Ratings Roundup: White Mountains, Everest Re, Inter Hannover

June 18, 2008

Standard & Poor’s Ratings Services has said that its ratings on White Mountains Re Group Ltd. (WMRe) – currently ‘BBB-‘ with a stable outlook – and its operating subsidiaries, Folksamerica Reinsurance Co. and Sirius International Insurance Corp. “are not affected by the announcement that Folksamerica will take a significant pretax reserve charge in the amount of $140 million in the second quarter of 2008.” However, S&P noted that this “reserve charge follows a $27 million reserve charge taken during the first quarter of this year. These reserve charges will be partially offset by an $80 million reserve release at Sirius. The severity and frequency of past years’ adverse reserve developments at Folksamerica had weakened WMRe’s overall financial strength in terms of both the quality of its balance sheet and its earnings profile. While we believe that management is taking steps to address this historical problem of reserve adequacy at Folksamerica, there still remains uncertainty as to whether the problem is fully resolved.” S&P added that the affirmation of the ratings “reflects continuation of the company’s very strong capital adequacy,” based on S&P’s risk-based capital model, strong commitments from WMRe’s parent, White Mountains Insurance Group Ltd. (WTM: BBB/Stable/–), good underwriting results from recent accident years, and its significantly reduced aggregate property catastrophe exposures from pre-2005 levels.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of the reinsurance and insurance subsidiaries of the Bermuda-based Everest Re Group, Ltd. Best also affirmed the ICRs of “a-” of Delaware-based Everest Re and Everest Reinsurance Holdings, Inc. and the debt ratings of “a-” on senior unsecured debt, “bbb+” on subordinated debt and “bbb” on junior subordinated notes and preferred stock of Everest Re. The outlook for all of the ratings is stable. “Everest Re’s ratings reflect its very strong risk-adjusted capitalization, strong long-term operating performance and excellent market profile as a leading global reinsurance franchise,” said Best. “Additionally, Everest Re’s success factors include diversification with regard to product lines, geography and distribution. The group also benefits from a strong and stable management team and has demonstrated success with regard to allocating capital to profitable business lines throughout phases of the reinsurance pricing

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on U.K.-based International Insurance Co. of Hannover Ltd. (Inter Hannover) to ‘AA-‘ from ‘A+’ and assigned a stable. S&P has also removed the Company from CreditWatch with developing implications, where it was placed on March 19, 2008. The rating agency said it has upgraded Inter Hannover to “reflect our view that the increased integration of Inter Hannover into Hannover Rueckversicherung AG (Hannover Re or the group; AA-/Stable/–) means that Inter Hannover is now considered a core subsidiary of Hannover Re under Standard & Poor’s methodology. ” Credit analyst Eoin Naughton explained that the “change reflects the increased reinsurance support provided to Inter Hannover by the group, and the development of Inter Hannover’s role within the group.” S&P also said: “The company is increasingly providing a distribution and administrative function for the wider group, while reducing retention of insurance risk on its own balance sheet. Naughton stated that the “stable outlook on Inter Hannover reflects the stable outlook on the parent, Hannover Re, and Inter Hannover’s status as a core subsidiary of the group.”

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