EX-99.1 3 h94438ex99-1.txt PRESS RELEASE DATED 2/21/2002 EXHIBIT 99.1 HCC ANNOUNCES FOURTH QUARTER AND FULL YEAR 2001 RESULTS HOUSTON (February 21, 2002) . . . HCC INSURANCE HOLDINGS, INC. (NYSE: HCC) today reported results for the fourth quarter and for the full year that ended December 31, 2001. Stephen L. Way, Chairman and Chief Executive Officer, announced that operating earnings* for the fourth quarter 2001 increased to $23.4 million, or $0.38 per share, compared to $17.9 million, or $0.34 per share, for the same period in the previous year. Net earnings for the fourth quarter 2001 increased substantially to $23.8 million, or $0.38 per share, compared to $13.1 million, or $0.25 per share, for the corresponding period in 2000. For the full year 2001, operating earnings* decreased to $60.1 million, or $1.01 per share from $64.3 million, or $1.25 per share, in 2000. Net earnings for the full year 2001 decreased to $30.2 million, or $0.51 per share from $55.5 million, or $1.07 per share, in the previous year. Mr. Way said, "Obviously, the September 11, 2001 tragedy had a material effect on our overall result for 2001, but we are confident that the fourth quarter earnings growth will continue and gain momentum in 2002. It should be noted that unlike many of our peer group, this catastrophe loss, like others in the past, did not impact the capital of the Company and, in fact, was contained to less than one quarter's earnings." Total revenue for the full year 2001 increased by 7 percent to a record $505.5 million compared to 2000, largely due to the 28% increase in net earned premium, which more than offset the decreases in revenue from other segments. It is noteworthy however, that comparing the fourth quarter 2001 to the same period in 2000, total revenue grew 20% and net earned premium grew 41%. Comparing the full year 2001 to the previous year, the Company's insurance company subsidiaries' net written premium increased 31 percent to a record $373.0 million and net earned premium increased 28 percent to a record $342.8 million. During the same period, gross written premium exceeded $1.0 billion for the first time. The Company expects these trends to continue, with net written and net earned premium rising even more rapidly in 2002. For the full year of 2001 compared to the previous year, management fees decreased to $61.8 million from $96.1 million, primarily due to the integration of several of the Company's underwriting agencies into the Company's insurance company subsidiaries; commission income decreased to $43.4 million from $49.9, million primarily due to the Company's reduction in ceded reinsurance and the substantial deterioration of the accident and health reinsurance market; other operating income decreased to $17.4 million from $25.5 million, due in part to the previous disposition of certain operating entities; and net investment income was flat at $39.6 million, but a very solid result considering the dramatic drop in yields during the year. Mr. Way added, "We expect total revenue to rise substantially as earned premiums continue to increase and probably accelerate over the next two years. Earnings should also gain momentum in the second half of 2002 and into 2003." As of December 31, 2001, total assets increased to $3.2 billion, total investments increased 25 percent to $888.5 million, shareholders' equity increased 44 percent to $763.5 million and book value per share increased 21 percent to $12.40, all compared to December 31, 2000. Please see the attached tables and also, the supplemental financial information that will be released shortly, in conjunction with the filing of an 8K with the Securities and Exchange Commission. This information can be obtained by visiting the Company's website at www.hcch.com. HCC will hold an open conference call beginning at 8:00 a.m. Central Time on Friday, February 22. To participate, please call 800-606-8940. A replay will be available until midnight Central Time March 1, 2002 at 800-615-3210, access code 5827664. 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 midnight March 1, 2002. HCC is an international insurance holding company and is one of the largest specialty insurance groups in the United States. HCC has assets of over $3.0 billion and its shares are traded 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 *See attached table. 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. and Subsidiaries ---------- Consolidated Balance Sheets (In thousands) ----------
December 31, 2001 December 31, 2000 ----------------- ----------------- ASSETS (unaudited) Investments: Fixed income securities $ 525,428 $ 433,844 Marketable equity securities 16,569 6,282 Short-term investments 338,904 263,805 Other investments 7,565 7,182 ------------ ------------ Total investments 888,466 711,113 Cash 16,891 13,991 Restricted cash and cash investments 138,545 101,738 Premium, claims and other receivables 665,965 609,716 Reinsurance recoverables 899,128 789,412 Ceded unearned premium 71,140 114,469 Ceded life and annuity benefits 83,013 86,760 Deferred policy acquisition costs 32,071 39,108 Property and equipment, net 52,486 39,438 Goodwill and intangible assets 328,815 266,015 Other assets 42,600 18,995 ------------ ------------ TOTAL ASSETS $ 3,219,120 $ 2,790,755 ============ ============ LIABILITIES Loss and loss adjustment expense payable $ 1,130,748 $ 944,117 Life and annuity policy benefits 83,013 86,760 Reinsurance balances payable 88,637 130,746 Unearned premium 179,530 190,550 Deferred ceding commissions 16,681 30,013 Premium and claims payable 717,159 617,847 Notes payable 181,928 212,133 Accounts payable and accrued liabilities 57,971 47,659 ------------ ------------ Total liabilities 2,455,667 2,259,825 SHAREHOLDERS' EQUITY Common stock 61,438 51,342 Additional paid-in capital 402,089 196,999 Retained earnings 293,426 277,876 Accumulated other comprehensive income 6,500 4,713 ------------ ------------ Total shareholders' equity 763,453 530,930 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,219,120 $ 2,790,755 ============ ============
HCC Insurance Holdings, Inc. and Subsidiaries ---------- Consolidated Statement of Earnings (Unaudited -- In thousands, except per share data) ----------
For the three months ended December 31, 2001 2000 ------------ ------------ REVENUE Net earned premium $ 93,707 $ 66,358 Management fees 18,127 18,662 Commission income 9,113 12,593 Net investment income 9,025 11,268 Net realized investment gain (loss) 630 (1,496) Other operating income 1,590 2,785 ------------ ------------ Total revenue 132,192 110,170 EXPENSE Loss and loss adjustment expense 51,247 48,936 Operating expense: Policy acquisition costs, net 6,408 2,070 Compensation expense 18,627 18,863 Other operating expense 15,779 13,559 ------------ ------------ Net operating expense 40,814 34,492 Interest expense 2,253 4,755 ------------ ------------ Total expense 94,314 88,183 ------------ ------------ Earnings before income tax provision 37,878 21,987 Income tax provision 14,041 8,852 ------------ ------------ NET EARNINGS $ 23,837 $ 13,135 ============ ============ BASIC EARNINGS PER SHARE DATA: Earnings per share $ 0.39 $ 0.26 ============ ============ Weighted average shares outstanding 61,021 51,181 ============ ============ DILUTED EARNINGS PER SHARE DATA: Earnings per share $ 0.38 $ 0.25 ============ ============ Weighted average shares outstanding 62,051 52,530 ============ ============ Cash dividends declared, per share $ 0.0625 $ 0.06 ============ ============
HCC Insurance Holdings, Inc. and Subsidiaries ---------- Consolidated Statement of Earnings (In thousands, except per share data) ----------
For the twelve months ended December 31, 2001 2000 ------------ ------------ (unaudited) REVENUE Net earned premium $ 342,787 $ 267,647 Management fee 61,795 96,058 Commission income 43,412 49,886 Net investment income 39,638 39,836 Net realized investment gain (loss) 393 (5,321) Other operating income 17,436 25,497 ------------ ------------ Total revenue 505,461 473,603 EXPENSE Loss and loss adjustment expense 267,390 198,470 Operating expense: Policy acquisition costs, net 27,923 23,743 Compensation expense 69,762 83,086 Other operating expense 71,119 53,274 ------------ ------------ Net operating expense 168,804 160,103 Interest expense 8,884 20,347 ------------ ------------ Total expense 445,078 378,920 ------------ ------------ Earnings before income tax provision 60,383 94,683 Income tax provision 30,186 37,202 ------------ ------------ Earnings before cumulative effect of accounting change 30,197 57,481 Cumulative effect of accounting change, net of deferred tax effect of $1,335 -- (2,013) ------------ ------------ NET EARNINGS $ 30,197 $ 55,468 ============ ============ BASIC EARNINGS PER SHARE DATA: Earnings before accounting change $ 0.52 $ 1.13 Cumulative effect of accounting change -- (0.04) ------------ ------------ Net earnings $ 0.52 $ 1.09 ============ ============ Weighted average shares outstanding 58,321 50,742 ============ ============ DILUTED EARNINGS PER SHARE DATA: Earnings before accounting change $ 0.51 $ 1.11 Cumulative effect of accounting change -- (0.04) ------------ ------------ Net earnings $ 0.51 $ 1.07 ============ ============ Weighted average shares outstanding 59,619 51,619 ============ ============ Cash dividends declared, per share $ 0.245 $ 0.22 ============ ============
HCC Insurance Holdings, Inc. and Subsidiaries ---------- Reconciliation of Net Earnings to Operating Earnings (Unaudited -- In thousands, except per share data) ----------
Fourth Quarter Year -------------------------- -------------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Net Earnings $ 23,837 $ 13,135 $ 30,197 $ 55,468 Add (Deduct): Exited lines of business -- 2,855 29,573 2,855 Realized (gain)/loss (409) 972 (255) 3,459 SAB 101 change in accounting principle -- -- -- 2,013 Other -- 974 564 484 ---------- ---------- ---------- ---------- Operating earnings $ 23,428 $ 17,936 $ 60,079 $ 64,279 ========== ========== ========== ========== Diluted net earnings per share $ 0.38 $ 0.25 $ 0.51 $ 1.07 ========== ========== ========== ========== Diluted operating earnings per share $ 0.38 $ 0.34 $ 1.01 $ 1.25 ========== ========== ========== ==========
HCC INSURANCE HOLDINGS, INC. FINANCIAL HIGHLIGHTS DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED DECEMBER 31, 2001 2000 ------------------------------- ------------ ------------ Gross written premium $ 243,468 $ 253,975 Net written premium 101,694 69,034 Net earned premium 93,707 66,358 Management fees 18,127 18,662 Commission income 9,113 12,593 Net investment income 9,025 11,268 Other operating income 1,590 2,785 Total revenue 132,192 110,170 Net earnings 23,837 13,135 EARNINGS PER SHARE (DILUTED) $ 0.38 $ 0.25 Operating earnings after tax 23,428 17,936 OPERATING EARNINGS PER SHARE (DILUTED) $ 0.38 $ 0.34 Cash flow from operations 23,764 53,463 Weighted average shares outstanding 62,051 52,530 GAAP gross loss ratio 83% 89% GAAP net loss ratio 55% 74% GAAP combined ratio 79% 90%
December 31, 2001 December 31, 2000 ----------------- ----------------- Total investments $ 888,466 $ 711,113 Total assets 3,219,120 2,790,755 Shareholders' equity 763,453 530,930 Book value per share $ 12.40 $ 10.29
HCC INSURANCE HOLDINGS, INC. FINANCIAL HIGHLIGHTS DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
TWELVE MONTHS ENDED DECEMBER 31, 2001 2000 -------------------------------- ------------ ------------ Gross written premium $ 1,010,075 $ 967,457 Net written premium 372,958 283,788 Net earned premium 342,787 267,647 Management fees 61,795 96,058 Commission income 43,412 49,886 Net investment income 39,638 39,836 Other operating income 17,436 25,497 Total revenue 505,461 473,603 Net earnings 30,197 55,468 EARNINGS PER SHARE (DILUTED) $ 0.51 $ 1.07 Operating earnings after tax 60,079 64,279 OPERATING EARNINGS PER SHARE (DILUTED) $ 1.01 $ 1.25 Cash flow from operations 105,740 137,824 Weighted average shares outstanding 59,619 51,619 GAAP gross loss ratio 106% 79% GAAP net loss ratio 78% 74% GAAP combined ratio 104% 95%
December 31, 2001 December 31, 2000 ----------------- ----------------- Total investments $ 888,466 $ 711,113 Total assets 3,219,120 2,790,755 Shareholders' equity 763,453 530,930 Book value per share $ 12.40 $ 10.29