10-K: White Mountains Insurance Group Reports Solid 2024 Results, Navigates Market Shifts

White Mountains Insurance Group reports a 6% increase in book value per share and an 8% increase in adjusted book value per share for 2024, driven by solid operating business performance and investment returns.

Summary

• White Mountains Insurance Group ended 2024 with a book value per share of $1,746 and an adjusted book value per share of $1,834, representing increases of 6% and 8% respectively, including dividends.
• Comprehensive income attributable to common shareholders was $230 million in 2024, compared to $511 million in 2023.
• The company's results were influenced by net realized and unrealized investment gains of $147 million in 2024, compared to $407 million in 2023.
• As of December 31, 2024, White Mountains had approximately $0.7 billion of undeployed capital.
• Ark's combined ratio was 83% in 2024, compared to 82% in 2023, including 13 points of catastrophe losses in 2024 and 4 points of net favorable prior year loss reserve development.
• Ark reported gross written premiums of $2,207 million, net written premiums of $1,593 million, and net earned premiums of $1,500 million in 2024.
• WM Outrigger Re's combined ratio was 60% in 2024, compared to 44% in 2023, with catastrophe losses impacting the 2024 ratio.
• As of July 1, 2024, White Mountains no longer consolidates BAM, resulting in an unrealized loss on deconsolidation of $115 million.
• HG Global reported gross written premiums and earned premiums of $52 million and $29 million, respectively, in 2024.
• Kudu reported total revenues of $119 million, pre-tax income of $81 million, and adjusted EBITDA of $55 million in 2024.
• Bamboo reported commission and fee revenues of $135 million and pre-tax income of $33 million in 2024, with managed premiums of $484 million.
• White Mountainss total consolidated portfolio return on invested assets was 6.9% in 2024, including $38 million of net realized and unrealized investment gains from White Mountainss investment in MediaAlpha.
• Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 6.5% in 2024.
• White Mountains expects to meet the requirements to be exempt from the Bermuda corporate income tax and the Pillar Two worldwide minimum tax until January 1, 2030.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both positive growth and challenges faced by the company. The sentiment is neutral to slightly positive.

Positives

• Book value per share and adjusted book value per share increased by 6% and 8% respectively.
• Ark's gross written premiums increased to $2,207 million.
• Kudu continues to deploy capital and generate revenue from its investments.
• Bamboo's managed premiums more than doubled, indicating strong growth.
• White Mountains expects to meet the requirements to be exempt from the Bermuda corporate income tax and the Pillar Two worldwide minimum tax until January 1, 2030.

Negatives

• Comprehensive income attributable to common shareholders decreased from $511 million in 2023 to $230 million in 2024.
• Net realized and unrealized investment gains decreased from $407 million in 2023 to $147 million in 2024.
• As of July 1, 2024, White Mountains no longer consolidates BAM, resulting in an unrealized loss on deconsolidation of $115 million.

Risks

• Unpredictable catastrophic events could materially adversely affect results of operations and financial condition.
• Ark may not successfully alleviate risk through reinsurance and retrocessional arrangements.
• The property and casualty insurance and reinsurance industries are highly competitive and cyclical.
• Ark/WM Outriggers loss and LAE reserves may be inadequate to cover the ultimate liability for losses.
• Kudus financial performance is dependent upon its clients asset and performance-based fees.
• Bamboos business is dependent on its capacity providers, and a change in availability, terms or ratings could materially impact Bamboos results of operations and financial condition.
• Bamboo primarily relies on third-party agents and brokers to distribute its products, and any deterioration in the relationships with these parties could adversely affect Bamboos business.
• Bamboo and its fronting partners are subject to extensive regulation which may prevent Bamboo from adequately pricing or selecting risk.
• Our investment portfolio may suffer reduced returns or losses.
• We may be subject to volatility from our investment in MediaAlpha.
• We may not meet the requirements of the five-year deferral from the Bermuda corporate income tax or the OECD Pillar Two Undertaxed Profits Rule.
• We may be treated as a PFIC, in which case a U.S. holder of our common shares could be subject to disadvantageous rules under U.S. federal income tax laws.
• The Company and certain of our non-U.S. subsidiaries may become subject to U.S. tax.
• Changes in tax laws or tax treaties could materially adversely affect our results of operations and financial condition.
• Our non-U.S. subsidiaries are treated as CFCs and may subject a U.S. 10% shareholder of our common shares to disadvantageous rules under U.S. federal income tax laws.
• Proposed regulations could subject U.S. persons who are shareholders to disadvantageous rules under U.S. federal income tax laws pertaining to related person insurance income.
• Regulation may have a material adverse effect on our operations and financial condition.
• Bermuda law differs from the laws in effect in the United States and may afford less protection to shareholders.
• We could be materially adversely affected if our controls designed to ensure compliance with guidelines, policies, and legal and regulatory standards are not effective.
• We may be unable to adequately maintain our systems and safeguard the security of our data.
• We may suffer losses from unfavorable outcomes from litigation and other legal proceedings.
• We depend on our key personnel to manage our business effectively, and they may be difficult to replace.

Future Outlook

White Mountains expects to meet the requirements to be exempt from the Bermuda corporate income tax and the Pillar Two worldwide minimum tax until January 1, 2030.

Industry Context

The report provides insights into White Mountains' performance within the insurance, reinsurance, and asset management sectors, highlighting competitive pressures and cyclical market conditions.

Comparison to Industry Standards

• Ark competes with other Lloyds syndicates, London market participants and major U.S., Bermuda, European and other international insurance and reinsurance companies.
• BAMs primary competitor is Assured Guaranty Ltd. (Assured).
• The report mentions specific competitors like American International Group, Arch Capital Group Ltd., Aspen Insurance Holdings Ltd., AXIS Capital Holdings Ltd., Chubb Ltd., Everest Re Group, Markel Group, Inc., RenaissanceRe Holdings Ltd., SiriusPoint Ltd., Beazley plc, Hiscox plc, Lancashire Holdings Ltd., MS Amlin Ltd. and other syndicates.

Stakeholder Impact

• Shareholders: The report provides information relevant to assessing the company's financial performance and future prospects.
• Employees: The report mentions the company's commitment to employee well-being and development.
• Customers: The report discusses the company's products and services, as well as its efforts to manage risk and provide financial stability.

Next Steps

• Ark expects its net after-tax exposure for a 1-in-250 year event related to its largest PML zone to approximate 25-35% of total tangible capital once the placement of Arks 2025 outwards reinsurance program is completed.
• Bamboo anticipates several new fronting relationships commencing in 2025.

Key Dates