Attached files
| file | filename |
|---|---|
| 8-K - 8-K - OneBeacon Insurance Group, Ltd. | a8-kcover4q2013.htm |
Exhibit 99.1
OneBeacon Insurance Group, Ltd.
Investor Financial Supplement
December 31, 2013
OneBeacon Insurance Group, Ltd.
Address:
601 Carlson Parkway, Minnetonka, MN 55305 (U.S. Corporate Headquarters)
Internet address:
www.onebeacon.com
Common Stock
Common Stock of OneBeacon Insurance Group, Ltd. is traded on the New York Stock Exchange under the symbol “OB”.
Insurance Financial Strength Ratings
A.M. Best | S&P | Fitch | Moody’s | |||||
Ratings - Ongoing Subsidiaries (1) | A | A- | A | A2 | ||||
Outlook | Stable | Stable | Stable | Stable | ||||
Ratings - Runoff Subsidiaries (2) | A | Unrated | A | A2 | ||||
Outlook | Under Review - Negative | N/A | Rating Watch - Negative | Negative | ||||
Following OneBeacon's announcement of the Runoff Transaction, A.M. Best, Fitch, Moody's and Standard & Poor's each issued a press release regarding the ratings implications. A.M. Best placed the subsidiaries being sold in the Runoff Transaction (the "Runoff Subsidiaries") under review with negative implications; Fitch placed the Runoff Subsidiaries on credit watch negative; and Moody's assigned a negative outlook. Standard & Poor's downgraded and subsequently, at the request of OneBeacon, withdrew its rating on the Runoff Subsidiaries. At the same time, all four ratings agencies affirmed the ratings of the remaining subsidiaries (the "Ongoing Subsidiaries") with stable Outlook. The above tables summarize the ratings related to the entities supporting the Ongoing Subsidiaries and, separately the Runoff Subsidiaries.
(1) | Insurance entities supporting the Ongoing business include Atlantic Specialty Insurance Company, Homeland Insurance Company of New York, Homeland Insurance Company of Delaware, and OBI National Insurance Company. |
(2) | Insurance entities supporting the Runoff business include OneBeacon Insurance Company, OneBeacon America Insurance Company, and The Employers' Fire Insurance Company. |
Transfer Agent | Company Contact | |
Wells Fargo Shareowner Services | Paul McDonough | |
1110 Centre Point Curve | Chief Financial Officer | |
Suite 101 | 877-248-8765 | |
Mendota Heights, MN 55120-4100 | ||
1-800-468-9716 | ||
This report is for informational purposes only and should be read in conjunction with documents filed by OneBeacon Insurance Group, Ltd. (the Company) with the U.S. Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
OneBeacon Insurance Group, Ltd.
Investor Financial Supplement
Table of Contents
Basis of Presentation | i - ii | Investing, Financing and Corporate | ||
Safe Harbor Statement | iii | Pre-Tax Results from Operations | 12 | |
Investment Results Pre-Tax | 13 | |||
Consolidated Results | Investment Returns | 14 | ||
Consolidated Financial Results | 1 | Composition of Invested Assets | 15 | |
Consolidated Statements of Operations and Comprehensive (Loss) Income | 2 | Capital Structure and Interest Coverage | 16 | |
Comprehensive (Loss) Income, Net (Loss) Income and Operating (Loss) Income | 3 | |||
Computation of Return on Equity Measures | 4 | |||
Consolidated Balance Sheets and Book Value Per Share | 5 | |||
Consolidated Pre-Tax Results from Operations | 6 | |||
Consolidating Pre-Tax Results from Operations | ||||
For the Three Months Ended December 31, 2013 and 2012 | 7 | |||
For the Year Ended December 31, 2013 and 2012 | 8 | |||
Consolidated Loss and LAE Reserve Summaries | ||||
For the Three Months and Year Ended December 31, 2013 and 2012 | 9 | |||
Insurance Operations | ||||
Specialty Products | ||||
Pre-Tax Results from Operations | 10 | |||
Specialty Industries | ||||
Pre-Tax Results from Operations | 11 | |||
OneBeacon Insurance Group, Ltd.
Basis of Presentation
Presentation
• | OneBeacon's reportable segments are Specialty Products and Specialty Industries, representing insurance underwriting operations, and Investing, Financing and Corporate. |
• | Specialty Products is a collection of niche businesses focused on providing U.S. customers distinct specialty insurance products. Specialty Products includes A.W.G. Dewar, OneBeacon Professional Insurance, OneBeacon Specialty Property, OneBeacon Environmental, OneBeacon Surety Group, OneBeacon Program Group, OneBeacon Crop Insurance, and Collector Cars and Boats, which was exited on January 1, 2013. |
• | Specialty Industries is a collection of niche businesses providing distinct solutions to targeted industry sectors. Specialty Industries includes OneBeacon Entertainment, International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks, and OneBeacon Energy Group, which was exited in the first quarter of 2013. |
• | Investing, Financing and Corporate includes the investing and financing activities for OneBeacon on a consolidated basis, and certain other corporate activities conducted through the top holding company, OneBeacon Insurance Group, Ltd., and its intermediate subsidiaries. |
• | On October 17, 2012, one of the Company's indirect wholly-owned subsidiaries, OneBeacon Insurance Group LLC, entered into a definitive agreement with Trebuchet US Holdings, Inc., a wholly-owned subsidiary of Armour Group Holdings Limited, to sell its runoff business. OneBeacon's runoff business includes the results of OneBeacon's remaining non-specialty commercial lines business and certain other run-off business, including asbestos and environmental reserves, as well as certain purchase accounting adjustments related to the OneBeacon Acquisition (the "Runoff Business", the sale of which is referred to as the "Runoff Transaction"). The Runoff Business has been included within discontinued operations, with the prior periods reclassified to conform to the current presentation. |
• | On February 22, 2012, OneBeacon completed the sale of its AutoOne Insurance (“AutoOne”) business to Interboro Holdings, Inc. (“Interboro”). Formed in 2001, the AutoOne division has offered products and services to assigned risk markets primarily in New York and New Jersey. AutoOne has been included within discontinued operations in the statements of operations with the prior periods reclassified to conform to the current presentation. |
• | The key measure of relative underwriting performance for an insurance company is the combined ratio. The combined ratio is calculated by adding the ratio of incurred loss and loss adjustment expenses ("LAE") to earned premiums (the “loss and LAE ratio”) and the ratio of policy acquisition and other underwriting expenses to earned premiums (the “expense ratio”). A combined ratio under 100% indicates that an insurance company is generating an underwriting profit. However, when considering investment income and investment gains or losses, insurance companies operating at a combined ratio of greater than 100% can be profitable. |
i
OneBeacon Insurance Group, Ltd.
Basis of Presentation (Continued)
Non-GAAP Financial Measures
• | This financial supplement includes non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures. Management believes these measures to be useful supplements to the comparable GAAP measures in evaluating the Company's financial performance. |
• | Operating income (loss) is a non-GAAP financial measure that excludes net realized and unrealized investment gains or losses, income (loss) from discontinued operations, gain or (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 unrealized investment gains and losses 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 unrealized investment gains or losses 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. The reconciliation of net income (loss) attributable to OneBeacon's common shareholders to operating income (loss) is included on page 3. |
• | Operating income (loss) per share is calculated by dividing operating income (loss) (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. 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 3. The calculation of operating income (loss) per share is also included on page 3. |
• | Adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses, 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 losses 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 losses and net foreign currency gains and losses on investments and other comprehensive income and 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 and losses, after tax, and AOCI/L, after tax, is included on page 4. |
• | Pre-tax operating income (loss) before interest expense on debt is a non-GAAP financial measure that represents pre-tax income from continuing operations less net realized and change in unrealized investment gains as well as interest expense on debt from pre-tax income from continuing operations. Management believes that pre-tax operating income before interest expense on debt provides a useful alternative picture of the underlying operating activities of the Company to the GAAP measure of pre-tax income from continuing operations, as it removes variability in the timing of investment gains which may be heavily influenced by investment market conditions. Although key to the Company's overall financial performance, management believes that realized and unrealized investment gains or losses are largely independent of the underwriting decision-making process. The reconciliation of pre-tax income from continuing operations to pre-tax operating income before interest expense on debt is included on page 16. |
• | Interest coverage is calculated by dividing pre-tax operating income before interest expense on debt (a non-GAAP financial measure described above) by interest expense on debt. Management believes that interest coverage is a useful supplement to understanding the Company's capital position. The reconciliation of the numerator to the most closely comparable GAAP measure is described above. The calculation of interest coverage is included on page 16. |
ii
OneBeacon Insurance Group, Ltd.
Safe Harbor Statement
Forward-looking statements contained in this presentation are based on the Company's assumptions and expectations concerning future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. OneBeacon's forward-looking statements could be affected by numerous foreseeable and unforeseeable events and developments such as exposure to catastrophe, or other large property and casualty losses, adequacy of reserves, risks associated with implementing business strategies, levels and pricing of new and renewal business achieved, credit, interest, currency and other risks associated with the Company's investment portfolio, changes in accounting policies, and other factors identified in the Company's Forms 10-Q and 10-K filed with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking information contained herein, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. The Company disclaims any obligation to publicly update or revise any forward-looking information or statements.
iii
OneBeacon Insurance Group, Ltd.
Consolidated Financial Results
(in millions, except per share amounts)
Three Months Ended | |||||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | |||||||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||||||||||||||
Highlights | |||||||||||||||||||||||||||||||
Comprehensive (loss) income | $ | (14.5 | ) | $ | 68.5 | $ | (2.7 | ) | $ | 39.3 | $ | 61.5 | |||||||||||||||||||
Net (loss) income | (13.3 | ) | 68.4 | (2.9 | ) | 39.1 | 41.4 | ||||||||||||||||||||||||
Operating (loss) income | (12.4 | ) | 49.4 | 14.2 | 27.8 | 22.5 | |||||||||||||||||||||||||
As of Dec 31, 2013 | As of Dec 31, 2012 | % Change | |||||||||||||||||||||||||||||
Per Share Amounts | |||||||||||||||||||||||||||||||
Book value per share [1] | $ | 11.58 | $ | 10.63 | 8.9 | % | |||||||||||||||||||||||||
Change in book value per share, including dividends, in the quarter [2] | 5.9 | % | |||||||||||||||||||||||||||||
Change in book value per share, including dividends, in the last twelve months on an IRR basis [3] | 17.3 | % | |||||||||||||||||||||||||||||
Common shares outstanding | 95.4 | 95.4 | |||||||||||||||||||||||||||||
Operating income (loss) per share (basic & diluted) (see p.3) [4] | $ | (0.13 | ) | $ | 0.52 | $ | 0.15 | $ | 0.29 | $ | 0.24 | ||||||||||||||||||||
Weighted average number of common shares outstanding (basic & diluted) [4] | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | ||||||||||||||||||||||||||
Financial Ratios | |||||||||||||||||||||||||||||||
Underwriting ratios: | |||||||||||||||||||||||||||||||
Loss and LAE ratio | 69.1 | % | 52.0 | % | 55.9 | % | 60.1 | % | 54.1 | % | |||||||||||||||||||||
Expense ratio | 42.8 | % | 36.3 | % | 38.2 | % | 36.0 | % | 37.2 | % | |||||||||||||||||||||
Combined ratio | 111.9 | % | 88.3 | % | 94.1 | % | 96.1 | % | 91.3 | % | |||||||||||||||||||||
As of Dec 31, 2013[5] | As of Dec 31, 2012[5] | % Change | |||||||||||||||||||||||||||||
Balance Sheet | |||||||||||||||||||||||||||||||
Total investments | $ | 2,364.9 | $ | 2,291.5 | 3.2 | % | |||||||||||||||||||||||||
Total OneBeacon's common shareholders' equity | $ | 1,104.3 | $ | 1,014.5 | 8.9 | % | |||||||||||||||||||||||||
Ratio of debt to total capital | 19.9 | % | 21.3 | % | (1.4) pts | ||||||||||||||||||||||||||
[1] | Represents OneBeacon's common shareholders' equity divided by common shares outstanding. |
[2] | Includes a quarterly dividend paid of $0.21 per share. |
[3] | Internal rate of return (IRR) calculated based on beginning book value per share, dividends paid and ending book value per share. Includes dividends of $0.84 per share. |
[4] | Operating income (loss) per share and related weighted average number of common shares outstanding include the impact of unvested restricted shares. |
[5] | Excludes $236.3 million and $338.1 million of investments that have been classified as held for sale as of December 31, 2013 and December 31, 2012, respectively. |
1
OneBeacon Insurance Group, Ltd.
Consolidated Statements of Operations and Comprehensive (Loss) Income
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Earned premiums | $ | 286.0 | $ | 286.5 | $ | 280.8 | $ | 278.9 | $ | 274.2 | $ | 1,132.0 | $ | 1,120.4 | |||||||||||||||
Net investment income | 12.1 | 9.4 | 11.4 | 10.1 | 10.2 | 53.6 | 41.1 | ||||||||||||||||||||||
Net realized and change in unrealized investment gains | (2.2 | ) | 28.4 | (25.5 | ) | 17.0 | 29.5 | 55.7 | 49.4 | ||||||||||||||||||||
Net other revenues [1] | (0.4 | ) | 24.0 | 0.6 | 5.5 | 1.1 | (0.5 | ) | 31.2 | ||||||||||||||||||||
Total revenues | 295.5 | 348.3 | 267.3 | 311.5 | 315.0 | 1,240.8 | 1,242.1 | ||||||||||||||||||||||
Loss and loss adjustment expenses | 197.5 | 148.9 | 157.0 | 167.8 | 148.4 | 650.0 | 622.1 | ||||||||||||||||||||||
Policy acquisition expenses | 63.8 | 54.8 | 52.5 | 53.6 | 48.0 | 249.4 | 208.9 | ||||||||||||||||||||||
Other underwriting expenses | 59.0 | 49.3 | 54.6 | 46.8 | 54.1 | 205.2 | 204.8 | ||||||||||||||||||||||
General and administrative expenses | 3.7 | 4.0 | 2.9 | 4.1 | 1.0 | 13.4 | 12.0 | ||||||||||||||||||||||
Interest expense | 4.8 | 3.2 | 3.3 | 3.3 | 3.2 | 16.9 | 13.0 | ||||||||||||||||||||||
Total expenses | 328.8 | 260.2 | 270.3 | 275.6 | 254.7 | 1,134.9 | 1,060.8 | ||||||||||||||||||||||
Pre-tax (loss) income | (33.3 | ) | 88.1 | (3.0 | ) | 35.9 | 60.3 | 105.9 | 181.3 | ||||||||||||||||||||
Income tax (expense) benefit | 19.7 | (19.8 | ) | 1.0 | 2.9 | (18.4 | ) | (8.4 | ) | (34.3 | ) | ||||||||||||||||||
Net (loss) income including noncontrolling interests | (13.6 | ) | 68.3 | (2.0 | ) | 38.8 | 41.9 | 97.5 | 147.0 | ||||||||||||||||||||
Income (loss) from discontinued operations, net of tax [2] | 0.5 | 0.5 | (0.5 | ) | 0.3 | (46.9 | ) | (24.3 | ) | (46.6 | ) | ||||||||||||||||||
Gain (loss) from sale of discontinued operations, net of tax | — | — | — | — | 46.6 | (91.0 | ) | 46.6 | |||||||||||||||||||||
Net (loss) income including noncontrolling interests | (13.1 | ) | 68.8 | (2.5 | ) | 39.1 | 41.6 | (17.8 | ) | 147.0 | |||||||||||||||||||
Less: Net income attributable to noncontrolling interests | (0.2 | ) | (0.4 | ) | (0.4 | ) | — | (0.2 | ) | (1.4 | ) | (1.0 | ) | ||||||||||||||||
Net (loss) income attributable to OneBeacon’s common shareholders | (13.3 | ) | 68.4 | (2.9 | ) | 39.1 | 41.4 | (19.2 | ) | 146.0 | |||||||||||||||||||
Other comprehensive (loss) income items | (1.2 | ) | 0.1 | 0.2 | 0.2 | 20.1 | (2.9 | ) | 20.6 | ||||||||||||||||||||
Comprehensive (loss) income attributable to OneBeacon’s common shareholders | $ | (14.5 | ) | $ | 68.5 | $ | (2.7 | ) | $ | 39.3 | $ | 61.5 | $ | (22.1 | ) | $ | 166.6 | ||||||||||||
[1] | The three months ended March 31, 2013 and year ended December 31, 2013 include other revenues of $23.0 million related to the gain on sale of Essentia, net of transaction costs. The three months ended September 30, 2013 and year ended December 31, 2013 include other revenues of $4.0 million related to a software licensing agreement. |
[2] | Results for the Runoff Business and AutoOne are reported as discontinued operations for all periods presented. The AutoOne transaction closed in February 2012. |
2
OneBeacon Insurance Group, Ltd.
Comprehensive (Loss) Income, Net (Loss) Income and Operating (Loss) Income
(in millions, except per share amounts)
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | ||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | ||||||||||||||||||||||
Comprehensive (loss) income attributable to OneBeacon’s common shareholders | $ | (14.5 | ) | $ | 68.5 | $ | (2.7 | ) | $ | 39.3 | $ | 61.5 | $ | (22.1 | ) | $ | 166.6 | |||||||||||
Net (loss) income attributable to OneBeacon’s common shareholders | $ | (13.3 | ) | $ | 68.4 | $ | (2.9 | ) | $ | 39.1 | $ | 41.4 | $ | (19.2 | ) | $ | 146.0 | |||||||||||
Weighted average number of common shares outstanding [1] | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | |||||||||||||||||||||
Net (loss) income attributable to OneBeacon’s common shareholders per share | $ | (0.14 | ) | $ | 0.71 | $ | (0.03 | ) | $ | 0.41 | $ | 0.43 | $ | (0.21 | ) | $ | 1.52 | |||||||||||
Net (loss) income attributable to OneBeacon’s common shareholders | $ | (13.3 | ) | $ | 68.4 | $ | (2.9 | ) | $ | 39.1 | $ | 41.4 | $ | (19.2 | ) | $ | 146.0 | |||||||||||
Less: | ||||||||||||||||||||||||||||
Net realized and change in unrealized investment (gains) losses | 2.2 | (28.4 | ) | 25.5 | (17.0 | ) | (29.5 | ) | (55.7 | ) | (49.4 | ) | ||||||||||||||||
Tax effect on net realized and change in unrealized investment gains (losses) | (0.8 | ) | 9.9 | (8.9 | ) | 6.0 | 10.3 | 19.5 | 17.3 | |||||||||||||||||||
(Income) loss from discontinued operations, net of tax | (0.5 | ) | (0.5 | ) | 0.5 | (0.3 | ) | 46.9 | 24.3 | 46.6 | ||||||||||||||||||
(Gain) loss from sale of discontinued operations, net of tax | — | — | — | — | (46.6 | ) | 91.0 | (46.6 | ) | |||||||||||||||||||
Operating (loss) income [2] | $ | (12.4 | ) | $ | 49.4 | $ | 14.2 | $ | 27.8 | $ | 22.5 | $ | 59.9 | $ | 113.9 | |||||||||||||
Weighted average number of common shares outstanding [1] | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | 94.5 | |||||||||||||||||||||
Operating (loss) income per share [2] | $ | (0.13 | ) | $ | 0.52 | $ | 0.15 | $ | 0.29 | $ | 0.24 | $ | 0.63 | $ | 1.21 | |||||||||||||
[1] | Weighted average number of common shares outstanding includes the impact of unvested restricted shares. |
[2] | Represents a non-GAAP financial measure. |
3
OneBeacon Insurance Group, Ltd.
Computation of Return on Equity Measures
($ in millions)
Year Ended Dec 31, 2013 | ||||||||||||||
Numerator: | ||||||||||||||
[A] | Comprehensive income attributable to OneBeacon’s common shareholders | $ | 166.6 | |||||||||||
[B] | Operating income [1] | $ | 113.9 | |||||||||||
As of | As of | |||||||||||||
Dec 31, 2013 | Dec 31, 2012 | Average | ||||||||||||
Denominator: | ||||||||||||||
[C] | OneBeacon’s common shareholders’ equity | $ | 1,104.3 | $ | 1,014.5 | $ | 1,059.4 | |||||||
Less: | ||||||||||||||
Net unrealized gains and losses and net foreign currency gains and losses on investments [2] | (124.6 | ) | (119.6 | ) | ||||||||||
Tax effect on net unrealized gains and losses and net foreign currency gains and losses on investments | 43.6 | 41.9 | ||||||||||||
Accumulated other comprehensive (income) loss (AOCI), after-tax | (6.8 | ) | 13.8 | |||||||||||
[D] | Adjusted OneBeacon’s common shareholders’ equity excluding cumulative net unrealized investment gains and losses and AOCI after tax [1] | $ | 1,016.5 | $ | 950.6 | $ | 983.6 | |||||||
Returns: | ||||||||||||||
Comprehensive return on average OneBeacon's common shareholders' equity [ A / C ] | 15.7 | % | ||||||||||||
Operating return on average adjusted OneBeacon's common shareholders' equity excluding cumulative net unrealized investment gains and losses and AOCI after tax [ B / D ] | 11.6 | % | ||||||||||||
[1] | Represents a non-GAAP financial measure. |
[2] | Net unrealized gains and losses and net foreign currency gains and losses on investments as of December 31, 2013 and 2012 includes unrealized gains and losses on investments held as well as deferred gains and losses relating to sales of investments to entities under common control. |
4
OneBeacon Insurance Group, Ltd.
Consolidated Balance Sheets and Book Value Per Share
As of December 31, 2013 and 2012
($ in millions, except per share amounts)
As of | ||||||||
Dec 31, 2013 | Dec 31, 2012 | |||||||
Assets | ||||||||
Investment securities | ||||||||
Fixed maturity investments | $ | 1,700.9 | $ | 1,593.3 | ||||
Short-term investments | 157.0 | 232.8 | ||||||
Common equity securities | 336.9 | 259.0 | ||||||
Convertible bonds | 30.5 | 62.6 | ||||||
Other investments | 139.6 | 143.8 | ||||||
Total investment securities | 2,364.9 | 2,291.5 | ||||||
Cash | 168.1 | 43.9 | ||||||
Reinsurance recoverables | 89.9 | 110.6 | ||||||
Premiums receivable | 228.2 | 225.6 | ||||||
Deferred acquisition costs | 103.7 | 123.9 | ||||||
Net deferred tax asset | 90.6 | 137.8 | ||||||
Investment income accrued | 10.1 | 12.1 | ||||||
Accounts receivable on unsettled investment sales | 3.3 | 2.1 | ||||||
Other assets | 272.7 | 227.2 | ||||||
Assets held for sale [1] | 1,880.1 | 2,226.8 | ||||||
Total assets | $ | 5,211.6 | $ | 5,401.5 | ||||
Liabilities | ||||||||
Loss and LAE reserves | $ | 1,054.3 | $ | 1,000.0 | ||||
Unearned premiums | 544.9 | 573.8 | ||||||
Debt | 274.7 | 274.7 | ||||||
Accounts payable on unsettled investment purchases | 11.6 | 6.2 | ||||||
Other liabilities | 338.6 | 302.7 | ||||||
Liabilities held for sale [1] | 1,880.1 | 2,226.8 | ||||||
Total 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, 95,404,138 shares issued and outstanding | 1,022.5 | 1,019.1 | ||||||
Retained earnings | 75.0 | 9.2 | ||||||
Accumulated 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 | 2.8 | ||||||
Total OneBeacon’s common shareholders’ equity and noncontrolling interests | 1,107.4 | 1,017.3 | ||||||
Total liabilities, OneBeacon’s common shareholders’ equity and noncontrolling interests | $ | 5,211.6 | $ | 5,401.5 | ||||
Total OneBeacon’s common shareholders’ equity | $ | 1,104.3 | $ | 1,014.5 | ||||
Common shares outstanding | 95.4 | 95.4 | ||||||
Book value per share | $ | 11.58 | $ | 10.63 | ||||
[1] | Assets and liabilities being sold as part of the Runoff Transaction are presented separately in the December 31, 2013 and 2012 consolidated balance sheet. |
5
OneBeacon Insurance Group, Ltd.
Consolidated Pre-Tax Results from Operations [1]
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Net written premiums | $ | 248.8 | $ | 265.1 | $ | 246.9 | $ | 314.1 | $ | 262.5 | $ | 1,179.2 | $ | 1,088.6 | |||||||||||||||
Earned premiums | 286.0 | 286.5 | 280.8 | 278.9 | 274.2 | 1,132.0 | 1,120.4 | ||||||||||||||||||||||
Total loss and LAE | (197.5 | ) | (148.9 | ) | (157.0 | ) | (167.8 | ) | (148.4 | ) | (650.0 | ) | (622.1 | ) | |||||||||||||||
Policy acquisition expenses | (63.8 | ) | (54.8 | ) | (52.5 | ) | (53.6 | ) | (48.0 | ) | (249.4 | ) | (208.9 | ) | |||||||||||||||
Other underwriting expenses | (59.0 | ) | (49.3 | ) | (54.6 | ) | (46.8 | ) | (54.1 | ) | (205.2 | ) | (204.8 | ) | |||||||||||||||
Underwriting (loss) income | (34.3 | ) | 33.5 | 16.7 | 10.7 | 23.7 | 27.4 | 84.6 | |||||||||||||||||||||
Net investment income | 12.1 | 9.4 | 11.4 | 10.1 | 10.2 | 53.6 | 41.1 | ||||||||||||||||||||||
Net realized and change in unrealized investment gains | (2.2 | ) | 28.4 | (25.5 | ) | 17.0 | 29.5 | 55.7 | 49.4 | ||||||||||||||||||||
Net other (expenses) revenues | (0.4 | ) | 24.0 | 0.6 | 5.5 | 1.1 | (0.5 | ) | 31.2 | ||||||||||||||||||||
General and administrative expenses | (3.7 | ) | (4.0 | ) | (2.9 | ) | (4.1 | ) | (1.0 | ) | (13.4 | ) | (12.0 | ) | |||||||||||||||
Interest expense | (4.8 | ) | (3.2 | ) | (3.3 | ) | (3.3 | ) | (3.2 | ) | (16.9 | ) | (13.0 | ) | |||||||||||||||
Pre-tax (loss) income from continuing operations | $ | (33.3 | ) | $ | 88.1 | $ | (3.0 | ) | $ | 35.9 | $ | 60.3 | $ | 105.9 | $ | 181.3 | |||||||||||||
Underwriting ratios [2] | |||||||||||||||||||||||||||||
Loss and LAE ratio | |||||||||||||||||||||||||||||
Current year: | |||||||||||||||||||||||||||||
Non-cat loss and LAE | 56.8 | % | 51.9 | % | 55.0 | % | 57.5 | % | 54.4 | % | 53.9 | % | 54.7 | % | |||||||||||||||
Catastrophe loss and LAE | 12.2 | % | 1.1 | % | 1.3 | % | 1.2 | % | (0.3 | )% | 4.2 | % | 0.8 | % | |||||||||||||||
Total loss and LAE | 69.0 | % | 53.0 | % | 56.3 | % | 58.7 | % | 54.1 | % | 58.1 | % | 55.5 | % | |||||||||||||||
Prior year: unfav (fav) | |||||||||||||||||||||||||||||
Total loss and LAE | 0.1 | % | (1.0 | )% | (0.4 | )% | 1.4 | % | — | % | (0.7 | )% | — | % | |||||||||||||||
Total loss and LAE ratio | 69.1 | % | 52.0 | % | 55.9 | % | 60.1 | % | 54.1 | % | 57.4 | % | 55.5 | % | |||||||||||||||
Policy acquisition expenses | 22.3 | % | 19.1 | % | 18.7 | % | 19.2 | % | 17.5 | % | 22.0 | % | 18.6 | % | |||||||||||||||
Other underwriting expenses | 20.5 | % | 17.2 | % | 19.5 | % | 16.8 | % | 19.7 | % | 18.1 | % | 18.3 | % | |||||||||||||||
Total expense ratio | 42.8 | % | 36.3 | % | 38.2 | % | 36.0 | % | 37.2 | % | 40.1 | % | 36.9 | % | |||||||||||||||
Total combined ratio | 111.9 | % | 88.3 | % | 94.1 | % | 96.1 | % | 91.3 | % | 97.5 | % | 92.4 | % | |||||||||||||||
[1] | Results for Runoff and AutoOne are reported as discontinued operations for all periods presented. The AutoOne transaction closed in February 2012. Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation. |
[2] | The combined ratio is calculated by adding the ratio of incurred loss and loss adjustment expenses to earned premiums ("loss and LAE ratio") and the ratio of policy acquisition and other underwriting expenses to earned premiums ("expense ratio"). |
6
OneBeacon Insurance Group, Ltd.
Consolidating Pre-Tax Results from Operations
For the Three Months Ended December 31, 2013 and 2012
($ in millions)
Specialty Products [1] | Specialty Industries [2] | Investing, Financing and Corporate | Consolidated | |||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||
Earned premiums | $ | 126.6 | $ | 154.8 | $ | 147.6 | $ | 131.2 | $ | — | $ | — | $ | 274.2 | $ | 286.0 | ||||||||||||||||
Loss and LAE | (71.7 | ) | (99.9 | ) | (76.7 | ) | (97.6 | ) | — | — | (148.4 | ) | (197.5 | ) | ||||||||||||||||||
Policy acquisition expenses | (22.0 | ) | (38.7 | ) | (26.0 | ) | (25.1 | ) | — | — | (48.0 | ) | (63.8 | ) | ||||||||||||||||||
Other underwriting expenses | (24.9 | ) | (28.5 | ) | (29.2 | ) | (30.5 | ) | — | — | (54.1 | ) | (59.0 | ) | ||||||||||||||||||
Underwriting income (loss) | 8.0 | (12.3 | ) | 15.7 | (22.0 | ) | — | — | 23.7 | (34.3 | ) | |||||||||||||||||||||
Net investment income | — | — | — | — | 10.2 | 12.1 | 10.2 | 12.1 | ||||||||||||||||||||||||
Net realized and change in unrealized investment gains | — | — | — | — | 29.5 | (2.2 | ) | 29.5 | (2.2 | ) | ||||||||||||||||||||||
Net other revenues (expenses) | — | — | 0.2 | 0.2 | 0.9 | (0.6 | ) | 1.1 | (0.4 | ) | ||||||||||||||||||||||
General and administrative expenses | 0.1 | — | (0.1 | ) | (0.5 | ) | (1.0 | ) | (3.2 | ) | (1.0 | ) | (3.7 | ) | ||||||||||||||||||
Interest expense | — | — | — | — | (3.2 | ) | (4.8 | ) | (3.2 | ) | (4.8 | ) | ||||||||||||||||||||
Pre-tax income (loss) from continuing operations | $ | 8.1 | $ | (12.3 | ) | $ | 15.8 | $ | (22.3 | ) | $ | 36.4 | $ | 1.3 | $ | 60.3 | $ | (33.3 | ) | |||||||||||||
Underwriting Ratios [3] | ||||||||||||||||||||||||||||||||
Loss and LAE ratio | 56.6 | % | 64.5 | % | 52.0 | % | 74.4 | % | 54.1 | % | 69.1 | % | ||||||||||||||||||||
Expense ratio | 37.1 | % | 43.2 | % | 37.4 | % | 42.4 | % | 37.2 | % | 42.8 | % | ||||||||||||||||||||
Total combined ratio | 93.7 | % | 107.7 | % | 89.4 | % | 116.8 | % | 91.3 | % | 111.9 | % | ||||||||||||||||||||
[1] | Specialty Products includes A.W.G. Dewar, OneBeacon Professional Insurance, OneBeacon Specialty Property, OneBeacon Environmental, OneBeacon Surety Group, OneBeacon Program Group, OneBeacon Crop Insurance, and Collector Cars and Boats, which was exited on January 1, 2013. |
[2] | Specialty Industries includes OneBeacon Entertainment, International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks, and OneBeacon Energy Group, which was exited in the first quarter of 2013. |
[3] | The combined ratio is calculated by adding the ratio of incurred loss and loss adjustment expenses to earned premiums ("loss and LAE ratio") and the ratio of policy acquisition and other underwriting expenses to earned premiums ("expense ratio"). |
7
OneBeacon Insurance Group, Ltd.
Consolidating Pre-Tax Results from Operations
For the Year Ended December 31, 2013 and 2012
($ in millions)
Specialty Products [1] | Specialty Industries [2] | Investing, Financing and Corporate | Consolidated | |||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||
Earned premiums | $ | 553.5 | $ | 604.0 | $ | 566.9 | $ | 528.0 | $ | — | $ | — | $ | 1,120.4 | $ | 1,132.0 | ||||||||||||||||
Loss and LAE | (312.3 | ) | (345.6 | ) | (309.8 | ) | (304.4 | ) | — | — | (622.1 | ) | (650.0 | ) | ||||||||||||||||||
Policy acquisition expenses | (106.3 | ) | (150.3 | ) | (102.6 | ) | (99.1 | ) | — | — | (208.9 | ) | (249.4 | ) | ||||||||||||||||||
Other underwriting expenses | (97.4 | ) | (96.2 | ) | (107.4 | ) | (109.0 | ) | — | — | (204.8 | ) | (205.2 | ) | ||||||||||||||||||
Underwriting income | 37.5 | 11.9 | 47.1 | 15.5 | — | — | 84.6 | 27.4 | ||||||||||||||||||||||||
Net investment income | — | — | — | — | 41.1 | 53.6 | 41.1 | 53.6 | ||||||||||||||||||||||||
Net realized and change in unrealized investment gains | — | — | — | — | 49.4 | 55.7 | 49.4 | 55.7 | ||||||||||||||||||||||||
Net other revenues (expenses) | 0.3 | 0.4 | 1.1 | (0.8 | ) | 29.8 | (0.1 | ) | 31.2 | (0.5 | ) | |||||||||||||||||||||
General and administrative expenses | — | — | (2.4 | ) | (1.9 | ) | (9.6 | ) | (11.5 | ) | (12.0 | ) | (13.4 | ) | ||||||||||||||||||
Interest expense | — | — | — | — | (13.0 | ) | (16.9 | ) | (13.0 | ) | (16.9 | ) | ||||||||||||||||||||
Pre-tax income from continuing operations | $ | 37.8 | $ | 12.3 | $ | 45.8 | $ | 12.8 | $ | 97.7 | $ | 80.8 | $ | 181.3 | $ | 105.9 | ||||||||||||||||
Underwriting Ratios [3] | ||||||||||||||||||||||||||||||||
Loss and LAE ratio | 56.4 | % | 57.2 | % | 54.7 | % | 57.7 | % | 55.5 | % | 57.4 | % | ||||||||||||||||||||
Expense ratio | 36.8 | % | 40.7 | % | 37.0 | % | 39.4 | % | 36.9 | % | 40.1 | % | ||||||||||||||||||||
Total combined ratio | 93.2 | % | 97.9 | % | 91.7 | % | 97.1 | % | 92.4 | % | 97.5 | % | ||||||||||||||||||||
[1] | Specialty Products includes A.W.G. Dewar, OneBeacon Professional Insurance, OneBeacon Specialty Property, OneBeacon Environmental, OneBeacon Surety Group, OneBeacon Program Group, OneBeacon Crop Insurance, and Collector Cars and Boats, which was exited on January 1, 2013. |
[2] | Specialty Industries includes OneBeacon Entertainment, International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks, and OneBeacon Energy Group, which was exited in the first quarter of 2013. |
[3] | The combined ratio is calculated by adding the ratio of incurred loss and loss adjustment expenses to earned premiums ("loss and LAE ratio") and the ratio of policy acquisition and other underwriting expenses to earned premiums ("expense ratio"). |
8
OneBeacon Insurance Group, Ltd.
Consolidated Loss and LAE Reserve Summaries
For the Three Months and Year Ended December 31, 2013 and 2012
($ in millions)
Three months ended December, 31 | Year ended December, 31 | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Gross beginning loss and LAE reserves [1] | $ | 1,052.9 | $ | 911.6 | $ | 1,000.0 | $ | 3,358.6 | ||||||||
Less beginning reinsurance recoverable on unpaid losses [1] | (80.2 | ) | (41.3 | ) | (107.3 | ) | (2,167.5 | ) | ||||||||
Net beginning loss and LAE reserves | 972.7 | 870.3 | 892.7 | 1,191.1 | ||||||||||||
Loss and LAE incurred relating to: | ||||||||||||||||
Current year losses | 148.3 | 197.5 | 622.1 | 657.4 | ||||||||||||
Prior year losses | 0.1 | — | — | (7.4 | ) | |||||||||||
Total incurred loss and LAE from continuing operations | 148.4 | 197.5 | 622.1 | 650.0 | ||||||||||||
Loss and LAE paid relating to: | ||||||||||||||||
Current year losses | (73.5 | ) | (101.6 | ) | (188.6 | ) | (224.6 | ) | ||||||||
Prior year losses | (73.4 | ) | (74.3 | ) | (352.1 | ) | (340.5 | ) | ||||||||
Total loss and LAE payments from continuing operations | (146.9 | ) | (175.9 | ) | (540.7 | ) | (565.1 | ) | ||||||||
Net loss and LAE reserves | 974.2 | 891.9 | 974.1 | 1,276.0 | ||||||||||||
Total incurred loss and LAE from discontinued operations | 71.4 | — | 78.9 | 48.4 | ||||||||||||
Total loss and LAE payments from discontinued operations | (13.7 | ) | (43.7 | ) | (102.3 | ) | (220.8 | ) | ||||||||
Net loss and LAE reserves | 1,031.9 | 848.2 | 950.7 | 1,103.6 | ||||||||||||
Net change in loss and LAE reserves reported in liabilities held for sale [2] [3] | (57.8 | ) | 44.5 | 23.4 | (147.1 | ) | ||||||||||
Net loss and LAE reserves sold [3] | — | — | — | (63.8 | ) | |||||||||||
Net ending loss and LAE reserves | 974.1 | 892.7 | 974.1 | 892.7 | ||||||||||||
Plus ending reinsurance recoverable on unpaid losses [1] | 80.2 | 107.3 | 80.2 | 107.3 | ||||||||||||
Gross ending loss and LAE reserves [1] | $ | 1,054.3 | $ | 1,000.0 | $ | 1,054.3 | $ | 1,000.0 | ||||||||
Earned premiums | $ | 274.2 | $ | 286.0 | $ | 1,120.4 | $ | 1,132.0 | ||||||||
Calendar year loss and LAE paid ratio | 53.6 | % | 61.5 | % | 48.3 | % | 49.9 | % | ||||||||
Calendar year loss and LAE incurred ratio | 54.1 | % | 69.1 | % | 55.5 | % | 57.4 | % | ||||||||
(Fav) / Unfav prior accident year development ratio | — | % | — | % | — | % | (0.7 | )% | ||||||||
Current accident year loss and LAE paid to incurred ratio | 49.6 | % | 51.4 | % | 30.3 | % | 34.2 | % | ||||||||
[1] | Gross beginning loss and LAE reserves and reinsurance recoverables on unpaid losses rollforward include purchase accounting adjustments relating to the OneBeacon acquisition. As further described below, the remaining fair value reductions to both loss and LAE reserves and reinsurance recoverables on unpaid losses were reclassified to held for sale. |
[2] | Assets and liabilities being sold as part of the Runoff Transaction are presented separately in the consolidated balance sheets for all periods presented. |
[3] | The AutoOne transaction closed in February 2012. |
9
OneBeacon Insurance Group, Ltd.
Specialty Products - Pre-Tax Results from Operations
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Net written premiums | $ | 120.6 | $ | 123.9 | $ | 97.4 | $ | 172.0 | $ | 116.3 | $ | 630.9 | $ | 509.6 | |||||||||||||||
Earned premiums | 154.8 | 153.7 | 141.0 | 132.2 | 126.6 | 604.0 | 553.5 | ||||||||||||||||||||||
Total loss and LAE | (99.9 | ) | (78.6 | ) | (77.8 | ) | (84.2 | ) | (71.7 | ) | (345.6 | ) | (312.3 | ) | |||||||||||||||
Policy acquisition expenses | (38.7 | ) | (30.4 | ) | (26.5 | ) | (27.4 | ) | (22.0 | ) | (150.3 | ) | (106.3 | ) | |||||||||||||||
Other underwriting expenses | (28.5 | ) | (24.3 | ) | (27.0 | ) | (21.2 | ) | (24.9 | ) | (96.2 | ) | (97.4 | ) | |||||||||||||||
Underwriting (loss) income | (12.3 | ) | 20.4 | 9.7 | (0.6 | ) | 8.0 | 11.9 | 37.5 | ||||||||||||||||||||
Net other revenues | — | 0.3 | — | — | — | 0.4 | 0.3 | ||||||||||||||||||||||
General and administrative expenses | — | — | (0.1 | ) | — | 0.1 | — | — | |||||||||||||||||||||
Pre-tax (loss) income from continuing operations | $ | (12.3 | ) | $ | 20.7 | $ | 9.6 | $ | (0.6 | ) | $ | 8.1 | $ | 12.3 | $ | 37.8 | |||||||||||||
Underwriting ratios | |||||||||||||||||||||||||||||
Loss and LAE ratio | |||||||||||||||||||||||||||||
Current year: | |||||||||||||||||||||||||||||
Non-cat loss and LAE | 53.5 | % | 50.5 | % | 53.5 | % | 58.4 | % | 57.3 | % | 53.7 | % | 54.7 | % | |||||||||||||||
Catastrophe loss and LAE | 12.5 | % | 1.0 | % | 1.3 | % | 0.2 | % | — | % | 3.8 | % | 0.6 | % | |||||||||||||||
Total loss and LAE | 66.0 | % | 51.5 | % | 54.8 | % | 58.6 | % | 57.3 | % | 57.5 | % | 55.3 | % | |||||||||||||||
Prior year: (fav) unfav | |||||||||||||||||||||||||||||
Total loss and LAE | (1.5 | )% | (0.3 | )% | 0.3 | % | 5.1 | % | (0.7 | )% | (0.3 | )% | 1.1 | % | |||||||||||||||
Total loss and LAE ratio | 64.5 | % | 51.2 | % | 55.1 | % | 63.7 | % | 56.6 | % | 57.2 | % | 56.4 | % | |||||||||||||||
Policy acquisition expenses | 25.0 | % | 19.8 | % | 18.8 | % | 20.7 | % | 17.4 | % | 24.9 | % | 19.2 | % | |||||||||||||||
Other underwriting expenses | 18.2 | % | 15.7 | % | 19.2 | % | 16.0 | % | 19.7 | % | 15.8 | % | 17.6 | % | |||||||||||||||
Total expense ratio | 43.2 | % | 35.5 | % | 38.0 | % | 36.7 | % | 37.1 | % | 40.7 | % | 36.8 | % | |||||||||||||||
Total combined ratio | 107.7 | % | 86.7 | % | 93.1 | % | 100.4 | % | 93.7 | % | 97.9 | % | 93.2 | % | |||||||||||||||
10
OneBeacon Insurance Group, Ltd.
Specialty Industries - Pre-Tax Results from Operations
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Net written premiums | $ | 128.2 | $ | 141.2 | $ | 149.5 | $ | 142.1 | $ | 146.2 | $ | 548.3 | $ | 579.0 | |||||||||||||||
Earned premiums | 131.2 | 132.8 | 139.8 | 146.7 | 147.6 | 528.0 | 566.9 | ||||||||||||||||||||||
Total loss and LAE | (97.6 | ) | (70.3 | ) | (79.2 | ) | (83.6 | ) | (76.7 | ) | (304.4 | ) | (309.8 | ) | |||||||||||||||
Policy acquisition expenses | (25.1 | ) | (24.4 | ) | (26.0 | ) | (26.2 | ) | (26.0 | ) | (99.1 | ) | (102.6 | ) | |||||||||||||||
Other underwriting expenses | (30.5 | ) | (25.0 | ) | (27.6 | ) | (25.6 | ) | (29.2 | ) | (109.0 | ) | (107.4 | ) | |||||||||||||||
Underwriting income (loss) | (22.0 | ) | 13.1 | 7.0 | 11.3 | 15.7 | 15.5 | 47.1 | |||||||||||||||||||||
Net other (expenses) revenues | 0.2 | 0.2 | 0.1 | 0.6 | 0.2 | (0.8 | ) | 1.1 | |||||||||||||||||||||
General and administrative expenses | (0.5 | ) | (0.6 | ) | (0.6 | ) | (1.1 | ) | (0.1 | ) | (1.9 | ) | (2.4 | ) | |||||||||||||||
Pre-tax income (loss) from continuing operations | $ | (22.3 | ) | $ | 12.7 | $ | 6.5 | $ | 10.8 | $ | 15.8 | $ | 12.8 | $ | 45.8 | ||||||||||||||
Underwriting ratios | |||||||||||||||||||||||||||||
Loss and LAE ratio | |||||||||||||||||||||||||||||
Current year: | |||||||||||||||||||||||||||||
Non-cat loss and LAE | 60.9 | % | 53.5 | % | 56.6 | % | 56.7 | % | 52.0 | % | 54.1 | % | 54.8 | % | |||||||||||||||
Catastrophe loss and LAE | 11.7 | % | 1.2 | % | 1.3 | % | 2.1 | % | (0.6 | )% | 4.7 | % | 1.0 | % | |||||||||||||||
Total loss and LAE | 72.6 | % | 54.7 | % | 57.9 | % | 58.8 | % | 51.4 | % | 58.8 | % | 55.8 | % | |||||||||||||||
Prior year: unfav (fav) | |||||||||||||||||||||||||||||
Total loss and LAE | 1.8 | % | (1.8 | )% | (1.2 | )% | (1.9 | )% | 0.6 | % | (1.1 | )% | (1.1 | )% | |||||||||||||||
Total loss and LAE ratio | 74.4 | % | 52.9 | % | 56.7 | % | 56.9 | % | 52.0 | % | 57.7 | % | 54.7 | % | |||||||||||||||
Policy acquisition expenses | 19.2 | % | 18.3 | % | 18.6 | % | 17.9 | % | 17.6 | % | 18.8 | % | 18.1 | % | |||||||||||||||
Other underwriting expenses | 23.2 | % | 18.9 | % | 19.7 | % | 17.5 | % | 19.8 | % | 20.6 | % | 18.9 | % | |||||||||||||||
Total expense ratio | 42.4 | % | 37.2 | % | 38.3 | % | 35.4 | % | 37.4 | % | 39.4 | % | 37.0 | % | |||||||||||||||
Total combined ratio | 116.8 | % | 90.1 | % | 95.0 | % | 92.3 | % | 89.4 | % | 97.1 | % | 91.7 | % | |||||||||||||||
11
OneBeacon Insurance Group, Ltd.
Investing, Financing and Corporate Operations - Pre-Tax Results from Operations
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Net investment income | $ | 12.1 | $ | 9.4 | $ | 11.4 | $ | 10.1 | $ | 10.2 | $ | 53.6 | $ | 41.1 | |||||||||||||||
Net realized and change in unrealized investment gains | (2.2 | ) | 28.4 | (25.5 | ) | 17.0 | 29.5 | 55.7 | 49.4 | ||||||||||||||||||||
Net other revenues (expenses) | (0.6 | ) | 23.5 | 0.5 | 4.9 | 0.9 | (0.1 | ) | 29.8 | ||||||||||||||||||||
General and administrative expenses | (3.2 | ) | (3.4 | ) | (2.2 | ) | (3.0 | ) | (1.0 | ) | (11.5 | ) | (9.6 | ) | |||||||||||||||
Interest expense | (4.8 | ) | (3.2 | ) | (3.3 | ) | (3.3 | ) | (3.2 | ) | (16.9 | ) | (13.0 | ) | |||||||||||||||
Pre-tax income (loss) from continuing operations | $ | 1.3 | $ | 54.7 | $ | (19.1 | ) | $ | 25.7 | $ | 36.4 | $ | 80.8 | $ | 97.7 | ||||||||||||||
12
OneBeacon Insurance Group, Ltd.
Investment Results Pre-Tax
($ in millions)
Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | |||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 | 2013 | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||||
Fixed maturity investments | $ | 10.5 | $ | 9.9 | $ | 10.4 | $ | 10.4 | $ | 9.9 | $ | 49.1 | $ | 40.6 | |||||||||||||||
Short-term investments | — | — | — | — | — | 0.1 | — | ||||||||||||||||||||||
Common equity securities | 2.0 | 1.3 | 1.6 | 1.5 | 1.8 | 6.8 | 6.2 | ||||||||||||||||||||||
Convertible fixed maturity investments | 1.2 | 0.4 | 0.3 | 0.2 | 0.3 | 4.6 | 1.2 | ||||||||||||||||||||||
Other investments | — | (0.3 | ) | 0.7 | (0.4 | ) | (0.1 | ) | (0.4 | ) | (0.1 | ) | |||||||||||||||||
Total investment income | 13.7 | 11.3 | 13.0 | 11.7 | 11.9 | 60.2 | 47.9 | ||||||||||||||||||||||
Less investment expenses | 1.6 | 1.9 | 1.6 | 1.6 | 1.7 | 6.6 | 6.8 | ||||||||||||||||||||||
Net investment income | $ | 12.1 | $ | 9.4 | $ | 11.4 | $ | 10.1 | $ | 10.2 | $ | 53.6 | $ | 41.1 | |||||||||||||||
Net realized investment gains (losses) | |||||||||||||||||||||||||||||
Fixed maturity investments | $ | 0.4 | $ | 3.9 | $ | 3.9 | $ | (5.0 | ) | $ | (0.7 | ) | $ | 27.1 | $ | 2.1 | |||||||||||||
Short-term investments | — | — | 0.1 | — | (0.1 | ) | — | — | |||||||||||||||||||||
Common equity securities | 2.3 | 16.7 | 1.2 | 2.7 | 15.5 | 2.1 | 36.1 | ||||||||||||||||||||||
Convertible fixed maturity investments | (1.6 | ) | 1.5 | (1.9 | ) | — | 0.7 | 0.4 | 0.3 | ||||||||||||||||||||
Other investments | 19.6 | 1.8 | 2.9 | (1.9 | ) | 2.9 | 21.2 | 5.7 | |||||||||||||||||||||
Net realized investment gains (losses) | $ | 20.7 | $ | 23.9 | $ | 6.2 | $ | (4.2 | ) | $ | 18.3 | $ | 50.8 | $ | 44.2 | ||||||||||||||
Change in net unrealized investment gains | |||||||||||||||||||||||||||||
Fixed maturity investments | $ | (1.4 | ) | $ | (4.4 | ) | $ | (29.8 | ) | $ | 0.5 | $ | (0.7 | ) | $ | 7.2 | $ | (34.4 | ) | ||||||||||
Short-term investments | — | — | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||
Common equity securities | (5.5 | ) | 7.9 | (2.4 | ) | 15.8 | 10.7 | 11.5 | 32.0 | ||||||||||||||||||||
Convertible fixed maturity investments | 1.6 | (0.9 | ) | (0.7 | ) | 1.0 | 1.7 | (0.4 | ) | 1.1 | |||||||||||||||||||
Other investments | (17.5 | ) | 1.9 | 1.3 | 3.7 | (0.6 | ) | (13.5 | ) | 6.3 | |||||||||||||||||||
Change in net unrealized investment gains | $ | (22.8 | ) | $ | 4.5 | $ | (31.6 | ) | $ | 21.0 | $ | 11.2 | $ | 4.8 | $ | 5.1 | |||||||||||||
Change in net unrealized foreign currency translation | |||||||||||||||||||||||||||||
Fixed maturity investments | $ | (0.1 | ) | $ | — | $ | (0.1 | ) | $ | 0.1 | $ | — | $ | 0.1 | $ | — | |||||||||||||
Short-term investments | — | — | — | — | — | — | — | ||||||||||||||||||||||
Common equity securities | — | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||
Convertible fixed maturity investments | — | — | — | — | — | — | — | ||||||||||||||||||||||
Other investments | — | — | — | — | — | — | — | ||||||||||||||||||||||
Change in net unrealized foreign currency translation | $ | (0.1 | ) | $ | — | $ | (0.1 | ) | $ | 0.2 | $ | — | $ | 0.1 | $ | 0.1 | |||||||||||||
Total investment return | |||||||||||||||||||||||||||||
Fixed maturity investments | $ | 9.3 | $ | 9.4 | $ | (15.6 | ) | $ | 6.0 | $ | 8.5 | 83.4 | 8.3 | ||||||||||||||||
Short-term investments | — | — | 0.1 | — | — | 0.1 | 0.1 | ||||||||||||||||||||||
Common equity securities | (1.2 | ) | 25.9 | 0.4 | 20.1 | 28.0 | 20.4 | 74.4 | |||||||||||||||||||||
Convertible fixed maturity investments | 1.2 | 1.0 | (2.3 | ) | 1.2 | 2.7 | 4.6 | 2.6 | |||||||||||||||||||||
Other investments | 2.1 | 3.4 | 4.9 | 1.4 | 2.2 | 7.3 | 11.9 | ||||||||||||||||||||||
Total investment return | $ | 11.4 | $ | 39.7 | $ | (12.5 | ) | $ | 28.7 | $ | 41.4 | $ | 115.8 | $ | 97.3 | ||||||||||||||
13
OneBeacon Insurance Group, Ltd.
Investment Returns[1]
($ in millions)
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | ||||||||||||||||||||||
2012 | 2013 | 2013 | 2013 | 2013 | 2012 [2] | 2013 | ||||||||||||||||||||||
Average market value of investments | ||||||||||||||||||||||||||||
Fixed maturity investments | $ | 1,891.4 | $ | 1,896.3 | $ | 1,885.0 | $ | 1,887.6 | $ | 1,901.5 | $ | 1,851.2 | $ | 1,900.9 | ||||||||||||||
Short-term investments | 253.5 | 223.6 | 185.2 | 159.0 | 159.5 | 256.4 | 184.4 | |||||||||||||||||||||
Common equity securities | 277.2 | 277.6 | 297.4 | 313.0 | 332.2 | 273.8 | 303.6 | |||||||||||||||||||||
Convertible fixed maturity investments | 67.6 | 50.5 | 34.1 | 30.9 | 31.2 | 74.2 | 38.7 | |||||||||||||||||||||
Other investments | 150.3 | 144.0 | 144.7 | 145.6 | 142.9 | 153.4 | 143.7 | |||||||||||||||||||||
Total average market value | $ | 2,640.0 | $ | 2,592.0 | $ | 2,546.4 | $ | 2,536.1 | $ | 2,567.3 | $ | 2,609.0 | $ | 2,571.3 | ||||||||||||||
Investment returns | ||||||||||||||||||||||||||||
Fixed maturity investments | 0.5 | % | 0.5 | % | (0.8 | )% | 0.3 | % | 0.4 | % | 4.5 | % | 0.4 | % | ||||||||||||||
Short-term investments | — | % | — | % | 0.1 | % | — | % | — | % | — | % | 0.1 | % | ||||||||||||||
Total fixed income | 0.5 | % | 0.4 | % | (0.7 | )% | 0.3 | % | 0.4 | % | 4.0 | % | 0.4 | % | ||||||||||||||
Common equity securities | (0.4 | )% | 9.3 | % | 0.1 | % | 6.4 | % | 8.4 | % | 7.5 | % | 24.5 | % | ||||||||||||||
Convertible fixed maturity investments | 1.8 | % | 2.0 | % | (6.7 | )% | 3.9 | % | 8.7 | % | 6.2 | % | 6.7 | % | ||||||||||||||
Total common equity & convertible fixed maturity securities | — | % | 8.2 | % | (0.6 | )% | 6.2 | % | 8.4 | % | 7.2 | % | 22.5 | % | ||||||||||||||
Other investments | 1.4 | % | 2.4 | % | 3.4 | % | 1.0 | % | 1.5 | % | 4.8 | % | 8.3 | % | ||||||||||||||
Total common equity, convertible fixed maturity securities & other investments | 0.4 | % | 6.4 | % | 0.6 | % | 4.6 | % | 6.5 | % | 6.4 | % | 18.3 | % | ||||||||||||||
Total return | 0.5 | % | 1.5 | % | (0.5 | )% | 1.1 | % | 1.6 | % | 4.4 | % | 3.8 | % | ||||||||||||||
Average amortized cost of investments | ||||||||||||||||||||||||||||
Fixed maturity investments | $ | 1,652.7 | $ | 1,849.0 | $ | 1,855.1 | $ | 1,871.7 | $ | 1,885.4 | $ | 1,783.4 | $ | 1,872.6 | ||||||||||||||
Short-term investments | 253.5 | 223.6 | 185.2 | 159.0 | 159.5 | 256.4 | 184.4 | |||||||||||||||||||||
Common equity securities | 236.9 | 236.3 | 253.3 | 262.1 | 267.9 | 241.5 | 252.8 | |||||||||||||||||||||
Convertible fixed maturity investments | 65.3 | 47.9 | 32.3 | 28.8 | 27.8 | 70.9 | 35.9 | |||||||||||||||||||||
Other investments | 118.5 | 114.1 | 113.3 | 111.9 | 107.7 | 121.3 | 111.4 | |||||||||||||||||||||
Total average amortized cost | $ | 2,326.9 | $ | 2,470.9 | $ | 2,439.2 | $ | 2,433.5 | $ | 2,448.3 | $ | 2,473.5 | $ | 2,457.1 | ||||||||||||||
Investment yield | ||||||||||||||||||||||||||||
Fixed maturity investments | 0.6 | % | 0.5 | % | 0.6 | % | 0.6 | % | 0.5 | % | 2.7 | % | 2.2 | % | ||||||||||||||
Short-term investments | — | % | — | % | — | % | — | % | — | % | — | % | — | % | ||||||||||||||
Common equity securities | 0.8 | % | 0.6 | % | 0.6 | % | 0.6 | % | 0.7 | % | 2.8 | % | 2.5 | % | ||||||||||||||
Convertible fixed maturity investments | 1.8 | % | 0.8 | % | 0.9 | % | 0.7 | % | 1.1 | % | 6.5 | % | 3.3 | % | ||||||||||||||
Other investments | — | % | (0.3 | )% | 0.6 | % | (0.4 | )% | (0.1 | )% | (0.3 | )% | (0.1 | )% | ||||||||||||||
Total investment yield | 0.6 | % | 0.5 | % | 0.5 | % | 0.5 | % | 0.5 | % | 2.4 | % | 1.9 | % | ||||||||||||||
[1] For all periods presented, average market value of investments and amortized cost of investments were calculated prior to the reclassification of assets being sold as part of the Runoff Transaction, which were required to be presented separately in the consolidated balance sheets.
[2] For the years ended December 31, 2013 and 2012, the average market value of investments and amortized cost of investments were calculated prior to the reclassification of assets being sold as part of the Runoff Transaction which were required to be presented separately in the consolidated balance sheets. The AutoOne transaction closed in February 2012.
14
OneBeacon Insurance Group, Ltd.
Composition of Invested Assets[1]
($ in millions)
Dec 31, 2012 | Mar 31, 2013 | Jun 30, 2013 | Sep 30, 2013 | Dec 31, 2013 | |||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
Fixed maturity investments | $ | 1,931.4 | 73.4 | % | $ | 1,861.0 | 72.8 | % | $ | 1,909.3 | 75.2 | % | $ | 1,865.8 | 73.6 | % | $ | 1,937.2 | 74.5 | % | |||||||||||||||
Short-term investments | 232.8 | 8.9 | % | 214.4 | 8.4 | % | 155.9 | 6.1 | % | 162.0 | 6.4 | % | 157.0 | 6.0 | % | ||||||||||||||||||||
Common equity securities | 259.0 | 9.8 | % | 296.2 | 11.6 | % | 298.6 | 11.8 | % | 327.5 | 12.9 | % | 336.9 | 13.0 | % | ||||||||||||||||||||
Convertible fixed maturity investments | 62.6 | 2.4 | % | 38.5 | 1.5 | % | 29.8 | 1.2 | % | 31.9 | 1.3 | % | 30.5 | 1.2 | % | ||||||||||||||||||||
Other investments | 143.8 | 5.5 | % | 144.4 | 5.7 | % | 145.0 | 5.7 | % | 146.2 | 5.8 | % | 139.6 | 5.3 | % | ||||||||||||||||||||
Total investments, market value | $ | 2,629.6 | 100.0 | % | $ | 2,554.5 | 100.0 | % | $ | 2,538.6 | 100.0 | % | $ | 2,533.4 | 100.0 | % | $ | 2,601.2 | 100.0 | % | |||||||||||||||
Inflation indexed treasuries | $ | 18.4 | 1.0 | % | $ | 4.1 | 0.2 | % | $ | 6.4 | 0.3 | % | $ | 0.6 | — | % | $ | 0.6 | — | % | |||||||||||||||
Other U.S. government obligations | 179.2 | 9.3 | % | 156.3 | 8.4 | % | 212.4 | 11.1 | % | 137.0 | 7.3 | % | 130.5 | 6.7 | % | ||||||||||||||||||||
Debt securities issued by industrial corporations | 711.5 | 36.8 | % | 746.8 | 40.1 | % | 723.7 | 38.0 | % | 732.2 | 39.3 | % | 754.5 | 39.0 | % | ||||||||||||||||||||
Municipal obligations | 3.2 | 0.2 | % | 3.2 | 0.2 | % | 3.1 | 0.2 | % | 3.0 | 0.2 | % | 16.5 | 0.9 | % | ||||||||||||||||||||
Asset-backed securities | 927.9 | 48.0 | % | 861.1 | 46.3 | % | 875.4 | 45.8 | % | 907.9 | 48.7 | % | 949.5 | 49.0 | % | ||||||||||||||||||||
Foreign government obligations | 6.5 | 0.3 | % | 3.9 | 0.2 | % | 3.7 | 0.2 | % | 2.4 | 0.1 | % | 2.3 | 0.1 | % | ||||||||||||||||||||
Preferred stocks | 84.7 | 4.4 | % | 85.6 | 4.6 | % | 84.6 | 4.4 | % | 82.7 | 4.4 | % | 83.3 | 4.3 | % | ||||||||||||||||||||
Total fixed maturity investments, market value | $ | 1,931.4 | 100.0 | % | $ | 1,861.0 | 100.0 | % | $ | 1,909.3 | 100.0 | % | $ | 1,865.8 | 100.0 | % | $ | 1,937.2 | 100.0 | % | |||||||||||||||
Government bonds | $ | 203.1 | 10.8 | % | $ | 163.5 | 9.0 | % | $ | 224.0 | 11.8 | % | $ | 139.4 | 7.5 | % | $ | 133.0 | 6.9 | % | |||||||||||||||
AAA/Aaa | 287.8 | 15.3 | % | 207.0 | 11.4 | % | 225.8 | 11.9 | % | 349.0 | 18.9 | % | 340.3 | 17.7 | % | ||||||||||||||||||||
AA/Aa | 643.4 | 34.2 | % | 631.4 | 34.8 | % | 618.4 | 32.6 | % | 482.9 | 26.2 | % | 533.7 | 27.8 | % | ||||||||||||||||||||
A/A | 305.5 | 16.2 | % | 371.5 | 20.5 | % | 347.8 | 18.4 | % | 424.1 | 22.9 | % | 445.8 | 23.2 | % | ||||||||||||||||||||
BBB/Baa | 356.4 | 18.9 | % | 345.7 | 19.0 | % | 359.4 | 19.0 | % | 340.9 | 18.4 | % | 363.3 | 18.9 | % | ||||||||||||||||||||
Other/not rated | 85.8 | 4.6 | % | 96.7 | 5.3 | % | 118.7 | 6.3 | % | 113.1 | 6.1 | % | 105.3 | 5.5 | % | ||||||||||||||||||||
Total fixed maturity investments, amortized cost | $ | 1,882.0 | 100.0 | % | $ | 1,815.8 | 100.0 | % | $ | 1,894.1 | 100.0 | % | $ | 1,849.4 | 100.0 | % | $ | 1,921.4 | 100.0 | % | |||||||||||||||
[1] | Market value and amortized cost of investments as of December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013 and December 31, 2012 were calculated prior to the reclassification of $236.3, $239.7, $260.8, $296.9 and $338.1 million, respectively, of assets being sold as part of the Runoff Transaction which are presented as assets held for sale in the respective consolidated balance sheets. |
15
OneBeacon Insurance Group, Ltd.
Capital Structure and Interest Coverage
($ in millions)
Capital Structure: | As of | |||||||
Dec 31, 2013 | Dec 31, 2012 | |||||||
Total capitalization | ||||||||
Senior notes, including current portion | $ | 274.7 | $ | 274.7 | ||||
OneBeacon’s common shareholders’ equity | 1,104.3 | 1,014.5 | ||||||
Total capitalization | $ | 1,379.0 | $ | 1,289.2 | ||||
Ratio of debt to total capital | 19.9 | % | 21.3 | % | ||||
Interest Coverage: | Year Ended | ||||||||
Dec 31, 2013 | Dec 31, 2012 | ||||||||
Pre-tax income | $ | 181.3 | $ | 105.9 | |||||
Less: | |||||||||
Net realized and change in unrealized investment gains | (49.4 | ) | (55.7 | ) | |||||
Interest expense on debt | 13.0 | 16.9 | |||||||
[A] | Pre-tax operating income before interest expense on debt [1] | $ | 144.9 | $ | 67.1 | ||||
[B] | Interest expense on debt | $ | 13.0 | $ | 16.9 | ||||
Interest coverage [A/B] [1] | 11.1x | 4.0x | |||||||
[1] | Represents a non-GAAP financial measure. |
16