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Thursday, February 27th, 2020

Fitch Revises OneBeacon's Outlook to Stable and Affirms Ratings

by March 29, 2016 General

Fitch Ratings has affirmed the ‘BBB+’ Issuer Default Rating (IDR) of OneBeacon Insurance Group, Ltd.’s (NYSE: OB) (OneBeacon) holding company and ‘A’ Insurer Financial Strength (IFS) rating of its operating subsidiaries. Fitch has also revised the Rating Outlook to Stable from Negative. Fitch took no rating action on the ‘BBB+’ IDR of White Mountains Insurance Group, Ltd. (White Mountains). OB is 75.5% owned by White Mountains. A full list of rating actions follows at the end of this release.KEY RATING DRIVERSFitch’s Outlook revision to Stable from Negative was driven by the company’s improved reserve experience and GAAP calendar year combined ratio for full-year 2015. Unfavorable reserve experience that contributed to deterioration in full year 2014 profits prompted the previous revision in Outlook to Negative.For full-year 2015, OneBeacon reported favorable reserve development of approximately $2 million compared to the $90 million adverse in the prior period. The favorable development was modest but did benefit the GAAP calendar year combined ratio by 0.2 percentage points (pp) compared to last year’s strain of 7.6 pp.Fitch’s current ratings of OneBeacon reflect an expectation that future reserve development will be neutral over the next 12 to 18 months. OneBeacon’s reserve composition has shifted over time as the underwriting portfolio migrated towards specialty lines that tend to have short to medium tail loss payment patterns. Greater loss reserve stability is also fostered by the company’s recent sale of run-off business segments and higher reinsurance utilization on current business.For full year 2015, OneBeacon reported a GAAP calendar year combined ratio of 96.3% an improvement from 101.7% in the prior year. A shift to underwriting profits was influenced by the change in reserve development, which was slightly offset by increased catastrophe losses and a higher expense ratio.In 2015, White Mountains signed a definitive agreement to sell reinsurance organization, Sirius Group to CMI International Holding PTE Ltd, the Singapore-based investment arm of CMI for approximately $2.3 billion. The transaction is expected to close in the near term. Also, on Feb. 1, 2016, Sumitomo Life Insurance Company acquired Symetra Financial Corporation. White Mountains received $658 million in proceeds from the transaction.RATING SENSITIVITIESKey rating triggers that could lead to a downgrade are:–Adverse loss reserve development of 5% or greater of prior year equity;–Sustained GAAP calendar year combined ratios over 100% or sustained fixed charge coverage below 5.0x;–Financial leverage above 30%.Key rating triggers that could lead to an upgrade include:–Improvement in competitive market position while continuing to produce favorable operating results while not sustaining deterioration in other credit factors.FULL LIST OF RATING ACTIONSFitch has affirmed the following ratings and revised the Outlook to Stable from Negative:OneBeacon U.S. Holdings, Inc.–IDR at ‘BBB+’;–$275 million 4.6% due Nov. 9, 2022 at ‘BBB’.OneBeacon U.S. insurance subsidiaries:Atlantic Specialty Insurance CompanyHomeland Insurance Company of New YorkHomeland Insurance Company of DelawareOBI National Insurance Company–IFS at ‘A’.Additional information is available on CriteriaInsurance Rating Methodology (pub. 16 Sep 2015) DisclosuresDodd-Frank Rating Information Disclosure Form Status Policy FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.