White Mountains Insurance Group Ltd.’s profits dropped by more than $25 million during the fourth quarter of 2010 despite its reinsurance business bouncing back from the losses it incurred from the Chilean earthquake earlier in the year.The Bermuda-based insurer reported a net income of $73 million in the fourth quarter and $87 million for the year compared to $100 million in the fourth quarter of 2009 and $470 million for the whole of 2009.Adjusted comprehensive income was $81 million in the fourth quarter and $141 million during 2010 versus $91 million in the same period in 2009 and $560 million for the entire year.The insurance company also recorded an adjusted book value per share of $441 at December 31, 2010, an increase of three percent for the fourth quarter of 2010 and six percent for the year, including dividends.Ray Barrette, chairman and CEO of White Mountains, said: “We had an OK year. Investment returns were decent given the conservative positioning of our portfolio.“OneBeacon’s overall underwriting results were dragged down by the businesses it recently exited, but the specialty results were good. White Mountains Re had a strong finish to the year and a solid year overall, quite a comeback given the Chile earthquake losses early in the year.“Esurance grew nicely at acceptable loss ratios, as both policyholder conversion and retention improved. Our share repurchase program is working well and added $7 to adjusted book value per share during the year.“Our balance sheet and capital position are strong. I expect continued soft insurance markets but we are well positioned to take advantage of opportunities as they arise.”OneBeacon’s book value per share increased three percent for the fourth quarter and nine percent for the year, including dividends.The GAAP combined ratio for the fourth quarter of 2010 was 97 percent compared to 93 percent for the fourth quarter of the previous year, while last year’s GAAP combined ratio was 101 percent versus 94 percent for period prior.OneBeacon has recently exited its personal lines business, which was sold in July 2010, and its non-specialty commercial lines business, which has been in run-off following the sale of the renewal rights to the business in December 2009.The increase in the combined ratio for the quarter was primarily due to an increase in the expense ratio, reflecting higher acquisition costs in its specialty businesses compared to the exited businesses and other underwriting expenses that have not decreased proportionately with the reduction in earned premium associated with the exited businesses.The current accident year loss ratio for the quarter was unchanged, despite higher loss ratios in both specialty and run-off, reflecting the shift in mix toward the better performing specialty business.The rise in the combined ratio for the year was mainly down to large loss activity and catastrophe losses experienced earlier in the year, particularly in the exited businesses.OneBeacon’s combined ratio benefited from favourable loss reserve development of five points and three points for the fourth quarter and full year of 2010, compared to six points and four points for the fourth quarter and full year of 2009.Mike Miller, CEO of OneBeaMike Miller, CEO of OneBeacon, said: “We are pleased to finish the year with a nine percent growth in book value per share. Solid investment results offset poor underwriting results.“Our overall 101 percent combined ratio for the year was driven by adverse results in businesses we recently exited. Our specialty results were solid, at a 94 percent combined ratio. After returning significant capital to shareholders and reducing our financial leverage, we emerged as a well-capitalised and focused specialty company.”Net written premiums were $233 million in the fourth quarter of 2010 and $1,236 million in the year, a decrease of 46 percent and 35 percent from the comparable periods in 2009, reflecting the sale of the non-specialty commercial lines business beginning with January 1, 2010 renewal dates and the personal lines business in July. Specialty premiums decreased by three percent for the fourth quarter and increased by four percent for the year.White Mountains Re’s GAAP combined ratio for last year’s fourth quarter was 71 percent compared to 74 percent for the fourth quarter of last year, while the GAAP combined ratio for 2010 was 94 percent compared to 80 percent for 2009.Allan Waters, CEO of White Mountains Re, said: “Aided by a benign hurricane season and our solid loss reserves, results for 2010 finished strong after a difficult start due mainly to the Chile earthquake. Along with the industry we increased our New Zealand earthquake estimate from $3 million to $14 million but it remains a small event for us.“January 1, 2011 renewal rates declined modestly but remain adequate in our primary lines of business. I am generally satisfied with our renewals, particularly in accident and health where we continued to grow our US book.”Catastrophe losses added eight points to the combined ratio for the fourth quarter of 2010, principally from five points of additional losses from the New Zealand earthquake that occurred in September 2010, compared to six points for the fourth quarter of 2009.Catastrophe losses added 23 points to the combined ratio for 2010, principally from 15 points of losses from the Chile earthquake that occurred in February 2010, compared to seven points for 2009.Favourable loss reserve development reduced the combined ratio by 14 points for the fourth quarter of 2010, compared to four points for the fourth quarter of 2009, while favourable loss reserve development reduced the combined ratio by seven points for 2010, compared to three points for 2009.The favourable loss reserve development for the 2010 periods is primarily related to recent underwriting years, as well as six points and two points of deferred gains on retroactive reinsurance recognised for the fourth quarter and full year of 2010 from a contract that incepted in 2000 and was fully collected in 2010.Net written premiums were down four percent for the quarter and up seven percent for the year. The decrease for the quarter was primarily due to decreases in the property lines, somewhat offset by increases in the trade credit and accident & health lines. For the year, lower property volume was more than offset by increased trade credit and accident and health business as well as effects of foreign currency translation.Esurance’s adjusted combined ratio for the fourth quarter of 2010 was 104 percent compared to 109 percent for the fourth quarter of last year, while the adjusted combined ratio was 103 percent for both 2010 and 2009. The loss and LAE ratio was 75 percent for the fourth quarter of 2010 compared to 79 percent for the fourth quarter of last year, while the loss and LAE ratio was 74 percent for both 2010 and 2009.Esurance’s adjusted combined ratio benefited from prior year favourable loss reserve development of two points for both the fourth quarter and full year of 2010 compared to one point for the fourth quarter and full year of 2009. The fourth quarter loss and LAE results also benefited from four points of favorable loss reserve development on current accident year reserves established for the first nine months of 2010.Gary Tolman, CEO of Esurance, said: “The Esurance segment had a good fourth quarter and full year. We returned to growth mode driven by improved policyholder conversion and retention. The loss and LAE ratio performed well for the year, even with poor loss results in Florida.“Florida results are improving due to the rate increases taken in 2010. Answer Financial and Esurance continue to work together to build the best choice model for auto insurance consumers.”Controlled premiums, which include policies sold by Answer Financial, were $282 million and $1.2 billion in the fourth quarter and full year of 2010 compared to $267 million and $1.1 billion in the fourth quarter and full year of 2009. Gross premiums written by Esurance were $190 million for the fourth quarter of 2010 and $839 million for the year, a five percent and seven percent increase from the comparable periods of 2009.As of December 31, 2010, the Esurance segment had 839,000 policies-in-force, including 328,000 policyholders at Answer Financial. The Esurance segment added approximately 65,000 policies-in-force during 2010, an increase of eight percent.White Mountains’ other operations segment reported pre-tax income of $24 million in the fourth quarter of 2010 and a pre-tax loss of $100 million for the year compared to a pre-tax loss of $24 million in the fourth quarter of 2009 and $111 million last year. The improvement in pre-tax results in the fourth quarter was mainly due to mark-to-market gains on the Symetra warrants, higher investment gains and improved results at WM Life Re.The decrease in pre-tax loss in the year was primarily due to higher investment gains in 2010 and the absence of a $7 million loss from the weather-risk business in 2009, partially offset by an $11 million loss on the disposition of Delos in 2010.The value of the Symetra warrants increased by $20 million in the fourth quarter of 2010 and decreased by $1 million in the year compared to a decrease of $4 million in the fourth quarter of 2009 and an increase of $11 million in the year.WM Life Re reported $4 million of pre-tax income and $61 million of pre-tax loss in the fourth quarter and full year of 2010 compared to $3 million and $57 million of pre-tax loss in the fourth quarter and full year of 2009. The losses in the full year of 2010 were primarily the result of a reduction in the surrender assumptions used to calculate WM Life Re’s variable annuity guarantee liability.The change in the surrender assumptions increased the liability by $48 million, which was recorded as a reduction of other revenues in the third quarter of 2010. 2009 included $22 million in losses from reductions in surrender assumptions.The GAAP total return on invested assets for the fourth quarter and full year of 2010 was 0.5 percent and five percent. Currency translation did not impact the fourth quarter of 2010, while the full year of 2010 included 0.5 percent of currency gains. The GAAP total return for the fourth quarter and full year of 2009 was 0.9 percent and 9.4 percent, which included 0.3 percent of currency losses and 1.3 percent of currency gains, respectively.Manning Rountree, President of White Mountains Advisors, said: “Our total investment portfolio was up 0.5 percent for the fourth quarter and five percent for the year, a fair absolute return. Dollar weakening boosted returns by 0.5 percent for the year.“Given our short duration, we left money on the table in fixed income during the first nine months, but we outperformed our benchmark as rates rose in the fourth quarter. Equities performed well in 2010.“Our separate account portfolios managed by Prospector Partners led the way, outperforming the S&P 500 by 400bps for the year. We like our positioning as we enter 2011. Fixed income duration remains short at 2.4 years, and credit quality remains strong. Roughly 14 percent of the portfolio is invested in equities, a number we expect to continue to increase opportunistically.”White Mountains estimates that its undeployed capital grew from over $700 million at the end of 2009 to about $1.1 billion at December 31, 2010. the company has repurchased and retired 677,125 of its common shares for $222 million under its share repurchase programme in 2010, including 140,324 shares for $45 million in the fourth quarter at an average share price of $319, which was approximately 72 percent of White Mountains’ December 31, 2010 adjusted book value per share.David Foy, executive vice-president and chief financial officer of White Mountains, said: “Our undeployed capital grew significantly in 2010 even though we repurchased over $220 million of White Mountains shares and repurchased or retired about $200 million of OneBeacon debt. Given our shares continue to trade at a meaningful discount to adjusted book value, we expect to continue to repurchase shares in 2011.”