[October 27, 2016] |
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Validus Reports Net Income Available to Validus Common Shareholders of $89.8 Million, or $1.11 Per Diluted Share and a 9.7% Annualized Return on Average Equity for the Third Quarter of 2016
Validus Holdings, Ltd. ("Validus" or the "Company") (NYSE: VR) today
reported net income available to Validus common shareholders of $89.8
million, or $1.11 per diluted common share, for the three months ended
September 30, 2016, compared to $66.7 million, or $0.78 per diluted
common share, for the three months ended September 30, 2015. Net income
available to Validus common shareholders was $351.6 million, or $4.24
per diluted common share, for the nine months ended September 30, 2016,
compared to $305.9 million, or $3.52 per diluted common share, for the
nine months ended September 30, 2015.
Net operating income available to Validus common shareholders was $82.6
million, or $1.02 per diluted common share, for the three months ended
September 30, 2016, compared to $65.8 million, or $0.77 per diluted
common share, for the three months ended September 30, 2015. Net
operating income available to Validus common shareholders was $254.9
million, or $3.07 per diluted common share, for the nine months ended
September 30, 2016, compared to $304.4 million, or $3.50 per diluted
common share, for the nine months ended September 30, 2015.
The annualized return on average equity was 9.7% for the three months
ended September 30, 2016, compared to 7.3% for the three months ended
September 30, 2015. The annualized return on average equity was 12.7%
for the nine months ended September 30, 2016, compared to 11.2% for the
nine months ended September 30, 2015.
The annualized net operating return on average equity was 8.9% for the
three months ended September 30, 2016, compared to 7.2% for the three
months ended September 30, 2015. The annualized net operating return on
average equity was 9.2% for the nine months ended September 30, 2016,
compared to 11.1% for the nine months ended September 30, 2015.
Book value per diluted common share at September 30, 2016 was $45.16,
reflecting quarterly growth of 2.5%, inclusive of common dividends.
Commenting on the financial results for the three months ended
September 30, 2016, Validus' Chairman and CEO Ed Noonan stated:
"Validus delivered favorable results for the third quarter of 2016, with
a combined ratio of 82.4% and strong investment returns driving book
value growth of 2.5% inclusive of common dividends. Given current market
conditions we continue to reduce exposure in areas under the most
competitive pressure - notably marine and energy and certain property
classes - while continuing to expand our profile in U.S. insurance and
the management of third party capital."
Income available to Validus common shareholders by segment for the three
months ended September 30, 2016 and September 30, 2015 was as follows:
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Income available to Validus common shareholders for
the three months ended
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September 30, 2016
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September 30, 2015
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(Expressed in millions of U.S. dollars, except per share information)
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Validus Re - Underwriting income (a) (c)
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$
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67.1
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$
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56.6
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Talbot - Underwriting income (a) (c)
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7.3
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21.1
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Western World - Underwriting loss (a) (c)
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(2.7
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)
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-
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Validus' share of AlphaCat income
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11.2
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7.5
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Validus' share of PaCRe, Ltd.
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-
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(8.0
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)
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Validus' share of AlphaCat income, net (a)
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11.2
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(0.5
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)
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Total segmental income
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82.9
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77.2
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Net investment income (b)
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41.1
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30.0
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Corporate operating expenses
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(40.7
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)
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(39.3
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)
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Eliminations and other
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(0.7
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)
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(2.1
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)
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Net operating income available to Validus common shareholders (c)
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$
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82.6
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$
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65.8
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Net operating income per diluted share available to Validus
common shareholders (c)
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$
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1.02
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$
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0.77
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Net income available to Validus common shareholders (c)
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$
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89.8
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$
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66.7
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Net income per diluted share available to Validus common
shareholders
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$
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1.11
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$
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0.78
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(a) Underwriting income and Validus' share of AlphaCat income are
non-GAAP measures.
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(b) Net investment income relates to our managed investment
portfolio. Total net investment income, inclusive of AlphaCat's
non-managed portfolio is $43.5 million and $31.6 million for the
three months ended September 30, 2016 and 2015, respectively.
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(c) A reconciliation of net operating income available to Validus
common shareholders and underwriting income to net income available
to Validus common shareholders, the most directly comparable GAAP
measure, is presented at the end of this release.
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This earnings release should be read in conjunction with the Company's
September 30, 2016 investor financial supplement that has been posted to
the Investors section of the Company's website located at www.validusholdings.com.
Third Quarter 2016 Results
Highlights for the third quarter are as follows:
-
Gross premiums written for the three months ended September 30, 2016
were $372.4 million compared to $402.5 million for the three months
ended September 30, 2015, a decrease of $30.1 million, or 7.5%. The
decrease was primarily driven by decreases in the Validus Re, Talbot
and AlphaCat segments, partially offset by an increase in the Western
World segment.
-
The loss ratio for the three months ended September 30, 2016 was
45.8%; which included $52.9 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 9.4
percentage points compared to a loss ratio for the three months ended
September 30, 2015 of 46.1% which included $93.7 million of favorable
loss reserve development on prior accident years, benefiting the loss
ratio by 16.9 percentage points. The loss ratio for the three months
ended September 30, 2016 included net non-notable losses of $21.6
million or 3.8 percentage points of the loss ratio. The non-notable
losses were primarily from a single non-notable loss event described
in further detail in the "Notable and Non-notable losses" section
below. The loss ratio for the three months ended September 30, 2015
included net notable losses of $49.0 million, or 8.8 percentage points
of the loss ratio and net non-notable losses of $22.2 million, or 4.0
percentage points of the loss ratio. The favorable development of
$52.9 million for the three months ended September 30, 2016 was
primarily due to favorable development on non-event reserves of $32.6
million and favorable development on event specific reserves of $20.3
million, primarily related to the 2015 Chilean earthquake and Tianjin
port explosion loss events.
-
The combined ratio for the three months ended September 30, 2016 was
82.4%, compared to a combined ratio of 84.3% for the three months
ended September 30, 2015, a decrease of 1.9 percentage points.
-
Net investment income for the three months ended September 30, 2016
was $41.1 million compared to $30.0 million for the three months ended
September 30, 2015, an increase of $11.1 million, or 36.9%. The
increase was primarily due to strong performance on the Company's
portfolio of structured securities, including $9.5 million of returns
generated from a single fixed income fund.
-
Net operating income available to Validus common shareholders for the
three months ended September 30, 2016 was $82.6 million compared to
$65.8 million for the three months ended September 30, 2015, an
increase of $16.8 million, or 25.6%.
-
Net income available to Validus common shareholders for the three
months ended September 30, 2016 was $89.8 million compared to $66.7
million for the three months ended September 30, 2015, an increase of
$23.2 million, or 34.8%.
-
Annualized return on average equity was 9.7% and annualized net
operating return on average equity was 8.9% for the three months ended
September 30, 2016 compared to 7.3% and 7.2%, respectively, for the
three months ended September 30, 2015.
Notable and Non-Notable Losses
The Company defines a notable loss event as an event whereby
consolidated net losses and loss expenses aggregate to a threshold
greater than or equal to $30.0 million. The Company defines a
non-notable loss event as an event whereby consolidated net losses and
loss expenses aggregate to a threshold greater than or equal to $15.0
million but less than $30.0 million.
During the three months ended September 30, 2016, the Company incurred
losses and loss expenses from a third quarter non-notable loss event as
follows:
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Three Months Ended September 30, 2016
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SpaceX Non-Notable Loss Event
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(Dollars in thousands)
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Validus Re
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Talbot
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Total
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Validus' Share of Net Losses and Loss Expenses
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$
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10,349
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$
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9,894
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$
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20,243
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Less: Reinstatement Premiums, net
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(2,159
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)
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919
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(1,240
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)
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Net Loss Attributable to Validus
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$
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8,190
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$
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10,813
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$
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19,003
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The September 1 st SpaceX rocket explosion at Cape Canaveral,
Florida resulted in estimated losses and loss expenses of $20.2 million,
or 3.6 percentage points of the loss ratio. Net of reinstatement
premiums of $1.2 million, the net loss attributable to the Company from
this event was $19.0 million.
During the three months ended September 30, 2015, the Company incurred
$49.0 million of losses and loss expenses from notable loss events, or
8.8 percentage points of the loss ratio, primarily relating to the port
explosion in Tianjin, China. Net of $3.9 million of reinstatement
premiums, the effect of these events on the Company's underwriting
income was a reduction of $45.1 million. Losses and loss expenses from a
single non-notable loss event, the 2015 Chilean earthquake, were $22.2
million, or 4.0 percentage points of the loss ratio during the three
months ended September 30, 2015. Net of $2.2 million of reinstatement
premiums, the effect of this event on the Company's underwriting income
was a reduction of $20.0 million.
The Company's loss ratio, excluding the impact of notable and
non-notable loss events and the change in prior accident years, for the
three months ended September 30, 2016 and 2015 was 51.2% and 50.2%,
respectively.
Validus Re Segment
Highlights for the third quarter include the following:
-
Gross premiums written for the three months ended September 30, 2016
were $94.7 million compared to $103.3 million for the three months
ended September 30, 2015, a decrease of $8.6 million, or 8.3%. Gross
premiums written for the three months ended September 30, 2016
included $53.8 million of property premiums, $(4.5) million of marine
premiums and $45.5 million of specialty premiums, compared to $65.4
million of property premiums, $13.4 million of marine premiums and
$24.5 million of specialty premiums for the three months ended
September 30, 2015. The decrease in the property lines of $11.6
million was primarily driven by a decrease in incepting business of
$5.3 million, along with adjustments to existing business of $6.3
million, primarily in the catastrophe and per risk excess of loss
classes. The decrease in the marine lines of $17.9 million was
primarily due to the timing of renewals of certain proportional
programs which incepted during the third quarter of 2015, as well as
adjustments to existing business. Partially offsetting the decreases
was an increase in the specialty lines of $21.0 million, primarily as
a result of increased casualty business written during the period of
$7.5 million and continued growth in the composite lines of $4.0
million, along with timing differences on the renewal of certain
contracts and decreased premium adjustments year on year.
-
The loss ratio for the three months ended September 30, 2016 was
43.1%, which included $33.0 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 14.5
percentage points compared to a loss ratio for the three months ended
September 30, 2015 of 50.3% which included $50.5 million of favorable
loss reserve development on prior accident years, benefiting the loss
ratio by 21.0 percentage points. The loss ratio for the three months
ended September 30, 2016 included net non-notable losses totaling
$10.4 million, or 4.5 percentage points of the loss ratio. The loss
ratio for the three months ended September 30, 2015 included net
notable losses of $37.0 million, or 15.4 percentage points of the loss
ratio and net non-notable losses of $17.5 million, or 7.3 percentage
points of the loss ratio. The favorable development of $33.0 million
on prior accident years for the three months ended September 30, 2016
was primarily due to favorable development on non-event reserves of
$14.5 million and favorable development on event specific reserves of
$18.5 million, the largest contributors being the 2015 Chilean
earthquake and Tianjin port explosion loss events.
-
The combined ratio for the three months ended September 30, 2016 was
70.7% compared to 77.6% for the three months ended September 30, 2015,
a decrease of 6.9 percentage points.
-
Underwriting income for the three months ended September 30, 2016 was
$67.1 million compared to $56.6 million for the three months ended
September 30, 2015, an increase of $10.4 million, or 18.4%.
Talbot Segment
Highlights for the third quarter include the following:
-
Gross premiums written for the three months ended September 30, 2016
were $189.7 million compared to $226.0 million for the three months
ended September 30, 2015, a decrease of $36.4 million, or 16.1%. Gross
premiums written for the three months ended September 30, 2016
included $64.3 million of property premiums, $48.1 million of marine
premiums and $77.3 million of specialty premiums compared to $72.7
million of property premiums, $66.8 million of marine premiums and
$86.5 million of specialty premiums for the three months ended
September 30, 2015. The decrease in the property and marine lines of
$8.4 million and $18.7 million, respectively, were primarily driven by
foreign exchange and reductions in our participation and non-renewals
on various programs due to the current rate environment, notably in
the downstream and upstream energy classes. The decrease in gross
premiums written in the specialty lines of $9.2 million was primarily
due to the timing of renewals of political risk contracts.
-
The loss ratio for the three months ended September 30, 2016 was
55.2%, which included $18.7 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 9.4
percentage points compared to a loss ratio for the three months ended
September 30, 2015 of 45.8% which included $36.0 million of favorable
loss reserve development on prior accident years, benefiting the loss
ratio by 17.4 percentage points. The loss ratio for the three months
ended September 30, 2016 included net non-notable losses totaling
$11.3 million, or 5.7 percentage points of the loss ratio. The loss
ratio for the three months ended September 30, 2015 included net
notable losses of $12.0 million, or 5.8 percentage points of the loss
ratio and net non-notable losses totaling $4.7 million, or 2.3
percentage points of the loss ratio. The favorable development of
$18.7 million on prior accident years for the three months ended
September 30, 2016 is primarily due to favorable development on
non-event reserves of $16.9 million and favorable development on event
specific reserves of $1.8 million.
-
The combined ratio for the three months ended September 30, 2016 was
96.4% compared to 90.0% for the three months ended September 30, 2015,
an increase of 6.4 percentage points.
-
Underwriting income for the three months ended September 30, 2016 was
$7.3 million compared to $21.1 million for the three months ended
September 30, 2015, a decrease of $13.8 million, or 65.4%.
Western World Segment
Highlights for the third quarter include the following:
-
Gross premiums written for the three months ended September 30, 2016
were $85.3 million compared to $70.9 million for the three months
ended September 30, 2015, an increase of $14.4 million, or 20.3%.
Gross premiums written for the three months ended September 30, 2016
included $23.8 million of property premiums and $61.5 million of
liability premiums, compared to $13.9 million of property premiums and
$57.0 million of liability premiums for the three months ended
September 30, 2015. The increase in gross premiums written in the
property lines of $9.9 million was primarily due to additional
business written in the commercial package property, program flood and
brokerage property classes of $4.0 million, $2.9 million, and $2.6
million, respectively, as a result of the continued build out of the
underwriting platform in short tail lines. The increase in gross
premiums written in the liability lines of $4.5 million was driven
primarily by increases in the commercial package liability and other
liability classes of $8.6 million and was partially offset by
decreases as a result of the discontinuation of underperforming
programs and brokerage general liability lines.
-
The loss ratio for the three months ended September 30, 2016 was
64.6%, which included $0.9 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by 1.2
percentage points compared to a loss ratio for the three months ended
September 30, 2015 of 63.8% which included $5.1 million of favorable
loss reserve development on prior accident years, benefiting the loss
ratio by 7.9 percentage points. Losses and loss expenses for the three
months ended September 30, 2016 included $3.0 million, or 4.3
percentage points of the loss ratio, of property losses on U.S.-based
weather events including flood. Of the 2015 incurred losses, $2.5
million, or 3.9 percentage points of the loss ratio, 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 September 30, 2016 was
104.1% compared to 100.4% for the three months ended September 30,
2015, an increase of 3.7 percentage points. The increase was primarily
as a result of the policy acquisition costs ratio during the three
months ended September 30, 2015 benefiting from a 4.6 percentage point
reduction due to the amortization of the fair value adjustment
accounted for at the time of the acquisition of Western World.
-
Underwriting loss for the three months ended September 30, 2016 was
$2.7 million compared to $nil for the three months ended September 30,
2015.
AlphaCat Segment
Highlights for the third quarter include the following:
-
AlphaCat's assets under management were $2,615.1 million as at
October 1, 2016, compared to $2,510.5 million as at July 1, 2016.
Third party assets under management were $2,292.6 million as at
October 1, 2016, compared to $2,186.9 million as at July 1, 2016.
-
Revenues earned for the three months ended September 30, 2016 were
$8.4 million, of which $7.0 million were earned from third parties,
compared to $7.5 million for the three months ended September 30,
2015, of which $5.8 million were earned from third parties. The
increase in revenues earned from third parties of $1.3 million was
primarily due to an increase in the capital base of the AlphaCat ILS
Funds.
-
Total expenses for the three months ended September 30, 2016 were $3.3
million, compared to $6.6 million for the three months ended
September 30, 2015, a decrease of $3.3 million, or 50.3%. The decrease
was primarily due to reduced placement fees incurred in relation to
raising new capital during the three months ended September 30, 2016.
-
Income available to Validus common shareholders before investment
income from AlphaCat Funds and Sidecars for the three months ended
September 30, 2016 was $5.1 million, compared to $0.9 million for the
three months ended September 30, 2015, an increase of $4.2 million.
-
Investment income available to Validus common shareholders from
AlphaCat Funds and Sidecars for the three months ended September 30,
2016 was $6.0 million, compared to $6.5 million for the three months
ended September 30, 2015, a decrease of $0.5 million or 7.7%.
-
Validus' share of AlphaCat income for the three months ended
September 30, 2016 was $11.2 million, compared to $7.5 million for the
three months ended September 30, 2015, an increase of $3.7 million, or
49.4%.
Investments
Highlights of our managed portfolio for the third quarter include the
following:
-
Net investment income for the three months ended September 30, 2016
was $41.1 million compared to $30.0 million for the three months ended
September 30, 2015, an increase of $11.1 million, or 36.9%. The
increase was primarily due to strong performance on the Company's
portfolio of structured securities, including $9.5 million of returns
generated from a single fixed income fund. Annualized effective yield
for the three months ended September 30, 2016 was 2.58%, compared to
1.91% for the three months ended September 30, 2015, an increase of 67
basis points.
-
Net realized gains on managed investments for the three months ended
September 30, 2016 were $4.1 million compared to losses of $1.2
million for the three months ended September 30, 2015, a favorable
movement of $5.3 million. The increase in net realized gains primarily
resulted from the sale of managed fixed maturities.
-
The change in net unrealized gains on managed investments for the
three months ended September 30, 2016 was $4.7 million compared to
$1.8 million for the three months ended September 30, 2015, a
favorable movement of $2.9 million, or 163.6%.
Corporate Operating Expenses
Highlights for the third quarter include the following:
-
General and administrative expenses for the three months ended
September 30, 2016 were $18.2 million compared to $18.8 million for
the three months ended September 30, 2015, a decrease of $0.6 million
or 3.1%.
-
Share compensation expenses for the three months ended September 30,
2016 were $4.0 million compared to $3.4 million for the three months
ended September 30, 2015, an increase of $0.7 million or 19.7%.
-
Finance expenses, excluding the Company's share of AlphaCat finance
expenses from consolidated variable interest entities, for the three
months ended September 30, 2016 were $14.3 million compared to $15.1
million for the three months ended September 30, 2015, a decrease of
$0.8 million or 5.5%.
-
Dividends paid on preferred shares for the three months ended
September 30, 2016 were $2.3 million compared to $nil for the three
months ended September 30, 2015.
-
Tax expenses for the three months ended September 30, 2016 were $1.8
million compared to $2.0 million for the three months ended September
30, 2015, a decrease of $0.2 million or 9.3%.
Year to Date 2016 Results
Highlights for the year to date include the following:
-
Gross premiums written for the nine months ended September 30, 2016
were $2,309.3 million compared to $2,247.9 million for the nine months
ended September 30, 2015, an increase of $61.4 million, or 2.7%.
-
The loss ratio for the nine months ended September 30, 2016 was 46.2%
which included $169.4 million of favorable loss reserve development on
prior accident years, benefiting the loss ratio by 9.9 percentage
points compared to a loss ratio for the nine months ended
September 30, 2015 of 44.8% which included $248.0 million of favorable
loss reserve development on prior accident years, benefiting the loss
ratio by 14.6 percentage points. The loss ratio for the nine months
ended September 30, 2016 included net notable losses of $37.9 million,
or 2.2 percentage points of the loss ratio and net non-notable losses
totaling $69.9 million, or 4.1 percentage points of the loss ratio.
The loss ratio for the nine months ended September 30, 2015 included
net notable losses of $97.1 million, or 5.7 percentage points of the
loss ratio and net non-notable losses of $22.2 million, or 1.3
percentage points of the loss ratio. The favorable development of
$169.4 million for the nine months ended September 30, 2016 was
primarily due to favorable development on non-event reserves of $160.4
million and favorable development on event reserves of $9.0 million.
-
The combined ratio for the nine months ended September 30, 2016 was
82.5% compared to 80.1% for the nine months ended September 30, 2015,
an increase of 2.4 percentage points.
-
Net operating income available to Validus common shareholders for the
nine months ended September 30, 2016 was $254.9 million compared to
$304.4 million for the nine months ended September 30, 2015, a
decrease of $49.5 million, or 16.3%.
-
Net income available to Validus common shareholders for the nine
months ended September 30, 2016 was $351.6 million compared to $305.9
million for the nine months ended September 30, 2015, an increase of
$45.8 million, or 15.0%.
-
Annualized return on average equity was 12.7% and annualized net
operating return on average equity was 9.2% for the nine months ended
September 30, 2016 compared to 11.2% and 11.1%, respectively, for the
nine months ended September 30, 2015.
Shareholders' Equity and Capitalization
As at September 30, 2016, total shareholders' equity was $4.1 billion
including $223.0 million of noncontrolling interest and $150.0 million
of preferred shares issued on June 13, 2016. Shareholders' equity
available to Validus common shareholders was $3.7 billion as at
September 30, 2016. Book value per diluted common share was $45.16 at
September 30, 2016 based on 82,341,307 diluted common shares, compared
to $44.41 at June 30, 2016 based on 83,700,593 diluted common shares, an
increase of 2.5%, inclusive of dividends for the three months ended
September 30, 2016. 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 September 30, 2016 was $4.7
billion, including $538.2 million of junior subordinated deferrable
debentures and $245.3 million of senior notes. Total capitalization at
September 30, 2016 was $6.4 billion, including $1.6 billion of
redeemable noncontrolling interest and $223.0 million of noncontrolling
interest related to AlphaCat.
Share Repurchases
The Company repurchased 1,349,690 shares during the three months ended
September 30, 2016. The share repurchases made during the three months
ended September 30, 2016 resulted in a dilutive impact to book value per
diluted common share of $0.07 for the quarter. A summary of the share
repurchases made to date under the Company's previously announced share
repurchase programs is as follows:
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Share Repurchase Activity (Expressed in thousands of
U.S. dollars except for share and per share information)
|
|
|
|
|
As at June 30, 2016
|
|
|
|
|
|
|
|
Quarter ended
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Effect of share repurchases:
|
|
|
|
(cumulative)
|
|
July
|
|
August
|
|
September
|
|
September 30, 2016
|
Aggregate purchase price (a)
|
|
|
|
$
|
2,620,814
|
|
$
|
18,438
|
|
$
|
20,599
|
|
$
|
27,895
|
|
$
|
66,932
|
Shares repurchased
|
|
|
|
78,841,758
|
|
382,648
|
|
411,738
|
|
555,304
|
|
1,349,690
|
Average price (a)
|
|
|
|
$
|
33.24
|
|
$
|
48.18
|
|
$
|
50.03
|
|
$
|
50.23
|
|
$
|
49.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Activity
(Expressed in thousands of U.S. dollars except for share and
per share information)
|
Effect of share repurchases:
|
|
|
|
As at September 30, 2016
|
|
As at October 26, 2016
|
|
Cumulative to Date Effect
|
Aggregate purchase price (a)
|
|
|
|
$
|
2,687,746
|
|
$
|
4,029
|
|
$
|
2,691,775
|
Shares repurchased
|
|
|
|
80,191,448
|
|
81,174
|
|
80,272,622
|
Average price (a)
|
|
|
|
$
|
33.52
|
|
$
|
49.63
|
|
$
|
33.53
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Share transactions are on a trade date basis through October 26,
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
October 28, 2016 at 10:00 AM (Eastern) to discuss the third quarter 2016
financial results and related matters. The conference call may be
accessed by dialing 1-844-309-6712 (toll-free U.S.) or 1-484-747-6926
(international) and entering the passcode 7188 6983. Those who intend to
participate in the conference call should register at least ten minutes
in advance to ensure access to the call. A telephone replay of the
conference call will be available through November 11, 2016, by dialing
1-855-859-2056 (toll-free U.S.) or 1-404-537-3406 (international) and
entering the passcode 7188 6983.
This conference call will also be available through a live audio webcast
accessible through the Investor Relations section of the Company's
website located at www.validusholdings.com.
A replay of the webcast will be available at the Investor Relations
section of the Company's website through November 11, 2016. In addition,
a financial supplement relating to the Company's financial results for
the three and nine months ended September 30, 2016 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 Underwriting Ltd.
("Talbot"), Western World Insurance Group, Inc. ("Western World") and
AlphaCat Managers, Ltd. ("AlphaCat").
Validus Re is a Bermuda based reinsurer focused on treaty reinsurance.
Talbot is a 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 and specialty reinsurance investments.
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Consolidated Balance Sheets
|
As at September 30, 2016 and December 31,
2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
Fixed maturities trading, at fair value (amortized cost:
2016-$5,547,838; 2015-$5,556,900)
|
|
|
|
$
|
5,576,341
|
|
|
$
|
5,510,331
|
|
Short-term investments trading, at fair value (amortized cost:
2016-$2,481,573; 2015-$1,941,615)
|
|
|
|
2,481,406
|
|
|
1,941,635
|
|
Other investments, at fair value (cost: 2016-$371,668; 2015-$315,963)
|
|
|
|
394,695
|
|
|
336,856
|
|
Cash and cash equivalents
|
|
|
|
443,992
|
|
|
723,109
|
|
Restricted cash
|
|
|
|
113,048
|
|
|
73,270
|
|
Total investments, cash and cash equivalents
|
|
|
|
9,009,482
|
|
|
8,585,201
|
|
Investments in affiliates, equity method (cost: 2016-$86,305;
2015-$70,186)
|
|
|
|
99,731
|
|
|
88,065
|
|
Premiums receivable
|
|
|
|
939,127
|
|
|
658,682
|
|
Deferred acquisition costs
|
|
|
|
249,922
|
|
|
181,002
|
|
Prepaid reinsurance premiums
|
|
|
|
119,805
|
|
|
77,992
|
|
Securities lending collateral
|
|
|
|
10,629
|
|
|
4,863
|
|
Loss reserves recoverable
|
|
|
|
444,609
|
|
|
350,586
|
|
Paid losses recoverable
|
|
|
|
36,069
|
|
|
23,071
|
|
Income taxes recoverable
|
|
|
|
6,879
|
|
|
16,228
|
|
Deferred tax asset
|
|
|
|
26,015
|
|
|
21,661
|
|
Receivable for investments sold
|
|
|
|
21,854
|
|
|
39,766
|
|
Intangible assets
|
|
|
|
117,010
|
|
|
121,258
|
|
Goodwill
|
|
|
|
196,758
|
|
|
196,758
|
|
Accrued investment income
|
|
|
|
24,906
|
|
|
23,897
|
|
Other assets
|
|
|
|
183,357
|
|
|
126,782
|
|
Total assets
|
|
|
|
$
|
11,486,153
|
|
|
$
|
10,515,812
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Reserve for losses and loss expenses
|
|
|
|
$
|
3,035,987
|
|
|
$
|
2,996,567
|
|
Unearned premiums
|
|
|
|
1,359,438
|
|
|
966,210
|
|
Reinsurance balances payable
|
|
|
|
76,429
|
|
|
75,380
|
|
Securities lending payable
|
|
|
|
11,095
|
|
|
5,329
|
|
Deferred tax liability
|
|
|
|
3,278
|
|
|
3,847
|
|
Payable for investments purchased
|
|
|
|
49,435
|
|
|
77,475
|
|
Accounts payable and accrued expenses
|
|
|
|
144,086
|
|
|
627,331
|
|
Notes payable to AlphaCat investors
|
|
|
|
372,730
|
|
|
75,493
|
|
Senior notes payable
|
|
|
|
245,311
|
|
|
245,161
|
|
Debentures payable
|
|
|
|
538,168
|
|
|
537,668
|
|
Total liabilities
|
|
|
|
$
|
5,835,957
|
|
|
$
|
5,610,461
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
|
1,559,580
|
|
|
1,111,714
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
Preferred shares (Issued and Outstanding: 2016-6,000; 2015-nil)
|
|
|
|
$
|
150,000
|
|
|
$
|
-
|
|
Common shares (Issued: 2016-161,273,353; 2015-160,570,772;
Outstanding: 2016-79,443,030; 2015-82,900,617)
|
|
|
|
28,223
|
|
|
28,100
|
|
Treasury shares (2016-81,830,323; 2015-77,670,155)
|
|
|
|
(14,320
|
)
|
|
(13,592
|
)
|
Additional paid-in capital
|
|
|
|
827,256
|
|
|
1,002,980
|
|
Accumulated other comprehensive loss
|
|
|
|
(21,092
|
)
|
|
(12,569
|
)
|
Retained earnings
|
|
|
|
2,897,553
|
|
|
2,634,056
|
|
Total shareholders' equity available to Validus
|
|
|
|
3,867,620
|
|
|
3,638,975
|
|
Noncontrolling interest
|
|
|
|
222,996
|
|
|
154,662
|
|
Total shareholders' equity
|
|
|
|
$
|
4,090,616
|
|
|
$
|
3,793,637
|
|
|
|
|
|
|
|
|
Total liabilities, noncontrolling interests and shareholders'
equity
|
|
|
|
$
|
11,486,153
|
|
|
$
|
10,515,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Non-GAAP Financial Measures
|
Consolidated Statements of Operations - Underwriting Income Format
|
For the three and nine months ended
September 30, 2016 and 2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(Dollars in thousands)
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
372,418
|
|
|
$
|
402,509
|
|
|
$
|
2,309,251
|
|
|
$
|
2,247,901
|
|
Reinsurance premiums ceded
|
|
|
|
(45,006
|
)
|
|
(48,810
|
)
|
|
(249,070
|
)
|
|
(295,553
|
)
|
Net premiums written
|
|
|
|
327,412
|
|
|
353,699
|
|
|
2,060,181
|
|
|
1,952,348
|
|
Change in unearned premiums
|
|
|
|
236,363
|
|
|
201,312
|
|
|
(351,415
|
)
|
|
(248,759
|
)
|
Net premiums earned
|
|
|
|
563,775
|
|
|
555,011
|
|
|
1,708,766
|
|
|
1,703,589
|
|
Other insurance related income
|
|
|
|
919
|
|
|
3,496
|
|
|
2,400
|
|
|
5,144
|
|
Total underwriting revenues
|
|
|
|
564,694
|
|
|
558,507
|
|
|
1,711,166
|
|
|
1,708,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
258,394
|
|
|
256,010
|
|
|
789,971
|
|
|
763,085
|
|
Policy acquisition costs
|
|
|
|
113,434
|
|
|
105,039
|
|
|
328,593
|
|
|
307,773
|
|
General and administrative expenses
|
|
|
|
82,443
|
|
|
96,886
|
|
|
258,339
|
|
|
265,146
|
|
Share compensation expenses
|
|
|
|
10,501
|
|
|
9,983
|
|
|
32,465
|
|
|
28,279
|
|
Total underwriting deductions
|
|
|
|
464,772
|
|
|
467,918
|
|
|
1,409,368
|
|
|
1,364,283
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
|
|
|
|
$
|
99,922
|
|
|
$
|
90,589
|
|
|
$
|
301,798
|
|
|
$
|
344,450
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
43,514
|
|
|
31,572
|
|
|
112,232
|
|
|
96,212
|
|
Finance expenses
|
|
|
|
(14,521
|
)
|
|
(18,512
|
)
|
|
(43,890
|
)
|
|
(58,161
|
)
|
Dividends on preferred shares
|
|
|
|
(2,252
|
)
|
|
-
|
|
|
(2,252
|
)
|
|
-
|
|
Tax expense
|
|
|
|
(1,830
|
)
|
|
(2,018
|
)
|
|
(1,418
|
)
|
|
(7,132
|
)
|
Loss from operating affiliates
|
|
|
|
-
|
|
|
(7,963
|
)
|
|
(23
|
)
|
|
(2,241
|
)
|
(Income) attributable to AlphaCat investors
|
|
|
|
(5,564
|
)
|
|
(1,438
|
)
|
|
(16,278
|
)
|
|
(1,438
|
)
|
Net operating (income) attributable to noncontrolling interest
|
|
|
|
(36,672
|
)
|
|
(26,467
|
)
|
|
(95,294
|
)
|
|
(67,336
|
)
|
Net operating income available to Validus common shareholders
|
|
|
|
$
|
82,597
|
|
|
$
|
65,763
|
|
|
$
|
254,875
|
|
|
$
|
304,354
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on investments
|
|
|
|
4,397
|
|
|
(1,187
|
)
|
|
6,537
|
|
|
5,226
|
|
Change in net unrealized gains on investments
|
|
|
|
5,459
|
|
|
3,916
|
|
|
84,331
|
|
|
2,467
|
|
Income (loss) from investment affiliate
|
|
|
|
453
|
|
|
2,482
|
|
|
(4,249
|
)
|
|
5,542
|
|
Foreign exchange (losses) gains
|
|
|
|
(766
|
)
|
|
(2,592
|
)
|
|
11,765
|
|
|
(9,528
|
)
|
Other loss
|
|
|
|
(1,529
|
)
|
|
(1,970
|
)
|
|
(773
|
)
|
|
(2,578
|
)
|
Net (income) loss attributable to noncontrolling interest
|
|
|
|
(767
|
)
|
|
238
|
|
|
(869
|
)
|
|
368
|
|
Net income available to Validus common shareholders
|
|
|
|
$
|
89,844
|
|
|
$
|
66,650
|
|
|
$
|
351,617
|
|
|
$
|
305,851
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected ratios:
|
|
|
|
|
|
|
|
|
|
|
Ratio of net to gross premiums written
|
|
|
|
87.9
|
%
|
|
87.9
|
%
|
|
89.2
|
%
|
|
86.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses ratio
|
|
|
|
45.8
|
%
|
|
46.1
|
%
|
|
46.2
|
%
|
|
44.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Policy acquisition costs ratio
|
|
|
|
20.1
|
%
|
|
18.9
|
%
|
|
19.2
|
%
|
|
18.1
|
%
|
General and administrative expenses ratio (a)
|
|
|
|
16.5
|
%
|
|
19.3
|
%
|
|
17.1
|
%
|
|
17.2
|
%
|
Expense ratio
|
|
|
|
36.6
|
%
|
|
38.2
|
%
|
|
36.3
|
%
|
|
35.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
|
82.4
|
%
|
|
84.3
|
%
|
|
82.5
|
%
|
|
80.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The general and administrative expense ratio includes share
compensation expenses.
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the three and nine months ended
September 30, 2016 and 2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
Validus Re Segment
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
94,741
|
|
|
$
|
103,297
|
|
|
$
|
1,072,219
|
|
|
$
|
1,112,410
|
|
Reinsurance premiums ceded
|
|
|
|
(15,967
|
)
|
|
(15,846
|
)
|
|
(111,658
|
)
|
|
(149,001
|
)
|
Net premiums written
|
|
|
|
78,774
|
|
|
87,451
|
|
|
960,561
|
|
|
963,409
|
|
Change in unearned premiums
|
|
|
|
149,705
|
|
|
153,210
|
|
|
(241,129
|
)
|
|
(205,110
|
)
|
Net premiums earned
|
|
|
|
228,479
|
|
|
240,661
|
|
|
719,432
|
|
|
758,299
|
|
Other insurance related income (loss)
|
|
|
|
58
|
|
|
2,569
|
|
|
(107
|
)
|
|
3,318
|
|
Total underwriting revenues
|
|
|
|
228,537
|
|
|
243,230
|
|
|
719,325
|
|
|
761,617
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
98,425
|
|
|
120,958
|
|
|
313,432
|
|
|
357,491
|
|
Policy acquisition costs
|
|
|
|
42,837
|
|
|
42,989
|
|
|
127,660
|
|
|
128,909
|
|
General and administrative expenses
|
|
|
|
17,528
|
|
|
19,964
|
|
|
52,579
|
|
|
58,254
|
|
Share compensation expenses
|
|
|
|
2,695
|
|
|
2,691
|
|
|
8,371
|
|
|
7,665
|
|
Total underwriting deductions
|
|
|
|
161,485
|
|
|
186,602
|
|
|
502,042
|
|
|
552,319
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
|
|
|
|
$
|
67,052
|
|
|
$
|
56,628
|
|
|
$
|
217,283
|
|
|
$
|
209,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Talbot Segment
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
189,674
|
|
|
$
|
226,025
|
|
|
$
|
752,058
|
|
|
$
|
789,148
|
|
Reinsurance premiums ceded
|
|
|
|
(22,877
|
)
|
|
(35,823
|
)
|
|
(137,496
|
)
|
|
(164,144
|
)
|
Net premiums written
|
|
|
|
166,797
|
|
|
190,202
|
|
|
614,562
|
|
|
625,004
|
|
Change in unearned premiums
|
|
|
|
32,258
|
|
|
15,942
|
|
|
(7,166
|
)
|
|
9,167
|
|
Net premiums earned
|
|
|
|
199,055
|
|
|
206,144
|
|
|
607,396
|
|
|
634,171
|
|
Other insurance related income
|
|
|
|
99
|
|
|
470
|
|
|
389
|
|
|
564
|
|
Total underwriting revenues
|
|
|
|
199,154
|
|
|
206,614
|
|
|
607,785
|
|
|
634,735
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
109,860
|
|
|
94,414
|
|
|
319,271
|
|
|
268,512
|
|
Policy acquisition costs
|
|
|
|
46,488
|
|
|
44,575
|
|
|
134,444
|
|
|
141,338
|
|
General and administrative expenses
|
|
|
|
32,333
|
|
|
43,292
|
|
|
109,929
|
|
|
115,341
|
|
Share compensation expenses
|
|
|
|
3,163
|
|
|
3,214
|
|
|
9,955
|
|
|
9,195
|
|
Total underwriting deductions
|
|
|
|
191,844
|
|
|
185,495
|
|
|
573,599
|
|
|
534,386
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
|
|
|
|
$
|
7,310
|
|
|
$
|
21,119
|
|
|
$
|
34,186
|
|
|
$
|
100,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western World Segment
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
85,260
|
|
|
$
|
70,871
|
|
|
$
|
236,190
|
|
|
$
|
207,372
|
|
Reinsurance premiums ceded
|
|
|
|
(6,202
|
)
|
|
(4,716
|
)
|
|
(15,347
|
)
|
|
(13,390
|
)
|
Net premiums written
|
|
|
|
79,058
|
|
|
66,155
|
|
|
220,843
|
|
|
193,982
|
|
Change in unearned premiums
|
|
|
|
(8,260
|
)
|
|
(2,225
|
)
|
|
(22,890
|
)
|
|
2,948
|
|
Net premiums earned
|
|
|
|
70,798
|
|
|
63,930
|
|
|
197,953
|
|
|
196,930
|
|
Other insurance related income
|
|
|
|
219
|
|
|
248
|
|
|
696
|
|
|
787
|
|
Total underwriting revenues
|
|
|
|
71,017
|
|
|
64,178
|
|
|
198,649
|
|
|
197,717
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
45,748
|
|
|
40,810
|
|
|
129,623
|
|
|
138,098
|
|
Policy acquisition costs
|
|
|
|
17,094
|
|
|
13,214
|
|
|
46,704
|
|
|
27,110
|
|
General and administrative expenses
|
|
|
|
10,171
|
|
|
9,587
|
|
|
33,704
|
|
|
29,137
|
|
Share compensation expenses
|
|
|
|
702
|
|
|
554
|
|
|
1,825
|
|
|
1,525
|
|
Total underwriting deductions
|
|
|
|
73,715
|
|
|
64,165
|
|
|
211,856
|
|
|
195,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting (loss) income
|
|
|
|
$
|
(2,698
|
)
|
|
$
|
13
|
|
|
$
|
(13,207
|
)
|
|
$
|
1,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the three and nine months ended
September 30, 2016 and 2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
AlphaCat Segment
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Third party
|
|
|
|
$
|
7,025
|
|
|
$
|
5,762
|
|
|
$
|
14,843
|
|
|
$
|
14,622
|
|
Related party
|
|
|
|
1,373
|
|
|
1,738
|
|
|
2,592
|
|
|
4,058
|
|
Total revenues
|
|
|
|
8,398
|
|
|
7,500
|
|
|
17,435
|
|
|
18,680
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
3,324
|
|
|
4,124
|
|
|
7,557
|
|
|
8,883
|
|
Share compensation expenses
|
|
|
|
(107
|
)
|
|
141
|
|
|
167
|
|
|
440
|
|
Finance expenses
|
|
|
|
31
|
|
|
2,297
|
|
|
914
|
|
|
9,259
|
|
Foreign exchange gains (losses)
|
|
|
|
5
|
|
|
(11
|
)
|
|
17
|
|
|
(9
|
)
|
Total expenses
|
|
|
|
3,253
|
|
|
6,551
|
|
|
8,655
|
|
|
18,573
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before investments from AlphaCat Funds and Sidecars
|
|
|
|
5,145
|
|
|
949
|
|
|
8,780
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss) from AlphaCat Funds and Sidecars
(a)
|
|
|
|
|
|
|
|
|
|
|
AlphaCat Sidecars
|
|
|
|
(72
|
)
|
|
1,445
|
|
|
593
|
|
|
3,886
|
|
AlphaCat ILS Funds - Lower Risk (b)
|
|
|
|
2,321
|
|
|
2,274
|
|
|
6,903
|
|
|
5,454
|
|
AlphaCat ILS Funds - Higher Risk (b)
|
|
|
|
2,479
|
|
|
1,807
|
|
|
5,607
|
|
|
6,608
|
|
BetaCat ILS Funds
|
|
|
|
1,303
|
|
|
1,007
|
|
|
2,979
|
|
|
1,241
|
|
PaCRe
|
|
|
|
-
|
|
|
(7,963
|
)
|
|
(23
|
)
|
|
(2,241
|
)
|
Total investment income (loss) from AlphaCat Funds and Sidecars
|
|
|
|
6,031
|
|
|
(1,430
|
)
|
|
16,059
|
|
|
14,948
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus' share of AlphaCat income (loss)
|
|
|
|
$
|
11,176
|
|
|
$
|
(481
|
)
|
|
$
|
24,839
|
|
|
$
|
15,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The investment income from the AlphaCat funds and sidecars is based
on equity accounting.
|
|
(b)
|
|
Lower risk AlphaCat ILS funds have a maximum permitted portfolio
expected loss of less than 7%, whereas higher risk AlphaCat ILS
funds have a maximum permitted portfolio expected loss of greater
than 7%. Expected loss represents the average annual loss over the
set of simulation scenarios divided by the total limit.
|
|
|
|
|
|
|
|
|
|
|
Corporate and Investments
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Investment income
|
|
|
|
|
|
|
|
|
|
|
Net investment income (a)
|
|
|
|
$
|
41,071
|
|
|
$
|
29,991
|
|
|
$
|
105,843
|
|
|
$
|
91,281
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
18,221
|
|
|
18,804
|
|
|
52,276
|
|
|
51,502
|
|
Share compensation expenses
|
|
|
|
4,048
|
|
|
3,383
|
|
|
12,147
|
|
|
9,454
|
|
Finance expenses (a)
|
|
|
|
14,317
|
|
|
15,143
|
|
|
42,637
|
|
|
45,623
|
|
Dividends on preferred shares
|
|
|
|
2,252
|
|
|
-
|
|
|
2,252
|
|
|
-
|
|
Tax expense
|
|
|
|
1,830
|
|
|
2,018
|
|
|
1,418
|
|
|
7,132
|
|
Total operating expenses
|
|
|
|
40,668
|
|
|
39,348
|
|
|
110,730
|
|
|
113,711
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on investments (a)
|
|
|
|
4,080
|
|
|
(1,233
|
)
|
|
5,514
|
|
|
5,051
|
|
Change in net unrealized gains on investments (a)
|
|
|
|
4,652
|
|
|
1,765
|
|
|
81,782
|
|
|
2,508
|
|
Income (loss) from investment affiliate
|
|
|
|
453
|
|
|
2,482
|
|
|
(4,249
|
)
|
|
5,542
|
|
Foreign exchange (losses) gains (a)
|
|
|
|
(1,067
|
)
|
|
(2,331
|
)
|
|
11,628
|
|
|
(9,024
|
)
|
Other loss
|
|
|
|
(1,529
|
)
|
|
(1,970
|
)
|
|
(773
|
)
|
|
(2,578
|
)
|
Total other items
|
|
|
|
6,589
|
|
|
(1,287
|
)
|
|
93,902
|
|
|
1,499
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate and Investments
|
|
|
|
$
|
6,992
|
|
|
$
|
(10,644
|
)
|
|
$
|
89,015
|
|
|
$
|
(20,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
These items exclude the components which are included in Validus'
share of AlphaCat and amounts which are consolidated from variable
interest entities.
|
|
|
|
|
|
|
|
|
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 September 30, 2016 and December 31,
2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
(Dollars in thousands, except share and per share amounts)
|
|
|
|
Equity Amount
|
|
Shares
|
|
Exercise Price (a)
|
|
Book Value Per Share
|
Book value per common share
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus common shareholders
(b)
|
|
|
|
$
|
3,717,620
|
|
|
79,443,030
|
|
|
|
|
$
|
46.80
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per common share
|
|
|
|
|
|
|
|
|
|
$
|
42.85
|
|
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus common shareholders (b)
|
|
|
|
3,717,620
|
|
|
79,443,030
|
|
|
|
|
|
Assumed exercise of outstanding stock options (c)
|
|
|
|
689
|
|
|
30,050
|
|
|
$
|
22.93
|
|
|
|
Unvested restricted shares
|
|
|
|
-
|
|
|
2,868,227
|
|
|
|
|
|
Book value per diluted common share
|
|
|
|
$
|
3,718,309
|
|
|
82,341,307
|
|
|
|
|
$
|
45.16
|
Adjustment for accumulated dividends
|
|
|
|
|
|
|
|
|
|
11.21
|
Book value per diluted common share plus accumulated dividends
|
|
|
|
|
|
|
|
|
|
$
|
56.37
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per diluted common share
|
|
|
|
|
|
|
|
|
|
$
|
41.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
(Dollars in thousands, except share and per share amounts)
|
|
|
|
Equity Amount
|
|
Shares
|
|
Exercise Price (a)
|
|
Book Value Per Share
|
Book value per common share
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Validus common shareholders (b)
|
|
|
|
$
|
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 common shareholders (b)
|
|
|
|
3,638,975
|
|
|
82,900,617
|
|
|
|
|
|
Assumed exercise of outstanding stock options (c)
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Weighted average exercise price for those stock options that have an
exercise price lower than book value per share.
|
|
(b)
|
|
Total shareholders' equity available to Validus common shareholders
excludes the liquidation value of the preferred shares of $150.0
million.
|
|
(c)
|
|
Using the "as-if-converted" method, assuming all proceeds received
upon exercise of stock options will be retained by the Company and
the resulting common shares from exercise remain outstanding.
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Non-GAAP Financial Measures Reconciliation
|
Underwriting Income, Net Operating Income available to Validus
Common Shareholders, Net Operating Income per share available to
Validus Common Shareholders and Annualized Net Operating Return on
Average Equity
|
For the three and nine months ended
September 30, 2016 and 2015
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income available to Validus common shareholders
|
|
|
|
$
|
89,844
|
|
|
$
|
66,650
|
|
|
$
|
351,617
|
|
|
$
|
305,851
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) losses on investments
|
|
|
|
(4,397
|
)
|
|
1,187
|
|
|
(6,537
|
)
|
|
(5,226
|
)
|
Change in net unrealized gains on investments
|
|
|
|
(5,459
|
)
|
|
(3,916
|
)
|
|
(84,331
|
)
|
|
(2,467
|
)
|
(Loss) income from investment affiliate
|
|
|
|
(453
|
)
|
|
(2,482
|
)
|
|
4,249
|
|
|
(5,542
|
)
|
Foreign exchange losses (gains)
|
|
|
|
766
|
|
|
2,592
|
|
|
(11,765
|
)
|
|
9,528
|
|
Other loss
|
|
|
|
1,529
|
|
|
1,970
|
|
|
773
|
|
|
2,578
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
|
767
|
|
|
(238
|
)
|
|
869
|
|
|
(368
|
)
|
Net operating income available to Validus common shareholders
|
|
|
|
$
|
82,597
|
|
|
$
|
65,763
|
|
|
$
|
254,875
|
|
|
$
|
304,354
|
|
Net investment income
|
|
|
|
(43,514
|
)
|
|
(31,572
|
)
|
|
(112,232
|
)
|
|
(96,212
|
)
|
Finance expenses
|
|
|
|
14,521
|
|
|
18,512
|
|
|
43,890
|
|
|
58,161
|
|
Dividends on preferred shares
|
|
|
|
2,252
|
|
|
-
|
|
|
2,252
|
|
|
-
|
|
Tax expense
|
|
|
|
1,830
|
|
|
2,018
|
|
|
1,418
|
|
|
7,132
|
|
Loss from operating affiliates
|
|
|
|
-
|
|
|
7,963
|
|
|
23
|
|
|
2,241
|
|
Income attributable to AlphaCat investors
|
|
|
|
5,564
|
|
|
1,438
|
|
|
16,278
|
|
|
1,438
|
|
Net operating income attributable to noncontrolling interest
|
|
|
|
36,672
|
|
|
26,467
|
|
|
95,294
|
|
|
67,336
|
|
Underwriting income
|
|
|
|
$
|
99,922
|
|
|
$
|
90,589
|
|
|
$
|
301,798
|
|
|
$
|
344,450
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income available to Validus common shareholders
|
|
|
|
82,597
|
|
|
65,763
|
|
|
254,875
|
|
|
304,354
|
|
Less: Dividends on outstanding warrants
|
|
|
|
-
|
|
|
(1,080
|
)
|
|
-
|
|
|
(3,566
|
)
|
Net operating income allocated to Validus, adjusted
|
|
|
|
$
|
82,597
|
|
|
$
|
64,683
|
|
|
$
|
254,875
|
|
|
$
|
300,788
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available to Validus common shareholders -
diluted
|
|
|
|
$
|
1.11
|
|
|
$
|
0.78
|
|
|
$
|
4.24
|
|
|
$
|
3.52
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) losses on investments
|
|
|
|
(0.05
|
)
|
|
0.01
|
|
|
(0.08
|
)
|
|
(0.06
|
)
|
Change in net unrealized gains on investments
|
|
|
|
(0.07
|
)
|
|
(0.05
|
)
|
|
(1.02
|
)
|
|
(0.03
|
)
|
(Loss) income from investment affiliate
|
|
|
|
(0.01
|
)
|
|
(0.03
|
)
|
|
0.05
|
|
|
(0.06
|
)
|
Foreign exchange losses (gains)
|
|
|
|
0.01
|
|
|
0.03
|
|
|
(0.14
|
)
|
|
0.11
|
|
Other loss
|
|
|
|
0.02
|
|
|
0.03
|
|
|
0.01
|
|
|
0.02
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
|
0.01
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Net operating income per share available to Validus common
shareholders - diluted
|
|
|
|
$
|
1.02
|
|
|
$
|
0.77
|
|
|
$
|
3.07
|
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share
equivalents
|
|
|
|
81,244,556
|
|
|
85,629,494
|
|
|
82,938,624
|
|
|
86,841,927
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders' equity available to Validus common
shareholders
|
|
|
|
$
|
3,716,938
|
|
|
$
|
3,651,151
|
|
|
$
|
3,699,319
|
|
|
$
|
3,642,656
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized net return on average equity
|
|
|
|
9.7
|
%
|
|
7.3
|
%
|
|
12.7
|
%
|
|
11.2
|
%
|
Annualized net operating return on average equity
|
|
|
|
8.9
|
%
|
|
7.2
|
%
|
|
9.2
|
%
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 common
shareholders, 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 common shareholders to net income (loss)
available (attributable) to Validus common shareholders, the most
comparable U.S. GAAP financial measure, is presented in the section
above entitled "Underwriting Income, Net Operating Income available to
Validus common shareholders, Net Operating Income per share available to
Validus common shareholders 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
common shareholders is defined as above, but excludes operating income
(loss) available (attributable) to noncontrolling interest and dividends
on preferred shares. Reconciliations of these measures to net income
(loss) and net income (loss) available (attributable) to Validus common
shareholders, 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 common shareholders, Net Operating Income per share
available to Validus common shareholders 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 common shareholders is defined as net
operating income (loss) as defined above, but excluding operating income
(loss) available (attributable) to noncontrolling interest and dividends
on preferred shares.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161027006734/en/
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