SEC Filing | White Mountains Insurance Group

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wtm-20230930

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 September 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 November 2, 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, September 30, 2023 and December 31, 2022	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Nine Months Ended September 30, 2023 and 2022	3

	Consolidated Statements of Changes in Equity,	6
	Three and Nine Months Ended September 30, 2023 and 2022

	Consolidated Statements of Cash Flows, Nine Months Ended September 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	47

	Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	47

	Liquidity and Capital Resources	70

	Non-GAAP Financial Measures	74

	Critical Accounting Estimates	75

	Forward-Looking Statements	76

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	77

Item 4.	Controls and Procedures	77

PART II.	OTHER INFORMATION	77

Items 1 through 6.		77

SIGNATURES		78

Part I.FINANCIAL INFORMATION.

Item 1.Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


Millions, except share and per share amounts	September 30, 2023		December 31, 2022
Assets
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	932.2	$	909.9
Short-term investments, at fair value	80.1		65.9
Total investments	1,012.3		975.8
Cash	4.9		18.2
Insurance premiums receivable	5.5		6.6
Deferred acquisition costs	38.5		36.0
Other assets	22.2		21.9
Total Financial Guarantee assets	1,083.4		1,058.5
P&C Insurance and Reinsurance (Ark/WM Outrigger)
Fixed maturity investments, at fair value	775.0		772.8
Common equity securities, at fair value	384.9		334.6
Short-term investments, at fair value	850.0		484.6
Other long-term investments	416.6		373.6
Total investments	2,426.5		1,965.6
Cash	129.6		101.5
Reinsurance recoverables	538.4		595.3
Insurance premiums receivable	781.6		544.1
Deferred acquisition costs	178.7		127.2
Goodwill and other intangible assets	292.5		292.5
Other assets	66.9		65.2
Total P&C Insurance and Reinsurance assets	4,414.2		3,691.4
Asset Management (Kudu)
Short-term investments, at fair value	17.3		—
Other long-term investments	780.7		695.9
Total investments	798.0		695.9
Cash (restricted $0.0 and $12.2)	5.4		101.4
Accrued investment income	15.8		12.4
Goodwill and other intangible assets	8.4		8.6
Other assets	8.3		7.6
Total Asset Management assets	835.9		825.9
Other Operations
Fixed maturity investments, at fair value	270.7		238.2
Common equity securities, at fair value	252.1		333.8
Investment in MediaAlpha, at fair value	188.8		168.6
Short-term investments, at fair value	215.5		373.6
Other long-term investments	698.5		418.5
Total investments	1,625.6		1,532.7
Cash	22.9		33.9
Goodwill and other intangible assets	71.2		91.3
Other assets	89.6		155.6
Total Other Operations assets	1,809.3		1,813.5
Total assets	$	8,142.8	$	7,389.3

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Unaudited)


Millions, except share and per share amounts	September 30, 2023		December 31, 2022
Liabilities
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	312.3	$	298.3
Debt	146.8		146.5
Accrued incentive compensation	19.9		28.0
Other liabilities	40.0		29.0
Total Financial Guarantee liabilities	519.0		501.8
P&C Insurance and Reinsurance (Ark/WM Outrigger)
Loss and loss adjustment expense reserves	1,571.8		1,296.5
Unearned insurance premiums	984.6		623.2
Debt	184.6		183.7
Reinsurance payable	146.3		251.1
Contingent consideration	62.1		45.3
Other liabilities	132.0		122.3
Total P&C Insurance and Reinsurance liabilities	3,081.4		2,522.1
Asset Management (Kudu)
Debt	203.7		208.3
Other liabilities	53.6		65.0
Total Asset Management liabilities	257.3		273.3
Other Operations
Debt	29.6		36.7
Accrued incentive compensation	64.0		86.1
Other liabilities	27.3		34.3
Total Other Operations liabilities	120.9		157.1
Total liabilities	3,978.6		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	544.9		536.0
Retained earnings	3,404.3		3,211.8
Accumulated other comprehensive income (loss), after-tax:
Net unrealized gains (losses) from foreign currency translation and interest rate swap	(2.7)		(3.5)
Total White Mountains’s common shareholders’ equity	3,949.1		3,746.9
Noncontrolling interests	215.1		188.1
Total equity	4,164.2		3,935.0
Total liabilities and equity	$	8,142.8	$	7,389.3

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2023		2022		2023		2022
Revenues:
Financial Guarantee (HG Global/BAM)
Earned insurance premiums	$	7.9	$	7.1	$	23.3	$	26.0
Net investment income	8.1		5.7		22.9		15.1
Net realized and unrealized investment gains (losses)	(24.1)		(38.8)		(17.0)		(114.0)
Other revenues	.7		1.3		2.0		3.7
Total Financial Guarantee revenues	(7.4)		(24.7)		31.2		(69.2)

P&C Insurance and Reinsurance (Ark/WM Outrigger)
Earned insurance premiums	498.9		346.1		1,047.3		757.8
Net investment income	16.9		4.9		41.2		9.7
Net realized and unrealized investment gains (losses)	(6.6)		(14.4)		35.9		(76.5)
Other revenues	3.6		6.6		(1.1)		10.1
Total P&C Insurance and Reinsurance revenues	512.8		343.2		1,123.3		701.1

Asset Management (Kudu)
Net investment income	15.1		14.8		44.0		41.2
Net realized and unrealized investment gains (losses)	11.2		41.1		45.4		45.8
Total Asset Management revenues	26.3		55.9		89.4		87.0

Other Operations
Net investment income	8.0		8.5		22.0		13.6
Net realized and unrealized investment gains (losses)	8.0		(17.3)		125.8		2.8
Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(46.8)		(18.6)		(38.9)		(113.3)
Commission revenues	3.5		3.2		10.0		8.7
Other revenues	15.2		33.0		67.1		89.6
Total Other Operations revenues	(12.1)		8.8		186.0		1.4
Total revenues	$	519.6	$	383.2	$	1,429.9	$	720.3

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2023		2022		2023		2022
Expenses:
Financial Guarantee (HG Global/BAM)
Acquisition expenses	$	2.1	$	1.7	$	6.3	$	9.5
General and administrative expenses	17.5		15.8		49.7		49.5
Interest expense	3.8		2.0		10.8		5.4
Total Financial Guarantee expenses	23.4		19.5		66.8		64.4

P&C Insurance and Reinsurance (Ark/WM Outrigger)
Loss and loss adjustment expenses	265.8		213.7		581.1		456.2
Acquisition expenses	90.3		74.8		211.5		174.9
General and administrative expenses	35.4		24.2		105.5		74.9
Change in fair value of contingent consideration	17.0		2.7		16.8		4.9
Interest expense	5.5		3.7		15.7		10.6
Total P&C Insurance and Reinsurance expenses	414.0		319.1		930.6		721.5

Asset Management (Kudu)
General and administrative expenses	4.5		4.5		12.3		10.4
Interest expense	5.5		4.2		15.5		10.3
Total Asset Management expenses	10.0		8.7		27.8		20.7

Other Operations
Cost of sales	8.0		25.0		33.5		68.8
General and administrative expenses	42.2		41.3		130.7		122.1
Interest expense	.9		.6		2.9		1.2
Total Other Operations expenses	51.1		66.9		167.1		192.1
Total expenses	498.5		414.2		1,192.3		998.7
Pre-tax income (loss) from continuing operations	21.1		(31.0)		237.6		(278.4)
Income tax (expense) benefit	(7.3)		7.4		(19.4)		26.1
Net income (loss) from continuing operations	13.8		(23.6)		218.2		(252.3)
Net income (loss) from discontinued operations, net of tax - NSM Group	—		6.3		—		16.4
Net gain (loss) from sale of discontinued operations, net of tax - NSM Group	—		886.8		—		886.8
Net income (loss)	13.8		869.5		218.2		650.9
Net (income) loss attributable to noncontrolling interests	9.8		18.7		4.5		101.5
Net income (loss) attributable to White Mountains’s common shareholders	$	23.6	$	888.2	$	222.7	$	752.4

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2023		2022		2023		2022
Net income (loss) attributable to White Mountains’s common shareholders	$	23.6	$	888.2	$	222.7	$	752.4
Other comprehensive income, net of tax:
Other comprehensive income (loss), net of tax	(1.7)		(1.4)		.9		(3.0)
Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	—		.7		—		(5.2)
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	—		2.9		—		2.9
Comprehensive income (loss)	21.9		890.4		223.6		747.1
Other comprehensive (income) loss attributable to noncontrolling interests	.7		(.3)		(.1)		.4
Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	22.6	$	890.1	$	223.5	$	747.5


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

Basic earnings (loss) per share
Continuing operations	$	9.19	$	(1.66)	$	86.82	$	(50.73)
Discontinued operations	—		308.59		—		304.97
Total consolidated operations	$	9.19	$	306.93	$	86.82	$	254.24
Diluted earnings (loss) per share
Continuing operations	$	9.19	$	(1.66)	$	86.82	$	(50.73)
Discontinued operations	—		308.59		—		304.97
Total consolidated operations	$	9.19	$	306.93	$	86.82	$	254.24
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 June 30, 2023	$	543.2	$	3,380.7	$	(1.7)	$	3,922.2	$	203.7	$	4,125.9
Net income (loss)	—		23.6		—		23.6		(9.8)		13.8
Other comprehensive income (loss), net of tax	—		—		(1.0)		(1.0)		(.7)		(1.7)

Total comprehensive income (loss)	—		23.6		(1.0)		22.6		(10.5)		12.1

Dividends to noncontrolling interests	—		—		—		—		(.5)		(.5)
Issuances of common shares	—		—		—		—		—		—
Repurchases and retirements of common shares	—		—		—		—		—		—

BAM member surplus contribution, net of tax	—		—		—		—		19.9		19.9
Amortization of restricted share awards	4.0		—		—		4.0		—		4.0
Recognition of equity-based compensation expense of subsidiaries	.4		—		—		.4		.2		.6
Net contributions and dilution from other noncontrolling interests	(.1)		—		—		(.1)		2.3		2.2

Balance at September 30, 2023	$	547.5	$	3,404.3	$	(2.7)	$	3,949.1	$	215.1	$	4,164.2


	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 June 30, 2022	$	603.2	$	2,725.1	$	(5.0)	$	3,323.3	$	168.7	$	3,492.0
Net income (loss)	—		888.2		—		888.2		(18.7)		869.5
Other comprehensive income (loss), net of tax	—		—		(1.8)		(1.8)		.3		(1.5)
Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	—		—		.7		.7		—		.7
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	—		—		2.9		2.9		—		2.9
Total comprehensive income (loss)	—		888.2		1.8		890.0		(18.4)		871.6

Dividends to noncontrolling interests	—		—		—		—		(.5)		(.5)


Repurchases and retirements of common shares	(71.5)		(437.4)		—		(508.9)		—		(508.9)
BAM member surplus contributions, net of tax	—		—		—		—		26.0		26.0
Amortization of restricted share awards	3.8		—		—		3.8		—		3.8
Recognition of equity-based compensation expense of subsidiaries	.4		—		—		.4		.2		.6
Net contributions and dilution from other noncontrolling interests	(.6)		—		—		(.6)		(.2)		(.8)
Disposition of noncontrolling interests	—		—		—		—		(17.5)		(17.5)

Balance at September 30, 2022	$	535.3	$	3,175.9	$	(3.2)	$	3,708.0	$	158.3	$	3,866.3

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