Year to Date Annualized Return on Average
Equity of 11.1%
Book Value Per Diluted Common Share of
$41.89 at September 30, 2015
Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE:VR)
today reported net income available to Validus of $66.7 million, or
$0.78 per diluted common share, for the three months ended
September 30, 2015, compared to $39.7 million, or $0.41 per
diluted common share, for the three months ended September 30,
2014. Net income available to Validus was $304.1 million, or $3.50
per diluted common share, for the nine months ended
September 30, 2015, compared to $355.4 million, or $3.70 per
diluted common share, for the nine months ended September 30,
2014.
Net operating income available to Validus was $73.6 million, or
$0.86 per diluted common share, for the three months ended
September 30, 2015, compared to $84.9 million, or $0.90 per
diluted common share, for the three months ended September 30,
2014. Net operating income available to Validus was $304.8 million,
or $3.51 per diluted common share, for the nine months ended
September 30, 2015, compared to $357.4 million, or $3.73 per
diluted common share, for the nine months ended September 30,
2014.
Book value per diluted common share at September 30, 2015
was $41.89, reflecting quarterly growth of 1.9% inclusive of
dividends.
Commenting on the financial results for the three months ended
September 30, 2015, Validus' Chairman and CEO Ed Noonan
stated:
“Validus delivered 1.9% growth in book value per diluted share
inclusive of dividends during the quarter, a meaningful
accomplishment given the significant investment market volatility
and loss activity including the Tianjin, China industrial explosion
and earthquake in Chile. Validus continues to benefit from our core
principles of strong underwriting and analytical discipline and a
rock solid balance sheet, foundations which serve us well as we
continue our evolution as a global provider of insurance and
reinsurance.”
Net income and net operating income available to Validus, net
earnings and net operating earnings per diluted common share
available to Validus, by segment for the three months ended
September 30, 2015 were as follows:
Net Income Availableto
Validus
Net Operating IncomeAvailable to
Validus
(Expressed in millions of U.S. dollars, except per share
information) Validus Re $ 63.9 $ 72.2 Talbot 24.2 26.4 PaCRe, Ltd.
(8.0 ) — Other AlphaCat Companies
7.5
5.2
AlphaCat subtotal (a) (0.5 ) 5.2 Western World 10.3 3.2 Corporate
& Eliminations (31.2 ) (33.4 )
Total $
66.7 $ 73.6 Net earnings per
diluted common share available to Validus $ 0.78
Net operating earnings per diluted common share available to
Validus $ 0.86
(a)
Validus’ share (net of intercompany
eliminations) of AlphaCat Net Income and Net Operating Income
Available to Validus is $(2.2) million and $5.7 million,
respectively.
Net operating income (loss), a non-GAAP financial measure, is
defined as net income (loss) excluding net realized and change in
net unrealized gains (losses) on investments, income (loss) from
investment affiliate, foreign exchange gains (losses), other income
(loss) and non-recurring items. Net operating income (loss)
available (attributable) to Validus is defined as above, but
excludes income (loss) available (attributable) to noncontrolling
interest. Reconciliations of these measures to net income (loss)
and net income (loss) available (attributable) to Validus, the most
directly comparable GAAP measures, are presented at the end of this
release.
Third Quarter 2015
Results
Highlights for the third quarter are as follows:
- Gross premiums written for the three
months ended September 30, 2015 were $401.7 million compared
to $359.0 million for the three months ended September 30,
2014, an increase of $42.7 million, or 11.9%. The increase was
primarily due to the contribution from Western World and an
increase in AlphaCat gross written premium. This increase was
offset by decreases at both Validus Re and Talbot.
- Net premiums earned for the three
months ended September 30, 2015 were $555.5 million compared
to $494.7 million for the three months ended September 30,
2014, an increase of $60.8 million, or 12.3%.
- Underwriting income for the three
months ended September 30, 2015 was $86.1 million compared to
$92.1 million for the three months ended September 30, 2014, a
decrease of $6.0 million, or 6.5%.
- Combined ratio for the three months
ended September 30, 2015 was 84.5% which included $91.5
million of favorable loss reserve development on prior accident
years, benefiting the loss ratio by 16.5 percentage points compared
to a combined ratio for the three months ended September 30,
2014 of 81.4% which included $55.6 million of favorable loss
reserve development on prior accident years, benefiting the loss
ratio by 11.2 percentage points. The favorable development of $91.5
million for the three months ended September 30, 2015 is
primarily from non-event reserves in the amount of $60.8 million.
Favorable development on prior years from event specific reserves
was $30.7 million.
- Net operating income available to
Validus for the three months ended September 30, 2015 was
$73.6 million compared to $84.9 million for the three months ended
September 30, 2014, a decrease of $11.3 million, or
13.3%.
- Net income available to Validus for the
three months ended September 30, 2015 was $66.7 million
compared to $39.7 million for the three months ended
September 30, 2014, an increase of $27.0 million, or
68.0%.
- Annualized return on average equity of
7.3% and annualized net operating return on average equity of 8.1%
for the three months ended September 30, 2015 compared to 4.2%
and 9.1%, respectively, for the three months ended
September 30, 2014.
Notable and Non-Notable Loss
Events
During the three months ended September 30, 2015, the
Company incurred a notable loss event, defined as consolidated
losses which aggregate to a threshold greater than or equal to
$30.0 million. The event, the August 12th explosion in the port of
Tianjin, China, resulted in an estimated loss to the Company of
$47.8 million or 8.6 percentage points of the loss ratio. Net of
$3.9 million of reinstatement premiums, the net loss was $43.9
million. During the three months ended September 30, 2014, the
Company incurred a loss of $28.1 million related to the Tripoli
airport which subsequently developed into a notable loss event
during the three months ended December 31, 2014.
Three Months Ended September 30, 2015
(Dollars in thousands) Third Quarter 2015 Notable Loss
Event (a) Validus Re Talbot
Total Description
Net Lossesand
LossExpenses
% of NPE(b)
Net Lossesand
LossExpenses
% of NPE(b)
Net Lossesand
LossExpenses
% of NPE(b)
Tianjin Loss and loss expenses $ 35,806 14.9% $ 11,983 5.8% $
47,789 8.6% Reinstatement premiums (3,136 ) (760 )
(3,896 ) Net loss
$ 32,670 13.6%
$ 11,223 5.4% $ 43,893
7.9% (a) The notable loss event amounts were
based on management's estimates following a review of the Company's
potential exposure and discussions with certain clients and
brokers. Given the magnitude of this event, and other uncertainties
inherent in loss estimation, meaningful uncertainty remains
regarding losses from this event and the Company's actual ultimate
net losses from this event may vary materially from this estimate.
Only those segments that incurred a loss on this event are shown
above. (b) NPE = net premiums earned. % of NPE for each segment is
calculated using the respective segment NPE.
During the three months ended September 30, 2015, the
Company incurred a non-notable loss event, defined as consolidated
losses which aggregate to a threshold greater than or equal to
$15.0 million, but less than $30.0 million. The event, a Chilean
earthquake, resulted in an estimated loss to the Company of $22.2
million, or 4.0 percentage points of the loss ratio. Net of $2.2
million of reinstatement premiums, the net loss was $20.0 million.
The Company's loss ratio, excluding prior year development, notable
loss events, and non-notable loss events for the three months ended
September 30, 2015 and 2014 was 50.2% for both periods.
Year to Date 2015
Results
Highlights for the year to date include the following:
- Gross premiums written for the nine
months ended September 30, 2015 were $2,248.1 million compared
to $2,026.6 million for the nine months ended September 30,
2014, an increase of $221.5 million, or 10.9%.
- Net premiums earned for the nine months
ended September 30, 2015 were $1,706.8 million compared to
$1,443.7 million for the nine months ended September 30, 2014,
an increase of $263.1 million, or 18.2%.
- Underwriting income for the nine months
ended September 30, 2015 was $341.0 million compared to $391.3
million for the nine months ended September 30, 2014, a
decrease of $50.2 million, or 12.8%.
- Combined ratio for the nine months
ended September 30, 2015 was 80.0% which included $245.8
million of favorable loss reserve development on prior accident
years, benefiting the loss ratio by 14.4 percentage points compared
to a combined ratio for the nine months ended September 30,
2014 of 72.9% which included $167.6 million of favorable loss
reserve development on prior accident years, benefiting the loss
ratio by 11.6 percentage points.
- Net operating income available to
Validus for the nine months ended September 30, 2015 was
$304.8 million compared to $357.4 million for the nine months ended
September 30, 2014, a decrease of $52.6 million, or
14.7%.
- Net income available to Validus for the
nine months ended September 30, 2015 was $304.1 million
compared to $355.4 million for the nine months ended
September 30, 2014, a decrease of $51.4 million, or
14.4%.
- Annualized return on average equity of
11.1% and annualized net operating return on average equity of
11.2% for the nine months ended September 30, 2015 compared to
12.8% and 12.9%, respectively, for the nine months ended
September 30, 2014.
Validus Re Segment
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2015 were $102.9 million compared
to $114.4 million for the three months ended September 30,
2014, a decrease of $11.5 million, or 10.0%. Gross premiums written
for the three months ended September 30, 2015 included $65.0
million of property premiums, $13.4 million of marine premiums and
$24.5 million of specialty premiums, compared to $70.1 million of
property premiums, $23.0 million of marine premiums and $21.3
million of specialty premiums for the three months ended
September 30, 2014. The decrease in the property lines of $5.1
million was primarily driven by adjustments to premiums on existing
business. The decrease in the marine lines of $9.6 million was
primarily driven by reduced proportional business due to timing of
the renewal of a significant program which was made in the first
quarter of 2015 versus the third quarter of 2014.
- Net premiums earned for the three
months ended September 30, 2015 were $240.7 million compared
to $226.7 million for the three months ended September 30,
2014, an increase of $14.0 million, or 6.2%.
- The combined ratio for the three months
ended September 30, 2015 was 77.6% compared to 70.3% for the
three months ended September 30, 2014, an increase of 7.3
percentage points.
- The loss ratio for the three months
ended September 30, 2015 was 50.3% compared to 45.0% for the
three months ended September 30, 2014, an increase of 5.3
percentage points. The loss ratio for the three months ended
September 30, 2015 included favorable loss reserve development
on prior accident years of $50.5 million, benefiting the loss ratio
by 21.0 percentage points. Favorable development on prior years
from non-event reserves was $25.3 million. Favorable development on
prior years from event specific reserves was $25.2 million,
including $12.0 million on Superstorm Sandy, $5.6 million on
Hurricane Ike and $5.0 million on the 2010 Chilean earthquake. The
loss ratio for the three months ended September 30, 2014 included
favorable loss reserve development on prior accident years of $20.1
million, benefiting the loss ratio by 8.9 percentage points.
- General and administrative expenses for
the three months ended September 30, 2015 were $20.0 million
compared to $18.5 million for the three months ended September 30,
2014, an increase of $1.4 million, or 7.8%.
- Net operating income available to
Validus Re for the three months ended September 30, 2015 was
$72.2 million compared to $86.0 million, for the three months ended
September 30, 2014, a decrease of $13.8 million, or
16.0%.
- Net income available to Validus Re for
the three months ended September 30, 2015 was $63.9 million
compared to $54.0 million, for the three months ended
September 30, 2014, an increase of $9.9 million, or
18.3%.
Highlights for the year to date include the following:
- Gross premiums written for the nine
months ended September 30, 2015 were $1,111.0 million compared
to $1,081.8 million for the nine months ended September 30,
2014, an increase of $29.2 million, or 2.7%. Gross premiums written
for the nine months ended September 30, 2015 included $530.5
million of property premiums, $153.4 million of marine premiums and
$427.2 million of specialty premiums, compared to $598.6 million of
property premiums, $175.7 million of marine premiums and $307.5
million of specialty premiums for the nine months ended
September 30, 2014.
- Net premiums earned for the nine months
ended September 30, 2015 were $758.3 million compared to
$686.8 million for the nine months ended September 30, 2014,
an increase of $71.5 million, or 10.4%.
- The combined ratio for the nine months
ended September 30, 2015 was 72.8% compared to 60.5% for the
nine months ended September 30, 2014, an increase of 12.3
percentage points.
- The loss ratio for the nine months
ended September 30, 2015 was 47.1% compared to 36.1% for the
nine months ended September 30, 2014, an increase of 11.0
percentage points. The loss ratio for the nine months ended
September 30, 2015 included favorable loss reserve development
on prior accident years of $106.1 million, benefiting the loss
ratio by 14.0 percentage points. The loss ratio for the nine months
ended September 30, 2014 included favorable loss reserve
development on prior accident years of $56.8 million, benefiting
the loss ratio by 8.3 percentage points.
- General and administrative expenses for
the nine months ended September 30, 2015 were $58.3 million
compared to $53.8 million for the nine months ended September 30,
2014, an increase of $4.5 million, or 8.4%.
- Net operating income available to
Validus Re for the nine months ended September 30, 2015 was
$254.9 million compared to $318.8 million, for the nine months
ended September 30, 2014, a decrease of $63.9 million, or
20.0%.
- Net income available to Validus Re for
the nine months ended September 30, 2015 was $250.8 million
compared to $319.5 million, for the nine months ended
September 30, 2014, a decrease of $68.7 million, or
21.5%.
Talbot Segment
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2015 were $226.0 million compared
to $245.7 million for the three months ended September 30,
2014, a decrease of $19.7 million, or 8.0%. Gross premiums written
for the three months ended September 30, 2015 included $72.7
million of property premiums, $66.8 million of marine premiums and
$86.5 million of specialty premiums compared to $67.0 million of
property premiums, $90.8 million of marine premiums and $87.8
million of specialty premiums for the three months ended
September 30, 2014. The decrease in the marine lines of $24.0
million was driven by decreases in a number of classes, but
primarily the upstream energy and cargo lines due to ongoing market
conditions and economic factors which have reduced new business and
renewals.
- Net premiums earned for the three
months ended September 30, 2015 were $206.1 million compared
to $232.8 million for the three months ended September 30,
2014, a decrease of $26.7 million, or 11.5%.
- The combined ratio for the three months
ended September 30, 2015 was 90.0% compared to 88.9% for the
three months ended September 30, 2014, an increase of 1.1
percentage points.
- The loss ratio for the three months
ended September 30, 2015 was 45.8% compared to 50.8% for the
three months ended September 30, 2014, a decrease of 5.0
percentage points. The loss ratio for the three months ended
September 30, 2015 included favorable loss reserve development
on prior accident years of $36.0 million, benefiting the loss ratio
by 17.4 percentage points. The favorable development on prior years
is primarily from non-event reserves in the amount of $30.4
million. Favorable development on prior years from event specific
reserves was $5.5 million. The loss ratio for the three months
ended September 30, 2014 included favorable loss reserve
development on prior accident years of $35.4 million, benefiting
the loss ratio by 15.2 percentage points.
- General and administrative expenses for
the three months ended September 30, 2015 were $43.3 million
compared to $37.7 million for the three months ended
September 30, 2014, an increase of $5.6 million, or
14.8%.
- Net operating income available to
Talbot for the three months ended September 30, 2015 was $26.4
million compared to $31.5 million, for the three months ended
September 30, 2014, a decrease of $5.1 million, or 16.2%.
- Net income available to Talbot for the
three months ended September 30, 2015 was $24.2 million
compared to $21.7 million, for the three months ended
September 30, 2014, an increase of $2.5 million, or
11.6%.
Highlights for the year to date include the following:
- Gross premiums written for the nine
months ended September 30, 2015 were $789.1 million compared
to $854.3 million for the nine months ended September 30,
2014, a decrease of $65.2 million, or 7.6%. Gross premiums written
for the nine months ended September 30, 2015 included $253.2
million of property premiums, $266.9 million of marine premiums and
$269.1 million of specialty premiums compared to $261.1 million of
property premiums, $319.8 million of marine premiums and $273.4
million of specialty premiums for the nine months ended
September 30, 2014.
- Net premiums earned for the nine months
ended September 30, 2015 were $634.2 million compared to
$658.6 million for the nine months ended September 30, 2014, a
decrease of $24.4 million, or 3.7%.
- The combined ratio for the nine months
ended September 30, 2015 was 84.3% compared to 84.8% for the
nine months ended September 30, 2014, a decrease of 0.5
percentage points.
- The loss ratio for the nine months
ended September 30, 2015 was 42.4% compared to 46.3% for the
nine months ended September 30, 2014, a decrease of 3.9
percentage points. The loss ratio for the nine months ended
September 30, 2015 included favorable loss reserve development
on prior accident years of $123.2 million, benefiting the loss
ratio by 19.4 percentage points. The loss ratio for the nine months
ended September 30, 2014 included favorable loss reserve
development on prior accident years of $99.2 million, benefiting
the loss ratio by 15.1 percentage points.
- General and administrative expenses for
the nine months ended September 30, 2015 were $115.3 million
compared to $107.0 million for the nine months ended September 30,
2014, an increase of $8.3 million, or 7.8%.
- Net operating income available to
Talbot for the nine months ended September 30, 2015 was $115.0
million compared to $113.7 million for the nine months ended
September 30, 2014, an increase of $1.3 million, or 1.1%.
- Net income available to Talbot for the
nine months ended September 30, 2015 was $112.4 million
compared to $110.5 million, for the nine months ended
September 30, 2014, an increase of $1.8 million, or 1.6%.
AlphaCat
Segment(1)
Highlights for the third quarter include the following:
- AlphaCat's assets under management were
$2,238.6 million as at October 1, 2015, compared to $2,079.3
million as at July 1, 2015. Third party assets under management
were $1,877.4 million as at October 1, 2015, compared to $1,724.3
million as at July 1, 2015. During the three months ended
September 30, 2015, a total of $165.7 million of capital was
raised, of which $163.8 million was raised from third parties.
- Management fees earned from third
parties were $5.8 million for the three months ended
September 30, 2015, compared to $4.1 million for the three
months ended September 30, 2014, an increase of $1.6 million.
Increased third party assets under management drove the increase in
third party management fees between periods.
- The AlphaCat sidecars and ILS funds
contributed $6.5 million of income for the three months ended
September 30, 2015, compared to $3.7 million for the three
months ended September 30, 2014, an increase of $2.9
million.
- Total expenses for the three months
ended September 30, 2015 were $6.6 million, compared to $3.9
million for the three months ended September 30, 2014, an
increase of $2.7 million. Included within the expenses for the
three months ended September 30, 2015 was $2.3 million of finance
expenses relating to the raising of third party capital.
- Validus' share of AlphaCat net
operating income for the three months ended September 30, 2015
was $5.7 million, compared to $3.9 million for the three months
ended September 30, 2014, an increase of $1.9 million.
- Validus' share of PaCRe's net realized
and unrealized investment losses for the three months ended
September 30, 2015 was $8.0 million, compared to $5.8 million
for the three months ended September 30, 2014, an increase of
$2.1 million.
- Validus' share of AlphaCat's net loss
for the three months ended September 30, 2015 was $2.2
million, compared to $2.0 million for the three months ended
September 30, 2014, an increase of $0.2 million.
- Highlights for the year to date include
the following:
- Management fees earned from third
parties for the nine months ended September 30, 2015 were
$14.6 million, compared to $14.2 million for the nine months ended
September 30, 2014, an increase of $0.4 million.
- The AlphaCat sidecars and ILS funds
contributed $17.2 million of income for the nine months ended
September 30, 2015, compared to $18.5 million for the nine
months ended September 30, 2014, a decrease of $1.3
million.
- Total expenses for the nine months
ended September 30, 2015 were $18.6 million, compared to $10.0
million for the nine months ended September 30, 2014, an
increase of $8.6 million. Included within the expenses for the nine
months ended September 30, 2015 was $9.2 million of finance
expenses relating to the raising of third party capital.
- PaCRe contributed $0.1 million of net
operating income for the nine months ended September 30, 2015,
compared to $0.2 million for the nine months ended
September 30, 2014, a decrease of $0.1 million.
- For the nine months ended
September 30, 2015, there was an accounting loss of $1.8
million on the deconsolidation of one of the ILS funds compared to
an accounting gain on another of the ILS funds of $1.4 million for
the nine months ended September 30, 2014.
- Validus' share of AlphaCat net
operating income for the nine months ended September 30, 2015
was $11.6 million, compared to $24.2 million for the nine months
ended September 30, 2014, a decrease of $12.7 million.
- Validus' share of PaCRe's net realized
and unrealized investment losses for the nine months ended
September 30, 2015 were $2.3 million, compared to a gain of
$2.5 million for the nine months ended September 30, 2014, a
decrease of $4.9 million.
- Validus' share of AlphaCat net income
for the nine months ended September 30, 2015 was $9.2 million,
compared to $26.8 million for the nine months ended
September 30, 2014, a decrease of $17.5 million.
(1) Please refer to page 16 of this document for further details
on the AlphaCat segment.
Western World Segment
The acquisition of Western World closed on October 2, 2014 and
the segment was included in the Company's results for the first
time in the fourth quarter of 2014. As such, there are no
comparatives for the three or nine months ended September 30,
2014.
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2015 were $70.9 million, which
included $13.9 million of property premiums and $57.0 million of
liability premiums.
- Net premiums earned for the three
months ended September 30, 2015 were $63.9 million.
- The combined ratio for the three months
ended September 30, 2015 was 100.4%.
- The loss ratio for the three months
ended September 30, 2015 was 63.8%, which included favorable
loss reserve development on prior accident years of $5.1 million,
benefiting the loss ratio by 7.9 percentage points. Of this, $2.5
million or 3.9 percentage points arose from the amortization of the
risk premium adjustment accounted for at the time of the
acquisition of Western World.
- Policy acquisition costs for the three
months ended September 30, 2015 were $13.2 million or 20.7% of
net premiums earned. Amortization of the fair value adjustment
accounted for at the time of the acquisition favorably impacted
policy acquisition costs by approximately $3.0 million or 4.7
percentage points.
- General and administrative expenses for
the three months ended September 30, 2015 were $9.6 million,
or 15.9% of net premiums earned.
- Net operating income available to
Western World for the three months ended September 30, 2015
was $3.2 million.
- Net income available to Western World
for the three months ended September 30, 2015 was $10.3
million.
Highlights for the year to date include the following:
- Gross premiums written for the nine
months ended September 30, 2015 were $207.4 million, which
included $39.1 million of property premiums and $168.2 million of
liability premiums.
- Net premiums earned for the nine months
ended September 30, 2015 were $196.9 million.
- The combined ratio for the nine months
ended September 30, 2015 was 99.5%.
- The loss ratio for the nine months
ended September 30, 2015 was 70.1%, which included favorable
loss reserve development on prior accident years of $15.6 million,
benefiting the loss ratio by 8.0 percentage points. Of this, $8.6
million or 4.4 percentage points arose from the amortization of the
risk premium adjustment accounted for at the time of the
acquisition of Western World.
- Policy acquisition costs for the nine
months ended September 30, 2015 were $27.1 million or 13.8% of
net premiums earned. Amortization of the fair value adjustment
accounted for at the time of the acquisition favorably impacted
policy acquisition costs by approximately $20.0 million or 10.2
percentage points.
- General and administrative expenses for
the nine months ended September 30, 2015 were $29.1 million,
or 15.6% of net premiums earned.
- Net operating income available to
Western World for the nine months ended September 30, 2015 was
$16.1 million.
- Net income available to Western World
for the nine months ended September 30, 2015 was $22.0
million.
Corporate Results
Corporate results include executive and board expenses, internal
and external audit expenses, interest and costs incurred in
connection with the Company's senior notes and junior subordinated
deferrable debentures and other costs relating to the Company as a
whole.
Highlights for the third quarter include the following:
- General and administrative expenses for
the three months ended September 30, 2015, net of operating segment
eliminations, were $18.5 million compared to $19.4 million for the
three months ended September 30, 2014, a decrease of $0.9 million
or 4.6%.
- Share compensation expenses for the
three months ended September 30, 2015 were $3.4 million compared to
$3.0 million for the three months ended September 30, 2014, an
increase of $0.4 million or 12.3%.
Highlights for the year to date include the following:
- General and administrative expenses for
the nine months ended September 30, 2015, net of operating
segment eliminations, were $49.1 million compared to $55.2 million
for the nine months ended September 30, 2014, a decrease of
$6.1 million, or 11.1%.
- Share compensation expenses for the
nine months ended September 30, 2015 were $9.5 million
compared to $8.4 million for the nine months ended
September 30, 2014, an increase of $1.1 million, or
13.1%.
Investments
Highlights for the third quarter include the following:
- Net investment income for the three
months ended September 30, 2015 was $31.5 million compared to
$25.3 million for the three months ended September 30, 2014,
an increase of $6.3 million, or 24.8%.
- Net realized losses on investments for
the three months ended September 30, 2015 were $41.9 million
compared to a gain of $4.6 million for the three months ended
September 30, 2014, a decrease of $46.5 million. The net
realized losses for the three months ended September 30, 2015,
included $40.7 million in realized losses relating to PaCRe. The
amount of PaCRe's realized losses attributable to noncontrolling
interest was $36.6 million for the three months ended
September 30, 2015, leaving a net loss to the Company of $4.1
million. The net realized gains on investments for the three months
ended September 30, 2014 was driven by $2.6 million in
realized gains relating to PaCRe. The amount of PaCRe's realized
gains attributable to noncontrolling interest was $2.3 million for
the three months ended September 30, 2014, leaving a net gain
to the Company of $0.3 million.
- The change in net unrealized losses on
investments for the three months ended September 30, 2015 was
$34.9 million compared to $85.0 million for the three months ended
September 30, 2014, a decrease of $50.1 million, or 58.9%. The
change in net unrealized losses on investments for the three months
ended September 30, 2015 included $38.8 million in unrealized
losses relating to PaCRe. The amount of PaCRe's net unrealized
losses attributable to noncontrolling interest was $34.9 million
for the three months ended September 30, 2015, leaving a net
loss to the Company of $3.9 million. The change in net unrealized
losses on investments for the three months ended September 30,
2014 was driven by $61.0 million in unrealized losses relating to
PaCRe. The amount of PaCRe's net unrealized losses attributable to
noncontrolling interest was $54.9 million for the three months
ended September 30, 2014, leaving a net loss to the Company of
$6.1 million.
Highlights for the year to date include the following:
- Net investment income for the nine
months ended September 30, 2015 was $96.2 million compared to
$69.9 million for the nine months ended September 30, 2014, an
increase of $26.2 million, or 37.5%.
- Net realized losses on investments for
the nine months ended September 30, 2015 were $35.5 million
compared to a gain of $16.2 million for the nine months ended
September 30, 2014, a decrease of $51.7 million. The net
realized losses for the nine months ended September 30, 2015,
included $40.7 million in realized losses relating to PaCRe. The
amount of PaCRe's realized losses attributable to noncontrolling
interest was $36.6 million for the nine months ended
September 30, 2015, leaving a net loss to the Company of $4.1
million. The net realized gains on investments for the nine months
ended September 30, 2014 was driven by $8.2 million in
realized gains relating to PaCRe. The amount of PaCRe's realized
gains attributable to noncontrolling interest was $7.4 million for
the nine months ended September 30, 2014, leaving a net gain
to the Company of $0.8 million.
- The change in net unrealized gains on
investments for the nine months ended September 30, 2015 was
$19.8 million compared to $16.1 million for the nine months ended
September 30, 2014, an increase of $3.6 million, or 22.4%. The
change in net unrealized gains on investments for the nine months
ended September 30, 2015 was driven by $17.3 million in unrealized
gains relating to PaCRe. The amount of PaCRe's net unrealized gains
attributable to noncontrolling interest was $15.6 million for the
nine months ended September 30, 2015, leaving a net gain to
the Company of $1.7 million. The change in net unrealized gains on
investments for the nine months ended September 30, 2014 was
driven by $16.9 million in unrealized gains relating to PaCRe. The
amount of PaCRe's net unrealized gains attributable to
noncontrolling interest was $15.3 million for the nine months ended
September 30, 2014, leaving a net loss to the Company of $1.7
million.
Shareholders' Equity and
Capitalization
As at September 30, 2015, total shareholders' equity was
$4.1 billion including $438.4 million of noncontrolling interest.
Shareholders' equity available to Validus was $3.6 billion as at
September 30, 2015. Book value per diluted common share was
$41.89 at September 30, 2015, compared to $41.43 at
June 30, 2015. Book value per diluted common share is a
non-GAAP financial measure. A reconciliation of this measure to
book value per common share is presented at the end of this
release.
Total capitalization at September 30, 2015 was $4.9
billion, including $538.1 million of junior subordinated deferrable
debentures and $247.4 million of senior notes. Total capitalization
available to Validus at September 30, 2015 was $4.4 billion,
excluding $438.4 million of noncontrolling interest.
Share Repurchases
For the three months ended September 30, 2015, the number
of shares repurchased by the Company was 1.4 million. The share
repurchases made during the three months ended September 30, 2015
resulted in a dilutive impact on book value per diluted common
share of $0.04 for the quarter. A summary of the share
repurchases made to date under the Company’s previously announced
share repurchase program is as follows:
Share Repurchase Activity(Expressed in thousands
of U.S. dollars except for share and per share information)
As at June 30, 2015 Quarter
ended Effect of share repurchases: (cumulative)
July August September September 30,
2015 Aggregate purchase price (a) $ 2,374,524 $ 22,741 $ 15,328
$ 22,625 $ 60,694 Shares repurchased 73,444,835 503,600 340,771
508,569 1,352,940 Average price (a) $ 32.33 $ 45.16 $
44.98 $ 44.49 $ 44.86
Share Repurchase
Activity(Expressed in thousands of U.S. dollars except for
share and per share information)
Effect of share repurchases: As at September 30, 2015
As at October 28, 2015 Cumulative to Date
Effect Aggregate purchase price (a) $ 2,435,218 $ — $ 2,435,218
Shares repurchased 74,797,775 — 74,797,775 Average price (a) $
32.56 $ — $ 32.56 (a) Share transactions are
on a trade date basis through October 28, 2015 and are inclusive of
commissions. Average share price is rounded to two decimal places.
Conference Call
The Company will host a conference call for analysts and
investors on October 30, 2015 at 10:00 AM (Eastern) to discuss the
third quarter 2015 financial results and related matters. The
conference call may be accessed by dialing 1-866-440-4674
(toll-free U.S.) or 1-704-908-0454 (international) and entering the
passcode 4212 9203. 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 13, 2015, by dialing
1-855-859-2056 (toll-free U.S.) or 1-404-537-3406 (international)
and entering the passcode 4212 9203.
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. A replay of the webcast
will be available at the Investor Relations section of the
Company's website through November 13, 2015. In addition, a
financial supplement relating to the Company's financial results
for the three and nine months ended September 30, 2015 is
available in the Investor Relations section of the Company's
website.
About Validus Holdings,
Ltd.
Validus Holdings, Ltd. is a holding company for reinsurance and
insurance operating companies and investment advisors including
Validus Reinsurance, Ltd. (“Validus Re”), Talbot Holdings Ltd.
(“Talbot”), Western World Insurance Group, Inc. (“Western World”)
and AlphaCat Managers, Ltd. (“AlphaCat”).
The results of Western World are consolidated from the October
2, 2014 date of acquisition.
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. Western World is a U.S.
specialty lines insurance company focused on excess and surplus
lines. AlphaCat is a Bermuda based investment adviser managing
capital for third parties and the Group in insurance linked
securities and other property catastrophe reinsurance
investments.
Validus Holdings, Ltd.Consolidated
Balance SheetsAs at September 30,
2015 and December 31, 2014(Expressed in thousands
of U.S. dollars, except share and per share information)
September 30, 2015 December 31,
2014 Assets Fixed maturities, at fair value
(amortized cost: 2015—$5,581,846; 2014—$5,534,494) $ 5,578,856 $
5,532,731 Short-term investments, at fair value (amortized cost:
2015—$1,661,705; 2014—$1,051,222) 1,661,687 1,051,074 Other
investments, at fair value (cost: 2015—$864,651; 2014—$879,176)
817,374 813,011 Cash and cash equivalents 408,485 577,240
Restricted cash 74,002 173,003 Total investments and
cash 8,540,404 8,147,059 Investments in affiliates 347,962 261,483
Premiums receivable 1,062,654 707,647 Deferred acquisition costs
225,065 161,295 Prepaid reinsurance premiums 125,547 81,983
Securities lending collateral 6,461 470 Loss reserves recoverable
385,212 377,466 Paid losses recoverable 21,681 38,078 Income taxes
recoverable 15,870 — Deferred tax asset 22,352 23,821 Receivable
for investments sold 15,055 18,318 Intangible assets 122,676
126,924 Goodwill 196,758 195,897 Accrued investment income 23,755
24,865 Other assets 124,511 164,633
Total assets $ 11,235,963 $ 10,329,939
Liabilities Reserve for losses and loss expenses $ 3,169,334
$ 3,234,394 Unearned premiums 1,281,319 990,564 Reinsurance
balances payable 90,838 127,128 Securities lending payable 6,927
936 Deferred tax liability 8,921 5,541 Payable for investments
purchased 118,164 68,574 Accounts payable and accrued expenses
248,834 318,245 Notes payable to AlphaCat investors 1,443,198
671,465 Senior notes payable 247,387 247,306 Debentures payable
538,054 539,277
Total
liabilities 7,152,976 6,203,430
Commitments and contingent liabilities Redeemable
noncontrolling interest — 79,956
Shareholders' equity
Common shares, 571,428,571 authorized, par
value $0.175 (Issued: 2015—158,434,541; 2014—155,554,224;
Outstanding: 2015—81,997,891; 2014—83,869,845)
27,726 27,222 Treasury shares (2015—76,436,650; 2014—71,684,379)
(13,376 ) (12,545 ) Additional paid-in-capital 1,048,917 1,207,493
Accumulated other comprehensive (loss) (10,869 ) (8,556 ) Retained
earnings 2,592,162 2,374,344
Total
shareholders' equity available to Validus 3,644,560
3,587,958 Noncontrolling interest
438,427 458,595
Total shareholders'
equity 4,082,987 4,046,553
Total liabilities, noncontrolling interests and shareholders'
equity $ 11,235,963 $ 10,329,939
Validus Holdings, Ltd.Consolidated
Statements of OperationsFor the three and
nine months ended September 30, 2015 and
2014(Expressed in thousands of U.S. dollars, except
share and per share information)
Three Months Ended September 30,
Nine Months Ended September 30, 2015
2014 2015 2014 Underwriting
income Gross premiums written $ 401,681 $ 358,974 $ 2,248,147 $
2,026,639 Reinsurance premiums ceded (48,425 )
(30,137 ) (294,161 ) (275,610 ) Net premiums written
353,256 328,837 1,953,986 1,751,029 Change in unearned premiums
202,203 165,859 (247,191 )
(307,373 )
Net premiums earned 555,459
494,696 1,706,795 1,443,656
Underwriting deductions Losses and loss
expenses 258,258 224,125 765,333 545,541 Policy acquisition costs
105,091 86,404 308,152 251,006 General and administrative expenses
95,999 83,319 263,990 231,606 Share compensation expenses
9,983 8,764 28,279 24,252
Total underwriting deductions 469,331
402,612 1,365,754 1,052,405
Underwriting income $
86,128 $
92,084 $
341,041 $
391,251 Net
investment income 31,524 25,261 96,153 69,909 Other insurance
related income 10,157 3,610 18,137 16,458 Finance expenses
(17,498 ) (15,354 ) (55,085 ) (47,380 )
Operating income before taxes, income
from operating affiliates and (income) attributable to
AlphaCat investors
$
110,311 $
105,601 $
400,246 $
430,238
Tax (expense) benefit (2,018 ) 953 (7,132 ) (398 ) Income from
operating affiliates 5,526 3,761 12,083 13,580 (Income)
attributable to AlphaCat investors (40,256 ) (25,807
) (94,341 ) (82,833 )
Net operating income $
73,563 $
84,508 $
310,856 $
360,587
Net realized (losses) gains on investments (41,906 ) 4,595
(35,493 ) 16,193 Change in net unrealized (losses) gains on
investments (34,908 ) (84,974 ) 19,766 16,146 Income from
investment affiliate 2,482 1,754 5,542 7,881 Foreign exchange
(losses) (2,274 ) (11,441 ) (9,061 ) (14,761 ) Other (loss) (1,970
) (7,690 ) (2,578 ) (1,473 ) Transaction expenses (a) —
(149 ) —
(3,401 )
Net income $
(5,013 ) $
(13,397 ) $
289,032 $
381,172
Net loss (income) attributable to noncontrolling interest 71,663
53,069 15,042 (25,745 )
Net income available to Validus $
66,650 $
39,672 $
304,074
$
355,427 Selected ratios: Net premiums
written / Gross premiums written 87.9 % 91.6 % 86.9 % 86.4 %
Losses and loss expenses 46.5 % 45.3 % 44.8 % 37.8 % Policy
acquisition costs 18.9 % 17.5 % 18.1 % 17.4 % General and
administrative expenses (b) 19.1 % 18.6 % 17.1
% 17.7 % Expense ratio 38.0 % 36.1 %
35.2 % 35.1 % Combined ratio 84.5 %
81.4 % 80.0 % 72.9 %
Notes:
(a) The transaction expenses relate to costs incurred in
connection with the acquisition of Western World Insurance Group,
Inc. (“Western World”), which was completed on October 2, 2014.
Western World results have been included in the Company's
consolidated results from October 2, 2014. Transaction expenses are
primarily comprised of legal, financial advisory and audit related
services. (b) The general and administrative expense ratio includes
share compensation expenses.
Validus Holdings, Ltd.Consolidated
Segment Operating Income (Loss)For the
three months ended September 30, 2015 and
2014(Expressed in thousands of U.S. dollars, except
share and per share information)
Three Months Ended September 30, 2015
Three Months Ended September 30, 2014
ValidusRe
AlphaCat Talbot
WesternWorld
CorporateandEliminations
Total
ValidusRe (b)
AlphaCat Talbot
CorporateandEliminations (b)
Total Underwriting income
Gross premiums written 102,913 9,448 226,025 70,871 (7,576 )
401,681 114,380 6,936 245,685 (8,027 ) 358,974 Reinsurance premiums
ceded (15,462 ) — (35,823 ) (4,716 ) 7,576 (48,425 )
(10,382 ) (648 ) (27,134 ) 8,027 (30,137 ) Net premiums
written 87,451 9,448 190,202 66,155 — 353,256 103,998 6,288 218,551
— 328,837 Change in unearned premiums 153,210 35,276
15,942 (2,225 ) — 202,203 122,712
28,850 14,297 — 165,859
Net premiums
earned 240,661 44,724
206,144 63,930 —
555,459 226,710 35,138
232,848 — 494,696
Underwriting deductions Losses and loss expenses 120,958
2,076 94,414 40,810 — 258,258 102,005 3,738 118,382 — 224,125
Policy acquisition costs 42,989 4,658 44,575 13,214 (345 ) 105,091
36,177 3,378 47,862 (1,013 ) 86,404 General and administrative
expenses 19,964 4,674 43,292 9,587 18,482 95,999 18,522 7,719
37,709 19,369 83,319 Share compensation expenses 2,691 141
3,214 554 3,383 9,983 2,582
179 2,990 3,013 8,764
Total
underwriting deductions 186,602 11,549
185,495 64,165 21,520
469,331 159,286 15,014
206,943 21,369 402,612
Underwriting income (loss) 54,059
33,175 20,649 (235 ) (21,520
) 86,128 67,424 20,124 25,905
(21,369 ) 92,084 Net investment income
18,362 1,533 6,457 5,634 (462 ) 31,524 20,270 837 4,965 (811 )
25,261 Other insurance related
income (loss)
2,569 7,522 470 248 (652 ) 10,157 863 5,980 109 (3,342 ) 3,610
Finance expenses (3,624 ) (2,355 ) (57 ) — (11,462 ) (17,498
) (3,622 ) (385 ) 162 (11,509 ) (15,354 )
Operating
income (loss) before taxes, income from operating affiliates and
(income) attributable to AlphaCat investors 71,366
39,875 27,519 5,647 (34,096 )
110,311 84,935 26,556 31,141
(37,031 ) 105,601 Tax benefit (expense) 851 —
(1,141 ) (2,431 ) 703 (2,018 ) 1,058 — 332 (437 ) 953 Income from
operating affiliates — 5,526 — — — 5,526 — 3,761 — — 3,761 (Income)
attributable to AlphaCat investors — (40,256 ) — —
— (40,256 ) — (25,807 ) — —
(25,807 )
Net operating income (loss) (a) 72,217
5,145 26,378 3,216 (33,393 )
73,563 85,993 4,510 31,473
(37,468 ) 84,508 Net operating loss
attributable to noncontrolling interest — 63 —
— — 63 — 438 — —
438
Net operating income (loss) available (attributable)
to Validus 72,217 5,208
26,378 3,216 (33,393 )
73,626 85,993 4,948
31,473 (37,468 ) 84,946
Net income (loss) available (attributable) to
Validus 63,879 (481 ) 24,158
10,342 (31,248 ) 66,650
54,018 (162 ) 21,653
(35,837 ) 39,672
Notes:
(a) Net operating income (loss), a non-GAAP financial
measure, is defined as net income (loss) excluding net realized and
change in unrealized gains (losses) on investments, foreign
exchange gains (losses), other income (loss), income (loss) from
investment affiliate 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. Net operating
income (loss) available (attributable) to Validus is defined as
above and includes income (loss) from noncontrolling interests. (b)
During the first quarter of 2015, certain intercompany reinsurance
transactions were presented on a net basis for segmental reporting
purposes. As a result, gross premiums written and reinsurance
premiums ceded for the Validus Re segment and Corporate &
Eliminations were reduced by $517 for the three months ended
September 30, 2014 for comparative purposes. There was no impact to
total gross premiums written and reinsurance premiums ceded on a
consolidated basis.
Validus Holdings, Ltd.Consolidated
Segment Operating Income (Loss)For the
nine months ended September 30, 2015 and
2014(Expressed in thousands of U.S. dollars, except
share and per share information)
Nine Months Ended September 30, 2015
Nine Months Ended September 30, 2014
ValidusRe
AlphaCat Talbot
WesternWorld
CorporateandEliminations
Total
ValidusRe (b)
AlphaCat Talbot
CorporateandEliminations(b)
Total Underwriting income Gross premiums
written 1,111,020 176,129 789,148 207,372 (35,522 ) 2,248,147
1,081,816 135,073 854,324 (44,574 ) 2,026,639 Reinsurance premiums
ceded (147,611 ) (4,538 ) (164,144 ) (13,390 ) 35,522
(294,161 ) (161,721 ) (4,348 ) (154,115 ) 44,574 (275,610 )
Net premiums written 963,409 171,591 625,004 193,982 — 1,953,986
920,095 130,725 700,209 — 1,751,029 Change in unearned premiums
(205,110 ) (54,196 ) 9,167 2,948 — (247,191 )
(233,271 ) (32,444 ) (41,658 ) — (307,373 )
Net premiums
earned 758,299 117,395
634,171 196,930 —
1,706,795 686,824 98,281
658,551 — 1,443,656
Underwriting deductions Losses and loss expenses
357,491 1,232 268,512 138,098 — 765,333 247,848 (7,155 ) 304,848 —
545,541 Policy acquisition costs 128,909 12,162 141,338 27,110
(1,367 ) 308,152 106,547 9,414 138,383 (3,338 ) 251,006 General and
administrative expenses 58,254 12,202 115,341 29,137 49,056 263,990
53,757 15,627 107,031 55,191 231,606 Share compensation expenses
7,665 440 9,195 1,525 9,454
28,279 7,126 330 8,434 8,362
24,252
Total underwriting deductions 552,319
26,036 534,386 195,870
57,143 1,365,754 415,278
18,216 558,696 60,215
1,052,405 Underwriting income
(loss) 205,980 91,359 99,785 1,060
(57,143 ) 341,041 271,546 80,065
99,855 (60,215 ) 391,251 Net
investment income 56,694 4,872 19,168 16,660 (1,241 ) 96,153 54,810
2,546 14,322 (1,769 ) 69,909 Other insurance related
income (loss)
3,318 17,048 564 787 (3,580 ) 18,137 2,385 21,482 384 (7,793 )
16,458 Finance expenses (11,068 ) (9,462 ) (231 ) — (34,324
) (55,085 ) (11,131 ) (2,039 ) 68 (34,278 ) (47,380 )
Operating income (loss) before taxes, income from operating
affiliates and (income) attributable to AlphaCat investors
254,924 103,817 119,286 18,507
(96,288 ) 400,246 317,610
102,054 114,629 (104,055 )
430,238 Tax (expense) benefit (14 ) — (4,286 ) (2,420 ) (412
) (7,132 ) 1,176 — (902 ) (672 ) (398 ) Income from operating
affiliates — 12,083 — — — 12,083 — 13,580 — — 13,580 (Income)
attributable to AlphaCat investors — (94,341 ) — —
— (94,341 ) — (82,833 ) — —
(82,833 )
Net operating income (loss) (a) 254,910
21,559 115,000 16,087 (96,700 )
310,856 318,786 32,801 113,727
(104,727 ) 360,587 Net operating (income)
attributable to noncontrolling interest — (6,047 ) —
— — (6,047 ) — (3,160 ) — —
(3,160 )
Net operating income (loss) available (attributable) to
Validus 254,910 15,512
115,000 16,087 (96,700 )
304,809 318,786 29,641
113,727 (104,727 ) 357,427
Net income (loss) available (attributable)
to Validus 250,758 13,278
112,354 21,959 (94,275 )
304,074 319,502 32,788
110,541 (107,404 ) 355,427
Notes:
(a) Net operating income (loss), a non-GAAP financial
measure, is defined as net income (loss) excluding net realized and
change in unrealized gains (losses) on investments, foreign
exchange gains (losses), other income (loss), income (loss) from
investment affiliate 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. Net operating
income (loss) available (attributable) to Validus is defined as
above and includes income (loss) from noncontrolling interests. (b)
During the first quarter of 2015, certain intercompany reinsurance
transactions were presented on a net basis for segmental reporting
purposes. As a result, gross premiums written and reinsurance
premiums ceded for the Validus Re segment and Corporate &
Eliminations were reduced by $22,352 for the nine months ended
September 30, 2014 for comparative purposes. There was no impact to
total gross premiums written and reinsurance premiums ceded on a
consolidated basis.
Validus Holdings, Ltd.AlphaCat
Supplemental Information - Non GAAPFor the
three and nine months ended September 30, 2015 and
2014(Expressed in thousands of U.S. dollars, except
share and per share information)
Three Months Ended September 30,
Nine Months Ended September 30, 2015
2014 2015 2014 Revenue -
management fees Third party 5,762 4,129 14,622 14,196
Related party 1,738 1,828 4,058 6,028
Total revenue 7,500 5,957 18,680 20,224
Expenses General and administrative expenses
4,124 3,426 8,883 7,875 Share compensation expenses 141 179 440 330
Finance expenses 2,297 302 9,259 1,800 Foreign exchange (gains) (11
) (16 ) (9 ) (9 )
Total expenses 6,551 3,891 18,573 9,996
Income before investments in
operating affiliates 949 2,066 107 10,228
Investment income (loss) in operating affiliates
(a) AlphaCat Re & Master Fund — — — (1,377 ) AlphaCat 2011,
2012, 2013, 2014, & 2015 1,445 1,360 3,886 7,507 AlphaCat ILS
Funds 4,081 2,307 12,062 12,321 BetaCat ILS Funds 1,007 — 1,241 —
PaCRe (b) (7,963 ) (5,895 ) (2,241 ) 2,737
Total
investment (loss) income in operating affiliates (1,430 )
(2,228 ) 14,948 21,188
(Loss) gain on
deconsolidation of ILS Fund (c) — — (1,777 ) 1,372
Net (loss) income (481 )
(162 ) 13,278 32,788
Validus' share of net (loss) income reconciliation
Third party management fees 5,762 4,129 14,622 14,196 Income from
Sidecars and ILS Funds 6,533 3,667 17,189 18,451 Total expenses
(6,551 ) (3,891 ) (18,573 ) (9,996 ) PaCRe contribution to
operating income (8 ) (49 ) 105 226 (Loss) gain on deconsolidation
of ILS Fund (c) — — (1,777 ) 1,372
Validus'
share of AlphaCat net operating income 5,736
3,856 11,566 24,249 PaCRe realized and
change in net unrealized (losses) gains (7,954 ) (5,844 ) (2,342 )
2,513 PaCRe foreign exchange (losses) (1 ) (3 ) (4 ) (2 )
Validus' share of AlphaCat net (loss)
income (2,219 ) (1,991 )
9,220 26,760
Notes:
(a) All investments in operating affiliates are presented in
accordance with the equity method of accounting. (b) Validus 10%
share of the results of PaCRe of $(8.0) million for the three
months ended September 30, 2015 and $(2.2) million for the nine
months ended September 30, 2015 includes the realized and change in
net unrealized losses on investments of $(8.0) million and $(2.3)
million, respectively. (c) (Loss) gain recognized on the
deconsolidation of one of the ILS funds effective June 1, 2015 and
one other fund effective January 1, 2014. These are non recurring
items.
Validus Holdings, Ltd.Non-GAAP
Financial Measures ReconciliationNet Operating Income available to
Validus, Net Operating Income per share available to Validus and
Annualized NetOperating Return on Average EquityFor the three and nine months ended September 30,
2015 and 2014(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended Nine Months
Ended September 30, September 30,
September 30, September 30, 2015
2014 2015 2014
Net income available to Validus $ 66,650 $ 39,672 $ 304,074
$ 355,427 Adjustments for: Net realized losses (gains) on
investments 41,906 (4,595 ) 35,493 (16,193 ) Change in net
unrealized losses (gains) on investments 34,908 84,974 (19,766 )
(16,146 ) (Income) from investment affiliate (2,482 ) (1,754 )
(5,542 ) (7,881 ) Foreign exchange losses 2,274 11,441 9,061 14,761
Other loss 1,970 7,690 2,578 1,473 Transaction expenses (a) — 149 —
3,401 Net (loss) income attributable to noncontrolling interest
(71,600 ) (52,631 ) (21,089 ) 22,585
Net operating income
available to Validus 73,626 84,946 304,809 357,427 Less:
Dividends and distributions declared on outstanding warrants
(1,080 ) (1,552 ) (3,566 ) (4,656 )
Net
operating income available to Validus, adjusted $ 72,546
$ 83,394 $ 301,243 $ 352,771
Net
income per share available to Validus - diluted $ 0.78 $ 0.41 $
3.50 $ 3.70 Adjustments for: Net realized losses (gains) on
investments 0.49 (0.04 ) 0.41 (0.17 ) Change in net unrealized
losses (gains) on investments 0.41 0.90 (0.23 ) (0.17 ) (Income)
from investment affiliate (0.03 ) (0.02 ) (0.06 ) (0.08 ) Foreign
exchange losses 0.03 0.12 0.10 0.15 Other loss 0.02 0.08 0.03 0.02
Transaction expenses (a) — — — 0.04 Net (loss) income attributable
to noncontrolling interest (0.84 ) (0.55 )
(0.24 ) 0.24
Net operating income per share
available to Validus - diluted $ 0.86 $ 0.90 $
3.51 $ 3.73
Weighted average number of
common shares and common share equivalents 85,629,494
94,736,572 86,841,927 95,937,641
Average shareholders'
equity available to Validus $ 3,650,746 $ 3,739,758 $ 3,643,140
$ 3,708,169
Annualized net operating return on average
equity 8.1 % 9.1 % 11.2 % 12.9 %
Notes:
(a) The transaction expenses relate to costs incurred in
connection with the acquisition of Western World Insurance Group,
Inc. (“Western World”), which was completed on October 2, 2014.
Western World results have been included in the Company's
consolidated results from October 2, 2014. Transaction expenses are
primarily comprised of legal, financial advisory and audit related
services.
Validus Holdings, Ltd.Non-GAAP
Financial Measures ReconciliationBook Value per Common Share, Book
Value per Diluted Common Share and Book Value per Diluted Common
Share plusAccumulated DividendsAs at
September 30, 2015 and December 31, 2014(Expressed
in thousands of U.S. dollars, except share and per share
information)
As at September 30, 2015
EquityAmount
Shares
Exercise
Price (a)
Book Value Per Share
Book value per common share Total shareholders'
equity available to Validus $ 3,644,560 81,997,891 $ 44.45
Tangible book value per common share 40.55
Book value per diluted common share Total shareholders'
equity available to Validus 3,644,560 81,997,891 Assumed exercise
of outstanding warrants (b) 59,506 3,377,320 $ 17.62 Assumed
exercise of outstanding stock options (b) 1,319 65,401 $ 20.17
Unvested restricted shares — 3,014,830
Book value per diluted common share $ 3,705,385
88,455,442 $ 41.89 Adjustment for accumulated
dividends 9.84
Book value per diluted common share plus
accumulated dividends $ 51.73
Tangible book value per
diluted common share 38.28
As at December 31,
2014
EquityAmount
Shares
Exercise Price
Book Value Per Share
Book value per common share Total shareholders' equity
available to Validus $ 3,587,958 83,869,845 $ 42.78
Tangible book value per common share 38.93
Book value per diluted common share Total shareholders'
equity available to Validus 3,587,958 83,869,845 Assumed exercise
of outstanding warrants (b) 90,950 5,174,114 $ 17.58 Assumed
exercise of outstanding stock options (b) 20,581 1,160,057 $ 17.74
Unvested restricted shares — 3,068,564
Book value per diluted common share $ 3,699,489
93,272,580 $ 39.66 Adjustment for accumulated
dividends 8.88
Book value per diluted common share plus
accumulated dividends $ 48.54
Tangible book value per
diluted common share 36.20
Notes:
(a) Weighted average exercise price for those
warrants and stock options that have an exercise price lower than
book value per share. (b) Using the "as-if-converted" method,
assuming all proceeds received upon exercise of warrants and stock
options will be retained by the Company and the resulting common
shares from exercise remain outstanding.
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) statutory or
regulatory developments including tax policy, reinsurance and other
regulatory matters; 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 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; and 17)
availability of reinsurance and retrocessional coverage, as well as
management's response to any of the aforementioned factors.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in Validus' most recent reports
on Form 10-K and Form 10-Q and other documents of the Company on
file with or furnished to the U.S. 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 Company undertakes 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 (loss) available (attributable) to Validus,
net operating income (loss) per share, underwriting income (loss),
annualized net operating return on average equity, book value per
diluted common share and book value per diluted common share plus
accumulated dividends 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 (loss) to net income
(loss), the most comparable U.S. GAAP financial measure, is
presented in the section above entitled “Net Operating Income
available to Validus, Net Operating Income per share available to
Validus and Annualized Net Operating Return on Average Equity”. A
reconciliation of underwriting income and operating 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 such as
net investment income (loss), other insurance related income
(loss), finance expenses, net realized and change in unrealized
gains (losses) on investments, foreign exchange gains
(losses), other income (loss) and transaction 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 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 available to
Validus, Net Operating Income per share available to Validus and
Annualized Net Operating Return on Average Equity.” A
reconciliation of book value per diluted common share and book
value per diluted common share plus accumulated dividends to book
value per common share, the most comparable U.S. GAAP financial
measure, is presented in the section above entitled “Book Value per
Common Share, Book Value per Diluted Common Share and Book Value
per Diluted Common Share plus Accumulated Dividends.” Net operating
income (loss) is calculated based on net income (loss) excluding
net realized gains (losses) on investments, change in net
unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliates 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. Net operating income (loss)
available (attributable) to Validus is defined as net operating
income (loss) as defined above, but excluding income (loss)
available (attributable) to noncontrolling interest.
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version on businesswire.com: http://www.businesswire.com/news/home/20151029006688/en/
Investors:Validus Holdings,
Ltd.Investor.Relations@validusholdings.com+1-441-278-9000orMedia:Brunswick
GroupRadina Russell / Josh Gerth+1-212-333-3810
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