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White Mountains Insurance Group Ltd. Reports Operating Results (10-Q)

October 29, 2010 | About:
10qk

10qk

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White Mountains Insurance Group Ltd. (WTM) filed Quarterly Report for the period ended 2010-09-30.

White Mountains Insurance Group Ltd. has a market cap of $2.67 billion; its shares were traded at around $317.35 with a P/E ratio of 32.9 and P/S ratio of 0.6. The dividend yield of White Mountains Insurance Group Ltd. stocks is 0.3%.WTM is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Chuck Royce of Royce& Associates, George Soros of Soros Fund Management LLC, Murray Stahl of Horizon Asset Management, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

White Mountains ended the third quarter of 2010 with an adjusted book value per share of $429, an increase of 6% for the third quarter and 3% for the first nine months of 2010, including dividends. White Mountains reported adjusted comprehensive income of $178 million and $60 million for the third quarter and first nine months of 2010, compared to adjusted comprehensive income of $243 million and $469 million for the third quarter and first nine months of 2009. The increase in adjusted book value during the third quarter of 2010 was driven by strong investment returns, foreign currency gains from the weakening U.S. dollar and good underwriting results, which benefited from favorable weather, partially offset by a loss recorded at WM Life Re resulting from a reduction in surrender assumptions. In addition, share repurchases increased adjusted book value per share $2 and $5 in the third quarter and first nine months of 2010.

White Mountains GAAP pre-tax total return on invested assets was 4.0% and 4.6% for the third quarter and first nine months of 2010, which included 1.9% and 0.5% of currency gains, compared to 4.1% and 8.3% for the third quarter and first nine months of last year, which included 1.2% and 1.6% of foreign currency gains. Adjusted book value per share increased $11 and $1 in the third quarter and first nine months of 2010 from foreign currency translation gains, due primarily to the weakening U.S. dollar during the third quarter, compared to an increase of $7 and $8 from foreign currency translation gains in the third quarter and first nine months of 2009. The third quarter of 2010 benefited from lower catastrophe activity than the prior year as White Mountains recorded $17 million of catastrophe losses in the quarter of 2010 compared to $43 million in the third quarter of 2009. The results for the first nine months of 2010 were impacted by $221 million of natural catastrophe losses, primarily from the Chile earthquake and winter weather in the Northeastern United States and Europe, compared to $68 million of catastrophe losses from relatively benign weather and few catastrophes in the first nine months of 2009. The third quarter of 2010 also included a $48 million loss recorded at WM Life Re resulting from a reduction in surrender assumptions. During the third quarter and first nine months of 2010, White Mountains repurchased and retired 189,392 and 536,801 of its common shares under its share repurchase program for $60 million and $177 million. These repurchases were completed at an average price of 74% and 77% of White Mountains September 30, 2010 adjusted book value per share.

OneBeacon ended the third quarter of 2010 with a book value per share of $12.91, an increase of 6% for the third quarter and 7% for the first nine months of 2010, including dividends. In July 2010, OneBeacon closed the Personal Lines Transaction and recorded an after tax gain of approximately $19 million on the sale in the third quarter, which was in addition to a $6 million tax benefit booked in the second quarter. OneBeacon reported GAAP combined ratios of 95% and 102% for the third quarter and first nine months of 2010, compared to 97% and 95% for the third quarter and first nine months of 2009. The decrease in the combined ratio for the quarter was primarily due to 5 points less of catastrophe losses compared to last year, partially offset by a 1 point increase in the expense ratio. The increase in the combined ratio for the first nine months was primarily due to large loss activity and catastrophe losses from Northeast storms in the first quarter of 2010. The first nine months of 2010 included 4 points of catastrophe losses compared to less than 2 points of catastrophe losses for the first nine months of last year. White Mountains Re reported GAAP combined ratios of 78% and 102% for the third quarter and first nine months of 2010 compared to 79% and 82% for the third quarter and first nine months of 2009. The combined ratios for the third quarter of 2010 and 2009 both benefited from relatively benign weather and favorable loss reserve development. The increase in the combined ratio for the first nine months of 2010 was primarily due to the increase in catastrophe losses described above.

Total net written premiums decreased 21% and 13% to $696 million in the third quarter and $2,385 million in the first nine months of 2010 compared to $880 million and $2,742 million in the third quarter and first nine months of 2009, primarily due to lower net written premiums at OneBeacon resulting from the Commercial Lines Transaction beginning with January 1, 2010 renewals and the Personal Lines Transaction in July 2010, partially offset by increases at White Mountains Re and Esurance. OneBeacons net written premiums were $288 million in the third quarter and $1,003 million in the first nine months of 2010, a decrease of 43% and 32% from the comparable periods of 2009, principally due to the aforementioned Commercial and Personal Lines Transactions. OneBeacons specialty lines premiums increased 5% for the third quarter and 7% for the first nine months of 2010. White Mountains Res net written premiums were $187 million in the third quarter and $736 million in the first nine months of 2010, an increase of 9% and 10% from the comparable periods of 2009, primarily due to increases in the trade credit and accident & health lines and, for the nine-month period, the effects of foreign currency translation. Esurances net written premiums were $221 million in the third quarter and $646 million in the first nine months of 2010, an increase of 8% from both comparable periods of 2009, due to higher new business sales driven by an improved conversion rate (i.e., the percentage of shoppers that buy policies).

White Mountains total revenues decreased 32% to $822 million in the third quarter of 2010 compared to $1,203 million in the third quarter of 2009, primarily due to lower net investment gains and earned insurance and reinsurance premiums. White Mountains reported net realized and unrealized investment losses of $3 million in the third quarter of 2010, which was significantly impacted by foreign currency translation on U.S. dollar-denominated investments at WMRe Sirius, the effects of which are offset in other comprehensive income (see Investment Returns on page 46), compared to $171 million of net realized and unrealized investment gains in the third quarter of 2009. Earned premiums were down 19% to $733

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