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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company and its Bermuda-domiciled subsidiaries were not subject to income tax in Bermuda in 2023 and prior years. On December 27, 2023, Bermuda enacted a 15% corporate income tax that will generally become effective on January 1, 2025. The Bermuda legislation defers the effective date for five years for Bermuda companies in consolidated groups that meet certain requirements. White Mountains expects to meet the requirements to be exempt from the Bermuda corporate income tax until January 1, 2030. The Bermuda legislation also provides for an economic transition adjustment that will reduce future years’ taxable income. Under GAAP, this economic transition adjustment was required to be recognized as a net deferred tax asset as of December 31, 2023. Accordingly, White Mountains’s net income for 2023 included a net deferred tax benefit of $68 million, of which $51 million was recorded at Ark and $17 million was recorded at HG Global. The Company has subsidiaries and branches that operate in various other jurisdictions around the world and are subject to tax in the jurisdictions in which they operate. As of December 31, 2023, the primary jurisdictions in which the Company’s subsidiaries and branches operate and were subject to tax include Israel, Luxembourg, the United Kingdom and the United States. The following table presents the total income tax (expense) benefit for the years ended December 31, 2023, 2022 and 2021:
|  | Year Ended December 31,
Millions |  | 2023 |  | 2022 |  | 2021
Current income tax (expense) benefit: |  |  |  |  |  |
U.S. federal |  | $ | (12.6) |  |  | $ | (16.9) |  |  | $ | (4.8) |
State |  | (2.2) |  |  | (4.5) |  |  | (2.1) |
Non-U.S. |  | (16.6) |  |  | (7.1) |  |  | (2.8) |
Total current income tax (expense) benefit |  | (31.4) |  |  | (28.5) |  |  | (9.7) |
Deferred income tax (expense) benefit: |  |  |  |  |  |
U.S. federal |  | (13.2) |  |  | (7.3) |  |  | (13.9) |
State |  | (3.8) |  |  | (1.8) |  |  | (7.0) |
Non-U.S. |  | 63.9 |  |  | (3.8) |  |  | (13.8) |
Total deferred income tax (expense) benefit |  | 46.9 |  |  | (12.9) |  |  | (34.7) |
Total income tax (expense) benefit |  | $ | 15.5 |  |  | $ | (41.4) |  |  | $ | (44.4) |
Effective Rate Reconciliation The following table presents a reconciliation of taxes calculated for 2023, 2022 and 2021 using the 21% U.S. federal statutory rate (the tax rate at which the majority of White Mountains’s worldwide operations are taxed) to the income tax (expense) benefit on pre-tax income (loss):
|  | Year Ended December 31,
Millions |  | 2023 |  | 2022 |  | 2021
Tax (expense) benefit at the U.S. statutory rate |  | $ | (118.7) |  |  | $ | 31.4 |  |  | $ | 57.5 |
Differences in taxes resulting from: |  |  |  |  |  |
Non-U.S. earnings, net of foreign taxes |  | 103.7 |  |  | (41.2) |  |  | (78.2) |
Bermuda corporate income tax |  | 68.0 |  |  | — |  |  | — |
Change in valuation allowance |  | (30.2) |  |  | (19.6) |  |  | (2.0) |
State taxes |  | (8.2) |  |  | (2.8) |  |  | (7.3) |
Noncontrolling interest |  | 6.8 |  |  | 3.4 |  |  | 2.1 |
Member’s surplus contributions |  | (5.7) |  |  | (6.2) |  |  | (5.6) |
Withholding tax |  | (4.1) |  |  | (3.1) |  |  | (.3) |
Tax rate changes |  | (.6) |  |  | (.4) |  |  | (10.9) |
Officer compensation |  | (.2) |  |  | (1.0) |  |  | (1.5) |
Tax exempt interest and dividends |  | .2 |  |  | .2 |  |  | .2 |
Other, net |  | 4.5 |  |  | (2.1) |  |  | 1.6 |
Total income tax (expense) benefit on pre-tax income (loss) |  | $ | 15.5 |  |  | $ | (41.4) |  |  | $ | (44.4) |
The non-U.S. component of pre-tax income (loss) was $450.0 million, $(94.4) million and $(319.0) million for the years ended December 31, 2023, 2022 and 2021. On June 10, 2021, the U.K. enacted an increase in its corporate tax rate from 19% to 25% for periods after April 1, 2023. During 2021, White Mountains increased its net U.K. deferred tax liability to reflect the higher tax rate. Tax Payments and Receipts Net income tax (refunds) payments totaled $42.7 million, $10.3 million and $(0.1) million for the years ended December 31, 2023, 2022 and 2021. Deferred Tax Assets and Liabilities Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for tax purposes. The following table presents an outline of the significant components of White Mountains’s U.S. federal, state and non-U.S. deferred tax assets and liabilities:
|  | December 31,
Millions |  | 2023 |  | 2022
Deferred tax assets related to: |  |  |  |
U.S. federal and state net operating and capital loss carryforwards |  | $ | 87.6 |  |  | $ | 85.4 |
Non-U.S. net operating loss carryforwards |  | 68.2 |  |  | 36.1 |
Intangible assets |  | 51.5 |  |  | — |
Incentive compensation |  | 25.4 |  |  | 21.4 |
Unearned premiums |  | 18.2 |  |  | — |
Accrued interest |  | 10.1 |  |  | 8.8 |
Loss reserves |  | 8.4 |  |  | — |
Deferred acquisition costs |  | 3.7 |  |  | 8.0 |
Tax credit carryforwards |  | 3.3 |  |  | 1.8 |
Net unrealized investment losses |  | — |  |  | 4.7 |
Other items |  | 1.0 |  |  | 1.3 |
Total gross deferred tax assets |  | 277.4 |  |  | 167.5 |
Less: valuation allowances |  | 116.1 |  |  | 94.3 |
Total net deferred tax assets |  | 161.3 |  |  | 73.2 |
Deferred tax liabilities related to: |  |  |  |
Member’s surplus contributions |  | 82.2 |  |  | 71.3 |
Purchase accounting |  | 43.9 |  |  | 43.9 |
Investment basis difference |  | 40.9 |  |  | 33.9 |
Deferred underwriting |  | 18.3 |  | 9.7 |
Net unrealized investment gains (losses) |  | 15.5 |  |  | — |
Other items |  | 1.2 |  |  | 2.2 |
Total deferred tax liabilities |  | 202.0 |  |  | 161.0 |
Net deferred tax asset (liability) |  | $ | (40.7) |  |  | $ | (87.8) |
White Mountains’s deferred tax assets (liabilities) are net of U.S. federal, state and non-U.S. valuation allowances and, to the extent they relate to non-U.S. jurisdictions, are shown at year-end exchange rates. Valuation Allowance White Mountains records a valuation allowance against deferred tax assets if it becomes more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in income tax expense in the period of change. In determining whether or not a valuation allowance, or change therein, is warranted, White Mountains considers factors such as prior earnings history, expected future earnings, carryback and carryforward periods and strategies that if executed would result in the realization of a deferred tax asset. It is possible that certain planning strategies or projected earnings in certain subsidiaries may not be sufficient to utilize the entire deferred tax asset, which could result in material changes to White Mountains’s deferred tax assets and tax expense. Of the $116.1 million valuation allowance as of December 31, 2023, $47.6 million related to deferred tax assets on net operating losses and net unrealized investment gains and losses in Luxembourg subsidiaries, $46.9 million related to deferred tax assets on net operating losses in U.S. subsidiaries and other federal and state deferred tax benefits, $20.8 million related to net operating losses and other deferred tax benefits in Israeli subsidiaries and $0.8 million related to net operating losses in U.K. subsidiaries. Of the $94.3 million valuation allowance as of December 31, 2022, $56.6 million related to deferred tax assets on net operating losses in U.S. subsidiaries and other federal and state deferred tax benefits, $20.4 million related to net operating losses and other deferred tax benefits in Israeli subsidiaries, $16.0 million related to deferred tax assets on net operating losses and net investment unrealized gains and losses in Luxembourg subsidiaries and $1.3 million related to net operating losses in U.K. subsidiaries. United States During 2023, White Mountains recorded income tax benefit of $7.2 million to reflect the decrease in the valuation allowance on the net deferred tax assets for certain U.S. operations within Other Operations. The decrease is due to realized gains during the year which reduced the company’s net operating loss carryforward and related deferred tax asset. As the deferred tax asset declined so did the corresponding valuation allowance. As of December 31, 2023, White Mountains management does not currently anticipate sufficient taxable income to utilize the remaining deferred tax assets. During 2022, White Mountains recorded income tax expense of $7.8 million to reflect the increase in the valuation allowance on the net deferred tax assets for certain U.S. operations within Other Operations, as White Mountains management did not anticipate sufficient taxable income to utilize the remaining deferred tax assets. During 2023 and 2022, White Mountains recorded income tax expense of $6.3 million and $17.5 million to reflect the increase in the valuation allowance on net deferred tax assets of BAM. White Mountains records both the tax expense related to BAM’s member surplus contributions (“MSC”) and the related changes in valuation allowance on such taxes directly through noncontrolling interest equity. During 2023 and 2022, BAM had income included in equity due to MSC that was available to offset its loss from continuing operations. In 2023 and 2022, BAM recorded both the income tax benefit on MSC of $8.7 million and $10.9 million and the offsetting expense in paid-in surplus. During 2023 and 2022, BAM continued to have a full valuation allowance recorded against its net deferred tax assets, as White Mountains management is unsure it will generate sufficient taxable income to utilize the deferred tax assets. During 2023, White Mountains recorded income tax benefit of $0.6 million to reflect the decrease in the valuation allowance against the deferred tax assets relating to its investment in certain partnership portfolios, including Elementum Holdings LLC at the U.S. branches of the White Mountains U.K. holdings companies. The decrease is due to partnership taxable income which reduced the company’s net operating loss carryforward and related deferred tax asset. As the deferred tax asset declined, so did the corresponding valuation allowance at the U.S. branches of the White Mountains U.K. holdings companies. White Mountains management is unsure it will generate sufficient taxable income to utilize the remaining deferred tax assets. During 2022, White Mountains recorded income tax expense of $4.0 million to reflect the establishment of a valuation allowance against the deferred tax assets relating to its investment in certain partnership portfolios, including Elementum Holdings LLC, and to reflect the change in the valuation allowance on deferred tax assets relating to net operating losses at the U.S. branches of the White Mountains U.K. holding companies. White Mountains management is unsure it will generate sufficient taxable income to utilize the deferred tax assets. During 2023, White Mountains recorded income tax expense of $0.1 million to reflect the increase in the valuation allowance on the net deferred tax assets for certain U.S. operations within Ark, as White Mountains management does not currently anticipate sufficient taxable income to utilize the remaining deferred tax assets. Non-U.S. Jurisdictions During 2023, White Mountains recorded income tax expense of $31.6 million to reflect the increase in the full valuation allowance against deferred tax assets which primarily relate to losses on the write-down of foreign subsidiaries and investments held in Luxembourg-domiciled subsidiaries. During 2022, White Mountains recorded income tax benefit of $9.2 million to reflect the decrease in the full valuation allowance against deferred tax assets at certain Luxembourg-domiciled subsidiaries. The decrease is due to a Luxembourg company with net operating loss carryforwards re-domiciling to Bermuda which reduced White Mountains net operating loss carryforwards in Luxembourg and the related deferred tax asset. As the deferred tax asset declined, so did the corresponding valuation allowance. White Mountains management does not currently anticipate sufficient taxable income to utilize the remaining deferred tax assets. During 2023, White Mountains recorded income tax expense of $0.4 million to reflect the increase in the valuation allowance against the deferred tax assets at certain Israel-domiciled subsidiaries, as White Mountains management does not currently anticipate sufficient taxable income to utilize the deferred tax assets. During 2022, White Mountains recorded income tax benefit of $1.5 million to reflect the decrease in the valuation allowance against the deferred tax assets at certain Israel-domiciled subsidiaries. The decrease is due to movement of foreign currency exchange rate gains during the year which reduced the company’s net operating loss carryforward and related deferred tax asset. As the deferred tax asset declined so did the corresponding valuation allowance. White Mountains management does not currently anticipate sufficient income to utilize the deferred tax assets. During 2023, White Mountains recorded income tax benefit of $0.4 million to reflect the decrease in the full valuation allowance against deferred tax assets at certain U.K. subsidiaries. The decrease is due to investment income gains during the year which reduced the company’s net operating loss carryforward and related deferred tax asset. As the deferred tax asset declined, so did the corresponding valuation allowance. White Mountains management does not currently anticipate sufficient taxable income to utilize the remaining deferred tax assets. During 2022, White Mountains recorded income tax expense of $1.0 million to reflect the increase in the full valuation allowance against deferred tax assets at certain U.K. subsidiaries, as White Mountains management does not currently anticipate sufficient taxable income to utilize the deferred tax assets. Net Operating Loss and Capital Loss Carryforwards The following table presents net operating loss and capital loss carryforwards as of December 31, 2023, the expiration dates and the deferred tax assets thereon:
|  | December 31, 2023
Millions |  | United States |  | Luxembourg |  |  |  |  |  | United Kingdom |  | Israel |  | Total
2024-2028 |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |
2029-2033 |  | 90.8 |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | 90.8 |
2034-2043 |  | 304.1 |  |  | 188.1 |  |  |  |  |  |  | — |  |  | — |  |  | 492.2 |
No expiration date |  | 1.9 |  |  | — |  |  |  |  |  |  | 3.2 |  |  | 89.1 |  |  | 94.2 |
Total |  | $ | 396.8 |  |  | $ | 188.1 |  |  |  |  |  |  | $ | 3.2 |  |  | $ | 89.1 |  |  | $ | 677.2 |
Gross deferred tax asset |  | $ | 87.6 |  |  | $ | 46.9 |  |  |  |  |  |  | $ | .8 |  |  | $ | 20.5 |  |  | $ | 155.8 |
Valuation allowance |  | (87.6) |  |  | (46.9) |  |  |  |  |  |  | (.8) |  |  | (20.5) |  |  | (155.8) |
Net deferred tax asset |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Included in the U.S. net operating loss carryforwards are losses of $0.7 million subject to limitation on utilization under the separate-return-limitation-year (SRLY) rules in the Internal Revenue Code. These loss carryforwards will begin to expire in 2028. As of December 31, 2023, there are U.K. foreign tax credit carryforwards available of $3.3 million, which do not have an expiration date. Uncertain Tax Positions Recognition of the benefit of a given tax position is based upon whether a company determines that it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. In evaluating the more likely than not recognition threshold, White Mountains must presume that the tax position will be subject to examination by a taxing authority with full knowledge of all relevant information. If the recognition threshold is met, then the tax position is measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. As of December 31, 2023 and 2022, White Mountains did not have any unrecognized tax benefits. White Mountains classifies all interest and penalties on unrecognized tax benefits as part of income tax expense. During the years ended December 31, 2023, 2022 and 2021, White Mountains did not recognize any net interest (income) expense. There was no accrued interest as of December 31, 2023, 2022 and 2021. Tax Examinations With few exceptions, White Mountains is no longer subject to U.S. federal, state, or non-U.S. income tax examinations by tax authorities for years before 2018.

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