HCC Sees Record Q3 2003 Results

Houston-based HCC Insurance Holdings Inc. reported that earnings for the third quarter and first nine months of 2003 increased by 58 percent and 39 percent respectively.

Net earnings for the third quarter of 2003 rose to $38.4 million or $0.59 per diluted share from $24.3 million or $0.39 per diluted share for the third quarter of 2002. For the first nine months of 2003, net earnings increased to $103.3 million or $1.61 per diluted share from $74.3 million or $1.18 per diluted share for the same period of 2002.

Stephen L. Way, chairman and CEO said the company expects “strong earnings growth to continue through 2004.”

Total revenue showed significant growth, increasing 42 percent for the third quarter 2003 to $248.6 million from $175.7 million and increasing 45 percent for the first nine months of 2003 to $700.6 million from $483.3 million, both compared to the corresponding period in 2002. This increase was due to the growth in all of our business segments, acquisitions completed late in 2002 and an increase in investment income.

The GAAP net combined ratio of HCC’s insurance company subsidiaries for the first nine months of 2003 was relatively flat at 88.8 percent compared to 87.3 percent in the corresponding period of 2002, but on substantially higher net earned premium.

Premium of its insurance company subsidiaries continued to grow, with gross written premium increasing 53 percent to $1.3 billion during the first nine months of 2003 compared to $852.1 million during the first nine months of 2002. During the same period, net written premium increased 66 percent to $666.1 million from $402.2 million and net earned premium increased by 48 percent to $535.4 million from $362.4 million. These increases are as a result of higher rates, increased retentions and strong growth particularly in the Diversified Financial Products segment.

Management fees increased 38 percent during the first nine months of 2003 to $79.0 million from $57.1 million in the same period of 2002. Commission income increased 35 percent to $42.8 million during the first nine months of 2003 from $31.6 million in the same period of 2002. These increases are due to organic growth and acquisitions.

Cash flow from operating activities increased substantially during the first nine months of 2003 rising 165 percent to $325.9 million from $122.8 million during the first nine months of 2002, as a result of increased revenue and higher net earnings.

Net investment income increased 26 percent in the first nine months of 2003 to $34.9 million, from $27.8 million in the same period of 2002. This increase was primarily as a result of greater invested assets, which grew 30 percent as of Sept. 30, 2003 to $1.52 billion compared to $1.17 billion at Dec. 31, 2002. Investment income growth is expected to continue through 2004 and accelerate if rates rise.

As of Sept. 30, total assets grew 25 percent to $4.6 billion and book value per share increased 11 percent to $15.77 both compared to Dec. 31, 2002, shareholders’ equity exceeded $1.0 billion for the first time in the company’s history and the company’s debt to total capital ratio was 23.6 percent.