XML 49 R28.htm IDEA: XBRL DOCUMENT v2.4.0.8
Derivatives (Tables)
 6 Months Ended
Jun. 30, 2014
Interest Rate Cap
  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Fair Value of Assets and Liabilities Measured on Recurring and Non-recurring Basis Table
The following tables summarize the changes in the fair value of the Interest Rate Cap for the three and six months ended June 30, 2014:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2014
 
2014
Beginning of period
 
$
8.2

 
$
11.1

    Net realized and unrealized losses
 
(2.0
)
 
(4.9
)
End of period
 
$
6.2

 
$
6.2
Assets Held under Derivative Agreement
The following table summarizes the Interest Rate Cap collateral balances held by White Mountains and ratings by counterparty:
 
 
June 30, 2014
Millions
 
Collateral Balances Held
 
Standard & Poor’s
 Rating(1)
Barclays Bank Plc
 
$
4.3

 
A
Nordea Bank Finland Plc
 
2.0

 
AA-
   Total
 
$
6.3

 
 
(1) Standard & Poor’s ratings as detailed above are: “AA-” (Very Strong, which is the fourth highest of twenty-one creditworthiness ratings) and “A” (Strong, which is the sixth highest of twenty-one creditworthiness ratings).
Variable Annuity
  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Pre-tax operating results of WM Life Re
The following table summarizes the pre-tax operating results of WM Life Re for the three and six months ended June 30, 2014 and 2013.
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
Millions
 
2014
 
2013
 
2014
 
2013
Fees, included in other revenue
 
$
5.1

 
$
6.2

 
$
10.5

 
$
13.0

Change in fair value of variable annuity liability,
   included in other revenue
 
22.0

 
55.9

 
20.7

 
240.2

Change in fair value of derivatives, included in other revenue
 
(26.2
)
 
(63.5
)
 
(32.7
)
 
(245.3
)
Foreign exchange, included in other revenue
 
.2

 
.1

 
.5

 
(14.5
)
Other investment income and gains (losses)
 
.2

 
(1.5
)
 
.5

 
(5.5
)
Total revenue
 
1.3

 
(2.8
)
 
(.5
)
 
(12.1
)
Change in fair value of variable annuity death benefit liabilities,
   included in other general and administrative expenses
 
.3

 
1.6

 
.3

 
7.2

Death benefit claims paid, included in general and
   administrative expenses
 
(.1
)
 
(.3
)
 
(.1
)
 
(1.4
)
General and administrative expenses
 
(1.0
)
 
(1.1
)
 
(2.4
)
 
(2.8
)
Pre-tax gain (loss)
 
$
.5

 
$
(2.6
)
 
$
(2.7
)
 
$
(9.1
)
Realized and unrealized derivative gains (losses) recognized in other revenues and carrying values, by the type of instrument
The following summarizes realized and unrealized derivative gains (losses) recognized in other revenue for the three and six months ended June 30, 2014 and 2013 and the carrying values, included in other assets, at June 30, 2014 and December 31, 2013 by type of instrument:
 
 
Gains (losses)
 
Carrying Value
 
 
Three Months Ended
 
Six Months Ended
 
As of
 
 
June 30,
 
June 30,
 
June 30,
2014
 
December 31, 2013
Millions
 
2014
 
2013
 
2014
 
2013
 
 
Fixed income/interest rate
 
$
(5.6
)
 
$
(8.5
)
 
$
(12.0
)
 
$
(39.3
)
 
$
(3.3
)
 
$
(9.7
)
Foreign exchange
 
(6.4
)
 
(22.0
)
 
(12.9
)
 
(75.6
)
 
58.2

 
58.0

Equity
 
(14.2
)
 
(33.0
)
 
(7.8
)
 
(130.4
)
 
19.9

 
20.9

Total
 
$
(26.2
)
 
$
(63.5
)
 
$
(32.7
)
 
$
(245.3
)
 
$
74.8

 
$
69.2
Fair Value of Assets and Liabilities Measured on Recurring and Non-recurring Basis Table
The following tables summarize the changes in White Mountains’s variable annuity reinsurance liabilities and derivative instruments for the three and six months ended June 30, 2014 and 2013:
 
 
Three Months Ended June 30, 2014
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3 (1)
 
Level 2 (1)(2)
 
Level 1 (3)
 
Total
Beginning of period
 
$
(54.1
)
 
$
64.1

 
$
25.1

 
$
.4

 
$
89.6

Purchases
 
—

 
—

 
—

 
—

 
—

Realized and unrealized (losses) gains
 
22.3

(4) 
(10.6
)
 
(15.5
)
 
(.1
)
 
(26.2
)
Transfers in
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(.2
)
 
12.7

 
(1.1
)
 
11.4

End of period
 
$
(31.8
)
 
$
53.3

 
$
22.3

 
$
(.8
)
 
$
74.8



 
 
Six Months Ended June 30, 2014
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3 (1)
 
Level 2 (1)(2)
 
Level 1 (3)
 
Total
Beginning of period
 
$
(52.8
)
 
$
63.4

 
$
4.7

 
$
1.1

 
$
69.2

Purchases
 
—

 
—

 
—

 
—

 
—

Realized and unrealized (losses) gains
 
21.0

(4) 
(9.9
)
 
(22.5
)
 
(.3
)
 
(32.7
)
Transfers in
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
(.2
)
 
40.1

 
(1.6
)
 
38.3

End of period
 
$
(31.8
)
 
$
53.3

 
$
22.3

 
$
(.8
)
 
$
74.8

 
 
Three Months Ended June 30, 2013
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3 (1)
 
Level 2 (1)(2)
 
Level 1 (3)
 
Total
Beginning of period
 
$
(251.6
)
 
$
127.4

 
$
(42.9
)
 
$
(8.7
)
 
$
75.8

Purchases
 
—

 
23.3

 
—

 
—

 
23.3

Realized and unrealized gains (losses)
 
57.5

(4) 
(24.2
)
 
(30.6
)
 
(8.7
)
 
(63.5
)
Transfers in
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
—

 
91.7

 
14.0

 
105.7

End of period
 
$
(194.1
)
 
$
126.5

 
$
18.2

 
$
(3.4
)
 
$
141.3


 
 
Six Months Ended June 30, 2013
 
 
Variable Annuity
(Liabilities)
 
Derivative Instruments
Millions
 
Level 3
 
Level 3 (1)
 
Level 2 (1)(2)
 
Level 1 (3)
 
Total
Beginning of period
 
$
(441.5
)
 
$
140.5

 
$
(20.5
)
 
$
(21.7
)
 
$
98.3

Purchases
 
—

 
59.4

 
—

 
—

 
59.4

Realized and unrealized gains (losses)
 
247.4

(4) 
(73.4
)
 
(116.0
)
 
(55.9
)
 
(245.3
)
Transfers in
 
—

 
—

 
—

 
—

 
—

Sales/settlements
 
—

 
—

 
154.7

 
74.2

 
228.9

End of period
 
$
(194.1
)
 
$
126.5

 
$
18.2

 
$
(3.4
)
 
$
141.3

(1) Consists of over-the-counter instruments.
(2) Consists of interest rate swaps, total return swaps, foreign currency forward contracts, and bond forwards. Fair value measurement based upon bid/ask pricing quotes for similar instruments that are actively traded, where available.  Swaps for which an active market does not exist have been priced using observable inputs including the swap curve and the underlying bond index.
(3) Consists of exchange traded equity index, foreign currency and interest rate futures. Fair value measurements based upon quoted prices for identical instruments that are actively traded.
(4) Includes $0.3 and $0.3 for the three and six months ended June 30, 2014 and $1.6 and $7.2 for the three and six months ended June 30, 2013 related to the change in the fair value of variable annuity death benefit liabilities, which are included in general and administrative expenses
Assets Held under Reinsurance Counterparty Trust Agreement
In addition to derivative instruments, WM Life Re held cash, short-term and fixed maturity investments posted as collateral to its variable annuity reinsurance hedging counterparties.  The total collateral includes the following:
Millions
 
June 30, 2014
 
December 31, 2013
 
June 30, 2013
Cash
 
$
27.8

 
$
56.1

 
$
61.2

Short-term investments
 
—

 
2.0

 
35.1

Fixed maturity investments
 
14.5

 
23.2

 
24.3

Total
 
$
42.3

 
$
81.3

 
$
120.6
Schedule of significant unobservable inputs associated with the fair value estimates for variable annuity reinsurance liabilities and derivative instruments
The following summarizes quantitative information about significant unobservable inputs associated with the fair value estimates for variable annuity reinsurance liabilities and derivative instruments that have been classified as Level 3 measurements:
 ($ in Millions)
 
June 30, 2014
Description
 
Fair 
Value
 
Valuation Technique(s)
 
Unobservable Input
 
Range
 
Weighted
Average
Variable annuity benefit guarantee liabilities
 
$
31.8

 
Discounted cash flows
 
Surrenders
 
 
 
 
 
 
 
 
 
 
     1 year
 
0.2
 %
-
32.0%
 
26.0
%
 
 
 
 
     2 year
 
0.1
 %
-
14.0%
 
7.2
%
 

 
 
 
Mortality
 
0.0
 %
-
5.9%
 
1.0
%
 

 
 
 
Foreign exchange volatilities
 
 
 
 
 
 
 
 
 
 
 
 
     1 year
 
8.4
 %
-
10.5%
 
8.9
%
 
 
 
 
 
 
     2 year
 
10.0
 %
-
11.8%
 
10.5
%
 
 
 
 
 
 
Index volatilities
 
 
 
 
 
 
 
 
 
 
 
 
     1 year
 
15.4
 %
-
18.4%
 
17.0
%
 
 
 
 
 
 
     2 year
 
16.9
 %
-
19.7%
 
18.2
%
Foreign exchange options
 
$
28.0

 
Counterparty valuations, adjusted for unwind quote discount
 
Adjustment to counterparty valuations
 
(1.2
)%
-
8.0%
 
2.5
%
 

 
 
 
 
 
 
 
Equity index options
$
25.3

 
Counterparty valuations, adjusted for unwind quote discount
 
Adjustment to counterparty valuations
 
0.5
 %
-
9.7%
 
3.4
%
 
 
 
 
 
 
 
 
 
Exchange traded and OTC derivative instruments
The following summarizes amounts offset under master netting agreements:
 
 
June 30, 2014
 
December 31, 2013
Millions
 
Gross asset amounts before offsets(1)
 
Gross liability amounts offset under master netting arrangements
 
Net amounts recognized in Other Assets
 
Gross asset amounts before offsets(1)
 
Gross liability amounts offset under master netting arrangements
 
Net amounts recognized in Other Assets
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
 
OTC
 
$
.1

 
$
(4.2
)
 
$
(4.1
)
 
$
2.4

 
$
(11.7
)
 
$
(9.3
)
Exchange traded
 
1.2

 
(.4
)
 
.8

 
1.0

 
(1.6
)
 
(.6
)
Foreign exchange contracts
 
 
 
 
 
 
 
 
 
 
 
 
OTC
 
59.2

 
—

 
59.2

 
67.8

 
(12.0
)
 
55.8

Exchange traded
 
.7

 
(1.7
)
 
(1.0
)
 
2.3

 
—

 
2.3

Equity contracts
 
 
 
 
 
 
 
 
 
 
 
 
OTC
 
25.2

 
(4.7
)
 
20.5

 
30.7

 
(9.2
)
 
21.5

Exchange traded
 
.4

 
(1.0
)
 
(.6
)
 
1.8

 
(2.3
)
 
(.5
)
Total(2)
 
$
86.8

 
$
(12.0
)
 
$
74.8

 
$
106.0

 
$
(36.8
)
 
$
69.2

(1) Amount equal to fair value of instrument as recognized in other assets
(2) All derivative instruments held by WM Life Re are subject to master netting arrangements.
Net exposure to collateral
The following summarizes the value, collateral held or provided by WM Life Re and net exposure to credit losses on OTC and exchange traded derivative instruments by counterparty recorded within other assets:
 
 
June 30, 2014
Millions
 
Net amount of assets reflected in Balance Sheet
 
Collateral provided to counterparty - Cash
 
Collateral provided to counter-party - Financial Instruments
 
Net amount of exposure after effect of collateral provided
 
Excess collateral provided to counter-party- Cash
 
Excess collateral provided - Financial Instruments
 
Counter-party collateral held by WMLife Re - Cash
 
Net amount of exposure to counter-party
 
Standard
& Poor's
Rating(1)
Bank of America
 
$
24.9

 
$
—

 
$
—

 
$
24.9

 
$
—

 
$
—

 
$
—

 
$
24.9

 
A
 
Barclays
 
.9

 
—

 
—

 
.9

 
—

 
—

 
—

 
.9

 
A
 
JP Morgan
 
23.4

 
—

 
—

 
23.4

 
2.3

 
—

 
—

 
25.7

 
A
+
Royal Bank
   of Scotland
 
10.7

 
—

 
—

 
10.7

 
—

 
—

 
—

 
10.7

 
A
-
Nomura
 
(1.6
)
 
1.6

 
—

 
—

 
4.5

 
14.5

 
—

 
19.0

 
BBB
+
Citigroup - OTC
 
17.4

 
—

 
—

 
17.4

 
6.1

 
—

 
—

 
23.5

 
A
 
Citigroup -
  Exchange Traded
 
(.9
)
 
.9

 
—

 
—

 
12.3

 
—

 
—

 
12.3

 
A
 
   Total
 
$
74.8

 
$
2.5

 
$
—

 
$
77.3

 
$
25.2

 
$
14.5

 
$
—

 
$
117.0

 
 
 

 
 
December 31, 2013
 
Millions
 
Net amount of assets reflected in Balance Sheet
 
Collateral provided to counter-party - Cash
 
Collateral provided to counter-party - Financial Instruments
 
Net amount of exposure after effect of collateral provided
 
Excess collateral provided to counter-party- Cash
 
Excess collateral provided - Financial Instruments
 
Counter-party collateral held by WMLife Re- Cash
 
Net amount of exposure to counter-party
 
Standard
& Poor's
Rating(1)
Bank of America
 
$
27.2

 
$
—

 
—

 
$
27.2

 
$
—

 
$
—

 
$
—

 
$
27.2

 
A
 
Barclays
 
1.4

 
—

 
—

 
1.4

 
—

 
—

 
—

 
1.4

 
A
+
JP Morgan
 
9.1

 
—

 
—

 
9.1

 
22.0

 
—

 
—

 
31.1

 
A
+
Royal Bank
   of Scotland
 
11.3

 
—

 
—

 
11.3

 
—

 
—

 
—

 
11.3

 
A
 
Nomura
 
(.4
)
 
—

 
.4

 
—

 
—

 
22.8

 
(.8
)
 
22.0

 
BBB
+
Citigroup - OTC
 
19.4

 
—

 
—

 
19.4

 
2.3

 
—

 
—

 
21.7

 
A
 
Citigroup -
   Exchange Traded
 
1.2

 
—

 
—

 
1.2

 
19.8

 
—

 
—

 
21.0

 
A
 
   Total
 
$
69.2

 
$
—

 
$
0.4

 
$
69.6

 
$
44.1

 
$
22.8

 
$
(.8
)
 
$
135.7

 
 
 
(1) Standard & Poor’s ratings as detailed above are: “A+” (Strong, which is the fifth highest of twenty-one creditworthiness ratings), “A” (Strong, which is the sixth highest of twenty-one creditworthiness ratings), “A-” (Strong, which is the seventh highest of twenty-one creditworthiness ratings) and
“BBB+” (Adequate, which is the eighth highest of twenty-one creditworthiness ratings).
Forward Contracts
  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Schedule of uncollateralized amounts due
The following table summarizes the notional amounts and uncollateralized balances associated with forward currency contracts:
 
 
June 30, 2014
 
December 31, 2013
Millions
 
Notional Amount
 
Carrying Value
 
Standard & Poor's
 Rating(1)
 
Notional Amount
 
Carrying Value
Barclays Bank Plc
 
$
2.0

 
$
.1

 
A
 
$
5.8

 
$
—

Deutsche Bank
 
1.7

 
—

 
A
 
7.7

 
—

Goldman Sachs
 
1.7

 
—

 
A-
 
2.1

 
—

HSBC Bank Plc
 
.7

 
—

 
AA-
 
3.3

 
(.1
)
JP Morgan
 
.9

 
—

 
A+
 
1.3

 
—

Royal Bank of Canada
 
—

 
—

 
AA-
 
.2

 
—

   Total
 
$
7.0

 
$
.1

 
 
 
$
20.4

 
$
(.1
)
(1) Standard & Poor's ratings as detailed above are: “AA-” (Very Strong, which is the sixth highest of twenty-one creditworthiness ratings), “A+” (Strong, which is the seventh highest of twenty-one creditworthiness ratings) and “A-” (Strong, which is the ninth highest of twenty-one creditworthiness ratings).