Second Quarter 2013 Highlights:
- Net earnings of $88.2 million, or $0.87 per diluted share
- GAAP combined ratio of 85.3%
- Catastrophe losses of $21.4 million
- Annualized return on equity of 9.9%
- Annualized operating return on equity (a) of 10.3%
- Net investment income increased 4% to $55.7 million
HCC had favorable loss development of $11.8 million in the second quarter and first six months of 2013, compared to no loss development in the same periods of 2012.Gross written premium increased 2% to $809.4 million for the second quarter of 2013, compared to $791.6 million for the same quarter of 2012. Net written premium decreased 2% to $629.0 million for the second quarter of 2013, versus $642.1 million for the same quarter of 2012. Net earned premium decreased 1% to $561.4 million for the second quarter of 2013, compared to $565.3 million for the same quarter of 2012. For the first six months of 2013, compared to the same period of 2012, gross written premium increased 4% to $1.5 billion; net written premium increased 1% to $1.2 billion; and net earned premium increased 1% to $1.1 billion. Investment income increased to $55.7 million for the second quarter of 2013, compared to $53.3 million for the same period of 2012. Investment income increased to $111.4 million for the first six months of 2013, compared to $110.3 million for the same period of 2012. As of June 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 operating cash flow of $176.3 million in the first six months of 2013, compared to $293.3 million in the same period of 2012. Operating cash flow is cash flow from operating activities excluding surety collateral outflows of $74.3 million and $21.2 million in the first six months of 2013 and 2012, respectively, as well as a payment of $27.5 million in 2012 to commute a large contract in Exited Lines. The Company's liquidity position remains strong with $256.1 million of cash and short-term investments and $253.6 million of available capacity under its $600.0 million revolving loan facility at June 30, 2013.
As of June 30, 2013, total assets were $10.2 billion, shareholders' equity was $3.5 billion and the Company's debt to total capital ratio was 15.4%.For further information about HCC's 2013 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 . (Note: If clicking on the above links does not open in a new web page, please cut and paste the above URLs into your browser's address bar.) HCC will hold an open conference call beginning at 8:00 a.m. Central Daylight Time on Wednesday, July 31. 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 1, 2013. 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.
CONTACT: Doug Busker, Director of Investor Relations HCC Insurance Holdings, Inc. Telephone: (713) 996-1192