DEFM14A 1 a20180326-defm14a.htm DEFM14A Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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VALIDUS HOLDINGS, LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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March 26, 2018
Dear Validus Holdings, Ltd. Shareholder:
We cordially invite you to the special general meeting of the shareholders of Validus Holdings, Ltd. (“Validus”), to be held at 29 Richmond Road, Pembroke HM 08, Bermuda, on April 27, 2018 at 9:00 a.m., Atlantic time or any adjournment thereof.
On January 21, 2018, Validus entered into an Agreement and Plan of Merger with American International Group, Inc. (“AIG”) and Venus Holdings Limited, a wholly-owned subsidiary of AIG (“Merger Sub”) (we refer to the Agreement and Plan of Merger as the “merger agreement”). Pursuant to the merger agreement and a statutory merger agreement that is an exhibit to the merger agreement, Merger Sub will be merged with and into Validus, with Validus surviving the merger as a wholly-owned subsidiary of AIG (which we refer to as the “merger”).
Pursuant to the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger (which we refer to as the “effective time”), each holder of common shares of Validus, $0.175 par value per common share (which we refer to as the “common shares”, each a “common share”), issued and outstanding immediately prior to such time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be entitled to receive, with respect to each such common share, $68.00 in cash, without interest and less any required withholding taxes (which we refer to as the “merger consideration”). Our issued and outstanding 5.875% non-cumulative preferred shares, series A (which we refer to as the “series A preferred shares”), will continue as preferred shares of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. Our issued and outstanding 5.800% non-cumulative preferred shares, series B (which we refer to as the “series B preferred shares” and, together with the series A preferred shares, which we refer to as the “preferred shares”), will continue as preferred shares of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
We are soliciting proxies for use at the special general meeting or any adjournment thereof to consider and vote upon proposals to approve: (1) an amendment to the Validus bye-laws to reduce the shareholder vote required to approve a merger with any other company from the affirmative vote of 75% of the votes cast at a general meeting of the shareholders to a simple majority of the votes cast at a general meeting of the shareholders (which we refer to as the “bye-law amendment proposal”), (2) the merger agreement, the statutory merger agreement required in accordance with Section 105 of the Bermuda Companies Act 1981, as amended, and the merger (which we refer to as the “merger proposal”), (3) on an advisory (non-binding) basis, the compensation that may be paid or become payable to Validus’ named executive officers in connection with the merger, as described in the proxy statement (which we refer to as the “compensation advisory proposal”) and (4) an adjournment of the special general meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes to approve the bye-law amendment proposal or the merger proposal at the special general meeting (which we refer to as the “adjournment proposal”). Common shares will be entitled to vote on all four proposals, whereas preferred shares will be entitled to vote only on the merger proposal and the adjournment proposal. We urge all shareholders to read this proxy statement and the documents included with this proxy statement carefully and in their entirety.
The Validus board of directors has unanimously (1) approved the bye-law amendment, (2) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus, (3) approved the merger, the merger agreement and the statutory merger agreement and (4) resolved that the bye-law amendment proposal, the merger proposal and the compensation advisory proposal be submitted to Validus shareholders for their consideration at the special general meeting. Accordingly, the Validus board of directors recommends that Validus shareholders vote “FOR” the bye-law amendment proposal, “FOR” the merger proposal, “FOR” the compensation advisory proposal and “FOR” the other proposals described in this proxy statement in respect of which they are entitled to vote.




If the bye-law amendment proposal is approved, the affirmative vote of a majority of the votes cast at the special general meeting or any adjournment thereof at which a quorum under Validus’ bye-laws is present will be required to approve the merger proposal. If the bye-law amendment proposal is not approved, the affirmative vote of 75% of the votes cast at the special general meeting or any adjournment thereof at which a quorum under Validus’ bye-laws is present will be required to approve the merger proposal. Approval of the merger proposal by holders of common shares and preferred shares, voting as one class, is necessary to complete the merger.
Your vote is very important. Whether or not you plan to attend the special general meeting, please take the time to complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or through the Internet. We ask that you do so as promptly as possible to ensure that your shares may be represented and voted at the special general meeting or any adjournment thereof. You may revoke a submitted proxy prior to its exercise by either giving notice of such revocation to the General Counsel of Validus in writing at Validus Holdings, Ltd., 29 Richmond Road, Pembroke, HM 08, Bermuda, or attending and voting in person at the special general meeting or by executing a subsequent proxy, provided that such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken.
If your common shares or preferred shares are held in street name by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee, as applicable, will not be permitted to vote your shares without instructions from you. You should instruct your bank, brokerage firm or other nominee as to how to vote your shares by following the procedures provided by your bank, brokerage firm or other nominee. You also will not be able to vote your shares in person at the special general meeting or any adjournment thereof unless you obtain a legal proxy form from your broker, bank or other nominee.
The accompanying proxy statement provides you with detailed information about the special general meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the proxy statement. A copy of the statutory merger agreement is attached as Annex A-1 to this proxy statement. We encourage you to read the entire proxy statement and its annexes, including the merger agreement, carefully.
If you have any questions or need assistance voting your shares, please call Innisfree M&A Incorporated, Validus’ proxy solicitor, toll-free at (888) 750-5834 (banks and brokers may call collect at (212) 750-5833).
Thank you in advance for your cooperation and continued support.
Sincerely,
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Edward J. Noonan
Chairman and Chief Executive Officer
Validus Holdings, Ltd.
The proxy statement is dated March 26, 2018, and is first being mailed to Validus shareholders on or about March 29, 2018.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.




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VALIDUS HOLDINGS, LTD.
29 Richmond Road
Pembroke HM 08, Bermuda

NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
To be Held on April 27, 2018
March 26, 2018
To Validus Holdings, Ltd. Shareholders:
On January 21, 2018, Validus Holdings, Ltd. (which we refer to as “Validus”) entered into an Agreement and Plan of Merger with American International Group, Inc. (“AIG”) and Venus Holdings Limited, a wholly-owned subsidiary of AIG (“Merger Sub”) (we refer to the Agreement and Plan of Merger as the “merger agreement”). Pursuant to the merger agreement and a statutory merger agreement that is an exhibit to the merger agreement, Merger Sub will be merged with and into Validus, with Validus surviving as a wholly-owned subsidiary of AIG (which we refer to as the “merger”).
Notice is hereby given that a special general meeting of shareholders (which we refer to as the “special general meeting”) of Validus will be held at Validus’ offices at 29 Richmond Road, Pembroke HM 08, Bermuda, on April 27, 2018 at 9:00 a.m., Atlantic time, for the following purposes:
Proposal 1: to approve an amendment to the Validus bye-laws to reduce the shareholder vote required to approve a merger with any other company from the affirmative vote of 75% of the votes cast at a general meeting of the shareholders to a simple majority of the votes cast at a general meeting of the shareholders (the “bye-law amendment”);
Proposal 2: to approve the merger agreement, the statutory merger agreement required in accordance with Section 105 of the Bermuda Companies Act 1981, as amended (which we refer to as the “Companies Act”), and the merger;
Proposal 3: on an advisory (non-binding) basis, to approve the compensation that may be paid or become payable to Validus’ named executive officers in connection with the merger, as described in this proxy statement; and
Proposal 4: to approve an adjournment of the special general meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes to approve Proposal 1 or Proposal 2 at the special general meeting.
Consummation of the merger is conditioned on, among other things, the approval of Proposal 2 (which we refer to as the “merger proposal”), but is not conditioned on the approval of Proposal 1 (which we refer to as “bye-law amendment proposal”), Proposal 3 (which we refer to as the “compensation advisory proposal”) or Proposal 4 (which we refer to as the “adjournment proposal”).
Only Validus shareholders of record, as shown in Validus’ register of members at the close of business on March 21, 2018, will be entitled to notice of, and to vote at, the special general meeting and any postponement or adjournment thereof. Common shares, par value $0.175 per common share (which we refer to as “common shares”, each a “common share”), will be entitled to vote on all of the above proposals. 5.875% non-cumulative preferred shares, series A, par value $0.175 per share and $25,000 liquidation preference per share (which we refer to as the “series A preferred shares”) and 5.800% non-cumulative preferred shares, series B, par value $0.175 per share




and $25,000 liquidation preference per share (which we refer to as the “series B preferred shares” and, together with the series A preferred shares, which we refer to as the “preferred shares”), will be entitled to vote only on Proposal 2 and Proposal 4.
Your vote is very important. Whether or not you plan to attend the special general meeting, please take the time to complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or through the Internet. We ask that you do so as promptly as possible to ensure that your shares may be represented and voted at the special general meeting.
You may revoke a submitted proxy prior to its exercise by either giving notice of such revocation to the General Counsel of Validus in writing at Validus Holdings, Ltd., 29 Richmond Road, Pembroke, HM 08, Bermuda, or attending and voting in person at the special general meeting or by executing a subsequent proxy, provided that such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken.
THE VALIDUS BOARD OF DIRECTORS HAS UNANIMOUSLY (1) APPROVED THE BYE-LAW AMENDMENT, (2) DETERMINED THAT THE MERGER, ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE MERGER AGREEMENT, IS FAIR TO, AND IN THE BEST INTERESTS OF, VALIDUS, (3) APPROVED THE MERGER, THE MERGER AGREEMENT AND THE STATUTORY MERGER AGREEMENT AND (4) RESOLVED THAT THE BYE-LAW AMENDMENT PROPOSAL, THE MERGER PROPOSAL AND THE COMPENSATION ADVISORY PROPOSAL BE SUBMITTED TO THE VALIDUS SHAREHOLDERS FOR THEIR CONSIDERATION AT THE SPECIAL GENERAL MEETING. ACCORDINGLY, THE VALIDUS BOARD OF DIRECTORS RECOMMENDS THAT VALIDUS SHAREHOLDERS VOTE “FOR” THE BYE-LAW AMENDMENT PROPOSAL, “FOR” THE MERGER PROPOSAL, “FOR” THE COMPENSATION ADVISORY PROPOSAL AND “FOR” THE OTHER PROPOSALS DESCRIBED IN THIS PROXY STATEMENT IN RESPECT OF WHICH THEY ARE ENTITLED TO VOTE.
For purposes of Section 106(2)(b)(i) of the Companies Act, the Validus board of directors considers the fair value for (i) each common share to be $68.00, without interest and less any applicable withholding taxes, (ii) each series A preferred share (and the related depositary shares) to be the continuation of each such preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged and (iii) each series B preferred share (and the related depositary shares) to be the continuation of each such preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged. Validus shareholders who are not satisfied that they have been offered fair value for their shares and whose shares are not voted in favor of the merger proposal may exercise their appraisal rights under the Companies Act to have the fair value of their shares appraised by the Supreme Court of Bermuda (which we refer to as the “Bermuda Court”). Validus shareholders intending to exercise appraisal rights MUST file their application for appraisal of the fair value of their shares with the Bermuda Court within ONE MONTH of the giving of the notice convening the special general meeting.
By order of the Board of Directors,
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Robert F. Kuzloski
Executive Vice President and General Counsel

Pembroke, Bermuda
March 26, 2018




TABLE OF CONTENTS








SUMMARY
This summary highlights the material information in this proxy statement. To fully understand Validus’ proposals and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement, including the annexes and documents incorporated by reference herein, and the other documents to which Validus has referred you. For information on how to obtain the documents that are on file with the United States Securities and Exchange Commission (which we refer to as the “SEC”), please see the section of this proxy statement titled “Where You Can Find More Information.”
Parties to the Merger (Page 21)
Validus Holdings, Ltd. is a leading global provider of reinsurance, insurance, and asset management services, delivering its premier solutions through four diversified yet complementary operating companies: Validus Reinsurance, Ltd., a global reinsurance group focused primarily on treaty reinsurance; Talbot Underwriting Ltd., a specialty (re)insurance group operating within the Lloyd’s market through Syndicate 1183; Western World Insurance Group, Inc., a U.S. specialty and excess and surplus lines organization; and AlphaCat Managers, Ltd., a Bermuda-based investment advisor managing capital for third parties and Validus through insurance-linked securities and other property catastrophe and specialty reinsurance investments (which we refer to as “AlphaCat”).
For additional information on Validus and its business, including how to obtain the documents that Validus has filed with the SEC, see the section of this proxy statement titled “Where You Can Find More Information.”
American International Group, Inc., is a leading global insurance organization (which we refer to as “AIG”). Founded in 1919, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement products, and other financial services to commercial and individual customers in more than 80 countries and jurisdictions. AIG’s diverse range of products and services help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Venus Holdings Limited, a Bermuda exempted company, is a wholly-owned subsidiary of AIG that was formed by AIG solely for purposes of entering into the merger agreement and the statutory merger agreement and completing the transactions contemplated thereby (which we refer to as the “Merger Sub”). Upon completion of the merger, Merger Sub will be merged with and into Validus and will cease to exist.
The Merger (Page 22)
Pursuant to the merger agreement and the statutory merger agreement required in accordance with Section 105 of the Companies Act (which we refer to as the “statutory merger agreement”), Merger Sub will merge with and into Validus, with Validus continuing as the surviving company. Validus, as the surviving company, will continue in existence as a Bermuda exempted company and as a wholly-owned subsidiary of AIG. As a result of the merger, under Bermuda law, Validus’ and Merger Sub’s respective undertakings, property and liabilities will become vested in Validus as the surviving company in the merger. The closing of the merger will occur on the third business day following the satisfaction or waiver of all closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions) or such other date and time as Validus and AIG may agree in writing. The merger will be effective upon the issuance of a certificate of merger by the Bermuda Registrar of Companies and at the time and date shown on such certificate of merger (which we refer to as the “effective time”).
Merger Consideration (Page 22)
At the effective time, each common share issued and outstanding immediately prior to the effective time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be canceled and converted into the right to receive $68.00 in cash, without interest and less any required withholding taxes (which we refer to as the “merger consideration”).
Preferred Shares (Page 57)
At the effective time, each series A preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights,

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terms and conditions of each such preferred share will remain unchanged. Following the merger, AIG may cause the surviving company to exercise any of its rights with respect to each series A preferred share issued and outstanding or the depository shares representing interests in such preferred shares.
At the effective time, each series B preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. Following the merger, AIG may take any action with respect to each series B preferred share issued and outstanding or the depository shares representing interests in such preferred shares.
The Statutory Merger Agreement (Page 22)
The statutory merger agreement, together with the merger agreement, governs the legal effects of the merger under Bermuda law. A copy of the statutory merger agreement is attached as Annex A-1 to this proxy statement.
The Special General Meeting (Page 78)
Time, Place and Purpose of the Special General Meeting (Page 78)
The special general meeting will be held on April 27, 2018, starting at 9:00 a.m., Atlantic time, at Validus’ offices at 29 Richmond Road, Pembroke HM 08, Bermuda. At the special general meeting, Validus shareholders will be asked to consider and vote on each of the following proposals:
Proposal 1 (the “bye-law amendment proposal”): to approve an amendment to the Validus bye-laws to reduce the shareholder vote required to approve a merger with any other company from the affirmative vote of 75% of the votes cast at a general meeting of the shareholders to a simple majority of the votes cast at a general meeting of shareholders;
Proposal 2 (the “merger proposal”): to approve the merger agreement, the statutory merger agreement and the merger;
Proposal 3 (the “compensation advisory proposal”): on an advisory (non-binding) basis, to approve the compensation that may be paid or become payable to Validus’ named executive officers in connection with the merger, as described in this proxy statement; and
Proposal 4 (the “adjournment proposal”): to approve an adjournment of the special general meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes to approve the bye-law amendment proposal or the merger proposal at the special general meeting.
Common shares outstanding as of the record date will be entitled to vote on each of the above proposals. Preferred shares outstanding as of the record date will have the right to vote only on Proposal 2 and Proposal 4.
Consummation of the merger is conditioned on, among other things, the approval of Proposal 2 above, but is not conditioned on the approval of Proposals 1, 3 or 4.
Record Date (Page 78)
Only shareholders of record, as shown on Validus’ register of members, at the close of business on March 21, 2018, the record date for the special general meeting, will be entitled to notice of, and to vote at, the special general meeting or any adjournment or postponement thereof. As of March 21, 2018, the record date for the special general meeting, there were 81,396,747 common shares, 6,000 series A preferred shares and 10,000 series B preferred shares issued and outstanding.
Quorum (Page 78)
Each common share and preferred share carries the right to vote on the merger proposal and the adjournment proposal. Accordingly, the quorum required at the special general meeting to consider the merger proposal and the adjournment proposal is the presence in person or by proxy of at least two shareholders representing in excess of 50% of the total voting power of all common shares and preferred shares as of the record date. Only the common shares carry the right to vote on the bye-law amendment proposal and the compensation advisory proposal. Accordingly, the quorum required at the special general meeting to consider the bye-law amendment proposal and

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the compensation advisory proposal is the presence in person or by proxy of at least two shareholders representing in excess of 50% of the total voting power of all common shares as of the record date.
Required Vote (Page 79)
The approval of the bye-law amendment proposal requires the affirmative vote of holders of a majority in voting power of the aggregate voting power of common shares in accordance with Validus’ bye-laws. Preferred shares do not have the right to vote on the bye-law amendment proposal.
If the bye-law amendment proposal is approved, the approval of the merger proposal requires the affirmative vote of a majority of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting or any adjournment thereof in accordance with Validus’ bye-laws. If the bye-law amendment is not approved, the approval of the merger proposal requires the affirmative vote of 75% of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting or any adjournment thereof in accordance with Validus’ bye-laws.
The approval of the compensation advisory proposal requires the affirmative vote of a majority of the votes cast by holders of common shares at the special general meeting in accordance with Validus’ bye-laws. Preferred shares do not have the right to vote on the compensation advisory proposal.
The approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting in accordance with Validus’ bye-laws.
Voting Securities (Page 79)
Except as provided below (i) holders of common shares have one vote for each common share held by them and are entitled to vote on all the proposals voted on at the special general meeting or any adjournment thereof and (ii) holders of preferred shares have one vote for each preferred share held by them and are entitled to vote only on the merger proposal and on the adjournment proposal. See the section of this proxy statement titled “The Special General MeetingVoting Securities” beginning on page 79 for a description of the voting rights of the preferred shares. Holders of depositary shares must act through the depositary to exercise any voting rights in respect of the preferred shares (or fractions thereof) represented thereby and the depositary will vote preferred shares held by it in accordance with the terms of its depositary agreement.
In accordance with Validus’ bye-laws, if any shareholder is deemed to control more than 9.09% of the aggregate voting power of securities of Validus entitled to vote, the votes conferred by the controlled shares are reduced by whatever amount is necessary so that after such reduction the votes conferred by the controlled shares of such shareholder will represent 9.09% of the aggregate voting power of securities of Validus entitled to vote.
If your common shares or preferred shares are held in “street name” by your bank, broker or other nominee, you should instruct your bank, broker or other nominee how to vote your shares using the instructions provided by your bank, broker or other nominee.
If you fail to submit a proxy or to vote in person at the special general meeting and you are a record holder, your shares will not be counted for purposes of quorum or as votes cast at the special general meeting. If your common shares or preferred shares are held in “street name” and you do not provide your bank, broker or other nominee with voting instructions, your shares will be treated as “broker non-votes” as described below. If you choose to vote in person at the special general meeting and your common shares or preferred shares are held in “street name”, you must first obtain a legal proxy form from your broker, bank or other nominee and bring such executed form with you to the meeting.

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Abstentions and “Broker Non-Votes” (Page 80)
Abstentions and “broker non-votes” will be counted toward the presence of a quorum at the special general meeting, but will not be considered votes cast on any proposal brought before the special general meeting. Because the vote required to approve the proposals to be voted upon at the special general meeting (other than the bye-law amendment proposal) is the affirmative vote of the specified required percentage of the votes cast assuming a quorum is present, an abstention or a “broker non-vote” with respect to any proposal to be voted on at the special general meeting (other than the bye-law amendment proposal) will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those shareholders voting. With respect to the bye-law amendment proposal, approval of which requires the affirmative vote of holders of a majority in voting power of the aggregate voting power of common shares of Validus, abstentions and “broker non-votes” will have the effect of a vote “against” the bye-law amendment.
Revocation of Proxies (Page 80)
You may revoke a submitted proxy prior to its exercise by either giving notice of such revocation to the General Counsel of Validus in writing at Validus Holdings, Ltd., 29 Richmond Road, Pembroke, HM 08, Bermuda, or attending and voting in person at the special general meeting or by executing a subsequent proxy, provided that such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken.
If your common shares or preferred shares are held in “street name” by your bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee as to how to revoke your previously provided voting instructions.
Background of the Merger (Page 22)
A description of the actions that led to the execution of the merger agreement is included under the section of this proxy statement titled “The MergerBackground of the Merger.”
Recommendation of the Validus Board of Directors (Page 26)
The Validus board of directors has unanimously (1) approved the bye-law amendment, (2) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus, (3) approved the merger, the merger agreement and the statutory merger agreement and (4) resolved that the bye-law amendment proposal, the merger proposal and the compensation advisory proposal be submitted to Validus shareholders for their consideration at the special general meeting. Accordingly, the Validus board of directors recommends that Validus shareholders vote “FOR” the bye-law amendment, “FOR” the merger proposal, “FOR” the compensation advisory proposal and “FOR” the other proposals described in this proxy statement in respect of which they are entitled to vote. See the section of this proxy statement titled “The MergerValidus’ Reasons for the Merger and Recommendation of the Validus Board of Directors” beginning on page 26 for the factors considered by the board of directors in reaching its determination that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus.

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Opinion of Validus’ Financial Advisor (Page 30)
Pursuant to an engagement letter dated January 5, 2018, Validus retained J.P. Morgan Securities LLC (which we refer to as “J.P. Morgan”) as its financial advisor in connection with the proposed merger.
At the meeting of the Validus board of directors on January 21, 2018, J.P. Morgan rendered its oral opinion to the Validus board of directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to the holders of common shares in the proposed merger was fair, from a financial point of view, to such holders. J.P. Morgan has confirmed its January 21, 2018 oral opinion by delivering its written opinion to the Validus board of directors, dated January 21, 2018, that, as of such date, the consideration to be paid to the holders of common shares in the proposed merger was fair, from a financial point of view, to such holders.
The full text of the written opinion of J.P. Morgan dated January 21, 2018, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Validus shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Validus board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the consideration to be paid in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of other any class of securities, creditors or other constituencies of Validus or as to the underlying decision by Validus to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareholder of Validus as to how such shareholder should vote with respect to the proposed merger or any other matter.
Financing (Page 38)
The merger is not conditioned upon receipt of financing by AIG. AIG has informed us that it expects to use cash on hand to fund the aggregate merger consideration. AIG has informed us that it may evaluate opportunistic funding alternatives prior to closing.
Interests of Certain Persons in the Merger (Page 39)
Validus’ executive officers and directors may have interests in the merger that may be different from or in addition to those of Validus shareholders generally. The Validus board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating and negotiating the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be approved by the shareholders of Validus. As described in more detail below, these interests potentially include:
the accelerated vesting (either upon the closing of the merger or upon a qualifying termination of employment following the closing of the merger, as described further below) of 553,337 Validus restricted share awards and Validus restricted stock unit awards that are subject solely to service-based vesting requirements (which we refer to respectively as “Validus restricted share awards” and “Validus RSU awards”) and 430,628 Validus restricted share awards that are subject to performance-based vesting requirements (which we refer to as “Validus performance share awards”) (determined at payout levels as described in detail below) held by the executive officers of Validus with aggregate estimated values of $37,626,916 and $29,282,704, respectively, based on the per share merger consideration equal to $68.00;
the payment of certain severance payments and benefits that the executive officers of Validus may become entitled to receive under their respective employment agreements with Validus if they experience a qualifying termination of employment following the closing the merger, with an aggregate estimated value of $38,579,352;
the accelerated vesting (upon a qualifying termination of employment following the closing of the merger, as described further below) of 1,342 cash-settled restricted stock unit awards granted pursuant to the AlphaCat Managers Ltd. Long Term Incentive Plan (which we refer to as the “AlphaCat Plan”) held by an executive officer of Validus with an aggregate estimated value of $1,608,317;

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the payment of a transaction bonus to an executive officer of Validus with a value equal to $2,850,961 that will vest and be paid out upon the closing of the merger;
new and potential employment and retention arrangements between certain executive officers of Validus and AIG; and
certain indemnification arrangements for Validus’ current officers and directors and the continuation of certain insurance arrangements for Validus’ current officers and directors for six years after the completion of the transactions.
See the section of this proxy statement titled “The MergerInterests of Validus’ Directors and Executive Officers in the Merger” beginning on page 39 for a more detailed discussion on the interests of Validus’ directors and executive officers in the merger.
The Merger Agreement (Page 49)
Treatment of Common Shares (Page 49)
At the effective time, each common share issued and outstanding immediately prior to the effective time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be canceled and converted into the right to receive the merger consideration of $68.00 per common share in cash, without interest and less any required withholding taxes.
Treatment of Preferred Shares (Page 57)
At the effective time, each series A preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
At the effective time, each series B preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
Treatment of Validus Equity Awards (Page 57)
At the effective time, subject to certain exceptions as described in greater detail below:
a pro rata portion of each Validus restricted share award will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, and the remaining portion of such Validus restricted share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the number equal to the quotient obtained by dividing the merger consideration by the volume weighted average closing price per share of AIG common stock over the ten consecutive trading days ending on the complete trading day immediately preceding the closing date, rounded up to the fourth decimal place (which we refer to as the “equity award exchange ratio”) and (y) the number of Validus common shares represented by such remaining portion;
a pro rata portion of each Validus performance share award (with the number of Validus common shares subject to award determined based on the target level of performance) will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award and the remaining portion of such Validus performance share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion, and (3) each holder of a performance share award will be entitled to receive an additional cash payment in respect of each performance share with a performance period that has not been completed as of the effective time equal to the merger consideration and accrued but unpaid dividends multiplied by the

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excess of (A) the number of performance shares determined based on maximum performance over (B) the target number of performance shares;
a number of Validus performance share awards, for any performance period that has not been completed as of the closing date of the merger, equal to the excess of (i) the number of Validus performance share awards determined based on the maximum level of performance over (ii) the number of Validus performance share awards determined based on the target level of performance, will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without proration; and
a pro rata portion of each unvested Validus RSU award will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, and the remaining portion of such unvested Validus RSU award will be assumed by AIG and converted into an AIG RSU award entitling the holder to receive a number of shares of AIG common stock equal to the product of (x) the total number of Validus common shares subject to such Validus RSU award immediately prior to the effective time multiplied by (y) the equity award exchange ratio.
The pro rata portion of each Validus equity award described above (which we refer to as the “pro rata portion”) will be determined (on an aggregate basis for awards with the same terms) by multiplying the number of Validus common shares subject to such award by a fraction, the numerator of which is equal to the number of days elapsed from the grant date of such award through the closing date of the merger, and denominator of which is equal to the number of days from the grant date of such award through the normal vesting date of such award.
Regulatory Clearances Required for the Merger (Page 46)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Validus and AIG cannot consummate the merger until Validus and AIG have notified the Department of Justice’s Antitrust Division and the Federal Trade Commission of the merger and furnished them with certain information and materials relating to the merger and the applicable waiting period has terminated or expired. Under the EU Merger Regulation, the merger cannot be consummated until after the European Commission has issued its clearance decision or the relevant waiting periods have expired without the issuance of a decision.
Further conditions include the receipt of required regulatory approvals, including from the New Hampshire Department of Insurance, the Bermuda Monetary Authority, the UK Prudential Regulation Authority, the UK Financial Conduct Authority, Lloyd’s of London, the Swiss Financial Market Supervisory Authority and certain other jurisdictions.
No Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreements (Page 53)
Validus has agreed in the merger agreement that it will not, and will cause each of its subsidiaries, and its and their respective directors, officers and employees not to, and will use its reasonable best efforts to cause its other representatives not to, among other things, solicit, encourage, initiate or take any action to facilitate the submission of any inquiry or the making of any proposal, in each case that constitutes, or would reasonably be expected to lead to, a “takeover proposal” (as described and summarized on page 53 of this proxy statement).
If Validus receives a bona fide written takeover proposal during the period between January 21, 2018 and the date Validus shareholders approve the merger agreement where such takeover proposal did not result from a material breach by Validus of such non-solicitation provisions, and the Validus board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that such takeover proposal constitutes or would reasonably be expected to lead to a “superior proposal,” then Validus may, subject to certain conditions, enter into a confidentiality agreement with and furnish information (including non-public information) about Validus and its subsidiaries to the person or group of persons making the takeover proposal and engage in or otherwise participate in discussions or negotiations with the person or group of persons making such takeover proposal.
The Validus board of directors has agreed to recommend approval of the merger proposal at the special general meeting and that it will not change such recommendation.

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However, the Validus board of directors may make an “adverse recommendation change” (as described and summarized on page 55 of this proxy statement) in compliance with the terms of the merger agreement if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law in response to either (i) a “superior proposal” (as described and summarized on page 56 of this proxy statement) received by Validus or (ii) an “intervening event” (as described and summarized on page 56 of this proxy statement). If Validus makes an adverse recommendation change, AIG may terminate the agreement and Validus will be required to pay a $162 million termination fee to AIG.
Subject to the procedures set forth in the merger agreement, if Validus receives a superior proposal, Validus may terminate the merger agreement to enter into an alternative acquisition agreement in respect of such superior proposal if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law. In such case, Validus must pay AIG a $162 million termination fee.
See the section of this proxy statement titled “The Merger AgreementNo Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreement” beginning on page 53.
Conditions to the Merger (Page 50)
The obligations of Validus, AIG and Merger Sub to consummate the merger under the merger agreement are subject to the satisfaction (or waiver by the applicable parties, if permissible under applicable law) of the following conditions:
the merger proposal having been approved by Validus shareholders;
the required regulatory approvals having been obtained and being in full force and effect and, with respect to AIG’s and Merger Sub’s obligations, such required regulatory approvals having been obtained without the imposition of a “burdensome condition”;
there being no injunction, judgment or ruling, enacted, promulgated, issued, entered, amended or enforced by any governmental authority enjoining, restraining or otherwise making illegal or prohibiting the consummation of the merger;
with respect to Validus’ obligations, on the one hand, and AIG’s and Merger Sub’s obligations, on the other hand, subject to the applicable materiality standards provided in the merger agreement, the representations and warranties of the other party in the merger agreement being true and correct as of January 21, 2018 and as of the closing date (except to the extent expressly made as of an earlier date, in which case, as of such date) and such other party having furnished a certificate signed on behalf of such other party by an executive officer of such other party, to that effect; and
the parties having performed or complied in all material respects with all obligations and covenants required to be performed by them under the merger agreement at or prior to the effective time and such other party having furnished a certificate signed on behalf of such other party by an executive officer of such other party, to that effect.
See the section of this proxy statement titled “The Merger AgreementConditions to Completion of the Merger” beginning on page 50 for more information on the conditions to the parties’ respective obligations to consummate the merger.
Termination of the Merger Agreement (Page 61)
The merger agreement may be terminated at any time before the effective time by mutual written consent of Validus and AIG and, subject to certain limitations described in the merger agreement, by either AIG or Validus if any of the following occurs:
the merger has not been consummated by September 21, 2018 (we refer to such date, which may be automatically extended to December 21, 2018 under certain circumstances, as the “walk-away date”), except that this right of termination is not available to any party whose breach of a representation or

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warranty or failure to perform any of its obligations under the merger agreement has been a principal cause of or resulted in the failure of the merger to occur on or before the walk-away date;
there is in effect any injunction, judgment or ruling, enacted, promulgated, issued, entered, amended or enforced by any governmental authority enjoining, restraining or otherwise making illegal or prohibiting the consummation of the merger that is final and nonappealable, except that this right of termination is only available if the applicable party has performed, in all material respects, its obligations under the merger agreement;
if Validus shareholders do not approve the merger proposal at the special general meeting (including any adjournment or postponement thereof); or
there has been a breach by the other party of its representations, warranties, covenants or agreements contained in the merger agreement, which breach would result in the failure of certain closing conditions relating to compliance with such representations, warranties, covenants and agreements to be satisfied on or prior to the walk-away date, and such breach is not capable of being cured or has not been cured within 30 days after written notice of such breach has been received by the party alleged to be in breach.
The merger agreement may be terminated by AIG at any time prior to the approval by Validus shareholders of the merger proposal if any of the following occurs:
the Validus board of directors makes an adverse recommendation change; or
Validus has willfully breached the covenants regarding the non-solicitation of an alternative transaction, prompt filing of this proxy statement, or the convening of a shareholder meeting to approve the merger agreement and the transactions contemplated by the merger agreement and the statutory merger agreement.
In such cases, Validus must pay AIG a $162 million termination fee.
Subject to the procedures set forth in the merger agreement, if Validus receives a superior proposal and Validus shareholders have not yet approved the merger proposal, Validus may terminate the merger agreement to enter into an alternative acquisition agreement in respect of such superior proposal if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law. In such case, Validus must pay AIG a $162 million termination fee.
Payment of the termination fee following termination of the merger agreement will not relieve Validus or AIG from liability for actual fraud or any willful and material breach of the merger agreement.
See the section of this proxy statement titled “The Merger AgreementTermination of the Merger Agreement” for more information on the respective termination rights of the parties under the merger agreement.

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Expenses and Termination Fees (Page 62)
Generally, all fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement and the statutory merger agreement will be paid by the party incurring or required to incur such fees and expenses, whether or not the merger is consummated.
Upon termination of the merger agreement, Validus may be required, under certain circumstances, to pay a termination fee of $162 million or $81 million to AIG.
Market Price of Validus Common Shares (Page 72)
The closing price of the common shares on the New York Stock Exchange (which we refer to as the “NYSE”) on January 19, 2018, the last full trading day prior to the announcement of the transaction, was $46.72 per common share. On March 23, 2018 the most recent practicable date before this proxy statement was mailed to our shareholders, the closing price of common shares on the NYSE was $67.43 per common share. You are encouraged to obtain current market quotations for common shares prior to voting your common shares.
Dissenting Shares (Page 57)
Under Bermuda law, Validus shareholders have rights of appraisal, pursuant to which those shareholders of Validus who do not vote in favor of the merger proposal and who are not satisfied that they have been offered fair value for their shares will be permitted to apply to the Bermuda Court for an appraisal of the fair value of their shares within one month from the giving of the notice convening the special general meeting. See the sections of this proxy statement titled “The MergerDissenters’ Rights of Appraisal for Validus Shareholders” beginning on page 48 and “The Merger AgreementDissenting Shares” beginning on page 57 for a more detailed description of the appraisal rights available to Validus shareholders.
Delisting and Deregistration of Validus Shares (Page 47)
If the merger is completed, the common shares will be delisted from the NYSE and deregistered under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”).
At the effective time, each preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. The depositary shares (representing interests in such preferred shares) will remain listed on the NYSE and registered by Validus under the Exchange Act immediately after the merger. AIG may decide, following the merger, to delist the depositary shares from the NYSE, to deregister such depositary shares under the Exchange Act or to take other action with respect to the depositary shares and preferred shares.

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Material U.S. Federal Income Tax Consequences of the Merger (Page 85)
The exchange of common shares for the merger consideration pursuant to the merger agreement generally will be a taxable transaction to U.S. holders of common shares for U.S. federal income tax purposes. On an exchange of your common shares for the merger consideration in the merger, you will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by you in the merger and your adjusted tax basis in your common shares.
The continuation of preferred shares as preferred shares of the surviving company in the merger will not be a taxable event for U.S. federal income tax purposes for holders of preferred shares. If you are a holder of preferred shares, you will not recognize any income, gain or loss for U.S. federal income tax purposes upon the continuation of your preferred shares as preferred shares of Validus as the surviving company in the merger, and will retain an adjusted tax basis and holding period in your surviving company preferred shares equal to the adjusted tax basis and holding period you had in your preferred shares prior to the merger.
TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, VALIDUS STRONGLY URGES YOU TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL GENERAL MEETING
The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special general meeting. These questions and answers may not address all questions that may be important to you as a shareholder of Validus. For more information, please see the section of this proxy statement titled “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.
Q: Why am I receiving this proxy statement?
A: Validus, AIG, and Merger Sub, a wholly-owned subsidiary of AIG, have entered into the merger agreement, pursuant to which Merger Sub will be merged with and into Validus, with Validus surviving the merger as a wholly-owned subsidiary of AIG.
In order to consummate the merger, Validus shareholders must approve the merger proposal. Validus will hold the special general meeting to obtain approval of the merger proposal and to consider certain other related matters which are not prerequisites to the consummation of the merger. This proxy statement, which you should read carefully, contains important information about the merger and related transactions and other matters being considered at the special general meeting.
Q: When and where is the special general meeting?
A: The special general meeting will take place at 9:00 a.m., Atlantic time, on April 27, 2018, at Validus’ offices at 29 Richmond Road, Pembroke HM 08, Bermuda.
Q: What is happening at the special general meeting?
A: At the special general meeting, Validus shareholders will be asked to consider and vote on each of the following proposals:
Proposal 1: to approve the bye-law amendment to reduce the shareholder vote required to approve a merger with any other company from the affirmative vote of 75% of the votes cast at a general meeting of the shareholders to a simple majority of the votes cast at a general meeting of the shareholders;
Proposal 2: to approve the merger agreement, the statutory merger agreement and the merger;
Proposal 3: on an advisory (non-binding) basis, to approve the compensation that may be paid or become payable to Validus’ named executive officers in connection with the merger, as described in this proxy statement; and
Proposal 4: to approve an adjournment of the special general meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes to approve the bye-law amendment proposal or the merger proposal at the special general meeting.
Common shares outstanding as of the record date will be entitled to vote on each of the above proposals. Preferred shares outstanding as of the record date will have the right to vote only on Proposal 2 and Proposal 4.
Q: Does the Validus board of directors recommend approval of the proposals?
A: The Validus board of directors recommends that Validus shareholders vote “FOR” the bye-law amendment, “FOR” the merger proposal, “FOR” the compensation advisory proposal and “FOR” the other proposals described in this proxy statement in respect of which they are entitled to vote.
See the section of this proxy statement titled “The MergerValidus’ Reasons for the Merger and Recommendation of the Validus Board of Directors” beginning on page 26 for a more complete description of the recommendations of the Validus board of directors. In considering the recommendations of the Validus board of directors, you should be aware that Validus’ executive officers and directors may have interests in the merger that are different from, or in

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addition to, those of Validus shareholders generally. See the section of this proxy statement titled “The MergerInterests of Validus’ Directors and Executive Officers in the Merger” beginning on page 39.
Q: What will happen in the merger?
A: If the merger proposal is approved and all other conditions to the merger have been satisfied or waived, Merger Sub will be merged with and into Validus, with Validus surviving the merger as a wholly-owned subsidiary of AIG.
Q: What will holders of common shares receive in the merger?
A: Pursuant to the terms of the merger agreement and the statutory merger agreement, each common share issued and outstanding immediately prior to the effective time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be canceled and converted into the right to receive the merger consideration of $68.00 per common share in cash, without interest and less any required withholding taxes.
Q: How does the merger consideration compare to the closing price of common shares prior to announcement of the transaction?
A: The merger consideration represents a premium of 45.6% to the closing price of common shares on January 19, 2018, the last full trading day prior to the announcement of the transaction.
Q: What will happen to issued and outstanding preferred shares in the merger?
A: Pursuant to the terms of the merger agreement, each preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. Following the merger, AIG may cause the surviving company to exercise any of its rights with respect to each series A preferred share issued and outstanding, each series B preferred share issued and outstanding or the depository shares representing interests in such preferred shares.
Q: Are shareholders able to exercise appraisal or dissenters’ rights?
A: Under Bermuda law, Validus shareholders have rights of appraisal, pursuant to which those shareholders of Validus who do not vote in favor of the merger proposal and who are not satisfied that they have been offered fair value for their shares will be permitted to apply to the Bermuda Court for an appraisal of the fair value of their shares within one month from the giving of the notice convening the special general meeting. See the section of this proxy statement titled “The MergerDissenters’ Rights of Appraisal for Validus Shareholders” for more information on appraisal rights.
Q: When do the parties expect to complete the merger?
A: The parties expect to complete the merger in mid-2018, although there can be no assurance that the parties will be able to do so. The closing of the merger is subject to customary closing conditions, including approval by Validus shareholders and receipt of certain insurance and other regulatory approvals.
See the section of this proxy statement titled “The Merger AgreementConditions to Completion of the Merger” for more information.
Q: If I hold common shares, will I be entitled to receive a dividend in respect of the second quarter of 2018?
A: The merger agreement provides that Validus will be permitted to declare, set a record date for, and pay a dividend in respect of the second quarter of 2018, even if the dates for such dividends would be outside the ordinary course of

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business for Validus. Validus shareholders as of the record date for any dividend declared by the Validus board of directors will be entitled to receive such declared dividend.
Q: What happens if the merger is not completed?
A: If the merger proposal is not approved by the requisite vote of Validus shareholders, or the merger is not completed for any other reason, the merger will not occur and Validus shareholders will not receive the merger consideration, which is described in greater detail in the section of this proxy statement titled “SummaryThe Merger Agreement.” Validus shareholders will continue to own the common shares and preferred shares owned by them until sold or otherwise disposed by them. Validus will remain an independent public company and the common shares will continue to be registered under the Exchange Act and traded on the NYSE. In addition, if the merger agreement is terminated, Validus may be required, under certain circumstances, to pay a termination fee of $162 million or $81 million to AIG.
Q: What are the U.S. federal income tax consequences of the merger to holders of common shares?
A: The exchange of common shares for the merger consideration pursuant to the merger agreement generally will be a taxable transaction to U.S. holders of common shares for U.S. federal income tax purposes. On an exchange of your common shares for the merger consideration in the merger, you will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by you in the merger and your adjusted tax basis in your common shares.
YOU SHOULD READ THE SECTION OF THIS PROXY STATEMENT TITLED “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES” FOR A MORE DETAILED DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, VALIDUS STRONGLY URGES YOU TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.
Q: What are the U.S. federal income tax consequences of the merger to holders of preferred shares?
A: The continuation of preferred shares as preferred shares of Validus as the surviving company in the merger will not be a taxable event for U.S. federal income tax purposes for holders of preferred shares. If you are a holder of preferred shares, you will not recognize any income, gain or loss for U.S. federal income tax purposes upon the continuation of your preferred shares as preferred shares of Validus as the surviving company in the merger, and you will retain an adjusted tax basis and holding period in your surviving company preferred shares equal to the adjusted tax basis and holding period you had in your preferred shares prior to the merger.
YOU SHOULD READ THE SECTION OF THIS PROXY STATEMENT TITLED “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES” FOR A MORE DETAILED DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, VALIDUS STRONGLY URGES YOU TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.
Q: Why are holders of common shares being asked to cast an advisory (non-binding) vote to approve “golden parachute compensation” payable to Validus’ named executive officers under existing agreements with Validus in connection with the merger?

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A: The SEC, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, adopted rules that require Validus to seek an advisory (non-binding) vote with respect to certain payments that will or may be made to Validus’ named executive officers in connection with the merger. The compensation advisory proposal satisfies this requirement. See the section of this proxy statement titled “The MergerInterests of Validus’ Directors and Executive Officers in the MergerMerger Related Compensation for Validus Named Executive Officers” for more details on such payments.
Q: Do any of Validus’ directors or officers have interests in the merger that may differ from or be in addition to the interests of Validus shareholders?
A: Validus’ executive officers and directors may have interests in the merger that may be different from or in addition to those of Validus shareholders generally. The Validus board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating and negotiating the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be approved by the shareholders of Validus. As described in more detail below, these interests potentially include:
the accelerated vesting (either upon the closing of the merger or upon a qualifying termination of employment following the closing of the merger, as described further below) of 553,337 Validus restricted share awards and Validus restricted stock unit awards and 430,628 Validus performance share awards (determined at payout levels as described in detail below) held by the executive officers of Validus with aggregate estimated values of $37,626,916 and $29,282,704, respectively, based on the per share merger consideration equal to $68.00;
the payment of certain severance payments and benefits that the executive officers of Validus may become entitled to receive under their respective employment agreements with Validus if they experience a qualifying termination of employment following the closing the merger, with an aggregate estimated value of $38,579,352;
the accelerated vesting of 1,342 cash-settled restricted stock unit awards granted pursuant to the AlphaCat Plan held by an executive officer of Validus with an aggregate estimated value of $1,608,317;
the payment of a transaction bonus to an executive officer of Validus with a value equal to $2,850,961 that will vest and be paid out upon the closing of the merger;
new and potential employment and retention arrangements between certain executive officers of Validus and AIG; and
certain indemnification arrangements for Validus’ current officers and directors and the continuation of certain insurance arrangements for Validus’ current officers and directors for six years after the completion of the transactions.
See the section of this proxy statement titled “The MergerInterests of Validus’ Directors and Executive Officers in the Merger” for a more detailed discussion.
Q: I am an employee of Validus who holds Validus equity awards granted under the Amended and Restated 2005 Long Term Incentive Plan. How will my Validus equity awards be treated in the merger?
A: At the effective time, subject to certain exceptions as described in more detail below:
a pro rata portion of each Validus restricted share award will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, and the remaining portion of such Validus restricted share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion;

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a pro rata portion of each Validus performance share award (with the number of Validus common shares subject to award determined based on the target level of performance) will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, and the remaining portion of such Validus performance share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion;
a number of Validus performance share awards, for any performance period that has not been completed as of the closing date of the merger, equal to the excess of (i) the number of Validus performance share awards determined based on the maximum level of performance over (ii) the number of Validus performance share awards determined based on the target level of performance, will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without pro-ration; and
a pro rata portion of each unvested Validus RSU award will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, and the remaining portion of such unvested Validus RSU award will be assumed by AIG and converted into an AIG RSU award entitling the holder to receive a number of shares of AIG common stock equal to the product of (x) the total number of Validus common shares subject to such Validus RSU award immediately prior to the effective time multiplied by (y) the equity award exchange ratio.
Q: What is the required quorum for the special general meeting?
A:  Each common share and preferred share carries the right to vote on the merger proposal and the adjournment proposal. Accordingly, the quorum required at the special general meeting to consider the merger proposal and the adjournment proposal is the presence in person or by proxy of at least two shareholders representing in excess of 50% of the total voting power of all common shares and preferred shares as of the record date. Only the common shares carry the right to vote on the bye-law amendment proposal and the compensation advisory proposal. Accordingly, the quorum required at the special general meeting to consider the bye-law amendment proposal and the compensation advisory proposal is the presence in person or by proxy of at least two shareholders representing in excess of 50% of the total voting power of all common shares as of the record date.
Q: What shareholder vote is required to approve the items to be voted on at the special general meeting, including the merger?
A: The approval of the bye-law amendment proposal requires the affirmative vote of holders of a majority in voting power of the aggregate voting power of common shares in accordance with Validus’ bye-laws. Holders of preferred shares do not have the right to vote on the bye-law amendment proposal.
If the bye-law amendment proposal is approved, the approval of the merger proposal requires the affirmative vote of a majority of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting or any adjournment thereof in accordance with Validus’ bye-laws. If the bye-law amendment is not approved, the approval of the merger proposal requires the affirmative vote of 75% of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting or any adjournment thereof in accordance with Validus’ bye-laws.
The approval of the compensation advisory proposal requires the affirmative vote of a majority of the votes cast by holders of common shares at the special general meeting in accordance with Validus’ bye-laws. Holders of preferred shares do not have the right to vote on the compensation advisory proposal.

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The approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast by holders of common shares and preferred shares, voting as one class, at the special general meeting in accordance with Validus’ bye-laws.
See the section of this proxy statement titled “Questions and Answers About the Merger and the Special General MeetingWho is entitled to vote at the special general meeting?” for a more detailed description.
Q: What effect do abstentions and “broker non-votes” have on the proposals?
A: Abstentions and “broker non-votes” will be counted toward the presence of a quorum at the special general meeting, but will not be considered votes cast on any proposal brought before the special general meeting. Because the vote required to approve the proposals to be voted upon at the special general meeting (other than the bye-law amendment proposal) is the affirmative vote of the specified required percentage of the votes cast assuming a quorum is present, an abstention or a “broker non-vote” with respect to any proposal to be voted on at the special general meeting (other than the bye-law amendment proposal) will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those shareholders voting. With respect to the bye-law amendment proposal, approval of which requires the affirmative vote of holders of a majority in voting power of the aggregate voting power of common shares of Validus, abstentions and “broker non-votes” will have the effect of a vote “against” the bye-law amendment.
Q: Does AIG have the financial resources to complete the merger?
A: Yes. It is anticipated that the total funds needed to complete the merger will be approximately $5.6 billion, and AIG has informed us that it has the financial resources to complete the merger and it expects to use cash on hand to fund the aggregate merger consideration. AIG has informed us that it may evaluate opportunistic funding alternatives prior to closing.
Q: Who is entitled to vote at the special general meeting and what is the record date?
A: Only Validus shareholders of record, as shown on Validus’ register of members at the close of business on March 21, 2018, the record date for the special general meeting, will be entitled to notice of, and to vote at, the special general meeting or any adjournment or postponement thereof. Common shares will be entitled to vote on the bye-law amendment proposal, the merger proposal, the compensation advisory proposal and the adjournment proposal, whereas preferred shares will be entitled to vote only on the merger proposal and the adjournment proposal.
Q: What do I need to do now?
A: We urge you to carefully read this proxy statement, including its annexes and the documents incorporated by reference in this proxy statement. You are also encouraged to review the documents referenced under the section of this proxy statement titled “Where You Can Find More Information” and consult with your accounting, legal and tax advisors. Once you have considered all relevant information, we encourage you to fill in and return the enclosed proxy card (if you are a shareholder of record) or voting instruction form you receive from your bank, broker or other nominee (if you are a shareholder who holds your shares through a bank, broker or other nominee) or to follow the instructions provided to you for voting over the Internet or by telephone. Holders of depositary shares must act through the depositary to exercise any voting rights in respect of the preferred shares (or fractions thereof) represented thereby and the depositary will vote preferred shares held by it in accordance with the terms of its depositary agreement.
Q: How do I vote my shares?
A: Shareholder of Record. If your common or preferred shares (which we refer to collectively as the “Validus shares”) are registered directly in your name, then you are considered a shareholder of record of Validus with respect to those shares and this proxy statement and the enclosed proxy card were sent to you directly by Validus. As a Validus shareholder of record, you may vote by completing, dating, signing and mailing the enclosed proxy card in

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the return envelope provided as soon as possible or by following the instructions on the proxy card to submit your proxy by telephone or over the Internet at the website indicated. Submission of the proxy by telephone or over the Internet is available through 11:59 p.m. Eastern Time on the business day immediately before the special general meeting. Validus shareholders of record may also vote by attending the special general meeting in person by bringing valid picture identification. However, whether or not you plan to attend the special general meeting in person, we encourage you to vote your Validus shares in advance to ensure that your vote is represented at the special general meeting. Abstentions and “broker non-votes” will be counted toward the presence of a quorum at the special general meeting, but will not be considered votes cast on any proposal brought before the special general meeting, as described above under the question titled “—What effect do abstentions and ‘broker non-votes’ have on the proposals?”
Beneficial Owner of Shares Held in Street Name. If your Validus shares are held in the name of a bank, broker or other similar organization or nominee, then you are considered a beneficial owner of such shares held for you in what is known as “street name.” Most shareholders of Validus hold their shares in “street name.” If this is the case, this proxy statement has been forwarded to you by your bank, broker or other organization or nominee together with a voting instruction form. You may vote by completing and returning your voting instruction form to your broker. Please review the voting instruction form to see if you are able to submit your voting instructions by telephone or over the Internet. The organization or nominee holding your account is considered the shareholder of record for purposes of voting at the special general meeting. As a beneficial owner, you have the right to instruct the organization that holds your shares of record how to vote the Validus shares that you beneficially own.
Owner of Depositary Shares in Respect of Preferred Shares. Holders of depositary shares must act through the depositary to exercise any voting rights in respect of the preferred shares (or fractions thereof) represented thereby and the depositary will vote preferred shares held by it in accordance with the terms of its depositary agreement.
Q: If my Validus shares are held in “street name,” how do I vote in person at the special general meeting?
A: If you are a beneficial owner of Validus shares held in “street name” rather than a shareholder of record, you may only vote your Validus shares in person at the special general meeting by bringing valid picture identification and a legal proxy form from your broker, bank or other nominee.
Q: What do I do if I want to change my vote?
A: You may revoke a submitted proxy prior to its exercise by either giving notice of such revocation to the General Counsel of Validus in writing at Validus Holdings, Ltd., 29 Richmond Road, Pembroke, HM 08, Bermuda, or attending and voting in person at the special general meeting or by executing a subsequent proxy, provided that such action is taken in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the votes are taken.
If your common shares or preferred shares are held in “street name” by your bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee as to how to revoke or change your previously provided voting instructions.
Q: If I hold my shares in certificated form, should I send in my share certificates now?
A: No. You should NOT return your share certificates with the enclosed proxy card, and you should not forward your share certificates to the paying agent without a letter of transmittal. Promptly after the effective time, each shareholder of record of a certificate representing common shares that has been converted into the right to receive the merger consideration will be sent a letter of transmittal describing the procedure for surrendering its shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent receives your share certificates and any other documents requested in the instructions.

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Q: If I hold my shares in book-entry form, how will I receive payment when the merger occurs?
A: If you hold shares in non-certificated book-entry form that have been converted into the right to receive the merger consideration, you will receive your cash payment in respect of those shares as promptly as practicable following the effective time and the paying agent’s receipt of the documents that it requests from you, if any.
Q: Who will solicit and pay the cost of soliciting proxies?
A: Validus has engaged Innisfree M&A Incorporated to assist in the solicitation of proxies for the special general meeting. Validus estimates that it will pay Innisfree M&A Incorporated a fee of approximately $25,000 plus $5.50 for any telephone call Innisfree M&A Incorporated makes to individual retail investors on Validus’ behalf and reimbursement of certain expenses.
Q: Who should Validus shareholders contact with any additional questions?
A: If you have any additional questions about the merger or you would like additional copies of this proxy statement or assistance voting your shares, you should contact Innisfree M&A Incorporated at:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th floor
New York, New York 10022
Shareholders may call toll free: (888) 750-5834
Banks and Brokers may call collect: (212) 750-5833
Q: Where can I find more information about Validus?
A: You can find more information about Validus in the documents described under the section of this proxy statement titled “Where You Can Find More Information.”

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Certain statements herein may include projections, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and Validus may make related oral, forward-looking statements on or following the date hereof. These projections, goals, assumptions and statements are not historical facts but instead represent only Validus’ belief regarding future events, many of which, by their nature, are inherently uncertain and outside Validus’ control. These projections, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal,” or “estimate.” It is possible that Validus’ actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements.
The proposed transaction is subject to risks and uncertainties and factors that could cause Validus’ actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include, but are not limited to:
that Validus may be unable to complete the proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived;
uncertainty as to the timing of completion of the proposed transaction;
the inability to complete the proposed transaction if Validus shareholders do not approve the merger proposal or due to the failure to satisfy other conditions to completion of the proposed transaction, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction;
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
risks related to disruption of management’s attention from Validus’ ongoing business operations due to the proposed transaction;
the effect of the announcement of the proposed transaction on Validus’ relationships with its clients, operating results and business generally;
the outcome of any legal proceedings to the extent initiated against Validus or others following the announcement of the proposed transaction;
Validus’ management’s response to any of the aforementioned factors; and
industry conditions.
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 Validus on file with or furnished to the SEC. Any forward-looking statements made in this material 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, Validus undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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PARTIES TO THE MERGER
Validus
Validus Holdings, Ltd.
29 Richmond Road,
Pembroke, HM 08,
Bermuda
+1 (441) 278-9000
Validus Holdings, Ltd. is a leading global provider of reinsurance, insurance, and asset management services, delivering its premier solutions through four diversified yet complementary operating companies: Validus Reinsurance, Ltd., a global reinsurance group focused primarily on treaty reinsurance; Talbot Underwriting Ltd., a specialty (re)insurance group operating within the Lloyd’s market through Syndicate 1183; Western World Insurance Group, Inc., a U.S. specialty and excess and surplus lines organization; and AlphaCat Managers, Ltd., a Bermuda-based investment advisor managing capital for third parties and Validus through insurance-linked securities and other property catastrophe and specialty reinsurance investments.
For additional information on Validus and its business, including how to obtain the documents that Validus has filed with the SEC, see the section of this proxy statement titled “Where You Can Find More Information.”
AIG
American International Group, Inc.
175 Water Street
New York, New York 10038
+1 (212) 770-7000
American International Group, Inc., is a leading global insurance organization. Founded in 1919, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement products, and other financial services to commercial and individual customers in more than 80 countries and jurisdictions. AIG’s diverse range of products and services help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Merger Sub
Venus Holdings Limited
Crawford House
50 Cedar Avenue
Hamilton, HM 11
Bermuda
Venus Holdings Limited, a Bermuda exempted company, is a wholly-owned subsidiary of AIG that was formed by AIG solely for purposes of entering into the merger agreement and the statutory merger agreement and completing the transactions contemplated by thereby. Merger Sub has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Upon completion of the merger, Merger Sub will be merged with and into Validus and will cease to exist, and Validus will continue as the surviving company.

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THE MERGER
This discussion of the merger is qualified in its entirety by reference to the merger agreement, a copy of which is incorporated by reference in its entirety and included in this proxy statement as Annex A. You should read the merger agreement in its entirety because it, and not this proxy statement, is the legal document that governs the merger.
Effects of the Merger
Pursuant to the merger agreement and the statutory merger agreement, Merger Sub will merge with and into Validus, with Validus continuing as the surviving company. Validus, as the surviving company, will continue in existence as a Bermuda exempted company and a wholly-owned subsidiary of AIG. As a result of the merger under Bermuda law, Validus’ and Merger Sub’s respective undertakings, property and liabilities will become vested in Validus as the surviving company in the merger.
At the effective time, each common share issued and outstanding immediately prior to the effective time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be canceled and converted into the right to receive the merger consideration.
At the effective time, each preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
Background of the Merger
The Validus board of directors and Validus’ senior management periodically review Validus’ operations, financial condition, financial performance and long-term strategic plans and objectives, as well as industry conditions, regulatory developments and their impact on Validus’ long-term strategic plan and objectives.  Within the past two years, the Validus board of directors has reviewed and considered the current and future industry trends and risks to Validus’ ability to execute its strategic plan as a stand-alone entity, including the impact of continuing consolidation in the insurance and reinsurance industry, losses incurred within the insurance and reinsurance industry as a result of catastrophes during 2017 and increasingly competitive pricing in many of the insurance and reinsurance markets in which Validus operates, including the response of those markets to the 2017 catastrophe year.
On November 10, 2017, Brian Duperreault, AIG’s Chairman and Chief Executive Officer, telephoned Ed Noonan, Chairman and Chief Executive Officer of Validus to explore Mr. Noonan’s willingness to meet to discuss a potential transaction involving AIG and Validus. Mr. Duperreault suggested that he and Mr. Noonan meet in person for further discussion.
On November 10, 2017, Mr. Noonan telephoned Andrea Vittorelli of J.P. Morgan to discuss his conversation with Mr. Duperreault and the potential transaction involving AIG and Validus.
On November 15, 2017, Mr. Duperreault and Mr. Noonan met in person. At this meeting, Mr. Duperreault stated to Mr. Noonan that AIG was interested in acquiring Validus at a price of $60.00 per share. Mr. Noonan commented to Mr. Duperreault that the price did not seem compelling but that he would communicate AIG’s proposal to the Validus board of directors.
In connection with this meeting, Mr. Noonan provided an update to Jeffrey Greenberg, Validus’ lead director, who had been a director of Validus since its formation, regarding the communications between Mr. Duperreault and Mr. Noonan.
On November 17, 2017, Mr. Duperreault telephoned Mr. Noonan to inquire whether it would be helpful for Mr. Noonan if he provided AIG’s proposal to Mr. Noonan in writing. Mr. Noonan confirmed that it would be helpful to receive the proposal in writing so that he could share with the Validus board of directors.

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On November 19, 2017, Mr. Noonan informed Mr. Duperreault that he had reviewed AIG’s offer to acquire Validus for $60.00 per share in cash with certain members of the Validus board of directors and that Validus would not be willing to move forward at that level.
On November 21, 2017, Mr. Duperreault emailed a letter to Mr. Noonan which included a non-binding indication of interest from AIG to acquire Validus for a price in a range between $65.00 per share and $68.00 per share in cash, subject to due diligence. The letter stated a willingness to work with Validus on a due diligence plan that would not disrupt Validus’ ordinary course activities during the January 1st renewals season. Mr. Noonan forwarded a copy of the letter to members of the Validus board of directors promptly following receipt. The letter did not mention management retention or the potential for board members to sit on the combined company’s board of directors.
On November 26, 2017, the Validus board of directors, Jeff Sangster, Validus’ Executive Vice President and Chief Financial Officer and Rob Kuzloski, Validus’ Executive Vice President and General Counsel, met telephonically to discuss AIG’s non-binding indication of interest. At this meeting, representatives of Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden Arps”), special outside counsel to Validus, reviewed with the Validus board of directors the general scope of duties of a public company board of directors and how those duties would be applied where a company had received a confidential non-binding indication of interest. Representatives of J.P. Morgan, Validus’ financial advisor, reviewed with the directors Validus’ performance and valuation and J.P. Morgan’s view of how the transaction multiples implied by the price range stated in AIG’s letter would compare to precedent transactions in the insurance and reinsurance industry. Representatives of J.P. Morgan also discussed with the Validus board of directors the likelihood of parties other than AIG being interested in transacting with Validus at similar multiples. The Validus board of directors discussed with the representatives of J.P. Morgan the importance of the upcoming January 1st renewals season and the particular risk of the impact of any leak on Validus’ ongoing business during that time period. At this meeting, the Validus board of directors authorized Mr. Noonan to continue discussions with Mr. Duperreault and to permit AIG to conduct limited due diligence on Validus.
On November 27, 2017, Mr. Noonan telephoned Mr. Duperreault and provided an update during which Mr. Noonan reported that the Validus board of directors had expressed support for Mr. Noonan to continue a dialogue with Mr. Duperreault. Mr. Noonan also stated that Validus would be willing to enter into a customary confidentiality agreement in order to permit AIG to review limited non-public information regarding Validus. Mr. Noonan noted to Mr. Duperreault that he and the Validus board of directors viewed AIG’s offer as not entirely consistent with relevant comparable transactions nor fully reflective of Validus’ value and that Validus’ directors had not made any determination that Validus was for sale, or that Validus would be for sale at the price range stated in AIG’s letter. Mr. Noonan also sought confirmation from Mr. Duperreault as to the seriousness of AIG’s commitment in pursuing an acquisition of Validus, as well as Mr. Duperreault’s views regarding the continued operation of Validus’ component businesses should they ultimately be owned by AIG.
On November 28, 2017, representatives of J.P. Morgan telephoned Alon Neches, Head of Corporate Development at AIG, and representatives of Citigroup and Perella Weinberg, AIG’s financial advisors, to discuss valuation questions raised by the Validus board of directors, as well as due diligence and transaction process and timing.
From November 28, 2017 through November 30, 2017, Validus and AIG exchanged drafts of a confidentiality agreement with respect to the sharing by Validus of non-public information, and Validus and AIG executed such confidentiality agreement on December 1, 2017.
During the period from December 1, 2017 to December 13, 2017, representatives of J.P. Morgan and representatives of Citigroup and Perella Weinberg participated in regular telephone conferences for the purpose of discussing due diligence and process matters.
On December 5, 2017, the Validus board of directors, Mr. Sangster, Mr. Kuzloski and representatives of J.P. Morgan met to discuss the status of Validus’ discussions with AIG and its advisors. Representatives of J.P. Morgan reviewed with the directors Validus’ performance and valuation.

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On December 6, 2017, representatives of J.P. Morgan opened the electronic data room to AIG and its financial and legal advisors to begin AIG’s due diligence review of certain non-public information.
On December 14, 2017, senior executives of Validus met with representatives of AIG and its financial advisors to discuss Validus’ business plan and operations.
On December 15, 2017, Mr. Kuzloski responded to questions from AIG and its advisors during a legal due diligence teleconference.
Representatives of Validus and AIG continued daily due diligence calls during the week of December 18th regarding finance, capital, accounting, actuarial and tax matters and Validus’ reserves and financial forecasts. In the course of those discussions, representatives of AIG informed representatives of J.P. Morgan that Mr. Duperreault intended to contact Mr. Noonan to discuss the results of AIG’s due diligence investigation during the last week of December.
On December 27, 2017, Mr. Duperreault telephoned Mr. Noonan. Mr. Duperreault stated that AIG had identified no material findings during its due diligence investigation that would compromise its valuation framework and that AIG was prepared to offer $65.00 per share in cash to acquire Validus. As part of additional discussions between Mr. Noonan and Mr. Duperreault, Mr. Duperreault indicated to Mr. Noonan that there may be room to negotiate with respect to this price. During this call, Mr. Noonan also discussed with Mr. Duperreault AIG’s plans with respect to the operation of Validus’ component businesses and their potential integration with AIG’s existing operations.
On December 28, 2017, representatives of J.P. Morgan telephoned Mr. Neches to confirm the content of the discussions between Mr. Duperreault and Mr. Noonan the previous day. Mr. Noonan and Mr. Duperreault also engaged in further telephonic discussions during the day regarding a potential transaction.
On December 29, 2017, Mr. Noonan, Mr. Sangster and Mr. Kuzloski provided a telephonic update to the Validus board of directors regarding Mr. Noonan’s discussion with Mr. Duperreault. Representatives of J.P. Morgan and Skadden Arps were also in attendance. During this call, the Validus board of directors instructed Mr. Noonan to deliver a counteroffer to Mr. Duperreault for a transaction at a price of $71.00 per share in cash and that Validus would have the ability to pay a dividend for the second quarter of 2018 in an amount up to $0.38 per share even if the proposed transaction were to close prior to the customary record date for such dividend.
On December 29, 2017, Mr. Noonan telephoned Mr. Duperreault and informed Mr. Duperreault that the Validus board of directors would be prepared to consider a transaction at a purchase price of $71.00 per share in cash and that Validus would have the ability to pay a dividend for the second quarter of 2018 in an amount up to $0.38 per share even if the proposed transaction were to close prior to the customary record date for such dividend.
On January 3, 2018, Mr. Duperreault invited Mr. Noonan to an in person meeting to discuss the potential transaction and later that day Mr. Duperreault and Mr. Noonan met at AIG’s offices. During this meeting, Mr. Duperreault stated that the AIG board of directors would be prepared to consider a transaction at a purchase price of $68.00 per share in cash. Mr. Noonan stated that he believed that it would be important for Validus shareholders to be assured that Validus would have the ability to pay a dividend for the second quarter of 2018 in an amount up to $0.38 per share even if the proposed transaction were to close prior to the customary record date for such dividend and that there would be support for such a transaction. Mr. Duperreault indicated that the transaction described by Mr. Noonan would be acceptable to AIG. Mr. Noonan agreed that he would update the Validus board of directors regarding the discussion and Mr. Duperreault’s proposal. On January 3, Mr. Duperreault emailed a letter to Mr. Noonan confirming AIG’s proposal.
Following this meeting, Mr. Noonan provided a telephonic update to the Validus board of directors regarding his discussion with Mr. Duperreault. Representatives of J.P. Morgan and Skadden Arps were also in attendance. During this update, the Validus board of directors authorized Mr. Noonan and Validus’ senior management team to seek to execute a transaction on the economic terms that had been discussed between Mr. Noonan and Mr. Duperreault.

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During the evening of January 3, 2018, a representative of J.P. Morgan sent an initial draft of the merger agreement prepared by Skadden Arps to representatives of AIG.
On January 4, 2018, representatives of J.P. Morgan telephoned Mr. Neches to discuss a schedule for completion of AIG’s due diligence.
Beginning January 5, 2018 through January 16, 2018, representatives of Validus, J.P. Morgan and AIG spoke telephonically on a daily basis during the work week to discuss matters relating to the potential transaction. Also during this period of time, the parties had additional telephone calls during which AIG completed its due diligence process.
During the early morning of January 10, 2017, a representative of Debevoise & Plimpton LLP (“Debevoise”), AIG’s outside legal advisor, sent a revised draft of the merger agreement to Skadden Arps.
During the evening of January 12, 2018, a representative of Skadden Arps sent a revised draft of the merger agreement to Debevoise. The draft reflected Validus’ response to certain issues that had been raised by AIG’s merger agreement draft, including regarding the scope of termination events and termination fees, the scope of the “fiduciary out” exceptions within the non-solicitation covenant, the scope of AIG’s commitments to seek and obtain regulatory approvals, the treatment of Validus’ outstanding employee equity awards and conditions to closing.
On January 14, 2018, representatives of Skadden Arps participated in a teleconference with representatives of Debevoise to discuss issues in Validus’ revised merger agreement draft, including the scope of termination events and termination fees, the scope of the “fiduciary out” exceptions within the non-solicitation covenant, the treatment of Validus’ outstanding employee equity awards and conditions to closing.
During the period from January 15, 2018 to January 21, 2018, representatives of Skadden Arps and Appleby, special Bermuda counsel to Validus, with the assistance of Validus’ senior management team, negotiated the terms and conditions of the merger agreement with AIG and its legal advisors. During this time, discussions continued regarding the treatment of Validus’ outstanding employee equity awards in the proposed transaction, including the vesting treatment of equity awards held by Validus employees who would not be expected to continue employment with Validus or AIG following an acquisition by AIG.
On January 17, 2018, representatives of AIG contacted Kean Driscoll, Validus’ President and Global Head of Reinsurance, to discuss AIG’s desire for Mr. Driscoll to agree to terms of an ongoing employment arrangement with AIG in advance of the announcement of a transaction. Mr. Noonan discussed the request with Peter Zaffino, AIG’s General Insurance CEO, and Mr. Duperreault and it was agreed that any employment discussions with Validus employees should be delayed and should not interfere with the parties’ finalization and announcement of a transaction.
On January 18, 2018, representatives of Validus, J.P. Morgan and AIG met on a teleconference to discuss Validus’ results for the fourth quarter of 2017.
On the morning of January 21, 2018, the compensation committee of the Validus board of directors held a telephonic meeting attended by members of Validus’ management and representatives of Skadden Arps. Representatives of Skadden Arps reviewed with the compensation committee of the Validus board of directors the proposed treatment of Validus’ outstanding equity awards as contemplated by the merger agreement and the Validus compensation committee unanimously approved such proposed treatment.
Following this meeting, the Validus board of directors held a telephonic meeting that was also attended by Mr. Sangster, Mr. Kuzloski, representatives of J.P. Morgan, representatives of Skadden Arps and representatives of Appleby. Representatives of Skadden Arps and Appleby discussed with the Validus board of directors the legal principles and standards applicable to its consideration of the proposed transaction. Representatives of Skadden Arps also reviewed the terms and conditions set forth in the proposed merger agreement, including, among other things, the parties’ respective termination rights (including Validus’ right to terminate the agreement if Validus’ board of

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directors in the exercise of its fiduciary duties, changes its recommendation with respect to the proposed transaction), the termination fees payable in connection with certain termination events under the proposed merger agreement, the obligations of the parties to obtain applicable regulatory approvals, the definition of a “material adverse effect,” the applicable closing conditions and the treatment of Validus’ outstanding indebtedness and preferred shares. Representatives of Skadden Arps and Appleby also discussed the proposed bye-law amendment with the directors. Representatives of J.P. Morgan then reviewed with the Validus board of directors J.P. Morgan’s financial analysis of the merger consideration, as more fully described below under the heading “—Opinion of Validus’ Financial Advisor,” and rendered to the Validus board of directors its oral opinion that, as of that date and based on and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration to be paid to the holders of common shares in the proposed transaction is fair, from a financial point of view, to such holders (such opinion was subsequently confirmed in writing by J.P. Morgan following the meeting). After discussion, and in light of the Validus board of directors’ review and consideration of the factors described under “—Validus’ Reasons for the Merger; Recommendation of the Validus Board of Directors,” the Validus board of directors unanimously: approved the bye-law amendment; determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus; approved the merger, the merger agreement and the statutory merger agreement; and resolved that the bye-law amendment proposal and the merger proposal be submitted to Validus shareholders for their consideration at the special general meeting.
On the afternoon of January 21, 2018, Validus and AIG entered into the merger agreement. AIG and Validus issued a joint press release prior to the opening of trading markets on January 22, 2018 announcing the transaction.
Validus’ Reasons for the Merger and Recommendation of the Validus Board of Directors
The Validus board of directors has unanimously (1) approved the bye-law amendment, (2) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus, (3) approved the merger, the merger agreement and the statutory merger agreement and (4) resolved that the bye-law amendment proposal, the merger proposal and the compensation advisory proposal be submitted to Validus shareholders for their consideration at the special general meeting. Accordingly, the Validus board of directors recommends that Validus shareholders vote “FOR” the merger proposal.
For purposes of Section 106(2)(b)(i) of the Companies Act, the Validus board of directors considers the fair value for (i) each common share to be $68.00, without interest and less any applicable withholding taxes, (ii) each series A preferred share (and the related depositary shares) to be the continuation of each such preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged and (iii) each series B preferred share (and the related depositary shares) to be the continuation of each such preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged.
Positive Factors Relating to the Merger
As described in the section of this proxy statement titled “The MergerBackground of the Merger,” the Validus board of directors, prior to and in reaching its determination at its meeting on January 21, 2018 that the merger, on the terms and subject to the conditions set forth in the merger agreement, is fair to, and in the best interests of, Validus, consulted with Validus’ management, financial advisor and outside legal counsel and considered a variety of potentially positive factors relating to the merger, including, but not limited to, the following:
Treatment of Common Shares
The value to be received by the holders of common shares in the merger, including the fact that the all cash consideration to be received represents a significant premium relative to the trading price of the common shares. The merger consideration of $68.00 per common share represents a premium of 45.6% to the closing price of common shares on January 19, 2018.
The fact that the merger consideration of $68.00 per common share is 1.57x Validus’ book value per share and 1.77x Validus’ tangible book value per share, in each case as of September 30, 2017.
The belief of the Validus board of directors that the merger consideration to be received by holders of common shares compared adequately to a range of values of Validus as an independent company based on

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traditional valuation analyses such as a discounted dividend model, comparable companies’ trading analyses, analyses of historical cash transaction control premiums paid and comparable precedent transactions analyses.
The fact that the $68.00 per common share AIG will pay is the result of negotiations and was the high end of AIG’s original proposed valuation range of $65.00 to $68.00 per common share.
The belief of the Validus board of directors that, as a result of the negotiations between the parties, the merger consideration of $68.00 per share was the highest price per share for the common shares that AIG was willing to pay at the time of those negotiations.
The possibility that, if Validus did not enter into the merger agreement, it could take a considerable amount of time and involve a substantial amount of risk before the trading price of the common shares would reach and sustain the $68.00 per share value of the merger consideration, as adjusted for present value.
The fact that the merger agreement allows Validus to continue to declare and pay regular quarterly cash dividends of up to $0.38 per common share, with its quarterly dividend for the second fiscal quarter of 2018 to be paid prior to the closing of the merger even if such closing would occur prior to the regular record or payment date of such dividend.
The possibility that, if Validus did not enter into the merger agreement, there would likely be few, if any, other parties that would be willing to offer more than AIG’s offer of $68.00 per common share.
The fact that the merger consideration is to be paid entirely in cash, which will allow holders of common shares to realize, upon closing, a certainty of value in light of the risks and uncertainties inherent in Validus’ prospects and the market, economic and other risks that arise from owning an equity interest in a public company.
The opinion of J.P. Morgan to the Validus board of directors on January 21, 2018 that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to the holders of common shares in the proposed merger was fair, from a financial point of view, to such holders.
Treatment of Preferred Shares
The fact that holders of preferred shares will continue to own preferred shares of Validus as the surviving company following the merger and that the relative rights, terms and conditions of each such preferred share will remain unchanged.
Terms of the Merger Agreement
The fact that the terms and conditions of the merger agreement, including, but not limited to, the representations, warranties and covenants of the parties and the conditions to closing, are reasonable.
The belief of the Validus board of directors that, based on consultation with Validus’ outside legal counsel, the conditions to the consummation of the merger as set forth in the merger agreement are reasonable and customary, and the likelihood in the view of the Validus board of directors that the merger would be completed because of the limited nature of such conditions.
The availability of appraisal rights to Validus shareholders who do not vote in favor of the merger proposal, which rights provide eligible shareholders with the opportunity to have the Bermuda Court determine the fair value of their shares.
The fact that the Validus board of directors is permitted to modify or withdraw its recommendation of the merger proposal and the bye-law amendment proposal in response to a material event or circumstance that was not known or was not reasonably foreseeable to the Validus board of directors on January 21, 2018 if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law, subject to the payment of a $162 million termination fee if AIG terminates the merger agreement fee (see the section of this proxy statement titled “The Merger AgreementNo Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreement”).

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Other specific terms of the merger agreement permitting Validus to consider a “superior proposal” received after January 21, 2018 and at any time prior to approval of the merger proposal by Validus shareholders, including:
Validus’ ability, under certain circumstances, to consider and respond to a written unsolicited bona fide proposal or engage in discussions or negotiations with the third party making such a proposal, in each case if the Validus board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that such “takeover proposal” either constitutes or would reasonably be expected to lead to a “superior proposal” (as such terms are described and summarized in the section of this proxy statement titled “The Merger AgreementNo Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreements”);
The fact that the terms of the merger agreement provide that, under certain circumstances where a superior proposal has been received, Validus is permitted to entertain takeover proposals, and the Validus board of directors is permitted to:
modify or withdraw its recommendation of the merger proposal and the bye-law amendment proposal in response to a superior proposal if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law, subject to the payment of a $162 million termination fee if AIG terminates the merger agreement; or
terminate the merger agreement to enter into an alternative acquisition agreement in respect of a superior proposal if the board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law, subject to the payment of a $162 million termination fee or terminate the merger agreement, subject, in each case, to compliance with certain procedural requirements, which may include under certain circumstances the payment of a termination fee (see the section of this proxy statement titled “The Merger Agreement-No Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreements”); and
The belief of the Validus board of directors, based on consultation with Validus’ financial advisor and outside legal counsel, that the $162 million termination fee, which is approximately 3.0% of the estimated aggregate merger consideration payable to holders of common shares in connection with the merger, would not preclude other parties from making an acquisition proposal for Validus.
The absence of any financing condition or contingency to the merger.
The fact that AIG is a strong, well-capitalized company with ample resources to consummate the transaction.
The high likelihood that AIG will proceed to consummate the merger without significant delay, given its regulatory sophistication, financial resources and high credit rating.
AIG’s commitment in the merger agreement to use its reasonable best efforts to consummate the merger (subject to the terms and conditions of the merger agreement).
The ability of the parties to consummate the merger.
Risk and Other Considerations of the Merger
In the course of its deliberations, the Validus board of directors, in consultation with Validus management and legal and financial advisors, also considered a variety of risks and other potentially negative factors relating to the merger, including the following:
The possibility that the merger might not be consummated, or that the consummation might be delayed.
The risk of diverting management focus and resources from other strategic opportunities and operational matters while implementing the merger.

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That restrictions on the conduct of Validus’ business prior to consummation of the merger could delay or prevent Validus from undertaking business opportunities that arise pending consummation of the merger, which opportunities might be lost to Validus if the merger could not be consummated.
The potential negative effect of the pendency of the merger on Validus’ business and relationships with customers, vendors, business partners and employees, including the risk that key employees might not choose to remain employed with Validus prior to the consummation of the merger, regardless of whether or not the merger is consummated.
The risk that Validus shareholders may not approve the merger proposal.
The risk that governmental entities may oppose or refuse to approve the merger or impose conditions on Validus and AIG (or any of their respective affiliates) prior to approving the merger, which conditions may constitute a burdensome condition under the terms of the merger agreement that would permit AIG to refuse to consummate the merger.
The absence of a broad pre-signing market check by Validus as to the availability of alternative proposals, even though the Validus board of directors determined that forgoing a broad pre-signing market check was in the best interests of Validus because (i) AIG was offering a significant premium to holders of common shares; (ii) the board believed following consultation with its financial advisor that it was unlikely that there would be other parties that would be willing to offer more than AIG; and (iii) discussions with alternative potential acquirers might not remain confidential and a leak might disrupt Validus’ discussions with AIG, jeopardize any potential transaction with AIG, or adversely impact Validus’ ongoing operations.
The fact that the all-cash merger consideration, while providing certainty of value upon consummation, would not allow holders of common shares to participate in any future earnings growth of Validus or benefit from any future increase in its value.
The fact that some of Validus’ directors and executive officers have other interests in the merger that are in addition to their interests as Validus shareholders (see the section of this proxy statement titled “The MergerInterests of Validus’ Directors and Executive Officers in the Merger”).
The specific terms of the merger agreement that either individually or in combination, could discourage potential acquirors from making a competing bid to acquire Validus, including:
The terms of the merger agreement placing certain limitations on the ability of Validus to initiate, solicit or take any action to knowingly facilitate or knowingly encourage any inquiries or requests for information by a third party with respect to a takeover proposal and to furnish non-public information to, or engage in discussions or negotiations with, a third party interested in pursuing an alternative business combination transaction; and
The fact that Validus must pay AIG a termination fee in connection with the merger if the merger agreement is terminated under certain circumstances, or which may become payable following a termination of the merger agreement in circumstances where no alternative transaction or superior proposal is ultimately consummated (which termination fee the Validus board of directors determined was reasonable and customary).
The foregoing discussion of the factors considered by the Validus board of directors is not intended to be exhaustive, but rather a summary of the material factors considered by the Validus board of directors. In reaching its decision to approve the merger agreement, including the merger and other transactions contemplated by the merger agreement, the Validus board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Validus board of directors considered the various factors as a whole, including discussions with, and questioning of, Validus’ management, financial advisor and outside legal counsel, and overall considered the factors to be favorable to, and to support, its determination.
The foregoing discussion of the information and factors considered by the Validus board of directors is forward-looking in nature. This information should be read in light of the factors described under the section of this proxy statement titled “Cautionary Statement Concerning Forward-Looking Information.”

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Opinion of Validus’ Financial Advisor
Pursuant to an engagement letter dated January 5, 2018, Validus retained J.P. Morgan as its financial advisor in connection with the proposed merger.
At the meeting of the Validus board of directors on January 21, 2018, J.P. Morgan rendered its oral opinion to the Validus board of directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid to the holders of common shares in the proposed merger was fair, from a financial point of view, to such holders. J.P. Morgan has confirmed its January 21, 2018 oral opinion by delivering its written opinion to the Validus board of directors, dated January 21, 2018, that, as of such date, the consideration to be paid to the holders of common shares in the proposed merger was fair, from a financial point of view, to such holders.
The full text of the written opinion of J.P. Morgan dated January 21, 2018, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Validus shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Validus board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the consideration to be paid in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of Validus or as to the underlying decision by Validus to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareholder of Validus as to how such shareholder should vote with respect to the proposed merger or any other matter.
In arriving at its opinions, J.P. Morgan, among other things:
reviewed a draft dated January 20, 2018 of the merger agreement;
reviewed certain publicly available business and financial information concerning Validus and the industries in which it operates;
compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
compared the financial and operating performance of Validus with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of the common shares and certain publicly traded securities of such other companies;
reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of Validus relating to its business; and
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of Validus with respect to certain aspects of the merger, and the past and current business operations of Validus, the financial condition and future prospects and operations of Validus, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Validus or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness, and did not assume any obligation to undertake such independent verification. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities or conduct any actuarial analyses, nor did J.P. Morgan evaluate the solvency of Validus or AIG under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available

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estimates and judgments by management as to the expected future results of operations and financial condition of Validus to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the merger and the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement and that the definitive merger agreement would not differ in any respect material to its analysis from the draft thereof provided to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by Validus and AIG in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory, actuarial or tax expert and relied on the assessments made by advisors to Validus with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on Validus or on the contemplated benefits of the merger.
J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be paid to the holders of Validus’ common shares in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Validus or the underlying decision by Validus to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation payable to any officers, directors, or employees of any party to the merger, or any class of such persons relative to the consideration to be paid to the holders of Validus common shares in the merger or with respect to the fairness of any such compensation. J.P. Morgan noted that it was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Validus or any other alternative transaction.
The terms of the merger agreement, including the merger consideration, were determined through arm’s length negotiations between Validus and AIG, and the decision to enter into the merger agreement was solely that of the Validus board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Validus board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Validus board of directors or management with respect to the proposed merger or the merger consideration.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the Validus board of directors on January 21, 2018 and contained in the presentation delivered to the Validus board of directors on such date in connection with the rendering of such opinion and this summary does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses. In addition, in its presentation, J.P. Morgan noted that the $68.00 per share merger consideration did not include the incremental $0.76 of first quarter and second quarter 2018 dividends contemplated to be paid between signing and close.
Public Trading Multiples
Using publicly available information, J.P. Morgan compared selected financial data of Validus with similar data for selected publicly traded companies engaged in two categories of businesses: reinsurance and diversified insurance and reinsurance, which J.P. Morgan judged to be analogous to Validus. The companies in each category selected by J.P. Morgan were:
Reinsurance:
Everest Re Group, Ltd.
RenaissanceRe Holdings Ltd.

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Diversified (re)insurance:
XL Catlin
AXIS Capital
Aspen Insurance
None of the selected companies reviewed is identical to Validus. Certain of these companies may have characteristics that are materially different from those of Validus. However, the companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Validus. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect Validus.
Using publicly available information, J.P. Morgan calculated, for each selected company: (i) the ratio of such company’s share price to the equity research analyst estimate for such company’s 2018 earnings per share (EPS); (ii) the ratio of such company’s share price to its book value (BV), calculated as of September 30, 2017; and (iii) the ratio of such company’s share price to its tangible book value (TBV), calculated as of September 30, 2017.
The following table represents the results of this analysis:
Company
  
Price to
2018E EPS
 
Price to
9/30/17 BV
 
Price to
9/30/17 TBV
Reinsurance
 
 
 
 
 
 
Everest Re Group, Ltd.
  
11.1x
 
1.16x
 
1.16x
RenaissanceRe Holdings Ltd.
  
12.5x
 
1.23x
 
1.31x
Diversified (re)insurance
  
 
 
 
 
 
XL Catlin
  
9.4x
 
0.93x
 
1.19x
AXIS Capital
  
10.3x
 
0.88x
 
0.90x
Aspen Insurance
 
9.6x
 
0.87x
 
0.90x
Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and judgment, J.P. Morgan selected multiple reference ranges for Validus as follows:
 
Range
Price to 2018E EPS
9.5x — 12.5x
Price to 9/30/17 BV
0.90x — 1.25x
Price to 9/30/17 TBV
0.90x — 1.30x
After applying these ranges to Validus’ estimated 2018 EPS of $4.41, based on the Validus projections provided by management; Validus’ book value of $43.22 per share, calculated as September 30, 2017 common equity divided by most recent shares outstanding per Validus management; and Validus’ tangible book value of $38.32 per share, calculated as September 30, 2017 common tangible equity divided by most recent shares outstanding per Validus management, this analysis indicated the following implied equity value per share ranges for the common shares, rounded to the nearest $0.01:

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Implied Equity Value Per Share
 
Low
High
Price to 2018E EPS
$41.92
$55.16
Price to 9/30/17 BV
$38.90
$54.03
Price to 9/30/17 TBV
$34.49
$49.82
The ranges of implied equity value per share were compared to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.
Selected Transaction Analysis
Using publicly available information, J.P. Morgan reviewed selected transactions involving acquired businesses that, for purposes of J.P. Morgan’s analysis and based on its experience and judgment, were considered similar to Validus’ business. Specifically, J.P. Morgan reviewed the following transactions involving companies in the Bermuda (re)insurance business.
Target
Acquiror
Month/Year Announced
Deal Value to Company Book Value
Deal Value to Company Tangible Book Value
Allied World Assurance Company
Fairfax Financial
December 2016
1.34x
1.56x
Ironshore Inc.
Liberty Mutual Insurance Co.
December 2016
1.45x
Endurance Specialty
SOMPO Holdings
October 2016
1.36x
1.53x
PartnerRe
Exor S.p.A.
August 2015
1.10x
1.22x
Sirius International Insurance Group
CM International Holding
July 2015
1.27x
Ironshore Inc.
Fosun International Limited
May 2015
1.21x
1.26x
Montpelier Re
Endurance Specialty
March 2015
1.21x
1.21x
Platinum Underwriters
RenaissanceRe
November 2014
1.13x
1.13x
None of the selected transactions reviewed was identical to the merger. Certain of these transactions may have characteristics that are materially different from those of the merger. However, the transactions selected were chosen because the participants in and certain other aspects of the transactions, for purposes of J.P. Morgan’s analysis, may be considered similar to the participants in and aspects of the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the merger.
Using publicly available information, J.P. Morgan calculated, for each selected transaction: (i) the ratio of the deal value to the target company’s book value; and (ii) the ratio of the deal value to the target company’s tangible book value.
Based on the results of this analysis, J.P. Morgan selected multiple reference ranges for Validus as follows:
 
Range
Deal value to company book value
1.10x — 1.35x
Deal value to company tangible book value
1.15x — 1.55x
After applying these ranges to Validus’ book value of $43.22 per share, calculated as September 30, 2017 common equity divided by most recent shares outstanding per Validus management; and Validus’ tangible book value of

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$38.32 per share, calculated as of September 30, 2017 common tangible equity divided by most recent shares outstanding per Validus management, this analysis indicated the following implied equity value per share ranges for the common shares, rounded to the nearest $0.01:
 
Implied Equity Value Per Share
 
Low
High
Price to 9/30/17 BV
$47.54
$58.35
Price to 9/30/17 TBV
$44.07
$59.40
The ranges of implied equity value per share were compared to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.
Dividend Discount Analysis
J.P. Morgan conducted a dividend discount analysis to determine a range of equity values for Validus’ fully diluted common shares, assuming Validus continued to operate as a stand-alone entity. The range was determined by adding the present value of an estimated future dividend stream for Validus over a ten-year period from 2018 through 2027, using financial projections for Validus prepared by Validus’ management for the years 2018—2020 and extrapolations reviewed and approved by Validus’ management for the years 2021—2027, and the present value of an estimated terminal value of the common shares at the end of 2028. In performing its analysis, including in determining the terminal value, J.P. Morgan made the following assumptions, among others: (i) a cost of equity of 7.25-8.25% (which range was chosen by J.P. Morgan taking into account macro-economic assumptions, estimates of risk, Validus’ capital structure and other appropriate factors); (ii) a long-term growth rate of 1.50-2.50%; and (iii) midyear discounting.
This analysis implied an equity value per share of $52.78 to $65.31 per common share of Validus. The range of implied equity value per share was compared to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.
Other Information
52-Week Historical Trading Range. J.P. Morgan observed that the trading range of the common shares for the 52-week period ended January 19, 2018, rounded to the nearest $0.01, was $41.15 per share to $58.76 per share. J.P. Morgan compared the range of implied equity value per share to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.
Analyst Price Target. J.P. Morgan reviewed the price target reflecting the most recent consensus estimates reflecting the median of equity research covering Validus by certain equity research analysts available as of January 19, 2018, and noted that such price target was between $50.00 and $60.00 per common share of Validus. J.P. Morgan compared the range of implied equity value per share to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.
Analyst Estimated Earnings Per Share. J.P. Morgan reviewed the most recent consensus estimates for Validus’ 2018 EPS reflecting the median of equity research covering Validus. J.P. Morgan then applied this estimate of $4.10 per share to the multiples range of 9.5x — 12.5x (which was the same range used by J.P. Morgan with respect to Validus management 2018E EPS; see “Public Trading Multiples” above). This analysis indicated an implied equity value per share range for the common shares, rounded to the nearest $0.01, of $38.95 — $51.25. J.P. Morgan compared the range of implied equity value per share to (a) the closing price of $46.72 per common share on of January 19, 2018, the last trading day prior to the announcement of the merger and (b) the merger consideration of $68.00 per common share.

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J.P. Morgan noted that the historical stock trading range analyses, analyst price target, and analyst estimated earnings per share noted above were presented merely for reference purposes only, and were not relied upon for valuation purposes.
Miscellaneous
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Validus. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Validus, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Validus. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Validus and the transactions compared to the merger.    
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Validus with respect to the merger and to deliver an opinion to the Validus board of directors with respect to the merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Validus and the industries in which it operates.
Validus has agreed to pay J.P. Morgan a transaction fee of approximately $45 million, $3.0 million of which was payable following delivery of J.P. Morgan’s opinion and the remainder of which is payable upon completion of the merger. In the event that Validus or any of its affiliates is paid a break-up, termination or similar fee in connection with the termination, abandonment or failure to occur of the proposed merger, Validus has agreed to pay J.P. Morgan a fee equal to 25% of such amount, which fee will not exceed the aggregate fee payable to J.P. Morgan in connection with the merger and against which any of the foregoing fees paid by Validus will be credited. In addition, Validus has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.
During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Validus and AIG for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included providing investment banking, commercial banking, and other financial services to Validus and to AIG. J.P. Morgan acted as a co-manager on Validus’ June 2016 and June 2017 preferred equity offerings and acted as financial advisor to AIG in an M&A

35



transaction announced in August 2016. During the two year period preceding delivery of its opinion ending on January 21, 2018, the aggregate fees received by J.P. Morgan from Validus were not in excess of $915,000 and from AIG were not in excess of $70,000,000. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of Validus and AIG. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Validus or AIG for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities.
Certain Validus Prospective Financial Information
Validus management does not as a matter of course make public projections as to future performance or earnings and is especially wary of making projections for extended periods due to the significant unpredictability inherent in its businesses. However, Validus provided, among other information, certain financial projections prepared by Validus’ management to J. P. Morgan, financial advisor to the Validus board of directors, in connection with its evaluation of the merger (which we refer to as the “financial projections”). The financial projections were not developed for the purposes of providing earnings guidance.
The financial projections each represent only one scenario in a wide range of potential outcomes. While presented with numeric specificity, the financial projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Validus’ business, all of which are inherently uncertain and difficult to predict and many of which are beyond Validus’ control. These financial projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. These financial projections may also be affected by Validus’ ability to achieve strategic goals, objectives and targets over the applicable periods. As such, these financial projections constitute forward-looking information and are subject to risks and uncertainties, including the various risks set forth in the sections of this proxy statement titled “Cautionary Statements Concerning Forward-Looking Information” and in Validus’ most recent reports on Form 10-K and Form 10-Q and other documents of Validus on file with or furnished to the SEC. Validus shareholders should read such sections of this proxy statement and such reports filed with the SEC for additional information regarding the risks inherent in forward-looking information such as the financial projections. The financial projections cover multiple years and such information by its nature becomes less reliable with each successive year.
The financial projections were not prepared with a view toward public disclosure, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, but, in view of Validus’ management, were prepared on a reasonable basis. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement are cautioned not to place undue reliance on the prospective financial projections. Neither Validus’ independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections included below, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the financial projections. Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared.
Certain of the financial projections set forth herein may be considered non-generally accepted accounting principles (which we refer to as “non-GAAP”) financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with generally accepted accounting principles (which we refer to as “GAAP”), and non-GAAP financial measures as used in the financial projections may not be comparable to similarly titled amounts used by other companies or persons.
The information about the financial projections set forth below do not give effect to the merger and none of the financial projections take into account the effect of any failure of the merger to be consummated.
You are strongly cautioned not to place undue reliance on the financial projections set forth below. The inclusion of the financial projections in this proxy statement should not be regarded as an indication that any of Validus, AIG or their affiliates, advisors or representatives considered or consider the financial projections to be predictive of actual

36



future events, and the financial projections should not be relied upon as such. None of Validus, AIG or their respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not materially differ from the financial projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the financial projections to reflect circumstances existing after the date such financial projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the financial projections are shown to be in error. None of Validus, AIG or their respective affiliates, advisors or representatives makes any representation to any other person regarding the financial projections. The financial projections are not being included in this proxy statement to influence a shareholder’s decision regarding how to vote on any given proposal, but because the financial projections were provided to J.P. Morgan. These financial projections are for illustrative purposes and should not be considered an indication of what Validus may do in the future.
The following is a summary of the financial projections (in millions, except per share data and percentage data):
(expressed in millions of U.S. dollars)
2017E
2018E
2019E
2020E
 
 
 
 
 
Net premiums written
2,516

3,292

3,626

3,937

Net premiums earned
2,581

3,129

3,479

3,800

Losses and loss expenses
(2,315
)
(1,719
)
(1,874
)
(2,045
)
Policy acquisition costs
(472
)
(530
)
(596
)
(663
)
General and administrative expenses
(359
)
(432
)
(447
)
(464
)
Share compensation expenses
(40
)
(39
)
(40
)
(41
)
Underwriting income (loss)
(592
)
418

531

597

Net investment income
178

177

192

205

Finance expenses
(59
)
(58
)
(57
)
(57
)
Tax benefit (expenses)
10

(17
)
(23
)
(29
)
Dividends on preferred shares
(16
)
(23
)
(23
)
(23
)
(Income) attributable to AlphaCat investors
17

(41
)
(48
)
(53
)
Net operating (income) attributable to noncontrolling interest
357

(102
)
(131
)
(143
)
Net income available to common shares
(105
)
354

441

498

Operating EPS
(1.32
)
4.41

5.79

6.99

Loss ratio
89.7
%
54.9
%
53.9
%
53.8
%
Combined ratio
123.4
%
86.9
%
85
%
84.6
%
Common equity
3,224

3,362

3,476

3,634



37



The following is a summary of the extrapolations:
(expressed in millions of U.S. dollars)
2021E
2022E
2023E
2024E
2025E
2026E
2027E
Terminal
 
 
 
 
 
 
 
 
 
Net premiums written
4,239

4,523

4,784

5,015

5,210

5,364

5,471

5,580

Net premiums earned
4,091

4,366

4,617

4,840

5,028

5,176

5,280

5,386

Losses and loss expenses
(2,219
)
(2,432
)
(2,638
)
(2,776
)
(2,893
)
(2,984
)
(3,049
)
(3,114
)
Policy acquisition costs
(714
)
(761
)
(805
)
(844
)
(877
)
(903
)
(921
)
(939
)
General and administrative expenses
(496
)
(525
)
(551
)
(572
)
(589
)
(602
)
(608
)
(621
)
Share compensation expenses
(44
)
(47
)
(50
)
(52
)
(54
)
(56
)
(57
)
(58
)
Underwriting income (loss)
630

612

587

609

629

646

660

669

Net investment income
212

220

229

236

241

244

246

248

Finance expenses
(57
)
(57
)
(57
)
(57
)
(57
)
(57
)
(57
)
(57
)
Tax benefit (expenses)
(32
)
(31
)
(30
)
(32
)
(33
)
(34
)
(35
)
(36
)
Dividends on preferred shares
(23
)
(23
)
(23
)
(23
)
(23
)
(23
)
(23
)
(23
)
(Income) attributable to AlphaCat investors
(57
)
(61
)
(64
)
(67
)
(70
)
(72
)
(73
)
(75
)
Net operating (income) attributable to noncontrolling interest
(154
)
(164
)
(174
)
(182
)
(189
)
(195
)
(199
)
(203
)
Net income available to common shares
520

497

469

485

498

510

520

524

Loss ratio
54.2
%
55.7
%
57.1
%
57.4
%
57.5
%
57.7
%
57.7
%
57.8
%
Combined ratio
84.9
%
86.3
%
87.6
%
87.7
%
87.8
%
87.8
%
87.8
%
87.9
%
Common equity
4,003

4,533

5,067

5,369

5,624

5,824

5,964

6,107

The following table represents the projected future dividend stream for Validus over the period from 2018 to 2027 (expressed in millions of U.S. dollars):
Year
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Cash flows
466

327

341

151

(33
)
(66
)
183

244

310

379

Financing
The merger is not conditioned upon receipt of financing by AIG. AIG has informed us that it has the financial resources to complete the merger and it expects to use cash on hand to fund the aggregate merger consideration. AIG has informed us that it may evaluate opportunistic funding alternatives prior to the closing.
Effective Time of Merger
The closing of the merger will occur on the third business day following the satisfaction or waiver of all the closing conditions set forth in the merger agreement (described in the section of this proxy statement titled “The Merger AgreementClosing; Effective Time”) (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions) or such other date and time as Validus and AIG may agree in writing.
The merger will become effective upon the issuance of the certificate of merger by the Bermuda Registrar of Companies and at the time and date shown on such certificate of merger.

38



Interests of Validus’ Directors and Executive Officers in the Merger
Validus’ executive officers and directors may have interests in the merger that may be different from or in addition to those of Validus shareholders generally. The Validus board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating and negotiating the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be approved by the shareholders of Validus.
Treatment of Outstanding Validus Restricted Share Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion (determined as described above) of each Validus restricted share award will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, and the remaining portion of such Validus restricted share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion. The AIG restricted shares will continue to be governed by the same terms and conditions (including with respect to the vesting schedule, any vesting acceleration terms and any right to receive accrued but unpaid dividends) as were applicable to the former Validus restricted share award immediately prior to the effective time.
Notwithstanding the foregoing, each Validus restricted share award held by a group of up to ten employees determined by the parties whose employment is expected to terminate at or immediately following the effective time will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, without pro-ration. This group of employees (which we refer to as the “designated employees”), may include executive officers of Validus and will be determined by the parties no later than thirty days prior to the effective time. As of March 21, 2018 (the last practicable date before the filing of this proxy statement), the designated employees have not been determined.
Under the terms of the Validus restricted share award agreements, which terms shall continue to apply to any corresponding AIG restricted shares, if, within two years following a change in control, an executive officer’s employment is terminated by the employer not for “cause” or by the executive officer for “good reason” (each as defined in the applicable award agreement), the corresponding AIG restricted shares will vest in full upon such termination of employment. The closing of the merger will constitute a change in control for purposes of the Validus restricted share award agreements.
Treatment of Outstanding Validus Performance Share Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion of each Validus performance share award (with the number of Validus common shares subject to award determined as described below) will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, and the remaining portion of such Validus performance share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion. The AIG restricted shares will continue to be governed by the same terms and conditions (including with respect to the vesting schedule, any vesting acceleration terms and any right to receive accrued but unpaid dividends) as were applicable to the former Validus performance share award immediately prior to the effective time, except that any performance-based vesting requirements will no longer apply.
Notwithstanding the foregoing, each Validus performance share award held by the designated employees will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without pro-ration.
For the purposes of determining the number of outstanding Validus performance share awards, the merger agreement provides that (i) with respect to any Validus performance share award with a performance period that has been

39



completed as of the effective time, the number of Validus performance share awards will be determined based on the actual level of performance achieved and (ii) with respect to any Validus performance share award with a performance period that has not been completed as of the effective time, any applicable performance-based vesting requirements will be deemed to be achieved at target payout levels. Notwithstanding the foregoing, in order to recognize the strong performance of the holders of Validus performance share awards, reward them for their part in generating the shareholder value created in the merger and incentivize them to remain employed with Validus through the closing of the merger, with respect to any Validus performance share award with a performance period that has not been completed as of the effective date, (i) the number of Validus performance share awards will be determined by assuming any applicable performance-based vesting requirements were achieved at maximum payout levels and (ii) the excess of the number of Validus performance share awards so determined over the number of Validus performance share awards determined assuming any applicable performance-based vesting requirements were achieved at target payout levels, whether or not held by a designated employee, will vest and be canceled and converted at the effective time into the right to receive a cash amount in respect of such excess number of Validus performance share awards, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without pro-ration.
Under the terms of the Validus performance share award agreements, which terms (other than any performance based vesting requirements) shall continue to apply to any corresponding AIG restricted shares, if, within two years following a change in control, an executive officer’s employment is terminated by the employer not for “cause” or by the executive officer for “good reason” (each as defined in the applicable award agreement), the corresponding AIG restricted shares will vest in full upon such termination of employment. The closing of the merger will constitute a change in control for purposes of the Validus performance share award agreements.
Treatment of Outstanding Validus RSU Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion of each unvested Validus RSU award will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, and the remaining portion of such unvested Validus RSU award will be assumed by AIG and converted into an AIG RSU award entitling the holder to receive a number of shares of AIG common stock equal to the product of (x) the total number of Validus common shares subject to such Validus RSU award immediately prior to the effective time multiplied by (y) the equity award exchange ratio. The AIG RSU awards will continue to be governed by the same terms and conditions (including with respect to the vesting schedule and any vesting acceleration terms) as were applicable to the Validus RSU award immediately prior to the effective time.
Notwithstanding the foregoing, each Validus RSU award held by the designated employees will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, without pro-ration. In addition, each Validus RSU award that is vested but not yet settled as of the effective time and each Validus RSU award (if any) held by a non-employee director of Validus will be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, without pro-ration.
Value to Executive Officers in Respect of Validus Equity Awards
Assuming for this purpose that the merger is completed on March 21, 2018 (the last practicable date before the filing of this proxy statement) and each executive officer of Validus is terminated not for “cause” or resigns for “good reason” on that day, which termination would result in the vesting in full of any equity awards that do not otherwise vest in full pursuant to the terms of the merger agreement, the table below sets forth the number of Validus restricted share awards and Validus performance share awards held by the executive officers and the value that the executive officers can expect to receive for such equity awards at the effective time based on the per share merger consideration equal to $68.00.

40



Name
Restricted Share Awards
Performance Share Awards
 
Number
(#)
Value
($)
Number (1)
(#)
Value
($)
Named Executive Officers
 
Edward J. Noonan
82,624

$
5,618,432

78,437

$
5,333,716

Jeffrey D. Sangster
52,984

$
3,602,912

51,140

$
3,477,520

Kean D. Driscoll
62,281

$
4,235,108

77,203

$
5,249,804

Peter A. Bilsby
51,463

$
3,499,484

47,259

$
3,213,612

Robert F. Kuzloski
54,001

$
3,672,068

29,397

$
1,998,996

7 Other Executive Officers (2)
249,984 (3)

$
16,998,912

147,193

$
10,009,124

(1)
The number of Validus performance share awards shown in this column is based on the assumption that the applicable performance-based vesting requirements are achieved as described above and total cash payments in respect of performance share awards with a performance period in progress are made at maximum payout levels (i.e., 175% of the target number of Validus performance share awards).
(2)
Includes John J. Hendrickson, Patrick Boisvert, Andrew E. Kudera, Michael R. Moore, Jonathan P. Ritz, Romel Salam and Lixin Zeng.
(3)
Includes 39,580 Validus RSU awards held by Mr. Boisvert.
Value to Directors in Respect of Validus Equity Awards
As of March 21, 2018 (the last practicable date before the filing of this proxy statement), the non-employee directors of Validus did not hold any unvested Validus equity or equity-based awards.
Potential Severance Payments Upon a Qualifying Termination Following the Effective Time
Validus has entered into employment agreements with each of its executive officers. Each executive officer’s employment agreement provides that if, within twenty-four months following a change in control, the executive officer’s employment is terminated by the employer without “cause” or by the executive officer for “good reason” (each, or any substantially similar term, as defined in the applicable employment agreement), the executive officer will be eligible to receive:
a lump sum cash severance amount equal to two times the sum of (i) the executive officer’s base salary and (ii) target annual bonus, paid on the date of termination;
except for Messrs. Bilsby, Hendrickson and Ritz, a lump sum amount equal to the value of certain housing, automobile, tuition, club membership and/or personal travel allowances to the extent that such allowances would have been provided pursuant to the executive officer’s employment agreement had the executive officer remained employed for an additional twelve months, paid on the date of termination;
continued health, life and disability benefits provided pursuant to the executive officer’s employment agreement for twenty-four months following the date of termination;
except for Mr. Noonan, continued payments of an annual retirement savings plan contribution or an equivalent payment equal to 10% of base salary (20% of base salary for Mr. Bilsby) for twenty-four months following the date of termination; and
for Messrs. Noonan, Sangster, Kuzloski and Hendrickson, a pro-rated annual bonus for the year of termination based on the number of days worked during such year, paid on the normal payment date.
The closing of the merger will constitute a change in control for purposes of the employment agreements. None of the employment agreements provide for a gross-up of the excise tax that may be imposed pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”). Each named executive officer is subject to post-termination restrictive covenant provisions pursuant to the terms of their employment agreements, including confidentiality, non-competition and non-solicitation covenants.

41



Assuming for this purpose that the merger is completed on March 21, 2018 (the last practicable date before the filing of this proxy statement) and each executive officer of Validus is terminated without cause or resigns for good reason on that day, the table below sets forth the estimated value of the severance payments and benefits that the executive officers of Validus would be eligible to receive under their employment agreements.
Name

Cash Severance
($)

Allowance Payments
($)
Health, Life and Disability Continuation Benefits
($)
Pension Continuation Payments
($)

Prorated Annual Bonus
($) (1)
Named Executive Officers
 
 
 
 
 
Edward J. Noonan
$
4,928,125

$
535,185

$
47,863

$

$
324,041

Jeffrey D. Sangster
$
3,125,000

$
60,000

$
70,416

$
125,000

$
205,479

Kean D. Driscoll
$
3,125,000

$
293,400

$
69,943

$
125,000

$

Peter A. Bilsby
$
2,937,880

$

$
20,763

$
235,030

$

Robert F. Kuzloski
$
2,750,000

$
252,308

$
55,496

$
110,000

$
180,822

7 Other Executive Officers
$
16,925,000

$
770,169

$
373,733

$
720,000

$
213,699

(1)
The amounts shown in this column represent a pro-rated annual bonus for the year of termination, calculated through March 21, 2018 and assuming achievement of the applicable performance metrics for the year of termination at target levels.
AlphaCat Cash-Settled RSU Awards and AlphaCat Transaction Bonus
Mr. Zeng participates in the AlphaCat Plan sponsored by Validus’ AlphaCat subsidiary. Pursuant to the AlphaCat Plan, Mr. Zeng receives grants of cash-settled phantom share awards (which we refer to as the “AlphaCat cash-settled RSU awards”), representing an unfunded promise to pay an amount in the future, the value of which is determined by reference to the value of a corresponding number of reference shares in one or more pooled investment vehicles that are managed or advised by AlphaCat. In order to more closely align Mr. Zeng’s long-term incentive compensation with the results generated for shareholders through his management of the investment vehicles managed or advised by AlphaCat, Mr. Zeng generally receives grants of time-based and performance-based AlphaCat cash-settled RSU awards instead of Validus equity awards.
Under the terms of the time-based AlphaCat cash-settled RSU award agreements, if Mr. Zeng’s employment is terminated by the employer without “cause” or by Mr. Zeng for “good reason” (each as defined in the applicable award agreement), the award will vest in full upon such termination of employment. Under the terms of the performance-based AlphaCat cash-settled RSU award agreements, if, within two years following a change in control, an executive officer’s employment is terminated by the employer not for “cause” or by the executive officer for “good reason”, the award will vest in full based on target performance upon such termination of employment, provided that the compensation committee of the Validus board of directors may determine in its sole good faith discretion to adjust certain performance metrics upwards. Unlike the Validus equity awards, no portion of the AlphaCat cash-settled RSU awards held by Mr. Zeng automatically vest upon the closing the merger pursuant to the terms of the merger agreement.
Assuming for this purpose that the merger is completed on March 21, 2018 (the last practicable date before the filing of this proxy statement) and Mr. Zeng is terminated without cause or resigns for good reason on the same day, which termination would result in the vesting in full of any AlphaCat cash-settled RSU awards, the table below sets forth the number of AlphaCat cash-settled RSU awards held by Mr. Zeng and the value that he can expect to receive for such equity awards at the effective time based on the present value of such awards as of that date.
Name
AlphaCat
Cash-Settled RSU Awards
 
Number
(#)
Value
($)
Lixin Zeng
1,342
$
1,608,317


42



In addition, pursuant to the merger agreement, Mr. Zeng is eligible to receive a transaction bonus equal to $2,850,961 payable upon the closing of the merger, subject to his continued employment with Validus through the closing of the merger. The transaction bonus was granted to Mr. Zeng in order to incentivize him to remain employed with Validus through the closing of the merger and because he holds significantly fewer Validus equity awards than the other executive officers of Validus and no portion of his AlphaCat cash-settled RSU awards automatically vests upon the closing the merger pursuant to the terms of the merger agreement. The amount of the transaction bonus was calculated by dividing the grant date value of each of Mr. Zeng’s last three grants of AlphaCat cash-settled RSU awards by the closing price per share of Validus common shares on the grant date of such AlphaCat cash-settled RSUs awards in order to determine the number of Validus equity awards that Mr. Zeng would otherwise have received absent the grant of the AlphaCat cash-settled RSUs awards. The resulting number was then multiplied by the merger consideration.
Compensation Arrangements with AIG
Certain executive officers of Validus may become officers of AIG or otherwise be retained to provide services to AIG following the closing of the merger. Any executive officers of Validus who become officers or employees of AIG or who otherwise are retained to provide services to AIG following the closing of the merger may, prior to the closing of the merger, enter into new individualized compensation arrangements with AIG and may participate in cash or equity incentive or other benefit plans maintained by AIG following the closing of the merger. Subsequent to Validus entering into the merger agreement, certain executive officers of Validus began discussions with AIG with respect to potential post-closing arrangements, including employment, retention and incentive arrangements.
As of March 21, 2018 (the last practicable date before the filing of this proxy statement), AIG has entered into new employment agreements with each of Messrs. Driscoll and Bilsby that will become effective subject to and upon the closing of the merger. The employment agreements provide for base salaries, annual incentive opportunities, long-term incentive opportunities and perquisites and benefits that are equivalent to those currently provided to such executives by Validus. Employee benefits will be provided under Validus’ benefit plans through 2018 and under certain of AIG’s benefit plans starting as early as 2019. The employment agreements also provide for the grant of a retention award in the form of AIG RSUs with a grant date value of $2,500,000 for Mr. Driscoll and £1,760,000 for Mr. Bilsby that will vest and pay out in a single lump sum on the third anniversary of the closing of the merger, subject to the executive’s continued employment with AIG through the vesting date, or upon an earlier termination of employment by AIG without cause, by the executive for good reason or as a result of the executive’s permanent disability or death.  Upon a termination of employment by AIG without cause or by the executive for good reason within 24 months after the closing of the merger, the executive will be entitled to receive the same severance payments and benefits described in the section entitled “Potential Severance Payments Upon a Qualifying Termination Following the Effective Time” beginning on page 41, subject to the executive’s execution of a release of claims in favor of AIG. In addition, as of March 21, 2018, AIG has entered into or expects to enter into new employment agreements with certain other executive officers of Validus who are not named executive officers, with base salaries, annual incentive opportunities, long-term incentive opportunities and perquisites and benefits that are consistent with those currently provided to such executives by Validus, and otherwise on terms substantially consistent to those provided to Messrs. Driscoll and Bilsby pursuant to their employment agreements with AIG, and that provide for retention awards for such executives in an amount not expected to exceed $5,750,000 in the aggregate.
None of the non-employee directors of Validus are expected to become non-employee directors of AIG or otherwise provide services to AIG following the closing of the merger.
Indemnification and Insurance
The merger agreement provides for certain indemnification arrangements for Validus’ current officers and directors and the continuation of certain insurance arrangements for Validus’ current officers and directors for six years after the completion of the transactions.
Merger-Related Compensation for Validus Named Executive Officers
The table below sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of Validus that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use

43



such term to describe the merger-related compensation payable to the named executive officers of Validus. The table below assumes that the merger is completed on March 21, 2018 (the last practicable date before the filing of this proxy statement) and each named executive officer is terminated without “cause” or resigns for “good reason” on that day, pursuant to the terms of the applicable employment agreement or equity award agreement. The amounts in respect of the “golden parachute” compensation set forth in the table below are subject to a non-binding advisory vote of Validus shareholders, as described in the section of this proxy statement titled “The Special General Meeting Purposes of the Special General Meeting” beginning on page 78.
Golden Parachute Compensation
Name
Cash
($) (1)
Equity
($) (2)
Perquisites/
Benefits
($) (3)
Total
($) (4)
Edward J. Noonan
$
5,787,351

$
10,952,148

$
47,863

$
16,787,362

Jeffrey D. Sangster
$
3,515,479

$
7,080,432

$
70,416

$
10,666,327

Kean D. Driscoll
$
3,543,400

$
9,484,912

$
69,943

$
13,098,255

Peter A. Bilsby
$
3,172,910

$
6,713,096

$
20,763

$
9,906,769

Robert F. Kuzloski
$
3,293,130

$
5,671,064

$
55,496

$
9,019,690

(1)
The amounts in this column represent (i) a lump sum amount equal to two times the sum of the named executive officer’s base salary and target annual bonus, (ii) except for Mr. Bilsby, a lump sum amount equal to the value of certain personal allowances to the extent that such allowances would have been provided pursuant to the named executive officer’s employment agreement had the named executive officer remained employed for an additional twelve months, (iii) except for Mr. Noonan, continued payments of an annual pension contribution or an equivalent payment equal to 10% of base salary (20% of base salary for Mr. Bilsby) for twenty-four months following the date of termination, and (iv) except for Messrs. Driscoll and Bilsby, a pro-rated annual bonus for the year of termination based on the number of days worked during such year, calculated for purposes of this table assuming achievement of the applicable performance metrics for the year of termination at target levels. The amounts shown in this column are “double-trigger” and will not be payable unless the named executive officer’s employment is terminated by the employer without cause or by the named executive officer for good reason within twenty-four months following the closing of the merger. The amounts in this column consist of:
Name (a)
Cash Severance
($)
Allowance Payments
($)
Pension Continuation Payments
($)

Prorated Annual Bonus
($)
Edward J. Noonan
$
4,928,125

$
535,185

$

$
324,041

Jeffrey D. Sangster
$
3,125,000

$
60,000

$
125,000

$
205,479

Kean D. Driscoll
$
3,125,000

$
293,400

$
125,000

$

Peter A. Bilsby
$
2,937,880

$

$
235,030

$

Robert F. Kuzloski
$
2,750,000

$
252,308

$
110,000

$
180,822

Each named executive officer is subject to post-termination restrictive covenant provisions pursuant to the terms of their employment agreements, including confidentiality, non-competition and non-solicitation covenants.
(2)
The amounts in this column represent the value of the accelerated vesting of Validus restricted share awards and Validus performance share awards held by the named executive officers, with total cash payments in respect of Validus performance share awards with a performance period in progress determined assuming any applicable performance-based vesting requirements were achieved at maximum payout levels as described in detail above. Unless the named executive officer is determined to be a designated employee, a pro rata portion of each Validus restricted share award is “single-trigger” and will vest and be cashed out at the closing of the merger, and the remaining portion of such award is “double-trigger” and will be converted into AIG restricted shares and will not be accelerated unless, within two years following the closing of the merger, the named executive officer experiences a qualifying termination of employment. If the named executive officer is determined to be a designated employee, the entire amount of each Validus restricted share award is “single-trigger” and will vest

44



and be cashed out at the closing of the merger. In addition, unless the named executive officer is determined to be a designated employee, a pro rata portion of each Validus performance share award determined based on actual performance for any completed performance period and assuming any applicable performance-based vesting requirements will be achieved at target payout levels for any performance period in progress is “single-trigger” and will vest and be cashed out at the closing of the merger, and the remaining portion of such award is “double-trigger” and will be converted into AIG restricted shares and will not be accelerated unless, within two years following the closing of the merger, the named executive officer experiences a qualifying termination of employment. If the named executive officer is determined to be a designated employee, the entire amount of each such Validus performance share award determined based on actual performance for any completed performance period and assuming any applicable performance-based vesting requirements will be achieved at target payout levels for any performance period in progress is “single-trigger” and will vest and be cashed out at the closing of the merger. A number of Validus performance shares awards equal to the excess of (x) the number of Validus performance share awards, for any performance period that has not been completed as of the effective time of the merger, determined assuming that any applicable performance-based vesting requirements were deemed achieved at maximum payout levels over (y) the number of Validus performance share awards determined assuming any applicable performance-based vesting requirements were achieved at target payout levels, whether or not held by a designated employee, are “single-trigger” and will vest and be cashed out at the closing of the merger, without pro-ration. The amounts in this column consist of:
Name
Restricted Share Awards
Performance Share Awards
Name
Number
(#)
Total Value (Single and Double Trigger)
($)
Single-Trigger Value ($)(a)
Single or Double-Trigger Value ($)(b)
Number
(#)
Total Value (Single and Double Trigger)
($)
Single-Trigger Value ($)(a)
Single or Double-Trigger Value ($)(b)
Edward J. Noonan
82,624
$
5,618,432

$
4,757,803

$
860,629

78,437
$
5,333,716

$
4,179,551

$
1,154,165

Jeffrey D. Sangster
52,984
$
3,602,912

$
3,039,890

$
563,022

51,140
$
3,477,520

$
2,718,929

$
758,591

Kean D. Driscoll
62,281
$
4,235,108

$
3,450,667

$
784,441

77,203
$
5,249,804

$
4,108,907

$
1,140,897

Peter A. Bilsby
51,463
$
3,499,484

$
2,823,371

$
676,113

47,259
$
3,213,612

$
2,299,481

$
914,131

Robert F. Kuzloski
54,001
$
3,672,068

$
3,029,756

$
642,312

29,397
$
1,998,996

$
1,353,471

$
645,525

a.
The amounts in this column represent “single-trigger” payments resulting from the pro rata portion of the Validus equity awards that will, in all circumstances, vest and be cashed out at the effective time. For the Validus performance share awards, the amounts in this column also include the number of Validus performance share awards, for any performance period that has not been completed as of the effective time of the merger, equal to the excess of (i) the number of Validus performance share awards determined based on the maximum level of performance over (ii) the number of Validus performance share awards determined based on the target level of performance, which are “single-trigger” and will vest and be cashed out at the closing of the merger, without pro-ration.
b.
The amounts in this column represent “double-trigger” payments resulting from the remaining portion of the Validus equity awards that, assuming that the named executive officer is not determined to be a designated employee, will not be accelerated unless, within two years following the closing of the merger, the named executive officer experiences a qualifying termination of employment. If the named executive officer is determined to be a designated employee, then the entire amount of each Validus equity award is “single-trigger” and will vest and be cashed out at the closing of the merger, including the amounts shown in this column.
(3)
The amounts in this column represent the total cost to Validus of the continued health, life and disability benefits provided pursuant to the named executive officer’s employment agreement for twenty-four months

45



following the date of termination. The amounts shown in this column are “double-trigger” and will not be payable unless the named executive officer’s employment is terminated by the employer without cause or by the named executive officer for good reason within twenty-four months following the closing of the merger.
(4)
The total amounts do not reflect any reductions to “parachute payments” as defined by Section 280G of the Code in order to avoid any applicable excise tax thereunder. A definitive analysis of the need, if any, for such reductions will depend on the effective time, the date of termination (if any) of the named executive officer and certain other assumptions used in the applicable calculations.
Dividends, Distributions and Share Repurchases
Validus customarily pays a quarterly cash dividend on the common shares. Under the terms of the merger agreement, prior to the effective time, Validus is permitted to declare and pay regular quarterly dividends of up to $0.38 per common share, with its quarterly dividend for the second fiscal quarter of 2018 to be paid prior to the closing of the merger even if such closing would occur prior to the regular record or payment date of such dividend.
Regulatory Clearances Required for the Merger
Each of the parties has agreed, upon the terms and subject to the conditions set forth in the merger agreement, to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and to cooperate with the other parties in doing, all things necessary, proper or advisable to fulfill all conditions to the closing of the merger applicable to such party and to consummate and make effective the merger and the transactions contemplated by the merger agreement and the statutory merger agreement in the most expeditious manner reasonably practicable.
Such obligations will not require AIG or any of its affiliates to take any action, including entering into any consent decree, hold separate order or other arrangement, that would, or would reasonably expected to have, a material adverse effect on the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Validus and its subsidiaries, taken as a whole (as described in the section of this proxy statement titled “The Merger AgreementEfforts to Complete the Merger”).
Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which we refer to as the “HSR Act”), Validus and AIG cannot consummate the merger until Validus and AIG have notified the Department of Justice’s Antitrust Division (which we refer to as the “Antitrust Division”) and the Federal Trade Commission (which we refer to as the “FTC”) of the merger and furnished them with certain information and materials relating to the merger and the applicable waiting period has terminated or expired. The termination or expiration of the waiting period means the parties have satisfied the regulatory requirements under the HSR Act. Validus and AIG filed the required notifications with the Antitrust Division and the FTC on February 14, 2018 and early termination of the waiting period was granted effective February 26, 2018.
Both Validus and AIG operate in the European Union. The EU Merger Regulation requires notification of and approval by the European Commission of mergers or acquisitions involving parties with worldwide and European Union sales exceeding given thresholds. The European Commission has an initial period of 25 working days after receipt of the notification to issue its decision (which we refer to as “Phase I”). The European Commission may extend this Phase I period to 35 working days if, within the first 20 working days after submission of the notification, the parties propose remedies to address any competition concerns identified by the European Commission. The European Commission may open an extended investigation, which extends Phase I by up to 90 working days, and can be extended to 105 working days if remedies are offered after the 55th working day or to 110 working days by request of the parties or by the Commission with consent of the parties. The merger cannot be consummated until after the European Commission has issued its clearance decision or the relevant waiting periods have expired without the issuance of a decision.
Insurance and Other Regulatory Matters
The insurance laws and regulations of all 50 U.S. states and the District of Columbia generally require that before the acquisition of control of an insurance company, either through the acquisition of or merger with the insurance company or a holding company of that insurance company, the acquiring party must obtain approval from the

46



insurance regulator of the insurance company’s state of domicile. In addition, under the laws of certain states, an acquirer must obtain the approval of the state’s insurance regulator to acquire control of an insurance company that is commercially domiciled in that state.
Applications or notifications in connection with the merger or the changes in control of various subsidiaries of Validus and AIG that may be deemed to occur as a result of the merger have been filed, pursuant to the merger agreement, with various U.S. state regulatory authorities, including the New Hampshire Department of Insurance.
Applications for approval or notifications to regulators have been filed with certain non-U.S. regulatory authorities, including but not limited to, the Bermuda Monetary Authority, the UK Prudential Regulation Authority, the UK Financial Conduct Authority, Lloyd’s of London and the Swiss Financial Market Supervisory Authority.
Although Validus and AIG do not expect these regulatory authorities to raise any significant concerns in connection with their review of the merger, there is no assurance that Validus and AIG will obtain all required regulatory approvals on a timely basis, if at all, or that these approvals will not include a restriction, limitation or condition that would trigger a burdensome condition, which, in such case, would permit AIG to refuse to close the transactions contemplated by the merger agreement and consummate the merger.
Other than the approvals and notifications described above, neither Validus nor AIG is aware of any material regulatory approvals required to be obtained, or waiting periods required to expire, after the making of a filing. If the parties discover that other approvals or filings and waiting periods are necessary, they will seek to obtain or comply with them, although, as is the case with the regulatory approvals described above, there can be no assurance that they will be obtained on a timely basis, if at all.
Payment of Merger Consideration and Surrender of Share Certificates
Paying Agent
Prior to the closing date, AIG will designate a paying agent reasonably acceptable to Validus for the payment and delivery of the aggregate merger consideration. Prior to the effective time, AIG will deposit or cause to be deposited with the paying agent cash in an amount sufficient to pay the aggregate merger consideration.
Payment Process
As soon as practicable, but in no event later than three business days after the effective time, the surviving company or AIG will cause the paying agent to mail a letter of transmittal (in a form subject to Validus’ reasonable approval) to each holder of a share certificate, as well as instructions regarding the procedures by which holders of share certificates may receive the merger consideration. Upon the completion of such applicable procedures and the surrender of such holder’s share certificates or without any action by holders of book-entry shares, the paying agent will deliver to the holder the merger consideration that the holder is entitled to receive and the share certificates or book-entry shares will be canceled immediately. No interest will be paid or accrue on the merger consideration.
Unregistered Transferees
If any merger consideration is to be paid to a person or entity other than the person or entity in whose name the surrendered Validus certificate is registered, it will be a condition to the payment of such merger consideration to such transferee that the surrendered certificate be properly endorsed or will otherwise be in proper form for transfer and the transferee will have paid any transfer and other required taxes has been paid or is not applicable.
Withholding
AIG, the surviving company or the paying agent, as applicable, will be entitled to deduct and withhold from the amounts otherwise payable pursuant to the merger agreement such amounts as are required to be deducted and withheld with respect to the making of payments under any provision of applicable tax or other law. Amounts so withheld will be treated for all purposes of the merger agreement as having been paid to the Validus shareholder in respect of which such deduction and withholding was made.
Delisting and Deregistration of Validus Shares
If the merger is completed, the common shares will be delisted from the NYSE and deregistered under the Exchange Act.

47



At the effective time, each preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. The depositary shares (representing interests in such preferred shares) will remain listed on the NYSE and registered by Validus under the Exchange Act immediately after the merger. AIG may decide, following the merger, to delist the depositary shares from the NYSE, to deregister such depositary shares under the Exchange Act or to take other action with respect to the depositary shares and preferred shares.
Dissenters’ Rights of Appraisal for Validus Shareholders
Any dissenting shareholder who did not vote in favor of the merger proposal and who is not satisfied that it has been offered fair value for its Validus shares may, within one month of the giving of the notice calling the special general meeting, apply to the Bermuda Court to appraise the fair value of its Validus shares.
FOR THE AVOIDANCE OF DOUBT, A FAILURE OF A DISSENTING SHAREHOLDER TO AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL WILL NOT CONSTITUTE A WAIVER OF ITS RIGHT TO HAVE THE FAIR VALUE OF ITS VALIDUS SHARES APPRAISED, PROVIDED THAT SUCH DISSENTING SHAREHOLDER DID NOT VOTE IN FAVOUR OF THE MERGER PROPOSAL.
Where the Bermuda Court has appraised the fair value of any Validus shares and the merger has been consummated prior to the appraisal (as is anticipated) then, within one month of the Bermuda Court appraising the value of the Validus shares, if the value received by any dissenting shareholder for its Validus shares is less than the value of its Validus shares as appraised by the Bermuda Court, the surviving company shall pay to such dissenting shareholder the difference between the value received and the value appraised by the Bermuda Court.
There is no right of appeal from an appraisal by the Bermuda Court. The costs of any application to the Bermuda Court to appraise the fair value of the Validus shares shall be at the discretion of the Bermuda Court.
Legal Proceedings Regarding the Merger

On March 20, 2018, a putative class action complaint was filed against Validus and the members of its board of directors on behalf of the public stockholders of Validus in the United States District Court for the District of New Jersey under the caption Rubin v. Validus Holdings, Ltd., et al., C.A. No. 2:18-cv-03828 (D.N.J.). The complaint alleges that the preliminary proxy statement issued in connection with the merger omitted material information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, rendering the preliminary proxy statement false and misleading. Among other remedies, the action seeks to enjoin the merger unless and until additional disclosures are provided and attorneys’ fees. Validus believes that the action is without merit.

48



THE MERGER AGREEMENT
The following describes the material provisions of the merger agreement, a composite conformed copy of which is included as Annex A to this proxy statement and incorporated by reference herein. The summary of the material provisions of the merger agreement below and elsewhere in this proxy statement is qualified in its entirety by reference to the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. Validus encourages you to read carefully the merger agreement in its entirety before making any decisions regarding the merger as it is the legal document governing the merger.
The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement and is not intended to provide any factual information about Validus or AIG. Factual disclosures about Validus or AIG contained in this proxy statement or Validus’ public reports filed with the SEC may supplement, update or modify the factual disclosures about Validus or AIG contained in the merger agreement and described in the summary. The representations, warranties and covenants made in the merger agreement by Validus, AIG and Merger Sub are qualified and subject to important limitations agreed to by Validus, AIG and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of allocating risk between the parties to the merger agreement, rather than establishing matters as facts, and may be subject to subsequent waiver or modification. The representations and warranties may also be subject to a contractual standard of materiality that may be different from that generally relevant to shareholders or applicable to reports and documents filed with the SEC, and in some cases are qualified by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement or otherwise publicly disclosed. The representations and warranties in the merger agreement will not survive the completion of the merger. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included or incorporated by reference into this proxy statement. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference into this proxy statement. See the section of this proxy statement titled “Where You Can Find More Information” beginning on page 90.
The Merger
On the terms and subject to the conditions of the merger agreement and the statutory merger agreement, and in accordance with the applicable provisions of the Companies Act, at the effective time, Merger Sub will merge with and into Validus, the separate corporate existence of Merger Sub will cease and Validus will survive the merger as a wholly-owned subsidiary of AIG.
Effects of the Merger
The merger agreement provides that, at the effective time, each common share issued and outstanding immediately prior to the effective time (other than common shares owned by Validus as treasury shares, owned by any subsidiary of Validus or owned by AIG, Merger Sub or any subsidiary of AIG, which will be canceled as set forth in the merger agreement) will be converted into the right to receive $68.00 in cash, without interest and less any required withholding tax. All such common shares will no longer be outstanding and will be canceled and cease to exist and each holder of a certificate previously evidencing any common shares or uncertificated common shares represented by book-entry will cease to have any rights with respect to those shares, except the right to receive the merger consideration.
At the effective time, AIG will become the sole owner of Validus’ common shares. Therefore, current Validus common shareholders will cease to have direct or indirect ownership interests in Validus or rights as Validus common shareholders, will not participate in any future earnings or growth of Validus, will not benefit from any appreciation in value of Validus and will not bear the future risks of Validus’ operations.

49



At the effective time, each series A preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
At the effective time, each series B preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged.
Following completion of the merger, Validus’ common shares will be delisted from the NYSE and deregistered under the Exchange Act. As a result, there will be no public market for Validus’ common shares. This will make certain provisions of the Exchange Act, such as the requirement of furnishing a proxy or information statement in connection with shareholders’ meetings, no longer applicable to Validus. After the effective time, Validus will also no longer be required to file periodic reports with the SEC on account of Validus’ common shares. However, Validus will continue to make securities filings with respect to its publicly-held preferred shares to the extent such filings are required under SEC regulations following the completion of the merger. AIG may decide, following the merger, to delist the depositary shares from the NYSE, to deregister such depositary shares under the Exchange Act or to take other action with respect to the depositary shares and preferred shares.
The directors of Merger Sub immediately prior to the effective time will be the initial directors of Validus as the surviving company until their earlier death, resignation or removal or until their respective successors are duly elected and qualified. The officers of Validus immediately prior to the effective time will be the initial officers of Validus as the surviving company until their earlier death, resignation or removal or until their respective successors are duly appointed and qualified.
Closing; Effective Time
The closing of the merger will occur on the third business day following the satisfaction or waiver of the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions) or at such other date and time as Validus and AIG may agree in writing. See the section of this proxy statement titled “The Merger AgreementConditions to Completion of the Merger” beginning on page 50 for further discussion on the conditions to the closing of the merger.
Conditions to Completion of the Merger
Mutual Conditions
The obligations of Validus, AIG and Merger Sub to effect the merger are subject to the satisfaction (or waiver by the parties, if permissible under applicable law) of the following conditions:
the merger proposal having been approved by Validus shareholders;
any waiting period (or extension thereof) applicable to the transactions contemplated by the merger agreement and the statutory merger agreement under the HSR Act having been terminated or having expired and the consents of, or declarations, notifications or filings with, and the other terminations or expirations of waiting periods required from, certain governmental authorities (see the section of this proxy statement titled “The MergerRegulatory Clearances Required for the Merger” beginning on page 46 for more information on the consents of, or declarations, notifications or filings with, and the other terminations or expirations of waiting periods required from, these governmental authorities) having occurred or been obtained and being in full force and effect; and
there being in effect no injunction, judgment or ruling, enacted, promulgated, issued, entered, amended or enforced by any governmental authority enjoining, restraining or otherwise making illegal or prohibiting the consummation of the merger.
AIG and Merger Sub Conditions
AIG’s and Merger Sub’s obligations to consummate the merger are subject to the satisfaction (or waiver by AIG and Merger Sub, if permissible under applicable law) of the following additional conditions:

50



the representation and warranty by Validus that no material adverse effect occurred with respect to Validus since December 31, 2016 being true and correct in all respects as of January 21, 2018 and as of the closing date as through made as of the closing date;
the representations and warranties of Validus relating to (i) the power and authority of Validus to execute, deliver and perform the merger agreement and the statutory merger agreement, (ii) the due authorization by Validus of the merger agreement and the statutory merger agreement, (iii) the enforceability of the merger agreement against Validus, (iv) the approval of the Validus board of directors of the merger, the merger agreement, the statutory merger agreement and the bye-law amendment, (v) the fees and expenses payable to any brokers and advisors of Validus, (vi) the capitalization of Validus, (vii) the requirements under Bermuda law and Validus’ bye-laws to approve the merger proposal and (viii) the applicability of any anti-takeover law to Validus with respect to the merger agreement, in the case of each of clauses (i) through (viii) above, being true and correct in all material respects as of January 21, 2018 and as of the closing date of the merger as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date);
the representations and warranties of Validus, other than the ones set out in the two bullet points above, being true and correct (disregarding all qualifications or limitations as to “materiality”, “material adverse effect” and words of similar import set forth therein) as of January 21, 2018 and as of the closing date with the same effect as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure to be true and correct has not had and would not, individually or in the aggregate, constitute a material adverse effect;
Validus having performed or complied in all material respects with the obligations and agreements required to be performed or complied with by it under the merger agreement at or prior to the effective time;
Validus having delivered to AIG a certificate of an executive officer of Validus that the conditions above have been satisfied; and
all required regulatory approvals (see the section of this proxy statement titled “The MergerRegulatory Clearances Required for the Merger” beginning on page 46 for more information on the consents of, or declarations, notifications or filings with, and the other terminations or expirations of waiting periods required from, these governmental authorities) having occurred or been obtained without the imposition of a “burdensome condition” (a description of which is summarized below).
Validus Conditions
Validus’ obligations to consummate the merger are subject to the satisfaction (or waiver by Validus, if permissible under applicable law) of the following additional conditions:
the representations and warranties of AIG and Merger Sub relating to (i) the power and authority of AIG and Merger Sub to execute, deliver and perform the merger agreement and the statutory merger agreement, (ii) the due authorization by AIG and Merger Sub of the merger agreement and the statutory merger agreement and (iii) the enforceability of the merger agreement against AIG and Merger Sub, (iv) the approval by the AIG board of directors of the merger agreement and the merger, (v) the absence of a required vote of the holders of any class or series of capital stock of AIG to approve the merger agreement, the statutory merger agreement or the merger and (vi) the fees and expenses payable to any brokers and advisors of AIG and Merger Sub being true and correct in all material respects as of January 21, 2018 and as of the closing date of the merger as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date);
the representations and warranties of AIG and Merger Sub (other than the representations and warranties described in the first bullet above), disregarding all qualification or limitations as to “materiality,” “parent material adverse effect” or similar effect, being true and correct as of January 21, 2018 and the closing date of the merger (except to the extent expressly made as of an earlier date, in which case as of such date), except for such failures to be true and correct has not had and would not, individually or in the aggregate, constitute a “parent material adverse effect” (a description of which is summarized below);

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AIG and Merger Sub having performed or complied in all material respects with the obligations and agreements required to be performed or complied with by them under the merger agreement at or prior to the effective time; and
AIG and Merger Sub having delivered to Validus a certificate of an executive officer of AIG that the conditions above have been satisfied.
Material Adverse Effect
For the purposes of the merger agreement, a “material adverse effect” will be deemed to occur if any effect, change event, circumstance, state of facts, development or occurrence, individually or in the aggregate, has had, or is reasonably expected to have, a material adverse effect on the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Validus and its subsidiaries, taken as a whole.
However, when determining whether a material adverse effect has occurred, none of the following will be considered except as expressly noted below:
changes, events or conditions generally affecting the insurance or risk management industries in the geographic regions or product markets in which Validus and its subsidiaries operate or underwrite insurance or reinsurance or manage risk;
general economic or regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions in any jurisdiction;
any failure, in and of itself, by Validus to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (although the underlying causes are not excluded and may be taken into account in determining whether a material adverse effect has occurred);
geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared), sabotage, terrorism (including cyber-terrorism) or man-made disaster, or any escalation or worsening of any such hostilities, acts of war (whether or not declared), sabotage, terrorism or man-made disaster;
the occurrence or continuation of any volcanic eruption, tsunami, pandemic, hurricane, tornado, windstorm, flood, earthquake, wildfire or other natural disaster or any conditions resulting from such natural disasters (including increases in liabilities under or in connection with insurance or reinsurance contracts to which Validus or any of its subsidiaries is a party arising from such a natural disaster);
the execution and delivery of the merger agreement or the public announcement, pendency or performance of the transactions contemplated by the merger agreement, including the impact thereof on the relationships of Validus or any of its subsidiaries with employees, customers, insureds, cedants, policyholders, brokers, agents, financing sources, business partners, service providers, governmental authorities or reinsurance providers;
any change or announcement of a potential change, in and of itself, in Validus’ or any of its subsidiaries’ credit, financial strength or claims paying ratings or the ratings of any of Validus’ or its subsidiaries’ businesses (although the underlying causes are not excluded and may be taken into account in determining whether a material adverse effect has occurred);
any change, in and of itself, in the market price, credit ratings or trading volume of Validus’ or any of its subsidiaries’ securities (although the underlying causes are not excluded and may be taken into account in determining whether a material adverse effect has occurred);
any change in applicable laws, GAAP (or authoritative interpretation or enforcement thereof) or in applicable statutory accounting principles, including accounting and financial reporting pronouncements by the SEC, the National Association of Insurance Commissioners, any insurance regulator and the Financial Accounting Standards Board (although this will not prevent or otherwise affect a determination that the actual consequences of an action taken or an omission by Validus or any of its subsidiaries that resulted in a failure to comply with applicable law is, or contributed to, a material adverse effect);

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any action required to be taken by Validus or a subsidiary of Validus’ pursuant to the terms of the merger agreement;
any failure of Validus or any of its subsidiaries to take an action prohibited by the terms of the merger agreement, but only if AIG has refused, after a timely request by Validus, to provide a waiver to the applicable prohibition in the merger agreement; or
the effect of the Tax Cuts and Jobs Act, P.L. 115-97 or any rule or regulation implementing the Tax Cuts and Jobs Act (although this will not prevent or otherwise affect a determination that the actual consequences of an action taken or an omission by Validus or any of its subsidiaries that resulted in a failure to comply with applicable law is, or contributed to, a material adverse effect).
Certain effects, changes, events or occurrences listed in each of the first, second, fourth and ninth bullets above may be taken into account in determining whether a material adverse effect has occurred with respect to Validus if, but only to the extent, any such effect, change, event or occurrence has a disproportionate adverse effect on Validus and its subsidiaries, taken as a whole, relative to other similarly-sized participants engaged primarily in the insurance and reinsurance industries in the geographic regions or product markets in which Validus and its subsidiaries operate or underwrite insurance or reinsurance. In such case, only the disproportionate effect or effects may be taken into account when determining whether a material adverse effect has occurred with respect to Validus.
Parent Material Adverse Effect
For the purposes of the merger agreement, a “parent material adverse effect” will be deemed to occur if any effect, change, event, circumstance, state of facts, development or occurrence, individually or in the aggregate, would, or would reasonably be expected to prevent or materially delay (i) the consummation by AIG or Merger Sub of any of the transactions contemplated by the merger agreement on a timely basis or (ii) the compliance by AIG or Merger Sub with its obligations under the merger agreement.
Efforts to Obtain Required Shareholder Approvals
Unless the merger agreement has been earlier terminated, including pursuant to Validus’ right to terminate the merger agreement to enter into an alternative acquisition agreement (see the section of this proxy statement titled “The Merger AgreementNo Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreements” below), Validus has agreed to hold a special general meeting of its shareholders and to use its reasonable best efforts to obtain the requisite approval of Validus shareholders for the bye-law amendment proposal and the merger proposal.
No Solicitation of Takeover Proposals; Adverse Recommendation Change; Alternative Acquisition Agreements
No Solicitation of Takeover Proposals
Validus is prohibited from taking certain actions, summarized in detail below, relating to takeover proposals. In this proxy statement, and in the merger agreement, a “takeover proposal” means any inquiry, proposal or offer from any person other than AIG and its subsidiaries, relating to a:
acquisition, including by means of bulk (or similar non-ordinary course) reinsurance or retrocession in a single transaction or a series of related transactions that, if consummated, would result in any person or group owning or having the economic benefit of 20% or more of the consolidated assets, revenues or net income of Validus and its subsidiaries or net exposure to insured liabilities;
acquisition of Validus common shares representing 20% or more of the outstanding common shares;
any transaction that, if consummated, would result in any person (or the shareholders of such person) (other than Validus or any of its subsidiaries as of the date hereof) being the direct or indirect beneficial owner of 20% or more of the voting power of, or economic interest in, any “significant subsidiary” of Validus within the meaning of Rule 1-02(w) of Regulation S-X of the SEC;
tender offer or exchange offer that, if consummated, would result in any person or group having beneficial ownership of common shares representing 20% or more of the outstanding common shares;

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merger, amalgamation, consolidation, share exchange, scheme of arrangement, business combination, reorganization, recapitalization, liquidation, dissolution or similar transaction involving Validus pursuant to which such person or group (or the shareholders of any person) would acquire, directly or indirectly, 20% or more of the aggregate voting power (without taking into account the voting cutback provisions in the Validus bye-laws) or economic interest in Validus or in the surviving entity in such transaction or the resulting direct or indirect parent of Validus or such surviving entity; or
combination of the foregoing, in each case, other than the transactions contemplated by the merger agreement and the statutory merger agreement.
Any transaction meeting the above conditions, whether effected in a single transaction or through a series of related transactions, or directly or indirectly, is a “takeover proposal.”
Specifically, Validus has agreed that it will, and will cause each of its subsidiaries, and its and their respective directors, officers and employees to, and will use its reasonable best efforts to cause its other representatives to immediately cease any solicitation, encouragement, discussions or negotiations of or with any persons that may be ongoing on or prior to January 21, 2018 with respect to any takeover proposal.
Validus has also agreed that, from January 21, 2018 until the earlier of the closing date and the date on which the merger agreement is terminated in accordance with its terms, it will not, and will cause each of its subsidiaries, and its and their respective directors, officers and employees not to, and will use its reasonable best efforts to cause its other representatives not to, directly or indirectly:
solicit, encourage, initiate or take any action to facilitate the submission of any inquiry or the making of any proposal, in each case that constitutes, or would reasonably be expected to lead to, a takeover proposal;
engage in or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any material non-public information for the purpose of encouraging or facilitating, a takeover proposal; or
enter into any letter of intent, agreement or agreement in principle with respect to a takeover proposal.
Validus has further agreed that it will, to the extent not previously done so prior to January 21, 2018, deliver a request to each person that executed a confidentiality agreement with Validus during the eighteen month period prior to January 21, 2018 in connection with considering or making a takeover proposal to promptly return or destroy any non-public information previously furnished or made available to such person or any of its representatives on behalf of Validus or representatives of Validus.
The non-solicitation obligations summarized above do not prohibit Validus or its representatives from contacting a person that has made a takeover proposal delivered to Validus during the period between January 21, 2018 and the date Validus shareholders approve the merger agreement that did not result from a material breach by Validus of such non-solicitation provisions solely to clarify the terms and conditions of such takeover proposal or to request that any takeover proposal made orally be made in writing.
If the Validus board of directors determines in good faith after consultation with its financial advisors and outside legal counsel that such takeover proposal constitutes or would reasonably be expected to lead to a takeover proposal superior to AIG’s, then Validus and its representatives may (i) enter into a confidentiality agreement with and furnish information (including non-public information) about Validus and its subsidiaries to the person or group of persons making the takeover proposal, and (ii) subsequently engage in or otherwise participate in discussions or negotiations with the person or group of persons making such takeover proposal.
If Validus enters into a confidentiality agreement and furnishes information (including non-public information) to a person or group of persons making a takeover proposal, the merger agreement requires Validus to promptly provide to AIG a copy of any material non-public information about Validus or its subsidiaries that is provided to any person given such access that was not previously provided to AIG or its representatives.
Validus has agreed to promptly notify AIG upon receipt of any takeover proposal. Validus has also agreed to promptly disclose to AIG the material terms and conditions of such takeover proposal and the identity of the person or group of persons making such takeover proposal and unredacted copies of all material correspondence or other material written documentation with respect thereto (and written summaries of any material oral communication).

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Finally, Validus has agreed to keep AIG reasonably informed of any material developments with respect to such takeover proposal on a prompt basis.
Adverse Recommendation Change; Termination of the Merger Agreement to Enter into an Alternative Acquisition Agreement
Except as described below, Validus has agreed that its board of directors will not:
withdraw or withhold its recommendation that the Validus shareholders approve the merger proposal;
modify, qualify or amend, in a manner adverse to AIG such recommendation;
fail to include such recommendation in this proxy statement;
approve, publicly endorse or recommend any takeover proposal or refrain from recommending against any takeover proposal that is a tender offer or exchange offer within 10 business days following the commencement of such offer; or
fail to publicly reaffirm such recommendation within 10 business days of receiving a written request made by AIG to make such public reaffirmation following the receipt by Validus of a takeover proposal (other than in the case of a takeover proposal in the form of a tender offer or exchange offer) that has not been withdrawn, provided that AIG may make any such request only once in any 10 day period and only once for each such public takeover proposal and once for each public material amendment to such takeover proposal.
If Validus takes any of the above actions it will be deemed an “adverse recommendation change” and this proxy statement generally refers to any of such actions as an “adverse recommendation change.”
In addition, except as described below, Validus has agreed that its board of directors will not authorize, cause or permit Validus or any of its subsidiaries to execute or enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, amalgamation agreement or other agreement related to any takeover proposal, other than a confidentiality agreement with the person or persons making the takeover proposal.
However, prior to the date Validus shareholders approve the merger agreement, in response to a superior proposal, the Validus board of directors may make an adverse recommendation change or cause Validus to terminate the merger agreement and enter into an alternative acquisition agreement and terminate the merger agreement if:
the Validus board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law;
such adverse recommendation change is made or entered into after the fourth business day following the receipt by AIG of written notice from Validus advising that its board of directors intends to take such action and Validus discloses to AIG (1) the material terms and conditions of such superior proposal and the identity of the person or group of persons making such superior proposal and its or their financing sources, if applicable, and (2) a copy of the most current version of the acquisition agreement (if any) with respect to such superior proposal and any agreement in Validus’ possession relating to the financing of such superior proposal; and
during the period following AIG’s receipt of the notice described in the immediately preceding bullet, in determining whether to make an adverse recommendation change or terminate the merger agreement and enter into an alternative acquisition agreement, (i) Validus has, and has caused its representatives to, negotiate with AIG in good faith (to the extent AIG desires to negotiate) to make such commercially reasonable adjustments to the terms and conditions of the merger agreement as would enable the Validus board of directors to no longer make an adverse recommendation change or a determination that a takeover proposal constitutes a superior proposal and (ii) the Validus board of directors determines, after considering the results of such negotiations and any revised proposals made by AIG, if any, after consulting with its financial advisor and outside legal counsel, that such superior proposal continues to be a superior proposal.

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For purposes of this proxy statement and the merger agreement, a “superior proposal” means a bona fide written takeover proposal with respect to Validus:
where references to “20%” (e.g., to outstanding assets or share capital) in the definition of “takeover proposal” are replaced by references to “50%”;
that did not result from a material breach of Validus’ non-solicitation obligations described above; and
which the Validus board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial and regulatory aspects of the proposal and the identity of the persons making the proposal (including any conditions relating to financing, regulatory approvals or other events or circumstances beyond the control of the party invoking the condition) and, if consummated, would be more favorable to the holders of common shares than the merger.
In addition, prior to the date Validus shareholders approve the merger agreement, in response to an intervening event, the Validus board of directors may make an adverse recommendation change if:
the Validus board of directors determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law;
such adverse recommendation change is made or entered into after the fourth business day following the receipt by AIG of written notice from Validus advising that its board of directors intends to take such action and Validus discloses to AIG the material changes, developments, effects, circumstances, states of facts or events comprising such intervening event; and
during the period following AIG’s receipt of the notice described in the immediately preceding bullet, in determining whether to make an adverse recommendation change, (i) Validus has, and has caused its representatives to, negotiate with AIG in good faith (to the extent AIG desires to negotiate) to make such commercially reasonable adjustments to the terms and conditions of the merger agreement as would enable the Validus board of directors to no longer make an adverse recommendation change and (ii) the Validus board of directors determines, after considering the results of such negotiations and any revised proposals made by AIG, if any, after consulting with its financial advisor and outside legal counsel, that failure to make an adverse recommendation change would be inconsistent with the directors’ fiduciary duties under applicable law.
For purposes of the merger agreement, “intervening event” means a material effect, change, event, circumstance, state of facts, development or occurrence relating to Validus and its subsidiaries, taken as a whole that:
was not known to the Validus board of directors on January 21, 2018;
was not reasonably foreseeable to the Validus board of directors as of January 21, 2018; and
first arose or occurred or, if such effect, change, event, circumstance, state of facts, development or occurrence existed as of January 21, 2018, becomes known to the Validus board of directors between January 21, 2018 and the date Validus shareholders approve the merger agreement.
However, the term “intervening event” does not include any effect, change, event, circumstance, state of facts, development or occurrence specifically related to the receipt, existence of or terms of a takeover proposal or any inquiry relating thereto.
As described in further detail in the section of this proxy statement titled “The Merger AgreementExpenses and Termination Fee,” Validus will be required to pay AIG a $162 million termination fee if:
Validus’ board of directors makes an adverse recommendation change in response to a superior proposal or intervening event and AIG terminates the merger agreement; or
Validus terminates the merger agreement and enters into an alternative acquisition agreement.

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Treatment of the Series A Preferred Shares
Subject to the rights of dissenting shareholders, each series A preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. Following the merger, AIG may cause the surviving company to exercise any of its rights with respect to each series A preferred share issued and outstanding or the depository shares representing interests in such preferred shares.
Treatment of the Series B Preferred Shares
Subject to the rights of dissenting shareholders, each series B preferred share issued and outstanding immediately prior to the effective time will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. As with series A preferred shares, following the merger AIG may cause the surviving company to exercise any of its rights with respect to each series B preferred share issued and outstanding or the depository shares representing interests in such preferred shares.
Dissenting Shares
Validus shareholders who do not vote in favor of the merger at the special general meeting will, with respect to common shares, receive the merger consideration, and with respect to preferred shares, have their preferred shares continue as preferred shares of Validus as the surviving company following the merger with the relative rights, terms and conditions of each such preferred share remaining unchanged. Any dissenting shareholder will, in the event that the fair value of a dissenting share as appraised by the Bermuda Court under the Companies Act is greater than, (i) with respect to common shares, the merger consideration, (ii) with respect to series A preferred shares, the value of their preferred shares of the surviving corporation or (iii) with respect to series B preferred shares, the value of their preferred shares of the surviving corporation, be entitled to receive such difference from Validus as the surviving company by payment made within thirty days after the final determination by the Bermuda Court of the “fair value” of such shares. If a dissenting shareholder fails to perfect, effectively withdraws or otherwise waives any right to appraisal, such dissenting shareholder’s shares, (i) if common shares, will be canceled and converted as of the effective time into the right to receive the merger consideration, (ii) if series A preferred shares, will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such class of preferred shares will remain unchanged or (iii) if series B preferred shares, will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such class of preferred shares will remain unchanged. For a more complete description of the available appraisal rights, see the section of this proxy statement titled “The MergerDissenters’ Rights of Appraisal of Validus Shareholders” beginning on page 48.
Under the merger agreement, Validus has agreed to give AIG (i) written notice of any demands for appraisal of dissenting shares (or withdrawals thereof) and, to the extent Validus has knowledge thereof, any applications to the Bermuda Court for appraisal of the fair value of the dissenting shares and (ii) to the extent permitted by applicable law, the opportunity to participate with Validus in any settlement, negotiations and proceeds with respect to any demands for appraisal under the Companies Act. Validus will not, without the prior written consent of AIG, voluntarily make any payment with respect to, offer to settle or settle any such demands or applications, or waive any failure to timely deliver a written demand for appraisal or to timely take any other action to exercise appraisal rights in accordance with the Companies Act.
Treatment of Validus Equity Awards
Treatment of Outstanding Validus Restricted Share Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion (as described above) of each Validus restricted share award will vest and be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, and the remaining portion of such Validus restricted share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion. The AIG restricted shares will continue to be governed by

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the same terms and conditions (including with respect to the vesting schedule, any vesting acceleration terms and any right to receive accrued but unpaid dividends) as were applicable to the former Validus restricted share award immediately prior to the effective time.
Notwithstanding the foregoing, each Validus restricted share award held by a designated employee will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus restricted share award, without pro-ration.
Under the terms of the Validus restricted share award agreements, which terms shall continue to apply to any corresponding AIG restricted shares, if, within two years following a change in control, an executive officer’s employment is terminated by the employer not for “cause” or by the executive officer for “good reason” (each as defined in the applicable award agreement), the corresponding AIG restricted shares will vest in full upon such termination of employment. The closing of the merger will constitute a change in control for purposes of the Validus restricted share award agreements.
Treatment of Outstanding Validus Performance Share Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion of each Validus performance share award (with the number of Validus common shares subject to award as determined below) will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, and the remaining portion of such Validus performance share award will be assumed by AIG and converted into a number of AIG restricted shares equal to the product of (x) the equity award exchange ratio and (y) the number of Validus common shares represented by such remaining portion. The AIG restricted shares will continue to be governed by the same terms and conditions (including with respect to the vesting schedule, any vesting acceleration terms and any right to receive accrued but unpaid dividends) as were applicable to the former Validus performance share award immediately prior to the effective time, except that any performance-based vesting requirements will no longer apply.
Notwithstanding the foregoing, each Validus performance share award held by the designated employees will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without pro-ration.
For the purposes of determining the number of outstanding Validus performance share awards, the merger agreement provides that (i) with respect to any Validus performance share award with a performance period that has been completed as of the effective time, the number of Validus performance share awards will be determined based on the actual level of performance achieved and (ii) with respect to any Validus performance share award with a performance period that has not been completed as of the effective time, any applicable performance-based vesting requirements will be deemed to be achieved at target payout levels. Notwithstanding the foregoing, in order to recognize the strong performance of the holders of Validus performance share awards, reward them for their part in generating the shareholder value created in the merger and incentivize them to remain employed with Validus through the closing of the merger, with respect to any Validus performance share award with a performance period that has not been completed as of the effective date, (i) the number of Validus performance share awards will be determined by assuming any applicable performance-based vesting requirements were achieved at maximum payout levels and (ii) the excess of the number of Validus performance share awards so determined over the number of Validus performance share awards determined assuming any applicable performance-based vesting requirements were achieved at target payout levels, whether or not held by a designated employee, will vest and be canceled and converted at the effective time into the right to receive a cash amount in respect of such excess number of Validus performance share awards, without interest and less applicable tax withholdings, equal to the sum of (i) the merger consideration and (ii) any accrued but unpaid dividends in respect of such Validus performance share award, without pro-ration.
Under the terms of the Validus performance share award agreements, which terms (other than any performance based vesting requirements) shall continue to apply to any corresponding AIG restricted shares, if, within two years following a change in control, an executive officer’s employment is terminated by the employer not for “cause” or

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by the executive officer for “good reason” (each as defined in the applicable award agreement), the corresponding AIG restricted shares will vest in full upon such termination of employment. The closing of the merger will constitute a change in control for purposes of the Validus performance share award agreements.
Treatment of Outstanding Validus RSU Awards
Pursuant to the terms of the merger agreement, except as set forth below, at the effective time, a pro rata portion of each unvested Validus RSU award will vest and will be canceled and converted into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, and the remaining portion of such unvested Validus RSU award will be assumed by AIG and converted into an AIG RSU award entitling the holder to receive a number of shares of AIG common stock equal to the product of (x) the total number of Validus common shares subject to such Validus RSU award immediately prior to the effective time multiplied by (y) the equity award exchange ratio. The AIG RSU awards will continue to be governed by the same terms and conditions (including with respect to the vesting schedule and any vesting acceleration terms) as were applicable to the Validus RSU award immediately prior to the effective time.
Notwithstanding the foregoing, each Validus RSU award held by the designated employees will vest and be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, without pro-ration. In addition, each Validus RSU award that is vested but not yet settled as of the effective time and each Validus RSU award (if any) held by a non-employee director of Validus will be canceled and converted at the effective time into the right to receive a cash amount, without interest and less applicable tax withholdings, equal to the merger consideration, without pro-ration.
Efforts to Complete the Merger
Each of the parties has agreed, upon the terms and subject to the conditions set forth in the merger agreement, to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and to cooperate with the other parties in doing, all things necessary, proper or advisable to fulfill all conditions to the closing of the merger applicable to such party and to consummate and make effective the merger and the transactions contemplated by the merger agreement and the statutory merger agreement in the most expeditious manner reasonably practicable. Specifically, such actions include:
using reasonable best efforts to obtain all necessary, proper or advisable consents from governmental authorities and making all necessary, proper or advisable registrations, filings and notices and using reasonable best efforts to take all steps as may be necessary to obtain such consents from any governmental authority (including under the insurance laws of any applicable jurisdiction and the HSR Act); and
executing and delivering any additional agreements, documents or instruments necessary, proper or advisable to consummate the transactions contemplated by the merger agreement and the statutory merger agreement and to fully carry out the purposes of the merger agreement.
In addition, each of the parties agreed to use its reasonable best efforts to take any and all actions necessary to avoid each and every impediment under any applicable law that may be asserted by, or judgment, decree and order that may be entered with, any governmental authority with respect to the transactions contemplated by the merger agreement and the statutory merger agreement so as to enable the closing to occur, in the most expeditious manner reasonably practicable. Specifically, such actions include:
obtaining all consents of governmental authorities that are necessary, proper or advisable to consummate the transactions contemplated by the merger agreement and the statutory merger agreement and secure the expiration or termination of any applicable waiting period under the HSR Act;
resolving any objections that may be asserted by any governmental authority with respect to the merger or any other transaction contemplated by the merger agreement and the statutory merger agreement; and
preventing the entry of, and have vacated, lifted, reversed or overturned, any judgment, decree or order of governmental authorities that would prevent, prohibit, restrict or delay the consummation of the merger or any other transaction contemplated by the merger agreement and the statutory merger agreement.

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Burdensome Condition
The obligations of the parties described in this section “—Efforts to Complete the Merger” will not require AIG or any of its affiliates to take any action, including entering into any consent decree, hold separate order or other arrangement, that would, or would reasonably expected to have, a material adverse effect on the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Validus and its subsidiaries, taken as a whole (any such requirement, individually or together with all other such requirements, termed a “burdensome condition”).
Furthermore, the provisions of the merger agreement do not obligate any party or its affiliates to take any action required by a governmental authority which is not conditioned upon the closing of the merger.
Filings
The section of this proxy statement titled “The MergerRegulatory Clearances Required for the Merger” beginning on page 46 includes a description of the material regulatory approvals required for the completion of the merger that are referenced above.
The parties have agreed that within 30 days after January 21, 2018, AIG will file and pay all necessary filing fees for the following required forms, applications, and notification filings with the governmental authorities listed below:
a “Form A” Acquisition of Control with the Insurance Commissioner of the State of New Hampshire;
an application with the Bermuda Monetary Authority;
a notification under section 178 of the Financial Services and Markets Act 2000 to the Prudential Regulation Authority and the Financial Conduct Authority;
a notification under section 43 of the Lloyd’s Underwriting Agents Bye-Law and section 12 of the Lloyd’s Membership Byelaw to Lloyd’s;
a notification to the Swiss Financial Market Supervisory Authority; and
any pre-acquisition notifications on “Form E” or similar market share notifications to be filed in each jurisdiction where required by applicable insurance laws.
Validus and AIG have further agreed that, within 30 days after January 21, 2018, both Validus and AIG will file a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the transactions contemplated by the merger agreement and the statutory merger agreement and requesting early termination of the waiting period under the HSR Act. Validus and AIG have also agreed that each will make any other necessary, proper or advisable registrations, filings and notices with relevant governmental authorities within 60 days after January 21, 2018.
Information
In connection with the efforts described in this section “—Efforts to Complete the Merger,” each party has agreed:
to consult with one another with respect to the obtaining of all consents of governmental authorities necessary, proper or advisable to consummate the transactions contemplated under the merger agreement and the statutory merger agreement and keep the others reasonably apprised on a prompt basis of the status of matters relating to such consents;
that each other party will have the right to review in advance and, to the extent practicable, and subject to any restrictions under applicable law, to consult the other on, any filing made with, or written materials submitted to, any governmental authority in connection with the transactions contemplated under the merger agreement and the statutory merger agreement and to in good faith consider and reasonably accept comments of the other parties thereon;
to promptly furnish to each other copies of all such filings and written materials after their filing or submission, in each case subject to applicable laws;
to promptly advise each other upon receiving any communication from any governmental authority whose consent is required to consummate the transactions contemplated under the merger agreement and the

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statutory merger agreement, including promptly furnishing each other copies of any written or electronic communication, and to promptly advise each other when any such communication causes such party to believe that there is a reasonable likelihood that any such consent will not be obtained or that the receipt of any such consent will be materially delayed or conditioned; and
to not participate in any live or telephonic meeting with any governmental authority (other than routine or ministerial matters) in respect of any filings, investigation or other inquiry relating to the transactions contemplated by the merger agreement and the statutory merger agreement, unless it consults with the other in advance and, to the extent permitted by applicable law and by such governmental authority, gives the other party the opportunity to attend and participate in such meeting.
Validus and AIG have further agreed that each will not be obligated to provide information to a third party if a party to the merger agreement determines in its reasonable judgment that (i) doing so would violate applicable law or a contract, agreement or obligation of confidentiality owing to a third party, jeopardize the protection of an attorney-client privilege or expose such party to risk of liability for disclosure of sensitive or personal information or (ii) such information is not directly related to the transactions contemplated by the merger agreement and the statutory merger agreement.
Termination of the Merger Agreement
The merger agreement may be terminated and the transactions contemplated by the merger agreement abandoned at any time prior to the effective time, whether before or after receipt of the requisite approvals of the Validus shareholders (except as otherwise noted), under any of the following circumstances:
by mutual written consent of Validus and AIG;
by either Validus or AIG, if the merger has not been consummated by a walk-away date of September 21, 2018, except that if, on September 21, 2018, the only condition to closing of the merger that has not been satisfied or waived by that date is the condition that such required regulatory approvals have been filed or obtained, or that certain required regulatory approvals have been obtained without the imposition of a burdensome condition, then the walk-away date will be automatically extended without further action of the parties to December 21, 2018 (however, the right to terminate the merger agreement pursuant to the provision described in this bullet will not be available to any party who has breached any of such party’s representations and warranties set forth in the merger agreement, or who has failed to perform its obligations under the merger agreement has been a principal cause of or resulted in the failure of the merger to occur on or prior the walk-away date);
by either Validus or AIG, if there is in effect any injunction, judgment or ruling, enacted, promulgated, issued, entered, amended or enforced by any governmental authority of competent jurisdiction enjoining, restraining or otherwise making illegal or prohibiting the consummation of the merger and that is final and nonappealable, except that the party seeking to terminate the merger agreement pursuant to the provision described in this bullet must have performed, in all material respects, its obligations under the merger agreement, including its obligations to use its reasonable best efforts to prevent the entry of and to remove any such restraint, as required by the provisions described under “—Efforts to Complete the Merger” beginning on page 59;
by either Validus or AIG, if Validus shareholders do not approve the merger proposal at the special general meeting (including any adjournment or postponement thereof);
by AIG, if Validus has breached any of its representations or warranties, or has failed to perform any of its obligations or agreements contained in the merger agreement, which breach or failure would result in the failure of certain conditions to the obligations of AIG to consummate the merger described under “—Conditions to Completion of the Merger” beginning on page 50 to be satisfied and which is incapable of being cured prior to the walk-away date or, if capable of being cured, has not been cured within 30 days following receipt by Validus of written notice from AIG stating its intention to terminate the merger agreement, provided that AIG will not have the right to terminate the merger agreement under this provision if either AIG or Merger Sub is in material breach of any of its representations, warranties, obligations or agreements under the merger agreement;

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by AIG if any of the following has occurred and Validus shareholders have not approved the merger proposal:
the Validus board of directors has made an adverse recommendation change and AIG exercises its right to terminate within 10 days of the Validus board of directors making such an adverse recommendation change;
Validus has willfully breached the covenants regarding the non-solicitation of an alternative transaction, prompt filing of this proxy statement, or the convening of a shareholder meeting to approve the merger agreement and the transactions contemplated by the merger agreement and the statutory merger agreement;
by Validus, if AIG or Merger Sub has breached any of its representations or warranties, or has failed to perform any of its obligations or agreements contained in the merger agreement, which breach or failure would result in the failure of certain conditions to the obligations of Validus to consummate the merger described under “—Conditions to Completion of the Merger” beginning on page 50 to be satisfied and which is not reasonably capable of being cured prior to the walk-away date or, if reasonably capable of being cured, has not been cured within 30 days after written notice thereof has been received by AIG from Validus stating its intention to terminate the merger agreement, provided that Validus will not have the right to terminate the merger agreement under this provision if it is in material breach of any of its representations, warranties, covenants or agreements under the merger agreement; or
by Validus, if Validus shareholders have not approved the merger proposal, the Validus board of directors has authorized Validus to enter into an alternative acquisition agreement with respect to a superior proposal and, concurrently with such termination, Validus enters into such alternative acquisition agreement and pays to AIG an amount equal to the termination fee in accordance with the merger agreement.
Upon termination of the merger agreement in accordance with its terms by a party, written notice will be given to the other parties specifying the provision thereof pursuant to which such termination is made and the merger agreement will become null and void without liability on the part of any party or its directors, officers or affiliates, other than, with respect to any party to the merger agreement, the obligations pursuant to certain provisions that will survive the termination of the merger agreement. In addition, nothing will relieve any party to the merger agreement from liability for actual fraud or any willful breach of any provision set forth in the merger agreement.
Expenses and Termination Fees
Generally, all fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement and the statutory merger agreement will be paid by the party incurring or required to incur such fees and expenses, whether or not the merger is consummated.
Validus will be obligated to pay a termination fee of $162 million (which we refer to as the “termination fee”) to AIG under the following circumstances:
AIG terminates the merger agreement as a result of a breach by Validus of its representations, warranties or covenants and prior to such breach, a takeover proposal is announced (and not withdrawn at least three business days prior to such breach) and Validus consummates or enters into a definitive agreement to consummate a takeover proposal within 12 months of the termination of the merger agreement with AIG, except that, for purposes of this bullet only, the reference in the definition of “takeover proposal” to “20%” is replaced with a reference to “50%”. Such payment must be made by wire transfer of same-day funds within two business days after consummation of the takeover proposal.
AIG or Validus terminates due to the shareholder approval not being obtained at the shareholder meeting, and prior to the shareholder meeting, a takeover proposal is announced (and not withdrawn at least 10 business days prior to the shareholder meeting), and Validus consummates or enters into a definitive agreement to consummate that takeover proposal within 12 months of the termination of the merger agreement with AIG, except that for purposes of this bullet only, each reference in the definition of “takeover proposal” to “20%” is replaced with a reference to “50%.” Such payment must be made by wire transfer of same-day funds within two business days after consummation of the takeover proposal.

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However, if Validus consummates a takeover proposal with any other person other than the person who announced a takeover proposal prior to the shareholder meeting, then Validus will instead be required to an “alternate fee” of $81 million in lieu of the $162 million termination fee.
Validus terminates the merger agreement to enter into an alternative acquisition agreement with respect to a superior takeover proposal. Such payment must be made by wire transfer of same-day funds simultaneously with the termination of the merger agreement with AIG.
AIG terminates the merger agreement due to the Validus board of directors having made an adverse recommendation change or having willfully breached the covenants regarding the non-solicitation of an alternative transaction, prompt filing of this proxy statement, or the convening of a shareholder meeting to approve the merger agreement and the transactions contemplated by the merger agreement and the statutory merger agreement. Such payment must be made by wire transfer of same-day funds within two business days of termination of the merger agreement.
In no event will Validus be required to pay the termination fee or the alternate fee more than once or both the termination fee and the alternate fee.
Conduct of Business Pending the Completion of the Merger
Validus has agreed to certain covenants in the merger agreement restricting the conduct of its business between January 21, 2018 and the earlier of the closing or the termination of the merger agreement. In general, except as required by applicable law, as required or contemplated by the terms of the merger agreement, as may have been previously disclosed in writing to AIG as provided in the merger agreement or with the prior written consent of AIG (such consent not to be unreasonably withheld, conditioned or delayed), (i) Validus will, and will cause its subsidiaries to, carry on its business in all material respects in the ordinary course of business consistent with past practice, (ii) Validus will, and will cause its subsidiaries to, use reasonable best efforts to preserve its and its subsidiaries’ business organizations substantially intact and preserve existing relationships with key customers, brokers, reinsurance providers, regulators, officers, employees and other persons with whom Validus or any of its subsidiaries have significant business relationships, in each case, consistent with past practice and (iii) Validus will not, and will not permit any of its subsidiaries to:
issue, sell or grant any of its shares or other equity or voting interests of Validus, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares or other equity or voting interests of Validus or any of its subsidiaries, or any options, rights, warrants or other commitments or agreements to acquire from Validus or any of its subsidiaries, or that obligate Validus or any of its subsidiaries to issue, any share capital of, or other equity or voting interests in, or any securities convertible into or exchangeable for shares of, or other equity or voting interests in, Validus or any of its subsidiaries; except that Validus may issue common shares or other securities as required pursuant to the vesting, settlement or exercise of equity awards or obligations to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any common shares, or other equity or voting interests in Validus that are (i) outstanding on January 21, 2018 in accordance with the terms of the applicable equity award or right in effect on January 21, 2018 or (ii) granted after January 21, 2018 in accordance with the merger agreement; and provided further that subsidiaries of Validus may make any such issuances, sales or grants to Validus or a direct or indirect wholly owned subsidiary of Validus;
redeem, purchase or otherwise acquire any outstanding shares or other equity or voting interests of Validus or any of its subsidiaries or any rights, warrants or options to acquire any shares of Validus or any of its subsidiaries or other equity or voting interests of Validus or any of its subsidiaries, except (i) pursuant to employee benefit plans or equity awards (including, for the avoidance of doubt, in connection with the forfeiture of any equity awards or the satisfaction of any per share exercise price related to any equity awards) or (ii) in connection with the satisfaction of tax withholding obligations with respect to any equity awards;

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establish a record date for, declare, set aside for payment or pay any dividend on, or make any other distribution in respect of, any shares or other equity or voting interests of Validus or any of its subsidiaries, in each case, other than (i) quarterly cash dividends paid by Validus on common shares not in excess of $0.38 per share, per quarter, with record and payment dates consistent with the timing of record and payment dates in the most recent comparable prior year fiscal quarter prior to January 21, 2018; provided, that if the closing date will occur on a date that is prior to the record or payment date for the quarterly dividend for Validus’ second fiscal quarter of 2018, then Validus may establish a record or payment date for such quarterly dividend prior to the closing date, (ii) periodic cash dividends paid by Validus on series A preferred shares and series B preferred shares not in excess of the amounts contemplated by the applicable certificates of designations for such shares with record dates and payments dates consistent with the timing of record and payment dates in the most recent comparable prior fiscal quarter prior to January 21, 2018 and (iii) dividends paid by a subsidiary of Validus to Validus or any direct or indirect wholly owned subsidiary of Validus;
split, combine, subdivide or reclassify any shares or other equity or voting interests of Validus or any of its subsidiaries;
incur any indebtedness for borrowed money, issue or sell any bonds, debentures or other debt securities or warrants or other rights to acquire any bonds, debentures or other debt securities of Validus or any of its subsidiaries, guarantee any such indebtedness or any debt securities of another person or enter into any “keep well” or other agreement to maintain any financial statement condition of another person (collectively, “indebtedness”), except for (i) letters of credit issued in the ordinary course of business in the insurance or reinsurance business of Validus or any of its subsidiaries, (ii) borrowings under Validus’ existing credit facilities not in excess of $20,000,000, (iii) indebtedness in the aggregate in excess of $20,000,000 and (iv) indebtedness incurred in connection with the refinancing of any indebtedness existing on January 21, 2018 or permitted to be incurred, assumed or otherwise entered into under the merger agreement;
enter into any swap or hedging transaction or other derivative agreements, except for in the ordinary course of business and in compliance with the investment guidelines;
sell or lease to any person, in a single transaction or series of related transactions, any of its owned properties or assets whose value or purchase price exceeds $10,000,000 individually or $20,000,000 in the aggregate, except (i) dispositions of obsolete, surplus or worn out assets or assets that are no longer used or useful in the conduct of the business of Validus or any of its subsidiaries, (ii) transfers among Validus and its subsidiaries, (iii) leases and subleases of real property owned by Validus or its subsidiaries or (iv) sales of investment assets in the ordinary course of business and in compliance with the investment guidelines;
make or authorize capital expenditures outside the ordinary course of business or make any loans or advances to, or, except as permitted by the investment guidelines, any investments in, any other person other than a subsidiary of Validus;
make any acquisition (including by merger or amalgamation) of the share capital or other equity or voting interests of any other person (except the acquisition of investment assets in the ordinary course of business and in compliance with the investment guidelines) or of the assets of any other person, in each case for consideration in excess of $10,000,000 individually or $20,000,000 in the aggregate;
acquire any real property or any direct or indirect interest in real property in excess of $10,000,000 individually or $20,000,000 in the aggregate (except the acquisition of investment assets in the ordinary course of business and in compliance with the investment guidelines);

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except as required pursuant to the terms of any employee benefit plan or other written agreement, in each case, in effect on January 21, 2018 or established or amended after January 21, 2018 in compliance with the merger agreement, (i) grant to any current or former director, officer or employee any increase in salary or bonus compensation opportunity or other incentive compensation opportunity, other than annual merit increases in base salary for 2018 to Validus employees who are not directors or executive officers or whose annual compensation does not exceed $750,000, in the ordinary course of business, (ii) grant to any current or former director, officer or employee any increase in severance, retention or termination pay, (iii) pay any bonus, other than the payment of annual bonuses for completed periods based on actual performance, in the ordinary course of business, (iv) grant any new awards, or amend or modify the terms of any outstanding awards (including pursuant to any action to accelerate the vesting or lapse or restrictions or payment, or fund or secure the payment of, any compensation or benefits under any employee benefit plan), (v) establish, adopt, enter into or amend any employee benefit plan or collective bargaining agreement or other agreement with a labor union, works council or similar organization, (vi) enter into any employment, consulting, severance or termination agreement with any current or former director, officer or employee of Validus or any of its subsidiaries, (vii) hire, promote or terminate without “cause” the employment of any executive officer or any employee whose annual compensation exceeds $500,000, (viii) forgive any loans or issue any loans (other than routine travel or business expense advances issued in the ordinary course of business consistent with Validus policy) to any Validus employee, director or independent contractor (who is a natural person), or (ix) change any actuarial or other assumptions used to calculate funding obligations with respect to any employee benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP; provided, however, that the foregoing does not restrict Validus or any of its subsidiaries from (a) entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case, in the ordinary course of business, plans, agreements, benefits and compensation arrangements (excluding equity-based and other long-term incentive grants), in each case, that have terms and a value that is consistent with the past practice of making compensation and benefits available to newly hired or promoted employees in similar positions, or consistent with the compensation and benefits of the then-current employee whom such newly hired or promoted employee is engaged to replace or succeed, (b) taking any of the foregoing actions to comply with, satisfy tax-qualification requirements under, or avoid the imposition of tax under, the Code and any applicable guidance thereunder, or other applicable law or (c) making immaterial changes in the ordinary course of business to nondiscriminatory health and welfare plans available to all employees generally;
make any material changes in financial accounting methods, principles or practices materially affecting the consolidated assets, liabilities or results of operations of Validus and its subsidiaries, except insofar as may be required by (i) GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization or (ii) applicable statutory accounting principles (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the National Association of Insurance Commissioners or any similar organization;
materially alter or materially amend any existing underwriting, reserving, claim handling, loss control or actuarial practice guideline or policy of Validus or any subsidiary of Validus that conducts the business of insurance or reinsurance or is licensed as a Lloyd’s corporate member or Lloyd’s managing agent or any material assumption underlying any reserves or actuarial practice or policy, except as may be required by (i) GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization or (ii) applicable statutory accounting principles (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the National Association of Insurance Commissioners or any similar organization;
reduce or strengthen any reserves, provisions for losses or other liability amounts in respect of insurance contracts and assumed reinsurance contracts, except (i) as may be required by (or, in the reasonable good faith judgment of Validus, advisable under) applicable statutory accounting principles or GAAP, as applicable, (ii) as a result of loss or exposure payments to other parties in accordance with the terms of insurance contracts and assumed reinsurance contracts or (iii) in the ordinary course of business;
adopt or implement any shareholder rights plan or similar arrangement;

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amend Validus’ organizational documents (other than pursuant to Validus’ bye-law amendment) or amend in any material respect the comparable organizational documents of any of the subsidiaries of Validus;
adopt any plan or agreement of complete or partial liquidation or dissolution, merger, amalgamation, consolidation, restructuring, recapitalization or other reorganization of Validus or any of its subsidiaries, continue or agree to continue Validus or any of its subsidiaries into any other jurisdiction, or convert or agree to convert Validus or any of its subsidiaries into any other form of legal entity (other than the liquidation of dormant subsidiaries);
grant any lien (other than permitted liens) in any of its material properties or assets other than to secure certain classes of indebtedness specified in the merger agreement;
settle or compromise any pending or threatened legal or administrative proceeding, suit, investigation, arbitration or action against Validus or any of its subsidiaries, or any of their officers or directors in their capacities as such, other than the settlement of legal or administrative proceeding, suit, investigation, arbitration or action (i) solely for monetary damages for an amount not to exceed $2,500,000 for any such settlement individually or $7,500,000 in the aggregate or (ii) for claims under contracts of insurance issued by Validus or any of its subsidiaries within applicable policy or contractual limits in the ordinary course of business;
cancel any material indebtedness or waive any material claims or rights under any material contract, other than in the ordinary course of business;
amend, modify or terminate any material contract in such a way as to materially reduce the expected business or economic benefits thereof or enter into any contract that would constitute a material contract or each reinsurance or retrocession treaty or agreement, slip, binder, cover note or other similar arrangement pursuant to which any subsidiary of Validus that conducts the business of insurance or reinsurance or is licensed as a Lloyd’s corporate member or Lloyd’s managing agent is the cedent involving at least $5,000,000 in annual premium or $5,000,000 in ceded liabilities if in effect as of January 21, 2018, in each case, other than in the ordinary course of business;
enter into, amend or modify any contract between Validus and any of its subsidiaries, on the one hand, and any director, officer or employee of Validus or any of its subsidiaries, on the other hand, of a type that would be required to be, but has not been, disclosed under Item 404 of Regulation S-K of the SEC;
voluntarily abandon, dispose of or permit to lapse any intellectual property right owned by Validus that is material to Validus and its subsidiaries, taken as a whole, other than in the ordinary course of business;
(i) make any material tax election, except for in the ordinary course of business, (ii) settle or compromise any audit or other proceeding relating to a material amount of tax, (iii) file any material amended tax return, (iv) extend or waive the application of any statute of limitations regarding the assessment or collection of any material tax, other than in the ordinary course of business, (v) enter into any tax indemnification, sharing, allocation, reimbursement or similar agreement, arrangement or understanding (other than any contract entered into in the ordinary course of business that does not relate principally to taxes), (vi) surrender any right to claim any material tax refund or (vii) make any material change to any tax accounting method, except for in the ordinary course of business;
acquire or dispose of any investment assets in any manner inconsistent with the investment guidelines;
amend, modify or otherwise change the investment guidelines;
enter into any new lines of business or withdraw from, or put into “run off”, any existing material lines of business; or
authorize any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.
Board of Directors and Management of Validus Following Completion of the Merger
The directors of Merger Sub immediately prior to the effective time will be the initial directors of Validus as the surviving company until their earlier death, resignation or removal or until their respective successors are duly elected and qualified. The officers of Validus immediately prior to the effective time will be the initial officers of

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Validus as the surviving company until their earlier death, resignation or removal or until their respective successors are duly appointed and qualified.
Indemnification; Directors’ and Officers’ Insurance
The merger agreement provides that, from and after the effective time, the surviving company will, and AIG will cause the surviving company to, indemnify and hold harmless, the present and former directors and officers of Validus or any of its subsidiaries (and each such person’s heirs, executors and administrators) with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in settlement or compromise) and expenses (including fees and expenses of legal counsel) in connection with any action based on or arising out of, in whole or in part, (i) the fact that such person is or was a director or officer of Validus or such subsidiary or (ii) the acts or omissions of such person in such person’s capacity as a director, officer, employee or agent of Validus or such subsidiary or taken at the request of Validus or such subsidiary, in each case, at, or at any time prior to, the effective time (including in connection with serving at the request of Validus or such subsidiary as a director, officer, employee, agent, trustee or fiduciary of another person (including any employee benefit plan)) (including any action relating in whole or in part to the transactions contemplated by the merger agreement or relating to the enforcement of the indemnification provisions in the merger agreement, as described in this paragraph), to the fullest extent permitted under applicable law.
In addition, for the six year period commencing immediately after the effective time, the surviving company will maintain in effect current directors’ and officers’ liability insurance of Validus and its subsidiaries covering acts or omissions occurring at or prior to the effective time with respect to those individuals who, as of January 21, 2018, were, and any individual who, prior to the effective time, becomes, covered by Validus’ directors’ and officer’s liability insurance policy. The terms, scope and amount of such insurance coverage will be no less favorable to such individuals than Validus’ directors’ and officers’ liability insurance policies as in effect on January 21, 2018. However, AIG may substitute such policies for policies by reputable insurers of at least the same coverage with respect to matters existing or occurring prior to the effective time, including a “tail” policy. However, if annual premium for such insurance exceeds 300% of the current annual premium, then AIG may provide or cause to be provided a policy for the applicable individuals with the best coverage as shall then be available at an annual premium not in excess of 300% of the current annual premium. In addition, Validus may, prior to the effective time, purchase for an aggregate amount not in excess of such 300% threshold for six years, a six-year prepaid “tail” policy on terms and conditions providing at least substantially equivalent benefits as the current policies maintained by Validus with respect to matters existing or occurring prior to the effective time including the transactions contemplated by the merger agreement. If such prepaid “tail” policy has been obtained by Validus, it shall be deemed to satisfy all obligations to obtain insurance pursuant to the foregoing provisions and the surviving company will use its reasonable best efforts to cause such policy to be maintained in full force and effect, for its full term, and to honor all of its obligations thereunder.
Employee Matters
From the effective time through the end of the calendar year following the year in which the effective time occurs (which we refer to as the “continuation period”), AIG has agreed to provide each individual who is employed by Validus immediately prior to the effective time (to whom we refer to as a “continuing employee”) with:
a base salary or wage rate that is no less than that provided to such continuing employee by Validus immediately prior to the effective time;
a target annual incentive compensation plus target long-term incentive compensation opportunity that is substantially similar, in the aggregate, to the target annual incentive compensation plus target long-term incentive compensation opportunity (excluding any “Partner’s Plan,” special, one-time or transaction-based compensation opportunities) provided to such continuing employee by Validus immediately prior to the effective time, with the form of such incentives to be determined in AIG’s discretion;
other compensation and employee benefits (excluding long-term incentive, special, one-time or transaction-based compensation and benefits) that are (A) during the calendar year in which the effective time occurs, no less favorable, in the aggregate, than those provided to such continuing employee by Validus immediately prior to the effective time and (B) for the remainder of the continuation period, substantially comparable in the aggregate to either, at AIG’s election, (x) those provided to such continuing employee by

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Validus immediately prior to the effective time or (y) those provided by AIG to its similarly situated employees; and
subject to certain exceptions, in the event of a termination of employment from AIG during the continuation period, severance benefits that are no less favorable than those provided to similarly situated AIG employees under AIG’s severance plans.
AIG has further agreed to honor and continue certain of Validus’ employment, severance, retention, termination and change-in-control plans, policies, programs, agreements and arrangements, in each case, as in effect at the effective time, subject, in each case, to the terms and conditions of such arrangements.
Validus has agreed that if requested by AIG at least 10 business days prior to the effective time, Validus will terminate any and all Validus employee benefit plans qualifying under Section 401(k) of the Code and other select employee benefit plans, in each case effective not later than the business day immediately preceding the effective time. In the event that AIG requests that such 401(k) plans or other employee benefit plans be terminated, Validus will provide AIG with the evidence that such 401(k) plans or other employee benefits plans have been terminated pursuant to resolution of the Validus board of directors, the form and substance of which shall be subject to review by AIG, not later than five business days immediately preceding the effective time. Such resolutions shall provide for the immediate vesting of any accrued but unvested benefits under the terminated 401(k) plans and the payment of any then unpaid employer matching contributions under the terminated 401(k) plans in respect of the year in which the effective time occurs.
AIG has agreed that, as soon as practicable following the effective time, it will permit any continuing employee who is a participant in any terminated 401(k) plans to roll over his or her account balances and outstanding loan balances, if any, thereunder into a plan maintained by AIG that is intended to qualify under Section 401(k) of the Code.
Amendment or Supplement and Waiver
The merger agreement may be amended or supplemented by written agreement of the parties, by action taken or authorized by the boards of directors of Validus and AIG, at any time before or after the receipt of the requisite approval of the Validus shareholders of the merger proposal, but after the requisite approval of the Validus shareholders, no amendment may be made that by law requires further approval by the Validus shareholders without such further approval.
At any time prior to the effective time, AIG and Validus may, subject to applicable law, (i) waive any inaccuracies in the representations and warranties of the other party, (ii) extend the time for performance of any of the obligations or other acts of the other parties or (iii) waive compliance by the other party with any of the agreements contained in the merger agreement or waive any of such party’s conditions. No failure or delay by a party in exercising any of its rights under the merger agreement will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right under the merger agreement. Any agreement on the part of a party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party.
No Third Party Beneficiaries
While the merger agreement is not intended and will not be construed to create any third-party beneficiaries or confer upon any person other than the parties to the merger agreement any rights, benefits or remedies of any nature whatsoever under or by reason of the merger agreement, it provides a limited exception for each Validus shareholder at the effective time as regards its rights to receive the merger consideration and for each present and former director and officer of Validus and its subsidiaries (and each such person’s heirs, executors and administrators) to continue to have indemnification, advancement of expenses and liability insurance coverage following completion of the transactions as described under “—Indemnification; Directors’ and Officers’ Insurance” beginning on page 67.
Remedies; Specific Enforcement
Validus and AIG agreed in the merger agreement that if for any reason any of the provisions of the merger agreement are not performed in accordance with their specific terms or are otherwise breached or violated, irreparable damage would be caused for which monetary relief would not be an adequate remedy under applicable law. Accordingly, each of the parties to the merger agreement agreed that, in addition to all other remedies to which

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it may be entitled, (i) each of the parties to the merger agreement is entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions thereof in the courts in the State of Delaware or the federal courts of the United States of America located in the State of Delaware and (ii) the right of specific enforcement is an integral part of the transactions contemplated by the merger agreement and without that right, neither of the parties would have entered into the merger agreement. Such relief may be sought without the posting of a bond or other necessary security. The parties agreed not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law.
Representations and Warranties
The merger agreement contains certain customary representations and warranties. Each of Validus and AIG has made representations and warranties regarding, among other things:
organization and standing;
corporate power and authority with respect to the execution, delivery and performance of the merger agreement and the statutory merger agreement, and the due and valid execution and delivery and enforceability of the merger agreement;
board recommendation and approval;
absence of conflicts with, or violations of, organizational documents, contracts and applicable laws;
required regulatory filings and consents and approvals of governmental authorities;
absence of certain legal proceedings; and
brokers’ fees payable in connection with the transactions contemplated by the merger agreement.
Additional representations and warranties made only by Validus relate to:
capital structure;
ownership of subsidiaries;
requisite shareholder approval;
SEC documents, financial statements and internal controls and disclosure controls and procedures;
absence of undisclosed liabilities;
absence of any material adverse effect since December 31, 2016;
compliance with applicable laws;
possession of, and compliance with, permits;
tax matters;
benefits matters and ERISA compliance;
labor matters;
investments;
intellectual property;
inapplicability of takeover statutes;
real property;
material contracts;
insurance and reinsurance subsidiaries;
statutory statements and examinations;

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agreements with insurance regulators;
insurance, reinsurance and retrocession contracts;
reserves;
insurance policies;
opinions from financial advisors;
related party transactions;
IT systems, data security and privacy; and
the operations, business practices and management of Validus’ AlphaCat investment management unit.
Additional representations and warranties made only by AIG and Merger Sub relate to:
Merger Sub’s ownership and operations;
the absence of certain agreements between AIG, Merger Sub or any of their affiliates, on the one hand, and any member of Validus’ management or board of directors, on the other hand;
the truthfulness and veracity of information supplied by AIG to Validus that Validus has included in this proxy statement; and
share ownership in Validus.
Existing Indebtedness
Validus has agreed to, if requested by AIG, provide commercially reasonable cooperation to AIG in taking such actions as are necessary under certain existing debt documents in respect of the transactions contemplated by the merger agreement and the statutory merger agreement, including delivering or causing a subsidiary to deliver any such notices, agreements, documents or instruments necessary, proper or advisable to comply with the terms thereof, including the delivery of officer certificates and opinions of counsel required to be delivered thereunder in connection with the transactions contemplated by the merger agreement and the statutory merger agreement.
In addition, Validus has agreed to, if requested by AIG, provide commercially reasonable cooperation to AIG and Merger Sub in either (i) arranging for the termination of certain existing debt documents (or redemption of the relevant notes or debentures) at the closing (or such other date thereafter selected by AIG) and the procurement of customary payoff letters and other customary release documentation in connection therewith or (b) obtaining any consents required under certain credit agreements to permit the consummation of the transactions contemplated by the merger agreement and the statutory merger agreement thereunder. In furtherance of the foregoing, if requested by AIG, Validus will and will cause its subsidiaries to execute and deliver such customary notices, agreements, documents or instruments necessary to either terminate certain existing debt documents or redeem the relevant notes or debentures, in each case effective as of the closing (or such other date thereafter selected by AIG) or to obtain the consents required under certain credit agreements, as determined by AIG in its sole discretion.
Other Covenants and Agreements
The merger agreement contains certain other covenants and agreements, including covenants relating to, among other things:
preparation by Validus of this proxy statement;
confidentiality and access by AIG to certain information about Validus;
consultation between AIG and Validus in connection with public statements with respect to the transactions contemplated by the merger agreement;
causing the dispositions of Validus equity securities (including derivative securities) and acquisitions of AIG equity securities (including derivative securities) pursuant to the transactions contemplated by the merger agreement by each individual who is a director or officer of Validus subject to Section 16 of the Exchange Act to be exempt under Rule 16b-3 promulgated under the Exchange Act;

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each party notifying the other party of any shareholder litigation relating to the transactions contemplated by the merger agreement and the statutory merger agreement, and Validus giving AIG the opportunity to participate in the defense and settlement of any shareholder litigation against Validus or its directors relating to the merger agreement and the statutory merger agreement and the transactions contemplated by the merger agreement;
Validus reasonably consulting with AIG and obtaining consent from AIG (such consent not to unreasonably be withheld, conditioned or delayed by AIG) for any material tax-related transactions that Validus intends to enter into prior to the closing date, including Section 953(d) elections, if such material transactions are being undertaken for the purposes of complying with or minimizing the adverse tax impact of the Tax Cuts and Jobs Act; and
Validus causing its AlphaCat investment adviser subsidiaries to use commercially reasonable efforts to obtain consents from clients of the AlphaCat investment adviser subsidiaries (which we refer to as “AlphaCat clients”) to the assignment or deemed assignment of the advisory contracts between the AlphaCat investment adviser subsidiaries and the AlphaCat clients in connection with the transactions contemplated by the merger agreement and the statutory merger agreement.
Governing Law; Jurisdiction
The merger agreement is governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule, except to the extent the provisions of the laws of Bermuda are mandatorily applicable to the merger.
All actions brought by Validus against AIG, or vice versa, that arise out of or relating to the interpretation and enforcement of the merger agreement and in respect of the transactions contemplated by the merger agreement and statutory merger agreement (except to the extent any such proceeding mandatorily must be brought in Bermuda) will be held and determined in the Delaware Court of Chancery or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular action, then any federal court within the State of Delaware. If both the Delaware Court of Chancery and the federal courts within the State of Delaware decline to accept jurisdiction, then any other state court within the State of Delaware and any appellate court therefrom will have jurisdiction over any action brought by Validus against AIG, or vice versa, arising out of or relating to the interpretation and enforcement of the merger agreement and in respect of the transactions contemplated by the merger agreement and statutory merger agreement.

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MARKET PRICE OF VALIDUS COMMON SHARES
Our common shares are quoted on the NYSE under the ticker symbol “VR.” The following table shows the intraday high and low prices for the common shares and cash dividends per share, for the periods indicated as reported by the NYSE. These prices do not necessarily represent actual transactions.
 
Validus
 
High
Low
Dividend
Year ended December 31, 2018
 
 
 
First quarter (through March 23, 2018)
$67.79
$45.04
$0.38
Year ended December 31, 2017
 
 
 
Fourth quarter
$53.30
$45.72
$0.38
Third quarter
$54.44
$41.15
$0.38
Second quarter
$57.40
$51.21
$0.38
First quarter
$58.76
$54.66
$0.38
Year ended December 31, 2016
 
 
 
Fourth quarter
$56.41
$48.77
$0.35
Third quarter
$51.43
$47.14
$0.35
Second quarter
$48.77
$44.23
$0.35
First quarter
$47.58
$41.73
$0.35
On January 19, 2018, the last full trading day prior to the announcement of the transaction, and March 23, 2018, the last reported sales price of common shares, as reported by the NYSE, was $46.72 and $67.43, respectively. Validus shareholders are encouraged to obtain current market quotations for common shares before making any decision with respect to the merger. No assurance can be given concerning the market price for common shares before or after the date on which the merger will close. The market price for common shares will fluctuate between the date of this proxy statement and the date on which the merger closes and thereafter.
As of March 21, 2018, there were approximately 36 holders of record of common shares. This does not represent the actual number of beneficial owners of common shares because shares are frequently held in “street names” by securities dealers and others for the benefit of beneficial owners who may vote shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS
Security Ownership of 5% Owners
The following table sets forth information as of March 16, 2018, with respect to the beneficial ownership of issued and outstanding common shares by each person known by us to beneficially own 5% or more of the issued and outstanding shares. As defined by the SEC, a person is deemed to “beneficially own” shares if such person directly or indirectly (i) has or shares the power to vote or dispose of such shares, regardless of whether such person has any pecuniary interest in the shares or (ii) has the right to acquire the power to vote or dispose of such shares within 60 days, including through the exercise of any option, warrant, or right. Pursuant to Rule 13d-4 under the Exchange Act, the statements concerning voting and dispositive power concerning common shares included in the footnotes to this table shall not be construed as confirmation that such persons are the beneficial owners of such common shares.

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Name and address of Beneficial Owner(1)
 
Common
Shares
 
Percentage
of Issued and
Outstanding
Validus
Common shares
Funds affiliated with or managed by The Vanguard Group(2)
 
6,416,430
 
8.09%
Funds affiliated with or managed by Capital World Investors (U.S.)(3)
 
4,656,948
 
5.87%
Funds affiliated with or managed by Boston Partners(4)
 
4,341,599
 
5.47%
(1)
The address for each beneficial owner is listed in the relevant footnote.
(2)
The Vanguard Group, 100 Vanguard Blvd. Malvern, PA 19355.
(3)
Capital World Investors (U.S.), 333 South Hope Street, 55th Floor, Los Angeles, CA 90071.
(4)
Boston Partners, 909 3rd Ave, New York, NY 10022.
Security Ownership of Directors and Executive Officers
The following table sets forth information as of March 16, 2018, with respect to the beneficial ownership of issued and outstanding common shares by Validus’ directors, named executive officers and its directors and named executive officers as a group.
Name and address of Beneficial Owner(1)
 
Common
Shares
 
Unvested Restricted Shares
 
Total
 
Percentage
of Issued and
Outstanding
Validus
Common shares (2)
Edward J. Noonan
 
1,129,100

 
82,624

 
1,211,724

 
1.42
%
Jeffrey D. Sangster
 
136,206

 
52,984

 
189,190

 
0.17
%
Kean D. Driscoll
 
27,952

 
62,281

 
90,233

 
0.04
%
Robert F. Kuzloski
 
68,388

 
54,001

 
122,389

 
0.09
%
Peter A. Bilsby
 
29,324

 
51,463

 
80,787

 
0.04
%
John J. Hendrickson
 
60,000

 
54,135

 
114,135

 
0.08
%
Michael E.A. Carpenter
 
225,905

 

 
225,905

 
0.28
%
Matthew J. Grayson
 
51,393

 

 
51,393

 
0.06
%
Jeffrey W. Greenberg
 
3,027

 

 
3,027

 
%
Jean-Marie Nessi
 
1,873

 

 
1,873

 
%
Mandakini Puri
 
6,756

 

 
6,756

 
0.01
%
Gail Ross
 
2,900

 

 
2,900

 
%
Dr. Therese M. Vaughan
 
6,756

 

 
6,756

 
0.01
%
Mahmoud Abdallah
 
6,756

 

 
6,756

 
0.01
%
Christopher E. Watson
 
1,822

 

 
1,822

 
%
Karin Hirtler-Garvey
 
2,994

 

 
2,994

 
%
Directors and Executive Officers as a group (22 persons)
 
1,896,567

 
553,337

 
2,449,904

 
2.39
%
Shares held by other persons owning less than 5%
 
62,017,484

 
1,622,483

 
63,639,967

 
78.18
%
*
Unvested restricted shares held by our named executive officers accumulate dividends and may be voted.
(1)
Unless otherwise stated, the address for each beneficial owner is c/o Validus Holdings, Ltd., 29 Richmond Road, Pembroke HM 08 Bermuda.

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(2)
The percentage of beneficial ownership for all holders has been rounded to the nearest 1/10th of a percentage. Total beneficial ownership is determined in accordance with the rules of the SEC and includes common shares issuable within 60 days of March 16, 2018 upon the exercise of all options and other rights beneficially owned by the indicated person on that date. Under our bye-laws, if, and for so long as, the common shares of a shareholder, including any votes conferred by “controlled shares” would otherwise represent more than 9.09% of the aggregate voting power of all common shares entitled to vote on a matter, including an election of directors, the votes conferred by such shares will be reduced by whatever amount is necessary such that, after giving effect to any such reduction (and any other reductions in voting power required by our bye-laws), the votes conferred by such shares represent 9.09% of the aggregate voting power of all common shares entitled to vote on such matter.
There are no arrangements, known to Validus, including any pledge by any person of securities of Validus, the operation of which may at a subsequent date result in a change in control of Validus, other than the merger agreement between Validus and AIG (see “BusinessGeneral” in Item 1 of Part I of Validus’ Annual Report on Form 10-K for the year ended December 31, 2017).

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APPRAISAL RIGHTS
Under Bermuda law, in the event of a merger of a Bermuda company with another Bermuda company or foreign corporation, any shareholder of the Bermuda company is entitled to receive fair value for its shares. For purposes of Section 106(2)(b)(i) of the Companies Act, the Validus board of directors considers the fair value for (i) each common share to be $68.00, without interest and less any applicable withholding taxes, (ii) each issued and outstanding series A preferred share, to be the continuation of each such series A preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged and (iii) each issued and outstanding series B preferred share, to be the continuation of each such series B preferred share as a preferred share of Validus as the surviving company following the merger with all of its relative rights, terms and conditions remaining unchanged.
Any Validus shareholder who is not satisfied that it has been offered fair value for its shares and whose shares are not voted in favor of the merger agreement, the statutory merger agreement and the merger may exercise its appraisal rights under the Companies Act to have the fair value of its shares appraised by the Bermuda Court. Persons owning beneficial interests in shares but who are not shareholders of record should note that only persons who are shareholders of record are entitled to make an application for appraisal. Any Validus shareholder intending to exercise appraisal rights must file its application for appraisal of the fair value of its shares with the Bermuda Court within one month after the date the notice convening the special general meeting to approve the merger has been given. The notice delivered with this proxy statement constitutes this notice. There are no statutory rules and limited decisions of the Bermuda Court prescribing in detail the operation of the provisions of the Companies Act governing appraisal rights that are set forth in Section 106 of the Companies Act or the process of appraisal by the Bermuda Court; the Bermuda Court retains considerable discretion as to the precise methodology that it would adopt when determining the fair value of shares in an appraisal application under the Companies Act.
If a Validus shareholder votes in favor of the merger agreement, the statutory merger agreement and the merger at the special general meeting, such shareholder will have no right to apply to the Bermuda Court to appraise the fair value of its shares, and instead, if the merger is consummated, and as discussed in the section of this proxy statement titled “The Merger AgreementEffects of the Merger,” each (i) common share of such shareholder will be canceled and converted into the right to receive the merger consideration, (ii) series A preferred share of such shareholder will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged and (iii) series B preferred share of such shareholder will continue as a preferred share of Validus as the surviving company following the merger and the relative rights, terms and conditions of each such preferred share will remain unchanged. Voting against the merger, or not voting, will not in itself satisfy the requirements for notice and exercise of a shareholder’s right to apply for appraisal of the fair value of its shares.
A FAILURE OF A DISSENTING SHAREHOLDER TO AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL WILL NOT CONSTITUTE A WAIVER OF ITS RIGHT TO HAVE THE FAIR VALUE OF ITS VALIDUS SHARES APPRAISED, PROVIDED THAT SUCH SHAREHOLDER DOES NOT VOTE IN FAVOUR OF THE MERGER PROPOSAL.
In any case where a registered holder of shares has made an appraisal application, in respect of the shares held by such dissenting shareholder, and the merger has been made effective under Bermuda law before the Bermuda Court’s appraisal of the fair value of such dissenting shares, then the dissenting shareholder shall be entitled to receive the consideration and, if the fair value of the dissenting shares is later appraised by the Bermuda Court to be greater than the value of the consideration, such dissenting shareholder will be paid the difference, between the amount paid to him as the consideration and the value appraised by the court within one month of the Bermuda Court’s appraisal.
In any case where the value of the dissenting shares held by a dissenting shareholder is appraised by the Bermuda Court before the merger has been made effective under Bermuda law, then the surviving company will be required to pay the dissenting shareholder within one month of the Bermuda Court’s appraisal an amount equal to the value of the dissenting shares appraised by the Bermuda Court, unless the merger is terminated under the terms of the merger agreement, in which case no payment shall be made. However, it is anticipated that, subject to having obtained the requisite approval, the merger would have proceeded prior to the appraisal by the Bermuda Court.

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A shareholder that has exercised appraisal rights has no right of appeal from an appraisal made by the Bermuda Court. The responsibility for apportioning the costs of any application to the Bermuda Court under Section 106 of the Companies Act will be in the discretion of the Bermuda Court.
The relevant portion of Section 106 of the Companies Act in relation to appraisal rights is as follows:
“(6) Any shareholder who did not vote in favor of the amalgamation or merger and who is not satisfied that he has been offered fair value for his shares may within one month of the giving of the notice referred to in subsection (2) apply to the Court to appraise the fair value of his shares.
(6A) Subject to subsection (6B), within one month of the Court appraising the fair value of any shares under subsection (6) the company shall be entitled either—
(a) to pay to the dissenting shareholder an amount equal to the value of his shares as appraised by the Court; or
(b) to terminate the amalgamation or merger in accordance with subsection (7).
(6B) Where the Court has appraised any shares under subsection (6) and the amalgamation or merger has proceeded prior to the appraisal then, within one month of the Court appraising the value of the shares, if the amount paid to the dissenting shareholder for his shares is less than that appraised by the Court, the amalgamated or surviving company shall pay to such shareholder the difference between the amount paid to him and the value appraised by the Court.
(6C) No appeal shall lie from an appraisal by the Court under this section.
(6D) The costs of any application to the Court under this section shall be in the discretion of the Court.
(7) An amalgamation agreement or merger agreement may provide that at any time before the issue of a certificate of amalgamation or merger the agreement may be terminated by the directors of an amalgamating or merging company, notwithstanding approval of the agreement by the shareholders of all or any of the amalgamating or merging companies.”
SHAREHOLDERS WHO HOLD THEIR SHARES IN BANK OR BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS, AND WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR BANKS, BROKERAGE FIRMS AND OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKERAGE FIRM OR OTHER NOMINEE HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE VALIDUS COMMON SHARES OR VALIDUS PREFERRED SHARES, AS APPLICABLE. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKERAGE FIRM AND OTHER NOMINEE MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.
A shareholder who elects to exercise appraisal rights under Section 106(6) of the Companies Act should mail or deliver a written demand to:
Validus Holdings, Ltd.
Attention: General Counsel
29 Richmond Road
Pembroke HM 08, Bermuda
Holders of depositary shares must act through the depositary to exercise appraisal rights in respect of the fractional preferred shares represented by depositary shares and should contact the depositary if they desire to seek to exercise appraisal rights.

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DELISTING OF VALIDUS COMMON SHARES
If the merger is completed, we expect that Validus’ common shares will be delisted from the NYSE and we will no longer file periodic reports with the SEC on account of Validus’ common shares. However, we will continue to make securities filings with respect to our publicly-held depositary shares (representing interests in our preferred shares) to the extent such filings are required under SEC regulations following the completion of the merger. AIG may decide, following the merger, to delist the depositary shares from the NYSE, to deregister such depositary shares under the Exchange Act or take other action with respect to the depositary shares and preferred shares.

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THE SPECIAL GENERAL MEETING
Date, Time and Place