8-K: White Mountains Reports Mixed Q4 Results, MediaAlpha Investment Weighs on Performance

White Mountains Insurance Group reported a decrease in book value per share and adjusted book value per share for the fourth quarter of 2024, primarily due to mark-to-market declines in its investment portfolio, including MediaAlpha.

Summary

• White Mountains Insurance Group reported a book value per share of $1,746 and an adjusted book value per share of $1,834 as of December 31, 2024.
• Both book value per share and adjusted book value per share decreased by 3% in Q4 2024 but increased by 6% and 8%, respectively, for the year, including dividends.
• The decline in adjusted book value per share (ABVPS) in Q4 was primarily driven by mark-to-market declines in the investment portfolio, particularly the MediaAlpha position.
• For the full year, ABVPS increased by 8%, supported by solid results from operating companies and positive investment returns.
• Comprehensive loss attributable to common shareholders was $(131) million for Q4 2024, compared to a profit of $288 million in Q4 2023.
• Comprehensive income attributable to common shareholders for the year ended December 31, 2024, was $230 million, compared to $511 million in the previous year.
• Ark produced a 77% combined ratio and $264 million of gross written premiums in Q4, up 14% year-over-year.
• HG Global generated $18 million of gross written premiums, driven by strong primary market volume at BAM.
• Kudu experienced a challenging quarter due to rising interest rates and a strengthening dollar, but its portfolio of participation contracts surpassed $1 billion.
• Bamboo had a strong quarter, with managed premiums and adjusted EBITDA up significantly year-over-year.
• MediaAlpha's share price declined 38% in Q4, resulting in a $122 million mark-to-market loss for White Mountains.
• Excluding MediaAlpha, investment returns were down slightly in Q4 but up 6.5% for the year.
• Undeployed capital stands at approximately $700 million, including proceeds from Bamboo's recent debt recapitalization.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While there are some negative aspects, such as the decline in book value and the impact of MediaAlpha, there are also positive highlights, including growth in certain segments and positive full-year results. The management commentary is generally optimistic.

Positives

• Ark's gross written premiums increased 14% year-over-year in Q4.
• HG Global saw strong primary market volume at BAM.
• Kudu's portfolio value surpassed $1 billion.
• Bamboo's managed premiums more than doubled for the full year.
• Excluding MediaAlpha, the total consolidated portfolio return was up 6.5% for the year.
• Ark had a good quarter and full year, producing combined ratios of 77% and 83%, respectively.
• Full year gross written premiums were $2.2 billion, up 16% year-over-year, aided by new underwriting teams and products.
• HG Global recorded a strong quarter to close out the year, with a record quarter for par value assumed, as annual new issuance of municipal bonds exceeded $500 billion for the first time.
• For the full year, managed premiums more than doubled to $484 million, and MGA adjusted EBITDA grew to $53 million, up seven-fold year-over-year.

Negatives

• Book value per share and adjusted book value per share both decreased 3% in the fourth quarter of 2024.
• MediaAlpha's share price decline led to a $122 million mark-to-market loss.
• Kudu had a tough quarter, impacted by rising interest rates and a strengthening dollar.
• HG Global reported a pre-tax loss of $20 million for the quarter.
• The total consolidated portfolio return was -2.3% in the fourth quarter of 2024.
• Arks combined ratio included 27 points of catastrophe losses in the fourth quarter of 2024, driven primarily by Hurricanes Milton and Helene, compared to negligible new catastrophe losses in the fourth quarter of 2023.
• HG Globals results in the year ended December 31, 2024 included the unrealized loss on deconsolidation of BAM of $115 million related to the fair value of the BAM surplus notes.
• HG Globals results in the fourth quarter of 2024 included a $15 million decrease in the fair value of the BAM surplus notes, which was driven by the increase in market interest rates.

Risks

• The California wildfires represent a significant industry loss event in the first quarter of 2025, potentially impacting Ark/WM Outrigger through the property line of business.
• Bamboo has exposure to the recent California wildfires, which could impact its fronted programs and captive insurance company.
• The impact of the California wildfires on go-forward primary market conditions and reinsurance renewal terms and conditions is yet to be determined.
• Rising interest rates and a strengthening U.S. dollar could continue to negatively impact Kudu's performance.
• The rate environment is moderating, which could affect Ark's opportunities for profitable growth in 2025.

Future Outlook

Although the rate environment is moderating, Ark continues to see opportunities for profitable growth in 2025. Bamboo expects to see continued growth in 2025, although its immediate focus is on supporting policyholders impacted by the wildfires in Los Angeles.

Management Comments

• Manning Rountree, CEO, commented, 'ABVPS was down 3% in the quarter, driven primarily by mark-to-market declines in our investment portfolio, including our position in MediaAlpha. On a full-year basis, ABVPS was up 8%, driven by solid results at our operating companies and positive returns in our investment portfolio.'
• Ian Beaton, CEO of Ark, said, 'Ark had a good quarter and full year, producing combined ratios of 77% and 83%, respectively. Full year gross written premiums were $2.2 billion, up 16% year-over-year, aided by new underwriting teams and products. Although the rate environment is moderating, we continue to see opportunities for profitable growth in 2025.'
• Kevin Pearson, President of HG Global, said, 'HG Global recorded a strong quarter to close out the year, with a record quarter for par value assumed, as annual new issuance of municipal bonds exceeded $500 billion for the first time.'
• Rob Jakacki, CEO of Kudu, said, 'Kudu proved resilient in a tough fourth quarter and delivered solid full year results. Kudus portfolio value has now surpassed the $1 billion milestone, and we continue to pursue a robust pipeline in 2025.'
• John Chu, CEO of Bamboo, said, 'Bamboo had a strong fourth quarter to close out an excellent year. For the full year, managed premiums more than doubled to $484 million, and MGA adjusted EBITDA grew to $53 million, up seven-fold year-over-year. We expect to see continued growth in 2025, although our immediate focus is on supporting our policyholders impacted by the wildfires in Los Angeles.'
• Mark Plourde, President of White Mountains Advisors, said, 'Excluding MediaAlpha, the total portfolio was down -0.4% in the quarter. Returns were impacted by rising interest rates and related mark-to-market losses. Excluding MediaAlpha, the total portfolio was up 6.5% for the year, a solid result.'

Industry Context

The report highlights the impact of market volatility and specific events like the California wildfires on the insurance industry. It also reflects the broader trend of moderating rate environments and the need for insurers to adapt to changing market conditions.

Comparison to Industry Standards

• The report mentions that White Mountains' short duration fixed income portfolio returned -0.3% in the quarter and 4.3% for the year, compared to the Bloomberg Intermediate Aggregate Index returns of -2.1% and 2.5%.
• The equity portfolio, excluding MediaAlpha, returned -0.6% in the quarter and 9.4% for the year, compared to the S&P 500 Index returns of 2.4% and 25.0%.
• Relative underperformance was attributable to our portfolio of international common stocks and other long-term investments.

Stakeholder Impact

• Shareholders are impacted by the decrease in book value per share and the volatility in the investment portfolio.
• Policyholders of Bamboo may be impacted by the California wildfires.
• Employees of Ark, HG Global, Kudu, and Bamboo are affected by the performance of their respective segments.

Next Steps

• Shareholders are urged to refer to the Form 10-K for more complete information concerning the company's financial results.
• MediaAlpha's fourth quarter earnings release and related shareholder letter are scheduled for February 24, 2025.

Key Dates

Keywords

White Mountains, Insurance, Financial Results, MediaAlpha, Ark, HG Global, Kudu, Bamboo, Book Value, Premiums, Investments