HOUSTON, Nov. 2, 2010 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released results for its third quarter ended September 30, 2010.
Net earnings for the third quarter of 2010 were $93.1 million, compared with $94.3 million during the third quarter of 2009. Net earnings per diluted share were $0.81 for the third quarter of 2010, compared to $0.83 for the same quarter of 2009. Net earnings for the first nine months of 2010 were $247.8 million, or $2.15 per diluted share, versus $269.1 million, or $2.37 per diluted share, for the first nine months of the previous year.
During the third quarter of 2010, the Company repurchased 407,166 shares of common stock at an average price of $25.10 per share. For the first nine months of 2010, the Company repurchased 457,316 shares of common stock at an average price of $25.02 per share. The Company has $289.0 million remaining under its $300 million share buyback authorization.
The GAAP combined ratio for the third quarter of 2010 was 82.1%, compared to 81.3% for the same quarter of 2009, and 85.3% in the first nine months of 2010, compared to 83.4% in the corresponding period of 2009.
The accident year combined ratio was 82.2% for the third quarter of 2010 and 85.1% for the first nine months of 2010, compared to 86.2% and 85.8% for the same periods in 2009, respectively. The accident year combined ratio for the first nine months of 2010 includes 1.0 percentage point for catastrophes. Book value per share increased to $28.95 at September 30, 2010, compared to $26.58 at December 31, 2009. The Company's annualized return on average equity for the third quarter of 2010 was 11.4%.
For the third quarter of 2010, the gross written premium of HCC's insurance company subsidiaries increased 3% to $640.7 million, compared to $620.4 million for the same quarter of 2009. Net written premium increased to $494.4 million in 2010, compared with net written premium of $493.3 million in 2009. Net earned premium decreased to $516.2 million for the third quarter of 2010, compared to $520.1 million for the same quarter of 2009. During the first nine months of 2010, gross written premium increased 3% to $2.0 billion, and net written premium and net earned premium increased slightly to $1.5 billion, compared to the first nine months of 2009.
"We continue to be pleased with our 2010 performance. The third quarter was another solid quarter in a continuing difficult environment. Our premium volume and loss and expense ratios are a reflection of our strategy of building a diverse portfolio of specialty businesses," said John N. Molbeck, Jr., HCC President and Chief Executive Officer.
During the third quarter of 2010, HCC had net favorable prior year reserve development of $0.9 million, compared to $25.4 million for the same period in 2009. For the first nine months of 2010, the Company recorded $1.3 million of net adverse prior year reserve development, compared to net favorable prior year reserve development of $36.6 million for the same period in 2009.
Investment income increased during the third quarter of 2010 to $51.1 million, compared to $48.1 million a year earlier, reflecting an increased amount of invested assets. On a year-to-date basis, investment income increased to $150.6 million in 2010 from $141.7 million in 2009. The Company's fixed income investments increased 10% from September 30, 2009 to $5.4 billion at September 30, 2010. As of September 30, 2010, HCC's fixed income securities portfolio had an average rating of AA+, an average duration of 4.6 years and an average tax equivalent yield of 4.9%.
The Company's liquidity position remains strong and its shareholders' equity was $3.3 billion at September 30, 2010. The Company held $572.3 million of cash and short-term investments at the end of the quarter. HCC has a $575.0 million revolving loan facility with $556.6 million of available capacity at September 30, 2010. The Company generated $175.3 million and $314.6 million of cash flow from operating activities in the third quarter and first nine months of 2010, respectively, compared to $155.4 million and $417.5 million for the same periods in 2009.
As of September 30, 2010, total investments were $5.8 billion, total assets were $9.3 billion, and the Company's debt to total capital ratio was 8.2%.
The Company also announced its new reporting segment structure, which was completed during the third quarter of 2010. The new segments are the result of the reorganization of the Company's management structure around its key lines of business. Beginning this quarter, the Company will report results in these six segments, each of which reports to an executive responsible for that segment's results:
- U.S. Property & Casualty
- Professional Liability
- Accident & Health
- U.S. Surety & Credit
- International
- Investing
The first five segments report the results of HCC's insurance underwriting businesses, including its underwriting agencies that produce the business. Segment results will be measured based on pretax underwriting profit. The consolidated investment portfolio, its related net investment income and any net realized investment gains and losses will be included in the Investing segment. Previously, HCC reported its results in the Insurance Company, Agency, and Other Operations segments. Prior period information has been adjusted to reflect the new reporting segment structure.
Included in the portfolio of products for each insurance segment are the following key products:
- U.S. Property & Casualty – aviation, small account errors and omissions liability, public risk, employment practices liability, title, residual value, disability, kidnap and ransom, contingency and brown water marine written in the United States.
- Professional Liability – directors' and officers' liability, large account errors and omissions liability, diversified financial products and fidelity written in the United States and internationally.
- Accident & Health – medical stop-loss, short-term domestic and international medical, HMO reinsurance and medical excess written in the United States.
- U.S. Surety & Credit – contract, commercial, court and bail bonds written in the United States and credit insurance managed in the United States.
- International – energy, property treaty, liability, surety, credit, property, ocean marine, accident and health and other smaller product lines written outside the United States.
The Company's remaining operations will be reported in a Corporate & Other category, which includes corporate operating expenses not allocable to the segments, interest expense on long-term debt, and underwriting results of our Exited Lines. The Exited Lines are six lines of business that HCC no longer writes and does not expect to write in the future, and include: 1) accident and health business managed by our underwriting agency, LDG Reinsurance, 2) workers' compensation, 3) provider excess, 4) Spanish medical malpractice, 5) U.K. motor and 6) film completion bonds.
In connection with the new segments, HCC changed the presentation of its consolidated income statement to better represent its current operations. Previously, HCC presented reinsurance ceding commissions that exceeded policy acquisition costs as a component of fee and commission income, within total revenue. HCC now presents all ceding commissions as an offset to policy acquisition costs, within total expense. Any remaining fee and commission income is now classified as a component of other operating income, within total revenue.
Finally, HCC has also changed the definition of its consolidated expense ratio for all periods presented. The expense ratio is calculated as the sum of other expense (excluding loss and loss adjustment expense) for each of the insurance segments, divided by the sum of total revenue for each of the insurance segments. The expense ratio excludes investment income and activity included in Corporate & Other.
For further information about HCC's results, the supplemental financial schedules are accessible on the Company's website at , as well as directly in the Investor Relations section of HCC's website at .
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HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, November 3, 2010. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161. In addition, there will be a live webcast available on a listen-only basis that can be accessed through the HCC website at . The webcast replay will be archived in the Investor Relations section of the HCC website through Friday, February 25, 2011.
Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading international specialty insurance group with offices across the United States and in the United Kingdom, Spain and Ireland. As of September 30, 2010, HCC had assets of $9.3 billion and shareholders' equity of $3.3 billion. HCC's major domestic and international insurance companies have a financial strength rating of "AA (Very Strong)" from Standard & Poor's Corporation. HCC's major domestic insurance companies have a financial strength rating of "AA (Very Strong)" from Fitch Ratings, "A1 (Good Security)" from Moody's Investors Service, Inc., and "A+ (Superior)" by A.M. Best Company, Inc.
For more information, visit our website at .
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.
CONTACT: HCC Insurance Holdings, Inc. Jonathan Lee, HCC Director of Investor Relations (713) 996-1156