Third Quarter 2013 Highlights and Updated 2013 Guidance:
- Net earnings of $98.2 million, or $0.98 per diluted share
- GAAP combined ratio of 83.5%
- Pretax net catastrophe losses of $17.9 million
- Annualized return on equity of 11.1%
- Annualized operating return on equity (a) of 10.8%
- Updated net earnings guidance for 2013 of $3.70 to $3.80 per diluted share
HOUSTON, Oct. 29, 2013 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE: HCC ) today released results for its third quarter ended September 30, 2013.
Net earnings were $98.2 million, or $0.98 per diluted share, for the third quarter of 2013, compared to $107.1 million, or $1.05 per diluted share, for the third quarter of 2012. Net earnings were $292.2 million for the first nine months of 2013, or $2.90 per diluted share, compared to $283.1 million, or $2.76 per diluted share, for the same period of 2012.
The 2013 results included accident year pretax net catastrophe losses of $17.9 million and $44.5 million for the third quarter and first nine months, respectively, which reduced net earnings by $0.12 and $0.29 per share for the respective periods. The 2012 results included catastrophe losses of $8.0 million and $20.3 million for the third quarter and first nine months, respectively, which reduced net earnings by $0.05 and $0.13 per share for the respective periods.
The Company's combined ratio was 83.5% for the third quarter of 2013, compared to 79.1% for the third quarter of 2012. The combined ratio was 84.1% for the first nine months of 2013, versus 83.3% for the same period of 2012. HCC's net paid loss ratio was 52.6% for the first nine months of 2013, compared to 56.3% for the same period of 2012.
"Our combined ratio remains below 85% for the year, and our businesses are performing at or above our expectations. We continue on a record pace for the year after a very strong 2012," said Christopher J.B. Williams, HCC's Chief Executive Officer.
HCC had net favorable loss development of $27.8 million in the third quarter of 2013, compared to $34.6 million in the same quarter of 2012, and $39.6 million in the first nine months of 2013, versus $34.6 million in the same period of 2012. The net favorable development in 2013 includes strengthening of reserves in the International Surety & Credit line of business to address a recent Spanish Supreme Court ruling.
Gross written premium increased 2% to $678.9 million for the third quarter of 2013, compared to $665.8 million for the same quarter of 2012. Net written premium decreased 2% to $521.7 million for the third quarter of 2013, versus $530.3 million for the same quarter of 2012. Net earned premium decreased 1% to $556.7 million for the third quarter of 2013, compared to $563.7 million for the same quarter of 2012.
For the first nine months of 2013, compared to the same period of 2012, gross written premium increased 3% to $2.2 billion; net written premium was flat at $1.7 billion; and net earned premium was flat at $1.7 billion.
Investment income was $54.2 million in the third quarter of 2013, compared to $56.3 million in the same period of 2012, and $165.6 million in the first nine months of 2013, compared to $166.6 million in the same period of 2012. As of September 30, 2013, HCC's fixed maturity securities portfolio had an average rating of AA, with a duration of 5.5 years and an average long-term tax equivalent yield of 4.5%.
HCC generated cash flow from operations of $271.4 million in the first nine months of 2013, compared to $496.0 million in the same period of 2012. Cash flow for 2013 was decreased by $127.9 million of U.S. Surety collateral repayments, whereas cash flow for 2012 was increased by $81.0 million of U.S. Surety collateral receipts. At September 30, 2013, the Company had $284.2 million of cash and short-term investments and $239.1 million of available capacity under its $600.0 million revolving loan facility.
As of September 30, 2013, total assets were $10.4 billion, shareholders' equity was $3.6 billion and the Company's debt to total capital ratio was 15.4%.
UPDATED EARNINGS GUIDANCE: Based on the Company's results through the first nine months, HCC's management estimates the Company will achieve net earnings of $3.70 to $3.80 per diluted share for the full year of 2013. For the fourth quarter of 2013 and consistent with the Company's prior guidance, these estimated results assume 2.7 loss ratio points for net catastrophe losses and no provision for loss development, foreign currency fluctuation, net realized investment gains (losses) or other-than-temporary impairment credit losses.
For further information about HCC's 2013 third quarter results, see the supplemental financial schedules that are accessible on HCC's website at http://www.hcc.com , as well as directly in the Investor Relations section of HCC's website at http://ir.hcc.com .
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HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, October 30. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161. There will also be a live webcast available on a listen-only basis that can be accessed through the HCC website at http://www.hcc.com . The webcast replay will be archived in the Investor Relations section of the HCC website through Friday, January 31, 2014.
Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading specialty insurer with offices in the United States, the United Kingdom, Spain and Ireland. HCC's major domestic and international insurance companies have financial strength ratings of "AA (Very Strong)" from Standard & Poor's Corporation, "A+ (Superior)" from A.M. Best Company, Inc., "AA (Very Strong)" from Fitch Ratings, and "A1 (Good Security)" from Moody's Investors Service, Inc.
For more information about HCC, please visit http://www.hcc.com .
a) Non-GAAP Financial Measure
Annualized operating return on equity is a non-GAAP financial measure under Regulation G and is calculated as net earnings excluding after-tax net realized investment gain/loss, other-than-temporary impairment credit losses, and foreign currency benefit/expense (collectively, operating earnings) divided by average shareholders' equity excluding accumulated other comprehensive income. To annualize a quarterly rate, the result is multiplied by four. See the supplemental financial schedules for a reconciliation of this non-GAAP financial measure to corresponding GAAP amounts. Management believes annualized operating return on equity is a useful measure for understanding the Company's profitability relative to shareholders' equity before consideration of investment-related gains/losses and foreign currency benefit/expense, both of which management excludes when evaluating operating results internally.
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.
Doug Busker, Director of Investor Relations HCC Insurance Holdings, Inc. Telephone: (713) 996-1192
