-----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, TCOK6u/Dg95ZeM4I0bU/TaEn5nfciiM0KyZjpK4N6Rzv4QAG1yZNC97WXRSyXDs8 cQlY/2qL/YU/NC9Wg603ig== 0000950129-03-000919.txt : 20030220 0000950129-03-000919.hdr.sgml : 20030220 20030220162456 ACCESSION NUMBER: 0000950129-03-000919 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030220 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCC INSURANCE HOLDINGS INC/DE/ CENTRAL INDEX KEY: 0000888919 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 760336636 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13790 FILM NUMBER: 03574573 BUSINESS ADDRESS: STREET 1: 13403 NORTHWEST FRWY CITY: HOUSTON STATE: TX ZIP: 77040-6094 BUSINESS PHONE: 7136907300 8-K 1 h03507e8vk.txt HCC INSURANCE HOLDINGS, INC. 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) February 20, 2003 HCC INSURANCE HOLDINGS, INC. (EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER) STATE OR OTHER COMMISSION IRS EMPLOYER JURISDICTION FILE NUMBER: IDENTIFICATION OF INCORPORATION: NUMBER: DELAWARE 0-20766 76-0336636 13403 NORTHWEST FREEWAY HOUSTON, TEXAS 77040-6094 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - (713) 690-7300 --------------------------------------------- ITEM 5. OTHER EVENTS On February 20, 2003, HCC Insurance Holdings, Inc. ("HCC") announced its operating results for the Fourth Quarter and full-year ended December 31, 2002. A press release setting forth the announcement is attached as Exhibit 99.1. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (b) Exhibits. -------- 99.1 Press Release dated February 20, 2003 announcing HCC's operating results for the Fourth Quarter and full-year ended December 31, 2002 and attachments thereto. 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. Dated: February 20, 2003 HCC INSURANCE HOLDINGS, INC. By: /s/ Christopher L. Martin --------------------------------------------- Christopher L. Martin Executive Vice President and General Counsel EXHIBIT INDEX Exhibits. 99.1 Press Release dated February 20, 2003 announcing HCC's operating results for the Fourth Quarter and full-year ended December 31, 2002 and attachments thereto. EX-99.1 3 h03507exv99w1.txt PRESS RELEASE EXHIBIT 99.1 HCC ANNOUNCES RECORD RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2002 HOUSTON (February 20, 2003) ... HCC INSURANCE HOLDINGS, INC. (NYSE: HCC) today reported results for the fourth quarter and for the full year that ended December 31, 2002. Net earnings for the fourth quarter 2002 increased 32 percent to $31.5 million, or $0.50 per share, compared to $23.8 million, or $0.38 per share, for the same period in the previous year. Net earnings for the full year 2002 increased substantially to $105.8 million, or $1.68 per share, from $30.2 million, or $0.51 per share, in 2001. Stephen L. Way, Chairman and Chief Executive Officer, said, "2002 was the best year in our history and we are disappointed that our share price did not reflect our results." He added, "Our business continues to grow, profitably and we are extremely optimistic about both the coming year and 2004." Total revenue for the full year 2002 increased by 32 percent to a record $669.4 million compared to 2001, driven by substantial increases in net earned premium and management fees. The Company anticipates similar growth in 2003. Comparing the full year 2002 to the previous year, the Company's insurance company subsidiaries' net written premium increased 46 percent to a $545.9 million (69 percent before discontinued lines) and net earned premium increased 47 percent to $505.5 million (62 percent before discontinued lines). During the same period, gross written premium reached a record $1.16 billion, growing 15 percent (33 percent before discontinued lines). The Company expects these trends to continue through 2003. For the full year of 2002 compared to the previous year, management fees increased 25 percent to $77.1 million primarily due to organic growth of existing lines of business and acquisitions made late in 2001; commission income was almost flat at $41.6 million, with the lack of growth primarily due to the Company's reduction in ceded reinsurance; other operating income decreased to $7.0 million from $17.4 million, due in part to the previous disposition of certain operating entities and the timing of acquisitions and dispositions of strategic investments; and net investment income was slightly lower at $37.8 million, but nonetheless a very good result considering the dramatic drop in yields during the year. As of December 31, 2002, total assets increased to $3.7 billion; total investments increased 31 percent to a record $1.2 billion; shareholders' equity increased 16 percent to $882.2 million; and book value per share increased 14 percent to $14.14, all compared to December 31, 2001. See attached tables. HCC will hold an open conference call beginning at 4:00 p.m. Central Time on Thursday, February 20. To participate, the number for domestic calls is (888) 614-6582 and the number for international calls is (952) 556-1533. A replay will be available until Friday, February 28, 2003 at (800) 615-3210, access code 6414524. In addition, there will be a live webcast available on a listen-only basis, that can be accessed through the HCC website at www.hcch.com. A replay of the webcast will be available until Friday, February 28, 2003. HCC is an international insurance holding company and a leading specialty insurance group. HCC has assets of $3.7 billion and its shares trade on the NYSE (symbol: HCC), with a market capitalization of over $1.5 billion. HCC is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A.M. Best Company. For more information, visit our website at WWW.HCCH.COM. Contact: L. Byron Way, Vice President, HCC Insurance Holdings, Inc. Telephone: (713) 690-7300 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. * * * * * HCC INSURANCE HOLDINGS, INC. FINANCIAL HIGHLIGHTS DECEMBER 31, 2002 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED DECEMBER 31, 2002 2001 - ----------------------------------- ----------- ----------- Gross written premium $ 307,165 $ 243,468 Net written premium 143,683 101,694 Net earned premium 143,122 93,707 Management fees 20,030 18,127 Commission income 9,941 9,113 Net investment income 9,988 9,025 Other operating income 3,714 1,590 Total revenue 186,089 132,192 Pre-tax earnings 47,818 37,878 Net earnings 31,495 23,837 Earnings per share (diluted) $ 0.50 $ 0.38 Cash flow from operations 52,269 23,764 Weighted average shares outstanding 63,109 62,051 GAAP gross loss ratio 50.8% 83.4% GAAP net loss ratio 59.6% 54.7% GAAP combined ratio 83.0% 79.2% DECEMBER 31, 2002 DECEMBER 31, 2001 ----------------- ----------------- Total investments $ 1,167,636 $ 888,466 Total assets 3,692,656 3,219,120 Shareholders' equity 882,198 763,453 Debt to total capital 20.7% 19.2% Book value per share $ 14.14 $ 12.40
HCC INSURANCE HOLDINGS, INC. FINANCIAL HIGHLIGHTS DECEMBER 31, 2002 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
TWELVE MONTHS ENDED DECEMBER 31, 2002 2001 - ------------------------------------ ------------ ------------ Gross written premium $ 1,159,249 $ 1,010,075 Net written premium 545,911 372,958 Net earned premium 505,521 342,787 Management fees 77,082 61,795 Commission income 41,572 43,412 Net investment income 37,769 39,638 Other operating income 6,985 17,436 Total revenue 669,382 505,461 Pre-tax earnings 163,179 60,383 Net earnings 105,828 30,197 Earnings per share (diluted) $ 1.68 $ 0.51 Cash flow from operations 175,097 105,740 Weighted average shares outstanding 62,936 59,619 GAAP gross loss ratio 58.6% 105.5% GAAP net loss ratio 60.6% 78.0% GAAP combined ratio 86.0% 103.7% DECEMBER 31, 2002 DECEMBER 31, 2001 ----------------- ----------------- Total investments $ 1,167,636 $ 888,466 Total assets 3,692,656 3,219,120 Shareholders' equity 882,198 763,453 Debt to total capital 20.7% 19.2% Book value per share $ 14.14 $ 12.40
HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS)
DECEMBER 31, 2002 DECEMBER 31, 2001 ----------------- ----------------- ASSETS Investments: Fixed income securities, at market (cost: 2002 - $807,772; 2001 - $513,674) $ 841,548 $ 525,428 Marketable equity securities, at market (cost: 2002 - $15,815; 2001 - $16,431) 15,609 16,569 Short-term investments, at cost, which approximates market 307,215 338,904 Other investments, at estimated fair value (cost: 2002 - $3,264; 2001 - $8,007) 3,264 7,565 ----------- ----------- Total investments 1,167,636 888,466 Cash 40,306 16,891 Restricted cash 189,396 138,545 Premium, claims and other receivables 753,527 665,965 Reinsurance recoverables 798,934 899,128 Ceded unearned premium 160,080 71,140 Ceded life and annuity benefits 78,951 83,013 Deferred policy acquisition costs 68,846 32,071 Property and equipment, net 52,491 52,486 Goodwill 331,844 315,318 Other assets 50,645 56,097 ----------- ----------- TOTAL ASSETS $ 3,692,656 $ 3,219,120 =========== =========== LIABILITIES Loss and loss adjustment expense payable $ 1,155,290 $ 1,130,748 Life and annuity policy benefits 78,951 83,013 Reinsurance balances payable 166,659 88,637 Unearned premium 326,906 179,530 Deferred ceding commissions 49,963 16,681 Premium and claims payable 749,523 717,159 Notes payable 230,027 181,928 Accounts payable and accrued liabilities 53,139 57,971 ----------- ----------- Total liabilities 2,810,458 2,455,667 SHAREHOLDERS' EQUITY Common stock, $1.00 par value; 250.0 million shares authorized; (shares issued and outstanding: 2002 - 62,358; 2001 - 61,438) 62,358 61,438 Additional paid-in capital 415,850 402,089 Retained earnings 383,380 293,426 Accumulated other comprehensive income 20,610 6,500 ----------- ----------- Total shareholders' equity 882,198 763,453 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,692,656 $ 3,219,120 =========== ===========
We are in the process of completing the purchase price allocations for the two acquisitions which were closed late in the fourth quarter of 2002. The net of any balance sheet adjustments will result in a change to recorded goodwill as at year end 2002, but is not expected to be material. HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED DECEMBER 31, DECEMBER 31 ---------------------------- ----------------------------- 2002 2001 2002 2001 --------- --------- --------- --------- REVENUE Net earned premium $ 505,521 $ 342,787 $ 143,122 $ 93,107 Management fees 77,082 61,795 20,030 18,127 Commission income 41,572 43,412 9,941 9,113 Net investment income 37,769 39,638 9,988 9,025 Net realized investment gain (loss) 453 393 (706) 630 Other operating income 6,985 17,436 3,714 1,590 --------- --------- --------- --------- Total revenue 669,382 505,461 186,089 132,192 EXPENSE Loss and loss adjustment expense 306,491 267,390 85,245 51,247 Operating expense: Policy acquisition costs, net 63,274 27,923 18,807 6,408 Compensation expense 80,495 69,762 21,751 18,627 Other operating expense 47,642 71,119 11,059 15,779 --------- --------- --------- --------- Net operating expense 191,411 168,804 51,617 40,814 Interest expense 8,301 8,884 1,409 2,253 --------- --------- --------- --------- Total expense 506,203 445,078 138,271 94,314 --------- --------- --------- --------- Earnings before income tax provision 163,179 60,383 47,818 37,878 Income tax provision 57,351 30,186 16,323 14,041 --------- --------- --------- --------- NET EARNINGS $ 105,828 $ 30,197 $ 31,495 $ 23,837 ========= ========= ========= ========= BASIC EARNINGS PER SHARE DATA: Earnings per share $ 1.70 $ 0.52 $ 0.50 $ 0.39 ========= ========= ========= ========= Weighted average shares outstanding 62,225 58,321 62,387 61,021 ========= ========= ========= ========= DILUTED EARNINGS PER SHARE DATA: Earnings per share $ 1.68 $ 0.51 $ 0.50 $ 0.38 ========= ========= ========= ========= Weighted average shares outstanding 62,936 59,619 63,109 62,051 ========= ========= ========= ========= Cash dividends declared, per share $ 0.255 $ 0.245 $ 0.065 $ 0.0625 ========= ========= ========= =========
HCC INSURANCE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, ----------------------------- ----------------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Cash flows from operating activities: Net earnings (loss) $ 105,828 $ 30,197 $ 31,495 $ 23,837 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Change in premium, claims and other receivables (40,897) (33,976) 11,543 66,493 Change in reinsurance recoverables 103,870 (191,552) 50,901 (1,496) Change in ceded unearned premium (88,940) 28,254 (25,047) 11,970 Change in loss and loss adjustment expense payable (57,747) 262,056 (11,442) (4,266) Change in reinsurance balances payable 70,762 (29,837) 12,260 (11,579) Change in unearned premium 122,811 (1,676) 22,011 (4,302) Change in premium and claims payable, net of restricted cash (57,642) 22,530 (40,777) (60,233) Gains on dispositions -- (8,171) -- -- Depreciation, amortization and impairments 10,808 34,926 2,875 5,144 Other, net 6,334 (7,011) (1,550) (1,804) --------- --------- --------- --------- Cash provided by operating activities 175,097 105,740 52,269 23,764 Cash flows from investing activities: Sales of fixed income securities 217,370 140,763 19,904 52,142 Maturity or call of fixed income securities 53,918 45,754 20,967 19,911 Sales of equity securities 3,958 5,408 541 1,584 Other proceeds -- 19,965 -- 18,923 Change in short-term investments 84,799 (43,986) 28,932 104,378 Cash paid for companies acquired, net of cash received (39,227) (95,952) (39,227) (95,952) Cost of securities acquired (505,099) (292,926) (92,578) (113,679) Purchases of property and equipment (5,782) (12,283) (1,834) (7,646) --------- --------- --------- --------- Cash used by investing activities (190,063) (233,257) (63,295) (20,339) Cash flows from financing activities: Issuance of notes payable 76,000 174,058 36,000 6,000 Sale of common stock, net of costs 11,230 192,831 1,192 20,293 Payments on notes payable (31,969) (222,116) (16,560) (12,593) Dividends paid and other, net (16,880) (14,356) (4,049) (3,737) --------- --------- --------- --------- Cash provided (used) by financing activities 38,381 130,417 16,583 9,963 --------- --------- --------- --------- Net change in cash 23,415 2,900 5,557 13,388 Cash at beginning of period 16,891 13,991 34,749 3,503 --------- --------- --------- --------- CASH AT END OF PERIOD $ 40,306 $ 16,891 $ 40,306 $ 16,891 ========= ========= ========= =========
HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY PREMIUM DECEMBER 31, 2002 ($ IN THOUSANDS)
4TH QTR 4TH QTR CHANGE 2002 2001 % ---------- ---------- ------ GROSS WRITTEN Group life, accident & health $ 124,700 $ 119,627 4 Aviation 58,610 60,892 (4) London market account 37,417 31,904 17 Global financial products 64,823 46 na Other specialty lines 16,109 4,271 277 ---------- ---------- ---- 301,659 216,740 39% Discontinued lines 5,506 26,728 ---------- ---------- $ 307,165 $ 243,468 ========== ========== NET WRITTEN Group life, accident & health $ 68,035 $ 39,554 72 Aviation 24,085 30,789 (22) London market account 21,971 15,856 39 Global financial products 15,001 44 na Other specialty lines 12,368 4,271 190 ---------- ---------- ---- 141,460 90,514 56% Discontinued lines 2,223 11,180 ---------- ---------- $ 143,683 $ 101,694 ========== ========== NET EARNED PREMIUM Group life, accident & health $ 69,915 $ 39,318 78 Aviation 24,361 25,702 (5) London market account 26,955 12,121 122 Global financial products 9,072 4 na Other specialty lines 8,990 4,289 110 ---------- ---------- ---- 139,293 81,434 71% Discontinued lines 3,829 12,273 ---------- ---------- $ 143,122 $ 93,707 ========== ==========
HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY PREMIUM DECEMBER 31, 2002 ($ IN THOUSANDS)
FULL YEAR FULL YEAR CHANGE 2002 2001 % ---------- ---------- ------ GROSS WRITTEN Group life, accident & health $ 503,263 $ 502,086 0 Aviation 212,518 198,015 7 London market account 199,816 133,579 50 Global financial products 178,653 46 na Other specialty lines 32,563 15,556 109 ---------- ---------- ---- 1,126,813 849,282 33% Discontinued lines 32,436 160,793 ---------- ---------- $1,159,249 $1,010,075 ========== ========== NET WRITTEN Group life, accident & health $ 244,554 $ 146,220 67 Aviation 99,826 98,249 2 London market account 113,925 54,056 111 Global financial products 43,731 44 na Other specialty lines 25,621 14,346 79 ---------- ---------- ---- 527,657 312,915 69% Discontinued lines 18,254 60,043 ---------- ---------- $ 545,911 $ 372,958 ========== ========== NET EARNED PREMIUM Group life, accident & health $ 240,070 $ 143,851 67 Aviation 100,960 91,377 10 London market account 89,260 43,360 106 Global financial products 23,102 4 na Other specialty lines 22,337 15,120 48 ---------- ---------- ---- 475,729 293,712 62% Discontinued lines 29,792 49,075 ---------- ---------- $ 505,521 $ 342,787 ========== ==========
FULL YEAR 2002 FULL YEAR 2001 NET EARNED ACTUAL LOSS NET EARNED ACTUAL LOSS LINE OF BUSINESS PREMIUM LOSSES RATIO PREMIUM LOSSES RATIO - ----------------------------------- ------------------------------------------ ------------------------------------------ Group life, accident & health $ 240,070 $ 149,251 62.2% $ 143,851 $ 97,071 67.5% Aviation 100,960 46,732 46.3 91,377 57,152 62.5 London market account 89,260 45,937 51.5 43,360 25,755 59.4 Global financial products 23,102 10,708 46.4 4 1 25.0 Other specialty lines 22,337 22,581 101.1 15,120 11,107 73.5 ------------------------------------------ ------------------------------------------ 475,729 275,209 57.8 293,712 191,086 65.1 Discontinued lines 29,792 31,282 105.0 49,075 76,304 155.5 ------------------------------------------ ------------------------------------------ Total $ 505,521 $ 306,491 60.6% $ 342,787 $ 267,390 78.0% ========================================== ==========================================
HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES SFAS NO. 142 RECONCILIATION (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) The tables below reconcile net earnings and earnings per share we reported to adjusted amounts that we would have reported had we adopted SFAS No. 142 on January 1, 2001 instead of January 1, 2002:
FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED DECEMBER 31, ENDED DECEMBER 31, ------------------------- -------------------------- 2002 2001 2002 2001 ---------- ---------- ------------ ---------- Net earnings: Reported net earnings $ 105,828 $ 30,197 $ 31,495 $ 23,837 Add back goodwill amortization -- 11,924 -- 2,762 Add back license amortization -- 555 -- 146 Less tax benefit from goodwill amortization -- (1,092) -- (273) ---------- ---------- ---------- ---------- ADJUSTED NET INCOME $ 105,828 $ 41,584 $ 31,495 $ 26,472 ========== ========== ========== ========== Basic earnings per share: Reported basic earnings per share $ 1.70 $ 0.52 $ 0.50 $ 0.39 Add back amortization, net of tax effect -- 0.19 -- 0.04 ---------- ---------- ---------- ---------- ADJUSTED BASIC EARNINGS PER SHARE $ 1.70 $ 0.71 $ 0.50 $ 0.43 ========== ========== ========== ========== Diluted earnings per share: Reported diluted earnings per share $ 1.68 $ 0.51 $ 0.50 $ 0.38 Add back amortization, net of tax effect -- 0.19 -- 0.05 ---------- ---------- ---------- ---------- ADJUSTED DILUTED EARNINGS PER SHARE $ 1.68 $ 0.70 $ 0.50 $ 0.43 ========== ========== ========== ==========
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