Investment Securities (Tables)

3 Months Ended

Mar. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Pre-tax net investment income for the three months ended March 31, 2013 and 2012 consisted of the following:



	Three Months Ended
	March 31,
Millions	2013			2012
Investment income:
Fixed maturity investments	$	26.0		$	36.7
Short-term investments	.8			1.0
Common equity securities	4.7			4.4
Convertible fixed maturity investments	.8			1.9
Other long-term investments	.7			.8
Interest on funds held under reinsurance treaties	—			—
Total investment income	33.0			44.8
Less third-party investment expenses	(4.5		)	(3.0		)
Net investment income, pre-tax	$	28.5		$	41.8

Schedule of realized and unrealized gain (loss) on investments

The following table summarizes net realized and unrealized investment gains (losses) for the three months ended March 31, 2013 and 2012:



	Three Months Ended									Three Months Ended
	March 31, 2013									March 31, 2012
Millions	Net realized and unrealized gains (losses)			Net foreign exchange gains (losses)			Total net realized and unrealized gains (losses) reflected in earnings			Net realized and unrealized gains (losses)			Net foreign currency gains (losses)			Total net realized and unrealized gains (losses) reflected in earnings
Fixed maturity investments	$	(8.0	)	$	(10.0	)	$	(18.0	)	$	30.7		$	(21.4	)	$	9.3
Short-term investments	—			.1			.1			—			(.3		)	(.3		)
Common equity securities	84.5			(.2		)	84.3			36.6			—			36.6
Convertible fixed maturity investments	1.6			(.2		)	1.4			6.2			—			6.2
Other long-term investments	6.5			.5			7.0			10.2			(3.4		)	6.8
Forward Contracts	.4			—			.4			—			—			—
Net realized and unrealized investment gains (losses), pre-tax	85.0			(9.8		)	75.2			83.7			(25.1		)	58.6
Income tax expense attributable to net realized and unrealized investment (losses) gains	(15.9		)	2.2			(13.7		)	(20.6		)	6.6			(14.0		)
Net realized and unrealized investment gains (losses), after tax	$	69.1		$	(7.6	)	$	61.5		$	63.1		$	(18.5	)	$	44.6

Net unrealized investment gains (losses) for Level 3 investments

The following table summarizes the amount of total pre-tax gains included in earnings attributable to unrealized investment gains for Level 3 investments for the three months ended March 31, 2013 and 2012:



	Three Months Ended
	March 31,
Millions	2013			2012
Fixed maturity investments	$	.2		$	7.8
Common equity securities	(.1		)	.5
Other long-term investments	6.4			7.2
Total unrealized investment gains, pre-tax - Level 3 investments	$	6.5		$	15.5

Investment holdings, fixed maturity investments

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ fixed maturity investments as of March 31, 2013 and December 31, 2012 were as follows:



	March 31, 2013
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
U.S. Government and agency obligations	$	435.9	$	.9	$	(.1	)	$	(1.2	)	$	435.5
Debt securities issued by corporations	2,361.2		75.7		(2.6		)	(24.6		)	2,409.7
Municipal obligations	5.3		—		(.1		)	—			5.2
Mortgage-backed and asset-backed securities	1,698.7		12.6		(1.9		)	(2.1		)	1,707.3
Foreign government, agency and provincial obligations	516.4		5.4		(6.3		)	(9.4		)	506.1
Preferred stocks	79.9		7.7		—			(.1		)	87.5
Total fixed maturity investments including assets held for sale	$	5,097.4	$	102.3	$	(11.0	)	$	(37.4	)	$	5,151.3
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction											(296.9		)
Total fixed maturity investments											$	4,854.4



	December 31, 2012
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
U.S. Government and agency obligations	$	440.4	$	1.0	$	(.1	)	$	(1.2	)	$	440.1
Debt securities issued by corporations	2,321.4		88.3		(1.6		)	(23.0		)	2,385.1
Municipal obligations	5.3		—		(.1		)	—			5.2
Mortgage-backed and asset-backed securities	2,081.0		25.1		(1.1		)	(9.4		)	2,095.6
Foreign government, agency and provincial obligations	526.6		6.9		(3.0		)	(8.6		)	521.9
Preferred stocks	79.9		6.7		—			(.2		)	86.4
Total fixed maturity investments including assets held for sale	$	5,454.6	$	128.0	$	(5.9	)	$	(42.4	)	$	5,534.3
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction											(338.1		)
Total fixed maturity investments											$	5,196.2

Investment holdings, equity securities, convertible fixed maturities and other long-term investments

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ common equity securities, convertible fixed maturities and other long-term investments as of March 31, 2013 and December 31, 2012 were as follows:



	March 31, 2013
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value
Common equity securities	$	876.8	$	201.7	$	(5.2	)	$	(.1	)	$	1,073.2
Convertible fixed maturity investments	$	91.2	$	5.9	$	(1.3	)	$	(.2	)	$	95.6
Other long-term investments	$	254.5	$	57.0	$	(10.3	)	$	(6.0	)	$	295.2



	December 31, 2012
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value
Common equity securities	$	895.2	$	143.4	$	(8.8	)	$	(.1	)	$	1,029.7
Convertible fixed maturity investments	$	121.7	$	6.1	$	(.4	)	$	—		$	127.4
Other long-term investments	$	257.2	$	65.9	$	(22.8	)	$	(6.1	)	$	294.2

Other long-term investments

The following table summarizes investments in hedge funds and private equity interests by investment objective and sector at March 31, 2013 and December 31, 2012:



	March 31, 2013				December 31, 2012
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Hedge funds
Long/short equity	$	60.0	$	—	$	60.3	$	—
Long/short credit & distressed	24.5		—		22.7		—
Long diversified strategies	1.7		—		1.7		—
Long/short equity REIT	16.7		—		16.0		—
Long/short equity activist	14.5		—		13.6		—
Long bank loan	.3		—		.3		—
Total hedge funds	117.7		—		114.6		—

Private equity funds
Multi-sector	25.9		8.9		23.3		5.4
Energy infrastructure & services	35.0		14.8		36.3		15.6
Distressed residential real estate	14.6		—		15.8		—
Real estate	10.9		3.3		11.6		3.3
Private equity secondaries	10.6		3.1		10.5		3.1
International multi-sector, Europe	4.2		5.0		5.1		5.0
Manufacturing/Industrial	9.0		28.7		9.9		29.1
Healthcare	4.2		5.0		4.3		5.4
International multi-sector, Asia	—		2.7		.4		2.7
Insurance	2.5		41.3		3.0		41.3
Aerospace/Defense/Government	3.0		21.8		2.8		22.2
Venture capital	2.2		.3		2.2		.3
Total private equity funds	122.1		134.9		125.2		133.4

Total hedge and private equity funds included in other long-term investments⁽¹⁾	$	239.8	$	134.9	$	239.8	$	133.4

⁽¹⁾Excludes carrying value of $35.0 and $34.9 at January 1, 2013 and March 31, 2013 associated with hedge funds and private equity funds accounted for using the equity method.

Fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds

The following summarizes the March 31, 2013 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:



	Notice Period
Millions Redemption frequency	30-59 days notice		60-89 days notice		90-119 days notice		120+ days notice		Total
Monthly	$	—	$	—	$	—	$	6.8	$	6.8
Quarterly	27.9		31.2		9.0		9.6		77.7
Semi-annual	—		22.7		—		—		22.7
Annual	1.7		—		8.5		.3		10.5
Total	$	29.6	$	53.9	$	17.5	$	16.7	$	117.7

Fair Value of private equity funds subject to lock-up periods

At March 31, 2013, investments in private equity funds were subject to lock-up periods as follows:



Millions	1-3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private Equity Funds — expected lock-up period remaining	$21.6	$34.0	$57.4	$9.1	$122.1

Fair value measurements by level, investment securities

The following tables summarize White Mountains’ fair value measurements for investments at March 31, 2013 and December 31, 2012, by level:



	March 31, 2013
Millions	Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Fixed maturity investments:
U.S. Government and agency obligations	$	435.5	$	364.6	$	70.9	$	—

Debt securities issued by corporations:
Consumer	735.5		—		735.5		—
Financials	378.4		—		378.4		—
Communications	331.6		—		331.6		—
Industrial	308.0		—		308.0		—
Basic Materials	211.6		—		211.6		—
Utilities	202.3		—		202.3		—
Energy	183.2		—		183.2		—
Technology	53.0		—		53.0		—
Other	6.1		—		6.1		—
Total debt securities issued by corporations:	2,409.7		—		2,409.7		—

Mortgage-backed and asset-backed securities	1,707.3		—		1,677.2		30.1
Foreign government, agency and provincial obligations	506.1		48.5		457.6		—
Preferred stocks	87.5		—		16.6		70.9
Municipal obligations	5.2		—		5.2		—
Total fixed maturity investments ⁽¹⁾	5,151.3		413.1		4,637.2		101.0

Short-term investments	654.4		654.4		—		—

Common equity securities:
Financials	320.1		283.3		—		36.8
Consumer	305.8		305.8		—		—
Energy	86.2		86.2		—		—
Basic materials	77.6		77.6		—		—
Technology	76.9		76.9		—		—
Communications	39.9		39.9		—		—
Utilities	39.7		39.6		.1		—
Other	127.0		64.0		63.0		—
Total common equity securities	1,073.2		973.3		63.1		36.8

Convertible fixed maturity investments	95.6		—		95.6		—
Other long-term investments ⁽²⁾	260.5		—		—		260.5
Total investments	$	7,235.0	$	2,040.8	$	4,795.9	$	398.3

⁽¹⁾Carrying value includes $296.9 that is classified as assets held for sale relating to discontinued operations.

⁽²⁾Excludes carrying value of $34.9 associated with other long-term investment limited partnerships accounted for using the equity method and $(0.2) related to forward contracts.



	December 31, 2012
Millions	Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Fixed maturity investments:
U.S. Government and agency obligations	$	440.1	$	369.1	$	71.0	$	—

Debt securities issued by corporations:
Consumer	727.1		—		727.1		—
Financials	401.4		1.0		400.4		—
Industrial	330.8		—		330.8		—
Communications	276.1		—		276.1		—
Utilities	204.2		—		204.2		—
Basic materials	189.1		—		189.1		—
Energy	181.5		—		181.5		—
Technology	54.0		—		54.0		—
Other	20.9		—		20.9		—
Total debt securities issued by corporations:	2,385.1		1.0		2,384.1		—

Mortgage-backed and asset-backed securities	2,095.6		—		2,073.5		22.1
Foreign government, agency and provincial obligations	521.9		52.1		469.8		—
Preferred stocks	86.4		—		15.6		70.8
Municipal obligations	5.2		—		5.2		—
Total fixed maturity investments ⁽¹⁾	5,534.3		422.2		5,019.2		92.9

Short-term investments	630.6		630.6		—		—

Common equity securities:
Financials	324.5		286.3		.9		37.3
Consumer	255.6		255.6		—		—
Basic materials	103.3		103.3		—		—
Energy	101.0		101.0		—		—
Technology	55.0		55.0		—		—
Utilities	43.6		43.4		.2		—
Communications	35.2		35.2		—		—
Other	111.5		53.1		58.4		—
Total common equity securities	1,029.7		932.9		59.5		37.3

Convertible fixed maturity investments	127.4		—		127.4		—
Other long-term investments ⁽²⁾	259.3		—		—		259.3
Total investments	$	7,581.3	$	1,985.7	$	5,206.1	$	389.5

⁽¹⁾Carrying value includes $338.1 that is classified as assets held for sale relating to discontinued operations.

⁽²⁾Excludes carrying value of $35.0 associated with other long-term investment limited partnerships accounted for using the equity method and $(0.1) related to currency forward contracts.

Debt securities issued by corporations, credit ratings

The following table summarizes the ratings of the corporate debt securities held in White Mountains’ investment portfolio as of March 31, 2013 and December 31, 2012:



	Fair Value at
Millions	March 31, 2013		December 31, 2012
AAA	$	—	$	—
AA	164.4		193.4
A	1,132.3		1,061.0
BBB	1,099.4		1,116.9
BB	7.0		7.0
Other	8.0		6.8
Debt securities issued by corporations ⁽¹⁾	$	2,411.1	$	2,385.1

⁽¹⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's Financial Services LLC ("Standard & Poor’s") and 2) Moody’s Investor Service ("Moody's").

Mortgage-backed, asset-backed securities

The following table summarizes mortgage and asset-backed securities as of March 31, 2013 and December 31, 2012:



	March 31, 2013						December 31, 2012
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
GNMA	$	805.5	$	805.5	$	—	$	1,013.4	$	1,013.4	$	—
FNMA	140.2		140.2		—		74.6		74.6		—
FHLMC	55.6		55.6		—		55.8		55.8		—
Total Agency⁽¹⁾	1,001.3		1,001.3		—		1,143.8		1,143.8		—
Non-agency:
Residential	55.6		55.6		—		160.6		160.6		—
Commercial	284.9		276.9		8.0		334.1		334.1		—
Total Non-agency	340.5		332.5		8.0		494.7		494.7		—

Total mortgage-backed securities	1,341.8		1,333.8		8.0		1,638.5		1,638.5		—
Other asset-backed securities:
Credit card receivables	132.3		110.2		22.1		173.5		151.4		22.1
Vehicle receivables	210.3		210.3		—		265.1		265.1		—
Other	22.9		22.9		—		18.5		18.5		—
Total other asset-backed securities	365.5		343.4		22.1		457.1		435.0		22.1
Total mortgage and asset-backed securities	$	1,707.3	$	1,677.2	$	30.1	$	2,095.6	$	2,073.5	$	22.1

⁽¹⁾Represents publicly traded mortgage-backed securities which carry the full faith and credit guaranty of the U.S. government (i.e., GNMA) or are guaranteed by a government sponsored entity (i.e., FNMA, FHLMC).

Schedule of security issuance years of investments in non-agency RMBS and non-agency CMBS securities

The security issuance years of White Mountains’ investments in non-agency RMBS and non-agency CMBS securities as of March 31, 2013 are as follows:



			Security Issuance Year
Millions	Fair Value		2005		2006		2007		2008		2010		2011		2012		2013
Non-agency RMBS	$	55.6	$	34.9	$	11.0	$	4.8	$	—	$	4.9	$	—	$	—	$	—
Non-agency CMBS	284.9		—		8.7		15.0		35.0		12.9		39.8		122.5		51.0
Total	$	340.5	$	34.9	$	19.7	$	19.8	$	35.0	$	17.8	$	39.8	$	122.5	$	51.0

Non-agency residential mortgage securities, collateral quality and tranche levels

The classification of the underlying collateral quality and the tranche levels of White Mountains’ non-agency RMBS securities are as follows as of March 31, 2013:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Prime	$	55.6	$	4.9	$	50.7	$	—
Non-prime	—		—		—		—
Sub-prime	—		—		—		—
Total	$	55.6	$	4.9	$	50.7	$	—

⁽¹⁾At issuance, Super Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to other AAA or Aaa bonds.

⁽²⁾At issuance, Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to non-AAA or non-Aaa bonds.

⁽³⁾At issuance, Subordinate were not rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were junior to AAA or Aaa bonds.

Non-agency commercial mortgage securities, type of interest rate and tranche levels

The amount of fixed and floating rate securities and their tranche levels of White Mountains’ non-agency CMBS securities are as follows as of March 31, 2013:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Fixed rate CMBS	$	206.5	$	128.0	$	60.7	$	17.8
Floating rate CMBS	78.4		14.9		36.4		27.1
Total	$	284.9	$	142.9	$	97.1	$	44.9

⁽¹⁾At issuance, Super Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to other AAA or Aaa bonds.

⁽²⁾At issuance, Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to non-AAA or non-Aaa bonds.

⁽³⁾At issuance, Subordinate were not rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were junior to AAA or Aaa bonds.

Rollforward of fair value investments by level

The following tables summarize the changes in White Mountains’ fair value measurements by level for the three months ended March 31, 2013 and 2012:



							Level 3 Investments
Millions	Level 1 ⁽³⁾ Investments			Level 2 Investments			Fixed Maturities		Common equity securities			Convertible fixed maturities		Other long-term investments			Total
Balance at January 1, 2013	$	1,355.1		$	5,206.1		$	92.9	$	37.3		$	—	$	259.3		$	6,950.7		⁽¹⁾⁽²⁾
Total realized and unrealized gains (losses)	80.1			(10.8		)	.1		(.1		)	—		5.8			75.1
Foreign currency losses through OCI	(.4		)	(4.8		)	—		—			—		(.4		)	(5.6		)
Amortization/Accretion	(.4		)	(14.0		)	—		—			—		—			(14.4		)
Purchases	318.6			1,445.8			8.0		—			—		18.9			1,791.3
Sales	(382.3		)	(1,828.3		)	—		—			—		(23.1		)	(2,233.7		)
Net change in investments related to purchases and sales of consolidated affiliates	14.5			2.7			—		—			—		—			17.2
Transfers in	1.2			—			—		—			—		—			1.2
Transfers out	—			(.8		)	—		(.4		)	—		—			(1.2		)
Balance at March 31, 2013	$	1,386.4		$	4,795.9		$	101.0	$	36.8		$	—	$	260.5		$	6,580.6		⁽¹⁾⁽²⁾

⁽¹⁾Excludes carrying value of $35.0 and $34.9 at January 1, 2013 and March 31, 2013 associated with other long-term investments accounted for using the equity method and $(0.1) and $(0.2) at January 1, 2013 and March 31, 2013 related to forward contracts.

⁽²⁾Carrying value includes $338.1 and $296.9 at January 1, 2013 and March 31, 2013 that is classified as assets held for sale relating to discontinued operations.

⁽³⁾Excludes carrying value of $630.6 and $654.4 at January 1, 2013 and March 31, 2013 and realized and unrealized gain for the period of $0.1 associated with short-term investments classified as level 1.



							Level 3 Investments
Millions	Level 1⁽³⁾ Investments			Level 2 Investments			Fixed Maturities			Common equity securities		Convertible fixed maturities		Other long-term investments				Total
Balance at January 1, 2012	$	1,033.1		$	6,088.2		$	78.9		$	32.3	$	—	$	268.3		⁽¹⁾	$	7,500.8		⁽¹⁾⁽²⁾
Total realized and unrealized gains	34.7			10.1			7.1			.5		—		6.5				58.9
Foreign currency gains through OCI	.7			50.4			.7			—		—		2.7				54.5
Amortization/Accretion	(.3		)	(12.5		)	(1.1		)	—		—						(13.9		)
Purchases	166.6			1,708.2			97.7			—		—		5.7				1,978.2
Sales	(129.0		)	(2,729.4		)	(4.1		)	—		—		(9.7		)		(2,872.2		)
Transfers in	—			—			—			—		—		—				—
Transfers out	—			—			—			—		—		—				—
Balance at March 31, 2012	$	1,105.8		$	5,115.0		$	179.2		$	32.8	$	—	$	273.5		⁽¹⁾	$	6,706.3		⁽¹⁾⁽²⁾

⁽¹⁾Excludes carrying value of $33.0 and $33.2 at March 31, 2012 and January 1, 2012 associated with other long-term investment limited partnerships accounted for using the equity method.

⁽²⁾Carrying value includes $111.8 that is classified as assets held for sale relating to discontinued operations.

⁽³⁾Excludes carrying value of $877.5 and $846.0 at March 31, 2012 and January 1, 2012 and realized and unrealized loss for the period of $0.3 associated with short-term investments classified as level 1.

Schedule of significant unobservable inputs used in estimating the fair value of investment securities

The following summarizes significant unobservable inputs used in estimating the fair value of investment securities classified within Level 3 other than hedge funds and private equity funds at March 31, 2013. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.

($ in Millions)

March 31, 2013

Description

Fair Value

Rating⁽²⁾

Valuation Technique(s)

Unobservable Input

Preferred Stock⁽¹⁾

$70.9

Discounted cash flow

Discount yield

7.4

Asset-backed securities

$8.0

BBB-

Broker pricing

Broker quote

$22.1

AA+

Broker pricing

Broker quote

Private equity securities

$36.8

Multiple of GAAP book value

Book value multiple

1.0

⁽¹⁾As of March 31, 2013 asset type consists of one security.

⁽²⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's Financial Services LLC (“Standard & Poor’s”) and 2) Moody’s Investor Service (“Moody's”).