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OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of aaaa of the property/casualty members of Houston Casualty Group (HCC). Concurrently, A.M. Best has affirmed the ICR of aaa and debt rating of aaa on $300 million 6.3% senior unsecured notes due 2019, as well as all indicative ratings under the shelf registration of the parent, HCC Insurance Holdings, Inc. (HCC Holdings) (Dover, DE) (NYSE: HCC).

A.M. Best also has upgraded the ICR to aaaa from aaa-a and affirmed the FSR of A+ (Superior) of HCC Life Insurance Company (HCC Life) (Indianapolis, IN). The outlook for the above ratings is stable.

In addition, A.M. Best has affirmed the FSRs of A+ (Superior) and the ICRs of aaa-a of American Contractors Indemnity Company (ACIC) (Los Angeles, CA), United States Surety Company (USSC) (Timonium, MD) and Perico Life Insurance Company (Perico) (Dover, DE). The outlook for the ratings of ACIC and USSC is stable, while the outlook for the ratings of Perico has been revised to negative from stable, as it has essentially been placed into run off, with all new and renewal business written by HCC Life. (See below for a detailed listing of the companies and ratings.)

The ratings of HCC reflect its long-standing presence in the specialty property/casualty market, its sustained profitability, strong capitalization, as well as substantial financial flexibility afforded by HCC Holdings.

These rating attributes are largely supported by HCCas business strategies, which have long focused on underwriting within defined commercial specialty lines, effective utilization of affiliated underwriting agencies/insurance intermediaries and the optimal utilization of reinsurance protection. These strategies have helped produce consistent operating profits in recent years despite challenging market conditions. The ratings also acknowledge HCCas near-term earnings prospects, its strong position in the specialty admitted and non-admitted market segments, low to moderate risk profile and its conservative investment strategy.

The organizationas flagship accident and health insurer, HCC Life, is a leader in the medical stop-loss insurance marketplace. HCC Life primarily markets its products to medium and larger groups.

The upgrading of the ICR of HCC Life reflects its continuing role as a core subsidiary within HCC Holdings and the profitable growth of its medical stop-loss business, as well as its newer individual and group health insurance lines of business. Additionally, HCC Lifeas earnings trend continues to be favorable due to its disciplined underwriting approach.

The ratings of ACIC and USSC recognize each companyas strong stand-alone capitalization and history of favorable operating performance, in addition to the relative importance of each to HCC Holdingsa total surety and credit business. The ratings also recognize the explicit and implicit support in place for these companies and the implied support to be provided by HCC Holdings in the future.

The negative outlook on Pericoas ratings represents A.M. Bestas view that the company no longer qualifies for full rating enhancement according to A.M. Bestas group rating criteria. In July 2011, HCC Holdings announced that it would consolidate the operations of Perico and HCC Life. Hence, Perico has essentially been placed into run off as the groupas new and renewal business is written only by HCC Life.

As of June 30, 2012, HCC Holdingsa debt-to-capital and debt-to-tangible capital ratios (excluding other comprehensive income/loss) were roughly 16% and 21%, respectively. Furthermore, interest coverage continues to be exceptionally strong. For liquidity purposes, a $600 million revolving credit facility is maintained, and as of June 30, 2012, approximately $300 million was available under the credit facility.

Potential upward movement in the ratings is unlikely in the near term. Downward movement in the ratings could result from a material decline in the organizationas capitalization, negative trends in claim frequency or severity that could materially impair underwriting results, as well as significant unforeseen adverse loss reserve development due to an underestimation of liabilities.

The FSR of A+ (Superior) and ICRs of aaaa have been affirmed for the following members of Houston Casualty Group:

• Houston Casualty Company
• Avemco Insurance Company
• U.S. Specialty Insurance Company
• HCC Specialty Insurance Company

The following indicative ratings have been affirmed under the current shelf registration:

HCC Insurance Holdings, Inc.a"
-- aaa on senior unsecured
-- aa-a on subordinated

HCC Capital Trust I and IIa"
-- aa-a on preferred securities

The methodology used in determining these ratings is Bestas Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestas rating process and contains the different rating criteria employed in the rating process. Bestas Credit Rating Methodology can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the worldas oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

Copyright 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.