HOUSTON, Nov. 1, 2005 (PRIMEZONE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released earnings for the third quarter and first nine months of 2005.
Net earnings for the third quarter of 2005 were lower at $8.0 million, or $0.07 per diluted share, compared to $15.8 million, or $0.16 per diluted share, for the third quarter of 2004 due to the impact of the previously reported hurricane losses and the effect of reinsurance commutations completed during the quarter, which together reduced net earnings by $65.2 million, or $0.59 per diluted share. Hurricane losses also affected net earnings in the same period in 2004 by $35.7 million, or $0.36 per diluted share.
For the first nine months of 2005 and despite the effect of the third quarter hurricane activity and the reinsurance commutations, net earnings increased 21% to a record $129.3 million, or $1.20 per diluted share, from $106.8 million, or $1.09 per diluted share, in the corresponding period of 2004.
Stephen L. Way, Chairman and Chief Executive Officer, said, "Our core operations continue to perform very well, notwithstanding the effect of the unprecedented hurricane losses and we expect strong earnings growth to continue into 2006."
Total revenue showed significant growth, increasing 30% for the first nine months of 2005 to $1.2 billion from $917.5 million in the corresponding period of 2004. This increase was predominantly due to the organic growth in most lines of business, investment income and various acquisitions made in 2004 and 2005.
The GAAP net combined ratio of our insurance company subsidiaries for the first nine months of 2005 was 94.3% compared to 92.9% in the same period of 2004, but on substantially higher net earned premium. Without the effect of the hurricanes and the reinsurance commutations, the combined ratio would have been lower by 9.8% for the first nine months of 2005 and lower by 7.6% during the same period in 2004.
Premium of our insurance company subsidiaries continued to grow substantially during the first nine months of 2005, with net written premium increasing 38% to $1.1 billion from $800.4 million during the first nine months of 2004 and net earned premium increasing by 39% to $995.9 million from $717.3 million during the same period. Excluding discontinued lines of business, these increases were considerably greater with net written premium rising 42% and net earned premium rising 46%. The larger premiums are a result of various acquisitions in 2004 and 2005 and strong organic growth particularly in our diversified financial products and life, accident and health lines of business where we significantly increased our retentions in 2005.
Mr. Way added, "Rates generally seem to be stabilizing and increases are expected in several lines following the disastrous industry results in the third quarter of 2005, giving us further optimism about future earnings growth."
Fee and commission income decreased during the first nine months of 2005 to $102.5 million from $135.8 million in the same period of 2004. This decrease is due to planned reductions in ceded reinsurance and the integration of our largest underwriting agency into our life insurance company subsidiary.
Net investment income increased 54% in the first nine months of 2005 to a record $70.0 million from $45.6 million in the same period of 2004. This growth was primarily a result of higher short-term yields and increased investment assets, which grew 20% as of September 30, 2005, to $3.0 billion compared to $2.5 billion at December 31, 2004. The Company continues to follow a conservative investment philosophy with a relatively short duration portfolio, no junk bonds and relatively few equity investments.
Cash flow from operating activities continued to be very strong during the first three quarters of 2005 increasing to $453.3 million from the previous record of $350.6 million during the first nine months of 2004, as a result of increased net loss reserves and reinsurance commutations during the third quarter of 2005.
As of September 30, 2005, total assets grew 12% to $6.6 billion; book value per share increased 8% to $13.97; and shareholders' equity grew 12% to $1.5 billion, all compared to December 31, 2004. The Company's debt to total capital ratio was 17.3% at the end of the third quarter of 2005. See attached tables.
HCC will hold an open conference call beginning at 4:00 p.m. (CST) on Tuesday, November 1, 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.hcch.com. A replay of the webcast will be available until Tuesday, November 8, 2005.
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 $6.6 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.hcch.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
September 30, 2005
(amounts in thousands, except per share data)
Three Months Ended September 30, 2005 2004
---------------------------------- -------- --------
Gross written premium $525,447 $490,149
Net written premium 371,698 255,593
Net earned premium 338,058 248,190
Fee and commission income 32,073 45,891
Net investment income 24,998 16,212
Other operating income 16,864 7,978
Total revenue 412,031 322,197
Net earnings 7,950 15,803
Earnings per share (diluted) 0.07 0.16
Cash flow from operations 334,417 136,945
Weighted average shares outstanding (diluted) 109,818 98,409
GAAP net loss ratio 87.5% 81.5%
GAAP combined ratio 112.8% 107.8%
September 30, December 31,
2005 2004
------------ -----------
Total investments $ 2,952,520 $ 2,468,491
Total assets 6,628,933 5,933,437
Shareholders' equity 1,477,184 1,323,665
Debt to total capital 17.3% 19.0%
Book value per share $ 13.97 $ 12.97
HCC Insurance Holdings, Inc.
Financial Highlights
September 30, 2005
(amounts in thousands, except per share data)
Nine Months Ended September 30, 2005 2004
------------------------------ ---------- ----------
Gross written premium $1,540,002 $1,470,920
Net written premium 1,107,443 800,409
Net earned premium 995,901 717,323
Fee and commission income 102,452 135,836
Net investment income 70,039 45,614
Other operating income 26,116 14,217
Total revenue 1,196,546 917,485
Net earnings 129,326 106,786
Earnings per share (diluted) 1.20 1.09
Cash flow from operations 453,254 350,579
Weighted average shares
outstanding (diluted) 108,003 98,361
GAAP net loss ratio 68.3% 66.4%
GAAP combined ratio 94.3% 92.9%
September 30, December 31,
2005 2004
------------ -----------
Total investments $ 2,952,520 $ 2,468,491
Total assets 6,628,933 5,933,437
Shareholders' equity 1,477,184 1,323,665
Debt to total capital 17.3% 19.0%
Book value per share $ 13.97 $ 12.97
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share data)
Sept. 30, Dec. 31,
2005 2004
ASSETS ---------- ----------
Investments:
Fixed income securities, at fair
value (cost: 2005 - $2,115,472;
2004 - $1,682,421) $2,114,792 $1,703,171
Short-term investments, at cost,
which approximates fair value 719,077 729,985
Other investments, at fair value
(cost: 2005 - $116,796;
2004 - $34,137) 118,651 35,335
---------- ----------
Total investments 2,952,520 2,468,491
Cash 90,254 69,933
Restricted cash and cash investments 183,628 188,510
Premium, claims and other receivables 951,139 923,638
Reinsurance recoverables 1,262,604 1,098,999
Ceded unearned premium 261,340 317,055
Ceded life and annuity benefits 73,675 74,627
Deferred policy acquisition costs 154,219 139,199
Goodwill 468,601 444,031
Other assets 230,953 208,954
---------- ----------
Total assets $6,628,933 $5,933,437
========== ==========
LIABILITIES
Loss and loss adjustment expense payable $2,629,397 $2,089,199
Life and annuity policy benefits 73,675 74,627
Reinsurance balances payable 202,820 228,998
Unearned premium 811,294 741,706
Deferred ceding commissions 71,379 94,896
Premium and claims payable 794,422 795,576
Notes payable 309,679 311,277
Accounts payable and accrued liabilities 259,083 273,493
---------- ----------
Total liabilities 5,151,749 4,609,772
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value;
250.0 million shares authorized
(shares issued and outstanding:
2005 - 105,725; 2004 - 102,057) 105,725 68,038
Additional paid-in capital 593,029 566,776
Retained earnings 758,790 651,216
Accumulated other comprehensive income 19,640 37,635
---------- ----------
Total shareholders' equity 1,477,184 1,323,665
---------- ----------
Total liabilities and
shareholders' equity $6,628,933 $5,933,437
========== ==========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(unaudited, in thousands, except per share data)
Nine months ended Three months ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
REVENUE
Net earned premium $ 995,901 $ 717,323 $ 338,058 $ 248,190
Fee and commission income 102,452 135,836 32,073 45,891
Net investment income 70,039 45,614 24,998 16,212
Net realized
investment gain 2,038 4,495 38 3,926
Other operating income 26,116 14,217 16,864 7,978
--------- --------- --------- ---------
Total revenue 1,196,546 917,485 412,031 322,197
--------- --------- --------- ---------
EXPENSE
Loss and loss adjustment
expense, net 679,932 476,079 295,768 202,317
Policy acquisition costs,
net 185,696 157,815 65,708 55,312
Other operating expense 135,884 114,726 40,403 38,975
Interest expense 5,848 6,018 2,070 2,060
--------- --------- --------- ---------
Total expense 1,007,360 754,638 403,949 298,664
--------- --------- --------- ---------
Earnings from continuing
operations before income
tax expense 189,186 162,847 8,082 23,533
Income tax expense on
continuing operations 60,567 56,039 839 7,907
--------- --------- --------- ---------
Earnings from continuing
operations 128,619 106,808 7,243 15,626
Earnings (loss) from
discontinued operations,
net of income tax 707 (22) 707 177
--------- --------- --------- ---------
Net earnings $ 129,326 $ 106,786 $ 7,950 $ 15,803
========= ========= ========= =========
Basic earnings per share
data:
Earnings from continuing
operations $ 1.23 $ 1.10 $ 0.07 $ 0.16
Earnings from discontinued
operations 0.01 -- 0.01 --
--------- --------- --------- ---------
Net earnings $ 1.24 $ 1.10 $ 0.08 $ 0.16
========= ========= ========= =========
Weighted average shares
outstanding 104,617 96,740 105,623 97,019
========= ========= ========= =========
Diluted earnings per
share data:
Earnings from continuing
operations $ 1.19 $ 1.09 $ 0.06 $ 0.16
Earnings from discontinued
operations 0.01 -- 0.01 --
--------- --------- --------- ---------
Net earnings $ 1.20 $ 1.09 $ 0.07 $ 0.16
========= ========= ========= =========
Weighted average shares
outstanding 108,003 98,361 109,818 98,409
========= ========= ========= =========
Cash dividends declared,
per share $ 0.207 $ 0.157 $ 0.075 $ 0.057
========= ========= ========= =========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands, except per share data)
Nine months ended Three months ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Cash flows from operating
activities:
Net earnings $ 129,326 $ 106,786 $ 7,950 $ 15,803
Adjustments to reconcile
net earnings to net
cash provided by
operating activities:
Change in premium,
claims and other
receivables (37,538) (31,521) 39,121 37,218
Change in reinsurance
recoverables (156,477) (192,811) (138,947) (128,039)
Change in ceded
unearned premium 65,591 (24,795) 14,648 (18,153)
Change in loss and
loss adjustment
expense payable 521,365 392,111 396,478 222,886
Change in reinsurance
balances payable (34,966) (19,412) 15,744 9,391
Change in unearned
premium 42,994 109,675 17,458 23,492
Change in premium and
claims payable, net
of restricted cash 3,728 44,165 5,188 (33,524)
Change in trading
portfolio (54,654) 5,623 (16,600) 4,174
Depreciation and
amortization expense 11,063 11,671 3,703 4,303
Other, net (37,178) (50,913) (10,326) (606)
--------- --------- --------- ---------
Cash provided by
operating
activities 453,254 350,579 334,417 136,945
--------- --------- --------- ---------
Cash flows from investing
activities:
Sales of fixed income
securities 163,841 199,491 49,071 65,797
Maturity or call of
fixed income securities 133,391 110,425 34,923 38,085
Cost of securities
acquired (733,400) (629,001) (235,256) (222,738)
Change in short-term
investments 36,234 4,979 (145,482) 13,786
Payments for purchase of
subsidiaries, net of
cash received (44,288) (78,446) (9,407) (7,408)
Sale of subsidiary 10,448 -- 10,448 --
Other, net (6,869) 7,289 4,509 2,546
--------- --------- --------- ---------
Cash used by investing
activities (440,643) (385,263) (291,194) (109,932)
--------- --------- --------- ---------
Cash flows from financing
activities:
Issuance of notes
payable 36,000 2,000 3,000 --
Payments on notes
payable (37,554) (2,287) (23,089) (102)
Sale of common stock 32,684 14,639 3,847 1,569
Dividends paid (19,606) (14,484) (7,890) (4,848)
Other (3,814) -- -- --
--------- --------- --------- ---------
Cash provided (used) by
financing activities 7,710 (132) (24,132) (3,381)
--------- --------- --------- ---------
Net increase (decrease)
in cash 20,321 (34,816) 19,091 23,632
Cash at beginning of
period 69,933 96,416 71,163 37,968
--------- --------- --------- ---------
Cash at end of period $ 90,254 $ 61,600 $ 90,254 $ 61,600
========= ========= ========= =========
HCC Insurance Holdings, Inc.
Insurance Company Premium
September 30, 2005
($ in thousands)
3rd Qtr 3rd Qtr %
2005 2004 Change
--------- --------- ---------
GROSS WRITTEN
Diversified financial products $ 241,781 $ 215,184 12%
Group life, accident & health 142,086 147,235 (3)
Aviation 53,090 53,003 --
London market account 32,366 34,649 (7)
Other specialty lines 49,991 41,061 22
--------- --------- ---------
519,314 491,132 6%
Discontinued lines 6,133 (983) nm
--------- --------- ---------
$ 525,447 $ 490,149 7%
========= ========= =========
NET WRITTEN
Diversified financial products $ 184,931 $ 100,183 85%
Group life, accident & health 124,358 87,860 42
Aviation 31,597 34,483 (8)
London market account (370) 10,701 nm
Other specialty lines 30,220 22,506 34
--------- --------- ---------
370,736 255,733 45%
Discontinued lines 962 (140) nm
--------- --------- ---------
$ 371,698 $ 255,593 45%
========= ========= =========
NET EARNED PREMIUM
Diversified financial products $ 143,084 $ 77,571 84%
Group life, accident & health 125,079 86,055 45
Aviation 35,008 35,016 --
London market account 8,784 22,050 (60)
Other specialty lines 25,023 18,554 35
--------- --------- ---------
336,978 239,246 41%
Discontinued lines 1,080 8,944 nm
--------- --------- ---------
$ 338,058 $ 248,190 36%
========= ========= =========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc.
Insurance Company Premium
September 30, 2005
($ in thousands)
Year to Date Change
2005 2004 %
---------- ---------- ----------
GROSS WRITTEN
Diversified financial products $ 665,400 $ 606,847 10%
Group life, accident & health 448,378 441,090 2
Aviation 159,446 149,996 6
London market account 124,164 151,993 (18)
Other specialty lines 133,766 105,055 27
---------- ---------- ----------
1,531,154 1,454,981 5%
Discontinued lines 8,848 15,939 nm
---------- ---------- ----------
$1,540,002 $1,470,920 5%
========== ========== ==========
NET WRITTEN
Diversified financial products $ 480,405 $ 267,997 79%
Group life, accident & health 381,367 249,172 53
Aviation 99,879 109,564 (9)
London market account 64,938 92,587 (30)
Other specialty lines 78,542 61,315 28
---------- ---------- ----------
1,105,131 780,635 42%
Discontinued lines 2,312 19,774 nm
---------- ---------- ----------
$1,107,443 $ 800,409 38%
========== ========== ==========
NET EARNED PREMIUM
Diversified financial products $ 371,414 $ 207,684 79%
Group life, accident & health 380,681 245,945 55
Aviation 101,817 92,283 10
London market account 66,402 83,572 (21)
Other specialty lines 69,574 46,845 49
---------- ---------- ----------
989,888 676,329 46%
Discontinued lines 6,013 40,994 nm
---------- ---------- ----------
$ 995,901 $ 717,323 39%
========== ========== ==========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc.
Consolidated Insurance Companies
Net Loss Ratios
September 30, 2005
($ in thousands)
Year to Date 2005 Full Year 2004
-------------------------- ---------------------------
Line of Net Earned Actual Loss Net Earned Actual Loss
Business Premium Losses Ratio Premium Losses Ratio
----------- -------- -------- ----- ---------- -------- -----
Diversified
financial
products $371,414 $178,568 48.1% $ 310,809 $147,970 47.6%
Group life,
accident &
health 380,681 277,924 73.0 343,913 229,389 66.7
Aviation 101,817 74,635 73.3 127,248 80,458 63.2
London market
account 66,402 63,162 95.1 111,341 73,428 65.9
Other specialty
lines 69,574 52,939 76.1 69,089 43,866 63.5
-------- -------- ----- ---------- -------- -----
989,888 647,228 65.4 962,400 575,111 59.8
Discontinued
lines 6,013 32,704 543.9 48,292 70,119 145.2
-------- -------- ----- ---------- -------- -----
Total $995,901 $679,932 68.3% $1,010,692 $645,230 63.8%
======== ======== ===== ========== ======== =====
The HCC Insurance Holdings, Inc. company logo can be found at http://www.primezone.com/newsroom/prs/?pkgid=1977