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Loss and Loss Adjustment Expense Reserves
 3 Months Ended
Mar. 31, 2013
Insurance Loss Reserves [Abstract]  
Loss and Loss Adjustment Expense Reserves
Loss and Loss Adjustment Expense Reserves
 
The following table summarizes the loss and loss adjustment expense (“LAE”) reserve activities of White Mountains’ insurance and reinsurance subsidiaries for the three months ended March 31, 2013 and 2012:
 
 
 
Three Months Ended
 
 
March 31,
Millions
 
2013
 
2012
Gross beginning balance
 
$
3,168.9

 
$
5,702.3

Less beginning reinsurance recoverable on unpaid losses
 
(429.1
)
 
(2,507.3
)
Net loss and LAE reserves
 
2,739.8

 
3,195.0

 
 
 
 
 
Less:  Beginning net loss and LAE reserves for
     OneBeacon's runoff business (1)
 
—

 
(383.3
)
 
 
 
 
 
Loss and LAE reserves acquired - American Fuji
 
21.3

 
—

 
 
 
 
 
Loss and LAE incurred relating to:
 
 

 
 

Current year losses
 
242.9

 
257.4

Prior year losses
 
1.4

 
(7.6
)
Total incurred losses and LAE
 
244.3

 
249.8

 
 
 
 
 
Accretion of fair value adjustment to loss and LAE reserves
 
1.2

 
7.1

Foreign currency translation adjustment to loss and LAE reserves
 
(9.6
)
 
11.8

 
 
 
 
 
Loss and LAE paid relating to:
 
 

 
 

Current year losses
 
(36.6
)
 
(44.5
)
Prior year losses
 
(270.6
)
 
(322.9
)
Total loss and LAE payments
 
(307.2
)
 
(367.4
)
 
 
 
 
 
Plus:  Ending net loss and LAE reserves for
OneBeacon's runoff business (1)
 
—

 
332.4

 
 
 
 
 
Net ending balance
 
2,689.8

 
3,045.4

Plus ending reinsurance recoverable on unpaid losses
 
410.8

 
2,465.4

Gross ending balance
 
$
3,100.6

 
$
5,510.8

(1) Loss and LAE reserve balances for OneBeacon's run-off business prior to September 30, 2012 were not classified as held for sale.  Adjustment is to present loss and LAE reserve activities from continuing operations.

Loss and LAE incurred relating to prior year losses for the three months ended March 31, 2013
During the three months ended March 31, 2013, White Mountains experienced $1.4 million of net unfavorable loss reserve development.  OneBeacon had net favorable loss reserve development of $2.9 million primarily driven by medical facilities and managed care errors and omissions lines in its healthcare business, which is included in OneBeacon's Professional Insurance underwriting unit. Sirius Group had net unfavorable loss reserve development of $4.3 million primarily due to a late reported agricultural claim related to the 2012 U.S. drought.
 
Loss and LAE incurred relating to prior year losses for the three months ended March 31, 2012
During the three months ended March 31, 2012, White Mountains experienced $7.6 million of net favorable loss reserve development. OneBeacon had net favorable loss reserve development of $1.9 million, primarily due to lower than expected severity on non-catastrophe losses related to professional liability lines, multiple peril liability lines and other general liability lines. Sirius Group had net favorable loss reserve development of $5.7 million included reductions for the 2011 Japan earthquake and tsunami of $8.1 million, partially offset by increases to asbestos and environmental reserves and reserves for other prior period catastrophe losses.

Fair value adjustment to loss and LAE reserves
In connection with purchase accounting for acquisitions, White Mountains is required to adjust loss and LAE reserves and the related reinsurance recoverables to fair value on their respective acquired balance sheets.  The net reduction to loss and LAE reserves is being recognized through an income statement charge ratably with and over the period the claims are settled.
White Mountains recognized $1.2 million of such charges, recorded as loss and LAE for the three months ended March 31, 2013, and $7.1 million for the three months ended March 31, 2012.  Accretion of fair value adjustment to losses and LAE reserves increased by $5.0 million in the first quarter of 2012 due to the acceleration of the amortization of the purchase accounting established for the acquisition of Scandinavian Re. This acceleration was a result of a final settlement and commutation of Scandinavian Re's multi-year retrocessional Casualty Aggregate Stop Loss Agreement with St. Paul Fire & Marine Insurance Company (“St Paul”). As of March 31, 2013, the remaining pre-tax un-accreted adjustment was $4.5 million.