8-K

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 23, 2010

HCC INSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13790	76-0336636
(State or other jurisdiction	(Commission File	(IRS Employer
of incorporation)	Number)	Identification No.)

13403 Northwest Freeway
Houston, Texas	77040-6094
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 690-7300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

     On February 23, 2010, HCC Insurance Holdings, Inc. (the “Company”) announced its results for the Fourth Quarter of 2009 and for the full year ended December 31, 2009. A press release setting forth the announcement is furnished as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

No.	Exhibit
99.1	Earnings Press Release dated February 23, 2010

     The information contained herein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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.

Date: February 24, 2010	HCC INSURANCE HOLDINGS, INC.
	By:	/s/ John N. Molbeck, Jr.
		John N. Molbeck, Jr.,
		President & Chief Executive Officer

EXHIBIT INDEX

No.	Exhibit
99.1	Earnings Press Release dated February 23, 2010

EX-99.1

Exhibit 99.1

Press Release

HCC INSURANCE HOLDINGS REPORTS STRONG 2009
RESULTS IN A DIFFICULT ENVIRONMENT

HOUSTON (February 23, 2010) . . .
HCC Insurance Holdings, Inc. (NYSE: HCC) today released earnings for the fourth quarter and full year 2009, which ended December 31.

Net earnings for the fourth quarter of 2009 were $84.8 million, compared to $71.6 million for the fourth quarter of 2008. Net earnings per diluted share were $0.74 for the fourth quarter of 2009, versus $0.63 for the same quarter of 2008. Net earnings for the full year of 2009 were $353.9 million, compared to $302.1 million for the 2008 full year. Net earnings per diluted share were $3.11 for 2009, versus $2.61 for 2008.

“Our return on average equity was 12.5% for the year. We are very pleased with this performance in an environment which remains challenging,” HCC President and Chief Executive Officer John N. Molbeck, Jr. said.

Book value per share increased 14.2% during the year from $23.27 to $26.58 after declared regular dividends totaling $0.52 per share. The Company repurchased 1.7 million shares of its common stock during 2009 for a total cost of $35.5 million and a weighted-average cost of $21.36 per share. In addition, this was the 13^th consecutive year in which HCC raised its dividend. Book value per share grew at a compounded rate of 15.1% over the last five years.

The Company’s GAAP combined ratio for the fourth quarter of 2009 was 85.8%, compared to 85.6% for the fourth quarter of 2008. The GAAP combined ratio for the full year of 2009 was 84.9%, versus 85.4% for 2008. HCC’s paid loss ratio for the year was 55.8%, which included 2.1 percentage points related to a commutation, compared to a paid loss ratio of 54.0% in 2008.

“Our combined ratio remained excellent for the year and our accident year combined ratio of 87.5% is a reflection of our strong underwriting culture, well managed expense ratio and the value of our non-correlated portfolio of businesses,” Mr. Molbeck said.

Gross written premium of HCC’s insurance company subsidiaries increased 7.3% to $655.7 million for the fourth quarter of 2009, compared to $611.2 million for the same quarter of 2008. Net written premium increased 2.8% to $518.4 million during the 2009 fourth quarter, compared to net written premium of $504.2 million for the 2008 fourth quarter. Net earned premium for the fourth quarter of 2009 increased 2.0% to $512.8 million, versus net earned premium of $502.6 million for the same quarter of 2008.

1

Gross written premium of HCC’s insurance company subsidiaries increased 2.4% to $2.6 billion for the full year of 2009, compared to 2008, while net written premium of $2.0 billion was essentially flat. Net earned premium of $2.0 billion for the 2009 full year was up 1.5% compared to 2008.

During the fourth quarter of 2009, HCC had net favorable prior year reserve development of $16.9 million, compared to net favorable prior year reserve development of $24.0 million for the same period of 2008. For the full year of 2009, the Company recorded $53.5 million of net favorable prior year reserve development. For the full year 2008, the Company had $82.4 million of net favorable prior year reserve development, offset by $57.5 million of additional reserves related to the 2008 accident year, primarily for its directors’ and officers’ liability and credit businesses, which resulted in a $24.9 million impact to earnings.

Total revenue in the fourth quarter of 2009 increased to $590.3 million, from $551.9 million in the same quarter of 2008. Total revenue increased to $2.4 billion for the full year of 2009, compared to $2.3 billion for the 2008 full year.

Fee and commission income was $103.7 million for the full year of 2009, compared to $125.2 million in the same period of 2008.

Investment income increased to $50.2 million during the fourth quarter of 2009, compared to $33.9 million during the fourth quarter of 2008. On a year-to-date basis, investment income grew to $192.0 million in 2009 from $164.8 million in 2008. This was the result of an increase in the size of our investment portfolio, the effect of which was offset by lower interest rates. Also included in 2008 is a loss on the sale of alternative investments.

HCC’s fixed income securities generated $49.0 million in investment income in the 2009 fourth quarter, versus $45.2 million in the 2008 fourth quarter. Investment income from fixed income securities was $189.5 million for the full year of 2009, compared to $174.7 million for the 2008 full year, as the Company’s fixed income investments increased 9.0% from December 31, 2008, to $4.6 billion at December 31, 2009.

As of December 31, 2009, HCC’s fixed income securities portfolio had an average rating of AA+, an average duration of 4.9 years and an average tax equivalent yield of 5.1%. As of December 31, 2009, HCC’s total investments had an average duration of 4.2 years.

The Company realized investment gains of $7.2 million in the fourth quarter of 2009 and $12.1 million in full year 2009, and recognized $0.2 million and $5.4 million of losses, respectively, for securities that had an other-than-temporary impairment in value. HCC held $5.6 million of subprime-related and Alt A securities, which had an average rating of BBB+, and owned no CDO or CLO securities. HCC has never been a counterparty to any credit default swap.

2

Other operating income was $4.6 million for the 2009 fourth quarter, compared to a loss of $1.2 million for the same period in 2008. Other operating income was $34.4 million for the full year of 2009, compared to $9.6 million for the 2008 full year.

As of December 31, 2009, total investments were $5.5 billion, total assets were $8.8 billion, shareholders’ equity was $3.0 billion and the Company’s debt to total capital ratio was 9.0%.

In the fourth quarter of 2009, HCC issued $300 million of Senior Notes due 2019 with a fixed interest rate of 6.3%. Additionally, as previously announced on January 11, 2010, the Company completed the redemption of its 1.3% Convertible Notes due 2023. The Company has a $575 million line of credit with no outstanding borrowings at year-end 2009, reflecting HCC’s strong liquidity position.

EARNINGS GUIDANCE: HCC’s management estimates the Company will achieve net earnings of $2.70 to $3.00 per diluted share for 2010. These estimated results assume the following: gross written premium of $2.8 billion; net written premium of $2.2 billion; total revenue of $2.4 billion; a combined ratio of 86.5%; and average fully diluted shares outstanding of 114 million shares. These assumptions do not include any provision for catastrophe losses, reserve development, capital gains or losses or changes in carrying values of assets.

For further information about HCC’s quarter and full year financial results, the supplemental financial schedules are accessible on the Company’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 Standard Time on Wednesday, February 24. 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, May 7, 2010.

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. As of December 31, 2009, HCC had assets of $8.8 billion and shareholders’ equity of $3.0 billion. HCC’s major domestic and international insurance companies have a financial strength rating of “AA (Very Strong)” from Standard & Poor’s Corporation. HCC’s major domestic insurance companies have a financial strength rating of “AA (Very Strong)” from Fitch Ratings, “A1 (Good Security)” from Moody’s Investors Service, Inc., and “A+ (Superior)” by A.M. Best Company, Inc.

3

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

Contact:       Jen Browne, Investor Relations Coordinator
     HCC Insurance Holdings, Inc.
     Telephone: (713) 996-1144

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.

*  *  *  *  *

4

HCC Insurance Holdings, Inc. and Subsidiaries
Financial Highlights
(Unaudited, in thousands except per share data)

	Twelve months ended						Three months ended
	December 31,						December 31,
	2009			2008			2009			2008
Gross written premium	$	2,559,791		$	2,498,763		$	655,705		$	611,207
Net written premium		2,046,289			2,060,618			518,400			504,236
Net earned premium		2,037,235			2,007,774			512,810			502,646
Fee and commission income		103,690			125,201			15,577			25,643
Net investment income		191,965			164,751			50,225			33,919
Other operating income (loss)		34,391			9,638			4,567			(1,191	)
Total revenue		2,373,928			2,279,423			590,253			551,866
Net earnings		353,868			302,120			84,792			71,599
Earnings per share (diluted)	$	3.11		$	2.61		$	0.74		$	0.63
Weighted-average shares outstanding (diluted) (millions)		113.1			115.5			113.4			114.1
GAAP net loss ratio		59.7	%		60.4	%		59.2	%		58.0	%
GAAP combined ratio		84.9	%		85.4	%		85.8	%		85.6	%
Paid loss ratio		55.8	%		54.0	%		58.4	%		62.1	%

	December 31,			December 31,
	2009			2008
Total investments	$	5,456,229		$	4,804,283
Total assets		8,834,391			8,332,000
Shareholders’ equity		3,031,183			2,640,023
Debt to total capital ratio		9.0	%		11.5	%
Book value per share	$	26.58		$	23.27

S-1

HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited, in thousands)

	December 31,			December 31,
	2009			2008
ASSETS
Investments:
Fixed income securities — available for sale, at fair value	$	4,538,073		$	4,133,165
Fixed income securities — held to maturity, at amortized cost		102,792			123,553
Short-term investments		810,673			497,477
Other investments		4,691			50,088
Total investments		5,456,229			4,804,283
Cash		129,460			27,347
Restricted cash and cash investments		146,133			174,905
Premium, claims and other receivables		600,332			770,823
Reinsurance recoverables		1,016,411			1,054,950
Ceded unearned premium		270,436			234,375
Ceded life and annuity benefits		61,313			64,235
Deferred policy acquisition costs		208,463			188,652
Goodwill		822,006			858,849
Other assets		123,608			153,581
Total assets	$	8,834,391		$	8,332,000
LIABILITIES
Loss and loss adjustment expense payable	$	3,492,309		$	3,415,230
Life and annuity policy benefits		61,313			64,235
Reinsurance balances payable		182,661			122,189
Unearned premium		1,044,747			977,426
Deferred ceding commissions		71,595			63,123
Premium and claims payable		154,596			405,287
Notes payable		298,483			343,649
Accounts payable and accrued liabilities		497,504			300,838
Total liabilities		5,803,208			5,691,977
SHAREHOLDERS’ EQUITY
Common stock		118,724			116,457
Additional paid-in capital		914,339			881,534
Retained earnings		1,977,254			1,677,831
Accumulated other comprehensive income		119,665			27,536
Treasury stock		(98,799	)		(63,335	)
Total shareholders’ equity		3,031,183			2,640,023
Total liabilities and shareholders’ equity	$	8,834,391		$	8,332,000

S-2

HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Unaudited, in thousands except per share data)

	Twelve months ended						Three months ended
	December 31,						December 31,
	2009			2008			2009			2008
REVENUE
Net earned premium	$	2,037,235		$	2,007,774		$	512,810		$	502,646
Fee and commission income		103,690			125,201			15,577			25,643
Net investment income		191,965			164,751			50,225			33,919
Other operating income (loss)		34,391			9,638			4,567			(1,191	)
Net realized investment gain (loss)		12,076			(16,808	)		7,224			(4,047	)
Other-than-temporary impairment loss:
Total loss		(6,443	)		(11,133	)		(354	)		(5,104	)
Portion recognized in equity, before tax		1,014			—			204			—
Net loss recognized in earnings		(5,429	)		(11,133	)		(150	)		(5,104	)
Total revenue		2,373,928			2,279,423			590,253			551,866
EXPENSE
Loss and loss adjustment expense, net		1,215,759			1,211,873			303,815			291,440
Policy acquisition costs, net		363,966			381,441			92,608			96,746
Other operating expense		259,488			233,509			63,979			59,089
Interest expense		16,164			20,362			4,348			5,815
Total expense		1,855,377			1,847,185			464,750			453,090
Earnings before income tax expense		518,551			432,238			125,503			98,776
Income tax expense		164,683			130,118			40,711			27,177
Net earnings	$	353,868		$	302,120		$	84,792		$	71,599
Basic earnings per share data:
Net earnings per share	$	3.14		$	2.63		$	0.75		$	0.63
Weighted-average shares outstanding (millions)		112.2			114.8			112.3			113.9
Diluted earnings per share data:
Net earnings per share	$	3.11		$	2.61		$	0.74		$	0.63
Weighted-average shares outstanding (millions)		113.1			115.5			113.4			114.1
Cash dividends declared, per share	$	0.520		$	0.470		$	0.135		$	0.125

S-3

HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited, in thousands)

	Twelve months ended
	December 31,
	2009			2008
Operating activities:
Net earnings	$	353,868		$	302,120
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables		23,432			46,985
Change in reinsurance recoverables		42,521			(98,354	)
Change in ceded unearned premium		(34,107	)		10,309
Change in loss and loss adjustment expense payable		22,439			188,264
Change in reinsurance balances payable		60,057			(8,014	)
Change in unearned premium		48,366			33,526
Change in premium and claims payable, net of restricted cash		(98,675	)		(80,219	)
Change in accounts payable and accrued liabilities		96,040			(53,079	)
Change in trading securities		—			49,091
Stock-based compensation expense		15,628			13,638
Depreciation and amortization expense		16,221			14,308
(Gain) loss on investments		(3,518	)		49,549
Other, net		40,525			37,844
Cash provided by operating activities		582,797			505,968
Investing activities:
Sales of available for sale fixed income securities		551,760			583,211
Maturity or call of available for sale fixed income securities		347,794			323,998
Maturity or call of held to maturity fixed income securities		86,364			—
Cost of available for sale fixed income securities acquired		(1,159,796	)		(1,527,664	)
Cost of held to maturity fixed income securities acquired		(59,754	)		(44,592	)
Cost of other investments acquired		—			(36,751	)
Change in short-term investments		(297,016	)		294,248
Proceeds from sales of strategic and other investments		114,940			77,097
Payments for purchase of businesses, net of cash received		(38,018	)		(103,153	)
Proceeds from sales of assets of business and subsidiary		50,557			—
Other, net		(16,581	)		(7,996	)
Cash used by investing activities		(419,750	)		(441,602	)
Financing activities:
Issuance of notes payable		296,096			—
Advances on line of credit		130,000			181,000
Payments on line of credit and convertible notes		(410,242	)		(161,000	)
Sale of common stock		19,198			18,198
Purchase of common stock		(35,464	)		(63,335	)
Dividends paid		(57,437	)		(52,453	)
Other, net		(3,085	)		1,436
Cash used by financing activities		(60,934	)		(76,154	)
Net increase (decrease) in cash		102,113			(11,788	)
Cash at beginning of year		27,347			39,135
Cash at end of year	$	129,460		$	27,347

S-4

HCC Insurance Holdings, Inc. and Subsidiaries
Gross Written Premium
(Unaudited, in thousands)

	Twelve months ended							Three months ended
	December 31,							December 31,
	2009		2008		Change			2009		2008		Change
Diversified financial products
D&O (1)	$	529,607	$	456,285		16	%	$	168,499	$	155,133		9	%
E&O (2)		257,786		274,293		(6	)		69,620		74,032		(6	)
Other Professional Liability		81,222		62,585		30			19,004		17,980		6
U.S. Surety & Credit		203,522		183,384		11			55,078		43,249		27
International Surety & Credit		75,776		75,175		1			20,627		16,408		26
		1,147,913		1,051,722		9			332,828		306,802		8
Group life, accident & health
Medical Stop-loss		633,573		616,878		3			160,300		153,580		4
Other Medical		137,187		136,111		1			39,765		35,068		13
Other		75,281		76,914		(2	)		9,958		12,041		(17	)
		846,041		829,903		2			210,023		200,689		5
Aviation		176,073		185,786		(5	)		42,160		38,518		9
London market account
Energy		98,934		97,334		2			6,657		11,138		(40	)
Other		87,669		78,227		12			18,471		10,395		78
		186,603		175,561		6			25,128		21,533		17
Other specialty lines
Public Risk		66,176		42,871		54			14,105		11,468		23
HCC Lloyd’s		42,961		72,349		(41	)		9,612		10,222		(6	)
Other		93,872		135,801		(31	)		21,699		21,970		(1	)
		203,009		251,021		(19	)		45,416		43,660		4
Discontinued lines		152		4,770	nm				150		5	nm
Total	$	2,559,791	$	2,498,763		2	%	$	655,705	$	611,207		7	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance
	for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance
	underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm	- Not meaningful comparison

S-5

HCC Insurance Holdings, Inc. and Subsidiaries
Net Written Premium
(Unaudited, in thousands)

	Twelve months ended							Three months ended
	December 31,							December 31,
	2009		2008		Change			2009			2008			Change
Diversified financial products
D&O (1)	$	376,021	$	341,698		10	%	$	115,189		$	118,376			(3	)%
E&O (2)		222,664		246,185		(10	)		58,400			64,678			(10	)
Other Professional Liability		58,815		42,686		38			12,450			11,943			4
U.S. Surety & Credit		189,208		175,533		8			49,493			40,349			23
International Surety & Credit		68,887		65,905		5			18,934			13,959			36
		915,595		872,007		5			254,466			249,305			2
Group life, accident & health
Medical Stop-loss		633,571		616,878		3			160,300			153,579			4
Other Medical		137,187		136,111		1			39,765			35,068			13
Other		26,020		36,490		(29	)		4,275			5,720			(25	)
		796,778		789,479		1			204,340			194,367			5
Aviation		124,336		136,019		(9	)		28,681			29,023			(1	)
London market account
Energy		49,452		57,913		(15	)		(834	)		1,648			nm
Other		52,955		49,321		7			10,000			8,444			18
		102,407		107,234		(5	)		9,166			10,092			(9	)
Other specialty lines
Public Risk		48,524		28,553		70			8,877			6,995			27
HCC Lloyd’s		35,721		63,191		(43	)		8,232			8,691			(5	)
Other		22,802		59,376		(62	)		4,489			5,767			(22	)
		107,047		151,120		(29	)		21,598			21,453			1
Discontinued lines		126		4,759		nm			149			(4	)		nm
Total	$	2,046,289	$	2,060,618		(1	)%	$	518,400		$	504,236			3	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm	— Not meaningful comparison

S-6

HCC Insurance Holdings, Inc. and Subsidiaries
Net Earned Premium
(Unaudited, in thousands)

	Twelve months ended							Three months ended
	December 31,							December 31,
	2009		2008		Change			2009		2008			Change
Diversified financial products
D&O (1)	$	371,650	$	312,135		19	%	$	96,938	$	82,440			18	%
E&O (2)		234,768		227,667		3			57,186		59,872			(4	)
Other Professional Liability		39,123		31,753		23			8,642		9,960			(13	)
U.S. Surety & Credit		182,627		167,914		9			47,191		43,733			8
International Surety & Credit		68,162		66,135		3			17,733		16,221			9
		896,330		805,604		11			227,690		212,226			7
Group life, accident & health
Medical Stop-loss		633,572		616,900		3			160,301		153,579			4
Other Medical		134,161		121,865		10			33,345		32,400			3
Other		29,887		38,503		(22	)		6,376		9,096			(30	)
		797,620		777,268		3			200,022		195,075			3
Aviation		129,626		139,838		(7	)		31,112		34,713			(10	)
London market account
Energy		49,116		57,262		(14	)		14,131		12,351			14
Other		54,043		49,595		9			13,441		13,682			(2	)
		103,159		106,857		(3	)		27,572		26,033			6
Other specialty lines
Public Risk		39,986		25,600		56			11,133		6,831			63
HCC Lloyd’s		40,273		62,126		(35	)		9,794		11,890			(18	)
Other		30,114		85,723		(65	)		5,337		15,882			(66	)
		110,373		173,449		(36	)		26,264		34,603			(24	)
Discontinued lines		127		4,758		nm			150		(4	)		nm
Total	$	2,037,235	$	2,007,774		1	%	$	512,810	$	502,646			2	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm	— Not meaningful comparison

S-7

HCC Insurance Holdings, Inc. and Subsidiaries
Net Investment Income and Unrealized Gain (Loss)
(Unaudited, in thousands)

	Twelve months ended						Three months ended
	December 31,						December 31,
	2009			2008			2009			2008
Sources of net investment income:
Fixed income securities
Taxable	$	106,690		$	98,538		$	27,796		$	25,822
Exempt from U.S. income taxes		82,760			76,172			21,171			19,376
Total fixed income securities		189,450			174,710			48,967			45,198
Short-term investments		3,230			20,931			528			3,231
Other		3,086			(26,949	)		1,803			(13,496	)
Total investment income		195,766			168,692			51,298			34,933
Investment expense		(3,801	)		(3,941	)		(1,073	)		(1,014	)
Net investment income	$	191,965		$	164,751		$	50,225		$	33,919
Unrealized gain (loss) on available for sale fixed income securities:
Increase (decrease) in unrealized gain/loss for period, before tax	$	141,685		$	(10,412	)	$	(52,185	)	$	112,688
Unrealized gain at:
December 31, 2009	$	156,311
September 30, 2009	$	208,496
June 30, 2009	$	72,665
March 31, 2009	$	59,977
December 31, 2008	$	14,626

S-8

HCC Insurance Holdings, Inc. and Subsidiaries
Net Loss Ratios
(Unaudited, in thousands)

	Twelve months ended					Twelve months ended
	December 31, 2009					December 31, 2008
	Net Earned		Loss			Net Earned		Loss
	Premium		Ratio			Premium		Ratio
Diversified financial products
D&O (1)	$	371,650		61.2	%	$	312,135		59.0	%
E&O (2)		234,768		49.6			227,667		50.0
Other Professional Liability		39,123		43.4			31,753		40.2
U.S. Surety & Credit		182,627		29.9			167,914		23.7
International Surety & Credit		68,162		50.9			66,135		56.1
		896,330		50.2			805,604		48.1
Group life, accident & health
Medical Stop-loss		633,572		71.7			616,900		73.1
Other Medical		134,161		86.0			121,865		80.9
Other		29,887		43.6			38,503		47.1
		797,620		73.0			777,268		73.1
Aviation		129,626		56.6			139,838		62.6
London market account
Energy		49,116		24.0			57,262		42.6
Other		54,043		41.5			49,595		50.8
		103,159		33.1			106,857		46.4
Other specialty lines
Public Risk		39,986		66.3			25,600		72.3
HCC Lloyd’s		40,273		69.1			62,126		78.3
Other		30,114		49.6			85,723		57.6
		110,373		62.8			173,449		67.2
Discontinued lines		127		nm			4,758		nm
Total	$	2,037,235		59.7	%	$	2,007,774		60.4	%

(1)	Includes D&O and related professional liability insurance underwritten by HCCG and D&O insurance for non-profit organizations underwritten by PIA.
(2)	Includes Miscellaneous E&O, Architects and Engineers E&O, and Diversified Financial Products insurance underwritten by PIA, as well as E&O insurance underwritten in the United Kingdom and Spain.
nm	- Not meaningful comparison

S-9

HCC Insurance Holdings, Inc. and Subsidiaries
Investments — Selected Disclosures
December 31, 2009
(Unaudited, in thousands)

			% of			Investment			Average
	Fair Value		Portfolio			Grade			Rating
Total Portfolio of Fixed Income Securities	$	4,642,081		100.0	%		99	%	AA+
Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
Agency	$	887,596		19.1	%		100	%	AAA
Non-Agency
Prime		52,495		1.1			63	%	BBB+
Alt A		4,091		0.1			54	%	BBB-
Total Residential MBS/CMO	$	944,182		20.3	%		98	%	AAA
Commercial Mortgage-Backed Securities	$	146,217		3.1	%		100	%	AAA
Asset-Backed Securities:
Auto	$	2,660		0.1	%		100	%	A-
Subprime Home Equity		1,547		—			78	%	A+
Other		10,158		0.2			66	%	BBB
Total Asset-Backed Securities	$	14,365		0.3	%		74	%	BBB+
Agency Securities:
Total Direct Obligations of U.S. Agencies	$	69,852		1.5	%		100	%	AAA
U.S. Corporate Bonds:
Non-Financial	$	368,972		7.9	%		100	%	A
Financial	$	190,852		4.1	%		100	%	A
Municipal Bonds:	$	2,205,760		47.5	%		100	%	AA
Insurance Enhanced	$	1,286,051		27.7	%		100	%	AA
Insured — Underlying Ratings	$	1,286,051		27.7	%		98	%	AA-
Non-Insured	$	919,709		19.8	%		100	%	AA+
Foreign Bonds	$	442,929		9.5	%		100	%	AAA

Notes:

The selected disclosures above do not include all classes of investments in the total portfolio of fixed income securities.

There are no CDOs/CLOs in the portfolio.

S-10

HCC Insurance Holdings, Inc. and Subsidiaries
Subprime Liability Exposure
December 31, 2009

• As of December 31, the Company had 75 “non-Side A only” D&O, E&O and Fiduciary Liability claims and 17 “Side A only” D&O claims relating to subprime issues.

• Of the D&O claims reported, four are on primary policies with gross policy limits totaling $20 million. The remaining D&O claims are on excess policies.

• The average policy limit on the “non-Side A only” claims is $13.5 million gross • and $9.1 million net, with an average attachment point of $89 million.

• The average policy limit for “Side A only” claims is $14.2 million gross and $11.3 million net, with an average attachment point of $159 million.

• Based upon the Company’s present knowledge, HCC believes the ultimate subprime related losses will be contained within the current overall reserves for D&O, E&O and Fiduciary Liability business.

S-11