UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 1, 2006
HCC INSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
001-13790 |
76-0336636 |
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
13403 Northwest Freeway |
77040-6094 |
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (713) 690-7300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
|
[ ] |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
[ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
[ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
This Form 8-K/A (“Amendment No. 1”) of the HCC Insurance Holdings, Inc. (the “Company”) Form 8-K originally filed on November 1, 2006 is filed solely for the purpose of including the forward looking statement disclaimer language set forth herein.
Except as stated above, this Amendment No. 1 does not otherwise update any information included in the Company’s prior filing on November 1, 2006.
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
Item 8.01 Other Events.
HOUSTON (November 1, 2006) . . .
HCC Insurance Holdings, Inc. (NYSE symbol: HCC) announced today that the independent review of the Company’s option granting practices, initiated by management, was proceeding and a report from the independent counsel to the Audit Committee, acting as an independent special committee of the Board of Directors, is expected during November. The Company intends to announce the Board’s findings and conclusions when the Board’s review of the Audit Committee’s recommendations is completed. Under review are ten years of the Company’s stock option granting practices. Management continues to cooperate fully with the independent counsel, the Company’s auditors and the Securities and Exchange Commission (“SEC”).
The filing of the Company’s Form 10-Q for second quarter 2006 was delayed pending the Board’s evaluation of any accounting changes or possible restatement of financial statements for prior periods that may be addressed in this independent review. As a result of this on-going review, the Company’s third quarter 2006 Form 10-Q will also be delayed. On a preliminary basis, the Company is disclosing selected financial information, which it believes would not be materially affected by possible results of the independent review, for the third quarter and year to date. See the attached tables.
Highlights of third quarter 2006:
Premium grew during the quarter compared to the same period in 2005, with gross written rising 2% to $536.1 million; net written rising 14% to $422.6 million; and net earned rising 25% to $421.1 million.
Net loss ratios were generally as anticipated but with improvement in the London market account and other of the Company’s specialty lines due to the lack of hurricane activity compared to third quarter 2005.
Fee and commission income rose 21% to $38.9 million, which was the first improvement in period to period comparison since 2004.
Net investment income grew 45% to $36.2 million and other operating income increased 20% to $20.3 million, both compared to third quarter 2005. Total investments rose 17% to $3.8 billion compared to year end 2005.
Certain items affected the selected financial information for the current quarter and/or its comparability with the same quarter in 2005, as follows: included in incurred losses is a charge of $2.1 million for the commutation of all recoverables due from a reinsurer in run-off and a credit for a reduction in overall reserves of $6.7 million following a review of our loss reserves in certain lines of business; included in fee and commission income is profit commission income of $5.1 million resulting from reserve releases.
Total revenue increased 25% to $516.7 million from the same period in 2005. Cash flow was down substantially in the quarter, primarily due to payment of 2005 hurricane claims and the timing of receipt of receivables and the payment of related payables. In addition, a large commutation resulted in positive cash flow of $120.0 million in the prior year quarter.
Stephen L. Way, Chairman and Chief Executive Officer, commenting on these results, said, “The record third quarter underwriting results reflect the lack of catastrophe claims, but more importantly, the diversity and strength of our operating businesses.” Mr. Way added, “We anticipate a very strong fourth quarter excluding any catastrophe activity and despite increased competition, we are optimistic about 2007.”
Mr. Way added the following comments on market conditions in the Company’s specialty lines of business.
In diversified financial products, domestic D&O remains stable with potential for some growth in 2007, while international business is soft and rate reductions continue. Thus far we have not seen any material change in policy terms or conditions. Our E&O business is seeing more competition particularly in the UK and Spain. Surety is generally very stable with domestic growth expected next year. Our financial guarantee business continues to grow profitably.
Group life, accident and health business is competitive but our margins remain very acceptable. We anticipate strong growth in 2007 due to recent acquisitions.
Aviation remains stable domestically, but competition continues in our international business, although overall margins are good.
The London market account is enjoying its best year ever and we are optimistic that the market will stay strong in 2007. Although this line is subject to unpredictable catastrophes, we continue to protect our capital with substantial reinsurance based upon conservative estimates of our aggregate exposures. While we have very profitable results through the third quarter 2006, the upside potential is less than most of our peers who are more likely to impact their capital in the event of major losses. Energy business continues to be our main focus where policy terms and conditions are expected to remain favorable.
Other specialty lines are more competitive but margins remain very acceptable.
* * * * *
As a result of the delay in filing its third quarter Form 10-Q with the SEC, the previously announced conference call for November 2, 2006 has been postponed. The Company intends to have a conference call after the second and third quarter Form 10-Q’s have been filed.
HCC is an international insurance holding company and a leading specialty insurance group since 1974, based in Houston, Texas with offices across the USA and in Bermuda, England and Spain. HCC has assets exceeding $7 billion and is rated AA (Very Strong) by Standard & Poor’s and A+ (Superior) by A. M. Best Company.
For more information, visit our website at www.hcc.com.
|
Contact: |
L. Byron Way, Vice President | |
|
|
HCC Insurance Holdings, Inc. | |
|
|
Telephone: (713) 690-7300 |
|
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. In addition, the completion of the independent review of the Company's option granting practices and any remedial decisions instituted by the Board of Directors might have a material affect on the risks and uncertainties of the Company's future results.
* * * * *
HCC Insurance Holdings, Inc. and Subsidiaries
Selected Financial Highlights
September 30, 2006
(Unaudited, in thousands except per share data)
Three Months Ended September 30,
2006 2005
-------- --------
Gross written premium $536,101 $525,447
Net written premium 422,581 371,698
Net earned premium 421,050 338,058
Fee and commission income 38,862 32,073
Net investment income 36,205 24,998
Other operating income 20,276 16,864
Total revenue 516,697 412,031
GAAP net loss ratio 56.1% 87.5%
Cash flow from operations $ 99,661 $334,417
Cash dividends declared, per share 0.100 0.075
HCC Insurance Holdings, Inc. and Subsidiaries
Selected Financial Highlights
September 30, 2006
(Unaudited, in thousands except per share data)
Nine Months Ended September 30,
2006 2005
---------- ----------
Gross written premium $1,628,213 $1,540,002
Net written premium 1,299,114 1,107,443
Net earned premium 1,204,941 995,901
Fee and commission income 104,208 102,452
Net investment income 108,959 70,039
Other operating income 59,071 26,116
Total revenue 1,475,986 1,196,546
GAAP net loss ratio 57.1% 68.3%
Cash flow from operations $ 359,416 $ 453,254
Cash dividends declared, per share 0.275 0.207
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
September 30, 2006
(Unaudited, in thousands)
3rd Qtr 3rd Qtr Change
2006 2005 %
--------- --------- -------
GROSS WRITTEN
Diversified financial products $ 240,046 $ 241,781 (1)%
Group life, accident & health 142,457 147,236 (3)
Aviation 50,976 53,090 (4)
London market account 44,799 32,366 38
Other specialty lines 57,837 49,991 16
Discontinued lines (14) 983 nm
--------- --------- -------
$ 536,101 $ 525,447 2%
========= ========= =======
NET WRITTEN
Diversified financial products $ 200,333 $ 184,931 8%
Group life, accident & health 130,007 124,358 5
Aviation 38,446 31,597 22
London market account 20,761 (370) nm
Other specialty lines 32,963 30,220 9
Discontinued lines 71 962 nm
--------- --------- -------
$ 422,581 $ 371,698 14%
========= ========= =======
NET EARNED PREMIUM
Diversified financial products $ 189,744 $ 143,084 33%
Group life, accident & health 129,234 125,079 3
Aviation 40,430 35,008 15
London market account 31,590 8,784 260
Other specialty lines 30,033 25,023 20
Discontinued lines 19 1,080 nm
--------- --------- -------
$ 421,050 $ 338,058 25%
========= ========= =======
nm - Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Insurance Company Premium
September 30, 2006
(Unaudited, in thousands)
Year to Date Year to Date Change
2006 2005 %
----------- ----------- ------
GROSS WRITTEN
Diversified financial products $ 690,779 $ 665,400 4%
Group life, accident & health 415,215 453,558 (8)
Aviation 166,072 159,446 4
London market account 202,964 124,134 64
Other specialty lines 152,960 133,766 14
Discontinued lines 223 3,698 nm
----------- ----------- ------
$ 1,628,213 $ 1,540,002 6%
=========== =========== ======
NET WRITTEN
Diversified financial products $ 574,098 $ 480,405 20%
Group life, accident & health 388,895 381,367 2
Aviation 128,810 99,879 29
London market account 111,278 64,938 71
Other specialty lines 96,056 78,542 22
Discontinued lines (23) 2,312 nm
----------- ----------- ------
$ 1,299,114 $ 1,107,443 17%
=========== =========== ======
NET EARNED PREMIUM
Diversified financial products $ 538,063 $ 371,414 45%
Group life, accident & health 385,257 380,681 1
Aviation 112,661 101,817 11
London market account 80,455 66,402 21
Other specialty lines 88,569 69,574 27
Discontinued lines (64) 6,013 nm
----------- ----------- ------
$ 1,204,941 $ 995,901 21%
=========== =========== ======
nm - Not meaningful comparison
HCC Insurance Holdings, Inc. and Subsidiaries
Consolidated Insurance Companies
Net Loss Ratios
September 30, 2006
(Unaudited, in thousands)
Year to Date 2006 Full Year 2005
---------------------------- ---------------------------
Line of Net Earned Incurred Loss Net Earned Incurred Loss
Business Premium Losses Ratio Premium Losses Ratio
----------- ----------- -------- ----- ---------- -------- -----
Diversified
financial
products $ 538,063 $263,647 49.0% $ 531,136 $255,570 48.1%
Group life,
accident
& health 385,257 274,748 71.3 504,382 361,289 71.6
Aviation 112,661 62,964 55.9 136,197 91,720 67.3
London market
account 80,455 35,806 44.5 93,017 98,638 106.0
Other specialty
lines 88,569 49,965 56.4 97,721 72,436 74.1
Discontinued
lines (64) 492 nm 7,535 41,544 nm
---------- -------- ---- ---------- -------- -----
Total $1,204,941 $687,622 57.1% $1,369,988 $921,197 67.2%
========== ======== ==== ========== ======== =====
nm - Not meaningful comparison
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HCC INSURANCE HOLDINGS, INC.
Date: November 7, 2006
By: /s/ Christopher L. Martin
Christopher L. Martin,
Executive Vice President and
General Counsel