Leases

6 Months Ended

Jun. 30, 2020

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 June 30, 2020 and December 31, 2019, the ROU asset was $34.0 million and $22.6 million and lease liabilities were $34.2 million and $22.8 million.

The following table summarizes net lease expense recognized in White Mountains’s consolidated statement of operations for the three and six months ended June 30, 2020 and 2019:



Millions	Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost	2020		2019		2020		2019
Lease cost	$	2.1	$	1.8	$	4.1	$	3.5
Less: sublease income	.1		.1		.2		.2
Net lease cost	$	2.0	$	1.7	$	3.9	$	3.3

The following table presents the contractual maturities of the lease liabilities associated with White Mountains’s operating lease agreements as of June 30, 2020:



Millions	As of June 30, 2020
Remainder of 2020	$	3.1
2021	6.8
2022	6.3
2023	6.1
2024	5.2
Thereafter	14.1
Total undiscounted lease payments	41.6
Less: present value adjustment	7.4
Operating lease liability	$	34.2

The following tables present lease related assets and liabilities by reportable segment as of June 30, 2020 and December 31, 2019:



	As of June 30, 2020
Millions	HG/BAM		NSM		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate ⁽¹⁾
ROU lease asset	$	9.8	$	16.8	$	2.2	$	5.2	$	34.0	4.8%
Lease liability	$	9.8	$	16.8	$	2.2	$	5.4	$	34.2	4.8%

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



	As of December 31, 2019
Millions	HG/BAM		NSM		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate ⁽¹⁾
ROU lease asset	$	10.4	$	4.8	$	2.3	$	5.1	$	22.6	4.6%
Lease liability	$	10.4	$	4.8	$	2.3	$	5.3	$	22.8	4.6%

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