HOUSTON, Aug. 5, 2008 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released earnings for the second quarter and first half of 2008, which ended June 30.
Net earnings for the second quarter of 2008 were $92.3 million, compared with $101.2 million during the second quarter of 2007. Net earnings per diluted share were $0.80 for the second quarter of 2008, compared to $0.86 in the same quarter of 2007. Net earnings for the first six months of 2008 were $173.4 million, versus $197.9 million for the first half of the previous year. Net earnings per diluted share were $1.49 for the first six months of 2008, versus $1.69 for the first half of 2007. These reductions were directly related to losses from HCC's trading securities, lower alternative investment returns and lower gains from the sales of strategic investments in 2008 than in 2007.
The GAAP combined ratio for the first six months of 2008 was 83.9 percent, compared to 84.0 percent for the corresponding period of 2007.
"We are very pleased with our second quarter and first half results, given the current soft market environment. The results are consistent with our 2008 guidance issued in February 2008. Our combined ratio remains below 85 percent, our target for 2008. We remain a focused underwriting organization that continues to execute its soft market plan of disciplined underwriting in order to maximize underwriting profits," HCC Chief Executive Officer Frank J. Bramanti said.
HCC's Board of Directors authorized a $100.0 million share repurchase on June 20, 2008. The Company repurchased 1.1 million shares for a total of $21.9 million through July 31, 2008. HCC plans to continue to opportunistically repurchase its shares, if they trade at a discount to book value, as part of its philosophy of building long-term shareholder value.
Book value per share increased to $22.19 at June 30, 2008, up five percent since December 31, 2007. The Company's annualized return on average equity for the second quarter of 2008 was 14.5 percent.
Total revenue of $593.9 million in the second quarter of 2008 was essentially flat, compared with $594.3 million in the same quarter of 2007. Total revenue was $1.2 billion for the first halves of 2008 and 2007.
Net earned premium of HCC's insurance company subsidiaries was $506.6 million, up two percent in the second quarter of 2008, compared with $494.4 million in the same quarter of 2007. During the 2008 second quarter, net written premium increased six percent to $567.2 million, while gross written premium increased four percent to $691.6 million, compared to the second quarter of 2007.
Net earned premium of HCC's insurance company subsidiaries was $1.0 billion, up one percent for the first six months of 2008. During the first half of 2008, net written premium increased three percent to $1.1 billion, while gross written premium increased one percent to $1.3 billion, compared to the first half of 2007.
"We continue to see opportunities to profitably expand our premium base. We have recently begun two new underwriting operations that will further allow us to expand our footprint in the insurance industry and build for the future," Mr. Bramanti said.
During the second quarter of 2008, HCC had net positive reserve development of $9.3 million compared to net adverse development of $3.4 million in 2007. For the first six months of 2008, the Company recorded $14.4 million of net positive reserve development, compared to net adverse development of $3.6 million for 2007.
Fee and commission income was relatively flat at $61.8 million in the first half of 2008, compared to $63.3 million in the same period of 2007.
Investment income decreased slightly during 2008, compared to 2007. This was caused by investment performance from alternative investments which resulted in a loss of $1.2 million for the second quarter of 2008, versus income of $5.0 million for the second quarter of 2007, and a loss of $2.4 million for the first half of 2008, compared to income of $12.6 million for the first half of 2007. Excluding income and losses from alternative investments, HCC's remaining investments generated $48.4 million in investment income in the 2008 second quarter, versus $43.7 million in the 2007 second quarter and $97.3 million for the first half of 2008, compared to $85.6 million for the first half of 2007, as the Company's fixed income and short-term investments increased 11 percent from June 30, 2007 to $4.6 billion at June 30, 2008.
As of June 30, 2008, HCC's fixed income securities portfolio had an average rating of AA+, an average duration of 5.0 years and an average tax equivalent yield of 5.3 percent. The Company held $13.2 million of subprime-related and Alt-A securities, which had an average rating of AAA, and owned no CDO or CLO securities.
"We continue to closely monitor our investment portfolio and have eliminated a few headline risk assets. Our alternative investment portfolio continues to underperform in the short run compared to our expectations; however, we believe in the long-term results of this asset class," Mr. Bramanti said. "We remain pleased with the overall performance of our investment portfolio and believe our high quality, low risk approach will continue to differentiate HCC from the market."
Other operating income was $10.9 million for the 2008 second quarter, compared to $20.1 million for the same period in 2007. The difference in second quarter results was principally due to losses on the Company's trading portfolio, versus gains in 2007. Other operating income was $6.0 million for the first half of 2008, compared to $38.7 million for the same period in 2007. Trading gains were $8.3 million in 2007, compared to losses of $11.7 million in 2008. In addition, gains on sales of strategic investments were $21.6 million in 2007, compared to $9.2 million in 2008. HCC's 2008 guidance assumed other operating income of approximately $3.3 million per quarter, excluding the effects of any trading portfolio activity or sales of strategic investments.
As of June 30, 2008, total investments increased to $4.8 billion, total assets were $8.3 billion, shareholders' equity was $2.6 billion and the Company's debt to total capital ratio remained very conservative at 12.6 percent.
See following tables for further information about HCC's quarter and year to-date financial results.
HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, August 6. 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 Tuesday, August 19, 2008.
Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. (HCC) is a leading international specialty insurance group with offices across the United States and in Belgium, Bermuda, Ireland, Spain and the United Kingdom. HCC has assets of $8.3 billion, shareholders' equity of $2.6 billion and is rated AA (Very Strong) by Standard & Poor's and AA (Very Strong) by Fitch Ratings. In addition, HCC's major domestic insurance companies are rated 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. and Subsidiaries
Financial Highlights
June 30, 2008
(Unaudited, in thousands except per share data)
Three months ended
June 30,
2008 2007
---------- ----------
Gross written premium $ 691,593 $ 665,601
Net written premium 567,150 533,820
Net earned premium 506,610 494,386
Fee and commission income 30,764 31,136
Net investment income 47,249 48,697
Other operating income 10,947 20,100
Total revenue 593,850 594,250
Net earnings 92,337 101,172
Earnings per share (diluted) 0.80 0.86
Cash flow from operations 94,639 169,989
Weighted average shares outstanding (diluted) 116,075 117,728
GAAP net loss ratio 59.8% 61.3%
GAAP combined ratio 84.1% 83.9%
Paid loss ratio 50.5% 43.1%
June 30, December 31,
2008 2007
---------- -----------
Total investments $4,762,527 $4,672,277
Total assets 8,315,278 8,074,645
Shareholders' equity 2,564,419 2,440,365
Debt to total capital 12.6% 11.7%
Book value per share $ 22.19 $ 21.21
HCC Insurance Holdings, Inc. and Subsidiaries
Financial Highlights
June 30, 2008
(Unaudited, in thousands except per share data)
Six months ended
June 30,
2008 2007
---------- ----------
Gross written premium $1,274,592 $1,264,702
Net written premium 1,060,797 1,030,785
Net earned premium 1,000,156 991,986
Fee and commission income 61,763 63,261
Net investment income 94,870 98,164
Other operating income 6,001 38,685
Total revenue 1,161,238 1,191,472
Net earnings 173,438 197,862
Earnings per share (diluted) 1.49 1.69
Cash flow from operations 230,439 400,300
Weighted average shares outstanding (diluted) 116,218 117,381
GAAP net loss ratio 59.6% 60.9%
GAAP combined ratio 83.9% 84.0%
Paid loss ratio 49.1% 49.0%
June 30, December 31,
2008 2007
------------------------
Total investments $4,762,527 $4,672,277
Total assets 8,315,278 8,074,645
Shareholders' equity 2,564,419 2,440,365
Debt to total capital 12.6% 11.7%
Book value per share $ 22.19 $ 21.21
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
June 30, December 31,
2008 2007
---------- ----------
ASSETS
Investments:
Fixed income securities $4,068,023 $3,666,705
Short-term investments 527,086 783,650
Other investments 167,418 221,922
---------- ----------
Total investments 4,762,527 4,672,277
Cash 27,129 39,135
Restricted cash and cash investments 188,862 193,151
Premium, claims and other receivables 810,109 763,401
Reinsurance recoverables 1,030,408 956,665
Ceded unearned premium 235,632 244,684
Ceded life and annuity benefits 65,275 66,199
Deferred policy acquisition costs 200,576 192,773
Goodwill 818,329 776,046
Other assets 176,431 170,314
---------- ----------
Total assets $8,315,278 $8,074,645
========== ==========
LIABILITIES
Loss and loss adjustment expense payable $3,446,824 $3,227,080
Life and annuity policy benefits 65,275 66,199
Reinsurance balances payable 119,893 129,838
Unearned premium 998,922 943,946
Deferred ceding commissions 60,891 68,968
Premium and claims payable 422,068 497,974
Notes payable 369,714 324,714
Accounts payable and accrued liabilities 267,272 375,561
---------- ----------
Total liabilities 5,750,859 5,634,280
SHAREHOLDERS' EQUITY
Common stock 115,701 115,069
Additional paid-in capital 847,452 831,419
Retained earnings 1,594,030 1,445,995
Accumulated other comprehensive income 9,819 47,882
Treasury stock (2,583) --
---------- ----------
Total shareholders' equity 2,564,419 2,440,365
---------- ----------
Total liabilities and shareholders' equity $8,315,278 $8,074,645
========== ==========
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,
2008 2007 2008 2007
---------- ---------- ---------- ----------
REVENUE
Net earned premium $1,000,156 $ 991,986 $ 506,610 $ 494,386
Fee and commission
income 61,763 63,261 30,764 31,136
Net investment
income 94,870 98,164 47,249 48,697
Net realized
investment loss (1,552) (624) (1,720) (69)
Other operating
income 6,001 38,685 10,947 20,100
---------- ---------- ---------- ----------
Total revenue 1,161,238 1,191,472 593,850 594,250
---------- ---------- ---------- ----------
EXPENSE
Loss and loss
adjustment expense,
net 595,927 603,763 302,901 303,291
Policy acquisition
costs, net 188,113 174,527 95,845 85,428
Other operating
expense 116,718 111,108 57,514 53,467
Interest expense 7,767 4,399 3,808 1,096
---------- ---------- ---------- ----------
Total expense 908,525 893,797 460,068 443,282
---------- ---------- ---------- ----------
Earnings before
income tax expense 252,713 297,675 133,782 150,968
Income tax expense 79,275 99,813 41,445 49,796
---------- ---------- ---------- ----------
Net earnings $ 173,438 $ 197,862 $ 92,337 $ 101,172
========== ========== ========== ==========
Basic earnings per
share data:
Net earnings
per share $ 1.50 $ 1.76 $ 0.80 $ 0.90
========== ========== ========== ==========
Weighted average
shares outstanding 115,363 112,117 115,492 112,273
========== ========== ========== ==========
Diluted earnings per
share data:
Net earnings
per share $ 1.49 $ 1.69 $ 0.80 $ 0.86
========== ========== ========== ==========
Weighted average
shares outstanding 116,218 117,381 116,075 117,728
========== ========== ========== ==========
Cash dividends
declared,
per share $ 0.22 $ 0.20 $ 0.11 $ 0.10
========== ========== ========== ==========
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,
2008 2007 2008 2007
---------- ---------- ---------- ----------
Cash flows from
operating
activities:
Net earnings $ 173,438 $ 197,862 $ 92,337 $ 101,172
Adjustments to
reconcile net
earnings to net
cash provided by
operating
activities:
Change in premium,
claims and other
receivables (43,624) 30,041 (47,403) (57,125)
Change in
reinsurance
recoverables (73,812) 94,621 (76,483) (16,646)
Change in ceded
unearned premium 9,052 (21,249) (10,847) (23,139)
Change in loss and
loss adjustment
expense payable 219,858 105,937 128,013 89,492
Change in
reinsurance
balances payable (9,945) (873) (4,184) 7,452
Change in
unearned premium 55,022 62,882 71,982 65,504
Change in premium
and claims
payable, net of
restricted cash (73,868) (42,100) (28,419) 44,587
Change in current
income taxes
payable (7,310) (14,690) (42,975) (38,013)
Change in trading
portfolio 42,574 4,865 33,512 (6,093)
Gain on sales of
strategic
investments (9,158) (21,618) (9,158) (10,811)
Stock-based
compensation
expense 6,797 6,389 3,931 4,178
Depreciation and
amortization
expense 6,824 7,861 3,434 4,125
Other, net (65,409) (9,628) (19,101) 5,306
---------- ---------- ---------- ----------
Cash provided by
operating
activities 230,439 400,300 94,639 169,989
---------- ---------- ---------- ----------
Cash flows from
investing
activities:
Sales of fixed
income securities 236,878 174,718 116,803 146,235
Maturity or call
of fixed income
securities 182,410 158,121 106,535 87,973
Cost of securities
acquired (925,693) (736,873) (469,720) (369,678)
Change in
short-term
investments 256,564 (26,014) 128,512 (50,871)
Proceeds from
sales of other
investments 30,994 -- 11,956 --
Proceeds from
sales of strategic
investments 22,818 39,816 22,818 16,866
Payments for
purchase of
subsidiaries, net
of cash received (72,369) (51,681) (883) (45,764)
Other, net (4,685) (5,356) (3,015) (3,188)
---------- ---------- ---------- ----------
Cash used by
investing
activities (273,083) (447,269) (86,994) (218,427)
---------- ---------- ---------- ----------
Cash flows from
financing
activities:
Advances on line
of credit 75,000 62,000 35,000 51,000
Payments on line
of credit and
notes payable (30,000) (12,887) (30,000) (1,548)
Sales of
common stock 9,868 16,422 5,276 8,382
Dividends paid (25,340) (22,381) (12,682) (11,208)
Other, net 1,110 (2,544) (2,798) 1,251
---------- ---------- ---------- ----------
Cash provided
(used) by
financing
activities 30,638 40,610 (5,204) 47,877
---------- ---------- ---------- ----------
Net increase
(decrease) in cash (12,006) (6,359) 2,441 (561)
Cash at beginning
of period 39,135 48,290 24,688 42,492
---------- ---------- ---------- ----------
Cash at end
of period $ 27,129 $ 41,931 $ 27,129 $ 41,931
========== ========== ========== ==========
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
June 30, 2008
(Unaudited, in thousands)
2nd Qtr 2nd Qtr Change
2008 2007 %
---------- ---------- ----------
GROSS WRITTEN
Diversified financial products $ 271,942 $ 260,149 5%
Group life, accident & health 207,750 202,268 3
Aviation 51,801 54,430 (5)
London market account 81,862 81,087 1
Other specialty lines 73,593 67,781 9
Discontinued lines 4,645 (114) nm
----------- ----------- ----------
$ 691,593 $ 665,601 4%
=========== =========== ==========
NET WRITTEN
Diversified financial products $ 226,645 $207,923 9%
Group life, accident & health 197,454 191,522 3
Aviation 37,534 38,240 (2)
London market account 51,068 48,837 5
Other specialty lines 49,758 47,420 5
Discontinued lines 4,691 (122) nm
----------- ----------- ----------
$ 567,150 $ 533,820 6%
=========== =========== ==========
NET EARNED PREMIUM
Diversified financial products $ 197,906 $ 193,337 2%
Group life, accident & health 195,354 192,224 2
Aviation 34,719 37,747 (8)
London market account 26,305 30,603 (14)
Other specialty lines 47,580 40,597 17
Discontinued lines 4,746 (122) nm
----------- ----------- ----------
$ 506,610 $ 494,386 2%
=========== =========== ==========
nm -- Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
June 30, 2008
(Unaudited, in thousands)
Year to Date Year to Date Change
2008 2007 %
---------- ---------- ----------
GROSS WRITTEN
Diversified financial products $ 483,306 $ 472,402 2%
Group life, accident & health 418,284 405,174 3
Aviation 96,629 106,093 (9)
London market account 122,798 149,222 (18)
Other specialty lines 148,936 132,276 13
Discontinued lines 4,639 (465) nm
---------- ---------- ----------
$1,274,592 $1,264,702 1%
========== ========== ==========
NET WRITTEN
Diversified financial products $ 407,146 $ 379,715 7%
Group life, accident & health 399,829 383,948 4
Aviation 69,880 77,843 (10)
London market account 80,096 93,969 (15)
Other specialty lines 99,161 95,741 4
Discontinued lines 4,685 (431) nm
---------- ---------- ----------
$1,060,797 $1,030,785 3%
========== ========== ==========
NET EARNED PREMIUM
Diversified financial products $390,083 $ 385,851 1%
Group life, accident & health 387,800 384,640 1
Aviation 69,712 77,091 (10)
London market account 53,395 64,499 (17)
Other specialty lines 94,426 80,335 18
Discontinued lines 4,740 (430) nm
---------- ---------- ----------
$1,000,156 $ 991,986 1%
========== ========== ==========
nm -- Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Investments - Selected Disclosures
June 30, 2008
(Unaudited, in thousands)
Average Ratings
Amortized Market -----------------------
Cost Value AAA AA
---------- ---------- ---------- ----------
Fixed Income
Securities $4,102,100 $4,068,023 $2,475,392 $1,019,040
========== ==========
Residential Mortgage
Backed Securities &
Collateralized
Mortgage
Obligations
Agency $664,254 $ 665,404 665,404 --
Non-Agency
Prime 103,291 95,608 95,608 --
Alt A 10,743 10,069 9,715 177
Subprime 3,264 3,133 2,412 --
---------- ----------
Total Residential
MBS/CMO $ 781,552 $ 774,214
========== ==========
Agency Securities
Debt $ 60,026 $ 60,848 60,848 --
========== ==========
Preferred Stock $ 7,910 $ 7,077 -- --
========== ==========
Commercial Mortgaged
Backed Securities $ 195,253 $ 190,014 190,014 --
========== ==========
Municipal Bond
Portfolio $1,883,263 $1,876,974 778,331 874,804
========== ==========
Insurance Enhanced $1,190,141 $1,183,127 491,471 490,170
========== ==========
Insured -
Underlying
Ratings $1,190,141 $1,183,127 179,954 711,178
========== ==========
Non-Insured $ 693,122 $ 693,847 288,483 384,825
========== ==========
Short-Term
Bank Sweep
Accounts - U.S. $ 52,424 $ 52,424
Bank Sweep Accounts
- Non-US 41,071 41,071
Taxable Money
Market Funds 433,591 433,591
---------- ----------
Total Short-Term $ 527,086 $ 527,086
========== ==========
Average Ratings
-------------------------------------------------
A BBB & below Other Average
---------- ---------- ---------- ----------
Fixed Income
Securities $ 492,638 $ 80,953 $ -- AA+
Residential Mortgage
Backed Securities &
Collateralized
Mortgage
Obligations
Agency -- -- -- AAA
Non-Agency
Prime -- -- -- AAA
Alt A 177 -- -- AAA
Subprime -- 721 -- AA+
Total Residential
MBS/CMO
Agency Securities
Debt -- -- -- AAA
Preferred Stock 7,077 -- -- A+
Commercial Mortgaged
Backed Securities -- -- -- AAA
Municipal Bond
Portfolio 190,446 32,012 1,381 AA+
Insurance Enhanced 170,489 30,997 -- AA
Insured -
Underlying Ratings 266,440 473 25,082 AA
Non-Insured 19,289 1,250 -- AA+
Notes:
There are no CDOs/CLOs in the portfolio.
Other Ratings are bonds with at least one enhanced rating; each issuer
has an equivalent investment grade rating.
Received paydown of $1.6 million on subprime and Alt A securities in
second quarter 2008 and recognized an other-than-temporary impairment
of $1.2 million related to these securities.
HCC Insurance Holdings, Inc. and Subsidiaries
Subprime Liability Exposure
June 30, 2008
* As of June 30, the Company had 38 "non-Side A only" D&O or E&O
claims and nine "Side A only" D&O claims relating to subprime
issues.
* Of the D&O claims reported, two are on primary policies with
gross policy limits totaling $9 million. The remaining D&O claims
are on excess policies.
* The average policy limit on the "non-Side A only" claims is $13.3
million gross and $8.7 million net, with an average attachment point
of $89 million.
* The average policy limit for "Side A only" claims is $14.4 million
gross and $11.7 million net, with an average attachment point of
$180 million.
* The majority of this D&O business is written excess and usually with
high attachment points.
* The majority of the Company's E&O business is written with limits
of $1 million or less.
* Except for run-off policies, HCC has not written multi-year policies.
* The insurance provided is "claims made" with defense costs included
within the policy limits.
* Many major financial institutions purchase "Side A only" coverage.
* Based upon the Company's present knowledge, the Company believes
the ultimate subprime related losses will be contained within the
current overall reserves for D&O and E&O business.
HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Insurance Companies
Net Loss Ratios
June 30, 2008
(Unaudited, in thousands)
Year to Date 2008
------------------------------------
Net Earned Incurred Loss
Line of Business Premium Losses Ratio
------------------------------ ---------- ---------- ----------
Diversified financial products $ 390,083 $ 178,488 45.8%
Group life, accident & health 387,800 287,718 74.2
Aviation 69,712 43,384 62.2
London market account 53,395 18,944 35.5
Other specialty
lines 94,426 63,940 67.7
Discontinued lines 4,740 3,453 nm
---------- ---------- ----------
Total $1,000,156 $ 595,927 59.6%
========== ========== ==========
Full Year 2007
------------------------------------
Net Earned Incurred Loss
Line of Business Premium Losses Ratio
------------------------------ ---------- ---------- ----------
Diversified financial products $ 777,414 $ 315,409 40.6%
Group life, accident & health 758,516 579,780 76.4
Aviation 153,121 89,683 58.6
London market account 124,609 68,798 55.2
Other specialty lines 171,824 115,804 67.4
Discontinued lines (398) 14,473 nm
---------- ---------- ----------
Total $1,985,086 $1,183,947 59.6%
========== ========== ==========
nm -- Not meaningful comparison
CONTACT: HCC Insurance Holdings, Inc.
Barney White, Vice President
of Investor Relations
(713) 744-3719
|
| Symbol: |
HCC |
| Last Trade: |
26.33
(11/20/2009 ET)
|
| Change: |
-0.08
(-0.302916%)
|
| Day's Range: |
26.19 -
26.42 |
| Open: |
26.37 |
| Previous Close: |
26.41 |
| TSO: |
112,500,000 |
| Market Cap: |
2.96B |
| Day's Volume: |
321,053 |
|
Blogger
Blog Search
Digg
del.icio.us
Facebook
Newsvine
Reddit
StumbleUpon
Technorati
Yahoo MyWeb
