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8-K - 8-K - OneBeacon Insurance Group, Ltd.a8-kcover4q2014.htm


Exhibit 99.1
 
 





 
OneBeacon Insurance Group, Ltd.
 
 
Investor Financial Supplement
 
 
December 31, 2014






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 (1)
 
A
 
A-
 
A
 
A2
Outlook
 
Stable
 
Stable
 
Stable
 
Stable
 
(1) 
Insurance entities include Atlantic Specialty Insurance Company, Homeland Insurance Company of New York, Homeland Insurance Company of Delaware, and OBI National 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 Income (Loss)
2
 
Capital Structure and Interest Coverage
16
Comprehensive Income (Loss), Net Income (Loss) and Operating Income (Loss)
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 and Year Ended December 31, 2014 and 2013
7-8
 
 
 
Consolidated Loss and LAE Reserve Summaries
 
 
 
 
For the Three Months and Year Ended December 31, 2014 and 2013
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, Other Specialty Products, 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 December 23, 2014, the Company completed the sale of its runoff business, which included the results of the 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 for all periods presented.
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 change in unrealized investment gains, loss (income) from discontinued operations, (loss) gain 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 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 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 is included on page 3.
Operating income (loss) per share is calculated by dividing operating income (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding. Management believes that operating income 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 is included on page 3. The calculation of operating income 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 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 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, after tax, and AOCI/L, after tax, is included on page 4.
Pre-tax operating income 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 are largely independent of the underwriting decision-making process. The reconciliation of pre-tax income (loss) 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

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This news 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 press release that address activities, events or developments which we expect will or may occur in the future are forward-looking statements. The words "will," "believe," "intend," "expect," "anticipate," "project," "estimate," "predict," “anticipate” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to OneBeacon’s:

change in 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 our 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 our business and operations;
future capital expenditures; and
pending legal proceedings.

These statements are based on certain assumptions and analyses made by us in light of OneBeacon’s experience and judgments about 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 our expectations is subject to a number of risks, uncertainties or other factors which are described in more detail, that could cause actual results to differ materially from expectations, including:

claims arising from catastrophic events, such as hurricanes, windstorms, earthquakes, floods, or terrorist attacks;
recorded loss and loss adjustment expense reserves subsequently proving to have been inadequate;
changes in interest rates, debt or equity markets or other market volatility that negatively impact our investment portfolio;
competitive forces and the cyclicality of the property and casualty insurance industry;
actions taken by rating agencies from time to time with respect to us, such as financial strength or credit rating downgrades or placing our ratings on negative watch;
the continued availability of capital and financing;
our ability to retain key personnel;
the continued availability and cost of reinsurance coverage and our ability to collect reinsurance recoverables;
the outcome of litigation and other legal or regulatory proceedings;
our ability to continue meeting our debt and related service obligations or to pay dividends;
the ability of our technology resources to prevent data breach and the ability of our internal controls to ensure compliance with legal and regulatory policies;
our ability to successfully develop new specialty businesses;
changes in laws or regulations, or their interpretations, which are applicable to us, our competitors, our agents or our customers;
participation in guaranty funds and mandatory market mechanisms;
the impact of new theories of liability;
changes to current shareholder dividend practice and regulatory restrictions on dividends;
credit risk exposure in certain of our business operations;
our status as a subsidiary of White Mountains, including potential conflicts of interest;
changes in tax laws or tax treaties; and
other factors, most of which are beyond our control, including the risks that are described from time to time in OneBeacon's filing with the Securities and Exchange Commission, including but not limited to OneBeacon's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed February 28, 2014.

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


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,
 
 
 
 
 
 
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
 
 
 
 
 
Highlights
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Comprehensive income (loss)
 
$
61.5

 
$
47.0

 
$
24.9

 
$
(1.1
)
 
$
(49.3
)
 
 

 
 

 
 

Net income (loss)
 
41.4

 
47.0

 
24.8

 
(1.1
)
 
(37.2
)
 
 

 
 

 
 

Operating income (loss)
 
22.5

 
35.2

 
11.2

 
16.6

 
(35.2
)
 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
Dec 31, 2014
 
As of
Dec 31, 2013
 
% Change
Per Share Amounts
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Book value per share [1]
 
 

 
 

 
 

 
 

 
 

 
$
10.99

 
$
11.58

 
(5.1)%

Change in book value per share, including dividends, in the quarter [2]
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
(4.4)%

Change in book value per share, including dividends, in the last twelve months on an IRR basis [3]
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
2.2%

Common shares outstanding
 
 

 
 

 
 

 
 

 
 

 
95.3

 
95.4

 


Operating income (loss) per share (basic & diluted) (see p.3) [4]
 
$
0.24

 
$
0.37

 
$
0.12

 
$
0.17

 
$
(0.37
)
 
 

 
 

 
 

Weighted average number of common shares outstanding (basic & diluted) [4]
 
94.5

 
94.6

 
94.7

 
94.7

 
94.7

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Underwriting ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loss and LAE ratio
 
54.1
%
 
54.0
%
 
64.0
%
 
60.6
%
 
96.7
%
 
 

 
 

 
 

Expense ratio
 
37.2
%
 
34.8
%
 
34.8
%
 
34.7
%
 
26.1
%
 
 

 
 

 
 

Combined ratio
 
91.3
%
 
88.8
%
 
98.8
%
 
95.3
%
 
122.8
%
 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
Dec 31, 2014
 
As of
Dec 31, 2013
 
Change
Balance Sheet
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Total investment securities
 
 

 
 

 
 

 
 
 
 

 
$
2,527.0

 
$
2,364.9

[5] 
6.9%

Total OneBeacon's common shareholders' equity
 
 

 
 

 
 

 
 
 
 

 
$
1,047.0

 
$
1,104.3

 
(5.2)%

Ratio of debt to total capital
 
 

 
 

 
 

 
 
 
 

 
20.8
%
 
19.9
%
 
0.9
  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 per share and related weighted average number of common shares outstanding include the impact of unvested restricted shares.
[5]
Excludes $236.3 million of investments that were classified as held for sale as of December 31, 2013.

1



OneBeacon Insurance Group, Ltd.
Consolidated Statements of Operations and Comprehensive Income (Loss)
($ in millions)
 
 
 
Three Months Ended
 
Year Ended
 
 
Dec 31,
 
Mar 31,
 
Jun 30,
 
Sep 30,
 
Dec 31,
 
Dec 31,
 
Dec 31,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Earned premiums
 
$
274.2

 
$
276.5

 
$
290.9

 
$
305.4

 
$
304.3

 
$
1,120.4

 
$
1,177.1

Net investment income
 
10.2

 
10.0

 
11.7

 
10.4

 
9.6

 
41.1

 
41.7

Net realized and change in unrealized investment gains
 
29.5

 
18.9

 
21.9

 
(16.0
)
 
15.6

 
49.4

 
40.4

Net other revenues [1]
 
1.1

 
1.0

 
1.0

 
1.3

 
2.5

 
31.2

 
5.8

Total revenues
 
315.0

 
306.4

 
325.5

 
301.1

 
332.0

 
1,242.1

 
1,265.0

Loss and loss adjustment expenses
 
148.4

 
149.4

 
186.1

 
185.2

 
294.4

 
622.1

 
815.1

Policy acquisition expenses
 
48.0

 
46.7

 
49.6

 
54.6

 
52.4

 
208.9

 
203.3

Other underwriting expenses
 
54.1

 
49.4

 
51.7

 
51.2

 
26.9

 
204.8

 
179.2

General and administrative expenses
 
1.0

 
3.3

 
3.6

 
2.4

 
4.5

 
12.0

 
13.8

Interest expense
 
3.2

 
3.2

 
3.3

 
3.2

 
3.3

 
13.0

 
13.0

Total expenses
 
254.7

 
252.0

 
294.3

 
296.6

 
381.5

 
1,060.8

 
1,224.4

Pre-tax income
 
60.3

 
54.4

 
31.2

 
4.5

 
(49.5
)
 
181.3

 
40.6

Income tax (expense) benefit
 
(18.4
)
 
(6.5
)
 
(5.3
)
 
1.7

 
24.7

 
(34.3
)
 
14.6

Net income including noncontrolling interests
 
41.9

 
47.9

 
25.9

 
6.2

 
(24.8
)
 
147.0

 
55.2

(Loss) income from discontinued operations, net of tax [2]
 
(46.9
)
 
(0.5
)
 
(0.1
)
 
(0.3
)
 
(0.9
)
 
(46.6
)
 
(1.8
)
(Loss) gain from sale of discontinued operations, net of tax
 
46.6

 

 
(0.5
)
 
(7.0
)
 
(11.3
)
 
46.6

 
(18.8
)
Net income (loss) including noncontrolling interests
 
41.6

 
47.4

 
25.3

 
(1.1
)
 
(37.0
)
 
147.0

 
34.6

Less: Net income attributable to noncontrolling interests
 
(0.2
)
 
(0.4
)
 
(0.5
)
 

 
(0.2
)
 
(1.0
)
 
(1.1
)
Net income (loss) attributable to OneBeacon’s common shareholders
 
41.4

 
47.0

 
24.8

 
(1.1
)
 
(37.2
)
 
146.0

 
33.5

Other comprehensive income (loss), net of tax
 
20.1

 

 
0.1

 

 
(12.1
)
 
20.6

 
(12.0
)
Comprehensive income (loss) attributable to OneBeacon’s common shareholders
 
$
61.5

 
$
47.0

 
$
24.9

 
$
(1.1
)
 
$
(49.3
)
 
$
166.6

 
$
21.5

                         

[1] 
The year ended December 31, 2013 include other revenues of $23.0 million related to the gain on sale of Essentia, net of transaction costs and other revenues of $4.0 million related to a software licensing agreement.
[2] 
Results for the Runoff Business are reported as discontinued operations for all periods presented.

2



OneBeacon Insurance Group, Ltd.
Comprehensive Income (Loss), Net Income (Loss) and Operating Income (Loss)
(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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Comprehensive income (loss) attributable to OneBeacon’s common shareholders
 
$
61.5

 
$
47.0

 
$
24.9

 
$
(1.1
)
 
$
(49.3
)
 
$
166.6

 
$
21.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to OneBeacon’s common shareholders
 
$
41.4

 
$
47.0

 
$
24.8

 
$
(1.1
)
 
$
(37.2
)
 
$
146.0

 
$
33.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding [1]
 
94.5

 
94.6

 
94.7

 
94.7

 
94.7

 
94.5

 
94.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to OneBeacon’s common shareholders per share
 
$
0.43

 
$
0.49

 
$
0.26

 
$
(0.01
)
 
$
(0.39
)
 
$
1.52

 
$
0.35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to OneBeacon’s common shareholders
 
$
41.4

 
$
47.0

 
$
24.8

 
$
(1.1
)
 
$
(37.2
)
 
$
146.0

 
$
33.5

Less:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net realized and change in unrealized investment gains
 
(29.5
)
 
(18.9
)
 
(21.9
)
 
16.0

 
(15.6
)
 
(49.4
)
 
(40.4
)
Tax effect on net realized and change in unrealized investment gains
 
10.3

 
6.6

 
7.7

 
(5.6
)
 
5.4

 
17.3

 
14.1

Loss (income) from discontinued operations, net of tax
 
46.9

 
0.5

 
0.1

 
0.3

 
0.9

 
46.6

 
1.8

Loss (gain) from sale of discontinued operations, net of tax
 
(46.6
)
 

 
0.5

 
7.0

 
11.3

 
(46.6
)
 
18.8

Operating income (loss) [2]
 
$
22.5

 
$
35.2

 
$
11.2

 
$
16.6

 
$
(35.2
)
 
$
113.9

 
$
27.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding [1]
 
94.5

 
94.6

 
94.7

 
94.7

 
94.7

 
94.5

 
94.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss) per share [2]
 
$
0.24

 
$
0.37

 
$
0.12

 
$
0.17

 
$
(0.37
)
 
$
1.21

 
$
0.29

                         

[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, 2014
Numerator:
 
 

[A]
 
Comprehensive income attributable to OneBeacon’s common shareholders
 
$
21.5

 
 
 
 
 
[B]
 
Operating income [1]
 
$
27.8

 
 
As of
 
As of
 
 
 
 
Dec 31, 2014
 
Dec 31, 2013
 
Average
Denominator:
 
 

 
 

 
 

[C]
 
OneBeacon’s common shareholders’ equity
 
$
1,047.0

 
$
1,104.3

 
$
1,075.7

 
 
Less:
 
 
 
 
 
 
 
 
Net unrealized gains and net foreign currency gains and losses on investments
 
(95.6
)
 
(124.6
)
 
 
 
 
Tax effect on net unrealized gains and net foreign currency gains and losses on investments
 
33.5

 
43.6

 
 
 
 
Accumulated other comprehensive (income) loss (AOCI/L), after-tax
 
5.2

 
(6.8
)
 
 
[D]
 
Adjusted OneBeacon’s common shareholders’ equity excluding cumulative net unrealized investment gains and losses and AOCI/L after tax [1]
 
$
990.1

 
$
1,016.5

 
$
1,003.3

Returns:
 
 

 
 

 
 

 
 
Comprehensive return on average OneBeacon's common shareholders' equity [ A / C ]
 
 
 
 
 
2.0
%
 
 
 
 
 
 
 
 
 
 
 
Operating return on average adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses and AOCI/L after tax [ B / D ]
 
 
 
 
 
2.8
%
                         

[1] 
Represents a non-GAAP financial measure.




4



OneBeacon Insurance Group, Ltd.
Consolidated Balance Sheets and Book Value Per Share
As of December 31, 2014 and 2013
($ in millions, except per share amounts)
 
 
As of
Assets
 
Dec 31, 2014
 
Dec 31, 2013
Investment securities
 
 

 
 

Fixed maturity investments
 
$
1,799.8

 
$
1,700.9

Short-term investments
 
202.2

 
157.0

Common equity securities
 
320.0

 
336.9

Convertible bonds
 
5.0

 
30.5

Other investments
 
200.0

 
139.6

Total investment securities
 
2,527.0

 
2,364.9

Cash
 
87.0

 
168.1

Reinsurance recoverables
 
173.8

 
89.9

Premiums receivable
 
241.5

 
228.2

Funds held under reinsurance contracts
 
37.1

 
1.8

Deferred acquisition costs
 
103.2

 
103.7

Net deferred tax asset
 
131.8

 
90.6

Investment income accrued
 
10.0

 
10.1

Accounts receivable on unsettled investment sales
 
7.2

 
3.3

Other assets
 
202.7

 
270.9

Assets held for sale [1] [2]
 
58.1

 
1,880.1

Total assets
 
$
3,579.4

 
$
5,211.6

Liabilities
 
 

 
 

Unpaid loss and loss adjustment expense reserves
 
$
1,342.2

 
$
1,054.3

Unearned premiums
 
588.3

 
544.9

Funds held under insurance contracts
 
81.0

 
63.3

Debt
 
274.7

 
274.7

Accounts payable on unsettled investment purchases
 
0.5

 
11.6

Other liabilities
 
242.2

 
275.3

Liabilities held for sale [1]
 

 
1,880.1

Total liabilities
 
2,528.9

 
4,104.2

OneBeacon’s common shareholders’ equity and noncontrolling interests
 
 

 
 

OneBeacon’s common shareholders’ equity:
 
 

 
 

Common shares and paid-in surplus
 
1,023.7

 
1,022.5

Retained earnings
 
28.5

 
75.0

Accumulated other comprehensive income (loss), after tax
 
(5.2
)
 
6.8

Total OneBeacon’s common shareholders’ equity
 
1,047.0

 
1,104.3

Total noncontrolling interests
 
3.5

 
3.1

Total OneBeacon’s common shareholders’ equity and noncontrolling interests
 
1,050.5

 
1,107.4

Total liabilities, OneBeacon’s common shareholders’ equity and noncontrolling interests
 
$
3,579.4

 
$
5,211.6

 
 
 
 
 
Total OneBeacon’s common shareholders’ equity
 
$
1,047.0

 
$
1,104.3

Common shares outstanding
 
95.3

 
95.4

Book value per share
 
$
10.99

 
$
11.58

                        
[1] Assets associated with a OneBeacon owned real estate property, which is being held for sale, are presented separately in the December 31, 2014 consolidated balance sheet.     
[2] Assets and liabilities sold as part of the Runoff Transaction, which closed on December 23, 2014, are presented separately in the December 31, 2013 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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Net written premiums
 
$
262.5

 
$
311.1

 
$
295.9

 
$
345.6

 
$
264.3

 
$
1,088.6

 
$
1,216.9

Earned premiums
 
274.2

 
276.5

 
290.9

 
305.4

 
304.3

 
1,120.4

 
1,177.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
(148.4
)
 
(149.4
)
 
(186.1
)
 
(185.2
)
 
(294.4
)
 
(622.1
)
 
(815.1
)
Policy acquisition expenses
 
(48.0
)
 
(46.7
)
 
(49.6
)
 
(54.6
)
 
(52.4
)
 
(208.9
)
 
(203.3
)
Other underwriting expenses
 
(54.1
)
 
(49.4
)
 
(51.7
)
 
(51.2
)
 
(26.9
)
 
(204.8
)
 
(179.2
)
Underwriting income
 
23.7

 
31.0

 
3.5

 
14.4

 
(69.4
)
 
84.6

 
(20.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
10.2

 
10.0

 
11.7

 
10.4

 
9.6

 
41.1

 
41.7

Net realized and change in unrealized investment gains
 
29.5

 
18.9

 
21.9

 
(16.0
)
 
15.6

 
49.4

 
40.4

Net other revenues
 
1.1

 
1.0

 
1.0

 
1.3

 
2.5

 
31.2

 
5.8

General and administrative expenses
 
(1.0
)
 
(3.3
)
 
(3.6
)
 
(2.4
)
 
(4.5
)
 
(12.0
)
 
(13.8
)
Interest expense
 
(3.2
)
 
(3.2
)
 
(3.3
)
 
(3.2
)
 
(3.3
)
 
(13.0
)
 
(13.0
)
Pre-tax income from continuing operations
 
$
60.3

 
$
54.4

 
$
31.2

 
$
4.5

 
$
(49.5
)
 
$
181.3

 
$
40.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting ratios
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Loss and LAE ratio
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Current year:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Non-cat loss and LAE
 
54.4
 %
 
53.6
 %
 
59.7
%
 
56.6
%
 
71.3
%
 
54.7
%
 
60.4
%
Catastrophe loss and LAE
 
(0.3
)%
 
1.0
 %
 
1.4
%
 
1.6
%
 
0.6
%
 
0.8
%
 
1.2
%
Total loss and LAE
 
54.1
 %
 
54.6
 %
 
61.1
%
 
58.2
%
 
71.9
%
 
55.5
%
 
61.6
%
Prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loss and LAE (fav) unfav
 
 %
 
(0.6
)%
 
2.9
%
 
2.4
%
 
24.8
%
 
%
 
7.6
%
Total loss and LAE ratio
 
54.1
 %
 
54.0
 %
 
64.0
%
 
60.6
%
 
96.7
%
 
55.5
%
 
69.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy acquisition expenses
 
17.5
 %
 
16.9
 %
 
17.1
%
 
17.9
%
 
17.2
%
 
18.6
%
 
17.3
%
Other underwriting expenses
 
19.7
 %
 
17.9
 %
 
17.7
%
 
16.8
%
 
8.9
%
 
18.3
%
 
15.2
%
Total expense ratio
 
37.2
 %
 
34.8
 %
 
34.8
%
 
34.7
%
 
26.1
%
 
36.9
%
 
32.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total combined ratio
 
91.3
 %
 
88.8
 %
 
98.8
%
 
95.3
%
 
122.8
%
 
92.4
%
 
101.7
%
                         

[1]
Results for the Runoff Business are reported as discontinued operations for all periods presented. Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation.


6



OneBeacon Insurance Group, Ltd.
Consolidating Pre-Tax Results from Operations
For the Three Months Ended December 31, 2014 and 2013
($ in millions)

 
 
Specialty Products [1]
 
Specialty Industries [2]
 
Investing, Financing and Corporate
 
Consolidated
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Earned premiums
 
$
149.1

 
$
126.6

 
$
155.2

 
$
147.6

 
$

 
$

 
$
304.3

 
$
274.2

Loss and loss adjustment expenses
 
(180.4
)
 
(71.7
)
 
(114.0
)
 
(76.7
)
 

 

 
(294.4
)
 
(148.4
)
Policy acquisition expenses
 
(24.8
)
 
(22.0
)
 
(27.6
)
 
(26.0
)
 

 

 
(52.4
)
 
(48.0
)
Other underwriting expenses
 
(10.3
)
 
(24.9
)
 
(16.6
)
 
(29.2
)
 

 

 
(26.9
)
 
(54.1
)
Underwriting income (loss)
 
(66.4
)
 
8.0

 
(3.0
)
 
15.7

 

 

 
(69.4
)
 
23.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 

 

 

 

 
9.6

 
10.2

 
9.6

 
10.2

Net realized and change in unrealized investment gains
 

 

 

 

 
15.6

 
29.5

 
15.6

 
29.5

Net other revenues
 
1.0

 

 
0.3

 
0.2

 
1.2

 
0.9

 
2.5

 
1.1

General and administrative expenses
 
0.1

 
0.1

 
(0.5
)
 
(0.1
)
 
(4.1
)
 
(1.0
)
 
(4.5
)
 
(1.0
)
Interest expense
 

 

 

 

 
(3.3
)
 
(3.2
)
 
(3.3
)
 
(3.2
)
Pre-tax income (loss) from continuing operations
 
$
(65.3
)
 
$
8.1

 
$
(3.2
)
 
$
15.8

 
$
19.0

 
$
36.4

 
$
(49.5
)
 
$
60.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting Ratios 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loss and LAE ratio
 
121.0
%
 
56.6
%
 
73.5
%
 
52.0
%
 
 
 
 
 
96.7
%
 
54.1
%
Expense ratio
 
23.5
%
 
37.1
%
 
28.5
%
 
37.4
%
 
 
 
 
 
26.1
%
 
37.2
%
Total combined ratio
 
144.5
%
 
93.7
%
 
102.0
%
 
89.4
%
 
 
 
 
 
122.8
%
 
91.3
%
                         

[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, Other Specialty Products, 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.







7



OneBeacon Insurance Group, Ltd.
Consolidating Pre-Tax Results from Operations
For the Year Ended December 31, 2014 and 2013
($ in millions)

 
 
Specialty Products [1]
 
Specialty Industries [2]
 
Investing, Financing and Corporate
 
Consolidated
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Earned premiums
 
$
582.1

 
$
553.5

 
$
595.0

 
$
566.9

 
$

 
$

 
$
1,177.1

 
$
1,120.4

Loss and loss adjustment expenses
 
(457.9
)
 
(312.3
)
 
(357.2
)
 
(309.8
)
 

 

 
(815.1
)
 
(622.1
)
Policy acquisition expenses
 
(96.2
)
 
(106.3
)
 
(107.1
)
 
(102.6
)
 

 

 
(203.3
)
 
(208.9
)
Other underwriting expenses
 
(78.4
)
 
(97.4
)
 
(100.8
)
 
(107.4
)
 

 

 
(179.2
)
 
(204.8
)
Underwriting income
 
(50.4
)
 
37.5

 
29.9

 
47.1

 

 

 
(20.5
)
 
84.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 

 

 

 

 
41.7

 
41.1

 
41.7

 
41.1

Net realized and change in unrealized investment gains
 

 

 

 

 
40.4

 
49.4

 
40.4

 
49.4

Net other revenues
 
0.9

 
0.3

 
1.1

 
1.1

 
3.8

 
29.8

 
5.8

 
31.2

General and administrative expenses
 
0.2

 

 
(2.3
)
 
(2.4
)
 
(11.7
)
 
(9.6
)
 
(13.8
)
 
(12.0
)
Interest expense
 

 

 

 

 
(13.0
)
 
(13.0
)
 
(13.0
)
 
(13.0
)
Pre-tax income from continuing operations
 
$
(49.3
)
 
$
37.8

 
$
28.7

 
$
45.8

 
$
61.2

 
$
97.7

 
$
40.6

 
$
181.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting Ratios 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loss and LAE ratio
 
78.7
%
 
56.4
%
 
60.1
%
 
54.7
%
 
 
 
 
 
69.2
%
 
55.5
%
Expense ratio
 
30.0
%
 
36.8
%
 
34.9
%
 
37.0
%
 
 
 
 
 
32.5
%
 
36.9
%
Total combined ratio
 
108.7
%
 
93.2
%
 
95.0
%
 
91.7
%
 
 
 
 
 
101.7
%
 
92.4
%
                         

[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, Other Specialty Products, 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.









8



OneBeacon Insurance Group, Ltd.
Consolidated Loss and LAE Reserve Summaries [1] 
For the Three Months and Year Ended December 31, 2014 and 2013
($ in millions)

 
 
Three months ended December 31,
 
Year ended December 31,
 
 
2014
 
2013
 
2014
 
2013
Gross beginning loss and LAE reserves
 
$
1,159.6

 
$
1,052.9

 
$
1,054.3

 
$
1,000.0

Less beginning reinsurance recoverable on unpaid losses
 
(101.4
)
 
(80.2
)
 
(80.2
)
 
(107.3
)
Net beginning loss and LAE reserves
 
1,058.2

 
972.7

 
974.1

 
892.7

 
 
 
 
 
 
 
 
 
Loss and LAE incurred relating to:
 
 
 
 
 
 
 
 
Current year losses
 
218.9

 
148.3

 
725.3

 
622.1

Prior year losses
 
75.5

 
0.1

 
89.8

 

Total incurred loss and LAE from continuing operations
 
294.4

 
148.4

 
815.1

 
622.1

 
 
 
 
 
 
 
 
 
 Loss and LAE paid relating to:
 
 
 
 
 
 
 
 
Current year losses
 
(84.3
)
 
(73.6
)
 
(199.6
)
 
(188.6
)
Prior year losses
 
(87.7
)
 
(73.4
)
 
(409.0
)
 
(352.1
)
Total loss and LAE payments from continuing operations
 
(172.0
)
 
(147.0
)
 
(608.6
)
 
(540.7
)
 
 
 
 
 
 
 
 
 
Net ending loss and LAE reserves
 
1,180.6

 
974.1

 
1,180.6

 
974.1

Plus ending reinsurance recoverable on unpaid losses
 
161.6

 
80.2

 
161.6

 
80.2

Gross ending loss and LAE reserves
 
$
1,342.2

 
$
1,054.3

 
$
1,342.2

 
$
1,054.3

 
 
 
 
 
 
 
 
 
Earned premiums
 
$
304.3

 
$
274.2

 
$
1,177.1

 
$
1,120.4

Ratios:
 
 
 
 
 
 
 
 
Calendar year loss and LAE paid
 
56.5
%
 
53.6
%
 
51.7
%
 
48.3
%
Calendar year loss and LAE incurred
 
96.7
%
 
54.1
%
 
69.2
%
 
55.5
%
Unfavorable prior accident year development
 
24.8
%
 
%
 
7.6
%
 
%
Current accident year loss and LAE paid to incurred
 
38.5
%
 
49.6
%
 
27.5
%
 
30.3
%
                         

[1] 
Assets and liabilities sold as part of the Runoff Transaction are presented separately in the consolidated balance sheet as of December 31, 2013.



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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Net written premiums
 
$
116.3

 
$
160.8

 
$
139.5

 
$
188.3

 
$
118.3

 
$
509.6

 
$
606.9

Earned premiums
 
126.6

 
135.4

 
145.9

 
151.7

 
149.1

 
553.5

 
582.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
(71.7
)
 
(78.0
)
 
(101.3
)
 
(98.2
)
 
(180.4
)
 
(312.3
)
 
(457.9
)
Policy acquisition expenses
 
(22.0
)
 
(21.4
)
 
(23.4
)
 
(26.6
)
 
(24.8
)
 
(106.3
)
 
(96.2
)
Other underwriting expenses
 
(24.9
)
 
(22.2
)
 
(22.7
)
 
(23.2
)
 
(10.3
)
 
(97.4
)
 
(78.4
)
Underwriting income (loss)
 
8.0

 
13.8

 
(1.5
)
 
3.7

 
(66.4
)
 
37.5

 
(50.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net other revenues
 

 
0.1

 
0.1

 
(0.3
)
 
1.0

 
0.3

 
0.9

General and administrative expenses
 
0.1

 
0.1

 

 

 
0.1

 

 
0.2

Pre-tax income (loss) from continuing operations
 
$
8.1

 
$
14.0

 
$
(1.4
)
 
$
3.4

 
$
(65.3
)
 
$
37.8

 
$
(49.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting ratios
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Loss and LAE ratio
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Current year:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Non-cat loss and LAE
 
57.3
 %
 
56.3
%
 
65.9
%
 
59.5
%
 
85.6
%
 
54.7
%
 
67.1
%
Catastrophe loss and LAE
 
 %
 
0.8
%
 
1.3
%
 
1.2
%
 
0.7
%
 
0.6
%
 
1.0
%
Total loss and LAE
 
57.3
 %
 
57.1
%
 
67.2
%
 
60.7
%
 
86.3
%
 
55.3
%
 
68.1
%
Prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loss and LAE (fav) unfav
 
(0.7
)%
 
0.5
%
 
2.3
%
 
4.0
%
 
34.7
%
 
1.1
%
 
10.6
%
Total loss and LAE ratio
 
56.6
 %
 
57.6
%
 
69.5
%
 
64.7
%
 
121.0
%
 
56.4
%
 
78.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy acquisition expenses
 
17.4
 %
 
15.8
%
 
16.1
%
 
17.6
%
 
16.6
%
 
19.2
%
 
16.5
%
Other underwriting expenses
 
19.7
 %
 
16.4
%
 
15.5
%
 
15.3
%
 
6.9
%
 
17.6
%
 
13.5
%
Total expense ratio
 
37.1
 %
 
32.2
%
 
31.6
%
 
32.9
%
 
23.5
%
 
36.8
%
 
30.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total combined ratio
 
93.7
 %
 
89.8
%
 
101.1
%
 
97.6
%
 
144.5
%
 
93.2
%
 
108.7
%
 


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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Net written premiums
 
$
146.2

 
$
150.3

 
$
156.4

 
$
157.3

 
$
146.0

 
$
579.0

 
$
610.0

Earned premiums
 
147.6

 
141.1

 
145.0

 
153.7

 
155.2

 
566.9

 
595.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
(76.7
)
 
(71.4
)
 
(84.8
)
 
(87.0
)
 
(114.0
)
 
(309.8
)
 
(357.2
)
Policy acquisition expenses
 
(26.0
)
 
(25.3
)
 
(26.2
)
 
(28.0
)
 
(27.6
)
 
(102.6
)
 
(107.1
)
Other underwriting expenses
 
(29.2
)
 
(27.2
)
 
(29.0
)
 
(28.0
)
 
(16.6
)
 
(107.4
)
 
(100.8
)
Underwriting income (loss)
 
15.7

 
17.2

 
5.0

 
10.7

 
(3.0
)
 
47.1

 
29.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net other revenues
 
0.2

 
0.1

 
0.2

 
0.5

 
0.3

 
1.1

 
1.1

General and administrative expenses
 
(0.1
)
 
(0.5
)
 
(0.5
)
 
(0.8
)
 
(0.5
)
 
(2.4
)
 
(2.3
)
Pre-tax income (loss) from continuing operations
 
$
15.8

 
$
16.8

 
$
4.7

 
$
10.4

 
$
(3.2
)
 
$
45.8

 
$
28.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting ratios
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Loss and LAE ratio
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Current year:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Non-cat loss and LAE
 
52.0
 %
 
51.0
 %
 
53.4
%
 
53.8
%
 
57.7
%
 
54.8
 %
 
54.1
%
Catastrophe loss and LAE
 
(0.6
)%
 
1.2
 %
 
1.6
%
 
2.0
%
 
0.5
%
 
1.0
 %
 
1.3
%
Total loss and LAE
 
51.4
 %
 
52.2
 %
 
55.0
%
 
55.8
%
 
58.2
%
 
55.8
 %
 
55.4
%
Prior year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loss and LAE (fav) unfav
 
0.6
 %
 
(1.6
)%
 
3.5
%
 
0.9
%
 
15.3
%
 
(1.1
)%
 
4.7
%
Total loss and LAE ratio
 
52.0
 %
 
50.6
 %
 
58.5
%
 
56.7
%
 
73.5
%
 
54.7
 %
 
60.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy acquisition expenses
 
17.6
 %
 
17.9
 %
 
18.1
%
 
18.2
%
 
17.8
%
 
18.1
 %
 
18.0
%
Other underwriting expenses
 
19.8
 %
 
19.3
 %
 
19.9
%
 
18.2
%
 
10.7
%
 
18.9
 %
 
16.9
%
Total expense ratio
 
37.4
 %
 
37.2
 %
 
38.0
%
 
36.4
%
 
28.5
%
 
37.0
 %
 
34.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total combined ratio
 
89.4
 %
 
87.8
 %
 
96.5
%
 
93.1
%
 
102.0
%
 
91.7
 %
 
95.0
%
 


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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Net investment income
 
$
10.2

 
$
10.0

 
$
11.7

 
$
10.4

 
$
9.6

 
$
41.1

 
$
41.7

Net realized and change in unrealized investment gains
 
29.5

 
18.9

 
21.9

 
(16.0
)
 
15.6

 
49.4

 
40.4

Net other revenues
 
0.9

 
0.8

 
0.7

 
1.1

 
1.2

 
29.8

 
3.8

General and administrative expenses
 
(1.0
)
 
(2.9
)
 
(3.1
)
 
(1.6
)
 
(4.1
)
 
(9.6
)
 
(11.7
)
Interest expense
 
(3.2
)
 
(3.2
)
 
(3.3
)
 
(3.2
)
 
(3.3
)
 
(13.0
)
 
(13.0
)
Pre-tax income (loss) from continuing operations
 
$
36.4

 
$
23.6

 
$
27.9

 
$
(9.3
)
 
$
19.0

 
$
97.7

 
$
61.2



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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Net investment income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$
9.9

 
$
10.3

 
$
10.6

 
$
10.5

 
$
10.4

 
$
40.6

 
$
41.8

Short-term investments
 

 

 

 

 

 

 

Common equity securities
 
1.8

 
1.7

 
2.0

 
1.5

 
1.3

 
6.2

 
6.5

Convertible fixed maturity investments
 
0.3

 

 
0.1

 
0.5

 
0.1

 
1.2

 
0.7

Other investments
 
(0.1
)
 
(0.3
)
 
0.6

 
(0.3
)
 
(0.3
)
 
(0.1
)
 
(0.3
)
Total investment income
 
11.9

 
11.7

 
13.3

 
12.2

 
11.5

 
47.9

 
48.7

Less investment expenses
 
1.7

 
1.7

 
1.6

 
1.8

 
1.9

 
6.8

 
7.0

Net investment income
 
$
10.2

 
$
10.0

 
$
11.7

 
$
10.4

 
$
9.6

 
$
41.1

 
$
41.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized investment gains (losses)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$
(0.7
)
 
$
0.8

 
$
1.6

 
$
2.2

 
$
2.0

 
$
2.1

 
$
6.6

Short-term investments
 
(0.1
)
 

 

 

 

 

 

Common equity securities
 
15.5

 
5.4

 
6.5

 
13.5

 
28.5

 
36.1

 
53.9

Convertible fixed maturity investments
 
0.7

 
1.1

 
1.2

 
1.0

 
0.2

 
0.3

 
3.5

Other investments
 
2.9

 

 

 
2.6

 
3.1

 
5.7

 
5.7

Net realized investment gains (losses)
 
$
18.3

 
$
7.3

 
$
9.3

 
$
19.3

 
$
33.8

 
$
44.2

 
$
69.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in net unrealized investment gains (losses)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$
(0.7
)
 
$
4.7

 
$
7.3

 
$
(8.0
)
 
$
(2.1
)
 
$
(34.4
)
 
$
1.9

Short-term investments
 
0.1

 

 

 

 

 
0.1

 

Common equity securities
 
10.7

 
3.1

 
6.6

 
(21.5
)
 
(20.8
)
 
32.0

 
(32.6
)
Convertible fixed maturity investments
 
1.7

 
0.7

 
(3.0
)
 
(1.8
)
 
(0.3
)
 
1.1

 
(4.4
)
Other investments
 
(0.6
)
 
3.1

 
1.7

 
(3.5
)
 
4.9

 
6.3

 
6.2

Change in net unrealized investment gains (losses)
 
$
11.2

 
$
11.6

 
$
12.6

 
$
(34.8
)
 
$
(18.3
)
 
$
5.1

 
$
(28.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in net unrealized foreign currency translation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$

 
$

 
$

 
$

 
$

 
$

 
$

Short-term investments
 

 

 

 
(0.1
)
 

 

 
(0.1
)
Common equity securities
 

 

 

 
(0.4
)
 
0.1

 
0.1

 
(0.3
)
Convertible fixed maturity investments
 

 

 

 

 

 

 

Other investments
 

 

 

 

 

 

 

Change in net unrealized foreign currency translation
 
$

 
$

 
$

 
$
(0.5
)
 
$
0.1

 
$
0.1

 
$
(0.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investment return
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$
8.5

 
$
15.8

 
$
19.5

 
$
4.7

 
$
10.3

 
$
8.3

 
$
50.3

Short-term investments
 

 

 

 
(0.1
)
 

 
0.1

 
(0.1
)
Common equity securities
 
28.0

 
10.2

 
15.1

 
(6.9
)
 
9.1

 
74.4

 
27.5

Convertible fixed maturity investments
 
2.7

 
1.8

 
(1.7
)
 
(0.3
)
 

 
2.6

 
(0.2
)
Other investments
 
2.2

 
2.8

 
2.3

 
(1.2
)
 
7.7

 
11.9

 
11.6

Total investment return (before expenses)
 
$
41.4

 
$
30.6

 
$
35.2

 
$
(3.8
)
 
$
27.1

 
$
97.3

 
$
89.1


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,
 
 
2013
 
2014
 
2014
 
2014
 
2014
 
2013
 
2014
Average market value of investments
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed maturity investments
 
$
1,901.5

 
$
1,951.5

 
$
1,989.1

 
$
1,966.1

 
$
1,859.6

 
$
1,900.9

 
$
1,927.0

Short-term investments
 
159.5

 
154.8

 
114.7

 
157.6

 
220.3

 
184.4

 
165.4

Common equity securities
 
332.2

 
342.0

 
353.4

 
337.5

 
317.7

 
303.6

 
335.8

Convertible fixed maturity investments
 
31.2

 
29.9

 
27.6

 
21.6

 
11.2

 
38.7

 
21.6

Other investments
 
142.9

 
141.3

 
143.4

 
139.2

 
167.4

 
143.7

 
152.2

Total average market value
 
$
2,567.3

 
$
2,619.5

 
$
2,628.2

 
$
2,622.0

 
$
2,576.2

 
$
2,571.3

 
$
2,602.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment returns
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed maturity investments
 
0.4
 %
 
0.8
 %
 
1.0
 %
 
0.2
 %
 
0.6
 %
 
0.4
 %
 
2.6
 %
Short-term investments
 
 %
 
 %
 
 %
 
(0.1
)%
 
 %
 
0.1
 %
 
(0.1
)%
Total fixed income
 
0.4
 %
 
0.7
 %
 
0.9
 %
 
0.2
 %
 
0.5
 %
 
0.4
 %
 
2.4
 %
Common equity securities
 
8.4
 %
 
3.0
 %
 
4.3
 %
 
(2.0
)%
 
2.9
 %
 
24.5
 %
 
8.2
 %
Convertible fixed maturity investments
 
8.7
 %
 
6.0
 %
 
(6.2
)%
 
(1.4
)%
 
 %
 
6.7
 %
 
(0.9
)%
Total common equity & convertible fixed maturity securities
 
8.4
 %
 
3.2
 %
 
3.5
 %
 
(2.0
)%
 
2.8
 %
 
22.5
 %
 
7.6
 %
Other investments
 
1.5
 %
 
2.0
 %
 
1.6
 %
 
(0.9
)%
 
4.6
 %
 
8.3
 %
 
7.6
 %
Total common equity, convertible fixed maturity securities & other investments
 
6.5
 %
 
2.9
 %
 
3.0
 %
 
(1.7
)%
 
3.4
 %
 
18.3
 %
 
7.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total return
 
1.6
 %
 
1.2
 %
 
1.3
 %
 
(0.1
)%
 
1.1
 %
 
3.8
 %
 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average amortized cost of investments
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed maturity investments
 
$
1,885.4

 
$
1,933.4

 
$
1,965.2

 
$
1,942.6

 
$
1,840.8

 
$
1,872.6

 
$
1,906.8

Short-term investments
 
159.5

 
154.9

 
114.8

 
157.7

 
220.4

 
184.4

 
165.4

Common equity securities
 
267.9

 
270.8

 
277.3

 
269.2

 
270.7

 
252.8

 
272.6

Convertible fixed maturity investments
 
27.8

 
25.3

 
24.1

 
20.5

 
11.1

 
35.9

 
19.3

Other investments
 
107.7

 
104.9

 
104.5

 
101.3

 
128.8

 
111.4

 
114.3

Total average amortized cost
 
$
2,448.3

 
$
2,489.3

 
$
2,485.9

 
$
2,491.3

 
$
2,471.8

 
$
2,457.1

 
$
2,478.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment yield
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed maturity investments
 
0.5
 %
 
0.5
 %
 
0.5
 %
 
0.5
 %
 
0.6
 %
 
2.2
 %
 
2.2
 %
Short-term investments
 
 %
 
 %
 
 %
 
 %
 
 %
 
 %
 
 %
Common equity securities
 
0.7
 %
 
0.6
 %
 
0.7
 %
 
0.6
 %
 
0.5
 %
 
2.5
 %
 
2.4
 %
Convertible fixed maturity investments
 
1.1
 %
 
 %
 
0.4
 %
 
2.4
 %
 
0.9
 %
 
3.3
 %
 
3.6
 %
Other investments
 
(0.1
)%
 
(0.3
)%
 
0.6
 %
 
(0.3
)%
 
(0.2
)%
 
(0.1
)%
 
(0.3
)%
Total investment yield
 
0.5
 %
 
0.5
 %
 
0.5
 %
 
0.5
 %
 
0.5
 %
 
1.9
 %
 
2.0
 %
                         

[1] For the three months ended September 30, 2014, June 30, 2014, March 31, 2014, and December 31, 2013 and the year ended December 31, 2013, average market value of investments and amortized cost of investments were calculated prior to the reclassification of assets sold as part of the Runoff Transaction, which were required to be presented separately in the consolidated balance sheets until the sale was completed on December 23, 2014.


14



OneBeacon Insurance Group, Ltd.
Composition of Invested Assets[1] 
($ in millions)
 
 
 
Dec 31,
2013
 
Mar 31,
2014
 
Jun 30,
2014
 
Sep 30,
2014
 
Dec 31,
2014
 
 
Amount
 
Mix
 
Amount
 
Mix
 
Amount
 
Mix
 
Amount
 
Mix
 
Amount
 
Mix
Fixed maturity investments
 
$
1,937.2

 
74.5
%
 
$
1,965.8

 
74.5
%
 
$
2,012.6

 
76.9
%
 
$
1,919.6

 
73.1
%
 
$
1,799.8

 
71.2
%
Short-term investments
 
157.0

 
6.0
%
 
152.7

 
5.8
%
 
76.8

 
2.9
%
 
238.4

 
9.1
%
 
202.2

 
8.0
%
Common equity securities
 
336.9

 
13.0
%
 
347.1

 
13.1
%
 
359.6

 
13.6
%
 
315.5

 
12.0
%
 
320.0

 
12.7
%
Convertible fixed maturity investments
 
30.5

 
1.2
%
 
29.3

 
1.1
%
 
25.9

 
1.0
%
 
17.3

 
0.7
%
 
5.0

 
0.2
%
Other investments[3]
 
139.6

 
5.3
%
 
143.0

 
5.5
%
 
143.7

 
5.6
%
 
134.8

 
5.1
%
 
200.0

 
7.9
%
Total investments, market value
 
$
2,601.2

 
100.0
%
 
$
2,637.9

 
100.0
%
 
$
2,618.6

 
100.0
%
 
$
2,625.6

 
100.0
%
 
$
2,527.0

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government obligations
 
131.1

 
6.7
%
 
210.1

 
10.7
%
 
159.5

 
7.9
%
 
73.3

 
3.8
%
 
38.0

 
2.1
%
Debt securities issued by industrial corporations
 
754.5

 
39.0
%
 
755.7

 
38.5
%
 
801.3

 
39.8
%
 
812.6

 
42.3
%
 
798.2

 
44.3
%
Municipal obligations
 
16.5

 
0.9
%
 
32.1

 
1.6
%
 
62.7

 
3.1
%
 
66.1

 
3.5
%
 
63.7

 
3.6
%
Asset-backed securities
 
949.5

 
49.0
%
 
881.3

 
44.8
%
 
903.0

 
44.9
%
 
881.6

 
45.9
%
 
814.4

 
45.2
%
Foreign government obligations
 
2.3

 
0.1
%
 
2.3

 
0.1
%
 
1.3

 
0.1
%
 
1.3

 
0.1
%
 
1.3

 
0.1
%
Preferred stocks
 
83.3

 
4.3
%
 
84.3

 
4.3
%
 
84.8

 
4.2
%
 
84.7

 
4.4
%
 
84.2

 
4.7
%
Total fixed maturity investments, market value
 
$
1,937.2

 
100.0
%
 
$
1,965.8

 
100.0
%
 
$
2,012.6

 
100.0
%
 
$
1,919.6

 
100.0
%
 
$
1,799.8

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government bonds
 
$
133.0

 
6.9
%
 
$
211.9

 
10.9
%
 
$
160.2

 
8.1
%
 
$
74.3

 
3.9
%
 
$
39.0

 
2.2
%
AAA/Aaa
 
340.3

 
17.7
%
 
252.6

 
13.0
%
 
298.9

 
15.1
%
 
277.1

 
14.6
%
 
151.4

 
8.5
%
AA/Aa
 
533.7

 
27.8
%
 
548.2

 
28.2
%
 
475.8

 
24.0
%
 
489.5

 
25.8
%
 
560.4

 
31.4
%
A/A
 
445.8

 
23.2
%
 
452.0

 
23.2
%
 
490.7

 
24.7
%
 
456.6

 
24.0
%
 
443.4

 
24.9
%
BBB/Baa
 
363.3

 
18.9
%
 
380.5

 
19.6
%
 
439.4

 
22.1
%
 
474.0

 
24.9
%
 
462.8

 
26.0
%
Other/not rated
 
105.3

 
5.5
%
 
100.1

 
5.1
%
 
120.1

 
6.0
%
 
128.3

 
6.8
%
 
124.8

 
7.0
%
Total fixed maturity investments, amortized cost[2]
 
$
1,921.4

 
100.0
%
 
$
1,945.3

 
100.0
%
 
$
1,985.1

 
100.0
%
 
$
1,899.8

 
100.0
%
 
$
1,781.8

 
100.0
%
                         

[1]  
Market value and amortized cost of investments as of September 30, 2014, June 30, 2014, March 31, 2014, and December 31, 2013 were calculated prior to the reclassification of $203.9, $203.8, $222.2, and $236.3 million, respectively, of assets sold as part of the Runoff Transaction which are presented as assets held for sale in the respective consolidated balance sheets.
[2] 
Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor's and 2) Moody's Investor Service, Inc.
[3] 
Other investments as of December 31, 2014 includes $65.1 million fair value of surplus notes issued upon closing the Runoff Transaction.

15



OneBeacon Insurance Group, Ltd.
Capital Structure and Interest Coverage
($ in millions)
 
Capital Structure:
 
As of
 
 
Dec 31, 2014
 
Dec 31, 2013
Total capitalization
 
 

 
 

Senior notes
 
$
274.7

 
$
274.7

OneBeacon’s common shareholders’ equity
 
1,047.0

 
1,104.3

Total capitalization
 
$
1,321.7

 
$
1,379.0

 
 
 
 
 
Ratio of debt to total capital
 
20.8
%
 
19.9
%






Interest Coverage:
 
Year Ended
 
 
Dec 31, 2014
 
Dec 31, 2013
 
Pre-tax income
 
$
40.6

 
$
181.3

 
Less:
 
 
 
 
 
Net realized and change in unrealized investment gains
 
(40.4
)
 
(49.4
)
 
Interest expense on debt
 
13.0

 
13.0

[A]
Pre-tax operating income before interest expense on debt [1]
 
$
13.2

 
$
144.9

 
 
 
 
 
 
[B]
Interest expense on debt
 
$
13.0

 
$
13.0

 
 
 
 
 
 
 
Interest coverage [A/B] [1]
 
1.0
x
 
11.1
x
                         

[1] 
Represents a non-GAAP financial measure.


16