Basis of preparation and consolidation

These unaudited Consolidated Financial Statements (the "Consolidated Financial Statements") have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the U.S. Securities and Exchange Commission (the "SEC").

The Company consolidates in these Consolidated Financial Statements the results of operations and financial position of all voting interest entities ("VOE") in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.

During the fourth quarter of 2015, the Company early adopted Accounting Standards Update ("ASU") 2015-02, “Consolidation (Topic 810) Amendments to the Consolidation Analysis” issued by the United States Financial Accounting Standards Board (“FASB”), which changed the method in which the Company determines whether entities are consolidated by the Company. The adoption of this amended accounting guidance was implemented utilizing a full retrospective application for all periods presented in the Company's Consolidated Financial Statements.

The amended guidance includes changes in the identification of the primary beneficiary of investment companies considered to be VIEs. These changes resulted in the Company concluding that it is considered to be the primary beneficiary of the AlphaCat sidecars, the AlphaCat ILS funds and the BetaCat ILS funds and therefore the Company is required to consolidate these entities. The adoption of the amended guidance also resulted in the Company concluding that it was no longer required to consolidate PaCRe Ltd. ("PaCRe") due to the change in the VIE definition of "kick-out" rights under the amended guidance. The cumulative effect of these changes on the Company's retained earnings through the six months ended June 30, 2015 was a gain of $405.

The following tables present the impact of the application of the amended accounting guidance on the Company's Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and Consolidated Statement of Cash Flows for the six months ended June 30, 2015:



	Three Months Ended June 30, 2015
	As previously reported			Adjustment for adoption of new consolidation guidance			Revised
Total revenues	$	591,492		$	(19,912	)	$	571,580
Total expenses	480,511			1,907			482,418
Net income	81,657			6,694			88,351
Net (income) attributable to noncontrolling interest	(17,644		)	(4,917		)	(22,561		)
Net income available to Validus	64,013			1,777			65,790
Comprehensive income available to Validus	67,588			1,777			69,365

Basic earnings per share available to common shareholders	$	0.75		$	0.02		$	0.77
Earnings per diluted share available to common shareholders	$	0.73		$	0.02		$	0.75



	Six Months Ended June 30, 2015
	As previously reported			Adjustment for adoption of new consolidation guidance			Revised
Total revenues	$	1,280,697		$	(65,351	)	$	1,215,346
Total expenses	934,010			2,004			936,014
Net income	294,045			(14,105		)	279,940
Net (income) attributable to noncontrolling interest	(56,621		)	15,882			(40,739		)
Net income available to Validus	237,424			1,777			239,201
Comprehensive income available to Validus	236,914			1,777			238,691

Basic earnings per share available to common shareholders	$	2.81		$	0.02		$	2.83
Earnings per diluted share available to common shareholders	$	2.72		$	0.02		$	2.74



	Six Months Ended June 30, 2015
	As previously reported			Adjustment for adoption of new consolidation guidance			Revised
Net cash (used in) provided by operating activities	$	(228,841	)	$	261,315		$	32,474
Net cash used in investing activities	(290,517		)	229,702			(60,815		)
Net cash provided by (used in) financing activities	389,593			(463,831		)	(74,238		)
Effect of foreign currency rate changes on cash and cash equivalents	(13,765		)	5,035			(8,730		)
Net decrease in cash	(143,530		)	32,221			(111,309		)
Cash and cash equivalents - beginning of period	577,240			(26,839		)	550,401
Cash and cash equivalents - end of period	433,710			5,382			439,092

In the opinion of management, these Consolidated Financial Statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair statement of the Company's financial position and results of operations as at the end of and for the periods presented. All significant intercompany accounts and transactions have been eliminated. The results of operations for any interim period are not necessarily indicative of the results for a full year.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the amounts included in the Consolidated Financial Statements reflect its best estimates and assumptions, actual results could differ materially from those estimates. The Company’s principal estimates include:

•reserve for losses and loss expenses;

•premium estimates for business written on a line slip or proportional basis;

•the valuation of goodwill and intangible assets;

•reinsurance recoverable balances including the provision for uncollectible amounts; and

•investment valuation of financial assets.

The term “ASC” used in these notes refers to Accounting Standard Codification issued by the FASB.