EX-99.1 2 a12-25625_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

GRAPHIC

 

HCC INSURANCE HOLDINGS REPORTS

RECORD NET EARNINGS OF $107.1 MILLION

FOR THE THIRD QUARTER OF 2012

 

Third Quarter 2012 Highlights and Updated 2012 Guidance:

 

·                  Annualized return on equity of 12.5% and annualized operating return on equity(a) of 14.2%

·                  Net earnings of $107.1 million, or $1.05 per diluted share

·                  Book value per share increased 4.2% to $34.60

·                  Net earned premium increased 4% to $563.7 million

·                  GAAP combined ratio of 79.1%

·                  Updated net earnings guidance of $3.50 to $3.65 per diluted share for 2012

 

HOUSTON (October 30, 2012) . . .

HCC Insurance Holdings, Inc. (NYSE: HCC) today released results for its third quarter ended September 30, 2012.

 

Net earnings were $107.1 million for the third quarter of 2012, compared to $60.4 million for the third quarter of 2011.  Net earnings per diluted share were $1.05 for the third quarter of 2012, versus $0.56 for the same quarter of 2011.  Net earnings were $283.1 million for the first nine months of 2012, or $2.76 per diluted share, compared to $176.9 million, or $1.57 per diluted share, for the same period of 2011.

 

The 2012 results include pretax net catastrophe losses of $8.0 million and $20.3 million for the third quarter and first nine months of 2012, respectively, which reduced net earnings per share by $0.05 and $0.13 in the respective periods.  The 2011 results include pretax net catastrophe losses of $34.6 million and $107.9 million for the third quarter and first nine months of 2011, respectively, which reduced net earnings per share by $0.21 and $0.63 in the respective periods.  Catastrophe losses added 1.4 and 1.3 percentage points to the Company’s net loss ratio for the third quarter and first nine months of 2012, respectively.

 

The Company’s combined ratio was 79.1% for the third quarter of 2012, compared to 93.1% for the third quarter of 2011.  The combined ratio was 83.3% for the first nine months of 2012, versus 92.6% for the same period of 2011.  HCC’s paid loss ratio was 56.3% for the first nine months of 2012, compared to 59.4% for the same period of 2011.

 

Book value per share increased 4.2% for the third quarter of 2012 to $34.60 at September 30, 2012.

 


 

“The third quarter was a record quarter and continued our excellent operating performance and strong cash flow across all of our segments,” HCC Chief Executive Officer John N. Molbeck, Jr. said.

 

HCC had net favorable loss development of $34.6 million in the third quarter of 2012, compared to net favorable development of $0.6 million in the same quarter of 2011, and net favorable development of $34.6 million in the first nine months of 2012, versus net adverse development of $21.6 million in the same period of 2011.

 

Gross written premium increased 6% to $665.8 million for the third quarter of 2012, compared to $628.8 million for the same quarter of 2011.  Net written premium increased 4% to $530.3 million for the third quarter of 2012, versus $512.3 million for the same quarter of 2011.  Net earned premium increased 4% to $563.7 million for the third quarter of 2012, compared to $544.3 million for the same quarter of 2011.

 

Gross written premium increased 6% to $2.1 billion for the first nine months of 2012, compared to $2.0 billion for the same period of 2011.  Net written premium increased 4% to $1.7 billion for the first nine months of 2012, versus $1.7 billion for the same period of 2011.  Net earned premium increased 6% to $1.7 billion for the first nine months of 2012, compared to $1.6 billion for the same period of 2011.

 

Investment income increased to $56.3 million in the third quarter of 2012, compared to $54.8 million in the same period of 2011.  Investment income increased to $166.6 million in the first nine months of 2012, compared to $158.8 million in the same period of 2011.  The Company’s fixed maturity securities portfolio increased 9% to $6.3 billion at September 30, 2012, from $5.8 billion at September 30, 2011.  The Company’s total investments increased 11% to $6.7 billion at September 30, 2012, from $6.1 billion at September 30, 2011.

 

As of September 30, 2012, HCC’s fixed maturity securities portfolio had an average rating of AA, with a duration of 4.6 years and an average long-term tax equivalent yield of 4.8%.

 

In the first nine months of 2012, the Company generated cash flow from operating activities of $496.0 million, compared to $288.0 million in the same period of 2011.  The Company’s liquidity position remains strong with $224.4 million of cash and short-term investments and $340.1 million of available capacity under its $600.0 million revolving loan facility at September 30, 2012.

 

As of September 30, 2012, total assets were $10.1 billion, shareholders’ equity was $3.5 billion and the Company’s debt to total capital ratio was 13.5%.

 

UPDATED EARNINGS GUIDANCE: Based on the Company’s results through the first nine months, HCC’s management estimates the Company will achieve net earnings of $3.50 to $3.65 per diluted share for the full year of 2012.  These estimated results assume the following: gross written premium of $2.8 billion; net written premium of $2.3 billion; a combined ratio of 84% - 86%; and average fully diluted shares outstanding of 100 million shares.  For the fourth quarter of 2012, the Company’s guidance includes 2.6 loss ratio points for net catastrophe losses in its

 

2


 

property treaty and property direct and facultative businesses and, consistent with its prior guidance, no provision for loss development, foreign currency fluctuation, net realized investment gains (losses) or other-than-temporary impairment credit losses.

 

For further information about HCC’s 2012 third quarter results, see the supplemental financial schedules that are accessible on HCC’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 Daylight Time on Wednesday, October 31.  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, February 1, 2013.

 

Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading international specialty insurance group with offices in the United States, 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.

 

a)  Non-GAAP Financial Measure

Annualized operating return on equity is a non-GAAP financial measure as defined by Regulation G and is calculated as operating earnings (or net earnings excluding after-tax net realized investment gain (loss), other-than-temporary impairment credit losses and foreign currency benefit (expense)) divided by average shareholders’ equity excluding accumulated other comprehensive income.  To annualize a quarterly rate, the result is multiplied by four.  See the supplemental financial schedules for a reconciliation of this non-GAAP financial measure to corresponding GAAP amounts.  Management believes annualized operating return on equity is a useful measure for understanding the Company’s profitability relative to shareholders’ equity before consideration of investment-related gains (losses) and foreign currency benefit (expense) that the Company does not consider in evaluating its operating results internally.

 

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


 

*     *     *     *     *

 

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,

 

 

 

2012 

 

2011 

 

2012 

 

2011

 

 

 

 

 

 

 

 

 

 

 

Gross written premium

 

$

 2,140,005

 

$

 2,020,137

 

$

 665,763

 

$

 628,847

 

 

 

 

 

 

 

 

 

 

 

Net written premium

 

1,730,799

 

1,661,091

 

530,307

 

512,334

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

1,676,122

 

1,576,987

 

563,650

 

544,256

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

166,642

 

158,782

 

56,342

 

54,765

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

1,873,484

 

1,759,084

 

631,673

 

610,524

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

283,139

 

176,905

 

107,062

 

60,437

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

 2.76

 

$

 1.57

 

$

 1.05

 

$

 0.56

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

100.6

 

110.9

 

99.7

 

107.0

 

 

 

 

 

 

 

 

 

 

 

Net loss ratio

 

57.9

%

67.4

%

53.9

%

69.9

%

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

83.3

%

92.6

%

79.1

%

93.1

%

 

 

 

 

 

 

 

 

 

 

Paid loss ratio

 

56.3

%

59.4

%

59.2

%

55.5

%

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

6,712,411

 

$

6,049,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

10,080,384

 

9,597,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

3,504,820

 

3,273,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt to total capital ratio

 

13.5

%

12.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

34.60

 

$

31.45

 

 

 

 

 

 

S - 1


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

September 30,

 

December 31,

 

 

 

2012

 

2011

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

Fixed income securities - available for sale, at fair value

 

$

6,315,365

 

$

5,718,834

 

Fixed income securities - held to maturity, at amortized cost

 

—

 

161,102

 

Equity securities

 

202,864

 

—

 

Short-term investments

 

160,138

 

133,917

 

Other investments

 

34,044

 

35,897

 

Total investments

 

6,712,411

 

6,049,750

 

Cash

 

64,293

 

104,550

 

Restricted cash

 

125,974

 

229,821

 

Premium, claims and other receivables

 

604,881

 

688,732

 

Reinsurance recoverables

 

1,013,957

 

1,056,068

 

Ceded unearned premium

 

262,168

 

222,300

 

Ceded life and annuity benefits

 

58,771

 

61,061

 

Deferred policy acquisition costs

 

199,401

 

189,633

 

Goodwill

 

885,860

 

872,814

 

Other assets

 

152,668

 

122,549

 

 

 

 

 

 

 

Total assets

 

$

10,080,384

 

$

9,597,278

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

3,692,250

 

$

3,658,317

 

Life and annuity policy benefits

 

58,771

 

61,061

 

Reinsurance, premium and claims payable

 

321,064

 

366,499

 

Unearned premium

 

1,118,094

 

1,031,034

 

Deferred ceding commissions

 

74,441

 

62,364

 

Notes payable

 

548,906

 

478,790

 

Accounts payable and accrued liabilities

 

762,038

 

665,231

 

 

 

 

 

 

 

Total liabilities

 

6,575,564

 

6,323,296

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

124,459

 

122,720

 

Additional paid-in capital

 

1,046,435

 

1,001,308

 

Retained earnings

 

2,664,745

 

2,429,818

 

Accumulated other comprehensive income

 

318,239

 

227,659

 

Treasury stock

 

(649,058

)

(507,523

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,504,820

 

3,273,982

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

10,080,384

 

$

9,597,278

 

 

S - 2


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

(Unaudited, in thousands except per share data)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

1,676,122

 

$

1,576,987

 

$

563,650

 

$

544,256

 

Net investment income

 

166,642

 

158,782

 

56,342

 

54,765

 

Other operating income

 

23,229

 

23,625

 

10,840

 

8,829

 

Net realized investment gain

 

8,519

 

3,169

 

1,472

 

2,674

 

Other-than-temporary impairment credit losses

 

(1,028

)

(3,479

)

(631

)

—

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

1,873,484

 

1,759,084

 

631,673

 

610,524

 

 

 

 

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

969,767

 

1,062,240

 

304,014

 

380,372

 

Policy acquisition costs, net

 

211,554

 

193,180

 

67,620

 

57,496

 

Other operating expense

 

268,164

 

244,491

 

100,458

 

84,254

 

Interest expense

 

19,101

 

16,597

 

5,962

 

5,610

 

 

 

 

 

 

 

 

 

 

 

Total expense

 

1,468,586

 

1,516,508

 

478,054

 

527,732

 

 

 

 

 

 

 

 

 

 

 

Earnings before income tax expense

 

404,898

 

242,576

 

153,619

 

82,792

 

Income tax expense

 

121,759

 

65,671

 

46,557

 

22,355

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

283,139

 

$

176,905

 

$

107,062

 

$

60,437

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.77

 

$

1.58

 

$

1.06

 

$

0.56

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

100.3

 

110.7

 

99.4

 

106.9

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.76

 

$

1.57

 

$

1.05

 

$

0.56

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

100.6

 

110.9

 

99.7

 

107.0

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.475

 

$

0.445

 

$

0.165

 

$

0.155

 

 

S - 3


 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

117,300

 

$

116,933

 

—

%

$

34,430

 

$

37,877

 

(9

)%

E&O

 

46,483

 

52,961

 

(12

)

14,990

 

15,963

 

(6

)

Public Risk

 

67,066

 

55,724

 

20

 

23,821

 

21,426

 

11

 

Other

 

250,175

 

184,115

 

36

 

89,170

 

68,956

 

29

 

 

 

481,024

 

409,733

 

17

 

162,411

 

144,222

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

297,933

 

312,881

 

(5

)

111,749

 

112,220

 

—

 

International D&O

 

79,943

 

80,022

 

—

 

20,377

 

18,411

 

11

 

 

 

377,876

 

392,903

 

(4

)

132,126

 

130,631

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

583,639

 

527,401

 

11

 

195,665

 

176,247

 

11

 

Other

 

38,974

 

37,834

 

3

 

14,073

 

15,225

 

(8

)

 

 

622,613

 

565,235

 

10

 

209,738

 

191,472

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

121,087

 

127,219

 

(5

)

40,325

 

40,257

 

—

 

Credit

 

45,591

 

42,149

 

8

 

15,651

 

15,158

 

3

 

 

 

166,678

 

169,368

 

(2

)

55,976

 

55,415

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

125,578

 

113,410

 

11

 

14,864

 

17,029

 

(13

)

Property Treaty

 

134,527

 

124,750

 

8

 

20,672

 

20,635

 

—

 

Liability

 

58,293

 

68,713

 

(15

)

18,051

 

20,642

 

(13

)

Surety & Credit

 

61,759

 

65,853

 

(6

)

18,308

 

18,664

 

(2

)

Other

 

79,954

 

74,629

 

7

 

23,305

 

18,804

 

24

 

 

 

460,111

 

447,355

 

3

 

95,200

 

95,774

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

31,703

 

35,543

 

(11

)

10,312

 

11,333

 

(9

)

Totals

 

$

2,140,005

 

$

2,020,137

 

6

%

$

665,763

 

$

628,847

 

6

%

 

S - 4


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

92,043

 

$

88,786

 

4

%

$

28,638

 

$

29,701

 

(4

)%

E&O

 

44,335

 

52,035

 

(15

)

14,100

 

15,449

 

(9

)

Public Risk

 

54,185

 

43,926

 

23

 

18,618

 

17,530

 

6

 

Other

 

107,303

 

88,465

 

21

 

38,616

 

30,096

 

28

 

 

 

297,866

 

273,212

 

9

 

99,972

 

92,776

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

218,794

 

239,894

 

(9

)

81,968

 

86,202

 

(5

)

International D&O

 

45,604

 

47,600

 

(4

)

11,293

 

10,644

 

6

 

 

 

264,398

 

287,494

 

(8

)

93,261

 

96,846

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

583,344

 

527,255

 

11

 

195,671

 

176,199

 

11

 

Other

 

38,674

 

37,550

 

3

 

13,976

 

15,160

 

(8

)

 

 

622,018

 

564,805

 

10

 

209,647

 

191,359

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

110,074

 

119,780

 

(8

)

36,689

 

37,037

 

(1

)

Credit

 

36,791

 

35,981

 

2

 

14,080

 

13,623

 

3

 

 

 

146,865

 

155,761

 

(6

)

50,769

 

50,660

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

83,353

 

68,329

 

22

 

2,340

 

5,432

 

(57

)

Property Treaty

 

113,302

 

100,139

 

13

 

13,483

 

14,013

 

(4

)

Liability

 

53,954

 

63,248

 

(15

)

16,638

 

18,815

 

(12

)

Surety & Credit

 

55,887

 

62,155

 

(10

)

16,074

 

18,689

 

(14

)

Other

 

61,693

 

50,415

 

22

 

18,031

 

12,415

 

45

 

 

 

368,189

 

344,286

 

7

 

66,566

 

69,364

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

31,463

 

35,533

 

(11

)

10,092

 

11,329

 

(11

)

Totals

 

$

1,730,799

 

$

1,661,091

 

4

%

$

530,307

 

$

512,334

 

4

%

 

S - 5


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2012

 

2011

 

Change

 

2012

 

2011

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

87,890

 

$

83,879

 

5

%

$

29,670

 

$

29,279

 

1

%

E&O

 

47,177

 

56,354

 

(16

)

15,198

 

17,997

 

(16

)

Public Risk

 

48,363

 

36,523

 

32

 

16,571

 

13,344

 

24

 

Other

 

82,163

 

68,365

 

20

 

26,302

 

25,326

 

4

 

 

 

265,593

 

245,121

 

8

 

87,741

 

85,946

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

252,622

 

270,408

 

(7

)

81,955

 

90,154

 

(9

)

International D&O

 

45,832

 

36,832

 

24

 

15,594

 

13,912

 

12

 

 

 

298,454

 

307,240

 

(3

)

97,549

 

104,066

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

583,344

 

527,255

 

11

 

195,671

 

176,199

 

11

 

Other

 

40,733

 

41,063

 

(1

)

13,378

 

15,516

 

(14

)

 

 

624,077

 

568,318

 

10

 

209,049

 

191,715

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

118,944

 

121,093

 

(2

)

39,336

 

40,284

 

(2

)

Credit

 

35,288

 

32,216

 

10

 

14,052

 

11,622

 

21

 

 

 

154,232

 

153,309

 

1

 

53,388

 

51,906

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

61,377

 

47,369

 

30

 

20,488

 

18,686

 

10

 

Property Treaty

 

77,422

 

64,528

 

20

 

28,415

 

26,563

 

7

 

Liability

 

57,603

 

60,181

 

(4

)

18,472

 

20,283

 

(9

)

Surety & Credit

 

53,701

 

56,009

 

(4

)

18,756

 

19,952

 

(6

)

Other

 

52,200

 

39,371

 

33

 

19,700

 

13,810

 

43

 

 

 

302,303

 

267,458

 

13

 

105,831

 

99,294

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

31,463

 

35,541

 

(11

)

10,092

 

11,329

 

(11

)

Totals

 

$

1,676,122

 

$

1,576,987

 

6

%

$

563,650

 

$

544,256

 

4

%

 

S - 6


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

 

 

 

 

 

 

 

Taxable

 

$

86,548

 

$

84,228

 

$

28,330

 

$

30,009

 

Exempt from U.S. income taxes

 

80,163

 

74,713

 

27,291

 

24,887

 

Total fixed maturity securities

 

166,711

 

158,941

 

55,621

 

54,896

 

Equity securities

 

2,339

 

—

 

1,346

 

—

 

Short-term investments

 

397

 

420

 

295

 

99

 

Other

 

1,699

 

2,992

 

831

 

962

 

Total investment income

 

171,146

 

162,353

 

58,093

 

55,957

 

Investment expense

 

(4,504

)

(3,571

)

(1,751

)

(1,192

)

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

166,642

 

$

158,782

 

$

56,342

 

$

54,765

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in unrealized gain for period, before tax

 

$

145,007

 

$

156,239

 

$

90,353

 

$

97,883

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2012

 

$

476,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

$

385,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

$

352,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

$

331,069

 

 

 

 

 

 

 

 

S - 7


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Loss Ratios

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Nine months ended

 

 

 

September 30, 2012

 

September 30, 2011

 

 

 

Net earned

 

Loss

 

Net earned

 

Loss

 

 

 

premium

 

ratio

 

premium

 

ratio

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

Aviation

 

$

87,890

 

 

56.9

%

$

83,879

 

 

64.9

%

E&O

 

47,177

 

74.1

 

56,354

 

73.7

 

Public Risk

 

48,363

 

95.9

 

36,523

 

84.5

 

Other

 

82,163

 

27.8

 

68,365

 

32.1

 

 

 

265,593

 

58.0

 

245,121

 

60.7

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

U.S. D&O

 

252,622

 

64.9

 

270,408

 

96.6

 

International D&O

 

45,832

 

14.5

 

36,832

 

(10.0

)

 

 

298,454

 

57.1

 

307,240

 

83.9

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

583,344

 

73.1

 

527,255

 

74.2

 

Other

 

40,733

 

50.5

 

41,063

 

50.7

 

 

 

624,077

 

71.7

 

568,318

 

72.5

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

Surety

 

118,944

 

24.7

 

121,093

 

25.2

 

Credit

 

35,288

 

37.0

 

32,216

 

36.6

 

 

 

154,232

 

27.5

 

153,309

 

27.6

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Energy

 

61,377

 

42.5

 

47,369

 

52.5

 

Property Treaty

 

77,422

 

22.0

 

64,528

 

95.9

 

Liability

 

57,603

 

49.5

 

60,181

 

18.1

 

Surety & Credit

 

53,701

 

57.7

 

56,009

 

40.9

 

Other

 

52,200

 

45.9

 

39,371

 

140.0

 

 

 

302,303

 

41.9

 

267,458

 

65.7

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

31,463

 

91.7

 

35,541

 

73.1

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

1,676,122

 

57.9

%

$

1,576,987

 

67.4

%

 

S - 8


 

HCC Insurance Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measure to GAAP

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings

 

$

283,139

 

$

176,905

 

$

107,062

 

$

60,437

 

 

 

 

 

 

 

 

 

 

 

Exclude:

 

 

 

 

 

 

 

 

 

Net realized investment gain, net of tax*

 

5,537

 

2,060

 

956

 

1,738

 

OTTI credit losses, net of tax*

 

(668

)

(2,261

)

(410

)

—

 

Foreign currency benefit (expense), net of tax*

 

(3,476

)

1,612

 

(4,412

)

309

 

Total items excluded from operating earnings

 

1,393

 

1,411

 

(3,866

)

2,047

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

$

281,746

 

$

175,494

 

$

110,928

 

$

58,390

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - beginning of period

 

$

3,273,982

 

$

3,278,400

 

$

3,343,257

 

$

3,251,662

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

227,659

 

97,186

 

259,776

 

145,887

 

 

 

 

 

 

 

 

 

 

 

Beginning equity, as adjusted

 

$

3,046,323

 

$

3,181,214

 

$

3,083,481

 

$

3,105,775

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - end of period

 

$

3,504,820

 

$

3,249,107

 

$

3,504,820

 

$

3,249,107

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

318,239

 

202,018

 

318,239

 

202,018

 

 

 

 

 

 

 

 

 

 

 

Ending equity, as adjusted

 

$

3,186,581

 

$

3,047,089

 

$

3,186,581

 

$

3,047,089

 

 

 

 

 

 

 

 

 

 

 

Average equity, as adjusted

 

$

3,116,452

 

$

3,114,152

 

$

3,135,031

 

$

3,076,432

 

 

 

 

 

 

 

 

 

 

 

Annualized operating return on equity

 

12.1

%

7.5

%

14.2

%

7.6

%

 

* Tax adjustment calculated using 35% statutory tax rate.

 

S - 9