Exhibit 99.1
Contacts: | ||
| Investors: | Media: | |
| Validus Holdings, Ltd. | Jamie Tully/Jonathan Doorley | |
| Jon Levenson, Senior Vice President | Sand Verbinnen & Co. | |
| +1-441-278-9000 | +1-212-687-8080 | |
Jon.Levenson@Validusre.bm | ||
| Roddy Watt / Tony Friend | ||
| College Hill | ||
| +44 (0) 207-457-2020 |
VALIDUS ANNOUNCES FOURTH QUARTER NET OPERATING INCOME OF $50.9 MILLION
AND NET INCOME OF $37.0 MILLION
AND NET INCOME OF $37.0 MILLION
Diluted Book Value Per Share of $23.78 at December 31, 2008
Hamilton, Bermuda, February 12, 2009— Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR) today reported net income for the quarter ended December 31, 2008 of $37.0 million, or $0.47 per diluted common share, compared with net income of $139.0 million, or $1.77 per diluted common share, for the quarter ended December 31, 2007. Net income for the year ended December 31, 2008 was $53.1 million, or $0.61 per diluted share, compared with $403.0 million, or $5.95 per diluted common share, for the corresponding period in 2007.
Net operating income for the fourth quarter of 2008 was $50.9 million, or $0.65 per diluted share, compared with net operating income of $131.5 million, or $1.68 per diluted common share, for the quarter ended December 31, 2007. Net operating income for the year ended December 31, 2008 was $175.1 million, or $2.22 per diluted common share, compared with $388.2 million, or $5.73 per diluted common share, for the year ended December 31, 2007. Operating results of Talbot have been included in the consolidated financial statements from the acquisition date of July 2, 2007.
Net operating income, a non-GAAP financial measure, is defined as net income excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items. Reconciliations of this measure to net income, the most directly comparable GAAP measure, are presented at the end of this release.
Commenting on fourth quarter and full year 2008 results and 2009 business conditions, Validus’ Chief Executive Officer Ed Noonan stated: “2008 was an extraordinary test of our enterprise risk management and we are very pleased with our success in such troubled times. We absorbed the worst financial markets in recent memory, as well as one of the most costly natural disasters in history, and still generated $98.4 million of underwriting income and $53.1 million in net income for our shareholders.
Our ability to protect our capital has positioned us to benefit strongly from the improving pricing
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
1
environment we see in our core short-tail lines of business. We continue to expand our business platform and see strong growth opportunities arising from dislocation among competitors.
Having grown our gross premium by 26% at January 1 in our Validus Re segment, due to rate increases coupled with modest exposure growth, we expect to see rates continue to increase over the balance of 2009.”
January 1, 2009 Reinsurance Renewals — Validus Re Segment
During the January 1 renewal season, the Validus Re segment underwrote $366.7 million in gross premiums written. The renewal data does not include Talbot’s operations as its business is distributed evenly throughout the year.
Below is a table outlining the Validus Re segment’s January 1, 2009 reinsurance renewals.
| January 1, 2009 Gross Premiums Written — Validus Re segment (unaudited) | ||||||||||||||||||||
| U.S. | International | |||||||||||||||||||
| Property | Property | Marine | Specialty | Total | ||||||||||||||||
| (U.S. $ millions) | ||||||||||||||||||||
2009 | $ | 138.2 | $ | 82.9 | $ | 105.8 | $ | 39.8 | $ | 366.7 | ||||||||||
2008 | 111.2 | 71.9 | 73.2 | 34.7 | 291.0 | |||||||||||||||
% Increase | 24.3 | % | 15.2 | % | 44.5 | % | 14.7 | % | 26.0 | % | ||||||||||
Fourth quarter 2008 results
Highlights for the fourth quarter include the following:
| • | Gross premiums written of $191.7 million compared to $191.0 million for the same quarter last year; | ||
| • | Net premiums earned of $316.0 million compared to $318.0 million for the same quarter last year; | ||
| • | Combined ratio of 89.5% which included $19.7 million of favorable prior year loss reserve development, benefiting the loss ratio by 6.2 percentage points, and losses and loss expenses of $77.2 million due to previously disclosed development on Hurricane Ike, adding 24.4 percentage points to the loss ratio; | ||
| • | Net income of $37.0 million, a decrease of $102.0 million from net income of $139.0 million, reflecting losses net of reinstatement premiums of $70.1 million on development on Hurricane Ike, reduced gains on the investment portfolio of $10.3 million, and an increase in foreign exchange losses of $11.0 million; and | ||
| • | Annualized return on average equity of 7.7% and annualized net operating return on average equity of 10.6%. |
Highlights for the year ended December 31, 2008 include the following:
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
2
| • | Gross premiums written increased by 37.6% to $1.36 billion from $988.6 million, due to the addition of Talbot for a complete year which added $709.0 million for 2008 compared to $286.5 million for 2007, offset by reduced gross premiums written in the Validus Re segment; | ||
| • | Net premiums earned increased by 46.4% to $1.26 billion from $858.1 million, due primarily to the addition of Talbot for a full year which added $603.0 million of net premiums earned in 2008 compared to $299.0 million in 2007; | ||
| • | Combined ratio of 92.2% which included $69.7 million of favorable prior year loss reserve development, benefitting the loss ratio by 5.5 percentage points, and losses and loss expenses of $282.7 million on Hurricanes Ike and Gustav, adding 22.5 percentage points to the loss ratio; | ||
| • | Investment income increased by 24.2% to $139.5 million from $112.3 million primarily due to higher investment balances resulting from funds from operations and the addition of Talbot; | ||
| • | Net income of $53.1 million, a decrease of $349.9 million, reflecting losses net of reinstatement premiums of $255.9 million on Hurricanes Ike and Gustav, increased losses on the investment portfolio of $95.3 million and an increase in foreign exchange losses of $56.1 million; and | ||
| • | Annualized return on average equity of 2.7% and annualized net operating return on average equity of 8.9%. |
Net impact of Hurricanes Ike and Gustav
The Company recorded $70.1 million of net negative impact from Hurricane Ike in the fourth quarter of 2008. Net negative impact includes the sum of estimates of net claims and claim expenses incurred, and earned reinstatement premiums assumed and ceded. These amounts are based on management’s estimates following a review of the Company’s potential exposure and discussions with certain clients and brokers. Given the magnitude and recent occurrence of these events, and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from these events and the Company’s actual ultimate net losses from these events may vary materially from these estimates.
See the supplemental financial data below for additional information detailing the net negative impact from Hurricanes Ike and Gustav on the Company’s consolidated financial statements and its Validus Re and Talbot segment results for the fourth quarter and full year periods ended December 31, 2008.
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
3
| Hurricane Ike | Estimated Net | Net | Total Estimated | |||||||||
| Losses and | Reinstatement | Effect | ||||||||||
| Loss Expenses | Premiums | on Net Income (Loss) | ||||||||||
| (U.S. $ millions) | ||||||||||||
As of September 30, 2008 | ||||||||||||
Validus Re | ||||||||||||
| Property | 120.3 | (13.9 | ) | 106.4 | ||||||||
| Marine | 36.8 | (4.1 | ) | 32.7 | ||||||||
| Specialty | 0.1 | — | 0.1 | |||||||||
| All lines | 157.2 | (18.0 | ) | 139.2 | ||||||||
Talbot | ||||||||||||
| Property | 15.2 | (0.4 | ) | 14.8 | ||||||||
| Marine | 10.5 | — | 10.5 | |||||||||
| Specialty | 0.5 | — | 0.5 | |||||||||
| All lines | 26.2 | (0.4 | ) | 25.8 | ||||||||
Total | ||||||||||||
| Property | 135.4 | (14.3 | ) | 121.2 | ||||||||
| Marine | 47.3 | (4.1 | ) | 43.2 | ||||||||
| Specialty | 0.7 | — | 0.7 | |||||||||
| All lines | 183.4 | (18.4 | ) | 165.0 | ||||||||
Change in Estimate | ||||||||||||
Validus Re | ||||||||||||
| Property | 38.2 | (4.2 | ) | 34.0 | ||||||||
| Marine | 20.8 | (2.4 | ) | 18.4 | ||||||||
| Specialty | (0.1 | ) | — | (0.1 | ) | |||||||
| All lines | 58.9 | (6.6 | ) | 52.3 | ||||||||
Talbot | ||||||||||||
| Property | 16.4 | (0.3 | ) | 16.1 | ||||||||
| Marine | 1.9 | (0.2 | ) | 1.7 | ||||||||
| Specialty | — | — | — | |||||||||
| All lines | 18.3 | (0.5 | ) | 17.8 | ||||||||
Total | ||||||||||||
| Property | 54.6 | (4.5 | ) | 50.1 | ||||||||
| Marine | 22.7 | (2.6 | ) | 20.1 | ||||||||
| Specialty | (0.1 | ) | — | (0.1 | ) | |||||||
| All lines | 77.2 | (7.1 | ) | 70.1 | ||||||||
As of December 31, 2008 | ||||||||||||
Validus Re | ||||||||||||
| Property | 158.2 | (18.1 | ) | 140.4 | ||||||||
| Marine | 57.6 | (6.5 | ) | 51.1 | ||||||||
| Specialty | — | — | — | |||||||||
| All lines | 216.1 | (24.6 | ) | 191.6 | ||||||||
Talbot | ||||||||||||
| Property | 31.5 | (0.7 | ) | 30.8 | ||||||||
| Marine | 12.4 | (0.2 | ) | 12.2 | ||||||||
| Specialty | 0.5 | — | 0.5 | |||||||||
| All lines | 44.4 | (0.9 | ) | 43.5 | ||||||||
Total | ||||||||||||
| Property | 190.0 | (18.7 | ) | 171.3 | ||||||||
| Marine | 70.0 | (6.7 | ) | 63.3 | ||||||||
| Specialty | 0.5 | — | 0.5 | |||||||||
| All lines | 260.6 | (25.5 | ) | 235.1 | ||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
4
| Hurricane Gustav | Estimated Net | Total Estimated | ||||||||||
| Losses and | Net Reinstatement | Effect | ||||||||||
| Loss Expenses | Premiums | on Net Income (Loss) | ||||||||||
| (U.S. $ millions) | ||||||||||||
As of September 30, 2008 and December 31, 2008 | ||||||||||||
Validus Re | ||||||||||||
| Property | 13.9 | (1.3 | ) | 12.6 | ||||||||
| Marine | 1.5 | — | 1.5 | |||||||||
| Specialty | — | — | — | |||||||||
| All lines | 15.4 | (1.3 | ) | 14.1 | ||||||||
Talbot | ||||||||||||
| Property | 3.7 | — | 3.7 | |||||||||
| Marine | 2.5 | — | 2.5 | |||||||||
| Specialty | 0.5 | — | 0.5 | |||||||||
| All lines | 6.7 | — | 6.7 | |||||||||
Total | ||||||||||||
| Property | 17.6 | (1.3 | ) | 16.3 | ||||||||
| Marine | 4.0 | — | 4.0 | |||||||||
| Specialty | 0.5 | — | 0.5 | |||||||||
| All lines | 22.1 | (1.3 | ) | 20.8 | ||||||||
Validus Re Segment Results
Gross premiums written during the fourth quarter of 2008 were $43.9 million, a decrease of $3.6 million from $47.5 million in the fourth quarter of 2007. Gross premiums written comprised $21.0 million of property premiums, $5.8 million of marine premiums and $17.1 million of specialty premiums compared to $16.3 million of property premiums, $18.1 million of marine premiums and $13.1 million of specialty premiums in the fourth quarter of 2007.
Net premiums earned for the fourth quarter of 2008 were $164.4 million compared to $162.5 million for the fourth quarter of 2007, an increase of $1.9 million or 1.2%.
The combined ratio increased to 81.2% from 48.9% in the fourth quarter of 2007. This increase was primarily due to development on losses on Hurricane Ike in the fourth quarter. Losses related to Hurricane Ike represented 35.8 percentage points on the loss ratio. The loss ratio of 58.4% also included favorable prior year loss reserve development of $6.1 million (representing 3.7 percentage points on the loss ratio).
Gross premiums written for the year ended December 31, 2008 were $687.8 million, a decrease of $14.3 million from $702.1 million in 2007. Gross premiums written comprised $493.0 million of property premiums, $117.7 million of marine premiums and $77.1 million of specialty premiums compared to $498.4 million of property premiums, $136.7 million of marine premiums and $67.0 million of specialty premiums for the year ended December 31, 2007. The decreases in property and marine premiums written were primarily driven by reduced market pricing, increased client retentions and reduced participation on certain property proportional treaties, partially offset by the benefit of reinstatement premiums resulting from changes in Hurricanes Ike and Gustav loss estimates.
Net premiums earned for the year ended December 31, 2008 were $653.5 million compared to $559.0 million in 2007, an increase of $94.5 million or 16.9%. The increase in net premiums earned reflects the benefit of earned premiums written in 2007 and the benefit of reinstatement premiums resulting from Hurricanes Ike and Gustav.
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
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5
The combined ratio increased to 86.0% from 50.3% for the year ended 2007. This increase was primarily due to losses on Hurricanes Ike and Gustav. Losses related to Hurricanes Ike and Gustav represented 35.4 percentage points of the loss ratio. The loss ratio of 64.4% also included favorable prior year loss reserve development of $15.1 million (representing 2.3 percentage points on the loss ratio).
Talbot Segment Results
Gross premiums written during the fourth quarter of 2008 were $152.7 million, compared to $143.5 million for the fourth quarter of 2007. Gross premiums written were comprised of $29.2 million of property premiums, $56.9 million of marine premiums and $66.6 million of specialty premiums compared to $20.6 million of property premiums, $59.0 million of marine premiums and $63.9 million of specialty premiums in the fourth quarter of 2007.
Net premiums earned for the fourth quarter of 2008 were $151.7 million compared to $155.6 million for the fourth quarter of 2007, a decrease of $3.9 million or 2.5%.
The combined ratio increased to 94.5% from 74.0% in the fourth quarter of 2007. This increase was primarily due to the increase in estimates on losses on Hurricane Ike. Losses related to Hurricane Ike represented 12.1 percentage points of the loss ratio. The loss ratio of 63.0% included favorable prior year loss reserve development of $13.6 million (representing 8.9 percentage points on the loss ratio).
Gross premiums written during the year ended December 31, 2008 were $709.0 million, compared to $286.5 million for the year ended December 31, 2007. The increase was due to 2008 being the first full year of operations since the acquisition of Talbot at the beginning of the third quarter of 2007. Gross premiums written for the year ended December 31, 2008 were comprised of $152.1 million of property premiums, $287.7 million of marine premiums and $269.2 million of specialty premiums.
Net premiums earned for the year ended December 31, 2008 were $603.0 million compared to $299.1 million for the year ended December 31, 2007. The increase was due to the acquisition of Talbot at the beginning of the third quarter of 2007 as noted above.
The combined ratio increased to 93.3% from 74.6% in 2007. This increase was primarily due to losses on Hurricanes Ike and Gustav. Losses related to Hurricanes Ike and Gustav represented 8.5 percentage points of the loss ratio. The loss ratio of 58.3% included favorable prior year loss reserve development of $54.7 million (representing 9.1 percentage points on the loss ratio). In 2007, there was $50.6 million of favorable prior period loss development.
Corporate Segment Results
Corporate results are comprised of executive and board expenses, internal and external audit expenses, interest and costs incurred in connection with the Company’s junior subordinated deferrable debentures and other costs relating to the Company as a whole. General and administrative expenses for the three months ended December 31, 2008 were $2.6 million compared to $2.2 million for the three months ended December 31, 2007. Stock compensation expenses for the three months ended December 31, 2008 were $3.6 million compared to $4.0 million for the three months ended December 31, 2007.
General and administrative expenses for the year ended December 31, 2008 were $17.9 million compared to $17.5 million for the year ended December 31, 2007. Stock compensation expenses for the year ended December 31, 2008 were $15.6 million compared to $10.5 million for the year
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
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6
ended December 31, 2007, which primarily reflects the added cost from the continued amortization of stock issuances arising from the Employee Seller shares issued to Talbot employees as part of the acquisition.
Investments
Net investment income increased in the year ended December 31, 2008 compared to the year ended December 31, 2007 due to higher investment balances resulting from the addition of Talbot and from funds generated from operations.
Investment income was $30.7 million in the fourth quarter of 2008 compared to $37.5 million in the fourth quarter of 2007. Net investment income decreased as a result of reduced market yields. Net realized gains on investments were $6.8 million, compared to $0.8 million of net realized gains in the fourth quarter of 2007. Investment income was $139.5 million in the year ended December 31, 2008 compared to $112.3 million in the year ended December 31, 2007, an increase of 24.2%, or $27.2 million. Net realized losses on investments were $1.6 million, compared to $1.6 million of net realized gains in the year ended December 31, 2007.
The Company recorded $7.1 million of net unrealized losses in the three months ended December 31, 2008 and $79.7 million in the year ended December 31, 2008. The Company recorded $9.3 million of net unrealized gains in the three months ended December 31, 2007 and $12.4 million of net unrealized gains in the year ended December 31, 2007. The net unrealized losses in the three months and year ended December 31, 2008 resulted primarily from market value declines due to spread widening as a result of volatility in the financial markets. At December 31, 2008, the unrealized loss on investments was $101.0 million, which represented 3.1% of total investments and cash.
Finance Expenses
Finance expenses for the quarter ended December 31, 2008 were $8.5 million, decreasing from $25.4 million in the quarter ended December 31, 2007. Finance expenses consist principally of interest on the Company’s junior subordinated deferrable debentures and third-party capital costs for Talbot. The decrease primarily relates to the reduction in the amount of outstanding debt and termination of third-party capital for Talbot commencing with the 2008 year of account.
Finance expenses for the year ended December 31, 2008, were $57.3 million, increasing from $51.8 million in the year ended December 31, 2007. The finance expense for 2008 from the Talbot segment is $27.4 million compared to $26.1 million in 2007. This is reflective of lower quarterly charges in 2008 as the profits attributable to third party capital for Talbot declines, offset by the fact that 2008 contains four quarters of charges, compared to two quarters in 2007, since Talbot was acquired on July 2, 2007.
Shareholders’ Equity and Capitalization
At December 31, 2008, shareholders’ equity was $1.94 billion. Diluted book value per common share was $23.78 compared to $24.00 at December 31, 2007. Diluted book value per common share is a non-GAAP financial measure. A reconciliation of this measure to shareholders’ equity is presented at the end of this release.
Total capitalization at December 31, 2008 was $2.24 billion, including $304.3 million of junior subordinated deferrable debentures.
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
7
Conference Call
The Company will host a conference call for analysts and investors on February 13, 2009 at 10:00 AM (Eastern) to discuss the fourth quarter and full year 2008 financial results and related matters. The conference call can be accessed via telephone by dialing 1-800-860-2442 (toll-free U.S.) or 1-412-858-4600 (international). 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 March 2, 2009 by dialing 1-877-344-7529 and entering the pass code 426285#.
This conference call will also be available through a live audio webcast accessible through the Investor Information section of our website located at www.validusre.bm. In addition, a financial supplement relating to our financial results for the quarter ended December 31, 2008 is available in the Investor Information section of our website.
About Validus Holdings, Ltd.
Validus Holdings, Ltd. is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”). Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.
Validus Re is rated “A-” (“Excellent”) by A.M. Best. For more information about Validus, visit our website at www.validusre.bm.
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
8
Validus Holdings, Ltd.
Consolidated Balance Sheets
As at December 31, 2008 and December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
As at December 31, 2008 and December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
| December 31, | December 31, | |||||||
| 2008 | 2007 | |||||||
Assets | ||||||||
| Fixed maturities, at fair value | $ | 2,454,501 | $ | 2,411,398 | ||||
| Short-term investments, at fair value | 377,036 | 250,623 | ||||||
| Cash and cash equivalents | 449,848 | 444,698 | ||||||
| Total cash and investments | 3,281,385 | 3,106,719 | ||||||
| Premiums receivable | 408,259 | 401,241 | ||||||
| Deferred acquisition costs | 108,156 | 105,562 | ||||||
| Prepaid reinsurance premiums | 22,459 | 22,817 | ||||||
| Securities lending collateral | 98,954 | 164,324 | ||||||
| Loss reserves recoverable | 208,796 | 134,404 | ||||||
| Paid losses recoverable | 1,388 | 7,810 | ||||||
| Net receivable for investments sold | 490 | — | ||||||
| Taxes recoverable | 1,365 | 3,325 | ||||||
| Goodwill and other intangible assets | 147,610 | 151,772 | ||||||
| Accrued investment income | 20,433 | 19,960 | ||||||
| Other assets | 23,185 | 26,290 | ||||||
Total assets | $ | 4,322,480 | $ | 4,144,224 | ||||
Liabilities | ||||||||
| Reserve for losses and loss expenses | $ | 1,305,303 | $ | 926,117 | ||||
| Unearned premiums | 539,450 | 557,344 | ||||||
| Reinsurance balances payables | 33,042 | 36,848 | ||||||
| Securities lending payable | 105,688 | 164,324 | ||||||
| Deferred taxation | 21,779 | 16,663 | ||||||
| Net payable for investments purchased | — | 31,426 | ||||||
| Accounts payable and accrued expenses | 74,184 | 126,702 | ||||||
| Debentures payable | 304,300 | 350,000 | ||||||
Total liabilities | 2,383,746 | 2,209,424 | ||||||
| Commitments and contingent liabilities | ||||||||
Shareholders’ equity | ||||||||
| Ordinary shares | 13,235 | 12,985 | ||||||
| Additional paid-in capital | 1,412,635 | 1,384,604 | ||||||
| Accumulated other comprehensive (loss) income | (7,858 | ) | (49 | ) | ||||
| Retained earnings | 520,722 | 537,260 | ||||||
Total shareholders’ equity | 1,938,734 | 1,934,800 | ||||||
Total liabilities and shareholder’ equity | $ | 4,322,480 | $ | 4,144,224 | ||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
9
Validus Holdings, Ltd.
Consolidated Statements of Operations and Comprehensive Income
For the three months and years ended December 31, 2008 and 2007
(expressed in thousands of U.S. dollars, except share amounts)
For the three months and years ended December 31, 2008 and 2007
(expressed in thousands of U.S. dollars, except share amounts)
| Three months ended | Year ended | |||||||||||||||||||
| December 31, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | Pro Forma 2007 | ||||||||||||||||
Revenues | ||||||||||||||||||||
| Gross premiums written | $ | 191,736 | $ | 190,996 | $ | 1,362,484 | $ | 988,637 | 1,377,948 | |||||||||||
| Reinsurance premiums ceded | (2,722 | ) | (4,566 | ) | (124,160 | ) | (70,210 | ) | (146,833 | ) | ||||||||||
| Net premiums written | 189,014 | 186,430 | 1,238,324 | 918,427 | 1,231,115 | |||||||||||||||
| Change in unearned premiums | 127,017 | 131,601 | 18,194 | (60,348 | ) | (88,201 | ) | |||||||||||||
| Net premiums earned | 316,031 | 318,031 | 1,256,518 | 858,079 | 1,142,914 | |||||||||||||||
| Net investment income | 30,671 | 37,525 | 139,528 | 112,324 | 132,205 | |||||||||||||||
| Realized gain on repurchase of debentures | — | — | 8,752 | — | — | |||||||||||||||
| Net realized gains (losses) on investments | 6,757 | 784 | (1,591 | ) | 1,608 | 378 | ||||||||||||||
| Net unrealized (losses) gains on investments | (7,099 | ) | 9,229 | (79,707 | ) | 12,364 | 12,364 | |||||||||||||
| Other income | 1,598 | 1,971 | 5,264 | 3,301 | 5,466 | |||||||||||||||
| Foreign exchange (losses) gains | (13,554 | ) | (2,515 | ) | (49,397 | ) | 6,696 | 7,878 | ||||||||||||
Total revenues | 334,404 | 365,025 | 1,279,367 | 994,372 | 1,301,205 | |||||||||||||||
Expenses | ||||||||||||||||||||
| Losses and loss expense | 191,576 | 107,567 | 772,154 | 283,993 | 427,207 | |||||||||||||||
| Policy acquisition costs | 61,407 | 53,277 | 234,951 | 134,277 | 195,743 | |||||||||||||||
| General and administrative expenses | 22,809 | 33,676 | 123,948 | 100,765 | 141,360 | |||||||||||||||
| Share compensation expense | 7,279 | 6,135 | 27,097 | 16,189 | 18,524 | |||||||||||||||
| Finance expenses | 8,522 | 25,423 | 57,318 | 51,754 | 77,645 | |||||||||||||||
| Aquiline Termination Fee | 3,000 | |||||||||||||||||||
| Fair value of warrants issued | — | — | — | 2,893 | 2,893 | |||||||||||||||
Total expenses | 291,593 | 226,078 | 1,215,468 | 589,871 | 866,372 | |||||||||||||||
Net income before taxes | 42,811 | 138,947 | 63,899 | 404,501 | 434,833 | |||||||||||||||
| Taxes | 5,796 | (22 | ) | 10,788 | 1,505 | (2,703 | ) | |||||||||||||
Net income | $ | 37,015 | $ | 138,969 | $ | 53,111 | $ | 402,996 | 432,130 | |||||||||||
Comprehensive income | ||||||||||||||||||||
| Foreign currency translation adjustments | (6,330 | ) | 591 | (7,809 | ) | (49 | ) | — | ||||||||||||
Comprehensive income | $ | 30,685 | $ | 139,560 | $ | 45,302 | $ | 402,947 | 432,130 | |||||||||||
Earnings per share | ||||||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||||||
| Basic | 75,404,091 | 74,199,836 | 74,677,903 | 65,068,093 | 72,699,745 | |||||||||||||||
| Diluted | 75,740,546 | 78,415,109 | 75,819,413 | 67,786,673 | 75,714,324 | |||||||||||||||
Basic earnings per share | $ | 0.47 | $ | 1.87 | $ | 0.62 | $ | 6.19 | $ | 5.94 | ||||||||||
Diluted earnings per share | $ | 0.47 | $ | 1.77 | $ | 0.61 | $ | 5.95 | $ | 5.71 | ||||||||||
Cash dividends declared per share | $ | 0.20 | $ | — | $ | 0.80 | $ | — | $ | — | ||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
10
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended December 31, 2008
(expressed in thousands of U.S. dollars, except share amounts)
For the three months ended December 31, 2008
(expressed in thousands of U.S. dollars, except share amounts)
| Three months ended December 31, 2008 | ||||||||||||||||
| Corporate & | ||||||||||||||||
| Validus Re | Talbot | Elimination | Total | |||||||||||||
| Gross premiums written | $ | 43,873 | $ | 152,662 | $ | (4,799 | ) | $ | 191,736 | |||||||
| Reinsurance premiums ceded | (1,696 | ) | (5,825 | ) | 4,799 | (2,722 | ) | |||||||||
| Net premiums written | 42,177 | 146,837 | — | 189,014 | ||||||||||||
| Change in unearned premiums | 122,191 | 4,826 | — | 127,017 | ||||||||||||
| Net premiums earned | 164,368 | 151,663 | — | 316,031 | ||||||||||||
| Losses and loss expense | 95,972 | 95,604 | — | 191,576 | ||||||||||||
| Policy acquisition costs | 28,011 | 33,560 | (164 | ) | 61,407 | |||||||||||
| General and administrative expenses | 7,301 | 12,882 | 2,626 | 22,809 | ||||||||||||
| Stock compensation expenses | 2,197 | 1,436 | 3,646 | 7,279 | ||||||||||||
| Underwriting income | $ | 30,887 | $ | 8,181 | $ | (6,108 | ) | $ | 32,960 | |||||||
| Net investment income | 25,258 | 7,075 | (1,662 | ) | 30,671 | |||||||||||
| Other income | 164 | 1,598 | (164 | ) | 1,598 | |||||||||||
| Finance expenses | (224 | ) | (1,530 | ) | (6,768 | ) | (8,522 | ) | ||||||||
| Operating income before taxes | 56,085 | 15,324 | (14,702 | ) | 56,707 | |||||||||||
| Taxes | 10 | 5,786 | — | 5,796 | ||||||||||||
| Net operating income | $ | 56,075 | $ | 9,538 | $ | (14,702 | ) | $ | 50,911 | |||||||
| Net realized gains on investments | 3,993 | 2,764 | — | 6,757 | ||||||||||||
| Net unrealized (losses) gains on investments | (26,097 | ) | 18,998 | — | (7,099 | ) | ||||||||||
| Foreign exchange losses | (1,054 | ) | (12,500 | ) | — | (13,554 | ) | |||||||||
| Net income | $ | 32,917 | $ | 18,800 | $ | (14,702 | ) | $ | 37,015 | |||||||
| Loss and loss expense ratio | 58.4 | % | 63.0 | % | 60.6 | % | ||||||||||
| Policy acquisition cost ratio | 17.0 | % | 22.1 | % | 19.4 | % | ||||||||||
| General and administrative expense ratio | 5.8 | % | 9.4 | % | 9.5 | % | ||||||||||
| Expense ratio | 22.8 | % | 31.5 | % | 28.9 | % | ||||||||||
| Combined ratio | 81.2 | % | 94.5 | % | 89.5 | % | ||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
11
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
For the three months ended December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
| Three months ended December 31, 2007 | ||||||||||||||||
| Corporate & | ||||||||||||||||
| Validus Re | Talbot | Elimination | Total | |||||||||||||
| Gross premiums written | $ | 47,499 | $ | 143,497 | $ | — | $ | 190,996 | ||||||||
| Reinsurance premiums ceded | (3,813 | ) | (753 | ) | — | (4,566) | ) | |||||||||
| Net premiums written | 43,686 | 142,744 | — | 186,430 | ||||||||||||
| Change in unearned premiums | 118,828 | 12,773 | — | 131,601 | ||||||||||||
| Net premiums earned | 162,514 | 155,517 | — | 318,031 | ||||||||||||
| Losses and loss expense | 48,244 | 59,323 | — | 107,567 | ||||||||||||
| Policy acquisition costs | 22,107 | 31,170 | — | 53,277 | ||||||||||||
| General and administrative expenses | 7,858 | 23,628 | 2,190 | 33,676 | ||||||||||||
| Stock compensation expenses | 1,189 | 978 | 3,968 | 6,135 | ||||||||||||
Underwriting income | $ | 83,116 | $ | 40,418 | $ | (6,158 | ) | $ | 117,376 | |||||||
| Net investment income | 25,039 | 12,446 | 40 | 37,525 | ||||||||||||
| Other income | — | 1,971 | — | 1,971 | ||||||||||||
| Finance expenses | (236 | ) | (17,228 | ) | (7,959 | ) | (25,423) | ) | ||||||||
| Operating income before taxes | 107,919 | 37,607 | (14,077 | ) | 131,449 | |||||||||||
| Taxes | 14 | (36 | ) | — | (22 | ) | ||||||||||
Net operating income | $ | 107,905 | $ | 37,643 | $ | (14,077 | ) | $ | 131,471 | |||||||
| Net realized (losses) gains on investments | (493 | ) | 1,277 | — | 784 | |||||||||||
| Net unrealized gains on investments | 7,221 | 2,008 | — | 9,229 | ||||||||||||
| Foreign exchange losses | (269 | ) | (2,246 | ) | — | (2,515 | ) | |||||||||
Net income | $ | 114,364 | $ | 38,682 | $ | (14,077 | ) | $ | 138,969 | |||||||
| Loss and loss expense ratio | 29.7 | % | 38.1 | % | 33.8 | % | ||||||||||
| Policy acquisition cost ratio | 13.6 | % | 20.1 | % | 16.8 | % | ||||||||||
| General and administrative expense ratio | 5.6 | % | 15.8 | % | 12.5 | % | ||||||||||
Combined ratio | 48.9 | % | 74.0 | % | 63.1 | % | ||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
12
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the year ended December 31, 2008
(expressed in thousands of U.S. dollars, except share amounts)
For the year ended December 31, 2008
(expressed in thousands of U.S. dollars, except share amounts)
| Year ended December 31, 2008 | ||||||||||||||||
| Corporate & | ||||||||||||||||
| Validus Re | Talbot | Elimination | Total | |||||||||||||
| Gross premiums written | $ | 687,771 | $ | 708,996 | $ | (34,283 | ) | $ | 1,362,484 | |||||||
| Reinsurance premiums ceded | (62,933 | ) | (95,510 | ) | 34,283 | (124,160 | ) | |||||||||
| Net premiums written | 624,838 | 613,486 | — | 1,238,324 | ||||||||||||
| Change in unearned premiums | 28,693 | (10,499 | ) | — | 18,194 | |||||||||||
| Net premiums earned | 653,531 | 602,987 | — | 1,256,518 | ||||||||||||
| Losses and loss expense | 420,645 | 351,509 | — | 772,154 | ||||||||||||
| Policy acquisition costs | 100,243 | 135,017 | (309 | ) | 234,951 | |||||||||||
| General and administrative expenses | 34,607 | 71,443 | 17,898 | 123,948 | ||||||||||||
| Stock compensation expenses | 6,829 | 4,702 | 15,566 | 27,097 | ||||||||||||
Underwriting income | $ | 91,207 | $ | 40,316 | $ | (33,155 | ) | $ | 98,368 | |||||||
| Net investment income | 101,994 | 41,520 | (3,986 | ) | 139,528 | |||||||||||
| Other income | 309 | 5,264 | (309 | ) | 5,264 | |||||||||||
| Finance expenses | (879 | ) | (27,351 | ) | (29,088 | ) | (57,318 | ) | ||||||||
| Operating income before taxes | 192,631 | 59,749 | (66,538 | ) | 185,842 | |||||||||||
| Taxes | 88 | 10,700 | — | 10,788 | ||||||||||||
Net operating income | $ | 192,543 | $ | 49,049 | $ | (66,538 | ) | $ | 175,054 | |||||||
| Realized gain on repurchase of debentures | — | — | 8,752 | 8,752 | ||||||||||||
| Net realized (losses) gains on investments | (9,718 | ) | 8,127 | — | (1,591 | ) | ||||||||||
| Net unrealized (losses) gains on investments | (84,714 | ) | 5,007 | — | (79,707 | ) | ||||||||||
| Foreign exchange losses | (16,701 | ) | (32,696 | ) | — | (49,397 | ) | |||||||||
Net income | $ | 81,410 | $ | 29,487 | $ | (57,786 | ) | $ | 53,111 | |||||||
| Loss and loss expense ratio | 64.4 | % | 58.3 | % | 61.5 | % | ||||||||||
| Policy acquisition cost ratio | 15.3 | % | 22.4 | % | 18.7 | % | ||||||||||
| General and administrative expense ratio | 6.3 | % | 12.6 | % | 12.0 | % | ||||||||||
| Expense ratio | 21.6 | % | 35.0 | % | 30.7 | % | ||||||||||
Combined ratio | 86.0 | % | 93.3 | % | 92.2 | % | ||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
13
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the year ended December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
Consolidated Statements of Operations
For the year ended December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
| Three months ended December 31, 2007 | ||||||||||||||||
| Corporate | ||||||||||||||||
| & | ||||||||||||||||
| Validus Re | Talbot | Elimination | Total | |||||||||||||
| Gross premiums written | $ | 702,098 | $ | 286,539 | $ | — | $ | 988,637 | ||||||||
| Reinsurance premiums ceded | (68,842 | ) | (1,368 | ) | — | (70,210 | ) | |||||||||
| Net premiums written | 633,256 | 285,171 | — | 918,427 | ||||||||||||
| Change in unearned premiums | (74,227 | ) | 13,879 | — | (60,348 | ) | ||||||||||
| Net premiums earned | 559,029 | 299,050 | — | 858,079 | ||||||||||||
| Losses and loss expense | 175,538 | 108,455 | — | 283,993 | ||||||||||||
| Policy acquisition costs | 70,323 | 63,954 | — | 134,277 | ||||||||||||
| General and administrative expenses | 31,412 | 48,886 | 17,467 | 97,765 | ||||||||||||
| Stock compensation expenses | 4,013 | 1,709 | 10,467 | 16,189 | ||||||||||||
Underwriting income (loss) | $ | 277,743 | $ | 76,046 | $ | (27,934 | ) | $ | 325,855 | |||||||
| Net investment income | 85,981 | 25,805 | 538 | 112,324 | ||||||||||||
| Other income | — | 3,301 | — | 3,301 | ||||||||||||
| Finance expenses | (1,378 | ) | (26,086 | ) | (24,290 | ) | (51,754 | ) | ||||||||
| Operating income (loss) before taxes | 362,346 | 79,066 | (51,686 | ) | 389,726 | |||||||||||
| Taxes | 61 | 1,444 | — | 1,505 | ||||||||||||
Net operating income | $ | 362,285 | $ | 77,622 | $ | (51,686 | ) | $ | 388,221 | |||||||
| Net realized gains on investments | 443 | 1,165 | — | 1,608 | ||||||||||||
| Net unrealized gains on investments | 8,556 | 3,808 | — | 12,364 | ||||||||||||
| Foreign exchange gains | 7,495 | (799 | ) | — | 6,696 | |||||||||||
| Fair value of warrants | — | — | (2,893 | ) | (2,893 | ) | ||||||||||
| Aquiline termination fee | — | — | (3,000 | ) | (3,000 | ) | ||||||||||
Net income | $ | 378,779 | $ | 81,796 | $ | (57,579 | ) | $ | 402,996 | |||||||
| Loss and loss expense ratio | 31.4 | % | 36.3 | % | 33.1 | % | ||||||||||
| Policy acquisition cost ratio | 12.6 | % | 21.4 | % | 15.6 | % | ||||||||||
| General and administrative expense ratio | 6.3 | % | 16.9 | % | 13.3 | % | ||||||||||
Combined ratio | 50.3 | % | 74.6 | % | 62.0 | % | ||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
14
Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation
Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity
For the three months and years ended December 31, 2008 and 2007
(expressed in thousands of U.S. dollars, except share amounts)
Non-GAAP Financial Measure Reconciliation
Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity
For the three months and years ended December 31, 2008 and 2007
(expressed in thousands of U.S. dollars, except share amounts)
| Three months ended | Year ended | |||||||||||||||
| December 31, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | |||||||||||||
Net income | $ | 37,015 | $ | 138,969 | $ | 53,111 | $ | 402,996 | ||||||||
| Adjustment for realized gain on repurchase of debentures | — | — | (8,752 | ) | — | |||||||||||
| Adjustment for Aquiline termination fee | — | — | — | 3,000 | ||||||||||||
| Adjustment for fair value of warrants issued | — | — | — | 2,893 | ||||||||||||
| Adjustment for net realized losses (gains ) on investments | (6,757 | ) | (784 | ) | 1,591 | (1,608 | ) | |||||||||
| Adjustment for net unrealized losses (gains) on investments | 7,099 | (9,229 | ) | 79,707 | (12,364 | ) | ||||||||||
| Adjustment for foreign exchange (losses) gains | 13,554 | 2,515 | 49,397 | (6,696) | ) | |||||||||||
Net operating income | $ | 50,911 | $ | 131,471 | $ | 175,054 | $ | 388,221 | ||||||||
Net income | $ | 37,015 | $ | 138,969 | $ | 53,111 | $ | 402,996 | ||||||||
| Less: Dividends and distributions declared on outstanding warrants | (1,736 | ) | — | (6,947 | ) | — | ||||||||||
Net income adjusted | $ | 35,279 | $ | 138,969 | $ | 46,164 | $ | 402,996 | ||||||||
Net income per share — diluted | $ | 0.47 | $ | 1.77 | $ | 0.61 | $ | 5.95 | ||||||||
| Adjustment for realized gain on repurchase of debentures | — | — | (0.12 | ) | — | |||||||||||
| Adjustment for Aquiline termination fee | — | — | — | 0.04 | ||||||||||||
| Adjustment for fair value of warrants issued | — | — | — | 0.04 | ||||||||||||
| Adjustment for net realized losses (gains ) on investments | (0.09 | ) | — | 0.02 | (0.02 | ) | ||||||||||
| Adjustment for net unrealized losses (gains) on investments | 0.09 | (0.12 | ) | 1.06 | (0.18 | ) | ||||||||||
| Adjustment for foreign exchange (losses) gains | 0.18 | 0.03 | 0.65 | (0.10 | ) | |||||||||||
Net operating income per share — diluted | $ | 0.65 | $ | 1.68 | $ | 2.22 | $ | 5.73 | ||||||||
| Weighted average number of common shares and common share equivalents — diluted | 75,740,546 | 78,415,109 | 75,819,413 | 67,786,673 | ||||||||||||
Net operating income | $ | 50,911 | $ | 131,471 | $ | 175,054 | $ | 388,221 | ||||||||
| Average shareholders’ equity | 1,927,673 | 1,862,080 | 1,967,517 | 1,498,369 | ||||||||||||
Annualized net operating return on average equity | 10.6 | % | 28.2 | % | 8.9 | % | 25.9 | % | ||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
15
Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation
Diluted Book Value Per Common Share
As at December 31, 2008 and December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
Non-GAAP Financial Measure Reconciliation
Diluted Book Value Per Common Share
As at December 31, 2008 and December 31, 2007
(expressed in thousands of U.S. dollars, except share amounts)
| At December 31, 2008 | ||||||||||||||||
| Exercise | Book value | |||||||||||||||
| Equity amount | Shares | Price | per share | |||||||||||||
Book value per common share | ||||||||||||||||
| Total shareholders’ equity | $ | 1,938,734 | 75,624,697 | $ | 25.64 | |||||||||||
Diluted book value per common share | ||||||||||||||||
| Total shareholders’ equity | $ | 1,938,734 | 75,624,697 | |||||||||||||
| Assumed exercise of outstanding warrants | 152,316 | 8,680,149 | $ | 17.55 | ||||||||||||
| Assumed exercise of outstanding options | 51,043 | 2,799,938 | $ | 18.23 | ||||||||||||
| Unvested restricted shares | — | 2,986,619 | ||||||||||||||
Diluted book value per common share | $ | 2,142,093 | 90,091,403 | $ | 23.78 | |||||||||||
| At December 31, 2007 | ||||||||||||||||
| Exercise | Book value | |||||||||||||||
| Equity amount | Shares | Price | per share | |||||||||||||
Book value per common share | ||||||||||||||||
| Total shareholders’ equity | $ | 1,934,800 | 74,199,836 | $ | 26.08 | |||||||||||
Diluted book value per common share | ||||||||||||||||
| Total shareholders’ equity | $ | 1,934,800 | 74,199,836 | |||||||||||||
| Assumed exercise of outstanding warrants | 152,869 | 8,711,729 | $ | 17.55 | ||||||||||||
| Assumed exercise of outstanding options | 49,196 | 2,761,176 | $ | 17.82 | ||||||||||||
| Unvested restricted shares | — | 3,367,961 | ||||||||||||||
Diluted book value per common share | $ | 2,136,865 | 89,040,702 | $ | 24.00 | |||||||||||
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
16
Cautionary Note Regarding Forward-Looking Statements
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, additionally, you should not place undue reliance on any such statements. This news release may include forward-looking statements, both with respect to us and our 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. 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 our risk management and loss limitation methods;4) cyclicality of demand and pricing in the insurance and reinsurance markets; 5) our limited operating history; 6) our ability to successfully implement our business strategy during “soft” as well as “hard” markets; 7) adequacy of our 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) our ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 13) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 14) the integration of Talbot or other businesses we may acquire or new business ventures we may start; 15) the effect on our investment portfolio 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 our most recent reports on Form 10-K and Form 10-Q and other documents on file with the Securities and Exchange Commission. Any forward-looking statements made in this news release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
In presenting the Company’s results, management has included and discussed certain schedules containing net operating income (loss), underwriting income, annualized net operating return on average equity and diluted book value per common share that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of net operating income to net income, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented in the “Consolidated Statement of Operations”. Annualized net operating return on average equity is presented in the section below entitled “Net Operating Income, Net Operating
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
17
Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, is presented in the section below entitled “Diluted Book Value Per Share”. Net operating income is calculated based on net income (loss) excluding net realized gains (losses), net unrealized gains (losses) on investments, gains (losses) arising from translation of non-US$ denominated balances and non-recurring items. Realized gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-US$ denominated balances are unrelated to our underlying business.
Validus Holdings Limited, 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
Tel: 441.278.9000 Fax: 441.278.9090
www.validusre.bm
18