Fitch Ratings Affirms HCC Insurance Holdings; Outlook Stable

 

Friday, Nov 06,2009, 11:39:19 AM   Click:

Fitch Ratings confirms all notes for HCC Insurance Holdings, Inc. (NYSE: HCC) as follows:

- Long-term Issuer Default Rating (IDR) at 'A +';

- 125 million dollars, 1.3% convertible notes due April 1, 2023 to 'A'.

Fitch has also affirmed the 'AA' insurer financial strength ratings (IFS) insurance subsidiaries HCC. A complete list of ratings is at the end of this release. Rating Outlook is Stable.

Fitch Ratings on HCC reflect the position of market leader the company in a number of narrowly defined segments Specialty Insurance not correlated, the strong capital position at its insurance subsidiaries and the low leverage, the company portfolio, conservative investment profile, solid underwriting results and adequate loss reserves.

Despite the recent turbulence in financial markets, equity GAAP HCC has increased 8% in 2008 and 13% until September 30, 2009, which is mainly attributable to strong underwriting results and investment losses minimal. The company holds a position of net unrealized gain of $ 209.3 million on its fixed-income securities at September 30, 2009.

HCC has demonstrated its underwriting discipline throughout the cycles of price and its ability to select and integrate acquisitions, as evidenced by an average combined ratio of 89% from 1991-2008. Until September 30, 2009, HCC reported GAAP combined ratio of 84.6% which included 2.4 points of favorable loss reserve.

Fitch believes that portfolio investment HCC to be careful with the majority of assets invested in high quality fixed income securities. The company has no direct exposure to equities and its exposure to alternative investments (primarily investment funds in funds of hedge funds) has been eliminated. HCC exposure to subprime and Alt-A securities is negligible at about 6 million dollars from its portfolio of 5.5 billion dollars of investment. HCC has approximately $ 620 million in cash and short-term, in addition to generating strong cash flow, Fitch considers adequate to meet its debts and obligations of the underwriters.

HCC of debt to total capital ratio is low at 13% and GAAP earnings based interest coverage is strong at 34 times (x) as of September 30, 2009. The company has 320 million of debt under its line of 575 million dollars from the Bank of Credit which expires in December 2011 and 125 million in convertible notes. Notes can be redeemed at any time by HCC holders in May or require the company to redeem on April 1, 2014 or 2019.

Fitch notes that although the portfolio of assets HCC was largely spared by the recent crisis in the credit market, the HCC is presented in a context of responsibility by its directors and officers (D & O), errors and omissions (E & O), fidelity, surety and credit books of business and its residual activity. Fitch believes the company exposure is manageable and will not result in a slight significant increase in loss ratios of the company.

Fitch notes that all subjects are covered in its reporting criteria are not specifically mentioned above are regarded as neutral to the rating of the date of this publication.

Fitch confirms the following notes:

HCC Insurance Holdings, Inc.

- IDR at 'A +';

- 125 million dollars, 1.3% convertible notes due April 1, 2023 to 'A'.

Houston Casualty Company

Avemco Insurance Company

HCC Life Insurance Company

HCC Specialty Insurance Company

U. S. Specialty Insurance Company

Perico Life Insurance Company

HCC Insurance Company

American Contractors Indemnity Company

United States Surety Company

- IFS rating to 'AA'.

Rating Outlook is Stable.

Additional information is available at www.fitchratings.com.

ALL FITCH RATINGS CREDIT ARE SUBJECT TO RESTRICTIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND EXCLUSIONS by following this link: HTTP: / / FITCHRATINGS.COM / UNDERSTANDINGCREDITRATINGS. FURTHER TERMS AND CONDITIONS FOR EVALUATION OF USE OF SUCH RATINGS ARE AVAILABLE ON THE WEBSITE OF PUBLIC AGENCY 'WWW.FITCHRATINGS.COM. Published ratings, criteria and methodologies are available from this site at any time. Fitch CODE OF CONDUCT, CONFIDENTIALITY, conflicts of interest, affiliate firewall, COMPLIANCE AND OTHER policies and procedures relevant CODE ARE ALSO AVAILABLE FROM THE 'driving section of this site.

SOURCE: Fitch Ratings

Fitch Ratings, Chicago
Dafina M. Dunmore, CFA, 312-368-3136
James B. Auden, CFA, 312-368-3146
or
Media Relations:
Brian Bertsch, 212-908-0549, New York
Email: brian.bertsch @ fitchratings.com



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