During 2019, White Mountains repurchased and retired $5 million of its common shares. During 2019, White Mountains deployed roughly $435 million in new business opportunities, ending the year with approximately $1.0 billion of undeployed capital.
HG Global reported GAAP pre-tax income of $54 million in 2019, compared to $32 million in 2018. The increase in pre-tax income was driven primarily by higher returns in HG Global’s investment portfolio. HG Global’s results in 2019 included $27 million of interest income on the BAM Surplus Notes, compared to $23 million in 2018.
White Mountains’s fixed income portfolio, including short-term investments, was $1.3 billion and $2.3 billion as of December 31, 2018 and 2017. The duration of White Mountains’s fixed income portfolio, including short-term investments, was 3.4 years as of both December 31, 2018 and 2017. White Mountains’s fixed income portfolio includes fixed maturity investments and short-term investments in the Collateral Trusts of $254 million and $204 million as of December 31, 2018 and 2017.
The following table presents the composition of White Mountains’s total operations investment portfolio as of December 31, 2019 and 2018:
White Mountains reported income tax benefit of $8 million in 2017 on pre-tax income from continuing operations of $8 million. White Mountains’s effective tax rate was different from the 2017 U.S. federal statutory rate of 35% primarily due to a full valuation allowance on the net deferred tax assets of Guilford net of the impact of tax rate changes, income generated in jurisdictions with lower tax rates than the United States, a tax benefit recorded at BAM related to its MSC collected and consolidated pre-tax income being near break-even. For BAM, MSC collected and the related taxes thereon are recorded directly to non-controlling interest equity, while the valuation allowance on such taxes is recorded through the income statement. As a result, BAM recorded a tax benefit of $10 million associated with the valuation allowance on taxes related to MSC collected that is included in the effective tax rate.
During 2019, White Mountains paid a $3 million common share dividend. As of December 31, 2019, the Company and its intermediate holding companies had $603 million of net unrestricted cash, short-term investments and fixed maturity investments, $684 million of common equity securities and $202 million of private equity funds, hedge funds and ILS funds.
White Mountains also has future binding commitments to fund certain other long-term investments. These commitments, which totaled approximately $183 million as of December 31, 2019, do not have fixed funding dates and, are therefore, excluded from the table above.
Under GAAP, White Mountains is required to carry the BAM Surplus Notes, including accrued interest, at nominal value with no consideration for time value of money. Based on a debt service model that forecasts operating results for BAM through maturity of the BAM Surplus Notes, the present value of the BAM Surplus Notes, including accrued interest and using an 8.0% discount rate, was estimated to be $157 million, $146 million and $162 million less than the nominal GAAP carrying values as of December 31, 2019, 2018 and 2017, respectively.
With a discounted cash flow analysis, small changes to inputs in a valuation model 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, 2019, resulting from increases and decreases to the discount rates and terminal cash flow exit multiples used in the discounted cash flow analysis:
This report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or referenced in this report which address activities, events or developments which White Mountains expects or anticipates will or may occur in the future are forward-looking statements. The words “will”, “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements with respect to White Mountains’s: