White Mountains Updates Earnings

White Mountains Insurance Group, Ltd. has issued its 2005 earnings report from its Bermuda head office. Although the company stressed that its fully converted tangible book value per share rose 2 percent for the year to $343, its adjusted comprehensive net income for the full year was $68 million compared to $539 million in 2004.

White Mountains indicated that there was an “adjusted comprehensive net loss for the [fourth] quarter of $11 million, compared to adjusted comprehensive net income of $233 million in the fourth quarter of the prior year.”

The bulletin noted that the following after-tax items impacted the fourth quarter of 2005:
— $91 million in losses from hurricanes Katrina ($44 million), Rita ($10
million), and Wilma ($37 million). For Katrina and Rita, these losses
are in addition to the amounts reported in the third quarter, when the
storms hit. In the case of Wilma, the storm occurred in the fourth
quarter.
— $52 million decrease in the value of the Company’s investment in
Montpelier Re, net of dividends received.
— $35 million gain recognized from the settlement of OneBeacon’s retiree
benefit plan through the funding of an independent trust to provide
benefits for covered participants.
 $36 million net reserve increase at OneBeacon.

CEO Steve Fass commented: “Due to the hurricane losses, primarily at White Mountains Re, which totaled $288 million after-tax for the year, and the $104 million after-tax decrease in the value of our Montpelier Re holdings for the year, our return in 2005 was well below our target. These losses mask the very strong underwriting results produced by OneBeacon and Esurance’s good year with premium growth of 75 percent. As we look to 2006, the hurricanes have already had a significant impact on reinsurance pricing and capacity. Property rates in cat-exposed areas have increased substantially and rates in other locales are also rising, though less dramatically. We are well positioned to capitalize on these trends due to our strong financial condition, large capacity and broad reinsurance platform.”

The bulletin said: “Net income for the year was $269 million, compared to $419 million in the prior year. Net income for the quarter was $12 million, compared to $165 million in the same quarter of 2004.”

OneBeacon, the group’s primary U.S. operation reported pretax income for 2005 of $435 million, compared to $391 million in 2004. The bulletin noted: “GAAP combined ratio was 98 percent, versus 99 percent in 2004. For the fourth quarter of 2005, pretax income was $38 million with a GAAP combined ratio of 94 percent. For the comparable period of 2004, pretax income was $119 million with a GAAP combined ratio of 97 percent. The GAAP combined ratio benefited by 3 points for the year and 11 points for the quarter from the funding of the retiree benefit trust and was negatively impacted by the same amounts from the net reserve increase in OneBeacon’s runoff operations. These actions, together with a rebalancing of reserves between OneBeacon’s ongoing and runoff operations, had the effect of lowering the combined ratios for OneBeacon’s ongoing business segments.”

The full report can be obtained on the Group’s Website at: http://www.whitemountains.com.