Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations

Discontinued Operations

Note 14. Discontinued Operations

On May 17, 2011, White Mountains entered into an agreement to sell Esurance and the business Esurance Insurance cedes to White Mountains Re. (“the Esurance Disposal Group”). Effective for the six-months ended June 30, 2011, the results of operations for the Esurance Disposal Group have been classified as discontinued operations and are presented, net of related income taxes, as such in the statement of comprehensive income. The assets and liabilities of the Esurance Disposal Group have been presented in the balance sheet as held for sale.  Prior year amounts have been reclassified to conform to the current period’s presentation.

The amounts reflected within discontinued operations differ from amounts previously presented within the Esurance segment. The segment results of operations for Esurance reported in previous periods included investment income and realized and unrealized investment gains and losses allocated to Esurance related capital that was used by Esurance but contained within White Mountains Re’s legal entities.  These allocations do not have separately identifiable cash flows and have therefore been excluded from amounts classified in discontinued operations and are now included in the White Mountains Re segment. For the three and six month periods of June 30, 2011, $0.9 million and $(3.3) million of net investment income and realized and unrealized investment gains and losses that had been previously included in the Esurance segment were excluded from net income (loss) from discontinued operations.  For the three and six month period June 30, 2010, $1.7 million and $2.8 million of net investment income and realized and unrealized investment gains and losses that had been previously included in the Esurance segment were excluded from net income (loss) from discontinued operations.

The following summarizes the assets and liabilities associated with the businesses classified as held for sale:

Millions	June 30,2011		December 31, 2010
Assets held for sale
Fixed maturity investments, at fair value	$	761.2	$	593.8
Short-term investments, at amortized cost (which approximates fair value)	24.6		131.0
Common equity securities, at fair value	43.9		43.0
Convertible fixed maturity investments, at fair value	15.0		17.2
Other long-term investments	—		4.0
Total investments	844.7		789.0
Cash	57.3		39.8
Reinsurance recoverable on paid and unpaid losses	34.8		34.4
Insurance premiums receivable	107.8		102.9
Deferred acquisition costs	43.0		34.7
Deferred tax asset	74.4		67.8
Other assets	51.9		54.2
Total assets held for sale	$	1,213.9	$	1,122.8
Liabilities held for sale
Loss and loss adjustment expense reserves	$	456.1	$	450.4
Unearned insurance premiums	215.3		201.6
Accrued incentive compensation	22.5		19.1
Other liabilities	86.0		80.4
Total liabilities held for sale	779.9		751.5
Net assets held for sale	$	434.0	$	371.3

The following summarizes the results of operations, including related income taxes associated with the businesses classified as discontinued operations:

	Three Months Ended June 30,						Six Months Ended June 30,
Millions, except per share amounts	2011			2010			2011			2010
Revenues
Earned insurance premiums	$	219.7		$	209.7		$	429.0		$	408.6
Net investment income	4.0			4.8			8.0			9.6
Net realized and unrealized investment gains	4.4			1.6			7.8			6.6
Other revenue	17.2			15.0			34.9			29.4
Total revenues	245.3			231.1			479.7			454.2
Expenses
Loss and loss adjustment expenses	156.2			152.5			310.1			303.8
Insurance and reinsurance acquisition expenses	51.7			44.5			99.2			86.6
Other underwriting expenses	19.1			18.6			37.5			38.9
General and administrative expenses	23.3			12.4			35.8			24.4
Total expenses	250.3			228.0			482.6			453.7
Pre-tax income (loss)	(5.0		)	3.1			(2.9		)	.5
Income tax (expense) benefit	4.7			(1.3		)	5.8			(1.3		)
Net income (loss) from discontinued operations	$	(.3	)	$	1.8		$	2.9		$	(.8	)

Earnings (Loss) Per Share

Basic earnings (loss) per share amounts are based on the weighted average number of common shares outstanding including unvested restricted shares that are considered participating securities.  Diluted earnings (loss) per share amounts are based on the weighted average number of common shares including unvested restricted shares and the net effect of potentially dilutive common shares outstanding.  The following table outlines the computation of earnings (loss) per share for discontinued operations for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,					Six Months Ended June 30,
	2011			2010		2011		2010
Basic and diluted earnings (loss) per share numerators (in millions):
Net income (loss)	$	(.3	)	$	1.8	$	2.9	$	(.8	)
Basic earnings (loss) per share denominators (in thousands):
Average common shares outstanding during the period	7,886			8,571		7,930		8,656
Average unvested restricted shares	73			100		65		96
Basic earnings (loss) per share denominator	7,959			8,671		7,995		8,752
Diluted earnings (loss) per share denominator (in thousands):
Average common shares outstanding during the period	7,886			8,571		7,930		8,656
Average unvested restricted shares	73			100		65		96
Average outstanding dilutive options to acquire common shares	—			—		—		—
Diluted earnings (loss) per share denominator	7,959			8,671		7,995		8,752
Basic and diluted earnings (loss) per share (in dollars):	$	(.03	)	$	.20	$	.36	$	(.09	)