Municipal Bond Guarantee Insurance

12 Months Ended

Dec. 31, 2014

In 2012, HG Global was capitalized with $594.5 million from White Mountains and $14.5 million from non-controlling interests to fund BAM, a newly formed mutual municipal bond insurer. As of December 31, 2014, White Mountains owned 96.9% of HG Global’s preferred equity and 88.4% of its common equity. HG Global, together with its subsidiaries, provided the initial capitalization of BAM through the purchase of $503.0 million of BAM surplus notes. HG Global provides first loss reinsurance protection for policies underwritten by BAM of up to 15% of par outstanding on a per policy basis through HG Re, which had statutory capital of $449.1 million and $436.9 million as of December 31, 2014 and 2013. HG Re’s obligations to BAM are collateralized in trusts, and there is an aggregate loss limit that is equal to the total assets in the collateral trusts at any point in time. At December 31, 2014 and 2013, the collateral trusts held assets of $120.0 million and $105.4 million. As of December 31, 2014 and 2013, HG Global had pre-tax income of $18.3 million and $38.1 million, which included $15.7 million and $40.2 million of interest income on the BAM surplus notes. As of December 31, 2014 and 2013, BAM had a pre-tax loss of $40.5 million and $78.6 million that was recorded in net loss attributable to non-controlling interests, which included $15.7 million and $40.2 million of interest expense on the BAM surplus notes. As of December 31, 2014, HG Global has accrued $74.4 million of interest receivable on the BAM surplus notes.

The following table provides a schedule of BAM’s insured obligations:



	December 31, 2014		December 31, 2013
Contracts outstanding	1,750		701
Remaining weighted average contract period (in years)	12.8		13.8
Contractual debt service outstanding (in millions):
Principal	$	12,362.5	$	4,703.7
Interest	$	7,086.9	$	3,264.4
Gross unearned insurance premiums	$	27.6	$	13.2