Significant Transactions

Acquisitions

NSM

On May 11, 2018, White Mountains closed its acquisition of 95% of NSM’s equity for cash consideration of $274.2 million. During the third quarter of 2018, White Mountains recorded a purchase price adjustment of $2.1 million. White Mountains recognized total assets acquired related to NSM of $495.2 million, including $383.0 million of goodwill and other intangible assets, total liabilities assumed of $204.6 million, including contingent consideration earnout liabilities related to NSM’s previous acquisitions of its U.K.-based operations, of $10.2 million, and non-controlling interest of $14.4 million reflecting acquisition date fair values. In connection with the acquisition, White Mountains incurred transaction costs of $6.3 million, which were expensed in 2018.

On May 18, 2018, NSM acquired 100% of Fresh Insurance Group Limited (“Fresh Insurance”) for upfront cash consideration of $49.6 million. During the third quarter of 2018, NSM recorded a purchase price adjustment of $0.7 million. The purchase price is subject to additional adjustments based upon growth in EBITDA during two earnout periods ending in February 2020 and February 2022. NSM recognized total assets acquired related to Fresh Insurance of $72.6 million, including $54.6 million of goodwill and other intangible assets, and total liabilities assumed of $22.3 million, reflecting acquisition date fair values. In connection with the acquisition, NSM recorded a contingent consideration earnout liability of $7.5 million.

On December 3, 2018, NSM acquired all the net assets of KBK for upfront cash consideration of $60.0 million and recognized $59.4 million of goodwill and other intangible assets, reflecting acquisition date fair values. The relative fair values of goodwill and other intangible assets recognized in connection with the acquisitions of KBK had not yet been determined at December 31, 2018. The purchase price is subject to additional adjustments based upon growth in EBITDA during three earnout periods ending in December 2019, December 2020 and December 2021. In connection to the KBK acquisition, NSM expects to record a contingent consideration earnout liability in the first quarter of 2019. White Mountains acquired 16,694,869 additional newly-issued units of NSM for $29 million in connection with NSM’s acquisition of KBK.

The contingent consideration earnout liabilities related to these acquisitions are subject to adjustment based upon EBITDA, EBITDA projections, and present value factors for acquired entities. For the period from May 11, 2018 through December 31, 2018, NSM recognized pre-tax expense of $2.7 million for the change in the fair value of its contingent consideration earnout liabilities for Fresh Insurance and its other U.K.-based operations. Any future adjustments to contingent consideration earnout liabilities under the agreements will also be recognized through pre-tax income. As of December 31, 2018, NSM recorded contingent consideration earnout liabilities of $20.2 million.

DavidShield

On January 24, 2018, White Mountains acquired 50% of DavidShield, its joint venture partner in PassportCard. DavidShield is a managing general agency that is the leading provider of expatriate medical insurance in Israel and uses the same card-based delivery system as PassportCard. As part of the transaction, White Mountains reorganized its equity stake in PassportCard so that White Mountains and its partner in DavidShield would each own 50% of both businesses. To facilitate the transaction, White Mountains provided financing to its partner in the form of a non-interest bearing loan that is secured by the partner’s equity in PassportCard and DavidShield. The gross purchase price for the 50% of DavidShield was $41.8 million, or $28.3 million net of the financing provided for the restructuring.

Kudu

On February 5, 2018, White Mountains entered into an agreement to fund up to $125.0 million in Kudu, a capital provider to asset management and wealth management firms. As of December 31, 2018, White Mountains owned 49.5% of Kudu. Kudu specializes in providing capital solutions to asset managers and registered investment advisers for purposes including generational ownership transfers, management buyouts, acquisition and growth finance and legacy partner liquidity. Kudu also provides strategic assistance to investees from time to time. Kudu’s capital solutions typically are structured as long-term or permanent revenue shares.

Kudu closed its first three transactions in 2018 deploying $63.0 million of capital in total, of which $31.5 million was from White Mountains. White Mountains has determined that Kudu is a VIE, but that White Mountains is not the primary beneficiary. White Mountains has elected to take the fair value option for its investment in Kudu. As of December 31, 2018, White Mountains had funded $31.5 million of its $125 million commitment, plus an additional $3.8 million for working capital.

On February 14, 2019, White Mountains entered into a definitive agreement to buy all of the interests in Kudu held by certain funds managed by Oaktree Capital Management, L.P. (“Oaktree”). See Note 20 — “Subsequent Events”.

Buzz

On August 4, 2016, White Mountains acquired a 70.9% ownership share in Buzz for a purchase price of British Pound Sterling (“GBP”) 6.1 million (approximately $8.1 million based upon the foreign exchange spot rate at the date of acquisition). White Mountains recognized total assets acquired related to Buzz of $11.5 million, including $7.6 million of goodwill and $1.1 million of other intangible assets, and total liabilities assumed of $0.1 million, reflecting acquisition date fair values.

On August 1, 2017, White Mountains acquired 37,409 newly-issued preferred shares of Buzz for GBP 4.0 million (approximately $5.0 million based upon the foreign exchange spot rate at the date of acquisition) and 5,808 common shares from the company founders for GBP 0.5 million (approximately $0.7 million based upon the spot rate at the date of acquisition). As of December 31, 2018 and 2017, White Mountains’s ownership share in Buzz was 77.1%.

MediaAlpha

On January 15, 2016, MediaAlpha acquired certain assets from Oversee.net for an aggregate purchase price of $3.9 million. The majority of assets acquired, which are included in other intangible assets, consists of customer relationships, a customer contract, a non-compete agreement from the seller, domain names and technology.

On October 5, 2017, MediaAlpha acquired certain assets associated with the Health, Life and Medicare insurance business of Healthplans.com for an aggregate purchase price of $28.0 million. The majority of assets acquired, which are included in other intangible assets, consists of customer relationships, a non-compete agreement from the seller and domain names. See Note 4 — “Goodwill and Other Intangibles Assets”.

On October 5, 2017, White Mountains acquired 131,579 newly-issued Class A common units of MediaAlpha for $12.5 million. As of December 31, 2018 and 2017, White Mountains’s ownership share in MediaAlpha was 61.0% and 64.4%.

Dispositions

OneBeacon

On September 28, 2017, White Mountains received $1.3 billion in cash proceeds from the OneBeacon Transaction and recorded a net gain of $554.6 million, net of transaction costs, and other comprehensive income of $2.9 million. As a result of the OneBeacon Transaction, OneBeacon’s results have been reported as discontinued operations within White Mountains’s GAAP financial statements. See Note 19 — “Held for Sale and Discontinued Operations”.

Tranzact

On July 21, 2016, White Mountains completed the sale of Tranzact to an affiliate of Clayton, Dubilier & Rice, LLC and received net proceeds of $221.3 million. In connection with the sale of Tranzact, the purchaser directly repaid $56.3 million for the portion of Tranzact’s debt attributable to White Mountains’s common shareholders. On October 5, 2016, White Mountains received additional proceeds of $1.2 million following the release of the post-closing purchase price adjustment escrow.

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. See Note 6 — “Income Taxes”. The increase to White Mountains’s book value from the sale of Tranzact was $82.1 million.

The following table presents a reconciliation of the gain reported in discontinued operations to the impact to White Mountains’s book value:



Millions	Year ended December 31, 2016
Gain from sale of Tranzact reported in discontinued operations	$	51.9
Add back reclassification from continuing operations for the release of a tax valuation allowance	30.2
Increase to White Mountains’s book value from sale of Tranzact	$	82.1

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. See Note 19 — “Held for Sale and Discontinued Operations”.

During 2017, White Mountains recorded a $3.2 million increase to the gain from sale of Tranzact in discontinued operations as a result of a change in state tax expense.

Sirius Group

On April 18, 2016, White Mountains completed the sale of Sirius Group to CMI for approximately $2.6 billion. Of this amount, $161.8 million was used to purchase certain assets 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 the third quarter of 2016, there was a final true-up to Sirius Group’s tangible common shareholder’s equity that resulted in a $4.0 million reduction to the gain. During 2016, White Mountains recorded $363.2 million of gain from sale of Sirius Group in discontinued operations and $113.3 million in other comprehensive income from discontinued operations from Sirius Group.

During 2017, White Mountains recorded a $0.7 million reduction to the gain from sale of Sirius Group as a result of a change to the valuation of the accrued incentive compensation payable to Sirius Group employees.

During 2018, White Mountains recorded a loss of $17.3 million within net (loss) gain on sale of discontinued operations for a contingency related to the sale of Sirius Group. See Note 18 — “Commitments and Contingencies”.

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. See Note 19 — “Held for Sale and Discontinued Operations”.