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White Mountains Book Value Per Share Rises to $309

HAMILTON, Bermuda, April 30 /PRNewswire-FirstCall/-- White Mountains Insurance Group, Ltd. ended the first quarter of 2004 with a fully converted tangible book value per share of $309, up 6% from year end and 16% from the first quarter of 2003.

Net income available to common shareholders was $96 million for the quarter, up from $91 million in the comparable period of 2003. Comprehensive net income for the quarter more than doubled to $194 million from $92 million in the first quarter of 2003.

During the quarter, the company announced it is leading with Berkshire Hathaway an investor group that will acquire Safeco Life & Investments for $1.35 billion. White Mountains will invest $200 million in the transaction, which is expected to close in the third quarter. The company also closed the Atlantic Specialty and Sierra acquisitions during the quarter. The Sierra acquisition resulted in an extraordinary gain of $9 million in the quarter. In addition, the Sirius acquisition closed in April.

CEO Ray Barrette said, "We executed well in the first quarter. OneBeacon and Folksamerica continue to produce superior underwriting results, while adding value through the Atlantic Specialty, CNA Re and Sierra transactions. We added a new reporting segment to reflect the growing importance of Esurance, our Internet-based insurance business. Esurance reached the break- even profitability point in the first quarter and we expect it to achieve substantial growth in earnings and premiums in the coming years. Investments continue to add significant value both in absolute and relative terms and contributed significantly to our comprehensive net income for the quarter."

OneBeacon

OneBeacon's pre-tax income for the first quarter of 2004 was $143 million, compared to pre-tax income of $138 million for the first quarter of 2003. The GAAP combined ratio was 96% for the first quarter of 2004 compared to 97% for the first quarter of 2003. Compensation accruals reflecting the rise in White Mountains stock price added $21 million of expenses in the quarter compared to the same period last year. Net written premiums for the first quarter of 2004 were $691 million, up 40% from $494 million in the first quarter of last year. The Atlantic Mutual transaction added $203 million in net written premiums in the quarter, $135 million of which was from the addition of unearned premiums at closing.

John Cavoores, President and CEO of OneBeacon, said, "We are pleased with our underwriting performance so far this year. For the quarter, the GAAP combined ratio was 96%. Our net written premiums are now growing rapidly with the addition of the Atlantic Mutual business. Also, our existing specialty businesses grew 25%, driven by AutoOne, OneBeacon Professional Partners and International Marine Underwriters."

Reinsurance

Pre-tax income for White Mountains' Reinsurance segment was $48 million for the first quarter of 2004, compared to $44 million for the first quarter of 2003. Improved earnings at Folksamerica drove the increase.

The GAAP combined ratio for the Reinsurance segment was 93% in the first quarter of 2004, compared to 94% in the comparable quarter of 2003. Net written premium in the segment declined 13% from the first quarter of 2003 to the first quarter of 2004, reflecting the non-renewal of several large treaties due to unacceptable terms, partially offset by an increase in business generated from the CNA renewal rights transaction which closed in October 2003.

Steve Fass, President and CEO of White Mountains Re, said, "Our reinsurance businesses are performing well. Folksamerica continues to produce a solid underwriting profit and our White Mountains Underwriting unit is making a terrific contribution, earning $21 million of fee income in the quarter. Furthermore, the Sirius acquisition will significantly expand our earning power and international presence, most notably in Western Europe."

White Mountains' Reinsurance segment consists of Folksamerica, White Mountains Underwriting and Fund American Re. Beginning in the second quarter of 2004, it will also include Sirius and the new reinsurance holding company, White Mountains Re.

Esurance

Esurance achieved break-even profitability in the first quarter of 2004, compared to a pre-tax loss of $4 million in the first quarter of last year. The GAAP combined ratio was 106% in the first quarter of 2004, compared to 134% for the first quarter of the prior year. Net written premiums continued to grow rapidly, up 84% to $45 million in the first quarter.

Gary Tolman, President and CEO of Esurance, said, "This is a break-out year for Esurance. We have become one of the fastest growing personal auto insurance companies in the United States. Our break even results for this quarter were a little earlier in the year than expected. We expect to be a strong contributor to White Mountains' profitability in the years to come."

Other Operations

White Mountains' other operations segment reported a pre-tax loss of $77 million for the first quarter of 2004, compared to a pre-tax loss of $31 million for the first quarter of 2003. The losses reported in this segment are principally the result of financing, purchase accounting and compensation expenses at the holding company level.

The incentive compensation accrual included in the other operations increased from $4 million in the first quarter of 2003 to $24 million in the first quarter of 2004. This increase was principally due to the appreciation in the price of White Mountains' stock from $460 at the end of last year to $524.50 at the end of the first quarter of this year. In addition, a change in accounting for preferred stock, adopted in the third quarter of 2003, required the company to report as interest expense $11.5 million of dividends and accretion that had previously been reported below the pre-tax income line. Finally, in the fourth quarter of 2003, the company purchased assets denominated in Swedish Kronor to hedge the cost of funding the purchase of Sirius. U.S. GAAP accounting requires the decrease or increase in the value of a foreign currency relative to the U.S. Dollar to be recorded as a realized loss or gain even when done for this purpose. Therefore, White Mountains recorded a loss of $14 million in the first quarter to reflect the weakening Krona valuation versus the US dollar.

Investment Activities

The GAAP total return on invested assets for the quarter was 3.3%, including the investment in Montpelier Re. Excluding Montpelier Re, the total return on invested assets was 2.1%.

John Gillespie, President of White Mountains Advisors, said, "The bond market rallied during the first quarter, which gave a lift to our results. However, this has turned around in April with rates moving up sharply as the signs of inflation are starting to show. We expect rates to continue to rise over the next few years and, therefore, are continuing to keep our fixed maturity portfolio duration short at about 3 years. We do not believe going any shorter than this makes sense as the give up in yield is too significant given the steepness of the short end of the curve. We had solid returns on our equity investments."

Net investment income was $71 million in the quarter, down 10% from last year due to the runoff of reserves in the non-core operations of OneBeacon. Realized gains were relatively consistent with the prior year, while unrealized gains, after-tax, increased $99 million in the quarter, adding $9 to book value per share. The change in accounting for Montpelier Re, described below, created $33 million of the after-tax unrealized gain, or $3 per share.

Changes in Presentation

During the first quarter of 2004, White Mountains sold 4.5 million common shares of Montpelier Re and purchased 2.4 million warrants to buy common shares of Montpelier Re in the future. The net effect was to reduce our fully diluted ownership to 18%. Based on this ownership level and a reduced number of White Mountains representatives on the Montpelier Re board, the Company changed the method of accounting for its investment in Montpelier Re from the equity method to the fair value method. White Mountains also adopted FIN 46 in the quarter, which required the consolidation of New Jersey Skylands, which is now included in the OneBeacon segment. The Company's economic exposure to the New Jersey auto market remains limited to the surplus notes invested in the reciprocal. The Company modified its segment presentation to include Esurance as a new segment to reflect the growing significance of that business, as well as its separate and distinct operation. Several changes were also made to the supplemental data provided on page 9. First, AutoOne is now included in the Specialty sub-segment of OneBeacon, which better captures the nature of that business, as well as its separate and distinct operation from the Personal Lines business, where it had previously been presented. Second, the results for the Reinsurance segment are now provided in total, whereas before the schedule displayed the results for Folksamerica, which is a component of the Reinsurance segment. This is to account for the changing profile of that segment to a global business with operations in multiple locations under the leadership of Steve Fass. Finally, results for the Esurance segment were added to the schedule.

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-Q with the Securities and Exchange Commission on or before Wednesday May 5, 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

This press 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 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 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 with 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 failure of announced acquisitions to enhance shareholder value;
  • 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;
  • business opportunities (or lack thereof) that may be presented to it and pursued;
  • competitive forces, including the conduct of other 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 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 press 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 and per share amounts)

                                              (Unaudited)
                                               March 31,       December 31,
                                                  2004              2003
       Assets

       Fixed maturity investments, at
        fair value                              $6,879.1          $6,248.1
       Short-term investments, at fair
        value                                    1,024.9           1,546.6
       Common equity securities, at fair
        value                                      779.9             513.6
       Other investments                           379.6             239.2

         Total investments                       9,063.5           8,547.5

       Reinsurance recoverable on unpaid
        losses                                   3,554.3           3,473.8
       Reinsurance recoverable on paid
        losses                                     128.5             121.7
       Insurance and reinsurance premiums
        receivable                                 926.8             779.0
       Deferred acquisition costs                  268.4             233.6
       Ceded unearned premiums                     198.3             185.3
       Investment in unconsolidated
        insurance affiliate(s)                     152.7             515.9
       Accounts receivable on unsettled
        investment purchases                        59.5               9.1
       Other assets                              1,144.8           1,105.1

         Total assets                          $15,496.8         $14,971.0

       Liabilities

       Loss and loss adjustment expense
        reserves                                $8,055.8          $7,728.2
       Unearned insurance and reinsurance
        premiums                                 1,571.5           1,409.4
       Debt                                        824.8             743.0
       Preferred stock subject to
        mandatory redemption                       198.5             194.5
       Funds held under reinsurance
        treaties                                   172.3             211.9
       Ceded reinsurance payable                   144.0             127.7
       Accounts payable on unsettled
        investment purchases                       103.1             371.6
       Other liabilities                         1,246.2           1,205.5

         Total liabilities                      12,316.2          11,991.8

       Common Shareholders' Equity

       Common shares and paid-in surplus         1,423.5           1,407.1
       Retained earnings                         1,372.8           1,286.4
       Accumulated other comprehensive
        income, after tax:
        Unrealized gains on investments            384.7             286.0
        Unrealized foreign currency
         translation losses                          (.4)              (.3)

         Total common shareholders'
          equity                                 3,180.6           2,979.2

       Total liabilities and common
        shareholders' equity                   $15,496.8         $14,971.0

       Common shares outstanding (000's)           9,046 sh          9,007 sh
       Common and equivalent shares
        outstanding (000's)                       10,820 sh         10,782 sh



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



                                          March 31,   December 31,   March 31,
                                             2004         2003        2003
    Book value per share numerators
     (in millions of dollars):

    Common shareholders' equity            $3,180.6    $2,979.2    $2,485.2
      Proceeds from assumed exercise
       of outstanding Warrants                300.0       300.0       300.0
      Assumed conversion of
       convertible preference shares
       to common shares                           -           -       230.5
      Benefits to be received from
       share obligations under
       employee benefit plans                   8.6         7.0         7.6
      Remaining adjustment of
       subsidiary preferred stock to
       face value                            (121.5)     (125.5)     (136.0)
    Book value per share numerator          3,367.7     3,160.7     2,887.3
      Goodwill of consolidated
       limited partnership
       investments                            (20.1)      (20.3)          -
    Fully converted tangible book
     value per common and equivalent
     share numerator                       $3,347.6    $3,140.4    $2,887.3

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

    Common Shares outstanding               9,045.5     9,007.2     8,351.4
      Common Shares issuable upon
       exercise of outstanding
       Warrants                             1,724.2     1,724.2     1,714.3
      Assumed conversion of
       convertible preference shares
       to common shares                           -           -       678.0
      Share obligations under
       employee benefits plans                 50.0        50.6        61.9
    Fully converted tangible book
     value per common and equivalent
     share denominator                     10,819.7    10,782.0    10,805.6

    Book value per share                    $311.25     $293.15     $262.08
    Fully converted tangible book
     value per common and equivalent
     share                                  $309.39     $291.27     $266.96





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

                                                      (Unaudited)
                                                  Three Months Ended
                                                       March 31,


                                                  2004           2003
     Revenues:
      Earned insurance and reinsurance
       premiums                                  $831.9          $803.0
      Net investment income                        71.0            78.6
      Net realized gains on investments            61.8            58.2
      Other revenue                                58.4            29.7

        Total revenues                          1,023.1           969.5
     Expenses:
      Loss and loss adjustment expenses           523.3           522.6
      Insurance and reinsurance
       acquisition expenses                       156.7           157.9
      Other underwriting expenses                 114.9            99.6
      General and administrative expenses          81.7            15.6
      Accretion of fair value adjustment
       to loss and loss adjustment expense
       reserves                                    10.1            14.2
      Interest expense on debt                     11.3            13.6
      Interest expense - dividends on
       preferred stock subject to
       mandatory redemption                         7.6               -
      Interest expense - accretion on
       preferred stock subject to
       mandatory redemption                         3.9               -

        Total expenses                            909.5           823.5

     Pretax income                                113.6           146.0

      Tax provision                               (44.9)          (46.1)

     Net income before minority interest,
      equity in earnings of unconsolidated
      affiliates
       and extraordinary item                      68.7            99.9

      Accretion of subsidiary preferred
       stock to face value                            -            (3.1)
      Dividends on subsidiary preferred
       stock                                          -            (7.6)
      Equity in earnings of unconsolidated
       insurance affiliates                        18.2            12.9

     Net income before extraordinary item          86.9           102.1

      Excess of fair value of acquired net
       assets over cost - Sierra Group              8.6               -

     Net income                                    95.5           102.1

      Net change in unrealized gains on
       investments                                 98.7            (9.5)
      Net change in foreign currency
       losses                                       (.1)            (.7)

     Comprehensive net income                    $194.1           $91.9


     Computation of net income available
      to common shareholders:
       Net income                                 $95.5          $102.1
       Redemption value adjustment -
        Convertible Preference Shares                 -           (11.5)
     Net income available to common
      shareholders                                $95.5           $90.6

     Basic earnings per common share:

       Net income before extraordinary
        item                                      $9.64          $10.94
       Net income                                 10.59           10.94

     Diluted earnings per common share:

       Net income before extraordinary
        item                                      $8.52           $9.92
       Net income                                  9.36            9.92



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


     For the Three Months Ended March 31, 2004


                               OneBeacon Reinsurance Esurance  Other     Total
       Revenues:
         Earned insurance and
          reinsurance premiums    $591.7    $204.5    $35.7       $-    $831.9
         Net investment income      51.4      11.5      0.4      7.7      71.0
         Net realized gains on
          investments               67.7       3.7      0.5    (10.1)     61.8
         Other revenue              44.0      20.6      1.1     (7.3)     58.4

           Total revenues          754.8     240.3     37.7     (9.7)  1,023.1
       Expenses:
         Loss and loss adjustment
          expenses                 371.3     128.2     26.3     (2.5)    523.3
         Insurance and reinsurance
          acquisition expenses     111.4      40.9      4.4        -     156.7
         Other underwriting
          expenses                  87.4      20.0      7.0      0.5     114.9
         General and administrative
          expenses                  41.9       3.2       -      36.6      81.7
         Accretion of fair value
          adjustment to loss and
          lae reserves                 -         -       -      10.1      10.1
         Interest expense on debt    0.1       0.5       -      10.7      11.3
         Interest expense  -
          dividends and accretion
          on preferred stock
           subject to mandatory
            redemption                -         -        -      11.5      11.5

           Total expenses         612.1     192.8     37.7      66.9     909.5

       Pretax income (loss)      $142.7     $47.5      $-     $(76.6)   $113.6

     For the Three Months Ended March 31, 2003

                               OneBeacon Reinsurance Esurance  Other     Total
       Revenues:
         Earned insurance and
          reinsurance premiums    $569.1    $207.3    $18.7     $7.9    $803.0
         Net investment income      63.6      13.0      1.1      0.9      78.6
         Net realized gains on
          investments               57.5       1.7      0.3     (1.3)     58.2
         Other revenue               5.7      19.6      0.5      3.9      29.7

           Total revenues          695.9     241.6     20.6     11.4     969.5
       Expenses:
         Loss and loss adjustment
          expenses                 367.7     133.4     15.7      5.8     522.6
         Insurance and reinsurance
          acquisition expenses     105.0      47.4      4.5      1.0     157.9
         Other underwriting
          expenses                  78.5      13.8      4.8      2.5      99.6
         General and administrative
          expenses                   6.9       2.9        -      5.8      15.6
         Accretion of fair value
          adjustment to loss and
          lae reserves                 -         -        -     14.2      14.2
         Interest expense on debt      -       0.5        -     13.1      13.6

           Total expenses          558.1     198.0     25.0     42.4     823.5

       Pretax income (loss)       $137.8     $43.6    $(4.4)  $(31.0)   $146.0



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




    Three Months Ended March 31, 2004                OneBeacon
                                                                 Total   Total
                                 Specialty   Personal Commercial  Core    (1)
    GAAP Ratios
    Loss and LAE                     48%        65%      62%      58%     63%
    Expense                          30%        32%      39%      33%     33%
         Total Combined              78%        97%     101%      91%     96%
    Dollars in millions
    Net written premiums          $213.3     $160.3   $316.5   $690.1  $690.9
    Earned premiums               $210.8     $169.2   $179.4   $559.4  $591.7

    Three Months Ended March 31, 2003                OneBeacon
                                                                 Total   Total
                                 Specialty  Personal Commercial   Core    (1)
    GAAP Ratios
    Loss and LAE                     52%        69%      63%      62%     65%
    Expense                          32%        30%      37%      32%     32%
         Total Combined              84%        99%     100%      94%     97%
    Dollars in millions
    Net written premiums          $171.3     $157.6   $120.5   $449.4  $493.8
    Earned premiums               $160.9     $192.9   $109.1   $462.9  $569.1


    (1) Includes results from Non-core operations.


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




    Three Months Ended March 31, 2004             Reinsurance         Esurance

    GAAP Ratios
    Loss and LAE                                        63%               74%
    Expense                                             30%               32%
         Total Combined                                 93%              106%
    Dollars in millions
    Net written premiums                             $203.4             $44.9
    Earned premiums                                  $204.5             $35.7

    Three Months Ended March 31, 2003             Reinsurance         Esurance

    GAAP Ratios
    Loss and LAE                                        64%               84%
    Expense                                             30%               50%
         Total Combined                                 94%              134%
    Dollars in millions
    Net written premiums                             $235.4             $24.4
    Earned premiums                                  $207.3             $18.7

SOURCE White Mountains Insurance Group, Ltd.
04/30/2004

CONTACT: David Foy of White Mountains Insurance Group, Ltd., +1-203-453-1681

Web site: http://www.whitemountains.com
(WTM)

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