Held for Sale and Discontinued Operations

9 Months Ended

Sep. 30, 2018

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Held for Sale and Discontinued Operations

OneBeacon

On September 28, 2017, Intact Financial Corporation completed its acquisition of OneBeacon in an all-cash transaction for $18.10 per share. White Mountains received total proceeds of $1.3 billion and recorded a gain of $554.6 million, net of transaction costs. During the three months ended September 30, 2017, net loss from discontinued operations related to OneBeacon was $(15.2) million. For 2017 through the closing date of the transaction, net income from discontinued operations related to OneBeacon was $20.5 million.

Tranzact

On July 21, 2016, White Mountains completed its sale of Tranzact to Clayton, Dubilier & Rice, LLC. During the nine months ended September 30, 2017, White Mountains recorded a $1.0 million reduction to the gain from sale of Tranzact in discontinued operations as a result of 2016 state tax payments.

Sirius Group

On April 18, 2016, White Mountains completed the sale of Sirius Group to CMI. During the three and nine months ended September 30, 2018, White Mountains recorded a $17.3 million loss and $17.2 million loss from the sale of Sirius Group which includes the tax contingency loss of $17.3 million recorded during the third quarter of 2018. See Note 15 — “Contingencies”. During the nine months ended September 30, 2018, White Mountains recorded a $0.1 million gain from the sale of Sirius Group as a result of a change to the valuation of the accrued incentive compensation payable to Sirius Group employees.

During the three and nine months ended September 30, 2017, White Mountains recorded a $0.2 million and $0.8 million reduction to the gain from sale of Sirius Group as a result of a change to the valuation of the accrued incentive compensation payable to Sirius Group employees.

Other

As of December 31, 2017, White Mountains has classified its Guilford, Connecticut property, which consists of an office building and adjacent land, as held for sale. The property has been measured at its estimated fair value net of costs of disposal, of $3.3 million as of September 30, 2018 and December 31, 2017.

Discontinued Operations

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Held for Sale and Discontinued Operations

Net Income (Loss) from Discontinued Operations

For the three and nine months ended September 30, 2018, White Mountains recognized net loss from sale of discontinued operations of $17.3 million and $17.2 million, which was primarily due to a tax contingency related to the sale of Sirius Group. See Note 15 — “Contingencies”.

The following table presents the results of operations, including related income taxes, associated with the business classified as discontinued operations for the three and nine months ended September 30, 2017. The amounts presented relate to OneBeacon, Sirius Group, and Tranzact. The results of discontinued operations from Sirius Group and Tranzact up to the closing date of the transaction inured to White Mountains. Given the fixed price nature of the OneBeacon Transaction, OneBeacon’s results were economically transferred to the buyer at signing.



	Three Months Ended									Nine Months Ended
	September 30, 2017									September 30, 2017
Millions	OneBeacon			Sirius Group			Total			OneBeacon		Sirius Group			Tranzact			Total
Revenues
Earned insurance premiums	$	268.4		$	—		$	268.4		$	807.6	$	—		$	—		$	807.6
Net investment income	13.0			—			13.0			39.7		—			—			39.7
Net realized and unrealized gains	11.5			—			11.5			38.8		—			—			38.8
Other revenue	2.2			—			2.2			7.7		—			—			7.7
Total revenues	295.1			—			295.1			893.8		—			—			893.8
Expenses
Loss and loss adjustment expenses	206.8			—			206.8			546.0		—			—			546.0
Insurance and reinsurance acquisition expenses	51.9			—			51.9			145.6		—			—			145.6
Other underwriting expenses	44.9			—			44.9			156.2		—			—			156.2
General and administrative expenses	7.4			—			7.4			21.2		—			—			21.2
Interest expense	3.4			—			3.4			10.0		—			—			10.0
Total expenses	314.4			—			314.4			879.0		—			—			879.0
Pre-tax (loss) income	(19.3		)	—			(19.3		)	14.8		—			—			14.8
Income tax benefit	4.1			—			4.1			5.7		—			—			5.7
Net (loss) income from discontinued operations	(15.2		)	—			(15.2		)	20.5		—			—			20.5
Net gain (loss) from sale of discontinued operations	554.5			(.2		)	554.3			554.5		(.8		)	(1.0		)	552.7
Total income (loss) from discontinued operations	539.3			(.2		)	539.1			575.0		(.8		)	(1.0		)	573.2
Change in foreign currency translation and other from discontinued operations	.1			—			.1			.3		—			—			.3
Recognition of benefit plan assets and obligations from the sale of OneBeacon, net of tax	2.9			—			2.9			2.9		—			—			2.9
Comprehensive income (loss) from discontinued operations	$	542.3		$	(.2	)	$	542.1		$	578.2	$	(.8	)	$	(1.0	)	$	576.4

Net Change in Cash from Discontinued Operations

The following table presents the net change in cash, including income tax payments to national governments and interest paid associated with the business classified as discontinued operations:



	Nine Months Ended
	September 30,
Millions	2018		2017
Net cash provided from (used for) operations	$	—	$	157.0
Net cash (used for) provided from investing activities	—		3.0
Net cash used for financing activities	—		(61.9		)
Net change in cash during the period	—		98.1
Cash balances at beginning of period	—		70.5
Net change in cash held for sale, excluding discontinued operations	—		(.9		)
Cash sold as part of sale of consolidated subsidiaries	—		167.7
Cash balances at end of period	$	—	$	—
Supplemental cash flows information:
Interest paid	$	—	$	—
Net income tax payment to national governments	$	—	$	—

Earnings Per Share from Discontinued Operations

White Mountains calculates earnings per share using the two-class method, which allocates earnings between common and unvested restricted common shares. Both classes of shares participate equally in earnings on a per share basis. Basic earnings per share amounts are based on the weighted average number of common shares outstanding adjusted for unvested restricted common shares. Diluted earnings per share amounts are also impacted by the net effect of potentially dilutive common shares outstanding.

The following table presents the Company’s computation of earnings per share for discontinued operations for the three and nine months ended September 30, 2018 and 2017:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Basic and diluted earnings per share numerators (in millions):
Net income (loss) attributable to White Mountains’s common shareholders	$	40.8		$	562.1		$	(3.7	)	$	604.7
Less total loss from continuing operations, net of tax	58.1			23.0			13.5			31.5
Net income from discontinued operations attributable to White Mountains’s common shareholders	$	(17.3	)	$	539.1		$	(17.2	)	$	573.2
Allocation of earnings to participating restricted common shares ⁽¹⁾	.2			(6.7		)	.2			(7.0		)
Basic and diluted earnings per share numerators	$	(17.1	)	$	532.4		$	(17.0	)	$	566.2
Basic earnings per share denominators (in thousands):
Total average common shares outstanding during the period	3,180.4			4,297.2			3,450.8			4,477.0
Average unvested restricted common shares ⁽³⁾	(41.5		)	(53.7		)	(39.7		)	(54.5		)
Basic earnings per share denominator	3,138.9			4,243.5			3,411.1			4,422.5
Diluted earnings per share denominator (in thousands):
Total average common shares outstanding during the period	3,180.4			4,297.2			3,450.8			4,477.0
Average unvested restricted common shares ⁽³⁾	(41.5		)	(53.7		)	(39.7		)	(54.5		)
Diluted earnings per share denominator	3,138.9			4,243.5			3,411.1			4,422.5
Basic and diluted earnings per share (in dollars) - discontinued operations:	$	(5.44	)	$	125.45		$	(4.98	)	$	128.03

⁽¹⁾Restricted shares issued by White Mountains contain dividend participation features, and therefore, are considered participating securities.

⁽²⁾Net earnings attributable to White Mountains’s common shareholders, net of restricted share amounts, is equal to undistributed earnings for the three and nine months ended September 30, 2018 and 2017.

⁽³⁾ Restricted common shares outstanding vest either in equal annual installments or upon a stated date. See Note 10 — “Employee Share-Based Incentive Compensation Plans”.