Investments in Unconsolidated Affiliates

White Mountains’s investments in unconsolidated affiliates represent investments in other companies in which White Mountains has a significant voting and economic interest but does not control the entity.



	December 31,
Millions	2014		2013
Symetra common shares	$	373.8	$	360.9
Unrealized gains (losses) from Symetra’s fixed maturity portfolio	37.6		(43.6		)
Carrying value of Symetra common shares	411.4		317.3

Hamer	3.0		4.1
Total investments in unconsolidated affiliates	$	414.4	$	321.4

Symetra

As of December 31, 2014 and 2013, White Mountains owned 20.05 million common shares of Symetra, a 17.31% and 17.03% common share ownership. White Mountains accounts for its investment in common shares of Symetra using the equity method. During 2014, White Mountains received cash dividends from Symetra of $34.1 million on its common share investment which is accounted for as a reduction of White Mountains’s investment in Symetra in accordance with equity accounting.

White Mountains previously owned warrants to acquire an additional 9.5 million common shares of Symetra at $11.49 per share. On June 20, 2013, White Mountains exercised these warrants in a cashless transaction and received 2.65 million common shares of Symetra in exchange for the warrants. Prior to their exercise, White Mountains accounted for its Symetra warrants as derivatives with changes in fair value recognized as a gain or loss recognized through other revenue in the income statement. White Mountains used a Black Scholes valuation model to determine the fair value of the Symetra warrants. During the six months ended June 30, 2013, White Mountains recognized a $10.8 million increase in the value of the warrants through other revenues based on the final Black Scholes valuation that was agreed upon between Symetra and White Mountains. During the six months ended June 30, 2013, White Mountains also received $1.5 million of dividends from Symetra on the warrants that were recorded in net investment income.

As of December 31, 2011, White Mountains concluded that its investment in Symetra common shares was other-than-temporarily impaired and wrote down the GAAP book value of the investment to its estimated fair value of $261.0 million or $15 per share. This impairment resulted in a basis difference between the GAAP carrying value of White Mountains’s investment in Symetra common shares and the amount derived by multiplying the percentage of White Mountains common share ownership by Symetra’s total GAAP equity. White Mountains recorded $45.9 million of after-tax equity in losses of unconsolidated affiliates and $136.6 million of after-tax equity in net unrealized losses of unconsolidated affiliates.

During 2013, Symetra repurchased 6.6 million of its common shares at an average price of $13.44. The net effect of Symetra’s share repurchases and the warrant exercises described above resulted in an additional basis difference between the GAAP carrying value of White Mountains’s investment in Symetra common shares and the amount derived by multiplying the percentage of White Mountains’s common share ownership by Symetra’s total GAAP equity. This basis difference totaled $19.3 million, of which $0.4 million was attributable to equity in earnings of unconsolidated affiliates and $18.9 million was attributable to equity in net unrealized gains of unconsolidated affiliates.

During 2014, further repurchases by Symetra of its common shares resulted in an additional basis difference between the GAAP carrying value of White Mountains’s investment in Symetra common shares and the amount derived by multiplying the percentage of White Mountains’s common share ownership by Symetra’s total GAAP equity. This basis difference totaled $2.4 million, of which $0.5 million was attributable to equity in earnings of unconsolidated affiliates and $1.9 million was attributable to equity in net unrealized gains of affiliates.

As a result of the various basis adjustments, White Mountains’s carrying value of its investment in Symetra differs from the carrying value by applying its ownership share against Symetra’s GAAP equity as normally done under the equity method. The pre-tax basis differences are being amortized over a 30-year period with a weighted average 28-years remaining. The amortization is based on estimated future cash flows associated with Symetra’s underlying assets and liabilities to which the basis differences have been attributed. White Mountains continues to record its equity in Symetra's earnings and net unrealized gains (losses). In addition, White Mountains recognizes the amortization of the basis differences through equity in earnings of unconsolidated affiliates and equity in net unrealized gains (losses) from investments in unconsolidated affiliates consistent with the original attribution of the basis differences between equity in earnings and equity in net unrealized gains (losses). For the year ended December 31, 2014, White Mountains recognized after-tax amortization of $2.8 million through equity in earnings of unconsolidated affiliates and $11.7 million through equity in net unrealized gains from investments in unconsolidated affiliates. As of December 31, 2014, the pre-tax unamortized basis difference was $170.4 million, of which $36.4 million is attributable to equity in earnings of unconsolidated affiliates and $134.0 million is attributable to equity in net unrealized gains of unconsolidated affiliates. Management does not believe that the investment in Symetra’s common shares is other-than-temporarily impaired as of December 31, 2014.

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra:



Millions	Common shares			Warrants			Total
Carrying value of investment in Symetra as of December 31, 2011⁽²⁾	$	261.0		$	12.6		$	273.6
Equity in earnings^(1)(3)(6)	32.3			—			32.3
Equity in net unrealized gains from Symetra’s fixed maturity portfolio⁽⁴⁾⁽⁵⁾	62.8			—			62.8
Dividends received	(4.9		)	—			(4.9		)
Increase in value of warrants	—			17.7			17.7
Carrying value of investment in Symetra as of December 31, 2012⁽²⁾	351.2			30.3			381.5
Equity in earnings^(1)(3)(6)	37.8			—			37.8
Equity in net unrealized losses from Symetra’s fixed maturity portfolio⁽⁴⁾⁽⁵⁾	(106.4		)	—			(106.4		)
Dividends received	(6.4		)	—			(6.4		)
Increase in value of warrants	—			10.8			10.8
Exercise of warrants	41.1			(41.1		)	—
Carrying value of investment in Symetra as of December 31, 2013⁽²⁾	317.3			—			317.3
Equity in earnings^(1)(3)(6)	47.0			—			47.0
Equity in net unrealized gains from Symetra’s fixed maturity portfolio⁽⁴⁾⁽⁵⁾	81.2			—			81.2
Dividends received	(34.1		)	—			(34.1		)
Carrying value of investment in Symetra as of December 31, 2014⁽²⁾⁽⁷⁾	$	411.4		$	—		$	411.4


⁽¹⁾	Equity in earnings for the years ended December 31, 2014, 2013 and 2012 excludes tax expense of $3.3, $2.8, and $2.6


⁽²⁾	Includes White Mountains’s equity in net unrealized gains (losses) from Symetra’s fixed maturity portfolio of $37.6, $(43.6), and $62.8 as of December 31, 2014, 2013 and 2012, which excludes tax (expense) benefit of $(2.7), $3.2 and $(5.1)


⁽³⁾	Equity in earnings for the years ended December 31, 2014, 2013 and 2012 includes $3.0, $3.0 and $3.5 increases relating to the pre-tax amortization of the Symetra common share basis difference.


⁽⁴⁾	Net unrealized gains for the years ended December 31, 2014, 2013 and 2012 includes $12.7, $11.8 and $13.1 increases relating to the pre-tax amortization of the Symetra common share basis difference.


⁽⁵⁾	Net unrealized gains (losses) from Symetra’s fixed maturity portfolio excludes tax (expense) benefit of $(5.9), $8.3 and $(5.1) for the years ended December 31, 2014, 2013 and 2012.


⁽⁶⁾	Equity in earnings for the years ended December 31, 2014, 2013 and 2012 includes $(0.1), $0.2, and $1.3 (gain) loss from the dilutive effect of Symetra’s yearly dividend and the issuance of restricted shares by Symetra


⁽⁷⁾	The aggregate value of White Mountains’s investment in common shares of Symetra was $462.1 based upon the quoted market price of $23.05 per share as of December 31, 2014.

The following table summarizes financial information for Symetra as of December 31, 2014 and 2013:



	December 31,
Millions	2014		2013
Symetra balance sheet data:
Total investments	$	30,634.3	$	27,901.1
Separate account assets	949.8		978.4
Total assets	32,994.2		30,129.5
Policyholder liabilities	27,276.0		25,328.8
Long-term debt	697.2		449.5
Separate account liabilities	949.8		978.4
Total liabilities	29,633.6		27,187.6
Common shareholders’ equity	3,360.6		2,941.9

The following table summarizes financial information for Symetra for the years ended December 31, 2014, 2013 and 2012:



	Years ended December 31,
Millions	2014		2013			2012
Symetra income statement data:
Net premiums earned	$	629.1	$	627.2		$	605.0
Net investment income	1,320.5		1,285.0			1,275.2
Total revenues	2,182.3		2,103.9			2,101.2
Policy benefits	1,399.6		1,394.9			1,371.8
Total expenses	1,882.4		1,865.3			1,831.1
Net income	254.4		220.7			205.4
Comprehensive net income (loss)	397.0		(777.6		)	549.3

Hamer and Bri-Mar

White Mountains received equity interests in Hamer and Bri-Mar, two small manufacturing companies distributed to White Mountains in connection with the dissolution of the Tuckerman Capital, LP fund (see Note 18). Effective October 1, 2012, these investments are accounted for under the equity method. For the years ended December 31, 2014, 2013 and 2012, White Mountains recorded equity in earnings of $1.9 million, $0.9 million and $0.4 million for Hamer. For December 31, 2014 and 2013, White Mountains also received $3.0 million and $0.8 million of cash dividends from Hamer. As of December 31, 2014, White Mountains’s investments in Hamer was $3.0 million.

On October 10, 2013, White Mountains sold its interest in Bri-Mar under an asset purchase agreement. For the year ended December 31, 2013, White Mountains recorded $1.1 million of cash proceeds from the sale and a $1.7 million loss on sale. Prior to the sale, White Mountains recorded equity in earnings of $0.9 million for Bri-Mar for the nine months ended September 30, 2013. White Mountains did not have any equity in earnings for Bri-Mar for the year ended December 31, 2012.

Pentelia

White Mountains obtained an equity interest of 33% in Pentelia Capital Management (“PCM”) for $1.6 million in April 2007. This investment is accounted for under the equity method. During the years ended December 31, 2013 and 2012, White Mountains recorded $0.1 million and $(1.3) million of equity in earnings in PCM. During the year ended December 31, 2013, White Mountains received $.4 million of cash dividends from PCM which liquidated White Mountains equity interest.