The Company maintains two professional offices in Hamilton, Bermuda which serve as its headquarters and its registered office. White Mountains Re's headquarters is in Hamilton, Bermuda with an additional office in New Jersey. Folksamerica is headquartered in New York, New York with branch offices in various cities throughout the United States. Sirius International is headquartered in Stockholm, Sweden with various branch offices in Europe and Asia. WMU maintains offices in Dublin, Ireland and Hamilton, Bermuda. The home office of OneBeacon is located in Boston, Massachusetts, with branch offices in various cities throughout the United States. Esurance is headquartered in San Francisco, California with various offices throughout the United States. In addition, the Company maintains a professional office in Hanover, New Hampshire which serves as its principal executive office, and an office in Guilford, Connecticut, which houses its investment and corporate finance functions.
Selected consolidated income statement data and ending balance sheet data for each of the five years ended December 31, 2004, follows:
(h)Includes outstanding Convertible Preference Shares, Options and warrants to acquire Common Shares, when applicable.
(i)In accordance with its adoption of Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" ("SFAS 141"), the Company recognized all of its outstanding deferred credits on January 1, 2002. See Note 1.
The income tax provision related to pretax earnings for 2004, 2003 and 2002 represents an effective tax rate of 19.0%, 34.3% and 9.8%, respectively. White Mountains' effective tax rate for 2004 was lower than the U.S. statutory rate of 35% primarily from income generated in jurisdictions other than the United States and from the recognition of foreign tax credits, offset by taxes incurred from an internal restructuring of the company. White Mountains' effective tax rate for 2002 was lower than the U.S. statutory rate of 35% primarily from income generated in jurisdictions other than the United States.
There were significant levels of property catastrophe activity during the last half of 2004, including the four hurricanes which affected the Southeast United States and the Caribbean, where White Mountains Re has historically been a significant participant in the property reinsurance market. Additionally, Sirius International was exposed to losses from the devastating tsunami that impacted South Asia in December 2004. White Mountains Re believes its underwriting discipline and risk management approach helped to contain these losses to manageable levels. This significant property catastrophe activity during the last half of 2004 resulted in $135 million of pre-tax losses, including $16 million related to the tsunami. There was no significant property catastrophe activity in 2003.
Both internal and external forces influence White Mountains' financial condition, results of operations and cash flows. Claim settlements, premium levels and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains and the settlement of the liability for that loss. The exact timing of the payment of claims and benefits cannot be predicted with certainty. White Mountains' insurance and reinsurance operating subsidiaries maintain portfolios of invested assets with varying maturities and a substantial amount of short-term investments to provide adequate cash for the payment of claims.
More recently, since the 1990s, OneBeacon has experienced an influx of claims from commercial insureds, including many non-Fortune 500-sized accounts written during the 1970s and 1980s, who are named as defendants in asbestos lawsuits. As a number of large well-known manufacturers of asbestos
OneBeacon's net loss and LAE reserves by line of business at December 31, 2004 and 2003 were as follows:
A hypothetical 1% increase in the discount rate would result in a decrease in pension and retiree medical projected benefit obligations of approximately $63 million. A hypothetical 1% decrease in the discount rate would result in an increase in pension and retiree medical projected benefit obligations of approximately $63 million. The impact of a hypothetical 1% change to the discount rate on periodic cost of pension/retiree medical benefits is not significant.