EX-99.1 2 a12-5555_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

HCC INSURANCE HOLDINGS REPORTS FOURTH QUARTER AND FULL YEAR 2011 RESULTS

 

Fourth Quarter 2011 Highlights and 2012 Guidance:

 

·                  Net earnings of $78.3 million and net earnings per diluted share of $0.74

·                  GAAP combined ratio of 86.8%, including 1.9 percentage points for catastrophes

·                  Book value per share increased 3.1% to $31.62

·                  Annualized return on equity of 9.6% and annualized operating return on equity(a) of 10.4%

·                  2.5 million shares of common stock repurchased for $65.8 million at an average cost of $26.63 per share

·                  Net earned premium increased 8% to $550.2 million

·                  Net earnings guidance of $2.80 to $3.10 per diluted share for 2012

 

HOUSTON (February 21, 2012) . . .

HCC Insurance Holdings, Inc. (NYSE: HCC) today released earnings for the fourth quarter and full year of 2011.

 

Net earnings were $78.3 million for the fourth quarter of 2011, compared to $97.3 million for the fourth quarter of 2010.  Net earnings per diluted share were $0.74 for the fourth quarter of 2011, versus $0.84 for the same quarter of 2010.  Net earnings were $255.2 million for 2011, or $2.30 per diluted share, compared to $345.1 million, or $2.99 per diluted share, for 2010.

 

The 2011 results include previously announced pretax net catastrophe losses of $10.0 million and $117.9 million for the fourth quarter and full year of 2011, respectively, which reduced net earnings by $0.06 and $0.70 per share in the respective periods.  These catastrophe losses added 1.9 and 5.3 percentage points to the Company’s GAAP net loss ratio for the fourth quarter and full year of 2011, respectively.

 

The Company’s GAAP combined ratio was 86.8% for the fourth quarter of 2011, compared to 82.3% for the fourth quarter of 2010.  The GAAP combined ratio was 90.8% for the full year of 2011, versus 84.6% for 2010.  HCC’s paid loss ratio for 2011 was 58.9%, compared to 59.7% for 2010.

 


 

Book value per share increased 3.1% and 10.3% for the fourth quarter and full year of 2011, respectively, to $31.62 at December 31, 2011.  Book value per share grew at a compounded rate of 11.5% over the last five years.  Dividends of $0.60 per share were declared in 2011.  This was the 15th consecutive year in which HCC raised its dividend.

 

HCC’s annualized return on equity was 9.6% for the fourth quarter of 2011 and 7.7% for the full year of 2011.  The Company’s annualized operating return on equity(a) was 10.4% for the fourth quarter of 2011 and 8.1% for the full year of 2011.

 

“HCC had a strong quarter and a solid year despite unprecedented catastrophe losses.  We look forward to 2012 and an improving pricing environment,” HCC Chief Executive Officer John N. Molbeck, Jr. said.

 

The Company repurchased 2.5 million shares of its common stock during the fourth quarter of 2011 for $65.8 million at an average cost of $26.63 per share.  As of February 21, 2012, the Company has repurchased 14.1 million shares for $412.5 million at an average cost of $29.30 per share since June 2010.

 

HCC had net favorable loss development of $11.5 million in the fourth quarter of 2011, compared to $23.9 million for the same period of 2010, and net adverse development of $10.1 million for the full year of 2011, versus $22.7 million of net favorable development for the full year of 2010.  The Company’s 2011 accident year net loss ratio was 65.3% and its accident year combined ratio was 91.0% for the full year of 2011.

 

Gross written premium increased 1% to $629.0 million for the fourth quarter of 2011, compared to $624.2 million for the same quarter of 2010.  Net written premium increased 7% to $521.1 million for the fourth quarter of 2011, versus $486.7 million for the same quarter of 2010.  Net earned premium increased 8% to $550.2 million for the fourth quarter of 2011, compared to $509.8 million for the same quarter of 2010.

 

Gross written premium increased 3% to $2.6 billion for the full year of 2011.  Net written premium increased 8% to $2.2 billion for the full year of 2011, compared to $2.0 billion for the same period of 2010.  Net earned premium increased 4% to $2.1 billion for the full year of 2011, versus $2.0 billion for 2010.

 

Investment income increased to $53.5 million in the fourth quarter of 2011, compared to $53.2 million in the same quarter of 2010.  Investment income increased to $212.3 million in the full year of 2011, versus $203.8 million in 2010.  The Company’s fixed income securities portfolio increased 13% to $5.9 billion at December 31, 2011, from $5.2 billion at December 31, 2010.  The Company’s total investments increased 6% to $6.0 billion at December 31, 2011, from $5.7 billion at December 31, 2010.

 

As of December 31, 2011, HCC’s fixed income securities portfolio had an average rating of AA, with a duration of 5.0 years and an average long-term tax equivalent yield of

 

2


 

4.8%.  In addition, HCC’s total investments had an average combined duration of 4.9 years.

 

The Company’s liquidity position remains strong with $238.5 million of cash and short-term investments and $407.4 million of available capacity under its $600.0 million revolving loan facility at December 31, 2011.  In the full year of 2011, the Company generated $465.0 million of operating cash flow compared to $431.0 million in 2010, before consideration of $43.7 million and $15.8 million in commutations, respectively.

 

As of December 31, 2011, total assets were $9.6 billion, shareholders’ equity was $3.3 billion and the Company’s debt to total capital ratio was 12.7%.

 

EARNINGS GUIDANCE: HCC’s management estimates the Company will achieve net earnings of $2.80 to $3.10 per diluted share for 2012.  These estimated results assume the following: gross written premium of $2.7 billion; net written premium of $2.2 billion; a combined ratio of 86%-89%; and average fully diluted shares outstanding of 100 million shares.  These assumptions include 2.6 loss ratio points for catastrophe losses in the Company’s property treaty and property direct and facultative businesses.  These assumptions do not include any 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 2011 fourth quarter and full-year earnings 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 Standard Time on Wednesday, February 22.  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 25, 2012.

 

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, “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.

 

3


 

(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, we multiply the result 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 actively manage or 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.

 

*     *     *     *     *

 

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,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Gross written premium

 

$

2,649,126

 

$

2,578,908

 

$

628,989

 

$

624,178

 

 

 

 

 

 

 

 

 

 

 

Net written premium

 

2,182,158

 

2,026,197

 

521,067

 

486,706

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

2,127,170

 

2,041,924

 

550,183

 

509,786

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

212,271

 

203,819

 

53,489

 

53,216

 

 

 

 

 

 

 

 

 

 

 

Other operating income

 

35,590

 

44,832

 

11,965

 

9,797

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

2,374,005

 

2,302,254

 

614,921

 

576,881

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

255,243

 

345,096

 

78,338

 

97,299

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

2.30

 

$

2.99

 

$

0.74

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

109.2

 

114.1

 

104.4

 

114.1

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss ratio

 

65.8

%

59.4

%

61.3

%

57.0

%

 

 

 

 

 

 

 

 

 

 

GAAP combined ratio

 

90.8

%

84.6

%

86.8

%

82.3

%

 

 

 

 

 

 

 

 

 

 

Paid loss ratio

 

58.9

%

59.7

%

57.5

%

67.7

%

 

 

 

December 31,

 

December 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

6,049,750

 

$

5,687,095

 

 

 

 

 

 

 

Total assets

 

9,625,253

 

9,064,082

 

 

 

 

 

 

 

Shareholders’ equity

 

3,292,014

 

3,296,432

 

 

 

 

 

 

 

Debt to total capital ratio

 

12.7

%

8.3

%

 

 

 

 

 

 

Book value per share

 

$

31.62

 

$

28.67

 

 

S - 1


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

December 31,

 

December 31,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

Fixed income securities - available for sale, at fair value

 

$

5,718,834

 

$

4,999,440

 

Fixed income securities - held to maturity, at amortized cost

 

161,102

 

193,668

 

Short-term investments

 

133,917

 

488,002

 

Other investments

 

35,897

 

5,985

 

Total investments

 

6,049,750

 

5,687,095

 

Cash

 

104,550

 

97,857

 

Restricted cash

 

229,821

 

148,547

 

Premium, claims and other receivables

 

688,732

 

635,867

 

Reinsurance recoverables

 

1,056,068

 

1,006,855

 

Ceded unearned premium

 

222,300

 

278,663

 

Ceded life and annuity benefits

 

61,061

 

58,409

 

Deferred policy acquisition costs

 

217,608

 

212,786

 

Goodwill

 

872,814

 

821,648

 

Other assets

 

122,549

 

116,355

 

 

 

 

 

 

 

Total assets

 

$

9,625,253

 

$

9,064,082

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

3,658,317

 

$

3,471,858

 

Life and annuity policy benefits

 

61,061

 

58,409

 

Reinsurance, premium and claims payable

 

366,499

 

345,730

 

Unearned premium

 

1,031,034

 

1,045,877

 

Deferred ceding commissions

 

62,364

 

72,565

 

Notes payable

 

478,790

 

298,637

 

Accounts payable and accrued liabilities

 

675,174

 

474,574

 

 

 

 

 

 

 

Total liabilities

 

6,333,239

 

5,767,650

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

122,720

 

120,942

 

Additional paid-in capital

 

1,001,308

 

954,332

 

Retained earnings

 

2,447,850

 

2,257,895

 

Accumulated other comprehensive income

 

227,659

 

97,186

 

Treasury stock

 

(507,523

)

(133,923

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,292,014

 

3,296,432

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

9,625,253

 

$

9,064,082

 

 

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,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

2,127,170

 

$

2,041,924

 

$

550,183

 

$

509,786

 

Net investment income

 

212,271

 

203,819

 

53,489

 

53,216

 

Other operating income

 

35,590

 

44,832

 

11,965

 

9,797

 

Net realized investment gain

 

3,653

 

12,104

 

484

 

4,207

 

Other-than-temporary impairment credit losses

 

(4,679

)

(425

)

(1,200

)

(125

)

 

 

 

 

 

 

 

 

 

 

Total revenue

 

2,374,005

 

2,302,254

 

614,921

 

576,881

 

 

 

 

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

1,399,247

 

1,213,029

 

337,007

 

290,384

 

Policy acquisition costs, net

 

328,134

 

322,046

 

88,974

 

79,968

 

Other operating expense

 

268,548

 

256,004

 

70,037

 

66,051

 

Interest expense

 

23,070

 

21,348

 

6,473

 

5,441

 

 

 

 

 

 

 

 

 

 

 

Total expense

 

2,018,999

 

1,812,427

 

502,491

 

441,844

 

 

 

 

 

 

 

 

 

 

 

Earnings before income tax expense

 

355,006

 

489,827

 

112,430

 

135,037

 

Income tax expense

 

99,763

 

144,731

 

34,092

 

37,738

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

255,243

 

$

345,096

 

$

78,338

 

$

97,299

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.31

 

$

3.00

 

$

0.74

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

109.1

 

113.9

 

104.3

 

113.8

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.30

 

$

2.99

 

$

0.74

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

109.2

 

114.1

 

104.4

 

114.1

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.600

 

$

0.560

 

$

0.155

 

$

0.145

 

 

S - 3


 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Twelve months ended

 

 

 

December 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net earnings

 

$

255,243

 

$

345,096

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Change in premium, claims and other receivables

 

(81,578

)

(38,507

)

Change in reinsurance recoverables

 

(47,892

)

(2,077

)

Change in ceded unearned premium

 

55,741

 

(10,713

)

Change in loss and loss adjustment expense payable

 

181,363

 

6,702

 

Change in unearned premium

 

(14,364

)

7,106

 

Change in reinsurance, premium and claims payable, excluding restricted cash

 

12,768

 

21,852

 

Change in accounts payable and accrued liabilities

 

17,538

 

31,032

 

Stock-based compensation expense

 

13,000

 

13,018

 

Depreciation and amortization expense

 

18,619

 

17,380

 

(Gain) loss on investments

 

1,026

 

(12,168

)

Other, net

 

9,812

 

36,479

 

Cash provided by operating activities

 

421,276

 

415,200

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Sales of available for sale fixed income securities

 

448,766

 

239,414

 

Maturity or call of available for sale fixed income securities

 

573,958

 

620,884

 

Maturity or call of held to maturity fixed income securities

 

29,102

 

25,240

 

Cost of available for sale fixed income securities acquired

 

(1,550,587

)

(1,347,285

)

Cost of held to maturity fixed income securities acquired

 

—

 

(120,643

)

Cost of other investments acquired

 

(33,060

)

(4,977

)

Change in short-term investments

 

355,468

 

311,983

 

Payments for purchase of businesses, net of cash received

 

(1,892

)

(36,348

)

Proceeds from sales of other investments

 

347

 

4,638

 

Proceeds from sale of subsidiaries

 

2,550

 

17,068

 

Other, net

 

(21,643

)

(9,627

)

Cash used by investing activities

 

(196,991

)

(299,653

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Advances on line of credit

 

305,000

 

50,000

 

Payments on line of credit

 

(125,000

)

(50,000

)

Payments on convertible notes

 

—

 

(64,472

)

Sale of common stock

 

36,044

 

29,193

 

Purchase of common stock

 

(373,584

)

(35,124

)

Dividends paid

 

(65,822

)

(63,245

)

Other, net

 

5,770

 

(13,502

)

Cash used by financing activities

 

(217,592

)

(147,150

)

 

 

 

 

 

 

Net increase (decrease) in cash

 

6,693

 

(31,603

)

Cash at beginning of year

 

97,857

 

129,460

 

 

 

 

 

 

 

Cash at end of year

 

$

104,550

 

$

97,857

 

 

S - 4


 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Twelve months ended December 31,

 

Three months ended December 31,

 

 

 

2011

 

2010

 

Change

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

154,903

 

$

162,539

 

(5

)%

$

37,970

 

$

40,939

 

(7

)%

E&O

 

68,846

 

81,567

 

(16

)

15,885

 

18,251

 

(13

)

Public Risk

 

73,168

 

64,802

 

13

 

17,444

 

14,405

 

21

 

Other

 

243,519

 

229,567

 

6

 

59,404

 

49,741

 

19

 

 

 

540,436

 

538,475

 

—

 

130,703

 

123,336

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

453,669

 

498,331

 

(9

)

140,788

 

153,821

 

(8

)

International D&O

 

108,834

 

97,960

 

11

 

28,812

 

28,034

 

3

 

 

 

562,503

 

596,291

 

(6

)

169,600

 

181,855

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

703,814

 

654,335

 

8

 

176,413

 

166,079

 

6

 

Other

 

98,488

 

107,394

 

(8

)

25,305

 

27,865

 

(9

)

 

 

802,302

 

761,729

 

5

 

201,718

 

193,944

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

169,237

 

171,595

 

(1

)

42,018

 

39,458

 

6

 

Credit

 

57,075

 

55,271

 

3

 

14,926

 

14,266

 

5

 

 

 

226,312

 

226,866

 

—

 

56,944

 

53,724

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

128,078

 

106,902

 

20

 

14,668

 

9,849

 

49

 

Property Treaty

 

128,767

 

74,514

 

73

 

4,017

 

3,110

 

29

 

Liability

 

89,519

 

86,681

 

3

 

20,806

 

18,180

 

14

 

Surety & Credit

 

84,683

 

75,106

 

13

 

18,830

 

18,087

 

4

 

Other

 

86,336

 

110,275

 

(22

)

11,707

 

22,277

 

(47

)

 

 

517,383

 

453,478

 

14

 

70,028

 

71,503

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

190

 

2,069

 

nm

 

(4

)

(184

)

nm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

2,649,126

 

$

2,578,908

 

3

%

$

628,989

 

$

624,178

 

1

%

 

nm - Not meaningful comparison

 

S - 5


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Twelve months ended December 31,

 

Three months ended December 31,

 

 

 

2011

 

2010

 

Change

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

117,333

 

$

110,539

 

6

%

$

28,547

 

$

26,442

 

8

%

E&O

 

67,606

 

81,443

 

(17

)

15,571

 

18,187

 

(14

)

Public Risk

 

58,096

 

46,844

 

24

 

14,170

 

10,209

 

39

 

Other

 

124,261

 

89,995

 

38

 

35,796

 

26,266

 

36

 

 

 

367,296

 

328,821

 

12

 

94,084

 

81,104

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

347,834

 

362,255

 

(4

)

107,940

 

112,373

 

(4

)

International D&O

 

64,428

 

39,307

 

64

 

16,828

 

11,233

 

50

 

 

 

412,262

 

401,562

 

3

 

124,768

 

123,606

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

703,619

 

654,335

 

8

 

176,364

 

166,079

 

6

 

Other

 

98,112

 

107,038

 

(8

)

25,224

 

27,774

 

(9

)

 

 

801,731

 

761,373

 

5

 

201,588

 

193,853

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

158,116

 

164,764

 

(4

)

38,336

 

37,416

 

2

 

Credit

 

50,743

 

44,609

 

14

 

14,762

 

12,331

 

20

 

 

 

208,859

 

209,373

 

—

 

53,098

 

49,747

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

75,286

 

53,063

 

42

 

6,957

 

1,347

 

nm

 

Property Treaty

 

98,370

 

59,878

 

64

 

(1,769

)

(2,116

)

(16

)

Liability

 

81,855

 

79,959

 

2

 

18,607

 

16,549

 

12

 

Surety & Credit

 

78,418

 

64,847

 

21

 

16,263

 

13,569

 

20

 

Other

 

57,890

 

66,597

 

(13

)

7,475

 

9,232

 

(19

)

 

 

391,819

 

324,344

 

21

 

47,533

 

38,581

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

191

 

724

 

nm

 

(4

)

(185

)

nm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

2,182,158

 

$

2,026,197

 

8

%

$

521,067

 

$

486,706

 

7

%

 

nm -  Not meaningful comparison

 

S - 6


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Twelve months ended December 31,

 

Three months ended December 31,

 

 

 

2011

 

2010

 

Change

 

2011

 

2010

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

 113,341

 

$

 115,952

 

(2

)%

$

 29,462

 

$

 28,704

 

3

%

E&O

 

73,666

 

95,275

 

(23

)

17,312

 

21,196

 

(18

)

Public Risk

 

50,440

 

46,409

 

9

 

13,917

 

11,883

 

17

 

Other

 

95,963

 

81,877

 

17

 

27,598

 

19,303

 

43

 

 

 

333,410

 

339,513

 

(2

)

88,289

 

81,086

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

359,178

 

377,868

 

(5

)

88,770

 

92,768

 

(4

)

International D&O

 

51,638

 

47,358

 

9

 

14,806

 

10,609

 

40

 

 

 

410,816

 

425,226

 

(3

)

103,576

 

103,377

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

703,619

 

654,335

 

8

 

176,364

 

166,079

 

6

 

Other

 

99,843

 

105,699

 

(6

)

23,442

 

26,216

 

(11

)

 

 

803,462

 

760,034

 

6

 

199,806

 

192,295

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

164,879

 

160,373

 

3

 

43,786

 

41,048

 

7

 

Credit

 

45,656

 

39,535

 

15

 

13,440

 

10,433

 

29

 

 

 

210,535

 

199,908

 

5

 

57,226

 

51,481

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

66,512

 

52,671

 

26

 

19,143

 

13,105

 

46

 

Property Treaty

 

90,912

 

47,594

 

91

 

26,384

 

15,061

 

75

 

Liability

 

81,339

 

81,887

 

(1

)

21,158

 

21,409

 

(1

)

Surety & Credit

 

73,832

 

69,264

 

7

 

17,823

 

15,464

 

15

 

Other

 

56,153

 

64,770

 

(13

)

16,782

 

16,676

 

1

 

 

 

368,748

 

316,186

 

17

 

101,290

 

81,715

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

199

 

1,057

 

nm

 

(4

)

(168

)

nm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

 2,127,170

 

$

 2,041,924

 

4

%

$

 550,183

 

$

 509,786

 

8

%

 

nm - Not meaningful comparison

 

S - 7


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Twelve months ended

 

Three months ended

 

 

 

December 31,

 

December 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities

 

 

 

 

 

 

 

 

 

Taxable

 

$

113,293

 

$

110,517

 

$

29,065

 

$

28,101

 

Exempt from U.S. income taxes

 

98,729

 

92,297

 

24,016

 

24,712

 

Total fixed income securities

 

212,022

 

202,814

 

53,081

 

52,813

 

Short-term investments

 

537

 

900

 

117

 

269

 

Other

 

4,486

 

4,344

 

1,494

 

1,291

 

Total investment income

 

217,045

 

208,058

 

54,692

 

54,373

 

Investment expense

 

(4,774

)

(4,239

)

(1,203

)

(1,157

)

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

212,271

 

$

203,819

 

$

53,489

 

$

53,216

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in unrealized gain for period, before tax

 

$

198,768

 

$

(21,677

)

$

38,546

 

$

(166,630

)

 

 

 

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

$

333,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

$

294,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2011

 

$

194,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

$

116,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

$

134,634

 

 

 

 

 

 

 

 

S - 8

 


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Loss Ratios

(Unaudited, in thousands)

 

 

 

Twelve months ended

 

Twelve months ended

 

 

 

December 31, 2011

 

December 31, 2010

 

 

 

Net earned

 

Loss

 

Net earned

 

Loss

 

 

 

premium

 

ratio

 

premium

 

ratio

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

Aviation

 

$

113,341

 

63.7

%

$

115,952

 

55.0

%

E&O

 

73,666

 

70.8

 

95,275

 

79.2

 

Public Risk

 

50,440

 

79.8

 

46,409

 

61.8

 

Other

 

95,963

 

37.9

 

81,877

 

28.4

 

 

 

333,410

 

60.3

 

339,513

 

56.3

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

U.S. D&O

 

359,178

 

90.3

 

377,868

 

62.6

 

International D&O

 

51,638

 

8.2

 

47,358

 

60.8

 

 

 

410,816

 

80.0

 

425,226

 

62.4

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

703,619

 

74.5

 

654,335

 

73.6

 

Other

 

99,843

 

62.4

 

105,699

 

71.0

 

 

 

803,462

 

73.0

 

760,034

 

73.3

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

Surety

 

164,879

 

20.6

 

160,373

 

22.8

 

Credit

 

45,656

 

40.0

 

39,535

 

41.5

 

 

 

210,535

 

24.8

 

199,908

 

26.5

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Energy

 

66,512

 

35.7

 

52,671

 

22.2

 

Property Treaty

 

90,912

 

80.0

 

47,594

 

58.2

 

Liability

 

81,339

 

34.0

 

81,887

 

43.3

 

Surety & Credit

 

73,832

 

56.6

 

69,264

 

41.7

 

Other

 

56,153

 

121.0

 

64,770

 

61.3

 

 

 

368,748

 

63.4

 

316,186

 

45.4

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

199

 

nm

 

1,057

 

nm

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

2,127,170

 

65.8

%

$

2,041,924

 

59.4

%

 

nm - Not meaningful comparison

 

S - 9


 

HCC Insurance Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measure to GAAP

(Unaudited, in thousands)

 

 

 

Twelve months ended

 

Three months ended

 

 

 

December 31,

 

December 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings

 

$

255,243

 

$

345,096

 

$

78,338

 

$

97,299

 

 

 

 

 

 

 

 

 

 

 

Exclude:

 

 

 

 

 

 

 

 

 

Net realized investment gain (loss), net of tax*

 

2,374

 

7,868

 

315

 

2,735

 

OTTI credit losses, net of tax*

 

(3,041

)

(276

)

(780

)

(81

)

Foreign currency benefit (expense), net of tax*

 

707

 

(1,032

)

(905

)

(83

)

Total items excluded from operating earnings

 

40

 

6,560

 

(1,370

)

2,571

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

$

255,203

 

$

338,536

 

$

79,708

 

$

94,728

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - beginning of period

 

$

3,296,432

 

$

3,031,183

 

$

3,267,139

 

$

3,337,102

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

97,186

 

119,665

 

202,018

 

208,936

 

 

 

 

 

 

 

 

 

 

 

Beginning equity, as adjusted

 

$

3,199,246

 

$

2,911,518

 

$

3,065,121

 

$

3,128,166

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - end of period

 

$

3,292,014

 

$

3,296,432

 

$

3,292,014

 

$

3,296,432

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

227,659

 

97,186

 

227,659

 

97,186

 

 

 

 

 

 

 

 

 

 

 

Ending equity, as adjusted

 

$

3,064,355

 

$

3,199,246

 

$

3,064,355

 

$

3,199,246

 

 

 

 

 

 

 

 

 

 

 

Average equity, as adjusted

 

$

3,131,801

 

$

3,055,382

 

$

3,064,738

 

$

3,163,706

 

 

 

 

 

 

 

 

 

 

 

Annualized operating return on equity

 

8.1

%

11.1

%

10.4

%

12.0

%

 

* Tax adjustment calculated using 35% statutory tax rate.

 

S - 10