White Mountains Insurance Group suffered a drop of almost $200 million in profits for the fourth quarter 2007, despite managing to avoid getting caught up in the sub-prime mortgage crisis.

Net income fell from $299 million for the fourth quarter 2006 to $101 million for the same time last year, while net income for the year was also down from $673 million two years ago compared to $407 million for 2007.

Adjusted comprehensive net income for the fourth quarter of 2007 was $127 million compared to $357 million in the fourth quarter of last year, with adjusted comprehensive net income for last year at $481 million compared to $734 million in 2006. These results reflect favourable weather conditions and strong investment results in all of the periods.

The 2006 results benefited from an after-tax gain of $171 million on the sale of 27.6 percent of OneBeacon through an initial public offering and other after-tax gains of $83 million on the purchase of Mutual Service Casualty Insurance Company, the sale of Sirius America, the sale of OneBeacon's Agri business and settlements of US Federal and state income tax audits.

OneBeacon's pre-tax income for the fourth quarter of 2007 was $83 million compared to $65 million in the fourth quarter of 2006, while the GAAP combined ratio was 93 percent compared with 98 percent, largely down to lower catastrophe losses and favourable development on prior accident year losses.

Meanwhile, net written premiums were $427 million for the fourth quarter, a decrease of one percent from the comparable period of 2006.

Mike Miller, CEO of OneBeacon, said: "OneBeacon closed its first full year as a public company with another strong quarter driven by continued good underwriting results and solid investment returns."

Ray Barrette, chairman and CEO of White Mountains, said: "We had a good year. We avoided the sub-prime mess and continued to generate solid returns in our investment portfolio."

Elsewhere, White Mountains Re's pre-tax income was $80 million for the quarter compared to $106 million, while the GAAP combined ratio was 92 percent compared to 85 percent.

There were no significant catastrophe losses in either the fourth quarter of 2007 or 2006. Pre-tax income for 2007 included $76 million of catastrophe losses, net of re-instatement premiums, primarily due to windstorms Kyrill, Hanno and the UK floods.

Pre-tax income for 2006 included losses on hurricanes Katrina, Rita and Wilma of $223 million, including the Olympus reimbursement.

Meanwhile, Esurance's pre-tax loss was $27 million for the quarter compared to $8 million, while the GAAP combined ratio was 120 percent compared to 109 percent.

The fourth quarter results were impacted by seasonal increases in claims frequency as well as increased loss severity.