Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of total income tax benefit (expense)

The total income tax benefit (expense) for the years ended December 31, 2013, 2012 and 2011 consisted of the following:



	Year Ended December 31,
Millions	2013			2012			2011
Current tax (expense) benefit:
U.S. federal	$	(19.0	)	$	8.2		$	36.3
State	(1.4		)	(3.4		)	(2.4		)
Non-U.S.	(16.5		)	(5.9		)	5.1
Total current tax (expense) benefit	(36.9		)	(1.1		)	39.0
Deferred tax (expense) benefit:
U.S. federal	(24.4		)	(55.5		)	(43.7		)
State	—			—			—
Non-U.S.	(15.3		)	72.3			114.7
Total deferred tax (expense) benefit	(39.7		)	16.8			71.0
Total income tax (expense) benefit	$	(76.6	)	$	15.7		$	110.0

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	2013			2012			2011
Tax (expense) benefit at the U.S. statutory rate	$	(120.7	)	$	(92.0	)	$	(34.3	)
Differences in taxes resulting from:
Non-U.S. earnings, net of foreign taxes	82.9			43.0			6.2
Change in valuation allowance	(33.6		)	(14.1		)	128.2
Tax reserve adjustments	(10.2		)	(1.3		)	4.3
Purchase of subsidiaries	5.3			5.1			—
Tax exempt interest and dividends	3.2			3.1			2.9
Withholding tax	(1.7		)	(2.9		)	0.2
Tax rate change enacted in Sweden	—			65.4			—
Tax rate change enacted in Luxembourg	—			7.2			1.2
Other, net	(1.8		)	2.2			1.3
Total income tax (expense) benefit on pre-tax income	$	(76.6	)	$	15.7		$	110.0

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	2013			2012
Deferred income tax assets related to:
Non-U.S. net operating loss carryforwards	$	520.6		$	511.9
U.S. federal net operating and capital loss carryforwards	148.6			164.8
Loss reserve discount	74.9			88.6
Incentive compensation	53.9			36.8
Unearned premiums	38.9			45.5
Runoff Transaction	24.2			49.3
Tax credit carryforwards	23.1			17.0
Deferred compensation	10.3			10.4
Fixed assets	4.9			2.8
Accrued interest	1.1			8.0
Pension and benefit accruals	—			10.3
Other items	6.9			5.7
Total gross deferred income tax assets	907.4			951.1
Less: valuation allowances	(289.8		)	(254.0		)
Total net deferred income tax assets	617.6			697.1
Deferred income tax liabilities related to:
Safety reserve	357.2			326.7
Net unrealized investment gains	44.6			54.2
Deferred acquisition costs	33.0			49.8
Purchase accounting	7.2			9.5
Members surplus contributions	5.4			.1
Pension and benefit accruals	3.4			—
Investment basis difference	3.0			21.0
Other items	7.9			7.5
Total deferred income tax liabilities	461.7			468.8
Net deferred tax asset	$	155.9		$	228.3

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, 2013, the expiration dates and the deferred tax assets thereon are as follows:



	December 31, 2013
Millions	United States			Luxembourg			Sweden		Netherlands			UK		Total
2013	$	—		$	—		$	—	$	—		$	—	$	—
2014 - 2018	—			—			—		0.5			—		0.5
2019 - 2023	11.2			—			—		0.6			—		11.8
2024 - 2033	429.8			—			—		—			—		429.8
No expiration date	—			1,750.0			62.3		—			15.6		1,827.9
Total	$	441.0		$	1,750.0		$	62.3	$	1.1		$	15.6	$	2,270.0
Gross deferred tax asset	$	148.6		$	511.3		$	5.8	$	.3		$	3.2	$	669.2
Valuation allowance	(58.3		)	(195.7		)	—		(.3		)	—		(254.3		)
Net deferred tax asset	$	90.3		$	315.6		$	5.8	$	—		$	3.2	$	414.9

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, 2011	$	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		)
Settlements with tax authorities	(.4		)	—			(.2		)	(.6		)
Balance at December 31, 2012	9.7			28.9			8.0			46.6
Changes in prior year tax positions	.6			(7.1		)	1.7			(4.8		)
Tax positions taken during the current year	7.9			.7			—			8.6
Settlements with tax authorities	—			—			(.4		)	(.4		)
Balance at December 31, 2013	$	18.2		$	22.5		$	9.3		$	50.0


⁽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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