White Mountains Insurance Group, Ltd. · NYSE:WTM
White Mountains Insurance — Investor Day (June 2008)
43 slides from White Mountains Insurance's investor day presentation, Jun 17, 2008
Slide 1: Annual Investor Meeting
White Mountains Insurance Group, Ltd. White Mountains Insurance Group, Ltd. Annual Investor Meeting Annual Investor Meeting June 17, 2008
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements Certain information and statements included in this presentation are not historical facts but are forwardlooking statements. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remar
Slide 3: Financial Highlights
3 Financial Highlights Financial Highlights ($ in millions, except per share values) 2006 2007 1Q08 Adjusted comprehensive net incomeNGM $734 $481 $0 Fully diluted tangible book value per shareNGM $406 $444 $443 - growth, including dividends 21% 12% 0% OneBeacon growth in ABVPSNGM, including dividen
Slide 4: Our Track Record
4 $0 $100 $200 $300 $400 $500 $600 $700 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q08 Market Value Per Share Fully Diluted Tangible Book Value Per Share Our Track Record Our Track Record White Mountains Returns From IPO in 198
Slide 5: Recent Developments
5 Recent Developments Recent Developments Increase of $60 million ($33 million a/t) to WMRe’s reserves in 2Q08 - $140 million increase in WMRe America (Folksamerica) reserves - Partially offset by $80 million release at WMRe Sirius - Deep dive into reserves to put an end to poor reserving track reco
Slide 6: WMRe – Casualty Reserve Review
6 WMRe WMRe – Casualty Reserve Review Casualty Reserve Review In 1Q08, we received claims reports indicating substantial increase in claims activity from 2000-01 construction defect (“CD”) exposed accounts Triggered detailed review of all 3 CD exposures – all written 2001/prior - Result was 1Q08 net
Slide 7: Recent Developments
7 Recent Developments Recent Developments Increase of $60 million ($33 million a/t) to WMRe’s reserves in 2Q08 - $140 million increase in WMRe America (Folksamerica) reserves - Partially offset by $80 million release at WMRe Sirius - Deep dive into reserves to put an end to poor reserving track reco
Slide 8: OneBeacon (75%) ($1.9 billion of regulatory capital) Specialty / Commercial Personal / Reciprocals Esurance
8 OneBeacon (75%) ($1.9 billion of regulatory capital) Specialty / Commercial Personal / Reciprocals Esurance ($0.4 billion of capital, mostly inside WMRe) Online personal auto Referral fees Answer Financial Galileo Weather White Mountains Re ($3.0 billion of regulatory capital, including capital su
Slide 9: Cumulative Growth in Adjusted Book Value per Share
9 $18.72 $19.14 $18.85 $17.76 $17.20 $16.18 $18.21 22.2% 23.5% 20.4% 11.1% 6.3% 15.1% $15 $16 $17 $18 $19 $20 09/30/06 (Pro-Forma) 12/31/2006 3/31/2007 6/30/2007 9/30/2007 12/31/2007 3/31/2008 0% 5% 10% 15% 20% 25% ABVPS Cumulative ABVPS Growth Cumulative Growth in Adjusted Book Value per Share Cumu
Slide 10: OneBeacon Segment Results
10 OneBeacon Segment Results OneBeacon Segment Results Net Written Premium ($ millions) GAAP Combined Ratio $2,459 $2,121 $1,958 $1,864 $1,973 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2003 2004 2005 2006 2007 98% 99% 98% 96% 93% 70% 75% 80% 85% 90% 95% 100% 105% 110% 2003 2004 2005 2006 2007
Slide 11: OneBeacon
11 OneBeacon OneBeacon Bermuda-based specialty property and casualty insurer - Track record of growing profitable specialty and segmented commercial businesses - Northeast personal lines business Underwriting profits for each of the past five years Solid growth in adjusted book value per shareNGM ,
Slide 12: White Mountains Re Segment Results
12 White Mountains Re White Mountains Re Segment Results Segment Results Net Written Premium ($ millions) GAAP Combined Ratio $886 $1,246 $1,304 $1,290 $1,096 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2003 2004 2005 2006 2007 96% 104% 118% 102% 94% 70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120%
Slide 13: White Mountains Re - Organization
13 White Mountains Re White Mountains Re - Organization Organization Top 20 global reinsurer Geographic & business line diversification $3.0B of regulatory capital $1.8B of legal entity gross premiums (includes Esurance) $1.3B of segment gross premiums White Mountains Re Bermuda $0.9B of regulatory
Slide 14: White Mountains Re – 2007 Results & Progress
14 White Mountains Re White Mountains Re – 2007 Results & Progress 2007 Results & Progress Underwriting discipline maintained in a softening market Gross written premiums declined 20% from 2006 94% GAAP combined ratio Restructured capital ($ millions): Debt & preferred issuance WMRe America distribu
Slide 15: White Mountains Re – Outlook
15 White Mountains Re White Mountains Re – Outlook Outlook Strong team at WMRe America WMRe Sirius & WMRe Bermuda remain in good hands - Bermuda began writing business directly in 2Q08 The balance sheet now meets our principles - keep it there Maintain underwriting discipline - Forecast gross premiu
Slide 16: Esurance Segment Results
16 Esurance Segment Results Esurance Segment Results Direct Written Premium ($ millions) Policies In Force (000’s) $116 $201 $352 $600 $803 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2003 2004 2005 2006 2007 119 212 373 485 74 0 50 100 150 200 250 300 350 400 450 500 2003 2004 2005 2006 2007
Slide 17: Esurance Segment Results
17 Esurance Segment Results Esurance Segment Results GAAP Combined Ratio Economic Combined RatioNGM 81% 69% 67% 73% 82% 20% 16% 12% 9% 7% 19% 17% 30% 26% 27% 0% 20% 40% 60% 80% 100% 120% 140% 2003 2004 2005 2006 2007 120% 102% 109% 108% Loss + LAE Other Underwriting Acquisition 69% 67% 73% 82% 18% 1
Slide 18: Esurance
18 Esurance Esurance Online personal auto insurance company 3rd largest provider of online personal auto quotes 30th largest U.S. personal auto insurance company Writing business in 28 states (representing 85% of the U.S. personal auto insurance market) Advertising spend: - 2005 - $60 million - 2006
Slide 19: Esurance
19 Esurance Esurance 25% 14% 7% 6% 2% 27% % of Online Quotes Submitted* % of Online Quotes Submitted* *Sources: Quotes submitted as of December 2007 from ComScore; awareness as of May 2008 from Abacus 39% 35% 18% 12% 11% Online Shoppers % Named for Online Auto Insurance* % Named for Online Auto Insu
Slide 20: Answer Financial
20 Answer Financial Answer Financial National insurance agency selling online and over the phone Sells personal auto, motorcycle, homeowners, condo and renters Offers comparative quotes from 15 auto insurers, including Travelers Progressive Hartford AIG Safeco Esurance Focused on distribution throug
Slide 21: Answer Financial, continued
21 Answer Financial, continued Answer Financial, continued 69% White Mountains ownership Transaction structure - $72 million enterprise value • Large policyholder base • Sophisticated technology platform • Preserved use of significant net operating losses Optimize Esurance marketing spend
Slide 22: White Mountains Financial Services
22 White Mountains Financial Services White Mountains Financial Services We actively seek value creating transactions and/or businesses - Activity high; hit rate low. Answer Financial, Berkshire Exchange. - Galileo Weather Risk Management • Heating/cooling degree days; precipitation; sunshine hours;
Slide 23: Consolidated Investments – Pre-tax Total Return
23 Consolidated Investments Consolidated Investments – Pre Pre-tax Total tax Total Return ReturnNGM NGM Investments – Pre-tax Total ReturnNGM 2003-1Q08 Cumulative 2007 1Q08 Annualized Fixed income 7.3% 2.3% 5.2% Short term investments 5.7% 1.0% 3.1% Common stock 8.8% -3.8% 15.5% Other investments 19
Slide 24: Investments
24 Investments Investments Asset allocation - 24% of investments in equities = 58% of shareholders’ equity - 76% of investments in fixed income • AA+ quality • 2 year duration Currency exposure - Regulatory - $1.7 billion (SEK, EUR, GBP) - Discretionary - $0.3 billion (GBP, AUD) Fair value measureme
Slide 25: Investments, continued
25 Investments, continued Investments, continued Going forward - Low real rate environment / outsized risks - Modest return potential in bonds; better risk vs. reward in stocks - Stick to our knitting – keep risks low, avoid losses in bonds, and find good value stocks
Slide 26: Capital Activities
26 Capital Activities Capital Activities 2007 - WMRe - $400 million senior notes (March) - WMRe - $250 million preference shares (May) - WTM - $475 million credit facility (June) - WTM – buyback of 291,000 shares (4Q) 2008 - OneBeacon - $2 per share special dividend, $146 million to WTM (March) -WTM
Slide 27: Berkshire Exchange
27 Berkshire Exchange Berkshire Exchange In March, we entered into an exchange agreement with Berkshire Hathaway Berkshire Hathaway will exchange all or substantially all of its 1.7 million shares of WTM at $485 per share for: - Two runoff businesses with GAAP book value of $58 million - $751 millio
Slide 28: Consolidated Capitalization
28 Consolidated Capitalization Consolidated Capitalization [1] Pro forma for repayment of $375 million of debt and the Berkshire Exchange Pro Forma [1] ($ in millions) 12/31/07 3/31/08 3/31/08 Total debt 1,193 $ 1,666 $ 1,291 $ Preferred stock - White Mountains Re 250 250 250 Minority interest - One
Slide 29: Symetra
29 Symetra Symetra Formerly Safeco Life & Investments Acquired August 2, 2004 - WTM & BRK each with 24% fully converted ownership 13% annualized growth in adjusted book value per shareNGM, including dividends, since closing Withdrew IPO in late 2007 due to poor equity market environment Business doi
Slide 30: What to Expect
30 What to Expect What to Expect Growth in tangible book value per share Commitment to our operating principles - underwriting comes first - maintain a disciplined balance sheet - invest for total return - think like owners Prudent capital deployment and active capital management Opportunistic appro
Slide 31: Wise Words
31 Wise Words Wise Words Benjamin Graham “In the short run the market is a voting machine; in the long run it is a weighing machine.” Benjamin Graham
Slide 32: Annual Investor Meeting
White Mountains Insurance Group, Ltd. White Mountains Insurance Group, Ltd. Annual Investor Meeting Annual Investor Meeting June 17, 2008
Slide 33: Appendix – Non-GAAP Financial Measures
33 Appendix Appendix – Non Non-GAAP Financial Measures GAAP Financial Measures 1. Adjusted comprehensive net income is a non-GAAP measure that excludes the change in net unrealized gains from Symetra’s fixed maturity portfolio from comprehensive net income. GAAP requires these assets to be marked-to
Slide 34: Appendix – Reconciliation of Non-GAAP Financial Measures
34 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted comprehensive net income to GAAP comprehensive net income ($ in millions) 2006 2007 1Q08 GAAP comprehensive net income (
Slide 35: Appendix – Reconciliation of Non-GAAP Financial Measures
35 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of fully diluted tangible book value per share to GAAP book value per share ($ in millions, except per share amounts; shares in thou
Slide 36: Appendix – Reconciliation of Non-GAAP Financial Measures
36 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of OneBeacon's adjusted book value per share to GAAP book value per share ($ in millions, except per share amounts, shares in millio
Slide 37: Appendix – Reconciliation of Non-GAAP Financial Measures
37 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of adjusted common equity to GAAP common shareholders' equity ($ in millions) Pro Forma 12/31/07 3/31/08 3/31/08 [1] GAAP common sha
Slide 38: Appendix – Reconciliation of Non-GAAP Financial Measures
38 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Symetra's adjusted common equity to GAAP common shareholders' equity ($ in millions, except per share amounts; shares in millions
Slide 39: Appendix – Reconciliation of Non-GAAP Financial Measures
39 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of total tangible capital to GAAP capital ($ in millions) Pro Forma 12/31/07 3/31/08 3/31/08 [1] GAAP common shareholders' equity $
Slide 40: Appendix – Reconciliation of Non-GAAP Financial Measures
40 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures Investment Return Reconciliation - 2006 total return before pension 8.7% effect of pension plan return [1] 0.4% investments - pretax total return 9.1% Pre-tax Adjusting GAAP Total Retur
Slide 41: Appendix – Reconciliation of Non-GAAP Financial Measures
41 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures Investment Return Reconciliation - 2007 total return before pension 8.1% effect of pension plan return [1] 0.2% investments - pretax total return 8.3% Pre-tax Adjusting GAAP Total Retur
Slide 42: Appendix – Reconciliation of Non-GAAP Financial Measures
42 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures Investment Return Reconciliation - 1Q 08 total return before pension 0.8% effect of pension plan return [1] 0.0% investments - pretax total return 0.8% Pre-tax Adjusting GAAP Total Retu
Slide 43: Appendix – Reconciliation of Non-GAAP Financial Measures
43 Appendix Appendix – Reconciliation of Non Reconciliation of Non-GAAP Financial Measures GAAP Financial Measures White Mountains Insurance Group, Ltd. Reconciliation of Esurance's economic combined ratio to GAAP combined ratio 2003 2004 2005 2006 2007 GAAP combined ratio 120% 102% 109% 108% 116% c
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