~~0000776867wtm:BamMemberwtm:SupplementalTrustMember2020-01-012020-01-31~~

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, ~~2021~~2022

☐ 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

WHITE MOUNTAINS INSURANCE GROUP, 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) 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, 2021, 3,017,772~~3, 2022, 2,576,232 common shares with a par value of $1.00 per share were outstanding (which includes ~~37,850~~38,350 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, September 30, ~~2021~~2022 and December 31, ~~2020~~2021	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	3

	Consolidated Statements of Changes in Equity,	6
	Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

	Consolidated Statements of Cash Flows, Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5448

	Results of Operations for the Three and NineMonths Ended September 30, ~~2021~~2022 and ~~2020~~2021	5448

	Liquidity and Capital Resources	8070

	Non-GAAP Financial Measures	8574

	Critical Accounting Estimates	8775

	Forward-Looking Statements	9176

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9177

Item 4.	Controls and Procedures	9277

PART II.	OTHER INFORMATION	9277

Items 1 through 6.		9277

SIGNATURES		9378

Part I.FINANCIAL INFORMATION.

Item 1.Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

September 30, 2021 December 31, 2020
Millions, except share and per share amounts
Assets Unaudited
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value $ 898.4 $ 859.5
Short-term investments, at fair value 50.3 60.4
Total investments 948.7 919.9
Cash 21.8 42.8
Insurance premiums receivable 6.9 6.9
Deferred acquisition costs 31.7 27.8
Other assets 18.7 20.4
Total Financial Guarantee assets 1,027.8 1,017.8
P&C Insurance and Reinsurance (Ark)
Fixed maturity investments, at fair value 618.1 —
Common equity securities, at fair value 159.6 —
Short-term investments, at fair value 396.5 —
Other long-term investments 320.6 —
Total investments 1,494.8 —
Cash 116.5 —
Reinsurance recoverables 465.6 —
Insurance premiums receivable 482.3 —
Ceded unearned premiums 92.1 —
Deferred acquisition costs and value of in-force business acquired 127.8 —
Goodwill and other intangible assets 292.5 —
Other assets 61.3 —
Total P&C Insurance and Reinsurance assets 3,132.9 —
Specialty Insurance Distribution (NSM)
     Cash (restricted $92.2 and $78.4) 126.5 126.5
Premiums and commissions receivable 78.8 76.7
     Goodwill and other intangible assets 734.8 736.8
     Other assets 56.4 59.6
Total Specialty Insurance Distribution assets 996.5 999.6
Asset Management (Kudu)
     Short-term investments, at fair value .1 .1
     Other long-term investments 604.7 400.6
Total investments 604.8 400.7
     Cash (restricted $4.5 and $0.0) 14.8 7.8
     Accrued investment income 9.0 9.8
     Goodwill and other intangible assets 9.0 9.2
     Other assets 8.4 2.7
Total Asset Management assets 646.0 430.2
Other Operations
     Fixed maturity investments, at fair value 316.4 347.7
     Short-term investments, at fair value 162.6 82.4
Investment in MediaAlpha, at fair value 316.4 802.2
     Other long-term investments 360.2 386.2
     Total investments 1,155.6 1,618.5
     Cash 31.1 34.1
     Cash pre-funded/placed in escrow for Ark Transaction — 646.3
     Goodwill and other intangible assets 48.7 36.4
     Other assets 75.0 48.5
     Total Other Operations assets 1,310.4 2,383.8
Total assets $ 7,113.6 $ 4,831.4
(Unaudited)


	September 30, 2022		December 31, 2021
Millions, except share and per share amounts
Assets
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	874.4	$	934.1
Short-term investments, at fair value	62.3		32.4
Total investments	936.7		966.5
Cash	17.3		19.8
Insurance premiums receivable	6.6		6.9
Deferred acquisition costs	34.9		33.1


Other assets	22.3		18.5
Total Financial Guarantee assets	1,017.8		1,044.8
P&C Insurance and Reinsurance (Ark)
Fixed maturity investments, at fair value	741.8		688.6
Common equity securities, at fair value	286.4		251.1
Short-term investments, at fair value	309.4		296.2
Other long-term investments	329.7		326.2
Total investments	1,667.3		1,562.1
Cash	123.4		67.8
Reinsurance recoverables	550.9		448.4
Insurance premiums receivable	698.6		416.0
Ceded unearned premiums	59.7		67.1
Deferred acquisition costs and value of in-force business acquired	151.4		108.2

Goodwill and other intangible assets	292.5		292.5
Other assets	62.9		64.9
Total P&C Insurance and Reinsurance assets	3,606.7		3,027.0
Asset Management (Kudu)

Other long-term investments	813.2		669.5

Cash (restricted $8.9 and $4.5)	76.6		21.4
Accrued investment income	12.5		16.9
Goodwill and other intangible assets	8.7		8.9
Other assets	9.7		10.4
Total Asset Management assets	920.7		727.1







Other Operations
Fixed maturity investments, at fair value	238.1		286.2
Short-term investments, at fair value	824.7		129.5
Common equity securities, at fair value	46.4		—
Investment in MediaAlpha, at fair value	148.2		261.6
Other long-term investments	479.8		382.1
Total investments	1,737.2		1,059.4
Cash	28.4		38.7



Goodwill and other intangible assets	92.0		39.1
Other assets	142.2		59.5
Assets held for sale - NSM Group	—		989.0
Assets held for sale - Other	—		16.1
Total Other Operations assets	1,999.8		2,201.8
Total assets	$	7,545.0	$	7,000.7

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)

September 30, 2021 December 31, 2020
Millions, except share and per share amounts
Liabilities Unaudited
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums $ 257.0 $ 237.5
Accrued incentive compensation 21.0 25.7
Other liabilities 32.5 28.3
Total Financial Guarantee liabilities 310.5 291.5
P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expense reserves 890.9 —
Unearned insurance premiums 596.6 —
Debt 200.7 —
Reinsurance payable 481.4 —
Contingent consideration 24.0 —
Other liabilities 87.4 —
Total P&C Insurance and Reinsurance liabilities 2,281.0 —
Specialty Insurance Distribution (NSM)
Debt 295.0 272.6
Premiums payable 132.5 113.4
Contingent consideration 6.7 14.6
     Other liabilities 84.2 91.2
Total Specialty Insurance Distribution liabilities 518.4 491.8
Asset Management (Kudu)
Debt 195.6 86.3
     Other liabilities 40.2 10.0
     Total Asset Management liabilities 235.8 96.3
Other Operations
Debt 19.1 17.5
Accrued incentive compensation 44.7 70.1
Other liabilities 49.8 46.3
Total Other Operations liabilities 113.6 133.9
Total liabilities 3,459.3 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 3,029,620 and 3,102,011 shares and paid-in surplus
3.0 3.1
Paid-in surplus 583.2 592.1
Retained earnings 2,935.3 3,311.2
Accumulated other comprehensive gain (loss), after-tax:
Net unrealized foreign currency translation and interest rate swap gains (losses) .2 (.4)
Total White Mountains’s common shareholders’ equity 3,521.7 3,906.0
Non-controlling interests 132.6 (88.1)
Total equity 3,654.3 3,817.9
Total liabilities and equity $ 7,113.6 $ 4,831.4
(Unaudited)


	September 30, 2022		December 31, 2021
Millions, except share and per share amounts
Liabilities
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	286.7	$	266.3
Debt	146.4		—
Accrued incentive compensation	21.6		24.7

Other liabilities	29.5		30.9
Total Financial Guarantee liabilities	484.2		321.9
P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expense reserves	1,329.4		894.7
Unearned insurance premiums	781.3		495.9
Debt	180.0		185.9
Reinsurance payable	312.7		424.1
Contingent consideration	32.9		28.0

Other liabilities	107.6		93.8
Total P&C Insurance and Reinsurance liabilities	2,743.9		2,122.4









Asset Management (Kudu)


Debt	253.5		218.2

Other liabilities	59.7		42.8
Total Asset Management liabilities	313.2		261.0







Other Operations
Debt	35.6		16.8

Accrued incentive compensation	67.2		48.5

Other liabilities	34.6		30.1

Liabilities held for sale - NSM Group	—		495.3
Total Other Operations liabilities	137.4		590.7
Total liabilities	3,678.7		3,296.0
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 2,576,232 and 3,017,772 shares	2.6		3.0
Paid-in surplus	532.7		585.9
Retained earnings	3,175.9		2,957.5
Accumulated other comprehensive income (loss), after-tax:
Net unrealized gains (losses) from foreign currency translation and interest rate swap	(3.2)		1.7

Total White Mountains’s common shareholders’ equity	3,708.0		3,548.1
Non-controlling interests	158.3		156.6
Total equity	3,866.3		3,704.7
Total liabilities and equity	$	7,545.0	$	7,000.7

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Revenues:	Revenues:									Revenues:
Financial Guarantee (HG Global/BAM)	Financial Guarantee (HG Global/BAM)									Financial Guarantee (HG Global/BAM)
Earned insurance premiums	Earned insurance premiums	$	6.7	$	6.2	$	19.6	$	17.2	Earned insurance premiums	$	7.1	$	6.7	$	26.0	$	19.6
Net investment income	Net investment income	4.4		4.7		13.2		15.1		Net investment income	5.7		4.4		15.1		13.2
Net realized and unrealized investment (losses) gains		(4.0)		3.2		(15.6)		23.7
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	(38.8)		(4.0)		(114.0)		(15.6)
Other revenues	Other revenues	.3		.4		.9		2.1		Other revenues	1.3		.3		3.7		.9
Total Financial Guarantee revenues	Total Financial Guarantee revenues	7.4		14.5		18.1		58.1		Total Financial Guarantee revenues	(24.7)		7.4		(69.2)		18.1

P&C Insurance and Reinsurance (Ark)	P&C Insurance and Reinsurance (Ark)									P&C Insurance and Reinsurance (Ark)
Earned insurance premiums	Earned insurance premiums	213.4		—		435.8		—		Earned insurance premiums	346.1		213.4		757.8		435.8
Net investment income	Net investment income	.6		—		1.8		—		Net investment income	4.9		.6		9.7		1.8
Net realized and unrealized investment gains		.3		—		10.3		—
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	(14.4)		.3		(76.5)		10.3
Other revenues	Other revenues	3.4		—		9.4		—		Other revenues	6.6		3.4		10.1		9.4
Total P&C Insurance and Reinsurance revenues	Total P&C Insurance and Reinsurance revenues	217.7		—		457.3		—		Total P&C Insurance and Reinsurance revenues	343.2		217.7		701.1		457.3

Specialty Insurance Distribution (NSM)
Commission revenues		67.0		58.2		194.6		174.2

Other revenues		15.3		12.5		46.8		37.6
Total Specialty Insurance Distribution revenues		82.3		70.7		241.4		211.8

Asset Management (Kudu)	Asset Management (Kudu)									Asset Management (Kudu)
Net investment income	Net investment income	9.5		6.4		26.1		19.3		Net investment income	14.8		9.5		41.2		26.1
Net realized and unrealized investment gains		18.9		9.8		62.5		1.5
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	41.1		18.9		45.8		62.5
Other revenues	Other revenues	.1		.1		.2		.2		Other revenues	—		.1		—		.2
Total Asset Management revenues	Total Asset Management revenues	28.5		16.3		88.8		21.0		Total Asset Management revenues	55.9		28.5		87.0		88.8

Other Operations	Other Operations									Other Operations

Net investment income	Net investment income	5.0		60.1		16.1		79.3		Net investment income	8.5		5.0		13.6		16.1
Net realized and unrealized investment gains (losses)	Net realized and unrealized investment gains (losses)	15.3		43.6		34.0		(17.4)		Net realized and unrealized investment gains (losses)	(17.3)		15.3		2.8		34.0
Net realized and unrealized investment (losses) gains from investment in MediaAlpha		(396.8)		250.0		(325.5)		295.0
Net realized and unrealized investment gains (losses) from investment in MediaAlpha										Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(325.5)
Commission revenues	Commission revenues	2.4		2.1		7.0		6.1		Commission revenues	3.2		2.4		8.7		7.0
Other revenues	Other revenues	28.1		2.2		57.6		6.0		Other revenues	33.0		28.1		89.6		57.6
Total Other Operations revenues	Total Other Operations revenues	(346.0)		358.0		(210.8)		369.0		Total Other Operations revenues	8.8		(346.0)		1.4		(210.8)
Total revenues	Total revenues	$	(10.1)	$	459.5	$	594.8	$	659.9	Total revenues	$	383.2	$	(92.4)	$	720.3	$	353.4

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Expenses:	Expenses:									Expenses:
Financial Guarantee (HG Global/BAM)	Financial Guarantee (HG Global/BAM)									Financial Guarantee (HG Global/BAM)
Insurance acquisition expenses	Insurance acquisition expenses	$	3.0	$	1.6	$	6.5	$	5.4	Insurance acquisition expenses	$	1.7	$	3.0	$	9.5	$	6.5

General and administrative expenses	General and administrative expenses	12.4		14.0		42.7		41.4		General and administrative expenses	15.8		12.4		49.5		42.7
Interest expense										Interest expense	2.0		—		5.4		—
Total Financial Guarantee expenses	Total Financial Guarantee expenses	15.4		15.6		49.2		46.8		Total Financial Guarantee expenses	19.5		15.4		64.4		49.2

P&C Insurance and Reinsurance (Ark)	P&C Insurance and Reinsurance (Ark)									P&C Insurance and Reinsurance (Ark)
Loss and loss adjustment expenses	Loss and loss adjustment expenses	129.2		—		247.8		—		Loss and loss adjustment expenses	213.7		129.2		456.2		247.8
Insurance and reinsurance acquisition expenses	Insurance and reinsurance acquisition expenses	53.7		—		124.4		—		Insurance and reinsurance acquisition expenses	74.8		53.7		174.9		124.4

General and administrative expenses	General and administrative expenses	21.8		—		84.4		—		General and administrative expenses	26.9		21.8		79.8		84.4
Interest expense	Interest expense	2.1		—		4.5		—		Interest expense	3.7		2.1		10.6		4.5
Total P&C Insurance and Reinsurance expenses	Total P&C Insurance and Reinsurance expenses	206.8		—		461.1		—		Total P&C Insurance and Reinsurance expenses	319.1		206.8		721.5		461.1

Specialty Insurance Distribution (NSM)
General and administrative expenses		48.8		42.9		142.1		131.0
Broker commission expenses		20.4		17.1		60.9		56.4
Change in fair value of contingent consideration		.6		.7		.8		(1.6)
Amortization of other intangible assets		8.2		5.1		25.0		16.2
Loss on assets held for sale		—		—		28.7		—
Interest expense		5.9		6.1		17.7		16.1
Total Specialty Insurance Distribution expenses		83.9		71.9		275.2		218.1

Asset Management (Kudu)	Asset Management (Kudu)									Asset Management (Kudu)
General and administrative expenses	General and administrative expenses	3.3		2.2		9.0		7.5		General and administrative expenses	4.5		3.3		10.2		9.0
Amortization of other intangible assets	Amortization of other intangible assets	—		.1		.2		.3		Amortization of other intangible assets	—		—		.2		.2
Interest expense	Interest expense	1.9		1.4		9.2		4.3		Interest expense	4.2		1.9		10.3		9.2
Total Asset Management expenses	Total Asset Management expenses	5.2		3.7		18.4		12.1		Total Asset Management expenses	8.7		5.2		20.7		18.4

Other Operations	Other Operations									Other Operations

Cost of sales	Cost of sales	24.0		2.3		45.9		6.5		Cost of sales	25.0		24.0		68.8		45.9
General and administrative expenses	General and administrative expenses	14.5		44.3		79.7		87.1		General and administrative expenses	39.9		14.4		118.9		79.4
Amortization of other intangible assets	Amortization of other intangible assets	2.0		.2		2.9		.6		Amortization of other intangible assets	1.4		2.0		3.2		2.9
Interest expense	Interest expense	.4		.3		1.1		.8		Interest expense	.6		.4		1.2		1.1
Total Other Operations expenses	Total Other Operations expenses	40.9		47.1		129.6		95.0		Total Other Operations expenses	66.9		40.8		192.1		129.3
Total expenses	Total expenses	352.2		138.3		933.5		372.0		Total expenses	414.2		268.2		998.7		658.0
Pre-tax (loss) income from continuing operations		(362.3)		321.2		(338.7)		287.9
Income tax expense		(21.6)		(98.5)		(41.9)		(97.1)
Net (loss) income from continuing operations		(383.9)		222.7		(380.6)		190.8
Net (loss) gain from sale of discontinued operations, net of tax		—		(.7)		18.7		(.8)
Pre-tax income (loss) from continuing operations										Pre-tax income (loss) from continuing operations	(31.0)		(360.6)		(278.4)		(304.6)
Income tax (expense) benefit										Income tax (expense) benefit	7.4		(28.6)		26.1		(52.2)
Net income (loss) from continuing operations										Net income (loss) from continuing operations	(23.6)		(389.2)		(252.3)		(356.8)
Net income (loss) from discontinued operations, net of tax - NSM Group										Net income (loss) from discontinued operations, net of tax - NSM Group	6.3		5.3		16.4		(23.8)
Net gain (loss) from sale of discontinued operations, net of tax - NSM Group										Net gain (loss) from sale of discontinued operations, net of tax - NSM Group	886.8		—		886.8		—

Net (loss) income		(383.9)		222.0		(361.9)		190.0
Net loss attributable to non-controlling interests		12.5		10.9		53.7		29.5
Net (loss) income attributable to White Mountains’s common shareholders		$	(371.4)	$	232.9	$	(308.2)	$	219.5
Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group										Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group	—		—		—		18.7
Net income (loss)										Net income (loss)	869.5		(383.9)		650.9		(361.9)
Net (income) loss attributable to non-controlling interests										Net (income) loss attributable to non-controlling interests	18.7		12.5		101.5		53.7
Net income (loss) attributable to White Mountains’s common shareholders										Net income (loss) attributable to White Mountains’s common shareholders	$	888.2	$	(371.4)	$	752.4	$	(308.2)

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
Millions 2021 2020 2021 2020
Net (loss) income attributable to White Mountains’s
   common shareholders $ (371.4) $ 232.9 $ (308.2) $ 219.5
Other comprehensive (loss) income, net of tax (2.2) 3.9 .6 1.0
Comprehensive (loss) income (373.6) 236.8 (307.6) 220.5
Other comprehensive loss (income) attributable to
   non-controlling interests .2 (.1) — (.3)
Comprehensive (loss) income attributable to
   White Mountains’s common shareholders $ (373.4) $ 236.7 $ (307.6) $ 220.2


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2022		2021		2022		2021
Net income (loss) attributable to White Mountains’s common shareholders	$	888.2	$	(371.4)	$	752.4	$	(308.2)

Other comprehensive income (loss), net of tax	(1.4)		—		(3.0)		(.3)

Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	.7		(2.2)		(5.2)		.9
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	2.9		—		2.9		—
Comprehensive income (loss)	890.4		(373.6)		747.1		(307.6)
Other comprehensive (income) loss attributable to non-controlling interests	(.3)		.2		.4		—
Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	890.1	$	(373.4)	$	747.5	$	(307.6)


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 (loss) earnings per share
Basic earnings (loss) per share										Basic earnings (loss) per share
Continuing operations	Continuing operations	$	(120.18)	$	75.32	$	(105.48)	$	70.40	Continuing operations	$	(1.66)	$	(121.90)	$	(50.73)	$	(98.16)
Discontinued operations	Discontinued operations	—		(.23)		6.03		(.26)		Discontinued operations	308.59		1.72		304.97		(1.29)
Total consolidated operations	Total consolidated operations	$	(120.18)	$	75.09	$	(99.45)	$	70.14	Total consolidated operations	$	306.93	$	(120.18)	$	254.24	$	(99.45)
Diluted (loss) earnings per share
Diluted earnings (loss) per share										Diluted earnings (loss) per share
Continuing operations	Continuing operations	$	(120.18)	$	75.32	$	(105.48)	$	70.40	Continuing operations	$	(1.66)	$	(121.90)	$	(50.73)	$	(98.16)
Discontinued operations	Discontinued operations	—		(.23)		6.03		(.26)		Discontinued operations	308.59		1.72		304.97		(1.29)
Total consolidated operations	Total consolidated operations	$	(120.18)	$	75.09	$	(99.45)	$	70.14	Total consolidated operations	$	306.93	$	(120.18)	$	254.24	$	(99.45)
Dividends declared and paid per White Mountains’s common share	Dividends declared and paid per White Mountains’s common share	$	—	$	—	$	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													White Mountains’s Common Shareholders’ Equity
Millions	Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity		Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total Equity
Balance at June 30, 2021		$	597.2	$	3,378.6	$	2.4	$	3,978.2	$	129.8	$	4,108.0
Balance at June 30, 2022														Balance at June 30, 2022	$	603.2	$	2,725.1	$	(5.0)	$	3,323.3	$	168.7	$	3,492.0
Net loss	Net loss	—		(371.4)		—		(371.4)		(12.5)		(383.9)		Net loss	—		888.2		—		888.2		(18.7)		869.5
Net change in foreign currency translation and other	Net change in foreign currency translation and other	—		—		(2.2)		(2.2)		(.2)		(2.4)		Net change in foreign currency translation and other	—		—		(1.1)		(1.1)		.3		(.8)
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group														Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	—		—		2.9		2.9		—		2.9
Total comprehensive loss	Total comprehensive loss	—		(371.4)		(2.2)		(373.6)		(12.7)		(386.3)		Total comprehensive loss	—		888.2		1.8		890.0		(18.4)		871.6

Dividends to non-controlling interests	Dividends to non-controlling interests	—		—		—		—		(.6)		(.6)		Dividends to non-controlling interests	—		—		—		—		(.5)		(.5)
Repurchases and retirements of common shares	Repurchases and retirements of common shares	(15.2)		(71.9)		—		(87.1)		—		(87.1)		Repurchases and retirements of common shares	(71.5)		(437.4)		—		(508.9)		—		(508.9)

BAM member surplus contribution, net of tax	BAM member surplus contribution, net of tax	—		—		—		—		14.7		14.7		BAM member surplus contribution, net of tax	—		—		—		—		26.0		26.0
Amortization of restricted share awards	Amortization of restricted share awards	3.6		—		—		3.6		—		3.6		Amortization of restricted share awards	3.8		—		—		3.8		—		3.8
Recognition of equity-based compensation expense of subsidiaries	Recognition of equity-based compensation expense of subsidiaries	.2		—		—		.2		—		.2		Recognition of equity-based compensation expense of subsidiaries	.4		—		—		.4		.2		.6
Net contributions and dilution from other non-controlling interests	Net contributions and dilution from other non-controlling interests	.4		—		—		.4		1.4		1.8		Net contributions and dilution from other non-controlling interests	(.6)		—		—		(.6)		(.2)		(.8)
Acquisition of non-controlling interests		—		—		—		—		—		—
Balance at September 30, 2021		$	586.2	$	2,935.3	$	.2	$	3,521.7	$	132.6	$	3,654.3
Disposition of non-controlling interests														Disposition of non-controlling interests	—		—		—		—		(17.5)		(17.5)
Balance at September 30, 2022														Balance at September 30, 2022	$	535.3	$	3,175.9	$	(3.2)	$	3,708.0	$	158.3	$	3,866.3


		White Mountains’s Common Shareholders’ Equity													White Mountains’s Common Shareholders’ Equity
Millions	Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total 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
Balance at June 30, 2021														Balance at June 30, 2021	$	597.2	$	3,378.6	$	2.4	$	3,978.2	$	129.8	$	4,108.0
Net income (loss)	Net income (loss)	—		232.9		—		232.9		(10.9)		222.0		Net income (loss)	—		(371.4)		—		(371.4)		(12.5)		(383.9)
Net change in foreign currency translation and other	Net change in foreign currency translation and other	—		—		3.8		3.8		.2		4.0		Net change in foreign currency translation and other	—		—		(2.2)		(2.2)		(.2)		(2.4)
Total comprehensive income (loss)	Total comprehensive income (loss)	—		232.9		3.8		236.7		(10.7)		226.0		Total comprehensive income (loss)	—		(371.4)		(2.2)		(373.6)		(12.7)		(386.3)

Dividends to non-controlling interests	Dividends to non-controlling interests	—		—		—		—		(.9)		(.9)		Dividends to non-controlling interests	—		—		—		—		(.6)		(.6)
Issuances of common shares		.2		—		—		.2		—		.2

Repurchases and retirements of common shares	Repurchases and retirements of common shares	—		(.1)		—		(.1)		—		(.1)		Repurchases and retirements of common shares	(15.2)		(71.9)		—		(87.1)		—		(87.1)
BAM member surplus contributions, net of tax	BAM member surplus contributions, net of tax	—		—		—		—		15.4		15.4		BAM member surplus contributions, net of tax	—		—		—		—		14.7		14.7
Amortization of restricted share awards	Amortization of restricted share awards	3.6		—		—		3.6		—		3.6		Amortization of restricted share awards	3.6		—		—		3.6		—		3.6
Recognition of equity-based compensation expense of subsidiary	Recognition of equity-based compensation expense of subsidiary	1.0		—		—		1.0		—		1.0		Recognition of equity-based compensation expense of subsidiary	.2		—		—		.2		—		.2
Net contributions and dilution from other non-controlling interests	Net contributions and dilution from other non-controlling interests	.3		—		—		.3		(.4)		(.1)		Net contributions and dilution from other non-controlling interests	.4		—		—		.4		1.4		1.8
Acquisition of non-controlling interests		—		—		—		—		.8		.8

Balance at September 30, 2020		$	592.1	$	2,822.1	$	(6.5)	$	3,407.7	$	(98.5)	$	3,309.2

Balance at September 30, 2021														Balance at September 30, 2021	$	586.2	$	2,935.3	$	.2	$	3,521.7	$	132.6	$	3,654.3

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited)


		White Mountains’s Common Shareholders’ Equity													White Mountains’s Common Shareholders’ Equity
Millions	Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total 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		—		(308.2)		—		(308.2)		(53.7)		(361.9)
Net change in foreign currency translation and other		—		—		.4		.4		—		.4
Total comprehensive (loss) income		—		(308.2)		.4		(307.8)		(53.7)		(361.5)
Balance at January 1, 2022														Balance at January 1, 2022	$	588.9	$	2,957.5	$	1.7	$	3,548.1	$	156.6	$	3,704.7
Net income (loss)														Net income (loss)	—		752.4		—		752.4		(101.5)		650.9
Other comprehensive income (loss), net of tax														Other comprehensive income (loss), net of tax	—		—		(7.8)		(7.8)		(.4)		(8.2)
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group														Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	—		—		2.9		2.9		—		2.9
Total comprehensive income (loss)														Total comprehensive income (loss)	—		752.4		(4.9)		747.5		(101.9)		645.6
Dividends declared on common shares	Dividends declared on common shares	—		(3.1)		—		(3.1)		—		(3.1)		Dividends declared on common shares	—		(3.0)		—		(3.0)		—		(3.0)
Dividends to non-controlling interests	Dividends to non-controlling interests	—		—		—		—		(1.8)		(1.8)		Dividends to non-controlling interests	—		—		—		—		(7.5)		(7.5)
Issuances of common shares	Issuances of common shares	1.7		—		—		1.7		—		1.7		Issuances of common shares	3.0		—		—		3.0		—		3.0
Issuance of shares of non-controlling interests	Issuance of shares of non-controlling interests	—		—		—		—		6.1		6.1		Issuance of shares of non-controlling interests	—		—		—		—		74.6		74.6
Repurchases and retirements of common shares	Repurchases and retirements of common shares	(16.6)		(78.0)		—		(94.6)		—		(94.6)		Repurchases and retirements of common shares	(89.2)		(521.3)		—		(610.5)		—		(610.5)
BAM member surplus contributions, net of tax	BAM member surplus contributions, net of tax	—		—		—		—		44.8		44.8		BAM member surplus contributions, net of tax	—		—		—		—		62.3		62.3
Amortization of restricted share awards	Amortization of restricted share awards	11.1		—		—		11.1		—		11.1		Amortization of restricted share awards	10.3		—		—		10.3		—		10.3
Recognition of equity-based compensation expense of subsidiaries	Recognition of equity-based compensation expense of subsidiaries	2.0		—		—		2.0		.3		2.3		Recognition of equity-based compensation expense of subsidiaries	8.1		—		—		8.1		.8		8.9
Net contributions and dilution from other non-controlling interests	Net contributions and dilution from other non-controlling interests	(7.2)		13.4		.2		6.4		(5.3)		1.1		Net contributions and dilution from other non-controlling interests	14.2		(9.7)		—		4.5		(9.1)		(4.6)
Acquisition of non-controlling interests		—		—		—		—		230.3		230.3
Balance at September 30, 2021		$	586.2	$	2,935.3	$	.2	$	3,521.7	$	132.6	$	3,654.3
Disposition of non-controlling interests														Disposition of non-controlling interests	—		—		—		—		(17.5)		(17.5)

Balance at September 30, 2022														Balance at September 30, 2022	$	535.3	$	3,175.9	$	(3.2)	$	3,708.0	$	158.3	$	3,866.3


		White Mountains’s Common Shareholders’ Equity													White Mountains’s Common Shareholders’ Equity
Millions	Millions	Common shares and paid-in surplus		Retained earnings		AOCI, after tax		Total		Non-controlling interest		Total 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
Balance at January 1, 2021														Balance at January 1, 2021	$	595.2	$	3,311.2	$	(.4)	$	3,906.0	$	(88.1)	$	3,817.9
Net income (loss)	Net income (loss)	—		219.5		—		219.5		(29.5)		190.0		Net income (loss)	—		(308.2)		—		(308.2)		(53.7)		(361.9)
Net change in foreign currency translation and other		—		—		.7		.7		.3		1.0
Other comprehensive income (loss), net of tax														Other comprehensive income (loss), net of tax	—		—		.4		.4		—		.4
Total comprehensive income (loss)	Total comprehensive income (loss)	—		219.5		.7		220.2		(29.2)		191.0		Total comprehensive income (loss)	—		(308.2)		.4		(307.8)		(53.7)		(361.5)
Dividends declared on common shares	Dividends declared on common shares	—		(3.2)		—		(3.2)		—		(3.2)		Dividends declared on common shares	—		(3.1)		—		(3.1)		—		(3.1)
Dividends to non-controlling interests	Dividends to non-controlling interests	—		—		—		—		(2.3)		(2.3)		Dividends to non-controlling interests	—		—		—		—		(1.8)		(1.8)
Issuances of common shares	Issuances of common shares	1.5		—		—		1.5		—		1.5		Issuances of common shares	1.7		—		—		1.7		—		1.7
Issuance of shares of non-controlling interests														Issuance of shares of non-controlling interests	—		—		—		—		6.1		6.1
Repurchases and retirements of common shares	Repurchases and retirements of common shares	(18.6)		(66.6)		—		(85.2)		—		(85.2)		Repurchases and retirements of common shares	(16.6)		(78.0)		—		(94.6)		—		(94.6)
BAM member surplus contributions, net of tax	BAM member surplus contributions, net of tax	—		—		—		—		46.9		46.9		BAM member surplus contributions, net of tax	—		—		—		—		44.8		44.8
Amortization of restricted share awards	Amortization of restricted share awards	12.3		—		—		12.3		—		12.3		Amortization of restricted share awards	11.1		—		—		11.1		—		11.1
Recognition of equity-based compensation expense of subsidiary	Recognition of equity-based compensation expense of subsidiary	1.0		—		—		1.0		—		1.0		Recognition of equity-based compensation expense of subsidiary	2.0		—		—		2.0		.3		2.3
Net contributions and dilution from other non-controlling interests	Net contributions and dilution from other non-controlling interests	(.4)		—		—		(.4)		2.1		1.7		Net contributions and dilution from other non-controlling interests	(7.2)		13.4		.2		6.4		(5.3)		1.1
Acquisition of non-controlling interests	Acquisition of non-controlling interests	—		—		—		—		.8		.8		Acquisition of non-controlling interests	—		—		—		—		230.3		230.3

Balance at September 30, 2020		$	592.1	$	2,822.1	$	(6.5)	$	3,407.7	$	(98.5)	$	3,309.2
Balance at September 30, 2021														Balance at September 30, 2021	$	586.2	$	2,935.3	$	.2	$	3,521.7	$	132.6	$	3,654.3

See Notes to Consolidated Financial Statements.

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(Unaudited)~~


		Nine Months Ended September 30,
(Unaudited)						(Unaudited)	Nine Months Ended September 30,
Millions	Millions	2021		2020		Millions	2022		2021
Cash flows from operations:	Cash flows from operations:					Cash flows from operations:
Net (loss) income		$	(361.9)	$	190.0
Adjustments to reconcile net income to net cash used for operations:
Net realized and unrealized investment gains		(91.2)		(7.8)
Net realized and unrealized investment loss (gains) from investment in MediaAlpha		325.5		(295.0)
Net income (loss)						Net income (loss)	$	650.9	$	(361.9)
Adjustments to reconcile net income to net cash provided from (used for) operations:						Adjustments to reconcile net income to net cash provided from (used for) operations:
Net realized and unrealized investment (gains) losses						Net realized and unrealized investment (gains) losses	141.9		(91.2)
Net realized and unrealized investment (gains) losses from investment in MediaAlpha						Net realized and unrealized investment (gains) losses from investment in MediaAlpha	113.3		325.5
Deferred income tax expense	Deferred income tax expense	29.0		87.9		Deferred income tax expense	22.1		36.7

Net (gain) loss from sale of discontinued operations, net of tax		(18.7)		.8
Amortization of restricted share and option awards		11.1		12.2
Amortization of restricted share awards						Amortization of restricted share awards	10.3		11.1
Amortization and depreciation	Amortization and depreciation	42.9		27.2		Amortization and depreciation	7.0		13.6

Net (income) loss from discontinued operation, net of tax - NSM Group						Net (income) loss from discontinued operation, net of tax - NSM Group	(16.4)		23.8
Net (gain) loss from sale of discontinued operations, net of tax - NSM Group and Sirius Group						Net (gain) loss from sale of discontinued operations, net of tax - NSM Group and Sirius Group	(886.8)		(18.7)
Other operating items:	Other operating items:					Other operating items:
Net change in reinsurance recoverables	Net change in reinsurance recoverables	(32.3)		—		Net change in reinsurance recoverables	(102.5)		(32.3)
Net change in insurance premiums receivable	Net change in insurance premiums receivable	(245.7)		—		Net change in insurance premiums receivable	(282.3)		(245.7)
Net change in commissions receivable		(1.2)		6.0

Net change in ceded unearned premiums	Net change in ceded unearned premiums	78.1		—		Net change in ceded unearned premiums	7.4		78.1
Net change in loss and loss adjustment expense reserves	Net change in loss and loss adjustment expense reserves	194.9		—		Net change in loss and loss adjustment expense reserves	434.7		194.9
Net change in premiums payable		9.5		5.3

Net change in unearned insurance premiums	Net change in unearned insurance premiums	290.0		28.6		Net change in unearned insurance premiums	305.8		290.0
Net change in deferred acquisition costs	Net change in deferred acquisition costs	(60.0)		(4.0)		Net change in deferred acquisition costs	(45.0)		(60.0)
Net change in reinsurance payable	Net change in reinsurance payable	(46.8)		—		Net change in reinsurance payable	(111.4)		(46.8)
Net change in restricted cash	Net change in restricted cash	18.3		26.6		Net change in restricted cash	4.4		4.5
Investments in Kudu Participation Contracts	Investments in Kudu Participation Contracts	(141.6)		(57.5)		Investments in Kudu Participation Contracts	(97.9)		(141.6)
Net change in other assets and liabilities, net	Net change in other assets and liabilities, net	46.1		(8.1)		Net change in other assets and liabilities, net	(37.3)		25.7
Net cash provided from (used for) operations - continuing operations						Net cash provided from (used for) operations - continuing operations	118.2		5.7
Net cash provided from (used for) operations - NSM Group discontinued operations (Note 19)						Net cash provided from (used for) operations - NSM Group discontinued operations (Note 19)	38.7		40.3
Net cash provided from (used for) operations						Net cash provided from (used for) operations	156.9		46.0
Cash flows from investing activities:						Cash flows from investing activities:
Net change in short-term investments						Net change in short-term investments	(735.4)		(83.7)
Sales of fixed maturity investments						Sales of fixed maturity investments	212.4		215.9
Maturities, calls and paydowns of fixed maturity investments						Maturities, calls and paydowns of fixed maturity investments	107.3		144.6
Sales of common equity securities and investment in MediaAlpha						Sales of common equity securities and investment in MediaAlpha	—		176.8
Distributions and redemptions of other long-term investments						Distributions and redemptions of other long-term investments	55.0		98.2
Proceeds from the sale of NSM Group, net of cash sold of $143.9 and $0.0						Proceeds from the sale of NSM Group, net of cash sold of $143.9 and $0.0	1,364.8		—

Net cash provided from operations		46.0		12.2
Cash flows from investing activities:
Net change in short-term investments		(87.3)		(370.3)
Sales of fixed maturity and convertible investments		215.9		293.2
Maturities, calls and paydowns of fixed maturity and convertible investments		144.6		135.2
Sales of common equity securities		176.8		582.9
Distributions and redemptions of other long-term investments and settlements of forward contracts		98.2		64.5

Proceeds from the sale of Other Operations, net of cash sold of $0.5 and $0.0						Proceeds from the sale of Other Operations, net of cash sold of $0.5 and $0.0	19.5		—
Release of cash pre-funded/placed in escrow for Ark Transaction	Release of cash pre-funded/placed in escrow for Ark Transaction	646.3		—		Release of cash pre-funded/placed in escrow for Ark Transaction	—		646.3
Purchases of consolidated subsidiaries, net of cash acquired of $52.2 and $13.4		(39.0)		(129.4)
Purchases of consolidated subsidiaries, net of cash acquired of $0.3 and $52.2						Purchases of consolidated subsidiaries, net of cash acquired of $0.3 and $52.2	(67.9)		10.6
Purchases of other long-term investments	Purchases of other long-term investments	(206.5)		(61.0)		Purchases of other long-term investments	(136.9)		(206.5)
Purchases of common equity securities	Purchases of common equity securities	(119.7)		(33.8)		Purchases of common equity securities	(88.0)		(119.7)
Purchases of fixed maturity and convertible investments		(996.0)		(411.3)
Purchases of fixed maturity investments						Purchases of fixed maturity investments	(474.1)		(996.0)
Other investing activities, net	Other investing activities, net	(2.7)		(42.0)		Other investing activities, net	3.7		(1.3)

Net cash (used to) provided from investing activities		(169.4)		28.0
Net cash provided from (used for) investing activities - continuing operations						Net cash provided from (used for) investing activities - continuing operations	260.4		(114.8)
Net cash provided from (used for) investing activities - NSM Group discontinued operations (Note 19)						Net cash provided from (used for) investing activities - NSM Group discontinued operations (Note 19)	7.1		(54.6)
Net cash provided from (used for) investing activities						Net cash provided from (used for) investing activities	267.5		(169.4)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Draw down of debt and revolving line of credit	Draw down of debt and revolving line of credit	403.9		69.4		Draw down of debt and revolving line of credit	211.8		368.9
Repayment of debt and revolving line of credit	Repayment of debt and revolving line of credit	(105.9)		(2.7)		Repayment of debt and revolving line of credit	(10.5)		(94.8)

Cash dividends paid to the Company’s common shareholders	Cash dividends paid to the Company’s common shareholders	(3.2)		(3.2)		Cash dividends paid to the Company’s common shareholders	(3.0)		(3.1)
Common shares repurchased	Common shares repurchased	(87.1)		(78.5)		Common shares repurchased	(610.5)		(94.6)

Net contributions from non-controlling interest shareholders		2.0		1.0
Net distributions from non-controlling interest shareholders						Net distributions from non-controlling interest shareholders	(9.2)		1.1
Contributions from discontinued operations						Contributions from discontinued operations	11.6		—

Contingent consideration payments related to acquisitions of subsidiaries		(8.8)		(7.0)
Acquisition of subsidiary shares from non-controlling interest shareholders		(.4)		—

Capital contributions from BAM members	Capital contributions from BAM members	44.8		46.9		Capital contributions from BAM members	62.3		44.8
Acquisition of subsidiary shares by non-controlling interest shareholders	Acquisition of subsidiary shares by non-controlling interest shareholders	6.1		—		Acquisition of subsidiary shares by non-controlling interest shareholders	74.6		6.1
Fidus Re premium payment	Fidus Re premium payment	(6.9)		(2.3)		Fidus Re premium payment	(5.6)		(6.9)
Other financing activities, net	Other financing activities, net	(22.2)		(9.8)		Other financing activities, net	(2.1)		(13.0)
Net cash provided from (used for) financing activities - continuing operations						Net cash provided from (used for) financing activities - continuing operations	(280.6)		208.5
Net cash provided from (used for) financing activities - NSM Group discontinued operations (Note 19)						Net cash provided from (used for) financing activities - NSM Group discontinued operations (Note 19)	(17.5)		13.8
Net cash provided from (used for) financing activities						Net cash provided from (used for) financing activities	(298.1)		222.3

Net change in cash during the period - continuing operations						Net change in cash during the period - continuing operations	98.0		99.4

Cash balances at beginning of period (includes restricted cash balances of $4.5 and $0.0 and excludes discontinued operations cash balances of $111.6 and $126.6)						Cash balances at beginning of period (includes restricted cash balances of $4.5 and $0.0 and excludes discontinued operations cash balances of $111.6 and $126.6)	147.7		84.6

Net cash provided from financing activities		222.3		13.8
Effect of exchange rate changes on cash		.6		(.2)
Net change in cash during the period - continuing operations, including the effect of exchange rate changes		99.5		53.8

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 $96.7 and $82.9)		$	310.7	$	214.8
Cash balances at end of period (includes restricted cash balances of $8.9 and $4.0 and excludes discontinued operations cash balances of $0.0 and 126.7)						Cash balances at end of period (includes restricted cash balances of $8.9 and $4.0 and excludes discontinued operations cash balances of $0.0 and 126.7)	$	245.7	$	184.0
Supplemental cash flows information:	Supplemental cash flows information:					Supplemental cash flows information:
Interest paid	Interest paid	$	(21.9)	$	(11.4)	Interest paid	$	(10.9)	$	(5.3)
Net income tax payments	Net income tax payments	$	(2.1)	$	(.1)	Net income tax payments	$	(3.2)	$	(2.1)

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~~White Mountains Insurance Group, Ltd. (the “Company” or the “Registrant”) 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”),~~Company, 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~~Certain amounts in the prior period financial statements ~~include all adjustments considered necessary by management~~have been reclassified to ~~fairly state~~conform to 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 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~~current presentation.

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.

~~Fair Value Measurement~~s

~~Fair value measurements are categorized into a hierarchy that distinguishes between inputs based~~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 2021 Annual Report 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 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”) and unobservable inputs, including the reporting entity’s estimates of the assumptions that market participants would use, having the lowest priority (“Level 3”).Form 10-K.

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, ~~2021,~~2022, White Mountains’s reportable segments were HG Global/BAM, Ark ~~NSM,~~and Kudu, with our remaining operating businesses, holding companies and other assets included in Other Operations.

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~~purpose projects, 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~~reinsurance 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, ~~2021~~2022 and December 31, ~~2020,~~2021, 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~~variable interest entity for which White Mountains is the primary beneficiary. BAM’s results are all attributed to non-controlling interests.

The Ark segment consists of Ark Insurance Holdings Limited and its subsidiaries (collectively, “Ark”). Ark ~~writes~~is a ~~diversified portfolio~~specialty property and casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance ~~and insurance,~~products, including property, marine & energy, specialty, accident & health and ~~casualty,~~casualty. Ark underwrites select coverages through Lloyd’s ~~of London (“Lloyd’s”)~~ Syndicates 4020 and 3902 (the “Syndicates”)~~. Beginning in January 2021, Ark began writing certain classes of~~ and its ~~business through~~wholly-owned subsidiary Group Ark Insurance Limited (“GAIL”)~~, Ark’s wholly-owned Class 4 Bermuda-based insurance and reinsurance company.~~

. White Mountains acquired a controlling ownership interest in Ark on January 1, 2021 (the “Ark Transaction”). See Note 2 — “Significant Transactions.” As of September 30, 2022 and December 31, 2021, White Mountains owned 72.0% of Ark on a basic shares outstanding basis (63.0% ~~on a fully-diluted, fully-converted basis,~~after taking account of management’s equity incentives). The remaining shares are owned by current and former employees. In the future, management rollover shareholders could earn additional shares in ~~the company~~Ark 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~~For the years of ~~NSM Insurance HoldCo, LLC and its subsidiaries (collectively, “NSM”). NSM is~~account prior to the Ark Transaction, 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. On behalf of its insurance carrier partners, NSM typically manages all aspectssignificant proportion of the ~~placement process, including product development, marketing,~~Syndicates’ underwriting ~~policy issuance~~capital was provided by third-party insurance and ~~claims. NSM earns commissions based on~~reinsurance groups (“TPC Providers”) using whole account reinsurance contracts with Ark’s corporate member. For the ~~volume~~years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates. Captions within results of operations and ~~in some cases, profitability~~other comprehensive income are shown net of amounts relating to the TPC Providers share of the insurance that it places. NSM does not take insurance risk. As of September 30, 2021 and December 31, 2020, White Mountains owned 96.6% and 96.5% of the basic units outstanding of NSM (87.3% and 89.6% on a fully diluted, fully converted basis). See Syndicates’ results, including investment results.

~~Note 2~~
—~~“Significant Transactions~~”.

The Kudu segment consists of Kudu Investment Management, LLC and its subsidiaries (collectively “Kudu”). Kudu provides capital solutions for boutique asset and wealth 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, generally tied to gross revenues and designed to generate ~~immediate~~ strong, stable cash yields. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, White Mountains owned ~~99.3%~~89.3% and ~~99.1%~~99.3% of the basic units outstanding ~~(84.7%~~(76.1% and ~~85.4%~~84.7% on a fully diluted, fully converted basis).

~~The~~White Mountains’s Other Operations ~~segment~~ consists of the Company and its wholly-owned subsidiary, White Mountains Capital, 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, Inc. (“MediaAlpha”), PassportCard Limited (“PassportCard”) and DavidShield Life Insurance Agency (2000) Ltd. (“DavidShield”) (collectively, “PassportCard/DavidShield”), Elementum Holdings LP (“Elementum”), and certain other consolidated and unconsolidated entities (“Other Operating Businesses”) and certain other assets.

Discontinued Operations

On August 1, 2022, White Mountains Holdings (Luxembourg) S.à r.l. (“WTM Holdings Seller”), an indirect wholly owned subsidiary of White Mountains, completed the previously announced sale of White Mountains Catskill Holdings, Inc. and NSM Insurance HoldCo, LLC (“NSM” and, collectively with White Mountains Catskill Holdings, Inc., the “NSM Group”) to Riser Merger Sub, Inc., an affiliate of The Carlyle Group Inc. (the “NSM Transaction”), pursuant to the terms of the securities purchase agreement, dated as of May 9, 2022. See Note 2 — “Significant Transactions.~~“Significant Transactions”~~.

~~Discontinued Operations~~” NSM is a full-service managing general agent (“MGA”) and ~~Assets Held~~program administrator with delegated binding authorities for ~~Sale~~

~~In the first quarter~~specialty property and casualty insurance. As of December 31, 2021, White Mountains ~~recorded~~owned 96.5% of the basic units outstanding of NSM (87.3% on a ~~gain on sale of discontinued operations as~~fully diluted, fully converted basis).

As a result of ~~reversing a liability arising from~~ the ~~tax indemnification provided~~NSM Transaction, the assets and liabilities of NSM Group have been presented in ~~connection with~~ the ~~sale of Sirius International Insurance Group, Ltd. (“Sirius Group”) in 2016.~~

~~On April 12, 2021, NSM sold the Fresh Insurance Services Group Limited (“Fresh Insurance”) motor business, which was classified~~balance sheet as held for sale ~~at March 31, 2021. The~~for periods prior to the closing of the transaction, ~~did not meet~~and the ~~criteria to be~~results of operations for NSM Group have been classified as discontinued ~~operations.~~operations in the statements of operations and comprehensive income through the closing of the transaction. Prior period amounts have been reclassified to conform to the current period’s presentation. See Note 19 — “Held for Sale and Discontinued ~~Operations”.~~Operations.”

Significant Accounting Policies

~~In addition~~Refer to the ~~following, refer to the Notes to Consolidated Financial Statements in the~~ Company’s ~~2020~~2021 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s significant accounting policies.

~~Ark Insurance Operations~~

Ark writes a diversified portfolio of reinsurance and insurance, including property, marine & energy, specialty, accident & health and casualty, 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 years of account. Insurance premiums are recognized as revenues over the loss exposure or coverage period in proportion to the level of insurance protection provided. In most cases, premiums are earned ratably over the term of the contract with unearned premiums calculated on a monthly pro-rata basis. Catastrophe premiums are earned in proportion to the level of insurance protection provided. 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 but 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 resulting adjustments 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.

~~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 underwriting capacity, customer relationships, renewal rights and trade names.

~~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, 2021 and December 31, 2020, NSM holds an interest rate swap derivative instrument that meets the criteria for hedge accounting. See~~ ~~Note 9 — “Derivatives”~~.

~~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 ceded reinsurance agreements with Fidus Re Ltd. (“Fidus Re”) during the second quarter of 2018 and the first quarter of 2021, which are both accounted for using the deposit method. See ~~Note 10 — “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 SiriusPoint Ltd. (“SiriusPoint”), formerly Third Point Reinsurance Ltd., which is accounted for using the deposit method and recorded within other assets. Ark earns an annual crediting rate of 3.0%, which is recorded within other revenue. During the three months ended June 30, 2021, Ark negotiated a reduction of $31.7 million, including accrued interest, to the aggregate excess of loss contract with SiriusPoint. As of September 30, 2021, the carrying value of Ark’s deposit in SiriusPoint, including accrued interest, was $20.3 million.

~~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 and the interest reserve account that Kudu maintains under its credit facility, are classified as restricted.

Note 2. Significant Transactions

~~MediaAlpha~~NSM

On ~~October 30, 2020, MediaAlpha completed an initial public offering (the “MediaAlpha IPO”). In~~August 1, 2022, the ~~offering,~~NSM Transaction closed. White Mountains ~~sold 3.6~~received $1.4 billion in net cash proceeds at closing and recognized a net transaction gain of $875.7 million, ~~shares at $19.00 per share ($17.67 per share net~~which was comprised of ~~underwriting fees) and received total proceeds of $63.8 million. White Mountains also received $55.0~~$886.8 million of net ~~proceeds~~gain from sale of discontinued operations and $2.9 million of comprehensive income related to ~~a dividend recapitalization at MediaAlpha.~~

~~Subsequent~~the recognition of foreign currency translation gains (losses) from the sale, partially offset by $14.0 million of compensation and other costs related to the ~~MediaAlpha IPO, White Mountains’s investment~~transaction recorded in ~~MediaAlpha is accounted for at fair value based on the publicly traded share price~~Other Operations.

Kudu

On May 26, 2022, Kudu raised $114.5 million of ~~MediaAlpha’s common stock and~~equity capital (the “Kudu Transaction”) from Massachusetts Mutual Life Insurance Company (“Mass Mutual”), White Mountains ~~presents its investment in MediaAlpha as a separate line item on the balance sheet.~~

~~As of December 31, 2020,~~and Kudu management. Mass Mutual, White Mountains ~~owned 20.5~~and Kudu management contributed $64.1 million, ~~MediaAlpha shares, representing~~$50.0 million and $0.4 million and in each case, at a ~~35.0% ownership interest (32.3% on a fully-diluted, fully converted basis).~~Atpre-money valuation of 1.3x, or $114.0 million above the December 31, ~~2020 closing price of $39.07 per share, the fair~~2021 equity value of ~~White Mountains’s remaining investment in MediaAlpha was $802.2 million.~~

~~On March 23, 2021, MediaAlpha completed a secondary offering~~Kudu’s go-forward portfolio 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.~~

participation contracts. As of September 30, ~~2021,~~2022, Kudu’s go-forward portfolio of participation contracts excludes $41.1 million of enterprise value relating to two portfolio companies that had announced sale transactions prior to the capital raise. As a result of the Kudu Transaction, White ~~Mountains owned 16.9 million shares, representing a 28.4%~~Mountains’s basic ownership ~~interest (26.3% fully-diluted/fully-converted basis)~~of Kudu decreased from 99.1% to 89.3%. At the September 30, 2021 closing price of $18.68 per share, the fair value of White Mountains’s investment in MediaAlpha was $316.4 million. At this level of ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $5.60 per share increase or decrease in White Mountains’s book value per share. At the October 2021 month-end closing price of $17.53 per share, the fair value of White Mountains’s investment in MediaAlpha was $297.0 million. See ~~Note 16 — “Equity-Method Eligible Investments”~~.

Ark

On October 1, 2020, White Mountains entered into a subscription and purchase agreement (the “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”). 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 to 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 $280.0 million funded directly to Lloyd’s on behalf of Ark under the terms of a ~~Deposit Trust Deed~~credit facility agreement and $366.3 million placed in ~~escrow, which is reflected on the balance sheet within the Other Operations segment as of December 31, 2020.~~escrow.

On January 1, 2021, White Mountains completed the Ark Transaction in accordance with the terms of the Ark SPA. As of September 30, ~~2021,~~2022, White Mountains owned 72.0% of Ark on a basic shares outstanding basis (63.0% ~~on a fully-diluted, fully-converted basis,~~) after taking account of management’s equity incentives). The remaining shares are owned by current and former employees. In the future, management rollover shareholders could earn additional shares in ~~the company~~Ark 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.

White Mountains recognized total assets acquired related to the 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 the first quarter of 2021.

In the third quarter of 2021, Ark issued $163.3 million of floating rate unsecured subordinated notes (the “Ark 2021 Subordinated Notes”) in three separate transactions. See Note 7 — ~~“Debt”~~“Debt.”. In connection with the issuance of the Ark 2021 Subordinated Notes, White Mountains and Ark terminated White Mountains’s commitment to provide up to $200.0 million of additional equity capital to Ark in 2021.

The following presents additional details of the assets acquired and liabilities assumed as of the 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 White Mountains cash contribution of $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. For the three and nine months ended September 30, 2022, Ark recognized $0.7 million and $6.8 million of amortization expense on the value of in-force business acquired. For the three and nine months ended September 30, 2021, Ark recognized $11.0 million and $54.9 million of amortization expense on the value of in-force business acquired. 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 (“LAE”), 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 and nine months ended September 30, 2021 are presented in~~ ~~Note 15 - “Segment Information.”~~ Pro forma financial information for Ark for the three and nine months ended September 30, 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, 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 for net proceeds of £1.1 million ($1.5 million based upon the foreign exchange spot rate as of the transaction date). As of March 31, 2021, the Fresh Insurance motor business was classified as held for sale and NSM recognized a loss of $28.7 million in the first quarter of 2021. See ~~Note 19 — “Held for Sale and 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 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 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 which ended 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 periods. As of September 30, 2022 and December 31, 2021, ~~the KBK contingent consideration liability was $6.6 million.~~

On April 7, 2020, NSM acquired 100% of Kingsbridge Group Limited (“Kingsbridge”), a leading provider of commercial lines insurance and consulting services for the professional contractor and freelancer markets in the United Kingdom. NSM paid £107.2 million ($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 ($52.4 million based upon the foreign exchange spot rate at the date of acquisition) to fund the transaction. During 2020, 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 values. The purchase price is subject to adjustment based upon growth in EBITDA during an earnout period ending in January 2022. During 2020, NSM initially recorded a liability relating to the fair value of the Kingsbridge contingent consideration of $4.1 million. During the fourth quarter of 2020, NSM recognized pre-tax income of $4.1 million for the change in fair value of the Kingsbridge contingent consideration liability and a foreign currency translation unrealized gain of $0.3 million. As of September 30, 2021, the Kingsbridge contingent consideration liability was $0.1 million.

On August 6, 2021, NSM acquired 100% of J.C. Taylor Insurance (“J.C. Taylor”), a managing general agent (“MGA”) offering classic and antique collector car insurance. NSM paid $49.6 million of upfront cash consideration for J.C. Taylor. NSM borrowed $35.0 million under its credit facility to fund the acquisition. NSMArk recognized total assets acquired related to the J.C. transaction of $60.3 million, including goodwill and other intangible assets of $55.7 million, and total liabilities of $10.7 million. The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisition of J.C. Taylor had not yet been finalized as of September 30, 2021.

~~The~~ contingent consideration liabilities ~~related~~of $32.9 million and $28.0 million. Any future adjustments to ~~NSM’s acquisitions are subject to adjustments based upon EBITDA, EBITDA projections, and present value factors for acquired entities.~~contingent consideration liabilities will be recognized through pre-tax income (loss). For the three and nine months ended September 30, ~~2021, NSM~~2022, Ark recognized pre-tax ~~loss~~expense of ~~$0.6~~$2.7 million and ~~$0.8~~$4.9 million for the change in the fair value of its contingent consideration liabilities. For both the three and nine months ended September 30, ~~2020, NSM~~2021, Ark recognized pre-tax ~~loss (income)~~expense of ~~$0.7 million and $(1.6)~~$1.5 million for the change in the fair value of its contingent consideration liabilities. ~~Any future adjustments~~

MediaAlpha

On October 30, 2020, MediaAlpha completed an initial public offering (the “MediaAlpha IPO”). In the offering, White Mountains 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 ~~contingent consideration liabilities under~~a dividend recapitalization at MediaAlpha.

Subsequent to the ~~agreements will be recognized through pre-tax income.~~ MediaAlpha IPO, White Mountains’s investment in MediaAlpha is accounted for at fair value based on the publicly traded share price of MediaAlpha’s common stock, and White Mountains presents its investment in MediaAlpha as a separate line item on the balance sheet.

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.

As of September 30, ~~2021 and December 31, 2020, NSM recorded total contingent consideration liabilities~~2022, White Mountains owned 16.9 million shares, representing a 27.4% basic ownership interest (25.0% fully-diluted/fully-converted basis). At this current level of ~~$6.7 million and $14.6~~ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $6.60 per share increase or decrease in White Mountains’s book value per share. At the September 30, 2022 closing price of $8.75 per share, the fair value of White Mountains’s investment in MediaAlpha was $148.2 million. See Note 16 — “Equity-Method Eligible Investments.”

PassportCard/DavidShield

On January 24, 2018, White Mountains acquired a 50.0% ownership interest in DavidShield, its joint venture partner in PassportCard. DavidShield is ~~a managing general agency~~an MGA that is the leading provider of expatriate medical insurance in Israel and uses the same card-based delivery system as PassportCard. As part of the transaction, White Mountains reorganized its equity stake in PassportCard so that White Mountains and its partner in DavidShield would each own 50.0% of both businesses. To facilitate the transaction, White Mountains provided financing to its partner in the form of a ~~non-interest bearing~~non-interest-bearing loan that is secured by the partner’s equity in PassportCard and DavidShield. The gross purchase price for the 50.0% interest in DavidShield was $41.8 million, or $28.3 million net of the 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%, 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. White Mountains’s ownership interest gives White Mountains the opportunity to exert significant influence over the significant financial and operating activities of PassportCard and DavidShield. Accordingly, PassportCard and DavidShield meet the criteria to be accounted for under the equity method. White Mountains has taken the fair value 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~~non-interest-bearing loan to its partner is limited to the total carrying value of ~~$114.4~~$143.0 million.

1512

Note 3. 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 fair value, which approximated amortized cost, as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Other long-term investments consist primarily of unconsolidated entities, including Kudu’s Participation Contracts, private equity funds and hedge funds, a ~~hedge~~bank loan fund, Lloyd’s trust deposits, ~~a bank loan fund,~~ insurance-linked securities (“ILS”) funds ~~(“ILS funds”)~~ and private debt investments.

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, 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, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Fixed maturity investments	Fixed maturity investments	$	8.2	$	7.0	$	21.9	$	22.4	Fixed maturity investments	$	11.1	$	8.2	$	28.6	$	21.9
Short-term investments	Short-term investments	—		.1		.5		1.0		Short-term investments	6.7		—		7.2		.5
Common equity securities	Common equity securities	.1		.5		.1		6.5		Common equity securities	.1		.1		.2		.1

Investment in MediaAlpha		—		55.0		—		60.0

Other long-term investments	Other long-term investments	12.0		8.9		37.1		24.7		Other long-term investments	17.1		12.0		45.9		37.1
Amount attributable to TPC Providers	Amount attributable to TPC Providers	(.2)		—		(.8)		—		Amount attributable to TPC Providers	(.3)		(.2)		(.8)		(.8)
Total investment income	Total investment income	20.1		71.5		58.8		114.6		Total investment income	34.7		20.1		81.1		58.8
Third-party investment expenses	Third-party investment expenses	(.6)		(.3)		(1.6)		(.9)		Third-party investment expenses	(.8)		(.6)		(1.5)		(1.6)
Net investment income, pre-tax	Net investment income, pre-tax	$	19.5	$	71.2	$	57.2	$	113.7	Net investment income, pre-tax	$	33.9	$	19.5	$	79.6	$	57.2

1613

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, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Realized investment gains (losses)										Realized investment gains (losses)
Fixed maturity investments	Fixed maturity investments	$	(6.8)	$	3.6	$	(23.2)	$	35.8	Fixed maturity investments	$	(4.9)	$	1.0	$	(10.8)	$	3.8
Short-term investments	Short-term investments	(.3)		—		—		.4		Short-term investments	(.1)		(.3)		(.4)		—
Common equity securities	Common equity securities	1.6		48.4		7.7		5.9		Common equity securities	—		—		—		.4
Investment in MediaAlpha	Investment in MediaAlpha	(396.8)		250.0		(325.5)		295.0		Investment in MediaAlpha	—		—		—		160.3
Other long-term investments	Other long-term investments	37.7		4.6		113.2		(34.3)		Other long-term investments	3.4		9.2		24.1		0.9
Net realized investment gains (losses)										Net realized investment gains (losses)	(1.6)		9.9		12.9		165.4
Unrealized investment gains (losses)										Unrealized investment gains (losses)
Fixed maturity investments										Fixed maturity investments	(58.8)		(7.9)		(192.9)		(27.0)
Short-term investments										Short-term investments	(2.1)		—		(2.6)		—
Common equity securities										Common equity securities	4.3		1.6		(6.3)		7.3
Investment in MediaAlpha										Investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(485.8)
Other long-term investments										Other long-term investments	27.5		28.4		40.8		112.3
Net unrealized investment gains (losses)										Net unrealized investment gains (losses)	(47.7)		(374.7)		(274.3)		(393.2)
Net realized and unrealized investment gains (losses), before amount attributable to TPC providers(1)										Net realized and unrealized investment gains (losses), before amount attributable to TPC providers(1)	(49.3)		(364.8)		(261.4)		(227.8)
Amount attributable to TPC Providers	Amount attributable to TPC Providers	(1.7)		—		(6.5)		—		Amount attributable to TPC Providers	1.3		(1.7)		6.2		(6.5)
Net realized and unrealized investment (losses) gains(1)		(366.3)		306.6		(234.3)		302.8
Less: net (losses) gains on investment securities sold during the period		(4.8)		36.1		(5.1)		29.6
Net realized and unrealized investment (losses) gains on investment securities held at the end of the period		$	(361.5)	$	270.5	$	(229.2)	$	273.2
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	$	(48.0)	$	(366.5)	$	(255.2)	$	(234.3)
Fixed maturity and short-term investments										Fixed maturity and short-term investments
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	$	(65.9)	$	(7.2)	$	(206.7)	$	(23.2)
Less: net realized and unrealized gains (losses) on investment securities sold during the period										Less: net realized and unrealized gains (losses) on investment securities sold during the period	.1		(5.7)		(3.0)		(6.9)
Net unrealized investment gains (losses) on investment securities held at the end of the period										Net unrealized investment gains (losses) on investment securities held at the end of the period	$	(66.0)	$	(1.5)	$	(203.7)	$	(16.3)
Common equity securities and investment in MediaAlpha										Common equity securities and investment in MediaAlpha
Net realized and unrealized investment gains (losses) on common equity securities										Net realized and unrealized investment gains (losses) on common equity securities	$	4.3	$	1.6	$	(6.3)	$	7.7
Net realized and unrealized investment gains (losses) from investment in MediaAlpha										Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(325.5)
Total net realized and unrealized investment gains (losses)										Total net realized and unrealized investment gains (losses)	(14.3)		(395.2)		(119.6)		(317.8)
Less: net realized and unrealized gains (losses) on investment securities sold during the period										Less: net realized and unrealized gains (losses) on investment securities sold during the period	—		.4		—		20.3
Net unrealized investment gains (losses) on investment securities held at the end of the period										Net unrealized investment gains (losses) on investment securities held at the end of the period	$	(14.3)	$	(395.6)	$	(119.6)	$	(338.1)

(1)For the three months ended September 30, 2022 and 2021, includes $(22.6) and ~~2020, includes~~ $(7.0) ~~and $0.8~~ of realized and unrealized investment gains (losses) related to foreign currency exchange. For the nine months ended September 30, 2022 and 2021, includes $(44.4) and ~~2020, includes~~ $(7.4) ~~and $(0.8)~~ of realized and unrealized investment gains (losses) related to foreign currency exchange.

The following table presents total gains included in earnings attributable to net unrealized investment gains for Level 3 investments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 for investments still held at the end of the period:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021

Other long-term investments	Other long-term investments	$	26.5	$	260.1	$	75.5	$	276.0	Other long-term investments	$	40.8	$	26.5	$	57.7	$	75.5
Total net unrealized investment gains, pre-tax - Level 3 investments	Total net unrealized investment gains, pre-tax - Level 3 investments	$	26.5	$	260.1	$	75.5	$	276.0	Total net unrealized investment gains, pre-tax - Level 3 investments	$	40.8	$	26.5	$	57.7	$	75.5

Investment Holdings

The following tables present the cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses) and carrying values of White Mountains’s fixed maturity investments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021											September 30, 2022
Millions	Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value		Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
U.S. Government and agency obligations	U.S. Government and agency obligations	$	207.4	$	.8	$	(.6)	$	—	$	207.6	U.S. Government and agency obligations	$	227.9	$	—	$	(11.0)	$	—	$	216.9
Debt securities issued by corporations	Debt securities issued by corporations	945.2		13.1		(3.4)		(.7)		954.2		Debt securities issued by corporations	1,068.8		—		(91.2)		(3.1)		974.5
Municipal obligations	Municipal obligations	276.1		18.0		(.7)		—		293.4		Municipal obligations	289.3		—		(24.4)		—		264.9
Mortgage and asset-backed securities	Mortgage and asset-backed securities	247.3		4.2		(1.4)		—		250.1		Mortgage and asset-backed securities	278.3		—		(37.6)		—		240.7

Collateralized loan obligations	Collateralized loan obligations	128.5		—		(.4)		(.5)		127.6		Collateralized loan obligations	169.7		—		(7.6)		(4.8)		157.3
Total fixed maturity investments	Total fixed maturity investments	$	1,804.5	$	36.1	$	(6.5)	$	(1.2)	$	1,832.9	Total fixed maturity investments	$	2,034.0	$	—	$	(171.8)	$	(7.9)	$	1,854.3


		December 31, 2020								December 31, 2021
Millions	Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Gains (Losses)		Carrying Value			Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
U.S. Government and agency obligations	U.S. Government and agency obligations	$	173.2	$	3.1	$	—	$	176.3		U.S. Government and agency obligations	$	212.1	$	.5	$	(1.1)	$	—	$	211.5
Debt securities issued by corporations	Debt securities issued by corporations	522.8		24.7		(.1)		547.4			Debt securities issued by corporations	993.3		8.7		(8.7)		(.4)		992.9
Municipal obligations	Municipal obligations	244.0		21.0		—		265.0			Municipal obligations	276.4		16.8		(1.3)		—		291.9
Mortgage and asset-backed securities	Mortgage and asset-backed securities	211.7		6.8		—		218.5			Mortgage and asset-backed securities	277.2		2.9		(2.5)		—		277.6

Collateralized loan obligations											Collateralized loan obligations	136.5		—		(.4)		(1.1)		135.0
Total fixed maturity investments	Total fixed maturity investments	$	1,151.7	$	55.6	$	(.1)	$	1,207.2		Total fixed maturity investments	$	1,895.5	$	28.9	$	(14.0)	$	(1.5)	$	1,908.9

The following table presents the cost or amortized cost and carrying ~~value~~values of White Mountains’s fixed maturity investments by contractual maturity as of September 30, ~~2021.~~2022. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.


		September 30, 2021					September 30, 2022
Millions	Millions	Cost or Amortized Cost		Carrying Value		Millions	Cost or Amortized Cost		Carrying Value
Due in one year or less	Due in one year or less	$	111.9	$	112.7	Due in one year or less	$	207.5	$	203.8
Due after one year through five years	Due after one year through five years	836.1		843.4		Due after one year through five years	917.9		849.4
Due after five years through ten years	Due after five years through ten years	368.5		377.3		Due after five years through ten years	354.8		309.3
Due after ten years	Due after ten years	112.2		121.8		Due after ten years	105.8		93.8
Mortgage and asset-backed securities and collateralized loan obligations	Mortgage and asset-backed securities and collateralized loan obligations	375.8		377.7		Mortgage and asset-backed securities and collateralized loan obligations	448.0		398.0

Total fixed maturity investments	Total fixed maturity investments	$	1,804.5	$	1,832.9	Total fixed maturity investments	$	2,034.0	$	1,854.3

The following tables present the cost or amortized cost, gross unrealized investment gains (losses), net foreign currency gains (losses), and carrying values of common equity securities, White Mountains’s investment in MediaAlpha and other long-term investments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021											September 30, 2022
Millions	Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value		Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
Common equity securities	Common equity securities	$	152.5	$	8.8	$	(.5)	$	(1.2)	$	159.6	Common equity securities	$	324.2	$	32.7	$	(8.7)	$	(15.4)	$	332.8
Investment in MediaAlpha	Investment in MediaAlpha	$	—	$	316.4	$	—	$	—	$	316.4	Investment in MediaAlpha	$	—	$	148.2	$	—	$	—	$	148.2

Other long-term investments	Other long-term investments	$	1,154.7	$	197.6	$	(62.9)	$	(3.9)	$	1,285.5	Other long-term investments	$	1,390.7	$	345.0	$	(90.0)	$	(23.0)	$	1,622.7

December 31, 2020
Millions Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Net Foreign
Currency
Gains (Losses) Carrying
Value
Investment in MediaAlpha $ — $ 802.2 $ — $ — $ 802.2
Other long-term investments $ 767.4 $ 95.8 $ (78.1) $ 1.7 $ 786.8


	December 31, 2021
Millions	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Foreign Currency Gains (Losses)		Carrying Value
Common equity securities	$	236.3	$	16.1	$	—	$	(1.3)	$	251.1
Investment in MediaAlpha	$	—	$	261.6	$	—	$	—	$	261.6

Other long-term investments	$	1,186.7	$	239.0	$	(44.1)	$	(3.8)	$	1,377.8

Fair Value Measurements

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 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) and unobservable inputs, including the reporting entity’s estimates of the assumptions that market participants would use, having the lowest priority (Level 3). See Note 17 — “Fair Value of Financial Instruments.”

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, White Mountains used quoted market prices or other observable inputs to determine fair value for approximately 69% and ~~73%~~68% of the investment portfolio.

Fair Value Measurements by Level

The following tables present White Mountains’s fair value measurements for investments as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 by level. The major security types were based on the legal form of the securities. White Mountains has disaggregated its fixed maturity investments based on the issuing entity type, which impacts credit quality, with debt securities issued by U.S. government entities carrying minimal credit risk, while the credit and other risks associated with other issuers, such as corporations, municipalities or entities issuing mortgage and asset-backed securities vary depending on the nature of the issuing entity type. White Mountains further disaggregates debt securities issued by corporations by industry sector because investors often reference commonly used benchmarks and their subsectors to monitor risk and performance. Accordingly, White Mountains has further disaggregated this asset class into subclasses based on the similar sectors and industry classifications it uses to evaluate investment risk and performance against commonly used benchmarks, such as the Bloomberg Barclays U.S. Intermediate Aggregate.

September 30, 2021
Millions Fair Value Level 1 Level 2 Level 3
Fixed maturity investments:
U.S. Government and agency obligations $ 207.6 $ 207.6 $ — $ —
Debt securities issued by corporations:
Financials 246.5 — 246.5 —
Consumer 180.5 — 180.5 —
Industrial 114.8 — 114.8 —
Technology 110.8 — 110.8 —
Healthcare 98.2 — 98.2 —
Utilities 69.9 — 69.9 —
Communications 53.2 — 53.2 —
Energy 47.0 — 47.0 —
Materials 33.3 — 33.3 —
Total debt securities issued by corporations 954.2 — 954.2 —
Municipal obligations 293.4 — 293.4 —
Mortgage and asset-backed securities 250.1 — 250.1 —
Collateralized loan obligations 127.6 — 127.6 —
Total fixed maturity investments 1,832.9 207.6 1,625.3 —
Short-term investments 609.5 601.6 7.9 —
Common equity securities (1)
159.6 — 159.6 —
Investment in MediaAlpha 316.4 316.4 — —
Other long-term investments 814.5 — — 814.5
Other long-term investments — NAV (2)
471.0 — — —
Total other long-term investments 1,285.5 — — 814.5
Total investments $ 4,203.9 $ 1,125.6 $ 1,792.8 $ 814.5


	September 30, 2022
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	216.9	$	216.9	$	—	$	—
Debt securities issued by corporations:
Financials	269.0		—		269.0		—
Consumer	181.4		—		181.4		—
Industrial	115.8		—		115.8		—
Healthcare	114.3		—		114.3		—
Technology	110.8		—		110.8		—
Utilities	75.9		—		75.9		—
Communications	49.1		—		49.1		—
Energy	36.1		—		36.1		—
Materials	22.1		—		22.1		—

Total debt securities issued by corporations	974.5		—		974.5		—
Municipal obligations	264.9		—		264.9		—
Mortgage and asset-backed securities	240.7		—		240.7		—

Collateralized loan obligations	157.3		—		157.3		—
Total fixed maturity investments	1,854.3		216.9		1,637.4		—
Short-term investments	1,196.4		1,196.4		—		—
Common equity securities (1)	332.8		46.4		286.4		—
Investment in MediaAlpha	148.2		148.2		—		—














Other long-term investments	1,058.0		—		13.9		1,044.1
Other long-term investments — NAV (2)	564.7		—		—		—
Total other long-term investments	1,622.7		—		13.9		1,044.1
Total investments	$	5,154.4	$	1,607.9	$	1,937.7	$	1,044.1

(1) Consist of investments in exchange traded funds (“ETFs”) and listed funds that predominantly invest in international equities.

(2) Consists of private equity funds and hedge funds, a bank loan fund, Lloyd’s trust deposits and ILS funds for which fair value is measured at net asset value (“NAV”) using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.


	December 31, 2021
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	211.5	$	211.5	$	—	$	—
Debt securities issued by corporations:
Financials	264.2		—		264.2		—
Consumer	178.1		—		178.1		—
Technology	117.9		—		117.9		—
Industrial	112.9		—		112.9		—
Healthcare	112.8		—		112.8		—
Utilities	70.9		—		70.9		—
Communications	56.0		—		56.0		—
Energy	48.0		—		48.0		—
Materials	32.1		—		32.1		—

Total debt securities issued by corporations	992.9		—		992.9		—
Municipal obligations	291.9		—		291.9		—
Mortgage and asset-backed securities	277.6		—		277.6		—

Collateralized loan obligations	135.0		—		135.0		—
Total fixed maturity investments	1,908.9		211.5		1,697.4		—
Short-term investments	465.9		465.9		—		—
Common equity securities (1)	251.1		—		251.1		—
Investment in MediaAlpha	261.6		261.6		—		—













Other long-term investments	895.3		—		4.7		890.6
Other long-term investments — NAV (2)	482.5		—		—		—
Total other long-term investments	1,377.8		—		4.7		890.6
Total investments	$	4,265.3	$	939.0	$	1,953.2	$	890.6

(1) Consist of investments in listed funds that predominantly invest in international equities.

(2) Consists of private equity funds and hedge funds, a ~~hedge~~bank loan fund, Lloyd’s trust deposits ~~a bank loan fund~~ and ILS funds for which fair value is measured at NAV using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.

Investments Held on Deposit or as Collateral

As of September 30, 2022 and December 31, 2021, investments of $455.1 million and $479.5 million were held in trusts required to be maintained in relation to HG Global’s reinsurance agreements with BAM.

BAM is required to maintain deposits with certain insurance regulatory agencies in order to maintain their insurance licenses. The fair value of such deposits, which represent state deposits and are included within the investment portfolio, totaled $4.6 million and $4.8 million as of September 30, 2022 and December 31, 2021.

Lloyd’s trust deposits are generally required of Lloyd's syndicates to protect policyholders in non-U.K. markets and are pledged into Lloyd’s trust accounts to provide a portion of the capital needed to support obligations at Lloyd’s. As of September 30, 2022 and December 31, 2021, Ark held Lloyd’s trust deposits with a fair value of $117.8 million and $113.8 million

The underwriting capacity of a member of Lloyd’s must be supported by providing a deposit (“Funds at Lloyd’s”) in the form of cash, securities or letters of credit in an amount determined by Lloyd’s. The amount of such deposit is calculated for each member through the completion of an annual capital adequacy exercise. These requirements allow Lloyd’s to evaluate that each member has sufficient assets to meet its underwriting liabilities plus a required solvency margin. As of September 30, 2022 and December 31, 2021, the fair value of Ark’s Funds at Lloyd’s investment deposits totaled $311.4 million and $342.8 million.

As of September 30, 2022 and December 31, 2021, Ark had $49.8 million and $50.0 million of short-term investments pledged as collateral under an uncommitted standby letter of credit. See Note 7 — “Debt.”

December 31, 2020
Millions Fair Value Level 1 Level 2 Level 3
Fixed maturity investments:
U.S. Government and agency obligations $ 176.3 $ 176.3 $ — $ —
Debt securities issued by corporations:
Financials 133.9 — 133.9 —
Consumer 81.9 — 81.9 —
Industrial 66.9 — 66.9 —
Technology 66.7 — 66.7 —
Healthcare 51.5 — 51.5 —
Communications 44.5 — 44.5 —
Energy 35.8 — 35.8 —
Materials 33.9 — 33.9 —
Utilities 32.3 — 32.3 —
Total debt securities issued by corporations 547.4 — 547.4 —
Municipal obligations 265.0 — 265.0 —
Mortgage and asset-backed securities 218.5 — 218.5 —
Total fixed maturity investments 1,207.2 176.3 1,030.9 —
Short-term investments 142.9 142.9 — —
Investment in MediaAlpha 802.2 802.2 — —
Other long-term investments 614.2 — — 614.2
Other long-term investments — NAV (1)
172.6 — — —
Total other long-term investments 786.8 — — 614.2
Total investments $ 2,939.1 $ 1,121.4 $ 1,030.9 $ 614.2

~~(1)~~ Consists of private equity funds and ILS funds for which fair value is measured at NAV using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy.

Debt Securities Issued by Corporations

The following table presents the credit ratings of debt securities issued by corporations held in White Mountains’s investment portfolio as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Fair Value at					Fair Value at
Millions	Millions	September 30, 2021		December 31, 2020		Millions	September 30, 2022		December 31, 2021
AAA	AAA	$	12.7	$	10.6	AAA	$	11.2	$	12.0
AA	AA	85.7		57.9		AA	90.5		85.0
A	A	473.3		318.3		A	524.0		490.4
BBB	BBB	373.7		159.6		BBB	343.0		396.8
BB		—		1.0

Other	Other	8.8		—		Other	5.8		8.7
Debt securities issued by corporations (1)	Debt securities issued by corporations (1)	$	954.2	$	547.4	Debt securities issued by corporations (1)	$	974.5	$	992.9

(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.

Mortgage and Asset-backed Securities and Collateralized Loan Obligations

The following table presents the fair value of White Mountains’s mortgage and asset-backed securities and collateralized loan obligations as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021						December 31, 2020							September 30, 2022						December 31, 2021
Millions	Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3		Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
Agency:	Agency:													Agency:
FNMA	FNMA	$	125.3	$	125.3	$	—	$	88.7	$	88.7	$	—	FNMA	$	114.1	$	114.1	$	—	$	125.4	$	125.4	$	—
FHLMC	FHLMC	76.5		76.5		—		70.1		70.1		—		FHLMC	74.5		74.5		—		90.5		90.5		—
GNMA	GNMA	29.4		29.4		—		40.6		40.6		—		GNMA	28.9		28.9		—		40.1		40.1		—
Total agency (1)	Total agency (1)	231.2		231.2		—		199.4		199.4		—		Total agency (1)	217.5		217.5		—		256.0		256.0		—

Non-agency: Residential	Non-agency: Residential	.6		.6		—		—		—		—		Non-agency: Residential	.4		.4		—		.5		.5		—

Total non-agency	Total non-agency	.6		.6		—		—		—		—		Total non-agency	.4		.4		—		.5		.5		—
Total mortgage-backed securities	Total mortgage-backed securities	231.8		231.8		—		199.4		199.4		—		Total mortgage-backed securities	217.9		217.9		—		256.5		256.5		—
Other asset-backed securities:	Other asset-backed securities:													Other asset-backed securities:
Credit card receivables	Credit card receivables	11.2		11.2		—		11.3		11.3		—		Credit card receivables	11.9		11.9		—		12.3		12.3		—
Vehicle receivables	Vehicle receivables	7.1		7.1		—		7.8		7.8		—		Vehicle receivables	10.9		10.9		—		8.8		8.8		—

Total other asset-backed securities	Total other asset-backed securities	18.3		18.3		—		19.1		19.1		—		Total other asset-backed securities	22.8		22.8		—		21.1		21.1		—
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	250.1		250.1		—		218.5		218.5		—		Total mortgage and asset-backed securities	240.7		240.7		—		277.6		277.6		—
Collateralized loan obligations	Collateralized loan obligations	127.6		127.6		—		—		—		—		Collateralized loan obligations	157.3		157.3		—		135.0		135.0		—
Total mortgage and asset-backed securities and collateralized loan obligations	Total mortgage and asset-backed securities and collateralized loan obligations	$	377.7	$	377.7	$	—	$	218.5	$	218.5	$	—	Total mortgage and asset-backed securities and collateralized loan obligations	$	398.0	$	398.0	$	—	$	412.6	$	412.6	$	—

(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).

As of September 30, ~~2021,~~2022, White Mountains’s investment portfolio included ~~$127.6~~$157.3 million of collateralized loan obligations that are within the senior tranches of their respective fund securitization structures. All of White Mountains’s collateral loan obligations were rated AAA or AA as of September 30, ~~2021.~~2022.

Investment in MediaAlpha

~~Subsequent to~~Following the MediaAlpha IPO, White Mountains’s investment in MediaAlpha is accounted for at fair value based on the publicly traded share price of MediaAlpha’s common stock and is presented as a separate line item on the balance sheet.

At the September 30, ~~2021~~2022 closing price of ~~$18.68~~$8.75 per share, the fair value of White Mountains’s investment in MediaAlpha was ~~$316.4~~$148.2 million. See Note 2 — “Significant ~~Transactions”.~~Transactions.”

2119

Other Long-Term Investments

The following table presents the carrying values of White Mountains’s other long-term investments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Fair Value at					Fair Value at
Millions	Millions	September 30, 2021		December 31, 2020		Millions	September 30, 2022		December 31, 2021
Kudu’s Participation Contracts	Kudu’s Participation Contracts	$	604.7	$	400.6	Kudu’s Participation Contracts	$	813.2	$	669.5
PassportCard/DavidShield	PassportCard/DavidShield	105.0		95.0		PassportCard/DavidShield	132.0		120.0
Elementum Holdings L.P.		56.7		55.1
Elementum Holdings, L.P.						Elementum Holdings, L.P.	45.0		45.0
Other unconsolidated entities (1)	Other unconsolidated entities (1)	27.0		42.4		Other unconsolidated entities (1)	37.0		34.4

Total unconsolidated entities	Total unconsolidated entities	793.4		593.1		Total unconsolidated entities	1,027.2		868.9
Private equity funds and hedge funds	Private equity funds and hedge funds	144.2		121.2		Private equity funds and hedge funds	239.8		153.8

Bank loan fund	Bank loan fund	161.7		—		Bank loan fund	155.7		163.0
Lloyd’s trust deposits	Lloyd’s trust deposits	111.2		—		Lloyd’s trust deposits	117.8		113.8
ILS funds	ILS funds	53.9		51.4		ILS funds	49.4		51.9
Private debt investments	Private debt investments	13.3		21.1		Private debt investments	13.0		14.1
Other	Other	7.8		—		Other	19.8		12.3
Total other long-term investments	Total other long-term investments	$	1,285.5	$	786.8	Total other long-term investments	$	1,622.7	$	1,377.8

(1) Includes White Mountains’s non-controlling equity interests in certain private common equity securities, ~~limited liability companies and~~ convertible preferred securities, limited liability company units and Simple Agreement for Future Equity (“SAFE”) investments.

Private Equity Funds and Hedge Funds

White Mountains invests in private equity funds and hedge funds, which are included in other long-term investments. The fair value of these investments is generally estimated using the ~~net asset value (“NAV”)~~NAV of the funds. As of September 30, ~~2021,~~2022, White Mountains held investments in 1416 private equity funds and 1two hedge ~~fund.~~funds. The largest investment in a single private equity fund or hedge fund was ~~$27.4~~$49.3 million and $31.3 million as of September 30, ~~2021~~2022 and ~~$29.1 million as of~~ December 31, ~~2020.~~2021.

The following table presents the fair value of investments and unfunded commitments in private equity funds and hedge funds by investment objective and sector as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
Millions	Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds	Private equity funds									Private equity funds
Aerospace/Defense/Government	Aerospace/Defense/Government	$	63.9	$	14.0	$	69.1	$	15.3	Aerospace/Defense/Government	$	102.9	$	45.1	$	69.8	$	11.8
Financial services	Financial services	63.2		29.6		23.5		30.4		Financial services	77.9		54.9		67.7		29.3
Real estate	Real estate	4.8		2.9		—		—		Real estate	4.3		2.5		4.3		2.9
Manufacturing/Industrial		.1		—		28.6		—

Total private equity funds	Total private equity funds	132.0		46.5		121.2		45.7		Total private equity funds	185.1		102.5		141.8		44.0
Hedge funds	Hedge funds									Hedge funds

Long/short equity financials and business services										Long/short equity financials and business services	49.3		—		—		—
European small/mid cap	European small/mid cap	12.2		—		—		—		European small/mid cap	5.4		—		12.0		—

Total hedge funds	Total hedge funds	12.2		—		—		—		Total hedge funds	54.7		—		12.0		—
Total private equity funds and hedge funds included in other long-term investments	Total private equity funds and hedge funds included in other long-term investments	$	144.2	$	46.5	$	121.2	$	45.7	Total private equity funds and hedge funds included in other long-term investments	$	239.8	$	102.5	$	153.8	$	44.0

Investments in private equity funds are generally subject to a lock-up period during which investors may not request a redemption. Distributions prior to the expected termination date of the fund may be limited to dividends or proceeds arising from the liquidation of the fund’s underlying investments. In addition, certain private equity funds have the option to extend the lock-up period.

The following table presents investments in private equity funds that were subject to lock-up periods as of September 30, ~~2021:~~2022:

Millions

1 – 3 years

3 – 5 years

5 – 10 years

>10 years

Total

Millions

1 – 3 years

3 – 5 years

5 – 10 years

>10 years

Total

Private equity funds — expected lock-up period remaining

$.3

$14.0

$109.0

$8.7

$132.0

Private equity funds — expected lock-up period remaining

$27.5

$19.0

$135.4

$3.2

$185.1

Investors in private equity funds are generally subject to indemnification obligations outside of the capital commitment period and prior to the winding up of the fund. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, White Mountains is not aware of any indemnification claims relating to its investments in private equity funds.

Redemption of investments in most hedge funds is subject to restrictions, including lock-up periods where no redemptions or withdrawals are allowed, restrictions on redemption frequency and advance notice periods for redemptions. Amounts requested for redemptions remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period. Advance notice requirements for redemptions from White Mountains’s hedge funds investments range from 45 to 90 days. One of White Mountains’s hedge fund ~~investment is subject~~investments also limits redemptions to ~~a perpetual two-year restriction on redemption frequency from~~every second anniversary following the date of the initial ~~investment in the fund and a 90-days advanced notice period requirement.~~

~~Lloyd’s Trust Deposits~~

White Mountains’s other long-term investments include Lloyd’s trust deposits, which consists of overseas deposits and Canadian comingled pooled funds. The Lloyd’s trust deposits invest primarily in short-term government securities, agency securities and corporate bonds held in trusts that are managed by Lloyd's of London. These investments are required of Lloyd's syndicates to protect policyholders in overseas markets and are pledged into Lloyd’s trust accounts to provide a portion of the capital needed to support obligations at Lloyd’s. The fair value of the Lloyd’s trust deposits is generally estimated using the NAV of the funds. As of September 30, 2021, White Mountains held Lloyd’s trust deposits with a fair value of $111.2 million.investment.

Bank Loan Fund

White Mountains’s other long-term investments include a bank loan fund with a fair value of ~~$161.7~~$155.7 million as of September 30, ~~2021.~~2022. The fair value of this investment is estimated using the NAV of the fund. The bank loan fund’s investment objective is to provide, on an unleveraged basis, high current income consistent with preservation of capital and low duration. The bank loan fund primarily invests in a broad portfolio of U.S. dollar-denominated, non-investment grade, floating-rate senior secured loans and may invest in other financial instruments, such as secured and unsecured corporate debt, credit default swaps, reverse repurchase agreements, ~~and~~ synthetic indices and cash and cash equivalents.

The investment in the bank loan fund is subject to restrictions on redemption frequency and advance notice periods for redemptions. Amounts requested for redemptions remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period. White Mountains may redeem all or a portion of its bank loan fund investment as of any calendar month-end upon 15 calendar days advanced written notice.

Lloyd’s Trust Deposits

White Mountains’s other long-term investments include Lloyd’s trust deposits, which consist of non-U.K. deposits and Canadian comingled pooled funds. The Lloyd’s trust deposits invest primarily in short-term government securities, agency securities and corporate bonds held in trusts that are managed by Lloyd's of London. These investments are generally required of Lloyd's syndicates to protect policyholders in non-U.K. markets and are pledged into Lloyd’s trust accounts to provide a portion of the capital needed to support obligations at Lloyd’s. The fair value of the Lloyd’s trust deposits is generally estimated using the NAV of the funds. As of September 30, 2022, White Mountains held Lloyd’s trust deposits with a fair value of $117.8 million.

Insurance-Linked Securities Funds

White Mountains’s other long-term investments include ILS fund investments. The fair value of these investments is generally estimated using the NAV of the funds. As of September 30, ~~2021,~~2022, White Mountains held investments in ILS funds with a fair value of ~~$53.9~~$49.4 million.

Investments in ILS funds are generally subject to restrictions, including lock-up periods where no redemptions or withdrawals are allowed, non-renewal clauses, restrictions on redemption frequency and advance notice periods for redemptions. From time to time, natural catastrophe, liquidity, market or other events will occur that make the determination of fair value for underlying investments in ILS funds less certain due to the potential for loss development. In such circumstances, the impacted investments may be subject to additional lock-up provisions.

ILS funds are typically subject to monthly and annual restrictions on redemptions and advance redemption notice period requirements that range between 30 and 90 days. Amounts requested for redemption remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period.

One of the ILS funds in White Mountains’s portfolio requires shareholders to provide advance redemption notice on or before September 15 of each calendar year. Amounts requested for redemption in this fund remain subject to market fluctuation until the underlying investment has fully matured or been commuted, which may be up to a period of three years from the start of each calendar year.

Rollforward of ~~Fair Value Measurements by~~ Level 3 Investments

White Mountains uses quoted market prices where available as the inputs to estimate fair value for its investments in active markets. Such measurements are considered to be either Level 1 or Level 2 measurements, depending on whether the quoted market price inputs are for identical securities (Level 1) or similar securities (Level 2). Level 3 measurements ~~for fixed maturity investments, common equity securities and other long-term investments~~ as of September 30, ~~2021~~2022 and ~~2020~~2021 consist of securities for which the estimated fair value has not been determined based upon quoted market price inputs for identical or similar securities.

The following ~~tables present~~table presents the changes in White Mountains’s fair value measurements ~~by level~~for Level 3 investments for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

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 gains (losses) (327.6) (13.1) 79.0 33.9 (227.8) (3)
Amortization/Accretion (.1) (5.9) — — (6.0)
Purchases 130.9 989.7 143.6 199.6 1,463.8
Sales (257.7) (284.9) (31.9) (70.9) (645.4)
Effect of Ark Transaction — 68.2 9.6 135.8 213.6
Transfers in — — — — —
Transfers out — — — — —
Balance at September 30, 2021 $ 524.0 $ 1,784.9 $ 814.5 $ 471.0 $ 3,594.4 (2)

~~(1)~~ Consists of private equity funds, a hedge fund, Lloyd’s trust deposits, a bank loan fund, and ILS funds for which fair value is measured at NAV using the practical expedient. Investments for which fair value is measured at NAV are not classified within the fair value hierarchy. See ~~Note 1 — “Basis of Presentation and Significant Accounting Policies”~~.

~~(2)~~ ~~Excludes carrying value of $609.5 and $142.9 as of September 30, 2021 and December 31, 2020 classified as short-term investments.~~

~~(3)~~ ~~Includes amounts attributable to TPC Providers of $6.5 for the nine months ended September 30, 2021.~~


Level 3 Investments
Millions	Other Long-term Investments			Other Long-term Investments
Balance at December 31, 2021	$	890.6	Balance at December 31, 2020	$	614.2
Net realized and unrealized gains	57.3		Net realized and unrealized gains	79.0
Amortization/accretion	—		Amortization/accretion	—
Purchases	127.9		Purchases	143.6
Sales	(31.7)		Sales	(31.9)
Effect of Ark Transaction	—		Effect of Ark Transaction	9.6
Transfers in	—		Transfers in	—
Transfers out	—		Transfers out	—
Balance at September 30, 2022	$	1,044.1	Balance at September 30, 2021	$	814.5

Level 3
Investments
Other Long-term Investments Measured at NAV (1)

Millions Level 1 Investments Level 2
Investments Common
Equity
Securities Other Long-term
Investments and
Investment in
MediaAlpha
Pre-IPO Total
Balance at December 31, 2019 $ 780.0 $ 1,109.6 $ .1 $ 654.0 $ 202.3 $ 2,746.0 (2)
Net realized and unrealized gains (losses) 29.2 12.5 — 275.6 (14.9) 302.4 (3)
Amortization/Accretion — (3.0) — — — (3.0)
Purchases 128.8 316.2 — 78.8 39.8 563.6

Sales (642.7) (368.5) — (8.1) (56.3) (1,075.6)
Transfers in — — — — — —
Transfers out — — — — — —
Balance at September 30, 2020 $ 295.3 $ 1,066.8 $ .1 $ 1,000.3 $ 170.9 $ 2,533.4 (2)

~~(1)~~ ~~Includes private equity funds, a hedge fund and ILS funds for which fair value is measured at NAV using the practical expedient are no longer classified within the fair value hierarchy. See~~ ~~Note 1 — “Basis of Presentation and Significant Accounting Policies~~”.

~~(2)~~ ~~Excludes carrying value of $571.8 and $201.2 as of September 30, 2020 and December 31, 2019 classified as short-term investments.~~

~~(3)~~ ~~Excludes realized and unrealized gains associated with short-term investments of $0.4 for the nine months ended September 30, 2020.~~

Fair Value Measurements — Transfers Between Levels - ~~Nine-months~~Nine months ended September 30, ~~2021~~2022 and ~~2020~~2021

Transfers between levels are recorded using the fair value measurement as of the end of the quarterly period in which the event or change in circumstance giving rise to the transfer occurred.

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, there were no fixed maturity investments or other long-term investments classified as Level 3 measurements in the prior period that were transferred to Level 2 measurements.

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, there were no fixed maturity investments or other long-term investments classified as Level 2 measurements in the prior period that were transferred to Level 3 measurements.

Significant Unobservable Inputs

The following tables present significant unobservable inputs used in estimating the fair value of White Mountains’s other long-term investments, classified within Level 3 as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The tables below exclude ~~$14.9~~$42.9 million and ~~$27.6~~$46.7 million of Level 3 other long-term investments generally valued based on recent or expected transaction prices. The fair value of investments in private equity funds and hedge funds, bank loan funds, Lloyd’s trust deposits ~~bank loans funds~~ and ILS funds are generally estimated using the NAV of the funds.

$ in Millions

September 30, 2021

$ in Millions

September 30, 2022

Description

Valuation Technique(s) (1)

Fair Value (2)

Unobservable Inputs

Description

Valuation Technique(s) (1)

Fair Value (2)

Unobservable Inputs

Discount Rate (3)(4)

Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (4)

Discount Rate (6)

Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (6)

Kudu’s Participation Contracts ~~(6)~~(5)

Discounted cash flow

$604.7

18% - 23%

7x - 13x

Kudu’s Participation Contracts ~~(6)~~(5)

Discounted cash flow

$813.2

17% - 24%

7x - 16x

PassportCard/DavidShield

Discounted cash flow

$105.0

23%

PassportCard/DavidShield

Discounted cash flow

$132.0

24%

Elementum Holdings, L.P.

Discounted cash flow

$56.7

17%

Elementum Holdings, L.P.

Discounted cash flow

$45.0

18%

Private debt investments

Discounted cash flow

$11.2

4% - 8%

N/A

Private debt investments

Discounted cash flow

$11.0

10%

N/A

Other

Discounted cash flow

$22.0

20% - 24%

(1) Key inputs to the discounted cash flow analysis generally include projections of future revenue and earnings, discount rates and terminal exit multiples or growth rates.

(2) Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.

(3) Since Kudu’s Participation Contracts are not subject to corporate taxes within Kudu Investment Management, LLC, pre-tax discount rates are applied to pre-tax cash flows in determining fair values. The weighted average discount rate and weighted average terminal cash flow exit multiple applied to Kudu’s Participation Contracts is 20% and 9.7x.

(4) As of September 30, 2022, three of Kudu’s Participation Contracts with a total fair value of $312.4 were valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and an expected sale transaction.

(5)In 2022, Kudu deployed a total of $97.9 into new and existing Kudu Participation Contracts, including Gramercy Funds Management, GenTrust, EC Management Services, and TK Partners.

(6) Increases (decreases) to the discount rates in isolation would result in lower (higher) fair value measurements, while increases (decreases) to the terminal cash flow exit multiples or terminal revenue growth rates in isolation would result in higher (lower) fair value measurements.

~~(5)~~ For the nine months ended September 30, 2021, Kudu deployed a total of $141.6 in new and existing Kudu Participation Contracts, including TIG Advisors, TK Partners, Third Eye Capital Management and Douglass Winthrop Advisors.

~~(6)~~ As of September 30, 2021, certain Kudu Participation Contracts with a total fair value of $121.0 were valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and an expected sale transaction.

$ in Millions

December 31, 2020

$ in Millions

December 31, 2021

Description

Valuation Technique(s) (1)

Fair Value (2)

Unobservable Inputs

Description

Valuation Technique(s) (1)

Fair Value (2)

Unobservable Inputs

Discount Rate (3)(4)

Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (4)

Discount Rate (6)

Terminal Cash Flow Exit Multiple (x) or Terminal Revenue Growth Rate (%) (6)

Kudu’s Participation Contracts (5)

Discounted cash flow

$400.6

18% - 23%

7x - 12x

PassportCard/DavidShield (6)

Discounted cash flow

$95.0

23%

Kudu’s Participation Contracts (3)(4)(5)

Discounted cash flow

$669.5

18% - 23%

7x - 13x

PassportCard/DavidShield

Discounted cash flow

$120.0

23%

Elementum Holdings, L.P.

Discounted cash flow

$55.1

17%

Elementum Holdings, L.P.

Discounted cash flow

$45.0

17%

Private debt investments

Discounted cash flow

$17.1

4% - 8%

N/A

Private debt investments

Discounted cash flow

$9.4

N/A

Other

Discounted cash flow

$18.8

20% - 24%

(1) Key inputs to the discounted cash flow analysis generally include projections of future revenue and earnings, discount rates and terminal exit multiples or growth rates.

(2) Includes the net unrealized investment gains (losses) associated with foreign currency; foreign currency effects based on observable inputs.

(4)In 2021, Kudu deployed a total of $223.4 into new and existing Kudu Participation Contracts, including TIG Advisors, TK Partners, Third Eye Capital Management, Douglass Winthrop Advisors, Granahan Investment Management and Radcliffe Capital Management.

(5) As of December 31, 2021, one of Kudu’s Participation Contracts with a total fair value of $78.8 was valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and an expected sale transaction.

~~(5)~~ ~~In 2020, Kudu deployed a total of $118.2 in new Kudu Participation Contracts, including Creation Investments Capital, Sequoia Financial Group, Channel Capital and Ranger Investment Management.~~

~~(6)~~ ~~In 2020, White Mountains made an additional $15.0 investment in PassportCard/DavidShield.~~ ~~See Note 2~~ — ~~“Significant Transactions”~~.

2523

Note 4. Goodwill and Other Intangible Assets

White Mountains accounts for purchases of businesses using the acquisition method. Under the acquisition method, White Mountains recognizes and measures the assets acquired, liabilities assumed and any non-controlling interest in the acquired entities at their acquisition date fair values. The estimated acquisition date fair values, ~~of certain assets and liabilities,~~ generally consisting of intangible assets and liabilities for contingent consideration, may be recorded at provisional amounts in circumstances where the information necessary to complete the acquisition accounting is not available at the reporting date. Any such provisional amounts are finalized as measurement period adjustments within one year of the acquisition date.

The following table presents the economic lives, acquisition date fair values, accumulated amortization and net carrying values for other intangible assets and goodwill, by reportable segment as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

$ in Millions Weighted Average Economic
Life
(in years) September 30, 2021 December 31, 2020
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:
Ark N/A $ 116.8 $ — $ — $ 116.8 $ — $ — $ — $ —
NSM (1)
N/A 559.8 — 30.2 529.6 506.4 — — 506.4
Kudu N/A 7.6 — — 7.6 7.6 — — 7.6
Other Operations N/A 17.4 — — 17.4 11.5 — — 11.5
Total goodwill 701.6 — 30.2 671.4 525.5 — — 525.5
Other intangible assets:
Ark
    Underwriting Capacity N/A 175.7 — — 175.7 — — — —
NSM (1)
Customer
   relationships 8.9 136.0 50.6 3.5 81.9 136.2 36.7 3.5 96.0
   Trade names 16 65.3 10.9 1.0 53.4 65.4 8.3 1.0 56.1
   Information
      technology
      platform 0 3.1 1.4 1.7 — 3.1 1.4 1.7 —
Renewal rights 12 82.5 13.1 — 69.4 82.5 4.9 — 77.6
Other 3.4 1.1 .6 — .5 1.7 1.0 — .7
      Subtotal 288.0 76.6 6.2 205.2 288.9 52.3 6.2 230.4
Kudu
   Trade names 7 2.2 .8 — 1.4 2.2 .6 — 1.6
Other Operations
   Trade names 18.1 8.2 1.0 — 7.2 3.6 .3 — 3.3
Customer
   relationships 13.3 18.9 3.5 — 15.4 14.2 1.4 — 12.8
Insurance
   Licenses N/A 8.6 — — 8.6 8.6 — — 8.6
Other 5.4 .3 .2 — .1 .3 .1 — .2
       Subtotal 36.0 4.7 — 31.3 26.7 1.8 — 24.9
Total other intangible assets 501.9 82.1 6.2 413.6 317.8 54.7 6.2 256.9
Total goodwill and other
   intangible assets
$ 1,203.5 $ 82.1 $ 36.4 1,085.0 $ 843.3 $ 54.7 6.2 782.4
Goodwill and other intangible assets attributed to non-controlling interests (118.0) (28.1)
Goodwill and other intangible assets included in White Mountains’s
   common shareholders’ equity $ 967.0 $ 754.3

~~(1)~~ As of September 30, 2021, NSM’s goodwill and intangible assets included $(2.3) and $(0.2) of the effect of foreign currency translation. As of December 31, 2020, NSM’s goodwill and intangible assets included $13.4 and $1.6 of the effect of foreign currency translation.


$ in Millions	Weighted Average Economic Life (in years)	September 30, 2022						December 31, 2021
		Acquisition Date Fair Value		Accumulated Amortization				Net Carrying Value		Acquisition Date Fair Value		Accumulated Amortization				Net Carrying Value
Goodwill:
Ark	N/A	$	116.8	$	—			$	116.8	$	116.8	$	—			$	116.8

Kudu	N/A	7.6		—				7.6		7.6						7.6
Other Operations	N/A	51.1		—				51.1		17.9		—				17.9
Total goodwill		175.5		—				175.5		142.3		—				142.3
Other intangible assets:
Ark
Underwriting capacity	N/A	175.7		—				175.7		175.7		—				175.7








Kudu
Trade names	7	2.2		1.1				1.1		2.2		.9				1.3
Other Operations
Trade names	15.9	17.9		2.4				15.5		8.2		1.5				6.7
Customer relationships	12.4	29.5		6.6				22.9		18.8		4.5				14.3


Other	12.1	2.8		.3				2.5		.3		.1				.2
Subtotal		50.2		9.3				40.9		27.3		6.1				21.2
Total other intangible assets		228.1		10.4				217.7		205.2		7.0				198.2
Total goodwill and other intangible assets		$	403.6	$	10.4			393.2		$	347.5	$	7.0			340.5
Goodwill and other intangible assets attributed to non-controlling interests						(103.1)								(91.8)
Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity						$	290.1							$	248.7

26Intangible Assets Valuation Methods

The goodwill recognized for the entities shown above is attributed to expected future cash flows. The acquisition date fair values of other intangible assets with finite lives are estimated using income approach techniques, which use future expected cash flows to develop a discounted present value amount.

The multi-period-excess-earnings method estimates fair value using the present value of the incremental after-tax cash flows attributable solely to the other intangible asset over its remaining life. This approach was used to estimate the fair value of other intangible assets associated with the underwriting capacity, trade names, customer relationships and contracts and information technology.

The relief-from-royalty method was used to estimate fair value for other intangible assets that relate to rights that could be obtained via a license from a third-party owner. Under this method, the fair value is estimated using the present value of license fees avoided by owning rather than leasing the asset. This technique was used to estimate the fair value of domain names, certain trademarks and brand names.

The with-or-without method estimates the fair value of an other intangible ~~asset~~assets that ~~provides~~provide an incremental benefit. Under this method, the fair value of the other intangible asset is calculated by comparing the value of the entity with and without the other intangible asset. This approach was used to estimate the fair value of favorable lease terms.

~~The following table presents a summary of the acquisition date fair values of goodwill and other intangible assets for acquisitions completed from January 1, 2020 through September 30, 2021:~~

~~$ in Millions~~

~~Acquisition of subsidiary/ asset~~

~~Goodwill and~~

~~Other intangible asset~~ ~~(1)~~

~~Acquisition Date~~

~~Kingsbridge~~

~~131.7~~

~~April 7, 2020~~

~~J.C. Taylor~~

~~55.7~~

~~August 6, 2021~~

~~Total NSM segment~~

~~187.4~~

~~Ark~~

~~292.5~~

~~January 1, 2021~~

~~Other Operations~~

~~30.6~~

~~Various~~

~~(1)~~ ~~Acquisition date fair values include the effect of adjustments during the measurement period and excludes the effect of foreign currency translation subsequent to the acquisition date.~~

On at least an annual basis beginning no later than the interim period included in the one-year anniversary of an acquisition, White Mountains evaluates goodwill and other intangible assets for potential impairment. Between annual evaluations, White Mountains considers changes in circumstances or events subsequent to the most recent evaluation that may indicate that an impairment may exist and, if necessary will perform an interim review for potential impairment.

~~On April 12, 2021, NSM sold Fresh Insurance’s motor business. In connection with~~The following table presents a summary of the ~~sale, White Mountains recognized a loss~~acquisition date fair values of ~~$28.7 million during the three months ended March 31, 2021. See~~ ~~Note 19 — “Held for Sale~~goodwill and ~~Discontinued Operations”. During the three months ended June 30, 2020, White Mountains recognized impairments of~~ other intangible assets for acquisitions completed from January 1, 2021 through September 30, 2022:

$ in Millions

Goodwill and

Other intangible asset (1)

Acquisition Date

Acquisition of subsidiary/ asset

Ark

292.5

January 1, 2021

Other Operations

86.6

Various

(1) Acquisition date fair values include the effect of ~~$6.2 million. The impairments related to NSM’s write-off~~adjustments during the measurement period and exclude the effect of ~~intangible assets in its U.K. vertical. The impairments related to lower premium volumes, including due~~foreign currency translation subsequent to the impact of the COVID-19 pandemic, and certain reorganization initiatives in the U.K. vertical. There were no other impairments of other intangible assets and no impairments of goodwill for the three and nine months ended September 30, 2021 and 2020.acquisition date.

The following tables present the change in goodwill and other intangible assets for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,															Three Months Ended September 30,
		2021							2020								2022						2021
Millions	Millions	Goodwill			Other Intangible Assets		Total Goodwill and Other Intangible Assets		Goodwill			Other Intangible Assets		Total Goodwill and Other Intangible Assets		Millions	Goodwill		Other Intangible Assets		Total Goodwill and Other Intangible Assets		Goodwill		Other Intangible Assets		Total Goodwill and Other Intangible Assets
Beginning balance	Beginning balance	$	629.4		$	414.8	$	1,044.2	$	518.2		$	241.7	$	759.9	Beginning balance	$	201.8	$	196.2	$	398.0	$	151.5	$	201.1	$	352.6
Acquisition of businesses		55.7		(1)	—		55.7		14.9		(2)	—		14.9
Attribution of acquisition date fair value estimates between goodwill and other intangible assets (3)		(9.3)			9.3		—		—			—		—

Foreign currency translation		(4.0)			(.3)		(4.3)		7.0			(.1)		6.9
Attribution of acquisition date fair value estimates between goodwill and other intangible assets (1)																Attribution of acquisition date fair value estimates between goodwill and other intangible assets (1)	(22.9)		22.9		—		(9.3)		9.3		—
Measurement period adjustments (2)																Measurement period adjustments (2)	(3.4)		—		(3.4)		(.4)		—		(.4)

Amortization																Amortization	—		(1.4)		(1.4)		—		(2.0)		(2.0)

Measurement period adjustments (4)		(.4)			—		(.4)		—			—		—
Amortization		—			(10.2)		(10.2)		—			(5.4)		(5.4)

Ending balance	Ending balance	$	671.4		$	413.6	$	1,085.0	$	540.1		$	236.2	$	776.3	Ending balance	$	175.5	$	217.7	$	393.2	$	141.8	$	208.4	$	350.2

(1)Relates to acquisitions within Other Operations. The relative fair values of goodwill and other intangible assets recognized in connection with ~~the acquisition of J.C. Taylor~~acquisitions during 2022 had not yet been finalized ~~at September 30, 2021.~~as of the end of the period.

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

~~(3)~~ ~~Relates to an acquisition within the Other Operations segment.~~

~~(4)~~ Measurement period adjustments relate to updated information about acquisition date fair values of assets acquired and liabilities assumed. During the ~~nine~~three months ended September 30, 2022 and 2021, adjustments relate to ~~an acquisition~~acquisitions within ~~the~~ Other ~~Operations segment.~~Operations.

Nine Months Ended September 30,
2021 2020
Millions Goodwill Other Intangible Assets Total Goodwill and Other Intangible Assets Goodwill Other Intangible Assets Total Goodwill and Other Intangible Assets
Beginning balance $ 525.5 $ 256.9 $ 782.4 $ 394.7 $ 260.0 $ 654.7
Attribution of acquisition date fair value
estimates between goodwill and other
intangible assets (1)
(9.3) 9.3 — — — —
Ark Transaction 116.8 175.7 292.5 — — —
Acquisition of businesses 71.5 (2) — 71.5 140.0 (3) — 140.0
Foreign currency translation (2.3) (.2) (2.5) 5.2 (.5) 4.7
Impairments — — — — (6.2) (6.2)
Loss on assets held for sale (4)
(30.2) — (30.2) — — —
Measurement period adjustments (5)
(.6) — (.6) .2 — .2
Amortization — (28.1) (28.1) — (17.1) (17.1)
Ending balance $ 671.4 $ 413.6 $ 1,085.0 $ 540.1 $ 236.2 $ 776.3


	Nine Months Ended September 30,
	2022						2021
Millions	Goodwill		Other Intangible Assets		Total Goodwill and Other Intangible Assets		Goodwill		Other Intangible Assets		Total Goodwill and Other Intangible Assets
Beginning balance	$	142.3	$	198.2	$	340.5	$	19.2	$	26.4	$	45.6
Ark Transaction	—		—		—		116.8		175.7		292.5
Acquisition of businesses (1)	59.5		—		59.5		15.8		—		15.8
Attribution of acquisition date fair value estimates between goodwill and other intangible assets (1)	(22.9)		22.9		—		(9.3)		9.3		—
Measurement period adjustments (2)	(3.4)				(3.4)		(.7)		.1		(.6)
Amortization	—		(3.4)		(3.4)		—		(3.1)		(3.1)


Ending balance	$	175.5	$	217.7	$	393.2	$	141.8	$	208.4	$	350.2

(1) Relates to ~~an acquisition~~acquisitions within ~~the~~ Other ~~Operations segment.~~

~~(2)~~Operations. The relative fair values of goodwill and other intangible assets of $55.7 recognized in connection with the acquisition of J.C. Taylor had not yet been finalized at September 30, 2021. The remaining $15.8 relates to the relative fair values of goodwill and other intangible assets recognized in connection with an acquisition within the Other Operations segment.

~~(3)~~The relative fair values of goodwill and other intangible assets recognized in connection with ~~the acquisition of Kingsbridge and an acquisition within Other Operations~~acquisitions during 2022 had not yet been finalized ~~at September 30, 2020.~~as of the end of the period.

~~(4)~~(2) ~~Relates to the sale of NSM’s Fresh Insurance’s motor business recorded in the first quarter of 2021. This amount excludes $1.5 of net proceeds related to the sale.~~

~~(5)~~Measurement period adjustments relate to updated information about acquisition date fair values of assets acquired and liabilities assumed. During the nine

months ended September 30, 2022 and 2021, adjustments relate to acquisitions within ~~the~~ Other ~~Operations segment.~~

Operations.

2825

Note 5. Loss and Loss Adjustment Expense Reserves

Ark establishes loss and 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 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 activity of Ark’s insurance and reinsurance subsidiaries for the three and nine months ended September 30, 2022 and 2021:


							Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021		Millions	2022		2021		2022		2021
Gross beginning balance	Gross beginning balance	$	760.0	$	696.0	Gross beginning balance	$	1,022.1	$	760.0	$	894.7	$	696.0
Less: beginning reinsurance recoverable on unpaid losses		(425.3)		(433.4)
Less: beginning reinsurance recoverable on unpaid losses (1)						Less: beginning reinsurance recoverable on unpaid losses (1)	(375.5)		(425.3)		(428.9)		(433.4)
Net loss and LAE reserves	Net loss and LAE reserves	334.7		262.6		Net loss and LAE reserves	646.6		334.7		465.8		262.6

Loss and LAE incurred relating to:	Loss and LAE incurred relating to:					Loss and LAE incurred relating to:
Current year losses	Current year losses	141.9		269.0		Current year losses	222.9		141.9		491.8		269.0
Prior year losses	Prior year losses	(12.7)		(21.2)		Prior year losses	(9.2)		(12.7)		(35.6)		(21.2)
Total incurred losses and LAE		129.2		247.8
Net incurred losses and LAE						Net incurred losses and LAE	213.7		129.2		456.2		247.8

Foreign currency translation adjustment to loss and LAE reserves		(1.2)		(3.4)

Loss and LAE paid relating to:	Loss and LAE paid relating to:					Loss and LAE paid relating to:
Current year losses	Current year losses	(9.0)		(11.5)		Current year losses	(6.1)		(9.0)		(20.8)		(11.5)
Prior year losses	Prior year losses	(20.3)		(62.1)		Prior year losses	(37.0)		(20.3)		(130.8)		(62.1)
Total loss and LAE payments		(29.3)		(73.6)
Net paid loss and LAE						Net paid loss and LAE	(43.1)		(29.3)		(151.6)		(73.6)

Change in TPC Providers’ participation (2)						Change in TPC Providers’ participation (2)	—		—		57.5		(2.2)
Foreign currency translation and other adjustments to loss and LAE reserves						Foreign currency translation and other adjustments to loss and LAE reserves	(9.2)		(1.2)		(19.9)		(1.2)

Net ending balance	Net ending balance	433.4		433.4		Net ending balance	808.0		433.4		808.0		433.4
Plus: ending reinsurance recoverable on unpaid losses		457.5		457.5
Plus: ending reinsurance recoverable on unpaid losses (3)						Plus: ending reinsurance recoverable on unpaid losses (3)	521.4		457.5		521.4		457.5
Gross ending balance	Gross ending balance	$	890.9	$	890.9	Gross ending balance	$	1,329.4	$	890.9	$	1,329.4	$	890.9

(1) The beginning reinsurance recoverable on unpaid losses includes amounts attributable to TPC Providers of $182.4 and $314.6 for the three months ended September 30, 2022 and 2021 and $276.8 and $319.2 for the nine months ended September 30, 2022 and 2021.

~~Ark’s GAAP combined ratio~~(2) Amount represents the impact to net loss and LAE reserves due to a change in the ~~third quarter of 2021 included $12.7 million (6 points) of favorable prior year development, primarily~~TPC Providers’ participation related to the ~~Property line~~annual reinsurance to close (“RITC”) process.

(3) The ending reinsurance recoverable on unpaid losses includes amounts attributable to TPC Providers of ~~business.~~

~~Ark’s GAAP combined ratio in the first nine months~~$168.0 and $299.9 as of ~~2021 included $21.2 million (5 points) of favorable prior year development, primarily related to the Property, Marine & Energy~~September 30, 2022 and ~~Accident & Health lines of business.~~

~~See~~ ~~Note 10 — “Municipal Bond Guarantee Insurance”~~ ~~for loss and LAE reserve balances related to White Mountains financial guarantee business.~~2021.

For the three and nine months ended September 30, 2022, Ark recognized $9.2 million and $35.6 million of net favorable prior year loss reserve development. Ark’s net favorable prior year loss reserve development in 2022 was driven primarily by good claims experience across most classes including the property and accident & health and specialty reserving lines of business, predominantly from business underwritten in London. For the three and nine months ended September 30, 2021, Ark recognized $12.7 million and $21.2 million of net favorable prior year loss reserve development. Ark’s net favorable prior year loss reserve development in 2021 was driven primarily by the property and accident & health reserving line of business.

TPC Providers’ Participation

An RITC agreement is generally put in place after the third year of operations for a year of account such that the outstanding loss and LAE reserves, including future development thereon, are reinsured into the next year of account. As a result, and in combination with the changing participation provided by TPC Providers, Ark’s participation on outstanding loss and LAE reserves reinsured into the next year of account may change, perhaps significantly. During the first quarter of 2022, an RITC was executed such that the outstanding loss and LAE reserves for claims arising out of the 2019 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 58.3%, were reinsured into the 2020 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates is 42.8%. During the first quarter of 2021, an RITC was executed such that the outstanding loss and LAE reserves for claims arising out of the 2018 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 57.6%, were reinsured into the 2019 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 58.3%.

Municipal Bond Guarantee Insurance

HG Re and BAM do not have any outstanding loss and LAE reserves related to BAM’s municipal bond guarantee insurance business.

Note 6. 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 certain risks 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.~~Ark for the three and nine months ended September 30, 2022 and 2021:


		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions					Millions	2022		2021		2022		2021
Written premiums:	Written premiums:									Written premiums:
Gross	Gross	$	162.4	$	895.0			Gross	$	215.5	$	162.4	$	1,252.5	$	895.0

Ceded	Ceded	(41.5)		(169.5)				Ceded	(22.9)		(41.5)		(246.0)		(169.5)
Net written premiums	Net written premiums	$	120.9	$	725.5			Net written premiums	$	192.6	$	120.9	$	1,006.5	$	725.5
Earned premiums:	Earned premiums:							Earned premiums:
Gross	Gross	$	284.5	$	622.0			Gross	$	454.9	$	284.5	$	966.6	$	622.0

Ceded	Ceded	(71.1)		(186.2)				Ceded	(108.8)		(71.1)		(208.8)		(186.2)
Net earned premiums	Net earned premiums	$	213.4	$	435.8			Net earned premiums	$	346.1	$	213.4	$	757.8	$	435.8
Losses and LAE:
Losses and loss adjustment expenses:								Losses and loss adjustment expenses:
Gross	Gross	$	193.5	$	372.7			Gross	$	391.4	$	193.5	$	712.9	$	372.7

Ceded	Ceded	(64.3)		(124.9)				Ceded	(177.7)		(64.3)		(256.7)		(124.9)
Net Losses and LAE		$	129.2	$	247.8
Net losses and loss adjustment expenses								Net losses and loss adjustment expenses	$	213.7	$	129.2	$	456.2	$	247.8

As of September 30, 2022, Ark had $521.4 million and $29.5 million of reinsurance recoverables on unpaid and paid losses. As of September 30, 2021, Ark had $457.5 million and $8.1 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 September 30, 2022, Ark’s reinsurance recoverables of $550.9 million included $168.0 million attributable to TPC Providers, which are collateralized. As of September 30, 2021, Ark’s reinsurance recoverables of $465.6 million included $299.9 million related to TPC Providers, which are collateralized.

The following table provides a listing of Ark’s remaining gross and net reinsurance recoverables, excluding amounts ~~related~~attributable to TPC Providers, by the reinsurer’s A.M. Best Company, Inc (“A.M. Best”) rating and the percentage of total ~~recoverables.~~recoverables as of September 30, 2022:


		As of September 30, 2021
$ in Millions										$ in Millions	As of September 30, 2022
A.M. Best Rating(1)	A.M. Best Rating(1)	Gross		Collateral		Net		% of Total		A.M. Best Rating(1)	Gross		Collateral		Net		% of Total
A+ or better	A+ or better	$	122.8	$	23.9	$	98.9	84.2	%	A+ or better	$	178.3	$	—	$	178.3	67.7	%
A- to A	A- to A	32.7		15.6		17.1		14.6		A- to A	78.9		—		78.9		29.9
B++ or lower and not rated	B++ or lower and not rated	10.2		8.8		1.4		1.2		B++ or lower and not rated	125.7		119.4		6.3		2.4
Total	Total	$	165.7	$	48.3	$	117.4	100.0	%	Total	$	382.9	$	119.4	$	263.5	100.0	%

(1) A.M. Best ratings as detailed above are: “A+ or better” (Superior) “A- to A” (Excellent), “B++” (Good).

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

Reinsurance Contracts Accounted for as Deposits

Ark has an aggregate excess of loss contract with SiriusPoint Ltd. (“SiriusPoint”), which is accounted for using the deposit method and recorded within other assets. Ark earns an annual crediting rate of 3.0%, which is recorded within other revenue. During the fourth quarter of 2021, Ark negotiated a reduction of $31.7 million, including accrued interest, to the aggregate excess of loss contract with SiriusPoint. As of September 30, 2022, the carrying value of Ark’s deposit in SiriusPoint, including accrued interest, was $20.3 million.

See Note 10 — “Municipal Bond Guarantee Insurance” for reinsurance contracts accounted for as deposits related to White Mountains’s financial guarantee business.

Note 7. Debt

The following table presents White Mountains’s debt outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


Millions		September 30, 2021		Effective Rate	(1)	December 31, 2020		Effective Rate	(1)
$ in Millions										$ in Millions	September 30, 2022		Effective Rate	(1)	December 31, 2021		Effective Rate	(1)

Ark 2007 Notes Tranche 1		$	30.0			$	—
Ark 2007 Notes Tranche 2		13.9				—
HG Global Senior Notes										HG Global Senior Notes	$	150.0	8.6%		$	—	N/A
Unamortized discount and issuance cost										Unamortized discount and issuance cost	(3.6)				—
HG Global Senior Notes, carrying value										HG Global Senior Notes, carrying value	146.4				—
Ark 2007 Subordinated Notes, carrying value	Ark 2007 Subordinated Notes, carrying value	43.9				—				Ark 2007 Subordinated Notes, carrying value	30.0				30.0

Ark 2021 Notes Tranche 1	Ark 2021 Notes Tranche 1	45.3				—				Ark 2021 Notes Tranche 1	37.6				44.2
Ark 2021 Notes Tranche 2	Ark 2021 Notes Tranche 2	47.0				—				Ark 2021 Notes Tranche 2	47.0				47.0
Ark 2021 Notes Tranche 3	Ark 2021 Notes Tranche 3	70.0				—				Ark 2021 Notes Tranche 3	70.0				70.0
Unamortized issuance cost	Unamortized issuance cost	(5.5)								Unamortized issuance cost	(4.6)				(5.3)
Ark 2021 Subordinated Notes, carrying value	Ark 2021 Subordinated Notes, carrying value	156.8								Ark 2021 Subordinated Notes, carrying value	150.0				155.9
Total Ark Subordinated Notes, carrying value	Total Ark Subordinated Notes, carrying value	200.7		5.1%		—				Total Ark Subordinated Notes, carrying value	180.0		7.3%		185.9		6.9%
NSM Bank Facility		300.4		7.4%	(2)	277.4		7.5%	(2)
Unamortized issuance cost		(6.7)				(6.1)
NSM Bank Facility, carrying value		293.7				271.3
Other NSM debt, carrying value		1.3		3.3%		1.3		2.5%
Kudu Credit Facility	Kudu Credit Facility	203.0		4.1%		—				Kudu Credit Facility	260.4		5.6%		225.4		4.3%
Unamortized issuance cost	Unamortized issuance cost	(7.4)				—				Unamortized issuance cost	(6.9)				(7.2)
Kudu Credit Facility, carrying value	Kudu Credit Facility, carrying value	195.6				—				Kudu Credit Facility, carrying value	253.5				218.2
Kudu Bank Facility		��				89.2		8.3%
Unamortized issuance cost		—				(2.9)
Kudu Bank Facility, carrying value		—				86.3

Other Operations debt	Other Operations debt	19.5		7.4%		18.0		7.4%		Other Operations debt	36.4		7.1%		17.1		7.5%
Unamortized issuance cost	Unamortized issuance cost	(.4)				(.5)				Unamortized issuance cost	(.8)				(.3)
Other Operations, carrying value		19.1				17.5
Other Operations debt, carrying value										Other Operations debt, carrying value	35.6				16.8
Total debt	Total debt	$	710.4			$	376.4			Total debt	$	615.5			$	420.9

(1) Effective rate includes the effect of the amortization of debt issuance costs.

~~(2)~~ NSM’s effective rate excludes the effect of the interest rate swap on the hedged portion of the debt. The weighted average interest rate for the quarter ended September 30, 2021 and December 31, 2020, excluding the effect of amortization of debt issuance costs, was 6.7% and 7.0%. The weighted average interest rate for the quarter ended September 30, 2021 and December 31, 2020 on the total NSM Bank Facility including both the effect of the amortization of debt issuance costs and the effect of the interest rate swap was 8.3% and 8.4%.

3228

HG Global Senior Notes

On April 29, 2022, HG Global received the proceeds of its $150.0 million face value floating rate secured senior notes (the “HG Global Senior Notes”). The HG Global Senior Notes, which mature in April 2032, accrue interest at a floating rate equal to the three-month Secured Overnight Financing Rate (“SOFR”) plus 6.3% per annum. Subsequent to the five-year anniversary of the funding date, absent the occurrence of an early amortization trigger event, HG Global will make payments of principal on a quarterly basis totaling $15.0 million annually. Upon the occurrence of an early amortization trigger event, HG Global is required to use all available cash flow to repay the notes. Early amortization trigger events include scenarios in which HG Re is effectively in run off. HG Global has the option to redeem, in whole or in part, the HG Global Senior Notes after the five-year anniversary of the funding date at the outstanding principal amounts plus accrued interest.

The HG Global Senior Notes require HG Global to maintain an interest reserve account of eight times the interest accrued for the most recent quarterly interest period, which is included in short-term investments. As of September 30, 2022, the interest reserve account is $26.4 million.

The HG Global Senior Notes are secured by the capital stock and other equity interests of HG Global’s subsidiaries, the interest reserve account, and all cash and non-cash proceeds from the foregoing collateral. The HG Global Senior Notes contain various affirmative and negative covenants that White Mountains considers to be customary for such borrowings.

If the payments of principal and interest under the HG Global Senior Notes become subject to tax withholding on behalf of a relevant governmental authority for certain indemnified taxes, the HG Global Senior Notes require the payment of additional amounts such that the amount received by the noteholders is the same as would have been received absent the tax withholding being imposed. The HG Global Senior Notes require the payment of additional interest of 1.0% per annum if the HG Global Senior Notes receive a non-investment grade rating or are no longer rated.

As of September 30, 2022, the HG Global Senior Notes had an outstanding principal balance of $150.0 million.

Ark Subordinated Notes

In March 2007, GAIL ~~a wholly-owned subsidiary of Ark,~~ issued $30.0 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 2007 ~~Notes Tranche 1”) and a €12.0 million floating rate subordinated note to Dekania Europe CDO II plc (the “Ark 2007 Notes Tranche 2”) (together, the “Ark 2007~~ Subordinated Notes”). The Ark 2007 Subordinated Notes, ~~Tranche 1,~~ which mature in June 2037, accrue interest at a floating rate equal to the three-month U.S. ~~LIBOR~~London Inter-Bank Offered Rate (“LIBOR”) plus 4.6%~~. The Ark 2007 Notes Tranche 2, which matures in June 2027, accrues interest at a floating rate equal to the three-month EURIBOR plus 4.6%.~~ per annum. As of September 30, ~~2021,~~2022, the Ark 2007 Subordinated Notes ~~Tranche 1~~ had an outstanding principal balance of $30.0 ~~million and the Ark 2007 Notes Tranche 2 had an outstanding balance of €12.0 million ($13.9 million based upon the foreign exchange spot rate as of September 30, 2021).~~million.

In the third quarter of 2021, GAIL issued $163.3 million face value floating rate subordinated notes at par in three separate transactions for proceeds of $157.8 million, net of debt issuance costs. The ~~Ark~~unsecured subordinated notes (the “Ark 2021 Subordinated ~~Notes~~Notes”) were issued in private placement offerings that were exempt from the registration requirements of the Securities Act of 1933. On July 13, 2021, Ark issued €39.1 million ($46.3 million based upon the foreign exchange spot rate as of the date of the transaction) face value floating rate unsecured subordinated notes (“Ark 2021 Notes Tranche 1”). The Ark 2021 Notes Tranche 1, which mature in July 2041, accrue interest at a floating rate equal to the three-month EURIBOR plus 5.75%. per annum. On August 11, 2021, Ark issued $47.0 million face value floating rate unsecured subordinated notes (“Ark 2021 Notes Tranche 2”). The Ark 2021 Notes Tranche 2, which mature in August 2041, accrue interest at a floating rate equal to the three-month U.S. LIBOR plus 5.75%. per annum. On September 8, 2021, Ark issued $70.0 million face value floating rate unsecured subordinated notes (“Ark 2021 Notes Tranche 3”). The Ark 2021 Notes Tranche 3, which mature in September 2041, accrue interest at a floating rate equal to the three-month U.S. LIBOR plus 6.1%. per annum. On the ten-year anniversary of the issue dates, the interest rate for the Ark 2021 Subordinated Notes will increase by 1.0% per annum. Ark has the option to redeem, in whole or in part, the Ark 2021 Subordinated Notes ahead of contractual maturity at the outstanding principal amounts plus accrued interest at the ten-year anniversary or any subsequent interest payment date.

All payments of principal and interest under the Ark 2021 Subordinated Notes are conditional upon GAIL’s solvency and compliance with the enhanced capital requirements of the Bermuda Monetary Authority (“BMA”). The deferral of payments of principal and interest under these conditions does not constitute a default by Ark and does not give the noteholders any rights to accelerate repayment of the Ark 2021 Subordinated Notes or take any enforcement action under the Ark 2021 Subordinated Notes.

If the payments of principal and interest under the Ark 2021 Subordinated Notes become subject to tax withholding on behalf of Bermuda or any political subdivision there, the Ark 2021 Subordinated Notes require the payment of additional amounts such that the amount received by the noteholders is the same as would have been received absent the tax withholding being imposed. The Ark 2021 Notes Tranche 3 require the payment of additional interest of 1.0% per annum upon the occurrence of a ~~Premium Load Event~~premium load event until such event is remedied. Premium ~~Load Events~~load events include the failure to meet payment obligations of the Ark 2021 Notes Tranche 3 when due, failure of GAIL to maintain an investment grade credit rating, failure to maintain 120% of GAIL’s Bermuda solvency capital requirement, failure of GAIL to maintain a debt to capital ratio below 40%, late filing of GAIL’s or Ark’s financial information, and making a restricted payment or distribution on GAIL’s common stock or other securities that rank junior or pari passu with the Ark 2021 Notes Tranche 3 when a different ~~Premium Load Event~~premium load event exists or will be caused by the restricted payment.

As of September 30, ~~2021,~~2022, the Ark 2021 Notes Tranche 1 had an outstanding principal balance of €39.1 million ($~~45.3~~37.6 million based upon the foreign exchange spot rate as of September 30, ~~2021)~~2022), the Ark 2021 Notes Tranche 2 had an outstanding principal balance of $47.0 million, and the Ark 2021 Notes Tranche 3 had an outstanding principal balance of $70.0 million.

~~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 for the Syndicates. As of September 30, 2021, the utilized level of the facility was $45.0 million, with the ability to increase up to $150.0 million, subject to formal approval by Lloyd’s. The Ark ~~LOC Facility has a termination date of December 31, 2025. During the three and nine months ended September 30, 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~~Subordinated Notes contain various affirmative ~~negative~~ and ~~financial~~negative covenants that White Mountains considers to be customary for such ~~borrowings, including a minimum tangible net worth covenant.~~borrowings.

Ark Standby Letter of Credit Facilities

~~NSM Bank Facility~~

~~NSM maintains a secured~~In December 2021, Ark entered into two uncommitted standby letter of credit facility agreements to support the continued growth and expansion of its GAIL insurance and reinsurance operations. The standby letter of credit facility agreements were executed with ING Bank N.V., London Branch (the ~~“NSM Bank~~“ING LOC Facility”) with ~~Ares Capital Corporation. In both 2021 and 2020, NSM amended the terms~~capacity of the facility. On April 7, 2020, NSM amended the NSM Bank Facility to increase the total commitment from $234.0 million, comprised of term loans of $224.0 million and a revolving credit loan commitment of $10.0 million, to $291.4 million, comprised of term loans of $276.4 million, including £42.5 million ($52.4 million based upon the foreign exchange spot rate as of the date of the transaction) in a GBP term loan, and a revolving credit loan ~~commitment~~ ~~of $15.0 million~~. In connection with the April 7, 2020 amendment, the reference rates for USD denominated borrowings increased. The USD-LIBOR rate floor increased 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%.

On June 2, 2021, NSM amended the NSM Bank Facility to reduce the margin over the reference interest rate for USD LIBOR loans from a range of 5.5% to 6.00% to a range of 4.50% to 5.00%, and reduce the margin over the reference rate for GBP loans from a range of 6.0% to 6.50% to a range of 5.00% to 5.50%. The amendment also increased the revolving credit loan commitment to $40.0 million and added a $50.0 million ~~delayed-draw term loan commitment. The amendment also changed the reference interest rate for the GBP loan from GBP-LIBOR to SONIA. The maturity dates~~on an uncollateralized basis and with Citibank Europe Plc (the “Citibank LOC Facility”) with capacity of ~~the term loans and the revolving~~$100.0 million on a collateralized basis. In September 2022, Ark entered another uncommitted standby letter of credit ~~loans were not changed as part~~facility agreement with Lloyds Bank Corporate Markets PLC (the “Lloyds LOC Facility”) with capacity of ~~the amendment. The term loans under the NSM Bank Facility mature~~$50.0 million on ~~May 11, 2026, and the revolving loan matures on November 11, 2025. The reference interest rates under the NSM Bank Facility are generally subject to~~ a ~~1.25% rate floor.~~

Under GAAP, if the terms of a debt instrument are amended, unless there is greater than 10% change in the expected discounted future cash flows of such instrument, the instrument’s carrying value does not change. White Mountains has determined that the impact of the 2021 and 2020 amendments to the NSM Bank Facility was less than 10% on the expected discounted future cash flows.

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

NSM Bank Facility Three Months Ended September 30, Nine Months Ended September 30,
Millions 2021 2020 2021 2020
Beginning balance $ 276.6 $ 273.4 $ 277.4 $ 221.3
Term loans
Borrowings (1)
— — — 52.4
Repayments (.7) (.7) (2.1) (1.3)
Foreign currency translation (1.5) 2.3 (.9) 2.6
Revolving credit loan
Borrowings (2)
35.0 — 35.0 —
Repayments (9.0) — (9.0) —
Ending balance 300.4 275.0 $ 300.4 $ 275.0

~~(1)~~ ~~Borrowings for the nine months ended September 30, 2020 included $52.4 for the funding of the acquisition of Kingsbridge.~~

~~(2)~~ ~~Borrowings for both the three and nine months ended September 30, 2021 included $35.0 for the funding of the acquisition of J.C. Taylor.~~

collateralized basis.

As of September 30, ~~2021,~~2022, the ~~term loans had an outstanding balance of $274.4 million, including £41.9 million ($56.6 million based upon the foreign exchange spot rate as of September 30, 2021) in a GBP term loan,~~ING LOC Facility and ~~the revolving credit loan had an outstanding balance of $26.0 million.~~

~~On June 15, 2018, NSM entered into an interest rate swap agreement to hedge its exposure to interest rate risk on $151.0 million of its USD denominated variable rate term loans. See~~ ~~Note 9 — “Derivatives”~~.

Lloyds LOC Facility were undrawn. As of September 30, ~~2021, $146.5~~2022, the Citibank LOC Facility had an outstanding principal balance of $36.2 million. As of September 30, 2022, $49.8 million of short-term investments were pledged as collateral under the ~~outstanding term loans were hedged by the swap~~Citibank LOC Facility. Ark’s uncommitted standby letter of credit facility agreements contain various representations, warranties and ~~$128.0 million of the outstanding term loans were unhedged.~~

~~The following table presents the NSM weighted average interest rate for the nine months ended September 30, 2021 and 2020:~~

NSM Weighted Average Interest Rate Nine Months Ended September 30,
2021 2020
Millions Weighted Average
Interest Expense (1)
Weighted Average Interest rate Weighted Average
Interest Expense (1)
Weighted Average Interest rate
Term loan - hedged $ 147.1 $ 10.0 9.1 % $ 148.5 $ 10.0 9.0 %
Term loan - unhedged 129.5 7.3 7.5 % 125.1 6.1 6.5 %
Total NSM Facility $ 276.6 $ 17.3 8.3 % $ 273.6 $ 16.1 7.8 %

(1) ~~Interest expense includes the amortization of debt issuance costs and the effect of the interest rate swap and excludes interest expense related to the Other NSM Debt.~~

~~The NSM Bank Facility 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 maximum consolidated total leverage ratio covenant.~~

~~Other NSM Debt~~

~~NSM also has a secured term loan related to its U.K. vertical. As of September 30, 2021, the secured term loan had an outstanding balance of $1.4 million and a maturity date of December 31, 2022.~~borrowings.

Kudu Credit Facility and Kudu Bank Facility

On December 23, 2019, Kudu entered into a secured credit facility with Monroe Capital Management Advisors, LLC (the “Kudu Bank Facility”). On March 23, 2021, Kudu replaced the Kudu Bank Facility and entered into a secured revolving credit facility (the “Kudu Credit Facility”) with ~~Massachusetts~~Mass Mutual ~~Life Insurance Company~~ to repay the Kudu Bank Facility, and to fund new investments and related transaction expenses. The maximum borrowing capacity of the Kudu Credit Facility is $300.0 million. The Kudu Credit Facility matures on March 23, 2036. In connection with the replacement of the Kudu Bank Facility, Kudu recognized a total loss of $4.1 million, representing debt issuance costs and prepayment fees, which are included within interest expense for the year to date period ended September 30, 2021.

~~Interest on the Kudu Credit Facility accrues at a floating interest rate equal to the greater of the three-month USD-LIBOR and 0.25%, plus in each case, the applicable spread of 4.30%.~~ The Kudu Credit Facility requires Kudu to maintain an interest reserve account, which is included in restricted cash. As of September 30, ~~2021,~~2022, the interest reserve account is ~~$4.5~~$8.9 million. The Kudu Credit Facility requires Kudu to maintain a ratio of the outstanding balance to the sum of the fair market value of the participation contracts and cash held in certain accounts (the “LTV Percentage”) of less than 50% in years 0-3, 40% in years 4-6, 25% in years 7-8, 15% in years 9-10, and 0% thereafter. As of September 30, ~~2021,~~2022, Kudu has a ~~34%~~35% LTV Percentage.

Kudu may borrow undrawn balances within the initial three-year availability period, subject to customary terms and conditions, to the extent the amount borrowed under the Kudu Credit Facility does not exceed the borrowing base, which is equal to 35% of the fair value of ~~Kudu’s~~ qualifying ~~participation contracts. When considering White Mountains’s remaining equity commitment to~~ Kudu ~~and the fair value of Kudu’s qualifying participation contracts as~~Participation Contracts. As of September 30, ~~2021,~~2022, the available undrawn balance was ~~$11.7~~$39.6 million.

~~During~~

The following table presents the ~~nine months ended September 30, 2021, Kudu borrowed $3.0 million and repaid~~change in debt under the ~~outstanding~~ Kudu Bank Facility ~~balance of $92.2 million. During~~and Kudu Credit Facility for the three and nine months ended September 30, ~~2021, Kudu borrowed $101.0 million~~2022 and ~~$203.0 million and made no repayments on the Kudu Credit Facility. As of September 30, 2021, the Kudu Credit Facility had an undrawn balance of $97.0 million.~~ 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2022		2021		2022		2021
Kudu Bank Facility
Beginning balance	$	—	$	—	$	—	$	89.2
Term loans
Borrowings	—		—		—		3.0
Repayments	—		—		—		(92.2)
Ending balance	$	—	$	—	$	—	$	—
Kudu Credit Facility
Beginning balance	$	260.4	$	203.0	$	225.4	$	—
Term loans
Borrowings	—		—		35.0		203.0
Repayments	—		—		—		—
Ending balance	$	260.4	$	203.0	$	260.4	$	203.0

The Kudu Credit Facility is secured by all property of the loan parties and contains various affirmative and negative covenants that White Mountains considers to be customary for such borrowings.

Other Operations Debt

As of September 30, ~~2021, debt in~~2022, White Mountains’s Other Operations ~~segment~~had debt with an outstanding principal balance of $36.4 million, which consisted of 3five secured credit facilities (collectively, “Other Operations debt”).

The first credit facility has a maximum borrowing capacity of $16.3 million, which is comprised of a term loan of $11.3 million, a delayed-draw term loan of $3.0 million and a revolving credit loan commitment of $2.0 million, all with a maturity date of March 12, 2024. The second credit facility has a maximum borrowing capacity of $15.0 million, which is comprised of a term loan of $9.0 million, a delayed-draw term loan of $4.0 million and a revolving credit loan commitment of $2.0 million, all with a maturity date of July 2, 2025. The third credit facility has a maximum borrowing capacity of $4.0 million, which is comprised of a revolving credit loan commitment, with a maturity date of October 26, 2021.

During the three and nine months ended September 30, 2021, White Mountains’s Other Operations segment borrowed $0.4 million and $0.7 million. During the three and nine months ended September 30, 2021, White Mountains’s Other Operations segment made repayments of $1.2 million and $2.6 million. As of September 30, 2021, the Other Operations debt had an outstanding balance of $19.5 million.

Compliance

At September 30, ~~2021,~~2022, White Mountains was in compliance in all material respects with the covenants under all of its debt instruments.

Note 8. 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~~such that taxes are imposed, the Bermuda Exempted Undertakings Tax Protection Act of 1966 states that 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.~~2035. The Company has subsidiaries and branches that operate in various other jurisdictions around the world ~~that~~and are subject to tax in the jurisdictions in which they operate. ~~The~~As of September 30, 2022, the primary jurisdictions in which the Company’s subsidiaries and branches ~~are~~were subject to tax ~~are~~were Ireland, Israel, Luxembourg, the United Kingdom and the United States.

White Mountains’s income tax benefit related to pre-tax loss from continuing operations for the three and nine months ended September 30, 2022 represented an effective tax rate of 23.9% and 9.4%. The effective tax rate was different from the U.S. statutory rate of 21.0%, driven primarily by full year forecasted income in jurisdictions with lower tax rates than the United States, partially offset by a full valuation allowance on net deferred tax assets in certain U.S. operations, consisting of the WM Adams, Inc. consolidated tax group within Other Operations and BAM, and state income taxes.

White Mountains’s income tax expense related to pre-tax loss from continuing operations for the three and nine months ended September 30, 2021 represented an effective tax rate of ~~(6.0)~~(7.9)% and ~~(12.4)~~(17.1)%. The effective tax rate was different from the U.S. statutory rate of 21.0%, ~~due to~~driven primarily by losses in jurisdictions with lower tax rates than the United States, a full valuation allowance on net deferred tax assets in certain U.S. operations, consisting of the WM Adams, Inc. consolidated tax group within ~~the~~ Other Operations ~~segment~~ and BAM, and state income taxes. For the nine months ended September 30, 2021, the effective rate was also different from the U.S. statutory rate of 21.0% due to additional tax expense related to the revaluation of U.K. deferred tax assets and liabilities.

On June 10, 2021, the U.K. enacted an increase in its corporate tax rate from 19.0% to 25.0% for periods after April 1, 2023. On June 30, 2021, White Mountains increased its net U.K. deferred tax liability to reflect the higher tax rate on temporary differences projected to reverse after the new rate becomes effective.

White Mountains’s income tax expense related to pre-tax income from continuing operations for the three and nine months ended September 30, 2020 represented an effective tax rate of 30.7% and 33.7%. The effective tax rate was different fromOn August 16, 2022, the U.S. ~~statutory rate of 21.0% due to~~enacted the Inflation Reduction Act (the “IRA”). White Mountains has evaluated the tax ~~expense associated with the reorganization~~provisions of the ~~Guilford Holdings, Inc. consolidated U.S.~~IRA, the most significant of which relate to the corporate alternative minimum tax group 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 associated with the reorganization of the Guilford Holdings, Inc. consolidated U.S. tax group within the Other Operations segment consisted of withholding taxes and the ~~establishment~~tax on share repurchases, and does not expect the legislation to have a material impact on its results of ~~a partial valuation allowance on deferred tax assets of various service companies, other entities and investments.~~operations.

In arriving at the effective tax rate for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, White Mountains forecasted all income and expense items including the change in unrealized investment gains (losses) and realized investment gains (losses) for the years ending December 31, ~~2021~~2022 and ~~2020.~~2021.

White Mountains records a valuation allowance against deferred tax assets if it becomes more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in income tax expense in the period of change. In determining whether or not a valuation allowance, or change therein, is warranted, White Mountains considers factors such as prior earnings history, expected future earnings, carryback and carryforward periods and strategies that if executed would result in the realization of a deferred tax asset.

With few exceptions, White Mountains is no longer subject to U.S. federal, state, or non-U.S. income tax examinations by tax authorities for years before ~~2015.~~2016.

Note 9. Derivatives

~~NSM Interest Rate Swap~~

On June 15, 2018, NSM entered into an interest rate swap agreement to hedge its exposure to interest rate risk on $151.0 million of its USD denominated variable rate term loans under the NSM Bank Facility. Under the terms of the swap agreement, NSM pays a fixed-rate of 2.97% and receives a variable rate, which is reset monthly, based on the then-current USD-LIBOR. As of September 30, 2021, the variable rate received by NSM under the swap agreement was 1.00%. Over the term of the swap, the notional amount decreases in accordance with the principal repayments NSM expects to make on its term loans. The interest rate swap is scheduled to mature on June 30, 2024.

As of September 30, 2021, $146.5 million of the outstanding term loans were hedged by the swap. For the three and nine months ended September 30, 2021, the weighted average effective interest rate on the outstanding term loans that were hedged, including the effect of the amortization of debt issuance costs and the effect of the interest rate swap, was 9.1%.

NSM’s obligations under the swap are secured by the same collateral securing the NSM Bank Facility on a pari passu basis. NSM does not currently hold any collateral deposits from or provide any collateral deposits to the swap counterparty.

NSM evaluated the effectiveness of the swap to hedge its interest rate risk associated with its variable rate debt and concluded at the swap inception date that the swap was highly effective in hedging that risk. NSM evaluates the effectiveness of the hedging relationship on an ongoing basis.

For the three and nine months ended September 30, 2021, White Mountains recognized net interest expense of $0.6 million and $1.9 million for the periodic net settlement payments on the swap. For the three and nine months ended September 30, 2020, White Mountains recognized net interest expense of $0.6 million and $1.9 million for the periodic net settlement payments on the swap. As of September 30, 2021 and December 31, 2020, the estimated fair value of the swap and the accrual of the periodic net settlement payments recorded in other liabilities was $6.0 million and $8.2 million. There was no ineffectiveness in the hedge for the three and nine months ended September 30, 2021 and 2020. For the three and nine months ended September 30, 2021, the $(0.6) million and $(2.2) million change in the fair value of the swap is included within White Mountains’s accumulated other comprehensive income (loss). For the three and nine months ended September 30, 2020, the $0.5 million and $(2.3) million change in the fair value of the swap is included within White Mountains’s accumulated other comprehensive income (loss).

~~NSM~~HG Global Interest Rate Cap

On June ~~4, 2020, NSM~~16, 2022, HG entered into an interest rate cap agreement, effective on July 25, 2022, to limit its exposure to the risk of interest rate increases on the ~~GBP denominated term loan under the NSM Bank Facility.~~HG Global Senior Notes. The notional amount of the interest rate cap is ~~£42.5~~$150.0 million ~~($52.4 million based upon the foreign exchange spot rate as of the date of the transaction)~~ and the termination date is June 4, 2022. On August 18, 2020, NSM entered into a separate interest rate cap agreement to extend the term of the original interest rate cap agreement by one year. The second interest rate cap agreement has an effective date of June 15, 2022 and a termination date of June 15, 2023.July 25, 2025.

~~NSM~~HG paid ~~total~~ initial premiums of ~~$0.1~~$3.3 million for the interest rate ~~caps.~~cap. Under the terms of the interest rate cap ~~agreements,~~agreement, if the ~~GBP-LIBOR~~current three-month SOFR rate at the measurement date exceeds ~~1.25%~~3.5%, ~~NSM~~HG will receive payments from the counterparty equal to the ~~GBP-LIBOR~~difference between the three-month SOFR rate ~~less~~on the ~~1.25%~~determination date and 3.5%, multiplied by the notional amount of the cap ~~rate.~~based on the number of days in the quarter and a year equal to 360 days. As of September 30, ~~2021,~~2022, the ~~GBP-LIBOR~~three-month SOFR rate was ~~0.08%~~3.6%.

~~NSM~~HG accounts for the interest rate ~~caps~~cap as ~~derivatives~~a derivative at fair value, with changes in fair value recognized in current period earnings within interest expense. For the three and nine months ended September 30, ~~2021,~~2022, White Mountains recognized a ~~negligible amount~~gain of $2.1 million and $0.6 million related to the change in fair value on the interest rate ~~caps within interest expense. For the three and nine months ended September 30, 2020, White Mountains recognized a change in fair value of $(0.1) million on the interest rate caps~~cap within interest expense. As of September 30, ~~2021 and December 31, 2020,~~2022, the estimated fair value of the ~~caps~~interest rate cap recorded in other assets was ~~less than $0.1~~$3.9 million. White Mountains classifies the interest rate cap as a Level 2 measurement.

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Note 10. Municipal Bond Guarantee Insurance

HG Global was established to fund the startup of BAM, a mutual municipal bond insurer. HG Global, together with its subsidiaries, provided the initial capitalization of BAM through the purchase of $503.0 million of the BAM Surplus Notes.

Reinsurance Treaties

FLRT

BAM is a party to a first loss reinsurance treaty (“FLRT”) with HG Re under which HG Re provides first loss protection up to 15%-of-par outstanding on each municipal bond insured by BAM. For capital appreciation bonds, par is adjusted to the estimated equivalent par value for current interest paying bonds. In return, BAM cedes up to 60% of the risk premium charged for insuring the municipal bond, which is net of a ceding commission. The FLRT is a perpetual agreement with ~~an initial term through~~terms that can be renegotiated after a specified period of time. During 2021, BAM and HG Re agreed that the terms may be renegotiated at the end of ~~2022.~~2024, and each subsequent five-year period thereafter.

Fidus Re

BAM is party to ~~two~~a collateralized financial guarantee excess of loss reinsurance ~~agreements~~agreement that ~~serve~~serves to increase BAM’s claims paying resources and ~~are~~is provided by Fidus Re ~~a Bermuda based special purpose insurer created in 2018 solely to provide reinsurance protection to BAM.~~Ltd. (“Fidus Re”).

In ~~the second quarter of~~ 2018, Fidus Re was initially capitalized by the issuance of $100.0 million of ~~insurance linked~~insurance-linked securities (the “Fidus Re 2018 Agreement”). The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM. The ~~insurance linked~~insurance-linked securities were issued by Fidus Re with an initial term of 12 years and are callable five years after the date of issuance. Under the Fidus Re 2018 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $165.0 million on a portion of BAM’s financial guarantee portfolio (the “2018 Covered Portfolio”) up to a total reimbursement of $100.0 million. The Fidus Re 2018 Agreement does not provide coverage for losses in excess of $276.1 million. The 2018 Covered Portfolio consists of approximately ~~36%~~28% of BAM’s portfolio of financial guaranty policies issued through September 30, ~~2021.~~2022.

In the first quarter of 2021, Fidus Re issued an additional $150.0 million of ~~insurance linked~~insurance-linked securities (the “Fidus Re 2021 Agreement”) with an initial term of 12 years and are callable five years after the date of issuance. The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM. Under the Fidus Re 2021 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $135.0 million on a portion of BAM’s financial guarantee portfolio (the “2021 Covered Portfolio”) up to a total reimbursement of $150.0 million. The Fidus Re 2021 Agreement does not provide coverage for losses in excess of $301.7 million. The 2021 Covered Portfolio consists of approximately ~~40%~~33% of BAM’s portfolio of financial guaranty policies issued through September 30, ~~2021.~~2022.

The Fidus Re ~~Agreements~~agreements are accounted for using deposit accounting and any related financing expenses are recorded in general and administrative expenses as they do not meet the risk transfer requirements necessary to be accounted for as reinsurance.

XOLT

In January 2020, BAM entered into an excess of loss reinsurance agreement (the “XOLT”) with HG Re. Under the XOLT, HG Re provides last dollar protection for exposures on municipal bonds insured by BAM in excess of ~~NYDFS~~New York State Department of Financial Services (“NYDFS”) single issuer limits. ~~The~~As of September 30, 2022, the XOLT is subject to an aggregate limit equal to the lesser of ~~$75.0~~$125.0 million or the assets held in the ~~Supplemental Trust~~supplemental collateral trust (the “Supplemental Trust”) at any point in time. The agreement is accounted for using deposit accounting and any related financing expenses are recorded in general and administrative expenses as the agreement does not meet the risk transfer requirements necessary to be accounted for as reinsurance.

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Collateral Trusts

HG Re’s obligations under the FLRT are limited to the assets in two collateral trusts: the Supplemental Trust and a Regulation 114 Trust ~~and a supplemental collateral trust (the “Supplemental Trust” and together with the Regulation 114 Trust,~~(together, the “Collateral Trusts”). Losses required to be reimbursed under the FLRT are subject to an aggregate limit equal to the assets held in the Collateral Trusts at any point in time.

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 Regulation 114 Trust balance as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$241.0~~$259.4 million and ~~$222.8~~$250.2 million.

The Supplemental Trust target balance is $603.0 million, less the amount of cash and securities in the Regulation 114 Trust in excess of its target balance (the “Supplemental Trust 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. The Supplemental Trust balance as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$603.8~~$574.5 million and ~~$604.3~~$601.8 million.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Collateral Trusts held assets of ~~$844.8~~$833.9 million and ~~$827.1~~$852.0 million, which included ~~$449.7~~$457.7 million and ~~$434.5~~$481.7 million of cash and investments, ~~$388.2~~$364.6 million and ~~$388.2~~$364.6 million of BAM Surplus Notes and ~~$6.9~~$11.6 million and ~~$4.4~~$5.7 million of interest receivable on the BAM Surplus Notes.

BAM Surplus Notes

Through 2024, the interest rate on the BAM Surplus Notes is a variable rate equal to the one-year U.S. Treasury rate plus 300 basis points, set annually. During ~~2021,~~2022, the interest rate on the BAM Surplus Notes is ~~3.1%~~3.2%. Beginning in 2025, the interest rate will be fixed at the higher of the then current variable rate or 8.0%. Under its agreements with HG Global, 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.

In December ~~2020,~~2021, BAM made a ~~$30.1~~$33.8 million cash payment of principal and interest on the BAM Surplus Notes held by HG Global. Of this payment, ~~$21.5~~$23.6 million was a repayment of principal held in the Supplemental Trust, ~~$0.2~~$0.4 million was a payment of accrued interest held inside the Supplemental Trust and ~~$8.4 million was a payment of accrued interest held outside the Supplemental Trust.~~

In January 2020, BAM made a one-time $65.0 million cash payment of principal and interest on the BAM Surplus Notes held by HG Global. Of this payment, $47.9 million was a repayment of principal held in the Supplemental Trust, $0.9 million was a payment of accrued interest held inside the Supplemental Trust and $16.2$9.8 million was a payment of accrued interest held outside the Supplemental Trust.

During the three and nine months ended September 30, 2022 and 2021, BAM made no repayments of the BAM Surplus Notes or accrued interest.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the principal balance on the BAM Surplus Notes was ~~$388.2~~$364.6 million and ~~$388.2~~$364.6 million and total interest receivable on the BAM Surplus Notes was ~~$164.8~~$166.4 million and ~~$155.7~~$157.6 million.

Insured Obligations and Premiums

The following table presents a schedule of BAM’s insured obligations as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Contracts outstanding	Contracts outstanding	11,877		10,997		Contracts outstanding	13,094		12,350
Remaining weighted average contract period outstanding (in years)	Remaining weighted average contract period outstanding (in years)	10.7		10.7		Remaining weighted average contract period outstanding (in years)	10.8		10.8
Contractual debt service outstanding (in millions):	Contractual debt service outstanding (in millions):					Contractual debt service outstanding (in millions):
Principal	Principal	$	83,829.0	$	75,287.7	Principal	$	98,619.0	$	89,196.5
Interest	Interest	39,528.4		36,448.8		Interest	47,595.0		41,486.5
Total debt service outstanding	Total debt service outstanding	$	123,357.4	$	111,736.5	Total debt service outstanding	$	146,214.0	$	130,683.0

Gross unearned insurance premiums (in millions)	Gross unearned insurance premiums (in millions)	$	257.0	$	237.5	Gross unearned insurance premiums (in millions)	$	286.7	$	266.3

The following table presents a schedule of BAM’s future premium revenues as of September 30, ~~2021:~~2022:

Millions September 30, 2021
October 1, 2021 - December 31, 2021 $ 6.2
January 1, 2022 - March 31, 2022 6.1
April 1, 2022 - June 30, 2022 6.1
July 1, 2022 - September 30, 2022 6.0
October 1, 2022 - December 31, 2022 5.9
Total 2022 24.1
2023 22.8
2024 21.1
2025 19.6
2026 18.1
2027 and thereafter 145.1
Total gross unearned insurance premiums $ 257.0


Millions	September 30, 2022
October 1, 2022 - December 31, 2022	$	6.9
January 1, 2023 - March 31, 2023	6.8
April 1, 2023 - June 30, 2023	6.7
July 1, 2023 - September 30, 2023	6.6
October 1, 2023 - December 31, 2023	6.4
Total 2023	26.5
2024	24.9
2025	23.2
2026	21.6
2027	20.1
2028 and thereafter	163.5
Total gross unearned insurance premiums	$	286.7

The following table presents a schedule of written premiums and earned premiums included in White Mountains’s HG Global/BAM segment for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,	Nine Months Ended September 30,
Millions	Millions	2021		2020			2021		2020		Millions		2022		2021		2022		2021
Written premiums:	Written premiums:										Written premiums:
Direct	Direct	$	12.8	$	14.4		$	34.5	$	45.5	Direct		$	18.4	$	12.8	$	44.9	$	34.5
Assumed	Assumed	—		—			4.5		.1		Assumed		1.3		—		1.3		4.5
Gross written premiums (1)	Gross written premiums (1)	$	12.8	$	14.4		$	39.0	$	45.6	Gross written premiums (1)		$	19.7	$	12.8	$	46.2	$	39.0
Earned premiums:	Earned premiums:										Earned premiums:
Direct	Direct	$	5.9	$	5.3		$	16.8	$	14.5	Direct		$	6.5	$	5.9	$	22.0	$	16.8
Assumed	Assumed	.8		.9			2.8		2.7		Assumed		.6		.8		4.0		2.8
Gross earned premiums (1)	Gross earned premiums (1)	$	6.7	$	6.2		$	19.6	$	17.2	Gross earned premiums (1)		$	7.1	$	6.7	$	26.0	$	19.6

(1) There are no ceded premium amounts in the periods ~~presented. Gross written~~presented and gross earned premiums ~~and Gross earned premium~~ are equivalent to net written premiums and net earned premiums.

~~In the second quarter of 2020, BAM assumed a municipal bond guarantee contract with a par value of $36.9 million through an endorsement to the facultative quota share reinsurance agreement.~~

In January 2021, BAM entered into a 100% facultative quota share reinsurance agreement under which it assumed a portfolio of municipal bond guarantee contracts with a par value of ~~$0.8 billion.~~$805.5 million.

In September 2022, BAM entered into a 100% facultative quota share reinsurance agreement under which it assumed a portfolio of municipal bond guarantee contracts with a par value of $42.5 million.

None of the contracts assumed under these reinsurance agreements were non-performing, and no loss reserves have been established for any of the contracts, either as of the transaction ~~dates~~date or as of September 30, ~~2021.~~2022. The agreements, which cover future claims exposure only, meet the risk transfer criteria under ASC 944-20, Insurance Activities and accordingly have been accounted for as reinsurance.

Note 11. Earnings Per Share

White Mountains calculates earnings per share using the two-class method, which allocates earnings between common shares and unvested restricted common shares. Both classes of shares participate equally in dividends and earnings on a per share basis. Basic earnings per share amounts are based on the weighted average number of common shares outstanding adjusted for unvested restricted common shares.

The following table presents the Company’s computation of earnings per share from continuing operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. See Note 19 — “Held for Sale and Discontinued ~~Operations”~~.Operations.”


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Basic and diluted earnings per share numerators (in millions):	Basic and diluted earnings per share numerators (in millions):									Basic and diluted earnings per share numerators (in millions):
Net (loss) income attributable to White Mountains’s common shareholders		$	(371.4)	$	232.9	$	(308.2)	$	219.5
Net income (loss) attributable to White Mountains’s common shareholders										Net income (loss) attributable to White Mountains’s common shareholders	$	888.2	$	(371.4)	$	752.4	$	(308.2)
Less: total income (loss) from discontinued operations, net of tax(1)	Less: total income (loss) from discontinued operations, net of tax(1)	—		(.7)		18.7		(.8)		Less: total income (loss) from discontinued operations, net of tax(1)	893.1		5.3		903.2		(5.1)
Net (loss) income from continuing operations attributable to White Mountains’s common shareholders		$	(371.4)	$	233.6	$	(326.9)	$	220.3
Less: net (income) loss from discontinued operations attributable to non-controlling interests										Less: net (income) loss from discontinued operations attributable to non-controlling interests	$	(.1)	$	—	$	(.7)	$	1.1
Net income (loss) from continuing operations attributable to White Mountains’s common shareholders										Net income (loss) from continuing operations attributable to White Mountains’s common shareholders	$	(4.8)	$	(376.7)	$	(150.1)	$	(304.2)

Allocation of losses (earnings) to participating restricted common shares (1)		4.5		(3.2)		3.8		(2.9)
Basic and diluted (losses) earnings per share numerators		$	(366.9)	$	230.4	$	(323.1)	$	217.4
Allocation of (earnings) losses to participating restricted common shares (2)										Allocation of (earnings) losses to participating restricted common shares (2)	.1		4.6		1.8		3.5
Basic and diluted earnings (losses) per share numerators										Basic and diluted earnings (losses) per share numerators	$	(4.7)	$	(372.1)	$	(148.3)	$	(300.7)
Basic earnings per share denominators (in thousands):	Basic earnings per share denominators (in thousands):									Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	Total average common shares outstanding during the period	3,090.3		3,101.8		3,099.4		3,129.0		Total average common shares outstanding during the period	2,893.8		3,090.3		2,959.3		3,099.4
Average unvested restricted common shares(2)		(37.8)		(43.1)		(36.0)		(40.0)
Average unvested restricted common shares (3)										Average unvested restricted common shares (3)	(38.3)		(37.8)		(35.5)		(36.0)
Basic earnings (losses) per share denominator	Basic earnings (losses) per share denominator	3,052.5		3,058.7		3,063.4		3,089.0		Basic earnings (losses) per share denominator	2,855.5		3,052.5		2,923.8		3,063.4
Diluted earnings per share denominator (in thousands):	Diluted earnings per share denominator (in thousands):									Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period	Total average common shares outstanding during the period	3,090.3		3,101.8		3,099.4		3,129.0		Total average common shares outstanding during the period	2,893.8		3,090.3		2,959.3		3,099.4
Average unvested restricted common shares (2)		(37.8)		(43.1)		(36.0)		(40.0)
Average unvested restricted common shares (3)										Average unvested restricted common shares (3)	(38.3)		(37.8)		(35.5)		(36.0)

Diluted earnings (losses) per share denominator	Diluted earnings (losses) per share denominator	3,052.5		3,058.7		3,063.4		3,089.0		Diluted earnings (losses) per share denominator	2,855.5		3,052.5		2,923.8		3,063.4

Basic and diluted earnings per share (in dollars) - continuing operations:	Basic and diluted earnings per share (in dollars) - continuing operations:									Basic and diluted earnings per share (in dollars) - continuing operations:
Distributed earnings - dividends declared and paid	Distributed earnings - dividends declared and paid	$	—	$	—	$	1.00	$	1.00	Distributed earnings - dividends declared and paid	$	—	$	—	$	1.00	$	1.00
Undistributed (losses) earnings		(120.18)		75.32		(106.48)		69.40
Basic and diluted (losses) earnings per share		$	(120.18)	$	75.32	$	(105.48)	$	70.40
Undistributed earnings (losses)										Undistributed earnings (losses)	(1.66)		(121.90)		(51.73)		(99.16)
Basic and diluted earnings (losses) per share										Basic and diluted earnings (losses) per share	$	(1.66)	$	(121.90)	$	(50.73)	$	(98.16)

(1)Includes net income (loss) from discontinued operations, net of tax - NSM Group, net gain (loss) from sale of discontinued operations, net of tax - NSM Group and net gain (loss) from sale of discontinued operations, net of tax - Sirius Group. See Note 19 — “Held for Sale and Discontinued Operations.”

(2) Restricted shares issued by White Mountains receive dividends and are therefore ~~are~~ considered participating securities.

~~(2)~~(3) Restricted shares outstanding vest upon a stated date. See Note 12 — “Employee Share-Based Incentive Compensation ~~Plans”.~~Plans.”

The following table presents the undistributed net earnings (losses) from continuing operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. See Note 19 — “Held for Sale and Discontinued ~~Operations”~~.Operations.”


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Undistributed net earnings (losses) - continuing operations:	Undistributed net earnings (losses) - continuing operations:									Undistributed net earnings (losses) - continuing operations:
Net (losses) earnings attributable to White Mountains’s common shareholders, net of restricted common share amounts		$	(366.9)	$	230.4	$	(323.1)	$	217.4
Net income (losses) attributable to White Mountains’s common shareholders, net of restricted common share amounts										Net income (losses) attributable to White Mountains’s common shareholders, net of restricted common share amounts	$	(4.7)	$	(372.1)	$	(148.3)	$	(300.7)
Dividends declared, net of restricted common share amounts (1)	Dividends declared, net of restricted common share amounts (1)	—		—		(3.1)		(3.1)		Dividends declared, net of restricted common share amounts (1)	—		—		(3.0)		(3.1)
Total undistributed net (losses) earnings, net of restricted common share amounts		$	(366.9)	$	230.4	$	(326.2)	$	214.3
Total undistributed net earnings (losses), net of restricted common share amounts										Total undistributed net earnings (losses), net of restricted common share amounts	$	(4.7)	$	(372.1)	$	(151.3)	$	(303.8)

(1) Restricted shares issued by White Mountains receive dividends and are therefore considered participating securities.

4136

Note 12. Employee Share-Based Incentive Compensation Plans

White Mountains’s Long-Term Incentive Plan (the “WTM Incentive Plan”) provides for grants of various types of share-based and non-share-based incentive awards to key employees of White Mountains. As of September 30, 2022 and 2021, White Mountains’s share-based compensation incentive awards consist of performance shares and restricted shares.

Performance Shares

Performance shares are designed to reward employees for meeting company-wide performance targets. Performance shares are conditional grants of a specified maximum number of common shares or an equivalent amount of cash. Awards generally vest at the end of a three-year service period, are subject to the attainment of pre-specified performance goals, and are valued based on the market value of common shares at the time awards are paid. Performance shares earned under the WTM Incentive Plan are typically paid in cash but may be paid in common shares. Compensation expense is recognized for the vested portion of the awards over the related service periods. The level of payout ranges from zero to 2two times the number of shares initially granted, depending on White Mountains’s financial performance. Performance shares become payable at the conclusion of a performance cycle (typically 3 years) if pre-defined financial targets are met. The performance measures used for determining performance share payouts are growth in White Mountains’s adjusted book value per share and intrinsic value per share. Intrinsic value per share is generally calculated by adjusting adjusted book value per share for differences between the adjusted book value of certain assets and liabilities and White Mountains’s estimate of their underlying intrinsic values.

The following table presents the performance share activity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 for performance shares granted under the WTM Incentive Plan:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Millions, except share amounts	Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense		Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding	Accrued Expense
Beginning of period	Beginning of period	41,252	$	45.7	42,458	$	15.8	42,458	$	56.3	42,473	$	43.7	Beginning of period	39,449	$	41.2	41,252	$	45.7	40,828	$	42.2	42,458	$	56.3
Shares paid (1)	Shares paid (1)	(219)	(.6)		—	—		(14,336)	(35.2)		(14,070)	(27.7)		Shares paid (1)	—	—		(219)	(.6)		(14,625)	(26.4)		(14,336)	(35.2)
New grants	New grants	—	—		—	—		13,475	—		14,055	—		New grants	—	—		—	—		13,225	—		13,475	—
Forfeitures and cancellations (2)	Forfeitures and cancellations (2)	(205)	.2		—	(.3)		(769)	.4		—	.1		Forfeitures and cancellations (2)	—	(.1)		(205)	.2		21	(.2)		(769)	.4
Expense recognized	Expense recognized	—	(6.5)		—	13.6		—	17.3		—	13.0		Expense recognized	—	11.9		—	(6.5)		—	37.4		—	17.3
End of period	End of period	40,828	$	38.8	42,458	$	29.1	40,828	$	38.8	42,458	$	29.1	End of period	39,449	$	53.0	40,828	$	38.8	39,449	$	53.0	40,828	$	38.8

(1) Includes WTM performance share payments in 2022 for the 2019-2021 performance cycle, which were paid in March 2022 at 172% of target and WTM performance share payments in 2021 for the 2018-2020 performance cycle, which were paid in ~~cash in~~ March 2021 at 200% ~~of target. WTM performance share payments in 2020 for the 2017-2019 performance cycle, which were paid in cash in March 2020, ranged from 174% to 180%~~ of target.

(2) Amounts include changes in assumed forfeitures, as required under GAAP.

During the nine months ended September 30, 2022, White Mountains granted 13,225 performance shares for the 2022-2024 performance cycle. During the nine months ended September 30, 2021, White Mountains granted 13,475 performance shares for the 2021-2023 performance cycle. ~~During~~

For the ~~nine months ended September 30, 2020, White Mountains granted 14,055~~2019-2021 performance cycle, the Company issued common shares for 750 performance shares ~~for~~earned and all other performance shares earned were settled in cash. For the ~~2020-2022~~2018-2020 performance ~~cycle.~~

~~All~~cycle, all performance shares earned were settled in cash. If all the outstanding WTM performance shares had vested on September 30, ~~2021,~~2022, the total additional compensation cost to be recognized would have been ~~$17.2~~$41.2 million, based on accrual factors (common share price and payout assumptions) as of September 30, ~~2021.~~2022.

4237

The following table presents performance shares outstanding and accrued expense for performance shares awarded under the WTM Incentive Plan as of September 30, ~~2021~~2022 for each performance cycle:


		Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2022
Millions, except share amounts	Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense		Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense
Performance cycle:	Performance cycle:				Performance cycle:
2019 – 2021		14,625	$	24.4
2020 – 2022	2020 – 2022	13,350	13.4		2020 – 2022	13,350	$	31.9
2021 – 2023	2021 – 2023	13,475	1.6		2021 – 2023	13,475	14.7
2022 – 2024					2022 – 2024	13,225	7.2

Sub-total	Sub-total	41,450	39.4		Sub-total	40,050	53.8
Assumed forfeitures	Assumed forfeitures	(622)	(.6)		Assumed forfeitures	(601)	(.8)
September 30, 2021		40,828	$	38.8
September 30, 2022					September 30, 2022	39,449	$	53.0

Restricted Shares

Restricted shares are grants of a specified number of common shares that generally vest at the end of a 34-month service period. The following table presents the unrecognized compensation cost associated with the outstanding restricted share awards for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Millions, except share amounts	Millions, except share amounts	Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value		Millions, except share amounts	Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value		Restricted Shares	Unamortized Issue Date Fair Value
Non-vested,	Non-vested,													Non-vested,
Beginning of period	Beginning of period	38,280	$	23.2	43,105	$	23.0	43,105	$	15.2	43,395	$	16.7	Beginning of period	38,350	$	23.0	38,280	$	23.2	37,850	$	15.9	43,105	$	15.2
Issued	Issued	—	—		—	—		13,475	16.1		14,055	15.1		Issued	—	—		—	—		13,225	13.8		13,475	16.1
Vested	Vested	(219)	—		—	—		(17,936)	—		(14,345)	—		Vested	—	—		(219)	—		(12,725)	—		(17,936)	—
Forfeited	Forfeited	(211)	(.2)		—	—		(794)	(.8)		—	—		Forfeited	—	—		(211)	(.2)		—	—		(794)	(.8)
Expense recognized	Expense recognized	—	(3.6)		—	(3.6)		—	(11.1)		—	(12.4)		Expense recognized	—	(3.8)		—	(3.6)		—	(10.5)		—	(11.1)
End of period	End of period	37,850	$	19.4	43,105	$	19.4	37,850	$	19.4	43,105	$	19.4	End of period	38,350	$	19.2	37,850	$	19.4	38,350	$	19.2	37,850	$	19.4

During the nine months ended September 30, 2022, White Mountains issued 13,225 restricted shares that vest on January 1, 2025. During the nine months ended September 30, 2021, White Mountains issued 13,475 restricted shares that vest on January 1, 2024. ~~During the nine months ended September 30, 2020, White Mountains issued 14,055 restricted shares that vest on January 1, 2023.~~ The unamortized issue date fair value as of September 30, ~~2021~~2022 is expected to be recognized ratably over the remaining vesting periods.

4338

Note 13. Leases

White Mountains has entered into lease agreements, primarily for office space. These leases are classified as operating leases, with lease expense recognized on a straight-line basis over the term of the lease. Lease incentives, such as free rent or landlord reimbursements for leasehold improvements, are recognized at lease inception and amortized on a straight-line basis over the term of the lease. Lease expense and the amortization of leasehold improvements are recognized within general and administrative expenses. Lease payments related to options to extend or renew the lease term are excluded from the calculation of lease liabilities unless White Mountains is reasonably certain of exercising those options.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the right of use (“ROU”) ~~asset was $42.9~~lease assets were $24.5 million and ~~$37.6~~$28.1 million and lease liabilities were ~~$45.9~~$26.5 million and ~~$38.3~~$30.0 million.

The following table summarizes net lease expense recognized in White Mountains’s consolidated ~~statement~~statements of operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


Millions	Millions	Three Months Ended September 30,				Nine Months Ended September 30,				Millions	Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Lease Cost	2021		2020		2021		2020		Lease Cost	2022		2021		2022		2021
Lease cost	Lease cost	$	2.7	$	1.6	$	7.2	$	5.7	Lease cost	$	1.9	$	1.9	$	5.9	$	4.8
Less: sublease income	Less: sublease income	.1		.1		.3		.3		Less: sublease income	.2		.1		.5		.3
Net lease cost	Net lease cost	$	2.6	$	1.5	$	6.9	$	5.4	Net lease cost	$	1.7	$	1.8	$	5.4	$	4.5

The following table presents the contractual maturities of the lease liabilities associated with White Mountains’s operating lease agreements as of September 30, ~~2021:~~2022:


Millions	Millions	As of September 30, 2021		Millions	As of September 30, 2022
Remainder of 2021		$	2.0
2022		10.8
Remainder of 2022				Remainder of 2022	$	1.7
2023	2023	9.8		2023	8.1
2024	2024	8.5		2024	7.1
2025	2025	6.7		2025	4.9
2026				2026	2.6
Thereafter	Thereafter	16.4		Thereafter	5.0
Total undiscounted lease payments	Total undiscounted lease payments	54.2		Total undiscounted lease payments	29.4
Less: present value adjustment	Less: present value adjustment	8.3		Less: present value adjustment	2.9
Operating lease liability		$	45.9
Operating lease liabilities				Operating lease liabilities	$	26.5

The following tables present lease related assets and liabilities by reportable segment as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

As of September 30, 2021
Millions HG/BAM Ark NSM Kudu Other Operations Total
Weighted Average Incremental Borrowing Rate (1)
ROU lease asset $ 8.0 $ 7.0 $ 13.8 $ 6.7 $ 7.4 $ 42.9 5.0%
Lease liability $ 8.6 $ 7.0 $ 15.0 $ 7.1 $ 8.2 $ 45.9


	As of September 30, 2022
Millions	HG/BAM		Ark		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate (1)
ROU lease assets	$	6.2	$	6.6	$	5.9	$	5.8	$	24.5	4.1%
Lease liabilities	$	6.7	$	6.6	$	6.8	$	6.4	$	26.5

(1) The present value of the remaining lease payments was determined by discounting the lease payments using the incremental borrowing rate.

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


	As of December 31, 2021
Millions	HG/BAM		Ark		Kudu		Other Operations		Total		Weighted Average Incremental Borrowing Rate (1)
ROU lease assets	$	7.6	$	7.0	$	6.4	$	7.1	$	28.1	4.0%
Lease liabilities	$	8.1	$	7.0	$	7.1	$	7.8	$	30.0

(1) The present value of the remaining lease payments was determined by discounting the lease payments using the incremental borrowing rate.

Note 14. Non-controlling Interests

Non-controlling interests consist of the ownership interests of non-controlling shareholders in consolidated entities and are presented separately on the balance sheet.

The following table presents the balance of non-controlling interests included in White Mountains’s total equity and the ~~related percentage of each consolidated entity’s total equity owned~~ownership interests held by non-controlling shareholders as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
$ in Millions	$ in Millions	Non-controlling Percentage		Non-controlling Equity		Non-controlling Percentage		Non-controlling Equity		$ in Millions	Non-controlling Percentage (1)		Non-controlling Equity		Non-controlling Percentage (1)		Non-controlling Equity
Non-controlling interests, excluding BAM	Non-controlling interests, excluding BAM									Non-controlling interests, excluding BAM
HG Global	HG Global	3.1	%	$	10.1	3.1	%	$	13.5	HG Global	3.1	%	$	(.3)	3.1	%	$	8.9
Ark	Ark	28.0	%	216.1		—	%	—		Ark	28.0	%	217.1		28.0	%	230.7
NSM		3.5	%	16.5		3.4	%	17.0

Kudu	Kudu	.7	%	3.1		.7	%	2.3		Kudu	10.7	%	80.8		.7	%	12.4
NSM (2)										NSM (2)	—	%	—		3.5	%	16.7

Other	Other	various		12.1		various		2.4		Other	various		20.8		various		11.9
Total, excluding BAM	Total, excluding BAM			257.9				35.2		Total, excluding BAM			318.4				280.6
BAM	BAM	100.0	%	(125.3)		100.0	%	(123.3)		BAM	100.0	%	(160.1)		100.0	%	(124.0)

Total non-controlling interests	Total non-controlling interests			$	132.6			$	(88.1)	Total non-controlling interests			$	158.3			$	156.6

(1) The non-controlling percentage represents the basic ownership interests held by non-controlling shareholders with the exception of HG Global, for which the non-controlling percentage represents the preferred share ownership held by non-controlling shareholders.

(2) As a result of the NSM Transaction, NSM has been classified as discontinued operations through the closing of the transaction. See Note 19 — “Held for Sale and Discontinued Operations.”

Note 15. Segment Information

As of September 30, ~~2021,~~2022, White Mountains conducted its operations through 5four segments: (1) HG Global/BAM, (2) Ark, (3) ~~NSM, (4)~~ Kudu, and ~~(5)~~(4) Other Operations. ~~A discussion of White Mountains’s consolidated investment operations is included after the discussion of operations by segment.~~

As a result of the ~~Ark~~NSM Transaction, ~~White Mountains began consolidating Ark~~the results of operations for NSM, previously reported as a segment, have been classified as discontinued operations in ~~its financial~~the statements as of ~~January 1, 2021.~~operations and comprehensive income through the closing of the transaction. Prior period amounts have been reclassified to conform to the current period’s presentation. See Note 19 — “Held for Sale and Discontinued Operations.”

White Mountains has made its segment determination based on consideration of the following criteria: (i) the nature of the business activities of each of the Company’s subsidiaries and affiliates; (ii) the manner in which the Company’s subsidiaries and affiliates are organized; (iii) the existence of primary managers responsible for specific subsidiaries and affiliates; and (iv) the organization of information provided to the chief operating decision makers and the Board of Directors. Significant intercompany transactions among White Mountains’s segments have been eliminated herein.

The following tables present the financial information for White Mountains’s segments:


Millions	Millions	HG Global/ BAM		Ark		NSM		Kudu		Other Operations		Total		Millions	HG Global/ BAM		Ark		Kudu		Other Operations		Total
Three Months Ended September 30, 2021
Three Months Ended September 30, 2022														Three Months Ended September 30, 2022
Earned insurance premiums	Earned insurance premiums	$	6.7	$	213.4	$	—	$	—	$	—	$	220.1	Earned insurance premiums	$	7.1	$	346.1	$	—	$	—	$	353.2
Net investment income	Net investment income	4.4		.6		—		9.5		5.0		19.5		Net investment income	5.7		4.9		14.8		8.5		33.9
Net realized and unrealized investment (losses) gains		(4.0)		.3		—		18.9		15.3		30.5
Net realized and unrealized investment losses from investment in MediaAlpha		—		—		—		—		(396.8)		(396.8)
Net realized and unrealized investment gains (losses)														Net realized and unrealized investment gains (losses)	(38.8)		(14.4)		41.1		(17.3)		(29.4)
Net realized and unrealized investment gains (losses) from investment in MediaAlpha														Net realized and unrealized investment gains (losses) from investment in MediaAlpha	—		—		—		(18.6)		(18.6)
Commission revenues	Commission revenues	—		—		67.0		—		2.4		69.4		Commission revenues	—		—		—		3.2		3.2

Other revenue		.3		3.4		15.3		.1		28.1		47.2
Other revenues														Other revenues	1.3		6.6		—		33.0		40.9
Total revenues	Total revenues	7.4		217.7		82.3		28.5		(346.0)		(10.1)		Total revenues	(24.7)		343.2		55.9		8.8		383.2

Loss and loss adjustment expenses	Loss and loss adjustment expenses	—		129.2		—		—		—		129.2		Loss and loss adjustment expenses	—		213.7		—		—		213.7
Insurance acquisition expenses		3.0		53.7		—		—		—		56.7
Insurance and reinsurance acquisition expenses														Insurance and reinsurance acquisition expenses	1.7		74.8		—		—		76.5

Cost of sales	Cost of sales	—		—		—		—		24.0		24.0		Cost of sales	—		—		—		25.0		25.0
General and administrative expenses	General and administrative expenses	12.4		21.8		48.8		3.3		14.5		100.8		General and administrative expenses	15.8		26.9		4.5		39.9		87.1
Broker commission expense		—		—		20.4		—		—		20.4
Change in fair value of contingent consideration liabilities		—		—		.6		—		—		.6

Amortization of other intangible assets	Amortization of other intangible assets	—		—		8.2		—		2.0		10.2		Amortization of other intangible assets	—		—		—		1.4		1.4

Interest expense	Interest expense	—		2.1		5.9		1.9		.4		10.3		Interest expense	2.0		3.7		4.2		.6		10.5
Total expenses	Total expenses	15.4		206.8		83.9		5.2		40.9		352.2		Total expenses	19.5		319.1		8.7		66.9		414.2
Pre-tax (loss) income		$	(8.0)	$	10.9	$	(1.6)	$	23.3	$	(386.9)	$	(362.3)
Pre-tax income (loss) from continuing operations														Pre-tax income (loss) from continuing operations	$	(44.2)	$	24.1	$	47.2	$	(58.1)	$	(31.0)


Millions	HG Global/ BAM		Ark		Kudu		Other Operations		Total
Three Months Ended September 30, 2021
Earned insurance premiums	$	6.7	$	213.4	$	—	$	—	$	220.1
Net investment income	4.4		.6		9.5		5.0		19.5
Net realized and unrealized investment gains (losses)	(4.0)		.3		18.9		15.3		30.5
Net realized and unrealized investment gains (losses) from investment in MediaAlpha	—		—		—		(396.8)		(396.8)
Commission revenues	—		—		—		2.4		2.4

Other revenues	.3		3.4		.1		28.1		31.9
Total revenues	7.4		217.7		28.5		(346.0)		(92.4)
Losses and loss adjustment expenses	—		129.2		—		—		129.2
Insurance and reinsurance acquisition expenses	3.0		53.7		—		—		56.7

Cost of sales	—		—		—		24.0		24.0
General and administrative expenses	12.4		21.8		3.3		14.4		51.9


Amortization of other intangible assets	—		—		—		2.0		2.0

Interest expense	—		2.1		1.9		.4		4.4
Total expenses	15.4		206.8		5.2		40.8		268.2
Pre-tax income (loss) from continuing operations	$	(8.0)	$	10.9	$	23.3	$	(386.8)	$	(360.6)

4641


Millions	Millions	HG Global/ BAM		NSM		Kudu		Other Operations		Total		Millions	HG Global/ BAM		Ark		Kudu		Other Operations		Total
Three Months Ended September 30, 2020
Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2022
Earned insurance premiums	Earned insurance premiums	$	6.2	$	—	$	—	$	—	$	6.2	Earned insurance premiums	$	26.0	$	757.8	$	—	$	—	$	783.8
Net investment income	Net investment income	4.7		—		6.4		60.1		71.2		Net investment income	15.1		9.7		41.2		13.6		79.6
Net realized and unrealized investment gains		3.2		—		9.8		43.6		56.6
Net unrealized investment gains from investment in MediaAlpha		—		—		—		250.0		250.0
Net realized and unrealized investment gains (losses)												Net realized and unrealized investment gains (losses)	(114.0)		(76.5)		45.8		2.8		(141.9)
Net realized and unrealized investment gains (losses) from investment in MediaAlpha												Net realized and unrealized investment gains (losses) from investment in MediaAlpha	—		—		—		(113.3)		(113.3)
Commission revenues	Commission revenues	—		58.2		—		2.1		60.3		Commission revenues	—		—		—		8.7		8.7

Other revenue		.4		12.5		.1		2.2		15.2
Other revenues												Other revenues	3.7		10.1		—		89.6		103.4
Total revenues	Total revenues	14.5		70.7		16.3		358.0		459.5		Total revenues	(69.2)		701.1		87.0		1.4		720.3

Insurance acquisition expenses		1.6		—		—		—		1.6
Loss and loss adjustment expenses												Loss and loss adjustment expenses	—		456.2		—		—		456.2
Insurance and reinsurance acquisition expenses												Insurance and reinsurance acquisition expenses	9.5		174.9		—		—		184.4

Cost of sales	Cost of sales	—		—		—		2.3		2.3		Cost of sales	—		—		—		68.8		68.8
General and administrative expenses	General and administrative expenses	14.0		42.9		2.2		44.3		103.4		General and administrative expenses	49.5		79.8		10.2		118.9		258.4
Broker commission expense		—		17.1		—		—		17.1
Change in fair value of contingent consideration liabilities		—		.7		—		—		.7

Amortization of other intangible assets	Amortization of other intangible assets	—		5.1		.1		.2		5.4		Amortization of other intangible assets	—		—		.2		3.2		3.4

Interest expense	Interest expense	—		6.1		1.4		.3		7.8		Interest expense	5.4		10.6		10.3		1.2		27.5
Total expenses	Total expenses	15.6		71.9		3.7		47.1		138.3		Total expenses	64.4		721.5		20.7		192.1		998.7
Pre-tax (loss) income		$	(1.1)	$	(1.2)	$	12.6	$	310.9	$	321.2
Pre-tax income (loss) from continuing operations												Pre-tax income (loss) from continuing operations	$	(133.6)	$	(20.4)	$	66.3	$	(190.7)	$	(278.4)

Millions HG Global/ BAM Ark NSM
Kudu
Other Operations Total
Nine Months Ended September 30, 2021
Earned insurance premiums $ 19.6 $ 435.8 $ — $ — $ — $ 455.4
Net investment income 13.2 1.8 — 26.1 16.1 57.2
Net realized and unrealized investment
   (losses) gains (15.6) 10.3 — 62.5 34.0 91.2
Net realized and unrealized investment
   losses from investment in MediaAlpha — — — — (325.5) (325.5)
Commission revenues — — 194.6 — 7.0 201.6
Other revenue .9 9.4 46.8 .2 57.6 114.9
     Total revenues 18.1 457.3 241.4 88.8 (210.8) 594.8
Loss and loss adjustment expenses — 247.8 — — — 247.8
Insurance acquisition expenses 6.5 124.4 — — — 130.9
Cost of sales — — — — 45.9 45.9
General and administrative expenses 42.7 84.4 142.1 9.0 79.7 357.9
Broker commission expense — — 60.9 — — 60.9
Change in fair value of contingent
    consideration liabilities — — .8 — — .8
Amortization of other intangible assets — — 25.0 .2 2.9 28.1
Loss on assets held for sale — — 28.7 — — 28.7
Interest expense — 4.5 17.7 9.2 1.1 32.5
     Total expenses 49.2 461.1 275.2 18.4 129.6 933.5
Pre-tax (loss) income $ (31.1) $ (3.8) $ (33.8) $ 70.4 $ (340.4) $ (338.7)


Millions	HG Global/ BAM		Ark		Kudu		Other Operations		Total
Nine Months Ended September 30, 2021
Earned insurance premiums	$	19.6	$	435.8	$	—	$	—	$	455.4
Net investment income	13.2		1.8		26.1		16.1		57.2
Net realized and unrealized investment gains (losses)	(15.6)		10.3		62.5		34.0		91.2
Net realized and unrealized investment gains (losses) from investment in MediaAlpha	—		—		—		(325.5)		(325.5)
Commission revenues	—		—		—		7.0		7.0

Other revenues	.9		9.4		.2		57.6		68.1
Total revenues	18.1		457.3		88.8		(210.8)		353.4
Losses and loss adjustment expenses	—		247.8		—		—		247.8
Insurance and reinsurance acquisition expenses	6.5		124.4		—		—		130.9

Cost of sales	—		—		—		45.9		45.9
General and administrative expenses	42.7		84.4		9.0		79.4		215.5


Amortization of other intangible assets	—		—		.2		2.9		3.1

Interest expense	—		4.5		9.2		1.1		14.8
Total expenses	49.2		461.1		18.4		129.3		658.0
Pre-tax income (loss) from continuing operations	$	(31.1)	$	(3.8)	$	70.4	$	(340.1)	$	(304.6)

4742

Millions HG Global/ BAM NSM Kudu Other Operations Total
Nine Months Ended September 30, 2020
Earned insurance premiums $ 17.2 $ — $ — $ — $ 17.2
Net investment income 15.1 — 19.3 79.3 113.7
Net realized and unrealized investment gains
   (losses) 23.7 — 1.5 (17.4) 7.8
Net unrealized investment gains from
investment in MediaAlpha
— — — 295.0 295.0
Commission revenues — 174.2 — 6.1 180.3
Other revenue 2.1 37.6 .2 6.0 45.9
     Total revenues 58.1 211.8 21.0 369.0 659.9
Insurance acquisition expenses 5.4 — — — 5.4
Cost of sales — — — 6.5 6.5
General and administrative expenses 41.4 131.0 7.5 87.1 267.0
Broker commission expense — 56.4 — — 56.4
Change in fair value of contingent
     consideration liabilities — (1.6) — — (1.6)
Amortization of other intangible assets — 16.2 .3 .6 17.1
Interest expense — 16.1 4.3 .8 21.2
     Total expenses 46.8 218.1 12.1 95.0 372.0
Pre-tax income (loss) $ 11.3 $ (6.3) $ 8.9 $ 274.0 $ 287.9

~~In compliance with ASC 606,~~ ~~Revenues from Contracts with Customers,~~ ~~the following tables present White Mountains’s total revenues by revenue source for the three and nine months ended September 30, 2021 and 2020:~~

Millions HG Global/BAM Ark NSM Kudu Other
Operations Total
Three Months Ended September 30, 2021
Commission and other revenue
Specialty Transportation (1)
$ — $ — $ 25.7 $ — $ — $ 25.7
Real Estate — — 6.2 — — 6.2
Social Services — — 10.2 — — 10.2
Pet — — 19.9 — — 19.9
United Kingdom — — 13.0 — — 13.0
Other — — 7.3 — 2.4 9.7
Total commission and other revenue — — 82.3 — 2.4 84.7
Product and service revenues — — — — 28.2 28.2
Revenues from contracts with customers — — 82.3 — 30.6 112.9
Other (2)
7.4 217.7 — 28.5 (376.6) (123.0)
Total revenues $ 7.4 $ 217.7 $ 82.3 $ 28.5 $ (346.0) $ (10.1)

~~(1)~~ ~~Includes the results of J.C. Taylor from August 6, 2021, the date of the J.C. Taylor transaction.~~

~~(2)~~ ~~Other consists of premiums, investment income, investment gains and losses and other revenues outside the scope of ASC 606,~~ ~~Revenues from Contracts with Customers.~~

Millions HG Global/BAM NSM Kudu Other
Operations Total
Three Months Ended September 30, 2020
Commission and other revenue
Specialty Transportation $ — $ 21.9 $ — $ — $ 21.9
Real Estate — 6.0 — — 6.0
Social Services — 8.6 — — 8.6
Pet — 14.7 — — 14.7
United Kingdom — 13.9 — — 13.9
Other — 5.6 — 2.1 7.7
Total commission and other revenue — 70.7 — 2.1 72.8
Product revenues — — — 2.0 2.0
Revenues from contracts with customers — 70.7 — 4.1 74.8
Other (1)
14.5 — 16.3 353.9 384.7
Total revenues $ 14.5 $ 70.7 $ 16.3 $ 358.0 $ 459.5

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

Millions HG Global/BAM Ark NSM Kudu Other
Operations Total
Nine Months Ended September 30, 2021
Commission and other revenue
Specialty Transportation (1)
$ — $ — $ 73.0 $ — $ — $ 73.0
Real Estate — — 25.2 — — 25.2
Social Services — — 26.2 — — 26.2
Pet — — 55.6 — — 55.6
United Kingdom — — 39.9 — — 39.9
Other — — 21.5 — 7.0 28.5
Total commission and other revenue — — 241.4 — 7.0 248.4
Product and service revenues — — — — 57.5 57.5
Revenues from contracts with customers — — 241.4 — 64.5 305.9
Other (2)
18.1 457.3 — 88.8 (275.3) 288.9
Total revenues $ 18.1 $ 457.3 $ 241.4 $ 88.8 $ (210.8) $ 594.8

~~(1)~~ ~~Includes the results of J.C. Taylor from August 6, 2021, the date of the J.C. Taylor transaction.~~

~~(2)~~ ~~Other consists of premiums, investment income, investment gains and losses and other revenues outside the scope of ASC 606,~~ ~~Revenues from Contracts with Customers.~~

Millions HG Global/BAM NSM Kudu Other
Operations Total
Nine Months Ended September 30, 2020
Commission and other revenue
Specialty Transportation $ — $ 66.1 $ — $ — $ 66.1
Real Estate — 32.7 — — 32.7
Social Services — 22.2 — — 22.2
Pet — 39.8 — — 39.8
United Kingdom (2)
— 36.3 — — 36.3
Other — 14.7 — 6.1 20.8
Total commission and other revenue — 211.8 — 6.1 217.9
Product revenues — — — 6.4 6.4
Revenues from contracts with customers — 211.8 — 12.5 224.3
Other (1)
58.1 — 21.0 356.5 435.6
Total revenues $ 58.1 $ 211.8 $ 21.0 $ 369.0 $ 659.9

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

~~(2)~~ ~~Includes the results of Kingsbridge from April 7, 2020, the date of the Kingsbridge transaction.~~

Note 16. Equity-Method Eligible Investments

White Mountains’s equity method eligible investments include White Mountains’s investment in MediaAlpha, certain other unconsolidated entities, including Kudu’s Participation Contracts, private equity funds and hedge funds in which White Mountains has the ability to exert significant influence over the investee’s operating and financial policies.

The following table presents the ~~basic~~ ownership interests and carrying values of White Mountains’s equity method eligible investments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
Millions	Millions	Basic Ownership Interest		Carrying Value		Basic Ownership Interest		Carrying Value		Millions	Ownership Interest		Carrying Value		Ownership Interest		Carrying Value
Kudu Participation Contracts(1)	Kudu Participation Contracts(1)	3.2 - 32.7%		604.7		3.2 - 35.0%		400.6		Kudu Participation Contracts(1)	4.1 - 33.0%		$	813.2	3.2 - 32.0%		$	669.5
Investment in MediaAlpha	Investment in MediaAlpha	28.4	%	$	316.4	35.0	%	$	802.2	Investment in MediaAlpha	27.4	%	148.2		28.0	%	261.6
PassportCard/DavidShield	PassportCard/DavidShield	53.8	%	105.0		53.8	%	95.0		PassportCard/DavidShield	53.8	%	132.0		53.8	%	120.0
Elementum Holdings, L.P.	Elementum Holdings, L.P.	29.7	%	56.7		28.9	%	55.1		Elementum Holdings, L.P.	29.7	%	45.0		29.7	%	45.0
Other equity method eligible investments, at fair value	Other equity method eligible investments, at fair value	Under 50.0%		95.6		Under 50.0%		132.2		Other equity method eligible investments, at fair value	Under 50.0%		102.7		Under 50.0%		109.3
Other equity method eligible investments, at fair value	Other equity method eligible investments, at fair value	50.0% and over		17.2		50.0% and over		15.2		Other equity method eligible investments, at fair value	50.0% and over		27.7		50.0% and over		17.8

(1) Ownership interest generally references basic ownership interest with the exception of Kudu’s Participation Contracts, which are non-controlling equity interests in the form of revenue and earnings participation contracts.

For the three and nine months ended September 30, 2022, White Mountains received dividend and income distributions from equity method eligible investments of $16.1 million and $42.9 million, which were recorded within net investment income in the consolidated statements of operations. For the three and nine months ended September 30, 2021, White Mountains received dividend and income distributions from equity method eligible investments of $13.0 million, and $37.7 million, which were recorded within net investment income in the consolidated statement of operations. For the three and nine months ended September 30, 2020, White Mountains received dividend and income distributions from equity method eligible investments of $63.9 million and $85.3 million, which were recorded within net investment income in the consolidated statementstatements of operations.

Subsequent to the MediaAlpha IPO, White Mountains’s investment in MediaAlpha is accounted for at fair value based on the publicly traded share price of MediaAlpha’s common stock, and White Mountains presents its investment in MediaAlpha as a separate line item on the balance sheet. See Note 2 — “Significant ~~Transactions”.~~Transactions.” For the nine months ended September 30, 2021, ~~and 2020,~~ MediaAlpha was considered a significant subsidiary.

The following tables present summarized financial information for MediaAlpha as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 and for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~
2021:


Millions	Millions	September 30, 2021		December 31, 2020		Millions	September 30, 2022		December 31, 2021
Balance sheet data:	Balance sheet data:					Balance sheet data:
Total assets	Total assets	$	245.5	$	210.3	Total assets	$	265.2	$	289.8
Total liabilities	Total liabilities	$	318.4	$	315.5	Total liabilities	$	333.6	$	351.4


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2022		2021		2022		2021
Income statement data:
Total revenues	$	89.0	$	152.7	$	335.1	$	483.7
Total expenses	$	110.2	$	157.0	$	379.2	$	488.2
Net income (loss)	$	(21.2)	$	(4.3)	$	(44.1)	$	(4.5)

Three Months Ended September 30, Nine Months Ended September 30,
Millions 2021 2020 2021 2020
Income statement data:
Total revenues $ 152.7 $ 151.5 $ 483.7 $ 394.6
Total expenses $ 157.0 $ 146.7 $ 488.2 $ 370.8
Net (loss) income $ (4.3) $ 4.8 $ (4.5) $ 23.8

Note 17. Fair Value of Financial Instruments

White Mountains records its financial instruments at fair value with the exception of debt obligations, which are recorded as debt at face value less unamortized original issue discount. See Note 7 — ~~“Debt”.~~“Debt.”

The following ~~table~~tables presents the fair value and carrying value of these financial instruments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
Millions	Millions	Fair Value		Carrying Value		Fair Value		Carrying Value		Millions	Fair Value		Carrying Value		Fair Value		Carrying Value
HG Global Senior Notes										HG Global Senior Notes	$	146.1	$	146.4	$	—	$	—
Ark 2007 Subordinated Notes	Ark 2007 Subordinated Notes	$	42.0	$	43.9	$	—	$	—	Ark 2007 Subordinated Notes	$	26.2	$	30.0	$	27.6	$	30.0
Ark 2021 Subordinated Notes	Ark 2021 Subordinated Notes	$	163.1	$	156.8	$	—	$	—	Ark 2021 Subordinated Notes	$	149.4	$	150.0	$	162.8	$	155.9
NSM Bank Facility		$	300.6	$	293.7	$	279.3	$	271.3
Other NSM debt		$	1.3	$	1.3	$	1.3	$	1.3
Kudu Credit Facility	Kudu Credit Facility	$	218.2	$	195.6	$	—	$	—	Kudu Credit Facility	$	265.5	$	253.5	$	246.8	$	218.2
Kudu Bank Facility		$	—	$	—	$	89.3	$	86.3

Other Operations debt	Other Operations debt	$	20.5	$	19.1	$	18.8	$	17.5	Other Operations debt	$	36.8	$	35.6	$	17.7	$	16.8

The fair value estimates for the HG Global Senior Notes, Ark 2007 Subordinated Notes, ~~the~~ Ark 2021 Subordinated Notes, ~~NSM Bank Facility, the Other NSM debt, the~~ Kudu Credit ~~Facility, the Kudu Bank~~ Facility and Other Operations debt have been determined based on a discounted cash flow approach and are considered to be Level 3 measurements.

For the fair value level measurements associated with White Mountains’s investment securities. See Note 3 — “Investment Securities.” For the fair value level measurements associated with White Mountains’s derivative instruments. See Note 9 — “Derivatives.”

Note 18. Commitments and Contingencies

Legal Contingencies

White Mountains, and the insurance industry in general, is routinely subject to claims related litigation and arbitration in the normal course of ~~business.~~ business, as well as litigation and arbitration that do not arise from, nor are directly related to, claims activity. White Mountains’s estimates of the costs of settling matters routinely encountered in claims activity are reflected in the reserves for unpaid loss and LAE. See Note 5 — “Losses and Loss Adjustment Expense Reserves.”

White Mountains considers the requirements of ASC 450 when evaluating its exposure to non-claims related litigation and arbitration. ASC 450 requires that accruals be established for litigation and arbitration if it is probable that a loss has been incurred and it can be reasonably estimated. ASC 450 also requires that litigation and arbitration be disclosed if it is probable that a loss has been incurred or if there is a reasonable possibility that a loss may have been incurred. White Mountains does not have any current non-claims related litigation that may have a material adverse effect on White Mountains’s financial condition, results of operations or cash flows.

~~The following description presents significant legal contingencies, ongoing non-claims related litigation or arbitration as of September 30, 2021:~~

~~Esurance~~

On October 7, 2011, the Company completed the sale of its Esurance Holdings, Inc. and its subsidiaries and Answer Financial Inc. and its subsidiaries (collectively, “Esurance”) to The Allstate Corporation (“Allstate”) pursuant to a Stock Purchase Agreement dated as of May 17, 2011. Subject to specified thresholds and limits, the Company remains contingently liable to Allstate for specified matters related to the pre-closing period, including (a) losses of Esurance arising from extra-contractual claims and claims in excess of policy limits, (b) certain corporate reorganizations effected to remove entities from Esurance that were not being sold in the transaction, and (c) certain tax matters, including certain net operating losses being less than stated levels. No claims relating to these matters were outstanding as of September 30, 2021.

~~Sirius Group Tax Contingency~~

In the first quarter of 2021, White Mountains recorded a $17.6 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 Sirius Group should prevail in its appeal (and that the interest deductions should not be disallowed). In June 2021, the Swedish Administrative Court of Appeal ruled in Sirius Group’s favor.

Note 19. Held for Sale and Discontinued Operations

NSM

On August 1, 2022, White Mountains closed the NSM Transaction. See Note 2 — “Significant Transactions.” As a result of the NSM Transaction, the assets and liabilities of NSM Group have been presented in the balance sheet as held for sale for periods prior to the closing of the transaction, and the results of operations for NSM Group have been classified as discontinued operations in the statements of operations and comprehensive income through the closing of the transaction. Prior period amounts have been reclassified to conform to the current period’s presentation.

Sirius Group

On April 18, 2016, White Mountains completed the sale of Sirius International Insurance Group, Ltd. (“Sirius Group”) to CM International Pte. Ltd. and CM Bermuda Limited (collectively “CMI”). In connection with the sale, White Mountains indemnified Sirius Group against the loss of certain interest deductions claimed by Sirius Group related to periods prior to the sale of Sirius Group to CMI that had been disputed by the Swedish Tax Agency. In late October 2018, the Swedish Administrative Court ruled against Sirius Group on its appeal of the Swedish Tax Agency’s denial of these interest deductions. As a result, in 2018 White Mountains recorded a loss of $17.3 million within net gain (loss) on sale of discontinued operations reflecting the value of these interest deductions.

As of December 31, 2020, White ~~Mountains recorded a~~Mountains’s liability ~~of $18.7 million,~~ related to the tax indemnification provided in connection with the sale of Sirius Group in ~~2016.~~2016 was $18.7 million. In April 2021, the Swedish Tax Agency informed the Swedish Administrative Court of Appeal that Sirius Group should prevail in its appeal and that the interest deductions should not be disallowed. In June 2021, the Swedish Administrative Court of Appeal ruled in Sirius Group’s favor. For the nine months ended September 30, 2021, White Mountains recorded a gain of $17.6 million in discontinued operations to reverse the liability accrued as of December 31, 2020 and $1.1 million gain related to foreign currency translation. ~~See~~ ~~Note 18 — “Commitments and Contingencies”~~.

~~NSM~~Summary of Reclassified Balances and Related Items

~~On April 12, 2021, NSM completed~~Net Assets Held for Sale

The following summarizes the ~~sale of the Fresh Insurance motor business for net proceeds of £1.1 million ($1.5 million based upon the foreign exchange spot rate as of the transaction date). The~~ assets and liabilities ~~included in the transaction, were measured at their estimated fair values, net of disposal and~~associated with NSM Group classified as held for ~~sale at March~~sale. As of December 31, ~~2021. However,~~2021, the ~~transaction did not meet the criteria to be~~amounts presented exclude $16.1 million of insurance licenses, investments and cash classified as ~~discontinued operations. In the first quarter of 2021, NSM recorded a loss of $28.7 million~~assets held for sale related to one of the ~~sale.~~Other Operating Businesses.


Millions	December 31, 2021
Assets held for sale
Short-term investments, at fair value	$	7.8
Cash (restricted $89.2)	111.6
Premiums and commissions receivable	85.0
Goodwill and other intangible assets	725.4
Other assets	59.2

Total assets held for sale	$	989.0
Liabilities held for sale
Debt	$	272.1
Premiums payable	135.9
Contingent consideration	6.8
Other liabilities	80.5
Total liabilities held for sale	495.3
Net assets held for sale	$	493.7

5245

Net Income (Loss) from Discontinued Operations

The following summarizes the results of operations, including related income taxes associated with the businesses classified as discontinued operations for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
Millions	2022 (1)		2021		2022 (1)		2021
Revenues
Commission revenues	$	26.6	$	67.0	$	176.9	$	194.6
Other revenues	7.0		15.3		48.1		46.8
Total revenues - NSM Group	33.6		82.3		225.0		241.4
Expenses
General and administrative expenses	15.7		48.9		126.8		142.4
Broker commission expenses	8.2		20.4		52.9		60.9
Change in fair value of contingent consideration	—		.6		.1		.8
Amortization of other intangible assets	—		8.2		9.1		25.0
Loss on assets held for sale	—		—		—		28.7
Interest expense	1.6		5.9		12.1		17.7
Total expenses - NSM Group	25.5		84.0		201.0		275.5
Pre-tax income (loss) from discontinued operations - NSM Group	8.1		(1.7)		24.0		(34.1)
Income tax (expense) benefit	(1.8)		7.0		(7.6)		10.3
Net income (loss) from discontinued operations, net of tax - NSM Group	6.3		5.3		16.4		(23.8)
Net gain (loss) from sale of discontinued operations, net of tax - NSM Group	886.8		—		886.8		—
Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group	—		—		—		18.7
Total income (loss) from discontinued operations, net of tax	893.1		5.3		903.2		(5.1)
Net (income) loss from discontinued operations attributable to non-controlling interests	(.2)		—		(.8)		1.1
Total income (loss) from discontinued operations attributable to White Mountains’s common shareholders	892.9		5.3		902.4		(4.0)
Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	.7		(1.7)		(5.2)		.9
Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group	2.9		—		2.9		—
Comprehensive income (loss) from discontinued operations	896.5		3.6		900.1		(3.1)
Other comprehensive income (loss) from discontinued operations attributable to non-controlling interests	(.1)		—		.2		(.1)
Comprehensive income (loss) from discontinued operations attributable to White Mountains’s common shareholders	$	896.4	$	3.6	$	900.3	$	(3.2)

(1) As a result of the NSM Transaction, the results of operations for NSM Group are presented for the periods from July 1, 2022 to August 1, 2022 and January 1, 2022 to August 1, 2022.

Net Change in Cash from Discontinued Operations

The following summarizes the net change in cash associated with the businesses classified as discontinued operations for the nine months ended September 30, 2022 and 2021:


	Nine Months Ended September 30,
Millions	2022		2021
Net cash provided from (used for) operations	$	38.7	$	40.3
Net cash provided from (used for) investing activities	7.1		(54.6)
Net cash used from (used for) financing activities	(17.5)		13.8
Effect of exchange rate changes on cash	4.0		.6
Net change in cash during the period	32.3		.1
Cash balances at beginning of period (includes restricted cash of $89.2 and $78.4)	111.6		126.6
Cash sold as part of the sale of NSM Group (includes restricted cash of $105.1 and $0.0)	(143.9)		—
Cash balances at end of period (includes restricted cash of $0.0 and $92.2)	—		126.7
Supplemental cash flows information:
Interest paid	$	(12.0)	$	(16.6)
Net income tax payments	$	—	$	—

Earnings Per Share from Discontinued Operations

White Mountains calculates earnings per share using the two-class method, which allocates earnings between common and unvested restricted common shares. Both classes of shares participate equally in earnings on a per share basis. Basic earnings per share amounts are based on the weighted average number of common shares outstanding adjusted for unvested restricted common shares. Diluted earnings per share amounts are also impacted by the net effect of potentially dilutive common shares outstanding.

The following table presents the Company’s computation of earnings per share for discontinued operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Basic and diluted earnings per share numerators (in millions):
Net income (loss) attributable to White Mountains’s common shareholders $ (371.4) $ 232.9 $ (308.2) $ 219.5
Less: total income (loss) from continuing operations, net of tax (371.4) 233.6 (326.9) 220.3
Net (loss) gain from discontinued operations attributable to White Mountains’s common shareholders $ — $ (.7) $ 18.7 $ (.8)
Allocation of earnings to participating restricted common shares (1)
— — (.2) —
Basic and diluted earnings(losses) per share numerators (2)
$ — $ (.7) $ 18.5 $ (.8)
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period 3,090.3 3,101.8 3,099.4 3,129.0
Average unvested restricted common shares (3)
(37.8) (43.1) (36.0) (40.0)
Basic earnings per share denominator 3,052.5 3,058.7 3,063.4 3,089.0
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period 3,090.3 3,101.8 3,099.4 3,129.0
Average unvested restricted common shares (3)
(37.8) (43.1) (36.0) (40.0)
Diluted earnings per share denominator 3,052.5 3,058.7 3,063.4 3,089.0
Basic and diluted earnings (losses) per share (in dollars) - discontinued operations: $ — $ (.23) $ 6.03 $ (.26)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Basic and diluted earnings per share numerators (in millions):
Net income (loss) attributable to White Mountains’s common shareholders	$	888.2	$	(371.4)	$	752.4	$	(308.2)
Less: net income (loss) from continuing operations	$	(23.6)	$	(389.2)	$	(252.3)	$	(356.8)
Less: net (income) loss from continuing operations attributable to non-controlling interests	$	18.8	$	12.5	$	102.2	$	52.6
Total gain (loss) from discontinued operations attributable to White Mountains’s common shareholders (1)	$	893.0	$	5.3	$	902.5	$	(4.0)
Allocation of earnings to participating restricted common shares (2)	(11.8)		(.1)		(10.8)		—
Basic and diluted earnings per share numerators (3)	$	881.2	$	5.2	$	891.7	$	(4.0)
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	2,893.8		3,090.3		2,959.3		3,099.4
Average unvested restricted common shares (4)	(38.3)		(37.8)		(35.5)		(36.0)
Basic earnings per share denominator	2,855.5		3,052.5		2,923.8		3,063.4
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period	2,893.8		3,090.3		2,959.3		3,099.4
Average unvested restricted common shares (4)	(38.3)		(37.8)		(35.5)		(36.0)

Diluted earnings per share denominator	2,855.5		3,052.5		2,923.8		3,063.4

Basic and diluted earnings (losses) per share (in dollars) - discontinued operations:	$	308.59	$	1.72	$	304.97	$	(1.29)

(1)Includes net income (loss) from discontinued operations, net of tax - NSM Group, net gain (loss) from sale of discontinued operations, net of tax - NSM Group, net gain (loss) from sale of discontinued operations, net of tax - Sirius Group and net (income) loss from discontinued operations attributable to non-controlling interests.

(2) Restricted shares issued by White Mountains ~~contain dividend participation features,~~receive dividends and are therefore ~~are~~ considered participating securities.

~~(2)~~(3) Net earnings attributable to White Mountains’s common shareholders, net of restricted share amounts, is equal to undistributed earnings for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

~~(3)~~(4) Restricted ~~common~~ shares outstanding vest upon a stated date. See Note 12 — “Employee Share-Based Incentive Compensation ~~Plans”~~.Plans.”

5347

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

The following discussion contains “forward-looking ~~statements”.~~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 9176 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.

The following discussion also includes ~~twelve~~nine non-GAAP financial measures: (i) adjusted book value per share, (ii) ~~BAM’s gross written premiums and member surplus contributions (“MSC”) from new business, (iii)~~ Ark’s adjusted loss and ~~loss adjustment expense~~LAE ratio, ~~(iv)~~(iii) Ark’s adjusted insurance acquisition expense ratio, ~~(v)~~(iv) Ark’s adjusted other underwriting expense ratio, ~~(vi)~~(v) Ark’s adjusted combined ratio ~~(vii) NSM’s~~(vi) Kudu’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), ~~(viii) NSM’s adjusted EBITDA, (ix) Kudu’s EBITDA, (x)~~(vii) Kudu’s adjusted EBITDA, ~~(xi)~~(viii) total consolidated portfolio returns excluding MediaAlpha, and ~~(xii)~~(ix) adjusted capital, that have been reconciled from their most comparable GAAP financial measures on page ~~85.~~74. 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, ~~2021~~2022 AND ~~2020~~2021

Overview

White Mountains reported book value per share of $1,439 and adjusted book value per share of $1,471 as of September 30, 2022. Book value per share and adjusted book value per share both increased 28% in the third quarter of 2022. For the first nine months of 2022, book value increased 23% and adjusted book value increased 24%, including dividends. The increases in book value per share and adjusted book value per share were driven primarily by the net gain from the sale of NSM of approximately $300 per share (based on 2.9 million shares outstanding at August 1, 2022). In addition, the growth in White Mountains’s book value per share and adjusted book value per share reflect good operating results at its businesses, partially offset by net realized and unrealized losses in its fixed income portfolio and investment in MediaAlpha. White Mountains reported book value per share of $1,162 and adjusted book value per share of $1,176 as of September 30, 2021. Book value per share and adjusted book value per share both decreased 9% in the third quarter of 2021. Book value per share decreased 8% and adjusted book value per share decreased 7% in the first nine months of 2021, including dividends. Book value per share and adjusted book value per share both increased 8% in the third quarter of 2020. Book value per share increased 7% and adjusted book value per share increased 8% in the first nine months of 2020, including dividends.

Results in the third quarter and first nine months of 2021 were driven primarily by $397 million and $326 million of net realized and unrealized investment losses from White Mountains’s investment in MediaAlpha, resulting from decreases in the MediaAlpha share price (from $39.07 as of December 31, 2020 and from $42.10 as of June 30, 2021) to $18.68 as of September 30, 2021. Results in the first nine months of 2021 also included realized investment gains on shares sold in a secondary offering completed by MediaAlpha. price.

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,~~August 1, 2022, White Mountains ~~sold 3.6~~closed the NSM Transaction. White Mountains received $1.4 billion in net cash proceeds at closing and recognized a net gain of $876 million, which was comprised of $887 million of net gain from sale of discontinued operations and $3 million of comprehensive income related to the recognition of foreign currency translation gains (losses) from the sale, partially offset by $14 million of compensation and other costs related to the transaction recorded in Other Operations.

During the third quarter of 2022, White Mountains repurchased and retired 366,645 of its common shares for ~~net proceeds of $160 million. As of September 30, 2021, White Mountains owned 16.9~~$509 million ~~shares of MediaAlpha, representing a 28% basic ownership interest (26% on a fully-diluted/fully-converted basis). At the September 30, 2021 closing~~at an average share price of ~~$18.68 per share, the value~~$1,388.24, or 96% of White Mountains’s investment in MediaAlpha was $316 million. At this level of ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $5.60 per share increase or decrease in White Mountains’sSeptember 30, 2022 book value per share and 94% of White Mountains’s September 30, 2022 adjusted book value per share.

~~Excluding net realized and unrealized investment losses from~~ As of September 30, 2022, White Mountains’s ~~investment in MediaAlpha, book value~~undeployed capital was approximately $1.1 billion.

In the HG Global/BAM segment, gross written premiums and ~~adjusted book value both increased~~MSC collected totaled $46 million and $109 million in the third quarter and first nine months of ~~2021, reflecting solid performance within White Mountains’s operating businesses.~~

~~Gross written premiums and MSC collected in the HG Global/BAM segment totaled~~2022 compared to $28 million and $84 million in the third quarter and first nine months of ~~2021 compared to $30 million~~2021. Total pricing was 110 and ~~$93 million~~81 basis points in the third quarter and first nine months of ~~2020.~~2022 compared to 69 and 66 basis points in the third quarter and first nine months of 2021. BAM insured municipal bonds with par value of $4.1 billion and $13.5 billion in the third quarter and first nine months of 2022 compared to $4.0 billion and $12.6 billion in the third quarter and first nine months of ~~2021~~2021. BAM’s total claims paying resources were $1,260 million as of September 30, 2022 compared to ~~$4.7 billion~~$1,192 million as of December 31, 2021 and ~~$11.8 billion~~$1,181 million as of September 30, 2021.

Ark reported a GAAP combined ratio of 87% and 90% in the third quarter and first nine months of ~~2020. Total pricing was 69 and 66 basis points in the third quarter and first nine months of 2021~~2022 compared to 63 and 79 basis points in the third quarter and first nine months of 2020. BAM’s total claims paying resources were $1,181 million as of September 30, 2021 compared to $987 million as of December 31, 2020 and $968 million as of September 30, 2020. In the first quarter of 2021, BAM completed a reinsurance agreement with Fidus Re that increased BAM’s claims paying resources by $150 million. In July 2021, S&P Global Ratings completed its annual review and affirmed BAM’s “AA/stable” rating.

~~Ark’s GAAP combined ratio was~~ 92% and 95% in the third quarter and first nine months of 2021. Ark’s adjusted combined ratio, which adds back amounts ~~ceded~~attributable to ~~third-party capital~~TPC providers, was 86% and 90% in the third quarter and first nine months of 2022 compared to 89% and 93% in the third quarter and first nine months of 2021. The adjusted combined ratio for the third quarter and first nine months of 2022 included 21 points and 17 points of catastrophe losses compared to 21 points and 16 points in the third quarter and first nine months of 2021. Catastrophe losses for the third quarter and first nine months of 2022 included $51 million related to Hurricane Ian on a net basis after reinstatement premiums. The adjusted combined ratio in the third quarter and first nine months of 2022 also included four points and five points of favorable prior year development compared to six points and five points in the third quarter and first nine months of 2021, ~~included 21 points and 16 points of catastrophe losses and six points and five points of net favorable prior year reserve development. In the third quarter of 2021~~principally in property lines. Ark reported gross written premiums of $216 million and $1,253 million, net written premiums of $193 million and $1,007 million and net earned premiums of $346 million and $758 million in the third quarter and first nine months of 2022 compared to gross written premiums of $162 million and $895 million, net written premiums of $121 million and net earned premiums of $213 million. Ark’s gross written premiums in the third quarter of 2021 were up 79% from the third quarter of 2020 (prior to White Mountains’s ownership of Ark), with risk-adjusted rate change approximately up 7%. In the first nine months of 2021, Ark reported gross written premiums of $895 million, net written premiums of $726 million and net earned premiums of $213 million and $436 ~~million. Ark’s gross written premiums~~million and in the third quarter and first nine months of ~~2021 were up 90% from the first nine months of 2020 (prior to White Mountains’s ownership of Ark), with risk-adjusted rate change up approximately 9%.~~2021. Ark reported pre-tax income (loss) of $24 million and $(20) million in the third quarter and first nine months of 2022 compared to $11 million and $(4) million in third quarter and first nine months of 2021. Ark’s results included net realized and unrealized investment gains (losses) of $(14) million and $(77) million in the third quarter and first nine months of 2022 compared to $0.3 million and $10 million in the third quarter and first nine months of 2021. Ark’s pre-tax loss for the first nine months of 2021 also included $25 million of transaction expenses related to White Mountains’s transaction with ~~Ark.~~Ark

~~NSM~~Kudu reported total revenue of $56 million, pre-tax ~~loss~~income of $2$47 million and adjusted EBITDA of ~~$19 million, and commission and other revenues of $82~~$12 million in the third quarter of ~~2021~~2022 compared to total revenue of $29 million, pre-tax ~~loss~~income of $1$23 million and adjusted EBITDA of ~~$15 million, and commission and other revenues of $71~~$7 million in the third quarter of ~~2020. NSM reported~~2021. Total revenues and pre-tax loss of $34 million, adjusted EBITDA of $53 million, and commission and other revenues of $241 million in the first nine months of 2021 compared to pre-tax loss of $6 million, adjusted EBITDA of $44 million, and commission and other revenues of $212 million in the first nine months of 2020. On April 12, 2021, NSM sold its Fresh Insurance motor business, which resulted in a loss of $29 million recorded in the first quarter of 2021. Results in the third quarter and first nine months of 2021 include the results of J.C. Taylor, an MGA offering classic and antique collector car insurance, from August 6, 2021, the date of its acquisition. Results in the third quarter and first nine months of 2021 and 2020 include the results of Kingsbridge Group Limited, a leading provider of commercial lines insurance and consulting services to the contingent workforce in the United Kingdom, from April 7, 2020, the date of its acquisition.

~~Kudu reported pre-tax~~ income ~~of $23 million, adjusted EBITDA of $7 million and total revenues of $29 million~~ in the third quarter of 2021 compared to pre-tax income of $13 million, adjusted EBITDA of $5 million and total revenues of $16 million in the third quarter of 2020. Pre-tax income and total revenues in the third quarter of 20212022 included ~~$19~~$41 million of net realized and unrealized investment gains on Kudu’s participation contracts compared to ~~$10~~$19 million of net realized and unrealized investment gains on Kudu’s participation contracts in the third quarter of ~~2020.~~2021. Kudu reported total revenue of $87 million, pre-tax income of ~~$70~~$66 million and adjusted EBITDA of ~~$19 million and total revenues of $89~~$33 million in the first nine months of ~~2021~~2022 compared to total revenue of $89 million, pre-tax ~~loss~~income of $9$70 million and adjusted EBITDA of ~~$14 million and total revenues of $21~~$19 million in the first nine months of ~~2020. Pre-tax~~2021. Total revenues and pre-tax income ~~and total revenues~~ in the first nine months of ~~2021~~2022 included ~~$63~~$46 million of net realized and unrealized investment gains on Kudu’s participation contracts compared to $2$63 million of net realized and unrealized investment gains on Kudu’s participation contracts in the first nine months of ~~2020. In~~2021.

As of September 30, 2022, the market value of White Mountains’s investment in MediaAlpha was $148 million, which was down from $167 million as of June 30, 2022. As of September 30, 2022, the closing price was $8.75 per share, which decreased from $9.85 as of June 30, 2022. Based on White Mountains’s ownership of 16.9 million shares of MediaAlpha as of September 30, 2022, each $1.00 per share increase or decrease in the stock price of MediaAlpha will result in an approximate $6.60 per share increase or decrease in White Mountains’s book value per share and adjusted book value per share.

White Mountains’s pre-tax total consolidated portfolio return on invested assets was 0.4% in the third quarter of ~~2021, Kudu deployed $131~~2022. This return included $19 million ~~including transaction costs,~~of unrealized investment losses from White Mountains’s investment in ~~two~~MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.5% in the third quarter of 2022. Excluding MediaAlpha, investment ~~management firms.~~

returns in the third quarter of 2022 were driven primarily by favorable other long-term investment results, which more than offset net realized and unrealized investment losses in the fixed income portfolio due to rising interest rates. White Mountains’s pre-tax total consolidated portfolio return on invested assets was -8.0% in the third quarter of 2021. This return included $397 million of ~~net~~ unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 1.4% in the third quarter of 2021. Excluding MediaAlpha, investment returns in the third quarter of 2021 were driven primarily by favorable other long-term investments results.

White Mountains’s pre-tax total consolidated portfolio return on invested assets was ~~13.5%~~-3.6% in the ~~third quarter~~first nine months of ~~2020.~~2022. This return included ~~$305~~$113 million of net ~~investment income and~~ unrealized investment ~~gains~~losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was ~~2.8%~~-1.4% in the ~~third quarter~~first nine months of ~~2020.~~2022. Excluding MediaAlpha, investment returns in the ~~third quarter~~first nine months of ~~2020~~2022 were driven primarily by ~~a rebound in equity markets following the decline experienced~~net unrealized investment losses in the ~~first quarter of 2020 in reaction~~fixed income portfolio due to ~~the COVID-19 pandemic.~~

rising interest rates, partially offset by favorable other long-term investment results. White Mountains’s pre-tax total consolidated portfolio return on invested assets was -3.7% in the first nine months of 2021. This return included ~~$325~~$326 million of net realized and unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 4.6% in the first nine months of 2021. Excluding MediaAlpha, investment returns in the ~~third quarter~~first nine months of 2021 were driven primarily by favorable other long-term investment results. White Mountains’s pre-tax total consolidated portfolio return on invested assets was 15.4% in the first nine months of 2020. This return included $355 million of net investment income and unrealized investment gains from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 2.8% in the first nine months of 2020. Excluding MediaAlpha, returns in the first nine months of 2020 were driven primarily by the impact of the decline in interest rates on fixed income markets.

5549

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.~~measure as of September 30, 2022, June 30, 2022, December 31, 2021, and September 30, 2021. See NON-GAAP FINANCIAL MEASURES on page ~~85.~~74.


		September 30, 2021		June 30, 2021		December 31, 2020		September 30, 2020			September 30, 2022		June 30, 2022		December 31, 2021		September 30, 2021
Book value per share numerators (in millions):	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	White Mountains’s common shareholders’ equity - GAAP book value per share numerator	$	3,521.7	$	3,978.2	$	3,906.0	$	3,407.7	White Mountains’s common shareholders’ equity - GAAP book value per share numerator	$	3,708.0	$	3,323.3	$	3,548.1	$	3,521.7

Time value of money discount on expected future payments on the BAM Surplus Notes (1)	Time value of money discount on expected future payments on the BAM Surplus Notes (1)	(128.0)		(132.8)		(142.5)		(144.3)		Time value of money discount on expected future payments on the BAM Surplus Notes (1)	(110.8)		(115.9)		(125.9)		(128.0)
HG Global’s unearned premium reserve (1)	HG Global’s unearned premium reserve (1)	206.8		201.5		190.0		181.0		HG Global’s unearned premium reserve (1)	232.2		221.6		214.6		206.8
HG Global’s net deferred acquisition costs (1)	HG Global’s net deferred acquisition costs (1)	(58.1)		(56.3)		(52.4)		(49.5)		HG Global’s net deferred acquisition costs (1)	(65.9)		(62.6)		(60.8)		(58.1)
Adjusted book value per share numerator	Adjusted book value per share numerator	$	3,542.4	$	3,990.6	$	3,901.1	$	3,394.9	Adjusted book value per share numerator	$	3,763.5	$	3,366.4	$	3,576.0	$	3,542.4
Book value per share denominators (in thousands of shares):	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	Common shares outstanding - GAAP book value per share denominator	3,029.6		3,109.2		3,102.0		3,102.0		Common shares outstanding - GAAP book value per share denominator	2,576.2		2,942.9		3,017.8		3,029.6
Unearned restricted common shares	Unearned restricted common shares	(17.0)		(20.6)		(14.8)		(19.3)		Unearned restricted common shares	(17.5)		(20.9)		(13.7)		(17.0)

Adjusted book value per share denominator	Adjusted book value per share denominator	3,012.6		3,088.6		3,087.2		3,082.7		Adjusted book value per share denominator	2,558.7		2,922.0		3,004.1		3,012.6
GAAP book value per share	GAAP book value per share	$	1,162.44	$	1,279.49	$	1,259.18	$	1,098.56	GAAP book value per share	$	1,439.31	$	1,129.27	$	1,175.73	$	1,162.44
Adjusted book value per share	Adjusted book value per share	$	1,175.86	$	1,292.03	$	1,263.64	$	1,101.28	Adjusted book value per share	$	1,470.84	$	1,152.12	$	1,190.39	$	1,175.86
Year-to-date dividends paid per share	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	$	1.00

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

Goodwill and Other Intangible Assets

The following table presents a summary of goodwill and other intangible assets that are included in White Mountains’s book value as of September 30, ~~2021,~~2022, June 30, 2022, December 31, ~~2020,~~2021, and September 30, ~~2020:~~2021:


Millions	Millions	September 30, 2021			June 30, 2021			December 31, 2020		September 30, 2020			Millions	September 30, 2022			June 30, 2022			December 31, 2021		September 30, 2021
Goodwill:	Goodwill:												Goodwill:
Ark	Ark	$	116.8		$	116.8		$	—	$	—		Ark	$	116.8		$	116.8		$	116.8	$	116.8
NSM		529.6		(2)	477.9			506.4		511.8		(4)

Kudu	Kudu	7.6			7.6			7.6		7.6			Kudu	7.6			7.6			7.6		7.6
Other Operations	Other Operations	17.4			27.1		(3)	11.5		20.7		(5)	Other Operations	51.1		(1)	77.4		(1)	17.9		17.4
Total goodwill	Total goodwill	671.4			629.4			525.5		540.1			Total goodwill	175.5			201.8			142.3		141.8
Other intangible assets:	Other intangible assets:												Other intangible assets:
Ark	Ark	175.7			175.7			—		—			Ark	175.7			175.7			175.7		175.7
NSM		205.2			213.7			230.4		218.5

Kudu	Kudu	1.4			1.5			1.6		1.7			Kudu	1.1			1.1			1.3		1.4
Other Operations	Other Operations	31.3			23.9			24.9		16.0			Other Operations	40.9			19.4			21.2		31.3
Total other intangible assets	Total other intangible assets	413.6			414.8			256.9		236.2			Total other intangible assets	217.7			196.2			198.2		208.4
Total goodwill and other intangible assets ~~(1)~~(2)	Total goodwill and other intangible assets ~~(1)~~(2)	1,085			1,044.2			782.4		776.3			Total goodwill and other intangible assets ~~(1)~~(2)	393.2			398			340.5		350.2
Goodwill and other intangible assets attributed to non-controlling interests	Goodwill and other intangible assets attributed to non-controlling interests	(118.0)			(115.9)			(28.1)		(27.1)			Goodwill and other intangible assets attributed to non-controlling interests	(103.1)			(103.4)			(91.8)		(92.0)
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	$	967.0		$	928.3		$	754.3	$	749.2		Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity	$	290.1		$	294.6		$	248.7	$	258.2

(1)The relative fair values of goodwill and other intangible assets recognized in connection with recent acquisitions had not yet been finalized as of September 30, 2022 and June 30, 2022.

(2) 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 J.C. Taylor had not yet been finalized at September 30, 2021.~~

~~(3)~~ ~~The relative fair values of goodwill and other intangible assets recognized in connection with an acquisition within Other Operations had not yet been finalized at June 30, 2021.~~

~~(4)~~ ~~The relative fair values of goodwill and other intangible assets recognized in connection with the acquisition of Kingsbridge had not yet been finalized at September 30, 2020.~~

~~(5)~~ ~~The relative fair values of goodwill and other intangible assets recognized in connection with an acquisition within Other Operations had not yet~~

~~been finalized at September 30, 2020.~~

5650

Summary of Consolidated Results

The following table presents White Mountains’s consolidated financial results for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Revenues	Revenues									Revenues

Financial Guarantee revenues	Financial Guarantee revenues	$	7.4	$	14.5	$	18.1	$	58.1	Financial Guarantee revenues	$	(24.7)	$	7.4	$	(69.2)	$	18.1
P&C Insurance and Reinsurance revenues	P&C Insurance and Reinsurance revenues	217.7		—		457.3		—		P&C Insurance and Reinsurance revenues	343.2		217.7		701.1		457.3
Specialty Insurance Distribution revenues		82.3		70.7		241.4		211.8

Asset Management revenues	Asset Management revenues	28.5		16.3		88.8		21.0		Asset Management revenues	55.9		28.5		87.0		88.8

Other Operations revenues	Other Operations revenues	(346.0)		358.0		(210.8)		369.0		Other Operations revenues	8.8		(346.0)		1.4		(210.8)
Total revenues	Total revenues	(10.1)		459.5		594.8		659.9		Total revenues	383.2		(92.4)		720.3		353.4
Expenses	Expenses									Expenses
Financial Guarantee expenses	Financial Guarantee expenses	15.4		15.6		49.2		46.8		Financial Guarantee expenses	19.5		15.4		64.4		49.2
P&C Insurance and Reinsurance expenses	P&C Insurance and Reinsurance expenses	206.8		—		461.1		—		P&C Insurance and Reinsurance expenses	319.1		206.8		721.5		461.1
Specialty Insurance Distribution expenses		83.9		71.9		275.2		218.1

Asset Management expenses	Asset Management expenses	5.2		3.7		18.4		12.1		Asset Management expenses	8.7		5.2		20.7		18.4

Other Operations expenses	Other Operations expenses	40.9		47.1		129.6		95.0		Other Operations expenses	66.9		40.8		192.1		129.3
Total expenses	Total expenses	352.2		138.3		933.5		372.0		Total expenses	414.2		268.2		998.7		658.0
Pre-tax income (loss)	Pre-tax income (loss)									Pre-tax income (loss)
Financial Guarantee pre-tax income (loss)	Financial Guarantee pre-tax income (loss)	(8.0)		(1.1)		(31.1)		11.3		Financial Guarantee pre-tax income (loss)	(44.2)		(8.0)		(133.6)		(31.1)
P&C Insurance and Reinsurance pre-tax income (loss)	P&C Insurance and Reinsurance pre-tax income (loss)	10.9		—		(3.8)		—		P&C Insurance and Reinsurance pre-tax income (loss)	24.1		10.9		(20.4)		(3.8)
Specialty Insurance Distribution pre-tax income (loss)		(1.6)		(1.2)		(33.8)		(6.3)

Asset Management pre-tax income (loss)	Asset Management pre-tax income (loss)	23.3		12.6		70.4		8.9		Asset Management pre-tax income (loss)	47.2		23.3		66.3		70.4

Other Operations pre-tax income (loss)	Other Operations pre-tax income (loss)	(386.9)		310.9		(340.4)		274.0		Other Operations pre-tax income (loss)	(58.1)		(386.8)		(190.7)		(340.1)
Total pre-tax income (loss)		(362.3)		321.2		(338.7)		287.9
Total pre-tax income (loss) from continuing operations										Total pre-tax income (loss) from continuing operations	(31.0)		(360.6)		(278.4)		(304.6)
Income tax (expense) benefit	Income tax (expense) benefit	(21.6)		(98.5)		(41.9)		(97.1)		Income tax (expense) benefit	7.4		(28.6)		26.1		(52.2)
Net income (loss) from continuing operations	Net income (loss) from continuing operations	(383.9)		222.7		(380.6)		190.8		Net income (loss) from continuing operations	(23.6)		(389.2)		(252.3)		(356.8)
Net (loss) gain from sale of discontinued operations, net of tax		—		(.7)		18.7		(.8)
Net income (loss) from discontinued operations, net of tax - NSM Group										Net income (loss) from discontinued operations, net of tax - NSM Group	6.3		5.3		16.4		(23.8)
Net gain (loss) from sale of discontinued operations, net of tax - NSM Group										Net gain (loss) from sale of discontinued operations, net of tax - NSM Group	886.8		—		886.8		—
Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group										Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group	—		—		—		18.7
Net income (loss)	Net income (loss)	(383.9)		222.0		(361.9)		190.0		Net income (loss)	869.5		(383.9)		650.9		(361.9)
Net loss attributable to non-controlling interests		12.5		10.9		53.7		29.5
Net (income) loss attributable to non-controlling interests										Net (income) loss attributable to non-controlling interests	18.7		12.5		101.5		53.7
Net income (loss) attributable to White Mountains’s common shareholders	Net income (loss) attributable to White Mountains’s common shareholders	(371.4)		232.9		(308.2)		219.5		Net income (loss) attributable to White Mountains’s common shareholders	888.2		(371.4)		752.4		(308.2)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(2.2)		3.9		.6		1.0		Other comprehensive income (loss), net of tax	(1.4)		—		(3.0)		(.3)
Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group										Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group	.7		(2.2)		(5.2)		.9
Recognition of foreign currency translation from sale of NSM Group, net of tax										Recognition of foreign currency translation from sale of NSM Group, net of tax	2.9		—		2.9		—
Comprehensive income (loss)	Comprehensive income (loss)	(373.6)		236.8		(307.6)		220.5		Comprehensive income (loss)	890.4		(373.6)		747.1		(307.6)
Comprehensive income attributable to non-controlling interests		.2		(.1)		—		(.3)
Other comprehensive (income) loss attributable to non-controlling interests										Other comprehensive (income) loss attributable to non-controlling interests	(.3)		.2		.4		—
Comprehensive income (loss) attributable to White Mountains’s common shareholders	Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	(373.4)	$	236.7	$	(307.6)	$	220.2	Comprehensive income (loss) attributable to White Mountains’s common shareholders	$	890.1	$	(373.4)	$	747.5	$	(307.6)

5751

I. Summary of Operations By Segment

As of September 30, ~~2021,~~2022, White Mountains conducted its operations through ~~five~~four segments: (1) HG Global/BAM, (2) Ark, (3) ~~NSM, (4)~~ Kudu and ~~(5)~~(4) Other Operations. A discussion of White Mountains’s consolidated investment operations is included after the discussion of operations by segment. White Mountains’s segment information is presented in Note 15 — “Segment Information” to the Consolidated Financial Statements.

As a result of the ~~Ark~~NSM Transaction, ~~White Mountains began consolidating Ark~~the results of operations for NSM Group have been classified as discontinued operations and are presented separately, net of related income taxes, in ~~its financial statements as~~the statement of ~~January 1, 2021.~~comprehensive income through the closing of the transaction. Prior year amounts have been reclassified to conform to the current period’s presentation. See Note 219 — ~~“Significant Transactions~~“Held for Sale and Discontinued Operations.”.

HG Global/BAM

HG Global/BAM consists of the consolidated results of HG Global, HG Re and 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 purpose projects, 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 HG Re, to provide up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM.

The following tables present the components of pre-tax income (loss) included in White Mountains’s HG Global/BAM segment related to the consolidation of HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended September 30, 2021
Millions HG Global BAM Eliminations Total
Direct written premiums $ — $ 12.8 $ — $ 12.8
Assumed written premiums 10.9 — (10.9) —
Gross written premiums 10.9 12.8 (10.9) 12.8
Ceded written premiums — (10.9) 10.9 —
Net written premiums $ 10.9 $ 1.9 $ — $ 12.8
Earned insurance premiums $ 5.5 $ 1.2 $ — $ 6.7
Net investment income 1.9 2.5 — 4.4
Net investment income - BAM Surplus Notes 3.1 — (3.1) —
Net realized and unrealized investment gains (2.0) (2.0) — (4.0)
Other revenue .1 .2 — .3
Total revenues 8.6 1.9 (3.1) 7.4
Insurance acquisition expenses 1.5 1.5 — 3.0
General and administrative expenses .2 12.2 — 12.4
Interest expense - BAM Surplus Notes — 3.1 (3.1) —
Total expenses 1.7 16.8 (3.1) 15.4
Pre-tax income (loss) $ 6.9 $ (14.9) $ — $ (8.0)
Supplemental information:
MSC collected (1)
$ — $ 14.7 $ — $ 14.7


	Three Months Ended September 30, 2022
Millions	HG Global		BAM		Eliminations		Total
Direct written premiums	$	—	$	18.4	$	—	$	18.4
Assumed written premiums	16.8		1.3		(16.8)		1.3
Gross written premiums	16.8		19.7		(16.8)		19.7
Ceded written premiums	—		(16.8)		16.8		—
Net written premiums	$	16.8	$	2.9	$	—	$	19.7

Earned insurance premiums	$	5.9	$	1.2	$	—	$	7.1
Net investment income	2.8		2.9		—		5.7
Net investment income - BAM Surplus Notes	2.9		—		(2.9)		—
Net realized and unrealized investment gains (losses)	(19.6)		(19.2)		—		(38.8)
Other revenues	.1		1.2		—		1.3
Total revenues	(7.9)		(13.9)		(2.9)		(24.7)
Insurance acquisition expenses	1.6		.1		—		1.7

General and administrative expenses	.6		15.2		—		15.8
Interest expense - HG Global Senior Notes	2.0		—		—		2.0
Interest expense - BAM Surplus Notes	—		2.9		(2.9)		—
Total expenses	4.2		18.2		(2.9)		19.5
Pre-tax income (loss)	$	(12.1)	$	(32.1)	$	—	$	(44.2)
Supplemental information:
MSC collected (1)	$	—	$	26.0	$	—	$	26.0

(1) MSC collected are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.


	Three Months Ended September 30, 2021
Millions	HG Global		BAM		Eliminations		Total
Direct written premiums	$	—	$	12.8	$	—	$	12.8
Assumed written premiums	10.9		—		(10.9)		—
Gross written premiums	10.9		12.8		(10.9)		12.8
Ceded written premiums	—		(10.9)		10.9		—
Net written premiums	$	10.9	$	1.9	$	—	$	12.8

Earned insurance premiums	$	5.5	$	1.2	$	—	$	6.7
Net investment income	1.9		2.5		—		4.4
Net investment income - BAM Surplus Notes	3.1		—		(3.1)		—
Net realized and unrealized investment gains	(2.0)		(2.0)		—		(4.0)
Other revenues	.1		.2		—		.3
Total revenues	8.6		1.9		(3.1)		7.4
Insurance acquisition expenses	1.5		1.5		—		3.0

General and administrative expenses	.2		12.2		—		12.4
Interest expense - BAM Surplus Notes	—		3.1		(3.1)		—
Total expenses	1.7		16.8		(3.1)		15.4
Pre-tax income (loss)	$	6.9	$	(14.9)	$	—	$	(8.0)
Supplemental information:
MSC collected (1)	$	—	$	14.7	$	—	$	14.7

(1) MSC collected are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.


	Nine Months Ended September 30, 2022
Millions	HG Global		BAM		Eliminations		Total
Direct written premiums	$	—	$	44.9	$	—	$	44.9
Assumed written premiums	39.6		1.3		(39.6)		1.3
Gross written premiums	39.6		46.2		(39.6)		46.2
Ceded written premiums	—		(39.6)		39.6		—
Net written premiums	$	39.6	$	6.6	$	—	$	46.2

Earned insurance premiums	$	21.5	$	4.5	$	—	$	26.0
Net investment income	7.1		8.0		—		15.1
Net investment income - BAM Surplus Notes	8.8		—		(8.8)		—
Net realized and unrealized investment gains (losses)	(57.8)		(56.2)		—		(114.0)
Other revenues	.3		3.4		—		3.7
Total revenues	(20.1)		(40.3)		(8.8)		(69.2)
Insurance acquisition expenses	7.6		1.9		—		9.5

General and administrative expenses	2.1		47.4		—		49.5
Interest expense - HG Global Senior Notes	5.4		—		—		5.4
Interest expense - BAM Surplus Notes	—		8.8		(8.8)		—
Total expenses	15.1		58.1		(8.8)		64.4
Pre-tax income (loss)	$	(35.2)	$	(98.4)	$	—	$	(133.6)
Supplemental information:
MSC collected (1)	$	—	$	62.3	$	—	$	62.3

(1) MSC collected are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.

5853

Three Months Ended September 30, 2020
Millions HG Global BAM Eliminations Total
Direct written premiums $ — $ 14.5 $ — $ 14.5
Assumed (ceded) written premiums 12.5 — (12.5) —
Gross written premiums 12.5 14.5 (12.5) 14.5
Ceded written premiums — (12.5) 12.5 —
Net written premiums $ 12.5 $ 2.0 $ — $ 14.5
Earned insurance premiums $ 5.1 $ 1.1 $ — $ 6.2
Net investment income 1.8 2.9 — 4.7
Net investment income - BAM Surplus Notes 4.6 — (4.6) —
Net realized and unrealized investment gains — 3.2 — 3.2
Other revenue .2 .2 — .4
Total revenues 11.7 7.4 (4.6) 14.5
Insurance acquisition expenses 1.1 .5 — 1.6
General and administrative expenses .6 13.4 — 14.0
Interest expense - BAM Surplus Notes — 4.6 (4.6) —
Total expenses 1.7 18.5 (4.6) 15.6
Pre-tax income (loss) $ 10.0 $ (11.1) $ — $ (1.1)
Supplemental information:
MSC collected (1)
$ — $ 15.4 $ — $ 15.4

~~(1)~~ ~~MSC are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.~~

Nine Months Ended September 30, 2021
Millions HG Global BAM Eliminations Total
Direct written premiums $ — $ 34.5 $ — $ 34.5
Assumed written premiums 33.4 4.5 (33.4) 4.5
Gross written premiums 33.4 39.0 (33.4) 39.0
Ceded written premiums — (33.4) 33.4 —
Net written premiums $ 33.4 $ 5.6 $ — $ 39.0
Earned insurance premiums $ 16.1 $ 3.5 $ — $ 19.6
Net investment income 5.4 7.8 — 13.2
Net investment income - BAM Surplus Notes 9.1 — (9.1) —
Net realized and unrealized investment losses (9.5) (6.1) — (15.6)
Other revenue .3 .6 — .9
Total revenues 21.4 5.8 (9.1) 18.1
Insurance acquisition expenses 4.3 2.2 — 6.5
General and administrative expenses 1.3 41.4 — 42.7
Interest expense - BAM Surplus Notes — 9.1 (9.1) —
Total expenses 5.6 52.7 (9.1) 49.2
Pre-tax income (loss) $ 15.8 $ (46.9) $ — $ (31.1)
Supplemental information:
MSC collected (1)
$ — 44.8 $ — $ 44.8

~~(1)~~ ~~MSC are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.~~


		Nine Months Ended September 30, 2020									Nine Months Ended September 30, 2021
Millions	Millions	HG Global		BAM		Eliminations		Total		Millions	HG Global		BAM		Eliminations		Total
Direct written premiums	Direct written premiums	$	—	$	45.5	$	—	$	45.5	Direct written premiums	$	—	$	34.5	$	—	$	34.5
Assumed (ceded) written premiums		39.1		.1		(39.1)		.1
Assumed written premiums										Assumed written premiums	33.4		4.5		(33.4)		4.5
Gross written premiums	Gross written premiums	39.1		45.6		(39.1)		45.6		Gross written premiums	33.4		39.0		(33.4)		39.0
Ceded written premiums	Ceded written premiums	—		(39.1)		39.1		—		Ceded written premiums	—		(33.4)		33.4		—
Net written premiums	Net written premiums	$	39.1	$	6.5	$	—	$	45.6	Net written premiums	$	33.4	$	5.6	$	—	$	39.0

Earned insurance premiums	Earned insurance premiums	$	14.1	$	3.1	$	—	$	17.2	Earned insurance premiums	$	16.1	$	3.5	$	—	$	19.6
Net investment income	Net investment income	6.1		9.0		—		15.1		Net investment income	5.4		7.8		—		13.2
Net investment income - BAM Surplus Notes	Net investment income - BAM Surplus Notes	14.1		—		(14.1)		—		Net investment income - BAM Surplus Notes	9.1		—		(9.1)		—
Net realized and unrealized investment gains		12.1		11.6		—		23.7
Other revenue		.3		1.8		—		2.1
Net realized and unrealized investment losses										Net realized and unrealized investment losses	(9.5)		(6.1)		—		(15.6)
Other revenues										Other revenues	.3		.6		—		.9
Total revenues	Total revenues	46.7		25.5		(14.1)		58.1		Total revenues	21.4		5.8		(9.1)		18.1
Insurance acquisition expenses	Insurance acquisition expenses	3.3		2.1		—		5.4		Insurance acquisition expenses	4.3		2.2		—		6.5

General and administrative expenses	General and administrative expenses	1.6		39.8		—		41.4		General and administrative expenses	1.3		41.4		—		42.7
Interest expense - BAM Surplus Notes	Interest expense - BAM Surplus Notes	—		14.1		(14.1)		—		Interest expense - BAM Surplus Notes	—		9.1		(9.1)		—
Total expenses	Total expenses	4.9		56.0		(14.1)		46.8		Total expenses	5.6		52.7		(9.1)		49.2
Pre-tax income (loss)	Pre-tax income (loss)	$	41.8	$	(30.5)	$	—	$	11.3	Pre-tax income (loss)	$	15.8	$	(46.9)	$	—	$	(31.1)
Supplemental information:	Supplemental information:									Supplemental information:
MSC collected (1)	MSC collected (1)	$	—	$	46.9	$	—	$	46.9	MSC collected (1)	$	—	44.8		$	—	$	44.8

(1) MSC are recorded directly to BAM’s equity, which is recorded as non-controlling interest on White Mountains’s balance sheet.

HG Global/BAM Results—Three Months Ended September 30, ~~2021~~2022 versus Three Months Ended September 30, ~~2020~~2021

BAM is required to prepare its financial statements on a statutory accounting basis for the NYDFS and does not report stand-alone GAAP financial results. ~~BAM is owned by its members, the municipalities that purchase BAM’s insurance for their debt issuances.~~ BAM charges an insurance premium on each municipal bond insurance policy it writes. A portion of the premium is MSC and the remainder is a risk premium. In the event of a municipal bond refunding, a portion of the MSC from original issuance can be reutilized, in effect serving as a credit against the total insurance premium on the refunding of the municipal bond. Issuers of debt insured by BAM are members of BAM so long as any of their BAM-insured debt is outstanding, and as members they have certain interests in BAM, including the right to vote for BAM’s directors and to receive dividends in the future, if declared.

Gross written premiums and MSC collected in the HG Global/BAM segment totaled $46 million in the third quarter of 2022 compared to $28 million in the third quarter of ~~2021 compared to $30 million~~2021. BAM insured $4.1 billion of municipal bonds, $3.3 billion of which were in the primary market, in the third quarter of ~~2020. BAM insured~~2022 compared to $4.0 billion of municipal bonds, $3.8 billion of which were in the primary market, in the third quarter of ~~2021 compared~~2021. In the third quarter of 2022, BAM completed an assumed reinsurance transaction to ~~$4.7 billion of~~reinsure municipal bonds ~~$4.4 billion~~with a par value of ~~which were~~$43 million.

Insured penetration in the primary market decreased to 6.2% in the third quarter of ~~2020. Demand remained strong for insured bonds in the primary market, as insured penetration in the primary market was~~2022 compared to 8.6% in the third quarter of 2021, ~~compared to 8.0%~~primarily as a result of a decrease in large transactions insured in the third quarter of ~~2020.~~2022 compared to the third quarter of 2021.

Total pricing, which reflects both gross written premiums and MSC, ~~from new business,~~ increased to 110 basis points in the third quarter of 2022 compared to 69 basis points in the third quarter of ~~2021 compared to 63 basis points in the third quarter of 2020. See~~ ~~“NON-GAAP FINANCIAL MEASURES”~~ ~~on page 85.~~2021. The increase in total pricing was driven primarily by ~~an increase in~~increased secondary market activity, higher pricing in the primary market and ~~secondary markets~~an assumed reinsurance transaction in the third quarter of 2022. Pricing in the primary market increased to 79 basis points in the third quarter of 2022 compared to 59 basis points in the third quarter of 2021. Pricing in the ~~primary market increased to 59 basis points in the third quarter of 2021 compared to 57 basis points in the third quarter of 2020. Pricing in the~~combined secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, ~~increased~~decreased to 229 basis points in the third quarter of 2022 compared to 309 basis points in the third quarter of ~~2021 compared to 154 basis points in the third quarter of 2020. Demand remained strong for insured bonds of issuers rated double-A minus or higher.~~

2021.

6054

The following table presents the gross par value of primary and secondary market policies issued, the gross par value of assumed reinsurance, the gross written premiums and MSC collected and total pricing for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,					Three Months Ended September 30,
$ in Millions	$ in Millions	2021		2020		$ in Millions	2022		2021

Gross par value of primary market policies issued	Gross par value of primary market policies issued	$	3,813.7	$	4,420.8	Gross par value of primary market policies issued	$	3,269.0	$	3,813.7
Gross par value of secondary market policies issued	Gross par value of secondary market policies issued	157.4		318.7		Gross par value of secondary market policies issued	826.5		157.4
Gross par value of assumed reinsurance	Gross par value of assumed reinsurance	—		—		Gross par value of assumed reinsurance	42.5		—
Total gross par value of market policies issued	Total gross par value of market policies issued	$	3,971.1	$	4,739.5	Total gross par value of market policies issued	$	4,138.0	$	3,971.1
Gross written premiums	Gross written premiums	$	12.8	$	14.4	Gross written premiums	$	19.7	$	12.8
MSC collected	MSC collected	14.7		15.4		MSC collected	26.0		14.7
Total gross written premiums and MSC collected	Total gross written premiums and MSC collected	$	27.5	$	29.8	Total gross written premiums and MSC collected	$	45.7	$	27.5
Present value of future installment MSC collections		—		—
Gross written premium adjustments on existing installment policies		.1		.1
Gross written premiums and MSC from new business		$	27.6	$	29.9

Total pricing	Total pricing	69 bps		63 bps		Total pricing	110 bps		69 bps

HG Global reported pre-tax income (loss) of $(12) million in the third quarter of 2022 compared to $7 million in the third quarter of ~~2021 compared to pre-tax income of $10 million in the third quarter of 2020.~~2021. The change in pre-tax income (loss) was driven primarily by ~~lower~~$20 million of net unrealized investment ~~returns~~losses on the HG Global ~~investment~~fixed income portfolio, as interest rates increased in the third quarter of ~~2021 resulting in net unrealized losses, and a decrease in interest income on the BAM Surplus Notes.~~2022. Results in the third quarter of 2022 and 2021 both included $3 million of interest income on the BAM Surplus Notes compared to $5 million in the third quarter of 2020. Interest income on the BAM Surplus Notes decreased due to both a decrease in the balance of the BAM Surplus Notes and a decrease in the interest rate earned on the BAM Surplus Notes in the third quarter of 2021 compared to the third quarter of 2020.Notes.

BAM is a mutual insurance company that is owned by its members. BAM’s results are consolidated into White Mountains’s GAAP financial statements and attributed to non-controlling interests. White Mountains reported ~~$15~~$32 million of GAAP pre-tax loss from BAM in the third quarter of ~~2021~~2022 compared to ~~$11~~$15 million in the third quarter of ~~2020.~~2021. The change in pre-tax loss was driven primarily by ~~lower~~$19 million of net unrealized investment ~~returns~~losses on the BAM ~~investment~~fixed income portfolio, as interest rates increased in the third quarter of ~~2021 resulting in net unrealized losses, partially offset by a decrease in interest expense on the BAM Surplus Notes.~~2022. Results in the third quarter of ~~2021~~2022 included $3 million of interest expense on the BAM Surplus Notes ~~compared to $5 million~~ ~~in the third quarter of 2020. Interest expense on the BAM Surplus Notes decreased due to both a decrease in the balance of the BAM Surplus Notes~~ and ~~a decrease in the interest rate earned on the BAM Surplus Notes in the third quarter of 2021 compared to the third quarter of 2020. Results in the third quarter of 2021 also included $12~~$15 million of general and administrative expenses, compared to ~~$13~~$3 million of interest expense and $12 million of general and administrative expenses in the third quarter of ~~2020.~~2021.

~~COVID-19~~

BAM expects that investor concerns about the impact of the COVID-19 pandemic should continue to result in both increased insured penetration in the primary market and opportunities in the secondary market. The COVID-19 pandemic is negatively impacting the finances of municipalities to varying degrees, and, over time, financial stress could emerge. BAM’s existing credit portfolio is of high quality and structured to be resilient during economic slowdowns. BAM views consumption-based tax-backed credits (sales, hotel, excise), transportation-related credits (airports, mass transportation, ports and toll roads) and higher education-related credits as those most likely to be affected by pandemic-related impacts on the economy. Combined, these sectors total approximately 17% of BAM’s outstanding insured par. All BAM-insured bond payments due through November 1, 2021 have been made by insureds. BAM currently has no insured bonds on its insured credit watchlist.

HG Global/BAM Results—Nine Months Ended September 30, ~~2021~~2022 versus Nine Months Ended September 30, ~~2020~~2021

Gross written premiums and MSC collected in the HG Global/BAM segment totaled $109 million in the first nine months of 2022 compared to $84 million in the first nine months of ~~2021 compared to $93 million~~2021. BAM insured $13.5 billion of municipal bonds, $10.1 billion of which were in the primary market, in the first nine months of ~~2020. BAM insured~~2022 compared to $12.6 billion of municipal bonds, $11.2 billion of which were in the primary market, in the first nine months of ~~2021 compared to $11.8 billion of municipal bonds, $10.1 billion of which were in the primary market, in~~2021. In the first nine months of ~~2020. In the first quarter of~~2022 and 2021, BAM completed an assumed reinsurance ~~transaction~~transactions to reinsure municipal bonds with a par ~~value~~values of ~~$805~~$43 million and $806 million. Demand remained strong for insured bonds in the primary market, as insured penetration in the primary market was 8.1% in the first nine months of 2021 compared to 7.1% in the first nine months of 2020.

Total pricing, which reflects both gross written premiums and MSC, ~~from new business, decreased~~increased to 81 basis points in the first nine months of 2022 compared to 66 basis points in the first nine months of ~~2021~~2021. The increase in total pricing was driven primarily by increased secondary market activity in the first nine months of 2022 compared to 79the first nine months of 2021. Pricing in the primary market increased to 57 basis points in the first nine months of ~~2020. See~~ ~~“NON-GAAP FINANCIAL MEASURES”~~ ~~on page 85. The decrease in total pricing was driven primarily by a decrease in pricing and the amount of par insured in the secondary market~~2022, compared to 56 basis points in the first nine months of ~~2021, partially offset by the assumed reinsurance transaction in the first quarter of~~ 2021. ~~Pricing in the primary market was 56 basis points in both the first nine months of 2021 and 2020.~~ Pricing in the secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, ~~decreased~~increased to 152 basis points in the first nine months of 2022, compared to 150 basis points in the first nine months of ~~2021 compared to 210 basis points in the first nine months of 2020. Demand remained strong for insured bonds of issuers rated double-A minus or higher.~~2021.

The following table presents the gross par value of primary and secondary market policies issued, the gross par value of assumed reinsurance, the gross written premiums and MSC collected and total pricing for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended September 30,					Nine Months Ended September 30,
$ in Millions	$ in Millions	2021		2020		$ in Millions	2022		2021

Gross par value of primary market policies issued	Gross par value of primary market policies issued	$	11,171.2	$	10,125.0	Gross par value of primary market policies issued	$	10,147.8	$	11,171.2
Gross par value of secondary market policies issued	Gross par value of secondary market policies issued	646.6		1,665.7		Gross par value of secondary market policies issued	3,269.4		646.6
Gross par value of assumed reinsurance	Gross par value of assumed reinsurance	805.5		36.9		Gross par value of assumed reinsurance	42.5		805.5
Total gross par value of market policies issued	Total gross par value of market policies issued	$	12,623.3	$	11,827.6	Total gross par value of market policies issued	$	13,459.7	$	12,623.3
Gross written premiums	Gross written premiums	39.0		$	45.6	Gross written premiums	46.2		39.0
MSC collected	MSC collected	44.8		46.9		MSC collected	62.3		44.8
Total gross written premiums and MSC collected	Total gross written premiums and MSC collected	$	83.8	$	92.5	Total gross written premiums and MSC collected	$	108.5	$	83.8
Present value of future installment MSC collections		—		.3
Gross written premium adjustments on existing installment policies		.1		.1
Gross written premiums and MSC from new business		$	83.9	$	92.9

Total pricing	Total pricing	66 bps		79 bps		Total pricing	81 bps		66 bps

HG Global reported pre-tax income (loss) of $(35) million in the first nine months of 2022 compared to $16 million in the first nine months of ~~2021 compared to~~2021. The change in pre-tax income (loss) was driven primarily by $58 million of ~~$42 million~~net unrealized investment losses on the HG Global fixed income portfolio, as interest rates increased in the first nine months of 2020. The change in pre-tax income was driven primarily by lower investment returns on the HG Global investment portfolio, as interest rates rose in the first nine months of 2021 resulting in unrealized losses and declined in the first nine months of 2020 resulting in unrealized gains, and a decrease in interest income on the BAM Surplus Notes.2022. Results in the first nine months of 2022 and 2021 both included $9 million of interest income on the BAM Surplus ~~Notes compared~~Notes.

On April 29, 2022, HG Global received the proceeds of its new $150 million, 10-year term loan credit facility. In turn, on May 2, 2022, HG Global paid a $120 million cash dividend to ~~$14~~shareholders, of which $116 million ~~in the first nine months of 2020. Interest income on the BAM Surplus Notes decreased due~~was paid to ~~both a decrease in the balance of the BAM Surplus Notes and a decrease in the interest rate earned on the BAM Surplus Notes in the first nine months of 2021 compared to the first nine months of 2020.~~White Mountains.

White Mountains reported ~~$47~~$98 million of GAAP pre-tax loss from BAM in the first nine months of ~~2021~~2022 compared to ~~$31~~$47 million in the first nine months of ~~2020.~~2021. The ~~change~~increase in pre-tax loss was driven primarily by ~~lower~~$56 million of net unrealized investment ~~returns~~losses on ~~BAM’s investment~~the BAM fixed income portfolio, as interest rates ~~rose~~increased in the first nine months of ~~2021 resulting in unrealized losses and declined in the first nine months of 2020 resulting in unrealized gains, partially offset by a decrease in interest expense on the BAM Surplus Notes.~~2022. Results in the first nine months of ~~2021~~2022 included $9 million of interest expense on the BAM Surplus Notes ~~compared to $14 million in the first nine months of 2020. Interest expense on the BAM Surplus Notes decreased due to both a decrease in the balance of the BAM Surplus Notes~~ and ~~a decrease in the interest rate earned on the BAM Surplus Notes in the first nine months of 2021 compared to the first nine months of 2020. Results in the first nine months of 2021 also included $41~~$47 million of general and administrative expenses, compared to ~~$40~~$9 million of interest expense and $41 million of general and administrative expenses in the first nine months of ~~2020.~~2021.

Claims Paying Resources

BAM’s ~~“claims~~claims paying ~~resources” represents~~resources represent the capital and other financial resources BAM has available to pay claims and, as such, is a key indication of BAM’s financial strength.

BAM’s claims paying resources were $1,260 million as of September 30, 2022 compared to $1,192 million as of December 31, 2021 and $1,181 million as of September 30, ~~2021 compared to $987 million as of December 31, 2020 and $968 million~~2021. The increase in claims paying resources as of September 30, ~~2020. In~~2022 compared to December 31, 2021 was driven primarily by increases in the ~~first quarter~~statutory value of ~~2021, BAM completed a reinsurance agreement with Fidus Re that increased~~the collateral trusts resulting from deposits of ceded premiums and an increase in BAM’s ~~claims paying resources by $150 million. The reinsurance agreement with Fidus Re is accounted~~qualified statutory capital resulting from business operations for ~~using deposit accounting and any related financing expenses are recorded in general and administrative expenses as~~ the ~~agreement does not meet the risk transfer requirements necessary to be accounted for as reinsurance.~~nine months ended September 30, 2022.

The following table presents BAM’s total claims paying resources as of September 30, ~~2021,~~2022, December 31, ~~2020~~2021 and September 30, ~~2020:~~2021:

Millions September 30, 2021 December 31, 2020 September 30, 2020
Policyholders’ surplus $ 322.8 $ 324.7 $ 347.2
Contingency reserve 102.7 86.4 81.6
Qualified statutory capital 425.5 411.1 428.8
Net unearned premiums 48.3 45.2 43.6
Present value of future installment premiums and MSC 13.9 14.0 14.4
HG Re, Ltd. collateral trusts at statutory value 442.8 417.0 381.0
Fidus Re, Ltd. collateral trust at statutory value 250.0 100.0 100.0
Claims paying resources $ 1,180.5 $ 987.3 $ 967.8


Millions	September 30, 2022		December 31, 2021		September 30, 2021
Policyholders’ surplus	$	316.9	$	298.1	$	322.8
Contingency reserve	113.9		101.8		102.7
Qualified statutory capital	430.8		399.9		425.5
Net unearned premiums	53.3		49.5		48.3
Present value of future installment premiums and MSC	13.3		13.8		13.9
HG Re Collateral trusts at statutory value	512.7		478.9		442.8
Fidus Re Collateral trust at statutory value	250.0		250.0		250.0
Claims paying resources	$	1,260.1	$	1,192.1	$	1,180.5

6356

HG Global/BAM Balance Sheets

The following tables present amounts from HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM that are contained within White Mountains’s consolidated balance sheet as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021									September 30, 2022
Millions	Millions	HG Global		BAM		Eliminations and Segment Adjustment		Total		Millions	HG Global		BAM		Eliminations and Segment Adjustment		Total
Assets	Assets									Assets
Fixed maturity investments		$	417.9	$	480.5	$	—	$	898.4
Short-term investments		29.5		20.8		—		50.3
Fixed maturity investments, at fair value										Fixed maturity investments, at fair value	$	443.6	$	430.8	$	—	$	874.4
Short-term investments, at fair value										Short-term investments, at fair value	38.0		24.3		—		62.3
Total investments	Total investments	447.4		501.3		—		948.7		Total investments	481.6		455.1		—		936.7
Cash	Cash	3.9		17.9		—		21.8		Cash	5.2		12.1		—		17.3
BAM Surplus Notes	BAM Surplus Notes	388.2		—		(388.2)		—		BAM Surplus Notes	364.6		—		(364.6)		—
Accrued interest receivable on BAM Surplus Notes	Accrued interest receivable on BAM Surplus Notes	164.8		—		(164.8)		—		Accrued interest receivable on BAM Surplus Notes	166.4		—		(166.4)		—
Insurance premiums receivable										Insurance premiums receivable	4.7		6.6		(4.7)		6.6
Deferred acquisition costs	Deferred acquisition costs	59.9		31.7		(59.9)		31.7		Deferred acquisition costs	68.0		34.9		(68.0)		34.9
Insurance premiums receivable		4.6		6.9		(4.6)		6.9
Accrued investment income		2.2		3.1		—		5.3

Other assets	Other assets	—		13.6		(.2)		13.4		Other assets	6.5		16.1		(.3)		22.3
Total assets	Total assets	$	1,071.0	$	574.5	$	(617.7)	$	1,027.8	Total assets	$	1,097.0	$	524.8	$	(604.0)	$	1,017.8
Liabilities	Liabilities									Liabilities
BAM Surplus Notes(1)	BAM Surplus Notes(1)	$	—	$	388.2	$	(388.2)	$	—	BAM Surplus Notes(1)	$	—	$	364.6	$	(364.6)	$	—
Accrued interest payable on BAM Surplus Notes(2)	Accrued interest payable on BAM Surplus Notes(2)	—		164.8		(164.8)		—		Accrued interest payable on BAM Surplus Notes(2)	—		166.4		(166.4)		—
Preferred dividends payable to White Mountains’s subsidiaries(3)		385.7		—		—		385.7
Preferred dividends payable to White Mountains(3)										Preferred dividends payable to White Mountains(3)	327.2		—		—		327.2
Preferred dividends payable to non-controlling interests	Preferred dividends payable to non-controlling interests	13.7		—		—		13.7		Preferred dividends payable to non-controlling interests	12.1		—		—		12.1
Unearned insurance premiums	Unearned insurance premiums	213.4		43.6		—		257.0		Unearned insurance premiums	239.7		47.0		—		286.7
Debt - HG Global Senior Notes										Debt - HG Global Senior Notes	146.4		—		—		146.4
Accrued incentive compensation	Accrued incentive compensation	.8		20.2		—		21.0		Accrued incentive compensation	1.0		20.6		—		21.6
Accounts payable on unsettled investment purchases		—		5.4		—		5.4

Other liabilities	Other liabilities	.5		77.6		(64.7)		13.4		Other liabilities	4.1		86.3		(73.0)		17.4
Total liabilities	Total liabilities	614.1		699.8		(617.7)		696.2		Total liabilities	730.5		684.9		(604.0)		811.4
Equity	Equity									Equity
White Mountains’s common shareholders’ equity	White Mountains’s common shareholders’ equity	446.8		—		—		446.8		White Mountains’s common shareholders’ equity	366.8		—		—		366.8
Non-controlling interests	Non-controlling interests	10.1		(125.3)		—		(115.2)		Non-controlling interests	(0.3)		(160.1)		—		(160.4)
Total equity	Total equity	456.9		(125.3)		—		331.6		Total equity	366.5		(160.1)		—		206.4
Total liabilities and equity	Total liabilities and equity	$	1,071.0	$	574.5	$	(617.7)	$	1,027.8	Total liabilities and equity	$	1,097.0	$	524.8	$	(604.0)	$	1,017.8

(1) Under GAAP, the BAM Surplus Notes are classified as debt by the issuer. Under ~~statutory~~U.S. Statutory accounting, ~~principles,~~ they are classified as policyholders’ surplus.

(2) Under GAAP, interest accrues daily on the BAM Surplus Notes. Under ~~statutory~~U.S. Statutory accounting, ~~principles,~~ interest is not accrued on the BAM Surplus Notes until it has been approved for payment by insurance regulators.

(3) HG Global preferred dividends payable to White ~~Mountains’s subsidiaries is~~Mountains are eliminated in White Mountains’s consolidated financial statements. For segment reporting, the HG Global preferred dividends payable to White ~~Mountains’s subsidiaries~~Mountains included within the HG Global/BAM segment are eliminated against the offsetting receivable included within ~~the~~ Other Operations, ~~segment,~~ and therefore are added back to White Mountains’s common shareholders’ equity within the HG Global/BAM segment.

6457


		December 31, 2020									December 31, 2021
Millions	Millions	HG Global		BAM		Eliminations and Segment Adjustment		Total Segment		Millions	HG Global		BAM		Eliminations and Segment Adjustment		Total Segment
Assets	Assets									Assets
Fixed maturity investments		$	415.9	$	443.6	$	—	$	859.5
Short-term investments		16.5		43.9		—		60.4
Fixed maturity investments, at fair value										Fixed maturity investments, at fair value	$	461.7	$	472.4	$	—	$	934.1
Short-term investments, at fair value										Short-term investments, at fair value	17.8		14.6		—		32.4
Total investments	Total investments	432.4		487.5		—		919.9		Total investments	479.5		487.0		—		966.5
Cash	Cash	23.8		19.0		—		42.8		Cash	13.4		6.4		—		19.8
BAM Surplus Notes	BAM Surplus Notes	388.2		—		(388.2)		—		BAM Surplus Notes	364.6		—		(364.6)		—
Accrued interest receivable on BAM Surplus Notes	Accrued interest receivable on BAM Surplus Notes	155.7		—		(155.7)		—		Accrued interest receivable on BAM Surplus Notes	157.6		—		(157.6)		—
Insurance premiums receivable										Insurance premiums receivable	4.3		6.9		(4.3)		6.9
Deferred acquisition costs	Deferred acquisition costs	54.1		27.8		(54.1)		27.8		Deferred acquisition costs	62.7		33.1		(62.7)		33.1
Insurance premiums receivable		4.4		6.9		(4.4)		6.9
Accrued investment income		2.0		3.0		—		5.0

Other assets	Other assets	—		15.8		(.4)		15.4		Other assets	2.1		16.6		(.2)		18.5
Total assets	Total assets	$	1,060.6	$	560.0	$	(602.8)	$	1,017.8	Total assets	$	1,084.2	$	550.0	$	(589.4)	$	1,044.8
Liabilities	Liabilities									Liabilities
BAM Surplus Notes(1)	BAM Surplus Notes(1)	$	—	$	388.2	$	(388.2)	$	—	BAM Surplus Notes(1)	$	—	$	364.6	$	(364.6)	$	—
Accrued interest payable on BAM Surplus Notes(2)	Accrued interest payable on BAM Surplus Notes(2)	—		155.7		(155.7)		—		Accrued interest payable on BAM Surplus Notes(2)	—		157.6		(157.6)		—
Preferred dividends payable to White Mountains’s subsidiaries(3)		363.9		—		—		363.9
Preferred dividends payable to White Mountains(3)										Preferred dividends payable to White Mountains(3)	400.5		—		—		400.5
Preferred dividends payable to non-controlling interests	Preferred dividends payable to non-controlling interests	12.7		—		—		12.7		Preferred dividends payable to non-controlling interests	14.2		—		—		14.2
Unearned insurance premiums	Unearned insurance premiums	196.1		41.4		—		237.5		Unearned insurance premiums	221.5		44.8		—		266.3

Accrued incentive compensation										Accrued incentive compensation	1.1		23.6		—		24.7

Other liabilities	Other liabilities	2.2		98.0		(58.9)		41.3		Other liabilities	.5		83.4		(67.2)		16.7
Total liabilities	Total liabilities	574.9		683.3		(602.8)		655.4		Total liabilities	637.8		674.0		(589.4)		722.4
Equity	Equity									Equity
White Mountains’s common shareholders’ equity	White Mountains’s common shareholders’ equity	472.2		—		—		472.2		White Mountains’s common shareholders’ equity	437.5		—		—		437.5
Non-controlling interests	Non-controlling interests	13.5		(123.3)		—		(109.8)		Non-controlling interests	8.9		(124.0)		—		(115.1)
Total equity	Total equity	485.7		(123.3)		—		362.4		Total equity	446.4		(124.0)		—		322.4
Total liabilities and equity	Total liabilities and equity	$	1,060.6	$	560.0	$	(602.8)	$	1,017.8	Total liabilities and equity	$	1,084.2	$	550.0	$	(589.4)	$	1,044.8

(1) Under GAAP, the BAM Surplus Notes are classified as debt by the issuer. Under ~~statutory~~U.S. Statutory accounting, ~~principles,~~ they are classified as policyholders’ surplus.

6558

Ark

~~On January 1, 2021, White Mountains completed the~~ Ark ~~Transaction. See~~ ~~Note 2 — “Significant Transactions”. In the third quarter of 2021, Ark issued $163 million of floating rate unsecured subordinated notes in three separate transactions. See~~ ~~Note 7 — “Debt”. In connection with the issuance of the Ark 2021 Subordinated Notes, White Mountains~~is a specialty property and ~~Ark terminated White Mountains’s commitment to provide up to $200 million of additional equity capital to Ark.~~

~~Ark writes a diversified portfolio of~~casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance products, including property, marine & energy, specialty, accident & health and ~~casualty,~~casualty. Ark underwrites select coverages through its two major subsidiaries in the ~~Syndicates. Beginning in January 2021, Ark began writing certain classes of its business through GAIL.~~United Kingdom and Bermuda.

The following table presents the components of pre-tax ~~loss~~income (loss) included in White Mountains’s Ark segment for the three and nine months ended September 30, 2022 and 2021:


							Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021		Millions	2022		2021		2022		2021
Earned insurance and reinsurance premiums		$	213.4	$	435.8
Earned insurance premiums						Earned insurance premiums	$	346.1	$	213.4	$	757.8	$	435.8
Net investment income	Net investment income	.6		1.8		Net investment income	4.9		.6		9.7		1.8
Net realized and unrealized investment gains		.3		10.3
Net realized and unrealized investment gains (losses)						Net realized and unrealized investment gains (losses)	(14.4)		.3		(76.5)		10.3
Other revenues	Other revenues	3.4		9.4		Other revenues	6.6		3.4		10.1		9.4
Total revenues	Total revenues	217.7		457.3		Total revenues	343.2		217.7		701.1		457.3
Losses and LAE	Losses and LAE	129.2		247.8		Losses and LAE	213.7		129.2		456.2		247.8
Insurance and reinsurance acquisition expenses	Insurance and reinsurance acquisition expenses	53.7		124.4		Insurance and reinsurance acquisition expenses	74.8		53.7		174.9		124.4

General and administrative expenses - other underwriting	General and administrative expenses - other underwriting	13.3		43.6		General and administrative expenses - other underwriting	13.2		13.3		53.9		43.6
General and administrative expenses - all other	General and administrative expenses - all other	8.5		40.8		General and administrative expenses - all other	13.7		8.5		25.9		40.8
Interest expense	Interest expense	2.1		4.5		Interest expense	3.7		2.1		10.6		4.5
Total expenses	Total expenses	206.8		461.1		Total expenses	319.1		206.8		721.5		461.1
Pre-tax income (loss)	Pre-tax income (loss)	$	10.9	$	(3.8)	Pre-tax income (loss)	$	24.1	$	10.9	$	(20.4)	$	(3.8)

For the years of account prior to the Ark Transaction, a significant proportion of the Syndicates’ underwriting capital was provided by TPC Providers using whole account reinsurance contracts ~~through~~with Ark’s corporate member. The TPC Providers’ ~~economic~~ participation in the Syndicates for the ~~remaining~~2020 open ~~years~~year of account ~~prior to the Ark Transaction~~ is ~~approximately 51%~~43% of the total net result of the Syndicates. For the years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates. Captions within Ark’s results of operations are shown net of amounts relating to the TPC ~~Providers~~Providers’ share of the Syndicates’ results, including investment results.

Ark Results—Three Months Ended September 30, 2022 versus Three Months Ended September 30, 2021

Ark reported gross written premiums of $216 million, net written premiums of $193 million and net earned premiums of $346 million in the third quarter of 2022 compared to gross written premiums of $162 million, net written premiums of $121 million and net earned premiums of $213 million in the third quarter of 2021. Premium growth at Ark has been supported by favorable market conditions across most classes with general inflationary concerns, capacity withdrawal in catastrophe lines, and the ongoing conflict in Ukraine driving positive rate momentum.

Ark reported pre-tax income of $24 million in the third quarter of 2022 compared to $11 million in the third quarter of 2021. Ark’s pre-tax income for the third quarter of 2022 included $14 million of net realized and unrealized investment losses, driven primarily by unrealized losses on fixed income securities and the impact of foreign currency on its investment portfolio, compared to $0.3 million of net realized and unrealized investment gains in the third quarter of 2021.

Ark’s GAAP combined ratio was 87% in the third quarter of 2022 compared to 92% in the third quarter of 2021. The GAAP combined ratio for the third quarter of 2022 included 21 points of natural catastrophe losses, driven primarily by Hurricane Ian, compared to 23 points of ~~catastrophes,~~natural catastrophe losses in the third quarter of 2021, driven primarily by Hurricane Ida ~~(16 points)~~ and European floods. Catastrophe losses for the ~~European floods (6 points), partially offset by 6~~third quarter of 2022 included $51 million related to Hurricane Ian on a net basis after reinstatement premiums. The GAAP combined ratio for the third quarter of 2022 included three points of ~~net~~ favorable prior year ~~reserve~~ development, driven primarily by the ~~Property~~property and accident & health and specialty reserving lines of business, predominantly from business underwritten in London. This compared to six points of favorable prior year development in the third quarter of 2021, driven primarily by the property and accident & health reserving line of business.

Ark’s adjusted combined ratio, which adds back amounts ~~ceded~~attributable to TPC Providers, was 86% in the third quarter of 2022 compared to 89% in the third quarter of 2021. The adjusted combined ratio for the third quarter of 2022 and 2021 both included 21 points of ~~catastrophes, driven primarily by Hurricane Ida (16 points) and~~natural catastrophe losses. The adjusted combined ratio for the ~~European floods (6 points), partially offset by 6~~third quarter of 2022 included four points of ~~net~~ favorable prior year ~~reserve~~ development ~~driven primarily by the Property line~~compared to six points of ~~business.~~

~~Ark reported pre-tax income of $11 million~~favorable prior year development in the third quarter of 2021. The underlying drivers of year-over-year changes were the same as those impacting the GAAP combined ratio.

The following table presents Ark’s loss and ~~loss adjustment expense,~~LAE, insurance acquisition expense, other underwriting expense and combined ratios on both a GAAP-basis and an adjusted basis, which adds back amounts ~~ceded~~attributable to TPC Providers, for the three and nine months ended September 30, 2022 and 2021:


		Three Months Ended September 30, 2021									Three Months Ended September 30, 2022
$ in Millions	$ in Millions	GAAP			TPC Providers’ Share (1)		Adjusted			$ in Millions	GAAP			TPC Providers’ Share		Adjusted (1)
Insurance premiums:	Insurance premiums:									Insurance premiums:
Gross written premiums	Gross written premiums	$	162.4		$	—	$	162.4		Gross written premiums	$	215.5		$	—	$	215.5
Net written premiums	Net written premiums	$	120.9		$	2.0	$	122.9		Net written premiums	$	192.6		$	2.1	$	194.7
Net earned premiums	Net earned premiums	$	213.4		$	18.2	$	231.6		Net earned premiums	$	346.1		$	3.3	$	349.4

Insurance expenses:	Insurance expenses:									Insurance expenses:
Loss and loss adjustment expenses	Loss and loss adjustment expenses	$	129.2		$	9.0	$	138.2		Loss and loss adjustment expenses	$	213.7		$	(1.5)	$	212.2
Insurance acquisition expenses		53.7			—		53.7
Insurance and reinsurance acquisition expenses										Insurance and reinsurance acquisition expenses	74.8			—		74.8
Other underwriting expenses	Other underwriting expenses	13.3			.4		13.7			Other underwriting expenses	13.2			.9		14.1
Total insurance expenses	Total insurance expenses	$	196.2		$	9.4	$	205.6		Total insurance expenses	$	301.7		$	(.6)	$	301.1

Ratios:	Ratios:									Ratios:
Loss and loss adjustment expense	Loss and loss adjustment expense	60.5		%			59.7		%	Loss and loss adjustment expense	61.7		%			60.7		%
Insurance acquisition expense		25.2		%			23.2		%
Insurance and reinsurance acquisition expense										Insurance and reinsurance acquisition expense	21.6					21.4
Other underwriting expense	Other underwriting expense	6.2		%			5.9		%	Other underwriting expense	3.8					4.0
Combined Ratio	Combined Ratio	91.9		%			88.8		%	Combined Ratio	87.1		%			86.1		%

(1) See “NON-GAAP FINANCIAL MEASURES” on page ~~85.~~74.


	Three Months Ended September 30, 2021
$ in Millions	GAAP			TPC Providers’ Share		Adjusted (1)
Insurance premiums:
Gross written premiums	$	162.4		$	—	$	162.4
Net written premiums	$	120.9		$	2.0	$	122.9
Net earned premiums	$	213.4		$	18.2	$	231.6

Insurance expenses:
Loss and loss adjustment expenses	$	129.2		$	9.0	$	138.2
Insurance and reinsurance acquisition expenses	53.7			—		53.7
Other underwriting expenses	13.3			.4		13.7
Total insurance expenses	$	196.2		$	9.4	$	205.6

Ratios:
Loss and loss adjustment expense	60.5		%			59.7		%
Insurance and reinsurance acquisition expense	25.2					23.2
Other underwriting expense	6.2					5.9
Combined Ratio	91.9		%			88.8		%

(1) See “NON-GAAP FINANCIAL MEASURES” on page 74.

Gross Written Premiums

Gross written premiums increased 33% to $216 million in the third quarter of 2022 compared to the third quarter of 2021, with risk adjusted rate change up approximately 6% year over year. The increase in gross written premiums was driven primarily by the property line of business for both insurance and reinsurance across London and Bermuda resulting from favorable market conditions, as well as increased writings in specialty lines, predominantly in cyber. The following table presents Ark’s gross written premiums by line of business for the three months ended September 30, ~~2021~~2022 and the three months ended September 30, 2020, which was prior to White Mountains’s ownership of Ark. White Mountains believes this is useful in understanding the underwriting growth in the newly acquired business. Gross written premiums increased 79% to $162 million in the third quarter of 2021 compared to the third quarter of 2020, with risk adjusted rate change up approximately 7%.2021:


		Three Months Ended September 30,					Three Months Ended September 30,
Millions	Millions	2021		2020		Millions	2022		2021
Property	Property	$	74.7	$	45.2	Property	$	102.6	$	74.7
Specialty	Specialty	32.0		18.4		Specialty	43.5		32.0
Marine & Energy	Marine & Energy	29.5		15.4		Marine & Energy	36.0		29.5
Casualty	Casualty	17.3		2.2		Casualty	21.4		17.3
Accident & Health	Accident & Health	8.9		9.5		Accident & Health	12.0		8.9
Total Gross Written Premium	Total Gross Written Premium	$	162.4	$	90.7	Total Gross Written Premium	$	215.5	$	162.4

Ark Results— Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

Ark reported gross written premiums of $1,253 million, net written premiums of $1,007 million and net earned premiums of $758 million in the first nine months of 2022 compared to gross written premiums of $895 million, net written premiums of $726 million and net earned premiums of $436 million in the first nine months of 2021. Premium growth at Ark has been supported by favorable market conditions across most classes with inflationary concerns, capacity withdrawal in catastrophe lines, and the ongoing conflict in Ukraine driving positive rate momentum.

Ark reported pre-tax loss of $20 million in the first nine months of 2022 compared to $4 million in the first nine months of 2021. Ark’s pre-tax loss for the first nine months of 2022 included $77 million of net realized and unrealized investment losses, driven primarily by unrealized losses on fixed income securities and the impact of foreign currency on its investment portfolio, compared to $10 million of net realized and unrealized investment gains in the third quarter of 2021. Ark’s pre-tax loss for the first nine months of 2021 also reflected $25 million of transaction expenses related to the Ark Transaction.

Ark’s GAAP combined ratio was 90% in the first nine months of 2022 compared to 95% in the first nine months of 2021. The GAAP combined ratio for the first nine months of 2022 included 1613 points of natural catastrophe losses, driven primarily by Hurricane Ian. This compared to 16 points of natural catastrophe losses in the first nine months of 2021, driven primarily by Hurricane Ida, ~~(8 points),~~ Winter Storm Uri ~~(5 points)~~ and European floods. Catastrophe losses for the ~~European floods (3 points), partially offset by 5~~first nine months of 2022 included $51 million related to Hurricane Ian on a net basis after reinstatement premiums. The GAAP combined ratio for the first nine months of 2022 also included four points related to the ongoing conflict in Ukraine within the specialty and marine & energy lines of business. The GAAP combined ratio for the first nine months of 2022 included five points of ~~net~~ favorable prior year ~~reserve~~ development, driven primarily by the ~~Property, Marine~~property and accident & ~~Energy~~health and ~~Accident & Health~~specialty reserving lines of business, predominantly from business underwritten in London. This compared to five points of prior year favorable development in the first nine months to 2021, driven primarily by the property and accident & health reserving line of business.

Ark’s adjusted combined ratio, which adds back amounts ~~ceded~~attributable to TPC Providers, was 90% in the first nine months of 2022 compared to 93% in the first nine months of 2021. The adjusted combined ratio for the first nine months of 2022 included 13 points of natural catastrophe losses compared to 16 points of natural catastrophe losses driven primarily by Hurricane Ida (7 points), Winter Storm Uri (5 points) and the European floods (3 points), partially offset by 5 points of net favorable prior year reserve development, driven primarily by the Property, Marine & Energy and Accident & Health lines of business.

~~Ark reported pre-tax loss of $4 million~~ in the first nine months of ~~2021, which~~2021. The adjusted combined ratio for the first nine months of 2022 also included ~~$25 million of transaction expenses~~four points related to the ~~Ark Transaction.~~ongoing conflict in Ukraine. The adjusted combined ratio for the first nine months of 2022 and 2021 both included five points of favorable prior year development. The underlying drivers of year-over-year changes were the same as those impacting the GAAP combined ratio.

The following table presents Ark’s loss and loss adjustment expense, insurance acquisition expense, other underwriting expense and combined ratios on both a GAAP-basis and an adjusted basis, which adds back amounts ceded to TPC Providers, for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30, 2021
$ in Millions GAAP
TPC Providers’ Share (1)
Adjusted
Insurance premiums:
Gross written premiums $ 895.0 $ — $ 895.0
Net written premiums $ 725.5 $ (5.9) $ 719.6
Net earned premiums $ 435.8 $ 65.0 $ 500.8
Insurance expenses:
Loss and loss adjustment expenses $ 247.8 $ 47.2 $ 295.0
Insurance acquisition expenses 124.4 — 124.4
Other underwriting expenses 43.6 1.6 45.2
Total insurance expenses $ 415.8 $ 48.8 $ 464.6
Ratios:
Loss and loss adjustment expense 56.9 % 58.9 %
Insurance acquisition expense 28.5 % 24.8 %
Other underwriting expense 10.0 % 9.0 %
Combined Ratio 95.4 % 92.7 %


	Nine Months Ended September 30, 2022
$ in Millions	GAAP			TPC Providers’ Share		Adjusted (1)
Insurance premiums:
Gross written premiums	$	1,252.5		$	—	$	1,252.5
Net written premiums	$	1,006.5		$	3.4	$	1,009.9
Net earned premiums	$	757.8		$	9.2	$	767.0

Insurance expenses:
Loss and loss adjustment expenses	$	456.2		$	1.9	$	458.1
Insurance and reinsurance acquisition expenses	174.9			—		174.9
Other underwriting expenses	53.9			2.7		56.6
Total insurance expenses	$	685.0		$	4.6	$	689.6

Ratios:
Loss and loss adjustment expense	60.2		%			59.7		%
Insurance and reinsurance acquisition expense	23.1					22.8
Other underwriting expense	7.1					7.4
Combined Ratio	90.4		%			89.9		%

(1) See “NON-GAAP FINANCIAL MEASURES” on page ~~85.~~74.


	Nine Months Ended September 30, 2021
$ in Millions	GAAP			TPC Providers’ Share		Adjusted (1)
Insurance premiums:
Gross written premiums	$	895.0		$	—	$	895.0
Net written premiums	$	725.5		$	(5.9)	$	719.6
Net earned premiums	$	435.8		$	65.0	$	500.8

Insurance expenses:
Loss and loss adjustment expenses	$	247.8		$	47.2	$	295.0
Insurance and reinsurance acquisition expenses	124.4			—		124.4
Other underwriting expenses	43.6			1.6		45.2
Total insurance expenses	$	415.8		$	48.8	$	464.6

Ratios:
Loss and loss adjustment expense	56.9		%			58.9		%
Insurance and reinsurance acquisition expense	28.5					24.8
Other underwriting expense	10.0					9.0
Combined Ratio	95.4		%			92.7		%

(1) See “NON-GAAP FINANCIAL MEASURES” on page 74.

6862

Gross Written Premiums

Gross written premiums increased 40% to $1,253 million in the first nine months of 2022, compared to the first nine months of 2021, with risk adjusted rate change up approximately 9%. Ark’s premium growth has impacted almost all lines of business supported by the build out of the Bermuda platform launched in 2021 and favorable market conditions, notably within the property and specialty lines of business. The following table presents Ark’s gross written premiums by line of business for the first nine months ~~of 2021~~ended September 30, 2022 and 2020, which was prior to White Mountains’s ownership of Ark. White Mountains believes this is useful in understanding the underwriting growth in the newly acquired business. Gross written premiums increased 90% to $895 million in the first nine months of 2021 compared to the first nine months of 2020, with risk adjusted rate change up approximately 9%.2021:


		For the Nine Months Ended					For the Nine Months Ended
Millions	Millions	September 30, 2021		September 30, 2020		Millions	September 30, 2022		September 30, 2021
Property	Property	$	355.0	$	177.1	Property	$	521.7	$	355.0
Specialty						Specialty	327.2		210.5
Marine & Energy	Marine & Energy	219.7		109.8		Marine & Energy	271.2		219.7
Specialty		210.5		88.0
Casualty						Casualty	72.2		48.1
Accident & Health	Accident & Health	61.7		74.1		Accident & Health	60.2		61.7
Casualty		48.1		22.2
Total Gross Written Premium	Total Gross Written Premium	$	895.0	$	471.2	Total Gross Written Premium	$	1,252.5	$	895.0

Catastrophe Risk Management

Ark has exposure to losses caused by ~~natural catastrophe~~unpredictable catastrophic events including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, and severe winter ~~weather.~~weather all over the world. Catastrophes can also include large losses driven by public health crises, terrorist attacks, explosions, infrastructure failures, cyber-attacks and ~~cyber-attacks.~~armed conflicts. The extent of a catastrophe loss is a function of both the severity of the event and total amount of insured exposure ~~affected by~~to the event, as well as the ~~unique~~ coverage provided to customers.

Ark seeks to manage its exposure to catastrophic losses by limiting and monitoring the aggregate insured value of policies in geographic areas with exposure to catastrophic ~~events.~~events and by buying reinsurance. To manage, monitor and analyze insured values and potential losses, Ark utilizes proprietary and third-party catastrophe management software to estimate potential losses for many different catastrophe scenarios. As a part of its enterprise risk management function, Ark seeks to protect its downside risk from catastrophes and large loss events by purchasing reinsurance, including excess of loss protections, aggregate covers, and industry loss warranties.

~~Based upon its business plan for 2021, Ark estimates that its two~~With peak U.S. windstorm season substantially over, Ark’s near-term largest ~~modeled~~ probable maximum loss natural catastrophe ~~scenarios~~scenario on a ~~net~~per occurrence basis at a 1-in-250-year return period ~~are U.S. windstorm and~~is U.S. earthquake. ~~In each case, the~~The October 2022 net after-tax estimated ~~net~~ impact of a 1-in-250-year return period U.S. earthquake loss ~~is expected to be less than~~represents roughly 25% of Ark’s total tangible capital (shareholders equity and subordinated debt). ~~The~~This net impact is ~~before~~after income ~~tax but after~~taxes, reinstatement premiums, amounts ceded to third-party reinsurers and amounts ~~ceded~~attributable to TPC Providers.

In addition, Ark also has loss exposures to other global events including, but not limited to, Japanese earthquakes, Japanese windstorms, European windstorms, Southeast U.S. windstorms and U.S. wildfires.

~~Ark’s estimates~~ Outside of ~~potential~~natural catastrophe losses, are dependent on many variables, including assumptions about demand surge and storm surge, loss adjustment expenses, insurance-to-value and storm intensity in the aftermath of weather-related catastrophes. In addition, in the case of our reinsurance operations, Ark has exposure to ~~account for quality of data provided by ceding companies. Accordingly, if the assumptions~~non-natural or man-made large losses. The current largest exposures are incorrect, the losses Ark might incur from an actual catastrophe could be materially higher than the expectation of losses generated from modeled catastrophe scenarios. There could also be unmodelled losses which exceed the amounts estimated for U.S. windstormcyber, offshore energy production platforms, terrorism events and ~~U.S. earthquake. For a further discussion, see “Risk Factors – Unpredictable catastrophic events could adversely affect our results of operations and financial condition” in White Mountains’s Annual Report on Form 10-K for the year ended December 31, 2020.~~

~~NSM~~

The following table presents the components of GAAP net loss, EBITDA and adjusted EBITDA included in White Mountains’s NSM segment for the three and nine months ended September 30, 2021 and 2020. NSM’s pre-tax loss for the first nine months of 2021 ended September 30, 2021 included a loss of $29 million related to the sale of its Fresh Insurance’s motor business. See ~~Note 2 — “Significant Transactions”~~.

Three Months Ended September 30, Nine Months Ended September 30,
Millions 2021 2020 2021 2020
Commission revenues $ 67.0 $ 58.2 $ 194.6 $ 174.2
Broker commission expenses 20.4 17.1 60.9 56.4
Gross profit 46.6 41.1 133.7 117.8
Other revenues 15.3 12.5 46.8 37.6
General and administrative expenses 48.8 42.9 142.1 131.0
Change in fair value of contingent consideration .6 .7 .8 (1.6)
Amortization of other intangible assets 8.2 5.1 25.0 16.2
Loss on assets held for sale — — 28.7 —
Interest expense 5.9 6.1 17.7 16.1
GAAP pre-tax loss (1.6) (1.2) (33.8) (6.3)
Income tax (benefit) expense (.8) .1 (7.6) (2.8)
GAAP net loss (.8) (1.3) (26.2) (3.5)
Add back:
Interest expense 5.9 6.1 17.7 16.1
Income tax (benefit) expense (.8) .1 (7.6) (2.8)
General and administrative expenses — depreciation 1.4 1.2 3.7 2.9
Amortization of other intangible assets 8.2 5.1 25.0 16.2
EBITDA (1)
13.9 11.2 12.6 28.9
Exclude:
Change in fair value of contingent consideration liabilities .6 .7 .8 (1.6)
Non-cash equity-based compensation expense .2 1.0 1.3 1.0
Impairments of intangible assets — — — 6.2
Loss on assets held for sale — — 28.7 —
Acquisition-related transaction expenses 3.4 .6 3.6 5.6
Investments made in the development of new business lines .3 .2 .4 .6
Restructuring expenses .7 1.7 5.1 3.2
Adjusted EBITDA (1)
$ 19.1 $ 15.4 $ 52.5 $ 43.9

~~(1)~~ ~~See~~ ~~“NON-GAAP FINANCIAL MEASURES”~~ ~~on page 85.~~

~~NSM Results—Three Months Ended September 30, 2021 versus Three Months Ended September 30, 2020~~

NSM reported pre-tax loss of $2 million, adjusted EBITDA of $19 million and commission and other revenues of $82 million in the third quarter of 2021 compared to pre-tax loss of $1 million, adjusted EBITDA of $15 million and commission and other revenues of $71 million in the third quarter of 2020. Results for the third quarter of 2021 include the results of J.C. Taylor, an MGA offering classic and antique collector car insurance, from August 6, 2021, the date of its acquisition. See ~~Note 2 — “Significant Transactions”~~. NSM’s general and administrative expenses were $49 million in the third quarter of 2021 compared to $43 million in the third quarter of 2020. The increase in NSM’s general and administrative expenses in the third quarter of 2021 compared to the third quarter of 2020 was driven primarily by the acquisition of J.C. Taylor and increased technology costs and professional fees related to information systems projects.

NSM’s business consists of over 25 active programs that are broadly categorized into six market verticals. J.C. Taylor was added to the Specialty Transportation vertical in the third quarter of 2021. The following table presents the controlled premium and commission and other revenues by vertical for the three months ended September 30, 2021 and 2020:

Three Months Ended September 30,
2021 2020
$ in Millions
Controlled Premium (1)
Commission and Other Revenues
Controlled Premium (1)
Commission and Other Revenues
Specialty Transportation $ 94.2 $ 25.7 $ 81.6 $ 21.9
Real Estate 27.0 6.2 28.5 6.0
Social Services 41.2 10.2 34.6 8.6
Pet 48.3 19.9 35.3 14.7
United Kingdom 53.4 13.0 53.6 13.9
Other 46.1 7.3 32.2 5.6
Total $ 310.2 $ 82.3 $ 265.8 $ 70.7

~~(1)~~ ~~Controlled Premium are total premiums placed by NSM during the period.~~

~~Specialty Transportation:NSM’s specialty transportation controlled premium and commission and other revenues increased 15% and 17%, respectively, in the third~~quarter of 2021 compared to the third quarter of 2020, driven primarily by the impact of higher commission levels and fees in the collector car and trucking businesses and the acquisition of J.C. Taylor, slightly offset by lower contingent commissions. J.C. Taylor contributed $6 million of controlled premium and $2 million of commission and other revenues from the date of acquisition. The higher commission levels and fees in the collector car business will continue to flow through this program’s results over the balance of the year.

~~Real Estate:~~NSM’s real estate controlled premium decreased 5% while commission and other revenues increased 3% in the third quarter of 2021 compared to the third quarter of 2020. The decrease in controlled premiums was driven primarily by declines in both rate and units in the coastal condominium program. The declines in the coastal condominium program were driven primarily by lower insurance carrier capacity available for the program as NSM is transitioning to a new insurance carrier platform. Until additional capacity is raised, the impact of lower capacity in the coastal condominium program will continue to flow through this program’s results over the remainder of the year. The increase in commission and other revenues was driven primarily by profit commission in the excess and surplus habitational program offsetting the decline in controlled premium.

~~Social Services:NSM’s social services controlled premium and commission and other revenues both increased 19% in the thirdquarter of 2021 compared to the third quarter of 2020, driven primarily by rate increases and unit growth.~~

~~Pet:NSM’s pet controlled premium and commission and other revenues increased 37% and 35%, respectively, in the third quarter of 2021 compared~~to the third quarter of 2020, driven primarily by substantial growth in units. The increase in commission and other revenues was slightly less than premium as lower rate affinity business grew faster than direct market business.

~~United Kingdom:~~NSM’s United Kingdom controlled premium was flat while commission and other revenues decreased 6% in the third quarter of 2021 compared to the third quarter of 2020. Controlled premium was flat as growth in the MGA business offset declines in the brokerage business and from the sale of Fresh Insurance motor business. The decrease in commission and other revenues was driven primarily by the sale of the Fresh Insurance motor business in April 2021 and changes in product mix, as the decline in travel and leisure brokerage programs which have higher commission rates than the MGA business, declined while the MGA business grew.

~~Other~~: NSM’s other controlled premium and commission and other revenues increased 43% and 30%, respectively, in the third quarter of 2021 compared to the third quarter of 2020, driven primarily by increases in the workers compensation and staffing markets resulting from the emergence from COVID-19 lockdowns. Commission and other revenues increased less than controlled premium driven primarily by product mix shifts into lower rate retail programs.

~~COVID-19~~

The COVID-19 pandemic negatively impacted certain programs (e.g., lower volumes in the travel and outdoor leisure businesses in the United Kingdom) while others have been positively impacted (e.g., higher volumes in pet). Results at NSM could still be negatively impacted in the coming quarters, but White Mountains does not currently anticipate dramatic impacts over the fullness of time.

~~NSM Results—Nine Months Ended September 30, 2021 versus Nine Months Ended September 30, 2020~~

NSM reported pre-tax loss of $34 million, adjusted EBITDA of $53 million and commission and other revenues of $241 million in the first nine months of 2021 compared to pre-tax loss of $6 million, adjusted EBITDA of $44 million and commission and other revenues of $212 million in the first nine months of 2020. Results in the first nine months of 2021, include the results of J.C. Taylor, an MGA offering classic and antique collector car insurance, from August 6, 2021, the date of its acquisition. See ~~Note 2 — “Significant Transactions”~~. NSM’s pre-tax loss in the first quarter of 2021 includes a loss of $29 million related to the sale of its Fresh Insurance motor business. Results in the third quarter and first nine months of 2021 and 2020 include the results of Kingsbridge Group Limited, a leading provider of commercial lines insurance and consulting services to the contingent workforce in the United Kingdom, from April 7, 2020, the date of its acquisition. See ~~Note 2 — “Significant Transactions”~~. NSM’s general and administrative expenses were $142 million in the first nine months of 2021 compared to $131 million in the first nine months of 2020. The increase in NSM’s general and administrative expenses in the first nine months of 2021 compared to the first nine months of 2020 was driven primarily by the acquisitions of J.C. Taylor and Kingsbridge and increased technology costs and professional fees related to information systems projects.

~~The following table presents the controlled premium and commission and other revenues by vertical for the nine months ended September 30, 2021 and 2020:~~

Nine Months Ended September 30,
2021 2020
$ in Millions
Controlled Premium (1)
Commission and Other Revenues
Controlled Premium (1)
Commission and Other Revenues
Specialty Transportation $ 261.7 $ 73.0 $ 240.4 $ 66.1
Real Estate 112.1 25.2 142.6 32.7
Social Services 106.3 26.2 88.3 22.2
Pet 137.3 55.6 96.6 39.8
United Kingdom 156.0 39.9 134.0 36.3
Other 126.0 21.5 95.5 14.7
Total $ 899.4 $ 241.4 $ 797.4 $ 211.8

~~(1)~~ ~~Controlled Premium are total premiums placed by NSM during the period.~~

~~Specialty Transportation:~~NSM’s specialty transportation controlled premium and commission and other revenues increased 9% and 10%, respectively, in the first nine months of 2021 compared to the first nine months of 2020, driven primarily by the impact of higher commission levels and fees, unit growth and the acquisition of J.C. Taylor in the collector car business and higher commission levels in the trucking business, slightly offset by lower contingent commissions.J.C. Taylor contributed $6 million of controlled premium and $2 million of commission and other revenues from the date of acquisition. The higher commission levels and fees in the collector car business will continue to flow through this program’s results over the balance of the year.

~~Real Estate:NSM’s real estate controlled premium and commission and other revenues decreased 21% and 23%, respectively, in the first nine months of~~2021 compared to the first nine months of 2020, driven primarily by declines in both rate and units in the coastal condominium program, partially offset by unit growth in NSM’s excess and surplus habitational program. The declines in the coastal condominium program were driven primarily by lower insurance carrier capacity available for the program as NSM is transitioning to a new insurance carrier platform. Until additional capacity is raised, the impact of lower capacity in the coastal condominium program will continue to flow through this program’s results over the remainder of the year.

~~Social Services:NSM’s social services controlled premium and commission and other revenues increased 20% and 18%, respectively, in the first ninemonths of 2021 compared to the first nine months of 2020, driven primarily by rate increases and unit growth.~~

~~Pet:~~NSM’s pet controlled premium and commission and other revenues increased 42% and 40%, respectively, in the first nine months of 2021 compared to the first nine months of 2020, driven by substantial growth in units. The increase in commission and other revenues was slightly less than premium as lower rate affinity business grew faster than direct market business.

~~United Kingdom:NSM’s United Kingdom controlled premium and commission and other revenues increased 16% and 10%, respectively, in the first nine~~months of 2021 compared to the first nine months of 2020, driven primarily by the acquisition of Kingsbridge and growth in the MGA business. Excluding Kingsbridge, which was acquired on April 7, 2020, United Kingdom controlled premium increased 6% in the first nine months of 2021 compared to the first nine months of 2020, as the COVID-19 pandemic restrictions in the United Kingdom began to lift and unit growth increased in the MGA business partially offset by declines in the brokerage business and from the sale of Fresh Insurance motor business. Excluding Kingsbridge, commission and other revenues declined 5% due to the sale of the Fresh Insurance motor business in April 2021 and changes in product mix, as a decline in travel and leisure brokerage programs, which have higher commission rates than the MGA business, declined while the MGA business grew.

~~Other:NSM’s other controlled premium and commission and other revenues increased 32% and 46%, respectively, in the first nine months of 2021 compared to the first nine months of 2020, driven primarily by~~increases in the workers compensation and staffing markets resulting from the emergence of COVID-19 lockdowns. Commission and other revenues increased more than controlled premium due to product mix shifts into higher rate workers compensation and an increase in contingent commissions.political risk.

Kudu

~~During the third quarter~~Kudu provides capital solutions for boutique asset and wealth managers for a variety of ~~2021, Kudu deployed $131 million,~~purposes including ~~transaction costs, into two investment~~generational ownership transfers, management ~~firms: Third Eye Capital, a Canadian private credit manager,~~buyouts, acquisition and ~~Douglass Winthrop Advisors, a New York-based registered investment advisor. During the nine months ended September 30, 2021,~~growth finance, and legacy partner liquidity. Kudu also ~~deployed $12 million into two of its existing portfolio companies.~~ provides strategic assistance to investees from time to time.

As of September 30, ~~2021,~~2022, Kudu ~~has~~had deployed a total of ~~$529~~$711 million ~~including transaction costs,~~ in 1520 asset and wealth management firms globally, ~~which have~~including one that was exited. As of September 30, 2022, the asset and wealth management firms had combined assets under management of approximately ~~$60~~$67 billion, spanning a range of asset classes, including real estate, ~~real assets,~~ wealth management, hedge funds, private equity and alternative credit strategies. ~~Kudu’s capital was deployed at an average gross cash yield at inception of 10.0%.~~

~~On March 23, 2021, Kudu replaced its existing secured bank facility with the Kudu Credit Facility. Subject to maximum LTV levels, the total borrowing capacity~~As a result of the Kudu ~~Credit Facility is $300 million (which includes the current advanced amount~~Transaction, White Mountains’s basic ownership of ~~$203 million)~~Kudu decreased from 99.1% to 89.3%. See Note 72 — ~~“Debt”~~“Significant Transactions.”

The following table presents the components of GAAP net income, EBITDA and adjusted EBITDA included in White Mountains’s Kudu segment for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021

Net investment income	Net investment income	$	9.5	$	6.4	$	26.1	$	19.3	Net investment income	$	14.8	$	9.5	$	41.2	$	26.1
Net unrealized investment gains		18.9		9.8		62.5		1.5
Net realized and unrealized investment gains (losses)										Net realized and unrealized investment gains (losses)	41.1		18.9		45.8		62.5
Other revenues	Other revenues	.1		.1		.2		.2		Other revenues	—		.1		—		.2
Total revenues	Total revenues	28.5		16.3		88.8		21.0		Total revenues	55.9		28.5		87.0		88.8
General and administrative expenses	General and administrative expenses	3.3		2.2		9.0		7.5		General and administrative expenses	4.5		3.3		10.2		9.0
Amortization of other intangible assets	Amortization of other intangible assets	—		.1		.2		.3		Amortization of other intangible assets	—		—		.2		.2
Interest expense	Interest expense	1.9		1.4		9.2		4.3		Interest expense	4.2		1.9		10.3		9.2
Total expenses	Total expenses	5.2		3.7		18.4		12.1		Total expenses	8.7		5.2		20.7		18.4
GAAP pre-tax income		23.3		12.6		70.4		8.9
Income tax expense		7.9		3.8		25.4		3.2
GAAP net income		15.4		8.8		45.0		5.7
GAAP pre-tax income (loss)										GAAP pre-tax income (loss)	47.2		23.3		66.3		70.4
Income tax (expense) benefit										Income tax (expense) benefit	(16.6)		(7.9)		(21.1)		(25.4)
GAAP net income (loss)										GAAP net income (loss)	30.6		15.4		45.2		45.0
Add back:	Add back:									Add back:
Interest expense	Interest expense	1.9		1.4		9.2		4.3		Interest expense	4.2		1.9		10.3		9.2
Income tax expense		7.9		3.8		25.4		3.2
Income tax expense (benefit)										Income tax expense (benefit)	16.6		7.9		21.1		25.4
General and administrative expenses - depreciation										General and administrative expenses - depreciation	—		—		—		—
Amortization of other intangible assets	Amortization of other intangible assets	—		.1		.2		.3		Amortization of other intangible assets	—		—		.2		.2
EBITDA (1)	EBITDA (1)	25.2		14.1		79.8		13.5		EBITDA (1)	51.4		25.2		76.8		79.8
Exclude:	Exclude:									Exclude:
Net unrealized investment gains		(18.9)		(9.8)		(62.5)		(1.5)
Net realized and unrealized investment (gains) losses										Net realized and unrealized investment (gains) losses	(41.1)		(18.9)		(45.8)		(62.5)
Non-cash equity-based compensation expense	Non-cash equity-based compensation expense	.2		.1		.4		.1		Non-cash equity-based compensation expense	—		.2		.1		.4
Acquisition-related transaction expenses		.9		.1		.9		1.6
Transaction expenses										Transaction expenses	1.2		.9		1.4		.9
Adjusted EBITDA (1)	Adjusted EBITDA (1)	$	7.4	$	4.5	$	18.6	$	13.7	Adjusted EBITDA (1)	$	11.5	$	7.4	$	32.5	$	18.6

(1) See “NON-GAAP FINANCIAL MEASURES” on page ~~85.~~74.

Kudu Results—Three Months Ended September 30, ~~2021~~2022 versus Three Months Ended September 30, ~~2020~~2021

Kudu reported total revenues of $56 million, pre-tax income of ~~$23~~$47 million and adjusted EBITDA of ~~$7 million and total revenues of $29~~$12 million in the third quarter of ~~2021~~2022 compared to total revenues of $29 million, pre-tax income of ~~$13~~$23 million and adjusted EBITDA of ~~$5 million and total revenues of $16~~$7 million in the third quarter of ~~2020.~~ ~~Pre-tax~~2021. Total revenues and pre-tax income ~~and total revenues~~ in the third quarter of ~~2021~~2022 included ~~$19~~$41 million of net realized and unrealized ~~investment~~ gains on Kudu’s Participation Contracts compared to $19 million in the third quarter of 2021. Net realized and unrealized gains on Kudu’s Participation Contracts in the third quarter of 2022 were driven primarily by $59 million of increases in the fair value of two Participation Contracts resulting from pending sale transactions, partially offset by declines in assets under management at several managers with public equity exposure and unrealized foreign currency losses. However, Kudu’s Participation Contracts performed well relative to market benchmarks in a volatile quarter. Total revenues, pre-tax income and adjusted EBITDA in the third quarter of 2022 also included $15 million of net investment income compared to $10 million in the third quarter of 2020. The increase in net unrealized investment gains on Kudu’s Participation Contracts was driven primarily by asset growth, the performance of Kudu’s underlying asset management businesses and the expected value to be received in potential sale transactions. Pre-tax income and total revenues in the third quarter of 2021 included $10 million of net investment income compared to $6 million in the third quarter of 2020.2021. The increase in net investment income was driven primarily by amounts earned from the ~~$205~~$182 million ~~(including approximately $3~~in new deployments, including $2 million of transaction ~~costs) in new deployments~~costs, that Kudu made subsequent to ~~the second quarter of 2020.~~

~~COVID-19~~

Over time, Kudu’s revenues will fluctuate with increases and decreases in assets under management and fee levels at Kudu’s underlying asset management businesses, which are impacted by increases and decreases in financial markets, such as those experienced during 2020 in response to the COVID-19 pandemic. Kudu’s portfolio diversification, in particular its emphasis on private capital and its de-emphasis on long-only strategies, should continue to provide some downside protection to financial market declines.September 30, 2021.

Kudu Results—Nine Months Ended September 30, ~~2021~~2022 versus Nine Months Ended September 30, ~~2020~~2021

Kudu reported total revenues of $87 million, pre-tax income of ~~$70~~$66 million and adjusted EBITDA of ~~$19 million and total revenues of $89~~$33 million in the first nine months of ~~2021~~2022 compared to total revenues of $89 million, pre-tax income of $9$70 million and adjusted EBITDA of ~~$14 million and total revenues of $21 million in the first nine months of 2020.~~ Pre-tax income in the first nine months of 2021 included $63 million of net unrealized investment gains on Kudu’s Participation Contracts compared to $2 million in the first nine months of 2020. The increase in net unrealized investment gains on Kudu’s Participation Contracts was driven primarily by asset growth, the performance of Kudu’s underlying asset management businesses and the expected value to be received in potential sale transactions. Pre-tax income and total revenues in the first nine months of 2021 included $26 million of net investment income compared to $19 million in the first nine months of ~~2020.~~2021. Total revenues and pre-tax income in the first nine months of 2022 included $46 million of net realized and unrealized gains on Kudu’s Participation Contracts compared to $63 million in the first nine months of 2021. Net realized and unrealized gains on Kudu’s Participation Contracts in the first nine months of 2022 were driven primarily by $92 million of increases in the fair value of two Participation Contracts resulting from pending sale transactions, partially offset by declines in assets under management at several managers with public equity exposure and unrealized foreign currency losses. Total revenues, pre-tax income and adjusted EBITDA in the first nine months of 2022 also included $41 million of net investment income compared to $26 million in the first nine months of 2021. The increase in net investment income was driven primarily by amounts earned from ~~the $264~~$324 million ~~(including approximately $4~~in new deployments, including $3 million of transaction ~~costs) in new deployments~~costs, that Kudu made in ~~2020~~2022 and 2021.

Other Operations

The following table presents ~~a summary~~the components of pre-tax income (loss) included in White Mountains’s ~~financial results from its~~ Other Operations ~~segment~~ for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Millions	Millions	2021		2020		2021		2020		Millions	2022		2021		2022		2021
Net investment income	Net investment income	$	5.0	$	60.1	$	16.1	$	79.3	Net investment income	$	8.5	$	5.0	$	13.6	$	16.1
Net realized and unrealized investment gains (losses)	Net realized and unrealized investment gains (losses)	15.3		43.6		34.0		(17.4)		Net realized and unrealized investment gains (losses)	(17.3)		15.3		2.8		34.0
Net realized and unrealized investment (losses) gains from investment in MediaAlpha		(396.8)		250.0		(325.5)		295.0
Net realized and unrealized investment gains (losses) from investment in MediaAlpha										Net realized and unrealized investment gains (losses) from investment in MediaAlpha	(18.6)		(396.8)		(113.3)		(325.5)
Commission revenues	Commission revenues	2.4		2.1		7.0		6.1		Commission revenues	3.2		2.4		8.7		7.0
Other revenues	Other revenues	28.1		2.2		57.6		6.0		Other revenues	33.0		28.1		89.6		57.6
Total revenues	Total revenues	(346.0)		358.0		(210.8)		369.0		Total revenues	8.8		(346.0)		1.4		(210.8)
Cost of sales	Cost of sales	24.0		2.3		45.9		6.5		Cost of sales	25.0		24.0		68.8		45.9
General and administrative expenses	General and administrative expenses	14.5		44.3		79.7		87.1		General and administrative expenses	39.9		14.4		118.9		79.4
Amortization of other intangible assets	Amortization of other intangible assets	2.0		.2		2.9		.6		Amortization of other intangible assets	1.4		2.0		3.2		2.9
Interest expense	Interest expense	.4		.3		1.1		.8		Interest expense	.6		.4		1.2		1.1
Total expenses	Total expenses	40.9		47.1		129.6		95.0		Total expenses	66.9		40.8		192.1		129.3
Pre-tax (loss) income		$	(386.9)	$	310.9	$	(340.4)	$	274.0
Pre-tax income (loss)										Pre-tax income (loss)	$	(58.1)	$	(386.8)	$	(190.7)	$	(340.1)

Other Operations Results—Three Months Ended September 30, ~~2021~~2022 versus Three Months Ended September 30, ~~2020~~2021

White Mountains’s Other Operations ~~segment~~ reported pre-tax ~~(loss) income~~loss of ~~$(387)~~$58 million in the third quarter of ~~2021~~2022 compared to ~~$311~~$387 million in the third quarter of ~~2020.~~2021. White Mountains’s Other Operations ~~segment~~ reported net ~~realized and~~ unrealized investment ~~(losses) gains~~losses from its investment in MediaAlpha of ~~$(397)~~$19 million in the third quarter of ~~2021~~2022 compared to ~~$250~~$397 million in the third quarter of ~~2020.~~2021. Excluding MediaAlpha, White Mountains’s Other Operations ~~segment~~ reported net realized and unrealized investment gains (losses) of $(17) million in the third quarter of 2022 compared to $15 million in the third quarter of 2021, ~~compared~~driven primarily by losses in the fixed income portfolio due to ~~$44~~rising interest rates in the third quarter of 2022 and gains on other long-term investments in the third quarter of 2021. White Mountains’s Other Operations reported net investment income of $9 million in the third quarter of ~~2020. White Mountains’s Other Operations segment reported net investment income of~~2022 compared to $5 million in the third quarter of 2021, ~~compared to $60 million~~driven primarily by higher yields and an increase in the asset base of short-term investments and fixed maturity investments within Other Operations in the third quarter of ~~2020. The decrease in net investment income was driven primarily by $55 million of net proceeds received from a dividend recapitalization at MediaAlpha in~~2022 compared to the third quarter of ~~2020.~~2021. See Summary of Investment Results on page ~~76.~~66.

~~The~~White Mountains’s Other Operations ~~segment~~ reported ~~$28~~$33 million of other revenues in the third quarter of ~~2021~~2022 compared to $2$28 million in the third quarter of ~~2020. The~~2021. White Mountains’s Other Operations ~~segment~~ reported ~~$24~~$25 million of cost of sales in the third quarter of ~~2021~~2022 compared to $2$24 million in the third quarter of ~~2020.~~2021. The increase in other revenues was driven primarily by recent acquisitions within Other Operations.

White Mountains’s Other Operations reported general and administrative expenses of $40 million in the third quarter of 2022 compared to $14 million in the third quarter of 2021. The increase in general and administrative expenses in the third quarter of 2022 compared to the third quarter of 2021 was driven by higher incentive compensation costs, primarily in connection with the NSM Transaction and a higher share price.

Other Operations Results—Nine Months Ended September 30, 2022 versus Nine Months Ended September 30, 2021

White Mountains’s Other Operations reported pre-tax loss of $191 million in the first nine months of 2022 compared to $340 million in the first nine months of 2021. White Mountains’s Other Operations reported net realized and unrealized investment losses from its investment in MediaAlpha of $113 million in the first nine months of 2022 compared to $326 million in the first nine months of 2021. Excluding MediaAlpha, White Mountains’s Other Operations reported net realized and unrealized investment gains of $3 million in the first nine months of 2022 compared to $34 million in the first nine months of 2021. White Mountains’s Other Operations reported net investment income of $14 million in the first nine months of 2022 compared to $16 million in the first nine months of 2021, driven primarily by lower distributions from private equity funds in the first nine months of 2022 compared to the first nine months of 2021. See Summary of Investment Results on page 66.

White Mountains’s Other Operations reported $90 million of other revenues in the first nine months of 2022 compared to $58 million in the first nine months of 2021. White Mountains’s Other Operations reported $69 million of cost of sales in the first nine months of 2022 compared to $46 million in the first nine months of 2021. The increases in other revenues and cost of sales were driven primarily by ~~an acquisition~~recent acquisitions within ~~the~~Other Operations.

White Mountains’s Other Operations ~~segment.~~

~~The Other Operations segment~~ reported general and administrative expenses of $15 million in the third quarter of 2021 compared to $44 million in the third quarter of 2020. The decrease in general and administrative expenses was driven primarily by lower incentive compensation costs.

~~Other Operations Results—Nine Months Ended September 30, 2021 versus Nine Months Ended September 30, 2020~~

~~White Mountains’s Other Operations segment reported pre-tax (loss) income of $(340)~~$119 million in the first nine months of 2021 compared to $274 million in the first nine months of 2020. White Mountains’s Other Operations segment reported net realized and unrealized investment (losses) gains from its investment in MediaAlpha of $(326) million in the first nine months of 2021 compared to $295 million in the first nine months of 2020. Excluding MediaAlpha, White Mountains’s Other Operations segment reported net realized and unrealized investment gains (losses) of $34 million in the first nine months of 2021 compared to $(17) million in the first nine months of 2020. White Mountains’s Other Operations segment reported net investment income of $16 million in the first nine months of 20212022 compared to $79 million in the first nine months of ~~2020.~~2021. The ~~decrease~~increase in ~~net investment income was driven primarily by $55 million of net proceeds received from a dividend recapitalization at MediaAlpha~~general and administrative expenses in the first nine months of ~~2020. See~~ ~~Summary of Investment Results~~ ~~on page 76.~~

~~The Other Operations segment reported $58 million of other revenues in~~2022 compared to the first nine months of 2021 compared to $6 million in the first nine months of 2020. The Other Operations segment reported $46 million of cost of sales in the first nine months of 2021 compared to $7 million in the first nine months of 2020. The increases in other revenues and cost of sales were driven primarily by a new acquisition within the Other Operations segment.

The Other Operation segment reported general and administrative expenses of $80 million in the first nine months of 2021 compared to $87 million in the first nine months of 2020. The decrease in general and administrative expenses was driven ~~primarily~~ by ~~lower~~higher incentive compensation ~~costs.~~costs, primarily in connection with the NSM Transaction and a higher share price.

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.

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.

The following table presents the pre-tax investment returns for White Mountains’s consolidated portfolio for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Fixed income investments	Fixed income investments	—	%	0.8	%	(0.1)	%	4.4	%	Fixed income investments	(0.8)	%	—	%	(6.3)	%	(0.1)	%
Bloomberg Barclays U.S. Intermediate Aggregate Index	Bloomberg Barclays U.S. Intermediate Aggregate Index	—	%	0.5	%	(0.8)	%	5.2	%	Bloomberg Barclays U.S. Intermediate Aggregate Index	(3.8)	%	—	%	(11.0)	%	(0.8)	%

Common equity securities	Common equity securities	1.2	%	7.9	%	7.0	%	1.6	%	Common equity securities	1.8	%	1.2	%	(2.0)	%	7.0	%

Investment in MediaAlpha	Investment in MediaAlpha	(55.6)	%	135.5	%	(51.8)	%	197.2	%	Investment in MediaAlpha	(11.2)	%	(55.6)	%	(43.3)	%	(51.8)	%
Other long-term investments	Other long-term investments	4.0	%	2.0	%	14.5	%	(1.4)	%	Other long-term investments	3.0	%	4.0	%	7.7	%	14.5	%
Total common equity securities, investment in MediaAlpha and other long-term investments	Total common equity securities, investment in MediaAlpha and other long-term investments	(17.2)	%	34.2	%	(8.2)	%	33.5	%	Total common equity securities, investment in MediaAlpha and other long-term investments	1.6	%	(17.2)	%	(0.7)	%	(8.2)	%
Total common equity securities and other long-term investments	Total common equity securities and other long-term investments	3.7	%	5.4	%	13.5	%	0.9	%	Total common equity securities and other long-term investments	2.8	%	3.7	%	6.0	%	13.5	%
S&P 500 Index (total return)	S&P 500 Index (total return)	0.6	%	8.9	%	15.9	%	5.6	%	S&P 500 Index (total return)	(4.9)	%	0.6	%	(23.9)	%	15.9	%

Total consolidated portfolio	Total consolidated portfolio	(8.0)	%	13.5	%	(3.7)	%	15.4	%	Total consolidated portfolio	0.4	%	(8.0)	%	(3.6)	%	(3.7)	%
Total consolidated portfolio - excluding MediaAlpha	Total consolidated portfolio - excluding MediaAlpha	1.4	%	2.8	%	4.6	%	2.8	%	Total consolidated portfolio - excluding MediaAlpha	0.5	%	1.4	%	(1.4)	%	4.6	%

Investment Returns—Three and Nine Months Ended September 30, ~~2021~~2022 versus Three and Nine Months Ended September 30, ~~2020~~2021

White Mountains’s pre-tax total consolidated portfolio return on invested assets was 0.4% in the third quarter of 2022. This return included $19 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.5% in the third quarter of 2022. Excluding MediaAlpha, investment returns in the third quarter of 2022 were driven primarily by favorable other long-term investment results, which more than offset net unrealized investment losses in the fixed income portfolio due to rising interest rates. White Mountains’s pre-tax total consolidated portfolio return on invested assets was -8.0% in the third quarter of 2021. This return included $397 million of ~~net~~ unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 1.4% in the third quarter of 2021. Excluding MediaAlpha, investment returns in the third quarter of 2021 were driven primarily by favorable other long-term investments results.

White Mountains’s pre-tax total consolidated portfolio return on invested assets was ~~13.5%~~-3.6% in the ~~third quarter~~first nine months of ~~2020.~~2022. This return included ~~$305~~$113 million of net ~~investment income and~~ unrealized investment ~~gains~~losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was ~~2.8%~~-1.4% in ~~the third quarter~~first nine months of ~~2020.~~2022. Excluding MediaAlpha, investment returns in the ~~third quarter~~first nine months of ~~2020~~2022 were driven primarily by ~~a rebound in equity markets following the decline experienced~~net unrealized investment losses in the ~~first quarter of 2020 in reaction~~fixed income portfolio due to ~~the COVID-19 pandemic.~~

Fixed Income Results

White Mountains’s fixed income portfolio, including short-term investments, was ~~$2.4~~$3.1 billion and ~~$1.4~~$2.4 billion as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, which represented 59% and 56% of total invested assets. The increase was driven primarily by the ~~inclusion~~receipt of ~~invested assets~~cash proceeds from the NSM Transaction, partially offset by cash outflows relating to White Mountains’s self-tender offer in the ~~Ark Transaction.~~third quarter of 2022. The duration of White Mountains’s fixed income portfolio, including short-term investments, was ~~2.5~~2.2 years and ~~3.2~~2.6 years as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. White Mountains’s fixed income portfolio includes fixed maturity investments and short-term investments in the HG Re Collateral Trusts of ~~$447~~$455 million and ~~$432~~$480 million as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

White Mountains’s fixed income portfolio return was -0.8% in the third quarter of 2022 compared to a flat return in the third quarter of 2021, ~~compared to 0.8% in the third quarter of 2020,~~outperforming and in line with the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -3.8% and 0.0% for the comparable periods. White Mountains’s fixed income portfolio returned -6.3% in the first nine months of 2022, compared to -0.1% in the first nine months of 2021, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of ~~0.0%~~-11.0% and 0.5% for the comparable periods. White Mountains’s fixed income portfolio returned -0.1% in the first nine months of 2021 compared to 4.4% in the first nine months of 2020, outperforming and underperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -0.8% ~~and 5.2%~~ for the comparable periods.

The results in the third quarter and first nine months of 2022 were driven primarily by the impact of White Mountains’s short duration positioning as interest rates increased in both periods. The results in the third quarter and first nine months of 2021 were driven primarily by the short duration positioning of White Mountains’s fixed income portfolio as interest rates increased ~~during the period, partially offset by currency losses. 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 as credit spreads tightened during the period. 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.both periods.

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 ~~$1.8~~$2.1 billion and ~~$1.6~~$1.9 billion as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, which represented ~~42%~~41% and ~~54%~~44% of total invested assets. See Note 3 — “Investment ~~Securities”~~Securities.”~~. The change was driven primarily by an increase~~

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned 1.6% in the ~~fair value~~third quarter of ~~Kudu’s Participation Contracts, the inclusion~~2022, which included $19 million of ~~invested assets relating to the Ark Transaction~~unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and ~~the addition of a bank loan fund at Ark, partially offset by a decline~~other long-term investments returned 2.8% in the ~~fair value~~third quarter of ~~White Mountains’s investment in MediaAlpha.~~

2022. White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned -17.2% in the third quarter of 2021, ~~driven primarily by~~which included $397 million of unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 3.7% in the third quarter of 2021.

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned ~~34.2%~~-0.7% in the ~~third quarter~~first nine months of ~~2020,~~2022, which included ~~$305~~$113 million of net ~~investment income and~~ unrealized investment ~~gains~~losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned ~~5.4%~~6.0% in the ~~third quarter~~first nine months of ~~2020.~~

2022. White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned -8.2% in the first nine months of 2021, ~~driven primarily by $325~~which included $326 million of net realized and unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 13.5% in the first nine months of 2021. White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned 33.5% in the first nine months of 2020, which included $355 million of net investment income and unrealized investment gains from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 0.9% in the first nine months of 2020.

During the second half of 2020, White Mountains sold its portfolio of common equity securities, including its portfolio of ETFs and international common equity securities, in anticipation of funding the Ark Transaction. Following the Ark Transaction, White Mountains’s portfolio of common equity securities consists of passive ETFs that seek to provide investment results that generally correspond to the performance of the S&P 500 Index and international listed ~~funds held in the Ark portfolio. As~~equity funds. White Mountains’s portfolio of common equity securities was $333 million and $251 million as of September 30, ~~2021, the fair value of White Mountains’s international listed funds was $160 million.~~2022 and December 31, 2021.

White Mountains’s portfolio of common equity securities returned 1.8% in the third quarter of 2022 compared to 1.2% in the third quarter of 2021, ~~compared to 7.9% in the third quarter of 2020,~~ outperforming ~~and underperforming~~ the S&P 500 Index, returns of ~~0.6%~~-4.9% and ~~8.9%~~0.6% for the comparable periods. White Mountains’s portfolio of common equity securities returned -2.0% in the first nine months of 2022 compared to 7.0% in the first nine months of 2021, ~~compared to 1.6% in the first nine months of 2020,~~outperforming and underperforming the S&P 500 Index returns of ~~15.9%~~-23.9% and ~~5.6%~~15.9% for the comparable periods. The results ~~for~~in the third quarter and first nine months of 2022 and 2021 were driven primarily by relative outperformance and underperformance in White Mountains’s ~~non-U.S. common~~international listed equity ~~positions versus~~funds as compared to the S&P 500 Index for these periods. The results for the third quarter and first nine months of 2020 were driven primarily by relative underperformance in White Mountains’s non-U.S. common equity positions versus the S&P 500 Index for these periods.Index.

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Historically, White Mountains’s portfolio of ETFs was designed to provide investment results that generally corresponded to the performance of the S&P 500 Index. White Mountains’s portfolio of ETFs was fully liquidated in the fourth quarter of 2020. In the third quarter and first nine months of 2020, White Mountains’s portfolio of ETFs essentially earned the effective index return, before expenses. White Mountains also maintained relationships with a small number of third-party registered investment advisers (the “actively managed common equity portfolio”), who primarily invested in non-U.S. equity securities through unit trusts. At the end of the third quarter of 2020, White Mountains fully redeemed its actively managed common equity portfolio. White Mountains’s actively managed common equity portfolio returned 4.7% in the third quarter of 2020, underperforming the S&P 500 Index return of 8.9%. White Mountains’s actively managed common equity portfolio returned -11.0% in the first nine months of 2020, underperforming the S&P 500 Index returns of 5.6%.

White Mountains maintains a portfolio of other long-term investments that consists primarily of unconsolidated entities, including Kudu’s Participation Contracts, private equity funds and hedge funds, a ~~hedge~~bank loan fund, Lloyd’s trust deposits, ~~a bank loan fund,~~ ILS funds and private debt investments. White Mountains’s portfolio of other long-term investments was ~~$1.3~~$1.6 billion and ~~$787 million~~$1.4 billion as of September 30, ~~2021~~2022 and December 31, 2020. The change in other long-term investments was driven primarily by an increase in the fair value of Kudu’s Participation Contracts, the inclusion of invested assets relating to the Ark Transaction and the addition of a bank loan fund at Ark.2021.

White Mountains’s other long-term investments portfolio returned 3.0% in the third quarter of 2022 compared to 4.0% in the third quarter of ~~2021 compared to 2.0% in~~2021. Investment returns for the third quarter of ~~2020.~~2022 were driven primarily by net investment income, net unrealized investment gains and unrealized foreign currency losses from Kudu’s Participation Contracts, partially offset by net unrealized and realized investment losses from private equity funds and hedge funds and unrealized losses from foreign currency on Lloyd’s trust deposits. Investment returns for the third quarter of 2021 were driven primarily by ~~$28 million of~~ net investment income and unrealized investment gains from Kudu’s Participation Contracts, ~~a $10 million~~an increase in the fair value of White Mountains’s investment in PassportCard/DavidShield and net investment income and realized and unrealized investment gains from private equity funds.

White Mountains’s other long-term investments portfolio returned 7.7% in the first nine months of 2022 compared to 14.5% in the first nine months of 2021. Investment returns for the first nine months of 2022 were driven primarily by net investment income, net realized and unrealized investment gains and unrealized foreign currency losses from Kudu’s Participation Contracts, ~~were driven primarily by asset growth, the performance of Kudu’s underlying asset management businesses~~net investment income and ~~the expected value to be received in potential sale transactions. Investment returns~~net realized and unrealized investment gains from ~~White Mountains’s investment in PassportCard/DavidShield were driven primarily by growth in leisure travel premiums~~private equity funds and ~~commission revenues as the global economy recovered~~hedge funds and unrealized losses from ~~the COVID-19 pandemic.~~foreign currency on Lloyd’s trust deposits. Investment returns in the ~~third quarter~~first nine months of ~~2020 included $16 million of~~2021 were driven primarily by net investment income and unrealized investment gains from Kudu’s Participation Contracts, ~~partially offset by net realized and unrealized investment losses from private equity funds.~~

White Mountains’s other long-term investments portfolio returned 14.5% in the first nine months of 2021 compared to -1.4% in the first nine months of 2020. Investment returns for the first nine months of 2021 were driven primarily by $89 million of net investment income and unrealized investment gains from Kudu’s Participation Contracts, a $10 millionan increase in the fair value of White ~~Mountains’s~~Mountain’s investment in PassportCard/DavidShield and realized and unrealized investment gains from private equity funds. Investment returns from Kudu’s Participation Contracts were driven primarily by asset growth, the performance of Kudu’s underlying asset management businesses and the expected value to be received in potential sale transactions. Investment returns from PassportCard/DavidShield were driven primarily by growth in leisure travel premiums and commission revenues as the global economy recovered from the COVID-19 pandemic. Investment returns for the first nine months of 2020 were driven primarily by a $10 million decrease in the fair value of 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 leisure travel premium and commission revenues and net realized and unrealized investment losses from private equity funds and a private debt investment, partially offset by net investment income from Kudu’s Participation Contracts.

Foreign Currency Exposure

As of September 30, ~~2021,~~2022, White Mountains had foreign currency exposure on ~~$275~~$168 million of net assets from continuing operations primarily related to ~~NSM’s U.K.-based operations,~~Ark’s non-U.S. business, Kudu’s non-U.S. Participation Contracts, ~~Ark’s non-U.S. business~~ and certain other foreign consolidated and unconsolidated ~~entities.~~entities within Other Operations.

The following table presents the fair value of White Mountains’s foreign denominated net assets (net liabilities) by segment as of September 30, ~~2021:~~2022:


Currency $ in Millions	Ark		Kudu		Other Operations		Total Fair Value		% of Total Shareholders’ Equity
CAD	$	57.4	$	72.7	$	—	$	130.1	3.4	%
AUD	18.1		35.7		—		53.8		1.4
GBP	16.3		—		—		16.3		.4
EUR	(46.4)		—		11.2		(35.2)		(.9)
All other	—		—		3.0		3.0		.1
Total	$	45.4	$	108.4	$	14.2	$	168.0	4.4	%

Currency
$ in Millions NSM Kudu Other Operations Ark Total Fair Value
% of Total Shareholders’ Equity
GBP $ 123.4 $ — $ — $ 16.8 $ 140.2 3.8 %
CAD — 79.5 — 29.6 109.1 3.0 %
AUD — 43.7 — 12.4 56.1 1.5 %
EUR — — 22.1 (57.1) (35.0) (1.0) %
All other — — 4.4 — 4.4 .2 %
Total $ 123.4 $ 123.2 $ 26.5 $ 1.7 $ 274.8 7.5 %

III. 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~~such that taxes are imposed, the Bermuda Exempted Undertakings Tax Protection Act of 1966 states that 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.~~2035. The Company has subsidiaries and branches that operate in various other jurisdictions around the world ~~that~~and are subject to tax in the jurisdictions in which they operate. ~~The~~As of September 30, 2022, the primary jurisdictions in which the Company’s subsidiaries and branches ~~are~~were subject to tax ~~are~~were Ireland, Israel, Luxembourg, the United Kingdom and the United States.

White Mountains’s income tax benefit related to pre-tax loss from continuing operations for the three and nine months ended September 30, 2022 represented an effective tax rate of 24% and 9%. The effective tax rate was different from the U.S. statutory rate of 21%, driven primarily by full year forecasted income in jurisdictions with lower tax rates than the United States, partially offset by a full valuation allowance on net deferred tax assets in certain U.S. operations, consisting of the WM Adams, Inc. consolidated tax group within Other Operations and BAM, and state income taxes.

White Mountains’s income tax expense related to pre-tax loss from continuing operations for the three and nine months ended September 30, 2021 represented an effective tax rate of ~~(6)~~(8)% and ~~(12)~~(17)%. The effective tax rate was different from the U.S. statutory rate of 21%, ~~due to~~driven primarily by losses in jurisdictions with lower tax rates than the United States, a full valuation allowance on net deferred tax assets in certain U.S. operations, consisting of the WM Adams, Inc. consolidated tax group ~~included~~ within ~~the~~ Other Operations ~~segment~~ and BAM, and state income taxes. For the nine months ended September 30, 2021, the effective rate was also different from the U.S. statutory rate of ~~21%~~21.0% due to additional tax expense related to the revaluation of U.K. deferred tax assets and liabilities. On June 10, 2021, the U.K. enacted an increase in its corporate tax rate from 19% to 25% for periods after April 1, 2023. On June 30, 2021, White Mountains increased its net U.K. deferred tax liability to reflect the higher tax rate on temporary differences projected to reverse after the new rate becomes effective.

White Mountains’s income tax expense related to pre-tax income from continuing operations for the three and nine months ended September 30, 2020 represented an effective tax rate of 31% and 34%. The effective tax rate 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 included within the Other Operations segment 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 associated with the reorganization of the Guilford Holdings, Inc. consolidated U.S. tax group consisted of withholding taxes and the establishment of a partial valuation allowance on deferred tax assets of various service companies, other entities and investments.

IV. Discontinued Operations

NSM

On August 1, 2022, White Mountains closed the NSM Transaction. White Mountains received $1.4 billion in net cash proceeds at closing and recognized a net gain of $876 million, which was comprised of $887 million of net gain from sale of discontinued operations and $3 million of comprehensive income related to the recognition of foreign currency translation gains (losses) from the sale, partially offset by $14 million of compensation and other costs related to the transaction recorded in Other Operations. See Note 2 — “Significant Transactions.”

White Mountains reported net income from discontinued operations, net of tax, for NSM Group of $6 million for the period from July 1, 2022 to August 1, 2022 and $16 million for the period from January 1, 2022 to August 1, 2022. White Mountains reported net income (losses) from discontinued operations, net of tax, for NSM Group of $5 million and $(24) million for the third quarter and first nine months of 2021. The net income (losses) from discontinued operations, net of tax, for NSM Group in the first nine months of 2021 included a loss of $29 million related to the sale of a subsidiary. See Note 19 — “Held for Sale and Discontinued Operations.”

Sirius Group

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.~~2016 and a $1 million gain related to foreign currency translation. The liability related to certain interest deductions claimed by Sirius Group that had been disputed by the Swedish Tax ~~Agency (STA).~~Agency. In April 2021, the ~~STA~~Swedish Tax Agency informed the Swedish Administrative Court of Appeal that Sirius Group should prevail in its appeal (and that the interest deductions should not be disallowed). In June 2021, the Swedish Administrative Court of Appeal ruled in Sirius Group’s favor. See Note 19 — “Held for Sale and Discontinued Operations.”

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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 ~~premium and~~premiums, fee ~~collections,~~revenues, 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, ~~insurance acquisition expenses, loss payments, costs~~cost 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. ~~Claim settlements, premium~~Premiums, fee revenues, investment returns, claims payments 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 insurance and reinsurance 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~~Following is a description of the dividend capacity of White Mountains’s insurance and reinsurance and other operating subsidiaries:

HG Global/BAM

As of September 30, ~~2021,~~2022, 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 months ended September 30, 2021, HG Global declared and paid a $22 million preferred dividend, of which White Mountains received $21 million.~~ As of September 30, ~~2021,~~2022, HG Global has accrued ~~$399~~$339 million of dividends payable to holders of its preferred shares, ~~$386~~$327 million of which is payable to White Mountains and is eliminated in consolidation.

On April 29, 2022, HG Global received the proceeds of its new $150 million, 10-year term loan credit facility. In turn, on May 2, 2022, HG Global paid a $120 million cash dividend to shareholders, of which $116 million was paid to White Mountains.

As of September 30, ~~2021,~~2022, HG Global and its subsidiaries had $1$3 million of net unrestricted cash 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, ~~2021,~~2022, HG Re had ~~$758~~$1 million of net unrestricted cash and investments and $120 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts. As of September 30, 2022, HG Re had $718 million of statutory capital and surplus and ~~$845~~$834 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, ~~2021,~~2022, the Collateral Trusts held assets of ~~$845~~$834 million, which included ~~$450~~$458 million of cash and investments, ~~$388~~$365 million of BAM Surplus Notes and $7$11 million of interest receivable on the BAM Surplus Notes.

~~As of September 30, 2021, HG Re had $2 million of cash and investments and $121 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts.~~

During the three and nine months ended September 30, ~~2021,~~2022, BAM made no repayments of the BAM Surplus Notes or accrued interest. In January 2020, BAM made a one-time $65 million cash payment of principal and interest on the BAM Surplus 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. See Note 10 — “Municipal Bond Guarantee ~~Insurance”~~.Insurance.”

Ark

During any 12-month period, GAIL, a class 4 licensed Bermuda insurer, has the ability to ~~declare or pay dividends or~~(i) make capital distributions ~~during any 12-month period~~based on 15% of its total statutory capital per the previous year’s statutory financial statements, or (ii) make dividend payments based on 25% of its total statutory capital and surplus per the previous year’s statutory financial statements, without ~~the~~ prior approval of Bermuda regulatory ~~authorities on~~authorities. Accordingly, White Mountains expects GAIL will have the ~~condition that any such declaration or payment of dividends or~~ability to make 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$114 million during 2022, which is equal to 15% of its December 31, ~~2020~~2021 statutory capital ~~excluding earned surplus. The amount~~ of ~~dividends available to be paid by GAIL in any given year is also~~$758 million, subject to ~~cash flow~~meeting all appropriate liquidity and ~~earnings generated by GAIL's business.~~solvency requirements. During the nine months ended September 30, ~~2021,~~2022, GAIL did not pay a dividend to its immediate parent.

During the nine months ended September 30, 2022, Ark paid $11 million of dividend to shareholders, $8 million of which was paid to White Mountains. As of September 30, ~~2021,~~2022, Ark and its intermediate holding companies had $4$21 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 nine months ended September 30, 2021, Ark did not pay any dividends to its immediate parent.~~

~~NSM~~Kudu

During the nine months ended September 30, ~~2021, NSM~~2022, Kudu distributed $4$19 million to unitholders, substantially all of which was paid to White Mountains. As of September 30, ~~2021, NSM~~2022, Kudu had ~~$34~~$68 million of net unrestricted ~~cash and short-term investments.~~

~~Kudu~~

During the nine months ended September 30, 2021, Kudu distributed $9 million to unitholders, substantially all of which was paid to White Mountains. As of September 30, 2021, Kudu had $10 million of net unrestricted cash and short-term investments.cash.

Other Operations

During the nine months ended September 30, ~~2021,~~2022, White Mountains paid a $3 million common share dividend. As of September 30, ~~2021,~~2022, the Company and its intermediate holding companies had ~~$507~~$1,076 million of net unrestricted cash, short-term investments and fixed maturity investments, ~~$316~~$148 million of MediaAlpha common stock, $46 million of common equity securities and ~~$160~~$292 million of private equity and hedge funds, ILS funds and ~~ILS funds.~~unconsolidated entities.

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Financing

The following table presents White Mountains’s capital structure as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


$ in Millions	$ in Millions	September 30, 2021			December 31, 2020			$ in Millions	September 30, 2022			December 31, 2021

HG Global Senior Notes (1)								HG Global Senior Notes (1)	$	146.4		$	—
Ark 2007 Subordinated Notes (1)	Ark 2007 Subordinated Notes (1)	$	43.9		$	—		Ark 2007 Subordinated Notes (1)	30.0			30.0

Ark 2021 Subordinated Notes (1)(2)	Ark 2021 Subordinated Notes (1)(2)	156.8			—			Ark 2021 Subordinated Notes (1)(2)	150.0			155.9
NSM Bank Facility (1)(2)		293.7			271.3
Other NSM debt (1)		1.3			1.3
Kudu Credit Facility (1)(2)	Kudu Credit Facility (1)(2)	195.6			—			Kudu Credit Facility (1)(2)	253.5			218.2
Kudu Bank Facility (1)(2)		—			86.3
Other Operations debt (1)(2)	Other Operations debt (1)(2)	19.1			17.5			Other Operations debt (1)(2)	35.6			16.8
Total debt from continuing operations								Total debt from continuing operations	615.5			420.9
Debt from discontinued operations (2)(3)								Debt from discontinued operations (2)(3)	—			272.1
Total debt	Total debt	710.4			376.4			Total debt	615.5			693.0
Non-controlling interests—excluding BAM	Non-controlling interests—excluding BAM	257.9			35.2			Non-controlling interests—excluding BAM	318.4			280.6
Total White Mountains’s common shareholders’ equity	Total White Mountains’s common shareholders’ equity	3,521.7			3,906.0			Total White Mountains’s common shareholders’ equity	3,708.0			3,548.1
Total capital	Total capital	4,490.0			4,317.6			Total capital	4,641.9			4,521.7
Time-value discount on expected future payments on the BAM Surplus Notes (3)		(128.0)			(142.5)
HG Global’s unearned premium reserve (3)		206.8			190.0
HG Global’s net deferred acquisition costs (3)		(58.1)			(52.4)
Time-value discount on expected future payments on the BAM Surplus Notes (4)								Time-value discount on expected future payments on the BAM Surplus Notes (4)	(110.8)			(125.9)
HG Global’s unearned premium reserve (4)								HG Global’s unearned premium reserve (4)	232.2			214.6
HG Global’s net deferred acquisition costs (4)								HG Global’s net deferred acquisition costs (4)	(65.9)			(60.8)
Total adjusted capital	Total adjusted capital	$	4,510.7		$	4,312.7		Total adjusted capital	$	4,697.4		$	4,549.6

Total debt to total adjusted capital	Total debt to total adjusted capital	15.7		%	8.7		%	Total debt to total adjusted capital	13.1		%	15.2		%

(1) See Note 7 — “Debt” for details of debt ~~arrangements.~~arrangements from continuing operations.

(2) Net of unamortized issuance ~~costs~~costs.

(3) The NSM bank facility with Ares Capital Corporation and the other NSM debt was settled in conjunction with the closing of the NSM Transaction and has been classified as held for sale as of December 31, 2021.

(4) 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.

Covenant Compliance

As of September 30, ~~2021,~~2022, White Mountains was in compliance in all material respects with all of the covenants under ~~all of~~ its debt instruments.

Share Repurchases

White Mountains’s board of directors has authorized the Company to repurchase its common shares from time to time, subject to market conditions. The repurchase authorizations do not have a stated expiration date. As of September 30, ~~2021,~~2022, White Mountains may repurchase an additional ~~463,223~~324,626 shares under these board authorizations. In addition, from time to time White Mountains has also repurchased its common shares through ~~tender~~self-tender offers that were separately approved by its board of directors.

During the ~~third quarter of 2021,~~nine months ended September 30, 2022, White Mountains repurchased and retired ~~79,294~~457,180 of its common shares for ~~$87~~$611 million at an average share price of ~~$1,099, or 93%~~$1,335, which was approximately 91% of White Mountains’s ~~September 30, 2021~~ adjusted book value per ~~share.~~ share as of September 30, 2022. The majority of these shares were repurchased through a “modified Dutch auction” self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses. Of the shares White Mountains repurchased in the first nine months of 2022, 4,011 were to satisfy employee income tax withholding pursuant to employee benefit plans, which do not reduce the board authorizations.

During the nine months ended September 30, 2021, White Mountains repurchased and retired 86,512 of its common shares for $95 million, at an average share price of $1,094, which was approximately 93% of White Mountains’s September 30, 2021 adjusted book value per share. Of the shares White Mountains repurchased in the first nine months of 2021, 7,218 were to satisfy employee income tax withholding pursuant to employee benefit plans, which do not reduce the board authorizations.

During the nine months ended September 30, 2020, White Mountains repurchased and retired 99,087 of its common shares for $85 million, at an average share price of $859, which was approximately 78% of White Mountains’s September 30, 2020 adjusted book value per share. Of the shares White Mountains repurchased in the first nine months of 2020, 5,899 were to satisfy employee income tax withholding pursuant to employee benefit plans. White Mountains did not repurchase any of its common shares in the third quarter of 2020.

Cash Flows

Detailed information concerning White Mountains’s cash flows during the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 follows:

Cash flows from operations for the nine months ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021

Net cash provided from (used for) operations was ~~$46~~$118 million infor the nine months ended September 30, ~~2021~~2022 compared to ~~$12~~$6 million infor the nine months ended September 30, ~~2020. During the first nine months ended September 30, 2021, the~~2021. The increase in cash provided from operations was driven primarily by ~~the~~ cash ~~inflow~~provided from Ark’s operations in 2022 compared to cash used for Ark’s operations in 2021, which included expenses from the Ark Transaction. This increase in cash provided from operations was partially offset by the ~~deployments~~increase in ~~Kudu’s participation contracts and Ark’s transaction expenses.~~investments in Kudu Participation Contracts in 2022. As of September 30, ~~2021,~~2022, the Company and its intermediate holding companies had ~~$507~~$1,076 million of net unrestricted cash, short-term investments and fixed maturity investments, ~~$316~~$148 million of MediaAlpha common stock, $46 million of common equity securities and ~~$160~~$292 million of private equity funds, hedge funds, ILS funds and ~~ILS funds.~~unconsolidated entities.

Cash flows from investing and financing activities for the nine months ended September 30, 2022

Financing and Other Capital Activities

During the nine months ended September 30, 2022, the Company declared and paid a $3 million cash dividend to its common shareholders.

During the nine months ended September 30, 2022, White Mountains repurchased and retired 457,180 of its common shares for $611 million. The majority of these shares were repurchased through a “modified Dutch auction” self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses. Of the shares White Mountains repurchased in the first nine months of 2022, 4,011 were to satisfy employee income tax withholding pursuant to employee benefit plans.

During the nine months ended September 30, 2022, HG Global received net proceeds of $147 million from the issuance of the HG Global Senior Notes.

During the nine months ended September 30, 2022, BAM received $62 million in MSC.

During the nine months ended September 30, 2022, Kudu borrowed $35 million in term loans under the Kudu Credit Facility.

Acquisitions and Dispositions

On May 26, 2022, Kudu raised $115 million of equity capital from the Kudu Transaction. Mass Mutual, White Mountains and Kudu management contributed $64 million, $50 million and $1 million in the Kudu Transaction, respectively.

On August 1, 2022, White Mountains closed the previously announced NSM Transaction. White Mountains received $1.4 billion in net cash proceeds at closing.

Cash flows from investing and financing activities for the nine months ended September 30, 2021

Financing and Other Capital Activities

During the nine months ended September 30, 2021, the Company declared and paid a $3 million cash dividend to its common shareholders.

During the nine months ended September 30, 2021, White Mountains repurchased and retired 86,512 of its common shares for $95 million, 7,218 of which were repurchased under employee benefit plans for statutory withholding tax payments.

During the nine months ended September 30, 2021, BAM received $45 million in MSC.

During the nine months ended September 30, 2021, HG Global declared and paid $22 million of preferred dividends, of which $21 million was paid to White Mountains.

During the third quarter of 2021, Ark issued $163 million face value floating rate unsecured subordinated notes at par in three transactions for proceeds of $158 million, net of debt issuance costs.

During the nine months ended September 30, 2021, ~~NSM distributed $4 million to unitholders, substantially all of which was paid to White Mountains.~~

~~During the nine months ended September 30, 2021, NSM repaid $2 million in term loans, borrowed $35 million in revolving loans and repaid $9 million in revolving loans under the NSM Bank Facility.~~

~~During the nine months ended September 30, 2021, Kudu distributed $9 million to unitholders, substantially all of which was paid to White Mountains.~~

~~During the nine months ended September 30, 2021,~~ Kudu borrowed $3 million in term loans under the Kudu Bank Facility.

On March 23, 2021, Kudu entered into the Kudu Credit Facility with an initial draw of $102 million, of which $92 million was used to repay the outstanding principal balance on its term loans under the Kudu Bank Facility. ~~During the nine months ended September 30, 2021, Kudu borrowed an additional $101 million in term loans under the Kudu Credit Facility.~~

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Acquisitions and Dispositions

On January 1, 2021 White Mountains completed the Ark Transaction, which included contributing $605 million of equity capital to Ark, at a pre-money valuation of $300 million, and purchasing $41 million of shares from certain selling shareholders. In the fourth quarter of 2020, White Mountains prefunded/placed in escrow a total of $646 million in preparation for closing the Ark Transaction.

~~On August 6, 2021, NSM acquired 100% of J.C. Taylor for $50 million of upfront cash consideration. NSM borrowed $35 million from the NSM Bank Facility to fund the acquisition.~~

~~Cash flows from investing and financing activities for the nine months ended September 30, 2020~~

~~Financing and Other Capital Activities~~

~~During the nine months ended September 30, 2020, the Company declared and paid a $3 million cash dividend to its common shareholders.~~

During the nine months ended September 30, 2020, White Mountains repurchased and retired 99,087 of its common shares for $85 million, 5,899 of which were repurchased under employee benefit plans for statutory withholding tax payments.

~~During the nine months ended September 30, 2020, BAM received $47 million in MSC.~~

~~During the nine months ended September 30, 2020, BAM repaid $48 million of principal and paid $17 million of accrued interest on the BAM Surplus Notes.~~

~~During the nine months ended September 30, 2020, HG Global declared and paid $23 million of preferred dividends, of which $22 million was paid to White Mountains.~~

During the nine months ended September 30, 2020, NSM borrowed £43 million ($52 million based upon the foreign exchange spot rate at the date of acquisition) in term loans under the NSM Bank Facility for the Kingsbridge transaction.

~~During the nine months ended September 30, 2020, Kudu borrowed $17 million in term loans under the Kudu Bank Facility and made no repayments.~~

~~Acquisitions and Dispositions~~

On April 7, 2020, NSM acquired 100% of Kingsbridge for £107 million ($132 million based upon the foreign exchange spot rate at the date of acquisition) in upfront cash. White Mountains contributed $80 million to NSM and NSM borrowed £43 million ($52 million based upon the foreign exchange spot rate at the date of acquisition) to fund the transaction.

~~On May 7, 2020 White Mountains made an additional $15 million investment in PassportCard/DavidShield.~~

NON-GAAP FINANCIAL MEASURES

This report includes 12nine non-GAAP financial measures that have been reconciled tofrom 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 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, 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 BAM Surplus Notes, the present value of the BAM Surplus Notes, including accrued interest and using an 8% discount rate, was estimated to be ~~$132~~$114 million, ~~$137~~$120 million, ~~$147~~$130 million and ~~$149~~$132 million less than the nominal GAAP carrying values as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively.

The value of HG Global’s unearned premium reserve, net of deferred acquisition costs, was ~~$154~~$172 million, ~~$150~~$164 million, ~~$142~~$159 million and ~~$136~~$154 million as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, 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 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 ~~56.~~

~~BAM’s gross written premiums and MSC from new business~~

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 61.50.

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

Ark’s adjusted loss and ~~loss adjustment expense~~LAE 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~~the impact of whole-account quota-share reinsurance arrangements attributable to TPC Providers for the Syndicates. The impact of these reinsurance arrangements ~~relate~~relates 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.~~basis (i.e., 100% of the Syndicates’ results). The reconciliation from the GAAP ratios to the adjusted ratios is included on page ~~67.~~60.

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~~NSM’s 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 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, (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 liabilities~~ - Contingent consideration 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, contingent consideration 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’s 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.

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 70.

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),~~(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 realized and unrealized investment 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 realized and unrealized investment ~~(gains) losses~~gains (losses) - Represents net unrealized investment gains and losses on ~~Kudu's~~Kudu’s Participation Contracts, which are recorded at fair value under ~~GAAP.~~GAAP, and realized investment gains and losses on Kudu’s Participation Contracts sold during the period.

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

•~~Acquisition-related transaction~~Transaction expenses - Represents costs directly related to ~~Kudu's transactions to acquire Participation Contracts,~~Kudu’s mergers and acquisitions activity, 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 ~~73.~~

64.

Total consolidated portfolio return excluding MediaAlpha

Total consolidated portfolio return excluding MediaAlpha is a non-GAAP financial measure that removes the net investment income and net realized and unrealized investment gains (losses) from White Mountains’s investment in MediaAlpha. White Mountains believes this measure to be useful to management and investors by showing the underlying performance of White Mountains’s investment portfolio without regard to MediaAlpha. The following tables present reconciliations from GAAP to the reported ~~percentages:~~percentages for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
GAAP Return Remove MediaAlpha Return - Excluding MediaAlpha GAAP Return Remove MediaAlpha Return - Excluding MediaAlpha
Total consolidated portfolio
return (8.0) % 9.4 % 1.4 % 13.5 % (10.7) % 2.8 %


	Three Months Ended September 30, 2022			Three Months Ended September 30, 2021
		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha
Total consolidated portfolio return		0.4	%	0.1	%	0.5	%	(8.0)	%	9.4	%	1.4	%

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
GAAP Return Remove MediaAlpha Return - Excluding MediaAlpha GAAP Return Remove MediaAlpha Return - Excluding MediaAlpha
Total consolidated portfolio
return (3.7) % 8.3 % 4.6 % 15.4 % (12.6) % 2.8 %


	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha		GAAP Return		Remove MediaAlpha		Return - Excluding MediaAlpha
Total consolidated portfolio return		(3.6)	%	2.2	%	(1.4)	%	(3.7)	%	8.3	%	4.6	%

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 ~~82.~~72.

CRITICAL ACCOUNTING ESTIMATES

Refer to the Company’s ~~2020~~2021 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s critical accounting estimates. ~~The following describes changes to White Mountains’s critical accounting estimates since December 31, 2020 as of September 30, 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, 2021, approximately 69% 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 fixed maturity investments, primarily its investments in U.S. Treasuries and short-term investments, which include U.S. Treasury Bills, its investment in MediaAlpha subsequent to the MediaAlpha IPO, and common equity securities.~~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, mortgage and asset-backed securities and collateralized loan obligations. Investments valued using Level 2 inputs also include certain common equity listed funds traded on foreign exchanges, which White Mountains values using the fund manager’s published 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

~~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, 2021, White Mountains owned a portfolio of other long-term investments valued at $1.3 billion, 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 investments. As of September 30, 2021, $815 million of White Mountains’s other long-term investments consisting primarily of unconsolidated entities, including Kudu’s Participation Contracts and private debt investments, 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, 2021, $471 million of White Mountains’s other long-term investments, consisting of private equity funds, a hedge fund, Lloyd’s trust deposits, a bank loan fund, 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, 2021, White Mountains’s most significant other long-term investments that are valued using Level 3 measurements include Kudu’s Participation Contracts and PassportCard/DavidShield.

~~Valuation of Kudu’s Participation Contracts~~

Kudu’s Participation Contracts comprise non-controlling equity interests in the form of revenue and earnings participation contracts. As of September 30, 2021, the combined fair value of Kudu’s Participation Contracts was $605 million. On a quarterly basis, White Mountains values each of Kudu’s Participation Contracts using discounted cash flow models. As of September 30, 2021, certain of Kudu’s Participation Contracts with a total fair value of $121 million were valued using a probability weighted expected return method, which was based on a discounted cash flow analysis and the expected value to be received in potential sale transactions.

The discounted cash flow 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. The inputs to each discounted cash flow analysis vary depending on the nature of each client. As of September 30, 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 7 to 13 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, 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)
Terminal Exit Multiple -2% -1% 18% - 23% +1% +2%
+2 $ 701 $ 667 $ 637 $ 607 $ 581
+1 $ 682 $ 650 $ 621 $ 593 $ 567
7x - 13x $ 663 $ 632 $ 605 $ 578 $ 554
-1 $ 644 $ 615 $ 589 $ 563 $ 540
-2 $ 625 $ 598 $ 574 $ 551 $ 530

~~(1)~~ ~~Since Kudu’s Participation Contracts are not subject to corporate taxes within Kudu Investment Management, LLC, pre-tax discount rates are applied to pre-tax cash flows in determining fair values.~~

~~Valuation PassportCard/DavidShield~~

On a quarterly basis, White Mountains values its investment in PassportCard/DavidShield using a discounted cash flow model. The discounted cash flow valuation 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 rate reflects the 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.

When making its fair value selection, which is within a range of reasonable values derived from the discounted cash flow model, White Mountains considers all available information, including any relevant market multiples and multiples implied by recent transactions, facts and circumstances specific to PassportCard/DavidShield’s businesses and industries, and any infrequent or unusual results for the period.

White Mountains concluded that an after-tax discount rate of 23% and a terminal revenue growth rate of 4% was appropriate for the valuation of its investment in PassportCard/DavidShield as of September 30, 2021. Utilizing these assumptions, White Mountains determined that the fair value of its investment in PassportCard/DavidShield was $105 million as of September 30, 2021.

Premiums and commission revenues from leisure travel insurance placed by PassportCard declined dramatically in the twelve months ended December 31, 2020 due to the COVID-19 pandemic. This decline was modestly offset by increased premiums and commission revenues from international private medical insurance placed by DavidShield. During the third quarter of 2020, PassportCard/DavidShield curtailed its global expansion efforts in response to the impact of the COVID-19 pandemic.

In the first quarter of 2021, sustained progress with COVID-19 vaccinations in Israel and abroad led to the Israeli airport reopening in March, which resulted in increased leisure travel and the placement of leisure travel insurance by PassportCard. As a global leader in vaccination efforts, Israel was recently accepted into the EU Digital COVID Certificate program, which permits travel without restrictions to many destination countries both within and outside of the European Union. In the first nine months of 2021, PassportCard’s premiums and commission revenues continued to recover significantly from 2020, with third quarter premiums and commission revenues nearly doubling from the second quarter of 2021. Premiums and commission revenues from international private medical insurance placed by DavidShield continued to grow in the first nine months of 2021.

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 White Mountains’s investment in PassportCard/DavidShield as of September 30, 2021, resulting from changes in key inputs to the discounted cash flow analysis, including the discount rate and terminal revenue growth rate:

$ in Millions Discount Rate
Terminal Revenue Growth Rate 21% 22% 23% 24% 25%
4.5% $ 127 $ 116 $ 106 $ 97 $ 89
4.0% $ 124 $ 114 $ 105 $ 95 $ 88
3.5% $ 121 $ 111 $ 102 $ 94 $ 86

~~Other Long-term Investments - NAV~~

White Mountains’s portfolio of other long-term investments includes investments in private equity funds, a hedge fund, Lloyd’s trust deposits, a bank loan fund and ILS funds, which are valued at fair value using NAV as a practical expedient. White Mountains employs a number of procedures to assess the reasonableness of the fair value measurements for other long-term investments measured at NAV, including obtaining and reviewing periodic and audited annual financial statements as well as periodically discussing each fund’s pricing with the fund manager. However, since the fund managers do not provide sufficient information to evaluate the pricing methods and inputs for each underlying investment, White Mountains considers the valuation inputs to be unobservable. The fair value of White Mountains’s other long-term investments measured at NAV are generally determined using the fund manager’s NAV. In the event that White Mountains believes the fair value differs from the NAV reported by the fund manager due to illiquidity or other factors, White Mountains will adjust the reported NAV to more appropriately represent the fair value of its investment.

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FORWARD-LOOKING STATEMENTS

This report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this report which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words “could”, “will”, “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains’s:

•change in book value per share, or adjusted book value per share or return on equity;

•business strategy;

•financial and operating targets or plans;

•incurred loss and ~~loss adjustment expenses~~LAE and the adequacy of its loss and ~~loss adjustment expense~~LAE reserves and related reinsurance;

•projections of revenues, income (or loss), earnings (or loss) per share, EBITDA, adjusted EBITDA, dividends, market share or other financial forecasts of White Mountains or its businesses;

•expansion and growth of its business and operations; and

•future capital expenditures.

These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to risks and uncertainties that could cause actual results to differ materially from expectations, including:

•the risks that are described from time to time in White Mountains’s filings with the Securities and Exchange Commission, including but not limited to White Mountains’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020;~~2021;

•claims arising from catastrophic events, such as hurricanes, earthquakes, floods, fires, severe winter weather, public health crises, terrorist attacks, explosions, infrastructure failures, cyber-attacks or ~~severe winter weather;~~armed conflicts;

•recorded loss reserves subsequently proving to have been inadequate;

•the market value of White Mountains’s investment in MediaAlpha;

•the trends and uncertainties from the COVID-19 pandemic, including judicial interpretations on the extent of insurance coverage provided by insurers for COVID-19 pandemic related claims;

•business opportunities (or lack thereof) that may be presented to it and pursued;

•actions taken by rating agencies, such as financial strength or credit ratings downgrades or placing ratings on negative watch;

•the continued availability of capital and financing;

•deterioration of general economic, market or business conditions, including due to outbreaks of contagious disease (including the COVID-19 pandemic) and corresponding mitigation efforts;

•competitive forces, including the conduct of other insurers;

•changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its customers; and

•other factors, most of which are beyond White Mountains’s control.

Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Refer to White Mountains’s ~~2020~~2021 Annual Report on Form 10-K and in particular Item 7A. - “Quantitative and Qualitative Disclosures About Market ~~Risk”~~Risk.”.

Item 4.Controls and Procedures.

The Principal Executive Officer (“PEO”) and the Principal Financial Officer (“PFO”) of White Mountains have evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the PEO and PFO have concluded that White Mountains’s disclosure controls and procedures are effective.

There were no significant changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended September 30, ~~2021.~~2022.

Part II.OTHER INFORMATION

Item 1.Legal Proceedings.

None.

Item 1A. Risk Factors.

There have been no material changes to any of the risk factors previously disclosed in the Registrant’s ~~2020~~2021 Annual Report

on Form 10-K.

Item 2.Issuer Purchases of Equity Securities.

Months Total Number of
Shares Purchased Average Price
Paid per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans (1)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans (1)
July 1 - July 30, 2021 2,841 $ 1,122.87 2,784 539,733
August 1 - August 31, 2021 16,878 $ 1,123.41 16,878 522,855
September 1 - September 30, 2021 59,632 $ 1,090.72 59,632 463,223
Total 79,351 $ 1,098.82 79,294 463,223


Months	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans (1)
July 1 - July 30, 2022	33,926	$	1,238.15	33,926	329,550
August 1 - August 31, 2022	4,924	$	1,247.63	4,924	324,626
September 1 - September 30, 2022(2)	327,795	$	1,405.89	—	324,626
Total	366,645	$	1,388.24	38,850	324,626

(1) White Mountains’s board of directors has authorized the Company to repurchase its common shares, from time to time, subject to market conditions. The repurchase authorizations do not have a stated expiration date.

(2) On September 26, 2022, White Mountains completed a “modified Dutch auction” self-tender offer, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share ($1,406 including expenses).

Item 3. Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

None.

Item 5.Other Information.

None.

9277

Item 6.Exhibits.


(a)	Exhibit number		Name
	22.1	—	Plan of Reorganization (incorporated by reference herein to the Company’s Registration Statement on S-4 (No. 333-87649) dated September 23, 1999)
	3.1	—	Memorandum of Continuance of the Company (incorporated by reference herein to Exhibit (3)(i) of the Company’s Current Report on Form 8-K dated November 1, 1999)
	3.2	—	Amended and Restated Bye-Laws of the Company (incorporated by reference herein to Exhibit 3 of the Company’s Report on Form 10-Q dated May 2, 2017)
	~~10.1~~	—	~~Loan and Servicing Agreement dated as of March 23, 2021 among Kudu Investment Management, LLC, Kudu Investment Holdings, LLC, Kudu Investments US, LLC, KFO Holdings, Ltd., KWCP Holdings UK, Ltd.,~~ ~~Massachusetts Mutual Life Insurance Company and Alter Domus~~()(*)
	~~10.2~~	—	~~Paying Agency Agreement dated 13 July 2021 between Group Ark Insurance Limited, The Bank of New York Mellon, London Branch and The Bank of New York Mellon SA/NV, Dublin Branch~~(~~) (*)~~
	~~10.3~~	—	~~Paying Agency Agreement dated 11 August 2021 between Group Ark Insurance Limited, The Bank of New York Mellon, London Branch and The Bank of New York Mellon SA/NV, Dublin Branch~~(~~) (*)~~
	~~10.4~~	—	~~Paying Agency Agreement dated 8 September 2021 between Group Ark Insurance Limited, The Bank of New York Mellon, London Branch and The Bank of New York Mellon SA/NV, Dublin Branch~~() ~~(*)~~
	31.1	—	Principal Executive Officer Certification Pursuant to Rule 13a-14 (a) of the Securities Exchange Act of 1934, as Amended. (()
	31.2	—	Principal Financial Officer Certification Pursuant to Rule 13a-14 (a) of the Securities Exchange Act of 1934, as Amended. (()
	32.1	—	Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ()()
	32.2	—	Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ()()
	101	—	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


(*)			Included herein
~~(**)~~			~~Portions of this exhibit are redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WHITE MOUNTAINS INSURANCE GROUP, LTD.

(Registrant)

Date:

November ~~8, 2021~~7, 2022

By: /s/ Michaela J. Hildreth

Michaela J. Hildreth

Managing Director and Chief Accounting Officer

9378


					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 gains (losses)	(327.6)		(13.1)		79.0		33.9		(227.8)		(3)

Amortization/Accretion	(.1)		(5.9)		—		—		(6.0)
Purchases	130.9		989.7		143.6		199.6		1,463.8
Sales	(257.7)		(284.9)		(31.9)		(70.9)		(645.4)


Effect of Ark Transaction	—		68.2		9.6		135.8		213.6
Transfers in	—		—		—		—		—
Transfers out	—		—		—		—		—
Balance at September 30, 2021	$	524.0	$	1,784.9	$	814.5	$	471.0	$	3,594.4	(2)


NSM Weighted Average Interest Rate	Nine Months Ended September 30,
	2021						2020
Millions	Weighted Average		Interest Expense (1)		Weighted Average Interest rate		Weighted Average		Interest Expense (1)		Weighted Average Interest rate
Term loan - hedged	$	147.1	$	10.0	9.1	%	$	148.5	$	10.0	9.0	%
Term loan - unhedged	129.5		7.3		7.5	%	125.1		6.1		6.5	%
Total NSM Facility	$	276.6	$	17.3	8.3	%	$	273.6	$	16.1	7.8	%


Millions	September 30, 2021
October 1, 2021 - December 31, 2021	$	6.2

January 1, 2022 - March 31, 2022	6.1
April 1, 2022 - June 30, 2022	6.1
July 1, 2022 - September 30, 2022	6.0
October 1, 2022 - December 31, 2022	5.9
Total 2022	24.1

2023	22.8
2024	21.1
2025	19.6
2026	18.1
2027 and thereafter	145.1
Total gross unearned insurance premiums	$	257.0


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


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

+2	$	701	$	667	$	637	$	607	$	581
+1	$	682	$	650	$	621	$	593	$	567
7x - 13x	$	663	$	632	$	605	$	578	$	554
-1	$	644	$	615	$	589	$	563	$	540
-2	$	625	$	598	$	574	$	551	$	530


$ in Millions	Discount Rate
Terminal Revenue Growth Rate	21%		22%		23%		24%		25%
4.5%	$	127	$	116	$	106	$	97	$	89
4.0%	$	124	$	114	$	105	$	95	$	88
3.5%	$	121	$	111	$	102	$	94	$	86