The following table presents White Mountains’s adjusted book value per share, a non-GAAP financial measure, as of December 31, 2019, 2018 and 2017 and reconciles this non-GAAP measure to book value per share, the most comparable GAAP measure. See “NON-GAAP FINANCIAL MEASURES” on page 58.
Total pricing, which reflects both gross written premiums and MSC from new business, decreased to 83 basis points in 2019, compared to 93 basis points in 2018. See “NON-GAAP FINANCIAL MEASURES” on page 58. The decrease in total pricing was driven primarily by a decrease in pricing in the primary market. Pricing in the primary market decreased to 51 basis points in 2019, compared to 71 basis points in 2018, driven primarily by lower interest rates and tighter credit spreads. Pricing in the assumed reinsurance and secondary markets, which is more transaction-specific than pricing in the primary market, increased to 219 basis points in 2019, compared to 150 basis points in 2018, partially offsetting the decline in pricing in the primary market.
Kudu reported pre-tax income of $11 million and revenues of $21 million for the period from April 4, 2019, the date of the Kudu Transaction, to December 31, 2019. Kudu’s pre-tax income and revenues were driven primarily by net investment income of $15 million and net realized and unrealized gains of $6 million from Kudu’s Participation Contracts. Kudu’s pre-tax income also included general and administrative expenses of $10 million, driven primarily by employee compensation costs and transaction related expenses.
White Mountains’s portfolio of common equity securities was $926 million and $866 million as of December 31, 2018 and 2017. White Mountains’s portfolio of common equity securities returned -7.7% for 2018, underperforming the S&P 500 Index return of -4.4%, driven primarily by relative underperformance in White Mountains’s international common equity portfolios. White Mountains’s portfolio of common equity securities returned 20.1% for 2017, underperforming the S&P 500 Index return of 21.8%.
Interest on the NSM Bank Facility accrues at a floating interest rate equal to the three-month LIBOR or the Prime Rate, as published by the Wall Street Journal plus, in each case, an applicable margin. The margin over LIBOR may vary between 4.25% and 4.75%, and the margin over the Prime Rate may vary between 3.25% and 3.75%, in each case, depending on the consolidated total leverage ratio of the borrower.
Total consolidated portfolio returns excluding the MediaAlpha Transaction, common equity securities and other long-term investment returns excluding the MediaAlpha Transaction and other long-term investments returns excluding the MediaAlpha Transaction are non-GAAP financial measures that remove the $115 million pre-tax unrealized investment gain resulting from the MediaAlpha Transaction recognized in the first quarter of 2019. Subsequent to the MediaAlpha Transaction, White Mountains no longer consolidates MediaAlpha and accounts for its remaining investment in MediaAlpha at fair value. White Mountains believes these measures to be useful to management and investors by making the returns in the current period comparable to the prior periods. A reconciliation from GAAP to the reported percentages is as follows:
Periodically, White Mountains’s management reviews the recoverability of amounts recorded from the BAM Surplus Notes. As of December 31, 2019, White Mountains believes such notes and interest thereon to be fully recoverable. White Mountains’s review is based on a debt service model that forecasts operating results for BAM, and related payments on the BAM Surplus Notes, through maturity of the BAM Surplus Notes in 2042. The model depends on 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 price of BAM’s municipal bond insurance.