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Net earnings for the third quarter of 2009 were $94.3 million, compared with $58.4 million during the third quarter of 2008. Net earnings per diluted share were $0.83 for the third quarter of 2009, compared to $0.50 for the same quarter of 2008. Net earnings for the first nine months of 2009 were $269.1 million, versus $230.5 million for the first nine months of the previous year. Net earnings per diluted share were $2.37 for the first nine months of 2009, versus $1.99 for the same period of 2008.
"HCC has delivered another strong quarter despite a very competitive insurance market and a challenging economic environment. During the third quarter, we continued to grow shareholder value. Since December 31, 2007, our book value per share has increased 25%, reflecting growth in our net earnings driven by continued underwriting and investment execution," HCC President and Chief Executive Officer John N. Molbeck, Jr. said.
Book value per share at September 30, 2009 increased to $26.54 per share, compared to $25.01 per share at June 30, 2009 and $23.27 at December 31, 2008. The Company's annualized return on average equity for the first nine months of 2009 was 12.8%.
The GAAP combined ratio for the third quarter of 2009 was 82.7%, compared to 88.0% for the third quarter of 2008. The GAAP combined ratio for the first nine months of 2009 was 84.6%, versus 85.3% for the corresponding period of 2008. The prior year combined ratios include losses from the 2008 hurricanes.
"Our 2009 accident year combined ratio of 87.6% for the quarter and 87.0% for the nine months ended September 30 compares very favorably to our peers," Mr. Molbeck commented.
Gross written premium of HCC's insurance company subsidiaries for the third quarter of 2009 increased to $620.4 million, compared to $613.0 million for the same quarter of 2008. Net written premium was $493.3 million during the third quarter of 2009, compared to $495.6 million during the 2008 third quarter. Net earned premium increased to $520.1 million in the third quarter of 2009, compared to $505.0 million in the same quarter of 2008. Gross written premium reflects growth in the diversified financial products and London market account lines of business, as well as new premium from HCC's acquisitions during 2008.
For the first nine months of 2009, gross written premium was $1.9 billion, net written premium was $1.5 billion and net earned premium was $1.5 billion, all of which were relatively flat compared to the first nine months of 2008.
"Our premium performance for both the quarter and year-to-date is impressive. Moreover, our year-to-date 2009 premium also reflects a reduction resulting from the discontinuance of an assumed quota share agreement and the sale of our U.K. motor business, both of which occurred in mid-2008," Mr. Molbeck said.
During the third quarter of 2009, HCC had net favorable prior year reserve development of $25.4 million compared to net favorable prior year reserve development of $44.0 million for the same period in 2008. For the first nine months of 2009, the Company recorded $36.6 million of net favorable prior year reserve development, compared to net favorable prior year reserve development of $58.4 million for the same period in 2008. The favorable 2009 reserve development was primarily from 2006 and prior underwriting years' reserves.
As announced in the Second Quarter 2009 earnings release, HCC commuted an assumed reinsurance contract with a cedent in July 2009 for $43.9 million. The commutation had no material effect on net earnings, but increased the net paid loss ratio for the third quarter and nine months of 2009 by 8.5 and 2.9 percentage points, respectively.
Total revenue in the third quarter of 2009 increased to $601.8 million, from $566.3 million in the same quarter of 2008. Total revenue increased to $1.8 billion for the first nine months of 2009, compared to $1.7 billion for the first nine months of 2008.
Fee and commission income was $88.1 million in the first nine months of 2009, compared to $100.0 million in the same period of 2008.
Investment income increased to $48.1 million during the third quarter of 2009, compared to $36.0 million during the third quarter of 2008, primarily due to the effect of losses on alternative investments in 2008 and higher income from fixed income securities in 2009. On a year-to-date basis, investment income grew to $141.7 million in 2009 from $130.8 million in 2008.
HCC's fixed income securities generated $47.6 million in investment income in the 2009 third quarter, versus $44.2 million in the 2008 third quarter. Investment income from fixed income securities was $140.5 million for the first nine months of 2009, compared to $129.5 million for the first nine months of 2008, as the Company's fixed income investments increased 24% to $4.9 billion at September 30, 2009 from $3.9 billion at September 30, 2008. HCC's income from short-term investments was $1.5 million in the third quarter of 2009, compared to $6.8 million in the third quarter of 2008 and $4.9 million in the first nine months of 2009, compared to $20.4 million in the first nine months of 2008.
As of September 30, 2009, HCC's fixed income securities portfolio had an average rating of AA+, an average duration of 4.7 years and an average tax equivalent yield of 4.9%. The Company held $6.4 million of subprime-related and Alt-A securities, which had an average rating of A-, and owned no CDO or CLO securities. HCC has never been a counterparty to any credit default swap.
Pretax other operating income was $1.4 million for the 2009 third quarter, compared to $4.8 million for the same period in 2008. Pretax other operating income was $29.8 million for the first nine months of 2009, compared to $10.8 million for the same period in 2008.
As of September 30, 2009, total investments were $5.5 billion, total assets were $9.0 billion, shareholders' equity was $3.0 billion and the Company's debt to total capital ratio was 13.0%.
This quarter HCC announced the sales of its investment in SureTec Financial Corp. and its London reinsurance broker, Rattner Mackenzie Limited. The Company also announced the opening of its Texas surety office.
For further information about HCC's quarter and year-to-date 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.
(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 Standard Time on Wednesday, November 4. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-0161. In addition, there will 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, February 26, 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 September 30, 2009, HCC had assets of $9.0 billion and shareholders' equity of $3.0 billion. HCC is rated AA (Very Strong) by Standard & Poor's and AA (Very Strong) by Fitch Ratings. In addition, HCC's major domestic insurance companies are rated A+ (Superior) by A.M. Best Company.
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.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: HCC Insurance Holdings, Inc.
CONTACT: HCC Insurance Holdings, Inc. Jen Browne, Investor Relations Coordinator (713) 996-1144
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