WHITE MOUNTAINS INSURANCE GROUP LTD FILES (8-K) Disclosing Results of Operations and Financial Condition, Financial Statements and Exhibits

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On February 8, 2022, White Mountains Insurance Group, Ltd. issued a press
release announcing its results for the three months and year ended December 31,
2022. The press release furnished herewith is attached as Exhibit 99.1 to this
Form 8-K.
Certain information included in the press release constitutes non-GAAP financial
measures (as defined in Regulation G of the Securities and Exchange Commission).
Specifically, there are 15 non-GAAP financial measures: (i) adjusted book value
per share, (ii) growth in adjusted book value per share excluding net realized
and unrealized investment losses from White Mountains's investment in
MediaAlpha, (iii) BAM's gross written premiums and member surplus contributions
("MSC") from new business, (iv) Ark's adjusted loss and loss adjustment expense
ratio, (v) Ark's adjusted insurance acquisition expense ratio, (vi) Ark's
adjusted other underwriting expense ratio, (vii) Ark's adjusted combined ratio,
(viii) NSM's earnings before interest, taxes, depreciation and amortization
("EBITDA"), (ix) NSM's adjusted EBITDA, (x) NSM's pro forma adjusted EBITDA,
(xi) Kudu's EBITDA, (xii) Kudu's adjusted EBITDA, (xiii) Kudu's annualized
adjusted EBITDA, (xiv) total consolidated portfolio return excluding MediaAlpha
and (xv) total equity portfolio returns excluding MediaAlpha. These non-GAAP
financial measures have been reconciled to their most comparable GAAP financial
measures.
Adjusted book value per share is a non-GAAP financial measure which is derived
by adjusting (i) the GAAP book value per share numerator and (ii) the common
shares outstanding denominator, as described below. The GAAP book value per
share numerator is adjusted (i) to include a discount for the time value of
money arising from the modeled timing of cash payments of principal and interest
on the BAM surplus notes and (ii) to add back the unearned premium reserve, net
of deferred acquisition costs, at HG Global. Under GAAP, White Mountains is
required to carry the BAM surplus notes, including accrued interest, at nominal
value with no consideration for time value of money. Based on a debt service
model that forecasts operating results for BAM through maturity of the surplus
notes, the present value of the BAM surplus notes, including accrued interest
and using an 8% discount rate, was estimated to be $130 million, $132 million,
$147 million and $149 million less than the nominal GAAP carrying values as of
December 31, 2021, September 30, 2021, December 31, 2020 and September 30, 2020,
respectively. The value of HG Global's unearned premium reserve, net of deferred
acquisition costs, was $159 million, $154 million, $142 million and $136 million
as of December 31, 2021, September 30, 2021, December 31, 2020 and September 30,
2020, respectively. White Mountains believes these adjustments are useful to
management and investors in analyzing the intrinsic value of HG Global,
including the value of the BAM surplus notes and the value of the in-force
business at HG Re, HG Global's reinsurance subsidiary. The denominator used in
the calculation of adjusted book value per share equals the number of common
shares outstanding adjusted to exclude unearned restricted common shares, the
compensation cost of which, at the date of calculation, has yet to be amortized.
Restricted common shares are earned on a straight-line basis over their vesting
periods. The reconciliation of GAAP book value per share to adjusted book value
per share is included on page 8 of Exhibit 99.1 to this Form 8-K.
The growth in adjusted book value per share excluding net realized and
unrealized investment losses from White Mountains's investment in MediaAlpha on
page 1 of Exhibit 99.1 to this Form 8-K is a non-GAAP financial measure. White
Mountains believes this measure to be useful to management and investors by
showing the underlying performance of White Mountains without regard to the
impact of changes in MediaAlpha's share price. A reconciliation from GAAP to the
reported percentages is as follows:
                                                                 Three Months Ended                 Twelve Months Ended
                                                                 December 31, 2021                   December 31, 2021
Growth in GAAP book value per share                                     1.1%                               (6.5)%
Adjustments to book value per share (see
reconciliation on page 8
   of Exhibit 99.1 to this Form 8-K)                                    0.1%                                0.8%

Remove net realized and unrealized investment losses
from

   White Mountains's investment in MediaAlpha                           1.6%                               10.0%

Growth in adjusted book value per share excluding net
realized

   and unrealized investment losses from White
Mountains's
   investment in MediaAlpha                                             2.8%                                4.3%



BAM's gross written premiums and MSC from new business is a non-GAAP financial
measure, which is derived by adjusting gross written premiums and MSC collected
(i) to include the present value of future installment MSC not yet collected and
(ii) to exclude the impact of gross written premium adjustments related to
policies closed in prior periods. White Mountains believes these adjustments are
useful to management and investors in evaluating the volume and pricing of new
business closed during the period. The reconciliation from GAAP gross written
premiums to gross written premiums and MSC from new business is included on page
17 of Exhibit 99.1 to this Form 8-K.

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Ark's adjusted loss and loss adjustment expense ratio, adjusted insurance
acquisition expense ratio, adjusted other underwriting expense ratio and
adjusted combined ratio are non-GAAP financial measures, which are derived by
adjusting the GAAP ratios to add back the impact of whole-account quota-share
reinsurance arrangements related to third-party capital providers for Ark's
Lloyd's syndicates. The impact of these reinsurance arrangements relates to
years of account prior to White Mountains's transaction with Ark. White
Mountains believes these adjustments are useful to management and investors in
evaluating Ark's results on a fully aligned basis. The reconciliation from the
GAAP ratios to the adjusted ratios is included on page 18 of Exhibit 99.1 to
this Form 8-K.
NSM's EBITDA, adjusted EBITDA and pro forma adjusted EBITDA are non-GAAP
financial measures. EBITDA is a non-GAAP financial measure that excludes
interest expense on debt, income tax (expense) benefit, depreciation and
amortization of other intangible assets from GAAP net income (loss). Adjusted
EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP
net income (loss) in addition to those excluded from EBITDA. The adjustments
relate to (i) change in fair value of contingent consideration liabilities, (ii)
non-cash equity-based compensation expense, (iii) impairments of intangible
assets, (iv) loss on assets held for sale, (v) transaction expenses, (vi)
investments made in the development of new business lines, (vii) restructuring
expenses and (viii) legal settlements. A description of each follows:
•Change in fair value of contingent consideration liabilities - Contingent
consideration liabilities are amounts payable to the sellers of businesses
purchased by NSM that are contingent on the earnings of such businesses in
periods subsequent to their acquisition. Under GAAP, contingent consideration
liabilities are initially recorded at fair value as part of purchase accounting,
with the periodic change in the fair value of these liabilities recorded as
income or an expense.
•Non-cash equity-based compensation expense - Represents non-cash expenses
related to NSM's management compensation emanating from the grants of equity
units.
•Impairments of intangible assets - Represents expense related to NSM's
write-off of intangible assets. For the periods presented, the impairments
related primarily to NSM's write-off of intangible assets in its U.K. vertical.
The impairments related to lower premium volumes, including due to the impact of
the COVID-19 pandemic, and certain reorganization initiatives in the U.K.
vertical.
•Loss on assets held for sale - Represents the loss on net assets held for sale
related to the Fresh Insurance motor business.
•Transaction expenses - Represents costs directly related to NSM's mergers and
acquisitions activity, such as transaction-related compensation, banking,
accounting and external lawyer fees, which are not capitalized and are expensed
under GAAP.
•Investments made in the development of new business lines - Represents the net
loss related to the start-up of newly established lines of business, which NSM
views as investments.
•Restructuring expenses - Represents expenses associated with eliminating
redundant work force and facilities that often arise as a result of NSM's
post-acquisition integration strategies. For the periods presented, this
adjustment relates primarily to NSM's expenses incurred in certain
reorganization initiatives in the U.K. vertical.
•Legal settlements - Represents amounts recognized from legal settlements.
Pro forma adjusted EBITDA is a non-GAAP financial measure that starts with
adjusted EBITDA and also (i) includes the earnings (losses) of acquired
businesses for the period of time over the previous 12 months that the
businesses were not owned by NSM and (ii) removes the earnings (losses) for the
previous 12 months related to businesses sold by NSM. White Mountains believes
that these non-GAAP financial measures are useful to management and investors in
evaluating NSM's performance. White Mountains also believes that pro forma
adjusted EBITDA is useful to management and investors to demonstrate the
earnings profile of NSM's business as of the end of the period for a full 12
month period. See page 19 of Exhibit 99.1 to this Form 8-K for the
reconciliation of NSM's GAAP net income (loss) to EBITDA, adjusted EBITDA and
pro forma adjusted EBITDA.
Kudu's EBITDA, adjusted EBITDA and annualized adjusted EBITDA are non-GAAP
financial measures. EBITDA is a non-GAAP financial measure that excludes
interest expense on debt, income tax (expense) benefit, depreciation and
amortization of other intangible assets from GAAP net income (loss). Adjusted
EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP
net income (loss) in addition to those excluded from EBITDA. The adjustments
relate to (i) net realized and unrealized investment gains (losses) on Kudu's
revenue and earnings participation contracts, (ii) non-cash equity-based
compensation expense and (iii) transaction expenses. A description of each
adjustment follows:
•Net realized and unrealized investment gains (losses) - Represents net
unrealized investment gains and losses recorded on Kudu's revenue and earnings
participation contracts, which are recorded at fair value under GAAP, and
realized investment gains and losses from participation contracts sold during
the period.
•Non-cash equity-based compensation expense - Represents non-cash expenses
related to Kudu's management compensation that are settled with equity units in
Kudu.
•Transaction expenses - Represents costs directly related to Kudu's mergers and
acquisitions activity, such as external lawyer, banker, consulting and placement
agent fees, which are not capitalized and are expensed under GAAP.
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Annualized adjusted EBITDA is a non-GAAP financial measure that (i) annualizes
partial year revenues related to Kudu's revenue and earnings participation
contracts acquired during the previous 12-month period and (ii) removes revenues
related to revenue and earnings participation contracts sold during the previous
12-month period. Annualized revenues related to participation contracts acquired
during the previous 12-month period are calculated on a contract-by-contract
basis by annualizing the revenues received for the partial 12-month period. For
example, if a participation contract was in effect for four months, the amount
added equals twice that amount. The adjustment to remove revenues for contracts
sold during the previous 12-month period is calculated on a contract-by-contract
basis based on actual revenues earned. White Mountains believes that these
non-GAAP financial measures are useful to management and investors in evaluating
Kudu's performance. White Mountains also believes that annualized adjusted
EBITDA is useful to management and investors to demonstrate the earnings profile
of Kudu's business as of the end of the period for a full 12-month period. See
page 20 of Exhibit 99.1 to this Form 8-K for the reconciliation of Kudu's GAAP
net income (loss) to EBITDA, adjusted EBITDA and annualized adjusted EBITDA.
Total consolidated portfolio return excluding MediaAlpha and total equity
portfolio return excluding MediaAlpha are non-GAAP financial measures that
remove the net investment income and net realized and unrealized investment
gains (losses) from White Mountains's investment in MediaAlpha. White Mountains
believes these measures to be useful to management and investors by showing the
underlying performance of White Mountains's investment portfolio and equity
portfolio without regard to White Mountains's investment in MediaAlpha. The
following tables present reconciliations from GAAP to the reported percentages:
                                                        Three Months Ended December 31,                               Twelve Months Ended December 31,
                                                      2021                              2020                         2021                             2020
Total consolidated portfolio return              0.3                %                14.3         %           (3.4)               %                31.9         %
Remove MediaAlpha                                1.5                %               (12.6)        %            9.8                %               (27.3)        %
Total consolidated portfolio return
  excluding MediaAlpha                           1.8                %                    1.7      %                 6.4           %                    4.6      %



                                              Three Months Ended                Twelve Months Ended
. . .

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

99.1 Press Release of White Mountains Insurance Group, Ltd. dated February 8,
2022, furnished herewith.