|
|
Despite monumental change, 2006 was a
year of continued consistency for our Company. Another record year of
results was coupled with unexpected management changes which brought
John N. Molbeck, our President and Chief Operating Officer, and me back
to HCC. Our voluntary independent option investigation was completed during the
fourth quarter of 2006 resulting in the resignations of Stephen L. Way,
our founder and former Chairman of the Board and Chief Executive
Officer, and Christopher L. Martin, former Executive Vice President and
General Counsel. It was unfortunate that the Company would lose Mr.
Way’s insight and experience that has formed HCC into a well respected,
well developed, well managed organization. Mr. Way’s leadership
developed the Company into what we are today and we thank him for his
untiring efforts. However, it is fortunate for all constituencies that
the Company will continue its consistent direction and approach with our
management team that has not only tremendous experience but much of it
along side one another. We look forward to continuing Mr. Way’s vision
and do so knowing that he remains both a friend and supporter.
We were fortunate that the efforts made by our administrative staff, led
by Ed Ellis and Pam Penny, allowed us to enter 2007 with all SEC filings
current. We are well positioned to continue our strong performance.
The Company continued its approach of acquiring businesses that augment
our current operations and allow us to expand our footprint in the
specialty marketplace. We acquired G. B. Kenrick & Associates, Inc.,
based in Auburn Hills, Michigan, allowing us to enter the public entity
market with an experienced team of professionals. We expanded our
presence in Medical Stop Loss by acquiring Novia Underwriters, Inc. in
June, 2006 and capped off the year by acquiring the Health Products
Division of Allianz Life Insurance Company in October, 2006. Both of
these acquisitions have been fully integrated into our Medical Stop Loss
operations and will allow the Company to continue to grow its gross
written premium and net earnings in 2007 and beyond.
2006 was another record year for the Company’s operations. Net earnings
grew to a record $342 million or $2.93 per share. Our revenue reached a
record $2.1 billion and gross written premium, net written premium and
net earned premium each reached a record level. A benign year, from a
catastrophe standpoint, positively impacted insurance industry results,
including HCC’s. In addition, we were able to commute over $120 million
of reinsurance recoverables which further reduced our credit risk to
reinsurers, reduced total reinsurance recoverables and allowed us to
further increase our investment assets. Cash flow was over $650 million
and helped our investment assets increase to almost $4.0 billion.
Investment income increased over 50% in 2006 to $153 million.
2006 was the 11th straight year the Company has increased its dividend
to shareholders. Our annual dividend rate is currently $0.40 per share
and we expect to continue to increase it in the future.
2007 will present more challenges for management to overcome; however,
our businesses are well run, with experienced executives strongly
committed to underwriting profits and prudent growth. The Company’s A.M.
Best rating of A+ and S&P rating of AA have both been affirmed, a
recognition of the strength of our Company’s management, our disciplined
conservative approach to the insurance business and the strength of our
balance sheet and capital structure. We will continue to focus on
leveraging our strengths to earn an above-average return for our
shareholders while taking below-average risks.
We want to thank our employees whose hard work and dedication allowed
the Company to continue to deliver superior results. Our 20% return on
equity is a testament to their efforts. We are grateful to our producers
and clients who continue to express their confidence in our approach to
providing insurance solutions to their business needs. |
