Exhibit 99.1
Contacts: | ||
| Investors: | Media: | |
| Validus Holdings, Ltd. | Jamie Tully/Jonathan Doorley | |
| Jon Levenson, Senior Vice President | Sard Verbinnen & Co. | |
| +1-441-278-9000 | +1-212-687-8080 | |
Jon.Levenson@Validusholdings.com | ||
| Roddy Watt / Tony Friend | ||
| College Hill | ||
| +44 (0) 207-457-2020 |
VALIDUS ANNOUNCES RECORD THIRD QUARTER 2009 NET OPERATING INCOME OF $145.6
MILLION, ANNUALIZED OPERATING RETURN ON AVERAGE EQUITY OF 19.0%
MILLION, ANNUALIZED OPERATING RETURN ON AVERAGE EQUITY OF 19.0%
Net income of $499.2 million
Diluted Book Value Per Share of $28.61 at September 30, 2009
Hamilton, Bermuda, November 5, 2009— Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR) today reported net income of $499.2 million, or $5.21 per diluted common share for the three months ended September 30, 2009, compared with a net (loss) of ($126.3) million, or ($1.71) per diluted common share, for the three months ended September 30, 2008. Net income for the nine months ended September 30, 2009 was $731.6 million, or $8.65 per diluted share, compared with $16.1 million, or $0.14 per diluted share, for the nine months ended September 30, 2008.
Net operating income for the three months ended September 30, 2009 was $145.6 million, or $1.52 per diluted share, compared with a net operating (loss) of ($53.1) million, or ($0.73) per diluted common share, for the three months ended September 30, 2008. Net operating income for the nine months ended September 30, 2009 was $356.4 million, or $4.21 per diluted share, compared with net operating income of $124.1 million, or $1.53 per diluted common share, for the nine months ended September 30, 2008.
Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items, including the gain on bargain purchase, net of expenses relating to the acquisition of IPC Holdings, Ltd. (“IPC”) Reconciliations of this measure to net income, the most directly comparable GAAP measure, are presented at the end of this release.
Commenting on third quarter results and 2009 business conditions, Validus’ Chairman and Chief Executive Officer Ed Noonan stated: “We completed the IPC amalgamation on September 4, 2009. As a consequence of the acquisition and of strong underlying financial results for our Validus Re and Talbot segments, we closed the quarter with total shareholders’ equity of $3.97 billion, total assets of $7.18 billion and total investments and cash of $5.71 billion. Diluted book value per share rose to $28.61 at September 30, 2009, which when combined with our $0.20 quarterly dividend resulted in an increase in diluted book value per share plus dividends of 10.5% in the quarter. Looking toward 2010, we approach the January renewal season with $4.3 billion of capital and the ability and intent to support our clients with our expanded resources.”
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
1
Third quarter 2009 results
Highlights for the third quarter include the following:
| • | Gross premiums written for the three months ended September 30, 2009 were $331.0 million compared to $269.2 million for the three months ended September 30, 2008, an increase of $61.8 million, or 23.0%. | ||
| • | Net premiums earned for the three months ended September 30, 2009 were $374.7 million compared to $339.3 million for the three months ended September 30, 2008, an increase of $35.4 million, or 10.4%. | ||
| • | Combined ratio of 66.7% which included $32.0 million of favorable prior year loss reserve development, benefiting the loss ratio by 8.5 percentage points. | ||
| • | Net operating income for the three months ended September 30, 2009 of $145.6 million compared to a loss of ($53.1) million for the three months ended September 30, 2008, an increase of $198.7 million, or 374.5%, primarily attributable to an increased contribution from underwriting income of $200.1 million and lower finance charges of $3.3 million, offset by lower investment income of $6.8 million. | ||
| • | Net income for the three months ended September 30, 2009 of $499.2 million compared to a loss of ($126.3) million for the three months ended September 30, 2008, an increase of $625.5 million, or 495.2%, reflecting an increase in operating income of $198.7 million, an increase in net unrealized investment gains of $65.1 million, a decrease in foreign exchange losses of $39.7 million, and the gain on bargain purchase, net of expenses of $302.9 million. | ||
| • | Annualized return on average equity of 65.3% and annualized operating return on average equity of 19.0%. |
Highlights for the nine months ended September 30, 2009 include the following:
| • | Gross premiums written for the nine months ended September 30, 2009 were $1,366.0 million compared to $1,170.7 million for the nine months ended September 30, 2008, an increase of $195.2 million, or 16.7%. | ||
| • | Net premiums earned for the nine months ended September 30, 2009 were $1,021.7 million compared to $940.5 million for the nine months ended September 30, 2008, an increase of $81.2 million, or 8.6%. | ||
| • | Combined ratio of 70.9% which included $53.3 million of favorable prior year loss reserve development, benefiting the loss ratio by 5.2 percentage points. | ||
| • | Net operating income for the nine months ended September 30, 2009 of $356.4 million compared to $124.1 million for the nine months ended September 30, 2008, an increase of $232.2 million, or 187.1%, primarily reflecting increased contribution from underwriting income of $231.2 million and lower finance charges of $19.1 million, offset by lower investment income of $25.6 million. | ||
| • | Net income for the nine months ended September 30, 2009 of $731.6 million compared to $16.1 million for the nine months ended September 30, 2008, an increase of $715.6 million, reflecting growth in operating income of $232.2 million, an increase in net unrealized investment gains of $182.4 million, a gain on bargain purchase, net of expenses of $287.1 million offset in part by an increase in net realized losses on investments of $12.3 million. | ||
| • | Annualized return on average equity of 38.7% and annualized operating return on average equity of 18.9%. |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
2
Validus Re Segment Results
Gross premiums written for the three months ended September 30, 2009 were $124.7 million compared to $125.0 million for the three months ended September 30, 2008, a decrease of $0.3 million, or 0.3%. Gross premiums written for the three months ended September 30, 2009 were comprised of $80.6 million of property premiums, $28.4 million of marine premiums and $15.7 million of specialty premiums compared to $97.5 million of property premiums, $19.2 million of marine premiums and $8.3 million of specialty premiums in the three months ended September 30, 2008.
Net premiums earned for the three months ended September 30, 2009 were $199.8 million compared to $181.4 million for the three months ended September 30, 2008, an increase of $18.4 million, or 10.1%.
The combined ratio for the three months ended September 30, 2009 was 49.2% compared to 139.7% for the three months ended September 30, 2008, a decrease of (90.5) percentage points.
The loss ratio for the three months ended September 30, 2009 was 23.0% compared to 119.7% for the three months ended September 30, 2008, a decrease of (96.7) percentage points, due primarily to lower incidences of significant property and other loss events in the three months ended September 30, 2009, which added 95.2 points to the loss ratio for the three months ended September 30, 2008. The loss ratio for the three months ended September 30, 2009 included favorable prior year loss reserve development of $19.3 million (benefiting the loss ratio by 9.6 percentage points).
Gross premiums written for the nine months ended September 30, 2009 were $734.4 million compared to $643.9 million for the nine months ended September 30, 2008, an increase of $90.5 million, or 14.1%. Gross premiums written for the nine months ended September 30, 2009 were comprised of $499.1 million of property premiums, $153.9 million of marine premiums and $81.3 million of specialty premiums compared to $472.0 million of property premiums, $111.9 million of marine premiums and $60.0 million of specialty premiums in the nine months ended September 30, 2008.
Net premiums earned for the nine months ended September 30, 2009 were $537.9 million compared to $489.2 million for the nine months ended September 30, 2008, an increase of $48.7 million, or 10.0%.
The combined ratio for the nine months ended September 30, 2009 was 52.8% compared to 87.7% for the nine months ended September 30, 2008, a decrease of (34.9) percentage points.
The loss ratio for the nine months ended September 30, 2009 was 26.5% compared to 66.4% for the nine months ended September 30, 2008, a decrease of (39.9) percentage points. The loss ratio for the nine months ended September 30, 2009 included favorable prior year loss reserve development of $24.1 million (benefiting the loss ratio by 4.5 percentage points).
Talbot Segment Results
Gross premiums written for the three months ended September 30, 2009 were $227.3 million compared to $157.3 million for the three months ended September 30, 2008, an increase of $70.0 million, or 44.5%. Gross premiums written for the three months ended September 30, 2009 were comprised of $79.2 million of property premiums, $69.6 million of marine premiums and $78.5 million of specialty premiums compared to $35.2 million of property premiums, $66.7 million of marine premiums and $55.4 million of specialty premiums in the three months ended September 30, 2008.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
3
Net premiums earned for the three months ended September 30, 2009 were $174.9 million compared to $157.9 million for the three months ended September 30, 2008, an increase of $17.0 million, or 10.8%.
The combined ratio for the three months ended September 30, 2009 was 83.5% compared to 97.7% for the three months ended September 30, 2008, a decrease of (14.2) percentage points.
The loss ratio for the three months ended September 30, 2009 was 50.4% compared to 64.2% for the three months ended September 30, 2008, a decrease of (13.8) percentage points. The loss ratio for the three months ended September 30, 2009 included favorable prior year loss reserve development of $12.8 million (benefiting the loss ratio by 7.3 percentage points).
Gross premiums written for the nine months ended September 30, 2009 were $690.4 million compared to $556.3 million for the nine months ended September 30, 2008, an increase of $134.0 million, or 24.1%. Gross premiums written for the nine months ended September 30, 2009 were comprised of $218.7 million of property premiums, $244.7 million of marine premiums and $227.0 million of specialty premiums compared to $123.0 million of property premiums, $230.8 million of marine premiums and $202.6 million of specialty premiums in the nine months ended September 30, 2008.
Net premiums earned for the nine months ended September 30, 2009 were $483.8 million compared to $451.3 million for the nine months ended September 30, 2008, an increase of $32.4 million, or 7.2%.
The combined ratio for the nine months ended September 30, 2009 was 87.3% compared to 92.9% for the nine months ended September 30, 2008, a decrease of (5.6) percentage points.
The loss ratio for the nine months ended September 30, 2009 was 51.3% compared to 56.7% for the nine months ended September 30, 2008, a decrease of (5.4) percentage points. The loss ratio for the nine months ended September 30, 2009 included favorable prior year loss reserve development of $29.2 million (benefiting the loss ratio by 6.0 percentage points).
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 September 30, 2009 were $4.6 million compared to $4.3 million for the three months ended September 30, 2008, an increase of $0.3 million, or 7.6%. Additionally, there was $302.9 million in income from the gain on bargain purchase, net of expenses relating to the acquisition of IPC during the quarter. Share compensation expense for the three months ended September 30, 2009 was $2.7 million compared to $3.0 million for the three months ended September 30, 2008, a decrease of $0.3 million, or 10.3%.
General and administrative expenses for the nine months ended September 30, 2009 were $13.8 million compared to $15.3 million for the nine months ended September 30, 2008, a decrease of $1.5 million, or 9.5%. Additionally, there was $287.1 million in income from the gain on bargain purchase, net of expenses relating to the acquisition of IPC during the quarter. Share compensation expense for the nine months ended September 30, 2009 was $8.1 million compared to $11.9 million for the nine months ended September 30, 2008, a decrease of $3.9 million, or 32.4%, due to the vesting of a tranche of restricted stock to senior executives during the three months ended March 31, 2009.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
4
Investments
Net investment income for the three months ended September 30, 2009 was $29.5 million compared to $36.4 million for the three months ended September 30, 2008, a decrease of $6.8 million, or 18.8%. Net investment income for the nine months ended September 30, 2009 was $83.3 million compared to $108.9 million for the nine months ended September 30, 2008, a decrease of $25.6 million, or 23.5%. Net investment income decreased as a result of reduced market yields and higher average cash balances.
Net realized gains on investments for the three months ended September 30, 2009 were $5.4 million compared to net realized (losses) of ($13.7) million for the three months ended September 30, 2008. Net realized (losses) on investments for the nine months ended September 30, 2009 were ($20.6) million compared to net realized (losses) of ($8.3) million for the nine months ended September 30, 2008.
Net unrealized gains on investments for the three months ended September 30, 2009 were $50.4 million compared to net unrealized (losses) of ($14.6) million for the three months ended September 30, 2008. Net unrealized gains on investments for the nine months ended September 30, 2009 were $109.8 million compared to net unrealized (losses) of ($72.6) million for the nine months ended September 30, 2008. The net unrealized gains in the three months ended September 30, 2009 resulted primarily from unrealized gains in non-agency RMBS and corporate bonds sectors, partially offset by unrealized losses in US government and government agency securities. As at September 30, 2009, the unrealized gain on investments was $25.1 million, which represented 0.4% of total investments and cash.
Finance Expenses
Finance expenses for the three months ended September 30, 2009 were $11.3 million compared to $14.5 million for the three months ended September 30, 2008, a decrease of $3.3 million, or 22.5%. Finance expenses for the nine months ended September 30, 2009 were $29.7 million compared to $48.8 million for the nine months ended September 30, 2008, a decrease of $19.1 million, or 39.1%. These decreases primarily related to the termination of third-party capital for Talbot commencing with the 2008 year of account. Finance expenses consisted principally of interest on the Company’s junior subordinated deferrable debentures and third-party capital costs for Talbot.
Shareholders’ Equity and Capitalization
As at September 30, 2009, shareholders’ equity was $3.97 billion. Diluted book value per common share was $28.61 compared to $26.08 at June 30, 2009. 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 September 30, 2009 was $4.3 billion, including $304.3 million of junior subordinated deferrable debentures.
Share Repurchase Program Authorization
The Company also announced today that on November 4, 2009, the Board of Directors of the Company (the “Board”) approved a share repurchase program, authorizing the Company to repurchase up to $400 million of its common shares. The Company expects the purchases to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position relative to internal and rating agency targets, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board at any time.
Conference Call
The Company will host a conference call for analysts and investors on November 6, 2009 at 9:00 AM (Eastern) to discuss the third quarter 2009 financial results and related matters. The conference call can be accessed via telephone by dialing 1-866-713-8566 (toll-free U.S.) or 1-617-597-5325 (international) and entering the pass code 31062383. 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 November 20, 2009 by dialing 1-888-286-8010 (toll-free U.S) or 1-617-801-6888 (international) and entering the pass code 45321761.
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
5
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. In addition, a financial supplement relating to our financial results for the three and nine months ended September 30, 2009 is available in the Investor Relations section of the Company’s 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 Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
6
Validus Holdings, Ltd.
Consolidated Balance Sheets
As at September 30, 2009 (Unaudited) and December 31, 2008
(Expressed in thousands of U.S. dollars, except share and per share information)
Consolidated Balance Sheets
As at September 30, 2009 (Unaudited) and December 31, 2008
| September 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Assets | ||||||||
| Fixed maturities, at fair value (amortized cost: 2009 - $4,566,801; 2008 - $2,553,018) | $ | 4,590,143 | $ | 2,454,501 | ||||
| Short-term investments, at fair value (amortized cost: 2009 - $595,557; 2008 - $379,537) | 594,581 | 377,036 | ||||||
| Other investments, at fair value (amortized cost: 2009 - $126,301) | 129,012 | — | ||||||
| Cash and cash equivalents | 393,788 | 449,848 | ||||||
| Total investments and cash | 5,707,524 | 3,281,385 | ||||||
| Premiums receivable | 723,029 | 408,259 | ||||||
| Deferred acquisition costs | 139,157 | 108,156 | ||||||
| Prepaid reinsurance premiums | 101,711 | 22,459 | ||||||
| Securities lending collateral | 100,053 | 98,954 | ||||||
| Loss reserves recoverable | 172,101 | 208,796 | ||||||
| Paid losses recoverable | 10,064 | 1,388 | ||||||
| Net receivable for investments sold | — | 490 | ||||||
| Income taxes recoverable | 3,027 | 1,365 | ||||||
| Intangibles assets | 124,096 | 127,217 | ||||||
| Goodwill | 20,393 | 20,393 | ||||||
| Accrued investment income | 43,190 | 20,433 | ||||||
| Other assets | 32,726 | 23,185 | ||||||
Total assets | $ | 7,177,071 | $ | 4,322,480 | ||||
Liabilities | ||||||||
| Reserve for losses and loss expenses | $ | 1,624,743 | $ | 1,305,303 | ||||
| Unearned premiums | 955,049 | 539,450 | ||||||
| Reinsurance balances payable | 40,879 | 33,042 | ||||||
| Securities lending payable | 101,040 | 105,688 | ||||||
| Deferred income taxes | 26,110 | 21,779 | ||||||
| Net payable for investments purchased | 39,224 | — | ||||||
| Accounts payable and accrued expenses | 119,534 | 74,184 | ||||||
| Debentures payable | 304,300 | 304,300 | ||||||
Total liabilities | 3,210,879 | 2,383,746 | ||||||
Shareholders’ equity | ||||||||
| Common shares, 571,428,571 authorized, par value $0.175 Issued and outstanding (2009 - 131,107,196; 2008 - 75,624,697) | 22,944 | 13,235 | ||||||
| Additional paid-in-capital | 2,748,121 | 1,412,635 | ||||||
| Accumulated other comprehensive (loss) income | (4,976 | ) | (7,858 | ) | ||||
| Retained earnings | 1,200,103 | 520,722 | ||||||
Total shareholders’ equity | 3,966,192 | 1,938,734 | ||||||
Total liabilities and shareholders’ equity | $ | 7,177,071 | $ | 4,322,480 | ||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
7
Validus Holdings, Ltd.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and nine months ended September 30, 2009 and 2008 (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and nine months ended September 30, 2009 and 2008 (Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2009 | September 30, 2008 | September 30, 2009 | September 30, 2008 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues | ||||||||||||||||
| Gross premiums written | $ | 331,028 | $ | 269,236 | $ | 1,365,951 | $ | 1,170,749 | ||||||||
| Reinsurance premiums ceded | (67,687 | ) | (35,139 | ) | (202,489 | ) | (121,438 | ) | ||||||||
| Net premiums written | 263,341 | 234,097 | 1,163,462 | 1,049,311 | ||||||||||||
| Change in unearned premiums | 111,376 | 105,229 | (141,786 | ) | (108,823 | ) | ||||||||||
| Net premiums earned | 374,717 | 339,326 | 1,021,676 | 940,488 | ||||||||||||
| Gain on bargain purchase, net of expenses | 302,950 | — | 287,099 | — | ||||||||||||
| Net investment income | 29,532 | 36,379 | 83,267 | 108,857 | ||||||||||||
| Realized gain on repurchase of debentures | — | — | — | 8,752 | ||||||||||||
| Net realized gains (losses) on investments | 5,429 | (13,667 | ) | (20,642 | ) | (8,348 | ) | |||||||||
| Net unrealized gains (losses) on investments | 50,437 | (14,649 | ) | 109,839 | (72,608 | ) | ||||||||||
| Other income | 1,101 | 1,269 | 2,875 | 3,666 | ||||||||||||
| Foreign exchange (losses) | (5,244 | ) | (44,933 | ) | (1,012 | ) | (35,843 | ) | ||||||||
Total revenues | 758,922 | 303,725 | 1,483,102 | 944,964 | ||||||||||||
Expenses | ||||||||||||||||
| Losses and loss expenses | 134,152 | 318,464 | 390,736 | 580,578 | ||||||||||||
| Policy acquisition costs | 64,236 | 60,425 | 190,125 | 173,545 | ||||||||||||
| General and administrative expenses | 46,036 | 30,120 | 125,315 | 101,139 | ||||||||||||
| Share compensation expenses | 5,862 | 6,012 | 18,848 | 19,818 | ||||||||||||
| Finance expenses | 11,257 | 14,517 | 29,732 | 48,796 | ||||||||||||
Total expenses | 261,543 | 429,538 | 754,756 | 923,876 | ||||||||||||
Net income (loss) before taxes | 497,379 | (125,813 | ) | 728,346 | 21,088 | |||||||||||
| Tax benefit (expense) | 1,799 | (487 | ) | 3,301 | (4,992 | ) | ||||||||||
Net income (loss) | $ | 499,178 | $ | (126,300 | ) | $ | 731,647 | $ | 16,096 | |||||||
Comprehensive income | ||||||||||||||||
| Foreign currency translation adjustments | (915 | ) | (1,556 | ) | 2,882 | (1,479 | ) | |||||||||
Comprehensive income (loss) | $ | 498,263 | $ | (127,856 | ) | $ | 734,529 | $ | 14,617 | |||||||
Earnings per share | ||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic | 92,492,373 | 74,864,724 | 81,458,329 | 74,435,840 | ||||||||||||
| Diluted | 95,834,809 | 74,864,724 | 84,626,505 | 77,922,718 | ||||||||||||
Basic earnings (loss) per share | $ | 5.38 | $ | (1.71 | ) | $ | 8.92 | $ | 0.15 | |||||||
Diluted earnings (loss) per share | $ | 5.21 | $ | (1.71 | ) | $ | 8.65 | $ | 0.14 | |||||||
Cash dividends declared per share | $ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.60 | ||||||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
8
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended September 30, 2009
Consolidated Statements of Operations
For the three months ended September 30, 2009
(Expressed in thousands of U.S. dollars, except share and per share information)
The following tables summarize the underwriting results of our operating segments and corporate segment:
| Corporate & | ||||||||||||||||
| Three months ended September 30, 2009 | Validus Re | Talbot | Eliminations | Total | ||||||||||||
| Gross premiums written | $ | 124,704 | $ | 227,325 | $ | (21,001 | ) | $ | 331,028 | |||||||
| Reinsurance premiums ceded | (38,435 | ) | (50,253 | ) | 21,001 | (67,687 | ) | |||||||||
| Net premiums written | 86,269 | 177,072 | — | 263,341 | ||||||||||||
| Change in unearned premiums | 113,499 | (2,123 | ) | — | 111,376 | |||||||||||
| Net premiums earned | 199,768 | 174,949 | — | 374,717 | ||||||||||||
| Losses and loss expenses | 45,987 | 88,165 | — | 134,152 | ||||||||||||
| Policy acquisition costs | 32,648 | 33,106 | (1,518 | ) | 64,236 | |||||||||||
| General and administrative expenses | 17,987 | 23,424 | 4,625 | 46,036 | ||||||||||||
| Share compensation expenses | 1,766 | 1,371 | 2,725 | 5,862 | ||||||||||||
Underwriting income (loss) | $ | 101,380 | $ | 28,883 | $ | (5,832 | ) | $ | 124,431 | |||||||
| Net investment income | 23,420 | 7,629 | (1,517 | ) | 29,532 | |||||||||||
| Net realized gains (losses) on investments | 5,397 | 32 | — | 5,429 | ||||||||||||
| Net unrealized gains (losses) on investments | 40,893 | 9,544 | — | 50,437 | ||||||||||||
| Other income | 1,847 | 772 | (1,518 | ) | 1,101 | |||||||||||
| Finance expenses | (393 | ) | (3,926 | ) | (6,938 | ) | (11,257 | ) | ||||||||
| Foreign exchange gains (losses) | 739 | (5,983 | ) | — | (5,244 | ) | ||||||||||
| Gain on bargain purchase, net of expenses | — | — | 302,950 | 302,950 | ||||||||||||
Net income (loss) before taxes | 173,283 | 36,951 | 287,145 | 497,379 | ||||||||||||
| Tax (expense) benefit | (41 | ) | 1,840 | — | 1,799 | |||||||||||
Net income (loss) | $ | 173,242 | $ | 38,791 | $ | 287,145 | $ | 499,178 | ||||||||
Selected ratios (1) | ||||||||||||||||
| Losses and loss expenses | 23.0 | % | 50.4 | % | 35.8 | % | ||||||||||
| Policy acquisition costs | 16.3 | % | 18.9 | % | 17.1 | % | ||||||||||
| General and administrative expenses | 9.9 | % | 14.2 | % | 13.8 | % | ||||||||||
| Expense ratio | 26.2 | % | 33.1 | % | 30.9 | % | ||||||||||
Combined ratio | 49.2 | % | 83.5 | % | 66.7 | % | ||||||||||
Total assets | $ | 5,087,544 | $ | 2,049,647 | $ | 39,880 | $ | 7,177,071 | ||||||||
| (1) | Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses. |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
9
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three months ended September 30, 2008
Consolidated Statements of Operations
For the three months ended September 30, 2008
(Expressed in thousands of U.S. dollars, except share and per share information)
| Corporate & | ||||||||||||||||
| Three months ended September 30, 2008 | Validus Re | Talbot | Eliminations | Total | ||||||||||||
| Gross premiums written | $ | 125,029 | $ | 157,307 | $ | (13,100 | ) | $ | 269,236 | |||||||
| Reinsurance premiums ceded | (36,286 | ) | (11,953 | ) | 13,100 | (35,139 | ) | |||||||||
| Net premiums written | 88,743 | 145,354 | — | 234,097 | ||||||||||||
| Change in unearned premiums | 92,653 | 12,576 | — | 105,229 | ||||||||||||
| Net premiums earned | 181,396 | 157,930 | — | 339,326 | ||||||||||||
| Losses and loss expenses | 217,081 | 101,383 | — | 318,464 | ||||||||||||
| Policy acquisition costs | 26,520 | 34,026 | (121 | ) | 60,425 | |||||||||||
| General and administrative expenses | 7,972 | 17,851 | 4,297 | 30,120 | ||||||||||||
| Share compensation expenses | 1,809 | 1,164 | 3,039 | 6,012 | ||||||||||||
Underwriting income (loss) | $ | (71,986 | ) | $ | 3,506 | $ | (7,215 | ) | $ | (75,695 | ) | |||||
| Net investment income | 25,984 | 11,737 | (1,342 | ) | 36,379 | |||||||||||
| Net realized gains (losses) on investments | (12,528 | ) | (1,139 | ) | — | (13,667 | ) | |||||||||
| Net unrealized gains (losses) on investments | (15,946 | ) | 1,297 | — | (14,649 | ) | ||||||||||
| Other income | 121 | 1,269 | (121 | ) | 1,269 | |||||||||||
| Finance expenses | (213 | ) | (7,201 | ) | (7,103 | ) | (14,517 | ) | ||||||||
| Foreign exchange (losses) | (22,919 | ) | (22,014 | ) | — | (44,933 | ) | |||||||||
Net income (loss) before taxes | (97,487 | ) | (12,545 | ) | (15,781 | ) | (125,813 | ) | ||||||||
| Tax (expense) | (31 | ) | (456 | ) | — | (487 | ) | |||||||||
Net income (loss) | $ | (97,518 | ) | $ | (13,001 | ) | $ | (15,781 | ) | $ | (126,300 | ) | ||||
Selected ratios (1): | ||||||||||||||||
| Losses and loss expenses | 119.7 | % | 64.2 | % | 93.9 | % | ||||||||||
| Policy acquisition costs | 14.6 | % | 21.5 | % | 17.8 | % | ||||||||||
| General and administrative expenses | 5.4 | % | 12.0 | % | 10.6 | % | ||||||||||
| Expense ratio | 20.0 | % | 33.5 | % | 28.4 | % | ||||||||||
Combined ratio | 139.7 | % | 97.7 | % | 122.3 | % | ||||||||||
Total assets | $ | 2,741,721 | $ | 1,763,614 | $ | 4,261 | $ | 4,509,596 | ||||||||
| (1) | Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses. |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
10
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the nine months ended September 30, 2009
Consolidated Statements of Operations
For the nine months ended September 30, 2009
(Expressed in thousands of U.S. dollars, except share and per share information)
The following tables summarize the underwriting results of our operating segments and corporate segment:
| Corporate & | ||||||||||||||||
| Nine months ended September 30, 2009 | Validus Re | Talbot | Eliminations | Total | ||||||||||||
| Gross premiums written | $ | 734,390 | $ | 690,357 | $ | (58,796 | ) | $ | 1,365,951 | |||||||
| Reinsurance premiums ceded | (94,794 | ) | (166,491 | ) | 58,796 | (202,489 | ) | |||||||||
| Net premiums written | 639,596 | 523,866 | — | 1,163,462 | ||||||||||||
| Change in unearned premiums | (101,684 | ) | (40,102 | ) | — | (141,786 | ) | |||||||||
| Net premiums earned | 537,912 | 483,764 | — | 1,021,676 | ||||||||||||
| Losses and loss expenses | 142,570 | 248,166 | — | 390,736 | ||||||||||||
| Policy acquisition costs | 90,346 | 102,378 | (2,599 | ) | 190,125 | |||||||||||
| General and administrative expenses | 45,928 | 65,565 | 13,822 | 125,315 | ||||||||||||
| Share compensation expenses | 4,986 | 5,804 | 8,058 | 18,848 | ||||||||||||
Underwriting income (loss) | $ | 254,082 | $ | 61,851 | $ | (19,281 | ) | $ | 296,652 | |||||||
| Net investment income | 64,989 | 22,816 | (4,538 | ) | 83,267 | |||||||||||
| Net realized (losses) gains on investments | (14,282 | ) | (6,360 | ) | — | (20,642 | ) | |||||||||
| Net unrealized gains (losses) on investments | 95,693 | 14,146 | — | 109,839 | ||||||||||||
| Other income | 3,034 | 2,440 | (2,599 | ) | 2,875 | |||||||||||
| Finance expenses | (1,233 | ) | (7,688 | ) | (20,811 | ) | (29,732 | ) | ||||||||
| Foreign exchange (losses) gains | (641 | ) | (427 | ) | 56 | (1,012 | ) | |||||||||
| Gain on bargain purchase, net of expenses | — | — | 287,099 | 287,099 | ||||||||||||
Net income before taxes | 401,642 | 86,778 | 239,926 | 728,346 | ||||||||||||
| Tax (expense) benefit | (107 | ) | 3,408 | — | 3,301 | |||||||||||
Net income | $ | 401,535 | $ | 90,186 | $ | 239,926 | $ | 731,647 | ||||||||
Selected ratios (1) | ||||||||||||||||
| Losses and loss expenses | 26.5 | % | 51.3 | % | 38.2 | % | ||||||||||
| Policy acquisition costs | 16.8 | % | 21.2 | % | 18.6 | % | ||||||||||
| General and administrative expenses | 9.5 | % | 14.8 | % | 14.1 | % | ||||||||||
| Expense ratio | 26.3 | % | 36.0 | % | 32.7 | % | ||||||||||
Combined ratio | 52.8 | % | 87.3 | % | 70.9 | % | ||||||||||
Total assets | $ | 5,087,544 | $ | 2,049,647 | $ | 39,880 | $ | 7,177,071 | ||||||||
| (1) | Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses. |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
11
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the nine months ended September 30, 2008
Consolidated Statements of Operations
For the nine months ended September 30, 2008
(Expressed in thousands of U.S. dollars, except share and per share information)
| Corporate & | ||||||||||||||||
| Nine months ended September 30, 2008 | Validus Re | Talbot | Eliminations | Total | ||||||||||||
| Gross premiums written | $ | 643,898 | $ | 556,335 | $ | (29,484 | ) | $ | 1,170,749 | |||||||
| Reinsurance premiums ceded | (61,237 | ) | (89,685 | ) | 29,484 | (121,438 | ) | |||||||||
| Net premiums written | 582,661 | 466,650 | — | 1,049,311 | ||||||||||||
| Change in unearned premiums | (93,498 | ) | (15,325 | ) | — | (108,823 | ) | |||||||||
| Net premiums earned | 489,163 | 451,325 | — | 940,488 | ||||||||||||
| Losses and loss expenses | 324,673 | 255,905 | — | 580,578 | ||||||||||||
| Policy acquisition costs | 72,232 | 101,458 | (145 | ) | 173,545 | |||||||||||
| General and administrative expenses | 27,306 | 58,561 | 15,272 | 101,139 | ||||||||||||
| Share compensation expenses | 4,632 | 3,266 | 11,920 | 19,818 | ||||||||||||
Underwriting income (loss) | $ | 60,320 | $ | 32,135 | $ | (27,047 | ) | $ | 65,408 | |||||||
| Net investment income | 76,736 | 34,445 | (2,324 | ) | 108,857 | |||||||||||
| Realized gain on repurchase of debentures | — | — | 8,752 | 8,752 | ||||||||||||
| Net realized (losses) gains on investments | (13,711 | ) | 5,363 | — | (8,348 | ) | ||||||||||
| Net unrealized gains (losses) on investments | (58,617 | ) | (13,991 | ) | — | (72,608 | ) | |||||||||
| Other income | 145 | 3,666 | (145 | ) | 3,666 | |||||||||||
| Finance expenses | (655 | ) | (25,821 | ) | (22,320 | ) | (48,796 | ) | ||||||||
| Foreign exchange (losses) | (15,647 | ) | (20,196 | ) | — | (35,843 | ) | |||||||||
Net income (loss) before taxes | 48,571 | 15,601 | (43,084 | ) | 21,088 | |||||||||||
| Tax (expense) | (78 | ) | (4,914 | ) | — | (4,992 | ) | |||||||||
Net income (loss) | $ | 48,493 | $ | 10,687 | $ | (43,084 | ) | $ | 16,096 | |||||||
Selected ratios (1) | ||||||||||||||||
| Losses and loss expenses | 66.4 | % | 56.7 | % | 61.7 | % | ||||||||||
| Policy acquisition costs | 14.8 | % | 22.5 | % | 18.5 | % | ||||||||||
| General and administrative expenses | 6.5 | % | 13.7 | % | 12.9 | % | ||||||||||
| Expense ratio | 21.3 | % | 36.2 | % | 31.4 | % | ||||||||||
Combined ratio | 87.7 | % | 92.9 | % | 93.1 | % | ||||||||||
Total assets | $ | 2,741,721 | $ | 1,763,614 | $ | 4,261 | $ | 4,509,596 | ||||||||
| (1) | Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses. |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
12
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 and nine months ended September 30, 2009 and 2008
(Expressed in thousands of U.S. dollars, except share and per share information)
Non-GAAP Financial Measure Reconciliation
Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity
For the three and nine months ended September 30, 2009 and 2008
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss) | $ | 499,178 | $ | (126,300 | ) | $ | 731,647 | $ | 16,096 | |||||||
| Adjustments for: | ||||||||||||||||
| Gain on bargain purchase, net of expenses | (302,950 | ) | — | (287,099 | ) | — | ||||||||||
| Realized gain on repurchase of debentures | — | — | — | (8,752 | ) | |||||||||||
| Net realized (gains) losses on investments | (5,429 | ) | 13,667 | 20,642 | 8,348 | |||||||||||
| Net unrealized (gains) losses on investments | (50,437 | ) | 14,649 | (109,839 | ) | 72,608 | ||||||||||
| Foreign exchange losses | 5,244 | 44,933 | 1,012 | 35,843 | ||||||||||||
| Net operating income (loss) | 145,606 | (53,051 | ) | 356,363 | 124,143 | |||||||||||
| Less: Dividends and distributions | ||||||||||||||||
| declared on outstanding warrants | (1,591 | ) | (1,739 | ) | (4,917 | ) | (5,217 | ) | ||||||||
Net operating income (loss), adjusted | $ | 144,015 | $ | (54,790 | ) | $ | 351,446 | $ | 118,926 | |||||||
Net income (loss) per share — diluted | $ | 5.21 | $ | (1.71 | ) | $ | 8.65 | $ | 0.14 | |||||||
| Adjustments for: | ||||||||||||||||
| Gain on bargain purchase, net of expenses | (3.16 | ) | — | (3.39 | ) | — | ||||||||||
| Realized gain on repurchase of debentures | — | — | — | (0.11 | ) | |||||||||||
| Net realized (gains) losses on investments | (0.06 | ) | 0.18 | 0.24 | 0.11 | |||||||||||
| Net unrealized (gains) losses on investments | (0.53 | ) | 0.20 | (1.30 | ) | 0.93 | ||||||||||
| Foreign exchange losses | 0.06 | 0.60 | 0.01 | 0.46 | ||||||||||||
Net operating income (loss) per share — diluted | $ | 1.52 | $ | (0.73 | ) | $ | 4.21 | $ | 1.53 | |||||||
Weighted average number of common shares and common share equivalents — diluted | 95,834,809 | 74,864,724 | 84,626,505 | 77,922,718 | ||||||||||||
Average shareholders’ equity | 3,059,081 | 1,986,696 | 2,519,970 | 1,974,713 | ||||||||||||
Annualized operating return on average equity | 19.0 | % | (10.7 | )% | 18.9 | % | 8.4 | % | ||||||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
13
Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation
Diluted Book Value Per Common Share
As at September 30, 2009 and December 31, 2008
(Expressed in thousands of U.S. dollars, except share and per share information)
Non-GAAP Financial Measure Reconciliation
Diluted Book Value Per Common Share
As at September 30, 2009 and December 31, 2008
| As at September 30, 2009 | ||||||||||||||||
| Book value per | ||||||||||||||||
| Equity amount | Shares | Exercise price | share | |||||||||||||
Book value per common share | ||||||||||||||||
| Total shareholders’ equity | $ | 3,966,192 | 131,107,196 | $ | 30.25 | |||||||||||
Diluted book value per common share | ||||||||||||||||
| Total shareholders’ equity | 3,966,192 | 131,107,196 | ||||||||||||||
| Assumed exercise of outstanding warrants | 139,576 | 7,952,138 | $ | 17.55 | ||||||||||||
| Assumed exercise of outstanding stock options | 68,368 | 3,430,816 | $ | 19.93 | ||||||||||||
| Unvested restricted shares | — | 3,383,298 | ||||||||||||||
Diluted book value per common share | $ | 4,174,136 | 145,873,448 | $ | 28.61 | |||||||||||
| As at December 31, 2008 | ||||||||||||||||
| Book value per | ||||||||||||||||
| Equity amount | Shares | Exercise price | 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 stock 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 | |||||||||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
14
Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended September 30, 2009 (Expressed in thousands of U.S. dollars, except share and per share information)
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended September 30, 2009
| Historical | Historical | Pro Forma | ||||||||||||||
| Validus | IPC | Purchase | Pro Forma | |||||||||||||
| Holdings, Ltd. | Holdings, Ltd. | Adjustments | Consolidated | |||||||||||||
Underwriting income | ||||||||||||||||
| Gross premiums written | $ | 331,028 | $ | 25,443 | $ | — | $ | 356,471 | ||||||||
| Reinsurance premiums ceded | (67,687 | ) | (179 | ) | — | (67,866 | ) | |||||||||
| Net premiums written | 263,341 | 25,264 | — | 288,605 | ||||||||||||
| Change in unearned premiums | 111,376 | 42,081 | — | 153,457 | ||||||||||||
| Net premiums earned | 374,717 | 67,345 | — | 442,062 | ||||||||||||
Underwriting deductions | ||||||||||||||||
| Losses and loss expenses | 134,152 | 2,101 | — | 136,253 | ||||||||||||
| Policy acquisition costs | 64,236 | 6,890 | — | 71,126 | ||||||||||||
| General and administrative expenses | 46,036 | 3,880 | — | 49,916 | ||||||||||||
| Share compensation expenses | 5,862 | 1,750 | — | 7,612 | ||||||||||||
| Total underwriting deductions | 250,286 | 14,621 | — | 264,907 | ||||||||||||
Underwriting income | 124,431 | 52,724 | — | 177,155 | ||||||||||||
| Net investment income | 29,532 | 13,650 | (3,731 | ) | 39,451 | |||||||||||
| Other income (expense) | 1,101 | (57 | ) | — | 1,044 | |||||||||||
| Finance expenses | (11,257 | ) | — | — | (11,257 | ) | ||||||||||
Operating income before income taxes | 143,807 | 66,317 | (3,731 | ) | 206,393 | |||||||||||
| Tax benefit | 1,799 | — | — | 1,799 | ||||||||||||
Net operating income | 145,606 | 66,317 | (3,731 | ) | 208,192 | |||||||||||
| Gain on bargain purchase, net of expenses | 302,950 | (69,700 | ) | (233,250 | ) | — | ||||||||||
| Net realized gains on investments | 5,429 | 5,664 | — | 11,093 | ||||||||||||
| Net unrealized gains on investments | 50,437 | 64,342 | — | 114,779 | ||||||||||||
| Foreign exchange (losses) gains | (5,244 | ) | 6,435 | — | 1,191 | |||||||||||
Net income | 499,178 | 73,058 | (236,981 | ) | 335,255 | |||||||||||
| Warrant dividend | (1,591 | ) | — | — | (1,591 | ) | ||||||||||
Net income available to common shareholders | $ | 497,587 | $ | 73,058 | $ | (236,981 | ) | $ | 333,664 | |||||||
Earnings per share | ||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic | 92,492,373 | 38,545,538 | 131,037,911 | |||||||||||||
| Diluted | 95,834,809 | 38,545,538 | 134,380,347 | |||||||||||||
| Basic earnings per common share | $ | 5.38 | $ | 2.55 | ||||||||||||
| Diluted earnings per common share | $ | 5.21 | $ | 2.49 | ||||||||||||
| Operating income per share | $ | 1.56 | $ | 1.58 | ||||||||||||
| Operating income per diluted share | $ | 1.52 | $ | 1.55 | ||||||||||||
| Notes: | ||
| (a) | Operating results of IPC have been included under Historical Validus Holdings, Ltd. from September 4, 2009, the date of acquisition. Historical IPC Holdings, Ltd. includes operating results for eight months only. | |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
15
Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the nine months ended September 30, 2009 (Expressed in thousands of U.S. dollars, except share and per share information)
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the nine months ended September 30, 2009
| Historical | Historical | Pro Forma | ||||||||||||||
| Validus | IPC | Purchase | Pro Forma | |||||||||||||
| Holdings, Ltd. | Holdings, Ltd. | Adjustments | Consolidated | |||||||||||||
Underwriting income | ||||||||||||||||
| Gross premiums written | $ | 1,365,951 | $ | 387,602 | $ | (265 | ) | $ | 1,753,288 | |||||||
| Reinsurance premiums ceded | (202,489 | ) | (6,794 | ) | 265 | (209,018 | ) | |||||||||
| Net premiums written | 1,163,462 | 380,808 | — | 1,544,270 | ||||||||||||
| Change in unearned premiums | (141,786 | ) | (118,557 | ) | — | (260,343 | ) | |||||||||
| Net premiums earned | 1,021,676 | 262,251 | — | 1,283,927 | ||||||||||||
Underwriting deductions | ||||||||||||||||
| Losses and loss expenses | 390,736 | 32,793 | — | 423,529 | ||||||||||||
| Policy acquisition costs | 190,125 | 26,634 | — | 216,759 | ||||||||||||
| General and administrative expenses | 125,315 | 23,942 | — | 149,257 | ||||||||||||
| Share compensation expenses | 18,848 | 6,714 | — | 25,562 | ||||||||||||
| Total underwriting deductions | 725,024 | 90,083 | — | 815,107 | ||||||||||||
Underwriting income | 296,652 | 172,168 | — | 468,820 | ||||||||||||
| Net investment income | 83,267 | 56,795 | (11,624 | ) | 128,438 | |||||||||||
| Other income (expense) | 2,875 | (31 | ) | — | 2,844 | |||||||||||
| Finance expenses | (29,732 | ) | (383 | ) | — | (30,115 | ) | |||||||||
Operating income before income taxes | 353,062 | 228,549 | (11,624 | ) | 569,987 | |||||||||||
| Tax benefit | 3,301 | — | — | 3,301 | ||||||||||||
Net operating income | 356,363 | 228,549 | (11,624 | ) | 573,288 | |||||||||||
| Gain on bargain purchase, net of expenses | 287,099 | (90,151 | ) | (196,948 | ) | — | ||||||||||
| Net realized (losses) gains on investments | (20,642 | ) | 6,826 | — | (13,816 | ) | ||||||||||
| Net unrealized gains on investments | 109,839 | 104,993 | — | 214,832 | ||||||||||||
| Foreign exchange (losses) gains | (1,012 | ) | 4,968 | — | 3,956 | |||||||||||
Net income | 731,647 | 255,185 | (208,572 | ) | 778,260 | |||||||||||
| Warrant dividend | (4,917 | ) | — | — | (4,917 | ) | ||||||||||
Net income available to common shareholders | $ | 726,730 | $ | 255,185 | $ | (208,572 | ) | $ | 773,343 | |||||||
Earnings per share | ||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic | 81,458,329 | 49,219,687 | 130,678,016 | |||||||||||||
| Diluted | 84,626,505 | 49,219,687 | 133,846,192 | |||||||||||||
| Basic earnings per common share | $ | 8.92 | $ | 5.92 | ||||||||||||
| Diluted earnings per common share | $ | 8.65 | $ | 5.81 | ||||||||||||
| Operating income per share | $ | 4.31 | $ | 4.35 | ||||||||||||
| Operating income per diluted share | $ | 4.21 | $ | 4.28 | ||||||||||||
| Notes: | ||
| (a) | Operating results of IPC have been included under Historical Validus Holdings, Ltd. from September 4, 2009, the date of acquisition. Historical IPC Holdings, Ltd. includes operating results for eight months only. | |
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
16
Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended June 30, 2009 (Expressed in thousands of U.S. dollars, except share and per share information)
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended June 30, 2009
| Historical | Historical | Pro Forma | ||||||||||||||
| Validus | IPC | Purchase | Pro Forma | |||||||||||||
| Holdings, Ltd. | Holdings, Ltd. | Adjustments | Consolidated | |||||||||||||
Underwriting income | ||||||||||||||||
| Gross premiums written | $ | 425,032 | $ | 127,549 | $ | — | $ | 552,581 | ||||||||
| Reinsurance premiums ceded | (62,291 | ) | (2,195 | ) | — | (64,486 | ) | |||||||||
| Net premiums written | 362,741 | 125,354 | — | 488,095 | ||||||||||||
| Change in unearned premiums | (34,541 | ) | (29,156 | ) | — | (63,697 | ) | |||||||||
| Net premiums earned | 328,200 | 96,198 | — | 424,398 | ||||||||||||
Underwriting deductions | ||||||||||||||||
| Losses and loss expenses | 124,751 | (8,417 | ) | — | 116,334 | |||||||||||
| Policy acquisition costs | 64,438 | 9,906 | — | 74,344 | ||||||||||||
| General and administrative expenses | 41,200 | 9,908 | — | 51,108 | ||||||||||||
| Share compensation expenses | 5,632 | 2,475 | — | 8,107 | ||||||||||||
| Total underwriting deductions | 236,021 | 13,872 | — | 249,893 | ||||||||||||
Underwriting Income | 92,179 | 82,326 | — | 174,505 | ||||||||||||
| Net investment income | 26,963 | 21,279 | (3,702 | ) | 44,540 | |||||||||||
| Other income | 1,017 | 19 | — | 1,036 | ||||||||||||
| Finance expenses | (10,752 | ) | — | — | (10,752 | ) | ||||||||||
Operating income before income taxes | 109,407 | 103,624 | (3,702 | ) | 209,329 | |||||||||||
| Tax benefit | 976 | — | — | 976 | ||||||||||||
Net operating income | 110,383 | 103,624 | (3,702 | ) | 210,305 | |||||||||||
| Gain on bargain purchase, net of expenses | (15,851 | ) | (8,813 | ) | 24,664 | — | ||||||||||
| Net realized (losses) gains on investments | (2,650 | ) | 5,080 | — | 2,430 | |||||||||||
| Net unrealized gains on investments | 37,249 | 72,305 | — | 109,554 | ||||||||||||
| Foreign exchange gains | 8,432 | 1,679 | — | 10,111 | ||||||||||||
Net income | 137,563 | 173,875 | 20,962 | 332,400 | ||||||||||||
| Warrant dividend | (1,590 | ) | — | — | (1,590 | ) | ||||||||||
Net income available to common shareholders | $ | 135,973 | $ | 173,875 | $ | 20,962 | $ | 330,810 | ||||||||
Earnings per share | ||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic | 76,138,038 | 54,679,419 | 130,817,457 | |||||||||||||
| Diluted | 78,942,065 | 55,036,063 | 133,978,128 | |||||||||||||
| Basic earnings per common share | $ | 1.79 | $ | 2.53 | ||||||||||||
| Diluted earnings per common share | $ | 1.74 | $ | 2.48 | ||||||||||||
| Operating income per share | $ | 1.43 | $ | 1.60 | ||||||||||||
| Operating income per diluted share | $ | 1.40 | $ | 1.57 | ||||||||||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
17
Validus Holdings, Ltd.
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended March 31, 2009 (Expressed in thousands of U.S. dollars, except share and per share information)
Pro Forma Combined — Validus Holdings, Ltd. and IPC Holdings, Ltd.
Pro Forma Combined Statement of Operations
For the three months ended March 31, 2009
| Historical | Historical | Pro Forma | ||||||||||||||
| Validus | IPC | Purchase | Pro Forma | |||||||||||||
| Holdings, Ltd. | Holdings, Ltd. | Adjustments | Consolidated | |||||||||||||
Underwriting income | ||||||||||||||||
| Gross premiums written | $ | 609,892 | $ | 234,610 | $ | (265 | ) | $ | 844,237 | |||||||
| Reinsurance premiums ceded | (72,512 | ) | (1,734 | ) | 265 | (73,981 | ) | |||||||||
| Net premiums written | 537,380 | 232,876 | — | 770,256 | ||||||||||||
| Change in unearned premiums | (218,621 | ) | (134,168 | ) | — | (352,789 | ) | |||||||||
| Net premiums earned | 318,759 | 98,708 | — | 417,467 | ||||||||||||
Underwriting deductions | ||||||||||||||||
| Losses and loss expenses | 131,834 | 39,109 | — | 170,943 | ||||||||||||
| Policy acquisition costs | 61,449 | 9,838 | — | 71,287 | ||||||||||||
| General and administrative expenses | 38,079 | 10,154 | — | 48,233 | ||||||||||||
| Share compensation expenses | 7,354 | 2,489 | — | 9,843 | ||||||||||||
| Total underwriting deductions | 238,716 | 61,590 | — | 300,306 | ||||||||||||
Underwriting income | 80,043 | 37,118 | — | 117,161 | ||||||||||||
| Net investment income | 26,772 | 21,866 | (4,191 | ) | 44,447 | |||||||||||
| Other income | 757 | 7 | — | 764 | ||||||||||||
| Finance expenses | (7,723 | ) | (383 | ) | — | (8,106 | ) | |||||||||
Operating income before income taxes | 99,849 | 58,608 | (4,191 | ) | 154,266 | |||||||||||
| Tax benefit | 526 | — | — | 526 | ||||||||||||
Net operating income | 100,375 | 58,608 | (4,191 | ) | 154,792 | |||||||||||
| Gain on bargain purchase, net of expenses | — | (11,638 | ) | 11,638 | — | |||||||||||
| Net realized losses on investments | (23,421 | ) | (3,918 | ) | — | (27,339 | ) | |||||||||
| Net unrealized gains (losses) on investments | 22,153 | (31,654 | ) | — | (9,501 | ) | ||||||||||
| Foreign exchange losses | (4,200 | ) | (3,146 | ) | — | (7,346 | ) | |||||||||
Net income | 94,907 | 8,252 | 7,447 | 110,606 | ||||||||||||
| Warrant dividend | (1,736 | ) | — | — | (1,736 | ) | ||||||||||
Net income available to common shareholders | $ | 93,171 | $ | 8,252 | $ | 7,447 | $ | 108,870 | ||||||||
Earnings per share | ||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding | ||||||||||||||||
| Basic | 75,744,577 | 54,425,368 | 130,169,945 | |||||||||||||
| Diluted | 79,102,643 | 54,959,647 | 134,062,290 | |||||||||||||
| Basic earnings per common share | $ | 1.23 | $ | 0.84 | ||||||||||||
| Diluted earnings per common share | $ | 1.20 | $ | 0.83 | ||||||||||||
| Operating income per share | $ | 1.30 | $ | 1.18 | ||||||||||||
| Operating income per diluted share | $ | 1.27 | $ | 1.15 | ||||||||||||
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
18
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) Validus’ limited operating history; 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 Talbot, IPC or other 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; 17) availability of reinsurance and retrocessional coverage; and 18) failure to realize the anticipated benefits of the IPC acquisition, including as a result of failure or delay in integrating the businesses of Validus and IPC, 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 the 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 parties 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), net operating income per share, 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 Statements of Operations” above. Underwriting income indicates the performance of the Company’s core underwriting function, excluding revenues and 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
Validus Holdings, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
19
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, Net Operating 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 above 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, Ltd., 19 Par-la-Ville Road, Hamilton, Bermuda HM11
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
Tel: 441.278.9000 Fax: 441.278.9090
www.validusholdings.com
20