OneBeacon: Q3 Drop In Book Value Per Share
Bermuda-domiciled OneBeacon Insurance Group, Ltd. today [Oct.28] reported book value per share of $11.57, a decrease of 2.8 percent for the third quarter and an increase of 1.5 percent through nine months, including dividends.
Mike Miller, CEO of OneBeacon, said, “Our decrease in book value in the quarter was driven by our equity portfolio losses in a challenging investment environment and the loss on the sale of AutoOne, which is roughly the cost of running-off the business over time.
“Looking back, AutoOne achieved strong results for the company but involuntary auto market conditions in New York and New Jersey no longer justify our investment in that business.
“I believe the sale is a preferable outcome for the company. Overall, for the quarter, underwriting results were solid at a 94 percent combined ratio, and we see moderate rate improvements in many lines. Lastly, we completed our ground-up analysis of A&E runoff claims; the study reconfirms the adequacy of our NICO reinsurance cover.”
For the third quarter, comprehensive loss and net loss were both $33 million, and operating loss was $2 million, or $0.02 per share, including the loss on the sale of AutoOne.
For the nine months ended September 30, 2011, comprehensive income and net income were both $25 million and operating income was $33 million, or $0.35 per share. Operating income is a non-GAAP financial measure which is explained later in this release.
During the quarter OneBeacon announced its agreement to sell its AutoOne business to Interboro Holdings, Inc. and recorded a charge of $28 million pre-tax — $18 million after tax or $0.19 per share — to reflect the estimated loss on the sale. The sale is expected to close in the fourth quarter, subject to regulatory approval.
As a result of the transaction, results for the AutoOne division are reported as discontinued operations within OneBeacon’s GAAP financial statements.
During the third quarter, OneBeacon completed a new ground-up study of its legacy asbestos and environmental exposures. The previous study was based on experience through 2007.
Reasonable estimates of potential adverse scenarios continue to be within the $2.5 billion reinsurance cover issued by National Indemnity Insurance (NICO), a Berkshire Hathaway company. The point estimate of incurred losses ceded to NICO increased from $2.2 billion to $2.3 billion. There was no impact to book value.
Insurance Operations: The third quarter GAAP combined ratio was 94.3%, compared to 92.0% for the third quarter of 2010, and 94.2% through September 30, 2011 compared to 100.8% for the first nine months of 2010. The variance for the quarter was primarily driven by 5 points of catastrophe losses, 6 points higher than the prior period, principally associated with Hurricane Irene, partially offset by improved non-catastrophe current accident year results and a decrease in the expense ratio. The nine-month combined ratio reflects 9 points of improvement in the current accident year loss ratio somewhat offset by a 2 point increase in the expense ratio. Catastrophe losses in the first nine months of 2011 and 2010 each added 4.5 points to the combined ratio. Favorable loss reserve development in the third quarter of 2011 was 4 points, compared to 6 points in the third quarter of 2010, while the first nine months of 2011 included 3 points, compared to 4 points of favorable loss reserve development in the first nine months of 2010.
Third quarter net written premiums were $297 million as compared to $269 million for the third quarter of 2010, driven by a 9% increase in Specialty Insurance Operations’ premiums. Several business units experienced particularly strong growth; specifically, OneBeacon Entertainment, OneBeacon Government Risks, OneBeacon Technology and the collector car and boat business written through Hagerty Insurance Agency.
For the nine months ended September 30, 2011, net written premiums were $822 million as compared to $943 million for the comparable period last year, reflecting the July 2010 sale of the traditional personal lines business. Specialty Insurance Operations’ premiums were $822 million compared to $772 million, an increase of 7% over the prior year.
Consolidated Investment Results: OneBeacon’s third quarter total return on invested assets was minus 1.0% compared to 2.1% for the third quarter of 2010. These results included net realized and unrealized investment losses of $47 million and net investment income of $16 million, compared to net realized and unrealized investment gains of $52 million and net investment income of $22 million for the third quarter of 2010. The average market value of invested assets was $2.8 billion in the third quarter of 2011 as compared to $3.5 billion in the third quarter of 2010, reflecting the impact of the company’s sale of the nonspecialty commercial lines and traditional personal lines businesses, and the company’s capital management activities.
Through the first nine months of the year, total return on invested assets was 1.6% compared to 4.3% through September 30, 2010.
These results included net realized and unrealized investment losses of $13 million and net investment income of $56 million, compared to net realized and unrealized investment gains of $80 million and net investment income of $75 million through the first nine months of 2010.
The average market value of invested assets was $3.0 billion through the first nine months of 2011 as compared to $3.8 billion through September 30, 2010, again reflecting the impact of the company’s sale of the nonspecialty commercial lines and the traditional personal lines businesses, and the company’s capital management activities.
OneBeacon Insurance Group, Ltd. is a Bermuda-domiciled holding company that is publicly traded on the New York Stock Exchange.
The firm’s underwriting companies offer a range of specialty insurance products sold through independent US agencies, regional and national brokers, wholesalers and managing general agencies.
The company’s businesses include OneBeacon Professional Insurance, International Marine Underwriters, OneBeacon Accident Group, OneBeacon Entertainment, OneBeacon Energy Group, OneBeacon Government Risks, OneBeacon Technology Insurance, OneBeacon Specialty Property, OneBeacon Property and Inland Marine, and OneBeacon Excess and Surplus Lines.
