(The following statement was released by the rating agency)
CHICAGO, September 19 (Fitch) (This is a correction of a release
earlier today. It clarifies that the Rating Outlook for HCC's
subsidiaries remains Negative rather than being revised to
Fitch Ratings-Chicago-16 September 2016: Fitch Ratings has
Insurance Holdings, Inc.'s (HCC) Long-Term Issuer Default Rating
(IDR) at 'A'
with a Stable Outlook. Fitch has also affirmed the Insurer
(IFS) ratings for HCC's operating subsidiaries at 'AA-' with a
A complete list of ratings follows at the end of this release.
KEY RATING DRIVERS
Fitch's rating action aligns HCC's operating company IDR to that
of its parent's
(Tokio Marine Holdings, Inc.; IFS rated 'A+'/Negative Outlook)
companies, but allows the IFS rating to be one notch above the
companies of Tokio Marine.
The Tokio Marine operating company 'A+' IFS rating is
constrained by the
Japanese operations' exposure to country risks in Japan, which
Fitch views as
only indirectly impacting U.S.-based HCC. Japan has a local
rating of 'A' with a Negative Outlook.
Fitch believes that Tokio Marine's ownership does not alter
rating profile and has only a modest influence on the management
of HCC, similar
to past U.S. based acquisitions Tokio Marine has made, such as
Group, Inc. (Delphi), which was acquired for $2.7 billion in
Philadelphia Consolidated Holding Corp. (Philadelphia), which
was acquired for
$4.5 billion in 2008. Fitch considers HCC to be 'Very Important'
in terms of
strategic fit to Tokio Marine and may migrate to 'Core' over
Fitch's ratings reflect HCC's consistent and disciplined
conservative capitalization, moderate financial leverage, and
niche in several
specialty insurance markets. The ratings also reflect
earnings volatility from crop insurance and property treaty
HCC reported a GAAP calendar year combined ratio of 87.9% for
first half 2016,
which represents a modest deterioration over first half 2015's
result of 86.7%.
The deterioration was primarily attributable to growth in crop
While HCC's financial leverage ratio remained flat at
approximately 19% for
first half 2016 the fixed charge coverage ratio of almost 48x
significantly over prior period due to significantly lower
interest rates on the
company's new debt which bears an interest rate of sub 200 bps.
Fitch recognizes there are several synergies between the Tokio
for example, HCC investments are expected to leverage Delphi's
experience, reinsurance structures can be modified to leverage
the potential for cross selling of products.
Fitch will likely compress holding company notching if any
further downgrades to
the IFS ratings occur therefore the outlook on the holding
company is Stable.
Key rating triggers that could lead to a downgrade include:
--A downgrade of Tokio Marine's operating company operating
--A material change in operating profile.
--A reduction in operating performance.
Fitch believes it is unlikely that any potential future
downgrade of the HCC
ratings would be to levels lower than those of the parent.
Fitch views a near-term rating upgrade as unlikely, but an
upgrade of parent
Tokio Marine's IDR could result in an upgrade to HCC's ratings.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following rating with a Stable Outlook:
HCC Insurance Holdings, Inc.
--IDR at 'A'.
Fitch has affirmed the following ratings with a Negative
American Contractors Indemnity Company
Avemco Insurance Company
HCC Life Insurance Company
HCC Specialty Insurance Company
Houston Casualty Company
U.S. Specialty Insurance Company
United States Surety Company
--IFS ratings of 'AA-'.
Gerald Glombicki, CPA
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
James B. Auden, CFA
Keith M. Buckley, CFA
Media Relations: Hannah James, New York, Tel: + 1 646 582 4947,
Additional information is available at www.fitchratings.com
Insurance Rating Methodology (pub. 15 Sep 2016)
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