2015 Net Operating Return on Average Equity
of 11.3%
Book Value Per Diluted Common Share of
$42.33 at December 31, 2015
Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR)
today reported net income available to Validus of $69.0 million, or
$0.81 per diluted common share, for the three months ended
December 31, 2015, compared to $125.9 million, or $1.38 per
diluted common share, for the three months ended December 31,
2014. Net income available to Validus was $374.9 million, or $4.34
per diluted common share, for the year ended December 31,
2015, compared to $480.0 million, or $5.07 per diluted common
share, for the year ended December 31, 2014.
Net operating income available to Validus was $105.4 million, or
$1.24 per diluted common share, for the three months ended
December 31, 2015, compared to $121.9 million, or $1.34 per
diluted common share, for the three months ended December 31,
2014. Net operating income available to Validus was $409.7 million,
or $4.74 per diluted common share, for the year ended
December 31, 2015, compared to $480.8 million, or $5.08 per
diluted common share, for the year ended December 31,
2014.
Book value per diluted common share at December 31, 2015
was $42.33, reflecting quarterly growth of 1.8% inclusive of
dividends.
Commenting on the financial results for the full year ended
December 31, 2015, Validus' Chairman and CEO Ed Noonan
stated:
“For the full year 2015, Validus earned $409.7 million in net
operating income and generated an 11.3% net operating return on
average equity. These strong results, despite competitive
pressures, reflect the diversification of Validus’ business as we
have shifted our mix to 46% insurance and 54% reinsurance
during 2015.”
Income available to Validus by segment for the three months
ended December 31, 2015 and December 31, 2014 were as
follows:
Income available to Validus for the three months
ended December 31, 2015 December 31, 2014
(Expressed in millions of U.S. dollars, except per share
information) Validus Re - Underwriting income $ 71.3 $ 113.1
Talbot - Underwriting income 36.1 7.9 Western World - Underwriting
income 3.8 7.8 Validus' share of PaCRe, Ltd. (1.7 ) (7.1 ) Validus'
share of other AlphaCat income
8.8
9.3
Validus' share of AlphaCat net income 7.1 2.2
Total segmental income (a) 118.3 131.0 Net
investment income (b) 29.9 28.4 Corporate operating expenses (42.4
) (37.4 ) Eliminations and other (0.4 ) (0.1 )
Net operating
income available to Validus (c) $ 105.4
$ 121.9 Net operating earnings per diluted
common share available to Validus $ 1.24
$ 1.34 Net income available to Validus
(c) $ 69.0 $ 125.9
Net earnings per diluted common share available to Validus
$ 0.81 $ 1.38 (a)
Underwriting income and Validus' share of AlphaCat net income are
non-GAAP measures. (b) Net investment income is related to our
managed investment portfolio. Total net investment income,
inclusive of AlphaCat's non-managed portfolio is $31.6 million and
$30.2 million for the three months ended December 31, 2015 and
2014, respectively.
(c) A reconciliation of net operating
income available to Validus to underwriting income (loss) and net
income (loss) available (attributable) to Validus, the most
directly comparable GAAP measures, are presented at the end of this
release.
January 2016 Reinsurance Renewals - Validus Re and AlphaCat
segments
During the January 2016 renewal season, the Validus Re and
AlphaCat segments underwrote $610.5 million in gross premiums
written, an increase of 12.9% from the prior year renewal period.
This renewal data does not include: (i) Talbot and Western World's
operations as the business of each of these segments is distributed
relatively evenly throughout the year and (ii) U.S. agriculture
premiums from Validus Re.
Below is a table outlining the Validus Re and AlphaCat combined
January 2016 renewals split by Catastrophe XOL, Per Risk and
Proportional.
January 2016
Gross Premiums Written
Validus Re segment and AlphaCat segment
premium (a) Catastrophe XOL Per Risk
Proportional Total (Expressed in
millions of U.S. dollars)
2016 $ 366.2 $ 56.4
$ 187.9 $ 610.5
2015 $ 317.2 $ 58.4
$ 165.3 $ 540.9 Increase
(Decrease) 15.4 % (3.4 )% 13.7 % 12.9 % (a) The renewal data
above does not include intercompany eliminations between Validus Re
and Talbot.
Below is a table outlining the Validus Re and AlphaCat segments'
January 2016 reinsurance renewals split by line of business.
Validus Re segment premium (a)
U.S. International
Property Property Marine
Specialty Casualty Total
(Expressed in millions of U.S. dollars)
2016 $ 93.8 $ 92.3 $
95.3 $ 138.0 $ 22.6 $ 442.0
2015 $ 90.0 $
113.1 $ 126.0 $ 110.9 $ —
$ 440.0 Increase (Decrease) 4.2 % (18.4 )%
(24.4 )% 24.4 % — % 0.5 %
AlphaCat segment premium
U.S. International Property
Property Marine Specialty
Casualty Total (Expressed in millions of U.S.
dollars)
2016 $ 127.2 $ 41.3 $ — $ — $ — $ 168.5
2015
$ 53.0 $ 47.9 $ — $ — $ — $
100.9 Increase (Decrease) 140.0 % (13.8 )% — %
— % — % 67.0 %
Validus Re segment and AlphaCat segment
premium (a) U.S. International Property
Property Marine Specialty
Casualty Total (Expressed in millions
of U.S. dollars)
2016 $ 221.0 $ 133.6 $ 95.3 $ 138.0 $ 22.6
$ 610.5
2015 $ 143.0 $ 161.0 $
126.0 $ 110.9 $ — $ 540.9
Increase (Decrease) 54.5 % (17.0 )% (24.4 )% 24.4 % — % 12.9
% (a) The renewal data above does not include intercompany
eliminations between Validus Re and Talbot.
This earnings release should be read in conjunction with the
Company's December 31, 2015 investor financial supplement that
has been posted to the Investor section of the Company's
website.
Fourth Quarter 2015
Results
Highlights for the fourth quarter are as follows:
- Gross premiums written for the three
months ended December 31, 2015 were $309.6 million compared to
$336.6 million for the three months ended December 31, 2014, a
decrease of $27.0 million, or 8.0%. The decrease was primarily due
to decreases at Validus Re and Talbot, and was partially offset by
increases at Western World and AlphaCat.
- Combined ratio for the three months
ended December 31, 2015 was 78.3% which included $58.1 million
of favorable loss reserve development on prior accident years,
benefiting the loss ratio by 10.7 percentage points compared to a
combined ratio for the three months ended December 31, 2014 of
75.6% which included $87.4 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by
15.7 percentage points. The favorable development of $58.1 million
for the three months ended December 31, 2015 is primarily from
non-event reserves in the amount of $47.8 million. Favorable
development on prior accident years from event specific reserves
was $10.3 million.
- Net operating income available to
Validus for the three months ended December 31, 2015 was
$105.4 million compared to $121.9 million for the three months
ended December 31, 2014, a decrease of $16.5 million, or
13.5%.
- Net income available to Validus for the
three months ended December 31, 2015 was $69.0 million
compared to $125.9 million for the three months ended
December 31, 2014, a decrease of $56.9 million, or 45.2%.
- Annualized return on average equity of
7.6% and annualized net operating return on average equity of 11.6%
for the three months ended December 31, 2015 compared to 13.8%
and 13.4%, respectively, for the three months ended
December 31, 2014.
Notable and Non-Notable Loss
Events
During the three months ended December 31, 2015, the
Company did not incur any notable loss events, defined as
consolidated losses that aggregate to a threshold greater than or
equal to $30.0 million. During the three months ended
December 31, 2014 there was adverse development on a previous
quarter non-notable loss event, Tripoli airport, of $6.8 million.
The fourth quarter adverse development caused this event to exceed
the $30.0 million threshold and become a notable loss event as a
result.
During the three months ended December 31, 2015, the
Company did not incur any non-notable loss events, defined as
consolidated losses that aggregate to a threshold greater than or
equal to $15.0 million, but less than $30.0 million. The Company's
loss ratio, excluding prior year development, notable loss events,
and non-notable loss events for the three months ended
December 31, 2015 and 2014 was 50.2% and 53.0%,
respectively.
Validus Re Segment
Highlights for the fourth quarter include the following:
- Gross premiums written for the three
months ended December 31, 2015 were $14.3 million compared to
$32.7 million for the three months ended December 31, 2014, a
decrease of $18.4 million, or 56.2%. Gross premiums written for the
three months ended December 31, 2015 included $15.6 million of
property premiums, $(0.7) million of marine premiums and ($0.5)
million of specialty premiums, compared to $14.0 million of
property premiums, $15.3 million of marine premiums and $3.5
million of specialty premiums for the three months ended
December 31, 2014. The decrease in the marine lines of
$15.9 million was primarily driven by the absence of a one-time
gain on the commutation of a Flagstone contract with a Lloyd's
counterparty which occurred in the three months ended
December 31, 2014.
- The loss ratio for the three months
ended December 31, 2015 was 43.3% compared to 25.8% for the
three months ended December 31, 2014, an increase of 17.5
percentage points. The loss ratio for the three months ended
December 31, 2015 included favorable loss reserve development
on prior accident years of $22.6 million, benefiting the loss ratio
by 9.7 percentage points. The favorable development on prior
accident years from non-event reserves was $18.0 million. Favorable
development on prior accident years from event specific reserves
was $4.6 million. The loss ratio for the three months ended
December 31, 2014 included favorable loss reserve development on
prior accident years of $30.8 million, benefiting the loss ratio by
13.3 percentage points.
- The combined ratio for the three months
ended December 31, 2015 was 69.3% compared to 51.3% for the
three months ended December 31, 2014, an increase of 18.0
percentage points.
- Underwriting income for the three
months ended December 31, 2015 was $71.3 million compared to
$113.1 million for the three months ended December 31, 2014, a
decrease of $41.7 million, or 36.9%.
Talbot Segment
Highlights for the fourth quarter include the following:
- Gross premiums written for the three
months ended December 31, 2015 were $229.7 million compared to
$247.4 million for the three months ended December 31, 2014, a
decrease of $17.8 million, or 7.2%. Gross premiums written for the
three months ended December 31, 2015 included $73.9 million of
property premiums, $60.6 million of marine premiums and $95.1
million of specialty premiums compared to $76.1 million of property
premiums, $72.9 million of marine premiums and $98.4 million of
specialty premiums for the three months ended December 31,
2014. The decrease in the marine premiums of $12.2 million was
driven by decreases in a number of classes, but primarily the cargo
class of business, due to ongoing market conditions and economic
factors that have reduced new business and renewals, together with
the non-recurrence of favorable adjustments in the prior year.
- The loss ratio for the three months
ended December 31, 2015 was 38.7% compared to 53.6% for the
three months ended December 31, 2014, a decrease of 14.9
percentage points. The loss ratio for the three months ended
December 31, 2015 included favorable loss reserve development
on prior accident years of $23.1 million, benefiting the loss ratio
by 11.3 percentage points. The favorable development on prior
accident years is primarily from non-event reserves in the amount
of $19.3 million. Favorable development on prior accident years
from event specific reserves was $3.8 million. The loss ratio for
the three months ended December 31, 2014 included favorable
loss reserve development on prior accident years of $42.0 million,
benefiting the loss ratio by 19.0 percentage points.
- The combined ratio for the three months
ended December 31, 2015 was 82.5% compared to 96.8% for the
three months ended December 31, 2014, a decrease of 14.3
percentage points.
- Underwriting income for the three
months ended December 31, 2015 was $36.1 million compared to
$7.9 million for the three months ended December 31, 2014, an
increase of $28.2 million.
Western World Segment
Highlights for the fourth quarter include the following:
- Gross premiums written for the three
months ended December 31, 2015 were $71.1 million compared to
$65.2 million for the three months ended December 31, 2014, an
increase of $5.9 million, or 9.0%. Gross premiums written for the
three months ended December 31, 2015 included $13.9 million of
property premiums and $57.2 million of liability premiums, compared
to $10.0 million of property premiums and $55.3 million of
liability premiums for the three months ended December 31,
2014.
- The loss ratio for the three months
ended December 31, 2015 was 54.7% compared to 69.9% for the
three months ended December 31, 2014, a decrease of 15.2
percentage points. The loss ratio for the three months ended
December 31, 2015 included favorable loss reserve development
on prior accident years on non-event reserves in the amount of $7.3
million, benefiting the loss ratio by 11.9 percentage points. Of
this, $2.3 million or 3.8 percentage points arose from the
amortization of the risk premium adjustment accounted for at the
time of the acquisition of Western World. The loss ratio for the
three months ended December 31, 2014 included favorable loss
reserve development on prior accident years of $11.2 million,
benefiting the loss ratio by 15.4 percentage points. Of this, $4.6
million or 6.3 percentage points arose from the amortization of the
risk premium adjustment accounted for at the time of the
acquisition of Western World.
- The combined ratio for the three months
ended December 31, 2015 was 94.3% compared to 89.7% for the
three months ended December 31, 2014, an increase of 4.6
percentage points.
- Underwriting income for the three
months ended December 31, 2015 was $3.8 million compared to
$7.8 million for the three months ended December 31, 2014, a
decrease of $4.0 million, or 51.8%.
AlphaCat Segment
Highlights for the fourth quarter include the following:
- AlphaCat's assets under management were
$2,386.2 million as at January 1, 2016, compared to $2,238.6
million as at October 1, 2015. Third party assets under management
were $2,059.5 million as at January 1, 2016, compared to $1,877.4
million as at October 1, 2015. During the three months ended
December 31, 2015, a total of $662.7 million of capital was
raised, of which $629.2 million was raised from third parties,
while $470.3 million was returned to PaCRe investors, including
$423.3 million to third parties, as this entity was off risk as of
January 1, 2016.
- Management fees earned for the three
months ended December 31, 2015 were $6.3 million, of which
$1.3 million were earned from related parties, compared to $5.9
million for the three months ended December 31, 2014, of which
$1.4 million were earned from related parties. The increase of $0.4
million in management fees between periods was driven by an
increase in assets under management.
- Total expenses for the three months
ended December 31, 2015 were $3.4 million, compared to $4.0
million for the three months ended December 31, 2014, a
decrease of $0.6 million. Included within the expenses for the
three months ended December 31, 2015 was $0.1 million of
non-recurring finance expenses related to the raising of third
party capital.
- Income before investment income from
AlphaCat Funds and Sidecars for the three months ended
December 31, 2015 was $2.9 million, compared to $1.9 million
for the three months ended December 31, 2014, an increase of
$1.0 million.
- Investment income from AlphaCat Funds
and Sidecars for the three months ended December 31, 2015 was
$5.9 million, compared to $7.4 million for the three months ended
December 31, 2014, a decrease of $1.4 million.
- Validus' share of PaCRe's net loss for
the three months ended December 31, 2015 was $1.7 million,
compared to $7.1 million for the three months ended
December 31, 2014, a decrease of $5.4 million.
- Validus' share of AlphaCat's net income
for the three months ended December 31, 2015 was $7.1 million,
compared to $2.2 million for the three months ended
December 31, 2014, an increase of $4.9 million. Excluding
Validus' share of PaCRe's net loss, Validus' share of AlphaCat
income for the three months ended December 31, 2015 was $8.8
million, compared to $9.3 million for the three months ended
December 31, 2014, a decrease of $0.4 million.
Investments
Highlights on our managed portfolio for the fourth quarter
include the following:
- Net investment income for the three
months ended December 31, 2015 was $29.9 million compared to
$28.4 million for the three months ended December 31, 2014, an
increase of $1.4 million, or 5.1%.
- Net realized losses on investments for
the three months ended December 31, 2015 were $3.4 million
compared to gains of $6.2 million for the three months ended
December 31, 2014, a decrease of $9.6 million.
- The change in net unrealized losses on
investments for the three months ended December 31, 2015 was
$34.5 million compared to $1.5 million for the three months ended
December 31, 2014, a decrease of $33.0 million.
Corporate Operating
Expenses
Highlights for the fourth quarter include the following:
- General and administrative expenses for
the three months ended December 31, 2015, were $24.2 million
compared to $19.7 million for the three months ended
December 31, 2014, an increase of $4.5 million or 23.0%.
- Share compensation expenses for the
three months ended December 31, 2015 were $3.5 million
compared to $3.0 million for the three months ended
December 31, 2014, an increase of $0.5 million or 17.1%.
Full Year 2015 Results
Highlights for the full year include the following(a):
- Gross premiums written for the year
ended December 31, 2015 were $2,557.5 million compared to
$2,358.9 million for the year ended December 31, 2014, an
increase of $198.6 million, or 8.4%.
- Combined ratio for the year ended
December 31, 2015 was 79.7% which included $306.1 million of
favorable loss reserve development on prior accident years,
benefiting the loss ratio by 13.6 percentage points compared to a
combined ratio for the year ended December 31, 2014 of 73.6%
which included $259.2 million of favorable loss reserve development
on prior accident years, benefiting the loss ratio by 13.0
percentage points.
- Net operating income available to
Validus for the year ended December 31, 2015 was $409.7
million compared to $480.8 million for the year ended
December 31, 2014, a decrease of $71.0 million, or 14.8%.
- Net income available to Validus for the
year ended December 31, 2015 was $374.9 million compared to
$480.0 million for the year ended December 31, 2014, a
decrease of $105.1 million, or 21.9%.
- Return on average equity of 10.3% and
net operating return on average equity of 11.3% for the year ended
December 31, 2015 compared to 13.0% and 13.1%, respectively,
for the year ended December 31, 2014.
(a)
Year ended 2014 comparative results
include the results of Western World that were consolidated from
the October 2, 2014 date of acquisition.
Shareholders' Equity and
Capitalization
As at December 31, 2015, total shareholders' equity was
$3.8 billion including $154.7 million of noncontrolling interest.
Shareholders' equity available to Validus was $3.6 billion as at
December 31, 2015. Book value per diluted common share was
$42.33 at December 31, 2015, compared to $41.89 at
September 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 available to Validus at December 31,
2015 was $4.4 billion, including $537.7 million of junior
subordinated deferrable debentures and $245.2 million of senior
notes. Total capitalization at December 31, 2015 was $5.7
billion, including $1.1 billion of redeemable noncontrolling
interest and $154.7 million of noncontrolling interest.
Share Repurchases
For the three months ended December 31, 2015, the number of
shares repurchased by the Company was 1.2 million. The share
repurchases made during the three months ended December 31,
2015 resulted in a dilutive impact on book value per diluted common
share of $0.05 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 September 30, 2015
Quarter ended Effect of share
repurchases: (cumulative) October November
December December 31, 2015 Aggregate purchase price
(a) $ 2,435,218 $ — $ 42,547 $ 13,966 $ 56,513 Shares repurchased
74,797,775 — 937,985 295,520 1,233,505 Average price (a) $ 32.56
$ — $ 45.36 $ 47.26 $ 45.81
Share Repurchase Activity
(Expressed in thousands of U.S. dollars
except for share and per share information)
Effect of share repurchases: As at December 31, 2015
As at January 27, 2016 Cumulative to Date
Effect Aggregate purchase price (a) $ 2,491,731 $ 16,167 $
2,507,898 Shares repurchased 76,031,280 369,146 76,400,426 Average
price (a) $ 32.77 $ 43.80 $ 32.83 (a) Share
transactions are on a trade date basis through January 27, 2016 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 January 29, 2016 at 10:00 AM (Eastern) to discuss
the fourth quarter and full year 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 9067 9492. 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 February 12, 2016,
by dialing 1-855-859-2056 (toll-free U.S.) or 1-404-537-3406
(international) and entering the passcode 9067 9492.
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 February 12, 2016. In addition, a
financial supplement relating to the Company's financial results
for the three months and year ended December 31, 2015 is
available in the Investor Relations section of the Company's
website.
About Validus Holdings,
Ltd.
Validus Holdings, Ltd. ("Validus") 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”).
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 Validus in insurance linked
securities and other property catastrophe reinsurance
investments.
Validus Holdings, Ltd.
Consolidated Balance Sheets -
Unaudited
As at December
31, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
December 31, 2015 December 31, 2014 (a)
Assets
Fixed maturities, at fair value (amortized
cost: 2015—$5,556,900; 2014—$5,546,994)
$ 5,510,331 $ 5,545,231 Short-term investments, at fair value
(amortized cost: 2015—$1,941,615; 2014—$1,501,360) 1,941,635
1,501,212 Other investments, at fair value (cost: 2015—$315,963;
2014—$320,476) 336,856 334,685 Cash and cash equivalents 723,109
550,401 Restricted cash 73,270 173,003 Total
investments and cash 8,585,201 8,104,532 Investments in affiliates
88,065 114,450 Premiums receivable 658,682 706,467 Deferred
acquisition costs 181,002 161,022 Prepaid reinsurance premiums
77,992 82,947 Securities lending collateral 4,863 470 Loss reserves
recoverable 350,586 377,466 Paid losses recoverable 23,071 38,078
Income taxes recoverable 16,228 — Deferred tax asset 21,661 23,821
Receivable for investments sold 39,766 18,318 Intangible assets
121,258 126,924 Goodwill 196,758 195,897 Accrued investment income
23,897 24,865 Other assets 126,782 137,307
Total assets $ 10,515,812 $ 10,112,564
Liabilities Reserve for losses and loss expenses $
2,996,567 $ 3,243,147 Unearned premiums 966,210 989,229 Reinsurance
balances payable 75,380 129,071 Securities lending payable 5,329
936 Deferred tax liability 3,847 5,541 Payable for investments
purchased 77,475 68,574 Accounts payable and accrued expenses
627,331 395,178 Notes payable to AlphaCat investors 75,493 — Senior
notes payable 245,161 244,960 Debentures payable 537,668
539,277
Total liabilities
5,610,461 5,615,913 Commitments and
contingent liabilities Redeemable noncontrolling interest 1,111,714
617,791
Shareholders' equity
Common shares, 571,428,571 authorized, par
value $0.175 (Issued: 2015—160,570,772; 2014—155,554,224;
Outstanding: 2015—82,900,617; 2014—83,869,845)
28,100 27,222 Treasury shares (2015—77,670,155; 2014—71,684,379)
(13,592 ) (12,545 ) Additional paid-in-capital 1,002,980 1,207,493
Accumulated other comprehensive (loss) (12,569 ) (8,556 ) Retained
earnings 2,634,056 2,372,972
Total
shareholders' equity available to Validus 3,638,975
3,586,586 Noncontrolling interest
154,662 292,274
Total shareholders'
equity 3,793,637 3,878,860
Total liabilities, noncontrolling interests and shareholders'
equity $ 10,515,812 $ 10,112,564
Notes:
(a) During the fourth quarter of 2015, the Company early adopted
Accounting Standards Update 2015-02, “Consolidation (Topic 810):
Amendments to the Consolidation Analysis” issued by the United
States Financial Accounting Standards Board (“FASB”). The impact on
the Company's cumulative retained earnings was a gain of $405.
Validus Holdings, Ltd.
Non-GAAP Financial Measures
Reconciliation
Book Value per Common Share, Book Value
per Diluted Common Share and Book Value per Diluted Common Share
plus Accumulated Dividends
As at December
31, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
As at December 31, 2015
Equity Amount
Shares
Exercise Price (a)
Book Value Per Share
Book value per common share Total shareholders'
equity available to Validus $ 3,638,975 82,900,617 $ 43.90
Tangible book value per common share 40.06
Book
value per diluted common share Total shareholders' equity
available to Validus 3,638,975 82,900,617 Assumed exercise of
outstanding warrants (b) — — $ — Assumed exercise of outstanding
stock options (b) 1,319 65,401 $ 20.17 Unvested restricted shares
— 3,026,376
Book value per diluted
common share $ 3,640,294 85,992,394 $
42.33 Adjustment for accumulated dividends 10.16
Book value per
diluted common share plus accumulated dividends $ 52.49
Tangible book value per diluted common share 38.63
As at December 31, 2014
Equity Amount
Shares
Exercise Price (a)
Book Value Per Share
Book value per common share Total shareholders' equity
available to Validus $ 3,586,586 83,869,845 $ 42.76
Tangible book value per common share 38.91
Book
value per diluted common share Total shareholders' equity
available to Validus 3,586,586 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 $ 3,698,117
93,272,580 $ 39.65 Adjustment for accumulated dividends 8.88
Book value per diluted common share plus accumulated
dividends $ 48.53
Tangible book value per diluted
common share 36.19
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.
Validus Holdings, Ltd.
Consolidated Statements of Operations -
Unaudited
For the three
months and year ended December 31, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended December 31, Year Ended
December 31, 2015 2014 (a) 2015
2014 (a) Underwriting income Gross premiums
written $ 309,605 $ 336,643 $ 2,557,506 $ 2,358,865 Reinsurance
premiums ceded (33,128 ) (33,623 ) (328,681 )
(313,208 ) Net premiums written 276,477 303,020 2,228,825
2,045,657 Change in unearned premiums 266,823
253,621 18,064 (52,602 )
Net
premiums earned 543,300 556,641
2,246,889 1,993,055 Other insurance
related income 969 1,544 6,113
3,472
Underwriting revenues
544,269 558,185 2,253,002
1,996,527
Underwriting deductions Losses and
loss expenses 214,748 223,723 977,833 765,015 Policy acquisition
costs 102,285 89,307 410,058 339,467 General and administrative
expenses 98,563 99,173 363,709 329,362 Share compensation expenses
10,062 8,821 38,341
33,073
Total underwriting deductions
425,658 421,024 1,789,941
1,466,917
Underwriting income $
118,611
$
137,161 $
463,061 $
529,610 Net
investment income 31,612 30,169 127,824 100,086 Finance expenses
(16,581 ) (17,605 ) (74,742 ) (68,324 )
Operating income before taxes, income
from operating affiliates and (income) attributable to
AlphaCat investors
$
133,642 $
149,725 $
516,143 $
561,372
Tax benefit (expense) 756 243 (6,376 ) (155 ) (Loss) from operating
affiliates (1,708 ) (7,077 ) (3,949 ) (4,340 ) (Income)
attributable to AlphaCat investors (974 ) —
(2,412 ) —
Net operating income $
131,716 $
142,891 $
503,406 $
556,877
Net realized (losses) gains on investments (2,928 ) 6,902
2,298 14,917 Change in net unrealized (losses) on investments
(34,862 ) (2,040 ) (32,395 ) (2,842 ) (Loss) income from investment
affiliate (1,261 ) 530 4,281 8,411 Foreign exchange gains (losses)
797 3,674 (8,731 ) (12,181 ) Other income (loss) 1,576 (770 )
(1,002 ) (2,243 ) Transaction expenses (b) —
(4,695 ) — (8,096 )
Net income $
95,038 $
146,492 $
467,857
$
554,843 Net (income) attributable to noncontrolling
interest (25,996 ) (20,584 ) (92,964 ) (74,880 )
Net income available
to Validus $
69,042 $
125,908 $
374,893 $
479,963 Selected
ratios: Net premiums written / Gross premiums written 89.3 %
90.0 % 87.1 % 86.7 % Losses and loss expenses 39.5 % 40.2 %
43.5 % 38.4 % Policy acquisition costs 18.8 % 16.0 % 18.3 %
17.0 % General and administrative expenses (c) 20.0 %
19.4 % 17.9 % 18.2 % Expense ratio 38.8 %
35.4 % 36.2 % 35.2 % Combined ratio
78.3 % 75.6 % 79.7 % 73.6 %
Notes:
(a) During the fourth quarter of 2015, the Company early adopted
Accounting Standards Update 2015-02, “Consolidation (Topic 810):
Amendments to the Consolidation Analysis” issued by the United
States Financial Accounting Standards Board (“FASB”). (b) 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. (c) The
general and administrative expense ratio includes share
compensation expenses.
Validus Holdings,
Ltd.
Non-GAAP Financial Measures
Reconciliation
Underwriting Income, Net Operating Income
available to Validus, Net Operating Income per share available to
Validus
and Annualized Net Operating Return on
Average Equity
For the three
months and year ended December 31, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended Year Ended December
31, December 31, December 31,
December 31, 2015 2014
2015 2014 Net income available to
Validus $ 69,042 $ 125,908 $ 374,893 $ 479,963 Adjustments for:
Net realized losses (gains) on investments 2,928 (6,902 ) (2,298 )
(14,917 ) Change in net unrealized losses on investments 34,862
2,040 32,395 2,842 Loss (income) from investment affiliate 1,261
(530 ) (4,281 ) (8,411 ) Foreign exchange (gains) losses (797 )
(3,674 ) 8,731 12,181 Other (income) loss (1,576 ) 770 1,002 2,243
Transaction expenses (a) — 4,695 — 8,096 Net (loss) attributable to
noncontrolling interest (325 ) (433 ) (693 )
(1,235 )
Net operating income available to Validus $
105,395 $ 121,874 $ 409,749 $ 480,762 Net investment income (31,612
) (30,169 ) (127,824 ) (100,086 ) Finance expenses 16,581 17,605
74,742 68,324 Tax (benefit) expense (756 ) (243 ) 6,376 155 Loss
from operating affiliates 1,708 7,077 3,949 4,340 Income
attributable to AlphaCat investors 974 — 2,412 — Net operating
income attributable to noncontrolling interest 26,321
21,017 93,657 76,115
Underwriting income $ 118,611 $ 137,161 $
463,061 $ 529,610
Net operating income
available to Validus 105,395 121,874 409,749 480,762 Less:
Dividends and distributions declared on outstanding warrants
— (1,552 ) (3,566 ) (6,208 )
Net
operating income available to Validus, adjusted $ 105,395
$ 120,322 $ 406,183 $ 474,554
Net income per share available to Validus - diluted $ 0.81 $
1.38 $ 4.34 $ 5.07 Adjustments for: Net realized losses (gains) on
investments 0.03 (0.08 ) (0.03 ) (0.16 ) Change in net unrealized
losses on investments 0.42 0.02 0.38 0.03 Loss (income) from
investment affiliate 0.01 — (0.05 ) (0.09 ) Foreign exchange
(gains) losses (0.01 ) (0.04 ) 0.10 0.13 Other (income) loss (0.02
) 0.01 0.01 0.02 Transaction expenses (a) — 0.05 — 0.09 Net (loss)
attributable to noncontrolling interest — —
(0.01 ) (0.01 )
Net operating income per
share available to Validus - diluted $ 1.24 $ 1.34
$ 4.74 $ 5.08
Weighted average
number of common shares and common share equivalents 85,181,258
90,948,156 86,426,760 94,690,271
Average shareholders'
equity available to Validus $ 3,641,970 $ 3,643,812 $ 3,641,920
$ 3,683,029
Annualized net operating return on average
equity 11.6 % 13.4 % 11.3 % 13.1 %
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.
Segment Information
For the three
months and year ended December 31, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
Validus Re Segment Three Months Ended December
31, Year Ended December 31, 2015
2014 2015 2014 Underwriting
income Gross premiums written $ 14,349 $ 32,741 $ 1,126,759 $
1,118,532 Reinsurance premiums ceded (87 ) 2,018 (149,088 )
(163,678 ) Net premiums written 14,262 34,759 977,671 954,854
Change in unearned premiums 217,652 195,701 12,542
(37,570 )
Net premiums earned 231,914 230,460
990,213 917,284 Other insurance related income
257 774 3,575 3,159
Underwriting
revenues 232,171 231,234 993,788 920,443
Underwriting deductions Losses and loss
expenses 100,485 59,442 457,976 307,290 Policy acquisition costs
37,478 35,123 166,387 141,670 General and administrative expenses
20,174 20,982 78,428 74,739 Share compensation expenses 2,685
2,613 10,350 9,739
Total
underwriting deductions 160,822 118,160 713,141
533,438
Underwriting
income $ 71,349 $ 113,074
$ 280,647 $ 387,005
Talbot Segment Three Months Ended
December 31, Year Ended December 31, 2015
2014 2015 2014 Underwriting
income Gross premiums written $ 229,687 $ 247,446 $ 1,018,835 $
1,101,770 Reinsurance premiums ceded (34,752 ) (38,096 ) (198,896 )
(192,211 ) Net premiums written 194,935 209,350 819,939 909,559
Change in unearned premiums 8,985 11,873 18,152
(29,785 )
Net premiums earned 203,920 221,223
838,091 879,774 Other insurance related income
287 711 851 1,095
Underwriting
revenues 204,207 221,934 838,942 880,869
Underwriting deductions Losses and loss
expenses 78,810 118,546 347,322 423,394 Policy acquisition costs
46,197 48,779 187,535 187,162 General and administrative expenses
39,965 43,797 155,306 150,828 Share compensation expenses 3,178
2,912 12,373 11,346
Total
underwriting deductions 168,150 214,034 702,536
772,730
Underwriting
income $ 36,057 $ 7,900
$ 136,406 $ 108,139
Western World Segment Three Months
Ended December 31, Year Ended December 31,
2015 2014 2015 2014
Underwriting income Gross premiums written $ 71,132 $ 65,235
$ 278,504 $ 65,235 Reinsurance premiums ceded (5,487 ) (6,428 )
(18,877 ) (6,428 ) Net premiums written 65,645 58,807 259,627
58,807 Change in unearned premiums (3,925 ) 14,189 (977 )
14,189
Net premiums earned 61,720 72,996
258,650 72,996 Other insurance related income
257 264 1,044 264
Underwriting
revenues 61,977 73,260 259,694 73,260
Underwriting deductions Losses and loss
expenses 33,780 51,035 171,878 51,035 Policy acquisition costs
14,298 3,169 41,408 3,169 General and administrative expenses 9,578
11,121 38,715 11,121 Share compensation expenses 558 135
2,083 135
Total underwriting deductions
58,214 65,460 254,084 65,460
Underwriting income $
3,763 $ 7,800 $
5,610 $ 7,800
Validus Holdings, Ltd. Segment Information
For the three
months and year ended December 31, 2015 and 2014
(Expressed in thousands of U.S. dollars,
except share and per share information)
AlphaCat Segment Three Months Ended
December 31, Year Ended December 31, 2015
2014 2015 2014 Revenue - management
fees Third party $ 5,039 $ 4,471 $ 19,661 $ 18,667 Related
party 1,251 1,439 5,309 7,467
Total
revenue 6,290 5,910 24,970 26,134
Expenses General and administrative expenses 3,232
2,259 12,115 10,134 Share compensation expenses 140 171 580 501
Finance expenses 53 1,617 9,312 3,417 Foreign exchange (gains) (7 )
(11 ) (16 ) (20 )
Total expenses 3,418 4,036 21,991 14,032
Income before investments from
AlphaCat Funds and Sidecars 2,872 1,874 2,979
12,102
Investment income (loss) from
AlphaCat Funds and Sidecars (a) AlphaCat Re & Master Fund —
— — (1,377 ) AlphaCat Sidecars 1,618 3,018 5,504 10,525 AlphaCat
ILS Funds 3,857 4,407 15,919 16,728 BetaCat ILS Funds 461 (51 )
1,702 (51 ) PaCRe (1,708 ) (7,077 ) (3,949 ) (4,340 )
Total
investment income from AlphaCat Funds and Sidecars 4,228
297 19,176 21,485
Validus' share of AlphaCat income $ 7,100
$ 2,171 $ 22,155
$ 33,587
Notes:
(a) All investments in AlphaCat Funds and Sidecars are presented in
accordance with the equity method of accounting.
Corporate and Investments
Three Months Ended December 31, Year Ended
December 31, 2015 2014 2015
2014 Investment income Net investment income $ 29,885
$ 28,437 $ 121,166 $ 95,800
Operating expenses
General and administrative expenses (24,222 ) (19,694 ) (75,724 )
(80,210 ) Share compensation expenses (3,501 ) (2,990 ) (12,955 )
(11,352 ) Finance expenses (15,448 ) (14,968 ) (61,071 ) (60,309 )
Tax expenses 756 243 (6,376 ) (155 )
Total
operating expenses (42,415 ) (37,409 ) (156,126 ) (152,026 )
Other items Net realized (losses) gains on
investments (3,353 ) 6,197 1,698 12,160 Change in net unrealized
(losses) on investments (34,515 ) (1,470 ) (32,007 ) (1,030 )
(Loss) income from investment affiliate (1,261 ) 530 4,281 8,411
Foreign exchange gains (losses) 852 3,857 (8,172 ) (10,700 ) Other
income (loss) 1,576 (770 ) (1,002 ) (2,243 ) Transaction expenses
(b) — (4,695 ) — (8,096 )
Total other items
(36,701 ) 3,649 (35,202 ) (1,498 )
Total corporate and investments $ (49,231 ) $ (5,323
) $ (70,162 ) $ (57,724 )
Notes:
(b) 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.
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 underwriting income and net operating income
(loss) available (attributable) to Validus to net income (loss)
available (attributable) to Validus, the most comparable U.S. GAAP
financial measure, is presented in the section above entitled
“Underwriting Income, 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.
The AlphaCat segment information is presented as an asset
manager view and therefore is considered non-GAAP.
Underwriting income indicates the performance of the Company's
core underwriting segments, excluding revenues and expenses such as
net investment 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.
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.
Annualized net operating return on average equity is presented
in the section above entitled “Underwriting Income, 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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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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