WHITE MOUNTAINS INSURANCE GROUP LTD

Kudu provides capital solutions for boutique asset and wealth managers for a variety of purposes including generational ownership transfers, management buyouts, acquisition and growth finance and legacy partner liquidity. Kudu also provides strategic assistance to investees from time to time. Kudu’s capital solutions generally are structured as noncontrolling equity interests in the form of revenue and earnings participation contracts (“Participation Contracts”) and designed to generate immediate cash yields.

During 2023, White Mountains committed an incremental $150 million of equity capital to Kudu, of which $130 million is undrawn as of December 31, 2023. Kudu expects to fund new capital deployments through the funds remaining from White Mountains’s capital commitment, excess operating cash flows, recycling of certain sales transaction proceeds, available debt capacity and additional equity commitments.

As of December 31, 2023 and 2022, White Mountains reported $959 million and $826 million of total assets and $684 million and $553 million of total equity related to Kudu. As of December 31, 2023 and 2022, White Mountains owned 89.6% and 89.3% of Kudu (76.3% and 76.1% on a fully-diluted/fully-converted basis) and reported $114 million and $75 million of noncontrolling interests related to Kudu.

Portfolio

As of December 31, 2023, Kudu has deployed $884 million into 25 asset and wealth management firms globally, including three that have been exited. As of December 31, 2023, the asset and wealth management firms had combined assets under management of approximately $104 billion, spanning a range of asset classes including real estate, wealth management, hedge funds, private equity and alternative credit strategies. Kudu’s capital was deployed at an average gross cash yield at inception of 9.9%.

Kudu’s philosophy is to partner with asset and wealth management firms that exhibit strong cash flow generation and growth. Kudu seeks to provide its solutions across a diverse mix of investment strategies and asset classes in the middle market.

Kudu’s average capital deployment to date has been approximately $35 million, with a range from $14 million to $81 million. Apportioned by manager type, Kudu’s portfolio as of December 31, 2023 was deployed 41% in private capital, 29% in alternatives segments, 19% in wealth management and 11% in traditional asset management. Kudu seeks diversity across asset classes. Kudu also prioritizes the private capital segment as the underlying clients of these firms tend to be locked-up for an extended period, which can provide stability of revenues in a potential market downturn.

Kudu expects that no single manager will represent more than 25% of Kudu’s net investment income. As more capital is deployed, the reliance on any one manager is expected to decrease. Additionally, Kudu seeks to diversify geographically. Its portfolio currently includes 16 firms headquartered in 11 different states in the United States, three in the United Kingdom, two in Australia and one in Canada.