OneBeacon hit with $109m reserve charge in 2014
White Mountains Insurance Group, the parent company of Bermuda-based OneBeacon and Sirius Group, reported a decrease in profits in 2014 as OneBeacon was hit with a reserve charge.
Profits hit $290.6 million for the year, compared with $309.4 million in 2013. Profits dived in the fourth quarter of 2014 to $55 million, compared with $118.2 million in the fourth quarter of 2013.
This was driven by a $109 million reserve charge for OneBeacon following an enhancement of its actuarial and claim analysis of its ongoing specialty loss reserves. Partially offsetting the loss reserve adjustment in the quarter was a $28 million pre-tax decrease in OneBeacon’s incentive compensation expense accrual.
However, through the full year 2014, net written premiums were $1.2 billion, an increase of 12 percent compared with 2013, which included an $80 million increase in net written premiums related to the newer businesses, crop, programmes and surety.
White Mountains’ reinsurance segment, Sirius Group, benefitted from a relatively benign cat year which saw its combined ratio improve to 76 percent in 2014, compared with 82 percent in 2013.
It posted gross and net written premiums of $1,137 million and $883 million in 2014 which grew slightly when compared to last year. Increases in the accident and health, other property and aviation lines were offset by decreases in property catastrophe excess and trade credit business.
Mike Miller, CEO of OneBeacon, said: “We are pleased to have closed the sale of the runoff business. This is a big milestone for the company. On the other hand, I am disappointed by our 102 percent combined ratio and 2 percent growth in book value for the year.
“We took a large reserve increase that was driven by large claims and adverse developments mostly in professional lines, especially lawyers’ liability claims. We put that book into runoff and sold its renewal rights in the fourth quarter. I believe this is behind us. It's unfortunate these developments overshadowed the outstanding results delivered by most of our business segments.”
Ray Barrette, chairman and chief executive officer, said: "We had a mixed year, growing ABVPS only 4 percent while making progress on many fronts. Foreign currency exchange losses cost us $15 per share, or roughly 2 points of ABVPS growth, despite reducing our foreign currency exposures to the lowest levels allowed by regulatory capital requirements.
“OneBeacon closed the runoff sale on December 23, after two years of regulatory review. The final amount of $101 million in surplus notes is higher than we had hoped for, and we took a $36 million pre-tax haircut on the notes to reflect the expected delays in payments of principal and interest. We strengthened OneBeacon's reserves at year-end to address the recent trend of large claim emergence in a few areas in order to put it behind us.
“OneBeacon reported a 102 percent combined ratio for the year and growth in book value per share, including dividends, of only 2 percent. These major steps put the 'new' OneBeacon on a clear path to success with a clean balance sheet, profitable, growing businesses, and a deep management team."