White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Day (June 2018)
49 slides from White Mountains Insurance's investor day presentation, Jun 8, 2018
Slide 1: Annual Investor Meeting – June 8, 2018
Exhibit 99.1 White Mountains Insurance Group, Ltd. Annual Investor Meeting – June 8, 2018
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 that the adjusted amounts are useful in depicting and evaluating the company’s financial condition and performance. The adjusted amounts are noted and described on p. 39
Slide 4: Introductions
Introductions WTM Board of Directors WTM Senior Team Senior Teams of: – BAM – MediaAlpha – PassportCard / DavidShield – NSM – Kudu 3
Slide 5: Performance Recap
Performance Recap Quarter Year ended ended ($ in millions, unless otherwise stated) 2015 2016 2017 1Q18 Growth in ABVPS 5% 13% 16% -1% Total return on investment portfolio 5% 3% 7% -1% Transaction gains $ 259 $ 559 $ 560 $ - Post OneBeacon distributions, cumulative $ - $ - $ 726 $ 1,231 [1] Post One
Slide 6: Track Record vs. S&P
Track Record vs. S&P 500 Return period ended December 31, 2017 Since WTM 1-year 5-year 10-year 20-year IPO (1985) WTM – ABVPS 16.1% 9.4% 7.7% 12.3% 13.9% S&P 500 21.8% 15.8% 8.5% 7.2% 11.0% 5
Slide 7: OneBeacon Transaction Recap
OneBeacon Transaction Recap Announced all-cash transaction with Intact Financial on May 2, 2017; closed September 28, 2017 Sale price of $18.10 per share, or 1.7x tangible book value $1.7 billion in total consideration; $1.3 billion to WTM WTM ABVPS gain of $150 WTM return of 2.5x invested
Slide 8: Operating Asset Sales
Operating Asset Sales WTM WTM Closing Price/ ABVPS proceeds date TBV gain ($ billions) IRR Symetra 1Q16 1.6x $43 $0.7 15% Sirius Group 2Q16 1.3x $90 $2.6 11% Tranzact 3Q16 n/a $16 $0.2 35% OneBeacon 3Q17 1.7x $150 $1.3 14% Total $299 $4.2[2] 7
Slide 9: Post OneBeacon: Snapshot
Post OneBeacon: Snapshot – March 31, 2017 September 30, 2015 March 31, 2017 (Actual) (Adjusted for OB transaction) Operating assets ABVPS $653 $904 Run rate growth in ABVPS Mid/high single digits Low single digits Undeployed capital $0.6 billion $3.1 billion 8
Slide 10: Post OneBeacon: Game Plan
Post OneBeacon: Game Plan Expect to shrink before we grow again Envision resizing as a $2.0 - $2.5 billion company Expect to hold $1.0 - $1.5 billion for deployments into new operating businesses Expect to execute value-adding capital deployments despite tough macro environment Deployment
Slide 11: Post OneBeacon: Distributions and Deployments
Post OneBeacon: Distributions and Deployments ($ in billions) $3.5 $3.1 $3.1 $3.0 $2.5 $2.3 $2.1 $2.0 $1.8 $1.5 $1.3 $1.0 $1.0 $0.8 $0.5 <$0.1 <$0.1 $0.0 [3] [3] [1] 1Q17 2Q17 3Q17 4Q17 1Q18 Capital distributions, cumulative New capital deployments, cumulative Undeployed capital 10
Slide 12: Post OneBeacon: Share Repurchases
Post OneBeacon: Share Repurchases ($ in millions, except per share amounts) $1,400 $505 $1,231 $1,200 $1,000 $800 $715 $8 $600 Repurchases $400 $200 $3 $- 2Q17 3Q17 4Q17 1Q18 2Q18 tender Total Shares: 3,184 821,842 - 9,965 575,068 1,410,059 Avg. price: $870 $870 - $841 $878 $873 11
Slide 13: Post OneBeacon: Deployments
Post OneBeacon: Deployments[4] ($ in millions) $600 $100 $548 $500 $9 $28 $13 $125 $400 $300 $273 $200 Capital deployments Capital $100 $- NSM Kudu DavidShield MediaAlpha WMC WMC Total operating strategic businesses investments 12
Slide 14: Themes around Recent Deployments
Themes around Recent Deployments Fee-based revenue models; no insurance balance sheets High-quality partners and management teams Proprietary transactions; not auctions Generally fair to full prices, but for quality operating businesses Two “tuck in” acquisitions for existing businesses (M
Slide 15: Parent Company Expenses
Parent Company Expenses ($ in millions) $100 $91 50,000 $82 45,460 $80 40,000 $61 35,275 $60 30,000 26,900 Expenses $40 20,000 LTIP LTIP sharesgranted $20 10,000 $- - 2016 2017 2018 Estimated [5] LTIP value at grant Salary & bonus at target G&A expenses LTIP shares granted Total expense as % of tota
Slide 16: Current Financial Position and Investments
Current Financial Position and Investments
Slide 17: Current Financial Position
Current Financial Position[6] Total capital of $3.1 billion, substantially all in common shareholders’ equity Undeployed capital of $1.3 billion, or 42% of total capital No parent company financial leverage (available if needed) Total debt to total capital of 6% Virtually no traditional in
Slide 18: Investments: Philosophy and Approach
Investments: Philosophy and Approach Invest for total return Policyholder funds invested conservatively Shareholder funds invested more aggressively Relative to peers, our portfolio generally has: – Shorter duration – Higher equity exposure Investment decisions take into account broader ca
Slide 19: Investments: Current Context
Investments: Current Context Context has changed with the sales of OneBeacon, Sirius Group and Symetra AUM declined from $28 billion at 4Q15 to $2 billion today Assets are now primarily shareholder funds, with minimal policyholder funds Reduced and repositioned human resources accordingly
Slide 20: Investments: Portfolio Composition
Investments: Portfolio Composition[7] Adjusted ($ in millions) 1Q18 1Q18[8] Fixed income $ 2,097 $ 1,394 Equities 1,199 1,124 Total portfolio $ 3,296 $ 2,518 Duration 2.8 years 3.3 years Credit quality A+ A+ Equity exposure 32% 36% 19
Slide 21: Investments: Performance
Investments: Performance[9] Quarter Year ended ended 2015 2016 2017 1Q18 Total return on investment portfolio 4.5% 2.5% 7.0% -1.0% ICE BofAML 10YT + 150 bps 2.4% 1.3% 3.6% -2.0% Conventional Wisdom Benchmark[10] 0.8% 4.1% 6.1% -1.3% Fixed income return -0.1% 2.0% 3.0% -1.0% BBG Intermediate U.S. Agg
Slide 22: Operating Companies
Operating Companies
Slide 23: Owners’ Capital Per Share at 1Q18
Owners’ Capital Per Share at 1Q18[11] WMC strategic investments WMC operating $60 businesses $21 Other $28 Illiquid investments $28 HG Global $209 The "Big Undeployed Five" capital $360 $411 NSM $87 Kudu $40 MediaAlpha $9 PC/DS Total: $908 ABVPS $15 22
Slide 24: 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; BAM provides primary coverage HG Re is a stock company, 97% owned by WTM; HG Re provides first-loss reinsurance to BAM WTM i
Slide 25: HG Global / BAM: Recent Results
HG Global / BAM: Recent Results Total premiums[12] of $104 million in 2017, up 35% year over year – Par insured down slightly (-8%) – Total pricing[12] up meaningfully (+46%) In June 2017, S&P affirmed BAM’s AA Stable rating (and downgraded National to A) In December 2017, BAM made its first c
Slide 26: HG Global / BAM: Market Environment
HG Global / BAM: Market Environment Quarter Year ended ended ($ in billions) 2015 2016 2017 1Q18 Total new municipal bond issuance $ 379 $ 425 $ 413 $ 62 Insured penetration, overall 7% 6% 6% 6% Insured penetration, target market 20% 20% 19% 16% BAM market share (transactions) 47% 46% 46% 55% 10YT (
Slide 27: HG Global / BAM: Financial Highlights
HG Global / BAM: Financial Highlights Quarter Year ended ended ($ in millions, except where stated) 2015 2016 2017 1Q18 Par insured ($ billions) $ 10.6 $ 11.3 $ 10.4 $ 1.3 Total pricing[12] 52 bps 68 bps 99 bps 96 bps Total premiums[12] $ 55 $ 77 $ 104 $ 13 Gross expenses $ 40 $ 43 $ 47 $ 13 S&P RAP
Slide 28: MediaAlpha: Overview
MediaAlpha: Overview Performance marketing technology company Provides platform solutions for real-time transactions of customer clicks, calls and leads Initially focused on auto insurance; has diversified into other “verticals” WTM acquired 60% of MediaAlpha in 2014; founders/management ret
Slide 29: MediaAlpha: Recent Results
MediaAlpha: Recent Results Exciting and transformative year for MediaAlpha Strong organic growth across all key verticals: – Secular and seasonal return to growth in auto insurance advertising spend – Tuck-in acquisition of Healthplans.com; MediaAlpha now the market leader in health & life insur
Slide 30: MediaAlpha: Financial Snapshot
MediaAlpha: Financial Snapshot ($ in millions) $250 $24 $223 $225 $22 $199 $20 $200 $175 $17 $16 $150 $125 $117 $12 $106 Revenues $100 $85 Adjusted EBITDA $8 $75 $7 $7 $50 $38 $6 $4 $25 $1 $- $- [14] [13] 2013 2014 2015 2016 2017 1Q18 TTM Revenues - p&c Revenues - health & life Revenues - other Adju
Slide 31: 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 32: PassportCard / DavidShield: Recent Results
PassportCard / DavidShield: Recent Results Strong organic growth in the core businesses, driven by travel insurance TTM controlled premiums of $113 million at end of 1Q18, up 32% year over year Cashflow generated by core businesses has crossed the $10 million threshold Reinvesting all free c
Slide 33: PassportCard / DavidShield: Financial Snapshot
PassportCard / DavidShield: Financial Snapshot ($ in millions) $120 $113 1.4 $107 1.2 $100 1.2 1.2 $79 1.0 $80 $64 0.8 $60 0.8 0.6 $40 0.5 Customers (millions) Controlled premiums 0.4 $20 0.2 $- - 2015 2016 2017 1Q18 TTM Premiums written Premiums - license/fee arrangements Total customers 32
Slide 34: NSM: Overview
NSM: Overview Full-service specialty MGU and program administrator Specialty lines include collector cars, non-profits, sports and fitness and coastal condo associations Strong team led by founders/management Geof and Billy McKernan Economic model is commission-based: roughly 90% base and 10
Slide 35: NSM: Recent Results
NSM: Recent Results[16] TTM controlled premiums of $596 million at end of 1Q18, up 7% year over year Expect 2018 Bank EBITDA of $35 million; will take time to flow through our GAAP financials All-in purchase price multiple of +/- 12x – Includes Fresh Insurance acquisition – Financed with rough
Slide 36: Kudu: Overview
Kudu: Overview New venture in the asset management sector Provides capital solutions and advisory services to boutique asset managers – Financing for generational transfers; legacy partner liquidity; MBOs; growth and acquisitions – Structurally-senior minority investments, typically in the form
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 “platform” deployments (nine figures and up), typically in control positions – In opportunistic tuck-in and follow-on deployments through current bu
Slide 38: Wise Words...
Wise Words... “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” Benjamin Graham
Slide 39: Appendices
Appendices 1. Notes (p. 39) 2. Non-GAAP Financial Measures (p. 40-48)
Slide 40: Notes
Notes [1] 1Q18 distributions, deployments and undeployed capital are adjusted to reflect the closing of the $505 million 2Q18 tender offer and $273 million in respect of the NSM acquisition. [2] Total WTM proceeds is adjusted to avoid double counting $0.6 billion of proceeds from the sale of Symetra
Slide 41: Non-GAAP Financial Measures: BVPS to ABVPS
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value per share ("BVPS") to adjusted book value per share ("ABVPS") and growth in ABVPS ($ in millions, except per share amounts; shares in thousands) 1Q17 Adj for Adjusted [1] 2014 3Q15 2015 2016 OneBeacon
Slide 42: Non-GAAP Financial Measures: Growth in BVPS and ABVPS
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. See table below for comparison of growth in GAAP book value per share and growth in ABVPS over a range of return perids: Return period ended December 31, 2017 Since WTM 1-year 5-year 10-year 20-year IPO (1985) WTM - BVPS 18.8% 9.6% 7.
Slide 43: Non-GAAP Financial Measures: Transaction Gains
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value per share ("BVPS") transaction gains to adjusted book value per share ("ABVPS") transaction gains ($ in millions, except per share amounts; shares in thousands) OneBeacon Tranzact Sirius Group Symetra
Slide 44: 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 2015 2016 2017 1Q18 GAAP total return on investment portfolio 3.6% 2.7% 5.6% -1.0% Adjusting items Remove BAM inv
Slide 45: Non-GAAP Financial Measures: Equity Exposure
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP equity exposure to equity exposure ($ in millions) Adjusted 1Q18 1Q18 [2] numerator GAAP common equity securities and other long-term investments $ 1,199 $ 1,124 Remove: certain unconsolidated WM Capital operati
Slide 46: Non-GAAP Financial Measures: Owners’ Capital Per Share
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP owners' capital per share to adjusted book value per share ("ABVPS") owners' capital per share ($ in millions, except per share amounts; shares in thousands) 1Q18 Carrying Value Value per share GAAP Adjusted Adj
Slide 47: Non-GAAP Financial Measures: BAM Premiums and Pricing
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of BAM GAAP total premiums to total premiums and BAM GAAP total pricing to total pricing ($ in millions, unless otherwise noted) 2015 2016 2017 1Q18 GAAP total gross written premiums and member surplus contributions $ 5
Slide 48: Non-GAAP Financial Measures: MediaAlpha Adjusted EBITDA
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of MediaAlpha's GAAP net income (loss) to adjusted EBITDA ($ in millions) Adjusted [2] Adjusted [3] 2013 [1] 2014 [1] 2015 2016 2017 2017 1Q18 1Q18 TTM Advertising and commission revenues $ 38 $ 85 $ 106 $ 117 $ 163 $ 1
Slide 49: Non-GAAP Financial Measures: NSM Bank EBITDA
Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of NSM's estimated 2018 GAAP net income to estimated 2018 Bank EBITDA ($ in millions) Estimate 2018 [1] Net revenue $ 110 General and administrative expenses (77) Amortization and depreciation (19) Interest expense (10)
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