test the reasonableness and validity of the income approach results. We utilized this methodology to determine the fair value of our reporting units in 2013 and 2011. Our 2012 impairment test consisted of a qualitative assessment in which we determined that is it more likely than not that the fair value of each of our five reporting units exceeded its carrying amount as of June 30, 2012.

When we complete a business acquisition, we record the business combination using the acquisition method of accounting. We value all identifiable assets and liabilities at fair value and allocate any remaining consideration to goodwill in our purchase price allocations. We assign goodwill to applicable reporting units, based on the reporting unit’s share of the estimated future cash flows of all acquired insurance products. Any future adjustments to finalize pre-2009 purchase price allocations, other than for certain tax-related items, are recorded as an adjustment to goodwill. All other adjustments of purchase price allocations are recorded through earnings in the period when the adjustment is determined.

Intangible assets not subject to amortization are tested for impairment annually, or sooner if an event occurs or circumstances change that indicate that an intangible asset might be impaired. Other intangible assets are amortized over their respective useful lives.

Foreign Currency

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. The cumulative translation adjustment, representing the effect of translating these subsidiaries’ assets and liabilities into U.S. dollars, is included in the foreign currency translation adjustment, net of the related deferred income tax effect, within accumulated other comprehensive income in shareholders’ equity.

For our other foreign subsidiaries and branches, the functional currency is the U.S. dollar. For all subsidiaries, transactions in non-functional currencies are translated at the rates of exchange in effect on the date the transaction occurs. Transaction gains and losses are recorded in earnings and included in other operating expense in the consolidated statements of earnings. Assets and liabilities recorded in non-functional currencies are translated into the functional currencies at exchange rates in effect at the balance sheet date.

For available for sale securities, unrealized gains and losses related to fluctuations in exchange rates are recorded as a component of other comprehensive income, net of the related deferred income tax effect, within shareholders’ equity until the securities mature or are sold.

The effect of exchange rate changes on cash balances held in foreign currencies was immaterial for all periods presented and is not shown separately in the consolidated statements of cash flows.

F-11

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Income Taxes

We file a consolidated Federal income tax return and include the foreign subsidiaries’ income to the extent required by law. Deferred income tax is accounted for using the liability method, which reflects the tax impact of temporary differences between the bases of assets and liabilities for financial reporting purposes and such bases as measured by tax laws and regulations. We provide a deferred tax liability for un-repatriated earnings of our foreign subsidiaries at prevailing statutory rates when required. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on our history of earnings, expectations for future earnings, taxable income in carryback years and the expected timing of the reversals of existing temporary differences. Due to our history of earnings, expectations for future earnings, and taxable income in carryback years, we expect to be able to fully realize the benefit of any net deferred tax asset, excluding amounts covered by valuation allowances, on a consolidated basis.

We maintain a liability for our uncertain tax positions where we determine it is not more likely than not the tax position will be sustained upon examination by the appropriate tax authority. Changes in the liability for our uncertain tax positions are reflected in income tax expense in the period when a new uncertain tax position arises, we change our judgment about the likelihood of uncertainty, the tax issue is settled, or the statute of limitations expires. We report any potential net interest income or expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively.

Stock-Based Compensation

We measure the fair value of restricted stock awards and units based on the closing stock price of our common stock on the grant date and expense that value on a straight-line basis over the vesting period. For restricted stock awards/units that contain a performance condition, we recognize expense based on the awards/units expected to vest and adjust the cumulative expense whenever our estimate of the number of awards/units to vest changes. For restricted stock awards that contain a market condition, we determine the fair value at the grant date using a Monte Carlo simulation model that takes into account the probabilities of numerous vesting outcomes. This fair value is expensed on a straight-line basis over the vesting period and is not adjusted for the ultimate number of shares to vest. For stock option awards, we use the Black-Scholes option pricing model to determine the fair value of an option on its grant date and expense that value on a straight-line basis over the option’s vesting period. For grants of unrestricted common stock, we measure fair value based on the closing stock price of our common stock on the grant date and expense that value on the grant date. We calculate expense for our employee stock purchase plan using a Black-Scholes option pricing model and recognize the expense over each six-month offering period.

Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding during the year. Diluted earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding plus the weighted-average potential common shares outstanding during the year. Outstanding common stock options and unvested restricted stock with no right to dividends, when dilutive, are included in the weighted-average potential common shares outstanding. We use the treasury stock method to calculate the dilutive effect of potential common shares outstanding. We treat unvested restricted stock and unvested restricted stock units that contain non-forfeitable rights to dividends or dividend-equivalents as participating securities and include them in the earnings allocation in calculating earnings per share under the two-class method.

F-12

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(2) Investments

The cost or amortized cost, gross unrealized gain or loss, and fair value of our fixed maturity and equity securities, all of which are classified as available for sale, were as follows:

	Cost or amortized cost		Gross unrealized gain		Gross unrealized loss			Fair value
December 31, 2013
U.S. government and government agency securities	$	91,047	$	2,157	$	(495	)	$	92,709
Fixed maturity securities of states, municipalities and political subdivisions		941,580		50,885		(5,979	)		986,486
Special purpose revenue bonds of states, municipalities and political subdivisions		2,240,412		71,541		(46,758	)		2,265,195
Corporate securities		1,195,387		40,860		(11,009	)		1,225,238
Residential mortgage-backed securities		622,766		15,289		(19,936	)		618,119
Commercial mortgage-backed securities		502,069		16,155		(13,336	)		504,888
Asset-backed securities		183,660		319		(1,587	)		182,392
Foreign government securities		144,566		3,237		(357	)		147,446
Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457	)	$	6,022,473
Equity securities	$	464,388	$	58,842	$	(5,764	)	$	517,466
December 31, 2012
U.S. government and government agency securities	$	195,049	$	4,560	$	(2	)	$	199,607
Fixed maturity securities of states, municipalities and political subdivisions		969,966		96,027		(182	)		1,065,811
Special purpose revenue bonds of states, municipalities and political subdivisions		2,033,947		168,772		(2,388	)		2,200,331
Corporate securities		1,247,282		69,243		(1,355	)		1,315,170
Residential mortgage-backed securities		632,665		32,560		(338	)		664,887
Commercial mortgage-backed securities		482,808		41,748		(267	)		524,289
Asset-backed securities		32,801		474		-			33,275
Foreign government securities		261,914		16,515		(18	)		278,411
Total fixed maturity securities	$	5,856,432	$	429,899	$	(4,550	)	$	6,281,781
Equity securities	$	275,827	$	13,768	$	(4,956	)	$	284,639

During 2012, we reclassified a portfolio of fixed maturity securities that had been classified as held to maturity to available for sale securities. Due to financial market disruptions and our desire to maintain greater flexibility in managing our entire investment portfolio in an uncertain economy, we changed our prior intent to hold these securities to maturity. On the transfer date, these securities had a fair value of $139.1 million and an amortized cost of $136.0 million. The securities’ net unrealized appreciation, net of the related deferred income tax effect, increased our accumulated other comprehensive income and shareholders’ equity by $2.0 million at March 31, 2012.

F-13

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Substantially all of our fixed maturity securities are investment grade. The following table displays the gross unrealized losses and fair value of all available for sale securities that were in a continuous unrealized loss position for the periods indicated.

	Less than 12 months					12 months or more					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
December 31, 2013
Fixed maturity securities
U.S. government and government agency securities	$	23,717	$	(495	)	$	-	$	-		$	23,717	$	(495	)
Fixed maturity securities of states, municipalities and political subdivisions		136,160		(5,277	)		8,997		(702	)		145,157		(5,979	)
Special purpose revenue bonds of states, municipalities and political subdivisions		684,560		(35,832	)		83,228		(10,926	)		767,788		(46,758	)
Corporate securities		277,853		(8,202	)		35,437		(2,807	)		313,290		(11,009	)
Residential mortgage-backed securities		306,874		(15,861	)		31,687		(4,075	)		338,561		(19,936	)
Commercial mortgage-backed securities		203,347		(12,611	)		4,915		(725	)		208,262		(13,336	)
Asset-backed securities		126,922		(1,587	)		-		-			126,922		(1,587	)
Foreign government securities		78,182		(357	)		-		-			78,182		(357	)
Equity securities		75,620		(5,437	)		7,016		(327	)		82,636		(5,764	)
Total	$	1,913,235	$	(85,659	)	$	171,280	$	(19,562	)	$	2,084,515	$	(105,221	)
December 31, 2012
Fixed maturity securities
U.S. government and government agency securities	$	55,034	$	(2	)	$	-	$	-		$	55,034	$	(2	)
Fixed maturity securities of states, municipalities and political subdivisions		14,162		(182	)		-		-			14,162		(182	)
Special purpose revenue bonds of states, municipalities and political subdivisions		155,902		(2,388	)		-		-			155,902		(2,388	)
Corporate securities		85,245		(1,220	)		2,616		(135	)		87,861		(1,355	)
Residential mortgage-backed securities		49,486		(338	)		-		-			49,486		(338	)
Commercial mortgage-backed securities		26,263		(267	)		-		-			26,263		(267	)
Foreign government securities		7,007		(18	)		-		-			7,007		(18	)
Equity securities		103,647		(4,956	)		-		-			103,647		(4,956	)
Total	$	496,746	$	(9,371	)	$	2,616	$	(135	)	$	499,362	$	(9,506	)

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate our securities for possible other-than-temporary impairment losses at each quarter end. During the past three years, our reviews covered all impaired securities where the loss exceeded $0.5 million and the loss either exceeded 10% of cost or the security had been in a loss position for longer than twelve consecutive months. Our reviews considered the factors described in the “Other-than-temporary Impairments” section in Note 1.

F-14

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

For other-than-temporary impairment losses, we recognize an other-than-temporary impairment loss in earnings in the period that we determine: 1) we intend to sell the security, 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in shareholders’ equity. Our other-than-temporary impairment losses were as follows:

	2013			2012			2011
Total other-than-temporary impairment loss	$	-		$	(2,069	)	$	(6,922	)
Portion recognized in other comprehensive income		-			1,041			2,243
Net other-than-temporary impairment loss recognized in earnings	$	-		$	(1,028	)	$	(4,679	)
Certain of the securities for which we had previously recognized an other-than-temporary impairment loss had both a credit loss and an impairment loss recorded in other comprehensive income. During 2012, we sold all but one of these securities, and sold the remaining security in 2013. The rollforward of credit losses on these securities was as follows:
	2013			2012			2011
Balance at beginning of year	$	625		$	5,047		$	4,273
Credit losses recognized in earnings
Securities previously impaired		-			899			2,447
Securities previously not impaired		-			129			2,232
Securities sold		(625	)		(5,450	)		(3,905	)
Balance at December 31	$	-		$	625		$	5,047
We do not consider the $105.2 million of gross unrealized losses on fixed maturity and equity securities in our portfolio at December 31, 2013 to be other-than-temporary impairments because: 1) as of December 31, 2013, we had received all contractual interest and principal payments on the fixed maturity securities, 2) we do not intend to sell the securities, 3) it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost or cost bases and 4) the unrealized loss relates to non-credit factors, particularly the significant interest rate increases that occurred in 2013. The change in our unrealized pretax net gains (losses) on investments during each year was as follows:
	2013			2012			2011
Available for sale fixed maturity securities	$	(324,363	)	$	91,947		$	198,768
Equity securities		44,266			8,812			-
Other investments		(2,534	)		4,867			(2,351	)
Change in net unrealized investment gains (losses)	$	(282,631	)	$	105,626		$	196,417

F-15

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

The amortized cost and fair value of our fixed maturity securities at December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-average life of our mortgage-backed and asset-backed securities was 5.9 years at December 31, 2013.

	Cost or amortized cost		Fair value
Due in 1 year or less	$	193,107	$	196,188
Due after 1 year through 5 years		1,056,510		1,098,771
Due after 5 years through 10 years		1,425,759		1,480,858
Due after 10 years through 15 years		991,474		1,001,684
Due after 15 years		946,142		939,573
Securities with contractual maturities		4,612,992		4,717,074
Mortgage-backed and asset-backed securities		1,308,495		1,305,399
Total fixed maturity securities	$	5,921,487	$	6,022,473

At December 31, 2013, our domestic insurance companies had deposited fixed maturity securities of $43.8 million (amortized cost of $43.0 million) to meet the deposit requirements of various state insurance departments. There are withdrawal and other restrictions on these deposits, but we direct how the deposits are invested and we earn interest on the funds.

The sources of our net investment income were as follows:

	2013			2012			2011
Fixed maturity securities
Taxable	$	98,966		$	114,047		$	113,293
Exempt from U.S. income taxes		113,875			107,488			98,729
Total fixed maturity securities		212,841			221,535			212,022
Equity securities		14,537			3,959			-
Short-term investments		160			620			537
Other investment income		668			2,856			4,486
Total investment income		228,206			228,970			217,045
Investment expense		(8,024	)		(6,336	)		(4,774	)
Net investment income	$	220,182		$	222,634		$	212,271

F-16

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Realized pretax gains (losses) on the sale of investments, which exclude other-than-temporary impairment credit losses, included the following:

	2013			2012			2011
Gains
Fixed maturity securities	$	20,191		$	32,644		$	10,045
Equity securities		20,886			797			-
Other investments		5,345			2,074			6
Total gains		46,422			35,515			10,051
Losses
Fixed maturity securities		(1,174	)		(3,327	)		(6,388	)
Equity securities		(3,218	)		(1,039	)		-
Other investments		-			(1	)		(10	)
Total losses		(4,392	)		(4,367	)		(6,398	)
Net
Fixed maturity securities		19,017			29,317			3,657
Equity securities		17,668			(242	)		-
Other investments		5,345			2,073			(4	)
Net realized investment gain	$	42,030		$	31,148		$	3,653

(3) Fair Value Measurements

Our financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in our financial statements. In determining fair value, we generally apply the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. We classify our financial instruments into the following three-level hierarchy:

• Level 1 – Inputs are based on quoted prices in active markets for identical instruments.

• Level 2 – Inputs are based on observable market data (other than quoted prices), or are derived from or corroborated by observable market data.

• Level 3 – Inputs are unobservable and not corroborated by market data.

Our Level 1 investments consist of U.S. Treasuries, money market funds and equity securities traded in an active exchange market. We use unadjusted quoted prices for identical instruments to measure fair value.

F-17

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Our Level 2 investments include most of our fixed maturity securities, which consist of U.S. government agency securities, municipal bonds (including those held as restricted securities), corporate debt securities, bank loans, mortgage-backed and asset-backed securities (including collateralized loan obligations), and deposits supporting our Lloyd’s syndicate business. Level 2 also includes certificates of deposit and other interest-bearing deposits at banks, which we report as short-term investments, and, at December 31, 2012, a forward contract that hedged our net investment in a Euro-functional currency foreign subsidiary. We measure fair value for the majority of our Level 2 investments using matrix pricing and observable market data, including benchmark securities or yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers, default rates, loss severity and other economic measures. We measure fair value for our structured securities using observable market data in cash flow models.

We are responsible for the prices used in our fair value measurements. We use independent pricing services to assist us in determining fair value for approximately 99% of our Level 2 investments. The pricing services provide a single price or quote per security. We use data provided by our third party investment managers and Lloyd’s of London to value the remaining Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, we perform various quantitative and qualitative procedures, including: 1) evaluation of the underlying methodologies, 2) analysis of recent sales activity, 3) analytical review of our fair values against current market prices and 4) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for our investments were judged to be inactive at year-end. Based on these procedures, we did not adjust the prices or quotes provided by our independent pricing services, third party investment managers or Lloyd’s of London as of December 31, 2013 or 2012.

Our Level 2 financial instruments also include our notes payable. We determine the fair value of our 6.30% Senior Notes based on quoted prices, but the market is inactive. The fair value of borrowings under our Revolving Loan Facility approximates the carrying amount because interest is based on 30-day LIBOR plus a margin.

Our Level 3 securities include certain fixed maturity securities and an insurance contract that we account for as a derivative and classify in other assets. Our Level 3 category also includes a liability for future earnout payments due to former owners of a business we acquired, which is classified within accounts payable and accrued liabilities. Fixed maturity securities classified as Level 3 are primarily special purpose revenue bond auction rate securities. The interest rates on these securities are reset through auctions at periodic intervals. These securities are thinly traded and observable market data is not readily available. We determine the fair value of these securities using prices quoted by a broker. We determine fair value of the derivative and the earnout payments based on internally developed models that use assumptions or other data that are not readily observable from objective sources.

F-18

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

The following tables present the fair value of our financial instruments that were carried or disclosed at fair value. Unless indicated, these items were carried at fair value on our consolidated balance sheets.

	Level 1		Level 2		Level 3		Total
December 31, 2013
Fixed maturity securities
U.S. government and government agency securities	$	84,032	$	8,677	$	-	$	92,709
Fixed maturity securities of states, municipalities and political subdivisions		-		986,486		-		986,486
Special purpose revenue bonds of states, municipalities and political subdivisions		-		2,255,928		9,267		2,265,195
Corporate securities		-		1,225,088		150		1,225,238
Residential mortgage-backed securities		-		618,119		-		618,119
Commercial mortgage-backed securities		-		504,888		-		504,888
Asset-backed securities		-		182,392		-		182,392
Foreign government securities		-		147,446		-		147,446
Total fixed maturity securities		84,032		5,929,024		9,417		6,022,473
Equity securities		517,466		-		-		517,466
Short-term investments*		68,958		109,795		-		178,753
Restricted cash and securities		-		1,853		-		1,853
Premium, claims and other receivables		-		66,515		-		66,515
Other assets		20		-		941		961
Total assets measured at fair value	$	670,476	$	6,107,187	$	10,358	$	6,788,021
Notes payable*	$	-	$	707,656	$	-	$	707,656
Accounts payable and accrued liabilities - earnout liability		-		1,853		7,259		9,112
Total liabilities measured at fair value	$	-	$	709,509	$	7,259	$	716,768

* Carried at cost or amortized cost on consolidated balance sheet.

F-19

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

	Level 1		Level 2		Level 3		Total
December 31, 2012
Fixed maturity securities
U.S. government and government agency securities	$	174,520	$	25,087	$	-	$	199,607
Fixed maturity securities of states, municipalities and political subdivisions		-		1,065,811		-		1,065,811
Special purpose revenue bonds of states, municipalities and political subdivisions		-		2,200,331		-		2,200,331
Corporate securities		-		1,315,006		164		1,315,170
Residential mortgage-backed securities		-		664,887		-		664,887
Commercial mortgage-backed securities		-		524,289		-		524,289
Asset-backed securities		-		33,275		-		33,275
Foreign government securities		-		278,411		-		278,411
Total fixed maturity securities		174,520		6,107,097		164		6,281,781
Equity securities		284,639		-		-		284,639
Short-term investments*		251,988		111,065		-		363,053
Other investments		20,925		-		-		20,925
Restricted cash and securities		-		2,043		-		2,043
Premium, claims and other receivables		-		68,207		-		68,207
Other assets		-		-		349		349
Total assets measured at fair value	$	732,072	$	6,288,412	$	513	$	7,020,997
Notes payable*	$	-	$	636,363	$	-	$	636,363
Accounts payable and accrued liabilities - forward contract		-		3,194		-		3,194
Accounts payable and accrued liabilities - earnout liability		-		2,043		7,009		9,052
Total liabilities measured at fair value	$	-	$	641,600	$	7,009	$	648,609

* Carried at cost or amortized cost on consolidated balance sheet.

F-20

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

The following table presents the changes in fair value of our Level 3 financial instruments.

	Fixed maturity securities			Other assets			Total assets			Accounts payable and accrued liabilities
Balance at December 31, 2011	$	1,170		$	1,516		$	2,686		$	-
Settlements		-			(1,863	)		(1,863	)		-
Earnout liability		-			-			-			6,968
Gains (losses) reported in:
Net earnings		(1	)		696			695			(41	)
Other comprehensive income		10			-			10			-
Transfers out of Level 3		(1,015	)		-			(1,015	)		-
Balance at December 31, 2012		164			349			513			7,009
Purchases		9,430			-			9,430			-
Gains (losses) reported in:
Net earnings		54			592			646			(250	)
Other comprehensive loss		(231	)		-			(231	)		-
Balance at December 31, 2013	$	9,417		$	941		$	10,358		$	7,259

There were no transfers between Level 1, Level 2 or Level 3 in 2013. We transferred an investment from Level 3 to Level 2 in 2012 because we were able to determine its fair value using inputs based on observable market data in the period transferred.

F-21

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(4) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic losses and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

	2013		2012		2011
Direct written premium	$	2,545,054	$	2,422,517	$	2,305,190
Reinsurance assumed		335,195		361,556		343,936
Reinsurance ceded		(624,926)		(530,677)		(466,968)
Net written premium	$	2,255,323	$	2,253,396	$	2,182,158
Direct earned premium	$	2,482,527	$	2,396,756	$	2,308,810
Reinsurance assumed		333,344		351,611		340,745
Reinsurance ceded		(576,631)		(505,742)		(522,385)
Net earned premium	$	2,239,240	$	2,242,625	$	2,127,170
Direct loss and loss adjustment expense	$	1,583,693	$	1,434,830	$	1,535,270
Reinsurance assumed		151,145		162,534		224,655
Reinsurance ceded		(444,788)		(291,853)		(360,678)
Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247
Policy acquisition costs	$	413,782	$	398,453	$	392,172
Ceding commissions		(134,343)		(117,252)		(126,047)
Net policy acquisition costs	$	279,439	$	281,201	$	266,125

The table below shows the components of our reinsurance recoverables in our consolidated balance sheets at December 31, 2013 and 2012.

	2013		2012
Reinsurance recoverable on paid losses	$	156,026	$	54,675
Reinsurance recoverable on outstanding losses		459,134		479,026
Reinsurance recoverable on incurred but not reported losses		663,597		539,021
Reserve for uncollectible reinsurance		(1,500)		(1,500)
Total reinsurance recoverables	$	1,277,257	$	1,071,222

F-22

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

In order to reduce our exposure to reinsurance credit risk, we evaluate the financial condition of our reinsurers and place our reinsurance with a diverse group of companies and syndicates, which we believe to be financially sound. Our recoverables are due principally from highly-rated reinsurers. The following table shows reinsurance balances with our reinsurers that had a net recoverable balance greater than $30.0 million at December 31, 2013 and 2012. The companies’ ratings were the latest published by A.M. Best Company, Inc. as of February 14, 2014 (for 2013) and February 15, 2013 (for 2012). The total recoverables column includes paid losses recoverable, outstanding losses recoverable and incurred but not reported losses recoverable. The total credits column includes letters of credit, cash available to us as collateral and other potential offsets.

Reinsurer	Rating	Location	Total recoverables		Total credits		Net recoverables
December 31, 2013
Transatlantic Reinsurance Company	A	New York	$	172,165	$	18,196	$	153,969
Hannover Rück SE	A+	Germany		128,518		20,559		107,959
Axis Reinsurance Company	A+	New York		92,562		11,983		80,579
ACE Property & Casualty Insurance Company	A+	Pennsylvania		67,742		4,267		63,475
Arch Reinsurance Company	A+	Nebraska		40,481		3,693		36,788
December 31, 2012
Transatlantic Reinsurance Company	A	New York	$	145,733	$	15,166	$	130,567
Hannover Rück SE	A+	Germany		97,281		18,587		78,694
Axis Reinsurance Company	A	New York		80,956		11,777		69,179
ACE Property & Casualty Insurance Company	A+	Pennsylvania		70,248		4,195		66,053
Arch Reinsurance Company	A+	Nebraska		41,472		2,544		38,928

HCC Life Insurance Company previously sold its entire block of individual life insurance and annuity business to Swiss Re Life & Health America, Inc. (rated “A+” by A.M. Best Company, Inc.) in the form of an indemnity reinsurance contract. Ceded life and annuity benefits included in our consolidated balance sheets at December 31, 2013 and 2012 were $56.5 million and $58.6 million, respectively.

At each quarter end, we review our financial exposure to the reinsurance market based on our individual reinsurance recoverable balances as of the prior quarter end. We take actions to collect outstanding balances or to mitigate our exposure to possible loss. We have a reserve for potentially uncollectible amounts as follows:

	2013		2012		2011
Balance at beginning of year	$	1,500	$	1,875	$	2,493
Provision recovery		-		(375)		(618)
Balance at December 31	$	1,500	$	1,500	$	1,875

If we collect cash from or resolve a dispute with a reinsurer, we reduce the allowance account. While we believe the reserve is adequate based on information currently available, market conditions may change or additional information might be obtained that may require us to change the reserve in the future.

F-23

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Reinsurers not authorized by the respective states of domicile of our U.S. domiciled insurance companies are required to collateralize reinsurance obligations due to us. The table below shows the amounts of letters of credit and cash available to us as collateral, plus other potential offsets at December 31, 2013 and 2012.

	2013		2012
Payables to reinsurers	$	208,850	$	190,228
Letters of credit		100,529		89,832
Funds held in trust		88,310		116,597
Total credits	$	397,689	$	396,657

The tables below show the calculation of net reserves, net unearned premium and net deferred policy acquisition costs at December 31, 2013 and 2012.

	2013		2012
Loss and loss adjustment expense payable	$	3,902,132	$	3,767,850
Reinsurance recoverable on outstanding losses		(459,134)		(479,026)
Reinsurance recoverable on incurred but not reported losses		(663,597)		(539,021)
Net reserves	$	2,779,401	$	2,749,803
Unearned premium	$	1,134,849	$	1,069,956
Ceded unearned premium		(305,438)		(256,988)
Net unearned premium	$	829,411	$	812,968
Deferred policy acquisition costs	$	201,698	$	191,960
Deferred ceding commissions		(89,528)		(74,609)
Net deferred policy acquisition costs	$	112,170	$	117,351

F-24

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(5) Goodwill

The goodwill balances by reportable segment and the changes in goodwill are shown in the table below.

	U.S. Property & Casualty		Professional Liability		Accident & Health			U.S. Surety & Credit		International		Total
Balance at December 31, 2011	$	223,000	$	301,547	$	144,132		$	79,700	$	124,435	$	872,814
Earnout and other		-		12,542		(19	)		-		523		13,046
Balance at December 31, 2012		223,000		314,089		144,113			79,700		124,958		885,860
Earnout and other		-		9,104		-			-		236		9,340
Balance at December 31, 2013	$	223,000	$	323,193	$	144,113		$	79,700	$	125,194	$	895,200

We acquired HCC Global Financial Products (HCC Global), which underwrites our U.S. and International directors’ and officers’ liability business, in 2002. The purchase agreement, as amended, includes a contingency for future earnout payments. The earnout is based on HCC Global’s pretax earnings on business written from the acquisition date through September 30, 2007, with no maximum amount due to the former owners. When conditions specified under the purchase agreement are met, we record a net amount owed to or due from the former owners based on our estimate, at that point in time, of how claims will ultimately be settled. This net amount will fluctuate in the future, and the ultimate total net earnout payments cannot be finally determined until all claims are settled or paid. All adjustments to the ultimate purchase price have been, or will be, recorded as an increase or decrease to goodwill. Based on our estimate of ultimate claims settlements during 2013, we increased goodwill by $9.1 million. The total HCC Global earnout and related goodwill recognized from the acquisition date through December 31, 2013 was $277.2 million.

F-25

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(6) Liability for Unpaid Loss and Loss Adjustment Expense

The table below provides a reconciliation of our liability for loss and loss adjustment expense payable (referred to as reserves) at December 31, 2013, 2012 and 2011.

	2013		2012		2011
Reserves at beginning of year	$	3,767,850	$	3,658,317	$	3,471,858
Less reinsurance recoverables on reserves		1,018,047		974,834		934,086
Net reserves at beginning of year		2,749,803		2,683,483		2,537,772
Net reserve additions from acquired businesses		-		14,705		6,261
Foreign currency adjustment		5,544		18,449		(6,108)
Net loss and loss adjustment expense:
Provision for loss and loss adjustment expense for claims occurring in current year		1,363,792		1,375,522		1,389,100
Increase (decrease) in estimated loss and loss adjustment expense for claims occurring in prior years		(73,742)		(70,011)		10,147
Net loss and loss adjustment expense		1,290,050		1,305,511		1,399,247
Net loss and loss adjustment expense payments for claims occurring during:
Current year		529,645		543,010		527,244
Prior years		736,351		729,335		726,445
Net loss and loss adjustment expense payments		1,265,996		1,272,345		1,253,689
Net reserves at end of year		2,779,401		2,749,803		2,683,483
Plus reinsurance recoverables on reserves		1,122,731		1,018,047		974,834
Reserves at end of year	$	3,902,132	$	3,767,850	$	3,658,317
The table below details our loss and loss adjustment expense on a consolidated basis and for our segments.
	2013		2012		2011
Net (favorable) adverse loss development
U.S. Property & Casualty	$	(39,363)	$	2,321	$	(3,145)
Professional Liability		(26,346)		(25,897)		47,084
Accident & Health		(18,027)		(10,511)		(1,324)
U.S. Surety & Credit		(37,898)		(25,377)		(11,300)
International		43,805		(10,084)		(13,830)
Exited Lines		4,087		(463)		(7,338)
Total net (favorable) adverse loss development		(73,742)		(70,011)		10,147
Accident year catastrophe losses		55,939		52,390		103,907
All other net loss and loss adjustment expense		1,307,853		1,323,132		1,285,193
Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247

F-26

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Loss development represents an increase or decrease in estimates of ultimate losses related to business written in prior accident years. We record such increases or decreases as loss and loss adjustment expense in the current reporting year. Favorable development means our original ultimate loss estimate was higher than the current estimate. Adverse development means the current ultimate loss estimate is higher than our original estimate. Loss development occurs as we review our loss exposure with our actuaries, increasing or decreasing estimates of our ultimate losses as a result of such reviews and as losses are finally settled or claims exposure changes.

Based on our annual reviews of reserves in our five insurance underwriting segments and in our Exited Lines, we recognized net favorable loss development of $73.7 million and $70.0 million in 2013 and 2012, respectively, and net adverse loss development of $10.1 million in 2011. These amounts included favorable development of $7.3 million, $21.4 million and $8.1 million, respectively, from the release of prior years’ catastrophe reserves. The primary drivers of development in each year by segment are described below.

U.S. Property & Casualty

Net favorable development of $39.4 million in 2013 was due to better than expected experience, primarily in underwriting years 2011 and prior, compared to the 2012 review. This amount included $17.0 million of favorable development related to a run-off assumed quota share contract (quota share contract) that we wrote from 2003 – 2008, where expected ultimate losses have continued to decline over the past three years. In addition, we recognized $5.8 million of favorable development related to our E&O line of business.

In 2012, the segment recognized net adverse development of $2.3 million, which included adverse development of $8.1 million in our public risk and $7.0 million in our E&O lines of business, partially offset by $5.6 million of favorable development in the quota share contract. The adverse development, which impacted underwriting years 2010 and prior for public risk and 2011 and prior for E&O, was based on higher than expected losses compared to our 2011 annual review.

Net favorable development of $3.1 million in 2011 primarily related to $7.5 million of favorable development from the quota share contract. The remaining net development related to immaterial amounts of favorable and adverse development in various lines of business.

Professional Liability

Net favorable development of $26.3 million in 2013 was due to better than expected loss experience in the U.S. D&O and International D&O lines of business, compared to the 2012 review. This development included reserve releases related to underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 million in underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis.

Net favorable development of $25.9 million in 2012 included reserve releases of $62.1 million due to better than expected loss experience in the U.S. D&O and International D&O lines of business, compared to the 2011 review. This development related to underwriting years prior to 2007, and was partially offset by reserve strengthening in underwriting year 2008.

The segment reported net adverse development of $47.1 million in 2011, including $104.2 million of adverse development, based on our evaluation of emerging frequency and severity trends within the diversified financial products (DFP) line of business within U.S. D&O. While our expectation was that both frequency and severity after 2008 would be more consistent with our experience prior to the worldwide financial crisis in 2007 and 2008, our 2011 reserve review indicated that loss experience for DFP was emerging consistent with the financial crisis period, prompting our revised assumptions primarily related to accident years 2009 – 2011. Partially offsetting the DFP reserve increase was $57.1 million of favorable development related to our D&O lines of business. Our reserve review indicated lower than expected actual loss experience in accident years prior to 2006.

F-27

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Accident & Health

In 2013, the segment reported net favorable development of $18.0 million related to underwriting years 2011 and 2012 and, in 2012, reported $10.5 million related to underwriting year 2011, due to better than expected claims activity in our medical stop-loss product.

U.S. Surety & Credit

The segment recognized net favorable development as follows: 1) 2013 – $20.6 million related to surety and $17.3 million related to credit, 2) 2012 – $18.0 million for surety and $7.4 million for credit and 3) 2011 – $10.0 million for surety and $1.3 million for credit. Our review of the segment’s reserves indicated better experience than our actuarial expectations in each year’s review compared to the prior year review.

International

In 2013, the segment’s net adverse development of $43.8 million was due to reserve strengthening of $70.3 million in the surety & credit line of business, partially offset by net favorable development in other lines of business, primarily energy and liability. For surety & credit, we increased our reserves on a specific class of Spanish surety bonds, the majority of which were written prior to 2006. The increase was made to reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling reported in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. We recognized net favorable development of $10.1 million in energy and $14.6 million in our liability lines primarily related to better than expected experience in underwriting years 2011 and prior, compared to our 2012 review. In addition, we recognized favorable development related to our release of catastrophe reserves for Superstorm Sandy ($3.4 million) and the 2010 New Zealand earthquake ($2.3 million), due to lower than expected losses.

The segment’s $10.1 million of net favorable development in 2012 included $59.0 million of net favorable development, primarily related to the liability and energy lines, partially offset by $48.9 million of adverse development related to the Spanish surety bonds. The adverse development was based on management’s evaluation of the claims and the likelihood that we would ultimately be required to pay the claims, based on information available at that time. The segment’s net favorable development related to better than expected experience in underwriting years 2011 and prior and also included $18.9 million of catastrophe reserve releases, primarily for Hurricane Irene ($10.7 million) and the Japan earthquake and tsunami ($4.6 million).

The $13.8 million of net favorable development in 2011 primarily related to: 1) better than expected experience in the energy and liability lines of business, 2) release of catastrophe reserves for the 2008 hurricanes ($4.9 million) and 3) $12.8 million of adverse development related to the Spanish surety bonds.

F-28

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(7) Notes Payable

Our notes payable consisted of the following at December 31, 2013 and 2012.

	2013		2012
6.30% Senior Notes	$	299,098	$	298,944
$600.0 million Revolving Loan Facility		355,000		285,000
Total notes payable	$	654,098	$	583,944

The estimated fair value of our Senior Notes was $352.7 million at December 31, 2013 and $351.4 million at December 31, 2012, based on quoted market prices. The estimated fair value of our Revolving Loan Facility approximated the carrying value at December 31, 2013 and 2012, based on borrowing rates offered to us at that time.

Senior Notes

Our $300.0 million 6.30% Senior Notes due 2019 were issued in 2009 at a discount of $1.5 million, for an effective interest rate of 6.37%. We pay interest semi-annually in arrears on May 15 and November 15. The Senior Notes are unsecured and subordinated general obligations of HCC. The Senior Notes may be redeemed in whole at any time or in part from time to time, at our option, at the redemption price determined in the manner described in the indenture governing the Senior Notes. The indenture contains covenants that impose conditions on our ability to create liens on the capital stock of our restricted subsidiaries (as defined in the indenture) or to engage in sales of the capital stock of our restricted subsidiaries. We were in compliance with these covenants at December 31, 2013.

Revolving Loan Facility

In 2011, we entered into an agreement for a four-year $600.0 million Revolving Loan Facility (Facility). The Facility allows us to borrow up to the maximum allowed on a revolving basis until the Facility expires. On April 26, 2013, we entered into an agreement to modify the Facility. Under the amended agreement, the Facility expires on April 26, 2017. The new borrowing rate is LIBOR plus 125 basis points, subject to increase or decrease based on changes in our debt rating. The weighted-average interest rate on borrowings under the Facility at December 31, 2013 was 1.42%. In addition, we pay an annual commitment fee of 15 basis points. The borrowings and letters of credit issued under the Facility reduced our available borrowing capacity on the Facility to $239.1 million at December 31, 2013. The Facility contains restrictive financial covenants that require HCC to maintain a minimum consolidated net worth (excluding accumulated other comprehensive income) and a maximum leverage ratio of 35%. We were in compliance with these covenants at December 31, 2013.

Standby Letter of Credit Facility

We have a $90.0 million Standby Letter of Credit Facility (Standby Facility) that is used to guarantee our performance in our Lloyd’s of London Syndicate 4141. The Standby Facility expires on December 31, 2017. We pay an annual fee of 105 basis points. Letters of credit issued under the Standby Facility are unsecured commitments of HCC. The Standby Facility contains the same restrictive financial covenants as the Facility, and we were in compliance with these covenants at December 31, 2013.

Subsidiary Letters of Credit

At December 31, 2013, certain of our subsidiaries had outstanding letters of credit with banks totaling $6.4 million. Of this amount, $5.9 million of outstanding letters of credit reduced our borrowing capacity under the Facility at year-end 2013.

F-29

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(8) Income Taxes

At December 31, 2013 and 2012, we had current income taxes payable of $2.0 million and $34.2 million, respectively, included in accounts payable and accrued liabilities in the consolidated balance sheets.

The following table summarizes the differences between our effective tax rate for financial statement purposes and the Federal statutory rate.

	2013			2012			2011
Statutory tax rate		35.0	%		35.0	%		35.0	%
Federal tax at statutory rate	$	200,448		$	194,049		$	124,252
Nontaxable municipal bond interest and dividend received deduction		(34,734)			(31,939)			(29,021)
State income taxes, net of federal tax benefit		2,097			3,619			3,050
Foreign income taxes		42,691			40,703			25,753
Foreign tax credit		(42,691)			(40,703)			(25,753)
Uncertain tax positions (net of federal tax benefit on state positions: $340 in 2013, $719 in 2012 and $212 in 2011)		518			878			38
Other, net		(2,816)			(3,420)			1,444
Income tax expense	$	165,513		$	163,187		$	99,763
Effective tax rate		28.9	%		29.4	%		28.1	%
The components of income tax expense were as follows:
	2013			2012			2011
Federal current	$	117,933		$	94,493		$	47,993
Federal deferred		804			20,827			21,075
Total federal		118,737			115,320			69,068
State current		2,649			2,570			2,203
State deferred		578			2,997			2,489
Total state		3,227			5,567			4,692
Foreign current		37,978			34,678			28,543
Foreign deferred		4,713			6,025			(2,790)
Total foreign		42,691			40,703			25,753
Uncertain tax positions		858			1,597			250
Income tax expense	$	165,513		$	163,187		$	99,763

F-30

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

The net deferred tax liability is included in accounts payable and accrued liabilities in our consolidated balance sheets. The deferred tax liability related to the book over tax basis of our foreign subsidiaries at December 31, 2013 was based on the assumption that we will merge certain subsidiaries in our International operations. The composition of deferred tax assets and liabilities at December 31, 2013 and 2012 was as follows:

	2013		2012
Excess of financial statement unearned premium over tax	$	26,821	$	26,192
Discounting of loss reserves, net of salvage and subrogation		51,143		51,554
Excess of financial statement accrued expenses over tax		18,258		19,693
Allowance for bad debts, not deductible for tax		3,146		4,733
Stock-based compensation expense in excess of deduction for tax		5,163		5,133
Financial statement loss for Lloyd’s syndicates in excess of deduction for tax		351		-
Federal tax net operating loss carryforwards		3,202		4,744
State tax net operating loss carryforwards		181		2,631
Foreign tax net operating loss carryforwards		22,605		8,359
Federal benefit of state uncertain tax positions		1,482		1,142
Valuation allowance		(27,430)		(9,187)
Total deferred tax assets		104,922		114,994
Unrealized gain on increase in value of securities		52,424		145,182
Deferred policy acquisition costs, net of ceding commissions, deductible for tax		14,570		15,360
Amortizable goodwill for tax		110,064		97,344
Financial statement income for Lloyd’s syndicates in excess of taxable income		-		3,860
Book basis in net assets of foreign subsidiaries in excess of tax basis		2,414		15,808
Depreciation and other items		14,458		13,927
Total deferred tax liabilities		193,930		291,481
Net deferred tax liability	$	(89,008)	$	(176,487)

Changes in the valuation allowance account applicable to deferred tax assets relate primarily to net operating losses in various foreign and state taxing jurisdictions. Changes in the valuation allowance were as follows:

	2013		2012		2011
Balance at beginning of year	$	9,187	$	7,983	$	8,143
State net operating loss carryforwards		(2,228)		(651)		(288)
Foreign net operating loss carryforwards		20,207		296		(342)
Other		264		1,559		470
Balance at December 31	$	27,430	$	9,187	$	7,983

At December 31, 2013, we had Federal, state and Spanish tax net operating loss carryforwards of approximately $9.1 million, $7.2 million and $70.2 million, respectively, which will expire in varying amounts through 2031. We had $9.1 million of additional foreign net operating losses in the U.K., France and Ireland that can be carried forward indefinitely. Future use of our $9.1 million Federal loss carryforward is subject to statutory limitations due to a prior ownership change. We have recorded valuation allowances of $4.1 million and $23.3 million against our state and Spanish loss carryforwards,

F-31

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

respectively. The Spanish net operating loss carryforward and related valuation allowance resulted primarily from recording additional net reserves related to Spanish surety bonds discussed in Note 6. The increase in valuation allowance related to our Spanish net operating loss carryforward does not affect our overall effective tax rate based on the assumption that we will merge certain subsidiaries in our International operations. Based on our history of taxable income in our domestic insurance and other operations, we believe it is more likely than not that the deferred tax assets related to net operating loss carryforwards, excluding amounts covered by valuation allowances, will be realized.

At December 31, 2013 and 2012, we had recorded tax liabilities for unrecognized gross tax benefits related to uncertain tax positions of $5.0 million and $4.1 million, respectively. If the uncertain tax benefits as of year-end 2013 had been recognized in 2013, the total amount of such benefits would have reduced our 2013 income tax expense and our effective tax rate. At December 31, 2013, it is reasonably possible that liabilities for unrecognized tax benefits could decrease $0.2 million (including no interest or penalties) in the next twelve months, due to the expiration of statutes of limitation.

The changes in our liability for unrecognized gross tax benefits were as follows:

	2013		2012		2011
Balance at beginning of year	$	4,129	$	2,522	$	2,274
Gross increases
Tax position of current year		632		145		160
Tax positions of prior years		506		2,988		763
Gross decreases
Statute expirations		(264)		(713)		(595)
Settlements		-		(404)		-
Tax positions of prior years		-		(409)		(80)
Balance at December 31	$	5,003	$	4,129	$	2,522

We report any potential net interest income and expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively. We recognized net interest expense of $0.3 million in 2013, $0.5 million in 2012 and a minimal amount in 2011, and no penalties in any year. At December 31, 2013, we had no accrual for penalties and $1.2 million for interest payable.

We file income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. Federal, state and local, or foreign income tax examinations by tax authorities for years before 2008. We currently are not under U.S. Federal examination. Our income tax returns for New York (2007 – 2012), Massachusetts (2009 – 2010), Illinois (2009 – 2011), and Spain (2009 – 2010) are currently under audit. While we cannot predict the outcome of these audits, we do not anticipate the results to have a material effect on our consolidated financial position, results of operations or cash flows.

F-32

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(9) Shareholders’ Equity

Treasury Stock

We purchased our common stock as follows:

	2013		2012		2011
Shares of common stock		1,055		5,567		12,645
Total cost	$	42,212	$	178,669	$	373,600
Weighted-average cost per share	$	40.02	$	32.09	$	29.55

Dividends

U.S. insurance companies are limited in the amount of dividends they can pay to their parent by the laws of their state of domicile. The maximum dividends that our direct domestic insurance subsidiaries can pay in 2014 without special permission is $350.8 million.

Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income in our consolidated balance sheets were as follows:

			Foreign		Accumulated
	Net unrealized		currency		other
	investment		translation		comprehensive
	gains (losses)		adjustment		income
Balance at December 31, 2010	$	82,673	$	14,513	$	97,186
Other comprehensive income – 2011		130,441		32		130,473
Balance at December 31, 2011		213,114		14,545		227,659
Other comprehensive income (loss) – 2012		69,389		(1,777)		67,612
Balance at December 31, 2012		282,503		12,768		295,271
Other comprehensive income (loss) – 2013		(182,543)		5,923		(176,620)
Balance at December 31, 2013	$	99,960	$	18,691	$	118,651
The changes in net unrealized investment gains (losses) during 2013 and 2012, shown in the table above, included reclassifications of amounts into net earnings. The reclassifications recorded in our consolidated statements of earnings were as follows:
	2013		2012
Net realized investment gain	$	42,030	$	31,148
Other-than-temporary impairment credit losses		-		(1,028)
Total reclassifications before taxes		42,030		30,120
Income tax expense		14,711		10,542
Total reclassifications	$	27,319	$	19,578

F-33

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Other

In 2012, we acquired the non-controlling interest of an entity we previously controlled and consolidated, resulting in a decrease in additional paid-in capital of $14.4 million.

(10) Earnings Per Share

The following table details the numerator and denominator used in our earnings per share calculations.

	2013		2012		2011
Net earnings	$	407,197	$	391,240	$	255,243
Less: net earnings attributable to unvested restricted stock		(6,638)		(6,982)		(3,864)
Net earnings available to common stock	$	400,559	$	384,258	$	251,379
Weighted-average common shares outstanding		98,853		100,176		109,051
Dilutive effect of outstanding securities (determined using treasury         stock method)		260		280		189
Weighted-average common shares and potential common        shares outstanding		99,113		100,456		109,240
Anti-dilutive securities not included in treasury stock method computation		109		443		2,426
Earnings per common share
Basic	$	4.05	$	3.84	$	2.31
Diluted	$	4.04	$	3.83	$	2.30

(11) Stock-Based Compensation

Our stock-based compensation plan, the 2008 Flexible Incentive Plan, is administered by the Compensation Committee of the Board of Directors. We currently have restricted stock awards, restricted stock units and stock options outstanding under this plan. Each restricted stock award and unit entitles the recipient to one share or equivalent unit of our common stock. Outstanding restricted stock awards and units vest over a period of up to ten years, which is the requisite service period. Each option granted under the plan may be used to purchase one share of our common stock. Outstanding options vest over a period of up to five years, which is the requisite service period, and expire six to ten years after the grant date.

The consolidated statements of earnings reflect total stock-based compensation expense of $16.2 million, $13.2 million and $12.4 million in 2013, 2012 and 2011, respectively. The total tax benefit recognized in earnings from stock-based compensation arrangements was $5.7 million, $4.6 million and $4.4 million in 2013, 2012 and 2011, respectively. At December 31, 2013, there was approximately $28.3 million of total unrecognized compensation expense related to unvested restricted stock awards, restricted units and options that is expected to be recognized over a weighted-average period of 2.6 years. At December 31, 2013, 4.6 million shares of our common stock were authorized and reserved for the exercise of options and release of restricted stock units, of which 1.4 million shares were reserved for awards previously granted and 3.2 million shares were reserved for future issuance.

F-34

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Restricted Stock

We measure the fair value of our restricted stock awards and units based on the closing price of our common stock on the grant date and expense that value on a straight-line basis over the vesting period.

Certain awards of restricted stock and restricted stock units contain a performance condition based on the ultimate results for the preceding underwriting year. The number of such shares that vest could differ from the number initially granted. We measure fair value for these awards based on the closing price of our common stock on the grant date, and we recognize expense on a straight-line basis over the vesting period for those awards expected to vest. These awards earn dividends or dividend equivalents during the vesting period.

In 2013, we granted a new form of restricted stock to certain of our executive officers. This restricted stock vests after three years and can vest from 0% to 200% of the initial shares granted. Vesting is determined equally based on an operating return on equity performance factor (ROE factor) and a total shareholder return performance factor (TSR factor). The ROE factor is calculated by comparing our actual results over the three-year period to an internal target, whereas the TSR factor is calculated by comparing our TSR over the three-year period to that of nine peer companies. The ROE factor qualifies as a performance condition and those awards are accounted for in the same manner as the other restricted stock grants described above. The TSR factor qualifies as a market condition, and we determine the fair value at grant date using a Monte Carlo simulation model that takes into account the probabilities of numerous outcomes of our TSR as well as that of the peer companies. This fair value is expensed on a straight-line basis over the vesting period and is not adjusted for the ultimate number of shares to vest. No dividends are earned during the vesting period on these shares.

The fair value of restricted stock awards that vested during 2013, 2012 and 2011 was $14.4 million, $10.9 million and $1.1 million, respectively. The fair value of restricted stock units that vested during 2013 and 2012 was $1.6 million and $2.6 million, respectively. No restricted stock units vested during 2011.

The following table details activity for our restricted stock awards and units during 2013.

			Weighted-		Weighted-
			average		average		Aggregate
	Number		grant date		contractual		intrinsic
	of shares		fair value		life		value
Restricted Stock Awards
Outstanding, beginning of year		1,572	$	28.84
Awarded		358		43.13
Vested		(322)		27.76
Forfeited		(171)		26.67
Outstanding, end of year		1,437		32.91		2.6 years	$	66,326
Expected to vest, end of year		1,132		33.18		2.6 years		52,232
Restricted Stock Units
Outstanding, beginning of year		145	$	27.98
Awarded		40		43.45
Vested		(37)		24.56
Forfeited		(13)		23.94
Outstanding, end of year		135		33.91		2.2 years	$	6,210
Expected to vest, end of year		108		34.15		2.2 years		4,996

F-35

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Stock Options

The table below shows the weighted-average fair value of options granted and the related weighted-average assumptions used in the Black-Scholes model, which we use to determine the fair value of an option on its grant date. We expense the fair value on a straight-line basis over the option’s vesting period. The risk-free interest rate is based on the U.S. Treasury rate that most closely approximates each option’s expected term. We based our expected volatility on the historical volatility of our stock over a period matching each option’s expected term. Our dividend yield is based on an average of our historical dividend payments divided by the stock price. We used historical exercise patterns by grant type to estimate the expected option life.

	2013			2012			2011
Fair value of options granted	$	7.17		$	7.89		$	7.84
Risk free interest rate		1.0	%		1.1	%		1.4	%
Expected volatility		23.0	%		31.4	%		34.1	%
Expected dividend yield		1.8	%		2.1	%		2.0	%
Expected option life		4.9 years			6.6 years			5.8 years

The following table details our stock option activity during 2013.

				Weighted-		Weighted-
				average		average		Aggregate
	Number			exercise		contractual		intrinsic
	of shares			price		life		value
Outstanding, beginning of year		1,514		$	27.33
Granted		181			42.11
Exercised		(381	)		27.04
Forfeited and expired		(21	)		26.44
Outstanding, end of year		1,293			29.50		4.3 years	$	21,514
Vested or expected to vest, end of year		1,149			29.32		4.2 years		19,327
Exercisable, end of year		479			25.62		2.7 years		9,821

The aggregate intrinsic value (the amount by which the fair value of the underlying stock exceeds the exercise price) of options exercised during 2013, 2012 and 2011 was $5.6 million, $10.2 million and $5.9 million, respectively. Exercise of options during 2013, 2012 and 2011 resulted in cash receipts of $10.3 million, $60.0 million and $39.8 million, respectively. The tax benefits realized from stock options exercised during 2013, 2012 and 2011 were $2.0 million, $3.7 million and $2.1 million, respectively.

Common Stock Grants

In each of the past three years, we granted fully-vested common stock valued at $80,000 to each non-management director as part of their annual compensation for serving on our Board of Directors. New directors were granted a pro-rata portion of $80,000 based on the date they joined the Board. We also granted up to $200,000 of fully vested common stock to the chairman of our Board each year. The number of shares granted was based on our closing stock price on the grant date, which was the day of the Annual Meeting of Shareholders or the day the director became chairman or joined the Board.

F-36

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Employee Stock Purchase Plan

In 2013, our stockholders authorized the issuance of up to 2.0 million shares of our common stock under the 2013 Employee Stock Purchase Plan (ESPP). The ESPP encourages share ownership by providing employees the opportunity to purchase HCC common stock at 85% of the closing price of the stock on either the first day or the last day of each six-month offering period (whichever is lower). Employees can invest between 1% and 15% of their base salary, subject to a maximum of the lesser of 1,500 shares in each offering period or $25,000 in each calendar year. The first offering period began on September 16, 2013 and ends on March 14, 2014. We recognize expense related to the ESPP over each offering period. The expense includes the 15% discount and the fair value of the “look-back” option calculated using the Black-Scholes option pricing model.

(12) Segments

We report HCC’s results in six operating segments, each of which reports to an HCC executive who is responsible for the segment results. Each of our five insurance underwriting segments bears risk for insurance coverage written within its portfolio of insurance products. Each segment generates income from premium written by our underwriting agencies, through third party agents and brokers, or on a direct basis. Fee and commission income earned by our agencies from third party insurance companies is included in segment revenue. Each segment incurs insurance losses, acquisition costs and other administrative expenses related to our insurance companies and underwriting agencies. We monitor and assess each segment’s pretax results based on underwriting profit, gross and net written premium, and its combined ratio, consisting of the net loss ratio and expense ratio.

Included in the portfolio of products for each insurance underwriting segment are the following key products:

• U.S. Property & Casualty – aviation, small account errors and omissions (E&O) liability, public risk, disability, contingency, primary and excess casualty, technical and construction property, title and mortgage reinsurance, residual value, employment practices liability (EPLI), and brown water marine written in the United States.

• Professional Liability – directors’ and officers’ (D&O) liability, large account E&O liability, fiduciary liability, fidelity and bankers’ blanket bonds, and EPLI for some D&O policyholders written in the United States and internationally.

• Accident & Health – medical stop-loss, short-term domestic and international medical coverages written in the United States.

• U.S. Surety & Credit – contract surety bonds, commercial surety bonds and bail bonds written in the United States and credit insurance managed in the United States.

• International – energy, property treaty, liability, surety, credit, property (direct and facultative), ocean marine, accident and health and other smaller product lines written outside the United States.

The Investing segment includes our consolidated investment portfolio, as well as all investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments. All investment activity is reported as revenue, consistent with our consolidated presentation.

In addition to our segments, we include a Corporate & Other category to reconcile segment results to consolidated totals. The Corporate & Other category includes corporate operating expenses not allocated to the segments, interest expense on long-term debt, foreign currency expense (benefit), activity related to an indemnification liability, and underwriting results of our Exited Lines. Our Exited Lines include these eight product lines that we no longer write and do not expect to write in the future: 1) accident and health business managed by our underwriting agency, LDG Reinsurance, 2) workers’ compensation, 3) provider excess, 4) Spanish medical malpractice, 5) U.K. motor, 6) film completion bonds, 7) HMO reinsurance and 8) medical excess reinsurance.

F-37

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

All stock-based compensation is included in Corporate & Other because it is not included in management’s evaluation of the five insurance underwriting segments. All contractual and discretionary bonuses are expensed in the respective employee’s segment in the year the bonuses are earned. Any such bonuses that will be paid by restricted stock awards or units, which will be granted by the Compensation Committee in the following year, are reversed within Corporate & Other. The appropriate stock-based compensation expense will be recorded in Corporate & Other as the awards vest in future years. The majority of our depreciation and amortization expense is included in Corporate & Other.

The following tables present information by business segment.

	U.S. Property & Casualty		Professional Liability			Accident & Health		U.S. Surety & Credit		International		Investing		Corporate & Other			Consolidated
Year ended December 31, 2013
Net earned premium	$	367,135	$	368,167		$	883,515	$	194,286	$	413,206	$	–	$	12,931		$	2,239,240
Other revenue		24,266		(7	)		4,932		1,468		4,334		262,212		459			297,664
Segment revenue		391,401		368,160			888,447		195,754		417,540		262,212		13,390			2,536,904
Loss and LAE		175,190		195,429			630,210		24,143		249,199		–		15,879			1,290,050
Other expense		117,910		66,391			130,814		109,550		158,869		–		90,610			674,144
Segment expense		293,100		261,820			761,024		133,693		408,068		–		106,489			1,964,194
Segment pretax earnings (loss)	$	98,301	$	106,340		$	127,423	$	62,061	$	9,472	$	262,212	$	(93,099	)	$	572,710
Year ended December 31, 2012
Net earned premium	$	354,050	$	394,687		$	831,827	$	207,955	$	412,853	$	–	$	41,253		$	2,242,625
Other revenue		18,865		731			4,918		843		5,005		252,754		86			283,202
Segment revenue		372,915		395,418			836,745		208,798		417,858		252,754		41,339			2,525,827
Loss and LAE		209,286		229,873			601,076		38,535		189,410		–		37,331			1,305,511
Other expense		116,398		66,721			122,232		113,619		146,807		–		100,112			665,889
Segment expense		325,684		296,594			723,308		152,154		336,217		–		137,443			1,971,400
Segment pretax earnings (loss)	$	47,231	$	98,824		$	113,437	$	56,644	$	81,641	$	252,754	$	(96,104	)	$	554,427
Year ended December 31, 2011
Net earned premium	$	333,410	$	410,816		$	758,270	$	210,535	$	368,748	$	–	$	45,391		$	2,127,170
Other revenue		23,951		912			4,684		1,247		5,309		211,245		(513	)		246,835
Segment revenue		357,361		411,728			762,954		211,782		374,057		211,245		44,878			2,374,005
Loss and LAE		201,017		328,503			552,292		52,206		233,879		–		31,350			1,399,247
Other expense		110,184		59,036			116,336		113,932		136,750		–		83,514			619,752
Segment expense		311,201		387,539			668,628		166,138		370,629		–		114,864			2,018,999
Segment pretax earnings (loss)	$	46,160	$	24,189		$	94,326	$	45,644	$	3,428	$	211,245	$	(69,986	)	$	355,006

F-38

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

The following table presents total assets by segment at December 31, 2013 and 2012.

			2013		2012
U.S. Property & Casualty			$	914,697	$	859,597
Professional Liability				1,110,592		1,053,024
Accident & Health				235,950		243,023
U.S. Surety & Credit				168,389		162,817
International				859,659		658,632
Investing				6,800,313		7,018,747
Corporate & Other				254,920		271,967
Total			$	10,344,520	$	10,267,807
The tables below present the split of our revenue, pretax earnings and total assets by geographic location. For these disclosures, we determine geographic location by the country of domicile of our subsidiaries that write the business and not by the location of insureds or reinsureds from whom the business was generated.
	2013		2012		2011
Domestic	$	1,868,557	$	1,880,954	$	1,779,789
Foreign		668,347		644,873		594,216
Total revenue	$	2,536,904	$	2,525,827	$	2,374,005
Domestic	$	443,898	$	364,083	$	237,056
Foreign		128,812		190,344		117,950
Total pretax earnings	$	572,710	$	554,427	$	355,006
			December 31,
			2013		2012
Domestic			$	7,397,509	$	7,536,285
Foreign				2,947,011		2,731,522
Total assets			$	10,344,520	$	10,267,807

F-39

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(13) Commitments and Contingencies

Catastrophe and Large Loss Exposure

We have exposure to catastrophic losses caused by natural perils (such as hurricanes, earthquakes, floods, tsunamis, hail storms and tornados), as well as from man-made events (such as terrorist attacks). The incidence, timing and severity of catastrophic losses are unpredictable. We assess our exposures in areas most vulnerable to natural catastrophes and apply procedures to ascertain our probable maximum loss from a single event. We maintain reinsurance protection that we believe is sufficient to limit our exposure to a foreseeable event. In 2013, we recognized accident year gross losses of $56.6 million from catastrophic events, primarily due to European floods, German hail storms and various small catastrophes. After reinsurance and reinstatement premium, our pretax loss was $52.0 million. In 2012, we recognized accident year gross losses of $84.8 million from catastrophic events, primarily from Superstorm Sandy in the United States. After reinsurance and reinstatement premium, our pretax loss was $52.8 million. In 2011, we recognized accident year gross losses of $175.5 million from catastrophic events primarily in Japan, New Zealand, the United States, Denmark and Thailand. After reinsurance and reinstatement premium, our pretax loss was $117.9 million.

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Indemnifications

In conjunction with the sales of business assets and subsidiaries, we have provided indemnifications to the buyers. Certain indemnifications cover typical representations and warranties related to our responsibilities to perform under the sales contracts. Under other indemnifications, we agree to reimburse the purchasers for taxes or ERISA-related amounts, if any, assessed after the sale date but related to pre-sale activities. We cannot quantify the maximum potential exposure covered by all of our indemnifications because the indemnifications cover a variety of matters, operations and scenarios. Certain of these indemnifications have no time limit. For those with a time limit, the longest such indemnification expires in 2025. We accrue a loss when a valid claim is made by a purchaser and we believe we have potential exposure. Our accrued liability was $1.9 million and $8.3 million at December 31, 2013 and 2012, respectively, to cover development on losses that were incurred prior to our sale of a subsidiary. In 2013, we released $5.1 million of the liability due to favorable claims activity and subrogation recoveries and also reduced the liability for the payment of claims.

Terrorist Exposure

Under the Terrorism Risk Insurance Program Reauthorization Act of 2007 (Reauthorization Act), we are required to offer terrorism coverage to our commercial policyholders in certain lines of business, for which we may, when warranted, charge an additional premium. The policyholders may or may not accept such coverage. The Reauthorization Act requires a $100.0 million terrorism-related loss event to trigger coverage. For such an event, the Federal government will reimburse 85% of our losses in excess of our deductible, up to the maximum annual amount in the Reauthorization Act. Our deductible is approximately $141.7 million for 2014. Currently, the Reauthorization Act expires on December 31, 2014.

F-40

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

Leases

We lease administrative office facilities and transportation equipment under operating leases that expire at various dates through 2022. The agreements generally require us to pay rent, utilities, real estate or property taxes, sales taxes, insurance and repairs. We recognize rent expense on a straight-line basis over the term of the lease, including free-rent periods. Rent expense under operating leases totaled $15.7 million in 2013, $16.0 million in 2012 and $16.2 million in 2011.

At December 31, 2013, future minimum rental payments required under long-term, non-cancelable operating leases, excluding certain expenses payable by us, were as follows:

2014	$	12,558
2015		11,459
2016		8,968
2017		6,380
2018		4,021
Thereafter		662
Total future minimum rental payments	$	44,048

(14) Related Party Transactions

We have amounts due to former owners of businesses we have acquired, some of whom are officers of certain of our subsidiaries. We had earnout liabilities of $22.8 million and $20.9 million at December 31, 2013 and 2012, respectively, reported in accounts payable and accrued liabilities in our consolidated balance sheets. We paid $7.2 million in 2013 and $32.1 million in 2012 related to these earnout agreements.

(15) Statutory Information

Our insurance companies file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by domestic or foreign insurance regulatory authorities. The differences between statutory financial statements and financial statements prepared in accordance with GAAP vary between domestic and foreign jurisdictions.

Statutory capital and surplus and net income, after intercompany eliminations, included in those companies’ respective filings with regulatory authorities were as follows:

	2013		2012		2011
Statutory capital and surplus	$	2,517,867	$	2,374,420	$	2,140,055
Statutory net income		453,649		445,999		294,396

The statutory capital and surplus of each of our insurance companies is significantly in excess of regulatory risk-based capital requirements.

F-41

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tables in thousands, except per share data)

(16) Supplemental Information

Supplemental cash flow information was as follows:

	2013		2012		2011
Income taxes paid	$	181,521	$	107,918	$	99,702
Interest paid		25,795		24,107		23,669
Dividends declared but not paid at year-end		22,575		16,680		16,136
Purchases of common stock not paid at year-end		-		5,657		16

(17) Quarterly Financial Data (Unaudited)

	Fourth Quarter				Third Quarter				Second Quarter				First Quarter
	2013		2012		2013		2012		2013		2012		2013		2012
Net earned premium	$	560,030	$	566,503	$	556,668	$	563,650	$	561,356	$	565,331	$	561,186	$	547,141
Other revenue		76,600		85,840		79,809		68,023		68,075		66,957		73,180		62,382
Total revenue		636,630		652,343		636,477		631,673		629,431		632,288		634,366		609,523
Loss and LAE expense		297,503		335,744		320,376		304,014		339,474		336,825		332,697		328,928
Other expense		182,744		167,070		176,001		174,040		165,126		161,144		150,273		163,635
Total expense		480,247		502,814		496,377		478,054		504,600		497,969		482,970		492,563
Earnings before income taxes		156,383		149,529		140,100		153,619		124,831		134,319		151,396		116,960
Income tax expense		41,373		41,428		41,925		46,557		36,669		40,826		45,546		34,376
Net earnings	$	115,010	$	108,101	$	98,175	$	107,062	$	88,162	$	93,493	$	105,850	$	82,584
Earnings per share
Basic	$	1.15	$	1.07	$	0.98	$	1.06	$	0.88	$	0.92	$	1.05	$	0.80
Diluted		1.14		1.06		0.98		1.05		0.87		0.92		1.05		0.79
Weighted-average shares outstanding
Basic		98,770		99,686		98,723		99,424		98,870		99,563		99,056		102,034
Diluted		99,046		99,926		98,993		99,700		99,121		99,851		99,287		102,193

The sum of earnings per share for the quarters may not equal the annual amounts due to rounding.

F-42

SCHEDULE 1

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUMMARY OF INVESTMENTS

OTHER THAN INVESTMENTS IN RELATED PARTIES

(in thousands)

	December 31, 2013
Column A	Column B		Column C		Column D
					Amount
					shown in
Type of Investment	Cost		Value		balance sheet
Fixed maturity securities
Bonds — United States Government and government agencies and authorities	$	91,047	$	92,709	$	92,709
Bonds — states, municipalities and political subdivisions		941,580		986,486		986,486
Bonds — special revenue		2,240,412		2,265,195		2,265,195
Bonds — corporate		1,195,387		1,225,238		1,225,238
Residential mortgage-backed securities		622,766		618,119		618,119
Commercial mortgage-backed securities		502,069		504,888		504,888
Asset-backed securities		183,660		182,392		182,392
Bonds — foreign		144,566		147,446		147,446
Total fixed maturity securities		5,921,487	$	6,022,473		6,022,473
Equity securities
Common stocks — banks, trust and insurance companies		36,337		40,751		40,751
Common stocks — industrial and miscellaneous		428,051		476,715		476,715
Total equity securities		464,388	$	517,466		517,466
Short-term investments		178,753				178,753
Total investments	$	6,564,628			$	6,718,692

S-1

SCHEDULE 2

HCC INSURANCE HOLDINGS, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS

(in thousands)

	December 31,
	2013		2012
ASSETS
Cash	$	2,206	$	4,932
Fixed maturity securities – available for sale, at fair value (amortized cost: 2013 – $497,233 and 2012 – $311,085)		518,822		325,552
Equity securities – available for sale, at fair value (cost: 2013 – $134,156 and 2012 – $114,649)		157,122		120,640
Short-term investments, at cost (approximates fair value)		6,498		22,409
Other investments, at fair value (cost: 2012 – $18,375)		-		20,908
Investment in subsidiaries		3,538,542		3,575,796
Intercompany loans to subsidiaries for acquisitions		174,280		177,052
Receivable from subsidiaries		80,946		58,209
Other assets		9,833		6,554
Total assets	$	4,488,249	$	4,312,052
LIABILITIES AND SHAREHOLDERS’ EQUITY
Payable to subsidiaries	$	36,654	$	17,375
Notes payable		654,098		583,944
Intercompany loan from subsidiary		-		25,300
Deferred Federal income tax		18,690		10,359
Accounts payable and accrued liabilities		104,377		132,462
Total liabilities		813,819		769,440
Total shareholders’ equity		3,674,430		3,542,612
Total liabilities and shareholders’ equity	$	4,488,249	$	4,312,052

See Notes to Condensed Financial Information.

S-2

SCHEDULE 2

HCC INSURANCE HOLDINGS, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF EARNINGS

(in thousands)

	Years ended December 31,
	2013		2012			2011
REVENUE
Equity in earnings of subsidiaries	$	415,408	$	400,294		$	238,602
Interest income from subsidiaries		9,101		8,858			12,231
Net investment income		13,691		10,290			4,561
Net realized investment gain (loss)		7,691		(309	)		(1,653	)
Other operating income		46		99			-
Total revenue		445,937		419,232			253,741
EXPENSE
Interest expense		25,804		25,132			22,481
Other operating expense		6,433		7,138			7,516
Total expense		32,237		32,270			29,997
Earnings before income tax expense		413,700		386,962			223,744
Income tax expense (benefit)		6,503		(4,278	)		(31,499	)
Net earnings	$	407,197	$	391,240		$	255,243

See Notes to Condensed Financial Information.

S-3

SCHEDULE 2

HCC INSURANCE HOLDINGS, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2013			2012			2011
Operating activities
Net earnings	$	407,197		$	391,240		$	255,243
Adjustments to reconcile net earnings to net cash provided by operating activities:
Undistributed net earnings of subsidiaries		(404,441	)		(392,486	)		(103,395	)
Change in accrued interest receivable on intercompany loans		(9,097	)		(3,154	)		(5,000	)
Change in accounts payable and accrued liabilities		(13,866	)		23,629			14,495
Gain (loss) on investments		(7,691	)		309			1,653
Other, net		28,555			3,947			(10,588	)
Cash provided by operating activities		657			23,485			152,408
Investing activities
Cash contributions to subsidiaries		(49,892	)		(30,250	)		(29,000	)
Sales of available for sale fixed maturity securities		78,350			87,099			109,655
Sales of equity securities		39,974			9,780			-
Sales of other investments		23,720			21,736			-
Maturity or call of available for sale fixed maturity securities		31,054			105,982			58,189
Cost of available for sale fixed maturity securities acquired		(20,030	)		(6,666	)		(130,322	)
Cost of equity securities acquired		(53,723	)		(124,710	)		-
Cost of other investments acquired		-			-			(32,496	)
Change in short-term investments		15,911			(20,987	)		103,684
Change in receivable from/payable to subsidiaries		(18,748	)		776			(34,767	)
Intercompany loans to subsidiaries for acquisitions		(7,228	)		(66,765	)		(1,911	)
Payments on intercompany loans to subsidiaries		19,157			51,427			43,548
Cash provided by investing activities		58,545			27,422			86,580
Financing activities
Issuance of notes payable		-			25,000			-
Payments on notes payable		(25,000	)		-			(13,000	)
Advances on line of credit		180,000			185,000			305,000
Payments on line of credit		(110,000	)		(80,000	)		(125,000	)
Sale of common stock		12,908			59,838			36,044
Purchase of common stock		(47,869	)		(173,028	)		(373,584	)
Dividends paid		(71,967	)		(64,345	)		(65,822	)
Other, net		-			-			(2,157	)
Cash used by financing activities		(61,928	)		(47,535	)		(238,519	)
Net increase (decrease) in cash		(2,726	)		3,372			469
Cash at beginning of year		4,932			1,560			1,091
Cash at end of year	$	2,206		$	4,932		$	1,560

See Notes to Condensed Financial Information.

S-4

SCHEDULE 2

HCC INSURANCE HOLDINGS, INC.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

NOTES TO CONDENSED FINANCIAL INFORMATION

(1) The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and related Notes of HCC Insurance Holdings, Inc. and Subsidiaries. Investments in subsidiaries are accounted for using the equity method.

(2) Intercompany loans to subsidiaries are demand notes issued primarily to fund the cash portion of acquisitions. They bear interest at a rate set by management, which approximates the interest rate charged for similar debt. At December 31, 2013, the interest rate on intercompany loans was 6.25%.

(3) In 2012, HCC borrowed $25.0 million as an intercompany loan from a subsidiary to pay down outstanding borrowings on its $600.0 million Revolving Loan Facility. This loan was repaid in full, plus interest at 2.45%, in 2013.

(4) Dividends received from subsidiaries were $328.2 million, $270.3 million and $279.9 million in 2013, 2012 and 2011, respectively. The dividends included $317.2 million, $262.8 million and $138.3 million, respectively, of fixed maturity securities plus the related accrued interest.

S-5

SCHEDULE 3

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTARY INSURANCE INFORMATION

(in thousands)

Column A	Column B			Column C		Column D		Column F		Column G		Column H		Column I			Column J		Column K
	(1)			(2)		(2)		(1)				(1)					(3)		(1)
	December 31,							Years ended December 31,
Segments	Deferred policy acquisition costs			Future policy benefits, losses, claims and loss expenses		Unearned premiums		Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred policy acquisition costs			Other operating expenses		Premium written
2013
U.S. Property & Casualty	$	26,374		$	665,871	$	473,230	$	367,135	$	-	$	175,190	$	35,260		$	82,563	$	385,355
Professional Liability		12,946			1,789,113		303,599		368,167		-		195,429		19,010			47,381		359,509
Accident & Health		3,618			314,593		18,105		883,515		-		630,210		69,745			61,069		881,368
U.S. Surety & Credit		35,549			112,916		125,948		194,286		-		24,143		68,105			41,444		199,121
International		34,483			853,711		213,967		413,206		-		249,199		88,048			70,737		417,039
Investing		-			-		-		-		220,182		-		-			-		-
Corporate & Other (4)		(800	)		222,419		-		12,931		-		15,879		(729	)		65,301		12,931
Total	$	112,170		$	3,958,623	$	1,134,849	$	2,239,240	$	220,182	$	1,290,050	$	279,439		$	368,495	$	2,255,323
2012
U.S. Property & Casualty	$	30,400		$	668,824	$	421,195	$	354,050	$	-	$	209,286	$	36,289		$	79,694	$	383,938
Professional Liability		15,382			1,754,824		305,315		394,687		-		229,873		25,365			41,356		378,138
Accident & Health		3,296			301,241		20,252		831,827		-		601,076		63,559			58,671		835,008
U.S. Surety & Credit		34,235			109,790		117,150		207,955		-		38,535		72,327			41,292		195,904
International		34,789			734,779		206,044		412,853		-		189,410		83,368			63,360		419,155
Investing		-			-		-		-		222,634		-		-			-		-
Corporate & Other (4)		(751	)		257,033		-		41,253		-		37,331		293			74,687		41,253
Total	$	117,351		$	3,826,491	$	1,069,956	$	2,242,625	$	222,634	$	1,305,511	$	281,201		$	359,060	$	2,253,396
2011
U.S. Property & Casualty	$	30,410		$	687,332	$	367,484	$	333,410	$	-	$	201,017	$	35,112		$	74,643	$	367,296
Professional Liability		20,083			1,698,239		318,092		410,816		-		328,503		17,002			42,026		412,262
Accident & Health		3,619			260,659		17,065		758,270		-		552,292		58,359			57,954		756,539
U.S. Surety & Credit		40,986			107,975		128,496		210,535		-		52,206		72,946			40,974		208,859
International		33,097			643,845		199,801		368,748		-		233,879		80,339			56,307		391,819
Investing		-			-		-		-		212,271		-		-			-		-
Corporate & Other (4)		(926	)		321,328		96		45,391		-		31,350		2,367			58,653		45,383
Total	$	127,269		$	3,719,378	$	1,031,034	$	2,127,170	$	212,271	$	1,399,247	$	266,125		$	330,557	$	2,182,158

(1) Columns B, F, H and K are shown including the effects of reinsurance.

(2) Columns C and D are shown excluding the effect of reinsurance.

(3) Other operating expenses are after all corporate expense allocations have been charged or credited to the individual segments.

(4) Includes activity related to Exited Lines.

Note: Column E is omitted because we have no other policy claims and benefits payable.

S-6

SCHEDULE 4

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

REINSURANCE

(in thousands)

Column A	Column B		Column C		Column D		Column E		Column F
	Direct amount		Ceded to other companies		Assumed from other companies		Net amount		Percent of amount assumed to net
Year ended December 31, 2013
Life insurance in force	$	904,189	$	210,475	$	-	$	693,714		—	%
Earned premium
Property and liability insurance	$	1,499,179	$	498,794	$	293,256	$	1,293,641		23	%
Accident and health insurance		983,348		77,837		40,088		945,599		4	%
Total	$	2,482,527	$	576,631	$	333,344	$	2,239,240		15	%
Year ended December 31, 2012
Life insurance in force	$	977,492	$	238,389	$	-	$	739,103		—	%
Earned premium
Property and liability insurance	$	1,483,722	$	446,890	$	282,500	$	1,319,332		21	%
Accident and health insurance		913,034		58,852		69,111		923,293		7	%
Total	$	2,396,756	$	505,742	$	351,611	$	2,242,625		16	%
Year ended December 31, 2011
Life insurance in force	$	1,070,323	$	261,803	$	-	$	808,520		—	%
Earned premium
Property and liability insurance	$	1,477,138	$	473,270	$	273,576	$	1,277,444		21	%
Accident and health insurance		831,672		49,115		67,169		849,726		8	%
Total	$	2,308,810	$	522,385	$	340,745	$	2,127,170		16	%

S-7

SCHEDULE 5

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

	2013			2012			2011
Allowance for doubtful accounts
Balance at beginning of year	$	3,622		$	3,668		$	3,639
Provision expense		2,807			1,584			362
Amounts written off and other		(652	)		(1,630	)		(333	)
Balance at end of year	$	5,777		$	3,622		$	3,668

S-8

EX-10.31

EXHIBIT 10.31

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

This Third Amendment (the “Amendment”) to the Employment Agreement, dated effective as of June 1, 2007 (as previously amended, the “Agreement”), by and between HCC Insurance Holdings, Inc., a Delaware corporation (“HCC”), and Michael J. Schell (“Executive”) is made and entered into as of May 22, 2013 (the “Execution Date”). HCC and Executive are sometimes collectively referred to herein as the “Parties” and individually as a “Party”. All capitalized terms, not otherwise defined herein, shall have the meaning ascribed to such term in the Agreement.

RECITALS

WHEREAS, the Parties set forth the terms and conditions of Executive’s employment with HCC in the Agreement; and

WHEREAS, the Parties now desire to amend the Agreement to extend the term thereof.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HCC and Executive hereby agree as follows:

AGREEMENT

1. Effective as of the Execution Date, Section 1 of the Agreement shall be deleted in its entirety and replaced with the following:

1.            Term. The Company hereby agrees to employ Executive as its Executive Vice President, and Executive hereby agrees to accept such employment, on the terms and conditions set forth herein, for the period (the “Term”) commencing on the Effective Date and expiring at the earlier to occur of (a) 11:59 p.m. on December 31, 2016 (the “Expiration Date”) and (b) the Termination Date (as hereinafter defined).

2. The provisions of Section 1 of this Amendment are hereby incorporated into and made part of the Agreement as if fully set forth therein.

3. Except as expressly provided herein, all other terms and conditions of the Agreement shall remain unchanged, and as expressly amended hereby, the Agreement is ratified and confirmed in all respects and shall remain in full force and effect.

4. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

[Signature Page Follows]

1

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date set forth below.

EXECUTIVE:		COMPANY:
		HCC Insurance Holdings, Inc.
/s/    Michael J. Schell		By:	/s/    Christopher J.B. Williams
Michael J. Schell			Christopher J.B. Williams Chief Executive Officer
Date:	May 30, 2013	Date:	May 22, 2013

EX-12

EXHIBIT 12

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

STATEMENT OF RATIOS

(in thousands, except ratios)

	Years ended December 31,
	2013			2012			2011			2010			2009
Net loss ratio
Loss and loss adjustment expense, net	$	1,290,050		$	1,305,511		$	1,399,247		$	1,213,029		$	1,215,759
Net earned premium		2,239,240			2,242,625			2,127,170			2,041,924			2,037,235
Net loss ratio (1)		57.6	%		58.2	%		65.8	%		59.4	%		59.7	%
(Net loss ratio = net loss and loss adjustment expense divided by net earned premium)
Expense ratio
Segment underwriting expense (2)	$	583,534		$	565,777		$	536,238		$	519,336		$	502,256
Segment revenue (3)		2,261,302			2,231,734			2,117,882			2,030,219			2,020,088
Expense ratio		25.8	%		25.4	%		25.3	%		25.6	%		24.9	%
(Expense ratio = segment underwriting expense divided by segment revenue)
Combined ratio		83.4	%		83.6	%		91.1	%		85.0	%		84.6	%
(Combined ratio = net loss ratio plus expense ratio)
Accident year net loss ratio
Loss and loss adjustment expense, net	$	1,290,050		$	1,305,511		$	1,399,247		$	1,213,029		$	1,215,759
Add: Favorable (adverse) development		73,742			70,011			(10,147	)		22,663			53,524
Accident year net loss and loss adjustment expense	$	1,363,792		$	1,375,522		$	1,389,100		$	1,235,692		$	1,269,283
Net earned premium	$	2,239,240		$	2,242,625		$	2,127,170		$	2,041,924		$	2,037,235
Add: (Increase) decrease related to prior year reinstatement premium		(818	)		(5,083	)		-			3,177			-
Accident year net earned premium	$	2,238,422		$	2,237,542		$	2,127,170		$	2,045,101		$	2,037,235
Accident year net loss ratio		60.9	%		61.5	%		65.3	%		60.4	%		62.3	%
(Accident year net loss ratio = accident year net loss and loss adjustment expense divided by accident year net earned premium)

(1) Calculated for our insurance companies using financial data reported in accordance with generally accepted accounting principles.

(2) Sum of Other Expense for each of our insurance segments.

(3) Sum of Segment Revenue for each of our insurance segments.

HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

STATEMENT OF RATIOS

(in thousands, except ratios)

	Years ended December 31,
	2013			2012			2011			2010			2009
Net paid loss ratio
Losses paid, net of reinsurance	$	1,265,996		$	1,272,345		$	1,253,689		$	1,218,080		$	1,137,779
Net earned premium		2,239,240			2,242,625			2,127,170			2,041,924			2,037,235
Net paid loss ratio		56.5	%		56.7	%		58.9	%		59.7	%		55.8	%
(Net paid loss ratio = losses paid, net of reinsurance, divided by net earned premium)
Ratio of earnings to fixed charges
Interest factor of rent expense (4)	$	5,232		$	5,328		$	5,390		$	5,294		$	5,277
Interest expense		26,210			25,628			23,070			21,348			16,164
Capitalized interest		-			303			382			-			51
Total fixed charges	$	31,442		$	31,259		$	28,842		$	26,642		$	21,492
Earnings before income tax expense	$	572,710		$	554,427		$	355,006		$	489,827		$	518,551
Interest factor of rent expense (4)		5,232			5,328			5,390			5,294			5,277
Interest expense		26,210			25,628			23,070			21,348			16,164
Earnings per calculation	$	604,152		$	585,383		$	383,466		$	516,469		$	539,992
Ratio of earnings to fixed charges (5)		19.21			18.73			13.30			19.39			25.13

(4) Estimated to be 33% of total rent expense.

(5) Earnings per calculation divided by total fixed charges.

EX-21

EXHIBIT 21

HCC INSURANCE HOLDINGS, INC.

SUBSIDIARIES

	Name	State or Country Incorporated
1	American Contractors Indemnity Company	California
2	Avemco Corporation	Delaware
3	Avemco Insurance Agency, Inc.	Maryland
4	Avemco Insurance Company	Maryland
5	Centris Group, Inc., The	Delaware
6	cineFinance Insurance Services, LLC	California
7	CW Midwest, Inc. (d/b/a Cox Insurance Group)	Indiana
8	Dickson Manchester & Company Limited	United Kingdom
9	G.B. Kenrick & Associates, Inc.	Michigan
10	HCC Acquisition Sub, Inc.	New York
11	HCC Administrators, Inc.	Illinois
12	HCC Aviation Insurance Group, Inc.	Texas
13	HCC Benefits Corporation	Delaware
14	HCC Claims Services Ltd.	United Kingdom
15	HCC Credit Group, Inc.	New York
16	HCC Diversificacion y Soluciones, S.L.	Spain
17	HCC Diversified Financial Products Limited	United Kingdom
18	HCC Employee Benefits, Inc.	Delaware
19	HCC Employer Services, Inc.	Alabama
20	HCC Employer Services, Inc.	Illinois
21	HCC Global Financial Products Ltd.	United Kingdom
22	HCC Global Financial Products of Texas, LLC	Texas
23	HCC Global Financial Products, LLC	Delaware
24	HCC Global Financial Products, SL	Spain
25	HCC Indemnity Guaranty Agency, Inc.	New York
26	HCC Insurance Holdings (International) Limited	United Kingdom
27	HCC Insurance Services Ltd.	United Kingdom
28	HCC Intermediate Holdings, Inc.	Delaware
29	HCC International Insurance Company PLC	United Kingdom
30	HCC Life Insurance Company	Indiana
31	HCC Medical Insurance Services, LLC	Wisconsin
32	HCC Marine 1, Ltd.	Louisiana
33	HCC Marine 2, Ltd.	Louisiana
34	HCC Marine Claims, LLC	Louisiana
35	HCC Public Risk Claim Service, Inc.	Michigan
36	HCC Re Agency Ltd.	Bermuda
37	HCC Reinsurance Company Limited	Bermuda
38	HCC Risk Management Corporation	Texas
39	HCC Risk Solutions Company	Nevada
40	HCC Service Company, Inc.	Delaware
41	HCC Service Delaware, LLC	Delaware
42	HCC Specialty Holdings (No. 1) Limited	United Kingdom
43	HCC Specialty Insurance Company	Oklahoma
44	HCC Specialty Ltd.	United Kingdom
45	HCC Specialty Underwriters, Inc.	Massachusetts
46	HCC Strategic Investments (UK) Ltd.	United Kingdom

	Name	State or Country Incorporated
47	HCC Strategic Investments, LLC	Delaware
48	HCC Surety Group, Inc.	Delaware
49	HCC Trustees Limited	United Kingdom
50	HCC Underwriters, A Texas Corporation	Texas
51	HCC Underwriting Agency Ltd.	United Kingdom
52	HCCI Credit Services Limited	United Kingdom
53	HCCI Group Limited	United Kingdom
54	HCCL Holdings Limited	United Kingdom
55	Houston Casualty Company	Texas
56	Houston Casualty Company Europe, Seguros y Reaseguros, S.A.	Spain
57	Illium, Inc.	Delaware
58	InsPro Corporation	California
59	LDG Re (London) Ltd.	United Kingdom
60	LDG Re Worldwide Limited	Delaware
61	LDG Re Worldwide Ltd.	United Kingdom
62	LDG Reinsurance Corporation	Massachusetts
63	LifeTrac, Inc.	Delaware
64	MAG Acquisition Sub, Inc.	Delaware
65	Manchester Dickson Holdings Limited	United Kingdom
66	Nameco (No. 808) Ltd.	United Kingdom
67	Novia Holdings, Inc.	Indiana
68	Occidental Services, Inc.	Delaware
69	PEPYS Holdings Limited	United Kingdom
70	Perico Life Insurance Company	Delaware
71	Perico Ltd.	Missouri
72	Professional Indemnity Agency, Inc.	New Jersey
73	Rattner Mackenzie Limited, (RML) (Exempted) Co.	Jordan
74	Specialty Insurance Underwriters, Inc.	Missouri
75	Specialty Reinsurance Intermediaries, Inc.	Massachusetts
76	Surety Associates Holding Co., Inc.	New Mexico
77	TMD PIA, LLC	New York
78	TTR, L.L.C.	New York
79	U. S. Specialty Insurance Company	Texas
80	United States Surety Company	Maryland
81	US Holdings, Inc.	Delaware
82	USBenefits Insurance Services, Inc.	California
83	USSC Holdings, Inc.	Maryland
84	VASA Brougher, Inc.	Indiana
85	VASA North America, Inc.	Indiana
86	Vintage Insurance Programs, LLC	Delaware

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 and S-3 (Nos. 333-68771,
333-99551, 333-152897, 333-173346, 333-180318 and 333-190484) of HCC Insurance Holdings, Inc. of our report dated February 28, 2014 relating to the consolidated financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

February 28, 2014

EX-24

EXHIBIT 24

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 5, 2014	/s/ Emmanuel T. Ballases
	Emmanuel T. Ballases

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 4, 2014	/s/ Judy C. Bozeman
	Judy C. Bozeman

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 4, 2014	/s/ Frank J. Bramanti
	Frank J. Bramanti

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 3, 2014	/s/ Walter M. Duer
	Walter M. Duer

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 4, 2014	/s/ James C. Flagg, Ph.D.
	James C. Flagg, Ph.D.

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 4, 2014	/s/ Thomas M. Hamilton
	Thomas M. Hamilton

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 3, 2014	/s/ Leslie S. Heisz
	Leslie S. Heisz

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 3, 2014	/s/ John N. Molbeck, Jr.
	John N. Molbeck, Jr.

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 7, 2014	/s/ Hans D. Rohlf
	Hans D. Rohlf

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 4, 2014	/s/ Robert A. Rosholt
	Robert A. Rosholt

POWER OF ATTORNEY

Know all men by these presents, that the undersigned constitutes and appoints Christopher J.B. Williams and Pamela J. Penny, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K and any and all amendments thereto, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

February 11, 2014	/s/ J. Mikesell Thomas
	J. Mikesell Thomas

EX-31.1

EXHIBIT 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Christopher J.B. Williams, certify that:

1. I have reviewed this annual report on Form 10-K of HCC Insurance Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 28, 2014	/s/ Christopher J.B. Williams
(Date)	Christopher J.B. Williams,
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Brad T. Irick, certify that:

1. I have reviewed this annual report on Form 10-K of HCC Insurance Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 28, 2014	/s/ Brad T. Irick
(Date)	Brad T. Irick,
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION WITH RESPECT TO ANNUAL REPORT OF HCC INSURANCE HOLDINGS, INC.

The undersigned, being the Chief Executive Officer and Chief Financial Officer of HCC Insurance Holdings, Inc. (the Company), pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, do hereby certify to the best of their knowledge with respect to the Annual Report of the Company on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2013 (the Report):

1. that the Report fully complies with all requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended; and

2. that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

February 28, 2014	/s/ Christopher J.B. Williams
(Date)	Christopher J.B. Williams,
	Chief Executive Officer

February 28, 2014	/s/ Brad T. Irick
(Date)	Brad T. Irick,
	Executive Vice President and Chief Financial Officer

This certification is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of such section. This certification is not deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference. A signed original of this certification has been provided to HCC Insurance Holdings, Inc. and will be retained by HCC Insurance Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Reinsurance (Detail Textuals) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Reinsurance [Abstract]
Ceded life and annuity benefits	$ 56.5	$ 58.6

XML

Income Taxes (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Changes in the valuation allowance
Balance at beginning of year	$ 27,430	$ 9,187	$ 7,983	$ 8,143
State net operating loss carryforwards	(2,228)	(651)	(288)
Foreign net operating loss carryforwards	20,207	296	(342)
Other	264	1,559	470
Balance at end of year	$ 27,430	$ 9,187	$ 7,983	$ 8,143

XML

Notes Payable (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 08, 2011
Notes Payable [Abstract]
Interest rate of senior notes	6.30%
Senior note, face amount			$ 300,000,000
Senior note, unamortized discount	1,500,000
Senior note, effective interest rate	6.37%
Borrowing capacity under line of credit facility				600,000,000
Borrowing rate under revolving loan facility	125.00%
Contractual interest rate on borrowing under facility	1.42%
Commitment fees basis points for revolving loan facility	0.15%
Remaining borrowing capacity under Revolving Loan Facility as reduced by outstanding letters of credit	239,100,000
Leverage ratio on restrictive financial covenants	35.00%
Letter of credit facility outstanding amount	90,000,000
Line of credit facility expiration date	Dec. 31, 2017
Repayment of convertible debt	0	0	0
Subsidiary letter of credit facility outstanding amount	6,400,000
Senior Notes Payable Fair Value	$ 352,700,000	$ 351,400,000

XML

Stock based Compensation (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingRollForward
Outstanding, beginning of year	1,514
Stock Issued During Period Shares Stock Options Exercised	381	2,079	1,458
Forfeited and expired	(21)
Outstanding, end of year	1,293	1,514
ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsAdditionalDisclosuresAbstrac
Outstanding, weighted average exercise price	$ 29.50	$ 27.33
Granted, weighted-average exercise price	$ 42.11
Exercised, weighted-average exercise price	$ 27.04
Forfeited and expired, weighted-average exercise price	$ 26.44
Outstanding, end of year, weighted-average contractual life, Options	4 years 3 months 21 days
Outstanding, end of year, aggregate intrinsic value, options	$ 21,514
Vested or expected to vest, end of year, number of shares	1,149
Vested or expected to vest, end of year, weighted-average exercise price	$ 29.32
Vested or expected to vest, end of year, weighted-average contractual life	4 years 2 months 12 days
Vested or expected to vest, end of year, aggregate intrinsic value	19,327
Exercisable, end of year, number of shares	479
Exercisable, end of year, weighted-average exercise price	$ 25.62
Exercisable, end of year, weighted-average contractual life	2 years 3 months 18 days
Exercisable, end of year, aggregate intrinsic value	$ 9,821

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Income Taxes (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Changes in our liability for unrecognized gross tax benefits
Balance at beginnng of year	$ 4,129	$ 2,522	$ 2,274
Tax position of current year	632	145	160
Tax position of prior years	506	2,988	763
Statute expirations	(264)	(713)	(595)
Settlements	0	(404)	0
Tax positions of prior years	0	(409)	(80)
Balance at end of year	$ 5,003	$ 4,129	$ 2,522

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Segments (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Total pretax earnings	$ 156,383	$ 140,100	$ 124,831	$ 151,396	$ 149,529	$ 153,619	$ 134,319	$ 116,960	$ 572,710	$ 554,427	$ 355,006
Domestic [Member]
Segment Reporting Information [Line Items]
Total pretax earnings									443,898	364,083	237,056
Foreign [Member]
Segment Reporting Information [Line Items]
Total pretax earnings									$ 128,812	$ 190,344	$ 117,950

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Schedule 3 Supplementary Insurance Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	$ 112,170	$ 117,351	$ 127,269
Future policy benefits, losses, claims and loss expenses	3,958,623	3,826,491	3,719,378
Unearned premiums	1,134,849	1,069,956	1,031,034
Premium revenue	2,239,240	2,242,625	2,127,170
Net investment income	220,182	222,634	212,271
Benefits, claims, losses and settlement expenses	1,290,050	1,305,511	1,399,247
Amortization of deferred policy acquisition costs	279,439	281,201	266,125
Other operating expenses	368,495	359,060	330,557
Premium written	2,255,323	2,253,396	2,182,158
United States Property And Casualty [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	26,374	30,400	30,410
Future policy benefits, losses, claims and loss expenses	665,871	668,824	687,332
Unearned premiums	473,230	421,195	367,484
Premium revenue	367,135	354,050	333,410
Benefits, claims, losses and settlement expenses	175,190	209,286	201,017
Amortization of deferred policy acquisition costs	35,260	36,289	35,112
Other operating expenses	82,563	79,694	74,643
Premium written	385,355	383,938	367,296
Professional Liability [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	12,946	15,382	20,083
Future policy benefits, losses, claims and loss expenses	1,789,113	1,754,824	1,698,239
Unearned premiums	303,599	305,315	318,092
Premium revenue	368,167	394,687	410,816
Benefits, claims, losses and settlement expenses	195,429	229,873	328,503
Amortization of deferred policy acquisition costs	19,010	25,365	17,002
Other operating expenses	47,381	41,356	42,026
Premium written	359,509	378,138	412,262
Accident And Health [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	3,618	3,296	3,619
Future policy benefits, losses, claims and loss expenses	314,593	301,241	260,659
Unearned premiums	18,105	20,252	17,065
Premium revenue	883,515	831,827	758,270
Benefits, claims, losses and settlement expenses	630,210	601,076	552,292
Amortization of deferred policy acquisition costs	69,745	63,559	58,359
Other operating expenses	61,069	58,671	57,954
Premium written	881,368	835,008	756,539
United States Surety And Credit [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	35,549	34,235	40,986
Future policy benefits, losses, claims and loss expenses	112,916	109,790	107,975
Unearned premiums	125,948	117,150	128,496
Premium revenue	194,286	207,955	210,535
Benefits, claims, losses and settlement expenses	24,143	38,535	52,206
Amortization of deferred policy acquisition costs	68,105	72,327	72,946
Other operating expenses	41,444	41,292	40,974
Premium written	199,121	195,904	208,859
International [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	34,483	34,789	33,097
Future policy benefits, losses, claims and loss expenses	853,711	734,779	643,845
Unearned premiums	213,967	206,044	199,801
Premium revenue	413,206	412,853	368,748
Benefits, claims, losses and settlement expenses	249,199	189,410	233,879
Amortization of deferred policy acquisition costs	88,048	83,368	80,339
Other operating expenses	70,737	63,360	56,307
Premium written	417,039	419,155	391,819
Investing [Member]
Supplementary Insurance Information, by Segment [Line Items]
Net investment income	220,182	222,634	212,271
Corporate And Other [Member]
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	(800)	(751)	(926)
Future policy benefits, losses, claims and loss expenses	222,419	257,033	321,328
Unearned premiums	0	0	96
Premium revenue	12,931	41,253	45,391
Benefits, claims, losses and settlement expenses	15,879	37,331	31,350
Amortization of deferred policy acquisition costs	(729)	293	2,367
Other operating expenses	65,301	74,687	58,653
Premium written	$ 12,931	$ 41,253	$ 45,383

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Notes Payable

		2013		2012
6.30% Senior Notes		$	299,098	$	298,944
$600.0 million Revolving Loan Facility			355,000		285,000
	Total notes payable	$	654,098	$	583,944

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Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Effect of reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs
Direct written premium									$ 2,545,054	$ 2,422,517	$ 2,305,190
Reinsurance assumed									335,195	361,556	343,936
Reinsurance ceded									(624,926)	(530,677)	(466,968)
Net written premium									2,255,323	2,253,396	2,182,158
Direct earned premium									2,482,527	2,396,756	2,308,810
Reinsurance assumed									333,344	351,611	340,745
Reinsurance ceded									(576,631)	(505,742)	(522,385)
Net earned premium	560,030	556,668	561,356	561,186	566,503	563,650	565,331	547,141	2,239,240	2,242,625	2,127,170
Direct loss and loss adjustment expense									1,583,693	1,434,830	1,535,270
Reinsurance assumed									151,145	162,534	224,655
Reinsurance ceded									(444,788)	(291,853)	(360,678)
Net loss and loss adjustment expense	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
Policy acquisition costs									413,782	398,453	392,172
Ceding commissions									(134,343)	(117,252)	(126,047)
Net policy acquisition costs									$ 279,439	$ 281,201	$ 266,125

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Segments (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Total assets	$ 10,344,520	$ 10,267,807
Domestic [Member]
Segment Reporting Information [Line Items]
Total assets	7,397,509	7,536,285
Foreign [Member]
Segment Reporting Information [Line Items]
Total assets	$ 2,947,011	$ 2,731,522

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Segments

12 Months Ended

Dec. 31, 2013

Segments [Abstract]

Segments

(12)Segments

We report HCC's results in six operating segments, each of which reports to an HCC executive who is responsible for the segment results. Each of our five insurance underwriting segments bears risk for insurance coverage written within its portfolio of insurance products. Each segment generates income from premium written by our underwriting agencies, through third party agents and brokers, or on a direct basis. Fee and commission income earned by our agencies from third party insurance companies is included in segment revenue. Each segment incurs insurance losses, acquisition costs and other administrative expenses related to our insurance companies and underwriting agencies. We monitor and assess each segment's pretax results based on underwriting profit, gross and net written premium, and its combined ratio, consisting of the net loss ratio and expense ratio.

Included in the portfolio of products for each insurance underwritingsegment are the following key products:

• U.S. Property & Casualty –aviation, small account errors and omissions (E&O) liability, public risk, disability, contingency, primary and excess casualty, technical and construction property, title and mortgage reinsurance, residual value,employment practices liability (EPLI), and brown water marine written in the United States.
• Professional Liability –directors' and officers' (D&O) liability, large account E&O liability,fiduciary liability, fidelity and bankers' blanket bonds, and EPLI for some D&O policyholders written in the United States and internationally.
• Accident & Health – medical stop-loss, short-term domestic and international medical coverageswritten in the United States.
• U.S. Surety & Credit – contract surety bonds, commercial surety bondsand bail bondswritten in the United States and credit insurancemanaged in the United States.
• International – energy, property treaty, liability, surety, credit,property (direct and facultative), ocean marine, accident and health and other smaller product lines written outside the United States.

The Investing segment includes our consolidated investment portfolio, as well as all investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments.All investment activity is reported as revenue, consistent with our consolidated presentation.

In addition to our segments, we include a Corporate & Other categoryto reconcile segment results to consolidated totals. The Corporate & Other category includes corporate operating expenses not allocated to the segments, interest expense on long-term debt, foreign currency expense (benefit),activity related to an indemnification liability, and underwriting results of our Exited Lines. Our Exited Lines include these eightproduct lines that we no longer write and do not expect to write in the future: 1) accident and health business managed by our underwriting agency, LDG Reinsurance, 2) workers' compensation, 3) provider excess, 4) Spanish medical malpractice, 5) U.K. motor, 6) film completion bonds, 7) HMO reinsurance and 8) medical excess reinsurance.

All stock-based compensation is included in Corporate & Other because it is not included in management's evaluation of the five insurance underwriting segments. All contractual and discretionary bonuses are expensed in the respective employee's segment in the year the bonuses are earned. Any such bonuses that will be paid by restricted stock awards or units, which will be granted by the Compensation Committee in the following year, are reversed within Corporate & Other. The appropriate stock-based compensation expense will be recorded in Corporate & Other as the awards vest in future years. The majority of our depreciation and amortization expense is included in Corporate & Other.

The following tables presentinformation by business segment.

			U.S. Property		Professional		Accident		U.S. Surety						Corporate
			& Casualty		Liability		& Health		& Credit		International		Investing		& Other		Consolidated
Year ended December 31, 2013
Net earned premium			$	367,135	$	368,167	$	883,515	$	194,286	$	413,206	$	0	$	12,931	$	2,239,240
Other revenue				24,266		(7)		4,932		1,468		4,334		262,212		459		297,664
	Segment revenue			391,401		368,160		888,447		195,754		417,540		262,212		13,390		2,536,904
Loss and LAE				175,190		195,429		630,210		24,143		249,199		0		15,879		1,290,050
Other expense				117,910		66,391		130,814		109,550		158,869		0		90,610		674,144
	Segment expense			293,100		261,820		761,024		133,693		408,068		-		106,489		1,964,194
		Segment pretax earnings (loss)	$	98,301	$	106,340	$	127,423	$	62,061	$	9,472	$	262,212	$	(93,099)	$	572,710

Year ended December 31, 2012
Net earned premium			$	354,050	$	394,687	$	831,827	$	207,955	$	412,853	$	0	$	41,253	$	2,242,625
Other revenue				18,865		731		4,918		843		5,005		252,754		86		283,202
	Segment revenue			372,915		395,418		836,745		208,798		417,858		252,754		41,339		2,525,827
Loss and LAE				209,286		229,873		601,076		38,535		189,410		0		37,331		1,305,511
Other expense				116,398		66,721		122,232		113,619		146,807		0		100,112		665,889
	Segment expense			325,684		296,594		723,308		152,154		336,217		-		137,443		1,971,400
		Segment pretax earnings (loss)	$	47,231	$	98,824	$	113,437	$	56,644	$	81,641	$	252,754	$	(96,104)	$	554,427

Year ended December 31, 2011
Net earned premium			$	333,410	$	410,816	$	758,270	$	210,535	$	368,748	$	0	$	45,391	$	2,127,170
Other revenue				23,951		912		4,684		1,247		5,309		211,245		(513)		246,835
	Segment revenue			357,361		411,728		762,954		211,782		374,057		211,245		44,878		2,374,005
Loss and LAE				201,017		328,503		552,292		52,206		233,879		0		31,350		1,399,247
Other expense				110,184		59,036		116,336		113,932		136,750		0		83,514		619,752
	Segment expense			311,201		387,539		668,628		166,138		370,629		-		114,864		2,018,999
		Segment pretax earnings (loss)	$	46,160	$	24,189	$	94,326	$	45,644	$	3,428	$	211,245	$	(69,986)	$	355,006

The following table presents total assets by segment at December 31, 2013 and 2012.

	2013		2012
U.S. Property & Casualty	$	914,697	$	859,597
Professional Liability		1,110,592		1,053,024
Accident & Health		235,950		243,023
U.S. Surety & Credit		168,389		162,817
International		859,659		658,632
Investing		6,800,313		7,018,747
Corporate & Other		254,920		271,967
Total	$	10,344,520	$	10,267,807

The tables below present the split of our revenue, pretax earnings and total assets by geographic location.For these disclosures, wedetermine geographic location by the country of domicile of our subsidiaries that write the business and not by the location of insureds or reinsureds from whom the business was generated.

	2013		2012		2011
Domestic	$	1,868,557	$	1,880,954	$	1,779,789
Foreign		668,347		644,873		594,216
Total revenue	$	2,536,904	$	2,525,827	$	2,374,005
Domestic	$	443,898	$	364,083	$	237,056
Foreign		128,812		190,344		117,950
Total pretax earnings	$	572,710	$	554,427	$	355,006

	December 31,
	2013		2012
Domestic	$	7,397,509	$	7,536,285
Foreign		2,947,011		2,731,522
Total assets	$	10,344,520	$	10,267,807

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Supplemental Information

12 Months Ended

Dec. 31, 2013

Supplemental Information [Abstract]

Supplemental Information

(16) Supplemental Information

Supplemental cash flow information was as follows:

	2013		2012		2011
Income taxes paid	$	181,521	$	107,918	$	99,702
Interest paid		25,795		24,107		23,669
Dividends declared but not paid at year-end		22,575		16,680		16,136
Purchases of common stock not paid at year-end		0		5,657		16

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Income Taxes (Parentheticals) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes [Abstract]
Federal tax benefit on state positions	$ 340	$ 719	$ 212

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Segments (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Assets	$ 10,344,520	$ 10,267,807
United States Property And Casualty [Member]
Segment Reporting Information [Line Items]
Assets	914,697	859,597
Professional Liability [Member]
Segment Reporting Information [Line Items]
Assets	1,110,592	1,053,024
Accident And Health [Member]
Segment Reporting Information [Line Items]
Assets	235,950	243,023
United States Surety And Credit [Member]
Segment Reporting Information [Line Items]
Assets	168,389	162,817
International [Member]
Segment Reporting Information [Line Items]
Assets	859,659	658,632
Investing [Member]
Segment Reporting Information [Line Items]
Assets	6,800,313	7,018,747
Corporate And Other [Member]
Segment Reporting Information [Line Items]
Assets	$ 254,920	$ 271,967

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Statutory Information

12 Months Ended

Dec. 31, 2013

Statutory Information Disclosure [Abstract]

Statutory Information

(15) Statutory Information 

Our insurance companies file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by domestic or foreign insurance regulatory authorities. The differences between statutory financial statements and financial statements prepared in accordance with GAAP vary between domestic and foreign jurisdictions.

Statutory capital and surplus and net income, after intercompany eliminations, included in those companies' respective filings with regulatory authorities were as follows:

	2013		2012		2011
Statutory capital and surplus	$	2,517,867	$	2,374,420	$	2,140,055
Statutory net income		453,649		445,999		294,396

The statutory capital and surplus of each of our insurance companies is significantly in excess of regulatory risk-based capital requirements.

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

2014	$	12,558
2015		11,459
2016		8,968
2017		6,380
2018		4,021
Thereafter		662
Total future minimum rental payments	$	44,048

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Statutory Information (Table)

12 Months Ended

Dec. 31, 2013

Statutory Information [Abstract]

Statutory Information

(15) Statutory Information 

Our insurance companies file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by domestic or foreign insurance regulatory authorities. The differences between statutory financial statements and financial statements prepared in accordance with GAAP vary between domestic and foreign jurisdictions.

Statutory capital and surplus and net income, after intercompany eliminations, included in those companies' respective filings with regulatory authorities were as follows:

	2013		2012		2011
Statutory capital and surplus	$	2,517,867	$	2,374,420	$	2,140,055
Statutory net income		453,649		445,999		294,396

The statutory capital and surplus of each of our insurance companies is significantly in excess of regulatory risk-based capital requirements.

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Segments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Total revenue	$ 636,630	$ 636,477	$ 629,431	$ 634,366	$ 652,343	$ 631,673	$ 632,288	$ 609,523	$ 2,536,904	$ 2,525,827	$ 2,374,005
Domestic [Member]
Segment Reporting Information [Line Items]
Total revenue									1,868,557	1,880,954	1,779,789
Foreign [Member]
Segment Reporting Information [Line Items]
Total revenue									$ 668,347	$ 644,873	$ 594,216

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Stock based Compensation (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Oustanding, beginning of year	1,572
Vested	(322)
Number of shares	358
Forfeited	(171)
Oustanding, end of year	1,437
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Outstanding, weighted-average grant date fair value	$ 32.91	$ 28.84
Vested, weighted average grant date fair value	$ 27.76
Weighted-average grant date fair value, awarded	$ 43.13
Forfeited, weighted-average grant date fair value	$ 26.67
Outstanding, end of year, weighted-average contractual life	2.6
Expected To Vest End Of Year Weighted Average Contractual Life	2.6
Expected to vest, end of year	1,132
Expected to vest, Weighted Average Grant Date Fair Value	$ 33.18
Expected to vest, End of year, Aggregate intrinsic value	$ 52,232
Outstanding, End of year, aggregate intrinsic value	66,326
Restricted stock units (RSU) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Oustanding, beginning of year	145
Vested	(37)
Number of shares	40
Forfeited	(13)
Oustanding, end of year	135
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Outstanding, weighted-average grant date fair value	$ 33.91	$ 27.98
Vested, weighted average grant date fair value	$ 24.56
Weighted-average grant date fair value, awarded	$ 43.45
Forfeited, weighted-average grant date fair value	$ 23.94
Outstanding, end of year, weighted-average contractual life	2.2
Expected To Vest End Of Year Weighted Average Contractual Life	2.2
Expected to vest, end of year	108
Expected to vest, End of year, Aggregate intrinsic value	4,996
Outstanding, End of year, aggregate intrinsic value	$ 6,210

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Changes in fair value of level 3 assets
Balance at beginning of period	$ 513	$ 2,686
Earnout liability	22,800	20,900
Purchases	9,430	0
Settlement	0	(1,863)
Sales	0	0
Other comprehensive income	(231)	10
Net earnings	646	695
Transfers out of Level 3	0	(1,015)
Balance at end of period	10,358	513
Fixed maturity securities [Member]
Changes in fair value of level 3 assets
Balance at beginning of period	164	1,170
Earnout liability		0
Purchases	9,430	0
Settlement	0	0
Sales	0	0
Other comprehensive income	(231)	10
Net earnings	54	(1)
Transfers out of Level 3		(1,015)
Balance at end of period	9,417	164
Other Assets [Member]
Changes in fair value of level 3 assets
Balance at beginning of period	349	1,516
Earnout liability		0
Purchases	0	0
Settlement	0	(1,863)
Sales	0	0
Other comprehensive income	0	0
Net earnings	592	696
Transfers out of Level 3	0	0
Balance at end of period	941	349
Earn Out Liability [Member]
Changes in fair value of level 3 assets
Balance at beginning of period	7,009	0
Earnout liability	0	6,968
Net earnings	(250)	(41)
Balance at end of period	$ 7,259	$ 7,009

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Differences between our effective tax rate for financial statement purposes and the Federal Statutory rate

	2013			2012			2011
Statutory tax rate		35.0	%		35.0	%		35.0	%
Federal tax at statutory rate	$	200,448		$	194,049		$	124,252
Nontaxable municipal bond interest and dividend received deduction		(34,734)			(31,939)			(29,021)
State income taxes, net of federal tax benefit		2,097			3,619			3,050
Foreign income taxes		42,691			40,703			25,753
Foreign tax credit		(42,691)			(40,703)			(25,753)
Uncertain tax positions (net of federal tax benefit on state
positions: $340 in 2013, $719 in 2012 and $212 in 2011)		518			878			38
Other, net		(2,816)			(3,420)			1,444
Income tax expense	$	165,513		$	163,187		$	99,763
Effective tax rate		28.9	%		29.4	%		28.1	%

The components of income tax expense

		2013		2012		2011
Federal current		$	117,933	$	94,493	$	47,993
Federal deferred			804		20,827		21,075
	Total federal		118,737		115,320		69,068
State current			2,649		2,570		2,203
State deferred			578		2,997		2,489
	Total state		3,227		5,567		4,692
Foreign current			37,978		34,678		28,543
Foreign deferred			4,713		6,025		(2,790)
	Total foreign		42,691		40,703		25,753
Uncertain tax positions			858		1,597		250
	Income tax expense	$	165,513	$	163,187	$	99,763

Composition of deferred tax assets and liabilities

		2013		2012
Excess of financial statement unearned premium over tax		$	26,821	$	26,192
Discounting of loss reserves, net of salvage and subrogation			51,143		51,554
Excess of financial statement accrued expenses over tax			18,258		19,693
Allowance for bad debts, not deductible for tax			3,146		4,733
Stock-based compensation expense in excess of deduction for tax			5,163		5,133
Financial statement loss for Lloyd’s syndicates in excess of deduction for tax			351		0
Federal tax net operating loss carryforwards			3,202		4,744
State tax net operating loss carryforwards			181		2,631
Foreign tax net operating loss carryforwards			22,605		8,359
Federal benefit of state uncertain tax positions			1,482		1,142
Valuation allowance			(27,430)		(9,187)
	Total deferred tax assets		104,922		114,994
Unrealized gain on increase in value of securities			52,424		145,182
Deferred policy acquisition costs, net of ceding commissions, deductible for tax			14,570		15,360
Amortizable goodwill for tax			110,064		97,344
Financial statement income for Lloyd’s syndicates in excess of taxable income			0		3,860
Book basis in net assets of foreign subsidiaries in excess of tax basis			2,414		15,808
Depreciation and other items			14,458		13,927
	Total deferred tax liabilities		193,930		291,481
	Net deferred tax liability	$	(89,008)	$	(176,487)

Changes in the valuation allowance

		2013		2012		2011
Balance at beginning of year		$	9,187	$	7,983	$	8,143
State net operating loss carryforwards			(2,228)		(651)		(288)
Foreign net operating loss carryforwards			20,207		296		(342)
Other			264		1,559		470
	Balance at December 31	$	27,430	$	9,187	$	7,983

Changes in our liability for unrecognized gross tax benefits

		2013		2012		2011
Balance at beginning of year		$	4,129	$	2,522	$	2,274
Gross increases
Tax position of current year			632		145		160
Tax positions of prior years			506		2,988		763
Gross decreases
Statute expirations			(264)		(713)		(595)
Settlements			0		(404)		0
Tax positions of prior years			0		(409)		(80)
	Balance at December 31	$	5,003	$	4,129	$	2,522

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Liability for Unpaid Loss and Loss Adjustment Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
LiabilityForUnpaidClaimsAndClaimsAdjustmentExpenseNetAbstract
Reserves for loss and loss adjustment expense payable at beginning of year				$ 3,767,850				$ 3,658,317	$ 3,767,850	$ 3,658,317	$ 3,471,858
Less reinsurance recoverables on reserves				1,018,047				974,834	1,018,047	974,834	934,086
Net reserves at beginning of period				2,749,803				2,683,483	2,749,803	2,683,483	2,537,772
Net reserve additions from acquired businesses	0				14,705				0	14,705	6,261
Foreign currency adjustment	5,544				18,449				5,544	18,449	(6,108)
Net loss and loss adjustment expense:
Provision for loss and loss adjustment expense for claims occurring in current year									1,363,792	1,375,522	1,389,100
Increase (decrease) in estimated loss and loss adjustment expense for claims occurring in prior years									(73,742)	(70,011)	10,147
Net loss and loss adjustment expense	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
Net loss and loss adjustment expense payments for claims occurring during:
Current year									529,645	543,010	527,244
Prior years									736,351	729,335	726,445
Net loss and loss adjustment expense payments									1,265,996	1,272,345	1,253,689
Net reserves for loss and loss adjustment expense payable at end of year	2,779,401				2,749,803				2,779,401	2,749,803	2,683,483
Plus reinsurance recoverables on reserves	1,122,731				1,018,047				1,122,731	1,018,047	974,834
Loss and loss adjustment expense payable at end of year	$ 3,902,132				$ 3,767,850				$ 3,902,132	$ 3,767,850	$ 3,658,317

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Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Information by business segment
Net earned premium	$ 560,030	$ 556,668	$ 561,356	$ 561,186	$ 566,503	$ 563,650	$ 565,331	$ 547,141	$ 2,239,240	$ 2,242,625	$ 2,127,170
Other revenue	76,600	79,809	68,075	73,180	85,840	68,023	66,957	62,382	297,664	283,202	246,835
Total revenue	636,630	636,477	629,431	634,366	652,343	631,673	632,288	609,523	2,536,904	2,525,827	2,374,005
Loss and LAE	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
Other expense	182,744	176,001	165,126	150,273	167,070	174,040	161,144	163,635	674,144	665,889	619,752
Segment expense									1,964,194	1,971,400	2,018,999
Segment pretax earnings (loss)									572,710	554,427	355,006
U.S. Property & Casualty [Member]
Information by business segment
Net earned premium									367,135	354,050	333,410
Other revenue									24,266	18,865	23,951
Total revenue									391,401	372,915	357,361
Loss and LAE									175,190	209,286	201,017
Other expense									117,910	116,398	110,184
Segment expense									293,100	325,684	311,201
Segment pretax earnings (loss)									98,301	47,231	46,160
Professional Liability [Member]
Information by business segment
Net earned premium									368,167	394,687	410,816
Other revenue									(7)	731	912
Total revenue									368,160	395,418	411,728
Loss and LAE									195,429	229,873	328,503
Other expense									66,391	66,721	59,036
Segment expense									261,820	296,594	387,539
Segment pretax earnings (loss)									106,340	98,824	24,189
Accident & Health [Member]
Information by business segment
Net earned premium									883,515	831,827	758,270
Other revenue									4,932	4,918	4,684
Total revenue									888,447	836,745	762,954
Loss and LAE									630,210	601,076	552,292
Other expense									130,814	122,232	116,336
Segment expense									761,024	723,308	668,628
Segment pretax earnings (loss)									127,423	113,437	94,326
U.S. Surety & Credit [Member]
Information by business segment
Net earned premium									194,286	207,955	210,535
Other revenue									1,468	843	1,247
Total revenue									195,754	208,798	211,782
Loss and LAE									24,143	38,535	52,206
Other expense									109,550	113,619	113,932
Segment expense									133,693	152,154	166,138
Segment pretax earnings (loss)									62,061	56,644	45,644
International [Member]
Information by business segment
Net earned premium									413,206	412,853	368,748
Other revenue									4,334	5,005	5,309
Total revenue									417,540	417,858	374,057
Loss and LAE									249,199	189,410	233,879
Other expense									158,869	146,807	136,750
Segment expense									408,068	336,217	370,629
Segment pretax earnings (loss)									9,472	81,641	3,428
Investing [Member]
Information by business segment
Net earned premium									0	0	0
Other revenue									262,212	252,754	211,245
Total revenue									262,212	252,754	211,245
Loss and LAE									0	0	0
Other expense									0	0	0
Segment expense									0	0	0
Segment pretax earnings (loss)									262,212	252,754	211,245
Corporate & Other [Member]
Information by business segment
Net earned premium									12,931	41,253	45,391
Other revenue									459	86	(513)
Total revenue									13,390	41,339	44,878
Loss and LAE									15,879	37,331	31,350
Other expense									90,610	100,112	83,514
Segment expense									106,489	137,443	114,864
Segment pretax earnings (loss)									$ (93,099)	$ (96,104)	$ (69,986)

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Schedule 2 HCCIH Financial Statements

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

					SCHEDULE 2
		HCC INSURANCE HOLDINGS, INC.
		CONDENSED FINANCIAL INFORMATION OF REGISTRANT
		BALANCE SHEETS
		(in thousands)
			December 31,
			2013		2012
		ASSETS
Cash			$	2,206	$	4,932
Fixed maturity securities – available for sale, at fair value (amortized cost: 2013 – $497,233
	and 2012 – $311,085)			518,822		325,552
Equity securities – available for sale, at fair value (cost: 2013 – $134,156
	and 2012 – $114,649)			157,122		120,640
Short-term investments, at cost (approximates fair value)				6,498		22,409
Other investments, at fair value (cost: 2012 – $18,375)				-		20,908
Investment in subsidiaries				3,538,542		3,575,796
Intercompany loans to subsidiaries for acquisitions				174,280		177,052
Receivable from subsidiaries				80,946		58,209
Other assets				9,833		6,554
	Total assets		$	4,488,249	$	4,312,052
		LIABILITIES AND SHAREHOLDERS’ EQUITY
Payable to subsidiaries			$	36,654	$	17,375
Notes payable				654,098		583,944
Intercompany loan from subsidiary				-		25,300
Deferred Federal income tax				18,690		10,359
Accounts payable and accrued liabilities				104,377		132,462
	Total liabilities			813,819		769,440
	Total shareholders’ equity			3,674,430		3,542,612
		Total liabilities and shareholders’ equity	$	4,488,249	$	4,312,052
		See Notes to Condensed Financial Information.

						SCHEDULE 2
	HCC INSURANCE HOLDINGS, INC.
	CONDENSED FINANCIAL INFORMATION OF REGISTRANT
	STATEMENTS OF EARNINGS
	(in thousands)
		Years ended December 31,
		2013		2012			2011
REVENUE
Equity in earnings of subsidiaries		$	415,408	$	400,294		$	238,602
Interest income from subsidiaries			9,101		8,858			12,231
Net investment income			13,691		10,290			4,561
Net realized investment gain (loss)			7,691		(309)			(1,653)
Other operating income			46		99			0
	Total revenue		445,937		419,232			253,741
EXPENSE
Interest expense			25,804		25,132			22,481
Other operating expense			6,433		7,138			7,516
	Total expense		32,237		32,270			29,997
Earnings before income tax expense			413,700		386,962			223,744
Income tax expense (benefit)			6,503		(4,278)			(31,499)
	Net earnings	$	407,197	$	391,240		$	255,243
	See Notes to Condensed Financial Information.

										SCHEDULE 2
					HCC INSURANCE HOLDINGS, INC.
					CONDENSED FINANCIAL INFORMATION OF REGISTRANT
					STATEMENTS OF CASH FLOWS
					(in thousands)
						Years ended December 31,
						2013		2012			2011
Operating activities
	Net earnings					$	407,197	$	391,240		$	255,243
	Adjustments to reconcile net earnings to net cash provided by operating
		activities:
			Undistributed net earnings of subsidiaries				(404,441)		(392,486)			(103,395)
			Change in accrued interest receivable on intercompany loans				(9,097)		(3,154)			(5,000)
			Change in accounts payable and accrued liabilities				(13,866)		23,629			14,495
			Gain (loss) on investments				(7,691)		309			1,653
			Other, net				28,555		3,947			(10,588)
				Cash provided by operating activities			657		23,485			152,408
Investing activities
	Cash contributions to subsidiaries						(49,892)		(30,250)			(29,000)
	Sales of available for sale fixed maturity securities						78,350		87,099			109,655
	Sales of equity securities						39,974		9,780			0
	Sales of other investments						23,720		21,736			0
	Maturity or call of available for sale fixed maturity securities						31,054		105,982			58,189
	Cost of available for sale fixed maturity securities acquired						(20,030)		(6,666)			(130,322)
	Cost of equity securities acquired						(53,723)		(124,710)			0
	Cost of other investments acquired						0		0			(32,496)
	Change in short-term investments						15,911		(20,987)			103,684
	Change in receivable from/payable to subsidiaries						(18,748)		776			(34,767)
	Intercompany loans to subsidiaries for acquisitions						(7,228)		(66,765)			(1,911)
	Payments on intercompany loans to subsidiaries						19,157		51,427			43,548
				Cash provided by investing activities			58,545		27,422			86,580
Financing activities
	Issuance of notes payable						0		25,000			0
	Payments on notes payable						(25,000)		0			(13,000)
	Advances on line of credit						180,000		185,000			305,000
	Payments on line of credit						(110,000)		(80,000)			(125,000)
	Sale of common stock						12,908		59,838			36,044
	Purchase of common stock						(47,869)		(173,028)			(373,584)
	Dividends paid						(71,967)		(64,345)			(65,822)
	Other, net						0		0			(2,157)
				Cash used by financing activities			(61,928)		(47,535)			(238,519)
			Net increase (decrease) in cash				(2,726)		3,372			469
			Cash at beginning of year				4,932		1,560			1,091
				Cash at end of year		$	2,206	$	4,932		$	1,560
See Notes to Condensed Financial Information.

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Reinsurance (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Amounts of letters of credit and cash available to us as collateral, plus other potential offsets
Payables to reinsurers	$ 208,850	$ 190,228
Letters of credit	100,529	89,832
Funds held in trust	88,310	116,597
Total credits	$ 397,689	$ 396,657

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Components Of Income Tax Expense Benefit Continuing Operations Abstract
Federal current									$ 117,933	$ 94,493	$ 47,993
Federal deferred									804	20,827	21,075
Total federal									118,737	115,320	69,068
State current									2,649	2,570	2,203
State deferred									578	2,997	2,489
Total state									3,227	5,567	4,692
Foreign current									37,978	34,678	28,543
Foreign deferred									4,713	6,025	(2,790)
Total foreign									42,691	40,703	25,753
Uncertain Tax Positions Gross									858	1,597	250
Income tax expense	$ 41,373	$ 41,925	$ 36,669	$ 45,546	$ 41,428	$ 46,557	$ 40,826	$ 34,376	$ 165,513	$ 163,187	$ 99,763

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

			Weighted-		Weighted-
			average		average		Aggregate
	Number		grant date		contractual		intrinsic
	of shares		fair value		life		value
Restricted Stock Awards
Outstanding, beginning of year		1,572	$	28.84
Awarded		358		43.13
Vested		(322)		27.76
Forfeited		(171)		26.67
Outstanding, end of year		1,437		32.91		2.6 years	$	66,326
Expected to vest, end of year		1,132		33.18		2.6 years		52,232
Restricted Stock Units
Outstanding, beginning of year		145	$	27.98
Awarded		40		43.45
Vested		(37)		24.56
Forfeited		(13)		23.94
Outstanding, end of year		135		33.91		2.2 years	$	6,210
Expected to vest, end of year		108		34.15		2.2 years		4,996

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2013			2012			2011
Fair value of options granted	$	7.17		$	7.89		$	7.84
Risk free interest rate		1.0	%		1.1	%		1.4	%
Expected volatility		23.0	%		31.4	%		34.1	%
Expected dividend yield		1.8	%		2.1	%		2.0	%
Expected option life		4.9 years			6.6 years			5.8 years

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

			Weighted-		Weighted-
			average		average		Aggregate
	Number		exercise		contractual		intrinsic
	of shares		price		life		value
Outstanding, beginning of year		1,514	$	27.33
Granted		181		42.11
Exercised		(381)		27.04
Forfeited and expired		(21)		26.44
Outstanding, end of year		1,293		29.50		4.3 years	$	21,514
Vested or expected to vest, end of year		1,149		29.32		4.2 years		19,327
Exercisable, end of year		479		25.62		2.7 years		9,821

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Accumulated Other Comprehensive Income (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net realized investment gain (loss)	$ 42,030	$ 31,148	$ 3,653
Other-than-temporary impairment credit losses	$ 0	$ 1,028	$ 4,679

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Notes Payable (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Notes Payable [Line Items]
Notes payable	$ 654,098	$ 583,944
6.3% Senior Notes [Member]
Notes Payable [Line Items]
Notes payable	299,098	298,944
$600 Million Revolving Loan Facility [Member]
Notes Payable [Line Items]
Notes payable	$ 355,000	$ 285,000

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General Information

12 Months Ended

Dec. 31, 2013

General Information [Abstract]

General Information

(1) General Information and Significant Accounting and Reporting Policies

HCC Insurance Holdings, Inc. (HCC) and its subsidiaries (collectivelywe, us or our) include domestic and foreign property and casualty and life insurance companies and underwriting agencies with offices in the United States, the United Kingdom, Spain and Ireland.We underwrite a variety of largely non-correlated specialty insurance products, including property and casualty, accident and health, surety andcredit product lines, in approximately 180 countries. We market our products through a network of independent agents and brokers, through managing general agents owned by the company,and directly to consumers. In addition, we assume insurance written by other insurance companies.

Our principal domestic insurance companies are Houston Casualty Company and U.S. Specialty Insurance Company, HCC Life Insurance Company, Avemco Insurance Company, American Contractors Indemnity Company and United States Surety Company. These companies operate throughout the United States.All of our principal domestic insurance companies operate on an admitted basis, except Houston Casualty Company, which operates on a surplus lines basis in the United States and also insures international risks. Our foreign insurance companies are HCC International Insurance Company PLC; Houston Casualty Company Europe, Seguros y Reaseguros, S.A.; HCC Reinsurance Company Limited and the London branch of Houston Casualty Company. These companies operate principally from the United Kingdom and Spain. We also participate inSyndicate 4141, a Lloyd's of London syndicate that we manage.

Our agencies underwrite insurance products and provide claims management services, primarily for our insurance companies. Our principal agencies operatingin the United States are HCC Global Financial Products,HCC Specialty, HCC Medical Insurance Services, LLC, HCC Indemnity Guaranty Agency and G.B. Kenrick & Associates. Our principal foreign agencies are HCC Global Financial Products, with operations in the United Kingdom and Spain and HCC Underwriting Agency, Ltd. (UK), which manages our syndicate and operates in the United Kingdom.

Basis of Presentation

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of HCC and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Management must make estimates and assumptions that affect amounts reported in our consolidated financial statements and in disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates.

Net Earned Premium, Policy Acquisition Costs and Ceding Commissions

Substantially all of the property and casualty, surety, and accident and health policies written by our insurance companies qualify as short-duration contracts. We recognize in current earned income the portion of the premium that provides insurance protection in the period. For the majority of our insurance policies, we recognize premium, net of reinsurance, on a pro rata basis over the term of the related contract. For certain disability policies, directors' and officers' liability tail policies, surety bonds and construction contracts, we recognize premium, net of reinsurance, over the period of risk in proportion to the amount of insurance protection provided. Unearned premium represents the portion of premium written that relates to the unexpired period of protection. Premium for commercial title insurance and group life policies is recognized in earnings when the premium is due. When the limit under a specific excess of loss reinsurance layer has been exhausted, we effectively expense the remaining premium for that limit and defer and amortize the reinstatement premium over the remaining period of risk.

We defer our direct costs to underwrite insurance policies, less amounts reimbursed by reinsurers, and charge or credit the costs to earnings proportionate with the premium earned. These policy acquisition costs include underwriters' salaries and bonuses attributable to successful marketing or underwriting efforts, commissions, premium taxes, fees and other incremental underwriting costs.Historical and current loss adjustment expense experience and anticipated investment income are considered in determining any premium deficiency and recoverability of related deferred policy acquisition costs.

Premium, Claims and Other Receivables

We use the gross method for reporting receivables and payables on brokered transactions. We review the collectibility of our receivables, primarily related to premiums receivable, on a current basis and generally cancel insurance coverage if the premium is unpaid.We provide an allowance foramountsdue from agents and brokers that are doubtful of collection. The allowance was $5.8million and $3.6million at December 31, 2013 and 2012, respectively. Our estimate of the level of the allowance could change as conditions change in the future.

Loss and Loss Adjustment Expense Payable

Loss and loss adjustment expense payable by our insurance companies is based on estimates of payments to be made for reported losses, incurred but not reported losses, and anticipated receipts from salvage and subrogation. Reserves are recorded on an undiscounted basis, except for reserves of acquired companies. The discount on those reserves is not material. Estimates for reported losses are based on all available information, including reports received from ceding companies on assumed business. Estimates for incurred but not reported losses are based both on our experience and the industry's experience. We continually review the estimates with our actuaries, and any changes are reflected in loss and loss adjustment expense in our consolidated statements of earnings in the period of the change.While we believe that amounts included in our consolidated financial statements are adequate, such estimates may be more or less than the amounts ultimately paid when the claims are settled.

We have no material exposure to asbestos claims or environmental pollution losses in any of our segments. Policies issued by our insurance companies do not have significant environmental exposure because of the types of risks covered.

Reinsurance

We record all reinsurance recoverables and ceded unearned premium as assets, and deferred ceding commissions as liabilities. All such amounts are calculated based on the reinsurance contract terms and recorded in a manner consistent with the underlying reinsured contracts. We record a reserve for uncollectible reinsurance based on our assessment of the reinsurer's creditworthiness and collectibility of the recordedamounts. Information utilized to calculate the reserve is subject to change, which could affect the level of the reserve in the future.

Cash and Short-term Investments

Cash consists of cash in banks, generally in operating accounts. Short-term investments, including certificates of deposit and money-market funds, are classified as investments in our consolidated balance sheets as they relate principally to our investment activities. We generally maintain our cash deposits in major banks and invest our short-term funds in institutional money-market funds and short-term financial instruments. These securities typically mature within ninety days and, therefore, bear minimal risk.

Restricted Cash and Securities

Our agencies hold funds of unaffiliated parties for the payment of claims, and our surety businesses hold funds as collateral for potential claims. These restricted fiduciary funds are shown as restricted cash and securities in our consolidated balance sheets. The corresponding liability is included within reinsurance, premium and claims payable or accounts payable and accrued liabilities in our consolidated balance sheets. Interest earned on these funds accrues to the benefit of the parties from whom the funds were withheld. Therefore, we do not include cash activity related to these funds in our consolidated statements of cash flows.

Investments

All of our fixed maturity securities are classified as available for sale and reported at fair value. In determining fair value, we apply the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets. The change in unrealized gain or loss on available for sale securities (including the foreign exchange effect for securities denominated in currencies other than the functional currency of the subsidiary) is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders' equity. We purchase our available for sale fixed maturity securities with the expectation that we will hold them to maturity, but we may sell them if market conditions or credit-related risk warrant earlier sales.

Our available for sale fixed maturity securities portfolio includes mortgage-backed and asset-backed securities for which we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.

Equity securities and other investment securities are carried at fair value. We classify these securities as available for sale, and the changein carrying value is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders' equity.

Short-term investments are carried at cost, which approximates fair value.

Realized investment gains or losses are determined on an average cost basis and included in earnings on the trade date. If a structured security fails to pay the full amount of expected principal, we recognize the unpaid amount as a realized loss in the period due and permanently reduce the security's cost basis.

Other-than-temporary Impairments

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate impaired securities for possible other-than-temporary impairment loss at each quarter end,considering various factors including:

• amount by which the security's fair value is less than its cost,
• length of time the security has been impaired,
• whether we intend to sell the security,
• if it is more likely than not that we will sell the security before recovery of its amortized cost basis,
• whether the impairment is due to an issuer-specific event, credit issues or change in market interest rates,
• the security's credit rating and any recent downgrades, and
• stress testing of expected cash flows under various scenarios.

For each impaired security, we determineif: 1) we do not intend to sell the security and 2) it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis. If we cannot assert these conditions, we record an other-than-temporary impairment loss through our consolidated statements of earnings in the current period. For all other impaired securities, we assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis. Such a shortfall in cash flows is referred to as a “credit loss.”For any such security, we separate the impairment loss into: 1) the credit loss and 2) the amount related to all other factors, such as interest rate changes, market conditions, etc. (the “non-credit” loss). We charge the credit loss to current period earnings and the non-credit loss to other comprehensive income, within shareholders' equity, on an after-tax basis. A security's cost basis is permanently reduced by the amount of a credit loss. We accrete income over the remaining life of a fixed maturity security based on the interest rate necessary to discount the expected future cash flows to the new basis. If the security is non-income producing, we apply any cash proceeds as a reduction of principal when received.

Derivative Financial Instruments

We hold an interest in a long-term mortgage impairment insurance contract, denominated in British pound sterling, for which the exposure is measured based on movement in a specified U.K. housing index. The contract qualifies as a derivative financial instrument, is unhedged and is reported at fair value in other assets in our consolidated balance sheets. We record changes in fair value and any foreign exchange gain/loss on the contract within other operating income in our consolidated statements of earnings.

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. As a result, we have exposure to fluctuations in exchange rates between these currencies and the U.S. dollar. From time to time, we may use derivative instruments to protect our investment in these foreign operations by limiting our exposure to fluctuations in exchange rates.

In 2012, we entered into a forward contract to sell 45.0million Euros for U.S. dollars in September 2013. The fair value of the forward contract was a $3.2 million liability at December 31, 2012, which was reported in accounts payable and accrued liabilities in our consolidated balance sheets. Through June 30, 2013, this transaction was designated and qualified as a hedge of a portion of our net investment in a subsidiary that has the Euro as its functional currency. There was no ineffectiveness on the forward contract during the six months ended June 30, 2013 or during 2012. Changes in the fair value of the forward contract, net of the related deferred income tax effect, totaled $1.5 million through June 30, 2013. We recognized this amount in our foreign currency translation adjustment, which is a component of accumulated other comprehensive income, effectively offsetting a portion of the effect of translating the foreign subsidiary's assets and liabilities from Euros to U.S. dollars.

In July 2013, we entered into a forward contract to buy 45.0 million Euros for U.S. dollars in September 2013, effectively offsetting the contract entered into in 2012. Beginning in July 2013, we discontinued hedge accounting and subsequent changes in the fair value of the two forward contracts were recognized in our consolidated statements of earnings. Because the contracts offset, the combined net change in fair value and the impact on pretax earnings was immaterial. No forward contracts remained at December 31, 2013.

Other Operating Income

Fee and commission income, primarily fromthird party agency and broker commissions,is reported in other operating income in our consolidated statements of earnings. We recognize fee and commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered to the client. We record revenue from profit commissions based on the profitability of business written, calculated using the respective commission formula and actual underwriting results through the date of calculation. Such amounts are adjusted if and when experience changes.

When our underwriting agencies utilize one of our insurance company subsidiaries as the policy issuing company, we eliminate in consolidation the fee and commission income against the related insurance company's policy acquisition costs and defer the policy acquisition costs of the underwriting agencies.

Goodwill and Intangible Assets

Goodwill is impaired when the fair value of a reporting unit is less than its carrying amount. We assess our goodwill for impairment annually, or sooner if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We noted no indicators of impairment in 2013. We conducted our 2013 goodwill impairment testas of June 30, 2013, which is consistentwith the timeframe for our annual assessment in prior years.

In years where we assess goodwill for impairment by determining the fair value of each reporting unit, we consider three valuation approaches (market, income and cost). We utilize the income and market valuation approaches and base our assumptions and inputs on market participant data, as well as our own data. For the income approach, we estimate the present value of each reporting unit's expected cash flows to determine its fairvalue. We utilize estimated future cash flows of the portfolio of products included in each reporting unit, as well as a risk-appropriate rate of return specific to each reporting unit. We utilize our budgets and projection of future operations based on historical and expected industry trends to estimate our future cash flows and their probability of occurring as projected. We also determine fair value of each reporting unitbased on market participant data, and use those results to test the reasonableness and validity of the income approach results. We utilized this methodology to determine the fair value of our reporting units in 2013 and 2011.Our 2012 impairment test consisted of a qualitative assessment in which we determined that is it more likely than not that the fair value of each of our five reporting units exceeded its carrying amount as of June 30, 2012.

When we complete a business acquisition, we record the business combination using the acquisition method of accounting.We value all identifiable assets and liabilities at fair value and allocate any remaining consideration to goodwill in our purchase price allocations. We assign goodwill to applicable reporting units, based on the reporting unit's share of the estimated future cash flows of all acquired insurance products. Any future adjustments to finalize pre-2009 purchase price allocations, other than for certain tax-related items, are recorded as an adjustment to goodwill. All other adjustments of purchase price allocations are recorded through earnings in the period when the adjustment is determined.

Intangible assets not subject to amortization are tested for impairment annually, or sooner if an event occurs or circumstances change that indicate that an intangible asset might be impaired. Other intangible assets are amortized over their respective useful lives.

Foreign Currency

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. The cumulative translation adjustment, representing the effect of translating these subsidiaries' assets and liabilities into U.S. dollars, is included in the foreign currency translation adjustment, net of the related deferred income tax effect, within accumulated other comprehensive income in shareholders' equity.

For our other foreign subsidiaries and branches, the functional currency is the U.S. dollar. For all subsidiaries, transactions in non-functional currencies are translated at the rates of exchange in effect on the date the transaction occurs. Transaction gains and losses are recorded in earnings and included in other operating expense in the consolidated statements of earnings. Assets and liabilities recorded in non-functional currencies are translated into the functional currencies at exchange rates in effect at the balance sheet date.

For available for sale securities, unrealized gains and losses related to fluctuations in exchange rates are recorded as a component of other comprehensive income, net of the related deferred income tax effect, within shareholders' equity until the securities mature or are sold.

The effect of exchange rate changes on cash balances held in foreign currencies was immaterial for all periods presented and is not shown separately in the consolidated statements of cash flows.

Income Taxes

We file a consolidated Federal income tax return and include the foreign subsidiaries' income to the extent required by law. Deferred income tax is accounted for using the liability method, which reflects the tax impact of temporary differences between the bases of assets and liabilities for financial reporting purposes and such bases as measured by tax laws and regulations. We provide a deferred tax liability for un-repatriated earnings of our foreign subsidiaries at prevailing statutory rates when required. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on our history of earnings, expectations for future earnings, taxable income in carryback years and the expected timing of the reversals of existing temporary differences. Due to our history of earnings, expectations for future earnings, and taxable income in carryback years, we expect to be able to fully realize the benefit of any net deferred tax asset,excluding amounts covered by valuation allowances,on a consolidated basis.

We maintain a liability for our uncertain tax positions where we determine it is not more likely than not the tax position will be sustained upon examination by the appropriate tax authority. Changes in the liability for our uncertain tax positions are reflected in income tax expense in the period when a new uncertain tax position arises, we change our judgment about the likelihood of uncertainty, the tax issue is settled, or the statute of limitations expires. We report any potential net interest income or expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively.

Stock-Based Compensation

We measure the fair valueof restricted stock awards and units based on the closing stock price of our common stock on the grant date and expense that value on a straight-line basis over the vesting period. For restricted stock awards/unitsthat contain a performance condition, we recognize expense based on the awards/units expected to vest and adjust the cumulative expense whenever our estimate of the number of awards/units to vest changes. For restricted stock awards that contain a market condition, we determine the fair value at the grant date using a Monte Carlo simulation model that takes into account the probabilities of numerous vesting outcomes. This fair value is expensed on a straight-line basis over the vesting period and is not adjusted for the ultimate number of shares to vest.For stock option awards, we use the Black-Scholes option pricing model to determine the fair value of an option on its grant date and expense that value on a straight-line basis over the option's vesting period.For grants of unrestricted common stock, we measure fair value based on the closing stock price of our common stock on the grant date and expense that value on the grant date. We calculate expense for our employee stock purchase plan using a Black-Scholes option pricing model and recognize the expense over each six-month offering period.

Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding during the year. Diluted earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding plus the weighted-average potential common shares outstanding during the year. Outstanding common stock options and unvested restricted stock with no right to dividends, when dilutive, are included in the weighted-average potential common shares outstanding. We use the treasury stock method to calculate the dilutive effect of potential common shares outstanding. We treat unvested restricted stock and unvested restricted stock units that contain non-forfeitable rights to dividends or dividend-equivalents as participating securities and include them in the earnings allocation in calculating earnings per share under the two-class method.

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Shareholders' Equity (Detail Textuals) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stockholders' Equity Note [Abstract]
Treasury stock shares acquired	1,055	5,567	12,645
Treasury stock value acquired cost method	$ 42,212,000	$ 178,669,000	$ 373,600,000
Treasury Stock Acquired Average Cost Per Share	$ 40.02	$ 32.09	$ 29.55
Statutory Accounting Practices Statutory Amount Available For Dividend Payments	350,800,000
Adjustments To Additional Paid In Capital Other	$ 14,400,000

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Liability for Unpaid Loss and Loss Adjustment Expense (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									$ (73,742)	$ (70,011)	$ 10,147
Catastrophe losses									55,939	52,390	103,907
All other net loss and loss adjustment expense									1,307,853	1,323,132	1,285,193
Loss and LAE expense	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
U.S. Property & Casualty [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									(39,363)	2,321	(3,145)
Loss and LAE expense									175,190	209,286	201,017
Professional Liability [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									(26,346)	(25,897)	47,084
Loss and LAE expense									195,429	229,873	328,503
Accident & Health [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									(18,027)	(10,511)	(1,324)
Loss and LAE expense									630,210	601,076	552,292
U.S. Surety & Credit [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									(37,898)	(25,377)	(11,300)
Loss and LAE expense									24,143	38,535	52,206
International [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									43,805	(10,084)	(13,830)
Loss and LAE expense									249,199	189,410	233,879
Exited Lines [Member]
Segment Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development									$ 4,087	$ (463)	$ (7,338)

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Acquisitions, Dispositions and Goodwill (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended					12 Months Ended							12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 U.S. Property & Casualty [Member]	Dec. 31, 2012 U.S. Property & Casualty [Member]	Dec. 31, 2011 U.S. Property & Casualty [Member]	Dec. 31, 2013 Professional Liability [Member]	Dec. 31, 2012 Professional Liability [Member]	Dec. 31, 2012 Accident & Health [Member]	Dec. 31, 2013 Accident & Health [Member]	Dec. 31, 2013 U.S. Surety & Credit [Member]	Dec. 31, 2012 U.S. Surety & Credit [Member]	Dec. 31, 2011 U.S. Surety & Credit [Member]	Dec. 31, 2013 International [Member]	Dec. 31, 2012 International [Member]
Goodwill [Line Items]
Balance at beginning of period	$ 885,860	$ 872,814	$ 223,000	$ 223,000	$ 223,000	$ 314,089	$ 301,547	$ 144,132	$ 144,113	$ 79,700	$ 79,700	$ 79,700	$ 124,958	$ 124,435
Earnout and other	9,340	13,046				9,104	12,542	(19)					236	523
Balance at end of period	$ 895,200	$ 885,860	$ 223,000	$ 223,000	$ 223,000	$ 323,193	$ 314,089	$ 144,113	$ 144,113	$ 79,700	$ 79,700	$ 79,700	$ 125,194	$ 124,958

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Acquisitions, Dispositions and Goodwill (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill [Abstract]

Goodwill balances by reportable segments

	U.S. Property		Professional		Accident		U.S. Surety
	& Casualty		Liability		& Health		& Credit		International		Total
Balance at December 31, 2011	$	223,000	$	301,547	$	144,132	$	79,700	$	124,435	$	872,814
Earnout and other		0		12,542		(19)		0		523		13,046
Balance at December 31, 2012		223,000		314,089		144,113		79,700		124,958		885,860
Earnout and other		0		9,104		0		0		236		9,340
Balance at December 31, 2013	$	223,000	$	323,193	$	144,113	$	79,700	$	125,194	$	895,200

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Schedule 2 HCCIH Financial Statements (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
REVENUE
Other operating income									$ 35,452	$ 30,448	$ 35,590
Net realized investment gain (loss)									42,030	31,148	3,653
Net investment income									220,182	222,634	212,271
Total revenue	636,630	636,477	629,431	634,366	652,343	631,673	632,288	609,523	2,536,904	2,525,827	2,374,005
EXPENSE
Interest expense									26,210	25,628	23,070
Other operating expense									368,495	359,060	330,557
Total expense	480,247	496,377	504,600	482,970	502,814	478,054	497,969	492,563	1,964,194	1,971,400	2,018,999
Earnings before income taxes	156,383	140,100	124,831	151,396	149,529	153,619	134,319	116,960	572,710	554,427	355,006
Income tax (benefit) expense	41,373	41,925	36,669	45,546	41,428	46,557	40,826	34,376	165,513	163,187	99,763
Net earnings	115,010	98,175	88,162	105,850	108,101	107,062	93,493	82,584	407,197	391,240	255,243
Parent Company [Member]
REVENUE
Equity in earnings of subsidiaries									415,408	400,294	238,602
Interest income from subsidiaries									9,101	8,858	12,231
Other operating income									46	99	0
Net realized investment gain (loss)									7,691	(309)	(1,653)
Net investment income									13,691	10,290	4,561
Total revenue									445,937	419,232	253,741
EXPENSE
Interest expense									25,804	25,132	22,481
Other operating expense									6,433	7,138	7,516
Total expense									32,237	32,270	29,997
Earnings before income taxes									413,700	386,962	223,744
Income tax (benefit) expense									6,503	(4,278)	(31,499)
Net earnings									$ 407,197	$ 391,240	$ 255,243

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Income Taxes (Details Textuals) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Income Taxes [Abstract]
Current income taxes payable	$ 2.0	$ 34.2
Federal tax net operating loss carryforward	9.1
State tax net operating loss carryforward	7.2
Foreign tax net operating loss carryforward	70.2
Foreign loss carryforward indefinetly	9.1
Valuation allowances against our state loss carryforwards	4.1
Valuation allowances against our foreign loss carryforwards	23.3
Recorded tax liabilities for unrecognized gross tax benefits	5.0	4.1
Decrease in recorded tax liabilities for unrecognized gross tax benefits	0.2
Net interest expense for uncertain tax positions	0.3	0.5
Accrued interest payable for uncertain tax positions	$ 1.2

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Liability for Unpaid Loss and Loss Adjustment Expense (Details Textuals1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	$ (73,742)	$ (70,011)	$ 10,147
Catastrophe losses	55,939	52,390	103,907
U.S. Property & Casualty [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	(39,363)	2,321	(3,145)
Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	(26,346)	(25,897)	47,084
Accident & Health [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	(18,027)	(10,511)	(1,324)
U.S. Surety & Credit [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	(37,898)	(25,377)	(11,300)
International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	43,805	(10,084)	(13,830)
Exited Lines [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	4,087	(463)	(7,338)
E & O [Member] | U.S. Property & Casualty [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	5,800	7,000
Public Risk [Member] | U.S. Property & Casualty [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		8,100
US D & O [Member] | Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development			57,100
International D & O [Member] | Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		62,100
Surety [Member] | U.S. Surety & Credit [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	20,600	18,000	10,000
Credit LOB [Member] | U.S. Surety & Credit [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	17,300	7,400	1,300
Energy [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	10,100
Liability LOB [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	14,600
Surety & Credit [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	70,300
D&O prior to 2007 and 2009 and 2010 | Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	64,200
D&O 2007 and 2008 | Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	37,900
New Zealand Earthquake [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	2,300
Superstorm Sandy [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	3,000
Hurricane Irene [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		10,700
Japan Earthquake and Tsunami [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		4,600
Spanish Surety Bonds [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		48,900	12,800
Hurricanes 2008 [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development			4,900
Quota Share Contract Member [Member] | U.S. Property & Casualty [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development	17,000	5,600	7,500
Liability And Energy Lines [Member] | International [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development		59,000
Diversified Financial Products [Member] | Professional Liability [Member]
Segment Lob Event Reporting Information [Line Items]
Net (Favorable) Adverse Loss Development			$ 104,200

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Acquisitions, Dispositions and Goodwill (Details Textuals) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Goodwill [Abstract]
Cash received for sale of inactive subsidiary	$ 9.1
Goodwill adjustment for earnout under purchase agreement	$ 277.2

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Reinsurance

12 Months Ended

Dec. 31, 2013

Reinsurance [Abstract]

Reinsurance

(4) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic losses and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

	2013		2012		2011
Direct written premium	$	2,545,054	$	2,422,517	$	2,305,190
Reinsurance assumed		335,195		361,556		343,936
Reinsurance ceded		(624,926)		(530,677)		(466,968)
Net written premium	$	2,255,323	$	2,253,396	$	2,182,158
Direct earned premium	$	2,482,527	$	2,396,756	$	2,308,810
Reinsurance assumed		333,344		351,611		340,745
Reinsurance ceded		(576,631)		(505,742)		(522,385)
Net earned premium	$	2,239,240	$	2,242,625	$	2,127,170
Direct loss and loss adjustment expense	$	1,583,693	$	1,434,830	$	1,535,270
Reinsurance assumed		151,145		162,534		224,655
Reinsurance ceded		(444,788)		(291,853)		(360,678)
Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247

Policy acquisition costs	$	413,782	$	398,453	$	392,172
Ceding commissions		(134,343)		(117,252)		(126,047)
Net policy acquisition costs	$	279,439	$	281,201	$	266,125

The table below shows the components of our reinsurance recoverables in our consolidated balance sheets at December 31, 2013 and 2012.

	2013		2012
Reinsurance recoverable on paid losses	$	156,026	$	54,675
Reinsurance recoverable on outstanding losses		459,134		479,026
Reinsurance recoverable on incurred but not reported losses		663,597		539,021
Reserve for uncollectible reinsurance		(1,500)		(1,500)
Total reinsurance recoverables	$	1,277,257	$	1,071,222

In order to reduce our exposure to reinsurance credit risk, we evaluate the financial condition of our reinsurers and place our reinsurance with a diverse group of companies and syndicates, which we believe to be financially sound. Our recoverables are due principally from highly-rated reinsurers. The following table shows reinsurance balances with our reinsurers that had a net recoverable balance greater than $30.0 million at December 31, 2013 and 2012. The companies'ratings were the latest published by A.M. Best Company, Inc. as of February 14, 2014(for 2013) and February 15, 2013(for 2012).The total recoverables column includes paid losses recoverable, outstanding losses recoverable and incurred but not reported losses recoverable. The total credits column includes letters of credit, cash available to us as collateral and other potential offsets.

			Total		Total		Net
Reinsurer	Rating	Location	recoverables		credits		recoverables
December 31, 2013
Transatlantic Reinsurance Company	A	New York	$	172,165	$	18,196	$	153,969
Hannover Rück SE	A+	Germany		128,518		20,559		107,959
Axis Reinsurance Company	A+	New York		92,562		11,983		80,579
ACE Property & Casualty Insurance Company	A+	Pennsylvania		67,742		4,267		63,475
Arch Reinsurance Company	A+	Nebraska		40,481		3,693		36,788
December 31, 2012
Transatlantic Reinsurance Company	A	New York	$	145,733	$	15,166	$	130,567
Hannover Rück SE	A+	Germany		97,281		18,587		78,694
Axis Reinsurance Company	A	New York		80,956		11,777		69,179
ACE Property & Casualty Insurance Company	A+	Pennsylvania		70,248		4,195		66,053
Arch Reinsurance Company	A+	Nebraska		41,472		2,544		38,928

HCC Life Insurance Company previously sold its entire block of individual life insurance and annuity business to Swiss Re Life & Health America, Inc. (rated “A+” by A.M. Best Company, Inc.) in the form of an indemnity reinsurance contract. Ceded life and annuity benefits included in our consolidated balance sheets at December 31, 2013 and 2012were $56.5million and $58.6million, respectively.

At each quarter end, we review our financial exposure to the reinsurance market based on our individual reinsurance recoverable balances as of the prior quarter end. We take actions to collect outstanding balances or to mitigate our exposure to possible loss. We have a reserve forpotentially uncollectible amounts as follows:

	2013		2012		2011
Balance at beginning of year	$	1,500	$	1,875	$	2,493
Provision recovery		-		(375)		(618)
Balance at December 31	$	1,500	$	1,500	$	1,875

If we collect cash from or resolve a dispute with a reinsurer, we reduce the allowance account. While we believe the reserve is adequate based on information currently available, market conditions may change or additional information might be obtained that may require us to change the reserve in the future.

Reinsurers not authorized by the respective states of domicile of our U.S. domiciled insurance companies are required to collateralize reinsurance obligations due to us. The table below shows the amounts of letters of credit and cash available to us as collateral, plus other potential offsets at December 31, 2013 and 2012.

		2013		2012
Payables to reinsurers		$	208,850	$	190,228
Letters of credit			100,529		89,832
Funds held in trust			88,310		116,597
	Total credits	$	397,689	$	396,657

The tables below show the calculation of net reserves, net unearned premium and net deferred policy acquisition costs at December 31, 2013 and 2012.

	2013		2012
Loss and loss adjustment expense payable	$	3,902,132	$	3,767,850
Reinsurance recoverable on outstanding losses		(459,134)		(479,026)
Reinsurance recoverable on incurred but not reported losses		(663,597)		(539,021)
Net reserves	$	2,779,401	$	2,749,803
Unearned premium	$	1,134,849	$	1,069,956
Ceded unearned premium		(305,438)		(256,988)
Net unearned premium	$	829,411	$	812,968
Deferred policy acquisition costs	$	201,698	$	191,960
Deferred ceding commissions		(89,528)		(74,609)
Net deferred policy acquisition costs	$	112,170	$	117,351

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating activities
Net earnings	$ 407,197	$ 391,240	$ 255,243
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables	(16,584)	61,675	(81,578)
Change in reinsurance recoverables	(193,906)	(6,812)	(47,892)
Change in ceded unearned premium	(48,284)	(34,580)	55,741
Change in loss and loss adjustment expense payable	115,880	82,201	181,363
Change in unearned premium	64,452	38,662	(14,364)
Change in reinsurance, premium and claims payable, excluding restricted cash	39,321	(59,177)	12,768
Change in accounts payable and accrued liabilities	(120,859)	100,091	17,538
Stock-based compensation expense	15,531	12,088	13,000
Depreciation and amortization expense	18,289	19,476	18,619
Gain on investments	(42,030)	(30,120)	1,026
Other, net	23,700	86,403	9,812
Cash provided by operating activities	262,707	661,147	421,276
Investing activities
Sales of available for sale fixed maturity securities	492,891	639,834	448,766
Sales of equity securities	146,624	14,117	0
Sales of other investments	23,719	21,736	347
Maturity or call of available for sale fixed maturity securities	627,041	697,404	573,958
Maturity or call of held to maturity fixed maturity securities	0	28,527	29,102
Cost of available for sale fixed maturity securities acquired	(1,346,498)	(1,489,235)	(1,550,587)
Cost of equity securities acquired	(345,129)	(262,528)	0
Cost of held to maturity fixed maturity securities acquired	0	0	0
Cost of other investments acquired	0	0	(33,060)
Change in short-term investments	181,972	(207,403)	355,468
Payments for purchase of businesses, net of cash received	(8,328)	(46,627)	(1,892)
Other, net	(7,346)	(14,728)	(19,093)
Cash used by investing activities	(235,054)	(618,903)	(196,991)
Financing activities
Issuance of notes payable	0	0	0
Advances on line of credit	180,000	185,000	305,000
Payments on line of credit	(110,000)	(80,000)	(125,000)
Payments on convertible notes	0	0	0
Sale of common stock	12,908	59,838	36,044
Purchase of common stock	(47,869)	(173,028)	(373,584)
Dividends paid	(71,967)	(64,345)	(65,822)
Other, net	(3,814)	(2,869)	5,770
Cash used by financing activities	(40,742)	(75,404)	(217,592)
Net decrease in cash	(13,089)	(33,160)	6,693
Cash at beginning of year	71,390	104,550	97,857
Cash at end of period	$ 58,301	$ 71,390	$ 104,550

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2013

Reinsurance [Abstract]

Effect of reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs

	2013		2012		2011
Direct written premium	$	2,545,054	$	2,422,517	$	2,305,190
Reinsurance assumed		335,195		361,556		343,936
Reinsurance ceded		(624,926)		(530,677)		(466,968)
Net written premium	$	2,255,323	$	2,253,396	$	2,182,158
Direct earned premium	$	2,482,527	$	2,396,756	$	2,308,810
Reinsurance assumed		333,344		351,611		340,745
Reinsurance ceded		(576,631)		(505,742)		(522,385)
Net earned premium	$	2,239,240	$	2,242,625	$	2,127,170
Direct loss and loss adjustment expense	$	1,583,693	$	1,434,830	$	1,535,270
Reinsurance assumed		151,145		162,534		224,655
Reinsurance ceded		(444,788)		(291,853)		(360,678)
Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247

Policy acquisition costs	$	413,782	$	398,453	$	392,172
Ceding commissions		(134,343)		(117,252)		(126,047)
Net policy acquisition costs	$	279,439	$	281,201	$	266,125

Components of our reinsurance recoverables

	2013		2012
Reinsurance recoverable on paid losses	$	156,026	$	54,675
Reinsurance recoverable on outstanding losses		459,134		479,026
Reinsurance recoverable on incurred but not reported losses		663,597		539,021
Reserve for uncollectible reinsurance		(1,500)		(1,500)
Total reinsurance recoverables	$	1,277,257	$	1,071,222

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Commitments and Contingencies (Details Textuals) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Commitments And Contingencies Line Items [Abstract]
Recognized Gross losses from catastrophic events	$ 56.6	$ 84.8	$ 175.5
Liability related to indemnifications	1.9	8.3
Release Of Liability Related To Indemnifications	5.1
Pretax cat loss after reinsurance	52.0	52.8	117.9
Operating Leases, Rent Expense	15.7	16.0	16.2
Terrorism Insurance Deductible	$ 141.7
Federal Reimbursement Percentage For Terrorism Losses	85.00%

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Liability for Unpaid Loss and Loss Adjustment Expense

12 Months Ended

Dec. 31, 2013

Liability for Unpaid Loss and Loss Adjustment Expense

Liability For Future Policy Benefits And Unpaid Claims Disclosure TextBlock

(6) Liability for Unpaid Loss and Loss Adjustment Expense

The table below provides a reconciliation of our liability for loss and loss adjustment expense payable (referred to as reserves) at December 31, 2013, 2012 and 2011.

	2013		2012		2011
Reserves at beginning of year	$	3,767,850	$	3,658,317	$	3,471,858
Less reinsurance recoverables on reserves		1,018,047		974,834		934,086
Net reserves at beginning of year		2,749,803		2,683,483		2,537,772
Net reserve additions from acquired businesses		0		14,705		6,261
Foreign currency adjustment		5,544		18,449		(6,108)
Net loss and loss adjustment expense:
Provision for loss and loss adjustment expense for claims occurring in
current year		1,363,792		1,375,522		1,389,100
Increase (decrease) in estimated loss and loss adjustment expense for
claims occurring in prior years		(73,742)		(70,011)		10,147
Net loss and loss adjustment expense		1,290,050		1,305,511		1,399,247
Net loss and loss adjustment expense payments for claims occurring during:
Current year		529,645		543,010		527,244
Prior years		736,351		729,335		726,445
Net loss and loss adjustment expense payments		1,265,996		1,272,345		1,253,689
Net reserves at end of year		2,779,401		2,749,803		2,683,483
Plus reinsurance recoverables on reserves		1,122,731		1,018,047		974,834
Reserves at end of year	$	3,902,132	$	3,767,850	$	3,658,317

The table belowdetails our loss and loss adjustment expense on a consolidated basis and for our segments.

			2013		2012		2011
Net (favorable) adverse loss development
	U.S. Property & Casualty		$	(39,363)	$	2,321	$	(3,145)
	Professional Liability			(26,346)		(25,897)		47,084
	Accident & Health			(18,027)		(10,511)		(1,324)
	U.S. Surety & Credit			(37,898)		(25,377)		(11,300)
	International			43,805		(10,084)		(13,830)
	Exited Lines			4,087		(463)		(7,338)
		Total net (favorable) adverse loss development		(73,742)		(70,011)		10,147
Accident year catastrophe losses				55,939		52,390		103,907
All other net loss and loss adjustment expense				1,307,853		1,323,132		1,285,193
		Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247

Loss development represents an increase or decrease in estimates of ultimate losses related to business written in prior accident years. We record such increases or decreases as loss and loss adjustment expense in the current reporting year. Favorable development means our original ultimate loss estimate was higher than the current estimate. Adverse development means the current ultimate loss estimate is higher than our original estimate. Loss development occurs as we review our loss exposure with our actuaries, increasing or decreasing estimates of our ultimate losses as a result of such reviews and as losses are finally settled or claims exposure changes.

Based on our annual reviews of reserves in our five insurance underwriting segments and in our Exited Lines, we recognized net favorable loss development of $73.7 million and $70.0 million in 2013 and 2012, respectively, and net adverse loss development of $10.1 million in 2011. These amounts included favorable development of $7.3 million, $21.4 million and $8.1 million, respectively, from the release of prior years' catastrophe reserves. The primary drivers of development in each year by segment are described below.

U.S. Property & Casualty

Net favorable development of $39.4 million in 2013was due to better than expected experience, primarily in underwriting years 2011 and prior, compared to the 2012 review. This amount included $17.0 million of favorable development related to a run-off assumed quota share contract (quota share contract) that we wrote from 2003 – 2008, where expected ultimate losses havecontinued to decline over the past three years. In addition, we recognized $5.8 million of favorable development related to our E&O line of business.

In 2012, the segment recognized net adverse development of $2.3 million, which includedadverse development of $8.1 million in our public risk and $7.0million in our E&O lines of business, partially offset by $5.6 million of favorable development in the quota share contract. The adverse development, which impacted underwriting years 2010 and prior for public risk and 2011 and prior for E&O, was based on higher than expected losses compared to our 2011 annual review.

Net favorable development of $3.1 million in 2011 primarily related to $7.5 million of favorable development from the quota share contract. The remaining net development related to immaterial amounts of favorable and adverse development in various lines of business.

Professional Liability

Net favorable development of $26.3 million in 2013was due to better than expected loss experience in the U.S. D&O and International D&O lines of business, compared to the 2012 review. This development included reserve releases related to underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 millionin underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis.

Net favorable development of $25.9 million in 2012 included reserve releases of $62.1 million due to better than expected loss experience in the U.S. D&O and InternationalD&O lines of business, compared to the 2011 review. This development related to underwriting years prior to 2007 and was partially offset by reserve strengtheningin underwriting year 2008.

The segment reported net adverse development of $47.1 million in 2011, including $104.2 million of adverse development, based on our evaluation of emerging frequency and severity trends within the diversified financial products (DFP) line of business within U.S. D&O. While our expectation was that both frequency and severity after 2008 would be more consistent with our experience prior to the worldwide financial crisis in 2007 and 2008, our 2011 reserve review indicated that loss experience for DFP was emerging consistent with the financial crisis period, prompting our revised assumptions primarily related to accident years 2009 – 2011. Partially offsetting the DFP reserve increase was $57.1 million of favorable development related to our D&O lines of business. Our reserve review indicated lower than expected actual loss experience in accident years prior to 2006.

Accident & Health

In 2013, the segment reported net favorable development of $18.0 million related to underwriting years 2011 and 2012 reported and, in 2012, $10.5 million related to underwriting year 2011, due to better than expected claims activity in our medical stop-loss product.

U.S. Surety & Credit

The segment recognized net favorable development as follows: 1) 2013 – $20.6 million related to surety and $17.3 million related to credit, 2) 2012 –$18.0 million for surety and $7.4 million for credit and 3) 2011 –$10.0 million for surety and $1.3 million for credit.Our review of the segment's reserves indicated better experience than our actuarial expectations in each year's review compared to the prior year review.

International

In 2013, the segment's net adverse development of $43.8 million was due to reserve strengthening of $70.3 million in the surety & credit line of business, partially offset by net favorable development in other lines of business, primarily energy and liability. For surety & credit, we increased our reserves on a specific class of Spanish surety bonds, the majority of which were written prior to 2006. The increase was made to reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling reported in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. We recognized net favorable development of $10.1 million in energy and $14.6 million in our liability lines primarily related to better than expected experience in underwriting years 2011 and prior, compared to our 2012 review. In addition, we recognized favorable developmentrelated to our release of catastrophe reserves for Superstorm Sandy($3.4 million) andthe 2010 New Zealand earthquake ($2.3 million),due to lower than expected losses.

The segment's $10.1 million of net favorable development in 2012 included $59.0 million of net favorable development, primarily related to the liability and energy lines, partially offset by $48.9 million of adverse development related to the Spanish surety bonds. The adverse development was based on management's evaluation of the claims and the likelihood that we would ultimately be required to pay the claims, based on information available at that time. The segment's net favorable development related to better than expected experience in underwriting years 2011 and prior and also included $18.9 million of catastrophe reserve releases, primarily for Hurricane Irene ($10.7 million) and the Japan earthquake and tsunami ($4.6 million).

The $13.8 million of net favorable development in 2011 primarily related to: 1) better than expected experience in the energy and liability lines of business, 2) release of catastrophe reserves for the 2008 hurricanes ($4.9 million) and 3) $12.8 million of adverse development related to the Spanish surety bonds.

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Composition of deferred tax assets and liabilities
Excess of financial statement unearned premium over tax	$ 26,821	$ 26,192
Discounting of loss reserves, net of salvage and subrogation	51,143	51,554
Excess of financial statement accrued expenses over tax	18,258	19,693
Allowance for bad debts, not deductible for tax	3,146	4,733
Stock-based compensation expense in excess of deduction for tax	5,163	5,133
Financial statement loss for Lloyd's syndicates in excess of deduction for tax	351	0
Tax basis in net assets of foreign subsidiaries in excess of book basis	0	0
Federal tax net operating loss carryforwards	3,202	4,744
State tax net operating loss carryforwards	181	2,631
Foreign tax net operating loss carryforwards	22,605	8,359
Federal benefit of state uncertain tax positions	1,482	1,142
Valuation allowance	27,430	9,187
Total deferred tax assets	104,922	114,994
Unrealized gain on increase in value of securities	52,424	145,182
Deferred policy acquisition costs, net of ceding commissions, deductible for tax	14,570	15,360
Amortizable goodwill for tax	110,064	97,344
Financial statement income for Lloyd's syndicates in excess of taxable income	0	3,860
Book Basis in net assets of foreign subsidiaries in excess of tax basis	2,414	15,808
Depreciation and other items	14,458	13,927
Total deferred tax liabilities	193,930	291,481
Net deferred tax liability	$ 89,008	$ 176,487

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Stock based compensation (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	358
Weighted-average grant date fair value, awarded	$ 43.13
Restricted stock units (RSU) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	40
Weighted-average grant date fair value, awarded	$ 43.45
StockOptionsMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	181
Weighted-average grant date fair value	$ 7.17	$ 7.89	$ 7.84

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Investments
Fixed maturity securities - available for sale, at fair value (amortized cost: 2013 - $5,921,487 and 2012 - $5,856,432)	$ 6,022,473	$ 6,281,781
Equity securities - available for sale, at fair value (cost: 2013 - $464,388 and 2012 - $275,827)	517,466	284,639
Short-term investments, at cost (approximates fair value)	178,753	363,053
Other investments, at fair value (cost: 2012 - $18,391)	0	20,925
Total investments	6,718,692	6,950,398
Cash	58,301	71,390
Restricted cash and securities	125,777	101,480
Premium, claims and other receivables	580,107	549,725
Reinsurance recoverables	1,277,257	1,071,222
Ceded unearned premium	305,438	256,988
Ceded life and annuity benefits	56,491	58,641
Deferred policy acquisition costs	201,698	191,960
Goodwill	895,200	885,860
Other assets	125,559	130,143
Total assets	10,344,520	10,267,807
LIABILITIES
Loss and loss adjustment expense payable	3,902,132	3,767,850
Life and annuity policy benefits	56,491	58,641
Reinsurance, premium and claims payable	332,985	294,621
Unearned premium	1,134,849	1,069,956
Deferred ceding commissions	89,528	74,609
Notes payable	654,098	583,944
Accounts payable and accrued liabilities	500,007	875,574
Total liabilities	6,670,090	6,725,195
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; 250,000 shares authorized (shares issued: 2013 - 125,577 and 2012 - 125,114; outstanding: 2013 - 100,336 and 2012 - 100,928)	125,577	125,114
Additional paid-in capital	1,073,105	1,052,253
Retained earnings	3,085,501	2,756,166
Accumulated other comprehensive income	118,651	295,271
Treasury stock, at cost (shares: 2013 - 25,241 and 2012 - 24,186)	(728,404)	(686,192)
Total shareholders' equity	3,674,430	3,542,612
Total liabilities and shareholders' equity	$ 10,344,520	$ 10,267,807

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Notes Payable

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Notes Payable

(7) Notes Payable

Our notes payable consisted of the following atDecember 31, 2013 and 2012.

		2013		2012
6.30% Senior Notes		$	299,098	$	298,944
$600.0 million Revolving Loan Facility			355,000		285,000
	Total notes payable	$	654,098	$	583,944

The estimated fair value of our Senior Notes was $352.7million at December 31, 2013 and $351.4million at December 31, 2012, based on quoted market prices.The estimated fair value of our Revolving Loan Facility approximated the carrying value at December 31, 2013 and 2012, based on borrowing rates offered to us at that time.

Senior Notes

Our $300.0 million 6.30% Senior Notes due 2019 were issued in 2009 at a discount of $1.5 million, for an effective interest rate of 6.37%. We pay interest semi-annually in arrears on May 15 and November 15. The Senior Notes are unsecured and subordinated general obligations of HCC. The Senior Notes may be redeemed in whole at any time or in part from time to time, at our option, at the redemption price determined in the manner described in the indenture governing the Senior Notes. The indenture contains covenants that impose conditions on our ability to create liens on the capital stock of our restricted subsidiaries (as defined in the indenture) or to engage in sales of the capital stock of our restricted subsidiaries. We were in compliance with these covenants at December 31, 2013.

Standby Letter of Credit Facility

We have a $90.0million Standby Letter of Credit Facility (Standby Facility) that is used to guarantee our performance in our Lloyd's of London Syndicate 4141.The Standby Facility expires on December 31, 2017. We pay an annual fee of 105 basis points. Letters of credit issued under the Standby Facility are unsecured commitments of HCC.The Standby Facility contains the same restrictive financial covenants as the Facility,and we were in compliance with these covenants at December 31, 2013.

Subsidiary Letters of Credit

At December 31, 2013, certain of our subsidiaries had outstanding letters of credit with banks totaling $6.4million.Of this amount, $5.9million of outstanding letters of credit reduced our borrowing capacity under the Facility at year-end 2013.

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Schedule 1 Summary of Investments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	$ 6,564,628
Amount shown in Balance Sheet	6,718,692
Available For Sale Fixed Maturities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	5,921,487
Fair Value	6,022,473
Amount shown in Balance Sheet	6,022,473
US Government Agencies Debt Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	91,047
Fair Value	92,709
Amount shown in Balance Sheet	92,709
US States and Political Subdivisions Debt Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	941,580
Fair Value	986,486
Amount shown in Balance Sheet	986,486
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,240,412
Fair Value	2,265,195
Amount shown in Balance Sheet	2,265,195
Corporate Debt Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,195,387
Fair Value	1,225,238
Amount shown in Balance Sheet	1,225,238
Residential Mortgage Backed Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	622,766
Fair Value	618,119
Amount shown in Balance Sheet	618,119
Commercial Mortgage Backed Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	502,069
Fair Value	504,888
Amount shown in Balance Sheet	504,888
Asset-backed Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	183,660
Fair Value	182,392
Amount shown in Balance Sheet	182,392
Foreign Government Debt Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	144,566
Fair Value	147,446
Amount shown in Balance Sheet	147,446
Equity Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	464,388
Fair Value	517,466
Amount shown in Balance Sheet	517,466
Banks, Trust and Insurance, Equities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	36,337
Fair Value	40,751
Amount shown in Balance Sheet	40,751
Industrial, Miscellaneous, and All Others [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	428,051
Fair Value	476,715
Amount shown in Balance Sheet	476,715
Short Term Investments Schedule One [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	178,753
Amount shown in Balance Sheet	$ 178,753

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Consolidated Statement of Changes in Shareholders' Equity (USD $) In Thousands	Total	Common stock [Member]	Additional paid-in capital [Member]	Retained earnings [Member]	Accumulated other comprehensive income [Member]	Treasury stock [Member]
Balance at Dec. 31, 2010	$ 3,278,400	$ 120,942	$ 954,332	$ 2,239,863	$ 97,186	$ (133,923)
Net earnings	255,243			255,243
Other Comprehensive Loss Net Of Tax	130,473				130,473
Issuance of 381, 2079 and 1,458 shares for exercise of options, including tax effect in 2013, 2012 and 2011, respectively	36,044	1,458	34,586
Purchase of 1,055, 5,567 and 12,645 common shares in 2013, 2012 and 2011, respectively	(373,600)					(373,600)
Stock-based compensation	12,710	320	12,390
Cash dividends declared $0.78, $0.64 and $0.60 per share in 2013, 2012 and 2011, respectively	(65,288)			(65,288)
Balance at Dec. 31, 2011	3,273,982	122,720	1,001,308	2,429,818	227,659	(507,523)
Net earnings	391,240			391,240
Other Comprehensive Loss Net Of Tax	67,612				67,612
Issuance of 381, 2079 and 1,458 shares for exercise of options, including tax effect in 2013, 2012 and 2011, respectively	59,838	2,079	57,759
Purchase of 1,055, 5,567 and 12,645 common shares in 2013, 2012 and 2011, respectively	(178,669)					(178,669)
Stock-based compensation	7,902	315	7,587
Cash dividends declared $0.78, $0.64 and $0.60 per share in 2013, 2012 and 2011, respectively	(64,892)			(64,892)
Other	(14,401)		(14,401)
Balance at Dec. 31, 2012	3,542,612	125,114	1,052,253	2,756,166	295,271	(686,192)
Net earnings	407,197			407,197
Other Comprehensive Loss Net Of Tax	(176,620)				(176,620)
Issuance of 381, 2079 and 1,458 shares for exercise of options, including tax effect in 2013, 2012 and 2011, respectively	12,908	381	12,527
Purchase of 1,055, 5,567 and 12,645 common shares in 2013, 2012 and 2011, respectively	(42,212)					(42,212)
Stock-based compensation	8,407	82	8,325
Cash dividends declared $0.78, $0.64 and $0.60 per share in 2013, 2012 and 2011, respectively	(77,862)			(77,862)
Other	0		0
Balance at Dec. 31, 2013	$ 3,674,430	$ 125,577	$ 1,073,105	$ 3,085,501	$ 118,651	$ (728,404)

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Quarterly Information (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Data (Unaudited) [Abstract]
Net earned premium	$ 560,030	$ 556,668	$ 561,356	$ 561,186	$ 566,503	$ 563,650	$ 565,331	$ 547,141	$ 2,239,240	$ 2,242,625	$ 2,127,170
Other revenue	76,600	79,809	68,075	73,180	85,840	68,023	66,957	62,382	297,664	283,202	246,835
Total revenue	636,630	636,477	629,431	634,366	652,343	631,673	632,288	609,523	2,536,904	2,525,827	2,374,005
Loss and LAE expense	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
Other expense	182,744	176,001	165,126	150,273	167,070	174,040	161,144	163,635	674,144	665,889	619,752
Total expense	480,247	496,377	504,600	482,970	502,814	478,054	497,969	492,563	1,964,194	1,971,400	2,018,999
Earnings before income taxes	156,383	140,100	124,831	151,396	149,529	153,619	134,319	116,960	572,710	554,427	355,006
Income tax expense	41,373	41,925	36,669	45,546	41,428	46,557	40,826	34,376	165,513	163,187	99,763
Net earnings	$ 115,010	$ 98,175	$ 88,162	$ 105,850	$ 108,101	$ 107,062	$ 93,493	$ 82,584	$ 407,197	$ 391,240	$ 255,243
Earnings per share
Basic	$ 1.15	$ 0.98	$ 0.88	$ 1.05	$ 1.07	$ 1.06	$ 0.92	$ 0.80	$ 4.05	$ 3.84	$ 2.31
Diluted	$ 1.14	$ 0.98	$ 0.87	$ 1.05	$ 1.06	$ 1.05	$ 0.92	$ 0.79	$ 4.04	$ 3.83	$ 2.30
Weighted-average shares outstanding
Basic	98,770	98,723	98,870	99,056	99,686	99,424	99,563	102,034	98,853	100,176	109,051
Diluted	99,046	98,993	99,121	99,287	99,926	99,700	99,851	102,193	99,113	100,456	109,240

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2013

Shareholders' Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

				Foreign		Accumulated
		Net unrealized		currency		other
		investment		translation		comprehensive
		gains (losses)		adjustment		income
Balance at December 31, 2010		$	82,673	$	14,513	$	97,186
Other comprehensive income - 2011			130,441		32		130,473
Balance at December 31, 2011			213,114		14,545		227,659
Other comprehensive income (loss) - 2012			69,389		(1,777)		67,612
Balance at December 31, 2012			282,503		12,768		295,271
Other comprehensive income (loss) - 2013			(182,543)		5,923		(176,620)
	Balance at December 31, 2013	$	99,960	$	18,691	$	118,651

		2013		2012
Net realized investment gain		$	42,030	$	31,148
Other-than-temporary impairment credit losses			0		(1,028)
	Total reclassifications before taxes		42,030		30,120
Income tax expense			14,711		10,542
	Total reclassifications	$	27,319	$	19,578

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Schedule 2 HCCIH Financial Statements (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
ASSETS
Cash	$ 58,301	$ 71,390	$ 104,550	$ 97,857
Fixed income securities - available for sale, at fair value (amortized cost: 2012 - $311,085; 2011 - $221,188)	6,022,473	6,281,781
Equity securities - available for sale, at fair value (cost: 2013 - $464,388 and 2012 - $275,827)	517,466	284,639
Short-term investments, at cost (approximates fair value)	178,753	363,053
Other investments, at fair value (amortized cost: 2012 -$18,375 and 2011-$38,037)	0	20,925
Other assets	125,559	130,143
Total assets	10,344,520	10,267,807
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable	654,098	583,944
Accounts payable and accrued liabilities	500,007	875,574
Liabilities	6,670,090	6,725,195
Total shareholders' equity	3,674,430	3,542,612	3,273,982	3,278,400
Liabilities and Stockholders' Equity	10,344,520	10,267,807
Parent Company [Member]
ASSETS
Cash	2,206	4,932	1,560	1,091
Fixed income securities - available for sale, at fair value (amortized cost: 2012 - $311,085; 2011 - $221,188)	518,822	325,552
Equity securities - available for sale, at fair value (cost: 2013 - $464,388 and 2012 - $275,827)	157,122	120,640
Short-term investments, at cost (approximates fair value)	6,498	22,409
Investment in subsidiaries	3,538,542	3,575,796
Other investments, at fair value (amortized cost: 2012 -$18,375 and 2011-$38,037)	0	20,908
Intercompany loans to subsidiaries for acquisitions	174,280	177,052
Receivable from subsidiaries	80,946	58,209
Other assets	9,833	6,554
Total assets	4,488,249	4,312,052
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to subsidiaries	36,654	17,375
Notes payable	654,098	583,944
Intercompany loans from subsidiaries	0	25,300
Deferred Federal income tax	18,690	10,359
Accounts payable and accrued liabilities	104,377	132,462
Liabilities	813,819	769,440
Total shareholders' equity	3,674,430	3,542,612
Liabilities and Stockholders' Equity	$ 4,488,249	$ 4,312,052

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Reinsurance (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Transatlantic Reinsurance Company [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables	$ 172,165	$ 145,733
Total credis	18,196	15,166
Net recoverables	153,969	130,567
Hannover Rueckversicherungs Ag [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables	128,518	97,281
Total credis	20,559	18,587
Net recoverables	107,959	78,694
Ace Property And Casualty Insurance Company [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables	67,742	70,248
Total credis	4,267	4,195
Net recoverables	63,475	66,053
Axis Reinsurance Company [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables	92,562	80,956
Total credis	11,983	11,777
Net recoverables	80,579	69,179
Arch Reinsurance Company [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables	40,481	41,472
Total credis	3,693	2,544
Net recoverables	36,788	38,928
Swiss Reinsurance America Corporation [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables		0
Total credis		0
Net recoverables		0
Harco National Insurance Company [Member]
Reinsurers With Net Recoverable Balances Greater Than 25 Million [Line Items]
Total recoverables		0
Total credis		0
Net recoverables		$ 0

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share, Basic and Diluted
Net earnings	$ 115,010	$ 98,175	$ 88,162	$ 105,850	$ 108,101	$ 107,062	$ 93,493	$ 82,584	$ 407,197	$ 391,240	$ 255,243
Less: net earnings attributable to unvested restricted stock									(6,638)	(6,982)	(3,864)
Net earnings available to common stock									$ 400,559	$ 384,258	$ 251,379
Weighted-average common shares outstanding	98,770	98,723	98,870	99,056	99,686	99,424	99,563	102,034	98,853	100,176	109,051
Dilutive effect of outstanding securities (determined using treasury stock method)									260	280	189
Weighted-average common shares and potential common shares outstanding	99,046	98,993	99,121	99,287	99,926	99,700	99,851	102,193	99,113	100,456	109,240
Anti-dilutive securities not included in treasury stock method computation									109	443	2,426
Earnings Per Share, Basic	$ 1.15	$ 0.98	$ 0.88	$ 1.05	$ 1.07	$ 1.06	$ 0.92	$ 0.80	$ 4.05	$ 3.84	$ 2.31
Earnings Per Share, Diluted	$ 1.14	$ 0.98	$ 0.87	$ 1.05	$ 1.06	$ 1.05	$ 0.92	$ 0.79	$ 4.04	$ 3.83	$ 2.30

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Derivatives (Detail Textuals) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
DerivativeInstrumentsandHedging
Derivative Assets (Liabilities), at Fair Value, Net	$ 3.2

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Reinsurance (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Reserve for potentially uncollectible amounts
Balance at beginning of year	$ 1,500	$ 1,500	$ 1,875	$ 2,493
Provision recovery	0	(375)	(618)
Balance at end of year	$ 1,500	$ 1,500	$ 1,875	$ 2,493

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Schedule 2 HCCIH Financial Statements (Parenthetical) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Available-for-sale Securities, Amortized Cost	$ 5,921,487	$ 5,856,432
Available-for-sale Equity Securities, Amortized Cost Basis	464,388	275,827
Other investments, cost	0	18,391
Parent Company [Member]
Condensed Financial Statements, Captions [Line Items]
Available-for-sale Securities, Amortized Cost	497,233	311,085
Available-for-sale Equity Securities, Amortized Cost Basis	134,156	114,649
Other investments, cost	$ 0	$ 18,375

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	$ 6,022,473	$ 6,281,781
Equity securities - available for sale, at fair value	517,466	284,639
Short-term investments*	178,753	363,053
Other Investments	0	20,925
Restricted cash and securities	1,853	2,043
Premium, claims and other receivables	66,515	68,207
Other assets	961	349
Total assets measured at fair value	6,788,021	7,020,997
Notes payable	707,656	636,363
Accounts payable and accrued liabilities - earnout liability	9,112	9,052
Accounts payable and accrued liabilities - forward contract	0	3,194
Total liabilities measured at fair value	716,768	648,609
Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	84,032	174,520
Equity securities - available for sale, at fair value	517,466	284,639
Short-term investments*	68,958	251,988
Other Investments Held At Fair Value	0	20,925
Restricted cash and securities	0	0
Premium, claims and other receivables	0	0
Other assets	20	0
Total assets measured at fair value	670,476	732,072
Notes payable	0	0
Accounts payable and accrued liabilities - earnout liability	0	0
Accounts payable and accrued liabilities - forward contract	0	0
Total liabilities measured at fair value	0	0
Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	5,929,024	6,107,097
Equity securities - available for sale, at fair value	0	0
Short-term investments*	109,795	111,065
Other Investments Held At Fair Value	0	0
Restricted cash and securities	1,853	2,043
Premium, claims and other receivables	66,515	68,207
Other assets	0	0
Total assets measured at fair value	6,107,187	6,288,412
Notes payable	707,656	636,363
Accounts payable and accrued liabilities - earnout liability	1,853	2,043
Accounts payable and accrued liabilities - forward contract	0	3,194
Total liabilities measured at fair value	709,509	641,600
Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	9,417	164
Equity securities - available for sale, at fair value	0	0
Short-term investments*	0	0
Other Investments Held At Fair Value	0	0
Restricted cash and securities	0	0
Premium, claims and other receivables	0	0
Other assets	941	349
Total assets measured at fair value	10,358	513
Notes payable	0	0
Accounts payable and accrued liabilities - earnout liability	7,259	7,009
Accounts payable and accrued liabilities - forward contract	0	0
Total liabilities measured at fair value	7,259	7,009
US Government and Government Agency Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	92,709	199,607
US Government and Government Agency Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	84,032	174,520
US Government and Government Agency Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	8,677	25,087
US Government and Government Agency Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	986,486	1,065,811
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	986,486	1,065,811
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	2,265,195	2,200,331
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	2,255,928	2,200,331
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	9,267	0
Corporate Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	1,225,238	1,315,170
Corporate Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Corporate Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	1,225,088	1,315,006
Corporate Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	150	164
Residential Mortgage Backed Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	618,119	664,887
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	618,119	664,887
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Commercial Mortgage Backed Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	504,888	524,289
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	504,888	524,289
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Asset-backed Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	182,392	33,275
Asset-backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	182,392	33,275
Asset-backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Foreign Government Securities [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	147,446	278,411
Foreign Government Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	0	0
Foreign Government Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	147,446	278,411
Foreign Government Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fixed maturity securities-available for sale
Fixed maturity securities - available for sale	$ 0	$ 0

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Stock based Compensation (Details Textuals) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Based Compensation [Line Items]
Stock-based compensation expense	$ 16,200,000	$ 13,200,000	$ 12,400,000
Total tax benefit recognized in earnings from stock-based compensation	5,700,000	4,600,000	4,000,000
Unrecognized compensation expense related to unvested options and restricted stock awards	28,300,000
Total unrecognized compensation cost recognized over a weighted-average period	2.6
Board Of Directors Fully Vested Stock Compensation	80,000
Chairman Of Board Fully Vested Common Stock Compensation	200,000
Aggregate intrinsic value of options exercised	5,600,000	10,200,000	5,900,000
Cash receipts from option exercises	10,300,000	60,000,000	39,800,000
Fair Value Of Rest Stock Awards Vested	14,400,000
Tax benefit (charge) from stock options	2,000,000	3,700,000	2,100,000
Employee Stock Purchase Plans Discount Rate	85.00%
Employee Stock Purchase Plans Base Salary Investment Percentage Minimum	1.00%
Employee Stock Purchase Plans Base Salary Investment Percentage Maximum	15.00%
Employee Stock Purchase Plans Investment Limit Per Period Shares	1,500
Employee Stock Purchase Plans Investment Limit Per Calendar Year Fair Value	$ 25,000
Employee Stock Purchase Plan [Member]
Stock Based Compensation [Line Items]
Shares authorized for Issuance Under Employee Stock Purchase Plan	2,000,000
Flexible Incentive Plan 2008 [Member]
Stock Based Compensation [Line Items]
Shares authorized for Issuance Under Employee Stock Purchase Plan	4,600,000

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Schedule 5 Valuation and Qualifying Accounts (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of year	$ 3,622	$ 3,668	$ 3,639
Provision expense	2,807	1,584	362
Amounts written off and other	(652)	(1,630)	(333)
Balance at end of year	$ 5,777	$ 3,622	$ 3,668

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Consolidated Statement of Changes in Shareholders' Equity (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Issuance of shares for exercise of options	381	2,079	1,458
Common shares purchased	1,055	5,567	12,645
Cash dividends declared	$ 0.78	$ 0.64	$ 0.60

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Investments
Fixed maturity securities, available for sale, amortized cost	$ 5,921,487	$ 5,856,432
Equity securities, available for sale, cost	464,388	275,827
Other investments, cost	$ 0	$ 18,391
SHAREHOLDERS' EQUITY
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	125,577	125,114
Common stock, shares outstanding	100,336	100,928
Treasury stock	25,241	24,186

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Investments (Details Change in Unrealized) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Investment [Abstract]
Available for sale fixed income securities	$ (324,363)	$ 91,947	$ 198,768
Other investments	(2,534)	4,867	(2,351)
Equity securities	44,266	8,812
Change in net unrealized investment gains (losses)	$ (282,631)	$ 105,626	$ 196,417

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Schedule 3 Supplementary Insurance Information

12 Months Ended

Dec. 31, 2013

Supplementary Insurance Information [Abstract]

Supplementary Insurance Information, for Insurance Companies Disclosure [Text Block]

																	SCHEDULE 3
	HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
	SUPPLEMENTARY INSURANCE INFORMATION
	(in thousands)
Column A		Column B		Column C		Column D		Column F		Column G		Column H		Column I		Column J		Column K
		(1)		(2)		(2)		(1)				(1)				(3)		(1)
		December 31,						Years ended December 31,
				Future
				policy								Benefits,
				benefits,								claims,		Amortization
		Deferred		losses,								losses		of deferred
		policy		claims						Net		and		policy		Other
		acquisition		and loss		Unearned		Premium		investment		settlement		acquisition		operating		Premium
Segments		costs		expenses		premiums		revenue		income		expenses		costs		expenses		written
2013
U.S. Property & Casualty		$	26,374	$	665,871	$	473,230	$	367,135	$	-	$	175,190	$	35,260	$	82,563	$	385,355
Professional Liability			12,946		1,789,113		303,599		368,167		-		195,429		19,010		47,381		359,509
Accident & Health			3,618		314,593		18,105		883,515		-		630,210		69,745		61,069		881,368
U.S. Surety & Credit			35,549		112,916		125,948		194,286		-		24,143		68,105		41,444		199,121
International			34,483		853,711		213,967		413,206		-		249,199		88,048		70,737		417,039
Investing			-		-		-		-		220,182		-		-		-		-
Corporate & Other (4)			(800)		222,419		-		12,931		-		15,879		(729)		65,301		12,931
Total		$	112,170	$	3,958,623	$	1,134,849	$	2,239,240	$	220,182	$	1,290,050	$	279,439	$	368,495	$	2,255,323
2012
U.S. Property & Casualty		$	30,400	$	668,824	$	421,195	$	354,050	$	-	$	209,286	$	36,289	$	79,694	$	383,938
Professional Liability			15,382		1,754,824		305,315		394,687		-		229,873		25,365		41,356		378,138
Accident & Health			3,296		301,241		20,252		831,827		-		601,076		63,559		58,671		835,008
U.S. Surety & Credit			34,235		109,790		117,150		207,955		-		38,535		72,327		41,292		195,904
International			34,789		734,779		206,044		412,853		-		189,410		83,368		63,360		419,155
Investing			-		-		-		-		222,634		-		-		-		-
Corporate & Other (4)			(751)		257,033		-		41,253		-		37,331		293		74,687		41,253
Total		$	117,351	$	3,826,491	$	1,069,956	$	2,242,625	$	222,634	$	1,305,511	$	281,201	$	359,060	$	2,253,396
2011
U.S. Property & Casualty		$	30,410	$	687,332	$	367,484	$	333,410	$	-	$	201,017	$	35,112	$	74,643	$	367,296
Professional Liability			20,083		1,698,239		318,092		410,816		-		328,503		17,002		42,026		412,262
Accident & Health			3,619		260,659		17,065		758,270		-		552,292		58,359		57,954		756,539
U.S. Surety & Credit			40,986		107,975		128,496		210,535		-		52,206		72,946		40,974		208,859
International			33,097		643,845		199,801		368,748		-		233,879		80,339		56,307		391,819
Investing			-		-		-		-		212,271		-		-		-		-
Corporate & Other (4)			(926)		321,328		96		45,391		-		31,350		2,367		58,653		45,383
Total		$	127,269	$	3,719,378	$	1,031,034	$	2,127,170	$	212,271	$	1,399,247	$	266,125	$	330,557	$	2,182,158
(1)	Columns B, F, H and K are shown including the effects of reinsurance.
(2)	Columns C and D are shown excluding the effect of reinsurance.
(3)	Other operating expenses are after all corporate expense allocations have been charged or credited to the individual segments.
(4)	Includes activity related to Exited Lines.
Note: Column E is omitted because we have no other policy claims and benefits payable.

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Quarterly Information (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

			Fourth Quarter				Third Quarter				Second Quarter				First Quarter
			2013		2012		2013		2012		2013		2012		2013		2012
Net earned premium			$	560,030	$	566,503	$	556,668	$	563,650	$	561,356	$	565,331	$	561,186	$	547,141
Other revenue				76,600		85,840		79,809		68,023		68,075		66,957		73,180		62,382
	Total revenue			636,630		652,343		636,477		631,673		629,431		632,288		634,366		609,523
Loss and LAE expense				297,503		335,744		320,376		304,014		339,474		336,825		332,697		328,928
Other expense				182,744		167,070		176,001		174,040		165,126		161,144		150,273		163,635
	Total expense			480,247		502,814		496,377		478,054		504,600		497,969		482,970		492,563
Earnings before income taxes				156,383		149,529		140,100		153,619		124,831		134,319		151,396		116,960
Income tax expense				41,373		41,428		41,925		46,557		36,669		40,826		45,546		34,376
	Net earnings		$	115,010	$	108,101	$	98,175	$	107,062	$	88,162	$	93,493	$	105,850	$	82,584
Earnings per share
	Basic		$	1.15	$	1.07	$	0.98	$	1.06	$	0.88	$	0.92	$	1.05	$	0.80
	Diluted			1.14		1.06		0.98		1.05		0.87		0.92		1.05		0.79
Weighted-average shares
	outstanding
		Basic		98,770		99,686		98,723		99,424		98,870		99,563		99,056		102,034
		Diluted		99,046		99,926		98,993		99,700		99,121		99,851		99,287		102,193

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Supplemental Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental Information
Income taxes paid	$ 181,521	$ 107,918	$ 99,702
Interest paid	25,795	24,107	23,669
Dividends declared but not paid at year end	22,575	16,680	16,136
Purchases of common stock not paid at end of period	$ 0	$ 5,657	$ 16

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Document and Entity Information (USD $) In Billions, except Share data in Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Feb. 14, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	HCC INSURANCE HOLDINGS INC/DE/
Entity Central Index Key	0000888919
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float	$ 4.3
Entity Common Stock, Shares Outstanding		100.6

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Investments (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Amortized cost and fair value of fixed maturity securities investments classified by contractual maturity date
Due in 1 year or less, Available for sale, Cost or amortized cost	$ 193,107
Due after 1 year through 5 years, Available for sale, Cost or amortized cost	1,056,510
Due after 5 years through 10 years, Available for sale, Cost or amortized cost	1,425,759
Due after 10 years through 15 years, Available for sale, Cost or amortized cost	991,474
Due after 15 years, Available for sale, Cost or amortized cost	946,142
Securities with contractual maturities, Available for sale, Cost or amortized cost	4,612,992
Mortgage-backed and asset-backed securities, Available for sale, Cost or amortized cost	1,308,495
Available-for-sale fixed maturity Securities, Amortized Cost Basis	5,921,487	5,856,432
Due in 1 year or less, Available for sale, Fair value	196,188
Due after 1 year through 5 years, Available for sale, Fair value	1,098,771
Due after 5 years through 10 years, Available for sale, Fair value	1,480,858
Due after 10 years through 15 years, Available for sale, Fair value	1,001,684
Due after 15 years, Available for sale, Fair value	939,573
Securities with contractual maturities, Available for sale, Fair value	4,717,074
Mortgage-backed and asset-backed securities, Available for sale, Fair value	$ 1,305,399

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(13)Commitments and Contingencies

Catastrophe and Large Loss Exposure

We have exposure to catastrophic losses caused by natural perils (such as hurricanes, earthquakes, floods, tsunamis, hail storms and tornados), as well as from man-made events (such as terrorist attacks). The incidence, timing and severity of catastrophic losses are unpredictable. We assess our exposures in areas most vulnerable to natural catastrophes and apply procedures to ascertain our probable maximum loss from a single event. We maintain reinsurance protection that we believe is sufficient to limit our exposure to a foreseeable event.In 2013, we recognized accident year gross losses of $56.6 million from catastrophic events, primarily due to European floods, German hail storms and various small catastrophes. After reinsurance and reinstatement premium, our pretax loss was $52.0 million. In 2012, we recognized accident year gross losses of $84.8 million from catastrophic events,primarily from Superstorm Sandy in the United States. After reinsurance and reinstatement premium, our pretax loss was $52.8 million.In 2011, we recognized accident year gross losses of $175.5 million from catastrophic events primarily in Japan, New Zealand, the United States, Denmark and Thailand. After reinsurance and reinstatement premium, our pretax loss was $117.9 million.

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Indemnifications

In conjunction with the sales of business assets and subsidiaries, we have provided indemnifications to the buyers. Certain indemnifications cover typical representations and warranties related to our responsibilities to perform under the sales contracts. Under other indemnifications, we agree to reimburse the purchasers for taxes or ERISA-related amounts, if any, assessed after the sale date but related to pre-sale activities. We cannot quantify the maximum potential exposure covered by all of our indemnifications because the indemnifications cover a variety of matters, operations and scenarios. Certain of these indemnifications have no time limit. For those with a time limit, the longest such indemnification expires in 2025. We accrue a loss when a valid claim is made by a purchaser and we believe we have potential exposure. Our accrued liability was $1.9million and $8.3 million at December 31, 2013 and 2012, respectively, to cover development on losses that were incurred prior to our sale of a subsidiary. In 2013, we released $5.1 million of the liability due to favorable claims activity and subrogation recoveries and also reduced the liability for the payment of claims.

Terrorist Exposure

Under the Terrorism Risk Insurance Program Reauthorization Act of 2007(Reauthorization Act), we are required to offer terrorism coverage to our commercial policyholders in certain lines of business, for which we may, when warranted, charge an additional premium. The policyholders may or may not accept such coverage. The Reauthorization Act requires a $100.0 million terrorism-related loss event to trigger coverage. For such an event, the Federal government will reimburse 85% of our losses in excess of our deductible, up to the maximum annual amount in the Reauthorization Act. Our deductible is approximately $141.7millionfor 2014. Currently, the Reauthorization Act expires on December 31, 2014.

Leases

We lease administrative office facilities and transportation equipment under operating leases that expire at various dates through2022. The agreements generally require us to pay rent, utilities, real estate or property taxes, sales taxes, insurance and repairs. We recognize rent expense on a straight-line basis over the term of the lease, including free-rent periods. Rent expense under operating leases totaled $15.7million in 2013, $16.0million in 2012 and $16.2million in 2011.

At December 31,2013, future minimum rental payments required under long-term, non-cancelable operating leases, excluding certain expenses payable by us, were as follows:

2014	$	12,558
2015		11,459
2016		8,968
2017		6,380
2018		4,021
Thereafter		662
Total future minimum rental payments	$	44,048

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Supplemental Information (Tables)

12 Months Ended

Dec. 31, 2013

Supplemental Information [Abstract]

Supplemental Information

	2013		2012		2011
Income taxes paid	$	181,521	$	107,918	$	99,702
Interest paid		25,795		24,107		23,669
Dividends declared but not paid at year-end		22,575		16,680		16,136
Purchases of common stock not paid at year-end		0		5,657		16

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Consolidated Statement of Earnings (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
REVENUE
Net earned premium	$ 560,030	$ 556,668	$ 561,356	$ 561,186	$ 566,503	$ 563,650	$ 565,331	$ 547,141	$ 2,239,240	$ 2,242,625	$ 2,127,170
Net investment income									220,182	222,634	212,271
Other operating income									35,452	30,448	35,590
Net realized investment gain									42,030	31,148	3,653
Other-than-temporary impairment credit losses									0	(1,028)	(4,679)
Total revenue	636,630	636,477	629,431	634,366	652,343	631,673	632,288	609,523	2,536,904	2,525,827	2,374,005
EXPENSE
Loss and LAE expense	297,503	320,376	339,474	332,697	335,744	304,014	336,825	328,928	1,290,050	1,305,511	1,399,247
Policy acquisition costs, net									279,439	281,201	266,125
Other operating expense									368,495	359,060	330,557
Interest expense									26,210	25,628	23,070
Total expense	480,247	496,377	504,600	482,970	502,814	478,054	497,969	492,563	1,964,194	1,971,400	2,018,999
Earnings before income taxes	156,383	140,100	124,831	151,396	149,529	153,619	134,319	116,960	572,710	554,427	355,006
Income tax expense	41,373	41,925	36,669	45,546	41,428	46,557	40,826	34,376	165,513	163,187	99,763
Net earnings	$ 115,010	$ 98,175	$ 88,162	$ 105,850	$ 108,101	$ 107,062	$ 93,493	$ 82,584	$ 407,197	$ 391,240	$ 255,243
Earnings per common share
Basic	$ 1.15	$ 0.98	$ 0.88	$ 1.05	$ 1.07	$ 1.06	$ 0.92	$ 0.80	$ 4.05	$ 3.84	$ 2.31
Diluted	$ 1.14	$ 0.98	$ 0.87	$ 1.05	$ 1.06	$ 1.05	$ 0.92	$ 0.79	$ 4.04	$ 3.83	$ 2.30

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Investments

12 Months Ended

Dec. 31, 2013

Investment [Abstract]

Investments

(2)Investments

		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
December 31, 2013
U.S. government and government agency securities		$	91,047	$	2,157	$	(495)	$	92,709
Fixed maturity securities of states, municipalities
	and political subdivisions		941,580		50,885		(5,979)		986,486
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,240,412		71,541		(46,758)		2,265,195
Corporate securities			1,195,387		40,860		(11,009)		1,225,238
Residential mortgage-backed securities			622,766		15,289		(19,936)		618,119
Commercial mortgage-backed securities			502,069		16,155		(13,336)		504,888
Asset-backed securities			183,660		319		(1,587)		182,392
Foreign government securities			144,566		3,237		(357)		147,446
	Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457)	$	6,022,473
Equity securities		$	464,388	$	58,842	$	(5,764)	$	517,466

December 31, 2012
U.S. government and government agency securities		$	195,049	$	4,560	$	(2)	$	199,607
Fixed maturity securities of states, municipalities
	and political subdivisions		969,966		96,027		(182)		1,065,811
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,033,947		168,772		(2,388)		2,200,331
Corporate securities			1,247,282		69,243		(1,355)		1,315,170
Residential mortgage-backed securities			632,665		32,560		(338)		664,887
Commercial mortgage-backed securities			482,808		41,748		(267)		524,289
Asset-backed securities			32,801		474		0		33,275
Foreign government securities			261,914		16,515		(18)		278,411
	Total fixed maturity securities	$	5,856,432	$	429,899	$	(4,550)	$	6,281,781
Equity securities		$	275,827	$	13,768	$	(4,956)	$	284,639

During 2012, we reclassified a portfolio of fixed maturity securities that had been classified as held to maturity to available for sale securities. Due to financial market disruptions and our desire to maintain greater flexibility in managing our entire investment portfolio in an uncertain economy, we changed our prior intent to hold these securities to maturity. On the transfer date, these securities had a fair value of $139.1million and an amortized cost of $136.0 million. The securities' net unrealized appreciation, net of the related deferred income tax effect, increased our accumulated other comprehensive income and shareholders' equity by $2.0 million at March 31, 2012.

Substantially all of our fixed maturity securities are investment grade.The following table displays the gross unrealized losses and fair value of all available for sale securities that were in a continuous unrealized loss position for the periods indicated.

				Less than 12 months				12 months or more				Total
						Unrealized				Unrealized				Unrealized
				Fair value		losses		Fair value		losses		Fair value		losses
December 31, 2013
Fixed maturity securities
	U.S. government and government agency
		securities		$	23,717	$	(495)	$	0	$	0	$	23,717	$	(495)
	Fixed maturity securities of states,
		municipalities and political subdivisions			136,160		(5,277)		8,997		(702)		145,157		(5,979)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			684,560		(35,832)		83,228		(10,926)		767,788		(46,758)
	Corporate securities				277,853		(8,202)		35,437		(2,807)		313,290		(11,009)
	Residential mortgage-backed securities				306,874		(15,861)		31,687		(4,075)		338,561		(19,936)
	Commercial mortgage-backed securities				203,347		(12,611)		4,915		(725)		208,262		(13,336)
	Asset-backed securities				126,922		(1,587)		0		0		126,922		(1,587)
	Foreign government securities				78,182		(357)		0		0		78,182		(357)
Equity securities					75,620		(5,437)		7,016		(327)		82,636		(5,764)
			Total	$	1,913,235	$	(85,659)	$	171,280	$	(19,562)	$	2,084,515	$	(105,221)

December 31, 2012
Fixed maturity securities
	U.S. government and government agency
		securities		$	55,034	$	(2)	$	0	$	0	$	55,034	$	(2)
	Fixed maturity securities of states,
		municipalities and political subdivisions			14,162		(182)		0		0		14,162		(182)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			155,902		(2,388)		0		0		155,902		(2,388)
	Corporate securities				85,245		(1,220)		2,616		(135)		87,861		(1,355)
	Residential mortgage-backed securities				49,486		(338)		0		0		49,486		(338)
	Commercial mortgage-backed securities				26,263		(267)		0		0		26,263		(267)
	Foreign government securities				7,007		(18)		0		0		7,007		(18)
Equity securities					103,647		(4,956)		0		0		103,647		(4,956)
			Total	$	496,746	$	(9,371)	$	2,616	$	(135)	$	499,362	$	(9,506)

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate our securities for possible other-than-temporary impairment losses at each quarter end. During the past three years, our reviews covered all impaired securities where the loss exceeded $0.5million and the loss either exceeded 10% of cost or the security had been in a loss position for longer than twelve consecutive months.Our reviews considered the factors described in the “Other-than-temporary Impairments” section in Note 1.

For other-than-temporary impairment losses, we recognize an other-than-temporary impairment loss in earnings in the period that we determine: 1) we intend to sell the security, 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis or 3) the security has a credit loss.Any non-credit portion of the other-than-temporary impairment loss is recognized in shareholders' equity. Our other-than-temporary impairment losses were as follows:

		2013		2012		2011
Total other-than-temporary impairment loss		$	0	$	(2,069)	$	(6,922)
Portion recognized in other comprehensive income			0		1,041		2,243
	Net other-than-temporary impairment loss recognized in earnings	$	0	$	(1,028)	$	(4,679)

Certain of the securities for which we had previously recognized an other-than-temporary impairment loss had both a credit loss and an impairment loss recorded in other comprehensive income.During 2012, we sold all but one of these securities,and sold the remaining security in 2013. The rollforward of credit losses on these securities was as follows:

			2013		2012		2011
Balance at beginning of year			$	625	$	5,047	$	4,273
Credit losses recognized in earnings
	Securities previously impaired			0		899		2,447
	Securities previously not impaired			0		129		2,232
	Securities sold			(625)		(5,450)		(3,905)
		Balance at December 31	$	0	$	625	$	5,047

We do not consider the $105.2million of gross unrealized losses on fixed maturity and equity securities in our portfolio at December 31,2013to be other-than-temporary impairments because: 1) as of December 31, 2013, we had received all contractual interest and principal payments on the fixed maturity securities, 2) we do not intend to sell the securities, 3) it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost or cost bases and 4) the unrealized loss relates to non-credit factors, particularly the significant interest rate increases that occurred in 2013.

The change in our unrealized pretax net gains (losses) on investments during each year was as follows:

		2013		2012		2011
Available for sale fixed maturity securities		$	(324,363)	$	91,947	$	198,768
Equity securities			44,266		8,812		0
Other investments			(2,534)		4,867		(2,351)
	Change in net unrealized investment gains (losses)	$	(282,631)	$	105,626	$	196,417

The amortized cost and fair value of our fixed maturity securities at December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-average life of our mortgage-backed and asset-backed securities was 5.9years at December 31, 2013.

		Cost or amortized cost		Fair value
Due in 1 year or less		$	193,107	$	196,188
Due after 1 year through 5 years			1,056,510		1,098,771
Due after 5 years through 10 years			1,425,759		1,480,858
Due after 10 years through 15 years			991,474		1,001,684
Due after 15 years			946,142		939,573
	Securities with contractual maturities		4,612,992		4,717,074
Mortgage-backed and asset-backed securities			1,308,495		1,305,399
	Total fixed maturity securities	$	5,921,487	$	6,022,473

At December 31, 2013, our domestic insurance companies had deposited fixed maturity securities of $43.8million (amortized cost of $43.0million) to meet the deposit requirements of various state insurance departments. There are withdrawal and other restrictions on these deposits, but we direct how the deposits are invested and we earn interest on the funds.

The sources of our net investment income were as follows:

			2013		2012		2011
Fixed maturity securities
	Taxable		$	98,966	$	114,047	$	113,293
	Exempt from U.S. income taxes			113,875		107,488		98,729
		Total fixed maturity securities		212,841		221,535		212,022
Equity securities				14,537		3,959		0
Short-term investments				160		620		537
Other investment income				668		2,856		4,486
		Total investment income		228,206		228,970		217,045
Investment expense				(8,024)		(6,336)		(4,774)
		Net investment income	$	220,182	$	222,634	$	212,271

Realized pretax gains (losses) on the sale of investments, which exclude other-than-temporary impairment credit losses, included the following:

			2013		2012		2011
Gains
	Fixed maturity securities		$	20,191	$	32,644	$	10,045
	Equity securities			20,886		797		0
	Other investments			5,345		2,074		6
		Total gains		46,422		35,515		10,051
Losses
	Fixed maturity securities			(1,174)		(3,327)		(6,388)
	Equity securities			(3,218)		(1,039)		0
	Other investments			0		(1)		(10)
		Total losses		(4,392)		(4,367)		(6,398)
Net
	Fixed maturity securities			19,017		29,317		3,657
	Equity securities			17,668		(242)		0
	Other investments			5,345		2,073		(4)
		Net realized investment gain	$	42,030	$	31,148	$	3,653

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General Information (Policies)

12 Months Ended

Dec. 31, 2013

General Information [Abstract]

Basis of presentation

Basis of Presentation

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of HCC and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Management must make estimates and assumptions that affect amounts reported in our consolidated financial statements and in disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates.

Net earned premium, policy acquisitions costs and ceding commisions

Net Earned Premium, Policy Acquisition Costs and Ceding Commissions

Substantially all of the property and casualty, surety, and accident and health policies written by our insurance companies qualify as short-duration contracts. We recognize in current earned income the portion of the premium that provides insurance protection in the period. For the majority of our insurance policies, we recognize premium, net of reinsurance, on a pro rata basis over the term of the related contract. For certain disability policies, directors' and officers' liability tail policies, surety bonds and construction contracts, we recognize premium, net of reinsurance, over the period of risk in proportion to the amount of insurance protection provided. Unearned premium represents the portion of premium written that relates to the unexpired period of protection. Premium for commercial title insurance and group life policies is recognized in earnings when the premium is due. When the limit under a specific excess of loss reinsurance layer has been exhausted, we effectively expense the remaining premium for that limit and defer and amortize the reinstatement premium over the remaining period of risk.

We defer our direct costs to underwrite insurance policies, less amounts reimbursed by reinsurers, and charge or credit the costs to earnings proportionate with the premium earned. These policy acquisition costs include underwriters' salaries and bonuses attributable to successful marketing or underwriting efforts, commissions, premium taxes, fees and other incremental underwriting costs.Historical and current loss adjustment expense experience and anticipated investment income are considered in determining any premium deficiency and recoverability of related deferred policy acquisition costs.

Premium, claims and other receivables

Premium, Claims and Other Receivables

We use the gross method for reporting receivables and payables on brokered transactions. We review the collectibility of our receivables, primarily related to premiums receivable, on a current basis and generally cancel insurance coverage if the premium is unpaid.We provide an allowance foramountsdue from agents and brokers that are doubtful of collection. The allowance was $5.8million and $3.6million at December 31, 2013 and 2012, respectively. Our estimate of the level of the allowance could change as conditions change in the future.

Loss and loss adjustment expense payable

Loss and Loss Adjustment Expense Payable

Loss and loss adjustment expense payable by our insurance companies is based on estimates of payments to be made for reported losses, incurred but not reported losses, and anticipated receipts from salvage and subrogation. Reserves are recorded on an undiscounted basis, except for reserves of acquired companies. The discount on those reserves is not material. Estimates for reported losses are based on all available information, including reports received from ceding companies on assumed business. Estimates for incurred but not reported losses are based both on our experience and the industry's experience. We continually review the estimates with our actuaries, and any changes are reflected in loss and loss adjustment expense in our consolidated statements of earnings in the period of the change.While we believe that amounts included in our consolidated financial statements are adequate, such estimates may be more or less than the amounts ultimately paid when the claims are settled.

We have no material exposure to asbestos claims or environmental pollution losses in any of our segments. Policies issued by our insurance companies do not have significant environmental exposure because of the types of risks covered.

Reinsurance

Reinsurance

We record all reinsurance recoverables and ceded unearned premium as assets, and deferred ceding commissions as liabilities. All such amounts are calculated based on the reinsurance contract terms and recorded in a manner consistent with the underlying reinsured contracts. We record a reserve for uncollectible reinsurance based on our assessment of the reinsurer's creditworthiness and collectibility of the recordedamounts. Information utilized to calculate the reserve is subject to change, which could affect the level of the reserve in the future.

Cash and short-term investments

Cash and Short-term Investments

Cash consists of cash in banks, generally in operating accounts. Short-term investments, including certificates of deposit and money-market funds, are classified as investments in our consolidated balance sheets as they relate principally to our investment activities. We generally maintain our cash deposits in major banks and invest our short-term funds in institutional money-market funds and short-term financial instruments. These securities typically mature within ninety days and, therefore, bear minimal risk.

Restricted cash and cash investments

Restricted Cash and Securities

Our agencies hold funds of unaffiliated parties for the payment of claims, and our surety businesses hold funds as collateral for potential claims. These restricted fiduciary funds are shown as restricted cash and securities in our consolidated balance sheets. The corresponding liability is included within reinsurance, premium and claims payable or accounts payable and accrued liabilities in our consolidated balance sheets. Interest earned on these funds accrues to the benefit of the parties from whom the funds were withheld. Therefore, we do not include cash activity related to these funds in our consolidated statements of cash flows.

Investments

Investments

All of our fixed maturity securities are classified as available for sale and reported at fair value. In determining fair value, we apply the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets. The change in unrealized gain or loss on available for sale securities (including the foreign exchange effect for securities denominated in currencies other than the functional currency of the subsidiary) is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders' equity. We purchase our available for sale fixed maturity securities with the expectation that we will hold them to maturity, but we may sell them if market conditions or credit-related risk warrant earlier sales.

Our available for sale fixed maturity securities portfolio includes mortgage-backed and asset-backed securities for which we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.

Equity securities and other investment securities are carried at fair value. We classify these securities as available for sale, and the changein carrying value is recorded as a component of other comprehensive income, net of the related deferred income tax effect, within our consolidated shareholders' equity.

Short-term investments are carried at cost, which approximates fair value.

Realized investment gains or losses are determined on an average cost basis and included in earnings on the trade date. If a structured security fails to pay the full amount of expected principal, we recognize the unpaid amount as a realized loss in the period due and permanently reduce the security's cost basis.

Other-than-temporary impairments

Other-than-temporary Impairments

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate impaired securities for possible other-than-temporary impairment loss at each quarter end,considering various factors including:

• amount by which the security's fair value is less than its cost,
• length of time the security has been impaired,
• whether we intend to sell the security,
• if it is more likely than not that we will sell the security before recovery of its amortized cost basis,
• whether the impairment is due to an issuer-specific event, credit issues or change in market interest rates,
• the security's credit rating and any recent downgrades, and
• stress testing of expected cash flows under various scenarios.

For each impaired security, we determineif: 1) we do not intend to sell the security and 2) it is more likely than not that we will not be required to sell the security before recovery of its amortized cost basis. If we cannot assert these conditions, we record an other-than-temporary impairment loss through our consolidated statements of earnings in the current period. For all other impaired securities, we assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis. Such a shortfall in cash flows is referred to as a “credit loss.”For any such security, we separate the impairment loss into: 1) the credit loss and 2) the amount related to all other factors, such as interest rate changes, market conditions, etc. (the “non-credit” loss). We charge the credit loss to current period earnings and the non-credit loss to other comprehensive income, within shareholders' equity, on an after-tax basis. A security's cost basis is permanently reduced by the amount of a credit loss. We accrete income over the remaining life of a fixed maturity security based on the interest rate necessary to discount the expected future cash flows to the new basis. If the security is non-income producing, we apply any cash proceeds as a reduction of principal when received.

Derivative financial instruments

Derivative Financial Instruments

We hold an interest in a long-term mortgage impairment insurance contract, denominated in British pound sterling, for which the exposure is measured based on movement in a specified U.K. housing index. The contract qualifies as a derivative financial instrument, is unhedged and is reported at fair value in other assets in our consolidated balance sheets. We record changes in fair value and any foreign exchange gain/loss on the contract within other operating income in our consolidated statements of earnings.

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. As a result, we have exposure to fluctuations in exchange rates between these currencies and the U.S. dollar. From time to time, we may use derivative instruments to protect our investment in these foreign operations by limiting our exposure to fluctuations in exchange rates.

In 2012, we entered into a forward contract to sell 45.0million Euros for U.S. dollars in September 2013. The fair value of the forward contract was a $3.2 million liability at December 31, 2012, which was reported in accounts payable and accrued liabilities in our consolidated balance sheets. Through June 30, 2013, this transaction was designated and qualified as a hedge of a portion of our net investment in a subsidiary that has the Euro as its functional currency. There was no ineffectiveness on the forward contract during the six months ended June 30, 2013 or during 2012. Changes in the fair value of the forward contract, net of the related deferred income tax effect, totaled $1.5 million through June 30, 2013. We recognized this amount in our foreign currency translation adjustment, which is a component of accumulated other comprehensive income, effectively offsetting a portion of the effect of translating the foreign subsidiary's assets and liabilities from Euros to U.S. dollars.

In July 2013, we entered into a forward contract to buy 45.0 million Euros for U.S. dollars in September 2013, effectively offsetting the contract entered into in 2012. Beginning in July 2013, we discontinued hedge accounting and subsequent changes in the fair value of the two forward contracts were recognized in our consolidated statements of earnings. Because the contracts offset, the combined net change in fair value and the impact on pretax earnings was immaterial. No forward contracts remained at December 31, 2013.

Other operating income

Other Operating Income

Fee and commission income, primarily fromthird party agency and broker commissions,is reported in other operating income in our consolidated statements of earnings. We recognize fee and commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered to the client. We record revenue from profit commissions based on the profitability of business written, calculated using the respective commission formula and actual underwriting results through the date of calculation. Such amounts are adjusted if and when experience changes.

When our underwriting agencies utilize one of our insurance company subsidiaries as the policy issuing company, we eliminate in consolidation the fee and commission income against the related insurance company's policy acquisition costs and defer the policy acquisition costs of the underwriting agencies.

Goodwill and intangible assets

Goodwill and Intangible Assets

Goodwill is impaired when the fair value of a reporting unit is less than its carrying amount. We assess our goodwill for impairment annually, or sooner if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We noted no indicators of impairment in 2013. We conducted our 2013 goodwill impairment testas of June 30, 2013, which is consistentwith the timeframe for our annual assessment in prior years.

In years where we assess goodwill for impairment by determining the fair value of each reporting unit, we consider three valuation approaches (market, income and cost). We utilize the income and market valuation approaches and base our assumptions and inputs on market participant data, as well as our own data. For the income approach, we estimate the present value of each reporting unit's expected cash flows to determine its fairvalue. We utilize estimated future cash flows of the portfolio of products included in each reporting unit, as well as a risk-appropriate rate of return specific to each reporting unit. We utilize our budgets and projection of future operations based on historical and expected industry trends to estimate our future cash flows and their probability of occurring as projected. We also determine fair value of each reporting unitbased on market participant data, and use those results to test the reasonableness and validity of the income approach results. We utilized this methodology to determine the fair value of our reporting units in 2013 and 2011.Our 2012 impairment test consisted of a qualitative assessment in which we determined that is it more likely than not that the fair value of each of our five reporting units exceeded its carrying amount as of June 30, 2012.

When we complete a business acquisition, we record the business combination using the acquisition method of accounting.We value all identifiable assets and liabilities at fair value and allocate any remaining consideration to goodwill in our purchase price allocations. We assign goodwill to applicable reporting units, based on the reporting unit's share of the estimated future cash flows of all acquired insurance products. Any future adjustments to finalize pre-2009 purchase price allocations, other than for certain tax-related items, are recorded as an adjustment to goodwill. All other adjustments of purchase price allocations are recorded through earnings in the period when the adjustment is determined.

Intangible assets not subject to amortization are tested for impairment annually, or sooner if an event occurs or circumstances change that indicate that an intangible asset might be impaired. Other intangible assets are amortized over their respective useful lives.

Foreign currency

Foreign Currency

We utilize the British pound sterling and the Euro as the functional currency in certain of our foreign operations. The cumulative translation adjustment, representing the effect of translating these subsidiaries' assets and liabilities into U.S. dollars, is included in the foreign currency translation adjustment, net of the related deferred income tax effect, within accumulated other comprehensive income in shareholders' equity.

For our other foreign subsidiaries and branches, the functional currency is the U.S. dollar. For all subsidiaries, transactions in non-functional currencies are translated at the rates of exchange in effect on the date the transaction occurs. Transaction gains and losses are recorded in earnings and included in other operating expense in the consolidated statements of earnings. Assets and liabilities recorded in non-functional currencies are translated into the functional currencies at exchange rates in effect at the balance sheet date.

For available for sale securities, unrealized gains and losses related to fluctuations in exchange rates are recorded as a component of other comprehensive income, net of the related deferred income tax effect, within shareholders' equity until the securities mature or are sold.

The effect of exchange rate changes on cash balances held in foreign currencies was immaterial for all periods presented and is not shown separately in the consolidated statements of cash flows.

Income taxes

Income Taxes

We file a consolidated Federal income tax return and include the foreign subsidiaries' income to the extent required by law. Deferred income tax is accounted for using the liability method, which reflects the tax impact of temporary differences between the bases of assets and liabilities for financial reporting purposes and such bases as measured by tax laws and regulations. We provide a deferred tax liability for un-repatriated earnings of our foreign subsidiaries at prevailing statutory rates when required. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on our history of earnings, expectations for future earnings, taxable income in carryback years and the expected timing of the reversals of existing temporary differences. Due to our history of earnings, expectations for future earnings, and taxable income in carryback years, we expect to be able to fully realize the benefit of any net deferred tax asset,excluding amounts covered by valuation allowances,on a consolidated basis.

We maintain a liability for our uncertain tax positions where we determine it is not more likely than not the tax position will be sustained upon examination by the appropriate tax authority. Changes in the liability for our uncertain tax positions are reflected in income tax expense in the period when a new uncertain tax position arises, we change our judgment about the likelihood of uncertainty, the tax issue is settled, or the statute of limitations expires. We report any potential net interest income or expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively.

Stock-based compensation

Stock-Based Compensation

We measure the fair valueof restricted stock awards and units based on the closing stock price of our common stock on the grant date and expense that value on a straight-line basis over the vesting period. For restricted stock awards/unitsthat contain a performance condition, we recognize expense based on the awards/units expected to vest and adjust the cumulative expense whenever our estimate of the number of awards/units to vest changes. For restricted stock awards that contain a market condition, we determine the fair value at the grant date using a Monte Carlo simulation model that takes into account the probabilities of numerous vesting outcomes. This fair value is expensed on a straight-line basis over the vesting period and is not adjusted for the ultimate number of shares to vest.For stock option awards, we use the Black-Scholes option pricing model to determine the fair value of an option on its grant date and expense that value on a straight-line basis over the option's vesting period.For grants of unrestricted common stock, we measure fair value based on the closing stock price of our common stock on the grant date and expense that value on the grant date. We calculate expense for our employee stock purchase plan using a Black-Scholes option pricing model and recognize the expense over each six-month offering period.

Earnings per share

Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding during the year. Diluted earnings per share is computed by dividing net earnings attributable to common stock by the weighted-average common shares outstanding plus the weighted-average potential common shares outstanding during the year. Outstanding common stock options and unvested restricted stock with no right to dividends, when dilutive, are included in the weighted-average potential common shares outstanding. We use the treasury stock method to calculate the dilutive effect of potential common shares outstanding. We treat unvested restricted stock and unvested restricted stock units that contain non-forfeitable rights to dividends or dividend-equivalents as participating securities and include them in the earnings allocation in calculating earnings per share under the two-class method.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

(3)Fair Value Measurements

Our financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in our financial statements. In determining fair value, we generally apply the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. We classify our financial instruments into the following three-level hierarchy:

•Level 1 – Inputs are based on quoted prices in active markets for identical instruments.

•Level 2 – Inputs are based on observable market data (other than quoted prices), or are derived from or corroborated by observable market data.

•Level 3 – Inputs are unobservable and not corroborated by market data.

Our Level 1 investments consist of U.S. Treasuries, money market funds and equity securities traded in an active exchange market. We use unadjusted quoted prices for identical instruments to measure fair value.

Our Level 2 investments include most of our fixed maturity securities, which consist of U.S. government agency securities, municipal bonds (including those held as restricted securities), corporate debt securities, bank loans, mortgage-backed and asset-backed securities (including collateralized loan obligations), and deposits supporting our Lloyd's syndicate business. Level 2 also includes certificates of deposit and other interest-bearing deposits at banks, which we report as short-term investments, and, at December 31, 2012, a forward contract that hedged our net investment in a Euro-functional currency foreign subsidiary. We measure fair value for the majority of our Level 2 investments using matrix pricing and observable market data, including benchmark securities or yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers, default rates, loss severity and other economic measures.

We are responsible for the prices used in our fair value measurements. We use independent pricing services to assist us in determining fair value for approximately99% of our Level 2 investments. The pricing services provide a single price or quote per security. We use data provided by our third party investment managers and Lloyd's of London to value the remaining Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, we perform various quantitative and qualitative procedures, including: 1) evaluation of the underlying methodologies, 2) analysis of recent sales activity, 3) analytical review of our fair values against current market prices and 4) comparison of the pricing services' fair value to other pricing services' fair value for the same investment.No markets for our investments were judged to be inactive at year-end.Based on these procedures, we did not adjust the prices or quotes provided by our independent pricing services, third party investment managers or Lloyd's of London as of December 31,2013or 2012.

Our Level 2 financial instruments also include our notes payable. We determine the fair value of our 6.30% Senior Notes based on quoted prices, but the market is inactive. The fair value of borrowings under our Revolving Loan Facility approximates the carrying amount because interest is based on 30-day LIBOR plus a margin.

Our Level 3 securities include certain fixed maturity securities and an insurance contract that we account for as a derivative and classify in other assets. Our Level 3 category also includes a liability for future earnout payments due to former owners of a business we acquired, which is classified within accounts payable and accrued liabilities. Fixed maturity securities classified as Level 3 are primarily special purpose revenue bond auction rate securities.  The interest rates on these securities are reset through auctions at periodic intervals.  These securities are thinly traded and observable market data is not readily available.  We determine the fair value of these securities using prices quoted by a broker. We determine fair value of the derivative and the earnout payments based on internally developed models that use assumptions or other data that are not readily observable from objective sources.

The following tables present the fair value of our financial instruments that were carried or disclosed at fair value.Unless indicated, these items were carried at fair value on our consolidated balance sheets.

			Level 1		Level 2		Level 3		Total
December 31, 2013
Fixed maturity securities
	U.S. government and government agency securities		$	84,032	$	8,677	$	0	$	92,709
	Fixed maturity securities of states, municipalities
		and political subdivisions		0		986,486		0		986,486
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		0		2,255,928		9,267		2,265,195
	Corporate securities			0		1,225,088		150		1,225,238
	Residential mortgage-backed securities			0		618,119		0		618,119
	Commercial mortgage-backed securities			0		504,888		0		504,888
	Asset-backed securities			0		182,392		0		182,392
	Foreign government securities			0		147,446		0		147,446
		Total fixed maturity securities		84,032		5,929,024		9,417		6,022,473
Equity securities				517,466		0		0		517,466
Short-term investments*				68,958		109,795		0		178,753
Restricted cash and securities				0		1,853		0		1,853
Premium, claims and other receivables				0		66,515		0		66,515
Other assets				20		0		941		961
	Total assets measured at fair value		$	670,476	$	6,107,187	$	10,358	$	6,788,021
Notes payable*			$	0	$	707,656	$	-	$	707,656
Accounts payable and accrued liabilities - earnout liability				0		1,853		7,259		9,112
	Total liabilities measured at fair value		$	0	$	709,509	$	7,259	$	716,768

__________

*Carried at cost or amortized cost on consolidated balance sheet.

			Level 1		Level 2		Level 3		Total
December 31, 2012
Fixed maturity securities
	U.S. government and government agency securities		$	174,520	$	25,087	$	0	$	199,607
	Fixed maturity securities of states, municipalities
		and political subdivisions		0		1,065,811		0		1,065,811
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		0		2,200,331		0		2,200,331
	Corporate securities			0		1,315,006		164		1,315,170
	Residential mortgage-backed securities			0		664,887		0		664,887
	Commercial mortgage-backed securities			0		524,289		0		524,289
	Asset-backed securities			0		33,275		0		33,275
	Foreign government securities			0		278,411		0		278,411
		Total fixed maturity securities		174,520		6,107,097		164		6,281,781
Equity securities				284,639		0		0		284,639
Short-term investments*				251,988		111,065		0		363,053
Other investments				20,925		0		0		20,925
Restricted cash and securities				0		2,043		0		2,043
Premium, claims and other receivables				0		68,207		0		68,207
Other assets				0		0		349		349
	Total assets measured at fair value		$	732,072	$	6,288,412	$	513	$	7,020,997
Notes payable*			$	-	$	636,363	$	-	$	636,363
Accounts payable and accrued liabilities - forward contract				-		3,194		-		3,194
Accounts payable and accrued liabilities - earnout liability				-		2,043		7,009		9,052
	Total liabilities measured at fair value		$	0	$	641,600	$	7,009	$	648,609

The following table presents the changes in fair value of our Level 3 financial instruments.

									Accounts
									payable
			Fixed						and
			maturity		Other		Total		accrued
			securities		assets		assets		liabilities
Balance at December 31, 2011			$	1,170	$	1,516	$	2,686	$	0
Settlements				0		(1,863)		(1,863)		0
Earnout liability				0		0		0		6,968
Gains (losses) reported in:
	Net earnings			(1)		696		695		(41)
	Other comprehensive income			10		0		10		0
Transfers out of Level 3				(1,015)		0		(1,015)		0
		Balance at December 31, 2012		164		349		513		7,009
Purchases				9,430		0		9,430		0
Gains (losses) reported in:
	Net earnings			54		592		646		(250)
	Other comprehensive loss			(231)		0		(231)		0
		Balance at December 31, 2013	$	9,417	$	941	$	10,358	$	7,259

There were no transfers between Level 1, Level 2 or Level 3 in 2013. We transferred an investment from Level 3 to Level 2 in 2012because we were able to determine its fair value using inputs based on observable market data in the period transferred.

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Investments (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fixed Maturity Securities
Taxable	$ 98,966	$ 114,047	$ 113,293
Exempt from U.S. income taxes	113,875	107,488	98,729
Total fixed maturity securities	212,841	221,535	212,022
Equity securities	14,537	3,959	0
Short-term investments	160	620	537
Other investment income	668	2,856	4,486
Total investment income	228,206	228,970	217,045
Investment expense	(8,024)	(6,336)	(4,774)
Net investment income	$ 220,182	$ 222,634	$ 212,271

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Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Parties [Abstract]

Related Party Transactions Disclosure [Text Block]

(14)Related Party Transactions

We have amounts due to former owners of businesses we have acquired, some of whom are officers of certain of our subsidiaries. We had earnout liabilities of $22.8 million and $20.9 million at December 31, 2013 and 2012, respectively, reported in accounts payable and accrued liabilities in our consolidated balance sheets. We paid $7.2million in 2013 and $32.1 million in 2012related to theseearnout agreements.

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Investments (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Gross unrealized losses and fair value of all available for sale fixed maturity securities that were in a continuous loss position
Less than 12 months, Fair value	$ 1,913,235	$ 496,746
Less than 12 months, Unrealized losses	(85,659)	(9,371)
12 months or more, Fair value	171,280	2,616
12 months or more, Unrealized losses	(19,562)	(135)
Total, Fair value	2,084,515	499,362
Total, Unrealized losses	$ (105,221)	$ (9,506)

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance	$ 295,271
Other Comprehensive Loss Net Of Tax	(176,620)	67,612	130,473
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	118,651	295,271
Net realized investment gain	(42,030)	(30,120)	1,022
Income tax expense	(14,711)	(10,542)	358
Total reclassifications	(27,319)	(19,578)	664
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance	282,503	213,114	82,673
Other Comprehensive Loss Net Of Tax	(182,543)	69,389	130,441
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	99,960	282,503	213,114
Accumulated Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance	12,768	14,545	14,513
Other Comprehensive Loss Net Of Tax	5,923	(1,777)	32
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	18,691	12,768	14,545
Accumulated other comprehensive income [Member]
Other Comprehensive Loss Net Of Tax	$ (176,620)	$ 67,612	$ 130,473

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Investments (Tables)

12 Months Ended

Dec. 31, 2013

Investment [Abstract]

Fixed Maturity & Equity Securities Available For Sale

		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
December 31, 2013
U.S. government and government agency securities		$	91,047	$	2,157	$	(495)	$	92,709
Fixed maturity securities of states, municipalities
	and political subdivisions		941,580		50,885		(5,979)		986,486
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,240,412		71,541		(46,758)		2,265,195
Corporate securities			1,195,387		40,860		(11,009)		1,225,238
Residential mortgage-backed securities			622,766		15,289		(19,936)		618,119
Commercial mortgage-backed securities			502,069		16,155		(13,336)		504,888
Asset-backed securities			183,660		319		(1,587)		182,392
Foreign government securities			144,566		3,237		(357)		147,446
	Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457)	$	6,022,473
Equity securities		$	464,388	$	58,842	$	(5,764)	$	517,466

December 31, 2012
U.S. government and government agency securities		$	195,049	$	4,560	$	(2)	$	199,607
Fixed maturity securities of states, municipalities
	and political subdivisions		969,966		96,027		(182)		1,065,811
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,033,947		168,772		(2,388)		2,200,331
Corporate securities			1,247,282		69,243		(1,355)		1,315,170
Residential mortgage-backed securities			632,665		32,560		(338)		664,887
Commercial mortgage-backed securities			482,808		41,748		(267)		524,289
Asset-backed securities			32,801		474		0		33,275
Foreign government securities			261,914		16,515		(18)		278,411
	Total fixed maturity securities	$	5,856,432	$	429,899	$	(4,550)	$	6,281,781
Equity securities		$	275,827	$	13,768	$	(4,956)	$	284,639

Gross unrealized losses and fair value of all available for sale fixed income securities loss that were in a continuous loss position

				Less than 12 months				12 months or more				Total
						Unrealized				Unrealized				Unrealized
				Fair value		losses		Fair value		losses		Fair value		losses
December 31, 2013
Fixed maturity securities
	U.S. government and government agency
		securities		$	23,717	$	(495)	$	0	$	0	$	23,717	$	(495)
	Fixed maturity securities of states,
		municipalities and political subdivisions			136,160		(5,277)		8,997		(702)		145,157		(5,979)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			684,560		(35,832)		83,228		(10,926)		767,788		(46,758)
	Corporate securities				277,853		(8,202)		35,437		(2,807)		313,290		(11,009)
	Residential mortgage-backed securities				306,874		(15,861)		31,687		(4,075)		338,561		(19,936)
	Commercial mortgage-backed securities				203,347		(12,611)		4,915		(725)		208,262		(13,336)
	Asset-backed securities				126,922		(1,587)		0		0		126,922		(1,587)
	Foreign government securities				78,182		(357)		0		0		78,182		(357)
Equity securities					75,620		(5,437)		7,016		(327)		82,636		(5,764)
			Total	$	1,913,235	$	(85,659)	$	171,280	$	(19,562)	$	2,084,515	$	(105,221)

December 31, 2012
Fixed maturity securities
	U.S. government and government agency
		securities		$	55,034	$	(2)	$	0	$	0	$	55,034	$	(2)
	Fixed maturity securities of states,
		municipalities and political subdivisions			14,162		(182)		0		0		14,162		(182)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			155,902		(2,388)		0		0		155,902		(2,388)
	Corporate securities				85,245		(1,220)		2,616		(135)		87,861		(1,355)
	Residential mortgage-backed securities				49,486		(338)		0		0		49,486		(338)
	Commercial mortgage-backed securities				26,263		(267)		0		0		26,263		(267)
	Foreign government securities				7,007		(18)		0		0		7,007		(18)
Equity securities					103,647		(4,956)		0		0		103,647		(4,956)
			Total	$	496,746	$	(9,371)	$	2,616	$	(135)	$	499,362	$	(9,506)

Other than temporary impairment

		2013		2012		2011
Total other-than-temporary impairment loss		$	0	$	(2,069)	$	(6,922)
Portion recognized in other comprehensive income			0		1,041		2,243
	Net other-than-temporary impairment loss recognized in earnings	$	0	$	(1,028)	$	(4,679)

Rollforward of other than temporary impairment credit losses

			2013		2012		2011
Balance at beginning of year			$	625	$	5,047	$	4,273
Credit losses recognized in earnings
	Securities previously impaired			0		899		2,447
	Securities previously not impaired			0		129		2,232
	Securities sold			(625)		(5,450)		(3,905)
		Balance at December 31	$	0	$	625	$	5,047

Amortized cost and fair value of fixed maturity securities investments classified by contractual maturity date

		Cost or amortized cost		Fair value
Due in 1 year or less		$	193,107	$	196,188
Due after 1 year through 5 years			1,056,510		1,098,771
Due after 5 years through 10 years			1,425,759		1,480,858
Due after 10 years through 15 years			991,474		1,001,684
Due after 15 years			946,142		939,573
	Securities with contractual maturities		4,612,992		4,717,074
Mortgage-backed and asset-backed securities			1,308,495		1,305,399
	Total fixed maturity securities	$	5,921,487	$	6,022,473

Change in Unrealized Gain (Loss) on Investments

		2013		2012		2011
Available for sale fixed maturity securities		$	(324,363)	$	91,947	$	198,768
Equity securities			44,266		8,812		0
Other investments			(2,534)		4,867		(2,351)
	Change in net unrealized investment gains (losses)	$	(282,631)	$	105,626	$	196,417

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Investments (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	$ 5,921,487	$ 5,856,432
Gross unrealized gain	200,443	429,899
Gross unrealized loss	(99,457)	(4,550)
Fixed maturity securities - available for sale	6,022,473	6,281,781
Available for sale equity securities
Available-for-sale Equity Securities, Amortized Cost Basis	464,388	275,827
Gross unrealized gain	58,842	13,768
Gross unrealized loss	(5,764)	(4,956)
Available-for-sale Securities, Equity Securities	517,466	284,639
US Government and Government Agency Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	91,047	195,049
Gross unrealized gain	2,157	4,560
Gross unrealized loss	(495)	(2)
Fixed maturity securities - available for sale	92,709	199,607
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	941,580	969,966
Gross unrealized gain	50,885	96,027
Gross unrealized loss	(5,979)	(182)
Fixed maturity securities - available for sale	986,486	1,065,811
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	2,240,412	2,033,947
Gross unrealized gain	71,541	168,772
Gross unrealized loss	(46,758)	(2,388)
Fixed maturity securities - available for sale	2,265,195	2,200,331
Corporate Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	1,195,387	1,247,282
Gross unrealized gain	40,860	69,243
Gross unrealized loss	(11,009)	(1,355)
Fixed maturity securities - available for sale	1,225,238	1,315,170
Residential Mortgage Backed Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	622,766	632,665
Gross unrealized gain	15,289	32,560
Gross unrealized loss	(19,936)	(338)
Fixed maturity securities - available for sale	618,119	664,887
Commercial Mortgage Backed Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	502,069	482,808
Gross unrealized gain	16,155	41,748
Gross unrealized loss	(13,336)	(267)
Fixed maturity securities - available for sale	504,888	524,289
Asset-backed Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	183,660	32,801
Gross unrealized gain	319	474
Gross unrealized loss	(1,587)	0
Fixed maturity securities - available for sale	182,392	33,275
Foreign Government Securities [Member]
Fixed Maturity & Equity securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	144,566	261,914
Gross unrealized gain	3,237	16,515
Gross unrealized loss	(357)	(18)
Fixed maturity securities - available for sale	$ 147,446	$ 278,411

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Investments (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Other than temporary impairment credit losses
Total other-than-temporary impairment loss	$ 0	$ (2,069)	$ (6,922)
Portion recognized in other comprehensive income	0	1,041	2,243
Net other-than-temporary impairment loss recognized in earnings	0	(1,028)	(4,679)
Credit losses recognized in earnings with component in other comprehensive income
Balance at beginning of period	625	5,047	4,273
Securities previously impaired	0	899	2,447
Securities previously not impaired	0	129	2,232
Securities sold	(625)	(5,450)	(3,905)
Balance at end of period	$ 0	$ 625	$ 5,047

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings per share

				2013		2012		2011
Net earnings				$	407,197	$	391,240	$	255,243
Less: net earnings attributable to unvested restricted stock					(6,638)		(6,982)		(3,864)
		Net earnings available to common stock		$	400,559	$	384,258	$	251,379
Weighted-average common shares outstanding					98,853		100,176		109,051
Dilutive effect of outstanding securities (determined using treasury
	stock method)				260		280		189
		Weighted-average common shares and potential common
			shares outstanding		99,113		100,456		109,240
Anti-dilutive securities not included in treasury stock
	method computation				109		443		2,426
Earnings per common share
		Basic		$	4.05	$	3.84	$	2.31
		Diluted		$	4.04	$	3.83	$	2.30

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Related Parties (Detail Textuals) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Related Parties [Abstract]
HCCG earnout payment	$ 7.2	$ 32.1
Earnout Liability	$ 22.8	$ 20.9

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Stock based Compensation

12 Months Ended

Dec. 31, 2013

Dec. 31, 2011

Stock based Compensation [Abstract]

Stock based Compensation

(11)Stock-Based Compensation 

Our stock-based compensation plan, the 2008 Flexible Incentive Plan, is administered by the Compensation Committee of the Board of Directors. We currently have restricted stock awards, restricted stock units and stock options outstanding under this plan.Each restricted stock award and unit entitles the recipient to one share or equivalent unit of our common stock. Outstanding restricted stock awards and units vest over a period of up to ten years, which is the requisite service period.Each option granted under the plan may be used to purchase one share of our common stock. Outstanding options vest over a period of up to five years, which is the requisite service period, and expire six to ten years after the grant date.

The consolidated statements of earnings reflect total stock-based compensation expense of $16.2million, $13.2million and $12.4million in 2013, 2012 and 2011, respectively. The total tax benefit recognized in earnings from stock-based compensation arrangements was $5.7million, $4.6million and $4.4million in 2013, 2012 and 2011, respectively. At December 31, 2013, there was approximately $28.3million of total unrecognized compensation expense related to unvested restricted stock awards, restricted units and options that is expected to be recognized over a weighted-average period of 2.6years. At December 31, 2013, 4.6million shares of our common stock were authorized and reserved for the exercise of options and release of restricted stock units, of which 1.4 million shares were reserved for awards previously granted and 3.2million shares were reserved for future issuance.

Restricted Stock

We measure the fair value of our restricted stock awards and units based on the closing price of our common stock on the grant dateand expense that value on a straight-line basis over the vesting period.

Certain awards of restricted stock and restricted stock units contain a performance condition based on the ultimate results for the preceding underwriting year. The number of such shares that vest could differ from the number initially granted. We measure fair value for these awards based on the closing price of our common stock on the grant date, and we recognize expense on a straight-line basis over the vesting period for those awards expected to vest. These awards earn dividends or dividend equivalents during the vesting period.

In 2013, we granted a new form of restricted stock to certain of our executive officers. This restricted stock vests after three years and can vest from 0% to 200% of the initial shares granted. Vesting is determined equally based on an operating return on equity performance factor (ROE factor) and a total shareholder return performance factor (TSR factor). The ROE factor is calculated by comparing our actual results over the three-year period to an internal target, whereas the TSR factor is calculated by comparing our TSR over the three-year period to that of nine peer companies. The ROE factor qualifies as a performance condition and those awards are accounted for in the same manner as the other restricted stock grants described above. The TSR factor qualifies as a market condition, and we determine the fair value at grant date using a Monte Carlo simulation model that takes into account the probabilitiesof numerous outcomes of our TSR as well as that of the peer companies. This fair value is expensed on a straight-line basis over the vesting period and is not adjusted for the ultimate number of shares to vest. No dividends are earned during the vesting period on these shares.

The fair value of restricted stock awards that vested during 2013, 2012and 2011 was $14.4million, $10.9 million and $1.1 million, respectively. The fair value of restricted stock units that vested during 2013and 2012 was $1.6 million and $2.6 million, respectively. No restricted stock units vested during 2011.

The following table details activity for our restricted stock awards and units during 2013.

			Weighted-		Weighted-
			average		average		Aggregate
	Number		grant date		contractual		intrinsic
	of shares		fair value		life		value
Restricted Stock Awards
Outstanding, beginning of year		1,572	$	28.84
Awarded		358		43.13
Vested		(322)		27.76
Forfeited		(171)		26.67
Outstanding, end of year		1,437		32.91		2.6 years	$	66,326
Expected to vest, end of year		1,132		33.18		2.6 years		52,232
Restricted Stock Units
Outstanding, beginning of year		145	$	27.98
Awarded		40		43.45
Vested		(37)		24.56
Forfeited		(13)		23.94
Outstanding, end of year		135		33.91		2.2 years	$	6,210
Expected to vest, end of year		108		34.15		2.2 years		4,996

Stock Options

The table below shows the weighted-average fair value of options granted and the related weighted-average assumptions used in the Black-Scholes model, which we use to determine the fair value of an option on its grant date. Weexpense the fair value on a straight-line basis over the option's vesting period. The risk-free interest rate is based on the U.S. Treasury rate that most closely approximates each option's expected term. We based our expected volatility on the historical volatility of our stock over a period matching each option's expected term. Our dividend yield is based on an average of our historical dividend payments divided by the stock price. We used historical exercise patterns by grant type to estimate the expected option life.

	2013			2012			2011
Fair value of options granted	$	7.17		$	7.89		$	7.84
Risk free interest rate		1.0	%		1.1	%		1.4	%
Expected volatility		23.0	%		31.4	%		34.1	%
Expected dividend yield		1.8	%		2.1	%		2.0	%
Expected option life		4.9 years			6.6 years			5.8 years

The following table details our stock option activity during 2013.

			Weighted-		Weighted-
			average		average		Aggregate
	Number		exercise		contractual		intrinsic
	of shares		price		life		value
Outstanding, beginning of year		1,514	$	27.33
Granted		181		42.11
Exercised		(381)		27.04
Forfeited and expired		(21)		26.44
Outstanding, end of year		1,293		29.50		4.3 years	$	21,514
Vested or expected to vest, end of year		1,149		29.32		4.2 years		19,327
Exercisable, end of year		479		25.62		2.7 years		9,821

In each of the past three years, we granted fully-vested common stock valued at $80,000to each non-management director as part of their annual compensation for serving on our Board of Directors.New directors were granted a pro-rata portion of $80,000 based on the date they joined the Board. We also grantedup to $200,000of fully vested common stock to the chairman of our Board each year.The number of shares granted was based on our closing stock price on the grant date, which was the day of the Annual Meeting of Shareholders or the day the director became chairman or joined the Board. 

Employee Stock Purchase Plan

In 2013, our stockholders authorized the issuance of up to 2.0 million shares of our common stock under the 2013 Employee Stock Purchase Plan (ESPP). The ESPP encourages share ownership by providing employees the opportunity to purchase HCC common stock at 85% of the closing price of the stock on either the first day or the last day of each six-month offering period (whichever is lower). Employees can invest between 1% and 15% of their base salary, subject to a maximum of the lesser of 1,500 shares in each offering period or $25,000 in each calendar year. The first offering period began on September 16, 2013 and ends on March 14, 2014. We recognize expense related to the ESPP over each offering period. The expense includes the 15% discount and the fair value of the “look-back” option calculated using the Black-Scholes option pricing model.

The aggregate intrinsic value (the amount by which the fair value of the underlying stock exceeds the exercise price) of options exercised during 2013, 2012 and 2011 was $5.6million, $10.2million and $5.9million, respectively.Exercise of options during 2013, 2012 and 2011 resulted in cash receipts of $10.3million, $60.0million and $39.8million, respectively. The tax benefits realized from stock options exercised during 2013, 2012 and 2011 were $2.0million, $3.7million and $2.1million, respectively.

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Schedule 2 HCCIH Financial Statements (Details Textuals) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Interest rate on intercompany loan	6.25%
Parent intercompany loan from subsidiary	$ 25.0
Dividends received from subsidiary	328.2	270.3	279.9
Dividend received including fixed income securities and related accrued interest	$ 317.2	$ 262.8	$ 138.3
Interest rate on loan from subsidiary	2.45%

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Earnings Per Share

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share

(10)Earnings Per Share

The following table details the numerator and denominator used in our earnings per share calculations.

				2013		2012		2011
Net earnings				$	407,197	$	391,240	$	255,243
Less: net earnings attributable to unvested restricted stock					(6,638)		(6,982)		(3,864)
		Net earnings available to common stock		$	400,559	$	384,258	$	251,379
Weighted-average common shares outstanding					98,853		100,176		109,051
Dilutive effect of outstanding securities (determined using treasury
	stock method)				260		280		189
		Weighted-average common shares and potential common
			shares outstanding		99,113		100,456		109,240
Anti-dilutive securities not included in treasury stock
	method computation				109		443		2,426
Earnings per common share
		Basic		$	4.05	$	3.84	$	2.31
		Diluted		$	4.04	$	3.83	$	2.30

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Quarterly Information

12 Months Ended

Dec. 31, 2013

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

(17) Quarterly Financial Data (Unaudited)

			Fourth Quarter				Third Quarter				Second Quarter				First Quarter
			2013		2012		2013		2012		2013		2012		2013		2012
Net earned premium			$	560,030	$	566,503	$	556,668	$	563,650	$	561,356	$	565,331	$	561,186	$	547,141
Other revenue				76,600		85,840		79,809		68,023		68,075		66,957		73,180		62,382
	Total revenue			636,630		652,343		636,477		631,673		629,431		632,288		634,366		609,523
Loss and LAE expense				297,503		335,744		320,376		304,014		339,474		336,825		332,697		328,928
Other expense				182,744		167,070		176,001		174,040		165,126		161,144		150,273		163,635
	Total expense			480,247		502,814		496,377		478,054		504,600		497,969		482,970		492,563
Earnings before income taxes				156,383		149,529		140,100		153,619		124,831		134,319		151,396		116,960
Income tax expense				41,373		41,428		41,925		46,557		36,669		40,826		45,546		34,376
	Net earnings		$	115,010	$	108,101	$	98,175	$	107,062	$	88,162	$	93,493	$	105,850	$	82,584
Earnings per share
	Basic		$	1.15	$	1.07	$	0.98	$	1.06	$	0.88	$	0.92	$	1.05	$	0.80
	Diluted			1.14		1.06		0.98		1.05		0.87		0.92		1.05		0.79
Weighted-average shares
	outstanding
		Basic		98,770		99,686		98,723		99,424		98,870		99,563		99,056		102,034
		Diluted		99,046		99,926		98,993		99,700		99,121		99,851		99,287		102,193

The sum of earnings per share for the quarters may not equal the annual amounts due to rounding.

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Reinsurance (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Components of reinsurance recoverables
Reinsurance recoverable on paid losses	$ 156,026	$ 54,675
Reinsurance recoverable on outstanding losses	459,134	479,026
Reinsurance recoverable on incurred but not reported losses	663,597	539,021
Reserve for uncollectible reinsurance	(1,500)	(1,500)	(1,875)	(2,493)
Total reinsurance recoverables	$ 1,277,257	$ 1,071,222

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Differences between our effective tax rate for financial statement purposes and the Federal statutory rate
Statutory tax rate									35.00%	35.00%	35.00%
Federal tax at statutory rate									$ 200,448	$ 194,049	$ 124,252
Nontaxable municipal bond interest and dividend received deduction									(34,734)	(31,939)	(29,021)
State income taxes, net of federal tax benefit									2,097	3,619	3,050
Foreign income taxes									42,691	40,703	25,753
Foreign tax credits									(42,691)	(40,703)	(25,753)
Uncertain tax positions (net of federal tax benefit (expense) on state positions: $340 in 2013, $719 in 2012 and $212 in 2011)									518	878	38
Other, net									(2,816)	(3,420)	1,444
Income tax expense	$ 41,373	$ 41,925	$ 36,669	$ 45,546	$ 41,428	$ 46,557	$ 40,826	$ 34,376	$ 165,513	$ 163,187	$ 99,763
Effective tax rate									28.90%	29.40%	28.10%

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Investments (Details Textuals) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Investment [Abstract]
Fair value of held to maturity securities transferred		$ 139,100,000
Amortized cost of held to maturity securities transferred		136,000,000
Net unrealized appreciation, net of tax, increase in AOCI & SHE from transfer		2,000,000
Condition for categorizing the impaired securities	500,000
Condition for categorizing the impaired securities, percentage	10.00%
Other-than-temporary impairment credit losses	0	1,028,000	4,679,000
Gross unrealized losses on fixed income securities	105,200,000
Weighted-average life of mortgage-backed and asset-backed securities, Years	5.9
Domestic insurance companies deposited fixed income securities (at fair value) required by state insurance departments.	43,800,000
Domestic insurance companies deposited fixed income securities (at amortized cost) required by state insurance departments.	$ 43,000,000
Senior note, effective interest rate	6.37%

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Fair Value Measurements (Details Textuals)	12 Months Ended
	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Independent pricing services to assist in determining fair value	99.00%
Debt Instrument, Interest Rate, Effective Percentage	6.37%

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Schedule 1 Summary of Investments

12 Months Ended

Dec. 31, 2013

Summary Of Investments

Summary of Investments, Other than Investments in Related Parties

								SCHEDULE 1
			HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
			SUMMARY OF INVESTMENTS
			OTHER THAN INVESTMENTS IN RELATED PARTIES
			(in thousands)
				December 31, 2013
Column A				Column B		Column C			Column D
									Amount
									shown in
Type of Investment				Cost		Value			balance sheet
	Fixed maturity securities
		Bonds — United States Government and government agencies and
			authorities	$	91,047	$	92,709		$	92,709
		Bonds — states, municipalities and political subdivisions			941,580		986,486			986,486
		Bonds — special revenue			2,240,412		2,265,195			2,265,195
		Bonds — corporate			1,195,387		1,225,238			1,225,238
		Residential mortgage-backed securities			622,766		618,119			618,119
		Commercial mortgage-backed securities			502,069		504,888			504,888
		Asset-backed securities			183,660		182,392			182,392
		Bonds — foreign			144,566		147,446			147,446
			Total fixed maturity securities		5,921,487	$	6,022,473			6,022,473
	Equity securities
		Common stocks — banks, trust and insurance companies			36,337		40,751			40,751
		Common stocks — industrial and miscellaneous			428,051		476,715			476,715
			Total equity securities		464,388	$	517,466			517,466
	Short-term investments				178,753					178,753
			Total investments	$	6,564,628				$	6,718,692

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Income Taxes [Text Block]

(8) Income Taxes

At December 31, 2013 and 2012, we had current income taxes payableof $2.0million and $34.2million, respectively,included in accounts payable and accrued liabilities in the consolidated balance sheets.

The following table summarizes the differences between our effective tax rate for financial statement purposes and the Federal statutory rate.

	2013			2012			2011
Statutory tax rate		35.0	%		35.0	%		35.0	%
Federal tax at statutory rate	$	200,448		$	194,049		$	124,252
Nontaxable municipal bond interest and dividend received deduction		(34,734)			(31,939)			(29,021)
State income taxes, net of federal tax benefit		2,097			3,619			3,050
Foreign income taxes		42,691			40,703			25,753
Foreign tax credit		(42,691)			(40,703)			(25,753)
Uncertain tax positions (net of federal tax benefit on state
positions: $340 in 2013, $719 in 2012 and $212 in 2011)		518			878			38
Other, net		(2,816)			(3,420)			1,444
Income tax expense	$	165,513		$	163,187		$	99,763
Effective tax rate		28.9	%		29.4	%		28.1	%

The components of income tax expense were as follows:

		2013		2012		2011
Federal current		$	117,933	$	94,493	$	47,993
Federal deferred			804		20,827		21,075
	Total federal		118,737		115,320		69,068
State current			2,649		2,570		2,203
State deferred			578		2,997		2,489
	Total state		3,227		5,567		4,692
Foreign current			37,978		34,678		28,543
Foreign deferred			4,713		6,025		(2,790)
	Total foreign		42,691		40,703		25,753
Uncertain tax positions			858		1,597		250
	Income tax expense	$	165,513	$	163,187	$	99,763

The net deferred tax liability is included in accounts payable and accrued liabilitiesin our consolidated balance sheets. The deferred tax liability related to the book over tax basis of our foreign subsidiaries at December 31, 2013 was based on the assumption that we will merge certain subsidiaries in our International operations. The composition of deferred tax assets and liabilities at December 31, 2013 and 2012 was as follows:

		2013		2012
Excess of financial statement unearned premium over tax		$	26,821	$	26,192
Discounting of loss reserves, net of salvage and subrogation			51,143		51,554
Excess of financial statement accrued expenses over tax			18,258		19,693
Allowance for bad debts, not deductible for tax			3,146		4,733
Stock-based compensation expense in excess of deduction for tax			5,163		5,133
Financial statement loss for Lloyd’s syndicates in excess of deduction for tax			351		0
Federal tax net operating loss carryforwards			3,202		4,744
State tax net operating loss carryforwards			181		2,631
Foreign tax net operating loss carryforwards			22,605		8,359
Federal benefit of state uncertain tax positions			1,482		1,142
Valuation allowance			(27,430)		(9,187)
	Total deferred tax assets		104,922		114,994
Unrealized gain on increase in value of securities			52,424		145,182
Deferred policy acquisition costs, net of ceding commissions, deductible for tax			14,570		15,360
Amortizable goodwill for tax			110,064		97,344
Financial statement income for Lloyd’s syndicates in excess of taxable income			0		3,860
Book basis in net assets of foreign subsidiaries in excess of tax basis			2,414		15,808
Depreciation and other items			14,458		13,927
	Total deferred tax liabilities		193,930		291,481
	Net deferred tax liability	$	(89,008)	$	(176,487)

Changes in the valuation allowance account applicable to deferred tax assets relate primarily to net operating losses in various foreign and state taxing jurisdictions.Changes in the valuation allowance were as follows:

		2013		2012		2011
Balance at beginning of year		$	9,187	$	7,983	$	8,143
State net operating loss carryforwards			(2,228)		(651)		(288)
Foreign net operating loss carryforwards			20,207		296		(342)
Other			264		1,559		470
	Balance at December 31	$	27,430	$	9,187	$	7,983

At December 31, 2013, we had Federal, state and Spanish tax net operating loss carryforwards of approximately $9.1million, $7.2million and $70.2million, respectively, which will expire in varying amounts through 2031. We had $9.1million of additional foreign net operating losses in the U.K., France and Ireland that can be carried forward indefinitely. Future use of our $9.1million Federal loss carryforward is subject to statutory limitations due to a prior ownership change. We have recorded valuation allowances of $4.1million and $23.3million against our state and Spanish loss carryforwards, respectively. The Spanish net operating losscarryforwardand related valuation allowance resulted primarily from recording additional net reserves related to Spanish surety bonds discussed in Note 6.The increase in valuation allowance related to our Spanish net operating loss carryforward does not affect our overall effective tax rate based on the assumption that we will merge certain subsidiaries in our International operations.Based on our history of taxable income in our domestic insurance and other operations, we believe it is more likely than not that the deferred tax assets related to net operating loss carryforwards, excluding amounts covered by valuation allowances, will be realized.

At December 31, 2013 and 2012, we had recorded tax liabilities for unrecognized gross tax benefits related to uncertain tax positions of $5.0million and $4.1million, respectively.If the uncertain tax benefits as of year-end 2013had been recognized in 2013, the total amount of such benefits would have reduced our2013 income tax expense and our effective tax rate.At December 31, 2013, it is reasonably possible that liabilities for unrecognized tax benefits could decrease $0.2million (including no interest or penalties) in the next twelve months, due to the expiration of statutes of limitation.

The changes in our liability for unrecognized gross tax benefits were as follows:

		2013		2012		2011
Balance at beginning of year		$	4,129	$	2,522	$	2,274
Gross increases
Tax position of current year			632		145		160
Tax positions of prior years			506		2,988		763
Gross decreases
Statute expirations			(264)		(713)		(595)
Settlements			0		(404)		0
Tax positions of prior years			0		(409)		(80)
	Balance at December 31	$	5,003	$	4,129	$	2,522

We report any potential net interest income and expense and penalties related to changes in our uncertain tax positions in our consolidated statements of earnings as interest expense and other operating expense, respectively. We recognized net interest expense of $0.3 million in 2013, $0.5 million in 2012 and a minimal amount in 2011, and no penalties in any year. At December 31, 2013, we had no accrual for penalties and $1.2 million for interest payable.

We file income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. Federal, state and local, or foreign income tax examinations by tax authorities for years before 2008. We currently are not under U.S. Federal examination. Our income tax returns for New York (2007 – 2012), Massachusetts (2009 – 2010), Illinois (2009 – 2011), and Spain(2009 – 2010) are currently under audit. While we cannot predict the outcome of these audits, we do not anticipate the results to have a material effect on our consolidated financial position, results of operations or cash flows.

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Schedule 4 Reinsurance

12 Months Ended

Dec. 31, 2013

Supplemental Schedule of Reinsurance Premiums for Insurance Companies [Abstract]

Supplemental Schedule of Reinsurance Premiums for Insurance Companies [Text Block]

									SCHEDULE 4
HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
REINSURANCE
(in thousands)
Column A	Column B		Column C		Column D		Column E		Column F
					Assumed from				Percent of
			Ceded to other		other				amount
	Direct amount		companies		companies		Net amount		assumed to net
Year ended December 31, 2013
Life insurance in force	$	904,189	$	210,475	$	0	$	693,714		—	%
Earned premium
Property and liability insurance	$	1,499,179	$	498,794	$	293,256	$	1,293,641		23	%
Accident and health insurance		983,348		77,837		40,088		945,599		4	%
Total	$	2,482,527	$	576,631	$	333,344	$	2,239,240		15	%
Year ended December 31, 2012
Life insurance in force	$	977,492	$	238,389	$	0	$	739,103		—	%
Earned premium
Property and liability insurance	$	1,483,722	$	446,890	$	282,500	$	1,319,332		21	%
Accident and health insurance		913,034		58,852		69,111		923,293		7	%
Total	$	2,396,756	$	505,742	$	351,611	$	2,242,625		16	%
Year ended December 31, 2011
Life insurance in force	$	1,070,323	$	261,803	$	0	$	808,520		—	%
Earned premium
Property and liability insurance	$	1,477,138	$	473,270	$	273,576	$	1,277,444		21	%
Accident and health insurance		831,672		49,115		67,169		849,726		8	%
Total	$	2,308,810	$	522,385	$	340,745	$	2,127,170		16	%

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Liability for Unpaid Loss and Loss Adjustment Expense (Tables)

12 Months Ended

Dec. 31, 2013

Liability for Unpaid Loss and Loss Adjustment Expense

Rollforward of Liability for Unpaid Loss and Loss Adjustment Expense

	2013		2012		2011
Reserves at beginning of year	$	3,767,850	$	3,658,317	$	3,471,858
Less reinsurance recoverables on reserves		1,018,047		974,834		934,086
Net reserves at beginning of year		2,749,803		2,683,483		2,537,772
Net reserve additions from acquired businesses		0		14,705		6,261
Foreign currency adjustment		5,544		18,449		(6,108)
Net loss and loss adjustment expense:
Provision for loss and loss adjustment expense for claims occurring in
current year		1,363,792		1,375,522		1,389,100
Increase (decrease) in estimated loss and loss adjustment expense for
claims occurring in prior years		(73,742)		(70,011)		10,147
Net loss and loss adjustment expense		1,290,050		1,305,511		1,399,247
Net loss and loss adjustment expense payments for claims occurring during:
Current year		529,645		543,010		527,244
Prior years		736,351		729,335		726,445
Net loss and loss adjustment expense payments		1,265,996		1,272,345		1,253,689
Net reserves at end of year		2,779,401		2,749,803		2,683,483
Plus reinsurance recoverables on reserves		1,122,731		1,018,047		974,834
Reserves at end of year	$	3,902,132	$	3,767,850	$	3,658,317

LiabilityForUnpaidClaimsAdjustmentExpenseByExpenseTypeTextBlock

			2013		2012		2011
Net (favorable) adverse loss development
	U.S. Property & Casualty		$	(39,363)	$	2,321	$	(3,145)
	Professional Liability			(26,346)		(25,897)		47,084
	Accident & Health			(18,027)		(10,511)		(1,324)
	U.S. Surety & Credit			(37,898)		(25,377)		(11,300)
	International			43,805		(10,084)		(13,830)
	Exited Lines			4,087		(463)		(7,338)
		Total net (favorable) adverse loss development		(73,742)		(70,011)		10,147
Accident year catastrophe losses				55,939		52,390		103,907
All other net loss and loss adjustment expense				1,307,853		1,323,132		1,285,193
		Net loss and loss adjustment expense	$	1,290,050	$	1,305,511	$	1,399,247

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Schedule 5 Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2013

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

						SCHEDULE 5
	HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
	VALUATION AND QUALIFYING ACCOUNTS
	(in thousands)
		2013		2012		2011
Allowance for doubtful accounts
	Balance at beginning of year	$	3,622	$	3,668	$	3,639
	Provision expense		2,807		1,584		362
	Amounts written off and other		(652)		(1,630)		(333)
	Balance at end of year	$	5,777	$	3,622	$	3,668

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Consolidated Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statement of Income and Comprehensive Income [Abstract]
Net earnings	$ 407,197	$ 391,240	$ 255,243
Investment gains (losses):
Investment gains (losses) during the period	(240,601)	135,746	195,395
Income tax charge (benefit)	(85,377)	46,779	65,618
Investments gains (losses), net of tax	(155,224)	88,967	129,777
Less reclassification adjustments for:
Net realized investment gain	42,030	30,120	(1,022)
Income tax charge (benefit)	14,711	10,542	(358)
Gains (losses) included in net earnings, net of tax	27,319	19,578	(664)
Net unrealized investment gains (losses)	(182,543)	69,389	130,441
Foreign currency translation adjustment	6,078	(2,720)	(1,740)
Income tax benefit	155	(943)	(1,772)
Foreign currency translation adjustment, net of tax	5,923	(1,777)	32
Other comprehensive income (loss)	(176,620)	67,612	130,473
Comprehensive income (loss)	$ 230,577	$ 458,852	$ 385,716

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Statutory Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statutory Information Table [Abstract]
Statutory policyholders' surplus	$ 2,517,867	$ 2,374,420	$ 2,140,055
Statutory net income	$ 453,649	$ 445,999	$ 294,396

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General Information (Details Textuals) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 USD ($) countries	Sep. 30, 2013 EUR (€)	Dec. 31, 2012 USD ($)	Dec. 31, 2012 EUR (€)
General Information [Abstract]
Number of countries in which The Company underwrites non-correlated specialty insurance products	180
Premiums Receivable, Allowance for Doubtful Accounts	$ 5.8		$ 3.6
The fair value of our obligation related to the forward contract.			3.2
Euros bought in September 2013, per July 2013 forward contract		45.0
Euros sold in September 2013, per 2012 forward contract				€ 45.0

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Shareholder's Equity

12 Months Ended

Dec. 31, 2013

Shareholders' Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

(9) Shareholders' Equity

Treasury Stock

We purchased our common stock as follows:

	2013		2012		2011
Shares of common stock		1,055		5,567		12,645
Total cost	$	42,212	$	178,669	$	373,600
Weighted-average cost per share	$	40.02	$	32.09	$	29.55

Dividends

U.S. insurance companies are limited in the amount of dividends they can pay to their parent by the laws of their state of domicile. The maximum dividends that our direct domestic insurance subsidiaries can pay in 2014 without special permission is $350.8 million.

Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income in our consolidated balance sheets were as follows:

				Foreign		Accumulated
		Net unrealized		currency		other
		investment		translation		comprehensive
		gains (losses)		adjustment		income
Balance at December 31, 2010		$	82,673	$	14,513	$	97,186
Other comprehensive income - 2011			130,441		32		130,473
Balance at December 31, 2011			213,114		14,545		227,659
Other comprehensive income (loss) - 2012			69,389		(1,777)		67,612
Balance at December 31, 2012			282,503		12,768		295,271
Other comprehensive income (loss) - 2013			(182,543)		5,923		(176,620)
	Balance at December 31, 2013	$	99,960	$	18,691	$	118,651

The changes in net unrealized investment gains (losses) during 2013 and 2012, shown in the table above, included reclassifications of amounts into net earnings. The reclassifications recorded in our consolidated statements of earnings were as follows:

		2013		2012
Net realized investment gain		$	42,030	$	31,148
Other-than-temporary impairment credit losses			0		(1,028)
	Total reclassifications before taxes		42,030		30,120
Income tax expense			14,711		10,542
	Total reclassifications	$	27,319	$	19,578

Other

In 2012, we acquired the non-controlling interest of an entity we previously controlled and consolidated, resulting in a decrease in additional paid-in capital of $14.4 million.

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Commitments and Contingencies [Abstract]
2014	$ 12,558
2015	11,459
2016	8,968
2017	6,380
2018	4,021
Thereafter	662
Total future minimum rental payments	$ 44,048

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Schedule 4 Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Life insurance in force
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct amouunt	$ 904,189	$ 977,492	$ 1,070,323
Ceded to other companies	210,475	238,389	261,803
Assumed from other companies	0	0	0
Net amount	693,714	739,103	808,520
Percent of amount assumed to net
Earned premium
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct amouunt	2,482,527	2,396,756	2,308,810
Ceded to other companies	576,631	505,742	522,385
Assumed from other companies	333,344	351,611	340,745
Net amount	2,239,240	2,242,625	2,127,170
Percent of amount assumed to net	15.00%	16.00%	16.00%
Property and liability insurance
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct amouunt	1,499,179	1,483,722	1,477,138
Ceded to other companies	498,794	446,890	473,270
Assumed from other companies	293,256	282,500	273,576
Net amount	1,293,641	1,319,332	1,277,444
Percent of amount assumed to net	23.00%	21.00%	21.00%
Accident and health insurance
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct amouunt	983,348	913,034	831,672
Ceded to other companies	77,837	58,852	49,115
Assumed from other companies	40,088	69,111	67,169
Net amount	$ 945,599	$ 923,293	$ 849,726
Percent of amount assumed to net	4.00%	7.00%	8.00%

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Stock based Compensation (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk free interest rate	1.00%	1.10%	1.40%
Expected volatility	23.00%	31.40%	34.10%
Expected dividend yield	1.80%	2.10%	2.00%
Expected option life	0 years 0 months	6 years 7 months	5 years 10 months

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Acquisitions, Dispositions and Goodwill

12 Months Ended

Dec. 31, 2013

Goodwill [Abstract]

Goodwill

(5)Goodwill

The goodwill balances by reportable segment and the changes in goodwill are shown in the table below.

	U.S. Property		Professional		Accident		U.S. Surety
	& Casualty		Liability		& Health		& Credit		International		Total
Balance at December 31, 2011	$	223,000	$	301,547	$	144,132	$	79,700	$	124,435	$	872,814
Earnout and other		0		12,542		(19)		0		523		13,046
Balance at December 31, 2012		223,000		314,089		144,113		79,700		124,958		885,860
Earnout and other		0		9,104		0		0		236		9,340
Balance at December 31, 2013	$	223,000	$	323,193	$	144,113	$	79,700	$	125,194	$	895,200

We acquired HCC Global Financial Products (HCC Global), which underwrites our U.S. and International directors' and officers' liability business, in 2002. The purchase agreement, as amended, includes a contingency for future earnout payments. The earnout is based on HCC Global's pretax earnings on business written from the acquisition date through September 30, 2007, with no maximum amount due to the former owners. When conditions specified under the purchase agreement are met, we record a net amount owed to or due from the former owners based on our estimate, at that point in time, of how claims will ultimately be settled. This net amount will fluctuate in the future, and the ultimate total net earnout payments cannot be finally determined until all claims are settled or paid. All adjustments to the ultimate purchase price have been, or will be, recorded as an increase or decrease to goodwill. Based on our estimate of ultimate claims settlements during 2013, we increased goodwill by $9.1million. The total HCC Global earnout and related goodwill recognized from the acquisition date through December 31, 2013 was $277.2 million.

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Segments (Tables)

12 Months Ended

Dec. 31, 2013

Segments [Abstract]

Information by business segment

			U.S. Property		Professional		Accident		U.S. Surety						Corporate
			& Casualty		Liability		& Health		& Credit		International		Investing		& Other		Consolidated
Year ended December 31, 2013
Net earned premium			$	367,135	$	368,167	$	883,515	$	194,286	$	413,206	$	0	$	12,931	$	2,239,240
Other revenue				24,266		(7)		4,932		1,468		4,334		262,212		459		297,664
	Segment revenue			391,401		368,160		888,447		195,754		417,540		262,212		13,390		2,536,904
Loss and LAE				175,190		195,429		630,210		24,143		249,199		0		15,879		1,290,050
Other expense				117,910		66,391		130,814		109,550		158,869		0		90,610		674,144
	Segment expense			293,100		261,820		761,024		133,693		408,068		-		106,489		1,964,194
		Segment pretax earnings (loss)	$	98,301	$	106,340	$	127,423	$	62,061	$	9,472	$	262,212	$	(93,099)	$	572,710

Year ended December 31, 2012
Net earned premium			$	354,050	$	394,687	$	831,827	$	207,955	$	412,853	$	0	$	41,253	$	2,242,625
Other revenue				18,865		731		4,918		843		5,005		252,754		86		283,202
	Segment revenue			372,915		395,418		836,745		208,798		417,858		252,754		41,339		2,525,827
Loss and LAE				209,286		229,873		601,076		38,535		189,410		0		37,331		1,305,511
Other expense				116,398		66,721		122,232		113,619		146,807		0		100,112		665,889
	Segment expense			325,684		296,594		723,308		152,154		336,217		-		137,443		1,971,400
		Segment pretax earnings (loss)	$	47,231	$	98,824	$	113,437	$	56,644	$	81,641	$	252,754	$	(96,104)	$	554,427

Total assets by segment

	2013		2012
U.S. Property & Casualty	$	914,697	$	859,597
Professional Liability		1,110,592		1,053,024
Accident & Health		235,950		243,023
U.S. Surety & Credit		168,389		162,817
International		859,659		658,632
Investing		6,800,313		7,018,747
Corporate & Other		254,920		271,967
Total	$	10,344,520	$	10,267,807

Revenue, pretax earnings and total assets by geographical location

Year ended December 31, 2011
Net earned premium			$	333,410	$	410,816	$	758,270	$	210,535	$	368,748	$	0	$	45,391	$	2,127,170
Other revenue				23,951		912		4,684		1,247		5,309		211,245		(513)		246,835
	Segment revenue			357,361		411,728		762,954		211,782		374,057		211,245		44,878		2,374,005
Loss and LAE				201,017		328,503		552,292		52,206		233,879		0		31,350		1,399,247
Other expense				110,184		59,036		116,336		113,932		136,750		0		83,514		619,752
	Segment expense			311,201		387,539		668,628		166,138		370,629		-		114,864		2,018,999
		Segment pretax earnings (loss)	$	46,160	$	24,189	$	94,326	$	45,644	$	3,428	$	211,245	$	(69,986)	$	355,006

	2013		2012		2011
Domestic	$	1,868,557	$	1,880,954	$	1,779,789
Foreign		668,347		644,873		594,216
Total revenue	$	2,536,904	$	2,525,827	$	2,374,005
Domestic	$	443,898	$	364,083	$	237,056
Foreign		128,812		190,344		117,950
Total pretax earnings	$	572,710	$	554,427	$	355,006

	December 31,
	2013		2012
Domestic	$	7,397,509	$	7,536,285
Foreign		2,947,011		2,731,522
Total assets	$	10,344,520	$	10,267,807

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Reinsurance (Details 5) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Calculation of net reserves, net unearned premium and net deferred policy acquisition costs
Loss and loss adjustment expense payable	$ 3,902,132	$ 3,767,850	$ 3,658,317	$ 3,471,858
Reinsurance recoverable on outstanding losses	(459,134)	(479,026)
Reinsurance recoverable on incurred but not reported losses	(663,597)	(539,021)
Net reserves	2,779,401	2,749,803	2,683,483	2,537,772
Unearned premium	1,134,849	1,069,956
Ceded unearned premium	(305,438)	(256,988)
Net unearned premium	829,411	812,968
Deferred policy acquisition costs	201,698	191,960
Deferred ceding commissions	(89,528)	(74,609)
Net deferred policy acquisition costs	$ 112,170	$ 117,351

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Investments (Details 5) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Realized pretax gains-losses-on the sale of investments excluding temporary impairment losses
Gains	$ 46,422	$ 35,515	$ 10,051
Losses	(4,392)	(4,367)	(6,398)
Net realized investment gain (loss)	42,030	31,148	3,653
Fixed Income Securities [Member]
Realized pretax gains-losses-on the sale of investments excluding temporary impairment losses
Gains	20,191	32,644	10,045
Losses	(1,174)	(3,327)	(6,388)
Net realized investment gain (loss)	19,017	29,317	3,657
Others [Member]
Realized pretax gains-losses-on the sale of investments excluding temporary impairment losses
Gains	5,345	2,074	6
Losses	0	(1)	(10)
Net realized investment gain (loss)	5,345	2,073	(4)
Equity Security [Member]
Realized pretax gains-losses-on the sale of investments excluding temporary impairment losses
Gains	20,886	797	0
Losses	(3,218)	(1,039)	0
Net realized investment gain (loss)	$ 17,668	$ (242)	$ 0

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Schedule 2 HCCIH Financial Statements (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating activities
Net earnings	$ 115,010	$ 98,175	$ 88,162	$ 105,850	$ 108,101	$ 107,062	$ 93,493	$ 82,584	$ 407,197	$ 391,240	$ 255,243
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in accounts payable and accrued liabilities									(120,859)	100,091	17,538
Gain on investments									(42,030)	(30,120)	1,026
Other, net									23,700	86,403	9,812
Cash provided by operating activities									262,707	661,147	421,276
Investing activities
Cost of other investments acquired									0	0	(33,060)
Sales of available for sale fixed maturity securities									492,891	639,834	448,766
Sales of equity securities									146,624	14,117	0
Sales of other investments									23,719	21,736	347
Change in short-term investments									181,972	(207,403)	355,468
Maturity or call of available for sale fixed maturity securities									627,041	697,404	573,958
Cost of available for sale fixed maturity securities acquired									(1,346,498)	(1,489,235)	(1,550,587)
Cost of equity securities acquired									345,129	262,528	0
Cash used by investing activities									(235,054)	(618,903)	(196,991)
Financing activities
Advances on line of credit									180,000	185,000	305,000
Payments on line of credit									(110,000)	(80,000)	(125,000)
Payments on convertible notes									0	0	0
Sale of common stock									12,908	59,838	36,044
Purchase of common stock									(47,869)	(173,028)	(373,584)
Dividends paid									(71,967)	(64,345)	(65,822)
Other, net									(3,814)	(2,869)	5,770
Cash used by financing activities									(40,742)	(75,404)	(217,592)
Net decrease in cash									(13,089)	(33,160)	6,693
Cash at beginning of year				71,390				104,550	71,390	104,550	97,857
Cash at end of period	58,301				71,390				58,301	71,390	104,550
Parent Company [Member]
Operating activities
Net earnings									407,197	391,240	255,243
Adjustments to reconcile net earnings to net cash provided by operating activities:
Distributions from subsidiaries in excess of (less than) net earnings									(404,441)	(392,486)	(103,395)
Change in accrued interest receivable added to intercompany loan balances									(9,097)	(3,154)	(5,000)
Change in accounts payable and accrued liabilities									(13,866)	23,629	14,495
Gain on investments									(7,691)	309	1,653
Other, net									28,555	3,947	(10,588)
Cash provided by operating activities									657	23,485	152,408
Investing activities
Cash contributions to subsidiaries									(49,892)	(30,250)	(29,000)
Cost of other investments acquired									0	0	(32,496)
Sales of available for sale fixed maturity securities									78,350	87,099	109,655
Sales of equity securities									39,974	9,780	0
Sales of other investments									23,720	21,736	0
Change in short-term investments									15,911	(20,987)	103,684
Maturity or call of available for sale fixed maturity securities									31,054	105,982	58,189
Cost of available for sale fixed maturity securities acquired									(20,030)	(6,666)	(130,322)
Cost of equity securities acquired									(53,723)	(124,710)	0
Change in receivable/payable from subsidiaries									(18,748)	776	(34,767)
Intercompany loans to subsidiaries for acquisitions									(7,228)	(66,765)	(1,911)
Payments on intercompany loans to subsidiaries									19,157	51,427	43,548
Cash used by investing activities									58,545	27,422	86,580
Financing activities
Issuance of notes payable									0	25,000	0
Advances on line of credit									180,000	185,000	305,000
Payments on line of credit									(110,000)	(80,000)	(125,000)
Payments on convertible notes									0	0	0
Sale of common stock									12,908	59,838	36,044
Purchase of common stock									(47,869)		(373,584)
Dividends paid									(71,967)	(64,345)	(65,822)
Payments on notes payable									(25,000)	0	(13,000)
Other, net									0	0	(2,157)
Cash used by financing activities									(61,928)	(47,535)	(238,519)
Net decrease in cash									(2,726)	3,372	469
Cash at beginning of year				4,932				1,560	4,932	1,560	1,091
Cash at end of period	$ 2,206				$ 4,932				$ 2,206	$ 4,932	$ 1,560