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Significant Transactions | 6 Months Ended
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Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Significant Transactions | Significant Transactions Acquisitions Elementum On May 31, 2019, White Mountains acquired a 30.0% limited partnership interest in Elementum, a third-party registered investment adviser specializing in natural catastrophe insurance-linked securities (“ILS”), for $55.1 million (the “Elementum Transaction”). Elementum manages separate accounts and pooled investment vehicles across various ILS sectors, including catastrophe bonds, collateralized reinsurance investments and industry loss warranties, on behalf of third-party clients. As part of the Elementum Transaction, White Mountains also committed to invest $50.0 million in ILS funds managed by Elementum. As of June 30, 2020, White Mountains had $52.1 million invested into four Elementum-managed funds. White Mountains has elected the fair value option for its investments in Elementum and the ILS funds managed by Elementum. Both the investment in Elementum and the investments in ILS funds managed by Elementum are included within other long-term investments. NSM On May 11, 2018, White Mountains acquired a 95.0% basic unit ownership interest in NSM (83.6% on a fully diluted, fully converted basis). White Mountains paid $274.2 million of cash consideration for its equity interest in NSM, and NSM borrowed $100.0 million in new debt as part of the transaction. On May 18, 2018, NSM acquired 100% of Fresh Insurance Services Group Limited (“Fresh Insurance”), an insurance broker that offers non-standard personal lines products in the United Kingdom. NSM paid $49.6 million of upfront cash consideration for Fresh Insurance. NSM borrowed $51.0 million to fund the transaction. During the six months ended June 30, 2019, NSM paid a purchase price adjustment of an additional $0.7 million of consideration. The purchase price is subject to additional adjustments based upon growth in EBITDA during two earnout periods, one which ended in February 2020 and one ending in February 2022. NSM did not make any payments related to the first Fresh Insurance earnout period. On December 3, 2018, NSM acquired all the net assets of KBK Insurance Group, Inc. (“KBK”), a specialized MGU focused on the towing and transportation space. NSM paid $60.0 million of upfront cash consideration for KBK. White Mountains contributed $29.0 million to NSM and NSM borrowed $30.1 million to fund the transaction. As of December 31, 2018, White Mountains had recognized $59.4 million of goodwill and other intangible assets, reflecting acquisition date fair value. The relative fair values of goodwill and of other intangible assets recognized in connection with the acquisition of KBK had not yet been finalized as of December 31, 2018. As of March 31, 2019, White Mountains determined that the relative values of goodwill and other intangible assets from the KBK transaction were $32.6 million and $32.7 million, reflecting acquisition date fair values, and recorded a liability of $5.9 million relating to the fair value of contingent consideration earnouts made in connection with the acquisition. The purchase price is subject to adjustments based upon growth in EBITDA during three earnout periods, one which ended in December 2019, one ending in December 2020 and one ending in December 2021. In the first quarter of 2020, NSM paid $6.4 million related to the first KBK earnout period. On April 1, 2019, NSM acquired 100% of Embrace Pet Insurance (“Embrace”), a nationwide provider of pet health insurance for dogs and cats. NSM paid $71.5 million of cash consideration, net of cash acquired, for Embrace. White Mountains contributed $58.2 million to NSM and NSM borrowed $20.4 million to fund the transaction. White Mountains recognized $52.2 million of goodwill and $15.4 million of other intangible assets, reflecting acquisition date fair values. On June 28, 2019, NSM acquired the renewal rights on its U.S. collector car business (the “Renewal Rights”) from American International Group, Inc. (“AIG”) for $82.5 million. The acquisition satisfied NSM’s contingent obligation to acquire the Renewal Rights from AIG. White Mountains contributed $59.1 million to NSM and NSM borrowed $22.5 million to fund the transaction. White Mountains recognized $82.5 million of other intangible assets, reflecting acquisition date fair values. See Note 4 — “Goodwill and Other Intangible Assets”. On April 7, 2020, NSM acquired 100% of Kingsbridge Group Limited (“Kingsbridge”), a leading provider of commercial lines insurance and consulting services to the U.K.’s contractor and freelancer markets. NSM paid £107.2 million (approximately $132 million based upon the foreign exchange spot rate at the date of acquisition) of upfront cash consideration for Kingsbridge. White Mountains contributed $80.3 million to NSM and NSM borrowed £42.5 million (approximately $52.4 million based upon the foreign exchange spot rate at the date of acquisition) to fund the transaction. As of June 30, 2020, White Mountains had recognized $125.1 million of goodwill and other intangible assets, reflecting acquisition date fair value. The relative fair values of other intangible assets recognized in connection with the acquisition of Kingsbridge had not yet been finalized as of June 30, 2020. The purchase price is subject to adjustment based upon growth in EBITDA during an earnout period ending in January 2022. In connection with the Kingsbridge acquisition, NSM expects to record a contingent consideration earnout liability in the third quarter of 2020. As of June 30, 2020 and December 31, 2019, NSM recorded total contingent consideration earnout liabilities of $11.7 million and $20.6 million. The contingent consideration earnout liabilities related to the Fresh Insurance and KBK acquisitions are subject to adjustments based upon EBITDA, EBITDA projections and present value factors for acquired entities. For the three and six months ended June 30, 2020, NSM recognized pre-tax income of $1.7 million and $2.3 million for the change in the fair value of its contingent consideration earnout liabilities. For the three and six months ended June 30, 2019, NSM recognized pre-tax expense of $6.3 million and $7.6 million for the change in the fair value of its contingent consideration earnout liabilities. Any future adjustments to contingent consideration earnout liabilities will be recognized through pre-tax income. For the three months ended June 30, 2020, NSM made no payments related to its contingent consideration earnout liabilities. For the six months ended June 30, 2020, NSM paid $6.4 million related to KBK’s contingent consideration earnout liabilities. For both the three and six months ended June 30, 2019, NSM paid $2.6 million related to its U.K. vertical’s contingent consideration earnout liabilities. Kudu On February 5, 2018, White Mountains entered into an agreement to fund up to $125.0 million in Kudu in exchange for a 49.5% basic units ownership interest in Kudu (42.7% on a fully diluted, fully converted basis). On April 4, 2019, White Mountains acquired the ownership interests in Kudu held by certain funds managed by Oaktree for cash consideration of $81.4 million. In addition, White Mountains assumed all of Oaktree’s unfunded capital commitments to Kudu, increasing White Mountains’s total capital commitment to $250.0 million. White Mountains recognized total assets acquired of $155.5 million, including $7.6 million of goodwill and $2.2 million of other intangible assets, total liabilities assumed of $0.8 million and non-controlling interest of $1.5 million. As a result of the Kudu Transaction, White Mountains’s basic unit ownership of Kudu increased from 49.5% to 99.1% (42.7% to 85.4% on a fully diluted, fully converted basis), and White Mountains began consolidating Kudu as a reportable segment in its financial statements during the second quarter of 2019. White Mountains’s consolidated financial statements and its segment disclosures include Kudu’s results from April 4, 2019, the date of the Kudu Transaction. For periods prior to the Kudu Transaction, White Mountains determined that Kudu was a VIE, but White Mountains was not the primary beneficiary. In those periods, White Mountains elected to use the fair value option. During the fourth quarter of 2019, White Mountains increased its total capital commitment to Kudu by $100.0 million to $350.0 million, of which $94.5 million and $129.0 million was undrawn as of June 30, 2020 and December 31, 2019. During the fourth quarter of 2019, Kudu obtained a committed $125.0 million credit facility, of which $51.0 million and $68.0 million was undrawn as of June 30, 2020 and December 31, 2019. See Note 5 — “Debt”. Dispositions MediaAlpha On February 26, 2019, MediaAlpha completed the MediaAlpha Transaction. White Mountains received net cash proceeds of $89.3 million from the MediaAlpha Transaction. White Mountains recognized a realized gain of $67.5 million and reduced its ownership interest of the basic units outstanding of MediaAlpha from 61.0% to 48.3% (58.9% to 42.0% on a fully diluted, fully converted basis) as a result of the MediaAlpha Transaction. White Mountains’s remaining ownership interest in MediaAlpha no longer meets the criteria for a controlling ownership interest and, accordingly, White Mountains deconsolidated MediaAlpha on February 26, 2019. White Mountains’s consolidated statement of operations and comprehensive income and its segment disclosures include MediaAlpha’s results of operations for the period from January 1, 2019 through February 26, 2019. Upon deconsolidation, White Mountains’s investment in MediaAlpha met the criteria to be accounted for under the equity method or under the fair value option. See Note 14 — “Equity-Method Eligible Investments”. White Mountains elected the fair value option and the investment in MediaAlpha was initially measured at its estimated fair value of $114.7 million as of the transaction date, with the change in fair value of $114.7 million recognized as an unrealized investment gain. White Mountains recognized a total of $182.2 million of realized and unrealized investment gains on the MediaAlpha Transaction. Other Transactions PassportCard/DavidShield On May 7, 2020, White Mountains made an additional $15.0 million investment in PassportCard/DavidShield to support operations and to continue global expansion through the ongoing COVID-19 pandemic. The transaction increased White Mountains’s ownership interest from 50.0% to 53.8% in both PassportCard and DavidShield, but had no impact on the governance structure of the companies, including White Mountains’s board representation or other investor rights. The governance structures for both PassportCard and DavidShield were designed to give White Mountains and its co-investor equal power to make the decisions that most significantly impact the operations of PassportCard and DavidShield. As a result of the transaction, White Mountains’s re-evaluated its accounting treatment for PassportCard and DavidShield. Because White Mountains does not have the unilateral power to direct the operations of PassportCard or DavidShield, White Mountains does not hold a controlling financial interest in either entity. Accordingly, White Mountains continues to account for its investments in PassportCard and DavidShield at fair value within other long-term investments (as equity-method eligible investments for which White Mountains has taken the fair value option).

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