With a price-to-earnings (P/E) ratio of 10.5, this Zacks #1 Rank (Strong Buy) specialty insurance underwriter is a true value pick.

Strong First Quarter Performance

On May 1, HCC Insurance Holdings delivered first quarter 2012 earnings of 84 cents per share, increasing 20% from the year-ago quarter. It was also 18.3% higher than the Zacks Consensus Estimate of 71 cents. The outperformance came on the back of solid results across all segments along with pricing improvement.

Total revenue increased 8% year over year to $609.5 million. The improvement came on the back of higher premiums and investment income.

Net earned premium was $547.1 million, an increase of 8% from last year.

Investment income advanced 10.5% year over year to $57.0 million.

Lower level of catastrophe activities led to a 950 basis points improvement in the combined ratio over last year’s 82.5%.

HCC Insurance Holdings spent $66.9 million to buyback 2.2 million shares in the quarter.

On June 2, the company’s board approved a quarterly dividend of 15.5 cents, representing a year-over-year hike of 6.9%.

Positive Estimate Revision

Over the last 30 days, the Zacks Consensus Estimate for 2012 rose 0.3% to $3.00 as two of nine estimates were revised upward. Over the past three months, the guidance is up nearly 5%. Meanwhile, the Zacks Consensus Estimate for 2013 is $3.15 per share, suggesting year-over-year improvement of 5%.

Attractive Valuation

Along with a P/E of 10.5, HCC Insurance Holdings also has a price-to-book (P/B) ratio of 1.0. (A P/E ratio under 15.0 and P/B ratio under 3.0 indicate value.)

Moreover, the company has 1-year return on equity (ROE) of 9.1%, higher than its peer group average of 7.3%.

The company’s share price hit the 52-week high on May 1 when the company announced its solid first quarter results.

Headquartered in Houston, Texas and founded in 1974, HCC Insurance Holdings underwrites non-correlated specialty insurance products, including property and casualty, accident and health, surety and credit product lines. With offices in the United States, the United Kingdom, Spain and Ireland, the company competes with ACE Limited (ACE), The Travelers Companies Inc. (TRV) and W.R. Berkley Corporation (WRB). HCC Insurance Holdings has a market capitalization of $3.23 billion and has 1,864 employees.