Investment Securities

White Mountains’s invested assets consist of securities and other long-term investments held for general investment purposes. The portfolio of investment securities includes short-term investments, fixed maturity investments, convertible fixed maturity investments and equity securities which are all classified as trading securities. Trading securities are reported at fair value as of the balance sheet date. Realized and unrealized investment gains and losses on trading securities are reported in pre-tax revenues. White Mountains’s investments in debt securities, including mortgage-backed and asset-backed securities, are generally valued using industry standard pricing models. Key inputs include benchmark yields, benchmark securities, reported trades, issuer spreads, bids, offers, credit ratings and prepayment speeds. Income on mortgage-backed and asset-backed securities is recognized using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.

Realized investment gains and losses resulting from sales of investment securities are accounted for using the specific identification method. Premiums and discounts on all fixed maturity investments are amortized or accreted to income over the anticipated life of the investment. Short-term investments consist of money market funds, certificates of deposit and other securities which, at the time of purchase, mature or become available for use within one year. Short-term investments are carried at amortized or accreted cost, which approximated fair value as of March 31, 2014 and December 31, 2013.

Other long-term investments primarily comprise White Mountains’s investments in hedge funds and private equity funds.

Net Investment Income

Pre-tax net investment income for the three months ended March 31, 2014 and 2013 consisted of the following:



	Three Months Ended
	March 31,
Millions	2014			2013
Investment income:
Fixed maturity investments	$	22.4		$	26.0
Short-term investments	.6			.8
Common equity securities	5.4			4.7
Convertible fixed maturity investments	.4			.8
Other long-term investments	.3			.7
Total investment income	29.1			33.0
Less third-party investment expenses	(4.8		)	(4.5		)
Net investment income, pre-tax	$	24.3		$	28.5

Net Realized and Unrealized Investment Gains and Losses

Net realized and unrealized investment gains and losses for the three months ended March 31, 2014 and 2013 consisted of the following:



	Three Months Ended
	March 31,
Millions	2014			2013
Net realized investment gains, pre-tax	$	21.7		$	36.5
Net unrealized investment gains, pre-tax	42.1			38.7
Net realized and unrealized investment gains, pre-tax	63.8			75.2
Income tax expense attributable to net realized and unrealized investment gains	(15.7		)	(13.7		)
Net realized and unrealized investment gains, after tax	$	48.1		$	61.5

Net realized investment gains (losses)

Net realized investment gains (losses) for the three months ended March 31, 2014 and 2013 consisted of the following:



	Three Months Ended									Three Months Ended
	March 31, 2014									March 31, 2013
Millions	Net realized gains (losses)			Net foreign exchange gains (losses)			Total net realized gains (losses) reflected in earnings			Net realized gains (losses)			Net foreign currency gains (losses)			Total net realized gains (losses) reflected in earnings
Fixed maturity investments	$	4.4		$	(3.5	)	$	.9		$	22.6		$	(14.6	)	$	8.0
Short-term investments	—			—			—			—			.1			.1
Common equity securities	18.9			(.1		)	18.8			22.6			(.2		)	22.4
Convertible fixed maturity investments	2.4			—			2.4			2.7			—			2.7
Other long-term investments	(.3		)	—			(.3		)	2.9			—			2.9
Forward contracts	(.1		)	—			(.1		)	.4			—			.4
Net realized investment gains (losses), pre-tax	25.3			(3.6		)	21.7			51.2			(14.7		)	36.5
Income tax expense attributable to net realized investment (losses) gains	(4.6		)	.9			(3.7		)	(11.8		)	3.3			(8.5		)
Net realized investment gains (losses), after tax	$	20.7		$	(2.7	)	$	18.0		$	39.4		$	(11.4	)	$	28.0

Net unrealized investment gains (losses)

The following table summarizes net unrealized investment gains (losses) for the three months ended March 31, 2014 and 2013:



	Three Months Ended									Three Months Ended
	March 31, 2014									March 31, 2013
Millions	Net unrealized gains (losses)			Net foreign exchange gains (losses)			Total net unrealized gains (losses) reflected in earnings			Net unrealized gains (losses)			Net foreign currency gains (losses)			Total net unrealized gains (losses) reflected in earnings
Fixed maturity investments	$	19.4		$	12.2		$	31.6		$	(30.6	)	$	4.6		$	(26.0	)
Short-term investments	—			—			—			—			—			—
Common equity securities	4.0			.5			4.5			61.9			—			61.9
Convertible fixed maturity investments	.7			—			.7			(1.1		)	(.2		)	(1.3		)
Other long-term investments	4.9			.4			5.3			3.6			.5			4.1
Forward contracts	—			—			—			—			—			—
Net unrealized investment gains (losses), pre-tax	29.0			13.1			42.1			33.8			4.9			38.7
Income tax expense attributable to net unrealized investment (losses) gains	(9.1		)	(2.9		)	(12.0		)	(4.1		)	(1.1		)	(5.2		)
Net unrealized investment gains (losses), after tax	$	19.9		$	10.2		$	30.1		$	29.7		$	3.8		$	33.5

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, 2014 and 2013:



	Three Months Ended
	March 31,
Millions	2014		2013
Fixed maturity investments	$	.2	$	.2
Common equity securities	.8		(.1		)
Other long-term investments	6.1		6.4
Total unrealized investment gains, pre-tax - Level 3 investments	$	7.1	$	6.5

Investment Holdings

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s fixed maturity investments as of March 31, 2014 and December 31, 2013 were as follows:



	March 31, 2014
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
U.S. Government and agency obligations	$	539.2	$	.6	$	(.8	)	$	(.6	)	$	538.4
Debt securities issued by corporations	2,311.6		48.3		(7.1		)	(6.3		)	2,346.5
Municipal obligations	33.5		.2		(.2		)	—			33.5
Mortgage-backed and asset-backed securities	1,847.9		4.1		(6.3		)	(3.5		)	1,842.2
Foreign government, agency and provincial obligations	366.4		3.4		(1.1		)	(4.3		)	364.4
Preferred stocks	79.9		6.1		—			(.1		)	85.9
Total fixed maturity investments including assets held for sale	$	5,178.5	$	62.7	$	(15.5	)	$	(14.8	)	$	5,210.9
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction											(222.2		)
Total fixed maturity investments											$	4,988.7



	December 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	$	365.5	$	.5	$	(1.0	)	$	(2.5	)	$	362.5
Debt securities issued by corporations	2,330.7		44.0		(13.2		)	(14.3		)	2,347.2
Municipal obligations	18.3		—		(.4		)	—			17.9
Mortgage-backed and asset-backed securities	2,027.3		2.4		(9.9		)	(5.3		)	2,014.5
Foreign government, agency and provincial obligations	444.2		3.7		(3.2		)	(4.8		)	439.9
Preferred stocks	79.9		5.1		—			(.2		)	84.8
Total fixed maturity investments including assets held for sale	$	5,265.9	$	55.7	$	(27.7	)	$	(27.1	)	$	5,266.8
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction											(236.3		)
Total fixed maturity investments											$	5,030.5

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s common equity securities, convertible fixed maturities and other long-term investments as of March 31, 2014 and December 31, 2013 were as follows:



	March 31, 2014
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
Common equity securities	$	905.6	$	273.9	$	(4.5	)	$	(.4	)	$	1,174.6
Convertible fixed maturity investments	$	64.3	$	10.6	$	(1.0	)	$	(.1	)	$	73.8
Other long-term investments	$	246.4	$	83.4	$	(25.5	)	$	(2.0	)	$	302.3



	December 31, 2013
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
Common equity securities	$	890.2	$	271.0	$	(3.6	)	$	(.8	)	$	1,156.8
Convertible fixed maturity investments	$	71.7	$	9.9	$	(.9	)	$	(.2	)	$	80.5
Other long-term investments	$	238.3	$	79.6	$	(26.6	)	$	(2.4	)	$	288.9

Hedge Funds and Private Equity Funds

White Mountains holds investments in hedge funds and private equity funds, which are included in other long-term investments. The fair value of these investments has been estimated using the net asset value of the funds. At March 31, 2014, White Mountains held investments in 16 hedge funds and 39 private equity funds. The largest investment in a single fund was $18.8 million at March 31, 2014. The following table summarizes investments in hedge funds and private equity interests by investment objective and sector at March 31, 2014 and December 31, 2013:



	March 31, 2014				December 31, 2013
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Hedge funds
Long/short equity	$	67.6	$	—	$	62.6	$	—
Long/short credit & distressed	23.3		—		22.8		—
Long/short equity REIT	18.8		—		18.3		—
Long/short equity activist	16.3		—		16.8		—
Long bank loan	.2		—		.2		—
Long diversified strategies	—		—		.1		—
Total hedge funds	126.2		—		120.8		—

Private equity funds
Energy infrastructure & services	46.8		12.7		45.9		13.1
Multi-sector	24.1		6.4		23.8		6.5
Manufacturing/Industrial	11.5		15.2		11.2		15.5
Aerospace/Defense/Government	10.6		15.5		5.8		19.2
Private equity secondaries	9.2		3.1		9.5		3.1
Healthcare	7.8		2.8		5.6		2.8
Real estate	7.1		3.3		8.2		3.3
Insurance	2.4		41.3		2.3		41.3
Venture capital	1.6		.3		1.6		.3
International multi-sector, Asia	—		2.7		—		2.7
International multi-sector, Europe	3.8		2.8		3.9		2.8
Total private equity funds	124.9		106.1		118.2		110.6

Total hedge and private equity funds included in other long-term investments⁽¹⁾	$	251.1	$	106.1	$	239.0	$	110.6

⁽¹⁾Excludes carrying value of $25.0 and $26.6 at March 31, 2014 and December 31, 2013 associated with hedge funds and private equity funds accounted for using the equity method.

Redemption of investments in certain hedge funds is subject to restrictions including lock-up periods where no redemptions or withdrawals are allowed, restrictions on redemption frequency and advance notice periods for redemptions. Amounts requested for redemptions remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period.

The following summarizes the March 31, 2014 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	$	4.9	$	—	$	—	$	5.5	$	10.4
Quarterly	29.4		30.4		11.9		8.8		80.5
Semi-annual	—		25.8		—		—		25.8
Annual	—		—		9.3		.2		9.5
Total	$	34.3	$	56.2	$	21.2	$	14.5	$	126.2

Certain of the hedge fund investments in which White Mountains is invested are no longer active and are in the process of disposing of their underlying investments. Distributions from such funds are remitted to investors as the fund’s underlying investments are liquidated. At March 31, 2014, distributions of $2.1 million were outstanding from these investments. The actual amount of the final distribution remittances remain subject to market fluctuations. The date at which such remittances will be received is not determinable at March 31, 2014.

White Mountains has also submitted redemption requests for certain of its investments in active hedge funds. At March 31, 2014, redemptions of $2.2 million are outstanding and are subject to market fluctuations. The date at which such redemptions will be received is not determinable at March 31, 2014. Redemptions are recorded as receivables when the investment is no longer subject to market fluctuations.

Investments in private equity funds are generally subject to a “lock-up” period during which investors may not request a redemption. Distributions prior to the expected termination date of the fund may be limited to dividends or proceeds arising from the liquidation of the fund’s underlying investments. In addition, certain private equity funds provide an option to extend the lock-up period at either the sole discretion of the fund manager or upon agreement between the fund and the investors.

At March 31, 2014, 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	$6.5	$29.5	$75.7	$13.2	$124.9

Fair value measurements at March 31, 2014

White Mountains’s invested assets that are measured at fair value include fixed maturity investments, common and preferred equity securities, convertible fixed maturity securities and other long-term investments, such as interests in hedge funds and private equity funds. Fair value measurements reflect management’s best estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements fall into a hierarchy with three levels based on the nature of the inputs. Fair value measurements based on quoted prices in active markets for identical assets are at the top of the hierarchy (“Level 1”), followed by fair value measurements based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar, but not identical instruments (“Level 2”). Measurements based on unobservable inputs, including a reporting entity’s estimates of the assumptions that market participants would use are at the bottom of the hierarchy (“Level 3”).

White Mountains uses quoted market prices or other observable inputs to determine fair value for the vast majority of its investment portfolio. Investments valued using Level 1 inputs include fixed maturity investments, primarily investments in U.S. Treasuries, common equities and short-term investments, which include U.S. Treasury Bills. Investments valued using Level 2 inputs consist of fixed maturity investments including corporate debt, state and other governmental debt, convertible fixed maturity securities and mortgage and asset-backed securities. Fair value estimates for investments that trade infrequently and have few or no observable market prices are classified as Level 3 measurements. Level 3 fair value estimates based upon unobservable inputs include White Mountains’s investments in hedge funds and private equity funds, as well as investments in certain debt and equity securities where quoted market prices are unavailable. White Mountains uses brokers and outside pricing services to assist in determining fair values. For investments in active markets, White Mountains uses the quoted market prices provided by outside pricing services to determine fair value. The outside pricing services used by White Mountains have indicated that if no observable inputs are available for a security, they will not provide a price. In those circumstances, White Mountains estimates the fair value using industry standard pricing models and observable inputs such as benchmark interest rates, matrix pricing, market comparables, broker quotes, issuer spreads, bids, offers, credit rating, prepayment speeds and other relevant inputs. White Mountains performs procedures to validate the market prices obtained from the outside pricing sources. Such procedures, which cover substantially all of its fixed maturity investments include, but are not limited to, evaluation of model pricing methodologies and review of the pricing services’ quality control processes and procedures on at least an annual basis, comparison of market prices to prices obtained from different independent pricing vendors on at least a semi-annual basis, monthly analytical reviews of certain prices, and review of assumptions utilized by the pricing service for selected measurements on an ad hoc basis throughout the year. White Mountains also performs back-testing of selected sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price on an ad-hoc basis throughout the year. Prices provided by the pricing services that vary by more than 5% and $1.0 million from the expected price based on these procedures are considered outliers. In circumstances where the results of White Mountains’s review process do not appear to support the market price provided by the pricing services, White Mountains challenges the price. If White Mountains cannot gain satisfactory evidence to support the challenged price, it relies upon its own pricing methodologies to estimate the fair value of the security in question. The fair values of such securities are considered to be Level 3 measurements.

White Mountains’s investments in debt securities are generally valued using matrix and other pricing models. Key inputs include benchmark yields, benchmark securities, reported trades, issuer spreads, bids, offers, credit ratings and prepayment speeds. Income on mortgage-backed and asset-backed securities is recognized using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized or accreted prospectively over the remaining economic life.

White Mountains employs a number of procedures to assess the reasonableness of the fair value measurements for its other long-term investments, including obtaining and reviewing the audited annual financial statements of each hedge fund and private equity fund and periodically discussing each fund’s pricing with the fund manager. However, since the fund managers do not provide sufficient information to evaluate the pricing inputs and methods for each underlying investment, the inputs are considered to be unobservable. Accordingly, the fair values of White Mountains’s investments in hedge funds and private equity funds have been classified as Level 3 measurements. The fair value of White Mountains’s investments in hedge funds and private equity funds has been determined using net asset value.

In addition to the investments described above, White Mountains has $84.6 million and $86.3 million of investment-related liabilities recorded at fair value and included in other liabilities as of March 31, 2014 and December 31, 2013. These liabilities relate to securities that have been sold short by limited partnerships in which White Mountains has investments and is required to consolidate under GAAP. All of the liabilities included have a Level 1 designation.

Fair Value Measurements by Level

The following tables summarize White Mountains’s fair value measurements for investments at March 31, 2014 and December 31, 2013, by level:



	March 31, 2014
Millions	Fair value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	538.4	$	471.7	$	66.7	$	—

Debt securities issued by corporations:
Consumer	741.0		—		741.0		—
Financials	446.0		—		446.0		—
Communications	267.5		—		267.5		—
Industrial	251.5		—		251.5		—
Energy	194.2		—		194.2		—
Utilities	132.7		—		132.7		—
Basic Materials	140.1		—		140.1		—
Technology	91.5		—		91.5		—
Other	82.0		—		82.0		—
Total debt securities issued by corporations:	2,346.5		—		2,346.5		—

Mortgage-backed and asset-backed securities	1,842.2		—		1,800.6		41.6
Foreign government, agency and provincial obligations	364.4		42.8		321.6		—
Preferred stocks	85.9		—		14.6		71.3
Municipal obligations	33.5		—		33.5		—
Total fixed maturity investments ⁽¹⁾	5,210.9		514.5		4,583.5		112.9

Short-term investments	674.0		666.6		7.4		—

Common equity securities:
Financials	359.8		312.9		—		46.9
Consumer	313.8		313.8		—		—
Industrial	106.5		106.5		—		—
Energy	81.1		81.1		—		—
Communications	56.5		56.5		—		—
Basic materials	56.0		56.0		—		—
Technology	44.9		44.9		—		—
Utilities	36.7		36.7		—		—
Other	119.3		42.7		76.3		.3
Total common equity securities	1,174.6		1,051.1		76.3		47.2

Convertible fixed maturity investments	73.8		—		67.7		6.1
Other long-term investments ⁽²⁾	277.4		—		—		277.4
Total investments	$	7,410.7	$	2,232.2	$	4,734.9	$	443.6

⁽¹⁾Carrying value includes $222.2 that is classified as assets held for sale relating to discontinued operations.

⁽²⁾Excludes carrying value of $25.0 associated with other long-term investment limited partnerships accounted for using the equity method and $(0.1) related to forward contracts.



	December 31, 2013
Millions	Fair value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	362.5	$	295.8	$	66.7	$	—

Debt securities issued by corporations:
Consumer	754.4		—		754.4		—
Industrial	434.4		—		434.4		—
Communications	281.1		—		281.1		—
Financials	265.0		—		265.0		—
Basic materials	173.6		—		173.6		—
Energy	159.7		—		159.7		—
Utilities	149.1		—		149.1		—
Technology	91.2		—		91.2		—
Other	38.7		—		38.7		—
Total debt securities issued by corporations:	2,347.2		—		2,347.2		—

Mortgage-backed and asset-backed securities	2,014.5		—		1,992.5		22.0
Foreign government, agency and provincial obligations	439.9		44.5		395.4		—
Preferred stocks	84.8		—		13.8		71.0
Municipal obligations	17.9		—		17.9		—
Total fixed maturity investments ⁽¹⁾	5,266.8		340.3		4,833.5		93.0

Short-term investments	635.9		621.5		14.4		—

Common equity securities:
Financials	360.4		314.3		—		46.1
Consumer	308.2		308.2		—		—
Industrial	105.4		105.4		—		—
Energy	78.6		78.6		—		—
Utilities	60.6		60.6		—		—
Communications	57.1		57.1		—		—
Basic materials	53.4		53.4		—		—
Technology	34.3		34.3		—		—
Other	98.8		24.5		74.3		—
Total common equity securities	1,156.8		1,036.4		74.3		46.1

Convertible fixed maturity investments	80.5		—		74.4		6.1
Other long-term investments ⁽²⁾	262.4		—		—		262.4
Total investments	$	7,402.4	$	1,998.2	$	4,996.6	$	407.6

⁽¹⁾Carrying value includes $236.3 that is classified as assets held for sale relating to discontinued operations.

⁽²⁾Excludes carrying value of $26.6 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

The following table summarizes the ratings of the corporate debt securities held in White Mountains’s investment portfolio as of March 31, 2014 and December 31, 2013:



	Fair Value at
Millions	March 31, 2014		December 31, 2013
AAA	$	—	$	—
AA	221.3		228.8
A	1,028.9		1,039.5
BBB	1,089.9		1,075.5
BB	—		—
Other	6.4		3.4
Debt securities issued by corporations⁽¹⁾	$	2,346.5	$	2,347.2

⁽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

White Mountains purchases commercial and residential mortgage-backed securities with the goal of maximizing risk adjusted returns in the context of a diversified portfolio. White Mountains’s non-agency commercial mortgage-backed portfolio (“CMBS”) is generally short-term and structurally senior, with more than 25 points of subordination on average for both fixed rate CMBS and floating rate CMBS as of March 31, 2014. In general, subordination represents the percentage principal loss on the underlying collateral that would be absorbed by other securities lower in the capital structure before the more senior security incurs a loss. White Mountains believes these levels of protection will mitigate the risk of loss tied to the refinancing challenges facing the commercial real estate market. As of March 31, 2014, on average less than 1% of the underlying loans were reported as non-performing for all non-agency CMBS held by White Mountains. White Mountains is not an originator of residential mortgage loans. White Mountains’s investments in hedge funds and private equity funds contain negligible amounts of sub-prime mortgage-backed securities at March 31, 2014. White Mountains considers sub-prime mortgage-backed securities as those that have underlying loan pools that exhibit weak credit characteristics, or those that are issued from dedicated sub-prime shelves or dedicated second-lien shelf registrations (i.e., White Mountains considers investments backed primarily by second-liens to be sub-prime risks regardless of credit scores or other metrics).

White Mountains categorizes mortgage-backed securities as “non-prime” (also called “Alt A” or “A-”) if they are backed by collateral that has overall credit quality between prime and sub-prime based on White Mountains’s review of the characteristics of their underlying mortgage loan pools, such as credit scores and financial ratios. White Mountains’s non-agency residential mortgage-backed portfolio is generally moderate-term and structurally senior. White Mountains does not own any collateralized loan obligations. White Mountains does not own any collateralized debt obligations, with the exception of $37.8 million of non-agency residential mortgage resecuritization tranches, each a senior tranche in its own right and each collateralized by a single earlier vintage Super Senior or Senior non-agency residential mortgage backed security.

The following table summarizes mortgage and asset-backed securities as of March 31, 2014 and December 31, 2013:



	March 31, 2014						December 31, 2013
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
GNMA	$	464.8	$	464.8	$	—	$	512.3	$	512.3	$	—
FNMA	167.3		167.3		—		81.2		81.2		—
FHLMC	85.6		85.6		—		91.3		91.3		—
Total Agency⁽¹⁾	717.7		717.7		—		684.8		684.8		—
Non-agency:
Residential	132.3		132.3		—		125.7		125.7		—
Commercial	329.7		310.1		19.6		282.3		282.3		—
Total Non-agency	462.0		442.4		19.6		408.0		408.0		—

Total mortgage-backed securities	1,179.7		1,160.1		19.6		1,092.8		1,092.8		—
Other asset-backed securities:
Credit card receivables	229.7		207.7		22.0		311.4		289.4		22.0
Vehicle receivables	231.5		231.5		—		365.0		365.0		—
Other	201.3		201.3		—		245.3		245.3		—
Total other asset-backed securities	662.5		640.5		22.0		921.7		899.7		22.0
Total mortgage and asset-backed securities	$	1,842.2	$	1,800.6	$	41.6	$	2,014.5	$	1,992.5	$	22.0

⁽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).

Non-agency Mortgage-backed Securities

The security issuance years of White Mountains’s investments in non-agency RMBS and non-agency CMBS securities as of March 31, 2014 are as follows:



					Security Issuance Year
Millions	Fair Value		2004		2005		2006		2007		2008		2009		2010		2011		2012		2013		2014
Non-agency RMBS	$	132.3	$	11.3	$	20.2	$	11.0	$	—	$	19.6	$	—	$	26.4	$	—	$	—	$	32.8	$	11.0
Non-agency CMBS	329.7		—		—		8.5		5.0		26.4		—		13.0		27.0		131.8		94.3		23.7
Total	$	462.0	$	11.3	$	20.2	$	19.5	$	5.0	$	46.0	$	—	$	39.4	$	27.0	$	131.8	$	127.1	$	34.7

Non-agency Residential Mortgage-backed Securities

The classification of the underlying collateral quality and the tranche levels of White Mountains’s non-agency RMBS securities are as follows as of March 31, 2014:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Prime	$	105.9	$	32.4	$	73.5	$	—
Non-prime	19.2		—		19.2		—
Sub-prime	7.2		7.2		—		—
Total	$	132.3	$	39.6	$	92.7	$	—

⁽¹⁾At issuance, Super Senior, or in the case of resecuritization, the underlying securities, 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, or in the case of resecuritization, the underlying securities, 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-backed Securities

The amount of fixed and floating rate securities and their tranche levels of White Mountains’s non-agency CMBS securities are as follows as of March 31, 2014:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Fixed rate CMBS	$	225.1	$	123.5	$	76.0	$	25.6
Floating rate CMBS	104.6		5.0		26.4		73.2
Total	$	329.7	$	128.5	$	102.4	$	98.8

⁽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 Measurements by Level

White Mountains uses quoted market prices where available as the inputs to estimate fair value for its investments in active markets. Such measurements are considered to be either Level 1 or Level 2 measurements, depending on whether the quoted market price inputs are for identical securities (Level 1) or similar securities (Level 2). Level 3 measurements for fixed maturity investments, common equity securities, convertible fixed maturity investments and other long-term investments at March 31, 2014 and 2013 consist of securities for which the estimated fair value has not been determined based upon quoted market price inputs for identical or similar securities.

The following tables summarize the changes in White Mountains’s fair value measurements by level for the three months ended March 31, 2014 and 2013:



							Level 3 Investments
Millions	Level 1 Investments			Level 2 Investments			Fixed Maturities			Common equity securities		Convertible fixed maturities		Other long-term investments			Total
Balance at January 1, 2014	$	1,376.7		$	4,982.2		$	93.0		$	46.1	$	6.1	$	262.4		$	6,766.5		^(1)(2)(3)
Total realized and unrealized gains (losses)	22.2			34.7			.4			.8		—		6.3			64.4			⁽⁴⁾
Foreign currency losses through OCI	(2.9		)	(10.5		)	(.1		)	—		—		(.3		)	(13.8		)
Amortization/Accretion	(.2		)	(11.1		)	—			—		—		—			(11.3		)
Purchases	352.6			840.4			19.6			.3		—		12.7			1,225.6
Sales	(180.1		)	(1,115.5		)	—			—		—		(3.7		)	(1,299.3		)
Net change in investments related to (sales) purchases of consolidated affiliates	(2.7		)	7.3			—			—		—		—			4.6
Transfers in	—			—			—			—		—		—			—
Transfers out	—			—			—			—		—		—			—
Balance at March 31, 2014	$	1,565.6		$	4,727.5		$	112.9		$	47.2	$	6.1	$	277.4		$	6,736.7		^(1)(2)(3)(4)

⁽¹⁾Excludes carrying value of $26.6 and $25.0 at January 1, 2014 and March 31, 2014 associated with other long-term investments accounted for using the equity method and $(0.1) and $(0.1) at January 1, 2014 and March 31, 2014 related to forward contracts.

⁽²⁾Carrying value includes $236.3 and $222.2 at January 1, 2014 and March 31, 2014 that is classified as assets held for sale relating to discontinued operations.

⁽³⁾Excludes carrying value of $635.9 and $674.0 at January 1, 2014 and March 31, 2014 associated with short-term investments.

⁽⁴⁾Excludes $0.7 realized and unrealized gains associated with the Prospector Funds consolidation of investment-related liabilities and $1.2 realized and unrealized losses associated with other long-term investments accounted for using the equity method.



							Level 3 Investments
Millions	Level 1Investments			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)(3)
Total realized and unrealized gains (losses)	80.1			(10.8		)	.1		(.1		)	—		5.8			75.1			⁽³⁾
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 (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)(3)

⁽¹⁾Excludes carrying value of $35.0 and $34.9 at January 1, 2013 and March 31, 2013 associated with other long-term investment limited partnerships 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 loss for the period of $0.1 associated with short-term investments.

Fair Value Measurements — transfers between levels - Three-month period ended March 31, 2014 and 2013

During the first three months of 2014 and 2013, no fixed income securities classified as Level 3 measurements in the prior

period were recategorized as Level 2 measurements.

Significant Unobservable Inputs

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. 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, 2014
Description	Fair Value	Rating⁽²⁾	Valuation Technique(s)	Unobservable Input
Non-agency commercial mortgage backed securities⁽¹⁾	$13.3	AAA	Discounted cash flow	Discount Spread over Swap	0.8%
				Prepayment rate	0.0%	CPY
				Default rate	0.0%	CDR
Asset-backed securities⁽¹⁾	$22.0	AA+	Broker pricing	Broker quote
Non-agency commercial mortgage backed securities⁽¹⁾	$6.3	BBB-	Broker pricing	Broker quote
Preferred stock⁽¹⁾	$71.3	NR	Discounted cash flow	Discount yield	6.9%
Private equity security⁽¹⁾	$36.4	NR	Multiple of GAAP book value	Book value multiple	1.0
Private equity security⁽¹⁾	$10.5	NR	Share price of recent transaction	Average share price	$1.10
Convertible preferred securities	$6.1	NR	Share price of recent transaction	Recent market transaction	$6.1

⁽¹⁾As of March 31, 2014, consists of one security.

⁽²⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.



($ in Millions)	December 31, 2013
Description	Fair Value	Rating⁽²⁾	Valuation Technique(s)	Unobservable Input
Asset-backed securities⁽¹⁾	$22.0	AA+	Broker pricing	Broker quote
Preferred stock⁽¹⁾	$71.0	NR	Discounted cash flow	Discount yield	7.4%
Private equity security⁽¹⁾	$35.6	NR	Multiple of GAAP book value	Book value multiple	1.0
Private equity security⁽¹⁾	$10.5	NR	Share price of recent transaction	Average share price	$1.10
Convertible preferred securities	$6.1	NR	Share price of recent transaction	Recent market transaction	$6.1

⁽¹⁾As of December 31, 2013, consists of one security.

⁽²⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.

The assumed prepayment rate is a significant unobservable input used to estimate the fair value of investments in non-agency CMBS. Generally for bonds priced at a premium, increases in prepayment speeds will result in a lower fair value, while decreases in prepayment speed may result in a higher fair value, with the inverse for bonds priced at a discount.