Exhibit 99.1
 | Validus Holdings, Ltd. Bermuda Commercial Bank Building 19 Par-la-Ville Road Hamilton, HM 11 Bermuda | |
| July 29, 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 June 30, 2009, the Portfolio had a fair market value of $3,530.6 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 June 30, 2009
| RATING | ||||||||||||||||||||||||||||||||||||
| Gov’t | AAA | AA | A | BBB | BB | B | Other | Total | ||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||
| Residential Mortgage-Backed GNMA | 100.3 | — | — | — | — | — | — | — | 100.3 | |||||||||||||||||||||||||||
| FNMA | 254.2 | — | — | — | — | — | — | — | 254.2 | |||||||||||||||||||||||||||
| Freddie Mac | 187.9 | — | — | — | — | — | — | — | 187.9 | |||||||||||||||||||||||||||
| Total Agency RMBS | 542.4 | — | — | — | — | — | — | — | 542.4 | |||||||||||||||||||||||||||
| Non-Agency RMBS | — | 51.0 | 8.3 | 22.8 | 17.7 | 1.2 | 57.4 | 23.3 | 181.7 | |||||||||||||||||||||||||||
| Total Residential Mortgage-Backed | 542.4 | 51.0 | 8.3 | 22.8 | 17.7 | 1.2 | 57.4 | 23.3 | 724.1 | |||||||||||||||||||||||||||
| Commercial Mortgage-Backed | — | 66.4 | — | — | — | — | — | — | 66.4 | |||||||||||||||||||||||||||
Total Mortgage-Backed Securities | 542.4 | 117.4 | 8.3 | 22.8 | 17.7 | 1.2 | 57.4 | 23.3 | 790.5 | |||||||||||||||||||||||||||
Asset-Backed Securities | ||||||||||||||||||||||||||||||||||||
| Sub Prime | — | 2.8 | — | 1.3 | — | — | — | — | 4.1 | |||||||||||||||||||||||||||
| Credit Cards | — | 9.3 | — | — | — | — | — | — | 9.3 | |||||||||||||||||||||||||||
| Autos | — | 52.0 | 0.4 | — | 0.9 | — | — | — | 53.3 | |||||||||||||||||||||||||||
| Stranded Cost & UK ABS | — | 9.5 | — | — | — | — | — | — | 9.5 | |||||||||||||||||||||||||||
Total Asset-Backed Securities | — | 73.6 | 0.4 | 1.3 | 0.9 | — | — | — | 76.2 | |||||||||||||||||||||||||||
Total Asset-Backed and Mortgage- | ||||||||||||||||||||||||||||||||||||
Backed Securities | 866.7 | |||||||||||||||||||||||||||||||||||
Note:Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
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Residential Mortgage Backed Securities (“RMBS”) (20.5% of total cash and investments*)
GSE (Government Sponsored Enterprise) RMBS (15.4%)
The Portfolio contains $542.4 million in GSE residential mortgage-backed securities.
The Portfolio contains $542.4 million in GSE residential mortgage-backed securities.
Validus’ GSE RMBS allocation has a weighted-average effective duration of 2.3 years; a weighted-average life of 3.9 years; a fair market price of 104.12 and corresponding yield of 3.6%; a book yield of 4.6% and an unrealized gain of approximately $13.0 million.
Non-Agency RMBS — Prime (2.5%)
The Portfolio’s $86.9 million prime non-Agency RMBS allocation includes $40.2 million of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 55.6% of Validus’ prime non-Agency allocation consists of securities whose loans were originated in 2005 and prior; 19.5% of the prime RMBS allocation was issued in 2006. The allocation has a weighted average current credit enhancement of 8.3%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 738 and a loan-to-value ratio of 66.3%.
Validus’ overall prime non-agency allocation has a weighted-average effective duration of 2.6 years; a weighted-average life of 4.0 years; a fair market price of 77.76 and corresponding yield of 13.7%; an equivalent weighted-average book yield of 5.5%; and an unrealized loss of approximately $27.5 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 | 10.0 | — | 5.0 | 0.6 | 6.1 | 21.7 | ||||||||||||||||||
| 2006 | 0.6 | — | 10.2 | — | 6.1 | 16.9 | ||||||||||||||||||
| 2005 | 16.6 | 3.2 | 5.8 | 0.8 | 5.2 | 31.6 | ||||||||||||||||||
| 2004 and prior | 13.0 | — | 3.1 | 0.6 | — | 16.7 | ||||||||||||||||||
Total | 40.2 | 3.2 | 24.1 | 2.0 | 17.4 | 86.9 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
Non-Agency RMBS — Alt-A (2.7%)
6.3% of the Portfolio’s $94.7 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 24.1%, 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 2.5 years; a weighted-average life of 4.4 years; a fair market price of 79.65 and corresponding yield of 5.6%; an equivalent weighted-average book yield of 3.5%; and an unrealized loss of approximately $22.7 million.
The Company determined that markets for certain of its non-agency RMBS (“identified non-agency RMBS securities”), primarily Alt-A, were illiquid at June 30, 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 157-4 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:
| * | Total cash and investments at 6/30/09 (MMs) = $3,530.6 |
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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 | 1.9 | 4.0 | — | — | 42.3 | 48.2 | ||||||||||||||||||
| 2006 | — | — | — | — | 20.9 | 20.9 | ||||||||||||||||||
| 2005 | 4.1 | — | 1.6 | 4.0 | 13.3 | 23.0 | ||||||||||||||||||
| 2004 and prior | — | 1.1 | 1.5 | — | — | 2.6 | ||||||||||||||||||
Total | 6.0 | 5.1 | 3.1 | 4.0 | 76.5 | 94.7 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
ABS (2.2% of total cash and investments *)
Auto & Credit Card ABS — Non Sub-Prime (2.1%)
The Portfolio’s $72.1 million allocation to ABS includes $70.8 million of AAA rated securities. The ABS portfolio excluding Sub-Prime consists of auto, credit card, stranded cost and UK ABS. 57.4% 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 0.5 years; a weighted-average life of 0.6 years; a fair market price of 101.31 and corresponding yield of 2.4%; a book yield of 4.7% and an unrealized gain of approximately $0.9 million.
Home Equity ABS — Sub-Prime (0.1%)
The Portfolio’s $4.1 million sub-prime home equity ABS allocation includes $2.8 million of AAA rated securities. 67.3% of Validus’ sub-prime allocation consists of securities issued in 2006 and prior. The allocation has a weighted-average current credit enhancement of 37.3%. 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 78.6%.
Validus’ overall home equity ABS allocation has a weighted-average effective duration of 0.9 years; a weighted-average life of 1.0 years; a fair market price of 84.69 and corresponding yield of 30.9%; a book yield of 0.5%; and an unrealized loss of approximately $0.9 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 | 1.3 | — | — | — | — | 1.3 | ||||||||||||||||||
| 2006 | 1.0 | — | 1.3 | — | — | 2.3 | ||||||||||||||||||
| 2005 | — | — | — | — | — | - | ||||||||||||||||||
| 2004 and prior | 0.5 | — | — | — | — | 0.5 | ||||||||||||||||||
Total | 2.8 | — | 1.3 | — | — | 4.1 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
CMBS (1.9% of total cash and investments *)
The Portfolio’s $66.4 million CMBS allocation consists entirely of AAA rated securities. The Portfolio is well-diversified with seasoned deals that have collateral with transparent histories. 89.2% of Validus’ CMBS allocation consists of securities issued in 2004 and prior. The allocation has a weighted average current credit enhancement of 29.5% and defeasance adjusted credit enhancement of 48.5%, both of which will increase as the securities pay down. The average loan-to-value ratio is 69.5% and the debt service coverage ratio in excess of 1.61.
| * | Total cash and investments at 6/30/09 (MMs) = $3,530.6 |
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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 101.25 and corresponding yield of 4.6%; a book yield of 5.2%; and an unrealized gain of approximately $0.5 million.
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 | 7.1 | — | — | — | — | 7.1 | ||||||||||||||||||
| 2006 | — | — | — | — | — | — | ||||||||||||||||||
| 2005 | — | — | — | — | — | — | ||||||||||||||||||
| 2004 and prior | 59.3 | — | — | — | — | 59.3 | ||||||||||||||||||
Total | 66.4 | — | — | — | — | 66.4 | ||||||||||||||||||
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
The following table shows fair market values by vintage year and rating:
| * | Total cash and investments at 6/30/09 (MMs) = $3,530.6 |
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As of June 30, 2009, the Portfolio’s allocation to Corporate and Financial issuers was $788.7 million and $226.1 million, respectively. The following table presents the ten largest Corporate and ten largest Financial issuers as of June 30, 2009:
Corporate Issuers
| % of Total | ||||||||
| Fair Value | Cash and | |||||||
| ISSUER | ($MM) | Investments | ||||||
| VERIZON | $ | 50.2 | 1.4 | % | ||||
| AT&T INC | 41.2 | 1.2 | % | |||||
| WELLS FARGO | 31.8 | 0.9 | % | |||||
| JP MORGAN CHASE & CO | 23.8 | 0.7 | % | |||||
| BANK OF AMERICA | 23.4 | 0.7 | % | |||||
| GENERAL ELECTRIC | 23.3 | 0.7 | % | |||||
| HEWLETT-PACKARD | 22.8 | 0.6 | % | |||||
| PEPSICO INC | 19.7 | 0.6 | % | |||||
| ORACLE | 18.5 | 0.5 | % | |||||
| ROCHE HOLDINGS | 15.9 | 0.5 | % | |||||
Sub-total | $ | 270.6 | 7.8 | % | ||||
Financial Issuers
| % of Total | ||||||||
| Fair Value | Cash and | |||||||
| ISSUER | ($MM) | Investments | ||||||
| WELLS FARGO | $ | 31.8 | 0.9 | % | ||||
| JP MORGAN CHASE & CO | 23.8 | 0.7 | % | |||||
| BANK OF AMERICA | 23.4 | 0.7 | % | |||||
| GENERAL ELECTRIC | 23.3 | 0.7 | % | |||||
| CITIGROUP | 15.3 | 0.4 | % | |||||
| HSBC HOLDINGS | 11.5 | 0.3 | % | |||||
| GOLDMAN SACHS GROUP INC | 9.7 | 0.3 | % | |||||
| BANCO SANTANDER SA | 8.8 | 0.2 | % | |||||
| MORGAN STANLEY | 8.7 | 0.2 | % | |||||
| NORTHERN TRUST | 8.1 | 0.2 | % | |||||
Sub-total | $ | 164.4 | 4.6 | % | ||||
| 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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