OneBeacon Insurance Group, Ltd. (OB)

OneBeacon Insurance Group, Ltd. is a property and casualty insurance writer that provides a range of specialty insurance products, as well as a range of segmented commercial and personal insurance products. The company has three segments: Primary Insurance Operations, Affiliate Quota Shares and Other Operations. It manages Primary Insurance Operations segment through three underwriting units: specialty lines, commercial lines and personal lines. The company has built the organization through acquisition of either people, books of business, or companies


For year 2006, revenues increased by 3.1% to $2.47 billions reflecting rise in premiums earned and higher net realized investment gains. Net income from continuing operations increased by 32% to $245.5 millions as a result of decreased loss and loss adjustment expenses, lower accretion of fair value adjustment to loss and loss adjustment expense reserves and higher equity earnings from affiliates.


While competitors combined ratio is in the high 80s, company’s combined ratio is 96.3% reflecting high expense ratio primarily due to inclusion of all management incentive plan costs. The company is aware about the fact and has targeted to reduce it by 3 percent point over a period of three years.


As evident by launch of Government Risk Solutions in March 2007, company plans to continue with its strategy of expanding its specialty focus and take advantage of growth in niche markets where it has competitive advantages. The company’s strategic relationship with both the investment managers can be considered as a competitive advantage as they are outperforming industry benchmarks by adopting total return investment strategy. Company’s equity portfolio with 25% returns significantly outperformed returns of 15.8% as measured by the S&P 500 index.


The company has a long term view towards managing the business and growing book value per share. Modest top line growth and a plan to increase its geographic footprint will enable them to sustain through the soft market. The company’s price to earnings multiple is 11.33, much lower than the industry’s average. These various factors portray the company’s long term prospects.