Investments in Unconsolidated Affiliates

6 Months Ended

Jun. 30, 2011

Investments in Unconsolidated Affiliates

Investments in Unconsolidated Affiliates

Note 11. Investments in Unconsolidated Affiliates

White Mountains’ investments in unconsolidated affiliates represent investments in other companies in which White Mountains has a significant voting and economic interest but does not control the entity.

Millions	June 30, 2011		December 31, 2010
Symetra common shares	$	388.5	$	350.4
Symetra warrants	32.5		37.1
Total investment in Symetra	421.0		387.5
Pentelia Capital Management	1.9		2.2
Total investments in unconsolidated affiliates	$	422.9	$	389.7

Symetra

At June 30, 2011 and December 31, 2010, White Mountains owned 17.4 million common shares of Symetra and warrants to acquire an additional 9.5 million common shares. White Mountains accounts for its investment in common shares of Symetra using the equity method and accounts for its Symetra warrants as derivatives with changes in fair value recognized as a gain or loss through other revenues.  White Mountains uses a Black Scholes valuation model to determine the fair value of the Symetra warrants.  The major assumptions used in valuing the Symetra warrants at June 30, 2011 were a risk free rate of 0.84%, volatility of 25%, an expected life of 3.08 years, a strike price of $11.49 per share and a share price of $13.43 per share. Symetra’s warrants are not publicly traded. Accordingly, the fair value measurement of the warrants is based on observable and unobservable inputs.  Due to an insufficient history of Symetra’s volatility, it is classified as a Level 3 measurement.

In January 2010, Symetra completed an initial public offering at a price of $12.00 per share, with 25.3 million shares sold by Symetra and 9.7 million shares sold by existing shareholders.  White Mountains did not sell any of its shares in the offering.  As a result of the offering, White Mountains’ fully converted ownership in Symetra decreased to approximately 20% during the first quarter of 2010.  The issuance of the new Symetra shares at a price below its adjusted book value per share diluted White Mountains’ investment in Symetra’s common shares, resulting in a $16.0 million decrease to White Mountains’ carrying value in Symetra.

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the three months ended June 30, 2011 and 2010:

	Three Months Ended June 30, 2011									Three Months Ended June 30, 2010
	Common									Common
Millions	Shares			Warrants			Total			Shares			Warrants			Total
Carrying value of investment in Symetra as of March 31	$	356.9		$	35.9		$	392.8		$	290.5		$	38.5		$	329.0
Equity in earnings of Symetra (1)	8.6			—			8.6			5.3		(3)	—			5.3
Net unrealized gains from Symetra’s fixed maturity portfolio	24.0			—			24.0			50.0			—			50.0
Dividends received	(1.0		)	—			(1.0		)	(.9		)	—			(.9		)
(Decrease) increase in value of warrants	—			(3.4		)	(3.4		)	—			(10.9		)	(10.9		)
Carrying value of investment in Symetra as June 30 (2)	$	388.5		$	32.5		$	421.0		$	344.9		$	27.6		$	372.5

(1)   Equity in earnings excludes tax expense of $0.7 and $0.

(2)   Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of $87.7 and $74.0 as of June 30, 2011 and 2010, which exclude tax expense of $7.1 and $0.

(3)   Includes a $0.3 loss from the dilutive effect of Symetra’s quarterly dividend and the issuance of restricted shares by Symetra.

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the six months ended June 30, 2011 and 2010:

	Six Months Ended									Six Months Ended
	June 30, 2011									June 30, 2010
	Common									Common
Millions	Shares			Warrants			Total			Shares			Warrants			Total
Carrying value of investment in Symetra as of December 31	$	350.4		$	37.1		$	387.5		$	269.2		$	38.5		$	307.7
Equity in earnings of Symetra (1)	15.9			—			15.9			(6.2)		(3)	—			(6.2		)
Net unrealized gains from Symetra’s fixed maturity portfolio	24.1			—			24.1			82.8		(4)	—			82.8
Dividends received	(1.9		)	—			(1.9		)	(.9		)	—			(.9		)
(Decrease) increase in value of warrants	—			(4.6		)	(4.6		)	—			(10.9		)	(10.9		)
Carrying value of investment in Symetra as June 30 (2)	$	388.5		$	32.5		$	421.0		$	344.9		$	27.6		$	372.5

(1) Equity in earnings excludes tax expense of $1.3 and $0.

(2) Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of $87.7 and $74.0 as of June 30, 2011 and 2010, which exclude tax expense of $7.1 and $0.

(3) Includes a $17.9 loss from the dilutive effect of Symetra’s initial public offering and a $0.6 loss from the dilutive effect of Symetra’s quarterly dividend and issuance of restricted shares by Symetra.

(4) Includes a $1.9 gain from the effect of Symetra’s initial public offering.

During the three and six months ended June 30, 2011, White Mountains received cash dividends from Symetra of $1.0 million and $1.9 million on its common share investment that was recorded as a reduction of White Mountains’ investment in Symetra.  During the three and six months ended June 30, 2011, White Mountains also received cash dividends from Symetra of $0.6 million and $1.0 million on its investment in Symetra warrants that was recorded in net investment income.

The aggregate value of White Mountains’ common shares of Symetra was $233.7 million based upon the quoted market price of $13.43 at June 30, 2011.