White Mountains Earnings Release

I just saw this a few minutes ago but here are some quick observations:

1) Company grew book value 2% sequentially.

2) GAAP combined ratio for Esurance was up sequentially but at the analyst day in June, WTM said that this reflects requirement to amortize policy acquisition costs over 6 months rather than the economic life of 30 months.

3) Comments on Esurance business very different than comments given on analyst day. In June, management said

"Underwriting comes first in all businesses excepting Esurance – where premiums come first. This exception because it is a good business and can grow profitably."

"Combined ratio if WTM stops writing new business – 82% combined ratio. It is incredible that you can write new business at a combined ratio at that level. 2/3rds of Esurance is new business. It’s so good we are going to grow."

Compare this to the press release from this morning:

Gary Tolman, CEO of Esurance, stated, "In the second quarter, Esurance faced an increasingly challenging environment. Competition for new business increased as many of our competitors, along with Esurance, have reduced rates and continue to spend heavily on advertising. While our rate of growth remains strong, it will not be as strong as previous years. Additionally, we increased our reserves by $6 million during the quarter, primarily for bodily injury claims for prior accident years. Overall, we remain very excited about our position in the market and our performance. The current accident year loss results look good, and we have grown our policyholder base by more than 50% in the last 12 months."

4) I am still looking at the 10-Q filed this morning but WTM seemed to avoid stepping into the sub prime mess in its investment portfolio. I think if there were any impairments here it would have been mentioned in the press release.

5) I didn't see any update on the Symetra IPO.

6) Net written premiums were down in all businesses except Esurance, but this was expected due to the combination of declines in pricing and the WTM devotion to underwriting discipline.