[July 24, 2014] |
|
Validus Announces Second Quarter 2014 Net Income of $153.4 Million
PEMBROKE, Bermuda --(Business Wire)--
Validus Holdings, Ltd. ("Validus" or the "Company") (NYSE:VR) today
reported net income available to Validus of $153.4 million, or $1.61 per
diluted common share, for the three months ended June 30, 2014, compared
to $30.7 million, or $0.28 per diluted common share, for the three
months ended June 30, 2013. Net income available to Validus was $315.8
million, or $3.27 per diluted common share, for the six months ended
June 30, 2014, compared to $254.0 million, or $2.21 per diluted common
share, for the six months ended June 30, 2013.
Net operating income available to Validus was $132.6 million, or $1.39
per diluted common share, for the three months ended June 30, 2014,
compared to $111.4 million, or $1.03 per diluted common share, for the
three months ended June 30, 2013. Net operating income available to
Validus was $278.7 million, or $2.89 per diluted common share, for the
six months ended June 30, 2014, compared to $327.1 million, or $2.90 per
diluted common share, for the six months ended June 30, 2013.
Book value per diluted common share stands at $38.55, reflecting
quarterly growth of 3.4% inclusive of dividends.
Commenting on the financial results for the three months ended June 30,
2014, Validus' Chairman and CEO Ed Noonan stated:
"Validus reported another solid quarter delivering $153.4 million of net
income and a 16.5% annualized return on average equity. Strong
underwriting and good diversification between insurance and reinsurance
continued to drive our results as Validus posted an overall combined
ratio of 68.6%. Despite competitive pressures in the marketplace and
more loss activity than the market may have appreciated, all three of
our segments - Validus Re, Talbot and AlphaCat - performed well.
Earlier in the quarter Validus announced an important strategic
development, an agreement to acquire Western World Insurance Group.
Western World is a leader in the U.S. excess and surplus lines market
and adds a key pillar to our existing global platform for the
distribution of short tail insurance and reinsurance."
Net income and net operating income available to Validus, earnings and
operating earnings per diluted share available to Validus, by segment
for the three months ended June 30, 2014 were as follows:
|
|
|
Net Income Available to Validus
|
|
Net Operating Income Available to Validus
|
|
|
|
(Expressed in millions of U.S. dollars, except per share information)
|
Validus Re
|
|
|
$
|
125.6
|
|
|
$
|
107.1
|
|
Talbot
|
|
|
|
52.7
|
|
|
|
48.6
|
|
PaCRe, Ltd.
|
|
|
|
3.8
|
|
|
|
0.1
|
|
Other AlphaCat Companies
|
|
|
|
11.2
|
|
|
|
11.7
|
|
AlphaCat subtotal
|
|
|
|
15.0
|
|
|
|
11.8
|
|
Corporate & Eliminations
|
|
|
|
(39.9
|
)
|
|
|
(34.9
|
)
|
Total
|
|
|
$
|
153.4
|
|
|
$
|
132.6
|
|
Earnings per diluted share available to Validus
|
|
|
$
|
1.61
|
|
|
|
Operating earnings per diluted share available to Validus
|
|
|
|
|
|
$
|
1.39
|
|
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) 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.
Second Quarter 2014 Results
Highlights for the second quarter include the following:
-
Gross premiums written for the three months ended June 30, 2014 were
$655.7 million compared to $702.3 million for the three months ended
June 30, 2013, a decrease of $46.6 million, or 6.6%.
-
Net premiums earned for the three months ended June 30, 2014 were
$466.0 million compared to $547.5 million for the three months ended
June 30, 2013, a decrease of $81.5 million, or 14.9%.
-
Underwriting income for the three months ended June 30, 2014 was
$146.1 million compared to $117.7 million for the three months ended
June 30, 2013, an increase of $28.5 million, or 24.2%.
-
Combined ratio for the three months ended June 30, 2014 of 68.6% which
included $72.7 million of favorable loss reserve development on prior
accident years, benefiting the loss ratio by 15.6 percentage points
compared to a combined ratio for the three months ended June 30, 2013
of 78.5% which included $41.0 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 7.5
percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses. Netted in the loss development for the quarter is adverse
movement on Validus' estimate of losses from Costa Concordia, which
increased by $15.9 million.
-
Net operating income available to Validus for the three months ended
June 30, 2014 was $132.6 million compared to $111.4 million for the
three months ended June 30, 2013, an increase of $21.2 million, or
19.0%.
-
Net income available to Validus for the three months ended June 30,
2014 was $153.4 million compared to $30.7 million for the three months
ended June 30, 2013, an increase of $122.6 million.
-
Annualized return on average equity of 16.5% and annualized net
operating return on average equity of 14.3%.
Highlights for the year to date include the following:
-
Gross premiums written for the six months ended June 30, 2014 were
$1,667.7 million compared to $1,807.1 million for the six months ended
June 30, 2013, a decrease of $139.4 million, or 7.7%.
-
Net premiums earned for the six months ended June 30, 2014 were $949.0
million compared to $1,078.5 million for the six months ended June 30,
2013, a decrease of $129.6 million, or 12.0%.
-
Underwriting income for the six months ended June 30, 2014 was $299.2
million compared to $327.7 million for the six months ended June 30,
2013, a decrease of $28.6 million, or 8.7%.
-
Combined ratio for the six months ended June 30, 2014 of 68.5% which
included $112.1 million of favorable loss reserve development on prior
accident years, benefiting the loss ratio by 11.8 percentage points
compared to a combined ratio for the six months ended June 30, 2013 of
69.7% which included $106.8 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 9.9
percentage points.
-
Net operating income available to Validus for the six months ended
June 30, 2014 was $278.7 million compared to $327.1 million for the
six months ended June 30, 2013, a decrease of $48.4 million, or 14.8%.
-
Net income available to Validus for the six months ended June 30, 2014
was $315.8 million compared to $254.0 million for the six months ended
June 30, 2013, an increase of $61.8 million, or 24.3%.
-
Annualized return on average equity of 17.0% and annualized net
operating return on average equity of 15.0%.
Notable Loss Events
During the three months ended June 30, 2014, the Company did not incur
any notable losses, defined as consolidated losses which aggregate to a
threshold greater than or equal to $30.0 million. During the three
months ended June 30, 2013, the Company incurred $77.6 million of losses
from one notable loss event, European floods, which represented 14.2
percentage points of the loss ratio. Including the impact of $7.1
million of reinstatement premiums, the effect of this event on second
quarter 2013 net income was a decrease of $70.4 million. The Company's
loss ratio, excluding prior year development and notable loss events,
for the three months ended June 30, 2014 and 2013 was 49.7% and 41.7%,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2014
|
|
|
|
|
(Dollars in thousands)
|
Second Quarter 2014 Notable Loss Event (a)
|
|
Validus Re
|
|
AlphaCat
|
|
Talbot
|
|
Total
|
Description
|
|
Net Losses and Loss Expenses
|
|
% of NPE
|
|
Net Losses and Loss Expenses
|
|
% of NPE
|
|
Net Losses and Loss Expenses
|
|
% of NPE
|
|
Net Losses and Loss Expenses
|
|
% of NPE
|
None
|
|
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
Total
|
|
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
|
$
|
|
-
|
|
|
-%
|
|
|
|
|
Three Months Ended June 30, 2013
|
|
|
|
|
(Dollars in thousands)
|
Second Quarter 2013 Notable Loss Event (a)
|
|
Validus Re
|
|
AlphaCat (d)
|
|
Talbot
|
|
Total
|
Description
|
|
|
|
Net Losses and Loss Expenses (b)
|
|
% of NPE (c)
|
|
Net Losses and Loss Expenses (b)
|
|
% of NPE (c)
|
|
Net Losses and Loss Expenses (b)
|
|
% of NPE (c)
|
|
Net Losses and Loss Expenses (b)
|
|
% of NPE (c)
|
European floods
|
|
Floods
|
|
$
|
69,895
|
|
|
22.9
|
%
|
|
$
|
975
|
|
|
2.8
|
%
|
|
$
|
6,717
|
|
|
3.2
|
%
|
|
$
|
77,587
|
|
|
14.2
|
%
|
Total
|
|
|
|
$
|
69,895
|
|
|
22.9
|
%
|
|
$
|
975
|
|
|
2.8
|
%
|
|
$
|
6,717
|
|
|
3.2
|
%
|
|
$
|
77,587
|
|
|
14.2
|
%
|
(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.
|
(b)
|
|
Net of reinsurance but not net of reinstatement premiums. Total
reinstatement premiums were $7.1 million for the three months ended
June 30, 2013.
|
(c)
|
|
NPE = Net premiums earned
|
(d)
|
|
The AlphaCat segment incurred loss and loss expenses of $1.0
million. The Company's share of the loss was $0.1 million as a
result of Validus' investment in an AlphaCat ILS fund.
|
Validus Re Segment - Second Quarter 2014 Results
Highlights for the second quarter include the following:
-
Gross premiums written for the three months ended June 30, 2014 were
$310.3 million compared to $353.4 million for the three months ended
June 30, 2013, a decrease of $43.1 million, or 12.2%. Gross premiums
written for the three months ended June 30, 2014 included $275.8
million of property premiums, $(0.2) million of marine premiums and
$34.7 million of specialty premiums, compared to $304.9 million of
property premiums, $10.8 million of marine premiums and $37.7 million
of specialty premiums for the three months ended June 30, 2013.
-
Net premiums earned for the three months ended June 30, 2014 were
$221.7 million compared to $304.8 million for the three months ended
June 30, 2013, a decrease of $83.0 million, or 27.2%.
-
The combined ratio for the three months ended June 30, 2014 was 57.8%
compared to 81.5% for the three months ended June 30, 2013, a decrease
of 23.7 percentage points.
-
The loss ratio for the three months ended June 30, 2014 was 35.0%
compared to 60.3% for the three months ended June 30, 2013, a decrease
of 25.3 percentage points. The loss ratio for the three months ended
June 30, 2014 included favorable loss reserve development on prior
accident years of $26.7 million, benefiting the loss ratio by 12.0
percentage points. The loss ratio for the three months ended June 30,
2013 included favorable loss reserve development on prior accident
years of $3.0 million, benefiting the loss ratio by 1.0 percentage
point. The favorable loss reserve development was primarily due to
lower than expected development on attritional losses.
-
Net operating income available to Validus Re for the three months
ended June 30, 2014 was $107.1 million compared to $73.6 million, for
the three months ended June 30, 2013, an increase of $33.6 million, or
45.6%.
-
General and administrative expenses for the three months ended June
30, 2014 were $17.0 million compared to $20.4 million for the three
months ended June 30, 2013, a decrease of $3.4 million, or 16.6%.
Highlights for the year to date include the following:
-
Gross premiums written for the six months ended June 30, 2014 were
$989.3 million compared to $1,101.3 million for the six months ended
June 30, 2013, a decrease of $112.1 million, or 10.2%. Gross premiums
written for the six months ended June 30, 2014 included $546.4 million
of property premiums, $152.7 million of marine premiums and $290.1
million of specialty premiums, compared to $630.9 million of property
premiums, $172.2 million of marine premiums and $298.2 million of
specialty premiums for the six months ended June 30, 2013.
-
Net premiums earned for the six months ended June 30, 2014 were $460.1
million compared to $607.9 million for the six months ended June 30,
2013, a decrease of $147.8 million, or 24.3%.
-
The combined ratio for the six months ended June 30, 2014 was 55.6%
compared to 66.6% for the six months ended June 30, 2013, a decrease
of 11.0 percentage points.
-
The loss ratio for the six months ended June 30, 2014 was 31.7%
compared to 42.3% for the six months ended June 30, 2013, a decrease
of 10.6 percentage points. The loss ratio for the six months ended
June 30, 2014 included favorable loss reserve development on prior
accident years of $36.7 million, benefiting the loss ratio by 8.0
percentage points. The loss ratio for the six months ended June 30,
2013 included favorable loss reserve development on prior accident
years of $31.8 million, benefiting the loss ratio by 5.2 percentage
points.
-
Net operating income available to Validus Re for the six months ended
June 30, 2014 was $240.0 million compared to $255.9 million, for the
six months ended June 30, 2013, a decrease of $15.9 million, or 6.2%.
-
General and administrative expenses for the six months ended June 30,
2014 were $35.2 million compared to $49.9 million for the six months
ended June 30, 2013, a decrease of $14.6 million, or 29.3%.
Talbot Segment - Second Quarter 2014 Results
Highlights for the second quarter include the following:
-
Gross premiums written for the three months ended June 30, 2014 were
$317.9 million compared to $315.5 million for the three months ended
June 30, 2013, an increase of $2.4 million, or 0.8%. Gross premiums
written for the three months ended June 30, 2014 included $116.0
million of property premiums, $109.4 million of marine premiums and
$92.6 million of specialty premiums compared to $124.2 million of
property premiums, $105.5 million of marine premiums and $85.8 million
of specialty premiums for the three months ended June 30, 2013.
-
Net premiums earned for the three months ended June 30, 2014 were
$211.8 million compared to $207.7 million for the three months ended
June 30, 2013, an increase of $4.1 million, or 2.0%.
-
The combined ratio for the three months ended June 30, 2014 was 78.7%
compared to 75.3% for the three months ended June 30, 2013, an
increase of 3.4 percentage points.
-
The loss ratio for the three months ended June 30, 2014 was 39.7%
compared to 38.6% for the three months ended June 30, 2013, an
increase of 1.1 percentage points. The loss ratio for the three months
ended June 30, 2014 included favorable loss reserve development on
prior accident years of $42.2 million, benefiting the loss ratio by
19.9 percentage points. The loss ratio for the three months ended
June 30, 2013 included favorable loss reserve development on prior
accident years of $38.0 million, benefiting the loss ratio by 18.3
percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional losses.
-
Net operating income available to Talbot for the three months ended
June 30, 2014 was $48.6 million compared to $56.6 million, for the
three months ended June 30, 2013, a decrease of $8.0 million, or 14.1%.
Highlights for the year to date include the following:
-
Gross premiums written for the six months ended June 30, 2014 were
$608.6 million compared to $609.0 million for the six months ended
June 30, 2013, a decrease of $0.4 million, or 0.1%. Gross premiums
written for the six months ended June 30, 2014 included $194.1 million
of property premiums, $229.0 million of marine premiums and $185.6
million of specialty premiums compared to $202.2 million of property
premiums, $230.3 million of marine premiums and $176.6 million of
specialty premiums for the six months ended June 30, 2013.
-
Net premiums earned for the six months ended June 30, 2014 were $425.7
million compared to $408.0 million for the six months ended June 30,
2013, an increase of $17.7 million, or 4.3%.
-
The combined ratio for the six months ended June 30, 2014 was 82.6%
compared to 73.6% for the six months ended June 30, 2013, an increase
of 9.0 percentage points.
-
The loss ratio for the six months ended June 30, 2014 was 43.8%
compared to 37.1% for the six months ended June 30, 2013, an increase
of 6.7 percentage points. The loss ratio for the six months ended
June 30, 2014 included favorable loss reserve development on prior
accident years of $63.8 million, benefiting the loss ratio by 15.0
percentage points. The loss ratio for the six months ended June 30,
2013 included favorable loss reserve development on prior accident
years of $75.0 million, benefiting the loss ratio by 18.4 percentage
points.
-
Net operating income available to Talbot for the six months ended
June 30, 2014 was $82.3 million compared to $116.3 million, for the
six months ended June 30, 2013, a decrease of $34.0 million, or 29.3%.
AlphaCat Segment - Second Quarter 2014 Results
Highlights for the second quarter include the following:
-
Gross premiums written from our consolidated entities, including
PaCRe, for the three months ended June 30, 2014 were $43.8 million
compared to $46.8 million for the three months ended June 30, 2013, a
decrease of $3.0 million, or 6.4%.
-
Net premiums earned for the three months ended June 30, 2014 were
$32.5 million compared to $35.0 million for the three months ended
June 30, 2013, a decrease of $2.5 million, or 7.2%.
-
Other income for the three months ended June 30, 2014 was $6.0 million
compared to $7.0 million for the three months ended June 30, 2013, a
decrease of $1.0 million, or 14.4%.
-
Income from operating affiliates for the three months ended June 30,
2014 was $4.9 million compared to $3.8 million for the three months
ended June 30, 2013, an increase of $1.1 million, or 29.0%.
-
Income attributable to operating affiliate investors for the three
months ended June 30, 2014 was $25.3 million compared to $20.3 million
for the three months ended June 30, 2013, resulting in a decrease to
net operating income of $5.1 million, or 24.9%.
-
The combined ratio for the three months ended June 30, 2014 was 12.2%
compared to 25.7% for the three months ended June 30, 2013, a decrease
of 13.5 percentage points.
-
The loss ratio for the three months ended June 30, 2014 was (9.3)%
compared to 3.8% for the three months ended June 30, 2013, a decrease
of 13.1 percentage points. The loss ratio for the three months ended
June 30, 2014 included favorable loss reserve development on prior
accident years of $3.7 million, benefiting the loss ratio by 11.5
percentage points. Accounting for Validus' ownership interest in the
various AlphaCat entities, the impact of the AlphaCat favorable
development on net operating income available to Validus was $0.9
million.
-
Net operating income available to AlphaCat for the three months ended
June 30, 2014 was $11.8 million compared to $11.9 million, for the
three months ended June 30, 2013, a decrease of 0.3%.
Highlights for the year to date include the following:
-
Gross premiums written from our consolidated entities, including
PaCRe, for the six months ended June 30, 2014 were $128.1 million
compared to $143.3 million for the six months ended June 30, 2013, a
decrease of $15.1 million, or 10.6%.
-
Net premiums earned for the six months ended June 30, 2014 were $63.1
million compared to $62.6 million for the six months ended June 30,
2013, an increase of $0.5 million, or 0.9%.
-
Other income for the six months ended June 30, 2014 was $15.5 million
compared to $13.6 million for the six months ended June 30, 2013, an
increase of $1.9 million, or 13.6%.
-
Income from operating affiliates for the six months ended June 30,
2014 was $9.8 million compared to $7.3 million for the six months
ended June 30, 2013, an increase of $2.5 million, or 34.2%.
-
Income attributable to operating affiliate investors for the six
months ended June 30, 2014 was $57.0 million compared to $30.3 million
for the six months ended June 30, 2013, resulting in a decrease to net
operating income of $26.7 million, or 88.0%.
-
The combined ratio for the six months ended June 30, 2014 was 5.1%
compared to 25.1% for the six months ended June 30, 2013, a decrease
of 20.0 percentage points.
-
The loss ratio for the six months ended June 30, 2014 was (17.3)%
compared to 2.1% for the six months ended June 30, 2013, a decrease of
19.4 percentage points. The loss ratio for the six months ended
June 30, 2014 included favorable loss reserve development on prior
accident years of $11.6 million, benefiting the loss ratio by 18.4
percentage points. Accounting for Validus' ownership interest in the
various AlphaCat entities, the impact of the AlphaCat favorable
development on net operating income available to Validus was $2.7
million.
-
Net operating income available to AlphaCat for the six months ended
June 30, 2014 was $24.7 million compared to $30.3 million, for the six
months ended June 30, 2013, a decrease of $5.6 million, or 18.4%.
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.
General and administrative expenses for the three months ended June 30,
2014, net of eliminations related to the operating segments, were $18.8
million compared to $14.4 million for the three months ended June 30,
2013, an increase of $4.5 million or 31.3%. Share compensation expenses
for the three months ended June 30, 2014, net of operating segment
eliminations were $3.0 million compared to $2.7 million for the three
months ended June 30, 2013, an increase of $0.3 million or 11.8%. In
addition to the general and administrative expenses noted above, there
were $3.3 million of non-recurring costs relating to the proposed
acquisition of Western World Insurance Group, Inc. in the quarter.
General and administrative expenses for the six months ended June 30,
2014, net of eliminations related to the operating segments, were $35.8
million compared to $30.2 million for the six months ended June 30,
2013, an increase of $5.6 million, or 18.4%. Share compensation expenses
for the six months ended June 30, 2014 were $5.3 million compared to
$2.1 million for the six months ended June 30, 2013, an increase of $3.3
million, or 155.9%.
Investments
Net investment income for the three months ended June 30, 2014 was $21.3
million compared to $26.2 million for the three months ended June 30,
2013, a decrease of $4.9 million, or 18.8%.
Net realized gains on investments for the three months ended June 30,
2014 were $7.9 million compared to $3.4 million for the three months
ended June 30, 2013, an increase of $4.4 million, or 130.5%.
The change in net unrealized gains on investments for the three months
ended June 30, 2014 was $45.4 million compared to the change in net
unrealized losses of ($141.3) million for the three months ended
June 30, 2013, an increase of $186.8 million, or 132.1%. Net unrealized
gains on investments for the three months ended June 30, 2014 were
driven by $31.3 million in unrealized gains relating to PaCRe. The
amount of PaCRe's net unrealized gains attributable to noncontrolling
interest was $28.1 million for the three months ended June 30, 2014,
leaving a net impact to the Company of $3.1 million.
The change in net unrealized losses on investments for the three months
ended June 30, 2013 was driven by ($70.8) million in unrealized losses
relating to PaCRe. The amount of PaCRe's net unrealized losses
attributable to noncontrolling interest was ($63.7) million for the
three months ended June 30, 2013, leaving a net impact to the Company of
($7.1) million.
Net investment income for the six months ended June 30, 2014 was $44.6
million compared to $51.9 million for the six months ended June 30,
2013, a decrease of $7.2 million, or 13.9%.
Net realized gains on investments for the six months ended June 30, 2014
were $11.6 million compared to $5.1 million for the six months ended
June 30, 2013, an increase of $6.5 million, or 126.1%.
The change in net unrealized gains on investments for the six months
ended June 30, 2014 was $101.1 million compared to the change in net
unrealized losses of ($148.6) million for the six months ended June 30,
2013, an increase of $249.7 million, or 168.1%. Net unrealized gains on
investments for the six months ended June 30, 2014 were driven by $77.9
million in unrealized gains relating to PaCRe. The amount of PaCRe's net
unrealized gains attributable to noncontrolling interest was $70.1
million for the six months ended June 30, 2014, leaving a net impact to
the Company of $7.8 million.
The change in net unrealized losses on investments for the six months
ended June 30, 2013 was driven by ($75.9) million in unrealized losses
relating to PaCRe. The amount of PaCRe's net unrealized losses
attributable to noncontrolling interest was ($68.3) million for the six
months ended June 30, 2013, leaving a net impact to the Company of
($7.6) million.
Finance Expenses
Finance expenses for the three months ended June 30, 2014 were $16.1
million compared to $17.6 million for the three months ended June 30,
2013, a decrease of $1.4 million, or 8.2%.
Finance expenses for the six months ended June 30, 2014 were $32.0
million compared to $31.9 million for the six months ended June 30,
2013, an increase of $0.1 million, or 0.3%.
Shareholders' Equity and Capitalization
As at June 30, 2014, total shareholders' equity was $4.4 billion
including $575.3 million of noncontrolling interest. Shareholders'
equity available to Validus was $3.8 billion as at June 30, 2014. Book
value per diluted common share was $38.55 at June 30, 2014, compared to
$37.58 at March 31, 2014. Book value per diluted common share is a
non-GAAP financial measure. A reconciliation of this measure is
presented at the end of this release.
Total capitalization at June 30, 2014 was $5.2 billion, including $541.4
million of junior subordinated deferrable debentures, $247.3 million of
senior notes and $66.3 million of redeemable noncontrolling interest.
Total capitalization available to Validus at June 30, 2014 was $4.6
billion, excluding $575.3 million of noncontrolling interest and $66.3
million of redeemable noncontrolling interest.
Share Repurchases
For the three months ended June 30, 2014, there were no share
repurchases. 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 March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
Effect of share repurchases:
|
|
(cumulative)
|
|
April
|
|
May
|
|
June
|
|
June 30, 2014
|
Aggregate purchase price (a)
|
|
$
|
1,917,688
|
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
-
|
Shares repurchased
|
|
62,171,982
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
-
|
Average price (a)
|
|
$
|
30.84
|
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated cumulative net accretive (dilutive) impact on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.93
|
Earnings per diluted share - Quarter (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.61
|
|
|
Share Repurchase Activity
(Expressed in thousands of U.S. dollars except for share and
per share information)
|
Effect of share repurchases:
|
|
As at June 30, 2014
|
|
July
|
|
As at July 23, 2014
|
|
Cumulative to Date Effect
|
Aggregate purchase price (a)
|
|
$
|
1,917,688
|
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
1,917,688
|
Shares repurchased
|
|
62,171,982
|
|
|
|
-
|
|
|
-
|
|
62,171,982
|
Average price (a)
|
|
$
|
30.84
|
|
|
$
|
|
-
|
|
$
|
|
-
|
|
$
|
30.84
|
(a) Share transactions are on a trade date basis through July 23, 2014
and are inclusive of commissions. Average share price is rounded to two
decimal places.
(b) As the average price per share repurchased during certain periods
between 2009 and 2014 was lower than the book value per common share,
the repurchase of shares increased the Company's period ending book
value per share.
(c) The estimated impact on earnings per diluted share was calculated by
comparing reported results versus i) net income per share plus an
estimate of lost net investment income on the cumulative share
repurchases divided by ii) weighted average diluted shares outstanding
excluding the weighted average impact of cumulative share repurchases.
The impact of cumulative share repurchases was accretive to earnings per
diluted share.
Conference Call
The Company will host a conference call for analysts and investors on
July 25, 2014 at 10:00 AM (Eastern) to discuss the second quarter 2014
financial results and related matters. The conference call may be
accessed by dialing 1-888-771-4371 (toll-free U.S.) or 1-847-585-4405
(international) and entering the passcode 3726 5015. 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 August 8, 2014, by dialing
1-888-843-7419 (toll-free U.S.) or 1-630-652-3042 (international) and
entering the passcode 3726 5015.
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 August 8, 2014. In addition, a
financial supplement relating to the Company's financial results for the
three and six months ended June 30, 2014 is available in the Investor
Relations section of the Company's website.
About Validus Holdings, Ltd.
Validus Holdings, Ltd. is a provider of reinsurance, insurance, and
insurance linked securities management operating through three primary
segments, Validus Reinsurance, Ltd., Talbot Holdings Ltd. and AlphaCat
Managers, Ltd. Validus Reinsurance, Ltd. ("Validus Re") is a Bermuda
based reinsurer focused on short tail lines of reinsurance. Talbot
Holdings Ltd. ("Talbot") is the Bermuda parent of the specialty
insurance group primarily operating within the Lloyd's insurance market
through Syndicate 1183. AlphaCat Managers, Ltd. ("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 Sheets
As at June 30, 2014 and December 31, 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Fixed maturities, at fair value (amortized cost: 2014-$5,115,945;
2013-$5,522,853)
|
|
|
$
|
5,154,629
|
|
|
$
|
5,542,258
|
|
Short-term investments, at fair value (amortized cost:
2014-$816,651; 2013-$751,734)
|
|
|
|
816,820
|
|
|
|
751,778
|
|
Other investments, at fair value (cost: 2014-$717,908; 2013-$637,728)
|
|
|
|
783,423
|
|
|
|
618,316
|
|
Cash and cash equivalents
|
|
|
|
1,166,410
|
|
|
|
1,056,346
|
|
Total investments and cash
|
|
|
|
7,921,282
|
|
|
|
7,968,698
|
|
Investments in affiliates
|
|
|
|
213,619
|
|
|
|
141,243
|
|
Premiums receivable
|
|
|
|
1,215,454
|
|
|
|
697,233
|
|
Deferred acquisition costs
|
|
|
|
210,642
|
|
|
|
134,269
|
|
Prepaid reinsurance premiums
|
|
|
|
178,291
|
|
|
|
103,251
|
|
Securities lending collateral
|
|
|
|
1,321
|
|
|
|
3,392
|
|
Loss reserves recoverable
|
|
|
|
338,734
|
|
|
|
370,154
|
|
Paid losses recoverable
|
|
|
|
59,682
|
|
|
|
80,080
|
|
Intangible assets
|
|
|
|
104,327
|
|
|
|
106,407
|
|
Goodwill
|
|
|
|
20,393
|
|
|
|
20,393
|
|
Accrued investment income
|
|
|
|
18,008
|
|
|
|
18,876
|
|
Other assets
|
|
|
|
156,651
|
|
|
|
202,436
|
|
Total assets
|
|
|
$
|
10,438,404
|
|
|
$
|
9,846,432
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Reserve for losses and loss expenses
|
|
|
$
|
2,867,307
|
|
|
$
|
3,030,399
|
|
Unearned premiums
|
|
|
|
1,372,768
|
|
|
|
824,496
|
|
Reinsurance balances payable
|
|
|
|
162,114
|
|
|
|
154,874
|
|
Securities lending payable
|
|
|
|
1,787
|
|
|
|
3,858
|
|
Deferred income taxes
|
|
|
|
20,522
|
|
|
|
19,086
|
|
Net payable for investments purchased
|
|
|
|
44,713
|
|
|
|
19,383
|
|
Accounts payable and accrued expenses
|
|
|
|
138,906
|
|
|
|
278,187
|
|
Notes payable to operating affiliates
|
|
|
|
622,950
|
|
|
|
439,272
|
|
Senior notes payable
|
|
|
|
247,252
|
|
|
|
247,198
|
|
Debentures payable
|
|
|
|
541,350
|
|
|
|
541,416
|
|
Total liabilities
|
|
|
|
6,019,669
|
|
|
|
5,558,169
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
|
66,282
|
|
|
|
86,512
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
Common shares, 571,428,571 authorized, par value $0.175 (Issued:
2014-155,205,796; 2013-154,488,497; Outstanding: 2014-91,394,939;
2013-96,044,312)
|
|
|
|
27,161
|
|
|
|
27,036
|
|
Treasury shares (2014-63,810,857; 2013-58,444,185)
|
|
|
|
(11,167
|
)
|
|
|
(10,228
|
)
|
Additional paid-in-capital
|
|
|
|
1,492,472
|
|
|
|
1,677,894
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
2,460
|
|
|
|
(617
|
)
|
Retained earnings
|
|
|
|
2,266,180
|
|
|
|
2,010,009
|
|
Total shareholders' equity available to Validus
|
|
|
|
3,777,106
|
|
|
|
3,704,094
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
|
575,347
|
|
|
|
497,657
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
|
4,352,453
|
|
|
|
4,201,751
|
|
|
|
|
|
|
|
Total liabilities, noncontrolling interests and shareholders'
equity
|
|
|
$
|
10,438,404
|
|
|
$
|
9,846,432
|
|
Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three and six months ended
June 30, 2014 and 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Underwriting income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
$
|
655,674
|
|
|
$
|
702,313
|
|
|
$
|
1,667,665
|
|
|
$
|
1,807,073
|
|
Reinsurance premiums ceded
|
|
|
|
(50,565
|
)
|
|
|
(121,396
|
)
|
|
|
(245,473
|
)
|
|
|
(308,612
|
)
|
Net premiums written
|
|
|
|
605,109
|
|
|
|
580,917
|
|
|
|
1,422,192
|
|
|
|
1,498,461
|
|
Change in unearned premiums
|
|
|
|
(139,106
|
)
|
|
|
(33,459
|
)
|
|
|
(473,232
|
)
|
|
|
(419,942
|
)
|
Net premiums earned
|
|
|
|
466,003
|
|
|
|
547,458
|
|
|
|
948,960
|
|
|
|
1,078,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
158,745
|
|
|
|
265,044
|
|
|
|
321,416
|
|
|
|
409,815
|
|
Policy acquisition costs
|
|
|
|
78,953
|
|
|
|
87,152
|
|
|
|
164,602
|
|
|
|
180,763
|
|
General and administrative expenses
|
|
|
|
73,842
|
|
|
|
70,967
|
|
|
|
148,287
|
|
|
|
151,246
|
|
Share compensation expenses
|
|
|
|
8,341
|
|
|
|
6,638
|
|
|
|
15,488
|
|
|
|
8,956
|
|
Total underwriting deductions
|
|
|
|
319,881
|
|
|
|
429,801
|
|
|
|
649,793
|
|
|
|
750,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
|
|
|
$
|
146,122
|
|
|
$
|
117,657
|
|
|
$
|
299,167
|
|
|
$
|
327,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
21,286
|
|
|
|
26,210
|
|
|
|
44,648
|
|
|
|
51,859
|
|
Other income
|
|
|
|
5,235
|
|
|
|
4,418
|
|
|
|
19,065
|
|
|
|
7,103
|
|
Finance expenses
|
|
|
|
(16,126
|
)
|
|
|
(17,566
|
)
|
|
|
(32,026
|
)
|
|
|
(31,935
|
)
|
Operating income before taxes, income from operating affiliates
and (income) attributable to operating affiliate investors
|
|
|
$
|
156,517
|
|
|
$
|
130,719
|
|
|
$
|
330,854
|
|
|
$
|
354,766
|
|
Tax (expense) benefit
|
|
|
|
(1,391
|
)
|
|
|
(93
|
)
|
|
|
(1,351
|
)
|
|
|
225
|
|
Income from operating affiliates
|
|
|
|
4,892
|
|
|
|
3,793
|
|
|
|
9,819
|
|
|
|
7,316
|
|
(Income) attributable to operating affiliate investors
|
|
|
|
(25,316
|
)
|
|
|
(20,264
|
)
|
|
|
(57,026
|
)
|
|
|
(30,341
|
)
|
Net operating income
|
|
|
$
|
134,702
|
|
|
$
|
114,155
|
|
|
$
|
282,296
|
|
|
$
|
331,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains on investments
|
|
|
|
7,858
|
|
|
|
3,409
|
|
|
|
11,598
|
|
|
|
5,130
|
|
Change in net unrealized gains (losses) on investments
|
|
|
|
45,427
|
|
|
|
(141,348
|
)
|
|
|
101,120
|
|
|
|
(148,585
|
)
|
Income from investment affiliate
|
|
|
|
779
|
|
|
|
1,753
|
|
|
|
6,127
|
|
|
|
3,230
|
|
Foreign exchange gains (losses)
|
|
|
|
3,158
|
|
|
|
(8,223
|
)
|
|
|
(3,320
|
)
|
|
|
(1,301
|
)
|
Transaction expenses (a)
|
|
|
|
(3,252
|
)
|
|
|
-
|
|
|
|
(3,252
|
)
|
|
|
-
|
|
Net income (loss)
|
|
|
$
|
188,672
|
|
|
$
|
(30,254
|
)
|
|
$
|
394,569
|
|
|
$
|
190,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interest
|
|
|
|
(35,305
|
)
|
|
|
60,976
|
|
|
|
(78,814
|
)
|
|
|
63,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to Validus
|
|
|
$
|
153,367
|
|
|
$
|
30,722
|
|
|
$
|
315,755
|
|
|
$
|
253,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written / Gross premiums written
|
|
|
|
92.3
|
%
|
|
|
82.7
|
%
|
|
|
85.3
|
%
|
|
|
82.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
34.1
|
%
|
|
|
48.4
|
%
|
|
|
33.9
|
%
|
|
|
38.0
|
%
|
Policy acquisition costs
|
|
|
|
16.9
|
%
|
|
|
15.9
|
%
|
|
|
17.3
|
%
|
|
|
16.8
|
%
|
General and administrative expenses (b)
|
|
|
|
17.6
|
%
|
|
|
14.2
|
%
|
|
|
17.3
|
%
|
|
|
14.9
|
%
|
Expense ratio
|
|
|
|
34.5
|
%
|
|
|
30.1
|
%
|
|
|
34.6
|
%
|
|
|
31.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
|
68.6
|
%
|
|
|
78.5
|
%
|
|
|
68.5
|
%
|
|
|
69.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The transaction expenses relate to costs incurred in
connection with the proposed acquisition of Western World
Insurance Group, Inc. 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 June 30, 2014
and 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2014
|
|
Three Months Ended June 30, 2013
|
|
|
|
Validus Re
|
|
AlphaCat
|
|
Talbot
|
|
Corporate and Eliminations
|
|
Total
|
|
Validus Re
|
|
AlphaCat
|
|
Talbot
|
|
Corporate and Eliminations
|
|
Total
|
Underwriting income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
310,286
|
|
|
43,790
|
|
|
317,944
|
|
|
(16,346
|
)
|
|
655,674
|
|
|
353,384
|
|
|
46,760
|
|
|
315,518
|
|
|
(13,349
|
)
|
|
702,313
|
|
Reinsurance premiums ceded
|
|
|
(30,535
|
)
|
|
-
|
|
|
(36,376
|
)
|
|
16,346
|
|
|
(50,565
|
)
|
|
(87,558
|
)
|
|
-
|
|
|
(47,187
|
)
|
|
13,349
|
|
|
(121,396
|
)
|
Net premiums written
|
|
|
279,751
|
|
|
43,790
|
|
|
281,568
|
|
|
-
|
|
|
605,109
|
|
|
265,826
|
|
|
46,760
|
|
|
268,331
|
|
|
-
|
|
|
580,917
|
|
Change in unearned premiums
|
|
|
(58,023
|
)
|
|
(11,330
|
)
|
|
(69,753
|
)
|
|
-
|
|
|
(139,106
|
)
|
|
38,925
|
|
|
(11,770
|
)
|
|
(60,614
|
)
|
|
-
|
|
|
(33,459
|
)
|
Net premiums earned
|
|
|
221,728
|
|
|
32,460
|
|
|
211,815
|
|
|
-
|
|
|
466,003
|
|
|
304,751
|
|
|
34,990
|
|
|
207,717
|
|
|
-
|
|
|
547,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
77,688
|
|
|
(3,033
|
)
|
|
84,090
|
|
|
-
|
|
|
158,745
|
|
|
183,646
|
|
|
1,313
|
|
|
80,085
|
|
|
-
|
|
|
265,044
|
|
Policy acquisition costs
|
|
|
31,125
|
|
|
3,056
|
|
|
45,593
|
|
|
(821
|
)
|
|
78,953
|
|
|
42,789
|
|
|
3,586
|
|
|
41,667
|
|
|
(890
|
)
|
|
87,152
|
|
General and administrative expenses
|
|
|
17,040
|
|
|
3,780
|
|
|
34,173
|
|
|
18,849
|
|
|
73,842
|
|
|
20,423
|
|
|
3,992
|
|
|
32,192
|
|
|
14,360
|
|
|
70,967
|
|
Share compensation expenses
|
|
|
2,336
|
|
|
161
|
|
|
2,862
|
|
|
2,982
|
|
|
8,341
|
|
|
1,529
|
|
|
85
|
|
|
2,357
|
|
|
2,667
|
|
|
6,638
|
|
Total underwriting deductions
|
|
|
128,189
|
|
|
3,964
|
|
|
166,718
|
|
|
21,010
|
|
|
319,881
|
|
|
248,387
|
|
|
8,976
|
|
|
156,301
|
|
|
16,137
|
|
|
429,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income (loss)
|
|
|
93,539
|
|
|
28,496
|
|
|
45,097
|
|
|
(21,010
|
)
|
|
146,122
|
|
|
56,364
|
|
|
26,014
|
|
|
51,416
|
|
|
(16,137
|
)
|
|
117,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
16,758
|
|
|
829
|
|
|
4,671
|
|
|
(972
|
)
|
|
21,286
|
|
|
22,949
|
|
|
973
|
|
|
4,383
|
|
|
(2,095
|
)
|
|
26,210
|
|
Other income (loss)
|
|
|
969
|
|
|
6,005
|
|
|
258
|
|
|
(1,997
|
)
|
|
5,235
|
|
|
(361
|
)
|
|
7,015
|
|
|
491
|
|
|
(2,727
|
)
|
|
4,418
|
|
Finance expenses
|
|
|
(3,670
|
)
|
|
(971
|
)
|
|
(68
|
)
|
|
(11,417
|
)
|
|
(16,126
|
)
|
|
(5,241
|
)
|
|
(2,945
|
)
|
|
(75
|
)
|
|
(9,305
|
)
|
|
(17,566
|
)
|
Operating income (loss) before taxes, income from operating
affiliates and (income) attributable to operating affiliate investors
|
|
|
107,596
|
|
|
34,359
|
|
|
49,958
|
|
|
(35,396
|
)
|
|
156,517
|
|
|
73,711
|
|
|
31,057
|
|
|
56,215
|
|
|
(30,264
|
)
|
|
130,719
|
|
Tax (expense) benefit
|
|
|
(460
|
)
|
|
-
|
|
|
(1,364
|
)
|
|
433
|
|
|
(1,391
|
)
|
|
(145
|
)
|
|
-
|
|
|
383
|
|
|
(331
|
)
|
|
(93
|
)
|
Income from operating affiliates
|
|
|
-
|
|
|
4,892
|
|
|
-
|
|
|
-
|
|
|
4,892
|
|
|
-
|
|
|
3,793
|
|
|
-
|
|
|
-
|
|
|
3,793
|
|
(Income) attributable to operating affiliate investors
|
|
|
-
|
|
|
(25,316
|
)
|
|
-
|
|
|
-
|
|
|
(25,316
|
)
|
|
-
|
|
|
(20,264
|
)
|
|
-
|
|
|
-
|
|
|
(20,264
|
)
|
Net operating income (loss) (a)
|
|
|
107,136
|
|
|
13,935
|
|
|
48,594
|
|
|
(34,963
|
)
|
|
134,702
|
|
|
73,566
|
|
|
14,586
|
|
|
56,598
|
|
|
(30,595
|
)
|
|
114,155
|
|
Net operating (income) attributable to noncontrolling interest
|
|
|
-
|
|
|
(2,094
|
)
|
|
-
|
|
|
-
|
|
|
(2,094
|
)
|
|
-
|
|
|
(2,707
|
)
|
|
-
|
|
|
-
|
|
|
(2,707
|
)
|
Net operating income (loss) available (attributable) to Validus
|
|
|
107,136
|
|
|
11,841
|
|
|
48,594
|
|
|
(34,963
|
)
|
|
132,608
|
|
|
73,566
|
|
|
11,879
|
|
|
56,598
|
|
|
(30,595
|
)
|
|
111,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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), 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.
|
|
Validus Holdings, Ltd.
Consolidated Segment Operating Income (Loss)
For the six months ended June 30, 2014
and 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2014
|
|
Six Months Ended June 30, 2013
|
|
|
|
Validus Re
|
|
AlphaCat
|
|
Talbot
|
|
Corporate and Eliminations
|
|
Total
|
|
Validus Re
|
|
AlphaCat
|
|
Talbot
|
|
Corporate and Eliminations
|
|
Total
|
Underwriting income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
989,272
|
|
|
128,137
|
|
|
608,639
|
|
|
(58,383
|
)
|
|
1,667,665
|
|
|
1,101,347
|
|
|
143,276
|
|
|
609,048
|
|
|
(46,598
|
)
|
|
1,807,073
|
|
Reinsurance premiums ceded
|
|
|
(173,175
|
)
|
|
(3,700
|
)
|
|
(126,981
|
)
|
|
58,383
|
|
|
(245,473
|
)
|
|
(213,286
|
)
|
|
-
|
|
|
(141,924
|
)
|
|
46,598
|
|
|
(308,612
|
)
|
Net premiums written
|
|
|
816,097
|
|
|
124,437
|
|
|
481,658
|
|
|
-
|
|
|
1,422,192
|
|
|
888,061
|
|
|
143,276
|
|
|
467,124
|
|
|
-
|
|
|
1,498,461
|
|
Change in unearned premiums
|
|
|
(355,983
|
)
|
|
(61,294
|
)
|
|
(55,955
|
)
|
|
-
|
|
|
(473,232
|
)
|
|
(280,176
|
)
|
|
(80,669
|
)
|
|
(59,097
|
)
|
|
-
|
|
|
(419,942
|
)
|
Net premiums earned
|
|
|
460,114
|
|
|
63,143
|
|
|
425,703
|
|
|
-
|
|
|
948,960
|
|
|
607,885
|
|
|
62,607
|
|
|
408,027
|
|
|
-
|
|
|
1,078,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
145,843
|
|
|
(10,893
|
)
|
|
186,466
|
|
|
-
|
|
|
321,416
|
|
|
257,048
|
|
|
1,313
|
|
|
151,454
|
|
|
-
|
|
|
409,815
|
|
Policy acquisition costs
|
|
|
70,370
|
|
|
6,036
|
|
|
90,521
|
|
|
(2,325
|
)
|
|
164,602
|
|
|
94,533
|
|
|
6,224
|
|
|
82,193
|
|
|
(2,187
|
)
|
|
180,763
|
|
General and administrative expenses
|
|
|
35,235
|
|
|
7,908
|
|
|
69,322
|
|
|
35,822
|
|
|
148,287
|
|
|
49,864
|
|
|
8,029
|
|
|
63,104
|
|
|
30,249
|
|
|
151,246
|
|
Share compensation expenses
|
|
|
4,544
|
|
|
151
|
|
|
5,444
|
|
|
5,349
|
|
|
15,488
|
|
|
2,942
|
|
|
162
|
|
|
3,762
|
|
|
2,090
|
|
|
8,956
|
|
Total underwriting deductions
|
|
|
255,992
|
|
|
3,202
|
|
|
351,753
|
|
|
38,846
|
|
|
649,793
|
|
|
404,387
|
|
|
15,728
|
|
|
300,513
|
|
|
30,152
|
|
|
750,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income (loss)
|
|
|
204,122
|
|
|
59,941
|
|
|
73,950
|
|
|
(38,846
|
)
|
|
299,167
|
|
|
203,498
|
|
|
46,879
|
|
|
107,514
|
|
|
(30,152
|
)
|
|
327,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
35,523
|
|
|
1,709
|
|
|
9,357
|
|
|
(1,941
|
)
|
|
44,648
|
|
|
46,142
|
|
|
1,854
|
|
|
9,101
|
|
|
(5,238
|
)
|
|
51,859
|
|
Other income (loss)
|
|
|
7,739
|
|
|
15,502
|
|
|
275
|
|
|
(4,451
|
)
|
|
19,065
|
|
|
13,129
|
|
|
13,648
|
|
|
491
|
|
|
(20,165
|
)
|
|
7,103
|
|
Finance expenses
|
|
|
(7,509
|
)
|
|
(1,654
|
)
|
|
(94
|
)
|
|
(22,769
|
)
|
|
(32,026
|
)
|
|
(8,493
|
)
|
|
(4,193
|
)
|
|
(149
|
)
|
|
(19,100
|
)
|
|
(31,935
|
)
|
Operating income (loss) before taxes, income from operating
affiliates and (income) attributable to operating affiliate investors
|
|
|
239,875
|
|
|
75,498
|
|
|
83,488
|
|
|
(68,007
|
)
|
|
330,854
|
|
|
254,276
|
|
|
58,188
|
|
|
116,957
|
|
|
(74,655
|
)
|
|
354,766
|
|
Tax benefit (expense)
|
|
|
118
|
|
|
-
|
|
|
(1,234
|
)
|
|
(235
|
)
|
|
(1,351
|
)
|
|
1,612
|
|
|
-
|
|
|
(671
|
)
|
|
(716
|
)
|
|
225
|
|
Income from operating affiliates
|
|
|
-
|
|
|
9,819
|
|
|
v
|
|
|
-
|
|
|
9,819
|
|
|
-
|
|
|
7,316
|
|
|
-
|
|
|
-
|
|
|
7,316
|
|
(Income) attributable to operating affiliate investors
|
|
|
-
|
|
|
(57,026
|
)
|
|
-
|
|
|
-
|
|
|
(57,026
|
)
|
|
-
|
|
|
(30,341
|
)
|
|
-
|
|
|
-
|
|
|
(30,341
|
)
|
Net operating income (loss) (a)
|
|
|
239,993
|
|
|
28,291
|
|
|
82,254
|
|
|
(68,242
|
)
|
|
282,296
|
|
|
255,888
|
|
|
35,163
|
|
|
116,286
|
|
|
(75,371
|
)
|
|
331,966
|
|
Net operating (income) attributable to noncontrolling interest
|
|
|
-
|
|
|
(3,598
|
)
|
|
-
|
|
|
-
|
|
|
(3,598
|
)
|
|
-
|
|
|
(4,900
|
)
|
|
-
|
|
|
-
|
|
|
(4,900
|
)
|
Net operating income (loss) available (attributable) to Validus
|
|
|
239,993
|
|
|
24,693
|
|
|
82,254
|
|
|
(68,242
|
)
|
|
278,698
|
|
|
255,888
|
|
|
30,263
|
|
|
116,286
|
|
|
(75,371
|
)
|
|
327,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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), 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.
|
|
Validus Holdings, Ltd.
Non-GAAP Financial Measures Reconciliation
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 and six months ended
June 30, 2014 and 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to Validus
|
|
|
$
|
153,367
|
|
|
$
|
30,722
|
|
|
$
|
315,755
|
|
|
$
|
253,965
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) on investments
|
|
|
|
(7,858
|
)
|
|
|
(3,409
|
)
|
|
|
(11,598
|
)
|
|
|
(5,130
|
)
|
Change in net unrealized (gains) losses on investments
|
|
|
|
(45,427
|
)
|
|
|
141,348
|
|
|
|
(101,120
|
)
|
|
|
148,585
|
|
(Income) from investment affiliate
|
|
|
|
(779
|
)
|
|
|
(1,753
|
)
|
|
|
(6,127
|
)
|
|
|
(3,230
|
)
|
Foreign exchange (gains) losses
|
|
|
|
(3,158
|
)
|
|
|
8,223
|
|
|
|
3,320
|
|
|
|
1,301
|
|
Transaction expenses (a)
|
|
|
|
3,252
|
|
|
|
-
|
|
|
|
3,252
|
|
|
|
-
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
|
33,211
|
|
|
|
(63,683
|
)
|
|
|
75,216
|
|
|
|
(68,425
|
)
|
Net operating income available to Validus
|
|
|
|
132,608
|
|
|
|
111,448
|
|
|
|
278,698
|
|
|
|
327,066
|
|
Less: Dividends and distributions declared on outstanding warrants
|
|
|
|
(1,552
|
)
|
|
|
(1,646
|
)
|
|
|
(3,104
|
)
|
|
|
(16,110
|
)
|
Net operating income available to Validus, adjusted
|
|
|
$
|
131,056
|
|
|
$
|
109,802
|
|
|
$
|
275,594
|
|
|
$
|
310,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to Validus - diluted
|
|
|
$
|
1.61
|
|
|
$
|
0.28
|
|
|
$
|
3.27
|
|
|
$
|
2.21
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) on investments
|
|
|
|
(0.08
|
)
|
|
|
(0.03
|
)
|
|
|
(0.12
|
)
|
|
|
(0.04
|
)
|
Change in net unrealized (gains) losses on investments
|
|
|
|
(0.48
|
)
|
|
|
1.31
|
|
|
|
(1.05
|
)
|
|
|
1.38
|
|
(Income) from investment affiliate
|
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.06
|
)
|
|
|
(0.03
|
)
|
Foreign exchange (gains) losses
|
|
|
|
(0.03
|
)
|
|
|
0.08
|
|
|
|
0.04
|
|
|
|
0.01
|
|
Transaction expenses (a)
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
0.03
|
|
|
|
-
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
|
0.35
|
|
|
|
(0.59
|
)
|
|
|
0.78
|
|
|
|
(0.63
|
)
|
Net operating income per share available to Validus - diluted
|
|
|
$
|
1.39
|
|
|
$
|
1.03
|
|
|
$
|
2.89
|
|
|
$
|
2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share
equivalents
|
|
|
|
95,276,836
|
|
|
|
107,776,292
|
|
|
|
96,538,178
|
|
|
|
107,393,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders' equity available to Validus
|
|
|
$
|
3,713,085
|
|
|
$
|
3,760,873
|
|
|
$
|
3,710,088
|
|
|
$
|
3,847,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized net operating return on average equity
|
|
|
|
14.3
|
%
|
|
|
11.9
|
%
|
|
|
15.0
|
%
|
|
|
17.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The transaction expenses relate to costs incurred in
connection with the proposed acquisition of Western World
Insurance Group, Inc. Transaction expenses are primarily comprised
of legal, financial advisory and audit related services.
|
|
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 June 30, 2014 and December 31, 2013
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
As at June 30, 2014
|
|
|
|
Equity Amount
|
|
Shares
|
|
Exercise Price
|
|
Book Value Per Share
|
Book value per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus
|
|
|
$
|
3,777,106
|
|
|
91,394,939
|
|
|
|
|
|
$
|
41.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus
|
|
|
|
3,777,106
|
|
|
91,394,939
|
|
|
|
|
|
|
Assumed exercise of outstanding warrants
|
|
|
|
90,950
|
|
|
5,174,114
|
|
|
$
|
17.58
|
|
|
|
Assumed exercise of outstanding stock options
|
|
|
|
27,313
|
|
|
1,477,694
|
|
|
$
|
18.48
|
|
|
|
Unvested restricted shares
|
|
|
|
-
|
|
|
2,991,261
|
|
|
|
|
|
|
Book value per diluted common share
|
|
|
$
|
3,895,369
|
|
|
101,038,008
|
|
|
|
|
|
$
|
38.55
|
Adjustment for accumulated dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
8.28
|
Book value per diluted common share plus accumulated dividends
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2013
|
|
|
|
Equity Amount
|
|
Shares
|
|
Exercise Price
|
|
Book Value Per Share
|
Book value per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus
|
|
|
$
|
3,704,094
|
|
|
96,044,312
|
|
|
|
|
|
$
|
38.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus
|
|
|
|
3,704,094
|
|
|
96,044,312
|
|
|
|
|
|
|
Assumed exercise of outstanding warrants
|
|
|
|
98,513
|
|
|
5,296,056
|
|
|
$
|
18.60
|
|
|
|
Assumed exercise of outstanding stock options
|
|
|
|
29,688
|
|
|
1,572,713
|
|
|
$
|
18.88
|
|
|
|
Unvested restricted shares
|
|
|
|
-
|
|
|
2,853,083
|
|
|
|
|
|
|
Book value per diluted common share
|
|
|
$
|
3,832,295
|
|
|
105,766,164
|
|
|
|
|
|
$
|
36.23
|
Adjustment for accumulated dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
7.68
|
Book value per diluted common share plus accumulated dividends
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43.91
|
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 income, finance expenses, gain on
bargain purchase, net of expenses, net realized and change in unrealized
gains (losses) on investments, foreign exchange gains (losses) 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), 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.
[ Back To TMCnet.com's Homepage ]
|