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Variable Annuity Reinsurance (Tables) | 6 Months Ended
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Jun. 30, 2011
Variable Annuity Reinsurance |
Pre-tax operating results of WM Life Re |
|  | Three Months Ended June 30, |  | Six Months Ended June 30, |
Millions |  | 2011 |  | 2010 |  | 2011 |  | 2010 |
Fees, included in other revenues |  | $ | 8.0 |  | $ | 7.2 |  | $ | 15.9 |  | $ | 14.5 |
Change in fair value of variable annuity liability, included in other revenues |  | (35.9 | ) | (186.2 | ) | 16.4 |  | (151.2 | )
Change in fair value of derivatives, included in other revenues |  | 22.0 |  | 172.8 |  | (43.5 | ) | 130.5 |
Foreign exchange, included in other revenues |  | 6.9 |  | 7.7 |  | 2.3 |  | 5.6 |
Other investment income and gains (losses) |  | (.2 | ) | (.2 | ) | (.6 | ) | (.5 | )
Total revenues |  | .8 |  | 1.3 |  | (9.5 | ) | (1.1 | )
Change in fair value of variable annuity death benefit liabilities, included in other expenses |  | (.5 | ) | (8.1 | ) | 2.5 |  | (6.1 | )
Death benefit claims paid, included in other expenses |  | (.7 | ) | (.4 | ) | (1.7 | ) | (.8 | )
General and administrative expenses |  | (1.4 | ) | (1.4 | ) | (2.1 | ) | (3.6 | )
Pre-tax (loss) income |  | $ | (1.8 | ) | $ | (8.6 | ) | $ | (10.8 | ) | $ | (11.6 | )
Changes in White Mountains' variable annuity reinsurance liabilities and derivative instruments | Table 2
Realized and unrealized derivative gains (losses) recognized in other revenues and carrying values, by the type of instrument |
|  | Variable Annuity (Liabilities) |  | Derivative Instruments |
Millions |  | Level 3 |  | Level 3 (1) |  | Level 2 (1)(2) |  | Level 1 (3) |  | Total (4) |
Balance at January 1, 2011 |  | $ | (610.2 | ) | $ | 275.3 |  | $ | 72.2 |  | $ | — |  | $ | 347.5 |
Purchases |  | — |  | 5.0 |  | — |  | — |  | 5.0 |
Realized and unrealized gains (losses) |  | 18.9 |  | (18.5 | ) | (8.2 | ) | (16.8 | ) | (43.5 | )
Transfers in (out) |  | — |  | — |  | — |  | — |  | — |
Sales/settlements |  | — |  | (29.1 | ) | (15.8 | ) | 4.9 |  | (40.0 | )
Balance at June 30, 2011 |  | $ | (591.3 | ) | $ | 232.7 |  | $ | 48.2 |  | $ | (11.9 | ) | $ | 269.0 |
|  | Variable Annuity (Liabilities) |  | Derivative Instruments |
Millions |  | Level 3 |  | Level 3 (1) |  | Level 2 (1)(2) |  | Level 1 (3) |  | Total (4) |
Balance at March 31, 2011 |  | $ | (554.9 | ) | $ | 226.0 |  | $ | 54.8 |  | $ | 7.3 |  | $ | 288.1 |
Purchases |  | — |  | — |  | — |  | — |  | — |
Realized and unrealized gains (losses) |  | (36.4 | ) | 6.7 |  | 12.5 |  | 2.8 |  | 22.0 |
Transfers in (out) |  | — |  | — |  | — |  | — |  | — |
Sales/settlements |  | — |  | — |  | (19.1 | ) | (22.0 | ) | (41.1 | )
Balance at June 30, 2011 |  | $ | (591.3 | ) | $ | 232.7 |  | $ | 48.2 |  | $ | (11.9 | ) | $ | 269.0 |
(1) Comprises over-the-counter instruments. (2) Comprises interest rate swaps, total return swaps and foreign currency forward contracts. Fair value measurement based upon bid/ask pricing quotes for similar instruments that are actively traded, where available. Swaps for which an active market does not exist have been priced using observable inputs including the swap curve and the underlying bond index. (3) Comprises exchange traded equity index, foreign currency and interest rate futures. Fair value measurements based upon quoted prices for identical instruments that are actively traded. (4) In addition to derivative instruments, WM Life Re held cash, short-term and fixed maturity investments of $370.5 at June 30, 2011 posted as collateral to its reinsurance counterparties.
Summary of collateral provided to WM Life Re from counterparties |
|  | Three Months Ended |  | Six Months Ended |  | Carrying Value |
|  | June 30, |  | June 30, |  | June 30, |  | December 31, |
Millions |  | 2011 |  | 2010 |  | 2011 |  | 2010 |  | 2011 |  | 2010 |
Fixed income/Interest rate |  | $ | (6.3 | ) | $ | 19.2 |  | $ | (12.5 | ) | $ | 23.4 |  | $ | 48.8 |  | $ | 43.9 |
Foreign exchange |  | 17.1 |  | 74.5 |  | (30.2 | ) | 68.5 |  | 161.2 |  | 225.3 |
Equity |  | 11.2 |  | 79.1 |  | (.8 | ) | 38.6 |  | 59.0 |  | 78.3 |
Total |  | $ | 22.0 |  | $ | 172.8 |  | $ | (43.5 | ) | $ | 130.5 |  | $ | 269.0 |  | $ | 347.5 |
Summary of value, collateral provided (held) by WM Life Re and net exposure on OTC derivative instruments |
Millions |  | June 30, 2011 |  | December 31, 2010 |
Short-term investments |  | $ | 51.6 |  | $ | 52.4 |
Fixed maturity securities |  | 1.0 |  | 48.6 |
Total |  | $ | 52.6 |  | $ | 101.0 |
Summary of uncollateralized amounts due under WM Life Re's OTC derivative contracts |
Millions |  | June 30, 2011 |  | December 31, 2010 |
OTC derivative instruments(1) |  | $ | 284.2 |  | $ | 351.5 |
Collateral held |  | (52.6 | ) | (101.0 | )
Collateral provided |  | 35.4 |  | 25.3 |
Net exposure to credit losses on fair value of OTC instruments |  | $ | 267.0 |  | $ | 275.8 |
(1) Value of OTC derivative instruments as of June 30, 2011 and December 31, 2010 excludes adjustments for counterparty credit risk of $(3.3) and $(4.0) included in fair value under GAAP. The following table summarizes uncollateralized amounts due under WM Life Re’s OTC derivative contracts:
Millions |  | Uncollateralized balance as of June 30, 2011 |  | S&P Rating(1) |
Citigroup (3) |  | $ | 73.5 |  | A |
Royal Bank of Scotland |  | 73.4 |  | A |
Bank of America |  | 50.1 |  | A |
Barclays |  | 25.9 |  | A+ |
Goldman Sachs(3) |  | 9.8 |  | A |
Other |  | 34.3 |  | (2) |
Total |  | $ | 267.0 |  |  |
(1) Standard & Poor’s (“S&P”) ratings as detailed above are: “A+” (which is the fifth highest of twenty-one creditworthiness ratings) and “A” (which is the sixth highest of twenty-one creditworthiness ratings). (2) The S&P ratings of the counterparties included in “Other” were “AA” (Very Strong, which is the third highest of twenty-one creditworthiness ratings) (17%), “A+” (27%) and “BBB+” (Adequate, which is the eighth highest of twenty-one creditworthiness ratings) (56%). (3) Collateral provided (held) calculated under master netting agreement.
Summary of additional collateral posted for variable reinsurance counterparties |
Millions |  | June 30, 2011 |  | December 31, 2010 |
Cash |  | $ | 345.9 |  | $ | 291.1 |
Short-term investments |  | 13.2 |  | 31.6 |
Fixed maturity investments |  | 11.4 |  | 3.3 |
Total |  | $ | 370.5 |  | $ | 326.0 |

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- Definition Tabular disclosure of derivative instruments (including nonderivative instruments that are designated and qualify as hedging instruments) of (a) the location and amount of gains and losses reported in the statement of financial performance and (b) the location and fair value amounts of the instruments reported in the statement of financial position. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Topic 815 -SubTopic 10 -Publisher FASB -Number -Article -Subparagraph -Name Accounting Standards Codification -Paragraph 4A -Section 50 -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5618551-113959 + Details
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