Revenues up at White Mountains but profits dip

White Mountains Insurance Group enjoyed a big increase in its revenues in the second quarter of 2018 mainly driven by the additional revenues of NSM Insurance HoldCo, an insurance programme administrator it acquired for $274 million, this year. But its overall profits deteriorated.

The company’s revenues increased to £122.3 million compared with $83.5 million a year earlier. The biggest gain was in the specialty insurance distribution business, which added $22.6 million to the results. But its financial guarantee business (BAM/HG Global) grew to $3.4 million from $2.2 million and its marketing technology business (MediaAlpha) increased its revenues to $71.8 million versus $30.8 million.

The company’s overall net income fell to $3 million compared with $13.6 million in the same period a year earlier.

Manning Rountree, CEO, said: "We had decent results in the quarter, with ABVPS up 1 percent. After a slow start to the year, BAM's results rebounded in the second quarter, with higher par insured volumes and good pricing. MediaAlpha maintained its momentum, with strong top and bottom line growth. Our investment portfolio produced a total return of 0.7%, driven largely by the rebound in equity markets. We made good progress on capital deployment during the quarter, closing the acquisition of NSM and in turn Fresh Insurance, as well as repurchasing 575,068 White Mountains shares for $505 million."

BAM insured municipal bonds with par value of $3.1 billion and $4.4 billion in the second quarter and first six months of 2018, compared to $2.7 billion and $5.1 billion in the second quarter and first six months of 2017. Gross written premiums and member surplus contributions totaled $29 million and $40 million in the second quarter and first six months of 2018, compared to $20 million and $48 million in the second quarter and first six months of 2017.

Seán McCarthy, CEO of BAM, said: "In the second quarter, new-issue municipal bond volume recovered, and longer-term new-money transactions represented a larger share of the total market volume. These favorable trends allowed BAM to more than double its primary and secondary market volume, quarter over quarter, while maintaining attractive risk-adjusted pricing levels. Claims-paying resources finished the quarter at an all-time high, reflecting the close of the Fidus Re transaction, which added $100 million of reinsurance protection in the form of collateralized insurance-linked securities. On June 25th, S&P Global Ratings affirmed BAM's AA/Stable rating, citing BAM's market acceptance, proven track record of credit discipline and growth in par insured and premiums written."

HG Global reported pre-tax income of $8 million and $12 million in the second quarter and first six months of 2018, compared to pre-tax income of $7 million and $13 million in the second quarter and first six months of 2017. White Mountains reported pre-tax loss related to BAM of $17 million and $36 million in the second quarter and first six months of 2018, compared to pre-tax loss of $12 million and $24 million in the second quarter and first six months of 2017. The changes at BAM were driven primarily by lower investment returns in 2018.

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.

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