HCC ANNOUNCES 2003 RESULTS
AND 2004 EARNINGS GUIDANCE

HOUSTON (February 19, 2004) . . .
HCC Insurance Holdings, Inc. (NYSE symbol: HCC) today reported results for the fourth quarter and for the full year that ended December 31, 2003.

Net earnings for the fourth quarter 2003 increased significantly to $50.5 million, or $0.77 per share, compared to $31.5 million, or $0.50 per share, for the same period in 2002.

Net earnings for the full year 2003 increased substantially to $143.6 million, or $2.23 per share, compared to $105.8 million, or $1.68 per share, for the full year 2002.

Stephen L. Way, Chairman and Chief Executive Officer, said, “2003 was the best year in our history and we are very pleased with our results.” He added, “We are not resting on our laurels and look forward to our future challenges and successes.”

The Company has provided 2004 net earnings guidance with a range between $2.65 and $2.75 per share. The Company expects total revenue to increase approximately 25% in 2004, including growth of net earned premium by 30%, fee and commission income by 15% and investment income by 10%. The GAAP combined ratio is expected to remain fairly constant around 85% to 88% on significantly increased net earned premium.

There were several non-recurring items recorded in the fourth quarter 2003 and a summary of these important items follows:

The Company completed the sale of all of the assets of its retail broking subsidiary HCC Employee Benefits, Inc., following an unsolicited approach from Houston based Capital Risk LLC, a subsidiary of Jardine Lloyd Thompson Group, PLC. The initial after tax gain related to this sale, which was recorded in the fourth quarter 2003, was $30.1 million, or $0.47 per share. This transaction is subject to an earnout formula and could result in a further gain, which would be recorded in 2004. In accordance with GAAP, all operating results from this operation and this gain are shown separately in the Company’s consolidated statements of earnings as “Discontinued Operations”, but are included in the Company’s net earnings. The operating earnings and the gain are shown separately. Management believes that the disposition of this non-core business was opportunistic and the resulting cashflow was immediately utilized in the Company’s recent acquisition of American Contractors Indemnity Company.

The Company reached an agreement with various reinsurers to commute certain reinsurance recoverables relating to the Company’s discontinued A&H line of business. This transaction results in the Company receiving a cash payment from the reinsurers in consideration for discounting the recoverables and reassuming any losses. The after tax discount recorded was $18.7 million, or $0.29 per share. The pre-tax discount is included in loss and loss adjustment expenses in the Company’s consolidated statements of earnings in the fourth quarter of 2003. It is expected that future investment income will overcome the discount given on this transaction. Management has been proactive about commuting some of its reinsurance recoverables and will continue to do this where it is in the best interest of the Company. Management has a positive view of commutations such as this because they result in removing older recoverables from the Company’s balance sheet, increased future investment income and a reduction in the overall amount of recoverables.

The Company and its independent auditors have determined that the Company needs to adjust the basis upon which the fee and commission income of its agency and intermediary subsidiaries are accounted. Accordingly, the Company has restated its financial statements for the first three quarters of 2003 and the Company will amend previously filed quarterly reports on Form 10-Q for those quarters. The cumulative effect of the change, $3.9 million, which is recorded in the first quarter of 2003, is not material to prior years but the effect of the change in basis of accounting became material in 2003 as a result of recent acquisitions. It is strictly a timing difference. The maximum timing difference is twelve months and the average timing difference is approximately six months on the portion of the affected revenue and the related components. The change does not impact the overall amount of fee and commissions ultimately earned or previously collected in cash by the Company. The change does not affect the net earnings of the Company’s reporting segments but, rather, results solely from adjustments to the consolidating entries made in the preparation of the Company’s consolidated financial statements. Likewise, the change does not affect cash flow from operations.

The effect of this change on earnings for fiscal year 2003 is $13.0 million, or $0.20 per share. The effect of this change has been reflected in management’s guidance for 2004. See the table attached which shows the effect on earnings and earnings per share for the first three quarters of 2003.

Mr. Way commented, “There is no effect on the future growth prospects of the Company from this accounting change.”

Total revenue for the full year 2003 increased by 41% to a record $929.1 million compared to 2002, driven by significant increases in net earned premium, fee and commission income and investment income. The Company anticipates continued revenue growth in 2004.

Comparing the full year 2003 to the previous year, the Company’s insurance company subsidiaries’ net written premium increased 59% to $865.5 million and net earned premium increased 46% to $738.3 million. During the same period, gross written premium reached a record $1.74 billion, growing 50% from the previous year. Premium growth is due to increased rates, a reduction in ceded reinsurance, organic growth and greater renewal retentions. The Company expects premium to continue to grow through at least 2004.

The GAAP combined ratio was higher in 2003 at 91% compared to 86% in the previous year. This increase was primarily the impact of the reinsurance commutation recorded in the fourth quarter, which added 4% to the full year loss ratio. Management is confident of maintaining its combined ratio at or below this level going forward on rising earned premium revenue.

For the full year of 2003 compared to the same period in 2002, fee and commisssion income increased 22% to $129.8 million, primarily due to organic growth of existing lines of business and acquisitions made in late 2002. During the same period, other operating income increased to $13.2 million from $7.0 million, due in part to the timing of acquisitions and dispositions of strategic investments.

In 2003, cashflow from operations was significantly higher rising more than 200% to $528.1 million compared to the previous year. During the same period, net investment income grew 25% to $47.3 million, primarily due to substantially increased investment assets resulting from increased loss reserves due to higher retentions, as well as significant cash flow from operations and despite low yields from our continuing short duration and conservative investment philosophy.

As of December 31, 2003, total assets increased 32% to $4.9 billion; total investments increased 46% to $1.7 billion; shareholders’ equity increased 19% to $1.0 billion; and book value per share increased 16% to $16.37, all compared to December 31, 2002 and all at record levels. See attached tables.

HCC will hold an open conference call beginning at 4:00 p.m. Central Time on Thursday, February 19. To participate, the number for domestic calls is (888) 243-0813 and the number for international calls is (703) 925-2400. In addition, there will be a live webcast available on a listen-only basis, that can be accessed through the HCC website at www.hcch.com. A replay of the webcast will be available until Friday, February 27, 2004.

HCC is an international holding company and a leading specialty insurance group since 1974, headquartered in Houston, Texas, with offices in Bermuda, Spain and the UK. HCC has assets of $4.9 billion, shareholders’ equity of more than $1 billion and is rated AA (Very Strong) by Standard & Poor’s and A+ (Superior) by A.M. Best Company.

For more information, visit our website at www.hcch.com.

©2005 HCC Insurance Holdings, Inc.