HG Re is a party to the FLRT with BAM, under which HG Re provides first-loss reinsurance protection of up to 15%-of-par outstanding for each policy assumed from BAM. For capital appreciation bonds, par is adjusted to the estimated equivalent par value for current interest paying bonds. HG Re is required to provide reinsurance on policies that fall within the FLRT underwriting guidelines agreed upon by HG Re.

BAM charges an insurance premium on each municipal bond insurance policy it underwrites. Historically, approximately 55% of the total insurance premium charged by BAM has been a member surplus contribution (“MSC”), and the remainder is a risk premium. In return for the reinsurance provided, HG Re receives approximately 60% of the risk premium charged, which is net of a ceding commission.

Prior to the deconsolidation of BAM on July 1, 2024, HG Re’s reinsurance balances under the FLRT eliminated in White Mountains’s consolidated financial statements. For the three months ended March 31, 2025, White Mountains recognized gross written premiums of $6.7 million and earned premiums of $8.2 million.

HG Re is party to an excess of loss reinsurance agreement (the “XOLT”) with BAM, under which HG Re provides last-dollar protection for exposures on municipal bonds insured by BAM in excess of the New York State Department of Financial Services (“NYDFS”) single issuer limits. As of March 31, 2025, the XOLT is subject to an aggregate limit equal to the lesser of $125.0 million or the assets held in the supplemental collateral trust (the “Supplemental Trust”) at any point in time. The XOLT is accounted for using deposit accounting, as the agreement does not meet the risk transfer requirements necessary to be accounted for as reinsurance. Accordingly, any financing revenues related to the XOLT are recorded in other revenues.

Prior to the deconsolidation of BAM on July 1, 2024, HG Re’s reinsurance balances under the XOLT eliminated in White Mountains’s consolidated financial statements. For the three months ended March 31, 2025, other revenues recognized by White Mountains related to the XOLT were insignificant.

On a monthly basis, BAM deposits cash equal to ceded premiums net of ceding commissions, due to HG Re under the FLRT directly into the Regulation 114 Trust. The Regulation 114 Trust target balance is equal to HG Re’s unearned premiums and unpaid loss and LAE reserves, if any. If, at the end of any quarter, the Regulation 114 Trust balance is below the target balance, funds will be withdrawn from the Supplemental Trust and deposited into the Regulation 114 Trust in an amount equal to the shortfall. If, at the end of any quarter, the Regulation 114 Trust balance is above 102% of the target balance, funds will be withdrawn from the Regulation 114 Trust and deposited into the Supplemental Trust. The Regulation 114 Trust balance as of March 31, 2025 and December 31, 2024 was $363.4 million and $352.1 million, which consisted of cash, investments and accrued investment income.

The Supplemental Trust target balance is $603.0 million, less the amount of cash and securities in the Regulation 114 Trust in excess of its target balance (the “Supplemental Trust Target Balance”). If, at the end of any quarter, the Supplemental Trust balance exceeds the Supplemental Trust Target Balance, such excess may be distributed to HG Re. The distribution will be made first as an assignment of accrued interest on the BAM Surplus Notes and second in cash and/or fixed income securities. For the three months ended March 31, 2025, HG Re did not receive any distributions from the Supplemental Trust. For the three months ended March 31, 2024, HG Re received a distribution from the Supplemental Trust of $26.2 million, which consisted of an assignment of accrued interest on the BAM Surplus Notes.

As the BAM Surplus Notes are repaid over time, the BAM Surplus Notes will be replaced in the Supplemental Trust by cash and fixed income securities. The Supplemental Trust balance as of March 31, 2025 and December 31, 2024 was $612.8 million and $598.0 million, which included $296.7 million and $289.4 million of cash, investments and accrued investment income, $300.9 million and $300.9 million of BAM Surplus Notes at nominal value and $15.2 million and $7.7 million of accrued interest receivable on the BAM Surplus Notes at nominal value.

Through June 30, 2024, the interest rate on the BAM Surplus Notes was a variable rate equal to the one-year U.S. Treasury rate plus 300 basis points, set annually, with each payment applied pro rata between outstanding principal and interest. Accordingly, in 2024, the interest rate on the BAM Surplus Notes was 8.2% through June 30, 2024. Effective July 1, 2024 and through maturity, HG Global and BAM amended the interest rate on the BAM Surplus Notes to be 10.0%, with a higher proportion of each payment to be applied to outstanding principal.

Under its agreements with HG Global, BAM is required to seek regulatory approval to pay principal and interest on the BAM Surplus Notes only to the extent that its remaining qualified statutory capital and other capital resources continue to support its outstanding obligations, its business plan and its “AA/stable” rating from Standard & Poor’s. No payment of principal or interest on the BAM Surplus Notes may be made without the approval of the NYDFS. During the three months ended March 31, 2025 and 2024, HG Global did not receive any payments of principal or interest on the BAM Surplus Notes.

As of March 31, 2025 and December 31, 2024, the principal balance on the BAM Surplus Notes was $300.9 million for both periods, and total interest receivable on the BAM Surplus Notes was $202.3 million and $194.8 million, all at nominal value. For the three months ended March 31, 2025, White Mountains accrued $7.5 million of interest income on the BAM Surplus Notes.

Prior to the deconsolidation of BAM on July 1, 2024, the BAM Surplus Notes, including accrued interest receivable, were classified as intercompany notes carried at nominal value, which eliminated in consolidation. Upon deconsolidation, White Mountains elected the fair value option for the BAM Surplus Notes. The BAM Surplus Notes are classified as a Level 3 measurement. White Mountains values the BAM Surplus Notes each quarter using a discounted cash flow analysis.

The discounted cash flow analysis used to value the BAM Surplus Notes depends on key inputs, such as projections of future revenues and earnings for BAM, expected payments on the BAM Surplus Notes through maturity and a discount rate to reflect time value and related uncertainty of the repayment pattern. The expected payments on the BAM Surplus Notes are based on management judgment, considering current performance, budgets and projected future results. These expected payments depend on BAM’s ability to generate excess cash flows from its operations, driven primarily by assumptions regarding future trends for the issuance of municipal bonds, interest rates, credit spreads, insured market penetration, competitive activity in the market for municipal bond insurance and other factors affecting the demand for and pricing of BAM’s municipal bond insurance, as well as BAM’s investment returns. The discount rate considers comparably-rated companies and instruments, adjusted for risks specific to BAM and the BAM Surplus Notes. As of March 31, 2025 and December 31, 2024, White Mountains concluded that a discount rate, which is a significant unobservable input used in estimating the fair value of the BAM Surplus Notes, of 8.00% and 8.10% was appropriate. The change in the discount rate in the quarter was driven by a decline in market interest rates.

When making its fair value selection, White Mountains considers all available information, facts and circumstances specific to BAM’s business and industry and any infrequent or unusual results for the period. As of March 31, 2025 and December 31, 2024, White Mountains recognized the BAM Surplus Notes at a fair value of $389.2 million and $381.7 million. The recorded fair values represent management's best estimate and are within the range of reasonable values derived from the discounted cash flow analysis.


Millions	Three Months Ended March 31, 2025

Beginning nominal value	$	495.7
Interest income from BAM Surplus Notes	7.5
Payments of principal and interest	—
Ending nominal value	503.2


Beginning fair value discount	(114.0)
Change in fair value of BAM Surplus Notes	—
Ending fair value discount	(114.0)

BAM Surplus Notes, at fair value	$	389.2


	March 31, 2025		December 31, 2024
Contracts outstanding	16,076		15,884
Remaining weighted average contract period (in years) (1)	11.2		11.2

Outstanding par value of policies assumed (in millions) (2)	$	18,665.6	$	18,503.3




Gross unearned insurance premiums (in millions)	$	295.8	$	297.3


	Three Months Ended March 31, 2025		Three Months Ended March 31, 2024
Millions			HG Global		BAM		Eliminations		Total
Written premiums:
Direct	$	—	$	—	$	10.5	$	—	$	10.5
Assumed	6.7		8.9		—		(8.9)		—
Gross written premiums (1)	$	6.7	$	8.9	$	10.5	$	(8.9)	$	10.5
Earned premiums:
Direct	$	—	$	—	$	7.3	$	—	$	7.3
Assumed	8.2		6.5		.5		(6.5)		.5
Gross earned premiums (1)	$	8.2	$	6.5	$	7.8	$	(6.5)	$	7.8