A.M. Best Reacts to OneBeacon’s Purchase of Atlantic Mutual’s Commercial Lines Renewals

A.M. Best Co. has commented that the financial strength and debt ratings of the subsidiaries of White Mountains Insurance Group(Hamilton, Bermuda) and Atlantic Mutual Companies (New York, N.Y.), remain unaffected following the announcement that OneBeacon Insurance Company (a subsidiary of White Mountains) has reached an agreement in principle to purchase Atlantic Specialty Insurance Company (a subsidiary of Atlantic Mutual) as a shell, as well as the renewal rights to the vast majority of Atlantic Mutual’s commercial lines business (approximately $450 million in segmented business lines).

At the time a definitive agreement is signed, which is anticipated within the next 30 days, A.M. Best expects to place the financial strength rating of B++ (Very Good) of Atlantic Specialty under review with positive implications, reflecting the pending acquisition by a stronger parent. The rating would remain under review until the completion of the acquisition, which is anticipated in early 2004.

The agreement in principal includes termination rights if retention on the $450 million subject book falls below 65 percent (current retention is far in excess of 65 percent). The proposed purchase also includes the acquisition of a substantial portion of Atlantic Mutual’s supporting infrastructure, including a significant number of employees, subject to the attainment of a minimum $250 million in renewal premiums. In addition, no prior year reserve liabilities are to be assumed by OneBeacon.

OneBeacon believes Atlantic Mutual’s predominantly Northeast, Atlantic and West Coast middle market commercial lines book would complement its Northeast book of similar business.

Moreover, the acquired infrastructure should enable OneBeacon to efficiently commence the renewal of Atlantic Mutual’s business. Atlantic Mutual’s strategy going forward will be to exit all commercial lines and focus on the affluent personal lines market.