<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarter Ended MARCH 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from __________ to __________
Commission file number 0-20766
--------------------------------------------------------
HCC INSURANCE HOLDINGS, INC.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 76-0336636
- - - --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13403 NORTHWEST FREEWAY, HOUSTON, TEXAS 77040-6094
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 690-7300
- - - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
On May 6, 1996, there were 28,420,600 shares of Common Stock, $1 par value
issued and outstanding after giving effect of the five for two stock split
payable as a dividend to shareholders of record April 30, 1996.
The Index to Exhibits is located on page 14.
The total number of sequentially numbered pages is 16.
1
<PAGE>
HCC INSURANCE HOLDINGS, INC.
INDEX
PAGE NO.
--------
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995. . . . . . . 3
Condensed Consolidated Statements of Earnings
Three Months Ended March 31, 1996 and
Three Months Ended March 31, 1995 . . . . . . . . 4
Condensed Consolidated Statements of Changes in
Shareholders' Equity
Three Months Ended March 31, 1996 and
Year Ended December 31, 1995. . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and
Three Months Ended March 31, 1995 . . . . . . . . 7
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . 11
Part II. OTHER INFORMATION. . . . . . . . . . . . . . . . . 13
2
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Condensed Consolidated Balance Sheets
----------
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
ASSETS
Investments:
Securities available for sale:
Fixed income securities, at market
(cost: 1996 $232,425,000;
1995 $231,807,000) $ 232,185,000 $ 234,881,000
Marketable equity securities, at market
(cost: 1996 $11,107,000;
1995 $10,050,000) 14,876,000 13,752,000
Mortgage loans, at unpaid principal
balance, net 81,000 81,000
Real estate, net of accumulated
depreciation and amortization
(1996 $1,815,000; 1995 $1,780,000) 4,307,000 4,287,000
Short-term investments, at cost,
which approximates market 20,744,000 37,061,000
------------- ------------
Total investments 272,193,000 290,062,000
Cash 6,864,000 3,125,000
Reinsurance recoverables 133,129,000 103,408,000
Premium and other receivables 90,497,000 75,275,000
Ceded unearned premium 62,270,000 73,282,000
Deferred policy acquisition costs 16,590,000 16,431,000
Property and equipment, net 3,625,000 3,842,000
Deferred income tax 3,851,000 2,921,000
Other assets, net 11,980,000 11,993,000
------------- ------------
TOTAL ASSETS $ 600,999,000 $ 580,339,000
------------- ------------
------------- ------------
LIABILITIES
Loss and loss adjustment expense payable $ 183,980,000 $ 158,451,000
Reinsurance balances payable 58,939,000 68,463,000
Unearned premium 117,173,000 118,732,000
Deferred ceding commissions 14,051,000 17,497,000
Premium payable 10,681,000 6,514,000
Notes payable 16,250,000 16,250,000
Accounts payable and accrued liabilities 5,260,000 5,894,000
------------- ------------
Total liabilities 406,334,000 391,801,000
SHAREHOLDERS' EQUITY
Common Stock, $1 par value; 50,000,000
shares authorized; (issued and outstanding:
1996 28,420,600 shares and 1995 28,347,005
shares) 28,421,000 28,347,000
Additional paid-in capital 105,271,000 104,744,000
Retained earnings 58,681,000 51,043,000
Unrealized investment loss, net 2,292,000 4,404,000
------------- ------------
Total shareholders' equity 194,665,000 188,538,000
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 600,999,000 $ 580,339,000
------------- ------------
------------- ------------
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Condensed Consolidated Statements of Earnings
(Unaudited)
----------
FOR THE THREE MONTHS ENDED
MARCH 31,
1996 1995
------ ------
REVENUE
Net earned premium $ 23,497,000 $ 18,065,000
Net investment income 3,434,000 2,683,000
Net realized investment gain 812,000 97,000
Fee and commission income 1,086,000 1,048,000
------------- ------------
Total revenue 28,829,000 21,893,000
EXPENSE
Loss and loss adjustment expense 13,038,000 11,276,000
Operating expense:
Policy acquisition costs 8,094,000 6,666,000
Compensation expense 1,817,000 1,813,000
Other operating expense 1,689,000 1,477,000
Ceding commissions (6,681,000) (5,637,000)
------------- ------------
Net operating expense 4,919,000 4,319,000
Interest expense 276,000 803,000
Currency conversion (gain) loss 127,000 (218,000)
------------- ------------
Total expense 18,360,000 16,180,000
------------- ------------
Earnings before income tax provision 10,469,000 5,713,000
Income tax provision 2,831,000 1,423,000
------------- ------------
NET EARNINGS $ 7,638,000 $ 4,290,000
------------- ------------
------------- ------------
EARNINGS PER SHARE DATA:
Earnings per share $ 0.26 $ 0.18
------------- ------------
------------- ------------
Weighted average shares outstanding 29,388,000 23,656,000
------------- ------------
------------- ------------
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Condensed Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 1996 and
for the year ended December 31, 1995
(Unaudited)
----------
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED TOTAL
COMMON PAID-IN RETAINED INVESTMENT SHAREHOLDERS'
STOCK CAPITAL EARNINGS GAIN (LOSS) EQUITY
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1994 $ 9,267,000 $ 75,025,000 $ 28,770,000 $(5,301,000) $107,761,000
58,876 shares of Common Stock issued
for exercise of options, including
tax benefit of $252,000 59,000 770,000 - - 829,000
2,012,500 shares of Common Stock issued
in public offering, net of costs 2,013,000 45,957,000 - - 47,970,000
Net earnings - - 22,273,000 - 22,273,000
Unrealized investment gain on fixed income
securities, net of deferred tax
charge of $4,293,000 - - - 7,973,000 7,973,000
Unrealized investment gain on marketable
equity securities, net of deferred tax
charge of $934,000 - - - 1,732,000 1,732,000
17,008,203 shares of Common Stock issued
for 150% stock dividend (see Note 1) 17,008,000 (17,008,000) - - -
------------ ------------ ------------ ----------- ------------
BALANCE AS OF DECEMBER 31, 1995 $ 28,347,000 $104,744,000 $ 51,043,000 $ 4,404,000 $188,538,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Condensed Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 1996 and
for the year ended December 31, 1995
(Unaudited)
(continued)
----------
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED TOTAL
COMMON PAID-IN RETAINED INVESTMENT SHAREHOLDERS'
STOCK CAPITAL EARNINGS GAIN (LOSS) EQUITY
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1995 $ 28,347,000 $104,744,000 $ 51,043,000 $ 4,404,000 $188,538,000
73,595 shares of Common Stock issued
for exercise of options, including
tax benefit of $306,000 74,000 527,000 - - 601,000
Net earnings - - 7,638,000 - 7,638,000
Unrealized investment loss on fixed income
securities, net of deferred tax
benefit of $1,158,000 - - - (2,155,000) (2,155,000)
Unrealized investment gain on marketable
equity securities, net of deferred tax
charge of $24,000 - - - 43,000 43,000
------------ ------------ ------------ ------------ ------------
BALANCE AS OF MARCH 31, 1996 $ 28,421,000 $105,271,000 $ 58,681,000 $ 2,292,000 $194,665,000
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Condensed Consolidated Statements of Cash Flows
(Unaudited)
----------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,638,000 $ 4,290,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Change in reinsurance recoverables (29,721,000) (1,825,000)
Change in premium and other receivables (15,222,000) (9,474,000)
Change in ceded unearned premium 11,012,000 8,902,000
Change in loss and loss adjustment expense payable 25,529,000 3,888,000
Change in reinsurance balances payable (9,524,000) (5,433,000)
Change in unearned premium (1,559,000) 6,337,000
Change in premium payable 4,167,000 6,665,000
Depreciation and amortization expense 337,000 267,000
Other, net (4,725,000) (1,540,000)
------------ ------------
Cash provided (used) by operating activities (12,068,000) 12,077,000
Cash flows from investing activities:
Sales of fixed income securities 3,465,000 -
Maturity or call of fixed income securities 3,720,000 353,000
Sales of equity securities 3,074,000 2,962,000
Cost of investments acquired (11,302,000) (11,920,000)
Other, net (68,000) (508,000)
------------ ------------
Cash used by investing activities (1,111,000) (9,113,000)
Cash flows from financing activities:
Payments on notes payable - (2,250,000)
Sale of Common Stock 601,000 557,000
------------ ------------
Cash provided (used) by financing activities 601,000 (1,693,000)
------------ ------------
Net increase (decrease) in cash and
short-term investments (12,578,000) 1,271,000
Cash and short-term investments at
beginning of period 40,186,000 24,827,000
------------ ------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 27,608,000 $ 26,098,000
------------ ------------
------------ ------------
Supplemental cash flow information:
Interest paid $ 266,000 $ 693,000
------------ ------------
------------ ------------
Income tax paid $ 1,253,000 $ 300,000
------------ ------------
------------ ------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) GENERAL INFORMATION
HCC Insurance Holdings, Inc. ("the Company") and its subsidiaries
(collectively, "the Companies") include domestic and foreign property and
casualty insurance companies and managing general agents, surplus lines
insurance brokers and wholesale insurance and reinsurance brokers. The
Company, through its subsidiaries, provides specialized property and
casualty insurance to commercial customers, underwritten on both a direct
and reinsurance basis, and, to a lesser extent, insurance agency services.
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements have been prepared
in conformity with generally accepted accounting principles and include all
adjustments which are, in the opinion of management, necessary for fair
presentation of the results of the interim periods. All adjustments made to
the interim periods are of a normal recurring nature. All significant
intercompany balances and transactions have been eliminated. The condensed
consolidated financial statements for periods reported should be read in
conjunction with the annual consolidated financial statements and notes
related thereto. The condensed consolidated balance sheet as of December
31, 1995, and the statement of shareholders' equity for the year then ended
were derived from audited financial statements, but do not include all
disclosures required by generally accepted accounting principles.
INCOME TAX
For the three months ended March 31, 1996 and 1995, the income tax provision
has been calculated based on an estimated effective tax rate for each of the
fiscal years. The difference between the Companies' effective tax rate and
the Federal statutory rate is primarily the result of nontaxable municipal
bond interest included in pretax income.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common and
common equivalent shares outstanding during the period divided into net
earnings. Outstanding common stock options, when dilutive, are considered to
be common stock equivalents for the purpose of this calculation. The
treasury stock method is used to calculate common stock equivalents due to
options. There is no difference between primary and fully diluted earnings
per share.
STOCK SPLIT
In April, 1996, the Board of Directors declared a five for two stock split
in the form of a 150% stock dividend on the Company's $1.00 par value Common
Stock, payable to shareholders of record April 30, 1996. The par value of
the Company's Common Stock remains unchanged. As of March 31, 1996, the
$17.1 million par value of additional shares to be issued was transferred
from additional paid-in capital to Common Stock. All per share and weighted
average shares outstanding data presented in the condensed consolidated
financial statements and notes thereto have been adjusted to reflect the
effects of the split. The issued and outstanding shares presented in the
condensed consolidated balance sheet as of December 31, 1995, have also been
adjusted to reflect the effects of the split.
RECLASSIFICATIONS
Certain amounts in the 1995 condensed consolidated financial statements have
been reclassified to conform to the 1996 presentation. Such
reclassifications had no effect on the Company's shareholders' equity, net
earnings or cash flows.
8
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Continued)
(2) REINSURANCE
In the normal course of business the Company's insurance company
subsidiaries cede a substantial portion of their premium to unrelated
domestic and foreign reinsurers through quota share, surplus, excess of loss
and facultative reinsurance agreements. Although the ceding of reinsurance
does not discharge the primary insurer from liability to its policyholder,
the subsidiaries participate in such agreements for the purpose of limiting
their loss exposure and diversifying their business. In addition, certain of
the insurance company subsidiaries' business was assumed from other
unrelated insurance and reinsurance companies. The following table
represents the approximate effect of such reinsurance transactions on net
premium and loss and loss adjustment expense:
LOSS AND LOSS
WRITTEN PREMIUM ADJUSTMENT
PREMIUM EARNED EXPENSE
------------- ------------- ------------
For the three months ended March 31, 1996:
Direct business $ 14,300,000 $ 25,803,000 $ 16,925,000
Reinsurance assumed 40,969,000 31,224,000 38,692,000
Reinsurance ceded (22,518,000) (33,530,000) (42,579,000)
------------- ------------- ------------
NET AMOUNTS $ 32,751,000 $ 23,497,000 $ 13,038,000
------------- ------------- ------------
------------- ------------- ------------
For the three months ended March 31, 1995:
Direct business $ 18,855,000 $ 20,935,000 $ 16,437,000
Reinsurance assumed 32,754,000 24,537,000 13,913,000
Reinsurance ceded (18,505,000) (27,407,000) (19,074,000)
------------- ------------- ------------
NET AMOUNTS $ 33,104,000 $ 18,065,000 $ 11,276,000
------------- ------------- ------------
------------- ------------- ------------
Substantially all of the reinsurance assumed in the three months ended March
31, 1996 and 1995, respectively, was underwritten directly by the Companies
but issued by other companies in order to satisfy local licensing or other
requirements, predominantly on non-U.S.A. business.
The table below represents the approximate composition of reinsurance
recoverables in the accompanying condensed consolidated balance sheets:
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
Reinsurance recoverable on paid losses $ 22,099,000 $ 13,678,000
Reinsurance recoverable on outstanding losses 106,569,000 83,847,000
Reinsurance recoverable on IBNR 7,061,000 8,278,000
Reserve for uncollectible reinsurance (2,600,000) (2,395,000)
------------- -------------
Total reinsurance recoverables $ 133,129,000 $ 103,408,000
------------- -------------
------------- -------------
9
<PAGE>
HCC Insurance Holdings, Inc. and Subsidiaries
----------
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Continued)
(2) REINSURANCE, CONTINUED
The Companies require reinsurers not authorized by the Texas Department of
Insurance to collateralize their reinsurance obligations to the Companies
with letters of credit or cash deposits. At March 31, 1996, the Companies
held letters of credit and cash deposits in the amounts of $66.8 million and
$16.0 million, respectively, to collateralize certain reinsurance balances.
The Companies have established a reserve of $2.6 million as of March 31,
1996, to reduce the effects of any recoverable problems. In order to
minimize their exposure to reinsurance credit risk, the Companies evaluate
the financial condition of the reinsurers and place their reinsurance with a
diverse group of financially sound companies.
(3) PENDING ACQUISITION
On January 8, 1996, the Company announced that it had reached an agreement
in principle to acquire all of the outstanding shares of common stock of LDG
Management Company Incorporated and affiliated companies ("LDG") in exchange
for 6,250,000 shares of the Company's Common Stock. This business
combination will be accounted for as a pooling of interests. The principal
shareholder of LDG is a director of the Company. A definitive Agreement and
Plan of Reorganization was executed effective as of February 22, 1996.
The agreement is subject to approval by the shareholders of both companies,
regulatory approval and other conditions to closing. The Company intends to
issue 6,250,000 shares of its Common Stock provided that the average trading
price of the Common Stock is at least $14.40 per share. If the average
trading price is less than $14.40 per share, the shareholders of LDG shall
be entitled to receive the number of shares of the Company's Common Stock
equal to the quotient of $90,000,000 divided by the average trading price of
the Company's Common Stock over a measuring period prior to the business
combination. If the average trading price of the Company's Common Stock is
less than $13.20 per share, each of LDG and the Company have the right to
terminate the agreement.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996 VERSUS QUARTER ENDED MARCH 31, 1995.
Gross written premium increased 7% to $55.3 million for the first quarter of
1996 from $51.6 million for the same period in 1995. This is slower growth
than previously reported due in part to the planned reduction in offshore
energy business as a result of reckless competition driving rates below an
acceptable level and the softening of marine rates. However, on the positive
side, property and aviation, which is still the Company's fastest growing
line, both continue to grow profitably. Net written premium for the first
quarter of 1996 decreased 1% to $32.8 million from $33.1 million for the same
period in 1995, however, the first quarter 1995 was inflated by the initial
impact of the reduction in the amount of non-catastrophe proportional
reinsurance purchased by the Company. Net earned premium increased 30% to
$23.5 million for the first quarter of 1996 from $18.1 million for the same
period in 1995, with much of the growth coming from aviation, where
substantially more premium is retained by the Company due to the lack of
catastrophe exposure in the business written.
Fee and commission income increased 4% to $1.1 million for the first quarter
of 1996 compared to $1.0 million for the same period in 1995. The Company
expects fee and commission income to increase substantially during the
remainder of 1996 due to the effects of the pending LDG merger as well as the
probability of large new and renewal individual commission items. Net
investment income increased 28% to $3.4 million for the first quarter of 1996
compared to $2.7 million for the same period in 1995 reflecting a higher
level of investment assets.
Net realized investment gains from sales of equity securities were $917,000
during the first quarter of 1996 compared to gains of $100,000 for the same
period in 1995. Net realized investment losses from disposition of fixed
income securities were $105,000 during the first quarter of 1996 compared to
losses of $3,000 for the same period in 1995.
Loss and LAE increased $1.8 million or 16% during the first quarter of 1996,
to $13.0 million, reflecting the overall increase in business, however the
Company's GAAP loss ratio decreased to 55.5% from 62.4%.
Other operating expense increased 14% to $1.7 million for the first quarter of
1996. These expenses reflect increased expenditures required to meet the
overall growth in business. Goodwill amortization expense was $72,000 for
the first quarters of both 1996 and 1995 and is included in other operating
expense.
Interest expense decreased 66% to $276,000 during the first quarter of 1996
from $803,000 due to the reduced level of indebtedness as a portion of the
proceeds of the June, 1995 public offering of Common Stock was used to retire
debt. During the first quarter of 1996, currency conversion losses amounted
to $127,000 compared to gains of $218,000 for the same period in 1995.
11
<PAGE>
Net earnings increased 78% to $7.6 million for the first quarter of 1996 from
$4.3 million for the same period in 1995. This increase was principally a
result of higher underwriting profit, higher investment income and increased
net realized investment gains.
Earnings per share increased 44% to $0.26 for the first quarter of 1996 from
$0.18 for the first quarter of 1995. This reflects a 78% increase in net
earnings partially offset by a 24% increase in weighted average shares
outstanding as a result of the 1995 public offering of Common Stock.
The Company's insurance company subsidiaries' statutory combined ratio was
79.8% for the first quarter of 1996, as compared to 81.8% for the same period
in 1995. The Company's combined ratio remains under 100%, significantly
better than the industry average.
The Company's book value per share was $6.85 as of March 31, 1996, up from
$6.65 as of December 31, 1995. Earnings added $0.27 per share to book value
during the first quarter of 1996, while the unrealized loss incurred during
the quarter on the investment portfolio, which is entirely marked-to-market,
amounted to $2.1 million, net of tax, or $0.07 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash and investment portfolio decreased $14.1
million or 5% since December 31, 1995, and totalled $279.1 million as of
March 31, 1996, of which $27.6 million was cash and short-term investments.
This decrease was as a result of unusually large claim payments during the
first quarter of 1996 in advance of the collection of the related reinsurance
recoverables and in addition, substantial payments for reinsurance
protections purchased during the first quarter of 1996. The Company expects
cash and investments to increase during the remainder of 1996. Total assets
increased to $601.0 million as of March 31, 1996, from $580.3 million as of
December 31, 1995.
FORWARD-LOOKING STATEMENTS IN THIS FORM 10-Q ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
INVESTORS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTY, INCLUDING WITHOUT LIMITATION, THE RISK OF A SIGNIFICANT NATURAL
DISASTER, THE INABILITY OF THE COMPANY TO REINSURE CERTAIN RISKS, THE
ADEQUACY OF ITS LOSS RESERVES, CHANGING REGULATIONS IN FOREIGN COUNTRIES, AS
WELL AS GENERAL MARKET CONDITIONS, COMPETITION AND PRICING. PLEASE REFER TO
THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS, COPIES OF WHICH ARE
AVAILABLE FROM THE COMPANY WITHOUT CHARGE, FOR FURTHER INFORMATION.
12
<PAGE>
Part II - Other Information
Item 1. LEGAL PROCEEDINGS:
There are no material pending legal proceedings to which the
registrant is a party or of which any of the property of the
registrant is the subject, except for claims arising in the
ordinary course of business of its wholly owned insurance company
subsidiaries, none of which are considered material.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits:
The exhibits listed on the accompany Index to Exhibits on page
14 are filed as part of this report.
(b) Reports on Form 8-K:
On January 8, 1996, the Registrant filed a report on Form 8-K
reporting the agreement in principle to acquire all of the
outstanding shares of Common Stock of LDG Management Company
Incorporated and affiliated companies.
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 thereunto duly authorized.
HCC Insurance Holdings, Inc.
--------------------------------------
(Registrant)
May 14, 1996 s/s Frank J. Bramanti
- - - ------------------- ---------------------------------------
(Date) Frank J. Bramanti, Executive Vice President
and Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
11 - Statement Regarding Computation of Earnings Per Share.
27 - EDGAR Financial Statement Schedule
14
<PAGE>
Exhibit 11
HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
<TABLE>
<CAPTION>
===============================================================================
FOR THE THREE MONTHS ENDED
MARCH 31,
1996 1995
- - - --------------------------------------------------------------------------------
<S> <C> <C>
Net earnings $ 7,638,000 $ 4,290,000
----------- -----------
----------- -----------
Primary:
Weighted average Common Stock and common stock
equivalents outstanding 29,388,000 23,656,000
----------- -----------
----------- -----------
Earnings per share $ 0.26 $ 0.18
----------- -----------
----------- -----------
Reconciliation of number of shares outstanding:
Common Stock outstanding at period end 28,421,000 9,324,000
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 1,001,000 151,000
Changes in Common Stock for issuance (34,000) (13,000)
Effect of five for two stock split (1) - 14,194,000
----------- -----------
Weighted average Common Stock and common stock
equivalents outstanding 29,388,000 23,656,000
----------- -----------
----------- -----------
Fully Diluted:
Weighted average Common Stock and common stock
equivalents outstanding 29,522,000 23,669,000
----------- -----------
----------- -----------
Earnings per share $ 0.26 $ 0.18
----------- -----------
----------- -----------
Reconciliation of number of shares outstanding:
Common Stock outstanding at period end 28,421,000 9,324,000
Additional dilutive effect of outstanding
options (as determined by the application
of the treasury stock method) 1,101,000 143,000
Effect of five for two stock split (1) - 14,202,000
----------- -----------
Weighted average Common Stock and common stock
equivalents outstanding 29,522,000 23,669,000
----------- -----------
----------- -----------
</TABLE>
(1) In April, 1996, the Board of Directors declared a five for two stock split
in the form of a 150% stock dividend on the Company's $1.00 par value Common
Stock, payable to shareholders of record April 30, 1996. The par value of
the Company's Common Stock remains unchanged. Adjustments have been made to
1995 amounts to present weighted average shares outstanding and earnings per
share on a consistent basis.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONDENSED
CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 232,185,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 14,876,000
<MORTGAGE> 81,000
<REAL-ESTATE> 4,307,000
<TOTAL-INVEST> 272,193,000
<CASH> 6,864,000
<RECOVER-REINSURE> 133,129,000
<DEFERRED-ACQUISITION> 16,590,000
<TOTAL-ASSETS> 600,999,000
<POLICY-LOSSES> 183,980,000
<UNEARNED-PREMIUMS> 117,173,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 16,250,000
0
0
<COMMON> 28,421,000
<OTHER-SE> 166,244,000
<TOTAL-LIABILITY-AND-EQUITY> 600,999,000
23,497,000
<INVESTMENT-INCOME> 3,434,000
<INVESTMENT-GAINS> 812,000
<OTHER-INCOME> 1,086,000
<BENEFITS> 13,038,000
<UNDERWRITING-AMORTIZATION> 8,094,000
<UNDERWRITING-OTHER> (3,175,000)
<INCOME-PRETAX> 10,469,000
<INCOME-TAX> 2,831,000
<INCOME-CONTINUING> 7,638,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,638,000
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
<RESERVE-OPEN> 66,326,000
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 70,350,000
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
