HCC ANNOUNCES RECORD 2004 RESULTS
AND PROVIDES 2005 EARNINGS GUIDANCE

HOUSTON (February 15, 2005) . . .
HCC Insurance Holdings, Inc. (NYSE symbol: HCC)  today reported results for the fourth quarter and for the full year that ended December 31, 2004.

Earnings from continuing operations in the fourth quarter 2004 more than doubled to $52.2 million, or $0.78 per diluted share, from $17.8 million, or $0.27 per diluted share, in the same period of 2003. Earnings from continuing operations for the full year 2004 grew 45% to $159.0 million, or $2.41 per diluted share, from $106.9 million, or $1.66 per diluted share, in 2003.

Net earnings for the fourth quarter 2004 increased to $56.2 million, or $0.84 per diluted share, compared to $50.5 million, or $0.77 per diluted share, for the same period in 2003. Net earnings for the full year 2004 increased to $163.0 million, or $2.47 per diluted share, compared to $143.6 million, or $2.23 per diluted share, for the full year 2003.

Net earnings include earnings and a gain from the sale of the Company’s retail benefits broker in December 2003 amounting to $0.57 per diluted share and an earnout adjustment of $0.06 per diluted share in 2004, all recorded as discontinued operations.

Stephen L. Way, Chairman and Chief Executive Officer, said, “2004 was the best year in our history and we are confident of improving on this in 2005.” Mr. Way added, “We have averaged more than 15% return on shareholders’ equity over the past ten years and this continues to be the standard we have as our goal for the future.”

The Company is providing 2005 net earnings guidance with a range between $3.15 and $3.25 per diluted share. This represents 28% earnings per diluted share growth and a 17% return on shareholders’ equity at the bottom end of the range, despite dilution from the equity offering in December 2004 and the expensing of stock options. The Company expects total revenue to increase approximately 20% in 2005, predominantly due to growth of net earned premium by 25% and investment income by 25%. The GAAP combined ratio is expected to be approximately 88% without any consideration for potential catastrophe activity during the coming year.

Total revenue for the full year 2004 increased by 36% to $1.3 billion compared to 2003, driven by significant increases in net earned premium, fee and commission income and investment income. The Company anticipates continued revenue growth in 2005.

Comparing the full year 2004 to the previous year, the Company’s insurance company subsidiaries’ net written premium increased 28% to $1.1 billion and net earned premium increased 37% to $1.0 billion. Premium growth is due to a reduction in ceded reinsurance, organic growth and acquisitions made. During the same period, gross written premium reached a record $2.0 billion, growing 14% from the previous year. Although gross premium growth will slow substantially as the Company stays very disciplined in its underwriting standards, the Company expects net premium to continue to rise through at least 2005, due to increased retentions in all non-catastrophe lines of business.

For the full year 2004 compared to the same period in 2003, fee and commission income increased 28% to $182.3 million, primarily due to organic growth of existing lines of business. Fee and commission income will reduce in 2005 due to the integration of one of the Company’s largest underwriting agencies into an affiliated insurance company and the general reduction in ceded reinsurance.

In 2004, cash flow from operations continued very strong rising 27% to a record $668.7 million from $528.1 million in the previous year. During the same period, net investment income grew 37% to $64.9 million, primarily due to substantially increased investment assets resulting from increased net loss reserves due to higher retentions, as well as the significant cash flow from operations. Investment income growth is expected to continue for at least the next few years.

During the fourth quarter of 2004, the Company reached an agreement with various reinsurers to commute certain reinsurance recoverables relating to various lines of business. These transactions resulted in the Company receiving cash payments of approximately $79.0 million from the reinsurers in consideration for reassuming any losses, but did not have a material effect on net earnings. It is expected that future investment income together with the final settlement of these claims within the reserves held, will benefit the Company’s results in future years.

Management has been very 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 as they result in increased future investment income and a reduction in the amount of recoverables. Recoverables are expected to stabilize in the second half of 2005, as outstanding losses are settled and the reduction in ceded reinsurance substantially reduces new recoverables.

As part of the Company’s annual reserve review, at year-end 2004 the Company determined that there was substantial redundancy in the $55.0 million net reserve set up in the third quarter 2004 to cover the multiple hurricanes and has therefore reduced the overall reserve by approximately $21.9 million. This redundancy was a result of the reassessment of the Company’s net position after reinsurance once more claim information became available. The Company’s gross loss reduced from $110.0 million to $89.9 million. In addition, the Company has strengthened its reserves in its discontinued lines to bring them comfortably above the actuarial point estimates. The net result of the reserve adjustments had no material effect on net earnings.

As of December 31, 2004, total assets increased 22% to $5.9 billion; total investments increased 45% to $2.5 billion; shareholders’ equity increased 26% to $1.3 billion; and book value per share increased 19% to $19.45, all compared to December 31, 2003 and all at record levels. See attached tables.

HCC will hold an open conference call beginning at 4:00 p.m. Central Time on Tuesday, February 15. To participate, the number for domestic calls is (866) 261-2650 and the number for international calls is (703) 639-1221. 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 Tuesday, February 22, 2005.

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 $5.9 billion, shareholders’ equity of $1.3 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.