OneBeacon Reports $12.12 Book Value Per Share

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    OneBeacon Reports $12.12 Book Value Per Share

    PR Newswire

    HAMILTON, Bermuda, July 29, 2011 /PRNewswire/ — OneBeacon Insurance Group, Ltd. (NYSE: OB) today reported book value per share of $12.12, an increase of 0.5% for the second quarter and 4.1% through six months, including dividends. Results in the quarter and six months were adversely impacted by the debt tender offer completed in April and restricted stock granted in May.

    Mike Miller, CEO of OneBeacon, said, "Our underwriting results for the quarter were solid despite significant catastrophe activity. Importantly, our non-catastrophe accident year results were strong. Investment returns were 1.0%, driven by our fixed income portfolio, which remains short in duration. Our specialty business grew nicely as many of the segments we invested in over the past few years gained traction, evidenced by higher renewal retentions, modestly improved pricing and sound new business production."

    For the second quarter, comprehensive income and net income were both $16 million, and operating income was $8 million, or $0.09 per share. For the six months ended June 30, 2011, comprehensive income was $58 million, net income was $57 million, and operating income was $35 million, or $0.37 per share. Operating income is a non-GAAP financial measure which is explained later in this release.

    During the second quarter, OneBeacon repurchased $150 million of its senior notes through a debt tender at a price of 108% of par resulting in a pre-tax loss of $12 million ($8 million after tax). OneBeacon's debt-to-capital ratio at the end of the second quarter was 19%.

    In May, the company granted 630,000 shares of restricted stock to CEO Mike Miller. The shares are treated as issued and outstanding upon grant for GAAP reporting purposes, although one quarter of the shares will vest on each of February 22, 2014, 2015, 2016 and 2017, respectively.

    During the second quarter, OneBeacon paid $115 million of dividends, including a special dividend of $1.00 per share or $95 million.

    Insurance Operations: The second quarter GAAP combined ratio was 96.1%, unchanged from the second quarter of 2010, and 95.1% through June 30, 2011 compared to 104.1% for the first six months of 2010. The decrease in the six-month combined ratio reflects 11 points of improvement in the current accident year loss ratio and a 3 point increase in the expense ratio. First-half 2010 results included significant catastrophe losses and other large losses, particularly in businesses that have since been exited.  During the second quarter of 2011, catastrophe losses associated with the spring windstorms contributed 5 points to the combined ratio, compared to 2 points of catastrophe losses in the second quarter of last year. Catastrophe losses in the first six months of 2011 added 4 points to the combined ratio compared to 6 points in the first six months of last year.  

    Second quarter net written premiums were $281 million as compared to $344 million for the second quarter of 2010, reflecting the impact of the company's sale of the traditional personal lines business. Specialty Insurance Operations' premiums were $266 million for the quarter compared to $238 million in 2010, an increase of 12% reflecting particularly strong growth in OneBeacon Accident Group, OneBeacon Professional Insurance and the collector car and boat business written through Hagerty Insurance Agency.

    For the six months ended June 30, 2011, net written premiums were $559 million as compared to $715 million for the comparable period last year, again reflecting the sale of the traditional personal lines business. Specialty Insurance Operations' premiums were $524 million compared to $498 million, an increase of 5% over the prior year.

    Consolidated Investment Results:  OneBeacon's second quarter total return on invested assets was 1.0% compared to 0.3% for the second quarter of 2010. These results included net realized and unrealized investment gains of $11 million and net investment income of $19 million, compared to net realized and unrealized investment losses of $14 million and net investment income of $25 million for the second quarter of 2010. The average market value of invested assets was $3.1 billion in the second quarter of 2011 as compared to $3.9 billion in the second quarter of 2010, reflecting the impact of the company's sale of the nonspecialty commercial lines and traditional personal lines businesses, and the company's capital management activities.

    Through the first six months of the year, total return on invested assets was 2.5% compared to 2.2% through June 30, 2010.  These results included net realized and unrealized investment gains of $34 million and net investment income of $40 million, compared to net realized and unrealized investment gains of $28 million and net investment income of $53 million for the first six months of 2010. The average market value of invested assets was $3.1 billion through the first six months of 2011 as compared to $3.9 billion through June 30, 2010, again reflecting the impact of the company's sale of the nonspecialty commercial lines and the traditional personal lines businesses, and the company's capital management activities.

    Company to Host Webcast: OneBeacon will host its second quarter 2011 webcast for analysts and investors at 10:00 a.m. ET on Friday, July 29. A copy of the earnings release, the slide presentation to be referenced during the call and a financial supplement are available on the company's website: www.onebeacon.com. An audio playback of the teleconference will be available on the website shortly following the webcast.

    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. The company's businesses include OneBeacon Professional Insurance, International Marine Underwriters, OneBeacon Accident Group, OneBeacon Entertainment, OneBeacon Energy Group, OneBeacon Government Risks, A.W.G. Dewar (tuition refund), collector cars and boats written through Hagerty Insurance Agency, OneBeacon Technology Insurance, OneBeacon Specialty Property, OneBeacon Property and Inland Marine, and OneBeacon Excess and Surplus Lines. The company also offers products and services to assigned risk markets through its AutoOne division. OneBeacon's insurance businesses are national in scope.

    ONEBEACON INSURANCE GROUP, LTD.

    CONSOLIDATED BALANCE SHEETS

    ($ in millions)

    (Unaudited)

    June 30,

    December 31,

    June 30,

    2011

    2010

    2010

    Assets

    Investment securities:

    Fixed maturity investments

    $

    2,228.5

    $

    2,415.5

    $

    2,174.8

    Short-term investments

    116.2

    300.0

    606.1

    Common equity securities

    304.7

    285.3

    235.2

    Convertible bonds

    79.8

    93.8

    133.4

    Other investments

    158.3

    171.4

    179.1

    Total investments

    2,887.5

    3,266.0

    3,328.6

    Cash

    31.3

    33.6

    48.0

    Reinsurance recoverable on unpaid losses

    1,825.9

    1,893.2

    2,100.7

    Reinsurance recoverable on paid losses

    16.2

    44.5

    19.2

    Premiums receivable

    276.9

    275.0

    376.0

    Deferred acquisition costs

    119.2

    114.5

    131.2

    Ceded unearned premiums

    26.2

    113.9

    144.2

    Net deferred tax asset

    90.8

    101.2

    157.1

    Investment income accrued

    15.8

    19.4

    19.8

    Accounts receivable on unsettled investment sales

    7.3

    5.4

    1.5

    Other assets

    276.4

    300.0

    286.7

    Assets held for sale (1)

    655.6

    Total assets

    $

    5,573.5

    $

    6,166.7

    $

    7,268.6

    Liabilities

    Loss and loss adjustment expense reserves

    $

    3,131.5

    $

    3,295.5

    $

    3,609.2

    Unearned premiums

    570.0

    627.5

    743.4

    Debt

    269.7

    419.6

    419.5

    Ceded reinsurance payable

    51.0

    149.3

    154.6

    Accounts payable on unsettled investment purchases

    23.6

    14.1

    29.3

    Other liabilities

    356.5

    411.8

    398.3

    Liabilities held for sale (1)

    502.3

    Total liabilities

    4,402.3

    4,917.8

    5,856.6

    OneBeacon's common shareholders' equity and noncontrolling interests

    OneBeacon's common shareholders' equity:

    Common shares and paid-in surplus

    1,001.2

    1,000.5

    1,004.7

    Retained earnings

    150.7

    228.2

    394.2

    Accumulated other comprehensive income (loss), after tax:

    Net unrealized foreign currency translation losses

    (0.7)

    Other comprehensive income and loss items

    0.4

    0.3

    (5.3)

    Total OneBeacon's common shareholders' equity

    1,152.3

    1,229.0

    1,392.9

    Total noncontrolling interests

    18.9

    19.9

    19.1

    Total OneBeacon's common shareholders' equity and noncontrolling interests

    1,171.2

    1,248.9

    1,412.0

    Total liabilities, OneBeacon's common shareholders' equity and noncontrolling interests

    $

    5,573.5

    $

    6,166.7

    $

    7,268.6

    (1)  Represents assets and liabilities sold as part of the Personal Lines Transaction required to be presented separately in the June 30, 2010 consolidated balance sheet.    

    ONEBEACON INSURANCE GROUP, LTD.

    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

    (in millions, except per share amounts)

    (Unaudited)

    Three Months Ended June 30,

    Six Months Ended June 30,

    2011

    2010 (1)

    2011

    2010 (1)

    Revenues:

    Earned premiums

    $

    265.0

    $

    428.3

    $

    528.5

    $

    881.5

    Net investment income

    18.7

    25.0

    39.7

    53.3

    Net realized and unrealized investment gains (losses)

    11.0

    (14.4)

    34.1

    28.0

    Net other expenses

    (11.5)

    (10.0)

    (10.7)

    (10.8)

    Total revenues

    283.2

    428.9

    591.6

    952.0

    Expenses:

    Loss and loss adjustment expenses

    151.8

    261.9

    296.4

    595.6

    Policy acquisition expenses

    55.4

    91.3

    106.4

    188.8

    Other underwriting expenses

    47.5

    58.5

    99.9

    132.7

    General and administrative expenses

    2.6

    3.0

    4.9

    7.3

    Interest expense on debt

    6.0

    7.9

    12.3

    17.0

    Total expenses

    263.3

    422.6

    519.9

    941.4

    Pre-tax income

    19.9

    6.3

    71.7

    10.6

    Income tax (expense) benefit  

    (3.9)

    2.8

    (13.4)

    (1.2)

    Net income including noncontrolling interests

    16.0

    9.1

    58.3

    9.4

    Less:  Net income attributable to noncontrolling interests

    (0.5)

    (0.5)

    (0.9)

    (0.8)

    Net income attributable to OneBeacon's common shareholders

    15.5

    8.6

    57.4

    8.6

    Change in other comprehensive income and loss items

    0.1

    0.2

    Comprehensive income attributable to OneBeacon's common shareholders

    $

    15.5

    $

    8.6

    $

    57.5

    $

    8.8

    Earnings per common share – basic and diluted

    Net income attributable to OneBeacon's common shareholders per share

    $

    0.16

    $

    0.09

    $

    0.61

    $

    0.09

    Weighted average number of common shares outstanding (2)

    94.7

    95.0

    94.5

    95.1

    (1) Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation.    

    (2) Weighted average common shares outstanding includes the impact of unvested restricted shares and also the impact of repurchases of Class A common shares made through the company's share repurchase program.  

    ONEBEACON INSURANCE GROUP, LTD.

    SEGMENT STATEMENTS OF OPERATIONS (1)

    ($ in millions)

    (Unaudited)

    For the Three Months Ended June 30, 2011

    Investing,

    Specialty

    Other

    Financing

    Insurance

    Insurance

    and Corporate

    Operations

    Operations

    Operations

    Total

    Earned premiums  

    $          246.9

    $            18.1

    $                       –

    $ 265.0

    Loss and loss adjustment expenses  

    (139.0)

    (12.8)

    (151.8)

    Policy acquisition expenses  

    (53.5)

    (1.9)

    (55.4)

    Other underwriting expenses  

    (42.0)

    (5.5)

    (47.5)

    Underwriting income (loss)  

    12.4

    (2.1)

    10.3

    Net investment income   

    18.7

    18.7

    Net realized and unrealized investment gains   

    11.0

    11.0

    Net other revenues (expenses)   

    0.1

    0.6

    (12.2)

    (11.5)

    General and administrative expenses  

    (0.4)

    (2.2)

    (2.6)

    Interest expense on debt

    (6.0)

    (6.0)

    Pre-tax income (loss)   

    $            12.1

    $             (1.5)

    $                     9.3

    $   19.9

    For the Three Months Ended June 30, 2010

    Investing,

    Specialty

    Other

    Financing

    Insurance

    Insurance

    and Corporate

    Operations

    Operations

    Operations

    Total

    Earned premiums  

    $          241.2

    $          187.1

    $                       –

    $ 428.3

    Loss and loss adjustment expenses  

    (143.1)

    (118.8)

    (261.9)

    Policy acquisition expenses  

    (50.9)

    (40.4)

    (91.3)

    Other underwriting expenses  

    (34.8)

    (23.7)

    (58.5)

    Underwriting income   

    12.4

    4.2

    16.6

    Net investment income   

    25.0

    25.0

    Net realized and unrealized investment losses   

    (14.4)

    (14.4)

    Net other revenues (expenses)   

    0.6

    (10.6)

    (10.0)

    General and administrative expenses  

    (0.5)

    (0.2)

    (2.3)

    (3.0)

    Interest expense on debt  

    (7.9)

    (7.9)

    Pre-tax income (loss)   

    $            12.5

    $              4.0

    $                 (10.2)

    $     6.3

    (1) To better align its operating and reporting structure with the company's business profile as a result of the transactions, OneBeacon revised its segment structure during the fourth quarter of 2010. Financial information for the prior period has been reclassified to conform to this presentation.    

    ONEBEACON INSURANCE GROUP, LTD.

    SEGMENT STATEMENTS OF OPERATIONS (1)

    ($ in millions)

    (Unaudited)

    For the Six Months Ended June 30, 2011   

    Investing,

    Specialty

    Other

    Financing

    Insurance

    Insurance

    and Corporate

    Operations

    Operations

    Operations

    Total

    Earned premiums

    $          488.8

    $            39.7

    $                       –

    $ 528.5

    Loss and loss adjustment expenses

    (271.6)

    (24.8)

    (296.4)

    Policy acquisition expenses

    (102.7)

    (3.7)

    (106.4)

    Other underwriting expenses

    (88.4)

    (11.5)

    (99.9)

    Underwriting income (loss)  

    26.1

    (0.3)

    25.8

    Net investment income  

    39.7

    39.7

    Net realized and unrealized investment gains

    34.1

    34.1

    Net other revenues (expenses)  

    0.2

    1.5

    (12.4)

    (10.7)

    General and administrative expenses

    (0.9)

    (4.0)

    (4.9)

    Interest expense on debt

    (12.3)

    (12.3)

    Pre-tax income  

    $            25.4

    $              1.2

    $                   45.1

    $   71.7

    For the Six Months Ended June 30, 2010  

    Investing,

    Specialty

    Other

    Financing

    Insurance

    Insurance

    and Corporate

    Operations

    Operations

    Operations

    Total

    Earned premiums

    $          477.1

    $          404.4

    $                       –

    $ 881.5

    Loss and loss adjustment expenses

    (279.6)

    (316.0)

    (595.6)

    Policy acquisition expenses

    (99.2)

    (89.6)

    (188.8)

    Other underwriting expenses

    (75.9)

    (56.8)

    (132.7)

    Underwriting income (loss)

    22.4

    (58.0)

    (35.6)

    Net investment income  

    53.3

    53.3

    Net realized and unrealized investment gains

    28.0

    28.0

    Net other revenues (expenses)  

    0.8

    (11.6)

    (10.8)

    General and administrative expenses

    (0.8)

    (0.7)

    (5.8)

    (7.3)

    Interest expense on debt

    (17.0)

    (17.0)

    Pre-tax income (loss)  

    $            22.4

    $           (58.7)

    $                   46.9

    $   10.6

    (1) To better align its operating and reporting structure with the company's business profile as a result of the transactions, OneBeacon revised its segment structure during the fourth quarter of 2010. Financial information for the prior period has been reclassified to conform to this presentation.    

    ONEBEACON INSURANCE GROUP, LTD.

    SUMMARY OF RATIOS AND PREMIUMS (1)

    ($ in millions)

    (Unaudited)

    Three Months Ended June 30, 2011

    MGA Business

    Specialty Industries

    Specialty Products

    Specialty
    Insurance
    Operations (2)

    Other
    Insurance
    Operations (3)

    Consolidated Insurance Operations

    Net written premiums

    $       71.7

    $      102.9

    $      91.4

    $              266.0

    $                14.6

    $            280.6

    Earned premiums

    $       68.3

    $        83.7

    $      94.9

    $              246.9

    $                18.1

    $            265.0

    Ratios

        Loss and loss adjustment expenses

    53.3%

    50.9%

    63.2%

    56.3%

    n/m

    57.3%

        Expense

    41.6%

    40.4%

    35.1%

    38.7%

    n/m

    38.8%

           GAAP combined

    94.9%

    91.3%

    98.3%

    95.0%

    n/m

    96.1%

    Three Months Ended June 30, 2010

    MGA Business

    Specialty Industries

    Specialty Products

    Specialty
    Insurance
    Operations (2)

    Other
    Insurance
    Operations (3)

    Consolidated Insurance Operations

    Net written premiums

    $       68.5

    $        86.5

    $      82.8

    $              237.8

    $              106.1

    $            343.9

    Earned premiums

    $       67.2

    $        73.8

    $    100.2

    $              241.2

    $              187.1

    $            428.3

    Ratios

        Loss and loss adjustment expenses

    54.5%

    52.7%

    67.4%

    59.3%

    63.5%

    61.1%

        Expense

    35.7%

    40.4%

    31.9%

    35.4%

    34.2%

    35.0%

           GAAP combined

    90.2%

    93.1%

    99.3%

    94.7%

    97.7%

    96.1%

    Six Months Ended June 30, 2011

    MGA Business

    Specialty Industries

    Specialty Products

    Specialty
    Insurance
    Operations (2)

    Other
    Insurance
    Operations (3)

    Consolidated Insurance Operations

    Net written premiums

    $     120.2

    $      188.5

    $    215.6

    $              524.3

    $                34.4

    $            558.7

    Earned premiums

    $     134.3

    $      164.6

    $    189.9

    $              488.8

    $                39.7

    $            528.5

    Ratios

        Loss and loss adjustment expenses

    49.4%

    53.9%

    61.4%

    55.6%

    n/m

    56.1%

        Expense

    41.8%

    41.4%

    35.2%

    39.1%

    n/m

    39.0%

           GAAP combined

    91.2%

    95.3%

    96.6%

    94.7%

    n/m

    95.1%

    Six Months Ended June 30, 2010

    MGA Business

    Specialty Industries

    Specialty Products

    Specialty
    Insurance
    Operations (2)

    Other
    Insurance
    Operations (3)

    Consolidated Insurance Operations

    Net written premiums

    $     115.2

    $      164.1

    $    218.8

    $              498.1

    $              217.3

    $            715.4

    Earned premiums

    $     130.4

    $      146.3

    $    200.4

    $              477.1

    $              404.4

    $            881.5

    Ratios

        Loss and loss adjustment expenses

    51.3%

    55.8%

    65.4%

    58.6%

    78.1%

    67.6%

        Expense

    37.6%

    40.8%

    33.2%

    36.7%

    36.2%

    36.5%

           GAAP combined

    88.9%

    96.6%

    98.6%

    95.3%

    114.3%

    104.1%

    (1)  To better align its operating and reporting structure with the company's business profile as a result of the transactions, OneBeacon revised its segment structure during the fourth quarter of 2010. As part of the resegmentation, agency results for business written on OneBeacon paper and in which OneBeacon has an ownership interest have been reclassified within the underwriting results. Financial information for the prior periods has been reclassified to conform to this presentation.    

    (2)  Within Specialty Insurance Operations, OneBeacon reports its businesses through three major underwriting units, representing an aggregation of its specialty lines businesses. MGA Business includes Collector Cars and Boats, A.W.G. Dewar and OneBeacon Entertainment. Specialty Industries includes International Marine Underwriters, OneBeacon Technology Insurance, OneBeacon Accident Group, OneBeacon Government Risks and OneBeacon Energy Group. Specialty Products includes OneBeacon Professional Insurance (which now includes Financial Services), OneBeacon Property and Inland Marine, OneBeacon Specialty Property and OneBeacon Excess and Surplus.    

    (3) Other Insurance Operations includes AutoOne Insurance, a division that offers products and services to assigned risk markets. Other Insurance Operations also includes the nonspecialty commercial lines business that was subject to the renewal rights agreement with The Hanover that began with January 1, 2010 effective dates, the traditional personal lines business that was subject to the sale to Tower Group, Inc. completed July 1, 2010, and other run-off business. As Other Insurance Operations for the 2011 periods consists primarily of business in run-off, GAAP ratios are not meaningful.    

    ONEBEACON INSURANCE GROUP, LTD.

    BOOK VALUE PER SHARE

    (in millions, except per share amounts)

    (Unaudited)

    June 30,

    March 31,

    December 31,

    June 30,

    2011

    2011

    2010

    2010

    Numerator

    OneBeacon's common shareholders' equity

    $

    1,152.3

    $

    1,251.3

    $

    1,229.0

    $

    1,392.9

    Denominator

    Common shares outstanding (1)

    95.1

    94.4

    94.4

    94.7

    Book value per share

    $

    12.12

    $

    13.26

    $

    13.02

    $

    14.71

    Growth in book value per share, including dividends, in the quarter on an IRR basis (2)

    0.5%

    Growth in book value per share, including dividends, in the six month period on an IRR basis (3)

    4.1%

    Growth in book value per share, including dividends, in the last twelve months on an IRR basis (4)

    13.3%

    (1)  Common shares outstanding includes the impact of unvested restricted shares and also the impact of repurchases of Class A common shares made through the company's share repurchase program.    

    (2)  Internal rate of return (IRR) calculated based on beginning book value per share, dividends paid and ending book value per share. Includes a quarterly dividend of $0.21 per share.    

    (3)  IRR calculated based on beginning book value per share, dividends paid and ending book value per share. Includes dividends of $0.42 per share (a quarterly dividend of $0.21 per share) and a special dividend of $1.00 per share paid in June 2011.    

    (4)  IRR calculated based on beginning book value per share, dividends paid and ending book value per share. Includes dividends of $0.84 per share (a quarterly dividend of $0.21 per share), a special dividend of $2.50 per share paid in September 2010 and a special dividend of $1.00 per share paid in June 2011.    

    ONEBEACON INSURANCE GROUP, LTD.

    COMPREHENSIVE INCOME, NET INCOME AND OPERATING INCOME (LOSS)  

    (in millions, except per share amounts)

    (Unaudited)

    Three Months Ended June 30,

    Six Months Ended June 30,

    Twelve Months Ended
    June 30,

    2011

    2010

    2011

    2010

    2011

    Comprehensive income attributable to OneBeacon's common shareholders

    $ 15.5

    $   8.6

    $ 57.5

    $    8.8

    $            173.5

    Net income attributable to OneBeacon's common shareholders

    $ 15.5

    $   8.6

    $ 57.4

    $    8.6

    $            167.1

    Weighted average common shares outstanding (1)

    94.7

    95.0

    94.5

    95.1

    94.6

    Net income attributable to OneBeacon's common shareholders per share

    $ 0.16

    $ 0.09

    $ 0.61

    $  0.09

    $              1.77

    Net income attributable to OneBeacon's common shareholders

    $ 15.5

    $   8.6

    $ 57.4

    $    8.6

    $            167.1

    Less:

    Net realized and unrealized investment gains and losses

    (11.0)

    14.4

    (34.1)

    (28.0)

    (80.7)

    Tax effect on net realized and unrealized investment gains and losses

    3.8

    (5.0)

    11.9

    9.8

    28.2

     Operating income (loss) (2)

    $   8.3

    $ 18.0

    $ 35.2

    $   (9.6)

    $            114.6

    Weighted average common shares outstanding (1)

    94.7

    95.0

    94.5

    95.1

    94.6

    Operating income (loss) per share (2)

    $ 0.09

    $ 0.19

    $ 0.37

    $ (0.10)

    $              1.21

    (1) Weighted average common shares outstanding includes the impact of unvested restricted shares and also the impact of repurchases of Class A common shares made through the company's share repurchase program.  

    (2) Represents a non-GAAP financial measure. See discussion of Non-GAAP financial measures.  

    ONEBEACON INSURANCE GROUP, LTD.

    COMPREHENSIVE AND OPERATING RETURNS ON AVERAGE EQUITY

    ($ in millions)

    (Unaudited)

    Twelve Months

    Ended

    June 30, 2011

    Numerator:

    [A]

    Comprehensive income attributable to OneBeacon's common shareholders

    $            173.5

    [B]

    Operating income (1)

    $            114.6

    As of

    As of

    June 30, 2011

    June 30, 2010

    Average

    Denominator:

    [C]

    OneBeacon's common shareholders' equity

    $         1,152.3

    $       1,392.9

    $         1,272.6

    Less:  

    Net unrealized gains and losses and net foreign currency gains and losses on investments (2)

                (148.3)

              (146.3)

    Tax effect on net unrealized gains and losses and net foreign currency gains and losses on investments

                    51.9

                  51.2

    Accumulated OCI/L, after-tax

                    (0.4)

                    6.0

    [D]

    Adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses, after tax, and AOCI/L (1)

    $         1,055.5

    $       1,303.8

    $         1,179.7

    Returns:

    Comprehensive return on average OneBeacon's common shareholders' equity  [ A / C ]

    13.6%

    Operating return on average adjusted OneBeacon's common shareholders' equity excluding net unrealized investment gains and losses, after tax, and AOCI/L [ B / D ]

    9.7%

    (1)  Represents a non-GAAP financial measure. See discussion of Non-GAAP financial measures.    

    (2)  Net unrealized gains and losses and net foreign currency gains and losses on investments as of June 30, 2011 and 2010 includes unrealized gains and losses on investments held as well as deferred gains and losses relating to sales of investments to entities under common control.    

    Discussion of Non-GAAP Financial Measures

    This earnings release includes non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures.  OneBeacon believes these measures to be useful supplements to the comparable GAAP measures in evaluating OneBeacon's financial performance. 

    Operating income (loss) is a non-GAAP financial measure that excludes net realized and unrealized investment gains or losses and the related tax effects from net income attributable to OneBeacon's common shareholders.  OneBeacon believes that this non-GAAP financial measure provides a useful alternative picture of the underlying operating activities of the company to the GAAP measure of net income attributable to OneBeacon's common shareholders, as it removes variability in the timing of investment gains and losses which may be heavily influenced by investment market conditions.  Although key to the company's overall financial performance, OneBeacon believes that net realized and unrealized investment gains or losses are largely independent of the underwriting decision-making process.

    Operating income (loss) per share is calculated by dividing operating income (loss) (a non-GAAP financial measure described above) by the weighted average number of common shares outstanding.  Management believes that operating income (loss) per share is a useful alternative picture of the underlying operating activities of the company as it removes variability in the timing of investment gains and losses which may be heavily influenced by investment market conditions.  Net income attributable to OneBeacon's common shareholders per share is the most directly comparable GAAP measure.  

    Shareholders' equity excluding net unrealized investment gains and losses, after-tax, and accumulated other comprehensive income/loss (AOCI/L), the average of which is used in calculating operating returns, is derived by excluding net unrealized gains and losses and net foreign currency gains and losses on investments, after tax, and accumulated other comprehensive income or loss (AOCI/L), after tax, from OneBeacon's common shareholders' equity. For the reasons described above, OneBeacon believes that it is appropriate to remove the variability in net unrealized gains and losses and net foreign currency gains and losses on investments and other comprehensive income and loss items when analyzing certain performance measures. 

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

    This press release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this release which address activities, events or developments which we expect or anticipate will or may occur in the future are forward-looking statements. The words "will," "believe," "intend," "expect," "anticipate," "project," "estimate," "predict" and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to OneBeacon's:

    • change in book value per share or return on equity;
    • business strategy;
    • financial and operating targets or plans;
    • incurred loss and loss adjustment expenses and the adequacy of its loss and loss adjustment expense reserves and related reinsurance;
    • projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
    • expansion and growth of our business and operations; and
    • future capital expenditures.

    These statements are based on certain assumptions and analyses made by OneBeacon in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:

    • claims arising from catastrophic events, such as hurricanes, windstorms, earthquakes, floods, or terrorist attacks;
    • recorded loss and loss adjustment expense reserves subsequently proving to have been inadequate;
    • the continued availability and cost of reinsurance coverage;
    • the continued availability of capital and financing;
    • general economic, market or business conditions;
    • business opportunities (or lack thereof) that may be presented to it and pursued;
    • competitive forces, including the conduct of other property and casualty insurers and agents;
    • changes in domestic or foreign laws or regulations, or their interpretation, applicable to OneBeacon, its competitors, its agents or its customers;
    • an economic downturn or other economic conditions adversely affecting its financial position including stock market volatility;
    • actions taken by ratings agencies from time to time, such as financial strength or credit ratings downgrades or placing ratings on negative watch;
    • the risks that are described from time to time in OneBeacon's filings with the Securities and Exchange Commission, including but not limited to OneBeacon's Annual Report on the Form 10-K for the fiscal year ended December 31, 2010 filed February 28, 2011.

    Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by OneBeacon will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, OneBeacon or its business or operations. OneBeacon assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

    Website: www.onebeacon.com

    SOURCE OneBeacon Insurance Group, Ltd.