White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Presentation (June 2021)
54 slides from White Mountains Insurance's investor presentation, Jun 4, 2021
Slide 1: White Mountains Insurance Group, Ltd. Annual Investor Presentation
White Mountains Insurance Group, Ltd. Annual Investor Presentation Exhibit 99.1
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
3 Introductions WTM Board of Directors WTM senior team Senior teams of: – HG Global / BAM – Ark – NSM – Kudu – MediaAlpha – PassportCard / DavidShield – Elementum
Slide 5: Year in Review
Year in Review
Slide 6: Performance Recap
5 Performance Recap Years ended ($ in millions) 2018 2019 2020 1Q21 Growth in ABVPS -2.8% 14.8% 24.2% -1.7% Growth in MVPS 0.9% 30.2% -10.2% 11.5%
Slide 7: 2020 Returns in Context
6 2020 Returns in Context Book value returns Market value returns WTM ABVPS 24.2% WTM -10.2% Dowling & Partners Composite TVC [1] 13.9% Dowling & Partners Composite [2] -0.3% S&P 500 18.4% Business Insurance Index [3] -11.0% S&P Financials -2.1%
Slide 8: Key Milestones
7 Key Milestones Ark: closed significant “scale-up” transaction – Back in the balance sheet business in a hard market – Control position; strong alignment with founders / management MediaAlpha: executed IPO and secondary sale – MOIC of 22x and IRR of 75% (at the end of 1Q21) – Remaining 26% stak
Slide 9: Distributions and Deployments
8 $0.0 $1.0 $1.8 $2.2 $3.3 $3.3 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 1Q17 2017 2018 2019 2020 1Q21 Capital distributions, cumulative New capital deployments, cumulative Undeployed capital Distributions and Deployments ($ in billions) [4] [5] [5]
Slide 10: Operating Businesses
Operating Businesses
Slide 11: Owners' Capital Per Share at the End of 1Q21
10 Owners’ Capital Per Share at the End of 1Q21 [6] Total: $1,242 ABVPS $139Ark $267 HG Global $265 MediaAlpha $195 NSM $151 Kudu $124 PC/DS $31 Elementum $18 Other operating businesses $31 Strategic investments / other $59 Undeployed capital $101
Slide 12: Key Businesses Today
11 Key Businesses Today Company Initial investment year WTM ownership [7] Management ownership [7] ABV [6] ($ in millions) Per share [6] ($) 2012 97% 3% $818 $265 2021 63% 37% 623 / 823 202 / 267 2018 90% 10% 467 151 2018 85% 15% 382 124 2014 26% 27% 600 195 2015 54% 46% 95 31 2019 30% 70% 57 18
Slide 13: HG Global / BAM: Overview
12 HG Global / BAM: Overview Financial guarantor, insuring only essential public purpose municipal bonds BAM is a mutual company owned by its municipality policyholders HG Re is a stock company owned by WTM; provides first-loss reinsurance to BAM WTM economics come in two forms: – Surplus no
Slide 14: HG Global / BAM: Recent Results
13 HG Global / BAM: Recent Results Total premiums [8] of $131 million in 2020, up 23% YOY – Par insured hit all-time high of $17.3 billion (up 35% YOY) ● Credit volatility drove robust demand for insurance ● Market share grew, reflecting “COVID-hustle” – Absolute pricing down slightly; risk-adjust
Slide 15: HG Global / BAM: Market Environment
14 HG Global / BAM: Market Environment ($ in billions) 2018 2019 2020 1Q21 Total new municipal bond issuance 324$ 407$ 459$ 105$ Insured penetration, overall 6% 6% 8% 8% Insured penetration, target market 19% 18% 27% 26% BAM market share (transactions) 54% 53% 56% 53% 10YT (period end) 2.69% 1.92% 0
Slide 16: HG Global / BAM: Financial Highlights
15 HG Global / BAM: Financial Highlights ($ in millions, except where stated) 2018 2019 2020 1Q21 Par insured ($ in billions) 12.0$ 12.8$ 17.3$ 3.5$ Total pricing [8] 93 bps 83 bps 76 bps 74 bps Primary + surety 71 bps 53 bps 61 bps 60 bps Secondary and assumed reinsurance 150 bps 219 bps 197 bps 11
Slide 17: Ark: Overview
16 Ark: Overview Global P&C (re)insurance business Founded in 2007 by Ian Beaton and Nick Bonnar Covers property and specialty lines (A&H, energy, marine, political) Writes business via: – Lloyd’s Syndicates 4020 and 3902 – Bermuda-based reinsurer Group Ark Insurance Ltd. Consistently top-
Slide 18: Ark: Transaction
17 Ark: Transaction First broad-based hard market in a decade Rekindled conversations with Ian and Nick, two of the best in the business – Valued management’s proven track record and “underwriting comes first” mindset – Believed Ark’s scale-up strategy would improve speed to market and reduce ex
Slide 19: Ark: Recent Results
18 Ark: Recent Results Strong 2020 results 98% COR, outperforming the Lloyd’s market by 12 points Strong operational execution to date – AM Best rating of “A/stable,” highest in the Class of 2020 – All underwriting platforms up and running for 1/1 renewals – Key hires in place Off to a good
Slide 20: NSM: Overview
19 NSM: Overview Full-service specialty MGU and program administrator (US and UK) Lines include specialty transportation, real estate, social services and pet Economic model is commission-based (90% base and 10% profit) Platform business with high capacity and appetite for follow-on investme
Slide 21: NSM: Recent Results
20 NSM: Recent Results Good results in 2020 – Pro forma Controlled Premiums [9] crossed $1 billion threshold (up 12% YOY organically) – TTM Pro forma adjusted EBITDA [10] of $62 million (up 5% YOY organically) – US business had an outstanding year; UK business had a tough year – Closed Kingsbridge
Slide 22: NSM: Financial Highlights
21 $597 $782 $919 $1,074 $1,090 $30 $40 $50 $62 $63 $- $10 $20 $30 $40 $50 $60 $70 $- $200 $400 $600 $800 $1,000 $1,200 2Q18 2018 2019 2020 1Q21 T T M P ro F or m a A dj us te d E B IT D A [1 0] T T M P ro F or m a C on tr ol le d Pr em iu m s [9 ] Specialty Transportation Social Services Real Estat
Slide 23: Kudu: Overview
22 Kudu: Overview Provides capital solutions and advisory services to boutique asset and wealth managers – Generational ownership transfers – Management buyouts – Acquisition and growth finance – Legacy partner liquidity Deals typically structured as revenue shares: healthy running cash yield pl
Slide 24: Kudu: Recent Results
23 Kudu: Recent Results Solid 2020 results – Deployed $121 million into four new deals and one follow-on – Portfolio generated positive investment performance and grew AUM by 4% – Fair value of Kudu’s participation contracts increased by 3% – Cash revenue yield on total capital of 10% – Adjusted E
Slide 25: Kudu: Financial Highlights
24 $142 $142 $219 $266 $263 $316 $326 $401 $427 $(1) $2 $5 $10 $15 $16 $17 $22 $23 $(5) $- $5 $10 $15 $20 $25 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 T T M A dj us te d E B IT D A Fa ir V al ue o f P ar tic ip at io n C on tr ac ts Fair Value TTM A
Slide 26: MediaAlpha: Overview
25 MediaAlpha: Overview Online customer acquisition technology platform Industry-leading marketplaces for real-time transactions across clicks, calls, and leads Multiple verticals, including P&C, health and life insurance Fee-based economic model with a percentage taken from all marketplace
Slide 27: MediaAlpha: Recent Results
26 MediaAlpha: Recent Results Record operating results in 2020 – Adjusted EBITDA grew to $58 million, up 35% YOY – Record year in auto insurance, with revenues up 81% Good start in 1Q21 – TTM Adjusted EBITDA grew to $62 million, up 29% year-over-year – Continued strong momentum in P&C and H&L ve
Slide 28: MediaAlpha: Financial Snapshot
27 $38 $85 $106 $117 $163 $297 $408 $585 $639 $1 $6 $7 $7 $11 $32 $43 $58 $62 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 TTM A dj us te d E B IT D A R ev en ue s Revenues - p&c
Slide 29: PassportCard / DavidShield: Overview
28 PassportCard / DavidShield: Overview Offers travel and expat medical insurance Delivers coverage and services in 200+ territories around the world Real-time, paperless insurance solution, delivered via debit card technology Superior customer experience, premium pricing and high reactivati
Slide 30: PassportCard / DavidShield: Recent Results
29 PassportCard / DavidShield: Recent Results Record results in 2019 and early 2020, then significant COVID disruption – 2020 Core EBITDA of $2 million (down from $17 million in 2019) – 2020 core premiums of $75 million (down 51% YOY) ● Travel premiums of $12 million (down 87% YOY) ● Expat medical
Slide 31: Elementum: Overview
30 Elementum: Overview One of the largest independent managers of insurance-linked securities (ILS) Manages institutional investment portfolios exposed to natural catastrophe event risk Delivers range of risk/return and liquidity profiles through various instruments – Catastrophe bonds – Colla
Slide 32: Elementum: Recent Results
31 Elementum: Recent Results Flattish results in 2020 – AUM grew 4% to $4.4 billion – Adjusted EBITDA shrank 4% to $13 million – We received cash dividends of $4 million, implying a cash yield of 7% – Our investments in four Elementum funds generated a blended return of +0.7% In 2019 and 2020, t
Slide 33: Financial Position & Investment Portfolio
Financial Position & Investment Portfolio
Slide 34: Current Financial Position
33 Current Financial Position Total capital of $4.5 billion, substantially all in common shareholders’ equity Undeployed capital [6] of $310 million, or 7% of total capital No parent company financial leverage Total debt to total capital of 10%
Slide 35: Investments: Philosophy and Approach
34 Investments: Philosophy and Approach Invest for total return $2.4 billion Total portfolio [11] at 1Q21 – $0.9 billion of policyholder funds (Ark and HG Global) – $1.5 billion of shareholder funds Investment decisions take into account broader capital position and corporate needs Low equit
Slide 36: Investments: Mandates
35 Investments: Mandates Mandate Total portfolio [11] Current position Objectives Parent $0.7 billion Fixed income Alternatives Safeguard known capital commitments Manage for total return HG Re $0.4 billion Fixed income Preserve claims paying resources and liquidity Ark $1.3 billion Fi
Slide 37: Investments: Composition
36 Investments: Composition [11] ($ in millions) Parent HG Re Ark Consolidated Fixed income 627$ 428$ 1,110$ 2,165$ Equities (incl. alternatives) 105 - 149 254 Total portfolio 732$ 428$ 1,260$ 2,419$ Fixed income duration 2.2 3.5 0.8 1.8 Fixed income credit quality AA- AA- A+ AA- Equity exposure n/a
Slide 38: Investments: Performance
37 Investments: Performance [12] 2019 2020 1Q21 Total return on investment portfolio 16.3% 3.5% 0.1% ICE BofAML 10YT + 150 bps 10.4% 12.1% -6.7% Conventional Wisdom Benchmark [13] 12.0% 9.5% -2.0% Fixed income return 6.2% 4.8% -0.7% BBG Intermediate U.S. Aggregate Index 6.7% 5.6% -1.6% Equity return
Slide 39: What to Expect
What to Expect
Slide 40: What to Expect from Us
39 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 41: Wise Words…
40 Wise Words… 1-year 5-year 10-year 20-year Since WTM IPO (1985) WTM - ABVPS 24.2% 12.8% 11.3% 10.6% 13.7% WTM - MVPS -10.2% 6.7% 11.7% 6.4% 11.7% S&P 500 18.4% 15.2% 13.9% 7.5% 11.3% Return periods ended December 31, 2020
Slide 42: Track Record
41 $20 $75 $280 $1,050 Year 1990 1995 2000 2005 2010 2015 2020 Adjusted Book Value Per Share Market Value Per Share * Growth since IPO: Adjusted Book Value Per Share 14% annualized, including dividends Market Value Per Share 12% annualized, including dividends Black Monday Financial Market Collapse
Slide 43: Appendices
Appendices 1. Notes (p. 43) 2. Non-GAAP Financial Measures (p. 44)
Slide 44: Notes
43 Notes 1. Average total value creation (tangible book value plus dividends) for 47 publicly-traded underwriters reported by Dowling & Partners. 2. Average performance for 58 publicly traded underwriters and brokers reported by Dowling & Partners. 3. Average performance for 50 publicly traded under
Slide 45: Non-GAAP Financial Measures: ABVPS Reconciliation
44 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP book value per share (BVPS) to adjusted book value per share (ABVPS) and growth in ABVPS ($ millions, except per share amounts; shares in thousands) 2018 2019 2020 1Q21 Numerator GAAP common shareholders' equ
Slide 46: Non-GAAP Financial Measures: BVPS vs ABVPS Returns
45 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 period ended March 31, 2021 1-year 5-year 10-year 20-year Since WTM IPO (1985) Since WTM IPO (1985) WTM - BVPS 23.1% 12.8
Slide 47: Non-GAAP Financial Measures: Allocation of Capital
46 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) GAAP Book Value Adjustments
Slide 48: Non-GAAP Financial Measures: BAM Total Premiums
47 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) 2018 2019 2020 1Q21 GAAP g
Slide 49: Non-GAAP Financial Measures: Ark Adjusted Ratios
48 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Ark's GAAP loss and loss adjustment expense ratio, insurance acquisition expense ratio, other underwriting expense ratio and combined ratio to their adjusted ratios Quarter ended March 31, 2021 ($ millions) GAAP T
Slide 50: Non-GAAP Financial Measures: NSM EBITDA
49 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) 2Q18 2018 2019 2020 1Q21 TTM GAAP net income (loss) (12)$ (18)$ (2)$ (7)$ (32)$ Add back: Intere
Slide 51: Non-GAAP Financial Measures: Kudu Adjusted EBITDA
50 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Kudu TTM GAAP net income (loss) to Kudu TTM Adjusted EBITDA and TTM Annualized adjusted EBITDA ($ millions) 1Q20 2Q20 3Q20 4Q20 1Q21 TTM GAAP net income (6)$ 5$ 12$ 21$ 45$ Add back: Interest expense 1 3 4 6 10 In
Slide 52: Non-GAAP Financial Measures: Fixed Income and Equities
51 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP fixed maturity and short-term investments to fixed income and GAAP common equity securities, investment in MediaAlpha and other long-term investments to equities (Total portfolio equals the sum of fixed incom
Slide 53: Non-GAAP Financial Measures: Equity Exposure
52 Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of GAAP common equity securities, investment in MediaAlpha and other long-term investments to equities and equity exposure ($ millions) 1Q21 Numerator GAAP common equity securities, investment in MediaAlpha and other
Slide 54: Non-GAAP Financial Measures: Investment Returns
53 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 (returns in USD) 2019 2020 1Q21 GAAP total return on investment portfolio 20.4% 31.9% -0.3% Remove: BAM invest
White Mountains Insurance Group — Investor Presentation (June 2021) on 6ix