Exhibit 99.1
Validus Holdings, Ltd. Bermuda Commercial Bank Building 19 Par-la-Ville Road Hamilton, HM 11 Bermuda | ||
May 5, 2009 | Mailing Address: Suite 1790 48 Par-la-Ville Road Hamilton, HM 11 Bermuda | |
Telephone: (441) 278-9000 Facsimile: (441) 278-9090 Website: www.validusre.bm |
ADDITIONAL DISCLOSURE ON THE VALIDUS HOLDINGS, LTD. (“VALIDUS”)
CONSOLIDATED INVESTMENT PORTFOLIO (THE “PORTFOLIO”)
CONSOLIDATED INVESTMENT PORTFOLIO (THE “PORTFOLIO”)
As of March 31, 2009, the Portfolio had a fair market value of $3,462.7 million. Validus is providing the following additional disclosure on the composition of its Portfolio in response to the continued volatility in the global credit markets.
Validus Mortgage-Backed And Asset-Backed Securities Portfolio
Market Values (in USD MM) as of March 31, 2009
RATING | ||||||||||||||||||||||||||||||||||||
Gov't | AAA | AA | A | BBB | BB | B | Other | Total | ||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||
Residential Mortgage-Backed GNMA | 71.0 | — | — | — | — | — | — | — | 71.0 | |||||||||||||||||||||||||||
FNMA | 287.8 | — | — | — | — | — | — | — | 287.8 | |||||||||||||||||||||||||||
Freddie Mac | 175.1 | — | — | — | — | — | — | — | 175.1 | |||||||||||||||||||||||||||
Total Agency RMBS | 533.9 | — | — | — | — | — | — | — | 533.9 | |||||||||||||||||||||||||||
Non-Agency RMBS | — | 101.8 | 12.9 | 15.0 | 4.2 | 8.9 | 28.0 | 36.6 | 207.4 | |||||||||||||||||||||||||||
Total Residential Mortgage-Backed | 533.9 | 101.8 | 12.9 | 15.0 | 4.2 | 8.9 | 28.0 | 36.6 | 741.3 | |||||||||||||||||||||||||||
Commercial Mortgage-Backed | — | 88.5 | — | — | — | — | — | — | 88.5 | |||||||||||||||||||||||||||
Total Mortgage-Backed Securities | 533.9 | 190.3 | 12.9 | 15.0 | 4.2 | 8.9 | 28.0 | 36.6 | 829.8 | |||||||||||||||||||||||||||
Asset-Backed Securities | ||||||||||||||||||||||||||||||||||||
Sub Prime | — | 3.2 | — | 1.5 | — | — | — | — | 4.7 | |||||||||||||||||||||||||||
Credit Cards | — | 9.8 | — | — | — | — | — | — | 9.8 | |||||||||||||||||||||||||||
Autos | — | 68.2 | 1.0 | — | 1.1 | — | — | — | 70.3 | |||||||||||||||||||||||||||
Stranded Cost & UK ABS | — | 10.3 | — | — | — | — | — | — | 10.3 | |||||||||||||||||||||||||||
Total Asset-Backed Securities | — | 91.5 | 1.0 | 1.5 | 1.1 | — | — | — | 95.1 | |||||||||||||||||||||||||||
Total Asset-Backed and Mortgage-Backed Securities | 924.9 | |||||||||||||||||||||||||||||||||||
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Residential Mortgage Backed Securities (“RMBS”) (21.4% of total cash and investments*)
GSE (Government Sponsored Enterprise) RMBS (15.4%)
The Portfolio contains $533.9 million in GSE residential mortgage-backed securities.
Validus’ GSE RMBS allocation has a weighted-average effective duration of 1.4 years; a weighted-average life of 2.5 years; a fair market price of 103.89 and corresponding yield of 3.2%; a book yield of 5.0% and an unrealized gain of approximately $12.5 million.
Non-Agency RMBS — Prime (3.3%)
The Portfolio’s $113.8 million prime non-Agency RMBS allocation includes $88.2 million of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 61.5% of Validus’ prime non-Agency allocation consists of securities whose loans were originated in 2005 and prior; 19.3% of the prime RMBS allocation was issued in 2006. The allocation has a weighted average current credit enhancement of 8.2%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 739 and a loan-to-value ratio of 65.6%.
Validus’ overall prime non-agency allocation has a weighted-average effective duration of 1.8 years; a weighted-average life of 3.2 years; a fair market price of 71.98 and corresponding yield of 21.3%; an equivalent weighted-average book yield of 5.4%; and an unrealized loss of approximately $47.1 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Prime non-Agency RMBS by Vintage Year & Rating
Vintage | AAA | AA | A | BBB | BB and below | Total | ||||||||||||||||||
2007 | 17.5 | — | 4.0 | — | — | 21.5 | ||||||||||||||||||
2006 | 7.6 | 6.8 | 7.5 | — | — | 21.9 | ||||||||||||||||||
2005 | 32.5 | 1.7 | 2.0 | — | 3.0 | 39.2 | ||||||||||||||||||
2004 and prior | 30.6 | 0.6 | — | — | — | 31.2 | ||||||||||||||||||
Total | 88.2 | 9.1 | 13.5 | — | 3.0 | 113.8 | ||||||||||||||||||
Note: | Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating. |
Non-Agency RMBS — Alt-A (2.7%)
14.6% of the Portfolio’s $93.6 million Alt-A non-Agency RMBS allocation consists of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 49.1% of Validus’ Alt-A non-Agency allocation consists of securities whose loans were originated in 2006 and prior. The allocation has a weighted average current credit enhancement of 24.5%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 711 and a loan-to-value ratio of 77.6%.
Validus’ overall Alt-A non-agency allocation has a weighted-average effective duration of 1.8 years; a weighted-average life of 4.0 years; a fair market price of 76.72 and corresponding yield of 8.9%; an equivalent weighted average book yield of 3.6%; and an unrealized loss of approximately $28.1 million.
The Company determined that markets for certain of its non-agency RMBS (“identified non-agency RMBS securities”), primarily Alt-A, were illiquid at March 31, 2009. As a result, the identified non-agency RMBS securities were deemed to be Level 3 securities as defined by Financial Accounting Standard 157 (“FAS 157”). The Company applied the guidance in FSP FAS 157-3 to determine the fair market value of the identified non-agency RMBS securities using a discounted cash flow model.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Alt-A non-Agency RMBS by Vintage Year & Rating
Vintage | AAA | AA | A | BBB | BB and below | Total | ||||||||||||||||||
2007 | 7.0 | 3.9 | — | — | 36.7 | 47.6 | ||||||||||||||||||
2006 | — | — | — | — | 21.0 | 21.0 | ||||||||||||||||||
2005 | 4.1 | — | 1.6 | 4.2 | 12.5 | 22.4 | ||||||||||||||||||
2004 and prior | 2.6 | — | — | — | — | 2.6 | ||||||||||||||||||
Total | 13.7 | 3.9 | 1.6 | 4.2 | 70.2 | 93.6 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
* | Total cash and investments at 3/31/09 (MMs) = $3,462.7 |
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ABS (2.7% of total cash and investments *)
Auto & Credit Card ABS — Non Sub-Prime (2.6%)
The Portfolio’s $90.4 million allocation to ABS includes $88.3 million of AAA rated securities. The ABS portfolio excluding Sub-Prime consists of auto, credit card, stranded cost and UK ABS. 54.4% of Validus’ auto- and credit card-backed allocation consists of securities whose loans were originated in 2006 and prior.
Validus’ ABS allocation, excluding Sub-Prime, has a weighted-average effective duration of 0.6 years; a weighted-average life of 0.6 years; a fair market price of 100.27 and corresponding yield of 5.1%; a book yield of 4.7% and an unrealized gain of approximately $0.2 million.
Home Equity ABS — Sub-Prime (0.1%)
The Portfolio’s $4.7 million sub-prime home equity ABS allocation includes $3.2 million of AAA rated securities. 63.8% of Validus’ sub-prime allocation consists of securities issued in 2006 and prior. The allocation has a weighted-average current credit enhancement of 36.3%. The credit enhancement will continue to increase as the securities pay down. The securities have a weighted-average FICO score of 619 and a loan-to-value ratio of 78.7%.
Validus’ overall home equity ABS allocation has a weighted-average effective duration of 0.8 years; a weighted-average life of 1.1 years; a fair market price of 88.63 and corresponding yield of 30.4%; a book yield of 0.7%; and an unrealized loss of approximately $1.2 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Sub prime HEL ABS by Vintage Year & Rating
Vintage | AAA | AA | A | BBB | BB and below | Total | ||||||||||||||||||
2007 | 1.7 | — | — | — | — | 1.7 | ||||||||||||||||||
2006 | 1.1 | — | 1.5 | — | — | 2.6 | ||||||||||||||||||
2005 | — | — | — | — | — | — | ||||||||||||||||||
2004 and prior | 0.4 | — | — | — | — | 0.4 | ||||||||||||||||||
Total | 3.2 | — | 1.5 | — | — | 4.7 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
CMBS (2.6% of total cash and investments *)
The Portfolio’s $88.5 million CMBS allocation consists entirely of AAA rated securities. The Portfolio is well-diversified with seasoned deals that have collateral with transparent histories. 91.1% of Validus’ CMBS allocation consists of securities issued in 2004 and prior. The allocation has a weighted average current credit enhancement of 33.0% and defeasance adjusted credit enhancement of 50.5%, both of which will increase as the securities pay down. The average loan-to-value ratio is 68.9% and the debt service coverage ratio in excess of 1.61.
Validus’ overall CMBS allocation has a weighted-average effective duration of 0.9 years; a weighted-average life of 1.0 years; a fair market price of 99.99 and corresponding yield of 6.1%; a book yield of 5.1%; and an unrealized loss of approximately $0.6 million.
* | Total cash and investments at 3/31/09 (MMs) = $3,462.7 |
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The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of CMBS by Vintage Year & Rating
Vintage | AAA | AA | A | BBB | BB and below | Total | ||||||||||||||||||
2007 | 7.9 | — | — | — | — | 7.9 | ||||||||||||||||||
2006 | — | — | — | — | — | — | ||||||||||||||||||
2005 | — | — | — | — | — | — | ||||||||||||||||||
2004 and prior | 80.6 | — | — | — | — | 80.6 | ||||||||||||||||||
Total | 88.5 | — | — | — | — | 88.5 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
* | Total cash and investments at 3/31/09 (MMs) = $3,462.7 |
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As of March 31, 2009, the Portfolio’s allocation to Corporate and Financial issuers was $655.2 million and $242.5 million, respectively. The following table presents the ten largest Corporate and ten largest Financial issuers as of March 31, 2009:
Corporate Issuers
% of Total | ||||||||
Fair Value | Cash and | |||||||
ISSUER | ($MM) | Investments | ||||||
AT&T INC | $ | 30.1 | 0.9 | % | ||||
WELLS FARGO | 23.3 | 0.7 | % | |||||
GENERAL ELECTRIC | 20.9 | 0.6 | % | |||||
PEPSICO | 19.7 | 0.6 | % | |||||
VERIZON | 19.6 | 0.6 | % | |||||
BANK OF AMERICA | 17.9 | 0.5 | % | |||||
ROCHE HOLDINGS | 15.3 | 0.4 | % | |||||
HEWLETT-PACKARD | 13.0 | 0.4 | % | |||||
WYETH | 12.1 | 0.3 | % | |||||
ORACLE | 11.9 | 0.3 | % | |||||
Sub-total | $ | 183.8 | 5.3 | % | ||||
Financial Issuers
% of Total | ||||||||
Fair Value | Cash and | |||||||
ISSUER | ($MM) | Investments | ||||||
WELLS FARGO | $ | 23.3 | 0.7 | % | ||||
GENERAL ELECTRIC | 20.9 | 0.6 | % | |||||
BANK OF AMERICA | 17.9 | 0.5 | % | |||||
CITIGROUP | 10.1 | 0.3 | % | |||||
JP MORGAN CHASE & CO | 9.9 | 0.3 | % | |||||
BANK OF NEW YORK | 9.4 | 0.3 | % | |||||
BP CAPITAL | 8.9 | 0.3 | % | |||||
HOUSEHOLD FINANCE CORP | 8.9 | 0.3 | % | |||||
GOLDMAN SACHS GROUP INC | 8.8 | 0.3 | % | |||||
MORGAN STANLEY | 8.1 | 0.2 | % | |||||
Sub-total | $ | 126.2 | 3.8 | % | ||||
1 | Issuers exclude government-backed, government-sponsored enterprises and cash and cash equivalents. | |
2 | Credit exposures represent only direct exposure to fixed maturities and short-term investments of the parent issuer and its major subsidiaries. |
These exposures exclude asset and mortgage backed securities that were issued, sponsored or serviced by the parent.
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