NU Online News Service, Aug. 3, 2:52 p.m.EDT

White Mountains Insurance Group, Ltd., said it is reorganizingits reinsurance business, news that appeared not to dramaticallyaffect the rating of the overall company as it also reportedimproved second-quarter financial results.

The Hamilton, Bermuda-based insurer said Friday that it isconverting its reinsurance Bermuda operations, White Mountains ReBermuda, into a branch of White Mountains Re Sirius.

Warren Trace, currently president and chief executive officer ofWhite Mountains Re Bermuda, will remain in charge of the Bermudabranch operations. He will report to Goran Thorstensson, presidentand CEO of Sirius.

The company said the reorganization is expected to be effectiveon Sept. 1, pending regulatory approvals.

Allan Waters, president and CEO of White Mountains Re, said in astatement, "This reorganization keeps our successful Bermudareinsurance team in place while bringing the security of the wholeSirius balance sheet to our clients in Bermuda."

The company said White Mountains Re will contribute in excess of$200 million of capital to Sirius, which will have in excess of$1.6 billion of regulatory capital on a pro forma basis as of June30.

In addition, approximately $400 million of capital will be freedup and transferred to White Mountains Re and White Mountainsholding companies.

White Mountains Reinsurance Company of America will remain underthe direction of Dwight Evans as president and CEO.

The company said White Mountains Re America underwritingplatform and regulatory capitalization stood at approximately $750million as of June 30 and will not be affected by thereorganization.

Insurance rating service A.M. Best Co. said the ratings of WhiteMountains Insurance Group were unaffected by the change. However,the outlook for Sirius International Insurance was revised fromstable to negative, while all other outlooks remained stable.

Best said it was concerned with the long-term potential forreduced capacity at Sirius to support "parental and affiliateneeds" based on the rating service's calculations and theassumption and guaranty of "select higher risk and highervolatility businesses of White Mountain Re Bermuda."

Standard & Poor's Rating Service said its rating of thecompany and subsidiaries were unaffected by the move.

White Mountains also reported second-quarter earnings rose $253million from the same period last year, going from net loss of $17million to net income of $236 million. That translated intoearnings per share of $20.35 from a loss of 87 cents last year.Revenues rose 17 percent, or $180 million, to $1.22 billion.

For the six months net income increased $243 million to $226million over the same period last year. Earnings per share wentfrom a loss of $6.24 to net of $23.82. Revenues rose 11 percent, or$208 million, to $2.19 billion.

The company's improved performance was credited with acombination of improved investment returns, light catastropheclaims and improved underwriting results.

The reinsurance unit suffered losses from storms in EasternEurope and the Air France plane crash off the coast of Brazilearlier this year.

White Mountains' One Beacon insurance reported second-quartercombined ratio dropped 1 point to 93 over the same period lastyear. Six-month results improved 4 points to 93.

White Mountains Re total second-quarter combined ratio improved27 points to 87, and the six-month combined ratio dropped 21 pointsto 83.

For the company's online auto insurance division, Esurance,second-quarter combined ratio improved 5 points to 100 andsix-month figures improved 7 points to 102.