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

February 28, 2012 | About:
10qk

10qk

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White Mountains Insurance Group Ltd. (WTM) filed Annual Report for the period ended 2011-12-31.

White Mtn Ins has a market cap of $3.8 billion; its shares were traded at around $496.06 with a P/E ratio of 30.5 and P/S ratio of 1.8. The dividend yield of White Mtn Ins stocks is 0.2%.

Highlight of Business Operations:

White Mountains total revenues decreased 15% to $2,178 million in 2011 compared to $2,567 million in 2010, primarily due to lower earned insurance and reinsurance premiums, partially offset by higher net investment gains and lower losses at WM Life Re. Earned premiums were down 14% to $1,928 million in 2011 as a 28% decrease at OneBeacon, which was driven by the Personal Lines Transaction and the Commercial Lines Transaction, was partially offset by an 8% increase at Sirius Group. Excluding the $425 million of earned premiums in 2010 related to the exited businesses at OneBeacon, White Mountains earned premiums increased 6% in 2011. Net investment income was down 26% to $185 million in 2011, due primarily to lower fixed maturity yields and a reduction in invested assets from the Personal Lines Transaction, OBH Senior Notes repurchases at OneBeacon and share repurchases. White Mountains reported net realized and unrealized investment gains of $123 million in 2011 compared to $83 million in 2010. Both periods were significantly impacted by foreign currency translation on U.S. dollar-denominated investments at Sirius International, the effects of which are offset in other comprehensive income (see Impact of Foreign Currency on Investment Returns on page 51). Other revenues decreased to a loss of $57 million in 2011 from a gain of $23 million in 2010, due primarily to foreign currency translation losses and higher mark-to-market losses on the Symetra warrants, partially offset by lower losses reported by WM Life Re. Other revenues included a $27 million loss from WM Life Re in 2011 compared to a $61 million loss in 2010. Other revenues in 2011 also included a $7 million pre-tax gain from Sirius Groups acquisition of Old Lyme, while other revenues in 2010 also included a $13 million pre-tax gain from Sirius Groups acquisition of Central National.

White Mountains total revenues decreased 25% to $2,567 million in 2010 compared to $3,443 million in 2009, primarily due to lower net investment gains and lower earned premiums due to the Commercial and Personal Lines Transactions. White Mountains reported net realized and unrealized investment gains of $83 million in 2010 compared to $362 million in 2009. Earned premiums decreased 17% in 2010 compared to 2009, with decreases at both OneBeacon and Sirius Group. Excluding earned premiums in 2010 and 2009 related to the exited businesses at OneBeacon, White Mountains earned premiums increased 3% in 2010. Net investment income was down 16% to $209 million in 2010, due primarily to lower fixed maturity yields and a reduction in invested assets from the Personal Lines Transaction, including a shift to lower yielding short-term investments during the first six months of 2010 in preparation for the sale, the OBH Senior Notes repurchases at OneBeacon and share repurchases. Other revenues decreased to $23 million in 2010 from $114 million in 2009, primarily due to a $44 million decrease in foreign currency translation gains at Sirius Group and a $39 million decrease related to the deconsolidation of Tuckerman Fund II effective January 1, 2010, partially offset by a $13 million pre-tax gain from Sirius Groups acquisition of Central National. Other revenues included $23 million of foreign currency translation gains at Sirius Group in 2010 compared to $67 million in 2009.

Sirius Groups gross written premiums increased 8% to $1,079 million in 2010 from $997 million in 2009, while net written premiums increased 7% to $866 million in 2010 from $807 million in 2009. These increases were primarily due to foreign currency translation ($59 million and $43 million of the increase, respectively) and increases in the trade credit and accident and health lines of business. The increases in net written premiums were slightly offset by the purchase of additional reinsurance in 2010, primarily on property catastrophe business. Despite the increase in net written premiums, during 2010 earned premiums declined 1% from 2009 due to changes in business mix, most notably a decrease in property catastrophe and casualty earned premiums, somewhat offset by increases in accident and health and trade credit earned premiums, which have a longer earnings recognition period.

Sirius Groups other revenues decreased to $36 million in 2010 from $107 million in 2009. Sirius Groups other revenues consisted primarily of $23 million of foreign currency translation gains in 2010 compared to $67 million in 2009. During 2010, Sirius Group acquired Central National Insurance Company of Omaha and recorded a pre-tax gain of approximately $13 million in other revenues that reflects the excess of the fair value of the net assets acquired over the consideration paid. In addition, Tuckerman Fund II is no longer consolidated. In 2009, Sirius Group reported other revenues of $39 million related to the consolidation of Tuckerman Fund II.

WM Life Re reported $61 million of pre-tax loss in 2010 compared to $57 million of pre-tax loss in 2009. During the third quarter of 2010, WM Life Re lowered the surrender assumptions used to calculate its variable annuity guarantee liability. WM Life Res previous assumptions reflected its expectation that surrenders would rise as the surrender charges in the underlying annuities decline. However, the persistent instability in financial and foreign exchange markets has kept surrenders low. The lower surrender assumption resulted in a $48 million increase in WM Life Res variable annuity guarantee liability, which was recorded as a reduction of other revenues in the third quarter of 2010. The WM Life Re results for 2009 included $22 million of losses from surrender assumption revisions made in the second quarter of 2009.

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