HOUSTON, May 8, 2007 (PRIME NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today announced record earnings for the first quarter of 2007.
Net earnings increased significantly for the first quarter of 2007 rising 22% to $96.7 million from $79.1 million for the first quarter of 2006. During the same period, net earnings per diluted share grew 22% to $0.83 per share from $0.68 per share.
Book value per share increased to $19.03 at March 31, 2007, up 4% since December 31, 2006. The Company's annualized return on average equity as of March 31, 2007 was 18.5%.
Frank J. Bramanti, Chief Executive Officer, said, "The Company continues to deliver record results despite the softening insurance marketplace. We are off to a great start for 2007 and our results are on track with our expectations for full year 2007."
Total revenue grew 28% during the first quarter of 2007 to $597.2 million from $466.3 million in the first quarter of 2006. This increase is primarily due to the growth in our insurance company subsidiaries' earned premium from acquisitions as well as organic growth and increases in overall investment income. We expect revenue to continue to increase throughout 2007.
During the first three months of 2007, our insurance company subsidiaries' gross written premium increased 18% to $599.1 million and net earned premium increased 31% to $497.6 million, both compared to the first quarter of 2006. Premiums grew as expected due to the acquisition of the Health Products Division of Allianz Life Insurance Company and strong growth in credit and surety. The GAAP combined ratio improved for the first three months of 2007 to 84.0% compared to 85.5% in the corresponding period of 2006.
Mr. Bramanti added, "Our margins remain at acceptable levels and we continue to see opportunities to expand our operations through acquisitions. We expect to expand the HCC footprint to provide growth for 2008 and beyond."
During the first quarter of 2007, fee and commission income was flat at $32.1 million compared to $31.7 million during the same period in 2006. We continue to focus our acquisition activities in this area.
Net investment income increased 35% in the first quarter of 2007 to $49.5 million from $36.6 million in the first quarter of 2006 as a result of excellent cash flow from operations, including $100 million of cash collected from a commutation consummated in the fourth quarter of 2006, and an increase in short-term interest rates.
As of March 31, 2007, total investments increased to $4.2 billion, total assets exceeded $7.6 billion, shareholders' equity was over $2.1 billion and the Company's debt to total capital ratio was 12.3%. See attached tables.
HCC will hold an open conference call beginning at 8:00 a.m. Central Time on Wednesday, May 9. 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 Friday, June 8, 2007.
Headquartered in Houston, Texas, HCC is a leading international specialty insurance group with offices across the United States and in Bermuda, Spain, Ireland and the United Kingdom. HCC has assets exceeding $7.6 billion, shareholders' equity of over $2.1 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.
The HCC Insurance Holdings, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1977
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
March 31, 2007
(Unaudited, in thousands except per share data)
Three Months Ended March 31,
2007 2006
---------- ----------
Gross written premium $ 599,101 $ 506,058
Net written premium 496,965 393,051
Net earned premium 497,600 380,571
Fee and commission income 32,125 31,669
Net investment income 49,467 36,581
Other operating income 18,585 18,750
Total revenue 597,222 466,273
Net earnings 96,690 79,142
Earnings per share (diluted) 0.83 0.68
Cash flow from operations 230,311 78,091
Weighted average shares outstanding
(diluted) 117,009 116,896
GAAP net loss ratio 60.4% 58.4%
GAAP combined ratio 84.0% 85.5%
March 31, December 31,
2007 2006
---------- ----------
Total investments $4,183,056 $3,927,995
Total assets 7,632,092 7,630,132
Shareholders' equity 2,132,449 2,042,803
Debt to total capital 12.3% 13.1%
Book value per share $ 19.03 $ 18.28
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
March 31, December 31,
2007 2006
---------- ----------
ASSETS
Investments:
Fixed income securities $3,298,657 $3,007,193
Short-term investments 682,041 714,685
Other investments 202,358 206,117
---------- ----------
Total investments 4,183,056 3,927,995
Cash 42,492 48,290
Restricted cash and cash investments 171,159 176,424
Premium, claims and other receivables 771,462 864,705
Reinsurance recoverables 1,058,667 1,169,934
Ceded unearned premium 224,235 226,125
Ceded life and annuity benefits 70,133 70,923
Deferred policy acquisition costs 185,202 182,410
Goodwill 742,607 742,677
Other assets 183,079 220,649
---------- ----------
Total assets $7,632,092 $7,630,132
========== ==========
LIABILITIES
Loss and loss adjustment expense payable $3,113,496 $3,097,051
Life and annuity policy benefits 70,133 70,923
Reinsurance balances payable 114,480 122,805
Unearned premium 917,728 920,350
Deferred ceding commissions 64,946 64,949
Premium and claims payable 554,272 646,224
Notes payable 298,281 308,887
Accounts payable and accrued liabilities 366,307 356,140
---------- ----------
Total liabilities 5,499,643 5,587,329
SHAREHOLDERS' EQUITY
Common stock 112,078 111,731
Additional paid-in capital 808,100 798,213
Retained earnings 1,183,691 1,098,887
Accumulated other comprehensive income 28,580 33,972
---------- ----------
Total shareholders' equity 2,132,449 2,042,803
---------- ----------
Total liabilities and
shareholders' equity $7,632,092 $7,630,132
========== ==========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited, in thousands except per share data)
Three months ended
March 31,
2007 2006
--------- ---------
REVENUE
Net earned premium $ 497,600 $ 380,571
Fee and commission income 32,125 31,669
Net investment income 49,467 36,581
Net realized investment loss (555) (1,298)
Other operating income 18,585 18,750
--------- ---------
Total revenue 597,222 466,273
--------- ---------
EXPENSE
Loss and loss adjustment expense, net 300,472 222,067
Policy acquisition costs, net 89,099 76,232
Other operating expense 57,641 47,333
Interest expense 3,303 2,154
--------- ---------
Total expense 450,515 347,786
--------- ---------
Earnings before income tax expense 146,707 118,487
Income tax expense 50,017 39,345
--------- ---------
Net earnings $ 96,690 $ 79,142
========= =========
Basic earnings per share data:
Net earnings per share $ 0.86 $ 0.71
========= =========
Weighted average shares outstanding 111,959 111,014
========= =========
Diluted earnings per share data:
Net earnings per share $ 0.83 $ 0.68
========= =========
Weighted average shares outstanding 117,009 116,896
========= =========
Cash dividends declared, per share $ 0.100 $ 0.075
========= =========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three months ended
March 31,
2007 2006
--------- ---------
Cash flows from operating activities:
Net earnings $ 96,690 $ 79,142
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Change in premium, claims and other
receivables 87,166 44,362
Change in reinsurance recoverables 111,267 12,632
Change in ceded unearned premium 1,890 (114)
Change in loss and loss adjustment
expense payable 16,445 23,775
Change in reinsurance balances payable (8,325) (27,057)
Change in unearned premium (2,622) 18,266
Change in premium and claims payable,
net of restricted cash (86,687) (30,318)
Change in trading portfolio 10,958 (47,994)
Depreciation and amortization expense 3,736 3,825
Stock-based compensation expense 2,211 2,703
Other, net (2,418) (1,131)
--------- ---------
Cash provided by operating activities 230,311 78,091
--------- ---------
Cash flows from investing activities:
Sales of fixed income securities 28,483 65,654
Maturity or call of fixed income securities 70,148 59,226
Cost of securities acquired (367,195) (471,614)
Change in short-term investments 24,857 246,750
Sale of strategic investments 22,950 17,363
Payments for purchase of subsidiaries,
net of cash received (5,917) (24,000)
Other, net (2,168) (2,047)
--------- ---------
Cash used by investing activities (228,842) (108,668)
--------- ---------
Cash flows from financing activities:
Issuance of notes payable 11,000 11,000
Payments on notes payable (11,339) (11,107)
Sale of common stock 8,040 7,638
Dividends paid (11,173) (8,310)
Other, net (3,795) 8,532
--------- ---------
Cash provided (used) by
financing activities (7,267) 7,753
--------- ---------
Net decrease in cash (5,798) (22,824)
Cash at beginning of period 48,290 73,935
--------- ---------
Cash at end of period $ 42,492 $ 51,111
========= =========
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
March 31, 2007
(Unaudited, in thousands)
1st Qtr 1st Qtr Change
2007 2006 %
--------- --------- ---------
GROSS WRITTEN
Diversified financial products $ 212,253 $ 197,246 8%
Group life, accident & health 202,906 134,154 51
Aviation 51,663 56,234 (8)
London market account 68,135 74,507 (9)
Other specialty lines 64,495 43,889 47
Discontinued lines (351) 28 nm
--------- --------- ---------
$ 599,101 $ 506,058 18%
========= ========= =========
NET WRITTEN
Diversified financial products $ 171,792 $ 161,645 6%
Group life, accident & health 192,426 129,443 49
Aviation 39,603 35,425 12
London market account 45,132 38,723 17
Other specialty lines 48,321 27,900 73
Discontinued lines (309) (85) nm
--------- --------- ---------
$ 496,965 $ 393,051 26%
========= ========= =========
NET EARNED PREMIUM
Diversified financial products $ 192,514 $ 169,112 14%
Group life, accident & health 192,416 127,761 51
Aviation 39,344 33,197 19
London market account 33,896 21,928 55
Other specialty lines 39,738 28,640 39
Discontinued lines (308) (67) nm
--------- --------- ---------
$ 497,600 $ 380,571 31%
========= ========= =========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Insurance Companies
Net Loss Ratios
March 31, 2007
(Unaudited, in thousands)
Year to Date 2007 Full Year 2006
------------------------- -----------------------------
Net Net
Line of Earned Incurred Loss Earned Incurred Loss
Business Premium Losses Ratio Premium Losses Ratio
--------- -------- -------- ----- ---------- ---------- -----
Diversified
financial
products $192,514 $ 87,654 45.5% $ 728,861 $ 351,010 48.2%
Group life,
accident &
health 192,416 145,211 75.5 591,070 432,343 73.1
Aviation 39,344 19,698 50.1 152,886 82,328 53.8
London market
account 33,896 19,412 57.3 112,362 48,316 43.0
Other specialty
lines 39,738 27,748 69.8 123,981 69,374 56.0
Discontinued
lines (308) 749 nm 29 28,485 nm
-------- -------- ---- ---------- ---------- ----
Total $497,600 $300,472 60.4% $1,709,189 $1,011,856 59.2%
======== ======== ==== ========== ========== ====
nm - Not meaningful comparison