White Mountains' Tangible Book Value Per Share Increases 4% to $359 in the Second Quarter
HAMILTON, Bermuda, July 29 /PRNewswire-FirstCall/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM, Bermuda: WTM) ended the second quarter of 2005 with a fully converted tangible book value per share of $359, an increase of 4% for the quarter and 16% for the past twelve months, including dividends.
CEO Ray Barrette said, "We had a good quarter with solid underwriting results. OneBeacon continues to run at a good, mid-90's combined ratio, and White Mountains Re came in at 88% in a light quarter for catastrophes. Esurance continues to grow rapidly while maintaining a loss ratio in the 60's. Investment results were good, although they were held back by the strength of the dollar. Equity returns were outstanding."
Adjusted comprehensive net income for the quarter was $136 million, compared to $38 million in the second quarter of 2004, while for the first six months adjusted comprehensive net income was $211 million, down from $233 million in the comparable period of last year. Relative to last year, investment results were much better in the quarter and essentially in line for the six months. Unrealized currency losses penalized both the quarterly and six month results, while last year's second quarter benefited from a $111 million transaction gain from the Sirius acquisition.
Net income for the quarter was $147 million, down from $169 million in the second quarter of 2004, which included the Sirius transaction gain. Net income for the first six months of 2005 was $323 million, including $56 million after tax ($74 million pre-tax) from a special dividend from Montpelier received in the first quarter, up 22% over the first six months of last year.
In June, the Company was advised that the Joint Committee on Taxation approved the IRS audit of the Company's 1997-2000 tax years, which contained no significant adjustments to the tax returns filed by the Company. This audit included the redomestication of the Company to Bermuda in 1999.
OneBeacon
OneBeacon's pre-tax income for the second quarter of 2005 was $121 million, up 27% from $95 million for the second quarter of 2004. For the first six months of 2005, pre-tax income was $281 million, up 18% from $238 million for the comparable period of 2004. The GAAP combined ratio was 95% for both the quarter and six months, essentially in line with the comparable periods in the prior year. Net written premiums were down 9% in the quarter and 17% for the six months. The decline in premium volume was partially due to the sale of the renewal rights for OneBeacon's legacy New York commercial business and the one-time premium increase in 2004 from the assumption of unearned premiums in the Atlantic Specialty acquisition.
During the second quarter, OneBeacon completed an internal study of its asbestos and environmental (A&E) exposures. Based on the study, OneBeacon increased its best estimate of incurred losses ceded to National Indemnity Company (NICO) by $353 million, net of underlying reinsurance ($841 million gross), to $2.1 billion, still well within the $2.5 billion limit provided by the NICO Cover. OneBeacon estimates that the range of reasonable outcomes around its best estimate is $1.7 billion to $2.4 billion, versus a range of $1.5 billion to $2.4 billion from the 2003 A&E study. Due to the NICO Cover, there was no impact to income or equity from the change in estimate.
Mike Miller, recently elected CEO of OneBeacon said, "Our underwriting results were solid again in the second quarter, with all three of our business units -- specialty, personal, and commercial -- producing combined ratios in the low-to-mid 90's. Importantly, our pricing continues to be adequate, albeit on a shrinking premium volume. The A&E study was a thorough review conducted by a cross-functional team including actuarial, claims, legal, finance, reinsurance and audit, and the methodology was reviewed with outside actuaries. The results reaffirm our conviction that the NICO Cover is adequate."
White Mountains Re
Pre-tax income for White Mountains Re was $89 million for the second quarter of 2005, up 24% from $72 million for the second quarter of 2004. For the first six months of 2005, pre-tax income was $143 million, up 20% from $119 million in the comparable prior year period. The GAAP combined ratio was 88% for the second quarter and 94% for the first six months of 2005, compared to 92% in each of the comparable periods of 2004. Net written premiums were down 31% for the quarter, primarily from a one-time change in written premium estimation methodology at Sirius in the prior year's second quarter. For the first six months of the year, premiums are up 14% reflecting the acquisition of Sirius in last year's second quarter.
Steve Fass, CEO of White Mountains Re, said, "I am pleased with our results so far in 2005. We were hit in the first quarter by European storm Erwin, but catastrophe losses were low in the second quarter. In addition, we benefited from a one-time reduction in ceded reinsurance premiums of $14 million in the quarter. We also experienced about $11 million of adverse development on hurricane Ivan claims in the quarter. We do not expect to have any material losses from hurricanes Dennis and Emily or the London bombings. Overall, we see softness in the reinsurance market, which is causing us to non-renew some business, but we believe prices on our book are adequate."
Esurance
Esurance had pre-tax income of $1 million in the second quarter and $3 million for the first six months of 2005, compared to a $1 million loss in both of the comparable periods of 2004. The GAAP combined ratio was 104% for both the quarter and six months, consistent with prior year performance. Net written premiums are up 71% and 72% for the quarter and six months, respectively, from the comparable periods of 2004.
Gary Tolman, CEO of Esurance, stated, "Our premium volume continues to come in well above prior year levels with excellent loss ratios. We are continuing to invest in growing our book, which I believe is adding significantly to our intrinsic business value. In the second quarter, our expansion continued with our entry into Tennessee. We are already seeing the positive impact of our first quarter launch in New Jersey, with that state rising to our 6th largest in terms of new business sales for the second quarter."
Other Operations
White Mountains' Other Operations segment reported a pre-tax loss of $18 million for the second quarter of 2005, compared to a pre-tax loss of $70 million for the second quarter of 2004. For the first six months of 2005 the segment reported a pre-tax loss of $11 million versus a loss of $146 million in the comparable period of 2004. The favorable results for 2005 reflect the benefit of the special dividend from Montpelier Re received in the first quarter of 2005, as well as several other smaller items.
Investment Activities
John Gillespie, President of White Mountains Advisors, said, "The bond market and dollar both rallied in the second quarter. While our fixed income results benefited from the bond market rally, the stronger dollar held our results back due to our exposure to the Swedish krona. Our equity results in 2005, however, continue to significantly outperform the S&P 500."
The GAAP total return on invested assets for the quarter was 1%. For the first six months it was 1.4%. Net investment income was $105 million in the quarter, up 12% from the second quarter of 2004, and $279 million for the first six months, up 70% from the prior period, primarily due to the Montpelier special dividend mentioned above.
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 1, 2005 and urges shareholders to refer to that document for more complete information concerning White Mountains' financial results.
Regulation G
This earnings release includes two non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures. White Mountains believes these measures to be more relevant than comparable GAAP measures in evaluating White Mountains' financial performance.
Adjusted comprehensive net income is a non-GAAP measure that excludes the change in net unrealized gains from Symetra's fixed maturity portfolio from comprehensive net income. GAAP requires these assets to be marked-to-market, which results in gains during periods when interest rates fall and losses in periods when interest rates rise. Because the liabilities related to the life insurance and structured settlement products that these assets support are not marked to market, it is likely that the economic impact on Symetra would be the opposite of that shown under GAAP (i.e., in general, Symetra's intrinsic value increases when interest rates rise and decreases when interest rates fall). The reconciliation of adjusted comprehensive net income to comprehensive net income is included on page 7.
Fully converted tangible book value per share is a non-GAAP measure which is derived by expanding the GAAP book value per share calculation to include the effects of assumed conversion of all convertible securities and to exclude any unamortized goodwill and net unrealized gains from Symetra's fixed maturity portfolio. The reconciliation of fully converted tangible book value per share to book value per share is included on page 6.
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 and related reinsurance;
* 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 to our expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:
* 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 property and
casualty insurers and reinsurers;
* changes in domestic or foreign laws or regulations, or their
interpretation, applicable to White Mountains, its competitors or its
clients;
* an economic downturn or other economic conditions adversely affecting
its financial position;
* recorded loss reserves subsequently proving to have been inadequate;
* 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, June 30,
2005 2004 2004
Assets
Fixed maturity investments $7,760.4 $7,900.0 $7,510.1
Short-term investments 773.1 1,058.2 1,464.9
Common equity securities 1,024.4 1,043.9 887.0
Other investments 533.3 527.4 447.2
Total investments 10,091.2 10,529.5 10,309.2
Reinsurance recoverable on unpaid
losses 4,403.5 3,797.4 3,733.3
Reinsurance recoverable on paid
losses 116.3 92.0 162.9
Funds held by ceding companies 735.3 943.8 953.1
Insurance and reinsurance premiums
receivable 981.9 942.2 963.6
Securities lending collateral 564.6 593.3 757.6
Investment in unconsolidated
insurance affiliates 531.2 466.6 151.6
Deferred acquisition costs 313.0 308.2 338.0
Ceded unearned premiums 241.9 224.1 205.7
Accounts receivable on unsettled
investment sales 19.5 19.9 76.7
Other assets 1,186.3 1,098.1 1,029.8
Total assets $19,184.7 $19,015.1 $18,681.5
Liabilities
Loss and loss adjustment expense
reserves $9,535.8 $9,398.5 $9,329.1
Reserves for structured contracts 278.2 375.9 401.0
Unearned insurance and reinsurance
premiums 1,759.0 1,739.4 1,824.5
Debt 777.6 783.3 824.3
Securities lending payable 564.6 593.3 757.6
Preferred stock subject to
mandatory redemption 222.2 211.9 202.7
Ceded reinsurance payable 202.6 201.4 124.1
Funds held under reinsurance
treaties 170.4 155.4 187.5
Accounts payable on unsettled
investment purchases 95.7 30.9 67.2
Other liabilities 1,486.8 1,641.2 1,450.3
Total liabilities 15,092.9 15,131.2 15,168.3
Common Shareholders' Equity
Common shares and paid-in surplus 1,727.2 1,725.8 1,717.7
Retained earnings 1,975.9 1,695.9 1,541.3
Accumulated other comprehensive
income, after tax:
Net unrealized gains on
investments 315.5 359.5 245.8
Equity in net unrealized gains
from Symetra's fixed maturity
portfolio 95.7 56.6 -
Net unrealized foreign currency
translation gains (losses) and
other (22.5) 46.1 8.4
Total common shareholders'
equity 4,091.8 3,883.9 3,513.2
Total liabilities and common
shareholders' equity $19,184.7 $19,015.1 $18,681.5
Common shares outstanding (000's) 10,774 10,773 10,769
Common and equivalent shares
outstanding (000's) 10,819 10,819 10,819
WHITE MOUNTAINS INSURANCE GROUP, LTD.
FULLY CONVERTED TANGIBLE BOOK VALUE PER COMMON AND EQUIVALENT SHARE
(Unaudited)
June 30, March 31, Dec. 31, June 30,
2005 2005 2004 2004
Book value per share numerators
(in millions):
Common shareholders' equity $4,091.8 $3,912.5 $3,883.9 $3,513.2
Benefits to be received from
share obligations under
employee benefit plans 6.6 6.5 6.7 8.4
Remaining adjustment of
subsidiary preferred stock to
face value (97.8) (103.1) (108.1) (117.3)
Book value per share numerator 4,000.6 3,815.9 3,782.5 3,404.3
Less: Equity in net unrealized
gains from Symetra's fixed
maturity portfolio (95.7) (32.1) (56.6) -
Less: Goodwill of consolidated
limited partnership investments (19.7) (19.8) (20.0) (19.7)
Fully converted tangible book
value per common and equivalent
share numerator $3,885.2 $3,764.0 $3,705.9 $3,384.6
Book value per share denominators
(in thousands of shares):
Common Shares outstanding 10,774.3 10,774.6 10,772.8 10,769.4
Share obligations under employee
benefits plans 44.7 44.7 46.5 50.0
Fully converted tangible book
value per common and equivalent
share denominator 10,819.0 10,819.3 10,819.3 10,819.4
Book value per common and
equivalent share $369.78 $352.69 $349.60 $314.65
Fully converted tangible book
value per common and equivalent
share $359.11 $347.89 $342.52 $312.82
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,
2005 2004 2005 2004
Revenues:
Earned insurance and
reinsurance premiums $943.4 $997.2 $1,898.4 $1,829.1
Net investment income 104.6 93.2 278.5 164.2
Net realized investment
gains (losses) 63.3 (5.6) 100.4 56.2
Other revenue 59.6 34.3 118.9 91.8
Total revenues 1,170.9 1,119.1 2,396.2 2,141.3
Expenses:
Loss and loss adjustment
expenses 570.2 623.4 1,189.5 1,146.7
Insurance and reinsurance
acquisition expenses 184.1 184.0 373.2 341.6
Other underwriting expenses 128.3 136.1 250.5 249.2
General and administrative expenses 61.5 42.3 99.2 124.0
Accretion of fair value adjustment
to loss and loss adjustment expense
reserves 9.1 12.8 19.0 22.9
Interest expense on debt 11.7 12.1 23.3 23.4
Interest expense - dividends on
preferred stock subject to
mandatory redemption 7.5 7.6 15.1 15.2
Interest expense - accretion on
preferred stock subject
to mandatory redemption 5.4 4.2 10.4 8.1
Total expenses 977.8 1,022.5 1,980.2 1,931.1
Pretax income 193.1 96.6 416.0 210.2
Income tax provision (55.4) (44.4) (111.7) (89.3)
Net income before equity in
earnings of unconsolidated
affiliates and extraordinary item 137.7 52.2 304.3 120.9
Equity in earnings of unconsolidated
insurance affiliates 9.1 4.9 18.8 23.1
Net income before
extraordinary item 146.8 57.1 323.1 144.0
Excess of fair value of acquired
net assets over cost - 111.4 - 120.0
Net income 146.8 168.5 323.1 264.0
Change in net unrealized gains
on investments 96.5 (138.9) (4.9) (40.2)
Change in foreign currency
translation (44.0) 8.8 (68.6) 8.7
Comprehensive net income 199.3 38.4 249.6 232.5
Deduct: Change in net unrealized
gains from Symetra's fixed
maturity portfolio (63.6) - (39.1) -
Adjusted comprehensive net income $135.7 $38.4 $210.5 $232.5
Basic earnings per share:
Net income before extraordinary
item $13.64 $6.30 $30.03 $15.93
Net income 13.64 18.59 30.03 29.20
Diluted earnings per share:
Net income before extraordinary
item $13.64 $5.56 $29.94 $14.11
Net income 13.64 16.45 29.94 25.93
Dividends per share $2.00 $- $4.00 $1.00
WHITE MOUNTAINS INSURANCE GROUP, LTD.
YTD SEGMENT INCOME STATEMENT
(in millions)
(Unaudited)
For the Six Months Ended June 30, 2005
OneBeacon WM Re Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $1,084.9 $680.5 $131.2 $1.8 $1,898.4
Net investment income 137.3 70.2 4.2 66.8 278.5
Net realized investment
gains (losses) 86.6 18.5 2.2 (6.9) 100.4
Other revenue 44.4 27.6 1.5 45.4 118.9
Total revenues 1,353.2 796.8 139.1 107.1 2,396.2
Expenses:
Loss and loss adjustment
expenses 664.3 436.6 86.9 1.7 1,189.5
Insurance and reinsurance
acquisition expenses 197.8 141.2 34.1 0.1 373.2
Other underwriting
expenses 172.3 62.2 15.1 0.9 250.5
General and administrative
expenses 37.2 6.3 (0.1) 55.8 99.2
Accretion of fair value
adjustment to loss and
lae reserves - 6.0 - 13.0 19.0
Interest expense on debt 0.7 1.1 - 21.5 23.3
Interest expense -
dividends and accretion
on preferred stock
subject to mandatory
redemption - - - 25.5 25.5
Total expenses 1,072.3 653.4 136.0 118.5 1,980.2
Pretax income (loss) $280.9 $143.4 $3.1 $(11.4) $416.0
For the Six Months Ended June 30, 2004
OneBeacon WM Re 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
investment gains
(losses) 70.9 12.4 0.4 (27.5) 56.2
Other revenue 63.9 33.4 0.5 (6.0) 91.8
Total revenues 1,438.6 644.9 79.3 (21.5) 2,141.3
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 11.5 - 341.6
Other underwriting
expenses 186.3 50.9 11.2 0.8 249.2
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 80.1 124.8 1,931.1
Pretax income (loss) $237.9 $119.4 $(0.8) $(146.3) $210.2
WHITE MOUNTAINS INSURANCE GROUP, LTD.
QTD SEGMENT INCOME STATEMENT
(in millions)
(Unaudited)
For the Three Months Ended June 30, 2005
OneBeacon WM Re Esurance Other Total
Revenues:
Earned insurance and
reinsurance premiums $539.5 $330.8 $71.3 $1.8 $943.4
Net investment income 49.5 38.3 2.1 14.7 104.6
Net realized investment gains
(losses) 40.8 10.6 1.2 10.7 63.3
Other revenue 27.8 7.8 0.6 23.4 59.6
Total revenues 657.6 387.5 75.2 50.6 1,170.9
Expenses:
Loss and loss adjustment
expenses 325.7 197.5 46.0 1.0 570.2
Insurance and reinsurance
acquisition expenses 97.7 65.8 20.5 0.1 184.1
Other underwriting expenses 91.5 28.6 7.6 0.6 128.3
General and administrative
expenses 20.9 4.0 (0.1) 36.7 61.5
Accretion of fair value
adjustment to loss and lae
reserves - 2.6 - 6.5 9.1
Interest expense on debt 0.4 0.5 - 10.8 11.7
Interest expense - dividends
and accretion on preferred
stock
subject to mandatory
redemption - - - 12.9 12.9
Total expenses 536.2 299.0 74.0 68.6 977.8
Pretax income (loss) $121.4 $88.5 $1.2 $(18.0) $193.1
For the Three Months Ended June 30, 2004
OneBeacon WM Re 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 investment
gains (losses) 3.2 8.7 (0.1) (17.4) (5.6)
Other revenue 19.9 12.8 0.3 1.3 34.3
Total revenues 683.8 404.6 42.5 (11.8) 1,119.1
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 6.0 0.3 136.1
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 43.3 57.9 1,022.5
Pretax income (loss) $95.2 $71.9 $(0.8) $(69.7) $96.6
WHITE MOUNTAINS INSURANCE GROUP, LTD.
SUMMARY OF GAAP RATIOS AND PREMIUMS
(Unaudited)
Six Months Ended June 30, 2005
OneBeacon WM Re Esurance
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 56% 60% 56% 61% 64% 66%
Expense 32% 33% 42% 34% 30% 38%
Total Combined 88% 93% 98% 95% 94% 104%
Dollars in millions
Net written premiums $427.0 $320.8 $306.3 $1,078.5 $705.1 $153.6
Earned premiums $406.6 $337.2 $314.5 $1,084.9 $680.5 $131.2
Six Months Ended June 30, 2004
OneBeacon WM Re Esurance
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 52% 60% 58% 62% 63% 75%
Expense 29% 32% 41% 34% 29% 29%
Total Combined 81% 92% 99% 96% 92% 104%
Dollars in millions
Net written premiums $420.2 $342.8 $508.8 $1,303.5 $618.2 $89.5
Earned premiums $413.0 $341.1 $358.9 $1,194.4 $557.5 $77.1
Three Months Ended June 30, 2005
OneBeacon WM Re Esurance
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 59% 58% 54% 60% 60% 64%
Expense 35% 33% 41% 35% 28% 40%
Total Combined 94% 91% 95% 95% 88% 104%
Dollars in millions
Net written premiums $210.3 $165.6 $170.2 $558.6 $285.7 $76.1
Earned premiums $203.1 $166.7 $155.7 $539.5 $330.8 $71.3
Three Months Ended June 30, 2004
OneBeacon WM Re Esurance
Specialty Personal Commercial Total(1)
GAAP Ratios
Loss and LAE 56% 54% 55% 61% 63% 75%
Expense 28% 34% 43% 34% 29% 30%
Total Combined 84% 88% 98% 95% 92% 105%
Dollars in millions
Net written premiums $206.9 $182.5 $192.3 $612.6 $414.8 $44.5
Earned premiums $202.2 $171.9 $179.5 $602.7 $353.0 $41.4
(1) Includes results from run off operations and reciprocals. (end)
SOURCE White Mountains Insurance Group, Ltd.
07/29/2005
CONTACT: David Foy of White Mountains Insurance Group, Ltd., +1-203-453- 1681
Web site: http://www.whitemountains.com
(WTM)