HCC Insurance Holdings Affirmed

HCC Insurance Holdings recently received affirmation of Standard & Poor’s “A” counterparty credit rating on HCC Insurance Holdings and “AA” counterparty credit and financial strength ratings on three subsidiaries of HCC: Houston Casualty Co., Avemco Insurance Co., and US Specialty Insurance Co. (collectively referred to as Houston Casualty). Simultaneously, S&P revised its outlook on HCC and Houston Casualty from negative to stable. In addition, S&P assigned a preliminary “A” senior debt, “A-” subordinated debt, and “BBB+” preferred stock ratings to HCC’s $600 million universal shelf offering registration.

S&P said the ratings on Houston Casualty reflect the group’s strong business profile, strong operating performance, and extremely strong capitalization. Offsetting these strengths are the group’s significant utilization of reinsurance, aggressive premium growth, and acquisition appetite. According to S&P, the revised outlook reflects HCC’s significantly improved financial leverage, which declined to 7.5 percent as of the first quarter of 2001 from 35 percent at the time of the acquisition of Centris Group Inc. at year-end 1999. The group’s combined ratio is expected to be lower than 90 percent in 2001, with further improvements in 2002. In addition, although HCC’s strong premium growth in the last two years is placing some pressure on operating capital at the insurance subsidiaries, S&P said it expects strong profits at these operations to enable the group to maintain capital adequacy ratios above 175 percent.