WHITE MOUNTAINS INSURANCE GROUP, LTD. 
By HAMILTON, Bermuda, April 28, 2014 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM) reported an adjusted book value per share of $656 at March 31, 2014, up 2.2% for the first quarter of 2014, including dividends.
Ray Barrette, Chairman and CEO, commented, "It was a good start to the year. Our investment portfolio gained 1.1% with steady results from our short, safe fixed income portfolio and a nice outperformance on the equity side. OneBeacon grew book value by 4% with a combined ratio of 89% and net written premium growth of 17%. Sirius Group reported a combined ratio of 73% and had a successful 1/1/14 renewal season. BAM continues its advance, guaranteeing $1.5 billion of par in the quarter, well above last year's first quarter. The interest rate on the BAM surplus notes was adjusted from a fixed rate of 8% to a floating rate of 300 basis points above the one-year treasury to reflect current market conditions. We reached agreements on a number of smaller but high potential insurance marketing/technology investments with more in the works."
Adjusted comprehensive income was $88 million in the first quarter of 2014, compared to $117 million in the first quarter of last year, while net income attributable to common shareholders was $96 million in the first quarter of 2014, compared to $120 million in the first quarter of last year.
OneBeacon
OneBeacon's book value per share increased 4.2% for the first quarter of 2014, including dividends. OneBeacon's GAAP combined ratio was 89% for the first quarter of 2014 compared to 88% for the first quarter of last year. There was one point of favorable loss reserve development in each period. Additionally, the loss ratio was slightly higher and the expense ratio slightly lower quarter over quarter due to change in business mix driven by the exit of the collector car and boat business in the first quarter of 2013. The first quarter of 2014 also includes a $5 million tax benefit relating to the settlement of the IRS examination for tax years 2005 and 2006.
Mike Miller, CEO of OneBeacon, said, "We are pleased with our strong start to the year, reporting 4.2% growth in book value, driven by solid results in both underwriting and investments. Premiums were up a healthy 17%, reflecting new business momentum and nice contributions from our newer business units. We remain focused on closing the sale of our runoff business in the second half of the year and are well-positioned to continue building our specialty platform."
Net written premiums were $311 million in the first quarter of 2014, an increase of 17% from the first quarter of last year. The increase reflects growth in net written premiums across most of OneBeacon's businesses, with particularly strong contributions from its newer units - OneBeacon Program Group, OneBeacon Surety Group and OneBeacon Crop Insurance - as well as from OneBeacon Technology Insurance.
Sirius Group
Sirius Group's GAAP combined ratio was 73% for the first quarter of 2014 compared to 81% for the first quarter of last year. The decrease in the combined ratio was driven by better loss reserve development. Favorable loss reserve development was 5 points in the first quarter of 2014, primarily due to reductions in casualty and accident and health loss reserves, compared to unfavorable development of 2 points in the first quarter last year, which was driven by a late reported agricultural claim related to the 2012 U.S. drought. Catastrophe losses did not meaningfully impact the combined ratio in either period.
Allan Waters, CEO of Sirius Group, said, "Our 73% combined ratio for the first quarter was a strong start to 2014. While the (re)insurance industry continues to experience substantial competition, Sirius Group's long track record of consistently disciplined underwriting and superior client service differentiate us in the marketplace. On April 1(st) we had a smooth CEO transition at Sirius International, with Monica Cramer-Manhem assuming the helm from Goran Thorstensson."
First quarter 2014 gross and net written premiums, at $453 million and $333 million, respectively, were essentially flat compared to the first quarter of last year, as increases in the accident and health line offset decreases in the property and trade credit lines.
HG Global/BAM
In the first quarter of 2014, BAM guaranteed more than $1.5 billion of municipal bonds, $1.3 billion of which were in the primary market, up more than 50% from the first quarter of last year. As of March 31, 2014, BAM's total claims paying resources were approximately $583 million on total insured par outstanding (including policies priced but not yet closed) of $6.2 billion.
HG Global reported pre-tax income of $5 million in the first quarter of 2014 compared to pre-tax income of $10 million in the first quarter of last year. The decrease was driven by lower interest income on the surplus notes due to the change in interest rate discussed below. White Mountains reported $9 million of GAAP pre-tax losses relating to BAM in the first quarter of 2014, driven by operating expenses and accrual of interest on surplus notes, partially offset by unrealized investment gains, compared to GAAP pre-tax losses of $18 million in the first quarter of last year. BAM's affairs are managed on a statutory accounting basis, and it does not report stand-alone GAAP financial results. BAM's statutory net loss was $8 million in the first quarter of 2014 and $7 million the first quarter of last year. As a mutual insurance company that is owned by its members, BAM's results do not affect White Mountains's adjusted book value per share. However, White Mountains is required to consolidate BAM's results in its GAAP financial statements and its results are attributed to non-controlling interests.
Bob Cochran, Chairman of BAM, said, "In the first quarter, BAM guaranteed close to half the primary insured market measured by volume. More importantly to BAM's mission to serve the needs of small- and medium-sized municipal governments, we provided borrowing cost savings to 135 separate issuers, or 57% of all insured transactions. The use of municipal bond insurance continued to rise in the first quarter, validating our belief that there is a growing need for our product in the marketplace. Our objective is to continue to increase the use of insurance steadily over the course of 2014. The change to the interest rate on the surplus notes reflects current market conditions, including BAM's progress in establishing its franchise as a market leader in the once-again-growing financial-guaranty insurance industry."
Effective January 1, 2014, HG Global and BAM agreed to change the interest rate on the BAM surplus notes for the five years ended December 31, 2018 from a fixed rate of 8% to a variable rate equal to the one-year U.S. treasury rate plus 300 basis points, set annually. Prior to the end of 2018, BAM has the option to extend the variable rate period for an additional three years. At the end of the variable rate period, the interest rate will be fixed at the higher of the then current variable rate or 8%. BAM is required to seek regulatory approval to pay interest and principal on its surplus notes only when adequate capital resources have accumulated beyond BAM's initial capitalization and a level that continues to support its outstanding obligations, business plan and ratings.
Other Operations
White Mountains's Other Operations segment reported pre-tax losses of $12 million in the first quarter of 2014, compared to $11 million of pre-tax gains in the first quarter of last year. The results for White Mountains's Other Operations segment for both periods were primarily driven by the results of investment assets contained within the segment.
White Mountains's Other Operations segment reported net realized and unrealized investment gains of $13 million in the first quarter of 2014, compared to $35 million of gains in the first quarter last year. WM Life Re reported pre-tax losses of $3 million in the first quarter of 2014 compared to $7 million in the first quarter last year.
Investment in Symetra Common Shares
During the first quarter of 2014, White Mountains recorded $13 million in equity in earnings from its investment in Symetra's common shares, which increased the value of the investment in Symetra's common shares used in the calculation of White Mountains's adjusted book value per share to $18.62 per Symetra common share at March 31, 2014. This compares to Symetra's quoted stock price of $19.82 and Symetra's book value per common share (excluding unrealized gains (losses) from its fixed maturity portfolio) of $20.50.
Investment Activities
The GAAP total return on invested assets for the first quarter of 2014 was 1.1%, compared to 1.4% for the first quarter of last year. Currency translation did not impact the first quarter of 2014, while the first quarter of 2013 results included 0.4% of currency losses.
Manning Rountree, President of White Mountains Advisors, said, "The total portfolio was up 1.1% for the quarter. Our short-duration fixed income portfolio returned 0.8%, lagging the Barclay's Intermediate Aggregate index return as interest rates fell in the quarter. The equity portfolio was up 2.4% for the quarter, outperforming the S&P 500."
Additional Information
White Mountains is a Bermuda-domiciled financial services holding company traded on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol WTM. Additional financial information and other items of interest are available at the company's website located at www.whitemountains.com. White Mountains expects to file its Form 10-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.
Regulation G
This earnings release includes two non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures. White Mountains believes these measures to be more relevant than comparable GAAP measures in evaluating White Mountains's financial performance.
Adjusted book value per share is a non-GAAP financial measure which is derived by expanding the calculation of GAAP book value per share to exclude equity in net unrealized gains (losses) from Symetra's fixed maturity portfolio, net of applicable taxes, from book value. In addition, the number of common shares outstanding used in the calculation of adjusted book value per share are adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. The reconciliation of adjusted book value per share to GAAP book value per share is included on page 7.
Adjusted comprehensive income (loss) is a non-GAAP financial measure that excludes the change in equity in net unrealized gains (losses) from Symetra's fixed maturity portfolio, net of applicable taxes, from comprehensive income (loss) attributable to White Mountains's common shareholders. The reconciliation of adjusted comprehensive income (loss) to GAAP comprehensive income (loss) attributable to White Mountains's common shareholders is included on page 8.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This earnings release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this release which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words "will", "believe", "intend", "expect", "anticipate", "project", "estimate", "predict" and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains's:
-- change in adjusted book value per share or return on equity;
-- business strategy;
-- financial and operating targets or plans;
-- incurred loss and loss adjustment expenses and the adequacy of its loss
and loss adjustment expense reserves and related reinsurance;
-- projections of revenues, income (or loss), earnings (or loss) per share,
dividends, market share or other financial forecasts;
-- expansion and growth of its business and operations; and
-- future capital expenditures.
These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:
-- the risks associated with Item 1A of White Mountains's 2013 Annual
Report on Form 10-K;
-- claims arising from catastrophic events, such as hurricanes,
earthquakes, floods, fires, terrorist attacks or severe winter weather;
-- the continued availability of capital and financing;
-- general economic, market or business conditions;
-- business opportunities (or lack thereof) that may be presented to it and
pursued;
-- competitive forces, including the conduct of other property and casualty
insurers and reinsurers;
-- changes in domestic or foreign laws or regulations, or their
interpretation, applicable to White Mountains, its competitors or its
customers;
-- an economic downturn or other economic conditions adversely affecting
its financial position;
-- recorded loss reserves subsequently proving to have been inadequate;
-- actions taken by ratings agencies from time to time, such as financial
strength or credit ratings downgrades or placing ratings on negative
watch; and
-- other factors, most of which are beyond White Mountains's control.
Consequently, all of the forward-looking statements made in this earnings release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
March 31, December March
31, 31,
2014 2013 2013
---- ---- ----
Assets
Fixed
maturity
investments $4,988.7 $5,030.5 $4,854.4
Short-
term
investments 674.0 635.9 654.4
Common
equity
securities 1,174.6 1,156.8 1,073.2
Convertible
fixed
maturity
investments 73.8 80.5 95.6
Other
long-
term
investments 302.3 288.9 295.2
----- ----- -----
Total
investments 7,213.4 7,192.6 6,972.8
Cash 338.6 382.8 411.5
Reinsurance
recoverable
on paid
and
unpaid
losses 440.4 453.5 426.4
Insurance
and
reinsurance
premiums
receivable 734.8 518.9 717.6
Funds
held by
ceding
companies 93.8 106.3 110.6
Investments
in
unconsolidated
affiliates 373.3 321.4 383.6
Deferred
acquisition
costs 190.0 174.7 190.4
Deferred
tax
asset 484.9 512.1 539.1
Ceded
unearned
insurance
and
reinsurance
premiums 149.5 92.4 144.1
Accounts
receivable
on
unsettled
investment
sales 19.9 12.1 99.0
Other
assets 574.7 497.4 461.2
Assets
held
for
sale 1,803.1 1,880.1 2,155.2
------- ------- -------
Total
assets $12,416.4 $12,144.3 $12,611.5
========= ======= =======
Liabilities
Loss and
loss
adjustment
expense
reserves $3,048.4 $3,079.3 $3,100.6
Unearned
insurance
and
reinsurance
premiums 1,116.6 901.4 1,064.9
Debt 677.6 676.4 676.2
Deferred
tax
liability 353.9 356.2 337.1
Ceded
reinsurance
payable 157.9 71.9 175.7
Funds
held
under
insurance
and
reinsurance
contracts 127.8 127.1 67.3
Accounts
payable
on
unsettled
investment
purchases 80.9 20.5 25.7
Other
liabilities 522.3 634.0 726.8
Liabilities
held
for
sale 1,803.1 1,880.1 2,155.2
------- ------- -------
Total
liabilities 7,888.5 7,746.9 8,329.5
------- ------- -------
Equity
White
Mountains's
common
shareholders'
equity
White
Mountains's
common
shares
and
paid-
in
surplus 1,052.9 1,051.1 1,037.3
Retained
earnings 2,880.8 2,802.3 2,601.4
Accumulated
other
comprehensive
income
(loss),
after
tax:
Equity
in net
unrealized
(losses)
gains
from
investments
in
Symetra
common
shares (3.9) (40.4) 49.7
Net
unrealized
foreign
currency
translation
gains 80.5 88.4 82.0
Pension
liability
and
other 4.2 4.1 (11.5)
--- --- -----
Total
White
Mountains's
common
shareholders'
equity 4,014.5 3,905.5 3,758.9
------- ------- -------
Non-
controlling
interests
Non-
controlling
interest
-
OneBeacon
Ltd. 279.2 273.7 263.5
Non-
controlling
interest
- SIG
Preference
Shares 250.0 250.0 250.0
Non-
controlling
interest
- HG
Global 18.4 16.6 16.6
Non-
controlling
interest
- BAM (102.7) (97.6) (53.8)
Non-
controlling
interest
-
other 68.5 49.2 46.8
---- ---- ----
Total
non-
controlling
interests 513.4 491.9 523.1
----- ----- -----
Total
equity 4,527.9 4,397.4 4,282.0
------- ------- -------
Total
liabilities
and
equity $12,416.4 $12,144.3 $12,611.5
========= ======= =======
WHITE MOUNTAINS INSURANCE GROUP, LTD.
BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE
(Unaudited)
March 31, December
31, March 31,
2014 2013 2013
---- ---- ----
Book
value
per
share
numerators
(in
millions):
White
Mountains's
common
shareholders'
equity -
book
value
per $4,014.5 $3,905.5 $3,758.9
share
numerator
(1)
Equity in
net
unrealized
losses
(gains)
from
Symetra's
fixed 3.9 40.4 (49.7)
maturity
portfolio,
net of
applicable
taxes
Adjusted
book
value
per
share
numerator
(1) $4,018.4 $3,945.9 $3,709.2
======== ====== ======
Book
value
per
share
denominators
(in
thousands
of
shares):
Common
shares
outstanding
-book
value
per
share
denominator
(1) 6,174.4 6,176.7 6,176.2
Unearned
restricted
common
shares (45.7) (33.0) (57.4)
----- ----- -----
Adjusted
book
value
per
share
denominator
(1) 6,128.7 6,143.7 6,118.8
======= ======= =======
Book
value
per
share $650.18 $632.30 $608.62
Adjusted
book
value
per
share $655.67 $642.27 $606.20
======= ======= =======
(1)
Excludes
out-of-
the-
money
stock
options.
March 31, December
31, 2013 March 31,
2014 2013
---- ----
YTD YTD YTD
--- --- ---
Growth in
adjusted
book
value
per
share,
including
dividends 2.2% 9.5% 3.3%
=== === ===
Dividends
per share $1.00 $1.00 $1.00
===== ===== =====
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(millions, except per share amounts)
(Unaudited)
Three Months
Ended
March 31,
---------
2014 2013
---- ----
Revenues:
Earned insurance and reinsurance
premiums $493.6 $495.4
Net investment income 24.3 28.5
Net realized and unrealized
investment gains 63.8 75.2
Other revenue (3.4) 28.3
---- ----
Total revenues 578.3 627.4
----- -----
Expenses:
Loss and loss adjustment expenses 229.3 244.3
Insurance and reinsurance
acquisition expenses 95.1 98.2
Other underwriting expenses 81.4 79.1
General and administrative expenses 50.1 42.6
Accretion of fair value adjustment
to loss and lae reserves .2 1.2
Interest expense 10.1 10.2
---- ----
Total expenses 466.2 475.6
----- -----
Pre-tax income from continuing
operations 112.1 151.8
Income tax expense (30.3) (41.6)
----- -----
Net income from continuing
operations 81.8 110.2
Net (loss) income from discontinued
operations, net of tax (.5) .5
--- ---
Income before equity in earnings of
unconsolidated affiliates 81.3 110.7
Equity in earnings of
unconsolidated affiliates, net of
tax 13.8 9.2
---- ---
Net income 95.1 119.9
Net loss attributable to non-
controlling interests .5 .5
--- ---
Net income attributable to White
Mountains's common shareholders 95.6 120.4
Comprehensive income, net of tax:
Change in equity in net unrealized
gains (losses) from investments 36.5 (8.0)
in Symetra common shares, net of
tax
Change in foreign currency
translation, pension liability and
other (7.8) (3.7)
---- ----
Comprehensive income 124.3 108.7
Comprehensive income attributable
to non-controlling interests - -
--- ---
Comprehensive income attributable
to White Mountains's common
shareholders 124.3 108.7
----- -----
Change in equity in net unrealized
(gains) losses from Symetra's
fixed maturity portfolio, net of
applicable taxes (36.5) 8.0
----- ---
Adjusted comprehensive income $87.8 $116.7
===== ======
Income (loss) per share
attributable to White Mountains's
common shareholders
Basic income (loss) per share
Continuing operations $15.56 $19.10
Discontinued operations (.08) .07
---- ---
Total consolidated operations $15.48 $19.17
------ ------
Diluted income (loss) per share
Continuing operations $15.56 $19.10
Discontinued operations (.08) .07
---- ---
Total consolidated operations $15.48 $19.17
------ ------
WHITE MOUNTAINS INSURANCE GROUP, LTD.
YTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS)
(millions)
(Unaudited)
For the Three
Months Ended March
31, 2014 HG Global/BAM
-------------
OneBeacon Sirius HG
Group Global BAM Other Total
--------- ------- ------ --- ----- -----
Revenues:
Earned
insurance
and
reinsurance
premiums $276.5 $215.5 $.2 $.1 $1.3 $493.6
Net
investment
income 10.0 8.7 .3 1.4 3.9 24.3
Net
investment
income
(loss) -
surplus
note
interest - - 3.9 (3.9) - -
Net realized
and
unrealized
investment
gains 18.9 28.1 .7 3.0 13.1 63.8
Other
revenue -
foreign
currency
translation
losses - (3.9) - - - (3.9)
Other
revenue 1.0 (1.4) - .2 .7 .5
--- ---- --- --- --- ---
Total
revenues 306.4 247.0 5.1 .8 19.0 578.3
----- ----- --- --- ---- -----
Expenses:
Loss and
loss
adjustment
expenses 149.4 78.8 - - 1.1 229.3
Insurance
and
reinsurance
acquisition
expenses 46.7 47.4 .1 .4 .5 95.1
Other
underwriting
expenses 49.4 31.8 - .1 .1 81.4
General and
administrative
expenses 3.3 8.2 .4 8.9 29.3 50.1
Accretion of
fair value
adjustment
to loss and
lae
reserves - .2 - - - .2
Interest
expense 3.2 6.6 - - .3 10.1
--- --- --- --- --- ----
Total
expenses 252.0 173.0 .5 9.4 31.3 466.2
----- ----- --- --- ---- -----
Pre-tax
income
(loss) $54.4 $74.0 $4.6 $(8.6) $(12.3) $112.1
===== ===== == ==== ===== ======
For the Three
Months Ended
March 31, 2013 HG Global/BAM
-------------
OneBeacon Sirius HG
Group Global BAM Other Total
--------- ------- ----- --- ----- -----
Revenues:
Earned
insurance and
reinsurance
premiums $286.5 $208.9 $ - $ - $ - $495.4
Net investment
income 9.4 13.1 .3 1.1 4.6 28.5
Net investment
income (loss)
-surplus note
interest - - 10.1 (10.1) - -
Net realized
and unrealized
investment
gains (losses) 28.4 13.1 (.2) (1.1) 35.0 75.2
Other revenue -
foreign
currency
translation
gains - 3.3 - - - 3.3
Other revenue -
Symetra
warrants - - - - (3.7) (3.7)
Other revenue 24.0 7.2 - .1 (2.6) 28.7
---- --- --- --- ---- ----
Total revenues 348.3 245.6 10.2 (10.0) 33.3 627.4
----- ----- ---- ----- ---- -----
Expenses:
Loss and loss
adjustment
expenses 148.9 95.4 - - - 244.3
Insurance and
reinsurance
acquisition
expenses 54.8 43.3 - .1 - 98.2
Other
underwriting
expenses 49.3 29.7 - .1 - 79.1
General and
administrative
expenses 4.0 8.3 .3 8.2 21.8 42.6
Accretion of
fair value
adjustment to
loss and lae
reserves - 1.2 - - - 1.2
Interest
expense 3.2 6.6 - - .4 10.2
--- --- --- --- --- ----
Total expenses 260.2 184.5 .3 8.4 22.2 475.6
----- ----- --- --- ---- -----
Pre-tax income
(loss) $88.1 $61.1 $9.9 $(18.4) $11.1 $151.8
===== ===== == ===== === ====
WHITE MOUNTAINS INSURANCE GROUP, LTD.
SELECTED FINANCIAL DATA
(Dollars in millions)
(Unaudited)
Three Months Ended
March 31,
-------------------
OneBeacon 2014 2013
--------- ---- ----
GAAP Ratios
Loss and LAE 54% 52%
Expense 35% 36%
--- ---
Combined 89% 88%
=== ===
Net written premiums $311.1 $265.1
Earned premiums $276.5 $286.5
Three Months Ended
March 31,
-------------------
Sirius Group 2014 2013
------------ ---- ----
GAAP Ratios
Loss and LAE 36% 46%
Expense 37% 35%
--- ---
Combined 73% 81%
=== ===
Gross written premiums $452.7 $451.7
Net written premiums $333.3 $334.1
Earned premiums $215.5 $208.9
Three Months Ended
March 31,
-------------------
BAM 2014 2013
--- ---- ----
Gross par value of primary
market policies priced $1,335.2 $866.5
Gross par value of
secondary market policies
priced 177.8 67.9
----- ----
Total gross par value of
market policies priced $1,513.0 $934.4
-------- ----
Gross par value of primary
and $1,329.0 $672.8
secondary market policies
issued
Gross written premiums $4.8 $2.0
Member surplus
contributions collected $4.8 $3.5
As of March 31,
2014
---------------
Policyholders' surplus $465.7
Contingency reserve 1.7
Qualified statutory capital 467.4
Net unearned premiums 4.0
Present value of future
installment premiums .9
Collateral trusts 110.9
Claims paying resources $583.2
======
Three Months Ended
March 31,
HG Global 2014 2013
--------- ---- ----
Net written premiums $3.7 $1.5
Earned premiums $.2 $ -
As of March 31,
2014
---------------
Unearned premiums $13.4
Deferred acquisition costs $3.1
CONTACT: David Foy
(203) 458-5850
SOURCE White Mountains Insurance Group, Ltd.
