Year to Date Annualized Return on Average
Equity of 13.0%
Book Value Per Diluted Common Share of
$41.43 at June 30, 2015
Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE:VR)
today reported net income available to Validus of $64.0 million, or
$0.73 per diluted common share, for the three months ended
June 30, 2015, compared to $153.4 million, or $1.61 per
diluted common share, for the three months ended June 30,
2014. Net income available to Validus was $237.4 million, or $2.72
per diluted common share, for the six months ended June 30,
2015, compared to $315.8 million, or $3.27 per diluted common
share, for the six months ended June 30, 2014.
Net operating income available to Validus was $98.3 million, or
$1.13 per diluted common share, for the three months ended
June 30, 2015, compared to $132.2 million, or $1.39 per
diluted common share, for the three months ended June 30,
2014. Net operating income available to Validus was $231.2 million,
or $2.64 per diluted common share, for the six months ended
June 30, 2015, compared to $272.5 million, or $2.82 per
diluted common share, for the six months ended June 30,
2014.
Book value per diluted common share at June 30, 2015 was $41.43,
reflecting quarterly growth of 1.2% inclusive of dividends.
Commenting on the financial results for the three months ended
June 30, 2015, Validus' Chairman and CEO Ed Noonan stated:
“During a quarter with meaningful loss activity in our core
classes of business, Validus delivered a 10.7% annualized operating
return on average equity, a strong result in the current
market.
Our diversified business model with a focus on short tail lines
continues to provide a strong platform for a thoughtful expansion
into new classes of business and markets. The foundation of our
success is our world class staff and an outstanding set of
proprietary analytical tools that benefit both our own results and
those of our clients.
Above all, we remain committed to underwriting profitability and
will continue to adjust our portfolio to maximize results in the
current market conditions.”
Net income and net operating income available to Validus, net
earnings and net operating earnings per diluted common share
available to Validus, by segment for the three months ended
June 30, 2015 were as follows:
Net Income Available to Validus
Net Operating Income Available to Validus (Expressed
in millions of U.S. dollars, except per share information) Validus
Re $ 76.1 $ 90.3 Talbot 18.6 27.3 PaCRe, Ltd. 1.7 — Other AlphaCat
Companies
4.3
4.9
AlphaCat subtotal 6.0 4.9 Western World (1.7 ) 9.0 Corporate &
Eliminations (35.0 ) (33.2 )
Total $ 64.0
$ 98.3 Net earnings per diluted
common share available to Validus $ 0.73 Net
operating earnings per diluted common share available to
Validus $ 1.13
Net operating income (loss), a non-GAAP financial measure, is
defined as net income (loss) excluding net realized and change in
net unrealized gains (losses) on investments, income (loss) from
investment affiliate, foreign exchange gains (losses), other income
(loss) and non-recurring items. Net operating income (loss)
available (attributable) to Validus is defined as above, but
excludes income (loss) available (attributable) to noncontrolling
interest. Reconciliations of these measures to net income (loss)
and net income (loss) available (attributable) to Validus, the most
directly comparable GAAP measures, are presented at the end of this
release.
Second Quarter 2015
Results
Highlights for the second quarter are as follows:
- Gross premiums written for the three
months ended June 30, 2015 were $727.0 million compared to
$655.7 million for the three months ended June 30, 2014, an
increase of $71.3 million, or 10.9%. The increase was primarily due
to the contribution from Western World and an increase in AlphaCat
gross written premium. This increase was offset by decreases at
both Validus Re and Talbot.
- Net premiums earned for the three
months ended June 30, 2015 were $573.6 million compared to
$466.0 million for the three months ended June 30, 2014, an
increase of $107.6 million, or 23.1%.
- Underwriting income for the three
months ended June 30, 2015 was $110.8 million compared to
$146.1 million for the three months ended June 30, 2014, a
decrease of $35.3 million, or 24.2%.
- Combined ratio for the three months
ended June 30, 2015 was 80.7% which included $70.7 million of
favorable loss reserve development on prior accident years,
benefiting the loss ratio by 12.3 percentage points compared to a
combined ratio for the three months ended June 30, 2014 of
68.6% which included $72.7 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by
15.6 percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses.
- Net operating income available to
Validus for the three months ended June 30, 2015 was $98.3
million compared to $132.2 million for the three months ended
June 30, 2014, a decrease of $33.8 million, or 25.6%.
- Net income available to Validus for the
three months ended June 30, 2015 was $64.0 million compared to
$153.4 million for the three months ended June 30, 2014, a
decrease of $89.4 million, or 58.3%.
- Annualized return on average equity of
7.0% and annualized net operating return on average equity of 10.7%
for the three months ended June 30, 2015 compared to 16.5% and
14.2%, respectively, for the three months ended June 30,
2014.
Notable and Non-Notable Loss
Events
During the three months ended June 30, 2015, the Company
incurred a notable loss event, defined as consolidated losses which
aggregate to a threshold greater than or equal to $30.0 million.
The event, Pemex, resulted in an estimated loss to the Company of
$48.1 million, or 8.4 percentage points of the loss ratio. During
the three months ended June 30, 2014, the Company did not
incur any notable loss events.
Three Months Ended
June 30, 2015 (Dollars in thousands) Second Quarter
2015 Notable Loss Event (a) Validus Re Talbot
Total Description Net Losses and
Loss Expenses (b) `
% of NPE (c) Net Losses and Loss
Expenses (b) % of NPE (c) Net Losses and Loss
Expenses (b) % of NPE (c) Pemex Explosion $ 35,189
13.3 % $ 12,885 6.3 % $ 48,074 8.4 %
Total $ 35,189 13.3 %
$ 12,885 6.3 % $
48,074 8.4 %
(a) The notable loss event amounts were based on management's
estimates following a review of the Company's potential exposure
and discussions with certain clients and brokers. Given the
magnitude of this event, and other uncertainties inherent in loss
estimation, meaningful uncertainty remains regarding losses from
this event and the Company's actual ultimate net losses from this
event may vary materially from this estimate. Only those segments
that incurred a loss on this event are shown above.
(b) Net of reinsurance but not net of reinstatement premiums.
Total Pemex reinstatement premiums were $(0.4) million for the
three months ended June 30, 2015.
(c) NPE = net premiums earned.
During the three months ended June 30, 2015, the Company
did not incur a non-notable loss event, defined as consolidated
losses which aggregate to a threshold greater than $15.0 million,
but less than $30.0 million. The Company's loss ratio, excluding
prior year development, notable loss events, and non-notable loss
events for the three months ended June 30, 2015 and 2014 was
52.9% and 45.0%, respectively.
Highlights for the year to date include the following:
- Gross premiums written for the six
months ended June 30, 2015 were $1,846.5 million compared to
$1,667.7 million for the six months ended June 30, 2014, an
increase of $178.8 million, or 10.7%.
- Net premiums earned for the six months
ended June 30, 2015 were $1,151.3 million compared to $949.0
million for the six months ended June 30, 2014, an increase of
$202.4 million, or 21.3%.
- Underwriting income for the six months
ended June 30, 2015 was $254.9 million compared to $299.2
million for the six months ended June 30, 2014, a decrease of
$44.3 million, or 14.8%.
- Combined ratio for the six months ended
June 30, 2015 was 77.9% which included $154.3 million of
favorable loss reserve development on prior accident years,
benefiting the loss ratio by 13.4 percentage points compared to a
combined ratio for the six months ended June 30, 2014 of 68.5%
which included $112.1 million of favorable loss reserve development
on prior accident years, benefiting the loss ratio by 11.8
percentage points.
- Net operating income available to
Validus for the six months ended June 30, 2015 was $231.2
million compared to $272.5 million for the six months ended
June 30, 2014, a decrease of $41.3 million, or 15.2%.
- Net income available to Validus for the
six months ended June 30, 2015 was $237.4 million compared to
$315.8 million for the six months ended June 30, 2014, a
decrease of $78.3 million, or 24.8%.
- Annualized return on average equity of
13.0% and annualized net operating return on average equity of
12.7% for the six months ended June 30, 2015 compared to 17.0%
and 14.7%, respectively, for the six months ended June 30,
2014.
Validus Re Segment - Second Quarter
2015 Results
Highlights for the second quarter include the following:
- Gross premiums written for the three
months ended June 30, 2015 were $296.9 million compared to
$301.3 million for the three months ended June 30, 2014, a
decrease of $4.4 million, or 1.5%. Gross premiums written for the
three months ended June 30, 2015 included $246.1 million of
property premiums, $6.5 million of marine premiums and $44.3
million of specialty premiums, compared to $266.8 million of
property premiums, $(0.2) million of marine premiums and $34.7
million of specialty premiums for the three months ended
June 30, 2014.
- Net premiums earned for the three
months ended June 30, 2015 were $264.6 million compared to
$221.7 million for the three months ended June 30, 2014, an
increase of $42.8 million, or 19.3%.
- The combined ratio for the three months
ended June 30, 2015 was 71.2% compared to 57.8% for the three
months ended June 30, 2014, an increase of 13.4 percentage
points.
- The loss ratio for the three months
ended June 30, 2015 was 46.6% compared to 35.0% for the three
months ended June 30, 2014, an increase of 11.6 percentage points.
The increase was primarily due to losses arising from the Pemex
explosion. The loss ratio for the three months ended June 30,
2015 included favorable loss reserve development on prior accident
years of $30.9 million, benefiting the loss ratio by 11.7
percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses. The loss ratio for the three months ended June 30, 2014
included favorable loss reserve development on prior accident years
of $26.7 million, benefiting the loss ratio by 12.0 percentage
points.
- General and administrative expenses for
the three months ended June 30, 2015 were $18.8 million compared to
$17.0 million for the three months ended June 30, 2014, an increase
of $1.7 million, or 10.2%.
- Net operating income available to
Validus Re for the three months ended June 30, 2015 was $90.3
million compared to $106.2 million, for the three months ended
June 30, 2014, a decrease of $15.9 million, or 15.0%.
- Net income available to Validus Re for
the three months ended June 30, 2015 was $76.1 million
compared to $124.3 million, for the three months ended
June 30, 2014, a decrease of $48.1 million, or 38.7%.
Highlights for the year to date include the following:
- Gross premiums written for the six
months ended June 30, 2015 were $1,008.1 million compared to
$967.4 million for the six months ended June 30, 2014, an
increase of $40.7 million, or 4.2%. Gross premiums written for the
six months ended June 30, 2015 included $465.4 million of
property premiums, $139.9 million of marine premiums and $402.7
million of specialty premiums, compared to $528.5 million of
property premiums, $152.7 million of marine premiums and $286.2
million of specialty premiums for the six months ended
June 30, 2014.
- Net premiums earned for the six months
ended June 30, 2015 were $517.6 million compared to $460.1
million for the six months ended June 30, 2014, an increase of
$57.5 million, or 12.5%.
- The combined ratio for the six months
ended June 30, 2015 was 70.7% compared to 55.6% for the six
months ended June 30, 2014, an increase of 15.1 percentage
points.
- The loss ratio for the six months ended
June 30, 2015 was 45.7% compared to 31.7% for the six months
ended June 30, 2014, an increase of 14.0 percentage points.
The loss ratio for the six months ended June 30, 2015 included
favorable loss reserve development on prior accident years of $55.6
million, benefiting the loss ratio by 10.7 percentage points. The
loss ratio for the six months ended June 30, 2014 included
favorable loss reserve development on prior accident years of $36.7
million, benefiting the loss ratio by 8.0 percentage points.
- General and administrative expenses for
the six months ended June 30, 2015 were $38.3 million compared to
$35.2 million for the six months ended June 30, 2014, an increase
of $3.1 million, or 8.7%.
- Net operating income available to
Validus Re for the six months ended June 30, 2015 was $182.7
million compared to $232.8 million, for the six months ended
June 30, 2014, a decrease of $50.1 million, or 21.5%.
- Net income available to Validus Re for
the six months ended June 30, 2015 was $186.9 million compared
to $265.5 million, for the six months ended June 30, 2014, a
decrease of $78.6 million, or 29.6%.
Talbot Segment - Second Quarter 2015
Results
Highlights for the second quarter include the following:
- Gross premiums written for the three
months ended June 30, 2015 were $293.0 million compared to
$317.9 million for the three months ended June 30, 2014, a
decrease of $24.9 million, or 7.8%. Gross premiums written for the
three months ended June 30, 2015 included $108.8 million of
property premiums, $89.7 million of marine premiums and $94.5
million of specialty premiums compared to $116.0 million of
property premiums, $109.4 million of marine premiums and $92.6
million of specialty premiums for the three months ended
June 30, 2014.
- Net premiums earned for the three
months ended June 30, 2015 were $205.4 million compared to
$211.8 million for the three months ended June 30, 2014, a
decrease of $6.4 million, or 3.0%.
- The combined ratio for the three months
ended June 30, 2015 was 88.7% compared to 78.7% for the three
months ended June 30, 2014, an increase of 10.0 percentage
points.
- The loss ratio for the three months
ended June 30, 2015 was 46.7% compared to 39.7% for the three
months ended June 30, 2014, an increase of 7.0 percentage
points. The increase was primarily due to losses arising from the
Pemex explosion. The loss ratio for the three months ended
June 30, 2015 included favorable loss reserve development on
prior accident years of $35.6 million, benefiting the loss ratio by
17.3 percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses. The loss ratio for the three months ended June 30,
2014 included favorable loss reserve development on prior accident
years of $42.2 million, benefiting the loss ratio by 19.9
percentage points.
- General and administrative expenses for
the three months ended June 30, 2015 were $35.6 million
compared to $34.2 million for the three months ended June 30,
2014, an increase of $1.4 million, or 4.0%.
- Net operating income available to
Talbot for the three months ended June 30, 2015 was $27.3
million compared to $48.6 million, for the three months ended
June 30, 2014, a decrease of $21.3 million, or 43.8%.
- Net income available to Talbot for the
three months ended June 30, 2015 was $18.6 million compared to
$52.7 million, for the three months ended June 30, 2014, a
decrease of $34.1 million, or 64.7%.
Highlights for the year to date include the following:
- Gross premiums written for the six
months ended June 30, 2015 were $563.1 million compared to
$608.6 million for the six months ended June 30, 2014, a
decrease of $45.5 million, or 7.5%. Gross premiums written for the
six months ended June 30, 2015 included $180.5 million of
property premiums, $200.1 million of marine premiums and $182.6
million of specialty premiums compared to $194.1 million of
property premiums, $229.0 million of marine premiums and $185.6
million of specialty premiums for the six months ended
June 30, 2014.
- Net premiums earned for the six months
ended June 30, 2015 were $428.0 million compared to $425.7
million for the six months ended June 30, 2014, an increase of
$2.3 million, or 0.5%.
- The combined ratio for the six months
ended June 30, 2015 was 81.5% compared to 82.6% for the six
months ended June 30, 2014, a decrease of 1.1 percentage
points.
- The loss ratio for the six months ended
June 30, 2015 was 40.7% compared to 43.8% for the six months
ended June 30, 2014, a decrease of 3.1 percentage points. The
loss ratio for the six months ended June 30, 2015 included
favorable loss reserve development on prior accident years of $87.3
million, benefiting the loss ratio by 20.4 percentage points. The
loss ratio for the six months ended June 30, 2014 included
favorable loss reserve development on prior accident years of $63.8
million, benefiting the loss ratio by 15.0 percentage points.
- General and administrative expenses for
the six months ended June 30, 2015 were $72.0 million compared to
$69.3 million for the six months ended June 30, 2014, an increase
of $2.7 million, or 3.9%.
- Net operating income available to
Talbot for the six months ended June 30, 2015 was $88.6
million compared to $82.3 million for the six months ended
June 30, 2014, an increase of $6.4 million, or 7.7%.
- Net income available to Talbot for the
six months ended June 30, 2015 was $88.2 million compared to
$88.9 million, for the six months ended June 30, 2014, a
decrease of $0.7 million, or 0.8%.
AlphaCat Segment - Second Quarter 2015
Results(1)
Highlights for the second quarter include the following:
- AlphaCat's assets under management were
$2,079.3 million as at July 1, 2015, compared to $1,879.6 million
as at April 1, 2015. Third party assets under management were
$1,724.3 million as at July 1, 2015, compared to $1,525.0 million
as at April 1, 2015. During the three months ended June 30,
2015, a total of $224.0 million of capital was raised, of which
$213.9 million was raised from third parties. During the three
months ended June 30, 2015, $52.4 million was returned to
investors, of which $19.3 million was returned to third party
investors.
- Net operating income available to
AlphaCat for the three months ended June 30, 2015 was $4.9
million. Validus' share of AlphaCat net operating income for the
three months ended June 30, 2015 was $3.1 million, compared to
$9.4 million for the three months ended June 30, 2014, a
decrease of $6.2 million.
- Net income available to AlphaCat for
the three months ended June 30, 2015 was $6.0 million.
Validus' share of AlphaCat net income for the three months ended
June 30, 2015 was $4.9 million, compared to $13.1 million for
the three months ended June 30, 2014, a decrease of $8.2
million.
- Management fees earned from third
parties were $4.3 million for the three months ended June 30,
2015 and June 30, 2014.
- The AlphaCat sidecars and ILS funds
contributed $5.6 million of income for the three months ended
June 30, 2015, compared to $8.1 million for the three months
ended June 30, 2014, a decrease of $2.5 million.
- Total expenses for the three months
ended June 30, 2015 were $5.0 million, compared to $3.1
million for the three months ended June 30, 2014, an increase
of $1.9 million. Included within the expenses for the three months
ended June 30, 2015 was $2.5 million of finance expenses relating
to the raising of third party capital.
- For the three months ended
June 30, 2015, there was an accounting loss of $1.8 million on
the deconsolidation of one of the ILS funds.
- Validus' share of PaCRe's net realized
and unrealized investment gains for the three months ended
June 30, 2015 were $1.7 million, compared to $3.7 million for
the three months ended June 30, 2014, a decrease of $2.0
million.
Highlights for the year to date include the following:
- Management fees earned from third
parties for the six months ended June 30, 2015 were $8.9
million, compared to $10.1 million for the six months ended
June 30, 2014, a decrease of $1.2 million.
- The AlphaCat sidecars and ILS funds
contributed $10.7 million of income for the six months ended
June 30, 2015, compared to $14.8 million for the six months
ended June 30, 2014, a decrease of $4.1 million.
- Total expenses for the six months ended
June 30, 2015 were $12.0 million, compared to $6.1 million for
the six months ended June 30, 2014, an increase of $5.9
million.
- PaCRe contributed $0.1 million of net
operating income for the six months ended June 30, 2015,
compared to $0.3 million for the six months ended June 30,
2014, a decrease of $0.2 million.
- For the six months ended June 30,
2015, there was an accounting loss of $1.8 million on the
deconsolidation of one of the ILS funds compared to an accounting
gain on another of the ILS funds of $1.4 million for the six months
ended June 30, 2014.
- Validus' share of AlphaCat net
operating income for the six months ended June 30, 2015 was
$5.8 million, compared to $20.4 million for the six months ended
June 30, 2014, a decrease of $14.6 million.
- Validus' share of PaCRe's net realized
and unrealized investment gains for the six months ended
June 30, 2015 were $5.6 million, compared to $8.4 million for
the six months ended June 30, 2014, a decrease of $2.7
million.
- Validus' share of AlphaCat net income
for the six months ended June 30, 2015 was $11.4 million,
compared to $28.8 million for the six months ended June 30,
2014, a decrease of $17.3 million.
(1) Please refer to pages 36 to 40 of the Investor
Financial Supplement for further details on the AlphaCat
segment.
Western World Segment - Second Quarter
2015 Results
The acquisition of Western World closed on October 2, 2014 and
the segment was included in the Company results for the first time
in Q4 2014. As such, there are no comparatives for the three or six
months ended June 30, 2014.
Highlights for the second quarter include the following:
- Gross premiums written for the three
months ended June 30, 2015 were $79.6 million. Gross premiums
written for the three months ended June 30, 2015 included
$15.9 million of property premiums and $63.7 million of liability
premiums.
- Net premiums earned for the three
months ended June 30, 2015 were $65.1 million.
- The combined ratio for the three months
ended June 30, 2015 was 101.1%.
- The loss ratio for the three months
ended June 30, 2015 was 71.8%. The loss ratio for the three
months ended June 30, 2015 included favorable loss reserve
development on prior accident years of $4.3 million, benefiting the
loss ratio by 6.5 percentage points. Of this, $2.9 million or 4.4
percentage points arose from the amortization of the risk premium
adjustment booked at acquisition.
- Policy acquisition costs for the three
months ended June 30, 2015 were $9.6 million. Amortization of
the fair value adjustment booked at acquisition favorably impacted
policy acquisition costs by approximately $6.6 million or 10.1
percentage points.
- General and administrative expenses for
the three months ended June 30, 2015 were $8.9 million.
- Net operating income available to
Western World for the three months ended June 30, 2015 was
$9.0 million.
- Net loss attributable to Western World
for the three months ended June 30, 2015 was $1.7
million.
Highlights for the year to date include the following:
- Gross premiums written for the six
months ended June 30, 2015 were $136.5 million. Gross premiums
written for the six months ended June 30, 2015 included $25.3
million of property premiums and $111.2 million of liability
premiums.
- Net premiums earned for the six months
ended June 30, 2015 were $133.0 million.
- The combined ratio for the six months
ended June 30, 2015 was 99.0%.
- The loss ratio for the six months ended
June 30, 2015 was 73.1%. The loss ratio for the six months
ended June 30, 2015 included favorable loss reserve
development on prior accident years of $10.6 million, benefiting
the loss ratio by 8.0 percentage points. Of this, $6.1 million or
4.6 percentage points arose from the amortization of the risk
premium adjustment booked at acquisition.
- Policy acquisition costs for the six
months ended June 30, 2015 were $13.9 million. Amortization of
the fair value adjustment booked at acquisition favorably impacted
policy acquisition costs by approximately $17.0 million or 12.8
percentage points.
- General and administrative expenses for
the six months ended June 30, 2015 were $19.6 million.
- Net operating income available to
Western World for the six months ended June 30, 2015 was $12.9
million.
- Net income available to Western World
for the six months ended June 30, 2015 was $11.6 million.
Corporate Results
Corporate results include executive and board expenses, internal
and external audit expenses, interest and costs incurred in
connection with the Company's senior notes and junior subordinated
deferrable debentures and other costs relating to the Company as a
whole.
General and administrative expenses for the three months ended
June 30, 2015, net of operating segment eliminations, were $16.2
million compared to $18.8 million for the three months ended June
30, 2014, a decrease of $2.7 million or 14.2%. Share compensation
expenses for the three months ended June 30, 2015, net of operating
segment eliminations were $3.2 million compared to $3.0 million for
the three months ended June 30, 2014, an increase of $0.2 million
or 6.6%.
General and administrative expenses for the six months ended
June 30, 2015, net of operating segment eliminations, were
$30.6 million compared to $35.8 million for the six months ended
June 30, 2014, a decrease of $5.2 million, or 14.7%. Share
compensation expenses for the six months ended June 30, 2015,
net of operating segment eliminations, were $6.1 million compared
to $5.3 million for the six months ended June 30, 2014, an
increase of $0.7 million, or 13.5%.
Investments
Net investment income for the three months ended June 30,
2015 was $33.6 million compared to $21.3 million for the three
months ended June 30, 2014, an increase of $12.3 million, or
57.9%.
Net realized gains on investments for the three months ended
June 30, 2015 were $2.2 million compared to $7.9 million for
the three months ended June 30, 2014, a decrease of $5.6
million, or 71.4%.
The change in net unrealized losses on investments for the three
months ended June 30, 2015 was $(17.5) million compared to
gains of $45.4 million for the three months ended June 30,
2014, a decrease of $63.0 million, or 138.6%. The change in net
unrealized losses on investments for the three months ended
June 30, 2015 included $17.1 million in unrealized gains
relating to PaCRe. The amount of PaCRe's net unrealized gains
attributable to noncontrolling interest was ($15.4) million for the
three months ended June 30, 2015, leaving a net impact to the
Company of $1.7 million.
The change in net unrealized gains on investments for the three
months ended June 30, 2014 was driven by $31.3 million in
unrealized gains relating to PaCRe. The amount of PaCRe's net
unrealized gains attributable to noncontrolling interest was
($28.1) million for the three months ended June 30, 2014,
leaving a net impact to the Company of $3.1 million.
Net investment income for the six months ended June 30,
2015 was $64.6 million compared to $44.6 million for the six months
ended June 30, 2014, an increase of $20.0 million, or
44.8%.
Net realized gains on investments for the six months ended
June 30, 2015 were $6.4 million compared to $11.6 million for
the six months ended June 30, 2014, a decrease of $5.2
million, or 44.7%.
The change in net unrealized gains on investments for the six
months ended June 30, 2015 was $54.7 million compared to
$101.1 million for the six months ended June 30, 2014, a
decrease of $46.4 million, or 45.9%. The change in net unrealized
gains on investments for the six months ended June 30, 2015 was
driven by $56.1 million in unrealized gains relating to PaCRe. The
amount of PaCRe's net unrealized gains attributable to
noncontrolling interest was ($50.5) million for the six months
ended June 30, 2015, leaving a net impact to the Company of
$5.6 million.
The change in net unrealized gains on investments for the six
months ended June 30, 2014 was driven by $77.9 million in
unrealized gains relating to PaCRe. The amount of PaCRe's net
unrealized gains attributable to noncontrolling interest was
($70.1) million for the six months ended June 30, 2014,
leaving a net impact to the Company of $7.8 million.
Shareholders' Equity and
Capitalization
As at June 30, 2015, total shareholders' equity was $4.2
billion including $510.1 million of noncontrolling interest.
Shareholders' equity available to Validus was $3.7 billion as at
June 30, 2015. Book value per diluted common share was $41.43
at June 30, 2015, compared to $41.27 at March 31, 2015.
Book value per diluted common share is a non-GAAP financial
measure. A reconciliation of this measure to book value per common
share is presented at the end of this release.
Total capitalization at June 30, 2015 was $5.0 billion,
including $538.0 million of junior subordinated deferrable
debentures and $247.4 million of senior notes. Total capitalization
available to Validus at June 30, 2015 was $4.4 billion,
excluding $510.1 million of noncontrolling interest.
Share Repurchases
For the three months ended June 30, 2015, the number of
shares repurchased by the Company was 2.0 million. A summary of the
share repurchases made to date under the Company’s previously
announced share repurchase program is as follows:
Share Repurchase Activity(Expressed in
thousands of U.S. dollars except for share and per share
information) As at March 31, 2015
Quarter ended Effect of share repurchases:
(cumulative) April May June June 30,
2015 Aggregate purchase price (a) $ 2,289,409 $ — $ 37,296 $
47,819 $ 85,115 Shares repurchased 71,475,993 — 873,120 1,095,722
1,968,842 Average price (a) $ 32.03 $ — $ 42.72
$ 43.64 $ 43.23
Estimated cumulative net
accretive (dilutive) impact on: Book value per diluted common
share (b) 4.09
Share Repurchase
Activity
(Expressed in thousands of U.S. dollars
except for share and per share information)
Effect of share repurchases: As at June 30, 2015
As at July 27, 2015 Cumulative to Date
Effect Aggregate purchase price (a) $ 2,374,524 $ 19,335 $
2,393,859 Shares repurchased 73,444,835 429,050 73,873,885 Average
price (a) $ 32.33 $ 45.06 $ 32.40
(a) Share transactions are on a trade date basis through
July 27, 2015 and are inclusive of commissions. Average share
price is rounded to two decimal places.
(b) As the average price per share repurchased during certain
periods between 2009 and 2015 was lower than the book value per
common share, the repurchase of shares increased the Company's
period ending book value per share.
Conference Call
The Company will host a conference call for analysts and
investors on July 29, 2015 at 10:00 AM (Eastern) to discuss the
second quarter 2015 financial results and related matters. The
conference call may be accessed by dialing 1-888-771-4371
(toll-free U.S.) or 1-847-585-4405 (international) and entering the
passcode 3986 7298. Those who intend to participate in the
conference call should register at least ten minutes in advance to
ensure access to the call. A telephone replay of the conference
call will be available through August 12, 2015, by dialing
1-888-843-7419 (toll-free U.S.) or 1-630-652-3042 (international)
and entering the passcode 3986 7298.
This conference call will also be available through a live audio
webcast accessible through the Investor Relations section of the
Company's website located at www.validusholdings.com. A replay of the webcast
will be available at the Investor Relations section of the
Company's website through August 12, 2015. In addition, a financial
supplement relating to the Company's financial results for the
three and six months ended June 30, 2015 is available in the
Investor Relations section of the Company's website.
About Validus Holdings,
Ltd.
Validus Holdings, Ltd. is a holding company for reinsurance and
insurance operating companies and investment advisors including
Validus Reinsurance, Ltd. (“Validus Re”), Talbot Holdings Ltd.
(“Talbot”), Western World Insurance Group, Inc. (“Western World”)
and AlphaCat Managers, Ltd. (“AlphaCat”).
The results of Western World are consolidated from the October
2, 2014 date of acquisition.
Validus Re is a Bermuda based reinsurer focused on short-tail
lines of reinsurance. Talbot is the Bermuda parent of the specialty
insurance group primarily operating within the Lloyd's insurance
market through Syndicate 1183. Western World is a U.S.
specialty lines insurance company focused on excess and surplus
lines. AlphaCat is a Bermuda based investment adviser managing
capital for third parties and the Group in insurance linked
securities and other property catastrophe reinsurance
investments.
Validus Holdings, Ltd.
Consolidated Balance Sheets
As at
June 30, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
June 30, 2015 December 31, 2014
Assets Fixed maturities, at fair value (amortized
cost: 2015—$5,462,612; 2014—$5,534,494) $ 5,459,304 $ 5,532,731
Short-term investments, at fair value (amortized cost:
2015—$1,337,914; 2014—$1,051,222) 1,338,051 1,051,074 Other
investments, at fair value (cost: 2015—$901,581; 2014—$879,176)
893,707 813,011 Cash and cash equivalents 433,710 577,240
Restricted cash 140,019 173,003 Total investments and
cash 8,264,791 8,147,059 Investments in affiliates 374,121 261,483
Premiums receivable 1,276,020 707,647 Deferred acquisition costs
253,225 161,295 Prepaid reinsurance premiums 161,516 81,983
Securities lending collateral 7,021 470 Loss reserves recoverable
376,665 377,466 Paid losses recoverable 40,198 38,078 Income taxes
recoverable 13,787 — Deferred tax asset 23,079 23,821 Receivable
for investments sold 29,131 18,318 Intangible assets 124,092
126,924 Goodwill 196,758 195,897 Accrued investment income 23,894
24,865 Other assets 260,998 164,633
Total assets $ 11,425,296 $ 10,329,939
Liabilities Reserve for losses and loss expenses $ 3,187,177
$ 3,234,394 Unearned premiums 1,519,491 990,564 Reinsurance
balances payable 95,705 127,128 Securities lending payable 7,487
936 Deferred tax liability 8,063 5,541 Payable for investments
purchased 105,871 68,574 Accounts payable and accrued expenses
167,776 318,245 Notes payable to operating affiliates 1,381,313
671,465 Senior notes payable 247,360 247,306 Debentures payable
538,032 539,277
Total
liabilities 7,258,275 6,203,430
Commitments and contingent liabilities Redeemable
noncontrolling interest — 79,956
Shareholders' equity
Common shares, 571,428,571 authorized, par
value $0.175 (Issued: 2015—158,379,505; 2014—155,554,224;
Outstanding: 2015—83,295,795; 2014—83,869,845)
27,716 27,222 Treasury shares (2015—75,083,710; 2014—71,684,379)
(13,140 ) (12,545 ) Additional paid-in-capital 1,097,527 1,207,493
Accumulated other comprehensive (loss) (9,066 ) (8,556 ) Retained
earnings 2,553,894 2,374,344
Total
shareholders' equity available to Validus 3,656,931
3,587,958 Noncontrolling interest
510,090 458,595
Total shareholders'
equity 4,167,021 4,046,553
Total liabilities, noncontrolling interests and shareholders'
equity $ 11,425,296 $ 10,329,939
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three and
six months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended June 30,
Six Months Ended June 30, 2015 2014
2015 2014 Underwriting income Gross
premiums written $ 726,968 $ 655,674 $ 1,846,466 $ 1,667,665
Reinsurance premiums ceded (54,896 ) (50,565 )
(245,736 ) (245,473 ) Net premiums written 672,072 605,109
1,600,730 1,422,192 Change in unearned premiums (98,490 )
(139,106 ) (449,394 ) (473,232 )
Net
premiums earned 573,582 466,003
1,151,336 948,960
Underwriting deductions Losses and loss expenses 266,146
158,745 507,075 321,416 Policy acquisition costs 104,425 78,953
203,061 164,602 General and administrative expenses 82,963 73,842
167,991 148,287 Share compensation expenses 9,242
8,341 18,296 15,488
Total underwriting deductions 462,776
319,881 896,423 649,793
Underwriting income $
110,806 $
146,122 $
254,913 $
299,167 Net investment income 33,608
21,286 64,629 44,648 Other insurance related income 3,148 4,811
7,980 12,848 Finance expenses (17,735 ) (16,126 )
(37,587 ) (32,026 )
Operating income before taxes, income
from operating affiliates and (income) attributable to
operating affiliate investors
$
129,827 $
156,093 $
289,935 $
324,637
Tax (expense) (2,549 ) (1,391 ) (5,114 ) (1,351 ) Income from
operating affiliates 4,104 4,892 6,557 9,819 (Income) attributable
to operating affiliate investors (30,879 ) (25,316 )
(54,085 ) (57,026 )
Net operating income $
100,503 $
134,278 $
237,293 $
276,079
Net realized gains on investments 2,244 7,858 6,413 11,598
Change in net unrealized (losses) gains on investments (17,530 )
45,427 54,674 101,120 Income from investment affiliate 284 779
3,060 6,127 Foreign exchange (losses) gains (3,236 ) 3,158 (6,787 )
(3,320 ) Other (loss) income (608 ) 424 (608 ) 6,217 Transaction
expenses (a) — (3,252 ) —
(3,252 )
Net income $
81,657 $
188,672 $
294,045 $
394,569 Net
(income) attributable to noncontrolling interest (17,644 ) (35,305
) (56,621 ) (78,814 )
Net income available to Validus $
64,013 $
153,367 $
237,424
$
315,755 Selected ratios: Net
premiums written / Gross premiums written 92.4 % 92.3 % 86.7 % 85.3
% Losses and loss expenses 46.4 % 34.1 % 44.0 % 33.9 %
Policy acquisition costs 18.2 % 16.9 % 17.7 % 17.3 % General
and administrative expenses (a) 16.1 % 17.6 %
16.2 % 17.3 % Expense ratio 34.3 % 34.5 %
33.9 % 34.6 % Combined ratio 80.7 %
68.6 % 77.9 % 68.5 %
(a) The general and administrative expense ratio includes share
compensation expenses.
Validus Holdings, Ltd.
Consolidated Segment Operating Income
(Loss)
For the three
months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended June 30, 2015
Three Months Ended June 30, 2014 Validus Re
AlphaCat Talbot Western World
Corporate and Eliminations Total
Validus Re (b) AlphaCat Talbot
Corporate and Eliminations (b) Total
Underwriting income Gross premiums written 296,895 64,117
293,046 79,554 (6,644 ) 726,968 301,273 43,790 317,944 (7,333 )
655,674 Reinsurance premiums ceded (18,853 ) — (37,246 )
(5,441 ) 6,644 (54,896 ) (21,522 ) — (36,376 ) 7,333
(50,565 ) Net premiums written 278,042 64,117 255,800 74,113
— 672,072 279,751 43,790 281,568 — 605,109 Change in unearned
premiums (13,492 ) (25,641 ) (50,362 ) (8,995 ) — (98,490 )
(58,023 ) (11,330 ) (69,753 ) — (139,106 )
Net premiums
earned 264,550 38,476
205,438 65,118 —
573,582 221,728 32,460
211,815 — 466,003
Underwriting deductions Losses and loss expenses 123,405 —
95,970 46,771 — 266,146 77,688 (3,033 ) 84,090 — 158,745 Policy
acquisition costs 43,826 3,844 47,659 9,617 (521 ) 104,425 31,125
3,056 45,593 (821 ) 78,953 General and administrative expenses
18,781 3,526 35,555 8,923 16,178 82,963 17,040 3,780 34,173 18,849
73,842 Share compensation expenses 2,396 150 3,024
494 3,178 9,242 2,336 161
2,862 2,982 8,341
Total underwriting
deductions 188,408 7,520
182,208 65,805 18,835
462,776 128,189 3,964
166,718 21,010 319,881
Underwriting income (loss) 76,142
30,956 23,230 (687 ) (18,835
) 110,806 93,539 28,496 45,097
(21,010 ) 146,122 Net investment income
20,080 1,754 6,406 5,723 (355 ) 33,608 16,265 829 4,671 (479 )
21,286 Other insurance related
income (loss)
434 3,755 40 276 (1,357 ) 3,148 545 6,005 258 (1,997 ) 4,811
Finance expenses (3,573 ) (2,591 ) (87 ) — (11,484 ) (17,735
) (3,670 ) (971 ) (68 ) (11,417 ) (16,126 )
Operating income
(loss) before taxes, income from operating affiliates and (income)
attributable to operating affiliate investors 93,083
33,874 29,589 5,312 (32,031 )
129,827 106,679 34,359 49,958
(34,903 ) 156,093 Tax (expense) benefit (2,745
) — (2,262 ) 3,734 (1,276 ) (2,549 ) (460 ) — (1,364 ) 433 (1,391 )
Income from operating affiliates — 4,104 — — — 4,104 — 4,892 — —
4,892 (Income) attributable to operating affiliate investors —
(30,879 ) — — — (30,879 ) —
(25,316 ) — — (25,316 )
Net operating income
(loss) (a) 90,338 7,099 27,327
9,046 (33,307 ) 100,503 106,219
13,935 48,594 (34,470 ) 134,278
Net operating (income) attributable to noncontrolling interest —
(2,156 ) — — — (2,156 ) — (2,094
) — — (2,094 )
Net operating income (loss)
available (attributable) to Validus 90,338
4,943 27,327 9,046
(33,307 ) 98,347 106,219
11,841 48,594 (34,470 )
132,184
Net income (loss) available
(attributable) to Validus 76,113 5,992
18,604 (1,689 ) (35,007
) 64,013 124,255 14,968
52,732 (38,588 ) 153,367
Notes:
(a) Net operating income (loss), a non-GAAP financial measure,
is defined as net income (loss) excluding net realized and change
in unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliate and non-recurring items. This measure focuses on the
underlying fundamentals of our operations without the influence of
gains (losses) from the sale of investments, translation of
non-U.S.$ currencies and non-recurring items. Gains (losses) from
the sale of investments are driven by the timing of the disposition
of investments, not by our operating performance. Gains (losses)
arising from translation of non-U.S.$ denominated balances are
unrelated to our underlying business. Net operating income (loss)
available (attributable) to Validus is defined as above and
includes income (loss) from noncontrolling interests.
(b) During the first quarter of 2015, certain intercompany
reinsurance transactions were presented on a net basis for
segmental reporting purposes. As a result, gross premiums written
and reinsurance premiums ceded for the Validus Re segment and
Corporate & Eliminations were reduced by $9,013 for the three
months ended June 30, 2014 for comparative purposes. There was no
impact to total gross premiums written and reinsurance premiums
ceded on a consolidated basis.
Validus Holdings, Ltd.
Consolidated Segment Operating Income
(Loss)
For the six
months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Six Months Ended June 30, 2015 Six
Months Ended June 30, 2014 Validus Re
AlphaCat Talbot Western World
Corporate and Eliminations Total
Validus Re AlphaCat Talbot
Corporate and Eliminations (b) Total
Underwriting income Gross premiums written 1,008,107 166,681
563,123 136,501 (27,946 ) 1,846,466 967,436 128,137 608,639 (36,547
) 1,667,665 Reinsurance premiums ceded (132,149 ) (4,538 ) (128,321
) (8,674 ) 27,946 (245,736 ) (151,339 ) (3,700 ) (126,981 )
36,547 (245,473 ) Net premiums written 875,958 162,143
434,802 127,827 — 1,600,730 816,097 124,437 481,658 — 1,422,192
Change in unearned premiums (358,320 ) (89,472 ) (6,775 ) 5,173
— (449,394 ) (355,983 ) (61,294 ) (55,955 ) —
(473,232 )
Net premiums earned 517,638
72,671 428,027 133,000
— 1,151,336 460,114
63,143 425,703 —
948,960 Underwriting deductions Losses
and loss expenses 236,533 (844 ) 174,098 97,288 — 507,075 145,843
(10,893 ) 186,466 — 321,416 Policy acquisition costs 85,920 7,504
96,763 13,896 (1,022 ) 203,061 70,370 6,036 90,521 (2,325 ) 164,602
General and administrative expenses 38,290 7,528 72,049 19,550
30,574 167,991 35,235 7,908 69,322 35,822 148,287 Share
compensation expenses 4,974 299 5,981 971
6,071 18,296 4,544 151 5,444
5,349 15,488
Total underwriting
deductions 365,717 14,487
348,891 131,705 35,623
896,423 255,992 3,202
351,753 38,846 649,793
Underwriting income (loss) 151,921
58,184 79,136 1,295 (35,623 )
254,913 204,122 59,941 73,950
(38,846 ) 299,167 Net investment income
38,332 3,339 12,711 11,026 (779 ) 64,629 34,540 1,709 9,357 (958 )
44,648 Other insurance related
income (loss)
749 9,526 94 539 (2,928 ) 7,980 1,522 15,502 275 (4,451 ) 12,848
Finance expenses (7,444 ) (7,107 ) (174 ) — (22,862 )
(37,587 ) (7,509 ) (1,654 ) (94 ) (22,769 ) (32,026 )
Operating
income (loss) before taxes, income from operating affiliates and
(income) attributable to operating affiliate investors
183,558 63,942 91,767 12,860
(62,192 ) 289,935 232,675 75,498
83,488 (67,024 ) 324,637 Tax (expense)
benefit (865 ) — (3,145 ) 11 (1,115 ) (5,114 ) 118 — (1,234 ) (235
) (1,351 ) Income from operating affiliates — 6,557 — — — 6,557 —
9,819 — — 9,819 (Income) attributable to operating affiliate
investors — (54,085 ) — — — (54,085 ) —
(57,026 ) — — (57,026 )
Net operating
income (loss) (a) 182,693 16,414 88,622
12,871 (63,307 ) 237,293 232,793
28,291 82,254 (67,259 ) 276,079
Net operating (income) attributable to noncontrolling interest —
(6,110 ) — — — (6,110 ) — (3,598
) — — (3,598 )
Net operating income (loss)
available (attributable) to Validus 182,693
10,304 88,622 12,871
(63,307 ) 231,183 232,793
24,693 82,254 (67,259 )
272,481
Net income (loss) available
(attributable) to Validus 186,879 13,759
88,196 11,617 (63,027
) 237,424 265,484 32,950
88,888 (71,567 ) 315,755
Notes:
(a) Net operating income (loss), a non-GAAP financial measure,
is defined as net income (loss) excluding net realized and change
in unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliate and non-recurring items. This measure focuses on the
underlying fundamentals of our operations without the influence of
gains (losses) from the sale of investments, translation of
non-U.S.$ currencies, and non-recurring items. Gains (losses) from
the sale of investments are driven by the timing of the disposition
of investments, not by our operating performance. Gains (losses)
arising from translation of non-U.S.$ denominated balances are
unrelated to our underlying business. Net operating income (loss)
available (attributable) to Validus is defined as above and
includes income (loss) from noncontrolling interests.
(b) During the first quarter of 2015, certain intercompany
reinsurance transactions were presented on a net basis for
segmental reporting purposes. As a result, gross premiums written
and reinsurance premiums ceded for the Validus Re segment and
Corporate & Eliminations were reduced by $21,836 for the six
months ended June 30, 2014 for comparative purposes. There was no
impact to total gross premiums written and reinsurance premiums
ceded on a consolidated basis.
Validus Holdings, Ltd.
Non-GAAP Financial Measures
Reconciliation
Net Operating Income available to Validus,
Net Operating Income per share available to Validus and Annualized
Net OperatingReturn on Average Equity
For the three and
six months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended Six Months
Ended June 30, June 30, June 30,
June 30, 2015 2014
2015 2014 Net income available to
Validus $ 64,013 $ 153,367 $ 237,424 $ 315,755 Adjustments for:
Net realized (gains) on investments (2,244 ) (7,858 ) (6,413 )
(11,598 ) Change in net unrealized losses (gains) on investments
17,530 (45,427 ) (54,674 ) (101,120 ) (Income) from investment
affiliate (284 ) (779 ) (3,060 ) (6,127 ) Foreign exchange losses
(gains) 3,236 (3,158 ) 6,787 3,320 Other loss (income) 608 (424 )
608 (6,217 ) Transaction expenses (a) — 3,252 — 3,252 Net income
attributable to noncontrolling interest 15,488 33,211
50,511 75,216
Net operating income available to
Validus 98,347 132,184 231,183 272,481 Less: Dividends and
distributions declared on outstanding warrants (1,081 )
(1,552 ) (2,486 ) (3,104 )
Net operating
income available to Validus, adjusted $ 97,266 $ 130,632
$ 228,697 $ 269,377
Net income per
share available to Validus - diluted $ 0.73 $ 1.61 $ 2.72 $
3.27 Adjustments for: Net realized (gains) on investments (0.03 )
(0.08 ) (0.07 ) (0.12 ) Change in net unrealized losses (gains) on
investments 0.20 (0.48 ) (0.63 ) (1.05 ) (Income) from investment
affiliate — (0.01 ) (0.04 ) (0.06 ) Foreign exchange losses (gains)
0.04 (0.03 ) 0.08 0.04 Other loss (income) 0.01 — — (0.07 )
Transaction expenses (a) — 0.03 — 0.03 Net income attributable to
noncontrolling interest 0.18 0.35
0.58 0.78
Net operating income per
share available to Validus - diluted $ 1.13 $ 1.39
$ 2.64 $ 2.82
Weighted average
number of common shares and common share equivalents 87,313,154
95,276,836 87,448,142 96,538,178
Average shareholders'
equity available to Validus $ 3,670,020 $ 3,713,085 $ 3,642,666
$ 3,710,088
Annualized net operating return on average
equity 10.7 % 14.2 % 12.7 % 14.7 %
Validus Holdings, Ltd.
Non-GAAP Financial Measures
Reconciliation
Book Value per Common Share, Book Value
per Diluted Common Share and Book Value per Diluted Common Share
plusAccumulated Dividends
As at
June 30, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
As at June 30, 2015 Equity Amount
Shares Exercise Price Book
Value Per Share Book value per common share Total
shareholders' equity available to Validus $ 3,656,931 83,295,795 $
43.90
Tangible book value per common share 40.05
Book value per diluted common share Total
shareholders' equity available to Validus 3,656,931 83,295,795
Assumed exercise of outstanding warrants 59,506 3,377,320 $ 17.62
Assumed exercise of outstanding stock options 3,040 119,377 $ 25.46
Unvested restricted shares — 2,980,925
Book value per diluted common share $ 3,719,477
89,773,417 $ 41.43 Adjustment for accumulated
dividends 9.52
Book value per diluted common share plus
accumulated dividends $ 50.95
Tangible book value per
diluted common share 37.86
As at December 31,
2014 Equity Amount Shares Exercise Price
Book Value Per Share Book value per common share
Total shareholders' equity available to Validus $ 3,587,958
83,869,845 $ 42.78
Tangible book value per common
share 38.93
Book value per diluted common share
Total shareholders' equity available to Validus 3,587,958
83,869,845 Assumed exercise of outstanding warrants 90,950
5,174,114 $ 17.58 Assumed exercise of outstanding stock options
20,581 1,160,057 $ 17.74 Unvested restricted shares —
3,068,564
Book value per diluted common share
$ 3,699,489 93,272,580 $ 39.66 Adjustment for
accumulated dividends 8.88
Book value per diluted common share
plus accumulated dividends $ 48.54
Tangible book
value per diluted common share 36.20
Cautionary Note Regarding Forward-Looking Statements
This press release may include forward-looking statements, both
with respect to the Company and its industry, that reflect our
current views with respect to future events and financial
performance. Statements that include the words "expect", "intend",
"plan", "believe", "project", "anticipate", "will", "may" and
similar statements of a future or forward-looking nature identify
forward-looking statements. All forward-looking statements address
matters that involve risks and uncertainties, many of which are
beyond the Company's control. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in such statements and, therefore,
you should not place undue reliance on any such statements. We
believe that these factors include, but are not limited to, the
following: 1) unpredictability and severity of catastrophic events;
2) rating agency actions; 3) adequacy of Validus' risk management
and loss limitation methods; 4) cyclicality of demand and pricing
in the insurance and reinsurance markets; 5) statutory or
regulatory developments including tax policy, reinsurance and other
regulatory matters; 6) Validus' ability to implement its business
strategy during "soft" as well as "hard" markets; 7) adequacy of
Validus' loss reserves; 8) continued availability of capital and
financing; 9) retention of key personnel; 10) competition; 11)
potential loss of business from one or more major insurance or
reinsurance brokers; 12) Validus' ability to implement,
successfully and on a timely basis, complex infrastructure,
distribution capabilities, systems, procedures and internal
controls, and to develop accurate actuarial data to support the
business and regulatory and reporting requirements; 13) general
economic and market conditions (including inflation, volatility in
the credit and capital markets, interest rates and foreign currency
exchange rates); 14) the integration of businesses Validus may
acquire or new business ventures Validus may start; 15) the effect
on Validus' investment portfolios of changing financial market
conditions including inflation, interest rates, liquidity and other
factors; 16) acts of terrorism or outbreak of war; and 17)
availability of reinsurance and retrocessional coverage, as well as
management's response to any of the aforementioned factors.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in Validus' most recent reports
on Form 10-K and Form 10-Q and other documents of the Company on
file with or furnished to the U.S. Securities and Exchange
Commission (“SEC”). Any forward-looking statements made in this
press release are qualified by these cautionary statements, and
there can be no assurance that the actual results or developments
anticipated by Validus will be realized or, even if substantially
realized, that they will have the expected consequences to, or
effects on, Validus or its business or operations. Except as
required by law, the Company undertakes no obligation to update
publicly or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise.
Non-GAAP Financial Measures
In presenting the Company's results, management has included and
discussed certain schedules containing net operating income (loss),
net operating income (loss) available (attributable) to Validus,
net operating income (loss) per share, underwriting income (loss),
annualized net operating return on average equity, book value per
diluted common share and book value per diluted common share plus
accumulated dividends that are not calculated under standards or
rules that comprise U.S. GAAP. Such measures are referred to as
non-GAAP. Non-GAAP measures may be defined or calculated
differently by other companies. These measures should not be viewed
as a substitute for those determined in accordance with U.S. GAAP.
A reconciliation of net operating income (loss) to net income
(loss), the most comparable U.S. GAAP financial measure, is
presented in the section above entitled “Net Operating Income
available to Validus, Net Operating Income per share available to
Validus and Annualized Net Operating Return on Average Equity”. A
reconciliation of underwriting income and operating income to net
income, the most comparable U.S. GAAP financial measure, is
presented in the “Consolidated Statements of Operations” above.
Underwriting income indicates the performance of the Company's
core underwriting function, excluding revenues and expenses such as
net investment income (loss), other insurance related income
(loss), finance expenses, net realized and change in unrealized
gains (losses) on investments, foreign exchange gains
(losses), other income (loss) and transaction expenses. The Company
believes the reporting of underwriting income enhances the
understanding of our results by highlighting the underlying
profitability of the Company's core insurance and reinsurance
business. Underwriting profitability is influenced significantly by
earned premium growth, adequacy of the Company's pricing and loss
frequency and severity.
Underwriting profitability over time is also influenced by the
Company's underwriting discipline, which seeks to manage exposure
to loss through favorable risk selection and diversification, its
management of claims, its use of reinsurance and its ability to
manage its expense ratio, which it accomplishes through its
management of acquisition costs and other underwriting expenses.
The Company believes that underwriting income provides investors
with a valuable measure of profitability derived from underwriting
activities.
Annualized net operating return on average equity is presented
in the section above entitled “Net Operating Income available to
Validus, Net Operating Income per share available to Validus and
Annualized Net Operating Return on Average Equity.” A
reconciliation of book value per diluted common share and book
value per diluted common share plus accumulated dividends to book
value per common share, the most comparable U.S. GAAP financial
measure, is presented in the section above entitled “Book Value per
Common Share, Book Value per Diluted Common Share and Book Value
per Diluted Common Share plus Accumulated Dividends.” Net operating
income (loss) is calculated based on net income (loss) excluding
net realized gains (losses) on investments, change in net
unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliates and non-recurring items. Realized gains (losses) from
the sale of investments are driven by the timing of the disposition
of investments, not by our operating performance. Gains (losses)
arising from translation of non-US$ denominated balances are
unrelated to our underlying business. Net operating income (loss)
available (attributable) to Validus is defined as net operating
income (loss) as defined above, but excluding income (loss)
available (attributable) to noncontrolling interest.
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Investors:Validus Holdings,
Ltd.Investor.Relations@validusholdings.com+1-441-278-9000orMedia:Brunswick
GroupRadina Russell / Josh Gerth+1-212-333-3810
Validus Holdings, Ltd. (delisted) (NYSE:VR)
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Validus Holdings, Ltd. (delisted) (NYSE:VR)
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