EXHIBIT 99.5
THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF THE
REGISTRANT AS OF JUNE 30, 2004 AND THE UNAUDITED PRO FORMA CONDENSED
COMBINED INCOME STATEMENTS OF THE REGISTRANT
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND THE YEAR ENDED
DECEMBER 31, 2003.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
INTRODUCTION AND OVERVIEW
On August 2, 2004, White Mountains Insurance Group, Ltd. (the "Company",
collectively with its subsidiaries "White Mountains") announced that the
investor group led by White Mountains and Berkshire Hathaway Inc. had
completed its acquisition (the "Acquisition") of the life and investments
business of Safeco Corporation ("Symetra Financial"). White Mountains paid
$200 million for approximately 19% of the outstanding shares of Symetra
Financial and warrants to acquire 1,099,600 common shares of Symetra
Financial. White Mountains' economic ownership of Symetra Financial is
approximately 24% on a fully converted basis (i.e., when considering all
outstanding warrants to acquire additional common shares of Symetra
Financial).
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined income statement of White
Mountains for the year ended December 31, 2003 and the six months ended June 30,
2004 presents results for White Mountains as if the acquisition of Symetra
Financial had occurred as of January 1, 2003 and January 1, 2004, respectively.
The accompanying unaudited pro forma condensed combined balance sheet of White
Mountains as of June 30, 2004 presents White Mountains' financial position as if
the acquisition of Symetra Financial had occurred on June 30, 2004.
White Mountains' investment in the common shares of Symetra Financial will be
accounted for by the equity method of accounting. The unaudited pro forma
financial information is provided for informational purposes only. The
unaudited pro forma financial information does not purport to represent what
White Mountains' financial position or results of operations actually would
have been had the Acquisition in fact occurred as of the dates indicated, or
to project White Mountains' financial position or results of operations for
any future date or period. The pro forma adjustments are based on available
information and assumptions that the Company currently believes are
reasonable under the circumstances and that are considered to be material to
the overall pro forma presentation. The unaudited pro forma financial
information should be read in conjunction with White Mountains' Annual Report
on Form 10-K for the year ended December 31, 2003, White Mountains' Quarterly
Report on Form 10-Q for the period ended June 30, 2004, Symetra Financial's
audited consolidated financial statements as of and for the year ended
December 31, 2003, which are enclosed herein as Exhibit 99.3, and Symetra
Financial's unaudited combined financial statements as of June 30, 2004 and
for the six months ended June 30, 2004 and 2003, which are enclosed herein as
Exhibit 99.4.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2004
(IN MILLIONS OF DOLLARS)
White Pro Forma Pro Forma
Mountains Adjustments Notes Combined
--------- ----------- ----- ---------
ASSETS
Total investments and cash $10,401.7 $ (200.0) [a] $10,201.7
Reinsurance recoverable on paid and unpaid losses 3,896.2 -- 3,896.2
Insurance and reinsurance premiums receivable 963.6 -- 963.6
Deferred acquisition costs 338.0 -- 338.0
Deferred tax asset 248.2 -- 248.2
Investment in unconsolidated insurance affiliates 151.6 200.00 [a] 351.6
Other assets 1,924.6 36.5 [b] 1,961.1
--------- -------- ---------
TOTAL ASSETS $17,923.9 $ 36.5 $17,960.4
========= ======== =========
LIABILITIES
Loss and loss adjustment expense reserves $ 9,329.1 $ -- $ 9,329.1
Unearned insurance and reinsurance premiums 1,824.5 -- 1,824.5
Debt 824.3 -- 824.3
Deferred tax liabilities 292.8 -- 292.8
Preferred stock subject to mandatory redemption 202.7 -- 202.7
Other liabilities 1,937.3 -- 1,937.3
--------- -------- ---------
TOTAL LIABILITIES 14,410.7 -- 14,410.7
--------- -------- ---------
SHAREHOLDERS' EQUITY 3,513.2 36.5 [b] 3,549.7
--------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,513.2 36.5 3,549.7
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $17,923.9 $ 36.5 $17,960.4
========= ======== =========
Fully converted tangible book value per share (10,819,416
shares outstanding) $ 312.82 $ 316.20
Book value per share (10,819,416 shares outstanding) $ 314.65 $ 318.02
See the accompanying notes to the unaudited pro forma
condensed combined financial statements.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
White Pro Forma Pro Forma
Mountains Adjustments Notes Combined
--------- ----------- ----- ---------
REVENUES
Earned insurance and reinsurance premiums $ 1,829.1 $ -- $ 1,829.1
Net investment income 164.2 (3.0) [a] 161.2
Net realized investment gains 56.2 -- 56.2
Net unrealized investment gains -- -- --
Other revenues 93.8 -- 93.8
----------- ------ -----------
TOTAL REVENUES 2,143.3 (3.0) 2,140.3
EXPENSES
Losses and loss adjustment expenses 1,146.7 -- 1,146.7
Insurance and reinsurance acquisition expenses 340.7 -- 340.7
Other underwriting expenses 252.1 -- 252.1
General and administrative expenses 124.0 -- 124.0
Other expenses 69.6 -- 69.6
----------- ------ -----------
TOTAL EXPENSES 1,933.1 -- 1,933.1
----------- ------ -----------
PRETAX EARNINGS (LOSS) 210.2 (3.0) 207.2
Income tax benefit (provision) (89.3) 0.8 [a] (88.5)
Equity in earnings of unconsolidated affiliates 23.1 20.0 [c] 43.1
----------- ------ -----------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS $ 144.0 $ 17.8 $ 161.8
=========== ====== ===========
Earnings per Common Share (Note d):
Average Common Shares used in computing basic earnings per share 9,040,207 9,040,207
Basic earnings per Common Share $ 15.93 $ 17.90
Average Common Shares used in computing diluted earnings per share 10,151,086 10,151,086
Diluted earnings per Common Share $ 14.11 $ 15.86
See the accompanying notes to the unaudited pro forma
condensed combined financial statements.
WHITE MOUNTAINS INSURANCE GROUP, LTD.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
White Pro Forma Pro Forma
Mountains Adjustments Notes Combined
--------- ----------- ----- ---------
REVENUES
Earned insurance and reinsurance premiums $ 3,137.7 $ -- $ 3,137.7
Net investment income 290.9 (6.0) [a] 284.9
Net realized investment gains 162.6 -- 162.6
Net unrealized investment gains -- --
Other revenues 215.4 -- 215.4
---------- ----- ----------
TOTAL REVENUES 3,806.6 (6.0) 3,800.6
EXPENSES
Losses and loss adjustment expenses 2,138.1 2,138.1
Insurance and reinsurance acquisition expenses 611.6 -- 611.6
Other underwriting expenses 363.3 -- 363.3
General and administrative expenses 201.8 201.8
Other expenses 119.5 -- 119.5
---------- ----- ----------
TOTAL EXPENSES 3,434.3 -- 3,434.3
---------- ----- ----------
PRETAX EARNINGS (LOSS) 372.3 (6.0) 366.3
Income tax benefit (provision) (127.6) 1.7 [a] (125.9)
Accretion and dividends on mandatorily redeemable preferred stock (21.5) -- (21.5)
Equity in earnings of unconsolidated affiliates 57.4 35.4 [c] 92.8
---------- ----- ----------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS $ 280.6 $31.1 $ 311.7
========== ===== ==========
Earnings per Common Share (Note d):
Average Common Shares used in computing basic earnings per share 8,725,217 8,725,217
Basic earnings per Common Share $ 26.48 $ 30.05
Average Common Shares used in computing diluted earnings per share 9,668,732 9,668,732
Diluted earnings per Common Share $ 23.63 $ 26.85
See the accompanying notes to the unaudited pro forma
condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following pro forma purchase accounting adjustments were undertaken to
reflect the Company's investment in Symetra Financial.
[a] INVESTMENT INCOME
The Company paid $200.0 MILLION in cash for its investment in Symetra
Financial. The Company estimates that it earned $3.0 MILLION and $6.0
MILLION for the periods ended June 30, 2004 and December 31, 2003,
respectively, on such balances which were held in short-term
investments. The yield of 3% approximates the Company's pre-tax yield
on its short-term investment portfolio during the period. As a result,
a Federal income tax benefit of $.8 MILLION and $1.7 MILLION, for the
periods ended June 30, 2004 and December 31, 2003, respectively, were
recorded for these transactions.
[b] EXTRAORDINARY GAINS
The Company paid $200.0 million for a 19% interest in the common
stock of Symetra Financial, which has a fair value at the date of
purchase of $200.0 million, and warrants to acquire 1,099,600 of
the common shares of Symetra Financial, which has a fair value
at the date of purchase of $36.5 million. As a result, the Company
has recognized a pro forma gain of $36.5 million representing the
excess of the fair value of assets acquired over the consideration
paid for its interests in Symetra Financial. The Company has valued
its warrants to acquire common shares of Symetra Financial using a
five-year expected term with a risk-free interest rate commensurate
with the term valued (3.8%) and using volatility of 30%.
[c] EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES
The Company recorded $20.0 MILLION and $35.4 MILLION representing the
Company's ownership of approximately 19% in the net income of Symetra
Financial for the periods ended June 30, 2004 and December 31, 2003,
respectively.
[d] EARNINGS PER COMMON SHARE
In determining both basic and diluted earnings per Common Share before
pro-forma adjustments, net income from continuing operations is reduced
by $49.5 million to reflect an adjustment to the redemption value on
the Company's convertible preference shares for the period ended
December 31, 2003. In determining diluted earnings per Common Share
before pro-forma adjustments, net income from continuing operations is
further reduced by $.8 million and $2.5 million for the periods ended
June 30, 2004 and December 31, 2003, respectively, resulting from
outstanding options and warrants to acquire common shares of an
unconsolidated affiliate of the Company. The basic earnings per Common
Share computation is determined using the weighted average number of
Common Shares outstanding during the period. The diluted earnings per
Common Share computation is determined using the weighted average
number of Common Shares and dilutive Common Share equivalents
outstanding during the period.