SEC Filing | White Mountains Insurance Group

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wtm-20230630

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, 2023

☐ 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 per share

WTM

New York Stock Exchange

WTM.BH

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 3, 2023, 2,560,452 common shares with a par value of $1.00 per share were outstanding (which includes 37,595 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, 2023 and December 31, 2022	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Six Months Ended June 30, 2023 and 2022	3

	Consolidated Statements of Changes in Equity,	6
	Three and Six Months Ended June 30, 2023 and 2022

	Consolidated Statements of Cash Flows, Six Months Ended June 30, 2023 and 2022	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

	Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022	46

	Liquidity and Capital Resources	69

	Non-GAAP Financial Measures	72

	Critical Accounting Estimates	74

	Forward-Looking Statements	74

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75

Item 4.	Controls and Procedures	75

PART II.	OTHER INFORMATION	75

Items 1 through 6.		75

SIGNATURES		76

Part I.FINANCIAL INFORMATION.

Item 1.Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2023		December 31, 2022
Millions, except share and per share amounts
Assets
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	932.9	$	909.9
Short-term investments, at fair value	67.5		65.9
Total investments	1,000.4		975.8
Cash	2.9		18.2
Insurance premiums receivable	6.4		6.6
Deferred acquisition costs	37.4		36.0


Other assets	25.3		21.9
Total Financial Guarantee assets	1,072.4		1,058.5
P&C Insurance and Reinsurance (Ark/WM Outrigger)
Fixed maturity investments, at fair value	755.8		772.8
Common equity securities, at fair value	382.6		334.6
Short-term investments, at fair value	640.3		484.6
Other long-term investments	410.7		373.6
Total investments	2,189.4		1,965.6
Cash	101.7		101.5
Reinsurance recoverables	669.7		595.3
Insurance premiums receivable	1,077.2		544.1

Deferred acquisition costs	232.1		127.2

Goodwill and other intangible assets	292.5		292.5
Other assets	69.4		65.2
Total P&C Insurance and Reinsurance assets	4,632.0		3,691.4
Asset Management (Kudu)
Short-term investments, at fair value	4.1		—
Other long-term investments	737.1		695.9
Total investments	741.2		695.9
Cash (restricted $13.4 and $12.2)	25.0		101.4
Accrued investment income	13.1		12.4
Goodwill and other intangible assets	8.4		8.6
Other assets	10.0		7.6
Total Asset Management assets	797.7		825.9







Other Operations
Fixed maturity investments, at fair value	252.0		238.2
Common equity securities, at fair value	272.5		333.8
Investment in MediaAlpha, at fair value	235.7		168.6
Short-term investments, at fair value	274.2		373.6
Other long-term investments	667.2		418.5
Total investments	1,701.6		1,532.7
Cash	24.9		33.9



Goodwill and other intangible assets	72.7		91.3
Other assets	75.0		155.6


Total Other Operations assets	1,874.2		1,813.5
Total assets	$	8,376.3	$	7,389.3

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Unaudited)


	June 30, 2023		December 31, 2022
Millions, except share and per share amounts
Liabilities
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	303.7	$	298.3
Debt	146.7		146.5
Accrued incentive compensation	14.7		28.0

Other liabilities	34.6		29.0
Total Financial Guarantee liabilities	499.7		501.8
P&C Insurance and Reinsurance (Ark/WM Outrigger)
Loss and loss adjustment expense reserves	1,421.0		1,296.5
Unearned insurance premiums	1,376.5		623.2
Debt	185.1		183.7
Reinsurance payable	247.0		251.1
Contingent consideration	45.1		45.3

Other liabilities	116.6		122.3
Total P&C Insurance and Reinsurance liabilities	3,391.3		2,522.1









Asset Management (Kudu)

Debt	203.7		208.3

Other liabilities	51.0		65.0
Total Asset Management liabilities	254.7		273.3







Other Operations
Debt	30.6		36.7

Accrued incentive compensation	51.0		86.1

Other liabilities	23.1		34.3


Total Other Operations liabilities	104.7		157.1
Total liabilities	4,250.4		3,454.3
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 2,560,452 and 2,572,156 shares	2.6		2.6
Paid-in surplus	540.6		536.0
Retained earnings	3,380.7		3,211.8
Accumulated other comprehensive income (loss), after-tax:
Net unrealized gains (losses) from foreign currency translation and interest rate swap	(1.7)		(3.5)

Total White Mountains’s common shareholders’ equity	3,922.2		3,746.9
Noncontrolling interests	203.7		188.1
Total equity	4,125.9		3,935.0
Total liabilities and equity	$	8,376.3	$	7,389.3

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	2023		2022		2023		2022
Revenues:
Financial Guarantee (HG Global/BAM)
Earned insurance premiums	$	7.7	$	10.5	$	15.4	$	18.9
Net investment income	7.6		4.8		14.8		9.4
Net realized and unrealized investment gains (losses)	(9.9)		(30.1)		7.1		(75.2)
Other revenues	.5		1.6		1.3		2.4
Total Financial Guarantee revenues	5.9		(13.2)		38.6		(44.5)

P&C Insurance and Reinsurance (Ark/WM Outrigger)
Earned insurance premiums	293.3		217.3		548.4		411.7
Net investment income	13.7		3.2		24.3		4.8
Net realized and unrealized investment gains (losses)	18.0		(44.6)		42.5		(62.1)
Other revenues	(2.0)		6.3		(4.7)		3.5
Total P&C Insurance and Reinsurance revenues	323.0		182.2		610.5		357.9







Asset Management (Kudu)
Net investment income	14.7		13.8		28.9		26.4
Net realized and unrealized investment gains (losses)	4.6		(17.6)		34.2		4.7

Total Asset Management revenues	19.3		(3.8)		63.1		31.1






Other Operations

Net investment income	7.0		3.3		14.0		5.1
Net realized and unrealized investment gains (losses)	76.0		(11.8)		117.8		20.1
Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(77.3)		(113.5)		7.9		(94.7)
Commission revenues	3.2		2.6		6.5		5.5
Other revenues	21.3		30.9		51.9		56.6
Total Other Operations revenues	30.2		(88.5)		198.1		(7.4)
Total revenues	$	378.4	$	76.7	$	910.3	$	337.1

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
Millions	2023		2022		2023		2022
Expenses:
Financial Guarantee (HG Global/BAM)
Acquisition expenses	$	1.5	$	4.8	$	4.2	$	7.8

General and administrative expenses	14.9		17.4		32.2		33.7
Interest expense	2.5		3.4		7.0		3.4
Total Financial Guarantee expenses	18.9		25.6		43.4		44.9

P&C Insurance and Reinsurance (Ark/WM Outrigger)
Loss and loss adjustment expenses	167.5		120.5		315.3		242.5
Acquisition expenses	61.4		50.2		121.2		100.1

General and administrative expenses	34.9		29.7		70.1		50.7
Change in fair value of contingent consideration	2.2		.1		(.2)		2.2
Interest expense	5.2		3.1		10.2		6.9
Total P&C Insurance and Reinsurance expenses	271.2		203.6		516.6		402.4










Asset Management (Kudu)
General and administrative expenses	4.0		3.1		7.8		5.9

Interest expense	5.3		3.3		10.0		6.1
Total Asset Management expenses	9.3		6.4		17.8		12.0








Other Operations



Cost of sales	11.6		22.4		25.5		43.8
General and administrative expenses	48.8		51.0		88.5		80.8

Interest expense	1.2		.3		2.0		.6
Total Other Operations expenses	61.6		73.7		116.0		125.2
Total expenses	361.0		309.3		693.8		584.5
Pre-tax income (loss) from continuing operations	17.4		(232.6)		216.5		(247.4)
Income tax (expense) benefit	(.2)		16.0		(12.1)		18.7
Net income (loss) from continuing operations	17.2		(216.6)		204.4		(228.7)
Net income (loss) from discontinued operations, net of tax - NSM Group	—		6.4		—		10.1




Net income (loss)	17.2		(210.2)		204.4		(218.6)
Net (income) loss attributable to noncontrolling interests	2.4		41.0		(5.3)		82.8
Net income (loss) attributable to White Mountains’s common shareholders	$	19.6	$	(169.2)	$	199.1	$	(135.8)

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	2023		2022		2023		2022
Net income (loss) attributable to White Mountains’s common shareholders	$	19.6	$	(169.2)	$	199.1	$	(135.8)
Other comprehensive income, net of tax:
Other comprehensive income (loss), net of tax	1.4		(1.1)		2.6		(1.5)
Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	—		(4.0)		—		(5.9)
Comprehensive income (loss)	21.0		(174.3)		201.7		(143.2)
Other comprehensive (income) loss attributable to noncontrolling interests	(.4)		.5		(.8)		.7
Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	20.6	$	(173.8)	$	200.9	$	(142.5)


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

Basic earnings (loss) per share
Continuing operations	$	7.65	$	(58.78)	$	77.57	$	(48.57)
Discontinued operations	—		1.98		—		3.17
Total consolidated operations	$	7.65	$	(56.80)	$	77.57	$	(45.40)
Diluted earnings (loss) per share
Continuing operations	$	7.65	$	(58.78)	$	77.57	$	(48.57)
Discontinued operations	—		1.98		—		3.17
Total consolidated operations	$	7.65	$	(56.80)	$	77.57	$	(45.40)
Dividends declared and paid per White Mountains’s common share	$	—	$	—	$	1.00	$	1.00

See Notes to Consolidated Financial Statements.

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	White Mountains’s Common Shareholders’ Equity
Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at March 31, 2023	$	537.8	$	3,367.3	$	(2.7)	$	3,902.4	$	190.4	$	4,092.8
Net income (loss)	—		19.6		—		19.6		(2.4)		17.2
Other comprehensive income (loss), net of tax	—		—		1.0		1.0		.4		1.4

Total comprehensive income (loss)	—		19.6		1.0		20.6		(2.0)		18.6

Dividends to noncontrolling interests	—		—		—		—		(.6)		(.6)
Issuances of common shares	2.0		—		—		2.0		—		2.0
Repurchases and retirements of common shares	(1.2)		(6.2)		—		(7.4)		—		(7.4)

BAM member surplus contribution, net of tax	—		—		—		—		14.7		14.7
Amortization of restricted share awards	4.1		—		—		4.1		—		4.1
Recognition of equity-based compensation expense of subsidiaries	.5		—		—		.5		.1		.6
Net contributions and dilution from other noncontrolling interests	—		—		—		—		1.1		1.1

Balance at June 30, 2023	$	543.2	$	3,380.7	$	(1.7)	$	3,922.2	$	203.7	$	4,125.9


	White Mountains’s Common Shareholders’ Equity
Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at March 31, 2022	$	586.3	$	2,956.2	$	(.4)	$	3,542.1	$	127.2	$	3,669.3
Net income (loss)	—		(169.2)		—		(169.2)		(41.0)		(210.2)
Other comprehensive income (loss), net of tax	—		—		(.6)		(.6)		(.5)		(1.1)
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	—		—		(4.0)		(4.0)		—		(4.0)
Total comprehensive income (loss)	—		(169.2)		(4.6)		(173.8)		(41.5)		(215.3)

Dividends to noncontrolling interests	—		—		—		—		(6.4)		(6.4)
Issuances of common shares	2.2		—		—		2.2		—		2.2
Issuance of shares of non-controlling interests	—		—		—		—		74.6		74.6
Repurchases and retirements of common shares	(10.4)		(52.2)		—		(62.6)		—		(62.6)
BAM member surplus contributions, net of tax	—		—		—		—		24.0		24.0
Amortization of restricted share awards	3.6		—		—		3.6		—		3.6
Recognition of equity-based compensation expense of subsidiaries	6.5		—		—		6.5		.4		6.9
Net contributions and dilution from other noncontrolling interests	15.0		(9.7)		—		5.3		(9.6)		(4.3)


Balance at June 30, 2022	$	603.2	$	2,725.1	$	(5.0)	$	3,323.3	$	168.7	$	3,492.0

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited)


	White Mountains’s Common Shareholders’ Equity
Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at January 1, 2023	$	538.6	$	3,211.8	$	(3.5)	$	3,746.9	$	188.1	$	3,935.0
Net income (loss)	—		199.1		—		199.1		5.3		204.4
Other comprehensive income (loss), net of tax	—		—		1.8		1.8		.8		2.6

Total comprehensive income (loss)	—