HCC REPORTS RECORD
FIRST QUARTER 2005 RESULTS
 

HOUSTON (May 3, 2005) . . .
HCC Insurance Holdings, Inc. (NYSE symbol: HCC) today released earnings for the first quarter of 2005.

Net earnings increased significantly for the first quarter of 2005 rising 29% to $57.3 million from $44.6 million for the first quarter of 2004. During the same period, net earnings per diluted share grew 19% to $0.81 per share from $0.68 per share, despite approximately $0.05 earnings per share dilution primarily from the Company’s December 2004 equity offering.

Stephen L. Way, Chairman and Chief Executive Officer, said, “Our first quarter results reflect the profitable growth and strong margins from our underwriting activities which are at a pace somewhat ahead of our business plan.”

Total revenue grew 37% during the first quarter of 2005 to $379.7 million, compared to the first quarter of 2004. As with last year, this increase was primarily due to the growth in our insurance company subsidiaries’ earned premium, particularly in our two largest lines, diversified financial products and group life, accident and health. Overall revenue is expected to continue to show strong growth into 2006.

Although our insurance company subsidiaries’ gross written premium growth slowed as expected during the first three months of 2005, net written premium increased substantially by 51% to $357.4 million and net earned premium by 47% to $320.1 million, both compared to the first quarter of 2004. This growth over last year’s record levels was achieved as a result of generally increased retentions and strong performance from acquisitions made in 2004, notwithstanding the substantially negative effect from our discontinued lines. Market conditions in our specialty lines continue to be fairly stable and we expect this premium growth to continue.

The GAAP combined ratio for the first three months of 2005 was 84.5% compared to 83.3% in the corresponding period of 2004 and 90.7% for the full year 2004. It should be noted that our London Market operations continue to perform exceptionally well despite difficult market conditions.

Mr. Way added, “In an environment of corporate governance issues and suspect balance sheets, our high ratings from S&P of AA (Very Strong) and A.M. Best Company of A+ (Superior) continue to give us a competitive advantage and we believe that our superior underwriting skills will continue to differentiate HCC’s results from those of our peers.”

As expected, fee and commission income was down during the first quarter of 2005 to $33.1 million from $43.8 million during the same period in 2004. This reduction was due to the planned decrease in ceded reinsurance by our insurance company subsidiaries, which resulted in the reduced revenue of our reinsurance brokers and the ceding commissions earned by our insurance companies and underwriting agencies. In addition, effective January 1, 2005, we consolidated the operations of our largest underwriting agency into our life insurance company.

Net investment income continues to increase rapidly, growing 55% in the first quarter of 2005 to $22.3 million compared to the first quarter of 2004. Increased investment assets and higher short term interest rates have fueled this increase and we anticipate growth continuing for the rest of this year and into 2006.

As of March 31, 2005, total investments increased to $2.6 billion, total assets exceeded $6.0 billion for the first time, book value per share increased to $20.10, shareholders’ equity exceeded $1.4 billion and the Company’s debt to total capital ratio was 18.2%. See attached tables.

HCC will hold an open conference call beginning at 4:00 p.m. Central Time on Tuesday, May 3. To participate, the number for domestic calls is (800) 374-0290 and the number for international calls is (706) 634-1303. 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 on the website until Tuesday, May 10, 2005.

HCC is an international insurance holding company and a leading specialty insurance group since 1974, based in Houston, Texas with offices across the USA and in Bermuda, England and Spain. HCC is traded on the NYSE (symbol: HCC), has assets exceeding $6.0 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.