Exhibit 99.1
| Validus Holdings, Ltd. |
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| 29 Richmond Road |
| Pembroke, HM08 Bermuda |
| Telephone: (441) 278-9000 |
| Facsimile: (441) 278-9090 |
| Website: www.validusholdings.com |
| Mailing address: Suite 1790 48 Par-la-Ville Road |
| Hamilton, HM11 Bermuda |
Validus Holdings, Ltd.
Explanatory Notes
Basis of Presentation
· This supplement is for information purposes only. It should be read in conjunction with documents filed by Validus Holdings, Ltd. with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act 1934.
· All financial information contained herein is unaudited, however, certain information contained herein relating to the year ended December 31, 2011 is derived from or agrees to audited financial information.
· Unless otherwise noted, dollar amounts are in thousands of U.S. dollars, except for ratio information.
· On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company during 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
· During the first quarter of 2012, to better align the Company’s operating and reporting structure with its current strategy, there was a change in the segment structure. This change was to include the AlphaCat group of companies as a separate operating segment. “AlphaCat segment” was included as an additional segment and includes the company’s investment in AlphaCat Re 2011. Prior period comparatives have been restated to reflect the change in segmentation.
Notes on Non-GAAP Measures
· In presenting the Company’s results herein, management has included certain schedules containing net operating income (loss) and underwriting income (loss) 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. We believe that these measures are important to investors and other interested parties. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP.
· The underwriting results of an insurance or reinsurance company are often measured by reference to its underwriting income because underwriting income indicates the performance of the company’s core underwriting function. Underwriting income is reconciled to net income by the addition or subtraction of net investment income (loss), finance expenses, transaction expenses, net realized gains (losses) on investments, net unrealized gains (losses) on investments and foreign exchange gains (losses).
· Net operating income (loss) available (attributable) to Validus is calculated based on net income (loss) available (attributable) to Validus 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. Net income is the most directly comparable GAAP measure. Net operating income focuses on the underlying fundamentals of our operations without the influence of realized gains (losses) from the sale of investments, net unrealized gains on investments, translation of non-US$ currencies 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.
· A reconciliation to the most comparable GAAP measure for net operating income can be found in the company’s latest earnings press release.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Three months ended March 31, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
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| Three Months Ended March 31, 2011 |
| Three Months Ended March 31, 2011 |
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| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
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Underwriting income |
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Gross premiums written |
| $ | 604,088 |
| $ | 7,150 |
| — |
| $ | 611,238 |
| $ | 263,057 |
| $ | (24,399 | ) | $ | 849,896 |
| $ | 611,238 |
| $ | 263,057 |
| $ | (24,399 | ) | $ | 849,896 |
| |
Reinsurance premiums ceded |
| (46,805 | ) | — |
| — |
| (46,805 | ) | (87,414 | ) | 24,399 |
| (109,820 | ) | (46,805 | ) | (87,414 | ) | 24,399 |
| (109,820 | ) | |||||||||||
Net premiums written |
| 557,283 |
| 7,150 |
| — |
| 564,433 |
| 175,643 |
| — |
| 740,076 |
| 564,433 |
| 175,643 |
| — |
| 740,076 |
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Change in unearned premiums |
| (308,340 | ) | (3,784 | ) | — |
| (312,124 | ) | 1,581 |
| — |
| (310,543 | ) | (312,124 | ) | 1,581 |
| — |
| (310,543 | ) | |||||||||||
Net premiums earned |
| 248,943 |
| 3,366 |
| — |
| 252,309 |
| 177,224 |
| — |
| 429,533 |
| 252,309 |
| 177,224 |
| — |
| 429,533 |
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Underwriting deductions |
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Losses and loss expenses |
| 310,544 |
| — |
| — |
| 310,544 |
| 165,654 |
| — |
| 476,198 |
| 310,544 |
| 165,654 |
| 40,998 |
| 476,198 |
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Policy acquisition costs |
| 39,750 |
| 316 |
| — |
| 40,066 |
| 37,216 |
| 14 |
| 77,296 |
| 40,066 |
| 37,216 |
| 14 |
| 77,296 |
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General and administrative expenses |
| 10,657 |
| 894 |
| 1,347 |
| 12,898 |
| 28,722 |
| 6,857 |
| 48,477 |
| 10,657 |
| 28,722 |
| 9,098 |
| 48,477 |
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Share compensation expenses |
| 3,105 |
| 27 |
| 328 |
| 3,460 |
| 2,719 |
| 5,870 |
| 12,049 |
| 3,105 |
| 2,719 |
| 6,225 |
| 12,049 |
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Total underwriting deductions |
| 364,056 |
| 1,237 |
| 1,675 |
| 366,968 |
| 234,311 |
| 12,741 |
| 614,020 |
| 364,372 |
| 234,311 |
| 15,337 |
| 614,020 |
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Underwriting (loss) income |
| $ | (115,113 | ) | $ | 2,129 |
| $ | (1,675 | ) | $ | (114,659 | ) | $ | (57,087 | ) | $ | (12,741 | ) | $ | (184,487 | ) | $ | (112,063 | ) | $ | (57,087 | ) | $ | (15,337 | ) | $ | (184,487 | ) |
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Net investment income |
| 24,432 |
| 1,219 |
| — |
| 25,651 |
| 6,590 |
| (2,266 | ) | 29,975 |
| 25,651 |
| 6,590 |
| (2,266 | ) | 29,975 |
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Other income |
| 1,418 |
| 641 |
| 230 |
| 2,289 |
| 3,017 |
| (3,700 | ) | 1,606 |
| 1,433 |
| 3,017 |
| (2,844 | ) | 1,606 |
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Finance expenses |
| (1,713 | ) | — |
| — |
| (1,713 | ) | (63 | ) | (12,225 | ) | (14,001 | ) | (1,713 | ) | (63 | ) | (12,225 | ) | (14,001 | ) | |||||||||||
Operating (loss) income before taxes |
| (90,976 | ) | 3,989 |
| (1,445 | ) | (88,432 | ) | (47,543 | ) | (30,932 | ) | (166,907 | ) | (86,692 | ) | (47,543 | ) | (32,672 | ) | (166,907 | ) | |||||||||||
Tax (expense) benefit |
| (2 | ) | — |
| — |
| (2 | ) | 1,793 |
| (332 | ) | 1,459 |
| (2 | ) | 1,793 |
| (332 | ) | 1,459 |
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Net operating (loss) income (a) |
| $ | (90,978 | ) | $ | 3,989 |
| $ | (1,445 | ) | $ | (88,434 | ) | $ | (45,750 | ) | $ | (31,264 | ) | $ | (165,448 | ) | $ | (86,694 | ) | $ | (45,750 | ) | $ | (33,004 | ) | $ | (165,448 | ) |
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Net realized gains on investments |
| 3,901 |
| 18 |
| — |
| 3,919 |
| 2,460 |
| — |
| 6,379 |
| 3,919 |
| 2,460 |
| — |
| 6,379 |
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Net unrealized (losses) on investments |
| (7,676 | ) | (839 | ) | — |
| (8,515 | ) | (4,313 | ) | — |
| (12,828 | ) | (8,515 | ) | (4,313 | ) | — |
| (12,828 | ) | |||||||||||
Foreign exchange (losses) gains |
| (4,270 | ) | (90 | ) | — |
| (4,360 | ) | 3,901 |
| (8 | ) | (467 | ) | (4,360 | ) | 3,901 |
| (8 | ) | (467 | ) | |||||||||||
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Net (loss) income |
| $ | (99,023 | ) | $ | 3,078 |
| $ | (1,445 | ) | $ | (97,390 | ) | $ | (43,702 | ) | $ | (31,272 | ) | $ | (172,364 | ) | $ | (95,650 | ) | $ | (43,702 | ) | $ | (33,012 | ) | $ | (172,364 | ) |
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Selected ratios: |
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Net premiums written / Gross premiums written |
| 92.3 | % | 100.0 | % |
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| 66.8 | % |
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| 87.1 | % | 92.3 | % | 66.8 | % |
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| 87.1 | % | |||||||||||
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Losses and loss expenses |
| 124.7 | % | 0.0 | % |
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| 93.5 | % |
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| 110.9 | % | 123.1 | % | 93.5 | % |
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| 110.9 | % | |||||||||||
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Policy acquisition costs |
| 16.0 | % | 9.4 | % |
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| 21.0 | % |
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| 18.0 | % | 15.9 | % | 21.0 | % |
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| 18.0 | % | |||||||||||
General and administrative expenses (b) |
| 5.5 | % | 27.4 | % |
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| 17.7 | % |
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| 14.1 | % | 5.5 | % | 17.7 | % |
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| 14.1 | % | |||||||||||
Expense ratio |
| 21.5 | % | 36.7 | % |
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| 38.7 | % |
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| 32.1 | % | 21.4 | % | 38.7 | % |
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| 32.1 | % | |||||||||||
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Combined ratio |
| 146.2 | % | 36.7 | % |
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| 132.2 | % |
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| 143.0 | % | 144.5 | % | 132.2 | % |
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| 143.0 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(d) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(e) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Underwriting Risk Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd. and AlphaCat High Return Fund Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Three months ended June 30, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
| Three Months Ended June 30, 2011 |
| Three Months Ended June 30, 2011 |
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| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
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Underwriting income |
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Gross premiums written |
| $ | 290,691 |
| $ | 50,960 |
| — |
| $ | 341,651 |
| $ | 276,886 |
| $ | (13,150 | ) | $ | 605,387 |
| $ | 341,651 |
| $ | 276,886 |
| $ | (13,150 | ) | $ | 605,387 |
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Reinsurance premiums ceded |
| (98,218 | ) | — |
| — |
| (98,218 | ) | (47,278 | ) | 13,150 |
| (132,346 | ) | (98,218 | ) | (47,278 | ) | 13,150 |
| (132,346 | ) | |||||||||||
Net premiums written |
| 192,473 |
| 50,960 |
| — |
| 243,433 |
| 229,608 |
| — |
| 473,041 |
| 243,433 |
| 229,608 |
| — |
| 473,041 |
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Change in unearned premiums |
| 31,814 |
| (42,569 | ) | — |
| (10,755 | ) | (36,646 | ) | — |
| (47,401 | ) | (10,755 | ) | (36,646 | ) | — |
| (47,401 | ) | |||||||||||
Net premiums earned |
| 224,287 |
| 8,391 |
| — |
| 232,678 |
| 192,962 |
| — |
| 425,640 |
| 232,678 |
| 192,962 |
| — |
| 425,640 |
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Underwriting deductions |
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Losses and loss expenses |
| 94,035 |
| — |
| — |
| 94,035 |
| 113,272 |
| — |
| 207,307 |
| 94,035 |
| 113,272 |
| 40,998 |
| 207,307 |
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Policy acquisition costs |
| 35,013 |
| 973 |
| (217 | ) | 35,769 |
| 42,307 |
| 154 |
| 78,230 |
| 35,769 |
| 42,307 |
| 154 |
| 78,230 |
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General and administrative expenses |
| 15,167 |
| 1,061 |
| 1,813 |
| 18,041 |
| 34,718 |
| 8,082 |
| 60,841 |
| 15,458 |
| 34,718 |
| 10,665 |
| 60,841 |
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Share compensation expenses |
| 1,823 |
| 21 |
| 174 |
| 2,018 |
| 2,026 |
| 3,584 |
| 7,628 |
| 1,823 |
| 2,026 |
| 3,779 |
| 7,628 |
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Total underwriting deductions |
| 146,038 |
| 2,055 |
| 1,770 |
| 149,863 |
| 192,323 |
| 11,820 |
| 354,006 |
| 147,085 |
| 192,323 |
| 14,598 |
| 354,006 |
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Underwriting income (loss) |
| $ | 78,249 |
| $ | 6,336 |
| $ | (1,770 | ) | $ | 82,815 |
| $ | 639 |
| $ | (11,820 | ) | $ | 71,634 |
| $ | 85,593 |
| $ | 639 |
| $ | (14,598 | ) | $ | 71,634 |
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Net investment income |
| 21,662 |
| 727 |
| — |
| 22,389 |
| 6,372 |
| (2,267 | ) | 26,494 |
| 22,389 |
| 6,372 |
| (2,267 | ) | 26,494 |
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Other income |
| 853 |
| 2,532 |
| (308 | ) | 3,077 |
| 1,967 |
| (4,449 | ) | 595 |
| 854 |
| 1,967 |
| (2,226 | ) | 595 |
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Finance expenses |
| (1,579 | ) | (2,923 | ) | — |
| (4,502 | ) | — |
| (11,859 | ) | (16,361 | ) | (4,502 | ) | — |
| (11,859 | ) | (16,361 | ) | |||||||||||
Operating income (loss) before taxes |
| 99,185 |
| 6,672 |
| (2,078 | ) | 103,779 |
| 8,978 |
| (30,395 | ) | 82,362 |
| 104,334 |
| 8,978 |
| (30,950 | ) | 82,362 |
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Tax (expense) benefit |
| (4 | ) | — |
| — |
| (4 | ) | (208 | ) | 241 |
| 29 |
| (4 | ) | (208 | ) | 241 |
| 29 |
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Net operating income (loss) (a) |
| $ | 99,181 |
| $ | 6,672 |
| $ | (2,078 | ) | $ | 103,775 |
| $ | 8,770 |
| $ | (30,154 | ) | $ | 82,391 |
| $ | 104,330 |
| $ | 8,770 |
| $ | (30,709 | ) | $ | 82,391 |
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Net realized gains on investments |
| 9,014 |
| 538 |
| — |
| 9,552 |
| 2,000 |
| — |
| 11,552 |
| 9,552 |
| 2,000 |
| — |
| 11,552 |
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Net unrealized gains (losses) on investments |
| 15,377 |
| (820 | ) | — |
| 14,557 |
| 3,969 |
| — |
| 18,526 |
| 14,557 |
| 3,969 |
| — |
| 18,526 |
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Foreign exchange (losses) gains |
| (5,266 | ) | (71 | ) | — |
| (5,337 | ) | 3,410 |
| (64 | ) | (1,991 | ) | (5,337 | ) | 3,410 |
| (64 | ) | (1,991 | ) | |||||||||||
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Net income (loss) |
| $ | 118,306 |
| $ | 6,319 |
| $ | (2,078 | ) | $ | 122,547 |
| $ | 18,149 |
| $ | (30,218 | ) | $ | 110,478 |
| $ | 123,102 |
| $ | 18,149 |
| $ | (30,773 | ) | $ | 110,478 |
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Net income attributable to noncontrolling interest |
| — |
| (594 | ) | — |
| (594 | ) | — |
| — |
| (594 | ) | (594 | ) | — |
| — |
| (594 | ) | |||||||||||
Net income (loss) available (attributable) to Validus |
| $ | 118,306 |
| $ | 5,725 |
| $ | (2,078 | ) | $ | 121,953 |
| $ | 18,149 |
| $ | (30,218 | ) | $ | 109,884 |
| $ | 122,508 |
| $ | 18,149 |
| $ | (30,773 | ) | $ | 109,884 |
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Selected ratios: |
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Net premiums written / Gross premiums written |
| 66.2 | % | 100.0 | % |
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| 82.9 | % |
|
| 78.1 | % | 71.3 | % | 82.9 | % |
|
| 78.1 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 41.9 | % | 0.0 | % |
|
|
|
| 58.7 | % |
|
| 48.7 | % | 40.4 | % | 58.7 | % |
|
| 48.7 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Policy acquisition costs |
| 15.6 | % | 11.6 | % |
|
|
|
| 21.9 | % |
|
| 18.4 | % | 15.4 | % | 21.9 | % |
|
| 18.4 | % | |||||||||||
General and administrative expenses (b) |
| 7.6 | % | 12.9 | % |
|
|
|
| 19.0 | % |
|
| 16.1 | % | 7.4 | % | 19.0 | % |
|
| 16.1 | % | |||||||||||
Expense ratio |
| 23.2 | % | 24.5 | % |
|
|
|
| 40.9 | % |
|
| 34.5 | % | 22.8 | % | 40.9 | % |
|
| 34.5 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Combined ratio |
| 65.1 | % | 24.5 | % |
|
|
|
| 99.5 | % |
|
| 83.2 | % | 63.2 | % | 99.6 | % |
|
| 83.2 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(d) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(e) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(f) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Underwriting Risk Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., and AlphaCat Re 2011, Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Six months ended June 30, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
| Six Months Ended June 30, 2011 |
| Six Months Ended June 30, 2011 |
| |||||||||||||||||||||||||||||
|
| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
| |||||||||||
Underwriting income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
| $ | 894,779 |
| $ | 58,110 |
| — |
| $ | 952,889 |
| $ | 539,943 |
| $ | (37,549 | ) | $ | 1,455,283 |
| $ | 952,889 |
| $ | 539,943 |
| $ | (37,549 | ) | $ | 1,455,283 |
| |
Reinsurance premiums ceded |
| (145,023 | ) | — |
| — |
| (145,023 | ) | (134,692 | ) | 37,549 |
| (242,166 | ) | (145,023 | ) | (134,692 | ) | 37,549 |
| (242,166 | ) | |||||||||||
Net premiums written |
| 749,756 |
| 58,110 |
| — |
| 807,866 |
| 405,251 |
| — |
| 1,213,117 |
| 807,866 |
| 405,251 |
| — |
| 1,213,117 |
| |||||||||||
Change in unearned premiums |
| (276,526 | ) | (46,353 | ) | — |
| (322,879 | ) | (35,065 | ) | — |
| (357,944 | ) | (322,879 | ) | (35,065 | ) | — |
| (357,944 | ) | |||||||||||
Net premiums earned |
| 473,230 |
| 11,757 |
| — |
| 484,987 |
| 370,186 |
| — |
| 855,173 |
| 484,987 |
| 370,186 |
| — |
| 855,173 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting deductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 404,579 |
| — |
| — |
| 404,579 |
| 278,926 |
| — |
| 683,505 |
| 404,579 |
| 278,926 |
| 40,998 |
| 683,505 |
| |||||||||||
Policy acquisition costs |
| 74,763 |
| 1,289 |
| (217 | ) | 75,835 |
| 79,523 |
| 168 |
| 155,526 |
| 75,835 |
| 79,523 |
| 168 |
| 155,526 |
| |||||||||||
General and administrative expenses |
| 25,824 |
| 1,955 |
| 3,160 |
| 30,939 |
| 63,440 |
| 14,939 |
| 109,318 |
| 26,115 |
| 63,440 |
| 19,763 |
| 109,318 |
| |||||||||||
Share compensation expenses |
| 4,928 |
| 48 |
| 502 |
| 5,478 |
| 4,745 |
| 9,454 |
| 19,677 |
| 4,928 |
| 4,745 |
| 10,004 |
| 19,677 |
| |||||||||||
Total underwriting deductions |
| 510,094 |
| 3,292 |
| 3,445 |
| 516,831 |
| 426,634 |
| 24,561 |
| 968,026 |
| 511,457 |
| 426,634 |
| 29,935 |
| 968,026 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting (loss) income |
| $ | (36,864 | ) | $ | 8,465 |
| $ | (3,445 | ) | $ | (31,844 | ) | $ | (56,448 | ) | $ | (24,561 | ) | $ | (112,853 | ) | $ | (26,470 | ) | $ | (56,448 | ) | $ | (29,935 | ) | $ | (112,853 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
| 46,094 |
| 1,946 |
| — |
| 48,040 |
| 12,962 |
| (4,533 | ) | 56,469 |
| 48,040 |
| 12,962 |
| (4,533 | ) | 56,469 |
| |||||||||||
Other income |
| 2,271 |
| 3,173 |
| (78 | ) | 5,366 |
| 4,984 |
| (8,149 | ) | 2,201 |
| 2,287 |
| 4,984 |
| (5,070 | ) | 2,201 |
| |||||||||||
Finance expenses |
| (3,292 | ) | (2,923 | ) | — |
| (6,215 | ) | (63 | ) | (24,084 | ) | (30,362 | ) | (6,215 | ) | (63 | ) | (24,084 | ) | (30,362 | ) | |||||||||||
Operating income (loss) before taxes |
| 8,209 |
| 10,661 |
| (3,523 | ) | 15,347 |
| (38,565 | ) | (61,327 | ) | (84,545 | ) | 17,642 |
| (38,565 | ) | (63,622 | ) | (84,545 | ) | |||||||||||
Tax (expense) benefit |
| (6 | ) | — |
| — |
| (6 | ) | 1,585 |
| (91 | ) | 1,488 |
| (6 | ) | 1,585 |
| (91 | ) | 1,488 |
| |||||||||||
Net operating income (loss) (a) |
| $ | 8,203 |
| $ | 10,661 |
| $ | (3,523 | ) | $ | 15,341 |
| $ | (36,980 | ) | $ | (61,418 | ) | $ | (83,057 | ) | $ | 17,636 |
| $ | (36,980 | ) | $ | (63,713 | ) | $ | (83,057 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains on investments |
| 12,915 |
| 556 |
| — |
| 13,471 |
| 4,460 |
| — |
| 17,931 |
| 13,471 |
| 4,460 |
| — |
| 17,931 |
| |||||||||||
Net unrealized gains (losses) on investments |
| 7,701 |
| (1,659 | ) | — |
| 6,042 |
| (344 | ) | — |
| 5,698 |
| 6,042 |
| (344 | ) | — |
| 5,698 |
| |||||||||||
Foreign exchange (losses) gains |
| (9,536 | ) | (161 | ) | — |
| (9,697 | ) | 7,311 |
| (72 | ) | (2,458 | ) | (9,697 | ) | 7,311 |
| (72 | ) | (2,458 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) |
| $ | 19,283 |
| $ | 9,397 |
| $ | (3,523 | ) | $ | 25,157 |
| $ | (25,553 | ) | $ | (61,490 | ) | $ | (61,886 | ) | $ | 27,452 |
| $ | (25,553 | ) | $ | (63,785 | ) | $ | (61,886 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| |||||||||||
Net income attributable to noncontrolling interest |
| — |
| (594 | ) | — |
| (594 | ) | — |
| — |
| (594 | ) | (594 | ) | — |
| — |
| (594 | ) | |||||||||||
Net income (loss) available (attributable) to Validus |
| $ | 19,283 |
| $ | 8,803 |
| $ | (3,523 | ) | $ | 24,563 |
| $ | (25,553 | ) | $ | (61,490 | ) | $ | (62,480 | ) | $ | 26,858 |
| $ | (25,553 | ) | $ | (63,785 | ) | $ | (62,480 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Selected ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written / Gross premiums written |
| 83.8 | % | 100.0 | % |
|
|
|
| 75.1 | % |
|
| 83.4 | % | 84.8 | % | 75.1 | % |
|
| 83.4 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 85.5 | % | 0.0 | % |
|
|
|
| 75.3 | % |
|
| 79.9 | % | 83.4 | % | 75.3 | % |
|
| 79.9 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Policy acquisition costs |
| 15.8 | % | 11.0 | % |
|
|
|
| 21.5 | % |
|
| 18.2 | % | 15.6 | % | 21.5 | % |
|
| 18.2 | % | |||||||||||
General and administrative expenses (b) |
| 6.5 | % | 17.0 | % |
|
|
|
| 18.4 | % |
|
| 15.1 | % | 6.4 | % | 18.4 | % |
|
| 15.1 | % | |||||||||||
Expense ratio |
| 22.3 | % | 28.0 | % |
|
|
|
| 39.9 | % |
|
| 33.3 | % | 22.0 | % | 39.9 | % |
|
| 33.3 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Combined ratio |
| 107.8 | % | 28.0 | % |
|
|
|
| 115.2 | % |
|
| 113.2 | % | 105.4 | % | 115.2 | % |
|
| 113.2 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(d) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(e) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(f) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Underwriting Risk Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., and AlphaCat Re 2011, Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Three months ended September 30, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three Months Ended September 30, 2011 |
| Three Months Ended September 30, 2011 |
| |||||||||||||||||||||||||||||
|
| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
| |||||||||||
Underwriting income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
| $ | 163,863 |
| $ | 18,940 |
| — |
| $ | 182,803 |
| $ | 238,937 |
| $ | (30,611 | ) | $ | 391,129 |
| $ | 182,803 |
| $ | 238,937 |
| $ | (30,611 | ) | $ | 391,129 |
| |
Reinsurance premiums ceded |
| (5,646 | ) | — |
| — |
| (5,646 | ) | (55,551 | ) | 30,611 |
| (30,586 | ) | (5,646 | ) | (55,551 | ) | 30,611 |
| (30,586 | ) | |||||||||||
Net premiums written |
| 158,217 |
| 18,940 |
| — |
| 177,157 |
| 183,386 |
| — |
| 360,543 |
| 177,157 |
| 183,386 |
| — |
| 360,543 |
| |||||||||||
Change in unearned premiums |
| 81,997 |
| 8,758 |
| — |
| 90,755 |
| 7,326 |
| — |
| 98,081 |
| 90,755 |
| 7,326 |
| — |
| 98,081 |
| |||||||||||
Net premiums earned |
| 240,214 |
| 27,698 |
| — |
| 267,912 |
| 190,712 |
| — |
| 458,624 |
| 267,912 |
| 190,712 |
| — |
| 458,624 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting deductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 128,823 |
| — |
| — |
| 128,823 |
| 97,244 |
| — |
| 226,067 |
| 128,823 |
| 97,244 |
| 40,998 |
| 226,067 |
| |||||||||||
Policy acquisition costs |
| 40,592 |
| 3,326 |
| (1,084 | ) | 42,834 |
| 36,651 |
| (2,080 | ) | 77,405 |
| 42,834 |
| 36,651 |
| (2,080 | ) | 77,405 |
| |||||||||||
General and administrative expenses |
| 7,468 |
| 2,167 |
| 620 |
| 10,255 |
| 23,164 |
| 2,507 |
| 35,926 |
| 8,129 |
| 23,164 |
| 4,633 |
| 35,926 |
| |||||||||||
Share compensation expenses |
| 2,190 |
| 26 |
| 284 |
| 2,500 |
| 1,903 |
| 2,979 |
| 7,382 |
| 2,190 |
| 1,903 |
| 3,289 |
| 7,382 |
| |||||||||||
Total underwriting deductions |
| 179,073 |
| 5,519 |
| (180 | ) | 184,412 |
| 158,962 |
| 3,406 |
| 346,780 |
| 181,976 |
| 158,962 |
| 5,842 |
| 346,780 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting income (loss) |
| $ | 61,141 |
| $ | 22,179 |
| $ | 180 |
| $ | 83,500 |
| $ | 31,750 |
| $ | (3,406 | ) | $ | 111,844 |
| $ | 85,936 |
| $ | 31,750 |
| $ | (5,842 | ) | $ | 111,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
| 22,807 |
| 751 |
| — |
| 23,558 |
| 6,451 |
| (2,262 | ) | 27,747 |
| 23,557 |
| 6,451 |
| (2,261 | ) | 27,747 |
| |||||||||||
Other income |
| 2,297 |
| 2,225 |
| (1,102 | ) | 3,420 |
| 1,418 |
| (4,838 | ) | — |
| 2,297 |
| 1,418 |
| (3,715 | ) | — |
| |||||||||||
Finance expenses |
| (2,632 | ) | 787 |
| — |
| (1,845 | ) | (151 | ) | (8,939 | ) | (10,935 | ) | (697 | ) | (151 | ) | (10,087 | ) | (10,935 | ) | |||||||||||
Operating income (loss) before taxes |
| 83,613 |
| 25,942 |
| (922 | ) | 108,633 |
| 39,468 |
| (19,445 | ) | 128,656 |
| 111,093 |
| 39,468 |
| (21,905 | ) | 128,656 |
| |||||||||||
Tax (expense) |
| (7 | ) | — |
| — |
| (7 | ) | (2,345 | ) | (186 | ) | (2,538 | ) | (7 | ) | (2,345 | ) | (186 | ) | (2,538 | ) | |||||||||||
Net operating income (loss) (a) |
| $ | 83,606 |
| $ | 25,942 |
| $ | (922 | ) | $ | 108,626 |
| $ | 37,123 |
| $ | (19,631 | ) | $ | 126,118 |
| $ | 111,086 |
| $ | 37,123 |
| $ | (22,091 | ) | $ | 126,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains (losses) on investments |
| 4,538 |
| (25 | ) | — |
| 4,513 |
| 733 |
| — |
| 5,246 |
| 4,513 |
| 733 |
| — |
| 5,246 |
| |||||||||||
Net unrealized (losses) gains on investments |
| (26,298 | ) | 324 |
| — |
| (25,974 | ) | (1,875 | ) | 1 |
| (27,848 | ) | (25,973 | ) | (1,875 | ) | — |
| (27,848 | ) | |||||||||||
Foreign exchange (losses) |
| (9,778 | ) | (164 | ) | — |
| (9,942 | ) | (9,943 | ) | (47 | ) | (19,932 | ) | (9,942 | ) | (9,943 | ) | (47 | ) | (19,932 | ) | |||||||||||
Transaction expenses (c) |
| — |
| — |
| — |
| — |
| — |
| (13,583 | ) | (13,583 | ) | — |
| — |
| (13,583 | ) | (13,583 | ) | |||||||||||
Net income (loss) |
| $ | 52,068 |
| $ | 26,077 |
| $ | (922 | ) | $ | 77,223 |
| $ | 26,038 |
| $ | (33,260 | ) | $ | 70,001 |
| $ | 79,684 |
| $ | 26,038 |
| $ | (35,721 | ) | $ | 70,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income attributable to noncontrolling interest |
| — |
| (13,516 | ) | — |
| (13,516 | ) | — |
| — |
| (13,516 | ) | (13,516 | ) | — |
| — |
| (13,516 | ) | |||||||||||
Net income (loss) available (attributable) to Validus |
| $ | 52,068 |
| $ | 12,561 |
| $ | (922 | ) | $ | 63,707 |
| $ | 26,038 |
| $ | (33,260 | ) | $ | 56,485 |
| $ | 66,168 |
| $ | 26,038 |
| $ | (35,721 | ) | $ | 56,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Selected ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written / Gross premiums written |
| 96.6 | % | 100.0 | % |
|
|
|
| 76.8 | % |
|
| 92.2 | % | 96.9 | % | 76.8 | % |
|
| 92.2 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 53.6 | % | 0.0 | % |
|
|
|
| 51.0 | % |
|
| 49.3 | % | 48.1 | % | 51.0 | % |
|
| 49.3 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Policy acquisition costs |
| 16.9 | % | 12.0 | % |
|
|
|
| 19.2 | % |
|
| 16.9 | % | 16.0 | % | 19.2 | % |
|
| 16.9 | % | |||||||||||
General and administrative expenses (b) |
| 4.0 | % | 7.9 | % |
|
|
|
| 13.1 | % |
|
| 9.4 | % | 3.9 | % | 13.1 | % |
|
| 9.4 | % | |||||||||||
Expense ratio |
| 20.9 | % | 19.9 | % |
|
|
|
| 32.3 | % |
|
| 26.3 | % | 19.8 | % | 32.3 | % |
|
| 26.3 | % | |||||||||||
Combined ratio |
| 74.5 | % | 19.9 | % |
|
|
|
| 83.3 | % |
|
| 75.6 | % | 67.9 | % | 83.3 | % |
|
| 75.6 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The transaction expenses relate to costs incurred in connection with the Company’s proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.
(d) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(e) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(f) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(g) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Underwriting Risk Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., and AlphaCat Re 2011, Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Nine months ended September 30, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
| Nine Months Ended September 30, 2011 |
| Nine Months Ended September 30, 2011 |
| |||||||||||||||||||||||||||||
|
| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
| |||||||||||
Underwriting income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
| $ | 1,058,642 |
| $ | 77,050 |
| — |
| $ | 1,135,692 |
| $ | 778,880 |
| $ | (68,160 | ) | $ | 1,846,412 |
| $ | 1,135,692 |
| $ | 778,880 |
| $ | (68,160 | ) | $ | 1,846,412 |
| |
Reinsurance premiums ceded |
| (150,669 | ) | — |
| — |
| (150,669 | ) | (190,243 | ) | 68,160 |
| (272,752 | ) | (150,669 | ) | (190,243 | ) | 68,160 |
| (272,752 | ) | |||||||||||
Net premiums written |
| 907,973 |
| 77,050 |
| — |
| 985,023 |
| 588,637 |
| — |
| 1,573,660 |
| 985,023 |
| 588,637 |
| — |
| 1,573,660 |
| |||||||||||
Change in unearned premiums |
| (194,529 | ) | (37,595 | ) | — |
| (232,124 | ) | (27,739 | ) | — |
| (259,863 | ) | (232,124 | ) | (27,739 | ) | — |
| (259,863 | ) | |||||||||||
Net premiums earned |
| 713,444 |
| 39,455 |
| — |
| 752,899 |
| 560,898 |
| — |
| 1,313,797 |
| 752,899 |
| 560,898 |
| — |
| 1,313,797 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting deductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 533,402 |
| — |
| — |
| 533,402 |
| 376,170 |
| — |
| 909,572 |
| 533,402 |
| 376,170 |
| 40,998 |
| 909,572 |
| |||||||||||
Policy acquisition costs |
| 115,355 |
| 4,615 |
| (1,301 | ) | 118,669 |
| 116,174 |
| (1,912 | ) | 232,931 |
| 118,669 |
| 116,174 |
| (1,912 | ) | 232,931 |
| |||||||||||
General and administrative expenses |
| 33,292 |
| 4,122 |
| 3,780 |
| 41,194 |
| 86,604 |
| 17,446 |
| 145,244 |
| 34,244 |
| 86,604 |
| 24,396 |
| 145,244 |
| |||||||||||
Share compensation expenses |
| 7,118 |
| 74 |
| 786 |
| 7,978 |
| 6,648 |
| 12,433 |
| 27,059 |
| 7,118 |
| 6,648 |
| 13,293 |
| 27,059 |
| |||||||||||
Total underwriting deductions |
| 689,167 |
| 8,811 |
| 3,265 |
| 701,243 |
| 585,596 |
| 27,967 |
| 1,314,806 |
| 693,433 |
| 585,596 |
| 35,777 |
| 1,314,806 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting income (loss) |
| $ | 24,277 |
| $ | 30,644 |
| $ | (3,265 | ) | $ | 51,656 |
| $ | (24,698 | ) | $ | (27,967 | ) | $ | (1,009 | ) | $ | 59,466 |
| $ | (24,698 | ) | $ | (35,777 | ) | $ | (1,009 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
| 68,901 |
| 2,697 |
| — |
| 71,598 |
| 19,413 |
| (6,795 | ) | 84,216 |
| 71,597 |
| 19,413 |
| (6,794 | ) | 84,216 |
| |||||||||||
Other income |
| 4,568 |
| 5,398 |
| (1,180 | ) | 8,786 |
| 6,402 |
| (12,987 | ) | 2,201 |
| 4,584 |
| 6,402 |
| (8,785 | ) | 2,201 |
| |||||||||||
Finance expenses |
| (5,924 | ) | (2,136 | ) | — |
| (8,060 | ) | (214 | ) | (33,023 | ) | (41,297 | ) | (6,912 | ) | (214 | ) | (34,171 | ) | (41,297 | ) | |||||||||||
Operating income (loss) before taxes |
| 91,822 |
| 36,603 |
| (4,445 | ) | 123,980 |
| 903 |
| (80,772 | ) | 44,111 |
| 128,735 |
| 903 |
| (85,527 | ) | 44,111 |
| |||||||||||
Tax (expense) |
| (13 | ) | — |
| — |
| (13 | ) | (760 | ) | (277 | ) | (1,050 | ) | (13 | ) | (760 | ) | (277 | ) | (1,050 | ) | |||||||||||
Net operating income (loss) (a) |
| $ | 91,809 |
| $ | 36,603 |
| $ | (4,445 | ) | $ | 123,967 |
| $ | 143 |
| $ | (81,049 | ) | $ | 43,061 |
| $ | 128,722 |
| $ | 143 |
| $ | (85,804 | ) | $ | 43,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains on investments |
| 17,453 |
| 531 |
| — |
| 17,984 |
| 5,193 |
| — |
| 23,177 |
| 17,984 |
| 5,193 |
| — |
| 23,177 |
| |||||||||||
Net unrealized (losses) gains on investments |
| (18,597 | ) | (1,335 | ) | — |
| (19,932 | ) | (2,219 | ) | 1 |
| (22,150 | ) | (19,931 | ) | (2,219 | ) | — |
| (22,150 | ) | |||||||||||
Foreign exchange (losses) |
| (19,314 | ) | (325 | ) | — |
| (19,639 | ) | (2,632 | ) | (119 | ) | (22,390 | ) | (19,639 | ) | (2,632 | ) | (119 | ) | (22,390 | ) | |||||||||||
Transaction expenses (c) |
| — |
| — |
| — |
| — |
| — |
| (13,583 | ) | (13,583 | ) | — |
| — |
| (13,583 | ) | (13,583 | ) | |||||||||||
Net income (loss) |
| $ | 71,351 |
| $ | 35,474 |
| $ | (4,445 | ) | $ | 102,380 |
| $ | 485 |
| $ | (94,750 | ) | $ | 8,115 |
| $ | 107,136 |
| $ | 485 |
| $ | (99,506 | ) | $ | 8,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income attributable to noncontrolling interest |
| — |
| (14,110 | ) | — |
| (14,110 | ) | — |
| — |
| (14,110 | ) | (14,110 | ) | — |
| — |
| (14,110 | ) | |||||||||||
Net income (loss) available (attributable) to Validus |
| $ | 71,351 |
| $ | 21,364 |
| $ | (4,445 | ) | $ | 88,270 |
| $ | 485 |
| $ | (94,750 | ) | $ | (5,995 | ) | $ | 93,026 |
| $ | 485 |
| $ | (99,506 | ) | $ | (5,995 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Selected ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written / Gross premiums written |
| 85.8 | % | 100.0 | % |
|
|
|
| 75.6 | % |
|
| 85.2 | % | 86.7 | % | 75.6 | % |
|
| 85.2 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 74.8 | % | 0.0 | % |
|
|
|
| 67.1 | % |
|
| 69.2 | % | 70.8 | % | 67.1 | % |
|
| 69.2 | % | |||||||||||
Policy acquisition costs |
| 16.2 | % | 11.7 | % |
|
|
|
| 20.7 | % |
|
| 17.7 | % | 15.8 | % | 20.7 | % |
|
| 17.7 | % | |||||||||||
General and administrative expenses (b) |
| 5.7 | % | 10.6 | % |
|
|
|
| 16.6 | % |
|
| 13.1 | % | 5.5 | % | 16.6 | % |
|
| 13.1 | % | |||||||||||
Expense ratio |
| 21.9 | % | 22.3 | % |
|
|
|
| 37.3 | % |
|
| 30.8 | % | 21.3 | % | 37.3 | % |
|
| 30.8 | % | |||||||||||
Combined ratio |
| 96.7 | % | 22.3 | % |
|
|
|
| 104.4 | % |
|
| 100.0 | % | 92.1 | % | 104.4 | % |
|
| 100.0 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The transaction expenses relate to costs incurred in connection with the Company’s proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.
(d) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(e) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(f) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(g) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Underwriting Risk Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., and AlphaCat Re 2011, Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Three months ended December 31, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
| Three Months Ended December 31, 2011 |
| Three Months Ended December 31, 2011 |
| |||||||||||||||||||||||||||||
|
| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
| |||||||||||
Underwriting income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
| $ | 55,851 |
| $ | (1,323 | ) | — |
| $ | 54,528 |
| $ | 235,242 |
| $ | (11,491 | ) | $ | 278,279 |
| $ | 54,528 |
| $ | 235,242 |
| $ | (11,491 | ) | $ | 278,279 |
| |
Reinsurance premiums ceded |
| (49 | ) | — |
| — |
| (49 | ) | (27,931 | ) | 11,491 |
| (16,489 | ) | (49 | ) | (27,931 | ) | 11,491 |
| (16,489 | ) | |||||||||||
Net premiums written |
| 55,802 |
| (1,323 | ) | — |
| 54,479 |
| 207,311 |
| — |
| 261,790 |
| 54,479 |
| 207,311 |
| — |
| 261,790 |
| |||||||||||
Change in unearned premiums |
| 196,679 |
| 27,834 |
| — |
| 224,513 |
| 2,043 |
| — |
| 226,556 |
| 224,513 |
| 2,043 |
| — |
| 226,556 |
| |||||||||||
Net premiums earned |
| 252,481 |
| 26,511 |
| — |
| 278,992 |
| 209,354 |
| — |
| 488,346 |
| 278,992 |
| 209,354 |
| — |
| 488,346 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting deductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 215,903 |
| 10,000 |
| — |
| 225,903 |
| 108,926 |
| — |
| 334,829 |
| 225,903 |
| 108,926 |
| 40,998 |
| 334,829 |
| |||||||||||
Policy acquisition costs |
| 39,227 |
| 3,331 |
| (1,093 | ) | 41,465 |
| 41,160 |
| (1,372 | ) | 81,253 |
| 41,465 |
| 41,160 |
| (1,372 | ) | 81,253 |
| |||||||||||
General and administrative expenses |
| 11,907 |
| 6,807 |
| (5,438 | ) | 13,276 |
| 30,878 |
| 8,099 |
| 52,253 |
| 12,109 |
| 30,878 |
| 9,266 |
| 52,253 |
| |||||||||||
Share compensation expenses |
| 2,191 |
| 33 |
| 196 |
| 2,420 |
| 1,934 |
| 2,883 |
| 7,237 |
| 2,191 |
| 1,934 |
| 3,112 |
| 7,237 |
| |||||||||||
Total underwriting deductions |
| 269,228 |
| 20,171 |
| (6,335 | ) | 283,064 |
| 182,898 |
| 9,610 |
| 475,572 |
| 281,668 |
| 182,898 |
| 11,006 |
| 475,572 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting (loss) income |
| $ | (16,747 | ) | $ | 6,340 |
| $ | 6,335 |
| $ | (4,072 | ) | $ | 26,456 |
| $ | (9,610 | ) | $ | 12,774 |
| $ | (2,676 | ) | $ | 26,456 |
| $ | (11,006 | ) | $ | 12,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
| 24,347 |
| 548 |
| — |
| 24,895 |
| 5,967 |
| (2,782 | ) | 28,080 |
| 24,895 |
| 5,967 |
| (2,782 | ) | 28,080 |
| |||||||||||
Other income |
| 3,358 |
| 6,068 |
| (4,837 | ) | 4,589 |
| 2,493 |
| (3,565 | ) | 3,517 |
| 3,414 |
| 2,493 |
| (2,390 | ) | 3,517 |
| |||||||||||
Finance expenses |
| (1,853 | ) | (1,523 | ) | — |
| (3,376 | ) | (13 | ) | (10,131 | ) | (13,520 | ) | (3,377 | ) | (13 | ) | (10,130 | ) | (13,520 | ) | |||||||||||
Operating income (loss) before taxes |
| 9,105 |
| 11,433 |
| 1,498 |
| 22,036 |
| 34,903 |
| (26,088 | ) | 30,851 |
| 22,256 |
| 34,903 |
| (26,308 | ) | 30,851 |
| |||||||||||
Tax (expense) benefit |
| (5 | ) | — |
| — |
| (5 | ) | 109 |
| 122 |
| 226 |
| (5 | ) | 109 |
| 122 |
| 226 |
| |||||||||||
Net operating income (loss) (a) |
| $ | 9,100 |
| $ | 11,433 |
| $ | 1,498 |
| $ | 22,031 |
| $ | 35,012 |
| $ | (25,966 | ) | $ | 31,077 |
| $ | 22,251 |
| $ | 35,012 |
| $ | (26,186 | ) | $ | 31,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains on investments |
| 3,685 |
| — |
| — |
| 3,685 |
| 1,670 |
| — |
| 5,355 |
| 3,685 |
| 1,670 |
| — |
| 5,355 |
| |||||||||||
Net unrealized gains (losses) on investments |
| 3,898 |
| (6 | ) | — |
| 3,892 |
| (1,733 | ) | — |
| 2,159 |
| 3,892 |
| (1,733 | ) | — |
| 2,159 |
| |||||||||||
Foreign exchange (losses) gains |
| (209 | ) | (139 | ) | — |
| (348 | ) | 444 |
| 170 |
| 266 |
| (348 | ) | 444 |
| 170 |
| 266 |
| |||||||||||
Transaction expenses (c) |
| — |
| — |
| — |
| — |
| — |
| (3,850 | ) | (3,850 | ) | — |
| — |
| (3,850 | ) | (3,850 | ) | |||||||||||
Net income (loss) |
| $ | 16,474 |
| $ | 11,288 |
| $ | 1,498 |
| $ | 29,260 |
| $ | 35,393 |
| $ | (29,646 | ) | $ | 35,007 |
| $ | 29,480 |
| $ | 35,393 |
| $ | (29,866 | ) | $ | 35,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income attributable to noncontrolling interest |
| — |
| (7,683 | ) | — |
| (7,683 | ) | — |
| — |
| (7,683 | ) | (7,683 | ) | — |
| — |
| (7,683 | ) | |||||||||||
Net income (loss) available to Validus |
| $ | 16,474 |
| $ | 3,605 |
| $ | 1,498 |
| $ | 21,577 |
| $ | 35,393 |
| $ | (29,646 | ) | $ | 27,324 |
| $ | 21,797 |
| $ | 35,393 |
| $ | (29,866 | ) | $ | 27,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Selected ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written / Gross premiums written |
| 99.9 | % | 100.0 | % |
|
|
|
| 88.1 | % |
|
| 94.1 | % | 99.9 | % | 88.1 | % |
|
| 94.1 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 85.5 | % | 37.7 | % |
|
|
|
| 52.0 | % |
|
| 68.6 | % | 81.0 | % | 52.0 | % |
|
| 68.6 | % | |||||||||||
Policy acquisition costs |
| 15.5 | % | 12.6 | % |
|
|
|
| 19.7 | % |
|
| 16.6 | % | 14.9 | % | 19.7 | % |
|
| 16.6 | % | |||||||||||
General and administrative expenses (b) |
| 5.6 | % | 25.8 | % |
|
|
|
| 15.7 | % |
|
| 12.2 | % | 5.1 | % | 15.7 | % |
|
| 12.2 | % | |||||||||||
Expense ratio |
| 21.1 | % | 38.4 | % |
|
|
|
| 35.4 | % |
|
| 28.8 | % | 20.0 | % | 35.4 | % |
|
| 28.8 | % | |||||||||||
Combined ratio |
| 106.6 | % | 76.1 | % |
|
|
|
| 87.4 | % |
|
| 97.4 | % | 101.0 | % | 87.4 | % |
|
| 97.4 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The transaction expenses relate to costs incurred in connection with the Company’s proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.
(d) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(e) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., PacRe, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(f) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(g) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd. and PacRe, Ltd.
Validus Holdings, Ltd.
Consolidated Segment Income Statement - Year ended December 31, 2011 (REPRESENTED)
(Expressed in thousands of U.S. Dollars, except share and per share information)
|
| Year Ended December 31, 2011 |
| Year Ended December 31, 2011 |
| |||||||||||||||||||||||||||||
|
| Validus Re |
| AlphaCat |
| Legal Entity |
| Validus Re |
| Talbot Segment |
| Corporate & |
| Total |
| Validus Re |
| Talbot |
| Corporate & |
| Total |
| |||||||||||
Underwriting income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
| $ | 1,114,493 |
| $ | 75,727 |
| — |
| $ | 1,190,220 |
| $ | 1,014,122 |
| $ | (79,651 | ) | $ | 2,124,691 |
| $ | 1,190,220 |
| $ | 1,014,122 |
| $ | (79,651 | ) | $ | 2,124,691 |
| |
Reinsurance premiums ceded |
| (150,718 | ) | — |
| — |
| (150,718 | ) | (218,174 | ) | 79,651 |
| (289,241 | ) | (150,718 | ) | (218,174 | ) | 79,651 |
| (289,241 | ) | |||||||||||
Net premiums written |
| 963,775 |
| 75,727 |
| — |
| 1,039,502 |
| 795,948 |
| — |
| 1,835,450 |
| 1,039,502 |
| 795,948 |
| — |
| 1,835,450 |
| |||||||||||
Change in unearned premiums |
| 2,150 |
| (9,761 | ) | — |
| (7,611 | ) | (25,696 | ) | — |
| (33,307 | ) | (7,611 | ) | (25,696 | ) | — |
| (33,307 | ) | |||||||||||
Net premiums earned |
| 965,925 |
| 65,966 |
| — |
| 1,031,891 |
| 770,252 |
| — |
| 1,802,143 |
| 1,031,891 |
| 770,252 |
| — |
| 1,802,143 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting deductions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 749,305 |
| 10,000 |
| — |
| 759,305 |
| 485,096 |
| — |
| 1,244,401 |
| 759,305 |
| 485,096 |
| 40,998 |
| 1,244,401 |
| |||||||||||
Policy acquisition costs |
| 154,582 |
| 7,946 |
| (2,394 | ) | 160,134 |
| 157,334 |
| (3,284 | ) | 314,184 |
| 160,134 |
| 157,334 |
| (3,284 | ) | 314,184 |
| |||||||||||
General and administrative expenses |
| 45,199 |
| 10,929 |
| (1,658 | ) | 54,470 |
| 117,482 |
| 25,545 |
| 197,497 |
| 46,353 |
| 117,482 |
| 33,662 |
| 197,497 |
| |||||||||||
Share compensation expenses |
| 9,309 |
| 107 |
| 982 |
| 10,398 |
| 8,582 |
| 15,316 |
| 34,296 |
| 9,309 |
| 8,582 |
| 16,405 |
| 34,296 |
| |||||||||||
Total underwriting deductions |
| 958,395 |
| 28,982 |
| (3,070 | ) | 984,307 |
| 768,494 |
| 37,577 |
| 1,790,378 |
| 975,101 |
| 768,494 |
| 46,783 |
| 1,790,378 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting income (loss) |
| $ | 7,530 |
| $ | 36,984 |
| $ | 3,070 |
| $ | 47,584 |
| $ | 1,758 |
| $ | (37,577 | ) | $ | 11,765 |
| $ | 56,790 |
| $ | 1,758 |
| $ | (46,783 | ) | $ | 11,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
| 93,248 |
| 3,245 |
| — |
| 96,493 |
| 25,380 |
| (9,577 | ) | 112,296 |
| 96,492 |
| 25,380 |
| (9,576 | ) | 112,296 |
| |||||||||||
Other income |
| 7,926 |
| 11,466 |
| (6,017 | ) | 13,375 |
| 8,895 |
| (16,552 | ) | 5,718 |
| 7,998 |
| 8,895 |
| (11,175 | ) | 5,718 |
| |||||||||||
Finance expenses |
| (7,777 | ) | (3,659 | ) | — |
| (11,436 | ) | (227 | ) | (43,154 | ) | (54,817 | ) | (10,289 | ) | (227 | ) | (44,301 | ) | (54,817 | ) | |||||||||||
Operating income (loss) before taxes |
| 100,927 |
| 48,036 |
| (2,947 | ) | 146,016 |
| 35,806 |
| (106,860 | ) | 74,962 |
| 150,991 |
| 35,806 |
| (111,835 | ) | 74,962 |
| |||||||||||
Tax (expense) |
| (18 | ) | — |
| — |
| (18 | ) | (651 | ) | (155 | ) | (824 | ) | (18 | ) | (651 | ) | (155 | ) | (824 | ) | |||||||||||
Net operating income (loss) (a) |
| $ | 100,909 |
| $ | 48,036 |
| $ | (2,947 | ) | $ | 145,998 |
| $ | 35,155 |
| $ | (107,015 | ) | $ | 74,138 |
| $ | 150,973 |
| $ | 35,155 |
| $ | (111,990 | ) | $ | 74,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains on investments |
| 21,138 |
| 531 |
| — |
| 21,669 |
| 6,863 |
| — |
| 28,532 |
| 21,669 |
| 6,863 |
| — |
| 28,532 |
| |||||||||||
Net unrealized (losses) on investments |
| (14,698 | ) | (1,341 | ) | — |
| (16,039 | ) | (3,952 | ) | — |
| (19,991 | ) | (16,039 | ) | (3,952 | ) | — |
| (19,991 | ) | |||||||||||
Foreign exchange (losses) gains |
| (19,524 | ) | (464 | ) | — |
| (19,988 | ) | (2,188 | ) | 52 |
| (22,124 | ) | (19,987 | ) | (2,188 | ) | 51 |
| (22,124 | ) | |||||||||||
Transaction expenses (c) |
| — |
| — |
| — |
| — |
| — |
| (17,433 | ) | (17,433 | ) | — |
| — |
| (17,433 | ) | (17,433 | ) | |||||||||||
Net income (loss) |
| $ | 87,825 |
| $ | 46,762 |
| $ | (2,947 | ) | $ | 131,640 |
| $ | 35,878 |
| $ | (124,396 | ) | $ | 43,122 |
| $ | 136,616 |
| $ | 35,878 |
| $ | (129,372 | ) | $ | 43,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income attributable to noncontrolling interest |
| — |
| (21,793 | ) | — |
| (21,793 | ) | — |
| — |
| (21,793 | ) | (21,793 | ) | — |
| — |
| (21,793 | ) | |||||||||||
Net income (loss) available to Validus |
| $ | 87,825 |
| $ | 24,969 |
| $ | (2,947 | ) | $ | 109,847 |
| $ | 35,878 |
| $ | (124,396 | ) | $ | 21,329 |
| $ | 114,823 |
| $ | 35,878 |
| $ | (129,372 | ) | $ | 21,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Selected ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written / Gross premiums written |
| 86.5 | % | 100.0 | % |
|
|
|
| 78.5 | % |
|
| 86.4 | % | 87.3 | % | 78.5 | % |
|
| 86.4 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Losses and loss expenses |
| 77.6 | % | 15.2 | % |
|
|
|
| 63.0 | % |
|
| 69.1 | % | 73.6 | % | 63.0 | % |
|
| 69.1 | % | |||||||||||
Policy acquisition costs |
| 16.0 | % | 12.0 | % |
|
|
|
| 20.4 | % |
|
| 17.4 | % | 15.5 | % | 20.4 | % |
|
| 17.4 | % | |||||||||||
General and administrative expenses (b) |
| 5.6 | % | 16.7 | % |
|
|
|
| 16.4 | % |
|
| 12.9 | % | 5.4 | % | 16.4 | % |
|
| 12.9 | % | |||||||||||
Expense ratio |
| 21.6 | % | 28.7 | % |
|
|
|
| 36.8 | % |
|
| 30.3 | % | 20.9 | % | 36.8 | % |
|
| 30.3 | % | |||||||||||
Combined ratio |
| 99.2 | % | 43.9 | % |
|
|
|
| 99.8 | % |
|
| 99.4 | % | 94.5 | % | 99.8 | % |
|
| 99.4 | % | |||||||||||
Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business.
(b) The general and administrative ratio includes share compensation expenses.
(c) The transaction expenses relate to costs incurred in connection with the Company’s proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.
(d) The Validus Re Segment includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Reaseguros, Inc., Validus Re Chile S.A., Underwriting Risk Services, S.A., Validus Re Americas, Ltd. and Validus Re Europe Limited.
(e) The AlphatCat Segment includes the following entities: AlphaCat Fund Ltd., AlphaCat Master Fund Ltd. AlphaCat Reinsurance Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd., PacRe, Ltd., Validus Underwriting Services, Ltd., Validus Ventures Ltd., and Validus Managers Ltd.
(f) On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011, Ltd. (“AlphaCat Re 2011”) a new special purpose “sidecar” reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. The financial statements of AlphaCat Re 2011 were included in the consolidated financial statements of the Company beginning in the second quarter of 2011 as Validus Re held a majority of AlphaCat Re 2011’s outstanding voting rights. The portion of AlphaCat Re 2011’s earnings attributable to third party investors for the year ended December 31, 2011 is recorded in the consolidated statement of operations and comprehensive income as ‘net income attributable to noncontrolling interest’. On December 23, 2011 AlphaCat Re 2011 completed a secondary share offering and subsequently Validus Re sold 86,113 shares in AlphaCat Re 2011 and no longer held a majority of the outstanding voting rights and therefore had an equity method investment in AlphaCat Re 2011 as at December 31, 2011.
(g) Validus Re Consolidated includes the following entities: Validus Reinsurance, Ltd., Validus Ltd., Validus Reinsurance, Ltd. (Singapore), Validus Specialty, Inc., Validus Reaseguros, Inc., Validus Services, Inc., Validus Re Chile S.A., Validus Re Americas, Ltd., Validus Underwriting Services, Ltd., Validus Re Europe Limited; AlphaCat Fund, Ltd, AlphaCat Master Fund, Ltd., AlphaCat Reinsurance, Ltd., AlphaCat High Return Fund Ltd., AlphaCat Re 2011, Ltd. and PacRe, Ltd.