Segment Information

White Mountains has determined that its reportable segments are HG Global/BAM, NSM, MediaAlpha and Other Operations.

As a result of the OneBeacon, Sirius Group and Tranzact transactions, the results of operations for OneBeacon and Sirius Group, previously reported in their own respective segments, and Tranzact, previously reported in the Other Operations segment, have been classified as discontinued operations and are now presented, net of related income taxes, as such in the statement of operations and comprehensive income. See Note 19 — “Held for Sale and Discontinued Operations”.

Beginning in the second quarter of 2017, MediaAlpha’s results have been presented as a separate segment within White Mountains’s consolidated financial statements. Prior year amounts have been reclassified to conform to the current period’s presentation.

White Mountains has made its segment determination based on consideration of the following criteria: (i) the nature of the business activities of each of the Company’s subsidiaries and affiliates; (ii) the manner in which the Company’s subsidiaries and affiliates are organized; (iii) the existence of primary managers responsible for specific subsidiaries and affiliates; and (iv) the organization of information provided to the chief operating decision makers and the Board of Directors.

The HG Global/BAM segment consists of White Mountains’s investment in HG Global and the consolidated results of BAM. BAM is a municipal bond insurer domiciled in New York that was established to provide insurance on municipal bonds issued to support essential U.S. public purposes such as schools, utilities, core governmental functions and existing transportation facilities. HG Global, together with its subsidiaries, provided the initial capitalization of BAM through the purchase of BAM Surplus Notes. HG Global also provides up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM. For capital appreciation bonds, par is adjusted to the estimated equivalent par value for current interest paying bonds. BAM's results are attributed to non-controlling interests.

NSM is a full-service MGU and program administrator for specialty property and casualty insurance. The company places insurance in niche sectors such as specialty transportation, social services and real estate. On behalf of its insurance carrier partners, NSM manages all aspects of the placement process, including product development, marketing, underwriting, policy issuance and claims. NSM earns commissions based on the volume and profitability of the insurance that it places. NSM does not take insurance risk.

MediaAlpha is a leading marketing technology company that develops technology that enables the programmatic buying and selling of vertical-specific, performance-based media between advertisers (buyers of advertising inventory) and publishers (sellers of advertising inventory) through cost-per-click, cost-per-call and cost-per-lead pricing models. MediaAlpha's media buying platform enables advertisers to create and automate data-driven bidding strategies designed to improve the efficiency and enhance overall performance of their marketing campaigns that target high-intent consumers at the time and place they are ready to purchase. MediaAlpha’s publisher platform is used by publishers to sell their vertical-specific, performance-based media to advertisers through transparent, programmatic, auction-based marketplaces.

White Mountains’s Other Operations segment consists of the Company and its wholly-owned subsidiary, WM Capital, its other intermediate holding companies, its investment management subsidiary, WM Advisors, investment assets managed by WM Advisors, its interests in PassportCard/DavidShield and Kudu, certain other consolidated and unconsolidated entities and certain other strategic investments. The consolidated entities consist of Wobi and Buzz. White Mountains’s Other Operations segment also includes its variable annuity reinsurance business, WM Life Re.

Significant intercompany transactions among White Mountains’s segments have been eliminated herein.

The following tables present the financial information for White Mountains’s segments:



Millions	HG Global/BAM ⁽¹⁾			NSM			MediaAlpha		Other Operations			Total
Year Ended December 31, 2018
Earned insurance premiums	$	13.9		$	—		$	—	$	—		$	13.9
Net investment income	16.7			—			—		42.3			59.0
Net realized and unrealized investment losses	(7.5		)	—			—		(100.8		)	(108.3		)
Advertising and commission revenues ⁽²⁾	—			94.7			295.5		4.1			394.3
Other revenues	1.2			6.9			1.6		.5			10.2
Total revenues	24.3			101.6			297.1		(53.9		)	369.1
Insurance acquisition expenses	5.3			—			—		—			5.3
Other underwriting expenses	.4			—			—		—			.4
Cost of sales	—			—			245.0		3.7			248.7
General and administrative expenses	48.0			61.6			31.7		94.4			235.7
Broker commission expense	—			28.9			—		—			28.9
Amortization of other intangible assets	—			8.3			10.3		.2			18.8
Interest expense	—			8.0			1.2		.3			9.5
Total expenses	53.7			106.8			288.2		98.6			547.3
Pre-tax (loss) income	$	(29.4	)	$	(5.2	)	$	8.9	$	(152.5	)	$	(178.2	)


⁽¹⁾	BAM manages its affairs on a statutory accounting basis. BAM’s statutory surplus includes the BAM Surplus Notes and is not reduced by accruals of interest expense on the BAM Surplus Notes. BAM’s statutory surplus is reduced only after a payment of principal or interest has been approved by the NYDFS.


⁽²⁾	As of December 31, 2018, approximately 29% of MediaAlpha’s advertising revenue was associated with one customer.As of December 31, 2018, approximately 33% of NSM’s commission revenue was associated with one single carrier.



Millions	HG Global/BAM ⁽¹⁾			MediaAlpha			Other Operations		Total
Year Ended December 31, 2017
Earned insurance premiums	$	9.4		$	—		$	1.0	$	10.4
Net investment income	12.3			—			43.7		56.0
Net realized and unrealized investment gains	.6			—			132.7		133.3
Advertising and commission revenues⁽²⁾	—			163.2			3.8		167.0
Other revenues	1.0			—			6.1		7.1
Total revenues	23.3			163.2			187.3		373.8
Losses and LAE	—			—			1.1		1.1
Insurance acquisition expenses	4.0			—			.1		4.1
Other underwriting expenses	.4			—			—		.4
Cost of sales	—			135.9			3.5		139.4
General and administrative expenses	42.9			16.2			148.9		208.0
Amortization of other intangible assets	—			10.5			.2		10.7
Interest expense	—			1.0			1.3		2.3
Total expenses	47.3			163.6			155.1		366.0
Pre-tax (loss) income	$	(24.0	)	$	(.4	)	$	32.2	$	7.8


⁽¹⁾	BAM manages its affairs on a statutory accounting basis. BAM’s statutory surplus includes the BAM Surplus Notes and is not reduced by accruals of interest expense on the BAM Surplus Notes. BAM’s statutory surplus is reduced only after a payment of principal or interest has been approved by the NYDFS.


⁽²⁾	As of December 31, 2017, approximately 27% of MediaAlpha’s advertising revenue was associated with one customer.



Millions	HG Global/BAM ⁽¹⁾			MediaAlpha			Other Operations			Total
Year Ended December 31, 2016
Earned insurance premiums	$	5.9		$	—		$	7.5		$	13.4
Net investment income	9.0			—			23.1			32.1
Net realized and unrealized investment gains (losses)	.7			—			(28.1		)	(27.4		)
Advertising and commission revenues ⁽²⁾	—			116.5			1.8			118.3
Other revenues	1.1			—			20.2			21.3
Total revenues	16.7			116.5			24.5			157.7
Losses and LAE	—			—			8.0			8.0
Insurance acquisition expenses	3.4			—			2.2			5.6
Other underwriting expenses	.4			—			—			.4
Cost of sales	—			97.8			4.2			102.0
General and administrative expenses	39.6			11.8			124.1			175.5
Amortization of other intangible assets	—			10.1			.4			10.5
Interest expense	—			.9			2.1			3.0
Total expenses	43.4			120.6			141.0			305.0
Pre-tax loss	$	(26.7	)	$	(4.1	)	$	(116.5	)	$	(147.3	)


⁽¹⁾	BAM manages its affairs on a statutory accounting basis. BAM’s statutory surplus includes the BAM Surplus Notes and is not reduced by accruals of interest expense on the BAM Surplus Notes. BAM’s statutory surplus is reduced only after a payment of principal or interest has been approved by the NYDFS.


⁽²⁾	As of December 31, 2016, approximately 24% of MediaAlpha’s advertising revenue was associated with one customer.



Millions Selected Balance Sheet Data	HG Global/BAM				NSM		MediaAlpha		Other Operations			Held for Sale		Total
December 31, 2018:
Total investments	$	768.3			$	1.7	$	—	$	1,772.9		$	—	$	2,542.9
Total assets	$	816.2		⁽¹⁾	$	627.0	$	88.4	$	1,827.7	⁽²⁾	$	3.3	$	3,362.6
Total liabilities	$	212.5		⁽²⁾	$	314.8	$	46.9	$	70.2		$	—	$	644.4
Total White Mountains’s common shareholders’ equity	$	759.8		⁽²⁾	$	298.3	$	25.3	$	1,756.4	⁽²⁾	$	3.3	$	2,843.1
Non-controlling interest	$	(156.1	)		$	13.9	$	16.2	$	1.1		$	—	$	(124.9	)
December 31, 2017:
Total investments	$	693.4			$	—	$	—	$	2,687.3		$	—	$	3,380.7
Total assets	$	747.4		⁽¹⁾	$	—	$	96.5	$	2,812.0	⁽²⁾	$	3.3	$	3,659.2
Total liabilities	$	167.0		⁽²⁾	$	—	$	59.8	$	71.6		$	—	$	298.4
Total White Mountains’s common shareholders’ equity	$	727.7		⁽²⁾	$	—	$	23.6	$	2,737.9	⁽²⁾	$	3.3	$	3,492.5
Non-controlling interest	$	(147.3	)		$	—	$	13.1	$	2.5		$	—	$	(131.7	)


⁽¹⁾	As of December 2018 and 2017,BAM’s total assets reflected the elimination of $481.3 and $499.0 of BAM Surplus Notes issued to HG Global and its subsidiaries, and $143.7 and $126.0 in accrued interest related to the BAM Surplus Notes.

⁽²⁾

HG Global preferred dividends payable to White Mountains’s subsidiaries is eliminated in White Mountains’s consolidated financial statements. For segment reporting, the HG Global preferred dividends payable to White Mountains’s subsidiaries included within the HG Global/BAM segment are eliminated against the offsetting receivable included within the Other Operations segment and therefore added back to White Mountains’s common shareholders’ equity within the HG Global/BAM segment. As of December 31, 2018 and 2017, the HG Global preferred dividends payable to White Mountains’s subsidiaries was $278.5 and $227.9.