WHITE MOUNTAINS REPORTS SECOND QUARTER RESULTS

HAMILTON, Bermuda 06 August 2019 - In a filing with the Bermuda Stock Exchange, White Mountains Insurance Group, Ltd., (the “Company “; Tickers: NYSE: WTM; BSX: WTM.BH) announced second quarter results.  The filing stated: 

WHITE MOUNTAINS REPORTS SECOND QUARTER RESULTS

HAMILTON, Bermuda (August 6, 2019) - White Mountains Insurance Group, Ltd. (NYSE: WTM) reportedbook value per share of $987 and adjusted book value per share of $986 as of June 30, 2019. Book value per share and adjusted book value per share both increased 1% in the second quarter of 2019. Book value per share and adjusted book value per share increased 10% and 11% in the first six months of 2019, including dividends. The results for the first six months of 2019 include the impact of the MediaAlpha transaction. Excluding the gain on the MediaAlpha transaction, book value per share and adjusted book value per share would have increased 4% and 5% in the first six months of 2019, including dividends.⁽¹⁾

Manning Rountree, CEO, commented, “We had a solid quarter. ABVPS was up 1%, driven primarily by investment results. BAM produced decent premium volumes despite challenging primary market conditions. NSM produced good organic growth (top line and bottom line) and closed the Embrace Pet Insurance acquisition during the quarter. Kudu is performing well and produced a profit in its first quarter as a new operating segment for White Mountains. MediaAlpha grew revenues and profits to new highs in the quarter. We closed the Elementum transaction in May, and we ended the quarter with $1.1 billion of undeployed capital.”

Comprehensive income attributable to common shareholders was $18 million and $302 million in the second quarter and first six months of 2019, compared to comprehensive income (loss) attributable to common shareholders of $3 million and $(45) million in the second quarter and first six months of 2018.

HG Global/BAM

BAM’s gross written premiums and member surplus contributions collected were $25 million and $40 million in the second quarter and first six months of 2019, compared to $29 million and $ 40 million in the second quarter and first six months of 2018. BAM insured municipal bonds with par value of $2.9 billion and $4.8 billion in the second quarter and first six months of 2019, compared to $3.1 billion and $4.4 billion in the second quarter and first six months of 2018. Total pricing was 84 and 83 basis points in the second quarter and first six months of 2019, compared to 101 and 100 basis points in the second quarter and first six months of 2018. BAM’s total claims paying resources were $895 million at June 30, 2019, compared to $871 million at December 31, 2018 and $827 million at June 30, 2018.

Seán McCarthy, CEO of BAM, said, “Municipal new-issue volume declined in the quarter, while insured penetration increased. BAM wrote healthy volumes in both the secondary market and the GreenStar program. Lower interest rates and tighter credit spreads impacted pricing, especially in the primary market. In June, BAM became the first municipal bond insurer to join the Federal Home Loan Bank of New York; membership strengthens BAM’s capital resources and provides access to an additional source of contingent liquidity. Also in June, S&P Global Ratings concluded its annual review and affirmed BAM’s “AA/stable” rating.”

HG Global reported pre-tax income of $ 15 million and $ 31 million in the second quarter and first six months of 2019, compared to pre-tax income of $8 million and $12 million in the second quarter and first six months of 2018. White Mountains reported pre-tax loss related to BAM of $7 million and $17 million in the second quarter and first six months of 2019, compared to pre-tax loss of $17 million and $36 million in the second quarter and first six months of 2018. The period over period changes were driven primarily by higher investment returns in the HG Global and BAM investment portfolios.

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

In the second quarter of 2019, NSM reported pre-tax income of $1 million, adjusted EBITDA of $16 million, and commission and other revenues of $66 million. In the first six months of 2019, NSM reported pre-tax loss of $1 million, adjusted EBITDA of $26 million, and commission and other revenues of $115 million. Results for the second quarter and first six months of 2019 include the results of Embrace Pet Insurance, a nationwide provider of pet health insurance for dogs and cats, which NSM acquired on April 1, 2019.

Geof McKernan, CEO of NSM, said, “NSM had a strong second quarter, growing trailing 12 months pro forma controlled premiums to $864 million from $759 million and pro forma adjusted EBITDA to $49 million from $40 million. These results reflect the contribution of the Embrace Pet Insurance acquisition as well as continued organic growth, principally in the specialty transportation and real estate verticals. We continue to invest in technology and talent to drive organic growth while also pursuing attractive acquisition opportunities.”

On June 28, 2019, NSM acquired the renewal rights on its U.S. collector car business from an affiliate of American International Group, Inc. for $82.5 million. The acquisition satisfied the previously disclosed obligation of NSM to acquire the renewal rights from AIG.

Kudu

On April 4, 2019, White Mountains completed its acquisition of the ownership interests in Kudu held by certain funds managed by Oaktree Capital Management, L.P. In addition, White Mountains assumed all of Oaktree’s unfunded capital commitments to Kudu, increasing White Mountains’s total capital commitment to $250 million. As a result of the transaction, White Mountains’s ownership of Kudu increased from 49% to 99%, and White Mountains began consolidating Kudu in its financial statements during the second quarter of 2019.

In the twelve months ended June 30, 2019, Kudu deployed $145 million in five investment management firms with combined assets under management of over $17 billion, spanning a range of asset classes, including real estate, real assets, wealth management, hedge funds and alternative credit strategies. In the second quarter of 2019, Kudu reported total revenues of $4 million and pre-tax income of $2 million.

Rob Jakacki, CEO of Kudu, said, “Kudu has established a leadership position in its target market. Our current portfolio of managers is performing well, and good financial results are emerging. We closed five transactions over the past year with an average cash yield at inception of 9.5%. Kudu as an enterprise has turned cash flow positive. In July, we closed a sixth transaction with First Long Island Investors, and we have a strong deal pipeline of quality managers. We are excited about our prospects.”

Other Operations

White Mountains’s Other Operations segment reported pre-tax income of $5 million and $288 million in the second quarter and first six months of 2019, compared to pre-tax loss of $11 million and $62 million in the second quarter and first six months of 2018. Pre-tax income for the first six months of 2019 included $182 million of realized and unrealized gains from the MediaAlpha transaction. Excluding the MediaAlpha transaction, net realized and unrealized investment gains were $23 million and $142 million in the second quarter and first six months of 2019, compared to net realized and unrealized investment gains (losses) of $13 million and $(33) million in the second quarter and first six months of 2018.

On June 3, 2019, White Mountains acquired a 30% limited partnership interest in Elementum Holdings LP for $55 million. Elementum manages portfolios of insurance linked securities—primarily catastrophe bonds and collateralized reinsurance—across a range of liquidity and risk/return profiles. As part of the transaction, White Mountains also agreed to invest a total of $50 million in funds managed by Elementum.

Investments

The total return on invested assets was 2.0% in the second quarter of 2019 compared to 0.7% in the second quarter of 2018. The total return on invested assets was 12.4% in the first six months of 2019, which included $115 million of unrealized investment gains from the MediaAlpha transaction. Excluding the MediaAlpha transaction, the total return on invested assets was 7.9% in the first six months of 2019 compared to -0.3% in the first six months of 2018.

Mark Plourde, Managing Director of White Mountains Advisors, said, “The total portfolio was up 2.0% for the second quarter, a good absolute result that benefited from the continued equity market rally and the decline in interest rates. Common stocks and ETFs returned 3.7%, lagging the S&P 500 Index return of 4.3%, due to relative underperformance in our international common stock positions. Other long-term investments were flat. Fixed income returned 2.0%, lagging the BBIA Index return of 2.4%, due to shorter duration positioning.”

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 complete press release can be found by using the following link:

http://investor.whitemountains.com/news-releases/news-release-details/white-mountains-reports-second-quarter-results-2

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This earnings release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this release which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words “will”, “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains’s:

•          change in adjusted book value per share or return on equity;

•          business strategy;

•          financial and operating targets or plans;

•          incurred loss and loss adjustment expenses and the adequacy of its loss and loss adjustment expense reserves;

•          projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;

•          expansion and growth of its business and operations; and

•          future capital expenditures.

These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to risks and uncertainties that could cause actual results to differ materially from expectations, including:

•          the risks that are described from time to time in White Mountains’s filings with the Securities and Exchange Commission, including but not limited to White Mountains’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and White Mountains’s June 30, 2019 Quarterly Report on Form 10-Q;

•          business opportunities (or lack thereof) that may be presented to it and pursued;

•          actions taken by ratings agencies from time to time, such as financial strength or credit ratings downgrades or placing ratings on negative watch;

•          the continued availability of capital and financing;

•          general economic, market or business conditions;

•          competitive forces, including the conduct of other insurers;

•          changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its customers;

•          an economic downturn or other economic conditions adversely affecting its financial position; and

•          other factors, most of which are beyond White Mountains’s control.

Consequently, all of the forward-looking statements made in this earnings release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.