WHITE MOUNTAINS REPORTS SECOND QUARTER RESULTS

HAMILTON, Bermuda, Aug. 7, 2023 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE:WTM) reported book value per share of $1,532 and adjusted book value per share of $1,576 as of June 30, 2023.  Book value per share and adjusted book value per share both increased 1% in the second quarter of 2023 and increased 5% and 6% in the first six months ended June 30, 2023, including dividends.

Manning Rountree, CEO, commented, "ABVPS was up 1% in the quarter.  BAM generated $26 million of total gross written premiums and member surplus contributions in the quarter; year over year primary market issuance is down, while pricing is up.  Ark produced an 89% combined ratio and grew premiums 50% year over year, including risk adjusted rate change of 21%.  Kudu grew annualized adjusted EBITDA to $43 million and closed one new deployment in the quarter.  MediaAlpha's share price declined in the quarter, reducing ABVPS by 2%.  Excluding MediaAlpha, the investment portfolio was up 3% in the quarter, with nice gains in both equities and fixed income.  Following our successful tender offer for MediaAlpha shares during the quarter, undeployed capital now stands at roughly $680 million."

Comprehensive income (loss) attributable to common shareholders was $21 million and $201 million in the second quarter and first six months of 2023 compared to $(174) million and $(143) million in the second quarter and first six months of 2022.  Results in the second quarter and first six months of 2023 included $(77) million and $8 million of unrealized investment gains (losses) from White Mountains's investment in MediaAlpha compared to $(114) million and $(95) million in the second quarter and first six months of 2022. 

HG Global/BAM

BAM's gross written premiums and member surplus contributions (MSC) collected were $26 million and $47 million in the second quarter and first six months of 2023 compared to $41 million and $63 million in the second quarter and first six months of 2022.  BAM insured municipal bonds with par value of $3.4 billion and $6.3 billion in the second quarter and first six months of 2023 compared to $5.9 billion and $9.3 billion in the second quarter and first six months of 2022.  Total pricing was 77 and 75 basis points in the second quarter and first six months of 2023 compared to 70 and 67 basis points in the second quarter and first six months of 2022.  BAM's total claims paying resources were $1,451 million at June 30, 2023 compared to $1,423 million at December 31, 2022 and $1,228 million at June 30, 2022.

Seán McCarthy, CEO of BAM, said, "In the face of higher interest rates, primary market issuance of municipal bonds remained muted for the quarter and half year.  BAM's par insured is down year over year as a result.  Secondary market activity remains a healthy contributor, and total pricing is up year over year.  In June, S&P Global Ratings affirmed BAM's AA rating and Stable outlook."

HG Global reported pre-tax income (loss) of $7 million and $24 million in the second quarter and first six months of 2023 compared to $(8) million and $(23) million in the second quarter and first six months of 2022.  HG Global's results included net realized and unrealized investment gains (losses) of $(6) million and $2 million in the second quarter and first six months of 2023 compared to $(15) million and $(38) million in the second quarter and first six months of 2022.

White Mountains reported pre-tax loss related to BAM of $20 million and $29 million in the second quarter and first six months of 2023 compared to $31 million and $66 million in the second quarter and first six months of 2022.  BAM's results included net realized and unrealized investment gains (losses) of $(4) million and $5 million in the second quarter and first six months of 2023 compared to $(15) million and $(37) million in the second quarter and first six months of 2022.

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 noncontrolling interests.

Ark/WM Outrigger

The Ark/WM Outrigger segment's combined ratio was 87% and 89% in the second quarter and first six months of 2023.  Ark/WM Outrigger reported gross written premiums of $606 million and $1,416 million, net written premiums of $461 million and $1,075 million and net earned premiums of $293 million and $548 million in the second quarter and first six months of 2023.  Ark/WM Outrigger reported pre-tax income of $52 million and $94 million in the second quarter and first six months of 2023.

Ark's combined ratio was 89% and 91% in the second quarter and first six months of 2023 compared to 87% and 93% in the second quarter and first six months of 2022.  Ark's combined ratio in the second quarter and first six months of 2023 both included four points of unfavorable prior year development, primarily due to Winter Storm Elliott and three large claims in the property and marine & energy lines of business, compared to ten points and six points of favorable prior year development in the second quarter and first six months of 2022.  Ark's combined ratio in the second quarter and first six months of 2023 included five points and three points of catastrophe losses compared to 11 points and 14 points of catastrophe losses, driven primarily by losses from the conflict in Ukraine, in the second quarter and first six months of 2022. 

Ark reported gross written premiums of $606 million and $1,416 million, net written premiums of $403 million and $973 million and net earned premiums of $284 million and $534 million in the second quarter and first six months of 2023 compared to gross written premiums of $404 million and $1,037 million, net written premiums of $270 million and $814 million and net earned premiums of $217 million and $412 million in the second quarter and first six months of 2022.  Ark reported pre-tax income (loss) of $42 million and $78 million in the second quarter and first six months of 2023 compared to $(21) million and $(45) million in the second quarter and first six months of 2022.  Ark's results included net realized and unrealized investment gains (losses) of $18 million and $43 million in the second quarter and first six months of 2023 compared to $(45) million and $(62) million in the second quarter and first six months of 2022.

Ian Beaton, CEO of Ark, said, "We are off to a good start through the first half of 2023 amidst a continuing strong rate environment, particularly in property and marine & energy.  Ark's combined ratio was 89% for the second quarter.  Gross written premiums were up 50% over prior year in the quarter, with risk adjusted rate change up 21%.  We believe we are well-positioned for the second half of the year."

WM Outrigger Re's combined ratio was 25% and 24% in the second quarter and first six months of 2023.  WM Outrigger Re reported gross and net written premiums of $58 million and $102 million and net earned premiums of $10 million and $15 million in the second quarter and first six months of 2023. 

Kudu

Kudu reported total revenues of $19 million, pre-tax income of $10 million and adjusted EBITDA of $12 million in the second quarter of 2023 compared to total revenues of $(4) million, pre-tax loss of $10 million and adjusted EBITDA of $11 million in the second quarter of 2022.  Total revenues, pre-tax income (loss) and adjusted EBITDA included $15 million of net investment income in the second quarter of 2023 compared to $14 million in the second quarter of 2022.  Total revenues and pre-tax income (loss) also included $5 million of net realized and unrealized investment gains (losses) in the second quarter of 2023 compared to $(18) million in the second quarter of 2022.  

Kudu reported total revenues of $63 million, pre-tax income of $45 million and adjusted EBITDA of $23 million in the first six months of 2023 compared to total revenues of $31 million, pre-tax income of $19 million and adjusted EBITDA of $21 million in the first six months of 2022.  Total revenues, pre-tax income and adjusted EBITDA included $29 million of net investment income in the first six months of 2023 compared to $26 million in the first six months of 2022.  Total revenues and pre-tax income also included $34 million of net realized and unrealized investment gains in the first six months of 2023 compared to $5 million in the first six months of 2022. 

Rob Jakacki, CEO of Kudu, said, "Trailing 12 months net investment income increased 1% quarter-over-quarter to $57 million, notwithstanding the impact of our recent portfolio exits.  Annualized revenues finished the quarter at $57 million and annualized adjusted EBITDA at $43 million.  We are pleased to have closed our investment in Martis Capital, a healthcare investor specializing in buyout and growth equity investments.  Our pipeline remains robust, and we expect additional deployments this year."

MediaAlpha 

During the second quarter of 2023, White Mountains completed a tender offer to purchase 5.9 million additional shares of MediaAlpha at a purchase price of $10.00 per share.  As of June 30, 2023, White Mountains owns 22.9 million shares of MediaAlpha, representing a 36% basic ownership interest (33% on a fully-diluted/fully-converted basis).  As of June 30, 2023, MediaAlpha's closing price was $10.31 per share, which decreased from $14.98 per share at March 31, 2023.  The carrying value of White Mountains's investment in MediaAlpha was $236 million as of June 30, 2023 compared to $254 million at March 31, 2023.  The $18 million decline in MediaAlpha's carrying value included $79 million of mark-to-market losses attributable to the 16.9 million shares of MediaAlpha owned by White Mountains as of March 31, 2023, partially offset by a $59 million increase in the carrying value attributable to the shares acquired in the tender offer and $2 million of mark-to-market gains attributable to the newly acquired shares.  At our current level of ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $9.00 per share increase or decrease in White Mountains's book value per share and adjusted book value per share.  We encourage you to read MediaAlpha's second quarter earnings release and related shareholder letter, which is available on MediaAlpha's investor relations website at www.investors.mediaalpha.com. 

Other Operations

White Mountains's Other Operations reported pre-tax income (loss) of $(31) million and $82 million in the second quarter and first six months of 2023 compared to $(162) million and $(133) million in the second quarter and first six months of 2022.  Unrealized investment gains (losses) from White Mountains's investment in MediaAlpha were $(77) million and $8 million in the second quarter and first six months of 2023 compared to $(114) million and $(95) million in the second quarter and first six months of 2022.  Excluding MediaAlpha, net realized and unrealized investment gains (losses) were $76 million and $118 million in the second quarter and first six months of 2023 compared to $(12) million and $20 million in the second quarter and first six months of 2022.  Net investment income was $7 million and $14 million in the second quarter and first six months of 2023 compared to $3 million and $5 million in the second quarter and first six months of 2022.  The increase in net investment income in the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022 was driven primarily by the increase in invested assets resulting from the sale of NSM in the third quarter of 2022.  White Mountains's Other Operations reported general and administrative expenses of $49 million and $89 million in the second quarter and first six months of 2023 compared to $51 million and $81 million in the second quarter and first six months of 2022.

Share Repurchases

In the second quarter of 2023, White Mountains repurchased and retired 5,542 of its common shares for $7 million at an average share price of $1,336.68, or 85% of White Mountains's adjusted book value per share at June 30, 2023.  In the first six months of 2023, White Mountains repurchased and retired 24,165 of its common shares for $33 million at an average share price of $1,354.88, or 86% of White Mountains's adjusted book value per share at June 30, 2023.

In the second quarter of 2022, White Mountains repurchased and retired 53,100 of its common shares for $63 million at an average share price of $1,179.96.  In the first six months of 2022, White Mountains repurchased and retired 90,535 of its common shares for $102 million at an average share price of $1,121.60.

Investments

The total consolidated portfolio return was 0.9% in the second quarter of 2023.  Excluding MediaAlpha, the total consolidated portfolio return was 3.0% in the second quarter of 2023.  The total consolidated portfolio return was -4.7% in the second quarter of 2022.  Excluding MediaAlpha, the total consolidated portfolio return was -2.1% in the second quarter of 2022. 

The total consolidated portfolio return was 5.5% in the first six months of 2023. Excluding MediaAlpha, the total consolidated portfolio return was 6.1% in the first six months of 2023.  The total consolidated portfolio return was -4.0% in the first six months of 2022.  Excluding MediaAlpha, the total consolidated portfolio return was -1.9% in the first six months of 2022.

Mark Plourde, President of White Mountains Advisors, said, "Excluding MediaAlpha, the total portfolio returned 3.0% in the quarter.  Our short-duration fixed income portfolio returned 0.5%, well ahead of the BBIA Index return of -0.7% as interest rates rose in the quarter.  The equity portfolio, excluding MediaAlpha, returned 4.9%, a solid absolute result but behind the S&P 500 Index return of 8.7%."

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulation G

This earnings release includes non-GAAP financial measures that have been reconciled from their most comparable GAAP financial measures.

• Adjusted book value per share is a non-GAAP financial measure which is derived by adjusting (i) the GAAP book value per share numerator and (ii) the common shares outstanding denominator, as described below.
  
  
  
  The GAAP book value per share numerator is adjusted (i) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM surplus notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global. 
  
  
  
  Under GAAP, White Mountains is required to carry the BAM surplus notes, including accrued interest, at nominal value with no consideration for time value of money.  Based on a debt service model that forecasts operating results for BAM through maturity of the surplus notes, the present value of the BAM surplus notes, including accrued interest and using an 8% discount rate, was estimated to be $95 million, $96 million $98 million and $120 million less than the nominal GAAP carrying values as of June 30, 2023, March 31, 2023, December 31, 2022 and June 30, 2022, respectively. 
  
  
  
  The value of HG Global's unearned premium reserve, net of deferred acquisition costs, was $182 million, $179 million, $179 million and $164 million as of June 30, 2023, March 31, 2023, December 31, 2022 and June 30, 2022, respectively.
  
  
  
  White Mountains believes these adjustments are useful to management and investors in analyzing the intrinsic value of HG Global, including the value of the BAM surplus notes and the value of the in-force business at HG Re, HG Global's reinsurance subsidiary. 
  
  
  
  The denominator used in the calculation of adjusted book value per share equals the number of common shares outstanding adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized.  Restricted common shares are earned on a straight-line basis over their vesting periods.  The reconciliation of GAAP book value per share to adjusted book value per share is included on page 7.
  
  
  
  
• The reduction in adjusted book value per share from the decline in MediaAlpha's share price on page 1 is a non-GAAP financial measure.  White Mountains believes this measure to be useful to management and investors by showing the impact of changes in MediaAlpha's share price to White Mountains's adjusted book value per share.  The following table presents the reconciliation from GAAP to the reported percentage:         

 

• Kudu's EBITDA, adjusted EBITDA, annualized adjusted EBITDA, annualized revenue and cash revenue yield are non-GAAP financial measures.
  
  
  
  EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax (expense) benefit, depreciation and amortization of other intangible assets from GAAP net income (loss). 
  
  
  
  Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA.  The adjustments relate to (i) net realized and unrealized investment gains (losses) on Kudu's revenue and earnings participation contracts, (ii) non-cash equity-based compensation expense and (iii) transaction expenses.  A description of each adjustment follows:
• Net realized and unrealized investment gains (losses) - Represents net unrealized investment gains and losses recorded on Kudu's revenue and earnings participation contracts, which are recorded at fair value under GAAP, and realized investment gains and losses from participation contracts sold during the period.
• Non-cash equity-based compensation expense - Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.
• Transaction expenses - Represents costs directly related to Kudu's mergers and acquisitions activity, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.

Annualized adjusted EBITDA is a non-GAAP financial measure that (i) annualizes partial year revenues related to Kudu's revenue and earnings participation contracts acquired during the previous 12-month period and (ii) removes partial year revenues related to revenue and earnings participation contracts sold during the previous 12-month period.

Annualized revenue is a non-GAAP financial measure that adds the adjustments for annualized adjusted EBITDA to GAAP net investment income. 

Cash revenue yield is a non-GAAP financial measure that is derived using annualized revenue as a percentage of total net capital drawn and invested. 

White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating Kudu's performance.  White Mountains also believes that annualized adjusted EBITDA is useful to management and investors in understanding the full earnings profile of Kudu's business as of the end of any 12-month period.  See page 18 for the reconciliation of Kudu's GAAP net income (loss) to EBITDA, adjusted EBITDA and annualized adjusted EBITDA, and the reconciliation of Kudu's GAAP net investment income to annualized revenue.

• Total consolidated portfolio return excluding MediaAlpha and total equity portfolio return excluding MediaAlpha are non-GAAP financial measures that remove the net investment income and net realized and unrealized investment gains (losses) from White Mountains's investment in MediaAlpha.  White Mountains believes these measures to be useful to management and investors by showing the underlying performance of White Mountains's investment portfolio and equity portfolio without regard to White Mountains's investment in MediaAlpha.  The following tables present reconciliations from GAAP to the reported percentages:     

      

 

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 "could", "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 book value per share, 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 and related reinsurance;
• projections of revenues, income (or loss), earnings (or loss) per share, EBITDA, adjusted EBITDA, dividends, market share or other financial forecasts of White Mountains or its businesses;
• 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, 2022;
• claims arising from catastrophic events, such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, severe winter weather, public health crises, terrorist attacks, war and war-like actions, explosions, infrastructure failures or cyber-attacks;
• recorded loss reserves subsequently proving to have been inadequate;
• the market value of White Mountains's investment in MediaAlpha;
• the trends and uncertainties from the COVID-19 pandemic, including judicial interpretations on the extent of insurance coverage provided by insurers for COVID-19 pandemic related claims;
• business opportunities (or lack thereof) that may be presented to it and pursued;
• actions taken by rating agencies, such as financial strength or credit ratings downgrades or placing ratings on negative watch;
• the continued availability of capital and financing;
• deterioration of general economic, market or business conditions, including due to outbreaks of contagious disease (including the COVID-19 pandemic) and corresponding mitigation efforts;
• 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; 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.

CONTACT: Rob Seelig

(603) 640-2212

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SOURCE White Mountains Insurance Group, Ltd.