WHITE MOUNTAINS INSURANCE GROUP LTD

Operating Cash and Short-term Investments

Holding Company Level

The primary sources of cash for the Company and certain of its intermediate holding companies are expected to be distributions from its insurance, reinsurance and other operating subsidiaries, net investment income, proceeds from sales, repayments and maturities of investments, capital raising activities and, from time to time, proceeds from sales of operating subsidiaries. The primary uses of cash are expected to be general and administrative expenses, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of debt obligations, dividend payments to holders of the Company’s common shares, distributions to noncontrolling interest holders of consolidated subsidiaries, contributions to operating subsidiaries and, from time to time, purchases of operating subsidiaries and repurchases of the Company’s common shares.

Operating Subsidiary Level

The primary sources of cash for White Mountains’s insurance, reinsurance and other operating subsidiaries are expected to be premium and fee collections, commissions, net investment income, proceeds from sales, repayments and maturities of investments, contributions from holding companies and capital raising activities. The primary uses of cash are expected to be claim payments, policy acquisition costs, general and administrative expenses, broker commission expenses, cost of sales, purchases of investments, payments to tax authorities, payments on and repurchases/retirements of debt obligations, distributions to holding companies, distributions to noncontrolling interest holders and, from time to time, purchases of operating subsidiaries.

Both internal and external forces influence White Mountains’s financial condition, results of operations and cash flows. Premium and fee collections, investment returns, claim payments and cost of sales may be impacted by changing rates of inflation and other economic conditions. Some time may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains’s insurance and reinsurance operating subsidiaries and the settlement of the liability for that loss. The exact timing of the payment of losses cannot be predicted with certainty. White Mountains’s insurance and reinsurance operating subsidiaries maintain portfolios of invested assets with varying maturities and a substantial amount of cash and short-term investments to provide adequate liquidity for the payment of claims.

Management believes that White Mountains’s cash balances, cash flows from operations and routine sales and maturities of investments are adequate to meet expected cash requirements for the foreseeable future at both a holding company and insurance, reinsurance and other operating subsidiary level.

Dividend Capacity

Following is a description of the dividend capacity of White Mountains’s insurance and reinsurance and other operating subsidiaries:

During any 12-month period, GAIL, a class 4 licensed Bermuda insurer, has the ability to (i) make capital distributions of up to 15% of its total statutory capital per the previous year’s statutory financial statements or (ii) make dividend payments of up to 25% of its total statutory capital and surplus per the previous year’s statutory financial statements, without prior approval of Bermuda regulatory authorities. Accordingly, GAIL will have the ability to pay a dividend of up to $337 million during 2025, which is equal to 25% of its statutory capital and surplus of $1,347 million as of December 31, 2024, subject to meeting all appropriate liquidity and solvency requirements and the filing of its December 31, 2024 statutory financial statements. During 2024, GAIL did not pay any dividends to its immediate parent.

During 2024, Ark paid $33 million of dividends to shareholders, $24 million of which were paid to White Mountains. As of December 31, 2024, Ark and its intermediate holding companies had $6 million of net unrestricted cash and short-term investments outside of its regulated and unregulated insurance and reinsurance operating subsidiaries.

WM Outrigger Re is a special purpose insurer subject to regulation and supervision by the BMA. WM Outrigger Re does not require regulatory approval to pay dividends; however, its dividend capacity is limited to amounts held outside of the collateral trust pursuant to its reinsurance agreement with GAIL. As of December 31, 2024, WM Outrigger Re had less than $1 million of net unrestricted cash held outside the collateral trust. As of December 31, 2024, WM Outrigger Re had $196 million of statutory capital and surplus and $204 million of assets held in the collateral trusts pursuant to its reinsurance agreement with GAIL.

During 2024, White Mountains received net distributions of $123 million from WM Outrigger Re, which included a net return of capital related to changes in White Mountains’s capital commitments for the 2024 and 2025 underwriting years and reinsurance profits for the 2023 underwriting year.

As of December 31, 2024, HG Global had $619 million face value of preferred shares outstanding, of which White Mountains owned 96.9%. Holders of the HG Global preferred shares are entitled to receive cumulative dividends at a fixed annual rate of 6.0% on a quarterly basis, payable when and if declared by HG Global. As of December 31, 2024, HG Global had accrued $476 million of dividends payable to holders of its preferred shares, $462 million of which are payable to White Mountains and eliminated in consolidation. As of December 31, 2024, HG Global and its subsidiaries had $5 million of net unrestricted cash outside of HG Re.

HG Re is a special purpose insurer subject to regulation and supervision by the BMA. HG Re does not require regulatory approval to pay dividends; however, its dividend capacity is limited to amounts held outside of the Collateral Trusts pursuant to the FLRT with BAM. As of December 31, 2024, HG Re had $7 million of net unrestricted cash. As of December 31, 2024, HG Re had $158 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts. As of December 31, 2024, HG Re had $718 million of statutory capital and surplus and $950 million of assets held in the Collateral Trusts.

HG Global has two primary sources of cash flows: (i) interest payments on the BAM Surplus Notes that are made outside the Collateral Trusts and (ii) releases of excess balances from the Collateral Trusts. During 2024, HG Global received cash payments of principal and interest on the BAM Surplus Notes of $30 million. Of these payments, $21 million was a repayment of principal held in the Supplemental Trust, $1 million was a payment of accrued interest held in the Supplemental Trust and $8 million was a payment of accrued interest held outside the Supplemental Trust. During 2024, HG Re received a distribution out of the Supplemental Trust of $80 million, which was comprised of the assignment of $59 million of accrued interest on the BAM Surplus Notes and a cash distribution of $21 million.

See Note 10 — “Municipal Bond Guarantee Reinsurance”on page F-55.

Kudu

During 2024, Kudu distributed $32 million to unitholders, $29 million of which was paid to White Mountains. As of December 31, 2024, Kudu had $13 million of net unrestricted cash and short-term investments.

Bamboo

Bamboo Captive is a protected cell captive domiciled in the state of Arizona and is subject to regulation and supervision by the Arizona DIFI. As an Arizona-domiciled protected cell, Bamboo Captive is required to maintain $0.5 million of minimum capital. As of December 31, 2024, Bamboo Captive had statutory capital and surplus of $7 million. Bamboo Captive cannot pay any dividends without the approval of Arizona DIFI. Bamboo Captive did not pay any dividends during 2024. As of December 31, 2024, Bamboo Captive had $11 million of net unrestricted cash and short-term investments.

During 2024, Bamboo paid $25 million of dividends to shareholders, $18 million of which were paid to White Mountains. As of December 31, 2024, Bamboo had $17 million of net unrestricted cash and short-term investments outside of Bamboo Captive.

During 2024, White Mountains paid a $3 million common share dividend. As of December 31, 2024, the Company and its intermediate holding companies had $540 million of net unrestricted cash, short-term investments and fixed maturity investments, $202 million of MediaAlpha common stock, $225 million of common equity securities and $345 million of private equity and hedge funds, ILS funds and certain unconsolidated entities.

Financing

The following table presents White Mountains’s capital structure as of December 31, 2024 and 2023:

(1)See Note 7 — “Debt” on page F-47 for details of debt arrangements.

(2)Net of unamortized issuance costs and original issue discount.

(3)As of July 1, 2024, White Mountains no longer consolidates BAM. Noncontrolling interests as of December 31, 2023 excludes BAM.

(4) Amount reflects White Mountains’s preferred share ownership in HG Global of 96.9%.

(5)For periods subsequent to July 1, 2024, White Mountains carries the BAM Surplus Notes under GAAP at fair value, which incorporates time value into its estimate.

Management believes that White Mountains has the flexibility and capacity to obtain funds externally through debt or equity financing on both a short-term and long-term basis. However, White Mountains can provide no assurance that, if needed, it would be able to obtain additional debt or equity financing on satisfactory terms, if at all.

It is possible that, in the future, one or more of the rating agencies may lower White Mountains’s existing ratings. If one or more of its ratings were lowered, White Mountains could incur higher borrowing costs on future borrowings, and its ability to access the capital markets could be impacted.

Covenant Compliance

As of December 31, 2024, White Mountains was in compliance, in all material respects, with all of the covenants under its debt instruments.

Contractual Obligations and Commitments

The following table presents White Mountains’s material contractual obligations and commitments as of December 31, 2024:

(1) Represents expected future cash outflows resulting from loss and LAE payments. The amounts presented are gross of reinsurance recoverables on unpaid losses of $434.4 as of December 31, 2024.

(2) The contingent consideration is primarily related to White Mountains’s acquisition of Ark. See “Contingent Consideration Liabilities” in Note 1 — “Basis of Presentation and Significant Accounting Policies”on page F-8.

The long-term incentive compensation balances included in the table above include amounts payable for performance shares. Exact amounts to be paid for performance shares cannot be predicted with certainty, as the ultimate amounts of these liabilities are based on the future performance of White Mountains and the market price of the Company’s common shares at the time the payments are made.

The estimated payments reflected in the table are based on current accrual factors (including performance relative to targets and common share price) and assume that all outstanding balances were 100% vested as of December 31, 2024.

There are no provisions within White Mountains’s operating lease agreements that would trigger acceleration of future lease payments.

White Mountains does not finance its operations through the securitization of its trade receivables, through special purpose entities or through synthetic leases. Further, White Mountains has not entered into any material arrangements requiring it to guarantee payment of third-party debt or lease payments or to fund losses of an unconsolidated special purpose entity.

White Mountains also has future binding commitments to fund certain other long-term investments. These commitments, which totaled approximately $94 million as of December 31, 2024, do not have fixed funding dates and are therefore excluded from the table above.

Share Repurchase Programs

The Company’s Board of Directors has authorized it to repurchase its common shares from time to time, subject to market conditions. Shares may be repurchased on the open market or through privately negotiated transactions. The repurchase authorizations do not have a stated expiration date. As of December 31, 2024, White Mountains may repurchase an additional 301,014 shares under these Board authorizations. In addition, from time to time White Mountains has also repurchased its common shares through self-tender offers that were separately authorized by its Board of Directors.

The following table presents common shares repurchased by the Company as well as the average price per share as a percent of December 31, 2024 GAAP book value per share, adjusted book value per share and market value per share.

Cash Flows

Detailed information concerning White Mountains’s cash flows from continuing operations during 2024, 2023 and 2022 follows:

Cash flows from operations for the years ended 2024, 2023 and 2022

Net cash flows provided from operations was $587 million, $404 million and $326 million for the years ended December 31, 2024, 2023 and 2022. The increases in cash provided from operations in both 2024 and 2023 were driven primarily by cash provided from operations at Ark/WM Outrigger Re. As of December 31, 2024, the Company and its intermediate holding companies had $540 million of net unrestricted cash, short-term investments and fixed maturity investments, $202 million of MediaAlpha common stock, $225 million of common equity securities and $345 million of private equity funds and hedge funds, ILS funds and certain unconsolidated entities.

Cash flows from investing and financing activities for the year ended December 31, 2024

During 2024, the Company declared and paid a $3 million cash dividend to its common shareholders.

During 2024, White Mountains repurchased and retired 5,269 of its common shares

for $8 million, all of which were to satisfy employee income tax withholding pursuant to employee benefit plans.

During 2024, Ark repaid the outstanding balance of $30 million and extinguished the Ark 2007 Subordinated Notes.

During 2024, Kudu borrowed $35 million in term loans under the Kudu Credit Facility.

HG Global received cash payments of principal and interest of $22 million on the BAM Surplus Notes during the six months ended December 31, 2024, after BAM’s deconsolidation.

BAM received $26 million in MSC during the six months ended June 30, 2024, prior to its deconsolidation.

On January 2, 2024, White Mountains closed the Bamboo Transaction in accordance with the terms of the Bamboo Merger Agreement, investing $297 million in equity into Bamboo, which included the contribution of $36 million to retire Bamboo’s legacy credit facility and the contribution of $20 million of primary capital.

Cash flows from investing and financing activities for the year ended December 31, 2023

During 2023, the Company declared and paid a $3 million cash dividend to its common shareholders.

During 2023, White Mountains repurchased and retired 24,165 of its common shares

for $33 million. Of the shares White Mountains repurchased in 2023, 4,629 were to satisfy employee income tax withholding pursuant to employee benefit plans.

During 2023, Kudu borrowed $12 million in term loans under the Kudu Credit Facility.

During 2023, Kudu repaid $17 million in term loans under the Kudu Credit Facility.

On June 28, 2023, White Mountains completed a tender offer to purchase 5.9 million additional shares of MediaAlpha at a purchase price of $10.00 per share for a total cost of $59 million.

Cash flows from investing and financing activities for the year ended December 31, 2022

During 2022, the Company declared and paid a $3 million cash dividend to its common shareholders.

During 2022, White Mountains repurchased and retired 461,256 of its common shares for $616 million. The majority of these shares were repurchased through a self-tender offer that White Mountains completed on September 26, 2022, through which it repurchased 327,795 of its common shares at a purchase price of $1,400 per share for a total cost of approximately $461 million, including expenses. Of the shares White Mountains repurchased in 2022, 4,011 were to satisfy employee income tax withholding pursuant to employee benefit plans.

During 2022, HG Global received net proceeds of $147 million from the issuance of the HG Global Senior Notes.

During 2022, Kudu borrowed $35 million and repaid $45 million in term loans under the Kudu Credit Facility.

On May 26, 2022, Kudu raised $115 million of equity capital (the “Kudu Transaction”) from Massachusetts Mutual Life Insurance Company (“Mass Mutual”), White Mountains and Kudu management. Mass Mutual, White Mountains and Kudu management contributed $64 million, $50 million and $1 million in the Kudu Transaction, respectively.

On August 1, 2022, White Mountains closed the previously announced NSM Transaction. White Mountains received $1.4 billion in net cash proceeds at closing.

On December 20, 2022, Outrigger Re Ltd. issued non-voting redeemable preference shares on behalf of four segregated accounts to White Mountains and other third-party investors. White Mountains purchased 100% of the preference shares issued by its segregated account, WM Outrigger Re, for $205 million.