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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

The following table presents pre-tax net investment income for the three months ended March 31, 2020 and 2019:



	Three Months Ended
	March 31,
Millions	2020			2019
Fixed maturity investments	$	8.1		$	8.1
Short-term investments	.8			1.3
Common equity securities	3.8			5.4
Other long-term investments	10.5			1.6
Total investment income	23.2			16.4
Third-party investment expenses	(.3		)	(.4		)
Net investment income, pre-tax	$	22.9		$	16.0

Schedule of realized gain (loss) on investments

The following table presents net realized and unrealized investment gains (losses) for the three months ended March 31, 2020 and 2019:



	Three Months Ended				Three Months Ended
	March 31, 2020				March 31, 2019
Millions		Total Net Realized and Unrealized Gains (Losses) Reflected in Earnings				Total Net Realized and Unrealized Gains Reflected in Earnings
Fixed maturity investments		$	2.2			$	21.1
Short-term investments		.4				—
Common equity securities		(140.8		)		111.3
Other long-term investments ^{(1) (2)}		(18.5		)		113.2
Net realized and unrealized investment (losses) gains, pre-tax		(156.7		)		245.6
Income tax benefit (expense) attributable to net realized and unrealized investment (losses) gains		25.5				(52.2		)
Net realized and unrealized investment (losses) gains, after-tax		$	(131.2	)		$	193.4

Schedule of unrealized gain (loss) on investments

The following table presents net realized and unrealized investment gains (losses) for the three months ended March 31, 2020 and 2019:



	Three Months Ended				Three Months Ended
	March 31, 2020				March 31, 2019
Millions		Total Net Realized and Unrealized Gains (Losses) Reflected in Earnings				Total Net Realized and Unrealized Gains Reflected in Earnings
Fixed maturity investments		$	2.2			$	21.1
Short-term investments		.4				—
Common equity securities		(140.8		)		111.3
Other long-term investments ^{(1) (2)}		(18.5		)		113.2
Net realized and unrealized investment (losses) gains, pre-tax		(156.7		)		245.6
Income tax benefit (expense) attributable to net realized and unrealized investment (losses) gains		25.5				(52.2		)
Net realized and unrealized investment (losses) gains, after-tax		$	(131.2	)		$	193.4

⁽¹⁾ For the three months ended March 31, 2019, excludes $67.5 of realized gain and includes $114.7 of unrealized investment gain associated with the MediaAlpha Transaction, which are both recorded in a separate line item in the statement of operations titled Realized gain and unrealized investment gain from the MediaAlpha Transaction. See Note 2 — “Significant Transactions”.

⁽²⁾ For the three months ended March 31, 2020 and March 31, 2019, includes $0.4 and $0.3 of realized and unrealized investment losses related to foreign currency exchange.

Net unrealized investment gains (losses) for Level 3 investments

The following table presents total gains (losses) included in earnings attributable to net unrealized investment gains (losses) for Level 3 investments for the three months ended March 31, 2020 and 2019:



	Three Months Ended
	March 31,
Millions	2020			2019
Other long-term investments	$	(9.4	)	$	114.0
Total net unrealized investment (losses) gains, pre-tax - Level 3 investments	$	(9.4	)	$	114.0

Investment holdings, equity securities, convertible fixed maturities and other long-term investments

The following tables present the cost or amortized cost, gross unrealized investment gains (losses) and carrying values of White Mountains’s fixed maturity investments as of March 31, 2020 and December 31, 2019:



	March 31, 2020
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
U.S. Government and agency obligations	$	217.5	$	6.4	$	—		$	223.9
Debt securities issued by corporations	486.2		9.2		(8.7		)	486.7
Municipal obligations	255.2		14.8		—			270.0
Mortgage and asset-backed securities	225.7		6.2		(.2		)	231.7
Total fixed maturity investments	$	1,184.6	$	36.6	$	(8.9	)	$	1,212.3



	December 31, 2019
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
U.S. Government and agency obligations	$	231.7	$	1.0	$	(.2	)	$	232.5
Debt securities issued by corporations	454.9		12.5		(.2		)	467.2
Municipal obligations	284.7		12.5		(.1		)	297.1
Mortgage and asset-backed securities	206.6		2.7		(.3		)	209.0
Total fixed maturity investments	$	1,177.9	$	28.7	$	(.8	)	$	1,205.8

The following tables present the cost or amortized cost, gross unrealized investment gains (losses), net foreign currency losses, and carrying values of White Mountains’s common equity securities and other long-term investments as of March 31, 2020 and December 31, 2019:



	March 31, 2020
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Foreign Currency Losses			Carrying Value
Common equity securities	$	544.8	$	11.3	$	(32.4	)	$	—		$	523.7
Other long-term investments	$	610.1	$	265.7	$	(67.6	)	$	(2.6	)	$	805.6



	December 31, 2019
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Foreign Currency Losses			Carrying Value
Common equity securities	$	553.3	$	130.6	$	—		$	—		$	683.9
Other long-term investments	$	667.4	$	255.2	$	(64.1	)	$	(2.2	)	$	856.3

Other Long-Term Investments

The following table presents the carrying values of White Mountains’s other long-term investments as of March 31, 2020 and December 31, 2019:



	Carrying Value at
Millions	March 31, 2020		December 31, 2019
Kudu’s Participation Contracts ⁽¹⁾	$	262.7	$	266.5
MediaAlpha ⁽¹⁾	210.0		180.0
PassportCard/DavidShield ⁽¹⁾	80.0		90.0
Elementum ⁽¹⁾	55.1		55.1
Other unconsolidated entities ⁽¹⁾⁽²⁾	24.8		31.2
Total unconsolidated entities ⁽¹⁾	632.6		622.8
Private equity funds and hedge funds	98.5		161.1
Insurance-linked securities funds	46.2		41.2
Private debt investments	25.8		28.7
Other	2.5		2.5
Total other long-term investments	$	805.6	$	856.3

Other long-term investments

The following table presents investments and unfunded commitments in private equity funds and hedge funds by investment objective and sector as of March 31, 2020 and December 31, 2019:



	March 31, 2020				December 31, 2019
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds
Manufacturing/Industrial	$	44.5	$	4.0	$	57.7	$	4.1
Aerospace/Defense/Government	37.5		23.3		33.8		23.3
Financial services	16.5		25.9		15.0		22.8
Total private equity funds	98.5		53.2		106.5		50.2
Hedge funds
Long/short banks and financials	—		—		54.6		—
Total hedge funds	—		—		54.6		—
Total private equity funds and hedge funds included in other long-term investments	$	98.5	$	53.2	$	161.1	$	50.2

Fair Value of private equity funds subject to lock-up periods

The following table presents investments in private equity funds that were subject to lock-up periods as of March 31, 2020:



Millions	1 – 3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private equity funds — expected lock-up period remaining	$4.7	$39.3	$43.3	$11.2	$98.5

Fair value measurements by level, investment securities

The following tables present White Mountains’s fair value measurements for investments as of March 31, 2020 and December 31, 2019 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.



	March 31, 2020
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	223.9	$	223.9	$	—	$	—

Debt securities issued by corporations:
Financials	151.3		—		151.3		—
Industrial	63.4		—		63.4		—
Healthcare	52.8		—		52.8		—
Technology	52.7		—		52.7		—
Consumer	47.5		—		47.5		—
Energy	38.2		—		38.2		—
Utilities	30.4		—		30.4		—
Communications	29.1		—		29.1		—
Materials	21.3		—		21.3		—
Total debt securities issued by corporations	486.7		—		486.7		—

Municipal obligations	270.0		—		270.0		—
Mortgage and asset-backed securities	231.7		—		231.7		—
Total fixed maturity investments	1,212.3		223.9		988.4		—

Short-term investments ⁽¹⁾	137.6		130.9		6.7		—

Common equity securities:
Exchange traded funds ⁽²⁾	415.6		403.7		11.9		—
Other ⁽³⁾	108.1		18.0		90.0		.1
Total common equity securities	523.7		421.7		101.9		.1

Other long-term investments	660.9		—		—		660.9
Other long-term investments — NAV ⁽⁴⁾	144.7		—		—		—
Total investments	$	2,679.2	$	776.5	$	1,097.0	$	661.0

⁽¹⁾Short-term investments are measured at amortized cost, which approximates fair value.

⁽²⁾ 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.

⁽³⁾Primarily consists of two investments in unit trusts that predominantly invest in international equities and an open-end mutual fund that invests in domestic large-cap companies.

⁽⁴⁾ Consists of private equity funds and ILS funds for which fair value is measured at NAV using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.



	December 31, 2019
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	232.5	$	232.5	$	—	$	—

Debt securities issued by corporations:
Financials	144.8		—		144.8		—
Industrial	59.0		—		59.0		—
Healthcare	52.6		—		52.6		—
Consumer	50.9		—		50.9		—
Energy	44.9		—		44.9		—
Technology	41.2		—		41.2		—
Communications	31.3		—		31.3		—
Utilities	25.0		—		25.0		—
Materials	17.5		—		17.5		—
Total debt securities issued by corporations	467.2		—		467.2		—

Municipal obligations	297.1		—		297.1		—
Mortgage and asset-backed securities	209.0		—		209.0		—
Total fixed maturity investments	1,205.8		232.5		973.3		—

Short-term investments ⁽¹⁾	201.2		189.4		11.8		—

Common equity securities:

Exchange traded funds ⁽²⁾	536.4		521.6		14.8		—
Other ⁽³⁾	147.5		25.9		121.5		.1
Total common equity securities	683.9		547.5		136.3		.1

Other long-term investments	654.0		—		—		654.0
Other long-term investments — NAV ⁽⁴⁾	202.3		—		—		—
Total investments	$	2,947.2	$	969.4	$	1,121.4	$	654.1

⁽¹⁾Short-term investments are measured at amortized cost, which approximates fair value.

⁽²⁾ 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.

⁽³⁾Primarily consists of two investments in unit trusts that predominantly invest in international equities and an open-end mutual fund that invests in domestic large-cap companies.

⁽⁴⁾ Consists of private equity funds, one hedge fund and ILS funds for which fair value is measured at NAV using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.

Debt securities issued by corporations, credit ratings

The following table presents the ratings of debt securities issued by corporations held in White Mountains’s investment portfolio as of March 31, 2020 and December 31, 2019:



	Fair Value at
Millions	March 31, 2020		December 31, 2019
AAA	$	11.3	$	9.5
AA	63.6		73.9
A	304.7		288.5
BBB	106.1		95.3
BB	1.0		—
Debt securities issued by corporations ⁽¹⁾	$	486.7	$	467.2


⁽¹⁾	Credit ratings are based upon issuer credit ratings provided by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”), or if unrated by Standard & Poor’s, long-term obligation ratings provided by Moody’s Investor Service, Inc.

Mortgage-backed, asset-backed securities

The following table presents the fair value of White Mountains’s mortgage and asset-backed securities as of March 31, 2020 and December 31, 2019:



	March 31, 2020						December 31, 2019
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
FNMA	$	90.6	$	90.6	$	—	$	88.6	$	88.6	$	—
FHLMC	72.1		72.1		—		60.5		60.5		—
GNMA	45.7		45.7		—		30.8		30.8		—
Total agency ⁽¹⁾	208.4		208.4		—		179.9		179.9		—
Total mortgage-backed securities	208.4		208.4		—		179.9		179.9		—
Other asset-backed securities:
Vehicle receivables	12.2		12.2		—		15.1		15.1		—
Credit card receivables	11.1		11.1		—		14.0		14.0		—
Total other asset-backed securities	23.3		23.3		—		29.1		29.1		—
Total mortgage and asset-backed securities	$	231.7	$	231.7	$	—	$	209.0	$	209.0	$	—


⁽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).

Rollforward of fair value investments by level

The following tables present the changes in White Mountains’s fair value measurements by level for the three months ended March 31, 2020 and 2019:



							Level 3 Investments					Other Long-term Investments Measured at NAV ⁽²⁾
Millions	Level 1 Investments			Level 2 Investments			Common Equity Securities		Other Long-term Investments			Other Long-term Investments Measured at NAV ⁽²⁾			Total
Balance at December 31, 2019	$	780.0		$	1,109.6		$	.1	$	654.0		$	202.3		$	2,746.0		⁽¹⁾
Net realized and unrealized (losses)	(98.7		)	(39.9		)	—		(9.7		)	(8.8		)	(157.1		)	⁽³⁾
Amortization/Accretion	—			(.8		)	—		—			—			(.8		)
Purchases	74.2			126.8			—		24.7			7.2			232.9
Sales	(109.9		)	(105.4		)	—		(8.1		)	(56.0		)	(279.4		)
Transfers in	—			—			—		—			—			—
Transfers out	—			—			—		—			—			—
Balance at March 31, 2020	$	645.6		$	1,090.3		$	.1	$	660.9		$	144.7		$	2,541.6		⁽¹⁾

⁽¹⁾Excludes carrying value of $137.6 million and $201.2 as of March 31, 2020 and December 31, 2019 classified as short-term investments.

⁽²⁾Includes private equity funds, hedge funds, ILS funds and unconsolidated entities for which fair value is measured at NAV using the practical expedient are no longer classified within the fair value hierarchy. See Note 1 — “Basis of Presentation and Significant Accounting Policies”.

⁽³⁾ Excludes realized and unrealized gains associated with short-term investments of $0.4 for the three months ended March 31, 2020.



							Level 3 Investments		Other Long-term Investments Measured at NAV ⁽³⁾
Millions	Level 1 Investments			Level 2 Investments			Other Long-term Investments		Other Long-term Investments Measured at NAV ⁽³⁾			Total
Balance at December 31, 2018	$	842.6		$	1,160.5		$	138.7	$	186.9		$	2,328.7		⁽¹⁾
Net realized and unrealized gains (losses)	91.7			40.7			114.0		(.8		)	245.6			⁽²⁾
Amortization/Accretion	.1			(.4		)	—		—			(.3		)
Purchases	14.6			142.3			11.5		49.2			217.6
Sales	(149.7		)	(105.4		)	—		(1.9		)	(257.0		)
Transfers in	—			—			10.9		—			10.9
Transfers out	—			—			—		(10.9		)	(10.9		)
Balance at March 31, 2019	$	799.3		$	1,237.7		$	275.1	$	222.5		$	2,534.6		⁽¹⁾

⁽¹⁾Excludes carrying value of $269.8 and $214.2 as of March 31, 2019 and December 31, 2018 classified as short-term investments.


⁽²⁾	Includes $114.7 unrealized investment gain associated with the MediaAlpha Transaction, which is recorded in a separate line item in the statement of operations titled Realized gain and unrealized investment gain from the MediaAlpha Transaction. See Note 2 — “Significant Transactions”.

⁽³⁾Includes private equity funds, hedge funds and unconsolidated entities for which fair value is measured at NAV using the practical expedient are no longer classified within the fair value hierarchy. See Note 1 — “Basis of Presentation and Significant Accounting Policies”.

Schedule of significant unobservable inputs used in estimating the fair value of investment securities

The following tables present significant unobservable inputs used in estimating the fair value of other long-term investments, other than private equity funds, hedge funds and ILS funds, classified within Level 3 as of March 31, 2020 and December 31, 2019. The fair value of investments in private equity funds, hedge funds and ILS funds are generally estimated using the NAV of the funds.



$ in Millions	March 31, 2020
Description	Valuation Technique(s)	Fair Value ⁽²⁾	Unobservable Inputs
			Discount Rate ⁽²⁾	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) ⁽³⁾
Kudu’s Participation Contracts ⁽¹⁾	Discounted cash flow	$262.7	18% - 24%	6x - 12x
MediaAlpha	Discounted cash flow	$210.0	15%	4%
PassportCard/DavidShield	Discounted cash flow	$80.0	25%	4%
Elementum Holdings, L.P.	Discounted cash flow	$55.1	20%	4%
Private debt instruments	Discounted cash flow	$25.8	7% - 15%	N/A
All other	Discounted cash flow	$13.6	25%	4%

Noblr, Inc.	Share price of recent transaction	$8.7	Share price:	$2.17
Zillion Insurance Services, Inc.	Recent transaction	$2.5	Transaction price:	$2.5
Compare.com	Estimated net realizable value	$2.5	Net realizable value:	$2.5

⁽¹⁾ In the first quarter of 2020, Kudu deployed $21.0 million in Creation Investments Capital Management.

⁽²⁾Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.

⁽³⁾Increases (decreases) to the discount rates in isolation would result in lower (higher) fair value measurements, while increases (decreases) to the terminal cash flow exit multiples or terminal revenue growth rates in isolation would result in higher (lower) fair value measurements.



$ in Millions	December 31, 2019
Description	Valuation Technique(s)	Fair Value ⁽¹⁾	Unobservable Inputs
			Discount Rate ⁽²⁾	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) ⁽²⁾
Kudu’s Participation Contracts	Discounted cash flow	$266.5	15% - 22%	6x - 12x
MediaAlpha	Discounted cash flow	$180.0	15%	4%
PassportCard/DavidShield	Discounted cash flow	$90.0	22%	4%
Elementum Holdings, L.P.	Discounted cash flow	$55.1	20%	4%
Private debt instruments	Discounted cash flow	$23.7	4% - 9%	N/A
All other	Discounted cash flow	$23.7	25% - 32%	4%

Noblr, Inc.	Share price of recent transaction	$5.0	Share price:	$2.17
Zillion Insurance Services, Inc.	Recent transaction	$2.5	Transaction price:	$2.5
Compare.com	Estimated net realizable value	$2.5	Net realizable value:	$2.5

⁽¹⁾Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.

⁽²⁾Increases (decreases) to the discount rates in isolation would result in lower (higher) fair value measurements, while increases (decreases) to the terminal cash flow exit multiples or terminal revenue growth rates in isolation would result in higher (lower) fair value measurements.