White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Day (June 2019)
49 slides from White Mountains Insurance's investor day presentation, Jun 7, 2019
Slide 1: Annual Investor Meeting – June 7, 2019
Exhibit 99.1 White Mountains Insurance Group, Ltd. Annual Investor Meeting – June 7, 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements This presentation 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
Slide 3: Notes and Non-GAAP Financial Measures
Notes and Non-GAAP Financial Measures Notes Management has adjusted certain amounts within this presentation. Management believes the adjusted amounts to be useful to management and investors in depicting and evaluating White Mountains’ financial condition and performance. The adjusted amounts are n
Slide 4: Introductions
Introductions WTM Board of Directors WTM senior team Senior teams of: – BAM – NSM – Kudu – MediaAlpha – PassportCard / DavidShield 3
Slide 5: Performance Recap
Performance Recap Quarter Years ended ended ($ in millions) 2016 2017 2018 [1] 1Q19 [1] Growth in ABVPS 13.3% 16.1% 3.2% 3.9% Growth in MVPS 15.2% 1.9% 0.9% 8.0% Transaction gains$ 559 $ 560 $ 174 $ - Post-OneBeacon distributions, cumulative$ 729 $ 1,252 $ 1,260 Post-OneBeacon deployments, cumulativ
Slide 6: 2018 Returns in Context
2018 Returns in Context Book value returns Market value returns WTM ABVPS [1] 3.2% WTM 0.9% Dowling & Partners Composite TVC [2] -2.3% Dowling & Partners Composite [3] -1.7% S&P 500 -4.4% Business Insurance Index [4] -6.1% S&P Financials -13.0% 5
Slide 7: Track Record vs. S&P
Track Record vs. S&P 500 Return periods ended December 31, 2018 Since WTM 1-year 5-year 10-year 20-year IPO (1985) WTM - ABVPS [1] 3.2% 8.1% 10.5% 11.8% 13.6% WTM - MVPS 0.9% 7.4% 12.6% 10.1% 11.9% S&P 500 -4.4% 8.5% 13.1% 5.6% 10.5% 6
Slide 8: Post-OneBeacon Expectations & Update
Post-OneBeacon Expectations & Update Expected to… Update 1. Shrink before we grew again, targeting ► Distributed $1.3 billion distributions of $1.5 - $2.0 billion ► Repurchased 31% of shares outstanding ► Average repurchase price of $872 per share 2. Target deployments of $0.2 billion annually ► $0.
Slide 9: Distributions and Deployments
Distributions and Deployments ($ in billions) $3.5 $3.1 $3.0 $2.8 $2.5 $2.3 $2.1 $2.0 $1.8 $1.4 $1.5 $1.3 $1.2 $1.1 $1.0 $0.5 $0.0 [5] [5] [6] [7] 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Capital distributions, cumulative New capital deployments, cumulative Undeployed capital 8
Slide 10: Recent Deployments: Themes
Recent Deployments: Themes Fee-based revenue models High-quality partners and management teams Proprietary transactions; not auctions Generally fair to full prices, but for quality operating businesses Platform businesses with capacity for knock-on / roll-up capital deployment 9
Slide 11: Platform Investments
Platform Investments ($ in millions) NSM Kudu MediaAlpha Equity capital Equity capital Equity capital Investment deployed Investment deployed Investment deployed Fresh$ - Versus$ 62 Oversee$ - KBK 30 Fair Oaks 20 Healthplans.com 13 Embrace 58 TIG 20 BOS 23 Savanna 20 Total$ 88 Total$ 145 Total$ 13 1
Slide 12: Financial Position & Investment Portfolio
Financial Position & Investment Portfolio
Slide 13: Current Financial Position
Current Financial Position Total capital of $3.3 billion, substantially all in common shareholders’ equity Undeployed capital [7] of $1.1 billion, or 34% of total capital No parent company financial leverage Total debt to total capital of 6% Virtually no traditional insurance liabilities 1
Slide 14: Investments: Philosophy and Approach
Investments: Philosophy and Approach Invest for total return Policyholder funds invested conservatively; shareholder funds invested more aggressively Invested assets today are primarily shareholder funds, with minimal policyholder funds Relative to peers, our portfolio generally has (i) shor
Slide 15: Investments: Portfolio Composition
Investments: Portfolio Composition [9] ($ in millions) 4Q18 1Q19 Fixed income$ 790 $ 909 Equities 1,086 1,071 Total portfolio$ 1,876 $ 1,979 Fixed income duration 3.0 years 2.7 years Fixed income credit quality A+ AA- Equity exposure 40% 37% 14
Slide 16: Investments: Performance
Investments: Performance [10] 2-year trailing Quarter ended Years ended ended 1Q19 2017 2018 1Q19 (annualized) Total return on investment portfolio 7.0% -3.4% 7.4% 4.6% ICE BofAML 10YT + 150 bps 3.6% 1.5% 3.5% 3.7% Conventional Wisdom Benchmark [11] 6.1% -0.5% 4.5% 4.3% Fixed income return 3.0% 0.6%
Slide 17: Operating Businesses
Operating Businesses
Slide 18: Owners' Capital Per Share at 1Q19
Owners’ Capital Per Share at 1Q19 [12] Strategic investments Other operating $53 businesses $43 All other $37 The Big Undeployed Five capital $488 $358 Total: $979 ABVPS 17
Slide 19: "Big Five" Investments
“Big Five” Investments Initial WTM Management ABV [12] Company Per share [12] ($) investment year ownership [13] ownership [13] ($ in millions) 2012 97% 3% $740 $234 2018 87% 13% 353 112 2018 85% 15% 258 82 2014 42% 27% 115 36 2015 50% 50% 75 24 Total $1,541 $488 18
Slide 20: HG Global / BAM: Overview
HG Global / BAM: Overview Financial guarantor, insuring only essential public purpose municipal bonds BAM is a mutual company owned by its municipality policyholders; principally provides primary coverage HG Re is a stock company owned by WTM; provides first-loss reinsurance to BAM WTM econo
Slide 21: HG Global / BAM: Recent Results
HG Global / BAM: Recent Results Total premiums [14] of $111 million in 2018, up 7% year over year – Par insured up nicely (15%) – Total pricing [14] down modestly (-7%) – $2.2 billion par assumed reinsurance transaction BAM made a $23 million cash payment of surplus note P&I (vs. $5 million in 2
Slide 22: HG Global / BAM: Market Environment
HG Global / BAM: Market Environment Quarter Years ended ended ($ in billions) 2016 2017 2018 1Q19 Total new municipal bond issuance$ 425 $ 413 $ 324 $ 76 Insured penetration, overall 6%6%6%5% Insured penetration, target market 20% 19% 19% 16% BAM market share (transactions) 46% 46% 54% 46% 10YT (per
Slide 23: HG Global / BAM: Financial Highlights
HG Global / BAM: Financial Highlights Quarter Years ended ended ($ in millions, except where stated) 2016 2017 2018 1Q19 Par insured ($ billions)$ 11.3 $ 10.4 $ 12.0 $ 1.9 Total pricing [14] 68 bps 99 bps 93 bps 83 bps S&P Risk Adjusted Pricing 3.53% 4.52% 4.44% 4.59% Total premiums [14] $ 77 $ 103
Slide 24: NSM: Overview
NSM: Overview Full-service specialty MGU and program administrator (US and UK) Specialty lines include collector cars and other specialty transportation, social services, real estate and pet Economic model is commission-based (90% base and 10% profit) Platform business with high capacity and
Slide 25: NSM: Recent Results
NSM: Recent Results Good results since our acquisition in May 2018 – Solid organic growth, most notably in specialty transportation and real estate – Net of significant investment in people and technology Executing well on “specialty rollup” strategy – Fresh Insurance, a UK-based non-standard pe
Slide 26: NSM: Financial Highlights
NSM: Financial Highlights ($ in millions) $900 $60 $829 $800 $759 $738 $50 [16] $700 [15] $47 $597 $610 $600 $40 $40 $40 $500 $30 $31 $400 $30 $300 $20 $200 TTM Pro Forma Adjusted EBITDA TTM Pro Forma Controlled Premiums Premiums FormaTTM Pro Controlled $10 $100 $- $- 2Q18 3Q18 4Q18 1Q19 1Q19 (w/ Em
Slide 27: Kudu: Overview
Kudu: Overview Provides capital solutions and advisory services to asset management and wealth management firms – Generational ownership transfers – Management buyouts – Acquisition and growth finance – Legacy partner liquidity Deals typically structured as revenue shares; target a healthy runni
Slide 28: Kudu: Recent Results
Kudu: Recent Results Productive first year: – Deployed $145 million of equity capital – Closed five deals Partnered with a diverse set of high-quality managers: Manager Asset class AUM ($ in billions) Savanna Real estate$ 1.4 TIG Advisors Multi manager hedge fund 4.9 Bingham Osborn & Scarborough
Slide 29: MediaAlpha: Overview
MediaAlpha: Overview Marketing technology company Provides platform solutions for real-time transactions in customer clicks, calls and leads Initially focused on auto insurance; has diversified into other insurance and non-insurance “verticals” Economic model is primarily fee based; MediaAlp
Slide 30: MediaAlpha: Recent Results
MediaAlpha: Recent Results Breakout year for MediaAlpha Strong organic growth across all key verticals: – Strong growth in P&C insurance and health & life insurance verticals – Gaining traction in newer verticals, such as travel and mortgage TTM revenues of $308 million at end of 1Q19, up 53%
Slide 31: MediaAlpha: Financial Snapshot
MediaAlpha: Financial Snapshot ($ in millions) $308 $36 $297 $300 $32 $32 $31 $250 $28 $24 $200 $163 $20 $150 $16 $117 Revenues $106 $12 Adjusted EBITDA $100 $85 $11 $8 $50 $38 $7 $6 $7 $4 $1 $0 $0 2013 2014 2015 2016 2017 2018 1Q19 TTM Net invested capital: $28 $27 $16 $22 $31 $21 $(67) Revenues -
Slide 32: MediaAlpha: Transaction
MediaAlpha: Transaction Sold 16 points of equity ownership at a $350 million valuation Implies a 5.0x multiple of invested capital – 2.5x returned in cash – 2.5x reflects the fair value of our go-forward stake Why do this deal? – Recognizes value created to date – Retains substantial upside –
Slide 33: PassportCard / DavidShield: Overview
PassportCard / DavidShield: Overview Travel and expat medical insurance MGA Originally launched in Israel; now expanding internationally Real-time, paperless insurance solution, delivered via debit card technology Superior customer experience, premium pricing and high “reactivation” rates
Slide 34: PassportCard / DavidShield: Recent Results
PassportCard / DavidShield: Recent Results Achieved record results in 2018 Results driven largely by PassportCard, now the largest travel insurance provider in the Israeli market Continue to reinvest substantially all free cash flow into international expansion – Launched in Australia in April
Slide 35: PassportCard / DavidShield: Financial Snapshot
PassportCard / DavidShield: Financial Snapshot ($ in millions) $138 $140 $134 1.8 1.7 1.6 $120 $107 1.6 1.4 $100 1.2 $79 1.2 $80 1.0 $64 $60 0.8 0.8 Customers (millions) Controlled Premiums 0.6 $40 0.5 0.4 $20 0.2 $0 - 2015 2016 2017 2018 1Q19 TTM Net invested capital [17]: $21 $21 $21 $49 $49 Premi
Slide 36: Elementum Advisors
Elementum Advisors On May 31, we closed an investment in Elementum Advisors – Acquired 30% of the management company; founding management retained 70% – Paid cash consideration of $55 million – Separately, invested $50 million from our investment portfolio into the Elementum funds Elementum is a
Slide 37: What to Expect from Us
What to Expect from Us More of the same Patient deployment of capital – In insurance, broader financial services and adjacent sectors – In chunkier deployments (nine figures and up), typically in control positions – In tuck-in and follow-on deployments through current businesses – Acknowledging
Slide 38: Wise Words...
Wise Words... Benjamin Graham “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” 37
Slide 39: Appendices
Appendices 1. Notes (p. 39) 2. Non-GAAP Financial Measures (p. 40)
Slide 40: Notes
Notes 1. Growth in ABVPS, transaction gains and ABVPS are adjusted to reflect the estimated $55 per share gain from the MediaAlpha transaction as if it had closed on 12/31/18. 2. Composite total value creation (tangible book value plus dividends) for 53 publicly-traded underwriters reported by Dowli
Slide 41: Non-GAAP Financial Measures: BVPS to ABVPS
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value per share ("BVPS") to adjusted book value per share ("ABVPS") and growth in ABVPS ($ millions, except per share amounts; shares in thousands) 2015 2016 2017 2018 1Q19 Numerator GAAP common shareholder
Slide 42: Non-GAAP Financial Measures: BVPS vs ABVPS Returns
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Comparison of GAAP book value per share ("BVPS") return to adjusted book value per share ("ABVPS") returns Return periods ended December 31, 2018 Since WTM 1-year 5-year 10-year 20-year IPO (1985) WTM - BVPS -3.7% 7.3% 10.7% 12.8% 14.
Slide 43: Non-GAAP Financial Measures: Fixed Income
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP fixed maturity and short-term investments to fixed income ($ millions) 4Q18 1Q19 GAAP fixed maturity and short-term investments$ 1,292 $ 1,402 Remove: BAM fixed maturity and short-term investments (514) (502) Al
Slide 44: Non-GAAP Financial Measures: Equities and Equity Exposure
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP common equity securities and other long term investments to equities and equity exposure ($ millions) 4Q18 1Q19 Numerator GAAP common equity securities and other long-term investments$ 1,251 $ 1,403 Remove: Medi
Slide 45: Non-GAAP Financial Measures: Investment Returns
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP investment returns to total return on investment portfolio, fixed income return and equity return Trailing (returns in USD) 2-year 1Q19 1Q17 2017 2018 1Q19 (annualized) GAAP total return on investment portfolio
Slide 46: Non-GAAP Financial Measures: Allocation of Capital
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value and GAAP book value per share allocation of capital to adjusted book value and adjusted book value per share allocation of capital ($ millions, except per share amounts) 1Q19 Value 1Q19 Value Per Shar
Slide 47: Non-GAAP Financial Measures: BAM Total Premiums
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of BAM GAAP gross written premiums and member surplus contributions (MSC) collected to gross written premiums and MSC from new business (total premiums) ($ millions, unless otherwise noted) 2016 2017 2018 1Q19 GAAP gros
Slide 48: Non-GAAP Financial Measures: NSM Adjusted EBITDA
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of NSM TTM GAAP net income (loss) to NSM TTM EBITDA, TTM Adjusted EBITDA and TTM Pro Forma Adjusted EBITDA ($ millions) 1Q19 2Q18 3Q18 4Q18 1Q19 (w/ Embrace) TTM GAAP net income (loss)$ (12) $ (17) $ (18) $ (20) $ (20)
Slide 49: Non-GAAP Financial Measures: MediaAlpha Adjusted EBITDA
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of MediaAlpha GAAP net income (loss) to MediaAlpha Adjusted EBITDA ($ millions) 2013 2014 2015 2016 2017 2018 1Q19 TTM GAAP net income (loss)$ 1 $ 6 $ (2) $ (4) $ - $ 9 $ 4 Add back: interest expense - - 1 1 1 1 2 incom
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