HCC to Exit Workers’ Comp

Citing claims from Sept. 11 and reserve charges for discontinued businesses, HCC Insurance Holdings Inc. posted a third-quarter net loss and announced it will exit the workers’ compensation insurance business written through subsidiary, U.S. Specialty Insurance Co. The exit from the workers’ comp line will hit the company with a related after-tax charge for discontinued lines of business of $29.6 million, or 50 cents a share. Explaining the withdrawal from the workers’ comp business, chairman and CEO Stephen L. Way said, “Although rates are rising and profitability is returning to the workers’ compensation line, it is not one of our core businesses and does not represent sufficient premium volume to maintain the division.” He added, “With rates rising more dramatically in our specialty lines, we feel we can best use management’s time and the company’s capital in other areas which are more likely to produce our expected return of at least 15 percent for next year.” HCC’s operating earnings for the third quarter of 2001 were $417,000 or $0.01 per share compared to $17.4 million or $0.33 per share for the third quarter of last year. Operating earnings for the nine months ended Sept. 30 were $36.7 million or $0.62 per share compared to $46.3 million or $0.90 per share in the same period of 2000. The third quarter and nine month figures reflect an after tax loss of $22.8 million or $0.38 per share related to losses arising out of the events of Sept. 11, the continuing effects from the March 2001 equity offering and the net effect of two other catastrophe losses involving Petrobras and Totale. Despite the reported loss, Way said the company is “well positioned” for continued growth in its specialty lines business and that for at least the next two years, underwriting profits are expected to continue to accelerate.

Topics Workers' Compensation