By Andrew Bary
White Mountains Insurance Group's sale of its California homeowners' business for a rich price is a coup for the property and casualty insurance specialist and highlights the value in its thinly traded stock.
The deal, announced early Friday, has prompted an 11% gain in its stock to $1,853. The shares still trade for about 87% of its book value of more than $2,100 a share adjusting for the transaction involving White Mountains' Bamboo unit.
That's a reasonable valuation for the diversified Bermuda-domiciled financial company that focuses on P&C insurance. White Mountains is a well-managed company with an impressive record of expanding its book value at a roughly 10% annual rate over the past decade. Even with the gain Friday, the stock is down 4% so far this year.
Most P&C stocks have trailed the stock market this year because of concerns that insurance pricing is easing after several strong years and the stocks are defensive and out of favor in what has been a "risk-on" market. White Mountains is lagging behind some of its peers in the stock market in 2025 including Fairfax Financial and Markel.
There's no reason that a solid insurer like White Mountains with a strong record of value creation shouldn't trade at or above book value. White Mountains' book value likely rose in the third quarter based on profits from operations and an increase in the value of its bond portfolio as interest rates fell. That would add to the book value of $2,100-plus per share.
White Mountains should have over $1 billion in cash on its balance sheet after the deal closes late in the current quarter. It could return a chunk of that cash to shareholders in dividends or stock buybacks. It now pays a minimal dividend of well under 1%.
White Mountains is one of six mini-Berkshire companies that pursue strategies similar to Berkshire Hathaway that B arron's profiled favorably in June. White Mountains has a market value of about $4.7 billion. White Mountains has virtually no analyst coverage and like Berkshire, it has limited communication with Wall Street. The company doesn't hold quarterly earnings conference calls.
White Mountains said Friday that it will sell a controlling interest in Bamboo, the California property and casualty insurer, to funds advised by CVC Capital Partners at a price that values the business at $1.75 billion.
White Mountains had owned about 64% of Bamboo and will hold 15% after the transaction. The sale price amounts to a big premium above Bamboo's recent capital of around $235 million and will result in $840 million in cash proceeds to White Mountains. The sale price also amounts to more than 20 times trailing Ebitda (earnings before interest, taxes depreciation and amortization), a high price for insurers that normally are valued at half that level or less.
The gain on the sale will lift the company's book value by $310 a share, the company said. Book had totaled $1,804 a share on June 30.
White Mountains's largest unit is Ark, a diversified P&C insurer. It owns Kudu, a successful investor in private asset managers and it also holds about a quarter of the public MediaAlpha, a digital platform that connects insurance carriers with potential customers.
What's the whole company worth? A reasonable guess is a 10% to 15% premium to the current book value -- which would be at least $2,300 a share. At $1,853, the stock trades at a nice discount to that level and the company has a good history of growing book value. Over time, the stock should track book value as it has done in the past.
Write to Andrew Bary at andrew.bary@barrons.com
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(END) Dow Jones Newswires
October 03, 2025 15:52 ET (19:52 GMT)
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