ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.



On August 7, 2020, White Mountains Insurance Group, Ltd. issued a press release
announcing its results for the three and six months ended June 30, 2020. The
press release furnished herewith is attached as Exhibit 99.1 to this Form 8-K.
Certain information included in the press release constitutes non-GAAP financial
measures (as defined in Regulation G of the Securities and Exchange Commission).
Specifically, the nine non-GAAP financial measures disclosed in the press
release include (i) adjusted book value per share, (ii) gross written premiums
and member surplus contributions ("MSC") from new business, (iii) NSM's earnings
before interest, taxes, depreciation and amortization ("EBITDA"), (iv) NSM's
adjusted EBITDA, (v) NSM's pro forma adjusted EBITDA, (vi) Kudu's EBITDA, (vii)
Kudu's adjusted EBITDA, (viii) Kudu's annualized adjusted EBITDA and (ix) total
consolidated portfolio return excluding the MediaAlpha transaction. These
non-GAAP financial measures have been reconciled to their most comparable GAAP
financial measures.
Adjusted book value per share is a non-GAAP financial measure which is derived
by adjusting (i) the GAAP book value per share numerator and (ii) the common
shares outstanding denominator, as described below. The GAAP book value per
share numerator is adjusted (i) to include a discount for the time value of
money arising from the modeled timing of cash payments of principal and interest
on the BAM surplus notes and (ii) to add back the unearned premium reserve, net
of deferred acquisition costs, at HG Global. 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 surplus
notes, the present value of the BAM surplus notes, including accrued interest,
was estimated to be $151 million, $154 million, $157 million and $140 million
less than the nominal GAAP carrying values as of June 30, 2020, March 31, 2020,
December 31, 2019 and June 30, 2019, respectively. The value of HG Global's
unearned premium reserve, net of deferred acquisition costs, was $131 million,
$121 million, $119 million and $113 million as of June 30, 2020, March 31, 2020,
December 31, 2019 and June 30, 2019 respectively. White Mountains believes these
adjustments are useful to management and investors in analyzing the intrinsic
value of HG Global, including the value of the surplus notes and the value of
the in-force business at HG Re, HG Global's reinsurance subsidiary. The
denominator used in the calculation of adjusted book value per share equals the
number of common shares outstanding adjusted to exclude unearned restricted
common shares, the compensation cost of which, at the date of calculation, has
yet to be amortized. Restricted common shares are earned on a straight-line
basis over their vesting periods. The reconciliation of GAAP book value per
share to adjusted book value per share is included on page 6 of Exhibit 99.1 to
this Form 8-K.
Gross written premiums and MSC from new business is a non-GAAP financial
measure, which is derived by adjusting gross written premiums and MSC collected
(i) to include the present value of future installment MSC not yet collected and
(ii) to exclude the impact of gross written premium adjustments related to
policies closed in prior periods. White Mountains believes these adjustments are
useful to management and investors in evaluating the volume and pricing of new
business closed during the period. The reconciliation from GAAP gross written
premiums to gross written premiums and MSC from new business is included on page
14 of Exhibit 99.1 to this Form 8-K.
NSM's EBITDA, adjusted EBITDA and pro forma adjusted EBITDA are non-GAAP
financial measures. EBITDA is a non-GAAP financial measure that excludes
interest expense on debt, income tax expense (benefit), depreciation and
amortization from GAAP net income (loss). Adjusted EBITDA is a non-GAAP
financial measure that excludes certain other items in GAAP net income (loss) in
addition to those excluded from EBITDA. The adjustments relate to (i) change in
fair value of contingent consideration earnout liabilities, (ii) impairments of
intangible assets, (iii) acquisition-related transaction expenses, (iv) fair
value purchase accounting adjustment for deferred revenue, (v) investments made
in the development of new business lines and (vi) restructuring expenses. A
description of each follows:
•Change in fair value of contingent consideration earnout liabilities - Earnout
liabilities are amounts payable to the sellers of businesses purchased by NSM
that are contingent on the earnings of such businesses in periods subsequent to
their acquisition. Under GAAP, earnout liabilities are initially recorded at
fair value as part of purchase accounting, with the periodic change in the fair
value of these liabilities recorded as income or an expense.
•Impairments of intangible assets - Represents expense related to NSM's
write-off of intangible assets. For the periods presented, the impairments
related primarily to NSM's write-off of intangible assets in its U.K. vertical.
The impairments related to lower premium volumes, including due to the impact of
the COVID-19 pandemic, and certain reorganization initiatives in the U.K.
vertical.
•Acquisition-related transaction expenses - Represents costs directly related to
NSM's transactions to acquire businesses, such as transaction-related
compensation, banking, accounting and external lawyer fees, which are not
capitalized and are expensed under GAAP.
•Fair value purchase accounting adjustment for deferred revenue - Represents the
amount of deferred revenue that had already been collected but subsequently
written down in connection with establishing the fair value of deferred revenue
as part of NSM's purchase accounting for Embrace Pet Insurance.

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•Investments made in the development of new business lines - Represents the net
loss related to the start-up of newly established lines of business, which NSM
views as investments. For the periods presented, this adjustment relates
primarily to NSM's investment expenditures, net of revenues generated, in the
organic development of (i) its pet insurance line and (ii) its MGA in the United
Kingdom. In 2019, NSM decided to cease investment in the organic development of
its pet insurance line and, instead, to acquire Embrace Pet Insurance.
•Restructuring expenses - Represents expenses associated with eliminating
redundant work force and facilities that often arise as a result of NSM's
post-acquisition integration strategies.
Pro forma adjusted EBITDA is a non-GAAP financial measure that starts with
adjusted EBITDA and also includes the earnings of acquired businesses for the
period of time over the previous twelve months that the businesses were not
owned by White Mountains. White Mountains believes that these non-GAAP financial
measures are useful to management and investors in evaluating NSM's performance.
White Mountains also believes that pro forma adjusted EBITDA is useful to
management and investors to demonstrate the earnings profile of NSM's business
as of the end of the period for a full 12 month period. See page 15 of
Exhibit 99.1 to this Form 8-K for the reconciliation of NSM's GAAP net income
(loss) to EBITDA, adjusted EBITDA and pro forma adjusted EBITDA.
Kudu's EBITDA, adjusted EBITDA and annualized adjusted EBITDA are non-GAAP
financial measures. EBITDA is a non-GAAP financial measure that excludes
interest expense on debt, income tax expense (benefit), depreciation and
amortization of other intangible assets from GAAP net income (loss). Adjusted
EBITDA is a non-GAAP financial measure that excludes certain other items in GAAP
net income (loss) in addition to those excluded from EBITDA. The adjustments
relate to (i) net unrealized investment (gains) losses on Kudu's revenue and
earnings participation contracts, (ii) non-cash equity-based compensation
expense and (iii) acquisition-related transaction expenses. A description of
each adjustment follows:
•Net unrealized investment (gains) losses - Represents net unrealized investment
gains and losses recorded on Kudu's revenue and earnings participation
contracts, which are recorded at fair value under GAAP.
•Non-cash equity based compensation expense Represents non-cash expenses related
to Kudu's management compensation that are settled with equity units in Kudu.
•Acquisition-related transaction expenses - Represents costs directly related to
Kudu's transactions to acquire revenue and earnings participation contracts,
such as external lawyer, banker, consulting and placement agent fees, which are
not capitalized and are expensed under GAAP.
Annualized adjusted EBITDA is a non-GAAP financial measure that annualizes
revenues related to Kudu's earnings and revenue participation contracts that
were in place as of the end of the 12 month period but were not in effect for
the full 12 month period. The amount added was calculated on a
contract-by-contract basis by annualizing the revenues received for the partial
12 month period. For example, if a participation contract was in effect for four
months, the amount added equals twice that amount. White Mountains believes that
these non-GAAP financial measures are useful to management and investors in
evaluating Kudu's performance. White Mountains also believes that annualized
adjusted EBITDA is useful to management and investors to demonstrate the
earnings profile of Kudu's business as of the end of the period for a full 12
month period. See page 16 of Exhibit 99.1 to this Form 8-K for the
reconciliation of Kudu's GAAP net income (loss) to EBITDA, adjusted EBITDA and
annualized adjusted EBITDA.
Total consolidated portfolio return excluding the MediaAlpha Transaction is a
non-GAAP financial measure that removes the $115 million pre-tax unrealized
investment gain resulting from the MediaAlpha Transaction recognized in the
first six months of 2019. White Mountains believes this measure to be useful to
management and investors by making the return in the prior period comparable to
the current period. A reconciliation from GAAP to the reported percentage is as
follows:
                                                                    For the

Six Months Ended June 30, 2019


                                                                            Remove MediaAlpha              Return - Excluding
                                                   GAAP Return                 Transaction               MediaAlpha Transaction

Total consolidated portfolio returns                       12.4  %                        (4.5) %                         7.9  %




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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

99.1 Press Release of White Mountains Insurance Group, Ltd. dated August 7, 2020, furnished herewith.

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