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White Mountains Reports 13% Growth In Book Value For 2003
Fourth Quarter 2003 Acquisitions to Add Significant Value in 2004

HAMILTON, Bermuda, Feb. 3 /PRNewswire-FirstCall/-- White Mountains Insurance Group, Ltd. ended 2003 with a fully converted tangible book value per share of $291, an increase of 13% (including dividends) from $259 at the end of 2002. Pre-tax income for 2003 was $372 million compared to $119 million in 2002. For the fourth quarter of 2003, pre-tax income was $64 million compared to $60 million in the prior year.

During the fourth quarter, White Mountains announced the following pending and completed acquisitions:

  • Renewal Rights to the Treaty Business of CNA Reinsurance;
  • Atlantic Specialty, the Commercial Insurance Business of Atlantic Mutual;
  • Sierra Insurance Group, a runoff insurance company, from Sierra Health Services;
  • Sirius Insurance Group, an international reinsurance operation, from ABB Holdings, Ltd.

CEO Ray Barrette said, "We had a solid year in 2003. We achieved terrific underwriting results in all of our ongoing businesses and earned nice returns on our investment portfolio. The drag from runoff operations shaved 2-3 percentage points from our book value growth, but this drag should essentially be over. In the fourth quarter, we were able to carefully capitalize on unique opportunities in each one of our businesses. All these transactions will add significant value for our shareholders and will be financed internally. In addition, Atlantic Specialty and Sirius International will clearly enhance our insurance and reinsurance operations, respectively."

OneBeacon

OneBeacon's pre-tax income for 2003 was $420 million compared to $200 million in 2002. The GAAP combined ratio was 98% for 2003 compared to 107% in 2002.

For the fourth quarter of 2003, OneBeacon's pre-tax income was $111 million with a GAAP combined ratio of 95%. For the comparable period of 2002, pre-tax income was $60 million with a GAAP combined ratio of 101%.

John Cavoores, CEO of OneBeacon, said, "We were operating on all cylinders in 2003. The GAAP combined ratio for core operations was 90% for the year. Core premiums are growing again and we are no longer writing non-core premiums. The addition of Atlantic Specialty, coupled with the introduction of new segmented personal insurance products and strong profit and growth in our specialty operations, gives OneBeacon terrific momentum going into 2004."

Net written premiums on core operations for 2003 were $1.9 billion, compared to $2.0 billion in 2002. Net written premiums on core operations for the fourth quarter of 2003 were $453 million, up 9% compared to $414 million in the same period last year. Net written premiums for 2003 were $2.0 billion, down from $2.5 billion in 2002. Net written premiums for the fourth quarter of 2003 were $465 million, down from $485 million in the fourth quarter of 2002.

Reinsurance

Pre-tax income for White Mountains' Reinsurance segment was $193 million for 2003, an increase of 16% over the $166 million recorded in 2002. For the fourth quarter of 2003, pre-tax income was $66 million versus $46 million in the comparable period of 2002.

Folksamerica's GAAP combined ratio was 95% in 2003, compared to 100% in 2002. Folksamerica's net written premiums increased 31% in 2003 to $889 million, while gross written premiums increased 46% to $1.4 billion. Folksamerica's GAAP combined ratio was 97% for the fourth quarter of 2003, compared to 100% for the fourth quarter of 2002. Net and gross written premiums increased 13% and 22%, respectively, in the fourth quarter compared to the fourth quarter of 2002.

Steve Fass, CEO of Folksamerica, said, "Overall, it was an outstanding year for Folksamerica. Underwriting results and premiums reached record levels. We also completed the renewal rights transaction with CNA Re and, through Folksamerica Re Solutions, negotiated the acquisition of Sierra Health Services. We expect these transactions to add to our economic value in 2004 and beyond."

White Mountains' Reinsurance segment consists of Folksamerica, Folksamerica Re Solutions, White Mountains Underwriting, Fund American Re, and White Mountains' investment in Montpelier.

Other Operations

White Mountains' Other Operations segment reported a pre-tax loss of $240 million for the full year 2003, compared to a pre-tax loss of $246 million in 2002. For the fourth quarter, the pre-tax loss was $112 million versus a pre- tax loss of $47 million in the comparable period of 2002. The Other Operations segment losses for each period was principally the result of financing, purchase accounting and compensation expenses at the holding company level. All results reported by the Company reflect the full cost of all compensation plans.

Investment Activities

John Gillespie, President of White Mountains Advisors, said, "We successfully navigated through a volatile year in the bond market and capitalized on a rising equity tide. In 2003, our equities and our fixed income portfolios both performed better than broadly accepted benchmarks. Our strategy continues to be to keep our bond portfolio duration relatively short at about three years and accumulate equities when we perceive value opportunities."

White Mountains' 2003 pre-tax income included $163 million of realized gains compared to $156 million in 2002. For the fourth quarter of 2003, realized gains were $49 million compared to $39 million last year. After-tax unrealized gains were $76 million in 2003 compared to $204 million in 2002. There were less unrealized gains in 2003 relative to 2002 primarily due to the increase in interest rates in 2003, versus the decline in rates in 2002.

Changes in Accounting Principles

During the fourth quarter of 2003, the FASB issued Staff Position No. 150- 3 ("FSP 150-3") deferring the adoption of SFAS 150 for certain mandatorily redeemable financial instruments. In this latest pronouncement, the FASB requires companies that were required to adopt SFAS 150 for such instruments in the third quarter of 2003 to reverse the effects of adoption in the fourth quarter of 2003. As a result, White Mountains recorded a $90 million gain as a cumulative effect of a change in accounting principles in the fourth quarter to reverse the effects of the $90 million charge recorded in the third quarter 2003 to adopt SFAS 150. Neither the adoption of SFAS 150 nor its subsequent reversal impacted fully converted tangible book value per share as the Company has always carried the Berkshire Preferred Stock at its full $300 million redemption value in computing its fully converted tangible book value per share.

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. The Company expects to file its Form 10-K with the Securities and Exchange Commission on or before Monday, March 15, 2004 and urges shareholders to refer to that document for more complete information concerning White Mountains' financial results.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The information contained in 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 we expect or anticipate 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':

  • growth in book value per share or return on equity;
  • business strategy;
  • financial and operating targets or plans;
  • incurred losses and the adequacy of its loss and loss adjustment expense reserves;
  • projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
  • expansion and growth of our 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 with our expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:

  • the failure of White Mountains to complete any or all of its recently announced acquisitions or, if White Mountains completes any such acquisition, the failure of any or all of such completed acquisitions to add value or to enhance White Mountains' business;
  • claims arising from catastrophic events, such as hurricanes, earthquakes, floods or terrorist attacks;
  • the continued availability of capital and financing;
  • general economic, market or business conditions;
  • competitive forces, including the conduct of other property and casualty insurers and reinsurers
  • changes in domestic or foreign laws or regulations applicable to White Mountains, its competitors or its clients;
  • an economic downturn or other economic conditions, such as changes in foreign currency exchange rates, adversely affecting its financial position;
  • loss reserves established subsequently proving to have been inadequate; and
  • other factors, most of which are beyond White Mountains' 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 update publicly 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, except share amounts)


                                            December 31,      December 31,
                                                 2003              2002
       Assets

       Fixed maturity investments, at
        fair value                             $6,248.1          $6,669.1
       Short-term investments, at fair
        value                                   1,546.6           1,790.6
       Common equity securities, at fair
        value                                     513.6             275.0
       Other investments                          239.2             164.7

         Total investments                      8,547.5           8,899.4

       Reinsurance recoverable on unpaid
        losses                                  3,473.8           4,071.9
       Reinsurance recoverable on paid
        losses                                    121.7             159.8
       Insurance and reinsurance premiums
        receivable                                779.0             830.5
       Investments in unconsolidated
        insurance affiliates                      515.9             399.9
       Deferred acquisition costs                 233.6             244.9
       Ceded unearned premiums                    185.3             163.9
       Accounts receivable on unsettled
        investment sales                            9.1             160.8
       Other assets                             1,105.1           1,102.5

         Total assets                         $14,971.0         $16,033.6

       Liabilities

       Loss and loss adjustment expense
        reserves                               $7,728.2          $8,875.3
       Unearned insurance and reinsurance
        premiums                                1,409.4           1,514.4
       Debt                                       743.0             793.2
       Accounts payable on unsettled
        investment purchases                      371.6             495.2
       Preferred stock subject to
        mandatory redemption                      194.5               -
       Funds held under reinsurance
        treaties                                  211.9             262.4
       Other liabilities                        1,333.2           1,285.3

         Total liabilities                     11,991.8          13,225.8

       Convertible preference shares                -               219.0
       Minority interest - preferred
        stock of subsidiaries                       -               180.9

       Common shareholders' equity

       Common shares and paid-in surplus        1,407.1           1,129.3
       Retained earnings                        1,286.4           1,071.9
       Accumulated other comprehensive
        income, after tax:
        Unrealized gains on investments           286.0             210.2
        Unrealized foreign currency
         translation losses                         (.3)             (3.5)

         Total common shareholders'
          equity                                2,979.2           2,407.9

       Total liabilities, convertible
        preference shares, minority
        interest
        and common shareholders' equity       $14,971.0         $16,033.6

       Common shares outstanding (000's)          9,007 sh          8,351 sh
       Common and equivalent shares
        outstanding (000's)                      10,782 sh         10,806 sh




                    WHITE MOUNTAINS INSURANCE GROUP, LTD.
                   FULLY CONVERTED TANGIBLE BOOK VALUE PER
                         COMMON AND EQUIVALENT SHARE
                                 (Unaudited)



                                   December 31,  September 30,  December 31,
                                         2003       2003           2002
    Book value per share
     numerators (in millions of
     dollars):

    Common shareholders' equity         $2,979.2  $2,794.6       $2,407.9
      Proceeds from assumed
       exercise of outstanding
       Warrants                            300.0     300.0          300.0
      Benefits to be received from
       share obligations under
       employee benefit plans                7.0       7.5            8.8
      Remaining adjustment of
       subsidiary preferred stock
       to face value                      (125.5)    (41.2)        (139.1)
    Book value per share numerator       3,160.7   3,060.9        2,577.6
      Conversion of convertible
       preference shares to Common
       Shares                                  -         -          219.0
      Unamortized goodwill                 (20.3)    (17.8)             -
    Fully converted tangible book
     value per common and
     equivalent share numerator         $3,140.4  $3,043.1       $2,796.6

    Book value per share
     denominators (in thousands of
     shares):

    Common Shares outstanding            9,007.2   9,002.4        8,351.4
      Common Shares issuable upon
       exercise of outstanding
       Warrants                          1,724.2   1,724.2        1,714.3
      Share obligations under
       employee benefits plans              50.6      55.4           61.9
    Book value per share
     denominator                        10,782.0  10,782.0       10,127.6
      Conversion of convertible
       preference shares to Common
       Shares                                  -         -          678.0
    Fully converted tangible book
     value per common and
     equivalent share denominator       10,782.0  10,782.0       10,805.6

    Book value per share                 $293.15   $283.90        $254.52
    Fully converted tangible book
     value per common and
     equivalent share                    $291.27   $282.24        $258.82



                      WHITE MOUNTAINS INSURANCE GROUP, LTD.
      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                      (millions, except per share amounts)

                                  (Unaudited)
                               Three Months Ended            Year Ended
                                   December 31,              December 31,
                               2003         2002          2003          2002
    Revenues:
     Earned insurance and
      reinsurance
      premiums                $791.3         $840.1     $3,137.7     $3,576.4
     Net investment
      income                    71.8           81.4        290.9        366.0
     Net realized gains
      on investments            48.6           39.3        162.6        156.0
     Other revenue              51.2           40.7        215.4        113.7

      Total revenues           962.9        1,001.5      3,806.6      4,212.1

    Expenses:
     Loss and loss
      adjustment expenses      503.6          627.7      2,138.1      2,638.2
     Insurance and
      reinsurance
      acquisition
      expenses                 154.7          184.2        611.6        806.3
     Other underwriting
      expenses                 107.6           54.0        363.3        403.9
     General and
      administrative
      expenses                  98.3           43.0        201.8         92.7
     Accretion of fair
      value adjustment to
      loss and loss
      adjustment expense
      reserves                  10.1           14.2         48.6         79.8
     Interest expense on
      debt                      11.5           18.8         48.6         71.8
     Interest expense -
      dividends and
      accretion on
      preferred stock
      subject to
      mandatory
      redemption                13.1              -         22.3            -

      Total expenses           898.9          941.9      3,434.3      4,092.7

    Pretax income               64.0           59.6        372.3        119.4

     Tax provision             (22.4)         (10.4)      (127.6)       (11.7)

    Net income before
     minority interest,
     equity in earnings
     of unconsolidated
     affiliates,
     accounting changes
      and extraordinary
      items                     41.6           49.2        244.7        107.7

     Dividends and
      accretion on
      subsidiary
      preferred stock to
      face value                   -          (10.5)       (21.5)       (40.9)
     Equity in earnings
      of unconsolidated
      affiliates                15.1            6.2         57.4         14.0

    Net income before
     accounting changes
     and extraordinary
     items                      56.7           44.9        280.6         80.8

     Cumulative effect of
      changes in
      accounting
      principles                89.8              -            -        660.2
     Excess of fair value
      of acquired net
      assets over cost             -              -            -          7.1

    Net income                 146.5           44.9        280.6        748.1

     Net change in
      unrealized gains on
      investments               31.7           17.0         75.8        203.7
     Net change in
      foreign currency
      gains (losses)             2.2            (.7)         3.2         (1.4)

    Comprehensive net
     income                   $180.4          $61.2       $359.6       $950.4


    Computation of net
     income available to
     common shareholders:
     Net income               $146.5          $44.9       $280.6       $748.1
     Redemption value
      adjustment and
      dividends -
      convertible
      preference shares            -          (19.4)       (49.5)       (19.4)
    Net income available
     to common
     shareholders             $146.5          $25.5       $231.1       $728.7

    Basic earnings per
     common share:

     Net income before
      accounting changes
      and extraordinary
      items                    $6.30          $3.09       $26.48        $7.47
     Net income                16.28           3.09        26.48        88.61

    Diluted earnings per
     common share:

     Net income before
      accounting changes
      and extraordinary
      items                    $5.57          $2.78       $23.63        $6.80
     Net income                14.52           2.78        23.63        80.75



                      WHITE MOUNTAINS INSURANCE GROUP, LTD.
                           YTD SEGMENT INCOME STATEMENT
                                  (in millions)


     For the Year Ended December 31, 2003


                                   OneBeacon  Reinsurance  Other    Total
       Revenues:
         Earned insurance and
          reinsurance premiums        $2,183.4   $922.6    $31.7  $3,137.7
         Net investment income           233.9     54.2      2.8     290.9
         Net realized gains (losses)
          on investments                 127.1     40.3     (4.8)    162.6
         Other revenue                    90.5     75.5     49.4     215.4

           Total revenues              2,634.9  1,092.6     79.1   3,806.6

       Expenses:
         Loss and loss adjustment
          expenses                     1,493.8    620.4     23.9   2,138.1
         Insurance and reinsurance
          acquisition expenses           394.9    197.0     19.7     611.6
         Other underwriting expenses     258.7     61.0     43.6     363.3
         General and administrative
          expenses                        67.6     19.6    114.6     201.8
         Accretion of fair value
          adjustment to loss and lae
          reserves                          -        -      48.6      48.6
         Interest expense on debt          0.3      2.0     46.3      48.6
         Interest expense  -
          dividends and accretion on
          preferred stock
           subject to mandatory
            redemption                      -        -      22.3      22.3

           Total expenses              2,215.3    900.0    319.0   3,434.3

       Pretax income (loss)             $419.6   $192.6  $(239.9)   $372.3


     For the Year Ended December 31, 2002

                                    OneBeacon Reinsurance  Other    Total
       Revenues:
         Earned insurance and
          reinsurance premiums        $2,870.9   $675.8    $29.7  $3,576.4
         Net investment income           314.0     52.7     (0.7)    366.0
         Net realized gains (losses)
          on investments                 113.0     88.3    (45.3)    156.0
         Other revenue                    14.4     53.6     45.7     113.7

           Total revenues              3,312.3    870.4     29.4   4,212.1

       Expenses:
         Loss and loss adjustment
          expenses                     2,131.3    478.8     28.1   2,638.2
         Insurance and reinsurance
          acquisition expenses           629.1    161.1     16.1     806.3
         Other underwriting expenses     329.2     42.4     32.3     403.9
         General and administrative
          expenses                        22.4     20.6     49.7      92.7
         Accretion of fair value
          adjustment to loss and lae
          reserves                          -        -      79.8      79.8
         Interest expense                   -       2.0     69.8      71.8

           Total expenses              3,112.0    704.9    275.8   4,092.7

       Pretax income (loss)             $200.3   $165.5  $(246.4)   $119.4



                      WHITE MOUNTAINS INSURANCE GROUP, LTD.
                           QTD SEGMENT INCOME STATEMENT
                                  (in millions)


     For the Three Months Ended December 31, 2003

                                       OneBeacon Reinsurance Other   Total

        Revenues:
          Earned insurance and
           reinsurance premiums           $524.9  $258.1     $8.3   $791.3
          Net investment income             60.6    14.2     (3.0)    71.8
          Net realized gains on
           investments                      14.9    30.3      3.4     48.6
          Other revenue                     33.0    18.8     (0.6)    51.2

            Total revenues                 633.4   321.4      8.1    962.9

        Expenses:
          Loss and loss adjustment
           expenses                        324.7   173.5      5.4    503.6
          Insurance and reinsurance
           acquisition expenses             93.5    55.8      5.4    154.7
          Other underwriting expenses       77.9    17.6     12.1    107.6
          General and administrative
           expenses                         26.5     8.5     63.3     98.3
          Accretion of fair value
           adjustment to loss and lae
           reserves                           -       -      10.1     10.1
          Interest expense on debt           0.3     0.5     10.7     11.5
          Interest expense  - dividends
           and accretion on preferred
           stock
            subject to mandatory
             redemption                       -       -      13.1     13.1

            Total expenses                 522.9   255.9    120.1    898.9

        Pretax income (loss)              $110.5   $65.5  $(112.0)   $64.0


     For the Three Months Ended December 31, 2002

                                      OneBeacon  Reinsurance Other    Total

        Revenues:
          Earned insurance and
           reinsurance premiums           $629.5  $203.0     $7.6   $840.1
          Net investment income             70.0     9.6      1.8     81.4
          Net realized gains (losses) on
           investments                      14.5    25.6     (0.8)    39.3
          Other revenue                      3.6    15.2     21.9     40.7

            Total revenues                 717.6   253.4     30.5  1,001.5

        Expenses:
          Loss and loss adjustment
           expenses                        467.9   149.3     10.5    627.7
          Insurance and reinsurance
           acquisition expenses            126.5    44.4     13.3    184.2
          Other underwriting expenses       41.6    11.1      1.3     54.0
          General and administrative
           expenses                         21.2     2.1     19.7     43.0
          Accretion of fair value
           adjustment to loss and lae
           reserves                           -       -      14.2     14.2
          Interest expense on debt            -      0.5     18.3     18.8

            Total expenses                 657.2   207.4     77.3    941.9

        Pretax income (loss)               $60.4   $46.0   $(46.8)   $59.6




                      WHITE MOUNTAINS INSURANCE GROUP, LTD.
                       SUMMARY OF GAAP RATIOS AND PREMIUMS
                                   (Unaudited)



    Year Ended December 31, 2003
                                          OneBeacon

                                                       Total    Total   Folks-
                         Personal Commercial Specialty  Core      (1)  america
    GAAP Ratios
    Loss and LAE              61%     61%     59%       60%       68%     67%
    Expense                   26%     34%     32%       30%       30%     28%
         Total Combined       87%     95%     91%       90%       98%     95%
    Dollars in millions
    Net written premiums   $942.2  $426.7  $499.9  $1,868.8  $2,004.0  $889.2
    Earned insurance
     premiums              $975.4  $432.0  $487.4  $1,894.8  $2,183.4  $844.3



    Year Ended December  31, 2002
                                             OneBeacon

                                                       Total    Total   Folks-
                         Personal Commercial Specialty  Core      (1)  america
    GAAP Ratios
    Loss and LAE              70%     67%     62%       68%       74%     70%
    Expense                   26%     33%     32%       29%       33%     30%
         Total Combined       96%    100%     94%       97%      107%    100%
    Dollars in millions
    Net written premiums $1,092.1  $454.6  $449.7  $1,996.4  $2,522.8  $678.7
    Earned insurance
     premiums            $1,015.5  $527.4  $420.1  $1,963.0  $2,870.9  $620.5


    Three Months Ended December 31, 2003
                                          OneBeacon

                                                       Total    Total   Folks-
                         Personal Commercial Specialty  Core      (1)  america
    GAAP Ratios
    Loss and LAE              61%     55%     55%       58%       62%     68%
    Expense                   33%     40%     34%       35%       33%     29%
         Total Combined       94%     95%     89%       93%       95%     97%
    Dollars in millions
    Net written premiums   $240.2   $98.6  $114.0    $452.8    $464.7  $225.1
    Earned insurance
     premiums              $240.5  $111.1  $126.0    $477.6    $524.9  $229.9


    Three Months Ended December 31, 2002
                                          OneBeacon

                                                       Total    Total   Folks-
                         Personal Commercial Specialty  Core      (1)  america
    GAAP Ratios
    Loss and LAE              57%     53%     66%       58%       74%     72%
    Expense                   26%     32%     30%       27%       27%     28%
         Total Combined       83%     85%     96%       85%      101%    100%
    Dollars in millions
    Net written premiums   $214.6   $92.1  $107.7    $414.4    $484.6  $199.7
    Earned insurance
     premiums              $257.8  $115.9  $114.1    $487.8    $629.5  $177.0


    (1) Includes results from Non-core operations.

SOURCE White Mountains Insurance Group, Ltd.
02/03/2004

CONTACT: David Foy for White Mountains, 203-453-1681
(WTM)