EX-99 3 a4450883_ex991.txt HCC EXHIBIT 99.1 Exhibit 99.1 HCC Reports Continued Success with Strong Second Quarter Results HOUSTON--(BUSINESS WIRE)--Aug. 7, 2003--HCC Insurance Holdings, Inc. (NYSE:HCC) today released earnings for the second quarter of 2003. Net earnings increased 29 percent for the second quarter of 2003 to $34.7 million from $26.8 million and diluted earnings per share grew 26% to $0.54 from $0.43, both compared to the same period in 2002. Net earnings increased 30 percent for the first six months of 2003 to $64.9 million from $50.1 and diluted earnings per share grew 28 percent to $1.02 from $0.80, both compared to the first six months of 2002. The increase in net earnings is primarily as a result of the continuing improvement in market conditions across all of our operations, including acquisitions made in 2002. Stephen L. Way, Chairman and Chief Executive Officer, said, "This earnings growth is at the high end of the previously announced range of 20 to 30 percent and, barring any major catastrophe, we anticipate achieving a similar result for the full year 2003." Total revenue grew substantially during the second quarter of 2003 rising 55 percent to $241.3 million from $155.9 million and rising 47 percent for the first six months of 2003 to $452.0 million from $307.6 million, both compared to the corresponding periods in 2002. Revenue continues to increase strongly across all of our segments and is expected to continue for the rest of this year and into 2004. Net written premium of our insurance company subsidiaries grew significantly by 72 percent to $443.6 million during the first six months of 2003 compared to $257.7 million in the first half of 2002. During the same period, net earned premium increased by 53 percent to $345.9 million from $226.1 million. These record levels were achieved as a result of higher rates and strong growth in new business including production from underwriting agencies that we acquired in 2002. Continued growth is expected through 2004. The GAAP combined ratio was 88.9 percent for the first six months of 2003 compared to 85.9 percent in the corresponding period of 2002. Mr. Way added, "This continuing strong underwriting performance was achieved while keeping our loss reserves at very conservative levels and despite some deterioration in our discontinued lines." Management fees increased 27 percent during the first six months of 2003 to $49.5 million, from $39.0 million in the first half of 2002. During the same period, commission income growth accelerated, rising 34 percent to $28.4 million. These increased revenues came from new business and the effect of acquisitions made in 2002. We anticipate continued growth in both segments through the rest of this year. Net investment income increased by 27 percent in the first half of 2003 to $22.9 million, compared to $18.0 million in the corresponding period in 2002. This growth was due to increased investment assets, which grew 23 percent to $266.1 million during the first six months of 2003 as a result of cash flow from operations, which more than offset low investment yields. We anticipate this growth continuing through 2004. As of June 30, 2003, total investments increased to $1.43 billion, total assets were over $4.3 billion, book value per share increased to $15.21 and the Company's debt to total capital ratio was 24.5 percent. See attached tables. HCC will hold an open conference call beginning at 4:00 p.m. Central Time on Thursday, August 7th to discuss these results. To participate, the number for domestic calls is 800-482-2225 and the number for international calls is 303-224-6997. 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 on the website until Friday, August 15, 2003. HCC is an international insurance holding company and a leading specialty insurance group since 1974. HCC is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A. M. Best Company. 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. For more information, visit our website at www.hcch.com. HCC Insurance Holdings, Inc. Financial Highlights June 30, 2003 (amounts in thousands, except per share data) Three Months Ended June 30, 2003 2002 --------------------------- ---- ---- Gross written premium $477,279 $305,852 Net written premium 251,091 135,390 Net earned premium 183,492 114,627 Management fees 27,083 19,583 Commission income 14,432 11,068 Net investment income 11,873 9,290 Other operating income 4,242 677 Total revenue 241,327 155,912 Pre-tax earnings 54,897 41,910 Net earnings 34,662 26,782 Earnings per share (diluted) 0.54 0.43 Cash flow from operations 97,401 33,580 Weighted average shares outstanding (diluted) 63,990 62,889 GAAP gross loss ratio 76.3% 51.5% GAAP net loss ratio 65.4% 59.1% GAAP combined ratio 89.1% 84.4% June 30, December 31, 2003 2002 ------------ ------------ Total investments $1,433,705 $1,167,636 Total assets 4,363,362 3,704,151 Shareholders' equity 960,783 882,907 Debt to total capital 24.5% 20.7% Book value per share $15.21 $14.15 HCC Insurance Holdings, Inc. Financial Highlights June 30, 2003 (amounts in thousands, except per share data) Six Months Ended June 30, 2003 2002 ------------------------- ---- ---- Gross written premium $856,727 553,620 Net written premium 443,592 257,662 Net earned premium 345,914 226,105 Management fees 49,541 38,995 Commission income 28,352 21,228 Net investment income 22,870 17,984 Other operating income 5,139 2,140 Total revenue 452,000 307,621 Pre-tax earnings 102,154 77,630 Net earnings 64,937 50,064 Earnings per share (diluted) 1.02 0.80 Cash flow from operations 199,272 46,682 Weighted average shares outstanding (diluted) 63,667 62,805 GAAP gross loss ratio 72.9% 60.1% GAAP net loss ratio 63.6% 60.2% GAAP combined ratio 88.9% 85.9% June 30, December 31, 2003 2002 ------------ ------------ Total investments $1,433,705 $1,167,636 Total assets 4,363,362 3,704,151 Shareholders' equity 960,783 882,907 Debt to total capital 24.5% 20.7% Book value per share $15.21 $14.15 HCC Insurance Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited, in thousands, except per share data) June 30, December 31, 2003 2002 --------------- -------------- ASSETS Investments: Fixed income securities, at market (cost: 2003 - $976,833; 2002 - $807,772) $1,019,438 $841,548 Marketable equity securities, at market (cost: 2003 - $15,118; 2002 - $15,815) 15,120 15,609 Short-term investments, at cost, which approximates market 396,977 307,215 Other investments, at estimated fair value (cost: 2003 - $2,170; 2002 - $3,264) 2,170 3,264 --------------- -------------- Total investments 1,433,705 1,167,636 Cash 16,259 40,306 Restricted cash 224,909 189,396 Premium, claims and other receivables 923,473 753,527 Reinsurance recoverables 863,018 798,934 Ceded unearned premium 230,037 164,224 Ceded life and annuity benefits 78,575 78,951 Deferred policy acquisition costs 101,873 68,846 Goodwill 334,360 335,288 Other assets 157,153 107,043 --------------- -------------- Total assets $4,363,362 $3,704,151 =============== ============== LIABILITIES Loss and loss adjustment expense payable $1,305,123 $1,155,290 Life and annuity policy benefits 78,575 78,951 Reinsurance balances payable 230,924 166,659 Unearned premium 497,770 331,050 Deferred ceding commissions 68,028 49,963 Premium and claims payable 850,389 749,523 Notes payable 311,639 230,027 Accounts payable and accrued liabilities 60,131 59,781 --------------- -------------- Total liabilities 3,402,579 2,821,244 SHAREHOLDERS' EQUITY Common stock, $1.00 par value; 250.0 million shares authorized; (shares issued and outstanding: 2003 - 63,188; 2002 - 62,358) 63,188 62,358 Additional paid-in capital 429,868 416,406 Retained earnings 440,113 383,378 Accumulated other comprehensive income 27,614 20,765 --------------- -------------- Total shareholders' equity 960,783 882,907 --------------- -------------- Total liabilities and shareholders' equity $4,363,362 $3,704,151 =============== ============== HCC Insurance Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (unaudited, in thousands, except per share data) For the six months For the three months ended June 30, ended June 30, 2003 2002 2003 2002 ---------- ---------- ---------- ----------- REVENUE Net earned premium $345,914 $226,105 $183,492 $114,627 Management fees 49,541 38,995 27,083 19,583 Commission income 28,352 21,228 14,432 11,068 Net investment income 22,870 17,984 11,873 9,290 Net realized investment gain 184 1,169 205 667 Other operating income 5,139 2,140 4,242 677 ---------- ---------- ---------- ----------- Total revenue 452,000 307,621 241,327 155,912 EXPENSE Loss and loss adjustment expense 220,112 136,083 120,080 67,752 Operating expense: Policy acquisition costs, net 41,458 25,534 20,947 12,480 Compensation expense 55,068 39,541 28,717 19,915 Other operating expense 29,612 23,992 14,772 11,392 ---------- ---------- ---------- ----------- Net operating expense 126,138 89,067 64,436 43,787 Interest expense 3,596 4,841 1,914 2,463 ---------- ---------- ---------- ----------- Total expense 349,846 229,991 186,430 114,002 ---------- ---------- ---------- ----------- Earnings before income tax provision 102,154 77,630 54,897 41,910 Income tax provision 37,217 27,566 20,235 15,128 ---------- ---------- ---------- ----------- Net earnings $64,937 $50,064 $34,662 $26,782 ========== ========== ========== =========== Basic earnings per share data: Earnings per share $1.03 $0.81 $0.55 $0.43 ========== ========== ========== =========== Weighted average shares outstanding 62,753 62,087 62,867 62,236 ========== ========== ========== =========== Diluted earnings per share data: Earnings per share $1.02 $0.80 $0.54 $0.43 ========== ========== ========== =========== Weighted average shares outstanding 63,667 62,805 63,990 62,889 ========== ========== ========== =========== Cash dividends declared, per share $0.13 $0.125 $0.065 $0.0625 ========== ========== ========== =========== HCC Insurance Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited, in thousands, except per share data) For the six months For the three months ended June 30, ended June 30, 2003 2002 2003 2002 --------- --------- --------- ---------- Cash flows from operating activities: Net earnings $64,937 $50,064 $34,662 $26,782 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Change in premium, claims and other Receivables (169,946) (37,451) (107,729) (46,737) Change in reinsurance recoverables (64,084) 30,036 (17,052) 29,419 Change in ceded unearned premium (65,813) (39,310) (41,382) (36,822) Change in loss and loss adjustment expense payable 149,833 (35,164) 70,912 (52,264) Change in reinsurance balances payable 64,265 38,459 35,430 35,312 Change in unearned premium 166,720 68,379 110,496 56,241 Change in premium and claims payable, net of restricted cash 65,353 (41,378) 23,602 13,441 Depreciation and amortization expense 5,564 5,378 2,588 2,631 Other, net (17,557) 7,669 (14,126) 5,577 --------- --------- --------- --------- Cash provided by operating activities 199,272 46,682 97,401 33,580 Cash flows from investing activities: Sales of fixed income securities 123,181 154,164 27,952 85,853 Maturity or call of fixed income securities 69,086 19,691 41,728 9,879 Sales of equity securities 1,165 3,417 182 2,228 Other proceeds 16,846 -- 16,846 -- Change in short-term investments (89,563) 41,502 58,636 42,695 Cost of securities acquired (407,875) (287,100) (243,638) (194,149) Earnout payments for purchase of subsidiaries (4,079) -- (4,079) -- Purchases of property and equipment (3,135) (2,838) (1,612) (1,513) --------- --------- --------- --------- Cash used by investing activities (294,374) (71,164) (103,985) (55,007) Cash flows from financing activities: Proceeds from notes payable, net of costs 134,845 40,000 -- 40,000 Sale of common stock, net of costs 11,969 9,261 8,238 2,691 Payments on notes payable (67,622) (13,269) (95) (10,742) Dividends paid and other, net (8,137) (8,944) (4,076) (3,877) --------- --------- --------- --------- Cash provided by financing activities 71,055 27,048 4,067 28,072 --------- --------- --------- --------- Net change in cash (24,047) 2,566 (2,517) 6,645 Cash at beginning of period 40,306 16,891 18,776 12,812 --------- --------- --------- --------- Cash at end of period $16,259 $19,457 $16,259 $19,457 ========= ========= ========= ========= HCC Insurance Holdings, Inc. Insurance Company Premium June 30, 2003 ($ in thousands) 2nd Qtr 2nd Qtr Change 2003 2002 % --------- --------- ------ GROSS WRITTEN Group life, accident & health $144,162 $122,755 17 Diversified financial products 143,106 42,556 236 London market account 79,434 68,508 16 Aviation 64,429 59,990 7 Other specialty lines 25,176 5,682 343 --------- --------- ------ 456,307 299,491 52% Discontinued lines 20,972 6,361 --------- --------- $477,279 $305,852 ========= ========= NET WRITTEN Group life, accident & health $81,168 $55,208 47 Diversified financial products 48,907 7,792 528 London market account 65,322 33,403 96 Aviation 30,525 29,421 4 Other specialty lines 21,256 5,384 295 --------- --------- ------ 247,178 131,208 88% Discontinued lines 3,913 4,182 --------- --------- $251,091 $135,390 ========= ========= NET EARNED PREMIUM Group life, accident & health $75,526 $54,238 39 Diversified financial products 26,512 4,574 480 London market account 37,081 16,269 128 Aviation 24,355 25,571 (5) Other specialty lines 9,553 5,347 79 --------- --------- 173,027 105,999 63% Discontinued lines 10,465 8,628 --------- --------- $183,492 $114,627 ========= ========= HCC Insurance Holdings, Inc. Insurance Company Premium June 30, 2003 ($ in thousands) Year to Date Year to Date Change 2003 2002 % ------------- ------------ -------- GROSS WRITTEN Group life, accident & health $283,482 $245,659 15 Diversified financial products 250,426 58,369 329 London market account 140,152 116,053 21 Aviation 108,960 104,104 5 Other specialty lines 46,056 9,884 366 ------------- ------------ -------- 829,076 534,069 55 % Discontinued lines 27,651 19,551 ------------- ------------ $856,727 $553,620 ============= ============ NET WRITTEN Group life, accident & health $157,353 $107,028 47 Diversified financial products 82,214 15,133 443 London market account 102,554 61,939 66 Aviation 51,204 52,054 (2) Other specialty lines 38,706 8,965 332 ------------- ------------ -------- 432,031 245,119 76 % Discontinued lines 11,561 12,543 ------------- ------------ $443,592 $257,662 ============= ============ NET EARNED PREMIUM Group life, accident & health $147,509 $105,805 39 Diversified financial products 44,818 7,277 516 London market account 66,457 32,521 104 Aviation 48,237 50,754 (5) Other specialty lines 19,081 8,982 112 ------------- ------------ -------- 326,102 205,339 59 % Discontinued lines 19,812 20,766 ------------- ------------ $345,914 $226,105 ============= ============ HCC Insurance Holdings, Inc. Consolidated Insurance Companies Net Loss Ratios June 30, 2003 ($ in thousands) Year to Date 2003 Full Year 2002 Net Net Earned Actual Loss Earned Actual Loss Line of Business Premium Losses Ratio Premium Losses Ratio -------------------- ------------------------ ------------------------ Group life, accident & health $147,509 $93,892 63.7% $240,070 $149,251 62.2% Diversified financial products 44,818 21,453 47.9 23,102 10,708 46.4 London market account 66,457 35,117 52.8 89,260 45,937 51.5 Aviation 48,237 30,701 63.6 100,960 46,732 46.3 Other specialty lines 19,081 14,065 73.7 22,337 22,581 101.1 ------------------------ ------------------------ 326,102 195,228 59.9 475,729 275,209 57.8 Discontinued lines 19,812 24,884 125.6 29,792 31,282 105.0 ------------------------ ------------------------ Total $345,914 $220,112 63.6% $505,521 $306,491 60.6% CONTACT: HCC Insurance Holdings, Inc., Houston L. Byron Way, 713-690-7300