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Discontinued Operations
 12 Months Ended
Dec. 31, 2011
Discontinued Operations  
Discontinued Operations

NOTE 20. Discontinued Operations

 

Esurance

 

On October 7, 2011, White Mountains completed the sale of Esurance Insurance and AFI to Allstate (see Note 2).  As a result of the transaction, Esurance Insurance, AFI and the business Esurance Insurance cedes to Sirius Group (collectively, “the Esurance Disposal Group”) are reported as discontinued operations.  White Mountains recognized a gain of $677.5 million on the Esurance Sale which is recorded net of tax in discontinued operations.  Effective as of December 31, 2011, the results of operations for the Esurance Disposal Group have been classified as discontinued operations and are presented, net of related income taxes, in the statement of comprehensive income. The assets and liabilities of the Esurance Disposal Group have been presented in the balance sheet as held for sale.  Prior year amounts have been reclassified to conform to the current period’s presentation.

 

AutoOne

 

On August 30, 2011, OneBeacon entered into an agreement to sell the AutoOne business to Interboro. AutoOne operates as a division within OneBeacon, offering products and services to automobile assigned risk markets. The transaction includes the sale of two insurance entities, AOIC and AOSIC, through which substantially all of the AutoOne business is written on a direct basis. During the year ended December 31, 2011, OneBeacon recorded a net charge of $29.6 million pre-tax, $19.2 million after tax, reflecting the estimated loss on sale of the AutoOne business, which includes the $25.0 million of net assets held for sale as well as estimates for transaction costs. As of December 31, 2011, the results of operations for the AutoOne business have been classified as discontinued operations and are presented, net of related income taxes, in the statement of comprehensive income. Prior year results of operations have been reclassified to conform to the current period’s presentation.

 

The AutoOne disposal group excludes investing and financing activities from amounts classified as discontinued operations. OneBeacon’s investing and financing operations are conducted on an overall consolidated level and accordingly, there were no separately identifiable cash investing or financing cash flows associated with AutoOne.  The assets and liabilities associated with the AutoOne business as of December 31, 2011 have been presented in the balance sheet as held for sale assuming the investing and financing steps required to affect the sale were completed as of the current balance sheet date. The prior year balance sheet has not been reclassified to conform to the current period’s presentation because the assets and liabilities associated with AutoOne in the prior year would not provide a meaningful comparison to the assets and liabilities presented as held for sale at December 31, 2011.

 

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

 

Millions

 

December 31,
2011

 

December 31,
2010

 

Assets held for sale

 

 

 

 

 

Fixed maturity investments, at fair value

 

$

111.8

 

$

593.8

 

Short-term investments, at amortized cost (which approximates fair value)

 

—

 

131.0

 

Common equity securities, at fair value

 

—

 

43.0

 

Convertible fixed maturity investments, at fair value

 

—

 

17.2

 

Other long-term investments

 

—

 

4.0

 

Total investments

 

111.8

 

789.0

 

Cash

 

5.5

 

39.8

 

Reinsurance recoverable on paid and unpaid losses

 

—

 

34.4

 

Insurance premiums receivable

 

8.8

 

102.9

 

Deferred acquisition costs

 

2.2

 

34.7

 

Deferred tax asset

 

1.9

 

67.8

 

Other assets

 

2.4

 

54.2

 

Total assets held for sale

 

$

132.6

 

$

1,122.8

 

Liabilities held for sale

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

64.7

 

$

450.4

 

Unearned insurance premiums

 

34.1

 

201.6

 

Accrued incentive compensation

 

—

 

19.1

 

Other liabilities

 

8.8

 

80.4

 

Total liabilities held for sale

 

107.6

 

751.5

 

Net assets held for sale

 

$

25.0

 

$

371.3

 

 

The following summarizes the results of operations, including related income taxes associated with the businesses classified as discontinued operations:

 

 

 

Year Ended December 31,

 

Millions, except per share amounts

 

2011

 

2010

 

2009

 

Revenues

 

 

 

 

 

 

 

Earned insurance premiums

 

$

727.9

 

$

910.6

 

$

882.8

 

Net investment income

 

12.0

 

19.6

 

22.3

 

Net realized and unrealized investment gains

 

.7

 

13.3

 

22.9

 

Other revenue

 

53.5

 

60.9

 

55.2

 

Total revenues

 

794.1

 

1,004.4

 

983.2

 

Expenses

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

542.3

 

678.8

 

695.0

 

Insurance and reinsurance acquisition expenses

 

159.2

 

191.7

 

170.1

 

Other underwriting expenses

 

80.4

 

87.9

 

98.7

 

General and administrative expenses

 

38.3

 

48.6

 

52.6

 

Total expenses

 

820.2

 

1,007.0

 

1,016.4

 

Pre-tax loss

 

(26.1

)

(2.6

)

(33.2

)

Income tax benefit (expense)

 

13.1

 

(4.0

)

5.4

 

Loss from discontinued operations

 

(13.0

)

(6.6

)

(27.8

)

Gain on sale of Esurance and AFI, net of tax

 

677.5

 

—

 

—

 

Loss on sale of AutoOne, net of tax

 

(19.2

)

—

 

—

 

Net income (loss) from discontinued operations

 

$

645.3

 

$

(6.6

)

$

(27.8

)

 

Earnings (Loss) Per Share

 

Basic earnings (loss) per share amounts are based on the weighted average number of common shares outstanding including unvested restricted shares that are considered participating securities.  Diluted earnings (loss) per share amounts are based on the weighted average number of common shares including unvested restricted shares and the net effect of potentially dilutive common shares outstanding.  The following table outlines the computation of earnings (loss) per share for discontinued operations for the years ended December 31, 2011, 2010 and 2009:

 

 

 

Year Ended December 31,

 

 

 

2011

 

2010

 

2009

 

Basic and diluted earnings (loss) per share numerators (in millions):

 

 

 

 

 

 

 

Net income (loss) attributable to White Mountains’ common shareholders

 

$

645.3

 

$

(6.6

)

$

(27.8

)

Allocation of income for participating unvested restricted common shares

 

(5.7

)

.1

 

.3

 

Net income (loss) attributable to White Mountains’ common shareholders, net of restricted common share amounts(3)

 

$

639.6

 

$

(6.5

)

$

(27.5

)

Basic earnings (loss) per share denominators (in thousands):

 

 

 

 

 

 

 

Total average common shares outstanding during the period

 

7,881.0

 

8,548.4

 

8,849.4

 

Average unvested restricted common shares (1)

 

(69.4

)

(97.3

)

(85.3

)

Basic earnings (loss) per share denominator

 

7,811.6

 

8,451.1

 

8,764.1

 

Diluted earnings (loss) per share denominator (in thousands):

 

 

 

 

 

 

 

Total average common shares outstanding during the period

 

7,881.0

 

8,548.4

 

8,849.4

 

Average unvested restricted common shares (1)

 

(69.4

)

(97.3

)

(85.3

)

Average outstanding dilutive options to acquire common shares (2)

 

—

 

.5

 

1.5

 

Diluted earnings (loss) per share denominator

 

7,811.6

 

8,451.6

 

8,765.6

 

Basic and diluted earnings (loss) per share (in dollars):

 

$

81.88

 

$

(.77

)

$

(3.14

)

 

(1) Restricted common shares outstanding vest either in equal annual installments or upon a stated date (see Note 11).

(2) The diluted earnings per share denominator for the year ended December 31, 2010 includes 1,200 common shares issuable upon exercise of incentive options at an average strike price of $189.31 per common share. The diluted earnings per share denominator for the year ended December 31, 2009 includes 5,280 common shares issuable upon exercise of incentive options at an average strike price of $183.03 per common share.  The non-qualified options were not included in the diluted earnings per share denominator for any of the periods presented as their inclusion would be anti-dilutive (See Note 11).

(3) Net income (loss) attributable to White Mountains’ common shareholders, net of restricted share amounts, is equal to undistributed earnings (loss) for the years ended December 31, 2011, 2010, and 2009.