~~0000776867 wtm:NSMInsuranceGroupMember wtm:NSMBankFacilityMember wtm:TermLoanMember 2019-07-01 2019-09-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended ~~September 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8993

~~1-8993~~

WHITE MOUNTAINS INSURANCE GROUP, ~~LTD~~.LTD.

(Exact name of Registrant as specified in its charter)



Bermuda
(State or other jurisdiction of incorporation or organization)						94-2708455
23 South Main Street, Suite 3B						(I.R.S. Employer Identification No.)
Hanover,						03755-2053
New Hampshire						(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (~~603~~) (603) 640-2200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, par value $1.00

WTM

New York Stock Exchange

per share

Bermuda Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~November 5, 2020, 3,102,011~~May 7, 2021, 3,107,267 common shares with a par value of ~~$1.00~~$1.00 per share were outstanding (which includes ~~43,105~~37,805 restricted common shares that were not vested at such date).

WHITE MOUNTAINS INSURANCE GROUP, LTD.

Table of Contents


				Page No.

PART I.			FINANCIAL INFORMATION

Item 1.			Financial Statements (Unaudited)

			Consolidated Balance Sheets, March 31, 2021 and December 31, 2020	1

			Consolidated Statements of Operations and Comprehensive Income,
			Three Months Ended March 31, 2021 and 2020	3

			Consolidated Statements of Changes in Equity,	6
			Three Months Ended March 31, 2021 and 2020

				~~Page No.~~

~~PART I.~~	~~FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements (Unaudited)~~

	~~Consolidated Balance Sheets, September 30, 2020 and December 31, 2019~~	1

	~~Consolidated Statements of Operations and Comprehensive Income,~~
	~~Three and Nine Months Ended September 30, 2020 and 2019~~	3

	~~Consolidated Statements of Changes in Equity,~~	6
	~~Three and Nine Months Ended September 30, 2020 and 2019~~

	Consolidated Statements of Cash Flows, ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	87

			Notes to Consolidated Financial Statements	98

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	49

			Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	49

			Liquidity and Capital Resources	7269

			Non-GAAP Financial Measures	7875

			Critical Accounting Estimates	8177

			Forward-Looking Statements	8681

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	8681

Item 4.			Controls and Procedures	8782

PART II.			OTHER INFORMATION	8782

Items 1 through 6.				8782

SIGNATURES				8883

Part I.FINANCIAL INFORMATION.


~~Item 1.~~	~~Financial Statements~~

Item 1.Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS


	March 31, 2021		December 31, 2020
Millions, except share and per share amounts
Assets	Unaudited
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	857.0	$	859.5
Short-term investments, at fair value	45.3		60.4
Total investments	902.3		919.9
Cash	18.9		42.8
Insurance premiums receivable	6.9		6.9
Deferred acquisition costs	28.7		27.8
Accrued investment income	5.2		5.0

Other assets	14.8		15.4
Total Financial Guarantee assets	976.8		1,017.8
P&C Insurance and Reinsurance (Ark)
Fixed maturity investments, at fair value	305.8		0
Common equity securities, at fair value	118.6		0
Short-term investments, at fair value	328.6		0
Other long-term investments	234.7		0
Total investments	987.7		0
Cash	308.8		0
Reinsurance recoverables	449.0		0
Insurance premiums receivable	435.4		0
Ceded unearned premiums	145.5		0
Deferred acquisition cost	79.2		0
Value of in-force business acquired	42.9		0
Goodwill and other intangible assets	292.5		0
Other assets	99.2		0
Total P&C Insurance and Reinsurance assets	2,840.2		0
Specialty Insurance Distribution (NSM)

Cash (restricted $79.3 and $78.4)	121.0		126.5
Premiums and commissions receivable	77.0		76.7
Goodwill and other intangible assets	699.7		736.8
Other assets	65.0		59.6
Total Specialty Insurance Distribution assets	962.7		999.6
Asset Management (Kudu)
Short-term investments, at fair value	.1		.1
Other long-term investments	427.4		400.6
Total investments	427.5		400.7
Cash (restricted $3.9 and $0.0)	10.9		7.8
Accrued investment income	7.5		9.8
Goodwill and other intangible assets	9.1		9.2
Other assets	2.7		2.7
Total Asset Management assets	457.7		430.2







Other Operations
Fixed maturity investments, at fair value	318.8		347.7
Short-term investments, at fair value	251.8		82.4

Investment in MediaAlpha, at fair value	600.2		802.2
Other long-term investments	370.1		386.2
Total investments	1,540.9		1,618.5
Cash	28.9		34.1
Cash pre-funded/placed in escrow for Ark Transaction	0		646.3
Accrued investment income	3.9		2.4
Accounts receivable on unsettled investment sales	3.5		3.4
Goodwill and other intangible assets	35.7		36.4
Other assets	49.7		40.4
Assets held for sale	.7		2.3
Total Other Operations assets	1,663.3		2,383.8
Total assets	$	6,900.7	$	4,831.4

See Notes to Consolidated Financial Statements

September 30, 2020 December 31, 2019
Millions, except share and per share amounts
Assets Unaudited
Financial Guarantee (HG Global/BAM)
     Fixed maturity investments, at fair value $ 831.8
$ 799.3
     Short-term investments, at fair value 56.1
46.3
     Total investments 887.9
845.6
     Cash 49.9
24.2
     Insurance premiums receivable 7.2
6.7
     Deferred acquisition costs 26.1
22.1
     Accrued investment income 5.2
5.4
     Accounts receivable on unsettled investment sales 0
3.9
     Other assets 15.0
16.1
     Total Financial Guarantee assets 991.3
924.0

Specialty Insurance Distribution (NSM)
     Cash (restricted $82.9 and $56.3) 125.0
89.7
Premiums and commissions receivable 67.7
70.8
     Goodwill and other intangible assets 730.3
623.0
     Other assets 57.2
41.7
Total Specialty Insurance Distribution assets 980.2
825.2

Asset Management (Kudu)
     Short-term investments, at fair value .1
.1
     Other long-term investments 325.5
266.5
Total investments 325.6
266.6
     Cash 8.4
5.8
     Accrued investment income 6.2
5.8
     Goodwill and other intangible assets 9.3
9.6
     Other assets 2.4
2.7
Total Asset Management assets 351.9
290.5

Other Operations
     Fixed maturity investments, at fair value 389.7
406.5
     Short-term investments, at fair value 515.6
154.8
     Common equity securities, at fair value 140.7
683.9
     Other long-term investments 845.7
589.8
     Total investments 1,891.7
1,835.0
     Cash 31.5
41.3
     Accrued investment income 2.8
5.7
     Accounts receivable on unsettled investment sales 54.7
5.1
     Goodwill and other intangible assets 36.7
22.1
     Other assets 41.9
31.3
     Assets held for sale .7
3.0
     Total Other Operations assets 2,060.0
1,943.5
Total assets $ 4,383.4
$ 3,983.2

CONSOLIDATED BALANCE SHEETS (CONTINUED)


	March 31, 2021		December 31, 2020
Millions, except share and per share amounts
Liabilities	Unaudited
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	243.7	$	237.5
Accrued incentive compensation	11.0		25.7

Other liabilities	28.6		28.3
Total Financial Guarantee liabilities	283.3		291.5
P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expense reserves	751.9		0
Unearned insurance premiums	565.4		0
Debt	44.1		0
Reinsurance payable	487.5		0
Contingent consideration related to the Ark Transaction	22.5		0
Accounts payable on unsettled investment purchases	61.6		0
Other liabilities	73.8		0
Total P&C Insurance and Reinsurance liabilities	2,006.8		0
Specialty Insurance Distribution (NSM)
Debt	272.7		272.6

Premiums payable	116.0		113.4

Contingent consideration earnout liabilities	7.9		14.6

Other liabilities	83.5		91.2
Total Specialty Insurance Distribution liabilities	480.1		491.8
Asset Management (Kudu)


Debt	95.9		86.3

Other liabilities	15.4		10.0
Total Asset Management liabilities	111.3		96.3







Other Operations
Debt	17.0		17.5

Accrued incentive compensation	40.4		70.1

Other liabilities	25.9		46.3

Total Other Operations liabilities	83.3		133.9
Total liabilities	2,964.8		1,013.5
Equity
White Mountains’s common shareholders’ equity
White Mountains’s common shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 3,107,267 and 3,102,011 shares and paid-in surplus	3.1		3.1
Paid-in surplus	594.8		592.1
Retained earnings	3,226.7		3,311.2
Accumulated other comprehensive gain (loss), after-tax:
Net unrealized foreign currency translation and interest rate swap gains (losses)	1.3		(.4)

Total White Mountains’s common shareholders’ equity	3,825.9		3,906.0
Non-controlling interests	110.0		(88.1)
Total equity	3,935.9		3,817.9
Total liabilities and equity	$	6,900.7	$	4,831.4

See Notes to Consolidated Financial Statements

~~CONSOLIDATED BALANCE SHEETS (CONTINUED)~~

September 30, 2020 December 31, 2019
Millions, except share and per share amounts
Liabilities Unaudited
Financial Guarantee (HG Global/BAM)
     Unearned insurance premiums $ 226.9
$ 198.4
     Accrued incentive compensation 19.4
21.7
     Accounts payable on unsettled investment purchases 6.4
0
     Other liabilities 27.8
26.7
     Total Financial Guarantee liabilities 280.5
246.8

Specialty Insurance Distribution (NSM)
Debt 270.2
219.2
Premiums payable 116.9
102.3
Contingent consideration earnout liabilities 11.8
20.6
     Other liabilities 77.5
59.0
Total Specialty Insurance Distribution liabilities 476.4
401.1

Asset Management (Kudu)
Debt 71.0
53.6
     Other liabilities 10.2
3.4
     Total Asset Management liabilities 81.2
57.0

Other Operations
Debt 18.2
10.7
Accrued incentive compensation 41.9
55.1
Other liabilities 176.0
67.8
Total Other Operations liabilities 236.1
133.6
Total liabilities 1,074.2
838.5

Equity
White Mountains’s common shareholders’ equity
White Mountains’s common shares at $1 par value per share—authorized 50,000,000
shares; issued and outstanding 3,102,011 and 3,185,353 shares and paid-in surplus 592.1
596.3
Paid-in surplus
Retained earnings 2,822.1
2,672.4
Accumulated other comprehensive loss, after-tax:
Net unrealized foreign currency translation and interest rate swap losses (6.5 ) (7.2 )
     Total White Mountains’s common shareholders’ equity 3,407.7
3,261.5
Non-controlling interests (98.5 ) (116.8 )
Total equity 3,309.2
3,144.7
Total liabilities and equity $ 4,383.4
$ 3,983.2

~~See Notes to Consolidated Financial Statements~~

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
Millions		2021		2020
Revenues:
Financial Guarantee (HG Global/BAM)
Earned insurance premiums		$	6.4	$	5.4
Net investment income		4.5		5.5
Net realized and unrealized investment (losses) gains		(17.9)		6.1
Other revenues		.3		.5
Total Financial Guarantee revenues		(6.7)		17.5

P&C Insurance and Reinsurance (Ark)
Earned insurance premiums		104.6		0
Net investment income		.8		0
Net realized and unrealized investment gains		1.1		0
Other revenues		2.6		0
Total P&C Insurance and Reinsurance revenues		109.1		0

Specialty Insurance Distribution (NSM)
Commission revenues		59.6		53.0

Other revenues		15.2		12.0
Total Specialty Insurance Distribution revenues		74.8		65.0

Asset Management (Kudu)
Net investment income		8.2		7.3
Net realized and unrealized investment gains (losses)		15.8		(24.8)
Other revenues		.1		.1
Total Asset Management revenues		24.1		(17.4)






Other Operations

Net investment income		7.1		10.1
Net realized and unrealized investment gains (losses)		2.1		(168.0)
Net realized and unrealized investment (losses) gains from investment in MediaAlpha		(41.7)		30.0
Commission revenues		2.3		2.1
Other revenues		7.1		1.5
Total Other Operations revenues		(23.1)		(124.3)
Total revenues		$	178.2	$	(59.2)

Three Months Ended September 30, Nine Months Ended September 30,
Millions 2020 2019 2020 2019
Revenues:
Financial Guarantee (HG Global/BAM)
   Earned insurance premiums $ 6.2
$ 5.2
$ 17.2
$ 13.7
   Net investment income 4.7
5.4
15.1
16.1
   Net realized and unrealized investment gains 3.2
7.1
23.7
30.4
   Other revenues .4
.3
2.1
1.3
Total Financial Guarantee revenues 14.5
18.0
58.1
61.5

Specialty Insurance Distribution (NSM)
Commission revenues 58.2
49.4
174.2
147.6
Other revenues 12.5
10.5
37.6
27.7
Total Specialty Insurance Distribution revenues 70.7
59.9
211.8
175.3

Asset Management (Kudu)
Net investment income 6.4
4.6
19.3
8.6
Net realized and unrealized investment gains 9.8
2.7
1.5
3.1
Other revenues .1
.2
.2
.2
Total Asset Management revenues 16.3
7.5
21.0
11.9

Marketing Technology (MediaAlpha)
   Advertising and commission revenues 0
0
0
48.8
Total Marketing Technology revenues 0
0
0
48.8

Other Operations
   Net investment income 60.1
8.4
79.3
30.7
   Net realized and unrealized investment gains 293.6
57.2
277.6
199.6
Realized gain and unrealized investment gain from the
   MediaAlpha Transaction
0
0
0
182.2
   Advertising and commission revenues 2.1
1.9
6.1
4.5
   Other revenues 2.2
2.6
6.0
3.6
Total Other Operations revenues 358.0
70.1
369.0
420.6
Total revenues $ 459.5
$ 155.5
$ 659.9
$ 718.1

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
Millions	2020			2019			2020			2019			Millions		2021		2020
Expenses:													Expenses:
Financial Guarantee (HG Global/BAM)													Financial Guarantee (HG Global/BAM)
Insurance acquisition expenses	$	1.6		$	1.4		$	5.4		$	4.1		Insurance acquisition expenses		$	1.9	$	1.7

General and administrative expenses													General and administrative expenses		16.4		14.7
Total Financial Guarantee expenses													Total Financial Guarantee expenses		18.3		16.4

P&C Insurance and Reinsurance (Ark)													P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expenses													Loss and loss adjustment expenses		66.0		0
Insurance and reinsurance acquisition expenses													Insurance and reinsurance acquisition expenses		36.7		0
Other underwriting expenses	.1			.1			.3			.3			Other underwriting expenses		11.2		0
General and administrative expenses	13.9			12.5			41.1			39.1			General and administrative expenses		26.6		0
Total Financial Guarantee expenses	15.6			14.0			46.8			43.5
Interest expense													Interest expense		1.1		0
Total P&C Insurance and Reinsurance expenses													Total P&C Insurance and Reinsurance expenses		141.6		0

Specialty Insurance Distribution (NSM)													Specialty Insurance Distribution (NSM)
General and administrative expenses	42.9			33.3			131.0			91.4			General and administrative expenses		46.0		39.6
Broker commission expenses	17.1			15.3			56.4			48.9			Broker commission expenses		18.9		18.3
Change in fair value of contingent consideration earnout liabilities	.7			(2.0		)	(1.6		)	5.6			Change in fair value of contingent consideration earnout liabilities		0		(.6)
Amortization of other intangible assets	5.1			4.4			16.2			13.5			Amortization of other intangible assets		8.6		4.8
Loss on assets held for sale													Loss on assets held for sale		28.7		0
Interest expense	6.1			4.4			16.1			12.2			Interest expense		5.9		4.3
Total Specialty Insurance Distribution expenses	71.9			55.4			218.1			171.6			Total Specialty Insurance Distribution expenses		108.1		66.4

Asset Management (Kudu)													Asset Management (Kudu)
General and administrative expenses	2.2			4.5			7.5			6.7			General and administrative expenses		2.5		2.5
Amortization of other intangible assets	.1			.2			.3			.2			Amortization of other intangible assets		.1		.1
Interest expense	1.4			0			4.3			0			Interest expense		5.8		1.4
Total Asset Management expenses	3.7			4.7			12.1			6.9			Total Asset Management expenses		8.4		4.0

Marketing Technology (MediaAlpha)
Cost of sales	0			0			0			40.6
General and administrative expenses	0			0			0			12.5
Amortization of other intangible assets	0			0			0			1.6
Interest expense	0			0			0			.2
Total Marketing Technology expenses	0			0			0			54.9


Other Operations													Other Operations

Cost of sales	2.3			2.3			6.5			5.0			Cost of sales		4.0		2.0
General and administrative expenses	44.3			27.7			87.1			87.2			General and administrative expenses		35.7		17.5
Amortization of other intangible assets	.2			0			.6			.1			Amortization of other intangible assets		.5		.2
Interest expense	.3			.3			.8			.3			Interest expense		.3		.3
Total Other Operations expenses	47.1			30.3			95.0			92.6			Total Other Operations expenses		40.5		20.0
Total expenses	138.3			104.4			372.0			369.5			Total expenses		316.9		106.8
Pre-tax income from continuing operations	321.2			51.1			287.9			348.6
Income tax expense	(98.5		)	(8.8		)	(97.1		)	(18.9		)
Net income from continuing operations	222.7			42.3			190.8			329.7
Net (loss) income from sale of discontinued operations, net of tax	(.7		)	.9			(.8		)	1.6
Net income	222.0			43.2			190.0			331.3
Pre-tax loss from continuing operations													Pre-tax loss from continuing operations		(138.7)		(166.0)
Income tax benefit													Income tax benefit		9.5		25.5
Net loss from continuing operations													Net loss from continuing operations		(129.2)		(140.5)
Net income from sale of discontinued operations, net of tax													Net income from sale of discontinued operations, net of tax		18.7		.9

Net loss													Net loss		(110.5)		(139.6)
Net loss attributable to non-controlling interests	10.9			5.5			29.5			22.3			Net loss attributable to non-controlling interests		35.2		10.8
Net income attributable to White Mountains’s common shareholders	$	232.9		$	48.7		$	219.5		$	353.6
Net loss attributable to White Mountains’s common shareholders													Net loss attributable to White Mountains’s common shareholders		$	(75.3)	$	(128.8)

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
Millions		2021		2020
Net loss attributable to White Mountains’s common shareholders		$	(75.3)	$	(128.8)

Other comprehensive income (loss), net of tax		1.8		(3.4)

Comprehensive loss		(73.5)		(132.2)
Other comprehensive income attributable to non-controlling interests		(.1)		0
Comprehensive loss attributable to White Mountains’s common shareholders		$	(73.6)	$	(132.2)

Three Months Ended September 30, Nine Months Ended September 30,
Millions 2020 2019 2020 2019
Net income attributable to White Mountains’s common
   shareholders
$ 232.9
$ 48.7
$ 219.5
$ 353.6
Other comprehensive income (loss), net of tax 3.9
(2.4 ) 1.0
(5.8 )
Comprehensive income 236.8
46.3
220.5
347.8
Other Comprehensive (income) loss attributable to
   non-controlling interests
(.1 ) .1
(.3 ) .3
Comprehensive income attributable to White
   Mountains’s common shareholders
$ 236.7
$ 46.4
$ 220.2
$ 348.1


Earnings (loss) per share attributable to White Mountains’s common shareholders:	Earnings (loss) per share attributable to White Mountains’s common shareholders:											Earnings (loss) per share attributable to White Mountains’s common shareholders:

Basic earnings (loss) per share
Basic (loss) earnings per share												Basic (loss) earnings per share
Continuing operations		$	75.32		$	15.01	$	70.40		$	110.67	Continuing operations	$	(30.33)	$	(40.82)
Discontinued operations		(.23		)	.28		(.26		)	.50		Discontinued operations	6.03		.28
Total consolidated operations		$	75.09		$	15.29	$	70.14		$	111.17	Total consolidated operations	$	(24.30)	$	(40.54)
Diluted earnings (loss) per share
Diluted (loss) earnings per share												Diluted (loss) earnings per share
Continuing operations		$	75.32		$	15.01	$	70.40		$	110.67	Continuing operations	$	(30.33)	$	(40.82)
Discontinued operations		(.23		)	.28		(.26		)	.50		Discontinued operations	6.03		.28
Total consolidated operations		$	75.09		$	15.29	$	70.14		$	111.17	Total consolidated operations	$	(24.30)	$	(40.54)
Dividends declared and paid per White Mountains’s common share		$	0		$	0	$	1.00		$	1.00	Dividends declared and paid per White Mountains’s common share	$	1.00	$	1.00

See Notes to Consolidated Financial Statements.

~~WHITE MOUNTAINS INSURANCE GROUP, LTD.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

~~(Unaudited)~~

White Mountains’s Common Shareholders’ Equity
Millions Common shares and paid-in surplus Retained earnings AOCI, after tax Total Non-controlling interest Total Equity
Balance at June 30, 2020 $ 587.0
$ 2,589.3
$ (10.3 ) $ 3,166.0
$ (102.7 ) $ 3,063.3
Net income (loss) —
232.9
—
232.9
(10.9 ) 222.0
Net change in foreign currency translation and other —
—
3.8
3.8
.2
4.0
Total comprehensive income (loss) —
232.9
3.8
236.7
(10.7 ) 226.0
Dividends to non-controlling interests —
—
—
—
(.9 ) (.9 )
Repurchases and retirements of common shares —
(.1 ) —
(.1 ) —
(.1 )
Issuances of common shares .2
—
—
.2
0
.2
Capital contributions from BAM members, net of tax —
—
—
—
15.4
15.4
Net contributions and dilution from other
non-controlling interests
.3
—
—
.3
(.4 ) (.1 )
Amortization of restricted share awards 3.6
—
—
3.6
—
3.6
Acquisition of non-controlling interests —
—
—
—
.8
.8
Recognition of equity-based compensation expense of subsidiary 1.0
—
—
1.0
—
1.0
Balance at September 30, 2020 $ 592.1
$ 2,822.1
$ (6.5 ) $ 3,407.7
$ (98.5 ) $ 3,309.2

White Mountains’s Common Shareholders’ Equity
Millions Common shares and paid-in surplus Retained earnings AOCI, after tax Total Non-controlling interest Total Equity
Balance at January 1, 2020 $ 596.3
$ 2,672.4
$ (7.2 ) $ 3,261.5
$ (116.8 ) $ 3,144.7
Net income (loss) —
219.5
—
219.5
(29.5 ) 190.0
Net change in foreign currency translation and other —
—
.7
.7
.3
1.0
Total comprehensive income (loss) —
219.5
.7
220.2
(29.2 ) 191.0
Dividends declared on common shares —
(3.2 ) —
(3.2 ) —
(3.2 )
Dividends to non-controlling interests —
—
—
—
(2.3 ) (2.3 )
Repurchases and retirements of common shares (18.6 ) (66.6 ) —
(85.2 ) —
(85.2 )
Issuances of common shares 1.5
—
—
1.5
—
1.5
Capital contributions from BAM members, net of tax —
—
—
—
46.9
46.9
Net contributions and dilution from other
non-controlling interests (.4 ) —
—
(.4 ) 2.1
1.7
Amortization of restricted share awards 12.3
—
—
12.3
—
12.3
Acquisition of non-controlling interests —
—
—
—
.8
.8
Recognition of equity-based compensation expense of subsidiary 1.0
—
—
1.0
—
1.0
Balance at September 30, 2020 $ 592.1
$ 2,822.1
$ (6.5 ) $ 3,407.7
$ (98.5 ) $ 3,309.2

YTD CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited)


	White Mountains’s Common Shareholders’ Equity
Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at January 1, 2021	$	595.2	$	3,311.2	$	(.4)	$	3,906.0	$	(88.1)	$	3,817.9
Net loss	—		(75.3)		—		(75.3)		(35.2)		(110.5)
Net change in foreign currency translation and other	—		—		1.7		1.7		.1		1.8
Total comprehensive (loss) income	—		(75.3)		1.7		(73.6)		(35.1)		(108.7)
Dividends declared on common shares	—		(3.1)		—		(3.1)		—		(3.1)
Dividends to non-controlling interests	—		—		—		—		(.6)		(.6)
Repurchases and retirements of common shares	(1.4)		(6.1)		—		(7.5)		—		(7.5)

Capital contributions from BAM members, net of tax	—		—		—		—		13.8		13.8
Net contributions from other non-controlling interests	(.4)		—		—		(.4)		(.2)		(.6)
Recognition of equity-based units of subsidiary	.5		—		—		.5		—		.5
Acquisition of non-controlling interests	—		—		—		—		220.2		220.2
Amortization of restricted share awards	4.0		—		—		4.0		—		4.0

Balance at March 31, 2021	$	597.9	$	3,226.7	$	1.3	$	3,825.9	$	110.0	$	3,935.9



























	White Mountains’s Common Shareholders’ Equity
Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at January 1, 2020	$	596.3	$	2,672.4	$	(7.2)	$	3,261.5	$	(116.8)	$	3,144.7
Net loss	—		(128.8)		—		(128.8)		(10.8)		(139.6)
Net change in foreign currency translation and other	—		—		(3.4)		(3.4)		—		(3.4)
Total comprehensive loss	—		(128.8)		(3.4)		(132.2)		(10.8)		(143.0)
Dividends declared on common shares	—		(3.2)		—		(3.2)		—		(3.2)
Dividends to non-controlling interests	—		—		—		—		(.5)		(.5)
Repurchases and retirements of common shares	(12.1)		(42.4)		—		(54.5)		—		(54.5)

Capital contributions from BAM members, net of tax	—		—		—		—		10.0		10.0
Net contributions from other non-controlling interests	—		—		—		—		.5		.5
Amortization of restricted share awards	5.1		—		—		5.1		—		5.1



Balance at March 31, 2020	$	589.3	$	2,498.0	$	(10.6)	$	3,076.7	$	(117.6)	$	2,959.1

White Mountains’s Common Shareholders’ Equity
Millions Common shares and paid-in surplus Retained earnings AOCI, after tax Total Non-controlling interest Total Equity
Balance at January 1, 2019 $ 584.0
$ 2,264.9
$ (5.8 ) $ 2,843.1
$ (124.9 ) $ 2,718.2
Net income (loss) —
353.6
—
353.6
(22.3 ) 331.3
Net change in foreign currency translation and other —
—
(5.5 ) (5.5 ) (.3 ) (5.8 )
Total comprehensive income (loss) —
353.6
(5.5 ) 348.1
(22.6 ) 325.5
Dividends declared on common shares —
(3.2 ) —
(3.2 ) —
(3.2 )
Dividends to non-controlling interests —
—
—
—
(1.6 ) (1.6 )
Repurchases and retirements of common shares (1.1 ) (3.8 ) —
(4.9 ) —
(4.9 )
Issuances of common shares 2.2
—
—
2.2
—
2.2
Capital contributions from BAM members, net of tax —
—
—
—
36.3
36.3
Net contributions from other non-controlling interests —
—
—
—
2.3
2.3
Amortization of restricted share awards 7.8
—
—
7.8
—
7.8
Acquisition of non-controlling interests —
—
—
—
1.8
1.8
Effect of deconsolidation of MediaAlpha —
—
—
—
(13.8 ) (13.8 )
Recognition of equity-based compensation expense of subsidiary .3
—
—
.3
—
.3
Balance at September 30, 2019 $ 593.2
$ 2,611.5
$ (11.3 ) $ 3,193.4
$ (122.5 ) $ 3,070.9

~~See Notes to Consolidated Financial Statements~~

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended September 30,
Millions 2020 2019
Cash flows from operations:
Net income $ 190.0
$ 331.3
Adjustments to reconcile net income to net cash used for operations:

Net realized and unrealized investment gains (302.8 ) (347.8 )
Realized gain from the MediaAlpha Transaction 0
(67.5 )
Deferred income tax expense 87.9
11.4
Net gain from sale of discontinued operations, net of tax .8
(1.6 )
Amortization of restricted share and option awards 12.2
8.3
Amortization and depreciation 27.2
19.8
Other operating items:
Net change in premiums and commissions receivable 6.0
(9.4 )
Net change in premiums payable 5.3
15.4
Net change in unearned insurance premiums 28.6
27.5
Net change in deferred acquisition costs (4.0 ) (2.4 )
Net change in restricted cash 26.6
17.0
Investments in Kudu Participation Contracts (57.5 ) (74.4 )
Net change in other assets and liabilities, net (8.1 ) (.1 )
Net cash provided from (used for) operations 12.2
(72.5 )
Cash flows from investing activities:

Net change in short-term investments (370.3 ) (54.5 )
Sales of fixed maturity and convertible investments 293.2
292.6
Maturities, calls and paydowns of fixed maturity and convertible investments 135.2
92.7
Sales of common equity securities 582.9
442.1
Distributions and redemptions of other long-term investments and settlements of forward contracts 64.5
28.7
Purchases of other long-term investments (61.0 ) (173.0 )
Purchases of common equity securities (33.8 ) (4.8 )
Purchases of fixed maturity and convertible investments (411.3 ) (428.0 )
Purchases of consolidated subsidiaries, net of cash acquired of $13.4 and $12.8 (129.4 ) (243.4 )
Other investing activities, net (42.0 ) (12.9 )
Net cash provided from (used for) investing activities 28.0
(60.5 )
Cash flows from financing activities:

Draw down of debt and revolving line of credit 69.4
149.4
Repayment of debt and revolving line of credit (2.7 ) (22.2 )
Cash dividends paid to the Company’s common shareholders (3.2 ) (3.2 )
Common shares repurchased (78.5 ) 0
Distribution to non-controlling interest shareholders (1.2 ) (27.7 )
Payments on contingent consideration earnout liabilities (7.0 ) (2.6 )
Repurchase of shares from non-controlling interest shareholders 0
(21.1 )
Proceeds from issuance of shares to non-controlling interest shareholders 0
62.7
Capital contributions to non-controlling interest shareholders 2.2
1.6
Capital contributions from BAM members 46.9
42.9
Fidus Re premium payment (2.3 ) (2.2 )
Other financing activities, net (9.8 ) (4.9 )
Net cash provided from financing activities 13.8
172.7
Effect of exchange rate changes on cash (.2 ) (.8 )
Net change in cash during the period - continuing operations, including the effect of
exchange rate changes 53.8
38.9
Cash balances at beginning of period (includes restricted cash balances of $56.3 and $50.0) 161.0
110.3
Cash balances at end of period (includes restricted cash balances of $82.9 and $67.0) $ 214.8
$ 149.2
Supplemental cash flows information:

Interest paid $ (11.4 ) $ (11.7 )
Net income tax payments $ (.1 ) $ (.3 )


	Three Months Ended March 31,
Millions	2021		2020
Cash flows from operations:
Net loss	$	(110.5)	$	(139.6)
Adjustments to reconcile net income to net cash used for operations:
Net realized and unrealized investment (gains) losses	(1.1)		186.7
Net realized and unrealized investment losses (gains) from investment in MediaAlpha	41.7		(30.0)
Deferred income tax expense	(1.4)		(27.9)

Net gain from sale of discontinued operations, net of tax	(18.7)		(.9)
Amortization of restricted share and option awards	4.0		5.1
Amortization and depreciation	12.8		7.1

Other operating items:
Net change in reinsurance recoverables	(15.7)		0
Net change in insurance premiums receivable	(199.7)		0
Net change in commissions receivable	(.2)		(.7)
Net change in ceded unearned premiums	24.8		0
Net change in loss and loss adjustment expense reserves	56.0		0
Net change in premiums payable	2.6		8.5
Net change in unearned insurance premiums	245.5		4.3
Net change in deferred acquisition costs	(51.3)		(1.2)
Net change in reinsurance payable	(40.7)		0
Net change in restricted cash	4.8		8.6
Investments in Kudu Participation Contracts	(11.0)		(21.0)
Net change in other assets and liabilities, net	(34.7)		(58.8)


Net cash used for operations	(92.8)		(59.8)
Cash flows from investing activities:
Net change in short-term investments	(103.1)		63.9
Sales of fixed maturity and convertible investments	97.8		116.1
Maturities, calls and paydowns of fixed maturity and convertible investments	31.4		58.9
Sales of common equity securities	160.3		40.3
Distributions and redemptions of other long-term investments and settlements of forward contracts	40.1		64.1



Release of cash pre-funded/placed in escrow for Ark Transaction	646.3		0
Purchases of consolidated subsidiaries, net of cash acquired of $52.0 and $0.0	11.1		0
Purchases of other long-term investments	(101.0)		(10.9)
Purchases of common equity securities	(68.8)		(20.9)
Purchases of fixed maturity and convertible investments	(411.1)		(180.1)
Other investing activities, net	60.9		(50.9)


Net cash (used for) provided from investing activities	363.9		80.5
Cash flows from financing activities:
Draw down of debt and revolving line of credit	105.3		12.0
Repayment of debt and revolving line of credit	(93.7)		(1.0)

Cash dividends paid to the Company’s common shareholders	(3.1)		(3.2)
Common shares repurchased	0		(47.8)

Distribution to non-controlling interest shareholders	(.9)		(.7)

Contingent consideration payments related to acquisitions of subsidiaries	(6.7)		(6.4)


Capital contributions to non-controlling interest shareholders	(.4)		.4
Capital contributions from BAM members	13.8		10.0

Fidus Re premium payment	(3.2)		(.8)
Other financing activities, net	(4.6)		(6.7)


Net cash provided from (used for) financing activities	6.5		(44.2)
Effect of exchange rate changes on cash	(.3)		(1.1)
Net change in cash during the period - continuing operations, including the effect of exchange rate changes	277.3		(24.6)

Cash balances at beginning of period (includes restricted cash balances of $78.4 and $56.3)	211.2		161.0


Cash balances at end of period (includes restricted cash balances of $83.2 and $64.9)	$	488.5	$	136.4
Supplemental cash flows information:
Interest paid	$	(7.5)	$	(5.2)
Net income tax payments	$	(1.4)	$	0

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The Company is an exempted Bermuda limited liability company whose principal businesses are conducted through its subsidiaries and other affiliates. The Company’s headquarters is located at 26 Reid Street, Hamilton, Bermuda HM 11, its principal executive office is located at 23 South Main Street, Suite 3B, Hanover, New Hampshire 03755-2053 and its registered office is located at Clarendon House, 2 Church Street, Hamilton, Bermuda HM 11. The Company’s website is located at www.whitemountains.com. The information contained on White Mountains’s website is not incorporated by reference into, and is not a part of, this report.

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of White Mountains Insurance Group, Ltd. (the “Company” or the “Registrant”), its subsidiaries (collectively with the Company, “White Mountains”) and other entities required to be consolidated under GAAP.

Consolidation Principles

Under GAAP, the Company is required to consolidate any entity in which it holds a controlling financial interest. A controlling financial interest is usually in the form of an investment representing the majority of the subsidiary’s voting interests. However, a controlling financial interest may also arise from a financial interest in a variable interest entity (“VIE”) through arrangements that do not involve ownership of voting interests. The Company consolidates a VIE if it determines that it is the primary beneficiary. The primary beneficiary is defined as the entity who holds a variable interest that gives it both the power to direct the VIE’s activities that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive returns from, the VIE that could potentially be significant to the VIE.

Intercompany transactions have been eliminated in consolidation. These interim financial statements include all adjustments considered necessary by management to fairly state the financial position, results of operations and cash flows of White Mountains. These interim financial statements may not be indicative of financial results for the full year and should be read in conjunction with the Company’s ~~2019~~2020 Annual Report on Form 10-K.

Business Combinations

White Mountains accounts for purchases of businesses using the acquisition method, which requires the measurement of assets acquired, including goodwill and other intangible assets, and liabilities assumed, including contingent liabilities, at their estimated fair values as of the acquisition date. The acquisition date fair values represent management’s best estimates and are based upon established valuation techniques, reasonable assumptions and, where appropriate, valuations performed by independent third parties. In circumstances where additional information is required in order to determine the acquisition date fair value of balance sheet amounts, provisional amounts may be recorded as of the acquisition date and may be subject to subsequent adjustment throughout the measurement period, which is up to one year from the acquisition date. Measurement period adjustments are recognized in the period in which they are determined. The results of operations and cash flows of businesses acquired are included in the consolidated financial statements from the date of acquisition. White Mountains accounts for purchases of other intangible assets that do not meet the definition of a business as asset acquisitions. Asset acquisitions are recognized at the amount of consideration paid, which is deemed to equal fair value.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~In the third quarter of 2020, White Mountains changed the method used to~~Fair Value Measurements

Fair value ~~its investment in MediaAlpha from~~measurements are categorized into a ~~discounted cash flow analysis to a probability-weighted expected return method ("PWERM"). Under the PWERM, MediaAlpha’s valuation is~~hierarchy that distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the ~~probability-weighted present value of expected future equity values under two possible future scenarios: (i) an initial public offering~~best information available when external market data is limited or unavailable (“~~IPO”~~unobservable inputs”). Quoted prices in active markets for identical assets or liabilities have the highest priority (“Level 1”), followed by observable inputs other than quoted prices, including prices for similar but not identical assets or liabilities (“Level 2”) ~~or (ii) remaining a private company. To determine~~and unobservable inputs, including the ~~equity value in the IPO scenario, the value~~reporting entity’s estimates of the ~~company was calculated using forward~~assumptions that market ~~multiples derived from a range of relevant companies and applied to MediaAlpha’s projected financial metrics. To determine~~participants would use, having the equity value in the remaining a private company scenario, the value of the company was calculated using a discounted cash flow model. The discounted cash flow model includes key inputs such as projections of future revenues and earnings, a discount rate and a terminal revenue growth rate. The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rates reflect MediaAlpha’s weighted average cost of capital considering comparable public company data, adjusted for risks specific to the business and industry. The terminal revenue growth rate is based on company, industry and macroeconomic expectations of perpetual revenue growth subsequent to the end of the discrete period in the discounted cash flow analysis.lowest priority (“Level 3”).

Reportable Segments

White Mountains has determined its reportable segments based on the nature of the underlying businesses, the manner in which the Company’s subsidiaries and affiliates are organized and managed and the organization of the financial information provided to the chief operating decision maker to assess performance and make decisions regarding allocation of resources. As of ~~September 30, 2020,~~March 31, 2021, White Mountains’s reportable segments were HG Global/BAM, Ark, NSM, Kudu and Other Operations. On February 26, 2019, MediaAlpha completed the sale of a significant minority stake to Insignia Capital Group in connection with a recapitalization and cash distribution to existing equityholders (the “MediaAlpha Transaction”). White Mountains deconsolidated MediaAlpha as a result of the MediaAlpha Transaction, and consequently it was no longer a reportable segment. White Mountains’s consolidated statement of comprehensive income and its segment disclosures include MediaAlpha’s results of operations through the date of the MediaAlpha Transaction. See ~~Note 2 —“Significant Transactions”~~ ~~and~~ ~~Note 13 — “Segment Information”~~.

The HG Global/BAM segment consists of HG Global Ltd. and its wholly-owned subsidiaries (“HG Global”) and the consolidated results of Build America Mutual Assurance Company (“BAM”) (collectively, “HG Global/BAM”). BAM is the first and only mutual municipal bond insurance company in the United States. By insuring the timely payment of principal and interest, BAM provides market access to, and lowers interest expense for, issuers of municipal bonds used to finance essential public purposes such as schools, utilities and transportation facilities. BAM is owned by and operated for the benefit of its members, the municipalities that purchase BAM’s insurance for their debt issuances. HG Global was established to fund the startup of BAM and, through its wholly-owned subsidiary, HG Re Ltd. (“HG Re”), to provide up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM. For capital appreciation bonds, par is adjusted to the estimated equivalent par value for current interest paying bonds. HG Global, together with its subsidiaries, funded the initial capitalization of BAM through the purchase of $503.0 million of surplus notes issued by BAM, consisting of $203.0 million of Series A Notes and $300.0 million of Series B Notes (the “BAM Surplus Notes”). As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, White Mountains owned 96.9% of HG Global’s preferred equity and 88.4% of its common equity. White Mountains does not have an ownership interest in BAM. However, White Mountains is required to consolidate BAM’s results in its financial statements because BAM is a VIE for which White Mountains is the primary beneficiary. BAM’s results are attributed to non-controlling interests.

The Ark segment consists of Ark Insurance Holdings Limited and its subsidiaries (collectively, “Ark”). Ark writes a diversified and balanced portfolio of reinsurance and insurance, including property, accident & health, energy, marine and political risks, through Lloyd’s Syndicates 4020 and 3902 (the “Syndicates”). Beginning in January 2021, Ark began writing certain classes of its business through Group Ark Insurance Limited (“GAIL”), Ark’s wholly-owned Bermuda-based insurance and reinsurance company.

As of March 31, 2021, White Mountains owned 72.0% of Ark on a basic shares outstanding basis (63.0% on a fully-diluted, fully-converted basis, taking account of management’s equity incentives). If the additional $200.0 million of equity capital that White Mountains has agreed to contribute to Ark is contributed in full, White Mountains will own 77.1% of Ark on a basic shares outstanding basis (67.5% on a fully-diluted, fully-converted basis). The remaining shares are owned by employees. In the future, management rollover shareholders could earn additional shares in the company if and to the extent that White Mountains achieves certain multiple of invested capital return thresholds. If fully earned, these additional shares would represent 12.5% of the shares outstanding at closing. See Note 2—“Significant Transactions”.

The NSM segment consists of NSM Insurance HoldCo, LLC and its subsidiaries (collectively, “NSM”). NSM is a full-service managing general underwriting agency (“MGU”) and program administrator for specialty property and casualty insurance. The company places insurance in niche sectors such as specialty transportation, real estate, social services and ~~pet health insurance.~~pet. On behalf of its insurance carrier partners, NSM typically manages all aspects of the placement process, including product development, marketing, underwriting, policy issuance and claims. NSM earns commissions based on the volume and profitability of the insurance that it places. NSM does not take insurance risk. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, White Mountains owned 96.6% ~~and 96.4%~~ of the basic units outstanding of NSM (89.6% ~~and 88.4%~~ on a fully diluted, fully converted basis). See Note 2 — “Significant Transactions”.

The Kudu segment consists of Kudu Investment Management, LLC and its subsidiaries (collectively “Kudu”), a capital solutions provider for asset management firms. Kudu provides capital solutions for boutique asset managers for a variety of purposes including generational ownership transfers, management buyouts, acquisition and growth finance and legacy partner liquidity. Kudu also provides strategic assistance to investees from time to time. Kudu’s capital solutions typically are structured as minority preferred equity stakes with distribution rights, typically tied to gross revenues and designed to generate immediate strong, stable cash yields. ~~On April 4, 2019,~~As of March 31, 2021 and December 31, 2020, White Mountains acquired the ownership interests in Kudu held by certain funds managed by Oaktree Capital Management, L.P. (“Oaktree”) for cash consideration of $81.4 million. In addition, White Mountains assumed all of Oaktree’s unfunded capital commitments to Kudu, increasing White Mountains’s total capital commitment to $250.0 million (the “Kudu Transaction”). As a resultowned 99.3% of the ~~Kudu Transaction, White Mountains’s~~ basic ~~unit ownership of Kudu increased from 49.5% to 99.1% (42.7% to 85.4%~~units outstanding (84.8% on a fully diluted, fully converted basis), and White Mountains began consolidating Kudu in its financial statements during the second quarter of 2019. During the fourth quarter of 2019, White Mountains increased its total capital commitment to Kudu by an additional $100.0 million to $350.0 million and, Kudu obtained a committed $125.0 million credit facility.. See Note 2 — “Significant Transactions”.

The Other Operations segment consists of the Company and its wholly-owned subsidiary, White Mountains Capital, ~~Inc.,~~LLC, (“WM Capital”) its other intermediate holding companies, its wholly-owned investment management subsidiary, White Mountains Advisors LLC (“WM Advisors”), investment assets managed by WM Advisors, its interests in MediaAlpha, ~~(for periods after the MediaAlpha Transaction)~~Inc. (“MediaAlpha”), PassportCard Limited (“PassportCard”) and DavidShield Life Insurance Agency (2000) Ltd. (“DavidShield”) (collectively, “PassportCard/DavidShield”), Elementum Holdings LP (“Elementum”) ~~and Kudu (for periods prior to the Kudu Transaction)~~, and certain other consolidated and unconsolidated entities and certain other ~~strategic investments.~~assets.

The MediaAlpha segment consisted of QL Holdings LLC and its wholly-owned subsidiary QuoteLab, LLC (collectively “MediaAlpha”). MediaAlpha is a marketing technology company. It operates a transparent and efficient online customer acquisition technology platform that facilitates real-time transactions between buyers and sellers of consumer referrals (e.g., clicks, calls and leads), primarily in the property & casualty, health and life insurance verticals.

Discontinued Operations and Assets Held for Sale

In the first quarter of 2021, White Mountains ~~has classified its Guilford, Connecticut property, which consists~~recorded a gain on sale of ~~an office building that was sold~~discontinued operations as a result of reversing a liability arising from the tax indemnification provided in ~~August~~connection with the sale of Sirius International Insurance Group, Ltd. (“Sirius Group”) in 2016.

As of December 31, 2020, ~~and adjacent land as~~assets held for sale asincluded a corporate aircraft, which was sold on February 12, 2021.

On April 12, 2021, NSM sold the Fresh Insurance Services Group Limited (“Fresh Insurance”) motor business. As of ~~September 30, 2020 and December~~March 31, ~~2019. The property has been measured at its estimated fair~~2021, assets held for sale included the net realizable value ~~net~~ of ~~disposal costs. See~~Fresh Insurance’s motor business, which was recorded in other assets in the NSM segment. Note 1719 — “Held for Sale and Discontinued Operations”.

Significant Accounting Policies

In addition to the following, refer to the Notes to Consolidated Financial Statements in the Company’s 2020 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s significant accounting policies.

Ark Insurance Operations

Ark writes a diversified and balanced portfolio of reinsurance and insurance, including property, accident & health, energy, marine and political risks, through the Syndicates. Beginning in January 2021, Ark began writing certain classes of its business through GAIL.

For the years of account prior to White Mountains’s transaction with Ark, a significant proportion of the Syndicates’ underwriting capital was provided by other third-party insurance and reinsurance groups (“TPC Providers”) using whole account reinsurance contracts through Ark’s corporate member. The TPC Providers’ economic participation in the Syndicates for the remaining open years of account prior to White Mountains’s transaction with Ark is approximately 51% of the total net result of the Syndicates. Captions within results of operations and other comprehensive income are shown net of amounts relating to the TPC Providers share of the Syndicates’ results, including investment results.

Ark’s premiums written comprise premiums on insurance contracts incepted during the year as well as premium adjustments related to prior accounting years. Insurance premiums are recognized in earnings over the loss exposure or coverage period in proportion to the level of protection provided. In most cases, such premiums are earned ratably over the term of the contract with unearned premiums calculated on a monthly pro-rata basis. Premiums earned are presented net of amounts ceded to reinsurers. Premiums receivable, representing amounts due from insureds, are presented net of an allowance for uncollectible premiums, including expected credit losses, both dispute and credit related. The allowance is based upon Ark’s ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by Ark’s ability to cancel the policy if the policyholder does not pay the premium.

Deferred acquisition costs comprise brokerage and taxes which are directly attributable to and vary with the production of business. These costs are deferred and amortized to the extent they related to successful contract acquisitions over the applicable premium recognition period.

Losses and loss adjustment expenses (“LAE”) are charged against income as incurred. Unpaid losses and LAE, including estimates for amounts incurred and not reported (“IBNR”) are based on estimates of the ultimate costs of settling claims, including the effects of inflation and other societal and economic factors. Unpaid loss and LAE reserves represent management’s best estimate of ultimate losses and LAE, net of estimated salvage and subrogation recoveries, if applicable. Such estimates are regularly reviewed and updated and any adjustments resulting there from are reflected in current results of operations. The process of estimating loss and LAE involves a considerable degree of judgment by management and the ultimate amount of expense to be incurred could be considerably greater than or less than the amounts currently reflected in the financial statements.

Reinsurance recoverables represent amounts of paid losses and loss adjustment expenses, case reserves and IBNR amounts ceded to reinsurers under reinsurance treaties. Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. Ark reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance, including expected credit losses. The allowance is based upon its ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors.

Derivatives

From time to time, White Mountains holds derivative financial instruments for risk management purposes. White Mountains recognizes all derivatives as either assets or liabilities, measured at fair value, on the consolidated balance sheet. Changes in the fair value of derivative instruments that meet the criteria for hedge accounting are recognized in other comprehensive income and reclassified into current period pre-tax income when the hedged items are recognized therein. Changes in the fair value of derivative instruments that do not meet the criteria for hedge accounting are recognized in current period pre-tax income.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, NSM holds an interest rate swap derivative instrument that meets the criteria for hedge accounting. See Note 79 — “Derivatives”.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the amount paid to acquire subsidiaries over the fair value of identifiable net assets at the date of acquisition. Other intangible assets consist primarily of the Lloyds underwriting capacity, trade names, URL and online names, customer relationships and contracts, information technology platforms and insurance licenses.

Reinsurance Contracts Accounted for as Deposits

Reinsurance contracts that do not meet the risk transfer requirements necessary to be accounted for as reinsurance are accounted for using the deposit method. Under the deposit method, ceded premiums paid are not recognized through income but rather treated as a deposit. BAM entered into a ceded reinsurance ~~contract agreement~~agreements with Fidus ~~Reinsurance~~Re Ltd. (“Fidus Re”) during the second quarter ~~ended June 30,~~of 2018 and the first quarter of 2021, which isare both accounted for using the deposit method. See Note 810 — “Municipal Bond Guarantee Insurance”. The nonrefundable consideration paid by BAM to Fidus Re is charged to financing expense within general and administrative expenses.

Ark has an aggregate excess of loss contract with Third Point Reinsurance Ltd. (“Third Point Re”) in the amount of $50.0 million, which is accounted for using the deposit method. Ark earns an annual crediting rate of 3% which is recorded within other revenue. As of March 31, 2021, the carrying value of Ark’s deposit in Third Point Re, including accrued interest, was $51.7 million and is recorded in other assets.

Cash and Restricted Cash

Cash includes amounts on hand and demand deposits with banks and other financial institutions. Amounts presented in the statement of cash flows are shown net of balances acquired and sold in the purchase or sale of the Company’s consolidated subsidiaries.

Cash balances that are not immediately available for general corporate purposes, including fiduciary accounts held by NSM on behalf of insurance carriers, are classified as restricted. Restricted amounts included within cash are disclosed parenthetically on the balance sheet. Changes in restricted cash balances are presented as a separate caption within the operations, investing and financing activities sections of the statement of cash flows.

~~Significant Accounting Policies~~

~~Refer to the Notes to Consolidated Financial Statements in the Company’s 2019 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s significant accounting policies.~~

Recently Adopted Changes in Accounting Principles

Income Taxes

On January 1, 2020, White Mountains adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740), which removes exceptions to standard guidance. Under the new guidance non-income-based taxes, such as franchise taxes, are reported within pre-tax income rather than being included in income taxes. In addition, the new guidance ~~eliminates~~eliminated the exception to the incremental approach for ~~interperiod~~inter-period tax allocation, which previously allowed consideration of the tax ~~effects~~effect of items such as discontinued operations and items recognized through other comprehensive income.

For periods subsequent to the adoption of ASU 2019-12, White Mountains ~~records~~has recorded both the tax expense related to BAM’s member surplus contributions (“MSC”) and the related valuation allowance on such taxes through the non-controlling interest equity. Prior to the adoption of ASU 2019-12, White Mountains recorded the tax expense related to BAM’s MSC directly to non-controlling interest equity, while the valuation allowance on such taxes was recorded through the income statement.

Goodwill

On January 1, 2020, White Mountains adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment ~~(ASC~~(ASC 350), which changed the guidance on goodwill impairment testing. Under the new guidance, the qualitative assessment of the recoverability of goodwill remains the same, but the second step of the two-step ~~quantitative~~qualitative test, which required calculation of the implied fair value of goodwill, has been eliminated. Instead, an impairment charge is recognized when the carrying value of a reporting unit exceeds its fair value. Any excess of carrying value over fair value is written down as an impairment. White Mountains did not identify any impairment indicators associated with its reporting units and therefore did not recognize an impairment of goodwill during the ~~three and nine months~~quarter ended ~~September 30, 2020 and accordingly,~~March 31, 2021. White Mountains’s adoption of ASU 2017-04 ~~had no~~did not have any impact on White Mountains’s financial statements.

Credit Losses

On January 1, 2020, White Mountains adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments ~~(ASC~~(ASC 326), which establishes new guidance for the recognition of credit losses for financial assets measured at amortized cost. The new ASU requires reporting entities to estimate the credit losses expected over the life of a credit exposure using historical information, current information and reasonable and supportable forecasts that affect the collectability of the financial asset. White Mountains measures its portfolio of investment securities at fair value with changes therein recognized through current period earnings and, accordingly, adoption of ASU 2016-13 ~~had no~~did not have any impact on White Mountains’s financial ~~statements~~statements.

~~Leases~~

~~On January 1, 2019, White Mountains adopted ASU 2016-02,~~ ~~Leases~~ (ASC 842), which requires lessees to recognize lease assets and liabilities on the balance sheet for both operating and financing leases, with the exception of leases with an original term of 12 months or less. White Mountains elected the optional transition method that permits prospective adoption with recognition of a cumulative effect adjustment to the opening balance of retained earnings. As a result, White Mountains has presented comparative periods prior to adoption in accordance with previous lease accounting guidance. White Mountains also elected all available practical expedients permitted under ASC 842, which allowed White Mountains to carryforward its historical lease classification and not reassess leases for the definition of a lease under the new guidance. As of January 1, 2019, White Mountains recognized $23.2 million for both the lease right-of-use assets and lease liabilities. As of September 30, 2020, White Mountains recognized $38.3 million and $39.1 million of lease right-of-use assets and lease liabilities. Adoption of ASU 2016-02 did not result in an adjustment to opening retained earnings.

~~Premium Amortization on Callable Debt Securities~~

~~On January 1, 2019, White Mountains adopted ASU 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities~~ (ASC 310-20), which changes the amortization period for certain purchased callable debt securities. Under the new guidance, for investments in callable debt securities held at a premium, the premium is amortized over the period to the earliest call date. The new guidance does not change the amortization period for callable debt securities held at a discount. Adoption of ASU 2017-08 had no impact on White Mountains’s financial statements.

Note 2. Significant Transactions

~~Acquisitions~~

~~Elementum~~MediaAlpha

On ~~May 31, 2019,~~October 30, 2020, MediaAlpha completed an initial public offering (the “MediaAlpha IPO”). In the offering, White Mountains ~~acquired~~sold 3.6 million shares at $19.00 per share ($17.67 per share net of underwriting fees) and received total proceeds of $63.8 million. White Mountains also received $55.0 million of net proceeds related to a ~~30.0% limited partnership~~dividend recapitalization at MediaAlpha. Following the MediaAlpha IPO, White Mountains owned 20.5 million MediaAlpha shares, representing a 35.0% ownership interest (32.3% on a fully-diluted, fully converted basis).

On March 23, 2021, MediaAlpha completed a secondary offering of 8.05 million shares. In the secondary offering, White Mountains sold 3.6 million shares at $46.00 per share ($44.62 per share net of underwriting fees) for net proceeds of $160.3 million. Following the completion of the offering, White Mountains owns 16.9 million shares, representing a 28.5% basic ownership interest (26.3% fully-diluted/fully-converted basis). At the March 31, 2021, closing price of $35.43 per share, the fair value of White Mountains’s remaining investment in ~~Elementum,~~MediaAlpha was $600.2 million. See Note 16 — “Equity-Method Eligible Investments”.

Ark

On October 1, 2020, White Mountains entered into a ~~third-party registered investment adviser specializing in natural catastrophe insurance-linked securities (“ILS”), for $55.1 million~~subscription and purchase agreement (the ~~“Elementum~~“Ark SPA”) with Ark and certain selling shareholders (collectively with Ark, the “Ark Sellers”). Certain Ark Sellers also entered into a related management warranty deed (together with the Ark SPA, the “Ark Acquisition Agreement”) pursuant to which they made certain warranties about the Ark business (collectively the “Ark Transaction”). ~~Elementum manages separate accounts~~Under the terms of the Ark SPA, White Mountains agreed to contribute $605.4 million of equity capital to Ark, at a pre-money valuation of $300.0 million, and ~~pooled investment vehicles across various ILS sectors,~~purchase $40.9 million of shares from the Ark Sellers. White Mountains also agreed to contribute up to an additional $200.0 million of equity capital to Ark in 2021. In accordance with the Ark SPA, in the fourth quarter of 2020 White Mountains pre-funded/placed in escrow a total of $646.3 million in preparation for closing the Ark Transaction, including ~~catastrophe bonds, collateralized reinsurance investments and industry loss warranties,~~$280.0 million funded directly to Lloyd’s on behalf of ~~third-party clients. As part~~Ark under the terms of a Deposit Trust Deed and $366.3 million placed in escrow, which is reflected on the balance sheet within the Other Operations segment as of December 31, 2020.

On January 1, 2021, White Mountains completed the Ark Transaction in accordance with the terms of the ~~Elementum Transaction,~~Ark SPA. As of March 31, 2021, White Mountains ~~also committed to invest $50.0~~owned 72.0% of Ark on a basic shares outstanding basis (63.0% on a fully-diluted, fully-converted basis, taking account of management’s equity incentives). If the additional $200 million ~~in ILS funds managed by Elementum. As~~ of ~~September 30, 2020,~~equity capital that White Mountains ~~had $52.7 million~~has agreed to contribute to Ark is contributed in full, White Mountains will own 77.1% of Ark on a basic shares outstanding basis (67.5% on a fully-diluted, fully-converted basis). The remaining shares are owned by employees. In the future, management rollover shareholders could earn additional shares in the company if and to the extent that White Mountains achieves certain multiple of invested ~~into four Elementum-managed funds.~~capital return thresholds. If fully earned, these additional shares would represent 12.5% of the shares outstanding at closing.

White Mountains ~~has elected~~recognized total assets acquired related to the ~~fair value option for its investments~~Ark Transaction of $2.5 billion, including goodwill and other intangible assets of $292.5 million, and total liabilities of $1.7 billion, including contingent consideration of $22.5 million and non-controlling interest of $220.2 million. Ark incurred transaction costs of $25.3 million in ~~Elementum~~the first quarter of 2021.

The following presents additional details of the assets acquired and liabilities assumed as of the ~~ILS funds managed by Elementum. Both~~January 1, 2021 acquisition date:


Millions	As of January 1, 2021
Investments	$	594.3
Cash	52.0		(1)
Reinsurance recoverables	433.4
Insurance premiums receivable	236.7
Ceded unearned premiums	170.2
Value of in-force business acquired	71.7
Other assets	88.9
Loss and loss adjustment expense reserves	(696.0)
Unearned insurance premiums	(326.1)
Debt	(46.4)

Ceded reinsurance payable	(528.3)
Other liabilities	(25.9)
Net tangible assets acquired	24.5
Goodwill	116.8
Other intangible assets - syndicate underwriting capacity	175.7
Deferred tax liability on other intangible assets	(33.4)
Net assets acquired	$	283.6

(1) Cash excludes the ~~investment in Elementum and the investments in ILS funds managed by Elementum are included within other long-term investments.~~

~~NSM~~

~~On May 11, 2018,~~ White Mountains ~~acquired a 95.0% basic unit ownership interest in NSM (83.6% on a fully diluted, fully converted basis). White Mountains paid $274.2 million~~cash contribution of ~~cash consideration for its equity interest in NSM, and NSM borrowed $100.0 million in new debt~~$605.4 as part of the Ark transaction.

The acquisition date fair values of assets and liabilities, including insurance reserves and intangible assets, are provisional and are subject to revision within one year of the acquisition date.

The values of net tangible assets acquired and the resulting goodwill, other intangible assets and contingent consideration were recorded at fair value using Level 3 inputs. The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill, other intangible assets and the contingent consideration liability were internally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. White Mountains developed internal estimates for the expected future cash flows and discount rates used in the present value calculations.

The value of in-force business acquired represents the estimated profits relating to the unexpired contracts, net of related prepaid reinsurance at the acquisition date through the expiration date of the contracts. The value of the syndicate underwriting capacity intangible asset was estimated using net cash flows attributable to Ark’s rights to write business in the Lloyd’s market. The value of the in-force business acquired and the syndicate underwriting capacity were estimated using a discounted cash flow method. Significant inputs to the valuation models include estimates of growth in premium revenues, investment returns, claim costs, expenses and discount rates based on a weighted average cost of capital.

In evaluating the fair value of Ark’s loss and loss adjustment expense reserves, White Mountains determined that the risk-free rate of interest was approximately equal to the risk factor reflecting the uncertainty within the reserves and that no adjustment was necessary.

Ark’s segment income and expenses for the three months ended March 31, 2021 are presented in Note 15 - “Segment Information.” Pro forma financial information for Ark for the three months ended March 31, 2020 has not been presented because as a private U.K. domiciled company Ark does not have quarterly financial reporting requirements and therefore quarterly financial information is not available for periods prior to the January 1, 2021 acquisition date.

NSM

On May 18, 2018, NSM acquired 100% of Fresh Insurance, ~~Services Group Limited (“Fresh Insurance”),~~which is an insurance broker that offers non-standard personal lines products in the United Kingdom. NSM paid $49.6 million of upfront cash consideration for Fresh Insurance. NSM borrowed $51.0 million to fund the transaction. During the nine months ended September 30, 2019, NSM paid a purchase price adjustment of an additional $0.7 million of consideration. The purchase price is subject to additional adjustments based upon growth in EBITDA during 2 earnout periods, one which ended in February 2020 and one ending in February 2022. NSM did not make any payments related to the first Fresh Insurance earnout period.

On April 12, 2021, NSM sold Fresh Insurance’s motor business. The assets and liabilities included in the transaction, principally goodwill, have been classified as held for sale as of March 31, 2021 and have been measured at their estimated fair values, net of disposal costs. As a result, White Mountains recognized a loss of $28.7 million. White Mountains determined that the transaction qualified as a held for sale business in the first quarter 2021, however, it did not meet the criteria to be classified as discontinued operations.

On December 3, 2018, NSM acquired all the net assets of KBK Insurance Group, Inc. (“KBK”), a specialized MGU focused on the towing and transportation space. NSM paid $60.0 million of upfront cash consideration for KBK. White Mountains contributed $29.0 million to NSM and NSM borrowed $30.1 million to fund the transaction. As of December 31, 2018, White Mountains had recognized $59.4 million of goodwill and other intangible assets, reflecting acquisition date fair value. The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisition of KBK had not yet been finalized as of December 31, 2018. As of March 31, 2019, White Mountains determined that the relative values of goodwill and other intangible assets from the KBK transaction were $32.6 million and $32.7 million, reflecting acquisition date fair values, and recorded a liability of $5.9 million relating to the fair value of contingent consideration earnouts made in connection with the acquisition. The purchase price is subject to adjustments based upon growth in EBITDA during three earnout periods, one which ended in December 2019, one ending in December 2020 and one ending in December 2021. In the first quarter of 2021 and 2020, NSM paid $6.7 million and $6.4 million related to the first and second KBK earnout period.

~~On April 1, 2019, NSM acquired 100%~~ As of ~~Embrace Pet Insurance (“Embrace”), a nationwide provider of pet health insurance for dogs and cats. NSM paid $71.5 million of cash~~March 31, 2021, the KBK contingent consideration net of cash acquired, for Embrace. White Mountains contributed $58.2 million to NSM and NSM borrowed $20.4 million to fund the transaction. White Mountains recognized $52.2 million of goodwill and $15.4 million of other intangible assets, reflecting acquisition date fair values.

~~On June 28, 2019, NSM acquired the renewal rights on its U.S. collector car business (the “Renewal Rights”) from American International Group, Inc. (“AIG”) for $82.5~~earnout liability was $6.4 million. The acquisition satisfied NSM’s contingent obligation to acquire the Renewal Rights from AIG. White Mountains contributed $59.1 million to NSM and NSM borrowed $22.5 million to fund the transaction. White Mountains recognized $82.5 million of other intangible assets, reflecting acquisition date fair values. See ~~Note 4 — “Goodwill and Other Intangible Assets”~~.

On April 7, 2020, NSM acquired 100% of Kingsbridge Group Limited (“Kingsbridge”), a leading provider of commercial lines insurance and consulting services tofor the ~~U.K.’s~~professional contractor and freelancer ~~markets.~~markets in the United Kingdom. NSM paid £107.2 million (approximately ~~$132~~$132.2 million based upon the foreign exchange spot rate at the date of acquisition) of upfront cash consideration for Kingsbridge. White Mountains contributed $80.3 million to NSM and NSM borrowed £42.5 million (approximately $52.4 million based upon the foreign exchange spot rate at the date of acquisition) to fund the transaction. ~~As of September 30,~~During 2020, ~~White Mountains had recognized $125.1 million~~NSM determined that the relative values of goodwill and other intangible assets recorded in connection with the Kingsbridge transaction were $111.5 million and $20.2 million, reflecting acquisition date fair ~~value.~~values. The purchase price is subject to adjustment based upon growth in EBITDA during an earnout period ending in January 2022. ~~The relative~~During 2020, NSM initially recorded a liability relating to the fair ~~values~~value of ~~other intangible assets recognized in connection with~~ the ~~acquisition of~~ Kingsbridge ~~and the contingent earnout liability had not yet been finalized as of September 30, 2020.~~

~~As of September 30, 2020 and December 31, 2019, NSM recorded total~~ contingent consideration earnout ~~liabilities~~ of ~~$11.8~~$4.1 million. During 2020, NSM recognized pre-tax income of $4.1 million for the change in fair value of the Kingsbridge contingent consideration earnout liability and ~~$20.6~~a foreign currency translation unrealized gain of $0.3 million. As of March 31, 2021, the Kingsbridge contingent consideration earnout liability was $0.2 million.

The contingent consideration earnout liabilities related to ~~the Fresh Insurance and KBK~~NSM’s acquisitions are subject to adjustments based upon EBITDA, EBITDA projections, and present value factors for acquired entities. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, NSM recognized 0 pre-tax (revenue) expense ~~(income) of $0.7~~and $(0.6) million ~~and $(1.6) million for the change in the fair value of its contingent consideration earnout liabilities. For the three and nine months ended September 30, 2019, NSM recognized~~ pre-tax ~~(income) expense of $(2.0) million and $5.6 million~~revenue for the change in the fair value of its contingent consideration earnout liabilities. Any future adjustments to contingent consideration earnout liabilities under the agreements will be recognized through pre-tax income. ~~For the three~~As of March 31, 2021 and ~~nine months ended September 30,~~December 31, 2020, NSM ~~paid $0.6 million and $7.0 million of~~recorded total contingent consideration earnout liabilities ~~related to KBK~~of $7.9 million and ~~the U.K. vertical. For both the three and nine months ended September 30, 2019, NSM paid $2.6 million of contingent consideration earnout liabilities related to the U.K. vertical.~~$14.6 million.

~~Kudu~~PassportCard/DavidShield

On ~~February 5,~~January 24, 2018, White Mountains ~~entered into an agreement to fund up to $125.0 million in Kudu in exchange for~~acquired a ~~49.5% basic units~~50% ownership interest in ~~Kudu (42.7% on~~DavidShield, its joint venture partner in PassportCard. DavidShield is a ~~fully diluted, fully converted basis). On April 4, 2019, White Mountains acquired~~managing general agency that is the ~~ownership interests~~leading provider of expatriate medical insurance in Kudu held by certain funds managed by Oaktree for cash consideration of $81.4 million. In addition, White Mountains assumed all of Oaktree’s unfunded capital commitments to Kudu, increasing White Mountains’s total capital commitment to $250.0 million. White Mountains recognized total assets acquired of $155.5 million, including $7.6 million of goodwillIsrael and ~~$2.2 million of other intangible assets, total liabilities assumed of $0.8 million and non-controlling interest of $1.5 million.~~

uses the same card-based delivery system as PassportCard. As a result of the Kudu Transaction, White Mountains’s basic unit ownership of Kudu increased from 49.5% to 99.1% (42.7% to 85.4% on a fully diluted, fully converted basis), and White Mountains began consolidating Kudu as a reportable segment in its financial statements during the second quarter of 2019. White Mountains’s consolidated financial statements and its segment disclosures include Kudu’s results from April 4, 2019, the date of the Kudu Transaction. For periods prior to the Kudu Transaction, White Mountains determined that Kudu was a VIE, but White Mountains was not the primary beneficiary. In those periods, White Mountains elected to use the fair value option.

During the fourth quarter of 2019, White Mountains increased its total capital commitment to Kudu by $100.0 million to $350.0 million, of which $94.5 million and $129.0 million was undrawn as of September 30, 2020 and December 31, 2019. During the fourth quarter of 2019, Kudu obtained a committed $125.0 million credit facility, of which $51.0 million and $68.0 million was undrawn as of September 30, 2020 and December 31, 2019. See ~~Note 5 — “Debt”~~.

~~Dispositions~~

~~MediaAlpha~~

~~On February 26, 2019, MediaAlpha completed the MediaAlpha Transaction. White Mountains received net cash proceeds of $89.3 million from the MediaAlpha Transaction.~~

White Mountains recognized a realized gain of $67.5 million and reduced its ownership interest of the basic units outstanding of MediaAlpha from 61.0% to 48.3% (58.9% to 42.0% on a fully diluted, fully converted basis) as a result of the MediaAlpha Transaction. White Mountains’s remaining ownership interest in MediaAlpha no longer meets the criteria for a controlling ownership interest and, accordingly, White Mountains deconsolidated MediaAlpha on February 26, 2019. White Mountains’s consolidated statement of operations and comprehensive income and its segment disclosures include MediaAlpha’s results of operations for the period from January 1, 2019 through February 26, 2019. Upon deconsolidation, White Mountains’s investment in MediaAlpha met the criteria to be accounted for under the equity method or under the fair value option. See ~~Note 14 — “Equity-Method Eligible Investments”. White Mountains elected the fair value option and the investment in MediaAlpha was initially measured at its estimated fair value of $114.7 million as~~part of the transaction, ~~date, with the change in fair value of $114.7 million recognized as an unrealized investment gain.~~ White Mountains ~~recognized~~reorganized its equity stake in PassportCard so that White Mountains and its partner in DavidShield would each own 50% of both businesses. To facilitate the transaction, White Mountains provided financing to its partner in the form of a ~~total~~non-interest bearing loan that is secured by the partner’s equity in PassportCard and DavidShield. The gross purchase price for the 50% interest in DavidShield was $41.8 million, or $28.3 million net of ~~$182.2 million of realized and unrealized investment gains on~~ the ~~MediaAlpha Transaction.~~

~~On October 30, 2020, MediaAlpha completed an initial public offering (the “MediaAlpha IPO”). See~~ ~~Note 18 — “Subsequent Events”~~.

~~Other Transactions~~

~~PassportCard/DavidShield~~financing provided for the restructuring.

On May 7, 2020, White Mountains made an additional $15.0 million investment in PassportCard/DavidShield to support operations through the ongoing COVID-19 pandemic. The transaction increased White Mountains’s ownership interest from 50.0% to 53.8% ~~in both PassportCard and DavidShield,~~, but had no impact on the governance structure of the companies, including White Mountains’s board representation or other investor rights. The governance structures for both PassportCard and DavidShield were designed to give White Mountains and its co-investor equal power to make the decisions that most significantly impact the operations of PassportCard and DavidShield.

As a result of the transaction, White Mountains’s re-evaluated its accounting treatment for PassportCard and DavidShield. Because White Mountains does not have the unilateral power to direct the operations of PassportCard or DavidShield, White Mountains does not hold a controlling financial interest in either PassportCard or DavidShield and does not consolidate either entity. ~~Accordingly,~~White Mountains’s ownership interest gives White Mountains ~~continues~~the opportunity to ~~account for its investments in~~exert significant influence over the significant financial and operating activities of PassportCard and DavidShield. Accordingly, PassportCard and DavidShield ~~at fair value within other long-term investments (as equity-method eligible investments~~meet the criteria to be accounted for ~~which~~under the equity method. White Mountains has taken the fair value ~~option)~~option for its investment in PassportCard and DavidShield. Changes in the fair value of PassportCard and DavidShield are recorded in realized and unrealized investment gains. White Mountains’s maximum exposure to loss on its equity investment in PassportCard/DavidShield and the non-interest bearing loan to its partner is limited to the total carrying value of $104.2 million.

Note 3. Loss and Loss Adjustment Expense Reserves

Ark establishes loss and loss adjustment expense (“LAE”) reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The process of estimating reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain.

Loss and LAE reserves typically comprise case reserves for claims reported and reserves for losses that have occurred but for which claims have not yet been reported, referred to as incurred but not reported (“IBNR”) reserves. IBNR reserves include a provision for expected future development on case reserves. Case reserves are estimated based on the experience and knowledge of claims staff regarding the nature and potential cost of each claim and are adjusted as additional information becomes known or payments are made. IBNR reserves are typically derived by subtracting paid loss and LAE and case reserves from estimates of ultimate losses and LAE. Actuaries estimate ultimate loss and LAE using various generally accepted actuarial methods applied to known losses and other relevant information. Like case reserves, IBNR reserves are adjusted as additional information becomes known or payments are made.

Ultimate loss and LAE are generally determined by extrapolation of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future. In forecasting ultimate loss and LAE with respect to any line of business, past experience with respect to that line of business is the primary resource, but cannot be relied upon in isolation. Ark’s own experience, particularly claims development experience, such as trends in case reserves, payments on and closings of claims, as well as changes in business mix and coverage limits, is the most important information for estimating its reserves. Ultimate loss and LAE for major losses and catastrophes are estimated based on the known and expected exposures to the loss event, rather than simply relying on the extrapolation of reported and settled claims.

Uncertainties in estimating ultimate loss and LAE are magnified by the time lag between when a claim actually occurs and when it is reported and eventually settled. This time lag is sometimes referred to as the “claim-tail”. The claim-tail for most property coverages is typically short (usually a few days up to a few months). The claim-tail for liability/casualty coverages can be quite long as claims are often reported and ultimately paid or settled years after the related loss events occur. During the long claims reporting and settlement period, additional facts regarding coverages written in prior accident years, as well as about actual claims and trends may become known and, as a result, Ark may adjust its reserves. If management determines that an adjustment is appropriate, the adjustment is booked in the accounting period in which such determination is made. Accordingly, should reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted.

In determining ultimate loss and LAE, the cost to indemnify claimants, provide needed legal defense and other services for insureds and administer the investigation and adjustment of claims are considered. These claim costs are influenced by many factors that change over time, such as expanded coverage definitions as a result of new court decisions, inflation in costs to repair or replace damaged property, inflation in the cost of services and legislated changes in statutory benefits, as well as by the particular, unique facts that pertain to each claim. As a result, the rate at which claims arose in the past and the costs to settle them may not always be representative of what will occur in the future. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple and conflicting interpretations. Changes in coverage terms or claims handling practices may also cause future experience and/or development patterns to vary from the past. Because of the factors previously discussed, the process requires the use of informed judgment and is inherently uncertain.

Ark performs an actuarial review of its recorded reserves each quarter, using several generally accepted actuarial methods to evaluate its loss reserves, each of which has its own strengths and weaknesses. Management places more or less reliance on a particular method based on the facts and circumstances at the time the reserve estimates are made.

The following table summarizes the loss and LAE reserve activities of Ark’s insurance and reinsurance subsidiaries for the three months ended March 31, 2021:


Millions	Three Months Ended March 31, 2021
Gross beginning balance as of January 1, 2021	$	696.0
Less: beginning reinsurance recoverable on unpaid losses	(433.4)
Net loss and LAE reserves	262.6

Loss and LAE incurred relating to:
Current year losses	65.5
Prior year losses	.5
Total incurred losses and LAE	66.0

Foreign currency translation adjustment to loss and LAE reserves	.7

Loss and LAE paid relating to:
Current year losses	(5.2)
Prior year losses	(19.7)
Total loss and LAE payments	(24.9)

Net ending balance	304.4
Plus: ending reinsurance recoverable on unpaid losses	447.5
Gross ending balance as of March 31, 2021	$	751.9

See Note 10 — “Municipal Bond Guarantee Insurance” for loss and LAE reserve balances related to White Mountains financial guarantee business.

Note 4. Third Party Reinsurance

In the normal course of business, Ark may seek to limit losses that may arise from catastrophes or other events by reinsuring with third party reinsurers. Ark remains liable for risks reinsured in the event that the reinsurer does not honor its obligations under reinsurance contracts. The following table summarizes the effects of reinsurance on written and earned premiums and on losses and LAE for Ark.


	Three Months Ended March 31, 2021
Millions
Written premiums:
Gross	$	404.5


Ceded	(62.1)
Net written premiums	$	342.4
Earned premiums:
Gross	$	162.6


Ceded	(58.0)
Net earned premiums	$	104.6
Losses and LAE:
Gross	$	115.6


Ceded	(49.6)
Net Losses and LAE	$	66.0

As of March 31, 2021, Ark had $447.5 million and $1.5 million of reinsurance recoverables on unpaid and paid losses. As reinsurance contracts do not relieve Ark of its obligation to its policyholders, Ark seeks to reduce the credit risk associated with reinsurance balances by avoiding over-reliance on specific reinsurers through the application of concentration limits and thresholds. Ark is selective with its reinsurers, placing reinsurance with only those reinsurers having a strong financial condition. Ark monitors the financial strength of its reinsurers on an ongoing basis.

As of March 31, 2021, Ark’s reinsurance recoverables on unpaid losses of $447.5 million included $331.0 million related to TPC Providers, which are collateralized. Of the remaining $116.5 million of reinsurance recoverables on unpaid losses, 90% are from reinsurers with an A.M. Best rating of “A” (Excellent, which is the third highest of 16 financial strength ratings).

See Note 10 — “Municipal Bond Guarantee Insurance” for third-party reinsurance balances related to White Mountains financial guarantee business.

Note 3.5. Investment Securities

White Mountains’s portfolio of investment securities held for general investment purposes consists of fixed maturity investments, short-term investments, common equity securities, its investment in MediaAlpha and other long-term investments, which are classified as trading securities. Trading securities are reported at fair value as of the balance sheet date. Net realized and unrealized investment gains (losses) on trading securities are reported in pre-tax revenues.

White Mountains’s fixed maturity investments are generally valued using industry standard pricing methodologies. Key inputs include benchmark yields, benchmark securities, reported trades, issuer spreads, bids, offers, credit ratings and prepayment speeds. Income on mortgage 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 (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 interest-bearing 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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Other long-term investments consist primarily of unconsolidated entities, including Kudu’s ~~non-controlling equity interests in the form of revenue and earnings participation contracts (“~~Participation ~~Contracts”),~~Contracts, private equity funds, a hedge ~~funds,~~fund, Lloyd’s trust deposits, a bank loan fund, ILS funds and private debt instruments.

Net Investment Income

White Mountains’s net investment income is comprised primarily of interest income associated with White Mountains’s fixed maturity investments and short-term investments, ~~and~~ dividend income from common equity securities, distributions from its investment in MediaAlpha and distributions from other long-term investments.

The following table presents pre-tax net investment income for the three ~~and nine~~ months ended ~~September 30, 2020~~ March 31, 2021 and ~~2019:~~2020:


	Three Months Ended
	March 31,
Millions		2021		2020
Fixed maturity investments		$	6.5	$	8.1
Short-term investments		1.6		.8
Common equity securities		0		3.8

Investment in MediaAlpha		0		2.4
Other long-term investments		13.8		8.1
Amount attributable to TPC Providers		(.9)		0
Total investment income		21.0		23.2
Third-party investment expenses		(.4)		(.3)
Net investment income, pre-tax		$	20.6	$	22.9

Three Months Ended Nine Months Ended
September 30 September 30
Millions 2020 2019 2020 2019
Fixed maturity investments $ 7.0
$ 8.0
$ 22.4
$ 24.4
Short-term investments .1
1.3
1.0
3.9
Common equity securities .5
2.5
6.5
10.8
Other long-term investments 63.9
7.0
84.7
17.4
Total investment income 71.5
18.8
114.6
56.5
Third-party investment expenses (.3 ) (.4 ) (.9 ) (1.1 )
Net investment income, pre-tax $ 71.2
$ 18.4
$ 113.7
$ 55.4

Net Realized and Unrealized Investment Gains (Losses)

The following table presents net realized and unrealized investment gains (losses) for the three ~~and nine~~ months ended ~~September 30, 2020~~ March 31, 2021 and ~~2019:~~2020:


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 30				September 30					March 31,
Millions	2020		2019		2020		2019		Millions	2021		2020
Fixed maturity investments	$	3.6	$	8.9	$	35.8	$	46.9	Fixed maturity investments	$	(25.4)	$	2.2
Short-term investments	0		0		.4		.3		Short-term investments	(1.3)		.4
Common equity securities	48.4		2.4		5.9		141.5		Common equity securities	1.0		(140.8)
Other long-term investments ^{(1) (2)(3)}	254.6		$	55.7	260.7		159.1
Net realized and unrealized investment gains	306.6		67.0		302.8		347.8
Less: net gains on investment securities sold during the period	36.1		0		29.6		12.4
Net realized and unrealized investment gains on investment securities held at the end of the period	$	270.5	$	67.0	$	273.2	$	335.4
Investment in MediaAlpha									Investment in MediaAlpha	(41.7)		30.0
Other long-term investments									Other long-term investments	28.1		(48.5)
Amount attributable to TPC Providers									Amount attributable to TPC Providers	(1.3)		0
Net realized and unrealized investment losses (1)									Net realized and unrealized investment losses (1)	(40.6)		(156.7)
Less: net losses on investment securities sold during the period									Less: net losses on investment securities sold during the period	(.2)		(8.7)
Net realized and unrealized investment losses on investment securities held at the end of the period									Net realized and unrealized investment losses on investment securities held at the end of the period	$	(40.4)	$	(148.0)

⁽¹⁾~~For the nine months ended September 30, 2019, excludes $67.5 of realized gain and includes $114.7 of unrealized investment gain associated with the~~

~~MediaAlpha Transaction, which are both recorded in a separate line item in the statement of operations titled Realized gain and unrealized investment gain~~

~~from the MediaAlpha Transaction. See~~ ~~Note 2 — “Significant Transactions”.~~

⁽²⁾For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, includes $(0.2) and ~~2019, includes $250.0, $295.0, $35.3 and $150.0 of unrealized investment gains from White Mountains’s investment in MediaAlpha.~~

⁽³⁾~~For the three and nine months ended September 30, 2020 and 2019, includes $0.8 and $(0.8)~~$(0.4) of realized and unrealized investment ~~gains (losses)~~losses related to foreign currency exchange.

The following table presents total gains (losses) included in earnings attributable to net unrealized investment gains (losses) for Level 3 investments for the three ~~and nine~~ months ended ~~September 30,~~ March 31, 2021 and 2020 ~~and 2019~~ for investments still held at the end of the period:


	Three Months Ended
	March 31,
Millions	2021		2020



Other long-term investments	$	16.7	$	(9.4)
Total net unrealized investment gains (losses), pre-tax - Level 3 investments	$	16.7	$	(9.4)

Three Months Ended Nine Months Ended
September 30 September 30
Millions 2020 2019 2020 2019
Other long-term investments $ 260.1
$ 54.4
$ 276.0
$ 154.4
Total net unrealized investment gains (losses), pre-tax - Level 3 investments $ 260.1
$ 54.4
$ 276.0
$ 154.4

Investment Holdings

The following tables present the cost or amortized cost, gross unrealized investment gains (losses) and carrying values of White Mountains’s fixed maturity investments as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


	March 31, 2021
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains		Carrying Value
U.S. Government and agency obligations	$	220.1	$	2.1	$	(.6)	$	0	$	221.6
Debt securities issued by corporations	678.6		13.9		(5.7)		.1		686.9
Municipal obligations	269.4		15.4		(1.0)		0		283.8
Mortgage and asset-backed securities	225.8		5.4		(1.3)		0		229.9

Collateralized loan obligations	59.5		0		(.1)		0		59.4
Total fixed maturity investments	$	1,453.4	$	36.8	$	(8.7)	$	.1	$	1,481.6


	September 30, 2020										December 31, 2020
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value		Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Value
U.S. Government and agency obligations	$	206.2	$	4.4	$	0		$	210.6	U.S. Government and agency obligations	$	173.2	$	3.1	$	0	$	176.3
Debt securities issued by corporations	505.4		24.0		(.7		)	528.7		Debt securities issued by corporations	522.8		24.7		(.1)		547.4
Municipal obligations	251.0		20.4		(.1		)	271.3		Municipal obligations	244.0		21.0		0		265.0
Mortgage and asset-backed securities	203.6		7.3		0			210.9		Mortgage and asset-backed securities	211.7		6.8		0		218.5

Total fixed maturity investments	$	1,166.2	$	56.1	$	(.8	)	$	1,221.5	Total fixed maturity investments	$	1,151.7	$	55.6	$	(.1)	$	1,207.2

On October 30, 2020, MediaAlpha completed an initial public offering. At the IPO price of $19.00 per share, MediaAlpha had an equity market capitalization of approximately $1.2 billion and an enterprise valuation of approximately $1.4 billion. In the offering, White Mountains sold 3,609,894 shares and received total proceeds of $63.8 million. Following the completion of the MediaAlpha IPO, White Mountains owns 20,532,202 MediaAlpha shares, representing a 32.3% fully-diluted ownership interest. At the IPO price of $19.00 per share, the value of White Mountains’s remaining investment in MediaAlpha was $390.1 million. At the October month-end closing price of $33.83 per share, the value of White Mountains’s investment in MediaAlpha was $694.6 million.

~~Agreement to Acquire Ark Insurance~~

On October 1, 2020, White Mountains entered into a subscription and purchase agreement (the “Ark SPA”) with Ark Insurance Holdings Limited (“Ark”) and certain selling shareholders (collectively with Ark, the “Ark Sellers”). Certain Ark Sellers also entered into a related management warranty deed (together with the Ark SPA, the “Ark Acquisition Agreement”) pursuant to which they made certain warranties about the Ark business. Ark manages the underwriting of syndicates 4020 and 3902 at Lloyd's, which underwrite a diversified and balanced portfolio of reinsurance and insurance, including property, accident & health, energy, marine and political risks.

Under the terms of the Ark Acquisition Agreement, White Mountains will contribute $605.4 million of equity capital to Ark, at a pre money valuation of $300.0 million, and will also purchase $40.9 million of shares from the selling shareholders. White Mountains will also commit to contribute up to an additional $200.0 million of equity capital to Ark in 2021 (collectively, the “Ark Transaction”). Total post-closing capitalization of Ark is expected to exceed $800.0 million ($1.0 billion if the additional $200.0 million is contributed). At closing, White Mountains will own 72.0% of Ark on a basic shares outstanding basis (63.0% on a fully-diluted, fully-converted basis, taking account of management’s equity incentives). If the additional $200.0 million is contributed in full, White Mountains will own 77.1% of Ark on a basic shares outstanding basis (67.5% on a fully-diluted, fully-converted basis). Management’s equity incentives are subject to an 8% rate of return threshold with no catch-up. All shares outstanding not owned by White Mountains will be owned by management rollover shareholders.

In the future, management rollover shareholders could earn additional shares in the company if and to the extent that White Mountains achieves certain multiple of invested capital return thresholds. These additional shares are generally eligible to vest in three equal tranches at multiple on invested capital (“MOIC”) thresholds of 2.0x, 2.5x and 3.0x. If fully earned, these additional shares would represent 12.5% of the shares outstanding at closing.

The Ark Transaction is expected to close in January 2021. The Ark Transaction is subject to the receipt of regulatory approvals, receipt by Ark’s Bermuda reinsurer of an indicative rating letter from A.M. Best indicating a rating of “A-” or higher, receipt by Ark of $150.0 million of letters of credit, the non-occurrence of a material adverse effect and other customary closing conditions.

On October 26, 2020, A.M. Best assigned Ark a preliminary credit assessment of “A”. On November 3, 2020, Ark received a commitment for $150.0 million of letters of credit. If all closing conditions are satisfied before December 15, 2020, White Mountains has committed to pre-fund up to $400.0 million of its capital contribution at that time, with the closing then occurring on January 1, 2021.

~~COVID-19~~

On January 30, 2020, the spread of novel coronavirus (“COVID-19”) was declared a Public Health Emergency of International Concern by the World Health Organization. Subsequently, on March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic. White Mountains continues to monitor the impact of the COVID-19 pandemic but, as the pandemic is ongoing, White Mountains cannot determine the ultimate impact it may have on the global financial markets, the overall economy and on White Mountains’s businesses, results of operations and financial condition.


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion contains “forward-looking statements”. White Mountains intends statements that are not historical in nature, which are hereby identified as forward-looking statements, to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. White Mountains cannot promise that its expectations in such forward-looking statements will turn out to be correct. White Mountains’s actual results could be materially different from and worse than its expectations. See “FORWARD-LOOKING STATEMENTS” on page 8681 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.

The following discussion also includes ~~eleven~~twelve non-GAAP financial measures: (i) adjusted book value per share, (ii) book value per share and adjusted book value per share that reflect (1) the effect of revaluing White Mountains’s investment in MediaAlpha as of September 30, 2020 using the IPO price of $19.00 per share and the reversal of a $124 million deferred tax liability (“DTL”) resulting from a related internal reorganization completed in advance of the MediaAlpha IPO in October, and (2) the effect of further revaluing White Mountains’s investment in MediaAlpha as of September 30, 2020 to the October month-end closing price of $33.83 per share, (iii) BAM’s gross written premiums and ~~member surplus contributions (“MSC”)~~MSC from new business, (iii) Ark’s adjusted loss and loss adjustment expense ratio, (iv) Ark’s adjusted insurance acquisition expense ratio, (v) Ark’s adjusted other underwriting expense ratio, (vi) Ark’s adjusted combined ratio (vii) NSM’s earnings before interest, taxes, depreciation and amortization (“~~EBITDA~~”(“EBITDA”), ~~(v)~~(viii) NSM’s adjusted EBITDA, ~~(vi)~~(ix) Kudu’s EBITDA, ~~(vii)~~(x) Kudu’s adjusted EBITDA, ~~(viii)~~(xi) total consolidated portfolio ~~return excluding MediaAlpha, (ix) total common equity securities and other long-term investments return excluding MediaAlpha, (x) other long-term investments return~~returns excluding MediaAlpha and ~~(xi) total~~(xii) adjusted capital, that have been reconciled from their most comparable GAAP financial measures on page ~~78.~~75. White Mountains believes these measures to be useful in evaluating White Mountains’s financial performance and condition.

RESULTS OF OPERATIONS FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

Overview

White Mountains reported book value per share of ~~$1,099~~$1,231 and adjusted book value per share of ~~$1,101~~$1,242 as of ~~September 30, 2020.~~March 31, 2021. Book value per share and adjusted book value per share decreased 2% in the first quarter of 2021, including dividends. The decline was driven primarily by a decrease in the market price for White Mountains’s investment in MediaAlpha and a loss on the assets held for sale for NSM’s Fresh Insurance motor business and transaction expenses at Ark related to White Mountains’s acquisition. Book value per share and adjusted book value per share both ~~increased 8%~~decreased 4% in the ~~third~~first quarter of ~~2020. For~~2020, including dividends, driven primarily by White Mountains’s pre-tax total return on invested assets of -4.6%, as equity markets declined as the COVID-19 pandemic expanded.

Results in the first ~~nine months~~quarter of ~~2020, book value per share increased 7%~~2021 included $42 million of net realized and ~~adjusted book value per share increased 8%, including dividends.~~

~~Marking the value of~~unrealized investment losses from White Mountains’s investment in MediaAlpha, as unrealized losses resulting from a decline in the MediaAlpha share price from $39.07 as of December 31, 2020 to ~~its initial public~~$35.43 as of March 31, 2021 were partially offset by realized gains on shares sold in a secondary offering ~~(the “MediaAlpha IPO”)~~completed by MediaAlpha. On March 23, 2021, MediaAlpha completed a secondary offering of 8.05 million shares at $46.00 per share ($44.62 per share net of underwriting fees). In the secondary offering, White Mountains sold 3.6 million shares for net proceeds of $160 million. Following the completion of the offering, White Mountains owns 16.9 million shares, representing a 28.5% basic ownership interest (26.3% fully-diluted/fully-converted basis). At the March 31, 2021 closing price of ~~$19.00~~$35.43 per share, ~~and giving effect to a related internal reorganization~~the fair value of White Mountains remaining stake in October, which resulted in the release of a $124 million deferred tax liability, book value per share would have been $1,132 and adjusted book value per share would have been $1,135 as of September 30, 2020.

MediaAlpha was $600 million. Subsequent to the ~~MediaAlpha IPO,~~secondary offering, each $1.00 per share increase or decrease in the ~~stock~~market price of MediaAlpha will result in an approximate $7$5.50 per share increase or decrease in White Mountains’s book value per share and adjusted book value per share. For example, further marking the value of White Mountains’s investment in MediaAlpha to its October month-end closing price of $33.83 per share, book value per share would have been $1,230 and adjusted book value per share would have been $1,233 as of September 30, 2020.

Comprehensive income attributable to common shareholders was $237 million and $220 million in the third quarter and first nine months of 2020, compared to comprehensive income attributable to common shareholders of $46 million and $348 million in the third quarter and first nine months of 2019. Results in the third quarter and first nine months of 2020 included $305 million and $355 million of net investment income and unrealized investment gains from White Mountains’s investment in MediaAlpha. Results in the third quarter and first nine months of 2019 included $37 million and $222 million of net investment income, realized gains and unrealized investment gains from White Mountains’s investment in MediaAlpha, $182 million of which was from MediaAlpha’s sale of a significant minority stake to Insignia Capital Group on February 26, 2019 (the “MediaAlpha Transaction”).

On October 30, 2020, MediaAlpha completed the MediaAlpha IPO. At the IPO price of $19 per share, MediaAlpha had an equity market capitalization of approximately $1.2 billion and an enterprise valuation of approximately $1.4 billion. In the offering, White Mountains sold 3,609,894 shares and received total proceeds of $64 million. Following the completion of the MediaAlpha IPO, White Mountains owns 20,532,202 MediaAlpha shares, representing a 32% fully-diluted ownership interest. At the IPO price of $19.00 per share, the value of White Mountains’s remaining investment in MediaAlpha was $390 million. At the October month-end closing price of $33.83 per share, the value of White Mountains’s remaining investment in MediaAlpha was $695 million.

White Mountains’s reported book value per share and adjusted book value per share may be subject to greater volatility in the future, as the valuation of its investment in MediaAlpha based on the market value of MediaAlpha’s common stock could be more volatile than the valuation of its investment in MediaAlpha based on the private discounted cash flow model used in White Mountains’s financial statements in periods prior to the MediaAlpha IPO.

During the third quarter of 2020, MediaAlpha secured $210 million of new third-party debt financing and used a portion of the proceeds to effect a dividend recapitalization. White Mountains received $55 million of net proceeds and recorded $55 million of net investment income related to the dividend recapitalization. Also during the third quarter of 2020, White Mountains increased the fair value of its investment in MediaAlpha by $250 million to $475 million. The increase was driven primarily by continued strong operating results, an improved outlook for the MediaAlpha business going forward and expectations for the MediaAlpha IPO.

Gross written premiums and MSC collected in the HG Global/BAM segment totaled ~~$30 million and $93~~$26 million in the ~~third~~first quarter ~~and first nine months~~ of ~~2020,~~2021, compared to ~~$44 million and $84~~$20 million in the ~~third~~first quarter ~~and first nine months~~ of ~~2019.~~2020. BAM insured municipal bonds with par value of ~~$4.7 billion and $11.8~~$3.5 billion in the ~~third~~first quarter ~~and first nine months~~ of ~~2020,~~2021, compared to ~~$4.1 billion and $8.9~~$3.0 billion in the ~~third~~first quarter ~~and~~of 2020. In the first ~~nine months~~quarter of ~~2019.~~2021, BAM completed an assumed reinsurance transaction to reinsure municipal bonds with a par value of $0.8 billion. Total pricing was ~~63 and 79~~74 basis points in the ~~third~~first quarter ~~and first nine months~~ of ~~2020,~~2021, compared to ~~107 and 94~~66 basis points in the ~~third~~first quarter ~~and first nine months~~ of ~~2019.~~2020. BAM’s total claims paying resources were ~~$968~~$1,144 million ~~at September 30, 2020,~~as of March 31, 2021, compared to ~~$938~~$987 million atas of December 31, ~~2019~~2020 and $930 million ~~at September 30, 2019.~~as of March 31, 2020. In the first quarter of 2021, BAM completed a reinsurance agreement with Fidus Re, Ltd. (“Fidus Re”) that increased BAM’s claims paying resources by $150 million.

On January 1, 2021, White Mountains closed the Ark Transaction. Ark’s GAAP combined ratio was 109% in the first quarter of 2021. Ark’s adjusted combined ratio, which adds back amounts ceded to insurance and reinsurance groups that provide third party capital (“TPC Providers”), was 108% in the first quarter of 2021. The adjusted combined ratio included 17 points of catastrophe losses, of which 14 points related to Winter Storm Uri. In the first quarter of 2021, gross written premiums, net written premiums and net earned premiums were $405 million, $342 million and $105 million. Gross written premiums in the first quarter of 2021 were more than double Ark’s gross written premiums in the first quarter of 2020 (prior to White Mountains’s ownership of Ark), with blended renewal pricing up over 10%. Ark reported pre-tax loss of $33 million in the first quarter of 2021, which included $25 million of transaction expenses related to the Ark Transaction. In the first quarter of 2021, AM Best assigned a financial strength rating of “A/stable” to Group Ark Insurance Ltd (“GAIL”), Ark’s wholly-owned Bermuda based insurance and reinsurance company.

NSM reported pre-tax loss of $33 million, adjusted EBITDA of $14 million, and commission and other revenues of $75 million in the first quarter of 2021, compared to pre-tax loss of $1 million, adjusted EBITDA of ~~$15~~$11 million, and commission and other revenues of $71 million in the third quarter of 2020, compared to pre-tax income of $5 million, adjusted EBITDA of $13 million, and commission and other revenues of $60 million in the third quarter of 2019. NSM reported pre-tax loss of $6 million, adjusted EBITDA of $44 million, and commission and other revenues of $212$65 million in the first ~~nine months~~quarter of ~~2020, compared to~~2020. NSM’s pre-tax loss ~~of $4 million, adjusted EBITDA of $39 million, and commission and other revenues of $175 million~~ in the first ~~nine months~~quarter of ~~2019.~~2021 includes a loss of $29 million related to the sale of its Fresh Insurance motor business. Results for the ~~third~~first quarter ~~and first nine months~~ of ~~2020~~2021 include the results of Kingsbridge Group Limited (“Kingsbridge”), a leading provider of commercial lines insurance and consulting services to the contingent workforce in the United Kingdom, which was acquired by NSM on April 7, 2020.

Kudu reported pre-tax income of ~~$13~~$16 million, ~~and~~ adjusted EBITDA of ~~$5 million in the third quarter of 2020, compared to pre-tax income of $3~~$6 million and ~~adjusted EBITDA~~total revenues of $3 million in the third quarter of 2019. Pre-tax income included $10 million of unrealized gains on Kudu’s Participation Contracts, reflecting the continued recovery in investment markets and an improved outlook for Kudu’s underlying asset management businesses. Kudu reported pre-tax income of $9 million and adjusted EBITDA of $14$24 million in the first ~~nine months~~quarter of ~~2020. Pre-tax income included $2~~2021, compared to pre-tax loss of $21 million, adjusted EBITDA of ~~unrealized gains on Kudu’s Participation Contracts, reflecting a full recovery from the impact~~$6 million and total revenues of ~~the market dislocation from the COVID-19 pandemic on Kudu’s underlying asset management businesses~~$(17) million in the first quarter of 2020. In the first quarter of ~~2020,~~2021, Kudu deployed ~~$21~~$11 million in Creation Investments Capital Management (“Creation”), a private equity firm specializing in impact investing. In the second quarter of 2020, Kudu deployed $37 million in Sequoia Financial Group, LLC (“Sequoia”), a registered investment advisor with $4.7 billion in client assets.an existing portfolio company. As of ~~September 30, 2020,~~March 31, 2021, Kudu has deployed ~~a total of $324~~$397 million in ~~11 asset~~13 investment management firms, with an average cash yield to Kudu at inception of ~~10.2%~~10.3%. The firms have total assets under management of approximately ~~$39~~$48 billion, spanning a range of asset classes, including real estate, real assets, wealth management, hedge funds, private equity and alternative credit strategies.

~~White Mountains’s pre-tax total return on invested assets was 13.5% in~~ On March 23, 2021, Kudu replaced its existing secured bank facility with a new secured revolving credit facility (the “Kudu Credit Facility”). Subject to maximum LTV levels, the ~~third quarter~~maximum borrowing capacity of ~~2020. This return included $305~~the Kudu Credit Facility is $300 million (which includes the initial advanced amount of net investment income and unrealized investment gains from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, White Mountains’s pre-tax total return on invested assets was 2.8% in the third quarter of 2020. In the third quarter of 2020, White Mountains sold $507 million of common equity securities in anticipation of funding the transaction with Ark Insurance Holdings Limited. See ~~Ark Transaction~~ on page 51. The total return on invested assets was 3.1% in the third quarter of 2019. This return included $37 million in unrealized investment gains and net investment income from MediaAlpha. Excluding MediaAlpha, White Mountains’s pre-tax total return on invested assets was 1.8% in the third quarter of 2019.$102 million).

White Mountains’s pre-tax total return on invested assets was ~~15.4%~~-0.3% in the first ~~nine months~~quarter of ~~2020.~~2021. This return included ~~$355~~$42 million inof net realized and unrealized investment ~~gains and net investment income~~losses from MediaAlpha. Excluding MediaAlpha, the total return on invested assets was ~~2.8%~~0.7% in the first ~~nine months~~quarter of ~~2020.~~2021. Excluding MediaAlpha, investment returns in the first quarter of 2021 were driven primarily by favorable other long-term investments results, partially offset by the impact of rising interest rates on the fixed income portfolio. White Mountains’s pre-tax total return on invested assets was ~~15.9%~~-4.6% in the first ~~nine months~~quarter of ~~2019.~~2020. This return included ~~$155~~$32 million inof net investment income and net unrealized investment gains ~~and net investment income~~ from MediaAlpha. Excluding MediaAlpha, the total return on invested assets was ~~9.9%~~-6.1% in the first ~~nine months~~quarter of ~~2019.~~

2020. Excluding MediaAlpha, investment returns in the ~~third~~first quarter of 2020 were driven primarily by ~~strong~~the decline in equity markets ~~following the decline experienced in the first quarter of 2020~~ in reaction to the COVID-19 pandemic. Excluding MediaAlpha, returns in first nine months of 2020 were primarily driven by a decline in interest rates. Excluding MediaAlpha, returns in the third quarter of 2019 were driven by a $15 million increase in the fair value of White Mountains’s investment in PassportCard/DavidShield, which was driven by continued growth in profitability metrics during the course of the year, and a decline in interest rates. Excluding MediaAlpha, returns in the first nine months of 2019 were primarily driven by strong equity markets and a decline in interest rates.

~~Ark Transaction~~

Under the terms of the Ark Acquisition Agreement, White Mountains will contribute $605 million of equity capital to Ark, at a pre money valuation of $300 million, and will also purchase $41 million of shares from the selling shareholders. White Mountains will also commit to contribute up to an additional $200 million of equity capital to Ark in 2021 (collectively, the “Ark Transaction”). Total post-closing capitalization of Ark is expected to exceed $800 million ($1.0 billion if the additional $200 million is contributed). At closing, White Mountains will own 72% of Ark on a basic shares outstanding basis (63% on a fully-diluted, fully-converted basis, taking account of management’s equity incentives). If the additional $200 million is contributed in full, White Mountains will own 77% of Ark on a basic shares outstanding basis (68% on a fully-diluted, fully-converted basis). Management’s equity incentives are subject to an 8% rate of return threshold with no catch-up. All shares outstanding not owned by White Mountains will be owned by management rollover shareholders.

In the future, management rollover shareholders could earn additional shares in the company if and to the extent that White Mountains achieves certain multiple of invested capital return thresholds. These additional shares are generally eligible to vest in three equal tranches at MOIC thresholds of 2.0x, 2.5x and 3.0x. If fully earned, these additional shares would represent 13% of the shares outstanding at closing.

The Ark Transaction is expected to close in January 2021. The Ark Transaction is subject to the receipt of regulatory approvals, receipt by Ark’s Bermuda reinsurer of an indicative rating letter from A.M. Best indicating a rating of “A-” or higher, receipt by Ark of $150 million of letters of credit, the non-occurrence of a material adverse effect and other customary closing conditions.

On October 26, 2020, A.M. Best assigned Ark a preliminary credit assessment of “A”. On November 3, 2020, Ark received a commitment for $150 million of letters of credit. Closing the Ark Transaction does not require the approval of the White Mountains shareholders. If all closing conditions are satisfied before December 15, 2020, White Mountains has committed to pre-fund up to $400 million of its capital contribution at that time, with the closing then occurring on January 1, 2021.

Adjusted Book Value Per Share

The following table presents White Mountains’s book value per share and reconciles it to adjusted book value per share, a non-GAAP measure. See NON-GAAP FINANCIAL MEASURES on page ~~78.~~75.


	September 30, 2020			June 30, 2020			December 31, 2019			September 30, 2019				March 31, 2021		December 31, 2020		March 31, 2020
Book value per share numerators (in millions):													Book value per share numerators (in millions):
White Mountains’s common shareholders’ equity - GAAP book value per share numerator	$	3,407.7		$	3,166.0		$	3,261.5		$	3,193.4		White Mountains’s common shareholders’ equity - GAAP book value per share numerator	$	3,825.9	$	3,906.0	$	3,076.7

Time value of money discount on expected future payments on the BAM Surplus Notes ⁽¹⁾	(144.3		)	(146.7		)	(151.6		)	(132.8		)	Time value of money discount on expected future payments on the BAM Surplus Notes (1)	(137.7)		(142.5)		(149.2)
HG Global’s unearned premium reserve ⁽¹⁾	181.0			173.8			156.7			160.4			HG Global’s unearned premium reserve (1)	195.3		190.0		160.5
HG Global’s net deferred acquisition costs ⁽¹⁾	(49.5		)	(47.0		)	(41.5		)	(42.0		)	HG Global’s net deferred acquisition costs (1)	(54.2)		(52.4)		(42.9)
Adjusted book value per share numerator	$	3,394.9		$	3,146.1		$	3,225.1		$	3,179.0		Adjusted book value per share numerator	$	3,829.3	$	3,901.1	$	3,045.1
Book value per share denominators (in thousands of shares):													Book value per share denominators (in thousands of shares):
Common shares outstanding - GAAP book value per share denominator	3,102.0			3,101.8			3,185.4			3,185.4			Common shares outstanding - GAAP book value per share denominator	3,107.3		3,102.0		3,135.0
Unearned restricted common shares	(19.3		)	(23.1		)	(18.5		)	(21.5		)	Unearned restricted common shares	(23.4)		(14.8)		(26.9)

Adjusted book value per share denominator	3,082.7			3,078.7			3,166.9			3,163.9			Adjusted book value per share denominator	3,083.9		3,087.2		3,108.1
GAAP book value per share	$	1,098.56		$	1,020.71		$	1,023.91		$	1,002.53		GAAP book value per share	$	1,231.27	$	1,259.18	$	981.39
Adjusted book value per share	$	1,101.28		$	1,021.91		$	1,018.41		$	1,004.76		Adjusted book value per share	$	1,241.71	$	1,263.64	$	979.74
Year-to-date dividends paid per share	$	1.00		$	1.00		$	1.00		$	1.00		Year-to-date dividends paid per share	$	1.00	$	1.00	$	1.00

MediaAlpha reported GAAP pre-tax loss of $6 million and revenues of $49 million from January 1, 2019 to February 26, 2019, the date of the MediaAlpha Transaction. During the period from January 1, 2019 to February 26, 2019, revenues were primarily driven by the property & casualty, health and life insurance verticals, which had revenues of $26 million and $17 million. During the period from January 1, 2019 to February 26, 2019, MediaAlpha recognized $7 million of costs related to the transaction with Insignia Group in general and administrative expenses.

Other Operations

The following table presents a summary of White Mountains’s financial results from its Other Operations segment for the three ~~and nine~~ months ended~~September 30, 2020~~ March 31, 2021 and ~~2019~~:2020:


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 30				September 30					March 31,
Millions	2020		2019		2020		2019		Millions		2021		2020
Net investment income	$	60.1	$	8.4	$	79.3	$	30.7	Net investment income		$	7.1	$	10.1
Net realized and unrealized investment gains	293.6		57.2		277.6		199.6
Realized gain and unrealized investment gain from the MediaAlpha Transaction	—		—		—		182.2
Advertising and commission revenues	2.1		1.9		6.1		4.5
Net realized and unrealized investment gains (losses)									Net realized and unrealized investment gains (losses)		2.1		(168.0)
Net realized and unrealized investment (losses) gains from investment in MediaAlpha									Net realized and unrealized investment (losses) gains from investment in MediaAlpha		(41.7)		30.0
Commission revenues									Commission revenues		2.3		2.1
Other revenues	2.2		2.6		6.0		3.6		Other revenues		7.1		1.5
Total revenues	358.0		70.1		369.0		420.6		Total revenues		(23.1)		(124.3)
Cost of sales	2.3		2.3		6.5		5.0		Cost of sales		4.0		2.0
General and administrative expenses	44.3		27.7		87.1		87.2		General and administrative expenses		35.7		17.5
Amortization of other intangible assets	.2		—		.6		.1		Amortization of other intangible assets		.5		.2
Interest expense	.3		.3		.8		.3		Interest expense		.3		.3
Total expenses	47.1		30.3		95.0		92.6		Total expenses		40.5		20.0
Pre-tax income	$	310.9	$	39.8	$	274.0	$	328.0
Pre-tax loss									Pre-tax loss		$	(63.6)	$	(144.3)

Other Operations Results—Three Months Ended ~~September 30, 2020~~March 31, 2021 versus Three Months Ended ~~September 30, 2019~~March 31, 2020

White Mountains’s Other Operations segment reported pre-tax ~~income~~loss of ~~$311~~$64 million in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$40~~$144 million in the ~~third~~first quarter of ~~2019.~~2020. White Mountains’s Other Operations segment reported net realized and unrealized investment (losses) gains from its investment in MediaAlpha of $(42) million in the first quarter of 2021, compared to $30 million in the first quarter of 2020. White Mountains’s Other Operations segment reported net realized and unrealized investment gains (losses) of ~~$294~~$2 million in the ~~third~~first quarter of ~~2020, driven primarily by the increase in the fair value of White Mountains’s investment in MediaAlpha,~~2021, compared to ~~$57~~$(168) million in the ~~third~~first quarter of 2019. White Mountains’s Other Operations segment reported net investment income of $60 million in the third quarter of 2020, driven primarily by the $55 million of net proceeds received from the dividend recapitalization at MediaAlpha, compared to $8 million ~~in thethird quarter of 2019~~.2020. See Summary of Investment Results on page ~~68.~~66. The Other Operations segment reported general and administrative expenses of ~~$44~~$36 million in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$28~~$18 million in the ~~third~~first quarter of ~~2019.~~2020. The increase in general and administrative expenses was driven primarily by higher incentive compensation costs, ~~in turn~~ driven primarily by ~~strong results~~an increase in White Mountains’s share price and a higher assumed harvest percentage on outstanding performance shares in periods subsequent to the ~~third quarter of 2020.~~

~~Other Operations Results—Nine Months Ended September 30, 2020 versus Nine Months Ended September 30, 2019~~MediaAlpha IPO.

White Mountains’s Other Operations segment reported pre-tax income of $274 million in the first nine months of 2020, compared to pre-tax income of $328 million in the first nine months of 2019. White Mountains’s Other Operations segment reported net realized and unrealized investment gains of $278 million in the first nine months of 2020, driven primarily by the increase in the fair value of White Mountains’s investment in MediaAlpha, compared to net realized and unrealized investment gains of $200 million in the first nine months of 2019. White Mountains’s Other Operations segment results for the first nine months of 2019 included a $182 million of gains from the MediaAlpha Transaction, which consisted of $67 million of realized gain and $115 million of unrealized investment gain. White Mountains’s Other Operations segment reported net investment income of $79 million in the first nine months of 2020, driven primarily by the $55 million of net proceeds received from the dividend recapitalization at MediaAlpha, compared to $31 million ~~in thefirst nine months of 2019. See~~ ~~Summary of Investment Results~~ ~~on page 68. General and administrative expenses were $87 million in both the first nine months of 2020 and 2019.~~

II. Summary of Investment Results

White Mountains’s total investment results include results from all segments. For purposes of discussing rates of return, all percentages are presented gross of management fees and trading expenses and are calculated before any adjustments for TPC Providers in order to produce a better comparison to benchmark returns.

The following table presents the pre-tax investment return for White Mountains’s consolidated portfolio for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Gross Investment Returns and Benchmark Returns

Prior to the MediaAlpha IPO, White Mountains’s investment in MediaAlpha was presented within other long-term investments. Subsequent to the MediaAlpha IPO, White Mountains presents its investment in MediaAlpha in a separate line item on the balance sheet. Amounts for periods prior to the MediaAlpha IPO have been reclassified to be comparable to the current period.

Three Months Ended Nine Months Ended
September 30 September 30
2020 2019 2020 2019

Common equity securities 7.9 % 1.0 % 1.6 % 18.4 %
Other long-term investments 36.6 % 8.7 % 40.8 % 44.0 %
Other long-term investments - excluding MediaAlpha 2.0 % 4.2 % (1.4 )% 3.8 %
Total common equity securities and other long-term investments 34.2 % 5.1 % 33.5 % 27.6 %
Total common equity securities and other long-term investments -
excluding MediaAlpha
5.4 % 2.5 % 0.9 % 14.3 %
S&P 500 Index (total return) 8.9 % 1.7 % 5.6 % 20.6 %

Fixed income investments 0.8 % 1.3 % 4.4 % 5.7 %
Bloomberg Barclays U.S. Intermediate Aggregate Index 0.5 % 1.4 % 5.2 % 6.2 %

Total consolidated portfolio 13.5 % 3.1 % 15.4 % 15.9 %
Total consolidated portfolio - excluding MediaAlpha 2.8 % 1.8 % 2.8 % 9.9 %
White Mountains’s returns for the three months ended March 31, 2021 and 2020 are as follows:


	Three Months Ended
	March 31,
		2021		2020



Fixed income investments		(1.0)	%	0.7	%
Bloomberg Barclays U.S. Intermediate Aggregate Index		(1.6)	%	2.5	%

Common equity securities		1.8	%	(20.9)	%

Investment in MediaAlpha		(8.5)	%	18.0	%
Other long-term investments		4.1	%	(5.8)	%
Total common equity securities, investment in MediaAlpha and other long-term investments		0.8	%	(9.6)	%
Total common equity securities and other long-term investments		3.8	%	(13.3)	%
S&P 500 Index (total return)		6.2	%	(19.6)	%

Total consolidated portfolio		(0.3)	%	(4.6)	%
Total consolidated portfolio - excluding MediaAlpha		0.7	%	(6.1)	%

Investment Returns—Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020

White Mountains’s pre-tax total return on invested assets was ~~13.5%~~-0.3% in the ~~third~~first quarter of ~~2020.~~2021. This return included ~~$250 million of unrealized investment gains and $55~~$42 million of net investment income from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, White Mountains’s pre-tax total return on invested assets was 2.8% in the third quarter of 2020. The total return on invested assets was 3.1% in the third quarter of 2019. This return included $35 million inrealized and unrealized investment ~~gains and $2 million in net investment income from MediaAlpha. Excluding MediaAlpha, White Mountains’s pre-tax total return on invested assets was 1.8% in the third quarter of 2019.~~

White Mountains’s pre-tax total return on invested assets was 15.4% in the first nine months of 2020. This return included $295 million in unrealized investment gains and $60 million in net investment incomelosses from MediaAlpha. Excluding MediaAlpha, the total return on invested assets was ~~2.8%~~0.7% in the first ~~nine months~~quarter of ~~2020.~~2021. White Mountains’s pre-tax total return on invested assets was ~~15.9%~~-4.6% in the first ~~nine months~~quarter of ~~2019.~~2020. This return included ~~$150~~$32 million inof net investment income and net unrealized investment gains ~~and $5 million in net investment income~~ from MediaAlpha. Excluding MediaAlpha, the total return on invested assets was ~~9.9%~~-6.1% in the first ~~nine months~~quarter of ~~2019.~~2020.

Excluding MediaAlpha, investment returns in the ~~third~~first quarter of 2021 were driven primarily by favorable other long-term investments results, partially offset by the impact of rising interest rates on the fixed income portfolio. Excluding MediaAlpha, investment returns in the first quarter of 2020 were driven primarily by ~~strong~~the decline in equity markets ~~following~~as the ~~decline experienced~~COVID-19 pandemic expanded.

Fixed Income Results

White Mountains’s fixed income portfolio, including short-term investments, was $2.1 billion and $1.4 billion as of March 31, 2021 and December 31, 2020. The increase was driven primarily by the inclusion of invested assets relating to the Ark Transaction. The duration of White Mountains’s fixed income portfolio, including short-term investments, was 2.5 years and 3.2 years as of March 31, 2021 and December 31, 2020. White Mountains’s fixed income portfolio includes fixed maturity investments and short-term investments in the Collateral Trusts of $426 million and $432 million as of March 31, 2021 and December 31, 2020.

White Mountains’s fixed income portfolio returned -1.0% in the first quarter of 2021, compared to 0.7% in the first quarter of 2020, outperforming and underperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -1.6% and 2.5% for the comparable periods. The results in ~~reaction to~~ the ~~COVID-19 pandemic. Excluding MediaAlpha, returns~~first quarter of 2021 were driven primarily by the short duration positioning of White Mountains’s fixed income portfolio as interest rates backed up in the quarter. The results in the first ~~nine months~~quarter of 2020 were driven primarily ~~driven~~ by ~~a decline in interest rates. Excluding MediaAlpha, returns in~~ the ~~third quarter of 2019 were driven by a $15 million increase in the fair value~~short duration positioning of White Mountains’s ~~investment in PassportCard/DavidShield, which was driven by continued growth in profitability metrics during the course of the year, and a decline in~~fixed income portfolio as interest ~~rates. Excluding MediaAlpha, returns~~rates declined significantly in the ~~first nine months of 2019 were primarily driven by strong equity markets and a decline in interest rates.~~quarter.

Common Equity Securities, Investment in MediaAlpha and Other Long-Term Investments Results

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments was ~~$1.3~~$1.8 billion and ~~$1.5~~$1.6 billion as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020, which represented 45% and 54% of total invested assets. SeeNote ~~3 -~~5 — “Investment Securities”. The change was driven primarily by the inclusion of invested assets relating to the Ark Transaction, partially offset by a decline in White Mountains’s investment in MediaAlpha resulting from the MediaAlpha secondary offering and the decline in MediaAlpha’s common share price during the quarter.

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments ~~represented approximately 42% and 52%~~returned 0.8% in the first quarter of ~~total invested assets as of September 30, 2020 and December 31, 2019. The decrease as of September 30, 2020 was driven primarily by the sale of $507~~2021, which included $42 million of common equity securities in the third quarter of 2020 in anticipation of funding White Mountains’s upcoming transaction with Ark, partially offset by a $295 million increase in the fair value of White Mountains’snet realized and unrealized investment ~~in MediaAlpha in 2020.~~

losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned ~~34.2%~~3.8% in the ~~third~~first quarter of 2021.

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned -9.6% in the first quarter of 2020, ~~compared to 5.1% in the third quarter~~which included $32 million of ~~2019. Excluding MediaAlpha,~~net investment income and net unrealized investment gains from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned ~~5.4%~~-13.3% in the ~~third~~first quarter of 2020.

During the second half of 2020, ~~compared to 2.5%~~White Mountains sold its portfolio of common equity securities, including its portfolio of ETFs and international common equity securities, in anticipation of funding the ~~third quarter~~Ark Transaction. As a result of ~~2019.~~the Ark Transaction, White Mountains’s portfolio of common equity securities ~~and other long-term investments returned 33.5%~~consisted of international listed funds in the ~~first nine months~~amount of 2020, compared to 27.6% in the first nine months of 2019. Excluding MediaAlpha, White Mountains’s portfolio of common equity securities and other long-term investments returned 0.9% in the first nine months of 2020, compared to 14.3% in the first nine months of 2019.

White Mountains’s portfolio of common equity securities primarily consists of passive ETFs and publicly-traded common equity securities that are actively managed by third-party registered investment advisers. White Mountains’s portfolio of common equity securities was $141 million and $684$119 million as of ~~September 30, 2020 and December~~March 31, ~~2019. During the third quarter of 2020, White Mountains sold $400 million of ETFs and liquidated its international common equity positions (totaling $107 million).~~2021.

White Mountains’s portfolio of common equity securities returned ~~7.9%~~1.8% in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~1.0%~~-20.9% in the ~~third~~first quarter of ~~2019,~~2020, underperforming the S&P 500 Index returns of ~~8.9%~~6.2% and 1.7% for the comparable periods. White Mountains’s portfolio of common equity securities returned 1.6% in the first nine months of 2020, compared to 18.4% in the first nine months of 2019, underperforming the S&P 500 Index returns of 5.6% and 20.6%-19.6% for the comparable periods. The results were driven primarily by relative underperformance in White Mountains’s ~~international~~non-U.S. common equity ~~portfolios in each period.~~positions versus the S&P 500 Index for both periods.

Historically, White Mountains’s portfolio of ETFs ~~seeks~~was designed to provide investment results that generally ~~correspond~~corresponds to the performance of the S&P 500 Index. White Mountains’s portfolio of ETFs was ~~$85 million~~fully liquidated as of December 31, 2020 and ~~$536~~amounted to $416 million as of ~~September 30,~~March 31, 2020. In the first quarter of 2020, ~~and December 31, 2019.~~ White Mountains’s portfolio of ETFs essentially earned the effective index return, before ~~expenses, over the period in which~~expenses. White Mountains ~~was invested in these funds.~~

~~White Mountains has~~also maintained ~~long-standing~~ relationships with a small number of third-party registered investment advisers (the “actively managed common equity portfolio”), ~~including Highclere International Investors (“Highclere”),~~ who ~~invests~~invested in small- and mid-cap equity securities listed in markets outside of the United States and Canada through a unit trust, and Silchester International Investors (“Silchester”), who invests in value-oriented non-U.S. equity securities through a unit ~~trust.~~

~~White Mountains’s actively managed common equity portfolio was $56 million and $147 million as~~trusts. At the end of ~~September 30, 2020 and December 31, 2019. During~~ the third quarter of 2020, White Mountains submitted redemption requests to Silchester and Highclere to liquidate White Mountains’s full investments in the unit trusts. As of September 30, 2020, White Mountains’s investment in the unit trustfully redeemed its actively managed by Silchester was no longer subject to market fluctuations and was recorded within accounts receivable on unsettled investment sales on White Mountains’s balance sheet. White Mountains received $51 million of proceeds from the Silchester redemption in early October 2020. As of September 30, 2020, White Mountains’s proportional share of the unit trust managed by Highclere in the amount of $56 million was segregated into a transition account, subject to market fluctuations until the underlying common equity securities were sold, and remained within common equity securities on White Mountains’s balance sheet. Highclere liquidated all of the common equity securities in the transition account and distributed net proceeds of $56 million to White Mountains in early October 2020.

portfolio. White Mountains’s actively managed common equity portfolio returned ~~4.7%~~-26.5% in the ~~third~~first quarter of 2020, ~~compared to -0.2% in the third quarter of 2019,~~ underperforming the S&P 500 Index ~~returns~~return of 8.9% and 1.7% in the comparable periods. White Mountains’s actively managed common equity portfolio returned -11.0% in the first nine months of 2020 compared to 13.0% in the first nine months of 2019, underperforming the S&P 500 Index returns of 5.6% and 20.6% for the comparable periods. The relative underperformance was driven by the international common equity portfolios managed by both Highclere and Silchester in each period.

-19.6%.

White Mountains maintains a portfolio of other long-term investments that consists primarily of unconsolidated entities,

including Kudu’s Participation Contracts, private equity funds, a hedge ~~funds,~~fund, Lloyd’s trust deposits, a bank loan fund, ILS funds and private debt instruments. White Mountains’s portfolio of other long-term investments was ~~$1.2~~$1.0 billion and ~~$856~~$787 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The ~~increase as of September 30, 2020~~change in other long-term investments was driven primarily by the inclusion of invested assets relating to the Ark Transaction, the addition of a ~~$295 million~~bank loan fund and an increase in the fair value of ~~White Mountains’s investment in MediaAlpha during 2020.~~Kudu Participation Contracts.

White Mountains’s other long-term investments portfolio returned 36.6% in the third quarter of 2020 compared to 8.7% in the third quarter of 2019. Excluding MediaAlpha, White Mountains’s other long-term investments portfolio returned 2.0% in the third quarter of 2020 compared to 4.2% in the third quarter of 2019. White Mountains’s other long-term investments portfolio returned 40.8%4.1% in the first ~~nine months~~quarter of ~~2020~~2021, compared to ~~44.0%~~-5.8% in the first ~~nine months~~quarter of ~~2019. Excluding MediaAlpha, White Mountains’s other long-term investments portfolio returned -1.4% in~~2020. Investment returns for the first ~~nine months~~quarter of ~~2020 compared to 3.8% in~~2021 were driven primarily by $16 million of net unrealized investment gains from Kudu’s Participation Contracts, driven primarily by strong asset growth and performance of Kudu’s underlying asset management firms, and $15 million of net investment income and realized and unrealized investment gains from private equity funds. Investment returns for the first ~~nine months of 2019.~~

~~Excluding MediaAlpha, returns in the third~~ quarter of 2020 were driven primarily by $25 million of net unrealized investment losses from Kudu’s Participation Contracts, driven primarily by the impact of the market dislocation on Kudu’s underlying asset management firms relating to the COVID-19 pandemic, and a $10 million ~~increase~~decrease in the fair value of Kudu’s Participation Contracts, reflecting the continued recovery in broad markets and an improved outlook for Kudu’s underlying asset management businesses, and net investment income from Kudu’s Participation Contracts, partially offset by losses from certain private equity funds. Excluding MediaAlpha, returns for the first nine months of 2020 were driven primarily by a $10 million decrease in White Mountains’s investment in PassportCard/DavidShield, where the global slowdown in travel activity in reaction to the COVID-19 pandemic caused a significant decline in premiums and revenues, and losses from certain private equity funds and a private debt investment, partially offset by net investment income from Kudu’s Participation Contracts. As a result of the COVID-19 pandemic, during the third quarter of 2020, PassportCard/DavidShield curtailed its global expansion efforts.

Excluding MediaAlpha, returns in the third quarter and first nine months of 2019 were primarily driven by a $15 million increase in the fair value of White Mountains’s investment in PassportCard/DavidShield, which was driven by continued growth in profitability metrics during the course of the year, along with gains from private equity funds and net investment income from Kudu’s Participation Contracts.revenues.

In the second quarter of 2019, White Mountains made an investment in three multi-investor ILS funds managed by Elementum, a third-party registered investment adviser specializing in natural catastrophe ILS. Elementum manages separate

accounts and pooled investment vehicles across various ILS sectors, including catastrophe bonds, collateralized reinsurance

investments and industry loss warranties, on behalf of third-party clients. In the first quarter of 2020, White Mountains made an investment in a fourth ILS fund managed by Elementum. As of ~~September 30,~~March 31, 2021 and December 31, 2020, White Mountains had approximately ~~$53~~$51 million invested in these four ILS funds.

~~Fixed Income Results~~

White Mountains’s fixed income portfolio, including short-term investments, was $1.8 billion and $1.4 billion as of September 30, 2020 and December 31, 2019. The duration of White Mountains’s fixed income portfolio, including short-term investments, was 2.4 years and 2.8 years as of September 30, 2020 and December 31, 2019. The increase in White Mountains’s fixed income portfolio, including short term investments, and the decrease in duration of White Mountains’s fixed income portfolio as of September 30, 2020, was driven primarily by the reinvestment of proceeds from the sale of common equity securities into short-term investments in the third quarter of 2020 in anticipation of funding White Mountains’s upcoming transaction with Ark. White Mountains’s fixed income portfolio includes fixed maturity investments and short-term investments in the Collateral Trusts of $397 million and $320 million as of September 30, 2020 and December 31, 2019.

White Mountains’s fixed income portfolio returned 0.8% in the third quarter of 2020, compared to 1.3% in the third quarter of 2019, outperforming and underperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of 0.5% and 1.4% for the comparable periods. White Mountains’s fixed income portfolio returned 4.4% in the first nine months of 2020, compared to 5.7% in the first nine months of 2019, underperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of 5.2% and 6.2% for the comparable periods. The results in the third quarter of 2020 were driven primarily by the impact of White Mountains’s overweight positioning to investment grade corporate bonds. The results in the first nine months of 2020 were driven primarily by the short duration positioning of White Mountains’s fixed income portfolio as interest rates declined significantly during the period.

The results in the third quarter and first nine months of 2019 were driven primarily by the short duration positioning of White Mountains’s fixed income portfolio as interest rates declined during both periods.

Foreign Currency Exposure

As of ~~September 30, 2020,~~March 31, 2021, White Mountains had foreign currency exposure on ~~$204~~$189 million of net assets primarily related to NSM’s ~~U.K.~~U.K.-based operations, ~~common equity securities managed by Highclere,~~Kudu’s non-U.S. Participation Contracts, Ark’s non-U.S. business and certain other foreign consolidated and unconsolidated entities.

From time to time, White Mountains may enter into foreign currency forward contracts in order to mitigate its foreign currency exposure on certain invested assets. As of September 30, 2020, White Mountains does not have any open foreign currency forward contracts.

The following table presents the fair value of White Mountains’s foreign denominated net assets by segment as of ~~September 30, 2020:~~March 31, 2021:


Currency $ in Millions	NSM		Kudu		Other Segment		Ark		Total Fair Value		% of Total Shareholders’ Equity
GBP	$	128.6	$	—	$	(.4)	$	(12.5)	$	115.7	3.0	%
AUD	—		43.9		—		2.5		46.4		1.2	%
EUR	—		—		19.9		2.5		22.4		.6	%
CAD	—		—		—		3.2		3.2		.1	%
All other	—		—		1.4		—		1.4		—	%
Total	$	128.6	$	43.9	$	20.9	$	(4.3)	$	189.1	4.9	%

Currency
$ in Millions
Fair Value
% of Common Shareholders’ Equity
GBP $ 135.0
4.0 %
EUR 32.6
1.0 %
JPY 18.4
.5 %
All other 17.6
.5 %
Total $ 203.6
6.0 %

Income Taxes

The Company and its Bermuda domiciled subsidiaries are not subject to Bermuda income tax under current Bermuda law. In the event there is a change in the current law and taxes are imposed, the Company and its Bermuda domiciled subsidiaries would be exempt from such tax until March 31, 2035 pursuant to the Bermuda Exempted Undertakings Tax Protection Act of 1966. The Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The jurisdictions in which the Company’s subsidiaries and branches are subject to tax are ~~Barbados,~~ Ireland, Israel, Luxembourg, the United Kingdom and the United States. On April 2, 2020, the European Court of Justice issued a ruling applicable to an unrelated taxpayer that concerns the scope of countries subject to exemption on withholding tax on dividends. The Company has reviewed the details of the case and its applicability to White Mountains and has concluded that it does not have a material impact on White Mountains’s accrual for uncertain tax positions as of September 30, 2020 with respect to withholding taxes on certain prior year intercompany dividends made in Europe.

In the first quarter of 2020, White Mountains adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740) (“ASU 2019-12”). For periods subsequent to the adoption of ASU 2019-12, White Mountains records both the tax expense related to BAM’s MSC and the related valuation allowance on such taxes through the non-controlling interest equity. Prior to the adoption of ASU 2019-12, White Mountains recorded the tax expense related to BAM’s MSC directly to non-controlling interest equity, while the valuation allowance on such taxes was recorded through the income statement.

White Mountains’s income tax ~~expense~~benefit related to pre-tax ~~income~~loss from continuing operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 represented an effective tax rate of ~~31% and 34%~~7%. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was different from the U.S. statutory rate of 21%, due to tax expense associated with the reorganization of the Guilford Holdings, Inc. consolidated U.S. tax group (“Guilford”) in preparation for the MediaAlpha IPO and state income taxes, partially offset by income generated in jurisdictions with lower tax rates than the United States. The additional tax expense consisted of withholding taxes and the establishment of a partial valuation allowance on deferred tax assets of various service companies, other entities and investments that are included in the Other Operations segment. See Note 68 — “Income Taxes”.

White Mountains’s income tax ~~expense~~benefit related to pre-tax ~~income~~loss from continuing operations infor the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 represented an effective tax rate of ~~17% and 5%~~15%. The effective tax rate ~~in the three and nine months ended September 30, 2019~~ was different from the U.S. statutory rate of ~~21.0%~~21%, due to income generated in jurisdictions with lower tax rates than the United States and state income taxes and a tax benefit recorded at BAM. Also, the effective tax rate for the first nine months of 2019 was different from the U.S. statutory rate of 21.0%, due to the release of a full valuation allowance on the net deferred tax assets of Guilford. Guilford includes Kudu, its investment in MediaAlpha, various service companies and certain other entities and investments that are included in the Other Operations segment. For BAM, MSC and the related taxes thereon, were recorded directly to non-controlling interest equity, while the valuation allowance on such taxes was recorded through the income statement. In the three and nine months ended September 30, 2019, BAM recorded a tax benefit of $4 million and $7 million associated with the valuation allowance on taxes related to MSC that is included in the effective tax rate.taxes. See Note 68 — “Income ~~Taxes~~Taxes””.

Discontinued Operations

In the first quarter of 2021, White Mountains recorded an $18 million gain within discontinued operations as a result of reversing a liability arising from the tax indemnification provided in connection with the sale of Sirius Group in 2016. The liability related to certain interest deductions claimed by Sirius Group that had been disputed by the Swedish Tax Agency (STA). In April 2021, the STA informed the Swedish Administrative Court of Appeal that, as a result of the Swedish Supreme Administrative Court having ruled that the Swedish interest disallowance rules violate the European Union’s freedom of establishment principle, Sirius Group should prevail in its appeal (and that the interest deductions should not be disallowed).

LIQUIDITY AND CAPITAL RESOURCES

Operating Cash and Short-term Investments

Holding Company Level

The primary sources of cash for the Company and certain of its intermediate holding companies are expected to be distributions from its insurance, reinsurance and other operating subsidiaries, net investment income, proceeds from sales, repayments and maturities of investments, capital raising activities and, from time to time, proceeds from sales of operating subsidiaries. The primary uses of cash are expected to be general and administrative expenses, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of its debt obligations, dividend payments to holders of the Company’s common shares, distributions to non-controlling interest holders of consolidated subsidiaries, contributions to operating subsidiaries and, from time to time, purchases of operating subsidiaries and repurchases of the Company’s common shares.

Operating Subsidiary Level

The primary sources of cash for White Mountains’s insurance, reinsurance and other operating subsidiaries are expected to be ~~commissions, fees~~premium and ~~premium~~fee collections, commissions, net investment income, proceeds from sales, repayments and maturities of investments, contributions from holding companies and capital raising activities. The primary uses of cash are expected to be claim payments, policy acquisition costs, general and administrative expenses, broker commission expenses, ~~costs of sales,~~ insurance acquisition expenses, loss payments, costs of sales, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of its debt obligations, distributions made to holding companies, distributions to non-controlling interest holders and, from time to time, purchases of operating subsidiaries.

Both internal and external forces influence White Mountains’s financial condition, results of operations and cash flows. ~~Premium~~Claim settlements, premium and fee levels, loss payments, cost of sales and investment returns may be impacted by changing rates of inflation and other economic conditions. Some time may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains’s operating subsidiaries and the settlement of the liability for that loss. The exact timing of the payment of losses and benefits cannot be predicted with certainty. White Mountains’s insurance and reinsurance operating subsidiaries maintain portfolios of invested assets with varying maturities and a substantial amount of cash and short-term investments to provide adequate liquidity for the payment of claims.

Management believes that White Mountains’s cash balances, cash flows from operations and routine sales and maturities of investments are adequate to meet expected cash requirements for the foreseeable future on both a holding company and insurance, reinsurance and other operating subsidiary level.

Dividend Capacity

The following is a description of the dividend capacity of White Mountains’s insurance, reinsurance and other operating subsidiaries:

HG Global/BAM

As of ~~September 30, 2020,~~March 31, 2021, HG Global had $619 million face value of preferred shares outstanding, of which White Mountains owned 96.9%. Holders of the HG Global preferred shares receive cumulative dividends at a fixed annual rate of 6.0% on a quarterly basis, when and if declared by HG Global. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, HG Global declared and paid a ~~$23~~$22 million preferred dividend, of which White Mountains received ~~$22~~$21 million. As of ~~September 30, 2020,~~March 31, 2021, HG Global has accrued ~~$363~~$370 million of dividends payable to holders of its preferred shares, ~~$350~~$357 million of which is payable to White Mountains and is eliminated in consolidation. As of ~~September 30, 2020,~~March 31, 2021, HG Global and its subsidiaries had $1 million of cash ~~and investments~~ outside of HG Re.

HG Re is a Special Purpose Insurer subject to regulation and supervision by the BMA, but it does not require regulatory approval to pay dividends. However, HG Re’s dividend capacity is limited to amounts held outside of the Collateral Trusts pursuant to the FLRT with BAM. As of ~~September 30, 2020,~~March 31, 2021, HG Re had ~~$763~~$745 million of statutory capital and surplus and ~~$814~~$819 million of assets held in the Collateral Trusts pursuant to the FLRT with BAM.

On a monthly basis, BAM deposits cash equal to ceded premiums, net of ceding commissions, due to HG Re under the FLRT directly into the Regulation 114 Trust. The Regulation 114 Trust target balance is equal to gross ceded unearned premiums and unpaid ceded loss and LAE expenses, if any. If, at the end of any quarter, the Regulation 114 Trust balance is below the target balance, funds will be withdrawn from the Supplemental Trust and deposited into the Regulation 114 Trust in an amount equal to the shortfall. If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust.

The Supplemental Trust Target Balance is $603 million, less the amount of cash and securities in the Regulation 114 Trust in excess of its target balance. If, at the end of any quarter, the Supplemental Trust balance exceeds the Supplemental Trust Target Balance, such excess may be distributed to HG Re. The distribution will be made first as an assignment of accrued interest on the BAM Surplus Notes and second in cash and/or fixed income securities. As the BAM Surplus Notes are repaid over time, the BAM Surplus Notes will be replaced in the Supplemental Trust by cash and fixed income securities.

As of ~~September 30, 2020,~~March 31, 2021, the Collateral Trusts held assets of $819 million, which included $428 million of cash and investments, $388 million of BAM Surplus Notes and $3 million of interest receivable on the BAM Surplus Notes.

As of March 31, 2021, HG Re had ~~$13~~$3 million of cash and investments and ~~$116~~$118 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts.

~~Effective January 1, 2014, HG Global and BAM agreed to change~~Through 2024, the interest rate on the BAM Surplus Notes ~~for the five years ending December 31, 2018 from a fixed rate of 8.0% to~~is a variable rate equal to the one-year U.S. Treasury rate plus 300 basis points, set annually. ~~In 2018, BAM exercised its option to extend the variable rate period for an additional three years and, during 2020,~~During 2021, the interest rate ~~is 4.6%. In January 2020, HG Global and BAM agreed to amend~~on the BAM Surplus Notes ~~to extend the end of the variable interest rate period until December 31, 2024. At the end of the variable rate period,~~is 3.1%. Beginning in 2025, the interest rate will be fixed at the higher of the then current variable rate or 8.0%. BAM is required to seek regulatory approval to pay interest and principal on the BAM Surplus Notes only to the extent that its remaining qualified statutory capital and other capital resources continue to support its outstanding obligations, its business plan and its “AA/stable” rating from Standard & Poor’s. No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS.

During the three months ended March 31, 2021, BAM made no repayments of the BAM Surplus Notes or accrued interest. In January 2020, BAM made a one-time $65 million ~~special~~ cash payment of principal and interest on the BAM Surplus ~~Notes.~~Notes held by HG Global. Of this payment, $48 million was a repayment of principal held in the Supplemental Trust, $1 million was a payment of accrued interest held in the Supplemental Trust and $16 million was a payment of accrued interest held outside the Supplemental Trust.

Ark

Group Ark Insurance Ltd. (“GAIL”), a class 4 licensed Bermuda insurer has the ability to declare or pay dividends or make capital distributions during any 12-month period without the prior approval of Bermuda regulatory authorities on the condition that any such declaration or payment of dividends or capital distributions does not cause a breach of any of its regulatory solvency and liquidity requirements. During 2021, GAIL has the ability, subject to meeting all appropriate liquidity and solvency requirements, to make dividend or capital distributions without the prior approval of regulatory authorities, subject to meeting all appropriate liquidity and solvency requirements, of $20 million, which is equal to 15% of its December 31, 2020 statutory capital, excluding earned surplus. The amount of dividends available to be paid by GAIL in any given year is also subject to cash flow and earnings generated by GAIL's business. During the three months ended March 31 2021, GAIL did not pay a dividend to its immediate parent.

As of March 31, 2021, Ark and its intermediate holding companies had $5 million of net unrestricted cash, short-term investments and fixed maturity investments outside of its regulated and unregulated insurance and reinsurance operating subsidiaries. During the three months ended March 31, 2021, Ark did not pay any dividends to its immediate parent.

NSM

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, NSM did not make any distributions to its unitholders. As of ~~September 30, 2020,~~March 31, 2021, NSM had $42 million of net unrestricted cash and short-term investments.

Kudu

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, Kudu ~~did not make any distributions~~distributed $5 million to ~~its unitholders.~~unitholders, substantially all of which was paid to White Mountains. As of ~~September 30, 2020,~~March 31, 2021, Kudu had $8$7 million of net unrestricted cash and short-term investments.

Other Operations

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, White Mountains paid a $3 million common share dividend. As of ~~September 30, 2020,~~March 31, 2021, the Company and its intermediate holding companies had ~~$937~~$600 million of net unrestricted cash, short-term investments and fixed maturity investments, ~~$141~~$600 million of MediaAlpha common ~~equity securities~~stock and ~~$171~~$166 million of private equity funds and ILS funds.

Financing

The following table presents White Mountains’s capital structure as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


$ in Millions	September 30, 2020			December 31, 2019			$ in Millions	March 31, 2021			December 31, 2020
NSM Bank Facility, net of unamortized issuance costs	$	268.8		$	217.4
Other NSM debt, net of unamortized issuance costs	1.4			1.8
Kudu Bank Facility, net of unamortized issuance costs	71.0			53.6
Other Operations debt, net of unamortized issuance costs	18.2			10.7

Ark Alesco Notes							Ark Alesco Notes	$	30.0		$	—
Ark Dekania Note							Ark Dekania Note	14.1			—
Ark Subordinated Notes							Ark Subordinated Notes	44.1			—
NSM Bank Facility (1)							NSM Bank Facility (1)	271.5			271.3
Other NSM debt (1)							Other NSM debt (1)	1.2			1.3
Kudu Credit Facility (1)							Kudu Credit Facility (1)	95.9			—
Kudu Bank Facility (1)							Kudu Bank Facility (1)	—			86.3

Other Operations debt (1)							Other Operations debt (1)	17.0			17.5
Total debt	359.4			283.5			Total debt	429.7			376.4
Non-controlling interests—excluding BAM	31.9			29.9			Non-controlling interests—excluding BAM	242.9			35.2
Total White Mountains’s common shareholders’ equity	3,407.7			3,261.5			Total White Mountains’s common shareholders’ equity	3,825.9			3,906.0
Total capital	3,799.0			3,574.9			Total capital	4,498.5			4,317.6
Time-value discount on expected future payments on the BAM Surplus Notes ⁽¹⁾	(144.3		)	(151.6		)
HG Global’s unearned premium reserve ⁽¹⁾	181.0			156.7
HG Global’s net deferred acquisition costs ⁽¹⁾	(49.5		)	(41.5		)
Time-value discount on expected future payments on the BAM Surplus Notes (2)							Time-value discount on expected future payments on the BAM Surplus Notes (2)	(137.7)			(142.5)
HG Global’s unearned premium reserve (2)							HG Global’s unearned premium reserve (2)	195.3			190.0
HG Global’s net deferred acquisition costs (2)							HG Global’s net deferred acquisition costs (2)	(54.2)			(52.4)
Total adjusted capital	$	3,786.2		$	3,538.5		Total adjusted capital	$	4,501.9		$	4,312.7

Total debt to total adjusted capital	9.5		%	8.0		%	Total debt to total adjusted capital	9.5		%	8.7		%

⁽¹⁾Net of unamortized issuance costs

(2) Amount reflects White Mountains’s preferred share ownership in HG Global of 96.9%.

Management believes that White Mountains has the flexibility and capacity to obtain funds externally through debt or equity financing on both a short-term and long-term basis. However, White Mountains can provide no assurance that, if needed, it would be able to obtain additional debt or equity financing on satisfactory terms, if at all.

It is possible that, in the future, one or more of the rating agencies may lower White Mountains’s existing ratings. If one or more of its ratings were lowered, White Mountains could incur higher borrowing costs on future borrowings and its ability to access the capital markets could be impacted.

Ark Subordinated Notes

In March 2007, Ark issued $30 million face value of floating rate unsecured junior subordinated deferrable interest notes to Alesco Preferred Funding XII Ltd., Alesco Preferred Funding XIII Ltd. and Alesco Preferred Funding XIV Ltd (the “Ark Alesco Notes”) and a €12 million floating rate subordinated note to Dekania Europe CDO II plc (the “Ark Dekania Note”) (together, the “Ark Subordinated Notes”). The Alesco Notes, which mature in June 2037, accrue interest at a floating rate equal to the three-month U.S. LIBOR plus 4.6%. The Ark Dekania Note, which matures in June 2027, accrues interest at a floating rate equal to the three-month EURIBOR plus 4.6%. As of March 31, 2021, the Ark Alesco Notes had an outstanding balance of $30 million and the Ark Dekania Note had an outstanding balance of €12 million (approximately $14 million based upon the foreign exchange spot rate as of March 31, 2021).

Ark Stand By Letter of Credit Facility

Ark has a secured stand by letter of credit facility (the “Ark LOC Facility”) with three lenders, Lloyds Bank plc, National Westminster Bank plc and ING Bank N.V, London Branch to provide capital support the Syndicates. As of March 31, 2021, the utilized level of the facility was $45 million, with the ability to increase to $150 million. The Ark LOC Facility has a termination date of December 31, 2025. During the three months ended March 31, 2021, Ark did not borrow or make any repayments under the Ark LOC Facility.

The Ark LOC Facility, which provides funds at Lloyd’s, is secured by all property of the loan parties and contains various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including a minimum tangible net worth covenant.

NSM Bank Facility

On April 7, 2020, NSM amended its secured credit facility (the “NSM Bank Facility”) with Ares Capital Corporation in connection with the acquisition of Kingsbridge. Under the amendment, the total commitment increased from $234 million, comprised of term loans ~~totaling~~of $224 million and a revolving credit loan ~~commitment~~ of $10 million, to $291 million, comprised of term loans ~~totaling~~of $276 million, including £43 million (approximately $52 million based upon the foreign exchange spot rate as of the date of the transaction) in a GBP term loan facility, and a revolving credit loan commitment of $15 million. The term loans under the NSM Bank Facility mature on May 11, 2026, and the revolving loan ~~under the NSM Bank Facility~~ matures on November 11, 2025.

Interest on the NSM Bank Facility accrues at a floating interest rate equal to the three-month LIBOR plus an applicable margin. In connection with the amendment, the reference rates for ~~U.S. Dollar~~USD denominated borrowings increased. The USD-LIBOR rate floor increased ~~from 1.0%~~ to 1.25% and the margin over USD-LIBOR increased from a range of 4.25% to 4.75% to a range of 5.50% to 6.00%. For GBP denominated borrowings, the GBP-LIBOR rate floor is 1.25% and the margin over GBP-LIBOR ranges from ~~6.0%~~6.00% to ~~6.5%~~6.50%. The margins over the reference interest rates vary within the range depending on the consolidated total leverage ratio of NSM. ~~As of September 30, 2020 and December 31, 2019 the weighted average interest rate on the NSM Bank Facility was 6.91% and 6.60%.~~

The following table presents the change in debt under the NSM Bank Facility for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


NSM Bank Facility	Three Months Ended						Nine Months Ended						NSM Bank Facility	Three Months Ended
	September 30						September 30							March 31,
Millions	2020			2019			2020			2019			Millions		2021		2020
Beginning balance	$	273.4		$	222.3		$	221.3		$	180.4		Beginning balance		$	277.4	$	221.3
Term loans													Term loans
Borrowings⁽¹⁾	—			—			52.4			42.9
Borrowings													Borrowings		—		—
Repayments	(.7		)	(.4		)	(1.3		)	(1.4		)	Repayments		(.7)		(.6)
Foreign currency translation	2.3			—			2.6			—			Foreign currency translation		.6		—
Revolving credit loan													Revolving credit loan
Borrowings	—			—			—			6.5			Borrowings		—		—
Repayments	—			—			—			(6.5		)	Repayments		—		—
Ending balance	$	275.0		$	221.9		$	275.0		$	221.9		Ending balance		$	277.3	$	220.7

During the nine months ended September 30, 2019, White Mountains repurchased and retired 5,679 of its common shares for $5 million, all of which were repurchased under employee benefit plans for statutory withholding tax payments.

~~During the nine months ended September 30, 2019, BAM received $44 million in MSC.~~

During the nine months ended September 30, 2019, NSM borrowed $20 million for the Embrace transaction and $23 million for the Renewal Rights transaction, both as term loans under the NSM Bank Facility. Additionally, during the nine months ended September 30, 2019, NSM borrowed and repaid $7 million of revolving credit loans and repaid $1 million of term loans under the NSM Bank Facility.

~~Acquisitions and Dispositions~~

~~On June 28, 2019, NSM acquired the Renewal Rights from AIG for $83 million. White Mountains contributed $59 million to NSM and NSM borrowed $23 million to fund the transaction.~~

On May 31, 2019, White Mountains acquired a 30% limited partnership interest in Elementum for $55 million. As part of the Elementum transaction, White Mountains also committed to invest $50 million in private equity funds managed by Elementum. As of September 30, 2019, White Mountains had invested $40 million in Elementum funds.

On April 4, 2019, White Mountains completed the Kudu Transaction for $81 million. In addition, White Mountains assumed all of Oaktree’s unfunded capital commitments to Kudu, increasing White Mountains’s total capital commitment to $250 million. During the nine months ended September 30, 2019, prior to the date of the Kudu Transaction, Kudu deployed $82 million, of which $41 million was from White Mountains.

~~On April 1, 2019, NSM acquired 100% of Embrace for $72 million, net of cash acquired. White Mountains contributed $58 million to NSM and NSM borrowed $20 million to fund the transaction.~~

~~On February 26, 2019, White Mountains received net cash proceeds of $89 million from the MediaAlpha Transaction.~~

NON-GAAP FINANCIAL MEASURES

This report includes 1112 non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures.

Adjusted book value per share

Adjusted book value per share is a non-GAAP financial measure, which is derived by adjusting (i) the GAAP book value per share numerator and (ii) the common shares outstanding denominator, as described below.

The GAAP book value per share numerator is adjusted (i) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM ~~surplus notes~~Surplus Notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global.

Under GAAP, White Mountains is required to carry the BAM ~~surplus notes,~~Surplus Notes, including accrued interest, at nominal value with no consideration for time value of money. Based on a debt service model that forecasts operating results for BAM through maturity of the ~~surplus notes,~~BAM Surplus Notes, the present value of the BAM ~~surplus notes,~~Surplus Notes, including accrued interest and using an 8% discount rate, was estimated to be ~~$149~~$142 million, ~~$151 million, $157~~$147 million and ~~$137~~$154 million less than the nominal GAAP carrying values as of ~~September 30, 2020, June 30, 2020,~~March 31, 2021, December 31, ~~2019~~2020 and ~~September 30, 2019,~~March 31, 2020, respectively.

The value of HG Global’s unearned premium reserve, net of deferred acquisition costs, was ~~$136~~$146 million, ~~$131 million, $119~~$142 million, and ~~$122~~$121 million as of ~~September 30, 2020, June 30, 2020,~~March 31, 2021, December 31, ~~2019~~2020 and ~~September 30, 2019~~March 31, 2020, respectively.

White Mountains believes these adjustments are useful to management and investors in analyzing the intrinsic value of HG Global, including the value of the BAM ~~surplus notes~~Surplus Notes and the value of the in-force business at HG Re, HG Global’s reinsurance subsidiary.

The denominator used in the calculation of adjusted book value per share equals the number of common shares outstanding, adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. Restricted common shares are earned on a straight-line basis over their vesting periods. The reconciliation of GAAP book value per share to adjusted book value per share is included on page ~~51.~~

The book value per share and adjusted book value per share included on page 49 that reflect (i) the effect of revaluing White Mountains’s investment in MediaAlpha as of September 30, 2020 using the IPO price of $19.00 per share and the reversal of a $124 million deferred tax liability (“DTL”) resulting from a related internal reorganization completed in advance of the MediaAlpha IPO in October, and (ii) the effect of further revaluing White Mountains’s investment in MediaAlpha as of September 30, 2020 to the October month-end closing price of $33.83 per share, are non-GAAP financial measures. White Mountains believes these measures are useful to management and investors in analyzing the book value per share and adjusted book value per share of White Mountains because it reflects the value of its investment in MediaAlpha after giving effect to the MediaAlpha IPO and related internal reorganization. A reconciliation from GAAP to the amount reported is as follows:

GAAP book value per share
Adjusted book value
per share
GAAP book value per share and adjusted book value per share, respectively,
   reported as of September 30, 2020 (see reconciliation on page 51)
$ 1,098.56
$ 1,101.28
Effect of revaluation of investment in MediaAlpha using the IPO price
   of $19.00 per share ⁽¹⁾
(6.80 ) (6.85 )
Reversal of DTL as of September 30, 2020 39.95
40.20
Value per share including the revaluation of investment in MediaAlpha using the
   IPO price of $19.00 per share ⁽¹⁾ and the reversal of the DTL as of
   September 30, 2020
1,131.71
1,134.63
Effect of revaluation of investment in MediaAlpha from the IPO price of $19.00
   per share to the October month-end closing price of $33.83 per share
98.16
98.77
Value per share including the revaluation of investment in MediaAlpha using
   October month-end closing price of $33.83 per share ⁽¹⁾ and the reversal of the
   DTL as of September 30, 2020
$ 1,229.87
$ 1,233.40
50.

⁽¹⁾
~~Includes impact of (i) dilution~~

BAM’s gross written premiums and MSC from ~~shares issued to MediaAlpha’s management concurrent with the IPO and (ii) underwriting fees paid on shares sold in the IPO.~~new business

~~Gross~~BAM’s gross written premiums and MSC from new business is a non-GAAP financial measure, which is derived by adjusting gross written premiums and MSC collected (i) to include the present value of future installment MSC not yet collected and (ii) to exclude the impact of gross written premium adjustments related to policies closed in prior periods. White Mountains believes these adjustments are useful to management and investors in evaluating the volume and pricing of new business closed during the period. The reconciliation from GAAP gross written premiums to gross written premiums and MSC from new business is included on page ~~57.~~55.

Ark’s adjusted loss and loss adjustment expense, insurance acquisition expense, other underwriting expense and combined ratios

Ark’s adjusted loss and loss adjustment expense ratio, adjusted insurance acquisition expense ratio, adjusted other underwriting expense ratio and adjusted combined ratio are non-GAAP financial measures, which are derived by adjusting the GAAP ratios to add back amounts ceded to TPC Providers for the Syndicates. The impact of these reinsurance arrangements relate to years of account prior to the Ark Transaction. White Mountains believes these adjustments are useful to management and investors in evaluating Ark’s results on a fully aligned basis. The reconciliation from the GAAP ratios to the adjusted ratios is included on page 60.

NSM’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) and NSM’s adjusted EBITDA

NSM’s EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax expense (benefit), depreciation and amortization of other intangible assets from GAAP net income (loss). Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) change in fair value of contingent consideration earnout liabilities, (ii) non-cash equity-based compensation expense, (iii) impairments of intangible assets, (iv) loss on assets held for sale, (v) acquisition-related transaction expenses, ~~(v) fair value purchase accounting adjustment for deferred revenue,~~ (vi) investments made in the development of new business lines and (vii) restructuring expenses. A description of each follows:

•

•Change in fair value of contingent consideration earnout liabilities - Earnout liabilities are amounts payable to the sellers of businesses purchased by NSM that are contingent on the earnings of such businesses in periods subsequent to their acquisition. Under GAAP, earnout liabilities are initially recorded at fair value as part of purchase accounting, with the periodic change in the fair value of these liabilities recorded as income or an expense.

•Non-cash equity-based compensation expense - Represents non-cash expenses related to NSM’s management compensation emanating from the grants of equity units.

•Impairments of intangible assets - Represents expense related to NSM’s write-off of intangible assets. For the periods presented, the impairments related primarily to NSM’s write-off of intangible assets in its U.K. vertical. The impairments related to lower premium volumes, including due to the impact of the COVID-19 pandemic, and certain reorganization initiatives in the U.K. vertical.

•Loss on assets held for sale - Represents the loss on the net assets held for sale related to the Fresh Insurance motor business.

•Acquisition-related transaction expenses - Represents costs directly related to NSM’s transactions to acquire businesses, such as transaction-related compensation, banking, accounting and external lawyer fees, which are not capitalized and are expensed under GAAP.

•Investments made in the development of new business lines - Represents the net loss related to the start-up of newly established lines of business, which NSM views as investments.

•Restructuring expenses - Represents expenses associated with eliminating redundant work force and facilities that often arise as a result of NSM’s post-acquisition integration strategies. For the periods presented, this adjustment relates primarily to NSM’s expenses incurred in certain reorganization initiatives in the U.K. vertical.

- Earnout liabilities are amounts payable to the sellers of businesses purchased by NSM that are contingent on the earnings of such businesses in periods subsequent to their acquisition. Under GAAP, earnout liabilities are initially recorded at fair value as part of purchase accounting, with the periodic change in the fair value of these liabilities recorded as income or an expense.


•	~~Non-cash equity-based compensation expense~~ ~~- Represents non-cash expenses related to NSM’s management compensation emanating from the grants of equity units.~~


•	~~Impairments of intangible assets~~ - Represents expense related to NSM’s write-off of intangible assets. For the periods presented, the impairments related primarily to NSM’s write-off of intangible assets in its U.K. vertical. The impairments related to lower premium volumes, including due to the impact of the COVID-19 pandemic, and certain reorganization initiatives in the U.K. vertical.


•	~~Acquisition-related transaction expenses~~ - Represents costs directly related to NSM’s transactions to acquire businesses, such as transaction-related compensation, banking, accounting and external lawyer fees, which are not capitalized and are expensed under GAAP.


•	~~Fair value purchase accounting adjustment for deferred revenue -~~ Represents the amount of deferred revenue that had already been collected but subsequently written down in connection with establishing the fair value of deferred revenue as part of NSM’s purchase accounting for Embrace.

•

~~Investments made in the development of new business lines~~ - Represents the net loss related to the start-up of newly established lines of business, which NSM views as investments. For the periods presented, this adjustment relates primarily to NSM’s investment expenditures, net of revenues generated, in the organic development of (i) its pet insurance line and (ii) its MGA in the United Kingdom. In 2019, NSM decided to cease investment in the organic development of its pet insurance line and, instead, to acquire Embrace.


•	~~Restructuring expenses~~ ~~- Represents expenses associated with eliminating redundant work force and facilities that often arise as a result of NSM’s post-acquisition integration strategies.~~

White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating NSM’s performance. The reconciliation of NSM’s GAAP net income (loss) to EBITDA and adjusted EBITDA is included on page 62.

Kudu’s EBITDA and Kudu’s adjusted EBITDA

Kudu's EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is a non-GAAP financial measure that excludes interest expense on debt, income tax expense (benefit), depreciation and amortization of other intangible assets from GAAP net income (loss). Adjusted EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP net income (loss) in addition to those excluded from EBITDA. The adjustments relate to (i) net unrealized investment ~~(gains) losses~~gains (losses) on Kudu's Participation Contracts, (ii) non-cash equity-based compensation expense and (iii) acquisition-related transaction expenses. A description of each adjustment follows:

•

•Net unrealized investment (gains) losses - Represents net unrealized investment gains and losses on Kudu's Participation Contracts, which are recorded at fair value under GAAP.

•Non-cash equity-based compensation expense - Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.

•Acquisition-related transaction expenses - Represents costs directly related to Kudu's transactions to acquire Participation Contracts, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.

~~- Represents net unrealized investment gains and losses recorded on Kudu's Participation Contracts, which are recorded at fair value under GAAP.~~


•	~~Non-cash equity-based compensation~~ ~~expense - Represents non-cash expenses related to Kudu's management compensation that are settled with equity units in Kudu.~~


•	~~Acquisition-related transaction expenses~~ - Represents costs directly related to Kudu's transactions to acquire Participation Contracts, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.

White Mountains believes that these non-GAAP financial measures are useful to management and investors in evaluating Kudu’s performance. The reconciliation of Kudu’s GAAP net income (loss) to EBITDA and adjusted EBITDA is included on page ~~65.~~64.

Total consolidated portfolio return excluding MediaAlpha

Total consolidated portfolio ~~returns excluding MediaAlpha, common equity securities and other long-term investment returns excluding MediaAlpha and other long-term investments~~ return excluding MediaAlpha ~~are~~is a non-GAAP financial ~~measures~~measure that ~~remove~~removes the net investment income and net realized and unrealized investment gains (losses) from White Mountains’s investment in ~~MediaAlpha in the three and nine months ended September 30, 2020 and 2019.~~MediaAlpha. White Mountains believes ~~these measures~~this measure to be useful to management and investors by ~~making~~showing the ~~returns in the prior period comparable~~underlying performance of White Mountains’s investment portfolio without regard to ~~the current period.~~MediaAlpha. A reconciliation from GAAP to the reported percentages is as follows:


	For the Three Months Ended March 31, 2021			For The Three Months Ended March 31, 2020
		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha
Total consolidated portfolio return		(0.3)	%	1.0	%	0.7	%	(4.6)	%	(1.5)	%	(6.1)	%

For the Three Months Ended September 30, 2020 For the Nine Months Ended September 30, 2020
GAAP Returns Remove MediaAlpha Returns - Excluding MediaAlpha GAAP Returns Remove MediaAlpha Returns - Excluding MediaAlpha
Total consolidated portfolio returns 13.5 % (10.7 )% 2.8 % 15.4 % (12.6 )% 2.8 %
Common equity securities and
other long-term investments returns
34.2 % (28.8 )% 5.4 % 33.5 % (32.6 )% 0.9 %
Other long-term investments returns 36.6 % (34.6 )% 2.0 % 40.8 % (42.2 )% (1.4 )%

For the Three Months Ended September 30, 2019 For the Nine Months Ended September 30, 2019
GAAP Returns Remove MediaAlpha Returns - Excluding MediaAlpha GAAP Returns Remove MediaAlpha Returns - Excluding MediaAlpha
Total consolidated portfolio returns 3.1 % (1.3 )% 1.8 % 15.9 % (6.0 )% 9.9 %
Common equity securities and
other long-term investments returns
5.1 % (2.6 )% 2.5 % 27.6 % (13.3 )% 14.3 %
Other long-term investments returns 8.7 % (4.5 )% 4.2 % 44.0 % (40.2 )% 3.8 %

Adjusted capital

Total capital at White Mountains is comprised of White Mountains’s common shareholders’ equity, debt and non-controlling interests other than non-controlling interests attributable to BAM. Total adjusted capital is a non-GAAP financial measure, which is derived by adjusting total capital (i) to include a discount for the time value of money arising from the expected timing of cash payments of principal and interest on the BAM Surplus Notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global. The reconciliation of total capital to total adjusted capital is included on page ~~74.~~71.

CRITICAL ACCOUNTING ESTIMATES

Refer to the Company’s ~~2019~~2020 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s critical accounting estimates. The following ~~presents an update~~describes changes to ~~Fair Value Measurements~~ White Mountains’s critical accounting estimates since December 31, 2020 as of ~~September 30, 2020.~~March 31, 2021.

I. Fair Value Measurements

General

White Mountains records certain assets and liabilities at fair value in its consolidated financial statements, with changes therein recognized in current period earnings. In addition, White Mountains discloses estimated fair value for certain liabilities measured at historical or amortized cost. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at a particular measurement date. Fair value measurements are categorized into a hierarchy that distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”), and unobservable inputs, including the reporting entity’s estimates of the assumptions that market participants would use, having the lowest priority (“Level 3”).

Assets and liabilities carried at fair value include substantially all of the investment portfolio, and derivative instruments, both exchange-traded and over the counter instruments. Valuation of assets and liabilities measured at fair value require management to make estimates and apply judgment to matters that may carry a significant degree of uncertainty. In determining its estimates of fair value, White Mountains uses a variety of valuation approaches and inputs. Whenever possible, White Mountains estimates fair value using valuation methods that maximize the use of quoted market prices or other observable inputs. Where appropriate, assets and liabilities measured at fair value have been adjusted for the effect of counterparty credit risk.

Invested Assets

White Mountains uses outside pricing services and brokers to assist in determining fair values. The outside pricing services White Mountains uses have indicated that they will only provide prices where observable inputs are available. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~62%~~73% of the investment portfolio recorded at fair value was priced based upon quoted market prices or other observable inputs.

Level 1 Measurements

Investments valued using Level 1 inputs include White Mountains’s common equity securities, its investment in MediaAlpha subsequent to the MediaAlpha IPO, and fixed maturity investments, primarily investments in U.S. Treasuries and short-term investments, which include U.S. Treasury ~~Bills, and common equity securities.~~Bills. For investments in active markets, White Mountains uses the quoted market prices provided by outside pricing services to determine fair value.

Level 2 Measurements

Investments valued using Level 2 inputs include fixed maturity investments which have been disaggregated into classes, including debt securities issued by corporations, municipal obligations, ~~and~~ mortgage and asset-backed ~~securities.~~securities and collateralized loan obligations. Investments valued using Level 2 inputs also include certain ~~passive ETFs that track U.S. stock indices such as the S&P 500 Index, but are~~common equity listed funds traded on foreign exchanges, which White Mountains values using the fund manager’s published net asset value per share (“NAV”) to account for the difference in market close times.

In circumstances where quoted market prices are unavailable or are not considered reasonable, White Mountains estimates the fair value using industry standard pricing methodologies and observable inputs such as benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers, credit ratings, prepayment speeds, reference data including research publications and other relevant inputs. Given that many fixed maturity investments do not trade on a daily basis, the outside pricing services evaluate a wide range of fixed maturity investments by regularly drawing parallels from recent trades and quotes of comparable securities with similar features. The characteristics used to identify comparable fixed maturity investments vary by asset type and take into account market convention.

White Mountains’s process to assess the reasonableness of the market prices obtained from the outside pricing sources covers substantially all of its fixed maturity investments and includes, but is not limited to, the evaluation of pricing methodologies and a review of the pricing services’ quality control procedures on at least an annual basis, a comparison of its invested asset prices obtained from alternate independent pricing vendors on at least a semi-annual basis, monthly analytical reviews of certain prices and a review of the underlying assumptions utilized by the pricing services for select measurements on an ad hoc basis throughout the year. White Mountains also performs back-testing of selected investment 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 of the security on an ad-hoc basis throughout the year. Prices provided by the pricing services that vary by more than $0.5 million and 5% from the expected price based on these assessment procedures are considered outliers, as are prices that have not changed from period to period and prices that have trended unusually compared to market conditions. In circumstances where the results of White Mountains’s review process does not appear to support the market price provided by the pricing services, White Mountains challenges the vendor provided price. If White Mountains cannot gain satisfactory evidence to support the challenged price, White Mountains will rely upon its own internal pricing methodologies to estimate the fair value of the security in question. The valuation process described above is generally applicable to all of White Mountains’s fixed maturity ~~investments.~~investments

Level 3 Measurements

Fair value estimates for investments that trade infrequently and have few or no quoted market prices or other observable inputs are classified as Level 3 measurements. Investments valued using Level 3 fair value estimates are based upon unobservable inputs and include investments in certain fixed maturity investments, common equity securities and other long-term investments where quoted market prices or other observable inputs are unavailable or are not considered reliable or reasonable.

Level 3 valuations are generated from techniques that use assumptions not observable in the market. These unobservable inputs reflect White Mountains’s assumptions of what market participants would use in valuing the investment. In certain circumstances, investment securities may start out as Level 3 when they are originally issued, but as observable inputs become available in the market, they may be reclassified to Level 2. Transfers of securities between levels are based on investments held as of the beginning of the period.

Other Long-Term Investments

As of ~~September 30, 2020,~~March 31, 2021, White Mountains owned a portfolio of other long-term investments valued at ~~$1.2~~$1.0 billion, ~~including~~that consisted primarily of unconsolidated entities, including Kudu’s Participation Contracts, private equity funds, a hedge fund, Lloyd’s trust deposits, a bank loan fund, ILS funds and private debt instruments. As of ~~September 30, 2020, $1 billion~~March 31, 2021, $656 million of White Mountains’s other long-term investments ~~including~~that consisted primarily of unconsolidated entities, including Kudu’s Participation Contracts, and private debt instruments were classified as Level 3 investments in the GAAP fair value hierarchy, were not actively traded in public markets and did not have readily observable market prices. The determination of the fair value of these securities involves significant management judgment, and the use of valuation models and assumptions that are inherently subjective and uncertain. As of ~~September 30, 2020, $171~~March 31, 2021, $376 million of White Mountains’s other long-term investments, ~~including~~consisting of private equity funds, a hedge fund, Lloyd’s trust deposits, a bank loan funds, and ILS funds, were valued at fair value using NAV as a practical expedient. Investments for which fair value is measured at NAV using the practical expedient are not classified within the fair value hierarchy.

White Mountains may use a variety of valuation techniques to determine fair value depending on the nature of the investment, including a discounted cash flow analysis, market multiple approach, cost approach and/or liquidation analysis. On an ongoing basis, White Mountains also considers qualitative changes in facts and circumstances, which may impact the valuation of its unconsolidated entities, including economic and market changes in relevant industries, changes to the entity’s capital structure, business strategy and key personnel, and any recent transactions relating to the unconsolidated entity. On a quarterly basis, White Mountains evaluates the most recent qualitative and quantitative information of the business and completes a fair valuation analysis for all Level 3 other long-term investments. Periodically, and at least on an annual basis, White Mountains uses a third-party valuation firm to complete an independent valuation analysis of significant unconsolidated entities.

As of ~~September 30, 2020,~~March 31, 2021, White Mountains’s most significant other long-term investments that are valued using Level 3 measurements include ~~MediaAlpha,~~ Kudu’s Participation Contracts and PassportCard/DavidShield.

~~Valuation of MediaAlpha~~

As of September 30, 2020, White Mountains valued its investment in MediaAlpha using a probability-weighted expected return method (“PWERM”). Under the PWERM, MediaAlpha’s valuation is based on the probability-weighted present value of expected future equity values under two possible future scenarios: (i) an IPO or (ii) remaining a private company. To determine the equity value in the IPO scenario, the value of the company was calculated using forward market multiples derived from a range of relevant companies and applied to MediaAlpha’s projected financial metrics. To determine the equity value in the remaining a private company scenario, the value of the company was calculated using a discounted cash flow model. The discounted cash flow model includes key inputs such as projections of future revenues and earnings, a discount rate and a terminal revenue growth rate. The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rates reflect MediaAlpha’s weighted average cost of capital considering comparable public company data, adjusted for risks specific to the business and industry. The terminal revenue growth rate is based on company, industry and macroeconomic expectations of perpetual revenue growth subsequent to the end of the discrete period in the discounted cash flow analysis.

White Mountains assessed the expected future equity values under various possible future scenarios as of September 30, 2020 and concluded that a probability weighting of 65% to an IPO and 35% to remaining a private company was appropriate for the PWERM as of September 30, 2020. White Mountains also concluded that a forward revenue exit multiple of 2 times was appropriate for the IPO scenario and a discount rate of 13% and a terminal revenue growth rate of 4% was appropriate for the remaining a private company scenario for the valuation of its investment in MediaAlpha as of September 30, 2020. Utilizing these assumptions, White Mountains determined that the fair value of its investment in MediaAlpha was $475 million as of September 30, 2020.

With a PWERM, changes to probability-weightings assigned to the IPO and remaining a private company scenarios may result in significant changes to fair value. The following table presents the estimated effect on the fair value of White Mountains’s investment in MediaAlpha as of September 30, 2020, resulting from changes in the IPO scenario probability weightings and valuation assumptions:

$ in Billions IPO Scenario Probability
IPO Valuation Assumptions 55% 60% 65% 70% 75%
$1.1 $ 428
$ 432
$ 432
$ 437
$ 442
$1.2 $ 461
$ 466
$ 475
$ 481
$ 490
$1.4 $ 505
$ 515
$ 529
$ 539
$ 548

Valuation of Kudu’s Participation Contracts

Kudu’s Participation Contracts comprise non-controlling equity interests in the form of revenue and earnings participation contracts. On a quarterly basis, White Mountains values each of Kudu’s Participation Contracts using discounted cash flow models. The valuation models include key inputs such as projections of future revenues and earnings of Kudu’s clients, a discount rate and a terminal cash flow exit multiple. The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rates reflect the weighted average cost of capital, considering comparable public company data, adjusted for risks specific to the business and industry. The terminal exit multiple is generally based on expectations of annual cash flow to Kudu from each of its clients in the terminal year of the cash flow model. In determining fair value, White Mountains considers factors such as performance of underlying products and vehicles, expected client growth rates, new fund launches, fee rates by products, capacity constraints, operating cash flow of underlying manager and other qualitative factors, including the assessment of key personnel.

As of ~~September 30, 2020,~~March 31, 2021, the combined fair value of Kudu’s Participation Contracts was ~~$326~~$427 million. The inputs to each discounted cash flow analysis vary depending on the nature of each client. As of ~~September 30, 2020,~~March 31, 2021, White Mountains concluded that pre-tax discount rates in the range of 18% to 23%, and terminal cash flow exit multiples in the range of 67 to 12 times were appropriate for the valuations of Kudu’s Participation Contracts.

With a discounted cash flow analysis, small changes to inputs in a valuation model may result in significant changes to fair value. The following table presents the estimated effect on the fair value of Kudu’s Participation Contracts as of ~~September 30, 2020,~~March 31, 2021, resulting from increases and decreases to the discount rates and terminal cash flow exit multiples used in the discounted cash flow analysis:


$ in Millions	Discount Rate⁽¹⁾										$ in Millions	Discount Rate(1)
Terminal Exit Multiple	-2%		-1%		18% - 23%		+1%		+2%		Terminal Exit Multiple	-2%		-1%		18% - 23%		+1%		+2%

+2	$	388	$	366	$	347	$	328	$	311	+2	$	509	$	481	$	456	$	431	$	409
+1	$	375	$	355	$	336	$	318	$	302	+1	$	492	$	466	$	442	$	418	$	397
6x - 12x	$	363	$	343	$	326	$	308	$	293
7x - 12x											7x - 12x	$	476	$	450	$	427	$	405	$	385
-1	$	350	$	332	$	315	$	299	$	284	-1	$	459	$	435	$	413	$	392	$	373
-2	$	338	$	321	$	306	$	291	$	278	-2	$	442	$	420	$	400	$	381	$	364



	September 30, 2020						December 31, 2019
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
FNMA	$	84.5	$	84.5	$	0	$	88.6	$	88.6	$	0
FHLMC	67.1		67.1		0		60.5		60.5		0
GNMA	37.4		37.4		0		30.8		30.8		0
Total agency ⁽¹⁾	189.0		189.0		0		179.9		179.9		0
Total mortgage-backed securities	189.0		189.0		0		179.9		179.9		0
Other asset-backed securities:
Credit card receivables	11.3		11.3		0		14.0		14.0		0
Vehicle receivables	10.6		10.6		0		15.1		15.1		0
Total other asset-backed securities	21.9		21.9		0		29.1		29.1		0
Total mortgage and asset-backed securities	$	210.9	$	210.9	$	0	$	209.0	$	209.0	$	0



	Carrying Value at
Millions	September 30, 2020		December 31, 2019
MediaAlpha ⁽¹⁾	$	475.0	$	180.0
Kudu’s Participation Contracts ⁽¹⁾	325.5		266.5
PassportCard/DavidShield ⁽¹⁾	95.0		90.0
Elementum Holdings L.P. ⁽¹⁾	55.1		55.1
Other unconsolidated entities ⁽¹⁾⁽²⁾	31.8		33.7
Total unconsolidated entities ⁽¹⁾	982.4		625.3
Private equity funds and hedge funds	118.2		161.1
Insurance-linked securities funds	52.7		41.2
Private debt investments ⁽³⁾	17.9		28.7
Total other long-term investments	$	1,171.2	$	856.3


	September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds									Private equity funds
Aerospace/Defense/Government	$	59.4	$	16.1	$	33.8	$	23.3	Aerospace/Defense/Government	$	73.0	$	14.0	$	69.1	$	15.3
Financial services									Financial services	43.2		35.3		23.5		30.4
Real estate									Real estate	4.0		3.0		0		0
Manufacturing/Industrial	39.8		2.0		57.7		4.1		Manufacturing/Industrial	1.3		0		28.6		0
Financial services	19.0		23.4		15.0		22.8

Total private equity funds	118.2		41.5		106.5		50.2		Total private equity funds	121.5		52.3		121.2		45.7
Hedge funds									Hedge funds
Long/short banks and financials	0		0		54.6		0

European small/mid cap									European small/mid cap	12.0		0		0		0

Total hedge funds	0		0		54.6		0		Total hedge funds	12.0		0		0		0
Total private equity funds and hedge funds included in other long-term investments	$	118.2	$	41.5	$	161.1	$	50.2	Total private equity funds and hedge funds included in other long-term investments	$	133.5	$	52.3	$	121.2	$	45.7


Millions	1 – 3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private equity funds — expected lock-up period remaining	$6.8	$27.0	$74.5	$13.2	$121.5



Millions	1 – 3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private equity funds — expected lock-up period remaining	$4.7	$36.4	$71.7	$5.4	$118.2


	Fair Value at
Millions	March 31, 2021		December 31, 2020
AAA	$	12.7	$	10.6
AA	60.2		57.9
A	353.2		318.3
BBB	250.9		159.6
BB	1.0		1.0

Other	8.9		0
Debt securities issued by corporations (1)	$	686.9	$	547.4


⁽¹⁾	Credit ratings are based upon issuer credit ratings provided by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”), or if unrated by Standard & Poor’s, long-term obligation ratings provided by Moody’s Investor Service, Inc.


⁽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).


					Level 3 Investments		Other Long-term Investments Measured at NAV (1)
Millions	Level 1 Investments		Level 2 Investments		Other Long-term Investments				Total
Balance at December 31, 2020	$	978.5	$	1,030.9	$	614.2	$	172.6	$	2,796.2	(2)
Net realized and unrealized (losses) gains	(43.2)		(22.9)		16.7		11.4		(38.0)		(3)

Amortization/Accretion	0		(1.4)		0		0		(1.4)
Purchases	53.4		426.4		17.5		94.5		591.8
Sales	(166.9)		(122.6)		(1.6)		(38.5)		(329.6)


Effect of Ark Transaction	0		68.2		9.6		135.8		213.6
Transfers in	0		0		0		0		0
Transfers out	0		0		0		0		0
Balance at March 31, 2021	$	821.8	$	1,378.6	$	656.4	$	375.8	$	3,232.6	(1)


⁽²⁾	Includes $114.7 unrealized investment gain associated with the MediaAlpha Transaction, which is recorded in a separate line item in the statement of operations titled Realized gain and unrealized investment gain from the MediaAlpha Transaction. See ~~Note 2 — “Significant Transactions”.~~



$ in Millions	September 30, 2020
Description	Valuation Technique(s)	Fair Value ⁽⁵⁾	Unobservable Inputs ⁽⁶⁾
MediaAlpha	Probability-weighted expected return method	$475.0	Weight ascribed to IPO	65%
			Forward Revenue Exit Multiple	2x
			Weight ascribed to remaining private	35%
			Discount Rate	13%
			Terminal Revenue Growth	4%

			Discount Rate ⁽²⁾⁽⁶⁾	Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) ⁽⁶⁾
Kudu’s Participation Contracts ⁽¹⁾⁽²⁾	Discounted cash flow	$325.5	18% - 23%	6x - 12x
PassportCard/DavidShield ⁽³⁾	Discounted cash flow	$95.0	23%	4%
Elementum Holdings, L.P.	Discounted cash flow	$55.1	19%	4%
Private debt instruments	Discounted cash flow	$17.9	5% - 10%	N/A
All other	Discounted cash flow	$18.1	20% - 24%	4%

Noblr, Inc.	Share price of recent transaction	$8.7	Share price:	$2.17
Zillion Insurance Services, Inc.⁽⁴⁾	Recent transaction	$5.0	Transaction price:	$5.0


$ in Millions		Weighted Average Economic Life (in years)	September 30, 2020									December 31, 2019									$ in Millions	Weighted Average Economic Life (in years)	March 31, 2021								December 31, 2020
			Acquisition Date Fair Value		Accumulated Amortization		Impairments		Net Carrying Value			Acquisition Date Fair Value		Accumulated Amortization		Impairments		Net Carrying Value					Acquisition Date Fair Value		Accumulated Amortization		Impairments and Amounts Allocated to Held for Sale		Net Carrying Value		Acquisition Date Fair Value		Accumulated Amortization		Impairments		Net Carrying Value
Goodwill:																					Goodwill:
Ark																					Ark	N/A	$	116.8	$	—	$	0	$	116.8	$	0	$	—	$	0	$	0
NSM ⁽¹⁾		N/A	$	511.8	$	—	$	—	$	511.8		$	381.6	$	—	$	—	$	381.6		NSM (1)	N/A	507.9		—		30.2		477.7		506.4		—		0		506.4
Kudu		N/A	7.6		—		—		7.6			7.6		—		—		7.6			Kudu	N/A	7.6		—		0		7.6		7.6		—		0		7.6
Other Operations		N/A	20.7		—		—		20.7			13.1		—		7.6		5.5			Other Operations	N/A	11.3		—		0		11.3		11.5		—		0		11.5
Total goodwill			540.1		—		—		540.1			402.3		—		7.6		394.7			Total goodwill		643.6		—		30.2		613.4		525.5		—		0		525.5

Other intangible assets:																					Other intangible assets:
Ark																					Ark
Underwriting Capacity																					Underwriting Capacity	N/A	175.7		0		0		175.7		0		0		0		0

NSM ⁽¹⁾																					NSM (1)
Customer relationships		9	118.4		28.4		3.5		86.5			121.7		19.8		1.4		100.5			Customer relationships	8.9	136.4		41.7		3.5		91.2		136.2		36.7		3.5		96.0
Trade names		19	60.8		7.1		1.0		52.7			61.9		5.3		.4		56.2			Trade names	16	65.4		9.1		1.0		55.3		65.4		8.3		1.0		56.1
Information technology platform		0	3.1		1.4		1.7		0			3.9		1.4		.6		1.9			Information technology platform	0	3.1		1.4		1.7		0		3.1		1.4		1.7		0
Renewal rights		12	82.5		3.9		0		78.6			82.5		.7		0		81.8			Renewal rights	12	82.5		7.6		0		74.9		82.5		4.9		0		77.6
Other		3	1.7		1.0		0		.7			1.7		.7		0		1.0			Other	3.4	1.7		1.1		0		.6		1.7		1.0		0		.7
Subtotal			266.5		41.8		6.2		218.5			271.7		27.9		2.4		241.4			Subtotal		289.1		60.9		6.2		222.0		288.9		52.3		6.2		230.4

Kudu																					Kudu
Trade names		7	2.2		.5		—		1.7			2.2		.2		0		2.0			Trade names	7	2.2		.7		0		1.5		2.2		.6		0		1.6

Other Operations																					Other Operations
Trade names		10	1.0		.1		—		.9			1.7		.5		.2		1.0			Trade names	9.6	3.6		.4		0		3.2		3.6		.3		0		3.3
Customer relationships		11	7.2		.8		—		6.4			7.2		.4		0		6.8			Customer relationships	10.7	14.2		1.8		0		12.4		14.2		1.4		0		12.8
Information technology platform		5	0		0		—		0			.5		.3		.2		0

Insurance Licenses		N/A	8.6		0		—		8.6			8.6		0		0		8.6			Insurance Licenses	N/A	8.6		0		0		8.6		8.6		0		0		8.6
Other		5	.2		.1		—		.1			.2		0		0		.2			Other	5.4	.3		.1		0		.2		.3		.1		0		.2
Subtotal			17.0		1.0		—		16.0			18.2		1.2		.4		16.6			Subtotal		26.7		2.3		0		24.4		26.7		1.8		0		24.9

Total other intangible assets	Total other intangible assets		285.7		43.3		6.2		236.2			292.1		29.3		2.8		260.0			Total other intangible assets		493.7		63.9		6.2		423.6		317.8		54.7		6.2		256.9

Total goodwill and other intangible assets	Total goodwill and other intangible assets		$	825.8	$	43.3	$	6.2	776.3			$	694.4	$	29.3	10.4		654.7			Total goodwill and other intangible assets		$	1,137.3	$	63.9	$	36.4	1,037.0		$	843.3	$	54.7	6.2		782.4

Goodwill and other intangible assets attributed to non-controlling interests	Goodwill and other intangible assets attributed to non-controlling interests								(27.1		)							(23.4		)	Goodwill and other intangible assets attributed to non-controlling interests								(108.4)								(28.1)

Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity	Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity								$	749.2								$	631.3		Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity								$	928.6							$	754.3



$ in Millions
Acquisition of subsidiary/ asset	Goodwill and Other intangible asset ⁽¹⁾		Acquisition Date
Embrace ⁽²⁾	$	67.6	April 1, 2019
Renewal Rights ⁽³⁾	82.5		June 28, 2019
Kingsbridge ⁽⁴⁾	125.1		April 7, 2020
Total NSM segment	$	275.2
Kudu Transaction	$	9.8	April 4, 2019
Other Operations ⁽⁴⁾	$	37.5	Various



Millions	September 30, 2020			Effective Rate ⁽¹⁾	December 31, 2019			Effective Rate ⁽¹⁾
NSM Bank Facility	$	275.0		7.4%	$	221.3		7.5%
Unamortized issuance cost	(6.2		)		(3.9		)
NSM Bank Facility, carrying value	268.8				217.4
Other NSM debt, carrying value	1.4			2.8%	1.8			3.0%
Kudu Bank Facility	74.0			8.4%	57.0			8.3%
Unamortized issuance cost	(3.0		)		(3.4		)
Kudu Bank Facility, carrying value	71.0				53.6
Other Operations debt	18.8			10.1%	11.1			8.3%
Unamortized issuance cost	(.6		)		(.4		)
Other Operations, carrying value	18.2				10.7
Total debt	$	359.4			$	283.5


Millions	March 31, 2021		Effective Rate	(1)	December 31, 2020		Effective Rate	(1)

Ark Alesco Notes, carrying value	$	30.0			$	0
Ark Dekania Note, carrying value	14.1				—
Ark Subordinated Notes, carrying value	44.1		4.6%		—
NSM Bank Facility	277.3		7.6%	(2)	277.4		7.5%	(2)
Unamortized issuance cost	(5.8)				(6.1)
NSM Bank Facility, carrying value	271.5				271.3
Other NSM debt, carrying value	1.2		2.3%		1.3		2.5%
Kudu Credit Facility	102.0		5.2%		—
Unamortized issuance cost	(6.1)				—
Kudu Credit Facility, carrying value	95.9				—
Kudu Bank Facility	—				89.2		8.3%
Unamortized issuance cost	—				(2.9)
Kudu Bank Facility, carrying value	—				86.3



Other Operations debt	17.5		7.6%		18.0		7.4%
Unamortized issuance cost	(.5)				(.5)
Other Operations, carrying value	17.0				17.5
Total debt	$	429.7			$	376.4


NSM Weighted Average Interest Rate	Three Months ended March 31,
	2021						2020
Millions	Weighted Average		Interest Expense (1)		Weighted Average Interest rate		Weighted Average		Interest Expense (1)		Weighted Average Interest rate
Term loan - hedged	$	147.6	$	3.4	9.2	%	$	148.4	$	3.0	8.1	%
Term loan - unhedged	129.8		2.5		7.7	%	72.6		1.2		6.6	%
Total NSM Facility	$	277.4	$	5.9	8.5	%	$	221.0	$	4.2	7.6	%


	March 31, 2021		December 31, 2020
Contracts outstanding	11,252		10,997
Remaining weighted average contract period outstanding (in years)	10.6		10.7
Contractual debt service outstanding (in millions):
Principal	$	77,689.3	$	75,287.7
Interest	36,710.5		36,448.8
Total debt service outstanding	$	114,399.8	$	111,736.5

Gross unearned insurance premiums (in millions)	$	243.7	$	237.5


Millions	March 31, 2021
April 1, 2021 - December 31, 2021	$	17.6

January 1, 2022 - March 31, 2022	5.7
April 1, 2022 - June 30, 2022	5.6
July 1, 2022 - September 30, 2022	5.6
October 1, 2022 - December 31, 2022	5.4
Total 2022	22.3

2023	21.0
2024	19.4
2025	18.0
2026	16.6
2027 and thereafter	128.8
Total gross unearned insurance premiums	$	243.7



Millions	September 30, 2020
October 1, 2020 - December 31, 2020	$	5.3

January 1, 2021 - March 31, 2021	5.3
April 1, 2021 - June 30, 2021	5.2
July 1, 2021 - September 30, 2021	5.1
October 1, 2021 - December 31, 2021	5.1
Total 2021	20.7

2022	19.6
2023	18.4
2024	17.2
2025	15.9
2026 and thereafter	129.8
Total gross unearned insurance premiums	$	226.9


	Three Months Ended March 31, 2021
Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense
Performance cycle:
2019 – 2021	14,850	$	24.9
2020 – 2022	13,555	12.7
2021 – 2023	13,000	1.2

Sub-total	41,405	38.8
Assumed forfeitures	(621)	(.6)
March 31, 2021	40,784	$	38.2



	Nine Months Ended September 30, 2020
Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense
Performance cycle:
2018 – 2020	13,450		$	15.4
2019 – 2021	15,600		10.6
2020 – 2022	14,055		3.6
Sub-total	43,105		29.6
Assumed forfeitures	(647	)	(.5		)
September 30, 2020	42,458		$	29.1


Millions	Three Months Ended March 31,
Lease Cost	2021		2020
Lease cost	$	1.9	$	2.0
Less: sublease income	.1		.1
Net lease cost	$	1.8	$	1.9


Millions	As of March 31, 2021
Remainder of 2021	$	5.7
2022	9.8
2023	8.5
2024	7.1
2025	5.4
Thereafter	12.2
Total undiscounted lease payments	48.7
Less: present value adjustment	7.7
Operating lease liability	$	41.0



Millions	As of September 30, 2020
Remainder of 2020	$	1.8
2021	7.6
2022	7.1
2023	6.9
2024	5.7
Thereafter	17.2
Total undiscounted lease payments	46.3
Less: present value adjustment	7.2
Operating lease liability	$	39.1


	As of December 31, 2019												As of December 31, 2020
Millions	HG/BAM		NSM		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate ⁽¹⁾	Millions	HG/BAM		NSM		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate (1)
ROU lease asset	$	10.4	$	4.8	$	2.3	$	5.1	$	22.6	4.6%	ROU lease asset	$	10.1	$	17.1	$	2.0	$	8.4	$	37.6	4.6%
Lease liability	$	10.4	$	4.8	$	2.3	$	5.3	$	22.8		Lease liability	$	10.1	$	17.1	$	2.0	$	9.1	$	38.3


Millions	HG Global/ BAM		Ark		NSM		Kudu		Other Operations		Total
Three Months Ended March 31, 2021
Earned insurance premiums	$	6.4	$	104.6	$	0	$	0	$	0	$	111.0
Net investment income	4.5		.8		0		8.2		7.1		20.6
Net realized and unrealized investment (losses) gains	(17.9)		1.1		0		15.8		2.1		1.1
Net realized and unrealized investment losses from investment in MediaAlpha	0		0		0		0		(41.7)		(41.7)
Commission revenues	0		0		59.6		0		2.3		61.9

Other revenue	.3		2.6		15.2		.1		7.1		25.3
Total revenues	(6.7)		109.1		74.8		24.1		(23.1)		178.2

Loss and loss adjustment expenses	0		66.0		0		0		0		66.0
Insurance acquisition expenses	1.9		36.7		0		0		0		38.6

Cost of sales	0		0		0		0		4.0		4.0
General and administrative expenses	16.4		37.8		46.0		2.5		35.7		138.4
Broker commission expense	0		0		18.9		0		0		18.9
Change in fair value of contingent consideration earnout liabilities	0		0		0		0		0		0
Amortization of other intangible assets	0		0		8.6		.1		.5		9.2
Loss on assets held for sale	0		0		28.7		0		0		28.7
Interest expense	0		1.1		5.9		5.8		.3		13.1
Total expenses	18.3		141.6		108.1		8.4		40.5		316.9
Pre-tax (loss) income	$	(25.0)	$	(32.5)	$	(33.3)	$	15.7	$	(63.6)	$	(138.7)


Millions	HG Global/ BAM		NSM		Kudu ⁽¹⁾		MediaAlpha ⁽²⁾			Other Operations		Total		Millions	HG Global/ BAM		NSM		Kudu		Other Operations		Total
Nine Months Ended September 30, 2019
Three Months Ended March 31, 2020														Three Months Ended March 31, 2020
Earned insurance premiums	$	13.7	$	0	$	0	$	0		$	0	$	13.7	Earned insurance premiums	$	5.4	$	0	$	0	$	0	$	5.4
Net investment income	16.1		0		8.6		0			30.7		55.4		Net investment income	5.5		0		7.3		10.1		22.9
Net realized and unrealized investment gains	30.4		0		3.1		0			199.6		233.1
Realized gain and unrealized investment gain from the MediaAlpha Transaction	0		0		0		0			182.2		182.2
Advertising and commission revenues	0		147.6		0		48.8			4.5		200.9
Net realized and unrealized investment gains (losses)														Net realized and unrealized investment gains (losses)	6.1		0		(24.8)		(168.0)		(186.7)
Net unrealized investment gains from investment in MediaAlpha														Net unrealized investment gains from investment in MediaAlpha	0		0		0		30.0		30.0
Commission revenues														Commission revenues	0		53.0		0		2.1		55.1

Other revenue	1.3		27.7		.2		0			3.6		32.8		Other revenue	.5		12.0		.1		1.5		14.1
Total revenues	61.5		175.3		11.9		48.8			420.6		718.1		Total revenues	17.5		65.0		(17.4)		(124.3)		(59.2)

Insurance acquisition expenses	4.1		0		0		0			0		4.1		Insurance acquisition expenses	1.7		0		0		0		1.7
Other underwriting expenses	.3		0		0		0			0		.3

Cost of sales	0		0		0		40.6			5.0		45.6		Cost of sales	0		0		0		2.0		2.0
General and administrative expenses	39.1		91.4		6.7		12.5			87.2		236.9		General and administrative expenses	14.7		39.6		2.5		17.5		74.3
Broker commission expense	0		48.9		0		0			0		48.9		Broker commission expense	0		18.3		0		0		18.3
Change in fair value of contingent consideration earnout liabilities	0		5.6		0		0			0		5.6		Change in fair value of contingent consideration earnout liabilities	0		(.6)		0		0		(.6)
Amortization of other intangible assets	0		13.5		.2		1.6			.1		15.4		Amortization of other intangible assets	0		4.8		.1		.2		5.1
Interest expense	0		12.2		—		.2			.3		12.7		Interest expense	0		4.3		1.4		.3		6.0
Total expenses	43.5		171.6		6.9		54.9			92.6		369.5		Total expenses	16.4		66.4		4.0		20.0		106.8
Pre-tax income (loss)	$	18.0	$	3.7	$	5.0	$	(6.1	)	$	328.0	$	348.6	Pre-tax income (loss)	$	1.1	$	(1.4)	$	(21.4)	$	(144.3)	$	(166.0)


⁽¹⁾	~~Other revenues consist of premiums, investment income, investment gains and losses and other revenues outside the scope of ASC 606,~~ ~~Revenues from Contracts with Customers.~~


	Basic Ownership Interest
Investee	March 31, 2021	December 31, 2020	Instrument Held
PassportCard/DavidShield	53.8%	53.8%	Common shares
New Market Solutions, LLC.	46.7%	46.7%	Units
durchblicker	45.0%	45.0%	Common shares
MediaAlpha	28.5%	35.0%	Common shares
Elementum Holdings, L.P.	29.7%	28.9%	Limited partnership interest
Compare.com	18.4%	18.4%	Common shares
Tuckerman Capital Funds	16.1 - 30.0%	14.9 - 62.0%	Limited and general partnership interests
Enlightenment Capital Funds	9.1 - 66.3%	9.7 - 66.7%	Limited and general partnership interests
Kudu Participation Contracts	3.2 - 35.6%	3.2 - 35.0%	Revenue and earnings participation contracts



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Millions	2020			2019			2020			2019
Income statement data:
Total revenues	$	151.5		$	110.4		$	394.6		$	281.9
Total expenses	$	(144.1	)	$	(102.6	)	$	(368.2	)	$	(274.5	)
Net income	$	7.4		$	7.8		$	26.4		$	7.4


⁽¹⁾	~~See~~ ~~Note 4 — “Goodwill and Other Intangible Assets”~~ ~~for details of goodwill and other intangible assets.~~


⁽²⁾	~~The relative fair values of goodwill and other intangible assets recognized in connection with the acquisition of Kingsbridge had not yet been finalized at June 30, 2020 or September 30, 2020.~~


⁽³⁾	~~The relative fair values of goodwill and other intangible assets recognized in connection with an acquisition in the Other Operations segment had not yet been finalized at September 30, 2020.~~


⁽⁴⁾	The relative fair values of goodwill and other intangible assets recognized in connection with the acquisition of Embrace Pet Insurance (“Embrace”) and in Other Operations had not yet been finalized as of September 30, 2019.


	Three Months Ended September 30, 2020												Three Months Ended March 31, 2021
Millions	HG Global		BAM			Eliminations			Total			Millions	HG Global		BAM		Eliminations		Total
Direct written premiums	$	—	$	14.5		$	—		$	14.5		Direct written premiums	$	—	$	8.0	$	—	$	8.0
Assumed written premiums	12.5		—			(12.5		)	—			Assumed written premiums	10.7		4.5		(10.7)		4.5
Gross written premiums	12.5		14.5			(12.5		)	14.5			Gross written premiums	10.7		12.5		(10.7)		12.5
Ceded written premiums	—		(12.5		)	12.5			—			Ceded written premiums	—		(10.7)		10.7		—
Net written premiums	$	12.5	$	2.0		$	—		$	14.5		Net written premiums	$	10.7	$	1.8	$	—	$	12.5

Earned insurance premiums	$	5.1	$	1.1		$	—		$	6.2		Earned insurance premiums	$	5.3	$	1.1	$	—	$	6.4
Net investment income	1.8		2.9			—			4.7			Net investment income	1.8		2.7		—		4.5
Net investment income - BAM Surplus Notes	4.6		—			(4.6		)	—			Net investment income - BAM Surplus Notes	3.0		—		(3.0)		—
Net realized and unrealized investment gains	—		3.2			—			3.2			Net realized and unrealized investment gains	(9.9)		(8.0)		—		(17.9)
Other revenue	.2		.2			—			.4			Other revenue	.1		.2		—		.3
Total revenues	11.7		7.4			(4.6		)	14.5			Total revenues	0.3		(4.0)		(3.0)		(6.7)
Insurance acquisition expenses	1.1		.5			—			1.6			Insurance acquisition expenses	1.5		.4		—		1.9
Other underwriting expenses	—		.1			—			.1

General and administrative expenses	.6		13.3			—			13.9			General and administrative expenses	.6		15.8		—		16.4
Interest expense - BAM Surplus Notes	—		4.6			(4.6		)	—			Interest expense - BAM Surplus Notes	—		3.0		(3.0)		—
Total expenses	1.7		18.5			(4.6		)	15.6			Total expenses	2.1		19.2		(3.0)		18.3
Pre-tax income (loss)	$	10.0	$	(11.1	)	$	—		$	(1.1	)
Pre-tax loss												Pre-tax loss	$	(1.8)	$	(23.2)	$	—	$	(25.0)
Supplemental information:												Supplemental information:
MSC collected ⁽¹⁾	$	—	$	15.4		$	—		$	15.4		MSC collected (1)	$	—	$	13.8	$	—	$	13.8