White Mountains Insurance Has Problems of Its Own

I just wanted to remind everyone that White Mountains Insurance (WTM) is holding its 2008 Annual Investor Information Meeting on June 17 in New York City. The company has no analyst coverage that I am aware of, and doesn't market very much, so the analyst day is a fine opportunity to understand the company better. If you aren't familiar with the company, WTM is a property casualty insurance company with three main businesses:

• OneBeacon
• White Mountains Re
• Esurance

The stock has been battered along with other financials over the last year, selling off from $611 down to a low of $449 a share. This was not the only reason it sold off, as there are issues in some of WTM's businesses that may make it harder for them to grow book value as robustly as they have historically.

If you look at the chart below, WTM looks like it has hit a technical "multiple bottom" in the $450-460 range. It has tested this level three times and bounced off of it. This is also right around its book value. Although I do not worship at the altar of technical analysis, I do recognize its value in picking entry and exit points, when fundamentals provide confirming evidence.



I have written on WTM previously in these posts:

White Mountains Insurance

I also posted my notes from the analyst day last year. It is a long post and is more or less a transcript of the event.

You can listen to the webcast of the event if you can't make it up to NYC on that day. The direct link is on the WTM web page.

Disclosure - I am long WTM.

Comments

[bostonmark]

I have written about WTM or White Mountains Insurance also, I am question if the decline in stock is not only connected to the sector decline but a more core reason, that is autoinsurance5.com/whi.../ are they holding an usual amount of mortgage backs in their investment portfolio run my White Mountain advisors? Until I have a better understanding of this I am a little scared of the decline and the strong downward trend tends to support the fact that something else might be going on. I am very curious and will be reading more news about them.

[The Hammer]

Your fos user. Your what if scenarios are all bs. about 5% of assets are in level 3 assets and mostly partnerships. The company is strong, buying back shares at below bv prices and the president just bought a load at 445.
The only thing going on here is pricing pressures and negative sentiment.

[bostonmark]

@Hammar. You might be right... but consider this... I am looking and watching WTM However, do not judge a stock by insiders buying and selling or even companies buying back, as often times this is for political reasons or personal reasons. John Gillespie the Investment guy sold 1.5 million dollars of the stock while Ray the chief bought .8 million dollars. So I can not make a judgement based on this. I think a stock is a buy or not should be based things like earnings momentum, P/E etc. Including investment assets. In my opinion returns on investment assets are an important number. Insurance companies do not make as much money on their combined ratio (
How insurance companies make money ) as you think, rather they leverage from their investment assets.

John Gillespie is an old money, conservative investor (White mountains Investments) but a guy like David Linker is a guy who is a MBS player at White mountains. I use to work with them and I like them both personally as well as the company, I have good feelings towards. However, what I am questioning is has their exposure to mortgage back securities declined in the last few years. I hope so, but I am looking for the facts or that is the reason for their 2 year price decline from 600 to 400. 600 to 400 is in my option a huge decline.

Define level 3 assets?- these are assets where there is some subjective price adjustments which need to be assign a value based on some non observable measure - This is not what I am talking about.

Most MBS are traded on the open market and decline in value because of 1) people's in ability to pay mortgages 2) supply and demand ie market price 3) interest rate changes. But its really all about market price. These are highly liquid highly traded assets traded like bonds. Not the level 3 assets you are talking about. I am talking about MBS which can have market gains or losses like bonds or stocks.

[The Hammer]

"I hope so, but I am looking for the facts or that is the reason for their 2 year price decline from 600 to 400. 600 to 400 is in my option a huge decline."
Yeah but the stock was overpriced imo when it was over 600+ a share. a quality insurer with roe of 12 % or so does deserve a premium over book imo but not 2 times. Now we are under tang book value. They are shrinking nthe company and reducing the share count, my best guess is around 8.8 mil shares outstanding now.
Actually page 16 10q q1 gives values of level 1 2 and 3 assets. as march 31,2008. If you do not trust the values they have listed for level 2 assets then its your choice. You supposedly worked there and it seems you had good feelings. So what's to question? Most insurance cos are taking a beating....just look at mkl cb all of them.