EX-99.1 2 a13-23084_1ex99d1.htm EX-99.1

Exhibit 99.1

GRAPHIC

HCC INSURANCE HOLDINGS REPORTS STRONG

THIRD QUARTER EARNINGS AND RECORD EARNINGS PER SHARE FOR THE FIRST NINE MONTHS OF 2013

 

Third Quarter 2013 Highlights and Updated 2013 Guidance:

 

·                  Net earnings of $98.2 million, or $0.98 per diluted share

·                  GAAP combined ratio of 83.5%

·                  Pretax net catastrophe losses of $17.9 million

·                  Annualized return on equity of 11.1%

·                  Annualized operating return on equity(a) of 10.8%

·                  Updated net earnings guidance for 2013 of $3.70 to $3.80 per diluted share

 

HOUSTON (October 29, 2013) . . .

 

HCC Insurance Holdings, Inc. (NYSE: HCC) today released results for its third quarter ended September 30, 2013.

 

Net earnings were $98.2 million, or $0.98 per diluted share, for the third quarter of 2013, compared to $107.1 million, or $1.05 per diluted share, for the third quarter of 2012.  Net earnings were $292.2 million for the first nine months of 2013, or $2.90 per diluted share, compared to $283.1 million, or $2.76 per diluted share, for the same period of 2012.

 

The 2013 results included accident year pretax net catastrophe losses of $17.9 million and $44.5 million for the third quarter and first nine months, respectively, which reduced net earnings by $0.12 and $0.29 per share for the respective periods.  The 2012 results included catastrophe losses of $8.0 million and $20.3 million for the third quarter and first nine months, respectively, which reduced net earnings by $0.05 and $0.13 per share for the respective periods.

 

The Company’s combined ratio was 83.5% for the third quarter of 2013, compared to 79.1% for the third quarter of 2012.  The combined ratio was 84.1% for the first nine months of 2013, versus 83.3% for the same period of 2012.  HCC’s net paid loss ratio was 52.6% for the first nine months of 2013, compared to 56.3% for the same period of 2012.

 

“Our combined ratio remains below 85% for the year, and our businesses are performing at or above our expectations.  We continue on a record pace for the year after a very strong 2012,” said Christopher J.B. Williams, HCC’s Chief Executive Officer.

 

HCC had net favorable loss development of $27.8 million in the third quarter of 2013, compared to $34.6 million in the same quarter of 2012, and $39.6 million in the first nine months of 2013, versus $34.6 million in the same period of 2012.  The net favorable development in 2013

 


 

includes strengthening of reserves in the International Surety & Credit line of business to address a recent Spanish Supreme Court ruling.

 

Gross written premium increased 2% to $678.9 million for the third quarter of 2013, compared to $665.8 million for the same quarter of 2012.  Net written premium decreased 2% to $521.7 million for the third quarter of 2013, versus $530.3 million for the same quarter of 2012.  Net earned premium decreased 1% to $556.7 million for the third quarter of 2013, compared to $563.7 million for the same quarter of 2012.

 

For the first nine months of 2013, compared to the same period of 2012, gross written premium increased 3% to $2.2 billion; net written premium was flat at $1.7 billion; and net earned premium was flat at $1.7 billion.

 

Investment income was $54.2 million in the third quarter of 2013, compared to $56.3 million in the same period of 2012, and $165.6 million in the first nine months of 2013, compared to $166.6 million in the same period of 2012.  As of September 30, 2013, HCC’s fixed maturity securities portfolio had an average rating of AA, with a duration of 5.5 years and an average long-term tax equivalent yield of 4.5%.

 

HCC generated cash flow from operations of $271.4 million in the first nine months of 2013, compared to $496.0 million in the same period of 2012.  Cash flow for 2013 was decreased by $127.9 million of U.S. Surety collateral repayments, whereas cash flow for 2012 was increased by $81.0 million of U.S. Surety collateral receipts.  At September 30, 2013, the Company had $284.2 million of cash and short-term investments and $239.1 million of available capacity under its $600.0 million revolving loan facility.

 

As of September 30, 2013, total assets were $10.4 billion, shareholders’ equity was $3.6 billion and the Company’s debt to total capital ratio was 15.4%.

 

UPDATED EARNINGS GUIDANCE: Based on the Company’s results through the first nine months, HCC’s management estimates the Company will achieve net earnings of $3.70 to $3.80 per diluted share for the full year of 2013.  For the fourth quarter of 2013 and consistent with the Company’s prior guidance, these estimated results assume 2.7 loss ratio points for net catastrophe losses and no 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 2013 third 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, October 30.  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

 

2


 

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, January 31, 2014.

 

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.

 

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)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Gross written premium

 

$

2,208,561

 

$

2,140,005

 

$

678,913

 

$

665,763

 

 

 

 

 

 

 

 

 

 

 

Net written premium

 

1,729,952

 

1,730,799

 

521,734

 

530,307

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

1,679,210

 

1,676,122

 

556,668

 

563,650

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

165,641

 

166,642

 

54,208

 

56,342

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

1,900,274

 

1,873,484

 

636,477

 

631,673

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

292,187

 

283,139

 

98,175

 

107,062

 

 

 

 

 

 

 

 

 

 

 

Operating earnings*

 

272,050

 

281,746

 

92,492

 

110,928

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

2.90

 

$

2.76

 

$

0.98

 

$

1.05

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

99.1

 

100.6

 

99.0

 

99.7

 

 

 

 

 

 

 

 

 

 

 

Net loss ratio

 

59.1

%

57.9

%

57.6

%

53.9

%

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

84.1

%

83.3

%

83.5

%

79.1

%

 

 

 

 

 

 

 

 

 

 

Paid loss ratio

 

52.6

%

56.3

%

53.5

%

59.2

%

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

6,857,161

 

$

6,950,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

10,448,779

 

10,267,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

3,588,079

 

3,542,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt to total capital ratio

 

15.4

%

14.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

35.82

 

$

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)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

Fixed maturity securities — available for sale, at fair value

 

$

6,194,625

 

$

6,281,781

 

Equity securities — available for sale, at fair value

 

433,345

 

284,639

 

Short-term investments

 

229,191

 

363,053

 

Other investments

 

—

 

20,925

 

Total investments

 

6,857,161

 

6,950,398

 

Cash

 

55,037

 

71,390

 

Restricted cash and securities

 

121,231

 

101,480

 

Premium, claims and other receivables

 

600,311

 

549,725

 

Reinsurance recoverables

 

1,215,577

 

1,071,222

 

Ceded unearned premium

 

301,891

 

256,988

 

Ceded life and annuity benefits

 

57,137

 

58,641

 

Deferred policy acquisition costs

 

204,740

 

191,960

 

Goodwill

 

894,851

 

885,860

 

Other assets

 

140,843

 

130,143

 

 

 

 

 

 

 

Total assets

 

$

10,448,779

 

$

10,267,807

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

4,021,847

 

$

3,767,850

 

Life and annuity policy benefits

 

57,137

 

58,641

 

Reinsurance, premium and claims payable

 

315,638

 

294,621

 

Unearned premium

 

1,165,580

 

1,069,956

 

Deferred ceding commissions

 

86,804

 

74,609

 

Notes payable

 

654,059

 

583,944

 

Accounts payable and accrued liabilities

 

559,635

 

875,574

 

 

 

 

 

 

 

Total liabilities

 

6,860,700

 

6,725,195

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

125,423

 

125,114

 

Additional paid-in capital

 

1,068,338

 

1,052,253

 

Retained earnings

 

2,992,720

 

2,756,166

 

Accumulated other comprehensive income

 

130,002

 

295,271

 

Treasury stock

 

(728,404

)

(686,192

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,588,079

 

3,542,612

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

10,448,779

 

$

10,267,807

 

 

S-2


 

Consolidated Statements of Earnings

(Unaudited, in thousands except per share data)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

1,679,210

 

$

1,676,122

 

$

556,668

 

$

563,650

 

Net investment income

 

165,641

 

166,642

 

54,208

 

56,342

 

Other operating income

 

24,308

 

23,229

 

7,679

 

10,840

 

Net realized investment gain

 

31,115

 

8,519

 

17,922

 

1,472

 

Other-than-temporary impairment credit losses

 

—

 

(1,028

)

—

 

(631

)

 

 

 

 

 

 

 

 

 

 

Total revenue

 

1,900,274

 

1,873,484

 

636,477

 

631,673

 

 

 

 

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

992,547

 

969,767

 

320,376

 

304,014

 

Policy acquisition costs, net

 

203,387

 

211,554

 

65,642

 

67,620

 

Other operating expense

 

268,357

 

268,164

 

103,785

 

100,458

 

Interest expense

 

19,656

 

19,101

 

6,574

 

5,962

 

 

 

 

 

 

 

 

 

 

 

Total expense

 

1,483,947

 

1,468,586

 

496,377

 

478,054

 

 

 

 

 

 

 

 

 

 

 

Earnings before income tax expense

 

416,327

 

404,898

 

140,100

 

153,619

 

Income tax expense

 

124,140

 

121,759

 

41,925

 

46,557

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

292,187

 

$

283,139

 

$

98,175

 

$

107,062

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.91

 

$

2.77

 

$

0.98

 

$

1.06

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

98.9

 

100.3

 

98.7

 

99.4

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

2.90

 

$

2.76

 

$

0.98

 

$

1.05

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding (millions)

 

99.1

 

100.6

 

99.0

 

99.7

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.555

 

$

0.475

 

$

0.225

 

$

0.165

 

 

S-3


 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2013

 

2012

 

Change

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

115,001

 

$

117,300

 

(2

)%

$

39,819

 

$

34,430

 

16

%

E&O

 

41,909

 

46,483

 

(10

)

13,581

 

14,990

 

(9

)

Public Risk

 

57,757

 

67,066

 

(14

)

20,652

 

23,821

 

(13

)

Other

 

319,842

 

250,175

 

28

 

102,069

 

89,170

 

14

 

 

 

534,509

 

481,024

 

11

 

176,121

 

162,411

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

284,769

 

297,933

 

(4

)

97,924

 

111,749

 

(12

)

International D&O

 

86,415

 

79,943

 

8

 

26,867

 

20,377

 

32

 

 

 

371,184

 

377,876

 

(2

)

124,791

 

132,126

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

610,366

 

583,639

 

5

 

205,327

 

195,665

 

5

 

Other

 

42,416

 

38,974

 

9

 

16,985

 

14,073

 

21

 

 

 

652,782

 

622,613

 

5

 

222,312

 

209,738

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

125,235

 

121,087

 

3

 

44,908

 

40,325

 

11

 

Credit

 

44,570

 

45,591

 

(2

)

13,459

 

15,651

 

(14

)

 

 

169,805

 

166,678

 

2

 

58,367

 

55,976

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

127,162

 

125,578

 

1

 

15,303

 

14,864

 

3

 

Property Treaty

 

133,578

 

134,527

 

(1

)

19,583

 

20,672

 

(5

)

Liability

 

59,992

 

58,293

 

3

 

19,782

 

18,051

 

10

 

Surety & Credit

 

68,186

 

61,759

 

10

 

21,990

 

18,308

 

20

 

Other

 

80,406

 

79,954

 

1

 

19,473

 

23,305

 

(16

)

 

 

469,324

 

460,111

 

2

 

96,131

 

95,200

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

10,957

 

31,703

 

(65

)

1,191

 

10,312

 

(88

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

2,208,561

 

$

2,140,005

 

3

%

$

678,913

 

$

665,763

 

2

%

 

S-4


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2013

 

2012

 

Change

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

91,540

 

$

92,043

 

(1

)%

$

31,406

 

$

28,638

 

10

%

E&O

 

36,969

 

44,335

 

(17

)

12,278

 

14,100

 

(13

)

Public Risk

 

47,110

 

54,185

 

(13

)

17,230

 

18,618

 

(7

)

Other

 

132,274

 

107,303

 

23

 

38,110

 

38,616

 

(1

)

 

 

307,893

 

297,866

 

3

 

99,024

 

99,972

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

198,452

 

218,794

 

(9

)

68,874

 

81,968

 

(16

)

International D&O

 

48,731

 

45,604

 

7

 

14,548

 

11,293

 

29

 

 

 

247,183

 

264,398

 

(7

)

83,422

 

93,261

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

609,693

 

583,344

 

5

 

205,089

 

195,671

 

5

 

Other

 

42,167

 

38,674

 

9

 

16,903

 

13,976

 

21

 

 

 

651,860

 

622,018

 

5

 

221,992

 

209,647

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

111,746

 

110,074

 

2

 

39,600

 

36,689

 

8

 

Credit

 

36,230

 

36,791

 

(2

)

10,248

 

14,080

 

(27

)

 

 

147,976

 

146,865

 

1

 

49,848

 

50,769

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

72,949

 

83,353

 

(12

)

1,829

 

2,340

 

(22

)

Property Treaty

 

113,169

 

113,302

 

—

 

11,903

 

13,483

 

(12

)

Liability

 

56,259

 

53,954

 

4

 

18,682

 

16,638

 

12

 

Surety & Credit

 

59,326

 

55,887

 

6

 

19,036

 

16,074

 

18

 

Other

 

62,365

 

61,693

 

1

 

14,792

 

18,031

 

(18

)

 

 

364,068

 

368,189

 

(1

)

66,242

 

66,566

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

10,972

 

31,463

 

(65

)

1,206

 

10,092

 

(88

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

1,729,952

 

$

1,730,799

 

—

%

$

521,734

 

$

530,307

 

(2

)%

 

S-5


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Nine months ended September 30,

 

Three months ended September 30,

 

 

 

2013

 

2012

 

Change

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

Aviation

 

$

84,191

 

$

87,890

 

(4

)%

$

27,905

 

$

29,670

 

(6

)%

E&O

 

39,494

 

47,177

 

(16

)

13,061

 

15,198

 

(14

)

Public Risk

 

48,530

 

48,363

 

—

 

15,775

 

16,571

 

(5

)

Other

 

104,432

 

82,163

 

27

 

34,943

 

26,302

 

33

 

 

 

276,647

 

265,593

 

4

 

91,684

 

87,741

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. D&O

 

229,501

 

252,622

 

(9

)

75,780

 

81,955

 

(8

)

International D&O

 

48,161

 

45,832

 

5

 

16,659

 

15,594

 

7

 

 

 

277,662

 

298,454

 

(7

)

92,439

 

97,549

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

609,693

 

583,344

 

5

 

205,089

 

195,671

 

5

 

Other

 

48,302

 

40,733

 

19

 

17,959

 

13,378

 

34

 

 

 

657,995

 

624,077

 

5

 

223,048

 

209,049

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

Surety

 

109,370

 

118,944

 

(8

)

36,645

 

39,336

 

(7

)

Credit

 

35,303

 

35,288

 

—

 

10,797

 

14,052

 

(23

)

 

 

144,673

 

154,232

 

(6

)

47,442

 

53,388

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy

 

62,271

 

61,377

 

1

 

18,814

 

20,488

 

(8

)

Property Treaty

 

85,067

 

77,422

 

10

 

26,569

 

28,415

 

(6

)

Liability

 

54,671

 

57,603

 

(5

)

19,088

 

18,472

 

3

 

Surety & Credit

 

54,186

 

53,701

 

1

 

18,120

 

18,756

 

(3

)

Other

 

55,066

 

52,200

 

5

 

18,258

 

19,700

 

(7

)

 

 

311,261

 

302,303

 

3

 

100,849

 

105,831

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

10,972

 

31,463

 

(65

)

1,206

 

10,092

 

(88

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

1,679,210

 

$

1,676,122

 

—

%

$

556,668

 

$

563,650

 

(1

)%

 

S - 6


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

 

 

 

 

 

 

 

Taxable

 

$

75,407

 

$

86,548

 

$

24,385

 

$

28,330

 

Exempt from U.S. income taxes

 

85,063

 

80,163

 

28,988

 

27,291

 

Total fixed maturity securities

 

160,470

 

166,711

 

53,373

 

55,621

 

Equity securities

 

10,758

 

2,339

 

2,950

 

1,346

 

Short-term investments

 

122

 

397

 

42

 

295

 

Other

 

350

 

1,699

 

31

 

831

 

Total investment income

 

171,700

 

171,146

 

56,396

 

58,093

 

Investment expense

 

(6,059

)

(4,504

)

(2,188

)

(1,751

)

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

165,641

 

$

166,642

 

$

54,208

 

$

56,342

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(263,596

)

$

145,007

 

$

(2,974

)

$

90,353

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

$

173,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

$

176,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2013

 

$

397,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

$

436,695

 

 

 

 

 

 

 

 

S - 7


 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Loss Ratios

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Nine months ended

 

 

 

September 30, 2013

 

September 30, 2012

 

 

 

Net earned

 

Loss

 

Net earned

 

Loss

 

 

 

premium

 

ratio

 

premium

 

ratio

 

U.S. Property & Casualty

 

 

 

 

 

 

 

 

 

Aviation

 

$

84,191

 

52.7

%

$

87,890

 

56.9

%

E&O

 

39,494

 

42.2

 

47,177

 

74.1

 

Public Risk

 

48,530

 

73.2

 

48,363

 

95.9

 

Other

 

104,432

 

23.5

 

82,163

 

27.8

 

 

 

276,647

 

43.8

 

265,593

 

58.0

 

 

 

 

 

 

 

 

 

 

 

Professional Liability

 

 

 

 

 

 

 

 

 

U.S. D&O

 

229,501

 

55.7

 

252,622

 

64.9

 

International D&O

 

48,161

 

29.3

 

45,832

 

14.5

 

 

 

277,662

 

51.1

 

298,454

 

57.1

 

 

 

 

 

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

 

 

 

 

Medical Stop-loss

 

609,693

 

75.2

 

583,344

 

73.1

 

Other

 

48,302

 

52.5

 

40,733

 

50.5

 

 

 

657,995

 

73.5

 

624,077

 

71.7

 

 

 

 

 

 

 

 

 

 

 

U.S. Surety & Credit

 

 

 

 

 

 

 

 

 

Surety

 

109,370

 

21.5

 

118,944

 

24.7

 

Credit

 

35,303

 

24.8

 

35,288

 

37.0

 

 

 

144,673

 

22.3

 

154,232

 

27.5

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Energy

 

62,271

 

26.7

 

61,377

 

42.5

 

Property Treaty

 

85,067

 

54.6

 

77,422

 

22.0

 

Liability

 

54,671

 

29.2

 

57,603

 

49.5

 

Surety & Credit

 

54,186

 

189.4

 

53,701

 

57.7

 

Other

 

55,066

 

40.8

 

52,200

 

45.9

 

 

 

311,261

 

65.6

 

302,303

 

41.9

 

 

 

 

 

 

 

 

 

 

 

Exited Lines

 

10,972

 

86.0

 

31,463

 

91.7

 

 

 

 

 

 

 

 

 

 

 

Totals

 

$

1,679,210

 

59.1

%

$

1,676,122

 

57.9

%

 

S - 8


 

HCC Insurance Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures to GAAP

(Unaudited, in thousands)

 

 

 

Nine months ended

 

Three months ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings

 

$

292,187

 

$

283,139

 

$

98,175

 

$

107,062

 

 

 

 

 

 

 

 

 

 

 

Exclude:

 

 

 

 

 

 

 

 

 

Net realized investment gain*

 

20,225

 

5,537

 

11,650

 

956

 

OTTI credit losses*

 

—

 

(668

)

—

 

(410

)

Foreign currency expense*

 

(88

)

(3,476

)

(5,967

)

(4,412

)

Total items excluded from operating earnings

 

20,137

 

1,393

 

5,683

 

(3,866

)

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

$

272,050

 

$

281,746

 

$

92,492

 

$

110,928

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - beginning of period

 

$

3,542,612

 

$

3,273,982

 

$

3,505,383

 

$

3,343,257

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

295,271

 

227,659

 

126,119

 

259,776

 

 

 

 

 

 

 

 

 

 

 

Beginning equity, as adjusted

 

$

3,247,341

 

$

3,046,323

 

$

3,379,264

 

$

3,083,481

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - end of period

 

$

3,588,079

 

$

3,504,820

 

$

3,588,079

 

$

3,504,820

 

 

 

 

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

130,002

 

318,239

 

130,002

 

318,239

 

 

 

 

 

 

 

 

 

 

 

Ending equity, as adjusted

 

$

3,458,077

 

$

3,186,581

 

$

3,458,077

 

$

3,186,581

 

 

 

 

 

 

 

 

 

 

 

Average equity, as adjusted

 

$

3,352,709

 

$

3,116,452

 

$

3,418,671

 

$

3,135,031

 

 

 

 

 

 

 

 

 

 

 

Annualized operating return on equity

 

10.8

%

12.1

%

10.8

%

14.2

%

 

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

 

S - 9