Investment Securities (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Par Value to Fair Value Reconciliation of Surplus Notes [Table Text Block]

Below is a table illustrating the valuation adjustments taken to arrive at estimated fair value of the surplus notes as of June 30, 2016 and December 31, 2015:



	Type of Surplus Note						Total as of June 30, 2016			Total as of December 31, 2015
Millions	Seller Priority			Pari Passu			Total as of June 30, 2016			Total as of December 31, 2015
Par Value	$	57.9		$	43.1		$	101.0		$	101.0
Fair value adjustments to reflect:
Current market rates on public debt and contract-based repayments⁽¹⁾	2.7			(8.4		)	(5.7		)	(15.1		)
Regulatory approval ⁽²⁾	(7.4		)	(12.5		)	(19.9		)	(24.2		)
Liquidity adjustment ⁽³⁾	(9.0		)	(3.6		)	(12.6		)	(10.2		)
Total adjustments	(13.7		)	(24.5		)	(38.2		)	(49.5		)
Fair value⁽⁴⁾	$	44.2		$	18.6		$	62.8		$	51.5


⁽¹⁾	Represents the value of the surplus notes, at current market yields on comparable publicly traded debt, and assuming issuer is allowed to make principal and interest payments when its financial capacity is available, as measured by statutory capital in excess of a 250% RBC score.


⁽²⁾	Represents anticipated timing of securing regulatory approvals for interest and principal payments to reflect graduated changes in Issuer’s statutory surplus. The monetary impact of the anticipated timing is measured based on credit spreads of publicly traded debt with roughly equivalent percentages of discounted payments missed.

⁽³⁾Represents impact of liquidity spread to account for OneBeacon’s sole ownership of the surplus notes, lack of a trading market and ongoing regulatory approval risk.

⁽⁴⁾ The increase in the fair value of the surplus notes during the six months ended June 30, 2016 was driven primarily by the narrowing of non-investment grade credit spreads as well as the time value of money benefit generated by moving six months closer to modeled cash receipts, partially offset by the impact of an interest payment received in the first quarter of 2016.

Pre-tax net investment income

Pre-tax net investment income for the three and six months ended June 30, 2016 and 2015 consisted of the following:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
Millions	2016			2015			2016			2015
Investment income:
Fixed maturity investments	$	17.9		$	12.4		$	32.5		$	24.8
Short-term investments	.5			.1			.6			.1
Common equity securities	.9			2.1			2.0			4.3
Other long-term investments	.6			.9			3.4			.9
Total investment income	19.9			15.5			38.5			30.1
Third-party investment expenses	(.7		)	(2.3		)	(1.4		)	(4.3		)
Net investment income, pre-tax	$	19.2		$	13.2		$	37.1		$	25.8

Schedule of Realized and Unrealized Gain (Loss) on Investments

Net realized and unrealized investment gains (losses) consisted of the following:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
Millions	2016			2015			2016			2015
Net realized investment gains, pre-tax	$	2.7		$	42.3		$	259.5		$	57.1
Net unrealized investment gains (losses), pre-tax	25.4			(57.3		)	(201.9		)	(47.1		)
Net realized and unrealized investment gains (losses), pre-tax	28.1			(15.0		)	57.6			10.0
Income tax (expense) benefit attributable to net realized and unrealized investment gains (losses)	(9.9		)	4.5			(18.4		)	(2.6		)
Net realized and unrealized investment gains (losses), after tax	$	18.2		$	(10.5	)	$	39.2		$	7.4

Realized Gain (Loss) on Investments

Net realized investment gains (losses) for the three and six months ended June 30, 2016 and 2015 consisted of the following:



	Three Months Ended								Three Months Ended
	June 30, 2016								June 30, 2015
Millions	Net realized gains (losses)			Net foreign currency gains		Total net realized gains (losses) reflected in earnings			Net realized gains			Net foreign currency losses			Total net realized gains reflected in earnings
Fixed maturity investments	$	1.8		$	—	$	1.8		$	1.6		$	—		$	1.6
Short-term investments	.1			—		.1			—			—			—
Common equity securities	3.8			—		3.8			25.5			(.1		)	25.4
Other long-term investments	(3.0		)	—		(3.0		)	15.3			—			15.3
Net realized investment gains (losses), pre-tax	2.7			—		2.7			42.4			(.1		)	42.3
Income tax expense attributable to net realized investment gains (losses)	(.4		)	—		(.4		)	(12.7		)	—			(12.7		)
Net realized investment gains (losses), after tax	$	2.3		$	—	$	2.3		$	29.7		$	(.1	)	$	29.6



	Six Months Ended								Six Months Ended
	June 30, 2016								June 30, 2015
Millions	Net realized gains (losses)			Net foreign currency gains		Total net realized (losses) gains reflected in earnings			Net realized gains			Net foreign currency gains		Total net realized gains reflected in earnings
Fixed maturity investments	$	.7		$	—	$	.7		$	2.1		$	—	$	2.1
Short-term investments	.2			—		.2			—			—		—
Common equity securities	261.4			—		261.4			47.5			.4		47.9
Other long-term investments	(2.8		)	—		(2.8		)	7.1			—		7.1
Net realized investment gains, pre-tax	259.5			—		259.5			56.7			.4		57.1
Income tax expense attributable to net realized investment gains	(43.3		)	—		(43.3		)	(17.2		)	—		(17.2		)
Net realized investment gains, after tax	$	216.2		$	—	$	216.2		$	39.5		$	.4	$	39.9

Schedule of unrealized gain (loss) on investments

The following table summarizes net unrealized investment gains (losses) and changes in the carrying value of investments measured at fair value:



	Three Months Ended									Three Months Ended
	June 30, 2016									June 30, 2015
Millions	Net unrealized gains (losses)			Net foreign currency losses			Total net unrealized gains (losses) reflected in earnings			Net unrealized losses			Net foreign currency gains			Total net unrealized losses reflected in earnings
Fixed maturity investments	$	20.7		$	—		$	20.7		$	(13.4	)	$	—		$	(13.4	)
Short-term investments	—			—			—			—			—			—
Common equity securities	(10.6		)	—			(10.6		)	(22.6		)	1.6			(21.0		)
Other long-term investments	15.5			(.2		)	15.3			(23.1		)	.2			(22.9		)
Net unrealized investment gains (losses), pre-tax	25.6			(.2		)	25.4			(59.1		)	1.8			(57.3		)
Income tax (expense) benefit attributable to net unrealized investment gains (losses)	(9.5		)	—			(9.5		)	17.3			(.1		)	17.2
Net unrealized investment gains (losses), after tax	$	16.1		$	(.2	)	$	15.9		$	(41.8	)	$	1.7		$	(40.1	)



	Six Months Ended								Six Months Ended
	June 30, 2016								June 30, 2015
Millions	Net unrealized gains (losses)			Net foreign currency gains		Total net unrealized gains (losses) reflected in earnings			Net unrealized losses			Net foreign currency losses			Total net unrealized losses reflected in earnings
Fixed maturity investments	$	42.4		$	—	$	42.4		$	(2.0	)	$	—		$	(2.0	)
Short-term investments	—			—		—			—			—			—
Common equity securities	(260.4		)	2.4		(258.0		)	(25.3		)	(2.4		)	(27.7		)
Other long-term investments	13.5			.2		13.7			(16.6		)	(.8		)	(17.4		)
Net unrealized investment (losses) gains, pre-tax	(204.5		)	2.6		(201.9		)	(43.9		)	(3.2		)	(47.1		)
Income tax benefit (expense) attributable to net unrealized investment (losses) gains	24.9			—		24.9			14.7			(.1		)	14.6
Net unrealized investment (losses) gains, after tax	$	(179.6	)	$	2.6	$	(177.0	)	$	(29.2	)	$	(3.3	)	$	(32.5	)

Net unrealized investment gains (losses) for Level 3 investments

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 three and six months ended June 30, 2016 and 2015:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
Millions	2016		2015			2016		2015
Fixed maturity investments	$	.8	$	(.2	)	$	1.3	$	—
Common equity securities	—		4.7			—		2.9
Other long-term investments	11.8		(5.5		)	12.9		.2
Total unrealized investment gains (losses), pre-tax - Level 3 investments	$	12.6	$	(1.0	)	$	14.2	$	3.1

Investment holdings, equity securities, convertible fixed maturities and other long-term investments

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s fixed maturity investments as of June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)		Carrying value
U.S. Government and agency obligations	$	261.2	$	.7	$	—		$	—	$	261.9
Debt securities issued by corporations	1,046.9		19.3		(.1		)	—		1,066.1
Municipal obligations	294.8		8.2		(.1		)	—		302.9
Mortgage and asset-backed securities	2,646.8		10.4		(2.0		)	—		2,655.2
Foreign government, agency and provincial obligations	1.0		.2		—			—		1.2
Preferred stocks	78.3		6.4		—			—		84.7
Total fixed maturity investments	$	4,329.0	$	45.2	$	(2.2	)	$	—	$	4,372.0
Less: fixed maturity investments reclassified to assets held for sale related to SSIE										9.2
Total fixed maturity investments										$	4,362.8



	December 31, 2015
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency gains (losses)		Carrying value
U.S. Government and agency obligations	$	160.4	$	—	$	(.4	)	$	—	$	160.0
Debt securities issued by corporations	1,001.0		4.3		(5.3		)	—		1,000.0
Municipal obligations	227.8		2.2		(1.2		)	—		228.8
Mortgage and asset-backed securities	1,170.6		2.0		(5.6		)	—		1,167.0
Foreign government, agency and provincial obligations	1.0		.2		—			—		1.2
Preferred stocks	78.3		4.4		—			—		82.7
Total fixed maturity investments	$	2,639.1	$	13.1	$	(12.5	)	$	—	$	2,639.7
Less: fixed maturity investments reclassified to assets held for sale related to SSIE										9.5
Total fixed maturity investments										$	2,630.2

The cost or amortized cost, gross unrealized investment gains and losses, net foreign currency gains and losses, and carrying values of White Mountains’s common equity securities and other long-term investments as of June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency (losses)			Carrying value
Common equity securities	$	374.1	$	43.5	$	(10.1	)	$	—		$	407.5
Other long-term investments	$	305.0	$	36.7	$	(10.3	)	$	(2.2	)	$	329.2



	December 31, 2015
Millions	Cost or amortized cost		Gross unrealized gains		Gross unrealized losses			Net foreign currency (losses)			Carrying value
Common equity securities	$	822.5	$	302.8	$	(11.4	)	$	—		$	1,113.9
Other long-term investments	$	304.5	$	32.0	$	(18.4	)	$	(2.3	)	$	315.8

Other Long-term Investments

Other long-term investments consist of the following as of June 30, 2016 and December 31, 2015:



	Carrying Value at
Millions	June 30, 2016		December 31, 2015
Hedge funds and private equity funds, at fair value⁽¹⁾	$	127.8	$	127.8
Private equity securities and limited liability companies, at fair value⁽¹⁾	84.3		82.1
Surplus notes investments, at fair value⁽¹⁾	62.8		51.5
Private convertible preferred securities⁽¹⁾	34.1		32.7
Tax advantaged federal affordable housing development fund⁽²⁾	13.4		14.7
Partnership investments accounted for under the equity method	3.5		3.8
Other	3.3		3.2
Total other-long term investments	$	329.2	$	315.8

⁽¹⁾See Fair Value Measurements by Level table.

⁽²⁾Fund accounted for using the proportional amortization method.

Other long-term investments

The following table summarizes investments in hedge funds and private equity funds by investment objective and sector as of June 30, 2016 and December 31, 2015:



	June 30, 2016				December 31, 2015
Millions	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Hedge funds
Long/short equity REIT	$	20.5	$	—	$	20.6	$	—
Long/short banks and financial	13.6		—		12.8		—
Other	3.5		—		3.6		—
Total hedge funds	37.6		—		37.0		—

Private equity funds
Aerospace/Defense/Government	25.9		23.5		19.8		30.3
Manufacturing/Industrial	24.8		20.2		24.9		2.5
Energy infrastructure & services	19.1		3.2		20.7		3.4
Multi-sector	11.1		2.1		14.8		2.1
Private equity secondaries	3.8		2.1		4.4		2.1
Healthcare	3.5		.4		3.8		.4
Insurance	1.7		41.3		2.0		41.3
Real estate	.3		.1		.4		.1
Direct lending/Mezzanine debt	—		37.5		—		—
Total private equity funds	90.2		130.4		90.8		82.2

Total hedge funds and private equity funds included in other long-term investments	$	127.8	$	130.4	$	127.8	$	82.2

Fair value of hedge funds subject to restrictions on redemption frequency and advance notice period requirements for investments in active hedge funds

The following summarizes the June 30, 2016 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		Total
Monthly	$	—	$	—	$	—	$	—
Quarterly	14.6		—		—		14.6
Semi-annual	—		20.5		—		20.5
Annual	—		—		2.5		2.5
Total	$	14.6	$	20.5	$	2.5	$	37.6

Fair Value of private equity funds subject to lock-up periods

As of June 30, 2016, 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	$27.1	$3.5	$59.6	$—	$90.2

Fair value measurements by level, investment securities

The following tables summarize White Mountains’s fair value measurements for investments as of June 30, 2016 and December 31, 2015 by level. The major security types were based on the legal form of the securities. White Mountains has disaggregated its fixed maturity investments based on the issuing entity type, which impacts credit quality, with debt securities issued by U.S. government entities carrying minimal credit risk, while the credit and other risks associated with other issuers, such as corporations, foreign governments, municipalities or entities issuing mortgage-backed or asset-backed securities vary depending on the nature of the issuing entity type. White Mountains further disaggregates debt securities issued by corporations and common equity securities by industry sector because investors often reference commonly used benchmarks and their subsectors to monitor risk and performance. Accordingly, White Mountains has further disaggregated these asset classes into subclasses based on the similar sectors and industry classifications it uses to evaluate investment risk and performance against commonly used benchmarks, such as the Barclays U.S. Intermediate Aggregate and S&P 500 indices.



	June 30, 2016
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	261.9	$	252.3	$	9.6	$	—

Debt securities issued by corporations:
Consumer	333.5		—		333.5		—
Health Care	157.3		—		157.3		—
Financials	154.8		—		154.8		—
Industrial	139.0		—		139.0		—
Utilities	94.3		—		94.3		—
Energy	60.6		—		60.6		—
Technology	57.3		—		57.3		—
Communications	43.3		—		43.3		—
Materials	26.0		—		26.0		—
Total debt securities issued by corporations	1,066.1		—		1,066.1		—

Mortgage and asset-backed securities	2,655.2				2,573.2		82.0
Municipal obligations	302.9		—		302.9		—
Foreign government, agency and provincial obligations	1.2		.6		.6		—
Preferred stocks	84.7		—		13.5		71.2
Total fixed maturity investments⁽⁴⁾	4,372.0		252.9		3,965.9		153.2

Short-term investments⁽⁴⁾	422.1		422.1		—		—

Common equity securities:
Consumer	152.8		152.8		—		—
Exchange traded funds ⁽¹⁾	87.5		65.6		21.9		—
Health Care	36.4		36.4		—		—
Communications	32.7		32.7		—		—
Technology	24.8		24.8		—		—
Other	73.3		—		73.3		—
Total common equity securities	407.5		312.3		95.2		—

Other long-term investments ⁽²⁾⁽³⁾	184.5		—		—		184.5
Total investments⁽⁴⁾	$	5,386.1	$	987.3	$	4,061.1	$	337.7

⁽¹⁾ETFs traded on foreign exchanges are priced using the fund's published NAV to account for the difference in market close times and are therefore designated a level 2 measurement.

⁽²⁾Excludes carrying value of $3.5 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $13.4 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.

⁽³⁾Excludes carrying value of $127.8 associated with hedge funds and private equity funds for which fair value is measured at net asset value using the practical expedient.

⁽⁴⁾Includes carrying value of $9.2 in fixed maturity investments and $0.3 in short-term investments that are classified as assets held for sale related to SSIE.



	December 31, 2015
Millions	Fair Value		Level 1		Level 2		Level 3
Fixed maturity investments:
U.S. Government and agency obligations	$	160.0	$	133.4	$	26.6	$	—

Debt securities issued by corporations:
Consumer	253.3		—		253.3		—
Financials	175.9		—		175.9		—
Health Care	151.3		—		151.3		—
Industrial	135.6		—		135.6		—
Energy	82.0		—		82.0		—
Utilities	61.5		—		61.5		—
Technology	60.0		—		60.0		—
Communications	49.2		—		49.2		—
Materials	31.2		—		31.2		—
Total debt securities issued by corporations	1,000.0		—		1,000.0		—

Mortgage and asset-backed securities	1,167.0		—		1,167.0		—
Municipal obligations	228.8		—		228.8		—
Foreign government, agency and provincial obligations	1.2		.6		.6		—
Preferred stocks	82.7		—		12.7		70.0
Total fixed maturity investments⁽⁴⁾	2,639.7		134.0		2,435.7		70.0

Short-term investments⁽⁴⁾	211.3		211.3		—		—

Common equity securities:
Financials	694.7		694.7		—		—
Exchange traded funds⁽¹⁾	141.8		120.5		21.3		—
Consumer	70.0		70.0		—		—
Communications	43.7		43.7		—		—
Health Care	35.7		35.7		—		—
Technology	27.0		27.0		—		—
Industrial	26.6		26.6		—		—
Other	74.4		—		74.4		—
Total common equity securities	1,113.9		1,018.2		95.7		—

Other long-term investments⁽²⁾⁽³⁾	169.5		—		—		169.5
Total investments⁽⁴⁾	$	4,134.4	$	1,363.5	$	2,531.4	$	239.5

⁽¹⁾ETFs traded on foreign exchanges are priced using the fund's published NAV to account for the difference in market close times and are therefore designated a level 2 measurement.

⁽²⁾Excludes carrying value of $3.8 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $14.7 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.

⁽³⁾Excludes carrying value of $127.8 associated with hedge funds and private equity funds for which fair value is measured at net asset value using the practical expedient.

⁽⁴⁾Includes carrying value of $9.5 in fixed maturity investments and $0.1 in short-term investments that are classified as assets held for sale related to SSIE.

Debt securities issued by corporations, credit ratings

The following table summarizes the ratings of debt securities issued by corporations held in White Mountains’s investment portfolio as of June 30, 2016 and December 31, 2015:



	Fair Value at
Millions	June 30, 2016		December 31, 2015
AAA	$	—	$	—
AA	125.7		95.2
A	376.6		397.7
BBB	563.8		507.1
Other	—		—
Debt securities issued by corporations⁽¹⁾	$	1,066.1	$	1,000.0

⁽¹⁾Credit ratings are assigned based on the following hierarchy: 1) Standard & Poor’s and 2) Moody’s.

Mortgage-backed, asset-backed securities



	June 30, 2016						December 31, 2015
Millions	Fair Value		Level 2		Level 3		Fair Value		Level 2		Level 3
Mortgage-backed securities:
Agency:
GNMA	$	284.7	$	284.7	$	—	$	265.5	$	265.5	$	—
FNMA	203.5		152.5		51.0		42.2		42.2		—
FHLMC	37.5		37.5		—		22.8		22.8		—
Total Agency⁽¹⁾	525.7		474.7		51.0		330.5		330.5		—
Non-agency:
Residential	194.3		194.3		—		133.2		133.2		—
Commercial	104.5		104.5		—		140.4		140.4		—
Total Non-agency	298.8		298.8		—		273.6		273.6		—

Total mortgage-backed securities	824.5		773.5		51.0		604.1		604.1		—
Other asset-backed securities:
Credit card receivables	689.1		658.1		31.0		217.7		217.7		—
Vehicle receivables	977.4		977.4		—		269.7		269.7		—
Other	164.2		164.2		—		75.5		75.5		—
Total other asset-backed securities	1,830.7		1,799.7		31.0		562.9		562.9		—
Total mortgage and asset-backed securities	$	2,655.2	$	2,573.2	$	82.0	$	1,167.0	$	1,167.0	$	—

⁽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).

Schedule of security issuance years of investments in non-agency RMBS and non-agency CMBS securities

The security issuance years of White Mountains’s investments in non-agency RMBS and non-agency CMBS securities as of June 30, 2016 are as follows:



							Security Issuance Year
Millions	Fair Value		2004		2005		2006		2007		2008		2009		2010		2011		2012		2013		2014		2015
Non-agency RMBS	$	194.3	$	21.9	$	6.4	$	3.4	$	—	$	3.2	$	—	$	10.8	$	11.8	$	6.9	$	12.3	$	65.3	$	52.3
Non-agency CMBS	104.5		—		—		—		—		—		—		5.0		—		18.4		11.6		23.4		46.1
Total	$	298.8	$	21.9	$	6.4	$	3.4	$	—	$	3.2	$	—	$	15.8	$	11.8	$	25.3	$	23.9	$	88.7	$	98.4

Non-agency residential mortgage securities, collateral quality and tranche levels

The classification of the underlying collateral quality and the tranche levels of White Mountains’s non-agency RMBS securities are as follows as of June 30, 2016:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Prime	$	187.4	$	133.6	$	53.8	$	—
Non-prime	6.9		—		6.9		—
Sub-prime	—		—		—		—
Total	$	194.3	$	133.6	$	60.7	$	—

⁽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.

Non-agency commercial mortgage securities, type of interest rate and tranche levels

The amount of fixed and floating rate securities and their tranche levels of White Mountains’s non-agency CMBS securities are as follows as of June 30, 2016:



Millions	Fair Value		Super Senior ⁽¹⁾		Senior ⁽²⁾		Subordinate ⁽³⁾
Fixed rate CMBS	$	93.2	$	8.9	$	46.1	$	38.2
Floating rate CMBS	11.3		—		—		11.3
Total	$	104.5	$	8.9	$	46.1	$	49.5

⁽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.

⁽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.

Rollforward of fair value investments by level

The following tables summarize the changes in White Mountains’s fair value measurements by level for the six months ended June 30, 2016 and 2015:



							Level 3 Investments
Millions	Level 1 investments			Level 2 investments			Fixed maturity investments			Common equity securities		Other long-term investments		Hedge Funds and Private Equity Funds measured at NAV⁽³⁾			Total
Balance at January 1, 2016	$	1,152.2		$	2,531.4		$	70.0		$	—	$	169.5	$	127.8		$	4,050.9		^(1)(2)(4)
Total realized and unrealized gains (losses)	7.1			38.3			1.3			—		12.9		(2.0		)	57.6
Amortization/Accretion	.1			(8.1		)	—			—		—		—			(8.0		)
Purchases	1,449.7			2,076.9			84.7			—		2.1		9.1			3,622.5
Sales	(2,043.9		)	(577.4		)	(2.8		)	—		—		(7.1		)	(2,631.2		)
Transfers in	—			—			—			—		—		—			—
Transfers out	—			—			—			—		—		—			—
Balance at June 30, 2016	$	565.2		$	4,061.1		$	153.2		$	—	$	184.5	$	127.8		$	5,091.8		^(1)(2)(4)

⁽¹⁾Excludes carrying value of $3.8 and $3.5 at January 1, 2016 and June 30, 2016 associated with other long-term investments accounted for using the equity method. Excludes carrying value of $14.7 and $13.4 at January 1, 2016 and June 30, 2016 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.

⁽²⁾Excludes carrying value of $211.3 and $422.1 at January 1, 2016 and June 30, 2016 associated with short-term investments, of which $0.1 and $0.3 is classified as held for sale at January 1, 2016 and June 30, 2016.

⁽³⁾Investments for which fair value is measured at net asset value using the practical expedient are no longer classified within the fair value hierarchy. (See Note 1 - “Summary of Significant Accounting Policies”).

⁽⁴⁾Includes carrying value of $9.5 and $9.2 of fixed maturity investments at January 1, 2016 and June 30, 2016 that is classified as assets held for sale related to SSIE.



							Level 3 Investments
Millions	Level 1 investments			Level 2 investments			Fixed maturity investments			Common equity securities			Other long-term investments			Hedge Funds and Private Equity Funds measured at NAV⁽⁴⁾			Total
Balance at January 1, 2015	$	550.6		$	2,372.9		$	76.4		$	39.5		$	126.9		$	177.3		$	3,343.6		^(1)(2)(5)
Total realized and unrealized gains (losses)	9.0			5.9			—			6.6			(6.8		)	(3.6		)	11.1			⁽³⁾
Amortization/Accretion	—			(9.9		)	—			—			—			—			(9.9		)
Purchases	495.4			734.3			35.3			—			22.5			6.2			1,293.7
Sales	(604.2		)	(616.0		)	—			(13.1		)	(2.3		)	(23.3		)	(1,258.9		)
Transfers in	—			34.9			—			—			—			—			34.9
Transfers out	—			—			(34.9		)	—			—			—			(34.9		)
Balance at June 30, 2015	$	450.8		$	2,522.1		$	76.8		$	33.0		$	140.3		$	156.6		$	3,379.6		^(1)(2)(5)

⁽¹⁾Excludes carrying value of $5.2 and $3.9 at January 1, 2015 and June 30, 2015 associated with other long-term investment limited partnerships accounted for using the equity method. Excludes carrying value of $16.8 and $15.8 at January 1, 2015 and June 30, 2015 associated with a tax advantaged federal affordable housing development fund accounted for using the proportional amortization method.

⁽²⁾Excludes carrying value of $376.8 and $401.3 at January 1, 2015 and June 30, 2015 associated with short-term investments of which $1.9 and $1.1 is classified as held for sale at January 1, 2015 and June 30, 2015.

⁽³⁾Excludes $0.9 realized and unrealized losses associated with the Prospector Offshore Fund consolidation of investment-related liabilities.

⁽⁴⁾ Investments for which fair value is measured at net asset value using the practical expedient are no longer classified within the fair value hierarchy. (See Note 1 - “Summary of Significant Accounting Policies”).

⁽⁵⁾Includes carrying value of $10.1 and $9.1 of fixed maturity investments at January 1, 2015 and June 30, 2015 that is classified as assets held for sale related to SSIE.

Schedule of significant unobservable inputs used in estimating the fair value of investment securities

The following summarizes significant unobservable inputs used in estimating the fair value of investment securities classified within Level 3 as of June 30, 2016 and December 31, 2015. The fair value of investments in hedge funds and private equity funds are estimated using the net asset value of the funds.



Description	June 30, 2016
$ in millions, except share price	Rating⁽²⁾	Valuation Technique(s)	Fair Value⁽³⁾	Unobservable Input
Preferred Stock⁽¹⁾	NR	Discounted cash flow	$71.2	Discount yield	-	7.04%
Asset-backed securities ⁽¹⁾	AAA	Broker pricing	$31.0	Broker quote
Agency residential mortgage-backed securities ^{(1) (7)}	AA+	Discounted cash flow	$51.0	Prepayment	-	15 CPR
				Discount spread/Treasury	-	95 bps
Private equity security⁽¹⁾	NR	Share price of most recent transaction	$21.0	Share price	-	$1.00
Private equity security⁽¹⁾	NR	Share price of most recent transaction	$33.8	Share price	-	$1.03
Private equity security⁽¹⁾	NR	Share price of most recent transaction	$3.2	Share price	-	$2.52
Convertible preferred security⁽¹⁾	NR	Multiple of EBITDA	$7.1	EBITDA multiple	-	6.00
Convertible preferred security⁽¹⁾	NR	Share price of most recent transaction	$27.0	Share price	-	$3.83
Private equity security⁽¹⁾	NR	Option pricing method	$9.7
				Time until expiration	-	4 years
			Volatility/Standard deviation		-	60.0%
			Risk free rate		-	1.15%
Surplus notes:	NR
- Seller priority		Discounted cash flow	$44.2	Discount rate⁽⁴⁾	-	10.6%
			Timing of interest payments⁽⁶⁾		-	5 years
			Timing of principal payments⁽⁶⁾		-	10 years
- Pari passu		Discounted cash flow	$18.6	Discount rate⁽⁵⁾	-	18.0%
			Timing of interest payments⁽⁶⁾		-	5 years
			Timing of principal payments⁽⁶⁾		-	15 years

⁽¹⁾As of June 30, 2016, each asset type consists of one security.

⁽²⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.

⁽³⁾Includes the unrealized gains and losses associated with foreign currency; foreign currency effects based on observable inputs.

⁽⁴⁾ Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the seller priority note is roughly equivalent to that of a conventional debt security with a credit rating of ‘B’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, was added to the treasury rate to determine the discount rate for the seller priority note.

⁽⁵⁾ Stochastic modeling supporting the fair value estimation indicates that the average percentage of discounted payments missed on the pari passu note is roughly equivalent to that of a conventional debt security with a credit rating of ‘CCC’. The corresponding credit spread increased by an additional 250 bps to reflect both a liquidity discount for a private debt instrument and regulatory payment approval uncertainty, was added to the treasury rate to determine the discount rate for the seller priority note.

⁽⁶⁾ OneBeacon has assumed for valuation purposes that subsequent interest payments will begin in year five (2020) and principal repayments begin on a graduated basis in year ten (2025) for the seller priority note and year fifteen (2030) for the pari passu note.

⁽⁷⁾ Conditional prepayment rate (“CPR”) is an annualized percentage of the existing mortgage pool that is expected to be prepaid in a year.

The assumed prepayment rate is a significant unobservable input used to estimate the fair value of investments in mortgage-backed securities. Generally for bonds priced at a premium, increases in prepayment speeds will result in a lower fair value, while decreases in prepayment speed may result in a higher fair value, with the inverse for bonds priced at a discount.



Description	December 31, 2015
$ in millions, except share price	Rating⁽²⁾	Valuation Technique(s)	Fair Value⁽³⁾	Unobservable Input
Preferred Stock⁽¹⁾⁽⁷⁾	NR	Par value⁽⁷⁾	$70.0	Issuer’s intent to call	-	$70.0
Private equity security⁽¹⁾	NR	Share price of most recent transaction	$21.0	Share price	-	$1.00
Private equity security⁽¹⁾	NR	Share price of most recent transaction	$33.8	Share price	-	$1.03
Convertible preferred security⁽¹⁾	NR	Multiple of EBITDA	$5.7	EBITDA multiple	-	6.00
Convertible preferred security⁽¹⁾	NR	Share price of most recent transaction	$27.0	Share price	-	$3.83
Private equity security⁽¹⁾	NR	Option pricing method	$9.6
				Time until expiration	-	4 years
			Volatility/Standard deviation		-	60.0%
			Risk free rate		-	1.15%
Surplus notes:	NR
- Seller priority		Discounted cash flow	$38.0	Discount rate⁽⁴⁾	-	13.0%
			Timing of interest payments⁽⁶⁾		-	5 years
			Timing of principal payments⁽⁶⁾		-	10 years
- Pari passu		Discounted cash flow	$13.5	Discount rate⁽⁵⁾	-	22.4%
			Timing of interest payments⁽⁶⁾		-	5 years
			Timing of principal payments⁽⁶⁾		-	15 years

⁽¹⁾As of December 31, 2015 each asset type consists of one security.

⁽²⁾Credit ratings are assigned based on the following hierarchy: 1) Standard and Poor's and 2) Moody’s.

⁽³⁾Includes the unrealized gains and losses associated with foreign currency; foreign currency effects based on observable inputs.

⁽⁶⁾For estimated value purposes, the assumption has been made that interest payouts begin in year five and that principal repayments being on a graduated basis in year ten for the seller priority notes and year fifteen for the pari passu note.

⁽⁷⁾Valuation based on the issuer’s intent as of December 31, 2015 to call the security in the near term.