Fitch Places Sirius on Rating Watch Evolving Following Acquisition by CMI; Affirms WTM

CHICAGO--()--Fitch Ratings has placed Sirius International Group, Ltd.'s (Sirius) Issuer Default Rating (IDR) of 'BBB+', senior debt rating of 'BBB', and operating subsidiaries' Insurer Financial Strength (IFS) ratings of 'A' on Rating Watch Evolving.

Fitch also affirmed White Mountains Insurance Group, Ltd.'s (White Mountains) IDR at 'BBB+'. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Fitch's rating action follows the announcement today that China Minsheng Investment Co., Ltd. (CMI) will purchase from White Mountains all of its outstanding shares of Sirius's parent, Sirius International Insurance Group, Ltd., for $2.2 billion, or approximately 1.3 times (x) tangible book value, in an all-cash transaction. CMI is a private investment company founded in May 2014 by 59 different corporate members from China. Fitch does not rate CMI. The transaction is expected to close in the next six months and is subject to regulatory approvals.

This transaction offers Sirius a better opportunity to grow and expand business in Asia, especially in China, which are markets that management has previously targeted for expansion.

Fitch anticipates resolving the Rating Watch Evolving status prior to the completion of the transaction. In particular, the Rating Watch is tied to Fitch gaining an understanding of CMI's strategy for Sirius going forward in terms of operating profile, profitability, growth expectations and capital management plans.

The affirmation of White Mountains' ratings reflects an improved pro forma financial leverage position and additional undeployed capital from the monetization of the Sirius investment. The $2.2 billion purchase price will result in a gain to White Mountains of approximately $65 per share. Consistent with White Mountains' historical investment and operating strategy, Fitch expects the company will eventually deploy this capital in new investment opportunities or return it to shareholders.

RATING SENSITIVITIES

Fitch needs to better understand how Sirius will be governed under CMI ownership. Fitch would likely affirm the ratings if CMI offers reasonable support to Sirius and not add or takeaway a meaningful amount of capital. To the extent that CMI's ownership would positively or negatively impact the credit profile of Sirius, the ratings could be upgraded or downgraded, respectively, upon the close of the transaction.

FULL LIST OF RATING ACTIONS

Fitch has placed the following ratings on Rating Watch Evolving:

Sirius International Group, Ltd.

--IDR 'BBB+';

--$400 million 6.375% due March 20, 2017 'BBB'.

--$250 million perpetual non-cumulative preference shares 'BB+'.

Sirius International Insurance Corporation

Sirius America Insurance Company

--IFS 'A'.

Fitch has affirmed the following rating with a Stable Outlook:

White Mountains Insurance Group, Ltd.

--IDR at 'BBB+'.

The ratings were not reviewed with respect to Fitch's updated insurance notching criteria published July 14, 2015.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Insurance Rating Methodology (pub. 14 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868367

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988571

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988571

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst:
Gerald B. Glombicki, CPA, +1-312-606-2354
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
or
Committee Chairperson:
Donald F. Thorpe, CFA, CPA, +1-312-606-2353
Senior Director
or
Alyssa Castelli, +1-212-908 0540
Media Relations, New York
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Gerald B. Glombicki, CPA, +1-312-606-2354
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
or
Committee Chairperson:
Donald F. Thorpe, CFA, CPA, +1-312-606-2353
Senior Director
or
Alyssa Castelli, +1-212-908 0540
Media Relations, New York
alyssa.castelli@fitchratings.com