Fitch Ratings has affirmed all Issuer Default Ratings (IDRs), debt and
Insurer Financial Strength (IFS) ratings for White Mountains Insurance
Group, Ltd. (White Mountains) and its holding company subsidiaries and
property/casualty insurance subsidiaries, including OneBeacon Insurance
Group, Ltd.'s subsidiaries (OneBeacon; 75.2% ownership by White
Mountains) and Sirius International Insurance Group, Ltd.'s subsidiaries
(Sirius Group; 100% ownership by White Mountains). A full rating list is
shown below. The Rating Outlook is Stable.
Fitch's rating rationale for the affirmation of White Mountains' ratings
reflects the company's low financial and operating leverage,
opportunistic business approach and favorable financial flexibility. The
ratings also reflect anticipated challenges in the overall competitive,
but generally improving property/casualty market rate environment, and
sizable levels of run-off reserves and asbestos and environmental (A&E)
exposure that have the potential for adverse reserve development.
White Mountains posted net income of $120 million through the first six
months of 2012, improved from a $17 million net loss for the comparable
prior year period due to reduced catastrophe losses thus far in 2012.
The company posted sizable net income of $768 million for full year
2011, driven by a $678 million gain on the sale of Esurance and Answer
Financial to The Allstate Corporation in October 2011.
OneBeacon posted favorable GAAP combined ratios of 94% for the first six
months of 2012 and 96% for full year 2011. Sirius Group posted a GAAP
combined ratio of 83% for the first six months of 2012. This is improved
from 100% for full year 2011, which saw 24 points of catastrophe losses
driven by the Japanese earthquake and tsunami, the New Zealand
earthquakes, floods in Thailand, and severe weather and tornados in the
White Mountains' financial leverage ratio continues to be modest at
13.6% at June 30, 2012 and 12.7% at Dec. 31, 2011. This is down from
16.3% at Dec. 31, 2010 due to $150 million in repurchases of OneBeacon's
outstanding debt in 2011 and a 3% net increase in White Mountains'
adjusted common shareholders' equity since year-end 2010, as strong net
income has been partially offset by increased common share repurchases.
White Mountains utilizes a conservative amount of operating leverage
with net premiums written to total shareholders' equity of 0.42x in
2011, which is down considerably from recent years as premiums have
declined almost 50% since 2006 following the recent sale of businesses,
while total equity has declined only 8%.
Fitch's ratings reflect White Mountains' disciplined underwriting and
operating strategy as the company continually evaluates the best use of
its financial resources and actively manages and deploys its capital
opportunistically. This strategy includes selling those businesses that
either do not fit within the core operations of the company or have
value to other companies/buyers as entities or renewal rights in excess
of White Mountains' assessment of their value.
White Mountains' sale transactions over the last several years have
freed up capital that previously supported the business writings,
providing financial flexibility that the company can use to support
additional business writings, investment opportunities, debt reduction,
dividends, or share repurchases. However, Fitch expects that White
Mountains will continue to maintain a level of insurance company
capitalization that is consistent with the current ratings.
Key rating triggers that could lead to an upgrade include improvement in
operating results in line with higher rated peers, overall flat to
favorable loss reserve development, debt-to-total capital maintained
below 20%, run rate operating earnings-based interest and preferred
dividend coverage of at least 5x, continued strong capitalization of the
insurance subsidiaries and increased stability in longer term strategic
operations and results.
Key rating triggers that could lead to a downgrade include significant
adverse loss reserve development, future earnings that are significantly
below industry levels, sizable deterioration in insurance subsidiary
capitalization, debt-to-total capital maintained above 30% and
additional A&E losses for OneBeacon significantly above the remaining
$198 million available limit under the $2.5 billionNational Indemnity
Fitch affirms the following ratings with a Stable Outlook:
White Mountains Insurance Group, Ltd.
--IDR at 'BBB+'.
OneBeacon U.S. Holdings, Inc.
--IDR at 'BBB+';
--$270 million 5.875% due May 15, 2013 at 'BBB'.
Sirius International Group, Ltd.
--$400 million 6.375% due March 20, 2017 at 'BBB';
--$250 million perpetual non-cumulative preference shares at 'BB+'.
OneBeacon Insurance Group and Their Members:
Atlantic Specialty Insurance Company
Camden Fire Insurance Association (The)
Employers' Fire Insurance Company (The)
Essentia Insurance Company
Homeland Insurance Company of New York
Northern Assurance Company of America (The)
OneBeacon America Insurance Company
OneBeacon Insurance Company
OneBeacon Midwest Insurance Company
Pennsylvania General Insurance Company
Traders & General Insurance Company
--IFS at 'A'.
Sirius International Insurance Corporation
Sirius America Insurance Company
--IFS at 'A-'.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--Insurance Rating Methodology (Sept. 22, 2011).
Insurance Rating Methodology
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Fitch RatingsPrimary AnalystBrian C. Schneider, CPA, CPCU,
AReSenior Director+1-312-606-2321Fitch, Inc.70
W. Madison StreetChicago, IL 60602orSecondary AnalystGretchen
ChairpersonR. Andrew Davidson, CFASenior Director+1-312-368-3144orMedia
Relations:Brian Bertsch, +1-212-908-0549 (New York)email@example.com
Source: Fitch Ratings