White Mountains’s portfolio of common equity securities and other long-term investments returned 4.9% in 2020. White Mountains’s portfolio of its investment in MediaAlpha, common equity securities and other long-term investments returned 80.0% in 2020. White Mountains’s portfolio of common equity securities and other long-term investments returned 20.8% in 2019. White Mountains’s portfolio of its investment in MediaAlpha, common equity securities and other long-term investments returned 36.9% in 2019.
The following table presents the gross par value of primary and secondary market policies issued, the gross par value of assumed reinsurance, the gross written premiums and MSC collected and total pricing for the twelve months ended December 31, 2020 and 2019:
United Kingdom: NSM’s United Kingdom controlled premium and commission and other revenues increased 15% and 8% in 2020, compared to 2019, driven primarily by the acquisition of Kingsbridge. Kingsbridge contributed $26 million of controlled premium and $12 million of commission and other revenues in 2020. Excluding Kingsbridge, United Kingdom controlled premium decreased 1% in 2020, compared to 2019, as growth in the MGA business was offset by declines in the brokerage business caused by disruption to the travel and non-standard auto markets in the United Kingdom resulting from the COVID-19 pandemic. Excluding Kingsbridge, United Kingdom commission and other revenues declined 19% due to COVID-related challenges and changes in product mix, as the brokerage business, which has higher commission rates than the MGA business, declined while the MGA business grew.
Real Estate: NSM’s real estate controlled premium and commission and other revenues increased 16% and 15% in 2019, compared to 2018, driven primarily by rate increases in coverages for coastal condominium associations, combined with significant unit growth in the excess and surplus habitational program.
Common equity securities and other long-term investments 4.9 % 20.8 % (3.6) %
Previously, White Mountains maintained relationships with a small number of third-party registered investment advisers (the “actively managed common equity portfolio”), including Highclere International Investors (“Highclere”), who invests in small- and mid-cap equity securities listed in markets outside of the United States and Canada through a unit trust, and Silchester International Investors (“Silchester”), who invests in value-oriented non-U.S. equity securities through a unit trust.
Prior to the 2019 MediaAlpha Transaction, MediaAlpha was a majority-owned consolidated subsidiary of White Mountains. Subsequent to the 2019 MediaAlpha Transaction, MediaAlpha was deconsolidated and accounted for at fair value.
Total other long-term investments $ 786.8 100.0 % $ 676.3 100.0 %
Both internal and external forces influence White Mountains’s financial condition, results of operations and cash flows. Premium and fee levels, loss payments, cost of sales and investment returns may be impacted by changing rates of inflation and other economic conditions. Some time may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains’s operating subsidiaries and the settlement of the liability for that loss. The exact timing of the payment of losses and benefits cannot be predicted with certainty.
The following table presents the change in debt under the NSM Bank Facility for the years ended December 31, 2020 and 2019:
On June 15, 2018, NSM entered into an interest rate swap agreement to hedge its exposure to interest rate risk on $151 million of its USD denominated variable rate term loans.
During 2020, HG Global declared and paid $23 million of preferred dividends, of which $22 million was paid to White Mountains.
During 2020, Kudu borrowed $32 million in term loans under the Kudu Bank Facility.
White Mountains’s process to assess the reasonableness of the market prices obtained from the outside pricing sources covers substantially all of its fixed maturity investments and includes, but is not limited to, the evaluation of pricing methodologies and a review of the pricing services’ quality control procedures on at least an annual basis, a comparison of its invested asset prices obtained from alternate independent pricing vendors on at least a semi-annual basis, monthly analytical reviews of certain prices and a review of the underlying assumptions utilized by the pricing services for select measurements on an ad hoc basis throughout the year. White Mountains also performs back-testing of selected investment sales activity to determine whether there are any significant differences between the market price used to value the security prior to sale and the actual sale price of the security on an ad-hoc basis throughout the year. Prices provided by the pricing services that vary by more than $0.5 million and 5% from the expected price based on these assessment procedures are considered outliers, as are prices that have not changed from period to period and prices that have trended unusually compared to market conditions. In circumstances where the results of White Mountains’s review process does not appear to support the market price provided by the pricing services, White Mountains challenges the vendor provided price. If White Mountains cannot gain satisfactory evidence to support the challenged price, White Mountains will rely upon its own internal pricing methodologies to estimate the fair value of the security in question.
These statements are based on certain assumptions and analyses made by White Mountains in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances. However, whether actual results and developments will conform to its expectations and predictions is subject to risks and uncertainties that could cause actual results to differ materially from expectations, including: