Correction: Fitch Affirms HCC’s IFS at ‘AA-‘; Outlook Remains Negative
Fitch Ratings has affirmed
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) core operating companies, but allows the IFS rating to be one notch above the core operating companies of Tokio Marine.
The Tokio Marine operating company 'A+' IFS rating is constrained by the Japanese operations' exposure to country risks in
Fitch believes that Tokio Marine's ownership does not alter HCC's stand-alone rating profile and has only a modest influence on the management of HCC, similar to past
Fitch's ratings reflect HCC's consistent and disciplined underwriting practices, conservative capitalization, moderate financial leverage, and niche in several specialty insurance markets. The ratings also reflect potentially increased earnings volatility from crop insurance and property treaty reinsurance.
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 insurance.
While HCC's financial leverage ratio remained flat at approximately 19% for first half 2016 the fixed charge coverage ratio of almost 48x improved 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 Marine companies; for example, HCC investments are expected to leverage Delphi's investment experience, reinsurance structures can be modified to leverage efficiencies, and 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.
RATING SENSITIVITIES
Key rating triggers that could lead to a downgrade include:
--A downgrade of Tokio Marine's operating company operating company IDR.
--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:
--IDR at 'A'.
Fitch has affirmed the following ratings with a Negative Outlook:
--IFS ratings of 'AA-'.
Additional information is available at www.fitchratings.com
Applicable Criteria
Insurance Rating Methodology (pub.
https://www.fitchratings.com/site/re/887191
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011882
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011882
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160919006441/en/
Fitch Ratings
Primary Analyst:
Director
or
Secondary Analyst:
James B. Auden, CFA, +1-312-368-3146
Managing Director
or
Committee Chairperson:
Managing Director
or
Media Relations:
[email protected]
Source: Fitch Ratings
Business Brief: Crop insurance deadline near
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News