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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2020

Debt and Equity Securities, FV-NI [Line Items]

The following table presents pre-tax net investment income for the three and nine months ended September 30, 2020 and 2019:



	Three Months Ended						Nine Months Ended
	September 30						September 30
Millions	2020			2019			2020			2019
Fixed maturity investments	$	7.0		$	8.0		$	22.4		$	24.4
Short-term investments	.1			1.3			1.0			3.9
Common equity securities	.5			2.5			6.5			10.8
Other long-term investments	63.9			7.0			84.7			17.4
Total investment income	71.5			18.8			114.6			56.5
Third-party investment expenses	(.3		)	(.4		)	(.9		)	(1.1		)
Net investment income, pre-tax	$	71.2		$	18.4		$	113.7		$	55.4

Schedule of realized gain (loss) on investments

The following table presents net realized and unrealized investment gains (losses) for the three and nine months ended September 30, 2020 and 2019:



	Three Months Ended				Nine Months Ended
	September 30				September 30
Millions	2020		2019		2020		2019
Fixed maturity investments	$	3.6	$	8.9	$	35.8	$	46.9
Short-term investments	—		—		.4		.3
Common equity securities	48.4		2.4		5.9		141.5
Other long-term investments ^{(1) (2)(3)}	254.6		$	55.7	260.7		159.1
Net realized and unrealized investment gains	306.6		67.0		302.8		347.8
Less: net gains on investment securities sold during the period	36.1		—		29.6		12.4
Net realized and unrealized investment gains on investment securities held at the end of the period	$	270.5	$	67.0	$	273.2	$	335.4

⁽¹⁾For the nine months ended September 30, 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 and nine months ended September 30, 2020 and 2019, includes $250.0, $295.0, $35.3 and $150.0 of unrealized investment gains from White Mountains’s investment in MediaAlpha.

⁽³⁾For the three and nine months ended September 30, 2020 and 2019, includes $0.8 and $(0.8) of realized and unrealized investment gains (losses) related to foreign currency exchange.

Schedule of unrealized gain (loss) on investments

The following table presents net realized and unrealized investment gains (losses) for the three and nine months ended September 30, 2020 and 2019:



	Three Months Ended				Nine Months Ended
	September 30				September 30
Millions	2020		2019		2020		2019
Fixed maturity investments	$	3.6	$	8.9	$	35.8	$	46.9
Short-term investments	—		—		.4		.3
Common equity securities	48.4		2.4		5.9		141.5
Other long-term investments ^{(1) (2)(3)}	254.6		$	55.7	260.7		159.1
Net realized and unrealized investment gains	306.6		67.0		302.8		347.8
Less: net gains on investment securities sold during the period	36.1		—		29.6		12.4
Net realized and unrealized investment gains on investment securities held at the end of the period	$	270.5	$	67.0	$	273.2	$	335.4

⁽¹⁾For the nine months ended September 30, 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 and nine months ended September 30, 2020 and 2019, includes $250.0, $295.0, $35.3 and $150.0 of unrealized investment gains from White Mountains’s investment in MediaAlpha.

⁽³⁾For the three and nine months ended September 30, 2020 and 2019, includes $0.8 and $(0.8) of realized and unrealized investment gains (losses) related to foreign currency exchange.

Net unrealized investment gains (losses) for Level 3 investments

The following table presents total gains included in earnings attributable to net unrealized investment gains (losses) for Level 3 investments for the three and nine months ended September 30, 2020 and 2019 for investments still held at the end of the period:



	Three Months Ended				Nine Months Ended
	September 30				September 30
Millions	2020		2019		2020		2019
Other long-term investments	$	260.1	$	54.4	$	276.0	$	154.4
Total net unrealized investment gains (losses), pre-tax - Level 3 investments	$	260.1	$	54.4	$	276.0	$	154.4

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 September 30, 2020 and December 31, 2019:



	September 30, 2020
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
U.S. Government and agency obligations	$	206.2	$	4.4	$	—		$	210.6
Debt securities issued by corporations	505.4		24.0		(.7		)	528.7
Municipal obligations	251.0		20.4		(.1		)	271.3
Mortgage and asset-backed securities	203.6		7.3		—			210.9
Total fixed maturity investments	$	1,166.2	$	56.1	$	(.8	)	$	1,221.5



	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 September 30, 2020 and December 31, 2019:



	September 30, 2020
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Foreign Currency Losses			Carrying Value
Common equity securities	$	124.2	$	16.5	$	—		$	—		$	140.7
Other long-term investments	$	696.4	$	552.4	$	(76.1	)	$	(1.5	)	$	1,171.2



	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

The following table presents the carrying values of White Mountains’s other long-term investments as of September 30, 2020 and December 31, 2019:



	Carrying Value at
Millions	September 30, 2020		December 31, 2019
MediaAlpha ⁽¹⁾	$	475.0	$	180.0
Kudu’s Participation Contracts ⁽¹⁾	325.5		266.5
PassportCard/DavidShield ⁽¹⁾	95.0		90.0
Elementum Holdings L.P. ⁽¹⁾	55.1		55.1
Other unconsolidated entities ⁽¹⁾⁽²⁾	31.8		33.7
Total unconsolidated entities ⁽¹⁾	982.4		625.3
Private equity funds and hedge funds	118.2		161.1
Insurance-linked securities funds	52.7		41.2
Private debt investments ⁽³⁾	17.9		28.7
Total other long-term investments	$	1,171.2	$	856.3

⁽¹⁾See Fair Value Measurements by Level table.

⁽²⁾Includes White Mountains’s non-controlling equity interests in certain private common equity securities, limited liability companies and convertible preferred securities and Simple Agreement for Future Equity (“SAFE”) investments.

⁽³⁾ Includes $5.1 and $5.0 in private debt investments carried at fair value as of September 30. 2020 and amortized cost as of December 31, 2019.

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 September 30, 2020 and December 31, 2019:



	September 30, 2020				December 31, 2019
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds
Aerospace/Defense/Government	$	59.4	$	16.1	$	33.8	$	23.3
Manufacturing/Industrial	39.8		2.0		57.7		4.1
Financial services	19.0		23.4		15.0		22.8
Total private equity funds	118.2		41.5		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	$	118.2	$	41.5	$	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 September 30, 2020:



Millions	1 – 3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private equity funds — expected lock-up period remaining	$4.7	$36.4	$71.7	$5.4	$118.2

Fair value measurements by level, investment securities

The following tables present White Mountains’s fair value measurements for investments as of September 30, 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.



	September 30, 2020
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	210.6	$	210.6	$	—	$	—

Debt securities issued by corporations:
Financials	142.9		—		142.9		—
Technology	68.5		—		68.5		—
Industrial	61.5		—		61.5		—
Consumer	60.7		—		60.7		—
Healthcare	49.3		—		49.3		—
Communications	42.3		—		42.3		—
Energy	38.9		—		38.9		—
Materials	37.4		—		37.4		—
Utilities	27.2		—		27.2		—
Total debt securities issued by corporations	528.7		—		528.7		—

Municipal obligations	271.3		—		271.3		—
Mortgage and asset-backed securities	210.9		—		210.9		—
Total fixed maturity investments	1,221.5		210.6		1,010.9		—

Short-term investments ⁽¹⁾	571.8		570.6		1.2		—

Common equity securities:
Exchange traded funds	84.7		84.7		—		—
Other ⁽²⁾	56.0		—		55.9		.1
Total common equity securities	140.7		84.7		55.9		.1

Other long-term investments	1,000.3		—		—		1,000.3
Other long-term investments — NAV ⁽³⁾	170.9		—		—		—
Total investments	$	3,105.2	$	865.9	$	1,068.0	$	1,000.4

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

⁽²⁾Primarily consists of one investment in a unit trust that predominantly invests in international equities.

⁽³⁾ 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 credit ratings of debt securities issued by corporations held in White Mountains’s investment portfolio as of September 30, 2020 and December 31, 2019:



	Fair Value at
Millions	September 30, 2020		December 31, 2019
AAA	$	11.2	$	9.5
AA	58.2		73.9
A	307.7		288.5
BBB	150.0		95.3
BB	1.6		—
Debt securities issued by corporations ⁽¹⁾	$	528.7	$	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 September 30, 2020 and December 31, 2019:



	September 30, 2020						December 31, 2019
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
FNMA	$	84.5	$	84.5	$	—	$	88.6	$	88.6	$	—
FHLMC	67.1		67.1		—		60.5		60.5		—
GNMA	37.4		37.4		—		30.8		30.8		—
Total agency ⁽¹⁾	189.0		189.0		—		179.9		179.9		—
Total mortgage-backed securities	189.0		189.0		—		179.9		179.9		—
Other asset-backed securities:
Credit card receivables	11.3		11.3		—		14.0		14.0		—
Vehicle receivables	10.6		10.6		—		15.1		15.1		—
Total other asset-backed securities	21.9		21.9		—		29.1		29.1		—
Total mortgage and asset-backed securities	$	210.9	$	210.9	$	—	$	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 September 30, 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 gains (losses)	29.2			12.5			—		275.6			(14.9		)	302.4			⁽³⁾
Amortization/Accretion	—			(3.0		)	—		—			—			(3.0		)
Purchases	128.8			316.2			—		78.8			39.8			563.6
Sales	(642.7		)	(368.5		)	—		(8.1		)	(56.3		)	(1,075.6		)
Transfers in	—			—			—		—			—			—
Transfers out	—			—			—		—			—			—
Balance at September 30, 2020	$	295.3		$	1,066.8		$	.1	$	1,000.3		$	170.9		$	2,533.4		⁽¹⁾

⁽¹⁾Excludes carrying value of $571.8 and $201.2 as of September 30, 2020 and December 31, 2019 classified as short-term investments.

⁽²⁾Includes private equity funds, hedge funds and ILS funds 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 nine months ended September 30, 2020.



							Level 3 Investments		Other Long-term Investments Measured at NAV ^(3,5)
Millions	Level 1 Investments			Level 2 Investments			Other Long-term Investments		Other Long-term Investments Measured at NAV ^(3,5)			Total
Balance at December 31, 2018	$	842.6		$	1,160.5		$	138.7	$	186.9		$	2,328.7		⁽¹⁾
Net realized and unrealized gains	121.8			66.6			154.2		4.9			347.5			^{(2, 4)}
Amortization/Accretion	.2			(1.2		)	—		—			(1.0		)
Purchases	101.4			331.3			211.3		106.4			750.4			⁽⁶⁾
Sales	(362.3		)	(465.2		)	—		(28.7		)	(856.2		)
Transfers in	—			—			82.6		—			82.6
Transfers out	—			—			—		(82.6		)	(82.6		)
Balance at September 30, 2019	$	703.7		$	1,092.0		$	586.8	$	186.9		$	2,569.4		⁽¹⁾

⁽¹⁾Excludes carrying value of $272.5 and $214.2 as of September 30, 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 ILS funds 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”.

⁽⁴⁾Excludes realized and unrealized losses associated with short-term investments of $0.3 for the nine months ended September 30, 2019.

⁽⁵⁾Transfer includes $71.7 associated with the Kudu Transaction. See Note 2 — “Significant Transactions”.

⁽⁶⁾Purchases include $70.1 associated with the Kudu Transaction. See Note 2 — “Significant Transactions”.

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 September 30, 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	September 30, 2020
Description	Valuation Technique(s)	Fair Value ⁽⁵⁾	Unobservable Inputs ⁽⁶⁾
MediaAlpha	Probability-weighted expected return method	$475.0	Weight ascribed to IPO	65%
			Forward Revenue Exit Multiple	2x
			Weight ascribed to remaining private	35%
			Discount Rate	13%
			Terminal Revenue Growth	4%

			Discount Rate ⁽²⁾⁽⁶⁾	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) ⁽⁶⁾
Kudu’s Participation Contracts ⁽¹⁾⁽²⁾	Discounted cash flow	$325.5	18% - 23%	6x - 12x
PassportCard/DavidShield ⁽³⁾	Discounted cash flow	$95.0	23%	4%
Elementum Holdings, L.P.	Discounted cash flow	$55.1	19%	4%
Private debt instruments	Discounted cash flow	$17.9	5% - 10%	N/A
All other	Discounted cash flow	$18.1	20% - 24%	4%

Noblr, Inc.	Share price of recent transaction	$8.7	Share price:	$2.17
Zillion Insurance Services, Inc.⁽⁴⁾	Recent transaction	$5.0	Transaction price:	$5.0

⁽¹⁾During the nine months ended September 30, 2020, Kudu deployed a total of $57.4 in new Kudu Participation Contracts, including Creation Investments Capital Management and Sequoia Financial Group.

⁽²⁾Since Kudu’s Participation Contracts are not subject to corporate taxes within Kudu Investment Management, LLC, pre-tax discount rates are applied to pre-tax cash flows in determining fair values.

⁽³⁾During the nine months ended September 30, 2020, White Mountains made an additional $15.0 investment in PassportCard/DavidShield. See Note 2 - “Significant Transactions”.

⁽⁴⁾During the nine months ended September 30, 2020, White Mountains made an additional $2.5 investment in Zillion Insurance Services, Inc.

⁽⁵⁾ Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.

⁽⁶⁾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.