EX-99.1 2 a13-11118_2ex99d1.htm EX-99.1

Exhibit 99.1

GRAPHIC

 

HCC INSURANCE HOLDINGS REPORTS

RECORD NET EARNINGS

FOR THE FIRST QUARTER OF 2013

 

Highlights:

 

·                  Net earnings of $105.9 million, or $1.05 per diluted share

·                  GAAP combined ratio of 83.8%

·                  Net written premium increased 4% to $579.2 million

·                  Annualized return on equity of 11.9%

·                  Annualized operating return on equity(a) of 11.4%

 

HOUSTON (April 30, 2013) . . .

HCC Insurance Holdings, Inc. (NYSE: HCC) today released results for its first quarter ended March 31, 2013.

 

Net earnings were $105.9 million, or $1.05 per diluted share, for the first quarter of 2013, compared to $82.6 million, or $0.79 per diluted share, for the first quarter of 2012.

 

The Company’s combined ratio was 83.8% for the first quarter of 2013, compared to 85.5% for the first quarter of 2012.  HCC’s paid loss ratio was 53.4% for the first quarter of 2013, compared to 63.0% for the same quarter of 2012.  The 2012 paid loss ratio included 5.1 percentage points related to a commutation in Exited Lines.  HCC had no loss development in either the first quarter of 2013 or 2012.  The 2013 results included accident year pretax net catastrophe losses of $5.2 million, which reduced net earnings by $0.03 per share.  The 2012 results included accident year pretax net catastrophe losses of $7.6 million, which reduced net earnings by $0.05 per share.

 

“Building on momentum from our record performance for full-year 2012, HCC began 2013 with its best-ever first quarter earnings.  We produced a combined ratio of 83.8% and an operating return on equity well in excess of our stated goal.  We believe HCC will continue to benefit from price improvements currently being experienced throughout many of our businesses,” HCC Chief Executive Officer Christopher J.B. Williams said.

 

Book value per share increased 1.7% and 10.7% for the first quarter of 2013 and the last twelve months, respectively, to $35.68 at March 31, 2013.  The Company purchased 0.7 million shares of its common stock during the first quarter of 2013 for $28.8 million at an average cost of $39.18 per share.

 



 

Gross written premium increased 5% to $720.2 million for the first quarter of 2013, compared to $682.7 million for the same quarter of 2012.  Net written premium increased 4% to $579.2 million for the first quarter of 2013, versus $558.4 million for the same quarter of 2012.  Net earned premium increased 3% to $561.2 million for the first quarter of 2013, compared to $547.1 million for the same quarter of 2012.

 

Investment income was $55.8 million for the first quarter of 2013, compared to $57.0 million for the same quarter of 2012.  As of March 31, 2013, HCC’s fixed maturity securities portfolio had an average rating of AA, with a duration of 4.9 years and an average long-term tax equivalent yield of 4.6%.

 

HCC generated operating cash flow of $69.2 million in the first quarter of 2013, compared to $125.2 million in the same quarter of 2012.  Operating cash flow is cash flow from operating activities excluding surety collateral outflows of $67.1 million and $22.7 million in the first quarter of 2013 and 2012, respectively, as well as a payment of $27.5 million in 2012 to commute a large contract in Exited Lines.  The Company’s liquidity position remains strong with $343.1 million of cash and short-term investments and $270.6 million of available capacity under its $600.0 million revolving loan facility at March 31, 2013.

 

As of March 31, 2013, total assets were $10.2 billion, shareholders’ equity was $3.6 billion and the Company’s debt to total capital ratio was 14.7%.

 

For further information about HCC’s 2013 first quarter results, see the supplemental financial schedules that are accessible on HCC’s website at http://www.hcc.com, as well as directly in the Investor Relations section of HCC’s website at http://ir.hcc.com.

 

(Note: If clicking on the above links does not open in a new web page, please cut and paste the above URLs into your browser’s address bar.)

 

HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, May 1.  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, August 2, 2013.

 

Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading specialty insurer with offices in the United States, the United Kingdom, Spain and Ireland.  HCC’s major domestic and international insurance companies have financial strength ratings of “AA (Very Strong)” from Standard & Poor’s Corporation, “A+ (Superior)” from A.M. Best Company, Inc., “AA (Very Strong)” from Fitch Ratings, and “A1 (Good Security)” from Moody’s Investors Service, Inc.

 

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

 

2



 

a)        Non-GAAP Financial Measure

 

Annualized operating return on equity is a non-GAAP financial measure under Regulation G and is calculated as net earnings excluding after-tax net realized investment gain/loss, other-than-temporary impairment credit losses, and foreign currency benefit/expense (collectively, operating earnings) divided by average shareholders’ equity excluding accumulated other comprehensive income.  To annualize a quarterly rate, the result is multiplied by four.  See the supplemental financial schedules for a reconciliation of this non-GAAP financial measure to corresponding GAAP amounts.  Management believes annualized operating return on equity is a useful measure for understanding the Company’s profitability relative to shareholders’ equity before consideration of investment-related gains/losses and foreign currency benefit/expense, both of which management excludes when evaluating operating results internally.

 

Contact:

Doug Busker, Director of Investor Relations

 

HCC Insurance Holdings, Inc.

 

Telephone: (713) 996-1192

 

Forward-looking statements contained in this press release are made under “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties.  The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission.

 

*     *     *     *     *

 

3



 

HCC Insurance Holdings, Inc. and Subsidiaries

Financial Highlights

(Unaudited, in thousands except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Gross written premium

 

$

720,205

 

$

682,689

 

 

 

 

 

 

 

Net written premium

 

579,184

 

558,404

 

 

 

 

 

 

 

Net earned premium

 

561,186

 

547,141

 

 

 

 

 

 

 

Net investment income

 

55,765

 

57,010

 

 

 

 

 

 

 

Total revenue

 

634,366

 

609,523

 

 

 

 

 

 

 

Net earnings

 

105,850

 

82,584

 

 

 

 

 

 

 

Operating earnings*

 

93,139

 

84,270

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

1.05

 

$

0.79

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

99.3

 

102.2

 

 

 

 

 

 

 

Net loss ratio

 

59.3

%

60.1

%

 

 

 

 

 

 

Combined ratio

 

83.8

%

85.5

%

 

 

 

 

 

 

Paid loss ratio

 

53.4

%

63.0

%

 

 

 

March 31,

 

December 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Total investments

 

$

6,806,052

 

$

6,950,398

 

 

 

 

 

 

 

Total assets

 

10,198,216

 

10,267,807

 

 

 

 

 

 

 

Shareholders’ equity

 

3,585,249

 

3,542,612

 

 

 

 

 

 

 

Debt to total capital ratio

 

14.7

%

14.2

%

 

 

 

 

 

 

Book value per share

 

$

35.68

 

$

35.10

 

 


*        Non-GAAP financial measure under Regulation G.  See calculation on S - 9.  Management believes operating earnings is a useful measure for understanding the Company’s profitability before consideration of investment-related gains/losses and foreign currency benefit/expense, both of which management excludes when evaluating operating results internally.

 

S-1



 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

Fixed maturity securities — available for sale, at fair value

 

$

6,185,456

 

$

6,281,781

 

Equity securities — available for sale, at fair value

 

350,352

 

284,639

 

Short-term investments

 

267,434

 

363,053

 

Other investments

 

2,810

 

20,925

 

Total investments

 

6,806,052

 

6,950,398

 

Cash

 

75,677

 

71,390

 

Restricted cash and securities

 

101,572

 

101,480

 

Premium, claims and other receivables

 

577,946

 

549,725

 

Reinsurance recoverables

 

1,066,351

 

1,071,222

 

Ceded unearned premium

 

257,359

 

256,988

 

Ceded life and annuity benefits

 

58,227

 

58,641

 

Deferred policy acquisition costs

 

192,199

 

191,960

 

Goodwill

 

885,994

 

885,860

 

Other assets

 

176,839

 

130,143

 

 

 

 

 

 

 

Total assets

 

$

10,198,216

 

$

10,267,807

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

3,774,162

 

$

3,767,850

 

Life and annuity policy benefits

 

58,227

 

58,641

 

Reinsurance, premium and claims payable

 

321,394

 

294,621

 

Unearned premium

 

1,085,833

 

1,069,956

 

Deferred ceding commissions

 

72,992

 

74,609

 

Notes payable

 

618,982

 

583,944

 

Accounts payable and accrued liabilities

 

681,377

 

875,574

 

 

 

 

 

 

 

Total liabilities

 

6,612,967

 

6,725,195

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

125,394

 

125,114

 

Additional paid-in capital

 

1,061,272

 

1,052,253

 

Retained earnings

 

2,845,444

 

2,756,166

 

Accumulated other comprehensive income

 

268,100

 

295,271

 

Treasury stock

 

(714,961

)

(686,192

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,585,249

 

3,542,612

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

10,198,216

 

$

10,267,807

 

 

S-2



 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

(Unaudited, in thousands except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

561,186

 

$

547,141

 

Net investment income

 

55,765

 

57,010

 

Other operating income

 

8,845

 

5,201

 

Net realized investment gain

 

8,570

 

171

 

 

 

 

 

 

 

Total revenue

 

634,366

 

609,523

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

332,697

 

328,928

 

Policy acquisition costs, net

 

66,949

 

69,444

 

Other operating expense

 

76,853

 

87,282

 

Interest expense

 

6,471

 

6,909

 

 

 

 

 

 

 

Total expense

 

482,970

 

492,563

 

 

 

 

 

 

 

Earnings before income tax expense

 

151,396

 

116,960

 

Income tax expense

 

45,546

 

34,376

 

 

 

 

 

 

 

Net earnings

 

$

105,850

 

$

82,584

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

1.05

 

$

0.80

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

99.1

 

102.0

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

1.05

 

$

0.79

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

99.3

 

102.2

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.165

 

$

0.155

 

 

S-3



 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

36,998

 

$

37,090

 

%

E&O

 

15,074

 

16,891

 

(11

)

Public Risk

 

21,441

 

19,784

 

8

 

Other

 

101,624

 

79,382

 

28

 

 

 

175,137

 

153,147

 

14

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

75,239

 

74,996

 

 

International D&O

 

28,780

 

26,249

 

10

 

 

 

104,019

 

101,245

 

3

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

202,808

 

193,233

 

5

 

Other

 

12,753

 

12,094

 

5

 

 

 

215,561

 

205,327

 

5

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

37,696

 

39,926

 

(6

)

Credit

 

14,553

 

14,567

 

 

 

 

52,249

 

54,493

 

(4

)

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

26,545

 

20,595

 

29

 

Property Treaty

 

72,345

 

69,338

 

4

 

Liability

 

18,133

 

19,260

 

(6

)

Surety & Credit

 

21,166

 

20,958

 

1

 

Other

 

29,618

 

27,525

 

8

 

 

 

167,807

 

157,676

 

6

 

 

 

 

 

 

 

 

 

Exited Lines

 

5,432

 

10,801

 

(50

)

 

 

 

 

 

 

 

 

Totals

 

$

720,205

 

$

682,689

 

5

%

 

S-4



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

28,614

 

$

27,507

 

4

%

E&O

 

12,538

 

16,505

 

(24

)

Public Risk

 

15,771

 

15,594

 

1

 

Other

 

46,959

 

32,722

 

44

 

 

 

103,882

 

92,328

 

13

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

51,699

 

55,705

 

(7

)

International D&O

 

15,927

 

15,208

 

5

 

 

 

67,626

 

70,913

 

(5

)

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

202,594

 

193,087

 

5

 

Other

 

12,674

 

12,011

 

6

 

 

 

215,268

 

205,098

 

5

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

33,690

 

36,134

 

(7

)

Credit

 

11,814

 

8,570

 

38

 

 

 

45,504

 

44,704

 

2

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

14,669

 

12,824

 

14

 

Property Treaty

 

66,167

 

62,302

 

6

 

Liability

 

16,570

 

17,892

 

(7

)

Surety & Credit

 

18,649

 

19,027

 

(2

)

Other

 

25,417

 

22,525

 

13

 

 

 

141,472

 

134,570

 

5

 

 

 

 

 

 

 

 

 

Exited Lines

 

5,432

 

10,791

 

(50

)

 

 

 

 

 

 

 

 

Totals

 

$

579,184

 

$

558,404

 

4

%

 

S-5



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

Aviation

 

$

27,857

 

$

28,823

 

(3

)%

E&O

 

13,198

 

16,377

 

(19

)

Public Risk

 

16,360

 

15,218

 

8

 

Other

 

36,116

 

28,600

 

26

 

 

 

93,531

 

89,018

 

5

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

U.S. D&O

 

76,705

 

86,254

 

(11

)

International D&O

 

16,074

 

15,184

 

6

 

 

 

92,779

 

101,438

 

(9

)

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

Medical Stop-loss

 

202,594

 

193,087

 

5

 

Other

 

14,531

 

13,794

 

5

 

 

 

217,125

 

206,881

 

5

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

Surety

 

35,607

 

39,920

 

(11

)

Credit

 

11,570

 

7,809

 

48

 

 

 

47,177

 

47,729

 

(1

)

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

Energy

 

21,039

 

15,094

 

39

 

Property Treaty

 

28,755

 

22,089

 

30

 

Liability

 

17,175

 

19,482

 

(12

)

Surety & Credit

 

18,213

 

17,761

 

3

 

Other

 

19,960

 

16,858

 

18

 

 

 

105,142

 

91,284

 

15

 

 

 

 

 

 

 

 

 

Exited Lines

 

5,432

 

10,791

 

(50

)

 

 

 

 

 

 

 

 

Totals

 

$

561,186

 

$

547,141

 

3

%

 

S-6



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

 

 

 

Taxable

 

$

25,960

 

$

31,115

 

Exempt from U.S. income taxes

 

27,889

 

26,612

 

Total fixed maturity securities

 

53,849

 

57,727

 

Equity securities

 

3,580

 

 

Short-term investments

 

12

 

62

 

Other

 

(47

)

467

 

Total investment income

 

57,394

 

58,256

 

Investment expense

 

(1,629

)

(1,246

)

 

 

 

 

 

 

Net investment income

 

$

55,765

 

$

57,010

 

 

 

 

 

 

 

Unrealized gain on available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in unrealized gain for period, before tax

 

$

(38,965

)

$

21,469

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

March 31, 2013

 

$

397,730

 

 

 

 

 

 

 

 

 

December 31, 2012

 

$

436,695

 

 

 

 

S-7



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Loss Ratios

(Unaudited, in thousands)

 

 

 

Three months ended

 

Three months ended

 

 

 

March 31, 2013

 

March 31, 2012

 

 

 

Net earned

 

Loss

 

Net earned

 

Loss

 

 

 

premium

 

ratio

 

premium

 

ratio

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

Aviation

 

$

27,857

 

61.7

%

$

28,823

 

46.9

%

E&O

 

13,198

 

60.2

 

16,377

 

61.0

 

Public Risk

 

16,360

 

78.2

 

15,218

 

93.0

 

Other

 

36,116

 

39.4

 

28,600

 

40.5

 

 

 

93,531

 

55.8

 

89,018

 

55.3

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

U.S. D&O

 

76,705

 

62.8

 

86,254

 

71.0

 

International D&O

 

16,074

 

51.2

 

15,184

 

51.9

 

 

 

92,779

 

60.8

 

101,438

 

68.2

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

202,594

 

75.2

 

193,087

 

75.3

 

Other

 

14,531

 

56.3

 

13,794

 

51.8

 

 

 

217,125

 

73.9

 

206,881

 

73.7

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

Surety

 

35,607

 

25.0

 

39,920

 

24.8

 

Credit

 

11,570

 

37.4

 

7,809

 

14.6

 

 

 

47,177

 

28.0

 

47,729

 

23.1

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Energy

 

21,039

 

45.3

 

15,094

 

37.1

 

Property Treaty

 

28,755

 

24.3

 

22,089

 

12.8

 

Liability

 

17,175

 

49.9

 

19,482

 

51.2

 

Surety & Credit

 

18,213

 

63.5

 

17,761

 

67.9

 

Other

 

19,960

 

46.4

 

16,858

 

43.3

 

 

 

105,142

 

43.7

 

91,284

 

41.4

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

5,432

 

84.6

 

10,791

 

85.2

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

561,186

 

59.3

%

$

547,141

 

60.1

%

 

S-8



 

HCC Insurance Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures to GAAP

(Unaudited, in thousands)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings

 

$

105,850

 

$

82,584

 

 

 

 

 

 

 

Exclude:

 

 

 

 

 

Net realized investment gain*

 

5,571

 

111

 

Foreign currency benefit (expense)*

 

7,140

 

(1,797

)

Total items excluded from operating earnings

 

12,711

 

(1,686

)

 

 

 

 

 

 

Operating earnings

 

$

93,139

 

$

84,270

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - beginning of period

 

$

3,542,612

 

$

3,273,982

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

295,271

 

227,659

 

 

 

 

 

 

 

Beginning equity, as adjusted

 

$

3,247,341

 

$

3,046,323

 

 

 

 

 

 

 

GAAP equity - end of period

 

$

3,585,249

 

$

3,293,957

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

268,100

 

244,295

 

 

 

 

 

 

 

Ending equity, as adjusted

 

$

3,317,149

 

$

3,049,662

 

 

 

 

 

 

 

Average equity, as adjusted

 

$

3,282,245

 

$

3,047,993

 

 

 

 

 

 

 

Annualized operating return on equity

 

11.4

%

11.1

%

 


* Net of tax, calculated using 35% statutory tax rate.

 

S-9