WHITE MOUNTAINS INSURANCE GROUP, LTD. Book value per share and adjusted book value per share decreased 5% and 4% in the second quarter of 2022 and 4% and 3% in the first six months of 2022, including dividends.
On
Comprehensive income (loss) attributable to common shareholders was
HG Global/BAM
BAM's gross written premiums and member surplus contributions (MSC) collected were
All BAM-insured bond payments due through
HG Global reported pre-tax income (loss) of
On
White Mountains reported pre-tax loss related to BAM of
BAM is a mutual insurance company that is owned by its members. BAM's results are consolidated into White Mountains's GAAP financial statements and attributed to non-controlling interests.
Ark
Ark's GAAP combined ratio was 87% and 93% in the second quarter and first six months of 2022 compared to 90% and 99% in the second quarter and first six months of 2021. Ark's adjusted combined ratio, which adds back amounts attributable to third-party capital providers, was 86% and 93% in the second quarter and first six months of 2022 compared to 84% and 96% in the second quarter and first six months of 2021. The adjusted combined ratio for the second quarter and first six months of 2022 included 11 points and 14 points of catastrophe losses compared to six points and 12 points in the second quarter and first six months of 2021. Catastrophe losses for the second quarter and first six months of 2022 included an estimate of incurred losses emanating from the conflict in
Ark reported gross written premiums of
NSM
NSM reported commission and other revenues of
Kudu
Kudu reported total revenues of
Kudu reported total revenues of
White Mountains owns 16.9 million shares of
Other Operations
White Mountains's Other Operations reported pre-tax income (loss) of
Excluding
White Mountains's Other Operations reported general and administrative expenses of
Share Repurchases
In the second quarter of 2022, White Mountains repurchased and retired 53,100 of its common shares for
In the first six months of 2021, White Mountains repurchased and retired 7,161 of its common shares for
Investments
The total consolidated portfolio return was -4.7% in the second quarter of 2022. Excluding
The total consolidated portfolio return was -4.0% in the first six months of 2022. Excluding
Additional Information
White Mountains is a
Regulation G
This earnings release includes non-GAAP financial measures that have been reconciled from their most comparable GAAP financial measures.
Adjusted book value per share is a non-GAAP financial measure which is derived by adjusting (i) the GAAP book value per share numerator and (ii) the common shares outstanding denominator, as described below.
The GAAP book value per share numerator is adjusted (i) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM surplus notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global.
Under GAAP, White Mountains is required to carry the BAM surplus notes, including accrued interest, at nominal value with no consideration for time value of money. Based on a debt service model that forecasts operating results for BAM through maturity of the surplus notes, the present value of the BAM surplus notes, including accrued interest and using an 8% discount rate, was estimated to be
The value of HG Global's unearned premium reserve, net of deferred acquisition costs, was
White Mountains believes these adjustments are useful to management and investors in analyzing the intrinsic value of HG Global, including the value of the BAM surplus notes and the value of the in-force business at HG Re, HG Global's reinsurance subsidiary.
The denominator used in the calculation of adjusted book value per share equals the number of common shares outstanding adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. Restricted common shares are earned on a straight-line basis over their vesting periods. The reconciliation of GAAP book value per share to adjusted book value per share is included on page 8.
BAM's gross written premiums and MSC from new business is a non-GAAP financial measure, which is derived by adjusting gross written premiums and MSC collected (i) to include the present value of future installment MSC not yet collected and (ii) to exclude the impact of gross written premium adjustments related to policies closed in prior periods. White Mountains believes these adjustments are useful to management and investors in evaluating the volume and pricing of new business closed during the period. The reconciliation from GAAP gross written premiums to gross written premiums and MSC from new business is included on page 17.
Ark's adjusted loss and loss adjustment expense ratio, adjusted insurance acquisition expense ratio, adjusted other underwriting expense ratio and adjusted combined ratio are non-GAAP financial measures, which are derived by adjusting the GAAP ratios to add back the impact of whole-account quota-share reinsurance arrangements attributable to third-party capital providers for Ark's Lloyd's syndicates. The impact of these reinsurance arrangements relates to years of account prior to White Mountains's transaction with Ark. White Mountains believes these adjustments are useful to management and investors in evaluating Ark's results on a fully aligned basis (i.e., 100% of the syndicates' results). The reconciliation from the GAAP ratios to the adjusted ratios is included on page 18.
NSM's EBITDA, adjusted EBITDA and pro forma adjusted EBITDA are non-GAAP financial measures.
EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax (expense) benefit, depreciation and amortization of other intangible assets from GAAP net income (loss).
Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) change in fair value of contingent consideration, (ii) non-cash equity-based compensation expense, (iii) impairments of intangible assets, (iv) loss on assets held for sale, (v) transaction expenses, (vi) investments made in the development of new business lines, (vii) restructuring expenses and (viii) legal settlements. A description of each follows:
Change in fair value of contingent consideration - Contingent consideration consists of amounts payable to the sellers of businesses purchased by NSM that are contingent on the earnings of such businesses in periods subsequent to their acquisition. Under GAAP, contingent consideration amounts are initially recorded as liabilities at fair value as part of purchase accounting, with the periodic change in the fair value of these liabilities recorded as income or an expense.
Non-cash equity-based compensation expense - Represents non-cash expenses related to NSM's management compensation emanating from the grants of equity units.
Impairments of intangible assets - Represents expense related to NSM's write-off of intangible assets. For the periods presented, the impairments related primarily to NSM's write-off of intangible assets in its
Loss on assets held for sale - Represents the loss on net assets held for sale related to the
Transaction expenses - Represents costs directly related to NSM's mergers and acquisitions activity, such as transaction-related compensation, banking, accounting and external lawyer fees, which are not capitalized and are expensed under GAAP.
Investments made in the development of new business lines - Represents the net loss related to the start-up of newly established lines of business, which NSM views as investments.
Restructuring expenses - Represents expenses associated with eliminating redundant work force and facilities that often arise as a result of NSM's post-acquisition integration strategies. For the periods presented, this adjustment relates primarily to NSM's expenses incurred in certain reorganization initiatives in the
Legal settlements - Represents amounts recognized from legal settlements.
Pro forma adjusted EBITDA is a non-GAAP financial measure that starts with adjusted EBITDA and also (i) includes the earnings (losses) of acquired businesses for the period of time over the previous 12 months that the businesses were not owned by NSM and (ii) removes the earnings (losses) for the previous 12 months related to businesses sold by NSM.
White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating NSM's performance. White Mountains also believes that pro forma adjusted EBITDA is useful to management and investors in understanding the full earnings profile of NSM's business as of the end of any 12-month period. See page 20 for the reconciliation of NSM's GAAP net income (loss) to EBITDA, adjusted EBITDA and pro forma adjusted EBITDA.
Kudu's EBITDA, adjusted EBITDA, annualized adjusted EBITDA and annualized revenue are non-GAAP financial measures.
EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax (expense) benefit, depreciation and amortization of other intangible assets from GAAP net income (loss).
Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) net realized and unrealized investment gains (losses) on Kudu's revenue and earnings participation contracts, (ii) non-cash equity-based compensation expense and (iii) transaction expenses. A description of each adjustment follows:
Net realized and unrealized investment gains (losses) - Represents net unrealized investment gains and losses recorded on Kudu's revenue and earnings participation contracts, which are recorded at fair value under GAAP, and realized investment gains and losses from participation contracts sold during the period.
Non-cash equity-based compensation expense - Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.
Transaction expenses - Represents costs directly related to Kudu's mergers and acquisitions activity, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.
Annualized adjusted EBITDA is a non-GAAP financial measure that (i) annualizes partial year revenues related to Kudu's revenue and earnings participation contracts acquired during the previous 12-month period and (ii) removes revenues related to revenue and earnings participation contracts sold during the previous 12-month period.
Annualized revenue is a non-GAAP financial measure that adds the adjustments for annualized adjusted EBITDA to GAAP net investment income revenue.
White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating Kudu's performance. White Mountains also believes that annualized adjusted EBITDA is useful to management and investors in understanding the full earnings profile of Kudu's business as of the end of any 12-month period. See page 21 for the reconciliation of Kudu's GAAP net income (loss) to EBITDA, adjusted EBITDA and annualized adjusted EBITDA.
Total consolidated portfolio return excluding
Three Months Ended
Six Months Ended
2022
2021
2022
2021
Total consolidated portfolio return
(4.7) %
5.0 %
(4.0) %
4.7 %
Remove
2.6 %
(2.6) %
2.1 %
(1.6) %
Total consolidated portfolio return
excluding
(2.1) %
2.4 %
(1.9) %
3.1 %
Three Months Ended
Total equity portfolio return
(7.2) %
Remove
5.4 %
Total equity portfolio return
excluding
(1.8) %
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This earnings release 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, included or referenced in this release which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words 'could', 'will', 'believe', 'intend', 'expect', 'anticipate', 'project', 'estimate', 'predict' and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains's:
change in book value per share, adjusted book value per share or return on equity;
business strategy;
financial and operating targets or plans;
incurred loss and loss adjustment expenses and the adequacy of its loss and loss adjustment expense reserves and related reinsurance;
projections of revenues, income (or loss), earnings (or loss) per share, EBITDA, adjusted EBITDA, dividends, market share or other financial forecasts of White Mountains or its businesses;
expansion and growth of its business and operations; and
future capital expenditures.
These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to risks and uncertainties that could cause actual results to differ materially from expectations, including:
the risks that are described from time to time in
claims arising from catastrophic events, such as hurricanes, earthquakes, floods, fires, severe winter weather, public health crises, terrorist attacks, explosions, infrastructure failures, cyber-attacks or armed conflicts;
recorded loss reserves subsequently proving to have been inadequate;
the market value of White Mountains's investment in
the trends and uncertainties from the COVID-19 pandemic, including judicial interpretations on the extent of insurance coverage provided by insurers for COVID-19 pandemic related claims;
business opportunities (or lack thereof) that may be presented to it and pursued;
actions taken by ratings agencies, such as financial strength or credit ratings downgrades or placing ratings on negative watch;
the continued availability of capital and financing;
deterioration of general economic, market or business conditions, including due to outbreaks of contagious disease (including the COVID-19 pandemic) and corresponding mitigation efforts;
competitive forces, including the conduct of other insurers;
changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its customers; and
other factors, most of which are beyond White Mountains's control.
Consequently, all of the forward-looking statements made in this earnings release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.
CONTACT:
(603) 640-2212
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SOURCE
Hamilton HM 11,
441-278-3160
603-640-2200
617-725-7122
203-458-5823
info@whitemountains.com
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