Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of total income tax benefit (expense)

The total income tax benefit (expense) for the years ended December 31, 2012, 2011 and 2010 consisted of the following:



	Year Ended December 31,
Millions	2012			2011			2010
Current tax benefit (expense):
U.S. federal	$	8.2		$	36.3		$	52.4
State	(3.4		)	(2.4		)	(2.2		)
Non-U.S.	(5.9		)	5.1			(9.1		)
Total current tax benefit (expense)	(1.1		)	39.0			41.1
Deferred tax benefit (expense):
U.S. federal	(55.5		)	(43.7		)	(74.3		)
State	—			—			—
Non-U.S.	72.3			114.7			3.6
Total deferred tax benefit (expense)	16.8			71.0			(70.7		)
Total income tax benefit (expense)	$	15.7		$	110.0		$	(29.6	)

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	2012			2011			2010
Tax (expense) benefit at the U.S. statutory rate	$	(92.0	)	$	(34.3	)	$	(66.2	)
Differences in taxes resulting from:
Tax rate change enacted in Sweden	65.4			—			—
Non-U.S. earnings, net of foreign taxes	43.0			6.2			22.8
Change in valuation allowance	(14.1		)	128.2			2.6
Tax rate change enacted in Luxembourg	7.2			1.2			2.8
Purchase of subsidiaries	5.1			—			4.5
Tax exempt interest and dividends	3.1			2.9			2.3
Withholding tax	(2.9		)	.2			(.2		)
Tax reserve adjustments	(1.3		)	4.3			(2.8		)
Sale of subsidiaries	—			—			4.2
Other, net	2.2			1.3			.4
Total income tax benefit (expense) on pre-tax income	$	15.7		$	110.0		$	(29.6	)

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	2012			2011
Deferred income tax assets related to:
Non-U.S. net operating loss carryforwards	$	509.5		$	503.7
U.S. federal net operating and capital loss carryforwards	165.2			102.7
Loss reserve discount	88.6			114.2
Runoff Transaction	49.3			—
Unearned premiums	45.5			41.2
Incentive compensation	36.8			43.4
Tax credit carryforwards	17.0			13.5
Deferred compensation	10.4			11.4
Pension and benefit accruals	10.3			8.0
Accrued interest	8.0			8.0
Fixed assets	2.8			(.1		)
Sale of AutoOne	—			10.4
Other items	7.7			6.4
Total gross deferred income tax assets	951.1			862.8
Less: valuation allowances	(254.0		)	(232.6		)
Total net deferred income tax assets	697.1			630.2
Deferred income tax liabilities related to:
Safety reserve	326.7			369.6
Net unrealized investment gains	54.2			34.8
Deferred acquisition costs	49.8			48.8
Investment basis difference	21.0			(.9		)
Purchase accounting	9.5			.6
Other items	7.6			5.9
Total deferred income tax liabilities	468.8			458.8
Net deferred tax asset	$	228.3		$	171.4

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, 2012, the expiration dates and the deferred tax assets thereon are as follows:



	December 31, 2012
Millions	United States			Luxembourg			Sweden		Total
2013	$	—		$	—		$	—	$	—
2014-2018	—			—			—		—
2019-2023	20.2			—			—		20.2
2024-2033	467.0			—			—		467.0
No expiration date	—			1,743.6			.1		1,743.7
Total	487.2			1,743.6			.1		2,230.9
Gross deferred tax asset	165.2			509.5			—		674.7
Valuation allowance	(32.3		)	(192.0		)	—		(224.3		)
Net deferred tax asset	$	132.9		$	317.5		$	—	$	450.4

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, 2010	$	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
Changes in prior year tax positions	.5			—			1.4			1.9
Tax positions taken during the current year	—			(20.2		)	—			(20.2		)
Lapse in statute of limitations	—			—			—			—
Settlements with tax authorities	(.4		)	—			(.2		)	(.6		)
Balance at December 31, 2012	$	9.7		$	28.9		$	8.0		$	46.6


⁽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.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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