<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2000
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)
Bermuda 94-2708455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 South Main Street, Hanover, New Hampshire 03755-2053
(Address of principal executive offices including zip code)
(603) 643-1567
(Registrant's telephone number, including area code)
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 |X| No |_|
As of August 7, 2000, 5,880,115 shares of Common Stock with a par value of $1.00
per share were outstanding.
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets,
June 30, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Income and Comprehensive Income
(Unaudited), Three Months and Six Months Ended June 30, 2000
and 1999 4
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Items 1 through 6 20
SIGNATURES 21
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Fixed maturity investments, at fair value (cost $1,126.8 and $957.9) $1,106.4 $ 924.5
Common equity securities, at fair value (cost $217.4 and $100.4) 219.8 108.4
Short-term investments, at amortized cost (which approximated market value) 202.4 117.5
Other investments (cost $62.4 and $57.5) 71.2 68.3
-------- --------
Total investments 1,599.8 1,218.7
Cash 11.5 3.9
Investments in unconsolidated insurance affiliates 478.8 422.6
Reinsurance recoverable on paid and unpaid losses 400.3 193.7
Insurance and reinsurance balances receivable 151.3 49.8
Deferred acquisition costs 46.6 22.2
Goodwill 26.6 3.6
Investment income accrued 18.8 15.0
Other assets 239.8 103.3
Net assets of discontinued mortgage banking operations 16.2 16.3
-------- --------
Total Assets $2,989.7 $2,049.1
======== ========
Liabilities
Loss and loss adjustment expense reserves $1,600.8 $ 851.0
Unearned insurance and reinsurance premiums 195.7 92.1
Short-term debt 10.0 4.0
Long-term debt 197.7 202.8
Deferred credits 121.0 100.6
Accounts payable and other liabilities 223.8 184.3
-------- --------
Total liabilities 2,349.0 1,434.8
-------- --------
Shareholders' Equity
Common stock at $1 par value per share - authorized 50,000,000 shares;
issued and outstanding 5,884,824 and 5,946,953 shares 5.9 5.9
Paid-in surplus 66.2 67.0
Retained earnings 517.0 534.2
Accumulated other comprehensive income, after tax 51.6 7.2
-------- --------
Total shareholders' equity 640.7 614.3
-------- --------
Total Liabilities and Shareholders' Equity $2,989.7 $2,049.1
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Unaudited
(millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Earned insurance and reinsurance premiums $122.8 $ 72.6 $193.2 $166.3
Gain (loss) on sale of Valley Group (5.4) 88.1 (5.4) 88.1
Net investment income 20.5 13.4 35.0 29.2
Net realized gains (losses) on investments and other assets 1.8 17.8 (4.2) 26.8
Earnings (losses) from unconsolidated insurance affiliates (.1) 4.8 (3.9) 9.0
Amortization of deferred credits and other benefits 14.6 1.9 22.4 3.7
Other revenue 9.7 .9 9.9 3.3
------ ------ ------ ------
Total revenues 163.9 199.5 247.0 326.4
------ ------ ------ ------
Expenses:
Losses and loss adjustment expenses 107.3 56.6 160.3 123.0
Insurance and reinsurance acquisition expenses 32.4 16.7 50.3 39.5
Compensation and benefits 12.4 12.3 19.1 25.1
General expenses 4.8 5.1 13.7 9.2
Interest expense 4.1 4.0 8.2 8.2
------ ------ ------ ------
Total expenses 161.0 94.7 251.6 205.0
------ ------ ------ ------
Pretax earnings (loss) 2.9 104.8 (4.6) 121.4
Tax provision 3.1 41.0 1.2 46.8
------ ------ ------ ------
Net income (loss) from continuing operations (.2) 63.8 (5.8) 74.6
Gain from sale of discontinued mortgage banking operations, after tax -- 14.9 -- 14.9
Net income (loss) from discontinued mortgage banking operations -- (2.0) -- 1.0
------ ------ ------ ------
Net income (loss) (.2) 76.7 (5.8) 90.5
====== ====== ====== ======
Other comprehensive income (loss) items arising during the period, after tax:
Net change in unrealized gains for investments held 9.7 (12.8) 43.0 (28.0)
Net change in foreign currency translation (.3) .8 (.4) .7
Recognition of net unrealized (gains) losses for investments sold (2.8) (11.5) 1.8 (17.4)
------ ------ ------ ------
Comprehensive net income $ 6.4 $ 53.2 $ 38.6 $ 45.8
====== ====== ====== ======
Basic earnings per share:
Net income (loss) $ (.03) $13.94 $ (.97) $15.97
Comprehensive net income 1.08 9.66 6.54 8.08
Diluted earnings per share:
Net income (loss) $ (.03) $12.41 $ (.97) $14.25
Comprehensive net income 1.08 8.59 6.54 7.20
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
2000 1999
------ ------
<S> <C> <C>
Cash flows from operations:
Net (loss) income from continuing operations $ (5.8) $ 74.6
Charges (credits) to reconcile net income to cash flows from operations:
Loss (gain) on sale of Valley Group 5.4 (88.1)
Net realized losses (gains) from investments and other assets 4.2 (26.8)
Undistributed loss (earnings) from unconsolidated insurance affiliates 5.3 (8.2)
Amortization of deferred credits and other benefits (22.4) (3.7)
Decrease in unearned insurance and reinsurance premiums (27.4) (.8)
Decrease in reinsurance recoverable on paid and unpaid losses 39.0 5.6
Decrease in insurance loss and loss adjustment expense reserves (32.4) (35.5)
Net change in current and deferred tax assets and liabilities (37.8) 42.7
Net change in other assets 4.8 1.4
Net change in other liabilities 11.7 (1.4)
Other, net 9.9 10.0
------ ------
Net cash flows used for operations (45.5) (30.2)
------ ------
Cash flows from investing activities:
Net decrease in short-term investments (84.1) (68.8)
Sales of common equity securities and other investments 66.3 85.8
Sales and maturities of fixed maturity investments 221.7 139.7
Proceeds from sale of consolidated subsidiary, net of cash balances sold -- 121.8
Purchases of common equity securities and other investments (144.0) (20.2)
Purchases of fixed maturity investments (69.7) (32.4)
Purchases of consolidated subsidiaries, net of cash balances acquired 67.9 (66.4)
Investment in unconsolidated insurance affiliate -- (15.7)
Net sales (purchases) of fixed assets 1.9 (1.2)
------ ------
Net cash flows provided from investing activities 60.0 142.6
------ ------
Cash flows from financing activities
Net repayments of short-term debt (9.0) (51.5)
Issuances of long-term debt 15.0 --
Repayments of long-term debt -- (70.6)
Purchases of common stock retired (8.0) (121.6)
Cash dividends paid to shareholders (4.7) (4.4)
------ ------
Net cash used for financing activities (6.7) (248.1)
------ ------
Net cash (used for) provided from discontinued operations (.2) 115.7
------ ------
Net increase (decrease) in cash during period 7.6 (20.0)
Cash balances at beginning of period 3.9 22.4
------ ------
Cash balance at end of period $ 11.5 $ 2.4
====== ======
Supplemental cash flows information:
Interest paid $ (7.9) $(34.9)
Net income taxes paid (39.0) (4.2)
Common stock issued to employees in lieu of cash compensation -- (3.4)
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
White Mountains Insurance Group, Ltd. (the "Company") and its subsidiaries
(collectively, "White Mountains") and have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). The
Company is a Bermuda corporation with its headquarters located at Crawford
House, 23 Church Street, Hamilton, Bermuda and its principal executive office
located at 80 South Main Street, Hanover, New Hampshire, 03755-2053. The
Company's consolidated property and casualty reinsurance operations are
conducted through Folksamerica Holding Company, Inc. ("Folksamerica"). The
Company's consolidated property and casualty insurance operations are conducted
through Peninsula Insurance Company ("PIC"), American Centennial Insurance
Company ("ACIC"), British Insurance Company of Cayman ("BICC") and Waterford
Insurance Company ("Waterford"). ACIC and BICC are currently in run-off and
Waterford is inactive. The Company's principal unconsolidated affiliates at June
30, 2000 consisted of a 26% interest in Financial Security Assurance Holdings
Ltd. ("FSA"), which writes municipal and commercial bond credit enhancement
insurance and a 50% interest in Main Street America Holdings, Inc. ("MSA"), a
stock subsidiary of National Grange Mutual ("NGM"), which shares 60% of NGM's
pool of east coast "main street" commercial and personal lines business.
All significant intercompany transactions have been eliminated in consolidation.
The financial statements include all adjustments considered necessary by
management to fairly present the financial position, results of operations and
cash flows of White Mountains. These interim financial statements may not be
indicative of financial results for the full year and should be read in
conjunction with the Company's 1999 Annual Report on Form 10-K. The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Certain amounts in the prior period financial
statements have been reclassified to conform with the current presentation.
Amounts presented in the statement of cash flows are shown net of balances
acquired and sold in the purchase or sale of the Company's consolidated
subsidiaries.
Disposition activities
On May 1, 1999, the Company concluded its sale of substantially all its mortgage
banking assets to a third party. As a result of the Company's decision to
dispose of its net mortgage banking assets, these activities are shown as
discontinued operations herein. See Note 2.
On June 17, 1999, White Mountains completed the sale of Valley Group, Inc.
("Valley Group") to a third party. Valley Group represented the majority of
White Mountains' primary property and casualty insurance operations at the time
of sale. The sale of Valley Group did not include Waterford, a small property
and casualty insurance company which is licensed to write property and casualty
insurance in 48 states.
On July 5, 2000, White Mountains sold its wholly-owned subsidiary, White
Mountains Holdings, Inc. and all its other holdings of FSA common stock to Dexia
S.A. ("Dexia"). See Note 7.
Acquisition activities
As of June 30, 2000 and December 31, 1999, White Mountains had deferred credit
balances of $121.0 million and $100.6 million, respectively, and goodwill of
$26.6 million and $3.6 million, respectively. The deferred credits and goodwill
resulted principally from the acquisition activities outlined below.
-6-
<PAGE>
In August 1998 White Mountains acquired all the outstanding common stock of
Folksamerica thereby causing Folksamerica to become a consolidated subsidiary of
the Company as of that date. Because the cost of White Mountains' investment in
Folksamerica was less than the value of Folksamerica's net identifiable assets
at that date, White Mountains recorded a $39.8 million deferred credit ($26.0
million at June 30, 2000) that is being amortized to income ratably over the
estimated period of benefit of five years.
In October 1999 White Mountains acquired the International American Group (which
consisted primarily of PIC, ACIC and BICC) for $86.7 million in cash. Because
the cost of acquiring PIC, ACIC and BICC was less than the value of its net
identifiable assets, the Company recorded a $62.0 million deferred credit ($47.3
million at June 30, 2000) which is being amortized ratably over the estimated
period of benefit of three years.
In May and September 1999 White Mountains exercised stock options to acquire
2,560,607 shares of the common stock of FSA. Because the cost of White
Mountains' investment in FSA common stock (resulting from the exercise of the
stock options) was less than the incremental portion of FSA's net identifiable
assets it acquired at the date of exercise, White Mountains recorded a $142
million deferred credit ($11.5 million at June 30, 2000) that is being amortized
to income ratably over the estimated period of benefit.
In June 1999 White Mountains acquired USF Re Insurance Co. ("USF Re") for total
consideration of $92.5 million. The purchase consideration included the issuance
of a $20.8 million, five-year note by White Mountains (which has been reduced to
$1.8 million at June 30, 2000 due to adverse loss development post acquisition)
with the balance paid in cash. White Mountains did not record a significant
amount of goodwill in connection with its acquisition of USF Re.
In March 2000 White Mountains acquired PCA Property & Casualty Insurance Company
("PCA"), a Florida-domiciled insurance company specializing in workers'
compensation which is in run-off, for $122.3 million in cash. Because the cost
of PCA was less than the fair value of its net identifiable assets acquired at
that date, White Mountains recorded a $3.9 million deferred credit on March
31, 2000 ($36.2 million at June 30, 2000) that is being amortized to income over
the estimated period of benefit of six years.
In May 2000 White Mountains completed its acquisition of the reinsurance
operations of Risk Capital Re ("Risk Capital"), a wholly-owned subsidiary of
Risk Capital Holdings, Inc. for $20.3 million in cash plus related expenses.
Because the cost of Risk Capital was more than the fair value of its net
identifiable assets at that date, White Mountains recorded $23.6 million in
goodwill ($23.5 million at June 30, 2000) that is being amortized to income over
the estimated period of benefit.
-7-
<PAGE>
Note 2. Discontinued Mortgage Banking Operations
Summary financial results of White Mountains' discontinued mortgage banking
operations follow.
STATEMENTS OF NET ASSETS OF DISCONTINUED MORTGAGE BANKING OPERATIONS
--------------------------------------------------------------------------------
June 30, December 31,
Millions 2000 1999
--------------------------------------------------------------------------------
Assets:
Cash and investments $10.2 $11.2
Residual mortgage loans 19.6 29.5
Other assets 13.4 17.8
-----------------
Total assets of discontinued mortgage banking assets $43.2 $58.5
-----------------
Liabilities:
Accounts payable and other liabilities $27.0 $42.2
-----------------
Net assets of discontinued mortgage banking operations $16.2 $16.3
================================================================================
STATEMENTS OF INCOME FROM DISCONTINUED MORTGAGE BANKING OPERATIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Three Months Six Months
ended June 30, ended June 30,
-------------- --------------
Millions 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Realized investment gains and net investment income $ 4.2 $ 6.3 $ 4.2 $27.9
Net gain on sales of mortgages -- 5.1 -- 25.4
Net mortgage servicing revenue -- 2.7 -- 10.9
Other mortgage operations revenue -- 3.0 -- 12.0
------------- -------------
Total revenues 4.2 17.1 4.2 76.2
------------- -------------
Expenses:
Compensation and benefits -- 7.5 -- 28.5
Interest expense -- 5.4 -- 24.5
General expenses 4.2 6.4 4.2 19.3
------------- -------------
Total expenses 4.2 19.3 4.2 72.3
------------- -------------
Pretax earnings (loss) -- (2.2) -- 3.9
Income tax benefit (provision) -- .5 -- (1.7)
------------- -------------
Net income (loss) before minority interest -- (1.7) -- 2.2
Minority interest - preferred stock dividends -- (.3) -- (1.2)
------------- -------------
Net income (loss) from discontinued mortgage banking operations $ -- $(2.0) $ -- $ 1.0
===================================================================================================
</TABLE>
-8-
<PAGE>
Note 3. Reinsurance and Insurance Loss and Loss Adjustment Expense Reserves
The following table summarizes the loss and loss adjustment expense reserve
activities of Folksamerica's reinsurance operations for the three months and six
months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
Millions 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross beginning balance $1,175.0 $ 706.5 $ 782.1 $ 723.2
Less beginning reinsurance recoverable on unpaid losses (292.8) (122.5) (136.2) (129.0)
--------------------------------------------
Net loss and loss adjustment expense reserves 882.2 584.0 645.9 594.2
Net loss and loss adjustment expense reserves acquired - USF Re(1) -- 106.4 -- 106.4
Net loss and loss adjustment expense reserves acquired - PCA(1) -- -- 252.3 --
Net loss and loss adjustment expense reserves acquired - Risk Capital(1) 312.5 -- 312.5 --
Losses and loss adjustment expenses incurred relating to:
Current year losses 90.5 29.6 139.3 65.2
Prior year losses 8.4 2.4 10.0 5.0
--------------------------------------------
Total incurred losses and loss adjustment expenses 98.9 32.0 149.3 70.2
Loss and loss adjustment expenses paid relating to:
Current year losses (2.8) (5.2) (5.6) (6.8)
Prior year losses (111.1) (43.2) (174.7) (90.0)
--------------------------------------------
Total loss and loss adjustment expense payments (113.9) (48.4) (180.3) (96.8)
Net ending balance 1,179.7 674.0 1,179.7 674.0
Plus ending reinsurance recoverable on unpaid losses 353.4 144.2 353.4 144.2
--------------------------------------------
Gross ending balance $1,533.1 $ 818.2 $1,533.1 $ 818.2
========================================================================================================================
</TABLE>
(1) Reinsurance recoverables on unpaid losses acquired in the Risk Capital, PCA
and USF Re acquisitions were $59.1 million, $153.3 million and $21.8 million,
respectively.
Incurred reinsurance losses totalling $10.0 million for the six months ended
June 30, 2000, related to prior accident years are primarily attributable to
reserve additions resulting from USF Re and asbestos, environmental liability
and breast implant exposures. Incurred reinsurance losses totalling $5.0 million
for the six months ended June 30, 1999, related to prior accident years are
primarily attributable to reserve additions resulting from asbestos,
environmental liability and breast implant exposures.
The following table summarizes the loss and loss adjustment expense reserve
activities of White Mountains' insurance operations for the three months and six
months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Millions 2000 1999 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross beginning balance $66.0 88.8 $68.9 $88.5
Less beginning reinsurance recoverable on unpaid losses (31.5) (8.9) (32.8) (8.9)
--------------------------------
Net loss and loss adjustment expense reserves 34.5 79.9 36.1 79.6
Losses and loss adjustment expenses incurred 8.4 24.6 11.0 52.8
Loss and loss adjustment expenses paid (4.3) (20.8) (8.5) (48.7)
Net loss and loss adjustment expenses sold - Valley Group -- (83.1) -- (83.1)
--------------------------------
Net ending balance 38.6 .6 38.6 .6
Plus ending reinsurance recoverable on unpaid losses 29.1 4.2 29.1 4.2
--------------------------------
Gross ending balance $67.7 4.8 $67.7 $ 4.8
=============================================================================================
</TABLE>
Loss and loss adjustment expenses incurred during the periods presented did not
include significant reserve strengthening for losses and loss adjustment
expenses relating to prior years.
-9-
<PAGE>
Note 4. Earnings Per Share
Basic earnings per share amounts are based on the weighted average number of the
Company's common stock ("Shares") outstanding. Diluted earnings per share
amounts are based on the weighted average number of Shares and the net effect of
potential dilutive Shares outstanding. In the diluted earnings per share
calculation, the Company's net income is reduced by an amount deemed to be
reflective of the dilution to FSA's reported net income caused by its investment
in FSA convertible preferred stock.
The following table outlines the Company's computation of earnings per Share for
the three months and six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings per Share numerators (in millions):
Net income (loss) $ (.2) $ 76.7 $ (5.8) $ 90.5
================ ================
Net income (loss) from continuing operations $ (.2) $ 63.8 $ (5.8) $ 74.5
================ ================
Comprehensive net income $ 6.4 $ 53.2 $ 38.6 $ 45.8
================ ================
---------------------------------------------------------------------------------------------------------------
Diluted earnings per Share numerators (in millions):
Net income (loss) $ (.2) $ 76.7 $ (5.8) $ 90.5
Dilution to earnings from unconsolidated insurance affiliates -- (.1) -- (.2)
---------------- ----------------
Diluted net income (loss) $ (.2) $ 76.6 $ (5.8) $ 90.3
================ ================
Diluted net income (loss) from continuing operations $ (.2) $ 63.7 $ (5.8) $ 74.4
================ ================
Diluted comprehensive net income $ 6.4 $ 53.1 $ 38.6 $ 45.6
================ ================
---------------------------------------------------------------------------------------------------------------
Earnings per Share denominators (in thousands):
Basic earnings per Share denominator (average common shares outstanding) 5,892 5,508 5,909 5,669
Dilutive stock options and warrants to acquire common stock (a) -- 669 -- 669
---------------- ----------------
Diluted earnings per Share denominator 5,892 6,177 5,909 6,338
================ ================
---------------------------------------------------------------------------------------------------------------
Basic earnings per Share (in dollars):
Net income (loss) $ (.03) $13.94 $ (.97) $15.97
================ ================
Net income (loss) from continuing operations $ (.03) $11.58 $ (.97) $13.16
================ ================
Comprehensive net income $ 1.08 $ 9.66 $ 6.54 $ 8.08
================ ================
---------------------------------------------------------------------------------------------------------------
Diluted earnings per Share (in dollars):
Net income (loss) $ (.03) $12.41 $ (.97) $14.25
================ ================
Net income (loss) from continuing operations $ (.03) $11.56 $ (.97) $11.74
================ ================
Comprehensive net income $ 1.08 $ 8.59 $ 6.54 $ 7.20
===============================================================================================================
</TABLE>
(a) The 2000 periods exclude the net anti-dilutive effects of stock options to
acquire 81,000 Shares at prices ranging from $107.52 to $108.32 per Share.
The 1999 periods include the net dilutive effects of warrants to acquire
1,000,000 shares at $21.66 per Share and stock options to acquire 2,000
Shares at $24.82 per Share.
-10-
<PAGE>
Note 5. Accounting Standards Recently Adopted and Issued
Accounting standards recently adopted and issued
In October 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position ("SOP") 98-7 entitled "Deposit Accounting:
Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Risk".
SOP 98-7 provides guidance on how to account for all insurance and reinsurance
contracts that do not transfer insurance risk. SOP 98-7 is effective for periods
beginning January 1, 2000, with early adoption permitted. The adoption of SOP
98-7 did not have a material impact on White Mountains' financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record all
derivatives on the balance sheet as either assets or liabilities and measure
those instruments at fair value. The manner in which companies are to record
gains and losses resulting from changes in the values of those derivatives
depends on the use of the derivative and whether it qualifies for hedge
accounting. The Company is not currently invested in traditional derivative
financial instruments for hedging or for any other purpose. However, under SFAS
133 derivatives may be deemed to be embedded in other financial instruments. If
the embedded derivatives meet certain criteria, they must be bifurcated from the
original contract and separately accounted for in a manner that is consistent
with other derivative financial instruments. SFAS No. 133 is effective for
fiscal years beginning after June 15, 2000. White Mountains expects to complete
its initial evaluation of the impact of the adoption of SFAS 133 and the
potential effects on its financial position and results of operations during the
2000 third quarter.
Note 6. Segment Information
White Mountains has determined that its reportable segments include Reinsurance,
Property and Casualty Insurance, Investments in Unconsolidated Insurance
Affiliates (which includes White Mountains' investment in MediaOne preferred
stock for the 1999 period) and Holding Company (primarily the operations of the
Company and certain of its onshore and offshore subsidiary holding companies).
Investment results are included within the segment to which the investments
relate. The Company has made its determination of segments based on
consideration of the following criteria: (i) the nature of the business
activities of each of the Company's subsidiaries and affiliates; (ii) the manner
in which the Company's subsidiaries and affiliates are organized; (iii) the
existence of primary managers responsible for specific subsidiaries and
affiliates; and (iv) the organization of information provided to the Company's
Board of Directors. There are no significant intercompany transactions among
White Mountains' segments other than occasional intercompany sales and transfers
of investment securities and intercompany management fees (all of which have
been eliminated herein). Financial information presented by segment is shown
below:
-11-
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Property and Investments in
Casualty Unconsolidated Holding
Millions Reinsurance Insurance Affiliates Company Total
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $182.3 $ 11.1 $ -- $ -- $193.4
Gain on sale of Valley Group -- -- -- (5.4) (5.4)
Net investment income 29.4 4.2 -- 1.4 35.0
Net realized investment gains (losses) (5.9) -- -- 1.7 (4.2)
Earnings (losses) from unconsolidated insurance affiliates -- -- (3.9) -- (3.9)
Amortization of deferred credit and other benefits 10.6 -- .2 11.6 22.4
Other revenue 1.4 8.3 -- -- 9.7
-----------------------------------------------------------------------
Total revenues $217.8 $ 23.6 $ (3.7) $ 9.3 $247.0
=======================================================================
Pretax earnings (loss) $ 5.7 $ 6.3 $ (3.7) $(12.9) $ (4.6)
=======================================================================
Net income (loss) from continuing operations $ 6.9 $ 3.8 $ (2.8) $(13.7) $ (5.8)
<CAPTION>
====================================================================================================================================
Six Months Ended June 30, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $ 99.3 $ 70.0 $ -- $ -- $169.3
Gain on sale of Valley Group -- -- -- 88.1 88.1
Net investment income 22.8 3.2 1.9 1.3 29.2
Net realized investment gains 4.3 9.7 -- 12.8 26.8
Earnings from unconsolidated insurance affiliates -- -- 9.0 -- 9.0
Amortization of deferred credit 3.6 -- -- .1 3.7
Other revenue -- -- -- .3 .3
-----------------------------------------------------------------------
Total revenues $130.0 $ 82.9 $ 10.9 $102.6 $326.4
=======================================================================
Pretax earnings $ 17.8 $ 5.2 $ 10.9 $ 87.5 $121.4
=======================================================================
Net income from continuing operations $ 13.8 $ 3.5 $ 7.8 $ 49.5 $ 74.6
====================================================================================================================================
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Property and Investments in
Casualty Unconsolidated Holding
Millions Reinsurance Insurance Affiliates Company Total
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $117.5 $ 5.5 $ -- $ -- $123.0
Gain on sale of Valley Group -- -- -- (5.4) (5.4)
Net investment income 17.7 2.1 -- .7 20.5
Net realized investment gains .8 -- -- 1.0 1.8
Earnings (losses) from unconsolidated insurance affiliates -- -- (.1) -- (.1)
Amortization of deferred credit and other benefits 8.7 -- .1 5.8 14.6
Other revenue 1.4 8.1 -- -- 9.5
-----------------------------------------------------------------------
Total revenues $146.1 $ 15.7 $ -- $ 2.1 $163.9
=======================================================================
Pretax earnings (loss) $ 7.4 $ 4.3 $ -- $ (8.8) $ 2.9
=======================================================================
Net income (loss) from continuing operations$ $ 6.9 $ 2.7 $ -- $ (9.8) $ (.2)
====================================================================================================================================
Three Months Ended June 30, 1999
------------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers $ 45.7 $ 27.7 $ -- $ -- $ 73.4
Gain on sale of Valley Group -- -- -- 88.1 88.1
Net investment income 11.3 1.3 1.0 (.2) 13.4
Net realized investment gains 4.0 8.9 -- 4.9 17.8
Earnings from unconsolidated insurance affiliates -- -- 4.8 -- 4.8
Amortization of deferred credit 1.8 -- -- .1 1.9
Other revenue -- -- -- .1 .1
-----------------------------------------------------------------------
Total revenues $ 62.8 $ 37.9 $ 5.8 $ 93.0 $199.5
=======================================================================
Pretax earnings $ 10.1 $ 4.6 $ 5.8 $ 84.3 $104.8
=======================================================================
Net income from continuing operations $ 7.9 $ 3.0 $ 4.1 $ 48.8 $ 63.8
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Millions Property and Investments in Net Assets of
Casualty Unconsolidated Holding Discontinued
Ending assets Reinsurance Insurance Affiliates Company Operations Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 2000 $2,215.1 $193.3 $478.8 $ 86.3 $16.2 $2,989.7
December 31, 1999 1,294.3 198.6 422.6 117.3 16.3 2,049.1
=========================================================================================================
</TABLE>
Note 7. Subsequent Event
On July 5, 2000 White Mountains concluded its previously announced sale of the
following assets to Dexia for cash proceeds of $620.4 million: (i) its indirect,
wholly-owned subsidiary, White Mountains Holdings, Inc. (which controls a
substantial amount of its holdings of FSA); (ii) all its other holdings of FSA
common stock; and (iii) various investment securities with a fair market value
of $50.0 million. In addition to the cash proceeds received on July 5, 2000,
White Mountains is entitled to receive additional proceeds from Dexia over the
next several years in an amount equal to the value of the $50.0 million
portfolio of investment securities sold to Dexia on the closing date at the
market value of such securities at such time. The transaction was consummated in
connection with Dexia's merger with FSA in which all other holders of
outstanding shares of FSA received $76.00 cash per share.
-13-
<PAGE>
The Dexia transaction served to increase White Mountains' June 30, 2000 tangible
book value by $245.9 million, after tax, or $40.41 per share.
Summary pro forma balance sheet information, which assumes the Dexia transaction
had occurred as of June 30, 2000, follows:
--------------------------------------------------------------------------------
June 30, 2000
Millions Actual Pro Forma
--------------------------------------------------------------------------------
Assets
Fixed maturity investments, at fair value $1,106.4 $1,100.6
Common equity securities, at fair value 219.8 175.6
Short-term investments 202.4 822.8
Other investments 71.2 71.2
Reinsurance recoverable on paid and unpaid losses 400.3 400.3
Insurance and reinsurance balances receivable 151.3 151.3
Investments in unconsolidated insurance affiliates 478.8 119.7
Other assets 359.5 409.5
-------------------
Total assets $2,989.7 $3,251.0
===================
Liabilities
Loss and loss adjustment expense reserves $1,600.8 $1,600.8
Unearned insurance and reinsurance premiums 195.7 195.7
Indebtedness 207.7 207.7
Deferred credits 121.0 109.5
Accounts payable and other liabilities 223.8 250.7
-------------------
Total Liabilities $2,349.0 $2,364.4
-------------------
Shareholders' Equity $ 640.7 $ 886.6
===================
Tangible Shareholders' Equity $ 726.2 $ 967.3
================================================================================
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS -- THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND
1999
White Mountains reported a net loss of $5.8 million or $.97 per Share for the
six months ended June 30, 2000, compared to net income of $90.5 million or
$14.25 per diluted Share for the comparable 1999 period. Comprehensive net
income, which includes other comprehensive income items (primarily changes in
net unrealized investment gains for the period), was $38.6 million or $6.54 per
Share for the six months ended June 30, 2000, compared to comprehensive net
income of $45.8 million or $7.20 per diluted Share for the comparable 1999
period.
White Mountains reported a net loss of $2 million or $.03 per Share for the
three months ended June 30, 2000, compared to net income of $76.7 million or
$12.41 per diluted Share for the comparable 1999 period. Comprehensive net
income was $6.4 million or $1.08 per Share for the three months ended June 30,
2000, compared to comprehensive net income of $53.2 million or $8.59 per diluted
Share for the comparable 1999 period.
Net income for the three months and six months ended June 30,1999 includes a
$88.1 million pretax gain ($53.8 million after tax) on the sale of Valley Group
and a $14.9 million after tax gain on the sale of discontinued mortgage banking
operations. The transactions were concluded during the 1999 second quarter.
-14-
<PAGE>
White Mountains ended the second quarter of 2000 with a tangible book value per
Share (which includes unamortized deferred credits less goodwill per Share) of
$123.21, an increase of $2.98 from the December 31, 1999 tangible book value per
Share of $120.23. Book value per Share at June 30, 2000 totalled $108.86, an
increase of $5.54 from the December 31, 1999 book value per Share of $103.32.
Insurance and Reinsurance Operations
Consolidated Reinsurance Operations. Folksamerica provided $6.9 million of net
income ($12.3 million of comprehensive net income) for the six months ended June
30, 2000 versus net income of $13.8 million ($1.3 million of comprehensive net
income) for the comparable 1999 period. A summary of Folksamerica's reinsurance
operating results follows:
--------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------
Dollars in millions 2000 1999 2000 1999
--------------------------------------------------------------------------------
Reinsurance Operations:
Net written premiums $117.0 $ 46.5 $184.4 $ 96.4
Earned premiums $117.5 $ 45.6 $182.3 $ 99.3
Loss and loss adjustment expense 84.1% 70.2% 81.8% 70.9%
Underwriting expense 28.4% 35.7% 30.0% 35.0%
----------------- -----------------
Statutory combined ratio 112.5% 105.9% 111.8% 105.9%
================================================================================
Folksamerica's combined ratio for the six months ended June 30, 2000 was 111.8%
versus a combined ratio of 105.9% for the comparable 1999 period. Folksamerica's
underwriting results for the 2000 first half include approximately $5.9 million
of net pretax adverse loss development associated with the acquired loss
reserves of USF Re. However, Folksamerica's underwriting results do not reflect
offsetting USF Re purchase price adjustments which are recorded at its parent.
These benefits recorded in the 2000 first half would serve to reduce the 2000
combined ratio to approximately 109%.
Consolidated Insurance Operations. A summary of written and earned premiums
relating to White Mountains' consolidated insurance operations follows:
--------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------
Dollars in millions 2000 1999 2000 1999
--------------------------------------------------------------------------------
Insurance Operations:
Net written premiums $ 5.4 $28.1 $11.2 $68.4
Earned premiums $ 5.3 $27.0 $10.9 $67.0
================================================================================
PIC, ACIC, BICC and Waterford provided $1.5 million in net income ($1.4 million
in comprehensive net income) during the 2000 first half which principally
resulted from favorable reinsurance collections on prior year paid losses at
BICC. Valley Group (consisting primarily of various regional property and
casualty insurance companies which were sold on June 17, 1999) contributed $3.5
million of net income ($2.5 million of comprehensive net loss) during the 1999
first half which principally resulted from unrealized losses in its fixed income
investment portfolio.
-15-
<PAGE>
During the 2000 second quarter, White Mountains recorded a $5.4 million loss
($3.5 million after tax) on the sale of Valley Group relating to potential
development on reserve guarantees made to the buyer.
Unconsolidated Insurance Operations. White Mountains recorded comprehensive net
income on its investment in FSA of $38.9 million during the 2000 first half
versus a comprehensive net loss of $17.7 million during the comparable 1999
period. The comprehensive net income for the 2000 period resulted principally
from unrealized gains on the portion of the Company's investment in FSA capital
stock that is marked to market. The comprehensive net loss from FSA for the 1999
period resulted principally from an accounting write-down resulting from a
scheduled exercise of FSA stock options.
The Company recorded comprehensive net income on its investment in MSA of $.4
million during the 2000 first half versus a comprehensive net loss of $1.7
million for the 1999 first half. The comprehensive net loss experienced during
the 1999 first half resulted principally from unrealized losses in MSA's fixed
income investment portfolio.
Investment Operations
Net investment income totalled $35.0 million for the six months ended June 30,
2000 compared to $29.2 million for the comparable 1999 period. Net investment
income totalled $20.5 million for the three months ended June 30, 2000 compared
to $13.4 million for the comparable 1999 period. White Mountains' investment
income is comprised primarily of interest income associated with its fixed
maturity investments and dividend income from its equity investments. The
increase in net investment income from the 1999 to 2000 periods are primarily
attributable to the acquisitions of PCA and/or Risk Capital.
White Mountains records net unrealized investment gains and losses as a result
of changes in the value of its available for sale investment portfolio holdings,
changes in the value of its outstanding options and convertible securities to
acquire the common stock of FSA and changes in its equity in the net unrealized
investment gains and losses of its unconsolidated insurance affiliates.
Additional information concerning White Mountains' net investment gains and
losses arising during the periods, before tax, were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------
Millions 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net realized investment gains (losses) $ 1.4 $ 17.8 $(4.6) $ 26.8
Net unrealized gains (losses) from investment securities 1.7 (22.7) (1.0) (31.0)
Net unrealized gains (losses) from investments in unconsolidated affiliates 8.7 (14.6) 61.7 (38.9)
----------------------------------
Total net investment gains (losses) on investments during the period $11.8 $(19.5) $56.1 $(43.1)
================================================================================================================
</TABLE>
The components of White Mountains' change in net unrealized investment gains,
after tax, as recorded on the income statement were as follows:
-16-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------
Millions 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net realized investment gains (losses) $ 1.4 $ 17.8 $ (4.6) $ 26.8
Income tax benefit (expense) applicable to such gains .6 (6.3) 2.0 (9.4)
-------------------------------------
Net realized investment gains (losses) for investments sold, after tax $ 2.0 $ 11.5 $ (2.6) $ 17.4
=====================================
Net unrealized investment gains (losses) for investments held $ 11.8 $(19.5) $ 56.1 $(43.1)
Income tax benefit (expense) applicable to such gains and losses (2.1) 6.7 (13.1) 15.1
-------------------------------------
Net unrealized investment gains (losses) for investments held, after tax 9.7 (12.8) 43.0 (28.0)
Recognition of net unrealized losses (gains) for investments sold, after tax (2.8) (11.5) 1.8 (17.4)
-------------------------------------
Change in net unrealized investment gains, after tax $ 6.9 $(24.3) $ 44.8 $(45.4)
=====================================================================================================================
</TABLE>
Net realized losses on investments of $4.6 million for the six months ended June
30, 2000 resulted principally from first quarter sales of fixed maturities in
preparation for Folksamerica's recent acquisitions. See "Liquidity and Capital
Resources". Net realized investment gains of $26.8 million for the 1999 first
half resulted principally from pretax gains from the sales of all or a portion
of White Mountains' investments in San Juan Basin Royalty Trust ($6.0 million),
Travelers Property Casualty Corp. ($4.8 million) and various common equities in
Folksamerica's operating portfolio ($3.5 million). In addition, pretax realized
gains on sales of equity securities and fixed maturity investments of $9.4
million were recorded in anticipation of or in connection with the sale of
Valley Group during the 1999 second quarter.
The $43.0 million increase in after tax net unrealized gains for investments
held during the 2000 first half included $40.1 million of after tax unrealized
gains recorded in connection with the Company's investment in FSA. The $28.0
million decrease in after tax net unrealized investment gains for investments
held during the 1999 first half primarily reflects: (i) unrealized losses of
$17.8 million after tax in Folksamerica's sizeable fixed maturity portfolio due
to an increase in market interest rates during the period; (ii) a $10.4 million
after tax reduction in unrealized gains associated with White Mountains' May 13,
1999 exercise of options to acquire 666,667 shares of the common stock of FSA
partially offset by: (iii) net after tax gains associated with White Mountains'
equity security portfolios.
Expenses and Taxes
Losses and loss adjustment expenses totalled $160.3 million for the 2000 first
half ($107.3 million for the 2000 second quarter) versus $123.0 million for the
comparable 1999 period ($58.6 million for the 1999 second quarter). Insurance
and reinsurance acquisition expenses totalled $50.3 million for the first half
of 2000 ($32.4 million for the 2000 second quarter) versus $39.5 million for the
first half of 2000 ($16.7 million for the 1999 second quarter). The increases in
these insurance expenses from the 1999 to 2000 periods are primarily
attributable to the PCA and Risk Capital acquisitions.
Compensation and benefits expenses totalled $19.1 million for the first half of
2000 ($12.4 million for the 2000 second quarter) versus $25.1 million for the
comparable 1999 period ($12.3 million for the 1999 second quarter). The decrease
in compensation and benefits expenses from the 1999 to 2000 year-to-date periods
is primarily the result of the sale of Valley Group which served to reduce White
Mountains' total headcount. Additionally, compensation and benefits for the 2000
second quarter includes a modest increase in contingent compensation in light of
the closing of the Dexia transaction.
General expenses totalled $13.7 million for the first half of 2000 ($4.8 million
for the 2000 second quarter) versus $92 million during the comparable 1999
period ($5.1 million for the 1999 second quarter). The increase in general
expenses during the 2000 period is primarily attributable to various
contingencies and expenditures recorded during the 2000 first quarter associated
with certain of the Company's acquisition and disposition activities over the
past several months, including the Dexia transaction.
-17-
<PAGE>
Interest expense remained at $8.2 million for the first half of 2000 versus the
comparable 1999 period.
As a result of the Company's redomestication to Bermuda during late 1999, income
earned by its offshore subsidiaries is generally subject to an effective overall
tax rate lower than that imposed by the United States, however, no tax benefits
will be attained in the event of net losses incurred by such companies. Income
earned by the Company's onshore subsidiaries continues to be subject to United
States income taxes. During the first half of 2000, White Mountains recorded a
$1.2 million tax provision which consisted of a Federal income tax provision of
$.4 million and a foreign and United States withholding tax provision of $.8
million. During the first half of 1999, White Mountains recorded a $46.8 million
tax provision which consisted of a Federal income tax provision of $39.5 million
and a state tax provision of $7.3 million. This resulted in a 33% effective
Federal rate. Differences between the Company's effective rate and a statutory
35% Federal rate include deferred credit amortization, dividends received
deductions and tax exempt interest income.
LIQUIDITY AND CAPITAL RESOURCES
White Mountains has made significant acquisitions of run-off insurance
portfolios during the 1999 and 2000 periods presented herein. These
transactions involved the assumption of sizable portfolios of invested assets
on favorable terms, as well the assumption of insurance liabilities. Run-off
liabilities paid are shown on the Company's statement of cash flows as uses
of operating cash whereby sales of the related assets acquired are shown as
sources of cash from investing activities.
During the first quarter of 2000, Folksamerica raised $196.3 million through
sales of investment securities (primarily fixed maturity investments) in
preparation for its acquisitions of PCA and Risk Capital.
On March 31, 2000, White Mountains completed its acquisition of PCA for
consideration of $122.3 million in cash. Significant assets and liabilities
acquired through PCA included $339.8 million of cash and investments, $160.0
million of reinsurance recoverables and $405.5 million of loss and loss
adjustment expenses.
On May 5, 2000, White Mountains completed its previously announced acquisition
of the reinsurance operations of Risk Capital for consideration of $20.1 million
in cash plus related expenses. Significant assets and liabilities acquired
through the Risk Capital transaction included $249.9 million of cash and
investments, $168.8 million of premiums receivable, $312.5 million of net loss
and loss adjustment expenses and $92.9 million of net unearned reinsurance
premiums. In addition, the Risk Capital acquisition provided White Mountains
with two profitable specialty underwriting units (Accident & Health and Marine)
and several significant new treaty clients.
During the 2000 first half, the Company repurchased 61,129 Shares for a total of
$7.6 million in cash. All Shares repurchased during 2000 have been retired.
FORWARD LOOKING STATEMENTS
White Mountains from time to time makes forward-looking statements. Such
forward-looking statements include, but are not limited to, (i) projections of
revenues, income (or loss), earnings (or loss) per Share, dividends, market
share or other financial forecasts, (ii) statements of plans, objectives or
goals of White Mountains or its management, including those related to growth in
book value and deferred credit per Share or return on equity and (iii) expected
losses on, and adequacy of loss reserves for, insurance in force. Words such as
"believes", "anticipates" "expects", "intends" and "plans" and similar
expressions are intended to identify forward-looking statements but are not the
exclusive means of identifying such statements.
-18-
<PAGE>
White Mountains cautions that a number of important factors could cause actual
results to differ materially from the plans, objectives, expectations, estimates
and intentions expressed in forward-looking statements made by White Mountains.
These factors include: (i) competitive forces, including the conduct of other
property and casualty insurers and reinsurers, (ii) changes in domestic or
foreign laws or regulations applicable to White Mountains, its competitors or
its clients, (iii) an economic downturn or other economic conditions (such as a
rising interest rate environment) adversely affecting White Mountains' financial
position, and (iv) inadequacy of loss reserves established by White Mountains.
White Mountains cautions that the foregoing list of important factors is not
exhaustive. In any event, such forward-looking statements made by White
Mountains speak only as of the date on which they are made, and White Mountains
does not undertake any obligation to update or revise such statements as a
result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
White Mountains' consolidated balance sheet includes a substantial amount of
assets and liabilities whose fair values are subject to market risk. The term
market risk refers to the risk of loss arising from adverse changes in: interest
rates, foreign currency exchange rates, commodity prices, and other relevant
market rates and prices such as prices for common equity securities. Due to
White Mountains' sizable investments in fixed maturity investments and common
equity securities at its insurance and reinsurance subsidiaries and its use of
medium and long-term debt financing at the Company and certain of its operating
companies, market risk can have a significant affect on White Mountains
consolidated financial position.
-19-
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote by Security Holders
At the Company's 2000 Annual Meeting of Shareholders, which was held on
May 22, 2000 in Hamilton, Bermuda, shareholders approved proposals (as
further described in the Company's 2000 Proxy Statement) calling for the
Election of Directors ("Proposal 1") and the Appointment of Independent
Auditors ("Proposal 2"). As of March 24, 2000, the "Record Date" for the
2000 Annual Meeting, a total of 5,904,534 shares were eligible to vote.
With respect to Proposal 1, 2,888,072 votes were cast in favor of the
proposal and 16,635 votes were withheld. With respect to Proposal 2,
4,315,137 votes were cast in favor of the proposal, 3,165 votes were
cast against the proposal and 7,089 votes abstained.
In connection with Proposal 1, incumbent directors Raymond Barrette,
Howard L. Clark, Jr., Robert P. Cochran and Arthur Zankel were
re-elected to the Board of Directors with terms ending in 2003, Mr.
Steven E. Pass was re-elected to the Board of Directors with a term
ending in 2001 and Mr. John D. Gillespie was re-elected to the Board of
Directors with a term ending in 2002.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11 - Statement Re Computation of Per Share Earnings*
27 - Financial Data Schedule for the six-month period ended June
30, 2000**
(b) Reports on Form 8-K
None other than amendments to previously filed reports on Form 8-K.
* Not included herein as the information is contained elsewhere
within report. See Note 4 of the Notes to Condensed Consolidated
Financial Statements.
** Filed herewith.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITE MOUNTAINS INSURANCE GROUP. LTD.
-------------------------------------
(Registrant)
Date: August 11, 2000 By: /s/
--------------------------------------
Michael S. Paquette
Senior Vice President and Controller
-21-
