Second Quarter 2012 Highlights:
- Annualized operating return on equity(a) of 11.3%
- Net earnings of $93.5 million, or $0.92 per diluted share
- Net earned premium increased 8% to $565.3 million
- GAAP combined ratio of 84.9%
- 1.9 million shares of common stock repurchased for $59.5 million at an average cost of $31.17 per share
HOUSTON, July 31, 2012 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released results for its second quarter ended June 30, 2012.
Net earnings were $93.5 million for the second quarter of 2012, compared to $69.5 million for the second quarter of 2011. Net earnings per diluted share were $0.92 for the second quarter of 2012, versus $0.61 for the same quarter of 2011. Net earnings were $176.1 million for the first six months of 2012, or $1.71 per diluted share, compared to $116.5 million, or $1.02 per diluted share, for the same period of 2011.
The 2012 results include pretax net catastrophe losses of $4.7 million and $12.3 million for the second quarter and first six months of 2012, respectively, which reduced net earnings by $0.03 and $0.08 per share in the respective periods. The 2011 results include pretax net catastrophe losses of $21.9 million and $73.3 million for the second quarter and first six months of 2011, respectively, from catastrophes in Japan, New Zealand, Australia and the United States, which reduced net earnings by $0.13 and $0.42 per share in the respective periods. Catastrophe losses added 0.9 and 1.1 percentage points to the Company's net loss ratio for the second quarter and first six months of 2012, respectively.
The Company's combined ratio was 84.9% for the second quarter of 2012, compared to 89.2% for the second quarter of 2011. The combined ratio was 85.0% for the first six months of 2012, versus 91.9% for the same period of 2011. HCC's paid loss ratio was 54.9% for the first half of 2012, compared to 61.5% for the same period of 2011.
Book value per share increased 3.0% for the second quarter of 2012 to $33.19 at June 30, 2012. HCC's annualized return on equity and annualized operating return on equity(a) were both 11.3% for the second quarter of 2012.
"We are obviously pleased with the quarter and the first six months of 2012. The pricing environment remains positive, margins attractive and Mother Nature, at least for the moment, calm," HCC Chief Executive Officer John N. Molbeck, Jr. said.
The Company repurchased 1.9 million shares of its common stock during the second quarter of 2012 for $59.5 million at an average cost of $31.17 per share.
HCC had no loss development in the second quarter of 2012, compared to net adverse loss development of $13.3 million for the same quarter of 2011, and no loss development in the first six months of 2012, versus net adverse loss development of $22.3 million in the same period of 2011.
Gross written premium increased 7% to $791.6 million for the second quarter of 2012, compared to $742.1 million for the same quarter of 2011. Net written premium increased 5% to $642.1 million for the second quarter of 2012, versus $609.9 million for the same quarter of 2011. Net earned premium increased 8% to $565.3 million for the second quarter of 2012, compared to $524.3 million for the same quarter of 2011.
Gross written premium increased 6% to $1.5 billion for the first six months of 2012, compared to $1.4 billion for the same period of 2011. Net written premium increased 5% to $1.2 billion for the first half of 2012, versus $1.1 billion for the same period of 2011. Net earned premium increased 8% to $1.1 billion for the first six months of 2012, compared to $1.0 billion for the same period of 2011.
Investment income increased to $53.3 million in the second quarter of 2012, compared to $52.4 million in the same period of 2011. Investment income increased to $110.3 million in the first six months of 2012, compared to $104.0 million in the same period of 2011. The Company's fixed maturity securities portfolio increased 9% to $6.1 billion at June 30, 2012, from $5.6 billion at June 30, 2011. The Company's total investments increased 10% to $6.4 billion at June 30, 2012, from $5.8 billion at June 30, 2011.
As of June 30, 2012, HCC's fixed maturity securities portfolio had an average rating of AA, with a duration of 4.5 years and an average long-term tax equivalent yield of 4.8%.
In the first half of 2012, the Company generated cash flow from operating activities of $244.6 million, compared to $121.8 million in the same period of 2011. The Company's liquidity position remains strong with $280.3 million of cash and short-term investments and $298.1 million of available capacity under its $600.0 million revolving loan facility at June 30, 2012.
As of June 30, 2012, total assets were $10.0 billion, shareholders' equity was $3.3 billion and the Company's debt to total capital ratio was 15.0%.
For further information about HCC's 2012 second 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, August 1. 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, November 2, 2012.
Headquartered in Houston, Texas, HCC Insurance Holdings, Inc. is a leading international specialty insurance group 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, "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 as defined by Regulation G and is calculated as operating earnings (or net earnings excluding after-tax net realized investment gain (loss), other-than-temporary impairment credit losses and foreign currency benefit (expense)) 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) that the Company does not consider in evaluating its 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.