Solid second quarter results, strong ratings from rating
agencies and continued focus on enhancing shareholders' value
HCC Insurance Holdings Inc.
) achieve a Zacks #1 Rank (Strong Buy) on September 26. This
specialty insurance underwriter delivered positive earnings
surprises for four consecutive quarters with an average beat of
Moreover, the stock surged to hit its 52-week high of $34.46 on
September 25. With a year-to-date return of 22.7% and long-term
earnings growth projection of 7.3%, the company offers an
attractive investment opportunity.
The Rank Driver
On July 31, HCC Insurance Holdings delivered second quarter 2012
earnings of 95 cents a share, reflecting an increase of 28.4% from
74 cents earned in the year-ago quarter and escalating 26.7% from
the Zacks Consensus Estimate of 75 cents. The outperformance came
on the back of a sturdy top line.
Total revenue increased 8.1% year over year to gross $632.3
million. The improvement came on the back of higher premiums and
Net earned premium in the second quarter was $547.1 million, a
year-over-year improvement of 8%.
Retention rate increased 200 basis points to 87%.
Investment income in the second quarter improved 1.7% year over
year to $53.3 million.
Lower level of catastrophe activities led to a 430 basis points
improvement in the combined ratio over the prior-year quarter to
HCC Insurance Holdings spent $59.5 million to buyback 1.9 million
shares in the quarter.
On August 23, the company's Board of Directors authorized a 6.4%
hike in its quarterly cash dividend to 16.5 cents.
On August 27, the Board approved a share buyback program. Per the
approval, the company is authorized to repurchase shares worth $300
On September 26, credit rating agency, A.M. Best affirmed the
ratings of HCC Insurance Holdings and its subsidiaries.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased nearly 5% to $3.16
per share over the last 60 days. This also represents a
year-over-year increase of 21.4%.
For 2013, the Zacks Consensus Estimate moved up by 1.3% to $3.19
per share, representing a year-over-year increase of 1.2%.
HCC Insurance Holdings currently trades at a forward P/E of 10.7x,
a 13% discount to the peer group average of 12.3x. On a
price-to-book basis, the shares are trading at 1.0x, compared to
the peer group average of 0.9x.
HCC Insurance Holdings has a trailing 12-month return on equity
(ROE) of 9.8%, substantially higher than the peer group average of
About the company
Headquartered in Houston, Texas and founded in 1974, HCC Insurance
Holdings underwrites non-correlated specialty insurance products
including property and casualty, accident and health, surety and
credit product lines. With offices in the United States, the United
Kingdom, Spain and Ireland, it has a market capitalization of $3.36
Other Zacks #1 Rank financial service providers include
Community Trust Bancorp Inc
1st Enterprise Bank
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