WHITE MOUNTAINS INSURANCE GROUP, LTD. 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 76 for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements. The following discussion also includes nine non-GAAP financial measures: (i) adjusted book value per share, (ii) Ark's adjusted loss and LAE ratio, (iii) Ark's adjusted insurance acquisition expense ratio, (iv) Ark's adjusted other underwriting expense ratio, (v) Ark's adjusted combined ratio (vi) Kudu's earnings before interest, taxes, depreciation and amortization ("EBITDA"), (vii) Kudu's adjusted EBITDA, (viii) total consolidated portfolio returns excluding MediaAlpha, and (ix) adjusted capital, that have been reconciled from their most comparable GAAP financial measures on page 74.White Mountains believes these measures to be useful in evaluatingWhite Mountains's financial performance and condition.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
Overview
White Mountains reported book value per share of$1,439 and adjusted book value per share of$1,471 as ofSeptember 30, 2022 . Book value per share and adjusted book value per share both increased 28% in the third quarter of 2022. For the first nine months of 2022, book value increased 23% and adjusted book value increased 24%, including dividends. The increases in book value per share and adjusted book value per share were driven primarily by the net gain from the sale of NSM of approximately$300 per share (based on 2.9 million shares outstanding atAugust 1, 2022 ). In addition, the growth inWhite Mountains's book value per share and adjusted book value per share reflect good operating results at its businesses, partially offset by net realized and unrealized losses in its fixed income portfolio and investment in MediaAlpha.White Mountains reported book value per share of$1,162 and adjusted book value per share of$1,176 as ofSeptember 30, 2021 . Book value per share and adjusted book value per share both decreased 9% in the third quarter of 2021. Book value per share decreased 8% and adjusted book value per share decreased 7% in the first nine months of 2021, including dividends. Results in the third quarter and first nine months of 2021 were driven primarily by$397 million and$326 million of net realized and unrealized investment losses fromWhite Mountains's investment in MediaAlpha, resulting from decreases in the MediaAlpha share price. OnAugust 1, 2022 ,White Mountains closed the NSM Transaction.White Mountains received$1.4 billion in net cash proceeds at closing and recognized a net gain of$876 million , which was comprised of$887 million of net gain from sale of discontinued operations and$3 million of comprehensive income related to the recognition of foreign currency translation gains (losses) from the sale, partially offset by$14 million of compensation and other costs related to the transaction recorded in Other Operations. During the third quarter of 2022,White Mountains repurchased and retired 366,645 of its common shares for$509 million at an average share price of$1,388.24 , or 96% ofWhite Mountains's September 30, 2022 book value per share and 94% ofWhite Mountains's September 30, 2022 adjusted book value per share. As ofSeptember 30, 2022 ,White Mountains's undeployed capital was approximately$1.1 billion . In the HG Global/BAM segment, gross written premiums and MSC collected totaled$46 million and$109 million in the third quarter and first nine months of 2022 compared to$28 million and$84 million in the third quarter and first nine months of 2021. Total pricing was 110 and 81 basis points in the third quarter and first nine months of 2022 compared to 69 and 66 basis points in the third quarter and first nine months of 2021. BAM insured municipal bonds with par value of$4.1 billion and$13.5 billion in the third quarter and first nine months of 2022 compared to$4.0 billion and$12.6 billion in the third quarter and first nine months of 2021. BAM's total claims paying resources were$1,260 million as ofSeptember 30, 2022 compared to$1,192 million as ofDecember 31, 2021 and$1,181 million as ofSeptember 30, 2021 . 48 -------------------------------------------------------------------------------- Ark reported a GAAP combined ratio of 87% and 90% in the third quarter and first nine months of 2022 compared to 92% and 95% in the third quarter and first nine months of 2021. Ark's adjusted combined ratio, which adds back amounts attributable to TPC providers, was 86% and 90% in the third quarter and first nine months of 2022 compared to 89% and 93% in the third quarter and first nine months of 2021. The adjusted combined ratio for the third quarter and first nine months of 2022 included 21 points and 17 points of catastrophe losses compared to 21 points and 16 points in the third quarter and first nine months of 2021. Catastrophe losses for the third quarter and first nine months of 2022 included$51 million related to Hurricane Ian on a net basis after reinstatement premiums. The adjusted combined ratio in the third quarter and first nine months of 2022 also included four points and five points of favorable prior year development compared to six points and five points in the third quarter and first nine months of 2021, principally in property lines. Ark reported gross written premiums of$216 million and$1,253 million , net written premiums of$193 million and$1,007 million and net earned premiums of$346 million and$758 million in the third quarter and first nine months of 2022 compared to gross written premiums of$162 million and$895 million , net written premiums of$121 million and$726 million and net earned premiums of$213 million and$436 million and in the third quarter and first nine months of 2021. Ark reported pre-tax income (loss) of$24 million and$(20) million in the third quarter and first nine months of 2022 compared to$11 million and$(4) million in third quarter and first nine months of 2021. Ark's results included net realized and unrealized investment gains (losses) of$(14) million and$(77) million in the third quarter and first nine months of 2022 compared to$0.3 million and$10 million in the third quarter and first nine months of 2021. Ark's pre-tax loss for the first nine months of 2021 also included$25 million of transaction expenses related toWhite Mountains's transaction with Ark Kudu reported total revenue of$56 million , pre-tax income of$47 million and adjusted EBITDA of$12 million in the third quarter of 2022 compared to total revenue of$29 million , pre-tax income of$23 million and adjusted EBITDA of$7 million in the third quarter of 2021. Total revenues and pre-tax income in the third quarter of 2022 included$41 million of net realized and unrealized investment gains on Kudu's participation contracts compared to$19 million of net realized and unrealized investment gains on Kudu's participation contracts in the third quarter of 2021. Kudu reported total revenue of$87 million , pre-tax income of$66 million and adjusted EBITDA of$33 million in the first nine months of 2022 compared to total revenue of$89 million , pre-tax income of$70 million and adjusted EBITDA of$19 million in the first nine months of 2021. Total revenues and pre-tax income in the first nine months of 2022 included$46 million of net realized and unrealized investment gains on Kudu's participation contracts compared to$63 million of net realized and unrealized investment gains on Kudu's participation contracts in the first nine months of 2021. As ofSeptember 30, 2022 , the market value ofWhite Mountains's investment in MediaAlpha was$148 million , which was down from$167 million as ofJune 30, 2022 . As ofSeptember 30, 2022 , the closing price was$8.75 per share, which decreased from$9.85 as ofJune 30, 2022 . Based onWhite Mountains's ownership of 16.9 million shares of MediaAlpha as ofSeptember 30, 2022 , each$1.00 per share increase or decrease in the stock price of MediaAlpha will result in an approximate$6.60 per share increase or decrease inWhite Mountains's book value per share and adjusted book value per share.White Mountains's pre-tax total consolidated portfolio return on invested assets was 0.4% in the third quarter of 2022. This return included$19 million of unrealized investment losses fromWhite Mountains's investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 0.5% in the third quarter of 2022. Excluding MediaAlpha, investment returns in the third quarter of 2022 were driven primarily by favorable other long-term investment results, which more than offset net realized and unrealized investment losses in the fixed income portfolio due to rising interest rates.White Mountains's pre-tax total consolidated portfolio return on invested assets was -8.0% in the third quarter of 2021. This return included$397 million of unrealized investment losses fromWhite Mountains's investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 1.4% in the third quarter of 2021. Excluding MediaAlpha, investment returns in the third quarter of 2021 were driven primarily by favorable other long-term investments results.White Mountains's pre-tax total consolidated portfolio return on invested assets was -3.6% in the first nine months of 2022. This return included$113 million of net unrealized investment losses fromWhite Mountains's investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was -1.4% in the first nine months of 2022. Excluding MediaAlpha, investment returns in the first nine months of 2022 were driven primarily by net unrealized investment losses in the fixed income portfolio due to rising interest rates, partially offset by favorable other long-term investment results.White Mountains's pre-tax total consolidated portfolio return on invested assets was -3.7% in the first nine months of 2021. This return included$326 million of net realized and unrealized investment losses fromWhite Mountains's investment in MediaAlpha. Excluding MediaAlpha, the total consolidated portfolio return on invested assets was 4.6% in the first nine months of 2021. Excluding MediaAlpha, investment returns in the first nine months of 2021 were driven primarily by favorable other long-term investment results. 49
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Adjusted Book Value Per Share
The following table presents
September 30, June 30, December 31, September 30,
2022 2022 2021 2021
Book value per share numerators (in
millions):
White Mountains's common shareholders'
equity -
GAAP book value per share numerator $ 3,708.0 $
3,323.3
Time value of money discount on expected future payments on the BAM Surplus Notes (1) (110.8) (115.9) (125.9) (128.0) HG Global's unearned premium reserve (1) 232.2 221.6 214.6 206.8 HG Global's net deferred acquisition costs (1) (65.9) (62.6) (60.8) (58.1) Adjusted book value per share numerator$ 3,763.5 $
3,366.4
per share denominator 2,576.2 2,942.9 3,017.8 3,029.6 Unearned restricted common shares (17.5) (20.9) (13.7) (17.0) Adjusted book value per share denominator 2,558.7 2,922.0 3,004.1 3,012.6 GAAP book value per share$ 1,439.31 $
1,129.27
$ 1,470.84 $
1,152.12
$ 1.00 $
1.00
(1) Amount reflects
The following table presents a summary of goodwill and other intangible assets that are included inWhite Mountains's book value as ofSeptember 30, 2022 ,June 30, 2022 ,December 31, 2021 , andSeptember 30, 2021 : September 30, June 30, December 31, September 30, Millions 2022 2022 2021 2021Goodwill : Ark$ 116.8 $ 116.8 $ 116.8 $ 116.8 Kudu 7.6 7.6 7.6 7.6 Other Operations 51.1 (1) 77.4 (1) 17.9 17.4 Total goodwill 175.5 201.8 142.3 141.8 Other intangible assets: Ark 175.7 175.7 175.7 175.7 Kudu 1.1 1.1 1.3 1.4 Other Operations 40.9 19.4 21.2 31.3 Total other intangible assets 217.7 196.2 198.2 208.4 Total goodwill and other intangible assets (2) 393.2 398 340.5 350.2Goodwill and other intangible assets attributed to non-controlling interests (103.1) (103.4) (91.8) (92.0)Goodwill and other intangible assets included inWhite Mountains's common shareholders' equity$ 290.1 $ 294.6 $ 248.7 $ 258.2 (1) The relative fair values of goodwill and other intangible assets recognized in connection with recent acquisitions had not yet been finalized as ofSeptember 30, 2022 andJune 30, 2022 . (2) See Note 4 - "Goodwill and Other Intangible Assets" for details of goodwill and other intangible assets. 50 --------------------------------------------------------------------------------
Summary of Consolidated Results
The following table presents
Three Months Ended Nine Months Ended
September 30, September 30,
Millions 2022 2021 2022 2021
Revenues
Financial Guarantee revenues$ (24.7) $ 7.4 $ (69.2) $ 18.1 P&C Insurance and Reinsurance revenues 343.2 217.7
701.1 457.3
Asset Management revenues 55.9 28.5
87.0 88.8
Other Operations revenues 8.8 (346.0) 1.4 (210.8) Total revenues 383.2 (92.4) 720.3 353.4 Expenses Financial Guarantee expenses 19.5 15.4 64.4 49.2 P&C Insurance and Reinsurance expenses 319.1 206.8
721.5 461.1
Asset Management expenses 8.7 5.2
20.7 18.4
Other Operations expenses 66.9 40.8 192.1 129.3 Total expenses 414.2 268.2 998.7 658.0 Pre-tax income (loss) Financial Guarantee pre-tax income (loss) (44.2) (8.0) (133.6) (31.1)P&C Insurance and Reinsurance pre-tax income (loss) 24.1 10.9
(20.4) (3.8)
Asset Management pre-tax income (loss) 47.2 23.3
66.3 70.4
Other Operations pre-tax income (loss) (58.1) (386.8) (190.7) (340.1) Total pre-tax income (loss) from continuing operations (31.0) (360.6) (278.4) (304.6) Income tax (expense) benefit 7.4 (28.6) 26.1 (52.2) Net income (loss) from continuing operations (23.6) (389.2) (252.3) (356.8) Net income (loss) from discontinued operations, net of tax - NSM Group 6.3 5.3 16.4 (23.8) Net gain (loss) from sale of discontinued operations, net of tax - NSM Group 886.8 - 886.8 - Net gain (loss) from sale of discontinued operations, net of tax - Sirius Group - - - 18.7 Net income (loss) 869.5 (383.9) 650.9 (361.9) Net (income) loss attributable to non-controlling interests 18.7 12.5 101.5 53.7 Net income (loss) attributable toWhite Mountains's common shareholders 888.2 (371.4) 752.4 (308.2) Other comprehensive income (loss), net of tax (1.4) - (3.0) (.3) Other comprehensive income (loss) from discontinued operations, net of tax - NSM Group .7 (2.2) (5.2) .9 Recognition of foreign currency translation from sale of NSM Group, net of tax 2.9 - 2.9 - Comprehensive income (loss) 890.4 (373.6) 747.1 (307.6) Other comprehensive (income) loss attributable to non-controlling interests (.3) .2 .4 - Comprehensive income (loss) attributable to White Mountains's common shareholders$ 890.1 $ (373.4) $ 747.5 $ (307.6) 51
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I. Summary of Operations By Segment
As ofSeptember 30, 2022 ,White Mountains conducted its operations through four segments: (1) HG Global/BAM, (2) Ark, (3) Kudu and (4) Other Operations. A discussion ofWhite Mountains's consolidated investment operations is included after the discussion of operations by segment.White Mountains's segment information is presented in Note 15 - "Segment Information" to the Consolidated Financial Statements. As a result of the NSM Transaction, the results of operations forNSM Group have been classified as discontinued operations and are presented separately, net of related income taxes, in the statement of comprehensive income through the closing of the transaction. Prior year amounts have been reclassified to conform to the current period's presentation. See Note 19 - "Held for Sale and Discontinued Operations."
HG Global/BAM
HG Global/BAM consists of the consolidated results of HG Global, HG Re and BAM. BAM is the first and only mutual municipal bond insurance company inthe United States . By insuring the timely payment of principal and interest, BAM provides market access to, and lowers interest expense for, issuers of municipal bonds used to finance essential public purpose projects, such as schools, utilities and transportation facilities. BAM is owned by and operated for the benefit of its members, the municipalities that purchase BAM's insurance for their debt issuances. HG Global was established to fund the startup of BAM and, through HG Re, to provide up to 15%-of-par, first loss reinsurance protection for policies underwritten by BAM. The following tables present the components of pre-tax income (loss) included inWhite Mountains's HG Global/BAM segment related to the consolidation of HG Global, which includes HG Re and its other wholly-owned subsidiaries, and BAM for the three and nine months endedSeptember 30, 2022 and 2021: Three Months Ended September 30, 2022 Millions HG Global BAM Eliminations Total Direct written premiums $ -$ 18.4 $ -$ 18.4 Assumed written premiums 16.8 1.3 (16.8) 1.3 Gross written premiums 16.8 19.7 (16.8) 19.7 Ceded written premiums - (16.8) 16.8 - Net written premiums$ 16.8 $ 2.9 $ -$ 19.7 Earned insurance premiums$ 5.9 $ 1.2 $ -$ 7.1 Net investment income 2.8 2.9 - 5.7 Net investment income - BAM Surplus Notes 2.9 - (2.9) - Net realized and unrealized investment gains (losses) (19.6) (19.2) - (38.8) Other revenues .1 1.2 - 1.3 Total revenues (7.9) (13.9) (2.9) (24.7) Insurance acquisition expenses 1.6 .1 - 1.7 General and administrative expenses .6 15.2 - 15.8 Interest expense - HG Global Senior Notes 2.0 - - 2.0 Interest expense - BAM Surplus Notes - 2.9 (2.9) - Total expenses 4.2 18.2 (2.9) 19.5 Pre-tax income (loss)$ (12.1) $ (32.1) $ -$ (44.2) Supplemental information: MSC collected (1) $ -$ 26.0 $ -$ 26.0
(1) MSC collected are recorded directly to BAM's equity, which is recorded as
non-controlling interest on
52
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Three Months Ended September 30, 2021
Millions HG Global BAM Eliminations Total
Direct written premiums $ - $ 12.8 $ - $ 12.8
Assumed written premiums 10.9 - (10.9) -
Gross written premiums 10.9 12.8 (10.9) 12.8
Ceded written premiums - (10.9) 10.9 -
Net written premiums $ 10.9 $ 1.9 $ - $ 12.8
Earned insurance premiums $ 5.5 $ 1.2 $ - $ 6.7
Net investment income 1.9 2.5 - 4.4
Net investment income - BAM Surplus Notes 3.1 - (3.1) -
Net realized and unrealized investment gains (2.0) (2.0) - (4.0)
Other revenues .1 .2 - .3
Total revenues 8.6 1.9 (3.1) 7.4
Insurance acquisition expenses 1.5 1.5 - 3.0
General and administrative expenses .2 12.2 - 12.4
Interest expense - BAM Surplus Notes - 3.1 (3.1) -
Total expenses 1.7 16.8 (3.1) 15.4
Pre-tax income (loss) $ 6.9 $ (14.9) $ - $ (8.0)
Supplemental information:
MSC collected (1) $ - $ 14.7 $ - $ 14.7 (1) MSC collected are recorded directly to BAM's equity, which is recorded as
non-controlling interest on
Nine Months Ended September 30, 2022
Millions HG Global BAM Eliminations Total
Direct written premiums $ - $ 44.9 $ - $ 44.9
Assumed written premiums 39.6 1.3 (39.6) 1.3
Gross written premiums 39.6 46.2 (39.6) 46.2
Ceded written premiums - (39.6) 39.6 -
Net written premiums $ 39.6 $ 6.6 $ - $ 46.2
Earned insurance premiums $ 21.5 $ 4.5 $ - $ 26.0
Net investment income 7.1 8.0 - 15.1
Net investment income - BAM Surplus Notes 8.8 - (8.8) -
Net realized and unrealized investment gains
(losses) (57.8) (56.2) - (114.0)
Other revenues .3 3.4 - 3.7
Total revenues (20.1) (40.3) (8.8) (69.2)
Insurance acquisition expenses 7.6 1.9 - 9.5
General and administrative expenses 2.1 47.4 - 49.5
Interest expense - HG Global Senior Notes 5.4 - - 5.4
Interest expense - BAM Surplus Notes - 8.8 (8.8) -
Total expenses 15.1 58.1 (8.8) 64.4
Pre-tax income (loss) $ (35.2) $ (98.4) $ - $ (133.6)
Supplemental information:
MSC collected (1) $ - $ 62.3 $ - $ 62.3 (1) MSC collected are recorded directly to BAM's equity, which is recorded as
non-controlling interest on
53
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Nine Months Ended September 30, 2021
Millions HG Global BAM Eliminations Total
Direct written premiums $ - $ 34.5 $ - $ 34.5
Assumed written premiums 33.4 4.5 (33.4) 4.5
Gross written premiums 33.4 39.0 (33.4) 39.0
Ceded written premiums - (33.4) 33.4 -
Net written premiums $ 33.4 $ 5.6 $ - $ 39.0
Earned insurance premiums $ 16.1 $ 3.5 $ - $ 19.6
Net investment income 5.4 7.8 - 13.2
Net investment income - BAM Surplus Notes 9.1 - (9.1) -
Net realized and unrealized investment losses (9.5) (6.1) - (15.6)
Other revenues .3 .6 - .9
Total revenues 21.4 5.8 (9.1) 18.1
Insurance acquisition expenses 4.3 2.2 - 6.5
General and administrative expenses 1.3 41.4 - 42.7
Interest expense - BAM Surplus Notes - 9.1 (9.1) -
Total expenses 5.6 52.7 (9.1) 49.2
Pre-tax income (loss) $ 15.8 $ (46.9) $ - $ (31.1)
Supplemental information:
MSC collected (1) $ - 44.8 $ - $ 44.8 (1) MSC are recorded directly to BAM's equity, which is recorded as
non-controlling interest on
HG Global/BAM Results-Three Months EndedSeptember 30, 2022 versus Three Months EndedSeptember 30, 2021 BAM is required to prepare its financial statements on a statutory accounting basis for the NYDFS and does not report stand-alone GAAP financial results. BAM charges an insurance premium on each municipal bond insurance policy it writes. A portion of the premium is MSC and the remainder is a risk premium. In the event of a municipal bond refunding, a portion of the MSC from original issuance can be reutilized, in effect serving as a credit against the total insurance premium on the refunding of the municipal bond. Gross written premiums and MSC collected in the HG Global/BAM segment totaled$46 million in the third quarter of 2022 compared to$28 million in the third quarter of 2021. BAM insured$4.1 billion of municipal bonds,$3.3 billion of which were in the primary market, in the third quarter of 2022 compared to$4.0 billion of municipal bonds,$3.8 billion of which were in the primary market, in the third quarter of 2021. In the third quarter of 2022, BAM completed an assumed reinsurance transaction to reinsure municipal bonds with a par value of$43 million . Insured penetration in the primary market decreased to 6.2% in the third quarter of 2022 compared to 8.6% in the third quarter of 2021, primarily as a result of a decrease in large transactions insured in the third quarter of 2022 compared to the third quarter of 2021. Total pricing, which reflects both gross written premiums and MSC, increased to 110 basis points in the third quarter of 2022 compared to 69 basis points in the third quarter of 2021. The increase in total pricing was driven primarily by increased secondary market activity, higher pricing in the primary market and an assumed reinsurance transaction in the third quarter of 2022. Pricing in the primary market increased to 79 basis points in the third quarter of 2022 compared to 59 basis points in the third quarter of 2021. Pricing in the combined secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, decreased to 229 basis points in the third quarter of 2022 compared to 309 basis points in the third quarter of 2021. 54 -------------------------------------------------------------------------------- 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 three months endedSeptember 30, 2022 and 2021: Three Months Ended September 30, $ in Millions 2022 2021 Gross par value of primary market policies issued$ 3,269.0 $ 3,813.7 Gross par value of secondary market policies issued 826.5 157.4 Gross par value of assumed reinsurance 42.5 - Total gross par value of market policies issued$ 4,138.0 $ 3,971.1 Gross written premiums$ 19.7 $ 12.8 MSC collected 26.0 14.7 Total gross written premiums and MSC collected$ 45.7 $ 27.5 Total pricing 110 bps 69 bps HG Global reported pre-tax income (loss) of$(12) million in the third quarter of 2022 compared to$7 million in the third quarter of 2021. The change in pre-tax income (loss) was driven primarily by$20 million of net unrealized investment losses on the HG Global fixed income portfolio, as interest rates increased in the third quarter of 2022. Results in the third quarter of 2022 and 2021 both included$3 million of interest income on the BAM Surplus Notes. BAM is a mutual insurance company that is owned by its members. BAM's results are consolidated intoWhite Mountains's GAAP financial statements and attributed to non-controlling interests.White Mountains reported$32 million of GAAP pre-tax loss from BAM in the third quarter of 2022 compared to$15 million in the third quarter of 2021. The change in pre-tax loss was driven primarily by$19 million of net unrealized investment losses on the BAM fixed income portfolio, as interest rates increased in the third quarter of 2022. Results in the third quarter of 2022 included$3 million of interest expense on the BAM Surplus Notes and$15 million of general and administrative expenses, compared to$3 million of interest expense and$12 million of general and administrative expenses in the third quarter of 2021. HG Global/BAM Results-Nine Months EndedSeptember 30, 2022 versus Nine Months EndedSeptember 30, 2021 Gross written premiums and MSC collected in the HG Global/BAM segment totaled$109 million in the first nine months of 2022 compared to$84 million in the first nine months of 2021. BAM insured$13.5 billion of municipal bonds,$10.1 billion of which were in the primary market, in the first nine months of 2022 compared to$12.6 billion of municipal bonds,$11.2 billion of which were in the primary market, in the first nine months of 2021. In the first nine months of 2022 and 2021, BAM completed assumed reinsurance transactions to reinsure municipal bonds with par values of$43 million and$806 million . Total pricing, which reflects both gross written premiums and MSC, increased to 81 basis points in the first nine months of 2022 compared to 66 basis points in the first nine months of 2021. The increase in total pricing was driven primarily by increased secondary market activity in the first nine months of 2022 compared to the first nine months of 2021. Pricing in the primary market increased to 57 basis points in the first nine months of 2022, compared to 56 basis points in the first nine months of 2021. Pricing in the secondary and assumed reinsurance markets, which is more transaction specific than pricing in the primary market, increased to 152 basis points in the first nine months of 2022, compared to 150 basis points in the first nine months of 2021. 55 -------------------------------------------------------------------------------- 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 nine months endedSeptember 30, 2022 and 2021: Nine Months Ended September 30, $ in Millions 2022 2021 Gross par value of primary market policies issued$ 10,147.8 $ 11,171.2 Gross par value of secondary market policies issued 3,269.4 646.6 Gross par value of assumed reinsurance 42.5 805.5 Total gross par value of market policies issued$ 13,459.7 $ 12,623.3 Gross written premiums 46.2 39.0 MSC collected 62.3 44.8 Total gross written premiums and MSC collected $ 108.5$ 83.8 Total pricing 81 bps 66 bps HG Global reported pre-tax income (loss) of$(35) million in the first nine months of 2022 compared to$16 million in the first nine months of 2021. The change in pre-tax income (loss) was driven primarily by$58 million of net unrealized investment losses on the HG Global fixed income portfolio, as interest rates increased in the first nine months of 2022. Results in the first nine months of 2022 and 2021 both included$9 million of interest income on the BAM Surplus Notes. OnApril 29, 2022 , HG Global received the proceeds of its new$150 million , 10-year term loan credit facility. In turn, onMay 2, 2022 , HG Global paid a$120 million cash dividend to shareholders, of which$116 million was paid toWhite Mountains .White Mountains reported$98 million of GAAP pre-tax loss from BAM in the first nine months of 2022 compared to$47 million in the first nine months of 2021. The increase in pre-tax loss was driven primarily by$56 million of net unrealized investment losses on the BAM fixed income portfolio, as interest rates increased in the first nine months of 2022. Results in the first nine months of 2022 included$9 million of interest expense on the BAM Surplus Notes and$47 million of general and administrative expenses, compared to$9 million of interest expense and$41 million of general and administrative expenses in the first nine months of 2021. Claims Paying Resources BAM's claims paying resources represent the capital and other financial resources BAM has available to pay claims and, as such, is a key indication of BAM's financial strength. BAM's claims paying resources were$1,260 million as ofSeptember 30, 2022 compared to$1,192 million as ofDecember 31, 2021 and$1,181 million as ofSeptember 30, 2021 . The increase in claims paying resources as ofSeptember 30, 2022 compared toDecember 31, 2021 was driven primarily by increases in the statutory value of the collateral trusts resulting from deposits of ceded premiums and an increase in BAM's qualified statutory capital resulting from business operations for the nine months endedSeptember 30, 2022 . The following table presents BAM's total claims paying resources as ofSeptember 30, 2022 ,December 31, 2021 andSeptember 30, 2021 : September 30, September 30, Millions 2022 December 31, 2021 2021 Policyholders' surplus $ 316.9 $ 298.1 $ 322.8 Contingency reserve 113.9 101.8 102.7 Qualified statutory capital 430.8 399.9 425.5 Net unearned premiums 53.3 49.5 48.3
Present value of future installment
premiums and MSC 13.3 13.8 13.9
HG Re Collateral trusts at
statutory value 512.7 478.9 442.8
Fidus Re Collateral trust at
statutory value 250.0 250.0 250.0
Claims paying resources $ 1,260.1 $ 1,192.1 $ 1,180.5
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