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Derivatives (Tables)
 12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Derivative [Line Items]    
Derivatives  
Derivatives
Variable Annuity Reinsurance    
Derivative [Line Items]    
Derivatives
Variable Annuity Reinsurance
White Mountains entered into agreements to reinsure death and living benefit guarantees associated with certain variable annuities in Japan. During the third quarter of 2015, the variable annuity contracts reinsured by WM Life Re began to mature and were fully runoff by June 30, 2016. The reinsurance agreement was commuted in December 2016.
The following table summarizes the pre-tax operating results of WM Life Re for the years ended December 31, 2016, 2015 and 2014:
 
 
Year Ended December 31,
Millions
 
2016
 
2015
 
2014
Fees, included in other revenue
 
$
1.2

 
$
9.3

 
$
18.6

Change in fair value of variable annuity liability, included in other revenue
 
(.3
)
 
(.4
)
 
52.9

Change in fair value of derivatives, included in other revenue
 
(2.0
)
 
(8.8
)
 
(72.4
)
Foreign exchange, included in other revenue
 
1.3

 
(1.3
)
 
(3.2
)
Other investment income and losses
 
—

 
(.4
)
 
(1.4
)
Total revenues
 
.2

 
(1.6
)
 
(5.5
)
Change in fair value of variable annuity death benefit liabilities, included in
   general and administrative expenses
 
—

 
—

 
.6

Death benefit claims paid, included in general and administrative expenses
 
(.3
)
 
(.1
)
 
(.1
)
General and administrative expenses
 
(2.6
)
 
(4.0
)
 
(4.3
)
Pre-tax loss
 
$
(2.7
)
 
$
(5.7
)
 
$
(9.3
)


During 2013, the ratio of annuitants’ aggregate account values to the aggregate guarantee value provided by WM Life Re increased, and as a result, annuitants surrendered their policies at higher rates than WM Life Re observed in the past. In response to this trend, WM Life Re adjusted the projected surrender assumptions used in the valuation of its variable annuity reinsurance liability upward. In 2014, surrender rates continued to outpace assumptions and WM Life Re again adjusted the projected surrender assumptions. For the year ended December 31, 2014, the change in the fair value of the variable annuity liability included $0.2 million of losses associated with changes in projected surrender assumptions. There was no change in projected surrender assumptions in 2015 or 2016.
The following summarizes net realized and unrealized derivative gains (losses) recognized in other revenue for the years ended December 31, 2016, 2015 and 2014 and the carrying values, included in other assets, as of December 31, 2016 and 2015 by type of instrument:
 
 
 
 
 
 
 
 
Carrying Value
 
 
Year Ended December 31,
 
December 31,
Millions
 
2016
 
2015
 
2014
 
2016
 
2015
Fixed income/interest rate
 
$
1.8

 
$
6.4

 
$
(33.7
)
 
$
—

 
$
.5

Foreign exchange
 
(4.8
)
 
(7.3
)
 
(1.3
)
 
—

 
14.8

Equity
 
1.0

 
(7.9
)
 
(37.4
)
 
—

 
4.8

Total
 
$
(2.0
)
 
$
(8.8
)
 
$
(72.4
)
 
$
—

 
$
20.1



The following table summarizes the changes in White Mountains’s variable annuity reinsurance liabilities and derivative instruments for the year ended December 31, 2016, 2015 and 2014:
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2016
 
$
.3

 
$
2.7

 
$
16.5

 
$
.9

 
$
20.1

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized (losses) gains
 
(.3
)
(5) 
2.9

 
(.7
)
 
(4.2
)
 
(2.0
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(5.6
)
 
(15.8
)
 
3.3

 
(18.1
)
Balance at December 31, 2016
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2015
 
$
.7

 
$
18.9

 
$
33.8

 
$
3.7

 
$
56.4

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized (losses) gains
 
(.4
)
(5) 
(9.7
)
 
(7.5
)
 
8.4

 
(8.8
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(6.5
)
 
(9.8
)
 
(11.2
)
 
(27.5
)
Balance at December 31, 2015
 
$
.3

 
$
2.7

 
$
16.5

 
$
.9

 
$
20.1

 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2014
 
$
(52.8
)
 
$
63.4

 
$
4.7

 
$
1.1

 
$
69.2

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized gains (losses)
 
53.5

(5) 
(38.6
)
 
(71.0
)
 
37.2

 
(72.4
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(5.9
)
 
100.1

 
(34.6
)
 
59.6

Balance at December 31, 2014
 
$
.7

 
$
18.9

 
$
33.8

 
$
3.7

 
$
56.4

(1) 
Consists of over-the-counter instruments.
(2) 
Consists of interest rate swaps, total return swaps, foreign currency forward contracts, and bond forwards. Fair value measurement based upon bid/ask pricing quotes for similar instruments that are actively traded, where available.  Swaps for which an active market does not exist have been priced using observable inputs including the swap curve and the underlying bond index.
(3) 
Consists of exchange traded equity index, foreign currency and interest rate futures. Fair value measurements based upon quoted prices for identical instruments that are actively traded.
(4) 
In addition to derivative instruments, WM Life Re held cash, short-term and fixed maturity investments of $0.0, $5.8 and $33.2 as of December 31, 2016, 2015 and 2014 posted as collateral to its reinsurance counterparties.
(5) 
There was no changes in the fair value of variable annuity death benefit liabilities for the years ended December 31, 2016 and December 31, 2015. In 2014, $0.6 related to the change in the fair value of variable annuity death benefit liabilities, which are included in general and administrative expenses.
(6) 
Consists of foreign currency options and equity options.



In addition to derivative instruments, WM Life Re held cash and fixed maturity investments posted as collateral to its variable annuity reinsurance counterparties. The total collateral includes the following:

 
 
December 31,
Millions
 
2016
 
2015
Cash
 
$
—

 
$
5.8

Fixed maturity investments
 
—

 
—

Total
 
$
—

 
$
5.8


Collateral in the form of fixed maturity securities consisted of Government of Japan Bonds, recorded at fair value. Collateral in the form of short-term investments consisted of money-market instruments, carried at amortized cost, which approximated fair value.
All of White Mountains’s variable annuity reinsurance liabilities were classified as Level 3 measurements. The fair value of White Mountains’s variable annuity reinsurance liabilities were estimated using actuarial and capital market assumptions related to the projected discounted cash flows over the term of the reinsurance agreement. Actuarial assumptions regarding future policyholder behavior, including surrender and lapse rates, were generally unobservable inputs and significantly impacted the fair value estimates. Generally, the liabilities associated with these guarantees increased with declines in the equity markets, interest rates and currencies against the Japanese yen, as well as with increases in market volatilities. White Mountains used derivative instruments to mitigate the risks associated with changes in the fair value of the reinsured variable annuity guarantees. The types of inputs used to estimate the fair value of these derivative instruments, with the exception of actuarial assumptions regarding policy holder behavior and risk margins, were generally the same as those used to estimate the fair value of variable annuity liabilities. There were no open derivatives instruments remaining as of December 31, 2016.
WM Life Re entered into both over-the-counter (“OTC”) and exchange traded derivative instruments to economically hedge the liability from the variable annuity benefit guarantee. In the case of OTC derivatives, WM Life Re had exposure to credit risk for amounts that were uncollateralized by counterparties. WM Life Re’s internal risk management guidelines established net counterparty exposure thresholds that took into account OTC counterparties’ credit ratings. The OTC derivative contracts were subject to restrictions on liquidation of the instruments and distribution of proceeds under collateral agreements. In the case of exchange traded instruments, WM Life Re had exposure to credit risk for amounts uncollateralized by margin balances. WM Life Re had master netting agreements with certain of its counterparties whereby the collateral provided (held) was calculated on a net basis. The following summarizes amounts offset under master netting agreements:

 
 
December 31, 2015
Millions
 
Gross asset amounts before offsets(1)
 
Gross liability amounts offset under master netting arrangements
 
Net amounts recognized in Other Assets
Interest rate contracts
 
 
 
 
 
 
OTC
 
$
2.4

 
$
(2.1
)
 
$
.3

Exchange traded
 
.1

 
(.1
)
 
—

Foreign exchange contracts
 
 
 
 
 
 
OTC
 
15.0

 
—

 
15.0

Exchange traded
 
.1

 
(.3
)
 
(.2
)
Equity contracts
 
 
 
 
 
 
OTC
 
4.4

 
(.6
)
 
3.8

Exchange traded
 
1.2

 
—

 
1.2

Total(2)
 
$
23.2

 
$
(3.1
)
 
$
20.1


(1) Amount equal to fair value of instrument as recognized in other assets.
(2) All derivative instruments held by WM Life Re were subject to master netting arrangements.

There were no open derivative instruments as of December 31, 2016 and no exposure to credit losses on OTC and exchanged traded derivatives as of that date. The following summarizes the value, collateral held or provided by WM Life Re and net exposure to credit losses on OTC and exchange traded derivative instruments by counterparty recorded within other assets as of December 31, 2015:
 
 
December 31, 2015
Millions
 
Net amount of assets reflected in Balance Sheet
 
Collateral provided to counterparty - Cash
 
Collateral provided to counter-party - Financial Instruments
 
Net amount of exposure after effect of collateral provided
 
Excess collateral provided to counter-party- Cash
 
Excess collateral provided - Financial Instruments
 
Counter-party collateral held by WM Life Re- Cash
 
Net amount of exposure to counter-party
 
Standard
& Poor's
Rating(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JP Morgan
 
$
8.5

 
$
—

 
$
—

 
$
8.5

 
$
—

 
$
—

 
$
5.5

 
$
3.0

 
A
+
Bank of America
 
.7

 
$
—

 
—

 
.7

 
$
—

 
—

 
—

 
.7

 
A

Citigroup - OTC
 
9.9

 
—

 
—

 
9.9

 
—

 
—

 
1.4

 
8.5

 
A
 
Citigroup - Exchange Traded
 
1.0

 
—

 
—

 
1.0

 
5.8

 
—

 
—

 
6.8

 
A
 
   Total
 
$
20.1

 
$
—

 
$
—

 
$
20.1

 
$
5.8

 
$
—

 
$
6.9

 
$
19.0

 
 
 
(1) 
Standard & Poor’s ratings as detailed above are:  “A+” (Strong, which is the fifth highest of twenty-three creditworthiness ratings),“A” (which is the sixth highest of twenty-three creditworthiness ratings), “A-” (which is the seventh highest of twenty-three creditworthiness ratings), and BBB+ (which is the eighth highest of twenty-three creditworthiness ratings).
  
Pre-tax operating results
The following table summarizes the pre-tax operating results of WM Life Re for the years ended December 31, 2016, 2015 and 2014:
 
 
Year Ended December 31,
Millions
 
2016
 
2015
 
2014
Fees, included in other revenue
 
$
1.2

 
$
9.3

 
$
18.6

Change in fair value of variable annuity liability, included in other revenue
 
(.3
)
 
(.4
)
 
52.9

Change in fair value of derivatives, included in other revenue
 
(2.0
)
 
(8.8
)
 
(72.4
)
Foreign exchange, included in other revenue
 
1.3

 
(1.3
)
 
(3.2
)
Other investment income and losses
 
—

 
(.4
)
 
(1.4
)
Total revenues
 
.2

 
(1.6
)
 
(5.5
)
Change in fair value of variable annuity death benefit liabilities, included in
   general and administrative expenses
 
—

 
—

 
.6

Death benefit claims paid, included in general and administrative expenses
 
(.3
)
 
(.1
)
 
(.1
)
General and administrative expenses
 
(2.6
)
 
(4.0
)
 
(4.3
)
Pre-tax loss
 
$
(2.7
)
 
$
(5.7
)
 
$
(9.3
)
  
Fair Value of Assets and Liabilities Measured on Recurring and Non-recurring Basis Table
The following table summarizes the changes in White Mountains’s variable annuity reinsurance liabilities and derivative instruments for the year ended December 31, 2016, 2015 and 2014:
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2016
 
$
.3

 
$
2.7

 
$
16.5

 
$
.9

 
$
20.1

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized (losses) gains
 
(.3
)
(5) 
2.9

 
(.7
)
 
(4.2
)
 
(2.0
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(5.6
)
 
(15.8
)
 
3.3

 
(18.1
)
Balance at December 31, 2016
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2015
 
$
.7

 
$
18.9

 
$
33.8

 
$
3.7

 
$
56.4

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized (losses) gains
 
(.4
)
(5) 
(9.7
)
 
(7.5
)
 
8.4

 
(8.8
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(6.5
)
 
(9.8
)
 
(11.2
)
 
(27.5
)
Balance at December 31, 2015
 
$
.3

 
$
2.7

 
$
16.5

 
$
.9

 
$
20.1

 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3(1)(6)
 
Level 2(1)(2)
 
Level 1(3)
 
Total(4)
Balance at January 1, 2014
 
$
(52.8
)
 
$
63.4

 
$
4.7

 
$
1.1

 
$
69.2

Purchases
 
—

 
—

 
—

 
—

 
—

Net realized and unrealized gains (losses)
 
53.5

(5) 
(38.6
)
 
(71.0
)
 
37.2

 
(72.4
)
Transfers in (out)
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(5.9
)
 
100.1

 
(34.6
)
 
59.6

Balance at December 31, 2014
 
$
.7

 
$
18.9

 
$
33.8

 
$
3.7

 
$
56.4

(1) 
Consists of over-the-counter instruments.
(2) 
Consists of interest rate swaps, total return swaps, foreign currency forward contracts, and bond forwards. Fair value measurement based upon bid/ask pricing quotes for similar instruments that are actively traded, where available.  Swaps for which an active market does not exist have been priced using observable inputs including the swap curve and the underlying bond index.
(3) 
Consists of exchange traded equity index, foreign currency and interest rate futures. Fair value measurements based upon quoted prices for identical instruments that are actively traded.
(4) 
In addition to derivative instruments, WM Life Re held cash, short-term and fixed maturity investments of $0.0, $5.8 and $33.2 as of December 31, 2016, 2015 and 2014 posted as collateral to its reinsurance counterparties.
(5) 
There was no changes in the fair value of variable annuity death benefit liabilities for the years ended December 31, 2016 and December 31, 2015. In 2014, $0.6 related to the change in the fair value of variable annuity death benefit liabilities, which are included in general and administrative expenses.
(6) 
Consists of foreign currency options and equity options.


  
Schedule of collateral

In addition to derivative instruments, WM Life Re held cash and fixed maturity investments posted as collateral to its variable annuity reinsurance counterparties. The total collateral includes the following:

 
 
December 31,
Millions
 
2016
 
2015
Cash
 
$
—

 
$
5.8

Fixed maturity investments
 
—

 
—

Total
 
$
—

 
$
5.8


  
Offestting Assets and Liabilities

 
 
December 31, 2015
Millions
 
Gross asset amounts before offsets(1)
 
Gross liability amounts offset under master netting arrangements
 
Net amounts recognized in Other Assets
Interest rate contracts
 
 
 
 
 
 
OTC
 
$
2.4

 
$
(2.1
)
 
$
.3

Exchange traded
 
.1

 
(.1
)
 
—

Foreign exchange contracts
 
 
 
 
 
 
OTC
 
15.0

 
—

 
15.0

Exchange traded
 
.1

 
(.3
)
 
(.2
)
Equity contracts
 
 
 
 
 
 
OTC
 
4.4

 
(.6
)
 
3.8

Exchange traded
 
1.2

 
—

 
1.2

Total(2)
 
$
23.2

 
$
(3.1
)
 
$
20.1


(1) Amount equal to fair value of instrument as recognized in other assets.
(2) All derivative instruments held by WM Life Re were subject to master netting arrangements.

  
Offsetting Assets
There were no open derivative instruments as of December 31, 2016 and no exposure to credit losses on OTC and exchanged traded derivatives as of that date. The following summarizes the value, collateral held or provided by WM Life Re and net exposure to credit losses on OTC and exchange traded derivative instruments by counterparty recorded within other assets as of December 31, 2015:
 
 
December 31, 2015
Millions
 
Net amount of assets reflected in Balance Sheet
 
Collateral provided to counterparty - Cash
 
Collateral provided to counter-party - Financial Instruments
 
Net amount of exposure after effect of collateral provided
 
Excess collateral provided to counter-party- Cash
 
Excess collateral provided - Financial Instruments
 
Counter-party collateral held by WM Life Re- Cash
 
Net amount of exposure to counter-party
 
Standard
& Poor's
Rating(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JP Morgan
 
$
8.5

 
$
—

 
$
—

 
$
8.5

 
$
—

 
$
—

 
$
5.5

 
$
3.0

 
A
+
Bank of America
 
.7

 
$
—

 
—

 
.7

 
$
—

 
—

 
—

 
.7

 
A

Citigroup - OTC
 
9.9

 
—

 
—

 
9.9

 
—

 
—

 
1.4

 
8.5

 
A
 
Citigroup - Exchange Traded
 
1.0

 
—

 
—

 
1.0

 
5.8

 
—

 
—

 
6.8

 
A
 
   Total
 
$
20.1

 
$
—

 
$
—

 
$
20.1

 
$
5.8

 
$
—

 
$
6.9

 
$
19.0

 
 
 
(1) 
Standard & Poor’s ratings as detailed above are:  “A+” (Strong, which is the fifth highest of twenty-three creditworthiness ratings),“A” (which is the sixth highest of twenty-three creditworthiness ratings), “A-” (which is the seventh highest of twenty-three creditworthiness ratings), and BBB+ (which is the eighth highest of twenty-three creditworthiness ratings).
  
Realized and unrealized derivative gains (losses) recognized in other revenues and carrying values, by the type of instrument
The following summarizes net realized and unrealized derivative gains (losses) recognized in other revenue for the years ended December 31, 2016, 2015 and 2014 and the carrying values, included in other assets, as of December 31, 2016 and 2015 by type of instrument:
 
 
 
 
 
 
 
 
Carrying Value
 
 
Year Ended December 31,
 
December 31,
Millions
 
2016
 
2015
 
2014
 
2016
 
2015
Fixed income/interest rate
 
$
1.8

 
$
6.4

 
$
(33.7
)
 
$
—

 
$
.5

Foreign exchange
 
(4.8
)
 
(7.3
)
 
(1.3
)
 
—

 
14.8

Equity
 
1.0

 
(7.9
)
 
(37.4
)
 
—

 
4.8

Total
 
$
(2.0
)
 
$
(8.8
)
 
$
(72.4
)
 
$
—

 
$
20.1

  
Forward Contracts [Member]    
Derivative [Line Items]    
Derivatives
The following table summarizes the notional amount and the uncollateralized balance associated with the forward currency contract:
 
 
December 31, 2016
Millions
 
Notional Amount
 
Carrying Value
 
Standard & Poor's
 Rating (1)
Barclays Bank PLC
 
$
184.6

 
$
(1.2
)
 
A-
(1) Standard & Poor’s ratings “A-” (Strong, which is the ninth highest of twenty-one creditworthiness ratings).