A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Sirius International Insurance Corporation (Sirius) (Sweden).

The revised outlook reflects the change in Sirius’ risk profile following the decision of its ultimate parent, White Mountains Insurance Group, Ltd (White Mountains) [NYSE: WTM], to release most of the capital from White Mountains Re Bermuda Ltd. (WMRe Bermuda) and form a Bermudian branch of Sirius. Sirius’ risk-adjusted capitalisation is likely to remain strong in 2009, despite some negative impact from absorbing additional property catastrophe business from WMRe Bermuda. Nevertheless, A.M. Best is concerned that the new business from WMRe Bermuda may lead to greater than expected volatility in performance due to an increase in Sirius’ catastrophe exposure, particularly within the U.S. Capitalisation was adversely affected by unrealized investment losses at year-end 2008; however, in the absence of the change in the company’s risk profile, the losses would have been insufficient to drive a change in the rating outlook to negative.

Although A.M. Best expects Sirius’ performance to remain good, the new portfolio from WMRe Bermuda may lead to less stable performance in the future. Sirius’ 2009 operating performance is likely to continue to benefit from strong underwriting results, with an anticipated combined ratio between 85%-90% (87.9% in 2008), subject to normal catastrophe experience for the year. However, in A.M. Best’s view, Sirius’ earnings will remain materially exposed to the financial markets, given the relatively high share of total equities in the company’s investment portfolio (26% of total investments at year-end 2008).

A.M. Best believes that Sirius continues to have an excellent business profile in the Scandinavian market, where it leads or co-leads approximately 34% of its third party portfolio (30% in 2008). For 2009, A.M. Best expects premiums written to increase to the range of SEK 8.5-8.7 billion on a pro forma basis (up from SEK 6.7 billion in 2008) as a result of the transfer of WMRe Bermuda’s book of business and organic growth. Also, A.M. Best anticipates that the share of gross premium from the property business will increase significantly above the 31% that it represented in 2008 as a consequence of the restructuring. Intra-group business is likely to continue to be an important part of the account (39% of gross premiums in 2008).

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.
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