White Mountains Book Value Per Share Increases to $313
HAMILTON, Bermuda, July 28 /PRNewswire-FirstCall/-- White Mountains Insurance Group, Ltd. ended the second quarter of 2004 with a fully converted tangible book value per share of $313, up 12% from June 30, 2003 and 8% since December 31, 2003, including dividends.
Comprehensive net income for the quarter was $38 million compared to $163 million in the second quarter of 2003. The decline was mainly due to $139 million of after-tax unrealized losses on the fixed income portfolio caused by a rise in interest rates, compared to after-tax unrealized gains of $76 million in the second quarter of 2003. In addition, pre-tax realized losses were $6 million in the second quarter of 2004 compared to $90 million of pre- tax realized gains in the second quarter of last year. These realized and unrealized losses were more than offset by strong underwriting results and the gain on the Sirius acquisition reflected in net income. For the year-to-date, comprehensive net income was $233 million compared to $254 million in the comparable period last year.
Net income for the quarter nearly doubled to $169 million, as the company had strong underwriting results and recorded a $111 million after-tax gain on the Sirius acquisition. Net income for the first six months of 2004 was $264 million, up 42% compared to $187 million for the first six months of last year.
CEO Ray Barrette said, "I am pleased we were able to grow our book value in the quarter despite a strong headwind from the bond market. Our short duration and good equity performance minimized the damage. Underwriting profits at both OneBeacon and White Mountains Re remain strong. The Sirius acquisition resulted in a gain of $111 million. Sirius is also generating significant underwriting profits on annualized premiums in excess of $500 million. Finally, we officially welcomed Berkshire Hathaway as a 16% shareholder as it exercised warrants in White Mountains a year ahead of schedule."
OneBeacon
OneBeacon's pre-tax income for the second quarter of 2004 was $95 million, compared to pre-tax income of $136 million for the second quarter of 2003. For the first six months of 2004, pre-tax income was $238 million, versus $275 million for the comparable period of 2003. Each measure was down due to significantly lower realized gains. The GAAP combined ratio improved to 95% and 96% for the second quarter and first six months of 2004 compared to 98% for each of the comparable periods of 2003. Net written premiums are up 26% and 33% for the quarter and year-to-date, respectively.
John Cavoores, CEO of OneBeacon said, "The combined ratio continues to improve in line with our expectations and our pricing remains disciplined in most segments. Our premium growth reflects the Atlantic Specialty acquisition, improved retentions in all lines and continued momentum at AutoOne and our other specialty segments."
Reinsurance
Pre-tax income for White Mountains' Reinsurance segment was $72 million for the second quarter of 2004, compared to $47 million for the second quarter of 2003. For the first six months of 2004, pre-tax income was $119 million versus $91 million in the comparable prior year period. The GAAP combined ratio was 92% for the second quarter and the first six months of 2004, compared to 96% and 95% in the comparable periods of 2003. Net written premiums were up 109% and 43% for the quarter and year-to-date, respectively.
Steve Fass, CEO of White Mountains Re, said, "Our reinsurance businesses across the globe are running well and producing underwriting profits. The combined ratio reflects the favorable prices, terms and conditions we have been able to achieve over the past several years. Premium growth mainly reflects the addition of Sirius to our enterprise."
White Mountains' Reinsurance segment consists of Folksamerica, Sirius, and White Mountains Underwriting.
Esurance
This segment had a pre-tax loss of less than a million in the second quarter of 2004, compared to a pre-tax loss of $5 million in the second quarter of the prior year. The GAAP combined ratio was 107% in the second quarter of 2004, compared to 126% for the second quarter of the prior year. Net written premiums are growing rapidly, up to $45 million in the second quarter of 2004, which is 72% higher than the second quarter of last year. The results and trends for the first six months of 2004 were similar to those reported for the second quarter of 2004.
Gary Tolman, CEO of Esurance, stated, "Esurance continued to expand its operation in the second quarter, boding well for ongoing future growth. We recently entered Georgia's $4.6 billion auto insurance market, and will introduce our auto product in Nevada very soon. When Esurance goes live in Nevada, we will be writing business in 16 states."
Other Operations
White Mountains' Other Operations segment reported a pre-tax loss of $70 million for the second quarter of 2004, compared to a pre-tax loss of $54 million for the second quarter of 2003. For the first six months of 2004 the segment reported a pre-tax loss of $146 million versus $85 million in the comparable period 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 increased loss in the first half of 2004 relative to 2003 is principally the result of higher accruals for incentive compensation due to the increase in the stock price from year end 2003, a change in accounting for preferred stock, a decrease in the value of the Company's investment in Montpelier warrants, which are marked-to-market through net income, and the impact currency fluctuations had on our hedging the cost of funding for the Sirius acquisition.
Investment Activities
John Gillespie, President of White Mountains Advisors, said, "The sell-off in the bond market clearly impacted our results in the second quarter. We have kept the duration of our fixed maturity portfolio fairly short at about 3 years, as we felt that rates were more likely to rise than fall. However, given the size of our fixed maturity portfolio, a significant move upward in interest rates is still going to have a negative impact on the value of our investments."
The GAAP total return on invested assets for the quarter was -1.5%. Year- to-date it was up 1.7%. Net investment income was $93 million in the quarter and $164 million for the first half of 2004, up 28% and 8%, respectively from the comparable periods of 2003. The growth in net investment income in the second quarter primarily reflected the investment income earned on the invested assets acquired in the Sirius acquisition.
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 http://www.whitemountains.com. The Company expects to file its Form 10-Q with the Securities and Exchange Commission on or before August 4, 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 "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 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)
(Unaudited)
June 30, December 31,
2004 2003
Assets
Fixed maturity investments, at
fair value $7,510.1 $6,248.1
Short-term investments, at fair
value 1,464.9 1,546.6
Common equity securities, at fair
value 887.0 513.6
Other investments 447.2 239.2
Total investments 10,309.2 8,547.5
Reinsurance recoverable on unpaid
losses 3,733.3 3,473.8
Reinsurance recoverable on paid
losses 162.9 121.7
Insurance and reinsurance premiums
receivable 963.6 779.0
Funds held by ceding reinsurers 953.1 144.1
Deferred acquisition costs 338.0 233.6
Ceded unearned premiums 205.7 185.3
Investment in unconsolidated
insurance affiliate(s) 151.6 515.9
Accounts receivable on unsettled
investment purchases 76.7 9.1
Other assets 1,029.8 961.0
Total assets $17,923.9 $14,971.0
Liabilities
Loss and loss adjustment expense
reserves $9,329.1 $7,728.2
Unearned insurance and reinsurance
premiums 1,824.5 1,409.4
Reserves for structured contracts 401.0 -
Debt 824.3 743.0
Preferred stock subject to
mandatory redemption 202.7 194.5
Funds held under reinsurance
treaties 187.5 211.9
Ceded reinsurance payable 124.1 127.7
Accounts payable on unsettled
investment purchases 67.2 371.6
Other liabilities 1,450.3 1,205.5
Total liabilities 14,410.7 11,991.8
Common Shareholders' Equity
Common shares and paid-in surplus 1,717.7 1,407.1
Retained earnings 1,541.3 1,286.4
Accumulated other comprehensive
income, after tax:
Unrealized gains on investments 245.8 286.0
Unrealized foreign currency
translation gains (losses) 8.4 (.3)
Total common shareholders'
equity 3,513.2 2,979.2
Total liabilities and common
shareholders' equity $17,923.9 $14,971.0
Common shares outstanding (000's) 10,769 sh 9,007 sh
Common and equivalent shares
outstanding (000's) 10,819 sh 10,782 sh
WHITE MOUNTAINS INSURANCE GROUP, LTD.
FULLY CONVERTED TANGIBLE BOOK VALUE PER COMMON AND EQUIVALENT SHARE
(Unaudited)
June 30, March 31, December 31, June 30,
2004 2004 2003 2003
Book value per share numerators
(in millions of dollars):
Common shareholders' equity $3,513.2 $3,180.6 $2,979.2 $2,869.3
Proceeds from assumed exercise
of outstanding warrants - 300.0 300.0 300.0
Benefits to be received from
share obligations under
employee benefit plans 8.4 8.6 7.0 7.5
Remaining adjustment of
subsidiary preferred stock to
face value (117.3) (121.5) (125.5) (132.7)
Book value per share numerator 3,404.3 3,367.7 3,160.7 3,044.1
Goodwill of consolidated limited
partnership investments (19.7) (20.1) (20.3) (15.7)
Fully converted tangible book
value per common and equivalent
share numerator $3,384.6 $3,347.6 $3,140.4 $3,028.4
Book value per share denominators
(in thousands of shares):
Common Shares outstanding 10,769.4 9,045.5 9,007.2 9,002.4
Common Shares issuable upon
exercise of outstanding
warrants - 1,724.2 1,724.2 1,724.2
Share obligations under employee
benefits plans 50.0 50.0 50.6 55.4
Fully converted tangible book
value per common and equivalent
share denominator 10,819.4 10,819.7 10,782.0 10,782.0
Book value per share $314.65 $311.25 $293.15 $282.33
Fully converted tangible book
value per common and equivalent
share $312.82 $309.39 $291.27 $280.88
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(millions, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenues:
Earned insurance and
reinsurance premiums $997.2 $755.2 $1,829.1 $1,558.2
Net investment income 93.2 73.0 164.2 151.6
Net realized gains
(losses) on investments (5.6) 90.0 56.2 148.2
Other revenue 35.4 44.2 93.8 73.9
Total revenues 1,120.2 962.4 2,143.3 1,931.9
Expenses:
Loss and loss adjustment
expenses 623.4 511.4 1,146.7 1,034.0
Insurance and reinsurance
acquisition expenses 184.0 148.9 340.7 306.8
Other underwriting
expenses 137.2 86.9 252.1 186.5
General and
administrative expenses 42.3 64.4 124.0 80.0
Accretion of fair value
adjustment to loss and
loss adjustment expense
reserves 12.8 14.2 22.9 28.4
Interest expense on debt 12.1 12.5 23.4 26.1
Interest expense -
dividends on preferred
stock subject to
mandatory redemption 7.6 - 15.2 -
Interest expense -
accretion on preferred
stock subject to
mandatory redemption 4.2 - 8.1 -
Total expenses 1,023.6 838.3 1,933.1 1,661.8
Pretax income 96.6 124.1 210.2 270.1
Tax provision (44.4) (44.7) (89.3) (90.8)
Net income before minority
interest, equity in
earnings of
unconsolidated
affiliates and
extraordinary item 52.2 79.4 120.9 179.3
Accretion of subsidiary
preferred stock to face
value - (3.3) - (6.4)
Dividends on subsidiary
preferred stock - (7.5) - (15.1)
Equity in earnings of
unconsolidated insurance
affiliates 4.9 15.8 23.1 28.7
Net income before
extraordinary item 57.1 84.4 144.0 186.5
Excess of fair value of
acquired net assets over
cost 111.4 - 120.0 -
Net income 168.5 84.4 264.0 186.5
Net change in unrealized
gains on investments (138.9) 75.8 (40.2) 66.3
Net change in foreign
currency losses 8.8 2.3 8.7 1.6
Comprehensive net income $38.4 $162.5 $232.5 $254.4
Computation of net income
available to common
shareholders:
Net income $168.5 $84.4 $264.0 $186.5
Redemption value
adjustment -
convertible preference
shares - (38.0) - (49.5)
Net income available to
common shareholders $168.5 $46.4 $264.0 $137.0
Basic earnings per common
share:
Net income before
extraordinary item $6.30 $5.38 $15.93 $16.21
Net income 18.59 5.38 29.20 16.21
Diluted earnings per
common share:
Net income before
extraordinary item $5.56 $4.77 $14.11 $14.56
Net income 16.45 4.77 25.93 14.56
WHITE MOUNTAINS INSURANCE GROUP, LTD.
YTD SEGMENT INCOME STATEMENT
(in millions)
For the Six Months Ended June 30, 2004
OneBeacon Reinsurance Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $1,194.4 $557.5 $77.1 $0.1 $1,829.1
Net investment income 109.4 41.6 1.3 11.9 164.2
Net realized gains on
investments 70.9 12.4 0.4 (27.5) 56.2
Other revenue 63.9 33.4 2.5 (6.0) 93.8
Total revenues 1,438.6 644.9 81.3 (21.5) 2,143.3
Expenses:
Loss and loss
adjustment expenses 738.3 350.0 57.4 1.0 1,146.7
Insurance and
reinsurance
acquisition expenses 216.4 113.7 10.6 - 340.7
Other underwriting
expenses 186.3 50.9 14.1 0.8 252.1
General and
administrative
expenses 59.3 6.5 - 58.2 124.0
Accretion of fair
value adjustment to
loss and lae
reserves - 2.7 - 20.2 22.9
Interest expense on
debt 0.4 1.7 - 21.3 23.4
Interest expense -
dividends and
accretion on
preferred stock
subject to
mandatory
redemption - - - 23.3 23.3
Total expenses 1,200.7 525.5 82.1 124.8 1,933.1
Pretax income (loss) $237.9 $119.4 $(0.8) $(146.3) $210.2
For the Six Months Ended
June 30, 2003
OneBeacon Reinsurance Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $1,106.9 $394.8 $41.4 $15.1 $1,558.2
Net investment income 120.0 25.7 0.6 5.3 151.6
Net realized gains on
investments 129.3 13.8 0.5 4.6 148.2
Other revenue 32.2 37.4 1.1 3.2 73.9
Total revenues 1,388.4 471.7 43.6 28.2 1,931.9
Expenses:
Loss and loss
adjustment expenses 733.7 254.0 34.8 11.5 1,034.0
Insurance and
reinsurance
acquisition expenses 202.9 94.1 8.0 1.8 306.8
Other underwriting
expenses 144.0 26.5 10.8 5.2 186.5
General and
administrative
expenses 33.0 5.5 - 41.5 80.0
Accretion of fair
value adjustment to
loss and lae
reserves - - - 28.4 28.4
Interest expense on
debt - 1.0 - 25.1 26.1
Total expenses 1,113.6 381.1 53.6 113.5 1,661.8
Pretax income (loss) $274.8 $90.6 $(10.0) $(85.3) $270.1
WHITE MOUNTAINS INSURANCE GROUP, LTD.
QTD SEGMENT INCOME STATEMENT
(in millions)
For the Three Months Ended June 30, 2004
OneBeacon Reinsurance Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $602.7 $353.0 $41.4 $0.1 $997.2
Net investment income 58.0 30.1 0.9 4.2 93.2
Net realized gains on
investments 3.2 8.7 (0.1) (17.4) (5.6)
Other revenue 19.9 12.8 1.4 1.3 35.4
Total revenues 683.8 404.6 43.6 (11.8) 1,120.2
Expenses:
Loss and loss adjustment
expenses 367.0 221.8 31.1 3.5 623.4
Insurance and reinsurance
acquisition expenses 105.0 72.8 6.2 - 184.0
Other underwriting
expenses 98.9 30.9 7.1 0.3 137.2
General and administrative
expenses 17.4 3.3 - 21.6 42.3
Accretion of fair value
adjustment to loss and
lae reserves - 2.7 - 10.1 12.8
Interest expense on debt 0.3 1.2 - 10.6 12.1
Interest expense -
dividends and accretion
on preferred stock
subject to mandatory
redemption - - - 11.8 11.8
Total expenses 588.6 332.7 44.4 57.9 1,023.6
Pretax income (loss) $95.2 $71.9 $(0.8) $(69.7) $96.6
For the Three Months Ended
June 30, 2003
OneBeacon Reinsurance Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $537.8 $187.5 $22.7 $7.2 $755.2
Net investment income 55.5 12.8 0.3 4.4 73.0
Net realized gains on
investments 71.8 12.1 0.2 5.9 90.0
Other revenue 26.5 17.8 0.6 (0.7) 44.2
Total revenues 691.6 230.2 23.8 16.8 962.4
Expenses:
Loss and loss adjustment
expenses 366.0 120.6 19.1 5.7 511.4
Insurance and reinsurance
acquisition expenses 97.9 46.7 3.5 0.8 148.9
Other underwriting
expenses 65.5 12.7 6.0 2.7 86.9
General and administrative
expenses 26.1 2.6 - 35.7 64.4
Accretion of fair value
adjustment to loss and
lae reserves - - - 14.2 14.2
Interest expense on debt - 0.5 - 12.0 12.5
Total expenses 555.5 183.1 28.6 71.1 838.3
Pretax income (loss) $136.1 $47.1 $(4.8) $(54.3) $124.1
WHITE MOUNTAINS INSURANCE GROUP, LTD.
SUMMARY OF GAAP RATIOS AND PREMIUMS
(Unaudited)
Six Months Ended June 30, 2004 OneBeacon
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 52% 60% 58% 62%
Expense 29% 32% 41% 34%
Total Combined 81% 92% 99% 96%
Dollars in millions
Net written premiums $420.2 $342.8 $508.8 $1,303.5
Earned premiums $413.0 $341.1 $358.9 $1,194.4
Six Months Ended June 30, 2003 OneBeacon
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 53% 69% 64% 66%
Expense 33% 28% 34% 32%
Total Combined 86% 97% 98% 98%
Dollars in millions
Net written premiums $329.0 $332.3 $232.4 $978.5
Earned premiums $329.3 $379.0 $215.1 $1,106.9
Three Months Ended June 30, 2004 OneBeacon
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 56% 54% 55% 61%
Expense 28% 34% 43% 34%
Total Combined 84% 88% 98% 95%
Dollars in millions
Net written premiums $206.9 $182.5 $192.3 $612.6
Earned premiums $202.2 $171.9 $179.5 $602.7
Three Months Ended June 30, 2003 OneBeacon
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 53% 70% 65% 68%
Expense 33% 26% 31% 30%
Total Combined 86% 96% 96% 98%
Dollars in millions
Net written premiums $157.7 $174.7 $111.9 $484.7
Earned premiums $168.4 $186.1 $106.0 $537.8
(1) Includes results from run off operations and reciprocals.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
SUMMARY OF GAAP RATIOS AND PREMIUMS
(Unaudited)
Six Months Ended June 30, 2004 Reinsurance Esurance
GAAP Ratios
Loss and LAE 63% 74%
Expense 29% 32%
Total Combined 92% 106%
Dollars in millions
Net written premiums $618.2 $89.5
Earned premiums $557.5 $77.1
Six Months Ended June 30, 2003 Reinsurance Esurance
GAAP Ratios
Loss and LAE 64% 84%
Expense 31% 46%
Total Combined 95% 130%
Dollars in millions
Net written premiums $433.5 $50.2
Earned premiums $394.8 $41.4
Three Months Ended June 30, 2004 Reinsurance Esurance
GAAP Ratios
Loss and LAE 63% 75%
Expense 29% 32%
Total Combined 92% 107%
Dollars in millions
Net written premiums $414.8 $44.5
Earned premiums $353.0 $41.4
Three Months Ended June 30, 2003 Reinsurance Esurance
GAAP Ratios
Loss and LAE 64% 84%
Expense 32% 42%
Total Combined 96% 126%
Dollars in millions
Net written premiums $198.1 $25.8
Earned premiums $187.5 $22.7
SOURCE White Mountains Insurance Group, Ltd.
07/28/2004
CONTACT: David Foy, White Mountains Insurance Group, Ltd., +1-203-453-1681
Web site: http://www.whitemountains.com
(WTM)