White Mountains Earnings Review

White Mountains Insurance (WTM) reported first quarter 2008 earnings and there were a couple of noteworthy items:

1) WTM released the breakdown of its investment portfolio by method of valuation - Level I, Level II and Level III. The allocation is:


Level I – $ 4.48 billion.
Level II – $ 6.38 billion.
Level III - $ 956.4 million.

The Level III assets are down from $1.22 billion at the end of 2007. This was higher than I expected. Level III assets are those valued with "prices based on assumptions that include significant unobservable inputs."

2) White Mountains Re decided to increase prior year loss reserves by $33 million in the first quarter of 2008. The 2008 reserve addition includes $41 million for late reported construction defect claims at Folksamerica for underwriting years 1995 through 2001, mostly in California.

The company said, “the construction defect claims represent building contractors’ loss exposures from reinsurance programs that were underwritten by Folksamerica during the 1995 through 2001 underwriting years, primarily from California or a neighboring state. The adverse development was recognized following the receipt of significantly late reported claims.”

3) Tangible book value decreased slightly quarter over quarter and is at $443. This is up 9% from March 31, 2007.

WTM has an annual investor meeting every June in New York City, and investors can listen in on the WTM web site:

White Mountains Insurance