EXHIBIT 99.1
HCC Announces Record 2006 Results
HOUSTON, Feb. 20, 2007 (PRIME NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today reported record results for the fourth quarter and year ended December 31, 2006.
Net earnings for the fourth quarter of 2006 increased 24% to $80.7 million, or $0.69 per diluted share, from $65.0 million, or $0.57 per diluted share, for the same period in 2005. Net earnings for the fourth quarter of 2006 were negatively affected $7.6 million, or $0.07 per diluted share, by costs related to the Company's option investigation and $13.1 million, or $0.11 per diluted share, by a large reinsurance commutation recorded during the quarter.
Net earnings for all of 2006 increased 79% to $342.3 million, or $2.93 per diluted share, from $191.2 million, or $1.75 per diluted share, in 2005. Affecting the 2006 results were after-tax charges of $9.3 million, or $0.08 per diluted share, for costs related to the Company's option investigation and $14.5 million, or $0.12 per diluted share, for reinsurance commutations.
Frank J. Bramanti, Chief Executive Officer of HCC, said, "We are extremely pleased with our 2006 results. Our employees continue to execute the business plan with superior ability and results."
Total revenue for 2006 increased 26% to $2.1 billion compared to $1.6 billion in 2005, driven by significant increases in net earned premium and investment income. The Company anticipates continued revenue growth in 2007.
The Company's 2006 net written premium increased 21% to $1.8 billion and net earned premium increased 25% to $1.7 billion. The premium growth is due to a reduction in ceded reinsurance, organic growth and recent acquisitions. The Company anticipates a continued rise in gross and net premium in 2007 due mainly to the effect of businesses acquired in 2006. The GAAP combined ratio improved from 93.2% to 84.2% for the full year 2006.
Fee and commission income increased in 2006 to $137.1 million from $132.6 million in 2005. The Company will continue to focus on expanding non-risk bearing revenue from its agency operations.
Cash flow from operating activities remained very strong in 2006, increasing to $653.4 million. This does not include $100 million of cash received in 2007 related to the 2006 commutation.
During 2006, net investment income grew 55% to $152.8 million due to substantially increased investment assets and higher interest rates. The Company's investment strategy continues to be very conservative with a relatively short duration and highly rated portfolio, no high-yield low-rated bonds and few equity investments. Other operating income increased from $39.8 million in 2005 to $77.0 million in 2006.
As of December 31, 2006, total assets increased 9% to $7.6 billion; total investments increased 21% to $3.9 billion; shareholders' equity increased 21% to $2.0 billion; and book value per share increased 20% to $18.28, all compared to December 31, 2005. Mr. Bramanti commented, "The results for 2006 were excellent as reflected by our 20% return on equity."
See attached tables for additional financial information.
HCC will hold an open conference call beginning at 8:00 a.m. Central Time on Wednesday, February 21, 2007. 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 until Friday, March 9, 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 $7.5 billion, shareholders' equity of over $2 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
December 31, 2006
(Unaudited, in thousands except per share data)
Three Months Ended December 31,
2006 2005
--------------- ---------------
Gross written premium $ 607,435 $ 498,284
Net written premium 513,438 393,781
Net earned premium 504,248 374,087
Fee and commission income 32,722 31,629
Net investment income 43,845 28,812
Other operating income 17,941 13,657
Total revenue 599,108 447,595
Net earnings 80,742 65,036
Earnings per share (diluted) 0.69 0.57
Cash flow from operations 293,682 170,736
Weighted average shares
outstanding (diluted) 117,115 113,566
GAAP net loss ratio 64.0% 64.1%
GAAP combined ratio 87.4% 89.9%
December 31, December 31,
2006 2005
--------------- ---------------
Total investments $ 3,927,995 $ 3,257,428
Total assets 7,630,132 7,028,800
Shareholders' equity 2,042,803 1,690,435
Debt to total capital 13.1% 15.5%
Book value per share $ 18.28 $ 15.26
HCC Insurance Holdings, Inc. and Subsidiaries
Financial Highlights
December 31, 2006
(Unaudited, in thousands except per share data)
Years Ended December 31,
2006 2005
------------ -------------
Gross written premium $ 2,235,648 $ 2,038,286
Net written premium 1,812,552 1,501,224
Net earned premium 1,709,189 1,369,988
Fee and commission income 137,131 132,628
Net investment income 152,804 98,851
Other operating income 77,012 39,773
Total revenue 2,075,295 1,642,688
Net earnings 342,285 191,192
Earnings per share (diluted) 2.93 1.75
Cash flow from operations 653,388 623,990
Weighted average shares
outstanding (diluted) 116,736 109,437
GAAP net loss ratio 59.2% 67.1%
GAAP combined ratio 84.2% 93.2%
December 31, December 31,
2006 2005
------------ ------------
Total investments $ 3,927,995 $ 3,257,428
Total assets 7,630,132 7,028,800
Shareholders' equity 2,042,803 1,690,435
Debt to total capital 13.1% 15.5%
Book value per share $ 18.28 $ 15.26
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
December 31, December 31,
2006 2005
-------------- --------------
ASSETS
Investments:
Fixed income securities $ 3,007,193 $ 2,268,624
Short-term investments 714,685 839,581
Other investments 206,117 149,223
-------------- --------------
Total investments 3,927,995 3,257,428
Cash 48,290 73,935
Restricted cash and cash investments 176,424 170,978
Premium, claims and other receivables 864,705 884,654
Reinsurance recoverables 1,169,934 1,361,983
Ceded unearned premium 226,125 239,416
Ceded life and annuity benefits 70,923 73,415
Deferred policy acquisition costs 182,410 156,253
Goodwill 742,677 532,947
Other assets 220,649 277,791
-------------- --------------
Total assets $ 7,630,132 $ 7,028,800
============== ==============
LIABILITIES
Loss and loss adjustment expense payable $ 3,097,051 $ 2,813,720
Life and annuity policy benefits 70,923 73,415
Reinsurance balances payable 122,805 176,954
Unearned premium 920,350 807,109
Deferred ceding commissions 64,949 67,886
Premium and claims payable 646,224 753,859
Notes payable 308,887 309,543
Accounts payable and accrued liabilities 356,140 335,879
-------------- --------------
Total liabilities 5,587,329 5,338,365
SHAREHOLDERS' EQUITY
Common stock 111,731 110,803
Additional paid-in capital 798,213 762,170
Retained earnings 1,098,887 798,388
Accumulated other comprehensive income 33,972 19,074
-------------- --------------
Total shareholders' equity 2,042,803 1,690,435
-------------- --------------
Total liabilities and
shareholders' equity $ 7,630,132 $ 7,028,800
============== ==============
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited, in thousands except per share data)
Years ended Three months ended
December 31, December 31,
2006 2005 2006 2005
---------- ---------- -------- --------
REVENUE
Net earned premium $1,709,189 $1,369,988 $504,248 $374,087
Fee and commission income 137,131 132,628 32,722 31,629
Net investment income 152,804 98,851 43,845 28,812
Net realized investment
gain (loss) (841) 1,448 352 (590)
Other operating income 77,012 39,773 17,941 13,657
---------- ---------- -------- --------
Total revenue 2,075,295 1,642,688 599,108 447,595
---------- ---------- -------- --------
EXPENSE
Loss and loss adjustment
expense, net 1,011,856 919,697 322,734 239,765
Policy acquisition
costs, net 319,885 261,708 88,873 74,012
Other operating expense 222,324 180,990 66,045 43,913
Interest expense 11,396 7,684 3,484 1,836
---------- ---------- -------- --------
Total expense 1,565,461 1,370,079 481,136 359,526
---------- ---------- -------- --------
Earnings from continuing
operations before
income tax expense 509,834 272,609 117,972 88,069
Income tax expense on
continuing operations 167,549 84,177 37,230 25,086
---------- ---------- -------- --------
Earnings from continuing
operations 342,285 188,432 80,742 62,983
Earnings from
discontinued operations,
net of income tax expense -- 2,760 -- 2,053
---------- ---------- -------- --------
Net earnings $ 342,285 $ 191,192 $ 80,742 $ 65,036
========== ========== ======== ========
Basic earnings
per share data:
Earnings from continuing
operations $ 3.08 $ 1.78 $ 0.72 $ 0.58
Earnings from
discontinued operations -- 0.03 -- 0.02
---------- ---------- -------- --------
Net earnings
per share $ 3.08 $ 1.81 $ 0.72 $ 0.60
========== ========== ======== ========
Weighted average shares
outstanding 111,309 105,463 111,635 107,970
========== ========== ======== ========
Diluted earnings
per share data:
Earnings from continuing
operations $ 2.93 $ 1.72 $ 0.69 $ 0.55
Earnings from
discontinued operations -- 0.03 -- 0.02
---------- ---------- -------- --------
Net earnings
per share $ 2.93 $ 1.75 $ 0.69 $ 0.57
========== ========== ======== ========
Weighted average shares
outstanding 116,736 109,437 117,115 113,566
========== ========== ======== ========
Cash dividends declared,
per share $ 0.375 $ 0.282 $ 0.100 $ 0.075
========== ========== ======== ========
HCC Insurance Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Years ended Three months ended
December 31, December 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Cash flows from
operating
activities:
Net earnings $ 342,285 $ 191,192 $ 80,742 $ 65,036
Adjustments to
reconcile net
earnings to net
cash provided by
operating
activities:
Change in
premium,
claims and
other
receivables 40,955 (6,094) 4,329 67,913
Change in
reinsurance
recoverables 192,049 (250,829) 136,018 (105,524)
Change in ceded
unearned
premium 13,291 82,433 17,878 21,924
Change in loss
and loss
adjustment
expense
payable 136,520 705,688 42,614 184,323
Change in
reinsurance
balances
payable (54,834) (49,772) (17,325) (25,866)
Change in
unearned
premium 109,280 38,809 (4,358) (4,185)
Change in
premium and
claims payable,
net of
restricted
cash (126,027) (3,851) (47,734) (34,436)
Gain on sale of
subsidiary -- (8,717) -- (3,307)
Change in
trading
portfolio (19,919) (66,809) 79,274 (12,155)
Depreciation
and
amortization
expense 14,980 14,647 2,738 3,584
Stock-based
compensation
expense 13,126 2,645 3,663 725
Other, net (8,318) (25,352) (4,157) 12,704
----------- ----------- ----------- -----------
Cash provided
by operating
activities 653,388 623,990 293,682 170,736
----------- ----------- ----------- -----------
Cash flows from
investing
activities:
Sales of fixed
income
securities 338,927 237,480 154,752 73,639
Maturity or call
of fixed income
securities 247,072 186,075 72,314 52,684
Cost of
securities
acquired (1,389,984) (1,054,529) (431,162) (321,129)
Change in
short-term
investments 129,919 (72,703) (41,279) (108,937)
Sale of strategic
investments 63,285 14,146 22,931 6,388
Payments for
purchase of
subsidiaries,
net of cash
received (45,722) (94,056) 9,568 (49,768)
Sale of
subsidiary -- 21,116 -- 10,668
Other, net (11,971) (10,509) (3,359) 4,118
----------- ----------- ----------- -----------
Cash used by
investing
activities (668,474) (772,980) (216,235) (332,337)
----------- ----------- ----------- -----------
Cash flows from
financing
activities:
Issuance of notes
payable 140,000 46,528 -- 10,528
Payments on notes
payable (140,616) (48,181) (84,270) (10,627)
Sale of common
stock 18,999 186,103 4,026 153,419
Dividends paid (38,923) (27,644) (11,149) (8,038)
Other 9,981 (3,814) 2,598 --
----------- ----------- ----------- -----------
Cash provided
(used) by
financing
activities (10,559) 152,992 (88,795) 145,282
----------- ----------- ----------- -----------
Net increase
(decrease) in
cash (25,645) 4,002 (11,348) (16,319)
Cash at beginning
of period 73,935 69,933 59,638 90,254
----------- ----------- ----------- -----------
Cash at end of
period $ 48,290 $ 73,935 $ 48,290 $ 73,935
=========== =========== =========== ===========
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
December 31, 2006
(Unaudited, in thousands)
4th Qtr 4th Qtr Change
2006 2005 %
--------- --------- -------
GROSS WRITTEN
Diversified financial products $ 265,278 $ 243,126 9 %
Group life, accident & health 206,424 139,824 48
Aviation 50,136 51,084 (2)
London market account 31,904 20,291 57
Other specialty lines 52,691 42,373 24
Discontinued lines 1,002 1,586 nm
--------- --------- --------
$ 607,435 $ 498,284 22 %
========= ========= ========
NET WRITTEN
Diversified financial products $ 220,134 $ 195,537 13 %
Group life, accident & health 201,916 121,438 66
Aviation 37,448 30,864 21
London market account 16,470 13,871 19
Other specialty lines 37,425 30,564 22
Discontinued lines 45 1,507 nm
--------- --------- --------
$ 513,438 $ 393,781 30 %
========= ========= ========
NET EARNED PREMIUM
Diversified financial products $ 190,798 $ 159,722 19 %
Group life, accident & health 205,813 123,701 66
Aviation 40,225 34,380 17
London market account 31,907 26,615 20
Other specialty lines 35,412 28,147 26
Discontinued lines 93 1,522 nm
--------- --------- --------
$ 504,248 $ 374,087 35 %
========= ========= ========
nm - Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
December 31, 2006
(Unaudited, in thousands)
Full Year Full Year Change
2006 2005 %
---------- ---------- -------
GROSS WRITTEN
Diversified financial products $ 956,057 $ 908,526 5 %
Group life, accident & health 621,639 593,382 5
Aviation 216,208 210,530 3
London market account 234,868 144,425 63
Other specialty lines 205,651 176,139 17
Discontinued lines 1,225 5,284 nm
---------- ---------- -------
$2,235,648 $2,038,286 10 %
========== ========== =======
NET WRITTEN
Diversified financial products $ 794,232 $ 675,942 18 %
Group life, accident & health 590,811 502,805 18
Aviation 166,258 130,743 27
London market account 127,748 78,809 62
Other specialty lines 133,481 109,106 22
Discontinued lines 22 3,819 nm
---------- ---------- -------
$1,812,552 $1,501,224 21 %
========== ========== =======
NET EARNED PREMIUM
Diversified financial products $ 728,861 $ 531,136 37 %
Group life, accident & health 591,070 504,382 17
Aviation 152,886 136,197 12
London market account 112,362 93,017 21
Other specialty lines 123,981 97,721 27
Discontinued lines 29 7,535 nm
---------- ---------- -------
$1,709,189 $1,369,988 25 %
========== ========== =======
nm - Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Insurance Companies
Net Loss Ratios
December 31, 2006
(Unaudited, in thousands)
2006 2005
---------------------------- ----------------------------
Line of Net Earned Incurred Loss Net Earned Incurred Loss
Business Premium Losses Ratio Premium Losses Ratio
-------- ---------- ---------- ------ ---------- ---------- ------
Diversified
financial
products $ 728,861 $ 351,010 48.2% $ 531,136 $ 255,570 48.1%
Group life,
accident
& health 591,070 432,343 73.1 504,382 361,289 71.6
Aviation 152,886 82,328 53.8 136,197 91,720 67.3
London
market
account 112,362 48,316 43.0 93,017 98,638 106.0
Other
specialty
lines 23,981 69,374 56.0 97,721 70,936 72.6
Discontinued
lines 29 28,485 nm 7,535 41,544 nm
---------- ---------- ------ ---------- ---------- ------
Total $1,709,189 $1,011,856 59.2% $1,369,988 $ 919,697 67.1%
========== ========== ====== ========== ========== ======
nm - Not meaningful comparison
CONTACT: HCC Insurance Holdings, Inc.
L. Byron Way, Vice President
(713) 690-7300
