White Mountains Reports First Quarter Results

Net written premiums were $257 million in the in the first quarter of 2017, a decrease of 8% from the first quarter of 2016.  During the first quarter of 2017, OneBeacon continued to reduce premiums writings in its Program, Entertainment and Healthcare businesses.  Excluding those businesses, net written premiums increased 3% for the first quarter of 2017.

HG Global/BAM

BAM insured municipal bonds with par value of $2.4 billion in the first quarter of 2017, compared to $2.2 billion in the first quarter of 2016.  Gross written premiums and member surplus contributions totaled $28 million in the first quarter of 2017, compared to $14 million in the first quarter of 2016.  Total pricing (i.e., premiums and member surplus contributions weighted by the par value of bonds insured) was 119 basis points in the first quarter of 2017, up from 62 basis points in the first quarter of 2016.   BAM's total claims paying resources increased $19 million to $662 million in the first quarter of 2017, compared to an increase of $6 million to $607 million in the first quarter of 2016. 

Bob Cochran, Chairman of BAM, said, "Interest-rate volatility helped drive strong demand for BAM's guaranty during the first quarter, allowing BAM to post a record quarter for gross written premiums and member surplus contributions and growth in claims-paying resources, even as new-issue municipal bond volume declined due to fewer refunding opportunities.  Demand was broad-based: BAM's secondary market insurance volume more than quadrupled from the same period in 2016.  In the primary market, retail investor demand prompted underwriters to use BAM insurance on portions of larger transactions that would otherwise have sold without a guaranty."

HG Global reported pre-tax income of $7 million in the both the first quarter of 2017 and the first quarter of 2016.  In non-controlling interests, White Mountains reported $12 million of GAAP pre-tax loss related to BAM in the first quarter of 2017, compared to $8 million in the first quarter of 2016.  The increase in the pre-tax loss was primarily driven by lower realized and unrealized investment gains on BAM's fixed income portfolio in the first quarter of 2017 compared to the first quarter of 2016. 

BAM's affairs are managed on a statutory accounting basis, and it does not report stand-alone GAAP financial results.  BAM's statutory net loss was $9 million in the first quarter of 2017, compared to an $8 million loss in the first quarter of 2016.  As a mutual insurance company that is owned by its members, BAM's results do not affect White Mountains's book value per share or adjusted book value per share.  However, White Mountains is required to consolidate BAM's results in its GAAP financial statements, and its results are attributed to non-controlling interests.

Other Operations

White Mountains's Other Operations segment reported pre-tax income of $7 million in the first quarter of 2017, compared to pre-tax loss of $29 million in the first quarter of 2016.  The improved results were driven by higher investment returns.  The Other Operations segment reported $35 million of net realized and unrealized gains in the first quarter of 2017, compared to $6 million in the first quarter of 2016.  The Other Operations segment reported $11 million of net investment income in the first quarter of 2017, compared to $1 million in the first quarter of 2016.

White Mountains's Other Operations segment general and administrative expenses increased $5 million to $76 million in the first quarter of 2017 compared to the first quarter of 2016, driven by $14 million of additional compensation expense recorded in the first quarter of 2017 related to the retirement of the Company's former Chairman and CEO.  Incentive compensation costs also reflect increases of 5% and 10% to White Mountains's common share market price during the first quarter of 2017 and the first quarter of 2016.

Investment Activities

The GAAP total return on invested assets was 1.5% for both the first quarter of 2017 and the first quarter of 2016.

Reid Campbell, President of White Mountains Advisors, said, "The total portfolio returned 1.5% for the quarter, a good result driven primarily by the continuing post-election equity market rally.  The fixed income portfolio returned 0.9% for the quarter, just ahead of the longer duration Bloomberg Barclays Intermediate Aggregate Index.  Fixed income duration edged up slightly during the quarter (from 2.6 years to 2.9 years), while credit quality remained strong.  The risk asset portfolio returned 3.7% for the quarter.  The principal components of this portfolio-common stocks and high-yield bonds-were in line with their respective indices, while other long-term investments lagged.  Risk asset exposure finished the quarter at 23% of the portfolio, up three points from year-end."

Additional Information

White Mountains is a Bermuda-domiciled financial services holding company traded on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol WTM.  Additional financial information and other items of interest are available at the company's website located at www.whitemountains.com.  White Mountains expects to file its Form 10-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.

Regulation G

This earnings release includes two non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures.

Adjusted book value per share is a non-GAAP financial measure which is derived by adjusting the GAAP book value per share denominator to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized.  In addition, the calculation of adjusted book value per share includes the dilutive effects of outstanding non-qualified options for periods prior to January 20, 2017, the expiration date of the non-qualified options.  The reconciliation of GAAP book value per share to adjusted book value per share is included on page 7.

In the third quarter of 2016, White Mountains purchased high-yield fixed maturity investments, which are U.S. dollar denominated publicly traded and 144A debt securities issued by corporations with generally at least one rating between "B-" and "BB+" inclusive by Standard and Poor's or similar ratings from other rating agencies.  Given the risk profile of these investments, White Mountains has included returns on high-yield fixed maturity investment returns with returns on common equity securities and other long-term investments.  A reconciliation of these returns follows:

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This earnings 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 White Mountains expects or anticipates 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 White Mountains's:

• change in adjusted book value per share or return on equity;
• business strategy;
• financial and operating targets or plans;
• incurred loss and loss adjustment expenses and the adequacy of its loss and loss adjustment expense reserves and related reinsurance;
• projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
• expansion and growth of its business and operations; and
• future capital expenditures.

These statements are based on certain assumptions and analyses made by White Mountains 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 its expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:

• the risk that OneBeacon Insurance Group, Ltd.'s proposed merger with Intact Financial Corporation (the "Transaction") may not be completed on the currently contemplated timeline or at all;
• the possibility that any or all of the various conditions to the consummation of the Transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals);
• the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement dated May 2, 2017, among OneBeacon, Intact Financial Corporation and the other parties thereto (the "Merger Agreement"), including in circumstances which would require OneBeacon to pay a termination fee or other expenses;
• the risks related to diverting management's attention from White Mountains's or OneBeacon's ongoing business operations and other risks related to the announcement or pendency of the Transaction, including on White Mountains's or OneBeacon's ability to retain and hire key personnel, their ability to maintain relationships with its customers, policyholders, brokers, service providers and others with whom they do business and their operating results and business generally; the risk that shareholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of defense, indemnification and liability;
• the risks that are described from time to time in White Mountains's filings with the Securities and Exchange Commission, including but not limited to White Mountains's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed February 27, 2017;
• claims arising from catastrophic events, such as hurricanes, earthquakes, floods, fires, terrorist attacks or severe winter weather;
• the continued availability of capital and financing;
• general economic, market or business conditions;
• business opportunities (or lack thereof) that may be presented to it and pursued;
• competitive forces, including the conduct of other property and casualty insurers and reinsurers;
• changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its customers;
• an economic downturn or other economic conditions adversely affecting its financial position;
• recorded loss reserves subsequently proving to have been inadequate;
• actions taken by ratings agencies from time to time, such as financial strength or credit ratings downgrades or placing ratings on negative watch; and
• other factors, most of which are beyond White Mountains's control.

Consequently, all of the forward-looking statements made in this earnings release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations.  White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.

WHITE MOUNTAINS INSURANCE GROUP, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (millions) (Unaudited)
		March 31,  2017				December 31,  2016				March 31,  2016
Assets
Fixed maturity investments		$	4,175.4			$	4,250.2			$	2,603.7
Short-term investments		230.9				287.0				261.4
Common equity securities		601.0				474.3				443.0
Other long-term investments		331.7				323.3				321.8
Total investments		5,339.0				5,334.8				3,629.9
Cash		125.0				149.8				173.7
Reinsurance recoverable on paid and unpaid losses		178.1				179.5				167.0
Insurance premiums receivable		227.5				229.9				231.7
Deferred acquisition costs		110.4				106.9				109.8
Deferred tax asset		125.5				126.7				133.6
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