Strategy

HCC's strategy is to maximize underwriting profits and produce non-risk-bearing fee and commission income while limiting risk to preserve shareholders' equity and to maximize earnings.

HCC concentrates its insurance writings in selected, narrowly defined specialty lines of business where underwriting profits can be achieved. The Company's operational flexibility enables it to emphasize more profitable lines of business during periods of increasing premium rates and deemphasize less profitable ones during periods of increasing competition.

HCC's underwriting agencies and brokers complement its insurance underwriting activities. The Company's ability to utilize affiliated insurers, underwriting agencies and reinsurance brokers enables HCC to retain a greater portion of gross revenue from its written premium.

Because HCC's business plan is to maximize underwriting profit and net earnings while preserving and achieving long-term growth of shareholders' equity, the Company continues to:

• Emphasize the underwriting of lines of business where underwriting profits are anticipated based on factors including premium rates, the availability and cost of reinsurance, policy terms and conditions, and market conditions.
• Limit HCC's insurance companies' aggregate net loss exposure from a catastrophic loss through the use of reinsurance for lines of business exposed to such losses, and diversification into lines of business not exposed to such losses.
• Consider the potential acquisition of specialty insurance operations and other strategic investments that present the opportunity for future profits or that enhance the Company's existing businesses.