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CONTACT: David Foy
Tel: 203-453-1681
WHITE MOUNTAINS REPORTS FIRST QUARTER 2003 RESULTS
HAMILTON, Bermuda (April 29, 2003)—White Mountains Insurance Group, Ltd. 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 | ||||
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 91% (103% 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 to 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.
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.
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;
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- competitive forces, including the conduct of other property and casualty insurers and reinsurers
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- 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
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- 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.
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WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions, except share and per share amounts)
| (Unaudited) | | ||||||
---|---|---|---|---|---|---|---|---|
| March 31, 2003 | December 31, 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 investment 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 | ||||
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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 (losses) on investments | 58.2 | (.1 | ) | ||||||
Other revenue | 24.5 | 40.0 | |||||||
Total revenues | 964.3 | 1,086.0 | |||||||
Expenses: | |||||||||
Loss and loss adjustment expenses | 522.6 | 706.4 | |||||||
Insurance and reinsurance acquisition expenses | 157.9 | 190.7 | |||||||
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 | 1,095.1 | |||||||
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 |
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WHITE MOUNTAINS INSURANCE GROUP, LTD.
FULLY CONVERTED TANGIBLE BOOK VALUE PER COMMON AND EQUIVALENT SHARE [1]
(Unaudited)
| (Unaudited) | | ||||||
---|---|---|---|---|---|---|---|---|
| March 31, 2003 | December 31, 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.
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EXHIBIT 99 (A)
WHITE MOUNTAINS REPORTS FIRST QUARTER 2003 RESULTS
UNDERWRITING RESULTS
INVESTMENT RESULTS
HOLDING COMPANY AND FINANCING ACTIVITIES
ADDITIONAL INFORMATION
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
WHITE MOUNTAINS INSURANCE GROUP, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (millions, except share and per share amounts)
WHITE MOUNTAINS INSURANCE GROUP, LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (millions, except per share amounts)
WHITE MOUNTAINS INSURANCE GROUP, LTD. FULLY CONVERTED TANGIBLE BOOK VALUE PER COMMON AND EQUIVALENT SHARE [1] (Unaudited)