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White Mountains Reports Fourth Quarter Results

HAMILTON, Bermuda, 06 February 2019 - In a filing with the Bermuda Stock Exchange, White Mountains Insurance Group, Ltd., (the “Company “; Tickers: NYSE: WTM; BSX: WTM.BH) reports Fourth Quarter Results.  The full filing can be found by using the following link: http://investor.whitemountains.com/news-releases/news-release-details/white-mountains-reports-fourth-quarter-results-1 .  The filing stated:

HAMILTON, Bermuda, Feb. 6, 2019 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of $896 and adjusted book value per share of $888 as of December 31, 2018.  For the fourth quarter and year ended December 31, 2018, book value per share decreased 5% and 4% and adjusted book value per share decreased 4% and 3%, including dividends.  Including the estimated gain of $55 per share for the MediaAlpha transaction, December 31, 2018 book value per share would have been $951 and adjusted book value per share would have been $943.

Manning Rountree, CEO, commented, "We had a tough fourth quarter, with ABVPS down 4%.  This result was driven largely by the impact of the rout in the equity markets on our investment portfolio.  BAM enjoyed a strong fourth quarter, ending the year at new highs for par in force, total premiums and claims paying resources and, in December, making a $23 million cash payment on the surplus notes.  NSM posted mixed results across its existing business lines in the quarter, while closing two new bolt-on acquisitions.  MediaAlpha had yet another strong quarter, ending the year at new highs for revenues and EBITDA.  The recently announced MediaAlpha transaction will increase ABVPS by 6%, recognizing the significant value created to date and setting the stage for further value creation.  During 2018, we returned $519 million to shareholders through share repurchases and allocated roughly $300 million to new business opportunities, ending the year with $1.2 billion of undeployed capital."

Comprehensive loss attributable to common shareholders was $141 million and $146 million in the fourth quarter and year ended December 31, 2018, compared to comprehensive income attributable to common shareholders of $23 million and $631 million in the fourth quarter and year ended December 31, 2017.  Results for the year ended December 31, 2017 include the $557 million gain from the sale of OneBeacon.

HG Global/BAM

BAM's gross written premiums and member surplus contributions (MSC) collected from new business totaled $51 million and $107 million in the fourth quarter and year ended December 31, 2018, compared to $33 million and $101 million in the fourth quarter and year ended December 31, 2017.  BAM insured municipal bonds with par value of $5.4 billion and $12.0 billion in the fourth quarter and year ended December 31, 2018, compared to $3.3 billion and $10.4 billion in the fourth quarter and year ended December 31, 2017.  Total pricing was 94 and 93 basis points in the fourth quarter and year ended December 31, 2018, compared to 99 basis points in both the fourth quarter and year ended December 31, 2017.  In the fourth quarter of 2018, BAM completed an assumed reinsurance transaction to insure municipal bonds with a par value of $2.2 billion for gross written premiums and MSC of $20 million.  BAM's total claims paying resources were $871 million at December 31, 2018, compared to $835 million at September 30, 2018 and $708 million at December 31, 2017.

Seán McCarthy, CEO of BAM, said, "Total premiums grew 7% in 2018 to a record high of $111 million, despite lower new-issue municipal bond volume.  Solid investor demand for BAM's guaranty, including increasing interest from large institutions, helped BAM's secondary market activity grow 21%.  We also completed our first assumed reinsurance transaction, bringing total par in force to a new high of $52 billion.  Claims-paying resources rose more than 20% in 2018, reflecting both organic growth and the $100 million of collateralized reinsurance protection added through the Fidus Re transaction that closed in April.  In December, BAM made a cash payment to HG Global of $23 million of surplus note principal and interest."

HG Global reported pre-tax income of $11 million and $32 million in the fourth quarter and year ended December 31, 2018, compared to pre-tax income of $5 million and $26 million in the fourth quarter and year ended December 31, 2017.  The changes were driven primarily by increases to earned insurance premiums and interest income on the surplus notes.

White Mountains reported pre-tax loss related to BAM of $8 million and $61 million in the fourth quarter and year ended December 31, 2018, compared to pre-tax loss of $14 million and $50 million in the fourth quarter and year ended December 31, 2017.  The decrease in the pre-tax loss in the fourth quarter of 2018, compared to the fourth quarter of 2017, was driven primarily by higher realized and unrealized investment gains on BAM's fixed income portfolio.  The increase in the pre-tax loss in the year ended December 31, 2018, compared to the year ended December 31, 2017, was driven primarily by lower realized and unrealized investment gains on BAM's fixed income portfolio and higher general and administrative expenses primarily relating to the Fidus Re transaction.

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 pre-tax loss of $3 million and $5 million in the fourth quarter of 2018 and the period from May 11, 2018 through December 31, 2018 (the "2018 ownership period").  NSM's adjusted EBITDA was $4 million and $16 million in the fourth quarter of 2018 and the 2018 ownership period.  NSM reported commission revenues of $36 million and $95 million in the fourth quarter of 2018 and the 2018 ownership period.

Geof McKernan, CEO of NSM, said, "We had mixed results in the quarter, with growth in the transportation and real estate verticals offset by shrink in the social services vertical.  During the quarter, we closed our acquisitions of both U.S-based KBK Insurance Group and U.K.-based MGA start-up First Specialty.  We remain acquisitive, with a strong appetite for profitable specialty insurance businesses, and we continue to invest in technology and talent to drive organic growth."

MediaAlpha

MediaAlpha reported break-even results and pre-tax income of $9 million in the fourth quarter and year ended December 31, 2018, compared to pre-tax income of $3 million and break-even results in the fourth quarter and year ended December 31, 2017.  MediaAlpha's adjusted EBITDA was $8 million and $32 million in the fourth quarter and year ended December 31, 2018, compared to $7 million and $11 million in the fourth quarter and year ended December 31, 2017.  MediaAlpha reported advertising and commission revenues of $79 million and $296 million in the fourth quarter and year ended December 31, 2018, compared to $62 million and $163 million in the fourth quarter and year ended December 31, 2017.  The increases in adjusted EBITDA and revenues in the fourth quarter and year ended December 31, 2018 were driven primarily by continued growth in the P&C vertical and the Health, Medicare and Life vertical.

Cost of sales was $66 million and $245 million in the fourth quarter and year ended December 31, 2018, compared to $50 million and $136 million in the fourth quarter and year ended December 31, 2017.  The increase in cost of sales was driven primarily by transaction volume growth.  General and administrative expenses were $11 million and $32 million in the fourth quarter and year ended December 31, 2018, compared to $6 million and $16 million in the fourth quarter and year ended December 31, 2017.  The increase in general and administrative expenses was driven primarily by the recognition of non-cash equity-based compensation expense of $5 million and $12 million in the fourth quarter and year ended December 31, 2018, respectively.

On February 4, 2019, White Mountains announced that MediaAlpha had signed a definitive agreement to sell a significant minority stake to Insignia Capital Group in connection with a recapitalization and cash distribution to existing shareholders.  MediaAlpha will also repurchase a portion of the holdings of existing shareholders.  The transaction values MediaAlpha at approximately $350 million.

White Mountains will retain a 42% ownership interest in MediaAlpha on a fully-diluted basis, and expects to receive a net cash distribution of approximately $85 million.

As a result of the transaction, White Mountains also expects that it will no longer consolidate MediaAlpha in its financial statements and will mark its interest in MediaAlpha to fair value at the transaction closing date and in subsequent periods.  Accordingly, upon closing, the transaction will result in a gain to each of White Mountains's book value per share and its adjusted book value per share of approximately $55.

Other Operations

White Mountains's Other Operations segment reported pre-tax loss of $144 million and $153 million in the fourth quarter and year ended December 31, 2018, compared to pre-tax income of $11 million and $32 million in the fourth quarter and year ended December 31, 2017, driven primarily by lower investment returns in the fourth quarter and year ended December 31, 2018 compared to the same periods of 2017, partially offset by decreases in general and administrative expenses.  Net realized and unrealized losses were $138 million and $101 million in the fourth quarter and year ended December 31, 2018, compared to net realized and unrealized gains of $33 million and $133 million in the fourth quarter and year ended December 31, 2017.  General and administrative expenses were $15 million and $94 million in the fourth quarter and year ended December 31, 2018, compared to $36 million and $150 million in the fourth quarter and year ended December 31, 2017.  The decreases in general and administrative expenses were driven primarily by lower compensation expenses.

Share Repurchases

In the fourth quarter of 2018, White Mountains repurchased and retired 7,425 of its common shares for $6 million, at an average share price of $841.  For the year ended December 31, 2018, White Mountains repurchased and retired 592,458 of its common shares for $519 million, at an average share price of $877.  The average share price paid in the fourth quarter and the year ended December 31, 2018 was approximately 89% and 93%, respectively, of White Mountains's December 31, 2018 adjusted book value per share including the estimated gain from the MediaAlpha transaction.

Investments

The total return on invested assets was -4.4% and -1.7% in the fourth quarter and year ended December 31, 2018 compared to a return of 1.4% and 5.6% for the fourth quarter and year ended December 31, 2017.

Mark Plourde, Managing Director of White Mountains Advisors, said, "We posted negative returns for the fourth quarter and the full year.  These are disappointing results, driven by our asset allocation and the sharp decline in equity markets in the fourth quarter.  The fixed income portfolio returned 1.2% for the year, outperforming the BBIA Index return of 0.9%.  Common stocks and other long-term investments returned -3.6% for the year, outperforming the S&P 500 return of -4.4%.  Our international equity portfolios underperformed, while our other long-term investments portfolio outperformed."

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-K on or before March 1, 2019 with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.

CONTACT: Todd Pozefsky
(203) 458-5807

CisionView original content:http://www.prnewswire.com/news-releases/white-mountains-reports-fourth-quarter-results-300790518.html

SOURCE White Mountains Insurance Group, Ltd.

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