The next business segment to present was White Mountains Re. WTM already covered
the reserve issues here at the start of the analyst meeting so it spent most of
the time discussing other issues. They first presented net written premiums and
combined ratios for the last five years.
The results show exactly what an investor wants to see at
an insurance company. A declining combined ratio, with strong net premiums
written growth, but the growth tailing off as the soft market starts and the
company refuses to write unprofitable business. Management seemed to confirm
this also. “We showed a little bit of growth in the hard market from 2004-2006
but now you see our premiums coming down and from 2006 where we wrote $1.3
billion we’ve now declined to $1.1 billion which is about a 15% decline. That’s
the front edge of our soft market strategy.”
Management reiterated this
philosophy later on in the presentation. “We are not going to write under priced
business and we are not very focused on the top line. We are really focused on
your bottom line and if we need to get smaller to maintain our returns we are
going to do that and we’ll return the capital we are not using to WTM and it
will be put to good use elsewhere. Most of the shrink (in premiums) is coming
from the North American market where prices are declining more rapidly than
Europe and elsewhere. The European market tends to be more stable.”
WTM
Re is unofficially projecting a combined ratio less than 100% for the full year
2008, and explained. “We had a fairly calm first half of the year so far and if
we include a full catastrophe load in second half results which is the long term
average catastrophe experience…we can report a combined ratio of less than 100%
for the year.”
Management covered the three segments under the WTM Re
Organization – WTM Re America, WTM Re Sirius and WTM Re Bermuda.
WTM Re AmericaThis unit has $900
million in regulatory capital and writes business in the excess and surplus
market, property casualty, accident and health, and agricultural market.
Management said that the casualty market is the one line coming down the most.
“The casualty business is the one that is actually shrinking probably most
rapidly. That was a $350 million business in the hard market and it is heading
down to just north of a $100 million business next year.”
Also in this
business unit is WTM Re Solutions, which is located in Simsbury, CT.
