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WHITE MOUNTAINS INSURANCE GROUP LTD

WHITE MOUNTAINS INSURANCE GROUP LTDWTMEarnings & Financial Report

NYSE · Financials · Fire, Marine & Casualty Insurance

White Mountains Insurance Group is a diversified insurance and related financial services holding company based in Hamilton, Bermuda. Redomiciled from Delaware, United States, on October 25, 1999, the company conducts most of its business through its insurance subsidiaries and other affiliates.

What changed in WHITE MOUNTAINS INSURANCE GROUP LTD's 10-K — 2022 vs 2023

Top changes in WHITE MOUNTAINS INSURANCE GROUP LTD's 2023 10-K

654 paragraphs added · 598 removed · 510 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

156 edited+32 added−22 removed157 unchanged
Reinsurance Protection As part of its enterprise risk management function, Ark purchases reinsurance for risk mitigation purposes. Ark utilizes reinsurance and retrocession agreements to reduce earnings volatility, protect capital, limit its exposure to risk concentration and accumulation of loss and to manage within its overall internal risk tolerances or those set and agreed by regulators, ratings agencies, and Lloyd’s.
Reinsurance Protection As part of its enterprise risk management function, Ark purchases reinsurance for risk mitigation purposes. Ark utilizes reinsurance and retrocession agreements to reduce earnings volatility, protect capital, limit its exposure to risk concentration and accumulation of loss and manage within its overall internal risk tolerances or those set and agreed by regulators, ratings agencies and Lloyd’s.
(“WTM Holdings Seller”), an indirect wholly owned subsidiary of White Mountains, completed the previously announced sale of White Mountains Catskill Holdings, Inc. and NSM Insurance HoldCo, LLC (“NSM” and, collectively with White Mountains Catskill Holdings, Inc., the “NSM Group”) to Riser Merger Sub, Inc., an affiliate of The Carlyle Group Inc.
(“WTM Holdings Seller”), an indirect wholly-owned subsidiary of White Mountains, completed the previously announced sale of White Mountains Catskill Holdings, Inc. and NSM Insurance HoldCo, LLC (“NSM”) (collectively with White Mountains Catskill Holdings, Inc., the “NSM Group”) to Riser Merger Sub, Inc., an affiliate of The Carlyle Group Inc.
The New York Insurance Law also establishes aggregate risk limits on the basis of total outstanding principal and interest of guaranteed obligations insured net of qualifying reinsurance and collateral (the “Aggregate Net Liability”), compared to the sum of the insurer’s policyholders’ surplus and contingency reserves.
New York Insurance Law also establishes aggregate risk limits on the basis of total outstanding principal and interest of guaranteed obligations insured net of qualifying reinsurance and collateral (the “Aggregate Net Liability”), compared to the sum of the insurer’s policyholders’ surplus and contingency reserves.
Contingency Reserves The New York Insurance Law and the insurance laws of other non-domiciliary states in which BAM is licensed require BAM to maintain a contingency reserve. The contingency reserve is established to protect policyholders against the effect of adverse economic developments or other unforeseen circumstances.
Contingency Reserves New York Insurance Law and the insurance laws of other non-domiciliary states in which BAM is licensed require BAM to maintain a contingency reserve. The contingency reserve is established to protect policyholders against the effect of adverse economic developments or other unforeseen circumstances.
Cybersecurity NYDFS’s cybersecurity regulation (“Part 500”) requires financial services institutions, including BAM, to establish and maintain a cybersecurity program designed to protect consumers’ private data and the confidentiality, integrity and availability of the institution’s information systems.
Cybersecurity The NYDFS’s cybersecurity regulation (“Part 500”) requires financial services institutions, including BAM, to establish and maintain a cybersecurity program designed to protect consumers’ private data and the confidentiality, integrity and availability of the institution’s information systems.
In addition, Ark also has loss exposures to other global natural catastrophe events including, but not limited to, Japanese earthquakes, Japanese windstorms, European windstorms, and U.S. wildfires. 12 Ark’s estimates of potential losses are dependent on many variables, including assumptions about storm intensity, storm surge, and loss amplification, loss adjustment expenses and insurance-to-value in the aftermath of weather-related catastrophes.
In addition, Ark also has loss exposures to other global natural catastrophe events including, but not limited to, Japanese earthquakes, Japanese windstorms, European windstorms, and U.S. wildfires. Ark’s estimates of potential losses are dependent on many variables, including assumptions about storm intensity, storm surge, and loss amplification, loss adjustment expenses and insurance-to-value in the aftermath of weather-related catastrophes.
The GDPR permits regulators to impose fines of up to €20 million or 4% of global annual revenue, whichever is higher, and establishes a private right of action. The GDPR was transposed into U.K. domestic law in January 2021 following the United Kingdom's exit from the EU (“U.K. GDPR”) and supplements the United Kingdom's Data Protection Act of 2018.
The GDPR permits regulators to impose fines of up to €20 million or 4% of global annual revenue, whichever is higher, and establishes a private right of action. The GDPR was transposed into U.K. domestic law in January 2021 following the U.K.'s exit from the EU (“U.K. GDPR”) and supplements the United Kingdom's Data Protection Act of 2018. The U.K.
The required amount of Funds at Lloyd’s is determined by Lloyd’s based on each syndicate’s solvency and capital requirement as calculated through its internal model. 23 Intervention Powers The Lloyd’s Council has wide discretionary powers to regulate Members’ underwriting at Lloyd’s. It may, for instance, withdraw a Member’s permission to underwrite business or to underwrite a particular class of business.
The required amount of Funds at Lloyd’s is determined by Lloyd’s based on each syndicate’s solvency and capital requirement as calculated through its internal model. Intervention Powers The Lloyd’s Council has wide discretionary powers to regulate Members’ underwriting at Lloyd’s. It may, for instance, withdraw a Member’s permission to underwrite business or to underwrite a particular class of business.
BAM reports on a statutory accounting basis to the New York State Department of Financial Services (“NYDFS”) and does not report stand-alone GAAP financial results. HG Global was established to fund the startup of BAM and, through HG Re, to provide up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM.
BAM reports on a statutory accounting basis to the New York State Department of Financial Services (“NYDFS”) and does not report stand-alone GAAP financial results. 1 HG Global was established to fund the startup of BAM and, through HG Re, to provide up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM.
Political and Credit Political and credit insurance primarily covers risks relating to the confiscation, expropriation, nationalization and deprivation of insured assets due to war, political, or government action as well as contract frustration and non-payment by obligors. Cyber Cyber insurance primarily covers the physical damage and liabilities arising from cyber-attacks, including coverage for ransomware, loss of data and third-party liabilities.
Political and Credit Political and credit insurance primarily covers risks relating to the confiscation, expropriation, nationalization and deprivation of insured assets due to war, political, or government action as well as contract frustration and non-payment by obligors. 10 Cyber Cyber insurance primarily covers the physical damage and liabilities arising from cyber attacks, including coverage for ransomware, loss of data and third-party liabilities.
Ark actively monitors price adequacy at various points between individual risks and the portfolio level to measure and evaluate overall performance. In addition, Ark updates rates to achieve targeted returns on capital at an individual risk as well as portfolio level to enhance return on capital. 11 Competition Specialized lines of insurance and reinsurance are highly competitive.
Ark actively monitors price adequacy at various points between individual risks and the portfolio level to measure and evaluate overall performance. In addition, Ark updates rates to achieve targeted returns on capital at an individual risk as well as portfolio level to enhance return on capital. Competition Specialized lines of insurance and reinsurance are highly competitive.
In addition, the Companies Act regulates return of capital, reduction of capital and any purchase or redemption of shares by the Company. The Economic Substance Act 2018, as amended (“ESA”) impacts every Bermuda registered entity engaged in a “relevant activity,” requiring impacted entities to maintain a substantial economic presence in Bermuda and to satisfy economic substance requirements.
In addition, the Companies Act regulates return of capital, reduction of capital and any purchase or redemption of shares by the Company. 23 The Economic Substance Act 2018, as amended (“ESA”) impacts every Bermuda registered entity engaged in a “relevant activity,” requiring impacted entities to maintain a substantial economic presence in Bermuda and to satisfy economic substance requirements.
Treaty reinsurance is an agreement whereby the reinsurer assumes a specified portion or category of risk under all qualifying policies issued by the ceding company during the term of the agreement, usually one year. When underwriting treaty reinsurance, the reinsurer does not evaluate each individual risk and generally accepts the original underwriting decisions made by the ceding company.
Treaty reinsurance is an agreement whereby the reinsurer assumes a specified portion or category of risk under all qualifying policies issued by the ceding company during the term of the agreement, usually one year. When underwriting treaty reinsurance business, the reinsurer does not evaluate each individual risk and generally accepts the original underwriting decisions made by the ceding company.
As of December 31, 2022, White Mountains owned 16.9 million shares, representing a 27.1% basic ownership interest (25.1% on a fully-diluted/fully-converted basis). At the December 31, 2022 closing price of $9.95 per share, the fair value of White Mountains’s investment in MediaAlpha was $169 million.
As of December 31, 2022, White Mountains owned 16.9 million MediaAlpha shares, representing a 27.1% ownership interest (25.1% on a fully-diluted/fully-converted basis). At the December 31, 2022 closing price of $9.95 per share, the fair value of White Mountains’s investment in MediaAlpha was $169 million.
Ark competes with insurance and reinsurance companies who operate in the Bermuda and Lloyd’s markets such as: • Bermuda insurance and reinsurance market: American International Group, Inc. (“AIG”), Arch Capital Group Ltd., Aspen Insurance Holdings Ltd., Everest Re Group, RenaissanceRe Holdings Ltd. and others; • Lloyd’s market: MS Amlin Ltd, Lancashire Holdings Ltd, Beazley plc, Hiscox plc, and other syndicates.
Ark competes with insurance and reinsurance companies who operate in the Bermuda and Lloyd’s markets such as: • Bermuda insurance and reinsurance market: American International Group, Inc., Arch Capital Group Ltd., Aspen Insurance Holdings Ltd., Everest Re Group, RenaissanceRe Holdings Ltd. and others; • Lloyd’s market: MS Amlin Ltd, Lancashire Holdings Ltd, Beazley plc, Hiscox plc, and other syndicates.
Ark incorporates the physical risk of climate change in its underwriting process through sensitivity and stress testing of its catastrophe models, including increased frequency of U.S. windstorms and the implications of storm surge. Ark licenses third-party global property catastrophe models from Risk Management Solutions Inc.
Ark incorporates the physical risk of climate change in its underwriting process through sensitivity and stress testing of its catastrophe models, including increased frequency of U.S. windstorms and the implications of storm surge. 13 Ark licenses third-party global property catastrophe models from Risk Management Solutions Inc.
In the United Kingdom, Ark participates in the Lloyd’s of London (“Lloyd’s”) market through Ark Corporate Member Limited (“ACML”), Ark’s wholly-owned Lloyd’s corporate member, which in turn provides underwriting capacity to Lloyd’s Syndicates 4020 and 3902 (the “Syndicates”). Ark Syndicate Management Limited (“ASML”) is Ark’s wholly-owned Lloyd’s managing agent, oversees the underwriting of the Syndicates.
In the United Kingdom, Ark participates in the Lloyd’s of London (“Lloyd’s”) market through Ark Corporate Member Limited (“ACML”), Ark’s wholly-owned Lloyd’s corporate member, which in turn provides underwriting capacity to Lloyd’s Syndicates 4020 and 3902 (the “Syndicates”). Ark Syndicate Management Limited (“ASML”), Ark’s wholly-owned Lloyd’s managing agent, oversees the underwriting of the Syndicates.
“AA” is the third highest of 23 financial strength ratings assigned by Standard & Poor’s. 1 BAM charges an insurance premium on each municipal bond insurance policy it underwrites. A portion of the premium is a member’s surplus contribution (“MSC”) and the remainder is a risk premium.
“AA” is the third highest of 23 financial strength ratings assigned by Standard & Poor’s. BAM charges an insurance premium on each municipal bond insurance policy it underwrites. A portion of the premium is a member’s surplus contribution (“MSC”) and the remainder is a risk premium.
Catastrophe Risk Management and Reinsurance Protection Catastrophe Risk Management Ark has exposure to losses caused by unpredictable catastrophic events including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, and severe winter weather all over the world.
Catastrophe Risk Management and Reinsurance Protection Catastrophe Risk Management Ark Ark has exposure to losses caused by unpredictable catastrophic events all over the world including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, and severe weather.
The SAC Act stipulates its own solvency test for the declaration of dividends and distributions for segregated accounts, which takes into account the solvency of each segregated account individually, rather than the solvency of the company itself. 19 Classification GAIL is registered as a Class 4 insurer.
The SAC Act stipulates its own solvency test for the declaration of dividends and distributions for segregated accounts, which takes into account the solvency of each segregated account individually, rather than the solvency of the company itself. Classification GAIL is registered as a Class 4 insurer.
The BMA may cancel an insurer’s registration on certain grounds specified in the Insurance Act. 21 Notification of Cyber Reporting Events Every insurer subject to the Insurance Act is required to notify the BMA where the insurer has reason to believe that a Cyber Reporting Event has occurred.
The BMA may cancel an insurer’s registration on certain grounds specified in the Insurance Act. Notification of Cyber Reporting Events Every insurer subject to the Insurance Act is required to notify the BMA where the insurer has reason to believe that a Cyber Reporting Event has occurred.
As special purpose insurers, HG Re and Outrigger Re Ltd. are not subject to this requirement. 20 Minimum Liquidity Ratio The Insurance Act provides a minimum liquidity ratio for general business insurers such as GAIL.
As special purpose insurers, HG Re and Outrigger Re Ltd. are not subject to this requirement. Minimum Liquidity Ratio The Insurance Act provides a minimum liquidity ratio for general business insurers such as GAIL.
Increases in the value and concentration of insured property or insured employees, the effects of inflation and changes in weather patterns could increase the future frequency and/or severity of claims from catastrophic events.
Increases in the value and concentration of insured property, the effects of inflation and changes in weather patterns could increase the future frequency and/or severity of claims from catastrophic events.
Reinsurance companies often enter into retrocessional reinsurance agreements for many of the reasons that ceding companies enter into reinsurance agreements. 7 Reinsurance is generally written on a treaty or facultative basis.
Reinsurance companies often enter into retrocessional reinsurance agreements for many of the reasons that ceding companies enter into reinsurance agreements. Reinsurance is generally written on a treaty or facultative basis.
See Note 6 — “Third-party Reinsurance” on page F- 43 for a discussion of Ark’s top reinsurers. Loss and LAE Reserves Ark establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred, including both reported and unreported claims.
See Note 6 — “Third-party Reinsurance” on page F- 45 for a discussion of Ark’s top reinsurers. Ark’s Loss and LAE Reserves Ark establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred, including both reported and unreported claims.
Political risk scenarios can include confiscation, expropriation, nationalization and deprivation of assets, non-payment of obligations, political violence and war derived from geo-political instability, country overthrow and commodity price movement. Ark estimates its largest net after-tax loss from non-natural/man-made loss scenarios to be approximately 15% of total tangible capital.
Political risk scenarios can include confiscation, expropriation, nationalization and deprivation of assets, non-payment of obligations, political violence and war derived from geo-political instability, country overthrow and commodity price movement. Ark estimates its largest net after-tax loss from non-natural/man-made loss scenarios to be approximately 12% of total tangible capital.
Once the placement of Ark’s 2023 outwards reinsurance program is completed, White Mountains expects its consolidated net after-tax exposure for a 1-in-250 year event to each of these PML zones will be roughly 10% of White Mountains’s common shareholders’ equity as of December 31, 2022.
Once the placement of Ark’s 2024 outwards reinsurance program is completed, White Mountains expects its consolidated net after-tax exposure for a 1-in-250 year event to each of these PML zones will be roughly 10% of White Mountains’s common shareholders’ equity as of December 31, 2023.
As of December 31, 2022, White Mountains conducted its business primarily in four areas: municipal bond insurance, property and casualty insurance and reinsurance, capital solutions for asset and wealth management firms and other operations. White Mountains’s municipal bond insurance business is conducted through its subsidiary HG Global Ltd. and its reinsurance subsidiary HG Re Ltd. (“HG Re”), (collectively, “HG Global”).
As of December 31, 2023, White Mountains conducted its business primarily in four areas: municipal bond insurance, property and casualty insurance and reinsurance, capital solutions for asset and wealth management firms and other operations. White Mountains’s municipal bond insurance business is conducted through its subsidiary HG Global Ltd. and its reinsurance subsidiary HG Re Ltd. (“HG Re”) (collectively, “HG Global”).
HG Global was established to fund the startup of and provide reinsurance, through HG Re, to Build America Mutual Assurance Company (“BAM”), a mutual municipal bond insurance company (collectively, “HG Global/BAM”). White Mountains’s property and casualty insurance and reinsurance business is conducted through its subsidiary Ark Insurance Holdings Limited and its subsidiaries (collectively, “Ark”).
HG Global was established to fund the startup of and provide reinsurance, through HG Re, to Build America Mutual Assurance Company (“BAM”), a mutual municipal bond insurance company (collectively, “HG Global/BAM”). White Mountains’s property and casualty insurance and reinsurance business is conducted through its subsidiary Ark Insurance Holdings Limited and its subsidiaries (collectively, “Ark”) and Outrigger Re Ltd.
Ark’s two largest natural catastrophe PML zones on a per occurrence basis for a 1-in-250 year event as of January 2023, as measured on a net after-tax exposure basis, are U.S. windstorm and U.S. earthquake. The net after-tax exposure is net of amounts ceded to reinsurers and reinstatement premiums.
Ark’s two largest natural catastrophe PML zones on a per occurrence basis for a 1-in-250 year event as of January 2024, as measured on a net after-tax exposure basis, are U.S. windstorm and U.S. earthquake. The net after-tax exposure is net of amounts ceded to reinsurers and reinstatement premiums.
Cyber loss can be derived from a number of scenarios that include major data security breach on large multinational organizations, business blackout from cyber-attack on power generation and distribution facilities, malicious attack on cloud service provider data center and ransomware contagion across both individual and multiple corporations.
Cyber losses can be derived from a number of scenarios that include major data security breach on large multinational organizations, business blackout from cyber attack on power generation and distribution facilities, malicious attack on cloud service provider data center and ransomware contagion across both individual and multiple corporations.
These models rely on several factors depending on the class of business, including exposure analysis, historical experience, estimates of future loss costs, claims experience and natural catastrophe outlook, including the physical risk of climate change and inflation. See “Ark — Catastrophe Risk Management and Reinsurance Protection ” on page 12 .
These models rely on several factors depending on the class of business, including exposure analysis, historical experience, estimates of future loss costs, claims experience and natural catastrophe outlook, including the physical risk of climate change and inflation. See “Ark — Catastrophe Risk Management and Reinsurance Protection ” on page 13 .
These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to the solvency requirements under the Companies Act 1981 of Bermuda, as amended (the “Companies Act”). See “LIQUIDITY AND CAPITAL RESOURCES — Dividend Capacity” on page 63 for further discussion.
These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to the solvency requirements under the Companies Act 1981 of Bermuda, as amended (the “Companies Act”). See “LIQUIDITY AND CAPITAL RESOURCES — Dividend Capacity” on page 67 for further discussion.
In the future, management rollover shareholders could earn additional shares in Ark if and to the extent that White Mountains achieves certain multiple of invested capital return thresholds. If fully earned, these additional shares would represent 12.5% of the shares outstanding at closing.
In the future, management rollover shareholders could earn additional shares in Ark if and to the extent that White Mountains achieves certain thresholds for its multiple of invested capital return. If fully earned, these additional shares would represent 12.5% of the shares outstanding at closing.
Upon issuance of the preference shares, Outrigger Re Ltd. entered into collateralized quota share agreements with GAIL to provide reinsurance protection on Ark’s Bermuda global property catastrophe excess of loss portfolio written in calendar year 2023.
Upon issuance of the preference shares, Outrigger Re Ltd. entered into collateralized quota share agreements with GAIL to provide reinsurance protection on Ark’s Bermuda global property catastrophe excess of loss portfolio written in the 2023 underwriting year.
Federal Regulation Although the federal government does not directly regulate the insurance business, federal legislation and administrative policies impact the industry. In addition, legislation has been introduced that, if enacted, could result in the federal government assuming a more direct role in the regulation of the insurance industry.
Federal Regulation Although the federal government does not directly regulate insurance businesses, federal legislation and administrative policies impact the industry. In addition, legislation has been introduced that, if enacted, could result in the federal government assuming a more direct role in the regulation of the insurance industry.
Throughout the unique challenges since 2020, White Mountains commitment to the health and safety of its employees and their families has been a guiding priority. To support its employees during this time, White Mountains expanded and encouraged remote work, introduced protocols and practices that emphasized employee well-being, regularly solicited feedback from its employees and significantly increased senior leadership communication. 25
Throughout the unique challenges since 2020, White Mountains’s commitment to the health and safety of its employees and their families has been a guiding priority. To support its employees during this time, White Mountains expanded and encouraged remote work, introduced protocols and practices that emphasized employee well-being, regularly solicited feedback from its employees and significantly increased senior leadership communication. 26
MediaAlpha MediaAlpha is a marketing technology company. It operates a transparent and efficient customer acquisition technology platform that facilitates real-time transactions between buyers and sellers of consumer referrals (i.e., clicks, calls and leads), primarily in the property & casualty, health and life insurance verticals. MediaAlpha generates revenue by earning a fee for each consumer referral sold on its platform.
It operates a transparent and efficient customer acquisition technology platform that facilitates real-time transactions between buyers and sellers of consumer referrals (i.e., clicks, calls and leads), primarily in the property & casualty, health and life insurance verticals. MediaAlpha generates revenue by earning a fee for each consumer referral sold on its platform.
BAM is domiciled in New York and is owned by and operated for the benefit of its policyholders, the municipalities that purchase BAM’s insurance for their debt issuances. Generally accepted accounting principles in the United States (“GAAP”) require White Mountains to consolidate BAM’s results in its financial statements, which are attributed to non-controlling interests.
BAM is domiciled in New York and is owned by and operated for the benefit of its policyholders, the municipalities that purchase BAM’s insurance for their debt issuances. Generally accepted accounting principles in the United States (“GAAP”) require White Mountains to consolidate BAM’s results in its financial statements, which are attributed to noncontrolling interests.
The 2022 BSCR must be filed with the BMA before April 30, 2023; at this time, we believe GAIL will exceed the minimum amount required to be maintained under Bermuda law.
The 2023 BSCR must be filed with the BMA before April 30, 2024; at this time, we believe GAIL will exceed the minimum amount required to be maintained under Bermuda law.
The governance structures for both PassportCard and DavidShield were designed to give White Mountains and its co-investor equal power to make the decisions that most significantly impact operations. White Mountains’s non-controlling equity interest in PassportCard/DavidShield is accounted for at fair value within other long-term investments.
The governance structures for both PassportCard and DavidShield were designed to give White Mountains and its co-investor equal power to make the decisions that most significantly impact operations. White Mountains’s noncontrolling equity interest in PassportCard/DavidShield is accounted for at fair value within other long-term investments.
During the fourth quarter of 2022, White Mountains agreed to invest an additional $100 million into ILS funds managed by Elementum beginning in 2023. White Mountains pre-funded $70 million of this investment as of December 31, 2022, which has been recorded as a receivable within other assets.
During the fourth quarter of 2022, White Mountains agreed to invest an additional $100 million into ILS funds managed by Elementum beginning in 2023. White Mountains pre-funded $70 million of this investment as of December 31, 2022, which was recorded as a receivable within other assets.
The Chief Risk Officer reports to the Ark Board on climate change matters on a quarterly basis. 24 General Cybersecurity We are subject to various state, federal and international laws and regulations that address the collection, storing, use, disclosure, security, privacy, transfer and other processing of personal information and other data, including Part 500, GDPR, the California Consumer Privacy Act, and the California Privacy Rights Act, among others.
The Chief Risk Officer reports to the Ark Board on climate change matters on a quarterly basis. 25 General Cybersecurity We are subject to various state, federal and international laws and regulations that address the collection, storing, use, disclosure, security, privacy, transfer and other processing of personal information and other data, including SEC rules, Part 500, GDPR, the California Consumer Privacy Act, and the California Privacy Rights Act, among others.
Catastrophic loss in respect of offshore energy production facilities can include physical damage, business interruption, pollution liability, extra expenses and control of oil or gas flow therefrom.
Catastrophic losses in respect of offshore energy production facilities can include physical damage, business interruption, pollution liability, extra expenses and control of oil or gas flow therefrom.
Upstream energy platform physical damage and liability covers a variety of oil and gas industry construction, exploration and production risks. Ark’s marine & energy insurance business consists of direct and facultative risks written primarily in the open market, as well as through lineslips and MGA binding authorities.
Upstream energy platform physical damage and liability covers a variety of oil and gas industry construction, exploration and production risks. Ark’s marine & energy insurance business consists of direct and facultative risks written primarily in the open market, as well as through line slips and MGA binding authorities.
During the years ended December 31, 2022, 2021 and 2020, Ark received a significant portion of its gross written premiums from four insurance and reinsurance intermediaries.
During the years ended December 31, 2023, 2022 and 2021, Ark received a significant portion of its gross written premiums from four insurance and reinsurance intermediaries.
The proceeds from the issuance of the preference shares were deposited into collateral trust accounts to fund any potential obligations under the reinsurance agreements with GAIL. Outrigger Re Ltd.’s obligations under the reinsurance agreements with GAIL are subject to an aggregate limit equal to the assets in the collateral trusts at any point in time.
The proceeds from the issuance of the preference shares were deposited into collateral trust accounts to fund any potential obligations under the reinsurance agreements with GAIL. Outrigger Re Ltd.’s obligations under the reinsurance agreements with GAIL are subject to an aggregate limit equal to the assets in the collateral trusts.
As of February 24, 2023, BAM was rated “AA/stable” by Standard & Poor’s. “AA” is the third highest of 23 financial strength ratings assigned by Standard & Poor’s. As of February 24, 2023, each of Lloyd’s Syndicates 4020 and 3902, benefits from the financial strength rating of “A/stable” by A.M. Best Company, Inc. (“A.M.
As of February 23, 2024, BAM was rated “AA/stable” by Standard & Poor’s. “AA” is the third highest of 23 financial strength ratings assigned by Standard & Poor’s. As of February 23, 2024, each of Lloyd’s Syndicates 4020 and 3902, benefits from the financial strength rating of “A/stable” by A.M. Best Company, Inc. (“A.M.
Once the placement of Ark’s 2023 outwards reinsurance program is completed, Ark expects its net after-tax exposure for a 1-in-250 year event to each of these PML zones to approximate 25-35% of total tangible capital (tangible shareholders equity and subordinated debt) . Total tangible capital was $946 million as of December 31, 2022.
Once the placement of Ark’s 2024 outwards reinsurance program is completed, Ark expects its net after-tax exposure for a 1-in-250 year event to each of these PML zones to approximate 25-35% of total tangible capital (tangible shareholders equity and subordinated debt) . Total tangible capital was $1,261 million as of December 31, 2023.
Kudu’s philosophy is to partner with asset and wealth management firms that exhibit strong cash flow generation and growth. Kudu seeks to provide its solutions across a diverse mix of investment strategies and asset classes in the middle market. Kudu’s average capital deployment to date has been approximately $36 million, with a range from $15 million to $81 million.
Kudu’s philosophy is to partner with asset and wealth management firms that exhibit strong cash flow generation and growth. Kudu seeks to provide its solutions across a diverse mix of investment strategies and asset classes in the middle market. Kudu’s average capital deployment to date has been approximately $35 million, with a range from $14 million to $81 million.
Catastrophe Risk Management Effective January, 1, 2023, through its quota share reinsurance agreement with GAIL, WM Outrigger Re has exposure to losses caused by unpredictable catastrophic events including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, severe winter weather, and infrastructure failures all over the world.
WM Outrigger Re Effective January, 1, 2023, through its quota share reinsurance agreement with GAIL, WM Outrigger Re has exposure to losses caused by unpredictable catastrophic events including natural and other disasters all over the world such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, severe weather, and infrastructure failures.
The following tables present BAM’s ten largest direct exposures based upon gross par outstanding as of December 31, 2022 and 2021: December 31, 2022 $ in Millions Gross Par Outstanding (2) Percent of Total Gross Par Outstanding (2) Standard & Poor’s Credit Rating (1) Pennsylvania Turnpike Commission, PA, Toll Roads $ 441.3 0.4 % A City of Chicago, IL (Cook County), Sales Tax - Local 409.0 0.4 AA- Clark County SD, NV (Clark County) 383.1 0.4 A+ New Jersey Transportation Trust Fund Authority, System & Program Bonds, NJ, Gas Tax (2) 375.9 0.4 BBB+ State of Illinois 369.8 0.4 BBB+ Miami-Dade County School Board (Miami-Dade County) 366.8 0.4 AA- Metropolitan Pier & Exposition Authority, IL (Cook County) 366.3 0.4 A- South Carolina Public Service Authority 366.0 0.4 A- Sacramento City USD, CA (Sacramento County) 349.4 0.3 BBB Metropolitan Transit Authority (MTA), NY, Mass Transit - Farebox (2) 346.9 0.3 BBB+ Total of top ten exposures $ 3,774.5 3.8 % (1) “AA-” is the fourth highest, “A+” is the fifth highest, “A” is the sixth highest, “A-” is the seventh highest, “BBB+” is the eighth highest and “BBB” is the ninth highest of 23 credit ratings assigned by Standard & Poor’s.
December 31, 2022 $ in Millions Gross Par Outstanding (2) Percent of Total Gross Par Outstanding (2) Standard & Poor’s Credit Rating (1) Pennsylvania Turnpike Commission, PA, Toll Roads $ 441.3 0.4 % A City of Chicago, IL (Cook County), Sales Tax - Local 409.0 0.4 AA- Clark County SD, NV (Clark County) 383.1 0.4 A+ New Jersey Transportation Trust Fund Authority, System & Program Bonds, NJ, Gas Tax (2) 375.9 0.4 BBB+ State of Illinois 369.8 0.4 BBB+ Miami-Dade County School Board (Miami-Dade County) 366.8 0.4 AA- Metropolitan Pier & Exposition Authority, IL (Cook County) 366.3 0.4 A- South Carolina Public Service Authority 366.0 0.4 A- Sacramento City USD, CA (Sacramento County) 349.4 0.3 BBB Metropolitan Transit Authority (MTA), NY, Mass Transit - Farebox (2) 346.9 0.3 BBB+ Total of top ten exposures $ 3,774.5 3.8 % (1) “AA-” is the fourth highest, “A+” is the fifth highest, “A” is the sixth highest, “A-” is the seventh highest, “BBB+” is the eighth highest and “BBB” is the ninth highest of 23 credit ratings assigned by Standard & Poor’s.
As of December 31, 2022, the asset and wealth management firms had combined assets under management of approximately $74 billion, spanning a range of asset classes including real estate, wealth management, hedge funds, private equity and alternative credit strategies. Kudu’s capital was deployed at an average gross cash yield at inception of 9.9%.
As of December 31, 2023, the asset and wealth management firms had combined assets under management of approximately $104 billion, spanning a range of asset classes including real estate, wealth management, hedge funds, private equity and alternative credit strategies. Kudu’s capital was deployed at an average gross cash yield at inception of 9.9%.
Prior period amounts have been reclassified to conform to the current period’s presentation. See Note 21 — “Held for Sale and Discontinued Operations ” on page F- 68 . REGULATION United States Insurance Regulation BAM is subject to regulation and supervision in New York and each of the states where it is licensed to conduct business.
Prior period amounts have been reclassified to conform to the current period’s presentation. See Note 20 — “Held for Sale and Discontinued Operations ” on page F- 70 . REGULATION United States Insurance Regulation BAM is subject to regulation and supervision in New York and each of the states where it is licensed to conduct business.
As of December 31, 2022, BAM was in compliance with the single and aggregate risk limits. 18 Distributions No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS.
As of December 31, 2023, BAM was in compliance with the single and aggregate risk limits. Distributions No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS.
In 2021, Fidus Re issued an additional $150 million of insurance linked securities (the “Fidus Re 2021 Agreement”), which have an initial term of 12 years and are callable five years after the date of issuance. The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM.
In 2022, Fidus Re issued an additional $150 million of insurance linked securities (the “Fidus Re 2022 Agreement”), which have an initial term of 12 years and are callable seven years after the date of issuance. The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM.
All other things being equal, pricing is generally higher when interest rates are higher, credit spreads are wider, BAM’s trading value is higher relative to competitors and the capture rate is higher.
All else being equal, pricing is generally higher when interest rates are higher, credit spreads are wider, BAM’s trading value is higher relative to competitors and the capture rate is higher.
Bermuda Insurance Regulation The Insurance Act 1978 of Bermuda and related regulations, as amended (the “Insurance Act”), regulates the insurance business of HG Re, a special purpose insurer, GAIL, Ark’s wholly-owned Class 4 insurance and reinsurance company, and Outrigger Re Ltd., a special purpose insurer.
Bermuda Insurance Regulation The Insurance Act 1978 of Bermuda and related regulations, as amended (the “Insurance Act”), regulates the insurance business of HG Re, a special purpose insurer, GAIL, Ark’s wholly-owned Class 4 insurance and reinsurance company, Outrigger Re Ltd., a special purpose insurer, and Bamboo Captive, Bamboo’s wholly-owned Class 2 captive insurer.
If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust. The Regulation 114 Trust balance as of December 31, 2022 and 2021 was $289 million and $250 million.
If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust. The Regulation 114 Trust balance as of December 31, 2023 and 2022 was $342 million and $289 million.
Kudu also prioritizes the private capital segment as the underlying clients of these firms tend to be locked-up for an extended period, which can provide stability of revenues in a potential market downturn. Kudu expects that no single manager will represent more than 25% of total firm revenues.
Kudu also prioritizes the private capital segment as the underlying clients of these firms tend to be locked-up for an extended period, which can provide stability of revenues in a potential market downturn. Kudu expects that no single manager will represent more than 25% of Kudu’s net investment income.
See “CRITICAL ACCOUNTING ESTIMATES — Surplus Notes Valuation — BAM Surplus Notes” on page 76 for a discussion on the accounting and risks associated with the BAM Surplus Notes. BAM launched in 2012 after securing its “AA/stable” rating from Standard & Poor’s Financial Services LLC (“Standard & Poor’s”). In June 2022, Standard & Poor’s affirmed BAM’s “AA/stable” rating.
See “CRITICAL ACCOUNTING ESTIMATES — Surplus Notes Valuation — BAM Surplus Notes” on page 78 for a discussion on the accounting and risks associated with the BAM Surplus Notes. BAM launched in 2012 after securing its “AA/stable” rating from Standard & Poor’s Financial Services LLC (“Standard & Poor’s”). In July 2023, Standard & Poor’s affirmed BAM’s “AA/stable” rating.
The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM. Under the Fidus Re 2022 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $110 million on a portion of BAM’s financial guarantee portfolio (the “2022 Covered Portfolio”) up to a total reimbursement of $150 million.
The proceeds from issuance were placed in a collateral trust supporting Fidus Re’s obligations to BAM. Under the Fidus Re 2021 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $135 million on a portion of BAM’s financial guarantee portfolio (the “2021 Covered Portfolio”) up to a total reimbursement of $150 million.
See “ CRITICAL ACCOUNTING ESTIMATES — Loss and LAE Reserves ” on page 76 and Note 5 — “Losses and Loss Adjustment Expense Reserves ” on page F- 32 for a full discussion regarding Ark’s loss reserving process. 13 KUDU Overview Kudu provides capital solutions for boutique asset and wealth managers for a variety of purposes including generational ownership transfers, management buyouts, acquisition and growth finance and legacy partner liquidity.
See “ CRITICAL ACCOUNTING ESTIMATES — Loss and LAE Reserves ” on page 79 and Note 5 — “Loss and Loss Adjustment Expense Reserves ” on page F- 33 for a full discussion regarding Ark’s loss reserving process. 15 KUDU Overview Kudu provides capital solutions for boutique asset and wealth managers for a variety of purposes including generational ownership transfers, management buyouts, acquisition and growth finance and legacy partner liquidity.
WM Advisors As of December 31, 2022, WM Advisors managed and/or provided oversight and administration for substantially all of White Mountains’s fixed maturity investments, short-term investments, common equity securities and other long-term investments, with the exception of BAM’s investment portfolio, which is managed by BAM and sub-advised to an outside third-party registered investment manager.
WM Advisors As of December 31, 2023, WM Advisors managed and/or provided oversight and administration for substantially all of White Mountains’s fixed maturity investments, short-term investments, common equity securities and other long-term investments, with the exception of BAM’s investment portfolio, which is managed by BAM and sub-advised to an outside third-party registered investment manager. 16 MediaAlpha MediaAlpha is a marketing technology company.
The 2021 Covered Portfolio consists of approximately 32% of BAM’s gross par outstanding as of December 31, 2022. 2 In 2022, Fidus Re issued an additional $150 million of insurance linked securities (the “Fidus Re 2022 Agreement”), which have an initial term of 12 years and are callable seven years after the date of issuance.
The 2018 Covered Portfolio consists of approximately 23% of BAM’s gross par outstanding as of December 31, 2023. 2 In 2021, Fidus Re issued an additional $150 million of insurance linked securities (the “Fidus Re 2021 Agreement”), which have an initial term of 12 years and are callable five years after the date of issuance.
As of December 31, 2022 and 2021, total interest receivable on the BAM Surplus Notes for both periods was $158 million, which includes amounts held outside the Collateral Trusts. Competition/Pricing The municipal bond insurance industry is highly competitive. BAM’s primary competitor is Assured Guaranty Ltd. (“Assured”).
As of December 31, 2023 and 2022, total interest receivable on the BAM Surplus Notes was $175 million and $158 million, which includes amounts held outside the Collateral Trusts. 3 Competition/Pricing The municipal bond insurance industry is highly competitive. BAM’s primary competitor is Assured Guaranty Ltd. (“Assured”).
Ark’s casualty insurance business is generally written on an excess of loss basis arising from operations of a wide range of predominantly large U.S. companies, including energy companies, with global operations. Ark’s casualty reinsurance business is underwritten on an excess of loss and proportional treaty basis.
Ark’s casualty insurance business is generally written on an excess of loss basis arising from operations of a wide range of predominantly large U.S. companies, including energy companies, with global operations.
On December 20, 2022, Outrigger Re Ltd. issued $250 million of non-voting redeemable preference shares on behalf of four segregated accounts to White Mountains and unrelated third party investors.
On December 20, 2022, Outrigger Re Ltd. issued $250 million of non-voting redeemable preference shares on behalf of four segregated accounts to White Mountains and unrelated third-party investors, of which $205 million was provided by White Mountains.
White Mountains also has non-controlling equity interests in various other operating businesses and private debt instruments with various other operating businesses, which are generally accounted for at fair value within other long-term investments. As of December 31, 2022 and 2021, the fair value of these interests totaled $35 million and $37 million.
White Mountains also has noncontrolling equity interests in various other operating businesses and private debt instruments with various other operating businesses, which are generally accounted for at fair value within other long-term investments. As of December 31, 2023 and 2022, the fair value of these interests totaled $40 million and $35 million.
Since 2000, DavidShield has delivered industry-leading medical insurance solutions to diplomats, non-governmental organizations and thousands of multinational corporations and individuals in over 95 countries. DavidShield receives structured commissions for placing policies with its insurance carrier partners and licensing fees for use of its card-based technology.
DavidShield is an MGA that is the leading provider of expatriate medical insurance in Israel. Since 2000, DavidShield has delivered industry-leading medical insurance solutions to diplomats, non-governmental organizations and thousands of multinational corporations and individuals in over 95 countries. DavidShield receives structured commissions for placing policies with its insurance carrier partners and licensing fees for use of its card-based technology.
As of December 31, 2022 and 2021, White Mountains reported $1,125 million and $1,084 million of total assets and $364 million and $446 million of total equity related to HG Global. As of December 31, 2022 and 2021, White Mountains owned 96.9% of HG Global’s preferred equity and 88.4% of its common equity.
As of December 31, 2023 and 2022, White Mountains reported $1,221 million and $1,125 million of total assets and $376 million and $364 million of total equity related to HG Global. As of December 31, 2023 and 2022, White Mountains owned 96.9% of HG Global’s preferred equity and 88.4% of its common equity.
Gallagher & Co 12.5 8.6 6.3 Willis Towers Watson plc 9.4 13.8 11.2 Total proportion of business produced by the top four insurance and reinsurance intermediaries 66.1 % 64.5 % 45.3 % Underwriting and Pricing Ark aims to build a diversified and balanced portfolio of risks that generates an underwriting profit each year.
Gallagher & Co 16.9 12.5 8.6 Aon plc 16.7 17.1 15.6 Willis Towers Watson plc 5.0 9.4 13.8 Total proportion of business produced by the top four insurance and reinsurance intermediaries 66.1 % 66.1 % 64.5 % Underwriting and Pricing Ark aims to build a diversified and balanced portfolio of risks that generates an underwriting profit each year.
The Fidus Re 2018 Agreement does not provide coverage for losses in excess of $276 million. The 2018 Covered Portfolio consists of approximately 27% of BAM’s gross par outstanding as of December 31, 2022.
The Fidus Re 2021 Agreement does not provide coverage for losses in excess of $302 million. The 2021 Covered Portfolio consists of approximately 27% of BAM’s gross par outstanding as of December 31, 2023.
Under the Fidus Re 2021 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $135 million on a portion of BAM’s financial guarantee portfolio (the “2021 Covered Portfolio”) up to a total reimbursement of $150 million. The Fidus Re 2021 Agreement does not provide coverage for losses in excess of $302 million.
Under the Fidus Re 2022 Agreement, Fidus Re reinsures 90% of aggregate losses exceeding $110 million on a portion of BAM’s financial guarantee portfolio (the “2022 Covered Portfolio”) up to a total reimbursement of $150 million. The Fidus Re 2022 Agreement does not provide coverage for losses in excess of $277 million.
In order to allow issuers and investors in BAM-insured municipal bonds to monitor financial strength first-hand, BAM publishes credit profiles on every insured issuer. Credit profiles are accessible by CUSIP, obligor, state or sector on BAM’s website.
BAM seeks to provide transparency with respect to its insured portfolio and each insured issuer. In order to allow issuers and investors in BAM-insured municipal bonds to monitor financial strength first-hand, BAM publishes credit profiles on every insured issuer. Credit profiles are accessible by CUSIP, obligor, state or sector on BAM’s website.
Lloyd’s Regulation Lloyd’s as a whole is authorized by the PRA and regulated by both the FCA and the PRA. Lloyd’s is required to implement certain rules prescribed by the PRA and by the FCA; such rules are to be implemented by Lloyd’s pursuant to its powers under the Lloyd’s Act 1982 relating to the operation of the Lloyd’s market.
Lloyd’s is required to implement certain rules prescribed by the PRA and by the FCA; such rules are to be implemented by Lloyd’s pursuant to its powers under the Lloyd’s Act 1982 relating to the operation of the Lloyd’s market.
Ark also engages with industry peers through the Lloyd’s Climate Change market group. Ark has assigned its Chief Risk Officer responsibility under the PRA Senior Insurance Managers Regime for climate change risk.
Ark regularly analyzes climate change risk as part of its risk management framework. Ark also engages with industry peers through the Lloyd’s Climate Change market group. Ark has assigned its Chief Risk Officer responsibility under the PRA Senior Insurance Managers Regime for climate change risk.
Best”) and “A+/stable” by Standard & Poor’s assigned to the Lloyd’s marketplace. “A” is the third highest of 16 financial strength ratings assigned by A.M. Best and “A+” is the fifth highest of 23 financial strength ratings assigned by Standard & Poor’s. As of February 24, 2023, GAIL was rated “A/stable” by A.M. Best.
Best”) and “AA-/stable” by Standard & Poor’s assigned to the Lloyd’s marketplace. “A” is the third highest of 16 financial strength ratings assigned by A.M. Best and “AA-” is the fourth highest of 23 financial strength ratings assigned by Standard & Poor’s. As of February 23, 2024, Ark was rated “A/stable” by A.M. Best.
Following the U.K.'s exit from the EU, and the expiry of the transition period on December 31, 2020, U.K. authorized insurers are subject to the U.K.'s separate domestic prudential regime. This regime is identical to the Solvency II regime from January 1, 2021, although the two regimes may begin to diverge over time.
Following the U.K.'s exit from the EU, and the expiry of the transition period on December 31, 2020, U.K. authorized insurers are subject to the U.K.'s separate domestic prudential regime. This regime was identical to the Solvency II regime from January 1, 2021, although the PRA has made proposals that may cause the two regimes to diverge.
Restrictions on Dividends, Distributions and Reductions of Capital As a Class 4 insurer, GAIL is prohibited from declaring or paying any dividends if in breach of the required minimum solvency margin or minimum liquidity ratio (the “Relevant Margins”) or if the declaration or payment of such dividend would cause the insurer to fail to meet the Relevant Margins.
As special purpose insurers, HG Re and Outrigger Re Ltd. are not subject to this requirement. 22 Restrictions on Dividends, Distributions and Reductions of Capital As a Class 4 insurer, GAIL is prohibited from declaring or paying any dividends if in breach of the required minimum solvency margin or minimum liquidity ratio (the “Relevant Margins”) or if the declaration or payment of such dividend would cause the insurer to fail to meet the Relevant Margins.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Catastrophes can also include large losses driven by public health crises, terrorist attacks, war and war-like actions, explosions, infrastructure failures, and cyber-attacks. The extent of a catastrophe loss is a function of both the severity of the event and total amount of insured exposure to the event as well as the coverage provided to customers.
Catastrophes can also include large losses driven by public health crises, terrorist attacks, war and war-like actions, explosions, infrastructure failures and cyber attacks. The extent of a catastrophe loss is a function of both the severity of the event and the total amount of insured exposure to the event, as well as the coverage provided to customers.
These financial strength ratings are used by policyholders, agents and brokers to assess the suitability of insurers and reinsurers as business counterparties and are an important factor in establishing the competitive position of insurance and reinsurance companies. Rating agencies periodically evaluate Ark to confirm that it continues to meet the criteria of the ratings previously assigned to it.
These financial strength ratings are used by policyholders, agents and brokers to assess the suitability of insurers and reinsurers as business counterparties and are an important factor in establishing the competitive position of insurance and reinsurance companies. Rating agencies periodically evaluate Ark to confirm that it continues to meet the criteria of the rating previously assigned to it.
The proposed regulations generally would apply to tax years of corporations beginning on or after the date finalized regulations are published in the Federal Register, and to tax years of U.S. persons in which or with which those corporations' tax years end.
The proposed regulations generally would apply to tax years of corporations beginning on or after the date on which finalized regulations are published in the Federal Register and to tax years of U.S. persons in which or with which those corporations' tax years end.
Additionally, the base erosion and profit shifting project currently being undertaken by the Organization for Economic Cooperation and Development (“OECD”) and the European Commission’s investigation into illegal state aid may result in changes to long standing tax principles, which could materially adversely affect our results of operations and financial condition.
Additionally, the base erosion and profit shifting (“BEPS”) project currently being undertaken by the Organization for Economic Cooperation and Development (“OECD”) and the European Commission’s investigation into illegal state aid may result in changes to long standing tax principles, which could materially adversely affect our results of operations and financial condition.
As a result, it may not be possible for our shareholders to enforce court judgments obtained in the United States against us based on the civil liability provisions of the federal or state securities laws of the United States, either in Bermuda or in countries other than the United States where we will have assets.
As a result, it may not be possible for our shareholders to enforce court judgments obtained in the United States against us based on the civil liability provisions of the federal or state securities laws of the United States, either in Bermuda or in countries other than the United States where we have assets.
Furthermore, it is possible that these legal proceedings could result in equitable remedies or other unexpected outcomes that could materially adversely affect our results of operations and financial condition. 35 We depend on our key personnel to manage our business effectively and they may be difficult to replace, which could materially adversely affect our results of operations and financial condition.
Furthermore, it is possible that these legal proceedings could result in equitable remedies or other unexpected outcomes that could materially adversely affect our results of operations and financial condition. We depend on our key personnel to manage our business effectively, and they may be difficult to replace, which could materially adversely affect our results of operations and financial condition.
If you are a U.S. person, we encourage you to consult your own tax advisor concerning the potential tax consequences to you under the PFIC rules. 32 The Company and certain of our non-U.S. subsidiaries may become subject to U.S. tax, which could materially adversely affect our results of operations and financial condition.
If you are a U.S. person, we encourage you to consult your own tax advisor concerning the potential tax consequences to you under the PFIC rules. The Company and certain of our non-U.S. subsidiaries may become subject to U.S. tax, which could materially adversely affect our results of operations and financial condition.
Regulatory authorities also may seek to exercise their supervisory or enforcement authority in new or more extensive ways. These actions, if they occur, could affect the competitive market and the way we conduct our business and manage our capital and could result in lower revenues and higher costs.
Regulatory authorities also may seek to exercise their supervisory or enforcement authority in new or more extensive ways. These actions, if they occur, could affect the competitive market and the way in which we conduct our business and manage our capital and could result in lower revenues and higher costs.
Ark and WM Outrigger Re write insurance and reinsurance policies that cover unpredictable catastrophic events. Ark and WM Outrigger Re have exposure to losses caused by unpredictable catastrophic events including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, and severe winter weather all over the world.
Ark and WM Outrigger Re write insurance and reinsurance policies that cover unpredictable catastrophic events all over the world. Ark and WM Outrigger Re have exposure to losses caused by events including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis and severe weather.
Best and Standard & Poor’s, the deterioration of which could materially adversely affect its ability to conduct business and, consequently, could materially adversely affect our results of operations and financial condition. Third-party rating agencies assess and rate the financial strength, including claims-paying ability, of insurers, reinsurers and the Lloyd’s marketplace.
Best, Standard & Poor’s and others, the deterioration of which could materially adversely affect its ability to conduct business and, consequently, could materially adversely affect our results of operations and financial condition. Third-party rating agencies assess and rate the financial strength, including claims-paying ability, of insurers, reinsurers and the Lloyd’s marketplace.
If controls are not effective, it could lead to unanticipated risk exposure, or damage to our reputation and, consequently, could materially adversely affect our results of operations and financial condition. 34 Other Risks Related to White Mountains and its Subsidiaries We may be unable to adequately maintain our systems and safeguard the security of our data, which could adversely impact our ability to operate our business and cause reputational harm and, consequently, could materially adversely affect our results of operations and financial condition.
If controls are not effective, it could lead to unanticipated risk exposure or damage to our reputation and, consequently, could materially adversely affect our results of operations and financial condition. 37 Other Risks Related to White Mountains and its Subsidiaries We may be unable to adequately maintain our systems and safeguard the security of our data, which could adversely impact our ability to operate our business and cause reputational harm and, consequently, could materially adversely affect our results of operations and financial condition.
Should there be a significant decrease in the publicly-traded share price of MediaAlpha’s common stock, it could materially adversely affect our results of operations and financial condition. 31 Our investment portfolio includes securities that do not have readily observable market prices. We use valuation methodologies that are inherently subjective and uncertain to value these securities.
Should there be a significant decrease in the publicly-traded share price of MediaAlpha’s common stock, it could materially adversely affect our results of operations and financial condition. 33 Our investment portfolio includes securities that do not have readily observable market prices. We use valuation methodologies that are inherently subjective and uncertain to value these securities.
Item 1A. Risk Factors 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. See “FORWARD-LOOKING STATEMENTS” on page 94 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
Item 1A. Risk Factors 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. See “FORWARD-LOOKING STATEMENTS” on page 95 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
Such an impairment would result in a non-cash charge to income that could materially adversely affect our results of operations and financial condition. 26 Risks Related to HG Global/BAM’s Business and Industry BAM may not maintain a favorable financial strength rating, which could materially adversely affect its ability to conduct business and, consequently, could materially adversely affect our results of operations and financial condition.
Such an impairment would result in a non-cash charge to income that could materially adversely affect our results of operations and financial condition. 27 Risks Related to HG Global/BAM’s Business and Industry BAM may not maintain a favorable financial strength rating, which could materially adversely affect its ability to conduct business and, consequently, could materially adversely affect our results of operations and financial condition.
The maintenance of “A-” or better financial strength ratings is particularly important to Ark’s ability to write new or renewal property and casualty insurance and reinsurance business in most markets. Ark writes insurance and reinsurance through Lloyd’s Syndicates 4020 and 3902, each of which benefits from the financial strength rating of “A/stable” by A.M.
The maintenance of an “A-” or better financial strength rating is particularly important to Ark’s ability to write new and renewal property and casualty insurance and reinsurance business in most markets. Ark writes insurance and reinsurance through Lloyd’s Syndicates 4020 and 3902, each of which benefits from the financial strength rating of “A/stable” by A.M.
For further discussion of our loss and LAE reserves, see “ CRITICAL ACCOUNTING ESTIMATES — Loss and LAE Reserves ” on page 76 . Risks Related to Kudu’s Business and Industry Kudu’s financial performance is dependent upon its clients’ asset and performance-based fees, which are subject to a variety of economic, market and other risks.
For further discussion of our loss and LAE reserves, see “ CRITICAL ACCOUNTING ESTIMATES — Loss and LAE Reserves ” on page 79 . Risks Related to Kudu’s Business and Industry Kudu’s financial performance is dependent upon its clients’ asset and performance-based fees, which are subject to a variety of economic, market and other risks.
Failure to identify and complete future acquisitions and dispositions could limit our ability to create shareholder value. Even if we were to identify and complete future acquisitions and dispositions, there is no assurance that such transactions will ultimately achieve their anticipated benefits, and such transactions could materially adversely affect our results of operation and financial condition.
Failure to identify and complete future acquisitions and dispositions could limit our ability to create shareholder value. Even if we were to identify and complete future acquisitions and dispositions, there is no assurance that such transactions will ultimately achieve their anticipated benefits, and such transactions could materially adversely affect our results of operations and financial condition.
Ark must maintain reserves adequate to cover its estimated ultimate liabilities for loss and LAE. Loss and LAE reserves are typically comprised of (i) case reserves for reported claims and (ii) incurred but not reported (“IBNR”) reserves for losses that have occurred but for which claims have not yet been reported and for expected future development on case reserves.
Ark/WM Outrigger must maintain reserves adequate to cover its estimated ultimate liabilities for loss and LAE. Loss and LAE reserves are typically comprised of (i) case reserves for reported claims and (ii) incurred but not reported (“IBNR”) reserves for losses that have occurred but for which claims have not yet been reported and for expected future development on case reserves.
See “ RATINGS ” on page 25 . A downgrade, withdrawal or negative watch/outlook of BAM’s financial strength rating could severely limit or prevent BAM’s ability to write municipal bond insurance policies, which could materially adversely affect our results of operations and financial condition.
See “ RATINGS ” on page 26 . A downgrade, withdrawal or negative watch/outlook of BAM’s financial strength rating could severely limit or prevent BAM’s ability to write municipal bond insurance policies, which could materially adversely affect our results of operations and financial condition.
We encourage shareholders who are U.S. persons to consult their own tax advisors concerning the proposed regulations. 33 Risks Related to Laws and Regulation Regulation may have a material adverse effect on our operations and financial condition.
We encourage shareholders who are U.S. persons to consult their own tax advisors concerning the proposed regulations. 36 Risks Related to Laws and Regulation Regulation may have a material adverse effect on our operations and financial condition.
Our business also depends upon our ability to securely process, store, transmit and safeguard confidential and proprietary information that is in our possession. This information includes confidential information relating to our business, and personally identifiable information (“PII”) and protected health information (“PHI”) belonging to our employees, customers, claimants and business partners.
Our business also depends upon our ability to securely process, store, transmit and safeguard confidential and proprietary information that is in our possession. This information includes confidential information relating to our business, as well as personally identifiable information (“PII”) and protected health information (“PHI”) belonging to our employees, customers, claimants and business partners.
Best and “A+/stable” by Standard & Poor’s assigned to the Lloyd’s marketplace. Beginning in January 2021, Ark began writing certain classes of its business through GAIL, Ark’s wholly-owned Bermuda-based insurance and reinsurance company, which has been assigned an “A/stable” financial strength rating by A.M. Best. See “ RATINGS ” on page 25 .
Best and “AA-/stable” by Standard & Poor’s assigned to the Lloyd’s marketplace. Beginning in January 2021, Ark began writing certain classes of its business through GAIL, Ark’s wholly-owned Bermuda-based insurance and reinsurance company, which has been assigned an “A/stable” financial strength rating by A.M. Best. See “ RATINGS ” on page 26 .
See “ Level 3 Measurements” under “ CRITICAL ACCOUNTING ESTIMATES - Fair Value Measurements” on page 73 for a description of the methodologies we use to determine GAAP fair value of our investments without a readily observable market price.
See “ Level 3 Measurements” under “ CRITICAL ACCOUNTING ESTIMATES - Fair Value Measurements” on page 76 for a description of the methodologies we use to determine GAAP fair value of our investments without a readily observable market price.
Ark incorporates the physical risk of climate change in its underwriting process through sensitivity and stress testing of its catastrophe models, including increased frequency of U.S. windstorms and the implications of storm surge.
Ark incorporates the physical risk of climate change to its underwriting process through sensitivity and stress testing of its catastrophe models, including increased frequency of U.S. windstorms and the implications of storm surge.
Adverse changes in equity markets, interest rates, debt markets or foreign currency exchange rates could result in significant losses to the value of our investment portfolio.” on page 31 .
Adverse changes in equity markets, interest rates, debt markets or foreign currency exchange rates could result in significant losses to the value of our investment portfolio.” on page 33 .
Much of our competitive advantage is based on the expertise, experience and know-how of our key personnel. We do not have fixed term employment agreements with any of our key personnel or key man life insurance, and the loss of one or more of these key personnel could materially adversely affect our results of operations and financial condition.
Much of our competitive advantage is based on the expertise, experience and know-how of our key personnel. We do not have fixed term employment agreements with any of our key personnel, and the loss of one or more of these key personnel could materially adversely affect our results of operations and financial condition.
In addition, the municipal bond insurance industry is highly competitive. BAM’s primary competitor is Assured. BAM and Assured each seeks to differentiate itself through financial strength ratings, claims paying resources and underwriting strategies. If BAM i s unable to compete effectively against Assured, it could result in fewer policies issued, lower premium levels and less favorable policy terms and conditions.
In addition, the municipal bond insurance industry is highly competitive. BAM’s primary competitor is Assured. BAM and Assured each seek to differentiate themselves through financial strength ratings, claims paying resources and underwriting strategies. If BAM i s unable to compete effectively against Assured, it could result in fewer policies issued, lower premium levels and less favorable policy terms and conditions.
Furthermore, a Bermuda court would ordinarily be expected to permit a shareholder to commence an action that alleges a fraud against non-controlling shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.
Furthermore, a Bermuda court would ordinarily be expected to permit a shareholder to commence an action that alleges a fraud against noncontrolling shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.
Such determinations have the effect of increasing Ark’s financial exposure to losses associated with such risks and, in the event of significant losses associated with a given risk, could materially adversely affect our results of operations and financial condition.
Such determinations have the effect of increasing Ark’s financial exposure to losses associated with risks that it underwrites and, in the event of significant losses associated with a given risk, could materially adversely affect our results of operations and financial condition.
If Ark is unable to maintain its competitive position throughout soft and hard market cycles, its business may be adversely affected, and it may not be able to compete effectively in the future, which could materially adversely affect our results of operations and financial condition. 29 Ark’s loss and LAE reserves may be inadequate to cover the ultimate liability for losses, and as a result, our results of operations and financial condition could be adversely affected.
If Ark is unable to maintain its competitive position throughout soft and hard market cycles, its business may be adversely affected, and it may not be able to compete effectively in the future, which could materially adversely affect our results of operations and financial condition. 30 Ark/WM Outrigger’s loss and LAE reserves may be inadequate to cover the ultimate liability for losses, and as a result, our results of operations and financial condition could be adversely affected.
These estimates involve actuarial and claims assessments and require Ark to make a number of assumptions about future events that are subject to unexpected changes and are beyond Ark’s control, such as future trends in claim severity, emerging coverage issues, frequency, inflation, legislative and judicial changes and other factors.
These estimates involve actuarial and claims assessments and require Ark/WM Outrigger to make a number of assumptions about future events that are subject to unexpected changes and are beyond Ark/WM Outrigger’s control, such as future trends in claim severity, emerging coverage issues, frequency, inflation, legislative and judicial changes and other factors.
If we are required to write down goodwill and other intangible assets, it could materially adversely affect our results of operations and financial condition. As of December 31, 2022, we had total goodwill and other intangible assets of $392 million on our consolidated balance sheet, $293 million of which relates to our acquisition of Ark.
If we are required to write down goodwill and other intangible assets, it could materially adversely affect our results of operations and financial condition. As of December 31, 2023, we had total goodwill and other intangible assets of $371 million on our consolidated balance sheet, $293 million of which relates to our acquisition of Ark.
As of December 31, 2022, White Mountains owned $912 million in securities, including our investments in Kudu’s Participation Contracts and PassportCard/DavidShield, that are not actively traded in public markets, do not have readily observable market prices, and are classified as Level 3 investments in the GAAP fair value hierarchy.
As of December 31, 2023, White Mountains owned $1,138 million in securities, including our investments in Kudu’s Participation Contracts and PassportCard/DavidShield, that are not actively traded in public markets, do not have readily observable market prices and are classified as Level 3 investments in the GAAP fair value hierarchy.
It is unlikely that BAM would pay principal and interest on the BAM Surplus Notes if such payments could lead to a rating downgrade. In December 2022, the NYDFS approved a $36 million cash payment of principal and interest on the BAM Surplus Notes.
It is unlikely that BAM would pay principal and interest on the BAM Surplus Notes if such payments could lead to a rating downgrade. In December 2023, the NYDFS approved a $27 million cash payment of principal and interest on the BAM Surplus Notes.
Loss and LAE reserves are estimates of what Ark believes the settlement and administration of claims will cost based on facts and circumstances then known to Ark.
Loss and LAE reserves are estimates of what Ark/WM Outrigger believes the settlement and administration of claims will cost based on facts and circumstances then known.
The maintenance of an “AA” or better financial strength rating from Standard & Poor’s is particularly important to BAM’s ability to write municipal bond insurance policies and meet its debt service obligations under the BAM Surplus Notes. On June 16, 2022, Standard & Poor’s concluded its most recent review and affirmed BAM’s “AA/stable” financial strength rating.
The maintenance of an “AA” or better financial strength rating from Standard & Poor’s is particularly important to BAM’s ability to write municipal bond insurance policies and meet its debt service obligations under the BAM Surplus Notes. On July 12, 2023, Standard & Poor’s concluded its most recent review and affirmed BAM’s “AA/stable” financial strength rating.
A downgrade, withdrawal or negative watch/outlook of these financial strength ratings also could limit Ark’s ability to raise new debt or could make new and certain existing debt more costly and/or have more restrictive conditions. 28 Ark may not successfully alleviate risk through reinsurance and retrocessional arrangements, which could materially adversely affect our results of operations and financial condition.
A downgrade, withdrawal or negative watch/outlook of these financial strength ratings also could limit Ark’s ability to raise new debt or could cause new and certain existing debt to be costlier and/or have more restrictive conditions. 29 Ark may not successfully alleviate risk through reinsurance and retrocessional arrangements, which could materially adversely affect our results of operations and financial condition.
If BAM does not pay some or all of the principal and interest due on the BAM Surplus Notes, it could materially adversely affect our results of operations and financial condition. As of December 31, 2022, White Mountains owned $340 million in BAM Surplus Notes and had accrued $158 million of interest thereon.
If BAM does not pay some or all of the principal and interest due on the BAM Surplus Notes, it could materially adversely affect our results of operations and financial condition. As of December 31, 2023, White Mountains owned $322 million in BAM Surplus Notes and had accrued $175 million of interest thereon.
Following the MediaAlpha IPO in October 2020, White Mountains’s investment in MediaAlpha is valued based on the publicly-traded share price of MediaAlpha’s common stock, which at the December 31, 2022 closing price of $9.95 per share was $169 million.
Following the MediaAlpha IPO in October 2020, White Mountains’s investment in MediaAlpha is valued based on the publicly-traded share price of MediaAlpha’s common stock, which at the December 31, 2023 closing price of $11.15 per share was $255 million.
Should the policies underwritten by BAM experience insured losses for any reason, it could materially adversely affect our results of operations and financial condition. 27 Risks Related to Ark’s and WM Outrigger Re’s Business and Industry Unpredictable catastrophic events could materially adversely affect our results of operations and financial condition.
Should the policies underwritten by BAM experience insured losses for any reason, this could materially adversely affect our results of operations and financial condition. 28 Risks Related to Ark/WM Outrigger’s Business and Industry Unpredictable catastrophic events could materially adversely affect our results of operations and financial condition.
Additionally, Kudu’s clients participate in a highly competitive, highly regulated industry that subjects their operations to a number of other risks that are out of our control and could materially adversely affect our results of operations and financial condition, including (i) changes in investor preference from the actively-managed investments offered by Kudu’s clients to passively-managed investments; (ii) the ability of Kudu’s clients to successfully attract new clients and retain existing ones; (iii) the ability of Kudu’s clients to avoid fee compression; (iv) the reliance of Kudu’s clients on a small number of key personnel; and (v) future changes to regulations that make Kudu’s clients’ businesses more cumbersome and expensive to operate. 30 Risks Related to Investments Our investment portfolio may suffer reduced returns or losses, which could materially adversely affect our results of operations and financial condition.
Additionally, Kudu’s clients participate in a highly competitive, highly regulated industry that subjects their operations to a number of other risks that are out of our control and could materially adversely affect our results of operations and financial condition, including (i) changes in investor preference from the actively-managed investments offered by Kudu’s clients to passively-managed investments; (ii) the ability of Kudu’s clients to successfully attract new clients and retain existing ones; (iii) the ability of Kudu’s clients to avoid fee compression; (iv) the reliance of Kudu’s clients on a small number of key personnel; and (v) future changes to regulations that make Kudu’s clients’ businesses more cumbersome and expensive to operate. 31 Risks Related to Bamboo’s Business and Industry Bamboo’s business is dependent on its capacity providers (both fronting and reinsurance), and a change in availability or terms could materially impact Bamboo’s results of operations and financial condition or adversely affect its ability to write business.
We periodically review goodwill and other intangible assets to determine whether an impairment has occurred. An impairment of goodwill or other intangible assets occurs when the carrying value of the asset exceeds its fair value.
White Mountains’s total goodwill and other intangible assets will increase in 2024 as a result of the Bamboo Transaction. We periodically review goodwill and other intangible assets to determine whether an impairment has occurred. An impairment of goodwill or other intangible assets occurs when the carrying value of the asset exceeds its fair value.
If a corporation is treated as a PFIC for a taxable year, it is generally treated as a PFIC for all later taxable years. Passive income for PFIC purposes generally includes interest, dividends and other investment income, subject to certain exceptions. On January 15, 2021, new final and proposed PFIC regulations issued by the U.S.
If a corporation is treated as a PFIC for a taxable year, it is generally treated as a PFIC for all later taxable years. Passive income for PFIC purposes generally includes interest, dividends and other investment income, subject to certain exceptions.
Through our subsidiary Kudu, we provide capital solutions for asset and wealth management firms through non-controlling equity interests in the form of revenue and earnings participation contracts.
Kudu provides capital solutions for asset and wealth management firms through Participation Contracts, which are noncontrolling equity interests in the form of revenue and earnings participation contracts.
Because of uncertainties associated with estimating ultimate loss and LAE reserves, we cannot be certain that Ark’s reserves are adequate. In the event that Ark’s reserves become insufficient to cover the actual losses and LAE, Ark may need to add to the reserves, which could have a material adverse effect on our results of operations and financial condition.
In the event that Ark/WM Outrigger’s reserves become insufficient to cover the actual losses and LAE, Ark/WM Outrigger may need to add to the reserves, which could have a material adverse effect on our results of operations and financial condition.
Our non-U.S. subsidiaries are treated as CFCs and may subject a U.S. 10% shareholder of our common shares to disadvantageous rules under U.S. federal income tax laws. The Tax Cuts and Jobs Act of 2017 (“TCJA”) modified certain U.S. tax rules that apply to controlled foreign corporations (“CFCs”).
The Tax Cuts and Jobs Act of 2017 (“TCJA”) modified certain U.S. tax rules that apply to controlled foreign corporations (“CFCs”). As a result of these changes, each of our non-U.S. subsidiaries is treated as a CFC.
Risks Related to Taxation We may be treated as a PFIC, in which case a U.S. holder of our common shares could be subject to disadvantageous rules under U.S. federal income tax laws. Significant potential adverse U.S. federal income tax consequences apply to any U.S. person who owns shares in a passive foreign investment company (“PFIC”).
Significant potential adverse U.S. federal income tax consequences apply to any U.S. person who owns shares in a passive foreign investment company (“PFIC”).
Removed
Department of the Treasury were published in the Federal Register. The final regulations are generally effective for tax years of shareholders beginning on or after their date of publication. The proposed regulations may be selectively adopted by shareholders prior to their finalization.
Added
Because of uncertainties associated with estimating ultimate loss and LAE reserves, we cannot be certain that Ark/WM Outrigger’s reserves are adequate.
Removed
We are carefully studying the final and proposed regulations, including their effective dates and their application to White Mountains to determine their effects on our PFIC status in the future.
Added
Bamboo is an MGA and program administrator with delegated binding authorities, and as such, is generally dependent on its fronting and reinsurance carrier partners (“Capacity Providers”) to bear the insurance risk on the programs designed and underwritten by Bamboo.
Removed
As a result of these changes, each of our non-U.S. subsidiaries is treated as a CFC.
Added
Bamboo currently relies on a small group of Capacity Providers for a large proportion of its business, and loss of capacity from any one of these could materially adversely affect Bamboo’s results of operations and financial condition.
Added
Should Bamboo fail to meet the profitability expectations of its Capacity Providers that write the business it places, its Capacity Providers could choose to stop writing the business or reduce the commission rate they will pay for placement services, which could materially adversely affect our results of operations and financial condition.
Added
For the year ended December 31, 2023, Bamboo placed substantially all of its business with one fronting partner.
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Should its fronting partner reduce the volume of business accepted from Bamboo or adversely change the terms and conditions of placement, we cannot guarantee that Bamboo would be able to find other fronting partners to write its programs, which could materially adversely affect its results of operations and financial condition.
Added
In addition, Bamboo relies on its fronting partner’s financial strength rating in establishing the competitive position of its products. A ratings downgrade of Bamboo’s fronting partner could result in a substantial loss of business should policyholders choose to move to other companies with higher financial strength ratings. Bamboo, in conjunction with its fronting partners, purchases various forms of reinsurance.
Added
The availability and cost of reinsurance are subject to prevailing market conditions, including terms, price and capacity, which can affect Bamboo’s business volume and profitability. In addition, reinsurance programs are generally subject to renewal on an annual basis. Bamboo and its fronting partners may not be able to obtain reinsurance on acceptable terms.
Added
Even if available, that reinsurance may not be available from entities with satisfactory creditworthiness. If Bamboo is unable to obtain satisfactory reinsurance, it would have to reduce the level of its underwriting commitments, which could materially adversely affect its results of operations and financial condition.
Added
For the year ended December 31, 2023, the (re)insurance capacity for Bamboo’s programs was concentrated, with two Capacity Providers representing approximately 45% of Bamboo’s premium.
Added
Should its Capacity Providers reduce the volume of business accepted from Bamboo or adversely change the terms and conditions, we cannot guarantee that Bamboo would be able to find other Capacity Providers to write the business, which could materially adversely affect its results of operations and financial condition.
Added
Bamboo primarily relies on third-party agents and brokers to distribute its products, and any deterioration in the relationships with these parties could adversely affect Bamboo’s business. Substantially all of Bamboo’s products are distributed through third-party agents and brokers who have the principal relationships with policyholders.
Added
Agents and brokers generally own the “renewal rights,” and thus Bamboo’s business model is dependent on its relationships with, and the success of, the agents and brokers with whom Bamboo does business.
Added
Because Bamboo primarily relies on third-party agents and brokers as its sales channel, any deterioration in the relationships with these parties or failure to provide competitive compensation could lead them to place less premium with Bamboo. Bamboo places a substantial portion of its premium through a limited number of agents and broker relationships.
Added
For the year ended December 31, 2023, the top three relationships accounted for 47% of managed premium. Certain of these agents and brokers also have wholly-owned insurance subsidiaries that may compete with Bamboo, and these brokers may favor their own insurers and reinsurers over other companies.
Added
Loss of all or a substantial portion of the business provided by one or more of these agents and brokers could have a material adverse effect on Bamboo’s business. Bamboo and its fronting partners are subject to extensive regulation which may prevent Bamboo from adequately pricing or selecting risk.
Added
Bamboo and its fronting partners are subject to extensive state regulation, primarily in the state of California. This regulation requires, among other things, state approval of policy forms and premium rates for fronting carriers and admitted producers. If policy forms and premium rates are not approved in a timely manner, Bamboo’s ability to price risk adequately will be adversely impacted.
Added
Additionally, state regulators could restrict market access or place undue burdens on Bamboo’s ability to manage risk selection.
Added
Inadequate pricing or selection of risk could materially adversely affect Bamboo’s results of operations and financial condition. 32 Risks Related to Investments Our investment portfolio may suffer reduced returns or losses, which could materially adversely affect our results of operations and financial condition.
Added
Risks Related to Taxation We may not meet the requirements of the five-year deferral from the Bermuda corporate income tax or the OECD Pillar Two Undertaxed Profits Rule, which could materially adversely affect our results of operations and financial condition. On December 27, 2023, Bermuda enacted a corporate income tax that will generally become effective on January 1, 2025.
Added
The Bermuda legislation defers the effective date until January 1, 2030, for Bermuda companies in consolidated groups that meet certain requirements.
Added
To qualify for the deferral, the group must (i) have permanent establishments in six or fewer countries, (ii) have less than €50 million of net tangible assets outside of the country where the group has the largest amount of net tangible assets and (iii) not have a Bermuda company subject to the Income Inclusion Rule of Pillar Two in any jurisdiction.
Added
White Mountains expects to meet the requirements to be exempt from the Bermuda corporate income tax until January 1, 2030. On December 15, 2022, European Union Member States voted to adopt the European Union Minimum Tax Directive (the “EU Minimum Tax Directive”) in conformity with OECD’s Pillar Two initiative.
Added
The EU Minimum Tax Directive requires European Union Member States to enact conforming law by December 31, 2023.
Added
The main rule of the EU Minimum Tax Directive, the Income Inclusion Rule (“IIR”), will become effective for fiscal years beginning on or after December 31, 2023, while the Undertaxed Profits Rule (“UTPR”) will become effective for fiscal years beginning on or after December 31, 2024. On December 20, 2023, Luxemburg enacted conforming Pillar Two legislation.
Added
The Luxembourg legislation defers the effective date of the UTPR until fiscal years beginning after December 31, 2029 for Luxembourg companies in consolidated groups with a non-EU parent company that meet certain requirements.
Added
To qualify for the deferral, the group must (i) have permanent establishments in six or fewer countries, and (ii) have less than €50 million of net tangible assets outside of the country where the group has the largest amount of net tangible assets.
Added
White Mountains expects to meet the requirements to be exempt from the Luxembourg UTPR until January 1, 2030. On July 11, 2023, the U.K. enacted conforming legislation adopting the Pillar Two IIR, which will become effective for fiscal years beginning on or after December 31, 2023.
Added
The U.K. has proposed legislation to adopt the Pillar Two UTPR effective for fiscal years beginning on or after December 31, 2024; however, this legislation has not yet been enacted.
Added
If White Mountains fails to meet the requirements of the five-year deferral under the Bermuda corporate income tax or the OECD Pillar Two UTPR, its results of operations and financial condition could be materially adversely affected. 34 We may be treated as a PFIC, in which case a U.S. holder of our common shares could be subject to disadvantageous rules under U.S. federal income tax laws.

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Item 2. Properties

Properties — owned and leased real estate

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In addition, Ark maintains underwriting offices in London, England and Hamilton, Bermuda. BAM’s and Kudu’s headquarters are located in New York, New York. The various offices and facilities of the consolidated Other Operating Businesses are owned or leased. Management considers its office facilities suitable and adequate for its current level of operations. Item 3. Legal Proceedings None.
In addition, Ark maintains underwriting offices in London, England and Hamilton, Bermuda. BAM’s and Kudu’s headquarters are located in New York, New York. The various offices and facilities of the consolidated Other Operating Businesses are owned or leased. Management considers its office facilities suitable and adequate for its current level of operations. Item 3. Legal Proceedings None. 39
In addition, White Mountains maintains a professional office in Guilford, Connecticut, which houses its corporate finance and investment functions, and in Boston, Massachusetts, which houses its corporate accounting, reporting and internal audit functions. All of the Company’s professional offices are leased. HG Global’s and Ark’s headquarters are located in Hamilton, Bermuda.
In addition, White Mountains maintains a professional office in Guilford, Connecticut, which houses its corporate finance and investment functions, and in Boston, Massachusetts, which houses its corporate accounting, reporting and internal audit functions. All of the Company’s professional offices are leased. HG Global’s, WM Outrigger Re’s and Ark’s headquarters are located in Hamilton, Bermuda.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. Legal Proceedings 36 ITEM 4. Mine Safety Disclosures 36 Available Information 36 Information About Our Executive Officers 37 PART II ITEM 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 38
ITEM 3. Legal Proceedings 39 ITEM 4. Mine Safety Disclosures 40 Available Information 40 Information About Our Executive Officers 40 PART II ITEM 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 41

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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In addition, the Company’s code of business conduct and ethics as well as the various charters governing the actions of certain of the Company’s Committees of its Board of Directors, including its Audit Committee, Compensation Committee and Nominating and Governance Committee, are available at www.whitemountains.com .
In addition, the Company’s code of business conduct and ethics as well as the various charters governing the actions of certain of the Company’s Committees of its Board of Directors, including its Audit Committee and Compensation/Nominating & Governance Committee, are available at www.whitemountains.com .
Caffrey served as Chief Executive Officer of Aon’s Global Affinity business. Prior to that, he served as Chief Financial Officer of Aon Risk Solutions globally and as Chief Financial Officer of Aon Risk Solutions Americas. Prior to joining Aon, Mr. Caffrey spent 12 years with McKinsey & Company. Mr.
Caffrey served as Chief Executive Officer of Aon’s Global Affinity business. Prior to that, he served as Chief Financial Officer of Aon Risk Solutions globally and as Chief Financial Officer of Aon Risk Solutions Americas. Prior to joining Aon, Mr. Caffrey spent 12 years with McKinsey & Company. Ms.
Seelig Executive Vice President and General Counsel 54 2002 All executive officers of the Company and its subsidiaries are elected by the Board for a term of one year or until their successors have been elected and have duly qualified. Information with respect to the principal occupation and relevant business experience of the Executive Officers follows: Mr.
Seelig Executive Vice President and General Counsel 55 2002 All executive officers of the Company and its subsidiaries are elected by the Board for a term of one year or until their successors have been elected and have duly qualified. Information with respect to the principal occupation and relevant business experience of the Executive Officers follows: Mr.
Seelig is Executive Vice President and General Counsel of the Company. Prior to joining White Mountains in 2002, Mr. Seelig was with the law firm of Cravath, Swaine & Moore. 37 PART II
Hildreth spent 13 years with PricewaterhouseCoopers. Mr. Seelig is Executive Vice President and General Counsel of the Company. Prior to joining White Mountains in 2002, Mr. Seelig was with the law firm of Cravath, Swaine & Moore. 40 PART II
Prior to that, she served as Managing Director and General Auditor of WM Capital. She joined White Mountains in 2003 and has served in a variety of accounting and auditing-related positions with the Company and its subsidiaries. Prior to joining the Company, Ms. Hildreth spent 13 years with PricewaterhouseCoopers. Mr.
Hildreth was appointed as Managing Director and Chief Accounting Officer of the Company in May 2021. Prior to that, she served as Managing Director and General Auditor of WM Capital. She joined White Mountains in 2003 and has served in a variety of accounting and auditing-related positions with the Company and its subsidiaries. Prior to joining the Company, Ms.
Caffrey Executive Vice President and Chief Financial Officer 50 2022 Reid T. Campbell President 55 2007 Michaela J. Hildreth Managing Director and Chief Accounting Officer 55 2021 Robert L.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS (as of February 23, 2024) Name Position Age Executive Officer Since G. Manning Rountree Chief Executive Officer 51 2009 Liam P. Caffrey Executive Vice President and Chief Financial Officer 51 2022 Michaela J. Hildreth Managing Director and Chief Accounting Officer 56 2021 Robert L.
Removed
Additionally, all such documents are physically available at the Company’s registered office at Clarendon House, 2 Church Street, Hamilton, HM 11 Bermuda. 36 INFORMATION ABOUT OUR EXECUTIVE OFFICERS (As of February 24, 2023) Name Position Age Executive Officer Since G. Manning Rountree Chief Executive Officer 50 2009 Liam P.
Removed
Campbell was appointed President of the Company in March 2022 and previously served as Executive Vice President and Chief Financial Officer from May 2017 until March 2022. Prior to that, he served as a Managing Director of WM Capital and as President of WM Advisors.
Removed
He joined White Mountains in 1994 and has served in a variety of financial management positions with the Company and its subsidiaries. Prior to joining White Mountains, Mr. Campbell spent three years with KPMG. Mr. Campbell also serves as a director of BAM. Ms. Hildreth was appointed as Managing Director and Chief Accounting Officer of the Company in May 2021.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities White Mountains’s common shares are listed on the New York Stock Exchange (symbol “WTM”) and the Bermuda Stock Exchange (symbol “WTM-BH”). As of February 21, 2023, there were 234 registered holders of White Mountains common shares, par value $1.00 per share.
Item 5. Market for the Company’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities White Mountains’s common shares are listed on the New York Stock Exchange (symbol “WTM”) and the Bermuda Stock Exchange (symbol “WTM-BH”). As of February 21, 2024, there were 234 registered holders of White Mountains common shares, par value $1.00 per share.
Cumulative returns for the five-year period ended December 31, 2022 are also shown for the Standard & Poor’s 500 Stocks Capitalization Weighted Index (“S&P 500”) and the Standard & Poor’s 500 Stocks (Property & Casualty) Capitalization Weighted Index (“S&P P&C”) for comparison.
Cumulative returns for the five-year period ended December 31, 2023 are also shown for the Standard & Poor’s 500 Stocks Capitalization Weighted Index (“S&P 500”) and the Standard & Poor’s 500 Stocks (Property & Casualty) Capitalization Weighted Index (“S&P P&C”) for comparison.
For information on securities authorized for issuance under the Company’s equity compensation plans, see “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” on page 98 . The following graph presents the five-year cumulative total return for a shareholder who invested $100 in common shares as of December 31, 2017, assuming re-investment of dividends.
For information on securities authorized for issuance under the Company’s equity compensation plans, see “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” on page 99 . The following graph presents the five-year cumulative total return for a shareholder who invested $100 in common shares as of December 31, 2018, assuming re-investment of dividends.
The repurchase authorizations do not have a stated expiration date. Item 6. Selected Financial Data None. 38
The repurchase authorizations do not have a stated expiration date. Item 6. Selected Financial Data None. 41
Purchases of Equity Securities by the Company The following table provides information regarding common shares repurchased by the Company during the fourth quarter of 2022: Months Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans (1) October 1 - October 31, 2022 — $ — — 324,626 November 1 - November 30, 2022 1,333 $ 1,297.85 1,333 323,293 December 1 - December 31, 2022 2,743 $ 1,298.24 2,743 320,550 Total 4,076 $ 1,298.11 4,076 320,550 (1) White Mountains’s board of directors has authorized the Company to repurchase its common shares, from time to time, subject to market conditions.
Purchases of Equity Securities by the Company The following table provides information regarding common shares repurchased by the Company during the fourth quarter of 2023: Months Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans (1) October 1 - October 31, 2023 — $ — — 301,014 November 1 - November 30, 2023 — $ — — 301,014 December 1 - December 31, 2023 — $ — — 301,014 Total — $ — — 301,014 (1) White Mountains’s board of directors has authorized the Company to repurchase its common shares, from time to time, subject to market conditions.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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ITEM 6. Selected Financial Data 38 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Results of Operations 39 Liquidity and Capital Resources 63 Transactions with Related Persons 68 Non-GAAP Financial Measures 69 Critical Accounting Estimates 71 Forward-Looking Statements 94 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 95 ITEM 8.
ITEM 6. Selected Financial Data 41 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 42 Results of Operations 42 Liquidity and Capital Resources 67 Transactions with Related Persons 73 Non-GAAP Financial Measures 73 Critical Accounting Estimates 74 Forward-Looking Statements 95 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 96 ITEM 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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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.
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 Company’s chief operating decision makers and its Board of Directors.
Under U.S. Statutory accounting, they are classified as policyholders’ surplus. (2) Under GAAP, interest accrues daily on the BAM Surplus Notes. Under U.S. Statutory accounting, interest is not accrued on the BAM Surplus Notes until it has been approved for payment by insurance regulators.
Under U.S. Statutory accounting, they are classified as policyholders’ surplus. (2) Under GAAP, interest accrues daily on the BAM Surplus Notes. Under U.S. Statutory accounting, interest is not accrued on the BAM Surplus Notes until it has been approved for payment by insurance regulators.
Of this payment, $25 million was a repayment of principal held in the Supplemental Trust, $1 million was a payment of accrued interest held in the Supplemental Trust and $10 million was a payment of accrued interest held outside the Supplemental Trust.
Of this payment, $25 million was a repayment of principal held in the Supplemental Trust, $1 million was a payment of accrued interest held in the Supplemental Trust and $10 million was a payment of accrued interest held outside the Supplemental Trust.
The GAAP book value per share numerator is adjusted (i) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM Surplus Notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global.
The GAAP book value per share numerator is adjusted (i) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global and (ii) to include a discount for the time value of money arising from the modeled timing of cash payments of principal and interest on the BAM Surplus Notes.
The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rate reflects the weighted average cost of capital, considering comparable public company data, adjusted for risks specific to the business and industry.
The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rate reflects the weighted average cost of capital, considering comparable public company data and adjusted for risks specific to the business and industry.
However, since the fund managers do not provide sufficient information to evaluate the pricing methods and inputs for each underlying investment, White Mountains considers the valuation inputs to be unobservable. The fair value of White Mountains’s other long-term investments measured at NAV are generally determined using the fund manager’s NAV.
However, since fund managers do not provide sufficient information to evaluate the pricing methods and inputs for each underlying investment, White Mountains considers the valuation inputs to be unobservable. The fair value of White Mountains’s other long-term investments measured at NAV are generally determined using the fund manager’s NAV.
Under its agreements with HG Global, BAM is required to seek regulatory approval to pay principal and interest on the BAM Surplus Notes only to the extent that its remaining qualified statutory capital and other capital resources continue to support its outstanding obligations, its business plan and its “AA/stable” rating from Standard & Poor’s.
Under its agreements with HG Global, BAM is required to seek regulatory approval to pay principal and interest on the BAM Surplus Notes only to the extent that its remaining qualified statutory capital and other capital resources continue to support its outstanding obligations, its business plan and its “AA/stable” rating from Standard & Poor’s.
It is important to note that the volatilities and variations discussed below are not meant to be worst-case scenarios or an all-inclusive list, and therefore it is possible that future volatilities and variations may be more than amounts discussed below. • Sustained elevated levels of inflation : Elevated levels of inflation have been observed during 2022, and recent economic forecasts suggest this trend will continue at least in the short term.
It is important to note that the volatilities and variations discussed below are not meant to be worst-case scenarios or an all-inclusive list, and therefore it is possible that future volatilities and variations may be more than amounts discussed below. • Sustained elevated levels of inflation : Elevated levels of inflation have been observed during 2022 and 2023, and recent economic forecasts suggest this trend will continue at least in the short term.
These investments are subject to credit spread risk and interest rate risk, and may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and various other market factors. The underlying investments of White Mountains’s multi-investor ILS funds consist primarily of catastrophe bonds, collateralized reinsurance investments and industry loss warranties.
These investments are subject to credit spread and interest rate risk and may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other market factors. The underlying investments of White Mountains’s multi-investor ILS funds consist primarily of catastrophe bonds, collateralized reinsurance investments and industry loss warranties.
Some, but perhaps not all, of the IBNR reserves may be needed to handle adverse reporting from clients. • Ark new business: In January 2021, in response to an improved underwriting environment, Ark converted GAIL into a Class 4 Bermuda-based insurance and reinsurance company and began to underwrite third-party business.
Some, but perhaps not all, of the IBNR reserves may be needed to handle adverse reporting from clients. 81 • Ark new business: In January 2021, in response to an improved underwriting environment, Ark converted GAIL into a Class 4 Bermuda-based insurance and reinsurance company and began to underwrite third-party business.
White Mountains purchased 100% of the preference shares issued by its segregated account, WM Outrigger Re, for $205 million. 67 Cash flows from investing and financing activities for the year ended December 31, 2021 Financing and Other Capital Activities During 2021, the Company declared and paid a $3 million cash dividend to its common shareholders.
White Mountains purchased 100% of the preference shares issued by its segregated account, WM Outrigger Re, for $205 million. Cash flows from investing and financing activities for the year ended December 31, 2021 Financing and Other Capital Activities During 2021, the Company declared and paid a $3 million cash dividend to its common shareholders.
Loss and LAE Reserves General Ark establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The process of estimating loss and LAE reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain.
Ark’s Loss and LAE Reserves General Ark establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The process of estimating loss and LAE reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain.
The result of the independent actuarial review indicated that Ark’s net recorded loss and LAE reserves fall within the ranges noted above. Although Ark believes its loss and LAE reserves are reasonably stated, ultimate losses may deviate, perhaps materially, from the recorded reserve amounts and could be above the high end of the range of actuarial projections.
The result of the independent actuarial review indicated that Ark’s net recorded loss and LAE reserves fall within the range noted above. Although Ark believes its loss and LAE reserves are reasonably stated, ultimate losses may deviate, perhaps materially, from the recorded reserve amounts and could be above the high end of the range of actuarial projections.
On a monthly basis, BAM deposits cash equal to ceded premiums, net of ceding commissions, due to HG Re under the FLRT into the Regulation 114 Trust. The Regulation 114 Trust target balance is equal to HG Re’s unearned premiums and unpaid loss and LAE reserves, if any.
On a monthly basis, BAM deposits cash equal to ceded premiums, net of ceding commissions, due to HG Re under the FLRT directly into the Regulation 114 Trust. The Regulation 114 Trust target balance is equal to HG Re’s unearned premiums and unpaid loss and LAE reserves, if any.
The reconciliation of total capital to total adjusted capital is included on page 65 . 70 CRITICAL ACCOUNTING ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss the Company’s consolidated financial statements, which have been prepared in accordance with GAAP.
The reconciliation of total capital to total adjusted capital is included on page 70 . CRITICAL ACCOUNTING ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss the Company’s consolidated financial statements, which have been prepared in accordance with GAAP.
Total revenues and pre-tax income in 2022 included $54 million of net investment income and $64 million of net realized and unrealized investment gains compared to $44 million and $90 million in 2021. Kudu deployed $101 million, including transaction costs, in five asset management firms in 2022.
Total revenues and pre-tax income in 2022 included $54 million of net investment income and $64 million of net realized and unrealized investment gains compared to $44 million and $90 million in 2021. Kudu deployed $101 million, including transaction costs, into five asset management firms in 2022.
While the impact on construction costs could be viewed as a short-term measure, there is uncertainty over how long it will take for the current elevated level of costs to reduce back to historic norms given COVID-19 disruption and worldwide supply chain issues. • Catastrophe losses : The years 2017 through 2022 have been active for major loss events, including natural catastrophes.
While the impact on construction costs could be viewed as a short-term measure, there is uncertainty over how long it will take for the current elevated level of costs to reduce back to historic norms given COVID-19 disruption and worldwide supply chain issues. • Catastrophe losses : The years 2017 through 2023 have been active for major loss events, including natural catastrophes.
Payments made to the BAM Surplus Notes are applied pro rata between outstanding principal and interest. Deferred interest is due on the stated maturity date in 2042. 3.
Payments made on the BAM Surplus Notes are applied pro rata between outstanding principal and interest. Deferred interest is due on the stated maturity date in 2042. 3.
In addition, from time to time White Mountains has also repurchased its common shares through tender offers that were separately approved by its board of directors.
In addition, from time to time White Mountains has also repurchased its common shares through self-tender offers that were separately approved by its Board of Directors.
White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise. 94
White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.
The estimated payments reflected in the table are based on current accrual factors (including performance relative to targets and common share price) and assume that all outstanding balances were 100% vested as of December 31, 2022. There are no provisions within White Mountains’s operating lease agreements that would trigger acceleration of future lease payments.
The estimated payments reflected in the table are based on current accrual factors (including performance relative to targets and common share price) and assume that all outstanding balances were 100% vested as of December 31, 2023. There are no provisions within White Mountains’s operating lease agreements that would trigger acceleration of future lease payments.
See Item 1A., Risk Factors, “ If BAM does not pay some or all of the principal and interest due on the BAM Surplus Notes, it could materially adversely affect our results of operations and financial condition.” on page 27 . Periodically, White Mountains’s management reviews the recoverability of amounts recorded from the BAM Surplus Notes.
See Item 1A., Risk Factors, “ If BAM does not pay some or all of the principal and interest due on the BAM Surplus Notes, it could materially adversely affect our results of operations and financial condition.” on page 28 . Periodically, White Mountains’s management reviews the recoverability of amounts recorded from the BAM Surplus Notes.
The majority of these shares were repurchased through a self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses.
The majority of these shares were repurchased through a self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses. 61 II.
The debt service model assumes both par insured and total pricing gradually increase from 2023 to 2026, and flatten thereafter. Assumptions regarding future trends for these factors are a matter of significant judgment, and whether actual results will follow the model is subject to a number of risks and uncertainties.
The debt service model assumes both par insured and total pricing gradually increase from 2024 to 2026 and flatten thereafter. Assumptions regarding future trends for these factors are a matter of significant judgment, and whether actual results will follow the model is subject to a number of risks and uncertainties.
White Mountains cannot promise that its expectations in such forward-looking statements will turn out to be correct. White Mountains’s actual results could be materially different from and worse than its expectations. See “ FORWARD-LOOKING STATEMENTS ” on page 94 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
White Mountains cannot promise that its expectations in such forward-looking statements will turn out to be correct. White Mountains’s actual results could be materially different from and worse than its expectations. See “ FORWARD-LOOKING STATEMENTS ” on page 95 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
The determination of the fair value of these securities involves significant management judgment, and the use of valuation models and assumptions that are inherently subjective and uncertain. See Item 1A. Risk Factors, “ Our investment portfolio includes securities that do not have readily observable market prices. We use valuation methodologies that are inherently subjective and uncertain to value these securities.
The determination of the fair value of these securities involves significant management judgment, and the use of valuation analyses and assumptions that are inherently subjective and uncertain. See Item 1A. Risk Factors, “ Our investment portfolio includes securities that do not have readily observable market prices. We use valuation methodologies that are inherently subjective and uncertain to value these securities.
The following table summarizes the participation of Ark’s TPC Providers by year of account: 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TPC Providers’ Participation — % 66.2 % 70.0 % 59.6 % 60.0 % 57.6 % 58.3 % 42.8 % — % — % Each of the ten tables includes three sections.
The following table summarizes the participation of Ark’s TPC Providers by year of account: 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TPC Providers’ Participation 66.2 % 70.0 % 59.6 % 60.0 % 57.6 % 58.3 % 42.8 % — % — % — % Each of the ten tables includes three sections.
On an ongoing basis, White Mountains also considers qualitative changes in facts and circumstances, which may impact the valuation of its unconsolidated entities, including economic and market changes in relevant industries, changes to the entity’s capital structure, business strategy and key personnel, and any recent transactions relating to the unconsolidated entity.
On an ongoing basis, White Mountains also considers qualitative changes in facts and circumstances, which may impact the valuation of its unconsolidated entities, including economic and market changes in relevant industries, changes to the entity’s capital structure, business strategy and key personnel and any recent transactions.
As of December 31, 2022, White Mountains believes such notes and interest thereon to be fully recoverable. White Mountains’s review is based on a debt service model that forecasts operating results for BAM and related payments on the BAM Surplus Notes through maturity of the BAM Surplus Notes in 2042.
As of December 31, 2023, White Mountains believes such notes and interest thereon to be fully recoverable. White Mountains’s review is based on a debt service model that forecasts operating results for BAM and related payments on the BAM Surplus Notes through maturity of the BAM Surplus Notes in 2042.
The top section of the table presents, for each of the previous 10 accident years (1) cumulative total undiscounted incurred loss and LAE as of each of the previous 10 year-end evaluations, (2) total IBNR plus expected development on reported claims as of December 31, 2022, and (3) the cumulative number of reported claims as of December 31, 2022.
The top section of the table presents, for each of the previous 10 accident years, (1) cumulative total undiscounted incurred loss and LAE as of each of the previous 10 year-end evaluations, (2) total IBNR plus expected development on reported claims as of December 31, 2023 and (3) the cumulative number of reported claims as of December 31, 2023.
Dividend Capacity Following is a description of the dividend capacity of White Mountains’s insurance and reinsurance and other operating subsidiaries: HG Global/BAM As of December 31, 2022, HG Global had $619 million face value of preferred shares outstanding, of which White Mountains owned 96.9%.
Dividend Capacity Following is a description of the dividend capacity of White Mountains’s insurance and reinsurance and other operating subsidiaries: HG Global/BAM As of December 31, 2023, HG Global had $619 million face value of preferred shares outstanding, of which White Mountains owned 96.9%.
As of December 31, 2022, Kudu had deployed $713 million in 20 asset and wealth management firms globally, including two that have been exited. As of December 31, 2022, the asset and wealth management firms have combined assets under management of approximately $74 billion, spanning a range of asset classes.
As of December 31, 2022, Kudu had deployed $713 million into 20 asset and wealth management firms globally, including two that have been exited. As of December 31, 2022, the asset and wealth management firms have combined assets under management of approximately $74 billion, spanning a range of asset classes.
White Mountains’s other long-term investments portfolio returned 10.5% in 2022 compared to 20.7% in 2021.
White Mountains’s portfolio of other long-term investments returned 10.5% in 2022 compared to 20.7% in 2021.
The duration of White Mountains’s fixed income portfolio, including short-term investments, was 2.6 years and 3.2 years as of December 31, 2021 and 2020. White Mountains’s fixed income portfolio includes fixed maturity and short-term investments held on deposit or as collateral. See Note 3 — “Investment Securities” .
The duration of White Mountains’s fixed income portfolio, including short-term investments, was 2.3 years and 2.6 years as of December 31, 2022 and 2021. White Mountains’s fixed income portfolio includes fixed maturity and short-term investments held on deposit or as collateral. See Note 3 — “Investment Securities” .
GAIL now underwrites a range of third-party business including property, specialty, marine & energy and casualty lines from Bermuda. GAIL’s initial expected loss ratios selected for reserving purposes were based on market benchmarks, supplemented based on discussions with underwriters, policy details, views at time of pricing the risk and emerging experience during 2021 and 2022.
GAIL now underwrites a range of third-party business including property, specialty, marine & energy and casualty lines from Bermuda. GAIL’s initial expected loss ratios selected for reserving purposes were based on market benchmarks, supplemented based on discussions with underwriters, policy details, views at time of pricing the risk and emerging experience since 2021.
The increase in claims paying resources was driven primarily by the Fidus Re 2022 and 2021 Agreements and increases in the statutory value of the collateral trusts resulting from positive cash flow from operations, partially offset by the portion of cash payments on the BAM surplus notes related to accrued interest held outside the Supplemental Trust.
The increase in claims paying resources was driven primarily by the Fidus Re 2022 Agreement and increases in the statutory value of the collateral trusts resulting from positive cash flow from operations, partially offset by the portion of cash payments on the BAM surplus notes related to accrued interest held outside the Supplemental Trust.
Premium growth at Ark has been supported by favorable market conditions across most classes with general inflationary concerns and market capacity constraints, along with the ongoing conflict in Ukraine driving positive rate momentum. Ark reported pre-tax income of $95 million in 2022 compared to $53 million in 2021.
Premium growth at Ark was supported by favorable market conditions across most classes with general inflationary concerns and market capacity constraints, along with the ongoing conflict in Ukraine, driving positive rate momentum. Ark reported pre-tax income of $95 million in 2022 compared to $53 million in 2021.
Range of Reserves The following table shows the recorded loss and LAE reserves and the high and low ends of Ark’s range of reasonable loss and LAE reserve estimates, net of reinsurance recoverables on unpaid losses, as of December 31, 2022.
Range of Reserves The following table shows the recorded loss and LAE reserves and the high and low ends of Ark’s range of reasonable loss and LAE reserve estimates, net of reinsurance recoverables on unpaid losses, as of December 31, 2023.
The following table presents common shares repurchased by the Company as well as the average price per share as a percent of December 31, 2022 GAAP book value per share, adjusted book value per share and market value per share.
The following table presents common shares repurchased by the Company as well as the average price per share as a percent of December 31, 2023 GAAP book value per share, adjusted book value per share and market value per share.
The values of securities established using these methodologies may never be realized, which could materially adversely affect our results of operations and financial condition.” on page 32 .
The values of securities established using these methodologies may never be realized, which could materially adversely affect our results of operations and financial condition.” on page 34 .
Also included in this section is a calculation of the loss and LAE reserves as of December 31, 2022 which is then included in the reconciliation to the consolidated balance sheet presented above.
Also included in this section is a calculation of the loss and LAE reserves as of December 31, 2023, which is then included in the reconciliation to the consolidated balance sheet presented above.
However, the BAM Surplus Notes and accrued interest are carried as assets at HG Global, of which White Mountains owns 96.9% of the preferred equity and 88.4% of the common equity, while the BAM Surplus Notes are carried as liabilities at BAM, which White Mountains has no ownership interest in and is completely attributed to non-controlling interests.
However, the BAM Surplus Notes and accrued interest are carried as assets at HG Global, of which White Mountains owns 96.9% of the preferred equity and 88.4% of the common equity, while the BAM Surplus Notes are carried as liabilities at BAM, which White Mountains has no ownership interest in and is completely attributed to noncontrolling interests.
Based on a debt service model that forecasts operating results for BAM through maturity of the BAM Surplus Notes, the present value of the BAM Surplus Notes, including accrued interest and using an 8.0% discount rate, was estimated to be $98 million, $130 million and $147 million less than the nominal GAAP carrying values as of December 31, 2022, 2021 and 2020, respectively.
Based on a debt service model that forecasts operating results for BAM through maturity of the BAM Surplus Notes, the present value of the BAM Surplus Notes, including accrued interest and using an 8.0% discount rate, was estimated to be $91 million, $98 million and $130 million less than the nominal GAAP carrying values as of December 31, 2023, 2022 and 2021, respectively.
The primary uses of cash are expected to be general and administrative expenses, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of debt obligations, dividend payments to holders of the Company’s common shares, distributions to non-controlling interest holders of consolidated subsidiaries, contributions to operating subsidiaries and, from time to time, purchases of operating subsidiaries and repurchases of the Company’s common shares.
The primary uses of cash are expected to be general and administrative expenses, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of debt obligations, dividend payments to holders of the Company’s common shares, distributions to noncontrolling interest holders of consolidated subsidiaries, contributions to operating subsidiaries and, from time to time, purchases of operating subsidiaries and repurchases of the Company’s common shares.
Catastrophe losses for 2022 included $45 million related to events in the Ukraine and $44 million related to Hurricane Ian on a net basis after reinstatement premiums.
Catastrophe losses for 2022 included $45 million related to the conflict in Ukraine and $44 million related to Hurricane Ian on a net basis after reinstatement premiums.
As of December 31, 2022, the asset and wealth management firms have combined assets under management of approximately $74 billion, spanning a range of asset classes, including real estate, wealth management, hedge funds, private equity and alternative credit strategies. Kudu’s capital was deployed at an average gross cash yield at inception of 9.9%.
As of December 31, 2023, the asset and wealth management firms have combined assets under management of approximately $104 billion, spanning a range of asset classes, including real estate, wealth management, hedge funds, private equity and alternative credit strategies. Kudu’s capital was deployed at an average gross cash yield at inception of 9.9%.
For example, the first column is calculated as the incremental paid loss and LAE in the first calendar year for each given accident year (e.g. calendar year 2020 for accident year 2020, calendar year 2021 for accident year 2021) divided by the cumulative incurred loss and LAE as of December 31, 2022 for that accident year.
For example, the first column is calculated as the incremental paid loss and LAE in the first calendar year for each given accident year (e.g., calendar year 2023 for accident year 2023, calendar year 2022 for accident year 2022) divided by the cumulative incurred loss and LAE as of December 31, 2023 for that accident year.
Summary of Investment Results White Mountains’s total investment results include results from all segments. For purposes of discussing rates of return all percentages are presented on a pre-tax basis, gross of management fees and trading expenses, and before any adjustments for TPC Providers, in order to produce a better comparison to benchmark returns.
Summary of Investment Results White Mountains’s total investment results include results from all segments. For purposes of discussing rates of return, percentages are presented gross of management fees and trading expenses and before any adjustments for TPC Providers, in order to produce a better comparison to benchmark returns.
See Note 5 — “Losses and Loss Adjustment Expense Reserves” on page F- 32 for a description of Ark’s loss and LAE reserves and actuarial methods. Ark performs an actuarial review of its recorded loss and LAE reserves each quarter, using several generally accepted actuarial methods to evaluate its loss reserves, each of which has its own strengths and weaknesses.
See Note 5 — “Loss and Loss Adjustment Expense Reserves” on page F- 33 for a description of Ark’s loss and LAE reserves and actuarial methods. Ark performs an actuarial review of its recorded loss and LAE reserves each quarter, using several generally accepted actuarial methods to evaluate its loss reserves, each of which has its own strengths and weaknesses.
The total unpaid loss and LAE reserves as of December 31, 2022 is calculated as the cumulative incurred loss and LAE from the top section less the cumulative paid loss and LAE from the middle section, plus any outstanding liabilities from accident years prior to 2013. 81 The bottom section of the table is supplementary information about the average historical claims duration as of December 31, 2022.
The total unpaid loss and LAE reserves as of December 31, 2023 is calculated as the cumulative incurred loss and LAE from the top section less the cumulative paid loss and LAE from the middle section, plus any outstanding liabilities from accident years prior to 2013. 83 The bottom section of the table is supplementary information about the average historical claims duration as of December 31, 2023.
In the event of a municipal bond refunding, a portion of the MSC from original issuance can be reutilized, in effect serving as a credit against the total insurance premium on the refunding of the municipal bond. Gross written premiums and MSC collected in the HG Global/BAM segment totaled $147 million and $118 million in 2022 and 2021.
In the event of a municipal bond refunding, a portion of the MSC from original issuance can be reutilized, in effect serving as a credit against the total insurance premium on the refunding of the municipal bond. Gross written premiums and MSC collected in the HG Global/BAM segment totaled $131 million and $147 million in 2023 and 2022.
As of December 31, 2022, White Mountains had total goodwill and other intangible assets of $392 million, of which $293 million related to the acquisition of Ark. During 2022 and 2021, White Mountains performed its periodic reviews for potential impairment and did not recognize any impairments of goodwill and other intangible assets. See Item 1A.
As of December 31, 2023, White Mountains had total goodwill and other intangible assets of $371 million, of which $293 million related to the acquisition of Ark. During 2023 and 2022, White Mountains performed its periodic reviews for potential impairment and did not recognize any impairments of goodwill and other intangible assets. See Item 1A.
White Mountains also has future binding commitments to fund certain other long-term investments. These commitments, which totaled approximately $102 million as of December 31, 2022, do not have fixed funding dates and, are therefore, excluded from the table above.
White Mountains also has future binding commitments to fund certain other long-term investments. These commitments, which totaled approximately $61 million as of December 31, 2023, do not have fixed funding dates and are therefore excluded from the table above.
In determining fair value, White Mountains considers factors such as performance of underlying products and vehicles, expected client growth rates, new fund launches, fee rates by products, capacity constraints, operating cash flow of underlying manager and other qualitative factors, including the assessment of key personnel.
In determining fair value, White Mountains considers factors for each underlying manager, such as performance of products and vehicles, expected client growth rates, new fund launches, fee rates by products, capacity constraints, operating cash flows and other qualitative factors, including the assessment of key personnel.
White Mountains’s fixed income portfolio includes fixed maturity and short-term investments held on deposit or as collateral. See Note 3 — “Investment Securities” . White Mountains’s fixed income portfolio returned -4.8% in 2022 compared to -0.4% in 2021, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -9.5% and -1.3% for the comparable periods.
White Mountains’s fixed income portfolio includes fixed maturity and short-term investments held on deposit or as collateral. See Note 3 — “Investment Securities” . White Mountains’s fixed income portfolio returned 5.8% in 2023 compared to -4.8% in 2022, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of 5.2% and -9.5% for the comparable periods.
These investments are based on quoted market prices or management’s estimates of fair value, which could cause the amount realized upon sale to differ from current reported fair values.
These investments are based on quoted market prices or fund managers’ estimates of fair value, which could cause the amount realized upon sale to differ from current reported fair values.
See Note 3 — “Investment Securities” on page F- 19 for tables that summarize the changes in White Mountains’s fair value measurements by level as of December 31, 2022 and 2021 and, for investments held at the end of the period, the total net unrealized gains (losses) attributable to Level 3 investments for the years ended December 31, 2022, 2021 and 2020. 75 2.
See Note 3 — “Investment Securities” on page F- 20 for tables that summarize the changes in White Mountains’s fair value measurements by level as of December 31, 2023 and 2022, and, for investments held at the end of the period, the total net unrealized gains (losses) attributable to Level 3 investments for the years ended December 31, 2023, 2022 and 2021. 2.
Transfers of securities between levels are based on investments held as of the beginning of the period. Other Long-Term Investments As of December 31, 2022, $912 million of White Mountains’s other long-term investments, which consisted primarily of unconsolidated entities including Kudu’s Participation Contracts and PassportCard/DavidShield, were classified as Level 3 investments in the GAAP fair value hierarchy.
Transfers of securities between levels are based on investments held as of the beginning of the period. Other Long-Term Investments As of December 31, 2023, $1,138 million of White Mountains’s other long-term investments, which consisted primarily of unconsolidated entities, including Kudu’s Participation Contracts and PassportCard/DavidShield, were classified as Level 3 investments in the GAAP fair value hierarchy.
White Mountains maintains a portfolio of other long-term investments that consists primarily of unconsolidated entities, including Kudu’s Participation Contracts, private equity funds and hedge funds, a bank loan fund, Lloyd’s trust deposits, ILS funds and private debt instruments. White Mountains’s portfolio of other long-term investments was $1.5 billion and $1.4 billion as of December 31, 2022 and 2021.
White Mountains maintains a portfolio of other long-term investments that consists primarily of unconsolidated entities, including Kudu’s Participation Contracts, private equity funds and hedge funds, a bank loan fund, Lloyd’s trust deposits, ILS funds and private debt instruments. White Mountains’s portfolio of other long-term investments was $2.0 billion and $1.5 billion as of December 31, 2023 and 2022.
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.
Holders of the HG Global preferred shares are entitled to receive cumulative dividends at a fixed annual rate of 6.0% on a quarterly basis, when and if declared by HG Global.
As of December 31, 2022, White Mountains’s debt service model indicated that the BAM Surplus Notes would be fully repaid approximately six years prior to final maturity, which is generally consistent with the results of the update of the debt service model as of December 31, 2021.
As of December 31, 2023, White Mountains’s debt service model indicated that the BAM Surplus Notes would be fully repaid approximately five years prior to final maturity, which is generally consistent with the results of the update of the debt service model as of December 31, 2022.
As a result, in 2021 White Mountains recorded a gain of $19 million in discontinued operations to reverse the accrued liability, including foreign currency translation. See Note 21 — “Held for Sale and Discontinued Operations” on page F- 68 .
As a result, in 2021 White Mountains recorded a gain of $19 million in discontinued operations to reverse the accrued liability, including foreign currency translation. See Note 20 — “Held for Sale and Discontinued Operations” on page F- 70 .
For example, a hypothetical increase in inflation rates by 4% per annum would increase the recorded loss and LAE reserves, net of reinsurance recoverables on unpaid losses, for the casualty lines of business by approximately $7 million, or approximately 5% of the recorded casualty loss and LAE reserves of $132 million.
For example, a hypothetical increase in inflation rates by 4% per annum would increase the recorded loss and LAE reserves, net of reinsurance recoverables on unpaid losses, for the casualty lines of business by approximately $10 million, or approximately 5% of the recorded casualty loss and LAE reserves of $218 million.
The GAAP combined ratio for 2022 included five points of favorable prior year loss reserve development, driven primarily by the property and accident & health, specialty and marine & energy reserving lines of business, predominantly from business underwritten in London.
The combined ratio for 2022 included six points of net favorable prior year loss reserve development, driven primarily by the property and accident & health, specialty and marine & energy reserving lines of business, predominantly from business underwritten in London.
Total revenues, pre-tax income, and adjusted EBITDA for the year ended 2022 also included $54 million of net investment income compared to $44 million for the year ended 2021. The increase in net investment income was driven primarily by amounts earned from $310 million (including $2.9 million of transaction costs) in new deployments that Kudu made during 2022 and 2021.
Total revenues, pre-tax income, and adjusted EBITDA for the year ended 2022 also included $54 million of net investment income compared to $44 million for the year ended 2021. The increase in net investment income was driven primarily by amounts earned from $310 million in new deployments that Kudu made during 2022 and 2021.
As actual losses develop, Ark will revise its initial expectations with its actual experience. However, it could be a few years before Ark has sufficient internal data to rely on and possibly longer for the longer-tailed lines of business, such as casualty. In 2022, GAIL reported gross written premiums of $619 million.
As actual losses develop, Ark will revise its initial expectations with its actual experience. However, it could be a few years before Ark has sufficient internal data to rely on and possibly longer for the longer-tail lines of business, such as casualty. In 2023, GAIL reported gross written premiums of $871 million.
The GAAP combined ratio for 2022 included 13 points of catastrophe losses, driven primarily by the events in Ukraine and Hurricane Ian, compared to 10 points of catastrophe losses in 2021, driven primarily by Hurricane Ida, Winter Storm Uri and European floods.
The combined ratio for 2022 included 13 points of catastrophe losses, driven primarily by losses from the conflict in Ukraine and Hurricane Ian, compared to 10 points of catastrophe losses in 2021, driven primarily by Hurricane Ida, Winter Storm Uri and European floods.
Summary of Operations By Segment As of December 31, 2022, White Mountains conducted its operations through three reportable segments: (1) HG Global/BAM, (2) Ark, and (3) Kudu, with our remaining operating businesses, holding companies and other assets included in Other Operations.
SUMMARY OF OPERATIONS BY SEGMENT As of December 31, 2023, White Mountains conducted its operations through three segments: (1) HG Global/BAM, (2) Ark/WM Outrigger and (3) Kudu, with our remaining operating businesses, holding companies and other assets included in Other Operations.
See Note 2 — “Significant Transactions” . Ark is a specialty property and casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance products, including property, specialty, marine & energy, casualty and accident & health. Ark underwrites select coverages through its two major subsidiaries in the United Kingdom and Bermuda.
Ark is a specialty property and casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance products, including property, specialty, marine & energy, casualty and accident & health. Ark underwrites select coverages through its two major subsidiaries in the United Kingdom and Bermuda.
White Mountains’s portfolio of common equity securities consists of passive ETFs that seek to provide investment results that generally correspond to the performance of the S&P 500 Index and international listed common equity funds. White Mountains’s portfolio of common equity securities was $668 million and $251 million as of December 31, 2022 and 2021.
White Mountains’s portfolio of common equity securities consists of international listed equity funds, as well as passive ETFs that seek to provide investment results that generally correspond to the performance of the S&P 500 Index. White Mountains’s portfolio of common equity securities was $538 million and $668 million as of December 31, 2023 and 2022.
No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS. In December 2022, BAM made a $36 million cash payment of principal and interest on the BAM Surplus Notes held by HG Global.
No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS. In December 2023, BAM made a $27 million cash payment of principal and interest on the BAM Surplus Notes held by HG Global.
Intermediate Aggregate Index (9.5) % (1.3) % 5.6 % Common equity securities (1.0) % 11.0 % 3.6 % Investment in MediaAlpha (35.6) % (60.1) % 520.3 % Other long-term investments 10.5 % 20.7 % 2.5 % Total common equity securities, investment in MediaAlpha and other long-term investments 2.3 % (7.1) % 80.0 % Total common equity securities and other long-term investments 8.1 % 19.3 % 4.9 % S&P 500 Index (total return) (18.1) % 28.7 % 18.4 % Total consolidated portfolio (1.6) % (3.4) % 31.9 % Total consolidated portfolio - excluding MediaAlpha 0.3 % 6.4 % 4.6 % Investment Returns—Year Ended December 31, 2022 versus Year Ended December 31, 2021 White Mountains’s total consolidated portfolio return on invested assets was -1.6% in 2022.
Intermediate Aggregate Index 5.2 % (9.5) % (1.3) % Common equity securities 13.4 % (1.0) % 11.0 % Investment in MediaAlpha 11.8 % (35.6) % (60.1) % Other long-term investments 20.6 % 10.5 % 20.7 % Total common equity securities, investment in MediaAlpha and other long-term investments 18.5 % 2.3 % (7.1) % Total common equity securities and other long-term investments 19.0 % 8.1 % 19.3 % S&P 500 Index (total return) 26.3 % (18.1) % 28.7 % Total consolidated portfolio 11.4 % (1.6) % (3.4) % Total consolidated portfolio - excluding MediaAlpha 11.4 % 0.3 % 6.4 % Investment Returns—Year Ended December 31, 2023 versus Year Ended December 31, 2022 White Mountains’s total consolidated portfolio return on invested assets, both including and excluding White Mountains’s investment in MediaAlpha, was 11.4% in 2023.
See Note 21 — “Held for Sale and Discontinued Operations” on page F- 68 . 62 Sirius Group On April 18, 2016, White Mountains completed the sale of Sirius International Insurance Group, Ltd. (“Sirius Group”) to CM International Pte. Ltd. and CM Bermuda Limited (collectively “CMI”).
See Note 20 — “Held for Sale and Discontinued Operations” on page F- 70 . Sirius Group On April 18, 2016, White Mountains completed the sale of Sirius International Insurance Group, Ltd. (“Sirius Group”) to CM International Pte. Ltd. and CM Bermuda Limited (collectively, “CMI”).
This return included $93 million of net unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.3% in 2022.
White Mountains’s total consolidated portfolio return on invested assets was -1.6% in 2022, which included $93 million of net unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.3% in 2022.
This return included $93 million of net unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.3% in 2022.
White Mountains’s total consolidated portfolio return on invested assets was -1.6% in 2022, which included $93 million of net unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.3% in 2022.
The discount rates reflect the weighted average cost of capital, considering comparable public company data, adjusted for risks specific to the business and industry. The terminal exit multiple is generally based on expectations of annual cash flow to Kudu from each of its clients in the terminal year of the cash flow model.
The discount rates reflect the weighted average cost of capital, considering comparable public company data and adjusted for risks specific to the business and industry. The terminal cash flow exit multiple is generally based on expectations of annual cash flow to Kudu from each of its underlying managers in the terminal year of the discounted cash flow analysis.
Losses and LAE are categorized by the year in which the policy is underwritten (the year of account, or underwriting year) for purposes of Ark’s claims management and estimation of the ultimate loss and LAE reserves. For purposes of Ark’s reporting under GAAP, losses and LAE are categorized by the accident year.
Losses and LAE are categorized by the year in which the policy is underwritten (the year of account, or underwriting year) for purposes of Ark’s claims management and estimation of the ultimate loss and LAE reserves.
Share Repurchase Programs White Mountains’s board of directors has authorized the Company to repurchase its common shares from time to time, subject to market conditions. The repurchase authorizations do not have a stated expiration date. As of December 31, 2022, White Mountains may repurchase an additional 320,550 shares under these board authorizations.
Share Repurchase Programs White Mountains’s Board of Directors has authorized the Company to repurchase its common shares from time to time, subject to market conditions. The repurchase authorizations do not have a stated expiration date. As of December 31, 2023, White Mountains may repurchase an additional 301,014 shares under these Board authorizations.
White Mountains’s fixed income portfolio returned -0.4% in 2021 compared to 4.9% in 2020, outperforming and underperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -1.3% and 5.6% for the comparable periods.
White Mountains’s fixed income portfolio returned -4.8% in 2022 compared to -0.4% in 2021, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -9.5% and -1.3% for the comparable periods.
White Mountains believes these measures to be useful in evaluating White Mountains’s financial performance and condition. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 Overview—Year Ended December 31, 2022 versus Year Ended December 31, 2021 White Mountains ended 2022 with book value per share of $1,457 and adjusted book value per share of $1,495.
White Mountains believes these measures to be useful in evaluating White Mountains’s financial performance and condition. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 Overview—Year Ended December 31, 2023 versus Year Ended December 31, 2022 White Mountains ended 2023 with book value per share of $1,656 and adjusted book value per share of $1,704.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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White Mountains generally manages the interest rate risk associated with its portfolio of fixed maturity investments by monitoring the average duration of the portfolio. As of December 31, 2022, White Mountains’s fixed maturity investments are comprised primarily of debt securities issued by corporations, U.S. government and agency obligations, municipal obligations, mortgage and asset-backed securities and collateralized loan obligations.
White Mountains generally manages the interest rate risk associated with its portfolio of fixed maturity investments by monitoring the average duration of the portfolio. As of December 31, 2023, White Mountains’s fixed maturity investments are comprised primarily of debt securities issued by corporations, U.S. government and agency obligations, municipal obligations, mortgage and asset-backed securities and collateralized loan obligations.
The fair value estimates for the HG Global Senior Notes, Ark 2007 Subordinated Notes, Ark 2021 Subordinated Notes, Kudu Credit Facility, and Other Operations debt have been determined based on a discounted cash flow approach and are considered to be Level 3 measurements. 96 Foreign Currency Exposure As of December 31, 2022, White Mountains had foreign currency exposure on $202 million of net assets primarily related to Ark’s non-U.S. business, Kudu’s non-U.S.
The fair value estimates for the HG Global Senior Notes, Ark 2007 Subordinated Notes, Ark 2021 Subordinated Notes, Kudu Credit Facility and Other Operations debt have been determined based on a discounted cash flow approach and are considered to be Level 3 measurements. 97 Foreign Currency Exposure As of December 31, 2023, White Mountains had foreign currency exposure on $204 million of net assets primarily related to Ark/WM Outrigger’s non-U.S. business, Kudu’s non-U.S.
Assuming a hypothetical 10% and 30% increase or decrease in the value of White Mountains’s common equity securities, investment in MediaAlpha and other long-term investments as of December 31, 2022, the carrying value of White Mountains’s common equity securities, investment in MediaAlpha and other long-term investments would increase or decrease by $233 million and $698 million on a pre-tax basis, respectively.
Assuming a hypothetical 10% and 30% increase or decrease in the value of White Mountains’s common equity securities, investment in MediaAlpha and other long-term investments as of December 31, 2023, the carrying value of White Mountains’s common equity securities, investment in MediaAlpha and other long-term investments would increase or decrease by $279 million and $837 million on a pre-tax basis, respectively.
The following table presents the fair value and carrying value of these financial instruments as of December 31, 2022 and December 31, 2021: December 31, 2022 December 31, 2021 Millions Fair Value Carrying Value (1) Fair Value Carrying Value (1) HG Global Senior Notes $ 155.7 $ 146.5 $ — $ — Ark 2007 Subordinated Notes $ 28.4 $ 30.0 $ 27.6 $ 30.0 Ark 2021 Subordinated Notes $ 163.1 $ 153.7 $ 162.8 $ 155.9 Kudu Credit Facility $ 223.9 $ 208.3 $ 246.8 $ 218.2 Other Operations debt $ 38.2 $ 36.7 $ 17.7 $ 16.8 (1) See Note 7 — “Debt” for details of debt arrangements.
The following table presents the fair value and carrying value of these financial instruments as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Millions Fair Value Carrying Value (1) Fair Value Carrying Value (1) HG Global Senior Notes $ 158.7 $ 146.9 $ 155.7 $ 146.5 Ark 2007 Subordinated Notes $ 30.5 $ 30.0 $ 28.4 $ 30.0 Ark 2021 Subordinated Notes $ 171.8 $ 155.5 $ 163.1 $ 153.7 Kudu Credit Facility $ 225.6 $ 203.8 $ 223.9 $ 208.3 Other Operations debt $ 30.0 $ 28.4 $ 38.2 $ 36.7 (1) See Note 7 — “Debt” for details of debt arrangements.
The following table presents the estimated effects of hypothetical increases and decreases in market interest rates on White Mountains’s fixed maturity investments: $ in Millions Fair Value at December 31, 2022 Assumed Change in Relevant Interest Rate Estimated Fair Value After Change in Interest Rate Pre-Tax Increase (Decrease) in Fair Value Fixed maturity investments $ 1,920.9 100 bps decrease $ 1,984.2 $ 63.3 50 bps decrease 1,952.6 31.7 50 bps increase 1,889.6 (31.3) 100 bps increase 1,858.8 (62.1) The magnitude of the fair value decrease in rising interest rate scenarios may be more significant than the fair value increase in comparable falling interest rate scenarios.
The following table presents the estimated effects of hypothetical increases and decreases in market interest rates on White Mountains’s fixed maturity investments: $ in Millions Fair Value at December 31, 2023 Assumed Change in Relevant Interest Rate Estimated Fair Value After Change in Interest Rate Pre-Tax Increase (Decrease) in Fair Value Fixed maturity investments $ 2,109.3 100 bps decrease $ 2,174.2 $ 64.9 50 bps decrease 2,142.0 32.7 50 bps increase 2,076.4 (32.9) 100 bps increase 2,043.5 (65.8) The magnitude of the fair value decrease in rising interest rate scenarios may be more significant than the fair value increase in comparable falling interest rate scenarios.
The following table presents the fair value of White Mountains’s foreign denominated net assets (net liabilities) by segment as of December 31, 2022: $ in Millions Currency Ark Kudu Other Operations Total Fair Value % of Total Shareholders ’ Equity CAD $ 61.1 $ 74.8 $ — $ 135.9 3.5 % GBP 51.3 — — 51.3 1.3 AUD 7.6 36.8 — 44.4 1.1 EUR (43.0) — 12.4 (30.6) (.8) All other — — 1.4 1.4 — Total $ 77.0 $ 111.6 $ 13.8 $ 202.4 5.1 % The following table illustrates the pre-tax effect that a hypothetical 20% increase (i.e., U.S. dollar strengthening) or decrease (i.e., U.S. dollar weakening) in the rate of exchange from the foreign currencies to the U.S. dollar would have on the carrying value of White Mountains’s foreign denominated net assets as of December 31, 2022: $ in Millions Carrying Value of Foreign Denominated Net Assets Hypothetical Change Hypothetical Pre-Tax Increase (Decrease) in Carrying Value Hypothetical Percentage Increase (Decrease) in Stockholders’ Equity $ 202.4 20% increase $ (40.5) (1.0) % 20% decrease $ 40.5 1.0 %
The following table presents the fair value of White Mountains’s foreign denominated net assets (liabilities) by segment as of December 31, 2023: Currency $ in Millions Ark/ WM Outrigger Kudu Other Operations Total Fair Value % of Total Shareholders ’ Equity CAD $ 84.0 $ 73.6 $ — $ 157.6 3.5 % AUD 26.8 60.0 — 86.8 1.9 EUR (50.9) 19.1 14.3 (17.5) (.4) GBP (24.0) — — (24.0) (.5) All other — — .9 .9 — Total $ 35.9 $ 152.7 $ 15.2 $ 203.8 4.5 % The following table illustrates the pre-tax effect that a hypothetical 20% increase (i.e., U.S. dollar strengthening) or decrease (i.e., U.S. dollar weakening) in the rate of exchange from the foreign currencies to the U.S. dollar would have on the carrying value of White Mountains’s foreign denominated net assets as of December 31, 2023: $ in Millions Carrying Value of Foreign Denominated Net Assets Hypothetical Change Hypothetical Pre-Tax Increase (Decrease) in Carrying Value Hypothetical Percentage Increase (Decrease) in Stockholders’ Equity $ 203.8 20% increase $ (40.8) (1.0) % 20% decrease $ 40.8 1.0 %
The following table presents the estimated pre-tax effects of hypothetical widening and tightening of credit spreads on White Mountains’s fixed maturity investments by asset class: December 31, 2022 Millions Fair Value Tighten 50 Tighten 25 Widen 25 Widen 50 U.S. government and agency obligations $ 206.4 $ — $ — $ — $ — Tighten 100 Tighten 50 Widen 50 Widen 100 Agency mortgage-backed securities 231.6 6.6 5.8 (6.7) (13.1) Other asset-backed securities 22.3 .2 .1 (.2) (.3) Non-agency: residential mortgage-backed securities .3 — — — — Tighten 200 Tighten 100 Widen 100 Widen 200 Debt securities issued by corporations 1,018.8 29.8 24.6 (32.6) (65.2) Municipal obligations 258.6 13.9 8.6 (13.1) (26.2) Tighten 300 Tighten 200 Widen 200 Widen 300 Collateralized loan obligations 182.9 16.3 13.5 (16.4) (24.7) 95 The magnitude of the fair value decrease in wider credit spread scenarios may be more significant than the fair value increase in comparable tighter credit spread scenarios.
Widening and tightening of credit spreads translate into decreases and increases in fair values of fixed maturity investments, respectively. 96 The following table presents the estimated pre-tax effects of hypothetical widening and tightening of credit spreads on White Mountains’s fixed maturity investments by asset class: December 31, 2023 Millions Fair Value Tighten 50 Tighten 25 Widen 25 Widen 50 U.S. government and agency obligations $ 204.9 $ — $ — $ — $ — Tighten 100 Tighten 50 Widen 50 Widen 100 Agency mortgage-backed securities 366.2 8.9 8.4 (10.2) (20.0) Other asset-backed securities 23.0 .2 .2 (.2) (.4) Non-agency: residential mortgage-backed securities .2 — — — — Tighten 200 Tighten 100 Widen 100 Widen 200 Debt securities issued by corporations 1,045.0 21.2 19.4 (30.6) (61.1) Municipal obligations 260.9 11.6 9.7 (12.5) (25.0) Tighten 300 Tighten 200 Widen 200 Widen 300 Collateralized loan obligations 209.1 15.3 13.4 (18.3) (27.4) The magnitude of the fair value decrease in wider credit spread scenarios may be more significant than the fair value increase in comparable tighter credit spread scenarios.
White Mountains’s overall strategy for fixed maturity investments is to purchase securities that are attractively priced in relation to their investment risks. Widening and tightening of credit spreads translate into decreases and increases in fair values of fixed maturity investments, respectively.
White Mountains’s overall strategy for fixed maturity investments is to purchase securities that are attractively priced in relation to their investment risks.

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