S&P Raises White Mountains Ratings to ‘BBB’; Outlook Stable

November 8, 2005

Standard & Poor’s Ratings Services announced that it has raised to “BBB” from “BBB-” its counterparty credit and senior debt ratings on White Mountains Insurance Group Ltd. (WTM) and Fund American Cos. Inc. with a stable outlook.

S&P also assigned its “A” counterparty credit and financial strength ratings to the members of OneBeacon Insurance Group with a stable outlook. In addition S&P affirmed its “A-” counterparty credit and financial strength ratings on Folksamerica Reinsurance Co. and Sirius International Insurance Corp., indicating that the ratings on the two companies “are based on their stand-alone merits, and both are considered strategically important to WTM.”

“The upgrade of WTM reflects the fact that the group exceeded Standard & Poor’s expectations, as well as its strong competitive position, strong operating performance, strong financial flexibility, extremely strong capitalization, and conservative balance sheet,” explained S&P credit analyst Siddhartha Ghosh.

S&P’s bulletin also notes: “WTM has demonstrated significantly improved earnings performance each year since 2001 and through the first nine months of 2005.”

As offsetting factors S&P indicated, WTM’s “reinsurance concentration with Olympus Re, potential reserve deficiencies at Folksamerica and OneBeacon, and integration risks associated with its acquisition strategy.”

S&P also assigned a stable outlook to WTM’s senior debt rating, based on its expectations “that WTM will continue its current corporate strategies without a material change in direction, continuing strong operating performance and strong financial flexibility for the next few years.

“The stable outlook of OneBeacon reflects Standard & Poor’s expectation that there will be no material change in its business position, very strong capital adequacy, and continuation of its strong underwriting profitability.

“The positive outlook of Folksamerica represents Standard & Poor’s expectation that its competitive position will continue to improve in a widely expected improved reinsurance marketplace post-Hurricanes Katrina and Rita.

“The positive outlook for Sirius reflects the competitive benefits that are expected to continue to accrue to Sirius from its increased underwriting capacity and enhanced strategic flexibility as a member of WMR, combined with the expected improved reinsurance marketplace.”

S&P also noted: “WTM’s consolidated insurance operations’ capital adequacy is expected to be at least 160 percent including any potential reserve deficiencies, large event losses, and Standard & Poor’s current one-in-250-year aggregate catastrophe exposure charges. WTM’s debt plus preferred leverage is expected to be 30 percent or better, interest coverage of 5x-8x, and fixed charge coverage (including preferred stock dividends) of 3x-5x, excluding realized capital gains for all figures. In addition, Standard & Poor’s believes WTM will continue to show strong operating performance in its OneBeacon segment and produce close to breakeven results for full-year 2005.

“If there is a material downward deviation from these expectations resulting in a significant negative impact on WTM’s earnings or capital, a significant change in competitive position at any one of WTM’s insurance subsidiaries, or a material adverse reserve development in excess of 5 percent-8 percent, WTM’s outlook could be revised to negative. At the same time, if WTM materially exceeds all the above expectations over the next two years including significant reduction of uncertainties around Scandinavian Re, the outlook of the senior debt rating could be revised to positive.”

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