Our 2009 Annual Report includes non-GAAP financial measures, identified by the superscript “NGM,” that have been reconciled to their most comparable GAAP financial measures. OneBeacon believes these measures to be useful supplements to the comparable GAAP measures in evaluating OneBeacon’s financial performance. These non-GAAP financial measures have been adjusted to exclude the impacts of economically defeasing the company’s mandatorily redeemable preferred stock. As described in the company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2009 (our Form 10-K), in connection with its initial public offering, the company created two irrevocable grantor trusts and funded them with assets sufficient to make the remaining dividend and redemption payments for $20 million of preferred stock that was redeemed in June 2007 and $300 million of preferred stock that was redeemed in May 2008. The company created and funded these trusts to appropriately capitalize and leverage the company in preparation for and in connection with its initial public offering. Having completed these actions, OneBeacon believes that presentation of certain of the non-GAAP financial measures as described below and on pages 48 and 73 of our Form 10-K, adjusted to exclude the impact of the economic defeasance of the preferred stock is a useful supplement to understanding the company’s earnings and profitability.
For a reconciliation of adjusted book value per common share to book value per common share, the most comparable GAAP measure, refer to pages 48 and 73 of our Form 10-K, included herein.
Adjusted comprehensive net income (loss) is derived by excluding the impact of economically defeasing the company’s mandatorily redeemable preferred stock from net income (loss), the most closely comparable GAAP measure. As described above, OneBeacon believes that adjusted comprehensive net income (loss) is a useful supplement to understanding the company’s earnings and profitability. The reconciliation of comprehensive net income (loss) to adjusted comprehensive net income (loss) is included here.
Adjusted net income (loss) is derived by excluding the impact of economically defeasing the company’s mandatorily redeemable preferred stock from net income (loss), the most closely comparable GAAP measure. As described above, OneBeacon believes that adjusted net income (loss) is a useful supplement to understanding the company’s earnings and profitability. The reconciliation of net income (loss) to adjusted net income (loss) is included here.
Operating income is a non-GAAP financial measure that excludes net realized and unrealized investment gains and losses and the related tax effects from net income (loss). OneBeacon believes that this non-GAAP financial measure provides a useful alternative picture of the underlying operating activities of the company to the GAAP measure of net income (loss), as it removes variability in the timing of investment gains and losses, which may be heavily influenced by investment market conditions. Although key to the company’s overall financial performance, OneBeacon believes that realized and unrealized investment gains and losses are largely independent of the underwriting decision-making process, as well as the activities of its other operations segment. The reconciliation of net income (loss) to operating income is included here.
Adjusted operating income is a non-GAAP financial measure that excludes the impact of economically defeasing the company’s mandatorily redeemable preferred stock from operating income (a non-GAAP financial measure described above). OneBeacon believes that adjusted operating income is a useful supplement to understanding the company’s earnings and profitability. The reconciliation of net income (loss) to adjusted operating income is included here.