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Investment Securities (Tables)
 3 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Pre-tax net investment income
Pre-tax net investment income for the three months ended March 31, 2017 and 2016 consisted of the following:
 
 
Three Months Ended
 
 
March 31,
Millions
 
2017
 
2016
Investment income:
 
 
 
 
Fixed maturity investments
 
$
24.5

 
$
14.5

Short-term investments
 
.3

 
.2

Common equity securities
 
2.1

 
1.2

Other long-term investments
 
(.1
)
 
2.8

Total investment income
 
26.8

 
18.7

Third-party investment expenses
 
(.7
)
 
(.8
)
Net investment income, pre-tax
 
$
26.1

 
$
17.9
Schedule of Realized and Unrealized Gain (Loss) on Investments
Net realized and unrealized investment gains (losses) consisted of the following:
 
 
Three Months Ended
 
 
March 31,
Millions
 
2017
 
2016
Net realized investment gains, pre-tax
 
$
1.1

 
$
256.8

Net unrealized investment gains (losses), pre-tax
 
50.2

 
(227.3
)
Net realized and unrealized investment gains, pre-tax
 
51.3

 
29.5

Income tax expense attributable to net realized and
     unrealized investment gains
 
(7.2
)
 
(8.5
)
Net realized and unrealized investment gains, after tax
 
$
44.1

 
$
21.0
Realized Gain (Loss) on Investments
Net realized investment gains (losses) for the three months ended March 31, 2017 and 2016 consisted of the following:
 
 
Three Months Ended
 
Three Months Ended
 
 
March 31, 2017
 
March 31, 2016
Millions
 
Net
realized (losses)
gains
 
Net
foreign
currency gains
 
Total net realized
(losses) gains
reflected in
earnings
 
Net
realized (losses)
gains
 
Net
foreign
currency gains (losses)
 
Total net realized
(losses) gains
reflected in
earnings
Fixed maturity investments
 
$
(2.2
)
 
$
.1

 
$
(2.1
)
 
$
(1.1
)
 
$
—

 
$
(1.1
)
Common equity securities
 
1.2

 
.1

 
1.3

 
257.6

 
—

 
257.6

Other long-term investments
 
1.9

 
—

 
1.9

 
.3

 
—

 
.3

Net realized investment gains,
   pre-tax
 
.9

 
.2

 
1.1

 
256.8

 
—

 
256.8

Income tax expense
   attributable to net realized
   investment gains
 
(.7
)
 
—

 
(.7
)
 
(42.9
)
 
—

 
(42.9
)
Net realized investment
   gains, after tax
 
$
.2

 
$
.2

 
$
.4

 
$
213.9

 
$
—

 
$
213.9
Schedule of unrealized gain (loss) on investments
The following table summarizes net unrealized investment gains (losses) and changes in the carrying value of investments measured at fair value:
 
 
Three Months Ended
 
Three Months Ended
 
 
March 31, 2017
 
March 31, 2016
Millions
 
Net
unrealized
 gains
 
Net
foreign
currency
gains (losses)
 
Total net unrealized gains
reflected in
earnings
 
Net
unrealized gains (losses)
 
Net
foreign
currency gains
 
Total net unrealized
gains (losses)
reflected in
earnings
Fixed maturity investments
 
$
17.5

 
$
1.7

 
$
19.2

 
$
21.7

 
$
—

 
$
21.7

Common equity securities
 
29.1

 
.5

 
29.6

 
(249.8
)
 
2.4

 
(247.4
)
Other long-term investments
 
4.2

 
.2

 
4.4

 
(2.0
)
 
.4

 
(1.6
)
Forward contracts
 
—

 
(3.0
)
 
(3.0
)
 
—

 
—

 
—

Net unrealized investment gains (losses), pre-tax
 
50.8

 
(.6
)
 
50.2

 
(230.1
)
 
2.8

 
(227.3
)
Income tax (expense) benefit
attributable to net unrealized
investment gains (losses)
 
(6.5
)
 
—

 
(6.5
)
 
34.4

 
—

 
34.4

Net unrealized investment
gains (losses), after tax
 
$
44.3

 
$
(.6
)
 
$
43.7

 
$
(195.7
)
 
$
2.8

 
$
(192.9
)
Net unrealized investment gains (losses) for Level 3 investments
The following table summarizes the amount of total gains (losses) included in earnings attributable to unrealized investment gains (losses) for Level 3 investments for the three months ended March 31, 2017 and 2016:
 
 
Three Months Ended
 
 
March 31,
Millions
 
2017
 
2016
Fixed maturity investments
 
$
.2

 
$
.5

Other long-term investments
 
(1.9
)
 
1.1

Total unrealized investment (losses) gains, pre-tax - Level 3 investments
 
$
(1.7
)
 
$
1.6
Investment holdings, equity securities, convertible fixed maturities and other long-term investments
The cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses), and carrying values of White Mountains’s fixed maturity investments as of March 31, 2017 and December 31, 2016 were as follows: 
 
 
March 31, 2017
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
gains
 
Carrying
value
U.S. Government and agency obligations
 
$
110.7

 
$
—

 
$
(.4
)
 
$
—

 
$
110.3

Debt securities issued by corporations
 
1,680.2

 
10.5

 
(7.6
)
 
3.7

 
1,686.8

Municipal obligations
 
328.9

 
2.8

 
(1.4
)
 
—

 
330.3

Mortgage and asset-backed securities
 
2,020.0

 
5.1

 
(8.7
)
 
—

 
2,016.4

Foreign government, agency and provincial obligations
 
17.3

 
.4

 
—

 
.2

 
17.9

Preferred stocks
 
8.3

 
5.4

 
—

 
—

 
13.7

   Total fixed maturity investments
 
$
4,165.4

 
$
24.2

 
$
(18.1
)
 
$
3.9

 
$
4,175.4


 
 
December 31, 2016
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
gains
 
Carrying
value
U.S. Government and agency obligations
 
$
281.7

 
$
.1

 
$
(3.5
)
 
$
—

 
$
278.3

Debt securities issued by corporations
 
1,512.6

 
8.4

 
(13.7
)
 
2.1

 
1,509.4

Municipal obligations
 
308.8

 
1.9

 
(1.7
)
 
—

 
309.0

Mortgage and asset-backed securities
 
2,141.7

 
2.6

 
(11.4
)
 
—

 
2,132.9

Foreign government, agency and provincial obligations
 
12.9

 
.3

 
—

 
—

 
13.2

Preferred stocks
 
8.3

 
5.7

 
—

 
—

 
14.0

Total fixed maturity investments
 
$
4,266.0

 
$
19.0

 
$
(30.3
)
 
$
2.1

 
$
4,256.8

Less: fixed maturity investments reclassified to assets
    held for sale related to SSIE
 
 
 
 
 
 
 
 
 
(6.6
)
Total fixed maturity investments
 
 
 
 
 
 
 
 
 
$
4,250.2


The cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses), and carrying values of White Mountains’s common equity securities and other long-term investments as of March 31, 2017 and December 31, 2016 were as follows:
 
 
March 31, 2017
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
gains (losses)
 
Carrying
value
Common equity securities
 
$
537.9

 
$
65.0

 
$
(2.4
)
 
$
.5

 
$
601.0

Other long-term investments
 
$
321.9

 
$
39.7

 
$
(23.3
)
 
$
(6.6
)
 
$
331.7

 
 
December 31, 2016
Millions
 
Cost or
amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Net foreign
currency
(losses)
 
Carrying
value
Common equity securities
 
$
440.8

 
$
35.9

 
$
(2.4
)
 
$
—

 
$
474.3

Other long-term investments
 
$
314.9

 
$
40.3

 
$
(28.0
)
 
$
(3.9
)
 
$
323.3


Other Long-term Investments
Other long-term investments consist of the following as of March 31, 2017 and December 31, 2016:
 
 
Carrying Value at
Millions
 
March 31, 2017
 
December 31, 2016
Hedge funds and private equity funds, at fair value
 
$
147.2

 
$
131.0

Private equity securities and limited liability companies, at fair value (1)(2)
 
72.4

 
72.0

OneBeacon Surplus Notes, at fair value (1)
 
69.6

 
71.9

Private convertible preferred securities, at fair value (1)
 
30.7

 
30.6

Tax advantaged federal affordable housing development fund (3)
 
11.7

 
12.3

Partnership investments accounted for under the equity method
 
3.0

 
3.5

Forward Contracts
 
(4.2
)
 
(1.2
)
Other
 
1.3

 
3.2

Total other-long term investments
 
$
331.7

 
$
323.3

(1) See Fair Value Measurements by Level table.
(2) White Mountains holds a 20% ownership interest in OneTitle Holdings LLC (“OTH”) and has provided a $10.0 million surplus note facility under which OTH’s wholly-owned insurance subsidiary, OneTitle National Guaranty Company, Inc. may, under certain circumstances, draw funds. At March 31, 2017, no funds had been drawn on the surplus note facility.
(3) Fund accounted for using the proportional amortization method.
Other long-term investments
The following table summarizes investments in hedge funds and private equity funds by investment objective and sector as of March 31, 2017 and December 31, 2016:
 
 
March 31, 2017
 
December 31, 2016
Millions
 
Fair Value
 
Unfunded
Commitments
 
Fair Value
 
Unfunded
Commitments
Hedge funds
 
 

 
 

 
 

 
 

Long/short banks and financials
 
$
54.2

 
$
—

 
$
36.5

 
$
—

Long/short equity REIT
 
19.7

 
—

 
19.9

 
—

Other
 
2.2

 
—

 
3.4

 
—

Total hedge funds
 
76.1

 
—

 
59.8

 
—

 
 
 
 
 
 
 
 
 
Private equity funds
 
 

 
 

 
 

 
 

Aerospace/Defense/Government
 
24.4

 
23.6

 
19.4

 
25.9

Manufacturing/Industrial
 
18.8

 
22.2

 
15.9

 
22.4

Multi-sector
 
11.0

 
2.0

 
11.4

 
2.0

Direct lending/Mezzanine debt
 
5.5

 
32.0

 
1.8

 
35.7

Healthcare
 
3.4

 
.4

 
3.5

 
.4

Energy infrastructure & services
 
2.8

 
3.0

 
14.1

 
3.2

Private equity secondaries
 
2.5

 
2.1

 
3.0

 
2.1

Financial Services
 
1.5

 
4.5

 
1.0

 
5.0

Insurance
 
.9

 
41.3

 
.8

 
41.3

Real estate
 
.3

 
.1

 
.3

 
.1

Total private equity funds
 
71.1

 
131.2

 
71.2

 
138.1

Total hedge funds and private equity funds
    included in other long-term investments
 
$
147.2

 
$
131.2

 
$
131.0

 
$
138.1
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 March 31, 2017 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
 
Total
Monthly
 
$
—

 
$
—

 
$
—

 
$
—

Quarterly
 
15.9

 
—

 
—

 
15.9

Semi-annual
 
38.3

 
19.7

 
—

 
58.0

Annual
 
—

 
—

 
2.2

 
2.2

Total
 
$
54.2

 
$
19.7

 
$
2.2

 
$
76.1
Fair Value of private equity funds subject to lock-up periods
As of March 31, 2017, 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
 
$18.4
 
$23.3
 
$22.2
 
$7.2
 
$71.1
Par Value to Fair Value Reconciliation of Surplus Notes
Below is a table illustrating the valuation adjustments taken to arrive at estimated fair value of the OneBeacon Surplus Notes as of March 31, 2017 and December 31, 2016:
 
 
Type of Surplus Note
 
Total as of March 31, 2017
 
Total as of December 31, 2016
Millions
 
Seller Priority
 
Pari Passu
 
Par Value
 
$
57.9

 
$
43.1

 
$
101.0

 
$
101.0

Fair value adjustments to reflect:
 
 
 
 
 
 
 
 
Current market rates on public debt and contract-based repayments(1)
 
7.2

 
1.8

 
9.0

 
5.1

Regulatory approval (2)
 
2.9

 
(13.2
)
 
(10.3
)
 
(15.6
)
Liquidity adjustment (3)
 
(19.9
)
 
(10.2
)
 
(30.1
)
 
(18.6
)
Total adjustments
 
(9.8
)
 
(21.6
)
 
(31.4
)
 
(29.1
)
Fair value (4)
 
$
48.1

 
$
21.5

 
$
69.6

 
$
71.9

(1) 
Represents the value of the surplus notes, at current market yields on comparable publicly traded debt, and assuming issuer is allowed to make principal and interest payments when its financial capacity is available, as measured by statutory capital in excess of a 250% RBC score under the National Association of Insurance Commissioners’ risk-based capital standards for property and casualty companies. The favorable year-to-date change in impact is due principally to the narrowing of non-investment grade credit spreads as well as the time value of money benefit from moving three months closer to modeled cash receipts.
(2) 
Represents anticipated delay in securing regulatory approvals of interest and principal payments to reflect graduated changes in Issuer's statutory surplus. The monetary impact of the anticipated delay is measured based on credit spreads of public securities with roughly equivalent percentages of discounted payments missed. The favorable year-to-date change in impact is driven primarily by the narrowing of non-investment grade credit spreads, which causes negative valuation impact from the anticipated delay in securing regulatory approval to be lower.
(3) Represents impact of liquidity spread to account for OneBeacon's sole ownership of the notes, lack of a trading market, and unique nature of the ongoing regulatory approval process. The unfavorable year-to-date change in impact is due largely to an increase in the assumed liquidity spread to 400 basis points at March 31, 2017 from 250 basis points at December 31, 2016.
(4) The decrease in the fair value of the surplus notes during the three months ended March 31, 2017 was driven primarily by an increase in the assumed liquidity spread, partially offset by the narrowing of non-investment grade credit spreads as well as the time value of money benefit generated by moving three months closer to modeled cash receipts.
Fair value measurements by level, investment securities
The following tables summarize White Mountains’s fair value measurements for investments as of March 31, 2017 and December 31, 2016 by level. The major security types were based on the legal form of the securities. 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 mortgage and asset-backed securities vary depending on the nature of the issuing entity type. White Mountains further disaggregates debt securities issued by corporations and common 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 Bloomberg Barclays U.S. Intermediate Aggregate and S&P 500 indices. The fair value measurements for derivative assets associated with White Mountains’s variable annuity business are presented in Note 9.
 
 
March 31, 2017
Millions
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 

 
 

 
 

 
 

U.S. Government and agency obligations
 
$
110.3

 
$
100.8

 
$
9.5

 
$
—

 
 
 
 
 
 
 
 
 
Debt securities issued by corporations:
 
 

 
 
 
 
 
 
Consumer
 
362.9

 
—

 
362.9

 
—

Financials
 
263.3

 
—

 
263.3

 
—

Health Care
 
248.4

 
—

 
248.4

 
—

Utilities
 
229.3

 
—

 
229.3

 
—

Industrial
 
174.5

 
—

 
174.5

 
—

Communications
 
135.9

 
—

 
135.9

 
—

Technology
 
118.1

 
—

 
118.1

 
—

Materials
 
101.9

 
—

 
101.9

 
—

Energy
 
52.5

 
—

 
52.5

 
—

Total debt securities issued by corporations
 
1,686.8

 
—

 
1,686.8

 
—

 
 
 
 
 
 
 
 
 
Mortgage and asset-backed securities
 
2,016.4

 
—

 
1,958.1

 
58.3

Municipal obligations
 
330.3

 
—

 
330.3

 
—

Foreign government, agency and provincial obligations
 
17.9

 
.6

 
17.3

 
—

Preferred stocks
 
13.7

 
—

 
13.7

 
—

Total fixed maturity investments
 
4,175.4

 
101.4

 
4,015.7

 
58.3

 
 
 
 
 
 
 
 
 
Short-term investments(4)
 
230.9

 
227.9

 
3.0

 
—

 
 
 
 
 
 
 
 
 
Common equity securities:
 
 

 
 

 
 

 
 

Exchange traded funds (1)
 
384.8

 
330.6

 
54.2

 
—

Consumer
 
32.2

 
32.2

 
—

 
—

Health Care
 
27.1

 
27.1

 
—

 
—

Financials
 
18.2

 
18.2

 
—

 
—

Technology
 
16.1

 
16.1

 
—

 
—

Communications
 
13.9

 
13.9

 
—

 
—

Industrial
 
9.0

 
9.0

 
—

 
—

Energy
 
7.7

 
7.7

 
—

 
—

Materials
 
5.1

 
5.1

 
—

 
—

Utilities
 
1.0

 
1.0

 
—

 
—

Other
 
85.9

 
—

 
85.9

 
—

Total common equity securities
 
601.0

 
460.9

 
140.1

 
—

 
 
 
 
 
 
 
 
 
Other long-term investments (2)(3) 
 
174.0

 
—

 
—

 
174.0

Total investments
 
$
5,181.3

 
$
790.2

 
$
4,158.8

 
$
232.3

(1) ETFs traded on foreign exchanges are priced using the fund's published NAV to account for the difference in market close times and are therefore designated a level 2 measurement.
(2) Excludes carrying value of $3.0 associated with other long-term investment limited partnerships accounted for using the equity method and $(4.2) related to foreign currency forward contracts. Excludes carrying value of $11.7 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
(3) Excludes carrying value of $147.2 associated with hedge funds and private equity funds for which fair value is measured at NAV using the practical expedient.
(4) Short-term investments are measured at amortized cost, which approximates fair value.
 
 
December 31, 2016
Millions
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Fixed maturity investments:
 
 

 
 

 
 

 
 

U.S. Government and agency obligations
 
$
278.3

 
$
268.8

 
$
9.5

 
$
—

 
 
 
 
 
 
 
 
 
Debt securities issued by corporations:
 
 

 
 

 
 

 
 

Consumer
 
385.6

 
—

 
385.6

 
—

Health Care
 
244.2

 
—

 
244.2

 
—

Utilities
 
180.3

 
—

 
180.3

 
—

Financials
 
176.0

 
—

 
176.0

 
—

Industrial
 
146.4

 
—

 
146.4

 
—

Communications
 
131.4

 
—

 
131.4

 
—

Materials
 
102.6

 
—

 
102.6

 
—

Technology
 
89.4

 
—

 
89.4

 
—

Energy
 
53.5

 
—

 
53.5

 
—

Total debt securities issued by corporations
 
1,509.4

 
—

 
1,509.4

 
—

 
 
 
 
 
 
 
 
 
Mortgage and asset-backed securities
 
2,132.9

 
—

 
2,132.9

 
—

Municipal obligations
 
309.0

 
—

 
309.0

 
—

Foreign government, agency and provincial obligations
 
13.2

 
.6

 
12.6

 
—

Preferred stocks
 
14.0

 
—

 
14.0

 
—

Total fixed maturity investments(4)
 
4,256.8

 
269.4

 
3,987.4

 
—

 
 
 
 
 
 
 
 
 
Short-term investments(4)(5)
 
287.1

 
274.4

 
12.7

 
—

 
 
 
 
 
 
 
 
 
Common equity securities:
 
 

 
 

 
 

 
 

Exchange traded funds(1)
 
321.6

 
270.4

 
51.2

 
—

Health Care
 
20.9

 
20.9

 
—

 
—

Consumer
 
12.9

 
12.9

 
—

 
—

Financials
 
11.6

 
11.6

 
—

 
—

Technology
 
11.0

 
11.0

 
—

 
—

Communications
 
10.5

 
10.5

 
—

 
—

Energy
 
3.7

 
3.7

 
—

 
—

Industrial
 
2.2

 
2.2

 
—

 
—

Other
 
79.9

 
—

 
79.9

 
—

Total common equity securities
 
474.3

 
343.2

 
131.1

 
—

 
 
 
 
 
 
 
 
 
Other long-term investments (2)(3)
 
177.7

 
—

 
—

 
177.7

Total investments(4)
 
$
5,195.9

 
$
887.0

 
$
4,131.2

 
$
177.7

(1) ETFs traded on foreign exchanges are priced using the fund's published NAV to account for the difference in market close times and are therefore designated a level 2 measurement.
(2) Excludes carrying value of $3.5 associated with other long-term investment limited partnerships accounted for using the equity method and $(1.2) related to foreign currency forward contracts. Excludes carrying value of $12.3 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
(3) Excludes carrying value of $131.0 associated with hedge funds and private equity funds for which fair value is measured at NAV using the practical expedient.
(4) Includes carrying value of $6.6 in fixed maturity investments and $0.1 in short-term investments that are classified as assets held for sale related to SSIE.
(5) Short-term investments are measured at amortized cost, which approximates fair value.
Debt securities issued by corporations, credit ratings
The following table summarizes the ratings of debt securities issued by corporations held in White Mountains’s investment portfolio as of March 31, 2017 and December 31, 2016:
 
 
Fair Value at
Millions
 
March 31, 2017
 
December 31, 2016
AA
 
93.1

 
100.9

A
 
484.7

 
381.9

BBB
 
846.5

 
786.5

BB
 
240.2

 
214.0

B
 
22.3

 
26.1

Debt securities issued by corporations(1)
 
$
1,686.8

 
$
1,509.4

(1) Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor’s Financial Services LLC ("Standard & Poor's") and 2) Moody's Investor Services ("Moody’s").
Mortgage-backed, asset-backed securities
The following table summarizes the carrying value of White Mountains’s mortgage and asset-backed securities as of March 31, 2017 and December 31, 2016:
 
 
March 31, 2017
 
December 31, 2016
Millions
 
Fair Value
 
Level 2
 
Level 3
 
Fair Value
 
Level 2
 
Level 3
Mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 
 

Agency:
 
 

 
 

 
 

 
 

 
 

 
 

GNMA
 
$
249.0

 
$
249.0

 
$
—

 
$
283.9

 
$
283.9

 
$
—

FNMA
 
270.1

 
270.1

 
—

 
278.3

 
278.3

 
—

FHLMC
 
86.1

 
86.1

 
—

 
89.8

 
89.8

 
—

Total Agency(1)
 
605.2

 
605.2

 
—

 
652.0

 
652.0

 
—

Non-agency:
 
 

 
 

 
 

 
 

 
 

 
 

Residential
 
309.9

 
251.6

 
58.3

 
205.3

 
205.3

 
—

Commercial
 
126.9

 
126.9

 
—

 
127.5

 
127.5

 
—

Total Non-agency
 
436.8

 
378.5

 
58.3

 
332.8

 
332.8

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Total mortgage-backed securities
 
1,042.0

 
983.7

 
58.3

 
984.8

 
984.8

 
—

Other asset-backed securities:
 
 

 
 
 
 
 
 

 
 
 
 
Credit card receivables
 
383.0

 
383.0

 
—

 
438.3

 
438.3

 
—

Vehicle receivables
 
353.0

 
353.0

 
—

 
479.5

 
479.5

 
—

Other
 
238.4

 
238.4

 
—

 
230.3

 
230.3

 
—

Total other asset-backed securities
 
974.4

 
974.4

 
—

 
1,148.1

 
1,148.1

 
—

Total mortgage and asset-backed securities
 
$
2,016.4

 
$
1,958.1

 
$
58.3

 
$
2,132.9

 
$
2,132.9

 
$
—

(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 RMBS and non-agency CMBS securities as of March 31, 2017 are as follows:
 
 
 
 
 
 
 
 
 
Security Issuance Year
 
 
 
 
 
 
Millions
 
Fair Value
 
2004
 
2005
 
2006
 
2008
 
2010
 
2011
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017
Non-agency
   RMBS
 
$
309.9

 
$
18.1

 
$
5.3

 
$
2.8

 
$
2.4

 
$
6.0

 
$
8.4

 
$
4.2

 
$
19.8

 
$
49.4

 
$
104.2

 
$
34.5

 
$
54.8

Non-agency
   CMBS
 
126.9

 
—

 
—

 
—

 
—

 
4.1

 
—

 
18.1

 
11.5

 
23.4

 
44.2

 
25.6

 
—

Total
 
$
436.8

 
$
18.1

 
$
5.3

 
$
2.8

 
$
2.4

 
$
10.1

 
$
8.4

 
$
22.3

 
$
31.3

 
$
72.8

 
$
148.4

 
$
60.1

 
$
54.8
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 March 31, 2017:
Millions
 
Fair Value
 
Super Senior (1)
 
Senior (2)
 
Subordinate (3)
Prime
 
$
309.9

 
$
104.9

 
$
205.0

 
$
—

Non-prime
 
—

 
—

 
—

 
—

Sub-prime
 
—

 
—

 
—

 
—

Total
 
$
309.9

 
$
104.9

 
$
205.0

 
$
—

(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 and were senior to other “AAA” or “Aaa” bonds.
(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” bonds.
(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” bonds. 
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 March 31, 2017:
Millions
 
Fair Value
 
Super Senior (1)
 
Senior (2)
 
Subordinate (3)
Fixed rate CMBS
 
$
115.2

 
$
1.6

 
$
70.1

 
$
43.5

Floating rate CMBS
 
11.7

 
—

 
—

 
11.7

Total
 
$
126.9

 
$
1.6

 
$
70.1

 
$
55.2

(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” bonds.
(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” bonds.
(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” bonds. 
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 March 31, 2017 and 2016:
 
 
 
Level 3 Investments
 
Millions
Level 1 investments
Level 2 
investments
Fixed
maturity investments
Common
equity
securities
Other long-term
investments
Hedge Funds and Private Equity Funds measured at NAV(3)
 
Total
 
Balance at January 1, 2017
$
612.5

$
4,118.5

$
—

$
—

$
177.7

$
131.0

 
$
5,039.7

(1)(2)(4) 
Total realized and
   unrealized gains (losses)
22.4

25.5

.2

—

(1.9
)
8.2

 
54.4

 
Amortization/Accretion
—

(6.5
)
—

—

—

—

 
(6.5
)
 
Purchases
124.5

890.4

58.1

—

.2

22.1

 
1,095.3

 
Sales
(197.1
)
(866.9
)


—

(2.0
)
(14.1
)
 
(1,080.1
)
 
Deconsolidation of SSIE
—

(5.2
)
—

—

—

 
 
(5.2
)
 
Transfers in
—

—

—

—

—

—

 
—

  
Transfers out
—

—

—

—

—

—

 
—

  
Balance at
March 31, 2017
$
562.3

$
4,155.8

$
58.3

$
—

$
174.0

$
147.2

 
$
5,097.6

(1)(2) 
(1)  Excludes carrying value of $3.5 and $3.0 at January 1, 2017 and March 31, 2017 associated with other long-term investments accounted for using the equity method and $(1.2) and $(4.2) related to foreign currency forward contracts. Excludes carrying value of $12.3 and $11.7 at January 1, 2017 and March 31, 2017 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
(2)  Excludes carrying value of $287.1 and $230.9 at January 1, 2017 and March 31, 2017 associated with short-term investments, of which $0.1 is classified as held for sale at January 1, 2017.
(3) Investments for which fair value is measured at NAV using the practical expedient are no longer classified within the fair value hierarchy. See Note 1 — “Summary of Significant Accounting Policies”.
(4)  Includes carrying value of $6.6 of fixed maturity investments at January 1, 2017 that is classified as assets held for sale related to SSIE.

 
 
 
Level 3 Investments
 
 
 
Millions
Level 1 investments
Level 2 
investments
Fixed
maturity investments
Common
equity
securities
Other long-term
investments
Hedge Funds and Private Equity Funds measured at NAV(3)
Total
 
Balance at January 1, 2016
$
1,152.2

$
2,531.4

$
70.0

$
—

$
169.5

$
127.8

$
4,050.9

(1)(2)(4) 
Total realized and
   unrealized gains (losses)
11.3

19.1

.5

—

1.1

(2.4
)
29.6

 
Amortization/Accretion
—

(4.2
)
—

—

—

—

(4.2
)
 
Purchases
109.0

292.4

—

—

2.1

8.9

412.4

 
Sales
(852.9
)
(272.6
)
—

—

—

(3.0
)
(1,128.5
)
 
Transfers in
—

—

—

—

—

—

—

 
Transfers out
—

—

—

—

—

—

—

 
Balance at
March 31, 2016
$
419.6

$
2,566.1

$
70.5

$
—

$
172.7

$
131.3

$
3,360.2

(1)(2)(4) 
(1) Excludes carrying value of $3.8 and $3.7 at January 1, 2016 and March 31, 2016 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $14.7 and $14.1 at January 1, 2016 and March 31, 2016 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.
(2) Excludes carrying value of $211.3 million and $261.7 million at January 1, 2016 and March 31, 2016 associated with short-term investments of which $0.1 and $0.3 is classified as held for sale at January 1, 2016 and March 31, 2016.
(3) Investments for which fair value is measured at NAV using the practical expedient are no longer classified within the fair value hierarchy. See Note 1 — “Summary of Significant Accounting Policies”.
(4)  Includes carrying value of $9.5 and $9.4 of fixed maturity investments at January 1, 2016 and March 31, 2016 that is classified as assets held for sale related to SSIE.
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, other than hedge funds and private equity funds, classified within Level 3 as of March 31, 2017 and December 31, 2016. The fair value of investments in hedge funds and private equity funds are generally estimated using the NAV of the funds.

Description
 
March 31, 2017
$ in millions, except share price
 
Rating(6)
 
Valuation Technique(s)
 
Fair 
Value(1)
 
Unobservable Input
Non-agency residential mortgage-backed securities
 
AAA
 
Broker pricing
 
$58.3
 
Broker quote
 
102.56
Private equity security
 
NR
 
Share price of most recent transaction
 
$21.0
 
Share price
-
$1.00
Private equity security
 
NR
 
Discounted cash flow
 
$22.1
 
Discount rate
-
25.0%
Private equity security
 
NR
 
Share price of most recent transaction
 
$3.4
 
Share price
-
$2.52
Private convertible preferred security
 
NR
 
Multiple of EBITDA
 
$3.7
 
EBITDA multiple
-
6.00
Private convertible preferred security
 
NR
 
Share price of most recent transaction
 
$27.0
 
Share price
-
$3.83
Community development tax incentive investment
 
NR
 
Member share of GAAP net equity
 
$14.5
 
GAAP net equity
 
$14.5
Private equity security
 
NR
 
Discounted cash flow/ Option pricing method
 
$9.4
 
Discount rate
-
21.0%
 
 
 
 
 
 
 
 
Time until expiration
-
4 years
 
 
 
 
 
 
Volatility/Standard deviation
-
50.0%
 
 
 
 
 
 
Risk free rate
-
1.00%
OneBeacon Surplus Notes:
 
NR
 
 
 
 
 
 
    - Seller priority
 
 
 
Discounted cash flow
 
$48.1
 
Discount rate (2)
-
10.6%
 
 
 
 
 
 
Timing of interest payments (4)
-
2020
 
 
 
 
 
 
Timing of principal payments (4)
-
2030
    - Pari passu
 
 
 
Discounted cash flow
 
$21.5
 
Discount rate (3)
-
15.0%
 
 
 
 
 
 
Timing of interest payments (5)
-
2021
 
 
 
 
 
 
Timing of principal payments (5)
-
2035
(1) Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.
(2) 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 to 400 bps as of March 31, 2017 from 250 bps as of December 31, 2016 to reflect an increase in the assumed liquidity spread for the seller priority note.
(3) 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 to 400 bps as of March 31, 2017 from 250 bps as of December 31, 2016 to reflect an increase in the assumed liquidity spread for the pari passu note.
(4) As of March 31, 2017, OneBeacon has assumed for the purpose of estimating fair value that all accrued but unpaid interest on the seller priority note since the date of issuance is paid in 2020, with regular annual interest payments beginning thereafter. Principal repayments are assumed to begin on a graduated basis in 2030.
(5) As of March 31, 2017, OneBeacon has assumed for the purpose of estimating fair value that regular annual interest payments on the pari passu note begin in 2021. All accrued but unpaid interest since the date of issuance is assumed to be paid in 2025. Principal repayments are assumed to begin on a graduated basis in 2035.
(6) Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.




Description
 
December 31, 2016
$ in millions, except share price
 
Valuation Technique(s)
 
Fair Value (1)
 
Unobservable Input
Private equity security
 
Share price of most recent transaction
 
$21.0
 
Share price
-
$1.00
Private equity security
 
Discounted cash flow
 
$22.1
 
Discount rate
-
25.0%
Private equity security
 
Share price of most recent transaction
 
$3.2
 
Share price
-
$2.52
Private convertible preferred security
 
Multiple of EBITDA
 
$3.6
 
EBITDA multiple
-
6.00
Private convertible preferred security
 
Share price of most recent transaction
 
$27.0
 
Share price
-
$3.83
Community development tax incentive investment
 
Member share of GAAP net equity
 
$14.3
 
GAAP net equity
 
$14.3
Private equity security
 
Discounted cash flow/ Option pricing method
 
$9.3
 
Discount rate
-
21.0%
 
 
 
 
 
 
Time until expiration
-
4 years
 
 
 
 
Volatility/Standard deviation
-
50.0%
 
 
 
 
Risk free rate
-
1.00%
OneBeacon Surplus Notes:
 
 
 
 
 
 
    - Seller priority
 
Discounted cash flow
 
$51.1
 
Discount rate (2)
-
9.6%
 
 
 
 
Timing of interest payments (4)
-
2020
 
 
 
 
Timing of principal payments (4)
-
2030
    - Pari passu
 
Discounted cash flow
 
$20.8
 
Discount rate (3)
-
15.0%
 
 
 
 
Timing of interest payments (5)
-
2021
 
 
 
 
Timing of principal payments (5)
-
2035

(1) Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.
(2) 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 basis points 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.
(3) 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 basis points 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.
(4) As of December 31, 2016, OneBeacon has assumed for the purpose of estimating fair value that all accrued but unpaid interest on the seller priority note since the date of issuance is paid in 2020, with regular annual interest payments beginning thereafter. Principal repayments are assumed to begin on a graduated basis in 2030.
(5) As of December 31, 2016, OneBeacon has assumed for the purpose of estimating fair value that regular annual interest payments on the pari passu note begin in 2021. All accrued but unpaid interest since the date of issuance is assumed to be paid in 2025. Principal repayments are assumed to begin on a graduated basis in 2035.