White Mountains Reports Third Quarter Results

HAMILTON, Bermuda, 5 November 2018 - In a filing with the Bermuda Stock Exchange, White Mountains Insurance Group, Ltd., (the “Company “; Tickers: NYSE: WTM; BSX: WTM.BH) reported their third quarter results.  The full filing stated:

White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of $938 and adjusted book value per share of $926 as of September 30, 2018.  Book value per share and adjusted book value per share both increased 2% in the third quarter of 2018 and 1% in the first nine months of 2018, including dividends.  Comprehensive income (loss) attributable to common shareholders was $40 million and $(5) million in the third quarter and first nine months of 2018, compared to comprehensive income attributable to common shareholders of $565 million and $608 million in the third quarter and first nine months of 2017, which included the gain from the sale of OneBeacon.

Manning Rountree, CEO, commented, "Overall results in the quarter were solid, with ABVPS up 2%.  The components were mixed.  Our investment portfolio was up 3.1%, a strong result driven by equities.  BAM had a slow quarter, with premiums and MSC from new business dipping to $16 million, reflecting lower pricing levels.  NSM had solid results, with modest growth in premiums.  MediaAlpha posted record results, yet again.  Kudu announced their first transaction in the quarter and two more in October, deploying $63 million of capital in total.  More broadly, we continue to pursue capital deployment opportunities with energy, rigor and discipline."

HG Global/BAM

BAM's gross written premiums and member surplus contributions (MSC) from new business totaled $16 million and $56 million in the third quarter and first nine months of 2018, compared to $19 million and $68 million in the third quarter and first nine months of 2017.  BAM insured municipal bonds with par value of $2.2 billion and $6.6 billion in the third quarter and first nine months of 2018, compared to $2.0 billion and $7.1 billion in the third quarter and first nine months of 2017.  Total pricing was 75 and 91 basis points in the third quarter and first nine months of 2018, compared to 103 and 99 basis points in the third quarter and first nine months of 2017.  BAM's total claims paying resources were $835 million at September 30, 2018, compared to $708 million at December 31, 2017 and $687 million at September 30, 2017.  The increase in claims paying resources was primarily driven by the $100 million reinsurance agreement with Fidus Re completed in the second quarter of 2018.

Seán McCarthy, CEO of BAM, said, "BAM's total par insured was up 6% compared with the same period in 2017, with a higher average transaction size and more active institutional buying.  While pricing was lower in the quarter, risk adjusted pricing remained at healthy levels.  BAM posted another quarter of organic growth in claims-paying resources."

HG Global reported pre-tax income of $8 million and $21 million in the third quarter and first nine months of 2018, compared to pre-tax income of $7 million and $20 million in the third quarter and first nine months of 2017.  White Mountains reported pre-tax loss related to BAM of $17 million and $53 million in the third quarter and first nine months of 2018, compared to pre-tax loss of $12 million and $36 million in the third quarter and first nine months of 2017.  The changes at BAM were driven primarily by lower investment returns in 2018, primarily from unrealized losses on fixed income investments, as interest rates rose during the quarter.

BAM is a mutual insurance company that is owned by its members.  BAM's results are consolidated into White Mountains's GAAP financial statements and attributed to non-controlling interests.

NSM

NSM reported a pre-tax loss of $5 million and $2 million for the third quarter of 2018 and the period from May 11, 2018 (the closing date of White Mountains's acquisition of NSM) through September 30, 2018.  NSM's adjusted EBITDA was $6 million and $11 million in the third quarter of 2018 and the period from May 11, 2018 through September 30, 2018.  NSM reported revenues of $40 million and $63 million in the third quarter of 2018 and the period from May 11, 2018 through September 30, 2018.  NSM's pre-tax loss in the third quarter of 2018 included $5 million of amortization of other intangible assets, $2 million of which related to the period from May 11, 2018 to June 30, 2018, as well as $3 million of general and administrative expenses related to the change in the fair value of NSM's contingent consideration earnout liabilities related to prior acquisitions.

Geof McKernan, CEO of NSM, said, "We continue to grow our business organically across our specialty divisions while also investing in technology and people.  We remain acquisitive, with a strong appetite for profitable specialty insurance businesses in the United States and United Kingdom."

MediaAlpha

MediaAlpha reported pre-tax income of $5 million and $9 million in the third quarter and first nine months of 2018, compared to pre-tax loss of $1 million and $3 million in the third quarter and first nine months of 2017.  MediaAlpha's adjusted EBITDA was $8 million and $25 million in the third quarter and first nine months of 2018, compared to $2 million and $5 million in the third quarter and first nine months of 2017.  MediaAlpha reported revenues of $75 million and $218 million in the third quarter and first nine months of 2018, compared to $38 million and $101 million in the third quarter and first nine months of 2017.  The increases in pre-tax income, adjusted EBITDA and revenues for both periods were primarily driven by growth in the P&C vertical and the Health, Medicare and Life vertical, which includes the impact of the acquisition of assets from Healthplans.com in the fourth quarter of 2017.

Cost of sales was $62 million and $179 million in the third quarter and first nine months of 2018, compared to $32 million and $86 million in the third quarter and first nine months of 2017.  The increase in cost of sales was primarily driven by transaction volume growth.  General and administrative expenses were $5 million and $21 million in the third quarter and first nine months of 2018, compared to $4 million and $11 million in the third quarter and first nine months of 2017.  The increase for the first nine months of 2018 compared to the first nine months of 2017 was primarily driven by the recognition of non-cash equity-based compensation expense of $7 million in the first nine months of 2018.

Other Operations

White Mountains's Other Operations segment reported pre-tax income (loss) of $53 million and $(9) million in the third quarter and first nine months of 2018, compared to pre-tax income of $14 million and $21 million in the third quarter and first nine months of 2017.  The changes were driven primarily by (i) higher investment returns in the third quarter of 2018 and lower investment returns in the first nine months of 2018 compared to the same periods of 2017 and (ii) a reduction in general and administrative expenses.  Net realized and unrealized gains were $70 million and $37 million in the third quarter and first nine months of 2018, compared to net realized and unrealized gains of $32 million and $99 million in the third quarter and first nine months of 2017.  Net investment income was $9 million and $32 million in the third quarter and first nine months of 2018, compared to $9 million and $31 million in the third quarter and first nine months of 2017.

General and administrative expenses were $26 million and $79 million in the third quarter and first nine months of 2018, compared to $27 million and $114 million in the third quarter and first nine months of 2017.  The decrease for the first nine months of 2018 compared to the first nine months of 2017 was primarily driven by lower incentive compensation costs.

In late October, the Swedish Administrative Court ruled against Sirius Group on its appeal of the Swedish Tax Agency's denial of certain interest deductions relating to periods prior to the sale of Sirius Group to CMI in 2016.  In connection with the sale, White Mountains indemnified Sirius Group against the loss of these interest deductions.  As a result, in the third quarter, White Mountains recorded a loss of $17 million within discontinued operations, reflecting the value of these interest deductions.  Sirius Group intends to appeal the decision to the Swedish Administrative Court of Appeal.

Share Repurchases

White Mountains did not repurchase any common shares in the third quarter of 2018.  For the first nine months of 2018, White Mountains repurchased and retired 585,033 of its common shares for $513 million at an average share price of $877, or approximately 95% of White Mountains's September 30, 2018 adjusted book value per share.  As of September 30, 2018, White Mountains had approximately $1.4 billion of undeployed capital.

Investments

The total return on invested assets was 3.1% in the third quarter of 2018 and 2.8% in the first nine months of 2018.  This compares to a return of 1.4% in the third quarter of 2017 and 4.3% in the first nine months of 2017.

Mark Plourde, Managing Director of White Mountains Advisors, said, "The total portfolio was up 3.1% for the quarter, driven by strong absolute returns in our equity portfolio.  The fixed income portfolio returned 0.4%, outperforming the BBIA Index return of 0.1%.  Common stocks and ETFs returned 6.1%, underperforming the S&P 500 return of 7.7%.  The relative underperformance was attributable to our international stock positions.  Other long-term investments returned 6.5%, primarily driven by strong returns in our private equity portfolio."

Additional Information

White Mountains is a Bermuda-domiciled financial services holding company traded on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol WTM.  Additional financial information and other items of interest are available at the company's website located at www.whitemountains.com.  White Mountains expects to file its Form 10-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.  

 The full press release con be found by using the following link:

http://www.prnewswire.com/news-releases/white-mountains-reports-third-quarter-results-300743646.html