WHITE MOUNTAINS REPORTS FOURTH QUARTER RESULTS

HAMILTON, Bermuda, Feb. 8, 2022 /PRNewswire/ -- White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of $1,176 and adjusted book value per share of $1,190 as of December 31, 2021.  Book value per share and adjusted book value per share both increased 1% in the fourth quarter of 2021.  Book value per share and adjusted book value per share decreased 7% and 6% in the year ended December 31, 2021, including dividends.  Excluding net realized and unrealized investment losses from White Mountains's investment in MediaAlpha, adjusted book value per share increased 3% in the fourth quarter and 4% in the year ended December 31, 2021, including dividends.

Manning Rountree, CEO, commented, "ABVPS grew 1% in the fourth quarter.  Strong results from our operating companies were partially offset by a mark-to-market decline in the value of our investment in MediaAlpha.  BAM produced $34 million of total premiums and member surplus contributions in the quarter, driven by continuing primary market demand for insurance.  Ark produced good underwriting results for the quarter and the year, while growing full year premiums 78%.  NSM finished the year with new highs for pro forma controlled premiums and pro forma adjusted EBITDA.  Likewise, Kudu finished the year by producing strong growth in adjusted EBITDA, recording $27 million of gains in the fair value of its portfolio and closing two transactions in the fourth quarter.  Excluding MediaAlpha, our investment portfolio returned 1.8% for the quarter and 6.4% for the full year.  We completed share repurchases of $13 million for the quarter and $108 million for the full year.  We finished the year with roughly $400 million of undeployed capital."

Comprehensive income (loss) attributable to common shareholders was $34 million and $(273) million in the fourth quarter and year ended December 31, 2021 compared to $495 million and $716 million in the fourth quarter and year ended December 31, 2020.  Results in the fourth quarter and year ended December 31, 2021 included $55 million and $380 million of net realized and unrealized investment losses from White Mountains's investment in MediaAlpha.  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.

MediaAlpha

White Mountains owns 16.9 million shares of MediaAlpha, representing a 28% basic ownership interest (26% on a fully-diluted/fully-converted basis).  At the December 31 closing price of $15.44, which was down from $18.68 at September 30, the value of White Mountains's investment in MediaAlpha was $262 million, which was down from $316 million at September 30, 2021.  This accounted for a decrease of $18 in both book value per share and adjusted book value per share in the quarter.  At our current level of ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $5.65 per share increase or decrease in White Mountains's book value per share and adjusted book value per share.  Our focus remains on MediaAlpha's intrinsic value, not on fluctuations in its share price.  We encourage you to read MediaAlpha's fourth quarter earnings release and related shareholder letter scheduled for February 24, 2022, which will be available on MediaAlpha's investor relations website at www.investors.mediaalpha.com.

HG Global/BAM

BAM's gross written premiums and member surplus contributions (MSC) collected were $34 million and $118 million in the fourth quarter and year ended December 31, 2021 compared to $38 million and $131 million in the fourth quarter and year ended December 31, 2020.  BAM insured municipal bonds with par value of $4.9 billion and $17.5 billion in the fourth quarter and year ended December 31, 2021 compared to $5.5 billion and $17.3 billion in the fourth quarter and year ended December 31, 2020.  Total pricing was 70 and 67 basis points in the fourth quarter and year ended December 31, 2021 compared to 70 and 76 basis points in the fourth quarter and year ended December 31, 2020.  BAM's total claims paying resources were $1,192 million at December 31, 2021 compared to $1,181 million at September 30, 2021 and $987 million at December 31, 2020.  In the first quarter of 2021, BAM completed a reinsurance agreement with Fidus Re that increased BAM's claims paying resources by $150 million. 

Seán McCarthy, CEO of BAM, said, "BAM insured $4.9 billion of par in the fourth quarter, capping off a good year.  In 2021, investor demand for bond insurance remained strong, with more than 8% of new municipal bond issues insured, marking the highest penetration rate since 2009.  For the full year, BAM insured a record $15.6 billion in the primary market.  Total pricing was flat in the quarter and down modestly for the full year, reflecting both tighter credit spreads and higher average credit quality for new policies."

Through the COVID-19 pandemic, BAM's portfolio has performed well.  All BAM-insured bond payments due through February 1, 2022 have been made by insureds, and there are no credits on BAM's watchlist.

HG Global reported pre-tax income of $5 million and $21 million in the fourth quarter and year ended December 31, 2021 compared to pre-tax income of $8 million and $50 million in the fourth quarter and year ended December 31, 2020.  The decreases in HG Global's pre-tax income in the fourth quarter and year ended December 31, 2021 compared to the fourth quarter and year ended December 31, 2020, were driven primarily by lower investment returns on the HG Global investment portfolio.

BAM made a $34 million cash payment of surplus note principal and interest in December 2021 compared to $30 million in December 2020.

White Mountains reported pre-tax loss related to BAM of $16 million and $63 million in the fourth quarter and year ended December 31, 2021 compared to pre-tax loss related to BAM of $15 million and $45 million in the fourth quarter and year ended December 31, 2020.  The increases in pre-tax loss related to BAM in the fourth quarter and year ended December 31, 2021 compared to the fourth quarter and year ended December 31, 2020, were driven primarily by lower investment returns on the BAM investment portfolio.

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 70% and 87% in the fourth quarter and year ended December 31, 2021.  Ark's adjusted combined ratio, which adds back amounts ceded to third-party capital providers, was 67% and 85% in the fourth quarter and year ended December 31, 2021.  The adjusted combined ratio for the year ended December 31, 2021 included ten points of catastrophe losses.  The adjusted combined ratio in the fourth quarter of 2021 included five points of net favorable development on catastrophe losses incurred in 2021, principally from Hurricane Ida.  The adjusted combined ratio in the fourth quarter and year ended December 31, 2021 included nine points and six points of net favorable prior year reserve development.

Ark reported gross written premiums of $164 million, net written premiums of $134 million and net earned premiums of $202 million in the fourth quarter of 2021.  Ark reported gross written premiums of $1,059 million, net written premiums of $859 million and net earned premiums of $637 million in the year ended December 31, 2021.  Ark reported pre-tax income of $57 million and $53 million in the fourth quarter and year ended December 31, 2021.  Ark's pre-tax income for the year ended December 31, 2021 reflected $25 million of transaction expenses related to White Mountains's transaction with Ark.

Ian Beaton, CEO of Ark, said, "Ark had a good finish to the year with an adjusted combined ratio of 67% in the fourth quarter, benefiting from both light catastrophes and favorable reserve development.  For the full year, Ark produced an adjusted combined ratio of 85%, an encouraging result in a year with heavy global catastrophe activity.  Gross written premiums were $1,059 million for the year, up 78% from 2020 with risk adjusted rate change of 8%.  In December, AM Best completed its annual review and affirmed Ark's "A/stable" rating.  Ark had a solid start to 2022, writing in excess of $500 million of gross written premiums in January with risk adjusted rate change up 11%." 

NSM

NSM reported commission and other revenues of $89 million, pre-tax income of $6 million and adjusted EBITDA of $18 million in the fourth quarter of 2021 compared to commission and other revenues of $73 million, pre-tax loss of $6 million and adjusted EBITDA of $15 million in the fourth quarter of 2020. 

NSM reported commission and other revenues of $330 million, pre-tax loss of $28 million and adjusted EBITDA of $71 million in the year ended December 31, 2021 compared to commission and other revenues of $285 million, pre-tax loss of $13 million and adjusted EBITDA of $59 million in the year ended December 31, 2020.  On April 12, 2021, NSM sold its Fresh Insurance motor business, which resulted in a loss of $29 million recorded in the first quarter of 2021.  Results in the fourth quarter and year ended December 31, 2021 include the results of J.C. Taylor, an MGA offering classic and antique collector car insurance, from August 6, 2021, the date of its acquisition.  Results in the fourth quarter and year ended December 31, 2021 and 2020 include the results of Kingsbridge Group Limited, a leading provider of commercial lines insurance and consulting services to the contingent workforce in the United Kingdom, from April 7, 2020, the date of its acquisition.

Geof McKernan, CEO of NSM, said, "NSM had a good fourth quarter to close out a strong year.  Trailing 12 months pro forma controlled premiums increased to a record $1,203 million, up 1% quarter over quarter, while trailing 12 months pro forma adjusted EBITDA increased to a record $76 million, up 2% quarter over quarter.  During 2021, we experienced significant growth, led by the Pet, Social Services and U.K. verticals."

Kudu

Kudu reported total revenues of $45 million, pre-tax income of $37 million and adjusted EBITDA of $14 million in the fourth quarter of 2021 compared to total revenues of $25 million, pre-tax income of $19 million and adjusted EBITDA of $8 million in the fourth quarter of 2020.  Total revenues and pre-tax income in the fourth quarter of 2021 included $22 million of realized investment gains and $5 million of unrealized investment gains on Kudu's participation contracts compared to $14 million of unrealized investment gains on Kudu's participation contracts in the fourth quarter of 2020. 

Kudu reported total revenues of $134 million, pre-tax income of $108 million and adjusted EBITDA of $33 million in the year ended December 31, 2021 compared to total revenues of $46 million, pre-tax income of $28 million and adjusted EBITDA of $22 million in the year ended December 31, 2020.  Total revenues and pre-tax income in the year ended December 31, 2021 included $22 million of realized investment gains and $68 million of unrealized investment gains on Kudu's participation contracts compared to $16 million of unrealized investment gains on Kudu's participation contracts in the year ended December 31, 2020. 

As of December 31, 2021, Kudu had deployed $612 million in 17 asset and wealth management firms globally, including one that was exited.  As of December 31, 2021, the asset and wealth management firms have combined assets under management of approximately $66 billion, spanning a range of asset classes.  Kudu's capital was deployed at an average gross cash yield at inception of 10.1%.

Rob Jakacki, CEO of Kudu, said, "Kudu had a strong fourth quarter and full year.  Year over year, revenues from participation contracts increased 48% to $44 million, while adjusted EBITDA increased 48% to $33 million.  Annualized adjusted EBITDA finished the year at $39 million.  We were delighted to complete two transactions in the fourth quarter: Granahan Investment Management, an equity specialist managing U.S. and global small cap portfolios, and Radcliffe Capital Management, a manager of defensive credit and opportunistic strategies."

Other Operations

White Mountains's Other Operations segment reported pre-tax (loss) income of $(52) million and $(392) million in the fourth quarter and year ended December 31, 2021 compared to $352 million and $626 million in the fourth quarter and year ended December 31, 2020.  The Other Operations segment results in the fourth quarter and year ended December 31, 2021 and 2020 were driven primarily by net realized and unrealized investment gains (losses) from White Mountains's investment in MediaAlpha.  Net realized and unrealized investment losses from White Mountains's investment in MediaAlpha were $55 million and $380 million in the fourth quarter and year ended December 31, 2021 compared to net realized and unrealized investment gains from White Mountains's investment in MediaAlpha of $391 million and $686 million in the fourth quarter and year ended December 31, 2020. 

Excluding MediaAlpha, net realized and unrealized investment gains were $17 million and $51 million in the fourth quarter and year ended December 31, 2021 compared to net realized and unrealized investment gains (losses) of $9 million and $(9) million in the fourth quarter and year ended December 31, 2020.  Net investment income was $2 million and $18 million in the fourth quarter and year ended December 31, 2021 compared to $3 million and $82 million in the fourth quarter and year ended December 31, 2020.  Net investment income in the year ended December 31, 2020 included $55 million of net proceeds received from a dividend recapitalization at MediaAlpha.

White Mountains's Other Operations segment reported general and administrative expenses of $26 million and $106 million in the fourth quarter and year ended December 31, 2021 compared to $55 million and $142 million in the fourth quarter and year ended December 31, 2020.  The decreases in general and administrative expenses in the fourth quarter and year ended December 31, 2021 compared to the fourth quarter and year ended December 31, 2020 were driven primarily by lower incentive compensation costs.

Share Repurchases

In the fourth quarter of 2021, White Mountains repurchased and retired 11,999 of its common shares for $13 million at an average share price of $1,072.72, or 90% of White Mountains's December 31, 2021 adjusted book value per share.  In the year ended December 31, 2021, White Mountains repurchased and retired 98,511 of its common shares for $108 million at an average share price of $1,091.29, or 92% of White Mountains's December 31, 2021 adjusted book value per share. 

In the year ended December 31, 2020, White Mountains repurchased and retired 99,087 of its common shares for $85 million at an average share price of $858.81, or 68% of White Mountains's December 31, 2020 adjusted book value per share.  White Mountains did not repurchase any of its common shares in the fourth quarter of 2020. 

Investments

The total consolidated portfolio return was 0.3% in the fourth quarter of 2021. Excluding MediaAlpha, the total consolidated portfolio return was 1.8% in the fourth quarter of 2021. The total consolidated portfolio return was 14.3% in the fourth quarter of 2020.  Excluding MediaAlpha, the total consolidated portfolio return was 1.7% in the fourth quarter of 2020.

The total consolidated portfolio return was -3.4% for the year ended December 31, 2021. Excluding MediaAlpha, the total consolidated portfolio return was 6.4% for the year ended December 31, 2021. The total consolidated portfolio return was 31.9% for the year ended December 31, 2020.  Excluding MediaAlpha, the total consolidated portfolio return was 4.6% for the year ended December 31, 2020.

Mark Plourde, Managing Director of White Mountains Advisors, said, "Excluding MediaAlpha, the total portfolio was up 1.8% in the quarter and 6.4% for the year, a solid result in a rising rate environment and driven by strong equity returns. The fixed income portfolio returned -0.3% for the quarter and -0.4% for the year, ahead of the longer duration BBIA Index returns of -0.5% and -1.3%.  Excluding MediaAlpha, the equity portfolio returned 5.1% in the quarter and 19.3% for the year, strong absolute returns, but behind the S&P 500 Index returns of 11.0% and 28.7%."

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-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.