CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 02, 2016 04:04 PM (EDT)
A.M. Best has upgraded the Financial Strength Rating (FSR) to A++ (Superior) from A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa+” from “aa” of the property/casualty members of Houston Casualty Group. A.M. Best has also upgraded the FSR to A++ (Superior) from A+ (Superior) and the Long-Term ICR to “aa+” from “aa” of HCC Life Insurance Company (HCC Life) (Indianapolis, IN). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has withdrawn the Long-Term ICR of “a” and Long-Term Issue Credit Ratings (Long-Term IR) of HCC Insurance Holdings, Inc. (HCC) (Dover, DE), as a result of the completed acquisition of the company by Tokio Marine & Nichido Fire Insurance Co. Ltd. (TMNF). (See below for a detailed list of the companies and Long-Term IRs.)
The ratings of the property/casualty members of the group take into consideration their strong levels of risk-adjusted capitalization and long-term consistently favorable underwriting and investment earnings. The ratings also reflect the group’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 proven underwriting expertise and loss reserve strategy, which help support balance sheet strength. Houston Casualty Group continues to produce outstanding gross and net underwriting results despite competitive challenges in the specialty admitted/surplus lines market and adverse results recorded in a portion of its professional liability line. The ratings also consider the strategic role these companies serve for the direct parent TMNF, and ultimate parent, Tokio Marine Holdings, Inc.
The ratings of HCC Life acknowledge its considerable contribution of premium and earnings to Houston Casualty Group in recent periods and its leadership position in the medical stop-loss insurance marketplace. In addition, HCC Life maintains a more-than-adequate level of risk-adjusted capitalization despite ordinary dividend payments that have exceeded earnings over the past two years. While operating earnings declined modestly over the past year due to an increase in its benefit loss ratio, HCC Life’s disciplined underwriting approach and ongoing expense management has resulted in favorable earnings over the most recent five-year period. Partially offsetting these positive rating factors is HCC Life’s significant concentration in the medical stop-loss line of business. However, A.M. Best notes that other product lines also have grown recently, including the short-term medical insurance line of business.
On Oct. 27, 2015, HCC was acquired in its entirety by TMNF. Under the terms of the transaction, senior unsecured notes issued by HCC were resolved and an existing shelf filing was withdrawn. The common stock of HCC, which prior to the closing traded on the NASDAQ market under the symbol “HCC,” ceased to trade before the opening of the market on Oct. 27, 2015, and was delisted as of the close of business that same day.
Upward movement in the group’s ratings could occur with advancements in line of business diversification, ongoing growth in policyholders’ surplus, continuation of underwriting and overall profitability or advancement of the relationship between these companies and the ultimate parent. Downward movement in the ratings could result from adverse trends in claim frequency or severity that materially impair underwriting results, deterioration in loss reserve development trends, a decline in capitalization or eroding premium levels. Rating actions, either upward or downward, could be taken if there is any change in the ratings of the group’s ultimate parent or in A.M. Best’s view of the strategic importance of the group to the ultimate parent.
The FSR has been upgraded to A++ (Superior) from A+ (Superior) and the Long-Term ICRs upgraded to “aa+” from “aa” for the following members of Houston Casualty Group:
The following Long-Term IR has been withdrawn:
HCC Insurance Holdings, Inc.—
— “a-” on $300 million 6.3% senior unsecured notes, due 2019
The following indicative Long-Term IRs have been withdrawn 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 Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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