Best Affirms OneBeacon and Subs Group Ratings; White Mountains

October 8, 2012

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of OneBeacon Insurance Company and its six pooled and four reinsured affiliates, collectively referred to as OneBeacon Insurance Group.

Best has also assigned an FSR of ‘A’ (Excellent) and an ICR of “a” to OBI National Insurance Company (OBIN) and Homeland Insurance Company of Delaware (HODE), newly formed subsidiaries of OneBeacon, who participate in a 100 percent quota share agreement.

“OBIN was established to write admitted business in Rhode Island and support the group’s workers’ compensation and other tiered business in certain states,” Best explained. ” HODE was established to write surplus lines in Pennsylvania, New York, Rhode Island and Delaware.”

In addition Best has affirmed the ICRs of “bbb” and debt ratings of OneBeacon’s publicly traded parent, Bermuda-based OneBeacon Insurance Group, Ltd. and its intermediate holding company, OneBeacon U.S. Holdings, Inc.

Best concurrently affirmed the ICR of “bbb” of the group’s ultimate parent, Bermuda-based White Mountains Insurance Group, Ltd., as well as the FSR of ‘B++’ (Good) and ICR of “bbb+” of Philadelphia-based Potomac Insurance Company, which currently is in run off.

The outlook for all of the above ratings is stable. All of the companies are headquartered in Minnetonka, Minnesota, except where otherwise indicated.

Best said its affirmation of OneBeacon’s ratings “reflects its excellent level of risk-adjusted capitalization and strong earnings through its solid underwriting and operating performance. The ratings also consider the strong financial flexibility of OneBeacon U.S. and OneBeacon Ltd.”

As partial offsetting factors, Best cited “the historical adverse development of the loss reserves of OneBeacon’s run-off business and the risk inherent in pursuing a less-diversified business strategy than in previous years following the sale of OneBeacon’s personal lines and standard commercial lines businesses.”

However, Best also indicated that its concern with OneBeacon’s more focused strategy “is significantly offset by the historical profitability of its specialty business.

“While the ratings for the group are stable, future positive rating actions may result from its continued strong underwriting and operating performance. However, negative rating actions could result if the group’s underwriting and operating performance falls markedly short of Best’s expectations, along with a weakening in its overall risk-adjusted capitalization.

“The affirmation of the ratings of OneBeacon Ltd., OneBeacon U.S. and White Mountains acknowledges the companies’ strong financial flexibility and the solid operating results generated through their operating subsidiaries.”

Best gave the following summary of the companies affected by its ratings actions:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for OneBeacon Insurance Company and its following affiliates:
— Atlantic Specialty Insurance Company
— The Camden Fire Insurance Association
— The Employers’ Fire Insurance Company
— Essentia Insurance Company
— Homeland Insurance Company of New York
— The Northern Assurance Company of America
— OneBeacon America Insurance Company
— OneBeacon Midwest Insurance Company
— Pennsylvania General Insurance Company
— Traders & General Insurance Company

The following debt rating has been affirmed:
OneBeacon U.S. Holdings, Inc.—
— “bbb” on $270 million 5.875 percent senior unsecured notes, due 2013

The following indicative ratings under the shelf registration have been affirmed:
OneBeacon U.S. Holdings, Inc. and OneBeacon Insurance Group, Ltd.—
— “bbb” on senior unsecured debt
— “bbb-” on subordinate debt
— “bb+” on preferred stock

OneBeacon U.S. Holdings Trust I, II, III—
— “bb+” on preferred stock

Source: A.M. Best

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