Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Schedule of total income tax benefit (expense)

The total income tax benefit (expense) for the years ended December 31, 2011, 2010 and 2009 consisted of the following:

	Year Ended December 31,
Millions	2011			2010			2009
Current tax benefit (expense):
U.S. federal	$	39.5		$	52.4		$	(40.0	)
State	(2.5		)	(2.2		)	(1.5		)
Non-U.S.	5.1			(9.1		)	(2.7		)
Total current tax benefit (expense)	42.1			41.1			(44.2		)
Deferred tax benefit (expense):
U.S. federal	(34.1		)	(61.6		)	(139.0		)
State	—			—			—
Non-U.S.	114.7			3.6			(31.0		)
Total deferred tax benefit (expense)	80.6			(58.0		)	(170.0		)
Total income tax benefit (expense)	$	122.7		$	(16.9	)	$	(214.2	)

Reconciliation of the U.S. federal statutory income tax rate and actual effective tax rate on pre-tax income

A reconciliation of taxes calculated using the 35% U.S. statutory rate (the tax rate at which the majority of White Mountains’ worldwide operations are taxed) to the income tax (expense) benefit on pre-tax income follows:

	Year Ended December 31,
Millions	2011			2010			2009
Tax (expense) benefit at the U.S. statutory rate	$	(21.5	)	$	(53.6	)	$	(279.1	)
Differences in taxes resulting from:
Change in valuation allowance	128.2			2.6			53.7
Non-U.S. earnings, net of foreign taxes	6.2			22.8			(1.2		)
Tax reserve adjustments	4.3			(2.8		)	8.8
Tax exempt interest and dividends	2.9			2.3			1.7
Tax rate change enacted in Luxembourg	1.2			2.8			—
Withholding tax	.2			(.2		)	(.7		)
Purchase of subsidiaries	—			4.5			—
Sale of subsidiaries	—			4.3			—
Other, net	1.2			.4			2.6
Total income tax benefit (expense) on pre-tax income	$	122.7		$	(16.9	)	$	(214.2	)

Schedule of components of deferred income tax assets and liabilities

An outline of the significant components of White Mountains’ deferred tax assets and liabilities follows:

	December 31,
Millions	2011			2010
Deferred income tax assets related to:
Non-U.S. net operating loss carryforwards	$	504.0		$	545.4
Loss reserve discount	114.2			142.4
U.S. federal and state net operating loss carryforwards	102.7			103.6
Incentive compensation	43.4			36.9
Unearned premiums	41.2			37.3
U.S. tax credit carryforwards	13.5			12.0
Deferred compensation	11.4			13.1
Loss on sale of AutoOne	10.4			—
Pension and benefit accruals	8.0			4.3
Accrued interest	3.5			.5
Investment basis differences	1.6			7.3
Fixed assets	(.1		)	4.8
Other items	9.5			14.1
Total gross deferred income tax assets	863.3			921.7
Less: valuation allowances	(232.7		)	(385.8		)
Total net deferred income tax assets	630.6			535.9
Deferred income tax liabilities related to:
Safety reserve	369.6			378.5
Deferred acquisition costs	48.8			41.5
Net unrealized investment gains	34.8			55.8
Purchase accounting	.7			2.1
Intangible assets	(.1		)	.1
Other items	5.4			(.8		)
Total deferred income tax liabilities	459.2			477.2
Net deferred tax asset (liability)	$	171.4		$	58.7

Schedule of net operating and capital loss carryforwards by expiration dates and the deferred tax assets thereon

Net operating loss and capital loss carryforwards as of December 31, 2011, the expiration dates and the deferred tax assets thereon are as follows:

	December 31, 2011
Millions	United States			Luxembourg			Sweden			Total
2012	$	—		$	—		$	—		$	—
2013-2017	2.4			—			—			2.4
2018-2022	18.7			—			—			18.7
2023-2032	305.7			—			—			305.7
No expiration date	—			1,740.3			10.7			1,751.0
Total	$	326.8		$	1,740.3		$	10.7		$	2,077.8
Gross deferred tax asset	$	102.7		$	501.2		$	2.8		$	606.7
Valuation allowance	(1.8		)	(225.5		)	(.3		)	(227.6		)
Net deferred tax asset	$	100.9		$	275.7		$	2.5		$	379.1

Reconciliation of changes in the amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Millions	Permanent Differences(1)			Temporary Differences(2)			Interest and Penalties(3)			Total
Balance at January 1, 2009	$	61.4		$	17.1		$	8.3		$	86.8
Changes in prior year tax positions	7.2			46.1			3.1			56.4
Tax positions taken during the current year	—			16.4			—			16.4
Lapse in statute of limitations	(1.0		)	—			(.2		)	(1.2		)
Settlements with tax authorities	(53.7		)	(.9		)	(6.9		)	(61.5		)
Balance at December 31, 2009	13.9			78.7			4.3			96.9
Changes in prior year tax positions	.5			(8.5		)	1.9			(6.1		)
Tax positions taken during the current year	.4			5.0			—			5.4
Lapse in statute of limitations	—			—			—			—
Settlements with tax authorities	(.3		)	(.1		)	—			(.4		)
Balance at December 31, 2010	14.5			75.1			6.2			95.8
Changes in prior year tax positions	(.9		)	.1			2.0			1.2
Tax positions taken during the current year	—			(20.4		)	—			(20.4		)
Lapse in statute of limitations	(3.4		)	(5.7		)	(1.4		)	(10.5		)
Settlements with tax authorities	(.6		)	—			—			(.6		)
Balance at December 31, 2011	$	9.6		$	49.1		$	6.8		$	65.5

(1)Represents the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate.

(2)Represents the amount of unrecognized tax benefits that, if recognized would create a temporary difference between the reported amount of an item in the Company’s Consolidated Balance Sheet and its tax basis.

(3)Net of tax benefit.