The Company maintains two professional offices in Hamilton, Bermuda, which serve as its headquarters and its registered office. The Company’s principal executive office is in Hanover, New Hampshire. In addition, White Mountains maintains professional offices in Guilford, Connecticut, which house its corporate finance and investment functions and Boston, Massachusetts, which house its corporate accounting, reporting and internal audit functions.
MediaAlpha recognized advertising and commission revenues of $296 in 2018, compared to $163 in 2017, and NSM, which was acquired during 2018, recognized advertising and commission revenues of $95 from May 11, 2018 through December 31, 2018. Other Operations recognized net realized and unrealized investment (losses) gains of $(101), $133 and $(28), in 2018 and 2017 and 2016, respectively, which contributed to the increase and decrease in revenues. In 2015, White Mountains changed the accounting for its investment in Symetra Financial Corporation from the equity method to fair value and recognized $259 of unrealized investment gains.
As a result of the sale of OneBeacon, Sirius Group, Tranzact and Esurance Holdings, Inc. and its subsidiaries and Answer Financial Inc. and its subsidiaries (collectively, “Esurance”), White Mountains has reclassified the results from these businesses for the past five years in the table above to discontinued operations, net of tax. In 2018, discontinued operations, net of tax, includes a loss of $17 for the recognition of a contingent liability related to the sale of Sirius. In 2017, discontinued operations, net of tax, includes a gain from sale of OneBeacon of $555 and income of $21 and a (loss) gain from sale of Sirius and Tranzact of $(1) and $3. In 2016, discontinued operations, net of tax, includes a gain from sale of Sirius and Tranzact of $363 and $52 and net income of $108 primarily related to the operations of OneBeacon. In 2015, discontinued operations, net of tax, includes a gain from sale of Esurance of $18 and net income of $117. In 2014, discontinued operations, net of tax, includes a loss on sale of other discontinued operations of $19, mostly offset by a gain from sale of Fireman’s Fund Insurance Company (“FFIC”) of $14, and net income of $261, primarily related to the operations of Sirius Group. See Note 19 - “Held for Sale and Discontinued Operations” on page.
The following discussion contains “forward-looking statements”. White Mountains intends statements that are not historical in nature, which are hereby identified as forward-looking statements, to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. White Mountains cannot promise that its expectations in such forward-looking statements will turn out to be correct. White Mountains’s actual results could be materially different from and worse than its expectations. See “FORWARD-LOOKING STATEMENTS” on page 62 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
The following table presents White Mountains’s adjusted book value per share, a non-GAAP financial measure, for the years ended December 31, 2018, 2017 and 2016 and reconciles this non-GAAP measure to book value per share, the most comparable GAAP measure. See “NON-GAAP FINANCIAL MEASURES” on page 55.
(1) The relative fair values of goodwill and other intangible assets recognized in connection with the acquisition of KBK had not yet been determined at December 31, 2018.
Gross written premiums and MSC collected in the HG Global/BAM segment totaled $101 million in 2017, compared to $77 million in 2016, as higher pricing more than offset a decrease in issuance volume. BAM’s volume for 2017 was affected by Standard & Poor’s review of BAM’s financial strength rating. On June 6, 2017, Standard & Poor’s placed BAM on credit watch negative and initiated a detailed review of BAM’s financial strength rating. On June 26, 2017, Standard & Poor’s concluded its review and affirmed BAM’s “AA/stable” financial strength rating. During the time that BAM was under review by Standard & Poor’s, it voluntarily withdrew from the marketplace and did not write any municipal bond insurance policies. In 2017, BAM insured $10.4 billion of municipal bonds, $9.6 billion of which were in the primary market, down 8% from 2016.
The following table presents BAM’s total claims paying resources as of December 31, 2018 and 2017:
The following table presents BAM’s total claims paying resources as of December 31, 2017 and 2016:
MediaAlpha Results-Year Ended December 31, 2017 versus Year Ended December 31, 2016
White Mountains’s portfolio of ETFs seeks to provide investment results that, before expenses, generally correspond to the performance of broad market indices. As of December 31, 2018 and 2017, White Mountains had approximately $675 million and $570 million invested in ETFs. In 2018 and 2017, the ETFs essentially earned the effective index return, before expenses, over the period in which White Mountains was invested in these funds.
During 2018, White Mountains paid a $4 million common share dividend. As of December 31, 2018, the Company and its intermediate holding companies had $536 million of net unrestricted cash, short-term investments and fixed maturity investments, $926 million of common equity securities and $67 million of other long-term investments included in its Other Operations segment.
Time-value discount on expected future payments on the BAM Surplus Notes (1)
At December 31, 2018, White Mountains was in compliance with all of the covenants under all of its debt instruments.
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, 2018.
During 2017, the Company repurchased and retired 832,725 of its common shares for $724 million, which included 10,993 for $9 million under employee benefit plans for statutory withholding tax payments.
During 2016, White Mountains made gross investments into the Tuckerman Capital Funds totaling $10 million and received a total of $4 million of distributions from these funds.
Market Approach: The market approach uses prices and other relevant information generated by market transactions involving identical or comparable businesses, such as recent sales or offerings of comparable assets.