HAMILTON, Bermuda, Nov 1, 2002 /PRNewswire-FirstCall via COMTEX/ -- White
Mountains Insurance Group, Ltd. (NYSE: WTM) ended the third quarter of 2002 with
a fully converted tangible book value per share of $249, which is a $24 increase
since the beginning of the year. Investment gains and improving underwriting
results in its insurance and reinsurance subsidiaries contributed to the
Chairman Jack Byrne said, "I am pleased. Our book value per share is growing
nicely again, our balance sheet is solid, our underwriting results are well
ahead of plan and we are making money on our investments. Our investment
portfolio is a mountain of dry powder. I am excited about several actions that
we have taken in the last few weeks that are allowing us to continue to improve
the strength of our balance sheet. We raised $225 million from the sale of our
equity that we expect to use to repay the $260 million seller note that is
coming due. These actions will lower our debt to quite comfortable levels. We
also restructured our credit facility to defer amortization and improve our
flexibility. Montpelier Re had a successful IPO demonstrating the lovely value
in the business created less than a year ago. In addition, we are continuing
with our equity registration and, once the SEC has approved the registration
statement, we will determine whether to pursue the public offering based on our
needs and opportunities then. There is great disorder under Heaven, and the
situation is excellent."
White Mountains reported comprehensive net income of $889 million for the nine
months ended September 30, 2002, as compared to a comprehensive net loss of $133
million for the nine months ended September 30, 2001. Comprehensive net income
for the first nine months of 2002 includes $667 million of net deferred credits,
which were primarily recognized during the first quarter in connection with the
adoption of new accounting standards.
For the quarter ended September 30, 2002, White Mountains reported comprehensive
net income of $133 million, versus comprehensive net income of $8 million for
the third quarter of 2001. After tax operating income for the quarter was $11
million at its insurance and reinsurance subsidiaries versus an after tax
operating loss of $128 million for the comparable period in 2001. Net after tax
investment gains were $168 million for the quarter as compared to gains of $113
million for the comparable 2001 period. Holding company losses, which are
primarily due to financing and purchase accounting charges, were $46 million for
the quarter. Third quarter 2001 results included approximately $85 million of
after tax losses from the World Trade Center attacks.
On October 24, 2002 White Mountains closed a $225 million private placement of
equity securities at a price of $295 per share. The financing included $200
million in the form of WTM convertible preference shares, which will be
exchanged into 677,966 common shares if approved by shareholders, and $25
million in the form of common shares. On October 31, 2002, White Mountains
completed a restructuring of its credit facility, which was established in
conjunction with the acquisition of OneBeacon in 2001.
RESULTS OF SIGNIFICANT OPERATING SUBSIDIARIES
One Beacon reported comprehensive net income of $140 million for the quarter
ended September 30, 2002 and $249 million for the nine months ended September
30, 2002. After tax operating income was $19 million and $55 million for the
three months and nine months ended September 30, 2002, respectively. After tax
deferred acquisition cost write-offs on the business transferred to Liberty
Mutual for the three months and nine months were $9 million and $31 million,
respectively. Net after tax investment gains were $130 million and $225 million
for the three months and nine months ended September 30, 2002, respectively.
For core business, the third quarter 2002 trade ratio was slightly under 100%.
The core trade ratio for the first nine months of 2002 was 102% compared to 114%
for all of 2001. Business in runoff had a trade ratio of 122% for the third
quarter of 2002 and 119% for the first nine months of 2002, versus 125% for all
of 2001. Net written premiums for business in runoff was $162 million for the
third quarter of 2002 and $620 million for the first nine months of 2002, as
compared to $1.7 billion for all of 2001. For the combined core and runoff
businesses, the third quarter trade ratio was 107%. The total trade ratio for
the first nine months of 2002 was 109% compared to 120% for all of 2001. The
2001 trade ratio included approximately three points relating to September 11.
Ray Barrette, Chairman and CEO of OneBeacon, said, "On a trade ratio basis, we
made our first underwriting profit in our core business in the third quarter.
Although small, and helped by good weather and the hard market, we are beginning
to see the results of the significant improvements we have been able to make in
the last year and a half. Specialty lines had another good quarter with a 93%
trade ratio and significant premium growth. In commercial lines, we had a
difficult quarter due to large losses, which were roughly seven points higher
than expected, resulting in a quarterly trade ratio of 111%. Commercial lines
premiums decreased 38% compared to the third quarter of 2001 as we continue to
re-underwrite the book and increase prices. Commercial lines prices were up 21%,
year over year during the quarter. Personal lines, including AutoOne, our New
York personal automobile LAD division, had a nice quarter with a 96% trade
ratio. AutoOne is growing quickly and more than offsetting the shrinkage in our
Barrette continued, "During the quarter, we made significant progress on many of
our new initiatives. AutoOne successfully negotiated an increased volume of LAD
agreements for 2003 assignments at fees that further justify our large
investment in the business starting in late 2001. In August, we received
approval to restructure our New Jersey personal auto business into a reciprocal,
the New Jersey Skylands Association. This has turned the New Jersey personal
auto market from a losing proposition into a nice competitive advantage for
OneBeacon. Finally, our new team at OneBeacon Professional Partners has entered
the professional/medical liability market in a measured way that reflects not
only the rising prices in that market but also the pitfalls created by the
turmoil in the business and the legal environment."
Folksamerica. Folksamerica reported comprehensive net income of $90 million
during the first nine months of 2002 versus a comprehensive net loss of $2
million for the comparable 2001 period. Comprehensive net income for the first
nine months of 2002 consisted of $32 million of after tax operating income, $31
million of net after tax investment gains and a $27 million gain from
amortization of deferred credits, including a $7 million gain on the bargain
purchase of Imperial Casualty in the second quarter of 2002. Folksamerica's
statutory combined ratio for the first nine months of 2002 was 99%, adjusted for
the effects of retroactive reinsurance, compared to 120% for all of 2001.
For the quarter ended September 30, 2002, Folksamerica reported comprehensive
net income of $22 million, which consisted of $3 million of after tax operating
income and $19 million of net after tax investment gains. Folksamerica's three
month statutory combined ratio, adjusted for the effect of retroactive
reinsurance, for the three months ended September 30, 2002 was just under 100%.
In comparison, Folksamerica's adjusted statutory combined ratio for the third
quarter of 2001 was 127%, including a $25 million provision for costs relating
to September 11.
Steve Fass, CEO of Folksamerica, said, "Our results, which include a $7 million
pre tax provision for European flood losses, are improving as expected.
Importantly, reinsurance fundamentals continue to improve, as capacity withdraws
and hard market conditions extend to additional lines of business. In this
market environment, our clients appreciate our strong balance sheet and our
rational, disciplined approach to underwriting."
Montpelier Re. White Mountains recorded $51 million in comprehensive net income
from its 26% investment in Montpelier Re during the first nine months of 2002,
which included a substantial fair value adjustment to its warrants to acquire
shares of Montpelier Re.
Tom Kemp, President of White Mountains and Chief Financial Officer of Montpelier
Re, commented, "Montpelier Re continues to deliver excellent results in the nine
months since it opened for business. Business is strong and we are experiencing
encouraging underwriting results. Most of the losses incurred are IBNR reserves
set on a conservative basis. On October 9, 2002, Montpelier Re completed a very
successful public offering which netted it $201 million."
White Mountains Underwriting, Ltd. ("WMU"). WMU, White Mountains' newly formed
underwriting manager specializing in handling international property excess
reinsurance, generated comprehensive net income of $6 million and $21 million
for the three months and nine months ended September 30, 2002, respectively. For
the three months and nine months ended September 30, 2002, WMU's consulting
contract with Olympus Re produced fee income of $8 million and $24 million,
White Mountains is a Bermuda-domiciled financial services holding company traded
on the New York Stock Exchange under the symbol WTM. Additional financial
information and other items of interest are available at the Company's web site
located at www.whitemountains.com .
The Company expects to file its Form 10-Q
with the Securities and Exchange Commission on or before Thursday, November 14,
2002 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 "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
- 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
- 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 continued availability of capital and financing;
- general economic, market or business conditions;
- business opportunities (or lack thereof) that may be presented to and
- competitive forces, including the conduct of other property and
casualty insurers and reinsurers
- changes in applicable domestic or foreign laws or regulations, our
competitors or our clients;
- an economic downturn or other economic conditions adversely affecting
our financial position;
- loss reserves established subsequently proving to have been inadequate;
- other factors, most of which are beyond our 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 us will be
realized or, even if substantially realized, that they will have the expected
consequences to, or effects on, us or our 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.