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

July 31, 2009 | About:
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White Mountains Insurance Group Ltd. (WTM) filed Quarterly Report for the period ended 2009-06-30.

White Mountains Insurance Group Ltd. is engaged in the business of property and casualty insurance and reinsurance. White Mountains Insurance Group Ltd. has a market cap of $2.12 billion; its shares were traded at around $239.5 with a P/E ratio of 24.7 and P/S ratio of 0.7. The dividend yield of White Mountains Insurance Group Ltd. stocks is 0.4%. White Mountains Insurance Group Ltd. had an annual average earning growth of 16.7% over the past 5 years.

Highlight of Business Operations:

White Mountains ended the second quarter of 2009 with an adjusted book value per share of $378, an increase of 8% and 7% for the three and six months ended June 30, 2009, including dividends. White Mountains reported adjusted comprehensive net income of $236 million and $226 million for the second quarter and first six months of 2009, compared to adjusted comprehensive net losses of $17 million in both of the corresponding periods of 2008.

OneBeacon ended the second quarter of 2009 with a book value per share of $13.51, an increase of 12% and 15% for the three and six months ended June 30, 2009, including dividends. OneBeacon reported a GAAP combined ratio of 93% for both the second quarter and first six months of 2009 compared to 94% and 97% in the second quarter and first six months of 2008. The second quarter and first six months of 2009 included 4 points and 3 points of net favorable loss reserve development. The second quarter of 2008 did not include significant reserve development and there was 1 point of net favorable loss reserve development in the first six months of 2008. White Mountains Re reported GAAP combined ratios of 87% and 83% for the second quarter and first six months of 2009, compared to 114% and 104% for the second quarter and first six months of 2008. Both 2009 periods benefited from minimal net adverse loss reserve development and lower catastrophe activity. Esurance reported GAAP combined ratios of 100% and 102% in the second quarter and first six months of 2009 compared to 105% and 109% in the second quarter and first six months of 2008. These decreases were due mainly to the impact of selective rate increases made in late 2007 and early 2008 and lower claims frequency caused by reduced driving. In addition, Esurances expense ratios improved due to lower acquisition expenses driven by reduced advertising spending. Operating income at AFI was $1 million and $3 million in the second quarter and first six months of 2009. White Mountains GAAP pre-tax total return on invested assets was 4.4% and 4.3% for the second quarter and first six months of 2009 compared to 0.6% and 1.2% for the second quarter and first six months of 2008. White Mountains fixed income portfolio outperformed its benchmarks in both 2009 periods, while the equity, convertible and other long-term investment portfolio lagged the S&P 500 return over the same periods, largely because of the portfolio mix, which is more heavily weighted toward convertibles and other long-term investments than common stocks.

Total net written premiums decreased to $870 million for the second quarter of 2009 compared to $943 million in the comparable 2008 period, as all three business segments reported reduced written premiums. Total net written premiums for the six months ended June 30, 2009 decreased to $1,862 million from $1,958 million in the 2008 period, as decreases at White Mountains Re and Esurance were somewhat offset by an increase at OneBeacon. OneBeacons net written premiums were $498 million for the quarter, a decrease of 6% from the second quarter of 2008, primarily due to premiums ceded under a new quota share reinsurance treaty designed to reduce property catastrophe exposure from homeowners business written in the Northeast (see Personal lines discussion below), and $967 million for the first six months of 2009, an increase of 1% over the comparable period of 2008, driven primarily by premiums from its new collector car and boat business. White Mountains Res net written premiums were $192 million for the quarter and $501 million for the first six months of 2009, decreases of 11% and 13% from the comparable periods of 2008. The largest decline was in the U.S. casualty line of business where pricing, terms, and conditions generally continue to not meet White Mountains Res underwriting standards. Esurances net written premiums decreased by 9% and 8% for the second quarter and first six months of 2009, to $180 million and $394 million, respectively, when compared to the same periods in 2008, as increased prices and lower advertising spending contributed to reduced new business sales volume.

White Mountains total revenues increased 17% to $1,219 million in the second quarter of 2009 compared to $1,039 million in the second quarter of 2008. White Mountains reported net realized and unrealized investment gains of $215 million in the second quarter of 2009 compared to $59 million of net realized and unrealized investment losses in the second quarter of 2008. Earned premiums were down 3% in the second quarter of 2009 compared to the second quarter of 2008, as decreased earned premiums at White Mountains Re and Esurance were somewhat offset by an increase at OneBeacon. Net investment income decreased 31% to $77 million in the second quarter of 2009 compared to $112 million in the second quarter of 2008, due to lower overall portfolio yields, shifts in portfolio mix to lower risk, lower yield investments and a decrease in the overall invested asset base.

White Mountains total expenses decreased 12% to $915 million in the second quarter of 2009 compared to $1,037 million in the second quarter of 2008. Losses and LAE expenses decreased $104 million, or 16%, due primarily to lower catastrophe losses in 2009 and to favorable loss reserve development in

Read the The complete ReportWTM is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Bruce Berkowitz of Fairholme Capital Management, Dodge & Cox.

Rating: 4.3/5 (4 votes)

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