HCC Insurace Beats The Street, Reports Solid Results

HCC Insurance HCC reported 3Q operating earnings of $0.81/share compared to Oppenheimer's $0.73/share estimate and the Street estimate of $0.72/share. GWPs were 2% higher than we expected, but net earned premiums were in line with Oppenheimer's $516M estimate. Calendar year losses were $6M better than its estimate at $297M and drove over half of the pre-tax beat. The company announced six new reporting segments and also changed the presentation of some income statement items. Despite these reporting changes, it appears to be a solid quarter, clearly demonstrating HCC's underwriting prowess. We remain at Outperform and will revisit estimates after the 10-Q. GWPs increased 3% YoY from strong growth in the Surety and Credit segment in addition to higher Inter national premiums. Of fsetting this trend was a decline in D&O, domestic aviation, E&O and Public Risk premium. Also notewor thy, NWP in the Energy line increased 67% YoY, and the Proper ty Treaty book continues to show momentum. Investment income increased by 6% YoY to $51.1M—slightly ahead of Oppenheimer's $50.6M estimate—despite a decline in duration to 4.6 years and average yield to 4.9%. Management noted in 2Q it was investing in longer duration municipal securities, and it wonders where the company is finding opportunities to invest additional dollars. Oppenheimer has an Outperform rating and a $33 PT on HCC HCC closed Tuesday at $27.34