White Mountains Insurance Group, Ltd. has reported a loss of $132 million for the first-quarter of 2020, driven by net realised and unrealised investment losses.
At a loss of $132 million, White Mountains’ overall result in Q1 2020 declined from income of $284 million in the same period in the previous year.
The company notes that in Q1 2019, net income included $182 million of realised and unrealised gains from MediaAlpha’s sale of a significant minority stake to Insignia Capital Group.
In Q1 2020, however, the COVID-19 pandemic has had a negative impact on financial markets and led to equity market declines, which resulted in realised and unrealised losses across parts of White Mountains’ operations.
Overall, White Mountains has reported that the total return on invested assets was -4.6% in Q1 2020, compared with 10.1% in the same period in 2019. Excluding the gains achieved from the above-mentioned MediaAlpha transaction, the total return on invested assets was 5.7% in Q1 2019.
By segment, and the firm reports that both NSM and Kudu fell to net losses in the quarter, of $1 million and $21 million, respectively. Within NSM, the loss included the performance of Embrace Pet Insurance, which NSM acquired in April of last year.
In Kudu, the net loss included a $25 million unrealised loss on the segment’s participation contract, which the firm says is a reflection of the market dislocation on the segment’s underlying asset management firms.
White Mountains’ Other Operations also fell to a loss in the first-quarter of the year, of $114 million. This compares with a gain of $283 million in Q1 2019, and the firm attributes the decline to $138 million of net realised and unrealised investment losses.
Manning Rountree, Chief Executive Officer (CEO), commented: “The impact of the COVID-19 pandemic on our businesses has been varied so far. Overall, ABVPS was down -4% for the quarter, driven primarily by a -4.6% return on our investment portfolio. BAM had a good quarter, driven by abundant secondary market activity. NSM also posted good results, growing the top line 4% quarter over quarter and closing the Kingsbridge acquisition in early April. Kudu reported a net loss for the quarter, as operating profits were more than offset by unrealized mark-to-market losses.
“MediaAlpha had yet another record quarter, driven by higher volumes in its insurance verticals. The global slowdown in travel activity caused a significant decline in premiums and revenues at PassportCard/DavidShield; in May we invested $15 million to support operations and to continue global expansion.
“During the quarter, we repurchased $54 million of shares at an average price of $844. We ended the quarter with $0.8 billion of undeployed capital and ample liquidity. I am proud of how our team has responded to these unprecedented challenges. Through their efforts, we remain open for business, operating remotely at all levels, and not missing a beat.”
Discussing the firm’s investment experience during the quarter, Mark Plourde, Managing Director of White Mountains Advisors, added: “The total portfolio returned -4.6% in the first quarter. The main event was the sharp decline in the equity markets. Common stocks and ETFs returned -20.9%, lagging the S&P 500 return of -19.6%.
“Other long-term investments returned -0.9%. This result included a $25 million decrease in the fair value of Kudu’s participation contracts, a $10 million decrease in the fair value of our investment in PassportCard/DavidShield and a $30 million increase in the fair value of our investment in MediaAlpha. Fixed income returned 0.7%, lagging the BBIA Index return of 2.5%, primarily due to the short duration positioning of our portfolio.”
