SEC Filing | White Mountains Insurance Group

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wtm-20220630

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, 2022

☐ 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 ý 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

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 4, 2022, 2,906,994 common shares with a par value of $1.00 per share were outstanding (which includes 38,350 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 , 2022 and December 31, 2021	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Six Months Ended June 30, 2022 and 2021	3

	Consolidated Statements of Changes in Equity,	6
	Three and Six Months Ended June 30, 2022 and 2021

	Consolidated Statements of Cash Flows, Six Months Ended June 30 , 2022 and 2021	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 , 2022 and 2021	48

	Liquidity and Capital Resources	70

	Non-GAAP Financial Measures	75

	Critical Accounting Estimates	77

	Forward-Looking Statements	78

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78

Item 4.	Controls and Procedures	79

PART II.	OTHER INFORMATION	79

Items 1 through 6.		79

SIGNATURES		80

Part I.FINANCIAL INFORMATION.

Item 1.Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2022		December 31, 2021
Millions, except share and per share amounts
Assets
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	884.4	$	934.1
Short-term investments, at fair value	55.3		32.4
Total investments	939.7		966.5
Cash	21.6		19.8
Insurance premiums receivable	6.9		6.9
Deferred acquisition costs	33.9		33.1


Other assets	19.7		18.5
Total Financial Guarantee assets	1,021.8		1,044.8
P&C Insurance and Reinsurance (Ark)
Fixed maturity investments, at fair value	739.3		688.6
Common equity securities, at fair value	278.6		251.1
Short-term investments, at fair value	101.2		296.2
Other long-term investments	330.0		326.2
Total investments	1,449.1		1,562.1
Cash	214.6		67.8
Reinsurance recoverables	398.7		448.4
Insurance premiums receivable	894.8		416.0
Ceded unearned premiums	105.4		67.1
Deferred acquisition costs and value of in-force business acquired	192.4		108.2

Goodwill and other intangible assets	292.5		292.5
Other assets	67.9		64.9
Total P&C Insurance and Reinsurance assets	3,615.4		3,027.0
Asset Management (Kudu)

Other long-term investments	727.0		669.5

Cash (restricted $7.3 and $4.5)	124.1		21.4
Accrued investment income	11.2		16.9
Goodwill and other intangible assets	8.7		8.9
Other assets	10.4		10.4
Total Asset Management assets	881.4		727.1







Other Operations
Fixed maturity investments, at fair value	243.0		286.2
Short-term investments, at fair value	88.6		129.5

Investment in MediaAlpha, at fair value	166.9		261.6
Other long-term investments	411.7		382.1
Total investments	910.2		1,059.4
Cash	23.1		38.7



Goodwill and other intangible assets	96.8		39.1
Other assets	114.4		59.5
Assets held for sale - NSM Group	997.8		989.0
Assets held for sale - Other	—		16.1
Total Other Operations assets	2,142.3		2,201.8
Total assets	$	7,660.9	$	7,000.7

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Unaudited)


	June 30, 2022		December 31, 2021
Millions, except share and per share amounts
Liabilities
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	274.0	$	266.3
Debt	146.3		—
Accrued incentive compensation	16.5		24.7

Other liabilities	32.7		30.9
Total Financial Guarantee liabilities	469.5		321.9
P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expense reserves	1,022.1		894.7
Unearned insurance premiums	1,020.6		495.9
Debt	183.5		185.9
Reinsurance payable	418.8		424.1
Contingent consideration	30.2		28.0

Other liabilities	105.1		93.8
Total P&C Insurance and Reinsurance liabilities	2,780.3		2,122.4









Asset Management (Kudu)


Debt	253.3		218.2

Other liabilities	45.3		42.8
Total Asset Management liabilities	298.6		261.0







Other Operations
Debt	35.0		16.8

Accrued incentive compensation	51.1		48.5

Other liabilities	30.0		30.1

Liabilities held for sale - NSM Group	504.4		495.3
Total Other Operations liabilities	620.5		590.7
Total liabilities	4,168.9		3,296.0
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 2,942,877 and 3,017,772 shares	2.9		3.0
Paid-in surplus	600.3		585.9
Retained earnings	2,725.1		2,957.5
Accumulated other comprehensive income (loss), after-tax:
Net unrealized gains (losses) from foreign currency translation and interest rate swap	(5.0)		1.7

Total White Mountains’s common shareholders’ equity	3,323.3		3,548.1
Non-controlling interests	168.7		156.6
Total equity	3,492.0		3,704.7
Total liabilities and equity	$	7,660.9	$	7,000.7

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	2022		2021		2022		2021
Revenues:
Financial Guarantee (HG Global/BAM)
Earned insurance premiums	$	10.5	$	6.5	$	18.9	$	12.9
Net investment income	4.8		4.3		9.4		8.8
Net realized and unrealized investment gains (losses)	(30.1)		6.3		(75.2)		(11.6)
Other revenues	1.6		.3		2.4		.6
Total Financial Guarantee revenues	(13.2)		17.4		(44.5)		10.7

P&C Insurance and Reinsurance (Ark)
Earned insurance premiums	217.3		117.8		411.7		$	222.4
Net investment income	3.2		.4		4.8		1.2
Net realized and unrealized investment gains (losses)	(44.6)		8.9		(62.1)		10.0
Other revenues	6.3		3.4		3.5		6.0
Total P&C Insurance and Reinsurance revenues	182.2		130.5		357.9		239.6







Asset Management (Kudu)
Net investment income	13.8		8.4		26.4		16.6
Net realized and unrealized investment gains (losses)	(17.6)		27.8		4.7		43.6
Other revenues	—		—		—		.1
Total Asset Management revenues	(3.8)		36.2		31.1		60.3






Other Operations

Net investment income	3.3		4.0		5.1		11.1
Net realized and unrealized investment gains (losses)	(11.8)		16.6		20.1		18.7
Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(113.5)		113.0		(94.7)		71.3
Commission revenues	2.6		2.3		5.5		4.6
Other revenues	30.9		22.4		56.6		29.5
Total Other Operations revenues	(88.5)		158.3		(7.4)		135.2
Total revenues	$	76.7	$	342.4	$	337.1	$	445.8

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
Millions	2022		2021		2022		2021
Expenses:
Financial Guarantee (HG Global/BAM)
Insurance acquisition expenses	$	4.8	$	1.6	$	7.8	$	3.5

General and administrative expenses	17.4		13.9		33.7		30.3
Interest expense	3.4		—		3.4		—
Total Financial Guarantee expenses	25.6		15.5		44.9		33.8

P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expenses	120.5		52.6		242.5		118.6
Insurance and reinsurance acquisition expenses	50.2		34.0		100.1		70.7

General and administrative expenses	29.8		24.8		52.9		62.6
Interest expense	3.1		1.3		6.9		2.4
Total P&C Insurance and Reinsurance expenses	203.6		112.7		402.4		254.3










Asset Management (Kudu)
General and administrative expenses	3.0		3.2		5.7		5.7
Amortization of other intangible assets	.1		.1		.2		.2
Interest expense	3.3		1.5		6.1		7.3
Total Asset Management expenses	6.4		4.8		12.0		13.2








Other Operations



Cost of sales	22.4		17.9		43.8		21.9
General and administrative expenses	50.1		29.3		79.0		65.0
Amortization of other intangible assets	.9		.4		1.8		.9
Interest expense	.3		.4		.6		.7
Total Other Operations expenses	73.7		48.0		125.2		88.5
Total expenses	309.3		181.0		584.5		389.8
Pre-tax income (loss) from continuing operations	(232.6)		161.4		(247.4)		56.0
Income tax (expense) benefit	16.0		(30.0)		18.7		(23.6)
Net income (loss) from continuing operations	(216.6)		131.4		(228.7)		32.4
Net gain (loss) from sale of discontinued operations, net of tax - Sirius	—		—		—		18.7



Net income (loss) from NSM Group discontinued operations, net of tax	6.4		1.1		10.1		(29.1)
Net income (loss)	(210.2)		132.5		(218.6)		22.0
Net (income) loss attributable to non-controlling interests	41.0		6.0		82.8		41.2
Net income (loss) attributable to White Mountains’s common shareholders	$	(169.2)	$	138.5	$	(135.8)	$	63.2

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
Millions	2022		2021		2022		2021
Net income (loss) attributable to White Mountains’s common shareholders	$	(169.2)	$	138.5	$	(135.8)	$	63.2

Other comprehensive income (loss), net of tax	(1.1)		.5		(1.5)		.2

Other comprehensive income (loss) from NSM Group discontinued operations, net of tax	(4.0)		.5		(5.9)		2.6
Comprehensive income (loss)	(174.3)		139.5		(143.2)		66.0
Other comprehensive (income) loss attributable to non-controlling interests	.5		(.1)		.7		(.2)
Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	(173.8)	$	139.4	$	(142.5)	$	65.8


Earnings (loss) per share attributable to White Mountains’s common shareholders:

Basic earnings (loss) per share
Continuing operations	$	(58.78)