EX-99.1 2 y80179exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(VALIDUS LOGO)
     
 
  Validus Holdings, Ltd.
 
  Bermuda Commercial Bank Building
 
  19 Par-la-Ville Road
 
  Hamilton, HM 11
 
  Bermuda
 
    
November 5, 2009
  Mailing Address:
 
  Suite 1790
 
  48 Par-la-Ville Road
 
  Hamilton, HM 11
 
  Bermuda
 
    
 
  Telephone: (441) 278-9000
 
  Facsimile: (441) 278-9090
 
  Website: www.validusre.bm
ADDITIONAL DISCLOSURE ON THE VALIDUS HOLDINGS, LTD. (“VALIDUS”)
CONSOLIDATED INVESTMENT PORTFOLIO (THE “PORTFOLIO”)
As of September 30, 2009, the Portfolio had a fair market value of $5,707.5 million. Validus is providing the following additional disclosure on the composition of its Portfolio in response to the continued volatility in the global credit markets.
Validus Mortgage-Backed And Asset-Backed Securities Portfolio
                                                                         
    Market Values (in USD MM) as of September 30, 2009  
    RATING  
    Gov't     AAA     AA     A     BBB     BB     B     Other     Total  
Mortgage-Backed Securities
                                                                        
Residential Mortgage-Backed GNMA
     129.4       —       —       —       —       —       —       —       129.4  
FNMA
     319.4       —       —       —       —       —       —       —       319.4  
Freddie Mac
     197.0       —       —       —       —       —       —       —       197.0  
 
                                                      
Total Agency RMBS
     645.8       —       —       —       —                       —       645.8  
Non-Agency RMBS
     —       18.2       13.2       19.1       17.1       6.7       37.6       51.0       162.9  
 
                                                        
Total Residential Mortgage-Backed
     645.8       18.2       13.2       19.1       17.1       6.7       37.6       51.0       808.7  
Commercial Mortgage-Backed
     —       53.2       —       —       —       —       —       —       53.2  
 
                                                      
Total Mortgage-Backed Securities
     645.8       71.4       13.2       19.1       17.1       6.7       37.6       51.0       861.9  
Asset-Backed Securities
                                                                        
Sub Prime
     —       2.7       —       1.0       —       —       —       —       3.7  
Credit Cards
     —       2.4       —       —       —       —       —       —       2.4  
Autos
     —       37.2       0.7       —       —       —       —       —       37.9  
Student Loan
     —       3.8       —       —       —       —       —       —       3.8  
Stranded Cost & UK ABS
     —       4.6       —       —       —       —       —       —       4.6  
 
                                                      
Total Asset-Backed Securities
     —       50.7       0.7       1.0       —       —       —       —       52.4  
 
                                                      
Total Asset-Backed and Mortgage- Backed Securities
                                                                     914.3  
 
                                                                      
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.

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(VALIDUS LOGO)
Residential Mortgage Backed Securities (“RMBS”) (14.2% of total cash and investments*)
GSE (Government Sponsored Enterprise) RMBS (11.3%)
The Portfolio contains $645.8 million in GSE residential mortgage-backed securities.
Validus’ GSE RMBS allocation has a weighted-average effective duration of 1.8 years; a weighted-average life of 3.1 years; a fair market price of 104.93 and corresponding yield of 2.8%; a book yield of 4.5% and an unrealized gain of approximately $16.1 million.
Non-Agency RMBS — Prime (1.3%)
The Portfolio’s $72.4 million prime non-Agency RMBS allocation includes $14.1 million of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 55.8% of Validus’ prime non-Agency allocation consists of securities whose loans were originated in 2005 and prior; 13.0% of the prime RMBS allocation was issued in 2006. The allocation has a weighted average current credit enhancement of 8.4%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 738 and a loan-to-value ratio of 67.3%.
Validus’ overall prime non-agency allocation has a weighted-average effective duration of 3.0 years; a weighted-average life of 4.1 years; a fair market price of 84.00 and corresponding yield of 9.72%; an equivalent weighted-average book yield of 5.5%; and an unrealized loss of approximately $13.5 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Prime non-Agency RMBS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     —       —       4.7       11.6       6.3       22.6  
2006
     —       —       —       0.8       8.6       9.4  
2005
     9.2       8.0       7.0       0.7       5.3       30.2  
2004 and prior
     4.9       0.5       4.2       0.6       —       10.2  
 
                                    
Total
     14.1       8.5       15.9       13.7       20.2       72.4  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
Non-Agency RMBS — Alt-A (1.6%)
4.4% of the Portfolio’s $90.5 million Alt-A non-Agency RMBS allocation consists of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 49.6% of Validus’ Alt-A non-Agency allocation consists of securities whose loans were originated in 2006 and prior. The allocation has a weighted average current credit enhancement of 24.2%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 711 and a loan-to-value ratio of 78.4%.
Validus’ overall Alt-A non-agency allocation has a weighted-average effective duration of 2.9 years; a weighted-average life of 4.6 years; a fair market price of 80.89 and corresponding yield of 4.6%; an equivalent weighted-average book yield of 3.3%; and an unrealized loss of approximately $22.1 million.
The Company determined that markets for certain of its non-agency RMBS (“identified non-agency RMBS securities”), primarily Alt-A, were illiquid at September 30, 2009. As a result, the identified non-agency RMBS securities were deemed to be Level 3 securities as defined by Financial Accounting Standard 157 (“FAS 157”). The Company applied the guidance in FSP FAS 157-4 to determine the fair market value of the identified non-agency RMBS securities using a discounted cash flow model.
*Total cash and investments at 9/30/09 (MMs) = $5,707.5

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(VALIDUS LOGO)
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Alt-A non-Agency RMBS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     —       3.6       —       —       42.0       45.6  
2006
     —       —       —       —       19.9       19.9  
2005
     4.0       —       1.6       3.4       13.4       22.4  
2004 and prior
     —       1.1       1.5       —       —       2.6  
 
                                    
Total
     4.0       4.7       3.1       3.4       75.3       90.5  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
ABS (0.9% of total cash and investments *)
Auto & Credit Card ABS — Non Sub-Prime (0.9%)
The Portfolio’s $48.7 million allocation to ABS includes $48.0 million of AAA rated securities. The ABS portfolio excluding Sub-Prime consists of auto, credit card, stranded cost and UK ABS. 56.9% of Validus’ auto- and credit card-backed allocation consists of securities whose loans were originated in 2006 and prior.
Validus’ ABS allocation, excluding Sub-Prime, has a weighted-average effective duration of 0.3 years; a weighted-average life of 1.3 years; a fair market price of 100.64 and corresponding yield of 1.6%; a book yield of 4.7% and an unrealized gain of approximately $0.7 million.
Home Equity ABS — Sub-Prime (0.1%)
The Portfolio’s $3.7 million sub-prime home equity ABS allocation includes $2.7 million of AAA rated securities. 70.3% of Validus’ sub-prime allocation consists of securities issued in 2006 and prior. The allocation has a weighted-average current credit enhancement of 41.0%. The credit enhancement will continue to increase as the securities pay down. The securities have a weighted-average FICO score of 617 and a loan-to-value ratio of 78.6%.
Validus’ overall home equity ABS allocation has a weighted-average effective duration of 1.4 years; a weighted-average life of 1.6 years; a fair market price of 89.23 and corresponding yield of 13.55%; a book yield of 0.5%; and an unrealized loss of approximately $0.5 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Sub prime HEL ABS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     1.1       —       —       —       —       1.1  
2006
     1.0       —       1.0       —       —       2.0  
2005
     —       —       —       —       —       —  
2004 and prior
     0.6       —       —       —       —       0.6  
 
                                    
Total
     2.7       —       1.0       —       —       3.7  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.

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CMBS (0.9% of total cash and investments *)
The Portfolio’s $53.2 million CMBS allocation consists entirely of AAA rated securities. The Portfolio is well-diversified with seasoned deals that have collateral with transparent histories. 86.7% of Validus’
*Total cash and investments at 9/30/09 (MMs) = $5,707.5
CMBS allocation consists of securities issued in 2004 and prior. The allocation has a weighted average current credit enhancement of 31.9% and defeasance adjusted credit enhancement of 46.4%, both of which will increase as the securities pay down. The average loan-to-value ratio is 70.2% and the debt service coverage ratio in excess of 1.49.
Validus’ overall CMBS allocation has a weighted-average effective duration of 0.9 years; a weighted-average life of 1.0 years; a fair market price of 102.35 and corresponding yield of 3.1%; a book yield of 5.2%; and an unrealized gain of approximately $1.0 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of CMBS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
                                               
2007
     7.1       —       —       —       —       7.1  
2006
     —       —       —       —       —       —  
2005
     —       —       —       —       —       —  
2004 and prior
     46.2       —       —       —       —       46.2  
 
                                    
Total
     53.3       —       —       —       —       53.3  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
*Total cash and investments at 9/30/09 (MMs) = $5,707.5

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As of September 30, 2009, the Portfolio’s allocation to Corporate and Financial issuers was $1,997.8 million and $724.4 million, respectively. The following table presents the ten largest Corporate and ten largest Financial issuers as of September 30, 2009:
                 
Corporate Issuers  
            % of Total  
    Fair Value     Cash and  
ISSUER   ($MM)     Investments  
GENERAL ELECTRIC
   $ 97.4       1.7 %
WELLS FARGO
     93.0       1.6 %
JP MORGAN CHASE & CO
     72.6       1.3 %
BANK OF AMERICA
     57.9       1.0 %
VERIZON
     50.5       0.9 %
CREDIT SUISSE
     50.4       0.9 %
BP PLC
     44.8       0.8 %
LLOYDS BANKING GROUP PLC
     43.5       0.8 %
MORGAN STANLEY
     40.5       0.7 %
AT&T
     38.1       0.7 %
 
            
Sub-total
   $ 588.7       10.4 %
 
            
                 
Financial Issuers  
            % of Total  
    Fair Value     Cash and  
ISSUER   ($MM)     Investments  
GENERAL ELECTRIC
   $ 97.4       1.7 %
WELLS FARGO
     93.0       1.6 %
JP MORGAN CHASE & CO
     72.6       1.3 %
BANK OF AMERICA
     57.9       1.0 %
CREDIT SUISSE
     50.4       0.9 %
LLOYDS BANKING GROUP PLC
     43.5       0.8 %
MORGAN STANLEY
     40.5       0.7 %
GOLDMAN SACHS
     30.0       0.5 %
HSBC HOLDINGS
     29.3       0.5 %
RABOBANK NEDERLAND
     25.2       0.4 %
 
            
Sub-total
   $ 539.8       9.4 %
 
            
 
    1 Issuers exclude government-backed, government-sponsored enterprises and cash and cash equivalents.
 
    2 Credit exposures represent only direct exposure to fixed maturities and short-term investments of the parent issuer and its major subsidiaries. These exposures exclude asset and mortgage backed securities that were issued, sponsored or serviced by the parent.

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