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, borrowings from credit facilities, 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, borrowings from credit facilities, 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:

Ark/WM Outrigger

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. During the six months ended June 30, 2025, GAIL did not pay any dividends to its immediate parent.

During the six months ended June 30, 2025, Ark declared and paid a $41 million dividend to shareholders, including $30 million that was paid to White Mountains. As of June 30, 2025, Ark and its intermediate holding companies had $9 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 June 30, 2025, WM Outrigger Re had less than $1 million of net unrestricted cash held outside the collateral trust. As of June 30, 2025, WM Outrigger Re had $197 million of statutory capital and surplus and $220 million of assets held in the collateral trusts pursuant to the reinsurance agreement with GAIL.

HG Global

As of June 30, 2025, 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 June 30, 2025, HG Global has accrued $509 million of dividends payable to holders of its preferred shares, $494 million of which is payable to White Mountains and is eliminated in consolidation. As of June 30, 2025, HG Global and its subsidiaries had $7 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. As of June 30, 2025, HG Re had $2 million of net unrestricted cash. As of June 30, 2025, HG Re had $173 million of accrued interest on the BAM Surplus Notes held outside the Collateral Trusts. As of June 30, 2025, HG Re had $755 million of statutory capital and surplus and $984 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 the six months ended June 30, 2025, HG Global did not receive any cash payments of principal and interest on the BAM Surplus Notes. During the six months ended June 30, 2025, HG Re received a distribution from the Supplemental Trust of $22 million, which consisted of an assignment of accrued interest on the BAM Surplus Notes of $15 million and a cash distribution of $7 million. See Note 10 — “Municipal Bond Guarantee Reinsurance.”

Kudu

During the six months ended June 30, 2025, Kudu distributed $7 million to unitholders, substantially all of which was paid to White Mountains. As of June 30, 2025, Kudu had $40 million of net unrestricted cash and short-term investments.

Bamboo

During the six months ended June 30, 2025, Bamboo paid $104 million of dividends to shareholders, $75 million of which were paid to White Mountains. As of June 30, 2025, Bamboo had $32 million of net unrestricted cash and short-term investments outside of the Bamboo Captive.

The Bamboo Captive is a protected cell captive domiciled in the state of Arizona and is subject to regulation and supervision by the Arizona Department of Insurance and Financial Institutions (“Arizona DIFI”). As an Arizona-domiciled protected cell, the Bamboo Captive is required to maintain $0.5 million of minimum capital. As of December 31, 2024, the Bamboo Captive had statutory capital and surplus of $7 million. The Bamboo Captive cannot pay any dividends without the approval of the Arizona DIFI. During the six months ended June 30, 2025, the Bamboo Captive did not pay any dividends to its immediate parent. As of June 30, 2025, the Bamboo Captive had $9 million of net unrestricted cash and short-term investments and $42 million of assets held as collateral pursuant to its reinsurance agreements.

During the six months ended June 30, 2025, White Mountains paid a $3 million common share dividend. As of June 30, 2025, the Company and its intermediate holding companies had $662 million of net unrestricted cash, short-term investments and fixed maturity investments, $196 million of MediaAlpha common stock and $310 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 June 30, 2025 and December 31, 2024:

(1)See Note 7 — “Debt”for details of debt arrangements.

(2) Net of unamortized issuance costs and, where applicable, the original issue discount.

On July 16, 2025, the Company entered into a credit agreement, which establishes a senior unsecured revolving credit facility of up to $250 million that matures on July 16, 2028 (the “WTM Credit Facility”). The WTM Credit Facility is undrawn, and the Company has no current plans to draw on the WTM Credit Facility.

On July 21, 2025, Kudu amended the Kudu Credit Facility to increase the total commitment from $350 million to $500 million, reduce the maximum loan-to-value ratio from 50% to 40% and revised the interest rate. The interest rate on the outstanding balance as of July 21, 2025 was reduced from a then floating rate of 8.75% to a fixed rate of 7.65%. Future borrowings will bear a fixed rate of interest equal to the interpolated yield on U.S. Treasuries at the time of borrowing plus a stated margin of 3.10%. The amended Kudu Credit Facility has a five-year availability period and matures on June 30, 2038.

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 June 30, 2025, White Mountains was in compliance in all material respects with all of the covenants under its debt instruments.

Share Repurchase Programs

The Company’s Board of Directors has authorized the Company 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 June 30, 2025, 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 approved by its Board of Directors.

During the six months ended June 30, 2025, White Mountains repurchased and retired 5,097 of its common shares for $10 million at an average share price of $1,945, which was approximately 108% of White Mountains’s book value per share as of June 30, 2025. During the six months ended June 30, 2024, White Mountains repurchased and retired 5,269 of its common shares for $8 million at an average share price of $1,505, which was approximately 87% of White Mountains’s book value per share as of June 30, 2024. All of the shares White Mountains repurchased in the first six months of 2025 and 2024 were to satisfy employee income tax withholding pursuant to employee benefit plans, which do not reduce the amount available under the Board repurchase authorizations.

Cash Flows

Detailed information concerning White Mountains’s cash flows from continuing operations during the six months ended June 30, 2025 and 2024 follows:

Cash flows from operations for the six months ended June 30, 2025 and June 30, 2024

Net cash used for operations was $137 million for the six months ended June 30, 2025 compared to net cash provided from operations of $253 million for the six months ended June 30, 2024. The increase in cash used for operations was driven primarily by a decrease in cash provided from operations at Ark/WM Outrigger Re and a new deployment at Kudu in 2025. As of June 30, 2025, the Company and its intermediate holding companies had $662 million of net unrestricted cash, short-term investments and fixed maturity investments, $196 million of MediaAlpha common stock and $310 million of private equity funds, hedge funds, ILS funds and certain unconsolidated entities.

Cash flows from investing and financing activities for the six months ended June 30, 2025

Financing and Other Capital Activities

During the six months ended June 30, 2025, the Company declared and paid a $3 million cash dividend to its common shareholders.

During the six months ended June 30, 2025, White Mountains repurchased and retired 5,097 of its common shares for $10 million, all of which were to satisfy employee income tax withholding pursuant to employee benefit.

During the six months ended June 30, 2025, Kudu borrowed $8 million in term loans under the Kudu Credit Facility.

During the six months ended June 30, 2025, White Mountains contributed $15 million to Kudu, which was used to repurchase certain management equity incentives that were then replaced with new equity incentive units.

During the six months ended June 30, 2025, Bamboo borrowed $110 million in term loans under the Bamboo Credit Facility.

Acquisitions and Dispositions

On April 1, 2025, White Mountains closed on its acquisition of Enterprise Solutions. White Mountains paid $58 million of cash consideration, which included a post-acquisition contribution of $2 million, and Enterprise Solutions borrowed $15 million in new debt as part of the transaction.

Cash flows from investing and financing activities for the six months ended June 30, 2024

Financing and Other Capital Activities

During the six months ended June 30, 2024, the Company declared and paid a $3 million cash dividend to its common shareholders.

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

Acquisitions and Dispositions

On January 2, 2024, White Mountains closed the Bamboo Transaction in accordance with the terms of the Bamboo Merger Agreement, investing $297 million of 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.