Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

Summary of Reclassified Balances and Related Items

Net Assets Held for Sale

The following table summarizes the assets and liabilities associated with business classified as held for sale. At June 30, 2017, amounts presented relate to OneBeacon. At December 31, 2016, amounts presented relate to OneBeacon, Star & Shield and SSIE.

Millions	June 30, 2017		December 31, 2016
Assets held for sale
Fixed maturity investments, at fair value	$	2,288.6	$	2,175.7
Short-term investments, at amortized cost (which approximates fair value)	55.5		112.3
Common equity securities, at fair value	205.5		188.7
Other long-term investments	134.1		150.5
Total investments	2,683.7		2,627.2
Cash	71.3		70.5
Reinsurance recoverable on unpaid and paid losses	198.0		179.8
Insurance and reinsurance premiums receivable	245.4		229.8
Deferred acquisition costs	106.9		96.3
Deferred tax asset	130.1		126.7
Ceded unearned insurance and reinsurance premiums	56.6		44.2
Accounts receivable on unsettled investment sales	5.8		1.4
Goodwill and other intangible assets	.6		1.2
Other assets	198.0		222.4
Total assets held for sale	$	3,696.4	$	3,599.5
Liabilities held for sale
Loss and loss adjustment expense reserves	$	1,411.2	$	1,370.6
Unearned insurance and reinsurance premiums	595.2		576.3
Debt	273.3		273.2
Accrued incentive compensation	39.5		44.3
Funds held under reinsurance treaties	210.2		153.0
Accounts payable on unsettled investment purchases	9.3		—
Other liabilities	140.1		151.9
Total liabilities held for sale	2,678.8		2,569.3
Net assets held for sale	$	1,017.6	$	1,030.2

Net Income (Loss) from Discontinued Operations

The following table summarizes the results of operations, including related income taxes, associated with the business classified as discontinued operations. For the three and six months ended June 30, 2017, the amounts presented relate to OneBeacon and Sirius Group. For the three and six months ended June 30, 2016, the amounts presented relate to OneBeacon, Sirius Group and Tranzact. The results of discontinued operations from Sirius Group and Tranzact up to the closing date of the transaction inured to White Mountains. Given the fixed price nature of the OneBeacon Transaction, OneBeacon’s results were economically transferred to the buyer at signing.

	Three Months Ended									Three Months Ended
	June 30, 2017									June 30, 2016
Millions	OneBeacon			Sirius Group			Total			OneBeacon		Sirius Group			Other Disc Ops			Total
Revenues
Earned insurance premiums	$	277.4		$	—		$	277.4		$	271.4	$	37.7		$	—		$	309.1
Net investment income	14.5			—			14.5			12.1		2.2			—			14.3
Net realized and unrealized gains	12.3			—			12.3			24.7		7.3			—			32.0
Other revenue	2.1			—			2.1			.8		4.7			47.0			52.5
Total revenues	306.3			—			306.3			309.0		51.9			47.0			407.9
Expenses
Loss and loss adjustment expenses	188.6			—			188.6			179.7		41.2			—			220.9
Insurance and reinsurance acquisition expenses	48.4			—			48.4			48.7		10.6			—			59.3
Other underwriting expenses	59.6			—			59.6			50.9		4.2			—			55.1
General and administrative expenses	8.8			—			8.8			3.5		2.3			47.1			52.9
Interest expense	3.3			—			3.3			3.2		1.3			1.3			5.8
Total expenses	308.7			—			308.7			286.0		59.6			48.4			394.0
Pre-tax (loss) income	(2.4		)	—			(2.4		)	23.0		(7.7		)	(1.4		)	13.9
Income tax benefit (expense)	5.8			—			5.8			2.0		2.2			(1.1		)	3.1
Net income (loss) from discontinued operations	3.4			—			3.4			25.0		(5.5		)	(2.5		)	17.0
Net (loss) gain from sale of discontinued    operations	—			(.6		)	(.6		)	—		366.6			—			366.6
Total (loss) income from discontinued    operations	3.4			(.6		)	2.8			25.0		361.1			(2.5		)	383.6
Change in foreign currency translation and other    from discontinued operations	.2			—			.2			.2		(5.2		)	—			(5.0		)
Change in foreign currency translation and other    from sale of Sirius Group	—			—			—			—		113.3			—			113.3
Comprehensive (loss) income from discontinued    operations	$	3.6		$	(.6	)	$	3.0		$	25.2	$	469.2		$	(2.5	)	$	491.9

	Six Months Ended											Six Months Ended
	June 30, 2017											June 30, 2016
Millions	OneBeacon		Sirius Group			Other Disc Ops			Total			OneBeacon		Sirius Group			Other Disc Ops			Total
Revenues
Earned insurance premiums	$	539.2	$	—		$	—		$	539.2		$	550.0	$	240.1		$	—		$	790.1
Net investment income	26.7		—			—			26.7			26.5		14.4			—			40.9
Net realized and unrealized gains (losses)	27.3		—			—			27.3			41.3		(1.5		)	—			39.8
Other revenue	5.5		—			—			5.5			1.7		.6			104.8			107.1
Total revenues	598.7		—			—			598.7			619.5		253.6			104.8			977.9
Expenses
Loss and loss adjustment expenses	339.2		—			—			339.2			338.5		154.9			—			493.4
Insurance and reinsurance    acquisition expenses	93.7		—			—			93.7			99.7		59.0			—			158.7
Other underwriting expenses	111.3		—			—			111.3			106.2		30.9			—			137.1
General and administrative expenses	13.8		—			—			13.8			7.4		10.4			100.5			118.3
Interest expense	6.6		—			—			6.6			6.5		7.9			2.7			17.1
Total expenses	564.6		—			—			564.6			558.3		263.1			103.2			924.6
Pre-tax income (loss)	34.1		—			—			34.1			61.2		(9.5		)	1.6			53.3
Income tax benefit (expense)	1.6		—			—			1.6			10.1		3.1			(2.1		)	11.1
Net income (loss) from    discontinued operations	35.7		—			—			35.7			71.3		(6.4		)	(.5		)	64.4
(Loss) gain from sale of discontinued    operations	—		(.6		)	(1.0		)	(1.6		)	—		366.6			—			366.6
Total income (loss) from discontinued    operations	35.7		(.6		)	(1.0		)	34.1			71.3		360.2			(.5		)	431.0
Change in foreign currency translation and    other from discontinued operations	.3		—			—			.3			.2		32.0			—			32.2
Change in foreign currency translation and    other from sale of Sirius Group	—		—			—			—			—		113.3			—			113.3
Comprehensive (loss) income from    discontinued operations	$	36.0	$	(.6	)	$	(1.0	)	$	34.4		$	71.5	$	505.5		$	(.5	)	$	576.5

Net Change in Cash from Discontinued Operations

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

	Six Months Ended
	June 30,
(Millions)	2017			2016
Net cash provided from (used for) operations	$	87.3		$	(61.2	)
Net cash (used for) provided from investing activities	(43.6		)	276.8
Net cash used for financing activities	(42.0		)	(43.1		)
Net change in cash during the period	1.7			172.5
Cash balances at beginning of period	70.5			245.4
Net change in cash held for sale, excluding discontinued operations	(.9		)	(.6		)
Cash sold as part of sale of consolidated subsidiaries	—			343.1
Cash balances at end of period	$	71.3		$	74.2
Supplemental cash flows information:
Interest paid	$	(6.3	)	$	(1.4	)
Net income tax payment to national governments	$	—		$	(18.3	)

Earnings Per Share

White Mountains calculates earnings per share using the two-class method, which allocates earnings between common and unvested restricted common shares. Both classes of shares participate equally in earnings on a per share basis. Basic earnings per share amounts are based on the weighted average number of common shares outstanding adjusted for unvested restricted common shares. Diluted earnings per share amounts are also impacted by net effect of potentially dilutive common shares outstanding. The following table outlines the Company’s computation of earnings per share for discontinued operations for the three and six months endedJune 30, 2017 and 2016:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Basic and diluted earnings per share numerators (in millions):
Net income attributable to White Mountains’s    common shareholders	$	2.8		$	383.6		$	34.1		$	431.0
Allocation of income for participating unvested restricted common shares(1)	—			(5.0		)	(.4		)	(4.9		)
Net income attributable to White Mountains’s common shareholders	$	2.8		$	378.6		$	33.7		$	426.1
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	4,572.1			5,096.1			4,568.4			5,317.8
Average unvested restricted common shares(3)	(57.2		)	(66.5		)	(54.9		)	(60.2		)
Basic earnings per share denominator	4,514.9			5,029.6			4,513.5			5,257.6
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period(4)	4,572.1			5,107.0			4,568.4			5,324.0
Average unvested restricted common shares(3)	(57.2		)	(66.5		)	(54.9		)	(60.2		)
Diluted earnings per share denominator(4)	4,514.9			5,040.5			4,513.5			5,263.8
Basic earnings per share (in dollars):	$	.61		$	75.27		$	7.47		$	81.04
Diluted earnings per share (in dollars):	$	.61		$	75.11		$	7.47		$	80.96

⁽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 and six months endedJune 30, 2017 and 2016.

⁽³⁾ Restricted common shares outstanding vest either in equal annual installments or upon a stated date. See Note 13 — “Employee Share-Based Compensation Plans”.

⁽⁴⁾ The diluted earnings per share denominator for the three and six months ended June 30, 2016 includes the impact of 120,000 common shares issuable upon exercise of the non-qualified options outstanding, which resulted in 10,863 and 6,194 incremental shares outstanding over the period.

Fair Value of Financial Instruments

The OBH Senior Notes are recorded as debt at face value less unamortized original issue discount. The following table summarizes the fair value and carrying value of this financial instrument as of June 30, 2017 and December 31, 2016:

	June 30, 2017				December 31, 2016
Millions	Fair Value		Carrying Value		Fair Value		Carrying Value
OBH Senior Notes	$	282.4	$	273.3	$	274.2	$	273.2

The fair value estimate for the OBH Senior Notes has been determined using quoted market prices. The OBH Senior Notes are considered a Level 2 measurement.

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 June 30, 2017 and December 31, 2016:

	Type of Surplus Note						Total as of June 30, 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)	7.9			2.1			10.0			5.1
Regulatory approval(2)	2.7			(13.7		)	(11.0		)	(15.6		)
Liquidity adjustment (3)	(19.6		)	(9.9		)	(29.5		)	(18.6		)
Total adjustments	(9.0		)	(21.5		)	(30.5		)	(29.1		)
Fair value (4)	$	48.9		$	21.6		$	70.5		$	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 June 30, 2017 from 250 basis points at December 31, 2016.

⁽⁴⁾ The decrease in the fair value of the surplus notes during the six months ended June 30, 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.