AM Best Co. has affirmed the financial strength ratings (FSR) of A- (excellent) and issuer credit ratings (ICR) of "a-" of White Mountains Reinsurance Company of America and White Mountains Re Bermuda Ltd.

Both companies are subsidiaries of Bermuda-based White Mountains Re Group, Ltd., a downstream intermediate holding company of White Mountains Insurance Group, Ltd.

AM Best also has affirmed the ICR and senior debt ratings of "bbb-" on $400 million 6.375 percent senior unsecured notes and the preferred stock rating of "bb" on $250 million fixed/floating perpetual non-cumulative preference shares of White Mountains Re Group. The outlook for all ratings is stable.

Best said the rating affirmations reflect the importance of the companies to White Mountains, the enhanced risk management strategy and excellent level of risk-adjusted capitalisation, offset by net operating losses in 2008.

These operating losses predominately resulted from significant net realised and unrealised capital losses from investments, higher natural catastrophe losses and charges that resulted from the strengthening of prior accident years' loss reserves.

In 2008, White Mountains Re Group increased prior year loss reserves by $80 million after a comprehensive review in the second quarter. The ratings also reflect the importance of the growth and profitability of the automobile insurance business assumed from one of White Mountains Re Group's affiliated companies, Best said.

White Mountains Re Bermuda was recapitalised by White Mountains Re Group in 2007 to expand the group's global reinsurance operating platform and build a stronger presence in the Bermuda reinsurance marketplace.