White Mountains Notes Book Value Per Share of $345

Bermuda-based White Mountains Insurance Group Ltd. ended the third quarter of 2005 with a fully converted tangible book value per share of $345, down $14 from the second quarter of 2005 primarily due to the Gulf Coast hurricanes. Tangible book value per share increased 2.5% for the first nine months of 2005 and 10% for the last twelve months, including dividends.

Adjusted comprehensive net loss for the quarter was $131 million compared to adjusted comprehensive net income of $73 million in the third quarter of the prior year. For the first nine months, adjusted comprehensive net income was $80 million compared to $306 million in the same period last year.

The following after-tax items impacted the quarter:

– $186 million in losses from hurricanes Katrina and Rita. In addition, there was a $12 million reduction in accrued profit commissions from Olympus Re.
– $87 million decrease in the value of the company’s investment in
Montpelier Re, net of dividends received.

CEO Steve Fass said, “Hurricane Katrina is an industry changing event. The magnitude of the insured loss is a multiple of any previous natural disaster. However, even in the face of the losses we incurred due to the Gulf Coast hurricanes, we are profitable through nine months. White Mountains’ losses were contained to less than 5% of our total capital and we continue to have a significant amount of dry powder. Further, we are already seeing an increase in pricing, and improved terms and conditions, which bodes well for the future.”

Net loss for the quarter was $66 million, compared to net loss of $10 million in the prior year’s third quarter. The increased loss was driven by a higher level of catastrophe claims from this year’s Gulf Coast hurricanes versus last year’s storms. For the first nine months, the company reported net income of $257 million versus $254 million in the comparable period. The first nine months benefited from the special dividend of $56 million after-tax ($74 million pretax) paid by Montpelier Re in the first quarter of 2005.

Subsequent to the end of the quarter, the company experienced losses related to hurricane Wilma. The company’s preliminary estimates indicate that its total pre-tax net losses resulting from the impact of this storm on its insurance and reinsurance operations will be less than $50 million. These estimates do not reflect any impact on the value of the company’s investment in Montpelier Re.

OneBeacon

OneBeacon’s pretax income for the third quarter of 2005 was $116 million, compared to $35 million for the third quarter of 2004. For the first nine months of 2005, pretax income was $397 million, versus $272 million for the comparable period of 2004. The GAAP combined ratio was 107% for the third quarter and 99% for the first nine months of 2005, compared to 109% and 100% for the comparable periods of 2004. Net written premiums decreased 9% in the quarter and 15% for the nine months from the comparable 2004 periods.

The decline in premium volume was partially due to the sale of the renewal rights for OneBeacon’s legacy New York commercial business and the one-time premium increase in 2004 from the assumption of unearned premiums in the Atlantic Specialty acquisition. In addition, personal lines premium decreased due to lower volumes in Massachusetts, New York and New Jersey. Third quarter results also included a $28 million gain on the sale of OneBeacon’s National Farmers Union Property and Casualty Company subsidiary.

Hurricanes Katrina and Rita caused pretax losses of $55 million in the quarter, mostly concentrated in the specialty property unit. The prior year’s third quarter had $31 million of pretax storm losses, as well as a $53 million pretax reserve increase.

Mike Miller, CEO of OneBeacon said, “Obviously the storm losses hurt our results for the third quarter. However, the rest of our businesses are doing well and, even with the impact of the storms, we produced an underwriting profit for the first nine months. In addition, we anticipate an improved pricing environment into 2006.”

White Mountains Re

White Mountains Re’s pretax loss for the third quarter of 2005 was $156 million, compared to a pretax loss of $80 million for the third quarter of 2004. For the first nine months of 2005, the pretax loss was $13 million versus pretax income of $39 million in the comparable prior year period. The GAAP combined ratio was 156% for the third quarter of 2005 and 116% for the first nine months of 2005, compared to 122% and 104% in the comparable periods of 2004. Net written premiums were down 13% in the quarter, reflecting the softer market in 2005 versus 2004. However, nine-month premiums were up 4% due to the acquisition of Sirius in April 2004.

Hurricanes Katrina and Rita caused pretax losses of $228 million in the quarter and a $13 million pretax reduction in accrued profit commissions from Olympus Re. The prior year’s third quarter had $95 million of pretax storm losses and a $15 million pretax reduction in accrued profit commissions from Olympus Re.

Fass added, “The losses from the Gulf Coast hurricanes, while substantial, were within our underwriting tolerances for events of this magnitude. Most of the loss occurred in our Folksamerica subsidiary, and we have already replenished its capital with a $150 million contribution from White Mountains. We are well-positioned to take advantage of the improved marketplace.”

Esurance

Esurance’s pretax loss in the third quarter of 2005 was $6 million, compared to pretax income of $1 million in the third quarter of the prior year. The third quarter loss was the result of higher acquisition expenses and a compensation accrual for a new long-term incentive plan adopted during the quarter. As a result of these increased expenses, the GAAP combined ratio was 113% in the third quarter of 2005, compared to 101% for the third quarter of the prior year. For the third quarter, the loss and LAE ratio of 67% was consistent with the 68% reported in the prior year’s quarter. Net written premiums continue to grow rapidly, up 83% to $100 million for the quarter and up 76% to $253 million for the nine months of 2005.

Gary Tolman, CEO of Esurance, stated, “Reaching the $100 million mark for premiums written during the quarter is another milestone in Esurance’s development. Although acquisition costs have increased, our marketing initiatives are working the way we want. By achieving large premium increases while maintaining an excellent loss ratio, I believe we are further growing our intrinsic business value.”

Other Operations

White Mountains’ Other Operations reported a pretax loss of $85 million for the third quarter of 2005, compared to a pretax loss of $33 million for the third quarter of 2004. For the first nine months of 2005, the segment reported a pretax loss of $96 million versus $180 million in the comparable period of 2004.

The higher loss for the quarter is primarily due to the decrease in the value of the company’s investment in Montpelier Re warrants. The lower loss in the nine months of 2005 reflects lower compensation expense and the benefit of the special dividend from Montpelier Re received in the first quarter of 2005.