A.M. Best Co. reiterated issuer credit ratings ("ICR") of 'a'
and debt rating of 'a' on $300 million 6.3% senior unsecured notes
due 2019 of
HCC Insurance Holdings, Inc.
Concurrently, the rating agency reiterated the financial
strength rating ("FSR") of A+ (Superior) and ICR of 'aa' of the
property/casualty subsidiaries of HCC.
Additionally, A.M. Best raised the ICR to "aa" from "aa-" and
reiterated the FSR of A+ (Superior) of HCC Life Insurance
All the ratings carry a stable outlook.
The ratings affirmation came on the back of its strong foothold
in the specialty property/casualty market over a larger span of
time, continued robust results, solid capitalization coupled with
extensive financial support from HCC Holdings.
The ICR of HCC Life was revised upward taking into consideration
its sustained position as a primary subsidiary within HCC Holdings,
growing medical stop-loss business with a dominant foothold in
medical stop-loss insurance market, besides the new individual and
group health insurance lines of business. Moreover, it has a
history of delivering solid results on the back of strong
A.M. Best, subsequently reiterated FSRs of A+ (Superior) and the
ICRs of "aa-" of American Contractors Indemnity Company and United
States Surety Company, the primary underwriting companies of HCC
Surety Group. The ratings carry a stable outlook.
The rating affirmations reflect continued sturdy operational
results, solid capitalization along with its dominant position in
the holding company.
Though the FSR of A+ (Superior) and the ICR of "aa-" of Perico
Life Insurance Company, another subsidiary of HCC Insurance, was
affirmed, the outlook was downgraded to negative from stable.
The outlook downgrade essentially takes into consideration the
merging of Perico Life's operation with HCC Life.
Though a rating upgrade is less likely in the near term, ratings
could be subject to downgrade if capitalization erodes, descending
movement claims frequency or severity weighs on underwriting
profitability or experiences adverse loss reserve development.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence in the stock as
well as maintaining creditworthiness in the market. On the other
hand, rating downgrade adversely affects the business, besides
increasing cost of future debt issuances. We believe strong
scorings with rating agencies will help it write more business
HCC Insurance Holdings holds a Zacks Rank #1 (Strong Buy),
indicating an upward boost on the shares over the near term.
The Travelers Companies Inc.
W.R. Berkley Corporation
), which closely compete with HCC Insurance, carry a Zacks
Rank #3 (Hold).
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