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Derivatives (Tables) - Variable Annuity Reinsurance | 12 Months Ended
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Dec. 31, 2015
Derivative [Line Items] |
Pre-tax operating results | The following table summarizes the pre-tax operating results of WM Life Re for the years ended December 31, 2015, 2014 and 2013:
|  | Year Ended December 31,
Millions |  | 2015 |  | 2014 |  | 2013
Fees, included in other revenue |  | $ | 9.3 |  |  | $ | 18.6 |  |  | $ | 25.0 |
Change in fair value of variable annuity liability, included in other revenue |  | (.4 | ) |  | 52.9 |  |  | 378.5 |
Change in fair value of derivatives, included in other revenue |  | (8.8 | ) |  | (72.4 | ) |  | (402.0 | )
Foreign exchange, included in other revenue |  | (1.3 | ) |  | (3.2 | ) |  | (14.5 | )
Other investment income and (losses) gains |  | (.4 | ) |  | (1.4 | ) |  | (7.1 | )
Total revenues |  | (1.6 | ) |  | (5.5 | ) |  | (20.1 | )
Change in fair value of variable annuity death benefit liabilities, included in general and administrative expenses |  | — |  |  | .6 |  |  | 10.2 |
Death benefit claims paid, included in general and administrative expenses |  | (.1 | ) |  | (.1 | ) |  | (1.9 | )
General and administrative expenses |  | (4.0 | ) |  | (4.3 | ) |  | (4.9 | )
Pre-tax loss |  | $ | (5.7 | ) |  | $ | (9.3 | ) |  | $ | (16.7 | )
Fair Value of Assets and Liabilities Measured on Recurring and Non-recurring Basis Table | The following table summarizes the changes in White Mountains’s variable annuity reinsurance liabilities and derivative instruments for the year ended December 31, 2015, 2014 and 2013:
|  | Variable Annuity (Liabilities) |  | Derivative Instruments
Millions |  | Level 3 |  | Level 3(1)(6) |  | Level 2(1)(2) |  | Level 1(3) |  | Total(4)
Balance at January 1, 2015 |  | $ | .7 |  |  | $ | 18.9 |  |  | $ | 33.8 |  |  | $ | 3.7 |  |  | $ | 56.4 |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Realized and unrealized (losses) gains |  | (.4 | ) | (5) | (9.7 | ) |  | (7.5 | ) |  | 8.4 |  |  | (8.8 | )
Transfers in (out) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Sales/settlements |  | — |  |  | (6.5 | ) |  | (9.8 | ) |  | (11.2 | ) |  | (27.5 | )
Balance at December 31, 2015 |  | $ | .3 |  |  | $ | 2.7 |  |  | $ | 16.5 |  |  | $ | 0.9 |  |  | $ | 20.1 |
|  | Variable Annuity (Liabilities) |  | Derivative Instruments
Millions |  | Level 3 |  | Level 3(1)(6) |  | Level 2(1)(2) |  | Level 1(3) |  | Total(4)
Balance at January 1, 2014 |  | $ | (52.8 | ) |  | $ | 63.4 |  |  | $ | 4.7 |  |  | $ | 1.1 |  |  | $ | 69.2 |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Realized and unrealized gains (losses) |  | 53.5 |  | (5) | (38.6 | ) |  | (71.0 | ) |  | 37.2 |  |  | (72.4 | )
Transfers in (out) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Sales/settlements |  | — |  |  | (5.9 | ) |  | 100.1 |  |  | (34.6 | ) |  | 59.6 |
Balance at December 31, 2014 |  | $ | .7 |  |  | $ | 18.9 |  |  | $ | 33.8 |  |  | $ | 3.7 |  |  | $ | 56.4 |
|  | Variable Annuity (Liabilities) |  | Derivative Instruments
Millions |  | Level 3 |  | Level 3(1)(6) |  | Level 2(1)(2) |  | Level 1(3) |  | Total(4)
Balance at January 1, 2013 |  | $ | (441.5 | ) |  | $ | 140.5 |  |  | $ | (20.5 | ) |  | $ | (21.7 | ) |  | $ | 98.3 |
Purchases |  | — |  |  | 59.4 |  |  | — |  |  | — |  |  | 59.4 |
Realized and unrealized gains (losses) |  | 388.7 |  | (5) | (136.5 | ) |  | (196.1 | ) |  | (69.4 | ) |  | (402.0 | )
Transfers in (out) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Sales/settlements |  | — |  |  | — |  |  | 221.3 |  |  | 92.2 |  |  | 313.5 |
Balance at December 31, 2013 |  | $ | (52.8 | ) |  | $ | 63.4 |  |  | $ | 4.7 |  |  | $ | 1.1 |  |  | $ | 69.2 |
(1) | Consists of over-the-counter instruments.
(2) | Consists of interest rate swaps, total return swaps, foreign currency forward contracts, and bond forwards. 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) | Consists of 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 $5.8, $33.2 and $81.3 as of December 31, 2015, 2014 and 2013 posted as collateral to its reinsurance counterparties.
(5) | There was no changes in the fair value of variable annuity death benefit liabilities for the year ended December 31, 2015. In 2014 and 2013, $0.6 and $10.2 related to the change in the fair value of variable annuity death benefit liabilities, which are included in general and administrative expenses.
(6) Consists of foreign currency options and equity options.
Schedule of collateral | In addition, WM Life Re held cash and short-term investments posted as collateral to its variable annuity reinsurance and derivatives counterparties. The total collateral includes the following:
|  | December 31,
Millions |  | 2015 |  | 2014
Cash |  | $ | 5.8 |  |  | $ | 23.7 |
Fixed maturity investments |  | — |  |  | 9.5 |
Total |  | $ | 5.8 |  |  | $ | 33.2 |
Schedule of significant unobservable inputs associated with the fair value estimates for variable annuity reinsurance liabilities and derivative instruments | The following summarizes quantitative information about significant unobservable inputs associated with the fair value estimates for variable annuity reinsurance liabilities and derivative instruments that have been classified as Level 3 measurements:
Description |  | December 31, 2015
$ in millions |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range |  | Weighted Average
Variable annuity benefit guarantee asset |  | $ | (.3 | ) |  | Discounted cash flows |  | Surrenders |  | 0.1 | % | - | 40.0 | % |  | 40.0 | %
|  |  |  |  |  |  | Mortality |  | 0.0 | % | - | 6.4% |  | 1.0 | %
|  |  |  |  |  |  | Foreign exchange volatilities |  |  |  |  |  |
|  |  |  |  |  | 0-1 year |  | 11.5 | % | - | 18.7% |  | 13.1 | %
|  |  |  |  |  | Index volatilities |  |  |  |  |  |
|  |  |  |  |  | 0-1 year |  | 25.0 | % | - | 27.5% |  | 26.4 | %
Foreign Exchange Options |  | $ | 1.9 |  |  | Counterparty valuations, adjusted for unwind quote discount |  | Adjustment to counterparty valuations |  | (0.5 | )% | - | (7.3)% |  | (5.9 | )%
Equity Index Options |  | $ | .8 |  |  | Counterparty valuations, adjusted for unwind quote discount |  | Adjustment to counterparty valuations |  | 0.7 | % | - | (6.7)% |  | (2.5 | )%
Offestting Assets and Liabilities | The following summarizes amounts offset under master netting agreements:
|  | December 31, 2015 |  | December 31, 2014
Millions |  | Gross asset amounts before offsets(1) |  | Gross liability amounts offset under master netting arrangements |  | Net amounts recognized in Other Assets |  | Gross asset amounts before offsets(1) |  | Gross liability amounts offset under master netting arrangements |  | Net amounts recognized in Other Assets
Interest rate contracts |  |  |  |  |  |  |  |  |  |  |  |
OTC |  | $ | 2.4 |  |  | $ | (2.1 | ) |  | $ | 0.3 |  |  | $ | 1.0 |  |  | $ | (5.4 | ) |  | $ | (4.4 | )
Exchange traded |  | .1 |  |  | (.1 | ) |  | — |  |  | 2.8 |  |  | (.1 | ) |  | 2.7 |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |  |  |
OTC |  | 15.0 |  |  | — |  |  | 15.0 |  |  | 45.5 |  |  | — |  |  | 45.5 |
Exchange traded |  | .1 |  |  | (.3 | ) |  | (0.2 | ) |  | — |  |  | (1.4 | ) |  | (1.4 | )
Equity contracts |  |  |  |  |  |  |  |  |  |  |  |
OTC |  | 4.4 |  |  | (.6 | ) |  | 3.8 |  |  | 11.7 |  |  | (.2 | ) |  | 11.5 |
Exchange traded |  | 1.2 |  |  | — |  |  | 1.2 |  |  | 3.4 |  |  | (.9 | ) |  | 2.5 |
Total(2) |  | $ | 23.2 |  |  | $ | (3.1 | ) |  | $ | 20.1 |  |  | $ | 64.4 |  |  | $ | (8.0 | ) |  | $ | 56.4 |
(1) Amount equal to fair value of instrument as recognized in other assets. (2) All derivative instruments held by WM Life Re are subject to master netting arrangements.
Offsetting Assets | The following summarizes the value, collateral held or provided by WM Life Re and net exposure to credit losses on OTC and exchange traded derivative instruments by counterparty recorded within other assets:
|  | December 31, 2015
Millions |  | Net amount of assets reflected in Balance Sheet |  | Collateral provided to counterparty - Cash |  | Collateral provided to counter-party - Financial Instruments |  | Net amount of exposure after effect of collateral provided |  | Excess collateral provided to counter-party- Cash |  | Excess collateral provided - Financial Instruments |  | Counter-party collateral held by WM Life Re - Cash |  | Net amount of exposure to counter-party |  | Standard & Poor's Rating(1)
JP Morgan |  | $ | 8.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 8.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 5.5 |  |  | $ | 3.0 |  |  | A | +
Bank of America |  | .7 |  |  | — |  |  | — |  |  | .7 |  |  | — |  |  | — |  |  | — |  |  | .7 |  |  | A |
Citigroup - OTC |  | 9.9 |  |  | — |  |  | — |  |  | 9.9 |  |  | — |  |  | — |  |  | 1.4 |  |  | 8.5 |  |  | A |
Citigroup - Exchange Traded |  | 1.0 |  |  | — |  |  | — |  |  | 1.0 |  |  | 5.8 |  |  | — |  |  | — |  |  | 6.8 |  |  | A |
Total |  | $ | 20.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 20.1 |  |  | $ | 5.8 |  |  | $ | — |  |  | $ | 6.9 |  |  | $ | 19.0 |  |  |  |
|  | December 31, 2014
Millions |  | Net amount of assets reflected in Balance Sheet |  | Collateral provided to counterparty - Cash |  | Collateral provided to counter-party - Financial Instruments |  | Net amount of exposure after effect of collateral provided |  | Excess collateral provided to counter-party- Cash |  | Excess collateral provided - Financial Instruments |  | Counter-party collateral held by WM Life Re- Cash |  | Net amount of exposure to counter-party |  | Standard & Poor's Rating(1)
JP Morgan |  | $ | 24.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 24.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 8.8 |  |  | $ | 15.5 |  |  | A | +
Bank of America |  | 5.6 |  |  | — |  |  | — |  |  | 5.6 |  |  | — |  |  | — |  |  | — |  |  | 5.6 |  |  | A |
Nomura |  | (3.5 | ) |  | 3.5 |  |  | — |  |  | — |  |  | 1.7 |  |  | 9.5 |  |  | — |  |  | 11.2 |  |  | BBB | +
Citigroup - OTC |  | 22.2 |  |  | — |  |  | — |  |  | 22.2 |  |  | — |  |  | — |  |  | 1.1 |  |  | 21.1 |  |  | A |
Citigroup - Exchange Traded |  | 3.7 |  |  | — |  |  | — |  |  | 3.7 |  |  | 16.0 |  |  | — |  |  | — |  |  | 19.7 |  |  | A |
Royal Bank of Scotland |  | 4.0 |  |  | — |  |  | — |  |  | 4.0 |  |  | — |  |  | — |  |  | — |  |  | 4.0 |  |  | A | -
Barclays |  | .1 |  |  | — |  |  | — |  |  | .1 |  |  | — |  |  | — |  |  | — |  |  | .1 |  |  | A |
Total |  | $ | 56.4 |  |  | $ | 3.5 |  |  | $ | — |  |  | $ | 59.9 |  |  | $ | 17.7 |  |  | $ | 9.5 |  |  | $ | 9.9 |  |  | $ | 77.2 |  |  |  |
(1) | Standard & Poor’s ratings as detailed above are: “A+” (Strong, which is the fifth highest of twenty-one creditworthiness ratings),“A” (which is the sixth highest of twenty-one creditworthiness ratings), “A-” (which is the seventh highest of twenty-one creditworthiness ratings), and BBB+ (which is the eighth highest of twenty-one creditworthiness ratings).
Realized and unrealized derivative gains (losses) recognized in other revenues and carrying values, by the type of instrument | The following summarizes realized and unrealized gains (losses) recognized in other revenues for the years ended December 31, 2015, 2014 and 2013 and the carrying values as of December 31, 2015 and 2014 by type of derivative instrument:
|  |  |  |  |  |  |  | Carrying Value
|  | Year Ended December 31, |  | December 31,
Millions |  | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014
Fixed income/interest rate |  | $ | 6.4 |  |  | $ | (33.7 | ) |  | $ | (108.7 | ) |  | $ | .5 |  |  | $ | (1.7 | )
Foreign exchange |  | (7.3 | ) |  | (1.3 | ) |  | (96.7 | ) |  | 14.8 |  |  | 44.1 |
Equity |  | (7.9 | ) |  | (37.4 | ) |  | (196.6 | ) |  | 4.8 |  |  | 14.0 |
Total |  | $ | (8.8 | ) |  | $ | (72.4 | ) |  | $ | (402.0 | ) |  | $ | 20.1 |  |  | $ | 56.4 |

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