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03 Feb 2010
Approximately $600 million of securities affected
New York, February 03, 2010 -- Moody's has confirmed the A2 insurance financial strength (IFS)
ratings of the OneBeacon Insurance Group inter-company pool members
(OneBeacon) and the Baa2 senior debt rating of its intermediate holding
company, OneBeacon U.S. Holdings, Inc.
(OneBeacon U.S.) following the company's announcement
that it plans to sell its standard personal lines business to Tower Group,
Inc. (Tower) for approximately $180 million. The
transaction is subject to certain state regulatory approvals. The
outlook on the ratings is negative.
Moody's said the rating confirmation was based on the group's
narrowed strategic focus on niche, low-to-moderate
hazard specialty business segments where profitability has been strong
in recent years. The company typically avoids writing large contract
limits and/or large deductible business which mitigates to a degree the
potential for shock-loss volatility in underwriting results.
Moody's also noted the significant reduction in OneBeacon's
gross PML profile and reduced geographic concentration following the intended
sale of its Northeast-focused personal lines portfolio.
The announced personal lines sale represents OneBeacon's second
transaction in two months. In December 2009, the company
sold -- via renewal rights agreement -- its non-specialty
commercial lines business. Moody's recognizes that the company
continues to be an active manager of its capital. The company's
adjusted financial leverage (33% at 12/31/09) is at the high end
of our expectations for the ratings. In addition, OneBeacon
will also need to continue to commit capital to legacy liabilities,
particularly, risk of adverse development on the run-off
of its commercial lines portfolio as well legacy asbestos and environmental
reserves (though the latter continue to be managed within an adverse development
cover from Berkshire Hathaway Inc.). Moody's Senior
Credit Officer Pano Karambelas said "The resolution of the negative
outlook will depend on the company's management of its risk adjusted
capitalization and the level of credit support in its capital structure."
Moody's said that it plans to withdraw the ratings of the York Insurance
Company of Maine (A2 IFS rating) and Massachusetts Homeland Insurance
Company (A2 IFS rating)--both currently members of the OneBeacon
Insurance Group pool--at the time of the completion of the
transaction as a result of the reorganization and sale of these two companies
to Tower as part of OneBeacon's personal lines business.
OneBeacon Insurance Group, Ltd. (NYSE: OB) is a Bermuda-domiciled
insurance holding company whose property and casualty insurance subsidiaries
provide a range of specialty insurance products in the U.S.
OneBeacon U.S. is an indirect wholly-owned subsidiary
of OneBeacon Insurance Group, Ltd., which, in
turn, in an indirect 75%-owned subsidiary of White
Mountains Insurance Group, Ltd. (NYSE: WTM),
with the remaining 25% shares publicly owned. Principal
and interest on OneBeacon U.S.'s outstanding senior notes
are guaranteed by WTM. For 2009, the company reported total
premiums earned of approximately $2.0 billion and net income
of $342 million. GAAP shareholders' equity was $1.4
billion as of December 31, 2009.
The following ratings were confirmed with a negative outlook:
Altantic Specialty Insurance Company -- insurance financial strength
AutoOne Insurance Company -- insurance financial strength at A2;
AutoOne Select Insurance Company -- insurance financial strength
The Camden Fire Insurance Association -- insurance financial strength
Essentia Insurance Company -- insurance financial strength at A2;
Homeland Insurance Company of New York -- insurance financial strength
Massachusetts Homeland Insurance Company -- insurance financial strength
The Northern Assurance Company of America -- insurance financial
strength at A2;
OneBeacon America Insurance Company -- insurance financial strength
OneBeacon Insurance Company -- insurance financial strength at A2;
OneBeacon Lloyd's of Texas -- insurance financial strength at A2;
OneBeacon Midwest Insurance Company -- insurance financial strength
Pennsylvania General Insurance Company -- insurance financial strength
Potomac Insurance Company -- insurance financial strength at A2;
York Insurance Company of Maine -- insurance financial strength at
OneBeacon U.S. Holdings, Inc. --
provisional senior unsecured debt at (P)Baa2; provisional subordinated
debt at (P)Baa3; provisional junior subordinated debt at (P)Baa3;
provisional preferred stock at (P)Ba1;
OneBeacon U.S. Holdings Trust I, II, III --
provisional trust preferred securities at (P)Baa3.
The last rating action on OneBeacon was on December 4, 2009 when
OneBeacon's ratings were placed on review for possible downgrade.
The principal methodology used in rating OneBeacon is "Moody's Global
Rating Methodology for Property and Casualty Insurers" which can be found
at www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to pay punctually senior policyholder claims and
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
Moody's confirms OneBeacon's ratings; outlook negative
Financial Institutions Group
Moody's Investors Service
No Related Data.
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