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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes 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, 2024, the primary jurisdictions in which the Company’s subsidiaries and branches operated and were subject to tax include Israel, Luxembourg, the United Kingdom and the United States. The Company and its Bermuda-domiciled subsidiaries were not subject to income tax in Bermuda in 2024 and prior years. On December 27, 2023, Bermuda enacted a 15% corporate income tax that became 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, 2024. Accordingly, White Mountains’s net income for 2023 included a net deferred tax benefit of $68.0 million, of which $51.0 million was recorded at Ark and $17.0 million was recorded at HG Global. As of July 1, 2024, White Mountains no longer consolidates BAM. As a result of the deconsolidation, the BAM Surplus Notes are recorded at fair value, which resulted in the reversal of a $5.0 million deferred tax liability related to the economic transition adjustment, generating a $5.0 million tax benefit in the third quarter of 2024. For the year ended December 31, 2024, certain of the Company’s subsidiaries were subject to the global minimum tax regime of the Organization for Economic Cooperation and Development (“OECD”) Pillar Two initiative, as enacted by Luxembourg and the United Kingdom in their respective domestic laws. The Pillar Two initiative includes a set of model rules that are generally designed to impose a top-up tax on a large multinational enterprise group to the extent the group is not subject to an effective tax rate of at least 15% in each jurisdiction in which the group has a consolidated affiliate or permanent establishment. The Company and its subsidiaries did not incur a top-up tax for the year ended December 31, 2024. The following table presents the total income tax (expense) benefit for the years ended December 31, 2024, 2023 and 2022:
|  | Year Ended December 31,
Millions |  | 2024 |  | 2023 |  | 2022
Current income tax (expense) benefit: |  |  |  |  |  |
U.S. federal |  | $ | (6.3) |  |  | $ | (12.6) |  |  | $ | (16.9) |
State |  | (.4) |  |  | (2.2) |  |  | (4.5) |
Non-U.S. |  | (14.8) |  |  | (16.6) |  |  | (7.1) |
Total current income tax (expense) benefit |  | (21.5) |  |  | (31.4) |  |  | (28.5) |
Deferred income tax (expense) benefit: |  |  |  |  |  |
U.S. federal |  | (18.8) |  |  | (13.2) |  |  | (7.3) |
State |  | 2.7 |  |  | (3.8) |  |  | (1.8) |
Non-U.S. |  | 5.0 |  |  | 63.9 |  |  | (3.8) |
Total deferred income tax (expense) benefit |  | (11.1) |  |  | 46.9 |  |  | (12.9) |
Total income tax (expense) benefit |  | $ | (32.6) |  |  | $ | 15.5 |  |  | $ | (41.4) |
Effective Rate Reconciliation The following table presents a reconciliation of taxes calculated for 2024, 2023 and 2022 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 |  | 2024 |  | 2023 |  | 2022
Tax (expense) benefit at the U.S. statutory rate |  | $ | (66.5) |  |  | $ | (118.7) |  |  | $ | 31.4 |
Differences in taxes resulting from: |  |  |  |  |  |
Non-U.S. earnings, net of foreign taxes |  | 40.2 |  |  | 103.7 |  |  | (41.2) |
Change in valuation allowance |  | (8.1) |  |  | (30.2) |  |  | (19.6) |
Bermuda corporate income tax |  | 5.0 |  |  | 68.0 |  |  | — |
Noncontrolling interest |  | 3.9 |  |  | 6.8 |  |  | 3.4 |
Tax rate changes |  | 2.9 |  |  | (.6) |  |  | (.4) |
BAM member surplus contributions prior to deconsolidation |  | (2.8) |  |  | (5.7) |  |  | (6.2) |
Withholding tax |  | (2.5) |  |  | (4.1) |  |  | (3.1) |
State taxes |  | (1.8) |  |  | (8.2) |  |  | (2.8) |
Tax exempt interest and dividends |  | .3 |  |  | .2 |  |  | .2 |
Officer compensation |  | — |  |  | (.2) |  |  | (1.0) |
Other, net |  | (3.2) |  |  | 4.5 |  |  | (2.1) |
Total income tax (expense) benefit on pre-tax income (loss) |  | $ | (32.6) |  |  | $ | 15.5 |  |  | $ | (41.4) |
The non-U.S. component of pre-tax income (loss) was $282.7 million, $450.0 million and $(94.4) million for the years ended December 31, 2024, 2023 and 2022. Tax Payments and Receipts Net income tax (refunds) payments totaled $34.3 million, $42.7 million and $10.3 million for the years ended December 31, 2024, 2023 and 2022. 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 |  | 2024 |  | 2023
Deferred tax assets related to: |  |  |  |
Non-U.S. net operating loss carryforwards |  | $ | 62.8 |  |  | $ | 68.2 |
Intangible assets |  | 51.5 |  |  | 51.5 |
Incentive compensation |  | 23.8 |  |  | 25.4 |
Unearned premiums |  | 20.5 |  |  | 18.2 |
Loss reserves |  | 8.5 |  |  | 8.4 |
U.S. federal and state net operating and capital loss carryforwards |  | 6.4 |  |  | 87.6 |
Tax credit carryforwards |  | 2.8 |  |  | 3.3 |
Accrued interest |  | .2 |  |  | 10.1 |
Deferred acquisition costs |  | — |  |  | 3.7 |
Other items |  | .9 |  |  | 1.0 |
Total gross deferred tax assets |  | 177.4 |  |  | 277.4 |
Less: valuation allowances |  | 89.2 |  |  | 116.1 |
Total net deferred tax assets |  | 88.2 |  |  | 161.3 |
Deferred tax liabilities related to: |  |  |  |
Purchase accounting |  | 43.9 |  |  | 43.9 |
Investment basis difference |  | 43.5 |  |  | 40.9 |
Deferred underwriting |  | 24.3 |  | 18.3 |
Net unrealized investment gains |  | 19.0 |  |  | 15.5 |
Deferred acquisition costs |  | 6.5 |  |  | — |
BAM member surplus contributions prior to deconsolidation |  | — |  |  | 82.2 |
Other items |  | 1.2 |  |  | 1.2 |
Total deferred tax liabilities |  | 138.4 |  |  | 202.0 |
Net deferred tax asset (liability) |  | $ | (50.2) |  |  | $ | (40.7) |
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 $89.2 million valuation allowance as of December 31, 2024, $43.4 million related to deferred tax assets on net operating losses and net unrealized investment gains and losses in the Company’s Luxembourg subsidiary, $25.2 million related to deferred tax assets on net operating losses in U.S. subsidiaries and other federal and state deferred tax benefits, $20.6 million related to net operating losses and other deferred tax benefits in Israeli subsidiaries. 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 the Luxembourg subsidiary, $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. United States For the year ended December 31, 2024, White Mountains recorded income tax expense of $8.6 million to reflect an increase in the valuation allowance on the net deferred tax assets for certain U.S. operations within Other Operations, as White Mountains does not currently anticipate sufficient taxable income to utilize the remaining deferred tax assets. For the year ended December 31, 2023, White Mountains recorded income tax benefit of $7.2 million to reflect a 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 did not anticipate sufficient taxable income to utilize the remaining deferred tax assets. As of July 1, 2024, White Mountains no longer consolidates BAM. Prior to the deconsolidation, White Mountains recorded income tax expense of $5.7 million and $6.3 million to reflect the increase in the valuation allowance on net deferred tax assets of BAM for the years ended December 31, 2024 and 2023. 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. For the years ended December 31, 2024 and 2023, BAM had income included in equity due to MSC that was available to offset its loss from continuing operations. For the years ended December 31, 2024 and 2023, BAM recorded both the income tax benefit on MSC of $3.1 million and $8.7 million and the offsetting expense in paid-in surplus. As of December 31, 2023, BAM had a full valuation allowance recorded against its net deferred tax assets, as White Mountains was unsure it will generate sufficient taxable income to utilize the deferred tax assets. Non-U.S. Jurisdictions For the year ended December 31, 2024, White Mountains recognized income tax benefit of $4.2 million to reflect a decrease in deferred tax assets and the corresponding decrease in the full valuation allowance at the Luxembourg-domiciled subsidiary. The decrease in the deferred tax assets was driven primarily by (i) a partial utilization from income on intercompany notes and (ii) a decline in the Luxembourg tax rate. White Mountains does not currently anticipate sufficient income to utilize the remaining deferred tax assets. For the year ended December 31, 2023, White Mountains recognized income tax expense of $31.6 million to reflect an increase in the full valuation allowance against deferred tax assets which primarily related to losses on the write-down of foreign subsidiaries and investments held in the Luxembourg-domiciled subsidiary. As of December 31, 2023, White Mountains did not anticipate sufficient income to utilize the deferred tax assets. For the year ended December 31, 2024, White Mountains recognized income tax benefit of $0.2 million to reflect a 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. White Mountains does not currently anticipate sufficient taxable income to utilize the deferred tax assets. For the year ended December 31, 2023, White Mountains recorded income tax expense of $0.4 million to reflect an increase in the valuation allowance against the deferred tax assets at certain Israel-domiciled subsidiaries, as White Mountains did not 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, 2024, the expiration dates and the deferred tax assets thereon:
|  | December 31, 2024
Millions |  | United States |  | Luxembourg |  |  |  |  |  | United Kingdom |  | Israel |  | Total
2025-2029 |  | $ | .4 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | .4 |
2030-2034 |  | .3 |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | .3 |
2035-2044 |  | 8.8 |  |  | 177.1 |  |  |  |  |  |  | — |  |  | — |  |  | 185.9 |
No expiration date |  | 3.5 |  |  | — |  |  |  |  |  |  | — |  |  | 88.1 |  |  | 91.6 |
Total |  | $ | 13.0 |  |  | $ | 177.1 |  |  |  |  |  |  | $ | — |  |  | $ | 88.1 |  |  | $ | 278.2 |
Gross deferred tax asset |  | $ | 6.4 |  |  | $ | 42.3 |  |  |  |  |  |  | $ | — |  |  | $ | 20.3 |  |  | $ | 69.0 |
Valuation allowance |  | (6.4) |  |  | (42.3) |  |  |  |  |  |  | — |  |  | (20.3) |  |  | (69.0) |
Net deferred tax asset |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Included in the U.S. net operating loss carryforwards are losses of $7.8 million subject to an annual limitation on utilization under Internal Revenue Code Section 382 and $0.7 million subject to the limitation on utilization under the separate-return-limitation-year (SRLY) rules in the Internal Revenue Code. These loss carryforwards will begin to expire in 2026. As of December 31, 2024, there are U.K. foreign tax credit carryforwards available of $2.8 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, 2024 and 2023, 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, 2024, 2023 and 2022, White Mountains did not recognize any net interest (income) expense. There was no accrued interest as of December 31, 2024, 2023 and 2022. 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 2019.

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