Ratings Recap: XL, Milli Re, One Beacon (Bermuda), Seguros Triple-S

August 7, 2008

Fitch Ratings has affirmed XL Capital Ltd.’s ratings as well as those of its P/C (re)insurance subsidiaries, including the Issuer Default Rating (IDR) for XL, at ‘A’, and the Insurer Financial Strength (IFS) rating of lead (re)insurance companies XL Insurance (Bermuda) Ltd. and XL Re Ltd. at ‘A+’. Fitch has also removed the ratings from its Rating Watch Negative list and assigned them a stable outlook. “The rating actions follow the successful completion of XL’s capital raising initiatives,” said Fitch (See also related article above).” In total, the company raised $3.375 billion of equity and hybrid securities. The capital raising was made up of approximately $2.3 billion of new common equity and $575 million of new equity security units. Additionally, part of the capital initiatives included XL exercising the put option under its Mangrove Bay contingent capital facility that had been in place since July 2003, which resulted in net proceeds of approximately $500 million in exchange for the issuance of preference ordinary shares.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘B++’ (Good) and the issuer credit rating (ICR) of “bbb” of Turkey’s Milli Reasurans Turk Anonim Sirketi (Milli Re). The outlook for the FSR remains stable, while the outlook for the ICR remains positive. Best said the “ratings reflect Milli Re’s strong current and prospective risk-adjusted capitalization and stable business profile partially offset by weak, although marginally improving, profitability of its non-life business. Milli Re’s overall profits are likely to remain reliant on investment returns.” Best also noted that “Milli Re’s risk-adjusted capitalization further improved in 2007 due to a combination of both the decline in underwriting risks (with the pruning of under performing business) and the improved overall earnings for the year following high investment returns.”

A.M. Best Co. has assigned indicative ratings of “bbb” on senior debt, “bbb-” on subordinated debt and “bb+” on preferred stock and trust preferred securities to Bermuda-based OneBeacon Insurance Group, Ltd. and OneBeacon U.S. Holdings, Inc.’s (formerly Fund American Companies, Inc.), recently filed $1 billion universal shelf registration. Best noted: “OneBeacon, Ltd. is the ultimate holding company for OneBeacon U.S. Holdings.” The Bermuda-based White Mountain Insurance Group, Ltd. owns 75.1 percent (as of June 30, 2008) of OneBeacon, Ltd. The outlook assigned to the ratings is stable. “The indicative ratings reflect the manageable financial leverage of OneBeacon, Ltd, with debt-to-total capital of 32 percent through second quarter 2008 and coverage ratios over a three-year period that support the assigned debt ratings,” said Best. “Furthermore, the ratings reflect the group’s improved operating performance over a five-year period and favorable capitalization. The operating companies of OneBeacon, Ltd. are consolidated under the OneBeacon Insurance Group (OneBeacon Group) (Canton, MA). OneBeacon Group’s financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a” are unchanged, and the outlook is stable.”

A.M. Best Co. has revised the rating outlook to stable from negative and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Seguros Triple-S, Inc. (STS) of San Juan, Puerto Rico. “The ratings reflect STS’ solid capitalization, consistent favorable operating performance and well established market presence in Puerto Rico,” Best explained. “Favorable operating earnings have contributed to surplus appreciation during the latest five-year period. These favorable operating results primarily are due to a consistent stream of investment income and, to a lesser extent, net underwriting income. Partially offsetting the positive rating factors is STS’ geographic concentration. As a Puerto Rico insurance provider, the company is exposed to catastrophic loss accumulation due to frequent and severe weather-related events as well as judicial, regulatory and economic concerns.”

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