A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa” of the property/casualty members of Houston Casualty Group (HCC). Concurrently, A.M. Best has affirmed the ICR of “a” and the issue rating of “a” on $300 million 6.3% senior unsecured notes due 2019, as well as all indicative ratings under the shelf registration of the parent, HCC Insurance Holdings, Inc. (HCC Holdings) (Dover, DE) (NYSE:HCC).

A.M. Best also has affirmed the FSR of A+ (Superior) and the ICR of “aa” of HCC Life Insurance Company (HCC Life) (Indianapolis, IN). The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The ratings of the property/casualty members of HCC take into consideration their long-term strong underwriting and investment earnings recorded consistently through the current periods, as well as their strong levels of risk-adjusted capitalization, and solid liquidity levels supported by the financial flexibility at HCC Holdings. The ratings also reflect HCC’s strong earnings prospects with its presence in the specialty property/casualty market, moderate risk profile and conservative investment strategy. The ratings are supported by the group’s proven underwriting expertise and loss reserve strategy, which help support balance sheet strength. HCC continues to produce outstanding gross and net underwriting results despite adverse competitive challenges in the specialty admitted / surplus lines market and adverse results recorded in a portion of its professional liability line. The overall success is driven by the underwriting acumen, well-established reputation, utilization of affiliated underwriting agencies / insurance intermediaries and an optimal reinsurance structure.

The ratings of HCC Life acknowledge its increased contribution of premium and earnings to the HCC Holdings organization in recent periods, its leadership position in the medical stop-loss insurance marketplace and its solid level of risk-adjusted capitalization. The steady growth in operating earnings is representative of HCC Life’s disciplined underwriting approach and ongoing expense management. Offsetting factors include HCC Life’s significant concentration in the medical stop-loss line of business. A.M. Best notes other products lines also have grown recently, including international and short-term medical insurance services.

As of June 30, 2015, HCC Holdings’ debt-to-capital and debt-to-tangible capital ratios (excluding other comprehensive income/loss) were roughly 19.3% and 24.2%, respectively. Furthermore, interest coverage continues to be exceptionally strong. For liquidity purposes, an $825 million revolving credit facility is maintained, and as of June 30, 2015, approximately $210 million was available under the credit facility.

On June 10, 2015, it was announced that Tokio Marine Holdings, Inc. would acquire all of the outstanding shares of stock of HCC Holdings. This transaction is expected to close in the fourth quarter of 2015.

The FSR of A+ (Superior) and the ICRs of “aa” have been affirmed for the following members of Houston Casualty Group:

  • Houston Casualty Company
  • Avemco Insurance Company
  • U.S. Specialty Insurance Company
  • HCC Specialty Insurance Company
  • American Contractors Indemnity Company
  • United States Surety Company
  • Producers Agriculture Insurance Company
  • Producers Lloyds Insurance Company

The following indicative ratings have been affirmed under the current shelf registration:

HCC Insurance Holdings, Inc.—

-- “a” on senior unsecured

-- “a-” on subordinated

HCC Capital Trust I and II—

-- “a-” on preferred securities

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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