White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Presentation (June 2024)
63 slides from White Mountains Insurance's investor presentation, Jun 7, 2024
Slide 1: White Mountains Insurance Group, Ltd. 2024 Annual Investor Presentation
White Mountains Insurance Group, Ltd. 2024 Annual Investor Presentation
Slide 2: Forward-Looking Statements
1 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, includ
Slide 3: Notes and Non-GAAP Financial Measures
2 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's financial condition and performance. The adjusted amounts ar
Slide 4: Introductions
Introductions
Slide 5: 2023 Year in Review
2023 Year in Review
Slide 6: 2023 Year in Review
5 2023 Year in Review Good, scrappy year – ABVPS up 14% to $1,704 Key highlights: – Strong operating results at Ark/WM Outrigger and Kudu – Mixed operating results elsewhere – Excellent investment returns – Value-added capital deployments
Slide 7: Returns in Context
6 Returns in Context YTD May 31, Book value returns 2023 1Q24 Market value returns 2023 2024 WTM ABVPS 14.0% 5.5% WTM 6.5% 20.1% Dowling & Partners Composite TVC [1] 22.1% n/a Dowling & Partners Composite [2] 14.0% n/a S&P 500 26.3% 11.3% S&P P&C Insurance Total Return 10.8% 24.1%
Slide 8: Recent Deployments
7 Recent Deployments Capital Returns as of March 31, 2024 ($ in millions) deployed $ % 1. Deployments impacting 2023 WM Outrigger 2023 205$ 71$ 35% MAX tender offer 59 61 104% DOXA 50 28 55% 2. Other recent deployments Kudu 150$ Bamboo 297 WM Outrigger 2024 130 White Mountains Partners TBD
Slide 9: Capital & Financial Position
Capital & Financial Position
Slide 10: Deployments, Distributions and Undeployed Capital
9 $2.9 $2.1 $3.1 $1.6 $0.6 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 1Q17 2017 2018 2019 2020 2021 Post-NSM 2022 2023 1Q24 $ in b ill io ns Capital deployments, cumulative Capital distributions, cumulative Undeployed capital Deployments, Distributions and Undeployed Capital [4][3] Post-OneBeacon: $1.8 bill
Slide 11: Financial Position as of 1Q24
10 Financial Position as of 1Q24 Total capital of $5.6 billion, principally in shareholders’ equity – No financial leverage at parent – Prudent financial leverage at opcos – Consolidated debt to total capital of 10% Undeployed capital of $0.6 billion, or 10% of total capital
Slide 12: Operating Businesses
Operating Businesses
Slide 13: Owners' Capital Per Share as of 1Q24
12 Owners’ Capital Per Share as of 1Q24 [6] Total: $1,797 ABVPS Ark $352 WM Outrigger $59 HG Global $351 Kudu $274 Bamboo $117 MediaAlpha $183 PC/DS $59 Elementum $14 Other operating businesses $38 Strategic investments & other $123 Undeployed capital $228
Slide 14: Key Operating Businesses
13 Key Operating Businesses Company Initial investment year WTM ownership [7] Management ownership [7] ABV [6] ($ in millions) Per share [6] ($) 2021 62% 38% $1,045 $410 2012 97% 3% 893 351 2018 76% 16% 697 274 2014 32% 29% 466 183 2024 64% 27% 298 117 2015 54% 46% 150 59 2019 27% 73% 35 14 WM Outri
Slide 15: Ark: Overview
14 Ark: Overview Specialized P&C (re)insurance business Founded in 2007 by Ian Beaton and Nick Bonnar Writes five major lines of business: property, specialty, marine & energy, A&H and casualty Business written via: – Lloyd’s Syndicates 4020 and 3902 – Bermuda-based reinsurer Group Ark Insur
Slide 16: Outrigger: Overview
15 Outrigger: Overview Outrigger Re is a sidecar to Ark’s Bermuda global property cat XOL reinsurance book; renewable annually Ark launched Outrigger for January 1, 2023 – $205 million of WTM capital; $45 million of third-party capital – Produced a return of 35% for WTM through 1Q24 Ark renewe
Slide 17: Ark: Recent Results
16 Ark: Recent Results Excellent results in 2023 – Combined ratio of 82% – Gross written premiums of $1.9 billion, up 31% YOY – Blended risk-adjusted rate change of +15% – Grew Tangible Book Value over 40% Good 1Q24 results – Combined ratio of 94% – Gross written premiums of $872 million, up 8%
Slide 18: Ark: Financial Snapshot
17 $598 $1,059 $1,452 $1,898 $1,961 98% 87% 82% 82% 83% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2020 2021 2022 2023 1Q24 TTM Com bined Ratio G ro ss W rit te n Pr em iu m s ( $ in m ill io ns ) Property Specialty Marine & Energy Casualty A&H Combined Ra
Slide 19: Ark: Relative Performance at Lloyd's
18 Ark: Relative Performance at Lloyd’s WM Outrigger 2019-2023 Profitability and Volatility [9] Less Profitable More Profitable L es s V ol at ile M or e V ol at ile ERS 218 Arch 1955 Antares 1274 CNA Hardy 382 RenRe 1458 Canopius 4444 Brit 2987 Argenta 2121 Liberty 4472 TMK 510 Hamilton 4000 Chauce
Slide 20: Ark: Market Environment
19 Ark: Market Environment WM Outrigger Rate, Terms & Conditions Uncertainties Property (re)insurance rolling Marine & energy flat Specialty differentiated A&H flat Casualty up 5-10% Political violence / war Catastrophic risks and secondary perils Inflation
Slide 21: Ark: Go-Forward Strategy
20 Ark: Go-Forward Strategy WM Outrigger Near-term, cyclical opportunities persisting Longer-term, secular themes and structural changes emerging Opportunistic capital redeployment in the face of uncertainty and risk Recent team additions: – A&H – Marine liability – Political violence / cris
Slide 22: HG Global / BAM: Overview
21 HG Global / BAM: Overview Financial guarantor that insures essential public purpose municipal bonds BAM is a mutual company owned by its municipality policyholders HG Global is a stock company owned by WTM; provides first-loss reinsurance to BAM WTM economics come in two forms: – BAM surp
Slide 23: HG Global / BAM: Recent Results
22 HG Global / BAM: Recent Results Decent year in 2023, down from record year in 2022 – Gross written premiums and MSC [10] of $131 million (down 10% YOY) – Par insured of $16 billion (down 3% YOY) – Total pricing of 0.84% (down 8% YOY) Cash payment on surplus notes of $27 million Decent 1Q24
Slide 24: HG Global / BAM: Market Environment
23 HG Global / BAM: Market Environment Year ended ($ in billions) 2021 2022 2023 1Q24 Total new municipal bond issuance 458$ 360$ 363$ 98$ Insured penetration, overall 8% 8% 9% 7% Insured penetration, target market 27% 26% 31% 31% BAM market share (transactions) 53% 56% 55% 53% 10YT (period end) 1.5
Slide 25: HG Global / BAM: Financial Snapshot
24 HG Global / BAM: Financial Snapshot Year ended ($ in millions, except where stated) 2021 2022 2023 1Q24 Gross premiums and MSC [10] 118$ 147$ 131$ 22$ Primary + surety 88 84 81 17 Secondary and assumed reinsurance 30 63 50 5 Par insured ($ in billions) 17.5$ 16.0$ 15.6$ 3.6$ Pricing 67 bps 91 bps
Slide 26: HG Global / BAM: Key Priorities
25 HG Global / BAM: Key Priorities Grow and expand BAM’s existing lines of business – Primary market increase insurance utilization in targeted regions and credit sectors – Secondary market broaden institutional investor utilization – Platform continue to automate trade analysis and executio
Slide 27: Kudu: Overview
26 Kudu: Overview Provides capital solutions and advisory services to asset management companies – Generational ownership transfers – Management buyouts – Acquisition and growth finance – Legacy partner liquidity Deals are typically structured as revenue shares: healthy running cash yield plus a
Slide 28: Kudu: Recent Results
27 Kudu: Recent Results Strong 2023 results – Levered Return of 12% – GAAP ROE of 17% – Portfolio value up 15% on a same store basis Deployed $172 million, primarily into five new deals Solid 1Q24 results – Levered Return of 12% – TTM 1Q24 GAAP ROE of 13% To date, full exits have produced a
Slide 29: Kudu: Financial Snapshot
28 $374 $210 $356 $219 7% 8% 11% 8% 12% 12% 6% 7% 20% 12% 17% 13% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $0 $200 $400 $600 $800 $1,000 $1,200 2019 2020 2021 2022 2023 1Q24 Return To ta l N et C ap ita l [1 1] ($ in m ill io ns ) Equity capital drawn, net Debt capital drawn, net Retained earnings Dry
Slide 30: Bamboo: Overview
29 Bamboo: Overview California homeowners’ insurance MGA founded and led by John Chu Differentiated model in dislocated market, with several competitive advantages: – Recent launched after 2017-2018 wildfire losses with adequate rate – Modern strong tech & data analytics; lean cost structure
Slide 31: Bamboo: Recent Results
30 Bamboo: Recent Results [14] Strong results in 1Q24 – Managed premiums of $90 million for 1Q and $277 million for TTM (up ~3x YOY) – MGA Adjusted EBITDA of $6 million for 1Q and $15 million for TTM – Strong underlying underwriting results $95 $277 $358 $(9) $15 $26 -$20 -$10 $0 $10 $20 $30 $40 $
Slide 32: Bamboo: Market Environment
31 Bamboo: Market Environment California homeowners’ insurance market reached a breaking point in 2023 – Legacy carriers struggling to price for rising home values, cat risk and reinsurance costs – >50% of primary capacity in admitted market has pulled back Bamboo benefiting from market dislocat
Slide 33: MediaAlpha: Overview
32 MediaAlpha: Overview Online customer acquisition technology company (NYSE: MAX) Industry-leading marketplaces for real-time transactions in clicks, calls and leads Multiple verticals, including P&C, health and life insurance Fee-based economic model: take percentage on all marketplace tra
Slide 34: MediaAlpha: Recent Results
33 MediaAlpha: Recent Results 2023 was a wild ride at MediaAlpha – Extreme cycle for personal auto insurers continued ad spend pullback – Transaction value of $593 million (down 20% YOY) – Adjusted EBITDA of $27 million (up 19% YOY) – MAX share price fell to $5 in 2Q23; rebounded to $11 by year
Slide 35: MediaAlpha: Financial Snapshot
34 $38 $101 $150 $175 $219 $396 $560 $816 $1,019 $738 $593 $619 $1 $6 $7 $7 $11 $32 $43 $58 $58 $23 $27 $34 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1Q24 TTM A djusted E BITD A
Slide 36: PassportCard / DavidShield: Overview
35 PassportCard / DavidShield: Overview Offers travel and expat medical insurance Delivers coverage and services in 180+ territories around the world Real-time, paperless insurance solution, delivered via debit card Superior customer experience, premium pricing and high reactivation rates
Slide 37: PassportCard / DavidShield: Recent Results
36 PassportCard / DavidShield: Recent Results 2023 was on track to be another record year until outbreak of war in early October Core premiums of $217 million (down 6% YOY) – 4Q23 Israeli travel premiums dropped to ~30% of prior year – Other businesses largely unaffected Solid 1Q24 in light of
Slide 38: PassportCard / DavidShield: Financial Snapshot
37 $55 $79 $107 $132 $154 $75 $125 $232 $217 $205 $6 $6 $10 $15 $18 $2 $14 $30 $14 $10 $0 $5 $10 $15 $20 $25 $30 $35 $40 $0 $40 $80 $120 $160 $200 $240 $280 2015 2016 2017 2018 2019 2020 2021 2022 2023 1Q24 TTM Core E BITD A , ,net ($ in m illions) Co re C on tro lle d Pr em iu m s ( $ in m ill io n
Slide 39: Elementum: Overview
38 Elementum: Overview Among the largest independent managers of insurance-linked securities (ILS) Manages portfolios of nat cat risk on behalf of institutional investors Accesses risk via a range of instruments: cat bonds, collateralized reinsurance, primary insurance Delivers a range of ri
Slide 40: Elementum: Recent Results
39 Elementum: Recent Results Strong 2023 for Elementum and broader ILS market – AUM increased to $3.9 billion (up 5%) – Adjusted EBITDA increased to $19 million (up 2x, driven by performance fees) – Fund returns to WTM of 16% – Continued strong cash yield Decent start to 2024 – AUM down 7% QOQ a
Slide 41: White Mountains Partners: Overview
40 White Mountains Partners: Overview New, wholly-owned business unit launched in 4Q23 Led by CEO and Managing Partner John Daly Provides first institutional capital to family, founder and entrepreneur-owned businesses in three sectors: – Essential services – Light industrial – Specialty consu
Slide 42: Investments
Investments
Slide 43: Investments: Philosophy and Approach
42 Investments: Philosophy and Approach Invest for total return Policyholder funds invested conservatively; shareholder funds invested more aggressively Relative to insurance peers, we tend to have (i) shorter duration and (ii) higher equity exposure Parent investment decisions take into acc
Slide 44: Investments: Composition
43 Investments: Composition ($ in millions) Ark HG Global Parent [18] Consolidated Fixed Income [17] 2,030$ 623$ 561$ 3,214$ Equities and Alternatives [17] 462 - 425 888 Total Portfolio [17] 2,492$ 623$ 986$ 4,102$ Fixed income duration (years) [19] 0.9 4.3 2.3 1.8 Fixed income credit quality A+ AA-
Slide 45: Investments: Performance
44 Investments: Performance [21] 2022 to 2022 to 1Q24 Year ended 1Q24 Annualized 2022 2023 1Q24 Annualized Outperformance Total Portfolio Return -2.1% 9.1% 1.3% 3.6% 10YT + 150 bps -14.8% 4.3% -1.2% -5.6% +9.2% Conventional Wisdom Benchmark [22] -13.6% 8.5% 0.9% -2.5% +6.0% Fixed Income Return -4.0%
Slide 46: What to Expect
What to Expect
Slide 47: What to Expect from Us
46 What to Expect from Us More of the same Focused on growing per share values over long periods of time Not focused on near-term GAAP results Adhering to our core operating principles: – Underwriting comes first – Maintain a disciplined balance sheet – Invest for total return – Think like o
Slide 48: Wise Words…
47 Wise Words… 1-year 5-year 10-year 20-year Since WTM IPO (1985) WTM - ABVPS 14.8% 13.0% 10.7% 9.7% 13.5% WTM - MVPS 30.3% 14.2% 11.7% 6.8% 12.4% S&P 500 29.9% 15.1% 13.0% 10.2% 11.4% S&P P&C Insurance Total Return [23] 41.3% 17.8% 16.5% 10.6% 10.7% Return periods ended March 31, 2024
Slide 49: Superior Track Record Over 35+ Years
48 Superior Track Record Over 35+ Years
Slide 50: Appendices
Appendices 1. Notes (p. 50) 2. Non-GAAP Financial Measures (p. 51)
Slide 51: Notes
50 Notes 1. Total value creation (tangible book value plus dividends) composite of 46 publicly traded underwriters reported by Dowling & Partners. 2. Composite performance for 56 publicly traded underwriters and brokers reported by Dowling & Partners. 3. 1Q17 undeployed capital amount is adjusted to
Slide 52: Non-GAAP Financial Measures: ABVPS Reconciliation
51 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value per share ("BVPS") to ABVPS and growth in ABVPS ($ millions, except per share amounts; shares in thousands) 2023 1Q24 Numerator WTM's common shareholders' equity (GAAP BVPS numerator) 4,240$ 4,470$
Slide 53: Non-GAAP Financial Measures: BVPS vs ABVPS Returns
52 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Comparison of GAAP BVPS returns to ABVPS returns 1-year 5-year 10-year 20-year Since WTM IPO (1985) WTM - BVPS 14.6% 12.3% 10.5% 9.5% 13.4% WTM - ABVPS 14.8% 13.0% 10.7% 9.7% 13.5% Return periods ended March 31, 2024
Slide 54: Non-GAAP Financial Measures: Allocation of Capital
53 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value and GAAP BVPS allocation of capital to actual and pro forma Adjusted Book Value and ABVPS allocation of capital ($ millions, except per share amounts) 1Q24 Actual 1Q24 Pro Forma 1Q24 Owners' Capita
Slide 55: Non-GAAP Financial Measures: Ark Tangible Book Value
54 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Ark's GAAP equity to Tangible Book Value and calculation of growth in book value to Growth in Tangible Book Value, including dividends ($ millions) Year Ended December 31, 2023 Beginning GAAP equity [a] 965$ Less:
Slide 56: Non-GAAP Financial Measures: Kudu EBITDA and Levered Return
55 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliations of Kudu GAAP net income to Kudu Annualized Adjusted EBITDA and return on equity to Levered Return Trailing Twelve Months Ended ($ millions) 4Q20 4Q21 4Q22 4Q23 1Q24 GAAP net income (loss) [a] 21$ 78$ 62$ 105$ 79$ Ad
Slide 57: Non-GAAP Financial Measures: Bamboo MGA Adjusted EBITDA
56 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliations of Bamboo GAAP net income to MGA Adjusted EBITDA and 1Q24 Annualized MGA Adjusted EBITDA ($ millions) 1Q24 GAAP net income (loss) 2$ Exclude: Net (income) loss, Bamboo Captive 0 MGA net income (loss) 2 Add back: Inc
Slide 58: Non-GAAP Financial Measures: Fixed Income and Equities
57 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of (i) GAAP fixed maturity and short-term investments to Fixed Income (ii) GAAP common equity securities, investment in MediaAlpha and other long-term investments to Equities and Alternatives and (iii) Equities and A
Slide 59: Non-GAAP Financial Measures: Ark Portfolio
58 Non-GAAP Financial Measures Ark Reconciliation of (i) Ark's GAAP fixed maturity and short-term investments to Ark Fixed Income, (ii) Ark's GAAP common equity securities and other long-term investments to Ark Equities and Alternatives (iii) Ark Equities and Alternatives / Total Ark Portfolio and (
Slide 60: Non-GAAP Financial Measures: HG Global Fixed Income
59 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of HG Global's GAAP fixed maturity and short-term investments to HG Global Fixed Income. Total HG Global Portfolio equals HG Global Fixed Income. ($ millions) 1Q24 HG Global GAAP fixed maturity and short-term investm
Slide 61: Non-GAAP Financial Measures: Parent Portfolio
60 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of (i) Other Operations GAAP fixed maturity and short-term investments to Parent Fixed Income (ii) Other Operations GAAP common equity securities, investment in MediaAlpha and other long-term investments to Parent Eq
Slide 62: Non-GAAP Financial Measures: Equities and Alternatives
61 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of (i) GAAP common equity securities, investment in MediaAlpha and other long-term investments to Equities and Alternatives and (ii) Equities and Alternatives / Adjusted Shareholders Equity ($ millions) 1Q24 Numerato
Slide 63: Non-GAAP Financial Measures: Investment Returns
62 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP investment returns to Total Portfolio Return, Fixed Income Return and Equity and Alternative Return (returns in USD) 2022 2023 1Q24 GAAP total return on investment portfolio -1.6% 11.4% 4.6% Adjusting items R
White Mountains Insurance Group — Investor Presentation (June 2024) on 6ix