HOUSTON, Aug. 3, 2006 (PRIMEZONE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released earnings for the second quarter of 2006.
Net earnings increased substantially during the second quarter of 2006, rising 40% to $89.5 million from $64.1 million and net earnings per diluted share grew 31% to $0.77 per diluted share from $0.59 per share, both compared to the same period in 2005.
Net earnings increased significantly during the first six months of 2006, rising 38% to $168.0 million from $121.4 million and diluted earnings per share grew 27% to $1.44 per diluted share from $1.13 per share, both compared to the first six months of 2005.
Commenting on the results, Stephen L. Way, Chairman and Chief Executive Officer, said, "We continue to produce record results with a strong balance sheet and we are confident about our future performance."
Total revenue grew substantially during the first six months of 2006, rising 22% to $959.3 million from $784.5 million in the corresponding period in 2005. This increase was primarily from growth of earned premium due to our increased retentions.
Net earned premium of the Company's insurance company subsidiaries continues to show strong growth rising by 19% to $783.9 million during the first six months of 2006 compared to $657.8 million in the first half of 2005. During the same period, net written premium increased by 19% to $876.5 million and gross written premium grew 8% to $1.1 billion. Gross premium growth primarily came from our London market energy business and from our credit and surety operations. Net written premium growth occurred across most lines due to increased retentions.
The GAAP combined ratio of the Company's insurance company subsidiaries was 84.0% for the first six months of 2006 compared to 84.8% in the corresponding period of 2005. There have been no material net reserve releases during the first half of 2006.
Mr. Way added, "Overall our business remains stable with relatively good margins in all lines and there are opportunities which we believe we can capitalize on for future growth."
Management fee and commission income was down slightly during the first six months of 2006 to $65.3 million from $70.4 million in the first half of 2005. Business continues to improve and we are optimistic about renewed growth opportunities in 2007.
Net investment income increased by 62% in the first half of 2006 to $72.8 million, compared to $45.0 million in the corresponding period in 2005. This growth was due to increased investment assets and higher short term yields.
As of June 30, 2006, total investments increased 10% to $3.6 billion; total assets grew to $7.4 billion; shareholders' equity increased to $1.8 billion; book value per share increased 8% to $16.48; and the Company's debt to total capital ratio remains very conservative at 15.5%, all compared to December 31, 2005. See following tables.
HCC will hold an open conference call beginning at 4:00 p.m. (CDT) on Thursday, August 3, to discuss these results. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-1303. In addition, there will be a live webcast available on a listen-only basis that can be accessed through the HCC website at www.hcc.com. A replay of the webcast will be available on the website until Thursday, August 10, 2006.
HCC is an international insurance holding company and a leading specialty insurance group since 1974, based in Houston, Texas with offices across the USA and in Bermuda, England and Spain. HCC has assets exceeding $7 billion and is rated AA (Very Strong) by Standard & Poor's and A+ (Superior) by A. M. Best Company.
For more information, visit our website at www.hcc.com.
Forward-looking statements contained in this press release are made under "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. The types of risks and uncertainties which may affect the Company are set forth in its periodic reports filed with the Securities and Exchange Commission.
HCC Insurance Holdings, Inc.
Financial Highlights
June 30, 2006
(In thousands, except per share data)
Three Months Ended June 30,
2006 2005
---------- ----------
Gross written premium $ 586,054 $ 539,436
Net written premium 483,482 378,393
Net earned premium 403,320 337,726
Fee and commission income 33,878 37,303
Net investment income 36,173 22,700
Other operating income 20,045 5,105
Total revenue 493,217 404,837
Net earnings 89,470 64,058
Earnings per share (diluted) 0.77 0.59
Cash flow from operations 181,818 84,928
Weighted average shares
outstanding (diluted) 116,860 108,269
GAAP net loss ratio 57.3% 58.7%
GAAP combined ratio 83.0% 85.0%
June 30, December 31,
2006 2005
---------- ----------
Total investments $3,567,601 $3,257,428
Total assets 7,371,148 7,026,066
Shareholders' equity 1,833,695 1,693,696
Debt to total capital 15.5% 15.5%
Book value per share $ 16.48 $ 15.29
HCC Insurance Holdings, Inc.
Financial Highlights
June 30, 2006
(In thousands, except per share data)
Six Months Ended June 30,
2006 2005
---------- ----------
Gross written premium $1,092,112 $1,014,555
Net written premium 876,533 735,745
Net earned premium 783,891 657,843
Fee and commission income 65,346 70,379
Net investment income 72,754 45,041
Other operating income 38,795 9,252
Total revenue 959,289 784,515
Net earnings 168,021 121,376
Earnings per share (diluted) 1.44 1.13
Cash flow from operations 259,755 118,837
Weighted average shares
outstanding (diluted) 116,885 107,042
GAAP net loss ratio 57.6% 58.4%
GAAP combined ratio 84.0% 84.8%
June 30, December 31,
2006 2005
---------- ----------
Total investments $3,567,601 $3,257,428
Total assets 7,371,148 7,026,066
Shareholders' equity 1,833,695 1,693,696
Debt to total capital 15.5% 15.5%
Book value per share $ 16.48 $ 15.29
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
June 30, December 31,
2006 2005
---------- ----------
ASSETS
Investments:
Fixed income securities $2,687,441 $2,268,624
Short-term investments 623,138 839,581
Other investments 257,022 149,223
---------- ----------
Total investments 3,567,601 3,257,428
Cash 44,342 73,935
Restricted cash and cash investments 167,073 170,978
Premium, claims and other receivables 896,983 884,654
Reinsurance recoverables 1,353,288 1,360,483
Ceded unearned premium 238,281 239,416
Ceded life and annuity benefits 72,782 73,415
Deferred policy acquisition costs 177,982 156,253
Goodwill 531,760 532,947
Other assets 321,056 276,557
---------- ----------
Total assets $7,371,148 $7,026,066
========== ==========
LIABILITIES
Loss and loss adjustment expense payable $2,918,441 $2,813,720
Life and annuity policy benefits 72,782 73,415
Reinsurance balances payable 154,248 176,954
Unearned premium 910,188 807,109
Deferred ceding commissions 67,325 65,702
Premium and claims payable 735,120 753,859
Notes payable 337,274 309,543
Accounts payable and accrued liabilities 342,075 332,068
---------- ----------
Total liabilities 5,537,453 5,332,370
SHAREHOLDERS' EQUITY
Common stock 111,253 110,803
Additional paid-in capital 762,865 747,568
Retained earnings 965,571 817,013
Accumulated other comprehensive
income (loss) (5,994) 18,312
---------- ----------
Total shareholders' equity 1,833,695 1,693,696
---------- ----------
Total liabilities and
shareholders' equity $7,371,148 $7,026,066
========== ==========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited, in thousands, except per share data)
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
REVENUE
Net earned premium $783,891 $657,843 $403,320 $337,726
Fee and commission income 65,346 70,379 33,878 37,303
Net investment income 72,754 45,041 36,173 22,700
Net realized investment
gain (loss) (1,497) 2,000 (199) 2,003
Other operating income 38,795 9,252 20,045 5,105
-------- -------- -------- --------
Total revenue 959,289 784,515 493,217 404,837
-------- -------- -------- --------
EXPENSE
Loss and loss adjustment
expense, net 451,592 384,164 231,025 198,101
Policy acquisition costs,
net 154,792 119,988 76,577 60,631
Other operating expense 95,994 95,481 49,191 49,532
Interest expense 4,437 3,778 2,283 1,970
-------- -------- -------- --------
Total expense 706,815 603,411 359,076 310,234
-------- -------- -------- --------
Earnings before income
tax expense 252,474 181,104 134,141 94,603
Income tax expense 84,453 59,728 44,671 30,545
-------- -------- -------- --------
Net earnings $168,021 $121,376 $ 89,470 $ 64,058
======== ======== ======== ========
Basic earnings per share
data:
Net earnings per share $ 1.51 $ 1.17 $ 0.80 $ 0.61
======== ======== ======== ========
Weighted average shares
outstanding 111,117 104,106 111,218 104,962
======== ======== ======== ========
Diluted earnings per
share data:
Net earnings per share $ 1.44 $ 1.13 $ 0.77 $ 0.59
======== ======== ======== ========
Weighted average shares
outstanding 116,885 107,042 116,860 108,269
======== ======== ======== ========
Cash dividends declared,
per share $ 0.175 $ 0.132 $ 0.100 $ 0.075
======== ======== ======== ========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
Cash flows from operating
activities:
Net earnings $168,021 $121,376 $ 89,470 $ 64,058
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Change in premium, claims
and other receivables (10,298) (92,171) (54,660) 41,597
Change in reinsurance
recoverables 7,195 (19,014) (3,937) (18,190)
Change in ceded unearned
premium 1,135 50,943 1,249 (1,357)
Change in loss and loss
adjustment expense
payable 104,721 124,887 80,946 74,948
Change in reinsurance
balances payable (22,706) (50,710) 4,351 (20,868)
Change in unearned premium 103,079 25,536 84,813 42,378
Change in premium and
claims payable, net of
restricted cash (17,222) 15,536 13,096 (84,339)
Change in trading portfolio (84,491) (38,054) (36,497) 3,274
Depreciation and
amortization expense 7,644 7,360 3,819 3,650
Other, net 2,677 (26,852) (832) (20,223)
-------- -------- -------- --------
Cash provided by
operating activities 259,755 118,837 181,818 84,928
-------- -------- -------- --------
Cash flows from investing
activities:
Sales of fixed income
securities 164,097 114,770 98,443 59,089
Maturity or call of fixed
income securities 117,698 98,468 58,472 66,218
Cost of securities acquired (791,385) (498,144) (319,771) (221,144)
Change in short-term
investments 218,856 181,716 (27,894) 36,691
Sale of strategic investment 17,363 -- -- --
Payments for purchase of
subsidiaries, net of cash
received (37,457) (34,881) (13,457) (34,881)
Other, net (5,097) (11,378) (3,050) (10,260)
-------- -------- -------- --------
Cash used by investing
activities (315,925) (149,449) (207,257) (104,287)
-------- -------- -------- --------
Cash flows from financing
activities:
Issuance of notes payable 39,000 33,000 28,000 33,000
Payments on notes payable (11,249) (14,465) (142) (14,372)
Sale of common stock 9,846 28,837 2,054 7,750
Dividends paid (16,648) (11,716) (8,338) (5,933)
Other 5,628 (3,814) (2,904) --
-------- -------- -------- --------
Cash provided by financing
activities 26,577 31,842 18,670 20,445
-------- -------- -------- --------
Net increase (decrease)
in cash (29,593) 1,230 (6,769) 1,086
Cash at beginning of period 73,935 69,933 51,111 70,077
-------- -------- -------- --------
Cash at end of period $ 44,342 $ 71,163 $ 44,342 $ 71,163
======== ======== ======== ========
HCC Insurance Holdings, Inc.
Insurance Company Premium
June 30, 2006
(In thousands)
2nd Qtr 2nd Qtr Change
2006 2005 %
--------- --------- ---------
GROSS WRITTEN
Diversified financial products $ 253,487 $ 224,547 13%
Group life, accident & health 138,604 156,210 (11)
Aviation 58,862 57,254 3
London market account 83,658 48,602 72
Other specialty lines 51,234 48,256 6
Discontinued lines 209 4,567 nm
--------- --------- ---------
$ 586,054 $ 539,436 9%
========= ========= =========
NET WRITTEN
Diversified financial products $ 212,120 $ 149,477 42%
Group life, accident & health 129,445 127,560 1
Aviation 54,939 36,156 52
London market account 51,794 36,396 42
Other specialty lines 35,193 27,248 29
Discontinued lines (9) 1,556 nm
--------- --------- ---------
$ 483,482 $ 378,393 28%
========= ========= =========
NET EARNED PREMIUM
Diversified financial products $ 179,207 $ 121,479 48%
Group life, accident & health 128,262 126,657 1
Aviation 39,034 32,992 18
London market account 26,937 30,907 (13)
Other specialty lines 29,896 23,326 28
Discontinued lines (16) 2,365 nm
--------- --------- ---------
$ 403,320 $ 337,726 19%
========= ========= =========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc.
Insurance Company Premium
June 30, 2006
(In thousands)
Year to Date Year to Date Change
2006 2005 %
---------- ---------- ---------
GROSS WRITTEN
Diversified financial products $ 450,733 $ 423,619 6%
Group life, accident & health 272,758 306,292 (11)
Aviation 115,096 106,356 8
London market account 158,165 91,798 72
Other specialty lines 95,123 83,775 14
Discontinued lines 237 2,715 nm
---------- ---------- ---------
$1,092,112 $1,014,555 8%
========== ========== =========
NET WRITTEN
Diversified financial products $ 373,765 $ 295,474 26%
Group life, accident & health 258,888 257,009 1
Aviation 90,364 68,282 32
London market account 90,517 65,308 39
Other specialty lines 63,093 48,322 31
Discontinued lines (94) 1,350 nm
---------- ---------- ---------
$ 876,533 $ 735,745 19%
========== ========== =========
NET EARNED PREMIUM
Diversified financial products $ 348,319 $ 228,330 53%
Group life, accident & health 256,023 255,602 --
Aviation 72,231 66,809 8
London market account 48,865 57,618 (15)
Other specialty lines 58,536 44,551 31
Discontinued lines (83) 4,933 nm
---------- ---------- ---------
$ 783,891 $ 657,843 19%
========== ========== =========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc.
Consolidated Insurance Companies
Net Loss Ratios
June 30, 2006
(In thousands)
Year to Date 2006
------------------------------
Net Earned Incurred Loss
Line of Business Premium Losses Ratio
------------------------------ --------- --------- -----
Diversified financial products $ 348,319 $ 175,400 50.4%
Group life, accident & health 256,023 179,494 70.1
Aviation 72,231 40,733 56.4
London market account 48,865 22,248 45.5
Other specialty lines 58,536 33,391 57.0
Discontinued lines (83) 326 nm
--------- --------- ----
Total $ 783,891 $ 451,592 57.6%
========= ========= ====
Full Year 2005
------------------------------
Net Earned Incurred Loss
Premium Losses Ratio
---------- ---------- -----
Diversified financial products $ 531,136 $ 255,570 48.1%
Group life, accident & health 504,382 361,289 71.6
Aviation 136,197 91,720 67.3
London market account 93,017 98,638 106.0
Other specialty lines 97,721 72,436 74.1
Discontinued lines 7,535 41,544 nm
---------- ---------- ----
Total $1,369,988 $ 921,197 67.2%
========== ========== ====
nm - Not meaningful comparison