10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended September 30, 2014.

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

from                                to                                 

Commission file number 001-13790

HCC Insurance Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware 76-0336636

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

13403 Northwest Freeway, Houston, Texas 77040-6094

(Address of principal executive offices) (Zip Code)

(713) 690-7300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨    No þ

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

On October 24, 2014, there were approximately 96.8 million shares of common stock outstanding.

HCC Insurance Holdings, Inc. and Subsidiaries

Table of Contents

	Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets — September 30, 2014 and December 31, 2013	5
Consolidated Statements of Earnings — Nine and three months ended September 30, 2014 and 2013	6
Consolidated Statements of Comprehensive Income — Nine and three months ended September  30, 2014 and 2013	7
Consolidated Statement of Changes in Shareholders’ Equity — Nine months ended September 30, 2014	8
Consolidated Statements of Cash Flows — Nine months ended September 30, 2014 and 2013	9
Notes to Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3. Defaults Upon Senior Securities	45
Item 4. Mine Safety Disclosures	45
Item 5. Other Information	45
Item 6. Exhibits	46
Signatures	47

2

FORWARD-LOOKING STATEMENTS

This Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements reflect our current expectations and projections about future events and include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this Report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as growth of our business and operations, business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Generally, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably” or similar expressions indicate forward-looking statements.

Many risks and uncertainties may have an impact on the matters addressed in these forward-looking statements, which could affect our future financial results and performance, including, among other things:

•  the effects of catastrophe losses,

•  the cyclical nature of the insurance business,

•  inherent uncertainties in the loss estimation process, which can adversely impact the adequacy of loss reserves,

•  the impact of past and future potential economic or credit market downturns, including any potential ratings downgrade or  impairment of the debt securities of sovereign issuers,

•  the effects of emerging claim and coverage issues,

•  the effects of extensive governmental regulation of the insurance industry,

•  changes to the country’s health care delivery system,

•  the effects of climate change on the risks we insure,

•  potential risk with agents and brokers,

•  the effects of industry consolidations,

•  our assessment of underwriting risk,

•  our retention of risk, which could expose us to potential losses,

•  the adequacy of reinsurance protection,

•  the ability and willingness of reinsurers to pay balances due us,

•  the occurrence of terrorist activities,

•  our ability to maintain our competitive position,

•  fluctuations in securities markets, which may reduce the value of our investment portfolio, reduce investment income or  generate realized investment losses,

•  changes in our assigned financial strength ratings,

•  our ability to raise capital and funds for liquidity in the future,

•  attraction and retention of qualified employees,

3

•  our ability to successfully expand our business through the acquisition of insurance-related companies,

•  impairment of goodwill,

•  the ability of our insurance company subsidiaries to pay dividends in needed amounts,

•  fluctuations in foreign exchange rates,

•  failure of, or loss of security related to, our information technology systems,

•  difficulties with outsourcing relationships, and

•  change of control.

We described these risks and uncertainties in greater detail in Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013.

These events or factors could cause our results or performance to differ materially from those we express in our forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this Report, our inclusion of this information is not a representation by us or any other person that our objectives or plans will be achieved.

Our forward-looking statements speak only at the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this Report may not occur.

4

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited, in thousands except per share data)

	September 30,       2014		December 31,     2013
ASSETS
Investments
Fixed maturity securities – available for sale, at fair value (amortized cost: 2014 – $6,339,054 and 2013 – $5,921,487)	$	6,576,541	$	6,022,473
Equity securities – available for sale, at fair value (cost: 2014 – $280,663 and 2013 – $464,388)		286,194		517,466
Short-term investments, at cost (approximates fair value)		250,867		178,753
Total investments		7,113,602		6,718,692
Cash		70,817		58,301
Restricted cash and securities		131,516		125,777
Premium, claims and other receivables		650,751		580,107
Reinsurance recoverables		1,194,034		1,277,257
Ceded unearned premium		330,224		305,438
Ceded life and annuity benefits		50,114		56,491
Deferred policy acquisition costs		230,350		201,698
Goodwill		899,148		895,200
Other assets		147,419		125,559
Total assets	$	10,817,975	$	10,344,520
LIABILITIES
Loss and loss adjustment expense payable	$	3,776,924	$	3,902,132
Life and annuity policy benefits		50,114		56,491
Reinsurance, premium and claims payable		375,299		332,985
Unearned premium		1,263,307		1,134,849
Deferred ceding commissions		97,276		89,528
Notes payable		744,213		654,098
Accounts payable and accrued liabilities		620,177		500,007
Total liabilities		6,927,310		6,670,090
SHAREHOLDERS’ EQUITY
Common stock, $1.00 par value; 250,000 shares authorized (shares issued: 2014 – 126,371 and 2013 – 125,577; outstanding: 2014 – 98,162 and 2013 – 100,336)		126,371		125,577
Additional paid-in capital		1,103,774		1,073,105
Retained earnings		3,356,841		3,085,501
Accumulated other comprehensive income		170,632		118,651
Treasury stock, at cost (shares: 2014 – 28,209 and 2013 – 25,241)		(866,953)		(728,404)
Total shareholders’ equity		3,890,665		3,674,430
Total liabilities and shareholders’ equity	$	10,817,975	$	10,344,520

See Notes to Consolidated Financial Statements.

5

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

(unaudited, in thousands except per share data)

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
REVENUE
Net earned premium	$	1,721,795	$	1,679,210	$	586,935	$	556,668
Net investment income		167,480		165,641		54,236		54,208
Other operating income		28,732		24,308		9,483		7,679
Net realized investment gain		64,535		31,115		39,384		17,922
Total revenue		1,982,542		1,900,274		690,038		636,477
EXPENSE
Loss and loss adjustment expense, net		960,875		992,547		311,937		320,376
Policy acquisition costs, net		218,221		203,387		76,210		65,642
Other operating expense		285,299		268,357		90,344		103,785
Interest expense		20,874		19,656		6,890		6,574
Total expense		1,485,269		1,483,947		485,381		496,377
Earnings before income tax expense		497,273		416,327		204,657		140,100
Income tax expense		151,959		124,140		64,390		41,925
Net earnings	$	345,314	$	292,187	$	140,267	$	98,175
Earnings per common share
Basic	$	3.45	$	2.91	$	1.41	$	0.98
Diluted	$	3.45	$	2.90	$	1.41	$	0.98

See Notes to Consolidated Financial Statements.

6

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited, in thousands)

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Net earnings	$	345,314	$	292,187	$	140,267	$	98,175
Other comprehensive income (loss)
Investment gains (losses):
Investment gains (losses) during the period		153,489		(232,481)		(26,336)		14,948
Income tax charge (benefit)		54,351		(82,526)		(9,467)		4,917
Investment gains (losses), net of tax		99,138		(149,955)		(16,869)		10,031
Less reclassification adjustments to:
Net realized investment gain		64,535		31,115		39,384		17,922
Income tax expense		22,587		10,890		13,784		6,272
Total reclassifications included in net earnings, net of tax		41,948		20,225		25,600		11,650
Net unrealized investment gains (losses)		57,190		(170,180)		(42,469)		(1,619)
Foreign currency translation adjustment		(5,368)		4,265		(7,059)		5,410
Income tax charge (benefit)		(159)		(646)		262		(92)
Foreign currency translation adjustment, net of tax		(5,209)		4,911		(7,321)		5,502
Other comprehensive income (loss)		51,981		(165,269)		(49,790)		3,883
Comprehensive income	$	397,295	$	126,918	$	90,477	$	102,058

See Notes to Consolidated Financial Statements.

7

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

Nine months ended September 30, 2014

(unaudited, in thousands except per share data)

	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Treasury stock		Total shareholders’ equity
Balance at December 31, 2013	$	125,577	$	1,073,105	$	3,085,501	$	118,651	$	(728,404)	$	3,674,430
Net earnings		-		-		345,314		-		-		345,314
Other comprehensive income		-		-		-		51,981		-		51,981
Issuance of 363 shares for exercise of options, including tax effect		363		12,275		-		-		-		12,638
Issuance of 92 shares for employee stock purchase plan		92		3,347		-		-		-		3,439
Purchase of 2,968 common shares		-		-		-		-		(138,549)		(138,549)
Stock-based compensation		339		15,047		-		-		-		15,386
Cash dividends declared, $0.745 per share		-		-		(73,974)		-		-		(73,974)
Balance at September 30, 2014	$	126,371	$	1,103,774	$	3,356,841	$	170,632	$	(866,953)	$	3,890,665

See Notes to Consolidated Financial Statements.

8

HCC Insurance Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Nine months ended September 30,
	2014		2013
Operating activities
Net earnings	$	345,314	$	292,187
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables		(56,631)		(52,395)
Change in reinsurance recoverables		60,074		(138,103)
Change in ceded unearned premium		(25,071)		(44,809)
Change in loss and loss adjustment expense payable		(95,341)		241,126
Change in unearned premium		129,226		95,395
Change in reinsurance, premium and claims payable		44,117		21,516
Change in accounts payable and accrued liabilities		(43,608)		(145,740)
Stock-based compensation expense		18,718		10,100
Depreciation and amortization expense		12,476		13,962
Gain on investments		(64,535)		(31,115)
Other, net		35,625		9,288
Cash provided by operating activities		360,364		271,412
Investing activities
Sales of available for sale fixed maturity securities		314,424		337,895
Sales of equity securities		436,126		95,989
Sales of other investments		-		23,719
Maturity or call of available for sale fixed maturity securities		413,290		488,817
Cost of available for sale fixed maturity securities acquired		(1,159,975)		(1,109,233)
Cost of equity securities acquired		(191,639)		(226,601)
Change in short-term investments		(79,714)		134,515
Payments for purchase of businesses, net of cash received		(7,003)		(8,214)
Proceeds from sales of subsidiaries		16,589		1,327
Other, net		(5,051)		(6,575)
Cash used by investing activities		(262,953)		(268,361)
Financing activities
Advances on line of credit		195,000		130,000
Payments on line of credit		(105,000)		(60,000)
Sale of common stock		16,077		8,725
Purchase of common stock		(126,226)		(47,869)
Dividends paid		(67,564)		(49,773)
Other, net		2,818		(487)
Cash used by financing activities		(84,895)		(19,404)
Net increase (decrease) in cash		12,516		(16,353)
Cash at beginning of year		58,301		71,390
Cash at end of period	$	70,817	$	55,037

See Notes to Consolidated Financial Statements.

9

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(1) General Information

HCC Insurance Holdings, Inc. (HCC) and its subsidiaries (collectively we, us or our) include domestic and foreign property and casualty and life insurance companies and underwriting agencies with offices in the United States, the United Kingdom, Spain and Ireland. We underwrite a variety of largely non-correlated specialty insurance products, including property and casualty, accident and health, surety and credit product lines, in approximately 180 countries. We market our products through a network of independent agents and brokers, through managing general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies.

Basis of Presentation

Our unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of HCC and its subsidiaries. We have made all adjustments that, in our opinion, are necessary for a fair statement of results of the interim periods, and all such adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013. The consolidated balance sheet at December 31, 2013 was derived from the audited financial statements but does not include all disclosures required by GAAP.

Management must make estimates and assumptions that affect amounts reported in our consolidated financial statements and in disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates.

Goodwill

We conducted our 2014 goodwill impairment test as of June 30, 2014, which is consistent with the timeframe for our annual assessment in prior years. Based on our latest assessment, the fair value of each reporting unit exceeded its carrying amount.

Recent Accounting Guidance

A new accounting standard issued in 2014 will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration/payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or investment income. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the first quarter of 2017 and may be applied on a full retrospective or modified retrospective approach. We are currently assessing the impact the implementation of this standard will have on our consolidated financial statements.

Acquisition

On September 29, 2014, we executed a definitive purchase agreement to acquire all of the capital stock of Producers Ag Insurance Group, Inc. (ProAg) for $110.0 million cash, subject to a net worth adjustment at closing as described in the purchase agreement. The transaction is expected to close in early 2015 following the necessary regulatory approvals. ProAg writes multi-peril crop, crop hail, named peril and livestock insurance.

10

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(2) Investments

The cost or amortized cost, gross unrealized gain or loss, and fair value of our fixed maturity and equity securities, all of which are classified as available for sale, were as follows:

	Cost or amortized             cost		Gross unrealized             gain		Gross unrealized             loss		Fair value
September 30, 2014
U.S. government and government agency securities	$	66,347	$	1,063	$	(263)	$	67,147
Fixed maturity securities of states, municipalities and political subdivisions		919,617		59,857		(497)		978,977
Special purpose revenue bonds of states, municipalities and political subdivisions		2,272,817		134,571		(3,119)		2,404,269
Corporate securities		1,234,819		37,584		(9,535)		1,262,868
Residential mortgage-backed securities		827,975		16,893		(9,770)		835,098
Commercial mortgage-backed securities		603,859		16,567		(5,405)		615,021
Asset-backed securities		329,358		365		(1,752)		327,971
Foreign government securities		84,262		1,932		(1,004)		85,190
Total fixed maturity securities	$	6,339,054	$	268,832	$	(31,345)	$	6,576,541
Equity securities	$	280,663	$	16,731	$	(11,200)	$	286,194
December 31, 2013
U.S. government and government agency securities	$	91,047	$	2,157	$	(495)	$	92,709
Fixed maturity securities of states, municipalities and political subdivisions		941,580		50,885		(5,979)		986,486
Special purpose revenue bonds of states, municipalities and political subdivisions		2,240,412		71,541		(46,758)		2,265,195
Corporate securities		1,195,387		40,860		(11,009)		1,225,238
Residential mortgage-backed securities		622,766		15,289		(19,936)		618,119
Commercial mortgage-backed securities		502,069		16,155		(13,336)		504,888
Asset-backed securities		183,660		319		(1,587)		182,392
Foreign government securities		144,566		3,237		(357)		147,446
Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457)	$	6,022,473
Equity securities	$	464,388	$	58,842	$	(5,764)	$	517,466

11

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

Substantially all of our fixed maturity securities are investment grade. The following tables display the gross unrealized losses and fair value of all available for sale securities that were in a continuous unrealized loss position for the periods indicated.

	Less than 12 months				12 months or more				Total
	Fair value		Unrealized   losses		Fair value		Unrealized   losses		Fair value		Unrealized   losses
September 30, 2014
Fixed maturity securities
U.S. government and government agency securities	$	15,675	$	(30)	$	11,129	$	(233)	$	26,804	$	(263)
Fixed maturity securities of states, municipalities and political subdivisions		12,500		(81)		29,505		(416)		42,005		(497)
Special purpose revenue bonds of states, municipalities and political subdivisions		26,622		(104)		176,961		(3,015)		203,583		(3,119)
Corporate securities		357,022		(4,672)		96,757		(4,863)		453,779		(9,535)
Residential mortgage-backed securities		179,700		(917)		253,192		(8,853)		432,892		(9,770)
Commercial mortgage-backed securities		110,383		(840)		144,183		(4,565)		254,566		(5,405)
Asset-backed securities		148,445		(863)		51,313		(889)		199,758		(1,752)
Foreign government securities		29,089		(924)		7,162		(80)		36,251		(1,004)
Equity securities		123,984		(10,217)		4,406		(983)		128,390		(11,200)
Total	$	1,003,420	$	(18,648)	$	774,608	$	(23,897)	$	1,778,028	$	(42,545)
December 31, 2013
Fixed maturity securities
U.S. government and government agency securities	$	23,717	$	(495)	$	-	$	-	$	23,717	$	(495)
Fixed maturity securities of states, municipalities and political subdivisions		136,160		(5,277)		8,997		(702)		145,157		(5,979)
Special purpose revenue bonds of states, municipalities and political subdivisions		684,560		(35,832)		83,228		(10,926)		767,788		(46,758)
Corporate securities		277,853		(8,202)		35,437		(2,807)		313,290		(11,009)
Residential mortgage-backed securities		306,874		(15,861)		31,687		(4,075)		338,561		(19,936)
Commercial mortgage-backed securities		203,347		(12,611)		4,915		(725)		208,262		(13,336)
Asset-backed securities		126,922		(1,587)		-		-		126,922		(1,587)
Foreign government securities		78,182		(357)		-		-		78,182		(357)
Equity securities		75,620		(5,437)		7,016		(327)		82,636		(5,764)
Total	$	1,913,235	$	(85,659)	$	171,280	$	(19,562)	$	2,084,515	$	(105,221)

12

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

At September 30, 2014, we held approximately 2,860 fixed maturity and equity securities, of which 28% included at least one lot in an unrealized loss position. A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate our securities for possible other-than-temporary impairment losses at each quarter end. Our reviews cover all impaired securities where the loss exceeds $1.0 million and the loss either exceeds 10% of cost or the security had been in a loss position for longer than twelve consecutive months. We do not consider the $42.5 million of gross unrealized losses in our portfolio at September 30, 2014 to be other-than-temporary impairments as these losses relate to non-credit factors, such as interest rate changes and market conditions. We recognized no other-than-temporary impairment losses in the first nine months of 2014 and 2013.

The amortized cost and fair value of our fixed maturity securities at September 30, 2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-average life of our mortgage-backed and asset-backed securities was 5.6 years at September 30, 2014.

					Cost or   amortized cost		Fair value
Due in 1 year or less					$	176,344	$	179,920
Due after 1 year through 5 years						1,066,029		1,101,193
Due after 5 years through 10 years						1,353,043		1,429,453
Due after 10 years through 15 years						944,332		1,001,521
Due after 15 years						1,038,114		1,086,364
Securities with contractual maturities						4,577,862		4,798,451
Mortgage-backed and asset-backed securities						1,761,192		1,778,090
Total fixed maturity securities					$	6,339,054	$	6,576,541
Realized pretax gains (losses) on the sale of investments included the following:
	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Gains
Fixed maturity securities	$	7,634	$	15,848	$	1,484	$	11,709
Equity securities		68,590		12,932		42,727		6,943
Other investments		-		5,345		-		-
Total gains		76,224		34,125		44,211		18,652
Losses
Fixed maturity securities		(4,889)		(994)		(1,201)		-
Equity securities		(6,800)		(2,016)		(3,626)		(730)
Total losses		(11,689)		(3,010)		(4,827)		(730)
Net
Fixed maturity securities		2,745		14,854		283		11,709
Equity securities		61,790		10,916		39,101		6,213
Other investments		-		5,345		-		-
Net realized investment gain	$	64,535	$	31,115	$	39,384	$	17,922

13

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(3) Fair Value Measurements

Our financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in our financial statements. In determining fair value, we generally apply the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. We classify our financial instruments into the following three-level hierarchy:

• Level 1 – Inputs are based on quoted prices in active markets for identical instruments.

• Level 2 – Inputs are based on observable market data (other than quoted prices), or are derived from or corroborated by observable market data.

• Level 3 – Inputs are unobservable and not corroborated by market data.

Our Level 1 investments consist of U.S. Treasuries, money market funds and equity securities traded in an active exchange market. We use unadjusted quoted prices for identical instruments to measure fair value.

Our Level 2 investments include most of our fixed maturity securities, which consist of U.S. government agency securities, municipal bonds (including those held as restricted securities), corporate debt securities, bank loans, mortgage-backed and asset-backed securities (including collateralized loan obligations), and deposits supporting our Lloyd’s syndicate business. Level 2 also includes certificates of deposit and other interest-bearing deposits at banks, which we report as short-term investments. We measure fair value for the majority of our Level 2 investments using matrix pricing and observable market data, including benchmark securities or yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers, default rates, loss severity and other economic measures. We measure fair value for our structured securities using observable market data in cash flow models.

We are responsible for the prices used in our fair value measurements. We use independent pricing services to assist us in determining fair value for 99% of our Level 2 investments. The pricing services provide a single price or quote per security. We use data provided by our third party investment managers and Lloyd’s of London to value the remaining Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, we perform various quantitative and qualitative procedures, including: 1) evaluation of the underlying methodologies, 2) analysis of recent sales activity, 3) analytical review of our fair values against current market prices and 4) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for our investments were judged to be inactive at period end. Based on these procedures, we did not adjust the prices or quotes provided by our independent pricing services, third party investment managers or Lloyd’s of London as of September 30, 2014 or December 31, 2013.

Our Level 2 financial instruments also include our notes payable. We determine the fair value of our 6.30% Senior Notes based on quoted prices in an inactive market. The fair value of borrowings under our Revolving Loan Facility approximates the carrying amount because interest is based on 30-day LIBOR plus a margin.

Our Level 3 securities include certain fixed maturity securities and an insurance contract that we account for as a derivative and classify in other assets. Our Level 3 category also includes liabilities for future earnout payments due to former owners of businesses we acquired, which are classified within accounts payable and accrued liabilities. We determine fair value of the derivative and the earnout payments based on internally developed models that use assumptions or other data that are not readily observable from objective sources. Fixed maturity securities classified as Level 3 at December 31, 2013 included special purpose revenue bond auction rate securities, which had interest rates that reset at periodic intervals. These securities were thinly traded and observable market data was not readily available. We determined the fair value of these securities using prices quoted by a broker.

14

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

The following tables present the fair value of our financial instruments that were carried or disclosed at fair value. Unless indicated, these items were carried at fair value on our consolidated balance sheets.

	Level 1		Level 2		Level 3		Total
September 30, 2014
Fixed maturity securities
U.S. government and government agency securities	$	59,796	$	7,351	$	-	$	67,147
Fixed maturity securities of states, municipalities and political subdivisions		-		978,977		-		978,977
Special purpose revenue bonds of states, municipalities     and political subdivisions		-		2,404,269		-		2,404,269
Corporate securities		-		1,262,719		149		1,262,868
Residential mortgage-backed securities		-		835,098		-		835,098
Commercial mortgage-backed securities		-		615,021		-		615,021
Asset-backed securities		-		327,971		-		327,971
Foreign government securities		-		85,190		-		85,190
Total fixed maturity securities		59,796		6,516,596		149		6,576,541
Equity securities		286,194		-		-		286,194
Short-term investments*		107,702		143,165		-		250,867
Restricted cash and securities		-		2,348		-		2,348
Premium, claims and other receivables		-		59,736		-		59,736
Other assets		19		-		1,201		1,220
Total assets measured at fair value	$	453,711	$	6,721,845	$	1,350	$	7,176,906
Notes payable*	$	-	$	793,162	$	-	$	793,162
Accounts payable and accrued liabilities - earnout liabilities		-		2,348		9,039		11,387
Total liabilities measured at fair value	$	-	$	795,510	$	9,039	$	804,549

* Carried at cost or amortized cost on consolidated balance sheet.

15

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

	Level 1		Level 2		Level 3		Total
December 31, 2013
Fixed maturity securities
U.S. government and government agency securities	$	84,032	$	8,677	$	-	$	92,709
Fixed maturity securities of states, municipalities and political subdivisions		-		986,486		-		986,486
Special purpose revenue bonds of states, municipalities and political subdivisions		-		2,255,928		9,267		2,265,195
Corporate securities		-		1,225,088		150		1,225,238
Residential mortgage-backed securities		-		618,119		-		618,119
Commercial mortgage-backed securities		-		504,888		-		504,888
Asset-backed securities		-		182,392		-		182,392
Foreign government securities		-		147,446		-		147,446
Total fixed maturity securities		84,032		5,929,024		9,417		6,022,473
Equity securities		517,466		-		-		517,466
Short-term investments*		68,958		109,795		-		178,753
Restricted cash and securities		-		1,853		-		1,853
Premium, claims and other receivables		-		66,515		-		66,515
Other assets		20		-		941		961
Total assets measured at fair value	$	670,476	$	6,107,187	$	10,358	$	6,788,021
Notes payable*	$	-	$	707,656	$	-	$	707,656
Accounts payable and accrued liabilities - earnout liability		-		1,853		7,259		9,112
Total liabilities measured at fair value	$	-	$	709,509	$	7,259	$	716,768

*Carried at cost or amortized cost on consolidated balance sheet.

In the first quarter of 2013, we purchased $9.4 million of special purpose revenue bond auction rate securities, which we continued to hold and classify in Level 3 at December 31, 2013. We sold these securities in the first quarter of 2014. There were no transfers between Level 1, Level 2 or Level 3 in the first nine months of 2014 and 2013.

16

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(4) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic losses and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Direct written premium	$	2,033,094	$	1,911,619	$	663,343	$	616,938
Reinsurance assumed		277,171		296,942		67,471		61,975
Reinsurance ceded		(487,875)		(478,609)		(145,620)		(157,179)
Net written premium	$	1,822,390	$	1,729,952	$	585,194	$	521,734
Direct earned premium	$	1,952,997	$	1,860,093	$	664,002	$	622,464
Reinsurance assumed		231,599		252,902		79,258		81,594
Reinsurance ceded		(462,801)		(433,785)		(156,325)		(147,390)
Net earned premium	$	1,721,795	$	1,679,210	$	586,935	$	556,668
Direct loss and loss adjustment expense	$	1,139,471	$	1,210,862	$	413,560	$	517,382
Reinsurance assumed		80,267		119,315		16,993		8,607
Reinsurance ceded		(258,863)		(337,630)		(118,616)		(205,613)
Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376
Policy acquisition costs	$	331,985	$	309,285	$	116,775	$	105,254
Ceding commissions		(113,764)		(105,898)		(40,565)		(39,612)
Net policy acquisition costs	$	218,221	$	203,387	$	76,210	$	65,642
The table below shows the components of our reinsurance recoverables in our consolidated balance sheets.
					September 30,		December 31,
					2014		2013
Reinsurance recoverable on paid losses					$	108,186	$	156,026
Reinsurance recoverable on outstanding losses						454,046		459,134
Reinsurance recoverable on incurred but not reported losses						633,302		663,597
Reserve for uncollectible reinsurance						(1,500)		(1,500)
Total reinsurance recoverables					$	1,194,034	$	1,277,257

17

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

Reinsurers not authorized by the respective states of domicile of our U.S. domiciled insurance companies are required to collateralize reinsurance obligations due to us. The table below shows letters of credit and cash that are available to us as collateral, as well as amounts we owe reinsurers that can be offset against amounts due to us.

	September 30,		December 31,
	2014		2013
Payables to reinsurers	$	195,643	$	208,850
Letters of credit		83,320		100,529
Funds held in trust		133,282		88,310
Total credits	$	412,245	$	397,689

(5) Liability for Unpaid Loss and Loss Adjustment Expense

The table below provides a reconciliation of our liability for loss and loss adjustment expense payable (referred to as reserves).

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Reserves at beginning of period	$	3,902,132	$	3,767,850	$	3,841,497	$	3,814,684
Less reinsurance recoverables on reserves		1,122,731		1,018,047		1,081,249		1,003,663
Net reserves at beginning of period		2,779,401		2,749,803		2,760,248		2,811,021
Net loss and loss adjustment expense		960,875		992,547		311,937		320,376
Net loss and loss adjustment expense payments		(1,024,673)		(884,022)		(350,603)		(297,696)
Foreign currency adjustment		(26,027)		(2,296)		(32,006)		22,331
Net reserves at end of period		2,689,576		2,856,032		2,689,576		2,856,032
Plus reinsurance recoverables on reserves		1,087,348		1,165,815		1,087,348		1,165,815
Reserves at end of period	$	3,776,924	$	4,021,847	$	3,776,924	$	4,021,847
The table below details our loss and loss adjustment expense on a consolidated basis, as well as the net (favorable) adverse loss development by segment.
	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Net (favorable) adverse loss development
U.S. Property & Casualty	$	(40,307)	$	(40,754)	$	(40,307)	$	(40,754)
Professional Liability		(978)		(26,284)		(978)		(26,284)
U.S. Surety & Credit		-		(9,492)		-		-
International		15,685		36,896		15,685		39,196
Exited Lines		(5,051)		-		(5,051)		-
Total net favorable loss development		(30,651)		(39,634)		(30,651)		(27,842)
Accident year catastrophe losses		15,886		48,055		5,531		18,134
All other net loss and loss adjustment expense		975,640		984,126		337,057		330,084
Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376

18

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

In the third quarter of 2014 and 2013, we conducted our annual review of the reserves in our U.S. Property & Casualty, Professional Liability and International segments. Based on these annual reviews, we recognized net favorable loss development of $30.7 million and $27.8 million, respectively. These amounts included favorable development of $5.1 million and $5.0 million, respectively from the release of prior years’ catastrophe reserves. In the second quarter of 2013, we conducted a limited review of our U.S. Surety & Credit reserves and recognized favorable development of $9.5 million. We also released $2.3 million of prior years’ catastrophe reserves in the International segment. The primary drivers of development in the respective periods by segment are described below.

U.S. Property & Casualty

In the third quarter of 2014, net favorable loss development of $40.3 million was due to better than expected loss experience, primarily in underwriting years 2012 and prior, compared to the same review conducted in the third quarter of 2013. The majority of the development related to our liability business ($20.7 million), our aviation business ($6.6 million) and a run-off assumed quota share contract ($5.0 million).

In 2013, net favorable development of $40.8 million was due to better than expected loss experience, primarily in underwriting years 2011 and prior, compared to the same review in the third quarter of 2012. This amount included $17.0 million of favorable development related to the run-off assumed quota share contract, which we wrote from 2003 – 2008, for which expected ultimate losses have continued to decline over the past three years.

Professional Liability

In the third quarter of 2014, we recognized minimal loss development based on our annual review of reserves.

In 2013, net favorable development of $26.3 million was due to better than expected loss experience, compared to the same review conducted in the third quarter of 2012. This development included reserve releases related to underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 million in underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis.

U.S. Surety & Credit

We recognized no loss development in 2014.

In the second quarter of 2013, we recognized favorable development of $9.5 million. Our review of reserves at that time indicated better experience than our actuarial expectations compared to the prior year review conducted in the fourth quarter of 2012. As a result, we recognized favorable development of $3.7 million and $5.8 million for our surety and credit lines of business, respectively, related to the 2010 and prior underwriting years.

International

In the third quarter of 2014, the segment’s $15.7 million net adverse loss development related to $43.5 million of adverse development for the surety & credit line of business, partially offset by $23.2 million of net favorable loss development in various lines of business and a $4.6 million reduction of prior years’ catastrophe reserves. We increased our reserves on a specific class of Spanish surety bonds to reflect our revised estimates of our liability under these bonds in light of our settlement of a large majority of the outstanding claims during the third quarter of 2014. The favorable development primarily related to our energy, property treaty and liability lines of business, which had better than expected loss experience in underwriting years 2013 and prior, compared to our review conducted in the same quarter of 2013. The net favorable development related to catastrophe reserves was primarily due to reserve releases for the 2013 European floods ($6.0 million), partially offset by reserve increases for the 2011 Denmark storms ($1.5 million).

19

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

In the third quarter of 2013, net adverse development of $39.2 million was due to $70.3 million of adverse development in the surety & credit line of business, partially offset by net favorable development in several other lines of business, primarily energy and liability. For surety & credit, we increased our reserves on the Spanish surety bonds discussed above. The increase was made to reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling published in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. We recognized net favorable development in our energy ($10.1 million) and U.K. professional liability ($16.1 million) products based on better than expected loss experience, primarily in underwriting years 2011 and prior. In addition, we recognized $3.4 million of favorable development from the release of 2012 catastrophe reserves for Superstorm Sandy, due to lower than expected losses.

In the second quarter of 2013, we recognized $2.3 million of favorable development on prior years’ catastrophe reserves, due to settlement of the remaining claims related to the 2010 New Zealand earthquake.

(6) Notes Payable

Our notes payable consisted of the following:

	September 30,		December 31,
	2014		2013
6.30% Senior Notes	$	299,213	$	299,098
Revolving Loan Facility		445,000		355,000
Total notes payable	$	744,213	$	654,098

On April 30, 2014, we entered into an agreement to modify our $600.0 million Revolving Loan Facility (Facility). The amended agreement increased the borrowing capacity under the Facility to $825.0 million and extended the term by two years to April 30, 2019, among other changes. The weighted-average interest rate on borrowings under the Facility at September 30, 2014 was 1.4%. The borrowings and letters of credit issued under the Facility reduced our available borrowing capacity on the Facility to $374.1 million at September 30, 2014.

There were no other material changes to the Facility or to the terms and conditions of our Senior Notes or Standby Letter of Credit Facility (Standby Facility) from those described in Note 7, “Notes Payable” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013.

We were in compliance with debt covenants related to our 6.30% Senior Notes, the Facility and the Standby Facility at September 30, 2014.

20

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(7) Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income in our consolidated balance sheets were as follows:

	Net unrealized    investment gains		Foreign currency translation       adjustment		Accumulated other   comprehensive     income
Nine months ended September 30, 2014
Balance at December 31, 2013	$	99,960	$	18,691	$	118,651
Other comprehensive income (loss)		57,190		(5,209)		51,981
Balance at September 30, 2014	$	157,150	$	13,482	$	170,632
Three months ended September 30, 2014
Balance at June 30, 2014	$	199,619	$	20,803	$	220,422
Other comprehensive loss		(42,469)		(7,321)		(49,790)
Balance at September 30, 2014	$	157,150	$	13,482	$	170,632

(8) Earnings Per Share

The following table details the numerator and denominator used in our earnings per share calculations.

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Net earnings	$	345,314	$	292,187	$	140,267	$	98,175
Less: net earnings attributable to unvested restricted stock		(5,610)		(4,754)		(2,328)		(1,527)
Net earnings available to common stock	$	339,704	$	287,433	$	137,939	$	96,648
Weighted-average common shares outstanding		98,340		98,881		97,909		98,723
Dilutive effect of outstanding securities (determined using treasury stock method)		238		254		225		270
Weighted-average common shares and potential common shares outstanding		98,578		99,135		98,134		98,993
Earnings per common share
Basic	$	3.45	$	2.91	$	1.41	$	0.98
Diluted	$	3.45	$	2.90	$	1.41	$	0.98

21

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(9) Stock-Based Compensation

In 2014, we granted the following shares of common stock, restricted stock and restricted stock units.

	Number      of shares		Weighted-average     grant date fair value		Aggregate       fair value		Vesting        period
Common stock		38	$	46.41	$	1,771		None
Restricted stock		355		43.92		15,603		0 - 4 years
Restricted stock units		13		45.14		593		4 years

For common stock grants, we measure fair value based on the closing stock price of our common stock on the grant date and expense it on the grant date.

Certain awards of restricted stock and restricted stock units contain a performance condition based on the ultimate results for the applicable underwriting year. The number of such shares that vest could be higher or lower than initially granted. We measure fair value for these awards based on the closing price of our common stock on the grant date, and we recognize expense on a straight-line basis over the vesting period for those restricted stock awards or units expected to vest.

Certain of our executive officers were granted performance-based restricted stock in 2014. This restricted stock vests after three years and can vest from 0% to 200% of the initial shares granted. Vesting is based equally on an operating return on equity performance factor and a total shareholder return performance factor.

(10) Segments

We report HCC’s results in six operating segments, including the following five insurance underwriting segments:

• U.S. Property & Casualty

• Professional Liability

• Accident & Health

• U.S. Surety & Credit

• International

The Investing segment includes our consolidated investment portfolio, as well as all investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments. All investment activity is reported as revenue, consistent with our consolidated presentation.

In addition to our segments, we include a Corporate & Other category to reconcile segment results to consolidated totals. The Corporate & Other category includes corporate operating expenses not allocated to the segments, interest expense on long-term debt, foreign currency expense (benefit), and underwriting results of our Exited Lines. Our Exited Lines include product lines that we no longer write and do not expect to write in the future.

22

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

The following tables present information by business segment.

	U.S. Property & Casualty		Professional  Liability		Accident  & Health		U.S. Surety  & Credit		International		Investing		Corporate  & Other		Consolidated
Nine months ended September 30, 2014
Net earned premium	$	271,718	$	261,457	$	723,051	$	148,496	$	316,591	$	-	$	482	$	1,721,795
Other revenue		14,933		800		7,865		1,576		2,745		232,015		813		260,747
Segment revenue		286,651		262,257		730,916		150,072		319,336		232,015		1,295		1,982,542
Loss and LAE		106,442		154,172		519,497		43,108		142,809		-		(5,153)		960,875
Other expense		86,807		49,533		114,855		82,052		128,080		-		63,067		524,394
Segment expense		193,249		203,705		634,352		125,160		270,889		-		57,914		1,485,269
Segment pretax earnings (loss)	$	93,402	$	58,552	$	96,564	$	24,912	$	48,447	$	232,015	$	(56,619)	$	497,273
Nine months ended September 30, 2013
Net earned premium	$	276,647	$	277,662	$	657,995	$	144,673	$	311,261	$	-	$	10,972	$	1,679,210
Other revenue		16,198		304		3,736		1,027		2,790		196,756		253		221,064
Segment revenue		292,845		277,966		661,731		145,700		314,051		196,756		11,225		1,900,274
Loss and LAE		121,060		141,921		483,709		32,287		204,137		-		9,433		992,547
Other expense		84,801		46,781		97,414		80,182		114,534		-		67,688		491,400
Segment expense		205,861		188,702		581,123		112,469		318,671		-		77,121		1,483,947
Segment pretax earnings (loss)	$	86,984	$	89,264	$	80,608	$	33,231	$	(4,620)	$	196,756	$	(65,896)	$	416,327
Three months ended September 30, 2014
Net earned premium	$	86,130	$	87,880	$	250,570	$	51,362	$	111,131	$	-	$	(138)	$	586,935
Other revenue		4,987		330		2,363		708		846		93,620		249		103,103
Segment revenue		91,117		88,210		252,933		52,070		111,977		93,620		111		690,038
Loss and LAE		13,054		50,851		178,202		14,550		60,429		-		(5,149)		311,937
Other expense		28,659		14,988		40,601		28,645		48,101		-		12,450		173,444
Segment expense		41,713		65,839		218,803		43,195		108,530		-		7,301		485,381
Segment pretax earnings (loss)	$	49,404	$	22,371	$	34,130	$	8,875	$	3,447	$	93,620	$	(7,190)	$	204,657
Three months ended September 30, 2013
Net earned premium	$	91,684	$	92,439	$	223,048	$	47,442	$	100,849	$	-	$	1,206	$	556,668
Other revenue		4,769		(21)		1,406		406		888		72,130		231		79,809
Segment revenue		96,453		92,418		224,454		47,848		101,737		72,130		1,437		636,477
Loss and LAE		13,666		30,100		163,143		13,436		99,221		-		810		320,376
Other expense		32,044		10,909		33,705		26,501		42,613		-		30,229		176,001
Segment expense		45,710		41,009		196,848		39,937		141,834		-		31,039		496,377
Segment pretax earnings (loss)	$	50,743	$	51,409	$	27,606	$	7,911	$	(40,097)	$	72,130	$	(29,602)	$	140,100

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HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

In the first nine months and third quarter of 2013, the Professional Liability segment pretax earnings included net favorable loss development of $26.3 million. In the first nine months and third quarter of 2014, the International segment pretax income included adverse development of $43.5 million related to strengthening reserves for Spanish surety bonds, compared to $70.3 million in the same periods of 2013.

(11) Commitments and Contingencies

Catastrophe and Large Loss Exposure

We have exposure to catastrophic and other large losses caused by natural perils (such as hurricanes, earthquakes, floods, tsunamis, hail storms and tornados) and man-made events (such as terrorist attacks). The incidence, timing and severity of these losses are unpredictable. We assess our exposures in areas most vulnerable to natural catastrophes and apply procedures to ascertain our probable maximum loss from a single event. We maintain reinsurance protection to reduce our potential losses from a future event. In the first nine months of 2014, we recognized accident year net catastrophe losses, after reinsurance and reinstatement premium, of $14.3 million related to various small catastrophes. We recognized $44.5 million in the first nine months of 2013, primarily due to European floods, German hail storms and various small catastrophes.

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Indemnifications

In conjunction with the sales of business assets and subsidiaries, we have provided indemnifications to the buyers. Certain indemnifications cover typical representations and warranties related to our responsibilities to perform under the sales contracts. Under other indemnifications, we agree to reimburse the purchasers for taxes or ERISA-related amounts, if any, assessed after the sale date but related to pre-sale activities. We cannot quantify the maximum potential exposure covered by all of our indemnifications because the indemnifications cover a variety of matters, operations and scenarios and some have no time limit. For those with a time limit, the longest indemnification expires in 2025. We accrue a loss when a valid claim is made by a purchaser and we believe we have potential exposure.

24

HCC Insurance Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited, tables in thousands except per share data)

(12) Supplemental Information

Supplemental cash flow information was as follows:

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Income taxes paid	$	95,678	$	126,295	$	25,265	$	26,354
Interest paid		16,758		14,808		1,774		1,486
Proceeds from sales of available for sale fixed maturity securities		314,424		337,895		27,581		166,094
Proceeds from sales of equity securities		436,126		95,989		265,944		51,681
Dividends declared but not paid at end of period		28,985		22,540
Purchases of common stock not paid at end of period		12,323		-

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis should be read in conjunction with our Consolidated Financial Statements and the related Notes as of September 30, 2014 and December 31, 2013.

Overview

We are a specialty insurance group with offices in the United States, the United Kingdom, Spain and Ireland, transacting business in approximately 180 countries. Our shares trade on the New York Stock Exchange and closed at $49.79 on October 24, 2014, resulting in market capitalization of $4.8 billion.

We underwrite and manage a variety of largely non-correlated specialty insurance products through these five insurance underwriting segments: U.S. Property & Casualty, Professional Liability, Accident & Health, U.S. Surety & Credit and International. We market our insurance products through a network of independent agents and brokers, through managing general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies.

Our organization is focused on generating consistent, industry-leading combined ratios. We concentrate our insurance writings in selected specialty lines of business in which we believe we can achieve meaningful underwriting profit. We rely on experienced underwriting personnel working within defined and monitored limits and our access to and expertise in the reinsurance marketplace to limit or reduce risk. By focusing on underwriting profitability, we are able to accomplish our primary objectives of maximizing net earnings and growing book value per share.

Our major 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.

Our results and key metrics for the nine months and quarter ended September 30, 2014 were as follows:

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earnings	$	345,314		$	292,187		$	140,267		$	98,175
Earnings per diluted share	$	3.45		$	2.90		$	1.41		$	0.98
Net loss ratio		55.8	%		59.1	%		53.1	%		57.6	%
Expense ratio		26.4			25.0			27.0			25.9
Combined ratio		82.2	%		84.1	%		80.1	%		83.5	%

Key facts about our consolidated group as of and for the nine months and quarter ended September 30, 2014 are as follows:

• We had consolidated shareholders’ equity of $3.9 billion, with book value per share of $39.64 .

• We produced total revenue of $2.0 billion and $690.0 million in the first nine months and third quarter, respectively.

• We purchased $138.5 million of our common stock at an average cost of $46.69 per share in the first nine months.

• We declared dividends of $0.745 per share and paid $67.6 million of dividends in the first nine months.

• Our debt to total capital ratio was 16.1%.

26

Comparisons in the following sections refer to the first nine months of 2014 compared to the same period of 2013, unless otherwise noted. Amounts in tables are in thousands, except for earnings per share, percentages, ratios and number of employees.

Revenue

Gross written premium, net written premium and net earned premium are detailed below by segment.

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
U.S. Property & Casualty	$	524,682	$	534,509	$	167,395	$	176,121
Professional Liability		371,402		371,184		125,472		124,791
Accident & Health		746,346		652,782		259,870		222,312
U.S. Surety & Credit		173,674		169,805		60,977		58,367
International		493,781		469,324		117,340		96,131
Exited Lines		380		10,957		(240)		1,191
Total gross written premium	$	2,310,265	$	2,208,561	$	730,814	$	678,913
U.S. Property & Casualty	$	288,706	$	307,893	$	103,321	$	99,024
Professional Liability		246,917		247,183		83,112		83,422
Accident & Health		741,752		651,860		257,991		221,992
U.S. Surety & Credit		152,417		147,976		54,359		49,848
International		392,116		364,068		86,549		66,242
Exited Lines		482		10,972		(138)		1,206
Total net written premium	$	1,822,390	$	1,729,952	$	585,194	$	521,734
U.S. Property & Casualty	$	271,718	$	276,647	$	86,130	$	91,684
Professional Liability		261,457		277,662		87,880		92,439
Accident & Health		723,051		657,995		250,570		223,048
U.S. Surety & Credit		148,496		144,673		51,362		47,442
International		316,591		311,261		111,131		100,849
Exited Lines		482		10,972		(138)		1,206
Total net earned premium	$	1,721,795	$	1,679,210	$	586,935	$	556,668

Growth in written premium occurred primarily in the Accident & Health segment, from growth of our medical stop-loss and short-term medical products. See the “Segment Operations” section below for further discussion of the relationship and changes in premium revenue within each insurance underwriting segment.

Net investment income, which is included in our Investing segment, was flat year-over-year primarily due to higher dividend income from equity securities, offset by lower income from reduced reinvestment yields. We recognized $64.5 million of net realized investment gains in the first nine months of 2014, compared to $31.1 million in the first nine months of 2013. The 2014 net realized investment gains were principally due to the sale of equity securities in the first and third quarters of 2014. See the “Investing Segment” section below for further discussion of our investing activities.

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Loss and Loss Adjustment Expense

The tables below detail our net loss and loss adjustment expense and our net loss ratios on a consolidated basis and for our segments.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
U.S. Property & Casualty	$	106,442		$	121,060		$	13,054		$	13,666
Professional Liability		154,172			141,921			50,851			30,100
Accident & Health		519,497			483,709			178,202			163,143
U.S. Surety & Credit		43,108			32,287			14,550			13,436
International		142,809			204,137			60,429			99,221
Exited Lines		(5,153)			9,433			(5,149)			810
Net loss and loss adjustment expense	$	960,875		$	992,547		$	311,937		$	320,376
Net (favorable) adverse loss development
U.S. Property & Casualty	$	(40,307)		$	(40,754)		$	(40,307)		$	(40,754)
Professional Liability		(978)			(26,284)			(978)			(26,284)
U.S. Surety & Credit		-			(9,492)			-			-
International		15,685			36,896			15,685			39,196
Exited Lines		(5,051)			-			(5,051)			-
Total net favorable loss development		(30,651)			(39,634)			(30,651)			(27,842)
Accident year catastrophe losses		15,886			48,055			5,531			18,134
All other net loss and loss adjustment expense		975,640			984,126			337,057			330,084
Net loss and loss adjustment expense	$	960,875		$	992,547		$	311,937		$	320,376
U.S. Property & Casualty		39.2	%		43.8	%		15.2	%		14.9	%
Professional Liability		59.0			51.1			57.9			32.6
Accident & Health		71.8			73.5			71.1			73.1
U.S. Surety & Credit		29.0			22.3			28.3			28.3
International		45.1			65.6			54.4			98.4
Consolidated net loss ratio		55.8	%		59.1	%		53.1	%		57.6	%
Consolidated accident year net loss ratio		57.5	%		61.5	%		58.1	%		62.6	%

Net loss and loss adjustment expense (referred to as loss expense) decreased $31.7 million in the first nine months of 2014, compared to the same period in 2013, primarily due to lower catastrophe losses in 2014. Our International segment incurred catastrophe losses, before reinstatement premium, of $15.9 million in 2014, compared to $48.1 million in 2013. Various catastrophes that were not individually significant events to us or the industry (which we refer to as “small catastrophes”) totaled $15.9 million in the first nine months of 2014 ($5.5 million in the third quarter) and $18.1 million ($5.1 million) in the comparable periods of 2013. In 2013, we recognized $30.0 million of large catastrophe losses, which consisted of $13.0 million for German hail storms (in the third quarter) and $17.0 million for European floods (in the second quarter). We recognized no large catastrophe losses in 2014. See “Segment Operations — International Segment” section below for additional discussion of our pretax net catastrophe losses.

Fluctuations in net loss development also impacted the change in loss expense in the Professional Liability and International segments. The net adverse development in the International segment for the first nine months of 2014 and 2013 included $43.5 million and $70.3 million, respectively, of adverse development related to strengthening reserves for Spanish surety bonds. See the “Segment Operations” section below for additional discussion of the changes in our loss expense, as well as discussion of the net loss ratios for each segment for 2014 and 2013.

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The table below provides a reconciliation of our consolidated reserves for loss and loss adjustment expense payable, net of reinsurance ceded, the amount of our paid claims, and our net paid loss ratio.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net reserves at beginning of period	$	2,779,401		$	2,749,803		$	2,760,248		$	2,811,021
Net loss and loss adjustment expense		960,875			992,547			311,937			320,376
Net loss and loss adjustment expense payments		(1,024,673)			(884,022)			(350,603)			(297,696)
Foreign currency adjustment		(26,027)			(2,296)			(32,006)			22,331
Net reserves at end of period	$	2,689,576		$	2,856,032		$	2,689,576		$	2,856,032
Net paid loss ratio		59.5	%		52.6	%		59.7	%		53.5	%

The amount of claims paid fluctuates year-over-year due to the timing of claims settlement, the occurrence of catastrophic events and commutations, and the mix of our business. In the first nine months and third quarter of 2014, we paid $199.9 million and $75.4 million, respectively, to settle claims related to Spanish surety bonds, of which approximately 60% was reinsured. This activity increased the respective net paid loss ratios by 4.4 and 3.9 percentage points.

Policy Acquisition Costs

The percentage of policy acquisition costs to net earned premium was 12.7% and 12.1% for the first nine months of 2014 and 2013, respectively, and 13.0% and 11.8% for the third quarter of 2014 and 2013, respectively. The difference between periods primarily related to higher commission rates on certain of our businesses, increased commissions due to higher writings of our short-term medical product, and lower profit commissions from reinsurers. We record profit commissions due from reinsurers as an offset to policy acquisition costs.

Other Operating Expense

Other operating expense increased 6% year-over-year and decreased 13% quarter-over-quarter in 2014, compared to the same periods in 2013. The changes in other operating expense were primarily due to the fluctuations in foreign currency benefit/expense and higher employee compensation and benefit costs in 2014. We recognized a foreign currency benefit of $8.9 million in the first nine months of 2014 and minimal expense in the same period of 2013. We recognized a $15.6 million benefit in the third quarter of 2014, compared to $9.2 million of expense in the third quarter of 2013. The foreign currency benefit/expense related to changes in the value of the British pound sterling and the Euro relative to the U.S. dollar.

Excluding the effect of foreign currency benefit/expense, other operating expense increased 10% year-over-year and 12% quarter-over-quarter, mainly due to increased compensation and benefit costs in 2014. Our employee count has grown to 1,976 from 1,900 at December 31, 2013, and our bonus expense increased in 2014 due to higher pretax earnings. Other operating expense included stock-based compensation expense of $17.7 million in 2014 and $10.4 million in 2013. At September 30, 2014, there was approximately $26.9 million of total unrecognized compensation expense, related to unvested restricted stock awards and units, options and our employee stock purchase plan, that is expected to be recognized over a weighted-average period of 1.7 years.

Interest Expense

Interest expense was $20.9 million and $19.7 million in the first nine months of 2014 and 2013, respectively, and included $14.5 million for our Senior Notes in both years.

Income Tax Expense

Our effective income tax rate was 30.6% for the first nine months of 2014, compared to 29.8% for the same period of 2013.

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Segment Operations

Each of our insurance segments bears risk for insurance coverage written within its portfolio of insurance products. Each segment generates income from premium written by our underwriting agencies, through third party agents and brokers, or on a direct basis. Certain segments also write facultative or individual account reinsurance, as well as treaty reinsurance business. In some cases, we purchase reinsurance to limit our losses from both individual policy losses and multiple policy losses from catastrophic occurrences and from aggregate losses in a year. Our segments maintain disciplined expense management and a streamlined management structure, which results in favorable expense ratios. The following provides operational information about our insurance underwriting segments, Investing segment and Corporate & Other category.

In 2014, we changed the presentation of certain categories of business that we disclose within our insurance underwriting segments and recast prior period financial data to be comparative with the revised presentation. However, we did not change our reportable segments. We believe this realignment of certain categories within segments provides better operational information for management and our shareholders.

U.S. Property & Casualty Segment

The following tables summarize the operations of the U.S. Property & Casualty segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earned premium	$	271,718		$	276,647		$	86,130		$	91,684
Other revenue		14,933			16,198			4,987			4,769
Segment revenue		286,651			292,845			91,117			96,453
Loss and loss adjustment expense, net		106,442			121,060			13,054			13,666
Other expense		86,807			84,801			28,659			32,044
Segment expense		193,249			205,861			41,713			45,710
Segment pretax earnings	$	93,402		$	86,984		$	49,404		$	50,743
Net loss ratio		39.2	%		43.8	%		15.2	%		14.9	%
Expense ratio		30.3			29.0			31.5			33.2
Combined ratio		69.5	%		72.8	%		46.7	%		48.1	%
Aviation	$	81,919		$	84,191		$	27,789		$	27,905
Liability		82,560			74,560			28,893			25,633
Sports & Entertainment		21,464			20,207			5,909			7,727
Public Risk		36,443			48,530			11,436			15,775
Other		49,332			49,159			12,103			14,644
Total net earned premium	$	271,718		$	276,647		$	86,130		$	91,684
Aviation		53.7	%		52.7	%		39.6	%		31.8	%
Liability		37.6			51.7			(3.7)			28.9
Sports & Entertainment		57.1			61.1			77.4			60.2
Public Risk		49.4			73.2			29.6			66.0
Other		2.3			(19.8)			(39.9)			(120.7)
Total net loss ratio		39.2	%		43.8	%		15.2	%		14.9	%

30

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Aviation	$	109,566	$	115,001	$	39,222	$	39,819
Liability		137,920		111,955		45,775		35,523
Sports & Entertainment		106,311		122,654		29,221		41,126
Public Risk		56,107		57,757		20,537		20,652
Other		114,778		127,142		32,640		39,001
Total gross written premium	$	524,682	$	534,509	$	167,395	$	176,121
Aviation	$	92,790	$	91,540	$	34,140	$	31,406
Liability		102,139		81,677		38,029		26,422
Sports & Entertainment		18,808		23,415		5,094		9,252
Public Risk		33,262		47,110		14,483		17,230
Other		41,707		64,151		11,575		14,714
Total net written premium	$	288,706	$	307,893	$	103,321	$	99,024

Our U.S. Property & Casualty segment pretax earnings increased 7% year-over-year, primarily due to a lower net loss ratio in 2014, compared to 2013. Gross written premium decreased in 2014 due to 1) reduced pricing from increased competition in Aviation and 2) cyclical reductions in Sports & Entertainment and title and residual value insurance (both included in Other). These decreases were largely offset by increased writings of our expanding casualty business, included in Liability, and timing of renewals for our brown water marine business (included in Other). Net written premium for Public Risk decreased in 2014 due to additional quota share reinsurance. Higher net earned premium from growth in our casualty business was offset by reduced premium earned by Public Risk due to the change in reinsurance. Loss expense and the 2014 accident year net loss ratio decreased in 2014, compared to 2013, primarily due to lower losses in Public Risk based on our re-underwriting of that book of business in 2013. The segment’s year-to-date expense ratio increased in 2014 primarily due to additional compensation costs related to new underwriting teams.

In 2014 and 2013, we recognized net favorable loss development based on our annual review of reserves for this segment, which we conduct in the third quarter of each year. The majority of the lines of business in this segment provide primary coverage, and claims are reported and settled on a short to medium-term basis. Accordingly, changes to our ultimate losses for a given underwriting year typically result from revised actuarial expectations, as compared to the prior year reserve review, with respect to the settlement value of known claims.

The segment’s net favorable loss development by line of business was as follows:

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Aviation	$	(6,584)	$	(8,402)	$	(6,584)	$	(8,402)
Liability		(20,704)		(9,144)		(20,704)		(9,144)
Sports & Entertainment		(1,304)		(2,312)		(1,304)		(2,312)
Public Risk		(4,628)		(567)		(4,628)		(567)
Other		(7,087)		(20,329)		(7,087)		(20,329)
Total net favorable loss development	$	(40,307)	$	(40,754)	$	(40,307)	$	(40,754)

31

Our Aviation line of business had a higher net loss ratio year-over-year and quarter-over-quarter due to higher losses in the third quarter of 2014, as well as lower net favorable development recognized in 2014. The 2014 development was based on recording our Aviation reserves in line with actuarially-indicated results since our 2013 annual review. In 2013, we recognized favorable development for treaty years 2011 and prior due to better than expected actuarially-indicated results since our 2012 annual review.

In our Liability line of business, we experienced lower losses and loss ratios in 2014, compared to 2013, due to higher favorable development in the professional lines, which include our E&O and employment practices liability products. In 2014, we recognized favorable development in our professional lines based on better than expected actuarially-indicated results since our 2013 annual review, primarily for underwriting years 2012 and prior. In 2013, we recognized favorable development for underwriting years 2010 – 2011 due to better than expected actuarially-indicated results since our 2012 annual review.

In Sports & Entertainment, the net favorable development in 2014 and 2013 primarily was due to expired risks for underwriting years 2013 and 2012, respectively.

Our Public Risk line of business had a lower loss ratio year-over-year and quarter-over-quarter, primarily due to our expectation of lower ultimate losses in 2014 following our re-underwriting the book of business in 2013. In addition, we recognized higher favorable development in 2014 based on better than expected actuarially-indicated results since our 2013 annual review. The development recorded in 2014 included the release of $0.5 million of prior years’ catastrophe reserves related to 2012 Superstorm Sandy.

The majority of the favorable loss development in Other relates to the run off of an assumed quota share contract for business that we wrote from 2003 – 2008. We recognized $5.0 million in 2014 and $17.0 million in 2013, due to continued better than expected results since the prior annual review. This assumed quota share contract is no longer earning premium, resulting in negative loss ratios in total for the Other line. The remaining development in Other was not material for any one product line in either year.

Regarding changes in presentation, the segment now includes Liability and Sports & Entertainment categories. The Liability category includes the prior E&O category, as well as employment practices liability, primary casualty and excess casualty, which were previously included in the Other category. The Sports & Entertainment category includes disability and contingency, which were previously included in the Other category.

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Professional Liability Segment

The following tables summarize the operations of the Professional Liability segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earned premium	$	261,457		$	277,662		$	87,880		$	92,439
Other revenue		800			304			330			(21)
Segment revenue		262,257			277,966			88,210			92,418
Loss and loss adjustment expense, net		154,172			141,921			50,851			30,100
Other expense		49,533			46,781			14,988			10,909
Segment expense		203,705			188,702			65,839			41,009
Segment pretax earnings	$	58,552		$	89,264		$	22,371		$	51,409
Net loss ratio		59.0	%		51.1	%		57.9	%		32.6	%
Expense ratio		18.9			16.8			17.0			11.8
Combined ratio		77.9	%		67.9	%		74.9	%		44.4	%
Gross written premium	$	371,402		$	371,184		$	125,472		$	124,791
Net written premium	$	246,917		$	247,183		$	83,112		$	83,422

Our Professional Liability segment pretax earnings decreased $30.7 million year-to-date in 2014, and $29.0 million quarter-to-date, compared to the same periods of 2013, primarily due to $25.3 million more net favorable loss development in 2013 than in 2014. The remaining reduction related to lower net earned premium in 2014 and an increase in the expense ratio, primarily due to the lower net earned premium in 2014 and higher reinsurance profit commissions, which offset the segment’s other expense, in 2013.

The segment had net favorable loss development of $1.0 million in the first nine months and third quarter of 2014, compared to $26.3 million in the same periods of 2013. The development in each period resulted from our annual review of reserves for this segment, which we conduct in the third quarter of each year. The majority of the insurance coverage in this segment is provided through “claims made” policies, and the final settlement value of these claims is not expected to be determined for several years due to the underlying complex nature of the claims. Accordingly, changes to our ultimate losses for a given underwriting year typically result from management’s revised expectations, as compared to the prior year reserve review, with respect to the settlement value of known claims.

The 2014 development related to our U.S. D&O products. We reduced reserves by $24.5 million for underwriting years prior to 2007 due to better than expected experience compared to our 2013 annual review. We also strengthened reserves primarily for underwriting year 2007 by $23.5 million due to indications of higher ultimate losses.

The 2013 development consisted of $15.8 million for our U.S. D&O products and $10.5 million for our International D&O product. Our 2013 review indicated better than expected experience for underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 million in underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis.

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Accident & Health Segment

The following tables summarize the operations of the Accident & Health segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earned premium	$	723,051		$	657,995		$	250,570		$	223,048
Other revenue		7,865			3,736			2,363			1,406
Segment revenue		730,916			661,731			252,933			224,454
Loss and loss adjustment expense, net		519,497			483,709			178,202			163,143
Other expense		114,855			97,414			40,601			33,705
Segment expense		634,352			581,123			218,803			196,848
Segment pretax earnings	$	96,564		$	80,608		$	34,130		$	27,606
Net loss ratio		71.8	%		73.5	%		71.1	%		73.1	%
Expense ratio		15.7			14.7			16.1			15.0
Combined ratio		87.5	%		88.2	%		87.2	%		88.1	%
Medical Stop-loss	$	647,824		$	609,693		$	218,700		$	205,089
Other		75,227			48,302			31,870			17,959
Total net earned premium	$	723,051		$	657,995		$	250,570		$	223,048
Medical Stop-loss		74.9	%		75.2	%		74.9	%		75.2	%
Other		46.0			52.5			45.4			50.0
Total net loss ratio		71.8	%		73.5	%		71.1	%		73.1	%
Medical Stop-loss	$	652,359		$	610,366		$	220,548		$	205,327
Other		93,987			42,416			39,322			16,985
Total gross written premium	$	746,346		$	652,782		$	259,870		$	222,312
Medical Stop-loss	$	647,765		$	609,693		$	218,669		$	205,089
Other		93,987			42,167			39,322			16,903
Total net written premium	$	741,752		$	651,860		$	257,991		$	221,992

The Accident & Health segment pretax earnings increased 20% in the first nine months of 2014, and 24% in the third quarter of 2014, compared to the respective periods in 2013. This increase was directly attributable to writing new medical stop-loss and short-term medical business, as well as rate increases on renewal business in 2014. The segment’s expense ratio increased in 2014 due to higher commissions related to the short-term medical product, as well as higher incentive compensation expense.

34

U.S. Surety & Credit Segment

The following tables summarize the operations of the U.S. Surety & Credit segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earned premium	$	148,496		$	144,673		$	51,362		$	47,442
Other revenue		1,576			1,027			708			406
Segment revenue		150,072			145,700			52,070			47,848
Loss and loss adjustment expense, net		43,108			32,287			14,550			13,436
Other expense		82,052			80,182			28,645			26,501
Segment expense		125,160			112,469			43,195			39,937
Segment pretax earnings	$	24,912		$	33,231		$	8,875		$	7,911
Net loss ratio		29.0	%		22.3	%		28.3	%		28.3	%
Expense ratio		54.7			55.0			55.0			55.4
Combined ratio		83.7	%		77.3	%		83.3	%		83.7	%
Surety	$	108,784		$	109,370		$	37,061		$	36,645
Credit		39,712			35,303			14,301			10,797
Total net earned premium	$	148,496		$	144,673		$	51,362		$	47,442
Surety		24.9	%		21.5	%		25.0	%		24.9	%
Credit		40.3			24.8			37.1			40.1
Total net loss ratio		29.0	%		22.3	%		28.3	%		28.3	%
Surety	$	121,321		$	125,235		$	40,988		$	44,908
Credit		52,353			44,570			19,989			13,459
Total gross written premium	$	173,674		$	169,805		$	60,977		$	58,367
Surety	$	109,476		$	111,746		$	37,764		$	39,600
Credit		42,941			36,230			16,595			10,248
Total net written premium	$	152,417		$	147,976		$	54,359		$	49,848

Our U.S. Surety & Credit segment pretax earnings decreased $8.3 million year-over-year due to $9.5 million of favorable loss development recognized in the second quarter of 2013. We recognized no loss development in the first nine months of 2014.

In the second quarter of 2013, we conducted a limited review of the segment’s reserves due to the settlement of a large 2010 Credit claim on favorable terms. This review indicated that actual loss experience for the 2010 and prior underwriting years was significantly better in 2013 compared to the prior year review. As a result, we recognized favorable development of $3.7 million for Surety and $5.8 million for Credit in the second quarter of 2013, which reduced the year-to-date net loss ratios.

35

International Segment

The following tables summarize the operations of the International segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net earned premium	$	316,591		$	311,261		$	111,131		$	100,849
Other revenue		2,745			2,790			846			888
Segment revenue		319,336			314,051			111,977			101,737
Loss and loss adjustment expense, net		142,809			204,137			60,429			99,221
Other expense		128,080			114,534			48,101			42,613
Segment expense		270,889			318,671			108,530			141,834
Segment pretax earnings (loss)	$	48,447		$	(4,620)		$	3,447		$	(40,097)
Net loss ratio		45.1	%		65.6	%		54.4	%		98.4	%
Expense ratio		40.1			36.5			43.0			41.9
Combined ratio		85.2	%		102.1	%		97.4	%		140.3	%
Marine & Energy	$	72,280		$	74,978		$	28,730		$	22,686
Property Treaty		76,369			85,067			24,956			26,569
Surety & Credit		57,359			54,186			17,220			18,120
Liability		63,564			54,671			23,199			19,088
Other		47,019			42,359			17,026			14,386
Total net earned premium	$	316,591		$	311,261		$	111,131		$	100,849
Marine & Energy		40.4	%		36.5	%		26.3	%		9.9	%
Property Treaty		8.4			54.6			(15.9)			62.3
Surety & Credit		114.0			189.4			273.3			441.0
Liability		32.8			29.2			4.1			(8.5)
Other		44.6			27.7			52.0			14.9
Total net loss ratios		45.1	%		65.6	%		54.4	%		98.4	%
Marine & Energy	$	142,149		$	143,849		$	23,547		$	18,191
Property Treaty		126,817			133,578			26,888			19,583
Surety & Credit		79,091			68,186			23,840			21,990
Liability		74,520			59,992			24,442			19,782
Other		71,204			63,719			18,623			16,585
Total gross written premium	$	493,781		$	469,324		$	117,340		$	96,131
Marine & Energy	$	93,375		$	86,489		$	11,293		$	3,517
Property Treaty		108,038			113,169			20,209			11,903
Surety & Credit		65,962			59,326			16,877			19,036
Liability		69,061			56,259			22,735			18,682
Other		55,680			48,825			15,435			13,104
Total net written premium	$	392,116		$	364,068		$	86,549		$	66,242

36

Our International segment pretax earnings increased $53.1 million in the first nine months and $43.5 million in the third quarter of 2014, compared to the same periods of 2013, due to 1) higher net earned premium, 2) the favorable impact of lower net catastrophe losses and 3) lower net adverse loss development year-over-year in 2014. The net adverse loss development for 2014 and 2013 included $43.5 million and $70.3 million, respectively, related to strengthening reserves for certain Spanish surety bonds. These increases were partially offset by higher other expenses.

Gross written premium and net written premium increased year-to-date in 2014, compared to 2013, primarily due to increased writings in Surety & Credit, Liability and our accident and health and direct and facultative property lines of business (included in Other). These increases were partially offset by decreased writings of Property Treaty business, due to reduced pricing and expanded competition in this line. The segment’s expense ratio increased in 2014 primarily due to higher compensation and benefits expense and the impact of the stronger British pound sterling compared to the U.S. dollar in 2014, as most of the segment’s operating expenses are British pound sterling expenses.

Our Property Treaty line of business incurred lower net catastrophe losses in 2014 than in 2013. We recognized no large catastrophe losses in 2014. In the third quarter of 2013, we recognized pretax catastrophe losses of $13.0 million related to German hail storms. In the second quarter of 2013, we recognized pretax catastrophe losses of $15.0 million related to European floods, including $2.0 million of inward reinstatement premium. The remaining 2013 net catastrophe losses, as well as the 2014 losses, related to small catastrophes. The following table summarizes the segment’s net catastrophe losses, as well as the impact on key metrics:

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net losses, after reinsurance	$	15,886		$	48,055		$	5,531		$	18,134
Reinstatement premium, net		(1,578)			(3,508)			(762)			(217)
Total net catastrophe losses	$	14,308		$	44,547		$	4,769		$	17,917
Impact of net catastrophe losses (in percentage points) on:
Net loss ratio		4.8	%		14.9	%		4.7	%		17.8	%
Expense ratio		(0.2)			(0.4)			(0.3)			(0.1)
Combined ratio		4.6	%		14.5	%		4.4	%		17.7	%
The International segment recognized $15.7 million of net adverse loss development in the first nine months and third quarter of 2014, compared to $36.9 million and $39.2 million in the same periods of 2013. The net (favorable) adverse loss development recognized by line of business was as follows:
	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Marine & Energy	$	(6,266)		$	(11,329)		$	(6,266)		$	(11,329)
Property Treaty		(9,500)			(3,291)			(9,500)			(3,291)
Surety & Credit		43,462			70,321			43,462			70,321
Liability		(9,881)			(13,335)			(9,881)			(13,335)
Other		(2,130)			(5,470)			(2,130)			(3,170)
Total net adverse loss development	$	15,685		$	36,896		$	15,685		$	39,196

37

The lines of business in our International segment provide a variety of coverages, most of which are medium to long-tail lines with moderate timing for claims reporting and medium to high reserve volatility. This segment incurs most of our catastrophe losses. In Marine & Energy, we insure complex, worldwide energy production facilities, oil rigs and offshore platforms that are subject to expensive business interruption claims and replacement costs. Catastrophe-related claims for energy projects may take several years to settle and can involve significant reserve volatility for coverage on both a primary and excess basis. The Property Treaty and direct and facultative property lines are short-tail with relatively fast claims reporting and lower reserve volatility.

We generally conduct our annual review of the International segment’s reserves in the fourth quarter. However, we accelerated our 2014 and 2013 annual reviews to the third quarter of each year due to the timing of issues related to certain Spanish surety bonds and a growing actuarially-indicated redundancy in several lines of business.

The adverse loss development in the Surety & Credit line of business primarily related to strengthening our reserves on a specific class of Spanish surety bonds, the majority of which were written prior to 2006. In the third quarter of 2013, we increased our reserves to reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling published in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. This resulted in recognition of $70.3 million of net adverse loss development in that quarter. We paid claims related to these bonds throughout 2014 and settled a large majority of the outstanding claims in the third quarter of 2014. In light of these settlements, we revised our estimates of our liability under these bonds and strengthened these reserves in the third quarter of 2014, which resulted in recognition of $43.5 million of net adverse development.

Our actual loss experience for Marine & Energy was better than the actuarial expectations in our current year reserve review compared to the prior year review. We conducted a detailed review of outstanding claims during each annual review to assist in determining our Marine & Energy reserves. The net favorable development recognized in 2014 related to the 2012 and prior accident years, partially offset by $10.0 million of reserve strengthening for the 2013 accident year. The net favorable development recognized in 2013 related to the 2008 – 2010 and 2012 accident years, as well as the release of $3.4 million of prior years’ catastrophe reserves related to Superstorm Sandy.

In Property Treaty, the 2014 net favorable development included the release of $6.0 million of prior years’ catastrophe reserves related to the 2013 European floods, as well as $1.5 million of reserve strengthening for the 2011 Denmark storms. The remaining net favorable development in 2014 and 2013 related to better than expected loss results based on a detailed review of outstanding claims and actuarial indications used in our current year reserve review compared to the prior year review.

The 2014 and 2013 net favorable development in Liability related primarily to our U.K. professional liability product, for which actual loss experience was better than the actuarially-indicated results in the current year reserve review compared to the prior year review. In 2014 and 2013, we recognized $12.7 million (for accident years 2013 and prior) and $16.1 million (for accident years 2011 and prior), respectively, for this product. In addition, 2014 and 2013 included adverse development related to other liability business, primarily for accident years 2011 and prior.

In the Other line of business, the net favorable loss development related to better than actuarially-indicated results, in our current reserve review compared to the prior year review, for our accident and health and direct and facultative property lines. In the second quarter of 2013, we recognized $2.3 million of favorable loss development in our direct and facultative property line related to settlement of claims for the 2010 New Zealand earthquake.

The previously-discussed favorable and adverse loss development, as well as the lower accident year catastrophe losses, caused the significant variances in the segment and line of business net loss ratios for the nine months and third quarter of 2014, compared to the same periods of 2013.

Regarding changes in presentation, the Marine & Energy category now includes the marine business, which was previously included in the Other category in 2013.

38

Investing Segment

We invest the majority of our funds in highly-rated fixed maturity securities, which are designated as available for sale securities. We held $6.6 billion of fixed maturity securities at September 30, 2014. Substantially all of our fixed maturity securities were investment grade and 74% were rated AAA or AA. In addition, we held $286.2 million of equity securities at September 30, 2014.

The following tables summarize the results and certain key metrics of our Investing segment.

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net investment income from:
Fixed maturity securities
Taxable	$	72,068		$	75,407		$	24,789		$	24,385
Exempt from U.S. income taxes		85,602			85,063			28,427			28,988
Total fixed maturity securities		157,670			160,470			53,216			53,373
Equity securities		14,231			10,758			2,088			2,950
Other		1,232			472			504			73
Total investment income		173,133			171,700			55,808			56,396
Investment expense		(5,653)			(6,059)			(1,572)			(2,188)
Total net investment income		167,480			165,641			54,236			54,208
Net realized investment gain		64,535			31,115			39,384			17,922
Segment pretax earnings	$	232,015		$	196,756		$	93,620		$	72,130
Fixed maturity securities:
Average yield *		3.5	%		3.6	%		3.4	%		3.6	%
Average tax equivalent yield *		4.3	%		4.5	%		4.3	%		4.4	%
Weighted-average life		8.3 years			8.2 years
Weighted-average duration		4.8 years			5.5 years
Weighted-average rating		AA			AA

* Excluding realized and unrealized gains and losses.

39

This table summarizes our investments by type, all of which were reported at fair value, at September 30, 2014 and December 31, 2013.

	September 30, 2014					December 31, 2013
	Amount		%			Amount		%
Fixed maturity securities
U.S. government and government agency securities	$	67,147		1	%	$	92,709		1	%
Fixed maturity securities of states, municipalities and political subdivisions		978,977		14			986,486		15
Special purpose revenue bonds of states, municipalities and political subdivisions		2,404,269		34			2,265,195		34
Corporate securities		1,262,868		18			1,225,238		18
Residential mortgage-backed securities		835,098		12			618,119		9
Commercial mortgage-backed securities		615,021		9			504,888		7
Asset-backed securities		327,971		4			182,392		3
Foreign government securities		85,190		1			147,446		2
Equity securities		286,194		4			517,466		8
Short-term investments		250,867		3			178,753		3
Total investments	$	7,113,602		100	%	$	6,718,692		100	%

At September 30, 2014, we held corporate fixed maturity securities issued by foreign corporations with an aggregate fair value of $472.7 million. In addition, we held securities issued by foreign governments, agencies or supranational entities with an aggregate fair value of $85.2 million. At December 31, 2013, we held $497.0 million and $147.4 million, respectively.

Our total investments increased $394.9 million in 2014, principally from newly generated cash flow and an $89.0 million increase in the pretax net unrealized gain. At September 30, 2014, the net unrealized gain on our investment portfolio was $243.0 million. The increase in the net unrealized gain was due to the decline in interest rates in 2014. Rates on 10-year U.S. Treasury notes declined 54 basis points in the first nine months of 2014. The weighted-average duration of our fixed maturity securities portfolio decreased to 4.8 years at September 30, 2014 (compared to 5.1 years at December 31, 2013 and 5.5 years at September 30, 2013), primarily due to the impact of the lower market interest rates on our municipal securities with call options and structured securities with prepayment options.

In the first quarter of 2014, we sold equity securities with a book value of $142.0 million, and realized a net gain of $21.3 million, in order to reposition our overall investment portfolio. In July 2014, we sold equity securities with a book value of $197.0 million and realized a net gain of $35.2 million. Due to an increase in equity valuations in early July, we made a decision at that time to further reduce our overall equity exposure.

The ratings of our individual securities within our fixed maturity securities portfolio at September 30, 2014 were as follows:

	Amount		%
AAA	$	1,039,212		16	%
AA		3,797,870		58
A		1,303,627		20
BBB		281,412		4
BB and below		154,420		2
Total fixed maturity securities	$	6,576,541		100	%

40

Corporate & Other

The following table summarizes activity in the Corporate & Other category.

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Net earned premium	$	482	$	10,972	$	(138)	$	1,206
Other revenue		813		253		249		231
Total revenue		1,295		11,225		111		1,437
Loss and loss adjustment expense, net		(5,153)		9,433		(5,149)		810
Other expense - Exited Lines		2,786		3,575		914		1,052
Other expense - Corporate		48,477		44,641		20,270		13,503
Interest expense		20,728		19,337		6,867		6,494
Foreign currency expense (benefit)		(8,924)		135		(15,601)		9,180
Total expense		57,914		77,121		7,301		31,039
Pretax loss	$	(56,619)	$	(65,896)	$	(7,190)	$	(29,602)

Net earned premium decreased year-over-year as we exited the HMO and medical excess reinsurance products in late 2012. Premium related to the other products included in Exited Lines was insignificant in both periods. The loss and loss adjustment expense in 2013 related to the HMO and medical excess reinsurance products. In the third quarter of 2014, we recognized $5.0 million of favorable loss development in our Spanish medical malpractice exited line of business due to reduced frequency of claims.

Our Corporate expenses not allocated to the segments increased year-over-year and quarter-over-quarter, primarily due to 1) higher incentive compensation based on the increase in pretax earnings and 2) expense related to certain unvested restricted stock awards for which the performance criteria were achieved in 2014. This higher expense was partially offset by allocation of certain stock-based compensation expense to our insurance underwriting segments beginning in 2014. The impact of foreign currency benefit/expense fluctuated period-over-period principally due to changes in the value of the British pound sterling and the Euro relative to the U.S. dollar. We hold available for sale securities denominated in non-functional currencies to economically hedge the currency exchange risk on our loss reserves denominated in non-functional currencies. The foreign currency benefit/expense related to loss reserves is recorded through the income statement, while the foreign currency benefit/expense related to available for sale securities is recorded through other comprehensive income within shareholders’ equity. This mismatch may cause fluctuations in our reported foreign currency benefit/expense in future periods.

41

Liquidity and Capital Management

We believe we have sufficient sources of liquidity at both a consolidated and insurance company legal entity level at a reasonable cost to pay claims and meet our other contractual obligations and liabilities as they become due in the short-term and long-term. Our current sources of liquidity include: 1) significant operating cash flow generated by our insurance companies, 2) our investment portfolio, most of which is held by our insurance companies, 3) our revolving loan and standby letter of credit facilities and 4) a $1.0 billion shelf registration. Our sources of liquidity are discussed below.

Cash Flow

We manage the liquidity of our insurance companies such that each subsidiary’s anticipated claims payments will be met by its own current operating cash flows, cash, short-term investments or investment maturities. Our insurance companies receive substantial cash from premiums, reinsurance recoverables, surety collateral, outward commutations, proceeds from sales and redemptions of investments, and investment income. Their principal cash outflows are for the payment of claims and loss adjustment expenses, premium payments to reinsurers, return of surety collateral, inward commutations, purchases of investments, policy acquisition costs, operating expenses, taxes and dividends paid to the parent company. We report all of the insurance companies’ investing activity in our Investing segment for segment reporting purposes. Our parent company’s principal cash inflows relate to its investment portfolio and dividends paid by the insurance companies, and its principal cash outflows relate to debt service, operating expenses, dividends paid to shareholders and common stock purchases. Cash provided by operating activities can fluctuate due to timing differences in the collection of premium receivables, reinsurance recoverables and surety collateral; the payment of losses, premium payables and return of surety collateral; and the completion of commutations.

The components of our net operating cash flows are summarized in the following table.

	Nine months ended September 30,
	2014		2013
Net earnings	$	345,314	$	292,187
Change in premium, claims and other receivables, net of reinsurance, premium and claims payable		(12,514)		(30,879)
Change in unearned premium, net		104,155		50,586
Change in loss and loss adjustment expense payable, net of reinsurance recoverables		(35,267)		103,023
Change in accounts payable and accrued liabilities		(43,608)		(145,740)
Gain on investments		(64,535)		(31,115)
Other, net		66,819		33,350
Cash provided by operating activities	$	360,364	$	271,412

Our cash provided by operating activities was $360.4 million in the first nine months of 2014, compared to $271.4 million in the same period of 2013. Cash provided by operating activities includes collateral funds we receive or refund for our U.S. surety business, for which we record a liability within accounts payable and accrued liabilities. We refunded U.S. surety collateral of $21.8 million in 2014 and $127.9 million in 2013. In addition, we paid $95.7 million of income tax payments in 2014, compared to $126.3 million in 2013.

Other fluctuations in our cash provided by operating activities relate to the timing of the collection and the payment of insurance-related receivables and payables. In regards to Spanish surety bonds, we paid claims of $199.9 million and collected reinsurance of $146.2 million in the first nine months of 2014. The related paid loss recoverables from reinsurers at September 30, 2014 were $69.5 million. At September 30, 2014, we had gross reserves of $140.3 million and ceded reserves of $78.4 million, or net reserves of $61.9 million, related to Spanish surety bonds. The net impact of our payment of claims and collection of recoverables related to these bonds will continue to impact our cash provided by operating activities in future periods, although the amount and timing of such payments and receipts are not determinable at this time.

On September 29, 2014, we executed a definitive purchase agreement to acquire all of the capital stock of Producers Ag Insurance Group, Inc. (ProAg) for $110.0 million cash, subject to a net worth adjustment at closing as described in the purchase agreement. We expect to close the transaction in the first quarter of 2015.

42

Investments

At September 30, 2014, we held a $7.1 billion investment portfolio, which included $250.9 million of liquid short-term investments. Our fixed maturity and equity securities portfolios are classified as available for sale. We expect to hold our fixed maturity securities until maturity, but we would be able to sell these securities, as well as our equity securities, to generate cash if needed. The parent company held $559.7 million of cash and investments at September 30, 2014, which are available to cover the holding company’s required cash disbursements.

Revolving Loan and Standby Letter of Credit Facilities

At September 30, 2014, we maintained an $825.0 million Revolving Loan Facility (Facility) with $374.1 million of available capacity. During the past several years, we used the Facility to fund purchases of our common stock. We expect to continue to use the Facility to opportunistically repurchase stock. We also have a $90.0 million Standby Letter of Credit Facility (Standby Facility) that is used to guarantee our performance in our Lloyd’s of London syndicate. The Facility expires in April 2019 and the Standby Facility expires in December 2017. See Note 7, “Notes Payable” to the Consolidated Financial Statements in our Annual Report on
Form 10-K for the year ended December 31, 2013 for additional information related to the Facility, the Standby Facility and our long-term debt.

Share Purchases

On August 20, 2014, our Board of Directors authorized a new $500.0 million stock purchase plan (the Plan) and cancelled $130.9 million remaining under a previous authorization. Purchases under the Plan may be made in the open market or in privately negotiated transactions from time-to-time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Purchases under the Plan will be made subject to market and business conditions, the level of cash generated from our operations, cash required for acquisitions, our debt covenant compliance, and other relevant factors. The Plan does not obligate us to purchase any particular number of shares, has no expiration date, and may be suspended or discontinued at any time at the Board’s discretion. As of October 24, 2014, $373.1 million of repurchase authority remains under the Plan.

We purchased our common stock in 2014 and 2013 as follows:

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Shares of common stock		2,968		1,055		2,007		31
Total cost	$	138,549	$	42,212	$	97,007	$	1,283
Weighted-average cost per share	$	46.69	$	40.02	$	48.35	$	42.00

Shelf Registration

We have a “Universal Shelf” registration statement that expires in March 2015, which we expect to renew. The Universal Shelf provides for the issuance of $1.0 billion of securities, which may be debt securities, equity securities, or a combination thereof. The Universal Shelf provides us the means to access the debt and equity markets relatively quickly, if we are satisfied with the current pricing in the financial markets.

Recent Accounting Guidance

See Note 1, “General Information — Recent Accounting Guidance” to the Consolidated Financial Statements for a description of recently issued accounting guidance that will impact our consolidated financial statements in future periods.

43

Critical Accounting Policies

We provided information about our critical accounting policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies,” in our Annual Report on Form 10-K for the year ended December 31, 2013. We have made no changes in the identification or methods of application of these policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Act)) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe, as specified in rules set forth by the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2014 using criteria established in the Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective in providing reasonable assurance of achieving the purposes described in Rule 13a-15(e) under the Act as of September 30, 2014.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

44

Part II — Other Information

Item 1. Legal Proceedings

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 23, 2012, the Board approved the purchase of up to $300.0 million of our common stock (the 2012 Plan). On August 20, 2014, the Board approved a new authorization for $500.0 million (the 2014 Plan) and cancelled $130.9 million remaining under the 2012 Plan. Purchases under the 2014 Plan may be made in the open market or in privately negotiated transactions from time-to-time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Purchases under the 2014 Plan will be made, subject to market and business conditions, the level of cash generated from our operations, cash required for acquisitions, our debt covenant compliance, and other relevant factors. The 2014 Plan does not obligate us to purchase any particular number of shares, has no expiration date, and may be suspended or discontinued at any time at the Board’s discretion. Our purchases in the third quarter of 2014 were as follows:

Period	Total number of             shares  purchased	Average price                  paid per share	Total number of shares       purchased as part of publicly announced plans or programs	Approximate dollar         value of shares that may       yet be purchased under the plans or programs
2012 Plan
July	192,048	$47.43	192,048	$156,921,443
August	548,342	$47.37	548,342	-
2014 Plan
August	-	-	-	$500,000,000
September	1,265,799	$48.92	1,265,799	$438,078,263

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

45

Item 6. Exhibits

Exhibit Number
2.1		Stock Purchase Agreement, dated September 29, 2014, by and among CMFG Life Insurance Company, CUNA Mutual Investment Corporation and HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on September 30, 2014).
3.1		Restated Certificate of Incorporation and Amendment of Certificate of Incorporation of HCC Insurance Holdings, Inc., filed with Delaware Secretary of State on July 23, 1996 and May 21, 1998, respectively (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8 (Registration No. 333-61687) filed on August 17, 1998).
3.2		Fourth Amended and Restated Bylaws of HCC Insurance Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 22, 2013).
4.1		Indenture, dated August 23, 2001, between HCC Insurance Holdings, Inc. and First Union National Bank related to Debt Securities (Senior Debt) (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on August 24, 2001).
4.2		Form of Fourth Supplemental Indenture, dated November 16, 2009, between HCC Insurance Holdings, Inc. and U.S. Bank National Association related to 6.30% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on November 13, 2009).
12	†	Statement Regarding Computation of Ratios.
31.1	†	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	†	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	†	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	†	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in XBRL: 1) Consolidated Balance Sheets, 2) Consolidated Statements of Earnings, 3) Consolidated Statements of Comprehensive Income, 4) Consolidated Statement of Changes in Shareholders’ Equity, 5) Consolidated Statements of Cash Flows and 6) Notes to Consolidated Financial Statements.

†     Filed herewith.

46

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HCC Insurance Holdings, Inc.
	(Registrant)
October 31, 2014	/s/ Christopher J.B. Williams
(Date)	Christopher J.B. Williams,
	Chief Executive Officer
October 31, 2014	/s/ Pamela J. Penny
(Date)	Pamela J. Penny, Executive Vice President and Chief Accounting Officer

47

EX-12

Exhibit 12

HCC Insurance Holdings, Inc. and Subsidiaries

Statement of Ratios

(unaudited, in thousands except ratios)

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net loss ratio
Loss and loss adjustment expense, net	$	960,875		$	992,547		$	311,937		$	320,376
Net earned premium		1,721,795			1,679,210			586,935			556,668
Net loss ratio (1)		55.8	%		59.1	%		53.1	%		57.6	%
(Net loss ratio = net loss and loss adjustment expense divided by net earned premium)
Expense ratio
Segment underwriting expense (2)	$	461,327		$	423,712		$	160,994		$	145,772
Segment revenue (3)		1,749,232			1,692,293			596,307			562,910
Expense ratio		26.4	%		25.0	%		27.0	%		25.9	%
(Expense ratio = segment underwriting expense divided by segment revenue)
Combined ratio		82.2	%		84.1	%		80.1	%		83.5	%
(Combined ratio = net loss ratio plus expense ratio)
Accident year net loss ratio
Loss and loss adjustment expense, net	$	960,875		$	992,547		$	311,937		$	320,376
Add: Favorable (adverse) development		30,651			39,634			30,651			27,842
Accident year net loss and loss adjustment expense	$	991,526		$	1,032,181		$	342,588		$	348,218
Net earned premium	$	1,721,795		$	1,679,210		$	586,935		$	556,668
Add: (Increase) decrease related to prior year reinstatement premium		2,564			-			2,564			-
Accident year net earned premium	$	1,724,359		$	1,679,210		$	589,499		$	556,668
Accident year net loss ratio		57.5	%		61.5	%		58.1	%		62.6	%
(Accident year net loss ratio = accident year net loss and loss adjustment expense divided by accident year net earned premium)

(1)  Calculated for our insurance companies using financial data reported in accordance with generally accepted accounting principles.

(2)  Sum of Other Expense for each of our insurance segments.

(3)  Sum of Segment Revenue for each of our insurance segments.

HCC Insurance Holdings, Inc. and Subsidiaries

Statement of Ratios

(unaudited, in thousands except ratios)

	Nine months ended September 30,						Three months ended September 30,
	2014			2013			2014			2013
Net paid loss ratio
Losses paid, net of reinsurance	$	1,024,673		$	884,022		$	350,603		$	297,696
Net earned premium		1,721,795			1,679,210			586,935			556,668
Net paid loss ratio		59.5	%		52.6	%		59.7	%		53.5	%
(Net paid loss ratio = losses paid, net of reinsurance, divided by net earned premium)
Ratio of earnings to fixed charges
Interest factor of rent expense (4)	$	4,087		$	3,875		$	1,303		$	1,338
Interest expense		20,874			19,656			6,890			6,574
Total fixed charges	$	24,961		$	23,531		$	8,193		$	7,912
Earnings before income tax expense	$	497,273		$	416,327		$	204,657		$	140,100
Interest factor of rent expense (4)		4,087			3,875			1,303			1,338
Interest expense		20,874			19,656			6,890			6,574
Earnings per calculation	$	522,234		$	439,858		$	212,850		$	148,012
Ratio of earnings to fixed charges (5)		20.92			18.69			25.98			18.71

(4)  Estimated to be 33% of total rent expense.

(5)  Earnings per calculation divided by total fixed charges.

EX-31.1

Exhibit 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Christopher J.B. Williams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCC Insurance Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 31, 2014	/s/ Christopher J.B. Williams
(Date)	Christopher J.B. Williams,
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Brad T. Irick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCC Insurance Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 31, 2014	/s/ Brad T. Irick
(Date)	Brad T. Irick, Executive Vice President
	and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION WITH RESPECT TO

QUARTERLY REPORT OF

HCC INSURANCE HOLDINGS, INC.

The undersigned, being the Chief Executive Officer and Chief Financial Officer of HCC Insurance Holdings, Inc. (the Company), pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, do hereby certify to the best of their knowledge with respect to the Quarterly Report of the Company on Form 10-Q, as filed with the Securities and Exchange Commission for the quarter ended September 30, 2014 (the Report):

1. that the Report fully complies with all requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended; and

2. that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

October 31, 2014	/s/ Christopher J.B. Williams
(Date)	Christopher J.B. Williams,
	Chief Executive Officer
October 31, 2014	/s/ Brad T. Irick
(Date)	Brad T. Irick, Executive Vice President
	and Chief Financial Officer

This certification is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of such section. This certification is not deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference. A signed original of this certification has been provided to HCC Insurance Holdings, Inc. and will be retained by HCC Insurance Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

(8)Earnings Per Share

The following table details the numerator and denominator used in our earnings per share calculations.

				Nine months ended September 30,				Three months ended September 30,
				2014		2013		2014		2013
Net earnings				$	345,314	$	292,187	$	140,267	$	98,175
Less: net earnings attributable to unvested restricted stock					(5,610)		(4,754)		(2,328)		(1,527)
		Net earnings available to common stock		$	339,704	$	287,433	$	137,939	$	96,648
Weighted-average common shares outstanding					98,340		98,881		97,909		98,723
Dilutive effect of outstanding securities (determined using
	treasury stock method)				238		254		225		270
		Weighted-average common shares and potential
			common shares outstanding		98,578		99,135		98,134		98,993
Earnings per common share
		Basic		$	3.45	$	2.91	$	1.41	$	0.98
		Diluted		$	3.45	$	2.90	$	1.41	$	0.98

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Supplemental Information (Tables)

9 Months Ended

Sep. 30, 2014

Supplemental Information [Abstract]

Supplemental Information

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Income taxes paid	$	95,678	$	126,295	$	25,265	$	26,354
Interest paid		16,758		14,808		1,774		1,486
Proceeds from sales of available for sale fixed maturity
securities		314,424		337,895		27,581		166,094
Proceeds from sales of equity securities		436,126		95,989		265,944		51,681
Dividends declared but not paid at end of period		28,985		22,540
Purchases of common stock not paid at end of period		12,323		-

XML

Segments (Tables)

9 Months Ended

Sep. 30, 2014

Segments [Abstract]

Information by business segment

			U.S. Property		Professional		Accident		U.S. Surety						Corporate
			& Casualty		Liability		& Health		& Credit		International		Investing		& Other		Consolidated
Nine months ended
	September 30, 2014
Net earned premium			$	271,718	$	261,457	$	723,051	$	148,496	$	316,591	$	-	$	482	$	1,721,795
Other revenue				14,933		800		7,865		1,576		2,745		232,015		813		260,747
	Segment revenue			286,651		262,257		730,916		150,072		319,336		232,015		1,295		1,982,542
Loss and LAE				106,442		154,172		519,497		43,108		142,809		-		(5,153)		960,875
Other expense				86,807		49,533		114,855		82,052		128,080		-		63,067		524,394
	Segment expense			193,249		203,705		634,352		125,160		270,889		-		57,914		1,485,269
		Segment pretax earnings (loss)	$	93,402	$	58,552	$	96,564	$	24,912	$	48,447	$	232,015	$	(56,619)	$	497,273

Nine months ended
	September 30, 2013
Net earned premium			$	276,647	$	277,662	$	657,995	$	144,673	$	311,261	$	-	$	10,972	$	1,679,210
Other revenue				16,198		304		3,736		1,027		2,790		196,756		253		221,064
	Segment revenue			292,845		277,966		661,731		145,700		314,051		196,756		11,225		1,900,274
Loss and LAE				121,060		141,921		483,709		32,287		204,137		-		9,433		992,547
Other expense				84,801		46,781		97,414		80,182		114,534		-		67,688		491,400
	Segment expense			205,861		188,702		581,123		112,469		318,671		-		77,121		1,483,947
		Segment pretax earnings (loss)	$	86,984	$	89,264	$	80,608	$	33,231	$	(4,620)	$	196,756	$	(65,896)	$	416,327

Three months ended
	September 30, 2014
Net earned premium			$	86,130	$	87,880	$	250,570	$	51,362	$	111,131	$	-	$	(138)	$	586,935
Other revenue				4,987		330		2,363		708		846		93,620		249		103,103
	Segment revenue			91,117		88,210		252,933		52,070		111,977		93,620		111		690,038
Loss and LAE				13,054		50,851		178,202		14,550		60,429		-		(5,149)		311,937
Other expense				28,659		14,988		40,601		28,645		48,101		-		12,450		173,444
	Segment expense			41,713		65,839		218,803		43,195		108,530		-		7,301		485,381
		Segment pretax earnings (loss)	$	49,404	$	22,371	$	34,130	$	8,875	$	3,447	$	93,620	$	(7,190)	$	204,657

Three months ended
	September 30, 2013
Net earned premium			$	91,684	$	92,439	$	223,048	$	47,442	$	100,849	$	-	$	1,206	$	556,668
Other revenue				4,769		(21)		1,406		406		888		72,130		231		79,809
	Segment revenue			96,453		92,418		224,454		47,848		101,737		72,130		1,437		636,477
Loss and LAE				13,666		30,100		163,143		13,436		99,221		-		810		320,376
Other expense				32,044		10,909		33,705		26,501		42,613		-		30,229		176,001
	Segment expense			45,710		41,009		196,848		39,937		141,834		-		31,039		496,377
		Segment pretax earnings (loss)	$	50,743	$	51,409	$	27,606	$	7,911	$	(40,097)	$	72,130	$	(29,602)	$	140,100

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Supplemental Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Supplemental Information
Income taxes paid	$ 25,265	$ 26,354	$ 95,678	$ 126,295
Interest paid	1,774	1,486	16,758	14,808
Proceeds from sales of available for sale fixed maturity securities	27,581	166,094	314,424	337,895
Proceeds from sales of equity securities	265,944	51,681	436,126	95,989
Dividends declared but not paid at end of period	28,985	22,540	28,985	22,540
Purchases of common stock not paid at end of period	$ 12,323		$ 12,323

XML

Stock based compensation (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Common stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	38
Weighted-average grant date fair value, awarded	$ 46.41
Aggregate fair value	$ 1,771
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	355
Weighted-average grant date fair value, awarded	$ 43.92
Aggregate fair value	15,603
Restricted stock [Member] | MinimumMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	0 years
Restricted stock [Member] | MaximumMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Restricted stock units (RSU) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares	13
Weighted-average grant date fair value, awarded	$ 45.14
Aggregate fair value	$ 593
Restricted stock units (RSU) [Member] | MinimumMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Restricted stock units (RSU) [Member] | MaximumMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2014

Notes Payable [Abstract]

Notes Payable

		September 30,		December 31,
		2014		2013
6.30% Senior Notes		$	299,213	$	299,098
Revolving Loan Facility			445,000		355,000
	Total notes payable	$	744,213	$	654,098

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Reinsurance (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Components of reinsurance recoverables
Reinsurance recoverable on paid losses	$ 108,186	$ 156,026
Reinsurance recoverable on outstanding losses	454,046	459,134
Reinsurance recoverable on incurred but not reported losses	633,302	663,597
Reserve for uncollectible reinsurance	(1,500)	(1,500)
Total reinsurance recoverables	$ 1,194,034	$ 1,277,257

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Segments (Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ (30,651)	$ (27,842)	$ (30,651)	$ (39,634)
Professional Liability [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	(978)	(26,284)	(978)	(26,284)
International [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	15,685	39,196	15,685	36,896
International [Member] | Surety & Credit [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ 43,500	$ 70,300	$ 43,500	$ 70,300

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Stock based Compensation

9 Months Ended

Sep. 30, 2014

Stock based Compensation [Abstract]

Stock based Compensation

(9) Stock-Based Compensation

In 2014, we granted the following shares of common stock, restricted stock and restricted stock units.

		Weighted-average
	Number	grant date		Aggregate		Vesting
	of shares	fair value		fair value		period
Common stock	38	$	46.41	$	1,771	None
Restricted stock	355		43.92		15,603	0 - 4 years
Restricted stock units	13		45.14		593	4 years

For common stock grants, we measure fair value based on the closing stock price of our common stock on the grant date and expense it on the grant date.

Certain awards of restricted stock and restricted stock units contain a performance condition based on the ultimate results for the applicable underwriting year.The number of such shares that vest could be higher or lowerthan initially granted.We measure fair value for these awards based on the closing price of our common stock on the grant date, and we recognize expense on a straight-line basis over the vesting period for those restricted stock awards or units expected to vest.

Certain of our executive officers were granted performance-based restricted stock in 2014. This restricted stock vests after three years and can vest from 0% to 200% of the initial shares granted.Vesting is based equally on an operating return on equity performance factor and a total shareholder return performance factor.

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income [Table Text Block]

				Foreign		Accumulated
		Net unrealized		currency		other
		investment		translation		comprehensive
		gains		adjustment		income
Nine months ended September 30, 2014
Balance at December 31, 2013		$	99,960	$	18,691	$	118,651
Other comprehensive income (loss)			57,190		(5,209)		51,981
	Balance at September 30, 2014	$	157,150	$	13,482	$	170,632
Three months ended September 30, 2014
Balance at June 30, 2014		$	199,619	$	20,803	$	220,422
Other comprehensive loss			(42,469)		(7,321)		(49,790)
	Balance at September 30, 2014	$	157,150	$	13,482	$	170,632

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Commitments and Contingencies (Details Textuals) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Commitments And Contingencies [Line Items]
Pretax cat loss after reinsurance	$ 14.3	$ 44.5
Longest Indemnification Expiration Date	2025

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Segments

9 Months Ended

Sep. 30, 2014

Segments [Abstract]

Segments

(10) Segments

We report HCC’s results in six operating segments, including the following five insurance underwriting segments:

U.S. Property & Casualty

Professional Liability

Accident & Health

U.S. Surety & Credit

International

The Investing segment includes our consolidated investment portfolio, as well as all investment income, investment related expenses, realized investment gains and losses, and other-than-temporary impairment credit losses on investments. All investment activity is reported as revenue, consistent with our consolidated presentation.

In addition to our segments, we include a Corporate & Other category to reconcile segment results to consolidated totals. The Corporate & Other category includes corporate operating expenses not allocated to the segments, interest expense on long-term debt, foreign currency expense (benefit), and underwriting results of our Exited Lines. Our Exited Lines include product lines that we no longer write and do not expect to write in the future.

The following tables present information by business segment.

			U.S. Property		Professional		Accident		U.S. Surety						Corporate
			& Casualty		Liability		& Health		& Credit		International		Investing		& Other		Consolidated
Nine months ended
	September 30, 2014
Net earned premium			$	271,718	$	261,457	$	723,051	$	148,496	$	316,591	$	-	$	482	$	1,721,795
Other revenue				14,933		800		7,865		1,576		2,745		232,015		813		260,747
	Segment revenue			286,651		262,257		730,916		150,072		319,336		232,015		1,295		1,982,542
Loss and LAE				106,442		154,172		519,497		43,108		142,809		-		(5,153)		960,875
Other expense				86,807		49,533		114,855		82,052		128,080		-		63,067		524,394
	Segment expense			193,249		203,705		634,352		125,160		270,889		-		57,914		1,485,269
		Segment pretax earnings (loss)	$	93,402	$	58,552	$	96,564	$	24,912	$	48,447	$	232,015	$	(56,619)	$	497,273

Nine months ended
	September 30, 2013
Net earned premium			$	276,647	$	277,662	$	657,995	$	144,673	$	311,261	$	-	$	10,972	$	1,679,210
Other revenue				16,198		304		3,736		1,027		2,790		196,756		253		221,064
	Segment revenue			292,845		277,966		661,731		145,700		314,051		196,756		11,225		1,900,274
Loss and LAE				121,060		141,921		483,709		32,287		204,137		-		9,433		992,547
Other expense				84,801		46,781		97,414		80,182		114,534		-		67,688		491,400
	Segment expense			205,861		188,702		581,123		112,469		318,671		-		77,121		1,483,947
		Segment pretax earnings (loss)	$	86,984	$	89,264	$	80,608	$	33,231	$	(4,620)	$	196,756	$	(65,896)	$	416,327

Three months ended
	September 30, 2014
Net earned premium			$	86,130	$	87,880	$	250,570	$	51,362	$	111,131	$	-	$	(138)	$	586,935
Other revenue				4,987		330		2,363		708		846		93,620		249		103,103
	Segment revenue			91,117		88,210		252,933		52,070		111,977		93,620		111		690,038
Loss and LAE				13,054		50,851		178,202		14,550		60,429		-		(5,149)		311,937
Other expense				28,659		14,988		40,601		28,645		48,101		-		12,450		173,444
	Segment expense			41,713		65,839		218,803		43,195		108,530		-		7,301		485,381
		Segment pretax earnings (loss)	$	49,404	$	22,371	$	34,130	$	8,875	$	3,447	$	93,620	$	(7,190)	$	204,657

Three months ended
	September 30, 2013
Net earned premium			$	91,684	$	92,439	$	223,048	$	47,442	$	100,849	$	-	$	1,206	$	556,668
Other revenue				4,769		(21)		1,406		406		888		72,130		231		79,809
	Segment revenue			96,453		92,418		224,454		47,848		101,737		72,130		1,437		636,477
Loss and LAE				13,666		30,100		163,143		13,436		99,221		-		810		320,376
Other expense				32,044		10,909		33,705		26,501		42,613		-		30,229		176,001
	Segment expense			45,710		41,009		196,848		39,937		141,834		-		31,039		496,377
		Segment pretax earnings (loss)	$	50,743	$	51,409	$	27,606	$	7,911	$	(40,097)	$	72,130	$	(29,602)	$	140,100

In the first nine months and third quarter of 2013, the Professional Liability segment pretax earnings included net favorable loss development of $26.3 million. In the first nine months and third quarter of 2014, the International segment pretax income included adverse development of $43.5 millionrelated to strengthening reserves for Spanish surety bonds, compared to $70.3million in the same periods of 2013.

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General Information

9 Months Ended

Sep. 30, 2014

General Information [Abstract]

General Information

(1) General Information

HCC Insurance Holdings, Inc. (HCC) and its subsidiaries (collectively we, us or our) include domestic andforeign property and casualty and life insurance companies and underwriting agencies with offices in theUnited States, the United Kingdom, Spain and Ireland. We underwrite a variety of largely non-correlated specialtyinsurance products, including property and casualty, accident and health, surety andcredit product lines,in approximately 180 countries. We market our products through a network of independent agents and brokers, throughmanaging general agents owned by the company, and directly to consumers. In addition, we assume insurance written by other insurance companies.

Basis of Presentation

Our unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of HCC and its subsidiaries. We have made all adjustments that, in our opinion, are necessary for a fair statement of results of the interim periods, and all such adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013. The consolidated balance sheet at December 31, 2013 was derived from the audited financial statements but does not include all disclosures required by GAAP.

Management must make estimates and assumptions that affect amounts reported in our consolidated financial statements and in disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates.

Goodwill

We conducted our 2014 goodwill impairment test as of June 30, 2014, which is consistent with the timeframe for our annual assessment in prior years. Based on our latest assessment, the fair value of each reporting unit exceeded its carrying amount.

Recent Accounting Guidance

A new accounting standard issued in 2014 will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration/payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or investment income. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the first quarter of 2017 and may be applied on a full retrospective or modified retrospective approach. We are currently assessing the impact the implementation of this standard will have on our consolidated financial statements.

Acquisition

On September 29, 2014, we executed a definitive purchase agreement to acquire all of the capital stock of Producers Ag Insurance Group, Inc. (ProAg) for $110.0 million cash, subject to a net worth adjustment at closing as described in the purchase agreement. The transaction is expected to close in early 2015 following the necessary regulatory approvals. ProAg writes multi-peril crop, crop hail, named peril and livestock insurance.

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Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Share-based Compensation [Abstract]

Schedule of Share-based Compensation, Common Stock, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

		Weighted-average
	Number	grant date		Aggregate		Vesting
	of shares	fair value		fair value		period
Common stock	38	$	46.41	$	1,771	None
Restricted stock	355		43.92		15,603	0 - 4 years
Restricted stock units	13		45.14		593	4 years

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Liability for Unpaid Loss and Loss Adjustment Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
LiabilityForUnpaidClaimsAndClaimsAdjustmentExpenseNetAbstract
Reserves at beginning of period	$ 3,841,497	$ 3,814,684	$ 3,902,132	$ 3,767,850
Less reinsurance recoverables on reserves	1,081,249	1,003,663	1,122,731	1,018,047
Net reserves at beginning of period	2,760,248	2,811,021	2,779,401	2,749,803
Net loss and loss adjustment expense:
Net loss and loss adjustment expense	311,937	320,376	960,875	992,547
Net loss and loss adjustment expense payments for claims occurring during:
Net loss and loss adjustment expense payments	(350,603)	(297,696)	(1,024,673)	(884,022)
Foreign currency adjustment	(32,006)	22,331	(26,027)	(2,296)
Net reserves at end of period	2,689,576	2,856,032	2,689,576	2,856,032
Plus reinsurance recoverables on reserves	1,087,348	1,165,815	1,087,348	1,165,815
Reserves at end of period	$ 3,776,924	$ 4,021,847	$ 3,776,924	$ 4,021,847

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Liability for Unpaid Loss and Loss Adjustment Expense (Tables)

9 Months Ended

Sep. 30, 2014

Liability for Unpaid Loss and Loss Adjustment Expense

Rollforward of Liability for Unpaid Loss and Loss Adjustment Expense

		Nine months ended September 30,				Three months ended September 30,
		2014		2013		2014		2013
Reserves at beginning of period		$	3,902,132	$	3,767,850	$	3,841,497	$	3,814,684
Less reinsurance recoverables on reserves			1,122,731		1,018,047		1,081,249		1,003,663
	Net reserves at beginning of period		2,779,401		2,749,803		2,760,248		2,811,021
Net loss and loss adjustment expense			960,875		992,547		311,937		320,376
Net loss and loss adjustment expense payments			(1,024,673)		(884,022)		(350,603)		(297,696)
Foreign currency adjustment			(26,027)		(2,296)		(32,006)		22,331
	Net reserves at end of period		2,689,576		2,856,032		2,689,576		2,856,032
Plus reinsurance recoverables on reserves			1,087,348		1,165,815		1,087,348		1,165,815
	Reserves at end of period	$	3,776,924	$	4,021,847	$	3,776,924	$	4,021,847

Details of Loss and Loss Adjustment Expense

			Nine months ended September 30,				Three months ended September 30,
			2014		2013		2014		2013
Net (favorable) adverse loss development
	U.S. Property & Casualty		$	(40,307)	$	(40,754)	$	(40,307)	$	(40,754)
	Professional Liability			(978)		(26,284)		(978)		(26,284)
	U.S. Surety & Credit			-		(9,492)		-		-
	International			15,685		36,896		15,685		39,196
	Exited Lines			(5,051)		-		(5,051)		-
		Total net favorable loss development		(30,651)		(39,634)		(30,651)		(27,842)
Accident year catastrophe losses				15,886		48,055		5,531		18,134
All other net loss and loss adjustment expense				975,640		984,126		337,057		330,084
		Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376

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Stock based Compensation (Details Textuals)	9 Months Ended
	Sep. 30, 2014
MinimumMember
Stock Based Compensation [Line Items]
Percentage Of Restricted Stock Shares Vesting Range	0.00%
MaximumMember
Stock Based Compensation [Line Items]
Percentage Of Restricted Stock Shares Vesting Range	200.00%

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Liability for Unpaid Loss and Loss Adjustment Expense (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Jun. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ (30,651)	$ (27,842)		$ (30,651)	$ (39,634)
Accident year catastrophe losses	5,531	18,134		15,886	48,055
All other net loss and loss adjustment expense	337,057	330,084		975,640	984,126
Loss and loss adjustment expense, net	311,937	320,376		960,875	992,547
U.S. Property & Casualty [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	(40,307)	(40,754)		(40,307)	(40,754)
Loss and loss adjustment expense, net	13,054	13,666		106,442	121,060
Professional Liability [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	(978)	(26,284)		(978)	(26,284)
Loss and loss adjustment expense, net	50,851	30,100		154,172	141,921
Accident & Health [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	0	0		0	0
Loss and loss adjustment expense, net	178,202	163,143		519,497	483,709
U.S. Surety & Credit [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	0	0	(9,500)	0	(9,492)
Loss and loss adjustment expense, net	14,550	13,436		43,108	32,287
International [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	15,685	39,196		15,685	36,896
Loss and loss adjustment expense, net	60,429	99,221		142,809	204,137
Exited Lines [Member]
Segment Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ (5,051)	$ 0		$ (5,051)	$ 0

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Liability for Unpaid Loss and Loss Adjustment Expense (Details Textuals1) (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Jun. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ (30,651)	$ (27,842)		$ (30,651)	$ (39,634)
U.S. Property & Casualty [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(40,307)	(40,754)		(40,307)	(40,754)
Professional Liability [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(978)	(26,284)		(978)	(26,284)
Accident & Health [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	0	0		0	0
U.S. Surety & Credit [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	0	0	(9,500)	0	(9,492)
International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	15,685	39,196		15,685	36,896
Exited Lines [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(5,051)	0		(5,051)	0
Aviation [Member] | U.S. Property & Casualty [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(6,600)
Surety [Member] | U.S. Surety & Credit [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development			(3,700)
Credit LOB [Member] | U.S. Surety & Credit [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development			(5,800)
Energy [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development		(10,100)
Liability LOB [Member] | U.S. Property & Casualty [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(20,700)
Liability LOB [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development		(16,100)
Surety & Credit [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	43,500	70,300		43,500	70,300
D&O prior to 2007 and 2009 and 2010 | Professional Liability [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development		(64,200)
D&O 2007 and 2008 | Professional Liability [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development		37,900
International segment - release of 2010 catastrophe reserves for New Zealand earthquake | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development			(2,300)
Superstorm Sandy [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development		(3,400)
Quota Share Contract Member [Member] | U.S. Property & Casualty [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(5,000)	(17,000)
Prior Year Catastrophe Reserve Releases [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(5,100)	(5,000)
Prior Year Catastrophe Reserve Releases [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(4,600)
International segment - release of 2013 catastrophe reserves for European floods | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	(6,000)
International segment - release of 2011 catastrophe reserves for Denmark storms | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	1,500
International segment - Various LOB [Member] | International [Member]
Segment LOB Event Reporting Information [Line Items]
Total net (favorable) adverse loss development	$ (23,200)

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities
Net earnings	$ 345,314	$ 292,187
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in premium, claims and other receivables	(56,631)	(52,395)
Change in reinsurance recoverables	60,074	(138,103)
Change in ceded unearned premium	(25,071)	(44,809)
Change in loss and loss adjustment expense payable	(95,341)	241,126
Change in unearned premium	129,226	95,395
Change in reinsurance, premium and claims payable	44,117	21,516
Change in accounts payable and accrued liabilities	(43,608)	(145,740)
Stock-based compensation expense	18,718	10,100
Depreciation and amortization expense	12,476	13,962
Gain on investments	(64,535)	(31,115)
Other, net	35,625	9,288
Cash provided by operating activities	360,364	271,412
Investing activities
Sales of available for sale fixed maturity securities	314,424	337,895
Sales of equity securities	436,126	95,989
Sales of other investments	0	23,719
Maturity or call of available for sale fixed maturity securities	413,290	488,817
Cost of available for sale fixed maturity securities acquired	(1,159,975)	(1,109,233)
Cost of equity securities acquired	(191,639)	(226,601)
Change in short-term investments	(79,714)	134,515
Payments for purchase of businesses, net of cash received	(7,003)	(8,214)
Proceeds from sale of subsidiaries	16,589	1,327
Other, net	(5,051)	(6,575)
Cash used by investing activities	(262,953)	(268,361)
Financing activities
Advances on line of credit	195,000	130,000
Payments on line of credit	(105,000)	(60,000)
Sale of common stock	16,077	8,725
Purchase of common stock	(126,226)	(47,869)
Dividends paid	(67,564)	(49,773)
Other, net	2,818	(487)
Cash used by financing activities	(84,895)	(19,404)
Net increase (decrease) in cash	12,516	(16,353)
Cash at beginning of year	58,301	71,390
Cash at end of period	$ 70,817	$ 55,037

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Notes Payable

9 Months Ended

Sep. 30, 2014

Notes Payable [Abstract]

Notes Payable

(6) Notes Payable

Our notes payable consisted of the following:

		September 30,		December 31,
		2014		2013
6.30% Senior Notes		$	299,213	$	299,098
Revolving Loan Facility			445,000		355,000
	Total notes payable	$	744,213	$	654,098

On April 30, 2014, we entered into an agreement to modify our $600.0 million Revolving Loan Facility (Facility). The amended agreement increased the borrowing capacity under the Facility to $825.0million and extended the term by two years to April 30, 2019, among other changes. The weighted-average interest rate on borrowings under the Facility at September 30, 2014was 1.4%. The borrowings and letters of credit issued under the Facility reduced our available borrowing capacity on the Facility to $374.1 million at September 30, 2014.

There were no other material changes to the Facility or to the terms and conditions of our Senior Notes or Standby Letter of Credit Facility (Standby Facility) from those described in Note 7, “Notes Payable” to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013.

We were in compliance with debt covenants related to our 6.30% Senior Notes, the Facility and the Standby Facility at September 30, 2014.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings per share

				Nine months ended September 30,				Three months ended September 30,
				2014		2013		2014		2013
Net earnings				$	345,314	$	292,187	$	140,267	$	98,175
Less: net earnings attributable to unvested restricted stock					(5,610)		(4,754)		(2,328)		(1,527)
		Net earnings available to common stock		$	339,704	$	287,433	$	137,939	$	96,648
Weighted-average common shares outstanding					98,340		98,881		97,909		98,723
Dilutive effect of outstanding securities (determined using
	treasury stock method)				238		254		225		270
		Weighted-average common shares and potential
			common shares outstanding		98,578		99,135		98,134		98,993
Earnings per common share
		Basic		$	3.45	$	2.91	$	1.41	$	0.98
		Diluted		$	3.45	$	2.90	$	1.41	$	0.98

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Supplemental Information

9 Months Ended

Sep. 30, 2014

Supplemental Information [Abstract]

Supplemental Information

(12) Supplemental Information

Supplemental cash flow information was as follows:

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Income taxes paid	$	95,678	$	126,295	$	25,265	$	26,354
Interest paid		16,758		14,808		1,774		1,486
Proceeds from sales of available for sale fixed maturity
securities		314,424		337,895		27,581		166,094
Proceeds from sales of equity securities		436,126		95,989		265,944		51,681
Dividends declared but not paid at end of period		28,985		22,540
Purchases of common stock not paid at end of period		12,323		-

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Investments
Fixed maturity securities - available for sale, at fair value (amortized cost: 2014 - $6,339,054 and 2013 - $5,921,487)	$ 6,576,541	$ 6,022,473
Equity securities - available for sale, at fair value (cost: 2014 - $280,663 and 2013 - $464,388)	286,194	517,466
Short-term investments, at cost (approximates fair value)	250,867	178,753
Total investments	7,113,602	6,718,692
Cash	70,817	58,301
Restricted cash and securities	131,516	125,777
Premium, claims and other receivables	650,751	580,107
Reinsurance recoverables	1,194,034	1,277,257
Ceded unearned premium	330,224	305,438
Ceded life and annuity benefits	50,114	56,491
Deferred policy acquisition costs	230,350	201,698
Goodwill	899,148	895,200
Other assets	147,419	125,559
Total assets	10,817,975	10,344,520
LIABILITIES
Loss and loss adjustment expense payable	3,776,924	3,902,132
Life and annuity policy benefits	50,114	56,491
Reinsurance, premium and claims payable	375,299	332,985
Unearned premium	1,263,307	1,134,849
Deferred ceding commissions	97,276	89,528
Notes payable	744,213	654,098
Accounts payable and accrued liabilities	620,177	500,007
Total liabilities	6,927,310	6,670,090
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; 250,000 shares authorized (shares issued: 2014 - 126,371 and 2013 - 125,577; outstanding: 2014 - 98,162 and 2013 - 100,336)	126,371	125,577
Additional paid-in capital	1,103,774	1,073,105
Retained earnings	3,356,841	3,085,501
Accumulated other comprehensive income	170,632	118,651
Treasury stock, at cost (shares: 2014 - 28,209 and 2013 - 25,241)	(866,953)	(728,404)
Total shareholders' equity	3,890,665	3,674,430
Total liabilities and shareholders' equity	$ 10,817,975	$ 10,344,520

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Stock based Compensation (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Number of shares	355
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Weighted-average grant date fair value, awarded	$ 43.92
Restricted stock units (RSU) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Number of shares	13
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Weighted-average grant date fair value, awarded	$ 45.14

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Consolidated Statement of Changes in Shareholders' Equity (USD $) In Thousands	Total	Common stock [Member]	Additional paid-in capital [Member]	Retained earnings [Member]	Accumulated other comprehensive income [Member]	Treasury stock [Member]
Balance at Dec. 31, 2013	$ 3,674,430	$ 125,577	$ 1,073,105	$ 3,085,501	$ 118,651	$ (728,404)
Net earnings	345,314			345,314
Other comprehensive income	51,981				51,981
Issuance of 363 shares for exercise of options, including tax effect	12,638	363	12,275
Issuance of 92 shares for employee stock purchase plan	3,439	92	3,347
Purchase of 2,968 common shares	(138,549)					(138,549)
Stock-based compensation	15,386	339	15,047
Cash dividends declared, $0.745 per share	(73,974)			(73,974)
Balance at Sep. 30, 2014	$ 3,890,665	$ 126,371	$ 1,103,774	$ 3,356,841	$ 170,632	$ (866,953)

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Notes Payable (Detail Textuals) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Notes Payable [Abstract]
Interest rate of senior notes	6.30%
Borrowing capacity under line of credit facility	$ 825.0	$ 600.0
Borrowing rate under revolving loan facility	1.40%
Remaining borrowing capacity under Revolving Loan Facility as reduced by outstanding letters of credit	$ 374.1
Line of credit facility expiration date	Apr. 30, 2019

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Reinsurance

9 Months Ended

Sep. 30, 2014

Reinsurance [Abstract]

Reinsurance

(4) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic losses and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

		Nine months ended September 30,				Three months ended September 30,
		2014		2013		2014		2013
Direct written premium		$	2,033,094	$	1,911,619	$	663,343	$	616,938
Reinsurance assumed			277,171		296,942		67,471		61,975
Reinsurance ceded			(487,875)		(478,609)		(145,620)		(157,179)
	Net written premium	$	1,822,390	$	1,729,952	$	585,194	$	521,734
Direct earned premium		$	1,952,997	$	1,860,093	$	664,002	$	622,464
Reinsurance assumed			231,599		252,902		79,258		81,594
Reinsurance ceded			(462,801)		(433,785)		(156,325)		(147,390)
	Net earned premium	$	1,721,795	$	1,679,210	$	586,935	$	556,668
Direct loss and loss adjustment expense		$	1,139,471	$	1,210,862	$	413,560	$	517,382
Reinsurance assumed			80,267		119,315		16,993		8,607
Reinsurance ceded			(258,863)		(337,630)		(118,616)		(205,613)
	Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376

Policy acquisition costs		$	331,985	$	309,285	$	116,775	$	105,254
Ceding commissions			(113,764)		(105,898)		(40,565)		(39,612)
	Net policy acquisition costs	$	218,221	$	203,387	$	76,210	$	65,642

The table below shows the components of our reinsurance recoverables in our consolidated balance sheets.

		September 30,		December 31,
		2014		2013
Reinsurance recoverable on paid losses		$	108,186	$	156,026
Reinsurance recoverable on outstanding losses			454,046		459,134
Reinsurance recoverable on incurred but not reported losses			633,302		663,597
Reserve for uncollectible reinsurance			(1,500)		(1,500)
	Total reinsurance recoverables	$	1,194,034	$	1,277,257

Reinsurers not authorized by the respective states of domicile of our U.S. domiciled insurance companies are required to collateralize reinsurance obligations due to us. The table below shows letters of credit and cash that are available to us as collateral, as well as amounts we owe reinsurers that can be offset against amounts due to us.

		September 30,		December 31,
		2014		2013
Payables to reinsurers		$	195,643	$	208,850
Letters of credit			83,320		100,529
Funds held in trust			133,282		88,310
	Total credits	$	412,245	$	397,689

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2014

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income [Text Block]

(7) Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income in our consolidated balance sheets were as follows:

				Foreign		Accumulated
		Net unrealized		currency		other
		investment		translation		comprehensive
		gains		adjustment		income
Nine months ended September 30, 2014
Balance at December 31, 2013		$	99,960	$	18,691	$	118,651
Other comprehensive income (loss)			57,190		(5,209)		51,981
	Balance at September 30, 2014	$	157,150	$	13,482	$	170,632
Three months ended September 30, 2014
Balance at June 30, 2014		$	199,619	$	20,803	$	220,422
Other comprehensive loss			(42,469)		(7,321)		(49,790)
	Balance at September 30, 2014	$	157,150	$	13,482	$	170,632

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Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Effect of reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs
Direct written premium	$ 663,343	$ 616,938	$ 2,033,094	$ 1,911,619
Reinsurance assumed	67,471	61,975	277,171	296,942
Reinsurance ceded	(145,620)	(157,179)	(487,875)	(478,609)
Net written premium	585,194	521,734	1,822,390	1,729,952
Direct earned premium	664,002	622,464	1,952,997	1,860,093
Reinsurance assumed	79,258	81,594	231,599	252,902
Reinsurance ceded	(156,325)	(147,390)	(462,801)	(433,785)
Net earned premium	586,935	556,668	1,721,795	1,679,210
Direct loss and loss adjustment expense	413,560	517,382	1,139,471	1,210,862
Reinsurance assumed	16,993	8,607	80,267	119,315
Reinsurance ceded	(118,616)	(205,613)	(258,863)	(337,630)
Net loss and loss adjustment expense	311,937	320,376	960,875	992,547
Policy acquisition costs	116,775	105,254	331,985	309,285
Ceding commissions	(40,565)	(39,612)	(113,764)	(105,898)
Net policy acquisition costs	$ 76,210	$ 65,642	$ 218,221	$ 203,387

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Consolidated Statement of Changes in Shareholders' Equity (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Issuance of shares for exercise of options	363
Issuance of shares for employee stock purchase plan	92
Purchase of common shares	2,968
Cash dividends declared	$ 0.745

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Investments
Fixed maturity securities, available for sale, amortized cost	$ 6,339,054	$ 5,921,487
Equity securities, available for sale, cost	$ 280,663	$ 464,388
SHAREHOLDERS' EQUITY
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	126,371	125,577
Common stock, shares outstanding	98,162	100,336
Treasury stock	28,209	25,241

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Investments (Details Textuals) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Investment [Abstract]
Condition for categorizing the impaired securities	$ 1,000,000
Condition for categorizing the impaired securities, percentage	10.00%
Weighted-average life of mortgage-backed and asset-backed securities, Years	5.6
Number of fixed maturity and equity securities held	2,860
Percentage of securities in unrealized loss position	28.00%
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses	$ (42,545,000)	$ (105,221,000)

XML

Document and Entity Information In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	HCC INSURANCE HOLDINGS INC/DE/
Entity Central Index Key	0000888919
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	96.8

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements [Abstract]

Fair Value Measurements

(3) Fair Value Measurements

Our financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in our financial statements.In determining fair value, we generally apply the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. We classify our financial instruments into the following three-level hierarchy:

•Level 1 – Inputs are based on quoted prices in active markets for identical instruments.

•Level 2 – Inputs are based on observable market data (other than quoted prices), or are derived from or corroborated by observable market data.

•Level 3 – Inputs are unobservable and not corroborated by market data.

Our Level 1 investments consist ofU.S. Treasuries, money market fundsand equity securities traded in an active exchange market. We use unadjusted quoted prices for identical instruments to measure fair value.

Our Level 2 investments include most of our fixed maturity securities, which consist of U.S. government agency securities, municipal bonds (including those held as restricted securities), corporate debt securities, bank loans, mortgage-backed and asset-backed securities (including collateralized loan obligations), and deposits supporting our Lloyd’s syndicate business. Level 2 also includes certificates of deposit and other interest-bearing deposits at banks, which we report as short-term investments. We measure fair value for the majority of our Level 2 investments using matrix pricing and observable market data, including benchmark securities or yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, bids, offers, default rates, loss severity and other economic measures. We measure fair value for our structured securities using observable market data in cash flow models.

We are responsible for the prices used in our fair value measurements. We use independent pricing services to assist us in determining fair value for 99% of our Level 2 investments. The pricing services provide a single price or quote per security. We use data provided by our third party investment managers and Lloyd’s of London to value the remaining Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, we perform various quantitative and qualitative procedures, including: 1) evaluation of the underlying methodologies, 2) analysis of recent sales activity, 3) analytical review of our fair values against current market prices and 4) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for our investments were judged to be inactive at period end. Based on these procedures, we did not adjust the prices or quotes provided by our independent pricing services, third party investment managers or Lloyd’s of London as of September 30,2014 or December 31, 2013.

Our Level 2 financial instruments also include our notes payable. We determine the fair value of our 6.30% Senior Notes based on quoted prices in an inactive market. The fair value of borrowings under our Revolving Loan Facility approximates the carrying amount because interest is based on 30-day LIBOR plus a margin.

Our Level 3 securities include certain fixed maturity securities and an insurance contract that we account for as a derivative and classify in other assets. Our Level 3 category also includes liabilities for future earnoutpayments due to former owners of businesses we acquired, which are classified within accounts payable and accrued liabilities. We determine fair value of the derivative and the earnout payments based on internally developed models that use assumptions or other data that are not readily observable from objective sources. Fixed maturity securities classified as Level 3 at December 31, 2013 included special purpose revenue bond auction rate securities, which had interest rates that reset at periodic intervals.  These securities were thinly traded and observable market data was not readily available.  We determined the fair value of these securities using prices quoted by a broker.

The following tables present the fair value of our financial instruments that were carried or disclosed at fair value. Unless indicated, these items were carried at fair value on our consolidated balance sheets.

			Level 1		Level 2		Level 3		Total
September 30, 2014
Fixed maturity securities
	U.S. government and government agency securities		$	59,796	$	7,351	$	-	$	67,147
	Fixed maturity securities of states, municipalities
		and political subdivisions		-		978,977		-		978,977
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		-		2,404,269		-		2,404,269
	Corporate securities			-		1,262,719		149		1,262,868
	Residential mortgage-backed securities			-		835,098		-		835,098
	Commercial mortgage-backed securities			-		615,021		-		615,021
	Asset-backed securities			-		327,971		-		327,971
	Foreign government securities			-		85,190		-		85,190
		Total fixed maturity securities		59,796		6,516,596		149		6,576,541
Equity securities				286,194		-		-		286,194
Short-term investments*				107,702		143,165		-		250,867
Restricted cash and securities				-		2,348		-		2,348
Premium, claims and other receivables				-		59,736		-		59,736
Other assets				19		-		1,201		1,220
	Total assets measured at fair value		$	453,711	$	6,721,845	$	1,350	$	7,176,906
Notes payable*			$	-	$	793,162	$	-	$	793,162
Accounts payable and accrued liabilities - earnout liabilities				-		2,348		9,039		11,387
	Total liabilities measured at fair value		$	-	$	795,510	$	9,039	$	804,549

__________

* Carried at cost or amortized cost on consolidated balance sheet.

			Level 1		Level 2		Level 3		Total
December 31, 2013
Fixed maturity securities
	U.S. government and government agency securities		$	84,032	$	8,677	$	-	$	92,709
	Fixed maturity securities of states, municipalities
		and political subdivisions		-		986,486		-		986,486
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		-		2,255,928		9,267		2,265,195
	Corporate securities			-		1,225,088		150		1,225,238
	Residential mortgage-backed securities			-		618,119		-		618,119
	Commercial mortgage-backed securities			-		504,888		-		504,888
	Asset-backed securities			-		182,392		-		182,392
	Foreign government securities			-		147,446		-		147,446
		Total fixed maturity securities		84,032		5,929,024		9,417		6,022,473
Equity securities				517,466		-		-		517,466
Short-term investments*				68,958		109,795		-		178,753
Restricted cash and securities				-		1,853		-		1,853
Premium, claims and other receivables				-		66,515		-		66,515
Other assets				20		-		941		961
	Total assets measured at fair value		$	670,476	$	6,107,187	$	10,358	$	6,788,021
Notes payable*			$	-	$	707,656	$	-	$	707,656
Accounts payable and accrued liabilities - earnout liability				-		1,853		7,259		9,112
	Total liabilities measured at fair value		$	-	$	709,509	$	7,259	$	716,768

__________

*Carried at cost or amortized cost on consolidated balance sheet.

In the first quarter of 2013, we purchased $9.4million of special purpose revenue bond auction rate securities, which we continued to hold and classify in Level 3 at December 31, 2013. We sold these securities in the first quarter of 2014. There were no transfers between Level 1, Level 2 or Level 3 in the first nine months of 2014and2013.

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Consolidated Statement of Earnings (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
REVENUE
Net earned premium	$ 586,935	$ 556,668	$ 1,721,795	$ 1,679,210
Net investment income	54,236	54,208	167,480	165,641
Other operating income	9,483	7,679	28,732	24,308
Net realized investment gain	39,384	17,922	64,535	31,115
Total revenue	690,038	636,477	1,982,542	1,900,274
EXPENSE
Loss and loss adjustment expense, net	311,937	320,376	960,875	992,547
Policy acquisition costs, net	76,210	65,642	218,221	203,387
Other operating expense	90,344	103,785	285,299	268,357
Interest expense	6,890	6,574	20,874	19,656
Total expense	485,381	496,377	1,485,269	1,483,947
Earnings before income taxes	204,657	140,100	497,273	416,327
Income tax expense	64,390	41,925	151,959	124,140
Net earnings	$ 140,267	$ 98,175	$ 345,314	$ 292,187
Earnings per common share
Basic	$ 1.41	$ 0.98	$ 3.45	$ 2.91
Diluted	$ 1.41	$ 0.98	$ 3.45	$ 2.9

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Investments (Tables)

9 Months Ended

Sep. 30, 2014

Investment [Abstract]

Fixed Maturity & Equity Securities Available For Sale

		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
September 30, 2014
U.S. government and government agency securities		$	66,347	$	1,063	$	(263)	$	67,147
Fixed maturity securities of states, municipalities
	and political subdivisions		919,617		59,857		(497)		978,977
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,272,817		134,571		(3,119)		2,404,269
Corporate securities			1,234,819		37,584		(9,535)		1,262,868
Residential mortgage-backed securities			827,975		16,893		(9,770)		835,098
Commercial mortgage-backed securities			603,859		16,567		(5,405)		615,021
Asset-backed securities			329,358		365		(1,752)		327,971
Foreign government securities			84,262		1,932		(1,004)		85,190
	Total fixed maturity securities	$	6,339,054	$	268,832	$	(31,345)	$	6,576,541
Equity securities		$	280,663	$	16,731	$	(11,200)	$	286,194

December 31, 2013
U.S. government and government agency securities		$	91,047	$	2,157	$	(495)	$	92,709
Fixed maturity securities of states, municipalities
	and political subdivisions		941,580		50,885		(5,979)		986,486
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,240,412		71,541		(46,758)		2,265,195
Corporate securities			1,195,387		40,860		(11,009)		1,225,238
Residential mortgage-backed securities			622,766		15,289		(19,936)		618,119
Commercial mortgage-backed securities			502,069		16,155		(13,336)		504,888
Asset-backed securities			183,660		319		(1,587)		182,392
Foreign government securities			144,566		3,237		(357)		147,446
	Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457)	$	6,022,473
Equity securities		$	464,388	$	58,842	$	(5,764)	$	517,466

Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position

				Less than 12 months				12 months or more				Total
						Unrealized				Unrealized				Unrealized
				Fair value		losses		Fair value		losses		Fair value		losses
September 30, 2014
Fixed maturity securities
	U.S. government and government agency
		securities		$	15,675	$	(30)	$	11,129	$	(233)	$	26,804	$	(263)
	Fixed maturity securities of states,
		municipalities and political subdivisions			12,500		(81)		29,505		(416)		42,005		(497)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			26,622		(104)		176,961		(3,015)		203,583		(3,119)
	Corporate securities				357,022		(4,672)		96,757		(4,863)		453,779		(9,535)
	Residential mortgage-backed securities				179,700		(917)		253,192		(8,853)		432,892		(9,770)
	Commercial mortgage-backed securities				110,383		(840)		144,183		(4,565)		254,566		(5,405)
	Asset-backed securities				148,445		(863)		51,313		(889)		199,758		(1,752)
	Foreign government securities				29,089		(924)		7,162		(80)		36,251		(1,004)
Equity securities					123,984		(10,217)		4,406		(983)		128,390		(11,200)
			Total	$	1,003,420	$	(18,648)	$	774,608	$	(23,897)	$	1,778,028	$	(42,545)

December 31, 2013
Fixed maturity securities
	U.S. government and government agency
		securities		$	23,717	$	(495)	$	-	$	-	$	23,717	$	(495)
	Fixed maturity securities of states,
		municipalities and political subdivisions			136,160		(5,277)		8,997		(702)		145,157		(5,979)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			684,560		(35,832)		83,228		(10,926)		767,788		(46,758)
	Corporate securities				277,853		(8,202)		35,437		(2,807)		313,290		(11,009)
	Residential mortgage-backed securities				306,874		(15,861)		31,687		(4,075)		338,561		(19,936)
	Commercial mortgage-backed securities				203,347		(12,611)		4,915		(725)		208,262		(13,336)
	Asset-backed securities				126,922		(1,587)		-		-		126,922		(1,587)
	Foreign government securities				78,182		(357)		-		-		78,182		(357)
Equity securities					75,620		(5,437)		7,016		(327)		82,636		(5,764)
			Total	$	1,913,235	$	(85,659)	$	171,280	$	(19,562)	$	2,084,515	$	(105,221)

Amortized cost and fair value of fixed maturity securities investments classified by contractual maturity date

		Cost or amortized cost		Fair value
Due in 1 year or less		$	176,344	$	179,920
Due after 1 year through 5 years			1,066,029		1,101,193
Due after 5 years through 10 years			1,353,043		1,429,453
Due after 10 years through 15 years			944,332		1,001,521
Due after 15 years			1,038,114		1,086,364
	Securities with contractual maturities		4,577,862		4,798,451
Mortgage-backed and asset-backed securities			1,761,192		1,778,090
	Total fixed maturity securities	$	6,339,054	$	6,576,541

Realized pretax gains (losses) on the sale of investments

			Nine months ended September 30,				Three months ended September 30,
			2014		2013		2014		2013
Gains
	Fixed maturity securities		$	7,634	$	15,848	$	1,484	$	11,709
	Equity securities			68,590		12,932		42,727		6,943
	Other investments			-		5,345		-		-
		Total gains		76,224		34,125		44,211		18,652
Losses
	Fixed maturity securities			(4,889)		(994)		(1,201)		-
	Equity securities			(6,800)		(2,016)		(3,626)		(730)
		Total losses		(11,689)		(3,010)		(4,827)		(730)
Net
	Fixed maturity securities			2,745		14,854		283		11,709
	Equity securities			61,790		10,916		39,101		6,213
	Other investments			-		5,345		-		-
		Net realized investment gain	$	64,535	$	31,115	$	39,384	$	17,922

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Investments

9 Months Ended

Sep. 30, 2014

Investment [Abstract]

Investments

(2) Investments

The cost or amortized cost, gross unrealized gain or loss, and fair value of our fixed maturity and equity securities, all of which are classified as available for sale, were as follows:

		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
September 30, 2014
U.S. government and government agency securities		$	66,347	$	1,063	$	(263)	$	67,147
Fixed maturity securities of states, municipalities
	and political subdivisions		919,617		59,857		(497)		978,977
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,272,817		134,571		(3,119)		2,404,269
Corporate securities			1,234,819		37,584		(9,535)		1,262,868
Residential mortgage-backed securities			827,975		16,893		(9,770)		835,098
Commercial mortgage-backed securities			603,859		16,567		(5,405)		615,021
Asset-backed securities			329,358		365		(1,752)		327,971
Foreign government securities			84,262		1,932		(1,004)		85,190
	Total fixed maturity securities	$	6,339,054	$	268,832	$	(31,345)	$	6,576,541
Equity securities		$	280,663	$	16,731	$	(11,200)	$	286,194

December 31, 2013
U.S. government and government agency securities		$	91,047	$	2,157	$	(495)	$	92,709
Fixed maturity securities of states, municipalities
	and political subdivisions		941,580		50,885		(5,979)		986,486
Special purpose revenue bonds of states, municipalities
	and political subdivisions		2,240,412		71,541		(46,758)		2,265,195
Corporate securities			1,195,387		40,860		(11,009)		1,225,238
Residential mortgage-backed securities			622,766		15,289		(19,936)		618,119
Commercial mortgage-backed securities			502,069		16,155		(13,336)		504,888
Asset-backed securities			183,660		319		(1,587)		182,392
Foreign government securities			144,566		3,237		(357)		147,446
	Total fixed maturity securities	$	5,921,487	$	200,443	$	(99,457)	$	6,022,473
Equity securities		$	464,388	$	58,842	$	(5,764)	$	517,466

Substantially all of our fixed maturity securities are investment grade. The following tables display the gross unrealized losses and fair value of all available for sale securities that were in a continuous unrealized loss position for the periods indicated.

				Less than 12 months				12 months or more				Total
						Unrealized				Unrealized				Unrealized
				Fair value		losses		Fair value		losses		Fair value		losses
September 30, 2014
Fixed maturity securities
	U.S. government and government agency
		securities		$	15,675	$	(30)	$	11,129	$	(233)	$	26,804	$	(263)
	Fixed maturity securities of states,
		municipalities and political subdivisions			12,500		(81)		29,505		(416)		42,005		(497)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			26,622		(104)		176,961		(3,015)		203,583		(3,119)
	Corporate securities				357,022		(4,672)		96,757		(4,863)		453,779		(9,535)
	Residential mortgage-backed securities				179,700		(917)		253,192		(8,853)		432,892		(9,770)
	Commercial mortgage-backed securities				110,383		(840)		144,183		(4,565)		254,566		(5,405)
	Asset-backed securities				148,445		(863)		51,313		(889)		199,758		(1,752)
	Foreign government securities				29,089		(924)		7,162		(80)		36,251		(1,004)
Equity securities					123,984		(10,217)		4,406		(983)		128,390		(11,200)
			Total	$	1,003,420	$	(18,648)	$	774,608	$	(23,897)	$	1,778,028	$	(42,545)

December 31, 2013
Fixed maturity securities
	U.S. government and government agency
		securities		$	23,717	$	(495)	$	-	$	-	$	23,717	$	(495)
	Fixed maturity securities of states,
		municipalities and political subdivisions			136,160		(5,277)		8,997		(702)		145,157		(5,979)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			684,560		(35,832)		83,228		(10,926)		767,788		(46,758)
	Corporate securities				277,853		(8,202)		35,437		(2,807)		313,290		(11,009)
	Residential mortgage-backed securities				306,874		(15,861)		31,687		(4,075)		338,561		(19,936)
	Commercial mortgage-backed securities				203,347		(12,611)		4,915		(725)		208,262		(13,336)
	Asset-backed securities				126,922		(1,587)		-		-		126,922		(1,587)
	Foreign government securities				78,182		(357)		-		-		78,182		(357)
Equity securities					75,620		(5,437)		7,016		(327)		82,636		(5,764)
			Total	$	1,913,235	$	(85,659)	$	171,280	$	(19,562)	$	2,084,515	$	(105,221)

At September 30,2014, we held approximately 2,860fixed maturity and equity securities, of which 28% included at least one lot in an unrealized loss position. A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate our securities for possible other-than-temporary impairment losses at each quarter end. Our reviews cover all impaired securities where the loss exceeds $1.0 million and the loss eitherexceeds 10% of cost or the security had been in a loss position for longer than twelve consecutive months. We do not consider the $42.5 million of gross unrealized losses in our portfolio atSeptember 30,2014 to be other-than-temporary impairments as these losses relate to non-credit factors, such as interest rate changes and market conditions. We recognized no other-than-temporary impairment losses in the first nine months of 2014 and 2013.

The amortized cost and fair value of our fixed maturity securities at September 30,2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-average life of our mortgage-backed and asset-backed securities was 5.6 years at September 30,2014.

		Cost or amortized cost		Fair value
Due in 1 year or less		$	176,344	$	179,920
Due after 1 year through 5 years			1,066,029		1,101,193
Due after 5 years through 10 years			1,353,043		1,429,453
Due after 10 years through 15 years			944,332		1,001,521
Due after 15 years			1,038,114		1,086,364
	Securities with contractual maturities		4,577,862		4,798,451
Mortgage-backed and asset-backed securities			1,761,192		1,778,090
	Total fixed maturity securities	$	6,339,054	$	6,576,541

Realized pretax gains (losses) on the sale of investments included the following:

			Nine months ended September 30,				Three months ended September 30,
			2014		2013		2014		2013
Gains
	Fixed maturity securities		$	7,634	$	15,848	$	1,484	$	11,709
	Equity securities			68,590		12,932		42,727		6,943
	Other investments			-		5,345		-		-
		Total gains		76,224		34,125		44,211		18,652
Losses
	Fixed maturity securities			(4,889)		(994)		(1,201)		-
	Equity securities			(6,800)		(2,016)		(3,626)		(730)
		Total losses		(11,689)		(3,010)		(4,827)		(730)
Net
	Fixed maturity securities			2,745		14,854		283		11,709
	Equity securities			61,790		10,916		39,101		6,213
	Other investments			-		5,345		-		-
		Net realized investment gain	$	64,535	$	31,115	$	39,384	$	17,922

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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2014

Reinsurance [Abstract]

Effect of reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs

		Nine months ended September 30,				Three months ended September 30,
		2014		2013		2014		2013
Direct written premium		$	2,033,094	$	1,911,619	$	663,343	$	616,938
Reinsurance assumed			277,171		296,942		67,471		61,975
Reinsurance ceded			(487,875)		(478,609)		(145,620)		(157,179)
	Net written premium	$	1,822,390	$	1,729,952	$	585,194	$	521,734
Direct earned premium		$	1,952,997	$	1,860,093	$	664,002	$	622,464
Reinsurance assumed			231,599		252,902		79,258		81,594
Reinsurance ceded			(462,801)		(433,785)		(156,325)		(147,390)
	Net earned premium	$	1,721,795	$	1,679,210	$	586,935	$	556,668
Direct loss and loss adjustment expense		$	1,139,471	$	1,210,862	$	413,560	$	517,382
Reinsurance assumed			80,267		119,315		16,993		8,607
Reinsurance ceded			(258,863)		(337,630)		(118,616)		(205,613)
	Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376

Policy acquisition costs		$	331,985	$	309,285	$	116,775	$	105,254
Ceding commissions			(113,764)		(105,898)		(40,565)		(39,612)
	Net policy acquisition costs	$	218,221	$	203,387	$	76,210	$	65,642

Components of our reinsurance recoverables

		September 30,		December 31,
		2014		2013
Reinsurance recoverable on paid losses		$	108,186	$	156,026
Reinsurance recoverable on outstanding losses			454,046		459,134
Reinsurance recoverable on incurred but not reported losses			633,302		663,597
Reserve for uncollectible reinsurance			(1,500)		(1,500)
	Total reinsurance recoverables	$	1,194,034	$	1,277,257

Amounts of letters of credit and cash available to us as collateral, plus other potential offsets

		September 30,		December 31,
		2014		2013
Payables to reinsurers		$	195,643	$	208,850
Letters of credit			83,320		100,529
Funds held in trust			133,282		88,310
	Total credits	$	412,245	$	397,689

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Measurements [Abstract]

Assets and liabilities at fair value

			Level 1		Level 2		Level 3		Total
September 30, 2014
Fixed maturity securities
	U.S. government and government agency securities		$	59,796	$	7,351	$	-	$	67,147
	Fixed maturity securities of states, municipalities
		and political subdivisions		-		978,977		-		978,977
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		-		2,404,269		-		2,404,269
	Corporate securities			-		1,262,719		149		1,262,868
	Residential mortgage-backed securities			-		835,098		-		835,098
	Commercial mortgage-backed securities			-		615,021		-		615,021
	Asset-backed securities			-		327,971		-		327,971
	Foreign government securities			-		85,190		-		85,190
		Total fixed maturity securities		59,796		6,516,596		149		6,576,541
Equity securities				286,194		-		-		286,194
Short-term investments*				107,702		143,165		-		250,867
Restricted cash and securities				-		2,348		-		2,348
Premium, claims and other receivables				-		59,736		-		59,736
Other assets				19		-		1,201		1,220
	Total assets measured at fair value		$	453,711	$	6,721,845	$	1,350	$	7,176,906
Notes payable*			$	-	$	793,162	$	-	$	793,162
Accounts payable and accrued liabilities - earnout liabilities				-		2,348		9,039		11,387
	Total liabilities measured at fair value		$	-	$	795,510	$	9,039	$	804,549

			Level 1		Level 2		Level 3		Total
December 31, 2013
Fixed maturity securities
	U.S. government and government agency securities		$	84,032	$	8,677	$	-	$	92,709
	Fixed maturity securities of states, municipalities
		and political subdivisions		-		986,486		-		986,486
	Special purpose revenue bonds of states, municipalities
		and political subdivisions		-		2,255,928		9,267		2,265,195
	Corporate securities			-		1,225,088		150		1,225,238
	Residential mortgage-backed securities			-		618,119		-		618,119
	Commercial mortgage-backed securities			-		504,888		-		504,888
	Asset-backed securities			-		182,392		-		182,392
	Foreign government securities			-		147,446		-		147,446
		Total fixed maturity securities		84,032		5,929,024		9,417		6,022,473
Equity securities				517,466		-		-		517,466
Short-term investments*				68,958		109,795		-		178,753
Restricted cash and securities				-		1,853		-		1,853
Premium, claims and other receivables				-		66,515		-		66,515
Other assets				20		-		941		961
	Total assets measured at fair value		$	670,476	$	6,107,187	$	10,358	$	6,788,021
Notes payable*			$	-	$	707,656	$	-	$	707,656
Accounts payable and accrued liabilities - earnout liability				-		1,853		7,259		9,112
	Total liabilities measured at fair value		$	-	$	709,509	$	7,259	$	716,768

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Investments (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Amortized cost and fair value of fixed maturity securities investments classified by contractual maturity date
Due in 1 year or less, Available for sale, Cost or amortized cost	$ 176,344
Due after 1 year through 5 years, Available for sale, Cost or amortized cost	1,066,029
Due after 5 years through 10 years, Available for sale, Cost or amortized cost	1,353,043
Due after 10 years through 15 years, Available for sale, Cost or amortized cost	944,332
Due after 15 years, Available for sale, Cost or amortized cost	1,038,114
Securities with contractual maturities, Available for sale, Cost or amortized cost	4,577,862
Mortgage-backed and asset-backed securities, Available for sale, Cost or amortized cost	1,761,192
Available-for-sale fixed maturity Securities, Amortized Cost Basis	6,339,054	5,921,487
Due in 1 year or less, Available for sale, Fair value	179,920
Due after 1 year through 5 years, Available for sale, Fair value	1,101,193
Due after 5 years through 10 years, Available for sale, Fair value	1,429,453
Due after 10 years through 15 years, Available for sale, Fair value	1,001,521
Due after 15 years, Available for sale, Fair value	1,086,364
Securities with contractual maturities, Available for sale, Fair value	4,798,451
Mortgage-backed and asset-backed securities, Available for sale, Fair value	1,778,090
Available-for-sale Securities, Fixed Maturity Securities, Fair value	$ 6,576,541	$ 6,022,473

XML

Investments (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	$ 6,339,054	$ 5,921,487
Gross unrealized gain	268,832	200,443
Gross unrealized loss	(31,345)	(99,457)
Fixed maturity securities - available for sale	6,576,541	6,022,473
Available for sale equity securities
Available-for-sale Equity Securities, Amortized Cost Basis	280,663	464,388
Gross unrealized gain	16,731	58,842
Gross unrealized loss	(11,200)	(5,764)
Available-for-sale Securities, Equity Securities	286,194	517,466
US Government and Government Agency Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	66,347	91,047
Gross unrealized gain	1,063	2,157
Gross unrealized loss	(263)	(495)
Fixed maturity securities - available for sale	67,147	92,709
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	919,617	941,580
Gross unrealized gain	59,857	50,885
Gross unrealized loss	(497)	(5,979)
Fixed maturity securities - available for sale	978,977	986,486
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	2,272,817	2,240,412
Gross unrealized gain	134,571	71,541
Gross unrealized loss	(3,119)	(46,758)
Fixed maturity securities - available for sale	2,404,269	2,265,195
Corporate Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	1,234,819	1,195,387
Gross unrealized gain	37,584	40,860
Gross unrealized loss	(9,535)	(11,009)
Fixed maturity securities - available for sale	1,262,868	1,225,238
Residential Mortgage Backed Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	827,975	622,766
Gross unrealized gain	16,893	15,289
Gross unrealized loss	(9,770)	(19,936)
Fixed maturity securities - available for sale	835,098	618,119
Commercial Mortgage Backed Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	603,859	502,069
Gross unrealized gain	16,567	16,155
Gross unrealized loss	(5,405)	(13,336)
Fixed maturity securities - available for sale	615,021	504,888
Asset-backed Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	329,358	183,660
Gross unrealized gain	365	319
Gross unrealized loss	(1,752)	(1,587)
Fixed maturity securities - available for sale	327,971	182,392
Foreign Government Securities [Member]
Fixed Maturity & Equity Securities Available for Sale
Available-for-sale Fixed Maturity Securities, Amortized Cost Basis	84,262	144,566
Gross unrealized gain	1,932	3,237
Gross unrealized loss	(1,004)	(357)
Fixed maturity securities - available for sale	$ 85,190	$ 147,446

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Investments (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	$ 1,003,420	$ 1,913,235
Less than 12 months, Unrealized losses	(18,648)	(85,659)
12 months or more, Fair value	774,608	171,280
12 months or more, Unrealized losses	(23,897)	(19,562)
Total, Fair value	1,778,028	2,084,515
Total, Unrealized losses	(42,545)	(105,221)
US Government and Government Agency Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	15,675	23,717
Less than 12 months, Unrealized losses	(30)	(495)
12 months or more, Fair value	11,129	0
12 months or more, Unrealized losses	(233)	0
Total, Fair value	26,804	23,717
Total, Unrealized losses	(263)	(495)
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	12,500	136,160
Less than 12 months, Unrealized losses	(81)	(5,277)
12 months or more, Fair value	29,505	8,997
12 months or more, Unrealized losses	(416)	(702)
Total, Fair value	42,005	145,157
Total, Unrealized losses	(497)	(5,979)
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	26,622	684,560
Less than 12 months, Unrealized losses	(104)	(35,832)
12 months or more, Fair value	176,961	83,228
12 months or more, Unrealized losses	(3,015)	(10,926)
Total, Fair value	203,583	767,788
Total, Unrealized losses	(3,119)	(46,758)
Corporate Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	357,022	277,853
Less than 12 months, Unrealized losses	(4,672)	(8,202)
12 months or more, Fair value	96,757	35,437
12 months or more, Unrealized losses	(4,863)	(2,807)
Total, Fair value	453,779	313,290
Total, Unrealized losses	(9,535)	(11,009)
Residential Mortgage Backed Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	179,700	306,874
Less than 12 months, Unrealized losses	(917)	(15,861)
12 months or more, Fair value	253,192	31,687
12 months or more, Unrealized losses	(8,853)	(4,075)
Total, Fair value	432,892	338,561
Total, Unrealized losses	(9,770)	(19,936)
Commercial Mortgage Backed Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	110,383	203,347
Less than 12 months, Unrealized losses	(840)	(12,611)
12 months or more, Fair value	144,183	4,915
12 months or more, Unrealized losses	(4,565)	(725)
Total, Fair value	254,566	208,262
Total, Unrealized losses	(5,405)	(13,336)
Asset-backed Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	148,445	126,922
Less than 12 months, Unrealized losses	(863)	(1,587)
12 months or more, Fair value	51,313	0
12 months or more, Unrealized losses	(889)	0
Total, Fair value	199,758	126,922
Total, Unrealized losses	(1,752)	(1,587)
Foreign Government Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	29,089	78,182
Less than 12 months, Unrealized losses	(924)	(357)
12 months or more, Fair value	7,162	0
12 months or more, Unrealized losses	(80)	0
Total, Fair value	36,251	78,182
Total, Unrealized losses	(1,004)	(357)
Equity Securities [Member]
Gross unrealized losses and fair value of all available for sale securities that were in a continuous loss position
Less than 12 months, Fair value	123,984	75,620
Less than 12 months, Unrealized losses	(10,217)	(5,437)
12 months or more, Fair value	4,406	7,016
12 months or more, Unrealized losses	(983)	(327)
Total, Fair value	128,390	82,636
Total, Unrealized losses	$ (11,200)	$ (5,764)

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Investments (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Realized pretax gains (losses) on the sale of investments
Gains	$ 44,211	$ 18,652	$ 76,224	$ 34,125
Losses	(4,827)	(730)	(11,689)	(3,010)
Net realized investment gain	39,384	17,922	64,535	31,115
Fixed Maturity Securities [Member]
Realized pretax gains (losses) on the sale of investments
Gains	1,484	11,709	7,634	15,848
Losses	(1,201)	0	(4,889)	(994)
Net realized investment gain	283	11,709	2,745	14,854
Equity Securities [Member]
Realized pretax gains (losses) on the sale of investments
Gains	42,727	6,943	68,590	12,932
Losses	(3,626)	(730)	(6,800)	(2,016)
Net realized investment gain	39,101	6,213	61,790	10,916
Others [Member]
Realized pretax gains (losses) on the sale of investments
Gains	0	0	0	5,345
Losses	0	0	0	0
Net realized investment gain	$ 0	$ 0	$ 0	$ 5,345

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Notes Payable (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Notes Payable [Line Items]
Notes payable	$ 744,213	$ 654,098
6.3% Senior Notes [Member]
Notes Payable [Line Items]
Notes payable	299,213	299,098
Revolving Loan Facility [Member]
Notes Payable [Line Items]
Notes payable	$ 445,000	$ 355,000

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(12)Commitments and Contingencies

Catastrophe and Large Loss Exposure

We have exposure to catastrophic and other large losses caused by natural perils (such as hurricanes, earthquakes, floods, tsunamis, hail storms and tornados) and man-made events (such as terrorist attacks). The incidence, timing and severity of these losses are unpredictable. We assess our exposures in areas most vulnerable to natural catastrophes and apply procedures to ascertain our probable maximum loss from a single event. We maintain reinsurance protection to reduce our potential losses from a future event.In the first nine months of 2014, we recognized accident year net catastrophe losses, after reinsurance and reinstatement premium, of $14.3 million related to various small catastrophes. We recognized $44.5 million in the first nine months of 2013, primarily due to European floods, German hail storms and various small catastrophes.

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries. We have provided accruals for these items to the extent we deem the losses probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Indemnifications

In conjunction with the sales of business assets and subsidiaries, we have provided indemnifications to the buyers. Certain indemnifications cover typical representations and warranties related to our responsibilities to perform under the sales contracts. Under other indemnifications, we agree to reimburse the purchasers for taxes or ERISA-related amounts, if any, assessed after the sale date but related to pre-sale activities. We cannot quantify the maximum potential exposure covered by all of our indemnifications because the indemnifications cover a variety of matters, operations and scenarios and some have no time limit. For those with a time limit, the longest indemnification expires in 2025. We accrue a loss when a valid claim is made by a purchaser and we believe we have potential exposure.

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Fair Value Measurements (Details Textuals) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013 Fair Value, Inputs, Level 3 [Member] Fixed Maturity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Independent pricing services to assist in determining fair value	99.00%
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases		$ 9.4

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Reinsurance (Details 4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Amounts of letters of credit and cash available to us as collateral, plus other potential offsets
Payables to reinsurers	$ 195,643	$ 208,850
Letters of credit	83,320	100,529
Funds held in trust	133,282	88,310
Total credits	$ 412,245	$ 397,689

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Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Information by business segment
Net earned premium	$ 586,935	$ 556,668	$ 1,721,795	$ 1,679,210
Other revenue	103,103	79,809	260,747	221,064
Total revenue	690,038	636,477	1,982,542	1,900,274
Loss and LAE	311,937	320,376	960,875	992,547
Other expense	173,444	176,001	524,394	491,400
Total expense	485,381	496,377	1,485,269	1,483,947
Earnings before income taxes	204,657	140,100	497,273	416,327
U.S. Property & Casualty [Member]
Information by business segment
Net earned premium	86,130	91,684	271,718	276,647
Other revenue	4,987	4,769	14,933	16,198
Total revenue	91,117	96,453	286,651	292,845
Loss and LAE	13,054	13,666	106,442	121,060
Other expense	28,659	32,044	86,807	84,801
Total expense	41,713	45,710	193,249	205,861
Earnings before income taxes	49,404	50,743	93,402	86,984
Professional Liability [Member]
Information by business segment
Net earned premium	87,880	92,439	261,457	277,662
Other revenue	330	(21)	800	304
Total revenue	88,210	92,418	262,257	277,966
Loss and LAE	50,851	30,100	154,172	141,921
Other expense	14,988	10,909	49,533	46,781
Total expense	65,839	41,009	203,705	188,702
Earnings before income taxes	22,371	51,409	58,552	89,264
Accident & Health [Member]
Information by business segment
Net earned premium	250,570	223,048	723,051	657,995
Other revenue	2,363	1,406	7,865	3,736
Total revenue	252,933	224,454	730,916	661,731
Loss and LAE	178,202	163,143	519,497	483,709
Other expense	40,601	33,705	114,855	97,414
Total expense	218,803	196,848	634,352	581,123
Earnings before income taxes	34,130	27,606	96,564	80,608
U.S. Surety & Credit [Member]
Information by business segment
Net earned premium	51,362	47,442	148,496	144,673
Other revenue	708	406	1,576	1,027
Total revenue	52,070	47,848	150,072	145,700
Loss and LAE	14,550	13,436	43,108	32,287
Other expense	28,645	26,501	82,052	80,182
Total expense	43,195	39,937	125,160	112,469
Earnings before income taxes	8,875	7,911	24,912	33,231
International [Member]
Information by business segment
Net earned premium	111,131	100,849	316,591	311,261
Other revenue	846	888	2,745	2,790
Total revenue	111,977	101,737	319,336	314,051
Loss and LAE	60,429	99,221	142,809	204,137
Other expense	48,101	42,613	128,080	114,534
Total expense	108,530	141,834	270,889	318,671
Earnings before income taxes	3,447	(40,097)	48,447	(4,620)
Investing [Member]
Information by business segment
Net earned premium	0	0	0	0
Other revenue	93,620	72,130	232,015	196,756
Total revenue	93,620	72,130	232,015	196,756
Loss and LAE	0	0	0	0
Other expense	0	0	0	0
Total expense	0	0	0	0
Earnings before income taxes	93,620	72,130	232,015	196,756
Corporate & Other [Member]
Information by business segment
Net earned premium	(138)	1,206	482	10,972
Other revenue	249	231	813	253
Total revenue	111	1,437	1,295	11,225
Loss and LAE	(5,149)	810	(5,153)	9,433
Other expense	12,450	30,229	63,067	67,688
Total expense	7,301	31,039	57,914	77,121
Earnings before income taxes	$ (7,190)	$ (29,602)	$ (56,619)	$ (65,896)

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share, Basic and Diluted
Net earnings	$ 140,267	$ 98,175	$ 345,314	$ 292,187
Less: net earnings attributable to unvested restricted stock	2,328	1,527	5,610	4,754
Net earnings available to common stock	137,939	96,648	339,704	287,433
Weighted-average common shares outstanding	97,909	98,723	98,340	98,881
Dilutive effect of outstanding securities (determined using treasury stock method)	225	270	238	254
Weighted-average common shares and potential common shares outstanding	98,134	98,993	98,578	99,135
Earnings Per Share, Basic	$ 1.41	$ 0.98	$ 3.45	$ 2.91
Earnings Per Share, Diluted	$ 1.41	$ 0.98	$ 3.45	$ 2.9
Net earnings available to common stock	$ 137,939	$ 96,648	$ 339,704	$ 287,433

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Consolidated Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Income and Comprehensive Income [Abstract]
Net earnings	$ 140,267	$ 98,175	$ 345,314	$ 292,187
Investment gains (losses):
Investment gains (losses) during the period	(26,336)	14,948	153,489	(232,481)
Income tax charge (benefit)	(9,467)	4,917	54,351	(82,526)
Investments gains (losses), net of tax	(16,869)	10,031	99,138	(149,955)
Less reclassification adjustments to:
Net realized investment gain	39,384	17,922	64,535	31,115
Income tax expense	13,784	6,272	22,587	10,890
Total reclassifications included in net earnings, net of tax	25,600	11,650	41,948	20,225
Net unrealized investment gains (losses)	(42,469)	(1,619)	57,190	(170,180)
Foreign currency translation adjustment	(7,059)	5,410	(5,368)	4,265
Income tax charge (benefit)	262	(92)	(159)	(646)
Foreign currency translation adjustment, net of tax	(7,321)	5,502	(5,209)	4,911
Other comprehensive income (loss)	(49,790)	3,883	51,981	(165,269)
Comprehensive income	$ 90,477	$ 102,058	$ 397,295	$ 126,918

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General Information (Details Textuals) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014 countries
General Information [Abstract]
Number of countries in which The Company underwrites non-correlated specialty insurance products	180
Amount of cash expected to be paid to acquire an entity	$ 110.0

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Liability for Unpaid Loss and Loss Adjustment Expense

9 Months Ended

Sep. 30, 2014

Liability for Unpaid Loss and Loss Adjustment Expense

Liability For Future Policy Benefits And Unpaid Claims Disclosure TextBlock

(5) Liability for Unpaid Loss and Loss Adjustment Expense

The table below provides a reconciliation of our liability for loss and loss adjustment expense payable (referred to as reserves).

		Nine months ended September 30,				Three months ended September 30,
		2014		2013		2014		2013
Reserves at beginning of period		$	3,902,132	$	3,767,850	$	3,841,497	$	3,814,684
Less reinsurance recoverables on reserves			1,122,731		1,018,047		1,081,249		1,003,663
	Net reserves at beginning of period		2,779,401		2,749,803		2,760,248		2,811,021
Net loss and loss adjustment expense			960,875		992,547		311,937		320,376
Net loss and loss adjustment expense payments			(1,024,673)		(884,022)		(350,603)		(297,696)
Foreign currency adjustment			(26,027)		(2,296)		(32,006)		22,331
	Net reserves at end of period		2,689,576		2,856,032		2,689,576		2,856,032
Plus reinsurance recoverables on reserves			1,087,348		1,165,815		1,087,348		1,165,815
	Reserves at end of period	$	3,776,924	$	4,021,847	$	3,776,924	$	4,021,847

The table below details our loss and loss adjustment expense on a consolidated basis, as well as the net (favorable) adverse loss development by segment.

			Nine months ended September 30,				Three months ended September 30,
			2014		2013		2014		2013
Net (favorable) adverse loss development
	U.S. Property & Casualty		$	(40,307)	$	(40,754)	$	(40,307)	$	(40,754)
	Professional Liability			(978)		(26,284)		(978)		(26,284)
	U.S. Surety & Credit			-		(9,492)		-		-
	International			15,685		36,896		15,685		39,196
	Exited Lines			(5,051)		-		(5,051)		-
		Total net favorable loss development		(30,651)		(39,634)		(30,651)		(27,842)
Accident year catastrophe losses				15,886		48,055		5,531		18,134
All other net loss and loss adjustment expense				975,640		984,126		337,057		330,084
		Net loss and loss adjustment expense	$	960,875	$	992,547	$	311,937	$	320,376

In the third quarter of 2014 and 2013, we conducted our annual review of the reserves in our U.S. Property & Casualty, Professional Liability and International segments. Based on these annual reviews, we recognized net favorable loss development of $30.7 million and $27.8 million, respectively. These amounts included favorable development of $5.1 million and $5.0 million, respectively from the release of prior years’ catastrophe reserves. In the second quarter of 2013, we conducted a limited review of our U.S. Surety & Credit reserves and recognized favorable development of $9.5 million. We also released $2.3 million of prior years’ catastrophe reserves in the International segment. The primary drivers of development in the respective periods by segment are described below.

U.S. Property & Casualty

In the third quarter of 2014, net favorable loss development of $40.3 million was due to better than expected loss experience, primarily in underwriting years 2012 and prior, compared to the same review conducted in the third quarter of 2013. The majority of the development related to our liability business ($20.7 million), our aviation business ($6.6 million) and a run-off assumed quota share contract ($5.0 million).

In 2013, net favorable development of $40.8 million was due to better than expected loss experience, primarily in underwriting years 2011 and prior, compared to the same review in the third quarter of 2012. This amount included $17.0 million of favorable development related to the run-off assumed quota share contract, which we wrote from 2003 – 2008, for which expected ultimate losses have continued to decline over the past three years.

Professional Liability

In the third quarter of 2014, we recognized minimal loss development based on our annual review of reserves.

In 2013, net favorable development of $26.3 million was due to better than expected loss experience, compared to the same review conducted in the third quarter of 2012. This development included reserve releases related to underwriting years prior to 2007 as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening of $37.9 million in underwriting years 2007 and 2008, which were impacted by the worldwide financial crisis.

U.S. Surety & Credit

We recognized no loss development in 2014.

In the second quarter of 2013, we recognized favorable development of $9.5 million. Our review of reserves at that time indicated better experience than our actuarial expectations compared to the prior year review conducted in the fourth quarter of 2012. As a result, we recognized favorable development of $3.7million and $5.8million for our surety and credit lines of business, respectively, related to the 2010 and prior underwriting years.

International

In the third quarter of 2014, the segment’s $15.7 million net adverse loss development related to $43.5 million of adverse development for the surety & credit line of business, partially offset by $23.2 million of net favorable loss development in various lines of business and a $4.6 million reduction of prior years’ catastrophe reserves. We increased our reserves on a specific class of Spanish surety bonds to reflect our revised estimates of our liability under these bonds in light of our settlement of a large majority of the outstanding claims during the third quarter of 2014. The favorable development primarily related to our energy, property treaty and liability lines of business, which had better than expected loss experience in underwriting years 2013 and prior, compared to our review conducted in the same quarter of 2013. The net favorable development related to catastrophe reserves was primarily due to reserve releases for the 2013 European floods ($6.0 million), partially offset by reserve increases for the 2011 Denmark storms ($1.5 million).

In the third quarter of 2013, net adverse development of $39.2 million was due to $70.3 million of adverse development in the surety & credit line of business, partially offset by net favorable development in several other lines of business, primarily energy and liability. For surety & credit, we increased our reserves on the Spanish surety bonds discussed above. The increase was madeto reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling published in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. We recognized net favorable development in our energy ($10.1 million) and U.K. professional liability ($16.1 million) products based on better than expected loss experience, primarily in underwriting years 2011 and prior. In addition, we recognized $3.4 million of favorable development from the release of 2012 catastrophe reserves for Superstorm Sandy, due to lower than expected losses.

In the second quarter of 2013, we recognized $2.3 million of favorable development on prior years’ catastrophe reserves, due to settlement of the remaining claims related to the 2010 New Zealand earthquake.

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Accumulated Other Comprehensive Income, Net of Tax, Beginning Balance	$ 220,422		$ 118,651
Other comprehensive income	(49,790)	3,883	51,981	(165,269)
Accumulated Other Comprehensive Income, Net of Tax, Ending Balance	170,632		170,632
Accumulated Net Unrealized Investment Gain [Member]
Accumulated Other Comprehensive Income, Net of Tax, Beginning Balance	199,619		99,960
Other comprehensive income	(42,469)		57,190
Accumulated Other Comprehensive Income, Net of Tax, Ending Balance	157,150		157,150
Accumulated Translation Adjustment [Member]
Accumulated Other Comprehensive Income, Net of Tax, Beginning Balance	20,803		18,691
Other comprehensive income	(7,321)		(5,209)
Accumulated Other Comprehensive Income, Net of Tax, Ending Balance	$ 13,482		$ 13,482

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Available for sale
Fixed maturity securities - available for sale	$ 6,576,541	$ 6,022,473
Equity securities - available for sale, at fair value	286,194	517,466
Short-term investments*	250,867	178,753
Restricted cash and securities	2,348	1,853
Premium, claims and other receivables	59,736	66,515
Other assets	1,220	961
Total assets measured at fair value	7,176,906	6,788,021
Notes payable	793,162	707,656
Accounts payable and accrued liabilities - earnout liabilities	11,387	9,112
Total liabilities measured at fair value	804,549	716,768
Fair Value, Inputs, Level 1 [Member]
Available for sale
Fixed maturity securities - available for sale	59,796	84,032
Equity securities - available for sale, at fair value	286,194	517,466
Short-term investments*	107,702	68,958
Other assets	19	20
Total assets measured at fair value	453,711	670,476
Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	6,516,596	5,929,024
Short-term investments*	143,165	109,795
Restricted cash and securities	2,348	1,853
Premium, claims and other receivables	59,736	66,515
Total assets measured at fair value	6,721,845	6,107,187
Notes payable	793,162	707,656
Accounts payable and accrued liabilities - earnout liabilities	2,348	1,853
Total liabilities measured at fair value	795,510	709,509
Fair Value, Inputs, Level 3 [Member]
Available for sale
Fixed maturity securities - available for sale	149	9,417
Other assets	1,201	941
Total assets measured at fair value	1,350	10,358
Accounts payable and accrued liabilities - earnout liabilities	9,039	7,259
Total liabilities measured at fair value	9,039	7,259
US Government and Government Agency Securities [Member]
Available for sale
Fixed maturity securities - available for sale	67,147	92,709
US Government and Government Agency Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale
Fixed maturity securities - available for sale	59,796	84,032
US Government and Government Agency Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	7,351	8,677
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member]
Available for sale
Fixed maturity securities - available for sale	978,977	986,486
Fixed Maturity Securities of States, Municipalities and Political Subdivisions Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	978,977	986,486
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member]
Available for sale
Fixed maturity securities - available for sale	2,404,269	2,265,195
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	2,404,269	2,255,928
Special Purpose Revenue Bonds Of States Municipalities And Political Subdivisions [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale
Fixed maturity securities - available for sale		9,267
Corporate Securities [Member]
Available for sale
Fixed maturity securities - available for sale	1,262,868	1,225,238
Corporate Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	1,262,719	1,225,088
Corporate Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale
Fixed maturity securities - available for sale	149	150
Residential Mortgage Backed Securities [Member]
Available for sale
Fixed maturity securities - available for sale	835,098	618,119
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	835,098	618,119
Commercial Mortgage Backed Securities [Member]
Available for sale
Fixed maturity securities - available for sale	615,021	504,888
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	615,021	504,888
Asset-backed Securities [Member]
Available for sale
Fixed maturity securities - available for sale	327,971	182,392
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	327,971	182,392
Foreign Government Securities [Member]
Available for sale
Fixed maturity securities - available for sale	85,190	147,446
Foreign Government Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale
Fixed maturity securities - available for sale	$ 85,190	$ 147,446