HCC Announces 32 Percent Increase in 2ndQ Net Earnings
HCC Insurance Holdings Inc. of Houston announced financial results for the second quarter and six months of 2002.
Second quarter net income totaled $26.8 million, a 32 percent increase from the second quarter of 2001. Net earnings for the first half of 2002 grew 41 percent to $50.1 million, compared to $35.4 million the previous year.
Total revenue continued to grow, increasing 31 percent for the first six months of 2002 to a record $307.6 million from $235.6 million in the first half of 2001. This increase was primarily due to the growth in HCC’s subsidiaries’ earned premium, as market conditions in our specialty lines continue to improve. Revenue is expected to further increase during the second half of this year and into 2003, as earned premium continues to rise.
Gross written premium of the insurance company subsidiaries, excluding discontinued lines, increased 16 percent to $547.4 million during the first half of 2002 compared to the first six months of 2001. During the same period and also excluding discontinued lines, net written premium increased by 58 percent to $252.9 million and net earned premium increased by 47 percent to $213.3 million.
The increases are as a result of higher rates, increased retentions, strong growth in the company’s London branch operations and new business in our other specialty business segment. This growth is expected to continue for the rest of this year and into 2003.
The GAAP combined ratio improved considerably for the first six months of 2002 to 85.9 percent, from 89.3 percent in the corresponding period of 2001. The GAAP gross loss ratio improved substantially in the first six months of 2002 to 60.1 percent from 85.2 percent in the same period in 2001. This improvement, together with a reduction in ceded premiums, is having a positive effect on reinsurance recoverables.
Management fees increased 32 percent during the first half of 2002 to $39.0 million, from $29.6 million in the same period of 2001. This increase is due to higher rates and new business in our other specialty lines segment. During the same period, commission income was lower at $21.2 million compared to $24.8 million, due in part to the substantial reduction in ceded reinsurance from our insurance company subsidiaries. Cash flow from operating activities increased substantially during the first six months of 2002 to $46.7 million from $16.5 million in the first half of 2001, as a result of increased business, higher retained premiums and net earnings.
Despite an increase in investment assets, net investment income decreased in the first six months of 2002 to $18.2 million, from $20.5 million in the first half of 2001. This reduction in income was a result of lower interest rates and the company’s conservative investment philosophy.
As of June 30, 2002, total investments increased to $965.0 million, total assets were $3.4 billion, book value per share increased to $13.21 and the company’s debt to total capital ratio was 20.3 percent.
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