Discontinued Operations

3 Months Ended

Mar. 31, 2017

Discontinued Operations

Held for Sale and Discontinued Operations

Sirius Group

On April 18, 2016, White Mountains completed the sale of Sirius Group to CMI for approximately $2.6 billion. $161.8 million of this amount was used to purchase certain assets to be retained by White Mountains out of Sirius Group, including shares of OneBeacon. The amount paid at closing was based on an estimate of Sirius Group’s closing date tangible common shareholder’s equity. During 2016, White Mountains recorded $363.2 million of gain from sale of Sirius Group in discontinued operations in the statement of operations and $113.3 million in other comprehensive income from discontinued operations.

Through April 18, 2016, Sirius Group’s results are reported as discontinued operations and assets and liabilities held for sale within White Mountains’s GAAP financial statements. Assets held for sale did not include White Mountains’s investment in OneBeacon and certain other investments that are in the Sirius Group legal entities. As of December 31, 2015, the value of these investments, net of related tax effects, was $686.2 million, of which $528.6 million related to Symetra. Net loss from discontinued operations does not include White Mountains’s net investment income and realized and unrealized investment gains and losses associated with these investments. For the three months ended March 31, 2016, $4.1 million of realized and unrealized investment gains and losses, net of related tax effects, that are included in the Sirius Group legal entities have been excluded from net loss from discontinued operations. For the three months ended March 31, 2016, White Mountains recorded $0.9 million of net loss from discontinued operations and $37.2 million of other comprehensive income from Sirius Group.

Tranzact

On June 9, 2016, White Mountains announced that it had entered into an agreement for the sale of Tranzact to an affiliate of Clayton, Dubilier & Rice, LLC. On July 21, 2016, White Mountains completed the sale of Tranzact and received net proceeds of $221.3 million at closing. On October 5, 2016, White Mountains received additional proceeds of $1.2 million following the release of the post-closing purchase price adjustment escrow. See Note 2 — “Significant Transactions”.

During 2016, White Mountains recorded a $51.9 million gain from the sale of Tranzact in discontinued operations, which included a $30.2 million tax expense for the reversal of a tax valuation allowance that is offset by a tax benefit recorded in continuing operations. In the first quarter of 2017, White Mountains recorded a $1.0 million reduction to the gain from sale of Tranzact in discontinued operations as a result of 2016 tax payments.

During 2016, White Mountains recognized a $21.4 million tax benefit in continuing operations related to the reversal of a valuation allowance that resulted from the gain on the sale of Tranzact recognized within discontinued operations. This tax benefit was recorded in continuing operations with an offsetting amount of net tax expense recorded in discontinued operations, $30.2 million of tax expense was recorded to gain from sale of Tranzact in discontinued operations and a $8.8 million tax benefit was recorded to net income from discontinued operations.

Through July 21, 2016, Tranzact’s results of operations are reported as discontinued operations and assets and liabilities held for sale within White Mountains’s GAAP financial statements. For the three months ended March 31 2016, White Mountains recorded a net loss from discontinued operations of $2.0 million from Tranzact.

Star & Shield

On July 1, 2016, SSIE voluntarily ceased writing new policies. As a result, White Mountains wrote off its investment in SSIE Surplus Notes which resulted in a $21.0 million total decrease to net income attributable to White Mountains's common shareholders and a corresponding increase to net income attributable to non-controlling interests. On January 13, 2017, White Mountains reached an agreement to sell Star & Shield and its investment in SSIE Surplus Notes to K2 Insurance Services, LLC and the sale was completed on March 7, 2017. White Mountains did not recognize any gain or loss on the sale. Through December 31, 2016, Star & Shield’s assets and liabilities are reported as held for sale within White Mountains’s GAAP financial statements.

Discontinued Operations [Member]

Discontinued Operations

Summary of Reclassified Balances and Related Items

Net Assets Held for Sale

The following summarizes the assets and liabilities associated with business classified as held for sale. At December 31, 2016, amounts presented relate to Star & Shield and SSIE.

Millions	December 31, 2016
Assets held for sale
Fixed maturity investments, at fair value	$	6.6
Short-term investments, at amortized cost (which approximates fair value)	.2
Total investments	6.8
Cash	.9
Reinsurance recoverable on unpaid losses	.3
Insurance and reinsurance premiums receivable	1.5
Other assets	.6
Total assets held for sale	$	10.1
Liabilities held for sale
Loss and loss adjustment expense reserves	$	5.0
Unearned insurance and reinsurance premiums	1.2
Other liabilities	(1.1		)
Total liabilities held for sale	5.1
Net assets held for sale	$	5.0

Net Income (Loss) from Discontinued Operations

The following summarizes the results of operations, including related income taxes associated with the business classified as discontinued operations. For the three months ended March 31, 2016, the amounts presented relate to Sirius Group and Tranzact. The results of discontinued operations from Sirius Group and Tranzact up to the closing date of the transaction inure to White Mountains.

	Three Months Ended								Three Months Ended
	March 31, 2017								March 31, 2016
Millions	Sirius Group		Other Disc Ops			Total			Sirius Group			Other Disc Ops			Total
Revenues
Earned insurance premiums	$	—	$	—		$	—		$	202.4		$	—		$	202.4
Net investment income	—		—			—			12.2			—			12.2
Net realized and unrealized losses	—		—			—			(8.8		)	—			(8.8		)
Other revenue	—		—			—			(4.1		)	57.8			53.7
Total revenues	—		—			—			201.7			57.8			259.5
Expenses
Loss and loss adjustment expenses	—		—			—			113.7			—			113.7
Insurance and reinsurance acquisition expenses	—		—			—			48.4			—			48.4
Other underwriting expenses	—		—			—			26.7			—			26.7
General and administrative expenses	—		—			—			8.1			53.4			61.5
Interest expense	—		—			—			6.6			1.4			8.0
Total expenses	—		—			—			203.5			54.8			258.3
Pre-tax (loss) income	—		—			—			(1.8		)	3.0			1.2
Income tax expense (benefit)	—		—			—			.9			(1.0		)	(.1		)
Net (loss) income from discontinued operations	—		—			—			(.9		)	2.0			1.1
Net loss from sale of discontinued operations	—		(1.0		)	(1.0		)	—			—			—
Total (loss) income from discontinued operations	$	—	$	(1.0	)	$	(1.0	)	$	(.9	)	$	2.0		$	1.1
Change in foreign currency translation and other    from discontinued operations	—		—			—			37.2			—			37.2
Comprehensive (loss) income from discontinued operations	$	—	$	(1.0	)	$	(1.0	)	$	36.3		$	2.0		$	38.3

Net Change in Cash from Discontinued Operations

The following summarizes the net change in cash, including income tax (payment to) refund from national governments and interest paid associated with the business classified as discontinued operations:

	Three Months Ended
	March 31,
(Millions)	2017			2016
Net cash (used for) provided from operations	$	—		$	(40.7	)
Net cash provided from investing activities	—			33.6
Net cash (used for) provided from financing activities	—			(8.3		)
Effect of exchange rate changes on cash	—			4.2
Net change in cash during the period	—			(11.2		)
Cash balances at beginning of period	.9			150.2
Net change in cash held for sale	(.9		)	.9
Cash balances at end of period	$	—		$	139.9
Supplemental cash flows information:
Interest paid	$	—		$	(1.4	)
Net income tax payment to national governments	$	—		$	(36.4	)

Earnings Per Share

Basic earnings per share amounts are based on the weighted average number of common shares outstanding including unvested restricted shares that are considered participating securities.  Diluted earnings per share amounts are based on the weighted average number of common shares including unvested restricted shares and the net effect of potentially dilutive common shares outstanding. The following table outlines the computation of earnings per share for discontinued operations for the three months endedMarch 31, 2017 and 2016:

	Three Months Ended
	March 31,
	2017			2016
Basic and diluted earnings per share numerators (in millions):
Net income attributable to White Mountains’s common shareholders	$	(1.0	)	$	1.1
Allocation of income for participating unvested restricted common shares(1)	—			—
Net income attributable to White Mountains’s common shareholders,    net of restricted common share amounts (2)	$	(1.0	)	$	1.1
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	4,564.6			5,539.6
Average unvested restricted common shares(3)	(52.5		)	(54.0		)
Basic earnings per share denominator	4,512.1			5,485.6
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period(4)	4,564.6			5,540.5
Average unvested restricted common shares(3)	(52.5		)	(54.0		)
Diluted earnings per share denominator(4)	4,512.1			5,486.5
Basic earnings per share (in dollars):	$	(.22	)	$	.20
Diluted earnings per share (in dollars):	$	(.22	)	$	.20

⁽¹⁾ Restricted shares issued by White Mountains contain dividend participation features, and therefore, are considered participating securities.

⁽²⁾ Net earnings attributable to White Mountains’s common shareholders, net of restricted share amounts, is equal to undistributed earnings for the three months endedMarch 31, 2017 and 2016.

⁽³⁾ Restricted common shares outstanding vest either in equal annual installments or upon a stated date. See Note 15 - “Employee Share-Based Compensation Plans”.

⁽⁴⁾ The diluted earnings per share denominator for the three months ended March 31, 2016 includes the impact of 125,000 common shares issuable upon exercise of the non-qualified options outstanding, which results in 882 incremental shares outstanding over the period. The incremental shares had an effect on diluted earning per share of less than $0.01 per share.