First Quarter 2012 Highlights:
- Annualized operating return on equity(a) of 11.1%
- Gross written premium increased 5% to $682.7 million
- Net earnings of $82.6 million and net earnings per diluted share of $0.79
- GAAP combined ratio of 85.2%, including 1.3 percentage points for catastrophes
- 2.2 million shares of common stock repurchased for $66.9 million at an average cost of $30.64 per share
HOUSTON, May 1, 2012 (GLOBE NEWSWIRE) -- HCC Insurance Holdings, Inc. (NYSE:HCC) today released results for its first quarter ended March 31, 2012.
Net earnings were $82.6 million for the first quarter of 2012, compared to $47.0 million for the first quarter of 2011. Net earnings per diluted share were $0.79 for the first quarter of 2012, versus $0.41 for the same quarter of 2011.
The 2012 results include pretax net catastrophe losses of $7.6 million stemming primarily from U.S. storms, which reduced net earnings by $0.05 per share. The 2011 results include pretax net catastrophe losses of $51.5 million from catastrophes in Japan, New Zealand and Australia, which reduced net earnings by $0.29 per share. Catastrophe losses added 1.3 percentage points to the Company's net loss ratio and combined ratio for the first quarter of 2012.
The Company's combined ratio was 85.2% for the first quarter of 2012, compared to 94.7% for the first quarter of 2011. HCC's paid loss ratio was 57.9% for the first quarter of 2012 before 5.1 percentage points related to a commutation in its Exited Lines, or 63.0% after the commutation, compared to 58.4% for the same quarter of 2011.
Book value per share increased 2.5% for the first quarter of 2012 to $32.23 at March 31, 2012. HCC's annualized return on equity was 10.1% for the first quarter of 2012. The Company's annualized operating return on equity(a) was 11.1% for the first quarter of 2012.
"The first quarter was strong for HCC across all segments. More importantly, pricing has continued to improve almost universally throughout our portfolio, which has enabled us to achieve the double digit operating return on equity that we forecasted at the end of last year," HCC Chief Executive Officer John N. Molbeck, Jr. said.
The Company repurchased 2.2 million shares of its common stock during the first quarter of 2012 for $66.9 million at an average cost of $30.64 per share.
HCC had no loss development in the first quarter of 2012, compared to net adverse loss development of $9.0 million for the same period of 2011. The Company's current accident year net loss ratio was 60.1% and its current accident year combined ratio was 85.2% for the first quarter of 2012.
Gross written premium increased 5% to $682.7 million for the first quarter of 2012, compared to $649.2 million for the same quarter of 2011. Net written premium increased 4% to $558.4 million for the first quarter of 2012, versus $538.9 million for the same quarter of 2011. Net earned premium increased 8% to $547.1 million for the first quarter of 2012, compared to $508.5 million for the same quarter of 2011.
Investment income increased to $57.0 million in the first quarter of 2012, compared to $51.6 million in the same quarter of 2011. The Company's fixed income securities portfolio increased 9% to $6.0 billion at March 31, 2012, from $5.5 billion at March 31, 2011. The Company's total investments increased 9% to $6.3 billion at March 31, 2012, from $5.7 billion at March 31, 2011.
As of March 31, 2012, HCC's fixed income securities portfolio had an average rating of AA, with a duration of 4.8 years and an average long-term tax equivalent yield of 5.0%. In addition, HCC's total investments had an average combined duration of 4.6 years.
In the first quarter of 2012, the Company generated operating cash flow of $102.5 million, which excludes the Company's payment of $27.5 million to commute a large contract in Exited Lines, compared to $82.1 million of operating cash flow in the same period of 2011. The Company's liquidity position remains strong with $312.0 million of cash and short-term investments and $325.0 million of available capacity under its $600.0 million revolving loan facility at March 31, 2012.
As of March 31, 2012, total assets were $9.8 billion, shareholders' equity was $3.3 billion and the Company's debt to total capital ratio was 14.6%.
For further information about HCC's 2012 first 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, May 2. 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, August 3, 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, we multiply the result 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 actively manage or 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.