White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Presentation (June 2011)
35 slides from White Mountains Insurance's investor presentation, Jun 22, 2011
Slide 1: Annual Investor Meeting June 22, 2011
White Mountains Insurance Group, Ltd. Annual Investor Meeting June 22, 2011
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements This presentation contains, and management may make, certain statements that are not historical facts but that are 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 state
Slide 3: Highlights: Solid Performance in Soft Markets
Highlights: Solid Performance in Soft Markets 2010: White Mountains Re: a solid year despite significant global cat activity OneBeacon: transformed into a specialty company Esurance: returned to profitable growth Solid investment returns 2011: Continued cat activity Generally soft markets except for
Slide 4: Highlights: Solid Performance in Soft Markets
Highlights: Solid Performance in Soft Markets 2010: White Mountains Re: a solid year despite significant global cat activity OneBeacon: transformed into a specialty company Esurance: returned to profitable growth Solid investment returns 2011: Continued cat activity Generally soft markets except for
Slide 5: 16% Annual Growth in ABVPS Since 1985 IPO
5 16% Annual Growth in ABVPSNGM Since 1985 IPO 1 year 3 year 5 year 10 year Since IPO White Mountains [1] 28.5% 6.3% 9.5% 12.2% 15.8% S&P 500 15.4% 1.9% 2.3% 2.9% 9.1% [1] - White Mountains growth in adjusted book value per share pro forma for the sale of Esurance & AFI to Allstate Return Period End
Slide 6: Sale of Esurance & AFI
Sale of Esurance & AFI Announced on May 18th; expected to close in the fall $700 million plus tangible book value About 2.5x tangible book value 11% IRR vs. S&P total return of 2% $80 increase in WTM adjusted book value per shareNGM $1.1 billion of capital freed up 6
Slide 7: Esurance & AFI: A Look Back
Esurance & AFI: A Look Back Esurance launched in 1999 funded by VC’s WTM purchased in 2000 for $9 million Economically profitable since 2004 Large annual advertising budget since 2005 Acquired AFI in 2008 Superior business model Solid growth after recovery from financial crisis Sale = win-win transa
Slide 8: OneBeacon Underwriting Performance
OneBeacon Underwriting Performance 8 Net written premiums $ in millions Combined ratio Net Written Premiums & Combined Ratios - 500.0 1,000.0 1,500.0 2,000.0 2,500.0 3,000.0 3,500.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 75.0% 85.0% 95.0% 105.0% 115.0% 125.0% 135.0% Specialty Insurance Op
Slide 9: OneBeacon: 14-15% IRR on Investment Since 2001
OneBeacon: 14-15% IRR on Investment Since 2001 9 Cumulative annualized after tax rate of return: Book value: 14% Market value: 15% Terminal value @ book: 14% Terminal value @ market: 15% $ in billions - $2 - $1 $0 $1 $2 $3 $4 cumulative distributions to WTM WTM equity capital committed cost net of c
Slide 10: White Mountains Re: 10% IRR on Book Value since 1996
White Mountains Re: 10% IRR on Book Value since 1996 10 $ in billions $0 $1 $2 $3 $4 cumulative distributions to WTM WTM equity capital committed cost net of cumulative distributions
Slide 11: White Mountains Re: Results
11 White Mountains Re: Results 2010: 94% combined ratio - $130 million Chile quake but no U.S. hurricanes $1,079 million gross written premiums Loss reserves developed favorably by $57 million $225 million of capital returned to WTM; $1.5 billion since 2006 1Q11: 132% combined ratio; same as 1Q10 $1
Slide 12: White Mountains Re: Underwriting Performance
12 White Mountains Re: Underwriting Performance Combined ratios: 2006 2007 2008 2009 2010 1Q11 Total Calendar year 102% 94% 106% 80% 94% 132% 97% Accident year 84% 91% 98% 83% 101% 136% 93% Accident year at full cat load NGM 95% 100% 97% 91% 93% 94% 95%
Slide 13: White Mountains Re: Business Mix
$2.5 B of capital @ 13 White Mountains Re: Business Mix Net Written Premiums ($ in millions) 2008 1Q11 (ttm) Property $486 $412 Casualty 96 30 Accident & Health 189 219 Trade Credit 14 56 Aviation, Space & Other 146 144 Total $931 $861
Slide 14: White Mountains Re: 2011 Outlook
14 White Mountains Re: 2011 Outlook Property rates moving in the right direction Global cat activity & RMS v 11.0 wind model in U.S. Trade credit still strong Other lines not showing a turn Industry capital & capacity still robust Lloyd’s syndicate Sirius 1945 7/1/11 start with £66 million stamp cap
Slide 15: White Mountains Re: Sirius Combined Ratio vs. Industry
15 White Mountains Re: Sirius Combined Ratio vs. Industry
Slide 16: White Mountains Re: The Sirius Story
16 White Mountains Re: The Sirius Story Founded in 1945 by the Axel Johnson group Purchased by WTM in 2004 for $428 million By 2010 Sirius’ business had grown to $ 1.0 billion of gross written premiums (legal entity) $4.1 billion of total assets $1.9 billion of regulatory capital Branch office struc
Slide 17: Investments
Investments Long-term philosophy of investing for total return Fixed income portfolio short, safe and sound Value-oriented equity portfolio = 43% of adjusted shareholders’ equity 2010 investment results — Solid absolute returns; poor relative returns — Strong contributions from equities, currency 1Q
Slide 18: Track Record: Total Portfolio Return
18 Track Record: Total Portfolio Return 1Q11 1-year 5-years 10-years Total portfolio return NGM 2.1% 5.1% 4.4% 5.7% 10 Year CMT -0.6% 8.4% 5.0% 5.3% Conventional Wisdom Benchmark 1.2% 8.1% 5.5% 5.4% Total fixed income 1.6% 3.8% 4.9% 5.2% Total fixed income, ex-currency 0.6% 3.2% 4.5% 5.1% Barclays I
Slide 19: Foreign Currency Exposure
19 Foreign Currency Exposure $ in millions exposure, 3/31/11 currency gross net SEK 776 $ 286 $ EUR 450 240 GBP 111 97 CAD 100 6 CLP / JPY 84 - other 91 54 total 1,612 $ 683 $
Slide 20: Fixed Income Portfolio
20 Fixed Income PortfolioNGM $ in billions 100%= 100%= 100%= wgt. avg. credit quality duration 1.6 AA 2.3 AA AA 1.9 $7.5 $7.3 $8.9 16% 30% 12% 28% 19% 18% 23% 21% 33% 11% 17% 22% 16% 11% 3% 6% 2% 13% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2007 2008 1Q11 other abs, munis, and pref'd non-agency M
Slide 21: Equity Exposure
21 Equity ExposureNGM $ in billions equities / adj shrs eq 43% 36% 58% 71% $3.1 $3.1 $1.4 $1.6 $5.2 $4.3 $4.0 $3.8 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 2007 2Q08 BRK PF 2009 1Q11 common equities, convertibles, alternatives & affiliated adjusted shareholders' e
Slide 22: WM Life Re: Runoff
WM Life Re: Runoff 22 Hedging program essentially breakeven in 2010, $9 million loss in 1Q11 There have been charges for surrender assumptions $48 million in 2010, $0 in 1Q11 In recent quarters, surrenders tracking with revised assumptions Downside on surrenders is limited The risk associated with h
Slide 23: Symetra
WTM invested $195 million as lead investor in August 2004 acquisition SYA went public in January 2010 Total current value of WTM investment = $407 million $78 million of dividends $293 million common stock at adjusted book valueNGM ($237 million at market) $36 million warrants Inception to date retu
Slide 24: Consolidated Capitalization
24 Consolidated Capitalization ($ in millions) 12/31/09 12/31/10 3/31/11 3/31/11 PF* Total debt $ 1,051 $ 819 $ 819 $ 669 Noncontrolling interest - WMRe pref. shares 250 250 250 250 Noncontrolling interest - OneBeacon 351 295 300 276 Adjusted shareholders' equity NGM 3,666 3,595 3,537 4,168 Total ad
Slide 25: Capital Management
Capital Management Ended 2010 with undeployed capital of about $1.1 billion $222 million of share repurchases $201 million of debt reduction at OneBeacon Have continued capital management activities into 2011 $93 million of share repurchases $150 million debt tender at OneBeacon completed in April E
Slide 26: What to Expect
26 What to Expect Growth in adjusted book value per share Commitment to our operating principles Underwriting comes first Maintain a disciplined balance sheet Invest for total return Think like owners Capital management Opportunistic approach to the business
Slide 27: Wise Words... Benjamin Graham
27 Wise Words... Benjamin Graham “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” Benjamin Graham
Slide 28: Appendix: Reconciliation of Non-GAAP Financial Measures
29 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted book value per share to GAAP book value per share ($ millions, except per share amounts; shares in thousands) Numerator 12/31/10 3/31/11 GAAP common shareholders' equity $ 3,65
Slide 29: Appendix: Reconciliation of Non-GAAP Financial Measures
30 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation White Mountains Re's accident year combined ratio at full cat load to GAAP combined ratio 2006 2007 2008 2009 2010 1Q11 Total GAAP combined ratio 102% 94% 106% 80% 94% 132% 97% prior year
Slide 30: Appendix: Reconciliation of Non-GAAP Financial Measures
31 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - total portfolio return to GAAP return Investment Return Reconciliation - 1Q11 GAAP Adjusting Total Portfolio Return Items Return fixed income return 1.6% 0.0% [1] 1.6% equ
Slide 31: Appendix: Reconciliation of Non-GAAP Financial Measures
32 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - total portfolio return to GAAP return over 1 year, 5 year and 10 year periods GAAP Adjusting Total Portfolio Return Items Return 1 year 5.0% 0.1% [1] 5.1% 5 year 3.9% 0.5%
Slide 32: Appendix: Reconciliation of Non-GAAP Financial Measures
33 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of fixed income portfolio to GAAP fixed income & short-term investments ($ millions) 2007 2008 1Q11 Total GAAP fixed income & short-term investments $ 9,004 $ 7,725 $ 7,415 unsettled trade
Slide 33: Appendix: Reconciliation of Non-GAAP Financial Measures
34 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of equity exposure to GAAP equity investments ($ millions) 2007 2Q08 BRK PF 2009 1Q11 GAAP common, convertible and alternative investments $ 2,645 $ 2,702 $ 1,033 $ 1,256 GAAP investments
Slide 34: Appendix: Reconciliation of Non-GAAP Financial Measures
35 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investment in Symetra's common stock at adjusted book value to GAAP equity accounting value ($ millions) 1Q11 investment in Symetra common stock, at GAAP equity accounting value $ 357 e
Slide 35: Appendix: Reconciliation of Non-GAAP Financial Measures
36 Appendix: Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted shareholders' equity and total adjusted capital to GAAP common shareholders' equity ($ millions) 12/31/09 12/31/10 3/31/11 GAAP common shareholders' equity $ 3,657 $ 3,653 $ 3,
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