A.M. Best Affirms Ratings of HCC Insurance Holdings, Inc. and Its Subsidiaries

  A.M. Best Affirms Ratings of HCC Insurance Holdings, Inc. and Its

Business Wire

OLDWICK, N.J. -- October 3, 2013

A.M. Best Co. has affirmed the financial strength rating (FSR) of A+
(Superior) and 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 debt rating of “a” of $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,

A.M. Best also affirmed the FSR of A+ (Superior) and ICR of “aa” of HCC Life
Insurance Company (HCC Life) (Indianapolis, IN).

In addition, A.M. Best has affirmed the FSR of A+ (Superior) and the ICRs of
“aa-” of American Contractors Indemnity Company (ACIC) (Los Angeles, CA) and
United States Surety Company (USSC) (Timonium, MD). The outlook for the above
ratings is stable. The above companies are subsidiaries of HCC Holdings. (See
below for a detailed listing of the companies and ratings.)

The ratings of the property/casualty members of HCC take into consideration
the sustained earnings reported through the second quarter of 2013 as well as
this group’s long-standing presence in the specialty property/casualty
marketplace, strong capitalization and the substantial financial flexibility
afforded by HCC Holdings. These rating attributes are largely supported by
HCC’s specialty niche business strategy, effective utilization of affiliated
underwriting agencies/insurance intermediaries and the optimal utilization of
reinsurance. Over the years, this strategy has culminated in HCC producing
better than average underwriting and operating margins despite less than
favorable economic conditions, low interest rates and ongoing market
challenges. The ratings also acknowledge HCC’s lead position in the specialty
admitted and non-admitted market segments, its strong near-term earnings
prospects, general price firming in select commercial insurance markets and
HCC’s ability to take advantage of opportunities when they arise.

The ratings of HCC Life reflect its role as a core subsidiary of the HCC
Holdings organization, its leadership position in the medical stop-loss
insurance marketplace and its consistent growth in both premiums and operating
earnings. While most of the premium growth can be attributed to group medical
stop-loss, other products lines also have grown, including international and
short-term medical insurance services. Additionally, the steady growth in
operating earnings is representative of HCC Life’s disciplined underwriting
approach and ongoing expense management.

The ratings of ACIC and USSC continue to recognize each company’s strong
stand-alone capitalization and history of favorable operating performance, in
addition to the relative importance of each to HCC Holdings’ total surety and
credit business. The ratings also recognize the explicit and implicit support
in place for these companies and the future implied support to be provided by
HCC Holdings.

At the same time, A.M. Best has withdrawn the ratings of Perico Life Insurance
Company (Perico) (Dover, DE), which is essentially an inactive shell company.
The absence of any written premiums or policyholder liabilities as of the
company’s last financial filing has rendered A.M. Best’s rating procedure

As of June 30, 2013, HCC Holdings’ debt-to-capital and debt-to-tangible
capital ratios (excluding other comprehensive income/loss) were roughly 16%
and 20%, respectively. Furthermore, interest coverage continues to be
exceptionally strong. For liquidity purposes, a $600 million revolving credit
facility is maintained, and as of June 30, 2013, approximately $260 million
was available under the credit facility.

Potential upward movement in the ratings is unlikely in the near term.
Downward movement in the ratings could result from a material decline in the
organization’s capitalization, negative trends in claim frequency or severity
that could materially impair underwriting results, as well as significant
unforeseen adverse loss reserve development due to an underestimation of

The FSR of A+ (Superior) and 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

The following indicative ratings have been affirmed under the current shelf

HCC Insurance Holdings, Inc.—
-- “a” on senior unsecured
-- “a-” on subordinated

HCC Capital Trust I and II—
-- “a-” on preferred securities

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at

A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Tom Zitelli—L/H, 908-439-2200, ext. 5412
Senior Financial Analyst
Joseph Roethel—P/C, 908-439-2200, ext. 5630
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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