wtm-20200807
FALSE0000776867Bermuda1-899394-27084550375500007768672020-08-072020-08-07

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 7, 2020
Date of Report (Date of earliest event reported)

WHITE MOUNTAINS INSURANCE GROUP, LTD.
(Exact name of registrant as specified in its charter)

Bermuda
(State or other jurisdiction of
 incorporation or organization)
1-8993
(Commission file number)
94-2708455
(I.R.S. Employer Identification No.)

23 South Main Street, Suite 3B, Hanover, New Hampshire 03755
(Address of principal executive offices)

(603) 640-2200
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, par value $1.00WTMNew York Stock Exchange
per shareBermuda Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).          Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o



ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On August 7, 2020, White Mountains Insurance Group, Ltd. issued a press release announcing its results for the three and six months ended June 30, 2020. The press release furnished herewith is attached as Exhibit 99.1 to this Form 8-K. Certain information included in the press release constitutes non-GAAP financial measures (as defined in Regulation G of the Securities and Exchange Commission). Specifically, the nine non-GAAP financial measures disclosed in the press release include (i) adjusted book value per share, (ii) gross written premiums and member surplus contributions (“MSC”) from new business, (iii) NSM’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), (iv) NSM’s adjusted EBITDA, (v) NSM’s pro forma adjusted EBITDA, (vi) Kudu’s EBITDA, (vii) Kudu’s adjusted EBITDA, (viii) Kudu’s annualized adjusted EBITDA and (ix) total consolidated portfolio return excluding the MediaAlpha transaction. These non-GAAP financial measures have been reconciled to their most comparable GAAP financial measures.
Adjusted book value per share is a non-GAAP financial measure which is derived by adjusting (i) the GAAP book value per share numerator and (ii) the common shares outstanding denominator, as described below. The GAAP book value per share numerator is adjusted (i) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM surplus notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global. Under GAAP, White Mountains is required to carry the BAM surplus notes, including accrued interest, at nominal value with no consideration for time value of money. Based on a debt service model that forecasts operating results for BAM through maturity of the surplus notes, the present value of the BAM surplus notes, including accrued interest, was estimated to be $151 million, $154 million, $157 million and $140 million less than the nominal GAAP carrying values as of June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019, respectively. The value of HG Global’s unearned premium reserve, net of deferred acquisition costs, was $131 million, $121 million, $119 million and $113 million as of June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019 respectively. White Mountains believes these adjustments are useful to management and investors in analyzing the intrinsic value of HG Global, including the value of the surplus notes and the value of the in-force business at HG Re, HG Global’s reinsurance subsidiary. The denominator used in the calculation of adjusted book value per share equals the number of common shares outstanding adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. Restricted common shares are earned on a straight-line basis over their vesting periods. The reconciliation of GAAP book value per share to adjusted book value per share is included on page 6 of Exhibit 99.1 to this Form 8-K.
Gross written premiums and MSC from new business is a non-GAAP financial measure, which is derived by adjusting gross written premiums and MSC collected (i) to include the present value of future installment MSC not yet collected and (ii) to exclude the impact of gross written premium adjustments related to policies closed in prior periods. White Mountains believes these adjustments are useful to management and investors in evaluating the volume and pricing of new business closed during the period. The reconciliation from GAAP gross written premiums to gross written premiums and MSC from new business is included on page 14 of Exhibit 99.1 to this Form 8-K.
NSM’s EBITDA, adjusted EBITDA and pro forma adjusted EBITDA are non-GAAP financial measures. EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax expense (benefit), depreciation and amortization from GAAP net income (loss). Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) change in fair value of contingent consideration earnout liabilities, (ii) impairments of intangible assets, (iii) acquisition-related transaction expenses, (iv) fair value purchase accounting adjustment for deferred revenue, (v) investments made in the development of new business lines and (vi) restructuring expenses. A description of each follows:
Change in fair value of contingent consideration earnout liabilities - Earnout liabilities are amounts payable to the sellers of businesses purchased by NSM that are contingent on the earnings of such businesses in periods subsequent to their acquisition. Under GAAP, earnout liabilities are initially recorded at fair value as part of purchase accounting, with the periodic change in the fair value of these liabilities recorded as income or an expense.
Impairments of intangible assets - Represents expense related to NSM’s write-off of intangible assets. For the periods presented, the impairments related primarily to NSM’s write-off of intangible assets in its U.K. vertical. The impairments related to lower premium volumes, including due to the impact of the COVID-19 pandemic, and certain reorganization initiatives in the U.K. vertical.
Acquisition-related transaction expenses - Represents costs directly related to NSM’s transactions to acquire businesses, such as transaction-related compensation, banking, accounting and external lawyer fees, which are not capitalized and are expensed under GAAP.
Fair value purchase accounting adjustment for deferred revenue - Represents the amount of deferred revenue that had already been collected but subsequently written down in connection with establishing the fair value of deferred revenue as part of NSM’s purchase accounting for Embrace Pet Insurance.

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Investments made in the development of new business lines - Represents the net loss related to the start-up of newly established lines of business, which NSM views as investments. For the periods presented, this adjustment relates primarily to NSM’s investment expenditures, net of revenues generated, in the organic development of (i) its pet insurance line and (ii) its MGA in the United Kingdom. In 2019, NSM decided to cease investment in the organic development of its pet insurance line and, instead, to acquire Embrace Pet Insurance.
Restructuring expenses - Represents expenses associated with eliminating redundant work force and facilities that often arise as a result of NSM’s post-acquisition integration strategies.
Pro forma adjusted EBITDA is a non-GAAP financial measure that starts with adjusted EBITDA and also includes the earnings of acquired businesses for the period of time over the previous twelve months that the businesses were not owned by White Mountains. White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating NSM’s performance. White Mountains also believes that pro forma adjusted EBITDA is useful to management and investors to demonstrate the earnings profile of NSM’s business as of the end of the period for a full 12 month period. See page 15 of Exhibit 99.1 to this Form 8-K for the reconciliation of NSM’s GAAP net income (loss) to EBITDA, adjusted EBITDA and pro forma adjusted EBITDA.
Kudu's EBITDA, adjusted EBITDA and annualized adjusted EBITDA are non-GAAP financial measures. EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax expense (benefit), depreciation and amortization of other intangible assets from GAAP net income (loss). Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) net unrealized investment (gains) losses on Kudu’s revenue and earnings participation contracts, (ii) non-cash equity-based compensation expense and (iii) acquisition-related transaction expenses. A description of each adjustment follows:
Net unrealized investment (gains) losses - Represents net unrealized investment gains and losses recorded on Kudu's revenue and earnings participation contracts, which are recorded at fair value under GAAP.
Non-cash equity based compensation expense Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.
Acquisition-related transaction expenses - Represents costs directly related to Kudu's transactions to acquire revenue and earnings participation contracts, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.
Annualized adjusted EBITDA is a non-GAAP financial measure that annualizes revenues related to Kudu's earnings and revenue participation contracts that were in place as of the end of the 12 month period but were not in effect for the full 12 month period. The amount added was calculated on a contract-by-contract basis by annualizing the revenues received for the partial 12 month period. For example, if a participation contract was in effect for four months, the amount added equals twice that amount. White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating Kudu’s performance. White Mountains also believes that annualized adjusted EBITDA is useful to management and investors to demonstrate the earnings profile of Kudu’s business as of the end of the period for a full 12 month period. See page 16 of Exhibit 99.1 to this Form 8-K for the reconciliation of Kudu’s GAAP net income (loss) to EBITDA, adjusted EBITDA and annualized adjusted EBITDA.
Total consolidated portfolio return excluding the MediaAlpha Transaction is a non-GAAP financial measure that removes the $115 million pre-tax unrealized investment gain resulting from the MediaAlpha Transaction recognized in the first six months of 2019. White Mountains believes this measure to be useful to management and investors by making the return in the prior period comparable to the current period. A reconciliation from GAAP to the reported percentage is as follows:
For the Six Months Ended June 30, 2019
GAAP ReturnRemove MediaAlpha TransactionReturn - Excluding MediaAlpha Transaction
Total consolidated portfolio returns12.4 %(4.5)%7.9 %


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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

99.1 Press Release of White Mountains Insurance Group, Ltd. dated August 7, 2020, furnished herewith.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WHITE MOUNTAINS INSURANCE GROUP, LTD.
August 7, 2020By:
/s/   J. BRIAN PALMER    
       J. Brian Palmer
      Managing Director and
       Chief Accounting Officer

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Document
Exhibit 99.1
https://cdn.kscope.io/60586464971b7996bbae3e12bdb786b4-image11.jpg
CONTACT: Todd Pozefsky
(203) 458-5807

WHITE MOUNTAINS REPORTS SECOND QUARTER RESULTS

HAMILTON, Bermuda (August 7, 2020) - White Mountains Insurance Group, Ltd. (NYSE: WTM) reported book value per share of $1,021 and adjusted book value per share of $1,022 as of June 30, 2020. Book value per share and adjusted book value per share both increased approximately 4% in the second quarter of 2020. Book value per share decreased 0.2% and adjusted book value per share increased 0.4% in the first six months of 2020, including dividends.

Manning Rountree, CEO, commented, “We had a good second quarter. ABVPS increased 4% to $1,022, driven primarily by a 6.5% return on our investment portfolio. BAM wrote $43 million of direct premiums and member surplus contributions, its biggest quarter ever, driven by robust demand for insurance and higher pricing. NSM saw 2% organic growth in controlled premiums, quarter over quarter, and closed the Kingsbridge acquisition in April. Kudu enjoyed a strong quarter, benefiting from the rebound in investment markets and closing the Sequoia transaction in June. MediaAlpha had another excellent quarter, driven by strong performance in its insurance verticals. At PassportCard/DavidShield, the global slowdown in travel activity has caused a significant decline in premiums and revenues; in May we invested $15 million to support operations and to continue global expansion. During the quarter, we repurchased $31 million of shares at an average price of $887. We ended the quarter with $0.8 billion of undeployed capital and ample liquidity.”

Comprehensive income (loss) attributable to common shareholders was $116 million and $(17) million in the second quarter and first six months of 2020, compared to comprehensive income attributable to common shareholders of $18 million and $302 million in the second quarter and first six months of 2019. The
results in the first six months of 2019 include $182 million of realized and unrealized gains from MediaAlpha’s sale of a significant minority stake to Insignia Capital Group on February 26, 2019 (the “MediaAlpha Transaction”).

HG Global/BAM

BAM’s gross written premiums and member surplus contributions (MSC) collected were $43 million and $63 million in the second quarter and first six months of 2020, compared to $25 million and $40 million in the second quarter and first six months of 2019. BAM insured municipal bonds with par value of $4.1 billion and $7.1 billion in the second quarter and first six months of 2020, compared to $2.9 billion and $4.8 billion in the second quarter and first six months of 2019. Total pricing was 105 and 89 basis points in the second quarter and first six months of 2020, compared to 84 and 83 basis points in the second quarter and first six months of 2019. BAM’s total claims paying resources were $957 million at June 30, 2020, compared to $938 million at December 31, 2019 and $895 million at June 30, 2019.



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Seán McCarthy, CEO of BAM, said, “BAM had a strong quarter. Institutional and retail investor concerns about credit volatility drove robust demand for insurance and expanded our opportunities to insure higher-quality bonds. This was evident in both the primary market, which reopened in April and experienced increased insured penetration, and the secondary market, which was highly active. The COVID-19 pandemic is negatively impacting the finances of municipalities to varying degrees, and, over time, financial stress could emerge. We continue to monitor the finances of our member issuers and are working proactively to make sure they are prepared for any pandemic-related revenue losses. BAM’s existing credit portfolio is of high quality and structured to be resilient during economic slowdowns; all BAM-insured bond payments due through August 1 have been made by insureds. Also, in late June, S&P Global Ratings affirmed BAM’s “AA/stable” rating.”

HG Global reported pre-tax income of $20 million and $32 million in the second quarter and first six months of 2020, compared to pre-tax income of $15 million and $31 million and in the second quarter and first six months of 2019. The increases were driven primarily by higher investment returns. White Mountains reported pre-tax loss related to BAM of $9 million and $19 million in the second quarter and first six months of 2020, compared to pre-tax loss related to BAM of $7 million and $17 million in the second quarter and first six months of 2019.

BAM is a mutual insurance company that is owned by its members.  BAM’s results are consolidated into White Mountains’s GAAP financial statements and attributed to non-controlling interests.

NSM

NSM reported pre-tax loss of $4 million, adjusted EBITDA of $18 million, and commission and other revenues of $76 million in the second quarter of 2020, compared to pre-tax income of $1 million, adjusted EBITDA of $16 million, and commission and other revenues of $66 million in the second quarter of 2019. Results for the second quarter of 2020 include the results of Kingsbridge Group Limited, a leading provider of commercial lines insurance and consulting services to the contingent workforce in the U.K. Kingsbridge was acquired on April 7, 2020. NSM reported pre-tax loss of $5 million, adjusted EBITDA of $29 million, and commission and other revenues of $141 million in the first six months of 2020, compared to pre-tax loss of $1 million, adjusted EBITDA of $26 million, and commission and other revenues of $115 million in the first six months of 2019.

Geof McKernan, CEO of NSM, said, “NSM had a sound second quarter despite the challenging environment. Trailing 12 months pro forma controlled premiums crossed the $1.0 billion threshold for the first time ever, reflecting both the Kingsbridge acquisition and 2% organic growth in our existing verticals. Pro forma adjusted EBITDA was $57 million, reflecting both the Kingsbridge acquisition and flat results in our existing verticals, as we continue to invest for growth. We saw significant growth in certain U.S. verticals, including pet and real estate, offset by a decline in the U.K. vertical.”

Kudu

Kudu reported pre-tax income of $18 million and adjusted EBITDA of $4 million in the second quarter of 2020, compared to pre-tax income of $2 million and adjusted EBITDA of $3 million in the second quarter of 2019. Pre-tax income in the second quarter of 2020 included a $17 million unrealized gain on Kudu’s participation contracts, reflecting the impact of the market rebound on Kudu’s underlying asset management businesses. Kudu reported pre-tax loss of $4 million and adjusted EBITDA of $9 million in the first six months of 2020. Pre-tax loss in the first six months of 2020 included an $8 million unrealized loss on Kudu’s participation contracts, reflecting the impact of the market dislocation from the COVID-19 pandemic in the first quarter of 2020 on Kudu’s underlying asset management businesses.

In the second quarter of 2020, Kudu deployed $37 million in Sequoia Financial Group, LLC, a registered investment advisor with $4.7 billion in client assets. As of June 30, 2020, Kudu has deployed a total of $324 million in 11 asset management firms with combined assets under management of approximately $38 billion, spanning a range of asset classes, including real estate, real assets, wealth management, hedge funds, private equity and alternative credit strategies.
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Rob Jakacki, CEO of Kudu, said, “Kudu’s diversified portfolio has proven resilient through a period of uncertainty in global markets. We were pleased to close our investment in Sequoia, a wealth manager with an impressive platform, and we are excited to partner with the firm to support its growth. We have now deployed $324 million across 11 firms with an average cash yield to Kudu at inception of 10.2%. Our model of providing tailored permanent capital solutions to asset and wealth managers has broad appeal, and our pipeline is strong.”

Other Operations

White Mountains’s Other Operations segment reported pre-tax income (loss) of $107 million and $(37) million in the second quarter and first six months of 2020, compared to pre-tax income of $5 million and $288 million in the second quarter first six months of 2019. Net realized and unrealized investment gains (losses) were $122 million and $(16) million in the second quarter and first six months of 2020, compared to net realized and unrealized investment gains of $23 million and $142 million in the second quarter and first six months of 2019. Pre-tax income for the first six months of 2019 also included $182 million of gains from the MediaAlpha Transaction, which consisted of $67 million of realized gains and $115 million of unrealized investment gains. General and administrative expenses were $25 million and $43 million in the second quarter and first six months of 2020, compared to $30 million and $60 million in the second quarter and first six months of 2019. The decreases were driven primarily by lower incentive compensation costs.

Share Repurchases

In the second quarter of 2020, White Mountains repurchased and retired 34,684 of its common shares for $31 million at an average share price of $886.70, or 87% of White Mountains’s June 30, 2020 adjusted book value per share. In the first six months of 2020, White Mountains repurchased and retired 99,087 of its common shares for $85 million at an average share price of $858.81, or 84% of White Mountains’s June 30, 2020 adjusted book value per share.

Investments

The total return on invested assets was 6.5% in the second quarter of 2020 compared to 2.0% in the second quarter of 2019. The total return on invested assets was 1.7% in the first six months of 2020 compared to 12.4% in the first six months of 2019, which included $115 million of unrealized investment gains from the MediaAlpha Transaction. Excluding the MediaAlpha Transaction, the total return on invested assets was 7.9% in the first six months of 2019.

Mark Plourde, Managing Director of White Mountains Advisors, said, "The total portfolio was up 6.5%; a strong result, driven by the rebound in equity markets during the quarter. Our portfolio of common stocks and ETFs returned 19.2%, just behind the S&P 500 return of 20.5%. Other long-term investments returned 4.0%, which included a $17 million increase in the fair value of Kudu’s participation contracts and a $15 million increase in the fair value of our investment in MediaAlpha. Fixed income returned 2.8%, ahead of the BBIA Index return of 2.1%.”

Additional Information

White Mountains is a Bermuda-domiciled financial services holding company traded on the New York Stock Exchange and the Bermuda Stock Exchange under the symbol WTM. Additional financial information and other items of interest are available at the company’s website located at www.whitemountains.com. White Mountains expects to file its Form 10-Q today with the Securities and Exchange Commission and urges shareholders to refer to that document for more complete information concerning its financial results.
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WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(Unaudited)
June 30,
2020
December 31,
2019
June 30,
2019
Assets 
   Financial Guarantee (HG Global/BAM)
     Fixed maturity investments$821.7  $799.3  $762.9  
     Short-term investments54.7  46.3  34.8  
Total investments876.4  845.6  797.7  
     Cash 32.0  24.2  10.3  
     Insurance premiums receivable7.3  6.7  6.6  
     Deferred acquisition costs25.0  22.1  20.5  
     Accrued investment income5.2  5.4  5.3  
     Accounts receivable on unsettled investment sales—  3.9  8.0  
     Other assets 14.6  16.1  16.1  
Total Financial Guarantee assets960.5  924.0  864.5  
Specialty Insurance Distribution (NSM)
     Short-term investments—  —  .2  
     Cash (restricted $96.3, $56.3 and $88.8)140.5  89.7  119.7  
Premium and commission receivable76.7  70.8  57.6  
     Goodwill and other intangible assets728.6  623.0  636.8  
     Other assets55.1  41.7  36.8  
Total Specialty Insurance Distribution assets1,000.9  825.2  851.1  
Asset Management (Kudu)
Short-term investments.1  .1  .1  
Other long-term investments315.6  266.5  142.2  
Total investments315.7  266.6  142.3  
Cash5.9  5.8  2.7  
Accrued investment income5.6  5.8  2.7  
Goodwill and other intangible assets9.4  9.6  9.8  
Other assets2.7  2.7  2.9  
Total Asset Management assets339.3  290.5  160.4  
   Other Operations
     Fixed maturity investments369.9  406.5  346.5  
     Short-term investments62.8  154.8  152.0  
     Common equity securities567.2  683.9  709.2  
     Other long-term investments582.5  589.8  522.2  
Total investments1,582.4  1,835.0  1,729.9  
     Cash32.9  41.3  17.6  
     Accrued investment income4.0  5.7  5.4  
     Accounts receivable on unsettled investment sales23.4  5.1  72.8  
     Goodwill and other intangible assets21.9  22.1  21.0  
     Other assets32.0  31.3  26.7  
     Assets held for sale3.0  3.0  2.8  
Total Other Operations assets1,699.6  1,943.5  1,876.2  
Total assets$4,000.3  $3,983.2  $3,752.2  




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WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(millions)
(Unaudited)
June 30,
2020
December 31,
2019
June 30,
2019
Liabilities
   Financial Guarantee (HG Global/BAM)
     Unearned insurance premiums$218.6  $198.4  $187.8  
     Accrued incentive compensation14.1  21.7  14.5  
     Accounts payable on unsettled investment purchases3.0  —  —  
     Other liabilities27.3  26.7  27.4  
Total Financial Guarantee liabilities263.0  246.8  229.7  
Specialty Insurance Distribution (NSM)
Debt268.4  219.2  219.7  
Premiums payable139.7  102.3  118.7  
Contingent consideration earnout liabilities11.7  20.6  30.9  
     Other liabilities81.1  59.0  56.1  
Total Specialty Insurance Distribution liabilities500.9  401.1  425.4  
Asset Management (Kudu)
Debt70.8  53.6  —  
Other liabilities6.5  3.4  3.5  
Total Asset Management liabilities77.3  57.0  3.5  
   Other Operations
Debt10.6  10.7  10.8  
Accrued incentive compensation18.9  55.1  36.8  
Other liabilities66.3  67.8  38.1  
Total Other Operations liabilities95.8  133.6  85.7  
Total liabilities937.0  838.5  744.3  
Equity
White Mountains’s common shareholder’s equity
     White Mountains’s common shares and paid-in surplus587.0  596.3  590.5  
     Retained earnings2,589.3  2,672.4  2,562.8  
Accumulated other comprehensive loss, after tax:
  Net unrealized foreign currency translation losses and interest rate swap(10.3) (7.2) (9.0) 
Total White Mountains’s common shareholders’ equity3,166.0  3,261.5  3,144.3  
Non-controlling interests(102.7) (116.8) (136.4) 
Total equity3,063.3  3,144.7  3,007.9  
Total liabilities and equity$4,000.3  $3,983.2  $3,752.2  

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WHITE MOUNTAINS INSURANCE GROUP, LTD.
BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE
(Unaudited)
 June 30,
2020
March 31,
2020
December 31,
2019
June 30,
2019
Book value per share numerators (in millions):
White Mountains’s common shareholders’ equity -
GAAP book value per share numerator
$3,166.0  $3,076.7  $3,261.5  $3,144.3  
Time value of money discount on expected future payments on the
  BAM Surplus Notes (1)
(146.7) (149.2) (151.6) (135.7) 
HG Global’s unearned premium reserve (1)
173.8  160.5  156.7  147.2  
HG Global’s net deferred acquisition costs (1)
(47.0) (42.9) (41.5) (37.9) 
Adjusted book value per share numerator$3,146.1  $3,045.1  $3,225.1  $3,117.9  
Book value per share denominators (in thousands of shares):
Common shares outstanding - GAAP book value per share denominator3,101.8  3,135.0  3,185.4  3,185.4  
Unearned restricted common shares(23.1) (26.9) (18.5) (24.5) 
Adjusted book value per share denominator3,078.7  3,108.1  3,166.9  3,160.9  
GAAP book value per share$1,020.71  $981.39  $1,023.91  $987.12  
Adjusted book value per share$1,021.91  $979.74  $1,018.41  $986.39  
(1) Amount reflects White Mountains's preferred share ownership in HG Global of 96.9%.
June 30,
2020
March 31,
2020
December 31,
2019
June 30,
2019
Quarter-to-date change in GAAP book value per share,
including dividends:
4.0 %(4.1)%2.1 %0.6 %
Quarter-to-date change in adjusted book value per share,
including dividends:
4.3 %(3.7)%1.4 %0.8 %
Year-to-date change in GAAP book value per share,
including dividends:
(0.2)%(4.1)%14.4 %10.3 %
Year-to-date change in adjusted book value per share,
including dividends:
0.4 %(3.7)%14.8 %11.2 %
Year-to-date dividends per share$1.00  $1.00  $1.00  $1.00  
June 30,
2020
March 31,
2020
December 31,
2019
June 30,
2019
Summary of goodwill and other intangible assets (in millions):
Goodwill:
NSM $504.9  
(1)
$379.1  $381.6  $398.4  
(2)
Kudu7.6  7.6  7.6  9.8  
(2)
Other Operations5.7  5.7  5.5  20.4  
Total goodwill518.2  392.4  394.7  428.6  
Other intangible assets:
NSM223.7  236.1  241.4  238.4  
Kudu1.8  1.9  2.0  —  
Other Operations16.2  16.4  16.6  .6  
Total other intangible assets241.7  254.4  260.0  239.0  
Total goodwill and other intangible assets759.9  646.8  654.7  667.6  
Goodwill and other intangible assets attributed to
non-controlling interests
(25.9) (23.5) (23.4) (25.4) 
Goodwill and other intangible assets included in
White Mountains’s common shareholders’ equity
$734.0  $623.3  $631.3  $642.2  
(1) The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisition of Kingsbridge had not yet been finalized at June 30, 2020.
(2) The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisition of Embrace and the Kudu transaction had not yet been finalized at June 30, 2019.



6


WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions)
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues:
   Financial Guarantee (HG Global/BAM)
     Earned insurance premiums$5.6  $4.3  $11.0  $8.5  
     Net investment income4.9  5.4  10.4  10.7  
     Net realized and unrealized investment gains14.4  11.5  20.5  23.3  
     Other revenues1.2  .4  1.7  1.0  
Total Financial Guarantee revenues26.1  21.6  43.6  43.5  
Specialty Insurance Distribution (NSM)
Commission revenues63.0  54.9  116.0  98.2  
Other revenues13.1  11.2  25.1  17.2  
Total Specialty Insurance Distribution revenues76.1  66.1  141.1  115.4  
Asset Management (Kudu)
Net investment income5.6  4.0  12.9  4.0  
Net realized and unrealized investment gains (losses)16.5  .4  (8.3) .4  
Other revenues—  —  .1  —  
Total Asset Management revenues22.1  4.4  4.7  4.4  
(1)
   Marketing Technology (MediaAlpha)
     Advertising and commission revenues—  —  —  48.8  
Total Marketing Technology revenues—  —  —  48.8  
(2)
   Other Operations
     Net investment income9.1  11.6  19.2  22.3  
     Net realized and unrealized investment gains (losses)122.0  23.3  (16.0) 142.4  
  Realized gain and unrealized investment gain from the
MediaAlpha Transaction
—  —  —  182.2  
     Advertising and commission revenues1.9  1.3  4.0  2.6  
     Other revenues2.3  .7  3.8  1.0  
Total Other Operations revenues135.3  36.9  11.0  350.5  
Total revenues$259.6  $129.0  $200.4  $562.6  

(1) Kudu's results are from April 4, 2019, the date White Mountains began consolidating Kudu, to June 30, 2019.
(2) MediaAlpha’s results are from January 1, 2019 to February 26, 2019, the date of the MediaAlpha Transaction.
7


WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(millions)
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Expenses:
Financial Guarantee (HG Global/BAM)
Insurance acquisition expenses$2.1  $1.4  $3.8  $2.7  
     Other underwriting expenses
.2  .1  .2  .2  
General and administrative expenses12.5  12.3  27.2  26.6  
Total Financial Guarantee expenses14.8  13.8  31.2  29.5  
Specialty Insurance Distribution (NSM)
General and administrative expenses48.5  32.8  88.1  58.1  
Broker commission expenses21.0  18.1  39.3  33.6  
Change in fair value of contingent consideration
earnout liabilities
(1.7) 6.3  (2.3) 7.6  
Amortization of other intangible assets6.3  4.1  11.1  9.1  
Interest expense5.7  4.1  10.0  7.8  
Total Specialty Insurance Distribution expenses79.8  65.4  146.2  116.2  
Asset Management (Kudu)
General and administrative expenses2.8  2.2  5.3  2.2  
Amortization of other intangible assets.1  —  .2  —  
Interest expense1.5  —  2.9  —  
Total Asset Management expenses4.4  2.2  8.4  2.2  
(1)
Marketing Technology (MediaAlpha)
Cost of sales—  —  —  40.6  
General and administrative expenses—  —  —  12.5  
Amortization of other intangible assets—  —  —  1.6  
Interest expense—  —  —  .2  
Total Marketing Technology expenses—  —  —  54.9  
(2)
Other Operations
Cost of sales2.2  1.6  4.2  2.7  
General and administrative expenses25.3  30.1  42.8  59.5  
Amortization of other intangible assets.2  .1  .4  .1  
Interest expense.2  —  .5  —  
Total Other Operations expenses27.9  31.8  47.9  62.3  
Total expenses126.9  113.2  233.7  265.1  
Pre-tax income (loss) from continuing operations132.7  15.8  (33.3) 297.5  
Income tax (expense) benefit (24.1) .1  1.4  (10.1) 
Net income (loss) from continuing operations108.6  15.9  (31.9) 287.4  
Net (loss) income from sale of discontinued operations,
net of tax
(1.0) —  (.1) .7  
Net income (loss) 107.6  15.9  (32.0) 288.1  
Net loss attributable to non-controlling interests7.8  4.6  18.6  16.8  
Net income (loss) attributable to
White Mountains’s common shareholders
$115.4  $20.5  $(13.4) $304.9  
(1) Kudu's results are from April 4, 2019, the date White Mountains began consolidating Kudu, to June 30, 2019.
(2) MediaAlpha’s results are from January 1, 2019 to February 26, 2019, the date of the MediaAlpha Transaction.
8


WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(millions)
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net income (loss) attributable to
White Mountains’s common shareholders
$115.4  $20.5  $(13.4) $304.9  
Other comprehensive income (loss), net of tax.5  (3.1) (2.9) (3.4) 
Comprehensive income (loss)115.9  17.4  (16.3) 301.5  
Other comprehensive (income) loss attributable to non-controlling interests(.2) .2  (.2) .2  
Comprehensive income (loss) attributable to White Mountains’s
common shareholders
$115.7  $17.6  $(16.5) $301.7  




WHITE MOUNTAINS INSURANCE GROUP, LTD.
EARNINGS PER SHARE
(Unaudited)

Income (loss) per share attributable to White Mountains’s common shareholdersThree Months Ended June 30,Six Months Ended June 30,
2020201920202019
Basic earnings (loss) per share
Continuing operations$37.46  $6.44  $(4.25) $95.71  
Discontinued operations(.32) —  (.03) .22  
Total consolidated operations$37.14  $6.44  $(4.28) $95.93  
Diluted earnings (loss) per share
Continuing operations$37.46  $6.44  $(4.25) $95.71  
Discontinued operations(.32) —  (.03) .22  
Total consolidated operations$37.14  $6.44  $(4.28) $95.93  
Dividends declared per White Mountains’s common share$—  $—  $1.00  $1.00  

9


WHITE MOUNTAINS INSURANCE GROUP, LTD.
QTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS)
(millions)
(Unaudited)


For the Three Months Ended June 30, 2020HG Global/BAM
HG GlobalBAMNSMKuduOther OperationsTotal
Revenues:
Earned insurance premiums$4.6  $1.0  $—  $—  $—  $5.6  
Net investment income2.0  2.9  —  5.6  9.1  19.6  
Net investment income (expense) -
BAM surplus note interest
4.7  (4.7) —  —  —  —  
Net realized and unrealized investment gains10.7  3.7  —  16.5  122.0  152.9  
Advertising and commission revenues—  —  63.0  —  1.9  64.9  
Other revenues.1  1.1  13.1  —  2.3  16.6  
Total revenues22.1  4.0  76.1  22.1  135.3  259.6  
Expenses:
Insurance acquisition expenses1.2  .9  —  —  —  2.1  
Other underwriting expenses—  .2  —  —  —  .2  
Cost of sales—  —  —  —  2.2  2.2  
General and administrative expenses.5  12.0  48.5  2.8  25.3  89.1  
Broker commission expenses—  —  21.0  —  —  21.0  
Change in fair value of contingent consideration
earnout liabilities
—  —  (1.7) —  —  (1.7) 
Amortization of other intangible assets—  —  6.3  .1  .2  6.6  
Interest expense—  —  5.7  1.5  .2  7.4  
Total expenses1.7  13.1  79.8  4.4  27.9  126.9  
Pre-tax income (loss)$20.4  $(9.1) $(3.7) $17.7  $107.4  $132.7  


10


WHITE MOUNTAINS INSURANCE GROUP, LTD.
QTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS) (CONTINUED)
(millions)
(Unaudited)


For the Three Months Ended June 30, 2019HG Global/BAM
HG GlobalBAMNSMKuduOther OperationsTotal
Revenues:
Earned insurance premiums$3.4  $.9  $—  $—  $—  $4.3  
Net investment income1.9  3.5  —  4.0  11.6  21.0  
Net investment income (expense) -
BAM surplus note interest
6.8  (6.8) —  —  —  —  
Net realized and unrealized investment gains4.0  7.5  —  .4  23.3  35.2  
Advertising and commission revenues—  —  54.9  —  1.3  56.2  
Other revenues—  .4  11.2  —  .7  12.3  
Total revenues16.1  5.5  66.1  4.4  36.9  129.0  
Expenses:
Insurance acquisition expenses.9  .5  —  —  —  1.4  
Other underwriting expenses—  .1  —  —  —  .1  
Cost of sales—  —  —  —  1.6  1.6  
General and administrative expenses.4  11.9  32.8  2.2  30.1  77.4  
Broker commission expenses—  —  18.1  —  —  18.1  
Change in fair value of contingent consideration
earnout liabilities
—  —  6.3  —  —  6.3  
Amortization of other intangible assets—  —  4.1  —  .1  4.2  
Interest expense—  —  4.1  —  —  4.1  
Total expenses1.3  12.5  65.4  2.2  31.8  113.2  
Pre-tax income (loss)$14.8  $(7.0) $.7  $2.2  $5.1  $15.8  

11





WHITE MOUNTAINS INSURANCE GROUP, LTD.
YTD SEGMENT STATEMENTS OF PRE-TAX INCOME (LOSS)
(millions)
(Unaudited)


For the Six Months Ended June 30, 2020HG Global/BAM
HG GlobalBAMNSMKuduOther OperationsTotal
Revenues:
Earned insurance premiums$9.0  $2.0  $—  $—  $—  $11.0  
Net investment income4.3  6.1  —  12.9  19.2  42.5  
Net investment income (expense) -
BAM surplus note interest
9.5  (9.5) —  —  —  —  
Net realized and unrealized investment gains (loss)12.1  8.4  —  (8.3) (16.0) (3.8) 
Advertising and commission revenues—  —  116.0  —  4.0  120.0  
Other revenue.1  1.6  25.1  .1  3.8  30.7  
Total revenues35.0  8.6  141.1  4.7  11.0  200.4  
Expenses:
Insurance acquisition expenses2.2  1.6  —  —  —  3.8  
Other underwriting expenses—  .2  —  —  —  .2  
Cost of sales—  —  —  —  4.2  4.2  
General and administrative expenses1.0  26.2  88.1  5.3  42.8  163.4  
Broker commission expenses—  —  39.3  —  —