The following discussion also includes four non-GAAP financial measures (i) adjusted book value per share, (ii) gross written premiums and MSC from new business, (iii) adjusted capital, and (iv) adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), that have been reconciled from their most comparable GAAP financial measures on page 55. White Mountains believes these measures to be useful in evaluating White Mountains’s financial performance and condition.
On May 11, 2018, White Mountains acquired a 95.0% equity interest in NSM, a full-service MGU and program administrator for specialty property & casualty insurance. NSM reported pre-tax loss of $5 million from May 11, 2018, the date of acquisition, through December 31, 2018 (“the 2018 ownership period”). NSM reported adjusted EBITDA of $16 million and revenues of $102 million in the 2018 ownership period.
White Mountains’s portfolio of common equity securities and other long-term investments returned 12.7% for 2017, underperforming the S&P 500 Index return of 21.8%, driven primarily by losses from foreign currency forward contracts and unconsolidated entities. White Mountains’s portfolio of common equity securities and other long-term investments returned 4.3% for 2016, underperforming the S&P 500 Index return of 12.0%, driven primarily by losses from private equity funds and unconsolidated entities and weak returns from certain actively managed common equity portfolios.
HG Global preferred dividends payable to White Mountains’s subsidiaries is eliminated in White Mountains’s consolidated financial statements. For segment reporting, the HG Global preferred dividends payable to White Mountains’s subsidiaries included within the HG Global/BAM segment are eliminated against the offsetting receivable included within the Other Operations segment, and therefore are added back to White Mountains’s common shareholders’ equity within the HG Global/BAM segment.
MediaAlpha reported break-even pre-tax income in 2017, compared to a pre-tax loss of $4 million in 2016. Adjusted EBITDA was $11 million in 2017, compared to $7 million in 2016. For the year ended December 31, 2017, the increase in pre-tax income and adjusted EBITDA were driven primarily by increases in gross profit of $7 million in the HLM vertical and $1 million in the P&C vertical, partially offset by increased operating expenses.
The following table presents White Mountains’s financial results from its Other Operations segment for the years ended December 31, 2018, 2017 and 2016:
Investment Returns-Year Ended December 31, 2018 versus Year Ended December 31, 2017
The following table presents White Mountains’s material contractual obligations and commitments as of December 31, 2018:
White Mountains’s portfolio of other long-term investments includes unconsolidated entities, including non-controlling interests in certain private common equity securities, limited liability companies and convertible preferred securities. White Mountains portfolio of unconsolidated entities are generally valued using level 3 inputs. The determination of the fair value of unconsolidated entities may involve significant management judgment, the use of valuation models and assumptions that are inherently subjective.