OneBeacon Insurance Group, Ltd. (NYSE:OB) today reported book value per share of $10.93, reflecting an increase of 2.9% for the third quarter and 10.0% through the first nine months of 2016, including dividends.
Mike Miller, CEO of OneBeacon, said, “We delivered solid underwriting results in the quarter and continued strong investment results, contributing to a healthy 10% growth in book value per share through the first nine months of the year. The modest decrease in net written premium year over year reflects disciplined underwriting in continued soft market conditions.”
OneBeacon reported comprehensive income of $28.6 million for the third quarter of 2016, compared to a $13.2 million comprehensive loss for the third quarter of last year. Operating income was $18.2 million or $0.19 per share for the third quarter of 2016, compared to operating income of $6.1 million or $0.06 per share for the third quarter of 2015. During the quarter, the company recorded a $3.2 million (pre-tax) favorable adjustment due to the final settlement of its qualified pension plan obligations.
The prior year third quarter comprehensive loss and operating income included $3.0 million (pre-tax) of other revenue related to the termination of the company’s agreement with Climate Crop Insurance Agency in connection with OneBeacon’s exit of the crop insurance business. During that period, OneBeacon transferred its crop insurance exposures to affiliates of AmTrust through a 100% quota share reinsurance agreement, ceding $16.8 million of earned premiums, $15.1 million of losses and $2.8 million of expenses.
For the nine months ended September 30, 2016, the company reported $99.7 million of comprehensive income, compared to $14.7 million for the first nine months of 2015. Operating income was $62.3 million or $0.66 per share for the first nine months of 2016, compared to $33.5 million or $0.35 per share through the first nine months of 2015.
During the first nine months of 2016, OneBeacon recorded $16.3 million in tax benefits related to favorable IRS settlements for the tax years 2007-2012.
There were no common shares repurchased under the company’s 2007 share repurchase authorization during the third quarter. Year-to-date repurchases total 850,349 common shares for a total of $10.6 million, reflecting an average price of $12.42 per share.
Operating income is a non-GAAP financial measure, which is explained later in this release.
Insurance Operations: OneBeacon’s GAAP combined ratio was 96.2% and 98.0% for the third quarter and first nine months of 2016, compared to 98.8% and 96.3% for the third quarter and the first nine months of last year. The company had no net loss reserve development in the third quarter of 2016 and 1.9 points of net unfavorable loss reserve development in the first nine months of 2016, while loss reserve development was not significant in the third quarter and first nine months of last year. The expense ratio was 37.6% for the third quarter and 37.5% for the first nine months of 2016, compared to 39.3% and 36.8% for the third quarter and first nine months of last year. The expense ratio for the third quarter of 2016 benefited from the favorable impact of the $3.2 million reduction from the final settlement of the company’s qualified pension plan obligations, while the expense ratio for the third quarter of 2015 was adversely impacted by the company’s exit from the crop business. The increase in the expense ratio for the first nine months of 2016 compared to the first nine months of last year was primarily due to lower premium volume and changing business mix.
Net written premiums were $324.1 million and $865.2 million in the third quarter and first nine months of 2016, an increase of 10.7% and decrease of 4.0% from the comparable periods of last year. In the third quarter of 2015, the company exited its crop business, which reduced net written premiums by $35.8 million and $9.2 million in the third quarter and the first nine months of 2015. Excluding the exited crop business, net written premiums decreased 1.4% and 5.0% in the third quarter and first nine months of 2016 versus the comparable periods of last year.
Investment Results: OneBeacon’s third quarter 2016 total return on invested assets was 1.1% compared to (0.6%) for the third quarter of 2015. These pre-tax results included net realized and unrealized investment gains of $15.5 million and net investment income of $11.8 million for the third quarter of 2016, compared to net realized and unrealized investment losses of $29.9 million and net investment income of $12.4 million for the third quarter of 2015.
Through the first nine months of 2016, the total return on invested assets was 3.8% compared to 0.3% through September 30, 2015. These results included net realized and unrealized investment gains of $56.8 million and net investment income of $38.3 million, compared to net realized and unrealized investment losses of $29.7 million and net investment income of $33.0 million for the first nine months of 2015. The return on the surplus notes issued as part of the runoff sale transaction that closed in December 2014 contributed 0.3 points and 0.8 points to the company’s current quarter and nine-month investment returns in 2016 versus negative 0.3 points for both comparable periods in the prior year.
About OneBeacon: OneBeacon Insurance Group, Ltd. is a Bermuda-domiciled holding company that is publicly traded on the New York Stock Exchange under the symbol “OB.” OneBeacon’s underwriting companies offer a range of specialty insurance products sold through independent agencies, regional and national brokers, wholesalers and managing general agencies. Each business is managed by an experienced team of specialty insurance professionals focused on a specific customer group or industry segment, and providing distinct products and tailored coverages and services. OneBeacon’s solutions target group accident; architects and engineers; commercial surety; entertainment; environmental; excess property; financial institutions; financial services; healthcare; management liability; ocean and inland marine; programs; public entities; technology; and tuition refund. For further information about our products and services visit: www.onebeacon.com and to remain up to date on OneBeacon’s news, follow us on Twitter @OneBeaconIns or visit our online newsroom: www.onebeacon.com/newsroom.
OneBeacon expects to file its Form 10-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.