Investments in Unconsolidated Affiliates

White Mountains’s investments in unconsolidated affiliates represent investments in other companies in which White Mountains has a significant voting and economic interest but does not control the entity.

Symetra

In 2004, White Mountains, Berkshire Hathaway, Inc. and several other private investors capitalized Symetra in order to purchase the life and investment operations of Safeco Corporation for $1.35 billion, during which White Mountains invested $195 million in Symetra. As of February 1, 2016 and December 31, 2015, White Mountains owned 20,562,379 common shares of Symetra, a 17.7% common share ownership. On February 1, 2016, Symetra closed its merger agreement with Sumitomo Life Insurance Company (“Sumitomo Life”) and White Mountains received proceeds of $658 million, or $32 per common share.

In August 2015, Symetra announced it had entered into a merger agreement with Sumitomo Life pursuant to which Sumitomo Life would acquire all of the outstanding shares of Symetra. Following the announcement and Symetra shareholders’ November 5, 2015 meeting to approve the transaction, White Mountains relinquished its representation on Symetra’s board of directors. As a result, White Mountains changed its accounting for Symetra common shares from the equity method to fair value. During the fourth quarter of 2015, White Mountains recognized $258.8 million ($241.1 million after tax) of unrealized investment gains through net income, representing the difference between the carrying value of Symetra common shares under the equity method at the date of change and fair value at December 31, 2015. During the first quarter of 2016, White Mountains recognized an additional $4.7 million of unrealized investment gains through net income.

As of December 31, 2011, White Mountains concluded that its investment in Symetra common shares was other-than-temporarily impaired and wrote down the GAAP book value of the investment to its estimated fair value of $261.0 million or $15 per share. This impairment, as well as the effect of Symetra capital transactions, resulted in a basis difference between the GAAP carrying value of White Mountains’s investment in Symetra common shares under the equity method and the amount derived by multiplying the percentage of White Mountains common share ownership by Symetra’s total GAAP equity. As of November 5, 2015, the pre-tax unamortized basis difference was $159.9 million, of which $32.6 million is attributable to equity in earnings of unconsolidated affiliates and $127.3 million is attributable to equity in net unrealized investment gains from investments in unconsolidated affiliates. The pre-tax basis differences were to be amortized over a 30-year period, based on estimated future cash flows associated with Symetra’s underlying assets and liabilities to which the basis differences were attributed. White Mountains recognized the amortization of the basis differences through equity in earnings of unconsolidated affiliates and equity in net unrealized investment gains (losses) from investments in unconsolidated affiliates consistent with the original attribution of the basis differences between equity in earnings and equity in net unrealized investment gains (losses). For the period ended November 5, 2015, White Mountains recognized after-tax amortization of $2.2 million through equity in earnings of unconsolidated affiliates and $8.9 million through equity in net unrealized investment gains from investments in unconsolidated affiliates. For 2014, White Mountains recognized after-tax amortization of $2.8 million through equity in earnings of unconsolidated affiliates and $11.7 million through equity in net unrealized investment gains from investments in unconsolidated affiliates.

The following table summarizes amounts recorded by White Mountains under the equity method relating to its investment in Symetra through November 5, 2015:



Millions
Equity method carrying value of investment in Symetra as of December 31, 2014 ⁽¹⁾	$	411.4
Equity in earnings ^(2)(3)(4)	25.1
Equity in net unrealized investment losses from Symetra’s fixed maturity portfolio ⁽⁵⁾⁽⁶⁾	(39.2		)
Distribution from Prospector Offshore Fund ⁽⁷⁾	12.4
Dividends received	(16.9		)
Equity method carrying value of investment in Symetra as of November 5, 2015⁽¹⁾⁽⁸⁾	$	392.8


⁽¹⁾	Includes White Mountains’s equity in net unrealized investment (losses) gains from Symetra’s fixed maturity portfolio of $(1.6) and $37.6, as of November 5, 2015 and December 31, 2014, which excludes tax benefit (expense) of $0.2 and $(2.7).


⁽²⁾	Equity in earnings for the period ended November 5, 2015 excludes tax expense of $1.6.


⁽³⁾	Equity in earnings for the period ended November 5, 2015 includes an increase of $2.3 relating to the pre-tax amortization of the Symetra common share basis difference.


⁽⁴⁾	Equity in earnings for the period ended November 5, 2015 includes losses of $(0.1) from the dilutive effect of Symetra’s yearly dividend and the issuance of restricted shares by Symetra


⁽⁵⁾	Net unrealized investment losses for the period ended November 5, 2015 includes an increase of $9.4 relating to the pre-tax amortization of the Symetra common share basis difference.


⁽⁶⁾	Net unrealized investment losses from Symetra’s fixed maturity portfolio excludes a tax benefit of $2.9 for the period ended November 5, 2015.


⁽⁷⁾	During 2015, pursuant to the redemption of White Mountains's investments in the Prospector Funds, 513,500 common shares of Symetra were distributed to White Mountains.


⁽⁸⁾	The aggregate value of White Mountains’s investment in common shares of Symetra was $651.2 based upon the quoted market price of $31.67 per share as of November 5, 2015.

The following table summarizes financial information for Symetra as of September 30, 2015:



	September 30,
Millions	2015
Symetra balance sheet data:
Total investments	$	32,409.2
Separate account assets	885.9
Total assets	34,962.8
Policyholder liabilities	29,492.0
Long-term debt	697.5
Separate account liabilities	885.9
Total liabilities	31,836.7
Common shareholders’ equity	3,126.1

The following table summarizes financial information for Symetra for the nine months ended September 30, 2015 and year ended December 31, 2014:



	Nine months ended September 30,			Year ended December 31,
Millions	2015			2014
Symetra income statement data:
Net premiums earned	$	539.3		$	629.1
Net investment income	994.3			1,320.5
Total revenues	1,605.9			2,182.4
Policy benefits	1,143.7			1,399.7
Total expenses	1,543.6			1,882.5
Net income	89.6			254.4
Comprehensive net (loss) income	(234.1		)	397.0

Hamer

On May 27, 2015, White Mountains sold its interest in Hamer LLC, a small manufacturing company that White Mountains received in 2012 in connection with the liquidation of a limited partnership fund, which resulted in a gain of $20.0 million recorded in other revenue. Prior to the sale, White Mountains recorded equity in earnings of $1.6 million for the six months ended June 30, 2015 and $1.9 million for the year ended December 31, 2014.