White Mountains Insurance Group, Ltd.’s (WTM) issuer credit rating (:ICR) of “bbb” was recently reiterated by A. M. Best. Concurrently, the rating agency affirmed financial strength rating (:FSR) of A (Excellent) and ICR of “a” Atlantic Specialty Insurance Company and its three U.S. reinsured affiliates, together known as OneBeacon Insurance Group (OneBeacon). The ratings carry a stable outlook.

Simultaneously, OneBeacon Insurance Group, Ltd. (OB) and its intermediate holding company, OneBeacon U.S. Holdings, Inc. (OneBeacon U.S.) were assigned an ICR of “bbb”.

The affirmations came on the back of stable risk-adjusted capitalization, strong earnings results stemming from underwriting performance and stable investment income, along with financial flexibility of OneBeacon U.S. and OneBeacon Ltd.

However, these factors were partially offset by unfavorable reserve development related to the run-off business and a considerable amount of dividend paid to shareholders that limited the growth initiatives. In addition, the high level of equity investment resulted in earnings and balance sheet volatility.

The ratings also account for the companies’ solid financial flexibility supported by strong operating results by the subsidiaries and financial leverage and interest coverage ratios remaining within A. M. Best’s benchmark.

Owing to the planned sale to Armour Group Holdings Limited, OneBeacon Ltd.’s specific indirect subsidiaries were under review in Oct 2012. These companies’ ratings continue to remain under review with a negative rating implication due to the awaited completion of sale.

OneBeacon, with a stable outlook, could witness an upgrade depending on its underwriting and operating performance. Conversely, the ratings are subject to downgrade if the operating results fall short of A. M. Best’s expectations or the risk-adjusted capitalization deteriorates.

Currently, White Mountains holds a Zacks Rank # 4 (Sell). Better-ranked stocks that are worth reckoning include Alleghany Corporation (Y) and AmTrust Financial Services, Inc. (AFSI). Both of these carry a Zacks Rank #1 (Strong Buy).

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