HCC Insurance Holdings’ (HCC) fourth-quarter 2014 adjusted earnings of $1.05 per share missed the Zacks Consensus Estimate of $1.07 per share and also declined year over year by 4.5%.
The decline was due to accident year pretax net catastrophe losses which were included in the quarter.
Including net realized investment gains and foreign currency expenses, HCC Insurance reported net income of $113 million or $1.16 per share in fourth-quarter 2014, compared with $115 million or $1.14 per share for the fourth quarter of 2013.
Quarterly Operational Update
Total revenues increased 5.2% year over year to $670 million in the fourth quarter, driven by solid growth in net earned premiums. Revenues also surpassed the Zacks Consensus Estimate of $658 million.
Gross premiums written during the quarter increased 3% to $691.3 million while net written premiums increased 4.8% year over year to $550.8 million.
Total expenses of $505.4 million in the quarter increased 5.2% year over year mainly due to higher loss and loss adjustment expenses and interest expenses.
Combined ratio for HCC Insurance deteriorated 70 basis points year over year to 81.9%.
Behind the Headlines
Net written premiums in the U.S. Property & Casualty division increased 18% year over year to $91.6 million in the fourth quarter. The rise was mainly attributable to solid performance across the Liability, Aviation and Other block of businesses, partially offset by soft performing Sports and Entertainment and Public Risk block of businesses.
In the Professional Liability division, net written premiums declined 11% year over year to $99.8 million.
Accident & Health reported net written premiums of $250.3 million, up 9% year over year.
Net written premiums in the U.S. Surety &Credit rose 2% year over year to $52.3 million, due to a rise in the Surety block.
In the International division, net written premiums stood at $56.8 million, up 7% due to solid performance in Surety and Credit as well as Liability businesses.
Net written premiums in the Exited Lines stood at ($0.006) million compared with $1.9 million in the year-ago quarter.
Full-Year 2014 Highlights
HCC Insurance reported 2014 adjusted earnings of $4.23 per share surpassing the Zacks Consensus Estimate of $4.05 per share and also improving year over year by 8.7%.
Total revenues increased 4.6% year over year to $2.6 billion in the 2014. Revenues were in line with the Zacks Consensus Estimate.
Financial Position
As of Dec 31, 2014, HCC Insurance had cash and short-term investments of $360.3 and $294.1 million of available capacity under its $825.0 million revolving loan facility.
Cash flow from operating activities was $478.6 million in 2014, up 82.2% year over year.
As of Dec 31, 2014, total assets of HCC Insurance were $10.7 billion, up 3.6% from 2013-end level.
As of Dec 31, 2014, shareholders’ equity of HCC Insurance stood at $3.9 billion, up 6.2% from 2013-end level. The return on equity ratio of HCC Insurance deteriorated 170 basis points from 2013-end level to 11.0%.
Share Buyback
During 2014 the company repurchased 4.7 million shares worth $224.7 million.
Zacks Rank
HCC Insurance currently sports a Zacks Rank #1 (Strong Buy).
Performance of Other Property and Casualty Insurers
RLI Corp. (RLI) reported fourth-quarter 2014 operating earnings of 71 cents per share, outpacing the Zacks Consensus Estimate by 18.3%. However, operating earnings declined marginally by 1.4% from the year-ago quarter.
The Travelers Companies Inc. (TRV) posted operating earnings of $3.07 per share in the fourth quarter of 2014, outperforming the Zacks Consensus Estimate by 21%. Earnings improved 14.6% year over year.
Progressive Corp.’s (PGR) earnings per share for fourth-quarter 2014 came in at 60 cents, 40% above the Zacks Consensus Estimate and up about 43% year over year.
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