UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the period ended ~~September 30, 2012~~March 31, 2013

o 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		94-2708455
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

80 South Main Street,
Hanover, New Hampshire		03755-2053
(Address of principal executive offices)		(Zip Code)

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

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, and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ý No o

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



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

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

As of ~~October 30, 2012,~~April 29, 2013, ~~6,583,653~~6,176,210 common shares with a par value of $1.00 per share were outstanding (which includes ~~96,095~~95,380 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, 2012~~March 31, 2013 and December 31, ~~2011~~2012	1

	Consolidated Statements of Operations and Comprehensive Income,,
	Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	2

	Consolidated Statements of Changes in Equity, ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	3

	Consolidated Statements of Cash Flows, ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45	42

	Results of Operations — Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	45	42

	Liquidity and Capital Resources	61	54

	Fair Value Considerations	68	60

	Non-GAAP Financial Measures	70	62

	Critical Accounting Estimates	70	62

	Forward-Looking Statements	70	62

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71	63

Item 4.	Controls and Procedures	71	63

PART II.	OTHER INFORMATION	71	63

Items 1 through 6.		71	63

SIGNATURES		76	66

Part I.FINANCIAL INFORMATION.

~~Item 1.Financial Statements~~


Item 1.	Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEET


(Millions, except share amounts)	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012
Assets	Unaudited						Unaudited
Fixed maturity investments, at fair value	$	4,912.4		$	6,221.9		$	4,854.4		$	5,196.2
Short-term investments, at amortized cost (which approximates fair value)	917.3			846.0			654.4			630.6
Common equity securities, at fair value	1,004.8			755.0			1,073.2			1,029.7
Convertible fixed maturity investments, at fair value	142.0			143.8			95.6			127.4
Other long-term investments	307.1			301.3			295.2			294.2
Total investments	7,283.6			8,268.0			6,972.8			7,278.1
Cash (restricted: $341.7 and $453.5)	549.2			705.4
Cash (restricted: $188.5 and $249.8)							411.5			462.4
Reinsurance recoverable on unpaid losses	356.8			2,507.3			410.8			429.1
Reinsurance recoverable on paid losses	14.8			30.5			15.6			17.9
Insurance and reinsurance premiums receivable	678.1			489.2			717.6			556.3
Funds held by ceding companies	102.7			106.5			110.6			127.4
Investments in unconsolidated affiliates	376.3			275.3			383.6			387.9
Deferred acquisition costs	211.3			187.0			190.4			195.3
Deferred tax asset	555.0			536.9			539.1			569.6
Ceded unearned insurance and reinsurance premiums	113.6			87.3			144.1			91.8
Accrued investment income	45.5			51.4			44.7			45.9
Accounts receivable on unsettled investment sales	167.2			4.7			99.0			3.9
Other assets	626.5			681.9			416.5			503.0
Assets held for sale	2,388.2			132.6			2,155.2			2,226.8
Total assets	$	13,468.8		$	14,064.0		$	12,611.5		$	12,895.4
Liabilities
Loss and loss adjustment expense reserves	$	3,059.8		$	5,702.3		$	3,100.6		$	3,168.9
Unearned insurance and reinsurance premiums	1,067.1			846.9			1,064.9			924.1
Variable annuity benefit guarantee	672.4			768.5			251.6			441.5
Debt	676.6			677.5			676.2			751.2
Deferred tax liability	399.7			365.5			337.1			341.3
Accrued incentive compensation	144.7			187.9			100.8			159.0
Ceded reinsurance payable	138.6			134.6			175.7			116.5
Funds held under reinsurance treaties	33.8			42.9			67.3			43.7
Accounts payable on unsettled investment purchases	47.7			34.6			25.7			11.4
Other liabilities	461.8			527.8			374.4			452.8
Liabilities held for sale	2,388.2			107.6			2,155.2			2,226.8
Total liabilities	9,090.4			9,396.1			8,329.5			8,637.2
Equity
White Mountains’ common shareholders’ equity
White Mountains’ common shares at $1 par value per share - authorized 50,000,000 shares;
issued and outstanding 6,583,653 and 7,577,855 shares	6.6			7.6
issued and outstanding 6,176,210 and 6,290,964 shares							6.2			6.3
Paid-in surplus	1,095.6			1,253.7			1,031.1			1,050.9
Retained earnings	2,577.4			2,789.7			2,601.4			2,542.7
Accumulated other comprehensive income, after tax:
Equity in net unrealized gains from investments in unconsolidated affiliates	59.3			—			49.7			57.7
Net unrealized foreign currency translation gains	80.8			46.1			82.0			85.7
Pension liability and other	(10.4		)	(9.4		)	(11.5		)	(11.5		)
Total White Mountains’ common shareholders’ equity	3,809.3			4,087.7			3,758.9			3,731.8
Noncontrolling interests
Noncontrolling interest - OneBeacon Ltd.	259.7			273.1
Noncontrolling interest - SIG Preference Shares	250.0			250.0
Noncontrolling interest - HG Global	16.6			—
Noncontrolling interest - BAM	(18.0		)	—
Noncontrolling interest - other	60.8			57.1
Total noncontrolling interests	569.1			580.2
Non-controlling interests
Non-controlling interest - OneBeacon Ltd.							263.5			251.4
Non-controlling interest - SIG Preference Shares							250.0			250.0
Non-controlling interest - HG Global							16.6			16.6
Non-controlling interest - BAM							(53.8		)	(36.0		)
Non-controlling interest - other							46.8			44.4
Total non-controlling interests							523.1			526.4
Total equity	4,378.4			4,667.9			4,282.0			4,258.2
Total liabilities and equity	$	13,468.8		$	14,064.0		$	12,611.5		$	12,895.4

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Unaudited


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
(Millions, except per share amounts)	2012			2011			2012			2011			2013			2012
Revenues:
Earned insurance and reinsurance premiums	$	536.8		$	491.1		$	1,545.3		$	1,433.5		$	495.4		$	498.0
Net investment income	37.6			42.8			119.8			138.1			28.5			41.8
Net realized and unrealized investment gains	72.7			2.9			123.2			36.4			75.2			58.6
Other revenue	50.3			(35.0		)	81.0			(28.3		)	28.3			31.2
Total revenues	697.4			501.8			1,869.3			1,579.7			627.4			629.6
Expenses:
Loss and loss adjustment expenses	308.1			280.2			821.7			920.4			244.3			249.8
Insurance and reinsurance acquisition expenses	107.6			107.0			326.2			296.6			98.2			109.1
Other underwriting expenses	76.6			64.3			228.4			203.9			79.1			73.5
General and administrative expenses	58.7			36.2			146.3			120.4			43.8			45.5
Interest expense on debt	11.3			12.8			33.1			38.8			10.2			10.9
Total expenses	562.3			500.5			1,555.7			1,580.1			475.6			488.8

Pre-tax income (loss) from continuing operations	135.1			1.3			313.6			(.4		)
Pre-tax income from continuing operations													151.8			140.8

Income tax (expense) benefit	(47.8		)	.6			(85.3		)	(.8		)
Income tax expense													(41.6		)	(31.1		)

Net income (loss) from continuing operations	87.3			1.9			228.3			(1.2		)
Net income from continuing operations													110.2			109.7

Loss from sale of discontinued operations, net of tax	(91.0		)	(18.2		)	(91.0		)	(18.2		)
Net loss from discontinued operations, net of tax	(15.8		)	(12.0		)	(24.5		)	(7.8		)
Net income (loss) from discontinued operations, net of tax													.5			(9.3		)

(Loss) income before equity in earnings of unconsolidated affiliates	(19.5		)	(28.3		)	112.8			(27.2		)
Income before equity in earnings of unconsolidated affiliates													110.7			100.4

Equity in earnings of unconsolidated affiliates, net of tax	7.7			1.5			24.4			16.1			9.2			10.2

Net (loss) income	(11.8		)	(26.8		)	137.2			(11.1		)
Net (income) loss attributable to noncontrolling interests	30.9			11.0			2.0			(21.2		)
Net income													119.9			110.6
Net loss (income) attributable to non-controlling interests													.5			(16.8		)

Net income (loss) attributable to White Mountains’ common shareholders	19.1			(15.8		)	139.2			(32.3		)
Net income attributable to White Mountains’ common shareholders													120.4			93.8

Comprehensive income, net of tax:
Change in equity in net unrealized gains from investments in unconsolidated affiliates	32.3			55.1			59.3			77.2
Other comprehensive income, net of tax:
Change in equity in net unrealized losses from investments in unconsolidated affiliates													(8.0		)	(1.2		)
Change in foreign currency translation and other	39.6			(81.8		)	33.3			(25.3		)	(3.7		)	23.5

Comprehensive income (loss)	91.0			(42.5		)	231.8			19.6
Comprehensive income attributable to noncontrolling interests	.4			—			.4			—
Comprehensive income (loss) attributable to White Mountains’ common shareholders	$	91.4		$	(42.5	)	$	232.2		$	19.6
Comprehensive income													108.7			116.1
Comprehensive income attributable to non-controlling interests													—			—
Comprehensive income attributable to White Mountains’ common shareholders													$	108.7		$	116.1

Income (loss) per share attributable to White Mountains’ common shareholders
Basic income (loss) per share
Continuing operations	$	19.11		$	1.81		$	36.96		$	(.80	)	$	19.10		$	13.86
Discontinued operations	(16.21		)	(3.81		)	(16.77		)	(3.26		)	.07			(1.25		)
Total consolidated operations	$	2.90		$	(2.00	)	$	20.19		$	(4.06	)	$	19.17		$	12.61

Diluted income (loss) per share
Continuing operations	$	19.11		$	1.81		$	36.96		$	(.80	)	$	19.10		$	13.86
Discontinued operations	(16.21		)	(3.81		)	(16.77		)	(3.26		)	.07			(1.25		)
Total consolidated operations	$	2.90		$	(2.00	)	$	20.19		$	(4.06	)	$	19.17		$	12.61

Dividends declared per White Mountains’ common share	$	—		$	—		$	1.00		$	1.00		$	1.00		$	1.00

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Unaudited


															White Mountains’ Common Shareholders’ Equity
(Millions)															Common shares and paid-in surplus			Retained earnings			AOCI, after tax			Total			Non-controlling interest			Total Equity
Balance at January 1, 2013															$	1,057.2		$	2,542.7		$	131.9		$	3,731.8		$	526.4		$	4,258.2

Net income (loss)															—			120.4			—			120.4			(.5		)	119.9
Net change in unrealized losses from investments in unconsolidated affiliates															—			—			(8.0		)	(8.0		)	—			(8.0		)
Net change in foreign currency translation															—			—			(3.7		)	(3.7		)	—			(3.7		)
Net change in pension liability and other accumulated comprehensive items															—			—			—			—			—			—
Total comprehensive income (loss)															—			120.4			(11.7		)	108.7			(0.5		)	108.2
Dividends declared on common shares															—			(6.2		)	—			(6.2		)	—			(6.2		)
Dividends to non-controlling interests															—			—			—			—			(5.2		)	(5.2		)
Repurchases and retirements of common shares															(23.5		)	(55.5		)	—			(79.0		)	—			(79.0		)
Issuances of common shares															—			—			—			—			—			—
Net contributions from non-controlling interests															—			—			—			—			2.2			2.2
Amortization of restricted share and option awards															3.6			—			—			3.6			0.2			3.8
Balance at March 31, 2013															$	1,037.3		$	2,601.4		$	120.2		$	3,758.9		$	523.1		$	4,282.0

	White Mountains’ Common Shareholders’ Equity														White Mountains’ Common Shareholders’ Equity
(Millions)	Common shareholders' equity			Common shares and paid-in surplus			Retained earnings			Accum. other comprehensive income, after tax		Non-controlling interests			Common shares and paid-in surplus			Retained earnings			AOCI, after tax			Total			Non-controlling interest			Total Equity
Balance at January 1, 2012	$	4,087.7		$	1,261.3		$	2,789.7		$	36.7	$	580.2		$	1,261.3		$	2,789.7		$	36.7		$	4,087.7		$	580.2		$	4,667.9

Net income (loss)	139.2			—			139.2			—		(2.0		)
Other comprehensive income (loss), after tax	93.0			—			—			93.0		(.4		)
Net income															—			93.8			—			93.8			16.8			110.6
Net change in unrealized losses from investments in unconsolidated affiliates															—			—			(1.2		)	(1.2		)	—			(1.2		)
Net change in foreign currency translation															—			—			23.5			23.5			—			23.5
Net change in pension liability and other accumulated comprehensive items															—			—			—			—			—			—
Total comprehensive income															—			93.8			22.3			116.1			16.8			132.9
Dividends declared on common shares	(6.6		)	—			(6.6		)	—		—			—			(6.6		)	—			(6.6		)	—			(6.6		)
Dividends to noncontrolling interests	—			—			—			—		(24.5		)
Dividends to non-controlling interests															—			—			—			—			(5.0		)	(5.0		)
Repurchases and retirements of common shares	(517.5		)	(172.6		)	(344.9		)	—		—			(162.6		)	(323.2		)	—			(485.8		)	—			(485.8		)
Issuances of common shares	5.8			5.8			—			—		—			4.6			—			—			4.6			—			4.6
Net contributions from noncontrolling interests	—			—			—			—		13.0
Net distributions to non-controlling interests															—			—			—			—			(1.5		)	(1.5		)
Amortization of restricted share and option awards	9.9			9.9			—			—		.6			2.8			—			—			2.8			.2			3.0
Allocation of fair value of net assets acquired to noncontrolling interests	(2.2		)	(2.2		)	—			—		2.2

Balance at September 30, 2012	$	3,809.3		$	1,102.2		$	2,577.4		$	129.7	$	569.1
	White Mountains’ Common Shareholders’ Equity
(Millions)	Common shareholders' equity			Common shares and paid-in surplus			Retained earnings			Accum. other comprehensive income, after tax		Non-controlling interests
Balance at January 1, 2011	$	3,653.0		$	1,359.0		$	2,175.6		$	118.4	$	607.8

Net (loss) income	(32.3		)	—			(32.3		)	—		21.2
Other comprehensive income, after tax	52.0			—			—			52.0		—
Dividends declared on common shares	(8.0		)	—			(8.0		)	—		—
Dividends to noncontrolling interests	—			—			—			—		(47.2		)
Repurchases and retirements of common shares	(229.8		)	(98.5		)	(131.3		)	—		—
Issuances of common shares	.9			.9			—			—		—
Net distributions to noncontrolling interests	—			—			—			—		(7.7		)
Amortization of restricted share and option awards	8.9			8.9			—			—		.3

Balance at September 30, 2011	$	3,444.7		$	1,270.3		$	2,004.0		$	170.4	$	574.4
Balance at March 31, 2012															$	1,106.1		$	2,553.7		$	59.0		$	3,718.8		$	590.7		$	4,309.5

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
(Millions)	2012			2011			2013			2012
Cash flows from operations:
Net income (loss)	$	137.2		$	(11.1	)
Net income							$	119.9		$	110.6
Charges (credits) to reconcile net income to net cash (used for) provided from operations:
Net realized and unrealized investment gains	(123.2		)	(36.4		)	(75.2		)	(58.6		)
Net loss from discontinued operations	24.5			7.8
Net loss on sale of discontinued operations	91.0			18.2
Deferred income tax expense							25.8			26.3
Net (income) loss from discontinued operations							(.5		)	9.3
Gain on sale of subsidiary - Essentia							(23.0		)	—
Excess of fair value of acquired net assets over cost - American Fuji							(6.9		)	—
Undistributed equity in earnings from unconsolidated affiliates, net of tax	(24.4		)	(16.1		)	(9.2		)	(10.2		)
Deferred income tax expense (benefit)	50.4			(45.6		)
Other operating items:
Net change in loss and loss adjustment expense reserves	(241.6		)	46.3			(86.2		)	(172.0		)
Net change in reinsurance recoverable on paid and unpaid losses	98.1			102.9			20.1			43.7
Net change in unearned insurance and reinsurance premiums	206.6			190.8			146.1			215.3
Net change in funds held by ceding companies	5.3			(17.2		)
Net change in variable annuity benefit guarantee liabilities	(96.1		)	151.1			(189.9		)	(220.0		)
Net change in variable annuity benefit derivative instruments	48.3			(6.3		)	22.5			116.1
Net change in deferred acquisition costs	(21.9		)	(31.2		)	4.5			(10.0		)
Net change in funds held by ceding companies							25.2			(.6		)
Net change in ceded unearned premiums	(22.1		)	(25.4		)	(52.4		)	(54.4		)
Net change in funds held under reinsurance treaties	1.9			(46.0		)	23.7			1.3
Net change in insurance and reinsurance premiums receivable	(206.9		)	(165.0		)	(179.7		)	(242.1		)
Net change in ceded reinsurance payable	31.5			44.2			75.7			51.2
Net change in other assets and liabilities, net	68.4			13.5			(24.7		)	(78.1		)
Net cash provided from operations - continuing operations	27.0			174.5
Net cash used for operations - continuing operations							(184.2		)	(272.2		)
Net cash used for operations - discontinued operations	(155.6		)	(133.9		)	(40.7		)	(61.1		)
Net cash (used for) provided from operations	(128.6		)	40.6
Net cash used for operations							(224.9		)	(333.3		)
Cash flows from investing activities:
Net change in short-term investments	(127.3		)	112.6			26.3			(88.1		)
Sales of fixed maturity and convertible fixed maturity investments	4,918.8			2,905.7			1,962.9			2,450.2
Maturities, calls and paydowns of fixed maturity and convertible fixed maturity investments	408.7			1,015.3			176.3			194.9
Sales of common equity securities	99.7			125.4			181.9			22.2
Distributions and redemptions of other long-term investments	20.9			90.0			20.9			11.1
Sale of unconsolidated affiliates (net of held in escrow)	9.8			—
Sales of consolidated and unconsolidated affiliates, net of cash sold							31.3			—
Funding of operational cash flows for discontinued operations							(40.7		)	(61.1		)
Purchases of other long-term investments	(28.8		)	(30.6		)	(17.4		)	(6.1		)
Contributions to discontinued operations	(155.6		)	(248.5		)
Purchases of common equity securities	(284.2		)	(189.0		)	(143.3		)	(98.7		)
Purchases of fixed maturity and convertible fixed maturity investments	(4,239.0		)	(3,497.6		)	(1,742.5		)	(1,737.1		)
Purchases of consolidated and unconsolidated affiliates, net of cash acquired							(9.2		)	—
Net change in unsettled investment purchases and sales	(149.5		)	54.0			(80.8		)	67.1
Net acquisitions of property and equipment	(1.5		)	(3.3		)	(3.5		)	(.6		)
Net cash provided from investing activities - continuing operations	472.0			334.0			362.2			753.8
Net cash provided from investing activities - discontinued operations	155.6			325.1			40.7			61.1
Net cash provided from investing activities	627.6			659.1			402.9			814.9
Cash flows from financing activities:
Repurchase of debt	—			(161.6		)
Draw down of revolving line of credit							80.0			—
Repayment of revolving line of credit							(155.0		)	—
Payments on capital lease obligation							(1.8		)	(1.2		)
Cash dividends paid to the Company’s common shareholders	(6.6		)	(8.0		)	(6.2		)	—
Cash dividends paid to OneBeacon Ltd.’s noncontrolling common shareholders	(14.9		)	(37.9		)
Cash dividends paid on SIG Preference Shares	(9.4		)	(9.4		)
Cash dividends paid to OneBeacon Ltd.’s non-controlling common shareholders							(5.0		)	(5.0		)
Common shares repurchased	(517.5		)	(229.7		)	(79.0		)	(485.8		)
Proceeds from issuances of common shares	—			.9
Net cash used for financing activities - continuing operations	(548.4		)	(445.7		)	(167.0		)	(492.0		)
Net cash (used for) provided from financing activities - discontinued operations	—			—			—			—
Net cash used for financing activities	(548.4		)	(445.7		)	(167.0		)	(492.0		)
Effect of exchange rate changes on cash	3.0			(2.0		)	(.6		)	(1.7		)
Net change in cash during the period	(46.4		)	252.0			10.4			(12.1		)
Net change in cash from discontinued operations	—			(191.2		)
Cash reclassified from assets held for sale (net of cash sold of $3.5 and $0)	2.0			—
Cash balances at beginning of period (excludes restricted cash balances of $453.5 and $286.7 and AutoOne cash of $0 and $4.7)	251.9			103.6
Cash balances at end of period (excludes restricted cash balances of $341.7 and $393.3)	$	207.5		$	164.4
Cash reclassified from assets held for sale (cash sold of $0 and $3.5)							—			5.5
Cash balances at beginning of period (excludes restricted cash balances of $249.8 and $453.5)							212.6			251.9
Cash balances at end of period (excludes restricted cash balances of $188.5 and $360.1)							$	223.0		$	245.3
Supplemental cash flows information:
Interest paid	$	(21.4	)	$	(38.5	)	$	(12.9	)	$	(12.8	)
Net income tax payments to national governments	$	(6.5	)	$	(6.4	)	$	(2.2	)	$	(8.7	)

¹~~AutoOne cash of~~ ~~$5.5~~ ~~is included in assets held for sale at September 30, 2011.~~

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

These interim consolidated financial statements include the accounts of White Mountains Insurance Group, Ltd. (the “Company” or the “Registrant”) and its subsidiaries (collectively, with the Company, “White Mountains”) and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company is an exempted Bermuda limited liability company whose principal businesses are conducted through its property and casualty insurance and reinsurance subsidiaries and affiliates. The Company’s headquarters is located at 14 Wesley Street, Hamilton, Bermuda HM 11, its principal executive office is located at 80 South Main Street, Hanover, New Hampshire 03755-2053 and its registered office is located at Clarendon House, 2 Church Street, Hamilton, Bermuda HM 11. White Mountains’ reportable segments are OneBeacon, Sirius Group, HG Global/BAM and Other Operations. ~~As discussed further in~~ ~~Note 2~~, on October 7, 2011, White Mountains completed its sale of Esurance Holdings, Inc. and its subsidiaries (“Esurance Insurance”) and Answer Financial Inc. and its subsidiaries (“AFI”) (collectively, “Esurance”). Esurance has been presented as discontinued operations. (See ~~Note 14~~ ~~for discontinued operations).~~

The OneBeacon segment consists of OneBeacon Insurance Group, Ltd. (“OneBeacon Ltd.”), an exempted Bermuda limited liability company that owns a family of U.S.-based property and casualty insurance companies (collectively, “OneBeacon”)~~, most of which operate in a multi-company pool.~~. OneBeacon is a specialty property and casualty insurance writer that offers a wide range of insurance products through independent agencies, regional and national brokers, wholesalers and managing general agencies. As of both ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, White Mountains owned 75.2% ~~and~~ ~~75.5%~~ of OneBeacon Ltd.’s outstanding common shares.

As discussed further in Note 2, OneBeacon entered into a definitive agreement to sell its runoff business in October 2012 (the “Runoff Transaction”) and sold its AutoOne Insurance business (“AutoOne”) in February 2012. ~~The~~Accordingly, the runoff business and AutoOne are presented as discontinued operations. Assets and liabilities associated with the runoff business as of ~~September 30, 2012~~March 31, 2013 and ~~AutoOne as of~~ December 31, ~~2011~~2012 have been presented as held for sale in the financial statements. Prior year income statement and cash flow amounts have been reclassified to conform to the current ~~year’s~~year's presentation. (See Note 1415 for discontinued operations).

The Sirius Group segment consists of Sirius International Insurance Group, Ltd., an exempted Bermuda limited liability company, and its subsidiaries (collectively, “Sirius Group”). Sirius Group provides insurance and reinsurance products for property, accident and health, aviation and space, trade credit, marine, agriculture and certain other exposures on a worldwide basis through its subsidiaries, Sirius International Insurance Corporation (“Sirius International”), Sirius America Insurance Company (“Sirius America”) and Lloyds Syndicate 1945 (“Syndicate 1945”). Sirius Group also specializes in the acquisition and management of runoff insurance and reinsurance companies both in the United States and internationally through its White Mountains Solutions ~~division. On~~division (“WM Solutions”).

The HG Global/BAM segment consists of White Mountains' investment in HG Global Ltd. (“HG Global”) and the consolidated results of Build America Mutual Assurance Company (“BAM”). During the third quarter of 2012, White Mountains capitalized HG Global with approximately $600 million to fund the start-up of BAM. BAM is a municipal bond insurer domiciled in New York that was established to provide insurance on bonds issued to support essential U.S. public purposes such as schools, utilities, core governmental functions and existing transportation facilities. HG Global, together with its subsidiaries, provided the initial capitalization of BAM through the purchase of $503 million of surplus notes issued by BAM (the “BAM Surplus Notes”). HG Global, through its wholly-owned subsidiary, HG Re Ltd. (“HG Re”), also provides 15%-of-par, first loss reinsurance protection for policies underwritten by BAM. As of March 31, 2013 and December 31, ~~2011~~2012, ~~Sirius Group completed a transaction led by~~ White Mountains ~~Solutions~~owned 97.3% of HG Global's preferred equity and 88.7% of its common equity. White Mountains does not have an ownership interest in BAM, which is a mutual insurance company owned by its members. However, GAAP requires White Mountains to acquire the runoff loss reserve portfolio of Old Lyme Insurance Company Ltd. (“Old Lyme”). Sirius Group also includes Scandinavian Reinsurance Company, Ltd. (“Scandinavian Re”) and Central National Insurance Company of Omaha (“Central National”), whichconsolidate BAM's results in its financial statements. BAM's results are ~~both in runoff.~~attributed to non-controlling interests.

White Mountains’ Other Operations segment consists of the Company and its intermediate holding companies, its wholly-owned investment management subsidiary, White Mountains Advisors LLC (“WM Advisors”), White Mountains’ variable annuity reinsurance business, White Mountains Life Reinsurance (Bermuda) Ltd. (“WM Life Re”), which is in runoff, as well as various other entities not included in other segments. ~~For~~ ~~2011~~,Prior to 2012, the Other Operations segment also included the consolidated results of the Tuckerman Capital, LP fund (“Tuckerman Fund I”). On December 31, 2011,, Tuckerman Fund I ~~liquidated~~was dissolved and ~~distributed~~ all of ~~its~~the net assets of the fund were distributed to the owners of the fund, of which ~~consisted~~White Mountains owned approximately 94%. In conjunction with the dissolution, White Mountains received a portion of the shares of~~two~~ ~~small manufacturing companies,~~ Hamer, LLC (“Hamer”) and Bri-Mar Manufacturing, LLC (“Bri-Mar”), two small manufacturing companies. Prior to ~~its partners, including~~the dissolution, Tuckerman Fund I was consolidated within White ~~Mountains. Commencing on~~ ~~January 1, 2012, the~~Mountains' financial statements. The consolidated results of Hamer and Bri-Mar are included in the Other Operations ~~segment.~~

~~In July~~segment from January 1, 2012 White Mountains capitalized HG Global Ltd. ("HG Global") to fund Build America Mutual Assurance Company ("BAM"), a newly formed mutual municipal bond insurer, and HG Re, Ltd. ("HG Re"), a wholly-owned subsidiary of HG Global. As ofthrough September 30, 2012, from which point these companies were no longer consolidated by White ~~Mountains owned~~ Mountains.~~97%~~ ~~of HG Global's preferred equity and~~ ~~89%~~ of its common equity. HG Global provided the initial capitalization of BAM through the purchase of surplus notes. Through HG Re, HG Global provides first loss reinsurance protection for policies underwritten by BAM of ~~15%~~ of par outstanding, on a per policy basis. HG Re's obligations to BAM are collateralized in trusts, and there is an aggregate loss limit that is equal to the total assets in the collateral trusts at any point in time. HG Global and BAM are both included in the Other Operations segment. U.S. GAAP requires White Mountains to consolidate the results of BAM. However, BAM is a mutual insurance company owned by its members and its equity and results of operations are included in noncontrolling interests.

White ~~Mountains’~~Mountains' discontinued operations consist of ~~Esurance Insurance, AFI,~~ OneBeacon's runoff business and AutoOne. ~~Esurance Insurance wrote personal auto insurance directly~~The OneBeacon runoff business included assets and liabilities that were principally related to ~~customers in~~ 30 ~~states through its website~~non-specialty commercial lines and ~~over the phone and also sold~~certain other lines of personal insurance for unaffiliated insurance companies. Esurance Insurance also wrote personal auto policies through select online agents and provided other insurance products through partnerships with industry leading online providers. Esurance Insurance earned commissions and fees by referring to unaffiliated insurance companies those shoppersrunoff business that it ~~could not underwrite because~~no longer writes, including nearly all of ~~pricing or underwriting eligibility. AFI sold insurance online~~its asbestos and ~~through call centers for both Esurance Insurance and unaffiliated companies utilizing a comparison quoting platform.~~environmental reserves. AutoOne was formed by OneBeacon in 2001 to provide products and services to automobile assigned risk markets primarily in New York and New Jersey.

All significant intercompany transactions have been eliminated in consolidation. These interim financial statements include all adjustments considered necessary by management to fairly present 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 ~~2011~~2012 Annual Report on Form 10-K.

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. Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation. Refer to the Company’s ~~2011~~2012 Annual Report on Form 10-K for a complete discussion regarding White Mountains’ significant accounting policies.

~~Noncontrolling~~Non-controlling Interests

~~Noncontrolling~~Non-controlling interests consist of the ownership interests of ~~noncontrolling parties~~non-controlling shareholders in consolidated ~~entities~~subsidiaries and are presented separately ~~as a component of equity~~ on the balance sheet.

The percentage of the ~~noncontrolling equity interests~~non-controlling shareholders' ownership interest in OneBeacon Ltd. at both ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 was 24.8% ~~and~~ ~~24.5%~~.

In July 2012, HG Global was capitalized with $594.5 million from White Mountains and $14.5 million from certain management members of BAM, the latter of which is included in ~~noncontrolling~~non-controlling interest. Upon closing, certain BAM management members also received additional common and preferred shares of HG Global that resulted in a $2.2 million allocation of the carrying value of White Mountains' investment in HG Global to the ~~noncontrolling~~non-controlling interest, which was recorded as an adjustment to paid-in surplus in White Mountains' consolidated statement of changes in equity.

White Mountains is required to consolidate BAM in its GAAP financial statements. However, since BAM is a mutual insurance company that is owned by its members, ~~and not White Mountains,~~ BAM's results do not affect White Mountains' common shareholders' equity as they are attributable to ~~noncontrolling~~non-controlling interests. For the ~~third quarter of 2012,~~three months endedMarch 31, 2013, BAM reported $1820.1 million in ~~pre-tax~~ losses that have been allocated to ~~noncontrolling~~non-controlling interest.

In May 2007, Sirius International Group, Ltd. (“SIG”), an intermediate holding company of Sirius Group, issued $250 million non-cumulative perpetual preference shares, with a $1,000 per share liquidation preference (the “SIG Preference Shares”)~~. Proceeds of~~, and received $245.7 million, of proceeds, net of $4.3 million of issuance costs and ~~commissions, were received from the issuance. The~~commissions. SIG Preference Shares and dividends thereon are included in ~~noncontrolling interests~~non-controlling interest on the balance ~~sheet.~~sheet and on the statement of income and comprehensive income.

At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, the ~~noncontrolling~~non-controlling equity interest in White Mountains' consolidated limited partnerships ~~that are consolidated with White Mountains (the Prospector Offshore Fund, the Prospector Turtle Fund and Tuckerman Fund I prior to~~ ~~December 31, 2011~~) was $~~52.8~~44.1 million and $~~54.2 million. On~~ ~~December 31, 2011, Tuckerman Fund I was dissolved and all of the net assets of the fund, which consisted of common stock of Hamer and Bri-Mar, were distributed. At~~ ~~September 30, 2012, the noncontrolling equity interest in Hamer and Bri-Mar was~~ ~~$4.5~~41.5 million. At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, the ~~noncontrolling~~non-controlling equity interest in A.W.G. Dewar Inc, a subsidiary of OneBeacon, was $~~3.2~~2.5 million and $~~2.3~~2.8 million. At both ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, the ~~noncontrolling~~non-controlling equity interest in Passage2Health Limited, a subsidiary of Sirius Group, was $~~0.3 million~~ ~~and~~ ~~$0.6~~0.2 million.

Recently Adopted Changes in Accounting Principles

Policy Acquisition Costs

On January 1, 2012,, White Mountains adopted ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (ASC 944). The new standard changes the types of policy acquisition costs that are eligible for deferral. Specifically, the new guidance limits deferrable costs to those that are incremental direct costs of contract acquisition and certain costs related to acquisition activities performed by the insurer, such as underwriting, policy issuance and processing, medical and inspection costs and sales force contract selling. The ASU defines incremental direct costs as those costs that result directly from and were essential to the contract acquisition and would not have been incurred absent the acquisition. Accordingly, under the new guidance, deferrable acquisition costs are limited to costs related to successful contract acquisitions. Acquisition costs that are not eligible for deferral are to be charged to expense in the period incurred.

White Mountains adopted ASU 2010-26 prospectively. Upon adoption, certain acquisition costs, primarily a portion of the profit sharing commissions associated with ~~OneBeacon’s~~OneBeacon's collector car and ~~boats~~boat business, no longer ~~meet~~met the criteria for deferral. ~~Deferred acquisition costs of~~ ~~$5.6 million~~ at ~~January 1,~~During the year ended December 31, 2012, ~~that no longer meet the criteria for deferral under ASU 2010-26 will be recognized in expense over the original amortization periods. For the~~ ~~three and nine months endedSeptember 30, 2012~~, White Mountains recognized $~~0.9 million~~ ~~and~~ ~~$5.3~~5.6 million of expense related to such previously deferrable acquisition ~~costs. If~~costs that, if White Mountains had adopted ASU 2010-26 retrospectively, ~~$1.4 million~~ ~~and~~ ~~$5.7 million~~ ~~of acquisition costs that were deferred~~ would have been recognized ~~in expense for the~~ ~~three and nine months endedSeptember 30, 2011~~.during 2011.

Fair Value Measurements

On January 1, 2012,, White Mountains adopted ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The ASU clarifies existing guidance with respect to the concepts of highest and best use and valuation premise and measuring instruments classified within a reporting entity’s shareholders’ equity. The ASU also clarifies disclosure requirements, requiring disclosure of quantitative information about unobservable inputs used in Level 3 fair value measurements. The ASU also amends existing guidance. In circumstances where a reporting entity manages a portfolio of financial assets and liabilities based on the net market and counterparty credit risk exposures, the ASU permits determination of the fair value of those instruments to be based on the net risk exposure. In addition, the ASU permits the application of premiums or discounts to be applied in a fair value measurement to the extent that market participants would consider them in valuing the financial instruments. The ASU also expands the required disclosures for Level 3 measurements, requiring that reporting entities provide a narrative description of the sensitivity of Level 3 fair value measurements to changes in unobservable inputs and the interrelationships between those inputs, if any. As a result of adopting ASU 2011-04, White Mountains expanded its fair value disclosures. (See Note 5).

~~Comprehensive Income~~

~~For fiscal periods beginning after December 15, 2011, ASU 2011-05,~~ ~~Comprehensive Income,~~ became effective, which requires all components of comprehensive income to be reported in a continuous financial statement or in consecutive statements displaying the components of net income and the components of other comprehensive income. Since White Mountains previously presented comprehensive income in a continuous financial statement, adoption of ASU 2011-05 had no effect on White Mountains’ financial statement presentation.

Recently Issued Accounting Pronouncements

Offsetting Assets and Liabilities

~~On December 16, 2011, the FASB issued~~Effective January 1, 2013, White Mountains adopted ASU 2011-11, Disclosures about Offsetting Assets and Liabilities (ASC 210).and ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The new ~~standard~~guidance expands the required disclosures in circumstances where either balances have been offset or the right of offset ~~exists. The required disclosures are intended~~exists to ~~provide information to enable~~make it easier for financial statement users to evaluate the effect or potential effect of netting arrangements on a reporting entity’s financial position. Disclosures required under the new standard include the gross amount of assets and liabilities recognized; the amounts that have been offset to arrive at the amounts presented in the statement of financial position; and for any amounts subject to an enforceable master netting arrangement, whether such amounts have been offset. In addition, a description of the rights of offset should be disclosed. ASU 2011-11 is effective for periods beginning on or after January 1, 2013. White Mountains is party to master netting arrangements in connection with ~~the~~ derivative instruments held by WM Life Re and ~~is currently evaluating the effect~~Sirius International. As a result of adoption, ~~will have on~~White Mountains has expanded its disclosures ~~but does not expect adoption~~ to ~~have a material effect on its financial position, results~~present the gross amounts of ~~operations or cash flows.~~assets and liabilities subject to master netting arrangements along with any related collateral amounts.

Note 2. Significant Transactions

~~Formation~~Sale of ~~HG Global~~Essentia Insurance Company

Effective January 1, 2013, OneBeacon completed the sale of Essentia Insurance Company (“Essentia”), an indirect wholly-owned subsidiary which wrote the collector car and ~~BAM~~boat business, to Markel Corporation. Concurrently therewith, OneBeacon and Hagerty Insurance Agency (“Hagerty”) terminated their underwriting arrangement with respect to the collector car and boat business. OneBeacon recognized a pre-tax gain on sale of $23.0 million ($15.0 million after tax) in the first quarter of 2013. The business associated with this agreement generated net written premiums of $35.3 million, or 11.7% of consolidated net written premiums, for the three months ended March 31, 2012.

WM Solutions

In ~~July 2012, White Mountains capitalized HG Global with~~ ~~$594.5 million~~ ~~to fund BAM,~~the third quarter of 2013, WM Solutions acquired American Fuji Fire (“American Fuji”), an AIG runoff subsidiary. The transaction resulted in a ~~newly formed mutual municipal bond insurer. As of September 30, 2012, White Mountains owned~~ ~~97%~~ ~~of HG Global's preferred equity and~~ ~~89%~~ ~~of its common equity. HG Global provided the initial capitalization of BAM through the purchase~~gain of $~~503.0~~ ~~million of BAM surplus notes. Through HG Re, HG Global provides first loss reinsurance protection for policies underwritten by BAM of~~ ~~15%~~ of par outstanding, on a per policy basis. HG Re's obligations to BAM are collateralized in trusts, and there is an aggregate loss limit that is equal to the total assets in the collateral trusts at any point in time. U.S. GAAP requires White Mountains to consolidate BAM in its financial statements. However, since BAM is a mutual insurance company that is owned by its members and not White Mountains, BAM's results do not affect White Mountains' common shareholders' equity as they are attributable to noncontrolling interests. For the three and nine months ended September 30, 2012, HG Global had pre-tax income of ~~$4.8 million, which included~~ ~~$8.3~~6.9 million ~~of interest income on the BAM surplus notes. For the three and nine months ended September 30, 2012, BAM had a pre-tax loss of~~ ~~$18.0 million~~ ~~that was~~ recorded in ~~net loss attributable to noncontrolling interests, which included~~ ~~$8.3 million~~ ~~of interest expense on its surplus notes.~~other revenues.

Sale of OneBeacon ~~runoff business~~Runoff Business

On October 17, 2012, one of ~~OneBeacon's~~OneBeacon’s indirect wholly-owned ~~subsidiaries,~~subsdiaries, OneBeacon Insurance Group LLC, entered into a definitive agreement with Trebuchet US Holdings, Inc. (“Trebuchet”), a wholly-owned subsidiary of Armour Group Holdings Limited (together with Trebuchet, “Armour”), to sell its runoff ~~business (the "Runoff Transaction").~~business. Pursuant to the terms of the agreement, at closing OneBeacon will transfer to Trebuchet all of the issued and outstanding shares of common stock of certain legal entities that will contain the assets, liabilities (including gross and ceded loss reserves) and capital supporting the runoff business as well as certain elements of the runoff business infrastructure, including staff and office space. ~~Additionally, as part of the Runoff Transaction, OneBeacon may provide financing in the form of surplus notes.~~ The transaction is subject to regulatory approvals ~~and is expected to close in the second half of 2013.~~

~~During the third quarter of 2012, OneBeacon recorded~~ ~~$100.5 million~~(see ~~in after-tax losses related to the Runoff Transaction. These losses are presented in discontinued operations and are composed of a~~ ~~$91.5 million~~ ~~after-tax loss on sale and a~~ ~~$9.0 million~~ ~~after-tax loss related to an reduction in the workers compensation loss reserve discount rate on reserves being transferred as part of the sale. OneBeacon also recognized~~ ~~$6.5 million~~ ~~of after-tax underwriting losses primarily related to unfavorable loss reserve development from a legacy assumed reinsurance treaty, which is presented in discontinued operations (see~~ Note 1415).

Sale of AutoOne

On February 22, 2012, OneBeacon completed the sale of AutoOne to Interboro Holdings, Inc. (“Interboro”). OneBeacon formed AutoOne in 2001 to provide products and services to automobile assigned risk markets primarily in New York and New Jersey. OneBeacon transferred to the buyer AutoOne Insurance Company (“AOIC”) and AutoOne Select Insurance Company (“AOSIC”), which contained the assets, liabilities (including loss reserves and unearned premiums), and the capital of the AutoOne business, and transferred substantially all of the AutoOne infrastructure including systems and office space as well as certain staff. As a result of the sale, AutoOne is reported as discontinued operations (~~see~~ (see Note 1415).

~~Sale of Esurance~~Common Shares Repurchased and Retired

~~On October 7, 2011,~~During the past several years, White ~~Mountains completed the sale of Esurance Insurance and AFI to The Allstate Corporation (“Allstate”) for~~ ~~$700 million~~ ~~plus tangible book value. White Mountains recorded a gain on the sale of~~ ~~$677.5 million~~ in discontinued operations in the fourth quarter of 2011. The transaction is subject to a true-up of the estimated tangible book value of the entities sold through the date of closing and certain other contingencies (~~see Note 14)~~.

~~Share Repurchases~~

~~On March 22, 2012, White Mountains completed a fixed-price tender offer and repurchased~~ ~~816,829~~ ~~of its common shares at~~ ~~$500~~ ~~per share. The total cost of the share repurchase was~~ ~~$408.6 million, including fees and expenses. During~~ ~~2011, White Mountains completed~~ ~~two~~ ~~“modified Dutch auction” self-tender offers and repurchased~~ ~~332,346~~ ~~of its common shares at an average price of~~ ~~$418~~ ~~per share. The total cost of the share repurchases was~~ ~~$138.8 million, including fees and expenses.~~

~~In addition to the tender offers, which were separately authorized, the~~Mountains' board of directors has authorized the Company to repurchase its common shares, from time to time, subject to market conditions. ~~In 2006,~~The repurchase authorizations do not have a stated expiration date. As of March 31, 2013, White ~~Mountains’ board of directors authorized the Company to repurchase up to~~ ~~1,000,000~~ ~~of its common shares and in 2010 White Mountains’ board of directors authorized the Company to~~Mountains may repurchase an additional ~~600,000~~545,496 ofshares under these board authorizations. In addition, from time to time White Mountains has also repurchased its common ~~shares. On May 25, 2012, White Mountains'~~shares through tender offers that were separately approved by its board of ~~directors authorized~~directors.

During the three months ended March 31, 2013, the Company ~~to repurchase an additional~~repurchased ~~1,000,000~~140,224 common shares for $79.0 million at an average share price of ~~its~~$564, which were comprised of 140,000 common ~~shares.~~shares repurchased under the board authorization and 224 common shares repurchased pursuant to employee benefit plans. Shares ~~may be~~ repurchased onpursuant to employee benefit plans do not fall under the ~~open market or through privately negotiated transactions. The repurchase authorization does not obligate~~board authorizations referred to above.

During the three months ended March 31, 2012, the Company repurchased 977,019 common shares for $485.8 million at an average share price of $497, which were comprised of (1) 157,629 common shares repurchased under the board authorization for $76.0 million at an average share price of $482; (2) 816,829 common shares repurchased through a fixed-price tender offer for $408.6 million at a share price of $500; and (3) 2,561 common shares repurchased to ~~acquire any specific number of shares, nor is there a stated expiration date.~~satisfy employee income tax withholding, pursuant to employee benefit plans.

~~During the~~ ~~three and nine months endedSeptember 30, 2012, the Company repurchased~~ ~~50,000~~ ~~and~~ ~~217,801~~ ~~common shares for~~ ~~$26.4 million~~ ~~and~~ ~~$107.6 million~~ ~~under this program.~~

~~During the nine months ended~~ ~~September 30, 2011, the Company repurchased~~ ~~265,768~~ ~~common shares for~~ ~~$93.2 million~~.

~~Since the inception of this authorization through September 30, 2012, the Company repurchased~~ ~~1,629,504~~ ~~common shares for~~ ~~$645.1 million. At~~ ~~September 30, 2012, the Company may repurchase an additional~~ ~~970,496~~ ~~shares under this authorization.~~

Note 3. Loss and Loss Adjustment Expense Reserves

The following table summarizes the loss and loss adjustment expense (“LAE”) reserve activities of White Mountains’ insurance and reinsurance subsidiaries for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
Millions	2012			2011			2012			2011			2013			2012
Gross beginning balance	$	5,329.8		$	5,642.4		$	5,702.3		$	5,736.8		$	3,168.9		$	5,702.3
Less beginning reinsurance recoverable on unpaid losses	(2,369.4		)	(2,193.0		)	(2,507.3		)	(2,344.0		)	(429.1		)	(2,507.3		)
Net loss and LAE reserves	2,960.4			3,449.4			3,195.0			3,392.8			2,739.8			3,195.0

Less: Beginning net loss and LAE reserves for AutoOne and OneBeacon's runoff business⁽¹⁾	(296.0		)	(503.2		)	(384.1		)	(620.6		)
Less: Beginning net loss and LAE reserves for OneBeacon's runoff business⁽¹⁾													—			(383.3		)

Loss and LAE reserves acquired - American Fuji													21.3			—

Loss and LAE incurred relating to:
Current year losses	318.2			307.1			842.9			968.0			242.9			257.4
Prior year losses	(10.1		)	(26.9		)	(21.2		)	(47.6		)	1.4			(7.6		)
Total incurred losses and LAE	308.1			280.2			821.7			920.4			244.3			249.8

Accretion of fair value adjustment to loss and LAE reserves	1.1			2.1			9.4			6.2			1.2			7.1
Foreign currency translation adjustment to loss and LAE reserves	12.0			(25.5		)	11.7			5.7			(9.6		)	11.8

Loss and LAE paid relating to:
Current year losses	(101.1		)	(109.7		)	(223.9		)	(226.3		)	(36.6		)	(44.5		)
Prior year losses	(181.5		)	(186.9		)	(726.8		)	(571.8		)	(270.6		)	(322.9		)
Total loss and LAE payments	(282.6		)	(296.6		)	(950.7		)	(798.1		)	(307.2		)	(367.4		)

Plus: Ending net loss and LAE reserves for AutoOne and OneBeacon's runoff business (1)	—			394.4			—			394.4
Plus: Ending net loss and LAE reserves for OneBeacon's runoff business⁽¹⁾													—			332.4

Net ending balance	2,703.0			3,300.8			2,703.0			3,300.8			2,689.8			3,045.4
Plus ending reinsurance recoverable on unpaid losses	356.8			2,581.2			356.8			2,581.2			410.8			2,465.4
Gross ending balance	$	3,059.8		$	5,882.0		$	3,059.8		$	5,882.0		$	3,100.6		$	5,510.8
⁽¹⁾Loss and LAE reserve balances for OneBeacon's run-off business prior to September 30, 2012 and AutoOne prior to September 30, 2011 were not classified as held for sale. Adjustment is to present loss and LAE reserve activities from continuing operations.

⁽¹⁾ Loss and LAE reserve balances for OneBeacon's run-off business prior to September 30, 2012 were not classified as held for sale. Adjustment is to present loss and LAE reserve activities from continuing operations.

Loss and LAE incurred relating to prior year losses for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013

During the three ~~and nine~~months ended~~September 30, 2012~~March 31, 2013, White Mountains experienced $~~$10.1 million~~ ~~and~~ ~~$21.2~~1.4 million of net ~~favorable~~unfavorable loss reserve development.

~~For the three and nine months ended~~ ~~September 30, 2012~~, OneBeacon had net favorable loss reserve development of $~~2.3~~2.9 million primarily driven by medical facilities and managed care errors and omissions lines in its healthcare business, which is included in OneBeacon's Professional Insurance underwriting unit. Sirius Group had net unfavorable loss reserve development of $4.3 million primarily due to a late reported agricultural claim related to the 2012 U.S. drought.

Loss and LAE incurred relating to prior year losses for the three months endedMarch 31, 2012

During the three months endedMarch 31, 2012, White Mountains experienced $7.6 million of net favorable loss reserve development. OneBeacon had net favorable loss reserve development of $1.9 million, primarily due to lower than expected severity on non-catastrophe losses related to professional liability lines, multiple peril liability lines and other general liability lines.

~~For the three and nine months ended~~ ~~September 30, 2012~~, Sirius Group had net favorable loss reserve development of $~~7.8~~5.7 million included reductions for the 2011 Japan earthquake and tsunami of $~~13.6~~8.1 million~~. With the completion of a ground-up asbestos reserve study in the quarter, Sirius Group increased asbestos loss reserves by~~ ~~$33.0 million~~ ~~and~~ ~~$45.0 million~~ ~~in the three and nine months ended September 30, 2012. These increases were more than~~, partially offset by ~~reductions in liability~~increases to asbestos and ~~property loss reserves.~~environmental reserves and reserves for other prior period catastrophe losses.

~~Loss and LAE incurred relating to prior year losses for the~~ ~~three and nine months endedSeptember 30, 2011~~

~~During the~~ ~~three and nine months endedSeptember 30, 2011, White Mountains experienced~~ ~~$26.9 million~~ ~~and~~ ~~$47.6 million~~ ~~of net favorable loss reserve development.~~

~~For the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2011, OneBeacon had net favorable loss reserve development of~~ ~~$6.0 million~~ ~~and~~ ~~$14.4 million, primarily related to professional liability lines, multiple peril liability lines and other general liability lines.~~

~~For the three and nine months ended September 30, 2011, Sirius Group had net favorable loss reserve development of~~ ~~$20.9 million~~ ~~and~~ ~~$33.2 million, primarily attributable to property lines.~~

Fair value adjustment to loss and LAE reserves

In connection with purchase accounting for acquisitions, White Mountains ~~was~~is required to adjust loss and LAE reserves and the related reinsurance recoverables to fair value on their respective acquired balance sheets. The net reduction to loss and LAE reserves is being recognized through an income statement charge ratably with and over the period the claims are settled.

White Mountains recognized $~~1.1 million~~ ~~and~~ ~~$9.4~~1.2 million of such charges, recorded as loss and LAE for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013, and $~~2.1 million~~ ~~and~~ ~~$6.2~~7.1 million for the three ~~and nine~~ months ended ~~September 30, 2011~~March 31, 2012. Accretion of fair value adjustment to losses and LAE reserves ~~for the nine months ended~~ ~~September 30, 2012~~ ~~included~~increased by $5.0 million ~~from~~in the first quarter of 2012 due to the acceleration of the amortization of the purchase accounting established for the acquisition of Scandinavian Re. This acceleration was a result of a final settlement and commutation of Scandinavian ~~Re’s~~Re's multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul Fire & Marine Insurance Company (“St Paul”). As of ~~September 30, 2012~~,March 31, 2013, the remaining ~~unamortized fair value~~pre-tax un-accreted adjustment ~~for Scandinavian Re~~ was $~~2.0~~4.5 million.

Note 4. Third Party Reinsurance

In the normal course of business, White Mountains’ insurance and reinsurance subsidiaries may seek to limit losses that may arise from catastrophes or other events by reinsuring with third party reinsurers. White Mountains remains liable for risks reinsured in the event that the reinsurer does not honor its obligations under reinsurance contracts.

OneBeacon

At ~~September 30, 2012~~March 31, 2013, OneBeacon had $~~2.0~~2.4 million and $105.8 million of reinsurance recoverables on paid ~~losses~~ and ~~$41.3 million~~ ~~that will become recoverable if claims are paid in accordance with current reserve estimates. The reinsurance balances associated with the runoff business are included in discontinued operations (see Note 14~~).unpaid losses. Reinsurance contracts do not relieve OneBeacon of its obligation to its policyholders. OneBeacon is selective with its reinsurers, placing reinsurance with only those reinsurers having a strong financial condition. OneBeacon monitors the financial strength of its reinsurers on an ongoing basis. Uncollectible amounts historically have not been significant.

~~Effective May 1, 2012, OneBeacon renewed its property catastrophe reinsurance program through April 30, 2013. The program provides coverage for OneBeacon’s property business as well as certain acts~~ As of ~~terrorism. Under the program, the first~~ ~~$25 million~~March 31, 2013, greater than 90% of ~~losses resulting from any single catastrophe are retained and the next~~ ~~$155 million~~ ~~of losses resulting from the catastrophe are reinsured in three layers, OneBeacon retains a co-participation of~~ ~~55%~~ ~~of losses from~~ ~~$25 million~~ to ~~$40 million~~, ~~15%~~ ~~of losses from~~ ~~$40 million~~ to ~~$80 million~~ ~~and~~ ~~10%~~ ~~of losses from~~ ~~$80 million~~ to ~~$180 million. Thus, for a~~ ~~$180 million~~ ~~loss, OneBeacon would retain~~ ~~$49.3 million. Any loss above~~ ~~$180 million~~ ~~would be retained in full. In the event of a catastrophe, OneBeacon’s property catastrophe~~ reinsurance ~~program is reinstated for the remainder of the original contract term by paying a reinstatement premium that is based~~recoverables on ~~the percentage of coverage reinstated and the original property catastrophe coverage premium.~~

~~The following table provides a listing of OneBeacon’s top reinsurers, based upon recoverable amounts, the percentage of total~~ paid and unpaid ~~reinsurance recoverables and the reinsurer’s A.M~~losses are from reinsurers with an A.M. Best Company ~~Inc. (“~~("A.M. ~~Best”~~Best") ~~rating.~~

Top Reinsurers (Millions) Balance at September 30, 2012 % of Total
A.M. Best
Rating ⁽¹⁾
Hannover Ruckversich $ 6.4
15 % A+
Hartford Steam Boiler 4.6
11 % A++
Munich Reinsurance America 4.5
10 % A+
Platinum Underwriters Re 4.1
9 % A
Transatlantic Reinsurance 2.0
5 % A

¹⁾~~A.M. Best ratings as detailed above are: “A++” (Superior,~~rating of A (Excellent, which is the third highest of ~~fifteen~~16 financial strength ratings)~~, “A+”~~ or better. The largest recoverable from an individual reinsurer was $11.0 million with Hannover Ruckversich, which has an A.M. Best rating of A+ (Superior, which is the second highest of ~~fifteen~~ ~~financial strength ratings) and “A” (Excellent, which is the third highest of~~ ~~fifteen~~16 financial strength ratings). The reinsurance balances associated with the runoff business are included in discontinued operations (see Note 15).

Sirius Group

At ~~September 30, 2012~~March 31, 2013, Sirius Group had $~~12.7~~13.2 million of reinsurance recoverables on paid losses and $~~315.5~~305.0 million of reinsurance recoverables on unpaid losses that will become recoverable if claims are paid in accordance with current reserve estimates. Because retrocessional reinsurance contracts do not relieve Sirius Group of its obligation to its ~~ceding companies,~~insureds, the collectability of balances due from ~~its~~Sirius Group's reinsurers is ~~important~~critical to ~~Sirius Group’s~~its financial strength. Sirius Group monitors the financial strength and ratings of ~~its reinsurers~~retrocessionaires on an ongoing basis.

The following table provides a listing of Sirius Group’s top reinsurers based upon recoverable amounts, the percentage of total ~~paid and unpaid reinsurance~~ recoverables and the reinsurers’ A.M. Best ~~ratings.~~

Rating.

Top Reinsurers (Millions) Balance at September 30, 2012 % of Total
A.M. Best
Rating ⁽¹⁾
% Collateralized
General Reinsurance Corporation $ 42.3
13 % A++ 1 %
Swiss Re Group 33.7
10 % A+ 5 %
Lloyds of London ⁽²⁾
29.9
9 % A 4 %
Olympus⁽³⁾
28.8
9 % NR-5 100 %
Michigan Catastrophic Claims Association ⁽⁴⁾
14.6
4 % N/A — %



Top Reinsurers (Millions)	Balance at March 31, 2013		% of Total		A.M. Best Rating⁽¹⁾	% Collateralized
Berkshire Hathaway	$	56.9	18	%	A++	—	%
Swiss Re Group	34.8		11	%	A+	—	%
Olympus Reinsurance Company⁽²⁾	24.9		8	%	NR-5	100	%
Lloyds of London⁽³⁾	17.0		5	%	A	9	%
Michigan Catastrophic Claims Association⁽⁴⁾	14.7		5	%	N/A	—	%

⁽¹⁾A.M. Best ratings as detailed above are: “A++” (Superior, which is the highest of ~~fifteen~~sixteen financial strength ratings), “A+” (Superior, which is the second highest of ~~fifteen~~sixteen financial strength ratings), “A” (Excellent, which is the third highest of ~~fifteen~~sixteen financial strength ratings) and “NR-5” (Not formally followed).

⁽²⁾~~Represents the total of reinsurance recoverables due to Sirius Group from all Lloyds Syndicates.~~

⁽³⁾Non-U.S. insurance entity. The balance is fully collateralized through funds held, letters of credit or trust agreements.

⁽³⁾Represents the total of reinsurance recoverables due to Sirius Group from all Lloyds Syndicates.

⁽⁴⁾ Michigan Catastrophic Claims Association ~~("MCCA"~~(“MCCA”) is a non-profit unincorporated ~~association.,~~association, established by the State of Michigan with the power to issue and collect assessments, to which every insurance company that sells automobile coverage in Michigan is required to be a member. A.M. Best does not rate MCCA. Sirius Group acquired its recoverable from MCCA in the acquisition of Stockbridge Insurance Company. As part of the acquisition, Sirius Group obtained $25.0 of reinsurance protection from the seller (currently rated A+ by A.M. Best) for unfavorable loss reserve development, including uncollectible reinsurance.

Note 5. Investment Securities

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

Realized investment gains and losses resulting from sales of investment securities are accounted for using the specific identification method. Premiums and discounts on all fixed maturity investments are amortized or accreted to income over the anticipated life of the investment. Short-term investments consist of money market funds, certificates of deposit and other securities which, at the time of purchase, mature or become available for use within one year. Short-term investments are carried at amortized or accreted cost, which approximated fair value as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012.

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

Net Investment Income

Pre-tax net investment income for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 consisted of the following:


	Three Months Ended						Nine Months Ended						Three Months Ended
	Sept 30,						Sept 30,						March 31,
Millions	2012			2011			2012			2011			2013			2012
Investment income:
Fixed maturity investments	$	33.0		$	38.5		$	105.1		$	127.0		$	26.0		$	36.7
Short-term investments	.5			.9			2.3			3.2			.8			1.0
Common equity securities	4.8			3.6			13.8			10.1			4.7			4.4
Convertible fixed maturity investments	2.0			1.3			5.9			3.9			.8			1.9
Other long-term investments	.7			1.2			2.2			1.9			.7			.8
Interest on funds held under reinsurance treaties	—			.2			—			(.6		)	—			—
Total investment income	41.0			45.7			129.3			145.5			33.0			44.8
Less third-party investment expenses	(3.4		)	(2.9		)	(9.5		)	(7.4		)	(4.5		)	(3.0		)
Net investment income, pre-tax	$	37.6		$	42.8		$	119.8		$	138.1		$	28.5		$	41.8

Net Realized and Unrealized Investment Gains and Losses

~~Net~~The following table summarizes net realized and unrealized ~~investment gains and losses for the~~ ~~three and nine months endedSeptember 30, 2012~~ ~~and~~ ~~2011~~ ~~consisted of the following:~~

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
Millions 2012 2011 2012 2011
Net realized investment gains, pre-tax $ 23.7
$ 38.3
$ 40.5
$ 67.7
Net unrealized investment (losses) gains, pre-tax 49.0
(35.4 ) 82.7
(31.3 )
Net realized and unrealized investment gains, pre-tax 72.7
2.9
123.2
36.4
Income tax expense attributable to net realized and unrealized
investment gains (losses)
(12.3 ) (1.4 ) (28.3 ) (12.7 )
Net realized and unrealized investment gains, after tax $ 60.4
$ 1.5
$ 94.9
$ 23.7

~~Net realized investment gains (losses)~~

~~Net realized~~ investment gains (losses) for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 ~~consisted of the following:~~:

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
Millions 2012 2011 2012 2011
Fixed maturity investments $ 29.0
$ 14.1
$ 69.5
$ 3.3
Short-term investments (3.4 ) .4
(3.9 ) (10.9 )
Common equity securities 3.9
23.1
(2.2 ) 41.0
Convertible fixed maturity investments 1.1
(.7 ) 3.2
6.3
Other long-term investments (7.2 ) 1.4
(26.4 ) 28.0
Forward contracts .3
—
.3
—
Net realized investment gains, pre-tax 23.7
38.3
40.5
67.7
Income tax expense attributable to net
realized investment gains
(7.4 ) (8.3 ) (12.8 ) (20.7 )
Net realized investment gains, after tax $ 16.3
$ 30.0
$ 27.7
$ 47.0

~~Net unrealized investment gains (losses)~~

~~The following table summarizes changes in the carrying value of investments measured at fair value:~~


	Three Months Ended									Nine Months Ended									Three Months Ended									Three Months Ended
	September 30, 2012									September 30, 2012									March 31, 2013									March 31, 2012
Millions	Net unrealized gains (losses)			Net foreign exchange gains (losses)			Total changes in fair value reflected in earnings			Net unrealized gains (losses)			Net foreign exchange gains (losses)			Total changes in fair value reflected in earnings			Net realized and unrealized gains (losses)			Net foreign exchange gains (losses)			Total net realized and unrealized gains (losses) reflected in earnings			Net realized and unrealized gains (losses)			Net foreign currency gains (losses)			Total net realized and unrealized gains (losses) reflected in earnings
Fixed maturity investments	$	27.2		$	(40.6	)	$	(13.4	)	$	35.5		$	(36.9	)	$	(1.4	)	$	(8.0	)	$	(10.0	)	$	(18.0	)	$	30.7		$	(21.4	)	$	9.3
Short-term investments	—			.1			.1			—			.1			.1			—			.1			.1			—			(.3		)	(.3		)
Common equity securities	65.1			(.1		)	65.0			71.5			(.1		)	71.4			84.5			(.2		)	84.3			36.6			—			36.6
Convertible fixed maturity investments	(.6		)	—			(.6		)	(2.9		)	—			(2.9		)	1.6			(.2		)	1.4			6.2			—			6.2
Other long-term investments	1.6			(3.7		)	(2.1		)	18.2			(2.7		)	15.5			6.5			.5			7.0			10.2			(3.4		)	6.8
Net unrealized investment gains (losses), pre-tax	93.3			(44.3		)	49.0			122.3			(39.6		)	82.7
Income tax expense attributable to net unrealized investment (losses) gains	(16.7		)	11.8			(4.9		)	(25.9		)	10.4			(15.5		)
Net unrealized investment gains (losses), after tax	$	76.6		$	(32.5	)	$	44.1		$	96.4		$	(29.2	)	$	67.2
Forward Contracts																			.4			—			.4			—			—			—
Net realized and unrealized investment gains (losses), pre-tax																			85.0			(9.8		)	75.2			83.7			(25.1		)	58.6
Income tax expense attributable to net realized and unrealized investment (losses) gains																			(15.9		)	2.2			(13.7		)	(20.6		)	6.6			(14.0		)
Net realized and unrealized investment gains (losses), after tax																			$	69.1		$	(7.6	)	$	61.5		$	63.1		$	(18.5	)	$	44.6

Three Months Ended Nine Months Ended
September 30, 2011 September 30, 2011
Millions Net
unrealized
gains
(losses) Net
foreign
exchange
gains
(losses) Total
changes in
fair value
reflected in
earnings Net
unrealized
gains
(losses) Net
foreign
exchange
gains
(losses) Total
changes in
fair value
reflected in
earnings
Fixed maturity investments $ 3.5
$ 67.5
$ 71.0
$ 12.6
$ 77.7
$ 90.3
Short-term investments (.1 ) (.4 ) (.5 ) (.1 ) (1.4 ) (1.5 )
Common equity securities (101.0 ) (.9 ) (101.9 ) (95.1 ) (1.8 ) (96.9 )
Convertible fixed maturity investments (11.2 ) —
(11.2 ) (19.3 ) —
(19.3 )
Other long-term investments (1.2 ) 8.4
7.2
(8.4 ) 4.5
(3.9 )
Net unrealized investment (losses) gains, pre-tax (110.0 ) 74.6
(35.4 ) (110.3 ) 79.0
(31.3 )
Income tax benefit (expense) attributable to net unrealized investment gains (losses) 26.4
(19.5 ) 6.9
28.5
(20.5 ) 8.0
Net unrealized investment (losses) gains, after tax $ (83.6 ) $ 55.1
$ (28.5 ) $ (81.8 ) $ 58.5
$ (23.3 )

The following table summarizes the amount of total pre-tax gains ~~(losses)~~ included in earnings attributable to unrealized investment gains ~~(losses)~~ for Level 3 investments for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


	Three Months Ended						Nine Months Ended					Three Months Ended
	Sept 30,						Sept 30,					March 31,
Millions	2012			2011			2012		2011			2013			2012
Fixed maturity investments	$	(1.0	)	$	(13.5	)	$	7.3	$	(14.9	)	$	.2		$	7.8
Common equity securities	.8			(17.5		)	1.8		(17.0		)	(.1		)	.5
Convertible fixed maturities	—			—			—		—
Other long-term investments	2.9			(3.2		)	11.3		(6.5		)	6.4			7.2
Total unrealized investment losses, pre-tax - Level 3 investments	$	2.7		$	(34.2	)	$	20.4	$	(38.4	)
Total unrealized investment gains, pre-tax - Level 3 investments												$	6.5		$	15.5

Investment Holdings

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ fixed maturity investments as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, were as follows:


	September 30, 2012													March 31, 2013
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value			Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
U.S. Government and agency obligations	$	393.7	$	1.2	$	(.1	)	$	(.1	)	$	394.7		$	435.9	$	.9	$	(.1	)	$	(1.2	)	$	435.5
Debt securities issued by corporations	2,213.8		91.6		(3.0		)	(21.1		)	2,281.3			2,361.2		75.7		(2.6		)	(24.6		)	2,409.7
Municipal obligations	3.8		—		—			—			3.8			5.3		—		(.1		)	—			5.2
Mortgage-backed and asset-backed securities	2,023.3		30.3		(1.1		)	(5.1		)	2,047.4			1,698.7		12.6		(1.9		)	(2.1		)	1,707.3
Foreign government, agency and provincial obligations	475.2		8.0		(.4		)	(6.4		)	476.4			516.4		5.4		(6.3		)	(9.4		)	506.1
Preferred stocks	79.8		6.3		—			—			86.1			79.9		7.7		—			(.1		)	87.5
Total fixed maturity investments including assets held for sale	$	5,189.6	$	137.4	$	(4.6	)	$	(32.7	)	$	5,289.7		$	5,097.4	$	102.3	$	(11.0	)	$	(37.4	)	$	5,151.3
Fixed maturity investments reclassified to assets held for sale related the Runoff Transaction											(377.3		)
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction																								(296.9		)
Total fixed maturity investments											$	4,912.4												$	4,854.4


	December 31, 2011													December 31, 2012
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value			Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)			Carrying value
U.S. Government and agency obligations	$	299.4	$	5.3	$	(.1	)	$	.4		$	305.0		$	440.4	$	1.0	$	(.1	)	$	(1.2	)	$	440.1
Debt securities issued by corporations	2,072.1		73.7		(7.8		)	(2.9		)	2,135.1			2,321.4		88.3		(1.6		)	(23.0		)	2,385.1
Municipal obligations	2.7		—		—			—			2.7			5.3		—		(.1		)	—			5.2
Mortgage-backed and asset-backed securities	3,190.5		25.9		(3.9		)	10.4			3,222.9			2,081.0		25.1		(1.1		)	(9.4		)	2,095.6
Foreign government, agency and provincial obligations	581.2		11.0		(.1		)	(2.9		)	589.2			526.6		6.9		(3.0		)	(8.6		)	521.9
Preferred stocks	82.3		3.2		(6.7		)	—			78.8			79.9		6.7		—			(.2		)	86.4
Total fixed maturity investments including assets held for sale	$	6,228.2	$	119.1	$	(18.6	)	$	5.0		$	6,333.7		$	5,454.6	$	128.0	$	(5.9	)	$	(42.4	)	$	5,534.3
Fixed maturity investments reclassified to assets held for sale related to AutoOne											(111.8		)
Fixed maturity investments reclassified to assets held for sale related to the Runoff Transaction																								(338.1		)
Total fixed maturity investments											$	6,221.9												$	5,196.2

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ common equity securities, convertible fixed maturities and other long-term investments as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, were as follows:


	September 30, 2012												March 31, 2013
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value		Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value
Common equity securities	$	870.0	$	139.7	$	(4.9	)	$	—		$	1,004.8	$	876.8	$	201.7	$	(5.2	)	$	(.1	)	$	1,073.2
Convertible fixed maturity investments	$	140.2	$	7.6	$	(5.8	)	$	—		$	142.0	$	91.2	$	5.9	$	(1.3	)	$	(.2	)	$	95.6
Other long-term investments	$	264.8	$	57.1	$	(8.6	)	$	(6.2	)	$	307.1	$	254.5	$	57.0	$	(10.3	)	$	(6.0	)	$	295.2


	December 31, 2011												December 31, 2012
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value		Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency losses			Carrying value
Common equity securities	$	691.7	$	72.0	$	(8.7	)	$	—		$	755.0	$	895.2	$	143.4	$	(8.8	)	$	(.1	)	$	1,029.7
Convertible fixed maturity investments	$	139.2	$	6.2	$	(1.6	)	$	—		$	143.8	$	121.7	$	6.1	$	(.4	)	$	—		$	127.4
Other long-term investments	$	274.4	$	55.5	$	(25.2	)	$	(3.4	)	$	301.3	$	257.2	$	65.9	$	(22.8	)	$	(6.1	)	$	294.2

1413

~~Other long-term investments~~Hedge Funds and Private Equity Funds

White Mountains holds investments in hedge funds and private equity funds, which are included in other long-term investments. The fair value of these investments has been estimated using the net asset value of the funds. At ~~September 30, 2012~~March 31, 2013, White Mountains held investments in 1715 hedge funds and 3638 private equity funds. The largest investment in a single fund was $~~19.2~~16.7 million at ~~September 30, 2012~~March 31, 2013. The following table summarizes investments in hedge funds and private equity interests by investment objective and sector at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012:


	September 30, 2012				December 31, 2011				March 31, 2013				December 31, 2012
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Hedge funds
Long/short equity	$	58.6	$	—	$	48.8	$	—	$	60.0	$	—	$	60.3	$	—
Long/short credit & distressed	33.8		—		32.3		—		24.5		—		22.7		—
Long diversified strategies	2.3		—		16.9		—		1.7		—		1.7		—
Long/short equity REIT	15.2		—		14.5		—		16.7		—		16.0		—
Long/short equity activist	14.0		—		12.3		—		14.5		—		13.6		—
Long bank loan	.4		—		.5		—		.3		—		.3		—
Total hedge funds	124.3		—		125.3		—		117.7		—		114.6		—

Private equity funds
Multi-sector	29.3		6.4		26.9		8.2		25.9		8.9		23.3		5.4
Energy infrastructure & services	32.9		11.7		28.0		9.9		35.0		14.8		36.3		15.6
Distressed residential real estate	19.2		—		27.4		—		14.6		—		15.8		—
Real estate	12.2		3.3		9.5		3.3		10.9		3.3		11.6		3.3
Private equity secondaries	11.0		3.2		11.3		4.0		10.6		3.1		10.5		3.1
International multi-sector, Europe	4.3		4.9		7.8		4.7		4.2		5.0		5.1		5.0
Manufacturing/Industrial	10.6		29.1		6.2		—		9.0		28.7		9.9		29.1
Healthcare	4.3		5.4		2.3		7.0		4.2		5.0		4.3		5.4
International multi-sector, Asia	.4		2.7		3.6		2.6		—		2.7		.4		2.7
Insurance	3.2		41.3		3.5		41.3		2.5		41.3		3.0		41.3
Aerospace/Defense/Government									3.0		21.8		2.8		22.2
Venture capital	2.4		.5		2.4		.5		2.2		.3		2.2		.3
Total private equity funds	129.8		108.5		128.9		81.5		122.1		134.9		125.2		133.4

Total hedge and private equity funds included in other long-term investments	$	254.1	$	108.5	$	254.2	$	81.5
Total hedge and private equity funds included in other long-term investments⁽¹⁾									$	239.8	$	134.9	$	239.8	$	133.4

⁽¹⁾Excludes carrying value of $35.0 and $34.9 at January 1, 2013 and March 31, 2013 associated with hedge funds and private equity funds accounted for using the equity method.

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

The following summarizes the ~~September 30, 2012~~March 31, 2013 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:


	Notice Period										Notice Period
Millions Redemption frequency	30-59 days notice		60-89 days notice		90-119 days notice		120+ days notice		Total		30-59 days notice		60-89 days notice		90-119 days notice		120+ days notice		Total
Monthly	$	—	$	—	$	—	$	6.8	$	6.8	$	—	$	—	$	—	$	6.8	$	6.8
Quarterly	27.1		29.3		19.9		9.4		85.7		27.9		31.2		9.0		9.6		77.7
Semi-annual	—		20.6		—		—		20.6		—		22.7		—		—		22.7
Annual	2.3		—		8.5		.4		11.2		1.7		—		8.5		.3		10.5
Total	$	29.4	$	49.9	$	28.4	$	16.6	$	124.3	$	29.6	$	53.9	$	17.5	$	16.7	$	117.7

Certain of the hedge fund investments in which White Mountains is invested are no longer active and are in the process of disposing of their underlying investments. Distributions from such funds are remitted to investors as the fund’s underlying investments are liquidated. At ~~September 30, 2012~~March 31, 2013, distributions of $~~3.3~~2.6 million were outstanding from these investments. The actual amount of the final distribution remittances remain subject to market fluctuations. The date at which such remittances will be received is not determinable at ~~September 30, 2012~~March 31, 2013.

White Mountains has also submitted redemption requests for certain of its investments in active hedge funds. At ~~September 30, 2012~~March 31, 2013, redemptions of $~~13.9~~7.1 million are outstanding and are subject to market fluctuations. The majority of such remittances are expected to be received in the ~~fourth~~second quarter of ~~2012.~~2013. Redemptions are recorded as receivables when ~~approved by~~ the ~~hedge funds and~~investment is no longer subject to market fluctuations.

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

At ~~September 30, 2012~~March 31, 2013, investments in private equity funds were subject to lock-up periods as follows:


Millions	1-3 years	3 – 5 years	5 – 10 years	>10 years	Total	1-3 years	3 – 5 years	5 – 10 years	>10 years	Total
Private Equity Funds — expected lock-up period remaining	$27.7	$15.6	$75.9	$10.6	$129.8	$21.6	$34.0	$57.4	$9.1	$122.1

Fair value measurements at ~~September 30, 2012~~March 31, 2013

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

1615

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

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

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

In addition to the investments described above, White Mountains has $~~77.1~~79.4 million and $~~68.1~~79.7 million of investment-related liabilities recorded at fair value and included in other liabilities as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012. These liabilities relate to securities that have been sold short by limited partnerships in which White Mountains has investments and is required to consolidate under GAAP. All of the liabilities included have a Level 1 designation.

1716

Fair Value Measurements by Level

The following tables summarize White Mountains’ fair value measurements for investments at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, by ~~level.~~ level:


	September 30, 2012								March 31, 2013
Millions	Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Fixed maturity investments:
US Government and agency obligations	$	394.7	$	340.5	$	54.2	$	—
U.S. Government and agency obligations									$	435.5	$	364.6	$	70.9	$	—

Debt securities issued by corporations:
Consumer	597.2		—		597.2		—		735.5		—		735.5		—
Industrial	488.1		—		488.1		—
Financials	405.4		1.1		404.3		—		378.4		—		378.4		—
Communications	217.1		—		217.1		—		331.6		—		331.6		—
Basic materials	175.1		—		175.1		—
Industrial									308.0		—		308.0		—
Basic Materials									211.6		—		211.6		—
Utilities									202.3		—		202.3		—
Energy	172.9		—		172.9		—		183.2		—		183.2		—
Utilities	204.4		—		204.4		—
Technology	21.1		—		21.1		—		53.0		—		53.0		—
Diversified	—		—		—		—
Other									6.1		—		6.1		—
Total debt securities issued by corporations:	2,281.3		1.1		2,280.2		—		2,409.7		—		2,409.7		—

Municipal obligations	3.8		—		3.8		—
Mortgage-backed and asset-backed securities	2,047.4		—		2,041.9		5.5		1,707.3		—		1,677.2		30.1
Foreign government, agency and provincial obligations	476.4		56.9		419.5		—		506.1		48.5		457.6		—
Preferred stocks	86.1		—		15.5		70.6		87.5		—		16.6		70.9
Municipal obligations									5.2		—		5.2		—
Total fixed maturity investments ⁽¹⁾	5,289.7		398.5		4,815.1		76.1		5,151.3		413.1		4,637.2		101.0

Short-term investments	917.3		917.3		—		—		654.4		654.4		—		—

Common equity securities:
Financials	316.1		277.9		2.3		35.9		320.1		283.3		—		36.8
Consumer	249.7		249.6		.1		—		305.8		305.8		—		—
Energy									86.2		86.2		—		—
Basic materials	118.2		118.2		—		—		77.6		77.6		—		—
Energy	96.8		96.8		—		—
Technology	51.6		51.6		—		—		76.9		76.9		—		—
Communications									39.9		39.9		—		—
Utilities	42.9		42.7		.2		—		39.7		39.6		.1		—
Other	129.5		73.2		56.3		—		127.0		64.0		63.0		—
Total common equity securities	1,004.8		910.0		58.9		35.9		1,073.2		973.3		63.1		36.8

Convertible fixed maturity investments	142.0		—		142.0		—		95.6		—		95.6		—
Other long-term investments ⁽²⁾	272.6		—		—		272.6		260.5		—		—		260.5
Total investments	$	7,626.4	$	2,225.8	$	5,016.0	$	384.6	$	7,235.0	$	2,040.8	$	4,795.9	$	398.3

⁽¹⁾Carrying value includes $~~377.3~~296.9 that is classified as assets held for sale relating to discontinued operations.

⁽²⁾Excludes carrying value of $~~34.3~~34.9 associated with other long-term investment limited partnerships accounted for using the equity method and $~~0.3~~(0.2) related to forward contracts.

1817


	December 31, 2011								December 31, 2012
Millions	Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Fair value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Fixed maturity investments:
US Government and agency obligations	$	305.0	$	296.2	$	8.8	$	—
U.S. Government and agency obligations									$	440.1	$	369.1	$	71.0	$	—

Debt securities issued by corporations:
Consumer	790.7		—		790.7		—		727.1		—		727.1		—
Financials									401.4		1.0		400.4		—
Industrial	359.4		—		359.4		—		330.8		—		330.8		—
Financials	239.6		3.8		235.8		—
Communications	225.8		—		225.8		—		276.1		—		276.1		—
Utilities									204.2		—		204.2		—
Basic materials	195.7		—		195.7		—		189.1		—		189.1		—
Energy	155.8		—		155.8		—		181.5		—		181.5		—
Utilities	140.1		—		140.1		—
Technology	24.5		—		24.5		—		54.0		—		54.0		—
Diversified	3.5		—		3.5		—
Other									20.9		—		20.9		—
Total debt securities issued by corporations:	2,135.1		3.8		2,131.3		—		2,385.1		1.0		2,384.1		—

Municipal obligations	2.7		—		2.7		—
Mortgage-backed and asset-backed securities	3,222.9		—		3,207.8		15.1		2,095.6		—		2,073.5		22.1
Foreign government, agency and provincial obligations	589.2		65.7		523.5		—		521.9		52.1		469.8		—
Preferred stocks	78.8		—		15.0		63.8		86.4		—		15.6		70.8
Municipal obligations									5.2		—		5.2		—
Total fixed maturity investments ⁽¹⁾	6,333.7		365.7		5,889.1		78.9		5,534.3		422.2		5,019.2		92.9

Short-term investments	846.0		846.0		—		—		630.6		630.6		—		—

Common equity securities:
Financials	219.2		185.8		1.5		31.9		324.5		286.3		.9		37.3
Consumer	188.8		188.5		.3		—		255.6		255.6		—		—
Basic materials	121.0		119.9		1.1		—		103.3		103.3		—		—
Energy	72.6		72.6		—		—		101.0		101.0		—		—
Technology									55.0		55.0		—		—
Utilities	42.0		41.8		.2		—		43.6		43.4		.2		—
Technology	25.8		25.8		—		—
Communications									35.2		35.2		—		—
Other	85.6		33.0		52.2		.4		111.5		53.1		58.4		—
Total common equity securities	755.0		667.4		55.3		32.3		1,029.7		932.9		59.5		37.3

Convertible fixed maturity investments	143.8		—		143.8		—		127.4		—		127.4		—
Other long-term investments ⁽²⁾	268.3		—		—		268.3		259.3		—		—		259.3
Total investments	$	8,346.8	$	1,879.1	$	6,088.2	$	379.5	$	7,581.3	$	1,985.7	$	5,206.1	$	389.5

⁽¹⁾Carrying value includes $~~111.8~~338.1 that is classified as assets held for sale relating to ~~AutoOne~~ discontinued operations.

⁽²⁾Excludes carrying value of $~~33.0~~35.0 associated with other long-term ~~investments~~investment limited partnerships accounted for using the equity ~~method.~~method and $(0.1) related to currency forward contracts.

1918

Debt securities issued by corporations

The following table summarizes the ratings of the corporate debt securities held in White Mountains’ investment portfolio as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012:


					Fair Value at
Millions	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
AAA	$	—	$	—	$	—	$	—
AA	165.5		206.8		164.4		193.4
A	992.8		802.8		1,132.3		1,061.0
BBB	1,108.5		1,110.8		1,099.4		1,116.9
BB	7.6		6.2		7.0		7.0
Other	6.9		8.5		8.0		6.8
Debt securities issued by corporations ⁽¹⁾	$	2,281.3	$	2,135.1	$	2,411.1	$	2,385.1

⁽¹⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's Financial Services LLC ("Standard & ~~Poor’s,~~Poor’s") and 2) Moody’s Investor Service ("Moody's").

~~and 3) Bloomberg (Composite rating).~~

Mortgage-backed, Asset-backed Securities

White Mountains purchases commercial and residential mortgage-backed securities with the goal of maximizing risk adjusted returns in the context of a diversified portfolio. White Mountains’ non-agency commercial mortgage-backed portfolio (“CMBS”) is generally ~~short tenor~~short-term and structurally senior, with more than 25 points of subordination on average for fixed rate CMBS and more than 5030 points of subordination on average for floating rate CMBS as of ~~September 30, 2012~~March 31, 2013. In general, subordination represents the percentage principal loss on the underlying collateral that would be absorbed by other securities lower in the capital structure before the more senior security incurs a loss. White Mountains believes these levels of protection will mitigate the risk of loss tied to the refinancing challenges facing the commercial real estate market. As of ~~September 30, 2012~~March 31, 2013, on average less than ~~1.0%~~1% of the underlying loans were reported as non-performing for all non-agency CMBS held by White Mountains. White Mountains is not an originator of residential mortgage loans and did not hold any residential mortgage-backed securities (“RMBS”) categorized as sub-prime as of ~~September 30, 2012~~March 31, 2013. White Mountains’ investments in hedge funds and private equity funds contain negligible amounts of sub-prime mortgage-backed securities at ~~September 30, 2012~~March 31, 2013. White Mountains considers sub-prime mortgage-backed securities as those that have underlying loan pools that exhibit weak credit characteristics, or those that are issued from dedicated sub-prime shelves or dedicated second-lien shelf registrations (i.e., White Mountains considers investments backed primarily by second-liens to be sub-prime risks regardless of credit scores or other metrics).

White Mountains categorizes mortgage-backed securities as “non-prime” (also called “Alt A” or “A-”) if they are backed by collateral that has overall credit quality between prime and sub-prime based on White Mountains’ review of the characteristics of their underlying mortgage loan pools, such as credit scores and financial ratios. White Mountains’ non-agency residential mortgage-backed portfolio is generally ~~short tenor~~moderate-term and structurally senior. White Mountains does not own any collateralized loan obligations or collateralized debt obligations, including residential mortgage-backed collateralized debt obligations.

2019

The following table summarizes mortgage and asset-backed securities as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012:


	September 30, 2012						December 31, 2011						March 31, 2013						December 31, 2012
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
GNMA	$	1,165.5	$	1,165.5	$	—	$	1,365.8	$	1,365.8	$	—	$	805.5	$	805.5	$	—	$	1,013.4	$	1,013.4	$	—
FNMA	97.2		97.2		—		712.6		712.6		—		140.2		140.2		—		74.6		74.6		—
FHLMC	37.6		37.6		—		35.9		35.9		—		55.6		55.6		—		55.8		55.8		—
Total Agency ⁽¹⁾	1,300.3		1,300.3		—		2,114.3		2,114.3		—		1,001.3		1,001.3		—		1,143.8		1,143.8		—
Non-agency:
Residential	160.5		160.5		—		83.1		68.0		15.1		55.6		55.6		—		160.6		160.6		—
Commercial	389.3		383.8		5.5		276.7		276.7		—		284.9		276.9		8.0		334.1		334.1		—
Total Non-agency	549.8		544.3		5.5		359.8		344.7		15.1		340.5		332.5		8.0		494.7		494.7		—

Total mortgage-backed securities	1,850.1		1,844.6		5.5		2,474.1		2,459.0		15.1		1,341.8		1,333.8		8.0		1,638.5		1,638.5		—
Other asset-backed securities:
Credit card receivables	80.8		80.8		—		380.6		380.6		—		132.3		110.2		22.1		173.5		151.4		22.1
Vehicle receivables	80.3		80.3		—		345.6		345.6		—		210.3		210.3		—		265.1		265.1		—
Other	36.2		36.2		—		22.6		22.6		—		22.9		22.9		—		18.5		18.5		—
Total other asset-backed securities	197.3		197.3		—		748.8		748.8		—		365.5		343.4		22.1		457.1		435.0		22.1
Total mortgage and asset- backed securities	$	2,047.4	$	2,041.9	$	5.5	$	3,222.9	$	3,207.8	$	15.1
Total mortgage and asset-backed securities													$	1,707.3	$	1,677.2	$	30.1	$	2,095.6	$	2,073.5	$	22.1

⁽¹⁾Represents publicly traded mortgage-backed securities which carry the full faith and credit guaranty of the U.S. government (i.e., GNMA) or are guaranteed by a government sponsored entity (i.e., FNMA, FHLMC).

Non-agency Mortgage-backed Securities

The security issuance years of White Mountains’ investments in non-agency RMBS and non-agency CMBS securities as of ~~September 30, 2012~~March 31, 2013 are as follows:


			Security Issuance Year																Security Issuance Year
Millions	Fair Value		2003		2006		2007		2009		2010		2011		2012		Fair Value		2005		2006		2007		2008		2010		2011		2012		2013
Non-agency RMBS	$	160.5	$	2.2	$	21.4	$	7.1	$	1.7	$	53.2	$	74.9	$	—	$	55.6	$	34.9	$	11.0	$	4.8	$	—	$	4.9	$	—	$	—	$	—
Non-agency CMBS	389.3		—		4.5		15.3		11.9		6.1		127.4		224.1		284.9		—		8.7		15.0		35.0		12.9		39.8		122.5		51.0
Total	$	549.8	$	2.2	$	25.9	$	22.4	$	13.6	$	59.3	$	202.3	$	224.1	$	340.5	$	34.9	$	19.7	$	19.8	$	35.0	$	17.8	$	39.8	$	122.5	$	51.0

Non-agency Residential Mortgage-backed Securities

The classification of the underlying collateral quality and the tranche levels of White Mountains’ non-agency RMBS securities are as follows as of ~~September 30, 2012~~March 31, 2013:


Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾		Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Prime	$	160.0	$	13.0	$	147.0	$	—	$	55.6	$	4.9	$	50.7	$	—
Non-prime	.5		—		.5		—		—		—		—		—
Sub-prime	—		—		—		—		—		—		—		—
Total	$	160.5	$	13.0	$	147.5	$	—	$	55.6	$	4.9	$	50.7	$	—

⁽¹⁾At issuance, Super Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to

other AAA or Aaa bonds.

⁽²⁾At issuance, Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to non-AAA

or non-Aaa bonds.

⁽³⁾At issuance, Subordinate were not rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were junior to

AAA or Aaa bonds.

2120

Non-agency Commercial Mortgage-backed Securities

The amount of fixed and floating rate securities and their tranche levels of White Mountains’ non-agency CMBS securities are as follows as of ~~September 30, 2012~~March 31, 2013:


Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾		Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Fixed rate CMBS	$	367.1	$	253.0	$	109.6	$	4.5	$	206.5	$	128.0	$	60.7	$	17.8
Floating rate CMBS	22.2		15.3		1.4		5.5		78.4		14.9		36.4		27.1
Total	$	389.3	$	268.3	$	111.0	$	10.0	$	284.9	$	142.9	$	97.1	$	44.9

⁽¹⁾At issuance, Super Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were

senior to other AAA or Aaa bonds.

⁽²⁾At issuance, Senior were rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were senior to

non-AAA or non-Aaa bonds.

⁽³⁾At issuance, Subordinate were not rated AAA by Standard & Poor’s, Aaa by Moody’s or AAA by Fitch and were

junior to AAA or Aaa bonds.

Rollforward of Fair Value Measurements by Level

White Mountains uses quoted market prices where available as the inputs to estimate fair value for its investments in active markets. Such measurements are considered to be either Level 1 or Level 2 measurements, depending on whether the quoted market price inputs are for identical securities (Level 1) or similar securities (Level 2). Level 3 measurements for fixed maturity investments, common equity securities, convertible fixed maturity investments and other long-term investments at ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 consist of securities for which the estimated fair value has not been determined based upon quoted market price inputs for identical or similar securities.

The following tables summarize the changes in White Mountains’ fair value measurements by level for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


							Level 3 Investments																					Level 3 Investments
Millions	Level 1 Investments			Level 2 Investments			Fixed Maturities			Common equity securities			Convertible fixed maturities		Other long-term investments			Total				Level 1 ⁽³⁾ Investments			Level 2 Investments			Fixed Maturities		Common equity securities			Convertible fixed maturities		Other long-term investments			Total
Balance at January 1, 2012	$	1,879.1		$	6,088.2		$	78.9		$	32.3		$	—	$	268.3		$	8,346.8		⁽¹⁾⁽²⁾
Balance at January 1, 2013																						$	1,355.1		$	5,206.1		$	92.9	$	37.3		$	—	$	259.3		$	6,950.7		⁽¹⁾⁽²⁾
Total realized and unrealized gains (losses)	57.8			53.8			8.4			11.4			—		(8.2		)	123.2				80.1			(10.8		)	.1		(.1		)	—		5.8			75.1
Foreign currency gains (losses) through OCI	13.2			75.5			.7			.1			—		3.1			92.6
Foreign currency losses through OCI																						(.4		)	(4.8		)	—		—			—		(.4		)	(5.6		)
Amortization/Accretion	(.7		)	(34.0		)	(.7		)	—			—		—			(35.4		)		(.4		)	(14.0		)	—		—			—		—			(14.4		)
Purchases	6,712.0			3,823.7			144.3			2.5			—		40.6			10,723.1				318.6			1,445.8			8.0		—			—		18.9			1,791.3
Sales	(6,435.6		)	(5,048.1		)	(99.2		)	(9.8		)	—		(31.2		)	(11,623.9		)		(382.3		)	(1,828.3		)	—		—			—		(23.1		)	(2,233.7		)
Net change in investments related to purchases and sales of consolidated affiliates																						14.5			2.7			—		—			—		—			17.2
Transfers in	—			56.9			—			—			—		—			56.9				1.2			—			—		—			—		—			1.2
Transfers out	—			—			(56.3		)	(.6		)	—		—			(56.9		)		—			(.8		)	—		(.4		)	—		—			(1.2		)
Balance at September 30, 2012	$	2,225.8		$	5,016.0		$	76.1		$	35.9		$	—	$	272.6		$	7,626.4		⁽¹⁾⁽²⁾
Balance at March 31, 2013																						$	1,386.4		$	4,795.9		$	101.0	$	36.8		$	—	$	260.5		$	6,580.6		⁽¹⁾⁽²⁾

⁽¹⁾Excludes carrying value of $~~33.0~~35.0 and $~~34.3~~34.9 at January 1, ~~2012~~2013 and ~~September 30, 2012~~March 31, 2013 associated with other long-term investments accounted for using the equity method and $~~0.3~~(0.1) and $(0.2) at ~~September 30, 2012~~January 1, 2013 and March 31, 2013 related to forward contracts.

⁽²⁾Carrying value includes $~~111.8~~338.1 and $~~377.3~~296.9 at January 1, ~~2012~~2013 and ~~September 30, 2012~~March 31, 2013 that is classified as assets held for sale relating to discontinued operations.

⁽³⁾Excludes carrying value of $630.6 and $654.4 at January 1, 2013 and March 31, 2013 and realized and unrealized gain for the period of $0.1 associated with short-term investments classified as level 1.

2221


							Level 3 Investments																						Level 3 Investments
Millions	Level 1 Investments			Level 2 Investments			Fixed Maturities			Common equity securities			Convertible fixed maturities		Other long-term investments				Total				Level 1⁽³⁾ Investments			Level 2 Investments			Fixed Maturities			Common equity securities		Convertible fixed maturities		Other long-term investments				Total
Balance at January 1, 2011	$	1,894.4		$	5,477.4		$	128.4		$	71.2		$	—	$	330.2		⁽¹⁾	$	7,901.6		⁽¹⁾
Total realized and unrealized gains (losses)	(50.5		)	115.9			(10.6		)	(4.9		)	—		22.5				72.4
Foreign currency gains (losses) through OCI	.3			(84.4		)	(4.4		)	1.6			—		(5.0		)		(91.9		)
Balance at January 1, 2012																							$	1,033.1		$	6,088.2		$	78.9		$	32.3	$	—	$	268.3		⁽¹⁾	$	7,500.8		⁽¹⁾⁽²⁾
Total realized and unrealized gains																							34.7			10.1			7.1			.5		—		6.5				58.9
Foreign currency gains through OCI																							.7			50.4			.7			—		—		2.7				54.5
Amortization/Accretion	2.4			(40.7		)	(.1		)	—			—		—				(38.4		)		(.3		)	(12.5		)	(1.1		)	—		—						(13.9		)
Purchases	6,690.7			3,987.4			212.8			19.7			—		27.9				10,938.5				166.6			1,708.2			97.7			—		—		5.7				1,978.2
Sales	(6,782.1		)	(4,596.9		)	1.6			(55.5		)	—		(83.4		)		(11,516.3		)		(129.0		)	(2,729.4		)	(4.1		)	—		—		(9.7		)		(2,872.2		)
Transfers in	—			111.8			1.0			—			—		—				112.8				—			—			—			—		—		—				—
Transfers out	—			(1.0		)	(111.8		)	—			—		—				(112.8		)		—			—			—			—		—		—				—
Balance at September 30, 2011	$	1,755.2		$	4,969.5		$	216.9		$	32.1		$	—	$	292.2		⁽¹⁾	$	7,265.9		⁽¹⁾
Balance at March 31, 2012																							$	1,105.8		$	5,115.0		$	179.2		$	32.8	$	—	$	273.5		⁽¹⁾	$	6,706.3		⁽¹⁾⁽²⁾

⁽¹⁾Excludes carrying value of $~~36.6~~33.0 and $~~41.9~~33.2 at ~~September 30, 2011~~March 31, 2012 and January 1, ~~2011~~2012 associated with other long-term investment limited partnerships accounted for using the equity method.

⁽²⁾Carrying value includes $111.8 that is classified as assets held for sale relating to discontinued operations.

⁽³⁾Excludes carrying value of $877.5 and $846.0 at March 31, 2012 and January 1, 2012 and realized and unrealized loss for the period of $0.3 associated with short-term investments classified as level 1.

Fair Value Measurements — transfers between levels - Three-month period ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012

During the first ~~nine~~three months of ~~2012~~2013~~, one security~~ and 2012, no fixed income securities classified as Level 3 measurements in the prior period was recategorized as Level 2 measurements because quoted market prices for similar securities that were considered reliable and could be validated against an alternative source were available at ~~September 30, 2012~~. ~~These measurements comprise “Transfers out” of Level 3 and “Transfers in” to Level 2 of~~ ~~$56.9 million~~ ~~in fixed maturities for the period ended~~ ~~September 30, 2012~~March 31, 2013.

~~During the first~~ ~~nine~~ ~~months of~~ ~~2011, seven securities which had been classified as Level 3 measurements at~~ ~~January 1, 2011~~ ~~were recategorized as Level 2 measurements because quoted market prices for similar securities that were considered reliable and could be validated against an alternative source were available at~~ ~~September 30, 2011. These measurements comprise “Transfers out” of Level 3 and “Transfers in” to Level 2 of~~ ~~$111.8 million~~ ~~in fixed maturities for the period ended~~ ~~September 30, 2011. One security that was classified as a Level 2 investment at~~ ~~January 1, 2011~~ ~~was priced with unobservable inputs and represents “Transfers in” of~~ ~~$1.0 million~~ in Level 3 investments. The fair value of this security was estimated using industry standard pricing models, in which management selected inputs using its best judgment. The pricing models used by White Mountains use the same valuation methodology for all Level 3 measurements for fixed maturities. The security is considered to be Level 3 because the measurements are not directly observable. At ~~September 30, 2011, the estimated fair value for this security determined using the industry standard pricing models was~~ ~~$0.8 million~~ ~~less than the estimated fair value based upon quoted prices provided by a third party pricing vendor.~~

Significant Unobservable Inputs

The following summarizes significant unobservable inputs used in estimating the fair value of investment securities classified within Level 3 other than hedge funds and private equity funds at ~~September 30, 2012~~March 31, 2013:. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.

($ in Millions)

September 30, 2012

March 31, 2013

Description

Fair Value

Rating⁽¹⁾

Valuation Technique(s)

Unobservable Input

Range⁽¹⁾

Fair Value

Rating⁽²⁾

Valuation Technique(s)

Unobservable Input

Non-agency commercial mortgage-backed securities

$5.5

Discounted cash flow

Prepayment Rate

0.0

CPY ⁽²⁾

Preferred Stock⁽¹⁾

$70.9

Discounted cash flow

Discount yield

7.4

Asset-backed securities

$8.0

BBB-

Broker pricing

Broker quote

Discount Margin over LIBOR

2.1

$22.1

AA+

Broker pricing

Broker quote

Preferred Stock

$70.6

Discounted cash flow

Discount yield

8.0

Private equity securities

$36.8

Multiple of GAAP book value

Book value multiple

1.0

⁽¹⁾~~Each~~As of March 31, 2013 asset type consists of one security.

⁽²⁾~~CPY refers to~~Credit ratings are assigned based on the ~~market convention for CMBS prepayment.~~following hierarchy: 1) Standard and Poor's Financial Services LLC (“Standard & Poor’s”) and 2) Moody’s Investor Service (“Moody's”).

The assumed prepayment rate is a significant unobservable input used to estimate the fair value of investments in non-agency commercial mortgage-backed securities (“CMBS”). Generally for bonds priced at a premium, increases in prepayment speeds will result in a lower fair value, while decreases in prepayment speed may result in a higher fair value.

2322

Note 6. Debt

White Mountains’ debt outstanding as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 consisted of the following:

Millions September 30,
2012 December 31,
2011
OBH Senior Notes, at face value $ 269.9
$ 269.9
Unamortized original issue discount (.1 ) (.1 )
OBH Senior Notes, carrying value 269.8
269.8
SIG Senior Notes, at face value 400.0
400.0
Unamortized original issue discount (.6 ) (.7 )
SIG Senior Notes, carrying value 399.4
399.3
WTM Bank Facility —
—
Old Lyme 2.1
2.1
Other debt ⁽¹⁾
5.3
6.3
Total debt $ 676.6
$ 677.5

⁽¹⁾~~Other debt relates to White Mountains’ consolidation of Hamer and Bri-Mar.~~



Millions	March 31, 2013			December 31, 2012
2012 OBH Senior Notes, at face value	$	275.0		$	275.0
Unamortized original issue discount	(.3		)	(.3		)
2012 OBH Senior Notes, carrying value	274.7			274.7
SIG Senior Notes, at face value	400.0			400.0
Unamortized original issue discount	(.6		)	(.6		)
SIG Senior Notes, carrying value	399.4			399.4
WTM Bank Facility	—			75.0
Old Lyme Note	2.1			2.1
Total debt	$	676.2		$	751.2

WTM Bank Facility

White Mountains has a revolving credit facility with a total commitment of $375.0 million (the “WTM Bank Facility”) with a syndicate of lenders administered by Bank of America, N.A. that has a maturity date of August 12, 2015.

In December 2012, White Mountains borrowed $150.0 million under the WTM Bank Facility at a blended interest rate of 3.53%. White Mountains repaid $75.0 million in December 2012 and the remaining balance of $75.0 million in January 2013. As of ~~September 30, 2012~~March 31, 2013, the WTM Bank Facility was undrawn.

The WTM Bank Facility contains various affirmative, negative and financial covenants which White Mountains considers to be customary for such borrowings, including certain minimum net worth and maximum debt to capitalization standards. Failure to meet one or more of these covenants could result in an event of default, which ultimately could eliminate availability under these facilities and result in acceleration of principal repayment on any amounts outstanding.

Debt Covenants

At ~~September 30, 2012~~March 31, 2013, White Mountains was in compliance with all of the covenants under the WTM Bank Facility, the ~~OneBeacon U.S. Holdings, Inc. (“OBH”)~~2012 OBH Senior Notes and the SIG Senior Notes.

~~Old Lyme~~

On ~~December 31, 2011, Sirius Group acquired the runoff loss reserve portfolio of Old Lyme. As part of the acquisition, Sirius Group entered into a~~ ~~five~~ ~~year~~ ~~$2.1 million~~ ~~purchase note. The principal amount of the purchase note is subject to upward adjustments for favorable loss reserve development (up to~~ ~~50%~~ of ~~$6.0 million) and downward adjustments for any adverse loss reserve development.~~

Note 7. 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 such that taxes are imposed, the Company and its Bermuda domiciled subsidiaries would be exempt from such tax until March 31, 2035, pursuant to the Bermuda Exempted Undertakings Tax Protection Act of 1966. The Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The jurisdictions in which the ~~Company’s~~Company's subsidiaries and branches are subject to tax are Australia, Belgium, Canada, ~~Denmark,~~ Germany, Gibraltar, Luxembourg, the Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United States.

White Mountains' income tax expense for the three months ended ~~September 30,~~ March 31, 2013 and 2012, represented an effective tax rate of ~~35.4%~~27.4% and 22.1%, which ~~is in line with the U.S. statutory rate of~~ ~~35%. White Mountains’ income tax expense for the nine months ended~~ ~~September 30, 2012~~ ~~represented effective tax rate of~~ ~~27.2%, which differed from~~was lower than the U.S. statutory rate of 35% primarily due to income generated in jurisdictions other than the United States.

~~White Mountains' effective tax rate for the three and nine months ended September 30, 2011 was not meaningful as pre-tax income was near break-even.~~

In arriving at the effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, 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, ~~2012~~2013 and ~~2011~~2012 ~~and included these gains (losses) in the effective tax rate calculation pursuant to ASC 740-270.~~.

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. During the next twelve months, it is possible that certain planning strategies ~~will no longer~~or projected earnings in certain subsidiaries may not be ~~sufficient~~feasible to utilize the entire deferred tax asset, which could result in material changes to White Mountains’ deferred tax assets and tax expense.

Upon completion of the Runoff Transaction, it is expected that the unrecognized tax benefits associated with tax positions where the deductibility is certain but the timing is uncertain, will decrease by approximately ~~$11.5 million. White Mountains does not expect the decrease to result in a material change to its financial position.~~

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 2005.

The IRS is conducting an examination of income tax returns for 2005 and 2006 for certain U.S. subsidiaries of OneBeacon. On January 5, 2011, White Mountains received Form 4549-A (Income Tax Discrepancy Adjustments) from the IRS relating to the examination of tax years 2005 and 2006. The estimated total assessment, including interest and utilization of alternative minimum and foreign tax credit carryovers, is $~~20.6~~18.7 million. White Mountains disagrees with the adjustments proposed by the IRS and ~~intends to defend~~is defending its position. ~~The~~Although the timing of the resolution of these issues is uncertain, ~~however,~~ it is reasonably possible that the resolution could occur within the next twelve months. An estimate of the range of potential outcomes cannot be made at this time. When ultimately settled, White Mountains does not expect the resolution of this examination to result in a material change to its financial position.

On July 28, 2011, the IRS commenced an examination of the income tax returns for 2007, 2008 and 2009 for certain U.S. subsidiaries of OneBeacon. On April 5, 2013, White Mountains received Form 4549-A (Income Tax Discrepancy Adjustments) from the IRS relating to the examination of tax years 2007, 2008 and 2009. The estimated total assessment, including interest, utilization of alternative minimum and foreign tax credit carryovers and capital loss carrybacks, is $87.0 million. However, $80.6 million of the proposed adjustments relate to items for which the expense deduction has been disallowed in a year being examined, but ultimate deductibility is highly certain to occur in a later period. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these deductions in the exam period would not affect the effective tax rate, but would accelerate the payment of cash to the taxing authority. White Mountains disagrees with the adjustments proposed by the IRS and is defending its position. Although the timing of the resolution of these issues is uncertain, it is reasonably possible that the resolution could occur within the next twelve months. An estimate of the range of potential outcomes cannot be made at this time. When ultimately settled, White Mountains does not expect the resolution of this examination to result in a material change to its financial position.

On December 15, 2011, the IRS commenced an examination of the income tax returns for 2010 for certain U.S. subsidiaries of ~~AFI. Pursuant to a Stock Purchase Agreement dated as of May 17, 2011 between~~Answer Financial Inc. On March 26, 2013, White Mountains and Allstate, White Mountains is required to indemnify Allstate for any changes in pre-closing taxes. White Mountains does not expect the resolution of this examination to result in a material change to its financial position.

~~The IRS conducted an examination of income tax returns for 2006 and 2007 for certain U.S. subsidiaries of Sirius Group. On October 26, 2011, the Sirius Group~~ received ~~and signed~~Form 4549 (Income Tax Examination Changes) from the IRS ~~Revenue Agent’s Report, which contained no proposed adjustments.~~relating to the examination year 2010. The ~~IRS also examined the U.S. income tax return filed by WM Belvaux S.à r.l., a Luxembourg subsidiary, for tax year 2007. On May 3, 2011, the exam was completed with no proposed adjustments.~~

~~The Ministry of Finance in Sweden has proposed reducing the corporate income tax rate in Sweden to~~ ~~22.0%~~ ~~from~~ ~~26.3%. If this proposal is enacted, the reduction in the Swedish corporate income tax rate would reduce the White Mountains' net deferred tax liability by approximately~~ ~~$60 million. The Ministry of Finance in Sweden has also proposed tax legislation that, if enacted, would limit the deductibility of interest paid~~adjustments on ~~certain intra-group debt instruments after January 1, 2013. At September 30, 2012, White Mountains has~~ ~~$272.1 million~~ of deferred tax assets related to net operating loss carryforwards that are being utilized from interest income on intra-group debt instruments that would be affected by the proposed tax legislation. However, management doessuch Form 4549 were not ~~expect that the proposed tax legislation will adversely affect the carrying value of these deferred tax assets as management believes it has alternate strategies to utilize the deferred tax assets.~~significant.

Note 8. Derivatives

Variable Annuity Reinsurance

White Mountains has entered into agreements to reinsure death and living benefit guarantees associated with certain variable annuities in Japan. At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, the total guarantee value was approximately ¥~~¥230.5~~228.5 billion (approximately $~~3.0~~2.4 billion at exchange rates on that date) and ¥~~233.7~~230.0 billion (approximately $~~3.0~~2.7 billion at exchange rates on that date)., respectively. The collective account values of the underlying variable annuities were approximately ~~80%~~94% and ~~78%~~87% of the guarantee value at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012., respectively.

The following table summarizes the pre-tax operating results of WM Life Re for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
Millions	2012			2011			2012			2011			2013			2012
Fees, included in other revenues	$	8.1		$	8.4		$	24.1		$	24.3		$	6.8		$	8.0
Change in fair value of variable annuity liability, included in other revenues	(11.3		)	(164.4		)	89.4			(148.0		)	184.3			211.2
Change in fair value of derivatives, included in other revenues	(11.0		)	148.9			(122.0		)	105.4			(181.8		)	(206.5		)
Foreign exchange, included in other revenues	9.0			14.8			(6.4		)	17.1			(14.6		)	(23.0		)
Other investment income and gains (losses)	3.8			.5			2.9			(.1		)	(4.0		)	(2.1		)
Total revenues	(1.4		)	8.2			(12.0		)	(1.3		)	(9.3		)	(12.4		)
Change in fair value of variable annuity death benefit liabilities, included in other expenses	.7			(5.6		)	6.7			(3.1		)
Death benefit claims paid, included in other expenses	(1.5		)	(.7		)	(4.9		)	(2.4		)
Change in fair value of variable annuity death benefit liabilities, included in other general and administrative expenses													5.6			8.8
Death benefit claims paid, included in general and administrative expenses													(1.1		)	(1.8		)
General and administrative expenses	(1.1		)	(1.1		)	(3.8		)	(3.2		)	(1.7		)	(1.3		)
Pre-tax (loss) income	$	(3.3	)	$	.8		$	(14.0	)	$	(10.0	)
Pre-tax loss													$	(6.5	)	$	(6.7	)

~~All of White Mountains’ variable annuity reinsurance liabilities were classified as Level 3 measurements at~~The following summarizes realized and unrealized derivative gains (losses) recognized in other revenues for the ~~September 30, 2012~~three months endedMarch 31, 2013 and ~~2011~~2012. and the carrying values, included in other assets, at March 31, 2013 and December 31, 2012 by type of instrument:



							Carrying Value
	Three Months Ended						As of
	March 31,						March 31, 2013			December 31, 2012
Millions	2013			2012			March 31, 2013			December 31, 2012
Fixed income/interest rate	$	(30.9	)	$	(79.0	)	$	(16.2	)	$	27.1
Foreign exchange	(53.6		)	(55.0		)	74.1			52.8
Equity	(97.3		)	(72.5		)	17.9			18.4
Total	$	(181.8	)	$	(206.5	)	$	75.8		$	98.3

The following tables summarize the changes in White Mountains’ variable annuity reinsurance liabilities and derivative instruments for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


	Three Months Ended September 30, 2012															Three Months Ended March 31, 2013
	Variable Annuity (Liabilities)			Derivative Instruments												Variable Annuity (Liabilities)				Derivative Instruments
Millions	Level 3			Level 3 ⁽¹⁾			Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total ⁽⁴⁾			Level 3				Level 3 ⁽¹⁾			Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total
Beginning of period	$	(661.8	)	$	213.0		$	61.0		$	(23.7	)	$	250.3		$	(441.5	)		$	140.5		$	(20.5	)	$	(21.7	)	$	98.3
Purchases	—			—			—			—			—			—				36.1			—			—			36.1
Realized and unrealized (losses) gains	(10.6		)	6.7			(15.3		)	(2.4		)	(11.0		)
Realized and unrealized gains (losses)																189.9			⁽⁴⁾	(49.2		)	(85.5		)	(47.1		)	(181.8		)
Transfers in	—			—			—			—			—			—				—			—			—			—
Sales/settlements	—			(6.7		)	(12.5		)	22.0			2.8			—				—			63.1			60.1			123.2
End of period	$	(672.4	)	$	213.0		$	33.2		$	(4.1	)	$	242.1		$	(251.6	)		$	127.4		$	(42.9	)	$	(8.7	)	$	75.8

Nine Months Ended September 30, 2012

Variable Annuity
(Liabilities)
Derivative Instruments
Millions Level 3
Level 3 ⁽¹⁾

Level 2 ⁽¹⁾⁽²⁾

Level 1 ⁽³⁾

Total ⁽⁴⁾
Beginning of period $ (768.5 ) $ 247.1
$ 39.2
$ 4.1
$ 290.4
Purchases —
6.1
—
—
6.1
Realized and unrealized gains (losses) 96.1
(24.1 ) (71.8 ) (26.1 ) (122.0 )
Transfers in —
—
—
—
—
Sales/settlements —
(16.1 ) 65.8
17.9
67.6
End of period $ (672.4 ) $ 213.0
$ 33.2
$ (4.1 ) $ 242.1

Three Months Ended September 30, 2011

Variable Annuity
(Liabilities)
Derivative Instruments
Millions Level 3
Level 3 ⁽¹⁾

Level 2 ⁽¹⁾⁽²⁾

Level 1 ⁽³⁾

Total ⁽⁴⁾
Beginning of period $ (591.3 ) $ 232.7
$ 48.2
$ (11.9 ) $ 269.0
Purchases —
—
—
—
—
Realized and unrealized (losses) gains (170.0 ) 45.6
75.7
27.6
148.9
Transfers in —
—
—
—
—
Sales/settlements —
—
(48.4 ) (15.7 ) (64.1 )
End of period $ (761.3 ) $ 278.3
$ 75.5
$ —
$ 353.8


	Nine Months Ended September 30, 2011															Three Months Ended March 31, 2012
	Variable Annuity (Liabilities)			Derivative Instruments												Variable Annuity (Liabilities)				Derivative Instruments
Millions	Level 3			Level 3 ⁽¹⁾			Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total ⁽⁴⁾			Level 3				Level 3 ⁽¹⁾			Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total
Beginning of period	$	(610.2	)	$	275.3		$	72.2		$	—		$	347.5		$	(768.5	)		$	247.1		$	39.2		$	4.1		$	290.4
Purchases	—			5.0			—			—			5.0			—				6.1			—			—			6.1
Realized and unrealized (losses) gains	(151.1		)	27.1			67.5			10.8			105.4
Realized and unrealized gains (losses)																220.0			⁽⁴⁾	(60.3		)	(98.2		)	(48.0		)	(206.5		)
Transfers in	—			—			—			—			—			—				—			—			—			—
Sales/settlements	—			(29.1		)	(64.2		)	(10.8		)	(104.1		)	—				(9.1		)	58.9			34.5			84.3
End of period	$	(761.3	)	$	278.3		$	75.5		$	—		$	353.8		$	(548.5	)		$	183.8		$	(.1	)	$	(9.4	)	$	174.3

⁽¹⁾Consists of over-the-counter instruments.

⁽²⁾Consists of interest rate swaps, total return swaps, foreign currency forward contracts, and bond forwards. Fair value measurement based upon bid/ask pricing quotes for similar instruments that are actively traded, where available. Swaps for which an active market does not exist have been priced using observable inputs including the swap curve and the underlying bond index.

⁽³⁾Consists of exchange traded equity index, foreign currency and interest rate futures. Fair value measurements based upon quoted prices for identical instruments that are actively traded.

⁽⁴⁾ Includes $5.6 and $8.8 for the three months ended March 31, 2013 and 2012, respectively, related to the increase in the fair value of variable annuity death benefit liabilities, which are included in other general and administrative expenses.

The U.S. dollar strengthened significantly against the Japanese Yen during the first quarter of 2013, which contributed to the decrease in the variable annuity liability during the quarter.

In addition to derivative instruments, WM Life Re held cash, short-term and fixed maturity investments of ~~$477.5~~ ~~and~~ ~~$419.7~~ at ~~September 30, 2012~~ ~~and~~ ~~2011~~posted as collateral to its variable annuity reinsurance counterparties. The total collateral comprises the following:



Millions	March 31, 2013		December 31, 2012		March 31, 2012
Cash	$	188.5	$	249.8	$	360.1
Short-term investments	15.6		5.1		1.5
Fixed maturity investments	25.7		138.7		29.3
Total	$	229.8	$	393.6	$	390.9

Collateral in the form of fixed maturity securities consists of Government of Japan Bonds, which are recorded at fair value. Collateral in the form of short-term investments consists of money-market instruments, carried at amortized cost, which approximates fair value.

All of White Mountains’ variable annuity reinsurance liabilities were classified as Level 3 measurements at March 31, 2013 and 2012. The fair value of White Mountains’ variable annuity reinsurance liabilities are estimated using actuarial and capital market assumptions related to the projected discounted cash flows over the term of the reinsurance agreement. ~~Assumptions~~Actuarial assumptions regarding future policyholder behavior, including surrender and lapse rates, are generally unobservable inputs and significantly impact the fair value estimates. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates as well as the variations in actuarial assumptions regarding policyholder behavior may result in significant fluctuations in the fair value estimates. Generally, the liabilities associated with these guarantees increase with declines in the equity markets, interest rates and currencies against the Japanese yen, as well as with increases in market volatilities. White Mountains uses derivative instruments, including put options, interest rate swaps, total return swaps on bond and equity indices and forwards and futures contracts on major equity indices, currency pairs and government bonds, to mitigate the risks associated with changes in the fair value of the reinsured variable annuity guarantees. The types of inputs used to estimate the fair value of these derivative instruments, with the exception of actuarial assumptions regarding policyholder behavior and risk margins, are generally the same as those used to estimate the fair value of variable annuity liabilities.

The following summarizes quantitative information about significant unobservable inputs associated with the fair value estimates for variable annuity reinsurance liabilities and derivative instruments that have been classified as Level 3 measurements:

September 30, 2012
($ in Millions)
Description

Fair
Value

Valuation
Technique(s)
Unobservable Input Range Weighted��Average
Variable annuity benefit guarantee liabilities $ 672.4
Discounted cash flows Surrenders 0.1 % - 3.0 % 0.4 %

Mortality 0.0 % - 6.4 % 0.9 %

Foreign exchange volatilities 10.8 % - 17.4 % 12.8 %

Index volatilities 13.1 % - 23.9 % 19.5 %

Foreign exchange and equity index options $ 213.0
Black-Scholes option pricing model Expected equity dividends 1.9 % - 5.2 % 3.1 %

Foreign exchange volatilities 10.8 % - 17.4 % 12.8 %

Index volatilities 13.1 % - 23.9 % 19.5 %



($ in Millions)	March 31, 2013
Description	Fair Value		Valuation Technique(s)	Unobservable Input	Range				Weighted Average
Variable annuity benefit guarantee liabilities	$	251.6	Discounted cash flows	Surrenders
				1 year	0.3	%	-	3.0%	0.7	%
				2 year	0.2	%	-	3.0%	0.8	%
				3 and more years	0.1	%	-	3.0%	0.7	%
				Mortality	0.0	%	-	5.3%	0.9	%
				Foreign exchange volatilities
				1 year	11.2	%	-	13.3%	12.2	%
				2 year	11.7	%	-	14.0%	12.6	%
				3 and more years	12.3	%	-	14.6%	13.2	%
				Index volatilities
				1 year	11.9	%	-	17.9%	13.3	%
				2 year	16.5	%	-	20.7%	18.0	%
				3 and more years	18.6	%	-	22.3%	20.9	%
Foreign exchange options	$	74.2	Counterparty valuations, adjusted for unwind quote discount	Adjustment to counterparty valuations	(0.1	)%	-	(3.2)%	(2.1	)%
Foreign exchange options			Counterparty valuations, adjusted for unwind quote discount	Adjustment to counterparty valuations
Equity index options	$	53.2	Counterparty valuations, adjusted for unwind quote discount	Adjustment to counterparty valuations	(1.7	)%	-	(3.0)%	(2.5	)%
Equity index options			Counterparty valuations, adjusted for unwind quote discount	Adjustment to counterparty valuations

~~The following summarizes realized and unrealized derivative gains (losses) recognized in other revenues for the~~ ~~three and nine months endedSeptember 30, 2012~~ ~~and~~ ~~2011~~ ~~and the carrying values, included in other assets, at~~ ~~September 30, 2012~~ ~~and~~ ~~December 31, 2011, by type of instrument:~~

Gains (Losses) Carrying Value
Three Months Ended Nine Months Ended As of
Sept 30, Sept 30, Sept 30, 2012 Dec 31, 2011
Millions 2012 2011 2012 2011
Fixed income/Interest rate $ (22.6 ) $ 29.8
$ (73.1 ) $ 17.3
$ 29.1
$ 31.1
Foreign exchange 6.5
63.0
(21.0 ) 32.8
127.9
161.3
Equity 5.1
56.1
(27.9 ) 55.3
85.1
98.0
Total $ (11.0 ) $ 148.9
$ (122.0 ) $ 105.4
$ 242.1
$ 290.4

WM Life Re enters into both over-the-counter (“OTC”) and exchange traded derivative instruments to economically hedge the liability from the variable annuity benefit guarantee. In the case of OTC derivatives, WM Life Re has exposure to credit risk for amounts that are uncollateralized by counterparties. WM Life Re’s internal risk management guidelines establish net counterparty exposure thresholds that take into account OTC counterparties’ credit ratings. The OTC derivative contracts are subject to restrictions on liquidation of the instruments and distribution of proceeds under collateral agreements.

In the case of exchange traded instruments, WM Life Re has exposure to credit risk for amounts uncollateralized by margin balances. WM Life Re has entered into master netting agreements with certain of its counterparties whereby the collateral provided (held) is calculated on a net basis. The following summarizes ~~collateral provided to WM Life Re from counterparties:~~amounts offset under master netting agreements:

Millions September 30, 2012 December 31, 2011
Short-term investments $ 63.3
$ 73.2
Fixed maturity securities —
—
Total $ 63.3
$ 73.2



	March 31, 2013								December 31, 2012
Millions	Gross asset amounts before offsets⁽¹⁾		Gross liability amounts offset under master netting arrangements			Net amounts recognized in Other Assets			Gross asset amounts before offsets⁽¹⁾		Gross liability amounts offset under master netting arrangements			Net amounts recognized in Other Assets
Interest rate contracts
OTC	$	—	$	(15.6	)	$	(15.6	)	$	52.6	$	(26.9	)	$	25.7
Exchange traded	1.0		(1.6		)	(.6		)	1.6		(.2		)	1.4
Foreign exchange contracts
OTC	89.6		(15.5		)	74.1			87.8		(34.4		)	53.4
Exchange traded	.6		(.6		)	—			.8		(1.4		)	(.6		)
Equity contracts
OTC	53.2		(27.2		)	26.0			63.6		(22.9		)	40.7
Exchange traded	.4		(8.5		)	(8.1		)	.1		(22.4		)	(22.3		)
Total⁽²⁾	$	144.8	$	(69.0	)	$	75.8		$	206.5	$	(108.2	)	$	98.3

⁽¹⁾Amount equal to fair value of instrument as recognized in other assets.

~~Collateral~~⁽²⁾ All derivative instruments held ~~by or provided~~ by WM Life Re ~~in the form of fixed maturity securities comprise U.S. Treasury securities, which~~ are ~~recorded at fair value. Collateral in the form of short-term investments consists of money-market instruments, carried at amortized cost, which approximates fair value.~~ subject to master netting arrangements.

The following summarizes the value, collateral ~~(held)~~held or provided by WM Life Re and net exposure to credit losses on OTC and exchange traded derivative instruments by counterparty recorded within other assets:

Millions September 30, 2012 December 31, 2011
OTC derivative instruments ⁽¹⁾
$ 251.4
$ 295.4
Collateral held (63.3 ) (73.2 )
Collateral provided 85.6
83.0
Net exposure to credit losses on fair value of OTC instruments $ 273.7
$ 305.2

⁽¹⁾~~Value of OTC derivative instruments as of~~ ~~September 30, 2012~~ ~~and~~ ~~December 31, 2011~~ ~~excludes adjustments for counterparty credit risk of~~ ~~$(5.2)~~

~~and~~ ~~$(9.1)~~ ~~included in fair value under GAAP.~~



	March 31, 2013
Millions	Net amount of assets reflected in Balance Sheet			Collateral provided - Financial Instruments		Collateral held - Financial Instruments		Collateral provided - Cash		Collateral held - Cash		Net amount of exposure after effect of collateral held		Standard & Poor's Rating⁽¹⁾
Bank of America	$	60.0		$	—	$	—	$	—	$	10.8	$	49.2	A
Barclays	6.5			—		—		—		—		6.5		A	+
JP Morgan	3.1			—		—		31.3		—		34.4		A	+
Royal Bank of Scotland	26.4			—		—		—		—		26.4		A
Nomura	(6.2		)	25.6		—		8.2		—		27.6		BBB	+
Goldman Sachs	—			—		—		—		—		—		A	-
Citigroup - OTC	(5.3		)	—		—		25.3		—		20.0		A
Citigroup - Exchange Traded	(8.7		)	—		—		24.7		—		16.0		A
Total	$	75.8		$	25.6	$	—	$	89.5	$	10.8	$	180.1

2827

~~The following table summarizes uncollateralized amounts due under WM Life Re’s OTC derivative contracts:~~


	Uncollateralized balance as of			December 31, 2012
Millions	September 30, 2012		S&P Rating⁽¹⁾	Net amount of assets reflected in Balance Sheet			Collateral provided - Financial Instruments		Collateral held - Financial Instruments		Collateral provided - Cash		Collateral held - Cash		Net amount of exposure after effect of collateral held		Standard & Poor's Rating⁽¹⁾
Citigroup ⁽²⁾	$	63.4	A
Bank of America				$	78.5		$	—	$	—	$	—	$	30.6	$	47.9	A
Barclays				11.6			—		—		—		—		11.6		A	+
JP Morgan				(22.8		)	—		—		55.6		—		32.8		A	+
Royal Bank of Scotland	58.5		A	33.6			—		—		—		—		33.6		A
Bank of America	50.3		A
JP Morgan ⁽²⁾	40.8		A+
Nomura ⁽²⁾	35.9		BBB+	(0.9		)	28.1		—		1.7		—		28.9		BBB	+
Barclays	20.7		A+
Goldman Sachs ⁽²⁾	4.1		A-
Goldman Sachs				(0.1		)	—		—		3.2		—		3.1		A	-
Citigroup - OTC				19.9			—		—		30.8		—		50.7		A
Citigroup - Exchange Traded				(21.5		)	—		—		35.0		—		13.5		A
Total	$	273.7		$	98.3		$	28.1	$	—	$	126.3	$	30.6	$	222.1

⁽¹⁾Standard & Poor’s (“S&P”) ratings as detailed above are: “A+” (Strong, which is the fifth highest of

~~twenty-two~~twenty-one creditworthiness ratings), “A” (Strong, which is the sixth highest of

~~twenty-two~~twenty-one creditworthiness ratings), “A-” (Strong, which is the seventh highest of ~~twenty-two~~twenty-one creditworthiness

ratings) and “BBB+” (Adequate, which is the eighth highest of ~~twenty-two~~twenty-one creditworthiness ratings).

⁽²⁾~~Collateral provided (held) calculated under master netting agreement.~~

The OTC derivative contracts are subject to restrictions on liquidation of the instruments and distribution of proceeds under collateral agreements. In addition, WM Life Re held cash, short-term and fixed maturity investments posted as collateral to its reinsurance counterparties. The additional collateral consists of the following:

Millions September 30, 2012 December 31, 2011
Cash $ 341.7
$ 453.5
Short-term investments 14.6
.6
Fixed maturity investments 121.2
31.2
Total $ 477.5
$ 485.3

Forward Contracts

Beginning in September 2012, White Mountains ~~has~~ entered into forward contracts ~~as a tool~~ to assist in maintaining currency positions within pre-defined ranges at Sirius Group. White Mountains monitors its exposure to foreign currency and adjusts its forward positions within the risk guidelines and ranges established by senior management for each currency, as necessary. While White Mountains actively manages its forward positions, mismatches between movements in foreign currency rates and its forward contracts may result in currency positions being outside the pre-defined ranges and/or foreign currency losses. At ~~September 30, 2012~~March 31, 2013, White Mountains held approximately $~~38.8~~79.3 million (SEK ~~254.0~~517.5 million) total gross notional value of foreign currency forward contracts.

All of White Mountains' forward contracts are traded over-the-counter. The fair value of the contracts has been estimated using OTC quotes for similar instruments and accordingly, the measurements have been classified as Level 2 measurements at ~~September 30, 2012~~March 31, 2013.

The following tables summarize the changes in White Mountains' forward contracts for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013:

Forward contracts
Three Months Ended Nine Months Ended
Millions September 30,
2012 September 30,
2012
Beginning of period $ —
$ —

    Purchases —
—

    Realized and unrealized gains(losses) .3
.3

    Sales/settlements —
—

End of period $ .3
$ .3



Millions	March 31, 2013
Beginning of period	$	(.1	)
Purchases	—
Net realized and unrealized gains	.4
Sales/settlements	(.5		)
End of period	$	(.2	)

The following summarizes realized and unrealized derivative gains (losses) recognized in net realized and unrealized investment gains for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and the carrying values, included in other long-term investments, at ~~September 30, 2012~~March 31, 2013 by type of currency:



	March 31, 2013
Millions	Gains (Losses)			Carrying Value
USD	$	(.3	)	$	(.3	)
SEK	—			—
EUR	—			—
GBP	.7			.1
Total	$	.4		$	(.2	)

All of White Mountains' forward contracts are over the counter instruments subject to master netting agreements. The following summarizes amounts offset under master netting agreements:


	Gains (Losses)
	Three Months Ended			Nine Months Ended			Carrying Value As of
	September 30,			September 30,			September 30,			March 31, 2013								December 31, 2012
Millions	2012			2012			2012			Gross asset amounts before offsets⁽¹⁾		Gross liability amounts offset under master netting arrangements			Net amounts recognized in Other assets			Gross asset amounts before offsets⁽¹⁾		Gross liability amounts offset under master netting arrangements			Net amounts recognized in Other assets
USD	$	.4		$	.4		$	.4		$	.1	$	(.4	)	$	(.3	)	$	—	$	—		$	—
SEK	—			—			—
EUR	(.1		)	(.1		)	(.1		)	—		—			—			—		(.1		)	(.1		)
GBP	—			—			—			.2		(.1		)	.1			—		—			—
Currency Translation	—			—			—
Total	$	.3		$	.3		$	.3		$	.3	$	(.5	)	$	(.2	)	$	—	$	(.1	)	$	(.1	)

⁽¹⁾Amount equal to fair value of instrument as recognized in other assets.

White Mountains does not hold or provide any collateral for the forward contracts. The following table summarizes ~~uncollateralized~~the notional amounts and uncollateralized balances associated with forward currency contracts:


	Uncollateralized balance as of			March 31, 2013						December 31, 2012
Millions	September 30, 2012		S&P Rating(1)	Notional Amount		Carrying Value			Standard & Poor's Rating⁽¹⁾	Notional Amount		Carrying Value
Barclays				24.7		.1			A+	7.7		(.1		)
Deutsche Bank	$	5.5	A+	13.8		(.2		)	A+	11.1		—
Goldman Sachs				1.1		—			A-	.4		—
HSBC				.1		—			AA-	10.1		—
JP Morgan				22.1		.1			A+	1.9		—
Royal Bank of Canada	8.0		A+	17.5		(.2		)	AA-	—		—
HSBC Bank plc	12.4		AA-
JP Morgan	7.3		A
Goldman Sachs	5.6		AA-
Total	$	38.8		$	79.3	$	(.2	)		$	31.2	$	(.1	)

⁽¹⁾Standard & Poor's (“S&P”) ratings as detailed above are: “AA-” (Very Strong, which is the sixth highest of

~~twenty-two~~twenty-one creditworthiness ratings), “A+” (Strong, which is the seventh highest of ~~twenty-two~~twenty-one creditworthiness

ratings) and “A” (Strong, which is the eighth highest of ~~twenty-two~~twenty-one creditworthiness ratings).

Note 9. Municipal Bond Guarantee Insurance

In 2012, HG Global was capitalized with $594.5 million from White Mountains and $14.5 million from non-controlling interests to fund BAM, a newly formed mutual municipal bond insurer. As of March 31, 2013, White Mountains owned 97.3% of HG Global's preferred equity and 88.7% of its common equity. HG Global, together with its subsidiaries, provided the initial capitalization of BAM through the purchase of $503.0 million of BAM surplus notes. Through HG Re, which had statutory capital of $417.7 million at March 31, 2013, HG Global provides first loss reinsurance protection for policies underwritten by BAM of up to 15% of par outstanding, on a per policy basis. HG Re’s obligations to BAM are collateralized in trusts, and there is an aggregate loss limit that is equal to the total assets in the collateral trusts at any point in time. For the three months ended March 31, 2013, HG Global had pre-tax income of $9.9 million, which included $10.1 million of interest income on the BAM surplus notes. For the three months ended March 31, 2013, BAM had a pre-tax loss of $18.4 million that was recorded in net loss attributable to non-controlling interests, which included $10.1 million of interest expense on the BAM surplus notes.

All of the contracts issued by BAM are accounted for as insurance contracts under ASC 944-605, Financial Guarantee Insurance Contracts. Premiums are received upfront and an unearned premium revenue liability, equal to the amount of the cash received, is established at contract inception. Premium revenues are recognized in revenue over the period of the contracts in proportion to the amount of insurance protection provided using a constant rate. The constant rate is calculated based on the relationship between the par outstanding in a given reporting period compared with the sum of each of the par amounts outstanding for all periods.

3029

The following table provides a schedule of BAM's insured obligations:



	March 31, 2013		December 31, 2012
Contracts issued and outstanding	105		3
Remaining weighted average contract period (in years)	13.1		10.4
Contractual debt service outstanding (in millions):
Principal	$	698.6	$	25.8
Interest	$	497.6	$	8.9
Unearned premium revenue	$	2.0	$	.1

Note 9.10. Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share amounts are based on the weighted average number of common shares outstanding including unvested restricted shares that are considered participating securities. Diluted earnings ~~(loss)~~ per share amounts are based on the weighted average number of common shares including unvested restricted shares and the net effect of potentially dilutive common shares outstanding. The following table outlines the Company’s computation of earnings ~~(loss)~~ per share from continuing operations for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 (see Note 1415 for earnings per share amounts for discontinued operations):

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2012 2011 2012 2011
Basic and diluted earnings (loss) per share numerators (in millions):

Net income (loss) from continuing operations attributable to
     White Mountains’ common shareholders
$ 125.9
$ 14.3
$ 254.6
$ (6.3 )
Allocation of (income) loss for unvested restricted common shares (1.8 ) (.1 ) (3.3 ) .1
Dividends declared on participating restricted common shares ⁽¹⁾
—
—
(.1 ) (.1 )
Total allocation to restricted common shares (1.8 ) (.1 ) (3.4 ) —
Net income (loss) attributable to White Mountains’ common shareholders, net of
      restricted common share amounts
$ 124.1
$ 14.2
$ 251.2
$ (6.3 )
Undistributed net earnings (loss) (in millions):
Net income (loss) attributable to White Mountains’ common shareholders, net of
      restricted common share amounts
$ 124.1
$ 14.2
$ 251.2
$ (6.3 )
Dividends declared net of participating restricted common share amounts ⁽¹⁾
—
—
(6.5 ) (7.9 )
Total undistributed net earnings (loss), net of restricted common share
      amounts
$ 124.1
$ 14.2
$ 244.7
$ (14.2 )
Basic earnings (loss) per share denominators (in thousands):
Total average common shares outstanding during the period 6,590.4
7,919.3
6,885.9
7,970.0
Average unvested restricted shares ⁽²⁾
(96.5 ) (73.5 ) (89.5 ) (68.0 )
Basic earnings (loss) per share denominator 6,493.9
7,845.8
6,796.4
7,902.0
Diluted earnings (loss) per share denominator (in thousands):
Total average common shares outstanding during the period 6,590.4
7,919.3
6,885.9
7,970.0
Average unvested restricted common shares⁽²⁾
(96.5 ) (73.5 ) (89.5 ) (68.0 )
Average outstanding dilutive options to acquire common shares ⁽³⁾
—
—
—
—
Diluted earnings (loss) per share denominator 6,493.9
7,845.8
6,796.4
7,902.0
Basic earnings (loss) per share (in dollars):

Net income (loss) attributable to White Mountains’ common shareholders $ 19.11
$ 1.81
$ 36.96
$ (.80 )
Dividends declared —
—
(1.00 ) (1.00 )
Undistributed earnings (loss) $ 19.11
$ 1.81
$ 35.96
$ (1.80 )
Diluted earnings (loss) per share (in dollars)
Net income (loss) attributable to White Mountains’ common shareholders $ 19.11
$ 1.81
$ 36.96
$ (.80 )
Dividends declared —
—
(1.00 ) (1.00 )
Undistributed earnings (loss) $ 19.11
$ 1.81
$ 35.96
$ (1.80 )



	Three Months Ended
	March 31,
	2013			2012
Basic and diluted earnings per share numerators (in millions):
Net income from continuing operations attributable to White Mountains’ common shareholders	$	119.9		$	103.1
Allocation of income for unvested restricted common shares	(1.5		)	(1.1		)
Dividends declared on participating restricted common shares ⁽¹⁾	(.1		)	(.1		)
Total allocation to restricted common shares	(1.6		)	(1.2		)
Net income attributable to White Mountains’ common shareholders, net of restricted common share amounts	$	118.3		$	101.9
Undistributed net earnings (in millions):
Net income attributable to White Mountains’ common shareholders, net of restricted common share amounts	$	118.3		$	101.9
Dividends declared on participating restricted common shares⁽¹⁾	(6.1		)	(6.5		)
Total undistributed net earnings, net of restricted common share amounts	$	112.2		$	95.4
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	6,273.5			7,431.7
Average unvested restricted shares ⁽²⁾	(79.0		)	(78.3		)
Basic earnings per share denominator	6,194.5			7,353.4
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period	6,273.5			7,431.7
Average unvested restricted common shares⁽²⁾	(79.0		)	(78.3		)
Average outstanding dilutive options to acquire common shares⁽³⁾	—			—
Diluted earnings per share denominator	6,194.5			7,353.4
Basic earnings per share (in dollars):
Net income attributable to White Mountains’ common shareholders	$	19.10		$	13.86
Dividends declared	(1.00		)	(1.00		)
Undistributed earnings	$	18.10		$	12.86
Diluted earnings per share (in dollars)
Net income attributable to White Mountains’ common shareholders	$	19.10		$	13.86
Dividends declared	(1.00		)	(1.00		)
Undistributed earnings	$	18.10		$	12.86

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

⁽²⁾Restricted shares outstanding vest either in equal annual installments or upon a stated date (see Note 1213)).

⁽³⁾The diluted earnings ~~(loss)~~ per share denominator for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 do not include common shares issuable upon exercise of the Non-Qualified Options as they are anti-dilutive to the calculation.

3130

Note ~~10.~~11. Segment Information

White Mountains has determined that its reportable segments are OneBeacon, Sirius Group, HG Global/BAM and Other 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’ segments have been eliminated herein. Financial information for White Mountains’ segments follows:


															HG Global/BAM
Millions	OneBeacon			Sirius Group			Other Operations		Total		OneBeacon		Sirius Group		HG			BAM			Other Operations			Total
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013
Earned insurance and reinsurance premiums	$	293.9		$	242.9		$	—	$	536.8	$	286.5	$	208.9	$	—		$	—		$	—		$	495.4
Net investment income	12.8			16.7			8.1		37.6		9.4		13.1		.3			1.1			4.6			28.5
Net investment income - surplus note income											—		—		10.1			(10.1		)	—			—
Net realized and unrealized investment gains (losses)	40.0			(8.9		)	41.6		72.7		28.4		13.1		(.2		)	(1.1		)	35.0			75.2
Other revenue	(.4		)	48.2			2.5		50.3		24.0		10.5		—			.1			(6.3		)	28.3
Total revenues	346.3			298.9			52.2		697.4		348.3		245.6		10.2			(10.0		)	33.3			627.4
Losses and loss adjustment expenses	164.7			143.4			—		308.1		148.9		95.4		—			—			—			244.3
Insurance and reinsurance acquisition expenses	66.6			41.0			—		107.6		54.8		43.3		—			.1			—			98.2
Other underwriting expenses	47.4			29.1			.1		76.6		49.3		29.7		—			.1			—			79.1
General and administrative expenses	4.4			10.2			44.1		58.7		4.0		9.5		.3			8.2			21.8			43.8
Interest expense on debt	4.1			6.5			.7		11.3		3.2		6.6		—			—			.4			10.2
Total expenses	287.2			230.2			44.9		562.3		260.2		184.5		.3			8.4			22.2			475.6
Pre-tax income	$	59.1		$	68.7		$	7.3	$	135.1
Pre-tax income (loss)											$	88.1	$	61.1	$	9.9		$	(18.4	)	$	11.1		$	151.8

Millions
OneBeacon
Sirius Group
Other Operations
Total
Three Months Ended September 30, 2011

Earned insurance and reinsurance premiums
$ 259.1

$ 232.0

$ —

$ 491.1
Net investment income
16.1

22.1

4.6

42.8
Net realized and unrealized investment gains (losses)
(47.4 )
65.9

(15.6 )
2.9
Other revenue
.1

(29.3 )
(5.8 )
(35.0 )
Total revenues
227.9

290.7

(16.8 )
501.8
Losses and loss adjustment expenses
149.7

130.5

—

280.2
Insurance and reinsurance acquisition expenses
58.6

48.4

—

107.0
Other underwriting expenses
36.0

28.3

—

64.3
General and administrative expenses
2.5

7.4

26.3

36.2
Interest expense on debt
4.1

6.5

2.2

12.8
Total expenses
250.9

221.1

28.5

500.5
Pre-tax (loss) income
$ (23.0 )
$ 69.6

$ (45.3 )
$ 1.3

Millions OneBeacon Sirius Group Other Operations Total
Nine Months Ended September 30, 2012

Earned insurance and reinsurance premiums $ 846.0
$ 699.3
$ —
$ 1,545.3
Net investment income 41.5
50.9
27.4
119.8
Net realized and unrealized investment gains (losses) 57.9
22.9
42.4
123.2
Other revenue (.1 ) 48.9
32.2
81.0
Total revenues 945.3
822.0
102.0
1,869.3
Losses and loss adjustment expenses 452.5
369.2
—
821.7
Insurance and reinsurance acquisition expenses 185.6
140.6
—
326.2
Other underwriting expenses 146.2
82.1
.1
228.4
General and administrative expenses 9.6
35.4
101.3
146.3
Interest expense on debt 12.2
19.6
1.3
33.1
Total expenses 806.1
646.9
102.7
1,555.7
Pre-tax income (loss) $ 139.2
$ 175.1
$ (.7 ) $ 313.6


Millions	OneBeacon			Sirius Group			Other Operations			Total			OneBeacon		Sirius Group		Other Operations		Total
Nine Months Ended September 30, 2011
Three Months Ended March 31, 2012
Earned insurance and reinsurance premiums	$	748.0		$	685.5		$	—		$	1,433.5		$	271.8	$	226.2	$	—	$	498.0
Net investment income	55.8			68.3			14.0			138.1			14.7		17.1		10.0		41.8
Net realized and unrealized investment gains (losses)	(13.3		)	60.7			(11.0		)	36.4
Net realized and unrealized investment gains													29.8		13.7		15.1		58.6
Other revenue	(12.2		)	(13.8		)	(2.3		)	(28.3		)	.1		18.3		12.8		31.2
Total revenues	778.3			800.7			.7			1,579.7			316.4		275.3		37.9		629.6
Losses and loss adjustment expenses	421.3			499.1			—			920.4			136.4		113.4		—		249.8
Insurance and reinsurance acquisition expenses	161.5			135.1			—			296.6			58.1		51.0		—		109.1
Other underwriting expenses	124.5			79.4			—			203.9			47.5		26.0		—		73.5
General and administrative expenses	7.4			23.3			89.7			120.4			2.7		18.9		23.9		45.5
Interest expense on debt	16.4			19.6			2.8			38.8			4.1		6.5		.3		10.9
Total expenses	731.1			756.5			92.5			1,580.1			248.8		215.8		24.2		488.8
Pre-tax income (loss)	$	47.2		$	44.2		$	(91.8	)	$	(.4	)
Pre-tax income													$	67.6	$	59.5	$	13.7	$	140.8

3331

Note ~~11.~~12. Investments in Unconsolidated Affiliates

White Mountains’ investments in unconsolidated affiliates represent investments in other companies in which White Mountains has a significant voting and economic interest but does not control the entity.


Millions	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
Symetra common shares	$	284.0	$	261.0	$	296.8	$	288.4
Unrealized gains from Symetra's fixed maturity portfolio	64.6		—		54.1		62.8
GAAP Carrying value of Symetra common shares	348.6		261.0
Carrying value of Symetra common shares					350.9		351.2
Symetra warrants	26.2		12.6		26.6		30.3
Total investment in Symetra	374.8		273.6		377.5		381.5
Hamer					3.8		4.0
Bri-Mar					1.8		1.9
Pentelia Capital Management	1.5		1.7		.5		.5
Total investments in unconsolidated affiliates	$	376.3	$	275.3	$	383.6	$	387.9

Symetra

At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, White Mountains owned 17.4 million common shares of Symetra Financial Corporation (“Symetra”) and warrants to acquire an additional 9.5 million common shares. White Mountains accounts for its investment in common shares of Symetra using the equity method. At December 31, 2011,, due to the prolonged low interest rate environment in which life insurance companies currently operate, White Mountains concluded that its investment in Symetra common shares was other-than-temporarily impaired and wrote down the GAAP book value of the investment to its estimated fair value of $261.0 million, or $15 per share at December 31, ~~2011~~.2011. White Mountains recorded $45.9 million of after-tax equity in losses of unconsolidated affiliates and $136.6 million of after-tax equity in net unrealized losses of unconsolidated affiliates.

Under the equity method, the GAAP carrying value of White Mountains’ investment in Symetra common shares is normally equal to the percentage of Symetra’s GAAP book value represented by White Mountains’ common share ownership, which was 15% at ~~September 30, 2012~~March 31, 2013. As a result of recording the write-down, White Mountains’ carrying value of its investment in Symetra differs from the carrying value by applying its ownership share against Symetra’s GAAP equity as normally done under the equity method. The pre-tax basis difference of $195.8 million as of December 31, 2011 is being amortized over a 30 year period pro rata based on estimated future cash flows associated with Symetra’s underlying assets and liabilities to which the basis difference has been attributed. White Mountains continues to record its equity in Symetra’s earnings and net unrealized gains (losses). In addition, White Mountains recognizes the amortization of the basis difference through equity in earnings of unconsolidated affiliates and equity in net unrealized gains (losses) from investments in unconsolidated affiliates consistent with the original attribution of the writedown between equity in earnings and equity in net unrealized gains (losses). For the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013, White Mountains recognized after-tax amortization of $~~0.8 million~~ ~~and~~ ~~$2.4~~0.7 million through equity in earnings of unconsolidated affiliates and $~~3.0 million~~ ~~and~~ ~~$9.1~~2.5 million through equity in net unrealized gains from investments in unconsolidated affiliates. At ~~September 30, 2012~~March 31, 2013, the pre-tax unamortized basis difference was $~~183.3~~175.7 million.

White Mountains accounts for its Symetra warrants as derivatives with changes in fair value recognized through the income statement as a gain or loss recognized through other revenues. White Mountains uses a Black Scholes valuation model to determine the fair value of the Symetra warrants. The major assumptions used in valuing the Symetra warrants at ~~September 30, 2012~~March 31, 2013 were a risk free rate of ~~0.22%~~0.17%, volatility of ~~36.5%~~29.1%, an expected life of ~~1.82~~1.33 years, a strike price of $11.49 per share and a share price of $~~12.30~~13.41 per share.

3432

The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:

Three Months Ended Three Months Ended
September 30, 2012 September 30, 2011
Millions Common Shares Warrants Total Common Shares Warrants Total
Carrying value of investment in Symetra as of June 30 $ 305.9
$ 29.8
$ 335.7
$ 388.5
$ 32.5
$ 421.0
Equity in earnings⁽¹⁾⁽²⁾
�� 8.8
—
8.8
1.6
—
1.6
Equity in net unrealized gains from Symetra’s fixed maturity portfolio ⁽³⁾
35.2
—
35.2
59.9
—
59.9
Dividends received (1.3 ) —
(1.3 ) (1.0 ) —
(1.0 )
Increase (decrease) in value of warrants —
(3.6 ) (3.6 ) —
(24.8 ) (24.8 )
Carrying value of investment in Symetra as September 30⁽⁴⁾⁽⁵⁾
$ 348.6
$ 26.2
$ 374.8
$ 449.0
$ 7.7
$ 456.7



	Three Months Ended									Three Months Ended
	March 31, 2013									March 31, 2012
Millions	Common Shares			Warrants			Total			Common Shares			Warrants		Total
Carrying value of investment in Symetra as of January 1	$	351.2		$	30.3		$	381.5		$	261.0		$	12.6	$	273.6
Equity in earnings ⁽¹⁾⁽²⁾	9.8			—			9.8			10.9			—		10.9
Equity in net unrealized gains from Symetra’s fixed maturity portfolio⁽³⁾	(8.7		)	—			(8.7		)	(1.2		)	—		(1.2		)
Dividends received	(1.4		)	—			(1.4		)	(1.2		)	—		(1.2		)
(Decrease) increase in value of warrants	—			(3.7		)	(3.7		)	—			11.1		11.1
Carrying value of investment in Symetra as March 31 ⁽⁴⁾⁽⁵⁾	$	350.9		$	26.6		$	377.5		$	269.5		$	23.7	$	293.2

⁽¹⁾Equity in earnings excludes tax expense of $~~0.7~~0.8 and $~~0.1~~0.7.

⁽²⁾Equity in earnings includes $~~0.9~~0.7 and $1.1 increase relating to the pre-tax amortization of Symetra common share impairment from ~~September 30,~~ March 31, 2013 and 2012.

⁽³⁾Net unrealized gains includes $~~3.3~~2.7 and $3.2 increase relating to the pre-tax amortization of Symetra common share impairment from ~~September 30,~~ March 31, 2013 and 2012.

⁽⁴⁾Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of $~~35.2~~(8.7) and $~~147.7~~(1.2) as of ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, which exclude tax ~~expense~~benefit of $~~2.8~~0.7 and $~~12.3~~0.0.

⁽⁵⁾The aggregate value of White Mountains’ investment in common shares of Symetra was $~~214.0~~233.3 based upon the quoted market price of $~~12.30~~ ~~per share~~

at ~~September 30, 2012~~.

~~The following table summarizes amounts recorded by White Mountains relating to its investment in Symetra for the~~ ~~nine months ended September 30, 2012~~ ~~and~~ ~~2011~~:

Nine Months Ended Nine Months Ended
September 30, 2012 September 30, 2011
Millions Common Shares Warrants Total Common Shares Warrants Total
Carrying value of investment in Symetra as of January 1 $ 261.0
$ 12.6
$ 273.6
$ 350.4
$ 37.1
$ 387.5
Equity in earnings ⁽¹⁾⁽²⁾
26.7
—
26.7
17.5
—
17.5
Equity in net unrealized gains from Symetra’s fixed maturity portfolio⁽³⁾
64.6
—
64.6
84.0
—
84.0
Dividends received (3.7 ) —
(3.7 ) (2.9 ) —
(2.9 )
Increase (decrease) in value of warrants —
13.6
13.6
—
(29.4 ) (29.4 )
Carrying value of investment in Symetra as September 30 ⁽⁴⁾⁽⁵⁾
$ 348.6
$ 26.2
$ 374.8
$ 449.0
$ 7.7
$ 456.7

⁽¹⁾~~Equity in earnings excludes tax expense of~~ ~~$2.2~~ ~~and~~ ~~$1.4~~.

⁽²⁾~~Equity in earnings includes~~ ~~$0.9~~ ~~increase relating to the pre-tax amortization of Symetra common share impairment from~~ ~~September 30, 2012~~.

⁽³⁾~~Net unrealized gains includes~~ ~~$9.9~~ ~~increase relating to the pre-tax amortization of Symetra common share impairment from~~ ~~September 30, 2012~~.

⁽⁴⁾~~Includes White Mountains’ equity in net unrealized gains from Symetra’s fixed maturity portfolio of~~ ~~$64.6~~ ~~and~~ ~~$147.7~~ ~~as of~~ ~~September 30, 2012~~ ~~and~~ ~~2011, which exclude tax expense of~~ ~~$5.2~~ ~~and~~ ~~$24.2~~.

⁽⁵⁾~~The aggregate value of White Mountains’ investment in common shares of Symetra was~~ ~~$214.0~~ ~~based upon the quoted market price of~~ ~~$12.30~~13.41 per share at

~~September 30, 2012~~March 31, 2013.

During the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013, White Mountains received cash dividends from Symetra of $~~1.3 million~~ ~~and~~ ~~$3.7~~1.4 million on its common share investment that was recorded as a reduction of White Mountains’ investment in Symetra. During the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013, White Mountains also received cash dividends of $~~0.7 million~~ ~~and~~ ~~$2.0~~0.8 million from Symetra on its investment in Symetra warrants that was recorded in net investment income.

Hamer and Bri-Mar

White Mountains received equity interests in Hamer and Bri-Mar, two small manufacturing companies distributed to White Mountains in connection with the dissolution of the Tuckerman Capital, LP fund. Effective October 1, 2012, these investments are accounted for under the equity method. For the three months ended March 31, 2013, White Mountains recorded equity in earnings of $0.3 million for Hamer. Bri-Mar did not have any earnings for the three months ended March 31, 2013. As of March 31, 2013, White Mountains' investments in Hamer and Bri-Mar was $3.8 million and $1.8 million, respectively.

3533

Note ~~12.~~13. Employee Share-Based Incentive Compensation Plans

White Mountains’ 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 and service providers of the Company and certain of its subsidiaries. White Mountains’ share-based compensation incentive awards consist of performance shares, restricted shares and stock options.

Share-Based Compensation Based on White Mountains Common Shares

WTM Performance Shares

Performance shares are conditional grants of a specified maximum number of common shares or an equivalent amount of cash. Performance share awards vest, subject to the attainment of performance goals, at the end of a ~~three-year~~three-year period and are valued based on the market value of common shares at the time awards are paid. The following table summarizes performance share activity for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 for performance shares granted under the WTM Incentive Plan and phantom performance shares granted under the Sirius Group Performance Plan (the “WTM Phantom Share Plan”):

Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
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 118,450
$ 32.7
150,064
$ 56.5
150,064
$ 66.1
163,184
$ 29.4
Shares paid or expired⁽¹⁾
�� —
—
—
—
(68,357 ) (48.4 ) (51,131 ) —
New grants 2,500
—
—
—
38,432
—
37,675
—
Assumed forfeitures and
cancellations ⁽²⁾
(1,359 ) (.4 ) —
—
(548 ) .4
336
(.6 )
Expense recognized —
6.6
—
(1.0 ) —
20.8
—
26.7
Ending September 30, 119,591
$ 38.9
150,064
$ 55.5
119,591
$ 38.9
150,064
$ 55.5



	Three Months Ended March 31,
	2013					2012
Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense			Target Performance Shares Outstanding		Accrued Expense
Beginning of period	119,357		$	29.4		150,064		$	66.1
Shares paid ⁽¹⁾	(47,310	)	(11.0		)	(68,357	)	(48.4		)
New grants	46,920		—			35,932		—
Assumed forfeitures and cancellations ⁽²⁾	9		.1			811		1.0
Expense recognized	—		10.1			—		8.7
Ending March 31,	118,976		$	28.6		118,450		$	27.4

⁽¹⁾WTM performance share payments in ~~2012~~2013 for the 2010-2012 performance cycle ranged from 33% to 98% of target. WTM performance share payments in 2012 for the 2009-2011 performance cycle ranged from147% to 155% of target. ~~There were no payments made in~~ ~~2011~~ ~~for the 2008-2010 performance cycle; those performance shares did not meet the threshold performance goals and expired.~~

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

For the 2009-2011 performance cycle, the Company issued common shares for 9,577 performance shares earned and all other performance shares earned were settled in cash. For the 2010-2012 performance cycle, the Company settled all performance shares earned in cash.

If the outstanding WTM performance shares had vested on ~~September 30, 2012~~March 31, 2013, the total additional compensation cost to be recognized would have been $~~26.6~~44.4 million, based on accrual factors at ~~September 30, 2012~~March 31, 2013 (common share price and payout assumptions).

Performance Shares granted under the WTM Incentive Plan

The following table summarizes performance shares outstanding and accrued expense for performance shares awarded under the WTM Incentive Plan at ~~September 30, 2012~~March 31, 2013 for each performance cycle:


Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense			Target Performance Shares Outstanding		Accrued Expense
Performance cycle:
2010 – 2012	42,320		$	19.0
2013 – 2015						46,920		$	2.2
2012 – 2014						37,977		11.4
2011 – 2013	37,255		12.9			37,130		15.8
2012 – 2014	38,092		5.4
Sub-total	117,667		37.3			122,027		29.4
Assumed forfeitures	(2,941	)	(1.0		)	(3,051	)	(.8		)
Total at September 30, 2012	114,726		$	36.3
Total at March 31, 2013						118,976		$	28.6

~~Phantom Performance Shares granted under WTM Phantom Share Plan~~

~~The following table summarizes phantom performance shares outstanding and accrued expense for grants made under WTM Phantom Share Plan at~~ ~~September 30, 2012~~ ~~for each performance cycle:~~

Millions, except share amounts
Target WTM
Phantom
Performance
Shares
Outstanding

Accrued
Expense
Performance cycle:

2010 – 2012 4,990
$ 2.7
2011 – 2013 ⁽¹⁾
—
—
2012 – 2014 ⁽¹⁾
—
—
Sub-total 4,990
2.7
Assumed forfeitures (125 ) (.1 )
Total at September 30, 2012 4,865
$ 2.6

⁽¹⁾ ~~All performance shares for the 2011–2013 and 2012–2014 performance cycles were granted from~~

~~the WTM Incentive Plan.~~

Restricted Shares

The following outlines the unrecognized compensation cost associated with the outstanding restricted share awards for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
	2012					2011				2012					2011				2013				2012
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			Restricted Shares	Unamortized Issue Date Fair Value			Restricted Shares		Unamortized Issue Date Fair Value
Non-vested,
Beginning of period	93,460		$	21.5		73,500	$	18.9		72,000		$	13.3		46,250	$	14.1		69,910	$	16.8		72,000		$	13.3
Issued	3,700		2.0			—	—			32,160		15.7			27,250	9.9			25,470	14.3			28,460		13.7
Vested	—		—			—	—			(7,000	)	—			—	—			—	—			(7,000	)	—
Forfeited	(1,065	)	(.2		)	—	—			(1,065	)	(.2		)	—	—			—	—			—		—
Expense recognized	—		(3.2		)	—	(2.8		)	—		(8.7		)	—	(7.9		)	—	(2.9		)	—		(2.5		)
Non-vested at September 30,	96,095		$	20.1		73,500	$	16.1		96,095		$	20.1		73,500	$	16.1
Non-vested at March 31,																			95,380	$	28.2		93,460		$	24.5

During the ~~third~~first quarter of ~~2012,~~2013, White Mountains issued ~~2,500~~25,470 restricted shares that vest on January 1, ~~2015 and~~ ~~1,200~~ ~~restricted shares that vest on July 16, 2015.~~2016. During the first quarter of 2012, White Mountains issued 25,460 restricted shares that vest on January 1, 2015 and 3,000 restricted shares that vest in two equal annual installments beginning in February 2014. ~~During the second quarter of 2011, White Mountains issued~~ ~~250~~ ~~restricted shares that vest on January 1, 2014. During the first quarter of 2011, White Mountains issued~~ ~~27,000~~ ~~restricted shares that vest on January 1, 2014. During the first quarter of 2010, White Mountains issued~~ ~~19,750~~ ~~restricted shares that vest on December 31, 2012.~~ The unrecognized compensation cost at ~~September 30, 2012~~March 31, 2013 is expected to be recognized ratably over the remaining vesting periods.

~~Non-Qualified Options~~

~~In January 2007, the Company issued~~ ~~200,000seven~~ ~~year Non-Qualified Options to the Company’s Chairman and CEO that vested in equal annual installments over~~ ~~five~~ ~~years and that had an initial exercise price of~~ ~~$650~~ ~~per common share that escalated at an annual rate of~~ 5% less the annual regular dividend rate. At the 2010 Annual General Meeting of Members held on May 26, 2010, the Company’s shareholders approved the following amendments to the Non-Qualified Options: (1) extend the term of the Non-Qualified Options by ~~three~~ ~~years to January 20, 2017; (2) freeze the exercise price at~~ ~~$742~~ ~~per common share, the exercise price on February 24, 2010; (3) extinguish~~ ~~75,000~~ ~~of the~~ ~~200,000~~ ~~Non-Qualified Options; and (4) limit the potential in-the-money value of the Non-Qualified Options in excess of~~ ~~$100.0 million~~ to ~~50%~~ ~~of the amount in excess of~~ ~~$100.0 million. For the~~ ~~nine months endedSeptember 30, 2011, White Mountains recognized a total of~~ ~~$0.1 million~~ ~~of expense related to amortizing the Non-Qualified Options. As of the first quarter of 2011 the Non-Qualified Options were fully amortized.~~

Share-Based Compensation Based on OneBeacon Ltd. Common Shares

The OneBeacon Long-Term Incentive Plan (the “OneBeacon Incentive Plan”) provides for grants of various types of share-based and non share-based incentive awards to key employees of OneBeacon Ltd. and certain of its subsidiaries. OneBeacon’s share-based incentive awards ~~consist of~~include OneBeacon performance shares ~~stock options granted in connection with OneBeacon’s initial public offering, restricted shares~~ and restricted ~~stock units (“RSUs”).~~shares.

OneBeacon Performance Shares

OneBeacon performance shares are conditional grants of a specified maximum number of common shares or an equivalent amount of cash. OneBeacon performance share awards vest, subject to the attainment of performance goals, at the end of a three-year period and are valued based on the market value of OneBeacon Ltd. common shares at the time awards are paid.

The following table summarizes performance share activity for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 for OneBeacon performance shares granted under the OneBeacon Incentive Plan:


	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended March 31,
	2012					2011					2012					2011					2013				2012
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			Target Performance Shares Outstanding		Accrued Expense		Target Performance Shares Outstanding		Accrued Expense
Beginning of period	560,577		$	3.1		671,727		$	10.0		642,667		$	9.7		1,464,295		$	18.5		563,190		$	1.2	642,667		$	9.7
Payments and deferrals⁽¹⁾⁽²⁾	—		—			—		—			(258,901	)	(7.8		)	(936,150	)	(10.5		)
Shares paid or expired⁽¹⁾																					(238,658	)	—		(249,733	)	(7.5		)
New awards	—		—			—		—			181,290		—			194,900		—			179,000		—		181,290		—
Assumed forfeitures and cancellations⁽³⁾⁽²⁾	(3,354	)	—			(19,583	)	.1			(7,833	)	—			(70,901	)	(.2		)	(13,665	)	—		(4,479	)	—
Expense recognized	—		(2.2		)	—		(.5		)	—		(1.0		)	—		1.8			—		.4		—		1.0
Ending September 30,	557,223		$	.9		652,144		$	9.6		557,223		$	.9		652,144		$	9.6
Ending March 31,																					489,867		$	1.6	569,745		$	3.2

⁽¹⁾ There were no payments made in 2013 for the 2010-2012 performance cycle; those performance shares did not meet the threshold performance goals and expired. OneBeacon performance share payments in 2012 for the 2009-2011 performance cycle were at 138.6% of target. ~~OneBeacon performance shares payments in 2011 for the 2008-2010 performance cycle were at~~ ~~68.5%~~ ~~of target.~~ Amounts include deposits into OneBeacon’s deferred compensation plan.

⁽²⁾OneBeacon performance share payments also include accelerated payments resulting from the OneBeacon Personal Lines and Commercial Lines Transactions. The accelerated OneBeacon performance shares payments for the 2009-2011 and 2010-2012 performance cycles were on a pro rata basis and at a performance factor of ~~100%~~.

⁽³⁾Amounts include changes in assumed forfeitures, as required under GAAP.

If the outstanding OneBeacon performance shares had been vested on ~~September 30, 2012~~March 31, 2013, the total additional compensation cost to be recognized would have been $~~1.7~~1.4 million, based on accrual factors at ~~September 30, 2012~~March 31, 2013 (common share price and payout assumptions).

3835

The following table summarizes OneBeacon performance shares outstanding awarded under the OneBeacon Incentive Plan at ~~September 30, 2012~~March 31, 2013 for each performance cycle:


Millions, except share amounts	Target OneBeacon Performance Shares Outstanding		Accrued Expense		Target OneBeacon Performance Shares Outstanding		Accrued Expense
Performance cycle:
2010 – 2012	238,658		$	—
2013 – 2015					179,000		$	.2
2012 – 2014					181,290		1.1
2011 – 2013	151,563		.4		142,138		.3
2012 – 2014	181,290		.5
Sub-total	571,511		.9		502,428		1.6
Assumed forfeitures	(14,288	)	—		(12,561	)	—
Total at September 30, 2012	557,223		$	.9
Total at March 31, 2013					489,867		$	1.6

OneBeacon Restricted Shares

The following ~~outlines~~summarizes the unrecognized compensation cost associated with the outstanding OneBeacon restricted share awards for the three ~~and nine~~ months ended ~~September 30,~~ March 31, 2013 and 2012:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2012				2011				2012				2011				2013					2012
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			Restricted Shares		Unamortized Issue Date Fair Value			Restricted Shares	Unamortized Issue Date Fair Value
Non-vested,
Beginning of period	930,000	$	11.2		630,000	$	8.5		630,000	$	7.7		630,000	$	8.6		927,000		$	9.6		630,000	$	7.7
Issued	—	—			—	—			300,000	4.6			—	—			—		—			300,000	4.6
Vested	—	—			—	—			—	—			—	—			(9,000	)	—			—	—
Forfeited	—	—			—	—			—	—			—	—			—		—			—	—
Expense recognized	—	(.8		)	—	(.4		)	—	(1.9		)	—	(.5		)	—		(.8		)	—	(.4		)
Non-vested at September 30,	930,000	$	10.4		630,000	$	8.1		930,000	$	10.4		630,000	$	8.1
Non-vested at March 31,																	918,000		$	8.8		930,000	$	11.9

On March 1, 2012, OneBeacon issued 300,000 restricted shares that vest in two equal annual installments on February 28, 2014 and 2015.

On May 25, 2011, OneBeacon issued 630,000 restricted shares to its CEO that vest in four equal annual installments beginning on February 22, 2014. Concurrently with the grant of the restricted shares, 35,000 OneBeacon performance shares issued to OneBeacon’s CEO for the 2011-2013 performance share cycle were forfeited and performance share awards to OneBeacon’s CEO for the subsequent five years have been or will also be reduced by 35,000 shares.

The unrecognized compensation cost at ~~September 30, 2012~~March 31, 2013 is expected to be recognized ratably over the remaining vesting periods.

~~Non-Qualified Options~~

~~In November 2006, in connection with its initial public offering, OneBeacon Ltd. issued to its key employees~~ ~~1,420,000~~ ~~OneBeacon Non-Qualified Options to acquire OneBeacon Ltd. common shares at an above-market fixed exercise price.~~

~~The following table summarizes option activity for the~~ ~~three and nine months endedSeptember 30, 2012~~ ~~and~~ ~~2011~~:

Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Millions, except share amounts
Target
Options
Outstanding

Target
Options
Outstanding

Target
Options
Outstanding

Target
Options
Outstanding
Beginning of period —
750,130
740,870
768,652
New awards —
—
—
—
Forfeitures and cancellations —
(9,260 ) —
(27,782 )
Vested and expired —
—
(740,870 ) —
Exercised —
—
—
—
Expense recognized —
—
—
—
Ending September 30, —
740,870
—
740,870

~~The fair value of each option award at grant was estimated using a Black-Scholes option pricing model using an expected volatility assumption of~~ ~~30%, a risk-free interest rate assumption of~~ ~~4.6%, a forfeiture assumption of~~ 5%~~, an expected dividend rate assumption of~~ ~~3.4%~~ ~~and an expected term assumption of~~ ~~5.5~~ ~~years. The options originally had a per share exercise price of~~ ~~$30.00. On May 27, 2008, the OneBeacon Compensation Committee of the Board of Directors (the “OB Compensation Committee”) amended the exercise price to~~ ~~$27.97~~ ~~as a result of the~~ ~~$2.03~~ ~~per share special dividend paid in the first quarter of 2008. On November 16, 2010, the OB Compensation Committee adjusted the exercise price to~~ ~~$25.47~~ ~~as a result of the~~ ~~$2.50~~ per share special dividend paid in the third quarter of 2010. The compensation expense associated with the options and the incremental fair value of the award modifications were recognized ratably over the vesting period.

~~For the three and~~ ~~nine months endedSeptember 30, 2011, White Mountains recognized~~ ~~$0.1 million~~ ~~and~~ ~~$0.4 million~~ ~~of expense related to amortizing the OneBeacon Non-Qualified Options. As of~~ ~~December 31, 2011, the OneBeacon Non-Qualified Options were fully amortized. The options expired unexercised in the second quarter of 2012.~~

~~Restricted Stock Units~~

The Non-Qualified Options granted by OneBeacon Ltd., in connection with its initial public offering, did not include a mechanism in the options to reflect the contribution to total return from the regular quarterly dividend. As a result, during the first quarter of 2008, OneBeacon granted ~~116,270~~ Restricted Stock Units (“RSUs”) to actively employed option holders that were scheduled to vest equally on November 9, 2009, 2010 and 2011 subject to, for each vesting tranche of units, the attainment of 4% growth in OneBeacon’s book value per share from January 1, 2008 through the end of the calendar year immediately following the applicable vesting date. Consistent with the terms of the RSU plan, all of the RSUs have vested and were deferred into a OneBeacon non-qualified deferred compensation plan that were paid out in May 2012.

Note ~~13.~~14. Fair Value of Financial Instruments

White Mountains ~~carries~~accounts for its financial instruments ~~on its balance sheet~~ at fair value with the exception of ~~its fixed-rate, long-term indebtedness~~1) the OBH Senior Notes and the SIG Senior Notes, which are recorded as debt liabilities at face value less unamortized original issue discount, and 2) the SIG Preference Shares, which are recorded as ~~noncontrolling interest.~~ non-controlling interest at face value.

The following table summarizes the fair value and ~~carrying~~book value of financial instruments as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012:


	September 30, 2012				December 31, 2011				March 31, 2013				December 31, 2012
Millions	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Book Value		Fair Value		Book Value
OBH Senior Notes	$	276.3	$	269.8	$	277.4	$	269.8
2012 OBH Senior Notes									$	287.8	$	274.7	$	282.4	$	274.7
SIG Senior Notes	442.9		399.4		418.6		399.3		454.0		399.4		441.9		399.4
SIG Preference Shares	257.5		250.0		217.5		250.0		262.5		250.0		257.5		250.0

The fair value estimate for the 2012 OBH Senior Notes has been determined using ~~observable inputs for similar instruments and is~~quoted market prices. The 2012 OBH Senior Notes are considered a Level 2 ~~measurement.~~measurement based upon the volume and frequency of observable transactions. The fair value estimates for the SIG Senior Notes and the SIG Preference Shares have been determined based on indicative broker quotes and are considered to be Level 3 measurements.

Note ~~14.~~15. Discontinued Operations

~~Esurance~~

~~On October 7, 2011, White Mountains completed the sale of Esurance Insurance and AFI to Allstate (see~~ ~~Note 2~~). As a result of the transaction, Esurance Insurance, AFI and the business Esurance Insurance cedes to Sirius Group (collectively, “the Esurance Disposal Group”) are reported as discontinued operations. White Mountains recognized a gain of ~~$677.5 million~~ on the Esurance Sale which is recorded net of tax in discontinued operations. Effective as of December 31, 2011, the results of operations for the Esurance Disposal Group have been classified as discontinued operations and are presented, net of related income taxes, in the statement of comprehensive income.

AutoOne

On February 22, 2012, OneBeacon completed the sale of the AutoOne business to Interboro. AutoOne operated as a division within OneBeacon that offered products and services to automobile assigned risk markets. The transaction included the sale of two insurance entities, AOIC and AOSIC, through which substantially all of the AutoOne business was written on a direct basis. The results of operations for the AutoOne business have been classified as discontinued operations and are presented, net of related income taxes, in the statement of comprehensive income. ~~The assets and liabilities associated with the AutoOne business as of~~ ~~December 31, 2011~~ ~~have been presented in the balance sheet as held for sale.~~

~~During the third quarter of 2012, OneBeacon and Interboro finalized the post-closing adjustments to the closing balance sheet resulting in OneBeacon recording a net gain of~~ ~~$0.5 million~~ after tax. This after-tax net gain is included in loss from sale of discontinued operations in the statements of comprehensive income (loss) for the three and nine months ended September 30, 2012. During the third quarter of 2011, OneBeacon recorded an after-tax loss of ~~$18.2 million~~ ~~in loss from sale of discontinued operations for the estimated loss on sale of AutoOne.~~

~~OneBeacon runoff business~~Runoff Transaction

On October 17, 2012, OneBeacon entered into an agreement to sell its runoff business to Armour. ~~For the~~During ~~nine~~three months ended ~~September 30,~~ March 31, 2013 and 2012, the results of operations for the runoff business have been classified as discontinued operations and are presented, net of related income taxes, in the statement of comprehensive income. Prior year results of operations have been reclassified to conform to the current period’s presentation. The assets and liabilities associated with the runoff business as of ~~September 30,~~March 31, 2013 and December 31, 2012 have been presented in the balance sheet as held for sale. The amounts classified as discontinued operations exclude investing and financing activities that are conducted on an overall consolidated level and, accordingly, there were no separately identifiable investments associated with the runoff business. ~~Therefore, the prior period balance sheet has not been reclassified to conform to the current period's presentation.~~

During the ~~third quarter of~~ three months endedMarch 31, 2013 and 2012, OneBeacon recorded $~~100.5~~0.5 million in ~~after-tax losses~~income and a $9.4 million loss from operations related to the Runoff Transaction. ~~These losses are presented in discontinued operations~~

Loss and ~~are composed of a~~LAE reserve development

OneBeacon experienced $~~91.5 million~~ ~~after-tax loss on sale and a~~ ~~$9.0 million~~ ~~after-tax loss related to a reduction in the workers compensation loss reserve discount rate on reserves being transferred as part of the sale. OneBeacon also recognized~~ ~~$6.5~~0.2 million of ~~after-tax underwriting losses primarily related to~~favorable loss reserve development and $12.4 million of unfavorable loss reserve development in the runoff business during the three months ended March 31, 2013 and 2012. The unfavorable development in 2012 was primarily driven by case incurred development on a small number of claims related to multiple peril liability lines and general liability lines and also the impact of an adverse court ruling in Mississippi regarding a disputed assessment from ~~a legacy assumed reinsurance treaty, which is presented in discontinued operations.~~an involuntary pool for hurricane Katrina claims.

Reinsurance

Included in the assets held for sale are reinsurance recoverables from two reinsurance contracts with subsidiaries of Berkshire Hathaway Inc. that OneBeacon was required to purchase in connection with White Mountains' acquisition of OneBeacon in ~~2001:~~2001 (the "OneBeacon Acquisition"): a reinsurance contract with National Indemnity Company (“NICO”) for up to $2.5 billion in old asbestos and environmental (“A&E”) claims and certain other exposures (the “NICO Cover”) and an adverse loss reserve development cover from General Reinsurance Corporation (“GRC”) for up to $570.0 million, comprised of $400.0 million of adverse loss reserve development occurring in years 2000 and prior (the “GRC Cover”) in addition to $170.0 million of reserves ceded as of the date of the OneBeacon Acquisition. The NICO Cover and GRC Cover, which were contingent on and occurred contemporaneously with the OneBeacon Acquisition, were put in place in lieu of a seller guarantee of loss and LAE reserves and are therefore accounted for under GAAP as a seller guarantee. As of ~~September 30,~~March 31, 2013 and December 31, 2012, the total reinsurance recoverables on paid and unpaid losses of $~~1,449.2~~1,381.0 million and $1,401.9 million related to both the NICO cover and the GRC cover ~~has~~have been included in assets held for sale. Both NICO and GRC have an A.M Best rating of A++, Superior, which is the highest of ~~fifteen~~sixteen ratings.

The total reinsurance recoverables on paid and unpaid losses in assets held for sale were $~~17.6~~14.1 million and $~~2,110.0~~1,960.9 million as of ~~September 30,~~March 31, 2012. The reinsurance recoverable on unpaid amount is gross of $~~153.4~~146.8 million in purchase accounting adjustments that will become recoverable if claims are paid in accordance with current reserve estimates. ~~In addition,~~ ~~$36.7 million~~ of the amount that is currently included in assets held for sale on the balance sheet will be reported in reinsurance recoverables on unpaid losses when the Runoff Transaction closes (at the then current value) as a result of a related reinsurance contract.

4137

Net Assets Held for Sale

The following summarizes the assets and liabilities associated with the businesses classified as held for sale:


Millions	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
Assets held for sale
Fixed maturity investments, at fair value	$	377.3	$	111.8	$	296.9	$	338.1
Cash	—		5.5		—		—
Reinsurance recoverable on unpaid losses	1,956.6		—		1,814.1		1,840.8
Reinsurance recoverable on paid losses	17.6		—		14.1		15.6
Insurance premiums receivable	13.6		8.8		9.9		11.0
Deferred acquisition costs	—		2.2		—		—
Deferred tax asset	6.1		1.9		4.2		5.1
Other assets	17.0		2.4		16.0		16.2
Total assets held for sale	$	2,388.2	$	132.6	$	2,155.2	$	2,226.8
Liabilities held for sale
Loss and loss adjustment expense reserves	$	2,212.9	$	64.7	$	1,980.2	$	2,052.6
Unearned insurance premiums	.6		34.1		.5		.5
Ceded reinsurance payable	19.5		—		23.5		21.9
Other liabilities	155.2		8.8		151.0		151.8
Total liabilities held for sale	2,388.2		107.6		2,155.2		2,226.8
Net assets held for sale	$	—	$	25.0	$	—	$	—

~~Loss~~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:


	Three Months Ended						Nine Months Ended						Three Months Ended March 31,
Millions, except per share amounts	Sept 30,						Sept 30,
	2012			2011			2012			2011
Millions													2013			2012
Revenues
Earned insurance premiums	$	(.4	)	$	233.3		$	10.0		$	701.9		$	.9		$	8.8
Net investment income	—			3.8			—			11.8			—			—
Net realized and unrealized investment gains (losses)	—			(6.4		)	—			1.4			—			—
Other revenue	—			17.5			—			54.0			—			—
Total revenues	(.4		)	248.2			10.0			769.1			.9			8.8
Expenses
Loss and loss adjustment expenses	27.7			177.4			48.4			512.3			—			19.6
Insurance and reinsurance acquisition expenses	(.8		)	51.4			(1.3		)	154.1			.1			.3
Other underwriting expenses	(1.1		)	35.0			1.1			83.9			.1			1.5
General and administrative expenses	—			1.7			—			37.5			—			—
Total expenses	25.8			265.5			48.2			787.8			.2			21.4
Pre-tax loss	(26.2		)	(17.3		)	(38.2		)	(18.7		)
Income tax benefit	10.4			5.3			13.7			10.9
Loss from discontinued operations	(15.8		)	(12.0		)	(24.5		)	(7.8		)
Pre-tax income (loss)													.7			(12.6		)
Income tax (expense) benefit													(.2		)	3.3
Income (loss) from discontinued operations													.5			(9.3		)
Loss from sale of discontinued operations	(91.0		)	(18.2		)	(91.0		)	(18.2		)	—			—
Net loss from discontinued operations	$	(106.8	)	$	(30.2	)	$	(115.5	)	$	(26.0	)
Net income (loss) from discontinued operations													$	.5		$	(9.3	)

4238

~~Loss~~Earnings (Loss) Per Share

Basic ~~loss~~earnings (loss) per share amounts are based on the weighted average number of common shares outstanding including unvested restricted shares that are considered participating securities. Diluted ~~loss~~earnings (loss) per share amounts are based on the weighted average number of common shares including unvested restricted shares and the net effect of potentially dilutive common shares outstanding.

The following table outlines the computation of ~~loss~~earnings (loss) per share for discontinued operations for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012:

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2012 2011 2012 2011
Basic and diluted loss per share numerators (in millions):

Net loss attributable to White Mountains’ common shareholders $ (106.8 ) $ (30.2 ) $ (115.5 ) $ (26.0 )
Allocation of income for participating unvested restricted common shares ⁽¹⁾
1.5
.3
1.5
.2
Net loss attributable to White Mountains’ common shareholders, net of
restricted common share amounts⁽²⁾
$ (105.3 ) $ (29.9 ) $ (114.0 ) $ (25.8 )
Basic loss per share denominators (in thousands):

Total average common shares outstanding during the period 6,590.4
7,919.3
6,885.9
7,970.0
Average unvested restricted common shares⁽³⁾
(96.5 ) (73.5 ) (89.5 ) (68.0 )
Basic loss per share denominator 6,493.9
7,845.8
6,796.4
7,902.0
Diluted loss per share denominator (in thousands):
Total average common shares outstanding during the period 6,590.4
7,919.3
6,885.9
7,970.0
Average unvested restricted common shares (96.5 ) (73.5 ) (89.5 ) (68.0 )
Average outstanding dilutive options to acquire common shares —
—
—
—
Diluted loss per share denominator 6,493.9
7,845.8
6,796.4
7,902.0
Basic and diluted loss per share (in dollars): $ (16.21 ) $ (3.81 ) $ (16.77 ) $ (3.26 )



	Three Months Ended March 31,
	2013			2012
Basic and diluted earnings (loss) per share numerators (in millions):
Net income (loss) attributable to White Mountains’ common shareholders	$	.5		$	(9.3	)
Allocation of income for participating unvested restricted common shares ⁽¹⁾	—			.1
Net income (loss) attributable to White Mountains’ common shareholders, net of restricted common share amounts⁽²⁾	$	.5		$	(9.2	)
Basic earnings (loss) per share denominators (in thousands):
Total average common shares outstanding during the period	6,273.5			7,431.7
Average unvested restricted common shares⁽³⁾	(79.0		)	(78.3		)
Basic earnings (loss) per share denominator	6,194.5			7,353.4
Diluted earnings (loss) per share denominator (in thousands):
Total average common shares outstanding during the period	6,273.5			7,431.7
Average unvested restricted common shares⁽³⁾	(79.0		)	(78.3		)
Average outstanding dilutive options to acquire common shares⁽⁴⁾	—			—
Diluted earnings (loss) per share denominator	6,194.5			7,353.4
Basic and diluted earnings (loss) per share (in dollars):	$	.07		$	(1.25	)

⁽¹⁾Restricted shares issued by White Mountains contain dividend participation features, and therefore, are considered participating securities.

⁽²⁾Net ~~loss~~earnings (loss) attributable to White Mountains’ common shareholders, net of restricted share amounts, is equal to undistributed ~~loss~~earnings (loss) for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012.

⁽³⁾ Restricted common shares outstanding vest either in equal annual installments or upon a stated date (see Note 1213).

⁽⁴⁾The diluted earnings per share denominator for the three months endedMarch 31, 2013 and 2012 do not include common shares issuable upon exercise of the Non-Qualified Options as they are anti-dilutive to the calculation.

Note ~~15.~~16. Contingencies

Esurance

On October 7, 2011, the Company completed the sale of its Esurance and Answer Financial subsidiaries (the “Transferred Subsidiaries”) to Allstate pursuant a Stock Purchase Agreement dated as of May 17, 2011 (filed as an exhibit to the Company's current report on Form 8-K on May 18, 2011, the “Agreement”).

The Company has certain contingencies under the Agreement as follows: (i) the final purchase price payable by Allstate under the Agreement, which is based upon the book value of the Transferred Subsidiaries at the closing date, is subject to a true-up process that has not yet been concluded, (ii) subject to specified thresholds and limits, the Company generally indemnifies Allstate for breaches of its representations and warranties in the Agreement for a period of eighteen months (although longer for specified representations and warranties) from the closing, (iii) the Company indemnifies Allstate for breaches of certain covenants in the Agreement, including certain agreements by the Company not to engage in certain competing business activities for two years after the closing and not to solicit certain employees of the Transferred Subsidiaries for three years after the closing, and (iv) subject to specified thresholds and limits, the Company indemnifies Allstate for specified matters related to the pre-closing period, including (a) specified litigation matters, (b) losses of the Transferred Subsidiaries arising from extra-contractual claims and claims in excess of policy limits (“ECO/EPL losses”), (c) certain corporate reorganizations effected to remove entities from the Transferred Subsidiaries that were not being sold in the transaction, and (d) certain tax matters, including certain net operating losses being less than stated levels. In addition, the Company retains 90% of positive or negative development in the loss reserves of the Transferred Subsidiaries as of the closing date (net of ECO/EPL losses).

Legal Contingencies

White Mountains, and the insurance and reinsurance industry in general, are routinely subject to claims related litigation and arbitration in the normal course of business, as well as litigation and arbitration that do not arise from, or are directly related to, claims activity. White Mountains' estimates of the costs of settling matters routinely encountered in claims activity are reflected in the reserves for unpaid loss and LAE. See Note 3.3.

~~Except as described below, White Mountains is not a party to any material non-claims litigation or arbitration.~~ 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.

Although the ultimate outcome of claims and non-claims related litigation and arbitration, and the amount or range of potential loss at any particular time, is often inherently uncertain, management does not believe that the ultimate outcome of such claims and non-claims related litigation and arbitration will have a material adverse effect on White Mountains' financial condition, results of operations or cash flows.

The following summarizes significant ongoing non-claims related litigation or arbitration as of March 31, 2013:

Esurance Sale

In 2011, the Company sold its Esurance and Answer Financial businesses (the ~~"Transferred Companies"~~“Transferred Companies”) to The Allstate Corporation ~~("Allstate"~~(“Allstate”) for a purchase price of approximately $1.01 billion. The purchase price consisted of $700 million plus the tangible book value of the Transferred Companies at the closing, which was estimated to be $308 million. Following closing, Allstate was required to prepare a final closing statement, including an audited balance sheet for the Transferred Companies as of the closing date. The Company believes this final closing statement was required to be prepared and audited no later than January 5, 2012. Allstate did not deliver the final closing statement to the Company until June 6, 2012, with an audit report dated June 1, 2012. The Company is disputing Allstate's calculation of tangible book value in the closing statement. The amount in dispute is approximately $20 million, after tax. The dispute principally relates to (i) the elimination of $24.7 million (pre-tax) of deferred acquisition costs ($16.0 million, after tax) and (ii) the inclusion of a liability equal to the costs associated with an Esurance extra-contractual (“ECO”) matter settled in April 2012 of $5.2 million ($3.4 million, after tax). Per the agreement governing the sale of the Transferred Companies (the “Sale Agreement”), disputes over the closing statement are to be arbitrated by an independent accountant.

The Company believes this final closing statement was required to be prepared and audited no later than January 5, 2012. Allstate did not deliver the final closing statement to the Company until June 6, 2012, with an audit report dated June 1, 2012. As a result, in addition to the substantive disputes over the final closing statement, the Company also believes that Allstate's failure to have the final closing statement prepared and audited by the required date ~~constitutes~~constituted a breach of Allstate's obligations under the ~~agreement governing the sale of the Transferred Companies.~~Sale Agreement. The Company ~~has~~ brought suit in the United States District Court for the Southern District of New York in connection with such breach. The court concluded that the Company's breach claim should also be arbitrated by the independent accountant under the Sale Agreement. That process is expected to be completed in the fourth quarter of 2013.

Tribune Company

In June 2011, Deutsche Bank Trust Company Americas, Law Debenture Company of New York and Wilmington Trust Company (collectively referred to as ~~"Plaintiffs"~~“Plaintiffs”), in their capacity as trustees for certain senior notes issued by the Tribune Company ~~("Tribune"~~(“Tribune”), filed lawsuits in various jurisdictions (the “Noteholder Actions”) against numerous defendants including OneBeacon, OBIC-sponsored benefit plans and other affiliates of White Mountains in their capacity as former shareholders of Tribune seeking recovery of the proceeds from the sale of common stock of Tribune in connection with Tribune's leveraged buyout in 2007 (the ~~"LBO"~~“LBO”). Tribune filed for bankruptcy in 2008 in the Delaware bankruptcy court (the ~~"Bankruptcy Court"~~“Bankruptcy Court”). The Bankruptcy Court granted Plaintiffs permission to commence these LBO-related actions. Plaintiffs seek recovery of the proceeds received by the former Tribune shareholders on a theory of constructive fraudulent transfer asserting that Tribune purchased or repurchased its common shares without receiving fair consideration at a time when it was, or as a result of the purchases of shares, was rendered, insolvent. OneBeacon has entered into a joint defense agreement with other affiliates of White Mountains that are defendants in the action. ~~OneBeacon and OBIC-sponsored benefit plans~~Certain subsidiaries of White Mountains received approximately $3239 million for Tribune common stock tendered in connection with the LBO.

In December 2011, the Judicial Panel on Multidistrict Litigation granted a motion to consolidate all of the Noteholder Actions for pretrial matters and transfer all such proceedings to the United States District Court for the Southern District of New York.

In addition, OneBeacon, OBIC-sponsored benefit plans and other affiliates of White Mountains in their capacity as former shareholders of Tribune, along with thousands of former Tribune shareholders, have been named as defendants in an adversary proceeding brought by the Official Committee of Unsecured Creditors of the Tribune Company, on behalf of the Tribune Company, which seeks to avoid the repurchase of shares by Tribune in the LBO on a theory of intentional fraudulent transfer (the “Committee Action”). The Committee Action has since been consolidated with the Noteholder Actions.

In September 2012, a case management order was entered in the consolidated cases, setting forth, among other things, a briefing schedule for an omnibus motion to dismiss in the Noteholder Actions. The court is expected to hear oral argument on that motion in ~~March~~the second quarter of 2013. Discovery and other motion practice (other than motions to amend the complaints) in the Committee Action and the Noteholder Actions is stayed until further order of the court.

Ace American Insurance Company

A subsidiary of OneBeacon, OneBeacon U.S. Holdings, Inc. ~~("OBH"~~(“OBH”), was sued in Federal Court in the Eastern District of Pennsylvania on August 17, 2012 by Ace American Insurance Company ~~("Ace"~~(“Ace”). The complaint ~~alleges~~alleged that OBH, through a professional recruiting firm, improperly hired a group of Ace employees from Ace's surety division. The complaint ~~seeks~~sought injunctive relief and unspecified ~~damages. Upon motions of both parties, the court ordered~~damages. After court-ordered expedited discovery ~~which has been completed. OBH's response~~was completed, the claims for injunctive relief were resolved pursuant to ~~Ace's motion~~a confidential agreement. After the claims against OBH for ~~preliminary injunction~~injunctive relief were resolved, Ace filed a Demand for Arbitration against five of the former Ace surety employees hired by OneBeacon, alleging breach of their duty of loyalty to Ace and misappropriation of Ace trade secrets. On March 6, 2013, Ace also filed an Amended Complaint in the Federal Court action, naming OneBeacon Insurance Group, Ltd., OneBeacon Insurance Group, LLC and OneBeacon Services, LLC as additional defendants. The only remaining claim is ~~due at the end of October.~~for damages and trial is scheduled for June 2013. OneBeacon believes that Ace's ~~motion is~~damages claim against all of the OneBeacon companies and the claims against the individual employees are without merit and intends to vigorously defend ~~the lawsuit.~~

~~Note 16. Subsequent Event~~

On October 16, 2012, OneBeacon announced it entered into an agreement to terminate its exclusive underwriting agreement with Hagerty Insurance Agency and to sell one of its insurance entities to Markel Corporation. OneBeacon anticipates recording an after-tax gain of ~~$15 million~~ related to this transaction. The sale is subject to regulatory approvals and is expected to close during the first quarter of 2013. The business associated with this agreement generated written premiums of approximately ~~$179 million, or~~ ~~16%~~ ~~of OneBeacon's consolidated written premiums for the~~ ~~twelve~~ ~~months prior to September 30, 2012.~~both claims.

4441


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

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

The following discussion also includes three non-GAAP financial measures - adjusted comprehensive income (loss), adjusted book value per share and total adjusted capital - that have been reconciled to their most comparable GAAP financial measures (see page ~~70)~~62). White Mountains believes these measures to be more relevant than comparable GAAP measures in evaluating White Mountains’ financial performance and condition.

RESULTS OF OPERATIONS FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2013 AND 2012 ~~AND 2011~~

Overview

White Mountains ended the ~~third~~first quarter of ~~2012~~2013 with an adjusted book value per share of ~~$574,~~$606, an increase of ~~1.6%~~3.3% for the quarter, ~~and 6.0% for the first nine months of 2012,~~ including dividends. White Mountains reported adjusted comprehensive income of ~~$59 million and $173~~$117 million in both the ~~third quarter and~~ first ~~nine months of 2012 compared to adjusted comprehensive loss of $98 million and $58 million in the third quarter and first nine months of 2011. In the third~~ quarter of ~~2012, strong investment~~2013 and ~~underwriting results more than offset a $101 million loss at OneBeacon from~~ the ~~sale~~first quarter of ~~its runoff business.~~

White Mountains' GAAP pre-tax total return on invested assets was 2.8% and 4.3% for the third quarter and first nine months of 2012, which included 0.6% and 0.4% of foreign currency gains, compared to a GAAP total return of -1.5% and 1.7% for the third quarter and first nine months of 2011, which included -1.2% and -0.2% of foreign currency losses.2012.

OneBeacon's book value per share ~~decreased 5.6% for the third quarter of 2012 and~~ increased ~~0.5%~~6.9% for the first ~~nine months~~quarter of ~~2012,~~2013, including dividends. ~~During the third~~The first quarter ~~of 2012, OneBeacon~~results include a $15 million after-tax gain recorded ~~$101 million in after-tax losses related to the~~from OneBeacon's sale of its runoff business. These losses are presented in discontinued operations and are composed of a $92 million after-tax loss on sale and a $9 million after-tax loss related to a reduction in the workers compensation loss reserve discount rate on reserves being transferred as part of the sale.Essentia Insurance Company (“Essentia”). OneBeacon's GAAP combined ratio was 95% for the third quarter of 2012 compared to 94% for the third quarter of last year, while the GAAP combined ratio was 93% for the first nine months of 2012 compared to 95% for the first nine months of last year. Both the quarter and first nine month results benefited from lower catastrophe losses partially offset by lower favorable development. In addition, the third quarter of 2011 had lower expenses due to an adjustment to incentive compensation accruals. Catastrophe losses were 2 points in both the third quarter and first nine months of 2012 compared to 5 points in the comparable periods of last year. Favorable loss reserve development was 1 point in the third quarter and in the first nine months of 2012 compared to 2 points in the comparable periods of last year.

~~Sirius Group's~~ GAAP combined ratio was 88% for the ~~third~~first quarter of ~~2012~~2013 compared to 89% for the ~~third~~first quarter of ~~2011, while the~~2012. Both periods included 1 point of favorable loss reserve development as well as 1 point of catastrophe losses. Sirius Group's GAAP combined ratio was ~~85%~~81% for the first ~~nine months~~quarter of ~~2012~~2013 compared to ~~104%~~84% for the first ~~nine months of 2011. The combined ratio for the third~~ quarter of ~~2012 included 19 points ($45 million) of~~2012. The decrease is primarily due to improved property, accident and health, and marine current accident year underwriting results. Catastrophe losses from Sirius Group's agricultural line of business, primarily as a result of the drought in the Midwestern United States. These loss estimates are subject to change as the majority of losses are based on both yield and final contractual commodity prices for corn and soybeans, which havedid not ~~yet been set. Additionally,~~meaningfully impact the combined ratio ~~for the third quarter of 2012 included 3 points ($6 million) of catastrophe losses, mainly due to storm losses~~ in the United States, compared to 11 points ($25 million) in the third quarter of last year, mainly as a result of hurricane Irene. The combined ratio for the first nine months of 2012 included 2 points ($14 million) of catastrophe losses compared to 27 points ($188 million) in the first nine months of last year. The combined ratio for first nine months of 2012 also included 7 points from the aforementioned agricultural losses. There was $8 million of net favorable loss reserve development in the third quarter of 2012 compared to $21 million in the third quarter of last year. With the completion of a ground-up asbestos reserve study in the quarter, Sirius Group increased asbestos loss reserves by $33 million. This increase was more than offset by reductions in liability and property loss reserves. Favorableeither period. Unfavorable loss reserve development was 2 points for the first quarter of 2013 and was primarily due to an adverse agricultural claim notice related to the 2012 U.S. drought, compared to favorable loss reserve development of 3 points for the first quarter of 2012.

Total net written premiums decreased 8% for the first quarter of 2013 to $599 million compared to $654 million in the first ~~nine months~~quarter of ~~2012~~2012. OneBeacon's net written premiums decreased 13% for the first quarter of 2013 to $265 million, compared to ~~5 points~~$303 million in the first ~~nine months of last year. In addition, in the third~~ quarter of 2012, ~~Sirius Group sold its interest in an equity affiliate investment, International Medical Group ("IMG"), a managing general underwriter~~primarily related to the OneBeacon's exit from the collector car and boat and energy businesses. Excluding the $42 million of net premiums written in the ~~medical and travel business, for a gain of $15 million.~~

~~During the third~~first quarter of 2012 White Mountains capitalized HG Global Ltd. ("HG Global") with $595 million to fund Build America Mutual Assurance Company ("BAM"), a newly formed mutual municipal bond insurer, and HG Re Ltd. ("HG Re"), a wholly-owned subsidiary of HG Global. As of September 30, 2012, White Mountains owned 97% of HG Global's preferred equity and 89% of its common equity. HG Global provided the initial capitalization of BAM through the purchase of $503 million of BAM surplus notes. Through HG Re, HG Global provides first loss reinsurance protection for policies underwritten by BAM of 15% of par outstanding, on a per policy basis. HG Re's obligations to BAM are collateralized in trusts, and there is an aggregate loss limit that is equal to the total assets in the collateral trusts at any point in time. For the third quarter of 2012, HG Global reported pre-tax income of $5 million, which was driven by $8 million of interest income on the BAM surplus notes, partially offset by startup and operational costs. For the third quarter of 2012, BAM reported $18 million in pre-tax losses that were driven by $8 million of interest expense on the BAM surplus notes and startup and operational costs. U.S. GAAP requires White Mountains to consolidate the results of BAM. However, since BAM is a mutual insurance company that is owned by its members and not White Mountains, BAM's results do not affect White Mountains' adjusted book value per share as they are attributed to noncontrolling interests.

White Mountains' total net written premiums increased 9% for both the third quarter and first nine months of 2012 to $559 million and $1,730 million, compared to $511 million and $1,589 million in the third quarter and first nine months of 2011.from these exited businesses, OneBeacon's net written premiums increased ~~13%~~2% for ~~both~~ the ~~third quarter and~~ first nine months of 2012 to $335 million and $930 million. A change in the method of estimating written premiums associated with the A.W.G. Dewar ("Dewar") tuition reimbursement insurance product resulted in approximately $9 million in net written premiums being recorded in the third quarter of 2012 that, under the prior method, would have been recorded in the fourth quarter. Excluding this change in estimate, premiums for the three and nine months ended September 30, 2012 would have increased 9% and 12%.2013. Sirius Group's net written premiums ~~increased~~decreased 5% ~~and 4%~~(6% in local currencies) to $334 million for the ~~third~~first quarter ~~and~~of 2013 from $351 million for the first ~~nine months~~quarter of 2012, as decreases in the accident and health and trade credit lines of business were partially offset by an increase in property lines.

White Mountains' GAAP total return on invested assets for the first quarter of 2013 was 1.4%, which included 0.4% of currency losses, compared to ~~$224 million and $800 million (increases~~2.0% for the first quarter of ~~6% for both periods in~~2012, which included 0.4% of currency gains. In local ~~currencies)~~currencies, White Mountains' fixed income portfolio was up 0.4%, outperforming the longer duration Barclay's Intermediate Aggregate Bond Index. White Mountains' value-oriented equity portfolio had strong absolute returns of 7.1%, though it lagged the S&P 500 Index return of 10.6%.

Adjusted Book Value Per Share

The following table presents White Mountains’ adjusted book value per share and reconciles this non-GAAP measure to the most comparable GAAP measure. (See NON-GAAP FINANCIAL MEASURES on page ~~70)~~62).


	September 30, 2012			June 30, 2012			December 31, 2011			September 30, 2011			March 31, 2013			December 31, 2012			March 31, 2012
Book value per share numerators (in millions):
White Mountains’ common shareholders’ equity	$	3,809.3		$	3,742.5		$	4,087.7		$	3,444.7		$	3,758.9		$	3,731.8		$	3,718.8
Equity in net unrealized gains from Symetra’s fixed maturity portfolio	(59.3		)	(27.0		)	—			(135.7		)
Equity in net unrealized (gains) losses from Symetra’s fixed maturity portfolio													(49.7		)	(57.7		)	1.2
Adjusted book value per share numerator ⁽¹⁾	$	3,750.0		$	3,715.5		$	4,087.7		$	3,309.0		$	3,709.2		$	3,674.1		$	3,720.0
Book value per share denominators (in thousands of shares):
Common shares outstanding	6,583.7			6,630.3			7,577.9			7,630.7			6,176.2			6,291.0			6,638.9
Unearned restricted shares	(46.8		)	(51.6		)	(37.6		)	(44.5		)	(57.4		)	(38.7		)	(59.4		)
Adjusted book value per share denominator ⁽¹⁾	6,536.9			6,578.7			7,540.3			7,586.2			6,118.8			6,252.3			6,579.5
Book value per share ⁽²⁾	$	578.60		$	564.45		$	539.43		$	451.42		$	608.62		$	593.20		$	560.16
Adjusted book value per share ⁽²⁾	$	573.66		$	564.77		$	542.11		$	436.18		$	606.20		$	587.63		$	565.38

⁽¹⁾ Excludes out of-the-money stock options.

⁽²⁾ During the first ~~nine months~~quarter of both ~~2012~~2013 and ~~2011,~~2012, White Mountains declared and paid a dividend of $1.00 per common ~~share.~~share

4642

Review of Consolidated Results

White Mountains’ consolidated financial results for the three ~~and nine~~ months ended~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 follow:


	Three Months Ended						Nine Months Ended						Three Months Ended
	Sept 30,						Sept 30,						March 31,
Millions	2012			2011			2012			2011			2013			2012
Gross written premiums	$	608.0		$	559.2		$	1,977.4		$	1,813.3		$	734.6		$	782.7
Net written premiums	$	559.1		$	511.2		$	1,729.9		$	1,588.9		$	601.2		$	653.9
Revenues
Earned insurance and reinsurance premiums	$	536.8		$	491.1		$	1,545.3		$	1,433.5		$	495.4		$	498.0
Net investment income	37.6			42.8			119.8			138.1			28.5			41.8
Net realized and unrealized investment gains	72.7			2.9			123.2			36.4			75.2			58.6
Other revenue — foreign currency translation gains (losses)	33.1			(30.4		)	33.1			(16.0		)
Other revenue — foreign currency translation gains													3.3			18.4
Other revenue — Hamer and Bri-Mar	8.6			8.0			24.1			18.9			—			8.2
Other revenue — Symetra warrants	(3.6		)	(24.7		)	13.6			(29.3		)	(3.7		)	11.1
Other revenue — other	12.2			12.1			10.2			(1.9		)	28.7			(6.5		)
Total revenues	697.4			501.8			1,869.3			1,579.7			627.4			629.6
Expenses
Losses and LAE	308.1			280.2			821.7			920.4			244.3			249.8
Insurance and reinsurance acquisition expenses	107.6			107.0			326.2			296.6			98.2			109.1
Other underwriting expenses	76.6			64.3			228.4			203.9			79.1			73.5
General and administrative expenses	39.0			27.1			104.7			97.5			34.4			31.2
General and administrative expenses — BAM	11.2			—			11.2			—			8.2			—
General and administrative expenses — Hamer and Bri-Mar	7.4			7.0			21.0			16.7			—			7.2
Accretion of fair value adjustment to loss and LAE reserves	1.1			2.1			9.4			6.2			1.2			7.1
Interest expense on debt	11.3			12.8			33.1			38.8			10.2			10.9
Total expenses	562.3			500.5			1,555.7			1,580.1			475.6			488.8
Pre-tax income (loss)	135.1			1.3			313.6			(.4		)
Income tax (expense) benefit	(47.8		)	.6			(85.3		)	(.8		)
Net income (loss) from continuing operations	87.3			1.9			228.3			(1.2		)
Loss income from sale of discontinued operations, net of tax	(91.0		)	(18.2		)	(91.0		)	(18.2		)
Net loss from discontinued operations, net of tax	(15.8		)	(12.0		)	(24.5		)	(7.8		)
Pre-tax income													151.8			140.8
Income tax expense													(41.6		)	(31.1		)
Net income from continuing operations													110.2			109.7
Net income (loss) from discontinued operations, net of tax													.5			(9.3		)
Equity in earnings of unconsolidated affiliates, net of tax	7.7			1.5			24.4			16.1			9.2			10.2
Net income (loss)	(11.8		)	(26.8		)	137.2			(11.1		)
Net income (loss) attributable to noncontrolling interests	30.9			11.0			2.0			(21.2		)
Net income (loss) attributable to White Mountains’ common shareholders	19.1			(15.8		)	139.2			(32.3		)
Other comprehensive income (loss), net of tax	71.9			(26.7		)	92.6			51.9
Comprehensive income (loss)	91.0			(42.5		)	231.8			19.6
Comprehensive income attributable to noncontrolling interests	.4			—			.4			—
Comprehensive income (loss) attributable to White Mountains’ common shareholders	91.4			(42.5		)	232.2			19.6
Net income													119.9			110.6
Net income (loss) attributable to non-controlling interests													.5			(16.8		)
Net income attributable to White Mountains’ common shareholders													120.4			93.8
Other comprehensive (loss) income, net of tax													(11.7		)	22.3
Comprehensive income													108.7			116.1
Comprehensive income attributable to non-controlling interests													—			—
Comprehensive income attributable to White Mountains’ common shareholders													108.7			116.1
Change in equity in net unrealized gains from Symetra’s fixed maturity portfolio	(32.3		)	(55.1		)	(59.3		)	(77.2		)	8.0			1.2
Adjusted comprehensive income (loss)	$	59.1		$	(97.6	)	$	172.9		$	(57.6	)
Adjusted comprehensive income													$	116.7		$	117.3

4743

Consolidated Results - Three Months Ended ~~September 30, 2012~~March 31, 2013 versus Three Months Ended ~~September 30, 2011~~March 31, 2012

White Mountains' total revenues ~~increased 39% to $697~~were essentially flat at $627 million in the ~~third~~first quarter of ~~2012~~2013 compared to ~~$502~~$630 million in the ~~third~~first quarter of 2011, primarily due to higher investment gains, higher foreign currency translation gains, higher earned insurance and reinsurance premiums and lower mark-to-market losses on White Mountains' investment in Symetra warrants.2012. Earned insurance and reinsurance premiums ~~increased 9% (10% in local currencies)~~decreased 1% to ~~$537~~$495 million in the ~~third~~first quarter of ~~2012,~~2013, with OneBeacon up ~~13%~~5% and Sirius Group ~~up 5% (7%~~down 8% (9% in local currencies). Net investment income was down ~~12%~~32% to ~~$38~~$29 million in the ~~third~~first quarter of ~~2012,~~2013, primarily from a lower invested asset base that was driven by share repurchases and lower fixed maturity ~~yields and the gradual shift in White Mountains' investment portfolio to common equity securities.~~yields. White Mountains reported net realized and unrealized investment gains of ~~$73~~$75 million in the ~~third~~first quarter of ~~2012~~2013, which included $10 million of net realized and unrealized foreign currency losses, compared to $3$59 million of gains in the ~~third~~first quarter of ~~2011~~2012, which included $25 million of net realized and unrealized foreign currency losses (see “~~Investment Returns~~Foreign Currency Translation” on page ~~56)~~51). Other revenues ~~improved~~decreased to ~~a gain of $50~~$28 million in the ~~third~~first quarter of 2013 from $31 million in the first quarter of 2012, ~~from~~as decreases in foreign currency exchange gains, the valuation of Symetra warrants and the deconsolidation of Hamer and Bri-Mar were partially offset by a ~~loss~~$23 million gain on OneBeacon's sale of ~~$35 million in the third~~Essentia. The first quarter of ~~2011, as the third quarter of 2012~~2013 included ~~$33~~$3 million in foreign currency translation gains compared to ~~$30~~$18 million of foreign currency ~~losses~~gains in the ~~third~~first quarter of ~~2011.~~2012. In addition, the ~~third~~first quarter of ~~2012~~2013 included $3$4 million of mark-to-market losses on the Symetra warrants compared to ~~$25~~$11 million of ~~such losses~~gains in the ~~third~~first quarter of ~~2011. The third~~2012. Effective October 1, 2012, the results of Hamer and Bri-Mar are no longer consolidated in White Mountains' financial statements. In the first quarter of 2012, ~~also included a $15~~White Mountains reported other revenues of $8 million ~~gain from Sirius Group's sale~~related to the consolidation of ~~its interest in IMG.~~Hamer and Bri-Mar.

White Mountains' total expenses ~~increased 12%~~decreased 3% to ~~$562~~$476 million in the ~~third~~first quarter of ~~2012~~2013 compared to ~~$501~~$489 million in the ~~third~~first quarter of ~~2011.~~2012. Losses and LAE ~~insurance~~decreased 2% in the first quarter of 2013, roughly in line with the decrease in earned premiums. Insurance and reinsurance acquisition expenses ~~and other underwriting expenses~~decreased 10%, primarily due to changes in ~~total increased 9%, as increases from the growth in~~ business mix at both OneBeacon and Sirius Group, while other underwriting expenses increased 8%, primarily due to increases at Sirius Group from costs related to the implementation of a global property underwriting system and ~~losses from Sirius Group's agricultural business were partially offset by decreased catastrophe losses. The third quarter of 2012 included $11 million of catastrophe losses compared~~higher professional fees relating to ~~$42 million in the third quarter of 2011.~~Lloyds initiatives. General and administrative expenses, ~~increased 62% to $59 million, primarily due to $11 million resulting from~~excluding the ~~consolidation~~effects of consolidating BAM in the first quarter of 2013 and ~~higher incentive compensation expenses.~~

~~White Mountains' income tax expense for~~Hamer and Bri-Mar in the ~~third~~first quarter of 2012, represented an effective tax rate of 35.4%, which is in line with the U.S. statutory rate of 35%. The effective tax rate for the third quarter of 2011 was not meaningful as pre-tax income was near break-even ($1.3 million).

The Ministry of Finance in Sweden has proposed reducing the corporate income tax rate in Sweden to 22.0% from 26.3%. If this proposal is enacted, the reduction in the Swedish corporate income tax rate would reduce the White Mountains' net deferred tax liability by approximately $60 million. The Ministry of Finance in Sweden has also proposed tax legislation that, if enacted, would limit the deductibility of interest paid on certain intra-group debt instruments after January 1, 2013. At September 30, 2012, White Mountains has $272 million of deferred tax assets related to net operating loss carryforwards that are being utilized from interest income on intra-group debt instruments that would be affected by the proposed tax legislation. However, management does not expect that the proposed tax legislation will adversely affect the carrying value of these deferred tax assets as management believes it has alternate strategies to utilize the deferred tax assets.

~~Consolidated Results -~~ ~~Nine Months EndedSeptember 30, 2012~~ ~~versus~~ ~~Nine Months EndedSeptember 30, 2011~~

White Mountains' total revenues increased 18% to $1,869 million in the first nine months of 2012 compared to $1,580 million in the first nine months of 2011, primarily due to higher earned insurance and reinsurance premiums, higher foreign currency translation gains, higher mark-to-market gains on White Mountains' investment in Symetra warrants and higher investment gains, partially offset by lower net investment income. Earned premiums increased 8% (9% in local currencies) to $1,545 million in the first nine months of 2012, with OneBeacon up 13% and Sirius Group up 2% (4% in local currencies). Net investment income was down 13% to $120 million in the first nine months of 2012, due primarily to lower fixed maturity yields and the gradual shift in White Mountains' investment portfolio to common equity securities. White Mountains reported net realized and unrealized investment gains of $123 million in the first nine months of 2012, compareddecreased 7% to $36 million in the first ~~nine months~~quarter of ~~2011 (see~~ ~~Investment Returns~~ ~~on page 56).~~2013, as an increase in the Other ~~revenues increased~~Operations segment due to higher incentive compensation accruals resulting from an increase in White Mountains' share price was more than offset by a decrease at Sirius Group, primarily due to a ~~gain~~reduction in severance and separation costs as a result of ~~$81 million~~a reduction in staff in the first ~~nine months~~quarter of 2012 from a loss of $28 million in the first nine months of 2011, as the first nine months of 2012 included $33 million in foreign currency translation gains compared to $16 million of foreign currency losses in the first nine months of 2011. In addition, the first nine months of 2012 included $14 million of mark-to-market gains on the Symetra warrants compared to $29 million of losses in the first nine months of 2011. Other revenues in the first nine months of 2012 also included a $15 million gain reported by the Sirius Group related to the sale of its interest in IMG, while the first nine months of 2011 included a $12 million loss from the repurchase of $150 million of OBH Senior Notes.

White Mountains' total expenses decreased 2% to $1,556 million in the first nine months of 2012, compared to $1,580 million in the first nine months of 2011. Losses and LAE, insurance and reinsurance acquisition expenses and other underwriting expenses in total decreased 3%, as decreased catastrophe losses were partially offset by increased expenses due to the growth in business at OneBeacon and Sirius Group. The first nine months of 2012 included $27 million of catastrophe losses compared to $231 million in catastrophe losses in the first nine months of 2011, primarily from the Japan earthquake and tsunami and New Zealand earthquakes. General and administrative expenses increased 22% to $146 million, primarily due to $11 million resulting from the consolidation of BAM and higher incentive compensation expenses. Interest expense on debt decreased 15% to $33 million in the first nine months of 2012 compared to $39 million in the first nine months of 2011, primarily due to reductions of outstanding debt resulting from repurchases of OBH Senior Notes.2012.

White Mountains' income tax expense for the first ~~nine months~~quarter of 2013 and 2012 represented an effective tax ~~rate~~rates of ~~27.2%~~27.4% and 22.1%, which ~~differed from~~was lower than the U.S. statutory rate of 35% in both periods due primarily ~~due~~ to income generated in jurisdictions other than the United States. ~~White Mountains' effective tax rate for the first nine months of 2011 was not meaningful as pre-tax loss was near break-even ($(0.4) million).~~

I. Summary of Operations By Segment

White Mountains conducts its operations through ~~three~~four segments: (1) OneBeacon, (2) Sirius Group, (3) HG Global/BAM and ~~(3)~~(4) Other Operations. While investment results are included in these segments, because White Mountains manages the majority of its investments through its wholly-owned subsidiary, WM Advisors, a discussion of White Mountains’ consolidated investment operations is included after the discussion of operations by segment. White Mountains’ segment information is presented in Note 1011 —“Segment Information” to the Consolidated Financial Statements.

OneBeacon

Financial results and GAAP combined ratios for OneBeacon for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 follow:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
Millions	2012			2011			2012			2011			2013			2012
Gross written premiums	$	353.4		$	308.8		$	983.8		$	869.1		$	280.9		$	318.7
Net written premiums	$	335.2		$	297.2		$	930.4		$	821.4		$	265.1		$	303.1

Earned insurance and reinsurance premiums	$	293.9		$	259.1		$	846.0		$	748.0		$	286.5		$	271.8
Net investment income	12.8			16.1			41.5			55.8			9.4			14.7
Net realized and unrealized investment (losses) gains	40.0			(47.4		)	57.9			(13.3		)
Net realized and unrealized investment gains													28.4			29.8
Other revenue	(.4		)	.1			(.1		)	(12.2		)	24.0			.1
Total revenues	346.3			227.9			945.3			778.3			348.3			316.4
Losses and LAE	164.7			149.7			452.5			421.3			148.9			136.4
Insurance and reinsurance acquisition expenses	66.6			58.6			185.6			161.5			54.8			58.1
Other underwriting expenses	47.4			36.0			146.2			124.5			49.3			47.5
General and administrative expenses	4.4			2.5			9.6			7.4			4.0			2.7
Interest expense on debt	4.1			4.1			12.2			16.4			3.2			4.1
Total expenses	287.2			250.9			806.1			731.1			260.2			248.8
Pre-tax income (loss)	$	59.1		$	(23.0	)	$	139.2		$	47.2
Pre-tax income													$	88.1		$	67.6

GAAP ratios:
Losses and LAE													52		%	50		%
Expense													36		%	39		%
Combined													88		%	89		%

The following table presents OneBeacon’s book value per share:


(Millions, except per share amounts)	September 30, 2012		June 30, 2012		December 31, 2011		September 30, 2011		March 31, 2013		December 31, 2012		March 31, 2012
OneBeacon book value per share:
OneBeacon's common shareholders’ equity	$	1,048.4	$	1,131.8	$	1,099.8	$	1,100.2	$	1,063.8	$	1,014.5	$	1,138.4
OneBeacon common shares outstanding	95.4		95.4		95.1		95.1		95.4		95.4		95.4
OneBeacon book value per common share ⁽¹⁾	$	10.99	$	11.86	$	11.56	$	11.57	$	11.15	$	10.63	$	11.93

⁽¹⁾ OneBeacon declared anand paid a ~~regularly~~regular quarterly dividend of $0.21 per common share in ~~each of~~ the first ~~three quarters of 2012~~

~~and the last~~ quarter of ~~2011.~~2013and in each quarter during 2012.

~~The following table provides OneBeacon’s GAAP ratios, net written premiums~~Essentia Sale

Effective January 1, 2013, OneBeacon completed the sale of Essentia, an indirect wholly-owned subsidiary which wrote the collector car and ~~earned insurance premiums for the~~ ~~three and nine months endedSeptember 30, 2012~~ ~~and~~ ~~2011~~:

Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2012 2011 2012 2011
GAAP Ratios:

Loss and LAE 56 % 58 % 54 % 56 %
Expense 39 % 36 % 39 % 39 %
Combined 95 % 94 % 93 % 95 %
Net written premiums $ 335.2
$ 297.2
$ 930.4
$ 821.4
Earned premiums $ 293.9
$ 259.1
$ 846.0
$ 748.0

~~Recent Developments~~

~~On October 17, 2012, OneBeacon entered into a definitive agreement to sell its runoff~~boat business, to ~~an affiliate of Armour Group Holdings Limited ("Armour"~~Markel Corporation. Concurrently therewith, OneBeacon and Hagerty Insurance Agency (“Hagerty”) (the "Runoff Transaction"). At closing, OneBeacon will transfer to Armour certain legal entities within the OneBeacon group, which will contain the assets, liabilities (including gross and ceded loss reserves), and capital supporting the runoff business, as well as certain elements of the runoff business infrastructure including staff and office space. The transaction is subject to regulatory approvals and is expected to close in the second half of 2013.

During the third quarter of 2012, OneBeacon recorded $101 million in after-tax losses related to the Runoff Transaction. These losses are presented in discontinued operations and are composed of a $92 million after-tax loss on sale and a $9 million after-tax loss related to a reduction in the workers compensation loss reserve discount rate on reserves being transferred as part of the sale.

~~On October 15, 2012, OneBeacon entered into definitive agreement to terminate its exclusive~~terminated their underwriting arrangement with ~~Hagerty Insurance Agency.~~respect to the collector car and boat business. OneBeacon recognized a pre-tax gain on sale of $23 million ($15 million after tax) in the first quarter of 2013. The business associated with this agreement generated net written premiums of ~~approximately $179~~$35 million, or 12% of OneBeacon's net written premiums, for the ~~twelve months~~quarter ended ~~September 30,~~March 31, 2012. In connection with this agreement, OneBeacon also agreed to sell its wholly-owned insurance subsidiary Essentia Insurance Company (“Essentia”). OneBeacon anticipates recording a $23 million pre-tax gain on the sale ($15 million after tax) upon closing the transaction. The sale is subject to regulatory approvals and is expected to close during the first quarter of 2013. The termination of the agency agreement will be effective as of the close date of the Essentia sale.

OneBeacon Results - Three Months Ended ~~September 30, 2012~~March 31, 2013 versus Three Months Ended ~~September 30, 2011~~March 31, 2012

OneBeacon ended the first quarter of 2013 with a book value per share of $11.15, an increase of 6.9% from December 31, 2012, including dividends. The increase was driven by strong investment and underwriting results and the $15 million after-tax gain from the sale of Essentia.

OneBeacon's GAAP combined ratio was ~~95%~~88% for the ~~third~~first quarter of ~~2012~~2013 compared to ~~94%~~89% for the ~~third~~first quarter of ~~2011.~~2012. The decrease in OneBeacon's combined ratio was due to a 3 point decrease in the expense ratio, primarily from lower insurance acquisition expenses due to changes in business mix driven by the termination of the underwriting arrangement with Hagerty, partially offset by a 2 point increase in the ~~combined~~loss and LAE ratio ~~was primarily due to lower favorable prior~~from higher current accident year ~~development, partially offset by lower catastrophe~~ losses. The third quarter of 2012 included 2 points of catastrophe losses, primarily related to hurricane Isaac, compared to 5 points of catastrophe losses in the third quarter of 2011, primarily related to hurricane Irene. The third quarter of 2012Both periods included 1 point of favorable loss reserve development ~~as compared to 2 points~~and 1 point of favorable loss reserve development in the prior year period. The expense ratio was 39% for the third quarter of 2012 compared to 36% for the third quarter of 2011. The increase was driven by higher incentive compensation expenses and employee costs associated with building new specialty businesses in the third quarter of 2012, primarily OneBeacon Property and Inland Marine and OneBeacon Programs.catastrophe losses.

5045

OneBeacon's net written premiums ~~increased~~decreased 13% for the ~~third~~first quarter of 2013 to $265 million, compared to $303 million in the first quarter of 2012, to $335 million, compared to $297 million in the third quarter of 2011. A change in estimating premiums associated with the Dewar tuition reimbursement insurance product resulted in approximately $9 million in net written premiums being recorded in the third quarter of 2012 that, under the prior method, would have been recorded in the fourth quarter. Excluding this change in estimate, premiums for the third quarter of 2012 would have increased 9%. The increase was primarily due to ~~a $10~~the exit from the collector car and boat and energy businesses. Excluding the $42 million increase from OneBeacon Professional Insurance, a $5 million increase from OneBeacon Government Risks, a $5 million increase from OneBeacon Energy Group, a $4 million increase from its collector cars and boats business, and a $4 million increase from OneBeacon Entertainment, partially offset by an $11 million decrease inof net written premiums from ~~OneBeacon Property and Inland Marine.~~the exited businesses in the first quarter of 2012, net written premiums increased 2%, as increases across most of OneBeacon's underwriting units were mostly offset by a decrease in professional insurance.

Reinsurance protection.OneBeacon purchases reinsurance in order to minimize loss from large risks or catastrophic events. OneBeacon also purchases individual property reinsurance coverage for certain risks to reduce large loss volatility through property-per-risk excess of loss reinsurance programs and individual risk facultative reinsurance. OneBeacon also maintains excess of loss casualty reinsurance programs that provide protection for individual risk or catastrophe losses involving workers compensation, general liability, automobile liability, professional liability or umbrella liability. The availability and cost of reinsurance protection is subject to market conditions, which are outside of ~~OneBeacon's~~management’s control. Limiting ~~the~~ risk of loss through reinsurance arrangements serves to mitigate the impact of large losses; however, the cost of this protection in an individual period may exceed the benefit.

For the ~~third~~first quarter of 2013 and 2012, OneBeacon's net combined ratio was higher than its gross combined ratio by 1 point and 5 points, ~~primarily due~~respectively. The year over year differential was largely attributable to the impact of favorable development on a large loss that had been ceded under the marine reinsurance treaty, and to a lesser extent the cost of facultative reinsurance, property reinsurance and catastrophe reinsurance. For the third quarter of 2011, OneBeacon's net combined ratio was higher than its gross combined ratio by 3 points, primarily due to the impact of the cost of property reinsurance, catastrophe reinsurance, and to a lesser extent the cost of facultative reinsurance and marine reinsurance.

~~OneBeacon Results - Nine Months Ended September 30, 2012 versus Nine Months Ended September 30, 2011~~

OneBeacon's GAAP combined ratio was 93% for the first nine months of 2012 compared to 95% for the first nine months of 2011. The decrease in the combined ratio was primarily due to lower catastrophe losses and lower current accident year losses, partially offset by lower favorable loss reserve development. The first nine months of 2012 included 2 points of catastrophe losses, primarily related to hurricane Isaac and storms in the midwestern United States, compared to 5 points of catastrophe lossesan increase in the first ~~nine months~~quarter of ~~2011,~~2013 in ceded loss recoveries associated primarily ~~related to hurricane Irene and tornadoes in~~with marine insurance, which largely offset the southeast and midwestern United States, as well as storms and freezing weather in the northeast and southwest. The first nine months of 2012 included 1 point of favorable loss reserve development compared to 2 points of favorable loss reserve development in the prior year period. The expense ratio for first nine months of 2012 also included one point ($5 million) from the amortization of previously deferred acquisition costs that are no longer eligible for deferral under ASU 2010-26, primarily a portion of the profit sharing commissions associated with OneBeacon’s collector car and boats business.premiums ceded.

OneBeacon's net written premiums increased 13% in the first nine months of 2012 to $930 million compared to $821 million in the first nine months of 2011. Excluding the effect of the change in estimate at Dewar's, premiums for the first nine months of 2012 would have increased 12% from the first nine months of 2011. The increase was primarily due to a $21 million increase from OneBeacon Professional Insurance primarily related to the medical excess line, a $20 million increase from OneBeacon Technology Insurance, a $14 million increase from OneBeacon Accident Group, a $13 million increase from OneBeacon Energy Group and a $12 million increase from its collector cars and boats business primarily related to growth in new business, partially offset by a $15 million decrease in net written premiums from OneBeacon Property and Inland Marine.

~~Reinsurance protection.~~For the first nine months of 2012, OneBeacon's net combined ratio was higher than its gross combined ratio by 6 points, primarily due to favorable development on a large loss that had been previously ceded and the cost of property reinsurance, facultative reinsurance and catastrophe reinsurance. For the first nine months of 2011, OneBeacon's net combined ratio was higher than its gross combined ratio by 4 points, primarily due to the impact of the cost of property reinsurance, facultative reinsurance, catastrophe reinsurance and marine reinsurance.

Sirius Group

Financial results and GAAP combined ratios for Sirius Group for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 follow:


	Three Months Ended						Nine Months Ended						Three Months Ended
	Sept 30,						Sept 30,						March 31,
($ in millions)	2012			2011			2012			2011			2013			2012
Gross written premiums	$	254.6		$	250.4		$	993.6		$	944.2		$	451.7		$	464.0
Net written premiums	$	223.9		$	214.0		$	799.5		$	767.5		$	334.1		$	350.8

Earned insurance and reinsurance premiums	$	242.9		$	232.0		$	699.3		$	685.5		$	208.9		$	226.2
Net investment income	16.7			22.1			50.9			68.3			13.1			17.1
Net realized and unrealized investment (losses) gains	(8.9		)	65.9			22.9			60.7
Other revenue - foreign currency translation gains (losses)	33.1			(30.4		)	33.1			(16.0		)
Net realized and unrealized investment gains													13.1			13.7
Other revenue - foreign currency translation gains													3.3			18.4
Other revenue	15.1			1.1			15.8			2.2			7.2			(.1		)
Total revenues	298.9			290.7			822.0			800.7			245.6			275.3
Losses and LAE	143.4			130.5			369.2			499.1			95.4			113.4
Insurance and reinsurance acquisition expenses	41.0			48.4			140.6			135.1			43.3			51.0
Other underwriting expenses	29.1			28.3			82.1			79.4			29.7			26.0
General and administrative expenses	9.1			5.3			26.0			17.1			8.3			11.8
Accretion of fair value adjustment to loss and LAE reserves	1.1			2.1			9.4			6.2			1.2			7.1
Interest expense on debt	6.5			6.5			19.6			19.6			6.6			6.5
Total expenses	230.2			221.1			646.9			756.5			184.5			215.8
Pre-tax income	$	68.7		$	69.6		$	175.1		$	44.2		$	61.1		$	59.5

GAAP ratios:
Losses and LAE	59		%	56		%	53		%	73		%	46		%	50		%
Expense	29		%	33		%	32		%	31		%	35		%	34		%
Combined	88		%	89		%	85		%	104		%	81		%	84		%

Sirius Group Results - Three Months Ended~~September 30, 2012~~ March 31, 2013 versus Three Months Ended~~September 30, 2011~~ March 31, 2012

Sirius Group's GAAP combined ratio was ~~88%~~81% for the ~~third~~first quarter of ~~2012~~2013 compared to ~~89%~~84% for the ~~third~~first quarter of ~~2011.~~2012. The decrease was primarily due to improved property, accident and health, and marine underwriting results in the first quarter of 2013. Catastrophe losses did not meaningfully affect the combined ratio ~~for~~in either period. For the ~~third~~first quarter of ~~2012 included 19~~2013, net unfavorable loss reserve development was 2 points ($454 million) ~~of losses from Sirius Group's~~, primarily due to a $5 million late reported agricultural ~~line of business, primarily as~~claim related to the 2012 U.S. drought and a ~~result of the drought~~$2 million increase in asbestos reserves, offset by loss estimate reductions in the ~~Midwestern United States. These loss estimates are subject to change as the majority of losses are based on both yield~~property and ~~final contractual commodity prices for corn~~accident and ~~soybeans, which have not yet been set.~~health lines. The ~~combined ratio for the third~~first quarter of 2012 ~~also~~ included 3 points ($6 million) of catastrophe losses, mainly due to storm losses in the United States, compared to 11 points ($25 million) for the third quarter of 2011, which included $11 million related to hurricane Irene and $7 million from the June 2011 New Zealand earthquake. Favorable loss reserve development was 3 points the third quarter of 2012 compared to 9 points in the third quarter of last year. With the completion of a ground-up asbestos reserve study in the quarter, Sirius Group increased asbestos loss reserves by $33 million. This increase was more than offset by reductions in liability and property loss reserves. The third quarter of 2011 included favorable loss reserve development, primarily ~~attributable~~due to reductions of loss estimates for the ~~property lines.~~ 2011 Japan earthquake.

Sirius Group's gross written premiums ~~increased 2% (3%~~decreased 3% (4% in local currencies) for the first quarter of 2013 to ~~$255~~$452 million, compared to $464 million in the ~~third~~first quarter of 2012, ~~from $250 million for the third quarter of 2011,~~ while net written premiums ~~increased~~decreased 5% (6% in local currencies) for the first quarter of 2013 to ~~$224~~$334 million, compared to $351 million in the ~~third~~first quarter of ~~2012 from $214 million in 2011.~~2012. These ~~increases~~decreases were primarily from the ~~property and~~ accident and health line of business, partially offset by increased property business. Net written premiums in the first quarter of 2013 also reflect increased retrocessions on the accident and health and marine lines of business ~~somewhat offset by decreases in trade credit.~~compared to the first quarter of 2012. Net earned premiums ~~increased 5% (7%~~decreased 8% (9% in local currencies) for the first quarter of 2013 to ~~$243~~$209 million, compared to $226 million in the ~~third~~first quarter of ~~2012 compared to $232 million in the third quarter of 2011.~~

Sirius Group's insurance and reinsurance acquisition expenses decreased 15% ($7 million) in the third quarter of 2012 from the third quarter of 2011. The third quarter of 2011 included non-recurring profit commission expenses related to a commutation.2012.

Sirius Group's other revenues in the first quarter of 2013 primarily consisted of ~~$33~~pre-tax transaction gains of $7 million from White Mountains Solutions' acquisition of American Fuji and $3 million of foreign currency translation gains ~~recorded in the third quarter of 2012~~ compared to ~~a loss~~foreign currency translation gains of ~~$30~~$18 million in the ~~third~~first quarter of ~~2011.~~2012. (See “Foreign Currency Translation” on page ~~57). In addition,~~51)

Sirius Group's other underwriting expenses increased $4 million in the ~~third~~first quarter of ~~2012, Sirius Group sold its interest~~2013, primarily due to costs related to the implementation of a global property underwriting system and higher professional fees relating to Lloyds initiatives. General and administrative expense decreased by $4 million, primarily due to the absence of employee severance and separation costs that were included in ~~IMG~~the first quarter of 2012. Accretion of fair value adjustment to losses and LAE reserves decreased by $6 million due to the acceleration of the amortization of the purchase accounting established for the acquisition of Scandinavian Reinsurance Company Ltd. (“Scandinavian Re”) due to a ~~gain~~treaty loss commutation in the first quarter of ~~$15 million.~~2012.

Reinsurance protection.Sirius Group's reinsurance protection primarily consists of pro-rata and excess of loss protections to cover aviation, trade credit, and certain property exposures. Sirius Group's proportional reinsurance programs provide protection for part of the non-proportional treaty accounts written in Europe, the Americas, Asia, the Middle East, and Australia. This reinsurance is designed to increase underwriting capacity where appropriate, and to reduce exposure both to large catastrophe losses and to a frequency of smaller loss events. Attachment points and coverage limits vary by region around the world.

Sirius Group's gross combined ratio was lower than the net combined ratio by 58 points for the ~~third~~first quarter of ~~2012~~2013 and ~~9 points~~flat for the ~~third~~first quarter of ~~2011.~~2012. The higher net combined ratio for ~~both~~ the ~~third~~first quarter of ~~2012 and 2011~~2013 was ~~driven by~~primarily due to the cost of property retrocessions with limited ceded property loss ~~recoveries, primarily due to the low level of catastrophe losses.~~

~~Sirius Group Results -~~ ~~Nine Months EndedSeptember 30, 2012~~ ~~versus~~ ~~Nine Months EndedSeptember 30, 2011~~

Sirius Group's GAAP combined ratio decreased to 85% for the nine months ended September 30, 2012 from 104% for the nine months ended September 30, 2011. The decrease was primarily due to lower catastrophe losses, offset by 7 points of agriculture losses, primarily as a result of the drought in the Midwestern United States. The combined ratio for the first nine months of 2012 included 2 points ($14 million) of catastrophe losses, mainly due to $7 million of losses from earthquakes in Italy and $3 million of storm losses in the United States, compared to 27 points ($188 million) of catastrophe losses in the first nine months of 2011, primarily composed of $90 million of losses from the Japan earthquake and tsunami, $49 million of losses from New Zealand earthquakes and $25 million of losses from severe weather and tornadoes in the Midwestern United States. The first nine months of 2012 included 2 points of favorable loss reserve development compared to 5 points for the first nine months of 2011.recoveries. For the first ~~nine months~~quarter of 2012, ~~Sirius Group increased asbestos loss reserves by $45 million, which was offset by reductions in casualty and property loss reserves, whereas reductions in the first nine months~~a higher percentage of ~~2011 were primarily attributable to property lines.~~

Sirius Group's gross ~~written premiums increased 5% (8%~~property losses were subject to the retrocessional program, resulting in ~~local currencies) to $994 million~~ceded loss recoveries, which in the first nine months of 2012 from $944 million for the first nine months of 2011, while net written premiums increased 4% (6% in local currencies) to $800 million for the first nine months of 2012 from $768 million in the first nine months of 2011. These increases were primarily from the property and accident and health lines of business partially offset by decreases in the casualty and trade credit lines. Net written premiums for the first nine months of 2012 increased less than gross written premiums due to increased retrocessions on the property and accident and health lines of business. Net earned premiums increased 2% (4% in local currencies) to $699 million for the first nine months of 2012 from $686 million in the first nine months of 2011.

turn lowered Sirius Group's ~~other revenues primarily consisted of $33 million of foreign currency translation gains recorded in the first nine months of 2012 compared to a loss of $16 million in the third quarter of 2011. (See~~ ~~Foreign Currency Translation~~ ~~on page 57). In addition, in the third quarter of 2012, Sirius Group sold its interest in IMG for gain of $15 million.~~

~~Reinsurance protection.~~ ~~Sirius Group's gross combined ratio was lower than the~~ net combined ratio by 5 points for the first nine months of 2012 and 9 points for the first nine months of 2011. The higher net combined ratio for the first nine months of 2012 was primarily due the cost of property retrocessions with limited ceded property loss recoveries, primarily due to the low level of catastrophe losses. The higher net combined ratio for the first nine months of 2011 was primarily due to the Japan and New Zealand earthquake losses, very little of which were ceded under Sirius Group's retrocessional reinsurance coverage, in addition to the cost of the property retrocessions. ratio.

~~Catastrophe Risk Management~~

To manage its aggregate exposure to very large catastrophe events, among other measures Sirius Group has been monitoring the largest net financial impact (“NFI”) that third-party models predict it would suffer in the worst modeled aggregate loss year (i.e., the 10,000-year global annual aggregate probable maximum loss (“PML”)). Sirius Group's NFI at January 31, 2012 was under $750 million. In 2012, Sirius Group started using a new proprietary property underwriting and pricing tool (“GPI”), which consolidates and reports on all its worldwide property exposures. GPI is used to calculate individual and aggregate PMLs by statistical blending of multiple third-party and proprietary models. In October 2012, GPI produced a significantly higher 10,000-year annual aggregate PML than previously estimated, and the resulting NFI increased from $725 million in July 2012 to $950 million. This increase was primarily driven by the variability of the models at the extreme tail and was not due to changes in Sirius' property portfolio, as limited new and renewal property business is written after July. Sirius Group monitors multiple indicators of catastrophe tail risk to measure its financial exposure to such scenarios. Prospectively, Sirius Group will not publish any single indicator of catastrophe tail risk. Sirius Group remains focused on monitoring tail risk in order to manage the potential impact of remote events on Sirius Group's and White Mountains' financial position.HG Global/BAM

~~Other Operations~~

~~A summary of White Mountains’ financial results from its Other Operations segment for the~~ ~~three and nine months endedSeptember 30, 2012~~ ~~and~~ ~~2011~~ ~~follow:~~

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
Millions 2012 2011 2012 2011
Net investment income $ 8.1
$ 4.6
$ 27.4
$ 14.0
Net realized and unrealized investment (losses) gains 41.6
(15.6 ) 42.4
(11.0 )
Other revenue - Hamer and Bri-Mar ⁽¹⁾
8.6
8.0
24.1
18.9
Other revenue — Symetra warrants (3.6 ) (24.7 ) 13.6
(29.3 )
Other revenue (2.5 ) 10.9
(5.5 ) 8.1
Total revenues 52.2
(16.8 ) 102.0
.7
Other underwriting expenses .1
—
.1
—
General and admin expenses - Hamer and Bri-mar ⁽¹⁾
7.4
7.0
21.0
16.7
General and admin expenses - BAM 11.2
—
11.2
—
General and admin expenses 25.5
19.3
69.1
73.0
Interest expense — debt .7
2.2
1.3
2.8
Total expenses 44.9
28.5
102.7
92.5
Pre-tax income (loss) $ 7.3
$ (45.3 ) $ (.7 ) $ (91.8 )

⁽¹⁾~~On December 31, 2011, Tuckerman Fund I was dissolved and all of the net assets of the fund, which consisted of common~~

~~shares of Hamer and Bri-Mar, two small manufacturing companies, were distributed to White Mountains.~~

~~Other Operations Results - Three and~~ ~~Nine Months EndedSeptember 30, 2012~~ ~~versus Three and~~ ~~Nine Months EndedSeptember 30, 2011~~

White Mountains' Other Operations segment reported pre-tax income of $7 million and pre-tax loss of $1 million in the third quarter and first nine months of 2012 compared to $45 million and $92 million of pre-tax loss in the third quarter and first nine months of 2011. The improvement in the third quarter was primarily driven by better investment results and lower mark-to-market losses from the Symetra warrants, partially offset by higher incentive compensation expenses and higher losses from WM Life Re. The improvement in the nine-month period was primarily driven by better investment results and a mark-to-market gain from the Symetra warrants compared to a loss in the 2011 period, partially offset by higher losses from WM Life Re. The increase in net investment income was primarily from the investment of the proceeds from the Esurance Sale in October 2011, partially offset by lower yields. White Mountains' Other Operations segment reported net realized and unrealized investment gains of $42 million in both the third quarter and first nine months of 2012 compared to $16 million and $11 million of losses in the third quarter and first nine months of 2011 (see ~~Investment Returns~~ ~~on page 56).~~

The value of White Mountains' investment in Symetra warrants decreased $4 million in the third quarter of 2012 and increased $14 million in the first nine months of 2012 compared to a decrease of $25 million and $29 million in the third quarter and first nine months of 2011. WM Life Re reported pre-tax losses of $3 million and $14 million in the third quarter and first nine months of 2012 compared to a $1 million pre-tax gain and a $10 million pre-tax loss in the third quarter and first nine months of 2011.

HG Global and BAM. The following table ~~illustrates~~presents the components of pre-tax income included in White Mountains' ~~Other Operations~~HG Global/BAM segment ~~results~~ 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, 2012:~~March 31, 2013:


	Three and Nine Months Ended
	September 30, 2012								Three Months Ended March 31, 2013
Millions	HG Global		BAM			Other Operations			HG Global			BAM			Eliminations			Total
Gross written premiums									$	—		$	2.0		$	—		$	2.0
Net written premiums									$	1.5		$	.5		$	—		$	2.0

Earned insurance and reinsurance premiums									$	—		$	—		$	—		$	—
Net investment income	$	0.1	$	0.6		$	0.7		.3			1.1			—			1.4
Net investment income - surplus note interest	8.3		(8.3		)	—
Net investment income - BAM Surplus Notes									10.1			—			(10.1		)	—
Net realized and unrealized investment gains	0.2		1.0			1.2			(.2		)	(1.1		)	—			(1.3		)
Other revenue									—			.1			—			.1
Total revenues	8.6		(6.7		)	1.9			10.2			.1			(10.1		)	.2
Insurance and reinsurance acquisition expenses									—			.1			—			.1
Other underwriting expenses	—		0.1			0.1			—			.1			—			.1
General and admin expenses - BAM	—		11.2			11.2
General and admin expenses - HG Global	3.8		—			3.8
General and administrative expenses									.3			8.2			—			8.5
Interest expense - BAM surplus notes									—			10.1			(10.1		)	—
Total expenses	3.8		11.3			15.1			.3			18.5			(10.1		)	8.7
Pre-tax income (loss)	$	4.8	$	(18.0	)	$	(13.2	)	$	9.9		$	(18.4	)	$	—		$	(8.5	)

~~For the third quarter of 2012,~~

HG Global reported pre-tax income of $5$10 million in the first quarter of 2013, which was driven by $8$10 million of interest income on the BAM ~~surplus notes, partially offset by startup and operational costs. For the third quarter of 2012,~~Surplus Notes. BAM reported $18 million in pre-tax losses in the first quarter of 2013 that were driven by $8$10 million of interest expense on the BAM ~~surplus notes~~Surplus Notes and ~~startup and operational costs.~~

~~White Mountains is required to consolidate BAM's results in its GAAP financial statements. However, since~~$8 million of operating expenses. Since BAM is a mutual insurance company ~~that is~~ owned by its members, ~~and not White Mountains,~~ BAM's results do not affect White Mountains' adjusted book value per share as they are attributed to ~~noncontrolling~~non-controlling interests.

The following table presents amounts from HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM that are contained within White Mountains’ consolidated balance sheet as of March 31, 2013:



	As of March 31, 2013
Millions	HG Global		BAM			Eliminations			Total
Assets
Fixed maturity investments	$	98.5	$	466.4		$	—		$	564.9
Short-term investments	2.3		4.3			—			6.6
Total investments	100.8		470.7			—			571.5
Cash	.4		9.6			—			10.0
BAM Surplus Notes	503.0		—			(503.0		)	—
Accrued interest receivable on BAM Surplus Notes	28.4		—			(28.4		)	—
Other assets	2.2		4.8			(1.0		)	6.0
Total assets	$	634.8	$	485.1		$	(532.4	)	$	587.5

Liabilities
BAM Surplus Notes⁽¹⁾	$	—	$	503.0		$	(503.0	)	$	—
Accrued interest payable on BAM Surplus Notes⁽²⁾	—		28.4			(28.4		)	—
Preferred dividends payable to White Mountains' subsidiaries⁽³⁾	25.3		—			—			25.3
Preferred dividends payable to noncontrolling interests	.7		—			—			.7
Other liabilities	1.8		7.5			(1.0		)	8.3
Total liabilities	27.8		538.9			(532.4		)	34.3

Equity
White Mountains’ common shareholders’ equity	590.4		—			—			590.4
Non-controlling interests	16.6		(53.8		)	—			(37.2		)
Total equity	607.0		(53.8		)	—			553.2
Total liabilities and equity	$	634.8	$	485.1		$	(532.4	)	$	587.5


⁽¹⁾	Under GAAP, the BAM Surplus Notes are classified as debt by the issuer. Under Statutory accounting, they are classified as Surplus.


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


⁽³⁾	Dividends on HG Global preferred shares payable to White Mountains' subsidiaries are eliminated in White Mountains' consolidated financial statements.

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Other Operations

A summary of White Mountains’ financial results from its Other Operations segment for the three months ended March 31, 2013 and 2012 follows:



	Three Months Ended
	March 31,
Millions	2013			2012
Net investment income	$	4.6		$	10.0
Net realized and unrealized investment gains	35.0			15.1
Other revenue - Hamer and Bri-Mar ⁽¹⁾	—			8.2
Other revenue — Symetra warrants	(3.7		)	11.1
Other revenue	(2.6		)	(6.5		)
Total revenues	33.3			37.9
General and administrative expenses - Hamer and Bri-mar ⁽¹⁾	—			7.2
General and administrative expenses	21.8			16.7
Interest expense — debt	.4			.3
Total expenses	22.2			24.2
Pre-tax income	$	11.1		$	13.7

⁽¹⁾As of October 1, 2012, Hamer and Bri-Mar are no longer consolidated and are accounted for as investments in unconsolidated affiliates.

Other Operations Results - Three Months Ended March 31, 2013 versus Three Months Ended March 31, 2012

White Mountains' Other Operations segment reported pre-tax income of $11 million in the first quarter of 2013 compared to $14 million in the first quarter 2012. Higher net realized and unrealized investment gains were more than offset by a decrease in the value of the Symetra warrants, lower net investment income and higher incentive compensation expenses. White Mountains' Other Operations segment reported net realized and unrealized investment gains of $35 million in first quarter of 2013 compared to $15 million in the first quarter of 2012 (see Investment Returns below). The value of White Mountains' investment in Symetra warrants decreased $4 million in the first quarter of 2013 compared to an increase of $11 million in the first quarter of 2012. Net investment income decreased from $10 million in the first quarter of 2012 to $5 million in the first quarter of 2013, primarily due to a lower invested asset base resulting from the funding of HG Global in July 2012 and share repurchases. The increase in general and administrative expenses in 2013 was primarily related to incentive compensation accruals, which were driven by the 10% increase in White Mountains' share price during the first quarter of 2013. WM Life Re reported losses of $7 million in both the first quarter of 2013 and 2012.

II. Summary of Investment Results

Investment Returns

For purposes of discussing rates of return, all percentages are presented gross of management fees and trading expenses in order to produce a better comparison to benchmark returns, while all dollar amounts are presented net of any management fees and trading expenses. A summary of White Mountains’ consolidated pre-tax investment results for the three ~~and nine~~ months ended~~September 30,~~ March 31, 2013 and 2012 ~~and~~ ~~2011~~ follows:


	Three Months Ended					Nine Months Ended					Three Months Ended
Pre-tax investment results	Sept 30,					Sept 30,					March 31,
Millions	2012		2011			2012		2011			2013			2012
Net investment income	$	37.6	$	42.8		$	119.8	$	138.1		$	28.5		$	41.8
Net realized and unrealized investment gains ⁽¹⁾	72.7		2.9			123.2		36.4			75.2			58.6
Net unrealized foreign currency gains (losses) on investments ⁽²⁾	92.5		(172.2		)	80.6		(52.8		)
Pre-tax investment gains included in discontinued operations	—		(2.6		)	—		13.2
Total GAAP pre-tax investment gains (losses)	$	202.8	$	(129.1	)	$	323.6	$	134.9
Net unrealized foreign currency (losses) gains on investments ⁽²⁾											(3.3		)	56.8
Total GAAP pre-tax investment gains											$	100.4		$	157.2

⁽¹⁾ Includes foreign currency ~~gains (losses)~~losses of ~~$(52.1) , $75.7, $(49.1),~~$9.8 and ~~$37.1.~~$25.1.

⁽²⁾ Amounts recognized through other comprehensive income. Excludes non-investment related foreign currency ~~gains (losses)~~losses of

~~$(51.1) , $90.2, $(45.9),~~ $0.5 and ~~$27.1.~~$33.6.

Gross investment returns and benchmark returns


	Three Months Ended				Nine Months Ended				Three Months Ended
	Sept 30,				Sept 30,				March 31,
	2012		2011		2012		2011		2013	2012
Fixed maturity investments	2.4	%	(0.5	)%	4.4	%	2.7	%	0.0%	1.7%
Short-term investments	0.7	%	(0.2	)%	0.7	%	0.8	%	(0.2)%	0.2%
Total fixed income	2.2	%	(0.5	)%	3.9	%	2.5	%	0.0%	1.5%
Barclay’s U.S. Intermediate Aggregate Index	1.4	%	2.3	%	3.4	%	5.0	%	0.2%	0.7%
Common equity securities	7.7	%	(11.3	)%	9.4	%	(6.7	)%	9.0%	5.1%
Convertible fixed maturity investments	(0.8	)%	(8.5	)%	1.8	%	(6.8	)%	2.2%	5.5%
Other long-term investments	—	%	(0.1	)%	(0.4	)%	6.8	%	2.3%	3.7%
Total equities, convertibles and other long-term investments	5.2	%	(7.8	)%	6.3	%	(2.8	)%	7.1%	4.8%
S&P 500 Index (total return)	6.3	%	(13.9	)%	16.4	%	(8.7	)%	10.6%	12.6%
Total consolidated portfolio	2.8	%	(1.5	)%	4.3	%	1.7	%	1.4%	2.0%

White Mountains’ GAAP pre-tax total return on invested assets was ~~2.8% and 4.3%~~1.4% for the ~~third~~first quarter ~~and~~ ~~first nine months~~ of ~~2012~~,2013, which included ~~0.6% and~~ 0.4% of foreign currency ~~gains,~~losses, compared to ~~a total return of -1.5% and 1.7%~~2.0% for the ~~third~~first quarter ~~and~~ ~~first nine months~~ of ~~2011~~,2012, which included ~~-1.2% and -0.2%~~0.4% of foreign currency ~~losses.~~gains. White Mountains' high-quality, short-duration, fixed income portfolio (a duration of approximately ~~2.4~~2.6 years, including short term investments at ~~September 30, 2012) returned 2.2% (1.5%~~March 31, 2013) was flat for the first quarter of 2013, but was up 0.4% in local ~~currencies) and 3.9% (3.3% in local currencies) for the~~ ~~third quarter~~ ~~and first nine months of~~ ~~2012, which was relatively in line with~~currencies, compared to the Barclays U.S. Intermediate Aggregate return of ~~1.4% and 3.4%~~0.2%. White Mountains' value-oriented equity portfolio, approximately ~~20%~~21% of GAAP invested assets at ~~September 30, 2012~~,March 31, 2013, was up ~~5.2%~~7.1% for the quarter ~~and 6.3% for the first nine months of 2012~~ compared to the S&P 500 Index ~~returns~~return of ~~6.3% and 16.4% for the comparable periods.~~10.6%. The underperformance against the benchmark is attributable to an overweight position in ~~both periods reflect large positions in~~gold mining, an underweight exposure to the consumer discretionary sector and the impact of other long-term investments and convertible fixed maturity ~~investments~~positions (as opposed to common equity securities)~~. It also reflects underweight exposure~~, which tend to lag the index in common equity and convertible securities to the technology, consumer discretionary, and industrial sectors and an overweight position in materials, in particular gold mining stocks, relative to the S&P 500 Index.strong markets. The common equity security portfolio managed by Prospector Partners LLC ("Prospector") was up ~~6.8%~~8.3% in the quarter, ~~outperforming~~underperforming the S&P 500 Index total return of ~~6.3%~~10.6%.

WM Advisors has a sub-advisory agreement with Prospector, a registered investment adviser, under which Prospector manages most of White Mountains’ publicly-traded common equity securities and convertible fixed maturity securities. Total annualized returns for White Mountains’ equity portfolio managed by Prospector compared to the annualized total returns of the S&P 500 Index are as follows:


	Periods ending September 30, 2012									Periods ending March 31, 2013
Annualized returns		1-year		3-years		5-years		7-years			1-year		3-years		5-years		Since Inception⁽¹⁾
Prospector separate accounts		15.6	%	9.5	%	(0.1	)%	4.6	%		11.4	%	9.7	%	2.0	%	7.2	%
S&P 500 Index		30.2	%	13.2	%	1.1	%	4.5	%		14.0	%	12.7	%	5.8	%	5.4	%

⁽¹⁾ Prospector separate annualized total returns since 12/2004.

Investment in Symetra Common Shares

At December 31, 2012, the carrying value of White Mountains' investment in Symetra common shares used in the calculation of adjusted book value per share was $16.58 per Symetra common share. During the first quarter of 2013, White Mountains recorded $9 million in equity in earnings from its investment in Symetra's common shares, which increased the value of the investment in Symetra's common shares used in the calculation of White Mountains' adjusted book value per share to $17.06 per Symetra common share at March 31, 2013. This compares to Symetra's quoted stock price of $13.41 and Symetra's book value per common share excluding unrealized gains and losses from its fixed maturity investment portfolio of $19.40.

Foreign Currency Translation

A summary of the impact of foreign currency translation on White Mountains’ consolidated financial results for the three ~~and nine~~ months ended~~September 30,~~ March 31, 2013 and 2012 ~~and~~ ~~2011~~ follows:

Three Months Ended Nine Months Ended
Sept 30, Sept 30,
Millions 2012 2011 2012 2011
Net unrealized investment (losses) gains — foreign currency $ (44.3 ) $ 74.6
$ (39.6 ) $ 79.0
Net realized investment (losses) gains — foreign currency (7.8 ) 3.7
(9.5 ) (39.3 )
Net realized and unrealized investment (losses) gains — foreign currency (52.1 ) 78.3
(49.1 ) 39.7
Other revenue — foreign currency translation gains (losses) 33.1
(30.4 ) 33.1
(16.0 )
Total foreign currency translation (losses) gains recognized through
net income, pre-tax
(19.0 ) 47.9
(16.0 ) 23.7
Income tax benefit expense (.7 ) (9.9 ) (2.0 ) (5.7 )
Total foreign currency translation (losses) gains recognized through net income after tax (19.7 ) 38.0
(18.0 ) 18.0

Change in foreign currency translation on investments 92.5

(172.2 )
80.6

(52.8 )
Change in foreign currency translation on non-investment net liabilities (51.1 ) 90.2
(45.9 ) 27.1
Total foreign currency translation gains (losses) recognized through other
comprehensive income
41.4
(82.0 ) 34.7
(25.7 )

Total foreign currency gains (losses) recognized through comprehensive income $ 21.7
$ (44.0 ) $ 16.7
$ (7.7 )



	Three Months Ended
	March 31,
Millions	2013			2012
Net realized and unrealized investment losses — foreign currency	$	(9.8	)	$	(25.1	)
Other revenue — foreign currency translation gains	3.3			18.4
Total foreign currency translation losses recognized through net income, pre-tax	(6.5		)	(6.7		)
Income tax benefit	1.6			.9
Total foreign currency translation losses recognized through net income after tax	(4.9		)	(5.8		)

Change in foreign currency translation on investments	(3.3		)	56.8
Change in foreign currency translation on non-investment net liabilities	(.5		)	(33.6		)
Total foreign currency translation (losses) gains recognized through other comprehensive income	(3.8		)	23.2

Total foreign currency (losses) gains recognized through comprehensive income	$	(8.7	)	$	17.4

At ~~September 30, 2012~~,March 31, 2013, White Mountains’ investment portfolio included ~~$1.2~~$1.0 billion in non-U.S. dollar-denominated investments, most of which are held at Sirius International Insurance Corporation ("Sirius International") and are denominated in Swedish kronor or euros. The value of the investments in this portfolio is impacted by changes in the exchange rate between the U.S. dollar and the ~~krona~~kronor and between the U.S. dollar and the euro. During the ~~third~~first quarter of 2013, the U.S. dollar strengthened .4% against the kronor and 3% against the euro. During the first ~~nine months~~quarter of 2012,, the U.S. dollar weakened 5%4% against the ~~kronor. During the~~ ~~third quarter~~kronor and ~~first nine months of 2012, the U.S. dollar weakened 2% and strengthened 1%~~3% against the euro. These currency movements resulted in approximately ~~$40~~$13 million of pre-tax foreign currency investment losses and $32 million of pre-tax foreign currency investment gains ~~for~~in the ~~three~~first quarter of 2013 and ~~nine months ended~~ ~~September 30,~~ 2012, which are recorded as components of net realized and unrealized investment gains and change in foreign currency translation on investments (recognized through other comprehensive income). ~~During the third quarter and first nine months of 2011, the U.S. dollar strengthened 9% and 2% against the kronor. During the~~ ~~third quarter~~ ~~and~~ ~~first nine months of 2011, the U.S dollar strengthened 8% and was flat against the euro. These currency movements resulted in approximately $94 million and $13 million of pre-tax foreign currency investment losses for the~~ ~~three and nine months endedSeptember 30, 2011~~.

Sirius International holds a large portfolio of investments that are denominated in U.S. dollars, but its functional currency is the Swedish kronor. When Sirius International prepares its stand-alone GAAP financial statements, it translates its U.S. dollar-denominated investments to Swedish kronor and recognizes the related foreign currency translation gains or losses through income. When White Mountains consolidates Sirius International, it translates Sirius International’s stand-alone GAAP financial statements to U.S. dollars and recognizes the foreign currency gains or losses arising from this translation, including those associated with Sirius International’s U.S. dollar-denominated investments, through other comprehensive income. Since White Mountains reports its financial statements in U.S. dollars, there is no net effect to adjusted book value per share or to investment returns from foreign currency translation on its U.S. dollar-denominated investments at Sirius International. However, net realized and unrealized investment gains, other revenues and other comprehensive income can be significantly affected during periods of high volatility in the foreign exchange rate between the U.S. dollar and the Swedish kronor.

The amount of foreign currency translation on Sirius International’s U.S. ~~dollar denominated~~dollar-denominated investments recognized as a decrease of other comprehensive income and an increase of net income was $3 million for the first quarter of 2013. The amount of foreign currency translation on Sirius International’s U.S. dollar-denominated investments recognized as an increase of other comprehensive income and a decrease of net income was ~~$39 million and $35~~$23 million for the ~~third~~first quarter ~~and~~ ~~first nine months~~ of ~~2012. The amount~~2012.

Investments by Country of foreign currency translation on Sirius International’s U.S. dollar denominated investments recognized as a decrease of other comprehensive income and an increase of net income was $66 million and $27 million for the ~~third quarter~~ ~~and~~ ~~first nine months of 2011~~.Issue

White Mountains’ investment portfolio consists of debt and equity securities issued in over 30 countries worldwide. The United States represents the country of issue for ~~75%~~78% of White Mountains’ fixed maturity, common equity and convertible fixed maturity investment portfolio. White Mountains has no direct sovereign risk exposure to European peripheral countries Ireland, Greece, Portugal, Spain and Italy (“peripheral countries”). White Mountains’ portfolio includes ~~.3 %~~.7% of total fixed maturity, convertible fixed maturity and common equity investments issued from peripheral countries at ~~September 30, 2012~~.March 31, 2013. However, White Mountains has indirect exposure to peripheral countries through securities issued from non-peripheral countries as the issuers of the securities could have exposure to peripheral countries.

5851

The following tables list White Mountains’ investments in fixed maturities, common equities and convertible fixed maturities at ~~September 30, 2012~~March 31, 2013 categorized as financial or non-financial investments and by country of issue:


	September 30, 2012		March 31, 2013
Millions	Fair value		Fair value
Debt securities issued by corporations:
Non-financial
Australia	$	44.9	$	44.2
Bermuda			26.9
Canada	166.9		164.7
France	56.1		41.7
Greece	—		—
Ireland	—		1.5
Italy	13.8		13.6
Netherlands	80.4		122.1
Portugal	—		—
Spain	8.3		11.2
Sweden	30.3		28.7
United Kingdom	115.9		115.7
United States	1,294.4		1,425.0
Other	64.9		36.0
Total non-financial debt	1,875.9		2,031.3
Financial
Australia	15.8		16.0
Greece	—		—
Ireland	—		—
Italy	—		—
Netherlands	47.6		12.5
Portugal	—		—
Spain	—		—
United Kingdom	17.3		17.9
United States	303.6		313.5
Other	21.1		18.5
Total financial debt	405.4		378.4
Debt securities issued by corporations	2,281.3
Mortgage-backed and asset-backed securities
France	13.0
Total debt securities issued by corporations			2,409.7
Mortgage-backed and asset-backed securities:
Sweden	31.2		22.8
United Kingdom	164.8		4.9
United States	1,838.4		1,679.6
Total mortgage-backed and asset-backed securities	2,047.4		1,707.3
Foreign government, agency and provincial obligations
Foreign government, agency and provincial obligations:
Canada	57.9		48.4
Germany	18.9		25.1
Greece	—		—
France	49.4		48.7
Ireland	—		—
Italy	—		—
Japan	30.9		25.6
New Zealand	50.9		50.3
Portugal	—		—
Spain	—		—
Sweden	246.8		286.8
Other	21.6		21.2
Total foreign government, agency and provincial obligations	476.4		506.1
US Government and agency obligations⁽¹⁾	394.7		435.5
Municipal obligations⁽¹⁾	3.8		5.2
Preferred stocks⁽¹⁾	86.1		87.5
Total fixed maturity investments	$	5,289.7	$	5,151.3

⁽¹⁾All securities were issued in the United States.

5952


	September 30, 2012		March 31, 2013
Millions	Fair value		Fair value
Common equity securities:
Non-financial
Canada	$	54.1	$	26.3
Greece	—		.6
Ireland	8.3		8.3
Italy	—		.5
Japan	14.5		16.5
Portugal	—		.4
South Africa	23.7		13.6
Spain	5.0		3.4
Switzerland	8.7		12.6
United States	539.9		651.8
Other	34.5		19.1
Total non-financial common equity securities	688.7		753.1

Financial
Bermuda	62.1		68.6
United States	251.7		243.9
Other	2.3		7.6
Total financial common equity securities	316.1		320.1
Total common equity securities	$	1,004.8	$	1,073.2

Convertible fixed maturities:
Canada	$	6.4	$	1.3
United Kingdom	13.6		13.1
United States	122.0		81.2
Total convertible fixed maturity investments	$	142.0	$	95.6

~~Investment in Symetra Common Shares~~

White Mountains recorded a GAAP other-than-temporary impairment write-down on its investment in Symetra common shares during the fourth quarter of 2011. As a result, White Mountains carried its investment in Symetra common shares at $15 per share at December 31, 2011, the estimate of its GAAP fair value. During the third quarter and first nine months of 2012, White Mountains recorded $8 million and $25 million in equity in earnings from its investment in Symetra's common shares, which increased the value of the investment in Symetra's common shares used in the calculation of White Mountains' adjusted book value per share to $16.32 per Symetra common share at September 30, 2012, compared to Symetra's quoted stock price of $12.30 and Symetra's book value per common share excluding unrealized gains and losses from its fixed maturity investment portfolio of $18.76.

6053

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 and tax sharing payments received from its insurance and reinsurance operating subsidiaries, capital raising activities, net investment income and proceeds from sales and maturities of investments. The primary uses of cash are expected to be repurchases of the Company’s ~~and OneBeacon Ltd.’s~~ common shares, payments on and repurchases/retirements of its debt obligations, dividend payments to holders of the Company’s common shares, to ~~noncontrolling~~non-controlling interest holders of OneBeacon Ltd.’s common shares and to holders of the SIG Preference Shares, purchases of investments, payments ~~made~~ to tax authorities, contributions to operating subsidiaries and operating expenses.

Operating subsidiary level. The primary sources of cash for White Mountains’ insurance and reinsurance operating subsidiaries are expected to be premium collections, net investment income, proceeds from sales 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, purchases of investments, payments on and repurchases/retirements of its debt obligations, distributions and tax sharing payments made to holding companies and operating expenses.

Both internal and external forces influence White Mountains’ financial condition, results of operations and cash flows. Claim settlements, premium levels and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, sometimes several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains and the settlement of the liability for that loss. The exact timing of the payment of claims and benefits cannot be predicted with certainty. White Mountains’ 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’ cash balances, cash flows from operations, routine sales and maturities of investments and the liquidity provided by the WTM Bank Facility are adequate to meet expected cash requirements for the foreseeable future on both a holding company and insurance and reinsurance operating subsidiary level.

Dividend Capacity

Under the insurance laws of the states and jurisdictions that White Mountains’ insurance and reinsurance operating subsidiaries are domiciled, an insurer is restricted with respect to the timing and the amount of dividends it may pay without prior approval by regulatory authorities. Accordingly, there can be no assurance regarding the amount of such dividends that may be paid by such subsidiaries in the future. Following is a description of the dividend capacity of White Mountains’ insurance and reinsurance operating subsidiaries:

OneBeacon:

Generally, OneBeacon's top tier regulated insurance operating subsidiaries have the ability to pay dividends during any 12-month period without the prior approval of regulatory authorities in an amount set by formula based on the greater of prior year statutory net income or 10% of prior year end statutory surplus, subject to the availability of unassigned funds. OneBeacon Insurance Company (“OBIC”), OneBeacon's primary top tier regulated insurance operating ~~subsidiaries have~~subsidiary, has the ability to pay ~~$103~~$330 million of dividends during 2013 (based on its 2012 statutory net income of $330 million) without prior approval of regulatory authorities, subject to the availability of unassigned funds. The amount of dividends available to be paid by OBIC in any given year is also subject to cash flow and earnings generated by OBIC's business, which now just comprises the runoff business, as well as to dividends received from its subsidiaries, including Atlantic Specialty Insurance Company (“ASIC”). At ~~June 30,~~December 31, 2012, ~~OneBeacon's top tier regulated insurance operating subsidiaries~~OBIC had $0.7 billion of unassigned funds and ~~at December 31, 2011, had~~$0.9 billion of statutory ~~surplus of $1.0 billion.~~ surplus.

During the ~~first nine months~~fourth quarter of 2012, ~~OneBeacon's~~OneBeacon executed various intercompany reinsurance agreements which, along with other internal capital transactions among our insurance operating subsidiaries, resulted in ASIC becoming the lead insurance company for the ongoing specialty business and OBIC becoming the lead insurance company for the runoff business. Notwithstanding these restructuring transactions, OneBeacon continues to manage its statutory capital on a combined basis. Although OBIC remains a top tier regulated insurance operating ~~subsidiaries paid $130 million of dividends~~subsidiary and maintains sufficient statutory capital to ~~their immediate parent, which included~~support the ~~distribution of a regulated insurance subsidiary with a value of $34 million.~~

~~During the first nine months of 2012, OneBeacon's unregulated insurance operating subsidiaries paid $4 million of dividends to their immediate parent. At~~ ~~September 30, 2012, OneBeacon's unregulated insurance operating subsidiaries had $14 million of net unrestricted cash, short-term investments and fixed maturity investments.~~

~~During the first nine months of 2012, OneBeacon Ltd. paid $60 million of regular quarterly dividends to its common shareholders. White Mountains received $45 million of these dividends.~~

At ~~September 30, 2012~~, OneBeacon Ltd. and its intermediate holding companies had $232 million of net unrestricted cash, short-term investments and fixed maturity investments and $67 million of common equity securities and convertible fixed maturity investments outside of its regulated and unregulated insurance operating subsidiaries.

~~Sirius Group:~~

Subject to certain limitations under Swedish law, Sirius International is permitted to transfer all or a portion of its pre-tax income to its Swedish parent companies to minimize taxes (referred to as a group contribution). In 2012, Sirius International intends to transfer approximately $86 million (based on the ~~September 30, 2012~~ ~~SEK to USD exchange rate) of its 2011 pre-tax income to its Swedish parent companies as a group contribution, $73 million of which was transferred during the first nine months of 2012.~~

~~Sirius International has the ability to pay dividends subject to the availability of unrestricted statutory surplus. Historically, Sirius International has allocated~~runoff business, the majority of ~~its pre-tax income, after group contributions to its Swedish parent companies, to~~ the ~~Safety Reserve (see “Safety Reserve” below). At December 31, 2011, Sirius International had $515 million (based on the December 31, 2011 SEK to USD exchange rate) of unrestricted~~group's statutory ~~surplus,~~capital is now included in ASIC, which is ~~available for distribution in 2012. During~~currently a subsidiary of OBIC, to support the ~~first nine months of 2012, Sirius International has paid $12 million in dividends to its immediate parent.~~ongoing specialty business.

~~Sirius America~~ASIC has the ability to pay dividends during any 12-month period without the prior approval of regulatory authorities in an amount set by formula based on the lesser of net investment income, as defined by statute, or 10% of statutory surplus, in both cases as most recently reported to regulatory authorities, subject to the availability of earned surplus. ~~Based upon June 30,~~Given the changes in structure noted above, ASIC will likely require prior approval by regulatory authorities in order to pay dividends until it builds up a historical net investment income stream and earned surplus balance under its new structure. At December 31, 2012, ASIC had negative earned surplus and $0.7 billion of statutory surplus.

During the first quarter of 2013, OneBeacon's top tier regulated insurance operating subsidiaries paid $10 million of dividends to their immediate parent.

During the first quarter of 2013, OneBeacon's unregulated insurance operating subsidiaries paid $4 million of dividends to their immediate parent. At March 31, 2013, OneBeacon's unregulated insurance operating subsidiaries had $16 million of net unrestricted cash, short-term investments and fixed maturity investments.

During the first quarter of 2013, OneBeacon Ltd. paid $20 million of regular quarterly dividends to its common shareholders. White Mountains received $15 million of these dividends.

At March 31, 2013, OneBeacon Ltd. and its intermediate holding companies had $326 million of net unrestricted cash, short-term investments and fixed maturity investments and $37 million of common equity securities and convertible fixed maturity investments outside of its regulated and unregulated insurance operating subsidiaries.

Sirius Group:

Subject to certain limitations under Swedish law, Sirius International is permitted to transfer a portion of its pre-tax income to its Swedish parent companies to minimize taxes (referred to as a group contribution). In 2013, Sirius International currently intends to transfer approximately $110 million (based on the March 31, 2013 SEK to USD exchange rate) of its 2012 pre-tax income to its Swedish parent companies as a group contribution, $8 million of which was transferred during the first quarter of 2013.

Sirius International has the ability to pay dividends subject to the availability of unrestricted statutory surplus. Historically, Sirius International has allocated the majority of its pre-tax income, after group contributions to its Swedish parent companies, to the Safety Reserve (see “Safety Reserve” on page 56). At December 31, 2012, Sirius International had $852 million (based on the December 31, 2012 SEK to USD exchange rate) of unrestricted statutory surplus, which is available for distribution in 2013. The amount of ~~$577~~dividends available to be paid by Sirius International in any given year is also subject to cash flow and earnings generated by Sirius International’s business, as well as to dividends received from its subsidiaries, including Sirius America Insurance Company (“Sirius America”). During the first quarter of 2013, Sirius International distributed $75 million of dividends to its immediate parent, which had been declared and accrued in December 2012. In 2013, Sirius International currently intends to distribute an additional $50 million of dividends to its immediate parent.

Sirius America has the ability to pay ~~$58~~dividends during any twelve-month period without the prior approval of regulatory authorities in an amount set by formula based on the lesser of net investment income, as defined by statute, or 10% of statutory surplus, in both cases as most recently reported to regulatory authorities, subject to the availability of earned surplus. Based upon 2012 statutory net investment income, Sirius America has the ability to pay $15 million of dividends during ~~2012~~2013 without prior approval of regulatory authorities, subject to the availability of earned surplus. At ~~June 30,~~December 31, 2012, Sirius America had ~~$109~~$56 million of earned surplus and $528 million of statutory surplus. Sirius America did not pay any dividends to its immediate parent induring the first ~~nine months~~quarter of 2013.

During the first quarter of 2013, Sirius Group distributed $75 million of dividends to its immediate parent, which had been declared and accrued in December 2012.

At ~~September 30, 2012~~,March 31, 2013, Sirius Group and its intermediate holding companies had ~~$67~~$64 million of net unrestricted cash, short-term investments and fixed maturity investments and ~~$18~~$19 million of other long-term investments outside of its regulated and unregulated insurance and reinsurance operating subsidiaries.

Capital Maintenance

In connection with Sirius Group's reorganization in October 2011, Sirius International and Sirius America entered into a capital maintenance agreement, which obligates Sirius International to make contributions to Sirius America's surplus in order for Sirius America to maintain surplus equal to at least 125% of the company action level risk based capital as defined in the NAIC Property/Casualty Risk-Based Capital Report. The agreement provides for a maximum contribution to Sirius America of $200 million. Sirius International also provides Sirius America with accident year stop loss reinsurance, which protects Sirius America's accident year loss and allocated loss adjustment expense ratio in excess of 70%, with a limit of $110 million.

Safety Reserve

Subject to certain limitations under Swedish law, Sirius International is permitted to transfer pre-tax income amounts into an untaxed reserve referred to as a safety reserve. At ~~September 30, 2012~~,March 31, 2013, Sirius International's safety reserve amounted to SEK 9.6 billion, or $1.5 ~~billion.~~billion (based on the March 31, 2013 SEK to USD exchange rate). Under GAAP, an amount equal to the safety reserve, net of a related deferred tax liability established at the Swedish tax rate of ~~26.3%~~22.0%, is classified as ~~common shareholders'~~shareholder’s equity. Generally, this deferred tax liability is only required to be paid by Sirius International if it fails to maintain prescribed levels of premium writings and loss reserves in future years. As a result of the indefinite deferral of these taxes, Swedish regulatory authorities do not apply any taxes to the safety reserve when calculating solvency capital under Swedish insurance regulations. Accordingly, under local statutory requirements, an amount equal to the deferred tax liability on Sirius International's safety reserve ($~~388~~325 million at ~~September 30, 2012~~)March 31, 2013) is included in solvency capital. Access to the safety reserve is restricted to coverage of ~~insurance~~reinsurance losses. Access for any other purpose requires the approval of Swedish regulatory authorities. Similar to the approach taken by Swedish regulatory authorities, most major rating agencies generally include the $1.5 billion balance of the safety reserve, without any provision for deferred taxes, in Sirius International's capital when assessing Sirius International's financial strength.

HG Global/BAM:

HG Global has $613 million face value of preferred shares outstanding, of which White Mountains owns 97.3%. 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. HG Global did not declare or pay any preferred dividends in 2012 or the first quarter of 2013. As of March 31, 2013, HG Global has accrued $26.0 million of dividends payable to holders of its preferred shares, $25.3 million of which is payable to White Mountains and eliminated in consolidation.

HG Re is a Special Purpose Insurer subject to regulation and supervision by the BMA, but does not require regulatory approval to pay dividends. However, HG Re’s dividend capacity is limited by amounts held in the collateral trusts pursuant to the FLRT with BAM. As of December 31, 2012, HG Re had statutory capital of $412 million, of which $12 million (which partially relates to accrued interest on the BAM Surplus Notes held by HG Re) was available for dividends to HG Global and $400 million was held as collateral in the Supplemental Trust pursuant to the FLRT with BAM.

Interest on the BAM Surplus Notes is payable quarterly at a fixed annual rate of 8.0%. Interest and principal payments are subject to approval of the New York State Department of Financial Services. BAM did not pay any interest on the BAM Surplus Notes in 2012 or the first quarter of 2013. As of March 31, 2013, HG Global has accrued $28 million of interest receivable on the BAM Surplus Notes.

Other Operations:

During the first ~~nine months~~quarter of ~~2012~~ ~~of 2012,~~2013, WM Advisors did not pay any dividends to its immediate parent. At ~~September 30, 2012~~,March 31, 2013, WM Advisors had approximately ~~$21~~$11 million of net unrestricted cash and short-term investments.

At ~~September 30, 2012~~,March 31, 2013, the Company and its intermediate holding companies had ~~$229~~$90 million of net unrestricted cash, short-term investments and fixed maturity investments, ~~$530~~$510 million of common equity securities and ~~$48~~$77 million of other long-term investments included in its Other Operations segment. During the first ~~nine months~~quarter of ~~2012,~~2013, White Mountains paid a $7$6 million common share dividend.

~~Interest on the BAM surplus notes is payable quarterly commencing on December 1, 2012. Interest and principal payments are subject to approval of the New York Department of Insurance.~~

Insurance Float

Insurance float is an important aspect of White Mountains’ insurance operations. Insurance float represents funds that an insurance or reinsurance company holds for a limited time. In an insurance or reinsurance operation, float arises because premiums are collected before losses are paid. This interval can extend over many years. During that time, the insurer or reinsurer invests the funds. When the premiums that an insurer or reinsurer collects do not cover the losses and expenses it eventually must pay, the result is an underwriting loss, which is considered to be the cost of insurance float.

One manner in which White Mountains calculates its insurance float is by taking its net investment assets and subtracting its total adjusted capital. Although insurance float can be calculated using numbers determined under GAAP, insurance float is not a GAAP concept and, therefore, there is no comparable GAAP measure.

Insurance float can increase in a number of ways, including through acquisitions of insurance and reinsurance operations, organic growth in existing insurance and reinsurance operations and recognition of losses that do not cause a corresponding reduction in investment assets. Conversely, insurance float can decrease in a number of other ways, including sales of insurance and reinsurance operations, shrinking or runoff of existing insurance and reinsurance operations, the acquisition of operations that do not have substantial investment assets (e.g., an agency) and the recognition of gains that do not cause a corresponding increase in investment assets. White Mountains has historically obtained its insurance float primarily through acquisitions, as opposed to organic growth. It is White Mountains’ intention to generate low-cost float over time through a combination of acquisitions and organic growth in its existing insurance and reinsurance operations. However, White Mountains will seek to increase its insurance float organically only when market conditions allow for an expectation of generating underwriting profits.

Certain operational leverage metrics can be measured with ratios that are calculated using insurance float. There are many activities that do not change the amount of insurance float at an insurance company but can have a significant impact on the company’s operational leverage metrics. For example, investment gains and losses, foreign currency gains and losses, debt issuances and repurchases/repayments, common and preferred share issuances and repurchases and dividends paid to shareholders are all activities that do not change insurance float but that can meaningfully impact operational leverage metrics.

The following table illustrates White Mountains’ consolidated insurance float position as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~:

2012:


($ in millions)	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012
Total investments	$	7,283.6		$	8,268.0		$	6,972.8		$	7,278.1
BAM total cash and investments							(480.3		)	(488.4		)
BAM Surplus Notes held by HG Global							503.0			503.0
Consolidated limited partnership investments ⁽¹⁾	(84.8		)	(77.2		)	(128.2		)	(91.2		)
Cash	549.2			705.4			411.5			462.4
Investments in unconsolidated affiliates	376.3			275.3			383.6			387.9
Equity in net unrealized gains from Symetra’s fixed maturity portfolio	(64.6		)	—			(54.1		)	(62.8		)
WM Life Re net derivative positions ⁽²⁾	(493.6		)	(551.3		)
Cash and investments posted as collateral by WM Life Re⁽²⁾							(229.8		)	(393.6		)
Net investment assets classified within assets held for sale	377.3			117.3			296.9			338.1
Accounts receivable on unsettled investment sales	167.2			4.7			99.0			3.9
Accounts payable on unsettled investment purchases	(47.7		)	(34.6		)	(25.7		)	(11.4		)
Interest-bearing funds held by ceding companies⁽³⁾	71.4			73.6			80.8			85.1
Interest-bearing funds held under reinsurance treaties ⁽⁴⁾	(14.8		)	(12.7		)	(17.9		)	(17.7		)
Net investment assets	$	8,119.5		$	8,768.5		$	7,811.6		$	7,993.4
Total White Mountains’ common shareholders’ equity	$	3,809.3		$	4,087.7		$	3,758.9		$	3,731.8
Noncontrolling interest—OneBeacon Ltd.	259.7			273.1
Noncontrolling interest— SIG Preference Shares	250.0			250.0
Non-controlling interest—OneBeacon Ltd.							263.5			251.4
Non-controlling interest—SIG Preference Shares							250.0			250.0
Debt	676.6			677.5			676.2			751.2
Total capital ⁽¹⁾	4,995.6			5,288.3			4,948.6			4,984.4
Equity in net unrealized gains from Symetra’s fixed maturity portfolio, net of applicable taxes	(59.3		)	—			(49.7		)	(57.7		)
Total adjusted capital	4,936.3			$	5,288.3		$	4,898.9		$	4,926.7
Insurance float	$	3,183.2		$	3,480.2		$	2,912.7		$	3,066.7
Insurance float as a multiple of total adjusted capital	0.6x			0.7x			0.6x			0.6x
Net investment assets as a multiple of total adjusted capital	1.6x			1.7x			1.6x			1.6x
Insurance float as a multiple of White Mountains’ common shareholders’ equity	0.8x			0.9x			0.8x			0.8x
Net investment assets as a multiple of White Mountains’ common shareholders’ equity	2.1x			2.1x			2.1x			2.1x

⁽¹⁾~~Total capital only includes noncontrolling interests that White Mountains benefits from the return on or has the ability to utilize the net assets supporting this noncontrolling interest.~~

⁽²⁾~~Consists of WM Life Re’s derivative instruments net of variable annuity liabilities and collateral provided to WM Life Re from counterparties.~~

⁽³⁾~~Excludes funds held by ceding companies from which White Mountains does not receive interest credits.~~

⁽⁴⁾~~Excludes funds held by White Mountains under reinsurance treaties for which White Mountains does not provide interest credits.~~


⁽¹⁾	Total capital only includes noncontrolling interests that White Mountains benefits from the return on or has the ability to utilize the net assets supporting this noncontrolling interest.


⁽²⁾	Consists of cash, fixed maturity and short-term investments held by WM Life Re and posted as collateral to its variable annuity reinsurance counterparties.


⁽³⁾	Excludes funds held by ceding companies from which White Mountains does not receive interest credits.


⁽⁴⁾	Excludes funds held by White Mountains under reinsurance treaties for which White Mountains does not provide interest credits.

During the first ~~nine months~~quarter of ~~2012~~,2013, insurance float decreased by ~~$297~~$154 million, primarily due to the ~~AutoOne Sale and the~~ continued runoff of reserves ~~related to the commercial lines business that was exited through a renewal rights sale~~ at OneBeacon ~~the final settlement~~ and ~~commutation of Scandinavian Re’s multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul, as well as commutations~~Sirius America and runoff of Sirius Group's casualty business and payments of losses incurred in 2010 and 2011 related to major catastrophes, primarily from hurricane Sandy and earthquakes in Chile, Japan and New Zealand. These catastrophe losses increased White Mountains’ insurance float when they were first recorded, which is now reversing and decreasing insurance float as the catastrophe losses are paid. ~~These decreases in insurance float were partially offset by an increase in float resulting from~~Based on March 31, 2013 balances, the ~~$101 million in after tax losses recognized at OneBeacon related to the Runoff Transaction. Upon~~ closing of the Runoff Transaction ~~insurance float~~ is expected to decrease insurance float by approximately ~~$375~~$297 million.

6457

Financing

The following table summarizes White Mountains’ capital structure as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012:


($ in millions)	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012
OBH Senior Notes, carrying value	$	269.8		$	269.8
2012 OBH Senior Notes, carrying value							$	274.7		$	274.7
SIG Senior Notes, carrying value	399.4			399.3			399.4			399.4
WTM Bank Facility	—			—			—			75.0
Old Lyme Note	2.1			2.1			2.1			2.1
Other debt⁽¹⁾	5.3			6.3
Total debt	676.6			677.5			676.2			751.2
Noncontrolling interest—OneBeacon Ltd.	259.7			273.1
Noncontrolling interest—SIG Preference Shares	250.0			250.0
Non-controlling interest—OneBeacon Ltd.							263.5			251.4
Non-controlling interest—SIG Preference Shares							250.0			250.0
Total White Mountains’ common shareholders’ equity	3,809.3			4,087.7			3,758.9			3,731.8
Total capital ⁽²⁾	4,995.6			5,288.3
Total capital ⁽¹⁾							4,948.6			4,984.4
Equity in net unrealized gains from Symetra’s fixed maturity portfolio	(59.3		)	—			(49.7		)	(57.7		)
Total adjusted capital	$	4,936.3		$	5,288.3		$	4,898.9		$	4,926.7

Total debt to total adjusted capital	14		%	13		%	14		%	15		%
Total debt and preference shares to total adjusted capital	19		%	18		%	19		%	20		%

Deferred tax on safety reserve ("DTSR")⁽³⁾	$	388.0		$	370.0
Deferred tax on safety reserve (“DTSR”)⁽²⁾							$	325.4		$	327.0

Total debt to total adjusted capital, including DTSR ⁽³⁾	13		%	12		%
Total debt and preference shares to total adjusted capital, including DTSR ⁽³⁾	17		%	16		%
Total debt to total adjusted capital, including DTSR ⁽²⁾							13		%	14		%
Total debt and preference shares to total adjusted capital, including DTSR ⁽²⁾							18		%	19		%

⁽¹⁾~~Other debt relates to White Mountains’ consolidation of Hamer and Bri-Mar~~

⁽²⁾Total capital only includes ~~noncontrolling~~non-controlling interests that White Mountains benefits from the return on or has the ability to utilize the net assets supporting this ~~noncontrolling~~non-controlling interest.

⁽³⁾⁽²⁾The deferred tax liability on the safety reserve at Sirius International is considered regulatory capital in Sweden (See “Safety ~~Reserve”~~Reserve” on page ~~62)~~56) .

Management believes that White Mountains ~~generally~~ has the flexibility and capacity to obtain funds externally as needed 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.

~~The Company’s 2011 Annual Report on Form 10-K contains a full discussion of White Mountains’ debt obligations as of~~ ~~December 31, 2011~~.

White Mountains has a revolving credit facility with a syndicate of lenders administered by Bank of America, N.A. with a total commitment of $375 million (the “WTM Bank Facility”). that has a maturity date of August 12, 2015. As of ~~September 30,~~December 31, 2012,, White Mountains had $75 million outstanding under the WTM Bank Facility, which the Company repaid in January 2013. As of March 31, 2013, the WTM Bank Facility was undrawn.

OneBeacon U.S. Holdings, Inc. ("OBH") has $270 million face value of senior unsecured debt outstanding that carries an interest rate of 5.875% and is scheduled to mature in May 2013 (the "OBH Senior Notes"). OneBeacon anticipates that it will refinance the OBH Senior Notes prior to their maturity.

The WTM Bank Facility contains various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including certain minimum net worth and maximum debt to capitalization standards. Failure to meet one or more of these covenants could result in an event of default, which ultimately could eliminate availability under ~~these facilities~~this facility and result in acceleration of principal repayment on any amounts outstanding. At ~~September 30, 2012~~,March 31, 2013, White Mountains was in compliance with all of the covenants under the WTM Bank Facility and anticipates it will continue to remain in compliance with these covenants for the foreseeable future.

It is possible that, in the future, one or more of the rating agencies may lower White Mountains’ existing ratings. If one or more of its ratings were lowered, White Mountains ~~provides~~could incur higher borrowing costs on future borrowings and its ability to access the capital markets could be impacted. In addition, White Mountains’ insurance and reinsurance operating subsidiaries could be adversely impacted by a lowering of their financial strength ratings, including a possible reduction in demand for their products in certain markets.

In November 2012, OneBeacon U.S. Holdings, Inc. (“OBH”) issued $275 million face value of senior unsecured debt (the “2012 OBH Senior Notes”) through a public offering, at an ~~irrevocable~~issue price of 99.9%. The net proceeds from the issuance of the 2012 OBH Senior Notes were used to repurchase OBH's previously issued Senior Notes. The 2012 OBH Senior Notes, which are fully and ~~unconditional guarantee~~unconditionally guaranteed as to the payment of principal and interest on the OBH Senior Notes. In consideration of this guarantee OneBeacon pays White Mountains a guarantee fee equal to 25 basis points per annum on the outstanding principal amount of the OBH Senior Notes. If White Mountains’ voting interest inby OneBeacon Ltd.~~’s common shares ceases to represent more than 50%~~, bear an annual interest rate of ~~all their voting securities, OneBeacon Ltd. will seek to redeem, exchange or otherwise modify the senior notes~~4.60%, payable semi-annually in ~~order to fully~~arrears on May 9 and permanently eliminate White Mountains’ obligations under the guarantee. In the event that White Mountains’ guarantee is not eliminated, the guarantee fee will increase over time up to a maximum guarantee fee of 425 basis points.November 9, until maturity on November 9, 2022.

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The 2012 OBH Senior Notes and the SIG Senior Notes were issued under indentures that contain restrictive covenants which, among other things, limit the ability of ~~the Company,~~OneBeacon, Ltd., OBH, SIG and their respective subsidiaries to create liens and enter into sale and leaseback transactions and limits the ability of ~~the Company,~~OneBeacon, Ltd., OBH, SIG and their respective subsidiaries to consolidate, merge or transfer their properties and assets. The indentures do not contain any financial ratios or specified levels of net worth or liquidity to which ~~the Company,~~OneBeacon, Ltd., OBH or SIG must adhere. At ~~September 30, 2012~~March 31, 2013, OneBeacon, Ltd., ~~White Mountains was~~OBH and SIG were in compliance with all of the covenants under the 2012 OBH Senior Notes and the SIG Senior Notes, and anticipates it will continue to remain in compliance with these covenants for the foreseeable future.

Share Repurchases

~~In 2006,~~During the past several years, White Mountains' board of directors has authorized the Company to repurchase ~~up to 1 million of~~ its common shares, from time to time, subject to market conditions. ~~On August 26, 2010,~~The repurchase authorizations do not have a stated expiration date. At March 31, 2013, White ~~Mountains' board of directors authorized the Company to~~Mountains may repurchase an additional ~~600,000 of~~545,496 shares under these board authorizations. In addition, from time to time White Mountains has also repurchased its common ~~shares. On May 25, 2012, White Mountains'~~shares through tender offers that were separately approved by its board of directors authorized the Company to repurchase an additional 1,000,000 of its common shares. Shares may be repurchased on the open market or through privately negotiated transactions. The repurchase authorization does not obligate the Company to acquire any specific number of shares, nor is there a stated expiration date.directors.

During the ~~third~~first quarter of ~~2012,~~2013, White Mountains repurchased ~~50,000~~a total of 140,224 of its common shares ~~under this authorization~~ for ~~$26~~$79 million at an average share price of ~~$528. White Mountains did not repurchase any of its common shares under this authorization during the third quarter of 2011. During the~~ ~~first nine months of 2012, White Mountains repurchased 217,801 of its common shares under this authorization for $108 million at an average share price of $494. During the~~ ~~first nine months of 2011, White Mountains repurchased 265,579 of its common shares under its share repurchase program for $93 million at an average share price of $351. Since the inception of this authorization through~~ ~~September 30, 2012, the Company repurchased 1,629,504 common shares for $645 million at an average share price of $396. At~~ ~~September 30, 2012, White Mountains may repurchase an additional 970,496 shares under this authorization.~~

In addition to the shares repurchased under the share repurchase authorization referred to above, during the first quarter of 2012, White Mountains completed a fixed-price self-tender offer, through which it repurchased 816,829 of its common shares at a price of $500 per share. The total cost of the share repurchases was $409 million, including fees and expenses related to the tender offer. White Mountains also completed two “modified Dutch auction” self-tender offers during the second half of 2011 and repurchased 332,346 of its common shares at an average price of $418 per share. The total cost of the share repurchases was $139 million, including fees and expenses related to these tender offers.

Including shares repurchased through its self-tender offer and shares repurchased under its share repurchase authorization, White Mountains repurchased a total of 1,034,630 of its common shares during the ~~first nine months of 2012~~ ~~for $516 million at an average share price of $499,~~$564, which was ~~87%~~93% of White Mountains' adjusted book value per share of ~~$574~~$606 at ~~September 30, 2012~~.March 31, 2013. These repurchases were comprised of (1) 140,000 common shares repurchased in a private transaction under the board authorization for $79 million at an average share price of $564; and (2) 224 common shares repurchased pursuant to employee benefit plans. Shares repurchased pursuant to employee benefit plans do not fall under the board authorization referred to above.

Cash Flows

Detailed information concerning White Mountains’ cash flows during ~~nine~~the three months ended~~September 30,~~ March 31, 2013 and 2012 ~~and~~ ~~2011~~ follows:

Cash flows from operations for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012

Net cash flows ~~from~~used for continuing operations was ~~a use of $128~~$(184) million ~~and a source of $41 million in the~~ ~~first nine months of 2012~~ and ~~2011~~$(272) million, in the first quarter of 2013 and the first quarter of 2012, respectively. The ~~decrease in~~net use of cash ~~flows from~~for continuing operations in ~~the~~ ~~first nine months of 2012~~ ~~was~~both periods is primarily from the continued runoff of reserves as a result of the Commercial Lines Transaction at OneBeacon, the final settlement and commutation of Scandinavian Re’s multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul, as well as commutations and runoff of Sirius Group's casualty business anddue to payments made on losses related to major catastrophes in 2010 and 2011, primarily from earthquakes in Chile, Japan and New ~~Zealand.~~ Zealand, as well as commutations and runoff of Sirius Group's casualty business. The first quarter of 2013 also included payments made on losses related to hurricane Sandy, while the first quarter of 2012 also included the final settlement and commutation of Scandinavian Re's multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul. Net cash flows used for discontinued operations was $(41) million and $(61) million in the first quarter of 2013 and 2012, respectively. The cash outflows from discontinued operations in 2013 and 2012 were primarily due to the runoff of reserves related to non-specialty commercial lines businesses that OneBeacon has exited since 2010.

White Mountains does not believe that these trends will have a meaningful impact on its future liquidity or its ability to

meet its future cash requirements.

Cash flows from investing and financing activities for the three months endedMarch 31, 2013

Financing and Other Capital Activities

During the first quarter of 2013, the Company declared and paid a $6 million cash dividend to its common shareholders.

During the first quarter of 2013, the Company repurchased and retired 140,224 of its common shares for $79 million.

During the first quarter of 2013, White Mountains repaid the $75 million that was outstanding under the WTM Credit Facility at December 31, 2012. White Mountains also borrowed and repaid an additional $80 million under the WTM Credit Facility during the quarter.

During the first quarter of 2013, OneBeacon Ltd. declared and paid $20 million of cash dividends to its common shareholders. White Mountains received a total of $15 million of these dividends.

During the first quarter of 2013, Sirius Group paid a $75 million cash dividends to its immediate parent. This dividend had been declared and accrued in December 2012.

During the first quarter of 2013, Sirius Group paid $13 million of interest on the SIG Senior Notes.

During the first quarter of 2013, White Mountains contributed $20 million to WM Life Re.

Acquisitions and Dispositions

During the first quarter of 2013, White Mountains Solutions closed on the acquisition of American Fuji Fire and Marine Insurance Company, a small runoff subsidiary of American International Group, for a purchase price of $10 million.

During the first quarter of 2013, OneBeacon completed the sale of a Essentia and received $31 million as consideration.

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Cash flows from investing and financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2012

Financing and Other Capital Activities

During the first ~~nine months~~quarter of 2012,~~, the Company declared and paid a $7 million cash dividend to its common shareholders.~~

~~During the~~ ~~first nine months of 2012~~, the Company repurchased and retired ~~1,037,191~~974,458 of its common shares for ~~$518 million, which included 2,561 common shares repurchased under employee benefit plans for $1~~$484 million.

During the first ~~nine months~~quarter of 2012,, OneBeacon Ltd. declared and paid ~~$60~~$20 million of cash dividends to its common shareholders. White Mountains received a total of ~~$45~~$15 million of these dividends.

During the first ~~nine months~~quarter of 2012,~~, OneBeacon paid a total of $8 million of interest on the OBH Senior Notes.~~

~~During the~~ ~~first nine months of 2012~~, Sirius Group paid ~~$26~~$13 million of interest on the SIG Senior ~~Notes and $9 million of dividends on the SIG Preference Shares.~~

~~During the~~ ~~first nine months of 2012, Sirius Group declared and paid $25 million of cash dividends to its immediate parent.~~

~~During the~~ ~~first nine months of 2012, White Mountains contributed $20 million to WM Life Re.~~

~~Acquisitions and Dispositions~~

In July 2012, HG Global was capitalized with $609 million of cash, $595 million of which was contributed by subsidiaries of White Mountains. Subsequently in July 2012, HG Global purchased $503 million of surplus notes from BAM for cash and contributed $100 million in cash to HG Re.

~~Cash flows from investing and financing activities for the~~ ~~nine months endedSeptember 30, 2011~~

~~Financing and Other Capital Activities~~Notes.

During the first quarter of ~~2011, the Company declared and paid an $8 million cash dividend to its common shareholders.~~

~~During the first nine months of 2011, the Company repurchased and retired 593,640 of its common shares for $230 million.~~

During the first nine months of 2011, OneBeacon Ltd. declared and paid $155 million of cash dividends to its common shareholders, including $60 million of regular quarterly dividends and a $95 million special dividend. White Mountains received a total of $117 million of these dividends.

~~During the first nine months of 2011, OBH repurchased and retired a portion of the outstanding OBH Senior Notes for $162 million.~~

~~During the first nine months of 2011, OneBeacon paid a total of $13 million of interest on the OBH Senior Notes.~~

~~During the first nine months of 2011, Sirius Group declared and paid $85 million of cash dividends to its immediate parent.~~

~~During the first nine months of 2011, Sirius Group paid $26 million of interest on the SIG Senior Notes and $9 million of dividends on the SIG Preference Shares.~~

~~During the first nine months of 2011,~~2012, White Mountains contributed $10 million to WM Life Re.

FAIR VALUE CONSIDERATIONS

White Mountains ~~measures~~records certain ~~financial instruments~~assets and liabilities at fair value in its consolidated financial statements, with changes therein recognized in earnings. In addition, White Mountains ~~discloses estimated fair value for~~records certain liabilities ~~measured~~ at historical or amortized ~~cost.~~cost and discloses the estimated fair value of these liabilities in the notes to the consolidated financial statements. 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; derivative instruments, both exchange traded and over the counter instruments; and reinsurance assumed liabilities associated with variable annuity benefit guarantees. 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 prices and other observable inputs. Where appropriate, assets and liabilities measured at fair value have been adjusted for the effect of counterparty credit risk.

White Mountains’ invested assets that are measured at fair value include fixed maturity securities, common and preferred equity securities, convertible fixed maturity securities and interests in hedge funds and private equity funds.

Where available, the estimated fair value of investments is based upon quoted prices in active markets. In circumstances where quoted prices are unavailable, White Mountains uses fair value estimates based upon other observable inputs including matrix pricing, benchmark interest rates, market comparables, and other relevant inputs. Where observable inputs are not available, the estimated fair value is based upon internal pricing models using assumptions that include inputs that may not be observable in the marketplace but which reflect management’s best judgment given the circumstances and consistent with what other market participants would use when pricing such instruments.

As of ~~September 30, 2012~~March 31, 2013, approximately 95% of the investment portfolio recorded at fair value was priced based upon quoted market prices or other observable inputs. Investments valued using Level 1 inputs include fixed maturities, primarily investments in U.S. Treasuries, common equities and short-term investments, which include U.S. Treasury Bills. Investments valued using Level 2 inputs comprise fixed maturities including corporate debt, state and other governmental debt, convertible fixed maturity securities and mortgage and asset-backed securities. Fair value estimates for investments that trade infrequently and have few or no observable market prices are classified as Level 3 measurements. Level 3 fair value estimates based upon unobservable inputs include White Mountains’ investments in hedge funds and private equity funds, as well as investments in certain debt securities, including asset-backed securities, where quoted market prices are unavailable. White Mountains uses brokers and outside pricing services to assist in determining fair values. For investments in active markets, White Mountains uses the quoted market prices provided by outside pricing services to determine fair value. The outside pricing services used by White Mountains have indicated that if no observable inputs are available for a security, they will not provide a price.

In those circumstances, White Mountains estimates the fair value using industry standard pricing models and observable inputs such as benchmark interest rates, matrix pricing, market comparables, broker quotes, issuer spreads, bids, offers, credit rating prepayment speeds and other relevant inputs. White Mountains performs procedures to validate the market prices obtained from the outside pricing sources. Such procedures, which cover substantially all of its fixed maturity investments include, but are not limited to, evaluation of model pricing methodologies and review of the pricing services’ quality control processes and procedures on at least an annual basis, comparison of market prices to prices obtained from a different independent pricing vendors on at least a semi-annual basis, monthly analytical reviews of certain prices, and review of assumptions utilized by the pricing service for selected measurements on an ad hoc basis throughout the year. White Mountains also performs back-testing of selected sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price on an ad-hoc basis throughout the year. Prices provided by the pricing services that vary by more than 5% and $1 million from the expected price based on these procedures are considered outliers. In circumstances where the results of White Mountains’ review process do not appear to support the market price provided by the pricing services, White Mountains challenges the price. The fair values of such securities are considered to be Level 3 measurements.

~~WM Life Re~~Variable Annuity Reinsurance Liabilities

White Mountains has entered into agreements to reinsure death and living benefit guarantees associated with certain variable annuities in Japan. White Mountains carries the benefit guarantees at fair value. The fair value of the guarantees is estimated using actuarial and capital market assumptions related to the projected discounted cash flows over the term of the reinsurance agreement. The valuation uses assumptions about surrenders rates, market volatilities and other factors, and includes a risk margin which represents the additional compensation a market participant would require to assume the risks related to the business. The selection of surrender rates, market volatility assumptions, risk margins and other factors require the use of significant management judgment. Assumptions regarding future policyholder behavior, including surrender and lapse rates, are generally unobservable inputs and significantly impact the fair value estimate. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates as well as variations in actuarial assumptions regarding policyholder behavior may result in significant fluctuations in the fair value of the liabilities associated with these guarantees that could materially affect results of operations. All of White Mountains’ variable annuity reinsurance liabilities ($~~672~~252 million) were classified as Level 3 measurements at ~~September 30, 2012~~. March 31, 2013.

WM Life Re projects future surrender rates by year for policies based on a combination of actual experience and expected policyholder behavior. Actual policyholder behavior, either individually or collectively, may differ from projected behavior as a result of a number of factors such as the level of the account value versus guarantee value and applicable surrender charge, views of the primary insurance company’s financial strength and ability to pay the guarantee at maturity, annuitants’ need for money in a prolonged recession and time remaining to receive the guarantee at maturity. Policyholder behavior is especially difficult to predict given that the types of contracts reinsured by WM Life Re are relatively new to the Japanese market and the recent financial turmoil is unprecedented for this type of product in the Japanese market. Actual policyholder behavior may differ materially from WM Life Re’s projections.

As of ~~September 30, 2012~~,March 31, 2013, WM Life Re’s annual surrender assumptions vary from 0.1% currently to 3.0% depending on the level of account value versus guarantee value; at the current levels of account value, the weighted average is approximately ~~0.4%~~0.6% per annum. The potential increase in the fair value of the liability due to a change in current actuarial assumptions is as follows:


	Increase in fair value of liability		Increase in fair value of liability
Millions	September 30, 2012	December 31, 2011	March 31, 2013		December 31, 2012
Decrease 50%	$3	$5	$	2	$	3
Decrease 100% (to zero surrenders)	$6	$10	$	4	$	5

The amounts in the table above could increase in the future if the fair value of the variable annuity guarantee liability changes due to factors other than the surrender assumptions (e.g., a decline in the ratio of the annuitants’ aggregate account values to their aggregate guarantee values).

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NON-GAAP FINANCIAL MEASURES

This report includes three non-GAAP financial measures that have been reconciled to their most comparable GAAP financial measures. White Mountains believes these measures to be more relevant than comparable GAAP measures in evaluating White Mountains’ results of operations and financial condition.

Adjusted comprehensive income is a non-GAAP financial measure that excludes the change in equity in net unrealized gains and losses from Symetra’s fixed maturity portfolio, net of applicable taxes, from comprehensive income. In the calculation of comprehensive income under GAAP, fixed maturity investments are marked-to-market while the liabilities to which those assets are matched are not. Symetra attempts to earn a “spread” between what it earns on its investments and what it pays out on its products. In order to try to fix this spread, Symetra invests in a manner that tries to match the duration and cash flows of its investments with the required cash outflows associated with its life insurance and structured settlements products. As a result, Symetra typically earns the same spread on in-force business whether interest rates fall or rise. Further, at any given time, some of Symetra’s structured settlement obligations may extend 40 or 50 years into the future, which is further out than the longest maturing fixed maturity investments regularly available for purchase in the market (typically 30 years). For these long-dated products, Symetra is unable to fully match the obligation with assets until the remaining expected payout schedule comes within the duration of securities available in the market. If at that time, these fixed maturity investments have yields that are lower than the yields expected when the structured settlement product was originally priced, the spread for the product will shrink and Symetra will ultimately harvest lower returns for its shareholders. GAAP comprehensive income increases when rates decline, which would suggest an increase in the value of Symetra - the opposite of what is happening to the intrinsic value of the business. Therefore, White Mountains’ management and Board of Directors use adjusted comprehensive income when assessing Symetra’s quarterly financial performance. In addition, this measure is typically the predominant component of change in adjusted book value per share, which is used in calculation of White Mountains’ performance for both short-term (annual bonus) and long-term incentive plans. The reconciliation of adjusted comprehensive income to comprehensive income is included on page ~~47.~~43.

Adjusted book value per share is a non-GAAP measure which is derived by expanding the GAAP calculation of book value per White Mountains common share to exclude equity in net unrealized gains and losses from Symetra’s fixed maturity portfolio, net of applicable taxes. In addition, the number of common shares outstanding used in the calculation of adjusted book value per share are adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. The reconciliation of adjusted book value per share to GAAP book value per share is included on page ~~46.~~42.

Total capital at White Mountains is comprised of White Mountains’ common shareholders’ equity, debt and ~~noncontrolling~~non-controlling interest in OneBeacon Ltd and the SIG Preference Shares. Total adjusted capital excludes the equity in net unrealized gains and losses from Symetra’s fixed maturity portfolio, net of applicable taxes from total capital. The reconciliation of total capital to total adjusted capital is included on page ~~64.~~57.

CRITICAL ACCOUNTING ESTIMATES

Refer to the Company’s ~~2011~~2012 Annual Report on Form 10-K for a complete discussion regarding White Mountains’ critical accounting estimates.

FORWARD-LOOKING STATEMENTS

The information contained in 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 “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:

changes in adjusted book value per share or return on equity;

business strategy;

financial and operating targets or plans;

incurred losses and the adequacy of its loss and LAE reserves and related reinsurance;

projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;

expansion and growth of its business and operations; and

future capital expenditures.

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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 with its expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:

the risks associated with Item 1A of White Mountains’ ~~2011~~2012 Annual Report on Form ~~10-K and~~ ~~Risk Factors~~ on

~~page 72;~~10-K;

claims arising from catastrophic events, such as hurricanes, earthquakes, floods or terrorist attacks;

the continued availability of capital and financing;

general economic, market or business conditions;

business opportunities (or lack thereof) that may be presented to it and pursued;

competitive forces, including the conduct of other property and casualty insurers and reinsurers;

changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its clients;

an economic downturn or other economic conditions adversely affecting its financial position;

recorded loss reserves subsequently proving to have been inadequate;

actions taken by ratings agencies from time to time, such as financial strength or credit ratings downgrades or placing ratings on negative watch; and

other factors, most of which are beyond White Mountains’ 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 update publicly 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’ ~~2011~~2012 Annual Report on Form 10-K and in particular Item 7A. - “Quantitative and Qualitative Disclosures About Market Risk”. As of ~~September 30, 2012~~March 31, 2013, there were no material changes in the market risks as described in White Mountains’ most recent Annual Report.


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’ disclosure controls and procedures are adequate and 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, 2012~~March 31, 2013.


Part II.	OTHER INFORMATION


Item 1.	Legal Proceedings.

Refer to White Mountains’ ~~2011~~2012 Annual Report on Form 10-K and in particular Item 3. - “Legal Proceedings”. As of ~~September 30, 2012~~March 31, 2013, other than what is described below, there were no material changes in the legal proceedings as described in White Mountains’ most recent Annual Report.

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Esurance Sale

In 2011, the Company sold its Esurance and Answer Financial businesses (the ~~"Transferred Companies"~~“Transferred Companies”) to The Allstate Corporation ~~("Allstate"~~(“Allstate”) for a purchase price of approximately $1.01 billion. The purchase price consisted of $700 million plus the tangible book value of the Transferred Companies at the closing, which was estimated to be $308 million. Following closing, Allstate was required to prepare a final closing statement, including an audited balance sheet for the Transferred Companies as of the closing date. The Company believes this final closing statement was required to be prepared and audited no later than January 5, 2012. Allstate did not deliver the final closing statement to the Company until June 6, 2012, with an audit report dated June 1, 2012. The Company is disputing Allstate's calculation of tangible book value in the closing statement. The amount in dispute is approximately $20 ~~million, after tax.~~million. The dispute principally relates to (i) the elimination of $25 million (pre-tax) of deferred acquisition costs ($16 million, after tax) and (ii) the inclusion of a liability equal to the costs associated with an Esurance extra-contractual (“ECO”) matter settled in April 2012 of $5 million ($3 million, after tax). Per the agreement governing the sale of the Transferred Companies (the “Sale Agreement”), disputes over the closing statement are to be arbitrated by an independent accountant.

The Company believes this final closing statement was required to be prepared and audited no later than January 5, 2012. Allstate did not deliver the final closing statement to the Company until June 6, 2012, with an audit report dated June 1, 2012. As a result, in addition to the substantive disputes over the final closing statement, the Company also believes that Allstate's failure to have the final closing statement prepared and audited by the required date ~~constitutes~~constituted a breach of Allstate's obligations under the ~~agreement governing the sale of the Transferred Companies.~~Sale Agreement. The Company ~~has~~ brought suit in the United States District Court for the Southern District of New York in connection with such breach. The court concluded that the Company’s breach claim should also be arbitrated by the independent accountant under the Sale Agreement. That process is expected to be completed in the fourth quarter of 2013.

Tribune Company

In June 2011, Deutsche Bank Trust Company Americas, Law Debenture Company of New York and Wilmington Trust Company (collectively referred to as ~~"Plaintiffs"~~“Plaintiffs”), in their capacity as trustees for certain senior notes issued by the Tribune Company ~~("Tribune"~~(“Tribune”), filed lawsuits in various jurisdictions (the “Noteholder Actions”) against numerous defendants including OneBeacon, OBIC-sponsored benefit plans and other affiliates of White Mountains in their capacity as former shareholders of Tribune seeking recovery of the proceeds from the sale of common stock of Tribune in connection with Tribune's leveraged buyout in 2007 (the ~~"LBO"~~“LBO”). Tribune filed for bankruptcy in 2008 in the Delaware bankruptcy court (the ~~"Bankruptcy Court"~~“Bankruptcy Court”). The Bankruptcy Court granted Plaintiffs permission to commence these LBO-related actions. Plaintiffs seek recovery of the proceeds received by the former Tribune shareholders on a theory of constructive fraudulent transfer asserting that Tribune purchased or repurchased its common shares without receiving fair consideration at a time when it was, or as a result of the purchases of shares, was rendered, insolvent. OneBeacon has entered into a joint defense agreement with other affiliates of White Mountains that are defendants in the action. ~~OneBeacon and OBIC-sponsored benefit plans~~Certain subsidiaries of White Mountains received approximately ~~$32~~$39 million for Tribune common stock tendered in connection with the LBO.

Ace American Insurance Company

A subsidiary of the OneBeacon, OneBeacon U.S. Holdings, Inc. ~~("OBH"~~(“OBH”), was sued in Federal Court in the Eastern District of Pennsylvania on August 17, 2012 by Ace American Insurance Company ~~("Ace"~~(“Ace”). The complaint ~~alleges~~alleged that OBH, through a professional recruiting firm, improperly hired a group of Ace employees from Ace's surety division. The complaint ~~seeks~~sought injunctive relief and unspecified ~~damages. Upon motions of both parties, the court ordered~~damages. After court-ordered expedited discovery ~~which has been completed. OBH's response~~was completed, the claims for injunctive relief were resolved pursuant to ~~Ace's motion~~a confidential agreement. After the claims against OBH for ~~preliminary injunction~~injunctive relief were resolved, Ace filed a Demand for Arbitration against five of the former Ace surety employees hired by OneBeacon, alleging breach of their duty of loyalty to Ace and misappropriation of Ace trade secrets. On March 6, 2013, Ace also filed an Amended Complaint in the Federal Court action, naming OneBeacon Insurance Group, Ltd., OneBeacon Insurance Group, LLC and OneBeacon Services, LLC as additional defendants. The only remaining claim is ~~due at the end of October.~~for damages and trial is scheduled for June 2013. OneBeacon believes that Ace's ~~motion is~~damages claim against all of the OneBeacon companies and the claims against the individual employees are without merit and intends to vigorously defend both claims. OneBeacon does not expect the ~~lawsuit.~~resolution of this lawsuit to result in a material change to its financial position.


Item 1A.	Risk Factors.

~~Other than what is described below, there~~There have been no material changes to any of the risk factors previously disclosed the Registrant’s ~~2011~~2012 Annual Report on Form ~~10-K or in the Registrant's March 31, 2012 Quarterly Report on Form 10-Q.~~10-K.

~~We may not maintain favorable financial strength or creditworthiness ratings which could adversely affect our ability to conduct business.~~

Third-party rating agencies assess and rate the financial strength, including claims‑paying ability, of insurers and reinsurers. These ratings are based upon criteria established by the rating agencies and are subject to revision at any time at the sole discretion of the agencies. Some of the criteria relate to general economic conditions and other circumstances outside the rated company's control. These financial strength ratings are used by policyholders, agents and brokers as an important means of assessing the suitability of insurers and reinsurers as business counterparties and have become an increasingly important factor in establishing the competitive position of insurance and reinsurance companies. These financial strength ratings do not refer to our ability to meet non-insurance obligations and are not a recommendation to purchase or discontinue any policy or contract issued by us or to buy, hold or sell our securities. The maintenance of an “A-” or better financial strength rating from A.M. Best and/or Standard & Poor's is particularly important to our ability to write new or renewal business in most markets. General creditworthiness ratings are used by existing or potential investors to assess the likelihood of repayment on a particular debt issue. The maintenance of an investment grade creditworthiness rating (e.g., “BBB-” or better from Standard & Poor's and “Baa3” or better from Moody's) is particularly important to our ability to raise new debt with acceptable terms. We believe that strong creditworthiness ratings are important factors that provide better financial flexibility when issuing new debt or restructuring existing debt.

Rating agencies periodically evaluate us to confirm that we continue to meet the criteria of the ratings previously assigned to us. The current financial strength ratings for OneBeacon's operating subsidiaries which are not being transferred as part of the Runoff Transaction (“Ongoing Subsidiaries”) are "A" (Excellent, third highest of fifteen ratings) by A. M. Best, "A-" (Strong, seventh highest of twenty-one ratings) by Standard & Poor's, "A2" (Good, sixth highest of twenty-one ratings) by Moody's and "A" (Strong, sixth highest of twenty-one ratings) by Fitch. The current financial strength ratings for Sirius Group's principal reinsurance operating subsidiaries are "A" (Excellent, third highest of fifteen ratings) by A. M. Best, "A-" (Strong, seventh highest of twenty-one ratings) by Standard & Poor's, "A3" (Good, seventh highest of twenty-one ratings) by Moody's and "A" (Strong, sixth highest of twenty-one ratings) by Fitch. OneBeacon's Ongoing Subsidiaries and Sirius Group's principal reinsurance operating subsidiaries currently have a "Stable" outlook from each of A.M. Best, Standard & Poor's, Fitch and Moody's. A downgrade, withdrawal or negative watch/outlook of our financial strength ratings could severely limit or prevent our insurance and reinsurance operating subsidiaries from writing new insurance or reinsurance policies or renewing existing policies, which could have a material adverse effect on our results of operations and financial condition. A downgrade, withdrawal or negative watch/outlook of our creditworthiness ratings could limit our ability to raise new debt or could make new debt more costly and/or have more restrictive conditions. See “~~Brokers, agents or policyholders may react negatively to the announcement of the Runoff Transaction.~~”~~in this Section 1A of this Form 10-Q~~

~~There is no certainty that the Runoff Transaction will close.~~

Consummation of the sale of the OneBeacon's Runoff Business pursuant to the Stock Purchase Agreement is subject to conditions, such as regulatory approval, that are outside of the control of the parties. There can be no assurance as to whether or when such conditions may be satisfied and a closing would occur.

~~Brokers, agents or policyholders may react negatively to the announcement of the Runoff Transaction.~~

Following OneBeacon's announcement of the Runoff Transaction, A.M. Best, Fitch, Moody's and Standard & Poor's each issued a press release regarding the ratings implications. A.M. Best placed the subsidiaries being sold in the Runoff Transaction (the "Runoff Subsidiaries") under review with negative implications; Fitch placed the Runoff Subsidiaries on credit watch negative; and Mood's assigned a negative outlook. Standard & Poor's downgraded and subsequently, at the request of OneBeacon, withdrew its rating on the Runoff Subsidiaries. All four rating agencies affirmed the ratings on the Ongoing Subsidiaries with stable outlook. The Runoff Subsidiaries have been underwriting specialty policies, and they will continue to do so up until the closing of the Runoff Transaction and for a limited time following the closing through a fronting and reinsurance agreement with Armour. It is possible that certain brokers, agents or policyholders dealing with specialty policies underwritten by the Runoff Subsidiaries could determine that the Runoff Subsidiaries no longer meet their placement standards and could cease placing business with the Runoff Subsidiaries. While OneBeacon believes that the Runoff Subsidiaries' financial strength is robust notwithstanding the Runoff Transaction, it intends to take various steps to provide assurances to the Runoff Subsidiaries' brokers, agents and policyholders. However, there is no assurance that the Runoff Subsidiaries will be successful in continuing to underwrite the specialty business on an interim basis, which may have an adverse impact on OneBeacon.


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 Plan (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plan (1)	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan ⁽¹⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plan ⁽¹⁾
July 1- 30, 2012	50,000	$	528.45	50,000	970,496
March 1 - March 31, 2013						140,224	$	563.57	140,000	545,496

Total	50,000	$	528.45	50,000	970,496	140,224	$	563.57	140,000	545,496

⁽¹⁾On November 17, 2006, White Mountains’ board of directors authorized the Company to repurchase up to 1 million of its common shares, from time to time, subject to market conditions. On August 26, 2010 and May 25, 2012, White Mountains’ board of directors authorized the Company to repurchase up to an additional 600,000 and 1,000,000, respectively, common shares, for a total authorization of 2.6 million shares. Shares may be repurchased on the open market or through privately negotiated transactions. The repurchase authorization does not have a stated expiration.


Item 3.	Defaults Upon Senior Securities.

None.


Item 4.	Mine Safety Disclosures

None.


Item 5.	Other Information.

None.


Item 6.	Exhibits.



(a)	Exhibits
	11	—	Statement Re Computation of Per Share Earnings. **
	~~10.1~~	—	Stock Purchase Agreement by and among the OneBeacon Insurance Group Ltd., OneBeacon Insurance Group LLC, Trebuchet and Armour Group Holdings Limited dated as of October 18, 2012. *
	~~10.2~~	—	Regulation 114 Trust Agreement by and among Build America Mutual Assurance Company, HG Re Ltd. and The Bank of New York Mellon, dated as of July 20, 2012. *
	~~10.3~~	—	~~Supplemental Trust Agreement by and among Build America Mutual Assurance Company, HGR Patton (Luxembourg) S.à r.l., United States of America Branch,~~and The Bank of New York Mellon, dated as of July 20, 2012. *
	~~10.4~~	—	Surplus Note Purchase Agreement between Build America Mutual Assurance Company, as Issuer and HG Holdings Ltd. and HG Re Ltd. as Purchasers dated as of July 17, 2012. *
	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. *
	101.1	—	The following financial information from White Mountains’ Quarterly Report on Form 10Q for the quarter ended ~~September 30, 2012~~March 31, 2013 formatted in XBRL: (i) Consolidated Balance Sheets, ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011;~~2012; (ii) Consolidated Statements of Operations and Comprehensive Income, Three Months Ended March 31, 2013 and ~~Nine Months Ended September 30, 2012 and 2011;~~2012; (iii) Consolidated Statements of Changes in Equity, ~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 and ~~2011;~~2012; (iv) Consolidated Statements of Cash Flows, ~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 and ~~2011;~~2012; and (v) Notes to Consolidated Financial Statements.*



*	Included herein
**	Not included as an exhibit as the information is contained elsewhere within this report. See Note 910 of the Notes to Consolidated Financial Statements.

7565

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:	~~October 30, 2012~~April 29, 2013		By: /s/ J. Brian Palmer
			J. Brian Palmer
			Vice President and Chief Accounting Officer

7666



	Three Months Ended									Nine Months Ended
	September 30, 2011									September 30, 2011
Millions	Net unrealized gains (losses)			Net foreign exchange gains (losses)			Total changes in fair value reflected in earnings			Net unrealized gains (losses)			Net foreign exchange gains (losses)			Total changes in fair value reflected in earnings
Fixed maturity investments	$	3.5		$	67.5		$	71.0		$	12.6		$	77.7		$	90.3
Short-term investments	(.1		)	(.4		)	(.5		)	(.1		)	(1.4		)	(1.5		)
Common equity securities	(101.0		)	(.9		)	(101.9		)	(95.1		)	(1.8		)	(96.9		)
Convertible fixed maturity investments	(11.2		)	—			(11.2		)	(19.3		)	—			(19.3		)
Other long-term investments	(1.2		)	8.4			7.2			(8.4		)	4.5			(3.9		)
Net unrealized investment (losses) gains, pre-tax	(110.0		)	74.6			(35.4		)	(110.3		)	79.0			(31.3		)
Income tax benefit (expense) attributable to net unrealized investment gains (losses)	26.4			(19.5		)	6.9			28.5			(20.5		)	8.0
Net unrealized investment (losses) gains, after tax	$	(83.6	)	$	55.1		$	(28.5	)	$	(81.8	)	$	58.5		$	(23.3	)



	Nine Months Ended September 30, 2012
	Variable Annuity (Liabilities)			Derivative Instruments
Millions	Level 3			Level 3 ⁽¹⁾			Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total ⁽⁴⁾
Beginning of period	$	(768.5	)	$	247.1		$	39.2		$	4.1		$	290.4
Purchases	—			6.1			—			—			6.1
Realized and unrealized gains (losses)	96.1			(24.1		)	(71.8		)	(26.1		)	(122.0		)
Transfers in	—			—			—			—			—
Sales/settlements	—			(16.1		)	65.8			17.9			67.6
End of period	$	(672.4	)	$	213.0		$	33.2		$	(4.1	)	$	242.1



	Three Months Ended September 30, 2011
	Variable Annuity (Liabilities)			Derivative Instruments
Millions	Level 3			Level 3 ⁽¹⁾		Level 2 ⁽¹⁾⁽²⁾			Level 1 ⁽³⁾			Total ⁽⁴⁾
Beginning of period	$	(591.3	)	$	232.7	$	48.2		$	(11.9	)	$	269.0
Purchases	—			—		—			—			—
Realized and unrealized (losses) gains	(170.0		)	45.6		75.7			27.6			148.9
Transfers in	—			—		—			—			—
Sales/settlements	—			—		(48.4		)	(15.7		)	(64.1		)
End of period	$	(761.3	)	$	278.3	$	75.5		$	—		$	353.8



	September 30, 2012
($ in Millions) Description	Fair Value		Valuation Technique(s)	Unobservable Input	Range					Weighted��Average
Variable annuity benefit guarantee liabilities	$	672.4	Discounted cash flows	Surrenders	0.1	%	-	3.0	%	0.4	%
				Mortality	0.0	%	-	6.4	%	0.9	%
				Foreign exchange volatilities	10.8	%	-	17.4	%	12.8	%
				Index volatilities	13.1	%	-	23.9	%	19.5	%

Foreign exchange and equity index options	$	213.0	Black-Scholes option pricing model	Expected equity dividends	1.9	%	-	5.2	%	3.1	%
			Black-Scholes option pricing model	Foreign exchange volatilities	10.8	%	-	17.4	%	12.8	%
				Index volatilities	13.1	%	-	23.9	%	19.5	%



Millions, except share amounts	Target WTM Phantom Performance Shares Outstanding		Accrued Expense
Performance cycle:
2010 – 2012	4,990		$	2.7
2011 – 2013 ⁽¹⁾	—		—
2012 – 2014 ⁽¹⁾	—		—
Sub-total	4,990		2.7
Assumed forfeitures	(125	)	(.1		)
Total at September 30, 2012	4,865		$	2.6