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Statutory Capital and Surplus | 12 Months Ended
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Dec. 31, 2019
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, 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 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. 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, 2019, HG Re had statutory capital and surplus of $745.4 million. As a Special Purpose Insurer, HG Re has a nominal minimum regulatory capital requirement of $1. BAM is domiciled in New York and is subject to regulation by the 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, 2019, 2018 and 2017 was $38.3 million, $34.6 million and $25.4 million. BAM’s members’ surplus, as reported to regulatory authorities as of December 31, 2019, was $402.4 million, which exceeds the minimum members’ surplus necessary for BAM to maintain its New York State financial guarantee insurance license of $66.0 million. 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. Following is a description of the dividend capacity of White Mountains’s reinsurance and other operating subsidiaries: HG Global/BAM As of December 31, 2019, 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 declared and paid preferred dividends of $2.0 million in 2019. As of December 31, 2019, HG Global had accrued $341.7 million of dividends payable to holders of its preferred shares, $330.2 million of which is payable to White Mountains and eliminated in consolidation. As of December 31, 2019, HG Global and its subsidiaries had $3.0 million of cash outside of HG Re. 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 FLRT with BAM. As of December 31, 2019, HG Re had $745.4 million of statutory capital and surplus and $786.7 million of assets held in the Collateral Trusts pursuant to the FLRT with BAM. On a monthly basis, BAM deposits cash equal to ceded premiums, net of ceding commissions, due to HG Re under the FLRT directly into the Regulation 114 Trust. The Regulation 114 Trust target balance is equal to gross ceded unearned premiums and unpaid ceded loss and LAE expenses, if any. If, at the end of any quarter, the Regulation 114 Trust balance is below the target balance, funds will be withdrawn from the Supplemental Trust and deposited into the Regulation 114 Trust in an amount equal to the shortfall. If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust. The Supplemental Trust Target Balance is $603.0 million, less the amount of cash and securities in the Regulation 114 Trust in excess of its target balance. If, at the end of any quarter, the Supplemental Trust balance exceeds the Supplemental Trust Target Balance, such excess may be distributed to HG Re. The distribution will be made first as an assignment of accrued interest on the BAM Surplus Notes and second in cash and/or fixed income securities. As the BAM Surplus Notes are repaid over time, the BAM Surplus Notes will be replaced in the Supplemental Trust by cash and fixed income securities. As of December 31, 2019, HG Re had $6.3 million of cash and investments and $111.2 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts. BAM is required to seek regulatory approval to pay interest and principal on the BAM Surplus Notes only to the extent that its remaining qualified statutory capital and other capital resources continue to support its outstanding obligations, business plan and its “AA/stable” rating from Standard & Poor’s. No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS. In December 2019, BAM made a $32.0 million cash payment of principal and interest on the BAM Surplus Notes held by HG Global. Of this payment, $23.7 million was a repayment of principal held in the Supplemental Trust, $0.3 million was a payment of accrued interest held in the Supplemental Trust and $8.0 million was a payment of accrued interest held outside the Supplemental Trust. During 2018, BAM made a $23.0 million cash payment of principal and interest on the BAM Surplus Notes. Of this payment, $17.7 million was a repayment of principal held in the Supplemental Trust, $0.7 million was a payment of accrued interest held in the Supplemental Trust and $4.6 million was a payment of accrued interest held outside the Supplemental Trust. In January 2020, BAM made an additional $65.0 million special cash payment of principal and interest on the BAM Surplus Notes. See Note 21 — “Subsequent Event”. NSM During 2019, NSM did not make any distributions to unitholders. As of December 31, 2019, NSM had $33.4 million of net unrestricted cash. Kudu In December 2019, Kudu entered into a secured credit facility to provide funding for distributions to unitholders and fund new investments and related transaction expenses. At closing, Kudu drew an initial term loan of $57.0 million to pay transaction expenses and to distribute $53.7 million to unitholders, of which $53.3 million was paid to White Mountains. As of December 31, 2019, Kudu had $5.9 million of net unrestricted cash and short-term investments. Other Operations During 2019, White Mountains paid a $3.2 million common share dividend. As of December 31, 2019, the Company and its intermediate holding companies had $602.6 million of net unrestricted cash, short-term investments and fixed maturity investments, $683.9 million of common equity securities and $202.3 million of private equity funds, hedge funds and ILS funds.

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