HCC Insurance Holdings Inc. (HCC, Financial) filed Quarterly Report for the period ended 2009-06-30.
HCC through its subsidiaries provides specialized property & casualty insurance coverages managing general agency services & insurance related services both to commercial customers & individuals. HCC\'s insurance products are underwritten on both a direct & reinsurance basis & are marketed by the Company itself & through a network of independent & affiliated agents & brokers. HCC\'s principal insurance company subsidiaries are Houston Casualty Co. U.S. Specialty Insurance Co. & Trafalgar Insurance Co. in Houston Texas; & AVEMCO Insurance Co. in Frederick Maryland. HCC Insurance Holdings Inc. has a market cap of $2.95 billion; its shares were traded at around $26.3 with a P/E ratio of 9.3 and P/S ratio of 1.3. The dividend yield of HCC Insurance Holdings Inc. stocks is 2%. HCC Insurance Holdings Inc. had an annual average earning growth of 15.5% over the past 10 years. GuruFocus rated HCC Insurance Holdings Inc. the business predictability rank of 2.5-star.
We earned $174.8 million, or $1.54 per diluted share in the first six months of 2009, compared to $172.1 million, or $1.48 per diluted share, in the first six months of 2008. Our second quarter earnings were $91.6 million, or $0.81 per diluted share in 2009, compared to $91.7 million, or $0.79 per diluted share, in 2008. Our 2009 year-to-date earnings included a $15.6 million pretax impact due to a $25.0 million termination payment we received in the first quarter to commute a reinsurance contract that had been accounted for using the deposit method of accounting. Year-to-date, our losses and operating expenses have been higher in 2009 than in 2008. Our combined ratio for the first six months of 2009 was 85.5%, compared to 83.9% for the same period of 2008. During the first six months of 2009, we had $11.3 million of positive reserve development, compared to $14.4 million in the first six months of 2008. Profitability from our underwriting operations remains at acceptable levels. Investment income was relatively flat year-over-year. Investment income on our fixed income securities grew $7.6 million year-to-date, but declined $10.1 million on our short-term investments. Our 2008 year-to-date results also included an $11.7 million loss related to trading securities, which we sold later in 2008. See the Results of Operations section below for additional discussion.
Net earnings were $174.8 million ($1.54 per diluted share) in the first half of 2009, compared to $172.1 million ($1.48 per diluted share) in the same period of 2008 and $91.6 million ($0.81 per diluted share) in the second quarter of 2009, compared to $91.7 million ($0.79 per diluted share) in the same period of 2008. The year-to-date increase in net earnings primarily resulted from the commutation of a reinsurance contract that had been accounted for using the deposit method of accounting and the net effect of other items described below. Net earnings were flat quarter-over-quarter and included a higher amount of positive development in 2009, offset by the effect of a gain from the sale of a strategic investment in 2008. Diluted earnings per share in both periods of 2009 benefited from the repurchase of 4.7 million shares of our common stock in 2008 and the first quarter of 2009. The share repurchases reduced our diluted weighted-average shares outstanding, which were 112.9 million and 116.2 million in the first six months of 2009 and 2008, respectively, and 112.5 million and 116.0 million in the second quarter of 2009 and 2008, respectively.
Our loss from alternative investments, which were primarily fund-of-fund hedge fund investments, was $1.0 million in the first six months of 2009 compared to $2.4 million in the same period of 2008. We reduced our exposure to these funds by redeeming $52.6 million in the fourth quarter of 2008 and the remaining $44.3 million in 2009. We have collected substantially all of these redeemed funds through June 30, 2009.
Other operating income was $28.4 million in the first half of 2009, compared to $6.0 million in the first half of 2008 and $5.5 million in the second quarter of 2009, compared to $10.9 million in the second quarter of 2008. The first half of 2009 included the $20.0 million termination payment to commute a reinsurance contract that had been accounted for using the deposit method of accounting. The 2008 gain included $9.2 million from the sale of a strategic investment, partially offset by losses related to our trading security portfolio that was sold in 2008. Period to period comparisons in this category may vary substantially, depending on acquisition of new investments, income or loss related to changes in the market values of certain investments, and gains or losses related to any disposition. The following table details the components of our other operating income.
At June 30, 2009, book value per share was $25.01, up from $23.27 at December 31, 2008. Total assets were $8.9 billion and shareholders equity was $2.8 billion, compared to $8.3 billion and $2.6 billion, respectively, at December 31, 2008. We repurchased 1.7 million shares of our common stock in the first quarter of 2009, which increased book value per share by $0.05.
Read the The complete ReportHCC is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, John Keeley of Keeley Fund Management, David Dreman of Dreman Value Management.
HCC through its subsidiaries provides specialized property & casualty insurance coverages managing general agency services & insurance related services both to commercial customers & individuals. HCC\'s insurance products are underwritten on both a direct & reinsurance basis & are marketed by the Company itself & through a network of independent & affiliated agents & brokers. HCC\'s principal insurance company subsidiaries are Houston Casualty Co. U.S. Specialty Insurance Co. & Trafalgar Insurance Co. in Houston Texas; & AVEMCO Insurance Co. in Frederick Maryland. HCC Insurance Holdings Inc. has a market cap of $2.95 billion; its shares were traded at around $26.3 with a P/E ratio of 9.3 and P/S ratio of 1.3. The dividend yield of HCC Insurance Holdings Inc. stocks is 2%. HCC Insurance Holdings Inc. had an annual average earning growth of 15.5% over the past 10 years. GuruFocus rated HCC Insurance Holdings Inc. the business predictability rank of 2.5-star.
Highlight of Business Operations:
We had shareholders equity of $2.8 billion at June 30, 2009. Our book value per share increased 7.5% in the first six months of 2009 to $25.01 at June 30, 2009, up from $23.27 per share at December 31, 2008. We had net earnings of $174.8 million, or $1.54 per diluted share, and generated $262.2 million of cash flow from operations in the first six months of 2009. We declared dividends of $0.25 per share in the first six months of 2009, compared to $0.22 per share in the first six months of 2008, and paid $28.2 million of dividends in 2009. We repurchased 1.7 million shares of our common stock for $35.5 million, at an average cost of $21.36 per share in 2009. We currently have $4.6 billion of fixed income securities with an average rating of AA+ that are available to fund claims and other liabilities. We maintain a $575.0 million Revolving Loan Facility that allows us to borrow up to the maximum on a revolving basis, under which we have $255.0 million of additional capacity at July 31, 2009. The facility expires in December 2011. We are rated AA (Very Strong) by Standard & Poors Corporation and AA (Very Strong) by Fitch Ratings. Our major domestic insurance companies are rated A+ (Superior) by A.M. Best Company, Inc.We earned $174.8 million, or $1.54 per diluted share in the first six months of 2009, compared to $172.1 million, or $1.48 per diluted share, in the first six months of 2008. Our second quarter earnings were $91.6 million, or $0.81 per diluted share in 2009, compared to $91.7 million, or $0.79 per diluted share, in 2008. Our 2009 year-to-date earnings included a $15.6 million pretax impact due to a $25.0 million termination payment we received in the first quarter to commute a reinsurance contract that had been accounted for using the deposit method of accounting. Year-to-date, our losses and operating expenses have been higher in 2009 than in 2008. Our combined ratio for the first six months of 2009 was 85.5%, compared to 83.9% for the same period of 2008. During the first six months of 2009, we had $11.3 million of positive reserve development, compared to $14.4 million in the first six months of 2008. Profitability from our underwriting operations remains at acceptable levels. Investment income was relatively flat year-over-year. Investment income on our fixed income securities grew $7.6 million year-to-date, but declined $10.1 million on our short-term investments. Our 2008 year-to-date results also included an $11.7 million loss related to trading securities, which we sold later in 2008. See the Results of Operations section below for additional discussion.
Net earnings were $174.8 million ($1.54 per diluted share) in the first half of 2009, compared to $172.1 million ($1.48 per diluted share) in the same period of 2008 and $91.6 million ($0.81 per diluted share) in the second quarter of 2009, compared to $91.7 million ($0.79 per diluted share) in the same period of 2008. The year-to-date increase in net earnings primarily resulted from the commutation of a reinsurance contract that had been accounted for using the deposit method of accounting and the net effect of other items described below. Net earnings were flat quarter-over-quarter and included a higher amount of positive development in 2009, offset by the effect of a gain from the sale of a strategic investment in 2008. Diluted earnings per share in both periods of 2009 benefited from the repurchase of 4.7 million shares of our common stock in 2008 and the first quarter of 2009. The share repurchases reduced our diluted weighted-average shares outstanding, which were 112.9 million and 116.2 million in the first six months of 2009 and 2008, respectively, and 112.5 million and 116.0 million in the second quarter of 2009 and 2008, respectively.
Our loss from alternative investments, which were primarily fund-of-fund hedge fund investments, was $1.0 million in the first six months of 2009 compared to $2.4 million in the same period of 2008. We reduced our exposure to these funds by redeeming $52.6 million in the fourth quarter of 2008 and the remaining $44.3 million in 2009. We have collected substantially all of these redeemed funds through June 30, 2009.
Other operating income was $28.4 million in the first half of 2009, compared to $6.0 million in the first half of 2008 and $5.5 million in the second quarter of 2009, compared to $10.9 million in the second quarter of 2008. The first half of 2009 included the $20.0 million termination payment to commute a reinsurance contract that had been accounted for using the deposit method of accounting. The 2008 gain included $9.2 million from the sale of a strategic investment, partially offset by losses related to our trading security portfolio that was sold in 2008. Period to period comparisons in this category may vary substantially, depending on acquisition of new investments, income or loss related to changes in the market values of certain investments, and gains or losses related to any disposition. The following table details the components of our other operating income.
At June 30, 2009, book value per share was $25.01, up from $23.27 at December 31, 2008. Total assets were $8.9 billion and shareholders equity was $2.8 billion, compared to $8.3 billion and $2.6 billion, respectively, at December 31, 2008. We repurchased 1.7 million shares of our common stock in the first quarter of 2009, which increased book value per share by $0.05.
Read the The complete ReportHCC is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, John Keeley of Keeley Fund Management, David Dreman of Dreman Value Management.
