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	September 30, 2012		December 31, 2011
Symetra common shares	$	284.0	$	261.0
Unrealized gains from Symetra's fixed maturity portfolio	64.6		—
GAAP Carrying value of Symetra common shares	348.6		261.0
Symetra warrants	26.2		12.6
Total investment in Symetra	374.8		273.6
Pentelia Capital Management	1.5		1.7
Total investments in unconsolidated affiliates	$	376.3	$	275.3

Symetra

At September 30, 2012 and December 31, 2011, White Mountains owned 17.4 million common shares of Symetra Financial Corporation (“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. At December 31, 2011, due to the prolonged low interest rate environment in which life insurance companies currently operate, White Mountains concluded that its investment in Symetra common shares was other-than-temporarily impaired and wrote down the GAAP book value of the investment to its estimated fair value of $261.0 million, or $15 per share at December 31, 2011. White Mountains recorded $45.9 million of after-tax equity in losses of unconsolidated affiliates and $136.6 million of after-tax equity in net unrealized losses of unconsolidated affiliates.

Under the equity method, the GAAP carrying value of White Mountains’ investment in Symetra common shares is normally equal to the percentage of Symetra’s GAAP book value represented by White Mountains’ common share ownership, which was 15% at September 30, 2012. As a result of recording the write-down, White Mountains’ carrying value of its investment in Symetra differs from the carrying value by applying its ownership share against Symetra’s GAAP equity as normally done under the equity method. The pre-tax basis difference of $195.8 million as of December 31, 2011 is being amortized over a 30 year period pro rata based on estimated future cash flows associated with Symetra’s underlying assets and liabilities to which the basis difference has been attributed. White Mountains continues to record its equity in Symetra’s earnings and net unrealized gains (losses). In addition, White Mountains recognizes the amortization of the basis difference through equity in earnings of unconsolidated affiliates and equity in net unrealized gains (losses) from investments in unconsolidated affiliates consistent with the original attribution of the writedown between equity in earnings and equity in net unrealized gains (losses). For the three and nine months ended September 30, 2012, White Mountains recognized after-tax amortization of $0.8 million and $2.4 million through equity in earnings of unconsolidated affiliates and $3.0 million and $9.1 million through equity in net unrealized gains from investments in unconsolidated affiliates. At September 30, 2012, the pre-tax unamortized basis difference was $183.3 million.

White Mountains accounts for its Symetra warrants as derivatives with changes in fair value recognized through the income statement as a gain or loss recognized 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 September 30, 2012 were a risk free rate of 0.22%, volatility of 36.5%, an expected life of 1.82 years, a strike price of $11.49 per share and a share price of $12.30 per share.

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the three months ended September 30, 2012 and 2011:



	Three Months Ended									Three Months Ended
	September 30, 2012									September 30, 2011
Millions	Common Shares			Warrants			Total			Common Shares			Warrants			Total
Carrying value of investment in Symetra as of June 30	$	305.9		$	29.8		$	335.7		$	388.5		$	32.5		$	421.0
Equity in earnings⁽¹⁾⁽²⁾	8.8			—			8.8			1.6			—			1.6
Equity in net unrealized gains from Symetra’s fixed maturity portfolio ⁽³⁾	35.2			—			35.2			59.9			—			59.9
Dividends received	(1.3		)	—			(1.3		)	(1.0		)	—			(1.0		)
Increase (decrease) in value of warrants	—			(3.6		)	(3.6		)	—			(24.8		)	(24.8		)
Carrying value of investment in Symetra as September 30⁽⁴⁾⁽⁵⁾	$	348.6		$	26.2		$	374.8		$	449.0		$	7.7		$	456.7

⁽¹⁾Equity in earnings excludes tax expense of $0.7 and $0.1.

⁽²⁾Equity in earnings includes $0.9 increase relating to the pre-tax amortization of Symetra common share impairment from September 30, 2012

⁽³⁾Net unrealized gains includes $3.3 increase relating to the pre-tax amortization of Symetra common share impairment from September 30, 2012.

⁽⁴⁾Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of $35.2 and $147.7 as of September 30, 2012 and 2011, which exclude tax expense of $2.8 and $12.3.

⁽⁵⁾The aggregate value of White Mountains’ investment in common shares of Symetra was $214.0 based upon the quoted market price of $12.30 per share

at September 30, 2012.

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the nine months ended September 30, 2012 and 2011:



	Nine Months Ended								Nine Months Ended
	September 30, 2012								September 30, 2011
Millions	Common Shares			Warrants		Total			Common Shares			Warrants			Total
Carrying value of investment in Symetra as of January 1	$	261.0		$	12.6	$	273.6		$	350.4		$	37.1		$	387.5
Equity in earnings ⁽¹⁾⁽²⁾	26.7			—		26.7			17.5			—			17.5
Equity in net unrealized gains from Symetra’s fixed maturity portfolio⁽³⁾	64.6			—		64.6			84.0			—			84.0
Dividends received	(3.7		)	—		(3.7		)	(2.9		)	—			(2.9		)
Increase (decrease) in value of warrants	—			13.6		13.6			—			(29.4		)	(29.4		)
Carrying value of investment in Symetra as September 30 ⁽⁴⁾⁽⁵⁾	$	348.6		$	26.2	$	374.8		$	449.0		$	7.7		$	456.7

⁽¹⁾Equity in earnings excludes tax expense of $2.2 and $1.4.

⁽²⁾Equity in earnings includes $0.9 increase relating to the pre-tax amortization of Symetra common share impairment from September 30, 2012.

⁽³⁾Net unrealized gains includes $9.9 increase relating to the pre-tax amortization of Symetra common share impairment from September 30, 2012.

⁽⁴⁾Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of $64.6 and $147.7 as of September 30, 2012 and 2011, which exclude tax expense of $5.2 and $24.2.

⁽⁵⁾The aggregate value of White Mountains’ investment in common shares of Symetra was $214.0 based upon the quoted market price of $12.30 per share at

September 30, 2012.

During the three and nine months ended September 30, 2012, White Mountains received cash dividends from Symetra of $1.3 million and $3.7 million on its common share investment that was recorded as a reduction of White Mountains’ investment in Symetra. During the three and nine months ended September 30, 2012, White Mountains also received cash dividends of $0.7 million and $2.0 million from Symetra on its investment in Symetra warrants that was recorded in net investment income.