White Mountains Reorganizes Reinsurance Unit As Profits Rise

NU Online News Service, Aug. 3, 2:52 p.m. EDT

White Mountains Insurance Group, Ltd., said it is reorganizing its reinsurance business, news that appeared not to dramatically affect the rating of the overall company as it also reported improved second-quarter financial results.

The Hamilton, Bermuda-based insurer said Friday that it is converting its reinsurance Bermuda operations, White Mountains Re Bermuda, into a branch of White Mountains Re Sirius.

Warren Trace, currently president and chief executive officer of White Mountains Re Bermuda, will remain in charge of the Bermuda branch operations. He will report to Goran Thorstensson, president and CEO of Sirius.

The company said the reorganization is expected to be effective on Sept. 1, pending regulatory approvals.

Allan Waters, president and CEO of White Mountains Re, said in a statement, "This reorganization keeps our successful Bermuda reinsurance team in place while bringing the security of the whole Sirius balance sheet to our clients in Bermuda."

The company said White Mountains Re will contribute in excess of $200 million of capital to Sirius, which will have in excess of $1.6 billion of regulatory capital on a pro forma basis as of June 30.

In addition, approximately $400 million of capital will be freed up and transferred to White Mountains Re and White Mountains holding companies.

White Mountains Reinsurance Company of America will remain under the direction of Dwight Evans as president and CEO.

The company said White Mountains Re America underwriting platform and regulatory capitalization stood at approximately $750 million as of June 30 and will not be affected by the reorganization.

Insurance rating service A.M. Best Co. said the ratings of White Mountains Insurance Group were unaffected by the change. However, the outlook for Sirius International Insurance was revised from stable to negative, while all other outlooks remained stable.

Best said it was concerned with the long-term potential for reduced capacity at Sirius to support "parental and affiliate needs" based on the rating service's calculations and the assumption and guaranty of "select higher risk and higher volatility businesses of White Mountain Re Bermuda."

Standard & Poor's Rating Service said its rating of the company and subsidiaries were unaffected by the move.

White Mountains also reported second-quarter earnings rose $253 million from the same period last year, going from net loss of $17 million to net income of $236 million. That translated into earnings per share of $20.35 from a loss of 87 cents last year. Revenues rose 17 percent, or $180 million, to $1.22 billion.

For the six months net income increased $243 million to $226 million over the same period last year. Earnings per share went from a loss of $6.24 to net of $23.82. Revenues rose 11 percent, or $208 million, to $2.19 billion.

The company's improved performance was credited with a combination of improved investment returns, light catastrophe claims and improved underwriting results.

The reinsurance unit suffered losses from storms in Eastern Europe and the Air France plane crash off the coast of Brazil earlier this year.

White Mountains' One Beacon insurance reported second-quarter combined ratio dropped 1 point to 93 over the same period last year. Six-month results improved 4 points to 93.

White Mountains Re total second-quarter combined ratio improved 27 points to 87, and the six-month combined ratio dropped 21 points to 83.

For the company's online auto insurance division, Esurance, second-quarter combined ratio improved 5 points to 100 and six-month figures improved 7 points to 102.