OneBeacon Reports $15.03 Book Value Per Share
HAMILTON, Bermuda, Feb. 3 /PRNewswire-FirstCall/ -- OneBeacon Insurance Group, Ltd. (NYSE: OB) today reported book value per share of $15.03, an increase of 5.5% for the fourth quarter and 30.6% through twelve months, including dividends.
Mike Miller, CEO of OneBeacon, said, "We are pleased with our performance on every front in 2009. We finished the year with strong results, including 31% growth in book value and a 94% GAAP combined ratio for both the quarter and the full year. Investment returns were excellent, with a 1% return for the fourth quarter and 10% for the year. The sale of our non-specialty Commercial Lines business in early December and our more recently announced Personal Lines sale is a major step in our transition to a specialty company."
Continued Miller, "Capital freed up by the sales significantly enhances our financial flexibility as we continue to grow our Specialty Lines. We enter 2010 with specialty business units that are performing well and positioned for continued success."
For the fourth quarter, comprehensive net income was $84 million and net income was $72 million, and operating income was $66 million or $0.70 per share. For the twelve months ended December 31, 2009, comprehensive net income was $361 million, net income was $342 million, and operating income was $180 million or $1.90 per share. Operating income is a non-GAAP financial measure which is explained later in this release.
On December 3, 2009, OneBeacon sold the renewal rights to its non-specialty Commercial Lines business to The Hanover Insurance Group. The agreement included small-commercial accounts and non-specialty middle-market business beginning with January 1, 2010 effective dates. As a result of this transaction, Specialty Lines financial results now include Technology, Financial Services, OneBeacon Specialty Property and Property and Inland Marine segmented commercial businesses. The non-specialty Commercial business subject to the renewal rights agreement is presented within Run-off results, along with other run-off business. Furthermore, OneBeacon's 2009 results include pre-tax proceeds of $23 million, reflected in net other revenues, from the renewal rights sale.
Insurance Operations
The fourth quarter GAAP combined ratio was 93.6% as compared to 86.2% for the fourth quarter of 2008, with 2009 results reflecting higher losses at AutoOne and higher expenses, including increased incentive compensation costs and severance and other costs associated with the renewal rights transaction. The full-year 2009 GAAP combined ratio was 94.4% compared to 95.0% for 2008, with the variance reflecting lower catastrophe losses and slightly more favorable loss development on prior accident year losses, somewhat offset by higher expenses.
Fourth quarter net written premiums were $435.5 million as compared to $473.7 million for the fourth quarter of 2008. Specialty Lines' premiums increased by 4.0% for the quarter, reflecting new business growth from most of the businesses, particularly Entertainment Brokers International Insurance Services, OneBeacon Energy and OneBeacon Professional Insurance. Personal Lines' premiums decreased by 21.8%, including the impact of premiums ceded under the homeowners quota share agreement, while Run-off premiums declined by 13.4%. Excluding the impact of the quota share, Personal Lines' premiums declined by 12.4% for the fourth quarter. Through December 31, 2009, net written premiums were $1,906.7 million as compared to $1,963.1 million in 2008. For the full year, Specialty Lines' premiums increased by 13.1%, while Personal Lines premiums decreased by 17.8% and Run-off premiums were 11.0% lower. Excluding the impact of the quota share, Personal Lines' premiums declined by 8.1%.
Consolidated Investment Results
OneBeacon's fourth quarter total return on invested assets was 1.1%, compared to minus 8.0% for the fourth quarter of 2008. These results included net realized and unrealized investment gains of $10 million and net investment income of $33 million, compared to net realized and unrealized investment losses of $350 million and net investment income of $27 million for the fourth quarter of 2008.
Through December 31, 2009, total return on invested assets was 9.9%, compared to minus 13.0% through the twelve months of 2008. Investment results included net realized and unrealized investment gains of $249 million and net investment income of $126 million. This compared to net realized and unrealized investment losses of $764 million and net investment income of $164 million through December 31, 2008.
Company to Host Webcast
OneBeacon will host its fourth quarter and full year 2009 Webcast for analysts and investors at 10:00 a.m. ET on Wednesday, February 3. Copies of the earnings release, the slide presentation that will be referenced during the call and a financial supplement are available on the company's Web site: www.onebeacon.com. An audio playback of the teleconference will be available on the Web site shortly following the Webcast.
About OneBeacon: OneBeacon Insurance Group, Ltd. is a Bermuda-domiciled holding company that is publicly traded on the New York Stock Exchange under the symbol "OB". OneBeacon Insurance Group's underwriting companies offer a range of specialty and personal insurance products sold through select independent agents, regional and national brokers, and wholesalers. The company's specialty businesses include OneBeacon Professional Insurance, International Marine Underwriters, Entertainment Brokers International Insurance Services, Specialty Accident and Health, OneBeacon Government Risks, OneBeacon Energy Group, A.W.G. Dewar (tuition refund), collector cars and boats written through Hagerty Insurance Agency, Technology, Financial Services, OneBeacon Specialty Property, and Property and Inland Marine.
As one of the oldest property and casualty insurers in the United States, OneBeacon traces its roots to 1831 and the Potomac Fire Insurance Company. Today, OneBeacon's specialty insurance businesses are national in scope while personal lines business is concentrated in the Northeastern United States.
ONEBEACON INSURANCE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
($ in millions)
(Unaudited)
December September December
31, 30, 31,
2009 2009 2008
---- ---- ----
Assets
Investment securities,
at fair value:
Fixed maturity investments $2,994.3 $2,795.7 $2,134.8
Common equity securities 187.6 81.2 276.7
Convertible bonds 170.2 244.0 241.2
Short-term investments 544.4 730.6 962.2
Other investments 146.3 166.2 196.6
----- ----- -----
Total investments 4,042.8 4,017.7 3,811.5
Cash 44.8 53.0 53.0
Reinsurance recoverable on
unpaid losses 2,192.9 2,244.3 2,503.3
Reinsurance recoverable on paid
losses 15.9 17.3 21.7
Premiums receivable 469.1 505.8 527.6
Securities lending collateral (1) - - 100.7
Deferred acquisition costs 215.0 228.8 225.5
Net deferred tax asset 161.1 101.7 252.7
Investment income accrued 29.4 26.0 25.7
Ceded unearned premiums 49.9 59.1 66.5
Accounts receivable on
unsettled investment sales 24.2 30.1 49.0
Other assets 286.9 290.7 303.6
----- ----- -----
Total assets $7,532.0 $7,574.5 $7,940.8
======== ======== ========
Liabilities
Loss and loss adjustment
expense reserves $3,934.8 $4,029.6 $4,294.0
Unearned premiums 1,018.3 1,081.2 1,088.2
Debt 620.5 620.4 731.9
Securities lending payable (2) 1.7 1.7 107.7
Ceded reinsurance payable 24.7 36.3 70.5
Accounts payable on unsettled
investment purchases 7.6 29.3 6.8
Other liabilities 476.3 383.6 469.4
----- ----- -----
Total liabilities 6,083.9 6,182.1 6,768.5
------- ------- -------
Shareholders' equity and
noncontrolling interests
OneBeacon's shareholders' equity:
Common shares and paid-in
surplus (3) 1,009.7 1,017.9 1,016.7
Retained earnings (3) 425.5 373.1 163.4
Accumulated other comprehensive
loss, after tax:
Net unrealized foreign
currency translation losses (0.7) (0.6) (0.6)
Other comprehensive income
and loss items (4) (5.5) (16.9) (24.4)
---- ----- -----
Total OneBeacon's
shareholders' equity 1,429.0 1,373.5 1,155.1
Total noncontrolling interests 19.1 18.9 17.2
---- ---- ----
Total OneBeacon's
shareholders' equity and
noncontrolling interests 1,448.1 1,392.4 1,172.3
------- ------- -------
Total liabilities,
OneBeacon's shareholders'
equity and noncontrolling
interests $7,532.0 $7,574.5 $7,940.8
======== ======== ========
(1) In 2009, the Company amended its securities lending program, giving
it more control over the assets held in the securities lending collateral
account. As a result, these assets are now included within the Company's
investments.
(2) In 2009, the Company settled substantially all of the outstanding
payables under its securities lending program thereby reducing this
liability.
(3) In the fourth quarter of 2009, a settlement was reached with the
Internal Revenue Service relating to the examination of OneBeacon's U.S.
income tax returns for 2003 and 2004. As a result of the settlement,
2009 results include a tax benefit in the statement of operations of $15.5
million offset by a capital distribution of $8.4 million reflected in
shareholders' equity. The net effect of the settlement resulted in an
increase to book value of $7.1 million.
(4) Other comprehensive income and loss items include the impact of
changes in OneBeacon's pension plans primarily related to changes in the
overfunded status of OneBeacon's qualified pension plan driven by
investment results and also changes in OneBeacon's interest rate swap
related to the mortgage note.
ONEBEACON INSURANCE GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in millions, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Earned premiums $488.7 $488.7 $1,959.5 $1,879.0
Net investment income 33.1 26.6 125.5 164.4
Net realized and unrealized
investment gains (losses) 9.5 (349.7) 248.6 (763.6)
Net other revenues (1) 28.5 3.2 44.7 13.8
---- --- ---- ----
Total revenues 559.8 168.8 2,378.3 1,293.6
----- ----- ------- -------
Expenses:
Loss and loss adjustment expenses 260.0 247.5 1,121.9 1,126.2
Policy acquisition expenses 104.0 106.7 398.3 368.3
Other underwriting expenses 93.6 67.2 330.0 290.8
General and administrative
expenses 7.2 4.1 26.1 18.6
Accretion of fair value
adjustment to loss and loss
adjustment expense reserves 1.3 3.0 5.4 12.0
Interest expense on debt 9.6 11.0 39.7 44.9
Interest expense - dividends on
preferred stock subject to
mandatory redemption - - - 11.8
Interest expense - accretion on
preferred stock subject to
mandatory redemption - - - 21.6
--- --- --- ----
Total expenses 475.7 439.5 1,921.4 1,894.2
----- ----- ------- -------
Pre-tax income (loss) 84.1 (270.7) 456.9 (600.6)
Income tax (expense) benefit (2) (11.5) 99.0 (112.8) 219.6
----- ---- ------ -----
Net income (loss) including
noncontrolling interests 72.6 (171.7) 344.1 (381.0)
Less: Net income attributable
to noncontrolling interests (0.2) (0.2) (2.1) (1.7)
---- ---- ---- ----
Net income (loss) attributable to
OneBeacon's shareholders 72.4 (171.9) 342.0 (382.7)
Change in foreign currency
translation (0.1) (0.6) (0.1) (0.3)
Change in other comprehensive
income and loss items (1) (3) 11.4 (25.7) 18.9 (25.2)
---- ----- ---- -----
Comprehensive net income (loss)
attributable to OneBeacon's
shareholders $83.7 $(198.2) $360.8 $(408.2)
===== ======= ====== =======
Earnings (loss) per share
attributable to OneBeacon's
shareholders - basic and diluted
Net income (loss) attributable
to OneBeacon's shareholders $0.76 $(1.81) $3.60 $(3.99)
Weighted average number of
shares outstanding (4) 95.1 95.1 95.1 95.9
(1) The year ended December 31, 2009 includes $7.4 million pre-tax
expense resulting from the settlement of the Company's interest rate
swap related to the mortgage note within net other revenues. Included
in change in other comprehensive income and loss items for the year
ended December 31, 2009 is a $4.8 million after tax ($7.4 million pre-
tax) increase resulting from the settlement of the interest rate swap.
(2) The three months and year ended December 31, 2009 include a tax
benefit of $15.5 million relating to the settlement of the federal
income tax examination of OneBeacon's U.S. income tax returns for 2003
and 2004.
(3) The three months and year ended December 31, 2009 include the impact
of an $11.4 million after tax and a $12.1 million after tax increase,
respectively, in OneBeacon's pension plans primarily related to an
increase in the overfunded status of OneBeacon's qualified pension
plan driven by investment results. The year ended December 31, 2009
also includes the impact of a $6.8 million after tax increase in
OneBeacon's interest rate swap related to the mortgage note. The three
months and year ended December 31, 2008 include the impact of a $20.6
million after tax and $19.5 million after tax decrease, respectively,
in OneBeacon's pension plans primarily related to a decrease in the
overfunded status of OneBeacon's qualified pension plan driven by
investment results. The three months and year ended December 31, 2008
also include the impact of a $5.1 million after tax and $5.7 million
after tax decrease, respectively, in OneBeacon's interest rate swap
related to the mortgage note.
(4) Includes the impact of repurchases of Class A common shares made
through the Company's share repurchase program which commenced in the
third quarter of 2007.
ONEBEACON INSURANCE GROUP, LTD.
SEGMENT STATEMENTS OF OPERATIONS
($ in millions)
(Unaudited)
For the Three Months Ended December 31, 2009
--------------------------------------------
Insurance
Operations Other Total
---------- ----- -----
Revenues:
Earned premiums $488.7 $- $488.7
Net investment income (expense) 33.9 (0.8) 33.1
Net realized and unrealized
investment gains (losses) 11.2 (1.7) 9.5
Net other revenues (expenses) 28.9 (0.4) 28.5
----- ---- -----
Total revenues 562.7 (2.9) 559.8
----- ---- -----
Expenses:
Loss and loss adjustment expenses 260.0 - 260.0
Policy acquisition expenses 104.0 - 104.0
Other underwriting expenses 93.6 - 93.6
General and administrative
expenses 4.1 3.1 7.2
Accretion of fair value adjustment
to loss and LAE reserves - 1.3 1.3
Interest expense on debt 0.1 9.5 9.6
----- ---- -----
Total expenses 461.8 13.9 475.7
----- ---- -----
Pre-tax income (loss) (1) $100.9 $(16.8) $84.1
====== ====== =====
For the Three Months Ended December 31, 2008
--------------------------------------------
Insurance
Operations Other Total
---------- ----- -----
Revenues:
Earned premiums $488.7 $- $488.7
Net investment income 26.1 0.5 26.6
Net realized and unrealized
investment losses (349.7) - (349.7)
Net other revenues (expenses) 4.1 (0.9) 3.2
----- ---- -----
Total revenues 169.2 (0.4) 168.8
----- ---- -----
Expenses:
Loss and loss adjustment expenses 247.5 - 247.5
Policy acquisition expenses 106.7 - 106.7
Other underwriting expenses 67.2 - 67.2
General and administrative
expenses 3.0 1.1 4.1
Accretion of fair value adjustment
to loss and LAE reserves - 3.0 3.0
Interest expense on debt 0.8 10.2 11.0
----- ---- -----
Total expenses 425.2 14.3 439.5
----- ---- -----
Pre-tax loss (1) $(256.0) $(14.7) $(270.7)
======= ====== =======
(1) Includes income from noncontrolling interests.
ONEBEACON INSURANCE GROUP, LTD.
SEGMENT STATEMENTS OF OPERATIONS
($ in millions)
(Unaudited)
For the Year Ended December 31, 2009
--------------------------------------
Insurance
Operations Other Total
---------- ----- -----
Revenues:
Earned premiums $1,959.5 $- $1,959.5
Net investment income
(expense) 127.4 (1.9) 125.5
Net realized and
unrealized investment
gains (losses) 250.7 (2.1) 248.6
Net other revenues 41.0 3.7 44.7
------- ---- -------
Total revenues 2,378.6 (0.3) 2,378.3
------- ---- -------
Expenses:
Loss and loss
adjustment expenses 1,121.9 - 1,121.9
Policy acquisition
expenses 398.3 - 398.3
Other underwriting
expenses 330.0 - 330.0
General and
administrative
expenses 16.9 9.2 26.1
Accretion of fair value
adjustment to loss and
LAE reserves - 5.4 5.4
Interest expense on debt 1.5 38.2 39.7
------- ---- -------
Total expenses 1,868.6 52.8 1,921.4
------- ---- -------
Pre-tax income (loss) (1) $510.0 $(53.1) $456.9
====== ====== ======
For the Year Ended December 31, 2008
-------------------------------------
Insurance
Operations Other Total
---------- ----- -----
Revenues:
Earned premiums $1,879.0 $- $1,879.0
Net investment income 152.8 11.6 164.4
Net realized and
unrealized investment
losses (760.5) (3.1) (763.6)
Net other revenues
(expenses) 14.0 (0.2) 13.8
------- --- -------
Total revenues 1,285.3 8.3 1,293.6
------- --- -------
Expenses:
Loss and loss
adjustment expenses 1,126.2 - 1,126.2
Policy acquisition
expenses 368.3 - 368.3
Other underwriting
expenses 290.8 - 290.8
General and
administrative
expenses 10.5 8.1 18.6
Accretion of fair value
adjustment to loss and
LAE reserves - 12.0 12.0
Interest expense on debt 3.5 41.4 44.9
Interest expense - dividends
on preferred stock subject
to mandatory redemption - 11.8 11.8
Interest expense - accretion
on preferred stock subject
to mandatory redemption - 21.6 21.6
--- ---- ----
Total expenses 1,799.3 94.9 1,894.2
------- ---- -------
Pre-tax loss (1) $(514.0) $(86.6) $(600.6)
======= ====== =======
(1) Includes income from noncontrolling interests.
ONEBEACON INSURANCE GROUP, LTD.
SUMMARY OF RATIOS AND PREMIUMS
($ in millions)
(Unaudited)
Three Months Ended Insurance
December 31, 2009 Operations
------------------ -----------
Specialty(1) Personal Run-off(2) Total
----------- -------- --------- -----
Ratios
Loss and loss
adjustment expenses 44.1% 77.3% 44.9% 53.2%
Expense 41.8% 32.7% 46.2% 40.4%
---- ---- ---- ----
Total GAAP
combined 85.9% 110.0% 91.1% 93.6%
===== ===== ===== =====
Net written premiums $222.2 $110.8 $102.5 $435.5
Earned premiums $244.0 $131.1 $113.6 $488.7
--------------- ----- ----- ----- -----
Three Months Ended Insurance
December 31, 2008 Operations
----------------- -----------
Specialty(1) Personal Run-off(2) Total
----------- -------- --------- -----
Ratios
Loss and loss
adjustment expenses 42.0% 61.8% 51.0% 50.6%
Expense 38.0% 32.2% 35.8% 35.6%
---- ---- ---- ----
Total GAAP
combined 80.0% 94.0% 86.8% 86.2%
===== ===== ===== =====
Net written premiums $213.7 $141.7 $118.3 $473.7
Earned premiums $206.8 $155.5 $126.4 $488.7
--------------- ----- ----- ----- -----
Year Ended December Insurance
31, 2009 Operations
------------------- -----------
Specialty(1) Personal Run-off(2) Total
----------- -------- --------- -----
Ratios
Loss and loss
adjustment expenses 43.9% 75.7% 61.1% 57.3%
Expense 39.6% 31.2% 39.6% 37.1%
---- ---- ---- ----
Total GAAP
combined 83.5% 106.9% 100.7% 94.4%
===== ===== ===== =====
Net written premiums $946.2 $508.7 $451.8 $1,906.7
Earned premiums $917.9 $567.9 $473.7 $1,959.5
--------------- ------ ------ ------ --------
Year Ended December Insurance
31, 2008 Operations
------------------ -----------
Specialty(1) Personal Run-off(2) Total
----------- -------- --------- -----
Ratios
Loss and loss
adjustment expenses 48.3% 64.0% 71.7% 59.9%
Expense 36.8% 31.9% 36.6% 35.1%
---- ---- ---- ----
Total GAAP
combined 85.1% 95.9% 108.3% 95.0%
===== ===== ===== =====
Net written premiums $836.9 $618.7 $507.5 $1,963.1
Earned premiums $730.0 $640.8 $508.2 $1,879.0
--------------- ------ ------ ------ --------
(1) Specialty lines includes Technology, Financial Services, OneBeacon
Specialty Property and Property and Inland Marine segmented
commercial businesses which were formerly reported in commercial
lines. Prior periods have been reclassified to conform to the current
presentation.
(2) Run-off includes non-specialty commercial lines business subject to
the renewal rights agreement with The Hanover and other run-off
business. Prior periods have been reclassified to conform to the
current presentation.
ONEBEACON INSURANCE GROUP, LTD.
BOOK VALUE PER SHARE
(in millions, except per share amounts)
(Unaudited)
December 31, September 30, December 31,
2009 2009 2008
---- ---- ----
Numerator
OneBeacon's
shareholders'
equity $1,429.0 $1,373.5 $1,155.1
Denominator
Common shares
outstanding 95.1 95.1 95.1
---- ---- ----
Book value per share $15.03 $14.44 $12.15
====== ====== ======
Change in book
value per share,
including dividends,
in the quarter (1) 5.5%
Change in book
value per share,
including dividends,
in the last twelve
months (2) 30.6%
(1) Includes a quarterly dividend of $0.21 per share.
(2) Includes dividends of $0.84 per share (a quarterly dividend of $0.21
per share).
ONEBEACON INSURANCE GROUP, LTD.
COMPREHENSIVE NET INCOME (LOSS), NET INCOME (LOSS) AND OPERATING INCOME
(in millions, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
--------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Comprehensive net income (loss)
attributable to OneBeacon's
shareholders $83.7 $(198.2) $360.8 $(408.2)
Adjusting items (1) - - - 29.4
--- --- --- ----
Adjusted comprehensive net income
(loss) (2) $83.7 $(198.2) $360.8 $(378.8)
===== ======= ====== =======
Net income (loss) attributable to
OneBeacon's shareholders $72.4 $(171.9) $342.0 $(382.7)
Adjusting items (1) - - - 29.4
--- --- --- ----
Adjusted net income (loss) (2) $72.4 $(171.9) $342.0 $(353.3)
===== ======= ====== =======
Weighted average common shares
outstanding (3) 95.1 95.1 95.1 95.9
---- ---- ---- ----
Net income (loss) attributable to
OneBeacon's shareholders per share $0.76 $(1.81) $3.60 $(3.99)
===== ====== ===== ======
Adjusted net income (loss) per share (2) $0.76 $(1.81) $3.60 $(3.68)
===== ====== ===== ======
Net income (loss) attributable to
OneBeacon's shareholders $72.4 $(171.9) $342.0 $(382.7)
Less:
Net realized and unrealized investment
gains and losses (9.5) 349.7 (248.6) 763.6
Tax effect on net realized and
unrealized investment gains and losses 3.3 (122.4) 87.0 (267.2)
--- ------ ---- ------
Operating income (2) $66.2 $55.4 $180.4 $113.7
Adjusting items (1) - - - 29.4
--- --- --- ----
Adjusted operating income (2) $66.2 $55.4 $180.4 $143.1
===== ===== ====== ======
Weighted average common shares
outstanding (3) 95.1 95.1 95.1 95.9
---- ---- ---- ----
Operating income per share (2) $0.70 $0.58 $1.90 $1.19
===== ===== ===== =====
Adjusted operating income per share (2) $0.70 $0.58 $1.90 $1.49
===== ===== ===== =====
(1) Adjusted to exclude the impact of economically defeasing the Company's
mandatorily redeemable preferred stock, which was redeemed in May 2008, as
illustrated below.
Adjusting items:
Dividends on preferred stock $- $- $- $11.8
Accretion on preferred stock - - - 21.6
Earnings on defeasance, net of tax - - - (4.0)
--- --- --- ----
Total adjusting items $- $- $- $29.4
== == == =====
(2) Represents a non-GAAP financial measure.
(3) Includes the impact of repurchases of common shares made through the
Company's share repurchase program which commenced in the third quarter of
2007.
ONEBEACON INSURANCE GROUP, LTD.
COMPREHENSIVE AND OPERATING RETURNS ON
AVERAGE EQUITY
($ in millions)
(Unaudited)
Year Ended
December 31, 2009
Numerator: -----------------
[A] Comprehensive net income $360.8
[B] Operating income (1) $180.4
As of As of
December 31, 2009 December 31, 2008 Average
----------------- ----------------- -------
Denominator:
[C]OneBeacon's shareholders'
equity $1,429.0 $1,155.1 $1,292.1
Less:
AOCI at January 1, 2008 (181.1) (181.1)
Change in OCI/L and net
unrealized investment gains
and losses recognized during
the year ended December 31,
2008, after tax (2) 314.6 -
Change in net unrealized
investment gains and losses (3) (269.1) 444.7
Tax effect on change in net
unrealized investment gains
and losses 94.2 (155.6)
Change in OCI/L during the
period, after tax (18.8) 25.5
----- ----
[D] Adjusted OneBeacon's
shareholders' equity
excluding change in net
unrealized investment
gains and losses, after
tax, and AOCI/L (1) $1,368.8 $1,288.6 $1,328.7
-------- --------
Returns:
Comprehensive return on average OneBeacon's
shareholders' equity [A/C] 27.9%
Operating return on average
adjusted OneBeacon's
shareholders' equity excluding
change in net unrealized
investment gains and losses,
after tax, and AOCI/L [B/D] 13.6%
(1) Represents a non-GAAP financial measure.
(2) The components of the change in OCI/L and net unrealized investment
gains and losses recognized during the year ended December 31, 2008, after
tax, are as illustrated below:
Change in net unrealized
investment gains and losses
during the year ended December
31, 2008 (3) $444.7
Tax effect on change in net
unrealized investment gains
and losses (3) (155.6)
Change in OCI/L during the
year ended December 31, 2008
excluding the adjustment to
adopt SFAS 159, after tax 25.5
----
$314.6
======
(3) Change in net unrealized investment gains and losses is a component of
net realized and unrealized investment gains (losses) as presented in the
Company's Statements of Operations and Comprehensive Income (Loss).
Discussion of Non-GAAP Financial Measures
This earnings release includes non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures. OneBeacon believes these measures to be useful supplements to the comparable GAAP measures in evaluating OneBeacon's financial performance. In addition, certain of these non-GAAP financial measures have been adjusted to exclude the impact of economically defeasing the Company's mandatorily redeemable preferred stock. As described in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, in connection with its initial public offering, the Company created two irrevocable grantor trusts and funded them with assets sufficient to make the remaining dividend and redemption payments for $20 million of preferred stock that was redeemed in June 2007 and $300 million of preferred stock that was redeemed in May 2008. The Company created and funded these trusts to appropriately capitalize and leverage the Company in preparation for and in connection with its initial public offering. Having completed these actions, OneBeacon believes that presentation of certain of the non-GAAP financial measures as described below, adjusted to exclude the impact of the economic defeasance of the preferred stock as of and for the respective periods, is a useful supplement to understanding the Company's earnings and profitability.
Adjusted comprehensive net income (loss) is derived by excluding the impact of economically defeasing the Company's mandatorily redeemable preferred stock from comprehensive net income (loss) attributable to OneBeacon's shareholders, the most closely comparable GAAP measure. As described above, OneBeacon believes that adjusted comprehensive net income (loss) is a useful supplement to understanding the Company's earnings and profitability.
Adjusted net income (loss) is derived by excluding the impact of economically defeasing the Company's mandatorily redeemable preferred stock from net income (loss) attributable to OneBeacon's shareholders, the most closely comparable GAAP measure. As described above, OneBeacon believes that adjusted net income (loss) is a useful supplement to understanding the Company's earnings and profitability.
Adjusted net income (loss) per share is calculated by dividing adjusted net income (loss) (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding. OneBeacon believes that adjusted net income (loss) per share is a useful supplement to understanding the Company's earnings and profitability.
Operating income is a non-GAAP financial measure that excludes net realized and unrealized investment gains or losses and the related tax effects from net income (loss) attributable to OneBeacon's shareholders. OneBeacon believes that this non-GAAP financial measure provides a useful alternative picture of the underlying operating activities of the Company to the GAAP measure of net income (loss) attributable to OneBeacon's shareholders, as it removes variability in the timing of investment gains and losses which may be heavily influenced by investment market conditions. Although key to the Company's overall financial performance, OneBeacon believes that realized and unrealized investment gains or losses are largely independent of the underwriting decision-making process as well as the activities of its other operations segment.
Adjusted operating income is a non-GAAP financial measure that excludes the impact of economically defeasing the Company's mandatorily redeemable preferred stock from operating income (a non-GAAP financial measure described above). OneBeacon believes that adjusted operating income is a useful supplement to understanding the Company's earnings and profitability.
Operating income per share is calculated by dividing operating income (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding. OneBeacon believes that operating income per share is a useful alternative picture of the underlying operating activities of the Company as it removes variability in the timing of investment gains and losses which may be heavily influenced by investment market conditions. Net income (loss) attributable to OneBeacon's shareholders per share is the most directly comparable GAAP measure.
Adjusted operating income per share is calculated by dividing adjusted operating income (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding. OneBeacon believes that adjusted operating income per share is a useful supplement to understanding the Company's earnings and profitability. Net income (loss) attributable to OneBeacon's shareholders per share is the most directly comparable GAAP measure.
Adjusted OneBeacon's shareholders' equity excluding change in net unrealized investment gains and losses, after-tax, and accumulated other comprehensive income/loss (AOCI/L), the average of which is used in calculating operating returns, is derived by excluding the impacts of net unrealized investment gains and losses recognized during the respective periods and accumulated other comprehensive income or loss and changes in other comprehensive income or loss (OCI/L), collectively AOCI/L, from OneBeacon's shareholders' equity. For the reasons described above, OneBeacon believes that it is appropriate to remove the variability in the timing of unrealized investment gains and losses and other comprehensive income and loss items when analyzing certain performance measures.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press 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 we expect or anticipate will or may occur in the future are forward-looking statements. The words "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 OneBeacon's:
- change in book value per share or return on equity;
- business strategy;
- financial and operating targets or plans;
- incurred loss and loss adjustment expenses and the adequacy of its loss and loss adjustment expense reserves and related reinsurance;
- projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
- expansion and growth of our business and operations; and
- future capital expenditures.
These statements are based on certain assumptions and analyses made by OneBeacon 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 our expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:
- claims arising from catastrophic events, such as hurricanes, windstorms, earthquakes, floods, fires, explosions, terrorist attacks or severe winter weather;
- recorded loss and loss adjustment expense reserves subsequently proving to have been inadequate;
- the continued availability and cost of reinsurance coverage;
- the continued availability of capital and financing;
- general economic, market or business conditions;
- business opportunities (or lack thereof) that may be presented to it and pursued;
- competitive forces, including the conduct of other property and casualty insurers and agents;
- changes in domestic or foreign laws or regulations, or their interpretation, applicable to OneBeacon, its competitors, its agents or its customers;
- an economic downturn or other economic conditions adversely affecting its financial position including stock market volatility;
- actions taken by ratings agencies from time to time, such as financial strength or credit ratings downgrades or placing ratings on negative watch;
- the risks that are described from time to time in OneBeacon's filings with the Securities and Exchange Commission, including but not limited to OneBeacon's Annual Report on the Form 10-K for the fiscal year ended December 31, 2008 filed February 27, 2009.
Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by OneBeacon will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, OneBeacon or its business or operations. OneBeacon assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE OneBeacon Insurance Group, Ltd.
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