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TEXT-Fitch puts OneBeacon some operating subs on watch negative
2012年10月18日 / 下午4点25分 / 5 年前

TEXT-Fitch puts OneBeacon some operating subs on watch negative

Oct 18 - Fitch Ratings today placed the 'A' Insurer Financial Strength (IFS)
ratings of several operating subsidiaries of OneBeacon Insurance Group, Ltd.
 (OneBeacon) on Rating Watch Negative. These companies are expected to be
transferred or merged into entities being transferred to Armour Group Holdings
Limited (Armour) as part of the sale of OneBeacon's runoff business to Armour.

Fitch has also affirmed with a Stable Rating Outlook the 'A' IFS ratings of
OneBeacon's ongoing insurance subsidiaries that are not being sold to Armour. A
full rating list is shown below.

Fitch's rationale for the Negative Watch reflects a planned sharp reduction in
capital levels of the targeted runoff companies at the time of closing to just
above regulatory minimums, at an NAIC risk-based capital (RBC) ratio (company
action level) of 100%. Should such weakened capital levels be maintained by
Armour management post sale, or should Armour management fail to provide clarity
with respect to future capital levels, Fitch would expect to downgrade the IFS
ratings of the runoff entities to no higher than 'BB+' upon the sale to Armour.
Fitch does not rate Armour. The close is currently targeted for the second half
of 2013, and is subject to regulatory approvals.

Fitch's expectation is that OneBeacon will retain a willingness and ability to
provide reasonable support to the remaining runoff entities up until the close
of the sale. Nonetheless, Fitch considers the nature of the transaction to be
somewhat complex, which creates execution risk in its successful completion.

As such, Fitch will continue to review the progress of the transaction during
the extended closing period and could downgrade the ratings, even before close,
if it is determined that the capitalization and management of the runoff
entities are no longer consistent with the expectations for the existing
ratings. Fitch would likely lower the ratings if the runoff business no longer
maintained an NAIC RBC ratio (company action level) of at least 200%.

OneBeacon's runoff business reserves consists of approximately $256 million of
other insurance operations runoff net loss and loss adjustment expense reserves
(23% of total OneBeacon net reserves at Sept. 30, 2012), which primarily
includes the non-specialty commercial lines business reserves associated with
the renewal rights sale to The Hanover Insurance Group effective Jan. 1, 2010
and other runoff business.

The transaction also includes the company's asbestos and environmental (A&E)
reserves, and the associated A&E cover with National Indemnity Company (NICO)
and the adverse development cover from General Reinsurance Company.

The sale of the runoff business will complete OneBeacon's transition into a
diversified specialty lines company and favorably allow for an exit from legacy
reserves. As a result of this and previous transactions, the company continues
to free up capital that previously supported the business writings and reserves.
This provides financial flexibility that the company can use to support
additional business writings, investment and acquisition opportunities or
capital management alternatives. However, Fitch expects that OneBeacon will
maintain a level of insurance company capitalization in its ongoing operations
that is consistent with the current ratings.

Fitch has also affirmed the 'A' IFS rating of Essentia Insurance Company
(Essentia), which is being sold to Markel Corporation as part of the termination
of OneBeacon's underwriting relationship with Hagerty Insurance Agency. The sale
of Essentia is expected to close during the first quarter of 2013, at which time
Fitch will likely affirm the IFS rating at the current level given that Markel's
insurance operating subsidiaries are also currently rated 'A' IFS.

Fitch has withdrawn the IFS rating of Pennsylvania General Insurance Company
following the sale of the shell company to North American Casualty Co. effective
Oct. 1, 2012.

See the Fitch Rating Action Commentary dated Aug. 7, 2012 for a summary of
additional areas of sensitivity and triggers that could result in a future
upgrade or downgrade of OneBeacon's ratings.

Fitch has placed the following ratings on Rating Watch Negative:

OneBeacon Insurance Company
Camden Fire Insurance Association (The)
Employers' Fire Insurance Company (The)
Northern Assurance Company of America (The)
OneBeacon America Insurance Company
OneBeacon Midwest Insurance Company
Traders & General Insurance Company
--IFS 'A'.

Fitch affirms the following ratings with a Stable Outlook:

OneBeacon U.S. Holdings, Inc.
--IDR at 'BBB+';
--$270 million 5.875% due May 15, 2013 at 'BBB'.

Atlantic Specialty Insurance Company
Essentia Insurance Company
Homeland Insurance Company of New York
--IFS at 'A'.

Fitch withdraws the following rating as it is no longer considered by Fitch to
be relevant to the agency's coverage after the recent sale by OneBeacon:
Pennsylvania General Insurance Company
--IFS at 'A'.

Additional information is available at ''. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--Insurance Rating Methodology (Sept. 19, 2012);
--Fitch Affirms White Mountains' Ratings (Aug. 7, 2012).

Applicable Criteria and Related Research:
Insurance Rating Methodology

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