White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Day (May 2009)
41 slides from White Mountains Insurance's investor day presentation, May 20, 2009
Slide 1: Annual Investor Meeting May 20, 2009
White Mountains Insurance Group, Ltd. Annual Investor Meeting May 20, 2009
Slide 2: Forward-Looking Statements
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 stateme
Slide 3: Financial Highlights
Financial Highlights 3 ($ millions, except per share values) 2006 2007 2008 1Q09 Adjusted book value per shareNGM $409 $447 $353 $352 - growth, including dividends 21% 11% -20% 0% OneBeacon growth in ABVPSNGM, including dividends 17% 16% -22% 3% OneBeacon GAAP combined ratio 96% 93% 95% 94% WMRe GAA
Slide 4: Our Track Record
4 $0 $100 $200 $300 $400 $500 $600 $700 1985 1990 1995 2000 2005 Market Value Per Share Adjusted Book Value Per Share 1Q09 Our Track Record White Mountains Returns From IPO in 1985 Market Value Per Share: 13% annualized, including dividends Adjusted Book Value Per ShareNGM: 15% annualized, including
Slide 5: 2008 – Bad News
2008 – Bad News Undeployed Capital: - Equity Losses - Berkshire Exchange WM Life Re 5
Slide 6: Equity Asset Allocation
Equity Asset Allocation Equity Asset Allocation 6 * - Excludes the unrealized loss on Symetra’s fixed maturity portfolio $1.6 $3.1 $1.3 * $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $- 80% 70% 60% 50% 40% 30% 20% 10% 0% % of Adjusted Shareholder’s Equity NGM Equity Investments ($ billions) Dec 07 Jun 08 Dec
Slide 7: WM Life Re – Runoff Business Description
WM Life Re – Runoff Business Description Two blocks of Japanese variable annuity business One counterparty Guaranty = return of initial deposit at death or maturity Ten year policies Policies have declining surrender charges though year seven Average remaining life of policies is now seven years $2.
Slide 8: WM Life Re – Results
WM Life Re – Results 2008 net loss of $188 million - $181 million loss September through December - Of full year net loss: • $93 million from model and assumption changes • $95 million principally from hedging losses 1Q09 net loss of $32 million - $38 million loss in January & February - Principally
Slide 9: WM Life Re – Actions Taken and Looking Forward
WM Life Re – Actions Taken and Looking Forward Increased and improved hedging - Shifted from Japanese bond futures to swaps - Tightened equity and fx hedging bands - Volatility coverage increased from 60% to 70% - Improved fund mapping - Enhanced trading coverage Downside risk estimates - Surrenders
Slide 10: 2008 – Good News
2008 – Good News Safety and soundness of fixed income portfolio “Best soft market execution I’ve experienced”: - OneBeacon’s underwriting profitability and growth - Continued profitability at WMRe Sirius; good start in Bermuda; good underwriting at WMRe America since 2003 - Improved loss ratio but n
Slide 11: 2009 – So Far
2009 – So Far Decent investment returns Good underwriting - OneBeacon’s continued underwriting profitability and growth - Good underwriting results at WMRe - Improved combined ratio at Esurance but no growth Losses at WM Life Re but recent stability Foreign exchange 11
Slide 12: OneBeacon - Historical Results
12 OneBeacon - Historical Results Net Written Premium ($ millions) GAAP Combined Ratio $2,121 $1,958 $1,864 $1,963 $426 $469 $0 $500 $1,000 $1,500 $2,000 $2,500 2005 2006 2007 2008 1Q08 1Q09 98% 96% 93% 95% 100% 94% 70% 75% 80% 85% 90% 95% 100% 105% 110% 2005 2006 2007 2008 1Q08 1Q09
Slide 13: OneBeacon – 2008 Results
13 OneBeacon – 2008 Results 22% drop in ABVPS NGM due to equity losses 95% combined ratio reflecting strong underwriting results from all businesses Solid loss reserve position Ground up study affirmed A&E reserves were well within NICO cover $2 billion net written premiums, a 5% increase driven by
Slide 14: OneBeacon – 2009 Outlook
14 OneBeacon – 2009 Outlook Growth in BVPS of 3% in 1Q09 94% combined ratio in 1Q09, 6 pts better than 1Q08 $469 million net written premiums in 1Q09 Disciplined underwriting in a soft market Reduced risk in investment portfolio Reduced exposure to catastrophes via quota share
Slide 15: White Mountains Re - Organization
16 $2.5 Billion of Capital @ March 31, 2009 $1.8 Billion of 2008 Gross Legal Entity Premiums Global Diversification White Mountains Re - Organization Property $485 52% United States $568 61% Accident & Health 189 20% Casualty 96 10% Europe 303 33% Aviation 55 6% Other 106 12% Other 60 6% Total $931
Slide 16: White Mountains Re - Historical Results
17 White Mountains Re - Historical Results Net Written Premium (ttm) ($ millions) $1,246 $1,304 $1,290 $1,096 $931 $880 $1,500 $1,250 $1,000 $750 $500 $250 $0 2004 2005 2006 2007 2008 1Q09 Casualty All Other
Slide 17: White Mountains Re - Historical Results
18 White Mountains Re - Historical Results GAAP Combined Ratio 130% 120% 110% 100% 90% 80% 70% 2004 2005 2006 2007 2008 1Q09
Slide 18: White Mountains Re - 2009 Outlook
19 White Mountains Re - 2009 Outlook First quarter 80% combined ratio - Low catastrophes Catastrophe exposures in line with capital Property, A&H and aviation improving Stepped back from trade credit US casualty still unappealing Further improvements – capital & expense efficiency
Slide 19: Esurance - Historical Results
20 Esurance - Historical Results Controlled Premium NGM (ttm) ($ millions) Policies In Force (000’s) $0 $250 $500 $750 $1,000 $1,250 2005 2006 2007 2008 1Q09 0 200 400 600 800 2005 2006 2007 2008 1Q09 Esurance Answer Financial $1,160 745 759 $803 $600 $352 485 373 212 $1,145
Slide 20: Esurance Direct - Online Market Presence
21 Esurance Direct - Online Market Presence % of Online Quotes Submitted* *Sources: Quotes submitted from ComScore Online Auto Insurance Reports 2007 & 2008; awareness as of December 2007 & 2008 from Abacus Associates 42% 36% 14% 11% 11% 45% 35% 11% 13% 10% % Named for Online Auto Insurance* 32% 31%
Slide 21: Esurance - Historical Results
22 Esurance - Historical Results GAAP Combined Ratio Economic Combined Ratio NGM 0% 20% 40% 60% 80% 100% 120% 140% 2005 2006 2007 2008 1Q09 109% 108% 116% Loss + LAE Other Underwriting Acquisition 0% 20% 40% 60% 80% 100% 120% 140% 2005 2006 2007 2008 1Q09 95% 97% 104% 102% 106% 103% 104%
Slide 22: Answer Financial
Answer Financial Large online/call center insurance agency Represents 15 top-rated carriers “Choice model” allows customers a fast and easy way to compare quotes and purchase policies Growing revenues and operating profit Benefits from the Esurance/Answer Financial relationship: - Monetize traffic f
Slide 23: Consolidated Investments – Pre-tax Total Return
25 Consolidated Investments – Pre-tax Total Return tax Total Return NGM Cumulative (in percent) 2006 2007 2008 1Q09 Annualized Fixed income 6.5 7.3 (3.7) 1.0 5.1 Short term investments 5.0 5.7 1.0 (0.3) 2.7 Common stock 20.1 8.8 (31.1) (4.3) 8.2 Other investments 14.5 19.3 (26.6) (2.4) 8.0 Pension 1
Slide 24: Fixed Income Portfolio Composition
Fixed Income Portfolio Composition Fixed Income Portfolio Composition The current consolidated fixed income portfolio is highly rated with duration just over 2 years and AA average rating 26 Structured securities Corporate bonds Governments Short-term $8.7 $7.4 $7.4 ($ billions) 100% 80% 60% 40% 20%
Slide 25: Fixed Income Portfolio Composition
Fixed Income Portfolio Composition The current structured product portfolio is highly rated with a AAA average rating 27 $2.9 Other ABS GNMA, FNMA, FHLMC CMBS Non-agency RMBS Structured Securities Portfolio ($ billions) 100% 80% 60% 40% 20% 0% 12/31/07 12/31/08 3/31/09 15% 35% 11% 39% 4% 59% 19% 18%
Slide 26: Consolidated Capitalization
28 Consolidated Capitalization ($ millions) 12/31/06 12/31/07 12/31/08 3/31/09 Total debt 1,107 $ 1,193 $ 1,362 $ 1,349 $ Noncontrolling int. - WMRe Group Pref Shares - 250 250 250 Noncontrolling interest - OneBeacon 491 517 284 287 Adjusted common equity NGM 4,459 4,719 3,096 3,085 Total adjusted c
Slide 27: Symetra
Formerly Safeco Life & Investments Acquired August 2, 2004 - WTM & BRK each with 24% fully converted ownership 11% annualized growth in adjusted book value per share NGM, including dividends, since closing Business performing well – with record sales of over $2 billion, 2008 adjusted book value incr
Slide 28: Compensation – WTM Corporate and Investment Staff
Compensation – WTM Corporate and Investment Staff 2008 losses likely zeroed out 3 LTIP cycles Next LTIP payout not likely until early 2012 - Loss of natural retention incentives No retroactive fixes No 2008 bonus for WTM CEO or CFO - Paid bonuses to deserving staff 2009 grants split between performa
Slide 29: What to Expect
31 What to Expect Growth in adjusted book value per share Preserve capital/regain financial flexibility - Stabilize/exit WM Life Re business Commitment to our operating principles - Underwriting comes first - Maintain a disciplined balance sheet - Invest for total return (on hold) - Think like owner
Slide 30: Wise Words
32 Wise Words Benjamin Graham “In the short run the market is a voting machine; in the long run it is a weighing machine.”
Slide 31: Appendix – Non-GAAP Financial Measures
33 Appendix – Non-GAAP Financial Measures 1. Adjusted book value per share is a non-GAAP measure which is derived by expanding the GAAP book value per share calculation to include the effects of assumed conversion of all convertible securities and to exclude net unrealized gains and losses from Syme
Slide 32: Appendix – Reconciliation of Non-GAAP Financial Measures
34 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted book value per share to GAAP book value per share ($ millions, except per share amounts; shares in thousands) Numerator 12/31/05 12/31/06 12/31/07 12/31/08 3/31/09 GAAP common
Slide 33: Appendix – Reconciliation of Non-GAAP Financial Measures
35 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of OneBeacon's adjusted book value per share to GAAP book value per share ($ millions, except per share amounts; shares in millions) Numerator Common shareholders' equity $ 1,560 $ 1,777
Slide 34: Appendix – Reconciliation of Non-GAAP Financial Measures
36 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted common equity and adjusted shareholders’ equity to GAAP common shareholders’ equity ($ millions) 12/31/06 12/31/07 6/30/2008 PF 12/31/08 3/31/09 GAAP common shareholders’ equi
Slide 35: Appendix – Reconciliation of Non-GAAP Financial Measures
37 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Esurance/AFI controlled premiums to GAAP gross written premium ($ millions) 12/31/06 12/31/07 12/31/08 3/31/09 (ttm) GAAP gross written premium - Esurance $ 600 $ 803 $ 826 $ 809 AFI c
Slide 36: Appendix – Reconciliation of Non-GAAP Financial Measures
38 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Esurance’s economic combined ratio to GAAP combined ratio 2005 2006 2007 2008 1Q09 GAAP combined ratio 109% 108% 116% 106% 103% customer acquisition impact [1] -14% -11% -12% -4% 1% ec
Slide 37: Appendix – Reconciliation of Non-GAAP Financial Measures
39 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - pretax total return to GAAP return Investment Return Reconciliation - 2006 total return before pension 8.7% effect of pension plan return [1] 0.4% investments - pretax to
Slide 38: Appendix – Reconciliation of Non-GAAP Financial Measures
40 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - pretax total return to GAAP return Investment Return Reconciliation - 2007 total return before pension 8.1% effect of pension plan return [1] 0.2% investments - pretax to
Slide 39: Appendix – Reconciliation of Non-GAAP Financial Measures
41 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - pretax total return to GAAP return Investment Return Reconciliation - 2008 total return before pension -9.5% effect of pension plan return [1] 0.0% investments - pretax t
Slide 40: Appendix – Reconciliation of Non-GAAP Financial Measures
42 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of investments - pretax total return to GAAP return Investment Return Reconciliation - 1Q09 total return before pension 0.0% effect of pension plan return [1] -0.1% investments - pretax t
Slide 41: Appendix – Reconciliation of Non-GAAP Financial Measures
43 Appendix – Reconciliation of Non-GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Symetra’s adjusted common equity to GAAP common shareholders’ equity and calculation of adjusted book value per share ($ millions, except per share amounts; shares in millions) 12/31/0
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