Fitch Ratings Affirms HCC Insurance Holdings Ratings

Business Wire, July 19, 2005

CHICAGO -- Fitch Ratings has affirmed all ratings of HCC Insurance Holdings, Inc. (HCC), including HCC's 'A-' long-term issuer and senior debt rating, and the 'AA-' insurer financial strength (IFS) rating of Houston Casualty Company and several other insurance subsidiaries. All ratings are listed below. The Rating Outlook is Stable.

The ratings continue to be based on HCC's market position in a number of specialty insurance segments, as well as the company's strong capital position at its insurance subsidiaries and the parent holding company, conservative investment profile, adequate loss reserves and favorable historical underwriting performance.

The company's operations in insurance underwriting, and fee based insurance intermediary businesses provide significant earnings and cash flow diversity. HCC's insurance operations focus on several specialty lines, including: medical stop loss, aviation, marine, property, energy, directors' & officers' liability, accident & health, surety and professional liability.

HCC has traditionally utilized significant amounts of reinsurance to manage underwriting risk, allowing the company to effectively manage net loss exposures relative to capital and mitigate undue risk concentrations, but also creating significant reinsurance recoverable balances and a need to skillfully manage reinsurer credit exposures. Reinsurance recoverables were approximately 103% of shareholders' equity at March 31, 2005. In response to more favorable market conditions and changes in business mix, the company has gradually increased its premium retention level (net written premium divided by gross written premium) to 75% as of March 31, 2005.

HCC continues to report very favorable underwriting results in spite of recent catastrophe losses. In 2004, HCC's GAAP combined ratio decreased slightly to 90.7% from 91% the prior year. Net income improved to $163 million in 2004 compared with $143.6 million in 2003. 2004 results were marred by approximately $33.1 million of hurricane related losses. First quarter 2005 net income rose 29% to $57.3 million and the GAAP combined ratio rose 1.2 points to 84.5% relative to the prior year first quarter.

HCC's debt-to-total capital ratio was 18.2% at March 31, 2005. Interest coverage was very strong at 29.1 times (x) for the full year 2004, compared with 23.3x for the full year 2003.

Entity/Issue/Type Action Rating/Outlook

HCC Insurance Holdings, Inc.

-- $172 million 2% convertible notes due 2021;

-- $125 million 1.3% convertible notes due 2023;

-- Long-term issuer rating Affirm 'A-'/Stable.

Houston Casualty Company

Avemco Insurance Company

HCC Life Insurance Company

HCC Specialty Insurance Company

U.S. Specialty Insurance Company

-- Insurer financial strength Affirm 'AA-'/Stable.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.