SEC Filing | White Mountains Insurance Group

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8993

WHITE MOUNTAINS INSURANCE GROUP, LTD.

(Exact name of Registrant as specified in its charter)



Bermuda
(State or other jurisdiction of incorporation or organization)		94-2708455
23 South Main Street, Suite 3B		(I.R.S. Employer Identification No.)
Hanover,		03755-2053
New Hampshire		(Zip Code)
(Address of principal executive offices)

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $1.00	WTM	New York Stock Exchange
per share		Bermuda Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer		☐	Non-accelerated filer		☐
Smaller reporting company			☐	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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of August 5, 2020, 3,101,761 common shares with a par value of $1.00 per share were outstanding (which includes 43,105 restricted common shares that were not vested at such date).

WHITE MOUNTAINS INSURANCE GROUP, LTD.

Table of Contents



		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets, June 30, 2020 and December 31, 2019	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Six Months Ended June 30, 2020 and 2019	3

	Consolidated Statements of Changes in Equity,	6
	Three and Six Months Ended June 30, 2020 and 2019

	Consolidated Statements of Cash Flows, Six Months Ended June 30, 2020 and 2019	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48

	Results of Operations for the Three and Six Months Ended June 30, 2020 and 2019	48

	Liquidity and Capital Resources	69

	Non-GAAP Financial Measures	75

	Critical Accounting Estimates	77

	Forward-Looking Statements	81

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81

Item 4.	Controls and Procedures	81

PART II.	OTHER INFORMATION	82

Items 1 through 6.		82

SIGNATURES		83

Part I.FINANCIAL INFORMATION.


Item 1.	Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS



	June 30, 2020		December 31, 2019
Millions, except share and per share amounts	June 30, 2020		December 31, 2019
Assets	Unaudited
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	821.7	$	799.3
Short-term investments, at fair value	54.7		46.3
Total investments	876.4		845.6
Cash	32.0		24.2
Insurance premiums receivable	7.3		6.7
Deferred acquisition costs	25.0		22.1
Accrued investment income	5.2		5.4
Accounts receivable on unsettled investment sales	—		3.9
Other assets	14.6		16.1
Total Financial Guarantee assets	960.5		924.0

Specialty Insurance Distribution (NSM)
Cash (restricted $96.3 and $56.3)	140.5		89.7
Premiums and commissions receivable	76.7		70.8
Goodwill and other intangible assets	728.6		623.0
Other assets	55.1		41.7
Total Specialty Insurance Distribution assets	1,000.9		825.2

Asset Management (Kudu)
Short-term investments, at fair value	.1		.1
Other long-term investments	315.6		266.5
Total investments	315.7		266.6
Cash	5.9		5.8
Accrued investment income	5.6		5.8
Goodwill and other intangible assets	9.4		9.6
Other assets	2.7		2.7
Total Asset Management assets	339.3		290.5

Other Operations
Fixed maturity investments, at fair value	369.9		406.5
Short-term investments, at fair value	62.8		154.8
Common equity securities, at fair value	567.2		683.9
Other long-term investments	582.5		589.8
Total investments	1,582.4		1,835.0
Cash	32.9		41.3
Accrued investment income	4.0		5.7
Accounts receivable on unsettled investment sales	23.4		5.1
Goodwill and other intangible assets	21.9		22.1
Other assets	32.0		31.3
Assets held for sale	3.0		3.0
Total Other Operations assets	1,699.6		1,943.5
Total assets	$	4,000.3	$	3,983.2

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)



	June 30, 2020			December 31, 2019
Millions, except share and per share amounts	June 30, 2020			December 31, 2019
Liabilities	Unaudited
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	218.6		$	198.4
Accrued incentive compensation	14.1			21.7
Accounts payable on unsettled investment purchases	3.0			—
Other liabilities	27.3			26.7
Total Financial Guarantee liabilities	263.0			246.8

Specialty Insurance Distribution (NSM)
Debt	268.4			219.2
Premiums payable	139.7			102.3
Contingent consideration earnout liabilities	11.7			20.6
Other liabilities	81.1			59.0
Total Specialty Insurance Distribution liabilities	500.9			401.1

Asset Management (Kudu)
Debt	70.8			53.6
Other liabilities	6.5			3.4
Total Asset Management liabilities	77.3			57.0

Other Operations
Debt	10.6			10.7
Accrued incentive compensation	18.9			55.1
Other liabilities	66.3			67.8
Total Other Operations liabilities	95.8			133.6
Total liabilities	937.0			838.5

Equity
White Mountains’s common shareholders’ equity
White Mountains’s common shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 3,101,761 and 3,185,353 shares and paid-in surplus	587.0			596.3
Paid-in surplus
Retained earnings	2,589.3			2,672.4
Accumulated other comprehensive loss, after-tax:
Net unrealized foreign currency translation and interest rate swap losses	(10.3		)	(7.2		)
Total White Mountains’s common shareholders’ equity	3,166.0			3,261.5
Non-controlling interests	(102.7		)	(116.8		)
Total equity	3,063.3			3,144.7
Total liabilities and equity	$	4,000.3		$	3,983.2

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended June 30,		Six Months Ended June 30,
Millions	2020	2019	2020	2019
Revenues: