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Statutory Capital and Surplus | 12 Months Ended
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Dec. 31, 2016
Insurance [Abstract] |
Statutory Capital and Surplus | Statutory Capital and Surplus White Mountains’s insurance operations are subject to regulation and supervision in each of the jurisdictions where they are domiciled and licensed to conduct business. Generally, regulatory authorities have broad supervisory and administrative powers over such matters as licenses, standards of solvency, premium rates, policy forms, investments, security deposits, methods of accounting, form and content of financial statements, reserves for unpaid loss and LAE, reinsurance, minimum capital and surplus requirements, dividends and other distributions to shareholders, periodic examinations and annual and other report filings. In general, such regulation is for the protection of policyholders rather than shareholders. The NAIC uses risk-based capital (“RBC”) standards for U.S. property and casualty insurers as a means of monitoring certain aspects affecting the overall financial condition of insurance companies. As of December 31, 2016, White Mountains’s active U.S. insurance operating subsidiaries exceeded their respective RBC requirements. The Insurance Act 1978 of Bermuda and related regulations, as amended (“Insurance Act”), regulates the insurance business of Bermuda-domiciled insurers. Under the Insurance Act, insurers are required to maintain available statutory capital and surplus at a level equal to or in excess of its enhanced capital requirement which is established by reference to either a Bermuda Solvency Capital Requirement (“BSCR”) model or an approved internal capital model. Generally, the Bermuda Monetary Authority (“BMA”) has broad supervisory and administrative powers over such matters as licenses, standards of solvency, investments, methods of accounting, form and content of financial statements, minimum capital and surplus requirements, and annual and other report filings. OneBeacon: OneBeacon’s U.S. combined statutory surplus was $624.8 million and $622.3 million as of December 31, 2016 and 2015. OneBeacon’s combined U.S. statutory net income (loss) for the years ended December 31, 2016, 2015 and 2014 was $36.7 million, $44.5 million and $(14.2) million. The minimum policyholders' surplus necessary to satisfy OneBeacon’s top tier regulated U.S. insurance subsidiary, ASIC, regulatory requirements was $107.5 million as of December 31, 2016, which equals the authorized control level of the NAIC risk-based capital of ASIC’s policyholders’ surplus. Split Rock’s statutory capital and surplus was $270.2 million and $249.5 million as of December 31, 2016 and 2015, which met Bermuda’s statutory capital and surplus requirements. Split Rock reported $42.4 million, $45.5 million and $46.2 million of statutory net income for the years ended December 31, 2016, 2015 and 2014. The principle differences between OneBeacon’s combined U.S. and Split Rock’s statutory reported amounts, and the amounts reported in accordance with GAAP include deferred acquisition costs, deferred taxes, and market value adjustments for debt securities. OneBeacon’s insurance subsidiaries' statutory policyholders’ surplus as of December 31, 2016 was in excess of the minimum requirements of relevant state and Bermuda insurance regulations. HG Global/BAM: HG Re is a Special Purpose Insurer under Bermuda insurance regulations and is subject to regulation and supervision by the BMA. As of December 31, 2016, HG Re had statutory capital and surplus of $467.2 million. As a Special Purpose Insurer, HG Re does not have minimum regulatory capital requirements. BAM is domiciled in New York and is subject to regulation by the New York State Department of Financial Services (“NYDFS”). New York financial guarantee insurance law establishes single risk and aggregate limits with respect to insured obligations insured by financial guarantee insurers. BAM’s statutory net loss for the years ended December 31, 2016, 2015 and 2014 was $32.7 million, $32.0 million and $31.8 million. BAM’s members’ surplus, as reported to regulatory authorities as of December 31, 2016 was $431.5 million, which exceeds the minimum members’ surplus necessary for BAM to maintain its New York State financial guarantee insurance license of $66.0 million. Other Operations: SSIE’s policyholders’ surplus, as reported to regulatory authorities as of December 31, 2016 and 2015, was $4.4 million and $5.0 million. SSIE’s statutory net income (loss) for the year ended December 31, 2016 and 2015 was $20.4 million and $(3.5) million. The minimum policyholders’ surplus necessary to satisfy SSIE’s regulatory requirements was $0.4 million as of December 31, 2016, which equals the authorized control level of the NAIC risk-based capital based on SSIE’s policyholders’ surplus. On December 30, 2016, SSIE entered into a Consent Order with the Florida Office of Insurance Regulation governing its wind down and the surrender and termination of SSIE’s Certificate of Authority as a domestic reciprocal in the State of Florida. Pursuant to the Consent Order, it is anticipated that SSIE will non-renew its last policy in August 2017. Dividend Capacity There are no restrictions under Bermuda law or the law of any other jurisdiction on the payment of dividends from retained earnings by White Mountains, provided that after the payment of any dividend, the Company would continue to be able to pay its liabilities as they become due and the realizable value of the Company’s assets would remain greater that its liabilities. However, under the insurance laws of the states and jurisdictions under which White Mountains’s insurance operating subsidiaries are domiciled, an insurer is restricted with respect to the timing and the amount of dividends it may pay without prior approval by regulatory authorities. As of December 31, 2016, White Mountains’s top tier insurance subsidiaries have approximately $562.5 million of GAAP shareholders’ equity (net of $177.1 million of non-controlling interest at OneBeacon), $60.0 million of which can be distributed to White Mountains without prior regulatory approval. As a result, as of December 31, 2016, $502.5 million of White Mountains’s GAAP shareholders’ equity held in its insurance subsidiaries was not available for the payment of dividends without prior regulatory approval, and approximately $2.3 billion of White Mountains’s retained earnings is unrestricted with respect to the payment of dividends to White Mountains’s common shareholders. When determining whether to make distributions from its insurance subsidiaries, White Mountains also considers factors such as internal capital targets and rating agency capital requirements. Accordingly, there can be no assurance regarding the amount of such dividends that may be paid by such subsidiaries in the future. Following is a description of the dividend capacity of White Mountains’s insurance operating subsidiaries: OneBeacon: On December 23, 2014, OneBeacon Insurance Company (subsequently renamed Bedivere) distributed ASIC to its immediate parent at a value of $700.5 million as part of the Runoff Transaction. OBIC also distributed $151.2 million of cash and other securities to its immediate parent in accordance with the prescribed minimum capital to be included in the company at the time of its sale to Armour, as approved by the PID. OneBeacon’s top-tier regulated U.S. insurance subsidiary, ASIC, has the ability to pay dividends to its immediate parent without the prior approval of regulatory authorities in an amount set by formula based on the lesser of (i) adjusted net investment income, as defined by statute, or (ii) 10% of statutory surplus, in both cases as most recently reported to regulatory authorities, subject to the availability of earned surplus. Based upon the formula above, ASIC currently has the ability to pay $11.4 million of dividends without prior approval of regulatory authorities. As of December 31, 2016, ASIC had $624.8 million of statutory surplus and $69.0 million of earned surplus. During 2016, ASIC paid $26.5 million of dividends to its immediate parent. In 2017, Split Rock has the ability to distribute statutory capital without the prior approval of the BMA, provided it does not reduce its total statutory capital, as shown in the previous year’s statutory financial statements, by 15% or more. In addition, Split Rock has the ability to pay dividends without the prior notification of regulatory authorities of up to 25% of its previous financial year’s total statutory capital and surplus, subject to meeting all appropriate liquidity and solvency requirements as specified in the Insurance Act of 1978 and the Companies Act of 1981. As of December 31, 2016, Split Rock had $210.1 million of statutory capital and $60.1 million of statutory surplus for total statutory capital and surplus of $270.2 million. Based upon the limitations described above, Split Rock currently has the ability to distribute up to $31.5 million of statutory capital and pay up to $60.1 million of dividends during 2017 without the prior approval of regulatory authorities. During 2016, Split Rock paid $25.0 million of dividends to its immediate parent and paid no such dividends during 2015. Also, during 2015, OneBeacon Ltd., through an intermediary holding company, contributed $85.0 million to Split Rock as statutory capital. During 2016 and 2015, OneBeacon’s unregulated insurance subsidiaries paid $5.7 million and $5.3 million of dividends to their immediate parent. As of December 31, 2016, OneBeacon’s unregulated insurance subsidiaries had $56.4 million of net unrestricted cash, short-term investments and fixed maturity investments and $71.9 million of other long-term investments, consisting of the OneBeacon Surplus Notes. During 2016 and 2015, OneBeacon Ltd. paid $79.2 million and $80.0 million of regular quarterly dividends to its common shareholders. For both 2016 and 2015, White Mountains received $60.3 million of these dividends. As of December 31, 2016, OneBeacon Ltd. and its intermediate holding companies subsidiaries had $64.5 million of net unrestricted cash, short-term investments and fixed maturity investments and $11.9 million of common equity securities outside of its regulated and unregulated insurance subsidiaries. HG Global/BAM: As of December 31, 2016, HG Global had $619.0 million face value of preferred shares outstanding, of which White Mountains owned 96.9%. Holders of the HG Global preferred shares receive cumulative dividends at a fixed annual rate of 6.0% on a quarterly basis, when and if declared by HG Global. HG Global did not declare or pay any preferred dividends in 2016. As of December 31, 2016, HG Global has accrued $186.2 million of dividends payable to holders of its preferred shares, $180.2 million of which is payable to White Mountains and eliminated in consolidation. HG Re is a Special Purpose Insurer subject to regulation and supervision by the BMA, but does not require regulatory approval to pay dividends. However, HG Re’s dividend capacity is limited to amounts held outside of the collateral trusts pursuant to the first loss reinsurance treaty (“FLRT”) with BAM. As of December 31, 2016, HG Re had statutory capital and surplus of $467.2 million, of which $465.4 million was held in the collateral trusts pursuant to the FLRT with BAM. Effective January 1, 2014, HG Global and BAM agreed to change the interest rate on the BAM Surplus Notes for the five years ending December 31, 2018 from a fixed rate of 8.0% to a variable rate equal to the one-year U.S. treasury rate plus 300 basis points, set annually, which was 3.54% for 2016 and is 3.78% for 2017. Prior to the end of 2018, BAM has the option to extend the variable rate period for an additional three years. At the end of the variable rate period, the interest rate will be fixed at the higher of the then current variable rate or 8.0%. BAM is required to seek regulatory approval to pay interest and principal on the BAM Surplus Notes only when adequate capital resources have accumulated beyond BAM’s initial capitalization and a level that continues to support its outstanding obligations, business plan and ratings. BAM did not pay any interest on the BAM Surplus Notes in 2016, 2015 or 2014. Other Operations: During 2016, WM Advisors did not pay any dividends to its immediate parent. As of December 31, 2016, WM Advisors held $17.8 million of net unrestricted cash and short-term investments. During 2016, White Mountains paid a $5.4 million common share dividend. As of December 31, 2016, the Company and its intermediate holding companies held $1,655.0 million of net unrestricted cash, short-term investments and fixed maturity investments, $285.6 million of common equity securities and $66.9 million of other long-term investments included in its Other Operations segment.

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