Fourth Quarter 2011 Highlights and 2012
Guidance:
- Net earnings of $78.3 million and net earnings per
diluted share of $0.74
- GAAP combined ratio of 86.8%, including 1.9 percentage
points for catastrophes
- Book value per share increased 3.1% to
$31.62
- Annualized return on equity of 9.6% and annualized
operating return on equity(a) of 10.4%
- 2.5 million shares of common stock repurchased for
$65.8 million at an average cost of $26.63 per share
- Net earned premium increased 8% to $550.2
million
- Net earnings guidance of $2.80 to $3.10 per diluted
share for 2012
HCC Insurance Holdings, Inc. (NYSE:HCC) today
released earnings for the fourth quarter and full year of 2011.
Net earnings were $78.3 million for the fourth quarter of 2011,
compared to $97.3 million for the fourth quarter of 2010. Net
earnings per diluted share were $0.74 for the fourth quarter of
2011, versus $0.84 for the same quarter of 2010. Net earnings were
$255.2 million for 2011, or $2.30 per diluted share, compared to
$345.1 million, or $2.99 per diluted share, for 2010.
The 2011 results include previously announced pretax net
catastrophe losses of $10.0 million and $117.9 million for the
fourth quarter and full year of 2011, respectively, which reduced
net earnings by $0.06 and $0.70 per share in the respective
periods. These catastrophe losses added 1.9 and 5.3 percentage
points to the Company's GAAP net loss ratio for the fourth quarter
and full year of 2011, respectively.
The Company's GAAP combined ratio was 86.8% for the fourth
quarter of 2011, compared to 82.3% for the fourth quarter of
2010. The GAAP combined ratio was 90.8% for the full year of
2011, versus 84.6% for 2010. HCC's paid loss ratio for 2011
was 58.9%, compared to 59.7% for 2010.
Book value per share increased 3.1% and 10.3% for the fourth
quarter and full year of 2011, respectively, to $31.62 at December
31, 2011. Book value per share grew at a compounded rate of
11.5% over the last five years. Dividends of $0.60 per share
were declared in 2011. This was the 15th consecutive year in
which HCC raised its dividend.
HCC's annualized return on equity was 9.6% for the fourth
quarter of 2011 and 7.7% for the full year of 2011. The
Company's annualized operating return on equity(a) was 10.4% for
the fourth quarter of 2011 and 8.1% for the full year of 2011.
"HCC had a strong quarter and a solid year despite unprecedented
catastrophe losses. We look forward to 2012 and an improving
pricing environment," HCC Chief Executive Officer John N. Molbeck,
Jr. said.
The Company repurchased 2.5 million shares of its common stock
during the fourth quarter of 2011 for $65.8 million at an average
cost of $26.63 per share. As of February 21, 2012, the Company has
repurchased 14.1 million shares for $412.5 million at an average
cost of $29.30 per share since June 2010.
HCC had net favorable loss development of $11.5 million in the
fourth quarter of 2011, compared to $23.9 million for the same
period of 2010, and net adverse development of $10.1 million for
the full year of 2011, versus $22.7 million of net favorable
development for the full year of 2010. The Company's 2011
accident year net loss ratio was 65.3% and its accident year
combined ratio was 91.0% for the full year of 2011.
Gross written premium increased 1% to $629.0 million for the
fourth quarter of 2011, compared to $624.2 million for the same
quarter of 2010. Net written premium increased 7% to $521.1
million for the fourth quarter of 2011, versus $486.7 million for
the same quarter of 2010. Net earned premium increased 8% to
$550.2 million for the fourth quarter of 2011, compared to $509.8
million for the same quarter of 2010.
Gross written premium increased 3% to $2.6 billion for the full
year of 2011. Net written premium increased 8% to $2.2 billion
for the full year of 2011, compared to $2.0 billion for the same
period of 2010. Net earned premium increased 4% to $2.1
billion for the full year of 2011, versus $2.0 billion for
2010.
Investment income increased to $53.5 million in the fourth
quarter of 2011, compared to $53.2 million in the same quarter of
2010. Investment income increased to $212.3 million in the
full year of 2011, versus $203.8 million in 2010. The
Company's fixed income securities portfolio increased 13% to $5.9
billion at December 31, 2011, from $5.2 billion at December 31,
2010. The Company's total investments increased 6% to $6.0
billion at December 31, 2011, from $5.7 billion at December 31,
2010.
As of December 31, 2011, HCC's fixed income securities portfolio
had an average rating of AA, with a duration of 5.0 years and an
average long-term tax equivalent yield of 4.8%. In addition,
HCC's total investments had an average combined duration of 4.9
years.
The Company's liquidity position remains strong with $238.5
million of cash and short-term investments and $407.4 million of
available capacity under its $600.0 million revolving loan facility
at December 31, 2011. In the full year of 2011, the Company
generated $465.0 million of operating cash flow compared to $431.0
million in 2010, before consideration of $43.7 million and $15.8
million in commutations, respectively.
As of December 31, 2011, total assets were $9.6 billion,
shareholders' equity was $3.3 billion and the Company's debt to
total capital ratio was 12.7%.
EARNINGS GUIDANCE: HCC's management estimates the Company will
achieve net earnings of $2.80 to $3.10 per diluted share for
2012. These estimated results assume the following: gross
written premium of $2.7 billion; net written premium of $2.2
billion; a combined ratio of 86%-89%; and average fully diluted
shares outstanding of 100 million shares. These assumptions
include 2.6 loss ratio points for catastrophe losses in the
Company's property treaty and property direct and facultative
businesses. These assumptions do not include any provision for
loss development, foreign currency fluctuation, net realized
investment gains (losses) or other-than-temporary impairment credit
losses.
For further information about HCC's 2011 fourth quarter and
full-year earnings 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 Standard Time on Wednesday, February 22. 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 25, 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.
CONTACT: Doug Busker, Director of Investor Relations
HCC Insurance Holdings, Inc.
(713) 996-1192
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