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Statutory Capital and Surplus | 12 Months Ended
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Dec. 31, 2013
Insurance [Abstract] |
Statutory Capital and Surplus | Statutory Capital and Surplus White Mountains’ insurance and reinsurance operations are subject to regulation and supervision in each of the jurisdictions where they are domiciled and licensed to conduct business. Generally, regulatory authorities have broad supervisory and administrative powers over such matters as licenses, standards of solvency, premium rates, policy forms, investments, security deposits, methods of accounting, form and content of financial statements, reserves for unpaid loss and LAE, reinsurance, minimum capital and surplus requirements, dividends and other distributions to shareholders, periodic examinations and annual and other report filings. In general, such regulation is for the protection of policyholders rather than shareholders. In addition, the NAIC uses risk-based capital (“RBC”) standards for property and casualty insurers as a means of monitoring certain aspects affecting the overall financial condition of insurance companies. At December 31, 2013, White Mountains’ active insurance and reinsurance operating subsidiaries exceeded their respective RBC requirements. The Insurance Act 1978 of Bermuda and related regulations, as amended (“Insurance Act”), regulates the insurance business of Split Rock. Under the Insurance Act, Split Rock is required to maintain available statutory capital and surplus at a level equal to or in excess of its enhanced capital requirement which is established by reference to either a Bermuda Solvency Capital Requirement (“BSCR”) model or an approved internal capital model. At December 31, 2013, Split Rock Insurance Ltd. met Bermuda’s statutory capital and surplus requirements. OneBeacon’s combined statutory surplus (including U.S. statutory surplus and Bermuda statutory capital and surplus for Split Rock) was $1.0 billion and $0.9 billion as of December 31, 2013 and 2012. OneBeacon’s combined U.S. statutory surplus was $0.9 billion as of both December 31, 2013 and 2012. OneBeacon’s combined U.S. statutory net income for the years ended December 31, 2013, 2012 and 2011 was $100.1 million, $82.0 million and $119.6 million. The minimum policyholders' surplus necessary to satisfy OneBeacon's regulatory requirements was $164.7 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital of OneBeacon’s primary top tier regulated operating subsidiary. Split Rock’s statutory capital and surplus was $96.4 million as of December 31, 2013. The principal differences between OneBeacon’s combined U.S. statutory amounts and Split Rock, and the amounts reported in accordance with GAAP include deferred acquisition costs, deferred taxes, and market value adjustments for debt securities. OneBeacon's insurance subsidiaries' statutory policyholders' surplus at December 31, 2013 was in excess of the minimum requirements of relevant state and Bermuda insurance regulations. Sirius International is subject to regulation and supervision in Sweden by the Financial Supervisory Authority (“FSA”). Sirius International’s total regulatory capital at December 31, 2013 was $2.5 billion. In accordance with FSA regulations, Sirius International holds restricted equity of $1.7 billion as a component of Swedish regulatory capital. This restricted equity cannot be paid as dividends. The minimum regulatory capital held by Sirius International necessary to satisfy the requirements established by the FSA was $132.4 million at December 31, 2013. Sirius America’s policyholders’ surplus, as reported to regulatory authorities as of December 31, 2013 and 2012, was $548.4 million and $528.3 million. Sirius America’s statutory net income for the years ended December 31, 2013, 2012 and 2011 was $55.9 million, $26.2 million and $101.4 million The principal differences between Sirius America’s statutory amounts and the amounts reported in accordance with GAAP include deferred acquisition costs, deferred taxes, gains recognized under retroactive reinsurance contracts and market value adjustments for debt securities. The minimum policyholders’ surplus necessary to satisfy Sirius America’s regulatory requirements was $113.9 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Sirius America’s policyholders’ surplus. Central National’s policyholders’ surplus, as reported to regulatory authorities as of December 31, 2013 and 2012, was $9.3 million and $11.2 million. Central National’s statutory net (loss) income for the years ended December 31, 2013 and 2012 was $(0.5) million and $1.7 million. The minimum policyholders’ surplus necessary to satisfy Central National’s regulatory requirements was $1.5 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Central National’s policyholders’ surplus. Woodridge’s policyholders' surplus, as reported to regulatory authorities as of December 31, 2013 and 2012, was $8.4 million and $8.6 million. Woodridge’s statutory net (loss) income for the years ended December 31, 2013 and 2012 was $(0.1) million and $0.1 million. The minimum policyholders' surplus necessary to satisfy Woodridge’s regulatory requirements was $0 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Woodridge’s policyholders' surplus. Oakwood's policyholders' surplus, as reported to regulatory authorities as of December 31, 2013 and 2012, was $20.7 million and $24.5 million. Oakwood’s statutory net (loss) income for the years ended December 31, 2013 and 2012 was $(0.9) million and $3.9 million. The minimum policyholders' surplus necessary to satisfy Oakwood’s regulatory requirements was $2.2 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Oakwood’s policyholders' surplus. PICO’s policyholders’ surplus, as reported to regulatory authorities as of December 31, 2012, was $6.3 million. In 2013, the net assets of PICO were transferred to Oakwood and PICO was subsequently dissolved. Citation’s policyholders' surplus, as reported to regulatory authorities as of December 31, 2013 and 2012, was $11.9 million and $13.1 million. Citation’s statutory net loss for the years ended December 31, 2013 and 2012 was $0.3 million and $4.2 million. The minimum policyholders' surplus necessary to satisfy Citation’s regulatory requirements was $0.1 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Citation’s policyholders' surplus. Ashmere’s policyholders' surplus, as reported to regulatory authorities as of December 31, 2013, was $12.7 million. Ashmere’s statutory net loss for the year ended December 31, 2013 was $0.4 million. The minimum policyholders' surplus necessary to satisfy Ashmere’s regulatory requirements was $4.6 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Ashmere’s policyholders' surplus. Empire’s policyholders' surplus, as reported to regulatory authorities as of December 31, 2013, was $10.7 million. Empire’s statutory net loss for the year ended December 31, 2013 was $10.4 million. The minimum policyholders' surplus necessary to satisfy Empire’s regulatory requirements was $1.4 million at December 31, 2013, which equals the authorized control level of the NAIC risk-based capital based on Empire’s policyholders' surplus. White Shoals Re Ltd. (“White Shoals Re”) is also subject to regulation and supervision by the Bermuda Monetary Authority (“BMA”). Generally, the BMA has broad supervisory and administrative powers over such matters as licenses, standards of solvency, investments, methods of accounting, form and content of financial statements, minimum capital and surplus requirements, and annual and other report filings. In general, such regulation is for the protection of policyholders rather than shareholders. As of December 31, 2013, White Shoals Re had statutory capital and surplus of $14.6 million. The minimum regulatory capital held by White Shoals Re necessary to satisfy the requirements established by the BMA was $6.2 million at December 31, 2013. WM Life Re is subject to regulation and supervision by the BMA. As of December 31, 2013, WM Life Re had statutory capital and surplus of $85.9 million. The minimum regulatory capital held by WM Life Re necessary to satisfy the requirements established by the BMA was $0.7 million at December 31, 2013. HG Re is a Special Purpose Insurer under Bermuda insurance regulations and is subject to regulation and supervision by the BMA. As of December 31, 2013, HG Re had statutory capital of $436.9 million. As a Special Purpose Insurer, HG Re does not have minimum regulatory capital requirements. BAM is domiciled in New York and is subject to regulation by the New York State Department of Financial Services (“NYDFS”). New York financial guarantee insurance law establishes single risk and aggregate limits with respect to insured obligations insured by financial guarantee insurers. BAM’s members’ surplus, as reported to regulatory authorities as of December 31, 2013 was $469.0 million, which exceeds the minimum members’ surplus necessary for BAM to maintain its New York State financial guarantee insurance license of $66.0 million. Dividend Capacity There are no restrictions under Bermuda law or the law of any other jurisdiction on the payment of dividends from retained earnings by White Mountains. However, under the insurance laws of the states and jurisdictions under which White Mountains' insurance and reinsurance operating subsidiaries are domiciled, an insurer is restricted with respect to the timing and the amount of dividends it may pay without prior approval by regulatory authorities. At December 31, 2013, White Mountains’ top tier insurance and reinsurance subsidiaries have approximately $2.8 billion of GAAP shareholders’ equity (net of $246 million of non-controlling interest at OneBeacon), $0.8 billion of which can be distributed to White Mountains without prior regulatory approval. As a result, at December 31, 2013, $2.0 billion of White Mountains’ GAAP shareholders' equity held in its insurance and reinsurance subsidiaries was not available for the payment of dividends without prior regulatory approval, and approximately $755 million of White Mountains’ retained earnings is unrestricted with respect to the payment of dividends to White Mountains’ common shareholders. When determining whether to make distributions from its insurance and reinsurance operating subsidiaries, White Mountains also considers factors such as internal capital targets and rating agency capital requirements. Accordingly, there can be no assurance regarding the amount of such dividends that may be paid by such subsidiaries in the future. Following is a description of the dividend capacity of White Mountains’ insurance and reinsurance operating subsidiaries: OneBeacon: Generally, OneBeacon's top tier regulated insurance operating subsidiaries have the ability to pay dividends during any twelve-month period without the prior approval of regulatory authorities in an amount set by formula based on the greater of prior year statutory net income or 10% of prior year end statutory surplus, subject to the availability of unassigned funds. OneBeacon Insurance Company (“OBIC”), OneBeacon's primary top tier regulated U.S. insurance operating subsidiary, has the ability to pay $86.6 million of dividends during 2014 (based on its 2013 statutory surplus of $866.2 million) without prior approval of regulatory authorities, subject to the availability of unassigned funds. The amount of dividends available to be paid by OBIC in any given year is also subject to cash flow and earnings generated by OBIC’s business, which now just comprises the Runoff Business, as well as to dividends received from its subsidiaries, including Atlantic Specialty Insurance Company (“ASIC”), the lead U.S. insurance operating subsidiary for the Ongoing Business. At December 31, 2013, OBIC had $0.6 billion of unassigned funds and $0.9 billion of statutory surplus. As disclosed in Note 21 - “Discontinued Operations”, during the fourth quarter of 2012, OneBeacon executed various intercompany reinsurance agreements which, along with other internal capital transactions among its regulated U.S. insurance operating subsidiaries, resulted in ASIC becoming the lead insurance company for the ongoing specialty business and OBIC becoming the lead insurance company for the Runoff Business. Notwithstanding these restructuring transactions, OneBeacon continues to manage its statutory capital on a combined basis. Although OBIC remains the primary top tier regulated U.S. insurance operating subsidiary and maintains sufficient statutory capital to support the Runoff Business, the majority of the group's statutory capital is now included in ASIC, which is currently a subsidiary of OBIC, to support the ongoing specialty business. Prior to the closing of the Runoff Transaction and subject to regulatory approval, OBIC will distribute ASIC to its immediate parent, OneBeacon LLC. ASIC has the ability to pay dividends during any twelve-month period without the prior approval of regulatory authorities in an amount set by formula based on the lesser of net investment income, as defined by statute, or 10% of statutory surplus, in both cases as most recently reported to regulatory authorities, subject to the availability of earned surplus and subject to dividends paid in prior periods. ASIC has the ability to pay $23.9 million of dividends during 2014 without prior approval of regulatory authorities, subject to the availability of earned surplus. Given the changes in structure noted above, and in order for ASIC to pay dividends consistent with being the lead insurance company for the Ongoing Business, ASIC may require prior approval by regulatory authorities in order to make additional distributions until it builds up a historical net investment income stream and earned surplus balance under its new structure. At December 31, 2013, ASIC had $94.6 million of earned surplus and $0.7 billion of statutory surplus. During 2013, ASIC paid a $190.0 million extraordinary return of capital to OBIC, which, in turn, distributed the $190.0 million to its immediate parent. During 2013, OneBeacon also contributed $35.0 million to OBIC. Split Rock has the ability to declare or pay dividends during any twelve-month period without the prior approval of Bermuda regulatory authorities on condition that any such declaration or payment of dividends does not cause a breach of any of its regulatory solvency and liquidity requirements. If Split Rock fails to meet its regulatory solvency or liquidity requirements on the last day of any financial year, it is prohibited from declaring or paying any dividends during the next financial year without the approval of the BMA. In addition, under the Companies Act 1981 of Bermuda (the “Companies Act”), Split Rock is prohibited from declaring or paying a dividend or making a distribution out of contributed surplus if there are reasonable grounds for believing that after such payment is made, Split Rock would be unable to pay its liabilities as they become due or the realizable value of its assets would be less than its liabilities. During 2014, Split Rock has the ability to make capital distributions without the prior approval of regulatory authorities, subject to meeting all appropriate liquidity and solvency requirements, of up to $20.3 million, which is equal to 15% of its December 31, 2013 statutory capital, excluding earned surplus. During 2013, OneBeacon contributed $135.1 million to Split Rock. Split Rock did not pay any dividends in 2013. During 2013, OneBeacon's unregulated insurance operating subsidiaries paid $17.3 million of dividends to their immediate parent. At December 31, 2013, OneBeacon's unregulated insurance operating subsidiaries had $57.9 million of net unrestricted cash, short-term investments and fixed maturity investments. During 2013, OneBeacon Ltd. paid $80.2 million of regular quarterly dividends to its common shareholders. White Mountains received $60.3 million of these dividends. At December 31, 2013, OneBeacon Ltd. and its intermediate holding companies held $217.5 million of net unrestricted cash, short-term investments and fixed maturity investments and $89.8 million of common equity securities and convertible fixed maturity investments outside of its regulated and unregulated insurance operating subsidiaries. Sirius Group: Subject to certain limitations under Swedish law, Sirius International is permitted to transfer a portion of its pre-tax income to its Swedish parent companies to minimize taxes (referred to as a group contribution). In 2013, Sirius International transferred $101.9 million of its 2012 pre-tax income to its Swedish parent companies as a group contribution. Sirius International has the ability to pay dividends subject to the availability of unrestricted statutory surplus. Historically, Sirius International has allocated the majority of its pre-tax income, after group contributions to its Swedish parent companies, to the Safety Reserve (see “Safety Reserve” on next page). At December 31, 2013, Sirius International had $587.0 million (based on the December 31, 2013 SEK to USD exchange rate) of unrestricted statutory surplus, which is available for distribution in 2014. The amount of dividends available to be paid by Sirius International in any given year is also subject to cash flow and earnings generated by Sirius International’s business, as well as to dividends received from its subsidiaries, including Sirius America. During 2013, Sirius International distributed $326.4 million of dividends to its immediate parent, $75.0 million of which had been declared and accrued in December 2012. Sirius America has the ability to pay dividends during any twelve-month period without the prior approval of regulatory authorities in an amount set by formula based on the lesser of net investment income, as defined by statute, or 10% of statutory surplus, in both cases as most recently reported to regulatory authorities, subject to the availability of earned surplus and subject to dividends paid in prior periods. Based upon 2013 statutory net investment income and dividends paid in 2013, Sirius America has no ability to pay any dividends during 2014 without prior approval of regulatory authorities. At December 31, 2013, Sirius America had $548.4 million of statutory surplus and $33.0 million of earned surplus. In 2013, Sirius America paid $75.0 million of dividends to its immediate parent. During 2013, Sirius Group distributed $250.0 million to its immediate parent, $75.0 million of which had been declared and accrued in December 2012. At December 31, 2013, Sirius Group and its intermediate holding companies held $67.0 million of net unrestricted cash, short-term investments and fixed maturity investments and $20.3 million of other long-term investments outside of its regulated and unregulated insurance and reinsurance operating subsidiaries. Capital Maintenance There is a capital maintenance agreement between Sirius International and Sirius America which obligates Sirius International to make contributions to Sirius America's surplus in order for Sirius America to maintain surplus equal to at least 125% of the company action level risk based capital as defined in the NAIC Property/Casualty Risk-Based Capital Report. The agreement provides for a maximum contribution to Sirius America of $200.0 million. Sirius International also provides Sirius America with accident year stop loss reinsurance, which protects Sirius America's accident year loss and allocated loss adjustment expense ratio in excess of 70%, with a limit of $90.0 million. Safety Reserve Subject to certain limitations under Swedish law, Sirius International is permitted to transfer pre-tax amounts into an untaxed reserve referred to as a safety reserve. At December 31, 2013, Sirius International’s safety reserve amounted to SEK 10.4 billion or $1.6 billion at the December 31, 2013 exchange rate of 6.43 USD to SEK. Under GAAP, an amount equal to the safety reserve, net of a related deferred tax liability established at the Swedish tax rate of 22.0%, is classified as shareholder’s equity. Generally, this deferred tax liability is only required to be paid by Sirius International if it fails to maintain prescribed levels of premium writings and loss reserves in future years. As a result of the indefinite deferral of these taxes, Swedish regulatory authorities apply no taxes to the safety reserve when calculating solvency capital under Swedish insurance regulations. Accordingly, under local statutory requirements, an amount equal to the deferred tax liability on Sirius International’s safety reserve ($357.2 million at December 31, 2013) is included in solvency capital. Access to the safety reserve is restricted to coverage of reinsurance losses. Access for any other purpose requires the approval of Swedish regulatory authorities. Similar to the approach taken by Swedish regulatory authorities, most major rating agencies generally include the $1.6 billion balance of the safety reserve, without any provision for deferred taxes, in Sirius International’s capital when assessing Sirius International’s financial strength. HG Global/BAM: At December 31, 2013, HG Global has $613.0 million face value of preferred shares outstanding, of which White Mountains owned 97.3%. Holders of the HG Global preferred shares receive cumulative dividends at a fixed annual rate of 6.0% on a quarterly basis, when and if declared by HG Global. HG Global did not declare or pay any preferred dividends in 2013. As of December 31, 2013, HG Global has accrued $55.2 million of dividends payable to holders of its preferred shares, $53.7 million of which is payable to White Mountains and eliminated in consolidation. HG Re is a Special Purpose Insurer subject to regulation and supervision by the BMA, but does not require regulatory approval to pay dividends. However, HG Re’s dividend capacity is limited by amounts held in the collateral trusts pursuant to the first loss reinsurance treaty (“FLRT”) with BAM. As of December 31, 2013, HG Re had statutory capital of $436.9 million, of which $35.0 million primarily relates to accrued interest on the BAM Surplus Notes held by HG Re, and $400.0 million was held as collateral in the supplemental trust pursuant to the FLRT with BAM. Interest on the BAM Surplus Notes is payable quarterly at a fixed annual rate of 8.0%. Interest and principal payments on the BAM Surplus Notes are subject to approval of the NYDFS. BAM did not pay any interest on the BAM Surplus Notes in 2013 or 2012. Other Operations: During 2013, WM Advisors did not pay any dividends to its immediate parent. At December 31, 2013, WM Advisors held $17.3 million of net unrestricted cash and short-term investments. At December 31, 2013, the Company and its intermediate holding companies held $231.0 million of net unrestricted cash, short-term investments and fixed maturity investments, $490.2 million of common equity securities and $139.2 million of other long-term investments included in its Other Operations segment. During 2013, White Mountains paid a $6.2 million common share dividend.

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