Highlights:
- Net earnings of $205.0 million, or $2.04 per diluted share, for the first half
- Net earnings of $97.1 million, or $0.97 per diluted share, for the second quarter
- GAAP combined ratio of 83.5% for the second quarter and 83.2% for the first half
- Annualized return on equity of 10.8% for the first half
- Annualized operating return on equity(a) of 10.7% for the first half
- Gross written premium increased 3% to $832.7 million for the second quarter and 3% to $1.6 billion for the first half
- Book value per share increased 7% for the first half to $39.12
HOUSTON, July 29, 2014 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released results for its second quarter ended June 30, 2014.
Net earnings were $97.1 million, or $0.97 per diluted share, in the second quarter of 2014, compared to $88.2 million, or $0.87 per diluted share, in the same quarter of 2013. Net earnings were $205.0 million, or $2.04 per diluted share, in the first six months of 2014, versus $194.0 million, or $1.92 per diluted share, in the same period of 2013.
The Company's combined ratio was 83.5% for the second quarter of 2014, compared to 85.3% for the same quarter of 2013. The combined ratio was 83.2% for the first six months of 2014, versus 84.5% for the same period of 2013. The net paid loss ratio was 59.4% for the first half of 2014, compared to 52.2% for the same period of 2013. HCC had no reserve development in the first six months of 2014, compared to favorable development of $11.8 million in the same period of 2013.
Christopher J.B. Williams, HCC's Chief Executive Officer, stated, "We are very pleased to report record net earnings for the first half of the year, driven by an outstanding underwriting performance and a combined ratio of 83.2%. HCC's businesses continue to generate consistent, favorable results, allowing us to explore opportunities to grow our existing businesses and to add teams focused on new lines. We believe HCC is well-positioned going forward."
The 2014 results included accident year pretax net catastrophe losses of $4.9 million and $9.5 million in the second quarter and first six months, respectively, which reduced net earnings by $0.03 and $0.06 per share in the respective periods. The 2013 results included pretax net catastrophe losses of $21.4 million and $26.6 million in the second quarter and first six months, respectively, which reduced net earnings by $0.14 and $0.17 per share in the respective periods.
Gross written premium increased 3% to $832.7 million in the second quarter of 2014, compared to $809.4 million in the same quarter of 2013. Net written premium increased 3% to $647.0 million in the second quarter of 2014, versus $629.0 million in the same quarter of 2013. Net earned premium increased 2% to $572.2 million in the second quarter of 2014, compared to $561.4 million in the same quarter of 2013.
In the first six months of 2014, compared to the same period of 2013, gross written premium increased 3% to $1.6 billion; net written premium increased 2% to $1.2 billion; and net earned premium increased 1% to $1.1 billion.
Investment income increased to $56.4 million in the second quarter of 2014, compared to $55.7 million in the same quarter of 2013, and to $113.2 million in the first six months of 2014, versus $111.4 million in the same period of 2013. As of June 30, 2014, HCC's fixed maturity securities portfolio had an average rating of AA, with a duration of 4.7 years and an average long-term tax equivalent yield of 4.4%.
HCC generated cash flow from operations of $195.3 million in the first six months of 2014, compared to $102.0 million in the same period of 2013. The Company's cash flow was decreased by U.S. Surety collateral repayments of $16.1 million in 2014 and $74.3 million in 2013. At June 30, 2014, the Company had $413.2 million of cash and short-term investments and $384.1 million of available capacity under its $825.0 million revolving loan facility.
The Company purchased 1.0 million shares of its common stock during the first six months of 2014 for $41.5 million at an average cost of $43.21 per share.
As of June 30, 2014, total assets were $10.9 billion, shareholders' equity was $3.9 billion and the Company's debt to total capital ratio was 15.8%.
For further information about HCC's 2014 second quarter earnings results, see the supplemental financial schedules that are available in the Investor Relations section of the Company's website at http://ir.hcc.com.
HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, July 30. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161. There will also be a live webcast available on a listen-only basis that can be accessed through the Investor Relations section of the Company's website at http://ir.hcc.com. The webcast replay will be archived in the Investor Relations section of the HCC website through Friday, October 31, 2014.
Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading specialty insurer with offices in the United States, the United Kingdom, Spain and Ireland. HCC's major domestic and international insurance companies have financial strength ratings of "AA (Very Strong)" from Standard & Poor's Corporation, "A+ (Superior)" from A.M. Best Company, Inc., "AA (Very Strong)" from Fitch Ratings, and "A1 (Good Security)" from Moody's Investors Service, Inc.
For more information about HCC, please visit http://www.hcc.com.
a) Non-GAAP Financial Measure
Annualized operating return on equity is a non-GAAP financial measure under Regulation G and is calculated as net earnings excluding after-tax net realized investment gain/loss, other-than-temporary impairment credit losses, and foreign currency benefit/expense (collectively, operating earnings) divided by average shareholders' equity excluding accumulated other comprehensive income. See the supplemental financial schedules for a reconciliation of this non-GAAP financial measure to corresponding GAAP amounts. Management believes annualized operating return on equity is a useful measure for understanding the Company's profitability relative to shareholders' equity before consideration of investment-related gains/losses and foreign currency benefit/expense, both of which management excludes when evaluating operating results internally.
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.