White Mountains Insurance Group Ltd – 2024 Financials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2024

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934

For the transition period from	to
Commission file number 1-8993

WHITE MOUNTAINS INSURANCE GROUP, LTD.

(Exact name of Registrant as specified in its charter)

Registrant's telephone number, including area code: (603)640-2200

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of voting shares (based on the closing price of those shares listed on the New York Stock Exchange) held by non-affiliates of the Registrant as of June 30, 2024, was $4,526,288,344.

As of February 24, 2025, 2,563,051 common shares, par value of $1.00 per share, were outstanding (which includes 22,240 restricted common shares that were not vested at such date).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement to be filed with the Securities and Exchange Commission ("SEC") pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the Registrant's Annual General Meeting of Members scheduled to be held May 22, 2025 are incorporated by reference into Part III of this Form 10-K. With the exception of the portions of the Proxy Statement specifically incorporated herein by reference, the Proxy Statement is not deemed to be filed as part of this Form 10-K.

PART I

Item 1. Business

GENERAL

White Mountains Insurance Group, Ltd. (the "Company" or the "Registrant") is an exempted Bermuda limited liability company whose principal businesses are conducted through its subsidiaries and affiliates. Within this report, the term "White Mountains" is used to refer to one or more entities within the consolidated organization, as the context requires. The Company's headquarters is located at 26 Reid Street, Hamilton, Bermuda HM 11, its principal executive office is located at 23 South Main Street, Suite 3B, Hanover, New Hampshire 03755-2053 and its registered office is located at Clarendon House, 2 Church Street, Hamilton, Bermuda HM 11. The Company's website is located at www.whitemountains.com. The information contained on White Mountains's website is not incorporated by reference into, and is not a part of, this report.

White Mountains is engaged in the business of making opportunistic and value-oriented acquisitions of businesses and assets in the insurance, financial services and related sectors, operating these businesses and assets through its subsidiaries and, if and when attractive exit valuations become available, disposing of these businesses and assets.

As of December 31, 2024, White Mountains conducted its business primarily in five areas: property and casualty insurance and reinsurance, municipal bond reinsurance, capital solutions for asset and wealth management firms, property and casualty insurance distribution and other operations. White Mountains's property and casualty insurance and reinsurance business is conducted through its subsidiary Ark Insurance Holdings Limited and its subsidiaries (collectively, "Ark") and Outrigger Re Ltd. Segregated Account 2023-1 ("WM Outrigger Re") (collectively with Ark, "Ark/WM Outrigger"). White Mountains's municipal bond reinsurance business is conducted through its subsidiary HG Global Ltd. and its reinsurance subsidiary HG Re Ltd. ("HG Re") (collectively with HG Re, "HG Global"). White Mountains provides capital solutions for asset and wealth management firms through its subsidiary Kudu Investment Management, LLC and its subsidiaries (collectively, "Kudu"). White Mountains's property and casualty insurance distribution business is conducted through its subsidiary PM Holdings LLC ("Bamboo Holdings") and its subsidiaries Bamboo Ide8 Insurance Services LLC ("Bamboo MGA") and Ide8 Re Inc. ("Bamboo Captive") (collectively with Bamboo Holdings and Bamboo MGA, "Bamboo"). White Mountains's other operations consist of the Company and its wholly-owned subsidiary, White Mountains Capital, LLC ("WM Capital"), its other intermediate holding companies, its wholly-owned investment management subsidiary, White Mountains Advisors LLC ("WM Advisors"), investment assets managed by WM Advisors, its interests in MediaAlpha, Inc. ("MediaAlpha"), DavidShield PassportCard Ltd. and its subsidiaries (collectively, "PassportCard/DavidShield"), Elementum Holdings LP ("Elementum"), White Mountains Partners LLC ("WTM Partners"), a Bermuda special purpose collateralized reinsurance vehicle that provides reinsurance capacity to Bamboo ("Bamboo CRV"), certain other consolidated and unconsolidated entities ("Other Operating Businesses") and certain other assets (collectively, "Other Operations").

As of December 31, 2024, White Mountains's reportable segments were Ark/WM Outrigger, HG Global, Kudu and Bamboo with its remaining operating businesses, holding companies and other assets included in Other Operations.

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ARK/WM OUTRIGGER

Overview

The Ark/WM Outrigger segment consists of Ark and WM Outrigger Re.

On January 1, 2021, White Mountains acquired a controlling ownership interest in Ark (the "Ark Transaction"). Ark is a specialty property and casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance products, including property, specialty, marine & energy, casualty and accident & health.

During the fourth quarter of 2022, Ark sponsored the formation of Outrigger Re Ltd., a Bermuda company registered as a special purpose insurer and segregated accounts company, to provide collateralized reinsurance protection on Ark's Bermuda global property catastrophe excess of loss portfolio written in the 2023 underwriting year. Ark renewed its quota share reinsurance agreement with Outrigger Re Ltd. for the 2024 and 2025 underwriting years. White Mountains consolidates its segregated account of Outrigger Re Ltd., WM Outrigger Re, in its financial statements.

Ark

Ark is a specialty property and casualty insurance and reinsurance company that offers a wide range of niche insurance and reinsurance products. Ark underwrites select coverages through its two major subsidiaries in the United Kingdom and Bermuda.

In the United Kingdom, Ark participates in the Lloyd's of London ("Lloyd's") market through Ark Corporate Member Limited ("ACML"), Ark's wholly- owned Lloyd's corporate member, which in tuprovides underwriting capacity to Lloyd's Syndicates 4020 and 3902 and Additional Central Settlement Number ("ACSN") 3832 (collectively, the "Syndicates"). ACSN 3832 writes business on behalf of Syndicate 4020. Ark Syndicate Management Limited ("ASML"), Ark's wholly-owned Lloyd's managing agent, oversees the underwriting of the Syndicates. The Syndicates underwrite a diversified portfolio of insurance and reinsurance, including property, specialty, marine & energy, casualty and accident & health. Syndicate 4020 commenced underwriting on April 1, 2007, Syndicate 3902 on January 1, 2017 and ACSN 3832 on July 1, 2024.

For the years of account prior to the Ark Transaction, a significant proportion of the Syndicates' underwriting capital was provided by third-party insurance and reinsurance groups ("TPC Providers") using whole account reinsurance contracts with Ark's corporate member. For the years of account subsequent to the Ark Transaction, Ark is no longer using TPC Providers to provide underwriting capital for the Syndicates.

In January 2021, in response to an improved underwriting environment and with the capital provided from the Ark Transaction, Ark converted its wholly- owned subsidiary Group Ark Insurance Limited ("GAIL") into a Class 4 Bermuda-domiciled insurance and reinsurance company and began to underwrite third-party business. Prior to this conversion, GAIL had been a Class 3 Bermuda-domiciled reinsurance company that only underwrote intercompany quota share reinsurance with ACML and provided additional capital to support ACML's capital requirements at Lloyd's ("Funds at Lloyd's"). As a result of the Ark Transaction, GAIL underwent significant expansion of operations during 2021 and 2022, with the recruitment of staff and enhancement of operations, to support this growth. GAIL underwrites a range of third-party business from Bermuda including property, marine & energy, specialty, casualty and accident & health lines. In November 2024, AM Best affirmed Ark's financial strength rating at "A/stable."

In both jurisdictions, Ark underwrites business primarily through insurance and reinsurance brokers and wholesalers, both in the open market and through managing general agents ("MGAs").

As of December 31, 2024 and 2023, White Mountains reported $5,134 million and $4,133 million of total assets and $1,438 million and $1,230 million of total equity related to Ark. As of December 31, 2024 and 2023, White Mountains owned 72.1% and 72.0% of Ark on a basic shares outstanding basis (61.9% and 61.9% after taking account of management's equity incentives) and reported $410 million and $337 million of noncontrolling interests related to Ark. The remaining shares are owned by current and former employees of Ark. In the future, management rollover shareholders could eaadditional shares in Ark if and to the extent that White Mountains achieves certain thresholds for its multiple of invested capital return. If fully earned, these shares would represent an additional 12.3% of the shares outstanding as of December 31, 2024.

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WM Outrigger Re

During the fourth quarter of 2022, Ark sponsored the formation of Outrigger Re Ltd., a Bermuda company registered as a special purpose insurer and segregated accounts company, to provide reinsurance capacity to Ark. Outrigger Re Ltd. was initially capitalized with $250 million of preference shares for business written in the 2023 underwriting year, of which White Mountains contributed $205 million. The remaining capital was provided by third-party investors. Outrigger Re Ltd. entered into collateralized quota share agreements with GAIL to provide reinsurance protection on Ark's Bermuda global property catastrophe excess of loss portfolio written in the 2023 underwriting year. The proceeds from the issuance of the preference shares were deposited into collateral trust accounts to fund any potential obligations under the reinsurance agreements with GAIL. Outrigger Re Ltd.'s obligations under the reinsurance agreements with GAIL are subject to an aggregate limit equal to the assets in the collateral trusts at any point in time. The terms of the reinsurance agreements are renewable upon the mutual agreement of Ark and the applicable preference shareholder of Outrigger Re Ltd.

During the fourth quarter of 2023, Ark renewed Outrigger Re Ltd. for the 2024 underwriting year with $250 million of capital. White Mountains rolled over $130 million from its commitment to the 2023 underwriting year and received a retuof capital of $75 million during 2024 as a result of its reduced capital commitment. The remaining capital was provided by third-party investors.

During the fourth quarter of 2024, Ark renewed Outrigger Re Ltd. for the 2025 underwriting year with $230 million of capital. White Mountains's total commitment was $150 million, of which $130 million was rolled over from its commitment to the 2024 underwriting year. The remaining capital was provided by third-party investors. The reduced capacity at Outrigger Re Ltd. was replaced by Ark through traditional quota share reinsurance agreements.

As of December 31, 2024 and 2023, White Mountains reported $236 million and $294 million of total assets and $196 million and $273 million of total equity related to WM Outrigger Re. As of December 31, 2024 and 2023, White Mountains owned 100% of WM Outrigger Re's preferred equity.

Insurance and Reinsurance Overview

Generally, insurance companies underwrite insurance policies in exchange for premiums paid by their customers (the insureds). An insurance policy is a contract between the insurance company and the insured where the insurance company agrees to pay for losses suffered by the insured or a third-party claimant that are covered under the contract. Such contracts are often subject to subsequent legal interpretation by courts, legislative action and arbitration.

Reinsurance is an arrangement in which a reinsurance company (the reinsurer) agrees to indemnify an insurance company (the ceding company) for insurance risks underwritten by the ceding company. Reinsurance can benefit a ceding company in several ways, including reducing net exposure to individual risks, providing protection from large or catastrophic losses and assisting in maintaining required capital levels and financial or operating leverage ratios. Reinsurance can provide a ceding company with additional underwriting capacity by permitting it to accept larger risks and underwrite a greater number of risks without increasing its capital as much as would be the case without reinsurance. Reinsurers themselves, may also purchase reinsurance, which is known as retrocessional reinsurance to cover risks assumed from ceding companies. Reinsurance companies often enter into retrocessional reinsurance agreements for many of the reasons that ceding companies enter into reinsurance agreements.

Reinsurance is generally written on a treaty or facultative basis. Treaty reinsurance is an agreement whereby the reinsurer assumes a specified portion or category of risk under all qualifying policies issued by the ceding company during the term of the agreement, usually one year. When underwriting treaty reinsurance business, the reinsurer does not evaluate each individual risk and generally accepts the original underwriting decisions made by the ceding company. Treaty reinsurance is typically written on either a proportional or excess of loss basis. A proportional reinsurance treaty is an arrangement whereby a reinsurer assumes a predetermined proportional share of the premiums and losses generated on specified business. An excess of loss treaty is an arrangement whereby a reinsurer assumes losses that exceed a specific retention of loss by the ceding company. Facultative reinsurance, on the other hand, is underwritten on a risk-by-risk basis, which allows the reinsurer to determine individual pricing for each exposure.

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Insurance and reinsurance companies incur a significant amount of their total expenses from policy obligations, which are commonly referred to as claims or losses. In settling claims, various loss adjustment expenses ("LAE") are incurred such as insurance adjusters' fees and litigation expenses. Loss and LAE are categorized by the year in which the policy is underwritten (the year of account or underwriting year) for purposes of Ark's claims management and estimation of the ultimate loss and LAE reserves. For purposes of Ark's reporting under GAAP, loss and LAE are categorized by the year in which the claim is incurred (the accident year). In the following calendar years, as Ark increases or decreases its estimate for the ultimate loss and LAE for claims in prior underwriting years, or prior accident years for reporting under GAAP, it will record favorable or unfavorable loss reserve development, which is recorded in the calendar year when such loss reserve development is determined. In addition, insurance companies incur policy acquisition expenses, such as commissions paid to agents and premium taxes, and other expenses related to the underwriting process, including employee compensation and benefits. A key measure of absolute and relative underwriting performance for an insurance company is the combined ratio. An insurance company's combined ratio is calculated by adding the ratio of incurred loss and LAE to earned premiums (the loss ratio) and the ratio of policy acquisition and other underwriting expenses to earned premiums (the expense ratio). A combined ratio under 100% indicates that an insurance company is generating an underwriting profit, while a combined ratio over 100% indicates that an insurance company is generating an underwriting loss.

Ark derives substantially all of its revenues from earned premiums, investment income and net realized and unrealized investment gains (losses). Ark also receives fee revenues and profit commissions from business ceded to its reinsurers across multiple classes of business. Written premiums represent the amount charged to an insured or reinsured party to provide coverage under an insurance or reinsurance contract, which are recognized as earned premiums within revenue over the period that insurance coverage period is provided (i.e., ratably over the life of the policy or, in the case of catastrophe premiums, in proportion to the level of insurance protection provided.) Unearned premiums represent the portion of premiums written that are applicable to future insurance coverage provided by policies. A significant period often elapses between receipt of insurance premiums and payment of insurance claims. During this time, Ark invests the premiums, earns investment income and generates net realized and unrealized investment gains (losses).

Lines of Business

Ark writes specialized lines of insurance and reinsurance across its United Kingdom and Bermuda platforms within five major lines of business: property, specialty, marine & energy, casualty and accident & health. Claims for property, specialty, marine & energy and accident & health coverages are typically reported and settled in a relatively short period of time. Casualty insurance (often referred to as liability insurance) generally covers the financial consequences of a legal liability of an individual or an organization resulting from negligent acts or omissions causing bodily injury, property damages and/or economic damages to a third-party. Settlements for casualty/liability coverages can extend for long periods of time as claims are often reported and ultimately paid or settled years after the related loss events occur.

Ark has recently added, and expects to continue to add, new business to its portfolio, as it focuses on profitable business opportunities while carefully managing underwriting risk. Ark also leads certain Lloyd's market consortia, including two that target renewable energy clients including wind farms, solar plants, hydroelectric plants, geothermal plants and wave and tidal projects.

The following table presents Ark's gross written premiums by line of business for the years ended December 31, 2024, 2023 and 2022:

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A description of Ark's business written within each line of business follows:

Property

Ark's property business is underwritten on both an insurance and reinsurance basis covering the financial consequences of accidental losses to an insured's property, such as a business's building, inventory and equipment, or personal property. Coverages provided include all risks of direct physical loss or damage, business interruption and natural and non-natural catastrophe perils. Ark's property insurance business consists primarily of direct and facultative contracts, line slips and MGA binding authorities. Ark's property insurance business is underwritten on a worldwide basis with a focus on excess & surplus lines in the United States and on large international accounts. Ark's property reinsurance business consists primarily of treaty reinsurance underwritten on a catastrophe excess of loss, per risk excess and proportional basis. Ark's property reinsurance business is underwritten on a worldwide basis with particular focus on risks in the United States, Europe and Asia. Ark also writes structured property business, which provides reinsurance capacity to primary fronting insurance companies, net after inuring reinsurance, with a limited downside risk profile that is managed through aggregated collateralized limits.

Specialty

Ark's specialty business is underwritten on both an insurance and reinsurance basis covering a range of individual risks and treaties primarily including aviation, space, political and credit, cyber, terrorism and political violence, nuclear, fine art & specie, surety and mortgage. Ark's specialty insurance and reinsurance business is underwritten on a worldwide basis.

Aviation

Aviation insurance primarily covers airlines and general aviation for loss of, or damage to, aircraft hull and ensuing passenger and third-party liability. Perils include war and war-like actions such as terrorism. Additionally, liability arising out of non-aircraft operations such as hangars and airports may be covered.

Space

Space insurance primarily covers loss of, or damage to, satellites during launch and in orbit, including faulty design that leads to early loss of operating life. Ark's space insurance is primarily written through binders supporting specialized, technical MGAs.

Political and Credit

Political and credit insurance primarily covers risks relating to the confiscation, expropriation, nationalization and deprivation of insured assets due to war, political or government action as well as contract frustration and non-payment by obligors.

Cyber

Cyber insurance primarily covers the physical damage and liabilities arising from cyber attacks, including coverage for ransomware, loss of data and third-party liabilities.

Terrorism and Political Violence

Terrorism and political violence insurance primarily covers physical loss or damage and threat thereof, including ensuing loss through business interruption, caused by declared terror events, political violence and war and war-like actions in developed and developing countries around the world.

Nuclear

Nuclear insurance covers country specific nuclear pools and companies and institutions with nuclear exposure excluded from standard property and casualty policies for coverage of physical damage and third-party liability.

Fine Art & Specie

Fine art & specie insurance primarily covers loss to fine art, specie, cash in transit and vault and jewelers' block risks as a result of theft or damage in transit or at exhibition.

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Surety

Surety insurance covers financial guarantee risks between a bond issuer, principal and obligee designed to address responsibility for debt payments, default or other financial obligations. Ark underwrites this portfolio on a reinsurance basis, primarily excess of loss, for U.S.-domiciled clients. The underlying assureds cover a variety of industries including construction, oil & gas, hotel & leisure and transportation projects.

Mortgage

Mortgage insurance covers financial guarantee and credit risks between a lending institution and a borrower designed to address responsibility for debt payments and default. Ark underwrites a reinsurance portfolio supporting government-sponsored enterprises (Fannie Mae and Freddie Mac) and private mortgage insurers on both a proportional and excess of loss basis.

Marine & Energy

Ark's marine & energy business is underwritten on both an insurance and reinsurance basis primarily covering marine hull, cargo, specie, marine & energy liabilities and upstream energy platform physical damage and liability. Marine hull consists primarily of coastal and ocean-going vessels and covers worldwide risks on an all perils or total loss only basis together with lighter craft, including yachts. Cargo consists of worldwide transits and moveable goods with a particular emphasis on bulk cargo, project cargo and pre-launch satellite risks. Specie is the transit and storage of high value goods including semiprecious and precious metals. Marine & energy liabilities consists of liability risks arising from doing business in their respective industries including liabilities arising from pollution and damage covered by protection and indemnity clubs, including for example the International Group of Protection & Indemnity Clubs. Upstream energy platform physical damage and liability covers a variety of oil and gas industry construction, exploration and production risks.

Ark's marine & energy insurance business consists of direct and facultative risks written primarily in the open market, as well as through line slips and MGA binding authorities. Ark's marine & energy reinsurance business consists of treaty reinsurance underwritten on both a proportional and excess of loss basis. Ark's marine & energy insurance and reinsurance business is underwritten on a worldwide basis.

Casualty

Ark's casualty business is underwritten on an insurance and reinsurance basis primarily covering medical malpractice, professional liability and general liability. Ark's casualty insurance business is generally written on an excess of loss and primary basis arising from operations of a wide range of predominantly large U.S. companies with global operations, including energy companies, lawyers, accountants, consultants and construction firms. Ark's casualty reinsurance business is underwritten on an excess of loss and proportional treaty basis.

Accident & Health

Ark's accident & health business is underwritten on both an insurance and reinsurance basis covering a wide range of personal accident, sickness, disability, travel, short-term life, health and medical insurance and reinsurance risks. Ark's accident & health insurance and reinsurance business consists of direct and facultative contracts written under the binding authority of external MGAs and through Accident & Health Underwriting Limited ("AHU"), Ark's wholly-owned MGA domiciled in the United Kingdom. Ark's accident & health insurance and reinsurance business is underwritten on a worldwide basis.

Geographic Concentration

The following table shows Ark's gross written premiums by geographic region based on the location of Ark's underwriting offices for the years ended December 31, 2024, 2023 and 2022:

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Marketing and Distribution

Ark offers its products and services through a network of brokers, MGAs and reinsurance intermediaries (collectively, "insurance and reinsurance intermediaries"). In the United Kingdom, Ark operates through the Syndicates with Lloyd's approved brokers and MGAs. In Bermuda, Ark primarily derives its reinsurance business through insurance and reinsurance intermediaries that represent the ceding company and its insurance business through brokers based in Bermuda and London. Ark pays commissions to brokers, MGAs and reinsurance intermediaries as compensation for facilitating the flow and processing of business, typically on industry standard percentages of premium underwritten. In addition, Ark pays certain MGAs profit commissions based on the underwriting profit of the business they produce.

During the years ended December 31, 2024, 2023 and 2022, Ark received a significant portion of its gross written premiums from four insurance and reinsurance intermediaries. The following table shows the proportion of business produced by the top four insurance and reinsurance intermediaries for the years ended December 31, 2024, 2023 and 2022:

Underwriting and Pricing

Ark aims to build a diversified and balanced portfolio of risks that generates an underwriting profit each year. Ark believes in a disciplined underwriting strategy that aims to consistently outperform the market. In hard market conditions, Ark aims to grow premiums, as pricing, terms and conditions and limit deployment are more favorable and can lead to enhanced returns on capital. In soft markets, Ark is willing to reduce its business volume when pricing, terms and conditions and limit deployment can make it more difficult to achieve an adequate retuon capital. Ark is willing to forgo business if it believes it is not priced appropriately for the exposure or risk assumed.

Ark operates an underwriting controls framework which includes individual underwriting authorities, continual quality monitoring and peer review of risks. The framework aims to ensure a high quality of underwriting through monitoring of pricing and rate change, contract certainty and appropriate terms and conditions. The nature of delegated underwriting naturally increases the risk of underwriting, through the ability of third parties being able to bind Ark to risks without detailed review of the risk involved. This risk is mitigated through the application of strict guidelines, managed by a dedicated team within the Ark compliance department. This team reviews MGA and third-party binding authority approvals pre-bind and monitors a program of audits to ensure compliance with regulations and guidelines.

Ark uses bespoke pricing models for each of the products that it underwrites. These pricing models seek to generate a pricing metric required to achieve an acceptable retuon capital for each class of business, and each of the risks priced therein. These models rely on several factors depending on the class of business, including exposure analysis, historical experience, estimates of future loss costs, claims experience and natural catastrophe outlook, including the physical risk of climate change and inflation. See "Ark - Catastrophe Risk Management and Reinsurance Protection" on page 8.

Ark actively monitors price adequacy at various points between individual risks and the portfolio level to measure and evaluate overall performance. In addition, Ark updates rates to achieve targeted returns on capital at an individual risk as well as portfolio level to enhance retuon capital.

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Competition

Specialized lines of insurance and reinsurance are highly competitive. Ark competes with other Lloyd's syndicates, London market participants and major U.S., Bermuda, European and other international insurance and reinsurance companies. The significant competitive factors for most products are price, terms and conditions, broker relationships, underwriting service, rating agency financial strength rating and claims service. Ark competes with insurance and reinsurance companies who operate in the Bermuda and Lloyd's markets such as:

• Bermuda insurance and reinsurance market: American International Group, Inc., Arch Capital Group Ltd., Aspen Insurance Holdings Ltd., AXIS Capital Holdings Ltd., Chubb Ltd., Everest Re Group, Markel Group, Inc., RenaissanceRe Holdings Ltd., SiriusPoint Ltd. and others;
• Lloyd's market: Beazley plc, Hiscox plc, Lancashire Holdings Ltd., MS Amlin Ltd. and other syndicates.

Claims Management

Effective claims management is a critical factor in achieving satisfactory underwriting results. Ark maintains an experienced staff of dedicated claims handlers and loss adjusters. These individuals seek to ensure that Ark has the appropriate level of expertise to handle complex claims. Within the claims departments, Ark also uses various shared services. These include third-party claims administrators, particularly for lower value, less specialized claims (for example in Ark's MGA-produced business), subrogation and recovery support and legal representation.

For business written in the Lloyd's market, claims handling and case reserves are established in accordance with the applicable Lloyd's Claim Scheme and Lloyd's Claims Management Principles and Oversight Framework.

Catastrophe Risk Management and Reinsurance Protection

Catastrophe Risk Management

Ark

Ark has exposure to losses caused by unpredictable catastrophic events all over the world including natural and other disasters such as hurricanes, windstorms, earthquakes, floods, wildfires, tornadoes, tsunamis and severe weather. Catastrophes can also include large losses driven by public health crises, terrorist attacks, war and war-like actions, explosions, infrastructure failures and cyber attacks. The extent of a catastrophe loss is a function of both the severity of the event and total amount of insured exposure to the event, as well as the coverage provided to customers. Increases in the value and concentration of insured property or insured employees, the effects of inflation, changes in weather patterns and increased terrorism and war and war-like actions could

increase the future frequency and/or severity of claims from catastrophic events. Climate change, which is characterized by higher temperatures, sea level rise and more extreme weather events including droughts, heavy storms, wildfires and stronger hurricanes, increases the frequency and severity of certain major natural catastrophes. There is also a growing threat of cyber catastrophes due to the increasing interconnectivity of global systems.

Ark seeks to manage its exposure to catastrophic losses by limiting and monitoring the aggregate insured value of policies in geographic areas with

exposure to catastrophic events and by buying reinsurance. To manage, monitor and analyze insured values and potential losses, Ark utilizes proprietary and third-party catastrophe management software to estimate potential losses for many different catastrophe scenarios. Ark incorporates the physical risk of climate change in its underwriting process through sensitivity and stress testing of its catastrophe models, including increased frequency of U.S. windstorms and the implications of storm surge.

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