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OneBeacon Insurance Group Ltd. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 30, 2012 07:02AM

OneBeacon Insurance Group Ltd. (OB) filed Quarterly Report for the period ended 2012-09-30. Onebeacon Insurance Group, Ltd. has a market cap of $1.3 billion; its shares were traded at around $13.6 with a P/E ratio of 22.3 and P/S ratio of 1.2. The dividend yield of Onebeacon Insurance Group, Ltd. stocks is 6.2%.



Highlight of Business Operations:

OneBeacon adopted ASU 2010-26 prospectively. As a result of adopting ASU 2010-26, $5.6 million of unamortized deferred acquisition costs as of January 1, 2012, primarily relating to a portion of profit sharing commission that had been deferred under prior guidance, have been determined to no longer be deferrable and will be recognized in expense over the original amortization period. During the three and nine months ended September 30, 2012, $0.9 million and $5.3 million, respectively, of the $5.6 million of unamortized acquisitions costs as of January 1, 2012 were recognized in expense. If OneBeacon had followed ASU 2010-26 in 2011, $1.4 million and $5.7 million, respectively, of acquisition costs that had been deferred would have been recognized in expense during the three and nine months ended September 30, 2011.

(1) Includes changes in net deferred gains and losses on sales of investments between OneBeacon and entities under White Mountains’ common control of $0.0 million and $(0.2) million, pre-tax, for the three and nine months ended September 30, 2012, respectively.

Our total revenues increased 52.0% to $346.3 million in the three months ended September 30, 2012, compared to $227.8 million in the three months ended September 30, 2011. The increase included a 13.4% increase in earned premiums related to several of our specialty businesses as described below. Net realized and unrealized investment gains (losses) significantly improved to a $40.0 million gain, compared to a $(47.4) million loss in the three months ended September 30, 2011 driven by changes in unrealized investments gains and losses in our equity portfolio resulting from improvements in the equity markets. Net investment income decreased 20.5% to $12.8 million in the three months ended September 30, 2012 due to a 6.4% decline in average invested assets. The decline in average invested assets since September 30, 2011 was driven by the AutoOne Transaction, return of capital to shareholders, repurchases of debt and the run-off of reserves related to the commercial lines business which was exited via a renewal rights sale. Net other revenues (expenses) in the three months ended September 30, 2012 were essentially flat compared to the three months ended September 30, 2011.

Our total revenues increased 21.5% to $945.3 million in the nine months ended September 30, 2012, compared to $778.3 million in the nine months ended September 30, 2011. The increase was mainly due to a 13.1% increase in earned premiums related to several of our specialty businesses as described below. Net realized and unrealized investment gains (losses) increased $71.2 million to $57.9 million of gains, compared to $(13.3) million of loss in the nine months ended September 30, 2011. Net investment income decreased 25.6% to $41.5 million in the nine months ended September 30, 2012 due to an 11.4% decline in average invested assets. The decline in average invested assets since September 30, 2011 was driven by the AutoOne Transaction, repurchases of debt and the run-off of reserves related to the commercial lines business that was exited via a renewal rights sale. Net other revenues (expenses) improved $12.1 million to $(0.1) million in the nine months ended September 30, 2012, compared to $(12.2) million in the nine months ended September 30, 2011. The nine months ended September 30, 2011 included a $12.0 million loss related to the purchase of a portion of our senior notes, partially offset by $0.8 million in additional consideration for aggregate premium renewals exceeding $200 million related to the renewal rights agreement for our commercial lines business.

Our process to assess the reasonableness of the market prices obtained from the outside pricing sources covers substantially all of our fixed maturity investments and includes, but is not limited to, evaluation of model pricing methodologies, review of the pricing services’ quality control processes and procedures on at least an annual basis, comparison of market prices to prices obtained from different independent pricing vendors on at least an annual basis, monthly analytical reviews of certain prices and review of assumptions utilized by the pricing service for selected measurements on an ad hoc basis throughout the year. We also perform back-testing of selected purchases and sales activity to determine whether there are any significant differences between the market price used to value the security prior to purchase or sale and the actual purchase or sale price on at least an annual basis. Prices provided by the pricing services that vary by more than 5% and $1.0 million from the expected price based on the procedures are considered outliers. In circumstances where the results of our review process does not appear to support the market price provided by the pricing

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