-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TczgJx/pxpiRpOVP1GCLD+NyMyt5E2tz+sC3tFlAg9V1rCpP6MWoIiTPOPe9yM9R Q5KnIdIsIFnhv+y485TZOg== 0000950123-09-058448.txt : 20091105 0000950123-09-058448.hdr.sgml : 20091105 20091105163734 ACCESSION NUMBER: 0000950123-09-058448 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20091105 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20091105 DATE AS OF CHANGE: 20091105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALIDUS HOLDINGS LTD CENTRAL INDEX KEY: 0001348259 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33606 FILM NUMBER: 091161614 BUSINESS ADDRESS: STREET 1: 19 PAR-LA-VILLE ROAD CITY: HAMILTON HM11 BERMUDA STATE: D0 ZIP: 00000 BUSINESS PHONE: 441-278-9000 MAIL ADDRESS: STREET 1: 19 PAR-LA-VILLE ROAD CITY: HAMILTON HM11 BERMUDA STATE: D0 ZIP: 00000 8-K 1 y80227e8vk.htm FORM 8-K e8vk
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 2009
Commission file number 001-33606
 
VALIDUS HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
     
BERMUDA   98-0501001
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
19 Par-La-Ville Road, Hamilton, HM 11 Bermuda
(Address of principal executive offices)
Registrant’s telephone number, including area code: (441) 278-9000

Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 2.02 Results of Operations and Financial Condition.
     On November 5, 2009, Validus Holdings, Ltd. issued a press release reporting its earnings for the three months ended September 30, 2009. A copy of this press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
     The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are filed herewith:
     
Exhibit No.   Description
 
    
99.1
   Press Release dated November 5, 2009 announcing the earnings of Validus Holdings, Ltd. for the quarter ended September 30, 2009

 

 

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 hereunto duly authorized.
Date: November 5, 2009
             
    VALIDUS HOLDINGS, LTD.
     (Registrant)		    
 
            
 
  By:
Name: 		  /s/ Joseph E. (Jeff) Consolino
 
Joseph E. (Jeff) Consolino 		   
 
  Title:   Executive Vice President & Chief Financial Officer    

 

EX-99.1 2 y80227exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(VALIDUS LOGO)
     
Contacts:
    
Investors:
  Media:
Validus Holdings, Ltd.
  Jamie Tully/Jonathan Doorley
Jon Levenson, Senior Vice President
  Sard Verbinnen & Co.
+1-441-278-9000
  +1-212-687-8080
Jon.Levenson@Validusholdings.com
 
 
  Roddy Watt / Tony Friend
 
  College Hill
 
  +44 (0) 207-457-2020 
VALIDUS ANNOUNCES RECORD THIRD QUARTER 2009 NET OPERATING INCOME OF $145.6
MILLION, ANNUALIZED OPERATING RETURN ON AVERAGE EQUITY OF 19.0%
Net income of $499.2 million
Diluted Book Value Per Share of $28.61 at September 30, 2009
     Hamilton, Bermuda, November 5, 2009 — Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR) today reported net income of $499.2 million, or $5.21 per diluted common share for the three months ended September 30, 2009, compared with a net (loss) of ($126.3) million, or ($1.71) per diluted common share, for the three months ended September 30, 2008. Net income for the nine months ended September 30, 2009 was $731.6 million, or $8.65 per diluted share, compared with $16.1 million, or $0.14 per diluted share, for the nine months ended September 30, 2008.
     Net operating income for the three months ended September 30, 2009 was $145.6 million, or $1.52 per diluted share, compared with a net operating (loss) of ($53.1) million, or ($0.73) per diluted common share, for the three months ended September 30, 2008. Net operating income for the nine months ended September 30, 2009 was $356.4 million, or $4.21 per diluted share, compared with net operating income of $124.1 million, or $1.53 per diluted common share, for the nine months ended September 30, 2008.
     Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items, including the gain on bargain purchase, net of expenses relating to the acquisition of IPC Holdings, Ltd. (“IPC”) Reconciliations of this measure to net income, the most directly comparable GAAP measure, are presented at the end of this release.
     Commenting on third quarter results and 2009 business conditions, Validus’ Chairman and Chief Executive Officer Ed Noonan stated: “We completed the IPC amalgamation on September 4, 2009. As a consequence of the acquisition and of strong underlying financial results for our Validus Re and Talbot segments, we closed the quarter with total shareholders’ equity of $3.97 billion, total assets of $7.18 billion and total investments and cash of $5.71 billion. Diluted book value per share rose to $28.61 at September 30, 2009, which when combined with our $0.20 quarterly dividend resulted in an increase in diluted book value per share plus dividends of 10.5% in the quarter. Looking toward 2010, we approach the January renewal season with $4.3 billion of capital and the ability and intent to support our clients with our expanded resources.”
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

1

 

(VALIDUS LOGO)
Third quarter 2009 results
     Highlights for the third quarter include the following:
  •   Gross premiums written for the three months ended September 30, 2009 were $331.0 million compared to $269.2 million for the three months ended September 30, 2008, an increase of $61.8 million, or 23.0%.
 
  •   Net premiums earned for the three months ended September 30, 2009 were $374.7 million compared to $339.3 million for the three months ended September 30, 2008, an increase of $35.4 million, or 10.4%.
 
  •   Combined ratio of 66.7% which included $32.0 million of favorable prior year loss reserve development, benefiting the loss ratio by 8.5 percentage points.
 
  •   Net operating income for the three months ended September 30, 2009 of $145.6 million compared to a loss of ($53.1) million for the three months ended September 30, 2008, an increase of $198.7 million, or 374.5%, primarily attributable to an increased contribution from underwriting income of $200.1 million and lower finance charges of $3.3 million, offset by lower investment income of $6.8 million.
 
  •   Net income for the three months ended September 30, 2009 of $499.2 million compared to a loss of ($126.3) million for the three months ended September 30, 2008, an increase of $625.5 million, or 495.2%, reflecting an increase in operating income of $198.7 million, an increase in net unrealized investment gains of $65.1 million, a decrease in foreign exchange losses of $39.7 million, and the gain on bargain purchase, net of expenses of $302.9 million.
 
  •   Annualized return on average equity of 65.3% and annualized operating return on average equity of 19.0%.
     Highlights for the nine months ended September 30, 2009 include the following:
  •   Gross premiums written for the nine months ended September 30, 2009 were $1,366.0 million compared to $1,170.7 million for the nine months ended September 30, 2008, an increase of $195.2 million, or 16.7%.
 
  •   Net premiums earned for the nine months ended September 30, 2009 were $1,021.7 million compared to $940.5 million for the nine months ended September 30, 2008, an increase of $81.2 million, or 8.6%.
 
  •   Combined ratio of 70.9% which included $53.3 million of favorable prior year loss reserve development, benefiting the loss ratio by 5.2 percentage points.
 
  •   Net operating income for the nine months ended September 30, 2009 of $356.4 million compared to $124.1 million for the nine months ended September 30, 2008, an increase of $232.2 million, or 187.1%, primarily reflecting increased contribution from underwriting income of $231.2 million and lower finance charges of $19.1 million, offset by lower investment income of $25.6 million.
 
  •   Net income for the nine months ended September 30, 2009 of $731.6 million compared to $16.1 million for the nine months ended September 30, 2008, an increase of $715.6 million, reflecting growth in operating income of $232.2 million, an increase in net unrealized investment gains of $182.4 million, a gain on bargain purchase, net of expenses of $287.1 million offset in part by an increase in net realized losses on investments of $12.3 million.
 
  •   Annualized return on average equity of 38.7% and annualized operating return on average equity of 18.9%.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

2

 

(VALIDUS LOGO)
Validus Re Segment Results
     Gross premiums written for the three months ended September 30, 2009 were $124.7 million compared to $125.0 million for the three months ended September 30, 2008, a decrease of $0.3 million, or 0.3%. Gross premiums written for the three months ended September 30, 2009 were comprised of $80.6 million of property premiums, $28.4 million of marine premiums and $15.7 million of specialty premiums compared to $97.5 million of property premiums, $19.2 million of marine premiums and $8.3 million of specialty premiums in the three months ended September 30, 2008.
     Net premiums earned for the three months ended September 30, 2009 were $199.8 million compared to $181.4 million for the three months ended September 30, 2008, an increase of $18.4 million, or 10.1%.
     The combined ratio for the three months ended September 30, 2009 was 49.2% compared to 139.7% for the three months ended September 30, 2008, a decrease of (90.5) percentage points.
     The loss ratio for the three months ended September 30, 2009 was 23.0% compared to 119.7% for the three months ended September 30, 2008, a decrease of (96.7) percentage points, due primarily to lower incidences of significant property and other loss events in the three months ended September 30, 2009, which added 95.2 points to the loss ratio for the three months ended September 30, 2008. The loss ratio for the three months ended September 30, 2009 included favorable prior year loss reserve development of $19.3 million (benefiting the loss ratio by 9.6 percentage points).
     Gross premiums written for the nine months ended September 30, 2009 were $734.4 million compared to $643.9 million for the nine months ended September 30, 2008, an increase of $90.5 million, or 14.1%. Gross premiums written for the nine months ended September 30, 2009 were comprised of $499.1 million of property premiums, $153.9 million of marine premiums and $81.3 million of specialty premiums compared to $472.0 million of property premiums, $111.9 million of marine premiums and $60.0 million of specialty premiums in the nine months ended September 30, 2008.
     Net premiums earned for the nine months ended September 30, 2009 were $537.9 million compared to $489.2 million for the nine months ended September 30, 2008, an increase of $48.7 million, or 10.0%.
     The combined ratio for the nine months ended September 30, 2009 was 52.8% compared to 87.7% for the nine months ended September 30, 2008, a decrease of (34.9) percentage points.
     The loss ratio for the nine months ended September 30, 2009 was 26.5% compared to 66.4% for the nine months ended September 30, 2008, a decrease of (39.9) percentage points. The loss ratio for the nine months ended September 30, 2009 included favorable prior year loss reserve development of $24.1 million (benefiting the loss ratio by 4.5 percentage points).
Talbot Segment Results
     Gross premiums written for the three months ended September 30, 2009 were $227.3 million compared to $157.3 million for the three months ended September 30, 2008, an increase of $70.0 million, or 44.5%. Gross premiums written for the three months ended September 30, 2009 were comprised of $79.2 million of property premiums, $69.6 million of marine premiums and $78.5 million of specialty premiums compared to $35.2 million of property premiums, $66.7 million of marine premiums and $55.4 million of specialty premiums in the three months ended September 30, 2008.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

3

 

(VALIDUS LOGO)
     Net premiums earned for the three months ended September 30, 2009 were $174.9 million compared to $157.9 million for the three months ended September 30, 2008, an increase of $17.0 million, or 10.8%.
     The combined ratio for the three months ended September 30, 2009 was 83.5% compared to 97.7% for the three months ended September 30, 2008, a decrease of (14.2) percentage points.
     The loss ratio for the three months ended September 30, 2009 was 50.4% compared to 64.2% for the three months ended September 30, 2008, a decrease of (13.8) percentage points. The loss ratio for the three months ended September 30, 2009 included favorable prior year loss reserve development of $12.8 million (benefiting the loss ratio by 7.3 percentage points).
     Gross premiums written for the nine months ended September 30, 2009 were $690.4 million compared to $556.3 million for the nine months ended September 30, 2008, an increase of $134.0 million, or 24.1%. Gross premiums written for the nine months ended September 30, 2009 were comprised of $218.7 million of property premiums, $244.7 million of marine premiums and $227.0 million of specialty premiums compared to $123.0 million of property premiums, $230.8 million of marine premiums and $202.6 million of specialty premiums in the nine months ended September 30, 2008.
     Net premiums earned for the nine months ended September 30, 2009 were $483.8 million compared to $451.3 million for the nine months ended September 30, 2008, an increase of $32.4 million, or 7.2%.
     The combined ratio for the nine months ended September 30, 2009 was 87.3% compared to 92.9% for the nine months ended September 30, 2008, a decrease of (5.6) percentage points.
     The loss ratio for the nine months ended September 30, 2009 was 51.3% compared to 56.7% for the nine months ended September 30, 2008, a decrease of (5.4) percentage points. The loss ratio for the nine months ended September 30, 2009 included favorable prior year loss reserve development of $29.2 million (benefiting the loss ratio by 6.0 percentage points).
Corporate Segment Results
     Corporate results are comprised of executive and board expenses, internal and external audit expenses, interest and costs incurred in connection with the Company’s junior subordinated deferrable debentures and other costs relating to the Company as a whole. General and administrative expenses for the three months ended September 30, 2009 were $4.6 million compared to $4.3 million for the three months ended September 30, 2008, an increase of $0.3 million, or 7.6%. Additionally, there was $302.9 million in income from the gain on bargain purchase, net of expenses relating to the acquisition of IPC during the quarter. Share compensation expense for the three months ended September 30, 2009 was $2.7 million compared to $3.0 million for the three months ended September 30, 2008, a decrease of $0.3 million, or 10.3%.
     General and administrative expenses for the nine months ended September 30, 2009 were $13.8 million compared to $15.3 million for the nine months ended September 30, 2008, a decrease of $1.5 million, or 9.5%. Additionally, there was $287.1 million in income from the gain on bargain purchase, net of expenses relating to the acquisition of IPC during the quarter. Share compensation expense for the nine months ended September 30, 2009 was $8.1 million compared to $11.9 million for the nine months ended September 30, 2008, a decrease of $3.9 million, or 32.4%, due to the vesting of a tranche of restricted stock to senior executives during the three months ended March 31, 2009.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

4

 

(VALIDUS LOGO)
Investments
     Net investment income for the three months ended September 30, 2009 was $29.5 million compared to $36.4 million for the three months ended September 30, 2008, a decrease of $6.8 million, or 18.8%. Net investment income for the nine months ended September 30, 2009 was $83.3 million compared to $108.9 million for the nine months ended September 30, 2008, a decrease of $25.6 million, or 23.5%. Net investment income decreased as a result of reduced market yields and higher average cash balances.
     Net realized gains on investments for the three months ended September 30, 2009 were $5.4 million compared to net realized (losses) of ($13.7) million for the three months ended September 30, 2008. Net realized (losses) on investments for the nine months ended September 30, 2009 were ($20.6) million compared to net realized (losses) of ($8.3) million for the nine months ended September 30, 2008.
     Net unrealized gains on investments for the three months ended September 30, 2009 were $50.4 million compared to net unrealized (losses) of ($14.6) million for the three months ended September 30, 2008. Net unrealized gains on investments for the nine months ended September 30, 2009 were $109.8 million compared to net unrealized (losses) of ($72.6) million for the nine months ended September 30, 2008. The net unrealized gains in the three months ended September 30, 2009 resulted primarily from unrealized gains in non-agency RMBS and corporate bonds sectors, partially offset by unrealized losses in US government and government agency securities. As at September 30, 2009, the unrealized gain on investments was $25.1 million, which represented 0.4% of total investments and cash.
Finance Expenses
     Finance expenses for the three months ended September 30, 2009 were $11.3 million compared to $14.5 million for the three months ended September 30, 2008, a decrease of $3.3 million, or 22.5%. Finance expenses for the nine months ended September 30, 2009 were $29.7 million compared to $48.8 million for the nine months ended September 30, 2008, a decrease of $19.1 million, or 39.1%. These decreases primarily related to the termination of third-party capital for Talbot commencing with the 2008 year of account. Finance expenses consisted principally of interest on the Company’s junior subordinated deferrable debentures and third-party capital costs for Talbot.
Shareholders’ Equity and Capitalization
     As at September 30, 2009, shareholders’ equity was $3.97 billion. Diluted book value per common share was $28.61 compared to $26.08 at June 30, 2009. Diluted book value per common share is a non-GAAP financial measure. A reconciliation of this measure to shareholders’ equity is presented at the end of this release.
     Total capitalization at September 30, 2009 was $4.3 billion, including $304.3 million of junior subordinated deferrable debentures.
Share Repurchase Program Authorization
     The Company also announced today that on November 4, 2009, the Board of Directors of the Company (the “Board”) approved a share repurchase program, authorizing the Company to repurchase up to $400 million of its common shares. The Company expects the purchases to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board at any time.
Conference Call
     The Company will host a conference call for analysts and investors on November 6, 2009 at 9:00 AM (Eastern) to discuss the third quarter 2009 financial results and related matters. The conference call can be accessed via telephone by dialing 1-866-713-8566 (toll-free U.S.) or 1-617-597-5325 (international) and entering the pass code 31062383. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 20, 2009 by dialing 1-888-286-8010 (toll-free U.S) or 1-617-801-6888 (international) and entering the pass code 45321761.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

5

 

(VALIDUS LOGO)
     This conference call will also be available through a live audio webcast accessible through the Investor Relations section of the Company’s website located at www.validusholdings.com. In addition, a financial supplement relating to our financial results for the three and nine months ended September 30, 2009 is available in the Investor Relations section of the Company’s website.
About Validus Holdings, Ltd.
     Validus Holdings, Ltd. is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”). Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

6

 

Validus Holdings, Ltd.
Consolidated Balance Sheets
As at September 30, 2009 (Unaudited) and December 31, 2008
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                 
    September 30,     December 31,  
    2009     2008  
    (Unaudited)          
Assets
                
Fixed maturities, at fair value
(amortized cost: 2009 - $4,566,801; 2008 - $2,553,018)
   $ 4,590,143     $ 2,454,501  
Short-term investments, at fair value
(amortized cost: 2009 - $595,557; 2008 - $379,537)
     594,581       377,036  
Other investments, at fair value
(amortized cost: 2009 - $126,301)
     129,012       —  
Cash and cash equivalents
     393,788       449,848  
 
            
Total investments and cash
     5,707,524       3,281,385  
Premiums receivable
     723,029       408,259  
Deferred acquisition costs
     139,157       108,156  
Prepaid reinsurance premiums
     101,711       22,459  
Securities lending collateral
     100,053       98,954  
Loss reserves recoverable
     172,101       208,796  
Paid losses recoverable
     10,064       1,388  
Net receivable for investments sold
     —       490  
Income taxes recoverable
     3,027       1,365  
Intangibles assets
     124,096       127,217  
Goodwill
     20,393       20,393  
Accrued investment income
     43,190       20,433  
Other assets
     32,726       23,185  
 
            
Total assets
   $ 7,177,071     $ 4,322,480  
 
            
 
                
Liabilities
                
Reserve for losses and loss expenses
   $ 1,624,743     $ 1,305,303  
Unearned premiums
     955,049       539,450  
Reinsurance balances payable
     40,879       33,042  
Securities lending payable
     101,040       105,688  
Deferred income taxes
     26,110       21,779  
Net payable for investments purchased
     39,224       —  
Accounts payable and accrued expenses
     119,534       74,184  
Debentures payable
     304,300       304,300  
 
            
Total liabilities
     3,210,879       2,383,746  
 
            
 
                
Shareholders’ equity
                
Common shares, 571,428,571 authorized, par value $0.175 Issued and outstanding (2009 - 131,107,196; 2008 - 75,624,697)
     22,944       13,235  
Additional paid-in-capital
     2,748,121       1,412,635  
Accumulated other comprehensive (loss) income
     (4,976 )     (7,858 )
Retained earnings
     1,200,103       520,722  
 
            
Total shareholders’ equity
     3,966,192       1,938,734  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 7,177,071     $ 4,322,480  
 
            
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

7

 

Validus Holdings, Ltd.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and nine months ended September 30, 2009 and 2008 (Unaudited)
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Three months ended     Nine months ended  
    September 30,
2009		     September 30,
2008		     September 30,
2009		     September 30,
2008		  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Revenues
                                
Gross premiums written
   $ 331,028     $ 269,236     $ 1,365,951     $ 1,170,749  
Reinsurance premiums ceded
     (67,687 )     (35,139 )     (202,489 )     (121,438 )
 
                        
Net premiums written
     263,341       234,097       1,163,462       1,049,311  
Change in unearned premiums
     111,376       105,229       (141,786 )     (108,823 )
 
                        
Net premiums earned
     374,717       339,326       1,021,676       940,488  
Gain on bargain purchase, net of expenses
     302,950       —       287,099       —  
Net investment income
     29,532       36,379       83,267       108,857  
Realized gain on repurchase of debentures
     —       —       —       8,752  
Net realized gains (losses) on investments
     5,429       (13,667 )     (20,642 )     (8,348 )
Net unrealized gains (losses) on investments
     50,437       (14,649 )     109,839       (72,608 )
Other income
     1,101       1,269       2,875       3,666  
Foreign exchange (losses)
     (5,244 )     (44,933 )     (1,012 )     (35,843 )
 
                        
Total revenues
     758,922       303,725       1,483,102       944,964  
 
                        
 
                                
Expenses
                                
Losses and loss expenses
     134,152       318,464       390,736       580,578  
Policy acquisition costs
     64,236       60,425       190,125       173,545  
General and administrative expenses
     46,036       30,120       125,315       101,139  
Share compensation expenses
     5,862       6,012       18,848       19,818  
Finance expenses
     11,257       14,517       29,732       48,796  
 
                        
Total expenses
     261,543       429,538       754,756       923,876  
 
                        
 
                                
Net income (loss) before taxes
     497,379       (125,813 )     728,346       21,088  
Tax benefit (expense)
     1,799       (487 )     3,301       (4,992 )
 
                        
Net income (loss)
   $ 499,178     $ (126,300 )   $ 731,647     $ 16,096  
 
                        
 
                                
Comprehensive income
                                
Foreign currency translation adjustments
     (915 )     (1,556 )     2,882       (1,479 )
 
                        
Comprehensive income (loss)
   $ 498,263     $ (127,856 )   $ 734,529     $ 14,617  
 
                        
 
                                
Earnings per share
                                
Weighted average number of common shares and common share equivalents outstanding
                                
Basic
     92,492,373       74,864,724       81,458,329       74,435,840  
Diluted
     95,834,809       74,864,724       84,626,505       77,922,718  
 
                                
Basic earnings (loss) per share
   $ 5.38     $ (1.71 )   $ 8.92     $ 0.15  
 
                        
Diluted earnings (loss) per share
   $ 5.21     $ (1.71 )   $ 8.65     $ 0.14  
 
                        
 
                                
Cash dividends declared per share
   $ 0.20     $ 0.20     $ 0.60     $ 0.60  
 
                        
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

8

 

Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended September 30, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
     The following tables summarize the underwriting results of our operating segments and corporate segment:
                                 
                    Corporate &        
Three months ended September 30, 2009   Validus Re     Talbot     Eliminations     Total  
Gross premiums written
   $ 124,704     $ 227,325     $ (21,001 )   $ 331,028  
Reinsurance premiums ceded
     (38,435 )     (50,253 )     21,001       (67,687 )
 
                        
Net premiums written
     86,269       177,072       —       263,341  
Change in unearned premiums
     113,499       (2,123 )     —       111,376  
 
                        
Net premiums earned
     199,768       174,949       —       374,717  
Losses and loss expenses
     45,987       88,165       —       134,152  
Policy acquisition costs
     32,648       33,106       (1,518 )     64,236  
General and administrative expenses
     17,987       23,424       4,625     46,036  
Share compensation expenses
     1,766       1,371       2,725       5,862  
 
                        
 
                                
Underwriting income (loss)
   $ 101,380     $ 28,883     $ (5,832 )   $ 124,431   
 
                        
 
                                
Net investment income
     23,420       7,629       (1,517 )     29,532  
Net realized gains (losses) on investments
     5,397       32       —       5,429  
Net unrealized gains (losses) on investments
     40,893       9,544       —       50,437  
Other income
     1,847       772       (1,518 )     1,101  
Finance expenses
     (393 )     (3,926 )     (6,938 )     (11,257 )
Foreign exchange gains (losses)
     739       (5,983 )     —       (5,244 )
Gain on bargain purchase, net of expenses
     —       —       302,950       302,950  
 
                        
 
                                
Net income (loss) before taxes
     173,283       36,951       287,145       497,379  
Tax (expense) benefit
     (41 )     1,840       —       1,799  
 
                        
Net income (loss)
   $ 173,242     $ 38,791     $ 287,145     $ 499,178  
 
                        
 
                                
Selected ratios (1)
                                
Losses and loss expenses
     23.0 %     50.4 %             35.8 %
Policy acquisition costs
     16.3 %     18.9 %             17.1 %
General and administrative expenses
     9.9 %     14.2 %             13.8 %
 
                          
Expense ratio
     26.2 %     33.1 %             30.9 %
 
                          
Combined ratio
     49.2 %     83.5 %             66.7 %
 
                          
 
                                
Total assets
   $ 5,087,544     $ 2,049,647     $ 39,880     $ 7,177,071  
 
                        
 
(1)   Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

9

 

Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended September 30, 2008
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
                    Corporate &        
Three months ended September 30, 2008   Validus Re     Talbot     Eliminations     Total  
Gross premiums written
   $ 125,029     $ 157,307     $ (13,100 )   $ 269,236  
Reinsurance premiums ceded
     (36,286 )     (11,953 )     13,100       (35,139 )
 
                        
Net premiums written
     88,743       145,354       —       234,097  
Change in unearned premiums
     92,653       12,576       —       105,229  
 
                        
Net premiums earned
     181,396       157,930       —       339,326  
Losses and loss expenses
     217,081       101,383       —       318,464  
Policy acquisition costs
     26,520       34,026        (121 )     60,425  
General and administrative expenses
     7,972       17,851       4,297       30,120  
Share compensation expenses
     1,809       1,164       3,039       6,012  
 
                        
 
                                
Underwriting income (loss)
   $ (71,986 )   $ 3,506     $ (7,215 )   $ (75,695 )
 
                        
 
                                
Net investment income
     25,984       11,737       (1,342 )     36,379  
Net realized gains (losses) on investments
     (12,528 )     (1,139 )     —       (13,667 )
Net unrealized gains (losses) on investments
     (15,946 )     1,297       —       (14,649 )
Other income
     121       1,269       (121 )     1,269  
Finance expenses
     (213 )     (7,201 )     (7,103 )     (14,517 )
Foreign exchange (losses)
     (22,919 )     (22,014 )     —       (44,933 )
 
                        
 
                                
Net income (loss) before taxes
     (97,487 )     (12,545 )     (15,781 )     (125,813 )
Tax (expense)
     (31 )     (456 )     —       (487 )
 
                        
Net income (loss)
   $ (97,518 )   $ (13,001 )   $ (15,781 )   $ (126,300 )
 
                        
 
Selected ratios (1):
                                
Losses and loss expenses
     119.7 %     64.2 %             93.9 %
Policy acquisition costs
     14.6 %     21.5 %             17.8 %
General and administrative expenses
     5.4 %     12.0 %             10.6 %
 
                          
Expense ratio
     20.0 %     33.5 %             28.4 %
 
                          
Combined ratio
     139.7 %     97.7 %             122.3 %
 
                          
 
                                
Total assets
   $ 2,741,721     $ 1,763,614     $ 4,261     $ 4,509,596  
 
                        
 
(1)   Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

10

 

Validus Holdings, Ltd.
Consolidated Statements of Operations
For the nine months ended September 30, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
     The following tables summarize the underwriting results of our operating segments and corporate segment:
                                 
                    Corporate &        
Nine months ended September 30, 2009   Validus Re     Talbot     Eliminations     Total  
Gross premiums written
   $ 734,390     $ 690,357     $ (58,796 )   $ 1,365,951  
Reinsurance premiums ceded
     (94,794 )     (166,491 )     58,796       (202,489 )
 
                        
Net premiums written
     639,596     523,866       —       1,163,462  
Change in unearned premiums
     (101,684 )     (40,102 )     —       (141,786 )
 
                        
Net premiums earned
     537,912       483,764       —       1,021,676  
Losses and loss expenses
     142,570       248,166       —       390,736  
Policy acquisition costs
     90,346     102,378       (2,599 )     190,125  
General and administrative expenses
     45,928       65,565       13,822       125,315  
Share compensation expenses
     4,986       5,804       8,058       18,848  
 
                        
 
                                
Underwriting income (loss)
   $ 254,082     $ 61,851     $ (19,281 )   $ 296,652  
 
                        
 
                                
Net investment income
     64,989     22,816       (4,538 )     83,267  
Net realized (losses) gains on investments
     (14,282 )     (6,360 )     —       (20,642 )
Net unrealized gains (losses) on investments
     95,693       14,146       —       109,839  
Other income
     3,034       2,440       (2,599 )     2,875  
Finance expenses
     (1,233 )     (7,688 )     (20,811 )     (29,732 )
Foreign exchange (losses) gains
     (641 )     (427 )     56       (1,012 )
Gain on bargain purchase, net of expenses
     —       —       287,099       287,099  
 
                        
 
                                
Net income before taxes
     401,642       86,778       239,926       728,346  
Tax (expense) benefit
     (107 )     3,408       —       3,301  
 
                        
Net income
   $ 401,535     $ 90,186     $ 239,926     $ 731,647  
 
                        
 
                                
Selected ratios (1)
                                
Losses and loss expenses
     26.5 %     51.3 %             38.2 %
Policy acquisition costs
     16.8 %     21.2 %             18.6 %
General and administrative expenses
     9.5 %     14.8 %             14.1 %
 
                          
Expense ratio
     26.3 %     36.0 %             32.7 %
 
                          
Combined ratio
     52.8 %     87.3 %             70.9 %
 
                          
 
                                
Total assets
   $ 5,087,544     $ 2,049,647     $ 39,880     $ 7,177,071  
 
                        
 
(1)   Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

11

 

Validus Holdings, Ltd.
Consolidated Statements of Operations
For the nine months ended September 30, 2008
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
                    Corporate &        
Nine months ended September 30, 2008   Validus Re     Talbot     Eliminations     Total  
Gross premiums written
   $ 643,898     $ 556,335     $ (29,484 )   $ 1,170,749  
Reinsurance premiums ceded
     (61,237 )     (89,685 )     29,484       (121,438 )
 
                        
Net premiums written
     582,661       466,650       —       1,049,311  
Change in unearned premiums
     (93,498 )     (15,325 )     —       (108,823 )
 
                        
Net premiums earned
     489,163       451,325       —       940,488  
Losses and loss expenses
     324,673       255,905       —       580,578  
Policy acquisition costs
     72,232       101,458       (145 )     173,545  
General and administrative expenses
     27,306       58,561       15,272       101,139  
Share compensation expenses
     4,632       3,266       11,920       19,818  
 
                        
 
                                
Underwriting income (loss)
   $ 60,320     $ 32,135     $ (27,047 )   $ 65,408  
 
                        
Net investment income
     76,736       34,445       (2,324 )     108,857  
Realized gain on repurchase of debentures
     —       —       8,752       8,752  
Net realized (losses) gains on investments
     (13,711 )     5,363       —       (8,348 )
Net unrealized gains (losses) on investments
     (58,617 )     (13,991 )     —       (72,608 )
Other income
     145       3,666       (145 )     3,666  
Finance expenses
     (655 )     (25,821 )     (22,320 )     (48,796 )
Foreign exchange (losses)
     (15,647 )     (20,196 )     —       (35,843 )
 
                        
 
                                
Net income (loss) before taxes
     48,571       15,601       (43,084 )     21,088  
Tax (expense)
     (78 )     (4,914 )     —       (4,992 )
 
                        
 
                                
Net income (loss)
   $ 48,493     $ 10,687     $ (43,084 )   $ 16,096  
 
                        
 
                                
Selected ratios (1)
                                
Losses and loss expenses
     66.4 %     56.7 %             61.7 %
Policy acquisition costs
     14.8 %     22.5 %             18.5 %
General and administrative expenses
     6.5 %     13.7 %             12.9 %
 
                          
Expense ratio
     21.3 %     36.2 %             31.4 %
 
                          
Combined ratio
     87.7 %     92.9 %             93.1 %
 
                          
 
                                
Total assets
   $ 2,741,721     $ 1,763,614     $ 4,261     $ 4,509,596  
 
                        
 
(1)   Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

12

 

Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation
Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity
For the three and nine months ended September 30, 2009 and 2008
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Three months ended     Nine months ended  
    September 30,     September 30,     September 30,     September 30,  
    2009      2008      2009      2008   
Net income (loss)
   $ 499,178     $ (126,300 )   $ 731,647     $ 16,096  
Adjustments for:
                                
Gain on bargain purchase, net of expenses
     (302,950 )     —       (287,099 )     —  
Realized gain on repurchase of debentures
     —     —       —       (8,752 )
Net realized (gains) losses on investments
     (5,429 )     13,667       20,642       8,348  
Net unrealized (gains) losses on investments
     (50,437 )     14,649       (109,839 )     72,608  
Foreign exchange losses
     5,244       44,933       1,012       35,843  
 
                        
Net operating income (loss)
     145,606       (53,051 )     356,363       124,143  
Less: Dividends and distributions
                                
declared on outstanding warrants
     (1,591 )     (1,739 )     (4,917 )     (5,217 )
 
                        
Net operating income (loss), adjusted
   $ 144,015     $ (54,790 )   $ 351,446     $ 118,926  
 
                        
 
                                
Net income (loss) per share — diluted
   $ 5.21     $ (1.71 )   $ 8.65     $ 0.14  
Adjustments for:
                                
Gain on bargain purchase, net of expenses
     (3.16 )     —       (3.39 )     —  
Realized gain on repurchase of debentures
     —       —       —       (0.11 )
Net realized (gains) losses on investments
     (0.06 )     0.18       0.24       0.11  
Net unrealized (gains) losses on investments
     (0.53 )     0.20       (1.30 )     0.93  
Foreign exchange losses
     0.06       0.60       0.01       0.46  
 
                        
Net operating income (loss) per share — diluted
   $ 1.52     $ (0.73 )   $ 4.21     $ 1.53  
 
                        
 
                                
Weighted average number of common shares and common share equivalents — diluted
     95,834,809       74,864,724       84,626,505       77,922,718  
 
                                
Average shareholders’ equity
     3,059,081       1,986,696       2,519,970       1,974,713  
 
                                
Annualized operating return on average equity
     19.0 %     (10.7 )%     18.9 %     8.4 %
 
                        
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

13

 

Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation
Diluted Book Value Per Common Share
As at September 30, 2009 and December 31, 2008
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    As at September 30, 2009  
                            Book value per  
    Equity amount     Shares     Exercise price     share  
Book value per common share
                                
Total shareholders’ equity
   $ 3,966,192        131,107,196              $ 30.25   
 
                              
 
                                
Diluted book value per common share
                                
Total shareholders’ equity
     3,966,192        131,107,196                   
Assumed exercise of outstanding warrants
     139,576        7,952,138      $ 17.55           
Assumed exercise of outstanding stock options
     68,368        3,430,816      $ 19.93           
Unvested restricted shares
     —        3,383,298                   
 
                            
Diluted book value per common share
   $ 4,174,136        145,873,448              $ 28.61   
 
                          
                                 
    As at December 31, 2008  
                            Book value per  
    Equity amount     Shares     Exercise price     share  
Book value per common share
                                
Total shareholders’ equity
   $ 1,938,734        75,624,697              $ 25.64   
 
                      
 
Diluted book value per common share
                                
Total shareholders’ equity
     1,938,734        75,624,697                   
Assumed exercise of outstanding warrants
     152,316        8,680,149      $ 17.55           
Assumed exercise of outstanding stock options
     51,043        2,799,938      $ 18.23           
Unvested restricted shares
     —        2,986,619                   
 
                            
Diluted book value per common share
   $ 2,142,093        90,091,403              $ 23.78   
 
                          
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

14

 

Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended September 30, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Historical     Historical     Pro Forma        
    Validus     IPC     Purchase     Pro Forma  
    Holdings, Ltd.     Holdings, Ltd.     Adjustments     Consolidated  
Underwriting income
                                
Gross premiums written
   $ 331,028     $ 25,443     $ —     $ 356,471  
Reinsurance premiums ceded
     (67,687 )     (179 )     —       (67,866 )
 
                        
Net premiums written
     263,341       25,264       —       288,605  
Change in unearned premiums
     111,376       42,081       —       153,457  
 
                        
Net premiums earned
     374,717       67,345       —       442,062  
 
                        
 
                                
Underwriting deductions
                                
Losses and loss expenses
     134,152       2,101       —       136,253  
Policy acquisition costs
     64,236       6,890       —       71,126  
General and administrative expenses
     46,036       3,880       —       49,916  
Share compensation expenses
     5,862       1,750     —       7,612  
 
                        
Total underwriting deductions
     250,286       14,621       —       264,907  
 
                        
 
                                
Underwriting income
     124,431       52,724       —       177,155  
Net investment income
     29,532       13,650       (3,731 )     39,451  
Other income (expense)
     1,101       (57 )     —       1,044  
Finance expenses
     (11,257 )     —       —       (11,257 )
 
                        
Operating income before income taxes
     143,807       66,317       (3,731 )     206,393  
Tax benefit
     1,799       —       —       1,799  
 
                        
Net operating income
     145,606       66,317       (3,731 )     208,192  
Gain on bargain purchase, net of expenses
     302,950       (69,700 )     (233,250 )     —  
Net realized gains on investments
     5,429       5,664       —       11,093  
Net unrealized gains on investments
     50,437       64,342       —       114,779  
Foreign exchange (losses) gains
     (5,244 )     6,435       —       1,191  
 
                        
 
                                
Net income
     499,178       73,058       (236,981 )     335,255  
 
                                
Warrant dividend
     (1,591 )     —       —       (1,591 )
 
                        
 
                                
Net income available to common shareholders
   $ 497,587     $ 73,058     $ (236,981 )   $ 333,664  
 
                        
 
                                
Earnings per share
                                
Weighted average number of common shares and common share equivalents outstanding
                                
Basic
     92,492,373               38,545,538       131,037,911  
Diluted
     95,834,809               38,545,538       134,380,347  
 
                                
Basic earnings per common share
   $ 5.38                     $ 2.55  
Diluted earnings per common share
   $ 5.21                     $ 2.49  
 
                                
Operating income per share
   $ 1.56                     $ 1.58  
Operating income per diluted share
   $ 1.52                     $ 1.55  
 
Notes:
 
(a)   Operating results of IPC have been included under Historical Validus Holdings, Ltd. from September 4, 2009, the date of acquisition. Historical IPC Holdings, Ltd. includes operating results for eight months only.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

15

 

Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the nine months ended September 30, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Historical     Historical     Pro Forma        
    Validus     IPC     Purchase     Pro Forma  
    Holdings, Ltd.     Holdings, Ltd.     Adjustments     Consolidated  
Underwriting income
                                
Gross premiums written
   $ 1,365,951     $ 387,602     $ (265 )   $ 1,753,288  
Reinsurance premiums ceded
     (202,489 )     (6,794 )     265       (209,018 )
 
                        
Net premiums written
     1,163,462       380,808       —       1,544,270  
Change in unearned premiums
     (141,786 )     (118,557 )     —       (260,343 )
 
                        
Net premiums earned
     1,021,676       262,251       —       1,283,927  
 
                        
 
                                
Underwriting deductions
                                
Losses and loss expenses
     390,736       32,793       —       423,529  
Policy acquisition costs
     190,125       26,634       —       216,759  
General and administrative expenses
     125,315       23,942       —       149,257  
Share compensation expenses
     18,848       6,714       —       25,562  
 
                        
Total underwriting deductions
     725,024       90,083       —       815,107  
 
                        
 
                                
Underwriting income
     296,652       172,168       —       468,820  
 
                                
Net investment income
     83,267       56,795       (11,624 )     128,438  
Other income (expense)
     2,875       (31 )     —       2,844  
Finance expenses
     (29,732 )     (383 )     —       (30,115 )
 
                        
Operating income before income taxes
     353,062       228,549       (11,624 )     569,987  
Tax benefit
     3,301       —       —       3,301  
 
                        
Net operating income
     356,363       228,549       (11,624 )     573,288  
Gain on bargain purchase, net of expenses
     287,099       (90,151 )     (196,948 )     —  
Net realized (losses) gains on investments
     (20,642 )     6,826       —       (13,816 )
Net unrealized gains on investments
     109,839       104,993       —       214,832  
Foreign exchange (losses) gains
     (1,012 )     4,968       —       3,956  
 
                        
 
                                
Net income
     731,647       255,185       (208,572 )     778,260  
 
                                
Warrant dividend
     (4,917 )     —       —       (4,917 )
 
                        
 
                                
Net income available to common shareholders
   $ 726,730     $ 255,185     $ (208,572 )   $ 773,343  
 
                        
 
                                
Earnings per share
                                
Weighted average number of common shares and common share equivalents outstanding
                                
Basic
     81,458,329               49,219,687       130,678,016  
Diluted
     84,626,505               49,219,687       133,846,192  
 
                                
Basic earnings per common share
   $ 8.92                     $ 5.92  
Diluted earnings per common share
   $ 8.65                     $ 5.81  
 
                                
Operating income per share
   $ 4.31                     $ 4.35  
Operating income per diluted share
   $ 4.21                     $ 4.28  
 
Notes:
 
(a)   Operating results of IPC have been included under Historical Validus Holdings, Ltd. from September 4, 2009, the date of acquisition. Historical IPC Holdings, Ltd. includes operating results for eight months only.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

16

 

Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended June 30, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Historical     Historical     Pro Forma        
    Validus     IPC     Purchase     Pro Forma  
    Holdings, Ltd.     Holdings, Ltd.     Adjustments     Consolidated  
Underwriting income
                                
Gross premiums written
   $ 425,032     $ 127,549     $ —     $ 552,581  
Reinsurance premiums ceded
     (62,291 )     (2,195 )     —       (64,486 )
 
                        
Net premiums written
     362,741       125,354       —       488,095  
Change in unearned premiums
     (34,541 )     (29,156 )     —       (63,697 )
 
                        
Net premiums earned
     328,200       96,198       —       424,398  
 
                        
 
                                
Underwriting deductions
                                
Losses and loss expenses
     124,751       (8,417 )     —       116,334  
Policy acquisition costs
     64,438       9,906       —       74,344  
General and administrative expenses
     41,200       9,908       —       51,108  
Share compensation expenses
     5,632       2,475       —       8,107  
 
                        
Total underwriting deductions
     236,021       13,872       —       249,893  
 
                        
 
                                
Underwriting Income
     92,179       82,326       —       174,505  
 
                                
Net investment income
     26,963       21,279       (3,702 )     44,540  
Other income
     1,017       19       —       1,036  
Finance expenses
     (10,752 )     —       —       (10,752 )
 
                        
Operating income before income taxes
     109,407       103,624       (3,702 )     209,329  
Tax benefit
     976       —       —       976  
 
                        
Net operating income
     110,383       103,624       (3,702 )     210,305  
Gain on bargain purchase, net of expenses
     (15,851 )     (8,813 )     24,664       —  
Net realized (losses) gains on investments
     (2,650 )     5,080       —       2,430  
Net unrealized gains on investments
     37,249       72,305       —       109,554  
Foreign exchange gains
     8,432       1,679       —       10,111  
 
                        
 
                                
Net income
     137,563       173,875       20,962       332,400  
Warrant dividend
     (1,590 )     —       —       (1,590 )
 
                        
Net income available to common shareholders
   $ 135,973     $ 173,875     $ 20,962     $ 330,810  
 
                        
 
                                
Earnings per share
                                
Weighted average number of common shares and common share equivalents outstanding
                                
Basic
     76,138,038             54,679,419       130,817,457  
Diluted
     78,942,065             55,036,063       133,978,128  
 
                                
Basic earnings per common share
   $ 1.79                 $ 2.53  
Diluted earnings per common share
   $ 1.74                 $ 2.48  
 
                                
Operating income per share
   $ 1.43                     $ 1.60  
Operating income per diluted share
   $ 1.40                     $ 1.57  
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

17

 

Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended March 31, 2009
 
(Expressed in thousands of U.S. dollars, except share and per share information)
                                 
    Historical     Historical     Pro Forma        
    Validus     IPC     Purchase     Pro Forma  
    Holdings, Ltd.     Holdings, Ltd.     Adjustments     Consolidated  
Underwriting income
                                
Gross premiums written
   $ 609,892     $ 234,610     $ (265 )   $ 844,237  
Reinsurance premiums ceded
     (72,512 )     (1,734 )     265       (73,981 )
 
                        
Net premiums written
     537,380       232,876       —       770,256  
Change in unearned premiums
     (218,621 )     (134,168 )     —       (352,789 )
 
                        
Net premiums earned
     318,759       98,708       —       417,467  
 
                        
 
                                
Underwriting deductions
                                
Losses and loss expenses
     131,834       39,109       —       170,943  
Policy acquisition costs
     61,449       9,838       —       71,287  
General and administrative expenses
     38,079       10,154       —       48,233  
Share compensation expenses
     7,354       2,489       —       9,843  
 
                        
Total underwriting deductions
     238,716       61,590       —       300,306  
 
                        
 
                                
Underwriting income
     80,043       37,118       —       117,161  
 
                                
Net investment income
     26,772       21,866       (4,191 )     44,447  
Other income
     757       7       —       764  
Finance expenses
     (7,723 )     (383 )     —       (8,106 )
 
                        
Operating income before income taxes
     99,849       58,608       (4,191 )     154,266  
Tax benefit
     526       —       —       526  
 
                        
Net operating income
     100,375       58,608       (4,191 )     154,792  
 
                                
Gain on bargain purchase, net of expenses
     —       (11,638 )     11,638       —  
Net realized losses on investments
     (23,421 )     (3,918 )     —       (27,339 )
Net unrealized gains (losses) on investments
     22,153       (31,654 )     —       (9,501 )
Foreign exchange losses
     (4,200 )     (3,146 )     —       (7,346 )
 
                        
 
                                
Net income
     94,907       8,252       7,447       110,606  
Warrant dividend
     (1,736 )     —       —       (1,736 )
 
                        
Net income available to common shareholders
   $ 93,171     $ 8,252     $ 7,447     $ 108,870  
 
                        
 
                                
Earnings per share
                                
Weighted average number of common shares and common share equivalents outstanding
                                
Basic
     75,744,577             54,425,368       130,169,945  
Diluted
     79,102,643             54,959,647       134,062,290  
 
                                
Basic earnings per common share
   $ 1.23                 $ 0.84  
Diluted earnings per common share
   $ 1.20                 $ 0.83  
 
                                
Operating income per share
   $ 1.30                     $ 1.18  
Operating income per diluted share
   $ 1.27                     $ 1.15  
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

18

 

Cautionary Note Regarding Forward-Looking Statements
     This press release may include forward-looking statements, both with respect to the Company and its industry, that reflect our current views with respect to future events and financial performance. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond the Company’s control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. We believe that these factors include, but are not limited to, the following: 1) unpredictability and severity of catastrophic events; 2) rating agency actions; 3) adequacy of Validus’ risk management and loss limitation methods; 4) cyclicality of demand and pricing in the insurance and reinsurance markets; 5) Validus’ limited operating history; 6) Validus’ ability to implement its business strategy during “soft” as well as “hard” markets; 7) adequacy of Validus’ loss reserves; 8) continued availability of capital and financing; 9) retention of key personnel; 10) competition; 11) potential loss of business from one or more major insurance or reinsurance brokers; 12) Validus’ ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 13) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 14) the integration of Talbot, IPC or other businesses Validus may acquire or new business ventures Validus may start; 15) the effect on Validus’ investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 16) acts of terrorism or outbreak of war; 17) availability of reinsurance and retrocessional coverage; and 18) failure to realize the anticipated benefits of the IPC acquisition, including as a result of failure or delay in integrating the businesses of Validus and IPC, as well as management’s response to any of the aforementioned factors.
     The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Validus’ most recent reports on Form 10-K and Form 10-Q and other documents of the Company on file with the Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Validus will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Validus or its business or operations. Except as required by law, the parties undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
     In presenting the Company’s results, management has included and discussed certain schedules containing net operating income (loss), net operating income per share, underwriting income, annualized net operating return on average equity and diluted book value per common share that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of net operating income to net income, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented in the “Consolidated Statements of Operations” above. Underwriting income indicates the performance of the Company’s core underwriting function, excluding revenues and expenses. The Company believes the reporting of underwriting income enhances the understanding of our results by highlighting the underlying profitability of the Company’s core insurance and reinsurance business. Underwriting profitability is influenced significantly by earned premium growth, adequacy of the Company’s pricing and loss frequency and severity. Underwriting profitability over time is also influenced by
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

19

 

the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses. The Company believes that underwriting income provides investors with a valuable measure of profitability derived from underwriting activities.
     Annualized net operating return on average equity is presented in the section above entitled “Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Diluted Book Value Per Share”. Net operating income is calculated based on net income (loss) excluding net realized gains (losses), net unrealized gains (losses) on investments, gains (losses) arising from translation of non-US$ denominated balances and non-recurring items. Realized gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-US$ denominated balances are unrelated to our underlying business.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com

20

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