Segment information

The Company conducts its operations worldwide through three operating segments, which have been determined under U.S. GAAP segment reporting to be Validus Re, AlphaCat and Talbot. The Company’s operating segments are strategic business units that offer different products and services. They are managed and have capital allocated separately because each segment requires different strategies.

Validus Re Segment

The Validus Re segment is focused on short-tail lines of reinsurance. The primary lines in which the segment conducts business are property, marine and specialty which includes agriculture, aerospace and aviation, financial lines of business, nuclear, terrorism, life, accident & health, workers’ compensation, crisis management, contingency, motor, technical lines, composite and trade credit.

AlphaCat Segment

The AlphaCat segment manages strategic relationships that leverage the Company’s underwriting and investment expertise and earns management, performance and underwriting fees primarily from the Company’s operating affiliates, AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013 and AlphaCat 2014, as well as PaCRe and the AlphaCat ILS funds.

Talbot Segment

The Talbot segment focuses on a wide range of marine and energy, war, political violence, commercial property, financial institutions, contingency, bloodstock, accident & health and aviation classes of business on an insurance or facultative reinsurance basis and principally property, aerospace and marine classes of business on a treaty reinsurance basis.

Corporate and eliminations

The Company has a corporate function ("corporate"), which includes the activities of the parent company, and which carries out certain functions for the group. Corporate includes ‘non-core’ underwriting expenses, predominantly general and administrative and stock compensation expenses. Corporate also denotes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. For internal reporting purposes, corporate is reflected separately, however corporate is not considered an operating segment under these circumstances. Other reconciling items include, but are not limited to, the elimination of inter segment revenues and expenses and unusual items that are not allocated to segments.

The following tables summarize the results of our operating segments and "Corporate":



Three Months Ended March 31, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	678,986		$	84,347		$	290,695		$	(42,037	)	$	1,011,991
Reinsurance premiums ceded	(142,640		)	(3,700		)	(90,605		)	42,037			(194,908		)
Net premiums written	536,346			80,647			200,090			—			817,083
Change in unearned premiums	(297,960		)	(49,964		)	13,798			—			(334,126		)
Net premiums earned	238,386			30,683			213,888			—			482,957

Underwriting deductions
Losses and loss expenses	68,155			(7,860		)	102,376			—			162,671
Policy acquisition costs	39,245			2,980			44,928			(1,504		)	85,649
General and administrative expenses	18,195			4,128			35,149			16,973			74,445
Share compensation expenses	2,208			(10		)	2,582			2,367			7,147
Total underwriting deductions	127,803			(762		)	185,035			17,836			329,912

Underwriting income (loss)	$	110,583		$	31,445		$	28,853		$	(17,836	)	$	153,045

Net investment income	18,765			880			4,686			(969		)	23,362
Other income	6,770			9,497			17			(2,454		)	13,830
Finance expenses	(3,839		)	(683		)	(26		)	(11,352		)	(15,900		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	132,279			41,139			33,530			(32,611		)	174,337
Tax benefit (expense)	578			—			130			(668		)	40
Income from operating affiliates	—			4,927			—			—			4,927
(Income) attributable to operating affiliate investors	—			(31,710		)	—			—			(31,710		)
Net operating income (loss)	$	132,857		$	14,356		$	33,660		$	(33,279	)	$	147,594

Net realized gains on investments	2,446			1,225			69			—			3,740
Change in net unrealized gains (losses) on investments	11,898			45,872			2,577			(4,654		)	55,693
Income from investment affiliate	5,348			—			—			—			5,348
Foreign exchange (losses) gains	(6,176		)	38			(150		)	(190		)	(6,478		)
Net income (loss)	$	146,373		$	61,491		$	36,156		$	(38,123	)	$	205,897

Net (income) attributable to noncontrolling interest	—			(43,509		)	—			—			(43,509		)
Net income (loss) available (attributable) to Validus	$	146,373		$	17,982		$	36,156		$	(38,123	)	$	162,388

Selected ratios (a):
Net premiums written / Gross premiums written	79.0		%	95.6		%	68.8		%				80.7		%

Losses and loss expenses	28.6		%	(25.6		)%	47.9		%				33.7		%

Policy acquisition costs	16.5		%	9.7		%	21.0		%				17.7		%
General and administrative expenses (b)	8.5		%	13.4		%	17.6		%				16.9		%
Expense ratio	25.0		%	23.1		%	38.6		%				34.6		%

Combined ratio	53.6		%	(2.5		)%	86.5		%				68.3		%

Total assets	$	5,603,777		$	1,582,014		$	2,975,510		$	94,788		$	10,256,089


(a)	Ratios are based on net premiums earned.


(b)	The general and administrative expense ratio includes share compensation expenses.



Three Months Ended March 31, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	747,963		$	96,516		$	293,530		$	(33,249	)	$	1,104,760
Reinsurance premiums ceded	(125,728		)	—			(94,737		)	33,249			(187,216		)
Net premiums written	622,235			96,516			198,793			—			917,544
Change in unearned premiums	(319,101		)	(68,899		)	1,517			—			(386,483		)
Net premiums earned	303,134			27,617			200,310			—			531,061

Underwriting deductions
Losses and loss expenses	73,402			—			71,369			—			144,771
Policy acquisition costs	51,744			2,638			40,526			(1,297		)	93,611
General and administrative expenses	29,441			4,037			30,912			15,889			80,279
Share compensation expenses	1,413			77			1,405			(577		)	2,318
Total underwriting deductions	156,000			6,752			144,212			14,015			320,979

Underwriting income (loss)	$	147,134		$	20,865		$	56,098		$	(14,015	)	$	210,082

Net investment income	23,193			881			4,718			(3,143		)	25,649
Other income	13,490			6,633			—			(17,438		)	2,685
Finance expenses	(3,252		)	(1,248		)	(74		)	(9,795		)	(14,369		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	180,565			27,131			60,742			(44,391		)	224,047
Tax expense (benefit)	1,757			—			(1,054		)	(385		)	318
Income from operating affiliates	—			3,523			—			—			3,523
(Income) attributable to operating affiliate investors	—			(10,077		)	—			—			(10,077		)
Net operating income (loss)	$	182,322		$	20,577		$	59,688		$	(44,776	)	$	217,811

Net realized gains on investments	1,593			—			128			—			1,721
Change in net unrealized (losses) on investments	(2,193		)	(4,788		)	(256		)	—			(7,237		)
Income from investment affiliate	1,477			—			—			—			1,477
Foreign exchange gains (losses)	11,162			(1,187		)	(3,918		)	865			6,922
Net income (loss)	$	194,361		$	14,602		$	55,642		$	(43,911	)	$	220,694

Net loss attributable to noncontrolling interest	—			2,549			—			—			2,549
Net income (loss) available (attributable) to Validus	$	194,361		$	17,151		$	55,642		$	(43,911	)	$	223,243

Selected ratios (a):
Net premiums written / Gross premiums written	83.2		%	100.0		%	67.7		%				83.1		%

Losses and loss expenses	24.2		%	0.0		%	35.6		%				27.3		%

Policy acquisition costs	17.1		%	9.6		%	20.2		%				17.6		%
General and administrative expenses (b)	10.2		%	14.9		%	16.1		%				15.6		%
Expense ratio	27.3		%	24.5		%	36.3		%				33.2		%

Combined ratio	51.5		%	24.5		%	71.9		%				60.5		%

Total assets	$	6,299,481		$	1,189,190		$	3,043,312		$	32,417		$	10,564,400


(a)	Ratios are based on net premiums earned.


(b)	The general and administrative expense ratio includes share compensation expenses.

The Company’s exposures are generally diversified across geographic zones. The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:



	Three Months Ended March 31, 2014
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	191,868	$	8,698	$	26,311	$	(5,665	)	$	221,212	21.9	%
Worldwide excluding United States (a)	61,534		7,678		37,182		(4,740		)	101,654		9.9	%
Australia and New Zealand	12,816		1,019		2,880		(281		)	16,434		1.6	%
Europe	37,896		1,301		18,791		(2,817		)	55,171		5.5	%
Latin America and Caribbean	6,934		—		31,239		(3,052		)	35,121		3.5	%
Japan	159		—		538		(53		)	644		0.1	%
Canada	2,899		216		3,145		(523		)	5,737		0.6	%
Rest of the world (b)	53,850		—		18,404		(1,798		)	70,456		7.0	%
Sub-total, non United States	176,088		10,214		112,179		(13,264		)	285,217		28.2	%
Worldwide including United States (a)	105,191		65,435		23,653		(6,646		)	187,633		18.5	%
Other location non-specific (c)	205,839		—		128,552		(16,462		)	317,929		31.4	%
Total	$	678,986	$	84,347	$	290,695	$	(42,037	)	$	1,011,991	100.0	%



	Three Months Ended March 31, 2013
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	236,496	$	17,489	$	20,541	$	(6,864	)	$	267,662	24.2	%
Worldwide excluding United States (a)	50,308		14,689		39,458		(4,508		)	99,947		9.0	%
Australia and New Zealand	25,026		2,183		3,005		(230		)	29,984		2.7	%
Europe	40,870		1,964		18,311		(2,848		)	58,297		5.3	%
Latin America and Caribbean	8,418		—		42,000		(3,218		)	47,200		4.3	%
Japan	737		—		654		(50		)	1,341		0.1	%
Canada	2,642		318		2,706		(525		)	5,141		0.5	%
Rest of the world (b)	19,079		—		18,314		(1,403		)	35,990		3.3	%
Sub-total, non United States	147,080		19,154		124,448		(12,782		)	277,900		25.2	%
Worldwide including United States (a)	100,540		59,873		19,156		(3,689		)	175,880		15.9	%
Other location non-specific (c)	263,847		—		129,385		(9,914		)	383,318		34.7	%
Total	$	747,963	$	96,516	$	293,530	$	(33,249	)	$	1,104,760	100.0	%


(a)	Represents risks in two or more geographic zones.


(b)	Represents risks in one geographic zone.


(c)	The other locations non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable, such as marine and aerospace risks, since these exposures can span multiple geographic areas and, in some instances, are not fixed locations.