OneBeacon Reports $13.26 Book Value Per Share

ONEBEACON INSURANCE GROUP, LTD. 

CONSOLIDATED BALANCE SHEETS

($ in millions)

(Unaudited)

March 31,

2011

December 31,

2010

March 31,

2010

Assets

Investment securities:

Fixed maturity investments

$

2,422.0

$

2,415.5

$

2,344.5

Short-term investments

244.8

300.0

1,068.8

Common equity securities

309.9

285.3

245.6

Convertible bonds

92.3

93.8

170.9

Other investments

163.0

171.4

160.5

Total investments

3,232.0

3,266.0

3,990.3

Cash

32.6

33.6

45.4

Reinsurance recoverable on unpaid losses

1,864.0

1,893.2

2,200.8

Reinsurance recoverable on paid losses

18.3

44.5

19.8

Premiums receivable

260.5

275.0

459.2

Deferred acquisition costs

112.0

114.5

188.5

Ceded unearned premiums

58.4

113.9

112.5

Net deferred tax asset

90.5

101.2

147.6

Investment income accrued

18.1

19.4

21.2

Accounts receivable on unsettled investment sales

15.3

5.4

42.7

Other assets

293.9

300.0

313.5

Total assets

$

5,995.6

$

6,166.7

$

7,541.5

Liabilities

Loss and loss adjustment expense reserves

$

3,224.7

$

3,295.5

$

3,991.3

Unearned premiums

586.5

627.5

999.4

Debt

419.6

419.6

594.0

Ceded reinsurance payable

90.4

149.3

89.3

Accounts payable on unsettled investment purchases

52.9

14.1

11.5

Other liabilities

350.5

411.8

427.4

Total liabilities

4,724.6

4,917.8

6,112.9

OneBeacon's common shareholders' equity and noncontrolling interests

OneBeacon's common shareholders' equity:

Common shares and paid-in surplus

1,000.6

1,000.5

1,010.1

Retained earnings

250.3

228.2

405.5

Accumulated other comprehensive income (loss), after tax:

Net unrealized foreign currency translation losses

-

-

(0.7)

Other comprehensive income and loss items

0.4

0.3

(5.3)

Total OneBeacon's common shareholders' equity

1,251.3

1,229.0

1,409.6

Total noncontrolling interests

19.7

19.9

19.0

Total OneBeacon's common shareholders' equity and noncontrolling interests

1,271.0

1,248.9

1,428.6

Total liabilities, OneBeacon's common shareholders' equity and noncontrolling interests

$

5,995.6

$

6,166.7

$

7,541.5

ONEBEACON INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in millions, except per share amounts)

(Unaudited)

Three Months Ended March 31,

2011

2010 (1)

Revenues:

Earned premiums

$

263.5

$

453.2

Net investment income

21.0

28.3

Net realized and unrealized investment gains

23.1

42.4

Net other revenues (expenses)

0.8

(0.8)

Total revenues

308.4

523.1

Expenses:

Loss and loss adjustment expenses

144.6

333.7

Policy acquisition expenses

51.0

97.5

Other underwriting expenses

52.4

74.2

General and administrative expenses

2.3

4.3

Interest expense on debt

6.3

9.1

Total expenses

256.6

518.8

Pre-tax income

51.8

4.3

Income tax expense

(9.5)

(4.0)

Net income including noncontrolling interests

42.3

0.3

Less:  Net income attributable to noncontrolling interests

(0.4)

(0.3)

Net income attributable to OneBeacon's common shareholders

41.9

-

Change in other comprehensive income and loss items

0.1

0.2

Comprehensive income attributable to OneBeacon's common shareholders

$

42.0

$

0.2

Earnings per common share - basic and diluted

Net income attributable to OneBeacon's common shareholders per share

$

0.44

$

-

Weighted average number of common shares outstanding (2)

94.4

95.1

 (1) Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation.    

 (2) Includes the impact of repurchases of Class A common shares made through the company's share repurchase program.  

ONEBEACON INSURANCE GROUP, LTD.

SEGMENT STATEMENTS OF OPERATIONS (1)

($ in millions)

(Unaudited)

For the Three Months Ended March 31, 2011 

Investing,

Specialty

Other

Financing

Insurance

Insurance

and Corporate

Operations

Operations

Operations

Total

Earned premiums

$          241.9

$            21.6

$                       -

$ 263.5

Loss and loss adjustment expenses

(132.6)

(12.0)

-

(144.6)

Policy acquisition expenses

(49.2)

(1.8)

-

(51.0)

Other underwriting expenses

(46.4)

(6.0)

-

(52.4)

  Underwriting income  

13.7

1.8

-

15.5

Net investment income  

-

-

21.0

21.0

Net realized and unrealized investment gains

-

-

23.1

23.1

Net other revenues (expenses)  

0.1

0.9

(0.2)

0.8

General and administrative expenses

(0.5)

-

(1.8)

(2.3)

Interest expense on debt

-

-

(6.3)

(6.3)

Pre-tax income  

$            13.3

$              2.7

$                   35.8

$   51.8

For the Three Months Ended March 31, 2010

Investing,

Specialty

Other

Financing

Insurance

Insurance

and Corporate

Operations

Operations

Operations

Total

Earned premiums

$          235.9

$          217.3

$                       -

$ 453.2

Loss and loss adjustment expenses

(136.5)

(197.2)

-

(333.7)

Policy acquisition expenses

(48.3)

(49.2)

-

(97.5)

Other underwriting expenses

(41.1)

(33.1)

-

(74.2)

  Underwriting income (loss)

10.0

(62.2)

-

(52.2)

Net investment income  

-

-

28.3

28.3

Net realized and unrealized investment gains

-

-

42.4

42.4

Net other revenues (expenses)  

0.2

-

(1.0)

(0.8)

General and administrative expenses

(0.3)

(0.5)

(3.5)

(4.3)

Interest expense on debt

-

-

(9.1)

(9.1)

Pre-tax income (loss)

$              9.9

$           (62.7)

$                   57.1

$     4.3

(1)  To better align its operating and reporting structure with the company's business profile as a result of the transactions, OneBeacon revised its segment structure during the fourth quarter of 2010. Financial information for the prior period has been reclassified to conform to this presentation.

ONEBEACON INSURANCE GROUP, LTD.

SUMMARY OF RATIOS AND PREMIUMS (1)

($ in millions)

(Unaudited)

Three Months Ended March 31, 2011

MGA

Business

Specialty

Industries

Specialty

Products

Specialty

Insurance

Operations (2)

Other

Insurance

Operations (3)

Total

Net written premiums

$       48.5

$        85.6

$    124.2

$              258.3

$                19.8

$ 278.1

Earned premiums

$       66.0

$        80.9

$      95.0

$              241.9

$                21.6

$ 263.5

Ratios

    Loss and loss adjustment expenses

45.3%

57.0%

59.6%

54.8%

55.6%

54.9%

    Expense

42.1%

42.4%

35.3%

39.5%

36.1%

39.2%

       GAAP combined

87.4%

99.4%

94.9%

94.3%

91.7%

94.1%

Three Months Ended March 31, 2010

MGA

Business

Specialty

Industries

Specialty

Products

Specialty

Insurance

Operations (2)

Other

Insurance

Operations (3)

Total

Net written premiums

$       46.7

$        77.6

$    136.0

$              260.3

$              111.2

$ 371.5

Earned premiums

$       63.2

$        72.5

$    100.2

$              235.9

$              217.3

$ 453.2

Ratios

    Loss and loss adjustment expenses

47.8%

59.0%

63.3%

57.9%

90.7%

73.6%

    Expense

39.7%

41.2%

34.4%

38.1%

37.9%

37.9%

       GAAP combined

87.5%

100.2%

97.7%

96.0%

128.6%

111.5%

(1)  To better align its operating and reporting structure with the company's business profile as a result of the transactions, OneBeacon revised its segment structure during the fourth quarter of 2010. As part of the resegmentation, agency results for business written on OneBeacon paper and in which OneBeacon has an ownership interest have been reclassified within the underwriting results.  Financial information for the prior period has been reclassified to conform to this presentation.

(2)  Within Specialty Insurance Operations, OneBeacon reports its businesses through three major underwriting units, representing an aggregation of its specialty lines businesses. MGA Business includes Collector Cars and Boats, A.W.G. Dewar and OneBeacon Entertainment. Specialty Industries includes International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks and OneBeacon Energy Group. Specialty Products includes OneBeacon Professional Insurance (which now includes Financial Services), OneBeacon Property and Inland Marine, OneBeacon Specialty Property and OneBeacon Excess and Surplus.

(3)  Other Insurance Operations includes AutoOne Insurance, a division that offers products and services to assigned risk markets. Other Insurance Operations also includes the nonspecialty commercial lines business that was subject to the renewal rights agreement with The Hanover that began with January 1, 2010 effective dates, the traditional personal lines business that was subject to the sale to Tower Group, Inc. completed July 1, 2010, and other run-off business.

ONEBEACON INSURANCE GROUP, LTD.

BOOK VALUE PER SHARE

(in millions, except per share amounts)

(Unaudited)

March 31,

December 31,

March 31,

2011

2010

2010

Numerator

OneBeacon's common shareholders' equity

$

1,251.3

$

1,229.0

$

1,409.6

Denominator

Common shares outstanding (1)

94.4

94.4

95.1

Book value per share

$

13.26

$

13.02

$

14.82

Growth in book value per share, including dividends, in the quarter

 on an IRR basis (2)

3.5%

Growth in book value per share, including dividends, in the last twelve months

 on an IRR basis (3)

13.4%

 (1) Includes the impact of repurchases of Class A common shares made through the company's share repurchase program.  

 (2) Internal rate of return (IRR) calculated based on beginning book value per share, dividends paid and ending book value per share.    

 Includes a quarterly dividend of $0.21 per share.    

 (3) Internal rate of return (IRR) calculated based on beginning book value per share, dividends paid and ending book value per share.    

 Includes dividends of $0.84 per share (a quarterly dividend of $0.21 per share) and a special dividend of $2.50 per share paid in September 2010.    

 ONEBEACON INSURANCE GROUP, LTD.

COMPREHENSIVE INCOME, NET INCOME AND OPERATING INCOME (LOSS)

(in millions, except per share amounts)

(Unaudited)

Three Months Ended March 31,

Twelve Months
Ended March 31,

2011

2010

2011

Comprehensive income attributable to OneBeacon's common shareholders

$ 42.0

$    0.2

$                                         166.6

Net income attributable to OneBeacon's common shareholders

$ 41.9

$      -

$                                         160.2

Weighted average common shares outstanding (1)

94.4

95.1

94.6

Net income attributable to OneBeacon's common shareholders per share

$ 0.44

$      -

$                                           1.69

Net income attributable to OneBeacon's common shareholders

$ 41.9

$      -

$                                         160.2

Less:

Net realized and unrealized investment gains

(23.1)

(42.4)

(55.3)

Tax effect on net realized and unrealized investment gains

8.1

14.8

19.4

 Operating income (loss) (2)

$ 26.9

$ (27.6)

$                                         124.3

Weighted average common shares outstanding (1)

94.4

95.1

94.6

Operating income (loss) per share (2)

$ 0.28

$ (0.29)

$                                           1.31

(1) Includes the impact of repurchases of Class A common shares made through the company's share repurchase program.

(2) Represents a non-GAAP financial measure. See discussion of Non-GAAP financial measures.

ONEBEACON INSURANCE GROUP, LTD.

COMPREHENSIVE AND OPERATING RETURNS ON AVERAGE EQUITY

($ in millions)

(Unaudited)

Twelve Months

Ended

March 31, 2011

Numerator:

[A]

Comprehensive income attributable to OneBeacon's common shareholders

$             166.6

[B]

Operating income (1)

$             124.3

As of

As of

March 31,

2011

March 31,

2010

Average

Denominator:

[C]

OneBeacon's common shareholders' equity

$           1,251.3

$          1,409.6

$          1,330.5

Less:  

Net unrealized gains and losses and net foreign currency gains and losses on investments (2)

(154.2)

(173.5)

Tax effect on net unrealized gains and losses and net foreign currency gains and losses on investments

54.0

60.7

Accumulated OCI/L, after-tax

(0.4)

6.0

[D]

Adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses, after tax, and AOCI/L (1)

$           1,150.7

$          1,302.8

$          1,226.8

Returns:

Comprehensive return on average OneBeacon's common shareholders' equity  [ A / C ]

12.5%

Operating return on average adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses, after tax, and AOCI/L [ B / D ]

10.1%

(1)  Represents a non-GAAP financial measure. See discussion of Non-GAAP financial measures.    

(2)  Net unrealized gains and losses and net foreign currency gains and losses on investments as of March 31, 2011 and 2010 includes unrealized gains and losses on investments held as well as deferred gains and losses relating to sales of investments to entities under common control.