HCC Insurance Holdings Inc. And Subsidiaries Ratings Affirmed; Outlook Positive

  • HCC continues to outperform the industry with strong underwriting margins and growth.
  • We are affirming our ratings on HCC and its subsidiaries.
  • The outlook is positive, reflecting strong stand-alone fundamentals and healthy capital leading to a potential upgrade if the Japanese sovereign rating and ultimately the parent are lifted.
NEW YORK (S&P Global Ratings) Sept. 5, 2019--S&P Global Ratings said today it affirmed its 'A-' long-term issuer credit rating on HCC Insurance Holdings, Inc. and its 'AA-' insurer financial strength and long-term issuer credit ratings on HCC's core and guaranteed operating companies. The outlook is positive.
The positive outlook on HCC is consistent with that on the core and guaranteed operating subsidiaries of HCC's parent, Tokio Marine & Nichido Fire Insurance Co. Ltd. (TMNF). The outlook reflects our expectation that HCC will maintain very strong capital and earnings through superior underwriting discipline with no material change in its overall risk profile. It also reflects the potential for a Japanese sovereign upgrade, which would result in both the parent and HCC also being upgraded if their stand-alone credit fundamentals do not change. We expect HCC to operate independently from the group, so we will continue to view it as an insulated subsidiary of TMNF.
We could lower the ratings in the next 24 months if HCC's stand-alone credit characteristics deteriorate, we lower our ratings on the core and guaranteed operating subsidiaries of TMNF, we no longer view HCC as an insulated subsidiary due to increased integration or dependence on the group, or capital adequacy weakens to below the 'AA' level for a sustained period.
We could raise our ratings on HCC if we raise our sovereign rating on Japan and HCC maintains its stand-alone credit strength.
HCC is a diversified, mainly U.S. property/casualty (P/C) insurer with a focus in niche specialty markets, agriculture coverage, and medical stop-loss business, leveraging underwriting specialization to outperform peers through underwriting cycles. The company focuses on building out a noncorrelated business mix with minimal catastrophe risk to enable stable operating results that are generally 5-10 points better than the industry and peers'. HCC has focused on building its business organically through effective cycle management, taking advantage of favorably priced markets. It has also grown inorganically by managing general-agent acquisitions to sustain expertise in niche coverages, including recent acquisitions of AmTrust Agriculture Insurance Services, NAS Insurance Services, LLC and Qdos Contractor of the Qdos Group. Additionally, the company has shown an appetite to acquire risk-bearing entities, as demonstrated by the medical stop-loss business it acquired from AIG in 2017. Since recent acquisitions, the net premiums written split for the business as of June 30, 2019, was 35% written by the North American P/C segment, 35% from medical stop loss, and 29% from the international segment. The company writes business out of the international segment mainly through Lloyd's syndicate, international insurance companies, and its London branch of Houston Casualty Company, including exposures in the U.S.
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