8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
November 3, 2009

HCC INSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13790	76-0336636
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

13403 Northwest Freeway
Houston, Texas	77040-6094
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 690-7300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

     On November 3, 2009, HCC Insurance Holdings, Inc. announced its results for the Third Quarter of 2009. A press release setting forth the announcement is furnished as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

No.	Exhibit
99.1	Earnings Press Release dated November 3, 2009

     The information contained herein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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 hereunto duly authorized.

	HCC INSURANCE HOLDINGS, INC.
Date: November 3, 2009
	By:	/s/ Randy D. Rinicella
		Randy D. Rinicella,
		Senior Vice President and General Counsel

EXHIBIT INDEX

No.	Exhibit
99.1	Earnings Press Release dated November 3, 2009

EX-99.1

Exhibit 99.1

HCC INSURANCE HOLDINGS REPORTS RESULTS
FOR 2009 THIRD QUARTER AND FIRST NINE MONTHS

HOUSTON (November 3, 2009) . . .
HCC Insurance Holdings, Inc. (NYSE: HCC) today released earnings for the third quarter and first nine months of 2009, which ended September 30.

Net earnings for the third quarter of 2009 were $94.3 million, compared with $58.4 million during the third quarter of 2008. Net earnings per diluted share were $0.83 for the third quarter of 2009, compared to $0.50 for the same quarter of 2008. Net earnings for the first nine months of 2009 were $269.1 million, versus $230.5 million for the first nine months of the previous year. Net earnings per diluted share were $2.37 for the first nine months of 2009, versus $1.99 for the same period of 2008.

“HCC has delivered another strong quarter despite a very competitive insurance market and a challenging economic environment. During the third quarter, we continued to grow shareholder value. Since December 31, 2007, our book value per share has increased 25%, reflecting growth in our net earnings driven by continued underwriting and investment execution,” HCC President and Chief Executive Officer John N. Molbeck, Jr. said.

Book value per share at September 30, 2009 increased to $26.54 per share, compared to $25.01 per share at June 30, 2009 and $23.27 at December 31, 2008. The Company’s annualized return on average equity for the first nine months of 2009 was 12.8%.

The GAAP combined ratio for the third quarter of 2009 was 82.7%, compared to 88.0% for the third quarter of 2008. The GAAP combined ratio for the first nine months of 2009 was 84.6%, versus 85.3% for the corresponding period of 2008. The prior year combined ratios include losses from the 2008 hurricanes.

“Our 2009 accident year combined ratio of 87.6% for the quarter and 87.0% for the nine months ended September 30 compares very favorably to our peers,” Mr. Molbeck commented.

Gross written premium of HCC’s insurance company subsidiaries for the third quarter of 2009 increased to $620.4 million, compared to $613.0 million for the same quarter of 2008. Net written premium was $493.3 million during the third quarter of 2009, compared to $495.6 million during the 2008 third quarter. Net earned premium increased to $520.1 million in the third quarter of 2009, compared to $505.0 million in the same quarter of 2008. Gross written premium reflects growth in the diversified financial

1

products and London market account lines of business, as well as new premium from HCC’s acquisitions during 2008.

For the first nine months of 2009, gross written premium was $1.9 billion, net written premium was $1.5 billion and net earned premium was $1.5 billion, all of which were relatively flat compared to the first nine months of 2008.

“Our premium performance for both the quarter and year-to-date is impressive. Moreover, our year-to-date 2009 premium also reflects a reduction resulting from the discontinuance of an assumed quota share agreement and the sale of our U.K. motor business, both of which occurred in mid-2008,” Mr. Molbeck said.

During the third quarter of 2009, HCC had net favorable prior year reserve development of $25.4 million compared to net favorable prior year reserve development of $44.0 million for the same period in 2008. For the first nine months of 2009, the Company recorded $36.6 million of net favorable prior year reserve development, compared to net favorable prior year reserve development of $58.4 million for the same period in 2008. The favorable 2009 reserve development was primarily from 2006 and prior underwriting years’ reserves.

As announced in the Second Quarter 2009 earnings release, HCC commuted an assumed reinsurance contract with a cedent in July 2009 for $43.9 million. The commutation had no material effect on net earnings, but increased the net paid loss ratio for the third quarter and nine months of 2009 by 8.5 and 2.9 percentage points, respectively.

Total revenue in the third quarter of 2009 increased to $601.8 million, from $566.3 million in the same quarter of 2008. Total revenue increased to $1.8 billion for the first nine months of 2009, compared to $1.7 billion for the first nine months of 2008.

Fee and commission income was $88.1 million in the first nine months of 2009, compared to $100.0 million in the same period of 2008.

Investment income increased to $48.1 million during the third quarter of 2009, compared to $36.0 million during the third quarter of 2008, primarily due to the effect of losses on alternative investments in 2008 and higher income from fixed income securities in 2009. On a year-to-date basis, investment income grew to $141.7 million in 2009 from $130.8 million in 2008.

HCC’s fixed income securities generated $47.6 million in investment income in the 2009 third quarter, versus $44.2 million in the 2008 third quarter. Investment income from fixed income securities was $140.5 million for the first nine months of 2009, compared to $129.5 million for the first nine months of 2008, as the Company’s fixed income investments increased 24% to $4.9 billion at September 30, 2009 from $3.9 billion at September 30, 2008. HCC’s income from short-term investments was $1.5 million in the third quarter of 2009, compared to $6.8 million in the third quarter of 2008 and $4.9

2

million in the first nine months of 2009, compared to $20.4 million in the first nine months of 2008.

As of September 30, 2009, HCC’s fixed income securities portfolio had an average rating of AA+, an average duration of 4.7 years and an average tax equivalent yield of 4.9%. The Company held $6.4 million of subprime-related and Alt-A securities, which had an average rating of A-, and owned no CDO or CLO securities. HCC has never been a counterparty to any credit default swap.

Pretax other operating income was $1.4 million for the 2009 third quarter, compared to $4.8 million for the same period in 2008. Pretax other operating income was $29.8 million for the first nine months of 2009, compared to $10.8 million for the same period in 2008.

As of September 30, 2009, total investments were $5.5 billion, total assets were $9.0 billion, shareholders’ equity was $3.0 billion and the Company’s debt to total capital ratio was 13.0%.

This quarter HCC announced the sales of its investment in SureTec Financial Corp. and its London reinsurance broker, Rattner Mackenzie Limited. The Company also announced the opening of its Texas surety office.

For further information about HCC’s quarter and year-to-date financial results, the supplemental financial schedules are accessible on the Company’s website at http://www.hcc.com, as well as directly in the Investor Relations section of HCC’s website at http://ir.hcc.com.

(Note: If clicking on the above links does not open in a new web page, please cut and paste the above urls into your browser’s address bar.)

HCC will hold an open conference call beginning at 8:00 a.m. Central Standard Time on Wednesday, November 4. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161. In addition, there will be a live webcast available on a listen-only basis that can be accessed through the HCC website at http://www.hcc.com. The webcast replay will be archived in the Investor Relations section of the HCC website through Friday, February 26, 2010.

Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading international specialty insurance group with offices across the United States and in the United Kingdom, Spain and Ireland. As of September 30, 2009, HCC had assets of $9.0 billion and shareholders’ equity of $3.0 billion. HCC is rated AA (Very Strong) by Standard & Poor’s and AA (Very Strong) by Fitch Ratings. In addition, HCC’s major domestic insurance companies are rated A+ (Superior) by A.M. Best Company.

For more information about HCC, please visit http://www.hcc.com.

3

Contact: Jen Browne, Investor Relations Coordinator
HCC Insurance Holdings, Inc.
Telephone: (713) 996-1144

Forward-looking statements contained in this press release are made under “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission.

* * * * *

4

HCC Insurance Holdings, Inc. and Subsidiaries
Financial Highlights
(Unaudited, in thousands except per share data)

	Nine months ended						Three months ended
	September 30,						September 30,
	2009			2008			2009			2008
				(as adjusted) (a)						(as adjusted) (a)
Gross written premium	$	1,904,086		$	1,887,556		$	620,382		$	612,964
Net written premium		1,527,889			1,556,382			493,287			495,585
Net earned premium		1,524,425			1,505,128			520,059			504,972
Fee and commission income		88,113			99,558			31,687			37,795
Net investment income		141,740			130,832			48,111			35,962
Other operating income		29,824			10,829			1,405			4,828
Total revenue		1,783,675			1,727,557			601,801			566,319
Net earnings		269,076			230,521			94,321			58,391
Earnings per share (diluted)	$	2.37		$	1.99		$	0.83		$	0.50
Weighted-average shares outstanding (diluted) (millions)		112.9			115.9			112.9			115.4
GAAP net loss ratio		59.8	%		61.2	%		58.4	%		64.3	%
GAAP combined ratio		84.6	%		85.3	%		82.7	%		88.0	%
Paid loss ratio		55.0	%		51.3	%		60.2	%		52.6	%

	September 30,			December 31,
	2009			2008
				(as adjusted) (a)
Total investments	$	5,452,227		$	4,804,283
Total assets		9,041,026			8,332,000
Shareholders’ equity		2,987,421			2,640,023
Debt to total capital		13.0	%		11.5	%
Book value per share	$	26.54		$	23.27

(a) Certain amounts changed due to 1/1/2009 adoption of new accounting standards.

S-1

HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)

	September 30,			December 31,
	2009			2008
				(as adjusted) (a)
ASSETS
Investments:
Fixed income securities — available for sale, at fair value	$	4,784,343		$	4,133,165
Fixed income securities — held to maturity, at amortized cost		103,286			123,553
Short-term investments		559,907			497,477
Other investments		4,691			50,088
Total investments		5,452,227			4,804,283
Cash		56,874			27,347
Restricted cash and cash investments		183,769			174,905
Premium, claims and other receivables		602,957			770,823
Reinsurance recoverables		1,046,548			1,054,950
Ceded unearned premium		261,346			234,375
Ceded life and annuity benefits		62,645			64,235
Deferred policy acquisition costs		203,031			188,652
Goodwill		824,658			858,849
Other assets		141,287			153,581
Assets held for sale		205,684			—
Total assets	$	9,041,026		$	8,332,000
LIABILITIES
Loss and loss adjustment expense payable	$	3,529,217		$	3,415,230
Life and annuity policy benefits		62,645			64,235
Reinsurance balances payable		147,313			122,189
Unearned premium		1,035,476			977,426
Deferred ceding commissions		69,553			63,123
Premium and claims payable		190,347			405,287
Notes payable		444,682			343,649
Accounts payable and accrued liabilities		409,474			300,838
Liabilities related to assets held for sale		164,898			—
Total liabilities		6,053,605			5,691,977
SHAREHOLDERS’ EQUITY
Common stock		117,216			116,457
Additional paid-in capital		902,917			881,534
Retained earnings		1,907,923			1,677,831
Accumulated other comprehensive income		158,164			27,536
Treasury stock		(98,799	)		(63,335	)
Total shareholders’ equity		2,987,421			2,640,023
Total liabilities and shareholders’ equity	$	9,041,026		$	8,332,000

(a) Certain amounts changed due to 1/1/2009 adoption of new accounting standards.

S-2

HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited, in thousands except per share data)

	Nine months ended						Three months ended
	September 30,						September 30,
	2009			2008			2009			2008
				(as adjusted) (a)						(as adjusted) (a)
REVENUE
Net earned premium	$	1,524,425		$	1,505,128		$	520,059		$	504,972
Fee and commission income		88,113			99,558			31,687			37,795
Net investment income		141,740			130,832			48,111			35,962
Other operating income		29,824			10,829			1,405			4,828
Net realized investment gain (loss)		4,852			(12,761	)		864			(12,808	)
Other-than-temporary impairment loss:
Total loss		(6,089	)		(6,029	)		(380	)		(4,430	)
Portion recognized in equity, before tax		810			—			55			—
Net loss recognized in earnings		(5,279	)		(6,029	)		(325	)		(4,430	)
Total revenue		1,783,675			1,727,557			601,801			566,319
EXPENSE
Loss and loss adjustment expense, net		911,944			920,433			303,808			324,506
Policy acquisition costs, net		271,358			284,695			92,418			96,582
Other operating expense		195,509			174,420			64,985			57,702
Interest expense		11,816			14,547			3,549			4,768
Total expense		1,390,627			1,394,095			464,760			483,558
Earnings before income tax expense		393,048			333,462			137,041			82,761
Income tax expense		123,972			102,941			42,720			24,370
Net earnings	$	269,076		$	230,521		$	94,321		$	58,391
Basic earnings per share data:
Net earnings per share	$	2.39		$	2.00		$	0.84		$	0.51
Weighted-average shares outstanding (millions)		112.2			115.2			111.9			114.8
Diluted earnings per share data:
Net earnings per share	$	2.37		$	1.99		$	0.83		$	0.50
Weighted-average shares outstanding (millions)		112.9			115.9			112.9			115.4
Cash dividends declared, per share	$	0.385		$	0.345		$	0.135		$	0.125

(a) Certain amounts changed due to 1/1/2009 adoption of new accounting standards.

S-3

HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

	Nine months ended
	September 30,
	2009			2008
				(as adjusted) (a)
Operating activities:
Net earnings	$	269,076		$	230,521
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables		36,443			22,705
Change in reinsurance recoverables		14,853			(119,825	)
Change in ceded unearned premium		(25,093	)		6,121
Change in loss and loss adjustment expense payable		51,519			278,156
Change in reinsurance balances payable		24,548			(4,344	)
Change in unearned premium		39,441			41,162
Change in premium and claims payable, net of restricted cash		(63,727	)		(105,135	)
Change in accounts payable and accrued liabilities		22,132			(49,446	)
Change in trading securities		—			49,091
Stock-based compensation expense		12,472			9,990
Depreciation and amortization expense		11,796			10,436
(Gain) loss on investments		(3,152	)		26,367
Other, net		27,238			5,376
Cash provided by operating activities		417,546			401,175
Investing activities:
Sales of available for sale fixed income securities		337,615			421,677
Maturity or call of available for sale fixed income securities		260,839			255,439
Maturity or call of held to maturity fixed income securities		86,190			—
Cost of available for sale fixed income securities acquired		(1,020,506	)		(1,088,234	)
Cost of held to maturity fixed income securities acquired		(59,677	)		—
Cost of other investments acquired		—			(36,735	)
Change in short-term investments		(91,617	)		33,665
Proceeds from sales of strategic and other investments		114,940			54,355
Payments for purchase of businesses, net of cash received		(37,995	)		(73,996	)
Proceeds from sale of assets of business		6,188			—
Other, net		(13,109	)		(3,203	)
Cash used by investing activities		(417,132	)		(437,032	)
Financing activities:
Advances on line of credit		115,000			106,000
Payments on line of credit and notes payable		(15,032	)		(56,000	)
Sale of common stock		9,423			13,884
Purchase of common stock		(35,464	)		(21,870	)
Dividends paid		(42,244	)		(38,061	)
Other, net		(2,570	)		13,013
Cash provided by financing activities		29,113			16,966
Net increase (decrease) in cash		29,527			(18,891	)
Cash at beginning of period		27,347			39,135
Cash at end of period	$	56,874		$	20,244

(a) Certain amounts changed due to 1/1/2009 adoption of new accounting standards.

S-4

HCC Insurance Holdings, Inc. and Subsidiaries
Gross Written Premium
(Unaudited, in thousands)

	Nine months ended							Three months ended
	September 30,							September 30,
	2009		2008		Change			2009		2008		Change
Diversified financial products
D&O (1)	$	361,108	$	301,152		20	%	$	128,398	$	113,996		13	%
E&O (2)		188,166		200,261		(6	)		60,309		66,219		(9	)
Other Professional Liability		62,218		44,605		39			17,637		16,585		6
U.S. Surety & Credit		148,444		140,135		6			52,105		49,792		5
International Surety & Credit		55,149		58,767		(6	)		15,574		15,022		4
		815,085		744,920		9			274,023		261,614		5
Group life, accident & health
Medical Stop-loss		473,273		463,298		2			157,429		152,412		3
Other Medical		97,422		101,043		(4	)		33,963		33,808		—
Other		65,323		64,873		1			19,297		24,710		(22	)
		636,018		629,214		1			210,689		210,930		—
Aviation		133,913		147,268		(9	)		50,162		50,639		(1	)
London market account
Energy		92,277		86,196		7			14,645		16,742		(13	)
Other		69,198		67,832		2			12,609		14,488		(13	)
		161,475		154,028		5			27,254		31,230		(13	)
Other specialty lines
Public Risk		52,071		31,403		66			16,194		10,110		60
HCC Lloyds		33,349		62,127		(46	)		9,736		15,702		(38	)
Other		72,173		113,831		(37	)		32,312		32,613		(1	)
		157,593		207,361		(24	)		58,242		58,425		—
Discontinued lines		2		4,765		nm			12		126		nm
Total	$	1,904,086	$	1,887,556		1	%	$	620,382	$	612,964		1	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm — Not meaningful comparison

S-5

HCC Insurance Holdings, Inc. and Subsidiaries
Net Written Premium
(Unaudited, in thousands)

	Nine months ended								Three months ended
	September 30,								September 30,
	2009			2008		Change			2009			2008		Change
Diversified financial products
D&O (1)	$	260,832		$	223,322		17	%	$	93,691		$	86,003		9	%
E&O (2)		164,264			181,507		(9	)		52,905			59,114		(11	)
Other Professional Liability		46,365			30,743		51			10,932			10,389		5
U.S. Surety & Credit		139,715			135,184		3			47,921			46,638		3
International Surety & Credit		49,953			51,946		(4	)		14,818			13,412		10
		661,129			622,702		6			220,267			215,556		2
Group life, accident & health
Medical Stop-loss		473,271			463,299		2			157,429			152,414		3
Other Medical		97,422			101,043		(4	)		33,963			33,808		—
Other		21,745			30,770		(29	)		6,375			9,061		(30	)
		592,438			595,112		—			197,767			195,283		1
Aviation		95,655			106,996		(11	)		34,779			37,116		(6	)
London market account
Energy		50,286			56,265		(11	)		2,551			6,100		(58	)
Other		42,955			40,877		5			10,149			10,946		(7	)
		93,241			97,142		(4	)		12,700			17,046		(25	)
Other specialty lines
Public Risk		39,647			21,558		84			11,796			6,711		76
HCC Lloyds		27,489			54,500		(50	)		8,572			13,391		(36	)
Other		18,313			53,609		(66	)		7,419			10,404		(29	)
		85,449			129,667		(34	)		27,787			30,506		(9	)
Discontinued lines		(23	)		4,763		nm			(13	)		78		nm
Total	$	1,527,889		$	1,556,382		(2	)%	$	493,287		$	495,585		—	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm — Not meaningful comparison

S-6

HCC Insurance Holdings, Inc. and Subsidiaries
Net Earned Premium
(Unaudited, in thousands)

	Nine months ended								Three months ended
	September 30,								September 30,
	2009			2008		Change			2009			2008		Change
Diversified financial products
D&O (1)	$	274,712		$	229,695		20	%	$	102,224		$	78,694		30	%
E&O (2)		177,582			167,795		6			59,300			59,315		—
Other Professional Liability		30,481			21,793		40			9,714			7,156		36
U.S. Surety & Credit		135,436			124,181		9			45,709			42,037		9
International Surety & Credit		50,429			49,914		1			17,778			16,093		10
		668,640			593,378		13			234,725			203,295		15
Group life, accident & health
Medical Stop-loss		473,271			463,321		2			157,429			152,413		3
Other Medical		100,816			89,465		13			34,587			32,325		7
Other		23,511			29,407		(20	)		7,411			9,655		(23	)
		597,598			582,193		3			199,427			194,393		3
Aviation		98,514			105,125		(6	)		33,053			35,413		(7	)
London market account
Energy		34,985			44,911		(22	)		12,546			14,488		(13	)
Other		40,602			35,913		13			13,662			12,941		6
		75,587			80,824		(6	)		26,208			27,429		(4	)
Other specialty lines
Public Risk		28,853			18,769		54			11,046			6,504		70
HCC Lloyds		30,479			50,236		(39	)		9,539			16,962		(44	)
Other		24,777			69,841		(65	)		6,074			20,954		(71	)
		84,109			138,846		(39	)		26,659			44,420		(40	)
Discontinued lines		(23	)		4,762		nm			(13	)		22		nm
Total	$	1,524,425		$	1,505,128		1	%	$	520,059		$	504,972		3	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm — Not meaningful comparison

S-7

HCC Insurance Holdings, Inc. and Subsidiaries
Net Investment Income and Unrealized Gain (Loss)
(Unaudited, in thousands)

	Nine months ended						Three months ended
	September 30,						September 30,
	2009			2008			2009			2008
Sources of net investment income:
Fixed income securities
Taxable	$	78,894		$	72,716		$	26,795		$	25,394
Exempt from U.S. income taxes		61,589			56,795			20,776			18,821
Total fixed income securities		140,483			129,511			47,571			44,215
Short-term investments		4,943			20,408			1,464			6,837
Alternative investments		(958	)		(16,735	)		—			(14,321	)
Other investments		—			575			—			77
Total investment income		144,468			133,759			49,035			36,808
Investment expense		(2,728	)		(2,927	)		(924	)		(846	)
Net investment income	$	141,740		$	130,832		$	48,111		$	35,962
Unrealized gain (loss) on available for sale fixed income securities:
Increase (decrease) in unrealized gain/loss for period, before tax	$	193,870		$	(123,100	)	$	135,831		$	(63,985	)
Unrealized gain at September 30, 2009	$	208,496
Unrealized gain at June 30, 2009	$	72,665
Unrealized gain at March 31, 2009	$	59,977
Unrealized gain at December 31, 2008	$	14,626

S-8

HCC Insurance Holdings, Inc. and Subsidiaries
Net Loss Ratios
(Unaudited, in thousands)

	Nine months ended						Nine months ended					Twelve months ended
	September 30, 2009						September 30, 2008					December 31, 2008
	Net Earned			Loss			Net Earned		Loss			Net Earned		Loss
	Premium			Ratio			Premium		Ratio			Premium		Ratio
Diversified financial products
D&O (1)	$	274,712			61.1	%	$	229,695		57.6	%	$	312,135		59.0	%
E&O (2)		177,582			48.9			167,795		47.6			227,667		50.0
Other Professional Liability		30,481			39.9			21,793		40.7			31,753		40.2
U.S. Surety & Credit		135,436			29.4			124,181		22.3			167,914		23.7
International Surety & Credit		50,429			53.0			49,914		51.0			66,135		56.1
		668,640			49.8			593,378		46.2			805,604		48.1
Group life, accident & health
Medical Stop-loss		473,271			73.7			463,321		73.5			616,900		73.1
Other Medical		100,816			75.4			89,465		78.3			121,865		80.9
Other		23,511			54.4			29,407		61.8			38,503		47.1
		597,598			73.3			582,193		73.7			777,268		73.1
Aviation		98,514			60.3			105,125		64.7			139,838		62.6
London market account
Energy		34,985			15.8			44,911		48.4			57,262		42.6
Other		40,602			42.8			35,913		61.9			49,595		50.8
		75,587			30.3			80,824		54.4			106,857		46.4
Other specialty lines
Public Risk		28,853			64.1			18,769		75.3			25,600		72.3
HCC Lloyds		30,479			65.3			50,236		78.4			62,126		78.3
Other		24,777			79.9			69,841		69.9			85,723		57.6
		84,109			69.2			138,846		73.7			173,449		67.2
Discontinued lines		(23	)		nm			4,762		nm			4,758		nm
Total	$	1,524,425			59.8	%	$	1,505,128		61.2	%	$	2,007,774		60.4	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm — Not meaningful comparison

S-9

HCC Insurance Holdings, Inc. and Subsidiaries
Investments — Selected Disclosures
September 30, 2009
(Unaudited, in thousands)

			% of			Investment			Average
	Fair Value		Portfolio			Grade			Rating
Total Portfolio of Fixed Income Securities	$	4,888,420		100.0	%		99	%	AA+
Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
Agency	$	911,005		18.6	%		100	%	AAA
Non-Agency
Prime		54,694		1.1			64	%	BBB
Alt A		4,541		0.1			59	%	BBB+
Total Residential MBS/CMO	$	970,240		19.8	%		98	%	AAA
Commercial Mortgage-Backed Securities	$	153,181		3.1	%		100	%	AAA
Asset-Backed Securities:
Auto	$	15,031		0.3	%		100	%	A+
Subprime Home Equity		1,608		—			79	%	A+
Other		10,242		0.2			66	%	BBB-
Total Asset-Backed Securities	$	26,881		0.5	%		86	%	A-
Agency Securities:
Total Direct Obligations of U.S. Agencies	$	132,925		2.7	%		100	%	AAA
U.S. Corporate Bonds:
Non-Financial	$	396,440		8.1	%		100	%	A
Financial	$	170,184		3.5	%		100	%	A
Municipal Bonds:	$	2,213,764		45.3	%		100	%	AA
Insurance Enhanced	$	1,308,258		26.8	%		100	%	AA
Insured — Underlying Ratings	$	1,308,258		26.8	%		100	%	AA-
Non-Insured	$	905,506		18.5	%		100	%	AA+
Foreign Bonds	$	479,729		9.8	%		100	%	AAA

Notes:

The selected disclosures above do not include all classes of investments in the total portfolio of fixed income securities.
There are no CDOs/CLOs in the portfolio.

S-10

HCC Insurance Holdings, Inc. and Subsidiaries
Subprime Liability Exposure
September 30, 2009

• As of September 30, the Company had 73 “non-Side A only” D&O, E&O and Fiduciary Liability claims and 17 “Side A only” D&O claims relating to subprime issues.

• Of the D&O claims reported, four are on primary policies with gross policy limits totaling $20 million. The remaining D&O claims are on excess policies.

• The average policy limit on the “non-Side A only” claims is $13.5 million gross and $9.1 million net, with an average attachment point of $90 million.

• The average policy limit for “Side A only” claims is $14.2 million gross and $11.3 million net, with an average attachment point of $159 million.

• Based upon the Company’s present knowledge, HCC believes the ultimate subprime related losses will be contained within the current overall reserves for D&O, E&O and Fiduciary Liability business.

S-11