WHITE MOUNTAINS INSURANCE GROUP LTD

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss the Company’s consolidated financial statements, which have been prepared in accordance with GAAP. The financial statements presented herein include all adjustments considered necessary by management to fairly present the financial condition, results of operations and cash flows of White Mountains.

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. Certain of these estimates are considered critical in that they involve a higher degree of judgment and are subject to a significant degree of variability. On an ongoing basis, management evaluates its estimates and bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

1. Fair Value Measurements

General

White Mountains records certain assets and liabilities at fair value in its consolidated financial statements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at a particular measurement date. Fair value measurements are categorized into a hierarchy that distinguishes between inputs based on market data from independent sources (observable inputs) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (unobservable inputs). Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”) and unobservable inputs, including the reporting entity’s estimates of the assumptions that market participants would use, having the lowest priority (“Level 3”).

The valuation of assets and liabilities measured at fair value requires management to make estimates and apply judgment to matters that may carry a significant degree of uncertainty. In determining its estimates of fair value, White Mountains uses a variety of valuation approaches and inputs. Whenever possible, White Mountains estimates fair value using valuation methods that maximize the use of quoted market prices or other observable inputs. Where appropriate, assets and liabilities measured at fair value have been adjusted for the effect of counterparty credit risk.

Fair value estimates for instruments that trade infrequently and have few or no quoted market prices or other observable inputs are classified as Level 3 measurements. The determination of the fair value of these Level 3 instruments involves significant management judgment and the use of valuation analyses and unobservable inputs that are inherently subjective and uncertain. These unobservable inputs reflect White Mountains’s assumptions of what market participants would use in valuing the instrument. See Item 1A. Risk Factors,“Our investment portfolio includes securities that do not have readily observable market prices. We use valuation methodologies that are inherently subjective and uncertain to value these securities. The values of securities established using these methodologies may never be realized, which could materially adversely affect our results of operations and financial condition.”on page 36.

See Note 1 — “Basis of Presentation and Significant Accounting Policies”on page F-8 for White Mountains’s accounting policies for investment securities.

As of December 31, 2025, White Mountains’s most significant assets classified as Level 3 measurements include the BAM Surplus Notes, Kudu’s Participation Contracts, the Bamboo SPV and PassportCard/DavidShield. As of December 31, 2025, the Bamboo SPV was measured at fair value based on the value implied in the Bamboo Sale Transaction. See Note 2 — “Significant Transactions”on page F-19.

As of December 31, 2025, the fair value of the BAM Surplus Notes was $339 million. On a quarterly basis, White Mountains values the BAM Surplus Notes using a discounted cash flow analysis. The discounted cash flow analysis used to fair value the BAM Surplus Notes depends on key inputs, such as projections of future revenues and earnings for BAM, expected payments on the BAM Surplus Notes through maturity and a discount rate to reflect time value and related uncertainty of the repayment pattern. The expected payments on the BAM Surplus Notes are based on management judgment, considering current performance, budgets and projected future results. These expected payments depend on BAM’s ability to generate excess cash flows from its operations, driven primarily by assumptions regarding future trends for the issuance of municipal bonds, interest rates, credit spreads, insured market penetration, competitive activity in the market for municipal bond insurance and other factors affecting the demand for and pricing of BAM’s municipal bond insurance, as well as BAM’s investment returns. The discount rate considers comparably-rated companies and instruments, adjusted for risks specific to BAM and the BAM Surplus Notes. As of December 31, 2025, White Mountains concluded that a discount rate of 8.05% was appropriate for the valuation of the BAM Surplus Notes.

When making its fair value selection, which is within a range of reasonable values derived from the discounted cash flow analysis, White Mountains considers all available information, facts and circumstances specific to BAM’s business and industry and any infrequent or unusual results for the period. See Item 1A. Risk Factors,“We may be subject to volatility from the valuation of the BAM Surplus Notes, which could materially adversely affect our results of operations and financial condition.”on page 33.

With a discounted cash flow analysis, small changes to key inputs may result in significant changes to fair value. The following table presents the estimated effect on the fair value of the BAM Surplus Notes as of December 31, 2025, resulting from changes to the discount rate used in the discounted cash flow analysis:

Kudu’s Participation Contracts

As of December 31, 2025, Kudu has a portfolio of Participation Contracts with a total fair value of $1,285 million. On a quarterly basis, White Mountains fair values each of Kudu’s Participation Contracts, typically using a discounted cash flow analysis. The discounted cash flow analyses used to fair value Kudu’s Participation Contracts include key inputs, such as projections of future revenues and earnings of Kudu’s managers, a discount rate and a terminal cash flow exit multiple. The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rates reflect the weighted average cost of capital, considering comparable public company data and adjusted for risks specific to the business and industry. The terminal cash flow exit multiple is generally based on expectations of annual cash flow to Kudu from each of its managers in the terminal year of the discounted cash flow analysis. In determining fair value, White Mountains considers factors for each of Kudu’s managers, such as performance of products and vehicles, expected asset growth rates, new fund launches, fee rates by product, capacity constraints, operating cash flows and other qualitative factors, including the assessment of key personnel. The inputs to each discounted cash flow analysis vary depending on the nature of each of Kudu’s managers. As of December 31, 2025, White Mountains concluded that pre-tax discount rates in the range of 16% to 25% and terminal cash flow exit multiples in the range of 7 to 22 times were appropriate for the valuations of Kudu’s Participation Contracts.

When making its fair value selections, which are within a range of reasonable values derived from the discounted cash flow analysis, White Mountains considers all available information, including any relevant market multiples and multiples implied by recent transactions, facts and circumstances specific to Kudu’s managers and any infrequent or unusual results for the period.

With a discounted cash flow analysis, small changes to key inputs may result in significant changes to fair value. The following table presents the estimated effect on the fair value of Kudu’s Participation Contracts as of December 31, 2025, resulting from changes in key inputs to the discounted cash flow analysis, including discount rates and terminal cash flow exit multiples:

(1) Since Kudu’s Participation Contracts are not subject to corporate taxes within Kudu Investment Management, LLC, pre-tax discount rates are applied to pre-tax cash flows in determining fair values.

As of December 31, 2025, the fair value of White Mountains’s investment in PassportCard/DavidShield was $170 million. On a quarterly basis, White Mountains values its investment in PassportCard/DavidShield using a discounted cash flow analysis. The discounted cash flow analysis used to fair value PassportCard/DavidShield includes key inputs, such as projections of future revenues and earnings, a discount rate and a terminal revenue growth rate. The expected future cash flows are based on management judgment, considering current performance, budgets and projected future results. The discount rate reflects the weighted average cost of capital, considering comparable public company data and adjusted for risks specific to the business and industry. The terminal revenue growth rate is based on company, industry and macroeconomic expectations of perpetual revenue growth subsequent to the end of the discrete period in the discounted cash flow analysis. As of December 31, 2025, White Mountains concluded that an after-tax discount rate of 24% and a terminal revenue growth rate of 4% were appropriate for the valuation of its investment in PassportCard/DavidShield.

When making its fair value selection, which is within a range of reasonable values derived from the discounted cash flow analysis, White Mountains considers all available information, including any relevant market multiples and multiples implied by recent transactions, facts and circumstances specific to PassportCard/DavidShield’s businesses and industries and any infrequent or unusual results for the period.

With a discounted cash flow analysis, small changes to key inputs may result in significant changes to fair value. The following table presents the estimated effect on the fair value of White Mountains’s investment in PassportCard/DavidShield as of December 31, 2025, resulting from changes in key inputs to the discounted cash flow analysis, including the discount rate and terminal revenue growth rate:

2. Ark’s Loss and LAE Reserves

General

Ark establishes loss and LAE reserves that are estimates of amounts needed to pay claims and related expenses in the future for insured events that have already occurred. The process of estimating loss and LAE reserves involves a considerable degree of judgment by management and, as of any given date, is inherently uncertain. See Note 5 — “Loss and Loss Adjustment Expense Reserves”on page F-36 for a description of Ark’s loss and LAE reserves and actuarial methods.

Ark performs an actuarial review of its recorded loss and LAE reserves each quarter, using several generally accepted actuarial methods to evaluate its loss reserves, each of which has its own strengths and weaknesses. Management bases its level of reliance on a particular method based on the facts and circumstances at the time the reserve estimates are made.

As part of Ark’s quarterly actuarial review, Ark compares the previous quarter’s projections of incurred, paid and case reserve activity, including amounts incurred but not reported, to actual amounts experienced in the quarter. Differences between previous estimates and actual experience are evaluated to determine whether a given actuarial method for estimating loss and LAE reserves should be relied upon to a greater or lesser extent than it had been in the past. While some variance is expected each quarter due to the inherent uncertainty in estimating loss and LAE reserves, persistent or large variances would indicate that prior assumptions and/or reliance on certain actuarial methods may need to be revised going forward.

Upon completion of each quarterly review, Ark selects indicated loss and LAE reserve levels based on the results of the relevant actuarial methods, which are the primary consideration in determining management’s best estimate of required loss and LAE reserves. However, in making its best estimate, management also considers other qualitative factors that may lead to a difference between held reserves and actuarially indicated reserve levels. Typically, these qualitative factors are considered when management and Ark’s actuaries conclude that there is insufficient historical incurred and paid loss information or that there is particular uncertainty about whether trends included in the historical incurred and paid loss information are likely to repeat in the future. Such qualitative factors include, among others, recent entry into new markets or new products, improvements in the claims department that are expected to lessen future ultimate loss costs, legal and regulatory developments, inflation, climate change or other uncertainties that may arise.

The process of establishing loss and LAE reserves, including amounts incurred but not reported, is complex and imprecise, as it must consider many variables that are subject to the outcome of future events. As a result, informed subjective estimates and judgments as to Ark’s ultimate exposure to losses are an integral component of the loss and LAE reserving process. Ark categorizes and tracks insurance and reinsurance reserves by “reserving class of business” for each underwriting office, London and Bermuda, and then aggregates the reserving classes by line of business, which are summarized herein as property and accident & health, marine & energy, specialty, casualty-active and casualty-runoff.

Ark regularly reviews the appropriateness of its loss and LAE reserves at the reserving class of business level, considering a variety of trends that impact the ultimate settlement of claims for the subsets of claims in each particular reserving class. Loss and LAE are categorized by the year in which the policy is underwritten (the year of account, or underwriting year) for purposes of Ark’s claims management and estimation of the ultimate loss and LAE reserves. For purposes of Ark’s reporting under GAAP, loss and LAE are categorized by the accident year.

Loss and LAE Reserves by Line of Business

The following table summarizes Ark’s loss and LAE reserves, net of reinsurance recoverables on unpaid losses, as of December 31, 2025:

For loss and LAE reserves as of December 31, 2025, Ark considers that the impact of the various reserving factors, as described in Note 5 — “Loss and Loss Adjustment Expense Reserves” on page F-36, on future paid losses would be similar to the impact of those factors on historical paid losses.

The major causes of material uncertainty (i.e., reserving factors) generally will vary for each line of business, as well as for each separately analyzed reserving class of business within the line of business. Also, reserving factors can have offsetting or compounding effects on estimated loss and LAE reserves. In most cases, it is not possible to measure the effect of a single reserving factor and construct a meaningful sensitivity expectation. Actual results will likely vary from expectations for each of these assumptions, resulting in an ultimate claim liability that is different from that being estimated currently.

Additional causes of material uncertainty exist in most product lines and may impact the types of claims that could occur within a particular line of business or reserving class of business. Examples where reserving factors within a line of business or reserving class of business are subject to change include changing types of insureds (e.g., size of account, industry insured, jurisdiction), changing underwriting standards or changing policy provisions (e.g., deductibles, policy limits, endorsements).

Ark Loss and LAE Development

See Note 5 — “Loss and Loss Adjustment Expense Reserves” on page F-36 for prior year loss and LAE development discussions for the year ended December 31, 2025.

Range of Reserves

The following table shows the recorded loss and LAE reserves and the high and low ends of Ark’s range of reasonable loss and LAE reserve estimates, net of reinsurance recoverables on unpaid losses, as of December 31, 2025. See Note 5 — “Loss and Loss Adjustment Expense Reserves”on page F-36 for a description of Ark’s loss and LAE reserves and actuarial methods.

The recorded reserves represent management's best estimate of unpaid loss and LAE reserves. Management’s best estimate of reserves is in the upper portion of the actuarial range of estimates in response to potential volatility in the actuarial indications and estimates for large claims. Ark uses the results of several different standard actuarial methods to develop its best estimate of ultimate loss and LAE reserves.

On an annual basis, Ark uses an independent external actuary to provide actuarial opinions on the reasonableness of loss and LAE reserves for its operating subsidiaries. Ark uses the independent actuarial review solely to corroborate Ark’s recorded loss and LAE reserves. The result of the independent actuarial review indicated that Ark’s net recorded loss and LAE reserves fall within the range noted above.

Although Ark believes its loss and LAE reserves are reasonably stated, ultimate losses may deviate, perhaps materially, from the recorded reserve amounts and could be above the high end of the range of actuarial projections. This is because ranges are developed based on known events as of the valuation date, whereas the ultimate disposition of losses is subject to the outcome of events and circumstances that may be unknown as of the valuation date.

Sensitivity Analysis

Below is a discussion of possible variations from current estimates of loss and LAE reserves due to changes in certain key assumptions. Each of the impacts described below is estimated individually, without consideration for any correlation among key assumptions. Further, there is uncertainty around other assumptions not explicitly quantified in the discussion below. Therefore, it would be inappropriate to take each of the amounts described below and add them together in an attempt to estimate volatility for Ark’s reserves in total. It is important to note that the volatilities and variations discussed below are not meant to be worst-case scenarios or an all-inclusive list, and therefore it is possible that future volatilities and variations may be more than amounts discussed below.

•Sustained elevated levels of inflation: Elevated levels of economic inflation have been observed since 2021. While most global economies are seeing these elevated levels begin to decline, inflation continues to be a key focus point for central bank policy. The extent to which inflation will impact the ultimate cost of insurance claims remains uncertain, particularly in the casualty lines of business with key social inflation drivers being court awards, changes in technology and the legal environment. For example, a hypothetical increase in inflation rates by 4% per annum would increase the recorded loss and LAE reserves, net of reinsurance recoverables on unpaid losses, for the casualty reserving lines of business by approximately $20 million, or approximately 7% of the recorded casualty loss and LAE reserves of $288 million.

•Catastrophe losses: The years 2017 through 2025 have been active for major loss events, including natural catastrophes. As time has passed, the emerging claims information for major loss events has been better than expected. As of December 31, 2025, Ark has recorded $230 million of loss and LAE reserves, net of reinsurance recoverables on unpaid losses, for major loss events, of which $171 million is held as IBNR reserves. Some, but perhaps not all, of the IBNR reserves may be needed to handle adverse reporting from clients.

•Conflict in Ukraine and Russia: The conflict in Ukraine and Russia has and will continue to have a significant impact on the insurance industry. Recent U.K. High Court rulings on leasing claims provided more certainty on coverages related to aviation hull war risk claims, but there are additional court cases to be decided and there is uncertainty as to how claims will be presented to reinsurers. For the year ended December 31, 2025, Ark recognized $91 million of unfavorable loss reserve development related to aviation losses from the conflict in Ukraine and Russia, driven by the U.K. High Court rulings. This is a complex loss event that will continue to be litigated and negotiated in the future. As such, there remains uncertainty with respect to the ultimate impact to both insurers and reinsurers.

Loss and LAE Reserve Summary

The following table summarizes the loss and LAE reserve activity of Ark’s insurance and reinsurance subsidiaries for the year ended December 31, 2025. The amounts in the table include balances ceded by Ark to WM Outrigger Re, which eliminate in White Mountains’s consolidated financial statements.

During the year ended December 31, 2025, Ark experienced $106 million of net favorable prior year loss reserve development, driven primarily by the property and accident & health ($85 million) and specialty ($27 million) reserving lines of business, partially offset by net unfavorable development in the marine & energy ($5 million) and casualty-active ($4 million) reserving lines of business. For property and accident & health, the net favorable prior year loss reserve development was driven primarily by positive claims experience for the 2024 and 2023 accident years. For specialty, the net favorable prior year loss reserve development was driven primarily by positive claims experience for the 2023 accident year, partially offset by negative claims experience for the 2022 and 2024 accident years. In addition, the net favorable prior year loss reserve development for specialty includes $91 million of unfavorable development related to aviation losses from the conflict in Ukraine and Russia resulting from the 2025 U.K. High Court rulings on leasing claims.

The following table summarizes the unpaid loss and LAE reserves, net of reinsurance recoverables on unpaid losses, for each of Ark’s major reserving lines of business as of December 31, 2025. The amounts in the table include balances ceded by Ark to WM Outrigger Re, which eliminate in White Mountains’s consolidated financial statements.

The following five tables cover each of Ark’s property and accident & health, marine & energy, specialty, casualty-active and casualty-runoff reserving lines of business and are net of reinsurance. Each of the five tables includes three sections as follows:

The top section of the table presents, for each of the previous ten accident years, (1) cumulative total undiscounted incurred loss and LAE as of each of the previous ten year-end evaluations, (2) total IBNR plus expected development on reported claims as of December 31, 2025 and (3) the cumulative number of reported claims as of December 31, 2025.

The middle section of the table presents cumulative paid loss and LAE for each of the previous ten accident years as of each of the previous ten year-end evaluations. Also included in this section is a calculation of the loss and LAE reserves as of December 31, 2025, which is then included in the reconciliation to the consolidated balance sheet presented above. The total unpaid loss and LAE reserves as of December 31, 2025 is calculated as the cumulative incurred loss and LAE from the top section less the cumulative paid loss and LAE from the middle section, plus any outstanding liabilities from accident years prior to 2015.

The bottom section of the table is supplementary information about the average historical claims duration as of December 31, 2025. It shows the weighted average annual percentage payout of incurred loss and LAE by accident year as of each age. For example, the first column is calculated as the incremental paid loss and LAE in the first calendar year for each given accident year (e.g., calendar year 2025 for accident year 2025, calendar year 2024 for accident year 2024) divided by the cumulative incurred loss and LAE as of December 31, 2025 for that accident year. The resulting ratios are weighted using cumulative incurred loss and LAE as of December 31, 2025.

3. Goodwill and Other Intangible Assets

As of December 31, 2025, goodwill and other intangible assets recognized in connection with business and asset acquisitions totaled $1,020 million, of which $642 million was attributable to White Mountains’s common shareholders.

Under the acquisition method, White Mountains recognizes and measures the assets acquired, including other intangible assets, at their acquisition date fair values. Goodwill represents the excess of the amount paid to acquire a business over the fair value of identifiable net assets at the acquisition date.

Goodwill and other intangible assets with indefinite lives are not amortized but rather are evaluated for impairment on an annual basis, or whenever indications of potential impairment exist. In the absence of any indications of potential impairment, the evaluation of goodwill and indefinite-lived intangible assets is performed no later than the interim period in which the anniversary of the acquisition date falls. White Mountains initially evaluates goodwill and indefinite-lived intangible assets using a qualitative approach (step zero) to determine whether it is more likely than not that the implied fair value is greater than the carrying value. If the results of the qualitative evaluation indicate that it is more likely than not that the carrying value of goodwill or the indefinite-lived intangible assets exceeds the implied fair value, White Mountains performs a quantitative analysis to compare the fair value with the carrying value. If the carrying value exceeds the estimated fair value, then an impairment charge is recognized through current period pre-tax income (loss).

Other intangible assets with finite lives are initially measured at their acquisition date fair values and subsequently amortized over their economic lives. Finite-lived intangible assets are presented net of accumulated amortization on the balance sheet. Finite-lived intangible assets are reviewed for impairment when events occur or there are changes in circumstances indicating that their carrying value may exceed fair value. An impairment exists when the carrying value of a finite-lived intangible asset exceeds the fair value.

During the year ended December 31, 2025, White Mountains performed its periodic reviews for potential impairment and recognized an impairment of goodwill of $9 million and other intangible assets of $1 million related to an Other Operating Business within Other Operations. Impairment charges are presented within general and administrative expenses on the statement of operations.

As of December 31, 2025, White Mountains had total goodwill and other intangible assets of $1,020 million, $578 million of which relates to Distinguished and $293 million of which relates to Ark. See Note 4 — “Goodwill and Other Intangible Assets” on page F-34.

See Item 1A. Risk Factors, “If we are required to write down goodwill and other intangible assets, it could materially adversely affect our results of operations and financial condition.”on page 29.