White Mountains Reports First Quarter 2003 Results
HAMILTON, Bermuda, April 29 /PRNewswire-FirstCall/-- White Mountains Insurance Group, Ltd. (NYSE: WTM) ended the first quarter of 2003 with a fully converted tangible book value per share of $267, an annualized increase of 15% (including dividends) from $259 at year-end. The Company's comprehensive net income was $92 million, compared to a comprehensive net loss of $40 million (excluding $660 million of deferred credits brought into income by an accounting change) during the first quarter of 2002.
CEO Ray Barrette said, "We are now firing on all cylinders and our tangible book value is growing nicely. Both OneBeacon and Folksamerica achieved underwriting profits in the quarter and our investment portfolio continued to deliver good returns. Our significant investment in Montpelier Re is also doing well."
A summary of White Mountains' after-tax comprehensive net income follows:
Quarter ended
March 31,
2003 2002
(in millions)
Underwriting results $30 $(30)
Investment results 93 23
Holding company and financing activities (31) (33)
Subtotal before accounting changes 92 (40)
Cumulative effect of accounting changes -- 660
Comprehensive net income $92 $620
UNDERWRITING RESULTS
A summary of underwriting results at White Mountains' insurance and reinsurance subsidiaries follows:
Quarter ended
March 31,
2003 2002
(in millions)
OneBeacon $17 $(72)
Folksamerica 10 14
White Mountains Underwriting Ltd. 17 7
Other insurance and reinsurance operations (5) (7)
Pre-tax underwriting results 39 (58)
Income taxes (9) 28
Comprehensive net income (loss) from underwriting $30 $(30)
OneBeacon
OneBeacon's GAAP combined ratio was 97% for the first quarter of 2003 compared to 109% for the first quarter of 2002 and 107% for all of 2002. This includes the full cost of long-term incentive compensation, which amounted to 3 points on the combined ratio in the quarter. Net written premiums were $494 million down from $716 million in the first quarter of 2002. Net written premiums on core operations, which is comprised of personal and commercial lines business in the Northeast and specialty business, were $450 million compared to $540 million in the first quarter of 2002. Net written premiums from business in run-off were $44 million, down 75% from $176 million in the first quarter of 2002.
John Cavoores, President of OneBeacon, said, "Our core operations had a 94% GAAP combined ratio in the first quarter. Personal lines, including AutoOne, had a strong quarter with a 95% combined ratio. While winter weather was a factor, the result was within our expected catastrophe loads. Commercial lines, which showed improvement from year-end, with a 100% combined ratio, was negatively impacted by the run-off of old workers compensation and general liability policies. We continued to have strong momentum in commercial lines as price increases averaged 15% in the first quarter and new business is up 49% quarter over quarter, with workers compensation representing only 9% of the new business mix. We have also launched a new package policy and system for small businesses starting with New England. Specialty operations had an outstanding quarter with an 86% combined ratio. Specialty now represents nearly 30% of premiums and is growing 24% over 2002."
Folksamerica
Folksamerica's GAAP combined ratio was 95% for the first quarter of 2003 compared to 90% (102% when excluding a one-time reduction in reinsurance recoverable allowance originally established in connection with the PCA Property & Casualty Insurance Company acquisition) in the first quarter last year. Net written premiums for the first quarter of 2003 were $238 million, up 62% from $147 million for the first quarter of 2002.
Steve Fass, CEO of Folksamerica, said, "This was a satisfying quarter with all underwriting units producing positive results. The January renewal season was great. Rates held or increased in nearly all lines, we expanded our participation with many existing clients and added several important new clients. In today's turbulent times insurers, more than ever, appreciate the stability and common sense approach to underwriting that are Folksamerica's hallmarks."
White Mountains Underwriting Ltd. ("WMU")
WMU, White Mountains' underwriting advisors specializing in the placement of international property excess reinsurance, generated advisory fees of $18 million and comprehensive net income of $15 million during the first quarter of 2003, compared to $8 million of advisory fees and $6 million in comprehensive net income during the first quarter of 2002. WMU recommended $59 million in written premiums with Olympus Reinsurance Ltd. in the first quarter of 2003, compared with $29 million during the first quarter of 2002.
Other Insurance and Reinsurance Operations
White Mountains' other insurance and reinsurance operations consist of Esurance, Fund American Re and the International American Group. First quarter 2003 comprehensive net losses were $2 million, compared to $6 million in the first quarter of 2002. The reduction in comprehensive net loss was primarily from improved results at Esurance, which is on track to achieve profitability during 2004.
INVESTMENT RESULTS
A summary of White Mountains' after-tax investment results follows:
Quarter ended
March 31,
2003 2002
(in millions)
Investment in Montpelier, including warrants $10 $ --
Net realized and unrealized gains (losses) 31 (32)
Net investment income 52 57
Investment in MSA -- (2)
Comprehensive net income from investing $93 $23
White Mountains' investment results for the first quarter of 2003 included gains from both its fixed maturity and common equity portfolios. Investment losses during the first quarter of 2002 were primarily from unrealized losses in the fixed maturity portfolio resulting from increasing interest rates during the period. The decrease in net investment income from the first quarter of 2002 to the first quarter of 2003 was primarily the result of lower average net invested assets in OneBeacon's investment portfolio as it gradually shrunk with the run-off of OneBeacon's non-core book. Fixed maturity yields were flat quarter over quarter.
John Gillespie, President of White Mountains Advisors, said, "We continued our strategy of gradually shortening the bond portfolio duration and gradually accumulating value equities in the first quarter."
HOLDING COMPANY AND FINANCING ACTIVITIES
White Mountains recorded after-tax expenses of $31 million for the first quarter of 2003 from holding company activities, mostly financing and purchase accounting charges. This compares with after-tax losses of $33 million for the first quarter of 2002. After-tax interest and other financing charges were $19 million in the first quarter of 2003 compared to $21 million in the first quarter of 2002. Purchase accounting charges related to the OneBeacon acquisition were $6 million in the first quarter of 2003 versus $11 million in the first quarter of 2002.
White Mountains' comprehensive net income for the first quarter of 2002 also included $660 million to recognize the net deferred credit balance in existence at that time as a result of the adoption of new accounting standards on January 1, 2002.
ADDITIONAL INFORMATION
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 website located at www.whitemountains.com. The Company expects to file its Form 10-Q with the Securities and Exchange Commission on or before Thursday, May 15, 2003 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 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 it
and pursued;
-- 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 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 and per share amounts)
(Unaudited)
March 31, December 31,
2003 2002
Assets
Fixed maturity investments, at
fair value $6,494.4 $6,669.1
Short-term investments, at fair
value 1,937.0 1,790.6
Common equity securities, at fair
value 291.1 275.0
Other investments 147.5 164.7
Total investments 8,870.0 8,899.4
Reinsurance recoverable on unpaid
losses 3,865.4 4,071.9
Reinsurance recoverable on paid
losses 158.9 159.8
Insurance premiums receivable -
currently due 121.8 112.0
Insurance premiums receivable -
other 451.4 503.0
Reinsurance premiums receivable 243.7 215.5
Accounts receivable on unsettled
sales 609.6 160.8
Investments in unconsolidated
insurance affiliates 417.0 399.9
Deferred tax asset 397.0 430.0
Deferred acquisition costs 244.5 244.9
Ceded unearned premiums 189.7 163.9
Other assets 569.0 672.5
Total Assets $16,138.0 $16,033.6
Liabilities
Loss and loss adjustment expense
reserves $8,552.7 $8,875.3
Unearned insurance and reinsurance
premiums 1,500.9 1,514.4
Accounts payable on unsettled
investment purchases 1,061.4 495.2
Debt 781.4 793.2
Funds held under reinsurance
treaties 169.8 262.4
Other liabilities 1,172.1 1,285.3
Total liabilities 13,238.3 13,225.8
Convertible Preference Shares 230.5 219.0
Minority Interest - preferred
stock of subsidiaries 184.0 180.9
Common Shareholders' Equity
Common shares and paid-in surplus 1,134.5 1,129.3
Retained earnings 1,154.2 1,071.9
Accumulated other comprehensive
income, after tax 196.5 206.7
Total common shareholders'
equity 2,485.2 2,407.9
Total Liabilities, Convertible
Preference Shares, Minority
Interest
and Common Shareholders' Equity $16,138.0 $16,033.6
Common shares outstanding (000's) 8,357 sh 8,351 sh
Common and equivalent shares
outstanding (000's) 10,816 sh 10,806 sh
Fully converted book value per
common and equivalent share $266.96 $258.82 WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Revenues:
Earned insurance and reinsurance
premiums $803.0 $959.4
Net investment income 78.6 86.7
Net realized gains on investments 58.2 (.1)
Other revenue 24.5 44.8
Total revenues 964.3 1,090.8
Expenses:
Loss and loss adjustment expenses 522.6 706.4
Insurance and reinsurance
acquisition expenses 157.9 195.5
General and administrative expenses 110.0 155.8
Accretion of fair value adjustment
to loss and loss adjustment expense
reserves 14.2 24.0
Interest expense 13.6 18.2
Total expenses 818.3 1,099.9
Pretax income (loss) 146.0 (9.1)
Tax benefit (provision) (46.1) 13.0
Net income before minority interest,
accounting changes and
equity in earnings of
unconsolidated subsidiaries 99.9 3.9
Accretion of subsidiary preferred
stock to face value (3.1) (2.4)
Dividends on subsidiary preferred
stock (7.6) (7.6)
Equity in earnings of unconsolidated
insurance affiliates 12.9 1.0
Net income (loss) from continuing
operations 102.1 (5.1)
Cumulative effect of changes in
accounting principles - 660.2
Net income 102.1 655.1
Other comprehensive loss items (10.2) (35.5)
Comprehensive net income $91.9 $619.6
Computation of net income available
to common shareholders:
Net income $102.1 $655.1
Redemption value adjustment -
Convertible Preference Shares (11.5) -
Net income available to common
shareholders $90.6 $655.1
Basic earnings per Common Share:
Net income (loss) from continuing
operations $10.94 $(.62)
Net income 10.94 80.09
Diluted earnings per Common Share:
Net income (loss) from continuing
operations $9.92 $(.62)
Net income 9.92 80.09
WHITE MOUNTAINS INSURANCE GROUP, LTD.
FULLY CONVERTED TANGIBLE BOOK VALUE
PER COMMON AND EQUIVALENT SHARE [1]
(Unaudited)
March 31, December 31,
2003 2002
Numerator (in millions):
common shareholders'
equity $2,485.2 $2,407.9
proceeds from assumed
exercise of outstanding
warrants 300.0 300.0
assumed conversion of
convertible preference
shares to common shares 230.5 219.0
benefits to be received
from share obligations
under employee benefit
plans 7.6 8.8
remaining accretion of
preferred stock to face
value (136.0) (139.1)
Book value per share
numerator 2,887.3 2,796.6
Denominator (in shares):
common shares
outstanding 8,357,087 sh 8,351,387 sh
shares issuable upon
exercise of outstanding
warrants 1,724,200 1,714,285
assumed conversion of
convertible preference
shares to common shares 677,966 677,966
share obligations under
employee benefits plans 56,265 61,965
Book value per share
denominator 10,815,518 sh 10,805,603 sh
Fully converted book
value per common and
equivalent share $266.96 $258.82
[1] assumes the conversion of outstanding convertible preference shares to
common shareholders' equity.
SOURCE White Mountains Insurance Group
-0- 04/29/2003
/CONTACT: David Foy of White Mountains, +1-203-453-1681/
(WTM)
CO: White Mountains Insurance Group
ST: New Hampshire
IN: INS
SU: ERN
AL-ES
-- NETU048 --
1668 04/29/2003 17:15 EDT http://www.prnewswire.com