White Mountains Reports Fourth Quarter Results
White Mountains Insurance Group (NYSE: WTM) reported robust financial results for the fourth quarter and full year 2020. Book value per share reached $1,259, up 15% QoQ and 23% YoY. Adjusted book value was $1,264. Comprehensive income attributable to shareholders was $495 million for the fourth quarter, significantly up from $65 million in Q4 2019. The successful IPO of MediaAlpha contributed $391 million in net investment income. BAM and NSM also reported growth in premiums and earnings metrics. The total return on invested assets was 14.3% in Q4 2020.
- Book value per share increased 15% QoQ and 23% YoY.
- Adjusted book value per share rose 24% YoY.
- Comprehensive income attributable to common shareholders reached $495 million in Q4 2020.
- MediaAlpha IPO contributed $391 million in net investment income.
- BAM wrote $38 million in premiums, a record high for the company.
- NSM reported a pre-tax loss of $6 million in Q4 2020, unchanged from Q4 2019.
- General and administrative expenses increased to $55 million for Q4 2020, up from $35 million in Q4 2019.
- Pre-tax losses related to BAM were $15 million for Q4 2020 compared to $18 million in Q4 2019.
HAMILTON, Bermuda, Feb. 5, 2021 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of
Manning Rountree, CEO, commented, "We had a strong fourth quarter to cap off an outstanding year. MediaAlpha completed a successful IPO, and investors drove its value higher during the quarter. BAM wrote
Comprehensive income attributable to common shareholders was
MediaAlpha
On October 30, 2020, MediaAlpha completed the MediaAlpha IPO. In the offering, White Mountains sold 3,609,894 shares and received total proceeds of
HG Global/BAM
BAM's gross written premiums and member surplus contributions (MSC) collected were
Seán McCarthy, CEO of BAM, said, "BAM completed a record year for both par insured and total premiums and MSC, driven by growing investor utilization of insurance, particularly following the period of market volatility that accompanied the spread of the COVID-19 pandemic in the Spring. In 2020,
The COVID-19 pandemic is negatively impacting the finances of municipalities to varying degrees, and, over time, financial stress could emerge. To date, BAM's portfolio continues to perform as expected; all BAM-insured bond payments due through February 1 have been made by insureds. BAM continues to monitor the finances of its members and to work proactively with its members to prepare for any pandemic-related revenue challenges.
HG Global reported pre-tax income of
In December 2020, BAM made a
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.
NSM
In the fourth quarter of 2020, NSM reported pre-tax loss of
Geof McKernan, CEO of NSM, said, "NSM had a good fourth quarter to close out a solid year. Trailing 12 months pro forma controlled premiums finished the year at
Kudu
Kudu reported pre-tax income of
In the fourth quarter of 2020, Kudu deployed
Rob Jakacki, CEO of Kudu, said, "Amid the challenging global environment, Kudu was active in 2020, closing five transactions, including three in the fourth quarter. Fourth-quarter results showed continued growth in profitability, with Kudu's portfolio capitalizing on strong markets and benefiting from year-end incentive fees. During the quarter, we were delighted to complete our first transaction in Australia, an investment in Channel Capital, a multi-affiliate boutique platform, and an investment in Ranger Investments, a Texas-based firm focused on U.S. small and micro-cap growth strategies."
Other Operations
White Mountains's Other Operations segment reported pre-tax income of
General and administrative expenses were
Ark
On October 1, 2020, White Mountains entered into a subscription and purchase agreement (SPA) with Ark Insurance Holdings Limited and certain selling shareholders providing for the acquisition by White Mountains of a controlling interest in Ark. In accordance with the SPA, in the fourth quarter of 2020 White Mountains pre-funded/placed in escrow a total of
Share Repurchases
In the year ended December 31, 2020, White Mountains repurchased and retired 99,087 of its common shares for
Investments
The total return on invested assets was
The total return on invested assets was
The total return on invested assets was
The total return on invested assets was
Mark Plourde, Managing Director of White Mountains Advisors, said, "Excluding MediaAlpha, the total portfolio was up
Additional Information
White Mountains is a Bermuda-domiciled financial services holding company traded on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol WTM. Additional financial information and other items of interest are available at the company's website located at www.whitemountains.com. White Mountains expects to file its Form 10-K on or before March 1, 2021 with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.
CONTACT: | Todd Pozefsky |
(203) 458-5807 |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
(millions) | ||||||||||||
(Unaudited) | ||||||||||||
December 31, | September 30, | December 31, | ||||||||||
Assets | ||||||||||||
Financial Guarantee (HG Global/BAM) | ||||||||||||
Fixed maturity investments | $ | 859.5 | $ | 831.8 | $ | 799.3 | ||||||
Short-term investments | 60.4 | 56.1 | 46.3 | |||||||||
Total investments | 919.9 | 887.9 | 845.6 | |||||||||
Cash | 42.8 | 49.9 | 24.2 | |||||||||
Insurance premiums receivable | 6.9 | 7.2 | 6.7 | |||||||||
Deferred acquisition costs | 27.8 | 26.1 | 22.1 | |||||||||
Accrued investment income | 5.0 | 5.2 | 5.4 | |||||||||
Accounts receivable on unsettled investment sales | — | — | 3.9 | |||||||||
Other assets | 15.4 | 15.0 | 16.1 | |||||||||
Total Financial Guarantee assets | 1,017.8 | 991.3 | 924.0 | |||||||||
Specialty Insurance Distribution (NSM) | ||||||||||||
Cash (restricted | 126.5 | 125.0 | 89.7 | |||||||||
Premium and commission receivable | 76.7 | 67.7 | 70.8 | |||||||||
Goodwill and other intangible assets | 736.8 | 730.3 | 623.0 | |||||||||
Other assets | 59.6 | 57.2 | 41.7 | |||||||||
Total Specialty Insurance Distribution assets | 999.6 | 980.2 | 825.2 | |||||||||
Asset Management (Kudu) | ||||||||||||
Short-term investments | .1 | .1 | .1 | |||||||||
Other long-term investments | 400.6 | 325.5 | 266.5 | |||||||||
Total investments | 400.7 | 325.6 | 266.6 | |||||||||
Cash | 7.8 | 8.4 | 5.8 | |||||||||
Accrued investment income | 9.8 | 6.2 | 5.8 | |||||||||
Goodwill and other intangible assets | 9.2 | 9.3 | 9.6 | |||||||||
Other assets | 2.7 | 2.4 | 2.7 | |||||||||
Total Asset Management assets | 430.2 | 351.9 | 290.5 | |||||||||
Other Operations | ||||||||||||
Fixed maturity investments | 347.7 | 389.7 | 406.5 | |||||||||
Short-term investments | 82.4 | 515.6 | 154.8 | |||||||||
Common equity securities | — | 140.7 | 683.9 | |||||||||
Investment in MediaAlpha | 802.2 | 475.0 | 180.0 | |||||||||
Other long-term investments | 386.2 | 370.7 | 409.8 | |||||||||
Total investments | 1,618.5 | 1,891.7 | 1,835.0 | |||||||||
Cash | 34.1 | 31.5 | 41.3 | |||||||||
Cash pre-funded/placed in escrow for Ark transaction | 646.3 | — | — | |||||||||
Accrued investment income | 2.4 | 2.8 | 5.7 | |||||||||
Accounts receivable on unsettled investment sales | 3.4 | 54.7 | 5.1 | |||||||||
Goodwill and other intangible assets | 36.4 | 36.7 | 22.1 | |||||||||
Other assets | 40.4 | 41.9 | 31.3 | |||||||||
Assets held for sale | 2.3 | .7 | 3.0 | |||||||||
Total Other Operations assets | 2,383.8 | 2,060.0 | 1,943.5 | |||||||||
Total assets | $ | 4,831.4 | $ | 4,383.4 | $ | 3,983.2 | ||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) | ||||||||||||
(millions) | ||||||||||||
(Unaudited) | ||||||||||||
December 31, | September 30, | December 31, | ||||||||||
Liabilities | ||||||||||||
Financial Guarantee (HG Global/BAM) | ||||||||||||
Unearned insurance premiums | $ | 237.5 | $ | 226.9 | $ | 198.4 | ||||||
Accrued incentive compensation | 25.7 | 19.4 | 21.7 | |||||||||
Accounts payable on unsettled investment purchases | — | 6.4 | — | |||||||||
Other liabilities | 28.3 | 27.8 | 26.7 | |||||||||
Total Financial Guarantee liabilities | 291.5 | 280.5 | 246.8 | |||||||||
Specialty Insurance Distribution (NSM) | ||||||||||||
Debt | 272.6 | 270.2 | 219.2 | |||||||||
Premiums payable | 113.4 | 116.9 | 102.3 | |||||||||
Contingent consideration earnout liabilities | 14.6 | 11.8 | 20.6 | |||||||||
Other liabilities | 91.2 | 77.5 | 59.0 | |||||||||
Total Specialty Insurance Distribution liabilities | 491.8 | 476.4 | 401.1 | |||||||||
Asset Management (Kudu) | ||||||||||||
Debt | 86.3 | 71.0 | 53.6 | |||||||||
Other liabilities | 10.0 | 10.2 | 3.4 | |||||||||
Total Asset Management liabilities | 96.3 | 81.2 | 57.0 | |||||||||
Other Operations | ||||||||||||
Debt | 17.5 | 18.2 | 10.7 | |||||||||
Accrued incentive compensation | 70.1 | 41.9 | 55.1 | |||||||||
Other liabilities | 46.3 | 176.0 | 67.8 | |||||||||
Total Other Operations liabilities | 133.9 | 236.1 | 133.6 | |||||||||
Total liabilities | 1,013.5 | 1,074.2 | 838.5 | |||||||||
Equity | ||||||||||||
White Mountains's common shareholder's equity | ||||||||||||
White Mountains's common shares and paid-in surplus | 595.2 | 592.1 | 596.3 | |||||||||
Retained earnings | 3,311.2 | 2,822.1 | 2,672.4 | |||||||||
Accumulated other comprehensive loss, after tax: | ||||||||||||
Net unrealized losses from foreign currency translation and | (.4) | (6.5) | (7.2) | |||||||||
Total White Mountains's common shareholders' equity | 3,906.0 | 3,407.7 | 3,261.5 | |||||||||
Non-controlling interests | (88.1) | (98.5) | (116.8) | |||||||||
Total equity | 3,817.9 | 3,309.2 | 3,144.7 | |||||||||
Total liabilities and equity | $ | 4,831.4 | $ | 4,383.4 | $ | 3,983.2 | ||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | |||||||||||||||||
BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE | |||||||||||||||||
(Unaudited) | |||||||||||||||||
December 31, | September 30, | December 31, | September 30, | ||||||||||||||
Book value per share numerators (in millions): | |||||||||||||||||
White Mountains's common shareholders' equity - | $ | 3,906.0 | $ | 3,407.7 | $ | 3,261.5 | $ | 3,193.4 | |||||||||
Time value of money discount on expected future payments on the BAM Surplus Notes (1) | (142.5) | (144.3) | (151.6) | (132.8) | |||||||||||||
HG Global's unearned premium reserve (1) | 190.0 | 181.0 | 156.7 | 160.4 | |||||||||||||
HG Global's net deferred acquisition costs (1) | (52.4) | (49.5) | (41.5) | (42.0) | |||||||||||||
Adjusted book value per share numerator | $ | 3,901.1 | $ | 3,394.9 | $ | 3,225.1 | $ | 3,179.0 | |||||||||
Book value per share denominators (in thousands of shares): | |||||||||||||||||
Common shares outstanding - GAAP book value per share denominator | 3,102.0 | 3,102.0 | 3,185.4 | 3,185.4 | |||||||||||||
Unearned restricted common shares | (14.8) | (19.3) | (18.5) | (21.5) | |||||||||||||
Adjusted book value per share denominator | 3,087.2 | 3,082.7 | 3,166.9 | 3,163.9 | |||||||||||||
GAAP book value per share | $ | 1,259.18 | $ | 1,098.56 | $ | 1,023.91 | $ | 1,002.53 | |||||||||
Adjusted book value per share | $ | 1,263.64 | $ | 1,101.28 | $ | 1,018.41 | $ | 1,004.76 | |||||||||
(1) Amount reflects White Mountains's preferred share ownership in HG Global of | |||||||||||||||||
December 31, | September 30, | December 31, | September 30, | ||||||||||||||
Quarter-to-date change in GAAP book value per share, | 14.6 | % | 7.6 | % | 2.1 | % | 1.6 | % | |||||||||
Quarter-to-date change in adjusted book value per share, | 14.7 | % | 7.8 | % | 1.4 | % | 1.9 | % | |||||||||
Year-to-date change in GAAP book value per share, | 23.1 | % | 7.4 | % | 14.4 | % | 12.0 | % | |||||||||
Year-to-date change in adjusted book value per share, | 24.2 | % | 8.2 | % | 14.8 | % | 13.3 | % | |||||||||
Year-to-date dividends per share | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||
December 31, | September 30, | December 31, | September 30, | ||||||||||||||
Summary of goodwill and other intangible assets (in millions): | |||||||||||||||||
Goodwill: | |||||||||||||||||
NSM | $ | 506.4 | $ | 511.8 | (1) | $ | 381.6 | $ | 397.0 | (2) | |||||||
Kudu | 7.6 | 7.6 | 7.6 | 7.6 | |||||||||||||
Other Operations | 11.5 | 20.7 | (1) | 5.5 | 20.2 | (2) | |||||||||||
Total goodwill | 525.5 | 540.1 | 394.7 | 424.8 | |||||||||||||
Other intangible assets: | |||||||||||||||||
NSM | 230.4 | 218.5 | 241.4 | 233.6 | |||||||||||||
Kudu | 1.6 | 1.7 | 2.0 | 2.0 | |||||||||||||
Other Operations | 24.9 | 16.0 | 16.6 | .5 | |||||||||||||
Total other intangible assets | 256.9 | 236.2 | 260.0 | 236.1 | |||||||||||||
Total goodwill and other intangible assets | 782.4 | 776.3 | 654.7 | 660.9 | |||||||||||||
Goodwill and other intangible assets attributed to | (28.1) | (27.1) | (23.4) | (25.0) | |||||||||||||
Goodwill and other intangible assets included in | $ | 754.3 | $ | 749.2 | $ | 631.3 | $ | 635.9 | |||||||||
(1) | The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisitions of Kingsbridge and in Other Operations had not yet been finalized at September 30, 2020. |
(2) | The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisitions of Embrace and in Other Operations had not yet been finalized at September 30, 2019. |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
(millions) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenues: | |||||||||||||||||
Financial Guarantee (HG Global/BAM) | |||||||||||||||||
Earned insurance premiums | $ | 5.6 | $ | 2.6 | $ | 22.8 | $ | 16.3 | |||||||||
Net investment income | 4.4 | 5.5 | 19.5 | 21.6 | |||||||||||||
Net realized and unrealized investment (losses) gains | — | (3.3) | 23.7 | 27.1 | |||||||||||||
Other revenues | .4 | .3 | 2.5 | 1.6 | |||||||||||||
Total Financial Guarantee revenues | 10.4 | 5.1 | 68.5 | 66.6 | |||||||||||||
Specialty Insurance Distribution (NSM) | |||||||||||||||||
Commission revenues | 58.3 | 45.8 | 232.5 | 193.4 | |||||||||||||
Other revenues | 15.0 | 12.0 | 52.6 | 39.7 | |||||||||||||
Total Specialty Insurance Distribution revenues | 73.3 | 57.8 | 285.1 | 233.1 | |||||||||||||
Asset Management (Kudu) | |||||||||||||||||
Net investment income | 10.2 | 6.1 | 29.5 | 14.7 | |||||||||||||
Net realized and unrealized investment gains | 14.4 | 3.2 | 15.9 | 6.3 | |||||||||||||
Other revenues | .1 | — | .3 | .2 | |||||||||||||
Total Asset Management revenues | 24.7 | 9.3 | 45.7 | 21.2 | (1) | ||||||||||||
Marketing Technology (MediaAlpha) | |||||||||||||||||
Advertising and commission revenues | — | — | — | 48.8 | |||||||||||||
Total Marketing Technology revenues | — | — | — | 48.8 | (2) | ||||||||||||
Other Operations | |||||||||||||||||
Net investment income | 2.7 | 12.7 | 82.0 | 43.4 | |||||||||||||
Net realized and unrealized investment gains (losses) | 8.6 | 55.5 | (8.8) | 219.8 | |||||||||||||
Net realized and unrealized investment gains from | 391.0 | 30.0 | 686.0 | 180.0 | |||||||||||||
Realized gain from the MediaAlpha transaction | — | — | — | 67.5 | |||||||||||||
Advertising and commission revenues | 2.2 | 2.4 | 8.3 | 6.9 | |||||||||||||
Other revenues | 7.9 | 2.5 | 13.9 | 6.1 | |||||||||||||
Total Other Operations revenues | 412.4 | 103.1 | 781.4 | 523.7 | |||||||||||||
Total revenues | $ | 520.8 | $ | 175.3 | $ | 1,180.7 | $ | 893.4 | |||||||||
(1) | Kudu's results are from April 4, 2019, the date White Mountains began consolidating Kudu, to December 31, 2019. |
(2) | MediaAlpha's results are from January 1, 2019 to February 26, 2019, the date of the MediaAlpha transaction with Insignia. |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) | |||||||||||||||||
(millions) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Expenses: | |||||||||||||||||
Financial Guarantee (HG Global/BAM) | |||||||||||||||||
Insurance acquisition expenses | $ | 1.6 | $ | 1.6 | $ | 7.0 | $ | 5.7 | |||||||||
Other underwriting expenses | .1 | .1 | .4 | .4 | |||||||||||||
General and administrative expenses | 15.3 | 11.4 | 56.4 | 50.5 | |||||||||||||
Total Financial Guarantee expenses | 17.0 | 13.1 | 63.8 | 56.6 | |||||||||||||
Specialty Insurance Distribution (NSM) | |||||||||||||||||
General and administrative expenses | 45.9 | 40.8 | 176.9 | 132.2 | |||||||||||||
Broker commission expenses | 18.9 | 15.9 | 75.3 | 64.8 | |||||||||||||
Change in fair value of contingent consideration | (1.7) | (3.5) | (3.3) | 2.1 | |||||||||||||
Amortization of other intangible assets | 10.5 | 5.9 | 26.7 | 19.4 | |||||||||||||
Interest expense | 6.0 | 4.5 | 22.1 | 16.7 | |||||||||||||
Total Specialty Insurance Distribution expenses | 79.6 | 63.6 | 297.7 | 235.2 | |||||||||||||
Asset Management (Kudu) | |||||||||||||||||
General and administrative expenses | 4.3 | 3.4 | 11.8 | 10.1 | |||||||||||||
Amortization of other intangible assets | — | — | .3 | .2 | |||||||||||||
Interest expense | 1.7 | .1 | 6.0 | .1 | |||||||||||||
Total Asset Management expenses | 6.0 | 3.5 | 18.1 | 10.4 | (1) | ||||||||||||
Marketing Technology (MediaAlpha) | |||||||||||||||||
Cost of sales | — | — | — | 40.6 | |||||||||||||
General and administrative expenses | — | — | — | 12.5 | |||||||||||||
Amortization of other intangible assets | — | — | — | 1.6 | |||||||||||||
Interest expense | — | — | — | .2 | |||||||||||||
Total Marketing Technology expenses | — | — | — | 54.9 | (2) | ||||||||||||
Other Operations | |||||||||||||||||
Cost of sales | 4.8 | 2.5 | 11.3 | 7.5 | |||||||||||||
General and administrative expenses | 54.8 | 35.3 | 141.9 | 122.5 | |||||||||||||
Amortization of other intangible assets | .7 | .5 | 1.3 | .6 | |||||||||||||
Interest expense | .6 | .3 | 1.4 | .6 | |||||||||||||
Total Other Operations expenses | 60.9 | 38.6 | 155.9 | 131.2 | |||||||||||||
Total expenses | 163.5 | 118.8 | 535.5 | 488.3 | |||||||||||||
Pre-tax income from continuing operations | 357.3 | 56.5 | 645.2 | 405.1 | |||||||||||||
Income tax benefit (expense) | 117.6 | (10.4) | 20.5 | (29.3) | |||||||||||||
Net income from continuing operations | 474.9 | 46.1 | 665.7 | 375.8 | |||||||||||||
Net (loss) income from sale of discontinued operations, | (1.5) | (.8) | (2.3) | .8 | |||||||||||||
Net income | 473.4 | 45.3 | 663.4 | 376.6 | |||||||||||||
Net loss attributable to non-controlling interests | 15.8 | 15.6 | 45.3 | 37.9 | |||||||||||||
Net income attributable to | $ | 489.2 | $ | 60.9 | $ | 708.7 | $ | 414.5 | |||||||||
(1) | Kudu's results are from April 4, 2019, the date White Mountains began consolidating Kudu, to December 31, 2019. |
(2) | MediaAlpha's results are from January 1, 2019 to February 26, 2019, the date of the MediaAlpha transaction with Insignia. |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||
(millions) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income attributable to | $ | 489.2 | $ | 60.9 | $ | 708.7 | $ | 414.5 | ||||||||
Other comprehensive income (loss), net of tax | 6.3 | 4.4 | 7.3 | (1.4) | ||||||||||||
Comprehensive income | 495.5 | 65.3 | 716.0 | 413.1 | ||||||||||||
Other comprehensive income attributable to non-controlling interests | (.2) | (.3) | (.5) | — | ||||||||||||
Comprehensive income attributable to White Mountains's | $ | 495.3 | $ | 65.0 | $ | 715.5 | $ | 413.1 | ||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||
EARNINGS PER SHARE | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Income (loss) per share attributable to White Mountains's common | Three Months Ended | Twelve Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Basic earnings (loss) per share | ||||||||||||||||
Continuing operations | $ | 158.19 | $ | 19.37 | $ | 227.72 | $ | 130.02 | ||||||||
Discontinued operations | (.49) | (.25) | (.75) | .25 | ||||||||||||
Total consolidated operations | $ | 157.70 | $ | 19.12 | $ | 226.97 | $ | 130.27 | ||||||||
Diluted earnings (loss) per share | ||||||||||||||||
Continuing operations | $ | 158.19 | $ | 19.37 | $ | 227.72 | $ | 130.02 | ||||||||
Discontinued operations | (.49) | (.25) | (.75) | .25 | ||||||||||||
Total consolidated operations | $ | 157.70 | $ | 19.12 | $ | 226.97 | $ | 130.27 | ||||||||
Dividends declared per White Mountains's common share | $ | — | $ | — | $ | 1.00 | $ | 1.00 | ||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||||||||||
QTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS) | ||||||||||||||||||||||||
(millions) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
For the Three Months Ended December 31, 2020 | HG Global/BAM | |||||||||||||||||||||||
HG Global | BAM | NSM | Kudu | Other | Total | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Earned insurance premiums | $ | 4.6 | $ | 1.0 | $ | — | $ | — | $ | — | $ | 5.6 | ||||||||||||
Net investment income | 1.7 | 2.7 | — | 10.2 | 2.7 | 17.3 | ||||||||||||||||||
Net investment income (expense) - | 4.7 | (4.7) | — | — | — | — | ||||||||||||||||||
Net realized and unrealized investment (losses) gains | (.3) | .3 | — | 14.4 | 8.6 | 23.0 | ||||||||||||||||||
Net realized and unrealized investment gains from | — | — | — | — | 391.0 | 391.0 | ||||||||||||||||||
Advertising and commission revenues | — | — | 58.3 | — | 2.2 | 60.5 | ||||||||||||||||||
Other revenues | — | .4 | 15.0 | .1 | 7.9 | 23.4 | ||||||||||||||||||
Total revenues | 10.7 | (.3) | 73.3 | 24.7 | 412.4 | 520.8 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Insurance acquisition expenses | 1.4 | .2 | — | — | — | 1.6 | ||||||||||||||||||
Other underwriting expenses | — | .1 | — | — | — | .1 | ||||||||||||||||||
Cost of sales | — | — | — | — | 4.8 | 4.8 | ||||||||||||||||||
General and administrative expenses | 1.0 | 14.3 | 45.9 | 4.3 | 54.8 | 120.3 | ||||||||||||||||||
Broker commission expenses | — | — | 18.9 | — | — | 18.9 | ||||||||||||||||||
Change in fair value of contingent consideration | — | — | (1.7) | — | — | (1.7) | ||||||||||||||||||
Amortization of other intangible assets | — | — | 10.5 | — | .7 | 11.2 | ||||||||||||||||||
Interest expense | — | — | 6.0 | 1.7 | .6 | 8.3 | ||||||||||||||||||
Total expenses | 2.4 | 14.6 | 79.6 | 6.0 | 60.9 | 163.5 | ||||||||||||||||||
Pre-tax income (loss) | $ | 8.3 | $ | (14.9) | $ | (6.3) | $ | 18.7 | $ | 351.5 | $ | 357.3 | ||||||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||||||||||
QTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS) (CONTINUED) | ||||||||||||||||||||||||
(millions) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
For the Three Months Ended December 31, 2019 | HG Global/BAM | |||||||||||||||||||||||
HG Global | BAM | NSM | Kudu | Other | Total | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Earned insurance premiums | $ | 2.1 | $ | .5 | $ | — | $ | — | $ | — | $ | 2.6 | ||||||||||||
Net investment income | 1.9 | 3.6 | — | 6.1 | 12.7 | 24.3 | ||||||||||||||||||
Net investment income (expense) - | 6.8 | (6.8) | — | — | — | — | ||||||||||||||||||
Net realized and unrealized investment (losses) gains | (.1) | (3.2) | — | 3.2 | 55.5 | 55.4 | ||||||||||||||||||
Net unrealized investment gains from | — | — | — | — | 30.0 | 30.0 | ||||||||||||||||||
Advertising and commission revenues | — | — | 45.8 | — | 2.4 | 48.2 | ||||||||||||||||||
Other revenues | — | .3 | 12.0 | — | 2.5 | 14.8 | ||||||||||||||||||
Total revenues | 10.7 | (5.6) | 57.8 | 9.3 | 103.1 | 175.3 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Insurance acquisition expenses | .5 | 1.1 | — | — | — | 1.6 | ||||||||||||||||||
Other underwriting expenses | — | .1 | — | — | — | .1 | ||||||||||||||||||
Cost of sales | — | — | — | — | 2.5 | 2.5 | ||||||||||||||||||
General and administrative expenses | .4 | 11.0 | 40.8 | 3.4 | 35.3 | 90.9 | ||||||||||||||||||
Broker commission expenses | — | — | 15.9 | — | — | 15.9 | ||||||||||||||||||
Change in fair value of contingent consideration | — | — | (3.5) | — | — | (3.5) | ||||||||||||||||||
Amortization of other intangible assets | — | — | 5.9 | — | .5 | 6.4 | ||||||||||||||||||
Interest expense | — | — | 4.5 | .1 | .3 | 4.9 | ||||||||||||||||||
Total expenses | .9 | 12.2 | 63.6 | 3.5 | 38.6 | 118.8 | ||||||||||||||||||
Pre-tax income (loss) | $ | 9.8 | $ | (17.8) | $ | (5.8) | $ | 5.8 | $ | 64.5 | $ | 56.5 | ||||||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||||||||||
YTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS) | ||||||||||||||||||||||||
(millions) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
For the Twelve Months Ended December 31, 2020 | HG Global/BAM | |||||||||||||||||||||||
HG Global | BAM | NSM | Kudu | Other | Total | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Earned insurance premiums | $ | 18.7 | $ | 4.1 | $ | — | $ | — | $ | — | $ | 22.8 | ||||||||||||
Net investment income | 7.8 | 11.7 | — | 29.5 | 82.0 | 131.0 | ||||||||||||||||||
Net investment income (expense) - | 18.8 | (18.8) | — | — | — | — | ||||||||||||||||||
Net realized and unrealized investment gains (losses) | 11.8 | 11.9 | — | 15.9 | (8.8) | 30.8 | ||||||||||||||||||
Net realized and unrealized investment gains from | — | — | — | — | 686.0 | 686.0 | ||||||||||||||||||
Advertising and commission revenues | — | — | 232.5 | — | 8.3 | 240.8 | ||||||||||||||||||
Other revenue | .3 | 2.2 | 52.6 | .3 | 13.9 | 69.3 | ||||||||||||||||||
Total revenues | 57.4 | 11.1 | 285.1 | 45.7 | 781.4 | 1,180.7 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Insurance acquisition expenses | 4.7 | 2.3 | — | — | — | 7.0 | ||||||||||||||||||
Other underwriting expenses | — | .4 | — | — | — | .4 | ||||||||||||||||||
Cost of sales | — | — | — | — | 11.3 | 11.3 | ||||||||||||||||||
General and administrative expenses | 2.6 | 53.8 | 176.9 | 11.8 | 141.9 | 387.0 | ||||||||||||||||||
Broker commission expenses | — | — | 75.3 | — | — | 75.3 | ||||||||||||||||||
Change in fair value of contingent | — | — | (3.3) | — | — | (3.3) | ||||||||||||||||||
Amortization of other intangible assets | — | — | 26.7 | .3 | 1.3 | 28.3 | ||||||||||||||||||
Interest expense | — | — | 22.1 | 6.0 | 1.4 | 29.5 | ||||||||||||||||||
Total expenses | 7.3 | 56.5 | 297.7 | 18.1 | 155.9 | 535.5 | ||||||||||||||||||
Pre-tax income (loss) | $ | 50.1 | $ | (45.4) | $ | (12.6) | $ | 27.6 | $ | 625.5 | $ | 645.2 | ||||||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||||||||||||||
YTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS) (CONTINUED) | ||||||||||||||||||||||||||||
(millions) | ||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
For the Twelve Months Ended December 31, 2019 | HG Global/BAM | |||||||||||||||||||||||||||
HG Global | BAM | NSM | Kudu (1) | MediaAlpha (2) | Other | Total | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Earned insurance premiums | $ | 13.1 | $ | 3.2 | $ | — | $ | — | $ | — | $ | — | $ | 16.3 | ||||||||||||||
Net investment income | 7.5 | 14.1 | — | 14.7 | — | 43.4 | 79.7 | |||||||||||||||||||||
Net investment income (expense) - | 27.4 | (27.4) | — | — | — | — | — | |||||||||||||||||||||
Net realized and unrealized investment gains | 11.0 | 16.1 | — | 6.3 | — | 219.8 | 253.2 | |||||||||||||||||||||
Net unrealized investment gains from | — | — | — | — | — | 180.0 | 180.0 | |||||||||||||||||||||
Realized gain from the MediaAlpha transaction | — | — | — | — | — | 67.5 | 67.5 | |||||||||||||||||||||
Advertising and commission revenues | — | — | 193.4 | — | 48.8 | 6.9 | 249.1 | |||||||||||||||||||||
Other revenue | — | 1.6 | 39.7 | .2 | — | 6.1 | 47.6 | |||||||||||||||||||||
Total revenues | 59.0 | 7.6 | 233.1 | 21.2 | 48.8 | 523.7 | 893.4 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Insurance acquisition expenses | 3.3 | 2.4 | — | — | — | — | 5.7 | |||||||||||||||||||||
Other underwriting expenses | — | .4 | — | — | — | — | .4 | |||||||||||||||||||||
Cost of sales | — | — | — | — | 40.6 | 7.5 | 48.1 | |||||||||||||||||||||
General and administrative expenses | 1.6 | 48.9 | 132.2 | 10.1 | 5.7 | 122.5 | 321.0 | |||||||||||||||||||||
General and administrative expenses - | — | — | — | — | 6.8 | — | 6.8 | |||||||||||||||||||||
Broker commission expenses | — | — | 64.8 | — | — | — | 64.8 | |||||||||||||||||||||
Change in fair value of contingent | — | — | 2.1 | — | — | — | 2.1 | |||||||||||||||||||||
Amortization of other intangible assets | — | — | 19.4 | .2 | 1.6 | .6 | 21.8 | |||||||||||||||||||||
Interest expense | — | — | 16.7 | .1 | .2 | .6 | 17.6 | |||||||||||||||||||||
Total expenses | 4.9 | 51.7 | 235.2 | 10.4 | 54.9 | 131.2 | 488.3 | |||||||||||||||||||||
Pre-tax income (loss) | $ | 54.1 | $ | (44.1) | $ | (2.1) | $ | 10.8 | $ | (6.1) | $ | 392.5 | $ | 405.1 | ||||||||||||||
(1) | Kudu's results are from April 4, 2019, the date White Mountains began consolidating Kudu, to December 31, 2019. |
(2) | MediaAlpha's results are from January 1, 2019 to February 26, 2019, the date of the MediaAlpha transaction with Insignia. |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | |||||||||||||||||
SELECTED FINANCIAL DATA | |||||||||||||||||
(millions) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
BAM | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Gross par value of primary market policies issued | $ | 5,154.6 | $ | 3,732.4 | $ | 15,279.6 | $ | 10,405.1 | |||||||||
Gross par value of secondary market policies issued | 357.2 | 190.8 | 2,022.9 | 1,311.8 | |||||||||||||
Gross par value of assumed reinsurance | — | — | 36.9 | 1,130.7 | |||||||||||||
Total gross par value of market policies issued | $ | 5,511.8 | $ | 3,923.2 | $ | 17,339.4 | $ | 12,847.6 | |||||||||
Gross written premiums | $ | 16.1 | $ | (2.5) | (1) | $ | 61.7 | $ | 38.7 | (1) | |||||||
MSC collected | 22.0 | 25.1 | (1) | 68.9 | 68.0 | (1) | |||||||||||
Total gross written premiums and MSC collected | $ | 38.1 | $ | 22.6 | $ | 130.6 | $ | 106.7 | |||||||||
Present value of future installment MSC collections | — | — | .3 | .3 | |||||||||||||
Gross written premium adjustments on existing | .3 | — | .4 | (.1) | |||||||||||||
Gross written premiums and MSC from | $ | 38.4 | $ | 22.6 | $ | 131.3 | $ | 106.9 | |||||||||
Total pricing | 70 bps | 58 bps | 76 bps | 83 bps | |||||||||||||
As of | As of | As of | ||||||||||
Policyholders' surplus | $ | 324.7 | $ | 347.2 | $ | 402.4 | ||||||
Contingency reserve | 86.4 | 81.6 | 68.2 | |||||||||
Qualified statutory capital | 411.1 | 428.8 | 470.6 | |||||||||
Statutory net unearned premiums | 45.2 | 43.6 | 39.3 | |||||||||
Present value of future installment premiums | 14.0 | 14.4 | 13.7 | |||||||||
HG Re, Ltd collateral trusts at statutory value | 417.0 | 381.0 | 314.0 | |||||||||
Fidus Re, Ltd collateral trust at statutory value | 100.0 | 100.0 | 100.0 | |||||||||
Claims paying resources | $ | 987.3 | $ | 967.8 | $ | 937.6 | ||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
HG Global | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net written premiums | $ | 13.9 | $ | (1.6) | (1) | $ | 53.0 | $ | 33.6 | (1) | |||||||
Earned premiums | $ | 4.6 | $ | 2.1 | $ | 18.7 | $ | 13.1 | |||||||||
As of | As of | As of | |||||||||||
Unearned premiums | $ | 196.1 | $ | 186.8 | $ | 161.7 | (1) | ||||||
Deferred acquisition costs | $ | 54.1 | $ | 51.1 | $ | 42.8 | (1) | ||||||
(1) | During the fourth quarter of 2019, BAM issued policy endorsements for certain policies issued in periods prior to the second quarter of 2018. The impact of the policy endorsements for the three months and twelve months ended December 31, 2019 was a decrease to BAM's gross written premiums of |
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||||||
SELECTED FINANCIAL DATA (CONTINUED) | ||||||||||||||||
(millions) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
NSM | Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended | ||||||||||||
Commission revenues | $ | 45.8 | $ | 58.3 | $ | 193.4 | $ | 232.5 | ||||||||
Broker commission expenses | 15.9 | 18.9 | 64.8 | 75.3 | ||||||||||||
Gross profit | 29.9 | 39.4 | 128.6 | 157.2 | ||||||||||||
Other revenues | 12.0 | 15.0 | 39.7 | 52.6 | ||||||||||||
General and administrative expenses | 40.8 | 45.9 | 132.2 | 176.9 | ||||||||||||
Change in fair value of contingent | (3.5) | (1.7) | 2.1 | (3.3) | ||||||||||||
Amortization of other intangible assets | 5.9 | 10.5 | 19.4 | 26.7 | ||||||||||||
Interest expense | 4.5 | 6.0 | 16.7 | 22.1 | ||||||||||||
GAAP pre-tax loss | (5.8) | (6.3) | (2.1) | (12.6) | ||||||||||||
Income tax benefit | (2.3) | (2.9) | (.6) | (5.7) | ||||||||||||
GAAP net loss | (3.5) | (3.4) | (1.5) | (6.9) | ||||||||||||
Add back: | ||||||||||||||||
Interest expense | 4.5 | 6.0 | 16.7 | 22.1 | ||||||||||||
Income tax benefit | (2.3) | (2.9) | (.6) | (5.7) | ||||||||||||
General and administrative expenses – | .8 | 1.6 | 2.8 | 4.5 | ||||||||||||
Amortization of other intangible assets | 5.9 | 10.5 | 19.4 | 26.7 | ||||||||||||
EBITDA | 5.4 | 11.8 | 36.8 | 40.7 | ||||||||||||
Add back: | ||||||||||||||||
Change in fair value of contingent | (3.5) | (1.7) | 2.1 | (3.3) | ||||||||||||
Non-cash equity-based | — | 1.4 | — | 2.4 | ||||||||||||
Impairments of intangible assets | — | — | — | 6.2 | ||||||||||||
Acquisition-related transaction expenses | 4.2 | 1.6 | 5.6 | 7.2 | ||||||||||||
Fair value purchase accounting adjustment | .9 | — | .9 | — | ||||||||||||
Investments made in the development of | — | .3 | .3 | .9 | ||||||||||||
Restructuring expenses | 1.9 | 1.6 | 2.3 | 4.8 | ||||||||||||
Adjusted EBITDA | $ | 8.9 | $ | 15.0 | $ | 48.0 | $ | 58.9 | ||||||||
Add: | ||||||||||||||||
Kingsbridge's Adjusted EBITDA from January 1, 2020 to April 7, 2020 | 2.6 | |||||||||||||||
Pro forma adjusted EBITDA | $ | 61.5 | ||||||||||||||
WHITE MOUNTAINS INSURANCE GROUP, LTD. | ||||||||||||
SELECTED FINANCIAL DATA (CONTINUED) | ||||||||||||
(millions) | ||||||||||||
(Unaudited) | ||||||||||||
Kudu | Three Months Ended | Three Months Ended | Twelve Months Ended | |||||||||
GAAP pre-tax income | $ | 5.8 | $ | 18.7 | $ | 27.6 | ||||||
Income tax expense | 1.5 | 3.8 | 7.0 | |||||||||
GAAP net income | 4.3 | 14.9 | 20.6 | |||||||||
Add back: | ||||||||||||
Interest expense | — | 1.7 | 6.0 | |||||||||
Income tax expense | 1.5 | 3.8 | 7.0 | |||||||||
Amortization of other intangible assets | — | — | .3 | |||||||||
EBITDA | 5.8 | 20.4 | 33.9 | |||||||||
Add back: | ||||||||||||
Net unrealized investment gains | (3.2) | (14.4) | (15.9) | |||||||||
Non-cash equity-based compensation expense | .4 | .3 | .4 | |||||||||
Acquisition-related transaction expenses | .5 | 2.1 | 3.7 | |||||||||
Adjusted EBITDA | $ | 3.5 | $ | 8.4 | $ | 22.1 | ||||||
Add: | ||||||||||||
Adjustment to annualize partial year revenues | 2.1 | |||||||||||
Annualized Adjusted EBITDA | $ | 24.2 | ||||||||||
Regulation G
This earnings release includes non-GAAP financial measures that have been reconciled to 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, 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.
- 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 16.
- 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 earnout liabilities, (ii) non-cash equity-based compensation expense, (iii) impairments of intangible assets, (iv) acquisition-related transaction expenses, (v) fair value purchase accounting adjustment for deferred revenue, (vi) investments made in the development of new business lines and (vii) restructuring expenses. A description of each follows:
- Change in fair value of contingent consideration earnout liabilities - Earnout liabilities are 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, earnout liabilities are initially recorded 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 U.K. vertical. The impairments related to lower premium volumes, including due to the impact of the COVID-19 pandemic, and certain reorganization initiatives in the U.K. vertical.
- Acquisition-related transaction expenses - Represents costs directly related to NSM's transactions to acquire businesses, such as transaction-related compensation, banking, accounting and external lawyer fees, which are not capitalized and are expensed under GAAP.
- Fair value purchase accounting adjustment for deferred revenue - Represents the amount of deferred revenue that had already been collected but subsequently written down in connection with establishing the fair value of deferred revenue as part of NSM's purchase accounting for Embrace Pet Insurance.
- 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 U.K. vertical.
Pro forma adjusted EBITDA is a non-GAAP financial measure that starts with adjusted EBITDA and also includes the earnings of acquired businesses for the period of time over the previous 12 months that the businesses were not owned by White Mountains.
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 to demonstrate the earnings profile of NSM's business as of the end of the period for a full 12 month period. See page 17 for the reconciliation of NSM's GAAP net income (loss) to EBITDA, adjusted EBITDA and pro forma adjusted EBITDA.
- Kudu's EBITDA, adjusted EBITDA and annualized 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) net unrealized investment (gains) losses on Kudu's revenue and earnings participation contracts, (ii) non-cash equity-based compensation expense and (iii) acquisition-related transaction expenses. A description of each adjustment follows:
- Net 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.
- Non-cash equity-based compensation expense - Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.
- Acquisition-related transaction expenses - Represents costs directly related to Kudu's transactions to acquire revenue and earnings participation contracts, 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 annualizes revenues related to Kudu's earnings and revenue participation contracts that were in place as of the end of the 12 month period but were not in effect for the full 12 month period. The amount added was calculated on a contract-by-contract basis by annualizing the revenues received for the partial 12 month period. For example, if a participation contract was in effect for four months, the amount added equals twice that amount.
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 to demonstrate the earnings profile of Kudu's business as of the end of the period for a full 12 month period. See page 18 for the reconciliation of Kudu's GAAP net income (loss) to EBITDA, adjusted EBITDA and annualized adjusted EBITDA.
- Total consolidated portfolio returns and total equity portfolio returns excluding MediaAlpha are non-GAAP financial measures that remove the net investment income and net realized and unrealized investment gains from White Mountains's investment in MediaAlpha in the fourth quarter and year ended December 31, 2020 and the fourth quarter and year ended December 31, 2019. White Mountains believes this measure to be useful to management and investors by making the returns in the prior period comparable to the current period. A reconciliation from GAAP to the reported percentage is as follows:
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Total consolidated portfolio returns | 14.3 | % | 3.9 | % | 31.9 | % | 20.4 | % | ||||
Remove MediaAlpha | (12.6) | % | (1.0) | % | (27.3) | % | (7.4) | % | ||||
Total consolidated portfolio returns - excluding MediaAlpha | 1.7 | % | 2.9 | % | 4.6 | % | 13.0 | % | ||||
Three Months Ended | Twelve Months Ended | |||||
2020 | 2020 | |||||
Total equity portfolio returns | 34.7 | % | 79.8 | % | ||
Remove MediaAlpha | (30.7) | % | (74.9) | % | ||
Total equity portfolio returns - excluding MediaAlpha | 4.0 | % | 4.9 | % | ||
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 or adjusted book value per share or return on equity;
- business strategy;
- financial and operating targets or plans;
- 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 White Mountains's filings with the Securities and Exchange Commission, including but not limited to White Mountains's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Item 1A. Risk Factors of White Mountains's Quarterly Report on Form 10-Q for the period ended September 30, 2020;
- claims arising from catastrophic events, such as hurricanes, earthquakes, floods, fires, terrorist attacks
- or severe winter weather;
- the market value of White Mountains investment in MediaAlpha;
- the trends and uncertainties from the COVID-19 pandemic, including judicial interpretations on the extent of insurance coverage provided by insurers for COVID-19 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.
View original content:http://www.prnewswire.com/news-releases/white-mountains-reports-fourth-quarter-results-301222949.html
SOURCE White Mountains Insurance Group, Ltd.
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