CHICAGO--(BUSINESS WIRE)-- 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 Midwestern U.S.

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 Company cover.

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.

--IDR at 'BBB+';

--$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).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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Fitch Ratings
Primary Analyst
Brian C. Schneider, CPA, CPCU, ARe
Senior Director
+1-312-606-2321
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Gretchen K. Roetzer
Director
+1-312-606-2327
or
Committee Chairperson
R. Andrew Davidson, CFA
Senior Director
+1-312-368-3144
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Source: Fitch Ratings