EX-99.2 3 h87109ex99-2.txt SUPPLEMENTARY FINANCIAL DATA - DATED 3/31/2001 1 EXHIBIT 99.2 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Balance Sheets (Unaudited) ----------
March 31, 2001 December 31, 2000 -------------- ----------------- (Restated) ASSETS Investments: Fixed income securities, at market (cost: 2001 $430,798,000; 2000 $422,821,000) $ 446,460,000 $ 433,844,000 Marketable equity securities, at market (cost: 2001 $10,249,000; 2000 $8,896,000) 9,179,000 6,282,000 Short-term investments, at cost, which approximates market 277,832,000 263,805,000 Other investments, at cost, which approximates fair value 7,180,000 7,182,000 -------------- -------------- Total investments 740,651,000 711,113,000 Cash 6,651,000 13,991,000 Restricted cash and cash investments 105,627,000 101,738,000 Premium, claims and other receivables 575,135,000 586,721,000 Reinsurance recoverables 833,956,000 789,412,000 Ceded unearned premium 95,189,000 114,469,000 Ceded life and annuity benefits 84,453,000 86,760,000 Deferred policy acquisition costs 35,594,000 39,108,000 Property and equipment, net 39,271,000 39,438,000 Goodwill 263,774,000 266,015,000 Other assets 11,398,000 18,995,000 -------------- -------------- TOTAL ASSETS $2,791,699,000 $2,767,760,000 ============== ============== LIABILITIES Loss and loss adjustment expense payable $ 990,722,000 $ 944,117,000 Life and annuity policy benefits 84,928,000 86,760,000 Reinsurance balances payable 102,689,000 130,746,000 Unearned premium 170,541,000 190,550,000 Deferred ceding commissions 24,360,000 30,013,000 Premium and claims payable 618,790,000 594,852,000 Notes payable 57,477,000 212,133,000 Accounts payable and accrued liabilities 37,513,000 47,659,000 -------------- -------------- Total liabilities 2,087,020,000 2,236,830,000 SHAREHOLDERS' EQUITY Common stock, $1.00 par value; 250,000,000 shares authorized; (shares issued and outstanding: 2001 58,678,954; 2000 51,342,006 58,679,000 51,342,000 Additional paid-in capital 348,000,000 196,999,000 Retained earnings 289,533,000 277,876,000 Accumulated other comprehensive income 8,467,000 4,713,000 -------------- -------------- Total shareholders' equity 704,679,000 530,930,000 -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,791,699,000 $2,767,760,000 ============== ==============
See Notes to Condensed Consolidated Financial Statements. 1 2 HCC Insurance Holdings, Inc. and Subsidiaries --------- Condensed Consolidated Statements of Earnings (Unaudited) ---------
For the three months ended March 31, 2001 2000 ------------ ------------ (Restated) REVENUE Net earned premium $ 71,921,000 $ 63,356,000 Management fees 15,750,000 29,261,000 Commission income 14,641,000 14,833,000 Net investment income 10,632,000 8,249,000 Net realized investment loss (824,000) (403,000) Other operating income 2,972,000 6,651,000 ------------ ------------ Total revenue 115,092,000 121,947,000 EXPENSE Loss and loss adjustment expense 48,542,000 48,809,000 Operating expense: Policy acquisition costs, net 4,274,000 9,321,000 Compensation expense 18,619,000 22,284,000 Other operating expense 14,415,000 14,108,000 ------------ ------------ Net operating expense 37,308,000 45,713,000 Interest expense 3,347,000 5,021,000 ------------ ------------ Total expense 89,197,000 99,543,000 ------------ ------------ Earnings before income tax provision 25,895,000 22,404,000 Income tax provision 10,717,000 9,000,000 ------------ ------------ Earnings before cumulative effect of accounting change 15,178,000 13,404,000 Cumulative effect of accounting change, net of deferred tax effect of $1,335,000 -- (2,013,000) ------------ ------------ Net earnings $ 15,178,000 $ 11,391,000 ============ ============ BASIC EARNINGS PER SHARE DATA: Earnings before accounting change $ 0.28 $ 0.27 Cumulative effect of accounting change -- (0.04) ------------ ------------ Net earnings $ 0.28 $ 0.23 ============ ============ Weighted average shares outstanding 53,720,000 50,400,000 ============ ============ DILUTED EARNINGS PER SHARE DATA: Earnings before accounting change $ 0.28 $ 0.26 Cumulative effect of accounting change -- (0.04) ------------ ------------ Net earnings $ 0.28 $ 0.22 ============ ============ Weighted average shares outstanding 55,070,000 50,706,000 ============ ============ Cash dividends declared, per share $ 0.06 $ 0.05 ============ ============
See Notes to Condensed Consolidated Financial Statements. 2 3 HCC Insurance Holdings, Inc. and Subsidiaries ---------- Condensed Consolidated Statements of Cash Flows (Unaudited) ----------
For the three months ended March 31, 2001 2000 ------------- ------------- (Restated) Cash flows from operating activities: Net earnings $ 15,178,000 $ 11,391,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Change in premium, claims and other receivables 11,586,000 71,428,000 Change in reinsurance recoverables (44,544,000) 46,146,000 Change in ceded unearned premium 19,280,000 3,832,000 Change in loss and loss adjustment expense payable 46,605,000 (17,783,000) Change in reinsurance balances payable (28,057,000) 1,060,000 Change in unearned premium (20,009,000) (6,478,000) Change in premium and claims payable, net of restricted cash 20,049,000 (44,508,000) Net realized investment loss 824,000 403,000 Gains on sales of other operating investments -- (1,144,000) Depreciation and amortization expense 4,521,000 4,447,000 Other, net (6,326,000) (7,158,000) ------------- ------------- Cash provided by operating activities 19,107,000 61,636,000 Cash flows from investing activities: Sales of fixed income securities 43,806,000 11,302,000 Maturity or call of fixed income securities 6,670,000 16,364,000 Sales of equity securities -- 6,547,000 Dispositions of other operating investments -- 16,145,000 Change in short-term investments (14,027,000) (120,083,000) Cash paid for companies acquired, net of cash received -- (9,901,000) Cost of securities acquired (60,598,000) (14,815,000) Purchases of property and equipment and other, net (1,299,000) (1,584,000) ------------- ------------- Cash used by investing activities (25,448,000) (96,765,000) Cash flows from financing activities: Proceeds from notes payable -- 24,000,000 Sale of common stock, net of costs 156,524,000 1,119,000 Payments on notes payable (154,500,000) (6,000,000) Dividends paid (3,023,000) (2,442,000) ------------- ------------- Cash provided (used) by financing activities (999,000) 16,677,000 ------------- ------------- Net change in cash (7,340,000) (18,452,000) Cash at beginning of period 13,991,000 26,825,000 ------------- ------------- CASH AT END OF PERIOD $ 6,651,000 $ 8,373,000 ============= =============
See Notes to Condensed Consolidated Financial Statement 3 4 HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY WRITTEN PREMIUM MARCH 31, 2001 ($ IN THOUSANDS)
1ST QTR 1ST QTR CHANGE 2001 2000 % ---------- ---------- ---------- GROSS WRITTEN A&H Reinsurance $ 45,090 $ 34,561 30% Aviation - Domestic 28,868 32,852 (12) Aviation - International 6,070 8,978 (32) Marine & Offshore Energy 7,986 4,526 76 Medical Stop-Loss 106,386 80,470 32 Property 12,456 21,065 (41) Workers' Compensation 10,834 10,431 4 Other 11,524 14,255 (19) ---------- ---------- ---------- $ 229,214 $ 207,138 11% ========== ========== ========== NET WRITTEN A&H Reinsurance $ 11,534 $ 13,993 (18)% Aviation - Domestic 14,992 10,482 43 Aviation - International 3,273 2,269 44 Marine & Offshore Energy 4,487 2,147 109 Medical Stop-Loss 30,629 23,484 30 Property 2,905 978 197 Workers' Compensation 1,840 2,221 (17) Other 2,845 5,086 (44) ---------- ---------- ---------- $ 72,505 $ 60,660 20% ========== ========== ========== NET EARNED PREMIUM A&H Reinsurance $ 11,312 $ 13,197 (14)% Aviation - Domestic 15,947 11,915 34 Aviation - International 4,395 6,050 (27) Marine & Offshore Energy 1,845 1,935 (5) Medical Stop-Loss 30,704 23,484 31 Property 2,891 1,171 147 Workers' Compensation 2,333 411 468 Other 2,494 5,193 (52) ---------- ---------- ---------- $ 71,921 $ 63,356 14% ========== ========== ==========
4 5 HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY WRITTEN PREMIUM MARCH 31, 2001 ($ IN THOUSANDS)
YEAR TO DATE FULL YEAR FULL YEAR FULL YEAR 2001 2000 1999 1998 ------------ ---------- ---------- ---------- GROSS WRITTEN A&H Reinsurance $ 45,090 $ 193,714 $ 158,264 $ 114,787 Aviation - Domestic 28,868 152,704 148,861 136,890 Aviation - International 6,070 38,385 61,168 66,683 Marine & Offshore Energy 7,986 26,102 18,694 34,941 Medical Stop-Loss 106,386 368,450 69,258 7,046 Property 12,456 53,275 63,309 106,515 Workers' Compensation 10,834 49,872 27,202 8,958 Other 11,524 84,955 21,575 22,456 ---------- ---------- ---------- ---------- $ 229,214 $ 967,457 $ 568,331 $ 498,276 ========== ========== ========== ========== NET WRITTEN A&H Reinsurance $ 11,534 $ 61,855 $ 37,725 $ 39,949 Aviation - Domestic 14,992 64,311 42,702 19,332 Aviation - International 3,273 15,483 25,811 33,698 Marine & Offshore Energy 4,487 8,435 6,616 7,978 Medical Stop-Loss 30,629 100,353 20,332 3,415 Property 2,905 10,015 2,945 8,356 Workers' Compensation 1,840 8,697 673 1,059 Other 2,845 14,639 3,120 8,096 ---------- ---------- ---------- ---------- $ 72,505 $ 283,788 $ 139,924 $ 121,883 ========== ========== ========== ========== NET EARNED PREMIUM A&H Reinsurance $ 11,312 $ 62,157 $ 39,745 $ 42,850 Aviation - Domestic 15,947 54,001 31,555 28,493 Aviation - International 4,395 19,694 31,229 36,765 Marine & Offshore Energy 1,845 5,624 8,794 12,737 Medical Stop-Loss 30,704 100,053 20,332 3,415 Property 2,891 6,312 3,985 8,997 Workers' Compensation 2,333 5,215 2,126 1,765 Other 2,494 14,591 3,596 8,078 ---------- ---------- ---------- ---------- $ 71,921 $ 267,647 $ 141,362 $ 143,100 ========== ========== ========== ==========
5 6 HCC INSURANCE HOLDINGS, INC. CONSOLIDATED INSURANCE COMPANIES GROSS LOSS RATIOS MARCH 31, 2001 ($ IN THOUSANDS)
Year to Date Full Year Full Year Full Year 2001 2000 1999 1998 Gross Earned Loss Gross Earned Loss Gross Earned Loss Gross Earned Loss Line of Business Premium Ratio Premium Ratio Premium Ratio Premium Ratio ------------------------------ ------------ -------- ------------ -------- ------------ -------- ------------ -------- Accident & Health Reinsurance $ 44,819 70% $ 194,957 91% $ 160,601 85% $ 114,991 83% Aviation - Domestic 36,449 65 151,770 70 143,299 91 117,733 93 Aviation - International 8,750 62 45,316 89 66,305 93 70,479 74 Marine & Offshore Energy 6,472 937* 24,382 81 19,438 331 29,930 104 Medical Stop-Loss 106,461 67 368,150 70 69,258 92 7,046 70 Property 14,893 91 62,504 80 88,178 227 89,968 206 Workers' Compensation 13,577 91 44,167 72 19,838 70 2,874 80 Other 16,468 71 83,349 108 21,316 67 20,054 72 ------------ -------- ------------ -------- ------------ -------- ------------ -------- Total $ 247,889 93%** $ 974,595 79% $ 588,233 117% $ 453,075 109% ============ ======== ============ ======== ============ ======== ============ ========
* Marine & Offshore Energy includes the Petrobras loss of $55.7 million. Without the Petrobras loss, the marine & offshore energy gross loss ratio would be 76% ** Total includes the Petrobras loss. Without the Petrobras loss, the total gross loss ratio would be 70% 6 7 HCC INSURANCE HOLDINGS, INC. CONSOLIDATED INSURANCE COMPANIES NET LOSS RATIOS MARCH 31, 2001 ($ IN THOUSANDS)
Year to Date Full Year Full Year Full Year 2001 2000 1999 1998 Net Earned Loss Net Earned Loss Net Earned Loss Net Earned Loss Line of Business Premium Ratio Premium Ratio Premium Ratio Premium Ratio ----------------------------- ---------- --------- --------- --------- --------- --------- --------- --------- Accident & Health Reinsurance $ 11,312 75% $ 62,157 73% $ 39,745 68% $ 42,280 63% Aviation - Domestic 15,947 58 54,001 65 31,555 74 28,493 79 Aviation - International 4,395 61 19,694 86 31,229 78 36,765 48 Marine & Offshore Energy 1,845 12 5,624 77 8,794 104 12,737 13 Medical Stop-Loss 30,704 70 100,053 73 20,332 84 3,415 75 Property 2,891 86 6,312 66 3,986 191 8,997 199 Workers' Compensation 2,333 86 5,215 56 2,126 50 2,335 42 Other 2,494 75 14,591 113 3,595 (2) 8,078 18 --------- --------- --------- --------- --------- --------- --------- --------- Total $ 71,921 67% $ 267,647 74% $ 141,362 78% $ 143,100 64% ========= ========= ========= ========= ========= ========= ========= =========
7 8 HCC INSURANCE HOLDINGS, INC. OPERATING EARNINGS (AMOUNTS IN 000'S EXCEPT PER SHARE AMOUNTS) MARCH 31, 2001
YEAR TO DATE FULL YEAR FULL YEAR FULL YEAR FULL YEAR 2001 2000 1999 1998 1997 ------------ ---------- ---------- ---------- ----------- GAAP Net Income $ 15,178 $ 55,468 $ 26,572 $ 73,110 $ 50,083 ========= ========= ========= ========= ========= Wtd Avg Shares O/S 55,070 51,619 50,646 49,933 49,206 ========= ========= ========= ========= ========= Earnings per Share $ 0.28 $ 1.07 $ 0.52 $ 1.46 $ 1.02 ========= ========= ========= ========= ========= PRO FORMA ADJUSTMENTS Merger Expenses $ -- $ -- $ -- $ 107 $ 8,069 Income Tax 0 0 0 0 (845) --------- --------- --------- --------- --------- Total Pro forma Adjs 0 0 0 107 7,224 Reported Net Income 15,178 55,468 26,572 73,110 50,083 --------- --------- --------- --------- --------- Pro forma Net Income $ 15,178 $ 55,468 $ 26,572 $ 73,217 $ 57,307 ========= ========= ========= ========= ========= Pro forma EPS $ 0.28 $ 1.07 $ 0.52 $ 1.47 $ 1.16 ========= ========= ========= ========= ========= OPERATING ADJUSTMENTS SAB 101 0 3,348 0 0 0 Merger Expense - Schanen 176 0 0 0 0 Restructuring / Other 0 5,154 48,951 0 10,000 Realized (gain)/loss 824 5,321 4,164 (845) 328 Income Tax (288) (5,012) (18,848) 296 (3,615) --------- --------- --------- --------- --------- Total Operating Adjs 712 8,811 34,267 (549) 6,713 Pro forma Net Income 15,178 55,468 26,572 73,217 57,307 --------- --------- --------- --------- --------- Operating Income $ 15,890 $ 64,279 $ 60,839 $ 72,668 $ 64,020 ========= ========= ========= ========= ========= Operating EPS $ 0.29 $ 1.25 $ 1.20 $ 1.46 $ 1.30 ========= ========= ========= ========= =========
8 9 HCC INSURANCE HOLDINGS, INC. UNDERWRITING AGENCY MANAGEMENT FEES MARCH 31, 2001
YEAR TO DATE FULL YEAR FULL YEAR FULL YEAR 2001 2000 1999 1998 ------------ ---------- ---------- ---------- LINE OF BUSINESS ----------------------------- HCCA/Aviation 157,304 6,905,237 9,596,234 11,728,343 HCCB/Medical Stop-Loss 7,897,415 40,263,388 27,978,075 23,613,161 HCCES/Workers' Compensation 1,392,489 15,385,804 19,729,864 10,038,616 LDG Re/A&H Reinsurance 5,763,180 28,273,379 30,885,189 26,077,366 Other 539,421 5,230,483 2,523,940 2,587,358 ---------- ---------- ---------- ---------- TOTAL MANAGEMENT FEES 15,749,809 96,058,291 90,713,302 74,044,844 ========== ========== ========== ==========
9 10 HCC INSURANCE HOLDINGS, INC. UNDERWRITING AGENCY WRITTEN PREMIUM MARCH 31, 2001
YEAR TO DATE FULL YEAR FULL YEAR FULL YEAR 2001 2000 1999 1998 ------------- ------------- ------------- ------------- LINE OF BUSINESS ---------------------------- HCCA/Aviation 1,953,570 92,411,946 91,156,281 92,667,528 HCCB/Medical Stop-Loss 105,422,596 402,908,065 184,302,013 182,528,033 HCCES/Workers' Compensation 6,169,927 97,876,890 106,758,475 52,529,169 LDG Re/A&H Reinsurance 86,060,489 443,040,776 452,016,823 356,530,555 Other 3,821,135 37,313,635 13,882,509 21,931,785 ------------- ------------- ------------- ------------- TOTAL WRITTEN PREMIUM 203,427,717 1,073,551,312 848,116,101 706,187,070 ============= ============= ============= =============
10 11 HCC INSURANCE HOLDINGS, INC. SUPPLEMENTAL INFORMATION MARCH 31, 2001
QTD QTD YTD YTD 3/31/2001 3/31/2000 3/31/2001 3/31/2000 GAAP Loss Ratio 67.5% 77.0% 67.5% 77.0% GAAP Exp Ratio 29.0% 27.1% 29.0% 27.1% --------- --------- --------- --------- GAAP Combined Ratio 96.5% 104.1% 96.5% 104.1% Statutory Loss Ratio * 69.7% * 69.7% Statutory Exp Ratio * 31.2% * 31.2% --------- --------- --------- --------- Statutory Combined Ratio * 100.9% * 100.9% Paid Loss & LAE $ 50,235 $ 55,702 $ 50,235 $ 55,702 Change in Reserves (1,693) (6,893) (1,693) (6,893) --------- --------- --------- --------- =Incurred L+LAE $ 48,542 $ 48,809 $ 48,542 $ 48,809
As of As of 3/31/2001 12/31/2000 Gross Reserves $ 990,722 $ 944,117 Net Reserves 248,179 249,872 GAAP EQUITY BY INSURANCE COMPANY Houston Casualty Co. $ 321,747 $ 317,381 Avemco Insurance Co. 105,051 98,724 US Specialty Insurance Co. 118,380 116,937 HCC Re 4,134 3,995 HCC Life 83,323 80,259 CIC/USFIC 40,184 39,553 NIU 5,522 5,154 Eliminations (241,911) (236,749) --------- ---------- HCC Total $ 436,430 $ 425,254 STATUTORY SURPLUS BY INSURANCE COMPANY Houston Casualty Co. * $ 231,165 Avemco Insurance Co. * 85,948 US Specialty Insurance Co. * 106,056 HCC Re * 3,995 HCC Life * 63,311 CIC/USFIC * 38,812 NIU * 5,141 Eliminations * (208,179) --------- ---------- HCC Total * $ 326,249
All $ in thousands. * Statutory information to follow. 11