OneBeacon Insurance: Onebeacon Reports $11.58 Book Value Per Share


The following excerpt is from the company's SEC filing.

HAMILTON, Bermuda (February 7, 2014) - OneBeacon Insurance Group, Ltd. (NYSE: OB) today reported book value per share of $11.58, an increase of 5.9% for the fourth quarter and 17.3% through twelve months, including dividends.

Mike Miller, CEO of OneBeacon, said, “We are very pleased to report 17.3% growth in book value per share for the year, driven by excellent results on all fronts. At a 92%, our 2013 combined ratio is a testament to our disciplined underwriting and specialty focus. Our ongoing businesses continue to grow at a healthy pace in a competitive but reasonable environment. The deep focus on ru noff reserves as part of the regulatory review of the sale transaction led to a meaningful reserve increase that was fully offset by reducing the loss on sale incurred in 2012. We remain focused on closing the sale later this year.”

For the fourth quarter, the company reported comprehensive income of $62 million, compared to a comprehensive loss of $15 million for the fourth quarter of 2012. Fourth quarter 2013 operating income was $23 million, or $0.24 per share, compared to a $12 million operating loss, or $0.13 per share for the fourth quarter of last year.

For the twelve months ended December 31, 2013, the company reported $167 million of comprehensive income, compared to a $22 million comprehensive loss for the full year 2012. Operating income

was $114 million or $1.21 per share for the twelve months of 2013, compared to $60 million or $0.63 per share through December 31, 2012.

Comprehensive income for the quarter and full year include a $20 million after-tax benefit from the annual remeasurement of the legacy pension plans, driven by positive investment performance from the underlying pension assets and an increase in the discount rate used to value the liability. Full-year results for 2012 reflected a $101 million after-tax charge related to the sale of the runoff business in the third quarter and a $43 million pre-tax underwriting loss related to Superstorm Sandy in the fourth quarter.

Insurance Operations: OneBeacon's combined ratio was 91.3% for the fourth quarter of 2013 compared to 111.9% for the fourth quarter of 2012, and 92.4% for the full year ended December 31, 2013 compared to 97.5% for the twelve months of 2012. Losses from catastrophes were negligible in the fourth quarter of 2013 and contributed less than a point to the full-year combined ratio, as compared to the prior year results, which included net catastrophe losses, including reinstatement premiums, primarily from Superstorm Sandy totaling 15 points for the fourth quarter and 5 points for the full year. The fourth quarter and full-year 2013 combined ratios reflected no net loss reserve development, as well as lower expense ratios. For the comparable periods in 2012, the company reported no net loss reserve development for the fourth quarter and favorable development of 1 point for the full year.

Net written premiums were $263 million for the fourth quarter and $1.1 billion for the year ended December 31, 2013, an increase of 6% and a decrease of 8%, respectively, relative to comparable periods last year. The decrease for the full year was driven by the company’s exit from the collector car and boat and energy businesses. Excluding the $38 million and $206 million of net written premiums related to the exited businesses from the fourth quarter and twelve months of 2012, net written premiums increased by 25% in the fourth quarter and 12% in the full year of 2013, respectively. These increases reflect growth in net written premiums across the company’s businesses, including its newest units, with particularly strong contributions from OneBeacon Government Risks, OneBeacon Program Group and International Marine Underwriters.

Investment Results: OneBeacon’s fourth quarter 2013 total return on averaged invested assets was 1.6% compared to 0.5% for the fourth quarter of 2012. These pre-tax results included net realized and unrealized investment gains of $30 million and net investment income of $10 million, compared to net realized

and unrealized investment losses of $2 million and net investment income of $12 million for the fourth quarter of 2012.

Through the twelve months ended December 31, 2013, the total return on invested assets was 3.8% compared to 4.4% through December 31, 2012. These results included net realized and unrealized investment gains of $49 million and net investment income of $41 million, compared to net realized and unrealized investment gains of $56 million and net investment income of $54 million for the full year 2012.

Discontinued Operations:  During the fourth quarter of 2013, the company completed a comprehensive actuarial analysis of its runoff business loss reserves.  As a result of this analysis, the company recorded a $71.5 million pre-tax ($46.5 million after-tax) provision to increase its runoff business loss reserves, which was offset by an equal reduction on the estimated ultimate loss on sale of the runoff business, both reported as part of discontinued operations.  The sale of the runoff business is pending the completion of regulatory review and is anticipated to close mid-2014.

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’s underwriting companies offer a range of specialty insurance products sold through independent agencies, regional and national brokers, wholesalers and managing general agencies. Each business is managed by an experienced team of specialty insurance professionals focused on a specific customer group or industry segment, and providing distinct products and tailored coverages and services. OneBeacon’s solutions target ocean and inland marine; entertainment, sports and leisure; group accident; crop; public entities; technology; tuition refund; professional liability; environmental; excess property; programs; and commercial surety. For further information about our products and services visit: www.onebeacon.com and to remain up to date on OneBeacon’s news, follow us on Twitter @OneBeaconIns or visit our online newsroom: www.onebeacon.com/newsroom.

  December 31, December 31,  2013 2012Assets    Investment securities:    Fixed maturity investments $1,700.9 $1,593.3Short-term investments 157.0 232.8Common equity securities 336.9 259.0Convertible fixed maturity investments 30.5 62.6Other investments 139.6 143.8Total investment securities 2,364.9 2,291.5Cash 168.1 43.9Reinsurance recoverables 89.9 110.6Premiums receivable 228.2 225.6Deferred acquisition costs 103.7 123.9Net deferred tax asset 90.6 137.8Investment income accrued 10.1 12.1Accounts receivable on unsettled investment sales 3.3 2.1Other assets 272.7 227.2Assets held for sale (1) 1,880.1 2,226.8Total assets $5,211.6 $5,401.5     Liabilities    Loss and loss adjustment expense reserves $1,054.3 $1,000.0Unearned premiums 544.9 573.8Debt 274.7 274.7Accounts payable on unsettled investment purchases 11.6 6.2Other liabilities 338.6 302.7Liabilities held for sale (1) 1,880.1 2,226.8Total liabilities 4,104.2 4,384.2     OneBeacon's common shareholders' equity and noncontrolling interests    OneBeacon's common shareholders' equity:    Common shares and paid-in surplus 1,022.5 1,019.1Retained earnings 75.0 9.2Accumulated other comprehensive income (loss), after tax 6.8 (13.8)Total OneBeacon's common shareholders' equity 1,104.3 1,014.5     Total noncontrolling interests 3.1 2.8Total OneBeacon's common shareholders' equity and noncontrolling interests 1,107.4 1,017.3Total liabilities, OneBeacon's common shareholders' equity and noncontrolling interests $5,211.6 $5,401.5

(1) Assets and liabilities being sold as part of the Runoff Transaction are presented separately in the December 31, 2013 and December 31, 2012 consolidated balance sheets.

  Three Months Ended December 31, Year Ended December 31,  2013 2012 (1) 2013 2012 (1)Revenues        Earned premiums $274.2 $286.0 $1,120.4 $1,132.0Net investment income 10.2 12.1 41.1 53.6Net realized and change in unrealized investment gains 29.5 (2.2) 49.4 55.7Net other revenues 1.1 (0.4) 31.2 (0.5)Total revenues 315.0 295.5 1,242.1 1,240.8Expenses        Loss and loss adjustment expenses 148.4 197.5 622.1 650.0Policy acquisition expenses 48.0 63.8 208.9 249.4Other underwriting expenses 54.1 59.0 204.8 205.2General and administrative expenses 1.0 3.7 12.0 13.4Interest expense 3.2 4.8 13.0 16.9Total expenses 254.7 328.8 1,060.8 1,134.9Pre-tax income (loss) from continuing operations 60.3 (33.3) 181.3 105.9Income tax (expense) benefit (18.4) 19.7 (34.3) (8.4)Net income (loss) from continuing operations 41.9 (13.6) 147.0 97.5Net (loss) income from discontinued operations, net of tax (2) (46.9) 0.5 (46.6) (24.3)Gain (loss) from sale of discontinued operations, net of tax 46.6 — 46.6 (91.0)Net income (loss) including noncontrolling interests 41.6 (13.1) 147.0 (17.8)Less: Net income attributable to noncontrolling interests  (0.2) (0.2) (1.0) (1.4)Net income (loss) attributable to OneBeacon's common shareholders 41.4 (13.3) 146.0 (19.2)Change in other comprehensive income and loss items 20.1 (1.2) 20.6 (2.9)Comprehensive income (loss) attributable to OneBeacon's common shareholders  $61.5 $(14.5) $166.6 $(22.1)Earnings per share attributable to OneBeacon's common shareholders—basic and diluted (3)        Net income (loss) from continuing operations per share $0.43 $(0.15) $1.52 $1.00Net (loss) income from discontinued operations, net of tax, per share (0.49) 0.01 (0.49) (0.25)Gain (loss) from sale of discontinued operations, net of tax, per share 0.49 — 0.49 (0.96)Net income (loss) attributable to OneBeacon's common shareholders per share $0.43 $(0.14) $1.52 $(0.21)         Weighted average number of common shares outstanding (3)  94.5 94.5 94.5 94.5

(2) Results for the Runoff Business are reported as discontinued operations for all periods presented. Results of AutoOne are reported as discontinued operations for the year ended December 31, 2012. The AutoOne transaction closed in February 2012.

(3) Earnings (loss) per share and related weighted average number of common shares outstanding include the impact of unvested restricted shares.

Three Months Ended December 31, 2013          SpecialtyProducts (1) Specialty Industries (2) Investing,FinancingandCorporate Total Earned premiums $126.6 $147.6 $— $274.2 Loss and loss adjustment expenses (71.7) (76.7) — (148.4) Policy acquisition expenses (22.0) (26.0) — (48.0) Other underwriting expenses (24.9) (29.2) — (54.1) Underwriting income 8.0 15.7 — 23.7 Net investment income — — 10.2 10.2 Net realized and change in unrealized investment gains — — 29.5 29.5 Net other revenues — 0.2 0.9 1.1 General and administrative expenses 0.1 (0.1) (1.0) (1.0) Interest expense — — (3.2) (3.2) Pre-tax income  $8.1 $15.8 $36.4 $60.3

Three Months Ended December 31, 2012          SpecialtyProducts (1) Specialty Industries (2) Investing,FinancingandCorporate Total Earned premiums $154.8 $131.2 $— $286.0 Loss and loss adjustment expenses (99.9) (97.6) — (197.5) Policy acquisition expenses (38.7) (25.1) — (63.8) Other underwriting expenses (28.5) (30.5) — (59.0) Underwriting loss (12.3) (22.0) — (34.3) Net investment income — — 12.1 12.1 Net realized and change in unrealized investment gains — — (2.2) (2.2) Net other revenues — 0.2 (0.6) (0.4) General and administrative expenses — (0.5) (3.2) (3.7) Interest expense  — — (4.8) (4.8) Pre-tax (loss) income  $(12.3) $(22.3) $1.3 $(33.3)

(2) Specialty Industries includes the results of OneBeacon Entertainment, International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks, and OneBeacon Energy Group, which is no longer an active underwriting operating segment.

Year Ended December 31, 2013          SpecialtyProducts (1) Specialty Industries (2) Investing,FinancingandCorporate Total Earned premiums $553.5 $566.9 $— $1,120.4 Loss and loss adjustment expenses (312.3) (309.8) — (622.1) Policy acquisition expenses (106.3) (102.6) — (208.9) Other underwriting expenses (97.4) (107.4) — (204.8) Underwriting income 37.5 47.1 — 84.6 Net investment income — — 41.1 41.1 Net realized and change in unrealized investment gains — — 49.4 49.4 Net other revenues 0.3 1.1 29.8 31.2 General and administrative expenses — (2.4) (9.6) (12.0) Interest expense — — (13.0) (13.0) Pre-tax income  $37.8 $45.8 $97.7 $181.3

Year Ended December 31, 2012          SpecialtyProducts (1) Specialty Industries (2) Investing,FinancingandCorporate Total Earned premiums $604.0 $528.0 $— $1,132.0 Loss and loss adjustment expenses (345.6) (304.4) — (650.0) Policy acquisition expenses (150.3) (99.1) — (249.4) Other underwriting expenses (96.2) (109.0) — (205.2) Underwriting income  11.9 15.5 — 27.4 Net investment income — — 53.6 53.6 Net realized and change in unrealized investment gains — — 55.7 55.7 Net other revenues (expenses) 0.4 (0.8) (0.1) (0.5) General and administrative expenses — (1.9) (11.5) (13.4) Interest expense — — (16.9) (16.9) Pre-tax income  $12.3 $12.8 $80.8 $105.9

Three Months Ended December 31, 2013        Specialty Products Specialty Industries Consolidated Insurance (1)Net written premiums $116.3 $146.2 $262.5Earned premiums $126.6 $147.6 $274.2       Underwriting ratios           Loss and loss adjustment expense ratio 56.6% 52.0% 54.1%     Expense ratio 37.1% 37.4% 37.2%        Combined ratio 93.7% 89.4% 91.3%       Three Months Ended December 31, 2012        Specialty Products Specialty Industries Consolidated Insurance (1)Net written premiums $120.6 $128.2 $248.8Earned premiums $154.8 $131.2 $286.0       Underwriting ratios           Loss and loss adjustment expense ratio 64.5% 74.4% 69.1%     Expense ratio 43.2% 42.4% 42.8%        Combined ratio 107.7% 116.8% 111.9%

Year Ended December 31, 2013        Specialty Products Specialty Industries Consolidated Insurance (1)Net written premiums $509.6 $579.0 $1,088.6Earned premiums $553.5 $566.9 $1,120.4       Underwriting ratios           Loss and loss adjustment expense ratio 56.4% 54.7% 55.5%     Expense ratio 36.8% 37.0% 36.9%        Combined ratio 93.2% 91.7% 92.4%       Year Ended December 31, 2012        Specialty Products Specialty Industries Consolidated Insurance (1)Net written premiums $630.9 $548.3 $1,179.2Earned premiums $604.0 $528.0 $1,132.0       Underwriting ratios           Loss and loss adjustment expense ratio 57.2% 57.7% 57.4%     Expense ratio 40.7% 39.4% 40.1%        Combined ratio 97.9% 97.1% 97.5%

(1) Results for the Runoff Business are reported as discontinued operations for all periods presented. Results of AutoOne are reported as discontinued operations for the year ended December 31, 2012. The AutoOne transaction closed in February 2012.

  December 31, September 30, December 31,  2013 2013 2012Numerator      OneBeacon's common shareholders' equity $1,104.3 $1,062.1 $1,014.5       Denominator      Common shares outstanding 95.4 95.4 95.4       Book value per share $11.58 $11.13 $10.63              Change in book value per share, including dividends, in the quarter 5.9%           Change in book value per share, including dividends, in the last twelve months on an IRR basis(1) 17.3%    

(1) 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).

 Three Months Ended December 31, Year Ended December 31, 2013 2012 2013 2012Comprehensive income (loss) attributable to OneBeacon's common shareholders$61.5 $(14.5) $166.6 $(22.1)        Net income (loss) attributable to OneBeacon's common shareholders$41.4 $(13.3) $146.0 $(19.2)        Weighted average number of common shares outstanding (1)94.5 94.5 94.5 94.5        Net income (loss) attributable to OneBeacon's common shareholders per share$0.43 $(0.14) $1.52 $(0.21)        Net income (loss) attributable to OneBeacon's common shareholders$41.4 $(13.3) $146.0 $(19.2)Less:       Net realized and change in unrealized investment gains(29.5) 2.2 (49.4) (55.7)Tax effect on net realized and change in unrealized investment gains10.3 (0.8)17.3 19.5Loss (income) from discontinued operations, net of tax46.9 (0.5) 46.6 24.3(Gain) loss from sale of discontinued operations, net of tax(46.6) — (46.6) 91.0  Operating income (loss) (2)$22.5 $(12.4) $113.9 $59.9        Weighted average number of common shares outstanding (1)94.5 94.5 94.5 94.5        Operating income (loss) per share (2)$0.24 $(0.13) $1.21 $0.63

(1) Operating income (loss) per share and related weighted average number of common shares outstanding include the impact of unvested restricted shares.

  Year Ended December 31, 2013Numerator:  [A] Comprehensive income attributable to OneBeacon’s common shareholders $166.6     [B] Operating income (1) $113.9  As of December 31, 2013 As of December 31, 2012 AverageDenominator:      [C] OneBeacon’s common shareholders’ equity $1,104.3 $1,014.5 $1,059.4  Less:        Net unrealized gains and net foreign currency gains and losses on investments (2) (124.6) (119.6)    Tax effect on net unrealized gains and net foreign currency gains and losses on investments 43.6 41.9    Accumulated other comprehensive (income) loss, after tax (6.8) 13.8  [D] Adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains, after tax, and accumulated other comprehensive (income) loss (1) $1,016.5 $950.6 $983.6Returns:        Comprehensive return on average OneBeacon's common shareholders' equity [ A / C ] 15.7%       Operating return on average adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains, after tax, and accumulated other comprehensive (income) loss [ B / D ]11.6%

(2) Net unrealized gains and net foreign currency gains and losses on investments as of December 31, 2013 and 2012 include net unrealized gains on investments held as well as deferred gains and losses relating to sales of investments to entities under common control.

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. 

Operating income (loss) is a non-GAAP financial measure that excludes net realized and change in unrealized investment gains, income (loss) from discontinued operations, gain (loss) from sale of discontinued operations, and the related tax effects, from net income (loss) attributable to OneBeacon's common 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 common shareholders, as it removes variability in the timing of realized and change in unrealized investment gains which may be heavily influenced by investment market conditions and also removes the impact related to discontinued operations. Although key to the company's overall financial performance, OneBeacon believes that net realized and change in unrealized investment gains are largely independent of the underwriting decision-making process. Management also believes that the impact of operations that have been discontinued are not relevant to evaluating financial performance on a comparative basis. The reconciliation of net income (loss) attributable to OneBeacon's common shareholders to operating income (loss) is included on page 11.

Operating income (loss) per share is calculated by dividing operating income (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding. Management believes that operating income (loss) 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. Management also believes that the impact of operations that have been discontinued are not relevant to evaluating financial performance on a comparative basis. Net income (loss) attributable to OneBeacon's common shareholders per share is the most directly comparable GAAP measure. As described above, the reconciliation of net income (loss) attributable to OneBeacon's common shareholders to operating income (loss) is included on page 11. The calculation of operating income (loss) per share is also included on page 11.

Adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains, after-tax, and accumulated other comprehensive income/loss (AOCI/L), the average of which is used in calculating operating returns, is derived by excluding net unrealized gains and net foreign currency gains and losses on investments, after tax, and AOCI/L, after tax, from OneBeacon's common shareholders' equity. For the reasons described above, OneBeacon believes that it is appropriate to remove the variability in net unrealized gains and net foreign currency gains and losses on investments and other comprehensive income (loss) items when analyzing certain performance measures. The reconciliation of OneBeacon's common shareholders' equity, the most closely comparable GAAP measure, to adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains, after tax, and AOCI/L, after tax, is included on page 12.

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:

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:

•changes in domestic or foreign laws or regulations, or their interpretation, applicable to OneBeacon, its competitors, its agents or its customers;

•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, 2012 filed February 28, 2013.

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.

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. OneBeacon Insurance Group next reports earnings on February 07, 2014.

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