White Mountains Insurance Group, Ltd. WTM and its units recently received rating action from credit rating giant, A.M. Best. The rating agency affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a” of Atlantic Specialty Insurance Company and its four U.S. reinsured units. Atlantic Specialty Insurance and its units are collectively called OneBeacon Insurance Group (“OneBeacon”).

In addition, the rating agency affirmed the Long-Term ICRs of “bbb”, the Long-Term Issue Credit Ratings (Long-Term IR) on issued securities as well as the indicative Long-Term IRs on the shelf registrations of OneBeacon Insurance Group, Ltd. and OneBeacon U.S. Holdings, Inc. Concurrently, the credit rating giant affirmed the Long-Term ICR of “bbb” of White Mountains Insurance. The outlook of all the aforementioned credit ratings remained stable.

The ratings affirmation of OneBeacon came on the back of its  solid risk-adjusted capitalization, and strong earnings over time through favorable underwriting and robust operating performance. The ratings also account for the financial flexibility of both OneBeacon U.S. Holdings, Inc. and OneBeacon Insurance Group, Ltd.

Robust financial flexibility and strong operational performance by the operating subsidiaries of OneBeacon Insurance Group, Ltd., OneBeacon U.S. Holdings, Inc. and White Mountains Insurance account for the ratings reiteration. Moreover, financial leverage and coverage ratios are well within the guidelines of the rating agency.

However, OneBeacon  might see ratings downgrade in case of adverse development of loss reserves, dividend payments that have limited surplus growth, and elevated level of equity investments that might dilute the company’s earnings.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investors’ confidence in the stock as well as maintaining credit worthiness in the market. Hence, it is expected that such ratings will help the company write more business, going forward.

WHITE MTN INS Price

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Stocks that Warrant a Look

Investors might also consider stocks from the same space like Mercury General Corporation MCY, NMI Holdings, Inc. NMIH, Alleghany Corporation Y and Arch Capital Group Ltd. ACGL. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mercury General is a P&C insurer that is engaged in writing personal automobile insurance in the U.S. The company delivered positive surprises in two of the last four quarters but with an average miss of 21.04%.

NMI Holdings offers private mortgage guaranty insurance services in the U.S. The company delivered positive surprises in all of the last four quarters with an average beat of 62.80%.

Alleghany Corporation deals with property and casualty reinsurance and insurance businesses in the U.S. and internationally. The company delivered positive surprises in three of the last four quarters, with an average beat of 20.52%.

Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarter with an average beat of 9.27%.

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