EX-99.1 2 a11-11231_2ex99d1.htm EX-99.1

Exhibit 99.1

 

 

HCC INSURANCE HOLDINGS REPORTS EARNINGS
FOR THE FIRST QUARTER OF 2011

 

HOUSTON (May 3, 2011) . . .

 

HCC Insurance Holdings, Inc. (NYSE: HCC) today released results for its first quarter ended March 31, 2011.

 

Net earnings were $47.0 million for the first quarter of 2011, compared to $71.4 million for the first quarter of 2010.  Net earnings per diluted share were $0.41 for the first quarter of 2011, versus $0.62 for the same quarter of 2010.  The 2011 results included pretax losses of $51.5 million, net of reinsurance and reinstatement premium, stemming from the first quarter catastrophes in Japan, New Zealand and Australia that reduced net earnings by $0.29 per share.  The 2010 results included pretax losses of $20.6 million, net of reinsurance, stemming from several catastrophes, the largest of which was the Chilean earthquake, that reduced net earnings by $0.12 per share in the first quarter of 2010.  The 2011 results were also impacted by a $3.1 million out-of-period correction related to other-than-temporary impairments, which reduced the first quarter 2011 net earnings by $0.02 per share.

 

Book value per share increased to $28.87 at March 31, 2011, compared to $28.67 at December 31, 2010.  The Company’s annualized return on average equity was 5.7% for the first quarter of 2011.  The Company repurchased 1.3 million shares of its common stock during the first quarter of 2011 for $40.2 million, or an average cost of $30.69 per share.  The Company purchased an additional 1.1 million shares following the close of the quarter.  As of May 3, 2011, $224.4 million remains under the Company’s $300.0 million share buyback authorization announced on March 14, 2011.

 

The Company’s GAAP combined ratio was 94.7% for the first quarter of 2011, compared to 89.8% for the first quarter of 2010.  Excluding the 2011 catastrophe losses, HCC’s net loss ratio was 58.8%, and its combined ratio was 84.8%.  HCC’s paid loss ratio was 58.4% for the first quarter of 2011, compared to 60.4% for the same quarter of 2010.  The Company’s current accident year net loss ratio was 66.6%, and the combined ratio was 92.9%.  Excluding catastrophe losses, HCC’s current accident year net loss ratio was 57.1%, and its combined ratio was 83.1%.

 

“HCC’s core businesses continued to perform well, but a series of horrific catastrophes punctuated the quarter’s results,” said John N. Molbeck, Jr., HCC’s Chief Executive

 


 

Officer.

 

Gross written premium of HCC’s insurance company subsidiaries increased 4% to $649.2 million for the first quarter of 2011, compared to $622.5 million for the first quarter of 2010.  Net written premium increased 8% to $538.9 million for the first quarter of 2011, versus $498.3 million for the same quarter of 2010.  Net earned premium was essentially flat at $508.5 million for the first quarter of 2011, compared to $509.6 million for the same quarter of 2010.

 

HCC had net adverse prior year reserve development of $9.0 million in the first quarter of 2011, compared to $5.0 million in the same quarter of 2010.

 

Investment income increased to $51.6 million for the first quarter of 2011, compared to $49.2 million for the same quarter of 2010, reflecting higher income from fixed income securities due to an increased level of investments.  The Company’s fixed income securities portfolio increased 11% to $5.5 billion at March 31, 2011 from $4.9 billion at March 31, 2010.

 

As of March 31, 2011, HCC’s fixed income securities portfolio had an average rating of AA+, with a duration of 5.4 years and an average long-term tax equivalent yield of 4.9%.  As of March 31, 2011, HCC’s total investments had an average combined duration of 5.2 years.

 

Other operating income was $7.3 million for the first quarter of 2011, compared to $17.9 million for the same quarter of 2010.  In 2010, the Company terminated its interest in a derivative contract, which generated an $8.0 million gain.

 

The Company’s liquidity position remains strong with $357.5 million of cash and short-term investments and $586.8 million of available capacity under its new $600.0 million revolving loan facility at March 31, 2011.  The Company generated $82.1 million of cash flow from operating activities in the first quarter of 2011, compared to $42.5 million in the first quarter of 2010.

 

As of March 31, 2011, total investments were $5.7 billion, total assets were $9.3 billion, shareholders’ equity was $3.3 billion and the Company’s debt to total capital ratio was 8.3%.

 

The Company also announced that Chris Williams, formerly the Chairman of the Company’s Board of Directors, has been appointed as President by the Board.  “I am very pleased to welcome Chris Williams to the Company as President.  Chris is an industry veteran, who as Chairman of the Board developed a great understanding of the Company’s strategy, finances and organization,” said HCC’s CEO John N. Molbeck, Jr.

 

For further information about HCC’s 2011 first quarter earnings results, see the supplemental financial schedules that are accessible on HCC’s website at

 

2


 

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 Daylight Time on Wednesday, May 4.  To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161.  There will also 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, August 5, 2011.

 

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.  HCC’s major domestic and international insurance companies have financial strength ratings of “AA (Very Strong)” from Standard & Poor’s Corporation, “A+ (Superior)” from A.M. Best Company Inc., “AA (Very Strong)” from Fitch Ratings, and “A1 (Good Security)” from Moody’s Investors Service, Inc.

 

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

 

Contact:

Doug Busker, Director of Investor Relations

 

HCC Insurance Holdings, Inc.

 

Telephone:  (713) 996-1192

 

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.

 

*     *     *     *     *

 

3


 

HCC Insurance Holdings, Inc. and Subsidiaries

Financial Highlights

(Unaudited, in thousands except per share data)

 

 

 

Three months ended
March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Gross written premium

 

$

649,208

 

$

622,496

 

 

 

 

 

 

 

Net written premium

 

538,884

 

498,251

 

 

 

 

 

 

 

Net earned premium

 

508,480

 

509,587

 

 

 

 

 

 

 

Net investment income

 

51,595

 

49,249

 

 

 

 

 

 

 

Other operating income

 

7,321

 

17,941

 

 

 

 

 

 

 

Total revenue

 

563,708

 

581,302

 

 

 

 

 

 

 

Net earnings

 

46,990

 

71,354

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

0.41

 

$

0.62

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

114.1

 

114.1

 

 

 

 

 

 

 

GAAP net loss ratio

 

68.4

%

64.1

%

 

 

 

 

 

 

GAAP combined ratio

 

94.7

%

89.8

%

 

 

 

 

 

 

Paid loss ratio

 

58.4

%

60.4

%

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Total investments

 

$

5,746,052

 

$

5,687,095

 

 

 

 

 

 

 

Total assets

 

9,256,301

 

9,064,082

 

 

 

 

 

 

 

Shareholders’ equity

 

3,308,160

 

3,296,432

 

 

 

 

 

 

 

Debt to total capital ratio

 

8.3

%

8.3

%

 

 

 

 

 

 

Book value per share

 

$

28.87

 

$

28.67

 

 

S-1


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

 

March 31,

 

December 31,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

Fixed income securities - available for sale, at fair value

 

$

5,299,461

 

$

4,999,440

 

Fixed income securities - held to maturity, at amortized cost

 

180,222

 

193,668

 

Short-term investments

 

258,724

 

488,002

 

Other investments

 

7,645

 

5,985

 

Total investments

 

5,746,052

 

5,687,095

 

Cash

 

98,783

 

97,857

 

Restricted cash

 

170,768

 

148,547

 

Premium, claims and other receivables

 

645,278

 

635,867

 

Reinsurance recoverables

 

1,115,249

 

1,006,855

 

Ceded unearned premium

 

243,877

 

278,663

 

Ceded life and annuity benefits

 

57,893

 

58,409

 

Deferred policy acquisition costs

 

216,105

 

212,786

 

Goodwill

 

841,734

 

821,648

 

Other assets

 

120,562

 

116,355

 

 

 

 

 

 

 

Total assets

 

$

9,256,301

 

$

9,064,082

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

3,660,290

 

$

3,471,858

 

Life and annuity policy benefits

 

57,893

 

58,409

 

Reinsurance, premium and claims payable

 

341,017

 

345,730

 

Unearned premium

 

1,028,173

 

1,045,877

 

Deferred ceding commissions

 

66,065

 

72,565

 

Notes payable

 

298,675

 

298,637

 

Accounts payable and accrued liabilities

 

496,028

 

474,574

 

 

 

 

 

 

 

Total liabilities

 

5,948,141

 

5,767,650

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

121,871

 

120,942

 

Additional paid-in capital

 

976,710

 

954,332

 

Retained earnings

 

2,288,247

 

2,257,895

 

Accumulated other comprehensive income

 

95,477

 

97,186

 

Treasury stock

 

(174,145

)

(133,923

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,308,160

 

3,296,432

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

9,256,301

 

$

9,064,082

 

 

S-2


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

(Unaudited, in thousands except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

508,480

 

$

509,587

 

Net investment income

 

51,595

 

49,249

 

Other operating income

 

7,321

 

17,941

 

Net realized investment gain (loss)

 

(559

)

4,525

 

Other-than-temporary impairment credit losses

 

(3,129

)

—

 

 

 

 

 

 

 

Total revenue

 

563,708

 

581,302

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

347,586

 

326,521

 

Policy acquisition costs, net

 

83,378

 

79,698

 

Other operating expense

 

64,312

 

66,668

 

Interest expense

 

5,553

 

5,390

 

 

 

 

 

 

 

Total expense

 

500,829

 

478,277

 

 

 

 

 

 

 

Earnings before income tax expense

 

62,879

 

103,025

 

Income tax expense

 

15,889

 

31,671

 

 

 

 

 

 

 

Net earnings

 

$

46,990

 

$

71,354

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

0.41

 

$

0.62

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

113.8

 

113.7

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

0.41

 

$

0.62

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

114.1

 

114.1

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.145

 

$

0.135

 

 

S-3


 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

 

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

41,448

 

$

37,521

 

10

%

E&O

 

19,693

 

23,591

 

(17

)

Public Risk

 

17,453

 

16,712

 

4

 

Other

 

50,956

 

59,798

 

(15

)

 

 

129,550

 

137,622

 

(6

)

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

55,646

 

62,212

 

(11

)

International D&O

 

23,929

 

20,853

 

15

 

Other

 

21,545

 

24,660

 

(13

)

 

 

101,120

 

107,725

 

(6

)

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

174,957

 

161,766

 

8

 

Other

 

21,343

 

22,412

 

(5

)

 

 

196,300

 

184,178

 

7

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

41,705

 

40,946

 

2

 

Credit

 

12,066

 

13,075

 

(8

)

 

 

53,771

 

54,021

 

—

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

16,303

 

16,582

 

(2

)

Property Treaty

 

71,819

 

37,630

 

91

 

Liability

 

24,118

 

27,947

 

(14

)

Surety & Credit

 

26,673

 

21,305

 

25

 

Other

 

29,435

 

33,878

 

(13

)

 

 

168,348

 

137,342

 

23

 

 

 

 

 

 

 

 

 

Exited Lines

 

119

 

1,608

 

nm

 

 

 

 

 

 

 

 

 

Totals

 

$

649,208

 

$

622,496

 

4

%

 

nm - Not meaningful comparison

 

S-4


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

 

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

27,394

 

$

26,021

 

5

%

E&O

 

19,566

 

23,530

 

(17

)

Public Risk

 

13,252

 

9,205

 

44

 

Other

 

26,510

 

21,490

 

23

 

 

 

86,722

 

80,246

 

8

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

41,771

 

46,360

 

(10

)

International D&O

 

14,180

 

8,493

 

67

 

Other

 

17,840

 

16,021

 

11

 

 

 

73,791

 

70,874

 

4

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

174,909

 

161,766

 

8

 

Other

 

21,196

 

22,317

 

(5

)

 

 

196,105

 

184,083

 

7

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

39,758

 

39,385

 

1

 

Credit

 

9,949

 

8,034

 

24

 

 

 

49,707

 

47,419

 

5

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

5,052

 

9,842

 

(49

)

Property Treaty

 

61,160

 

35,257

 

73

 

Liability

 

22,360

 

26,177

 

(15

)

Surety & Credit

 

24,758

 

19,636

 

26

 

Other

 

19,110

 

24,116

 

(21

)

 

 

132,440

 

115,028

 

15

 

 

 

 

 

 

 

 

 

Exited Lines

 

119

 

601

 

nm

 

 

 

 

 

 

 

 

 

Totals

 

$

538,884

 

$

498,251

 

8

%

 

nm -  Not meaningful comparison

 

S-5


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

 

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

27,282

 

$

28,943

 

(6

)%

E&O

 

19,557

 

26,232

 

(25

)

Public Risk

 

11,252

 

11,490

 

(2

)

Other

 

22,163

 

22,265

 

—

 

 

 

80,254

 

88,930

 

(10

)

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

71,354

 

78,134

 

(9

)

International D&O

 

10,775

 

13,440

 

(20

)

Other

 

18,621

 

18,578

 

—

 

 

 

100,750

 

110,152

 

(9

)

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

174,909

 

161,766

 

8

 

Other

 

23,631

 

25,018

 

(6

)

 

 

198,540

 

186,784

 

6

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

40,661

 

40,017

 

2

 

Credit

 

10,703

 

6,732

 

59

 

 

 

51,364

 

46,749

 

10

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

12,049

 

16,187

 

(26

)

Property Treaty

 

16,004

 

6,754

 

137

 

Liability

 

19,932

 

20,772

 

(4

)

Surety & Credit

 

17,374

 

18,189

 

(4

)

Other

 

12,088

 

14,265

 

(15

)

 

 

77,447

 

76,167

 

2

 

 

 

 

 

 

 

 

 

Exited Lines

 

125

 

805

 

nm

 

 

 

 

 

 

 

 

 

Totals

 

$

508,480

 

$

509,587

 

—

%

 

nm - Not meaningful comparison

 

S-6


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities

 

 

 

 

 

Taxable

 

$

27,095

 

$

26,868

 

Exempt from U.S. income taxes

 

24,911

 

21,731

 

Total fixed income securities

 

52,006

 

48,599

 

Short-term investments

 

156

 

190

 

Other

 

642

 

1,508

 

Total investment income

 

52,804

 

50,297

 

Investment expense

 

(1,209

)

(1,048

)

 

 

 

 

 

 

Net investment income

 

$

51,595

 

$

49,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in unrealized gain for period, before tax

 

$

(18,214

)

$

7,572

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

$

116,420

 

 

 

 

 

 

 

 

 

December 31, 2010

 

$

134,634

 

 

 

 

S-7


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Loss Ratios

(Unaudited, in thousands)

 

 

 

Three months ended

 

Three months ended

 

 

 

March 31, 2011

 

March 31, 2010

 

 

 

Net earned

 

Loss

 

Net earned

 

Loss

 

 

 

premium

 

ratio

 

premium

 

ratio

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

Aviation

 

$

27,282

 

58.5

%

$

28,943

 

56.6

%

E&O

 

19,557

 

59.5

 

26,232

 

63.0

 

Public Risk

 

11,252

 

73.7

 

11,490

 

70.0

 

Other

 

22,163

 

52.3

 

22,265

 

48.8

 

 

 

80,254

 

59.2

 

88,930

 

58.3

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

U.S. D&O

 

71,354

 

59.7

 

78,134

 

62.3

 

International D&O

 

10,775

 

60.6

 

13,440

 

58.6

 

Other

 

18,621

 

92.1

 

18,578

 

59.4

 

 

 

100,750

 

65.8

 

110,152

 

61.4

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

174,909

 

73.9

 

161,766

 

73.9

 

Other

 

23,631

 

66.3

 

25,018

 

74.8

 

 

 

198,540

 

73.0

 

186,784

 

74.0

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

Surety

 

40,661

 

25.4

 

40,017

 

25.1

 

Credit

 

10,703

 

44.2

 

6,732

 

34.8

 

 

 

51,364

 

29.3

 

46,749

 

26.5

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Energy

 

12,049

 

80.9

 

16,187

 

77.1

 

Property Treaty

 

16,004

 

126.7

 

6,754

 

177.0

 

Liability

 

19,932

 

51.8

 

20,772

 

55.8

 

Surety & Credit

 

17,374

 

40.5

 

18,189

 

44.0

 

Other

 

12,088

 

221.7

 

14,265

 

81.1

 

 

 

77,447

 

95.8

 

76,167

 

73.0

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

125

 

nm

 

805

 

nm

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

508,480

 

68.4

%

$

509,587

 

64.1

%

 

nm - Not meaningful comparison

 

S-8