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Press Release: White Mountains Reports Fourth Quarter Results

· 02/05/2021 08:00

White Mountains Reports Fourth Quarter Results

PR Newswire

HAMILTON, Bermuda, Feb. 5, 2021

HAMILTON, Bermuda, Feb. 5, 2021 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of $1,259 and adjusted book value per share of $1,264 as of December 31, 2020. Book value per share and adjusted book value per share both increased 15% in the fourth quarter of 2020. Book value per share and adjusted book value per share increased 23% and 24% in the year ended December 31, 2020, including dividends.

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 $38 million of total premiums and member surplus contributions in the quarter, capping off a record year. NSM completed a solid year, with 3% quarter over quarter growth in pro forma controlled premiums and 8% quarter over quarter growth in pro forma adjusted EBITDA. Kudu had a strong finish to the year, benefiting from the move higher in investment markets while closing three transactions in the quarter. Our investment in Ark, which was announced on October 1, closed on January 1, 2021. Ark has hit the ground running with a good January renewal season, with gross written premium expected to be in excess of $270 million. Our investment portfolio (excluding MediaAlpha) returned 1.7% in the quarter. Our capital base is, for the time being, more or less fully deployed."

Comprehensive income attributable to common shareholders was $495 million and $716 million in the fourth quarter and year ended December 31, 2020, compared to $65 million and $413 million in the fourth quarter and year ended December 31, 2019. Results in the fourth quarter and year ended December 31, 2020 included $391 million and $746 million of net investment income and realized and unrealized investment gains from White Mountains's investment in MediaAlpha, as well as $131 million from the release of a deferred tax liability as a result of an internal reorganization in connection with the MediaAlpha IPO. Results in the fourth quarter and year ended December 31, 2019 included $33 million and $256 million of net investment income, realized gains and unrealized investment gains from White Mountains's investment in MediaAlpha, $182 million of which was from MediaAlpha's sale of a significant minority stake to Insignia Capital Group on February 26, 2019.

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 $64 million. White Mountains owns 20,532,202 MediaAlpha shares, representing a 32% fully-diluted ownership interest. At the December 31, 2020 closing price of $39.07 per share, the value of White Mountains's remaining investment in MediaAlpha was $802 million. At the January 2021 month-end closing price of $55.00 per share, the value of White Mountains's remaining investment in MediaAlpha was $1,129 million.

HG Global/BAM

BAM's gross written premiums and member surplus contributions (MSC) collected were $38 million and $131 million in the fourth quarter and year ended December 31, 2020, compared to $23 million and $107 million in the fourth quarter and year ended December 31, 2019. BAM insured municipal bonds with par value of $5.5 billion and $17.3 billion in the fourth quarter and year ended December 31, 2020, compared to $3.9 billion and $12.8 billion in the fourth quarter and year ended December 31, 2019. Total pricing was 70 and 76 basis points in the fourth quarter and year ended December 31, 2020, compared to 58 and 83 basis points in the fourth quarter and year ended December 31, 2019. BAM's total claims paying resources were $987 million at December 31, 2020, compared to $968 million at September 30, 2020 and $938 million at December 31, 2019.

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, 7.5% of all new-issue municipal bonds were sold with insurance, up 27% from 2019 and the highest level since BAM's launch in 2012."

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 $8 million and $50 million in the fourth quarter and year ended December 31, 2020, compared to pre-tax income of $10 million and $54 million in the fourth quarter and year ended December 31, 2019. The decreases in HG Global's pre-tax income were driven primarily by a decrease in interest income on the BAM Surplus Notes partially offset by higher net results from insurance operations.

In December 2020, BAM made a $30 million cash payment of surplus note principal and interest.

White Mountains reported pre-tax loss related to BAM of $15 million and $45 million in the fourth quarter and year ended December 31, 2020, compared to pre-tax loss related to BAM of $18 million and $44 million in the fourth quarter and year ended December 31, 2019. The decrease in BAM's pre-tax loss in the fourth quarter of 2020, compared to the fourth quarter of 2019 was driven primarily by a higher investment results and a decrease in interest expense on the BAM Surplus Notes partially offset by higher general and administrative expenses. The increase in BAM's pre-tax loss in the year ended December 31, 2020, compared to the year ended 2019 was driven primarily by a lower investment results and higher general and administrative expenses partially offset by a decrease in interest expense on the BAM surplus notes.

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 $6 million, adjusted EBITDA of $15 million, and commission and other revenues of $73 million, compared to pre-tax loss of $6 million, adjusted EBITDA of $9 million, and commission and other revenues of $58 million in the fourth quarter of 2019. In the year ended December 31, 2020, NSM reported pre-tax loss of $13 million, adjusted EBITDA of $59 million, and commission and other revenues of $285 million, compared to pre-tax loss of $2 million, adjusted EBITDA of $48 million, and commission and other revenues of $233 million in the year ended December 31, 2019. Results for the fourth quarter and year ended December 31, 2020 include the results of Kingsbridge Group Limited, a leading provider of commercial lines insurance and consulting services to the contingent workforce in the U.K., which was acquired on April 7, 2020.

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 $1,074 million, up 3% quarter over quarter, while trailing 12 months pro forma adjusted EBITDA finished at $62 million, up 8% quarter over quarter. We experienced significant growth in 2020 despite the tough global environment, led by strong performance in all U.S. specialty insurance programs."

Kudu

Kudu reported pre-tax income of $19 million and adjusted EBITDA of $8 million in the fourth quarter of 2020, compared to pre-tax income of $6 million and adjusted EBITDA of $4 million in the fourth quarter of 2019. Kudu reported pre-tax income of $28 million and adjusted EBITDA of $22 million in the year ended December 31, 2020. Pre-tax income in the fourth quarter of 2020 and for the full year ended December 31, 2020 included $14 million and $16 million, respectively, of unrealized gains on Kudu's participation contracts, as assets under management grew, markets rose across various asset classes and the forward outlook for Kudu's participation contracts improved.

In the fourth quarter of 2020, Kudu deployed $62 million in three transactions. As of December 31, 2020, Kudu has deployed a total of $386 million in 13 asset management firms with combined assets under management of approximately $45 billion, spanning a range of asset classes, including real estate, real assets, wealth management, hedge funds, private equity and alternative credit strategies. The capital deployed has generated an average gross cash yield to Kudu at inception of 10.3%.

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."

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