Standard & Poor's Ratings Services yesterday revised its outlook on Bermuda-based White Mountains Insurance Group Ltd. and OneBeacon Insurance Group Ltd. to negative from stable.

S&P said it affirmed its 'BBB' counterparty credit ratings on White Mountains and OneBeacon and its A counterparty credit and financial strength ratings on OneBeacon.

In addition, Standard & Poor's also affirmed its 'BBB-' counterparty credit rating on White Mountains Re Group Ltd. and its A- counterparty credit and financial strength ratings on White Mountains Re America (formerly Folksamerica Reinsurance Co.), Sirius International Insurance Corp. (Sirius), and White Mountains Re Bermuda Ltd. The outlook on these companies remains stable. Standard & Poor's views these reinsurance subsidiaries as core to White Mountains Re, and the ratings on all of them move in tandem with one another.

"The negative outlook on OneBeacon reflects our expectation that its earnings prospects have diminished from their historical levels," said Standard & Poor's credit analyst Siddhartha Ghosh. "In addition, its statutory capital could decline by a significant amount from its September 30, 2008, level of $1.47 billion." This is a 24 percent decline from $1.9 billion at year-end 2007.

S&P said it affirmed the ratings because of OneBeacon's strong competitive position, especially in its niche specialty business, continued underwriting profitability, and very strong capital adequacy. Mitigating this are significantly increased volatility in the investment portfolio, a relatively high expense ratio, and a geographic concentration in the northeastern US.

The ratings on WMRe reflect the group's strong competitive position in the global reinsurance market, very strong capital adequacy at each operating subsidiary, conservative financial leverage, and some progress in strategic risk-management initiatives. Partially offsetting these factors are S&P's concern about the group's decline in prospective earnings and the potential for further adverse reserve developments at WMRe America as well as risks associated with some prior acquisitions.