EX-99.1 2 a15-10155_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

HCC INSURANCE HOLDINGS REPORTS RECORD FIRST QUARTER NET EARNINGS AND EARNINGS PER SHARE

 

Highlights:

 

·                  Net earnings of $112.9 million, or $1.17 per diluted share

·                  GAAP combined ratio of 86.5%

·                  Gross written premium increased 11% to $826.1 million

·                  Net written premium increased 13% to $668.9 million

·                  Annualized return on equity of 11.5% and operating return on equity(a) of 9.9%

·                  Book value per share increased to $41.03

 

HOUSTON (April 28, 2015) . . .

 

HCC Insurance Holdings, Inc. (NYSE: HCC) today released results for its first quarter ended March 31, 2015.

 

Net earnings were $112.9 million, or $1.17 per diluted share, in the first quarter of 2015, compared to $107.9 million, or $1.07 per diluted share, in the same quarter of 2014.

 

The Company’s consolidated results for the first quarter of 2015 include the results of Producers Ag Insurance Group, Inc. (ProAg), which HCC acquired effective January 1, 2015 for $104.5 million.  ProAg contributed $72.6 million, $54.7 million and $17.0 million of gross written, net written and net earned premium, respectively, to consolidated premium.  Including transaction costs, ProAg’s operations generated a loss of $7.7 million, or $0.08 per share.  The majority of this loss relates to the seasonal nature of the crop insurance business.  The loss increased the Company’s first quarter 2015 consolidated loss ratio, expense ratio and combined ratio by 0.8, 1.1 and 1.9 percentage points, respectively.

 

The Company’s combined ratio was 86.5% for the first quarter of 2015 (84.6% excluding ProAg), compared to 83.4% for the same quarter of 2014.  The net paid loss ratio was 64.7% for both quarters.  HCC had no reserve development in either the first quarter of 2015 or 2014.

 

First quarter 2015 net earnings benefited from the Company’s assertion to permanently reinvest accumulated undistributed earnings of the Company’s controlled foreign corporations for 2014 and prior years.  With this assertion, deferred taxes on these earnings, which had previously been booked at the U.S. tax rate of 35%, were adjusted to the U.K. tax rate of 20%.  This assertion resulted in reduced tax expense of $5.9 million in the first quarter of 2015.

 

“For the third consecutive year, we are pleased to report record first quarter results.  Despite a challenging market, we continue to grow our businesses selectively and profitably, with net written premium up 13% overall and 4% excluding ProAg.  We are pleased with ProAg’s results, which are slightly ahead of our expectations,” said Christopher J.B. Williams, HCC’s Chief Executive Officer.

 



 

Gross written premium increased 11% to $826.1 million (or 1% to $753.5 million excluding ProAg) in the first quarter of 2015, compared to $746.7 million in the same quarter of 2014.  Net written premium increased 13% to $668.9 million (or 4% to $614.2 million excluding ProAg) versus $590.2 million in the respective quarters.  Net earned premium increased 7% to $600.6 million (or 4% to $583.6 million excluding ProAg) in the first quarter of 2015, compared to $562.6 million in the same quarter of 2014.

 

Investment income was $53.5 million in the first quarter of 2015, compared to $56.8 million in the same quarter of 2014.  As of March 31, 2015, HCC’s fixed maturity securities portfolio had an average rating of AA, a duration of 4.7 years and an average long-term tax equivalent yield of 4.1%.

 

HCC generated cash flow from operations of $31.1 million in the first quarter of 2015, compared to $95.5 million in the same quarter of 2014.  At March 31, 2015, the Company had $418.6 million of cash and short-term investments and $230.1 million of available capacity under its $825.0 million revolving loan facility.

 

The Company purchased 1.0 million shares of its common stock during the first quarter of 2015 for $54.4 million at an average cost of $55.77 per share.

 

As of March 31, 2015, total assets were $11.0 billion, shareholders’ equity was $3.9 billion and the Company’s debt to total capital ratio was 18.4%.

 

For further information about HCC’s 2015 first quarter earnings results, see the supplemental financial schedules that are available in the Investor Relations section of the Company’s website at http://ir.hcc.com.

 

HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, April 29.  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 Investor Relations section of the Company’s website at http://ir.hcc.com.  The webcast replay will be archived in the Investor Relations section of the HCC website through Friday, July 31, 2015.

 

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 Financial Services LLC, “A+ (Superior)” from A.M. Best Company, Inc., “AA (Very Strong)” from Fitch Ratings, and “A1 (Good Security)” from Moody’s Investors Service, Inc.

 

2



 

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.  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,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Gross written premium

 

$

826,136

 

$

746,722

 

 

 

 

 

 

 

Net written premium

 

668,916

 

590,182

 

 

 

 

 

 

 

Net earned premium

 

600,563

 

562,612

 

 

 

 

 

 

 

Net investment income

 

53,482

 

56,806

 

 

 

 

 

 

 

Total revenue

 

676,450

 

648,930

 

 

 

 

 

 

 

Net earnings

 

112,917

 

107,911

 

 

 

 

 

 

 

Operating earnings*

 

92,659

 

97,293

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

1.17

 

$

1.07

 

 

 

 

 

 

 

Weighted-average shares outstanding (diluted)

 

95,197

 

98,913

 

 

 

 

 

 

 

Net loss ratio

 

60.8

%

58.8

%

 

 

 

 

 

 

Expense ratio

 

25.7

%

24.6

%

 

 

 

 

 

 

Combined ratio

 

86.5

%

83.4

%

 

 

 

 

 

 

Paid loss ratio

 

64.7

%

64.7

%

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Total investments

 

$

7,112,361

 

$

7,164,906

 

 

 

 

 

 

 

Total assets

 

11,026,297

 

10,714,346

 

 

 

 

 

 

 

Shareholders’ equity

 

3,933,427

 

3,903,351

 

 

 

 

 

 

 

Debt to total capital ratio

 

18.4

%

17.4

%

 

 

 

 

 

 

Book value per share

 

$

41.03

 

$

40.44

 

 


*            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,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

Fixed maturity securities — available for sale, at fair value

 

$

6,452,444

 

$

6,610,368

 

Equity securities — available for sale, at fair value

 

334,763

 

296,352

 

Short-term investments

 

325,154

 

258,186

 

 

 

 

 

 

 

Total investments

 

7,112,361

 

7,164,906

 

Cash

 

93,464

 

102,093

 

Restricted cash and securities

 

122,526

 

119,010

 

Premium, claims and other receivables

 

727,615

 

553,027

 

Reinsurance recoverables

 

1,176,141

 

1,168,900

 

Ceded unearned premium

 

332,646

 

316,715

 

Ceded life and annuity benefits

 

48,590

 

48,499

 

Deferred policy acquisition costs

 

236,661

 

220,321

 

Goodwill

 

949,351

 

905,636

 

Other assets

 

226,942

 

115,239

 

 

 

 

 

 

 

Total assets

 

$

11,026,297

 

$

10,714,346

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense payable

 

$

3,693,165

 

$

3,728,085

 

Life and annuity policy benefits

 

48,590

 

48,499

 

Reinsurance, premium and claims payable

 

434,198

 

301,476

 

Unearned premium

 

1,305,327

 

1,198,930

 

Deferred ceding commissions

 

101,169

 

94,202

 

Notes payable

 

889,290

 

824,251

 

Accounts payable and accrued liabilities

 

621,131

 

615,552

 

 

 

 

 

 

 

Total liabilities

 

7,092,870

 

6,810,995

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

126,794

 

126,472

 

Additional paid-in capital

 

1,115,796

 

1,113,551

 

Retained earnings

 

3,526,071

 

3,441,424

 

Accumulated other comprehensive income

 

172,262

 

175,014

 

Treasury stock

 

(1,007,496

)

(953,110

)

 

 

 

 

 

 

Total shareholders’ equity

 

3,933,427

 

3,903,351

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

11,026,297

 

$

10,714,346

 

 

S - 2



 

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

(Unaudited, in thousands except per share data)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

Net earned premium

 

$

600,563

 

$

562,612

 

Net investment income

 

53,482

 

56,806

 

Other operating income

 

9,219

 

9,266

 

Net realized investment gain

 

13,186

 

20,246

 

 

 

 

 

 

 

Total revenue

 

676,450

 

648,930

 

 

 

 

 

 

 

EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense, net

 

365,162

 

330,746

 

Policy acquisition costs, net

 

75,211

 

69,041

 

Other operating expense

 

77,483

 

87,052

 

Interest expense

 

7,766

 

7,119

 

 

 

 

 

 

 

Total expense

 

525,622

 

493,958

 

 

 

 

 

 

 

Earnings before income tax expense

 

150,828

 

154,972

 

Income tax expense

 

37,911

 

47,061

 

 

 

 

 

 

 

Net earnings

 

$

112,917

 

$

107,911

 

 

 

 

 

 

 

Net earnings attributable to unvested stock

 

(1,641

)

(1,692

)

 

 

 

 

 

 

Net earnings available to common stock

 

$

111,276

 

$

106,219

 

 

 

 

 

 

 

Basic earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

1.17

 

$

1.08

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

94,881

 

98,662

 

 

 

 

 

 

 

Diluted earnings per share data:

 

 

 

 

 

Net earnings per share

 

$

1.17

 

$

1.07

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

95,197

 

98,913

 

 

 

 

 

 

 

Cash dividends declared, per share

 

$

0.295

 

$

0.225

 

 

S - 3



 

 

HCC Insurance Holdings, Inc. and Subsidiaries

Gross Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2015

 

2014

 

Change

 

 

 

 

 

 

 

 

 

North America Property & Casualty

 

 

 

 

 

 

 

Liability

 

$

128,277

 

$

121,537

 

6

%

Agriculture

 

72,615

 

 

nm

 

Other Specialty

 

148,485

 

166,737

 

(11

)

 

 

349,377

 

288,274

 

21

 

 

 

 

 

 

 

 

 

Accident & Health

 

260,144

 

235,917

 

10

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

London Market

 

117,931

 

131,979

 

(11

)

Specialty

 

98,687

 

90,261

 

9

 

 

 

216,618

 

222,240

 

(3

)

 

 

 

 

 

 

 

 

Exited Lines

 

(3

)

291

 

nm

 

Totals

 

$

826,136

 

$

746,722

 

11

%

 

nm - Not meaningful

 

S - 4



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Written Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2015

 

2014

 

Change

 

 

 

 

 

 

 

 

 

North America Property & Casualty

 

 

 

 

 

 

 

Liability

 

$

95,951

 

$

85,403

 

12

%

Agriculture

 

54,657

 

 

nm

 

Other Specialty

 

87,619

 

91,729

 

(4

)

 

 

238,227

 

177,132

 

34

 

 

 

 

 

 

 

 

 

Accident & Health

 

255,918

 

234,751

 

9

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

London Market

 

96,678

 

107,259

 

(10

)

Specialty

 

78,096

 

70,749

 

10

 

 

 

174,774

 

178,008

 

(2

)

 

 

 

 

 

 

 

 

Exited Lines

 

(3

)

291

 

nm

 

Totals

 

$

668,916

 

$

590,182

 

13

%

 

nm - Not meaningful

 

S - 5



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Earned Premium

(Unaudited, in thousands)

 

 

 

Three months ended March 31,

 

 

 

2015

 

2014

 

Change

 

 

 

 

 

 

 

 

 

North America Property & Casualty

 

 

 

 

 

 

 

Liability

 

$

101,507

 

$

96,075

 

6

%

Agriculture

 

16,989

 

 

nm

 

Other Specialty

 

90,743

 

105,259

 

(14

)

 

 

209,239

 

201,334

 

4

 

 

 

 

 

 

 

 

 

Accident & Health

 

254,950

 

232,143

 

10

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

London Market

 

63,358

 

61,661

 

3

 

Specialty

 

73,019

 

67,183

 

9

 

 

 

136,377

 

128,844

 

6

 

 

 

 

 

 

 

 

 

Exited Lines

 

(3

)

291

 

nm

 

Totals

 

$

600,563

 

$

562,612

 

7

%

 

nm - Not meaningful

 

S-6



 

HCC Insurance Holdings, Inc. and Subsidiaries

Net Investment Income and Unrealized Gain

(Unaudited, in thousands)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Sources of net investment income:

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

 

 

 

Taxable

 

$

24,718

 

$

23,260

 

Exempt from U.S. income taxes

 

27,341

 

28,583

 

Total fixed maturity securities

 

52,059

 

51,843

 

Equity securities

 

2,736

 

6,637

 

Other

 

418

 

431

 

Total investment income

 

55,213

 

58,911

 

Investment expense

 

(1,731

)

(2,105

)

 

 

 

 

 

 

Net investment income

 

$

53,482

 

$

56,806

 

 

 

 

 

 

 

Unrealized gain on available for sale securities:

 

 

 

 

 

 

 

 

 

 

 

Increase in unrealized gain for period, before tax

 

$

6,823

 

$

65,834

 

 

 

 

 

 

 

Unrealized gain at:

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

$

269,736

 

 

 

 

 

 

 

 

 

December 31, 2014

 

$

262,913

 

 

 

 

S-7



 

HCC Insurance Holdings, Inc. and Subsidiaries

Underwriting Ratios

(Unaudited)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

North America Property & Casualty

 

 

 

 

 

Liability

 

62.1

%

63.7

%

Agriculture

 

88.0

 

 

Other Specialty

 

42.4

 

40.2

 

Loss Ratio

 

55.6

 

51.4

 

Expense Ratio

 

32.7

 

28.6

 

Combined Ratio

 

88.3

%

80.0

%

 

 

 

 

 

 

Accident & Health

 

 

 

 

 

Loss Ratio

 

73.4

%

73.6

%

Expense Ratio

 

15.2

 

14.9

 

Combined Ratio

 

88.6

%

88.5

%

 

 

 

 

 

 

International

 

 

 

 

 

London Market

 

38.9

%

36.5

%

Specialty

 

50.4

 

50.3

 

Loss Ratio

 

45.1

 

43.7

 

Expense Ratio

 

34.7

 

36.1

 

Combined Ratio

 

79.8

%

79.8

%

 

 

 

 

 

 

Consolidated

 

 

 

 

 

Loss Ratio

 

60.8

%

58.8

%

Expense Ratio

 

25.7

 

24.6

 

Combined Ratio

 

86.5

%

83.4

%

 

S-8



 

HCC Insurance Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures to GAAP

(Unaudited, in thousands)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

GAAP net earnings

 

$

112,917

 

$

107,911

 

 

 

 

 

 

 

Exclude:

 

 

 

 

 

Net realized investment gain*

 

8,571

 

13,160

 

Foreign currency benefit (expense)*

 

11,687

 

(2,542

)

Total items excluded from operating earnings

 

20,258

 

10,618

 

 

 

 

 

 

 

Operating earnings

 

$

92,659

 

$

97,293

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

GAAP equity - beginning of period

 

$

3,903,351

 

$

3,674,430

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

175,014

 

118,651

 

 

 

 

 

 

 

Beginning equity, as adjusted

 

$

3,728,337

 

$

3,555,779

 

 

 

 

 

 

 

GAAP equity - end of period

 

$

3,933,427

 

$

3,782,113

 

 

 

 

 

 

 

Exclude - Accumulated other comprehensive income

 

172,262

 

162,221

 

 

 

 

 

 

 

Ending equity, as adjusted

 

$

3,761,165

 

$

3,619,892

 

 

 

 

 

 

 

Average equity, as adjusted

 

$

3,744,751

 

$

3,587,836

 

 

 

 

 

 

 

Annualized operating return on equity

 

9.9

%

10.8

%

 


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

 

S-9