Best Affirms Sirius ‘A’ Ratings

November 3, 2008

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit rating of “a” of Sweden’s Sirius International Insurance Corporation with stable outlooks. The Company is a subsidiary of Bermuda-based White Mountains Insurance Group (WMG).

“The ratings reflect Sirius’ strong risk-adjusted capitalization, very good operating performance despite low investment income and very good business profile in Scandinavia,” said Best.

The rating agency also indicated that it “expects Sirius’ risk-adjusted capitalization to remain strong in 2008 despite an expected deterioration resulting from a planned SEK 400-500 million [$52.17 to $65.2 million] capital contribution to the parent,” White Mountains Insurance, “and taking a 7 percent stake in OneBeacon Insurance Group, Ltd.

“Sirius’ risk-adjusted capitalization continues to benefit from a contingency reserve (SEK 9.1 billion [$1.1868 billion] in 2007), for which A.M. Best gives full equity credit. In 2007, Sirius’ capitalization improved significantly due to decreasing intra-group premiums and the sale of Scandinavian Reinsurance Company Limited to a member of WMG.”

Best added that it “expects Sirius’ 2008 operating performance to be negatively impacted by substantial realized losses in its equity portfolio. However, this is likely to be offset by continuously strong underwriting results with an anticipated combined ratio between 85 to 90 percent, supported by a favorable claims experience (subject to benign catastrophe losses for the remainder of the year) and lower acquisition expenses due to higher retrocession commissions. The two large quota-share treaties with Esurance Insurance Company and White Mountains Reinsurance Company of America are expected to remain profitable in 2008, with a combined ratio below 100 percent (95 percent in 2007). As a result, A.M. Best expects Sirius to achieve positive earnings in 2008, albeit at a lower level than in 2007.”

In Best’s estimation Sirius “continues to have a very good business profile in the Scandinavian market, where it leads or co-leads approximately 30 percent of its third party portfolio.

“Sirius is also the main internal reinsurer within WMG, accounting for 46 percent of total premiums in 2007.”

However, Best also said it ” believes that Sirius’ increasing dependence on group business has resulted in more volatile premium income, and in 2007, Sirius’ premiums decreased by 17 percent following the non renewal of the OneBeacon casualty quota-share.

“For 2008, A.M. Best believes that premiums are likely to be relatively stable at SEK 6.5-6.7 billion as the moderate increase in the third party property and accident and health portfolios are expected to offset the declining rates in other lines of business.”

Source: A.M. Best –

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