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Investment Securities | 12 Months Ended
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Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | Investment Securities Net Investment Income White Mountains’ net investment income is comprised primarily of interest income associated with White Mountains’ fixed maturity investments, dividend income from its equity investments and interest income from its short-term investments. Pre-tax net investment income for 2013, 2012 and 2011 consisted of the following:
|  | Year Ended December 31,
Millions |  | 2013 |  | 2012 |  | 2011
Investment income: |  |  |  |  |  |
Fixed maturity investments |  | $ | 100.5 |  |  | $ | 132.0 |  |  | $ | 166.2 |
Short-term investments |  | 3.4 |  |  | 3.1 |  |  | 4.5 |
Common equity securities |  | 20.5 |  |  | 22.2 |  |  | 15.4 |
Convertible fixed maturity investments |  | 2.9 |  |  | 6.0 |  |  | 5.5 |
Other long-term investments |  | 3.0 |  |  | 3.1 |  |  | 4.2 |
Interest on funds held under reinsurance treaties |  | .3 |  |  | .6 |  |  | (.4 | )
Total investment income |  | 130.6 |  |  | 167.0 |  |  | 195.4 |
Third-party investment expenses |  | (19.7 | ) |  | (13.4 | ) |  | (10.9 | )
Net investment income, pre-tax |  | $ | 110.9 |  |  | $ | 153.6 |  |  | $ | 184.5 |
Net Realized and Unrealized Investment Gains and Losses Net realized and unrealized investment gains and losses consisted of the following:
|  | Year Ended December 31,
Millions |  | 2013 |  | 2012 |  | 2011
Net realized investment gains, pre-tax |  | $ | 104.5 |  |  | $ | 68.1 |  |  | $ | 68.3 |
Net unrealized investment gains, pre-tax |  | 57.2 |  |  | 50.1 |  |  | 5.8 |
Net realized and unrealized investment gains, pre-tax |  | 161.7 |  |  | 118.2 |  |  | 74.1 |
Income tax expense attributable to net realized and unrealized investment gains |  | (21.9 | ) |  | (26.8 | ) |  | (18.1 | )
Net realized and unrealized investment gains, after tax |  | $ | 139.8 |  |  | $ | 91.4 |  |  | $ | 56.0 |
Net realized investment gains (losses) Net realized investment gains (losses) for 2013, 2012 and 2011 consisted of the following:
|  | Year ended December 31, 2013
Millions |  | Net realized gains (losses) |  | Net foreign exchange gains (losses) |  | Total changes in fair value reflected in earnings
Fixed maturity investments |  | $ | 8.6 |  |  | $ | (15.0 | ) |  | $ | (6.4 | )
Short-term investments |  | .1 |  |  | — |  |  | .1 |
Common equity securities |  | 104.5 |  |  | (3.7 | ) |  | 100.8 |
Convertible fixed maturity investments |  | 1.0 |  |  | — |  |  | 1.0 |
Other long-term investments |  | 7.5 |  |  | 1.4 |  |  | 8.9 |
Forward contracts |  | .1 |  |  | — |  |  | .1 |
Net realized investment gains (losses), pre-tax |  | 121.8 |  |  | (17.3 | ) |  | 104.5 |
Income taxes attributable to realized investment gains (losses) |  | (30.0 | ) |  | 5.5 |  |  | (24.5 | )
Net realized investment gains (losses), after-tax |  | $ | 91.8 |  |  | $ | (11.8 | ) |  | $ | 80.0 |
|  | Year ended December 31, 2012
Millions |  | Net realized gains (losses) |  | Net foreign exchange gains (losses) |  | Total changes in fair value reflected in earnings
Fixed maturity investments |  | $ | 82.5 |  |  | $ | (2.5 | ) |  | $ | 80.0 |
Short-term investments |  | — |  |  | (4.3 | ) |  | (4.3 | )
Common equity securities |  | 1.3 |  |  | — |  |  | 1.3 |
Convertible fixed maturity investments |  | (8.2 | ) |  | (1.8 | ) |  | (10.0 | )
Other long-term investments |  | 1.4 |  |  | — |  |  | 1.4 |
Forward contracts |  | (.3 | ) |  | — |  |  | (.3 | )
Net realized investment gains (losses), pre-tax |  | 76.7 |  |  | (8.6 | ) |  | 68.1 |
Income taxes attributable to realized investment gains (losses) |  | (23.8 | ) |  | 2.2 |  |  | (21.6 | )
Net realized investment gains (losses), after-tax |  | $ | 52.9 |  |  | $ | (6.4 | ) |  | $ | 46.5 |
|  | Year ended December 31, 2011
Millions |  | Net realized gains (losses) |  | Net foreign exchange gains (losses) |  | Total changes in fair value reflected in earnings
Fixed maturity investments |  | $ | 49.4 |  |  | $ | (38.3 | ) |  | $ | 11.1 |
Short-term investments |  | — |  |  | (9.9 | ) |  | (9.9 | )
Common equity securities |  | 34.6 |  |  | — |  |  | 34.6 |
Convertible fixed maturity investments |  | (2.2 | ) |  | — |  |  | (2.2 | )
Other long-term investments |  | 35.2 |  |  | (0.5 | ) |  | 34.7 |
Net realized investment gains (losses), pre-tax |  | 117.0 |  |  | (48.7 | ) |  | 68.3 |
Income taxes attributable to realized investment gains (losses) |  | (37.0 | ) |  | 12.8 |  |  | (24.2 | )
Net realized investment gains (losses), after-tax |  | $ | 80.0 |  |  | $ | (35.9 | ) |  | $ | 44.1 |
Net unrealized investment gains (losses) The following table summarizes net unrealized investment gains (losses) and changes in the carrying value of investments measured at fair value:
|  | Year ended December 31, 2013
Millions |  | Net unrealized gains (losses) |  | Net foreign exchange gains (losses) |  | Total net unrealized gains (losses) reflected in earnings
Fixed maturity investments |  | $ | (93.9 | ) |  | $ | 15.3 |  |  | $ | (78.6 | )
Short-term investments |  | .1 |  |  | — |  |  | .1 |
Common equity securities |  | 119.2 |  |  | (0.4 | ) |  | 118.8 |
Convertible fixed maturity investments |  | 3.2 |  |  | — |  |  | 3.2 |
Other long-term investments |  | 10.3 |  |  | 3.4 |  |  | 13.7 |
Forward contracts |  | — |  |  | — |  |  | — |
Net unrealized investment gains (losses), pre-tax |  | 38.9 |  |  | 18.3 |  |  | 57.2 |
Income taxes attributable to unrealized investment gains (losses) |  | 8.2 |  |  | (5.6 | ) |  | 2.6 |
Net unrealized investment gains (losses), after-tax |  | $ | 47.1 |  |  | $ | 12.7 |  |  | $ | 59.8 |
|  | Year ended December 31, 2012
Millions |  | Net unrealized gains (losses) |  | Net foreign exchange gains (losses) |  | Total net unrealized gains (losses) reflected in earnings
Fixed maturity investments |  | $ | 18.5 |  |  | $ | (45.9 | ) |  | $ | (27.4 | )
Short-term investments |  | — |  |  | .1 |  |  | .1 |
Common equity securities |  | 65.9 |  |  | (.1 | ) |  | 65.8 |
Convertible fixed maturity investments |  | 1.1 |  |  | — |  |  | 1.1 |
Other long-term investments |  | 13.2 |  |  | (2.7 | ) |  | 10.5 |
Net unrealized investment gains (losses), pre-tax |  | 98.7 |  |  | (48.6 | ) |  | 50.1 |
Income taxes attributable to unrealized investment gains (losses) |  | (17.9 | ) |  | 12.7 |  |  | (5.2 | )
Net unrealized investment gains (losses), after-tax |  | $ | 80.8 |  |  | $ | (35.9 | ) |  | $ | 44.9 |
|  | Year ended December 31, 2011
Millions |  | Net unrealized gains (losses) |  | Net foreign exchange gains (losses) |  | Total net unrealized gains (losses) reflected in earnings
Fixed maturity investments |  | $ | 7.6 |  |  | $ | 68.9 |  |  | $ | 76.5 |
Short-term investments |  | — |  |  | (1.1 | ) |  | (1.1 | )
Common equity securities |  | (40.6 | ) |  | (1.8 | ) |  | (42.4 | )
Convertible fixed maturity investments |  | (11.5 | ) |  | — |  |  | (11.5 | )
Other long-term investments |  | (19.1 | ) |  | 3.4 |  |  | (15.7 | )
Net unrealized investment gains (losses), pre-tax |  | (63.6 | ) |  | 69.4 |  |  | 5.8 |
Income taxes attributable to unrealized investment gains (losses) |  | 24.0 |  |  | (17.9 | ) |  | 6.1 |
Net unrealized investment gains (losses), after-tax |  | $ | (39.6 | ) |  | $ | 51.5 |  |  | $ | 11.9 |
White Mountains recognized gross realized investment gains of $221.4 million, $162.2 million and $191.6 million and gross realized investment losses of $116.9 million, $94.1 million and $123.3 million on sales of investment securities during 2013, 2012 and 2011. As of December 31, 2013 and 2012, White Mountains reported $20.5 million and $11.4 million in accounts payable on unsettled investment purchases and $12.1 million and $3.9 million in accounts receivable on unsettled investment sales. The following table summarizes the amount of total gains (losses) included in earnings attributable to unrealized investment gains (losses) for Level 3 investments for the years ended December 31, 2013, 2012 and 2011.
|  | Year Ended December 31,
Millions |  | 2013 |  | 2012 |  | 2011
Fixed maturity investments |  | $ | (2.3 | ) |  | $ | 7.7 |  |  | $ | (12.2 | )
Common equity securities |  | .9 |  |  | 3.0 |  |  | (16.6 | )
Convertible fixed maturity investments |  | — |  |  | — |  |  | — |
Other long-term investments |  | 11.2 |  |  | 7.0 |  |  | (16.8 | )
Total net unrealized investment gains (losses), pre-tax - Level 3 investments |  | $ | 9.8 |  |  | $ | 17.7 |  |  | $ | (45.6 | )
The components of White Mountains’ net realized and unrealized investment gains (losses), after-tax, as recorded on the statements of operations and comprehensive income were as follows:
|  | Year Ended December 31,
Millions |  | 2013 |  | 2012 |  | 2011
Net change in pre-tax unrealized gains (losses) on investments in unconsolidated affiliates |  | $ | (106.4 | ) |  | $ | 62.8 |  |  | $ | (63.6 | )
Income taxes |  | 8.3 |  |  | (5.1 | ) |  | 5.1 |
Net change in unrealized gains (losses) on investments in unconsolidated affiliates, after tax |  | (98.1 | ) |  | 57.7 |  |  | (58.5 | )
Net realized and unrealized foreign currency gains (losses) on investments through OCI |  | 11.3 |  |  | 95.5 |  |  | (41.7 | )
Total investments gains (losses) through accumulated other comprehensive income |  | (86.8 | ) |  | 153.2 |  |  | (100.2 | )
Net realized and unrealized investment gains, after-tax |  | 139.8 |  |  | $ | 91.4 |  |  | $ | 56.0 |
Total investment gains (losses) recorded during the period, after-tax |  | $ | 53.0 |  |  | $ | 244.6 |  |  | $ | (44.2 | )
Investment Holdings The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ fixed maturity investments as of December 31, 2013 and 2012, were as follows:
|  | December 31, 2013
Millions |  | Cost or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Net foreign currency losses |  | Carrying value
US Government and agency obligations |  | $ | 365.5 |  |  | $ | .5 |  |  | $ | (1.0 | ) |  | $ | (2.5 | ) |  | $ | 362.5 |
Debt securities issued by corporations |  | 2,330.7 |  |  | 44.0 |  |  | (13.2 | ) |  | (14.3 | ) |  | 2,347.2 |
Municipal obligations |  | 18.3 |  |  | — |  |  | (.4 | ) |  | — |  |  | 17.9 |
Mortgage-backed and asset-backed securities |  | 2,027.3 |  |  | 2.4 |  |  | (9.9 | ) |  | (5.3 | ) |  | 2,014.5 |
Foreign government, agency and provincial obligations |  | 444.2 |  |  | 3.7 |  |  | (3.2 | ) |  | (4.8 | ) |  | 439.9 |
Preferred stocks |  | 79.9 |  |  | 5.1 |  |  | — |  |  | (.2 | ) |  | 84.8 |
Total fixed maturity investments including assets held for sale |  | $ | 5,265.9 |  |  | $ | 55.7 |  |  | $ | (27.7 | ) |  | $ | (27.1 | ) |  | $ | 5,266.8 |
Fixed maturity investments reclassified to assets held for sale (1) |  |  |  |  |  |  |  |  |  | (236.3 | )
Total fixed maturity investments |  |  |  |  |  |  |  |  |  | $ | 5,030.5 |
(1) | Assets held for sale related to discontinued operations. See Note 21.
|  | December 31, 2012
Millions |  | Cost or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Net foreign currency gains (losses) |  | Carrying value
US Government and agency obligations |  | $ | 440.4 |  |  | $ | 1.0 |  |  | $ | (.1 | ) |  | $ | (1.2 | ) |  | $ | 440.1 |
Debt securities issued by corporations |  | 2,321.4 |  |  | 88.3 |  |  | (1.6 | ) |  | (23.0 | ) |  | 2,385.1 |
Municipal obligations |  | 5.3 |  |  | — |  |  | (0.1 | ) |  | — |  |  | 5.2 |
Mortgage-backed and asset-backed securities |  | 2,081.0 |  |  | 25.1 |  |  | (1.1 | ) |  | (9.4 | ) |  | 2,095.6 |
Foreign government, agency and provincial obligations |  | 526.6 |  |  | 6.9 |  |  | (3.0 | ) |  | (8.6 | ) |  | 521.9 |
Preferred stocks |  | 79.9 |  |  | 6.7 |  |  | — |  |  | (.2 | ) |  | 86.4 |
Total fixed maturity investments including assets held for sale |  | $ | 5,454.6 |  |  | $ | 128.0 |  |  | $ | (5.9 | ) |  | $ | (42.4 | ) |  | $ | 5,534.3 |
Fixed maturity investments reclassified to assets held for sale (1) |  |  |  |  |  |  |  |  |  | (338.1 | )
Total fixed maturity investments |  |  |  |  |  |  |  |  |  | $ | 5,196.2 |
(1) | Assets held for sale related to discontinued operations. See Note 21.
The weighted average duration of White Mountains’ fixed income portfolio at December 31, 2013 was approximately 2.1 years, including short-term investments, and approximately 2.4 years excluding short-term investments. The cost or amortized cost and carrying value of White Mountains’ fixed maturity investments and convertible fixed maturity investments at December 31, 2013 is presented below by contractual maturity. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.
|  | December 31, 2013
Millions |  | Cost or amortized cost |  | Carrying value
Due in one year or less |  | $ | 491.2 |  |  | $ | 490.7 |
Due after one year through five years |  | 2,376.7 |  |  | 2,389.3 |
Due after five years through ten years |  | 321.0 |  |  | 322.2 |
Due after ten years |  | 41.5 |  |  | 45.8 |
Mortgage-backed and asset-backed securities |  | 2,027.3 |  |  | 2,014.5 |
Preferred stocks |  | 79.9 |  |  | 84.8 |
Total |  | $ | 5,337.6 |  |  | $ | 5,347.3 |
The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’ common equity securities, convertible fixed maturity investments and other long-term investments as of December 31, 2013 and 2012 were as follows:
|  | December 31, 2013
Millions |  | Cost or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Net foreign currency losses |  | Carrying value
Common equity securities |  | $ | 890.2 |  |  | $ | 271.0 |  |  | $ | (3.6 | ) |  | $ | (.8 | ) |  | $ | 1,156.8 |
Convertible fixed maturity investments |  | $ | 71.7 |  |  | $ | 9.9 |  |  | $ | (.9 | ) |  | $ | (.2 | ) |  | $ | 80.5 |
Other long-term investments |  | $ | 238.3 |  |  | $ | 79.6 |  |  | $ | (26.6 | ) |  | $ | (2.4 | ) |  | $ | 288.9 |
|  | December 31, 2012
Millions |  | Cost or amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Net foreign currency losses |  | Carrying value
Common equity securities |  | $ | 895.2 |  |  | $ | 143.4 |  |  | $ | (8.8 | ) |  | $ | (.1 | ) |  | $ | 1,029.7 |
Convertible fixed maturity investments |  | $ | 121.7 |  |  | $ | 6.1 |  |  | $ | (.4 | ) |  | $ | — |  |  | $ | 127.4 |
Other long-term investments |  | $ | 257.2 |  |  | $ | 65.9 |  |  | $ | (22.8 | ) |  | $ | (6.1 | ) |  | $ | 294.2 |
Proceeds from the sales and maturities of investments, excluding short-term investments, totaled $4,924.8 million, $6,997.5 million and $5,034.0 million for the years ended December 31, 2013, 2012 and 2011. Investments Held on Deposit or as Collateral As of December 31, 2013 and 2012, investments of $170.4 million and $169.9 million, respectively, were held in trusts required to be maintained in relation to various reinsurance agreements. White Mountains’ consolidated insurance and reinsurance operations are required to maintain deposits with certain insurance regulatory agencies in order to maintain their insurance licenses. The fair value of such deposits which are included within total investments totaled $290.7 million and $319.3 million as of December 31, 2013 and 2012. As of December 31, 2013 and 2012, OneBeacon held unrestricted collateral from its customers, which is included in cash and invested assets, relating to its surety business of $63.3 million and $5.9 million. The obligation to return these funds is included in funds held under insurance and reinsurance contracts in the consolidated balance sheets. As of December 31, 2013 and 2012, White Mountains held $23.2 million and $138.7 million of restricted collateral in the form of fixed maturities and $2.0 million and $5.1 million of restricted collateral in the form of short-term investments associated with variable annuity reinsurance and interest rate cap agreements. See Note 8. Fair value measurements at December 31, 2013 White Mountains used quoted market prices or other observable inputs to determine fair value for the 95% of its investment portfolio. Investments valued using Level 1 inputs include fixed maturity investments, primarily investments in U.S. Treasuries, common equities and short-term investments, which include U.S. Treasury Bills. Investments valued using Level 2 inputs consist of fixed maturity investments including corporate debt, state and other governmental debt, convertible fixed maturity securities and mortgage and asset-backed securities. Fair value estimates for investments that trade infrequently and have few or no observable market prices are classified as Level 3 measurements. Level 3 fair value estimates based upon unobservable inputs include White Mountains’ investments in hedge funds and private equity funds, as well as investments in certain debt securities where quoted market prices are unavailable. White Mountains uses brokers and outside pricing services to assist in determining fair values. For investments in active markets, White Mountains uses the quoted market prices provided by outside pricing services to determine fair value. The outside pricing services used by White Mountains have indicated that if no observable inputs are available for a security, they will not provide a price. In those circumstances, White Mountains estimates the fair value using industry standard pricing models and observable inputs such as benchmark interest rates, market comparables, broker quotes, issuer spreads, bids, offers, credit rating, prepayment speeds and other relevant inputs. White Mountains performs procedures to validate the market prices obtained from the outside pricing sources. Such procedures, which cover substantially all of its fixed maturity investments include, but are not limited to, evaluation of model pricing methodologies and review of the pricing services’ quality control processes and procedures on at least an annual basis, comparison of market prices to prices obtained from different independent pricing vendors on at least a semi-annual basis, monthly analytical reviews of certain prices, and review of assumptions utilized by the pricing service for selected measurements on an ad hoc basis throughout the year. White Mountains also performs back-testing of selected sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price on an ad-hoc basis throughout the year. Prices provided by the pricing services that vary by more than 5% and $1.0 million from the expected price based on these procedures are considered outliers. In circumstances where the results of White Mountains’ review process do not appear to support the market price provided by the pricing services, White Mountains challenges the price. If White Mountains cannot gain satisfactory evidence to support the challenged price, it relies upon its own pricing methodologies to estimate the fair value of the security in question. The fair values of such securities are considered to be Level 3 measurements. White Mountains’ investments in debt securities are generally valued using matrix and other pricing models. Key inputs include benchmark yields, benchmark securities, reported trades, issuer spreads, bids, offers, credit ratings and prepayment speeds. Income on mortgage-backed and asset-backed securities is recognized using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized or accreted prospectively over the remaining economic life. White Mountains employs a number of procedures to assess the reasonableness of the fair value measurements for its other long-term investments, including obtaining and reviewing the audited annual financial statements of each hedge fund and private equity fund and periodically discussing each fund’s pricing with the fund manager. However, since the fund managers do not provide sufficient information to evaluate the pricing inputs and methods for each underlying investment, the inputs are considered to be unobservable. Accordingly, the fair value of White Mountains’ investments in hedge funds and private equity funds has been classified as Level 3 measurements. The fair value of White Mountains’ investments in hedge funds and private equity funds has been determined using net asset value. In addition to the investments described above, White Mountains has $86.3 million and $79.7 million of investment-related liabilities recorded at fair value and included in other liabilities as of December 31, 2013 and 2012. These liabilities relate to securities that have been sold short by limited partnerships in which White Mountains has investments and is required to consolidate under GAAP. All of the liabilities included have a Level 1 designation. Fair Value Measurements by Level The following tables summarize White Mountains’ fair value measurements for investments at December 31, 2013 and 2012 by level. The fair value measurements for derivative assets associated with White Mountains’ variable annuity business are presented in Note 8.
|  | December 31, 2013
Millions |  | Fair value |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs
Fixed maturity investments: |  |  |  |  |  |  |  |
U.S. Government and agency obligations |  | $ | 362.5 |  |  | $ | 295.8 |  |  | $ | 66.7 |  |  | $ | — |
Debt securities issued by corporations: |  |  |  |  |  |  |  |  |
Consumer |  | 754.4 |  |  | — |  |  | 754.4 |  |  | — |
Financials |  | 434.4 |  |  | — |  |  | 434.4 |  |  | — |
Industrial |  | 281.1 |  |  | — |  |  | 281.1 |  |  | — |
Communications |  | 265.0 |  |  | — |  |  | 265.0 |  |  | — |
Utilities |  | 173.6 |  |  | — |  |  | 173.6 |  |  | — |
Energy |  | 159.7 |  |  | — |  |  | 159.7 |  |  | — |
Basic Materials |  | 149.1 |  |  | — |  |  | 149.1 |  |  | — |
Technology |  | 91.2 |  |  | — |  |  | 91.2 |  |  | — |
Other |  | 38.7 |  |  | — |  |  | 38.7 |  |  | — |
Total debt securities issued by corporations: |  | 2,347.2 |  |  | — |  |  | 2,347.2 |  |  | — |
Mortgage-backed and asset-backed securities |  | 2,014.5 |  |  | — |  |  | 1,992.5 |  |  | 22.0 |
Foreign government, agency and provincial obligations |  | 439.9 |  |  | 44.5 |  |  | 395.4 |  |  | — |
Preferred stocks |  | 84.8 |  |  | — |  |  | 13.8 |  |  | 71.0 |
Municipal obligations |  | 17.9 |  |  | — |  |  | 17.9 |  |  | — |
Total fixed maturity investments (1) |  | 5,266.8 |  |  | 340.3 |  |  | 4,833.5 |  |  | 93.0 |
Short-term investments |  | 635.9 |  |  | 621.5 |  |  | 14.4 |  |  | — |
Common equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Financials |  | 360.4 |  |  | 314.3 |  |  | — |  |  | 46.1 |
Consumer |  | 308.2 |  |  | 308.2 |  |  | — |  |  | — |
Industrial |  | 105.4 |  |  | 105.4 |  |  | — |  |  | — |
Energy |  | 78.6 |  |  | 78.6 |  |  | — |  |  | — |
Technology |  | 60.6 |  |  | 60.6 |  |  | — |  |  | — |
Communications |  | 57.1 |  |  | 57.1 |  |  | — |  |  | — |
Basic materials |  | 53.4 |  |  | 53.4 |  |  | — |  |  | — |
Utilities |  | 34.3 |  |  | 34.3 |  |  | — |  |  | — |
Other |  | 98.8 |  |  | 24.5 |  |  | 74.3 |  |  | — |
Total common equity securities |  | 1,156.8 |  |  | 1,036.4 |  |  | 74.3 |  |  | 46.1 |
Convertible fixed maturity investments |  | 80.5 |  |  | — |  |  | 74.4 |  |  | 6.1 |
Other long-term investments (2) |  | 262.4 |  |  | — |  |  | — |  |  | 262.4 |
Total investments |  | $ | 7,402.4 |  |  | $ | 1,998.2 |  |  | $ | 4,996.6 |  |  | $ | 407.6 |
(1) | Carrying value includes $236.3 that is classified as assets held for sale relating to discontinued operations.
(2) | Excludes carrying value of $26.6 associated with other long-term investment limited partnerships accounted for using the equity method and $(.1) related to currency forward contracts.
|  | December 31, 2012
Millions |  | Fair value |  | Level 1 Inputs |  | Level 2 Inputs |  | Level 3 Inputs
Fixed maturity investments: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and agency obligations |  | $ | 440.1 |  |  | $ | 369.1 |  |  | $ | 71.0 |  |  | $ | — |
Debt securities issued by corporations: |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  | 727.1 |  |  | — |  |  | 727.1 |  |  | — |
Financials |  | 401.4 |  |  | 1.0 |  |  | 400.4 |  |  | — |
Industrial |  | 330.8 |  |  | — |  |  | 330.8 |  |  | — |
Communications |  | 276.1 |  |  | — |  |  | 276.1 |  |  | — |
Utilities |  | 204.2 |  |  | — |  |  | 204.2 |  |  | — |
Basic materials |  | 189.1 |  |  | — |  |  | 189.1 |  |  | — |
Energy |  | 181.5 |  |  | — |  |  | 181.5 |  |  | — |
Technology |  | 54.0 |  |  | — |  |  | 54.0 |  |  | — |
Other |  | 20.9 |  |  | — |  |  | 20.9 |  |  | — |
Total debt securities issued by corporations: |  | 2,385.1 |  |  | 1.0 |  |  | 2,384.1 |  |  | — |
Mortgage-backed and asset-backed securities |  | 2,095.6 |  |  | — |  |  | 2,073.5 |  |  | 22.1 |
Foreign government, agency and provincial obligations |  | 521.9 |  |  | 52.1 |  |  | 469.8 |  |  | — |
Preferred stocks |  | 86.4 |  |  | — |  |  | 15.6 |  |  | 70.8 |
Municipal obligations |  | 5.2 |  |  | — |  |  | 5.2 |  |  | — |
Total fixed maturity investments(1) |  | 5,534.3 |  |  | 422.2 |  |  | 5,019.2 |  |  | 92.9 |
Short-term investments |  | 630.6 |  |  | 630.6 |  |  | — |  |  | — |
Common equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Financials |  | 324.5 |  |  | 286.3 |  |  | .9 |  |  | 37.3 |
Consumer |  | 255.6 |  |  | 255.6 |  |  | — |  |  | — |
Basic materials |  | 103.3 |  |  | 103.3 |  |  | — |  |  | — |
Energy |  | 101.0 |  |  | 101.0 |  |  | — |  |  | — |
Technology |  | 55.0 |  |  | 55.0 |  |  | — |  |  | — |
Utilities |  | 43.6 |  |  | 43.4 |  |  | .2 |  |  | — |
Industrial |  | 41.9 |  |  | 41.9 |  |  | — |  |  | — |
Communications |  | 35.2 |  |  | 35.2 |  |  | — |  |  | — |
Other |  | 69.6 |  |  | 11.2 |  |  | 58.4 |  |  | — |
Total common equity securities |  | 1,029.7 |  |  | 932.9 |  |  | 59.5 |  |  | 37.3 |
Convertible fixed maturity investments |  | 127.4 |  |  | — |  |  | 127.4 |  |  | — |
Other long-term investments(2) |  | 259.3 |  |  | — |  |  | — |  |  | 259.3 |
Total investments |  | $ | 7,581.3 |  |  | $ | 1,985.7 |  |  | $ | 5,206.1 |  |  | $ | 389.5 |
(1) | Carrying value includes $338.1 that is classified as assets held for sale relating to discontinued operations.
(2) | Excludes carrying value of $35.0 associated with other long-term investment limited partnerships accounted for using the equity method and $(.1) related to currency forward contracts.
Debt securities issued by corporations The following table summarizes the ratings of the corporate debt securities held in White Mountains’ investment portfolio as of December 31, 2013 and 2012:
|  | Fair Value at
|  | December 31,
Millions |  | 2013 |  | 2012
AAA |  | $ | — |  |  | $ | — |
AA |  | 228.8 |  |  | 193.4 |
A |  | 1,039.5 |  |  | 1,061.0 |
BBB |  | 1,075.5 |  |  | 1,116.9 |
BB |  | — |  |  | 7.0 |
Other |  | 3.4 |  |  | 6.8 |
Debt securities issued by corporations(1) |  | $ | 2,347.2 |  |  | $ | 2,385.1 |
(1) | Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor’s and 2) Moody’s.
Mortgage-backed, Asset-backed Securities White Mountains purchases commercial and residential mortgage-backed securities with the goal of maximizing risk adjusted returns in the context of a diversified portfolio. White Mountains’ non-agency commercial mortgage-backed portfolio (“CMBS”) is generally short-term and structurally senior, with more than 25 points of subordination on average for both fixed rate CMBS and floating rate CMBS as of December 31, 2013. In general, subordination represents the percentage principal loss on the underlying collateral that would be absorbed by other securities lower in the capital structure before the more senior security incurs a loss. White Mountains believes these levels of protection will mitigate the risk of loss. As of December 31, 2013, on average less than 1% of the underlying loans were reported as non-performing for all non-agency CMBS held by White Mountains. White Mountains is not an originator of residential mortgage loans. White Mountains’ investments in hedge funds and private equity funds contain negligible amounts of sub-prime mortgage-backed securities at December 31, 2013. White Mountains considers sub-prime mortgage-backed securities as those that have underlying loan pools that exhibit weak credit characteristics, or those that are issued from dedicated sub-prime shelves or dedicated second-lien shelf registrations (i.e., White Mountains considers investments backed primarily by second-liens to be sub-prime risks regardless of credit scores or other metrics). White Mountains categorizes mortgage-backed securities as “non-prime” (also called “Alt A” or “A-”) if they are backed by collateral that has overall credit quality between prime and sub-prime based on White Mountains’ review of the characteristics of their underlying mortgage loan pools, such as credit scores and financial ratios. White Mountains’ non-agency residential mortgage-backed portfolio is generally moderate-term and structurally senior. White Mountains does not own any collateralized loan obligations. White Mountains does not own any collateralized debt obligations, with the exception of $41.8 million of non-agency residential mortgage resecuritization tranches, each a senior tranche in its own right and each collateralized by a single earlier vintage Super Senior or Senior non-agency residential mortgage backed security.
|  | December 31, 2013 |  | December 31, 2012
Millions |  | Fair Value |  | Level 2 |  | Level 3 |  | Fair Value |  | Level 2 |  | Level 3
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
GNMA |  | $ | 512.3 |  |  | $ | 512.3 |  |  | $ | — |  |  | $ | 1,013.4 |  |  | $ | 1,013.4 |  |  | $ | — |
FNMA |  | 81.2 |  |  | 81.2 |  |  | — |  |  | 74.6 |  |  | 74.6 |  |  | — |
FHLMC |  | 91.3 |  |  | 91.3 |  |  | — |  |  | 55.8 |  |  | 55.8 |  |  | — |
Total Agency(1) |  | 684.8 |  |  | 684.8 |  |  | — |  |  | 1,143.8 |  |  | 1,143.8 |  |  | — |
Non-agency: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | 125.7 |  |  | 125.7 |  |  | — |  |  | 160.6 |  |  | 160.6 |  |  | — |
Commercial |  | 282.3 |  |  | 282.3 |  |  | — |  |  | 334.1 |  |  | 334.1 |  |  | — |
Total Non-agency |  | 408.0 |  |  | 408.0 |  |  | — |  |  | 494.7 |  |  | 494.7 |  |  | — |
Total mortgage-backed securities |  | 1,092.8 |  |  | 1,092.8 |  |  | — |  |  | 1,638.5 |  |  | 1,638.5 |  |  | — |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit card receivables |  | 311.4 |  |  | 289.4 |  |  | 22.0 |  |  | 173.5 |  |  | 151.4 |  |  | 22.1 |
Vehicle receivables |  | 365.0 |  |  | 365.0 |  |  | — |  |  | 233.2 |  |  | 233.2 |  |  | — |
Other |  | 245.3 |  |  | 245.3 |  |  | — |  |  | 50.4 |  |  | 50.4 |  |  | — |
Total asset-backed securities |  | 921.7 |  |  | 899.7 |  |  | 22.0 |  |  | 457.1 |  |  | 435.0 |  |  | 22.1 |
Total mortgage and asset-backed securities |  | $ | 2,014.5 |  |  | $ | 1,992.5 |  |  | $ | 22.0 |  |  | $ | 2,095.6 |  |  | $ | 2,073.5 |  |  | $ | 22.1 |
(1) | Represents publicly traded mortgage-backed securities which carry the full faith and credit guaranty of the U.S. government (i.e., GNMA) or are guaranteed by a government sponsored entity (i.e., FNMA, FHLMC).
Non-agency Mortgage-backed Securities The security issuance years of White Mountains’ investments in non-agency RMBS and non-agency CMBS securities as of December 31, 2013 are as follows:
|  |  |  |  | Security Issuance Year |  |  |  |
Millions |  | Fair Value |  | 2004 | 2005 |  | 2006 |  | 2007 |  | 2008 |  | 2009 | 2010 |  | 2011 |  | 2012 |  | 2013
Non-agency RMBS |  | $ | 125.7 |  |  | $ | 11.9 |  | $ | 33.4 |  |  | $ | 10.8 |  |  | $ | 2.1 |  |  | $ | — |  |  | $ | — |  | $ | 33.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 34.1 |
Non-agency CMBS |  | 282.3 |  |  | — |  | — |  |  | 8.6 |  |  | 5.7 |  |  | 28.1 |  |  | — |  | 11.5 |  |  | 31.9 |  |  | 113.8 |  |  | 82.7 |
Total |  | $ | 408.0 |  |  | $ | 11.9 |  | $ | 33.4 |  |  | $ | 19.4 |  |  | $ | 7.8 |  |  | $ | 28.1 |  |  | $ | — |  | $ | 44.9 |  |  | $ | 31.9 |  |  | $ | 113.8 |  |  | $ | 116.8 |
Non-agency Residential Mortgage-backed Securities The classification of the underlying collateral quality and the tranche levels of White Mountains’ non-agency RMBS securities are as follows as of December 31, 2013:
Millions |  | Fair Value |  | Super Senior(1) |  | Senior(2) |  | Subordinate(3)
Prime |  | $ | 96.1 |  |  | $ | 24.1 |  |  | $ | 72.0 |  |  | $ | — |
Non-prime |  | 21.9 |  |  | — |  |  | 21.9 |  |  | — |
Sub-prime |  | 7.7 |  |  | 7.7 |  |  | — |  |  | — |
Total |  | $ | 125.7 |  |  | $ | 31.8 |  |  | $ | 93.9 |  |  | $ | — |
(1) | At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch Ratings (“Fitch”) and were senior to other “AAA” or “Aaa” bonds.
(2) | At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were senior to non-“AAA” or non-“Aaa” bonds.
(3) | At issuance, Subordinate were not rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were junior to “AAA” or “Aaa” bonds.
Non-agency Commercial Mortgage-backed Securities The amount of fixed and floating rate securities and their tranche levels of White Mountains’ non-agency CMBS securities are as follows as of December 31, 2013:
Millions |  | Fair Value |  | Super Senior(1) |  | Senior(2) |  | Subordinate(3)
Fixed rate CMBS |  | $ | 189.0 |  |  | $ | 117.2 |  |  | $ | 54.4 |  |  | $ | 17.4 |
Floating rate CMBS |  | 93.3 |  |  | 5.7 |  |  | 28.0 |  |  | 59.6 |
Total |  | $ | 282.3 |  |  | $ | 122.9 |  |  | $ | 82.4 |  |  | $ | 77.0 |
(1) | At issuance, Super Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were senior to other “AAA” or “Aaa” bonds.
(2) | At issuance, Senior, or in the case of resecuritization, the underlying securities, were rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were senior to non-“AAA” or non-“Aaa” bonds.
(3) | At issuance, Subordinate were not rated “AAA” by Standard & Poor’s, “Aaa” by Moody’s or “AAA” by Fitch and were junior to “AAA” or “Aaa” bonds.
Hedge Funds and Private Equity Funds White Mountains holds investments in hedge funds and private equity funds, which are included in other long-term investments. The fair value of these investments has been estimated using the net asset value of the funds. At December 31, 2013, White Mountains held investments in 15 hedge funds and 39 private equity funds. The largest investment in a single fund was $18.3 million at December 31, 2013 and $16.0 million at December 31, 2012. The following table summarizes investments in hedge funds and private equity interests by investment objective and sector at December 31, 2013 and 2012:
|  | December 31, 2013 |  | December 31, 2012
Millions |  | Fair Value |  | Unfunded Commitments |  | Fair Value |  | Unfunded Commitments
Hedge funds |  |  |  |  |  |  |  |  |  |  |  |
Long/short equity |  | $ | 62.6 |  |  | $ | — |  |  | $ | 60.3 |  |  | $ | — |
Long/short credit & distressed |  | 22.8 |  |  | — |  |  | 22.7 |  |  | — |
Long/short equity REIT |  | 18.3 |  |  | — |  |  | 16.0 |  |  | — |
Long/short equity activist |  | 16.8 |  |  | — |  |  | 13.6 |  |  | — |
Long bank loan |  | .2 |  |  | — |  |  | .3 |  |  | — |
Long diversified strategies |  | .1 |  |  | — |  |  | 1.7 |  |  | — |
Total hedge funds |  | 120.8 |  |  | — |  |  | 114.6 |  |  | — |
Private equity funds |  |  |  |  |  |  |  |  |  |  |  |
Energy infrastructure & services |  | 45.9 |  |  | 13.1 |  |  | 36.3 |  |  | 15.6 |
Multi-sector |  | 23.8 |  |  | 6.5 |  |  | 23.3 |  |  | 5.4 |
Manufacturing/Industrial |  | 11.2 |  |  | 15.5 |  |  | 9.9 |  |  | 15.1 |
Private equity secondaries |  | 9.5 |  |  | 3.1 |  |  | 10.5 |  |  | 3.1 |
Real estate |  | 8.2 |  |  | 3.3 |  |  | 11.6 |  |  | 3.3 |
Aerospace/Defense/Government |  | 5.8 |  |  | 19.2 |  |  | 2.8 |  |  | 22.2 |
Healthcare |  | 5.6 |  |  | 2.8 |  |  | 4.3 |  |  | 5.4 |
International multi-sector, Europe |  | 3.9 |  |  | 2.8 |  |  | 5.1 |  |  | 5.0 |
Insurance |  | 2.3 |  |  | 41.3 |  |  | 3.0 |  |  | 41.3 |
Venture capital |  | 1.6 |  |  | .3 |  |  | 2.2 |  |  | .3 |
Distressed residential real estate |  | .4 |  |  | — |  |  | 15.8 |  |  | — |
International multi-sector, Asia |  | — |  |  | 2.7 |  |  | .4 |  |  | 2.7 |
Total private equity funds |  | 118.2 |  |  | 110.6 |  |  | 125.2 |  |  | 119.4 |
Total hedge and private equity funds included in other long-term investments |  | $ | 239.0 |  |  | $ | 110.6 |  |  | $ | 239.8 |  |  | $ | 119.4 |
Redemption of investments in certain hedge funds is subject to restrictions including lock-up periods where no redemptions or withdrawals are allowed, restrictions on redemption frequency and advance notice periods for redemptions. Amounts requested for redemptions remain subject to market fluctuations until the redemption effective date, which generally falls at the end of the defined redemption period. The following summarizes the December 31, 2013 fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds:
|  | Notice Period
Millions Redemption frequency |  | 30-59 days notice |  | 60-89 days notice |  | 90-119 days notice |  | 120+ days notice |  | Total
Monthly |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5.8 |  |  | $ | 5.8 |
Quarterly |  | 29.1 |  |  | 30.2 |  |  | 11.8 |  |  | 8.6 |  |  | 79.7 |
Semi-annual |  | — |  |  | 25.4 |  |  | — |  |  | — |  |  | 25.4 |
Annual |  | .1 |  |  | — |  |  | 9.6 |  |  | .2 |  |  | 9.9 |
Total |  | $ | 29.2 |  |  | $ | 55.6 |  |  | $ | 21.4 |  |  | $ | 14.6 |  |  | $ | 120.8 |
Certain of the hedge fund and private equity fund investments in which White Mountains is invested are no longer active and are in the process of disposing of their underlying investments. Distributions from such funds are remitted to investors as the fund’s underlying investments are liquidated. At December 31, 2013, distributions of $3.0 million were outstanding from these investments. The actual amount of the final distribution remittances remain subject to market fluctuations. The date at which such remittances will be received is not determinable at December 31, 2013. White Mountains has also submitted redemption requests for certain of its investments in active hedge funds. At December 31, 2013, redemptions of $2.1 million are outstanding and are subject to market fluctuations. The date at which such redemptions will be received is not determinable at December 31, 2013. Redemptions are recorded as receivables when the investment is no longer subject to market fluctuations. Investments in private equity funds are generally subject to a “lock-up” period during which investors may not request a redemption. Distributions prior to the expected termination date of the fund may be limited to dividends or proceeds arising from the liquidation of the fund’s underlying investments. In addition, certain private equity funds provide an option to extend the lock-up period at either the sole discretion of the fund manager or upon agreement between the fund and the investors. At December 31, 2013, investments in private equity funds were subject to lock-up periods as follows:
Millions |  | 1-3 years |  | 3 – 5 years |  | 5 – 10 years |  | >10 years |  | Total
Private Equity Funds — expected lock-up period remaining |  | $ | 6.9 |  |  | $ | 30.8 |  |  | $ | 67.6 |  |  | $ | 12.9 |  |  | $ | 118.2 |
Rollforward of Fair Value Measurements by Level White Mountains uses quoted market prices where available as the inputs to estimate fair value for its investments in active markets. Such measurements are considered to be either Level 1 or Level 2 measurements, depending on whether the quoted market price inputs are for identical securities (Level 1) or similar securities (Level 2). Level 3 measurements for fixed maturity investments, common equity securities, convertible fixed maturity investments and other long-term investments at December 31, 2013 and 2012 consist of securities for which the estimated fair value has not been determined based upon quoted market price inputs for identical or similar securities. The following tables summarize the changes in White Mountains’ fair value measurements by level for the years ended December 31, 2013 and 2012:
|  |  |  |  |  | Level 3 Investments |  |  |
Millions |  | Level 1 Investments |  | Level 2 Investments |  | Fixed maturity investments |  | Common equity securities |  | Convertible fixed maturity investments |  | Other long-term investments |  | Total |
Balance at January 1, 2013 |  | $ | 1,355.1 |  |  | $ | 5,206.1 |  |  | $ | 92.9 |  |  | $ | 37.3 |  |  | $ | — |  |  | $ | 259.3 |  | (1) | $ | 6,950.7 |  | (1)(2)(3)
Total realized and unrealized gains (losses) |  | 221.9 |  |  | (56.9 | ) |  | (2.7 | ) |  | 1.0 |  |  | — |  |  | 18.7 |  |  | 182.0 |  | (4)
Foreign currency gains (losses) in OCI |  | (.3 | ) |  | 12.5 |  |  | .3 |  |  | — |  |  | — |  |  | (.9 | ) |  | 11.6 |  |
Amortization/Accretion |  | (1.0 | ) |  | (51.2 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (52.2 | ) |
Purchases |  | 862.1 |  |  | 3,689.6 |  |  | 37.9 |  |  | 8.8 |  |  | — |  |  | 37.1 |  |  | 4,635.5 |  |
Sales |  | (1,078.9 | ) |  | (3,842.8 | ) |  | (6.3 | ) |  | — |  |  | — |  |  | (51.8 | ) |  | (4,979.8 | ) |
Net change in investments related to purchases and sales of consolidated affiliates |  | 16.0 |  |  | 2.7 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18.7 |  |
Transfers in |  | 1.8 |  |  | 119.4 |  |  | 90.3 |  |  | — |  |  | 6.1 |  |  | — |  |  | 217.6 |  |
Transfers out |  | — |  |  | (97.2 | ) |  | (119.4 | ) |  | (1.0 | ) |  | — |  |  | — |  |  | (217.6 | ) |
Balance at December 31, 2013 |  | $ | 1,376.7 |  |  | $ | 4,982.2 |  |  | $ | 93.0 |  |  | $ | 46.1 |  |  | $ | 6.1 |  |  | $ | 262.4 |  | (1) | $ | 6,766.5 |  | (1)(2)(3)
(1) | Excludes carrying value of $26.6 and $35.0 at December 31, 2013 and January 1, 2013 associated with other long-term investments accounted for using the equity method and $(.1) at December 31, 2013 related to currency forward contracts.
(2) | Carrying value includes $236.3 and $338.1 at December 31, 2013 and January 1, 2013 that is classified as assets held for sale relating to discontinued operations.
(3) | Excludes carrying value of $635.9 and $630.6 at December 31, 2013 and January 1, 2013 classified as short-term investments.
(4) | Excludes $20.6 of realized and unrealized losses associated with the Prospector Funds consolidation of investment-related liabilities and $.2 of realized and unrealized gains associated with short-term investments.
|  |  |  |  |  | Level 3 Investments |
Millions |  | Level 1 Investments |  | Level 2 Investments |  | Fixed maturity investments |  | Common equity securities |  | Convertible fixed maturity investments |  | Other long-term investments |  | Total |
Balance at January 1, 2012 |  | $ | 1,033.1 |  |  | $ | 6,088.2 |  |  | $ | 78.9 |  |  | $ | 32.3 |  |  | $ | — |  |  | $ | 268.3 |  | (1) | $ | 7,500.8 |  | (1)(2)(3)
Total realized and unrealized (losses) gains |  | 52.0 |  |  | 53.6 |  |  | 8.7 |  |  | 12.4 |  |  | — |  |  | (3.3 | ) |  | 123.4 |  |
Foreign currency gains (losses) in OCI |  | 4.4 |  |  | 81.9 |  |  | .8 |  |  | .2 |  |  | — |  |  | 3.7 |  |  | 91.0 |  |
Amortization/Accretion |  | (.8 | ) |  | (48.0 | ) |  | (.8 | ) |  | — |  |  | — |  |  | — |  |  | (49.6 | ) |
Purchases |  | 1,216.9 |  |  | 4,927.1 |  |  | 144.4 |  |  | 3.1 |  |  | — |  |  | 39.4 |  |  | 6,330.9 |  |
Sales |  | (950.5 | ) |  | (5,937.0 | ) |  | (99.4 | ) |  | (10.1 | ) |  | — |  |  | (48.8 | ) |  | (7,045.8 | ) |
Transfers in |  | — |  |  | 62.4 |  |  | 22.1 |  |  | — |  |  | — |  |  | — |  |  | 84.5 |  |
Transfers out |  | — |  |  | (22.1 | ) |  | (61.8 | ) |  | (.6 | ) |  | — |  |  | — |  |  | (84.5 | ) |
Balance at December 31, 2012 |  | $ | 1,355.1 |  |  | $ | 5,206.1 |  |  | $ | 92.9 |  |  | $ | 37.3 |  |  | $ | — |  |  | $ | 259.3 |  | (1) | $ | 6,950.7 |  | (1)(2)(3)
(1) | Excludes carrying value of $35.0 and $33.0 at December 31, 2012 and January 1, 2012 associated with other long-term investment limited partnerships accounted for using the equity method and $(.1) at December 31, 2012 related to currency forward contracts.
(2) | Carrying value includes $338.1 and $111.8 at December 31, 2012 and January 1, 2012 that is classified as assets held for sale relating to AutoOne discontinued operations.
(3) | Excludes carrying value of $630.6 and $846.0 at December 31, 2012 and January 1, 2012 classified as short-term investments.
Fair Value Measurements — transfers between levels During 2013, three fixed maturity securities classified as Level 3 measurements in the prior period were recategorized as Level 2 measurements because quoted market prices for similar securities that were considered reliable and could be validated against an alternative source were available at December 31, 2013. These measurements comprise “Transfers out” of Level 3 and “Transfers in” to Level 2 of $119.4 million for the period ended December 31, 2013. Included in these transfers is one asset-backed fixed maturity security classified within Level 2 as of June 30, 2013 that was recategorized to Level 3 as of September 30, 2013. The security represents “Transfers out” of Level 2 and “Transfer in” to Level 3 of $90.3 million as of September 30, 2013. As of September 30, 2013, the estimated fair value for this security determined using the industry standard pricing models was $1.3 million less than the estimated fair value based upon quoted prices provided by a third party pricing vendor. As of December 31, 2013, reliable quoted market prices provided by a third party pricing vendor were available for the security and the security was transferred back to Level 2. During 2012, two fixed maturity securities classified as Level 3 measurements in the prior period were recategorized as Level 2 measurements because quoted market prices for similar securities that were considered reliable and could be validated against an alternative source were available at December 31, 2012. These measurements comprise “Transfers out” of Level 3 and “Transfers in” to Level 2 of $61.8 million for the period ended December 31, 2012. For the year-ended December 31, 2012, “Transfers out” of Level 2 and “Transfers in” to Level 3 fixed maturity investments of $22.1 million consists of one asset-backed security for which the estimated fair value was determined using a single broker quote. Significant Unobservable Inputs The following summarizes significant unobservable inputs used in estimating the fair value of investment securities classified within Level 3 other than hedge funds and private equities at December 31, 2013. The fair value of investments in hedge funds and private equity funds, which are classified within Level 3, are estimated using the net asset value of the funds.
($ in Millions) |  | December 31, 2013
Description |  | Fair Value | Rating(2) | Valuation Technique(s) | Unobservable Input
Preferred Stock(1) |  | $71.0 | NR | Discounted cash flow | Discount yield | - | 7.4%
Private equity security |  | $35.6 | NR | Multiple of GAAP book value | Book value multiple | - | 1.0
Private equity security |  | $10.5 | NR | Share price of recent transaction | Average share price | - | $1.10
Convertible preferred securities |  | $6.1 | NR | Share price of recent transaction | Share price of recent transaction | - | $6.1
Asset-backed securities (1) |  | $22.0 | AA+ | Broker pricing | Broker quote |  |
(1) | As of December 31, 2013 each asset type consists of one security.
(2) | Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor’s and 2) Moody’s.

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