EX-99.1 3 h96751ex99-1.txt PRESS RELEASE EXHIBIT 99.1 HCC REPORTS RECORD FIRST QUARTER RESULTS WITH STRONG GROWTH IN UNDERWRITING OPERATIONS HOUSTON (May 9, 2002) . . . HCC INSURANCE HOLDINGS, INC. (NYSE SYMBOL: HCC) today released earnings for the first quarter of 2002. Net earnings increased 53 percent for the first quarter of 2002 to a record $23.3 million from $15.2 million and net earnings per share increased 32 percent to a record $0.37 per share from $0.28 per share, both for the same period of 2001. Operating earnings* increased 45 percent for the first quarter of 2002 to a record $23.0 million from $15.9 million and operating earnings per share* increased 28 percent to $0.37 per share $0.29 per share, both compared to the first quarter of 2001. Stephen L. Way, Chairman and Chief Executive Officer said, "We are extremely pleased with our record first quarter results, which are in line with our 2002 business plan. We have made a smooth transition to accentuate our underwriting and the future looks extremely good" Total revenue grew substantially during the first quarter of 2002 to a record $151.7 million, a 32 percent increase from $115.1 million in the first quarter of 2001. This increase was primarily due to the growth in our insurance company subsidiaries' earned premium, as market conditions in our specialty lines continue to improve. Revenue is expected to further increase during this year as earned premium continues to rise. Gross written premium of our insurance company subsidiaries, excluding discontinued lines, increased 20 percent to a record $243.8 million during the first quarter of 2002 compared to the first quarter of 2001. During the same period net written premium increased by 76 percent to a record $119.0 million and net earned premium increased by 56 percent to a record $104.6 million. These increases are as a result of rate increases, increased retentions and strong growth in our London branch operations and other specialty business segment. The GAAP combined ratio improved substantially for the first three months of 2002 to 87.3 percent, from 95.8 percent in the corresponding period of 2001. Mr. Way stated that "This impressive result came from an improvement in both loss and expense ratios. Our strong underwriting performance during the quarter is the result of our continued patience during an extended soft cycle and our ability to rapidly increase our retained premiums in an improving underwriting environment." The GAAP gross loss ratio also improved in the first quarter of 2002 to 69.3 percent from 92.9 percent in the corresponding period in 2001. Mr. Way said, "This improved result has an added benefit, as together with the reduction in ceded premiums, we should begin to see a marked reduction in our reinsurance recoverables. Management fees increased 23 percent during the first quarter of 2002 to $19.4 million, from $15.8 million in the first quarter of 2001, due to increased business and acquisitions completed in 2001. Commission income was down during the same period at $10.2 million compared to $14.6 million, due in part to the substantial reduction in ceded reinsurance from the insurance company subsidiaries. Despite an increase in investment assets, net investment income decreased in the first quarter of 2002 to $8.7 million, from $10.6 million in the first quarter of 2001. The reduced income was a result of lower interest rates and the company's conservative investment philosophy. It is expected that increased cash flow from higher retained premiums will improve this result going forward. As of March 31, 2002, total investments increased to $908.6 million, total assets were over $3.2 billion, book value per share increased to $12.69 and the Company's debt to total capital ratio was 18.6 percent. *See attached tables. HCC will hold an open conference call beginning at 8:00 a.m. CST on Friday, May 10th. To participate, the number for domestic calls is (877) 679-9051 and the number for international calls is (952) 556-2804. A replay will be available until Friday, May 17, 2002 at (800) 615-3210, access code 5960548. 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, May 17, 2002. HCC is an international insurance holding company and one of the largest specialty insurance groups in the USA. HCC has assets of over $3.2 billion and its shares trade on the NYSE (symbol: HCC) with a market capitalization of over $1.5 billion. HCC is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A. M. Best Company. For more information, visit our website at www.hcch.com. ------------- Contact: L. Byron Way, Vice President. HCC Insurance Holdings, Inc. Telephone (713) 690-7300 *See attached table. Forward-looking statements contained in this press release are made under "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission. * * * * 2 HCC INSURANCE HOLDINGS, INC. FINANCIAL HIGHLIGHTS MARCH 31, 2002 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 2002 2001 Gross written premium $247,768 $229,214 Net written premium 122,272 72,505 Net earned premium 111,478 71,921 Management fees 19,412 15,750 Commission income 10,160 14,641 Net investment income 8,694 10,632 Other operating income 1,463 2,972 Total revenue 151,709 115,092 Net earnings 23,282 15,178 EARNINGS PER SHARE (DILUTED) $0.37 $0.28 Operating earnings after tax * 22,956 15,890 OPERATING EARNINGS PER SHARE (DILUTED) * $0.37 $0.29 Cash flow from operations 13,102 19,107 Weighted average shares outstanding 62,713 55,070 GAAP gross loss ratio 69.3% 92.9% GAAP net loss ratio 61.3% 67.5% GAAP combined ratio 87.3% 95.8% March 31, 2002 December 31, 2001 -------------- ----------------- Total investments $908,617 $888,466 Total assets 3,235,560 3,219,120 Shareholders' equity 787,829 763,453 Book value per share $12.69 $12.40
* See attached table. 3 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES -------- CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) --------
For the three months ended March 31, 2002 2001 ----------------------- ------------------ REVENUE Net earned premium $ 111,478 $ 71,921 Management fees 19,412 15,750 Commission income 10,160 14,641 Net investment income 8,694 10,632 Net realized investment gain (loss) 502 (824) Other operating income 1,463 2,972 ------------------ ------------------ Total revenue 151,709 115,092 EXPENSE Loss and loss adjustment expense 68,331 48,542 Operating expense: Policy acquisition costs, net 13,054 4,274 Compensation expense 19,626 18,619 Other operating expense 12,600 14,415 ------------------ ------------------ Net operating expense 45,280 37,308 Interest expense 2,378 3,347 ------------------ ------------------ Total expense 115,989 89,197 ------------------ ------------------ Earnings before income tax provision 35,720 25,895 Income tax provision 12,438 10,717 ------------------ ------------------ Net earnings $ 23,282 $ 15,178 ================== ================== BASIC EARNINGS PER SHARE DATA: Earnings per share $ 0.38 $ 0.28 ================== ================== Weighted average shares outstanding 61,936 53,720 ================== ================== DILUTED EARNINGS PER SHARE DATA: Earnings per share $ 0.37 $ 0.28 ================== ================== Weighted average shares outstanding 62,713 55,070 ================== ================== Cash dividends declared, per share $ 0.0625 $ 0.06 ================== ==================
4 HCC Insurance Holdings, Inc. and Subsidiaries --------- Condensed Consolidated Balance Sheets (unaudited, in thousands) --------
March 31, 2002 December 31, 2001 ---------------- ------------------- ASSETS Investments: Fixed income securities, at market (cost: 2002 - $533,546; 2001 - $513,674) $ 540,787 $ 525,428 Marketable equity securities, at market (cost: 2002 - $15,297; 2001 - $16,431) 15,241 16,569 Short-term investments, at cost, which approximates market 340,097 338,904 Other investments, at estimated fair value (cost: 2002 - $13,023; 2001 - $8,007) 12,492 7,565 ----------------- ----------------- Total investments 908,617 888,466 Cash 12,812 16,891 Restricted cash 154,234 138,545 Premium, claims and other receivables 656,679 665,965 Reinsurance recoverables 898,511 899,128 Ceded unearned premium 73,628 71,140 Ceded life and annuity benefits 82,654 83,013 Deferred policy acquisition costs 36,986 32,071 Property and equipment, net 51,899 52,486 Goodwill 315,206 315,318 Other assets 44,334 56,097 ----------------- ----------------- TOTAL ASSETS $ 3,235,560 $ 3,219,120 ================= ================= LIABILITIES Loss and loss adjustment expense payable $ 1,147,848 $ 1,130,748 Life and annuity policy benefits 82,654 83,013 Reinsurance balances payable 91,784 88,637 Unearned premium 191,668 179,530 Deferred ceding commissions 18,557 16,681 Premium and claims payable 678,029 717,159 Notes payable 179,523 181,928 Accounts payable and accrued liabilities 57,668 57,971 ----------------- ----------------- Total liabilities 2,447,731 2,455,667 SHAREHOLDERS' EQUITY Common stock, $1.00 par value; 250.0 million shares authorized; (shares issued and outstanding: 2002 - 62,023; 2001 - 61,438) 62,023 61,438 Additional paid-in capital 409,636 402,089 Retained earnings 312,831 293,426 Accumulated other comprehensive income 3,339 6,500 ----------------- ----------------- Total shareholders' equity 787,829 763,453 ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,235,560 $ 3,219,120 ================= =================
5 HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY PREMIUM MARCH 31, 2002 ($ IN THOUSANDS)
1ST QTR 1ST QTR CHANGE 2002 2001 % --------------- ---------------- --------------- GROSS WRITTEN Group life, accident & health $ 145,883 $ 150,638 (3) Aviation 44,114 34,938 26 Property, marine & offshore energy 33,828 14,279 137 Other specialty lines 20,015 3,449 480 --------------- ---------------- --------------- 243,840 203,304 20% Discontinued lines 3,928 25,910 --------------- ---------------- $ 247,768 $ 229,214 =============== ================ NET WRITTEN Group life, accident & health $ 64,927 $ 40,442 61 Aviation 22,633 18,265 24 Property, marine & offshore energy 20,465 6,308 224 Other specialty lines 10,923 2,475 341 --------------- ---------------- --------------- 118,948 67,490 76% Discontinued lines 3,324 5,015 --------------- ---------------- $ 122,272 $ 72,505 =============== ================ NET EARNED PREMIUM Group life, accident & health $ 64,884 $ 40,261 61 Aviation 25,183 20,342 24 Property, marine & offshore energy 8,182 3,979 106 Other specialty lines 6,338 2,475 156 --------------- ---------------- --------------- 104,587 67,057 56% Discontinued lines 6,891 4,864 --------------- ---------------- $ 111,478 $ 71,921 =============== ================
6 HCC INSURANCE HOLDINGS, INC. INSURANCE COMPANY PREMIUM MARCH 31, 2002 ($ IN THOUSANDS)
YEAR TO DATE FULL YEAR FULL YEAR FULL YEAR 2002 2001 2000 1999 -------------- ---------------- ------------- -------------- GROSS WRITTEN Group life, accident & health $ 145,883 $ 629,228 $ 546,702 $ 217,659 Aviation 44,114 198,015 191,089 210,029 Property, marine & offshore energy 33,828 83,068 64,352 82,003 Other specialty lines 20,015 15,602 29,281 17,962 -------------- ---------------- ------------- ------------ 243,840 925,913 831,424 527,653 Discontinued lines 3,928 84,162 136,033 40,678 -------------- ---------------- ------------- ------------ $ 247,768 $1,010,075 $ 967,457 $ 568,331 ============== ================ ============= ============ NET WRITTEN Group life, accident & health $ 64,927 $ 188,580 $ 148,100 $ 48,899 Aviation 22,633 98,249 79,794 68,513 Property, marine & offshore energy 20,465 34,750 16,256 9,561 Other specialty lines 10,923 14,390 14,552 8,730 -------------- ---------------- ------------- ------------ 118,948 335,969 258,702 135,703 Discontinued lines 3,324 36,989 25,086 4,221 -------------- ---------------- ------------- ------------ $ 122,272 $ 372,958 $ 283,788 $ 139,924 ============== ================ ============= ============ NET EARNED PREMIUM Group life, accident & health $ 64,884 $ 186,188 148,039 50,919 Aviation 25,183 91,377 73,695 62,784 Property, marine & offshore energy 8,182 23,748 10,163 12,779 Other specialty lines 6,338 15,124 14,552 9,072 -------------- ---------------- ------------- ------------ 104,587 316,437 246,449 135,554 Discontinued lines 6,891 26,350 21,198 5,808 -------------- ---------------- ------------- ------------ $ 111,478 $ 342,787 $ 267,647 $ 141,362 ============== ================ ============= ============
7 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES -------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS) --------
For the three months ended March 31, 2002 2001 --------------- --------------- Cash flows from operating activities: Net earnings $ 23,282 $ 15,178 Adjustments to reconcile net earnings to net cash provided by operating activities: Change in premium, claims and other receivables 9,286 11,586 Change in reinsurance recoverables 617 (44,544) Change in ceded unearned premium (2,488) 19,280 Change in loss and loss adjustment expense payable 17,100 46,605 Change in reinsurance balances payable 3,147 (28,057) Change in unearned premium 12,138 (20,009) Change in premium and claims payable, net of restricted cash (54,819) 20,049 Depreciation and amortization expense 2,747 4,521 Other, net 2,092 (5,502) ----------------- ---------------- Cash provided by operating activities 13,102 19,107 Cash flows from investing activities: Sales of fixed income securities 68,311 43,806 Maturity or call of fixed income securities 9,812 6,670 Sales of equity securities 1,189 -- Change in short-term investments (1,193) (14,027) Cost of securities acquired (92,951) (60,598) Purchases of property and equipment (1,325) (1,299) ----------------- ---------------- Cash used by investing activities (16,157) (25,448) Cash flows from financing activities: Sale of common stock, net of costs 6,570 156,524 Payments on notes payable (2,527) (154,500) Dividends paid and other, net (5,067) (3,023) ----------------- ---------------- Cash used by financing activities (1,024) (999) ----------------- ---------------- Net change in cash (4,079) (7,340) Cash at beginning of period 16,891 13,991 ----------------- ---------------- CASH AT END OF PERIOD $ 12,812 $ 6,651 ================= ================
8 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES ---------- RECONCILIATION OF NET EARNINGS TO OPERATING EARNINGS AND SFAS NO. 142 RECONCILIATION (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
First Quarter 2002 2001 ---------------- ---------------- Net earnings: $ 23,282 $ 15,178 Add (deduct): Realized (gain) loss (326) 536 Other -- 176 --------------- --------------- Operating earnings $ 22,956 $ 15,890 =============== =============== Diluted earnings per share $ 0.37 $ 0.28 =============== =============== Diluted operating earnings per share $ 0.37 $ 0.29 =============== ===============
The tables below reconcile net earnings and earnings per share we reported to adjusted amounts that we would have reported had we adopted SFAS No. 142 on January 1, 2001 instead of January 1, 2002: Net earnings: Reported net earnings $ 23,282 $ 15,178 Add back goodwill amortization -- 2,823 Add back license amortization -- 217 Less tax benefit from goodwill amortization -- (273) --------------- -------------- ADJUSTED NET INCOME $ 23,282 $ 17,945 =============== ============== Basic earnings per share: Reported basic earnings per share $ 0.38 $ 0.28 Add back amortization, net of tax effect -- 0.05 --------------- -------------- ADJUSTED BASIC EARNINGS PER SHARE $ 0.38 $ 0.33 =============== ============== Diluted earnings per share: Reported diluted earnings per share $ 0.37 $ 0.28 Add back amortization, net of tax effect -- 0.05 --------------- -------------- ADJUSTED DILUTED EARNINGS PER SHARE $ 0.37 $ 0.33 =============== ============== ADJUSTED DILUTED OPERATING EARNINGS PER SHARE $ 0.37 $ 0.34 =============== ==============
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