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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended ~~March 31,~~June 30, 2004
orOR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 1-8993

WHITE MOUNTAINS INSURANCE GROUP, LTD.
(Exact name of registrant as specified in its charter)

Bermuda (State or other jurisdiction of incorporation or organization)		94-2708455 (I.R.S. Employer Identification No.)
80 South Main Street, Hanover, New Hampshire 03755-2053 (Address of principal executive offices including zip code)
(603) 640-2200 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

As of ~~April 30,~~August 4, 2004, ~~9,045,251~~10,769,451 common shares with a par value of $1.00 per share ("Common Shares") were outstanding (which includes 15,000 restricted Common Shares which were not vested at such date).

WHITE MOUNTAINS INSURANCE GROUP, LTD.

Table of Contents

			Page No.
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements (Unaudited)
		Consolidated Balance Sheets, ~~March 31,~~June 30, 2004 ~~(Unaudited)~~ and December 31, 2003	3
		Consolidated Statements of Income and Comprehensive Income, ~~(Unaudited),~~ Three and Six Months Ended ~~March 31,~~June 30, 2004 and 2003	4
		Consolidated Statements of Common Shareholders' Equity, ~~(Unaudited), Three~~Six Months Ended ~~March 31,~~June 30, 2004 and 2003	5
		Consolidated Statements of Cash Flows, ~~(Unaudited), Three~~Six Months Ended ~~March 31,~~June 30, 2004 and 2003	6
		Notes to Consolidated Financial Statements ~~(Unaudited)~~	7
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
		Results of Operations—Three and Six Months Ended ~~March 31,~~June 30, 2004 and 2003	3129
		Liquidity and Capital Resources	4439
		Critical Accounting Policies and Estimates	4843
		Forward-Looking Statements	4944
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		5044
	Item 4. Controls and Procedures		5045
PART II. OTHER INFORMATION
	Items 1 through 6		5045
SIGNATURES			5246

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS
Unaudited

			(Unaudited)								June 30, 2004			December 31, 2003
			March 31, 2004			December 31, 2003
			(dollars in millions, except share amounts)								(dollars in millions, except share amounts)
Assets	Assets								Assets
Fixed maturity investments, at fair value (cost: $6,579.6 and $6,010.2)			$	6,879.1		$	6,248.1
Fixed maturity investments, at fair value (amortized cost: $7,395.5 and $6,010.2)									Fixed maturity investments, at fair value (amortized cost: $7,395.5 and $6,010.2)		$	7,510.1		$	6,248.1
Short-term investments, at amortized cost (which approximates fair value)	Short-term investments, at amortized cost (which approximates fair value)			1,024.9			1,546.6		Short-term investments, at amortized cost (which approximates fair value)			1,464.9			1,546.6
Common equity securities, at fair value (cost: $576.6 and $396.2)				779.9			513.6
Other investments (cost: $317.6 and $184.0)				379.6			239.2
Common equity securities, at fair value (cost: $697.9 and $396.2)									Common equity securities, at fair value (cost: $697.9 and $396.2)			887.0			513.6
Other investments (cost: $388.4 and $184.0)									Other investments (cost: $388.4 and $184.0)			447.2			239.2

	Total investments			9,063.5			8,547.5		Total investments			10,309.2			8,547.5
Cash	Cash			117.2			89.9		Cash			92.5			89.9
Reinsurance recoverable on unpaid losses	Reinsurance recoverable on unpaid losses			1,257.4			1,213.5		Reinsurance recoverable on unpaid losses			1,458.9			1,213.5
Reinsurance recoverable on unpaid losses—Berkshire Hathaway Inc.	Reinsurance recoverable on unpaid losses—Berkshire Hathaway Inc.			2,296.9			2,260.3		Reinsurance recoverable on unpaid losses—Berkshire Hathaway Inc.			2,274.4			2,260.3
Reinsurance recoverable on paid losses	Reinsurance recoverable on paid losses			128.5			121.7		Reinsurance recoverable on paid losses			162.9			121.7
Insurance and reinsurance premiums receivable	Insurance and reinsurance premiums receivable			926.8			779.0		Insurance and reinsurance premiums receivable			963.6			779.0
Funds held by ceding companies									Funds held by ceding companies			953.1			144.1
Deferred acquisition costs	Deferred acquisition costs			268.4			233.6		Deferred acquisition costs			338.0			233.6
Deferred tax asset	Deferred tax asset			243.3			260.0		Deferred tax asset			248.2			260.0
Ceded unearned premiums	Ceded unearned premiums			198.3			185.3		Ceded unearned premiums			205.7			185.3
Investment in unconsolidated insurance affiliate(s)	Investment in unconsolidated insurance affiliate(s)			152.7			515.9		Investment in unconsolidated insurance affiliate(s)			151.6			515.9
Investment income accrued	Investment income accrued			75.6			73.0		Investment income accrued			93.9			73.0
Accounts receivable on unsettled investment sales	Accounts receivable on unsettled investment sales			59.5			9.1		Accounts receivable on unsettled investment sales			76.7			9.1
Other assets	Other assets			708.7			682.2		Other assets			595.2			538.1

Total assets	Total assets		$	15,496.8		$	14,971.0		Total assets		$	17,923.9		$	14,971.0

Liabilities	Liabilities								Liabilities
Loss and loss adjustment expense reserves	Loss and loss adjustment expense reserves		$	8,055.8		$	7,728.2		Loss and loss adjustment expense reserves		$	9,329.1		$	7,728.2
Unearned insurance and reinsurance premiums	Unearned insurance and reinsurance premiums			1,571.5			1,409.4		Unearned insurance and reinsurance premiums			1,824.5			1,409.4
Reserves for structured contracts									Reserves for structured contracts			401.0			—
Debt	Debt			824.8			743.0		Debt			824.3			743.0
Deferred tax liability									Deferred tax liability			292.8			—
Funds held under reinsurance treaties	Funds held under reinsurance treaties			172.3			211.9		Funds held under reinsurance treaties			187.5			211.9
Ceded reinsurance payable	Ceded reinsurance payable			144.0			127.7		Ceded reinsurance payable			124.1			127.7
Accounts payable on unsettled investment purchases	Accounts payable on unsettled investment purchases			103.1			371.6		Accounts payable on unsettled investment purchases			67.2			371.6
Other liabilities	Other liabilities			1,246.2			1,205.5		Other liabilities			1,157.5			1,205.5
Preferred stock subject to mandatory redemption:	Preferred stock subject to mandatory redemption:								Preferred stock subject to mandatory redemption:
	Held by Berkshire Hathaway Inc. (redemption value $300.0)			178.5			174.5		Held by Berkshire Hathaway Inc. (redemption value $300.0)			182.7			174.5
	Held by others (redemption value $20.0)			20.0			20.0		Held by others (redemption value $20.0)			20.0			20.0

		Total liabilities		12,316.2			11,991.8			Total liabilities		14,410.7			11,991.8
Common shareholders' equity	Common shareholders' equity								Common shareholders' equity
Common Shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 9,045,567 and 9,007,195 shares				9.0			9.0
Common Shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 10,769,451 and 9,007,195 shares									Common Shares at $1 par value per share—authorized 50,000,000 shares; issued and outstanding 10,769,451 and 9,007,195 shares			10.8			9.0
Paid-in surplus	Paid-in surplus			1,420.4			1,399.6		Paid-in surplus			1,712.3			1,399.6
Retained earnings	Retained earnings			1,372.8			1,286.4		Retained earnings			1,541.3			1,286.4
Accumulated other comprehensive income, after tax:	Accumulated other comprehensive income, after tax:								Accumulated other comprehensive income, after tax:
	Unrealized gains on investments			384.7			286.0		Net unrealized gains on investments			245.8			286.0
	Unrealized foreign currency translation losses			(0.4	)		(0.3	)	Net unrealized foreign currency translation gains (losses)			8.4			(.3	)
Unearned compensation—restricted Common Share awards	Unearned compensation—restricted Common Share awards			(5.9	)		(1.5	)	Unearned compensation—restricted Common Share awards			(5.4	)		(1.5	)

		Total common shareholders' equity		3,180.6			2,979.2			Total common shareholders' equity		3,513.2			2,979.2

Total liabilities and common shareholders' equity	Total liabilities and common shareholders' equity		$	15,496.8		$	14,971.0		Total liabilities and common shareholders' equity		$	17,923.9		$	14,971.0

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Unaudited

			Three Months Ended March 31,								Three Months Ended June 30,						Six Months Ended June 30,
			2004			2003					2004			2003			2004			2003
			(dollars in millions, except per share amounts)								(dollars in millions, except per share amounts)
Revenues:	Revenues:								Revenues:
	Earned insurance and reinsurance premiums		$	831.9		$	803.0		Earned insurance and reinsurance premiums		$	997.2		$	755.2		$	1,829.1		$	1,558.2
	Net investment income			71.0			78.6		Net investment income			93.2			73.0			164.2			151.6
	Net realized investment gains			61.8			58.2		Net realized investment gains (losses)			(5.6	)		90.0			56.2			148.2
	Other revenue			58.4			29.7		Other revenue			35.4			44.2			93.8			73.9

		Total revenues		1,023.1			969.5			Total revenues		1,120.2			962.4			2,143.3			1,931.9

Expenses:	Expenses:								Expenses:
	Loss and loss adjustment expenses			523.3			522.6		Loss and loss adjustment expenses			623.4			511.4			1,146.7			1,034.0
	Insurance and reinsurance acquisition expenses			156.7			157.9		Insurance and reinsurance acquisition expenses			184.0			148.9			340.7			306.8
	Other underwriting expenses			114.9			99.6		Other underwriting expenses			137.2			86.9			252.1			186.5
	General and administrative expenses			81.7			15.6		General and administrative expenses			42.3			64.4			124.0			80.0
	Accretion of fair value adjustment to loss and loss adjustment expense reserves			10.1			14.2		Accretion of fair value adjustment to loss and loss adjustment expense reserves			12.8			14.2			22.9			28.4
	Interest expense on debt			11.3			13.6		Interest expense on debt			12.1			12.5			23.4			26.1
	Interest expense—dividends and accretion on preferred stock subject to mandatory redemption			11.5			—		Interest expense—dividends and accretion on preferred stock subject to mandatory redemption			11.8			—			23.3			—

		Total expenses		909.5			823.5			Total expenses		1,023.6			838.3			1,933.1			1,661.8

Pretax income	Pretax income			113.6			146.0		Pretax income			96.6			124.1			210.2			270.1
	Income tax provision			(44.9	)		(46.1	)	Tax provision			(44.4	)		(44.7	)		(89.3	)		(90.8	)

Net income before minority interest and equity in earnings of affiliates				68.7			99.9
Net income before minority interest and equity in earnings of affiliate(s)									Net income before minority interest and equity in earnings of affiliate(s)			52.2			79.4			120.9			179.3
	Dividends and accretion on mandatorily redeemable preferred stock of subsidiaries			—			(10.7	)	Dividends and accretion on mandatorily redeemable preferred stock of subsidiaries			—			(10.8	)		—			(21.5	)
	Equity in earnings of unconsolidated insurance affiliates			18.2			12.9		Equity in earnings of unconsolidated insurance affiliate(s)			4.9			15.8			23.1			28.7

Net income before extraordinary item	Net income before extraordinary item			86.9			102.1		Net income before extraordinary item			57.1			84.4			144.0			186.5
	Excess of fair value of acquired net assets over cost—Sierra Group			8.6			—		Excess of fair value of acquired net assets over cost			111.4			—			120.0			—

Net income	Net income			95.5			102.1		Net income			168.5			84.4			264.0			186.5

	Net change in unrealized gains and losses for investments held			124.9			29.5		Net change in unrealized gains and losses for investments held			(135.2	)		129.0			(10.3	)		158.5
	Net change in foreign currency translation			(.1	)		(.7	)	Net change in foreign currency translation			8.8			2.3			8.7			1.6
	Recognition of unrealized gains and losses for investments sold			(26.2	)		(39.0	)	Recognition of net unrealized gains and losses for investments sold			(3.7	)		(53.2	)		(29.9	)		(92.2	)

Comprehensive net income	Comprehensive net income		$	194.1		$	91.9		Comprehensive net income		$	38.4		$	162.5		$	232.5		$	254.4

Computation of net income available to common shareholders
Computation of net income available to common shareholders:									Computation of net income available to common shareholders:
	Net income		$	95.5		$	102.1		Net income		$	168.5		$	84.4		$	264.0		$	186.5
	Redemption value adjustment—Convertible preference shares			—			(11.5	)	Redemption value adjustment—Convertible preference shares			—			(38.0	)		—			(49.5	)

Net income available to common shareholders	Net income available to common shareholders		$	95.5		$	90.6		Net income available to common shareholders		$	168.5		$	46.4		$	264.0		$	137.0

Basic earnings per Common Share:	Basic earnings per Common Share:								Basic earnings per Common Share:
	Net income before extraordinary item		$	9.64		$	10.94		Net income before extraordinary item		$	6.30		$	5.38		$	15.93		$	16.21
	Net income			10.59			10.94		Net income			18.59			5.38			29.20			16.21
Diluted earnings per Common Share:	Diluted earnings per Common Share:								Diluted earnings per Common Share:
	Net income before extraordinary item		$	8.52		$	9.92		Net income before extraordinary item		$	5.56		$	4.77		$	14.11		$	14.56
	Net income			9.36			9.92		Net income			16.45			4.77			25.93			14.56

Dividends declared and paid per Common Share	Dividends declared and paid per Common Share		$	1.00		$	1.00		Dividends declared and paid per Common Share		$	—		$	—		$	1.00		$	1.00

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY

Unaudited

Common
shareholders'
equity
Common
Shares and
paid-in
surplus
Retained
earnings
Accum. other
comprehensive
income,
after tax
Unearned
compensation

(millions)

Balances at January 1, 2004 $ 2,979.2 $ 1,408.6 $ 1,286.4 $ 285.7 $ (1.5 )

Net income 95.5 — 95.5 — —
Other comprehensive income, after tax 98.6 — — 98.6 —
Dividends declared on Common Shares (9.1 ) — (9.1 ) — —
Changes to accrued option expense 2.8 2.8 — — —
Issuances of Common Shares 13.3 18.0 — — (4.7 )
Amortization of restricted Common Share awards .3 — — — .3

Balances at March 31, 2004 $ 3,180.6 $ 1,429.4 $ 1,372.8 $ 384.3 $ (5.9 )

Common
shareholders'
equity
Common
Shares and
paid-in
surplus
Retained
earnings
Accum. other
comprehensive
income,
after tax
Unearned
compensation

(millions)

Balances at January 1, 2003 $ 2,407.9 $ 1,134.6 $ 1,071.9 $ 206.7 $ (5.3 )

Net income 102.1 — 102.1 — —
Other comprehensive loss, after tax (10.2 ) — — (10.2 ) —
Redemption value adjustment — Convertible Preference Shares (11.5 ) — (11.5 ) — —
Dividends declared on Common Shares (8.3 ) — (8.3 ) — —
Changes to accrued option expense 1.3 1.3 — — —
Issuances of Common Shares .7 .7 — — —
Amortization of restricted Common Share awards 3.2 — — — 3.2

Balances at March 31, 2003 $ 2,485.2 $ 1,136.6 $ 1,154.2 $ 196.5 $ (2.1 )

	Common shareholders' equity			Common Shares and paid-in surplus			Retained earnings			Accum. other comprehensive income, after tax			Unearned compensation
	(millions)
Balances at January 1, 2004	$	2,979.2		$	1,408.6		$	1,286.4		$	285.7		$	(1.5	)

Net income		264.0			—			264.0			—			—
Other comprehensive loss, after tax		(31.5	)		—			—			(31.5	)		—
Dividends declared on Common Shares		(9.1	)		—			(9.1	)		—			—
Changes to accrued option expense		2.6			2.6			—			—			—
Exercise of warrants held by Berkshire Hathaway, Inc.		294.0			294.0			—			—			—
Issuances of Common Shares		13.3			18.0			—			—			(4.7	)
Repurchases and retirements of Common Shares		(.1	)		(.1	)		—			—			—
Amortization of restricted Common Share awards		.8			—			—			—			.8

Balances at June 30, 2004	$	3,513.2		$	1,723.1		$	1,541.3		$	254.2		$	(5.4	)

	Common shareholders' equity			Common Shares and paid-in surplus			Retained earnings			Accum. other comprehensive income, after tax		Unearned compensation
	(millions)
Balances at January 1, 2003	$	2,407.9		$	1,134.6		$	1,071.9		$	206.7	$	(5.3	)

Net income		186.5			—			186.5			—		—
Other comprehensive income, after tax		67.9			—			—			67.9		—
Redemption value adjustment — Convertible Preference Shares		(49.5	)		—			(49.5	)		—		—
Dividends declared on Common Shares		(8.3	)		—			(8.3	)		—		—
Changes to accrued option expense		3.7			3.7			—			—		—
Issuances of Common Shares		269.5			271.5			—			—		(2.0	)
Repurchases and retirements of Common Shares		(13.8	)		(5.5	)		(8.3	)		—		—
Amortization of restricted Common Share awards		5.4			—			—			—		5.4

Balances at June 30, 2003	$	2,869.3		$	1,404.3		$	1,192.3		$	274.6	$	(1.9	)

See Notes to Consolidated Financial Statements

WHITE MOUNTAINS INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

			Three Months Ended March 31,							Six Months Ended June 30,
			2004			2003				2004			2003
			(millions)							(millions)
Cash flows from operations:	Cash flows from operations:								Cash flows from operations:
Net income	Net income		$	95.5		$	102.1		Net income	$	264.0		$	186.5
Charges (credits) to reconcile net income to cash flows used for operations:	Charges (credits) to reconcile net income to cash flows used for operations:								Charges (credits) to reconcile net income to cash flows used for operations:
	Excess of fair value of acquired net assets over cost—Sierra Group			(8.6	)		—		Excess of fair value of acquired net assets over cost		(120.0	)		—
		Deferred income tax provision		25.4			36.5		Deferred tax provision		59.1			71.8
		Net realized investment gains		(61.8	)		(58.2	)	Net realized investment gains		(56.2	)		(148.2	)
Other operating items:	Other operating items:								Other operating items:
	Net change in reinsurance recoverable on paid and unpaid losses			86.6			207.4		Net change in reinsurance recoverable on paid and unpaid losses		294.5			267.0
	Net change in loss and loss adjustment expense reserves			(125.9	)		(322.6	)	Net change in loss and loss adjustment expense reserves		(710.3	)		(588.8	)
	Net change in insurance and reinsurance premiums receivable			(117.8	)		13.6		Net change in insurance and reinsurance premiums receivable		(18.2	)		(10.5	)
	Net change in unearned insurance and reinsurance premiums			123.0			(13.5	)	Net change in unearned insurance and reinsurance premiums		68.0			(80.6	)
	Net change in deferred acquisition costs			(30.0	)		.4		Net change in deferred acquisition costs		(63.4	)		5.6
	Net change in funds held under reinsurance treaties			(44.9	)		(92.6	)	Net change in funds held under reinsurance treaties		(52.6	)		(77.6	)
	Net change in other assets and liabilities			(58.9	)		(62.4	)	Net change in other assets and liabilities		(180.3	)		44.4

Net cash flows used for operations	Net cash flows used for operations			(117.4	)		(189.3	)	Net cash flows used for operations		(515.4	)		(330.4	)

Cash flows from investing activities:	Cash flows from investing activities:								Cash flows from investing activities:
	Net decrease (increase) in short-term investments			569.6			(146.4	)	Net decrease (increase) in short-term investments		328.9			(406.4	)
	Sales of fixed maturity investments			1,240.7			3,564.0		Sales of fixed maturity investments		4,071.5			13,875.5
	Maturities of fixed maturity investments			198.6			137.7		Sales of common equity securities and other investments		405.0			68.5
	Sale of Montpelier common shares			155.3			—		Maturities of fixed maturity investments		313.4			538.5
	Sales of common equity securities and other investments			81.5			55.3		Sale of Montpelier common shares		155.3			—
	Sale of consolidated affiliate, net of cash sold			22.1			—		Sale of consolidated affiliate, net of cash sold		22.1			—
	Purchases of fixed maturity investments			(1,656.7	)		(3,437.4	)	Purchases of fixed maturity investments		(3,899.5	)		(14,239.2	)
	Purchases of common equity securities and other investments			(133.6	)		(76.4	)	Purchases of consolidated affiliates, net of cash acquired		(458.5	)		—
	Net change in unsettled investment purchases and sales			(304.9	)		117.4		Purchases of common equity securities and other investments		(336.0	)		(195.8	)
	Purchases of consolidated affiliates, net of cash acquired			(23.5	)		—		Net change in unsettled investment purchases and sales		(356.9	)		785.9
	Net acquisitions of property and equipment			(1.0	)		(4.8	)	Net acquisitions of property and equipment		(10.4	)		(12.1	)

Net cash flows provided from investing activities	Net cash flows provided from investing activities			148.1			209.4		Net cash flows provided from investing activities		234.9			414.9

Cash flows from financing activities:	Cash flows from financing activities:								Cash flows from financing activities:
	Repayments of debt			—			(6.5	)	Issuances of debt		—			693.4
	Cash dividends paid to common shareholders			(9.1	)		(8.3	)	Repayments of debt		—			(739.9	)
	Cash dividends paid to preferred shareholders			(7.6	)		(7.6	)	Cash dividends paid to common shareholders		(9.1	)		(8.3	)
	Proceeds from issuances of Common Shares			13.3			.7		Cash dividends paid to preferred shareholders		(15.1	)		(15.1	)
									Proceeds from issuances of Common Shares		13.3			.8
Net cash used for financing activities				(3.4	)		(21.7	)
									Proceeds from exercise of warrants to acquire Common Shares		294.0			—
Net increase (decrease) in cash during the period				27.3			(1.6	)

Net cash provided from (used for) financing activities									Net cash provided from (used for) financing activities		283.1			(69.1	)

Net increase in cash during the period									Net increase in cash during the period		2.6			15.4
Cash balances at beginning of period	Cash balances at beginning of period			89.9			121.5		Cash balances at beginning of period		89.9			121.5

Cash balances at end of period	Cash balances at end of period		$	117.2		$	119.9		Cash balances at end of period	$	92.5		$	136.9

Supplemental cash flows information:	Supplemental cash flows information:								Supplemental cash flows information:
	Interest paid		$	(.3	)	$	(13.0	)	Interest paid	$	(21.3	)	$	(22.7	)
	Net income taxes (paid) received			(27.3	)		32.1		Net taxes (paid) received		(33.7	)		22.2

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

These interim consolidated financial statements include the accounts of White Mountains Insurance Group, Ltd. (the "Company" or the "Registrant") and its subsidiaries (collectively, "White Mountains") and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company is a Bermuda limited liability company with its headquarters located at ~~Crawford House, 23 Church~~the Bank of Butterfield Building, 42 Reid Street, Hamilton ~~Bermuda~~ HM ~~11.~~12, Bermuda. The Company's principal executive office is located at 80 South Main Street, Hanover, New Hampshire 03755-2053 and its registered office is located at Clarendon House, 2 Church Street, Hamilton ~~Bermuda~~ HM ~~11.~~11, Bermuda.

The Company's reportable segments are OneBeacon, ~~Reinsurance,~~White Mountains Re, Esurance and Other Operations.

The OneBeacon ~~Insurance Group LLC~~ family of companies are U.S.-based property and casualty insurance writers, ~~including, among several others, OneBeacon Insurance Company, Pennsylvania General Insurance Company and Camden Fire Insurance Association (collectively "OneBeacon"). OneBeacon was~~which were acquired by White Mountains from Aviva plc ("Aviva", formerly CGNU plc) on June 1, 2001 (the "OneBeacon Acquisition").

White Mountains' reinsurance operations are conducted primarily through its recently formed global reinsurance management organization ("White Mountains Re"), which oversees the operations of Folksamerica, ~~Holding Company Inc. (together with its reinsurance subsidiary, Folksamerica Reinsurance Company, "Folksamerica").~~Sirius, and WMU, as described below.

Folksamerica became a wholly-owned subsidiary of White Mountains in 1998. In connection with the OneBeacon Acquisition, Folksamerica was contributed to OneBeacon. On March 31, 2004, OneBeacon distributed its interest in Folksamerica back to its parent, Fund American Companies, Inc. ("Fund American").

On April 16, 2004, White Mountains completed its acquisition of Sirius Insurance Holding Sweden AB and its subsidiaries ("Sirius") from ABB Ltd. The principal companies acquired were Sirius International Insurance Corporation ("Sirius International"), Sirius America Insurance Company ("Sirius America") and Scandinavian Reinsurance Company Ltd. ("Scandinavian Re"). Stockholm-based Sirius International is the largest reinsurance company in Scandinavia and has offices in Stockholm, London, Hamburg, Zurich, Belgium, and Singapore. Sirius America is a U.S.-based insurer focused on primary insurance programs that was acquired by Folksamerica as part of the transaction. Scandinavian Re is a Bermuda-based finite reinsurer that is in runoff. Subsequent to White Mountains' acquisition of Sirius, Fund American Reinsurance Company Ltd. ("Fund American Re"), which is domiciled in Bermuda but maintains its executive office and an operating branch in Stockholm, Sweden and operates through an additional branch in Singapore, was sold to Sirius by the Company. The results of Fund American Re are now included in Sirius' results throughout this report.

White Mountains' reinsurance operations also include its wholly owned subsidiaries, White Mountains Underwriting Limited (domiciled in Ireland) and White Mountains Underwriting (Bermuda) Limited (collectively, "WMU") ~~and Fund American Reinsurance Company Ltd. ("Fund American Re")~~. WMU is an underwriting advisory company specializing in international property and marine excess reinsurance. ~~Fund American Re is domiciled in Bermuda but maintains its executive office and an operating branch in Stockholm, Sweden, and operates through an additional branch in Singapore.~~

Esurance ~~Inc. ("Esurance")~~ has been a unit of White Mountains since October 2000. Esurance markets personal auto insurance directly to customers and through select online agents. The results included in the Esurance segment include the results of its internet-based management company as well as the underwriting results of business generated through Esurance and underwritten by OneBeacon and Folksamerica. The aggregation of Esurance's management company results and the underwriting results of the business it generates within the White Mountains organization is referred to in this report as "Esurance enterprise-wide" results.

White Mountains' Other Operations consists of the Company and its intermediate holding companies, as well as the International American Group, Inc. (the "International American Group"). The International American Group, which was acquired by White Mountains in 1999, consists of American Centennial Insurance Company ("American Centennial") and British Insurance Company of Cayman ("British Insurance Company") and, prior to its sale in January 2004, also included Peninsula Insurance Company ("Peninsula").

During the first quarter of 2004, White Mountains sold a ~~significant~~ portion of its investment in Montpelier Re Holdings Ltd. ("Montpelier") common shares to third parties. As a result of this sale,

as well as changes to the composition of the Board of Directors of both Montpelier and White Mountains, White Mountains changed the method of accounting for its remaining common share investment in Montpelier as of March 31, 2004 from an equity method investment in an unconsolidated affiliate to a common equity security classified as available for sale and carried at fair value. See Note 5.

White Mountains has completed numerous significant transactions during the periods presented which have affected the comparability of the financial statement information presented herein. White Mountains' consolidated statements of income and comprehensive income include the results of acquired businesses beginning as of the date each respective acquisition was completed. Net changes in assets and liabilities reported in the consolidated statements of cash flows exclude those assets and liabilities acquired or sold during the periods presented.

All significant intercompany transactions have been eliminated in consolidation. The financial statements include all adjustments considered necessary by management to fairly present the financial position, results of operations and cash flows of White Mountains. These interim financial statements may not be indicative of financial results for the full year and should be read in conjunction with the Company's 2003 Annual Report on Form 10-K. The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts in the prior period financial statements have been reclassified to conform with the current presentation. Refer to the Company's 2003 Annual Report on Form 10-K for a complete discussion regarding White Mountains' significant accounting policies.

Recently Adopted Changes in Accounting Principles

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which addresses consolidation issues surrounding special purpose entities and certain other entities, collectively termed variable interest entities ("VIE"), to which the usual condition for consolidation does not apply. A VIE is an entity in which the equity investors do not have the characteristics of a controlling interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Under FIN 46, the primary beneficiary of a VIE is required to consolidate the VIE in its financial statements. The primary beneficiary is an entity that has a variable interest that will absorb the majority of the VIE's expected losses if they occur, receive a majority of the entity's expected residual returns if they occur, or both. FIN 46 was effective immediately for new VIEs established or purchased subsequent to January 31, 2003. For VIEs entered into prior to February 1, 2003, additional disclosure requirements were effective for financial statements issued after January 31, 2003 and consolidation requirements were effective for the first interim period ending after March 15, 2004. White Mountains did not identify any material VIEs created subsequent to January 31, 2003 which required consolidation. White Mountains adopted the disclosure provisions of FIN 46 beginning with its December 31, 2002 Form 10-K and its consolidation provisions as of March 31, 2004.

For purposes of FIN 46, New Jersey Skylands Insurance Association is considered to be a VIE and as a result, the balance sheet accounts and the results of operations of the Association have been consolidated in White Mountains' financial statements as of ~~March 31,~~and for the three months ended June 30, 2004. See Note 11.

Additionally, White Mountains held certain investments in limited partnerships at March 31, 2004 that, for purposes of FIN 46, were considered to be VIEs. However, in December 2003, the FASB published a revision to FIN-46, ("FIN 46R") indefinitely deferring the effective date for applying the provisions of FIN 46 for investment companies that are not subject to SEC Regulation S-X,

Rule 6-03(c)(1), but are currently accounting for their investments in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, Audits of Investment Companies (the Audit Guide). Since the limited partnerships in which White Mountains is invested account for their investment in accordance with the Audit Guide, the provisions of FIN 46 have not been adopted with respect to these investments.

Note 2. Acquisitions and Dispositions

Sirius

On ~~December 8, 2003,~~April 16, 2004, White Mountains ~~entered into a definitive agreement with ABB to acquire the~~completed its acquisition (the "Sirius Acquisition") of Sirius Insurance ~~Group,~~Holdings and its subsidiaries, including Sirius International, Sirius America and Scandinavian Re from ABB Ltd. for SEK 3.27 billion (approximately $427.5 million based upon the foreign exchange spot rate at the date of acquisition), which includes $10.5 million of expenses incurred in connection with the acquisition. Sirius is a group of international insurers and reinsurers which focuses mainly on property and other short-tailed lines.

The Sirius Acquisition was accounted for by the purchase method of accounting and, therefore, the identifiable assets and liabilities of Sirius were recorded by White Mountains at their fair values on April 16, 2004. The process of determining the fair value of such assets and liabilities acquired was as follows: (i) the purchase price of Sirius was preliminarily allocated to the acquired assets and liabilities, based on their respective estimated fair values at April 16, 2004; (ii) the excess of the estimated fair value of acquired net assets over the purchase price was used to reduce the estimated fair values of all non-current, non-financial assets acquired to zero; and (iii) the remaining excess of the estimated fair value of net assets over the purchase price was recorded as an extraordinary gain.

The fair value of identifiable assets and liabilities acquired on April 16, 2004 were as follows (in $ millions):

Fair value of assets acquired	$	3,306.9
Fair value of liabilities acquired		2,768.0

Fair value of net assets acquired		538.9
Total purchase price, including expenses		(427.5	)

Resulting extraordinary gain	$	111.4

Significant assets and liabilities acquired through Sirius included $1,851.9 million of cash and investments, $790.1 million of funds held by ceding companies, $286.2 million of reinsurance recoverable on paid and unpaid losses, $245.8 million of insurance and reinsurance ~~organization based~~balances receivable, $24.3 million of deferred acquisition costs, $1,612.7 million of loss and loss adjustment expense reserves, $432.2 million of reserves for structured settlements, $276.5 million of unearned insurance premiums and $289.4 million of deferred tax liabilities.

Supplemental unaudited pro forma condensed combined income statement information for the six-month period ended June 30, 2004, which assumes that the Sirius Acquisition had occurred as of January 1, 2004, and for the twelve-month period ended December 31, 2003, which assumes the Sirius Acquisition had occurred as of January 1, 2003, follows:

		Pro Forma Six Months Ended June 30, 2004		Pro Forma Twelve Months Ended December 31, 2003(1)
		(Unaudited)
		(millions, except per share amounts)
Total revenues		$	2,290.0	$	4,408.3
Income before extraordinary items		$	179.2	$	262.0
Net income		$	299.2	$	347.5
Earnings per Common Share:
	Pro forma net income—basic	$	33.10	$	34.15
	Pro forma net income—diluted	$	29.39	$	30.55

(1): Because Sirius is a foreign company that has not previously reported interim financial information in ~~Sweden. SeeNote 14—Subsequent Event—~~accordance with GAAP, pro forma information for ~~details of~~ the ~~closing of this transaction subsequent~~Sirius Acquisition is not available for the 2003 interim periods.

The unaudited pro forma information presented above for the six-month period ended June 30, 2004 and the twelve-month period ended December 31, 2003 has been supplied for comparative purposes only and does not purport to reflect the ~~end of~~actual results that would have been reported had the ~~first quarter.~~Sirius Acquisition been consummated at January 1, 2004 and 2003, respectively. Additionally, such pro forma financial information does not purport to represent results that may occur in the future.

Other acquisitions and dispositions

On March 15, 2004, White Mountains entered into a definitive agreement to lead with Berkshire Hathaway, Inc. ("Berkshire") an investor group that will acquire the life and investment business of Safeco Corporation ("Safeco Life") for approximately $1.35 billion. Safeco Life focuses mainly on group insurance, individual life insurance, structured settlements and retirement ~~services and mutual funds.~~services. This acquisition closed on August 2, 2004, with White Mountains and Berkshire ~~will~~ each ~~invest~~investing $200 million and ~~receive~~receiving warrants to purchase additional common shares of a newly formed acquisition company. On a fully converted basis, White Mountains and Berkshire ~~will~~ each own approximately 24% of the new ~~company.~~company and White Mountains ~~expects~~will account for this ~~acquisition to close in~~investment under the ~~third quarter of 2004.~~equity method.

On March 31, 2004, OneBeacon acquired Atlantic Specialty Insurance Company ("Atlantic Specialty"), a subsidiary of Atlantic Mutual Insurance Company ("Atlantic Mutual"), and the renewal rights to Atlantic Mutual's segmented commercial insurance business, including the unearned premiums on the acquired book (the "Atlantic Specialty Transaction"). The overall gross written premium for this book of business totals approximately $400 million. Under the terms of the agreement, OneBeacon will pay Atlantic Mutual a renewal commission on the premiums

renewed. In connection with its acquisition of Atlantic Specialty, OneBeacon issued a $20.0 million note to the seller (See Note 6).

On March 31, 2004, Folksamerica completed its acquisition of the Sierra Insurance Group companies (the "Sierra Group"), consisting of California Indemnity Insurance Company and its three subsidiaries, from Nevada-based Sierra Health Services, Inc. Folksamerica paid $76.2 million for the Sierra Group, which included $14.2 million in cash and a $62.0 million purchase note (see Note 6), of which $58.0 million will be adjusted over its six-year term to reflect favorable or adverse loss reserve development on the acquired reserve portfolio and runoff of remaining policies in force (mainly workers compensation business) as well as certain other balance sheet protections. The acquired companies' net assets at the time of the close were $84.8 million, including $270.3 million of investments, $174.4 million of reinsurance balances recoverable, $406.9 million of loss and loss adjustment expense reserves and $25.1 million of unearned premium. The acquisition resulted in an $8.6 million extraordinary ~~gain.~~gain, which White Mountains recognized in the first quarter of 2004.

In January 2004, Folksamerica sold Peninsula ~~Insurance Company ("Peninsula")~~ to the Donegal Group for $23.3 million, or 107.5% of its GAAP book value, resulting in a pretax gain of $2.1 ~~million.~~million, which White Mountains recognized in the first quarter of 2004.

Note 3. Loss and Loss Adjustment Expense Reserves

The following table summarizes the loss and loss adjustment expense ("LAE") reserve activities of White Mountains' insurance and reinsurance subsidiaries for the three and six months ended ~~March 31,~~June 30, 2004 and 2003:

		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
		2004			2003				2004			2003			2004			2003
		Millions							(millions)
Gross beginning balance	Gross beginning balance	$	7,728.2		$	8,875.3		Gross beginning balance	$	8,055.8		$	8,552.7		$	7,728.2		$	8,875.3
	Less beginning reinsurance recoverable on unpaid losses		(3,473.8	)		(4,071.9	)	Less beginning reinsurance recoverable on unpaid losses		(3,554.3	)		(3,865.4	)		(3,473.8	)		(4,071.9	)

Net loss and LAE reserves	Net loss and LAE reserves		4,254.4			4,803.4		Net loss and LAE reserves		4,501.5			4,687.3			4,254.4			4,803.4
Loss and LAE reserves sold—Peninsula	Loss and LAE reserves sold—Peninsula		(17.0	)		—		Loss and LAE reserves sold—Peninsula		—			—			(17.0	)		—
Loss and LAE reserves acquired—Sierra Group			244.4	⁽¹⁾		—
Loss and LAE reserves consolidated—New Jersey Skylands Insurance Association			62.1			—
Loss and LAE reserves acquired—Sirius(1)								Loss and LAE reserves acquired—Sirius(1)		1,328.9			—			1,328.9			—
Loss and LAE reserves acquired—Sierra Group(1)								Loss and LAE reserves acquired—Sierra Group(1)		—			—			244.4			—
Loss and LAE reserves consolidated—NJ Skylands Reciprocal								Loss and LAE reserves consolidated—NJ Skylands Reciprocal		—			—			62.1			—
Loss and LAE incurred relating to:	Loss and LAE incurred relating to:							Loss and LAE incurred relating to:
	Current year losses		522.8			519.7		Current year losses		592.8			483.9			1,115.6			1,003.6
	Prior year losses		.5			2.9		Prior year losses		30.6			27.5			31.1			30.4

Total incurred loss and LAE	Total incurred loss and LAE		523.3			522.6		Total incurred loss and LAE		623.4			511.4			1,146.7			1,034.0
Accretion of fair value adjustment to loss and LAE reserves	Accretion of fair value adjustment to loss and LAE reserves		10.1			14.2		Accretion of fair value adjustment to loss and LAE reserves		12.8			14.2			22.9			28.4
Foreign currency translation adjustment to loss and LAE reserves								Foreign currency translation adjustment to loss and LAE reserves		8.0			—			8.0			—
Loss and LAE paid relating to:	Loss and LAE paid relating to:							Loss and LAE paid relating to:
	Current year losses		(97.8	)		(111.2	)	Current year losses		(161.6	)		(79.1	)		(259.4	)		(190.2	)
	Prior year losses		(478.0	)		(541.7	)	Prior year losses		(717.2	)		(661.7	)		(1,195.2	)		(1,203.5	)

Total loss and LAE payments	Total loss and LAE payments		(575.8	)		(652.9	)	Total loss and LAE payments		(878.8	)		(740.8	)		(1,454.6	)		(1,393.7	)
Net ending balance	Net ending balance		4,501.5			4,687.3		Net ending balance		5,595.8			4,472.1			5,595.8			4,472.1
	Plus ending reinsurance recoverable on unpaid losses		3,554.3			3,865.4		Plus ending reinsurance recoverable on unpaid losses		3,733.3			3,814.4			3,733.3			3,814.4

Gross ending balance	Gross ending balance	$	8,055.8		$	8,522.7		Gross ending balance	$	9,329.1		$	8,286.5		$	9,329.1		$	8,286.5

(1): Reinsurance recoverables on unpaid losses acquired in the Sirius and Sierra Group ~~acquisition~~acquisitions totalled $283.8 million and $162.5 ~~million.~~million, respectively.

White Mountains ~~did not experience any material~~experienced $30.6 million and $31.1 million of net unfavorable loss reserve development on prior accident year loss reserves during the ~~first quarters~~three and six months ended June 30, 2004, respectively, principally due to emerging claims experienced in OneBeacon's run-off operations and increases in reserves at OneBeacon as a result of ~~2004~~audits of national account and program claims administered by third parties.

White Mountains recorded $27.5 million and $30.4 million of unfavorable loss reserve development on prior accident year loss and LAE reserves during the three and six months ended June 30, 2003. The six month development in 2003 included $9.8 million recorded at Folksamerica and $19.8 million recorded at OneBeacon, including $12.0 million for a significant 1995 property claim from a pool in which OneBeacon had participated (the Industrial Risk Insurers pool) which had been in litigation and was settled through an arbitration decision during the second quarter of 2003.

In connection with purchase accounting for the acquisition of OneBeacon, White Mountains was required to adjust to fair value OneBeacon's loss and LAE reserves and the related reinsurance recoverables by $646.9 million and $346.9 million, respectively, on OneBeacon's acquired balance sheet. This net reduction to loss and LAE reserves of $300.0 million at June 1, 2001 ($~~105.5~~95.4 million at ~~March 31,~~June 30, 2004) is being recognized through an income statement charge ratably with and over the period the claims are settled. As such, White Mountains recognized $10.1 million and $20.2 million of such charges ~~recorded as loss and LAE,~~ for the three and six months ended ~~March 31,~~June 30, 2004, respectively, and $14.2 million and $28.4 million for the three and six months ended ~~March 31, 2003.~~June 30, 2003, respectively.

In connection with purchase accounting for the Sirius Acquisition, White Mountains was required to adjust to fair value the loss and LAE reserves on Sirius International's acquired balance sheet by $58.1 million. This fair value adjustment is being recognized through an income statement charge ratably with and over the period the claims are settled. As such, White Mountains recognized $2.7 million of such charges for both the three and six months ended June 30, 2004.

Note 4. Third Party Reinsurance

In the normal course of business, White Mountains' insurance and reinsurance subsidiaries seek to limit losses that may arise from catastrophes or other events by reinsuring with third party reinsurers. White Mountains remains liable for risks reinsured in the event that the reinsurer is unable to honor its obligations under reinsurance contracts.

OneBeacon

In connection with the OneBeacon Acquisition, Aviva caused OneBeacon to purchase two reinsurance contracts; a full risk-transfer cover from National Indemnity Company ("NICO") for up to $2.5 billion in old asbestos and environmental ("A&E") claims and certain other exposures (the "NICO Cover") and an adverse development cover from General Reinsurance Corporation ("GRC") for up to $400.0 million of adverse development on losses occurring in years 2000 and prior (the "GRC Cover") in addition to $170.0 million of reserves ceded as of the date of the OneBeacon Acquisition.

Under the terms of the NICO Cover, NICO receives the economic benefit of reinsurance recoverables from certain of OneBeacon's third party reinsurers in existence at the time the NICO Cover was executed ("Third Party Recoverables"). As a result, the Third Party Recoverables serve to protect the $2.5 billion limit of NICO coverage for the benefit of OneBeacon. Third Party Recoverables are typically for the amount of loss in excess of a stated level each year. White Mountains estimates that on an incurred basis, net of Third Party Recoverables, it has exhausted approximately $1.7 billion of the coverage provided by NICO at ~~March 31,~~June 30, 2004. Approximately ~~$567~~$588 million of these incurred losses have been paid by NICO through ~~March 31,~~June 30, 2004. To the extent that actual experience differs from White Mountains' estimate of ultimate A&E losses and Third Party Recoverables, future losses could utilize some or all of the $757 million protection remaining under the NICO Cover.

At ~~March 31,~~June 30, 2004, OneBeacon had ~~$71.3~~$72.4 million of reinsurance currently recoverable on paid losses and ~~$2,970.2~~$2,857.9 million (gross of purchase accounting adjustments as described in Note 3) that will become recoverable if claims are paid in accordance with current reserve estimates. Because reinsurance contracts do not relieve OneBeacon of its primary obligation to its policyholders, the collectibility of balances due from OneBeacon's reinsurers is critical to OneBeacon's financial strength. OneBeacon is selective with regard to its reinsurers, placing reinsurance with only those reinsurers having strong financial condition. OneBeacon monitors the financial strength of its reinsurers on an ongoing basis. As a result, uncollectible amounts have not historically been significant. The following table provides a listing of OneBeacon's top reinsurers based upon recoverable amounts, the percentage of total reinsurance recoverables and the reinsurer's A.M. Best rating.

Top Reinsurers (dollars in millions)
Balance at
March 31, 2004
% of Total
A.M. Best
Rating(3)

Subsidiaries of Berkshire (NICO and GRC) $ 2,197.9 72 % A ++
Liberty Mutual Insurance Group and subsidiaries (1) 175.2 6 A
American Re-Insurance Company 60.4 2 A +
Tokio Fire and Marine Insurance Company 52.8 2 A ++
Aviva plc and its affiliates (2) 34.7 1 not rated

Top Reinsurers (dollars in millions)	Balance at June 30, 2004		% of Total		A.M. Best Rating(3)
Subsidiaries of Berkshire (NICO and GRC)	$	2,158.0	74	%	A	++
Liberty Mutual Insurance Group and subsidiaries(1)		156.6	5		A
American Re-Insurance Company		61.3	2		A	+
Tokio Fire and Marine Insurance Company		58.1	2		A	++
Aviva plc and its affiliates(2)		24.5	1		not rated

(1): At ~~March 31,~~June 30, 2004, OneBeacon had assumed balances payable and expenses payable of approximately ~~$107.4~~$72.9 million under its renewal rights agreement with Liberty Mutual Insurance

Group ("Liberty Mutual"), which expired on October 31, 2003. In the event of Liberty Mutual insolvency, OneBeacon has the right to offset these balances against its reinsurance recoverable due from Liberty Mutual.

(2): Represents non-U.S. insurance entities whose balances are fully collateralized through funds held, letters of credit and/or trust agreements.
(3): A.M. Best ratings as detailed above are: "A++" (Superior, which is the highest of fifteen ratings), "A+" (Superior, which is the second highest of fifteen ratings) and "A" (Excellent, which is the third highest of fifteen ratings).

~~Folksamerica~~White Mountains Re

In 2000, Folksamerica purchased a reinsurance contract from Imagine Re (the "Imagine Cover") to reduce its statutory operating leverage and protect its surplus from adverse development relating to A&E exposures as well as the reserves assumed in several acquisitions. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration ~~Contracts,"~~Contracts", amounts related to reserves transferred to Imagine Re for liabilities incurred as a result of past insurable events have been accounted for as retroactive reinsurance. At ~~March 31,~~June 30, 2004 and December 31, 2003, Folksamerica's reinsurance recoverables included ~~$258.4~~$259.0 million and $312.4 million, respectively, recorded under the Imagine Cover. All balances due from Imagine Re are fully collateralized, either with Folksamerica as the beneficiary of invested assets in a trust, with funds held, or through a letter of credit. As of December 31, 2003, the entire $115.0 million of coverage available under this contract had been fully utilized. At ~~March 31,~~June 30, 2004 and December 31, 2003, Folksamerica had also recorded ~~$47.8~~$46.0 million and $50.6 million in deferred gains, respectively, related to adverse development on loss reserves incurred as a result of past insurable events transferred to Imagine Re at the inception of the Imagine Cover.

At ~~March 31,~~June 30, 2004, ~~Folksamerica~~White Mountains Re had ~~$52.9~~$86.2 million of reinsurance currently recoverable on paid losses and ~~$849.7~~$1,146.0 million that will become recoverable if claims are paid in accordance with current reserve estimates. Because reinsurance contracts do not relieve ~~Folksamerica~~White Mountains Re of its obligation to its ceding companies, the collectibility of balances due from ~~Folksamerica's~~its reinsurers is critical to ~~Folksamerica's~~White Mountains Re's financial strength. ~~Folksamerica~~White Mountains Re is selective with regard to its reinsurers, placing reinsurance with only those reinsurers having strong financial condition. ~~Folksamerica~~White Mountains Re monitors the financial strength of its reinsurers on an ongoing basis. The following table provides a listing of

~~Folksamerica's~~ White Mountains Re's top reinsurers based upon recoverable amounts, the percentage of total recoverables and the reinsurer's A.M. Best Rating.

Top Reinsurers (dollars in millions)	Balance at March 31, 2004		% of Total		A.M. Best Rating (2)		Balance at June 30, 2004		% of Total		A.M. Best Rating(2)
Imagine Re(1)	$	258.4	29	%	A	-	$	259.0	21	%	A	-
Olympus Reinsurance Company(1)		135.9	15		A	-		149.1	12		A	-
London Life & General Reinsurance Company Ltd. and London Life & Casualty Reinsurance Corp.(1)		135.4	15		A			135.4	11		A
St. Paul Travelers		97.8	11		A	+		83.5	7		A
GRC		45.6	5		A	++		73.2	6		A	++

(1): Represents non-U.S. insurance entities whose balances are fully collateralized through funds held, letters of credit or trust agreements.
(2): A.M. Best ratings as detailed above are: "A++" (Superior, which is the highest of fifteen ratings), ~~"A+" (Superior, which is the second highest of fifteen ratings),~~ "A" (Excellent, which is the third highest of fifteen ratings) and "A-" (Excellent, which is the fourth highest of fifteen ratings).

Note 5. Investment Securities

White Mountains' portfolio of fixed maturity investments is comprised primarily of investment grade corporate debt securities, U.S. government and agency securities and mortgage-backed securities (greater than 99% of such securities received a rating from the National Association of Insurance Commissioners of 1 or 2) and are classified as available for sale. Nearly all of the fixed maturity securities currently held by White Mountains are publicly traded.

White Mountains' net investment income is comprised primarily of interest income associated with the fixed maturity investments of its consolidated insurance and reinsurance operations, dividend income from its equity investments and interest income from its short-term investments. Net investment income for the three and six months ended ~~March 31,~~June 30, 2004 and 2003 consisted of the following:

		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
		2004			2003				2004			2003			2004			2003
		Millions							Millions
Investment income:	Investment income:							Investment income:
	Fixed maturity investments	$	60.3		$	73.8		Fixed maturity investments	$	76.2		$	68.8		$	136.5		$	142.6
	Short-term investments		3.6			3.9		Short-term investments		2.6			2.7			6.2			6.6
	Common equity securities		5.3			1.1		Common equity securities		11.4			3.8			16.7			4.9
	Other		2.7			.9		Other		4.8			(.2	)		7.5			.7

Total investment income	Total investment income		71.9			79.7		Total investment income		95.0			75.1			166.9			154.8
	Less investment expenses and other charges		(.9	)		(1.1	)	Less investment expenses and other charges		(1.8	)		(2.1	)		(2.7	)		(3.2	)

Net investment income, before tax		$	71.0		$	78.6
Net investment income, pretax								Net investment income, pretax	$	93.2		$	73.0		$	164.2		$	151.6

The composition of realized investment gains (losses) for the three and six months ended ~~March 31,~~June 30, 2004 and 2003 consisted of the following:

		Three Months Ended March 31,							Three Months Ended June 30,					Six Months Ended June 30,
		2004			2003				2004			2003		2004			2003
		Millions							Millions
Fixed maturity investments	Fixed maturity investments	$	14.5		$	42.9		Fixed maturity investments	$	(2.8	)	$	83.0	$	11.7		$	125.9
Common equity securities	Common equity securities		19.1			20.8		Common equity securities		7.1			1.0		26.2			21.8
Montpelier common shares	Montpelier common shares		35.2			—		Montpelier common shares		—			—		35.2			—
Other investments	Other investments		(7.0	)		(5.5	)	Other investments		(9.9	)		6.0		(16.9	)		.5

	Net realized investment gains, before tax	$	61.8		$	58.2		Net realized investment gains (losses), pretax	$	(5.6	)	$	90.0	$	56.2		$	148.2

During the first quarter of 2004, White Mountains sold 4.5 million common shares of Montpelier to third parties for net proceeds of $155.3 million, resulting in a pretax realized gain of $35.2 ~~million. As a result of this sale and certain other actions undertaken~~million (See Note 1). Also during the 2004 period, White Mountains changed the method of accounting for its remaining common share investment in Montpelier as of March 31, 2004 from an equity method investment in an unconsolidated affiliate to a common equity security carried at fair value.

~~During~~ the first quarter of 2004, White Mountains purchased additional warrants to acquire 2,390,786 common shares of Montpelier from an existing warrant holder for $54.1 million in cash, thereby raising the total number of such warrants owned by White Mountains to 7,172,358. The Montpelier warrants have an exercise price of $16.67 per share (as adjusted for stock splits) and are exercisable until December 2011.

White Mountains accounts for its Montpelier warrants under SFAS No. 133, "Accounting for Derivative Instruments and Hedging ~~Activities,"~~Activities", recording the instruments at fair value with changes in fair value recognized through the income statement as a realized investment

gain or loss. White Mountains has determined the fair value of ~~the~~its total position of Montpelier warrants to be ~~$121.0~~$136.9 million as of ~~March 31,~~June 30, 2004 and ~~recognized an investment gain on other investments (presented as a realized gain) of $3.8 million for the three months ended March 31, 2004 and~~recorded an investment loss on other investments (presented as a realized ~~loss)~~losses) of ~~$1.0~~$(11.5) million and $(7.7) million for the three and six months ended ~~March 31,~~June 30, 2004 and investment gains on other investments (presented as realized gains) of $12.5 million and $11.5 million for the three and six months ended June 30, 2003.

~~During the first quarter of 2003,~~The following table summarizes White Mountains' ~~sold off a large portion~~investment in Montpelier as of ~~its fixed maturity investment portfolio resulting in a pretax gain of $42.9 million.~~June 30, 2004 and December 31, 2003:

	As of June 30, 2004					As of December 31, 2003
	Shares	Carrying Value		Fair Value		Shares	Carrying Value		Fair Value
	Millions
Common shares	6.3	$	214.0	$	214.0	10.8	$	282.7	$	396.3
Warrants to acquire common shares	7.2		136.9		136.9	4.8		90.5		90.5

Total	13.5	$	350.9	$	350.9	15.6	$	373.2	$	486.8

As of ~~March 31,~~June 30, 2004 and December 31, 2003, White Mountains reported ~~$103.1~~$67.2 million and $371.6 million in accounts payable on unsettled investment purchases, respectively. The large 2003 payable related primarily to an unsettled purchase of a Swedish Treasury Bill, which was included in short-term investments at December 31, 2003.

Impairment

Temporary losses on investment securities are recorded as unrealized losses. Temporary losses do not impact net income and earnings per common share but serve to reduce comprehensive net income, shareholders' equity and tangible book value. Unrealized losses subsequently identified as other-than-temporary impairments are recorded as realized losses. Other-than-temporary impairments previously recorded as unrealized losses do not impact comprehensive net income, shareholders' equity and tangible book value but serve to reduce net income and earnings per common share.

White Mountains' methodology of assessing other-than-temporary impairments is based on security-specific facts and circumstances as of the balance sheet date. As a result, subsequent adverse changes in an issuers' credit quality or subsequent weakening of market conditions that differ from expectations could result in additional other-than-temporary impairments. In addition, the sale of a fixed maturity security with a previously recorded unrealized loss would result in a realized loss. Either of these situations would adversely impact net income and earnings per common share but would not impact comprehensive net income, shareholders' equity or tangible book value.

The following table presents an analysis of the continuous periods during which White Mountains has held investment positions which were carried at an unrealized loss as of ~~March 31,~~June 30, 2004 (excluding short-term investments):

March 31, 2004

0-6
Months
6-12
Months
> 12
Months
Total

Dollars in millions

Fixed maturity investments:
Number of positions 20 8 5 33
Market value $ 519.5 $ 114.8 $ 5.6 $ 639.9
Amortized cost $ 520.6 $ 116.1 $ 5.7 $ 642.4
Unrealized loss $ (1.1 ) $ (1.3 ) $ (.1 ) $ (2.5 )

Common equity securities:
Number of positions 8 1 — 9
Market value $ 10.9 $ 1.7 $ — $ 12.6
Cost $ 11.5 $ 1.9 $ — $ 13.4
Unrealized loss $ (.6 ) $ (.2 ) $ — $ (.8 )

Other investments:
Number of positions 1 1 7 9
Market value $ 9.2 $ .6 $ 6.2 $ 16.0
Cost $ 10.0 $ .9 $ 9.1 $ 20.0
Unrealized loss $ (.8 ) $ (.3 ) $ (2.9 ) $ (4.0 )

Total:
Number of positions 29 10 12 51
Market value $ 539.6 $ 117.1 $ 11.8 $ 668.5
Amortized cost $ 542.1 $ 118.9 $ 14.8 $ 675.8
Unrealized loss $ (2.5 ) $ (1.8 ) $ (3.0 ) $ (7.3 )

% of total gross unrealized losses 34 % 25 % 41 % 100.0 %

		June 30, 2004
		0-6 Months			6-12 Months			> 12 Months			Total
		Dollars in millions
Fixed maturity investments:
	Number of positions		461			15			7			483
	Market value	$	3,376.5		$	65.1		$	37.7		$	3,479.3
	Amortized cost	$	3,420.1		$	65.7		$	39.9		$	3,525.7
	Unrealized loss	$	(43.6	)	$	(.6	)	$	(2.2	)	$	(46.4	)

Common equity securities:
	Number of positions		22			—			1			23
	Market value	$	82.0		$	—		$	1.7		$	83.7
	Cost	$	97.2		$	—		$	1.9		$	99.1
	Unrealized loss	$	(15.2	)	$	—		$	(.2	)	$	(15.4	)

Other investments:
	Number of positions		13			—			7			20
	Market value	$	97.3		$	—		$	6.7		$	104.0
	Cost	$	103.3		$	—		$	9.7		$	113.0
	Unrealized loss	$	(6.0	)	$	—		$	(3.0	)	$	(9.0	)

Total:
	Number of positions		496			15			15			526
	Market value	$	3,555.8		$	65.1		$	46.1		$	3,667.0
	Amortized cost	$	3,620.6		$	65.7		$	51.5		$	3,737.8
	Unrealized loss	$	(64.8	)	$	(.6	)	$	(5.4	)	$	(70.8	)

% of total gross unrealized losses			91	%		1	%		8	%		100	%

For the ~~three~~six months ended ~~March 31,~~June 30, 2004, White Mountains did not experience any other-than-temporary impairment charges. During the three months ended March 31, 2003, White Mountains experienced $17.5 million in pretax other-than-temporary impairment charges. Of the charge recorded in 2003, $8.1 million was related to White Mountains' investment in the common stock of Octel Corp ("Octel"), primarily due to the fact that Octel's unrealized loss position was greater than 20% of White Mountains' cost over the previous six-month period and also that certain factors had been reported by Octel which affected the likelihood that White Mountains would recover the original cost of its investment. White Mountains did not experience any material impairment charges relating to any other individual investment security during the 2003 period.

White Mountains believes that the gross unrealized losses relating to its fixed maturity investments at ~~March 31,~~June 30, 2004 resulted primarily from increases in market interest rates from the dates that certain investments within that portfolio were acquired as opposed to fundamental changes in the credit quality of the issuers of such securities. ~~Therefore,~~White Mountains views these decreases in value ~~are viewed~~ as being temporary because ~~White Mountains~~it has the intent and ability to retain such investments ~~for~~until maturity. However, should White Mountains sell a ~~period of time sufficient to allow for any anticipated recovery~~fixed maturity investment that has an existing unrealized loss resulting from an increase in market ~~value.~~interest rates, this loss would be realized through the income statement at the time of the sale. White Mountains also believes that the gross unrealized losses recorded on its common equity securities and its other investments at ~~March 31,~~June 30, 2004 resulted primarily from decreases in quoted market values from the dates that certain investments

securities within that portfolio were acquired as opposed to fundamental changes in the issuer's financial performance and near-term financial prospects. Therefore, these decreases are also viewed as being temporary. However, due to the inherent risk involved in investing in the equity markets, it is possible that the decrease in market value of these investments may ultimately prove to be other than temporary. As of ~~March 31,~~June 30, 2004, White Mountains' investment portfolio did not include any investment securities with an after-tax unrealized loss of more than $3.0 million.

Note 6. Debt

White Mountains' debt outstanding as of ~~March 31,~~June 30, 2004 and December 31, 2003 consisted of the following:

			March 31, 2004			December 31, 2003					June 30, 2004			December 31,2003
			Millions								Millions
Senior Notes, face value	Senior Notes, face value		$	700.0		$	700.0		Senior Notes, face value		$	700.0		$	700.0
	Unamortized original issue discount			(1.9	)		(1.9	)	Unamortized original issue discount			(1.8	)		(1.9	)

		Senior Notes, carrying value		698.1			698.1			Senior Notes, carrying value		698.2			698.1
Bank Facility	Bank Facility			—			—		Bank Facility			—			—

Sierra Note	Sierra Note			62.0			—		Sierra Note			61.5			—
Atlantic Specialty Note	Atlantic Specialty Note			20.0			—		Atlantic Specialty Note			20.0			—
C-F Seller note				25.0			25.0
C-F seller note									C-F seller note			25.0			25.0
Fund III notes	Fund III notes			15.0			15.0		Fund III notes			15.0			15.0
Other debt	Other debt			4.7			4.9		Other debt			4.6			4.9

	Total debt		$	824.8		$	743.0		Total debt		$	824.3		$	743.0

Senior Notes

On May 19, 2003, Fund American, a wholly-owned subsidiary of the Company, issued $700.0 million face value of senior unsecured debt through a public offering, at an issue price of 99.7% (the "Senior Notes"). The Senior Notes bear an annual interest rate of 5.9%, payable semi-annually in arrears on May 15 and November 15, until maturity on May 15, 2013, and are fully and unconditionally guaranteed as to the payment of principal and interest by the Company. Fund American incurred $7.3 million in expenses related to the issuance of the Senior Notes (including the $4.5 million underwriting discount), which have been deferred and are being recognized into interest expense over the life of the Senior Notes. Taking into effect the amortization of the original issue discount and all underwriting and issuance expenses, the Senior Notes have an effective yield to maturity of approximately 6.0% per annum.

Bank Facility

In September 2003, Fund American established a $300.0 million revolving credit facility (the "Bank Facility") arranged through Fleet Securities, Inc. and Banc One Capital Markets, Inc., which matures in September 2006 and under which both Fund American and the Company are permitted borrowers. Under the Bank Facility, the Company guarantees all obligations of Fund American, and Fund American guarantees all borrowings of the Company subject to certain limitations imposed by the terms of the Company's preferred stock held by Berkshire. As of ~~March 31,~~June 30, 2004, the Bank Facility was undrawn.

New Debt

In connection with its acquisition of the Sierra Group on March 31, 2004, Folksamerica entered into a $62.0 million purchase note (the "Sierra Note"), $58.0 million of which ~~can~~will be adjusted over its six-year term to reflect ~~any net~~favorable or adverse loss reserve development on the acquired reserve portfolio and runoff of remaining policies in force (mainly workers compensation business) as well as certain other balance sheet protections. Interest will accrue on the unpaid balance of the Sierra Note at a rate of 4%4.0% per annum, compounded quarterly, and will be payable at its maturity.

In connection with its acquisition of Atlantic Specialty on March 31, 2004, OneBeacon issued a $20.0 million ~~purchase~~ note to the seller (the "Atlantic Specialty Note"). The note accrues interest at a rate of ~~5.15%~~5.2% except that the outstanding principal amount in excess of $15.0 million accrues interest at a rate of 3.6%. OneBeacon is required to repay $2.0 million of principal on the notes per year, ~~beginning~~commencing with the first payment due on January 1, 2007.

Note 7. Earnings Per Share

Basic earnings per share amounts are based on the weighted average number of Common Shares outstanding. Diluted earnings per share amounts are based on the weighted average number of Common Shares and the net effect of potentially dilutive Common Shares outstanding, based on the treasury stock method. The following table details the Company's computation of earnings per Common Share for the three and six months ended ~~March 31,~~June 30, 2004 and 2003:

	Three months ended March, 31						Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003			2004			2003
Basic earnings per share numerators (in millions):
Net income before extraordinary item	$	86.9		$	102.1		$	57.1		$	84.4		$	144.0		$	186.5
Redemption value adjustment—Convertible Preference Shares		—			(11.5	)		—			(38.0	)		—			(49.5	)

Net income before extraordinary item available to common shareholders	$	86.9		$	90.6		$	57.1		$	46.4		$	144.0		$	137.0

Extraordinary item—excess of fair value of acquired net assets over cost		8.6			—			111.4			—			120.0			—

Net income available to common shareholders	$	95.5		$	90.6		$	168.5		$	46.4		$	264.0		$	137.0

Diluted earnings per share numerators (in millions):
Net income before extraordinary item available to common shareholders	$	86.9		$	90.6		$	57.1		$	46.4		$	144.0		$	137.0
Other effects on diluted earnings(1)		(.8	)		(.6	)		(.2	)		(.8	)		(.8	)		(1.2	)

Adjusted net income before extraordinary item available to common shareholders	$	86.1		$	90.0		$	56.9		$	45.6		$	143.2		$	135.8

Extraordinary item—excess of fair value of acquired net assets over		8.6			—
Extraordinary item—excess of fair value of acquired net assets over cost								111.4			—			120.0			—

Adjusted net income before extraordinary item available to common shareholders	$	94.7		$	90.0
Adjusted net income available to common shareholders							$	168.3		$	45.6		$	263.2		$	135.8

Earnings per share denominators (in thousands):
Basic earnings per share denominator (average Common Shares outstanding)		9,012			8,282			9,068			8,615			9,040			8,449
Average outstanding dilutive options and Warrants		1,094			795
Average outstanding dilutive options and warrants								1,163			943			1,111			877

Diluted earnings per share denominator(2)		10,106			9,077			10,231			9,558			10,151			9,326

Basic earnings per share (in dollars):
Net income before extraordinary item	$	9.64		$	10.94		$	6.30		$	5.38		$	15.93		$	16.21
Extraordinary item—excess of fair value of acquired net assets over cost		.95			—			12.29			—			13.27			—

Net income	$	10.59		$	10.94		$	18.59		$	5.38		$	29.20		$	16.21

Diluted earnings per share (in dollars):
Net income before extraordinary item	$	8.52		$	9.92		$	5.56		$	4.77		$	14.11		$	14.56
Extraordinary item—excess of fair value of acquired net assets over cost		.84			—			10.89			—			11.82			—

Net income	$	9.36		$	9.92		$	16.45		$	4.77		$	25.93		$	14.56

(1): ~~Includes~~The diluted earnings per share numerators for certain periods presented include an adjustment to White Mountains' equity in earnings ~~recorded on~~related to its investment in the common shares of Montpelier, which is reflective of dilution in Montpelier's earnings brought about by outstanding warrants and options to acquire common shares of Montpelier that are ~~currently~~ in-the-money. As of March 31, 2004, White Mountains changed its method of accounting for this investment from equity accounting to fair value, therefore, this equity adjustment is not applicable to periods beginning after March 31, 2004. The diluted earnings per share numerators also include, when applicable, an add-back of the income or expense relating to options to acquire Common Shares and restricted Common Shares when the inclusion of such items in the earnings per share denominator is dilutive (see note 2 below).
(2): The ~~following Common Share equivalents are not included in~~diluted earnings per share denominators for all periods presented include the dilutive ~~per share calculation as the impact~~effects of ~~their inclusion would be anti-dilutive (see Note 9): (i) in the 2004 and 2003 periods,~~ average ~~options~~outstanding warrants to acquire ~~50,265 and 59,115~~1,724,200 Common Shares ~~respectively,~~ at an average strike price of ~~$134.09 and $126.20~~$173.99 per Common ~~Share, respectively and (ii) in~~Share. The warrants were fully exercised on June��29, 2004. The diluted earnings per share denominators for all periods presented exclude the ~~2004 and 2003 periods, 9,956 and 73,500~~anti-dilutive effects of unearned restricted Common Shares outstanding ~~respectively.~~which are being fully expensed over the vesting period. The ~~dilutive~~diluted earnings per share ~~calculations~~denominator for the three months ended June 30, 2004 ~~and 2003 periods~~ includes the dilutive effect of ~~warrants~~options to acquire ~~1,724,200 warrants~~50,165 Common Shares at an average price strike of $136.08 per Common Share. For all other periods presented, the diluted earnings per share denominators exclude the anti-dilutive effects of outstanding vested and unvested options to acquire Common ~~Shares at $173.99 per Common Share.~~Shares.

Note 8. Segment Information

White Mountains has determined that its reportable segments include "OneBeacon" ~~(consisting of the operations of OneBeacon excluding business generated by Esurance)~~, ~~"Reinsurance"~~"White Mountains Re" (consisting of the operations of Folksamerica, ~~(excluding business generated by Esurance), WMU~~Sirius and ~~Fund American Re)~~WMU), "Esurance" ~~(consisting of the Esurance enterprise-wide results)~~ and "Other Operations" (consisting of White Mountains' investment in Montpelier warrants, the International American Group, the operations of the Company and its intermediate subsidiary holding companies).

White Mountains has made its segment determination based on consideration of the following criteria: (i) the nature of the business activities of each of the Company's subsidiaries and affiliates; (ii) the manner in which the Company's subsidiaries and affiliates are organized; (iii) the existence of primary managers responsible for specific subsidiaries and affiliates; and (iv) the organization of information provided to the Board of Directors. Significant intercompany transactions among White Mountains' segments have been eliminated herein. Certain amounts in the prior periods have been reclassified to conform with the current presentation. Financial information for White Mountains' segments follows:

Millions
OneBeacon
Reinsurance
Esurance
Other
Operations
Total
Three months ended March 31, 2004
Earned insurance and reinsurance premiums $ 591.7 $ 204.5 $ 35.7 $ — $ 831.9
Net investment income 51.4 11.5 .4 7.7 71.0
Net realized investment gains (losses) 67.7 3.7 .5 (10.1 ) 61.8
Other revenue (loss) 44.0 20.6 1.1 (7.3 ) 58.4

Total revenues 754.8 240.3 37.7 (9.7 ) 1,023.1

Loss and LAE 371.3 128.2 26.3 (2.5 ) 523.3
Insurance and reinsurance acquisition expenses 111.4 40.9 4.4 — 156.7
Other underwriting expenses 87.4 20.0 7.0 .5 114.9
General and administrative expenses 41.9 3.2 — 36.6 81.7
Accretion of fair value adjustment to loss and LAE reserves — — — 10.1 10.1
Interest expense on debt .1 .5 — 10.7 11.3
Interest expense on preferred stock subject to mandatory redemption — — — 11.5 11.5

Total expenses 612.1 192.8 37.7 66.9 909.5

Pretax income (loss) $ 142.7 $ 47.5 $ — $ (76.6 ) $ 113.6

Millions
OneBeacon
Reinsurance
Esurance
Other
Operations
Total
Three months ended March 31, 2003
Earned insurance and reinsurance premiums $ 569.1 $ 207.3 $ 18.7 $ 7.9 $ 803.0
Net investment income 63.6 13.0 1.1 .9 78.6
Net realized investment gains (losses) 57.5 1.7 .3 (1.3 ) 58.2
Other revenue 5.7 19.6 .5 3.9 29.7

Total revenues 695.9 241.6 20.6 11.4 969.5

Loss and LAE 367.7 133.4 15.7 5.8 522.6
Insurance and reinsurance acquisition expenses 105.0 47.4 4.5 1.0 157.9
Other underwriting expenses 78.5 13.8 4.8 2.5 99.6
General and administrative expenses 6.9 2.9 — 5.8 15.6
Accretion of fair value adjustment to loss and LAE reserves — — — 14.2 14.2
Interest expense on debt — .5 — 13.1 13.6

Total expenses 558.1 198.0 25.0 42.4 823.5

Pretax income (loss) $ 137.8 $ 43.6 $ (4.4 ) $ (31.0 ) $ 146.0

Millions	OneBeacon		WMRe		Esurance			Other Operations			Total
Three months ended June 30, 2004
Earned insurance and reinsurance premiums	$	602.7	$	353.0	$	41.4		$	.1		$	997.2
Net investment income		58.0		30.1		.9			4.2			93.2
Net realized investment gains (losses)		3.2		8.7		(.1	)		(17.4	)		(5.6	)
Other revenue		19.9		12.8		1.4			1.3			35.4

Total revenues		683.8		404.6		43.6			(11.8	)		1,120.2

Loss and LAE		367.0		221.8		31.1			3.5			623.4
Insurance and reinsurance acquisition expenses		105.0		72.8		6.2			—			184.0
Other underwriting expenses		98.9		30.9		7.1			.3			137.2
General and administrative expenses		17.4		3.3		—			21.6			42.3
Accretion of fair value adjustment to loss and LAE reserves		—		2.7		—			10.1			12.8
Interest expense on debt		.3		1.2		—			10.6			12.1
Interest expense on preferred stock subject to mandatory redemption		—		—		—			11.8			11.8

Total expenses		588.6		332.7		44.4			57.9			1,023.6

Pretax income (loss)	$	95.2	$	71.9	$	(.8	)	$	(69.7	)	$	96.6

Millions	OneBeacon		WMRe		Esurance			Other Operations			Total
Six months ended June 30, 2004
Earned insurance and reinsurance premiums	$	1,194.4	$	557.5	$	77.1		$	.1		$	1,829.1
Net investment income		109.4		41.6		1.3			11.9			164.2
Net realized investment gains (losses)		70.9		12.4		.4			(27.5	)		56.2
Other revenue (loss)		63.9		33.4		2.5			(6.0	)		93.8

Total revenues		1,438.6		644.9		81.3			(21.5	)		2,143.3

Loss and LAE		738.3		350.0		57.4			1.0			1,146.7
Insurance and reinsurance acquisition expenses		216.4		113.7		10.6			—			340.7
Other underwriting expenses		186.3		50.9		14.1			.8			252.1
General and administrative expenses		59.3		6.5		—			58.2			124.0
Accretion of fair value adjustment to loss and LAE reserves		—		2.7		—			20.2			22.9
Interest expense on debt		.4		1.7		—			21.3			23.4
Interest expense on preferred stock subject to mandatory redemption		—		—		—			23.3			23.3

Total expenses		1,200.7		525.5		82.1			124.8			1,933.1

Pretax income (loss)	$	237.9	$	119.4	$	(.8	)	$	(146.3	)	$	210.2

Selected Balance Sheet Data
OneBeacon
Reinsurance
Esurance
Other Operations
Total
March 31, 2004
Total investments $ 5,867.3 $ 2,416.4 $ 25.7 $ 754.1 $ 9,063.5
Reinsurance recoverable on paid and unpaid losses 3,046.6 910.9 — (274.7 ) 3,682.8
Total assets 10,442.6 4,271.6 240.2 542.4 15,496.8
Loss and LAE reserves 6,161.3 2,200.2 50.2 (355.9 ) 8,055.8
Total liabilities 8,086.2 3,165.3 253.8 810.9 12,316.2
Total equity 2,356.4 1,106.3 (13.6 ) (268.5 ) 3,180.6

December 31, 2003
Total investments $ 5,530.5 $ 2,089.4 $ 54.9 $ 872.7 $ 8,547.5
Reinsurance recoverable on paid and unpaid losses 3,068.6 791.5 — (264.6 ) 3,595.5
Total assets 10,316.5 3,701.2 252.0 701.3 14,971.0
Loss and LAE reserves 6,259.9 1,781.4 36.3 (349.4 ) 7,728.2
Total liabilities 8,110.6 2,596.8 269.6 1,014.8 11,991.8
Total equity 2,205.9 1,104.4 (17.6 ) (313.5 ) 2,979.2

Millions	OneBeacon		WMRe		Esurance			Other Operations			Total
Three months ended June 30, 2003
Earned insurance and reinsurance premiums	$	537.8	$	187.5	$	22.7		$	7.2		$	755.2
Net investment income		55.5		12.8		.3			4.4			73.0
Net realized investment gains		71.8		12.1		.2			5.9			90.0
Other revenue (loss)		26.5		17.8		.6			(.7	)		44.2

Total revenues		691.6		230.2		23.8			16.8			962.4

Loss and LAE		366.0		120.6		19.1			5.7			511.4
Insurance and reinsurance acquisition expenses		97.9		46.7		3.5			.8			148.9
Other underwriting expenses		65.5		12.7		6.0			2.7			86.9
General and administrative expenses		26.1		2.6		—			35.7			64.4
Accretion of fair value adjustment to loss and LAE reserves		—		—		—			14.2			14.2
Interest expense on debt		—		.5		—			12.0			12.5

Total expenses		555.5		183.1		28.6			71.1			838.3

Pretax income (loss)	$	136.1	$	47.1	$	(4.8	)	$	(54.3	)	$	124.1

Millions	OneBeacon		WMRe		Esurance			Other Operations			Total
Six months ended June 30, 2003
Earned insurance and reinsurance premiums	$	1,106.9	$	394.8	$	41.4		$	15.1		$	1,558.2
Net investment income		120.0		25.7		.6			5.3			151.6
Net realized investment gains		129.3		13.8		.5			4.6			148.2
Other revenue		32.2		37.4		1.1			3.2			73.9

Total revenues		1,388.4		471.7		43.6			28.2			1,931.9

Loss and LAE		733.7		254.0		34.8			11.5			1,034.0
Insurance and reinsurance acquisition expenses		202.9		94.1		8.0			1.8			306.8
Other underwriting expenses		144.0		26.5		10.8			5.2			186.5
General and administrative expenses		33.0		5.5		—			41.5			80.0
Accretion of fair value adjustment to loss and LAE reserves		—		—		—			28.4			28.4
Interest expense on debt		—		1.0		—			25.1			26.1

Total expenses		1,113.6		381.1		53.6			113.5			1,661.8

Pretax income (loss)	$	274.8	$	90.6	$	(10.0	)	$	(85.3	)	$	270.1

Note 9. ~~Stock-Based~~Share-Based Compensation

White Mountains' share-based compensation plans, consisting primarily of performance shares with limited use of incentive stock options to acquire Common Shares ("Options") and restricted Common Share awards ("Restricted Shares"), are designed to maximize shareholder value over long periods of time by aligning the financial interests of its management with those of its owners. Performance shares are payable upon achievement of pre-defined business goals and are valued based on the market value of Common Shares at the time awards are earned. Performance shares are typically paid in cash, though they may be paid in Common Shares at the election of the Board of Directors.

White Mountains expenses all its share-based compensation, including its outstanding Options, and accounts for these obligations under the recognition and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations, including FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Options or Award ~~Plans~~Plans" ("FIN 28"). White Mountains recorded compensation charges of ~~$59.4~~$23.5 million and ~~$16.2~~$82.9 million for outstanding performance shares during the three and six months ended ~~March 31,~~June 30, 2004, respectively and $56.3 million and $72.5 million for outstanding performance shares during the three and six months ended June 30, 2003, respectively. Compensation expense charged to earnings for Restricted Shares was ~~$.3~~$.6 million and ~~$3.2~~$.9 million for the three and six months ended ~~March 31,~~June 30, 2004, respectively and $2.3 million and $5.4 million for the three and six months ended June 30, 2003, respectively.

In 2000, the Company issued a one-time award of 81,000 Options to nine key employees. The Options were issued at an exercise price equal to the market value of the underlying Common Shares on February 27, 2000 (the grant date). The exercise price escalates on a straight-line basis by 6% per annum over the ten-year life of the Options. As a result, the Company accounts for the outstanding Options as variable options under FIN 28, with compensation expense charged to earnings over the service period based on the intrinsic value of the underlying Common Shares. Compensation expense charged against earnings for Options was ~~$2.8~~$(.2) million and ~~$1.3~~$2.6 million for the three and six months ended ~~March 31,~~June 30, 2004, respectively and $2.5 million and $3.7 million for the three and six months ended June 30, 2003, respectively. At ~~March 31,~~June 30, 2004, the Company had 49,965 Options outstanding (6,765 of which were exercisable) with a weighted average exercise price of ~~$134.74~~$136.75 per Common Share. During the ~~three~~six months ended ~~March 31,~~June 30, 2004, 600 Options were exercised at an average exercise price of $133.16 per Common Share.

White Mountains has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") with respect to its outstanding Options and Restricted Shares. The following table illustrates the pro forma effect on net income and earnings per share for each period indicated as if the Company applied the fair value recognition provisions of SFAS 123 to its employee Option incentive compensation program. The effects of Restricted Share and performance share expense are not included below because the accounting treatment that the Company follows under APB 25 is identical to the fair value accounting prescribed by SFAS 123 for these instruments.

		Three Months Ended March 31,						Three months ended June 30,						Six months ended June 30,
		2004			2003			Three months ended June 30,						Six months ended June 30,
		Millions, except per share amounts
Net income, as reported		$	95.5		$	102.1
Millions, except per share amounts							Millions, except per share amounts		Three months ended June 30,						Six months ended June 30,
Millions, except per share amounts							Millions, except per share amounts		Three months ended June 30,						Six months ended June 30,
Net income as reported							Net income as reported	$	168.5		$	84.4		$	264.0		$	186.5
	Add: Option expense included in reported net income		2.8			1.3	Add: Option expense included in reported net income		(.2	)		2.5			2.6			3.7
	Deduct: Option expense determined under fair value based method		(.1	)		—	Deduct: Option expense determined under fair value based method		(.1	)		(.1	)		(.1	)		(.1	)

Net income, pro forma	Net income, pro forma	$	98.2		$	103.4	Net income, pro forma	$	168.2		$	86.8		$	266.5		$	190.1

Earnings per share:	Earnings per share:						Earnings per share:
	Basic—as reported	$	10.59		$	10.94	Basic—as reported	$	18.59		$	5.38		$	29.20		$	16.21
	Basic—pro forma		10.90			11.09	Basic—pro forma		18.56			5.66			29.48			16.64
	Diluted—as reported		9.36			9.92	Diluted—as reported		16.45			4.77			25.93			14.56
	Diluted—pro forma		9.64			10.05	Diluted—pro forma		16.45			5.02			26.17			14.95

Note 10. Common Shares, Mandatorily Redeemable Preferred Stock and Convertible Preference Shares

Common Shares issued

~~During~~On June 29, 2004, Berkshire exercised all of its warrants to purchase 1,724,200 Common Shares of White Mountains for $294 million. As a result, Berkshire now holds approximately 16.0% of White Mountains' outstanding common stock. Berkshire bought the warrants in connection with the financing of White Mountains' acquisition of OneBeacon in 2001. The warrants were exercisable at any time until May 2008 and callable by the Company on or after May 31, 2005. Berkshire and the Company agreed to reduce the exercise price by approximately 2%.

In addition to the Berkshire warrant exercise, during the first ~~quarter~~six months of 2004, the Company issued a total of 38,372 Common Shares, which consisted of 27,772 shares issued to the OneBeacon employee stock ownership plan, 10,000 Restricted Shares issued to key management personnel, and 600 shares issued in satisfaction of Options exercised.

Mandatorily Redeemable Preferred Stock

In July 2003, White Mountains adopted the provisions of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150") and it subsequently adopted FASB Staff Position No. 150-3 ("FSP 150-3") in November 2003. SFAS 150, among other things, required an issuer of mandatorily redeemable financial instruments to classify such instruments as a liability and to initially measure the liability at its fair value. In addition, all future dividends paid to holders of those instruments, as well as any accretion related to those instruments, are to be reflected as interest cost. FSP 150-3 was released by the FASB in November 2003 and it indefinitely deferred the fair value measurement provisions of SFAS 150 for certain mandatorily redeemable noncontrolling interests. However, the presentation provisions of SFAS 150 are still applicable to those instruments.

White Mountains has two classes of mandatorily redeemable preferred stock of subsidiaries, which were previously classified as minority interests, that fall within the scope of SFAS 150 and are considered noncontrolling interests under FSP 150-3. Upon adoption of SFAS 150 in 2003, White Mountains reclassified these instruments from mezzanine equity to liabilities at their historical carrying

values. During the ~~first quarter of~~three and six months ended June 30, 2004, ~~$11.5~~$11.8 million and $23.3 million of dividends and accretion on White Mountains' mandatorily redeemable preferred stock have been recorded as interest expense.

Convertible Preference Shares

In October of 2002, White Mountains sold $200.0 million of its equity securities in a private transaction. Investment funds managed by Franklin Mutual Advisers, LLC purchased 677,966 convertible preference shares of the Company at a price of $200.0 million ($295.00 per share). Upon shareholder approval at the Company's Annual Meeting held on May 19, 2003, the convertible preference shares were repurchased and cancelled in consideration of 677,966 Common Shares. Because the redemption value of the convertible preference shares was in excess of the cash received upon their issuance, they were required to be marked-to-market until the date they were converted to shareholders' equity, resulting in a cumulative $68.5 million charge to retained earnings ($~~11.5~~49.5 million of which was recognized during the ~~three~~six months ended ~~March 31,~~June 30, 2003), with an offsetting increase to paid-in surplus.

Note 11. Variable Interest Entities

New Jersey Skylands

As part of a restructuring of its New Jersey personal lines, OneBeacon formed New Jersey Skylands Management LLC and the New Jersey Insurance Department approved the formation of New Jersey Skylands Insurance Association and its wholly owned subsidiary New Jersey Skylands Insurance Company (together, the "Association") during the third quarter of 2002. New Jersey Skylands Insurance Association (the "NJ Skylands Reciprocal"), is a not-for-profit, policyholder-owned reciprocal insurance carrier. A reciprocal is an unincorporated association with each insured sharing risk with the others in the association. Thus, each participant in this pool is both an insurer and an insured. Policyholders share profits and losses in the same proportion as the amount of insurance purchased by that member. However, policyholders in the reciprocal are not subject to assessment for losses of the reciprocal.

An attorney-in-fact administers the reciprocal. Such administration entails paying losses, investing premium inflow, recruiting new members, underwriting new and renewal business, receiving premiums and exchanging reinsurance contracts. New Jersey Skylands Management LLC is the attorney-in-fact for all the business affairs of the NJ Skylands Reciprocal. Accordingly, New Jersey Skylands Insurance Company, the stock insurance company, has a management agreement with New Jersey Skylands Management LLC to manage its business affairs.

The NJ Skylands Reciprocal was capitalized by OneBeacon with a $31.25 million surplus note. Principal and interest on the surplus note are repayable only with regulatory approval. As defined in the surplus note agreement, the NJ Skylands Reciprocal's obligation to pay principal under the surplus note agreement is subordinated to all liabilities and obligations to policyholders, to claimants for benefits under contracts of insurance it issued, to all other classes of creditors other than surplus note holders, and to the State of New Jersey and any governmental or quasi-governmental entity. The Association began writing personal automobile coverage for new customers in August 2002.

OneBeacon has no ownership interest in the Association. As a result of its adoption of FIN 46, White Mountains' future economic income derived from the New Jersey automobile insurance market will differ from the operating results that it will record on a consolidated GAAP basis. On an economic basis, OneBeacon will realize income from management and service fees charged by New Jersey Skylands Management Corporation to the Association and interest on the surplus note. On a

consolidated GAAP basis, White Mountains will recognize profits from the insurance operations of the Association until such time that the Association's equity is greater than zero or losses until the accumulated losses in the Association exceed OneBeacon's initial surplus note investment.

White Mountains has determined that the Association qualifies as a VIE under the provisions of FIN 46. Upon adoption of FIN 46 on March 31, 2004, White Mountains consolidated the Association, which had total assets and total liabilities with a carrying value of $138.5 million and $111.6 million, respectively. The resulting $26.9 million difference between the carrying values of the total assets and liabilities of the Association was equal to the March 31, 2004 carrying value of the surplus note investment at OneBeacon. Therefore, the adoption of FIN 46 did not have an effect on the Company's financial condition. The Company's economic exposure to the New Jersey auto market remains limited to the surplus notes invested in the reciprocal.

Note 12. Consolidating Financial Information

The Company has fully and unconditionally guaranteed Fund American's May 2003 issuance of the Senior Notes (see Note 6) and may fully and unconditionally guarantee any debt securities or trust preferred securities issued by Fund American's subsidiaries pursuant to its July 2003 shelf registration statement. The following tables present White Mountains' consolidating balance sheets as of ~~March 31,~~June 30, 2004 and December 31, 2003, ~~and~~ statements of income for the three and six months ended June 30, 2004 and 2003 and cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2004 and 2003. These financial statements reflect the Company's financial position, results of operations and cash flows on a stand-alone basis, that of Fund American and of the Company's other entities, as well as the necessary adjustments to eliminate intercompany balances and transactions.

		(Dollars in Millions)													(Dollars in Millions)
Consolidating Balance Sheet as of March 31, 2004		The Company		Other Entities			Fund American		Eliminations			Total
Consolidating Balance Sheet as of June 30, 2004														Consolidating Balance Sheet as of June 30, 2004	The Company		Other Entities		Fund American		Eliminations			Total
ASSETS	ASSETS													ASSETS
Fixed maturity investments, at fair value	Fixed maturity investments, at fair value	$	—	$	66.6		$	6,812.5	$	—		$	6,879.1	Fixed maturity investments, at fair value	$	—	$	957.9	$	6,552.2	$	—		$	7,510.1
Short-term investments, at amortized cost	Short-term investments, at amortized cost		22.1		378.9			623.9		—			1,024.9	Short-term investments, at amortized cost		301.7		635.2		528.0		—			1,464.9
Common equity securities, at fair value	Common equity securities, at fair value		—		—			779.9		—			779.9	Common equity securities, at fair value		—		84.9		802.1		—			887.0
Other investments	Other investments		—		232.3			147.3		—			379.6	Other investments		—		292.5		154.7		—			447.2

	Total investments		22.1		677.8			8,363.6					9,063.5	Total investments		301.7		1,970.5		8,037.0		—			10,309.2
Cash	Cash		—		33.1			84.1		—			117.2	Cash		.2		3.9		88.4		—			92.5
Reinsurance recoverable on paid and unpaid losses	Reinsurance recoverable on paid and unpaid losses		—		8.3			3,674.5		—			3,682.8	Reinsurance recoverable on paid and unpaid losses		—		172.8		3,723.4		—			3,896.2
Insurance and reinsurance premiums receivable	Insurance and reinsurance premiums receivable		—		42.6			884.2		—			926.8	Insurance and reinsurance premiums receivable		—		113.9		849.7		—			963.6
Funds held by ceding companies														Funds held by ceding companies		—		760.7		192.4		—			953.1
Deferred acquisition costs	Deferred acquisition costs		—		3.9			264.5		—			268.4	Deferred acquisition costs		—		41.2		296.8		—			338.0
Deferred tax asset	Deferred tax asset		—		(2.0	)		350.9		(105.6	)		243.3	Deferred tax asset		—		19.5		361.6		(132.9	)		248.2
Ceded unearned premiums	Ceded unearned premiums		—		2.2			196.1		—			198.3	Ceded unearned premiums		—		52.9		152.8		—			205.7
Investments in unconsolidated insurance affiliate(s)	Investments in unconsolidated insurance affiliate(s)		—		—			152.7		—			152.7	Investments in unconsolidated insurance affiliate(s)		—		—		151.6		—			151.6
Investment income accrued	Investment income accrued		—		2.4			73.2		—			75.6	Investment income accrued		—		16.4		77.5		—			93.9
Accounts receivable on unsettled investment sales	Accounts receivable on unsettled investment sales		—		—			59.5		—			59.5	Accounts receivable on unsettled investment sales		—		—		76.7		—			76.7
Investments in subsidiaries	Investments in subsidiaries		3,220.5		—			—		(3,220.5	)		—	Investments in subsidiaries		3,313.5		—		—		(3,313.5	)		—
Other assets	Other assets		5.0		85.2			618.5		—			708.7	Other assets		3.2		118.5		473.5		—			595.2

	Total assets	$	3,247.6	$	853.5		$	14,721.8	$	(3,326.1	)	$	15,496.8
Total assets														Total assets	$	3,618.6	$	3,270.3	$	14,481.4	$	(3,446.4	)	$	17,923.9

LIABILITIES AND COMMON SHAREHOLDERS' EQUITY	LIABILITIES AND COMMON SHAREHOLDERS' EQUITY													LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Loss and LAE reserves	Loss and LAE reserves	$	—	$	71.8		$	7,984.0	$	—		$	8,055.8	Loss and LAE reserves	$	—	$	1,445.7	$	7,883.4	$	—		$	9,329.1
Unearned insurance and reinsurance premiums	Unearned insurance and reinsurance premiums		—		25.6			1,545.9		—			1,571.5	Unearned insurance and reinsurance premiums		—		223.9		1,600.6		—			1,824.5
Debt														Debt		—		4.6		819.7		—			824.3
Reserve for structured contracts														Reserve for structured contracts		—		401.0		—		—			401.0
Deferred tax liability														Deferred tax liability		—		425.7		—		(132.9	)		292.8
Funds held under reinsurance treaties														Funds held under reinsurance treaties		—		18.3		169.2		—			187.5
Ceded reinsurance payable														Ceded reinsurance payable		—		2.5		121.6		—			124.1
Accounts payable on unsettled investment purchases	Accounts payable on unsettled investment purchases		—		—			103.1		—			103.1	Accounts payable on unsettled investment purchases		—		—		67.2		—			67.2
Debt			—		12.6			812.2		—			824.8
Funds held under reinsurance treaties			—		—			172.3		—			172.3
Other liabilities	Other liabilities		67.0		379.1			1,049.7		(105.6	)		1,390.2	Other liabilities		105.4		227.2		824.9		—			1,157.5
Preferred stock subject to mandatory redemption	Preferred stock subject to mandatory redemption		—		20.0			178.5		—			198.5	Preferred stock subject to mandatory redemption		—		20.0		182.7		—			202.7

	Total liabilities		67.0		509.1			11,845.7		(105.6	)		12,316.2	Total liabilities		105.4		2,768.9		11,669.3		(132.9	)		14,410.7

Common shareholders' equity	Common shareholders' equity	$	3,180.6	$	344.4		$	2,876.1	$	(3,220.5	)	$	3,180.6	Common shareholders' equity		3,513.2		501.4		2,812.1		(3,313.5	)		3,513.2

Total liabilities and common shareholders' equity	Total liabilities and common shareholders' equity	$	3,247.6	$	853.5		$	14,721.8	$	(3,326.1	)	$	15,496.8	Total liabilities and common shareholders' equity	$	3,618.6	$	3,270.3	$	14,481.4	$	(3,446.4	)	$	17,923.9

Consolidating Balance Sheet as of December 31, 2003	Consolidating Balance Sheet as of December 31, 2003	The Company		Other Entities			Fund American		Eliminations			Total		Consolidating Balance Sheet as of December 31, 2003	The Company		Other Entities			Fund American		Eliminations			Total
		(in millions)													(Dollars in Millions)
ASSETS	ASSETS													ASSETS
Fixed maturity investments, at fair value	Fixed maturity investments, at fair value	$	—	$	71.0		$	6,177.1	$	—		$	6,248.1	Fixed maturity investments, at fair value	$	—	$	71.0		$	6,177.1	$	—		$	6,248.1
Short-term investments, at amortized cost	Short-term investments, at amortized cost		11.1		682.2			854.6		(1.3	)		1,546.6	Short-term investments, at amortized cost		11.1		682.2			854.6		(1.3	)		1,546.6
Common equity securities, at fair value	Common equity securities, at fair value		—		—			513.6		—			513.6	Common equity securities, at fair value		—		—			513.6		—			513.6
Other investments	Other investments		—		89.9			149.3		—			239.2	Other investments		—		89.9			149.3		—			239.2

	Total investments		11.1		843.1			7,694.6		(1.3	)		8,547.5	Total investments		11.1		843.1			7,694.6		(1.3	)		8,547.5
Cash	Cash		.3		27.1			62.5		—			89.9	Cash		.3		27.1			62.5		—			89.9
Reinsurance recoverable on paid and unpaid losses	Reinsurance recoverable on paid and unpaid losses		—		8.8			3,586.7		—			3,595.5	Reinsurance recoverable on paid and unpaid losses		—		8.8			3,586.7		—			3,595.5
Insurance and reinsurance premiums receivable														Insurance and reinsurance premiums receivable		—		44.6			744.4		(10.0	)		779.0
Funds held by ceding companies														Funds held by ceding companies		—		5.9			138.2		—			144.1
Deferred acquisition costs														Deferred acquisition costs		—		3.6			230.0		—			233.6
Deferred tax asset														Deferred tax asset		—		(8.2	)		361.6		(93.4	)		260.0
Ceded unearned premiums														Ceded unearned premiums		—		.9			184.4		—			185.3
Investments in unconsolidated insurance affiliates														Investments in unconsolidated insurance affiliates		—		90.5			425.4		—			515.9
Investment income accrued														Investment income accrued		—		—			73.0		—			73.0
Accounts receivable on unsettled investment sales	Accounts receivable on unsettled investment sales		—		—			9.1		—			9.1	Accounts receivable on unsettled investment sales		—		—			9.1		—			9.1
Insurance and reinsurance premiums receivable			—		44.6			744.4		(10.0	)		779.0
Investments in unconsolidated insurance affiliates			—		90.5			425.4		—			515.9
Deferred tax asset			—		(8.2	)		361.6		(93.4	)		260.0
Deferred acquisition costs			—		3.6			230.0		—			233.6
Ceded unearned premiums			—		.9			184.4		—			185.3
Investment income accrued			—		—			73.0		—			73.0
Investments in subsidiaries	Investments in subsidiaries		3,021.0		—			—		(3,021.0	)		—	Investments in subsidiaries		3,021.0		—			—		(3,021.0	)		—
Other assets	Other assets		5.0		86.8			616.1		(25.7	)		682.2	Other assets		5.0		80.9			477.9		(25.7	)		538.1

	Total assets	$	3,037.4	$	1,097.2		$	13,987.8	$	(3,151.4	)	$	14,971.0	Total assets	$	3,037.4	$	1,097.2		$	13,987.8	$	(3,151.4	)	$	14,971.0

LIABILITIES AND COMMON SHAREHOLDERS' EQUITY	LIABILITIES AND COMMON SHAREHOLDERS' EQUITY													LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Loss and LAE reserves	Loss and LAE reserves	$	—	$	75.9		$	7,652.3	$	—		$	7,728.2	Loss and LAE reserves	$	—	$	75.9		$	7,652.3	$	—		$	7,728.2
Unearned insurance and reinsurance premiums	Unearned insurance and reinsurance premiums		—		23.3			1,386.1		—			1,409.4	Unearned insurance and reinsurance premiums		—		23.3			1,386.1		—			1,409.4
Accounts payable on unsettled investment purchases			—		302.0			69.6		—			371.6
Debt	Debt		—		12.9			730.1		—			743.0	Debt		—		12.9			730.1		—			743.0
Funds held under reinsurance treaties	Funds held under reinsurance treaties		—		—			211.9		—			211.9	Funds held under reinsurance treaties		—		—			211.9		—			211.9
Ceded reinsurance payable														Ceded reinsurance payable		—		—			127.7		—			127.7
Accounts payable on unsettled investment purchases														Accounts payable on unsettled investment purchases		—		302.0			69.6		—			371.6
Other liabilities	Other liabilities		58.2		318.8			1,086.6		(130.4	)		1,333.2	Other liabilities		58.2		318.8			958.9		(130.4	)		1,205.5
Preferred stock subject to mandatory redemption	Preferred stock subject to mandatory redemption		—		20.0			174.5		—			194.5	Preferred stock subject to mandatory redemption		—		20.0			174.5		—			194.5

	Total liabilities		58.2		752.9			11,311.1		(130.4	)		11,991.8	Total liabilities		58.2		752.9			11,311.1		(130.4	)		11,991.8

Common shareholders' equity	Common shareholders' equity	$	2,979.2	$	344.3		$	2,676.7	$	(3,021.0	)	$	2,979.2	Common shareholders' equity	$	2,979.2	$	344.3		$	2,676.7	$	(3,021.0	)	$	2,979.2

Total liabilities common shareholders' equity	Total liabilities common shareholders' equity	$	3,037.4	$	1,097.2		$	13,987.8	$	(3,151.4	)	$	14,971.0	Total liabilities common shareholders' equity	$	3,037.4	$	1,097.2		$	13,987.8	$	(3,151.4	)	$	14,971.0

Consolidating Statement of Income Three Months Ended March 31, 2004
The Company
Other Entities
Fund American
Eliminations
Total

(Dollars in Millions)

Earned insurance and reinsurance premiums $ — $ 19.9 $ 812.0 $ — $ 831.9
Net investment income — 4.2 66.8 — 71.0
Net realized investment losses — (9.0 ) 70.8 — 61.8
Other revenue (loss) — 11.5 50.2 (3.3 ) 58.4

Total revenues — 26.6 999.8 (3.3 ) 1,023.1

Loss and LAE — 12.6 510.7 — 523.3
Insurance and reinsurance acquisition expenses — 4.8 155.2 (3.3 ) 156.7
Other underwriting expenses — .2 114.7 — 114.9
General and administrative expenses 15.4 3.3 63.0 — 81.7
Accretion of fair value adjustment to loss and LAE reserves — — 10.1 — 10.1
Interest expense — .1 11.2 — 11.3
Interest expense on preferred shares — .5 11.0 — 11.5

Total expenses 15.4 21.5 875.9 (3.3 ) 909.5

Pretax income (loss) (15.4 ) 5.1 123.9 — 113.6
Income tax benefit (provision) — 1.2 (46.1 ) — (44.9 )
Equity in earnings of subsidiaries 110.9 577.9 — (688.8 ) —
Equity in earnings of unconsolidated insurance affiliates — — 18.2 — 18.2
Excess of fair value of acquired net assets over cost — — 8.6 — 8.6

Net income (loss) $ 95.5 $ 584.2 $ 104.6 $ (688.8 ) $ 95.5

Consolidating Statement of Income Three Months Ended March 31, 2003
The Company
Other Entities
Fund American
Eliminations
Total

(Dollars in Millions)

Earned insurance and reinsurance premiums $ — $ 17.8 $ 785.2 $ — $ 803.0
Net investment income .1 1.0 77.5 — 78.6
Net realized investment gains (1.1 ) 1.5 57.8 — 58.2
Other revenue (loss) (.7 ) 23.8 6.6 — 29.7

Total revenues (1.7 ) 44.1 927.1 — 969.5

Loss and LAE — 12.5 510.1 — 522.6
Insurance and reinsurance acquisition expenses — 4.3 154.6 (1.0 ) 157.9
Other underwriting expenses — 1.2 97.4 1.0 99.6
General and administrative expenses 6.0 3.0 6.6 — 15.6
Accretion of fair value adjustment to loss and LAE reserves — — 14.2 — 14.2
Interest expense .1 — 13.5 — 13.6
Interest expense on preferred shares — — — — —

Total expenses 6.1 21.0 796.4 — 823.5

Pretax income (7.8 ) 23.1 130.7 — 146.0
Income tax provision (1.2 ) (.3 ) (44.6 ) — (46.1 )
Accretion and dividends on preferred stock of subsidiaries — (.5 ) (10.2 ) — (10.7 )
Equity in earnings of subsidiaries 111.1 445.9 — (557.0 ) —
Equity in earnings of unconsolidated insurance affiliates — — 12.9 — 12.9

Net income (loss) $ 102.1 $ 468.2 $ 88.8 $ (557.0 ) $ 102.1

Consolidating Statement of Income Three Months Ended June 30, 2004		The Company			Other Entities			Fund American			Eliminations			Total
		(Dollars in Millions)
Earned insurance and reinsurance premiums		$	—		$	164.3		$	832.9		$	—		$	997.2
Net investment income			—			15.1			78.1			—			93.2
Net realized investment losses			—			(10.6	)		5.0			—			(5.6	)
Other revenue			—			15.8			22.7			(3.1	)		35.4

	Total revenues		—			184.6			938.7			(3.1	)		1,120.2

Loss and LAE			—			98.7			524.7			—			623.4
Insurance and reinsurance acquisition expenses			—			38.2			148.9			(3.1	)		184.0
Other underwriting expenses			—			17.5			119.7			—			137.2
General and administrative expenses			7.5			4.1			30.7			—			42.3
Accretion of fair value adjustment to loss and LAE reserves			—			2.7			10.1			—			12.8
Interest expense			.1			—			12.0			—			12.1
Interest expense on preferred shares			—			.5			11.3			—			11.8

	Total expenses		7.6			161.7			857.4			(3.1	)		1,023.6

Pretax income (loss)			(7.6	)		22.9			81.3			—			96.6
Tax provision			(.1	)		(4.8	)		(39.5	)		—			(44.4	)
Equity in earnings of subsidiaries			176.2			—			—			(176.2	)		—
Equity in earnings of unconsolidated insurance affiliates			—			—			4.9			—			4.9
Excess of fair value of acquired net assets over cost			—			110.9			.5			—			111.4

Net income		$	168.5		$	129.0		$	47.2		$	(176.2	)	$	168.5

Consolidating Statement of Income Three Months Ended June 30, 2003		The Company			Other Entities			Fund American			Eliminations			Total
		(Dollars in Millions)
Earned insurance and reinsurance premiums		$	—		$	16.7		$	738.5		$	—		$	755.2
Net investment income			.1			.9			72.0			—			73.0
Net realized investment gains			—			10.9			79.1			—			90.0
Other revenue			.6			13.4			37.4			(7.2	)		44.2

	Total revenues		.7			41.9			927.0			(7.2	)		962.4

Loss and LAE			—			12.9			498.5			—			511.4
Insurance and reinsurance acquisition expenses			—			2.2			152.9			(6.2	)		148.9
Other underwriting expenses			—			1.3			86.6			(1.0	)		86.9
General and administrative expenses			25.6			2.7			36.1			—			64.4
Accretion of fair value adjustment to loss and LAE reserves			—			—			14.2			—			14.2
Interest expense			—			.1			12.4			—			12.5

	Total expenses		25.6			19.2			800.7			(7.2	)		838.3

Pretax income (loss)			(24.9	)		22.7			126.3			—			124.1
Tax benefit (provision)			1.2			(.1	)		(45.8	)		—			(44.7	)
Accretion and dividends on preferred stock of subsidiaries			—			(.5	)		(10.3	)		—			(10.8	)
Equity in earnings of subsidiaries			108.1			—			—			(108.1	)		—
Equity in earnings of unconsolidated insurance affiliates			—			—			15.8			—			15.8

Net income		$	84.4		$	22.1		$	86.0		$	(108.1	)	$	84.4

Consolidating Statement of Cash Flows
Three Months Ended March 31, 2004
The Company
Other Entities
Fund American
Total

(Dollars in Millions)

Cash flows from operations:
Net income (loss), excluding equity in earnings of subsidiaries $ (15.4 ) $ 6.3 $ 104.6 $ 95.5
Charges (credits) to reconcile net income to cash flows from operations:
Net realized investment losses (gains) — 9.0 (70.8 ) (61.8 )
Other operating items:
Net change in reinsurance recoverables on paid and unpaid losses — .5 86.1 86.6
Net change in loss and loss adjustment expense reserves — (3.4 ) (122.5 ) (125.9 )
Net change in insurance and reinsurance premiums receivable — 2.0 (119.8 ) (117.8 )
Net change in unearned insurance and reinsurance premiums — 2.6 120.4 123.0
Net change in deferred acquisition costs — — (30.0 ) (30.0 )
Net change in other assets and liabilities 21.9 43.1 (152.0 ) (87.0 )

Net cash flows provided from (used for) operations 6.5 60.1 (184.0 ) (117.4 )

Cash flows from investing activities:
Net (increase) decrease in short-term investments (11.0 ) 288.0 292.6 569.6
Sales of fixed maturity investments — 4.5 1,236.2 1,240.7
Maturities of fixed maturity investments — — 198.6 198.6
Sale of Montpelier common shares — — 155.3 155.3
Sales of common equity securities and other investments — — 81.5 81.5
Purchases of fixed maturity investments — — (1,656.7 ) (1,656.7 )
Purchases of common equity securities and other investments — (44.1 ) (89.5 ) (133.6 )
Net change in unsettled investment purchases and sales — (302.0 ) (2.9 ) (304.9 )
Net purchases and sales of consolidated affiliates — — (1.4 ) (1.4 )
Net acquisitions of fixed assets — — (1.0 ) (1.0 )

Net cash flows (used for) provided from investing activities (11.0 ) (53.6 ) 212.7 148.1

Cash flows from financing activities:
Cash dividends paid to common shareholders (9.1 ) — — (9.1 )
Cash dividends paid to preferred shareholders — (.5 ) (7.1 ) (7.6 )
Proceeds from issuance of Common Shares 13.3 — — 13.3

Net cash provided from (used for) financing activities 4.2 (.5 ) (7.1 ) (3.4 )

Net (decrease) increase in cash during period (.3 ) 6.0 21.6 27.3
Cash balances at beginning of period .3 27.1 62.5 89.9

Cash balances at end of period $ — $ 33.1 $ 84.1 $ 117.2

Consolidating Statement of Income Six Months Ended June 30, 2004		The Company			Other Entities			Fund American			Eliminations			Total
		(Dollars in Millions)
Earned insurance and reinsurance premiums		$	—		$	184.2		$	1,644.9		$	—		$	1,829.1
Net investment income			—			19.3			144.9			—			164.2
Net realized investment gains (losses)			—			(19.6	)		75.8			—			56.2
Other revenue			—			27.3			72.9			(6.4	)		93.8

	Total revenues		—			211.2			1,938.5			(6.4	)		2,143.3

Loss and LAE			—			111.3			1,035.4			—			1,146.7
Insurance and reinsurance acquisition expenses			—			43.0			304.1			(6.4	)		340.7
Other underwriting expenses			—			17.7			234.4			—			252.1
General and administrative expenses			22.9			7.4			93.7			—			124.0
Accretion of fair value adjustment to loss and LAE reserves			—			2.7			20.2			—			22.9
Interest expense			.1			.1			23.2			—			23.4
Interest expense on preferred shares			—			1.0			22.3			—			23.3

	Total expenses		23.0			183.2			1,733.3			(6.4	)		1,933.1

Pretax income (loss)			(23.0	)		28.0			205.2			—			210.2
Tax provision			(.1	)		(3.6	)		(85.6	)		—			(89.3	)
Equity in earnings of subsidiaries			287.1			—			—			(287.1	)		—
Equity in earnings of unconsolidated insurance affiliates			—			—			23.1			—			23.1
Excess of fair value of acquired net assets over cost			—			110.9			9.1			—			120.0

Net income		$	264.0		$	135.3		$	151.8		$	(287.1	)	$	264.0

Consolidating Statement of Income Six Months Ended June 30, 2003		The Company			Other Entities			Fund American			Eliminations			Total
		(Dollars in Millions)
Earned insurance and reinsurance premiums		$	—		$	34.5		$	1,523.7		$	—		$	1,558.2
Net investment income			.2			1.9			149.5			—			151.6
Net realized investment gains (losses)			(1.1	)		12.4			136.9			—			148.2
Other revenue (loss)			(.1	)		37.2			44.0			(7.2	)		73.9

	Total revenues		(1.0	)		86.0			1,854.1			(7.2	)		1,931.9

Loss and LAE			—			25.4			1,008.6			—			1,034.0
Insurance and reinsurance acquisition expenses			—			6.5			307.5			(7.2	)		306.8
Other underwriting expenses			—			2.5			184.0			—			186.5
General and administrative expenses			31.6			5.7			42.7			—			80.0
Accretion of fair value adjustment to loss and LAE reserves			—			—			28.4			—			28.4
Interest expense			.1			.1			25.9			—			26.1

	Total expenses		31.7			40.2			1,597.1			(7.2	)		1,661.8

Pretax income (loss)			(32.7	)		45.8			257.0			—			270.1
Tax provision			—			(.4	)		(90.4	)		—			(90.8	)
Accretion and dividends on preferred stock of subsidiaries			—			(1.0	)		(20.5	)		—			(21.5	)
Equity in earnings of subsidiaries			219.2			—			—			(219.2	)		—
Equity in earnings of unconsolidated insurance affiliates			—			—			28.7			—			28.7

Net income		$	186.5		$	44.4		$	174.8		$	(219.2	)	$	186.5

		(Dollars in Millions)													(Dollars in Millions)
Consolidating Statement of Cash Flows Three Months Ended March 31, 2003		The Company			Other Entities			Fund American			Total
Consolidating Statement of Cash Flows Six Months Ended June 30, 2004														Consolidating Statement of Cash Flows Six Months Ended June 30, 2004	The Company			Other Entities			Fund American			Total
Cash flows from operations:	Cash flows from operations:													Cash flows from operations:
	Net income (loss), excluding equity in earnings of subsidiaries	$	(9.0	)	$	22.3		$	88.8		$	102.1		Net income (loss), excluding equity in earnings of subsidiaries	$	(23.1	)	$	135.3		$	151.8		$	264.0
Charges (credits) to reconcile net income to cash flows from operations:	Charges (credits) to reconcile net income to cash flows from operations:													Charges (credits) to reconcile net income to cash flows from operations:
	Net realized losses (gains) on investments		1.1			(1.5	)		(57.8	)		(58.2	)	Excess of fair value of acquired net assets over cost		—			(110.9	)		(9.1	)		(120.0	)
														Deferred tax provision		—			(6.5	)		65.6			59.1
Net realized investment (gains) losses														Net realized investment (gains) losses		—			19.6			(75.8	)		(56.2	)
Other operating items:	Other operating items:													Other operating items:
	Net change in reinsurance recoverables on paid and unpaid losses		—			(3.8	)		211.2			207.4		Net change in reinsurance recoverables on paid and unpaid losses		—			122.2			172.3			294.5
	Net change in loss and loss adjustment expense reserves		—			5.9			(328.5	)		(322.6	)	Net change in loss and loss adjustment expense reserves		—			(269.6	)		(440.7	)		(710.3	)
	Net change in insurance and reinsurance premiums receivable		—			(3.4	)		17.0			13.6		Net change in insurance and reinsurance premiums receivable		—			23.1			(41.3	)		(18.2	)
	Net change in unearned insurance and reinsurance premiums		—			3.8			(17.3	)		(13.5	)	Net change in unearned insurance and reinsurance premiums		—			(12.9	)		80.9			68.0
	Net change in deferred acquisition costs		—			.4			—			.4		Net change in deferred acquisition costs		—			(13.3	)		(50.1	)		(63.4	)
	Net change in other assets and liabilities		39.1			7.9			(165.5	)		(118.5	)	Net change in funds held under reinsurance treaties		—			2.8			(55.4	)		(52.6	)
Net change in other assets and liabilities														Net change in other assets and liabilities		(28.6	)		(44.9	)		(106.8	)		(180.3	)

Net cash flows provided from (used for) operations			31.2			31.6			(252.1	)		(189.3	)
Net cash flows used for operations														Net cash flows used for operations		(51.7	)		(155.1	)		(308.6	)		(515.4	)

Cash flows from investing activities:	Cash flows from investing activities:													Cash flows from investing activities:
Net increase in short-term investments			(22.5	)		(3.4	)		(120.5	)		(146.4	)
Net (increase) decrease in short-term investments														Net (increase) decrease in short-term investments		(290.6	)		195.7			423.8			328.9
Sales of fixed maturity investments	Sales of fixed maturity investments		—			1.7			3,562.3			3,564.0		Sales of fixed maturity investments		—			588.4			3,483.1			4,071.5
Sales of common equity securities and other investments														Sales of common equity securities and other investments		—			266.2			138.8			405.0
Maturities of fixed maturity investments	Maturities of fixed maturity investments		—			—			137.7			137.7		Maturities of fixed maturity investments		—			7.7			305.7			313.4
Sales of common equity securities and other investments			—			—			55.3			55.3
Sale of Montpelier common shares														Sale of Montpelier common shares		—			—			155.3			155.3
Sale of consolidated affiliate, net of cash sold														Sale of consolidated affiliate, net of cash sold		—			—			22.1			22.1
Purchases of fixed maturity investments	Purchases of fixed maturity investments		—			—			(3,437.4	)		(3,437.4	)	Purchases of fixed maturity investments		—			(77.3	)		(3,822.2	)		(3,899.5	)
Purchases of consolidated affiliates, net of cash acquired														Purchases of consolidated affiliates, net of cash acquired		—			(358.8	)		(99.7	)		(458.5	)
Purchases of common equity securities and other investments	Purchases of common equity securities and other investments		—			—			(76.4	)		(76.4	)	Purchases of common equity securities and other investments		—			(199.7	)		(136.3	)		(336.0	)
Net change in unsettled investment purchases and sales	Net change in unsettled investment purchases and sales		—			—			117.4			117.4		Net change in unsettled investment purchases and sales		—			(302.2	)		(54.7	)		(356.9	)
Net acquisitions of property and equipment			—			—			(4.8	)		(4.8	)
Net acquisitions of fixed assets														Net acquisitions of fixed assets		—			(.2	)		(10.2	)		(10.4	)

Net cash flows (used for) provided from investing activities			(22.5	)		(1.7	)		233.6			209.4
Net cash flows provided from (used for) investing activities														Net cash flows provided from (used for) investing activities		(290.6	)		119.8			405.7			234.9

Cash flows from financing activities:	Cash flows from financing activities:													Cash flows from financing activities:
Repayments of debt			—			—			(6.5	)		(6.5	)
Intercompany dividends			—			5.0			(5.0	)		—
Intercompany dividends and transfers														Intercompany dividends and transfers		44.0			13.1			(57.1	)		—
Cash dividends paid to common shareholders	Cash dividends paid to common shareholders		(8.3	)		—			—			(8.3	)	Cash dividends paid to common shareholders		(9.1	)		—			—			(9.1	)
Cash dividends paid to preferred shareholders	Cash dividends paid to preferred shareholders		—			(.5	)		(7.1	)		(7.6	)	Cash dividends paid to preferred shareholders		—			(1.0	)		(14.1	)		(15.1	)
Proceeds from issuance of Common Shares	Proceeds from issuance of Common Shares		.7			—			—			.7		Proceeds from issuance of Common Shares		13.3			—			—			13.3
Proceeds from exercise of warrants to acquire Common Shares														Proceeds from exercise of warrants to acquire Common Shares		294.0			—			—			294.0

Net cash (used for) provided from financing activities			(7.6	)		4.5			(18.6	)		(21.7	)
Net cash provided from (used for) financing activities														Net cash provided from (used for) financing activities		342.2			12.1			(71.2	)		283.1

Net increase (decrease) in cash during period	Net increase (decrease) in cash during period		1.1			34.4			(37.1	)		(1.6	)	Net increase (decrease) in cash during period		(.1	)		(23.2	)		25.9			2.6
Cash balances at beginning of period	Cash balances at beginning of period		(.8	)		41.4			80.9			121.5		Cash balances at beginning of period		.3			27.1			62.5			89.9

Cash balances at end of period	Cash balances at end of period	$	.3		$	75.8		$	43.8		$	119.9		Cash balances at end of period	$	.2		$	3.9		$	88.4		$	92.5

Consolidating Statement of Cash Flows Six Months Ended June 30, 2003		The Company			Other Entities			Fund American			Total
		(Dollars in Millions)
Cash flows from operations:
Net income (loss), excluding equity in earnings of subsidiaries		$	(32.7	)	$	44.4		$	174.8		$	186.5
Charges (credits) to reconcile net income to cash flows from operations:
	Deferred tax provision (benefit)		—			(8.2	)		80.0			71.8
	Net realized losses (gains)		1.1			(12.4	)		(136.9	)		(148.2	)
Other operating items:
	Net change in reinsurance recoverables on paid and unpaid losses		—			(2.7	)		269.7			267.0
	Net change in loss and LAE reserves		—			(2.2	)		(586.6	)		(588.8	)
	Net change in insurance and reinsurance premiums receivable		—			(1.0	)		(9.5	)		(10.5	)
	Net change in unearned insurance and reinsurance premiums		—			9.7			(90.3	)		(80.6	)
	Net change in deferred acquisition costs		—			(1.4	)		7.0			5.6
	Net change in funds held under reinsurance treaties		—			—			(77.6	)		(77.6	)
	Net change in other assets and liabilities		35.6			6.1			2.7			44.4

Net cash flows provided from (used for) operations			4.0			32.3			(366.7	)		(330.4	)

Cash flows from investing activities:
Net decrease (increase) in short-term investments			4.6			(11.9	)		(399.1	)		(406.4	)
Sales of fixed maturity investments			—			6.0			13,869.5			13,875.5
Sales of common equity securities and other investments			—			—			68.5			68.5
Maturities of fixed maturity investments			—			—			538.5			538.5
Purchases of fixed maturity investments			—			—			(14,239.2	)		(14,239.2	)
Purchases of common equity securities and other investments			(.1	)		—			(195.7	)		(195.8	)
Net change in unsettled investment purchases and sales			—			—			785.9			785.9
Net acquisitions of capital assets			—			—			(12.1	)		(12.1	)

Net cash flows provided from (used for) investing activities			4.5			(5.9	)		416.3			414.9

Cash flows from financing activities:
Issuances of debt			—			—			693.4			693.4
Repayments of debt			—			—			(739.9	)		(739.9	)
Intercompany dividends and transfers			—			(20.2	)		20.2			—
Cash dividends paid to common shareholders			(8.3	)		—			—			(8.3	)
Cash dividends paid to preferred shareholders			—			(1.0	)		(14.1	)		(15.1	)
Proceeds from issuance of Common Shares			.8			—			—			.8

Net cash used for financing activities			(7.5	)		(21.2	)		(40.4	)		(69.1	)

Net increase in cash during period			1.0			5.2			9.2			15.4
Cash balances at beginning of period			(.8	)		41.4			80.9			121.5

Cash balances at end of period		$	.2		$	46.6		$	90.1		$	136.9

Note 13. Retirement and Postretirement Plans

The components of net periodic benefit costs for the three and six months ended ~~March 31,~~June 30, 2004 and 2003 were as follows:

Pension Benefits
Other Postretirement Benefits

Three Months Ended March 31,

2004
2003
2004
2003

Millions

Service cost $ 0.3 $ — $ — $ —
Interest cost 6.7 .5 1.0 —
Expected return on plan assets (7.6 ) — — —
Amortization of prior service benefit — — (1.0 ) —
Amortization of unrecognized loss — — .2 —

Net periodic pension cost before settlements, curtailments and special termination benefits (.6 ) .5 .2 —
Special termination benefits expense .7 — — —

Net periodic pension cost $ .1 $ .5 $ .2 $ —

	Three Months Ended June 30,
Millions	Three Months Ended June 30,
Millions	2004			2003			2004			2003
	Pension Benefits						Other Postretirement Benefits
Service cost	$	.3		$	.5		$	—		$	—
Interest cost		6.7			7.6			1.0			—
Expected return on plan assets		(7.6	)		(7.6	)		—			—
Amortization of prior service benefit		—			—			(1.0	)		—
Amortization of unrecognized loss		—			—			.2			—

Net periodic pension cost before settlements, curtailments and special termination benefits		(.6	)		.5			.2			—
Special termination benefits expense		.3			—			—			—

Net periodic pension cost	$	(.3	)	$	.5		$	.2		$	—

	Six Months Ended June 30,
Millions	Six Months Ended June 30,
Millions	2004			2003			2004			2003
	Pension Benefits						Other Postretirement Benefits
Service cost	$	.5		$	.9		$	.1		$	—
Interest cost		13.4			15.2			2.0			—
Expected return on plan assets		(15.1	)		(15.2	)		—			—
Amortization of prior service benefit		—			—			(2.1	)		—
Amortization of unrecognized loss		—			—			.3			—

Net periodic pension cost before settlements, curtailments and special termination benefits		(1.2	)		.9			.3			—
Special termination benefits expense		1.0			—			—			—

Net periodic pension cost	$	(.2	)	$	.9		$	.3		$	—

At December 31, 2003, the Company expected to contribute $5.1 million to its pension plans and $9.0 million to its other postretirement plans during 2004. As of ~~March 31,~~June 30, 2004, ~~$1.3~~$2.0 million and ~~$2.0~~$3.4 million were contributed to the pensions plans and other ~~postretirment~~postretirement plans. The Company anticipates contributing an additional ~~$3.7~~$3.0 million and ~~$6.2~~$4.8 million to the pension plans and other postretirement plans for the remainder of 2004.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "Medicare Act") made significant changes to the federal Medicare Program that will impact OneBeacon's retiree medical obligations. OneBeacon ~~has decided~~expects to ~~defer recognition of~~recognize the effects of the Medicare Act ~~until further~~during the third quarter of 2004 in response to the recently issued FASB ~~guidance is available, which could require changing previously reported information.~~Staff Position No. 106-2 entitled "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." OneBeacon anticipates that the provisions of the Medicare Act, once recognized, will reduce its retiree medical benefit obligation as the Medicare Act provides for increased coverage for prescription drugs. OneBeacon does not believe that it will need to amend its retiree medical plan to realize these benefits. The impact of the recognition of benefits provided for under Medicare Act is expected to be immaterial to White Mountains' consolidated financial position.

~~Note 14. Subsequent Event~~

On April 16, 2004, White Mountains completed its acquisition of the Sirius Insurance Group from ABB Ltd for SEK3.33 billion ($435.5 million). The total tangible shareholder's equity value of the acquired companies as of December 31, 2003 was SEK3.665 billion. The principal Sirius International Group companies are Sirius International Insurance Corporation ("Sirius International"), Sirius America Insurance Company ("Sirius America") and Scandinavian Reinsurance Company Ltd. ("Scandinavian Re"). Stockholm-based Sirius International is the largest reinsurance company in Scandinavia and has offices in Stockholm, London, Hamburg, Zurich, Belgium, and Singapore. The Sirius Insurance Group wrote over $500 million in net premiums in 2003. The company focuses mainly on property and other short-tailed lines and no longer writes financial insurance products. Sirius America, a U.S.-based insurer focused on primary insurance programs since 2000, wrote $104 million of net premiums in 2003. Scandinavian Re is a Bermuda-based finite reinsurer that is in runoff.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains "forward-looking statements". White Mountains intends statements which are not historical in nature, and 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' actual results could be materially different from and worse than its expectations. See "Forward-Looking Statements" for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2004 AND 2003

Overview

White Mountains ended the ~~first~~second quarter of 2004 with a fully converted tangible book value per Common Share of ~~$309.39, which represents an increase of 6%~~$313, up 12% over the ~~$291.27 as of~~last twelve months, up 8% since December 31, 2003 and ~~16% over the $266.96 as of~~up 1% since March 31, ~~2003.~~2004, including dividends.

Comprehensive net income for the quarter ~~more than doubled~~was $38 million compared to ~~$194.1 million from $91.9~~$163 million in the ~~first~~second quarter of 2003. The ~~Company continued~~decline was mainly due to ~~have~~$139 million of after-tax unrealized losses on the fixed income portfolio due to a rise in interest rates, compared to after-tax unrealized gains of $76 million in 2003. In addition, pre-tax realized losses were $6 million in the second quarter of 2004 compared to $90 million of pre-tax realized gains in the second quarter of last year. These realized and unrealized losses were more than offset by strong ~~operating performance from its insurance~~underwriting results and ~~reinsurance subsidiaries~~the gain on the Sirius Acquisition reflected in net income. For the first six months of 2004, comprehensive net income was $233 million compared to $254 million in the comparable period last year.

Net income for the quarter nearly doubled to $169 million, as the company had strong underwriting results and ~~experienced strong investment results during~~recorded a $111 million after-tax extraordinary gain on the ~~quarter.~~Sirius Acquisition. Net income for the first six months of 2004 was $264 million, up 42% compared to $187 million last year, again driven by the Sirius Acquisition gain.

OneBeacon produced ~~strong~~solid underwriting results in the ~~first~~second quarter of 2004, with a GAAP combined ratio of 95% compared to 98% for the second quarter of 2003. For the first six months of 2004, OneBeacon's combined ratio was 96% compared to ~~97%~~98% in the comparable period of 2003. Net written premiums grew 26% and 33% for the ~~first~~ quarter ~~of 2003,~~ and ~~added significant value through~~year-to-date, respectively. The growth in premiums was driven by the Atlantic Specialty Transaction. Premium writings from historically unprofitable run-off business have ceased with the expiration of the Liberty Mutual Insurance Group ("Liberty Mutual") quota share agreement in October 2003 (the "Liberty Agreement"). Net written premiums are now growing rapidly with the addition of the Atlantic Mutual commercial business, along with 25% growth from existing specialty operations, primarily from AutoOne Insurance and OneBeacon Professional Partners. OneBeacon's specialty lines continue to provide excellent underwriting performance, with a combined ratio of 78% in the first quarter of 2004, compared to 84% in the 2003 period.transaction.

White Mountains' reinsurance ~~businesses~~operations, which now include Sirius, Folksamerica, and White Mountains Underwriting, also performed well in the quarter, ~~as Folksamerica produced strong underwriting results and WMU continued~~with a combined ratio of 92%, compared to ~~contribute, earning $17.3 million~~96% for the second quarter of ~~third party fee income in~~2003. For the ~~quarter.~~first six months of 2004, the combined ratio was also 92%, versus 95% for the comparable period of 2003. Net written premiums ~~from reinsurance operations declined 14% as compared to~~more than doubled in the ~~first~~ quarter, ~~of 2003,~~primarily reflecting the non-renewal of several large treaties due to unacceptable terms. This decrease was partially offset by an increase in business generated from the CNA Re renewal rights transaction which closed in October 2003. Folksamerica closed the Sierra Group acquisition at the endimpact of the ~~quarter. This "exit-visa" transaction resulted in an $8.6 million extraordinary gain recognized during the quarter.~~

~~The~~ Sirius Insurance Group acquisition, which closed on April 16, 2004, will significantly expand White Mountains' international presence, most notably in Western Europe. White Mountains recently announced the formation of White Mountains Re Group, Ltd. ("White Mountains Re"), a Bermuda-based holding company, and the appointment of Steven Fass as its President and CEO to manage global reinsurance operations. White Mountains Re will combine Folksamerica, Fund American Re and WMU with the newly acquired Sirius Insurance Group to form a cohesive, global reinsurance organization. White Mountains' reinsurance operations now have combined regulatory capital of approximately $2 billion and over $2 billion in gross premiums.Acquisition.

Esurance ~~reached the~~reported results just below break-even ~~profitability point~~ in the ~~first~~ quarter, ~~and increased~~while increasing its net written premium ~~writings~~volume by ~~84%~~72% over the 2003 ~~first~~second quarter. ~~In addition,~~ Esurance ~~expects to continue entering new states~~is now actively pursuing business in 15 states. The combined ratio for Esurance has improved significantly over the ~~near future. Management expects Esurance to achieve substantial growth in earnings and premiums in the coming years. White Mountains has modified its segment presentation to include~~

~~Esurance, its internet-based insurance business, as a new segment to reflect the growing significance of that business, as well as its separate and distinct operation.~~

Investments continue to add significant value both in absolute and relative terms and contributed significantly to White Mountains' comprehensive net income for the quarter. The GAAP total return on invested assetspast year, running at 107% for the quarter ~~was 3.3%, including White Mountains' investment~~compared to 126% in ~~Montpelier. Excluding Montpelier,~~ the ~~total return on invested assets was 2.1%. White Mountains sold a portion~~second quarter of its common stock investment in Montpelier during the quarter resulting in a $35.2 million pre-tax realized gain, and changed the method of accounting for its remaining Montpelier common stock to the fair value method, resulting in a $32.5 million increase in after-tax unrealized gains. The bond market rallied during2003. For the first ~~quarter~~six months of 2004, ~~which gave a lift~~Esurance's combined ratio was 106% compared to ~~White Mountains' investment results. However,~~130% in ~~April, rates moved up sharply as~~ the ~~first signs~~comparable period of inflation started to show. Management expects interest rates to continue to rise over the next few years and, therefore, continues to keep White Mountains' fixed maturity portfolio duration short at about 3 years.2003.

Set forth below is a reconciliation of White Mountains' fully converted tangible book value per common and equivalent share as of June 30, 2004, March 31, 2004, December 31, 2003 and ~~March 31,~~June 30, 2003:

March 31, 2004
Dec. 31, 2003
March 31, 2003

(millions)

Book value per share numerators:
Common shareholders' equity $ 3,180.6 $ 2,979.2 $ 2,485.2
Proceeds from assumed exercise of outstanding Warrants 300.0 300.0 300.0
Assumed conversion of convertible preference shares to Common Shares — — 230.5
Benefits to be received from share obligations under employee benefit plans 8.6 7.0 7.6
Remaining adjustment of subsidiary preferred stock to face value (121.5 ) (125.5 ) (136.0 )

Book value per share numerator 3,367.7 3,160.7 2,887.3
Unamortized deferred credits and goodwill (20.1 ) (20.3 ) —

Fully converted tangible book value per common and equivalent share numerator $ 3,347.6 $ 3,140.4 $ 2,887.3

Book value per share denominators:

(thousands)

Common Shares outstanding 9,045.5 9,007.2 8,351.4
Common Shares issuable upon exercise of outstanding Warrants 1,724.2 1,724.2 1,714.3
Assumed conversion of convertible preference shares to Common Shares — — 678.0
Share obligations under employee benefit plans 50.0 50.6 61.9

Fully converted tangible book value per common and equivalent share denominator 10,819.7 10,782.0 10,805.6

Book value per share $ 311.25 $ 293.15 $ 262.08
Fully converted tangible book value per common and equivalent share 309.39 291.27 266.96

		June 30, 2004			March 31, 2004			Dec. 31, 2003			June 30, 2003
		(millions)
Book value per share numerators:
Common shareholders' equity		$	3,513.2		$	3,180.6		$	2,979.2		$	2,869.3
	Proceeds from assumed exercise of outstanding warrants		—			300.0			300.0			300.0
	Benefits to be received from share obligations under employee benefit plans		8.4			8.6			7.0			7.5
	Remaining adjustment of subsidiary preferred stock to face value		(117.3	)		(121.5	)		(125.5	)		(132.7	)

Book value per share numerator			3,404.3			3,367.7			3,160.7			3,044.1
	Unamortized goodwill		(19.7	)		(20.1	)		(20.3	)		(15.7	)

Fully converted tangible book value per common and equivalent share numerator		$	3,384.6		$	3,347.6		$	3,140.4		$	3,028.4

Book value per share denominators:			(thousands)
Common Shares outstanding			10,769.4			9,045.5			9,007.2			9,002.4
	Common Shares issuable upon exercise of outstanding warrants		—			1,724.2			1,724.2			1,724.2
	Share obligations under employee benefit plans		50.0			50.0			50.6			55.4

Fully converted tangible book value per common and equivalent share denominator			10,819.4			10,819.7			10,782.0			10,782.0

Book value per share		$	314.65		$	311.25		$	293.15		$	282.33
Fully converted tangible book value per common and equivalent share			312.82			309.39			291.27			280.88

Book value per share is derived by dividing the Company's total GAAP shareholders' equity as of a given date by the number of Common Shares outstanding as of that date, including the dilutive effects of outstanding Options and Warrants, as well as the unamortized accretion of preferred stock. Fully converted tangible book value per share is derived by expanding the book value per share calculation to include ~~(i) the effects of assumed conversion of all convertible securities and (ii)~~ any remaining unamortized goodwill ~~or deferred credits~~ as of the applicable date. White Mountains' management believes that the growth in ~~the Company's~~ fully converted tangible book value per common share represents ~~the most relevant~~a measure of ~~the~~ value created at the Company over ~~time.~~time that is more relevant than traditional GAAP measurements.

Recent Developments

~~During the first quarter of~~ Sirius. On April 16, 2004, ~~and into the early second quarter,~~ White Mountains ~~has closed three major transactions~~completed its acquisition of Sirius from ABB Ltd. for SEK 3.27 billion (approximately $427.5 million based upon the foreign exchange spot rate at the date of acquisition). Sirius wrote over $500 million in net premiums in 2003. The company focuses mainly on property and ~~entered into~~other short-tailed lines and no longer writes financial insurance products. Sirius America, a ~~fourth.~~U.S.-based insurer focused on primary insurance programs since 2000 which was acquired by Folksamerica as part of the transaction, wrote over $100 million of net premiums in 2003. Scandinavian Re, a Bermuda-based finite reinsurer, is in runoff.

Safeco Life. During the first quarter of 2004, White Mountains announced that it is leading, with Berkshire, an investor group to acquire Safeco Life for $1.35 billion. Safeco Life focuses mainly on group insurance, individual life insurance, structured settlements and retirement ~~services and mutual funds.~~services. This acquisition closed on August 2, 2004, with White Mountains and Berkshire ~~will~~ each ~~invest~~investing $200 million and ~~receive~~receiving warrants to purchase additional common shares of a newly formed acquisition company. On a fully converted basis, White Mountains and Berkshire ~~will~~ each own approximately 24% of the new company. ~~White Mountains expects this acquisition to close in the third quarter of 2004.~~

~~Sirius Insurance Group.~~Berkshire warrants. On ~~April 16,~~June 29, 2004, ~~White Mountains completed its acquisition~~Berkshire exercised of the Sirius Insurance Group from ABB Ltd for SEK3.33 billion ($435.5 million). The total tangible shareholder's equity value of the acquired companies as of December 31, 2003 was approximately SEK3.67 billion. The Sirius Insurance Group wrote over $500 million in net premiums in 2003. The company focuses mainly on property and other short-tailed lines and no longer writes financial insurance products. Sirius America, a U.S.-based insurer focused on primary insurance programs since 2000, wrote over $100 million of net premiums in 2003. Scandinavian Re is a Bermuda-based finite reinsurer that is in runoff.

~~Atlantic Specialty.~~ On March 31, 2004, OneBeacon completed its acquisition of Atlantic Specialty and acquired the renewal rights to Atlantic Mutual's commercial insurance business, including the unearned premiums on the acquired book of business. This business was underwritten by Atlantic Mutual on a segmented basis by industry class, providing commercial multiple peril coverages as well as workers compensation, automobile and general liability coverages to the technology industry, wholesalers, metal workers, food processors, printers, professional services and financial institutions. In 2003, the overall gross written premium for this book of renewal business was approximately $400 million. OneBeacon will pay Atlantic Mutual a one-year renewal commission on the premiums renewed.

~~Sierra Group.~~ On March 31, 2004, Folksamerica completed its acquisition of the Sierra Group from Sierra Health Services, Inc. Folksamerica paid $76.2 million for the Sierra Group, which included $14.2 million in cash and a $62.0 million purchase note, of which $58.0 million will be adjusted over its six-year term to reflect favorable or adverse loss reserve development on the acquired reserve portfolio and runoff of remaining policies in force (mainly workers compensation business) as well as certain other balance sheet protections. The acquired companies' net assets at the time of the close were $84.8 million, including $270.3 million of investments, $174.4 million of reinsurance balances recoverable, $406.9 million of loss and loss adjustment expense reserves and $25.1 million of unearned premium. The acquisition resulted in an $8.6 million extraordinary gain.

~~Folksamerica has placed the Sierra Group companies into runoff and~~ all of ~~the acquired companies' runoff administration was transferred to third party administrators working under Folksamerica's direction.~~

~~Changes in Presentation~~

~~During the first quarter of 2004, White Mountains sold 4.5 million common shares of Montpelier and purchased an additional 2.4 million~~its warrants to ~~buy common shares of Montpelier. The net effect was to reduce White Mountains' fully diluted ownership to 18%. Based on this ownership level and a reduced number~~purchase 1,724,200 Common Shares of White Mountains ~~representatives on~~for $294 million. As a result, Berkshire now holds approximately 16% of White Mountains outstanding common stock. Berkshire bought the ~~Montpelier Board~~warrants in connection with the financing of ~~Directors,~~White Mountains' acquisition of OneBeacon in 2001. Berkshire and the Company ~~changed~~agreed to reduce the ~~method~~exercise price by approximately 2%. As a result of ~~accounting for its remaining common share investment in Montpelier from~~ the ~~equity method to~~discount, the ~~fair~~exercise of the warrants had a small impact on fully converted tangible book value ~~method.~~per share.

White Mountains adopted FIN 46 in the first quarter of 2004, which required, beginning as of March 31, 2004, White Mountains to consolidate the financials of New Jersey Skylands Insurance Association, a policyholder owned reciprocal, and its wholly owned subsidiary, New Jersey Skylands Insurance Company (together, the "Association"). FIN 46 was adopted prospectively. Accordingly, the Association's balance sheet has been consolidated as of March 31, 2004, and the results of the Association will be included in the OneBeacon segment for periods ending after March 31, 2004.

In addition, AutoOne Insurance is now included in the Specialty sub-segment of OneBeacon, which better captures the nature of that business, as well as its separate and distinct operation from the Personal Lines business, where it had previously been presented.

As previously mentioned, White Mountains has included Esurance as a new segment this quarter. The Esurance enterprise-wide results included in this segment include the results of its internet-based management company as well as the underwriting results of business generated through Esurance and underwritten by OneBeacon and Folksamerica.

Review of Consolidated Results

The Company continued to have strong operating performance from its insurance and reinsurance subsidiaries. In addition, the following items positively impacted comprehensive net income for the first quarter of 2004:

•: ~~$35.2 million in pre-tax realized gains from the sale of a portion of the White Mountains' common share investment in Montpelier.~~
•: $32.5 million increase in after-tax unrealized gains related in the change in the White Mountains' accounting for its remaining investment in Montpelier common shares from the equity method to fair value accounting under FAS 115.
•: ~~$66.1 million increase in after-tax unrealized gains on investments, excluding the Montpelier common stock.~~

A summary of White Mountains' consolidated financial results follows:

	Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003				2004			2003			2004			2003
	Millions							(millions)
Gross written premiums	$	1,109.0		$	947.6		Gross written premiums	$	1,299.6		$	880.0		$	2,406.5		$	1,827.6

Net written premiums	$	939.2		$	762.1		Net written premiums	$	1,071.9		$	716.1		$	2,011.2		$	1,478.2

Earned insurance and reinsurance premiums	$	831.9		$	803.0		Earned insurance and reinsurance premiums	$	997.2		$	755.2		$	1,829.1		$	1,558.2
Net investment income		71.0			78.6		Net investment income		93.2			73.0			164.2			151.6
Net realized investment gains		61.8			58.2
Net realized investment gains (losses)							Net realized investment gains (losses)		(5.6	)		90.0			56.2			148.2
Other revenue		58.4			29.7		Other revenue		35.4			44.2			93.8			73.9

Total revenues		1,023.1			969.5
							Total revenues		1,120.2			962.4			2,143.3			1,931.9

Loss and LAE		523.3			522.6		Loss and LAE		623.4			511.4			1,146.7			1,034.0
Insurance and reinsurance acquisition expenses		156.7			157.9		Insurance and reinsurance acquisition expenses		184.0			148.9			340.7			306.8
Other underwriting expenses		114.9			99.6		Other underwriting expenses		137.2			86.9			252.1			186.5
General and administrative expenses		81.7			15.6		General and administrative expenses		42.3			64.4			124.0			80.0
Accretion of fair value adjustment to loss and LAE reserves		10.1			14.2		Accretion of fair value adjustment to loss and LAE reserves		12.8			14.2			22.9			28.4
Interest expense on debt		11.3			13.6		Interest expense on debt		12.1			12.5			23.4			26.1
Interest expense—dividends and accretion on preferred stock subject to mandatory redemption		11.5			—
Interest expense — dividends and accretion on preferred stock subject to mandatory redemption							Interest expense — dividends and accretion on preferred stock subject to mandatory redemption		11.8			—			23.3			—

Total expenses		909.5			823.5
							Total expenses		1,023.6			838.3			1,933.1			1,661.8
Pretax income		113.6			146.0

							Pretax income		96.6			124.1			210.2			270.1
Tax provision		(44.9	)		(46.1	)	Tax provision		(44.4	)		(44.7	)		(89.3	)		(90.8	)
Accretion and dividends on mandatorily redeemable preferred stock		—			(10.7	)	Accretion and dividends on mandatorily redeemable preferred stock		—			(10.8	)		—			(21.5	)
Equity in earnings of unconsolidated insurance affiliates		18.2			12.9
Equity in earnings of unconsolidated insurance affiliate(s)							Equity in earnings of unconsolidated insurance affiliate(s)		4.9			15.8			23.1			28.7

Net income before extraordinary item		86.9			102.1
Excess of fair value of acquired new assets over cost		8.6			—
							Net income before extraordinary item		57.1			84.4			144.0			186.5
Net income		95.5			102.1
Excess of fair value of acquired net assets over cost							Excess of fair value of acquired net assets over cost		111.4			—			120.0			—

							Net income		168.5			84.4			264.0			186.5
Other comprehensive income (loss)		98.6			(10.2	)	Other comprehensive income (loss)		(130.1	)		78.1			(31.5	)		67.9

Comprehensive net income	$	194.1		$	91.9
							Comprehensive net income	$	38.4		$	162.5		$	232.5		$	254.4

White Mountains' total revenues increased by 6%16% for the ~~three~~three-month period ended June 30, 2004 compared to the same period in 2003. Growth in revenues was driven by the 32% increase in earned premiums due to the Sirius and Atlantic Specialty transactions. This was partially offset by a $96 million decrease in realized investment gains. Net investment income grew 28% in the quarter primarily due to the income earned on the additional invested assets acquired in the Sirius transaction. Total expenses grew 22% for the quarter as loss, acquisition, and underwriting expenses were all up primary due to the Sirius and Atlantic Specialty transactions.

White Mountains' total revenues increased by 11% for the six month period ended ~~March 31,~~June 30, 2004 compared to the same period in 2003, ~~principally from increased revenues at OneBeacon from earned premiums generated by Atlantic Specialty and fee revenues generated by New Jersey Skylands Management LLC. Total~~while total expenses increased by ~~10%~~16% for the ~~three~~six months ended ~~March 31,~~June 30, 2004 as compared to the prior ~~year due primarily to an increase in incentive compensation expense~~year. Each of these increases was driven by the Sirius Acquisition and ~~from~~ the ~~inclusion of dividends and accretion on preferred stock in interest expense in 2004 as a result of the Company's adoption of SFAS 150.~~Atlantic Specialty transaction.

Summary of Operations by Segment

White Mountains conducts its operations through four segments: ~~(i)~~(I) "OneBeacon" ~~(consisting of the operations of OneBeacon excluding business generated by Esurance)~~, (ii) ~~"Reinsurance"~~"White Mountains Re" (consisting primarily of the operations of Folksamerica, ~~(excluding business generated by Esurance), WMU~~Sirius, and ~~Fund American Re)~~WMU), (iii) "Esurance" ~~(consisting of the Esurance enterprise-wide results)~~ and (iv) "Other Operations" (consisting of the operations of the Company and its intermediate subsidiary holding companies, White Mountains' investment in Montpelier warrants and the results of the International

American Group). White Mountains manages all of its investments through its wholly owned subsidiary, White Mountains Advisors LLC ("WM Advisors"), therefore, a discussion of White Mountains' consolidated investment operations is included after the discussion of operations by segment.

I. OneBeacon

OneBeacon's pre-tax income for the first quarter of 2004 was $142.7 million, compared to pre-tax income of $137.8 million for the first quarter of 2003. The GAAP combined ratio was 96% for the first quarter of 2004 compared to 97% for the first quarter of 2003. The loss ratio improved by 2 points to 63% as underwriting results continue to be solid. Net unfavorable development on prior accident year reserves was modest at $6.3 million as favorable development in OneBeacon's ongoing businesses—specialty, personal and commercial—was offset by adverse development in the run-off business. Net written premiums for the first quarter of 2004 were $690.9 million, up 40% from $493.8 million in the first quarter of last year. The acquisition of Atlantic Specialty and the renewal rights to the commercial book of Atlantic Mutual added $203 million in net written premiums in the 2004 first quarter, $135 million of which was from the addition of unearned premiums at closing. OneBeacon's specialty, personal and commercial businesses all experienced growth in written premiums during the current quarter. The loss ratio for each ongoing business improved from the first quarter of 2003 to the first quarter of 2004.

Financial results for OneBeacon for the three and six months ended June 30, 2004 and 2003 were as follows:

Three Months Ended March 31,

2004
2003

Millions

Gross written premiums $ 705.2 $ 568.9

Net written premiums $ 690.9 $ 493.8

Earned insurance and reinsurance premiums $ 591.7 $ 569.1
Net investment income 51.4 63.6
Net realized investment gains 67.7 57.5
Other revenue 44.0 5.7

Total revenues 754.8 695.9

Loss and loss adjustment expenses 371.3 367.7
Insurance and reinsurance acquisition expenses 111.4 105.0
Other underwriting expenses 87.4 78.5
General and administrative expenses 41.9 6.9
Interest expense on debt .1 —

Total expenses 612.1 558.1

Pretax income $ 142.7 $ 137.8

OneBeacon's total revenues increased by 8% for the three months ended March 31, 2004 primarily due to a $38.3 million increase in other revenues, a $22.6 million increase in earned premiums and a $10.2 million increase in net realized investment gains. The increase in earned premiums was due primarily to continued growth in AutoOne Insurance, OneBeacon Professional Partners ("OBPP") and International Marine Underwriters ("IMU"), three of OneBeacon's specialty businesses, and as a result of the Atlantic Specialty Transaction. This growth in earned premiums was partially offset by reduced earned premiums in personal lines and also a $73.9 million decline in earned premiums from run-off operations as a result of the expiration of the renewal rights agreement with Liberty Mutual. Net realized investment gains for the three months ended March 31, 2004 includes $35.2 million from the sale of 4.5 million shares of Montpelier. Total revenues for the three months ended March 31, 2004

~~were also impacted by a $12.2 million decrease in net investment income due to the continued run-off of loss reserves, as well as reduced interest rates.~~

Total expenses increased by 10% for the three months ended March 31, 2004, as compared to the three months ended March 31, 2003. Other underwriting expenses increased 11% compared to the three months ended March 31, 2003, mainly due to incentive compensation expense. A $7.9 million release of the New York assigned risk liability mitigated the other underwriting expense increase in 2004.

Other revenue and general and administrative expenses for the three months ended March 31, 2004 increased significantly due mainly to certain consolidated limited partnership income and fee revenue generated by New Jersey Skylands Management LLC and the corresponding expenses associated with these businesses.

		Three Months Ended June 30,				Six Months Ended June 30,
		2004		2003		2004		2003
		(millions)
Gross written premiums		$	658.1	$	519.8	$	1,363.3	$	1,088.7

Net written premiums		$	612.6	$	484.7	$	1,303.5	$	978.5

Earned insurance and reinsurance premiums		$	602.7	$	537.8	$	1,194.4	$	1,106.9
Net investment income			58.0		55.5		109.4		120.0
Net realized investment gains			3.2		71.8		70.9		129.3
Other revenue			19.9		26.5		63.9		32.2

Total revenues			683.8		691.6		1,438.6		1,388.4

Loss and loss adjustment expenses			367.0		366.0		738.3		733.7
Insurance and reinsurance acquisition expenses			105.0		97.9		216.4		202.9
Other underwriting expenses			98.9		65.5		186.3		144.0
General and administrative expenses			17.4		26.1		59.3		33.0
Interest expense on debt			.3		—		.4		—

	Total expenses		588.6		555.5		1,200.7		1,113.6

	Pretax income	$	95.2	$	136.1	$	237.9	$	274.8

The following tables provide GAAP ratios, net written premiums and earned insurance premiums for OneBeacon's ongoing operations and in total for the three and six months ended ~~March 31,~~June 30, 2004 and 2003 (dollars in millions):

Three Months Ended March 31, 2004

GAAP Ratios
Net Premiums

Loss
Expense
Combined
Written
Earned
Specialty 48 % 30 % 78 % $ 213.3 $ 210.8
Personal 65 32 97 160.3 169.2
Commercial 62 39 101 316.5 179.4

Total ongoing 58 % 33 % 91 % $ 690.1 $ 559.4

Total(1) 63 % 33 % 96 % $ 690.9 $ 591.7

Three Months Ended March 31, 2003

GAAP Ratios
Net Premiums

Loss
Expense
Combined
Written
Earned
Specialty 52 % 32 % 84 % $ 171.3 $ 160.9
Personal 69 30 99 157.6 192.9
Commercial 63 37 100 120.5 109.1

Total ongoing 62 % 32 % 94 % $ 449.4 $ 462.9

Total (1) 65 % 32 % 97 % $ 493.8 $ 569.1

GAAP Ratios
Net Premiums
GAAP Ratios
Net Premiums

Loss
Expense
Combined
Written
Earned
Loss
Expense
Combined
Written
Earned

Three Months Ended June 30, 2004
Three Months Ended June 30, 2003
Specialty 56 % 28 % 84 % $ 206.9 $ 202.2 53 % 33 % 86 % $ 157.7 $ 168.4
Personal 54 34 88 182.5 171.9 70 26 96 174.7 186.1
Commercial 55 43 98 192.3 179.5 65 31 96 111.9 106.0
Total(1) 61 % 34 % 95 % $ 612.6 $ 602.7 68 % 30 % 98 % $ 484.7 $ 537.8

Six Months Ended June 30, 2004

Six Months Ended June 30, 2003
Specialty 52 % 29 % 81 % $ 420.2 $ 413.0 53 % 33 % 86 % $ 329.0 $ 329.3
Personal 60 32 92 342.8 341.1 69 28 97 332.3 379.0
Commercial 58 41 99 508.8 358.9 64 34 98 232.4 215.1
Total(1) 62 % 34 % 96 % $ 1,303.5 $ 1,194.4 66 % 32 % 98 % $ 978.5 $ 1,106.9

(1): Includes results from run-off ~~operations.~~

operations and New Jersey Skylands Insurance Association.

OneBeacon Results—Three Months Ended June 30, 2004 versus Three Months Ended June 30, 2003

Overview

OneBeacon's pre-tax income for the second quarter of 2004 was $95 million, compared to pre-tax income of $136 million for the second quarter of 2003. The key driver of the decrease was significantly lower realized gains as operating results continue to be solid. The GAAP combined ratio was 95% for the second quarter of 2004 compared to 98% for the second quarter of 2003. Net written premiums for the second quarter of 2004 were $613 million, up 26% from $485 million in the second quarter of last year, primarily driven by the Atlantic Specialty Transaction. In addition, OneBeacon's specialty businesses had significant growth.

Specialty Lines. OneBeacon's specialty businesses focus on providing custom coverages to certain niche markets, including AutoOne Insurance, our wholly owned Limited Assigned Distribution servicing carrier, ocean marine (offered through IMU), agricultural ("Agri"), and rural and farm related markets (offered through National Farmers Union, "NFU"), medical errors and omissions ~~and directors and officers liability~~ (offered through OBPP) and other specialty products, such as tuition reimbursement. Additionally, during the second quarter of 2004, OneBeacon entered into the excess and surplus lines property business. Each specialty business has its own operations and distribution channel that target specific customer groups.

The underwriting performance of the specialty lines continued to be excellent, with the combined ratio for these businesses running at 84% in the second quarter of 2004. During the three months ended ~~March 31,~~June 30, 2004, OneBeacon wrote specialty lines premiums of ~~$213.3~~$207 million, ~~representing~~ a ~~25%~~31% increase as compared to ~~$171.3~~$158 million written during the three months ended ~~March 31,~~June 30, 2003. This increase was mainly due to a ~~60%~~68% increase at AutoOne Insurance, from ~~$43.3~~$41 million for the three months ended ~~March 31,~~June 30, 2003 to ~~$69.3~~$69 million in the 2004 period, due primarily to successful marketing efforts relating to AutoOne Insurance's takeout business ~~under the~~

~~New York Automobile Insurance Plan's credit programs~~ and also AutoOne Insurance's expansion into ~~writing policies in the~~ New Jersey Personal Automobile Insurance Plan. Written premiums from IMU for the three months ended March 31, 2004 increased 19% over the 2003 period to $28.0 million. Written premiums from Agri declined to $20.8 millionLimited Assigned Distribution and growth in the first quarter of 2004, a decrease of 13% as compared to the three months ended March 31, 2003, resulting from an exit from several states. Specialty lines written premium also included $50.3 million from NFU, a decrease of 9% in written premium from the three months ended March 31, 2003. This decrease at NFU was due in part to a decline in new business which was partially offset by stronger retentionOBPP and rate and rate pursuit. Written premiums for the three months ended March 31, 2004 included $38.0 million from OBPP, compared to $20.3 million in the first quarter of 2003. Written premiums from other specialty products were relatively flat with that for the comparable 2003 period.IMU.

Personal Lines. OneBeacon's personal lines principally include automobile, homeowners and Custom-Pac products (Custom-Pac products are combination policies offering home and automobile coverage with optional umbrella, boatowners and other coverages). OneBeacon's mix of personal lines products between automobile and homeowners, including Custom-Pac products, was ~~71%~~69% and ~~22%~~26%, respectively, of personal lines net written premium during the three months ended ~~March 31,~~June 30, 2004, compared with ~~75%~~64% and ~~21%~~31% for the three months ended ~~March 31,~~June 30, 2003. OneBeacon writes the majority of its personal lines business in New York, Massachusetts and Maine.

Over the past several years, OneBeacon ~~has continued to improve premium adequacy~~improved its results through rate increases approved by regulators, re-underwriting efforts, aggressive rate pursuit actions and continued improvement in insurance-to-value programs in its homeowners line. ~~However, recent rate increases in personal lines have been modest as OneBeacon achieved average price increases of 3% and 1% in automobile and homeowners, respectively,~~This is reflected in the ~~three months ended March 31,~~combined ratio for this line which was 88% for the second quarter of 2004, ~~including the effects of rate and rate pursuit actions~~compared to 96% in the ~~three months ended March 31, 2004 and throughout~~second quarter of 2003. ~~OneBeacon management has now focused its efforts on improving~~Premium growth was modest in this line as the ~~retention~~second quarter net written premiums grew by 4% as compared to the second quarter of ~~its most profitable policies in force through the introduction of new segmented products and refinement in its existing rate plans.~~2003.

Commercial Lines. OneBeacon's commercial lines products include, among others, multiple peril, commercial automobile and workers compensation. OneBeacon's mix of commercial lines products for multiple peril, commercial automobile and workers compensation was ~~61%~~50%, ~~16%~~24% and ~~18%~~12% of commercial lines net written premium for the three months ended ~~March 31,~~June 30, 2004 including the impact of the Atlantic Specialty ~~Transaction, and 56%, 27% and 8% excluding net written premium relating to the Atlantic Specialty Transaction,~~transaction compared with ~~48%~~56%, ~~29%~~23% and ~~12%~~7% for the three months ended ~~March 31,~~June 30, 2003.

Commercial lines results for the three months ended ~~March 31,~~June 30, 2004 include the impact of the Atlantic Specialty Transaction, which contributed ~~$203.2~~$78 million of written premiums and ~~$72.8~~$72 million of earned premiums. Excluding premium relating to the Atlantic Specialty Transaction, written premiums for the three months ended ~~March 31,~~June 30, 2004 decreased 5%2% from the three months ended ~~March 31,~~June 30, 2003, primarily due to the continued effects of actions taken in prior quarters to reduce the concentration of risks subject to terrorism, such as monitoring total insured values in 11 major cities, as well as continued efforts to re-underwrite the commercial ~~book.~~book, primarily in New York. The commercial book achieved price increases of 8% for business written during the three months ended ~~March 31,~~June 30, 2004 and OneBeacon has also improved renewal retentions over the comparable 2003 period. With the ~~changes that OneBeacon has implemented in its commercial lines business since the OneBeacon Acquisition and completion~~acquisition of ~~the~~ Atlantic Specialty ~~Transaction, OneBeacon has begun to shift its focus from reducing unprofitable business to profitable growth, with its~~and the successful implementation of the new multiple peril coverage for small ~~businesses called~~business (OnePac) ~~and new~~, commercial lines has positioned itself as a niche provider for middle market ~~products.~~commercial lines, as well as the small business market.

~~II. Reinsurance~~OneBeacon Results—Six Months Ended June 30, 2004 versus Six Months Ended June 30, 2003

~~As described above, White Mountains' Reinsurance segment consists of Folksamerica, WMU and Fund American Re. Pre-tax~~OneBeacon's pre-tax income for ~~White Mountains' Reinsurance segment~~the six months ended June 30, 2004 was ~~$47.5~~$238 million, compared to pre-tax income of $275 million for the comparable 2003 period. The GAAP combined ratio was 96% for the first ~~quarter~~six months of 2004, compared to ~~$43.6 million~~98% for the comparable 2003 period. Net written premiums for the first ~~quarter~~six months of ~~2003.~~2004 were $1.3 billion, up 33% from the comparable period last year. The Atlantic Specialty transaction was the key driver in the increase in premiums.

~~White Mountains' financial~~OneBeacon's total revenues and expenses increased by 4% and 8%, respectively, for the six months ended June 30, 2004 primarily due to the impact of the Atlantic Specialty Transaction and by the consolidation of New Jersey Skylands Insurance Association.

The results ~~from its Reinsurance segment~~of each of the three major lines of business for the six months ended June 30, 2004 and their comparison with the six months ended June 30, 2003 were consistent with those described for the three months ended ~~March 31,~~June 30, 2004 described above. Of note, the growth in net written premiums for commercial lines is much higher for the six months ended period as the first quarter included a one-time acquisition of unearned premium related to the Atlantic Specialty transaction.

II. White Mountains Re

White Mountains recently formed a global reinsurance management organization, White Mountains Re, under the direction of Steve Fass, who had served as CEO of Folksamerica since 1984. Through Folksamerica, Sirius and WMU, White Mountains Re offers lead capacity for most property, casualty, accident & health and marine exposures, with program business written through Sirius America. Underwriting offices are located in New York, Stockholm, Chicago, Belgium, Miami, London, Connecticut, Bermuda, Hamburg, Toronto, Singapore and Dublin.

White Mountains Re's financial results for the three and six months ended June 30, 2004 and 2003 follows:

	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
						Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003			2004		2003		2004		2003
	Millions					(millions)
Gross written premiums	$	358.9	$	344.3	Gross written premiums	$	597.0	$	324.3	$	953.7	$	668.6

Net written premiums	$	203.4	$	235.4	Net written premiums	$	414.8	$	198.1	$	618.2	$	433.5

Earned insurance and reinsurance premiums	$	204.5	$	207.3	Earned insurance and reinsurance premiums	$	353.0	$	187.5	$	557.5	$	394.8
Net investment income		11.5		13.0	Net investment income		30.1		12.8		41.6		25.7
Net realized investment gains		3.7		1.7	Net realized investment gains		8.7		12.1		12.4		13.8
Other revenue		20.6		19.6	Other revenue		12.8		17.8		33.4		37.4

Total revenues		240.3		241.6
					Total revenues		404.6		230.2		644.9		471.7

Loss and loss adjustment expenses		128.2		133.4	Loss and loss adjustment expenses		221.8		120.6		350.0		254.0
Insurance and reinsurance acquisition expenses		40.9		47.4	Insurance and reinsurance acquisition expenses		72.8		46.7		113.7		94.1
Other underwriting expenses		20.0		13.8	Other underwriting expenses		30.9		12.7		50.9		26.5
General and administrative expenses		3.2		2.9	General and administrative expenses		3.3		2.6		6.5		5.5
Accretion of fair value adjustment to loss and LAE reserves					Accretion of fair value adjustment to loss and LAE reserves		2.7		—		2.7		—
Interest expense on debt		.5		.5	Interest expense on debt		1.2		.5		1.7		1.0

Total expenses		192.8		198.0
					Total expenses		332.7		183.1		525.5		381.1
Pretax income	$	47.5	$	43.6

					Pretax income	$	71.9	$	47.1	$	119.4	$	90.6

The following table provides ~~Reinsurance~~White Mountains Re's GAAP combined ratios for the three and six months ended ~~March 31,~~June 30, 2004 and 2003:

Three Months Ended March 31,

2004
2003

GAAP Ratios:
Loss 63 % 65 %
Expense 30 29

Total Combined 93 % 94 %

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
GAAP Ratios:
Loss	63	%	64	%	63	%	64	%
Expense	29		32		29		31

Total Combined	92	%	96	%	92	%	95	%

~~The Reinsurance segment's~~Pre-tax income for White Mountains Re was $72 million for the second quarter of 2004, compared to $47 million for the second quarter of 2003. White Mountains Re's GAAP combined ratio was ~~93%~~92% for the three months ended ~~March 31,~~June 30, 2004, compared to ~~94%~~96% for the three months ended ~~March 31,~~June 30, 2003. ~~The~~White Mountains Re's results include the earnings from recently acquired Sirius as well as the favorable environment in the ~~Reinsurance segment continue~~worldwide reinsurance business experienced over the past several years as discussed below.

Pre-tax income for White Mountains Re was $119 million for the first six months of 2004, compared to ~~run~~$91 million for the first six months of 2003. White Mountains Re's GAAP combined ratio was 92% for the six months ended June 30, 2004, compared to 95% for the six months ended June 30, 2003. As mentioned above White Mountains Re's results include the earnings from the recently acquired Sirius, as well as the continuation of strong results from Folksamerica and WMU. Net written premiums, total revenues, and total expenses were all up substantially due to the Sirius Acquisition.

In the second quarter of 2004, White Mountains Re continued to capitalize on its financial stability, reputation and disciplined underwriting strategy and expertise. White Mountains Re's profitability continued to reflect the recent mild property catastrophe experience, as well as continued favorable terms and conditions in the global insurance and reinsurance ~~marketplace~~market which developed in late 2000 and ~~mild property catastrophe activity.~~have generally continued into 2004. While it is expected that favorable terms and conditions will continue on most classes of business, increasing competition has begun to adversely impact pricing on certain classes, mainly property. The acquisition of Sirius, which primarily has a European customer base, has complemented and strengthened White Mountains Re's position within the global reinsurance market, and has favorably contributed to White Mountains Re's operations and results in the three months ended June 30, 2004.

~~Gross~~White Mountains Re's gross written premiums were ~~$358.9~~$597 million and $954 million for the ~~first~~ three and six months ofended June 30, 2004, ~~as compared to $344.3~~while net written premiums were $415 million and $618 million for the ~~first~~ three and six months ended June 30, 2004. Each of ~~2003. Net written premiums decreased 14% from the first quarter of 2003~~these is up significantly relative to the ~~first~~prior year figures, due mainly to the acquisition of Sirius in the second quarter of 2004, ~~due primarily to~~which contributed $284 million of gross premiums written and $185 million of net premiums written for the ~~cancellation of several large casualty treaties whose pricing or terms did not meet Folksamerica's guidelines. Partially offsetting this decline was the~~three months ended June 30, 2004, respectively

Additionally, Folksamerica has generated new business ~~generated~~ from the previously announced CNA Re transaction and the establishment of a Chicago underwriting office. Annual gross written premiums through ~~March 31,~~June 30, 2004 resulting

from this transaction were approximately ~~$100~~$110 million, of which ~~$24~~$56 million was recorded as gross written premium and ~~$17~~$36 million as net written premium in the ~~first quarter~~six months ended June 30, 2004. Partially offsetting the increases resulting from these acquisitions was the cancellation of ~~2004.~~several large casualty treaties at Folksamerica whose pricing or terms did not meet White Mountains Re's strict underwriting guidelines.

Folksamerica's relationship with WMU, which began in 2002 and has resulted in referrals of international reinsurance placements to Folksamerica, continued in 2004. Additionally, under quota share agreements, Folksamerica cedes up to 75% of substantially all underwritten business referred to it by WMU and 75% of substantially all of its short-tailed, non-casualty excess of loss business, as well as 50% of its property proportional business, to Olympus Reinsurance Company ("Olympus"). During the three months ended March 31, 2004 and 2003, Folksamerica ceded $117.2 million and $106.8 million in written premiums and $23.2 million and $12.1 million in losses and loss adjustment expenses to Olympus. White Mountains Re, through either Folksamerica or WMU, receives fee income on reinsurance placements referred to Olympus and is entitled to additional fees based on net underwriting profits on referred business. During the three and six months ended ~~March 31,~~June 30, 2004, ~~and 2003,~~ White Mountains earned ~~$26.3~~$22 million and ~~$24.4~~$48 million, respectively, of fee income from ~~Olympus.~~Olympus as compared to $20 million and $44 million for the three and six months ended June 30, 2003. The additional capacity provided by the quota share relationship with Olympus ~~enhanced~~enhances Folksamerica's ability to provide significant reinsurance capacity.

WMU receives advisory fees on reinsurance placements referred to Olympus and is entitled to a profit commission on net profits on referred business. WMU placed $48.9 million of written premiums with Olympus and recorded $5.9 million of advisory fees during the three months ended March 31, 2004, as compared to $59.1 million and $7.1 million for the comparable 2003 periods. WMU also recorded $11.4 million of profit commissions during the three months ended March 31, 2004, as compared to $10.9 million for the comparable 2003 periods. Revenues earned by WMU on business underwritten by Folksamerica, as well as the offsetting commission expenses at Folksamerica, have been eliminated from the results of the Reinsurance segment. Such intercompany revenue at WMU totaled $3.7 million for the three months ended March 31, 2004 and $4.3 million for the three months ended March 31, 2003.

~~Fund American Re reported pretax income of $4.4 million for the three months ended March 31, 2004, versus pretax income of $1.4 million in the comparable 2003 period.~~

~~White Mountains Re~~

White Mountains has recently formed a global reinsurance management organization under the direction of Steve Fass, who had served as CEO of Folksamerica since 1984. Through Folksamerica, Sirius International Insurance Corporation and WMU, White Mountains Re offers lead capacity for most property, casualty, accident & health and marine exposures. Program business is written through Sirius America Insurance Company. Underwriting offices are located in New York, Stockholm, Chicago, Belgium, Miami, London, Connecticut, Bermuda, Hamburg, Toronto, Singapore and Dublin.

III. Esurance

Esurance, a San Francisco-based, online personal auto insurance company, has been a subsidiary within the White Mountains organization since October 2000. Esurance markets personal auto insurance directly to customers and through select online agents. Esurance recently entered the auto insurance market in Georgia and now writes business in 15 states, with 26% of its ~~first~~second quarter 2004 premiums written in California, 25% in Florida, ~~13%~~11% in Texas, 7% in Michigan, 5% in Pennsylvania, and ~~24%~~26% in ten other states.

The Esurance segment broke even in the first quarter of 2004, compared to a pre-tax loss of $4.4 million in the first quarter of the prior year. Net written premiums for the first quarter of 2004 were $44.9 million, an increase of 84% from $24.4 million in the first quarter of 2003. The introduction of Esurance's new highly segmented, tiered auto program in New York, Ohio, and Maryland was responsible for $3.0 million of premium growth, with the remainder coming from Esurance's other states. Significant growth in premium volume also resulted from ongoing expansion of the online marketing and online agency channels.

~~Esurance's enterprise-wide~~ results for the three months ended ~~March 31,~~June 30, 2004 and 2003 follows:

Three Months Ended March 31,

Millions

2004
2003

Gross written premiums $ 44.9 $ 24.4

Net written premiums $ 44.9 $ 24.4

Earned insurance and reinsurance premiums $ 35.7 $ 18.7
Net investment income .4 1.1
Net realized gains on investments .5 .3
Other revenue 1.1 .5

Total revenues 37.7 20.6

Loss and LAE 26.3 15.7
Insurance and reinsurance acquisition expenses 4.4 4.5
Other underwriting expenses 7.0 4.8

Total expenses 37.7 25.0

Pretax income (loss) $ — $ (4.4 )

Esurance's loss ratio improved by 10 points for the three months ended March 31, 2004, as compared to the three months ended March 31, 2003. This loss ratio improvement was driven by Esurance's transition to its new auto program in all states, along with rate increases in select states. Esurance's loss adjustment expenses improved slightly in the first quarter of 2004 as compared to the first quarter of 2003, when start-up expenses associated with the establishment of Esurance's own claims operation had added two points to the loss ratio. Esurance's Internet-focused, self-service platform allowed it to grow written premium substantially while keeping operating expenses relatively flat. As a result, Esurance's expense ratio improved to 32% for the first three months of 2004 from 50% for the first three months of 2003.

		Three Months Ended June 30,						Six Months Ended June 30,
Millions		Three Months Ended June 30,						Six Months Ended June 30,
Millions		2004			2003			2004			2003
Gross written premiums		$	44.5		$	25.8		$	89.5		$	50.2

Net written premiums		$	44.5		$	25.8		$	89.5		$	50.2

Earned insurance and reinsurance premiums		$	41.4		$	22.7		$	77.1		$	41.4
Net investment income			.9			.3			1.3			.6
Net realized gains (losses) on investments			(.1	)		.2			.4			.5
Other revenue			1.4			.6			2.5			1.1

	Total revenues		43.6			23.8			81.3			43.6

Loss and LAE			31.1			19.1			57.4			34.8
Insurance and reinsurance acquisition expenses			6.2			3.5			10.6			8.0
Other underwriting expenses			7.1			6.0			14.1			10.8

	Total expenses		44.4			28.6			82.1			53.6

	Pretax loss	$	(.8	)	$	(4.8	)	$	(.8	)	$	(10.0	)

The following table provides Esurance's GAAP combined ratios:

			Three Months Ended June 30,				Six Months Ended June 30,
			2004		2003		2004		2003
GAAP Ratios:
	Loss		75	%	84	%	74	%	84	%
	Expense		32		42		32		46

		Total Combined	107	%	126	%	106	%	130	%

Esurance's pretax loss of less than a million for the second quarter ended June 30, 2004 was better than the pretax loss of $5 million for the prior year quarter. Esurance broke even in the first quarter of 2004, so the year-to-date loss is also less than a million, compared to a $10 million pretax loss for the comparable period in 2003. Net written premiums for the second quarter of 2004 were up 72% and 78%, respectively, over the comparable periods of 2003.

Esurance's total revenues increased by $20 million to $44 million for the quarter ended June 30, 2004 and by $38 million to $81 million for the year-to-date. Revenue growth was driven primarily by the premium growth discussed above. In addition, other revenue, comprised primarily of installment fees and partner referral revenue, increased by 133% for the quarter and 127% for the year-to-date. Esurance continues to expand its partner referral program, garnering revenue from visitors to Esurance's website who reside in states not currently covered by Esurance or those who do not qualify for Esurance's auto program.

Esurance's highly segmented auto program continues to perform well in the states where Esurance currently writes business. The auto program, combined with Esurance's efficient, self-service, web-enabled operating platform, has enabled Esurance to significantly increase premium volume and in-force policy count. As of June 30, 2004, Esurance's in-force count was 95,000 policies, a 64% increase over June 30, 2003. The policy count has grown due to new policy sales and a 3 percentage-point improvement in retention.

Three Months Ended March 31,

2004
2003

GAAP Ratios:
Loss 74 % 84 %
Expense 32 50

Total Combined 106 % 134 %

Esurance's overall operating results are continuing to benefit from improving economies of scale and its superior technology platform as total expenses for the three and six month periods ended June 30, 2004 only grew by $16 million and $29 million, respectively, over the comparable prior year periods, which is considerably less than the revenue growth cited above.

IV. Other Operations

Other Operations consists of the operations of the Company and the Company's intermediate subsidiary holding companies and the International American Group, as well as White Mountains' investment in Montpelier warrants. A ~~tabular~~ summary of White Mountains' financial results from its Other Operations segment for the ~~three~~six months ended ~~March 31,~~June 30, 2004 and 2003 follows:

	Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
Millions	Three Months Ended March 31,						Millions	Three Months Ended June 30,						Six Months Ended June 30,
Millions	2004			2003			Millions	2004			2003			2004			2003
Gross written premiums	$	—		$	10.0		Gross written premiums	$	—		$	10.1		$	—		$	20.1

Net written premiums	$	—		$	8.5		Net written premiums	$	—		$	7.5		$	—		$	16.0

Earned insurance and reinsurance premiums	$	—		$	7.9		Earned insurance and reinsurance premiums	$	.1		$	7.2		$	.1		$	15.1
Net investment income		7.7			.9		Net investment income		4.2			4.4			11.9			5.3
Net realized investment losses		(10.1	)		(1.3	)
Net realized investment gains (losses)							Net realized investment gains (losses)		(17.4	)		5.9			(27.5	)		4.6
Other revenue (loss)		(7.3	)		3.9		Other revenue (loss)		1.3			(.7	)		(6.0	)		3.2

Total revenues		(9.7	)		11.4
							Total revenues		(11.8	)		16.8			(21.5	)		28.2

Loss and LAE		(2.5	)		5.8		Loss and LAE		3.5			5.7			1.0			11.5
Insurance and reinsurance acquisition expenses		—			1.0		Insurance and reinsurance acquisition expenses		—			.8			—			1.8
Other underwriting expenses		.5			2.5		Other underwriting expenses		.3			2.7			.8			5.2
General and administrative expenses		36.6			5.8		General and administrative expenses		21.6			35.7			58.2			41.5
Accretion of fair value adjustment to loss and loss adjustment expense reserves		10.1			14.2
Accretion of fair value adjustment to loss and lae reserves							Accretion of fair value adjustment to loss and lae reserves		10.1			14.2			20.2			28.4
Interest expense on debt		10.7			13.1		Interest expense on debt		10.6			12.0			21.3			25.1
Interest expense on preferred stock subject to mandatory redemption		11.5			—		Interest expense on preferred stock subject to mandatory redemption		11.8			—			23.3			—

Total expenses		66.9			42.4
							Total expenses		57.9			71.1			124.8			113.5
Pretax loss	$	(76.6	)	$	(31.0	)

							Pretax loss	$	(69.7	)	$	(54.3	)	$	(146.3	)	$	(85.3	)

Other Operations Results—Three Months Ended June 30, 2004 versus Three Months Ended June 30, 2003

The losses reported in White Mountains' Other Operations ~~segment reported a pre-tax loss of $76.6 million for the first quarter of 2004, compared to a pre-tax loss of $31.0 million for the first quarter of 2003. The losses reported in this~~ segment are principally the result of financing, purchase accounting and compensation expenses at the holding company level. The increased loss reported in the second quarter of 2004, isas compared to the second quarter of 2003, was principally the result of ~~higher incentive compensation expense,~~a decrease in the value of White Mountains' investment in Montpelier warrants and a change in accounting for preferred ~~stock, and the impact of currency exchange rates on the Company's investment assets denominated in Swedish Kronor.~~

The Other Operations' incentive compensation expense, included in general and administrative expenses, increased from $3.8 million in the first quarter of 2003 to $23.7 million in the first quarter of

2004. The increase in incentive compensation expense from the first quarter of 2003 to the first quarter of 2004 was principally due to a 14% appreciation in White Mountains' stock price in the quarter versus a 6% appreciation during the first quarter of 2003.stock. The change in accounting for preferred stock under SFAS 150, adopted in the third quarter of 2003, required the Company to report as interest expense ~~$11.5~~$12 million of dividends and accretion in the ~~first~~second quarter of 2004, compared to ~~$13.5~~$11 million that had been reported below the pre-tax income line in the ~~first~~second quarter of 2003. In addition, in the fourth quarter of 2003, the Company purchased assets denominated in Swedish Kronor to economically hedge the cost of funding the purchase of the Sirius Insurance Group. White Mountains recorded a realized loss of $14.0 million in the first quarter of 2004 to reflect the weakening Krona valuation versus the U.S. dollar. Interest expense on debt in the first quarter decreased by $2.4 million from the prior year primarily due to the lower interest rate the Company is paying on its Senior Notes compared to the previous banking facility it had in the first quarter last year and a lower average outstanding debt balance.

During the ~~first~~second quarter of 2003, the Other Operations segment included the results of Peninsula, which the Company sold on January 5, 2004. All of the written and earned premiums in the Other Operations segment in the 2003 period were from Peninsula, which was the only active insurance company in this segment. ~~Peninsula also accounted~~

Other Operations Results—Six Months Ended June 30, 2004 versus Six Months Ended June 30, 2003

The increased loss reported for ~~$5.8 million~~the first six months of 2004 in ~~losses and loss adjustment~~this segment was primarily due to higher incentive compensation expenses ~~$1.0 million of insurance acquisition expenses and $1.8 million of other underwriting expenses~~due to the increase in White Mountains stock price from year-end 2003, the change in accounting in preferred stock as described above, the decrease in the value of Montpelier warrants and the impact currency fluctuations had on our hedging the cost of funding for the Sirius Acquisition.

During the first ~~quarter~~six months of ~~2003.~~2003, the Other Operations segment included the results of Peninsula, as described above.

Summary of Investment Operations

Overview

White Mountains manages all of its consolidated investments through its wholly-owned subsidiary, WM Advisors. White Mountains' investment philosophy is to invest its assets with a view towards maximizing its after-tax total return over extended periods of time. Under this approach, each dollar of after-tax investment income and realized and unrealized gains and losses is valued equally. White Mountains' overall fixed maturity investment strategy is to purchase securities that are attractively priced in relation to perceived credit risks. White Mountains generally manages the interest rate risk associated with holding fixed maturity investments by actively monitoring and maintaining the average duration of the portfolio with the goal of achieving an adequate after-tax total return without subjecting the portfolio to an unreasonable level of interest rate risk. White Mountains' investment portfolio mix as of ~~March 31,~~June 30, 2004 was focused on capital preservation and consisted in large part of high-quality, fixed maturity investments and short-term investments.

Results

~~During~~For the ~~quarter, the GAAP total return on invested assets for the quarter was 3.3%, including White Mountains' investment in Montpelier. Excluding Montpelier,~~three month period ended June 30, 2004, the total return on invested assets was ~~2.1%~~-1.5%. For the first six months of 2004 it was up 1.7%. The primary reason for the negative return in the second quarter was the decline in the company's fixed income portfolio as a result of the increase in the general level of interest rates. Management is continuing to keep its fixed maturity portfolio duration relatively short at about 3 years to reflect its concern that rates may rise further in the next few years.

White Mountains sold a portion of its common stock investment in Montpelier during the first quarter resulting in a $35.2 million pre-tax realized gain, and changed the method of accounting for its remaining Montpelier common stock to the fair value method, resulting in a $32.5 million increase in after-tax unrealized gains. In addition, the bond market rallied during the first quarter of 2004, which gave a further lift to White Mountains' investment results. However, in April, rates moved up sharply as the first signs of inflation started to show. Management expects rates to continue to rise over the next few years and, therefore, is continuing to keep its fixed maturity portfolio duration short at about 3 years.

White Mountains' total net investment results for the three months ended ~~March 31,~~June 30, 2004 and 2003 are shown below:

Three Months Ended March 31,

Dollars in Millions

2004
2003

Net investment income, pre-tax $ 71.0 $ 78.6
Net realized investment gains, pre-tax $ 61.8 $ 58.2
Change in net unrealized investment gains, after-tax $ 98.7 $ (9.5 )

	Three Months Ended June 30,					Six Months Ended June 30,
Dollars in Millions	Three Months Ended June 30,					Six Months Ended June 30,
Dollars in Millions	2004			2003		2004			2003
Net investment income, pretax	$	93.2		$	73.0	$	164.2		$	151.6
Net realized investment gains (losses), pretax	$	(5.6	)	$	90.0	$	56.2		$	148.2
Change in net unrealized investment gains (losses), after-tax	$	(138.9	)	$	75.8	$	(40.2	)	$	66.3

White Mountains' net investment income is comprised primarily of interest income associated with its substantial portfolio of fixed maturity investments and dividend income from its equity investments. White Mountains' realized investment gains and losses result principally from sales of fixed maturity investments, common equity securities and common shares of Montpelier. Net investment income was ~~$71.0 million in the first quarter of 2003, down 10%~~up 28% from last year mainly due to the ~~runoff of reserves~~Sirius Acquisition. The significant negative swing in ~~the run-off operations of OneBeacon. Realized gains were relatively consistent with the prior year, while~~both realized and unrealized gains ~~after-tax, increased $98.6 million in~~and losses was driven by the ~~quarter, due principally from a decline~~increase in interest rates ~~during the quarter and $32.5 million related to the change in accounting for Montpelier, as~~ described above.

Impairment

SeeNote 5—Investments of the accompanying consolidated financial statements for White Mountains' analysis of impairment losses on investment securities.

LIQUIDITY AND CAPITAL RESOURCES

Operating cash and short-term investments

White Mountains' consolidated sources of cash consist primarily of premium collections, net investment income, financing activities and proceeds from sales and maturities of investments. White Mountains' consolidated uses of cash are primarily claim payments, operating expenses, financing costs and the purchase of investments.

Both internal and external forces influence White Mountains' financial condition, results of operations and cash flows. Claim settlements, premium levels and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to White Mountains and the settlement of the liability for that loss. Management believes that White Mountains' cash balances, cash flows from operations, routine sales of investments and the liquidity provided by the Bank Facility are adequate to meet expected cash requirements for the foreseeable future.

Dividend Capacity

The Company and certain of its intermediate holding companies rely on cash dividends and tax sharing payments received from the operating subsidiaries. Under the insurance laws of the states and jurisdictions under which White Mountains' insurance subsidiaries are domiciled, an insurer is restricted with respect to the timing or the amount of dividends it may pay without prior approval by regulatory authorities. Accordingly, there can be no assurance regarding the amount of such dividends that may be paid by such subsidiaries in the future. In the first six months of 2004, OneBeacon's first tier insurance subsidiaries paid cash dividends of $83.2 million to their parent. For the remainder of 2004, OneBeacon's first tier insurance subsidiaries have the ability to pay dividends of approximately $246.8 million without approval of regulatory authorities. OneBeacon's distribution of Folksamerica to its parent, Fund American, in the first quarter of 2004 was effected as a share repurchase and did not impair OneBeacon's dividend paying capacity. In the first six months of 2004, Folksamerica's first tier reinsurance subsidiaries paid cash dividends of $8.0 million to their parent and for the remainder of 2004, Folksamerica's first tier reinsurance subsidiaries have the ability to pay dividends of approximately $53 million without approval of regulatory authorities.

In accordance with provisions available under Swedish tax law, Sirius can voluntarily transfer its pretax earnings, or a portion thereof, subject to certain limitations, into an untaxed reserve referred to as a safety reserve. Sirius' safety reserve was approximately $1.0 billion at June 30, 2004. Under GAAP, the safety reserve is eliminated resulting in higher retained earnings, net of the related deferred tax liability established at the effective Swedish tax rate of 28%. This tax is only required to be paid by Sirius if it fails to maintain predetermined levels of premium writings in future years or if it chooses to distribute the earnings previously transferred into the safety reserve. As a result of the indefinite deferral of these taxes, Swedish regulatory authorities do not apply any taxes to the safety reserve when calculating solvency capital under Swedish insurance regulations.

Insurance Float

Insurance float is an important dynamic of White Mountains' operations that must be managed effectively. Float is money that an insurance company holds for a limited time. In an insurance operation, float arises because premiums are collected before losses are paid. This interval can extend over many years. During that time, the insurer invests the money. When the premiums that an insurer collects do not cover the losses and expenses it eventually must pay the result is an underwriting loss, which is considered to be the cost of float. The amount and cost of float for White Mountains is affected by underlying market conditions, as well as acquisitions or dispositions of insurance and reinsurance businesses. Although insurance float can be calculated using numbers determined under GAAP, insurance float is not a GAAP concept and therefore there is no comparable GAAP measure.

For each of the years in the three-year period ending December 31, 2003, the Company has had negative cash flows from operations but has generated significant float from its insurance and reinsurance operations. The Company's cash flow from operations does not include float generated by the acquisition of insurance and reinsurance businesses in recent years. Post-acquisition, such companies are often placed into partial or complete run-off, thereby resulting in negative cash flows from operations as the investment portfolios acquired are liquidated over time to pay claims. White Mountains expects that it will continue to have negative cash flows from operations for the foreseeable future but expects float to increase ~~particularly in light of~~from time to time with potential acquisitions, as was the case with the recent Sirius ~~Insurance Group~~ and Sierra Group acquisitions.

One of the means by which White Mountains calculates its insurance float is by taking its net investment assets and subtracting its total tangible capital. The following table illustrates White Mountains' consolidated insurance float position as of ~~March 31,~~June 30, 2004 and for the past four year-ends:

Year Ended December 31,

($ in millions)
March 31,
2004

2003
2002
2001
2000

Total investments $ 9,063.5 $ 8,547.5 $ 8,899.4 $ 9,005.7 $ 2,102.2
Cash 117.2 89.9 121.5 67.4 4.4
Investments in unconsolidated insurance affiliates 152.7 515.9 399.9 311.1 130.6
Accounts receivable on unsettled investment sales 59.5 9.1 160.8 75.2 —
Accounts payable on unsettled investment purchases (103.1 ) (371.6 ) (495.2 ) (311.2 ) (.2 )

Net investment assets $ 9,289.8 $ 8,790.8 $ 9,086.4 $ 9,148.2 $ 2,237.0

Total common shareholders' equity $ 3,180.6 $ 2,979.2 $ 2,407.9 $ 1,444.6 $ 1,046.5
Debt 824.8 743.0 793.2 1,125.4 96.0
Preferred stock subject to mandatory redemption 198.5 194.5 180.9 170.3 —
Convertible preference shares — — 219.0 — —
Deferred credits and goodwill — — — 682.5 92.2

Total capital $ 4,203.9 $ 3,916.7 $ 3,601.0 $ 3,422.8 $ 1,234.7

Insurance float $ 5,085.9 $ 4,874.1 $ 5,485.4 $ 5,725.4 $ 1,002.3

Insurance float as a multiple of total capital 1.2x 1.2x 1.5x 1.7x 0.8x
Net investment assets as a multiple of total capital 2.2x 2.2x 2.5x 2.7x 1.8x
Insurance float as a multiple of shareholders' equity 1.6x 1.6x 2.3x 4.0x 1.0x
Net investment assets as a multiple of shareholders' equity 2.9x 3.0x 3.8x 6.3x 2.1x

					Year Ended December 31,
($ in millions)		June 30, 2004			Year Ended December 31,
($ in millions)		June 30, 2004			2003			2002			2001			2000
Total investments		$	10,309.2		$	8,547.5		$	8,899.4		$	9,005.7		$	2,102.2
Cash			92.5			89.9			121.5			67.4			4.4
Investment in unconsolidated insurance affiliate(s)			151.6			515.9			399.9			311.1			130.6
Accounts receivable on unsettled investment sales			76.7			9.1			160.8			75.2			—
Accounts payable on unsettled investment purchases			(67.2	)		(371.6	)		(495.2	)		(311.2	)		(.2	)

	Net investment assets	$	10,562.8		$	8,790.8		$	9,086.4		$	9,148.2		$	2,237.0

Total common shareholders' equity		$	3,513.2		$	2,979.2		$	2,407.9		$	1,444.6		$	1,046.5
Debt			824.3			743.0			793.2			1,125.4			96.0
Preferred stock subject to mandatory redemption			202.7			194.5			180.9			170.3			—
Convertible preference shares			—			—			219.0			—			—
Deferred credits and goodwill			(19.7	)		(20.3	)		—			682.5			92.2

	Total tangible capital	$	4,520.5		$	3,896.4		$	3,601.0		$	3,422.8		$	1,234.7

	Insurance float	$	6,042.3		$	4,894.4		$	5,485.4		$	5,725.4		$	1,002.3

Insurance float as a multiple of total tangible capital			1.3	x		1.3	x		1.5	x		1.7	x		0.8	x
Net investment assets as a multiple of total tangible capital			2.3	x		2.3	x		2.5	x		2.7	x		1.8	x
Insurance float as a multiple of shareholders' equity			1.7	x		1.6	x		2.3	x		4.0	x		1.0	x
Net investment assets as a multiple of shareholders' equity			3.0	x		3.0	x		3.8	x		6.3	x		2.1	x

White Mountains has historically obtained its float primarily through acquisitions, as opposed to organic growth. In the case of OneBeacon, the substantial amount of float initially acquired with the OneBeacon Acquisition has shrunk as a result of OneBeacon's re-underwriting efforts and the effects of the Liberty Agreement. OneBeacon's float is expected to continue to shrink over the next few years as older, long-tailed loss reserves are paid and are not replaced with the same level of new writings as those written in the past. In the case of White Mountains' Reinsurance operations, its float is expected to gradually increase in the next few years as a result of higher premium writings ~~as a result of~~from its increase in capital base over the past two years and from recent acquisitions. It is White Mountains' intention to generate low-cost float over time through a combination of acquisitions and/or by organic ~~growth in~~grow thin its existing insurance and reinsurance ~~operations, but~~operations. However, White Mountains will seek to increase its float organically only when market conditions ~~indicate a high likelihood~~allow for an expectation of generating underwriting profits. The ~~acquisition~~increase in White Mountains' consolidated float position during the first six months of 2004 is mainly attributable to the Sirius and the Sierra Group ~~on March 31, 2004 added approximately $146.1 million to White Mountains' consolidated insurance float position.~~acquisitions.

Financing

The following table summarizes White Mountains' consolidated capital structure as of ~~March 31,~~June 30, 2004 and December 31, 2003:

Millions	Millions	March 31, 2004			December 31, 2003			Millions	June 30, 2004			December 31, 2003
Senior Notes, carrying value	Senior Notes, carrying value	$	698.1		$	698.1		Senior Notes, carrying value	$	698.2		$	698.1
Bank Facility	Bank Facility		—			—		Bank Facility		—			—
Sierra Note	Sierra Note		62.0			—		Sierra Note		61.5			—
Atlantic Specialty Note	Atlantic Specialty Note		20.0			—		Atlantic Specialty Note		20.0			—
C-F Seller note	C-F Seller note		25.0			25.0		C-F Seller note		25.0			25.0
Fund III notes	Fund III notes		15.0			15.0		Fund III notes		15.0			15.0
Other debt	Other debt		4.7			4.9		Other debt		4.6			4.9

	Total debt	$	824.8		$	743.0		Total debt	$	824.3		$	743.0

Preferred stock subject to mandatory redemption	Preferred stock subject to mandatory redemption		198.5			194.5		Preferred stock subject to mandatory redemption		202.7			194.5
Common shareholders' equity	Common shareholders' equity		3,180.6			2,979.2		Common shareholders' equity		3,513.2			2,979.2

	Total capitalization	$	4,203.9		$	3,916.7		Total capitalization	$	4,540.2		$	3,916.7

Debt to total capitalization	Debt to total capitalization		20	%		19	%	Debt to total capitalization		18	%		19	%

Management believes that White Mountains' strong financial position provides it with the flexibility and capacity to obtain funds externally as needed through debt or equity financing on both a short-term and long-term basis. In July 2003, White Mountains enhanced its access to the capital markets by having a shelf registration declared effective by the SEC for offerings of up to $2.0 billion in debt and/or equity securities.

In May 2003, White Mountains reduced its cost of capital and significantly reduced its near-term obligations by fully prepaying its previous $739.9 million amortizing bank facility, principally through the net proceeds from the issuance of the Senior Notes, which were issued by Fund American through a public offering. The Senior Notes bear a fixed interest rate of 5.9% and mature in May of 2013.

Fund American's Senior Notes are currently rated "Baa2" (Adequate, the ~~9th~~9^th highest of 21 ratings) by Moody's Investor Services ("Moody's") and "BBB-" (Adequate, the ~~10th~~10^th highest of 24 ratings) by S&P. The outlook for each rating is stable. It is possible that, in the future, one or more of the rating agencies may lower White Mountains' existing ratings. If one or more of its ratings were downgraded, White Mountains could incur higher borrowing costs and its ability to access the capital markets could be impacted. In addition, White Mountains' insurance and reinsurance operations could be adversely impacted by a downgrade in their financial strength ratings, including a possible reduction in demand for their products in certain markets.

Contractual Obligations and Commitments

Below is a schedule of White Mountains' material contractual obligations and commitments as of ~~March 31,~~June 30, 2004:

Millions	Millions	Due in One Year or Less		Due in Two Years		Due in Three Years		Due in Four Years		Due After Four Years		Total		Millions	Due in One Year or Less		Due in Two Years		Due in Three Years		Due in Four Years		Due After Four Years		Total
Debt	Debt	$	—	$	25.0	$	6.6	$	17.0	$	778.0	$	826.6	Debt	$	—	$	25.0	$	21.6	$	2.0	$	777.5	$	826.1
Mandatorily redeemable preferred stock	Mandatorily redeemable preferred stock		—		—		—		—		320.0		320.0	Mandatorily redeemable preferred stock		—		—		—		—		320.0		320.0

	Total contractual obligations(1)	$	—	$	25.0	$	6.6	$	17.0	$	1,098.0	$	1,146.6	Total contractual obligations (1)	$	—	$	25.0	$	21.6	$	2.0	$	1,097.5	$	1,146.1

(1): Does not reflect contractual obligations and commitments under operating leases.

At December 31, 2003, contractual obligations and commitments under operating leases were $153.9 million. There are no provisions within White Mountains' leasing agreements that would trigger acceleration of future lease payments. White Mountains does not finance its operations through the securitization of its trade receivables, through special purpose entities or through synthetic leases. Further, White Mountains has not entered into any arrangement requiring it to guarantee payment of third party debt or to fund losses of an unconsolidated special purpose entity.

In June 1999, White Mountains sold ~~VGI~~the Valley Group, Inc. to Unitrin, Inc. ("Unitrin"~~) (the "VGI Sale"~~). As part of the ~~VGI Sale,~~sale, White Mountains has provided Unitrin with adverse loss development protection of up to $50.0 million on loss reserves sold to Unitrin. During the second quarter of 2004, White Mountains settled its obligation to Unitrin ~~has made~~for an amount which had been previously recorded as a ~~demand for the full $50.0 million.~~liability in its financial statements.

Detailed information concerning White Mountains' liquidity and capital resource activities during the ~~three~~six months ended ~~March 31,~~June 30, 2004 and 2003 follows:

For the ~~three~~six months ended ~~March 31,~~June 30, 2004

~~In December 2003,~~On June 29, 2004, Berkshire exercised of all of its warrants to purchase 1,724,200 Common Shares of White Mountains ~~entered into a definitive agreement~~for $294.0 million. Berkshire bought the warrants in connection with the financing of White Mountains' acquisition of OneBeacon in 2001. The warrants were exercisable at any time until May 2008 and callable by the Company on or after May 31, 2005. In consideration for the early exercise of the warrants, Berkshire and the Company agreed to ~~acquire~~reduce the exercise price by approximately 2%.

On April 16, 2004, White Mountains completed the Sirius ~~Insurance Group~~Acquisition for SEK 3.27 billion (approximately $427.5 million based upon the foreign exchange spot rate at ~~a purchase price~~the date of ~~SEK3.3 billion. Because~~acquisition) which includes $10.5 million of expenses incurred in connection with the ultimate purchase price was payable in Swedish kronor, White Mountains purchased SEK2.2 billion for USD $300 million on December 10, 2003 and subsequently invested it in short-term Swedish Treasury Bills to economically hedge the cost of funding the purchase of Sirius. White Mountains recorded a realized loss of $14.0 million in the first quarter of 2004 to reflect the weakening Krona valuation versus the U.S. dollar as of March 31, 2004.acquisition.

On March 31, 2004, ~~Folksamerica~~White Mountains completed the acquisition of the Sierra Group from Sierra Health Services, Inc. ~~Folksamerica~~White Mountains paid $76.2 million for the Sierra Group, which included $14.2 million in cash and a $62.0 million purchase note.

For the ~~three~~six months ended ~~March 31,~~June 30, 2004, White Mountains declared and paid a total of ~~$7.6~~$15.1 million in dividends to holders of preferred stock with a face value of $320.0 million.

In March 2004, the Company declared and paid an annual dividend of $9.1 million to its common shareholders.

During the ~~three~~six months ended ~~March 31,~~June 30, 2004, OneBeacon Insurance Group LLC (OneBeacon's parent) declared and paid a total of ~~$40.0~~$70.0 million in cash dividends to Fund American, its immediate parent company. Also during the ~~three~~six months ended ~~March 31,~~June 30, 2004, WMU paid a total of ~~$45.0~~$55.0 million of dividends to its immediate parent, White Mountains Re. On March 31, 2004, OneBeacon distributed Folksamerica up to Fund American.

During the ~~three~~six months ended ~~March 31,~~June 30, 2004, the Company issued a total of 600 Common Shares to its employees through the exercise of Options during the period and, as a result, the Company received cash proceeds of $0.1 million in connection with these Option exercises. In addition, during the first quarter of ~~2003,~~2004, White Mountains issued 27,772 Common Shares to employees of OneBeacon in connection with OneBeacon's employee stock ownership plan. OneBeacon paid $13.2 million to the Company in consideration for these Common Shares.

During the first quarter of 2004, White Mountains made payments amounting to $126.6 million, in cash or by deferral into certain non-qualified compensation plans of the Company or its subsidiaries, to participants in its long-term incentive compensation plans. These payments were made with respect to 168,329 performance shares at payout levels ranging from 93% to 200% of target.

For the ~~three~~six months ended ~~March 31,~~June 30, 2003

On May 19, 2003, Fund American issued the Senior Notes for net proceeds of $693.4 million. Using proceeds from the Senior Notes, Fund American repaid the entire $614.9 million of term loans outstanding under its previous bank facility. In ~~March~~addition, on May 27, 2003, ~~White Mountains made a scheduled principal amortization payment of $6.5 million on~~using the ~~Bank Facility. During the first three months of 2003, White Mountains paid a total of $12.9~~remaining $78.5 million in ~~interest~~proceeds from the Senior Notes and cash on hand, Fund American repaid the entire $125.0 million of revolving loans outstanding under the ~~Bank Facility including $5.2~~previous bank facility. In connection with the repayment of the previous bank facility, on May 20, 2003, Fund American paid an aggregate $56.4 million ~~paid under related~~to unwind all of its existing interest rate swap agreements.

~~In March~~For the six months ended June 30, 2003, White Mountains made scheduled principal amortization payments of $6.5 million on its previous bank facility prior to the repayment and paid a total of $22.5 million in interest under that facility, including $10.6 million paid under the interest rate swap agreements.

For the six months ended June 30, 2003, White Mountains declared and paid a total of ~~$7.6~~$15.1 million in dividends to holders of preferred stock with a face value of $320.0 million.

In March 2003, the Company declared and paid an annual dividend of $8.3 million to its common shareholders.

During the ~~first quarter of~~six months ended June 30, 2003, OneBeacon declared and paid a total of ~~$37.5~~$79.0 million in cash dividends to Fund American, its immediate parent company. Also during the six months ended June 30, 2003, WMU paid a total of $30.0 million of dividends to its immediate parent, White Mountains Re, and WM Advisors paid a total of $10.0 million in dividends to Fund American.

During the ~~first quarter of~~six months ended June 30, 2003, the Company issued a total of ~~5,700~~6,316 Common Shares to its employees through the exercise of Options during the period and, as a result, the Company received cash proceeds of ~~$.7~~$.8 million in connection with these Option exercises.

During the first quarter of 2003, White Mountains ~~paid a total of~~made payments with respect to 39,500 performance shares (relating to the 2000-2002 performance period) at a 200% ~~value,~~payout level, amounting to $25.7 million, to its participants in cash or by deferral into certain non-qualified compensation plans of the Company or its subsidiaries. In the second quarter of 2003, White Mountains made payments with respect to an additional 33,075 performance shares, amounting to $13.1 million in cash or by deferral into certain non-qualified compensation plans of the Company. The payments on these additional performance shares in the second quarter represented accelerated payments to certain non-employee directors of the Company for performance periods originally scheduled to end on December 31, 2003, 2004 and 2005.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to the Company's 2003 Annual Report on Form 10-K for a complete discussion regarding White Mountains' critical accounting policies and estimates.

FORWARD-LOOKING STATEMENTS

The information contained in this report ~~release~~ 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 "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':

•: future growth in tangible book value per share or return on equity;
•: business strategy;
•: financial and operating targets or plans;
•: incurred losses and the adequacy of its loss and LAE reserves;
•: projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
•: expansion and growth of its business and operations; and
•: future capital expenditures.

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 with its expectations and predictions is subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations, including:

•: the failure of announced acquisitions to enhance shareholder value;
•: claims arising from catastrophic events, such as hurricanes, earthquakes, floods or terrorist attacks;
•: the continued availability of capital and financing;
•: general economic, market or business conditions;
•: business opportunities (or lack thereof) that may be presented to it and pursued;
•: competitive forces, including the conduct of other insurers and reinsurers;
•: changes in domestic or foreign laws or regulations applicable to White Mountains, its competitors or its clients;
•: an economic downturn or other economic conditions adversely affecting its financial position;
•: loss reserves established subsequently proving to have been inadequate; and
•: other factors, most of which are beyond White Mountains' control.

Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by White Mountains will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, White Mountains or its business or operations. White Mountains assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Refer to the Company's 2003 Annual Report on Form 10-K, and in particular Item 7A.—"Quantitative and Qualitative Disclosures About Market Risk". ~~As of March 31, 2004, there have been no material~~That information is hereby supplemented as follows:

Foreign Currency Exchange Rates

White Mountains' foreign assets and liabilities are valued using period-end exchange rates and its foreign revenues and expenses are valued using average exchange rates. Foreign currency exchange rate risk is the risk that White Mountains will incur losses due to adverse changes in foreign currency exchanges rates.

As a result of the ~~market risks described~~Sirius Acquisition during the second quarter of 2004, White Mountains has a higher concentration of assets, liabilities, revenues and expenses denominated in foreign currencies than in prior periods. The functional currency of Sirius is the Swedish Krona. Assuming a hypothetical 10% increase or decrease in the ~~Company's most recently filed Annual Report on Form 10-K.~~rate of exchange from the Swedish Krona to the U.S. Dollar as of June 30, 2004, the carrying value of White Mountains' net assets denominated in Swedish Kronor would have respectively increased or decreased by approximately $40 million.

Item 4. Controls and Procedures

The Principal Executive Officer ("PEO") and the Principal Financial Officer ("PFO") of White Mountains have evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-14 of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the PEO and PFO have concluded that White Mountains' disclosure controls and procedures are adequate and effective.

There have been no significant changes in White Mountains' internal controls, or in factors that could significantly affect internal controls, subsequent to their most recent evaluation of such controls.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Refer to the Company's 2003 Annual Report on Form 10-K, and in particular Item 3—"Legal Proceedings" for a brief description of non-routine legal proceedings. Damages sought by the claimants do not exceed 10% of the Company's current assets.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote by Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

11		11 —	Statement Re Computation of Per Share Earnings*
~~31.1~~	—	31.1—	Principal Executive Officer Certification Pursuant to Rule 13a-14 (a) of the Securities Exchange Act of 1934, as Amended.
~~31.2~~	—	31.2—	Principal Financial Officer Certification Pursuant to Rule 13a-14 (a) of the Securities Exchange Act of 1934, as Amended.
~~32.1~~	—	32.1—	Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~

—32.2—

Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Not included as an exhibit as the information is contained elsewhere within this report. See Note 7 of the Notes to Consolidated Financial Statements.

(b): Reports on Form 8-K

On ~~February 4,~~April 30, 2004 the Company filed a Form 8-K (Item 2) announcing that it completed its previously announced acquisition of Sirius and its subsidiaries, Sirius International Insurance Corporation, Sirius America Insurance Company and Scandinavian Reinsurance Company, Ltd.

On May 7, 2004, the Company filed a Form 8-K (Item 12) which served to furnish information regarding its press release announcing its results for the three ~~and twelve~~ month ~~periods~~period ended ~~December~~March 31, ~~2003.~~2004.

On ~~March 16,~~June 28, 2004, the Company filed a Form 8-K/A (Item 7) which served to amend the Form 8-K ~~(Item 5) announcing that it~~filed on April 30, 2004, to provide the financial statements and ~~Berkshire are leading an investor group that will acquire~~pro forma financial information related to the ~~life and investments business of Safeco Life.~~Sirius Acquisition.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		WHITE MOUNTAINS INSURANCE GROUP, LTD. (Registrant)
Date: ~~May~~August 4, 2004		By:	/s/ J. BRIAN PALMER J. Brian Palmer Chief Accounting Officer

Top Reinsurers (dollars in millions)	Balance at March 31, 2004		% of Total		A.M. Best Rating(3)
Subsidiaries of Berkshire (NICO and GRC)	$	2,197.9	72	%	A	++
Liberty Mutual Insurance Group and subsidiaries (1)		175.2	6		A
American Re-Insurance Company		60.4	2		A	+
Tokio Fire and Marine Insurance Company		52.8	2		A	++
Aviva plc and its affiliates (2)		34.7	1		not rated

		March 31, 2004
		0-6 Months			6-12 Months			> 12 Months			Total
		Dollars in millions
Fixed maturity investments:
	Number of positions		20			8			5			33
	Market value	$	519.5		$	114.8		$	5.6		$	639.9
	Amortized cost	$	520.6		$	116.1		$	5.7		$	642.4
	Unrealized loss	$	(1.1	)	$	(1.3	)	$	(.1	)	$	(2.5	)

Common equity securities:
	Number of positions		8			1			—			9
	Market value	$	10.9		$	1.7		$	—		$	12.6
	Cost	$	11.5		$	1.9		$	—		$	13.4
	Unrealized loss	$	(.6	)	$	(.2	)	$	—		$	(.8	)

Other investments:
	Number of positions		1			1			7			9
	Market value	$	9.2		$	.6		$	6.2		$	16.0
	Cost	$	10.0		$	.9		$	9.1		$	20.0
	Unrealized loss	$	(.8	)	$	(.3	)	$	(2.9	)	$	(4.0	)

Total:
	Number of positions		29			10			12			51
	Market value	$	539.6		$	117.1		$	11.8		$	668.5
	Amortized cost	$	542.1		$	118.9		$	14.8		$	675.8
	Unrealized loss	$	(2.5	)	$	(1.8	)	$	(3.0	)	$	(7.3	)

% of total gross unrealized losses			34	%		25	%		41	%		100.0	%

Millions	OneBeacon		Reinsurance		Esurance		Other Operations			Total
Three months ended March 31, 2004
Earned insurance and reinsurance premiums	$	591.7	$	204.5	$	35.7	$	—		$	831.9
Net investment income		51.4		11.5		.4		7.7			71.0
Net realized investment gains (losses)		67.7		3.7		.5		(10.1	)		61.8
Other revenue (loss)		44.0		20.6		1.1		(7.3	)		58.4

Total revenues		754.8		240.3		37.7		(9.7	)		1,023.1

Loss and LAE		371.3		128.2		26.3		(2.5	)		523.3
Insurance and reinsurance acquisition expenses		111.4		40.9		4.4		—			156.7
Other underwriting expenses		87.4		20.0		7.0		.5			114.9
General and administrative expenses		41.9		3.2		—		36.6			81.7
Accretion of fair value adjustment to loss and LAE reserves		—		—		—		10.1			10.1
Interest expense on debt		.1		.5		—		10.7			11.3
Interest expense on preferred stock subject to mandatory redemption		—		—		—		11.5			11.5

Total expenses		612.1		192.8		37.7		66.9			909.5

Pretax income (loss)	$	142.7	$	47.5	$	—	$	(76.6	)	$	113.6

Millions	OneBeacon		Reinsurance		Esurance			Other Operations			Total
Three months ended March 31, 2003
Earned insurance and reinsurance premiums	$	569.1	$	207.3	$	18.7		$	7.9		$	803.0
Net investment income		63.6		13.0		1.1			.9			78.6
Net realized investment gains (losses)		57.5		1.7		.3			(1.3	)		58.2
Other revenue		5.7		19.6		.5			3.9			29.7

Total revenues		695.9		241.6		20.6			11.4			969.5

Loss and LAE		367.7		133.4		15.7			5.8			522.6
Insurance and reinsurance acquisition expenses		105.0		47.4		4.5			1.0			157.9
Other underwriting expenses		78.5		13.8		4.8			2.5			99.6
General and administrative expenses		6.9		2.9		—			5.8			15.6
Accretion of fair value adjustment to loss and LAE reserves		—		—		—			14.2			14.2
Interest expense on debt		—		.5		—			13.1			13.6

Total expenses		558.1		198.0		25.0			42.4			823.5

Pretax income (loss)	$	137.8	$	43.6	$	(4.4	)	$	(31.0	)	$	146.0

Selected Balance Sheet Data	OneBeacon		Reinsurance		Esurance			Other Operations			Total
March 31, 2004
Total investments	$	5,867.3	$	2,416.4	$	25.7		$	754.1		$	9,063.5
Reinsurance recoverable on paid and unpaid losses		3,046.6		910.9		—			(274.7	)		3,682.8
Total assets		10,442.6		4,271.6		240.2			542.4			15,496.8
Loss and LAE reserves		6,161.3		2,200.2		50.2			(355.9	)		8,055.8
Total liabilities		8,086.2		3,165.3		253.8			810.9			12,316.2
Total equity		2,356.4		1,106.3		(13.6	)		(268.5	)		3,180.6

December 31, 2003
Total investments	$	5,530.5	$	2,089.4	$	54.9		$	872.7		$	8,547.5
Reinsurance recoverable on paid and unpaid losses		3,068.6		791.5		—			(264.6	)		3,595.5
Total assets		10,316.5		3,701.2		252.0			701.3			14,971.0
Loss and LAE reserves		6,259.9		1,781.4		36.3			(349.4	)		7,728.2
Total liabilities		8,110.6		2,596.8		269.6			1,014.8			11,991.8
Total equity		2,205.9		1,104.4		(17.6	)		(313.5	)		2,979.2

			Three Months Ended March 31, 2004
			GAAP Ratios						Net Premiums
			Loss		Expense		Combined		Written		Earned
Specialty			48	%	30	%	78	%	$	213.3	$	210.8
Personal			65		32		97			160.3		169.2
Commercial			62		39		101			316.5		179.4

	Total ongoing		58	%	33	%	91	%	$	690.1	$	559.4

		Total(1)	63	%	33	%	96	%	$	690.9	$	591.7

			Three Months Ended March 31,
			2004		2003
GAAP Ratios:
	Loss		74	%	84	%
	Expense		32		50

		Total Combined	106	%	134	%