White Mountains' subsidiaries ratings affirmed by AM Best
Bermuda-based reinsurance firm White Mountains Re Group's subsidiaries Folksamerica Reinsurance Co. and Fund American Reinsurance Co. have been affirmed and assigned financial strength ratings (FSR) respectively by AM Best Co.
The ratings agency has affirmed the FSR of A- (excellent) and the issuer credit rating (ICR) of "a-" of Folksamerica Reinsurance Company and assigned an FSR of A- (excellent) and an ICR of "a-" to Fund American Reinsurance.
Best also has affirmed the ICR and senior debt rating of "bbb-" on $400 million 6.375 percent senior unsecured notes of White Mountains Re.
Concurrently, AM Best has affirmed the preferred stock rating of "bb" on $250 million 7.506 percent non-cumulative perpetual preference shares. The outlook for all ratings is stable.
Best said it actions on Folksamerica Re and White Mountains Re were based on both companies' excellent level of risk-adjusted capitalisation and enhanced risk management strategy. Partially offsetting these positive attributes are the historical volatility in operating performance, due in part to legacy issues at Folksamerica Re and dependence on the growth and profitability of the automobile insurance business assumed from one of their affiliated companies.
The ratings assigned to Fund American Re reflect its fine level of risk-adjusted capitalisation and the significant business support it receives from Folksamerica Re. Fund American Re has been recapitalised by White Mountains Re to expand the group's global reinsurance operational platform and build a stronger presence in the Bermuda reinsurance marketplace.
Best anticipates that Fund American Re will be challenged by increased competition from both established companies and new start-ups seeking to enter the industry. The additional capacity brought to the market could dampen expected returns if pricing of reinsurance coverage fails to meet anticipated levels.