Leases

9 Months Ended

Sep. 30, 2019

White Mountains has entered into lease agreements, primarily for office space. These leases are classified as operating leases, with lease expense recognized on a straight-line basis over the term of the lease. Lease incentives, such as free rent or landlord reimbursements for leasehold improvements, are recognized at lease inception and amortized on a straight-line basis over the term of the lease. Lease expense and the amortization of leasehold improvements are recognized within general and administrative expenses. Lease payments related to options to extend or renew the lease term are excluded from the calculation of lease liabilities unless White Mountains is reasonably certain of exercising those options.

On January 1, 2019, White Mountains adopted ASU 2016-02, Leases (ASC 842). See Note 1 — “Basis of Presentation and Significant Accounting Policies” — Basis of Presentation and Significant Accounting Policies. Prior to adoption of ASU 2016-02, White Mountains recognized lease expense for operating leases on a straight-line basis, but did not recognize lease assets or liabilities on its consolidated balance sheet. Upon adoption on January 1, 2019, White Mountains recognized lease right-of-use (“ROU”) assets of $23.2 million and lease liabilities of $23.2 million. As of September 30, 2019, the ROU asset was $23.0 million and lease liabilities were $23.3 million.

The following table summarizes net lease expense recognized in White Mountains’s consolidated statement of operations for the three and nine months ended September 30, 2019:



Millions Lease Cost	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Lease cost	$	1.9	$	5.4
Less: sublease income	.1		.3
Net lease cost	$	1.8	$	5.1

The following table presents the contractual maturities of the lease liabilities associated with White Mountains’s operating lease agreements as of September 30, 2019:



Millions	As of September 30, 2019
Remainder of 2019	$	1.7
2020	5.7
2021	4.7
2022	4.2
2023	3.6
Thereafter	6.3
Total undiscounted lease payments	26.2
Less: present value adjustment	2.9
Operating lease liability	$	23.3

The following table presents lease related assets and liabilities by reportable segment as of September 30, 2019:



	As of September 30, 2019
Millions	HG/BAM		NSM		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate ⁽¹⁾
ROU lease asset	$	10.8	$	4.4	$	2.3	$	5.5	$	23.0	4.5%
Lease liability	$	10.8	$	4.4	$	2.3	$	5.8	$	23.3	4.5%

⁽¹⁾ The present value of the remaining lease payments were determined by discounting the lease payments using the incremental borrowing rate.