XML 25 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Loss and Loss Adjustment Expense Reserves
 6 Months Ended
Jun. 30, 2013
Insurance Loss Reserves [Abstract]  
Loss and Loss Adjustment Expense Reserves
Loss and Loss Adjustment Expense Reserves
 
The following table summarizes the loss and loss adjustment expense (“LAE”) reserve activities of White Mountains’ insurance and reinsurance subsidiaries for the three and six months ended June 30, 2013 and 2012:
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2013
 
2012
 
2013
 
2012
Gross beginning balance
 
$
3,100.6

 
$
5,510.8

 
$
3,168.9

 
$
5,702.3

Less beginning reinsurance recoverable on unpaid losses
 
(410.8
)
 
(2,465.4
)
 
(429.1
)
 
(2,507.3
)
Net loss and LAE reserves
 
2,689.8

 
3,045.4

 
2,739.8

 
3,195.0

 
 
 
 
 
 
 
 
 
Less:  Beginning net loss and LAE reserves for
     OneBeacon's runoff business (1)
 
—

 
(333.1
)
 
—

 
(384.0
)
 
 
 
 
 
 
 
 
 
Loss and LAE reserves acquired - American Fuji
 
—

 
—

 
21.3

 
—

 
 
 
 
 
 
 
 
 
Loss and LAE incurred relating to:
 
 
 
 
 
 

 
 

Current year losses
 
290.0

 
267.4

 
532.9

 
524.8

Prior year losses
 
(15.4
)
 
(3.5
)
 
(14.0
)
 
(11.1
)
Total incurred losses and LAE
 
274.6

 
263.9

 
518.9

 
513.7

 
 
 
 
 
 
 
 
 
Accretion of fair value adjustment to loss and LAE reserves
 
.1

 
1.2

 
1.3

 
8.3

Foreign currency translation adjustment to loss and LAE reserves
 
(4.6
)
 
(12.1
)
 
(14.2
)
 
(.3
)
 
 
 
 
 
 
 
 
 
Loss and LAE paid relating to:
 
 
 
 
 
 

 
 

Current year losses
 
(83.3
)
 
(78.4
)
 
(119.9
)
 
(122.9
)
Prior year losses
 
(207.3
)
 
(222.5
)
 
(477.9
)
 
(545.4
)
Total loss and LAE payments
 
(290.6
)
 
(300.9
)
 
(597.8
)
 
(668.3
)
 
 
 
 
 
 
 
 
 
Plus:  Ending net loss and LAE reserves for
OneBeacon's runoff business (1)
 
—

 
296.0

 
—

 
296.0

 
 
 
 
 
 
 
 
 
Net ending balance
 
2,669.3

 
2,960.4

 
2,669.3

 
2,960.4

Plus ending reinsurance recoverable on unpaid losses
 
388.6

 
2,369.4

 
388.6

 
2,369.4

Gross ending balance
 
$
3,057.9

 
$
5,329.8

 
$
3,057.9

 
$
5,329.8

(1) Loss and LAE reserve balances for OneBeacon's run-off business prior to September 30, 2012 were not classified as held for sale.  Adjustment is to present loss and LAE reserve activities from continuing operations.

Loss and LAE incurred relating to prior year losses for the three and six months ended June 30, 2013
During the three and six months ended June 30, 2013, White Mountains experienced $15.4 million and $14.0 million of net favorable loss reserve development.
For the three and six months ended June 30, 2013, OneBeacon had net favorable loss reserve development of $1.0 million and $3.9 million primarily driven by its healthcare, ocean marine and government risk businesses. For the three and six months ended June 30, 2013, Sirius Group had net favorable loss reserve development of $14.4 million and $10.1 million primarily due to decreases in property loss reserves, including reductions in loss reserves for the Japan earthquake and hurricane Sandy.
 
Loss and LAE incurred relating to prior year losses for the three and six months ended June 30, 2012
During the three and six months ended June 30, 2012, White Mountains experienced $3.5 million and $11.1 million of net favorable loss reserve development.
For the three and six months ended June 30, 2012, OneBeacon had $3.4 million and $5.3 million of net favorable loss reserve development primarily related to professional liability lines, multiple peril liability lines and other general liability lines.
For the three months ended June 30, 2012, there was no meaningful prior year loss reserve development at Sirius Group. For the six months ended June 30, 2012, Sirius Group had net favorable loss reserve development of $5.8 million that included decreases to property loss reserves mostly offset by increases to accident and health and asbestos loss reserves.

Fair value adjustment to loss and LAE reserves
In connection with purchase accounting for acquisitions, White Mountains is required to adjust loss and LAE reserves and the related reinsurance recoverables to fair value on their respective acquired balance sheets.  The net reduction to loss and LAE reserves is being recognized through an income statement charge ratably with and over the period the claims are settled.
White Mountains recognized $0.1 million and $1.3 million of such charges, recorded as loss and LAE for the three and six months ended June 30, 2013, and $1.2 million and $8.3 million for the three and six months ended June 30, 2012.  Accretion of fair value adjustment to losses and LAE reserves increased by $5.0 million in the first quarter of 2012 due to the acceleration of the amortization of the purchase accounting established for the acquisition of Scandinavian Re. This acceleration was a result of a final settlement and commutation of Scandinavian Re's multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul Fire & Marine Insurance Company (“St Paul”). As of June 30, 2013, the remaining pre-tax un-accreted adjustment was $4.4 million.