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
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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
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