Investment Securities (Tables)

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Pre-tax net investment income

The following table presents pre-tax net investment income for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Millions	2022		2021		2022		2021
Fixed maturity investments	$	11.1	$	8.2	$	28.6	$	21.9
Short-term investments	6.7		—		7.2		.5
Common equity securities	.1		.1		.2		.1
Other long-term investments	17.1		12.0		45.9		37.1
Amount attributable to TPC Providers	(.3)		(.2)		(.8)		(.8)
Total investment income	34.7		20.1		81.1		58.8
Third-party investment expenses	(.8)		(.6)		(1.5)		(1.6)
Net investment income, pre-tax	$	33.9	$	19.5	$	79.6	$	57.2

Schedule of net realized and unrealized investment gains and losses

The following table presents net realized and unrealized investment gains (losses) for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2022		2021		2022		2021
Realized investment gains (losses)
Fixed maturity investments	$	(4.9)	$	1.0	$	(10.8)	$	3.8
Short-term investments	(.1)		(.3)		(.4)		—
Common equity securities	—		—		—		.4
Investment in MediaAlpha	—		—		—		160.3
Other long-term investments	3.4		9.2		24.1		0.9
Net realized investment gains (losses)	(1.6)		9.9		12.9		165.4
Unrealized investment gains (losses)
Fixed maturity investments	(58.8)		(7.9)		(192.9)		(27.0)
Short-term investments	(2.1)		—		(2.6)		—
Common equity securities	4.3		1.6		(6.3)		7.3
Investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(485.8)
Other long-term investments	27.5		28.4		40.8		112.3
Net unrealized investment gains (losses)	(47.7)		(374.7)		(274.3)		(393.2)
Net realized and unrealized investment gains (losses), before    amount attributable to TPC providers(1)	(49.3)		(364.8)		(261.4)		(227.8)
Amount attributable to TPC Providers	1.3		(1.7)		6.2		(6.5)
Net realized and unrealized investment gains (losses)	$	(48.0)	$	(366.5)	$	(255.2)	$	(234.3)
Fixed maturity and short-term investments
Net realized and unrealized investment gains (losses)	$	(65.9)	$	(7.2)	$	(206.7)	$	(23.2)
Less: net realized and unrealized gains (losses) on investment           securities sold during the period	.1		(5.7)		(3.0)		(6.9)
Net unrealized investment gains (losses) on investment    securities held at the end of the period	$	(66.0)	$	(1.5)	$	(203.7)	$	(16.3)
Common equity securities and investment in MediaAlpha
Net realized and unrealized investment gains (losses) on common    equity securities	$	4.3	$	1.6	$	(6.3)	$	7.7
Net realized and unrealized investment gains (losses) from    investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(325.5)
Total net realized and unrealized investment gains (losses)	(14.3)		(395.2)		(119.6)		(317.8)
Less: net realized and unrealized gains (losses) on investment          securities sold during the period	—		.4		—		20.3
Net unrealized investment gains (losses) on investment    securities held at the end of the period	$	(14.3)	$	(395.6)	$	(119.6)	$	(338.1)

(1) For the three months ended September 30, 2022 and 2021, includes $(22.6) and $(7.0) of realized and unrealized investment gains (losses) related to foreign currency exchange. For the nine months ended September 30, 2022 and 2021, includes $(44.4) and $(7.4) 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 for Level 3 investments for the three and nine months ended September 30, 2022 and 2021 for investments still held at the end of the period:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Millions	2022		2021		2022		2021
Other long-term investments	$	40.8	$	26.5	$	57.7	$	75.5
Total net unrealized investment gains, pre-tax - Level 3 investments	$	40.8	$	26.5	$	57.7	$	75.5

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), net foreign currency gains (losses) and carrying values of White Mountains’s fixed maturity investments as of September 30, 2022 and December 31, 2021:

	September 30, 2022
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
U.S. Government and agency obligations	$	227.9	$	—	$	(11.0)	$	—	$	216.9
Debt securities issued by corporations	1,068.8		—		(91.2)		(3.1)		974.5
Municipal obligations	289.3		—		(24.4)		—		264.9
Mortgage and asset-backed securities	278.3		—		(37.6)		—		240.7
Collateralized loan obligations	169.7		—		(7.6)		(4.8)		157.3
Total fixed maturity investments	$	2,034.0	$	—	$	(171.8)	$	(7.9)	$	1,854.3

	December 31, 2021
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
U.S. Government and agency obligations	$	212.1	$	.5	$	(1.1)	$	—	$	211.5
Debt securities issued by corporations	993.3		8.7		(8.7)		(.4)		992.9
Municipal obligations	276.4		16.8		(1.3)		—		291.9
Mortgage and asset-backed securities	277.2		2.9		(2.5)		—		277.6
Collateralized loan obligations	136.5		—		(.4)		(1.1)		135.0
Total fixed maturity investments	$	1,895.5	$	28.9	$	(14.0)	$	(1.5)	$	1,908.9

The following tables present the cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses), and carrying values of common equity securities, White Mountains’s investment in MediaAlpha and other long-term investments as of September 30, 2022 and December 31, 2021:

	September 30, 2022
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
Common equity securities	$	324.2	$	32.7	$	(8.7)	$	(15.4)	$	332.8
Investment in MediaAlpha	$	—	$	148.2	$	—	$	—	$	148.2
Other long-term investments	$	1,390.7	$	345.0	$	(90.0)	$	(23.0)	$	1,622.7

	December 31, 2021
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
Common equity securities	$	236.3	$	16.1	$	—	$	(1.3)	$	251.1
Investment in MediaAlpha	$	—	$	261.6	$	—	$	—	$	261.6
Other long-term investments	$	1,186.7	$	239.0	$	(44.1)	$	(3.8)	$	1,377.8

Schedule of fixed maturity investment holdings

The following table presents the cost or amortized cost and carrying values of White Mountains’s fixed maturity investments by contractual maturity as of September 30, 2022. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	September 30, 2022
Millions	Cost or Amortized Cost		Carrying Value
Due in one year or less	$	207.5	$	203.8
Due after one year through five years	917.9		849.4
Due after five years through ten years	354.8		309.3
Due after ten years	105.8		93.8
Mortgage and asset-backed securities and collateralized loan obligations	448.0		398.0
Total fixed maturity investments	$	2,034.0	$	1,854.3

Fair value measurements by level, investment securities

The following tables present White Mountains’s fair value measurements for investments as of September 30, 2022 and December 31, 2021 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, 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 by industry sector because investors often reference commonly used benchmarks and their subsectors to monitor risk and performance. Accordingly, White Mountains has further disaggregated this asset class 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.

	September 30, 2022
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	216.9	$	216.9	$	—	$	—
Debt securities issued by corporations:
Financials	269.0		—		269.0		—
Consumer	181.4		—		181.4		—
Industrial	115.8		—		115.8		—
Healthcare	114.3		—		114.3		—
Technology	110.8		—		110.8		—
Utilities	75.9		—		75.9		—
Communications	49.1		—		49.1		—
Energy	36.1		—		36.1		—
Materials	22.1		—		22.1		—
Total debt securities issued by corporations	974.5		—		974.5		—
Municipal obligations	264.9		—		264.9		—
Mortgage and asset-backed securities	240.7		—		240.7		—
Collateralized loan obligations	157.3		—		157.3		—
Total fixed maturity investments	1,854.3		216.9		1,637.4		—
Short-term investments	1,196.4		1,196.4		—		—
Common equity securities (1)	332.8		46.4		286.4		—
Investment in MediaAlpha	148.2		148.2		—		—
Other long-term investments	1,058.0		—		13.9		1,044.1
Other long-term investments — NAV (2)	564.7		—		—		—
Total other long-term investments	1,622.7		—		13.9		1,044.1
Total investments	$	5,154.4	$	1,607.9	$	1,937.7	$	1,044.1

(1) Consist of investments in exchange traded funds (“ETFs”) and listed funds that predominantly invest in international equities.

(2) Consists of private equity funds and hedge funds, a bank loan fund, Lloyd’s trust deposits and ILS funds for which fair value is measured at net asset value (“NAV”) using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.

	December 31, 2021
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	211.5	$	211.5	$	—	$	—
Debt securities issued by corporations:
Financials	264.2		—		264.2		—
Consumer	178.1		—		178.1		—
Technology	117.9		—		117.9		—
Industrial	112.9		—		112.9		—
Healthcare	112.8		—		112.8		—
Utilities	70.9		—		70.9		—
Communications	56.0		—		56.0		—
Energy	48.0		—		48.0		—
Materials	32.1		—		32.1		—
Total debt securities issued by corporations	992.9		—		992.9		—
Municipal obligations	291.9		—		291.9		—
Mortgage and asset-backed securities	277.6		—		277.6		—
Collateralized loan obligations	135.0		—		135.0		—
Total fixed maturity investments	1,908.9		211.5		1,697.4		—
Short-term investments	465.9		465.9		—		—
Common equity securities (1)	251.1		—		251.1		—
Investment in MediaAlpha	261.6		261.6		—		—
Other long-term investments	895.3		—		4.7		890.6
Other long-term investments — NAV (2)	482.5		—		—		—
Total other long-term investments	1,377.8		—		4.7		890.6
Total investments	$	4,265.3	$	939.0	$	1,953.2	$	890.6

(1) Consist of investments in listed funds that predominantly invest in international equities.

(2) Consists of private equity funds and hedge funds, a bank loan fund, Lloyd’s trust deposits 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, 2022 and December 31, 2021:

	Fair Value at
Millions	September 30, 2022		December 31, 2021
AAA	$	11.2	$	12.0
AA	90.5		85.0
A	524.0		490.4
BBB	343.0		396.8
Other	5.8		8.7
Debt securities issued by corporations (1)	$	974.5	$	992.9

(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 and collateralized loan obligations as of September 30, 2022 and December 31, 2021:

	September 30, 2022						December 31, 2021
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
FNMA	$	114.1	$	114.1	$	—	$	125.4	$	125.4	$	—
FHLMC	74.5		74.5		—		90.5		90.5		—
GNMA	28.9		28.9		—		40.1		40.1		—
Total agency (1)	217.5		217.5		—		256.0		256.0		—
Non-agency: Residential	.4		.4		—		.5		.5		—
Total non-agency	.4		.4		—		.5		.5		—
Total mortgage-backed securities	217.9		217.9		—		256.5		256.5		—
Other asset-backed securities:
Credit card receivables	11.9		11.9		—		12.3		12.3		—
Vehicle receivables	10.9		10.9		—		8.8		8.8		—
Total other asset-backed securities	22.8		22.8		—		21.1		21.1		—
Total mortgage and asset-backed securities	240.7		240.7		—		277.6		277.6		—
Collateralized loan obligations	157.3		157.3		—		135.0		135.0		—
Total mortgage and asset-backed securities and collateralized loan obligations	$	398.0	$	398.0	$	—	$	412.6	$	412.6	$	—

(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).

Schedule of carrying values for other long-term investments

The following table presents the carrying values of White Mountains’s other long-term investments as of September 30, 2022 and December 31, 2021:

	Fair Value at
Millions	September 30, 2022		December 31, 2021
Kudu’s Participation Contracts	$	813.2	$	669.5
PassportCard/DavidShield	132.0		120.0
Elementum Holdings, L.P.	45.0		45.0
Other unconsolidated entities (1)	37.0		34.4
Total unconsolidated entities	1,027.2		868.9
Private equity funds and hedge funds	239.8		153.8
Bank loan fund	155.7		163.0
Lloyd’s trust deposits	117.8		113.8
ILS funds	49.4		51.9
Private debt investments	13.0		14.1
Other	19.8		12.3
Total other long-term investments	$	1,622.7	$	1,377.8

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

Other long-term investments

The following table presents the fair value of investments and unfunded commitments in private equity funds and hedge funds by investment objective and sector as of September 30, 2022 and December 31, 2021:

	September 30, 2022				December 31, 2021
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds
Aerospace/Defense/Government	$	102.9	$	45.1	$	69.8	$	11.8
Financial services	77.9		54.9		67.7		29.3
Real estate	4.3		2.5		4.3		2.9
Total private equity funds	185.1		102.5		141.8		44.0
Hedge funds
Long/short equity financials and business services	49.3		—		—		—
European small/mid cap	5.4		—		12.0		—
Total hedge funds	54.7		—		12.0		—
Total private equity funds and hedge funds    included in other long-term investments	$	239.8	$	102.5	$	153.8	$	44.0

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, 2022:

Millions	1 – 3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private equity funds — expected lock-up period remaining	$27.5	$19.0	$135.4	$3.2	$185.1

Rollforward of fair value investments by level

The following table presents the changes in White Mountains’s fair value measurements for Level 3 investments for the nine months ended September 30, 2022 and 2021:

Level 3 Investments
Millions	Other Long-term Investments			Other Long-term Investments
Balance at December 31, 2021	$	890.6	Balance at December 31, 2020	$	614.2
Net realized and unrealized gains	57.3		Net realized and unrealized gains	79.0
Amortization/accretion	—		Amortization/accretion	—
Purchases	127.9		Purchases	143.6
Sales	(31.7)		Sales	(31.9)
Effect of Ark Transaction	—		Effect of Ark Transaction	9.6
Transfers in	—		Transfers in	—
Transfers out	—		Transfers out	—
Balance at September 30, 2022	$	1,044.1	Balance at September 30, 2021	$	814.5

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 White Mountains’s other long-term investments, classified within Level 3 as of September 30, 2022 and December 31, 2021. The tables below exclude $42.9 million and $46.7 million of Level 3 other long-term investments generally valued based on recent or expected transaction prices. The fair value of investments in private equity funds and hedge funds, bank loan funds, Lloyd’s trust deposits and ILS funds are generally estimated using the NAV of the funds.

$ in Millions	September 30, 2022
Description	Valuation Technique(s) (1)	Fair Value (2)	Unobservable Inputs
			Discount Rate (6)	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (6)
Kudu’s Participation Contracts (3)(4)(5)	Discounted cash flow	$813.2	17% - 24%	7x - 16x
PassportCard/DavidShield	Discounted cash flow	$132.0	24%	4%
Elementum Holdings, L.P.	Discounted cash flow	$45.0	18%	4%
Private debt investments	Discounted cash flow	$11.0	10%	N/A

(1) Key inputs to the discounted cash flow analysis generally include projections of future revenue and earnings, discount rates and terminal exit multiples or growth rates.

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

(3) 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. The weighted average discount rate and weighted average terminal cash flow exit multiple applied to Kudu’s Participation Contracts is 20% and 9.7x.

(4) As of September 30, 2022, three of Kudu’s Participation Contracts with a total fair value of $312.4 were valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and an expected sale transaction.

(5) In 2022, Kudu deployed a total of $97.9 into new and existing Kudu Participation Contracts, including Gramercy Funds Management, GenTrust, EC Management Services, and TK Partners.

(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, 2021
Description	Valuation Technique(s) (1)	Fair Value (2)	Unobservable Inputs
			Discount Rate (6)	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (6)
Kudu’s Participation Contracts (3)(4)(5)	Discounted cash flow	$669.5	18% - 23%	7x - 13x
PassportCard/DavidShield	Discounted cash flow	$120.0	23%	4%
Elementum Holdings, L.P.	Discounted cash flow	$45.0	17%	4%
Private debt investments	Discounted cash flow	$9.4	8%	N/A

(1) Key inputs to the discounted cash flow analysis generally include projections of future revenue and earnings, discount rates and terminal exit multiples or growth rates.

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

(3) 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. The weighted average discount rate and weighted average terminal cash flow exit multiple applied to Kudu’s Participation Contracts is 20% and 10x.

(4) In 2021, Kudu deployed a total of $223.4 into new and existing Kudu Participation Contracts, including TIG Advisors, TK Partners, Third Eye Capital Management, Douglass Winthrop Advisors, Granahan Investment Management and Radcliffe Capital Management.

(5) As of December 31, 2021, one of Kudu’s Participation Contracts with a total fair value of $78.8 was valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and an expected sale transaction.

(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.