# White Mountains Insurance Group Ltd: Form 10-Q for the period ended Sep 30, 2023

- Company: [White Mountains Insurance Group Ltd](/companies/wtm.md) (CIK 776867)
- Form: 10-Q
- Filed: 2023-11-06
- Accepted by EDGAR: Nov 6, 2023, 08:33 ET
- Period: 2023-09-30
- Accession: 0000776867-23-000017
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/776867/000077686723000017/wtm-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/776867/000077686723000017/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $519.6m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.43bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $8.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $33.5m | us-gaap:CostOfGoodsAndServicesSold |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $15.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $44.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $7.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $19.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $23.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $222.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $9.19 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $86.82 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $9.19 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $86.82 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 2,522,900 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 2,528,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $379.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $32.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2023-09-30 | $8.14bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $3.98bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $564.7m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $3.95bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 116,121 characters.

*The following discussion contains “forward-looking statements.” White Mountains intends statements that are not historical in nature, which are hereby identified as forward-looking statements, to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. White Mountains cannot promise that its expectations in such forward-looking statements will turn out to be correct. White Mountains’s actual results could be materially different from and worse than its expectations. See “***FORWARD-LOOKING STATEMENTS”** *on page 76 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.*

*The following discussion also includes five non-GAAP financial measures: (i) adjusted book value per share, (ii) Kudu’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), (iii) Kudu’s adjusted EBITDA, (iv) total consolidated portfolio returns excluding MediaAlpha, and (v) adjusted capital, that have been reconciled from their most comparable GAAP financial measures on page 74. White Mountains believes these measures to be useful in evaluating White Mountains’s financial performance and condition.*

### RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

### Overview

White Mountains reported book value per share of $1,542 and adjusted book value per share of $1,588 as of September 30, 2023. Book value per share and adjusted book value per share both increased 1% in the third quarter of 2023 and increased 6% in the first nine months of 2023, including dividends. The increases in book value per share and adjusted book value per share in the third quarter of 2023 were driven primarily by solid results at the operating companies and positive returns from other long-term investments, partially offset by the impact of mark-to-market losses from the decline in MediaAlpha’s share price. The increases in book value per share and adjusted book value per share in the first nine months of 2023 were driven primarily by good results at the operating companies and positive returns across the investments portfolio excluding MediaAlpha, partially offset by the impact of mark-to-market losses from the decline in MediaAlpha’s share price.

White Mountains reported book value per share of $1,439 and adjusted book value per share of $1,471 as of September 30, 2022. Book value per share and adjusted book value per share both increased 28% in the third quarter of 2022. For the first nine months of 2022, book value per share increased 23% and adjusted book value per share increased 24%, including dividends. The increases in book value per share and adjusted book value per share were driven primarily by the net gain from the sale of NSM of approximately $300 per share (based on 2.9 million shares outstanding at August 1, 2022). In addition, the growth in White Mountains’s book value per share and adjusted book value per share reflected good results at the operating companies, partially offset by negative returns from the fixed income portfolio and the impact of mark-to-market losses from the decline in MediaAlpha’s share price.

On October 20, 2023, White Mountains announced that it entered into an agreement to acquire a majority stake in Bamboo Ide8 Insurance Services, LLC (“Bamboo”), an MGA focused on the California homeowners insurance market. White Mountains expects to invest approximately $285 million, including primary capital to support Bamboo’s growth, and to acquire approximately 70% of Bamboo basic shares outstanding. The precise size of White Mountains’s ownership interest and equity investment will vary based on rollover elections by certain unitholders prior to closing. The transaction is expected to close in the first quarter of 2024. Including the Bamboo acquisition, White Mountains’s undeployed capital is roughly $400 million as of September 30, 2023.

On October 25, 2023 White Mountains announced the launch of White Mountains Partners (“WM Partners”), which will invest in non-insurance sectors including essential services, light industrial, and specialty consumer. White Mountains expects to deploy $500 million of equity capital through WM Partners over time.

HG Global/BAM reported gross written premiums and MSC collected of $36 million and $84 million in the third quarter and first nine months of 2023 compared to $46 million and $109 million in the third quarter and first nine months of 2022. Total pricing was 87 and 80 basis points in the third quarter and first nine months of 2023 compared to 110 and 81 basis points in the third quarter and first nine months of 2022. BAM insured municipal bonds with par value of $4.2 billion and $10.5 billion in the third quarter and first nine months of 2023 compared to $4.1 billion and $13.5 billion in the third quarter and first nine months of 2022. BAM’s total claims paying resources were $1,474 million as of September 30, 2023 compared to $1,423 million as of December 31, 2022 and $1,260 million as of September 30, 2022.

The Ark/WM Outrigger segment’s combined ratio was 77% and 83% in the third quarter and first nine months of 2023. Ark/WM Outrigger reported gross written premiums of $251 million and $1,667 million, net written premiums of $231 million and $1,306 million and net earned premiums of $499 million and $1,047 million in the third quarter and first nine months of 2023. Ark/WM Outrigger reported pre-tax income of $99 million and $193 million in the third quarter and first nine months of 2023.

Ark’s combined ratio was 81% and 87% in the third quarter and first nine months of 2023 compared to 87% and 90% in the third quarter and first nine months of 2022. Ark’s combined ratio in the third quarter of 2023 included 11 points of catastrophe losses, which included losses from Hurricane Idalia, the Maui wildfires and various smaller events, compared to 21 points of catastrophe losses in the third quarter of 2022, driven primarily by losses from Hurricane Ian. Ark’s combined ratio in the first nine months of 2023 included seven points of catastrophe losses, which included losses from Hurricane Idalia, the Maui wildfires and various smaller events, compared to 17 points of catastrophe losses in the first nine months of 2022, driven primarily by losses from Hurricane Ian and the conflict in Ukraine. Ark’s combined ratio in the third quarter and first nine months of 2023 included less than one point of net favorable prior year development and two points of net unfavorable prior year development compared to three points and five points of net favorable prior year development in the third quarter and first nine months of 2022. Ark reported gross written premiums of $251 million and $1,667 million, net written premiums of $225 million and $1,198 million and net earned premiums of $438 million and $972 million in the third quarter and first nine months of 2023 compared to gross written premiums of $216 million and $1,253 million, net written premiums of $193 million and $1,007 million and net earned premiums of $346 million and $758 million in the third quarter and first nine months of 2022. Ark reported pre-tax income (loss) of $62 million and $140 million in the third quarter and first nine months of 2023 compared to $24 million and $(20) million in the third quarter and first nine months of 2022. Ark’s results included net realized and unrealized investment gains (losses) of $(7) million and $36 million in the third quarter and first nine months of 2023 compared to $(14) million and $(77) million in the third quarter and first nine months of 2022.

WM Outrigger Re’s combined ratio was 44% and 40% in the third quarter and first nine months of 2023. WM Outrigger Re reported gross and net written premiums of $6 million and $108 million and net earned premiums of $61 million and $75 million in the third quarter and first nine months of 2023. WM Outrigger Re reported pre-tax income of $37 million and $53 million in the third quarter and first nine months of 2023.

Kudu reported total revenues of $26 million, pre-tax income of $16 million and adjusted EBITDA of $12 million in the third quarter of 2023 compared to total revenues of $56 million, pre-tax income of $47 million and adjusted EBITDA of $12 million in the third quarter of 2022. Kudu’s revenues, pre-tax income and adjusted EBITDA included $15 million of net investment income in both the third quarter of 2023 and 2022. Kudu’s revenues and pre-tax income also included $11 million of net realized and unrealized investment gains in the third quarter of 2023 compared to $41 million in the third quarter of 2022. Kudu reported total revenues of $89 million, pre-tax income of $62 million and adjusted EBITDA of $34 million in the first nine months of 2023 compared to total revenues of $87 million, pre-tax income of $66 million and adjusted EBITDA of $33 million in the first nine months of 2022. Kudu’s revenues, pre-tax income and adjusted EBITDA included $44 million of net investment income in the first nine months of 2023 compared to $41 million in the first nine months of 2022. Kudu’s revenues and pre-tax income in the first nine months of 2023 also included $45 million of net realized and unrealized gains compared to $46 million in the first nine months of 2022.

As of September 30, 2023, White Mountains owned 22.9 million shares of MediaAlpha, representing a 35% basic ownership interest (33% on a fully-diluted/fully-converted basis). As of September 30, 2023, MediaAlpha’s closing price was $8.26 per share, which decreased from $10.31 per share as of June 30, 2023. The carrying value of White Mountains’s investment in MediaAlpha was $189 million as of September 30, 2023, which decreased from $236 million as of June 30, 2023. At White Mountains’s current level of ownership, each $1.00 per share increase or decrease in the share price of MediaAlpha will result in an approximate $9.00 per share increase or decrease in White Mountains’s book value per share and adjusted book value per share.

White Mountains’s total consolidated portfolio return on invested assets was -0.2% in the third quarter of 2023, which included $47 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.6% in the third quarter of 2023, driven primarily by net unrealized investment gains and net investment income from other long-term investments, partially offset by net unrealized investment losses on common equity securities. White Mountains’s total consolidated portfolio return on invested assets was 0.4% in the third quarter of 2022, which included $19 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.5% in the third quarter of 2022, driven primarily by net unrealized investment gains and net investment income from other long-term investments, partially offset by net unrealized investment losses in the fixed income portfolio due to rising interest rates.

White Mountains’s total consolidated portfolio return on invested assets was 5.3% in the first nine months of 2023, which included $39 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 6.3% in the first nine months of 2023, driven primarily by net realized and unrealized investment gains and net investment income from other long-term investments, net investment income from the fixed income portfolio and net realized and unrealized investment gains from common equity securities. White Mountains’s total consolidated portfolio return on invested assets was -3.6% in the first nine months of 2022, which included $113 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was -1.4% in the first nine months of 2022, driven primarily by net unrealized investment losses in the fixed income portfolio due to rising interest rates, partially offset by net realized and unrealized gains and net investment income from other long-term investments.

### Adjusted Book Value Per Share

The following table presents White Mountains’s book value per share and reconciles it to adjusted book value per share, a non-GAAP measure as of September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022. See **NON-GAAP FINANCIAL MEASURES** on page 74.

| Millions Book value per share numerators (in millions): | September 30, 2023 | June 30, 2023 | December 31, 2022 | September 30, 2022 |
| --- | ---: | ---: | ---: | ---: |
| White Mountains’s common shareholders’ equity - GAAP book value per share numerator | **$3,949.1** | $3,922.2 | $3,746.9 | $3,708.0 |
| HG Global’s unearned premium reserve (1) | **254.2** | 246.8 | 242.1 | 232.2 |
| HG Global’s net deferred acquisition costs (1) | **(73.1)** | (70.7) | (69.0) | (65.9) |
| Time value of money discount on expected future payments on the BAM Surplus Notes (1) | **(90.2)** | (91.8) | (95.1) | (110.8) |
| Adjusted book value per share numerator | **$4,040.0** | $4,006.5 | $3,824.9 | $3,763.5 |
| **Book value per share denominators (in thousands of shares):** |  |  |  |  |
| Common shares outstanding - GAAP book value per share denominator | **2,560.5** | 2,560.5 | 2,572.1 | 2,576.2 |
| Unearned restricted common shares | **(15.7)** | (19.1) | (14.1) | (17.5) |
| Adjusted book value per share denominator | **2,544.8** | 2,541.4 | 2,558.0 | 2,558.7 |
| GAAP book value per share | **$1,542.36** | $1,531.84 | $1,456.74 | $1,439.31 |
| Adjusted book value per share | **$1,587.59** | $1,576.46 | $1,495.28 | $1,470.84 |
| Year-to-date dividends paid per share | **$1.00** | $1.00 | $1.00 | $1.00 |

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

### Goodwill and Other Intangible Assets

The following table presents goodwill and other intangible assets that are included in White Mountains’s adjusted book value as of September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022:

| Millions Goodwill: | September 30, 2023 | June 30, 2023 | December 31, 2022 | September 30, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Ark | **$116.8** | $116.8 | $116.8 | $116.8 |
| Kudu | **7.6** | 7.6 | 7.6 | 7.6 |
| Other Operations (1) | **44.4** | 44.4 | 52.1 | 51.1 |
| Total goodwill | **168.8** | 168.8 | 176.5 | 175.5 |
| **Other intangible assets:** |  |  |  |  |
| Ark | **175.7** | 175.7 | 175.7 | 175.7 |
| Kudu | **.8** | .8 | 1.0 | 1.1 |
| Other Operations (1) | **26.8** | 28.3 | 39.2 | 40.9 |
| Total other intangible assets | **203.3** | 204.8 | 215.9 | 217.7 |
| Total goodwill and other intangible assets (2) | **$372.1** | $373.6 | $392.4 | $393.2 |
| Goodwill and other intangible assets attributed to non-controlling interests | **$(95.2)** | $(95.4) | $(102.7) | $(103.1) |
| **Goodwill and other intangible assets included in White Mountains’s common shareholders’ equity** | **$276.9** | $278.2 | $289.7 | $290.1 |

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

(2) See **Note 4 — “Goodwill and Other Intangible Assets”** on page 24 for details of other intangible assets.

### Summary of Consolidated Results

The following table presents White Mountains’s consolidated financial results for the three and nine months ended September 30, 2023 and 2022:

| Millions Revenues | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Financial Guarantee revenues | **$(7.4)** | $(24.7) | **$31.2** | $(69.2) |
| P&C Insurance and Reinsurance revenues | **512.8** | 343.2 | **1,123.3** | 701.1 |
| Asset Management revenues | **26.3** | 55.9 | **89.4** | 87.0 |
| Other Operations revenues | **(12.1)** | 8.8 | **186.0** | 1.4 |
| Total revenues | **519.6** | 383.2 | **1,429.9** | 720.3 |
| **Expenses** |  |  |  |  |
| Financial Guarantee expenses | **23.4** | 19.5 | **66.8** | 64.4 |
| P&C Insurance and Reinsurance expenses | **414.0** | 319.1 | **930.6** | 721.5 |
| Asset Management expenses | **10.0** | 8.7 | **27.8** | 20.7 |
| Other Operations expenses | **51.1** | 66.9 | **167.1** | 192.1 |
| Total expenses | **498.5** | 414.2 | **1,192.3** | 998.7 |
| **Pre-tax income (loss)** |  |  |  |  |
| Financial Guarantee pre-tax income (loss) | **(30.8)** | (44.2) | **(35.6)** | (133.6) |
| P&C Insurance and Reinsurance pre-tax income (loss) | **98.8** | 24.1 | **192.7** | (20.4) |
| Asset Management pre-tax income (loss) | **16.3** | 47.2 | **61.6** | 66.3 |
| Other Operations pre-tax income (loss) | **(63.2)** | (58.1) | **18.9** | (190.7) |
| **Total pre-tax income (loss) from continuing operations** | **21.1** | (31.0) | **237.6** | (278.4) |
| Income tax (expense) benefit | **(7.3)** | 7.4 | **(19.4)** | 26.1 |
| **Net income (loss) from continuing operations** | **13.8** | (23.6) | **218.2** | (252.3) |
| Net income (loss) from discontinued operations, net of tax - NSM Group | **—** | 6.3 | **—** | 16.4 |
| Net gain (loss) from sale of discontinued operations, net of tax - NSM Group | **—** | 886.8 | **—** | 886.8 |
| **Net income (loss)** | **13.8** | 869.5 | **218.2** | 650.9 |
| Net (income) loss attributable to noncontrolling interests | **9.8** | 18.7 | **4.5** | 101.5 |
| **Net income (loss) attributable to White Mountains’s common shareholders** | **23.6** | 888.2 | **222.7** | 752.4 |
| Other comprehensive income (loss), net of tax | **(1.7)** | (1.4) | **.9** | (3.0) |
| Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group | **—** | .7 | **—** | (5.2) |
| Net gain (loss) from foreign currency translation from sale of discontinued operations, net of tax - NSM Group | **—** | 2.9 | **—** | 2.9 |
| **Comprehensive income (loss)** | **21.9** | 890.4 | **223.6** | 747.1 |
| Other comprehensive (income) loss attributable to noncontrolling interests | **.7** | (.3) | **(.1)** | .4 |
| **Comprehensive income (loss) attributable to White Mountains’s common shareholders** | **$22.6** | $890.1 | **$223.5** | $747.5 |

50

### I. SUMMARY OF OPERATIONS BY SEGMENT

As of September 30, 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. 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. Significant intercompany transactions among White Mountains’s segments have been eliminated herein. White Mountains’s segment information is presented in **Note 14 — “Segment Information”** to the Consolidated Financial Statements.

During the fourth quarter of 2022, Ark sponsored the formation of Outrigger Re Ltd. to provide reinsurance protection on Ark’s Bermuda global property catastrophe excess of loss portfolio written in calendar year 2023. White Mountains consolidates its segregated account of Outrigger Re Ltd., WM Outrigger Re, in its financial statements. WM Outrigger Re’s quota share reinsurance agreement with GAIL eliminates in White Mountains’s consolidated financial statements. WM Outrigger Re exclusively provides reinsurance protection to Ark. As a result, WM Outrigger Re was aggregated with Ark within the Ark/WM Outrigger segment starting in 2023. See **Note 2 — “Significant Transactions.”**

As a result of the NSM Transaction, the results of operations for NSM, previously reported as a segment, have been classified as discontinued operations in the statements of operations and comprehensive income through the closing of the transaction. See **Note 19 — “Held for Sale and Discontinued Operations.”**

Prior period amounts have been reclassified to conform to the current period’s presentation.

### HG Global/BAM

The following tables present the components of pre-tax income (loss) included in the HG Global/BAM segment related to the consolidation of HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM for the three and nine months ended September 30, 2023 and 2022:

| Millions | Three Months Ended September 30, 2023 HG Global | BAM | Eliminations | Total |
| --- | ---: | ---: | ---: | ---: |
| Direct written premiums | **$—** | **$16.5** | **$—** | **$16.5** |
| Assumed written premiums | **14.2** | **—** | **(14.2)** | **—** |
| Gross written premiums | **14.2** | **16.5** | **(14.2)** | **16.5** |
| Ceded written premiums | **—** | **(14.2)** | **14.2** | **—** |
| Net written premiums | **$14.2** | **$2.3** | **$—** | **$16.5** |
| Earned insurance premiums | **$6.6** | **$1.3** | **$—** | **$7.9** |
| Net investment income | **4.3** | **3.8** | **—** | **8.1** |
| Net investment income - BAM Surplus Notes | **6.6** | **—** | **(6.6)** | **—** |
| Net realized and unrealized investment gains (losses) | **(13.6)** | **(10.5)** | **—** | **(24.1)** |
| Other revenues | **—** | **.7** | **—** | **.7** |
| Total revenues | **3.9** | **(4.7)** | **(6.6)** | **(7.4)** |
| Acquisition expenses | **2.0** | **.1** | **—** | **2.1** |
| General and administrative expenses | **.5** | **17.0** | **—** | **17.5** |
| Interest expense (1) | **3.9** | **—** | **—** | **3.9** |
| Interest expense - BAM Surplus Notes | **—** | **6.6** | **(6.6)** | **—** |
| Total expenses | **6.4** | **23.7** | **(6.6)** | **23.5** |
| **Pre-tax income (loss)** | **$(2.5)** | **$(28.4)** | **$—** | **$(30.9)** |
| **Supplemental information:** |  |  |  |  |
| MSC collected (2) | **$—** | **$19.9** | **$—** | **$19.9** |

(1) Amount includes $0.1 of intercompany interest expense that is eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s intercompany interest expense included within the HG Global/BAM segment is eliminated against the offsetting intercompany interest income included within Other Operations.

(2) MSC collected are recorded directly to BAM’s equity, which is recorded as noncontrolling interest on White Mountains’s balance sheet.

| Millions | Three Months Ended September 30, 2022 HG Global | BAM | Eliminations | Total |
| --- | ---: | ---: | ---: | ---: |
| Direct written premiums | $— | $18.4 | $— | $18.4 |
| Assumed written premiums | 16.8 | 1.3 | (16.8) | 1.3 |
| Gross written premiums | 16.8 | 19.7 | (16.8) | 19.7 |
| Ceded written premiums | — | (16.8) | 16.8 | — |
| Net written premiums | $16.8 | $2.9 | $— | $19.7 |
| Earned insurance premiums | $5.9 | $1.2 | $— | $7.1 |
| Net investment income | 2.8 | 2.9 | — | 5.7 |
| Net investment income - BAM Surplus Notes | 2.9 | — | (2.9) | — |
| Net realized and unrealized investment gains | (19.6) | (19.2) | — | (38.8) |
| Other revenues | .1 | 1.2 | — | 1.3 |
| Total revenues | (7.9) | (13.9) | (2.9) | (24.7) |
| Acquisition expenses | 1.6 | .1 | — | 1.7 |
| General and administrative expenses | .6 | 15.2 | — | 15.8 |
| Interest expense | 2.0 | — | — | 2.0 |
| Interest expense - BAM Surplus Notes | — | 2.9 | (2.9) | — |
| Total expenses | 4.2 | 18.2 | (2.9) | 19.5 |
| **Pre-tax income (loss)** | $(12.1) | $(32.1) | $— | $(44.2) |
| **Supplemental information:** |  |  |  |  |
| MSC collected (1) | $— | $26.0 | $— | $26.0 |

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

| Millions | Nine Months Ended September 30, 2023 HG Global | BAM | Eliminations | Total |
| --- | ---: | ---: | ---: | ---: |
| Direct written premiums | **$—** | **$37.3** | **$—** | **$37.3** |
| Assumed written premiums | **31.9** | **—** | **(31.9)** | **—** |
| Gross written premiums | **31.9** | **37.3** | **(31.9)** | **37.3** |
| Ceded written premiums | **—** | **(31.9)** | **31.9** | **—** |
| Net written premiums | **$31.9** | **$5.4** | **$—** | **$37.3** |
| Earned insurance premiums | **$19.4** | **$3.9** | **$—** | **$23.3** |
| Net investment income | **12.4** | **10.5** | **—** | **22.9** |
| Net investment income - BAM Surplus Notes | **19.7** | **—** | **(19.7)** | **—** |
| Net realized and unrealized investment gains (losses) | **(11.4)** | **(5.6)** | **—** | **(17.0)** |
| Other revenues | **—** | **2.0** | **—** | **2.0** |
| Total revenues | **40.1** | **10.8** | **(19.7)** | **31.2** |
| Acquisition expenses | **5.6** | **.7** | **—** | **6.3** |
| General and administrative expenses | **1.9** | **47.8** | **—** | **49.7** |
| Interest expense (1) | **11.1** | **—** | **—** | **11.1** |
| Interest expense - BAM Surplus Notes | **—** | **19.7** | **(19.7)** | **—** |
| Total expenses | **18.6** | **68.2** | **(19.7)** | **67.1** |
| **Pre-tax income (loss)** | **$21.5** | **$(57.4)** | **$—** | **$(35.9)** |
| **Supplemental information:** |  |  |  |  |
| MSC collected (2) | **$—** | **$46.4** | **$—** | **$46.4** |

(1) Amount includes $0.3 of intercompany interest expense that is eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s intercompany interest expense included within the HG Global/BAM segment is eliminated against the offsetting intercompany interest income included within Other Operations.

(2) MSC collected are recorded directly to BAM’s equity, which is recorded as noncontrolling interest on White Mountains’s balance sheet.

| Millions | Nine Months Ended September 30, 2022 HG Global | BAM | Eliminations | Total |
| --- | ---: | ---: | ---: | ---: |
| Direct written premiums | $— | $44.9 | $— | $44.9 |
| Assumed written premiums | 39.6 | 1.3 | (39.6) | 1.3 |
| Gross written premiums | 39.6 | 46.2 | (39.6) | 46.2 |
| Ceded written premiums | — | (39.6) | 39.6 | — |
| Net written premiums | $39.6 | $6.6 | $— | $46.2 |
| Earned insurance premiums | $21.5 | $4.5 | $— | $26.0 |
| Net investment income | 7.1 | 8.0 | — | 15.1 |
| Net investment income - BAM Surplus Notes | 8.8 | — | (8.8) | — |
| Net realized and unrealized investment gains (losses) | (57.8) | (56.2) | — | (114.0) |
| Other revenues | .3 | 3.4 | — | 3.7 |
| Total revenues | (20.1) | (40.3) | (8.8) | (69.2) |
| Acquisition expenses | 7.6 | 1.9 | — | 9.5 |
| General and administrative expenses | 2.1 | 47.4 | — | 49.5 |
| Interest expense | 5.4 | — | — | 5.4 |
| Interest expense - BAM Surplus Notes | — | 8.8 | (8.8) | — |
| Total expenses | 15.1 | 58.1 | (8.8) | 64.4 |
| **Pre-tax income (loss)** | $(35.2) | $(98.4) | $— | $(133.6) |
| **Supplemental information:** |  |  |  |  |
| MSC collected (1) | $— | 62.3 | $— | $62.3 |

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

### HG Global/BAM Results—Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

Gross written premiums and MSC collected in the HG Global/BAM segment totaled $36 million in the third quarter of 2023 compared to $46 million in the third quarter of 2022. BAM insured $4.2 billion of municipal bonds, $3.7 billion of which were in the primary market, in the third quarter of 2023 compared to $4.1 billion of municipal bonds, $3.3 billion of which were in the primary market, in the third quarter of 2022. In the third quarter of 2022, BAM completed an assumed reinsurance transaction to reinsure municipal bonds with a par value of $43 million.

Insured penetration in the primary market increased to 7.8% in the third quarter of 2023, driven by demand from both large and small deals, compared to 6.2% in the third quarter of 2022.

Total pricing, which reflects both gross written premiums and MSC, decreased to 87 basis points in the third quarter of 2023 compared to 110 basis points in the third quarter of 2022. The decrease in total pricing was driven by lower pricing in the primary market and a decrease in the percentage of par insured in the secondary market, which was partially offset by higher pricing in the secondary market. Pricing in the primary market decreased to 61 basis points in the third quarter of 2023 compared to 79 basis points in the third quarter of 2022. Pricing in the combined secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, increased to 259 basis points in the third quarter of 2023 compared to 229 basis points in the third quarter of 2022.

The following table presents the gross par value of primary and secondary market policies issued, the gross written premiums and MSC collected and total pricing for the three months ended September 30, 2023 and 2022:

*$ in Millions*

|  | Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Gross par value of primary market policies issued | **$3,659.9** | $3,269.0 |
| Gross par value of secondary market policies issued | **542.4** | 826.5 |
| Gross par value of assumed reinsurance | **—** | 42.5 |
| Total gross par value of market policies issued | **$4,202.3** | $4,138.0 |
| Gross written premiums | **$16.5** | $19.7 |
| MSC collected | **19.9** | 26.0 |
| Total gross written premiums and MSC collected | **$36.4** | $45.7 |
| Total pricing | **87 bps** | 110 bps |

53

HG Global reported pre-tax loss of $3 million in the third quarter of 2023 compared to $12 million in the third quarter of 2022. HG Global’s results in the third quarter of 2023 included net realized and unrealized investment losses on its fixed income portfolio of $14 million compared to $20 million in the third quarter of 2022, driven by increasing interest rates in each period. HG Global’s results in the third quarter of 2023 also included interest income on the BAM Surplus Notes of $7 million compared to $3 million in the third quarter of 2022, as the interest rate increased to 8% in 2023 from 3% in 2022.

BAM is a mutual insurance company that is owned by its members. BAM’s results are consolidated into White Mountain’s GAAP financial statements and attributed to noncontrolling interests. White Mountains reported $28 million of GAAP pre-tax loss from BAM in the third quarter of 2023 compared to $32 million in the third quarter of 2022. BAM’s results included net realized and unrealized investment losses on its fixed income portfolio of $11 million in the third quarter of 2023 compared to $19 million in the third quarter of 2022, driven by increasing interest rates in each period. BAM’s results in the third quarter of 2023 also included of interest expense on the BAM Surplus Notes of $7 million compared to $3 million in the third quarter of 2022.

### HG Global/BAM Results—Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

Gross written premiums and MSC collected in the HG Global/BAM segment totaled $84 million in the first nine months of 2023 compared to $109 million in the first nine months of 2022. BAM insured $10.5 billion of municipal bonds, $8.7 billion of which were in the primary market, in the first nine months of 2023 compared to $13.5 billion of municipal bonds, $10.1 billion of which were in the primary market, in the first nine months of 2022. In the third quarter of 2022, BAM completed an assumed reinsurance transaction to reinsure municipal bonds with a par value of $43 million.

Insured penetration in the primary market increased to 8.6% in the first nine months of 2023, driven primarily by demand from large deals in the period, compared to 7.8% in the first nine months of 2022.

Total pricing, which reflects both gross written premiums and MSC, decreased to 80 basis points in the first nine months of 2023, compared to 81 basis points in the first nine months of 2022. The decrease in total pricing was driven primarily by a decrease in the percentage of par insured in the secondary market, which was partially offset by higher pricing in the secondary market. Pricing in the primary market was 57 basis points in the first nine months of 2023 and 2022. Pricing in the secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, increased to 193 basis points in the first nine months of 2023 compared to 152 basis points in the first nine months of 2022.

The following table presents the gross par value of primary and secondary market policies issued, the gross written premiums and MSC collected and total pricing for the nine months ended September 30, 2023 and 2022:

*$ in Millions*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Gross par value of primary market policies issued | **$8,735.5** | $10,147.8 |
| Gross par value of secondary market policies issued | **1,746.9** | 3,269.4 |
| Gross par value of assumed reinsurance | **—** | 42.5 |
| Total gross par value of market policies issued | **$10,482.4** | $13,459.7 |
| Gross written premiums | **$37.3** | $46.2 |
| MSC collected | **46.4** | 62.3 |
| Total gross written premiums and MSC collected | **$83.7** | $108.5 |
| Total pricing | **80 bps** | 81 bps |

54

HG Global reported pre-tax income (loss) of $22 million in the first nine months of 2023 compared to $(35) million in the first nine months of 2022. HG Global’s results in the first nine months of 2023 included net realized and unrealized investment losses on its fixed income portfolio of $11 million, as interest rates increased, compared to $58 million in the first nine months of 2022, as interest rates increased significantly. HG Global’s results in the first nine months of 2023 also included interest income on the BAM Surplus Notes of $20 million compared to $9 million in the first nine months of 2022, as the interest rate increased to 8% in 2023 from 3% in 2022.

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

BAM is a mutual insurance company that is owned by its members. BAM’s results are consolidated into White Mountains’s GAAP financial statements and attributed to noncontrolling interests. White Mountains reported $57 million of GAAP pre-tax loss from BAM in the first nine months of 2023, compared to $98 million in the first nine months of 2022. BAM’s results included net realized and unrealized investment losses on its fixed income portfolio of $6 million in the first nine months of 2023, as interest rates increased, compared to $56 million in the first nine months of 2022, as interest rates increased significantly. BAM’s results in the first nine months of 2023 also included interest expense on the BAM Surplus Notes of $20 million compared to $9 million in the first nine months of 2022.

### Claims Paying Resources

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

BAM’s claims paying resources were $1,474 million as of September 30, 2023 compared to $1,423 million as of December 31, 2022 and $1,260 million as of September 30, 2022. The increase in claims paying resources as of September 30, 2023 compared to December 31, 2022 was driven primarily by an increase in the HG Re Collateral Trusts resulting from deposits of ceded premiums and an increase in contingency reserves for the first nine months of 2023. In the fourth quarter of 2022, BAM completed a reinsurance agreement with Fidus Re that increased BAM’s claims paying resources by $150 million.

The following table presents BAM’s total claims paying resources as of September 30, 2023, December 31, 2022 and September 30, 2022:

| Millions | September 30, 2023 | December 31, 2022 | September 30, 2022 |
| --- | ---: | ---: | ---: |
| Policyholders’ surplus | **$285.8** | $283.4 | $316.9 |
| Contingency reserve | **131.5** | 118.2 | 113.9 |
| Qualified statutory capital | **417.3** | 401.6 | 430.8 |
| Statutory net unearned premiums | **58.3** | 55.3 | 53.3 |
| Present value of future installment premiums and MSC | **10.9** | 13.3 | 13.3 |
| HG Re Collateral Trusts at statutory value | **587.5** | 553.1 | 512.7 |
| Fidus Re collateral trusts at statutory value | **400.0** | 400.0 | 250.0 |
| Claims paying resources | **$1,474.0** | $1,423.3 | $1,260.1 |

55

### HG Global/BAM Balance Sheets

The following tables present amounts from HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM that are contained within White Mountains’s consolidated balance sheet as of September 30, 2023 and December 31, 2022:

| Millions Assets | September 30, 2023 HG Global | BAM | Eliminations and Segment Adjustments | Total |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturity investments, at fair value | **$521.7** | **$410.5** | **$—** | **$932.2** |
| Short-term investments, at fair value | **40.0** | **40.1** | **—** | **80.1** |
| Total investments | **561.7** | **450.6** | **—** | **1,012.3** |
| Cash | **1.1** | **3.8** | **—** | **4.9** |
| BAM Surplus Notes | **340.0** | **—** | **(340.0)** | **—** |
| Accrued interest receivable on BAM Surplus Notes | **177.6** | **—** | **(177.6)** | **—** |
| Insurance premiums receivable | **3.9** | **5.5** | **(3.9)** | **5.5** |
| Deferred acquisition costs | **75.4** | **38.5** | **(75.4)** | **38.5** |
| Other assets | **7.8** | **14.7** | **(.3)** | **22.2** |
| Total assets | **$1,167.5** | **$513.1** | **$(597.2)** | **$1,083.4** |
| **Liabilities** |  |  |  |  |
| BAM Surplus Notes (1) | **$—** | **$340.0** | **$(340.0)** | **$—** |
| Accrued interest payable on BAM Surplus Notes (2) | **—** | **177.6** | **(177.6)** | **—** |
| Preferred dividends payable to White Mountains (3) | **384.7** | **—** | **—** | **384.7** |
| Preferred dividends payable to noncontrolling interests | **14.2** | **—** | **—** | **14.2** |
| Unearned insurance premiums | **262.3** | **50.0** | **—** | **312.3** |
| Debt | **146.8** | **—** | — | **146.8** |
| Intercompany debt (4) | **5.3** | **—** | — | **5.3** |
| Accrued incentive compensation | **1.1** | **18.8** | — | **19.9** |
| Other liabilities | **12.8** | **92.6** | **(79.6)** | **25.8** |
| Total liabilities | **827.2** | **679.0** | **(597.2)** | **909.0** |
| **Equity** |  |  |  |  |
| White Mountains’s common shareholders’ equity (3)(4) | **343.6** | **—** | **—** | **343.6** |
| Noncontrolling interests | **(3.3)** | **(165.9)** | **—** | **(169.2)** |
| **Total equity** | **340.3** | **(165.9)** | **—** | **174.4** |
| **Total liabilities and equity** | **$1,167.5** | **$513.1** | **$(597.2)** | **$1,083.4** |

(1) Under GAAP, the BAM Surplus Notes are classified as debt. 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.

(3) HG Global’s preferred dividends payable to White Mountains are eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s preferred dividends payable to White Mountains included within the HG Global/BAM segment are eliminated against the offsetting receivable included within Other Operations.

(4) HG Global’s intercompany debt is eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s intercompany debt included within the HG Global/BAM segment is eliminated against the offsetting receivable included within Other Operations.

| Millions Assets | December 31, 2022 HG Global | BAM | Eliminations and Segment Adjustments | Total Segment |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturity investments, at fair value | $489.6 | $420.3 | $— | $909.9 |
| Short-term investments, at fair value | 42.0 | 23.9 | — | 65.9 |
| Total investments | 531.6 | 444.2 | — | 975.8 |
| Cash | 13.2 | 5.0 | — | 18.2 |
| BAM Surplus Notes | 340.0 | — | (340.0) | — |
| Accrued interest receivable on BAM Surplus Notes | 157.9 | — | (157.9) | — |
| Insurance premiums receivable | 4.3 | 6.6 | (4.3) | 6.6 |
| Deferred acquisition costs | 71.2 | 36.0 | (71.2) | 36.0 |
| Other assets | 7.0 | 15.1 | (.2) | 21.9 |
| Total assets | $1,125.2 | $506.9 | $(573.6) | $1,058.5 |
| **Liabilities** |  |  |  |  |
| BAM Surplus Notes (1) | $— | $340.0 | $(340.0) | $— |
| Accrued interest payable on BAM Surplus Notes (2) | — | 157.9 | (157.9) | — |
| Preferred dividends payable to White Mountains (3) | 341.4 | — | — | 341.4 |
| Preferred dividends payable to noncontrolling interests | 12.5 | — | — | 12.5 |
| Unearned insurance premiums | 249.8 | 48.5 | — | 298.3 |
| Debt | 146.5 | — | — | 146.5 |
| Intercompany debt (4) | 6.0 | — | — | 6.0 |
| Accrued incentive compensation | 1.3 | 26.7 | — | 28.0 |
| Other liabilities | 3.7 | 88.5 | (75.7) | 16.5 |
| Total liabilities | 761.2 | 661.6 | (573.6) | 849.2 |
| **Equity** |  |  |  |  |
| White Mountains’s common shareholders’ equity (3)(4) | 364.6 | — | — | 364.6 |
| Noncontrolling interests | (.6) | (154.7) | — | (155.3) |
| **Total equity** | 364.0 | (154.7) | — | 209.3 |
| **Total liabilities and equity** | $1,125.2 | $506.9 | $(573.6) | $1,058.5 |

(1) Under GAAP, the BAM Surplus Notes are classified as debt. 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.

(3) HG Global’s preferred dividends payable to White Mountains are eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s preferred dividends payable to White Mountains included within the HG Global/BAM segment are eliminated against the offsetting receivable included within Other Operations.

(4) HG Global’s intercompany debt is eliminated in White Mountains’s consolidated financial statements. For segment reporting, HG Global’s intercompany debt included within the HG Global/BAM segment is eliminated against the offsetting receivable included within Other Operations.

### Ark/WM Outrigger

The following table presents the components of pre-tax income (loss) included in the Ark/WM Outrigger segment for the three and nine months ended September 30, 2023 and 2022:

| Millions | Three Months Ended September 30, 2023 Ark | WM Outrigger Re | Eliminations | Total | 2022 Ark |
| --- | ---: | ---: | ---: | ---: | ---: |
| Direct written premiums | **$189.4** | **$—** | **$—** | **$189.4** | $118.6 |
| Assumed written premiums | **61.8** | **6.0** | **(6.0)** | **61.8** | 96.9 |
| Gross written premiums | **251.2** | **6.0** | **(6.0)** | **251.2** | 215.5 |
| Ceded written premiums | **(26.2)** | **—** | **6.0** | **(20.2)** | (22.9) |
| Net written premiums | **$225.0** | **$6.0** | **$—** | **$231.0** | $192.6 |
| Earned insurance premiums | **$438.3** | **$60.6** | **$—** | **$498.9** | $346.1 |
| Net investment income | **13.9** | **3.0** | **—** | **16.9** | 4.9 |
| Net realized and unrealized investment gains (losses) | **(6.6)** | **—** | **—** | **(6.6)** | (14.4) |
| Other revenues | **3.6** | **—** | **—** | **3.6** | 6.6 |
| Total revenues | **449.2** | **63.6** | **—** | **512.8** | 343.2 |
| Losses and LAE | **258.5** | **7.3** | **—** | **265.8** | 213.7 |
| Acquisition expenses | **71.0** | **19.3** | **—** | **90.3** | 74.8 |
| General and administrative expenses - other underwriting | **25.5** | **—** | **—** | **25.5** | 13.2 |
| General and administrative expenses - all other | **9.8** | **.1** | **—** | **9.9** | 11.0 |
| Change in fair value of contingent consideration | **17.0** | **—** | **—** | **17.0** | 2.7 |
| Interest expense | **5.5** | **—** | **—** | **5.5** | 3.7 |
| Total expenses | **387.3** | **26.7** | **—** | **414.0** | 319.1 |
| **Pre-tax income (loss)** | **$61.9** | **$36.9** | **$—** | **$98.8** | $24.1 |

| Millions | Nine Months Ended September 30, 2023 Ark | WM Outrigger Re | Eliminations | Total | 2022 Ark |
| --- | ---: | ---: | ---: | ---: | ---: |
| Direct written premiums | **$727.1** | **$—** | **$—** | **$727.1** | $563.8 |
| Assumed written premiums | **939.6** | **108.4** | **(108.4)** | **939.6** | 688.7 |
| Gross written premiums | **1,666.7** | **108.4** | **(108.4)** | **1,666.7** | 1,252.5 |
| Ceded written premiums | **(468.7)** | **—** | **108.4** | **(360.3)** | (246.0) |
| Net written premiums | **$1,198.0** | **$108.4** | **$—** | **$1,306.4** | $1,006.5 |
| Earned insurance premiums | **$971.9** | **$75.4** | **$—** | **$1,047.3** | $757.8 |
| Net investment income | **33.5** | **7.7** | **—** | **41.2** | 9.7 |
| Net realized and unrealized investment gains (losses) | **35.9** | **—** | **—** | **35.9** | (76.5) |
| Other revenues | **(1.1)** | **—** | **—** | **(1.1)** | 10.1 |
| Total revenues | **1,040.2** | **83.1** | **—** | **1,123.3** | 701.1 |
| Losses and LAE | **573.2** | **7.9** | **—** | **581.1** | 456.2 |
| Acquisition expenses | **189.3** | **22.2** | **—** | **211.5** | 174.9 |
| General and administrative expenses - other underwriting | **78.5** | **—** | **—** | **78.5** | 53.9 |
| General and administrative expenses - all other | **26.8** | **.2** | **—** | **27.0** | 21.0 |
| Change in fair value of contingent consideration | **16.8** | **—** | **—** | **16.8** | 4.9 |
| Interest expense | **15.7** | **—** | **—** | **15.7** | 10.6 |
| Total expenses | **900.3** | **30.3** | **—** | **930.6** | 721.5 |
| **Pre-tax income (loss)** | **$139.9** | **$52.8** | **$—** | **$192.7** | $(20.4) |

58

For the years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates. During the first quarter of 2023, an RITC agreement was executed such that the outstanding loss and LAE reserves for claims arising out of the 2020 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 43%, were reinsured into the 2021 year of account, for which the TPC Providers’ participation in the total net results of the Syndicates was 0%. Captions within Ark’s results of operations for the three and nine months ended September 30, 2022 are shown net of amounts relating to TPC Providers’ share of the Syndicates’ results, including investment results.

### Ark/WM Outrigger Results—Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

The Ark/WM Outrigger segment’s combined ratio was 77% in the third quarter of 2023. The Ark/WM Outrigger segment reported gross written premiums of $251 million, net written premiums of $231 million and net earned premiums of $499 million in the third quarter of 2023. The Ark/WM Outrigger segment reported pre-tax income of $99 million in the third quarter of 2023.

Ark’s combined ratio was 81% in the third quarter of 2023 compared to 87% in the third quarter of 2022. Ark’s combined ratio in the third quarter of 2023 included 11 points of catastrophe losses, which included losses from Hurricane Idalia, the Maui wildfires and various smaller events, compared to 21 points of catastrophe losses in the third quarter of 2022, driven primarily by losses from Hurricane Ian. Ark’s combined ratio in the third quarter 2023 included less than one point of net favorable prior year development. This compared to three points of net favorable prior year development in the third quarter of 2022, driven primarily by good claims experience across most classes including the property and specialty lines of business, predominantly from business underwritten in London.

Ark reported gross written premiums of $251 million, net written premiums of $225 million and net earned premiums of $438 million in the third quarter of 2023 compared to gross written premiums of $216 million, net written premiums of $193 million and net earned premiums of $346 million in the third quarter of 2022. Ark reported pre-tax income of $62 million in the third quarter of 2023 compared to $24 million in the third quarter of 2022. Ark’s results included net realized and unrealized investment losses of $7 million in the third quarter of 2023, driven primarily by the impact of foreign currency on its investment portfolio, compared to $14 million in the third quarter of 2022, driven primarily by net unrealized investment losses on its fixed income portfolio and the impact of foreign currency on its investment portfolio. Ark’s results also included $17 million for the increase in the fair value of its contingent consideration liabilities compared to $3 million in the third quarter of 2022.

Ark has exposure to the ongoing conflict within the geographical area of Israel and Gaza, primarily through its specialty (political risk/violence), marine and accident & health lines of business. At this time, Ark does not expect losses from the conflict to have a material impact on its results of operations or financial condition. However, losses could increase depending upon the scope and duration of the conflict.

WM Outrigger Re’s combined ratio was 44% in the third quarter of 2023. WM Outrigger Re reported gross and net written premiums of $6 million and net earned premiums of $61 million in the third quarter of 2023. WM Outrigger Re’s catastrophe premiums are earned in proportion to the insurance protection provided. WM Outrigger Re reported pre-tax income $37 million in the third quarter of 2023.

The following table presents the Ark/WM Outrigger segment’s insurance premiums, insurance expenses and insurance ratios for the three months ended September 30, 2023 and 2022:

*$ in Millions*

| Insurance premiums: | Three Months Ended September 30, 2023 Ark | WM Outrigger Re | Eliminations | Total | 2022 Ark |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross written premiums | **$251.2** | **$6.0** | **$(6.0)** | **$251.2** | $215.5 |
| Net written premiums | **$225.0** | **$6.0** | **$—** | **$231.0** | $192.6 |
| Net earned premiums | **$438.3** | **$60.6** | **$—** | **$498.9** | $346.1 |
| Insurance expenses: |  |  |  |  |  |
| Loss and loss adjustment expenses | **$258.5** | **$7.3** | **$—** | **$265.8** | $213.7 |
| Acquisition expenses | **71.0** | **19.3** | **—** | **90.3** | 74.8 |
| Other underwriting expenses (1) | **25.5** | **—** | **—** | **25.5** | 13.2 |
| Total insurance expenses | **$355.0** | **$26.6** | **$—** | **$381.6** | $301.7 |
| Insurance ratios: |  |  |  |  |  |
| Loss and loss adjustment expense | **59.0%** | **12.0%** | **—%** | **53.3%** | 61.7% |
| Acquisition expense | **16.2** | **31.8** | **—** | **18.1** | 21.6 |
| Other underwriting expense | **5.8** | **—** | **—** | **5.1** | 3.8 |
| Combined Ratio | **81.0%** | **43.8%** | **—%** | **76.5%** | 87.1% |

(1) Included within general and administrative expenses

#### Gross Written Premiums

Gross written premiums increased 17% to $251 million in the third quarter of 2023 compared to the third quarter of 2022, with risk adjusted rate change up approximately 11% year over year. The increase in gross written premiums was driven primarily by the property line of business for both insurance and reinsurance across London and Bermuda, reflecting the rate environment and additional capacity provided by Outrigger Re Ltd., as well as the marine & energy line of business. The risk adjusted rate change on the Outrigger Re Ltd. portfolio of global property reinsurance was 17% in the third quarter of 2023. The following table presents the Ark/WM Outrigger segment’s gross written premiums by line of business for the three months ended September 30, 2023 and 2022:

| Millions | Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Property | **$123.9** | $102.6 |
| Marine & Energy | **49.0** | 36.0 |
| Specialty | **39.1** | 43.5 |
| Casualty | **27.3** | 21.4 |
| Accident & Health | **11.9** | 12.0 |
| Total Gross Written Premium | **$251.2** | $215.5 |

60

### Ark/WM Outrigger Results— Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

The Ark/WM Outrigger segment’s combined ratio was 83% in the first nine months of 2023. The Ark/WM Outrigger segment reported gross written premiums of $1,667 million, net written premiums of $1,306 million and net earned premiums of $1,047 million in the first nine months of 2023. The Ark/WM Outrigger segment reported pre-tax income of $193 million in the first nine months of 2023.

Ark’s combined ratio was 87% in the first nine months of 2023, compared to 90% in the first nine months of 2022. Ark’s combined ratio in the first nine months of 2023 included seven points of catastrophe losses, which included losses from Hurricane Idalia, the Maui wildfires and various smaller events, compared to 17 points of catastrophe losses in the first nine months of 2022, driven primarily by losses from Hurricane Ian and the conflict in Ukraine. Ark’s combined ratio in the first nine months of 2023 also included two points of net unfavorable prior year development, driven primarily by Winter Storm Elliot and three large claims in the property and marine & energy lines of business, compared to five points of net favorable prior year development in the first nine months of 2022, driven primarily by good claims experience across most classes including the property and specialty lines of business, predominantly from business underwritten in London.

Ark reported gross written premiums of $1,667 million, net written premiums of $1,198 million and net earned premiums of $972 million in the first nine months of 2023, compared to gross written premiums of $1,253 million, net written premiums of $1,007 million and net earned premiums of $758 million in the first nine months of 2022. Ark reported pre-tax income (loss) of $140 million in the first nine months of 2023 compared to $(20) million in the first nine months of 2022. Ark’s results included net realized and unrealized investment gains (losses) of $36 million in the first nine months of 2023, driven primarily by net unrealized investment gains on other long-term investments, compared to $(77) million in the first nine months of 2022, driven primarily by net unrealized investment losses on its fixed income portfolio and the impact of foreign currency on its investment portfolio. Ark’s results also included $17 million for the increase in the fair value of its contingent consideration liabilities compared to $5 million in the first nine months of 2022.

WM Outrigger Re’s combined ratio was 40% in the first nine months of 2023. WM Outrigger Re reported gross and net written premiums of $108 million and net earned premiums of $75 million in the first nine months of 2023. WM Outrigger Re reported pre-tax income $53 million in the first nine months of 2023.

The following table presents the Ark/WM Outrigger segment’s insurance premiums, insurance expenses and insurance ratios for the nine months ended September 30, 2023 and 2022:

*$ in Millions*

| Insurance premiums: | Nine Months Ended September 30, 2023 Ark | WM Outrigger Re | Eliminations | Total | 2022 Ark |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross written premiums | **$1,666.7** | **$108.4** | **$(108.4)** | **$1,666.7** | $1,252.5 |
| Net written premiums | **$1,198.0** | **$108.4** | **$—** | **$1,306.4** | $1,006.5 |
| Net earned premiums | **$971.9** | **$75.4** | **$—** | **$1,047.3** | $757.8 |
| Insurance expenses: |  |  |  |  |  |
| Loss and loss adjustment expenses | **$573.2** | **$7.9** | **$—** | **$581.1** | $456.2 |
| Acquisition expenses | **189.3** | **22.2** | **—** | **211.5** | 174.9 |
| Other underwriting expenses (1) | **78.5** | **—** | **—** | **78.5** | 53.9 |
| Total insurance expenses | **$841.0** | **$30.1** | **$—** | **$871.1** | $685.0 |
| Insurance ratios: |  |  |  |  |  |
| Loss and loss adjustment expense | **59.0%** | **10.5%** | **—%** | **55.5%** | 60.2% |
| Acquisition expense | **19.5** | **29.4** | **—** | **20.2%** | 23.1 |
| Other underwriting expense | **8.1** | **—** | **—** | **7.5%** | 7.1 |
| Combined Ratio | **86.6%** | **39.9%** | **—%** | **83.2%** | 90.4% |

61

#### Gross Written Premiums

Gross written premiums increased 33% to $1,667 million in the first nine months of 2023 compared to the third quarter of 2022, with risk adjusted rate change up approximately 16% year over year. The increase in gross written premiums was driven primarily by the property line of business for both insurance and reinsurance across London and Bermuda, reflecting the rate environment and additional capacity provided by Outrigger Re Ltd., as well as the specialty and marine & energy lines of business. The risk adjusted rate change on the Outrigger Re Ltd. portfolio of global property reinsurance was 36% in the first nine months of 2023. The following table presents the Ark/WM Outrigger segment’s gross written premiums by line of business for the nine months ended September 30, 2023 and 2022:

| Millions | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Property | **$809.4** | $521.7 |
| Specialty | **381.9** | 327.2 |
| Marine & Energy | **332.3** | 271.2 |
| Casualty | **84.2** | 72.2 |
| Accident & Health | **58.9** | 60.2 |
| Total Gross Written Premium | **$1,666.7** | $1,252.5 |

### Ark/WM Outrigger Balance Sheets

The following tables present amounts from Ark and WM Outrigger Re that are contained within White Mountains’s consolidated balance sheet as of September 30, 2023 and December 31, 2022:

| Millions Assets | September 30, 2023 Ark | WM Outrigger Re | Eliminations and Segment Adjustments | Total |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturity investments, at fair value | **$775.0** | **$—** | **$—** | **$775.0** |
| Common equity securities, at fair value | **384.9** | **—** | **—** | **384.9** |
| Short-term investments, at fair value | **616.7** | **233.3** | **—** | **850.0** |
| Other long-term investments | **416.6** | **—** | **—** | **416.6** |
| Total investments | **2,193.2** | **233.3** | **—** | **2,426.5** |
| Cash | **129.5** | **.1** | **—** | **129.6** |
| Reinsurance recoverables | **579.4** | **—** | **(41.0)** | **538.4** |
| Insurance premiums receivable | **781.6** | **58.3** | **(58.3)** | **781.6** |
| Deferred acquisition costs | **172.8** | **5.9** | **—** | **178.7** |
| Goodwill and other intangible assets | **292.5** | **—** | **—** | **292.5** |
| Other assets | **66.9** | **—** | **—** | **66.9** |
| Total assets | **$4,215.9** | **$297.6** | **$(99.3)** | **$4,414.2** |
| **Liabilities** |  |  |  |  |
| Loss and loss adjustment expense reserves | **$1,571.8** | **$8.0** | **$(8.0)** | **$1,571.8** |
| Unearned insurance premiums | **984.6** | **33.0** | **(33.0)** | **984.6** |
| Debt | **184.6** | **—** | **—** | **184.6** |
| Reinsurance payable | **204.6** | **—** | **(58.3)** | **146.3** |
| Contingent consideration | **62.1** | **—** | **—** | **62.1** |
| Other liabilities | **132.0** | **—** | **—** | **132.0** |
| Total liabilities | **3,139.7** | **41.0** | **(99.3)** | **3,081.4** |
| **Equity** |  |  |  |  |
| White Mountains’s common shareholders’ equity | **796.4** | **256.6** | **—** | **1,053.0** |
| Noncontrolling interests | **279.8** | **—** | **—** | **279.8** |
| **Total equity** | **1,076.2** | **256.6** | **—** | **1,332.8** |
| **Total liabilities and equity** | **$4,215.9** | **$297.6** | **$(99.3)** | **$4,414.2** |

62

| Millions Assets | December 31, 2022 Ark | WM Outrigger Re (1) | Eliminations and Segment Adjustments | Total |
| --- | ---: | ---: | ---: | ---: |
| Fixed maturity investments, at fair value | $772.8 | $— | $— | $772.8 |
| Common equity securities, at fair value | 334.6 | — | — | 334.6 |
| Short-term investments, at fair value | 280.9 | 203.7 | — | 484.6 |
| Other long-term investments | 373.6 | — | — | 373.6 |
| Total investments | 1,761.9 | 203.7 | — | 1,965.6 |
| Cash | 100.0 | 1.5 | — | 101.5 |
| Reinsurance recoverables | 595.3 | — | — | 595.3 |
| Insurance premiums receivable | 544.1 | — | — | 544.1 |
| Deferred acquisition costs | 127.2 | — | — | 127.2 |
| Goodwill and other intangible assets | 292.5 | — | — | 292.5 |
| Other assets | 65.2 | — | — | 65.2 |
| Total assets | $3,486.2 | $205.2 | $— | $3,691.4 |
| **Liabilities** |  |  |  |  |
| Loss and loss adjustment expense reserves | $1,296.5 | $— | $— | $1,296.5 |
| Unearned insurance premiums | 623.2 | — | — | 623.2 |
| Debt | 183.7 | — | — | 183.7 |
| Reinsurance payable | 251.1 | — | — | 251.1 |
| Contingent consideration | 45.3 | — | — | 45.3 |
| Other liabilities | 121.1 | 1.2 | — | 122.3 |
| Total liabilities | 2,520.9 | 1.2 | — | 2,522.1 |
| **Equity** |  |  |  |  |
| White Mountains’s common shareholders’ equity | 717.4 | 204.0 | — | 921.4 |
| Noncontrolling interests | 247.9 | — | — | 247.9 |
| **Total equity** | 965.3 | 204.0 | — | 1,169.3 |
| **Total liabilities and equity** | $3,486.2 | $205.2 | $— | $3,691.4 |

(1) Amounts as of December 31, 2022 for WM Outrigger Re have been reclassified from Other Operations to the Ark/WM Outrigger segment to conform to the presentation as of September 30, 2023.

### Kudu

As of September 30, 2023, Kudu had deployed a total of $828 million, including transaction costs, in 23 asset and wealth management firms globally, including three that have been exited. As of September 30, 2023, the asset and wealth management firms had combined assets under management of approximately $75 billion, spanning a range of asset classes, including real estate, wealth management, hedge funds, private equity and alternative credit strategies.

During 2023, White Mountains committed an incremental $150 million of equity capital to Kudu for the purposes of future deployments. Kudu expects to begin drawing on this commitment in the fourth quarter of 2023.

The following table presents the components of GAAP net income, EBITDA and adjusted EBITDA included in the Kudu segment for the three and nine months ended September 30, 2023 and 2022:

| Millions | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | **$15.1** | $14.8 | **$44.0** | $41.2 |
| Net realized and unrealized investment gains (losses) | **11.2** | 41.1 | **45.4** | 45.8 |
| Total revenues | **26.3** | 55.9 | **89.4** | 87.0 |
| General and administrative expenses | **4.5** | 4.5 | **12.3** | 10.4 |
| Interest expense | **5.5** | 4.2 | **15.5** | 10.3 |
| Total expenses | **10.0** | 8.7 | **27.8** | 20.7 |
| **GAAP pre-tax income (loss)** | **16.3** | 47.2 | **61.6** | 66.3 |
| Income tax (expense) benefit | **(4.6)** | (16.6) | **(13.9)** | (21.1) |
| **GAAP net income (loss)** | **11.7** | 30.6 | **47.7** | 45.2 |
| Add back: |  |  |  |  |
| Interest expense | **5.5** | 4.2 | **15.5** | 10.3 |
| Income tax expense (benefit) | **4.6** | 16.6 | **13.9** | 21.1 |
| General and administrative expenses - depreciation | **.1** | — | **.1** | — |
| Amortization of other intangible assets | **—** | — | **.2** | .2 |
| **EBITDA (2)** | **21.9** | 51.4 | **77.4** | 76.8 |
| Exclude: |  |  |  |  |
| Net realized and unrealized investment (gains) losses | **(11.2)** | (41.1) | **(45.4)** | (45.8) |
| Non-cash equity-based compensation expense | **—** | — | **—** | .1 |
| Transaction expenses | **1.1** | 1.2 | **2.4** | 1.4 |
| **Adjusted EBITDA (2)** | **$11.8** | $11.5 | **$34.4** | $32.5 |

(1) Net investment income includes revenues from participation contracts and income from short-term and other long-term investments.

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

The following table presents the changes in the fair value of Kudu’s Participation Contracts:

| Millions | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 |  | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance of Kudu’s Participation Contracts | **$737.1** | $727.0 | **$695.9** |  | $669.5 |
| Contributions to Participation Contracts | **26.7** | 45.1 | **144.1** | (1) | 97.9 |
| Proceeds from Participation Contracts sold | **—** | — | **(110.4)** | (1) | — |
| Net realized and unrealized investment gains (losses) on Participation Contracts sold and pending sale (2) | **(.6)** | 16.3 | **(1.8)** |  | 40.7 |
| Net unrealized investment gains (losses) on Participation Contracts - all other (3) | **12.1** | 24.8 | **47.5** |  | 5.1 |
| Ending balance of Kudu’s Participation Contracts (4) | **$775.3** | $813.2 | **$775.3** |  | $813.2 |

(1) Includes $35.8 of non-cash contributions to (proceeds from) Participation Contracts.

(2) Includes net realized and unrealized investment gains (losses) recognized from Participation Contracts beginning in the quarter a contract is classified as pending sale.

(3) Includes net unrealized investment gains (losses) recognized from (i) ongoing Participation Contracts and (ii) Participation Contracts prior to classification as pending sale.

(4) As of September 30, 2023, Kudu’s other long-term investments also include $5.4 related to a private debt instrument.

### Kudu Results—Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

Kudu reported total revenues of $26 million, pre-tax income of $16 million and adjusted EBITDA of $12 million in the third quarter of 2023 compared to total revenues of $56 million, pre-tax income of $47 million and adjusted EBITDA of $12 million in the third quarter of 2022. Total revenues, pre-tax income and adjusted EBITDA included $15 million of net investment income in both the third quarter of 2023 and 2022. Net investment income in the third quarter of 2023 compared to the third quarter of 2022 included higher dividends from existing Participation Contracts, due to growth in assets under management, as well as the impact of new deployments made subsequent to September 30, 2022, offset by a decrease in dividends due to sale transactions. Total revenues and pre-tax income also included $11 million of net realized and unrealized investment gains in the third quarter of 2023 compared to $41 million in the third quarter of 2022. Net realized and unrealized investment gains in the third quarter of 2022 were positively impacted by two Participation Contracts pending sale.

### Kudu Results—Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

Kudu reported total revenues of $89 million, pre-tax income of $62 million and adjusted EBITDA of $34 million in the first nine months of 2023, compared to total revenues of $87 million, pre-tax income of $66 million and adjusted EBITDA of $33 million in the first nine months of 2022. Total revenues, pre-tax income and adjusted EBITDA included $44 million of net investment income in the first nine months of 2023 compared to $41 million in the first nine months of 2022. The increase in net investment income in the first nine months of 2023 compared to the first nine months of 2022 was driven primarily by amounts earned from new deployments that Kudu made during 2022 and 2023, partially offset by a decrease in dividends due to sale transactions. Total revenues and pre-tax income also included $45 million of net realized and unrealized investment gains in the first nine months of 2023, driven by positive returns on existing Participation Contracts, compared to $46 million in the first nine months of 2022, driven by the positive impact from two Participation Contracts pending sale.

### Other Operations

The following table presents the components of pre-tax income (loss) included in White Mountains’s Other Operations for the three and nine months ended September 30, 2023 and 2022:

| Millions | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | **$8.0** | $8.5 | **$22.0** | $13.6 |
| Net realized and unrealized investment gains (losses) | **8.0** | (17.3) | **125.8** | 2.8 |
| Net realized and unrealized investment gains (losses) from investment in MediaAlpha | **(46.8)** | (18.6) | **(38.9)** | (113.3) |
| Commission revenues | **3.5** | 3.2 | **10.0** | 8.7 |
| Other revenues | **15.2** | 33.0 | **67.1** | 89.6 |
| Total revenues | **(12.1)** | 8.8 | **186.0** | 1.4 |
| Cost of sales | **8.0** | 25.0 | **33.5** | 68.8 |
| General and administrative expenses | **42.2** | 41.3 | **130.7** | 122.1 |
| Interest expense | **.9** | .6 | **2.9** | 1.2 |
| Total expenses | **51.1** | 66.9 | **167.1** | 192.1 |
| **Pre-tax income (loss)** | **$(63.2)** | $(58.1) | **$18.9** | $(190.7) |

65

### Other Operations Results—Three Months Ended September 30, 2023 versus Three Months Ended September 30, 2022

White Mountains’s Other Operations reported pre-tax loss of $63 million in the third quarter of 2023 compared to $58 million in the third quarter of 2022. White Mountains’s Other Operations reported unrealized investment losses from its investment in MediaAlpha of $47 million in the third quarter of 2023 compared to $19 million in the third quarter of 2022. Excluding MediaAlpha, White Mountains’s Other Operations reported net realized and unrealized investment gains (losses) of $8 million in the third quarter of 2023 compared to $(17) million in the third quarter of 2022. The net realized and unrealized investment gains in the third quarter of 2023 were driven by gains from other long-term investments, substantially offset by losses from common equity securities and the fixed income portfolio, while the results in the third quarter of 2022 were driven by losses in the fixed income portfolio, common equity securities and other long-term investments. White Mountains’s Other Operations reported net investment income of $8 million in the third quarter of 2023 compared to $9 million in the third quarter of 2022. See **Summary of Investment Results** on page 67.

White Mountains’s Other Operations reported $15 million of other revenues in the third quarter of 2023 compared to $33 million in the third quarter of 2022. White Mountains’s Other Operations reported $8 million of cost of sales in the third quarter of 2023 compared to $25 million in the third quarter of 2022. The decreases in other revenues and cost of sales were driven primarily by a recent sale within Other Operations.

White Mountains’s Other Operations reported general and administrative expenses of $42 million in the third quarter of 2023 compared to $41 million in the third quarter of 2022.

White Mountains’s Other Operations includes its investment in PassportCard/DavidShield, which has operations, including its principal executive office, in Israel. White Mountains is monitoring the ongoing conflict in Israel but does not expect that any effect on PassportCard/DavidShield will have a material impact on White Mountains’s results of operations or financial condition.

### Other Operations Results—Nine Months Ended September 30, 2023 versus Nine Months Ended September 30, 2022

White Mountains’s Other Operations reported pre-tax income (loss) of $19 million in the first nine months of 2023, compared to $(191) million in the first nine months of 2022. White Mountains’s Other Operations results included unrealized investment losses from its investment in MediaAlpha of $39 million in the first nine months of 2023 compared to $113 million in the first nine months of 2022. Excluding MediaAlpha, White Mountains’s Other Operations results included net realized and unrealized investment gains of $126 million in the first nine months of 2023 compared to $3 million in the first nine months of 2022. The net realized and unrealized investment gains for the first nine months of 2023 were driven by gains from other long-term investments and common equity securities, partially offset by losses from the fixed income portfolio, while the results for the first nine months of 2022 were driven by gains from other long-term investments, partially offset by losses in the fixed income portfolio and common equity securities. White Mountains’s Other Operations results included net investment income of $22 million in the first nine months of 2023 compared to $14 million in the first nine months of 2022. See **Summary of Investment Results** on page 67.

White Mountains’s Other Operations reported $67 million of other revenues in the first nine months of 2023 compared to $90 million in the first nine months of 2022. Other revenues in the first nine months of 2023 included a transaction gain from a recent sale within Other Operations, which was more than offset by a reduction in operating revenues for the sold entity. White Mountains’s Other Operations reported $34 million of cost of sales in the first nine months of 2023 compared to $69 million in the first nine months of 2022. The decrease in cost of sales was driven primarily by the recent sale within Other Operations.

White Mountains’s Other Operations reported general and administrative expenses of $131 million in the first nine months of 2023 compared to $122 million in the first nine months of 2022. The increase in general and administrative expenses in the first nine months of 2023 compared to the first nine months of 2022 was driven primarily by two acquisitions within Other Operations in the second half of 2022, partially offset by a decrease due to the recent sale within Other Operations.

### II. 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. For 2022 returns, percentages are calculated before any adjustments for TPC Providers in order to produce a better comparison to benchmark returns.

### Gross Investment Returns and Benchmark Returns

The following table presents the pre-tax investment returns for White Mountains’s consolidated portfolio for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Fixed income investments | **—%** | (0.8)% | **2.5%** | (6.3)% |
| Bloomberg Barclays U.S. Intermediate Aggregate Index | **(1.9)%** | (3.8)% | **(0.3)%** | (11.0)% |
| Common equity securities | **(2.5)%** | 1.8% | **6.8%** | (2.0)% |
| Investment in MediaAlpha | **(19.9)%** | (11.2)% | **(17.2)%** | (43.3)% |
| Other long-term investments | **2.8%** | 3.0% | **12.4%** | 7.7% |
| Total common equity securities, investment in MediaAlpha and other long-term investments | **(0.4)%** | 1.6% | **8.6%** | (0.7)% |
| Total common equity securities and other long-term investments | **1.4%** | 2.8% | **11.1%** | 6.0% |
| S&P 500 Index (total return) | **(3.3)%** | (4.9)% | **13.1%** | (23.9)% |
| Total consolidated portfolio | **(0.2)%** | 0.4% | **5.3%** | (3.6)% |
| Total consolidated portfolio - excluding MediaAlpha | **0.6%** | 0.5% | **6.3%** | (1.4)% |

### Investment Returns—Three and Nine Months Ended September 30, 2023 versus Three and Nine Months Ended September 30, 2022

White Mountains’s total consolidated portfolio return on invested assets was -0.2% in the third quarter of 2023, which included $47 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.6% in the third quarter of 2023, driven primarily by net unrealized investment gains and net investment income from other long-term investments, partially offset by net unrealized investment losses on common equity securities. White Mountains’s total consolidated portfolio return on invested assets was 0.4% in the third quarter of 2022, which included $19 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.5% in the third quarter of 2022, driven primarily by net unrealized investment gains and net investment income from other long-term investments, partially offset by net unrealized investment losses in the fixed income portfolio due to rising interest rates.

White Mountains’s total consolidated portfolio return on invested assets was 5.3% in the first nine months of 2023, which included $39 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 6.3% in the first nine months of 2023, driven primarily by net realized and unrealized investment gains and net investment income from other long-term investments, net investment income from the fixed income portfolio and net realized and unrealized investment gains from common equity securities. White Mountains’s total consolidated portfolio return on invested assets was -3.6% in the first nine months of 2022, which included $113 million of unrealized investment losses from White Mountains’s investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was -1.4% in the first nine months of 2022, driven primarily by net unrealized investment losses in the fixed income portfolio due to rising interest rates, partially offset by net realized and unrealized gains and net investment income from other long-term investments.

#### Fixed Income Results

White Mountains’s fixed income portfolio, including short-term investments, was $3.1 billion and $2.8 billion as of September 30, 2023 and December 31, 2022, which represented 54% and 55% of total invested assets. The duration of White Mountains’s fixed income portfolio, including short-term investments, was 2.1 years and 2.3 years as of September 30, 2023 and December 31, 2022. 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 return was flat in the third quarter of 2023, compared to -0.8% in the third quarter of 2022, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -1.9% and -3.8% for the comparable periods. The results in the third quarter of 2023 were driven primarily by net investment income, offset by net unrealized investment losses due to the increase in interest rates on White Mountains’s short duration portfolio. The results in the third quarter of 2022 were driven primarily by net unrealized investment losses due to the increase in interest rates on White Mountains’s short duration portfolio.

White Mountains’s fixed income portfolio returned 2.5% in the first nine months of 2023, compared to -6.3% in the first nine months of 2022, outperforming the Bloomberg Barclays U.S. Intermediate Aggregate Index returns of -0.3% and -11.0% for the comparable periods. The results in the first nine months of 2023 were driven primarily by net investment income due to the increase in shorter-term interest rates. The results in the first nine months of 2022 were driven primarily by net unrealized investment losses due to the increase in interest rates on White Mountains’s short duration portfolio.

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

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments was $2.7 billion and $2.3 billion as of September 30, 2023 and December 31, 2022, which represented 46% and 45% of total invested assets. See **Note 3 — “Investment Securities.”**

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned -0.4% in the third quarter of 2023, which included $47 million of unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 1.4% in the third quarter of 2023. White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned 1.6% in the third quarter of 2022, which included $19 million of unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 2.8% in the third quarter of 2022.

White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned 8.6% in the first nine months of 2023, which included $39 million of unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 11.1% in the first nine months of 2023. White Mountains’s portfolio of common equity securities, its investment in MediaAlpha and other long-term investments returned -0.7% in the first nine months of 2022, which included $113 million of unrealized investment losses from MediaAlpha. White Mountains’s portfolio of common equity securities and other long-term investments returned 6.0% in the first nine months of 2022.

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 generally corresponding to the performance of the S&P 500 Index. White Mountains’s portfolio of common equity securities was $637 million and $668 million as of September 30, 2023 and December 31, 2022.

White Mountains’s portfolio of common equity securities returned -2.5% in the third quarter of 2023 compared to 1.8% in the third quarter of 2022, outperforming the S&P 500 Index returns of -3.3% and -4.9% for the comparable periods. The results in the third quarter of 2023 and 2022 were driven primarily by relative outperformance in White Mountains’s international listed equity funds as compared to the S&P 500 Index. White Mountains’s portfolio of common equity securities returned 6.8% in the first nine months of 2023, compared to -2.0% in the first nine months of 2022, underperforming and outperforming the S&P 500 Index returns of 13.1% and -23.9% for the comparable periods. The results in the first nine months of 2023 and 2022 were driven primarily by relative underperformance and outperformance in White Mountains’s international listed equity funds as compared to the S&P 500 Index.

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 $1.9 billion and $1.5 billion as of September 30, 2023 and December 31, 2022.

White Mountains’s other long-term investments portfolio returned 2.8% in the third quarter of 2023 compared to 3.0% in the third quarter of 2022. Investment returns for the third quarter of 2023 were driven primarily by net investment income and net unrealized investment gains from Kudu’s Participation Contracts, as well as net unrealized investment gains from certain unconsolidated entities and ILS funds. Investment returns for the third quarter of 2022 were driven primarily by net investment income, net unrealized investment gains and unrealized foreign currency losses from Kudu’s Participation Contracts, partially offset by net realized and unrealized investment losses from private equity funds and hedge funds and unrealized losses from foreign currency on Lloyd’s trust deposits.

White Mountains’s other long-term investments portfolio returned 12.4% in the first nine months of 2023 compared to 7.7% in the first nine months of 2022. Investment returns for the first nine months of 2023 were driven primarily by net investment income and net realized and unrealized investment gains from Kudu’s Participation Contracts, net realized and unrealized investment gains from private equity funds and hedge funds and net unrealized investment gains from unconsolidated entities and ILS funds. Investment returns for the first nine months of 2022 were driven primarily by net investment income, net realized and unrealized investment gains and unrealized foreign currency losses from Kudu’s Participation Contracts, net investment income and net realized and unrealized investment gains from private equity funds and unrealized losses from foreign currency on Lloyd’s trust deposits.

### Foreign Currency Exposure

As of September 30, 2023, White Mountains had foreign currency exposure on $183 million of net assets primarily related to Ark/WM Outrigger’s non-U.S. business, Kudu’s non-U.S. Participation Contracts, and certain other foreign consolidated and unconsolidated entities.

The following table presents the fair value of White Mountains’s foreign denominated net assets (liabilities) by segment as of September 30, 2023:

*$ in Millions Currency*

|  | Ark/WM Outrigger | Kudu | Other Operations | Total Fair Value | % of Total Shareholders’ Equity |
| --- | ---: | ---: | ---: | ---: | ---: |
| CAD | $73.6 | $72.2 | $— | $145.8 | 3.5% |
| AUD | 24.8 | 41.6 | — | 66.4 | 1.6% |
| GBP | (7.3) | — | — | (7.3) | (.2)% |
| EUR | (54.3) | 18.0 | 13.3 | (23.0) | (.5)% |
| All other | — | — | 1.4 | 1.4 | —% |
| Total | **$36.8** | **$131.8** | **$14.7** | **$183.3** | 4.4% |

### III. Income Taxes

The Company and its Bermuda domiciled subsidiaries are not subject to income tax under current Bermuda law. The Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. As of September 30, 2023, the primary jurisdictions in which the Company’s subsidiaries and branches were subject to tax include Ireland, Israel, Luxembourg, the United Kingdom and the United States.

White Mountains’s income tax expense related to pre-tax income from continuing operations for the three months ended September 30, 2023 represented an effective tax rate of 35%. The effective tax rate was different from the U.S. statutory rate of 21%, driven primarily by an increase in the valuation allowance at BAM, as well as withholding taxes and state income taxes, partially offset by full year forecasted income in jurisdictions with lower tax rates than the United States.

White Mountains’s income tax expense related to pre-tax income from continuing operations for the nine months ended September 30, 2023 represented an effective tax rate of 8%. The effective tax rate was different from the U.S. statutory rate of 21%, driven primarily by full year forecasted income in jurisdictions with lower tax rates than the United States.

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

On April 1, 2023, the U.K. corporate tax rate increased from 19% to 25%.

### IV. Discontinued Operations

### NSM

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

White Mountains reported net income from discontinued operations, net of tax, for NSM Group of $6 million for the period from July 1, 2022 to August 1, 2022 and $16 million for the period from January 1, 2022 to August 1, 2022. See **Note 19 — “Held for Sale and Discontinued Operations.”**

### LIQUIDITY AND CAPITAL RESOURCES

### Operating Cash and Short-term Investments

### Holding Company Level

The primary sources of cash for the Company and certain of its intermediate holding companies are expected to be distributions from its insurance, reinsurance and other operating subsidiaries, net investment income, proceeds from sales, repayments and maturities of investments, capital raising activities and, from time to time, proceeds from sales of operating subsidiaries. The primary uses of cash are expected to be general and administrative expenses, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of 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.

### Operating Subsidiary Level

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

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

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

### 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 September 30, 2023, HG Global had $619 million face value of preferred shares outstanding, of which White Mountains owned 96.9%. Holders of the HG Global preferred shares 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 September 30, 2023, HG Global has accrued $399 million of dividends payable to holders of its preferred shares, $385 million of which is payable to White Mountains and is eliminated in consolidation. As of September 30, 2023, HG Global and its subsidiaries had less than $1 million of net unrestricted cash outside of HG Re.

HG Re is a special purpose insurer subject to regulation and supervision by the BMA. HG Re does not require regulatory approval to pay dividends, however, its dividend capacity is limited to amounts held outside of the Collateral Trusts pursuant to the FLRT with BAM. As of September 30, 2023, HG Re had less than $1 million of net unrestricted cash and investments. As of September 30, 2023, HG Re had $112 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts. As of September 30, 2023, HG Re had $751 million of statutory capital and surplus and $900 million of assets held in the Collateral Trusts.

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. If, at the end of any quarter, the Regulation 114 Trust balance is below the target balance, funds will be withdrawn from the Supplemental Trust and deposited into the Regulation 114 Trust in an amount equal to the shortfall. If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust.

The Supplemental Trust Target Balance is $603 million, less the amount of cash and securities in the Regulation 114 Trust in excess of its target balance. If, at the end of any quarter, the Supplemental Trust balance exceeds the Supplemental Trust Target Balance, such excess may be distributed to HG Re. The distribution will be made first as an assignment of accrued interest on the BAM Surplus Notes and second in cash and/or fixed income securities. As the BAM Surplus Notes are repaid over time, the BAM Surplus Notes will be replaced in the Supplemental Trust by cash and fixed income securities. The Supplemental Trust balance as of September 30, 2023 was $589 million.

As of September 30, 2023, the Collateral Trusts held assets of $900 million, which included $527 million of cash and investments, $340 million of BAM Surplus Notes and $33 million of interest receivable on the BAM Surplus Notes.

Through 2024, the interest rate on the BAM Surplus Notes is a variable rate equal to the one-year U.S. Treasury rate plus 300 basis points, set annually. During 2023, the interest rate on the BAM Surplus Notes is 7.7%. Beginning in 2025, the interest rate will be fixed at the higher of the then current variable rate or 8.0%. Under its agreements with HG Global, BAM is required to seek regulatory approval to pay 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. No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS.

During the nine months ended September 30, 2023, BAM made no repayments of the BAM Surplus Notes or accrued interest. See **Note 10 — “Municipal Bond Guarantee Insurance.”**

### Ark/WM Outrigger

During any 12-month period, GAIL, a class 4 licensed Bermuda insurer, has the ability to (i) make capital distributions of up to 15% of its total statutory capital per the previous year’s statutory financial statements, or (ii) make dividend payments of up to 25% of its total statutory capital and surplus per the previous year’s statutory financial statements, without prior approval of Bermuda regulatory authorities. Accordingly, GAIL will have the ability to make capital distributions of up to $113 million during 2023, which is equal to 15% of its December 31, 2022 statutory capital of $755 million, subject to meeting all appropriate liquidity and solvency requirements. During the nine months ended September 30, 2023, GAIL paid a $15 million dividend to its immediate parent.

During the nine months ended September 30, 2023, Ark paid a $24 million dividend to its shareholders, including $17 million to White Mountains. As of September 30, 2023, Ark and its intermediate holding companies had $1 million of net unrestricted cash and short-term investments outside of its regulated and unregulated insurance and reinsurance operating subsidiaries.

WM Outrigger Re is a special purpose insurer subject to regulation and supervision by the BMA. WM Outrigger Re does not require regulatory approval to pay dividends, however, its dividend capacity is limited to amounts held outside of the collateral trust pursuant to the reinsurance agreement with GAIL. As of September 30, 2023, WM Outrigger Re had less than $1 million of net unrestricted cash and investments held outside the collateral trust. As of September 30, 2023, WM Outrigger Re had $257 million of statutory capital and surplus and $233.3 million of assets held in the collateral trusts pursuant to the reinsurance agreement with GAIL.

### Kudu

During the nine months ended September 30, 2023, Kudu distributed $73 million to unitholders, substantially all of which was paid to White Mountains. As of September 30, 2023, Kudu had $9 million of net unrestricted cash and short-term investments.

### Other Operations

During the nine months ended September 30, 2023, White Mountains paid a $3 million common share dividend. As of September 30, 2023, the Company and its intermediate holding companies had $512 million of net unrestricted cash, short-term investments and fixed maturity investments, $189 million of MediaAlpha common stock, $252 million of common equity securities and $410 million of private equity and hedge funds, ILS funds and certain unconsolidated entities.

### Financing

The following table presents White Mountains’s capital structure as of September 30, 2023 and December 31, 2022:

*$ in Millions*

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| HG Global Senior Notes (1)(2) | **$146.8** | $146.5 |
| Ark 2007 Subordinated Notes (1) | **30.0** | 30.0 |
| Ark 2021 Subordinated Notes (1)(2) | **154.6** | 153.7 |
| Kudu Credit Facility (1)(2) | **203.7** | 208.3 |
| Other Operations debt (1)(2) | **29.6** | 36.7 |
| Total debt | **564.7** | 575.2 |
| Noncontrolling interests—excluding BAM | **381.0** | 342.8 |
| Total White Mountains’s common shareholders’ equity | **3,949.1** | 3,746.9 |
| Total capital | **4,894.8** | 4,664.9 |
| HG Global’s unearned premium reserve (3) | **254.2** | 242.1 |
| HG Global’s net deferred acquisition costs (3) | **(73.1)** | (69.0) |
| Time-value discount on expected future payments on the BAM Surplus Notes (3) | **(90.2)** | (95.1) |
| Total adjusted capital | **$4,985.7** | $4,742.9 |
| Total debt to total adjusted capital | **11.3%** | 12.1% |

(1) See **Note 7 — “Debt”** for details of debt arrangements.

(2) Net of unamortized issuance costs and, where applicable, the original issue discount.

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

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

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

### Covenant Compliance

As of September 30, 2023, White Mountains was in compliance in all material respects with all of the covenants under its debt instruments.

### 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 September 30, 2023, White Mountains may repurchase an additional 301,014 shares under these Board authorizations. 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.

During the nine months ended September 30, 2023, White Mountains repurchased and retired 24,165 of its common shares for $33 million at an average share price of $1,355, which was approximately 85% of White Mountains’s adjusted book value per share as of September 30, 2023. Of the shares White Mountains repurchased in the first nine months of 2023, 4,629 were to satisfy employee income tax withholding pursuant to employee benefit plans, which do not reduce the amount available under the Board repurchase authorizations.

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

### Cash Flows

Detailed information concerning White Mountains’s cash flows from continuing operations during the nine months ended September 30, 2023 and 2022 follows:

### Cash flows from operations for the nine months ended September 30, 2023 and September 30, 2022

Net cash provided from (used for) operations was $380 million for the nine months ended September 30, 2023 compared to $118 million for the nine months ended September 30, 2022. The increase in cash provided from operations was driven primarily by cash provided from Ark’s operations in 2023. As of September 30, 2023, the Company and its intermediate holding companies had $512 million of net unrestricted cash, short-term investments and fixed maturity investments, $189 million of MediaAlpha common stock, $252 million of common equity securities and $410 million of private equity funds, hedge funds, ILS funds and unconsolidated entities.

### Cash flows from investing and financing activities for the nine months ended September 30, 2023

#### Financing and Other Capital Activities

During the nine months ended September 30, 2023, the Company declared and paid a $3 million cash dividend to its common shareholders.

During the nine months ended September 30, 2023, White Mountains repurchased and retired 24,165 of its common shares for $33 million. Of the shares White Mountains repurchased in the first three months of 2023, 4,629 were to satisfy employee income tax withholding pursuant to employee benefit plans.

During the nine months ended September 30, 2023, BAM received $46 million in MSC.

During the nine months ended September 30, 2023, Kudu borrowed $12 million in term loans under the Kudu Credit Facility.

During the nine months ended September 30, 2023, Kudu repaid $17 million in term loans under the Kudu Credit Facility.

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

#### Financing and Other Capital Activities

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

During the nine months ended September 30, 2022, White Mountains repurchased and retired 457,180 of its common shares for $611 million at an average share price of $1,355. The majority of these shares were repurchased through a “modified Dutch auction” self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses. Of the shares White Mountains repurchased in the first nine months of 2022, 4,011 were to satisfy employee income tax withholding pursuant to employee benefit plans, which do not reduce the board authorizations.

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

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

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

#### Acquisitions and Dispositions

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

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

### NON-GAAP FINANCIAL MEASURES

This report includes five non-GAAP financial measures that have been reconciled with from their most comparable GAAP financial measures.

### Adjusted book value per share

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

The GAAP book value per share numerator is adjusted (i) to 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 value of HG Global’s unearned premium reserve, net of deferred acquisition costs, was $187 million, $182 million, $179 million and $172 million as of September 30, 2023, June 30, 2023, December 31, 2022 and September 30, 2022, respectively.

Under GAAP, White Mountains is required to carry the BAM Surplus Notes, including accrued interest, at nominal value with no consideration for time value of money. Based on a debt service model that forecasts operating results for BAM through maturity of the BAM Surplus Notes, the present value of the BAM Surplus Notes, including accrued interest and using an 8% discount rate, was estimated to be $93 million, $95 million, $98 million and $114 million less than the nominal GAAP carrying values as of September 30, 2023, June 30, 2023, December 31, 2022 and September 30, 2022, respectively.

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

The denominator used in the calculation of adjusted book value per share equals the number of common shares outstanding, adjusted to exclude unearned restricted common shares, the compensation cost of which, at the date of calculation, has yet to be amortized. Restricted common shares are earned on a straight-line basis over their vesting periods. The reconciliation of GAAP book value per share to adjusted book value per share is included on page 49.

### Kudu’s EBITDA and adjusted EBITDA

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

- *Net realized and unrealized investment gains (losses)* - Represents net unrealized investment gains and losses on Kudu’s Participation Contracts, which are recorded at fair value under GAAP, and realized investment gains and losses on Kudu’s Participation Contracts sold during the period.
- *Non-cash equity-based compensation expense* - Represents non-cash expenses related to Kudu’s management compensation that are settled with equity units in Kudu.
- *Transaction expenses* - Represents costs directly related to Kudu’s mergers and acquisitions activity, such as external lawyer, banker, consulting and placement agent fees, which are not capitalized and are expensed under GAAP.

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

### Total consolidated portfolio return excluding MediaAlpha

Total consolidated portfolio return excluding MediaAlpha is a non-GAAP financial measure that removes the net investment income and net realized and unrealized investment gains (losses) from White Mountains’s investment in MediaAlpha. White Mountains believes this measure to be useful to management and investors by showing the underlying performance of White Mountains’s investment portfolio without regard to MediaAlpha.

The following tables present reconciliations from GAAP to the reported percentages for three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, 2023 GAAP Return | Remove MediaAlpha | Return - Excluding MediaAlpha | Three Months Ended September 30, 2022 GAAP Return | Remove MediaAlpha | Return - Excluding MediaAlpha |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total consolidated portfolio return | **(0.2)%** | **0.8%** | **0.6%** | 0.4% | 0.1% | 0.5% |

|  | Nine Months Ended September 30, 2023 GAAP Return | Remove MediaAlpha | Return - Excluding MediaAlpha | Nine Months Ended September 30, 2022 GAAP Return | Remove MediaAlpha | Return - Excluding MediaAlpha |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total consolidated portfolio return | **5.3%** | **1.0%** | **6.3%** | (3.6)% | 2.2% | (1.4)% |

### Total adjusted capital

Total capital at White Mountains is comprised of White Mountains’s common shareholders’ equity, debt and noncontrolling interests other than noncontrolling interests attributable to BAM. Total adjusted capital is a non-GAAP financial measure, which is derived by adjusting total capital (i) to include a discount for the time value of money arising from the expected timing of cash payments of principal and interest on the BAM Surplus Notes and (ii) to add back the unearned premium reserve, net of deferred acquisition costs, at HG Global. The reconciliation of total capital to total adjusted capital is included on page 72.

### CRITICAL ACCOUNTING ESTIMATES

Refer to the Company’s 2022 Annual Report on Form 10-K for a complete discussion regarding White Mountains’s critical accounting estimates.

### FORWARD-LOOKING STATEMENTS

This report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this report which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words “could”, “will”, “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains’s:

- change in book value per share, adjusted book value per share or return on equity;
- business strategy;
- financial and operating targets or plans;
- incurred loss and LAE and the adequacy of its loss and LAE reserves and related reinsurance;
- projections of revenues, income (or loss), earnings (or loss) per share, EBITDA, adjusted EBITDA, dividends, market share or other financial forecasts of White Mountains or its businesses;
- expansion and growth of its business and operations; and
- future capital expenditures.

These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to risks and uncertainties that could cause actual results to differ materially from expectations, including:

- the risks that are described from time to time in White Mountains’s filings with the Securities and Exchange Commission, including but not limited to White Mountains’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022;
- claims arising from catastrophic events, such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis, severe winter weather, public health crises, terrorist attacks, war and war-like actions, explosions, infrastructure failures or cyber attacks;
- recorded loss reserves subsequently proving to have been inadequate;
- the market value of White Mountains’s investment in MediaAlpha;
- the trends and uncertainties from the COVID-19 pandemic, including judicial interpretations on the extent of insurance coverage provided by insurers for COVID-19 pandemic related claims;
- business opportunities (or lack thereof) that may be presented to it and pursued;
- actions taken by rating agencies, such as financial strength or credit ratings downgrades or placing ratings on negative watch;
- the continued availability of capital and financing;
- deterioration of general economic, market or business conditions, including due to outbreaks of contagious disease (including the COVID-19 pandemic) and corresponding mitigation efforts;
- competitive forces, including the conduct of other insurers;
- changes in domestic or foreign laws or regulations, or their interpretation, applicable to White Mountains, its competitors or its customers; and
- other factors, most of which are beyond White Mountains’s control.

Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to publicly update any such forward-looking statements, whether as a result of new information, future events or otherwise.

## Market risk

As filed, 153 characters.

Refer to White Mountains’s 2022 Annual Report on Form 10-K and in particular **Item 7A. - “Quantitative and Qualitative Disclosures About Market Risk.”**

## Controls and procedures

As filed, 668 characters.

The Principal Executive Officer (“PEO”) and the Principal Financial Officer (“PFO”) of White Mountains have evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of September 30, 2023. Based on that evaluation, the PEO and PFO have concluded that White Mountains’s disclosure controls and procedures are adequate and effective.

There were no changes to White Mountains’s internal control over financial reporting that occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect White Mountains’s internal control over financial reporting.

## Risk factors

As filed, 137 characters.

There have been no material changes to any of the risk factors previously disclosed in the Registrant’s 2022 Annual Report

on Form 10-K.

Filed Nov 6, 2023.
Source: SEC EDGAR, the filing index for accession 0000776867-23-000017. Last ingested by Listed: Nov 6, 2026, 02:06 ET. No prices; not investment advice.