White Mountains Insurance Group Earnings 2019-06-30

WTM 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the period ended June 30, 2019

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

For the transition period from to

Commission file number 1-8993

WHITE MOUNTAINS INSURANCE GROUP, LTD.

(Exact name of Registrant as specified in its charter)



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

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

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $1.00	WTM	New York Stock Exchange
per share		Bermuda Stock Exchange

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

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

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



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company		☐	Emerging growth company	☐

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

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

As of August 5, 2019, 3,185,353 common shares with a par value of $1.00 per share were outstanding (which includes 43,395 restricted common shares that were not vested at such date).

WHITE MOUNTAINS INSURANCE GROUP, LTD.

Table of Contents



		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets, June 30, 2019 and December 31, 2018	1

	Consolidated Statements of Operations and Comprehensive Income,
	Three and Six Months Ended June 30, 2019 and 2018	3

	Consolidated Statements of Changes in Equity,	6
	Three and Six Months Ended June 30, 2019 and 2018

	Consolidated Statements of Cash Flows, Six Months Ended June 30, 2019 and 2018	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

	Results of Operations for the Three and Six Months Ended June 30, 2019 and 2018	44

	Liquidity and Capital Resources	62

	Fair Value Considerations	67

	Non-GAAP Financial Measures	69

	Critical Accounting Estimates	71

	Forward-Looking Statements	71

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71

Item 4.	Controls and Procedures	72

PART II.	OTHER INFORMATION	72

Items 1 through 6.		72

SIGNATURES		74

Part I.FINANCIAL INFORMATION.

Item 1.
Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS



	June 30, 2019		December 31, 2018
Millions, except share and per share amounts	June 30, 2019		December 31, 2018
Assets	Unaudited
Financial Guarantee (HG Global/BAM)
Fixed maturity investments, at fair value	$	762.9	$	701.4
Short-term investments, at fair value	34.8		66.9
Total investments	797.7		768.3
Cash	10.3		12.5
Insurance premiums receivable	6.6		6.4
Deferred acquisition costs	20.5		19.0
Accrued investment income	5.3		4.9
Accounts receivable on unsettled investment sales	8.0		—
Other assets	16.1		5.1
Total Financial Guarantee assets	864.5		816.2

Specialty Insurance Distribution (NSM)
Short-term investments, at fair value	.2		1.7
Cash (restricted $88.8 and $50.0)	119.7		66.2
Premium and commission receivable	57.6		44.0
Goodwill and other intangible assets	636.8		486.2
Other assets	36.8		28.9
Total Specialty Insurance Distribution assets	851.1		627.0

Global Asset and Wealth Management (Kudu)
Other long-term investments	142.2		—
Short-term investments, at fair value	.1		—
Cash	2.7		—
Accrued investment income	2.7		—
Goodwill and other intangible assets	9.8		—
Other assets	2.9		—
Total Global Asset and Wealth Management assets	160.4		—

Marketing Technology (MediaAlpha)
Cash	—		5.7
Accounts receivable from publishers and advertisers	—		37.0
Goodwill and other intangible assets	—		43.4
Other assets	—		2.3
Total Marketing Technology assets	—		88.4

Other Operations
Fixed maturity investments, at fair value	346.5		376.1
Short-term investments, at fair value	152.0		145.6
Common equity securities, at fair value	709.2		925.6
Other long-term investments	522.2		325.6
Total investments	1,729.9		1,772.9
Cash	17.6		25.9
Accrued investment income	5.4		5.5
Accounts receivable on unsettled investment sales	72.8		—
Goodwill and other intangible assets	21.0		7.9
Other assets	26.7		15.5
Assets held for sale	2.8		3.3
Total Other Operations assets	1,876.2		1,831.0
Total assets	$	3,752.2	$	3,362.6

See Notes to Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS (CONTINUED)



	June 30, 2019			December 31, 2018
Millions, except share and per share amounts	June 30, 2019			December 31, 2018
Liabilities	Unaudited
Financial Guarantee (HG Global/BAM)
Unearned insurance premiums	$	187.8		$	176.0
Accrued incentive compensation	14.5			20.4
Accounts payable on unsettled investment purchases	—			2.2
Other liabilities	27.4			13.9
Total Financial Guarantee liabilities	229.7			212.5

Specialty Insurance Distribution (NSM)
Debt	219.7			178.5
Premiums payable	118.7			77.2
Contingent consideration earnout liabilities	30.9			20.2
Other liabilities	56.1			38.9
Total Specialty Insurance Distribution liabilities	425.4			314.8

Global Asset and Wealth Management (Kudu)
Other liabilities	3.5			—
Total Global Asset and Wealth Management liabilities	3.5			—

Marketing Technology (MediaAlpha)
Debt	—			14.2
Amounts due to publishers and advertisers	—			27.0
Other liabilities	—			5.7
Total Marketing Technology liabilities	—			46.9

Other Operations
Debt	10.8			—
Accrued incentive compensation	36.8			38.9
Accounts payable on unsettled investment purchases	—			5.0
Other liabilities	38.1			26.3
Total Other Operations liabilities	85.7			70.2
Total liabilities	744.3			644.4

Equity
White Mountains’s common shareholders’ equity
White Mountains’s common shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 3,185,353 and 3,173,115 shares	3.2			3.2
Paid-in surplus	587.3			580.8
Retained earnings	2,562.8			2,264.9
Accumulated other comprehensive loss, after-tax:
Net unrealized foreign currency translation losses and interest rate swap	(9.0		)	(5.8		)
Total White Mountains’s common shareholders’ equity	3,144.3			2,843.1
Non-controlling interests	(136.4		)	(124.9		)
Total equity	3,007.9			2,718.2
Total liabilities and equity	$	3,752.2		$	3,362.6

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended June 30,					Six Months Ended June 30,
Millions	2019		2018			2019		2018
Revenues:
Financial Guarantee (HG Global/BAM)
Earned insurance premiums	$	4.3	$	3.4		$	8.5	$	6.4
Net investment income	5.4		4.0			10.7		7.7
Net realized and unrealized investment gains (losses)	11.5		(2.4		)	23.3		(10.3		)
Other revenues	.4		.4			1.0		.6
Total Financial Guarantee revenues	21.6		5.4			43.5		4.4

Specialty Insurance Distribution (NSM)
Commission revenues	54.9		22.6			98.2		22.6
Other revenues	11.2		.9			17.2		.9
Total Specialty Insurance Distribution revenues	66.1		23.5			115.4		23.5

Global Asset and Wealth Management (Kudu)
Net investment income	4.0		—			4.0		—
Net realized and unrealized investment gains	.4		—			.4		—
Total Global Asset and Wealth Management revenues	4.4		—			4.4		—

Marketing Technology (MediaAlpha)
Advertising and commission revenues	—		71.8			48.8		141.9
Other revenues	—		—			—		1.6
Total Marketing Technology revenues	—		71.8			48.8		143.5

Other Operations
Net investment income	11.6		7.8			22.3		23.8
Net realized and unrealized investment gains (losses)	23.3		12.9			142.4		(32.9		)
Realized gain and unrealized investment gain from the MediaAlpha Transaction	—		—			182.2		—
Advertising and commission revenues	1.3		1.0			2.6		1.9
Other revenues	.7		(.1		)	1.0		.2
Total Other Operations revenues	36.9		21.6			350.5		(7.0		)
Total revenues	$	129.0	$	122.3		$	562.6	$	164.4

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
Millions	2019		2018		2019		2018
Expenses:
Financial Guarantee (HG Global/BAM)
Insurance acquisition expenses	$	1.4	$	1.3	$	2.7	$	2.7
Other underwriting expenses	.1		.1

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$975.99	3	$3,060

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-08-06	Earnings, Exhibits
8-K	2019-06-28	Other Events
8-K	2019-06-07	Regulation FD, Exhibits
8-K	2019-05-24	Shareholder Vote
8-K	2019-05-06	Earnings, Exhibits
8-K	2019-04-04	Other Events
8-K	2019-02-14	Other Events
8-K	2019-02-06	Earnings, Exhibits
8-K	2019-02-04	Other Events, Exhibits
8-K	2019-01-03	Officers, Other Events, Exhibits
8-K	2018-08-23	Officers, Exhibits
8-K	2018-06-08	Regulation FD, Exhibits
8-K	2018-05-24	Officers, Shareholder Vote
8-K	2018-05-11	Other Events
8-K	2018-04-10	Other Events, Exhibits
8-K	2018-03-31	Enter Agreement, Exhibits
8-K	2018-03-01	Officers, Exhibits
8-K	2018-02-07	Earnings, Exhibits

GS	Goldman Sachs	73,760
SFM	Sprouts Farmers Market	2,650
PRIM	Primoris Services	1,050
CPS	Cooper-Standard Holdings	882
LHC	Leader Hill	256
CVLY	Codorus Valley Bancorp	210
RBCN	Rubicon Technology	22
HMG	HMG Courtland Properties	14
REAP	Renewable Energy & Power	0
DHCP	Ditech Holding	0

EX-10	wtm10q63019ex10.htm
EX-31.1	wtm10-q63019ex311.htm
EX-31.2	wtm10-q63019ex312.htm
EX-32.1	wtm10-q63019ex321.htm
EX-32.2	wtm10-q63019ex322.htm