White Mountains earnings dip

White Mountains Insurance earned slightly more than $92 million last quarter, down slightly from the $96 million in net income reported in the first quarter of the previous year, according to Wednesday’s filing with the Securities and Exchange Commission.

The earnings amounted to $8.54 a diluted share.

The decline is mainly due to losses resulting from European windstorms last winter and more conservative underwriting standards and reserve policies, the company said, but it was offset by investment net income of $118 million, a 20 percent increase.

The insurance conglomerate – officially headquartered in Bermuda, but run out of Hanover – also doubled earnings at its personal and commercial unit, to $87 million, but Esurance, its growing auto insurance company, lost $9 million.

White Mountains’ biggest setback was in its White Mountains Re subsidiary, a reinsurance company that is particularly sensitive to large weather-related losses.

In 2006, White Mountains Re took a big hit resuting from Katrina and two other hurricanes that hit the southern United States in 2005. This year, two winter storms that caused more than $9 billion worth of damage in Europe, resulted in some $45 million in losses for White Mountains Re. As a result, the subsidiary earned $58 million in the last quarter, as compared to $84 million in the first quarter of 2006.

Usually, such damage raises the price of premiums, as more property owners take out insurance at a higher price to prepare for future losses. But White Mountains Re’s gross written premiums decreased by $47 million, or 10 percent. The decreases were due to subsidiary clients decision to retain more exposure, causing them not to meet White Mountains Re’s underwriting standards.

The filing also disclosed that the Internal Revenue Service is involved in an ongoing audit of the company’s income tax returns from 2003 and 2004. But thus far, no issues have been raised and the company said it is not expected to affect the $70.6 million of unrecognized tax benefits the company had as of the beginning of this year.

On Tuesday, another White Mountains reinsurer – Montpelier Re — repurchased all of White Mountains’ remaining interest in the company for $65 million. – BOB SANDERS