-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LqjNzct1+e58zBSEj1vXgN+rh5uwjO0I4GcE9bO40Og7t6QaGeD5TRyGAZKIG8gX 6YJSL6CoEBqnn/fZH2GE+g== 0000912057-96-009709.txt : 19960701 0000912057-96-009709.hdr.sgml : 19960701 ACCESSION NUMBER: 0000912057-96-009709 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCC INSURANCE HOLDINGS INC/DE/ CENTRAL INDEX KEY: 0000888919 STANDARD INDUSTRIAL CLASSIFICATION: 6331 IRS NUMBER: 760336636 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13790 FILM NUMBER: 96565159 BUSINESS ADDRESS: STREET 1: 13403 NORTHWEST FRWY CITY: HOUSTON STATE: TX ZIP: 77040-6094 BUSINESS PHONE: 7136907300 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended MARCH 31, 1996 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from __________ to __________ Commission file number 0-20766 -------------------------------------------------------- HCC INSURANCE HOLDINGS, INC. - - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 76-0336636 - - - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 13403 NORTHWEST FREEWAY, HOUSTON, TEXAS 77040-6094 - - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (713) 690-7300 - - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. On May 6, 1996, there were 28,420,600 shares of Common Stock, $1 par value issued and outstanding after giving effect of the five for two stock split payable as a dividend to shareholders of record April 30, 1996. The Index to Exhibits is located on page 14. The total number of sequentially numbered pages is 16. 1 HCC INSURANCE HOLDINGS, INC. INDEX PAGE NO. -------- Part I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Balance Sheets March 31, 1996 and December 31, 1995. . . . . . . 3 Condensed Consolidated Statements of Earnings Three Months Ended March 31, 1996 and Three Months Ended March 31, 1995 . . . . . . . . 4 Condensed Consolidated Statements of Changes in Shareholders' Equity Three Months Ended March 31, 1996 and Year Ended December 31, 1995. . . . . . . . . . . 5 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1996 and Three Months Ended March 31, 1995 . . . . . . . . 7 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . 11 Part II. OTHER INFORMATION. . . . . . . . . . . . . . . . . 13 2 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Balance Sheets ---------- MARCH 31, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) ASSETS Investments: Securities available for sale: Fixed income securities, at market (cost: 1996 $232,425,000; 1995 $231,807,000) $ 232,185,000 $ 234,881,000 Marketable equity securities, at market (cost: 1996 $11,107,000; 1995 $10,050,000) 14,876,000 13,752,000 Mortgage loans, at unpaid principal balance, net 81,000 81,000 Real estate, net of accumulated depreciation and amortization (1996 $1,815,000; 1995 $1,780,000) 4,307,000 4,287,000 Short-term investments, at cost, which approximates market 20,744,000 37,061,000 ------------- ------------ Total investments 272,193,000 290,062,000 Cash 6,864,000 3,125,000 Reinsurance recoverables 133,129,000 103,408,000 Premium and other receivables 90,497,000 75,275,000 Ceded unearned premium 62,270,000 73,282,000 Deferred policy acquisition costs 16,590,000 16,431,000 Property and equipment, net 3,625,000 3,842,000 Deferred income tax 3,851,000 2,921,000 Other assets, net 11,980,000 11,993,000 ------------- ------------ TOTAL ASSETS $ 600,999,000 $ 580,339,000 ------------- ------------ ------------- ------------ LIABILITIES Loss and loss adjustment expense payable $ 183,980,000 $ 158,451,000 Reinsurance balances payable 58,939,000 68,463,000 Unearned premium 117,173,000 118,732,000 Deferred ceding commissions 14,051,000 17,497,000 Premium payable 10,681,000 6,514,000 Notes payable 16,250,000 16,250,000 Accounts payable and accrued liabilities 5,260,000 5,894,000 ------------- ------------ Total liabilities 406,334,000 391,801,000 SHAREHOLDERS' EQUITY Common Stock, $1 par value; 50,000,000 shares authorized; (issued and outstanding: 1996 28,420,600 shares and 1995 28,347,005 shares) 28,421,000 28,347,000 Additional paid-in capital 105,271,000 104,744,000 Retained earnings 58,681,000 51,043,000 Unrealized investment loss, net 2,292,000 4,404,000 ------------- ------------ Total shareholders' equity 194,665,000 188,538,000 ------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 600,999,000 $ 580,339,000 ------------- ------------ ------------- ------------ See Notes to Condensed Consolidated Financial Statements. 3 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Statements of Earnings (Unaudited) ---------- FOR THE THREE MONTHS ENDED MARCH 31, 1996 1995 ------ ------ REVENUE Net earned premium $ 23,497,000 $ 18,065,000 Net investment income 3,434,000 2,683,000 Net realized investment gain 812,000 97,000 Fee and commission income 1,086,000 1,048,000 ------------- ------------ Total revenue 28,829,000 21,893,000 EXPENSE Loss and loss adjustment expense 13,038,000 11,276,000 Operating expense: Policy acquisition costs 8,094,000 6,666,000 Compensation expense 1,817,000 1,813,000 Other operating expense 1,689,000 1,477,000 Ceding commissions (6,681,000) (5,637,000) ------------- ------------ Net operating expense 4,919,000 4,319,000 Interest expense 276,000 803,000 Currency conversion (gain) loss 127,000 (218,000) ------------- ------------ Total expense 18,360,000 16,180,000 ------------- ------------ Earnings before income tax provision 10,469,000 5,713,000 Income tax provision 2,831,000 1,423,000 ------------- ------------ NET EARNINGS $ 7,638,000 $ 4,290,000 ------------- ------------ ------------- ------------ EARNINGS PER SHARE DATA: Earnings per share $ 0.26 $ 0.18 ------------- ------------ ------------- ------------ Weighted average shares outstanding 29,388,000 23,656,000 ------------- ------------ ------------- ------------ See Notes to Condensed Consolidated Financial Statements. 4 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Statements of Changes in Shareholders' Equity For the three months ended March 31, 1996 and for the year ended December 31, 1995 (Unaudited) ----------
ADDITIONAL UNREALIZED TOTAL COMMON PAID-IN RETAINED INVESTMENT SHAREHOLDERS' STOCK CAPITAL EARNINGS GAIN (LOSS) EQUITY ----------- ------------ ------------ ------------ ------------ BALANCE AS OF DECEMBER 31, 1994 $ 9,267,000 $ 75,025,000 $ 28,770,000 $(5,301,000) $107,761,000 58,876 shares of Common Stock issued for exercise of options, including tax benefit of $252,000 59,000 770,000 - - 829,000 2,012,500 shares of Common Stock issued in public offering, net of costs 2,013,000 45,957,000 - - 47,970,000 Net earnings - - 22,273,000 - 22,273,000 Unrealized investment gain on fixed income securities, net of deferred tax charge of $4,293,000 - - - 7,973,000 7,973,000 Unrealized investment gain on marketable equity securities, net of deferred tax charge of $934,000 - - - 1,732,000 1,732,000 17,008,203 shares of Common Stock issued for 150% stock dividend (see Note 1) 17,008,000 (17,008,000) - - - ------------ ------------ ------------ ----------- ------------ BALANCE AS OF DECEMBER 31, 1995 $ 28,347,000 $104,744,000 $ 51,043,000 $ 4,404,000 $188,538,000
See Notes to Condensed Consolidated Financial Statements. 5 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Statements of Changes in Shareholders' Equity For the three months ended March 31, 1996 and for the year ended December 31, 1995 (Unaudited) (continued) ----------
ADDITIONAL UNREALIZED TOTAL COMMON PAID-IN RETAINED INVESTMENT SHAREHOLDERS' STOCK CAPITAL EARNINGS GAIN (LOSS) EQUITY ------------ ------------ ------------ ------------ ------------ BALANCE AS OF DECEMBER 31, 1995 $ 28,347,000 $104,744,000 $ 51,043,000 $ 4,404,000 $188,538,000 73,595 shares of Common Stock issued for exercise of options, including tax benefit of $306,000 74,000 527,000 - - 601,000 Net earnings - - 7,638,000 - 7,638,000 Unrealized investment loss on fixed income securities, net of deferred tax benefit of $1,158,000 - - - (2,155,000) (2,155,000) Unrealized investment gain on marketable equity securities, net of deferred tax charge of $24,000 - - - 43,000 43,000 ------------ ------------ ------------ ------------ ------------ BALANCE AS OF MARCH 31, 1996 $ 28,421,000 $105,271,000 $ 58,681,000 $ 2,292,000 $194,665,000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See Notes to Condensed Consolidated Financial Statements. 6 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Statements of Cash Flows (Unaudited) ----------
FOR THE THREE MONTHS ENDED MARCH 31, -------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net earnings $ 7,638,000 $ 4,290,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Change in reinsurance recoverables (29,721,000) (1,825,000) Change in premium and other receivables (15,222,000) (9,474,000) Change in ceded unearned premium 11,012,000 8,902,000 Change in loss and loss adjustment expense payable 25,529,000 3,888,000 Change in reinsurance balances payable (9,524,000) (5,433,000) Change in unearned premium (1,559,000) 6,337,000 Change in premium payable 4,167,000 6,665,000 Depreciation and amortization expense 337,000 267,000 Other, net (4,725,000) (1,540,000) ------------ ------------ Cash provided (used) by operating activities (12,068,000) 12,077,000 Cash flows from investing activities: Sales of fixed income securities 3,465,000 - Maturity or call of fixed income securities 3,720,000 353,000 Sales of equity securities 3,074,000 2,962,000 Cost of investments acquired (11,302,000) (11,920,000) Other, net (68,000) (508,000) ------------ ------------ Cash used by investing activities (1,111,000) (9,113,000) Cash flows from financing activities: Payments on notes payable - (2,250,000) Sale of Common Stock 601,000 557,000 ------------ ------------ Cash provided (used) by financing activities 601,000 (1,693,000) ------------ ------------ Net increase (decrease) in cash and short-term investments (12,578,000) 1,271,000 Cash and short-term investments at beginning of period 40,186,000 24,827,000 ------------ ------------ CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 27,608,000 $ 26,098,000 ------------ ------------ ------------ ------------ Supplemental cash flow information: Interest paid $ 266,000 $ 693,000 ------------ ------------ ------------ ------------ Income tax paid $ 1,253,000 $ 300,000 ------------ ------------ ------------ ------------
See Notes to Condensed Consolidated Financial Statements. 7 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Notes to Condensed Consolidated Financial Statements (Unaudited) (1) GENERAL INFORMATION HCC Insurance Holdings, Inc. ("the Company") and its subsidiaries (collectively, "the Companies") include domestic and foreign property and casualty insurance companies and managing general agents, surplus lines insurance brokers and wholesale insurance and reinsurance brokers. The Company, through its subsidiaries, provides specialized property and casualty insurance to commercial customers, underwritten on both a direct and reinsurance basis, and, to a lesser extent, insurance agency services. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include all adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim periods. All adjustments made to the interim periods are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated. The condensed consolidated financial statements for periods reported should be read in conjunction with the annual consolidated financial statements and notes related thereto. The condensed consolidated balance sheet as of December 31, 1995, and the statement of shareholders' equity for the year then ended were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. INCOME TAX For the three months ended March 31, 1996 and 1995, the income tax provision has been calculated based on an estimated effective tax rate for each of the fiscal years. The difference between the Companies' effective tax rate and the Federal statutory rate is primarily the result of nontaxable municipal bond interest included in pretax income. EARNINGS PER SHARE Earnings per share are based on the weighted average number of common and common equivalent shares outstanding during the period divided into net earnings. Outstanding common stock options, when dilutive, are considered to be common stock equivalents for the purpose of this calculation. The treasury stock method is used to calculate common stock equivalents due to options. There is no difference between primary and fully diluted earnings per share. STOCK SPLIT In April, 1996, the Board of Directors declared a five for two stock split in the form of a 150% stock dividend on the Company's $1.00 par value Common Stock, payable to shareholders of record April 30, 1996. The par value of the Company's Common Stock remains unchanged. As of March 31, 1996, the $17.1 million par value of additional shares to be issued was transferred from additional paid-in capital to Common Stock. All per share and weighted average shares outstanding data presented in the condensed consolidated financial statements and notes thereto have been adjusted to reflect the effects of the split. The issued and outstanding shares presented in the condensed consolidated balance sheet as of December 31, 1995, have also been adjusted to reflect the effects of the split. RECLASSIFICATIONS Certain amounts in the 1995 condensed consolidated financial statements have been reclassified to conform to the 1996 presentation. Such reclassifications had no effect on the Company's shareholders' equity, net earnings or cash flows. 8 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (2) REINSURANCE In the normal course of business the Company's insurance company subsidiaries cede a substantial portion of their premium to unrelated domestic and foreign reinsurers through quota share, surplus, excess of loss and facultative reinsurance agreements. Although the ceding of reinsurance does not discharge the primary insurer from liability to its policyholder, the subsidiaries participate in such agreements for the purpose of limiting their loss exposure and diversifying their business. In addition, certain of the insurance company subsidiaries' business was assumed from other unrelated insurance and reinsurance companies. The following table represents the approximate effect of such reinsurance transactions on net premium and loss and loss adjustment expense: LOSS AND LOSS WRITTEN PREMIUM ADJUSTMENT PREMIUM EARNED EXPENSE ------------- ------------- ------------ For the three months ended March 31, 1996: Direct business $ 14,300,000 $ 25,803,000 $ 16,925,000 Reinsurance assumed 40,969,000 31,224,000 38,692,000 Reinsurance ceded (22,518,000) (33,530,000) (42,579,000) ------------- ------------- ------------ NET AMOUNTS $ 32,751,000 $ 23,497,000 $ 13,038,000 ------------- ------------- ------------ ------------- ------------- ------------ For the three months ended March 31, 1995: Direct business $ 18,855,000 $ 20,935,000 $ 16,437,000 Reinsurance assumed 32,754,000 24,537,000 13,913,000 Reinsurance ceded (18,505,000) (27,407,000) (19,074,000) ------------- ------------- ------------ NET AMOUNTS $ 33,104,000 $ 18,065,000 $ 11,276,000 ------------- ------------- ------------ ------------- ------------- ------------ Substantially all of the reinsurance assumed in the three months ended March 31, 1996 and 1995, respectively, was underwritten directly by the Companies but issued by other companies in order to satisfy local licensing or other requirements, predominantly on non-U.S.A. business. The table below represents the approximate composition of reinsurance recoverables in the accompanying condensed consolidated balance sheets: MARCH 31, DECEMBER 31, 1996 1995 ------------- ------------- Reinsurance recoverable on paid losses $ 22,099,000 $ 13,678,000 Reinsurance recoverable on outstanding losses 106,569,000 83,847,000 Reinsurance recoverable on IBNR 7,061,000 8,278,000 Reserve for uncollectible reinsurance (2,600,000) (2,395,000) ------------- ------------- Total reinsurance recoverables $ 133,129,000 $ 103,408,000 ------------- ------------- ------------- ------------- 9 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (2) REINSURANCE, CONTINUED The Companies require reinsurers not authorized by the Texas Department of Insurance to collateralize their reinsurance obligations to the Companies with letters of credit or cash deposits. At March 31, 1996, the Companies held letters of credit and cash deposits in the amounts of $66.8 million and $16.0 million, respectively, to collateralize certain reinsurance balances. The Companies have established a reserve of $2.6 million as of March 31, 1996, to reduce the effects of any recoverable problems. In order to minimize their exposure to reinsurance credit risk, the Companies evaluate the financial condition of the reinsurers and place their reinsurance with a diverse group of financially sound companies. (3) PENDING ACQUISITION On January 8, 1996, the Company announced that it had reached an agreement in principle to acquire all of the outstanding shares of common stock of LDG Management Company Incorporated and affiliated companies ("LDG") in exchange for 6,250,000 shares of the Company's Common Stock. This business combination will be accounted for as a pooling of interests. The principal shareholder of LDG is a director of the Company. A definitive Agreement and Plan of Reorganization was executed effective as of February 22, 1996. The agreement is subject to approval by the shareholders of both companies, regulatory approval and other conditions to closing. The Company intends to issue 6,250,000 shares of its Common Stock provided that the average trading price of the Common Stock is at least $14.40 per share. If the average trading price is less than $14.40 per share, the shareholders of LDG shall be entitled to receive the number of shares of the Company's Common Stock equal to the quotient of $90,000,000 divided by the average trading price of the Company's Common Stock over a measuring period prior to the business combination. If the average trading price of the Company's Common Stock is less than $13.20 per share, each of LDG and the Company have the right to terminate the agreement. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 1996 VERSUS QUARTER ENDED MARCH 31, 1995. Gross written premium increased 7% to $55.3 million for the first quarter of 1996 from $51.6 million for the same period in 1995. This is slower growth than previously reported due in part to the planned reduction in offshore energy business as a result of reckless competition driving rates below an acceptable level and the softening of marine rates. However, on the positive side, property and aviation, which is still the Company's fastest growing line, both continue to grow profitably. Net written premium for the first quarter of 1996 decreased 1% to $32.8 million from $33.1 million for the same period in 1995, however, the first quarter 1995 was inflated by the initial impact of the reduction in the amount of non-catastrophe proportional reinsurance purchased by the Company. Net earned premium increased 30% to $23.5 million for the first quarter of 1996 from $18.1 million for the same period in 1995, with much of the growth coming from aviation, where substantially more premium is retained by the Company due to the lack of catastrophe exposure in the business written. Fee and commission income increased 4% to $1.1 million for the first quarter of 1996 compared to $1.0 million for the same period in 1995. The Company expects fee and commission income to increase substantially during the remainder of 1996 due to the effects of the pending LDG merger as well as the probability of large new and renewal individual commission items. Net investment income increased 28% to $3.4 million for the first quarter of 1996 compared to $2.7 million for the same period in 1995 reflecting a higher level of investment assets. Net realized investment gains from sales of equity securities were $917,000 during the first quarter of 1996 compared to gains of $100,000 for the same period in 1995. Net realized investment losses from disposition of fixed income securities were $105,000 during the first quarter of 1996 compared to losses of $3,000 for the same period in 1995. Loss and LAE increased $1.8 million or 16% during the first quarter of 1996, to $13.0 million, reflecting the overall increase in business, however the Company's GAAP loss ratio decreased to 55.5% from 62.4%. Other operating expense increased 14% to $1.7 million for the first quarter of 1996. These expenses reflect increased expenditures required to meet the overall growth in business. Goodwill amortization expense was $72,000 for the first quarters of both 1996 and 1995 and is included in other operating expense. Interest expense decreased 66% to $276,000 during the first quarter of 1996 from $803,000 due to the reduced level of indebtedness as a portion of the proceeds of the June, 1995 public offering of Common Stock was used to retire debt. During the first quarter of 1996, currency conversion losses amounted to $127,000 compared to gains of $218,000 for the same period in 1995. 11 Net earnings increased 78% to $7.6 million for the first quarter of 1996 from $4.3 million for the same period in 1995. This increase was principally a result of higher underwriting profit, higher investment income and increased net realized investment gains. Earnings per share increased 44% to $0.26 for the first quarter of 1996 from $0.18 for the first quarter of 1995. This reflects a 78% increase in net earnings partially offset by a 24% increase in weighted average shares outstanding as a result of the 1995 public offering of Common Stock. The Company's insurance company subsidiaries' statutory combined ratio was 79.8% for the first quarter of 1996, as compared to 81.8% for the same period in 1995. The Company's combined ratio remains under 100%, significantly better than the industry average. The Company's book value per share was $6.85 as of March 31, 1996, up from $6.65 as of December 31, 1995. Earnings added $0.27 per share to book value during the first quarter of 1996, while the unrealized loss incurred during the quarter on the investment portfolio, which is entirely marked-to-market, amounted to $2.1 million, net of tax, or $0.07 per share. LIQUIDITY AND CAPITAL RESOURCES The Company's consolidated cash and investment portfolio decreased $14.1 million or 5% since December 31, 1995, and totalled $279.1 million as of March 31, 1996, of which $27.6 million was cash and short-term investments. This decrease was as a result of unusually large claim payments during the first quarter of 1996 in advance of the collection of the related reinsurance recoverables and in addition, substantial payments for reinsurance protections purchased during the first quarter of 1996. The Company expects cash and investments to increase during the remainder of 1996. Total assets increased to $601.0 million as of March 31, 1996, from $580.3 million as of December 31, 1995. FORWARD-LOOKING STATEMENTS IN THIS FORM 10-Q ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. INVESTORS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTY, INCLUDING WITHOUT LIMITATION, THE RISK OF A SIGNIFICANT NATURAL DISASTER, THE INABILITY OF THE COMPANY TO REINSURE CERTAIN RISKS, THE ADEQUACY OF ITS LOSS RESERVES, CHANGING REGULATIONS IN FOREIGN COUNTRIES, AS WELL AS GENERAL MARKET CONDITIONS, COMPETITION AND PRICING. PLEASE REFER TO THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS, COPIES OF WHICH ARE AVAILABLE FROM THE COMPANY WITHOUT CHARGE, FOR FURTHER INFORMATION. 12 Part II - Other Information Item 1. LEGAL PROCEEDINGS: There are no material pending legal proceedings to which the registrant is a party or of which any of the property of the registrant is the subject, except for claims arising in the ordinary course of business of its wholly owned insurance company subsidiaries, none of which are considered material. Item 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: The exhibits listed on the accompany Index to Exhibits on page 14 are filed as part of this report. (b) Reports on Form 8-K: On January 8, 1996, the Registrant filed a report on Form 8-K reporting the agreement in principle to acquire all of the outstanding shares of Common Stock of LDG Management Company Incorporated and affiliated companies. SIGNATURES Pursuant to the requirements 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) May 14, 1996 s/s Frank J. Bramanti - - - ------------------- --------------------------------------- (Date) Frank J. Bramanti, Executive Vice President and Chief Financial Officer 13 INDEX TO EXHIBITS 11 - Statement Regarding Computation of Earnings Per Share. 27 - EDGAR Financial Statement Schedule 14 EX-11 2 EXHIBIT 11 Exhibit 11 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
=============================================================================== FOR THE THREE MONTHS ENDED MARCH 31, 1996 1995 - - - -------------------------------------------------------------------------------- Net earnings $ 7,638,000 $ 4,290,000 ----------- ----------- ----------- ----------- Primary: Weighted average Common Stock and common stock equivalents outstanding 29,388,000 23,656,000 ----------- ----------- ----------- ----------- Earnings per share $ 0.26 $ 0.18 ----------- ----------- ----------- ----------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 28,421,000 9,324,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,001,000 151,000 Changes in Common Stock for issuance (34,000) (13,000) Effect of five for two stock split (1) - 14,194,000 ----------- ----------- Weighted average Common Stock and common stock equivalents outstanding 29,388,000 23,656,000 ----------- ----------- ----------- ----------- Fully Diluted: Weighted average Common Stock and common stock equivalents outstanding 29,522,000 23,669,000 ----------- ----------- ----------- ----------- Earnings per share $ 0.26 $ 0.18 ----------- ----------- ----------- ----------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 28,421,000 9,324,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,101,000 143,000 Effect of five for two stock split (1) - 14,202,000 ----------- ----------- Weighted average Common Stock and common stock equivalents outstanding 29,522,000 23,669,000 ----------- ----------- ----------- -----------
(1) In April, 1996, the Board of Directors declared a five for two stock split in the form of a 150% stock dividend on the Company's $1.00 par value Common Stock, payable to shareholders of record April 30, 1996. The par value of the Company's Common Stock remains unchanged. Adjustments have been made to 1995 amounts to present weighted average shares outstanding and earnings per share on a consistent basis. EX-27 3 EXHIBIT 27
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 232,185,000 0 0 14,876,000 81,000 4,307,000 272,193,000 6,864,000 133,129,000 16,590,000 600,999,000 183,980,000 117,173,000 0 0 16,250,000 0 0 28,421,000 166,244,000 600,999,000 23,497,000 3,434,000 812,000 1,086,000 13,038,000 8,094,000 (3,175,000) 10,469,000 2,831,000 7,638,000 0 0 0 7,638,000 0.26 0.26 66,326,000 0 0 0 0 70,350,000 0
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