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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 19, 2007 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of selected subsidiaries of White Mountains Insurance Group, Ltd. (White Mountains) [NYSE: WTM] (Hamilton, Bermuda), including the FSRs of A (Excellent) and the ICRs of "a" of the U.S. operating companies comprising the OneBeacon Insurance Group (OneBeacon). A.M. Best also has affirmed the ICR of "bbb" of White Mountains and assigned an ICR of "bbb" to OneBeacon Insurance Group, Ltd. (OneBeacon, Ltd.) (Hamilton Bermuda) [NYSE: OB].
In addition, A.M. Best has withdrawn the FSR of A (Excellent) and the ICRs of "a" of Farmers and Merchants Insurance Company (Farmers) and Midwestern Insurance Company (Midwestern) (both of Tulsa, OK) and assigned a category of NR-3 (Rating Procedure Inapplicable) to both companies. The ratings were withdrawn following the execution of their respective reinsurance and assumption agreements, wherein all liabilities were transferred to OneBeacon Insurance Company (Philadelphia, PA).
Concurrently, A.M. Best has affirmed the ICR of "bbb" and the various debt ratings of Fund American Companies, Inc. (Fund American) (Wilmington, DE). Fund American's preferred stock was defeased in November 2006 as part of OneBeacon, Ltd.'s initial public offering. OneBeacon, Ltd. is the ultimate parent of Fund American and is 72% owned by White Mountains. The outlook for all ratings is stable. (See link below for a detailed list of the companies and ratings.)
White Mountains' ratings reflect its conservative financial leverage of 22% (debt plus preferred stock-to-total tangible capital) and its strong financial flexibility, as well as the steps taken to improve earnings sustainability at its various operating entities. On a consolidated basis, the group's operating earnings have improved over a five-year period leading to generally favorable return measures, particularly when considering realized capital gains. Somewhat offsetting these positive rating factors are the inherent risks associated with White Mountains' aggressive growth strategy at Esurance Insurance Group and the negative impact of storm losses in 2004 and 2005 from White Mountains Re, Ltd.'s reinsurance operations.
OneBeacon, Ltd.'s consolidated financial leverage of 28% is higher than that of White Mountains but still within A.M. Best's parameters for the current rating level. In addition, the risk-adjusted capitalization (as measured by Best's Capital Adequacy Ratio) of its principal operating unit, OneBeacon, continues to adequately support the current rating level. Furthermore, OneBeacon's balance sheet is enhanced by virtue of significant reinsurance protection on asbestos and environmental (A&E) and other mass tort liabilities. OneBeacon has historically incurred adverse loss reserve development on prior accident years, which largely reflects its run-off books of business. However, its more recent accident years (2002 and forward) have generally developed favorably, reflective of current management's shedding of underperforming business written prior to OneBeacon's 2001 acquisition by White Mountains, as well as the underwriting initiatives put into place since that time. Since its acquisition by White Mountains, OneBeacon's returns have improved, driven by expansion into specialty niches, improved pricing prior to 2007 and reduced storm losses in recent years.
For a complete list of White Mountains' FSRs, ICRs and debt ratings, please visit White Mountains Insurance Group, Ltd..
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.