HOUSTON, Feb. 23, 2010 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released earnings for the fourth quarter and full year 2009, which ended December 31.
Net earnings for the fourth quarter of 2009 were $84.8 million, compared to $71.6 million for the fourth quarter of 2008. Net earnings per diluted share were $0.74 for the fourth quarter of 2009, versus $0.63 for the same quarter of 2008. Net earnings for the full year of 2009 were $353.9 million, compared to $302.1 million for the 2008 full year. Net earnings per diluted share were $3.11 for 2009, versus $2.61 for 2008.
"Our return on average equity was 12.5% for the year. We are very pleased with this performance in an environment which remains challenging," HCC President and Chief Executive Officer John N. Molbeck, Jr. said.
Book value per share increased 14.2% during the year from $23.27 to $26.58 after declared regular dividends totaling $0.52 per share. The Company repurchased 1.7 million shares of its common stock during 2009 for a total cost of $35.5 million and a weighted-average cost of $21.36 per share. In addition, this was the 13th consecutive year in which HCC raised its dividend. Book value per share grew at a compounded rate of 15.1% over the last five years.
The Company's GAAP combined ratio for the fourth quarter of 2009 was 85.8%, compared to 85.6% for the fourth quarter of 2008. The GAAP combined ratio for the full year of 2009 was 84.9%, versus 85.4% for 2008. HCC's paid loss ratio for the year was 55.8%, which included 2.1 percentage points related to a commutation, compared to a paid loss ratio of 54.0% in 2008.
"Our combined ratio remained excellent for the year and our accident year combined ratio of 87.5% is a reflection of our strong underwriting culture, well managed expense ratio and the value of our non-correlated portfolio of businesses," Mr. Molbeck said.
Gross written premium of HCC's insurance company subsidiaries increased 7.3% to $655.7 million for the fourth quarter of 2009, compared to $611.2 million for the same quarter of 2008. Net written premium increased 2.8% to $518.4 million during the 2009 fourth quarter, compared to net written premium of $504.2 million for the 2008 fourth quarter. Net earned premium for the fourth quarter of 2009 increased 2.0% to $512.8 million, versus net earned premium of $502.6 million for the same quarter of 2008.
Gross written premium of HCC's insurance company subsidiaries increased 2.4% to $2.6 billion for the full year of 2009, compared to 2008, while net written premium of $2.0 billion was essentially flat. Net earned premium of $2.0 billion for the 2009 full year was up 1.5% compared to 2008.
During the fourth quarter of 2009, HCC had net favorable prior year reserve development of $16.9 million, compared to net favorable prior year reserve development of $24.0 million for the same period of 2008. For the full year of 2009, the Company recorded $53.5 million of net favorable prior year reserve development. For the full year 2008, the Company had $82.4 million of net favorable prior year reserve development, offset by $57.5 million of additional reserves related to the 2008 accident year, primarily for its directors' and officers' liability and credit businesses, which resulted in a $24.9 million impact to earnings.
Total revenue in the fourth quarter of 2009 increased to $590.3 million, from $551.9 million in the same quarter of 2008. Total revenue increased to $2.4 billion for the full year of 2009, compared to $2.3 billion for the 2008 full year.
Fee and commission income was $103.7 million for the full year of 2009, compared to $125.2 million in the same period of 2008.
Investment income increased to $50.2 million during the fourth quarter of 2009, compared to $33.9 million during the fourth quarter of 2008. On a year-to-date basis, investment income grew to $192.0 million in 2009 from $164.8 million in 2008. This was the result of an increase in the size of our investment portfolio, the effect of which was offset by lower interest rates. Also included in 2008 is a loss on the sale of alternative investments.
HCC's fixed income securities generated $49.0 million in investment income in the 2009 fourth quarter, versus $45.2 million in the 2008 fourth quarter. Investment income from fixed income securities was $189.5 million for the full year of 2009, compared to $174.7 million for the 2008 full year, as the Company's fixed income investments increased 9.0% from December 31, 2008, to $4.6 billion at December 31, 2009.
As of December 31, 2009, HCC's fixed income securities portfolio had an average rating of AA+, an average duration of 4.9 years and an average tax equivalent yield of 5.1%. As of December 31, 2009, HCC's total investments had an average duration of 4.2 years.
The Company realized investment gains of $7.2 million in the fourth quarter of 2009 and $12.1 million in full year 2009, and recognized $0.2 million and $5.4 million of losses, respectively, for securities that had an other-than-temporary impairment in value. HCC held $5.6 million of subprime-related and Alt A securities, which had an average rating of BBB+, and owned no CDO or CLO securities. HCC has never been a counterparty to any credit default swap.
Other operating income was $4.6 million for the 2009 fourth quarter, compared to a loss of $1.2 million for the same period in 2008. Other operating income was $34.4 million for the full year of 2009, compared to $9.6 million for the 2008 full year.
As of December 31, 2009, total investments were $5.5 billion, total assets were $8.8 billion, shareholders' equity was $3.0 billion and the Company's debt to total capital ratio was 9.0%.
In the fourth quarter of 2009, HCC issued $300 million of Senior Notes due 2019 with a fixed interest rate of 6.3%. Additionally, as previously announced on January 11, 2010, the Company completed the redemption of its 1.3% Convertible Notes due 2023. The Company has a $575 million line of credit with no outstanding borrowings at year-end 2009, reflecting HCC's strong liquidity position.
EARNINGS GUIDANCE: HCC's management estimates the Company will achieve net earnings of $2.70 to $3.00 per diluted share for 2010. These estimated results assume the following: gross written premium of $2.8 billion; net written premium of $2.2 billion; total revenue of $2.4 billion; a combined ratio of 86.5%; and average fully diluted shares outstanding of 114 million shares. These assumptions do not include any provision for catastrophe losses, reserve development, capital gains or losses or changes in carrying values of assets.
For further information about HCC's quarter and full year financial results, the supplemental financial schedules are accessible on the Company'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 Standard Time on Wednesday, February 24. 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, May 7, 2010.
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 December 31, 2009, HCC had assets of $8.8 billion and shareholders' equity of $3.0 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 about HCC, please visit http://www.hcc.com.
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.