Exhibit 99.1
HCC INSURANCE HOLDINGS REPORTS RESULTS
FOR FIRST QUARTER OF 2008HOUSTON (May 6, 2008) . . .
HCC Insurance Holdings, Inc. (NYSE: HCC)today released earnings for the first quarter of 2008, which ended March 31.
Net earnings for the first quarter of 2008 were $81.1 million, compared with $96.7 million during the first quarter of 2007. During the same periods, net earnings per diluted share were $0.70 compared to $0.83 in 2007.
The net earnings of the Insurance Company segment increased during the first quarter of 2008, due to favorable underwriting margins despite conditions in the insurance market. The GAAP combined ratio remained consistent for the first three months of 2008 at 83.7 percent compared to 84.0 percent for the corresponding period of 2007.
“We are very pleased with our underwriting results for the first quarter of 2008 given the softening market. We have projected a combined ratio of 85 percent for 2008 and our results for the first quarter are on track,” HCC Chief Executive Officer Frank J. Bramanti said.
The decline in first quarter consolidated net earnings was principally due to unrealized losses in HCC’s trading portfolio — which consists of investments in American Safety Insurance Holdings, Ltd. and Tower Group, Inc. — of $9.0 million pretax ($5.9 million after tax) in 2008, versus a realized and unrealized pretax gain of $2.2 million ($1.4 million after tax) in 2007; a pretax loss of $1.2 million ($0.8 million after tax) on the Company’s alternative investments portfolio in 2008, versus pretax income of $7.0 million ($4.5 million after tax) in 2007; and a gain of $10.8 million pretax ($7.0 million after tax) on the sale of a strategic investment in 2007, versus no activity in 2008. This investment-related activity reduced diluted earnings per share by $0.06 in 2008 and increased diluted earnings per share by $0.11 in 2007.
Book value per share increased to $21.88 at March 31, 2008, up three percent since December 31, 2007. The Company’s annualized return on average equity as of March 31, 2008 was 13.1 percent.
Total revenue of $567.4 million in the first quarter of 2008 was $29.8 million lower than in the same quarter of 2007. The decrease was primarily due to the $30.2 million pretax change in the investment-related items discussed above.
Net earned premium of the Company’s insurance company subsidiaries was $493.5 million, down one percent during the first three months of 2008, compared with $497.6 million for the first quarter of 2007. During the same period, net written premium also decreased one percent to $493.6 million, while gross written premium declined three percent to $583.0 million compared to the first quarter of 2007. This trend is in line with the Company’s expectations for 2008.
“Gross written premium, net written premium and net earned premium were all down slightly from 2007 amounts due to the impact of softening rates in several of our markets, which has curtailed our risk appetite. Despite these softening rates, our margins remain at acceptable levels of profitability thanks to our consistent underwriting discipline,” Mr. Bramanti said.
During the first quarter of 2008, fee and commission income decreased slightly to $31.0 million, compared to $32.1 million during the same period in 2007.
Investment income from the Company’s fixed income securities increased 20 percent during the first quarter of 2008, while total net investment income declined four percent in 2008 to $47.6 million from $49.5 million in 2007. The decline in income from the Company’s $159.8 million alternative investments portfolio exceeded the increase in income on its fixed income securities portfolio.
As of March 31, 2008, HCC’s fixed income securities portfolio had an average rating of AA+, average duration of five years and an average tax equivalent yield of 5.3 percent. The Company held only $15.4 million of subprime-related securities, which had an average rating of AAA, and owned no CDO or CLO securities.
“We are pleased with the growth in income produced by our fixed income securities portfolio and remain confident that our high quality investment portfolio and our conservative investment policy will continue to help protect our shareholders’ equity from the volatility and excessive losses being experienced in the marketplace,” Mr. Bramanti said.
Other operating income (loss) was $(4.9) million in 2008, compared to $18.6 million in 2007. The 2008 loss includes the $9.0 million loss on the Company’s trading portfolio discussed above. HCC’s projection for other operating income for 2008 is approximately $3.3 million per quarter, excluding the effect of any trading portfolio activity or sales of strategic investments.
As of March 31, 2008, total investments increased to $4.8 billion, total assets exceeded $8.2 billion, shareholders’ equity was more than $2.5 billion and the Company’s debt to total capital ratio remained very conservative at 12.6 percent. (See attached tables).
The Company continues to closely monitor its D&O and E&O exposure to subprime issues. While the environment remains challenging, based upon the Company’s current
knowledge, the Company continues to believe that it has provided for the ultimate losses that will eventually be incurred on this business and that its D&O and E&O business remains profitable.
“The difficult underwriting environment highlights the strength of our ability to manage the bottom half of the underwriting cycle. Our continuing discipline and focus on underwriting profitability should allow us to minimize the impact of declining rates on our operating results and financial position,” Mr. Bramanti said.
HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, May 7. 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 atwww.hcc.com. A replay of the webcast will be available on the website until Tuesday,May 20, 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 more than $8.2 billion, shareholders’ equity in excess of $2.5 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 atwww.hcc.com.
| | |
| Contact: | | Barney White, HCC Vice President of Investor Relations
Telephone: (713) 744-3719 |
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, 2008
(Unaudited, in thousands except per share data)
| | | | | | | | | |
| | | Three months ended March 31, |
| | | 2008 | | 2007 |
| Gross written premium | | $ | 582,999 | | | $ | 599,101 | |
| Net written premium | | | 493,647 | | | | 496,965 | |
| Net earned premium | | | 493,546 | | | | 497,600 | |
| Fee and commission income | | | 30,999 | | | | 32,125 | |
| Net investment income | | | 47,621 | | | | 49,467 | |
| Other operating income (loss) | | | (4,946 | ) | | | 18,585 | |
| Total revenue | | | 567,388 | | | | 597,222 | |
| Net earnings | | | 81,101 | | | | 96,690 | |
| Earnings per share (diluted) | | | 0.70 | | | | 0.83 | |
| Cash flow from operations | | | 135,800 | | | | 230,311 | |
| Weighted average shares outstanding (diluted) | | | 116,372 | | | | 117,009 | |
| GAAP net loss ratio | | | 59.4 | % | | | 60.4 | % |
| GAAP combined ratio | | | 83.7 | % | | | 84.0 | % |
| Paid loss ratio | | | 47.7 | % | | | 54.8 | % |
| |
| | | March 31, 2008 | | December 31, 2007 |
| Total investments | | $ | 4,799,702 | | | $ | 4,672,277 | |
| Total assets | | | 8,218,418 | | | | 8,074,645 | |
| Shareholders’ equity | | | 2,522,194 | | | | 2,440,365 | |
| Debt to total capital | | | 12.6 | % | | | 11.7 | % |
| Book value per share | | $ | 21.88 | | | $ | 21.21 | |
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
| | | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2008 | | | 2007 | |
ASSETS | | | | | | | | |
| | | | | | | | | |
| Investments: | | | | | | | | |
| Fixed income securities | | $ | 3,929,549 | | | $ | 3,666,705 | |
| Short-term investments | | | 655,598 | | | | 783,650 | |
| Other investments | | | 214,555 | | | | 221,922 | |
| | | | | | | |
| Total investments | | | 4,799,702 | | | | 4,672,277 | |
| Cash | | | 24,688 | | | | 39,135 | |
| Restricted cash and cash investments | | | 180,754 | | | | 193,151 | |
| Premium, claims and other receivables | | | 775,126 | | | | 763,401 | |
| Reinsurance recoverables | | | 953,925 | | | | 956,665 | |
| Ceded unearned premium | | | 224,785 | | | | 244,684 | |
| Ceded life and annuity benefits | | | 65,892 | | | | 66,199 | |
| Deferred policy acquisition costs | | | 194,957 | | | | 192,773 | |
| Goodwill | | | 817,372 | | | | 776,046 | |
| Other assets | | | 181,217 | | | | 170,314 | |
| | | | | | | |
| | | | | | | | | |
Total assets | | $ | 8,218,418 | | | $ | 8,074,645 | |
| | | | | | | |
| |
LIABILITIES | | | | | | | | |
| | | | | | | | | |
| Loss and loss adjustment expense payable | | $ | 3,318,811 | | | $ | 3,227,080 | |
| Life and annuity policy benefits | | | 65,892 | | | | 66,199 | |
| Reinsurance balances payable | | | 124,077 | | | | 129,838 | |
| Unearned premium | | | 926,940 | | | | 943,946 | |
| Deferred ceding commissions | | | 62,562 | | | | 68,968 | |
| Premium and claims payable | | | 442,379 | | | | 497,974 | |
| Notes payable | | | 364,714 | | | | 324,714 | |
| Accounts payable and accrued liabilities | | | 390,849 | | | | 375,561 | |
| | | | | | | |
| | | | | | | | | |
Total liabilities | | | 5,696,224 | | | | 5,634,280 | |
| | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| Common stock | | | 115,298 | | | | 115,069 | |
| Additional paid-in capital | | | 838,648 | | | | 831,419 | |
| Retained earnings | | | 1,514,414 | | | | 1,445,995 | |
| Accumulated other comprehensive income | | | 53,834 | | | | 47,882 | |
| | | | | | | |
| | | | | | | | | |
Total shareholders’ equity | | | 2,522,194 | | | | 2,440,365 | |
| | | | | | | |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 8,218,418 | | | $ | 8,074,645 | |
| | | | | | | |
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited, in thousands except per share data)
| | | | | | | | | |
| | | Three months ended | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
REVENUE | | | | | | | | |
| Net earned premium | | $ | 493,546 | | | $ | 497,600 | |
| Fee and commission income | | | 30,999 | | | | 32,125 | |
| Net investment income | | | 47,621 | | | | 49,467 | |
| Net realized investment gain (loss) | | | 168 | | | | (555 | ) |
| Other operating income (loss) | | | (4,946 | ) | | | 18,585 | |
| | | | | | | |
| | | | | | | | | |
Total revenue | | | 567,388 | | | | 597,222 | |
| | | | | | | |
| | | | | | | | | |
EXPENSE | | | | | | | | |
| Loss and loss adjustment expense, net | | | 293,026 | | | | 300,472 | |
| Policy acquisition costs, net | | | 92,268 | | | | 89,099 | |
| Other operating expense | | | 59,204 | | | | 57,641 | |
| Interest expense | | | 3,959 | | | | 3,303 | |
| | | | | | | |
| | | | | | | | | |
Total expense | | | 448,457 | | | | 450,515 | |
| | | | | | | |
| | | | | | | | | |
| Earnings before income tax expense | | | 118,931 | | | | 146,707 | |
| Income tax expense | | | 37,830 | | | | 50,017 | |
| | | | | | | |
| | | | | | | | | |
Net earnings | | $ | 81,101 | | | $ | 96,690 | |
| | | | | | | |
| | | | | | | | | |
Basic earnings per share data: | | | | | | | | |
| Net earnings per share | | $ | 0.70 | | | $ | 0.86 | |
| | | | | | | |
| | | | | | | | | |
| Weighted average shares outstanding | | | 115,234 | | | | 111,959 | |
| | | | | | | |
| | | | | | | | | |
Diluted earnings per share data: | | | | | | | | |
| Net earnings per share | | $ | 0.70 | | | $ | 0.83 | |
| | | | | | | |
| | | | | | | | | |
| Weighted average shares outstanding | | | 116,372 | | | | 117,009 | |
| | | | | | | |
| | | | | | | | | |
| Cash dividends declared, per share | | $ | 0.11 | | | $ | 0.10 | |
| | | | | | | |
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| | | | | | | | | |
| | | Three months ended | |
| | | March 31, | |
| | | 2008 | | | 2007 | |
| Cash flows from operating activities: | | | | | | | | |
| Net earnings | | $ | 81,101 | | | $ | 96,690 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | |
| Change in premium, claims and other receivables | | | 3,779 | | | | 87,166 | |
| Change in reinsurance recoverables | | | 2,671 | | | | 111,267 | |
| Change in ceded unearned premium | | | 19,899 | | | | 1,890 | |
| Change in loss and loss adjustment expense payable | | | 91,845 | | | | 16,445 | |
| Change in reinsurance balances payable | | | (5,761 | ) | | | (8,325 | ) |
| Change in unearned premium | | | (16,960 | ) | | | (2,622 | ) |
| Change in premium and claims payable, net of restricted cash | | | (45,449 | ) | | | (86,687 | ) |
| Change in trading portfolio | | | 9,062 | | | | 10,958 | |
| Depreciation and amortization expense | | | 3,390 | | | | 3,736 | |
| Stock-based compensation expense | | | 2,866 | | | | 2,211 | |
| Other, net | | | (10,643 | ) | | | (2,418 | ) |
| | | | | | | |
Cash provided by operating activities | | | 135,800 | | | | 230,311 | |
| | | | | | | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Sales of fixed income securities | | | 120,075 | | | | 28,483 | |
| Maturity or call of fixed income securities | | | 75,875 | | | | 70,148 | |
| Cost of securities acquired | | | (455,973 | ) | | | (367,195 | ) |
| Change in short-term investments | | | 128,052 | | | | 24,857 | |
| Sales of other investments | | | 19,038 | | | | — | |
| Sale of strategic investments | | | — | | | | 22,950 | |
| Payments for purchase of subsidiaries, net of cash received | | | (71,486 | ) | | | (5,917 | ) |
| Other, net | | | (1,670 | ) | | | (2,168 | ) |
| | | | | | | |
Cash used by investing activities | | | (186,089 | ) | | | (228,842 | ) |
| | | | | | | |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Advances on line of credit | | | 40,000 | | | | 11,000 | |
| Payments on line of credit and notes payable | | | — | | | | (11,339 | ) |
| Sale of common stock | | | 4,592 | | | | 8,040 | |
| Dividends paid | | | (12,658 | ) | | | (11,173 | ) |
| Other, net | | | 3,908 | | | | (3,795 | ) |
| | | | | | | |
Cash provided (used) by financing activities | | | 35,842 | | | | (7,267 | ) |
| | | | | | | |
| | | | | | | | | |
| Net decrease in cash | | | (14,447 | ) | | | (5,798 | ) |
| | | | | | | | | |
| Cash at beginning of period | | | 39,135 | | | | 48,290 | |
| | | | | | | |
| | | | | | | | | |
Cash at end of period | | $ | 24,688 | | | $ | 42,492 | |
| | | | | | | |
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
March 31, 2008
(Unaudited, in thousands)
| | | | | | | | | | | | | |
| | | 1st Qtr | | | 1st Qtr | | | Change | |
| | | 2008 | | | 2007 | | | % | |
GROSS WRITTEN | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Diversified financial products | | $ | 211,364 | | | $ | 212,253 | | | | — | % |
| Group life, accident & health | | | 210,534 | | | | 202,906 | | | | 4 | |
| Aviation | | | 44,828 | | | | 51,663 | | | | (13 | ) |
| London market account | | | 40,936 | | | | 68,135 | | | | (40 | ) |
| Other specialty lines | | | 75,343 | | | | 64,495 | | | | 17 | |
| Discontinued lines | | | (6 | ) | | | (351 | ) | | nm | |
| | | | | | | | | | |
| | | $ | 582,999 | | | $ | 599,101 | | | | (3 | )% |
| | | | | | | | | | |
| | | | | | | | | | | | | |
NET WRITTEN | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Diversified financial products | | $ | 180,501 | | | $ | 171,792 | | | | 5 | % |
| Group life, accident & health | | | 202,375 | | | | 192,426 | | | | 5 | |
| Aviation | | | 32,346 | | | | 39,603 | | | | (18 | ) |
| London market account | | | 29,028 | | | | 45,132 | | | | (36 | ) |
| Other specialty lines | | | 49,403 | | | | 48,321 | | | | 2 | |
| Discontinued lines | | | (6 | ) | | | (309 | ) | | nm | |
| | | | | | | | | | |
| | | $ | 493,647 | | | $ | 496,965 | | | | (1 | )% |
| | | | | | | | | | |
| | | | | | | | | | | | | |
NET EARNED PREMIUM | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Diversified financial products | | $ | 192,177 | | | $ | 192,514 | | | | — | % |
| Group life, accident & health | | | 192,446 | | | | 192,416 | | | | — | |
| Aviation | | | 34,993 | | | | 39,344 | | | | (11 | ) |
| London market account | | | 27,090 | | | | 33,896 | | | | (20 | ) |
| Other specialty lines | | | 46,846 | | | | 39,738 | | | | 18 | |
| Discontinued lines | | | (6 | ) | | | (308 | ) | | nm | |
| | | | | | | | | | |
| | | $ | 493,546 | | | $ | 497,600 | | | | (1 | )% |
| | | | | | | | | | |
| | |
| nm | | - Not meaningful comparison |
HCC Insurance Holdings, Inc. and Subsidiaries
Investments — Selected Disclosures
March 31, 2008
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Average Ratings | |
| | | Amortized Cost | | | Market Value | | | AAA | | | AA | | | A | | | BBB & below | | | Other | | | Average | |
| Fixed Income Securities | | $ | 3,903,397 | | | $ | 3,929,549 | | | $ | 2,743,218 | | | $ | 814,596 | | | $ | 297,074 | | | $ | 74,661 | | | $ | — | | | AA+ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Mortgage Backed Securities & Collateralized Mortgage Obligations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Agency | | $ | 640,074 | | | $ | 657,389 | | | | 657,389 | | | | — | | | | — | | | | — | | | | — | | | AAA |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Agency | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Prime | | | 105,233 | | | | 102,172 | | | | 102,172 | | | | — | | | | — | | | | — | | | | — | | | AAA |
| Alt A | | | 11,586 | | | | 11,117 | | | | 10,695 | | | | 211 | | | | 211 | | | | — | | | | — | | | AAA |
| Subprime | | | 5,204 | | | | 4,266 | | | | 3,197 | | | | — | | | | — | | | | 1,069 | | | | — | | | AA |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Residential MBS/CMO | | $ | 762,097 | | | $ | 774,944 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Mortgaged Backed Securities | | $ | 202,717 | | | $ | 200,922 | | | | 200,922 | | | | — | | | | — | | | | — | | | | — | | | AAA |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Municipal Bond Portfolio | | $ | 1,900,653 | | | $ | 1,909,847 | | | | 1,073,525 | | | | 715,429 | | | | 98,548 | | | | 22,345 | | | | — | | | AA+ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Insurance Enhanced | | $ | 1,205,396 | | | $ | 1,208,141 | | | | 779,251 | | | | 327,043 | | | | 79,496 | | | | 22,351 | | | | — | | | AA+ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Insured — Underlying Ratings | | $ | 1,205,396 | | | $ | 1,208,141 | | | | 192,699 | | | | 688,761 | | | | 300,827 | | | | 483 | | | | 25,371 | | | AA |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Insured | | $ | 695,257 | | | $ | 701,706 | | | | 294,857 | | | | 387,622 | | | | 19,227 | | | | — | | | | — | | | AA+ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-Term | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bank Sweep Accounts — US | | $ | 39,503 | | | $ | 39,503 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bank Sweep Accounts — Non-US | | | 135,795 | | | | 135,795 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable Money Market Funds | | | 366,654 | | | | 366,654 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Short-term Non US Gov Bonds | | | 113,646 | | | | 113,646 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Short-Term | | $ | 655,598 | | | $ | 655,598 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 $1.4 million on subprime and Alt A securities in first quarter 2008.
HCC Insurance Holdings, Inc. and Subsidiaries
Subprime Liability Exposure
March 31, 2008
| • | | As of March 31, the Company had 32 “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, one is on a primary policy with a gross policy limit of $5 million. The remaining D&O claims are on excess policies. |
| |
| • | | The average policy limit on the “non-Side A only” claims is $12.4 million gross and $8.5 million net, with an average attachment point exceeding $90 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. |
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| • | | Except for run-off policies, HCC has not written multi-year policies. |
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| • | | The insurance provided is “claims made” with defense costs included within the policy limits. |
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| • | | Many major financial institutions purchase “Side A only” coverage. |
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| • | | Based upon the Company’s current knowledge, the Company continues to believe it has provided for the ultimate losses that will be incurred on its D&O and E&O businesses relating to subprime issues. |
HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Insurance Companies
Net Loss Ratios
March 31, 2008
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year to Date 2008 | | | Full Year 2007 | |
| | | Net Earned | | | Incurred | | | Loss | | | Net Earned | | | Incurred | | | Loss | |
| Line of Business | | Premium | | | Losses | | | Ratio | | | Premium | | | Losses | | | Ratio | |
| Diversified financial products | | $ | 192,177 | | | $ | 88,723 | | | | 46.2 | % | | $ | 777,414 | | | $ | 315,409 | | | | 40.6 | % |
| Group life, accident & health | | | 192,446 | | | | 143,393 | | | | 74.5 | | | | 758,516 | | | | 579,780 | | | | 76.4 | |
| Aviation | | | 34,993 | | | | 20,153 | | | | 57.6 | | | | 153,121 | | | | 89,683 | | | | 58.6 | |
| London market account | | | 27,090 | | | | 8,998 | | | | 33.2 | | | | 124,609 | | | | 68,798 | | | | 55.2 | |
| Other specialty lines | | | 46,846 | | | | 31,362 | | | | 66.9 | | | | 171,824 | | | | 115,804 | | | | 67.4 | |
| Discontinued lines | | | (6 | ) | | | 397 | | | nm | | | | (398 | ) | | | 14,473 | | | nm | |
| | | | | | | | | | | | | | | | | | | |
Total | | $ | 493,546 | | | $ | 293,026 | | | | 59.4 | % | | $ | 1,985,086 | | | $ | 1,183,947 | | | | 59.6 | % |
| | | | | | | | | | | | | | | | | | | |
| | |
| nm | | - Not meaningful comparison |
