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Investment Securities (Tables)
 6 Months Ended
Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Pre-tax net investment income
Pre-tax net investment income for the three and six months ended June 30, 2015 and 2014 consisted of the following:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2015
 
2014
 
2015
 
2014
Investment income:
 
 
 
 
 
 
 
 
Fixed maturity investments
 
$
23.4

 
$
25.6

 
$
46.5

 
$
48.0

Short-term investments
 
.7

 
.6

 
1.3

 
1.2

Common equity securities
 
3.3

 
5.5

 
6.7

 
10.9

Convertible fixed maturity and preferred investments
 
.1

 
.8

 
.3

 
1.2

Other long-term investments
 
.9

 
1.9

 
.8

 
2.6

Interest on funds held under reinsurance treaties
 
—

 
—

 
(.1
)
 
—

Total investment income
 
28.4

 
34.4

 
55.5

 
63.9

Third-party investment expenses
 
(4.6
)
 
(4.8
)
 
(8.4
)
 
(9.6
)
Net investment income, pre-tax
 
$
23.8

 
$
29.6

 
$
47.1

 
$
54.3
Schedule of Realized and Unrealized Gain (Loss) on Investments
Net realized and unrealized investment gains and losses for the three and six months ended June 30, 2015 and 2014 consisted of the following:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2015
 
2014
 
2015
 
2014
Net realized investment gains, pre-tax
 
$
112.9

 
$
30.5

 
$
165.7

 
$
52.2

Net unrealized investment (losses) gains, pre-tax
 
(174.0
)
 
83.4

 
(123.4
)
 
125.5

Net realized and unrealized investment (losses) gains, pre-tax
 
(61.1
)
 
113.9

 
42.3

 
177.7

Income tax benefit (expense) attributable to net realized and
     unrealized investment gains (losses)
 
16.5

 
(23.0
)
 
(9.8
)
 
(38.7
)
Net realized and unrealized investment (losses) gains, after tax
 
$
(44.6
)
 
$
90.9

 
$
32.5

 
$
139.0
Realized Gain (Loss) on Investments
Net realized investment gains (losses) for the three and six months ended June 30, 2015 and 2014 consisted of the following:
 
 
Three Months Ended
 
Three Months Ended
 
 
June 30, 2015
 
June 30, 2014
Millions
 
Net
realized
gains
(losses)
 
Net
foreign
currency gains
 
Total net realized
gains (losses)
reflected in
earnings
 
Net
realized
gains
 
Net
foreign
currency gains
 
Total net realized
gains
reflected in
earnings
Fixed maturity investments
 
$
2.7

 
$
14.3

 
$
17.0

 
$
5.7

 
$
3.0

 
$
8.7

Short-term investments
 
—

 
5.7

 
5.7

 
—

 
—

 
—

Common equity securities
 
65.9

 
7.2

 
73.1

 
19.4

 
—

 
19.4

Convertible fixed maturity and preferred investments
 
.6

 
—

 
.6

 
1.5

 
—

 
1.5

Other long-term investments
 
16.9

 
—

 
16.9

 
.6

 
.3

 
.9

Forward contracts
 
(.4
)
 
—

 
(.4
)
 
—

 
—

 
—

Net realized investment gains,
   pre-tax
 
85.7

 
27.2

 
112.9

 
27.2

 
3.3

 
30.5

Income tax (expense)
   attributable to net realized
   investment gains
 
(24.6
)
 
(6.4
)
 
(31.0
)
 
(5.3
)
 
(1.0
)
 
(6.3
)
Net realized investment
   gains, after tax
 
$
61.1

 
$
20.8

 
$
81.9

 
$
21.9

 
$
2.3

 
$
24.2

 
 
Six Months Ended
 
Six Months Ended
 
 
June 30, 2015
 
June 30, 2014
Millions
 
Net
realized
gains
(losses)
 
Net
foreign
currency gains
 
Total net realized
gains (losses)
reflected in
earnings
 
Net
realized
gains
(losses)
 
Net
foreign
currency (losses) gains
 
Total net realized
gains (losses)
reflected in
earnings
Fixed maturity investments
 
$
12.4

 
$
35.5

 
$
47.9

 
$
10.1

 
$
(.5
)
 
$
9.6

Short-term investments
 
—

 
9.3

 
9.3

 
—

 
—

 
—

Common equity securities
 
90.3

 
8.3

 
98.6

 
38.3

 
(.1
)
 
38.2

Convertible fixed maturity and preferred investments
 
(3.6
)
 
—

 
(3.6
)
 
3.9

 
—

 
3.9

Other long-term investments
 
12.8

 
1.1

 
13.9

 
.3

 
.3

 
.6

Forward contracts
 
(.4
)
 
—

 
(.4
)
 
(.1
)
 
—

 
(.1
)
Net realized investment gains
  (losses), pre-tax
 
111.5

 
54.2

 
165.7

 
52.5

 
(.3
)
 
52.2

Income tax (expense)
   attributable to net realized
   investment gains (losses)
 
(31.1
)
 
(13.1
)
 
(44.2
)
 
(9.9
)
 
(.1
)
 
(10.0
)
Net realized investment
   gains (losses), after tax
 
$
80.4

 
$
41.1

 
$
121.5

 
$
42.6

 
$
(.4
)
 
$
42.2
Schedule of unrealized gain (loss) on investments
The following table summarizes net unrealized investment gains (losses) for the three and six months ended June 30, 2015 and 2014:
 
 
Three Months Ended
 
Three Months Ended
 
 
June 30, 2015
 
June 30, 2014
Millions
 
Net
unrealized
(losses)
 
Net
foreign
currency (losses) gains
 
Total net unrealized
(losses)
reflected in
earnings
 
Net
unrealized
gains
(losses)
 
Net
foreign
currency gains
 
Total net unrealized
gains (losses)
reflected in
earnings
Fixed maturity investments
 
$
(34.7
)
 
$
(39.0
)
 
$
(73.7
)
 
$
24.9

 
$
28.2

 
$
53.1

Short-term investments
 
—

 
—

 
—

 
—

 
—

 
—

Common equity securities
 
(63.9
)
 
(8.2
)
 
(72.1
)
 
21.0

 
1.4

 
22.4

Convertible fixed maturity and preferred investments
 
—

 
(.1
)
 
(.1
)
 
(2.4
)
 
.3

 
(2.1
)
Other long-term investments
 
(29.1
)
 
1.0

 
(28.1
)
 
8.7

 
1.3

 
10.0

Forward contracts
 
—

 
—

 
—

 
—

 
—

 
—

Net unrealized investment (losses)
gains, pre-tax
 
(127.7
)
 
(46.3
)
 
(174.0
)
 
52.2

 
31.2

 
83.4

Income tax benefit (expense)
attributable to net unrealized
investment (losses) gains
 
36.0

 
11.5

 
47.5

 
(9.8
)
 
(6.9
)
 
(16.7
)
Net unrealized investment
(losses) gains, after tax
 
$
(91.7
)
 
$
(34.8
)
 
$
(126.5
)
 
$
42.4

 
$
24.3

 
$
66.7


 
 
Six Months Ended
 
Six Months Ended
 
 
June 30, 2015
 
June 30, 2014
Millions
 
Net
unrealized
(losses) gains
 
Net
foreign
currency gains (losses)
 
Total net unrealized
 (losses) gains
reflected in
earnings
 
Net
unrealized
gains
(losses)
 
Net
foreign
currency gains
 
Total net unrealized
gains (losses)
reflected in
earnings
Fixed maturity investments
 
$
(22.6
)
 
$
1.2

 
$
(21.4
)
 
$
44.3

 
$
40.4

 
$
84.7

Short-term investments
 
—

 
—

 
—

 
—

 
—

 
—

Common equity securities
 
(68.1
)
 
(7.5
)
 
(75.6
)
 
25.0

 
1.9

 
26.9

Convertible fixed maturity and preferred investments
 
.7

 
—

 
.7

 
(1.7
)
 
.3

 
(1.4
)
Other long-term investments
 
(28.2
)
 
1.1

 
(27.1
)
 
13.6

 
1.7

 
15.3

Forward contracts
 
—

 
—

 
—

 
—

 
—

 
—

Net unrealized investment (losses)
    gains, pre-tax
 
(118.2
)
 
(5.2
)
 
(123.4
)
 
81.2

 
44.3

 
125.5

Income tax benefit (expense)
   attributable to net unrealized
   investment (losses) gains
 
33.2

 
1.2

 
34.4

 
(18.9
)
 
(9.8
)
 
(28.7
)
Net unrealized investment
   (losses) gains, after tax
 
$
(85.0
)
 
$
(4.0
)
 
$
(89.0
)
 
$
62.3

 
$
34.5

 
$
96.8
Net unrealized investment gains (losses) for Level 3 investments
The following table summarizes the amount of total pre-tax unrealized investment (losses) gains included in earnings for Level 3 investments for the three and six months ended June 30, 2015 and 2014:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2015
 
2014
 
2015
 
2014
Fixed maturity investments
 
$
.3

 
$
.2

 
$
(.4
)
 
$
.4

Common equity securities
 
4.9

 
2.0

 
3.1

 
2.8

Convertible fixed maturity and preferred investments
 
.7

 
3.2

 
.8

 
3.2

Other long-term investments
 
(27.2
)
 
8.9

 
(30.0
)
 
15.0

Total unrealized investment (losses) gains, pre-tax - Level 3 investments
 
$
(21.3
)
 
$
14.3

 
$
(26.5
)
 
$
21.4
Investment holdings, equity securities, convertible fixed maturities and other long-term investments
The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s fixed maturity investments as of June 30, 2015 and December 31, 2014 were as follows: 
 
 
June 30, 2015
Millions
 
Cost or
amortized
cost(1)
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
(losses) gain(1)
 
Carrying
value
U.S. Government and agency obligations
 
$
183.9

 
$
.3

 
$
(.2
)
 
$
(.4
)
 
$
183.6

Debt securities issued by corporations
 
2,232.7

 
27.7

 
(7.0
)
 
57.7

 
2,311.1

Municipal obligations
 
118.0

 
.8

 
(1.1
)
 
—

 
117.7

Mortgage-backed and asset-backed securities
 
2,057.4

 
9.2

 
(4.7
)
 
15.5

 
2,077.4

Foreign government, agency and provincial obligations
 
98.9

 
.3

 
(1.1
)
 
.6

 
98.7

Preferred stocks
 
79.5

 
6.3

 
—

 
.2

 
86.0

   Total fixed maturity investments
 
$
4,770.4

 
$
44.6

 
$
(14.1
)
 
$
73.6

 
$
4,874.5

(1) The cost of investment securities is determined using the functional currency of the White Mountains consolidated entity that holds the investment. As a result, the table includes unrealized foreign currency gains from U.S. dollar denominated investments held at Sirius Group.

 
 
December 31, 2014
Millions
 
Cost or
amortized
cost(1)
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
gains (losses)(1)
 
Carrying
value
U.S. Government and agency obligations
 
$
184.7

 
$
.1

 
$
(.3
)
 
$
3.6

 
$
188.1

Debt securities issued by corporations
 
2,221.3

 
45.2

 
(5.1
)
 
49.8

 
2,311.2

Municipal obligations
 
82.0

 
1.4

 
(.2
)
 
—

 
83.2

Mortgage-backed and asset-backed securities
 
1,811.1

 
7.6

 
(3.5
)
 
25.7

 
1,840.9

Foreign government, agency and provincial obligations
 
274.6

 
4.2

 
(1.0
)
 
(2.7
)
 
275.1

Preferred stocks
 
79.6

 
6.1

 
—

 
.1

 
85.8

Total fixed maturity investments
 
$
4,653.3

 
$
64.6

 
$
(10.1
)
 
$
76.5

 
$
4,784.3

(1) The cost of investment securities is determined using the functional currency of the White Mountains consolidated entity that holds the investment. As a result, the table includes unrealized foreign currency gains from U.S. dollar denominated investments held at Sirius Group.


The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s common equity securities, convertible fixed maturity and preferred investments and other long-term investments as of June 30, 2015 and December 31, 2014 were as follows:
 
 
June 30, 2015
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
gains
 
Carrying
value
Common equity securities
 
$
656.7

 
$
69.1

 
$
(12.2
)
 
$
.2

 
$
713.8

Convertible fixed maturity and preferred investments
 
$
3.1

 
$
1.4

 
$
—

 
$
—

 
$
4.5

Other long-term investments
 
$
346.0

 
$
54.0

 
$
(11.9
)
 
$
2.0

 
$
390.1

 
 
December 31, 2014
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
(losses) gains
 
Carrying
value
Common equity securities
 
$
633.6

 
$
175.1

 
$
(5.2
)
 
$
(1.9
)
 
$
801.6

Convertible fixed maturity and preferred investments
 
$
19.1

 
$
.9

 
$
(.2
)
 
$
.7

 
$
20.5

Other long-term investments
 
$
343.3

 
$
73.0

 
$
(10.9
)
 
$
1.6

 
$
407.0


Other Long-term Investments
Other long-term investments consist of the following as of June 30, 2015 and December 31, 2014:
 
 
Carrying Value at
Millions
 
June 30, 2015
 
December 31, 2014
Hedge funds and private equity funds, at fair value(1)
 
$
210.8

 
$
242.9

Surplus notes investments, at fair value(1)
 
66.3

 
65.1

Private equity securities and limited liability companies, at fair value(1)(2)
 
89.9

 
69.7

Tax advantaged federal affordable housing development fund(3)
 
15.8

 
16.8

Partnership investments accounted for under the equity method
 
3.9

 
5.2

Other(1)
 
3.4

 
7.3

Total other-long term investments
 
$
390.1

 
$
407.0

(1) See Fair Value Measurements by Level table.
(2) On April 2, 2015, White Mountains invested $21.0 in PassportCard. White Mountains has chosen to take the fair value election for its investment.
(3) Fund accounted for using the proportional amortization method.


Other long-term investments
he following table summarizes investments in hedge funds and private equity funds by investment objective and sector as of June 30, 2015 and December 31, 2014:
 
 
June 30, 2015
 
December 31, 2014
Millions
 
Fair Value
 
Unfunded
Commitments
 
Fair Value
 
Unfunded
Commitments
Hedge funds
 
 

 
 

 
 

 
 

Long/short equity REIT
 
$
20.5

 
—

 
$
20.3

 
—

Long/short credit & distressed
 
19.2

 
—

 
21.4

 
—

Long/short equity banks and financial
 
15.9

 
$
—

 
29.9

 
$
—

Other
 
22.1

 
—

 
20.4

 
—

Total hedge funds
 
77.7

 
—

 
92.0

 
—

 
 
 
 
 
 
 
 
 
Private equity funds
 
 

 
 

 
 

 
 

Energy infrastructure & services
 
45.7

 
9.9

 
59.6

 
11.0

Manufacturing/Industrial
 
25.9

 
2.9

 
23.2

 
7.3

Multi-sector
 
24.5

 
4.4

 
24.2

 
5.3

Aerospace/Defense/Government
 
18.7

 
32.2

 
20.7

 
5.1

Healthcare
 
6.3

 
.8

 
6.1

 
2.8

Private equity secondaries
 
7.4

 
3.2

 
8.5

 
3.1

Insurance
 
2.1

 
41.3

 
2.1

 
41.2

Real estate
 
1.8

 
.1

 
3.6

 
3.3

Venture capital
 
.3

 
—

 
1.4

 
.3

International multi-sector, Europe
 
.4

 
—

 
1.5

 
2.3

Total private equity funds
 
133.1

 
94.8

 
150.9

 
81.7

 
 
 
 
 
 
 
 
 
Total hedge funds and private equity funds
    included in other long-term investments
 
$
210.8

 
$
94.8

 
$
242.9

 
$
81.7


 
Fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds
The following summarizes the June 30, 2015 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:
 
 
Notice Period
Millions
Redemption frequency
 
30-59 days
notice
 
60-89 days
notice
 
90-119 days
notice
 
120+ days
notice
 
Total
Monthly
 
$
5.2

 
$
—

 
$
—

 
$
—

 
$
5.2

Quarterly
 
17.8

 
19.2

 
—

 
8.0

 
45.0

Semi-annual
 
—

 
22.5

 
—

 
—

 
22.5

Annual
 
—

 
—

 
4.9

 
.1

 
5.0

Total
 
$
23.0

 
$
41.7

 
$
4.9

 
$
8.1

 
$
77.7
Fair Value of private equity funds subject to lock-up periods
As of June 30, 2015, investments in private equity funds were subject to lock-up periods as follows:
Millions
 
1-3 years
 
3 – 5 years
 
5 – 10 years
 
>10 years
 
Total
Private Equity Funds — expected lock-up period remaining
 
$27.0
 
$29.5
 
$72.5
 
$4.1
 
$133.1
Fair value measurements by level, investment securities
The following tables summarize White Mountains’s fair value measurements for investments as of June 30, 2015 and December 31, 2014, by major security type and class by level. The major security types were based on the legal form of the securities, with a separate break-out for convertible fixed maturity investments as they may react similar to either debt securities or equity securities, depending on prevailing market conditions. White Mountains has disaggregated its fixed maturity investments based on the issuing entity type, which impacts credit quality, with debt securities issued by U.S. government entities carrying minimal credit risk, while the credit and other risks associated with other issuers, such as corporations, foreign governments, municipalities or entities issuing asset-backed securities vary depending on the nature of the issuing entity type. White Mountains further disaggregates debt securities issued by corporations and equity securities by industry sector because investors often reference commonly used benchmarks and their subsectors to monitor risk and performance. Accordingly, White Mountains has further disaggregated these asset classes into subclasses based on the similar sectors and industry classifications it uses to evaluate investment risk and performance against commonly used benchmarks, such as the Barclays Intermediate Aggregate and S&P 500 indices:
 
 
June 30, 2015
Millions
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 

 
 

 
 

 
 

U.S. Government and agency obligations
 
$
183.6

 
$
131.5

 
$
52.1

 
$
—

 
 
 
 
 
 
 
 
 
Debt securities issued by corporations:
 
 

 
 
 
 
 
 
Consumer
 
544.0

 
—

 
544.0

 
—

Financials
 
405.0

 
—

 
405.0

 
—

Health Care
 
306.2

 
—

 
306.2

 
—

Industrial
 
281.3

 
—

 
281.3

 
—

Communications
 
237.2

 
—

 
237.2

 
—

Energy
 
194.2

 
—

 
194.2

 
—

Utilities
 
149.0

 
—

 
149.0

 
—

Technology
 
90.3

 
—

 
90.3

 
—

Materials
 
98.4

 
—

 
98.4

 
—

Other
 
5.5

 
—

 
5.5

 
—

Total debt securities issued by corporations
 
2,311.1

 
—

 
2,311.1

 
—

 
 
 
 
 
 
 
 
 
Municipal obligations
 
117.7

 
—

 
117.7

 
—

Mortgage-backed and asset-backed securities
 
2,077.4

 
—

 
2,070.0

 
7.4

Foreign government, agency and provincial obligations
 
98.7

 
18.8

 
79.9

 
—

Preferred stocks
 
86.0

 
—

 
14.8

 
71.2

Total fixed maturity investments
 
4,874.5

 
150.3

 
4,645.6

 
78.6

 
 
 
 
 
 
 
 
 
Short-term investments
 
840.5

 
838.3

 
2.2

 
—

 
 
 
 
 
 
 
 
 
Common equity securities:
 
 

 
 

 
 

 
 

Exchange traded funds(2)
 
361.5

 
340.1

 
21.4

 
—

Financials
 
93.7

 
60.6

 
—

 
33.1

Consumer
 
51.6

 
51.6

 
—

 
—

Health Care
 
25.8

 
25.8

 
—

 
—

Industrial
 
32.3

 
32.3

 
—

 
—

Technology
 
38.2

 
38.2

 
—

 
—

Communications
 
23.8

 
23.8

 
—

 
—

Energy
 
2.5

 
2.5

 
—

 
—

Materials
 
3.6

 
3.6

 
—

 
—

Utilities
 
1.1

 
1.1

 
—

 
—

Other
 
79.7

 
—

 
79.7

 
—

Total common equity securities
 
713.8

 
579.6

 
101.1

 
33.1

 
 
 
 
 
 
 
 
 
Convertible fixed maturity and preferred investments
 
4.5

 
—

 
—

 
4.5

Other long-term investments (1) 
 
370.6

 
—

 
—

 
370.6

Total investments
 
$
6,803.9

 
$
1,568.2

 
$
4,748.9

 
$
486.8

(1) Excludes carrying value of $3.9 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $15.8 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method and $(0.2) related to forward contracts.
(2) ETFs traded on foreign exchanges are priced with an adjusted NAV and are therefore included within level 2 measurements.

 
 
December 31, 2014
Millions
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 

 
 

 
 

 
 

U.S. Government and agency obligations
 
$
188.1

 
$
134.1

 
$
54.0

 
$
—

 
 
 
 
 
 
 
 
 
Debt securities issued by corporations:
 
 

 
 

 
 

 
 

Consumer
 
575.3

 
—

 
575.3

 
—

Financials
 
431.4

 
—

 
431.4

 
—

Health Care
 
284.2

 
—

 
284.2

 
—

Industrial
 
225.4

 
—

 
219.8

 
5.6

Communications
 
214.3

 
—

 
214.3

 
—

Energy
 
177.9

 
—

 
177.9

 
—

Utilities
 
173.6

 
—

 
173.6

 
—

Technology
 
118.0

 
—

 
118.0

 
—

Materials
 
103.0

 
—

 
103.0

 
—

Other
 
8.1

 
—

 
8.1

 
—

Total debt securities issued by corporations
 
2,311.2

 
—

 
2,305.6

 
5.6

 
 
 
 
 
 
 
 
 
Municipal obligations
 
83.2

 
—

 
83.2

 
—

Mortgage-backed and asset-backed securities
 
1,840.9

 
—

 
1,840.9

 
—

Foreign government, agency and provincial obligations
 
275.1

 
21.3

 
253.8

 
—

Preferred stocks
 
85.8

 
—

 
14.7

 
71.1

Total fixed maturity investments
 
4,784.3

 
155.4

 
4,552.2

 
76.7

 
 
 
 
 
 
 
 
 
Short-term investments
 
871.7

 
868.8

 
2.9

 
—

 
 
 
 
 
 
 
 
 
Common equity securities:
 
 

 
 

 
 

 
 

Financials
 
237.5

 
197.3

 
—

 
40.2

Consumer
 
161.2

 
161.1

 
.1

 
—

Health Care
 
101.9

 
101.9

 
—

 
—

Industrial
 
67.5

 
67.5

 
—

 
—

Technology
 
54.3

 
54.3

 
—

 
—

Communications
 
32.9

 
32.9

 
—

 
—

Energy
 
32.6

 
32.6

 
—

 
—

Materials
 
21.2

 
21.2

 
—

 
—

Utilities
 
9.5

 
9.4

 
.1

 
—

Other
 
83.0

 
9.7

 
73.3

 
—

Total common equity securities
 
801.6

 
687.9

 
73.5

 
40.2

 
 
 
 
 
 
 
 
 
Convertible fixed maturity and preferred investments
 
20.5

 
—

 
12.3

 
8.2

Other long-term investments (1)
 
385.0

 
—

 
—

 
385.0

Total investments
 
$
6,863.1

 
$
1,712.1

 
$
4,640.9

 
$
510.1

(1) Excludes carrying value of $5.2 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $16.8 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
Debt securities issued by corporations, credit ratings
The following table summarizes the ratings of the corporate debt securities held in White Mountains’s investment portfolio as of June 30, 2015 and December 31, 2014:
 
 
Fair Value at
Millions
 
June 30, 2015
 
December 31, 2014
AAA
 
$
—

 
$
—

AA
 
200.5

 
236.9

A
 
887.6

 
957.8

BBB
 
1,213.5

 
1,105.9

BB
 
6.4

 
—

Other
 
3.1

 
10.6

Debt securities issued by corporations(1)
 
$
2,311.1

 
$
2,311.2

(1) Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's Financial Services LLC (“Standard & Poor’s”) and 2) Moody’s Investor Service (“Moody's”).
Mortgage-backed, asset-backed securities
The following table summarizes mortgage and asset-backed securities as of June 30, 2015 and December 31, 2014:
 
 
June 30, 2015
 
December 31, 2014
Millions
 
Fair Value
 
Level 2
 
Level 3
 
Fair Value
 
Level 2
 
Level 3
Mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 
 

Agency:
 
 

 
 

 
 

 
 

 
 

 
 

GNMA
 
$
355.4

 
$
355.4

 
$
—

 
$
411.2

 
$
411.2

 
$
—

FNMA
 
38.9

 
38.9

 
—

 
36.6

 
36.6

 
—

FHLMC
 
34.8

 
34.8

 
—

 
49.6

 
49.6

 
—

Total Agency(1)
 
429.1

 
429.1

 
—

 
497.4

 
497.4

 
—

Non-agency:
 
 

 
 

 
 

 
 

 
 

 
 

Residential
 
204.5

 
204.5

 
—

 
131.2

 
131.2

 
—

Commercial
 
301.0

 
301.0

 
—

 
236.9

 
236.9

 
—

Total Non-agency
 
505.5

 
505.5

 
—

 
368.1

 
368.1

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Total mortgage-backed securities
 
934.6

 
934.6

 
—

 
865.5

 
865.5

 
—

Other asset-backed securities:
 
 

 
 
 
 
 
 

 
 
 
 
Credit card receivables
 
518.6

 
518.6

 
—

 
522.2

 
522.2

 
—

Vehicle receivables
 
430.0

 
430.0

 
—

 
289.4

 
289.4

 
—

Other
 
194.2

 
186.8

 
7.4

 
163.8

 
163.8

 
—

Total other asset-backed securities
 
1,142.8

 
1,135.4

 
7.4

 
975.4

 
975.4

 
—

Total mortgage and asset-backed securities
 
$
2,077.4

 
$
2,070.0

 
$
7.4

 
$
1,840.9

 
$
1,840.9

 
$
—

(1)  Represents publicly traded mortgage-backed securities which carry the full faith and credit guaranty of the U.S. government (i.e., GNMA) or are guaranteed by a government sponsored entity (i.e., FNMA, FHLMC).
Schedule of security issuance years of investments in non-agency RMBS and non-agency CMBS securities
The security issuance years of White Mountains’s investments in non-agency residential mortgage-backed securities ("RMBS") and non-agency commercial mortgage-backed securities (“CMBS”) as of June 30, 2015 are as follows:
 
 
 
 
 
 
Security Issuance Year
 
 
 
 
 
 
Millions
 
Fair Value
 
2004
 
2005
 
2006
 
2007
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
 
2015
Non-agency
   RMBS
 
$
204.5

 
$
33.0

 
$
12.3

 
$
8.7

 
$
—

 
$
14.0

 
$
—

 
$
47.4

 
$
18.4

 
$
4.1

 
$
25.8

 
$
40.8

 
$
—

Non-agency
   CMBS
 
301.0

 
—

 
—

 
8.3

 
—

 
—

 
—

 
10.7

 
—

 
25.8

 
58.6

 
121.4

 
76.2

Total
 
$
505.5

 
$
33.0

 
$
12.3

 
$
17.0

 
$
—

 
$
14.0

 
$
—

 
$
58.1

 
$
18.4

 
$
29.9

 
$
84.4

 
$
162.2

 
$
76.2
Non-agency residential mortgage securities, collateral quality and tranche levels
The classification of the underlying collateral quality and the tranche levels of White Mountains’s non-agency RMBS securities are as follows as of June 30, 2015:
Millions
 
Fair Value
 
Super Senior (1)
 
Senior (2)
 
Subordinate (3)
Prime
 
$
202.5

 
$
69.1

 
$
133.4

 
$
—

Non-prime
 
2.0

 
—

 
2.0

 
—

Sub-prime
 
—

 
—

 
—

 
—

Total
 
$
204.5

 
$
69.1

 
$
135.4

 
$
—

(1)  At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch Ratings (“Fitch”) and were senior to other “AAA” or “Aaa” securities.
(2) At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were senior to non-“AAA” or non-“Aaa” securities.
(3) At issuance, Subordinate were not rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or "AAA" by Fitch and were junior to “AAA” or “Aaa” securities. 
Non-agency commercial mortgage securities, type of interest rate and tranche levels
The amount of fixed and floating rate securities and their tranche levels of White Mountains’s non-agency CMBS securities are as follows as of June 30, 2015:
Millions
 
Fair Value
 
Super Senior (1)
 
Senior (2)
 
Subordinate (3)
Fixed rate CMBS
 
$
204.2

 
$
18.4

 
$
84.5

 
$
101.3

Floating rate CMBS
 
96.8

 
—

 
—

 
96.8

Total
 
$
301.0

 
$
18.4

 
$
84.5

 
$
198.1

(1)  At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch Ratings (“Fitch”) and were senior to other “AAA” or “Aaa” securities.
(2) At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were senior to non-“AAA” or non-“Aaa” securities.
(3) At issuance, Subordinate were not rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or "AAA" by Fitch and were junior to “AAA” or “Aaa” securities. 
Rollforward of fair value investments by level
The following tables summarize the changes in White Mountains’s fair value measurements by level for the three months ended June 30, 2015 and 2014:
 
 
 
Level 3 Investments
 
 
 
Millions
Level 1 investments
Level 2 
investments
Fixed
maturity investments
Common
equity
securities
Convertible fixed maturity and
preferred investments
Other long-term
investments
 
Total
 
Balance at January 1, 2015
$
843.3

$
4,638.0

$
76.7

$
40.2

$
8.2

$
385.0

 
$
5,991.4

(1)(2) 
Total realized and
   unrealized gains (losses)
13.1

31.3

—

6.9

(3.7
)
(13.3
)
 
34.3

(3) 
Foreign currency losses
   through OCI
(5.4
)
(62.3
)
(.2
)
—

—

(2.3
)
 
(70.2
)
  
Amortization/Accretion
(.1
)
(21.1
)
—

—

—

—

 
(21.2
)
 
Purchases
945.9

2,002.4

76.0

—

—

33.1

 
3,057.4

 
Sales
(1,017.8
)
(1,915.5
)
—

(9.5
)
—

(18.0
)
 
(2,960.8
)
 
Effect of redemption of Prospector hedge funds
(49.1
)
—

—

(4.5
)
—

(13.9
)
 
(67.5
)
 
Transfers in
—

73.9

—

—

—

—

 
73.9

  
Transfers out
—

—

(73.9
)
—

—

—

 
(73.9
)
  
Balance at
   June 30, 2015
$
729.9

$
4,746.7

$
78.6

$
33.1

$
4.5

$
370.6

 
$
5,963.4

(1)(2) 
(1)  Excludes carrying value of $5.2 and $3.9 at January 1, 2015 and June 30, 2015 associated with other long-term investments accounted for using the equity method. Excludes carrying value of $16.8 and $15.8 at January 1, 2015 and June 30, 2015 million associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method. Excludes $(0.2) related to forward contracts at June 30. 2015.
(2)  Excludes carrying value of $871.7 and $840.5 at January 1, 2015 and June 30, 2015 associated with short-term investments.
(3) Excludes $0.9 realized and unrealized losses associated with the Prospector Offshore Fund consolidation of investment-related liabilities and realized and unrealized loss for the period of $9.3 associated with short-term investments.
 
 
 
Level 3 Investments
 
 
 
Millions
Level 1 investments
Level 2 
investments
Fixed
maturity investments
Common
equity
securities
Convertible fixed maturity and
preferred investments
Other long-term
investments
 
Total
 
Balance at January 1, 2014
$
1,376.7

$
4,982.2

$
93.0

$
46.1

$
6.1

$
262.4

 
$
6,766.5

(1)(2)(3) 
Total realized and
   unrealized gains
67.3

89.8

.9

2.7

3.2

16.8

 
180.7

(4) 
Foreign currency losses
   through OCI
(6.8
)
(50.8
)
(.4
)
—

—

(1.4
)
 
(59.4
)
 
Amortization/Accretion
(.3
)
(22.0
)
(.1
)
—

—

—

 
(22.4
)
 
Purchases
953.5

1,632.0

76.1

5.0

1.5

17.4

 
2,685.5

 
Sales
(896.1
)
(1,875.6
)
—

—

—

(6.8
)
 
(2,778.5
)
 
Net change in investments
related to purchases of
   consolidated affiliates
(2.7
)
7.3

—

—

—

—

 
4.6

 
Transfers in
—

19.6

8.5

—

—

—

 
28.1

 
Transfers out
—

(8.5
)
(19.6
)
—

—

—

 
(28.1
)
 
Balance at
   June 30, 2014
$
1,491.6

$
4,774.0

$
158.4

$
53.8

$
10.8

$
288.4

 
$
6,777.0

(1)(2)(3) 
(1) Excludes carrying value of $6.8 and $5.6 at January 1, 2014 and June 30, 2014 associated with other long-term investment limited partnerships accounted for using the equity method and $(0.1) and $0.1 at January 1, 2014 and June 30, 2014 related to forward contracts. Excludes carrying value of $19.1 and $18.0 at January 1, 2014 and June 30, 2014 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
(2)  Carrying value includes $236.3 and 203.8 at January 1, 2014 and June 30, 2014 that is classified as assets held for sale relating to discontinued operations.
(3) Excludes carrying value of $635.9 and $564.0 at January 1, 2014 and June 30, 2014 associated with short-term investments.
(4) Excludes $1.8 realized and unrealized losses associated with the Prospector Offshore Fund and Prospector Turtle Fund consolidation of investment-related liabilities. The Prospector Turtle Fund was liquidated as of December 31, 2014.
Schedule of significant unobservable inputs used in estimating the fair value of investment securities
The following summarizes significant unobservable inputs used in estimating the fair value of investment securities classified within Level 3 other than hedge funds and private equity funds as of June 30, 2015 and December 31, 2014. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.

($ in millions)
 
 
 
 
 
June 30, 2015
 
December 31, 2014
Description
 
Rating(2)
 
Valuation
Technique(s)
 
Fair 
Value(7)
 
Unobservable Input
 
Fair 
Value(7)
 
Unobservable Input
Preferred Stock(1)
 
NR
 
Discounted cash flow
 
$71.2
 
Discount yield
-
7.1%
 
$71.1
 
Discount yield
-
7.1%
Private equity security(1)
 
NR
 
Multiple of GAAP book value
 
$33.1
 
Book value multiple
-
1.20
 
$40.2
 
Book value multiple
-
1.10
Private equity security(1)
 
NR
 
Share price of most recent transaction
 
$20.1
 
Share price
-
$1.06
 
$20.1
 
Share price
-
$1.06
Private equity security(1)
 
NR
 
Share price of most recent transaction
 
$9.5
 
Share price
-
$290.96
 
$10.4
 
Share price
-
$290.96
Private equity security(1)
 
NR
 
Share price of most recent transaction
 
$16.1
 
Share price
-
$0.13
 
$15.8
 
Share price
-
$0.13
Private equity security(1)
 
NR
 
Share price of most recent transaction
 
$21.0
 
Share price
-
$1.00
 
N/A
 
N/A
 
N/A
Convertible preferred
   security(1)
 
NR
 
Multiple of EBITDA
 
$4.5
 
EBITDA multiple
-
6.00
 
$3.8
 
EBITDA multiple
-
6.00
Convertible preferred
   security(1)
 
NR
 
Share price of most recent transaction
 
N/A
 
N/A
 
N/A
 
$4.5
 
Share price
-
$0.71
Debt security issued
   by corporation(1)
 
NR
 
Discounted cash flow
 
N/A
 
N/A
 
N/A
 
$5.6
 
Illiquidity discount(3)
-
10%
Asset-backed security(1)
 
A
 
Broker pricing
 
$7.4
 
Broker quote
 
N/A
 
N/A
 
N/A
 
N/A
Surplus notes:
 
NR
 
 
 
 
 

 
 
 

    - Seller priority
 
 
 
Discounted cash flow
 
$45.4
 
Discount
 rate (4)
-
10.2%
 
$44.0
 
Discount
 rate (4)
-
9.3%
 
 
 
 
 
 
Timing of interest
payments(5)
-
5 years
 
Timing of interest
payments(5)
-
5 years
 
 
 
 
 
 
Timing of principal
payments(5)
-
10 years
 
Timing of principal
payments(5)
-
10 years
    - Pari passu
 
 
 
Discounted cash flow
 
$20.9
 
Discount
 rate(5)
-
15.5%
 
$21.1
 
Discount
 rate(5)
-
13.5%
 
 
 
 
 
 
Timing of interest
payments(6)
-
5 years
 
Timing of interest
payments(6)
-
5 years
 
 
 
 
 
 
Timing of principal
payments(6)
-
15 years
 
Timing of principal
payments(6)
-
10 years
(1) As of June 30, 2015, consists of 1 security.
(2) Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.
(3) Judgmentally determined based on the Company’s limited trading ability of the issuer.
(4) Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the seller priority note is roughly equivalent to that of a conventional debt security with a credit rating of ‘B’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, was added to the treasury rate to determine the discount rate for the pari passu note.
(5) Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the pari passu note is roughly equivalent to that of a conventional debt security with a credit rating of ‘CCC’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, was added to the treasury rate to determine the discount rate for the seller priority note.
(6) For estimated value purposes, the assumption has been made that interest payouts begin in year five and principal repayments begin on a graduated basis in year ten for the seller priority note and year fifteen for the pari passu note.
(7) Includes the unrealized gains and losses associated with foreign currency; foreign currency effects based on observable inputs.