[February 01, 2018] |
|
Validus Reports Fourth Quarter and Full Year 2017 Financial Results
Validus Holdings, Ltd. ("Validus" or the "Company") (NYSE:VR) today
reported a net (loss) attributable to Validus common shareholders of
$(8.7) million, or $(0.11) per diluted common share, for the three
months ended December 31, 2017, compared to net income available to
Validus common shareholders of $7.8 million, or $0.10 per diluted common
share, for the three months ended December 31, 2016. Net (loss)
attributable to Validus common shareholders was $(63.5) million, or
$(0.80) per diluted common share, for the year ended December 31, 2017,
compared to net income available to Validus common shareholders of
$359.4 million, or $4.36 per diluted common share, for the year ended
December 31, 2016.
Net operating income available to Validus common shareholders was $4.2
million, or $0.05 per diluted common share, for the three months ended
December 31, 2017, compared to $58.5 million, or $0.73 per diluted
common share, for the three months ended December 31, 2016. Net
operating (loss) attributable to Validus common shareholders was $(85.0)
million, or $(1.07) per diluted common share, for the year ended
December 31, 2017, compared to net operating income available to Validus
common shareholders of $320.9 million, or $3.90 per diluted common
share, for the year ended December 31, 2016.
Book value per common share at December 31, 2017 was $44.06, compared to
$44.51 at September 30, 2017. Book value per diluted common share at
December 31, 2017 was $42.71, compared to $43.13 at September 30, 2017,
reflecting a quarterly decrease of (0.1)%, inclusive of common dividends.
Commenting on the results for the three months ended December 31, 2017,
Validus' Chairman and CEO Ed Noonan stated:
"We continue to position the Company well, utilizing both traditional
retro and the Validus-sponsored Tailwind Re catastrophe bond to improve
the risk return characteristics of our portfolio. Through portfolio
optimization we were able to take advantage of rate increases while
reducing our peak U.S. hurricane PML's, which are down 65% since their
height in 2013. Looking ahead, we are very excited to become part of the
AIG Group at closing and are looking forward to being able to continue
to serve our clients and brokers in new and exciting ways."
(Loss) income (attributable) available to Validus common shareholders by
segment for the three months ended December 31, 2017 and December 31,
2016 was as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
(Expressed in millions of U.S. dollars,
except per share information)
|
|
|
|
2017
|
|
2016
|
Reinsurance segment - Underwriting income
|
|
|
|
$
|
30.7
|
|
|
$
|
61.3
|
|
Insurance segment - Underwriting (loss)
|
|
|
|
(36.8
|
)
|
|
(19.1
|
)
|
Asset Management segment - (Loss) income
|
|
|
|
(1.1
|
)
|
|
6.3
|
|
Total segmental (loss) income
|
|
|
|
(7.2
|
)
|
|
48.5
|
|
Total managed investment return (a)
|
|
|
|
30.3
|
|
|
(20.5
|
)
|
Corporate expenses
|
|
|
|
(30.9
|
)
|
|
(19.3
|
)
|
Other items
|
|
|
|
(0.9
|
)
|
|
(0.9
|
)
|
Net (loss) income (attributable) available to Validus common
shareholders
|
|
|
|
$
|
(8.7
|
)
|
|
$
|
7.8
|
|
Net (loss) income per diluted share (attributable) available to
Validus common shareholders
|
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.10
|
|
Net operating income available to Validus common shareholders (b)
|
|
|
|
$
|
4.2
|
|
|
$
|
58.5
|
|
Net operating income per diluted share available to Validus
common shareholders(b)
|
|
|
|
$
|
0.05
|
|
|
$
|
0.73
|
|
(a)
|
|
Total managed investment return includes returns generated on
managed assets governed by the Company's investment policy statement
("IPS") and excludes returns on non-managed assets held in support
of consolidated AlphaCat variable interest entities which are not
governed by the Company's IPS.
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(b)
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|
Net operating income available to Validus common shareholders is
presented after tax and is considered a non-GAAP financial measure.
A reconciliation of net (loss) income (attributable) available to
Validus common shareholders, the most comparable GAAP measure, to
net operating income available to Validus common shareholders is
presented at the end of this release.
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January 2018 Reinsurance Renewals - Reinsurance and Asset Management
segments
During the January 2018 renewal season, the Reinsurance and Asset
Management segments underwrote $921.2 million in gross premiums written,
an increase of 41.6% from the January 2017 renewal period. This renewal
data does not include: (i) the Insurance segment's operations as the
business is distributed relatively evenly throughout the year; or (ii)
the Reinsurance and Asset Management segment's agricultural premiums.
The following table presents the Reinsurance and Asset Management
segments' January 2018 and 2017 reinsurance renewals by Catastrophe XOL,
Per Risk XOL and Proportional premiums:
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|
|
|
|
|
|
|
|
Reinsurance and Asset Management segment's combined premium
|
(Dollars in thousands)
|
|
|
|
Catastrophe XOL
|
|
Per Risk XOL
|
|
Proportional
|
|
Total
|
2018
|
|
|
|
$
|
545,536
|
|
|
$
|
65,740
|
|
|
$
|
309,923
|
|
|
$
|
921,199
|
|
2017
|
|
|
|
$
|
380,870
|
|
|
$
|
66,016
|
|
|
$
|
203,548
|
|
|
$
|
650,434
|
|
Increase (decrease)
|
|
|
|
43.2
|
%
|
|
(0.4
|
)%
|
|
52.3
|
%
|
|
41.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the Reinsurance and Asset Management
segments' January 2018 and 2017 reinsurance renewals by line of business:
|
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|
|
|
|
|
|
|
Reinsurance segment premium
|
|
|
|
|
Property
|
|
Specialty -
Short-tail
|
|
Specialty -
Other
|
|
Total
|
(Dollars in thousands)
|
|
|
|
U.S.
|
|
International
|
|
|
|
2018
|
|
|
|
$
|
147,152
|
|
|
$
|
119,588
|
|
|
$
|
262,444
|
|
|
$
|
117,616
|
|
|
$
|
646,800
|
|
2017
|
|
|
|
$
|
107,364
|
|
|
$
|
103,298
|
|
|
$
|
231,149
|
|
|
$
|
45,383
|
|
|
$
|
487,194
|
|
Increase
|
|
|
|
37.1
|
%
|
|
15.8
|
%
|
|
13.5
|
%
|
|
159.2
|
%
|
|
32.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Management segment premium
|
|
|
|
|
Property
|
|
Specialty - Short-tail
|
|
Specialty - Other
|
|
Total
|
(Dollars in thousands)
|
|
|
|
U.S.
|
|
International
|
|
|
|
2018
|
|
|
|
$
|
242,684
|
|
|
$
|
27,467
|
|
|
$
|
4,248
|
|
|
$
|
-
|
|
|
$
|
274,399
|
|
2017
|
|
|
|
$
|
136,574
|
|
|
$
|
21,538
|
|
|
$
|
5,128
|
|
|
$
|
-
|
|
|
$
|
163,240
|
|
Increase (decrease)
|
|
|
|
77.7
|
%
|
|
27.5
|
%
|
|
(17.2
|
)%
|
|
-
|
%
|
|
68.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance and Asset Management segments' combined premium
|
|
|
|
|
Property
|
|
Specialty - Short-tail
|
|
Specialty - Other
|
|
Total
|
(Dollars in thousands)
|
|
|
|
U.S.
|
|
International
|
|
|
|
2018
|
|
|
|
$
|
389,836
|
|
|
$
|
147,055
|
|
|
$
|
266,692
|
|
|
$
|
117,616
|
|
|
$
|
921,199
|
|
2017
|
|
|
|
$
|
243,938
|
|
|
$
|
124,836
|
|
|
$
|
236,277
|
|
|
$
|
45,383
|
|
|
$
|
650,434
|
|
Increase
|
|
|
|
59.8
|
%
|
|
17.8
|
%
|
|
12.9
|
%
|
|
159.2
|
%
|
|
41.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the January 2018 renewal season, the Reinsurance segment
underwrote $646.8 million in gross premiums written (excluding
agriculture premiums), an increase of $159.6 million, or 32.8% from the
2017 renewal season. The increase was primarily driven by:
-
An increase in the specialty - other lines of $72.2 million, or 159.2%
as a result of the continued build out of the Company's casualty
portfolio and the timing of renewals; and
-
An increase in U.S. property renewals of $39.8 million, or 37.1%
driven by rate increases and significant premium growth on a few lines
where the Company participated with large gross positions and managed
its net exposure through strategic retrocession purchases.
The Asset Management segment underwrote $274.4 million in gross premiums
written during the January 2018 renewal season, an increase of $111.2
million, or 68.1% from the 2017 renewal season. The increase was
primarily driven by significant rate increases in the retrocession
component of the portfolio and an increase in assets under management.
This earnings release should be read in conjunction with the Company's
fourth quarter 2017 investor financial supplement that has been posted
to the Investors section of the Company's website located at www.validusholdings.com.
Fourth Quarter 2017 Results
Highlights for the fourth quarter 2017 were as follows:
-
Gross premiums written for the
three months ended December 31, 2017 were $443.3 million compared to
$339.5 million for the three months ended December 31, 2016, an
increase of $103.9 million, or 30.6%. The increase was primarily
driven by an increase in the Insurance segment.
-
Reinsurance premiums ceded for the
three months ended December 31, 2017 were $96.4 million compared to
$40.6 million for the three months ended December 31, 2016, an
increase of $55.8 million, or 137.3%. The increase was primarily
driven by an increase in the Reinsurance and Insurance segments.
-
Net premiums earned for the
three months ended December 31, 2017 were $651.5 million compared to
$540.4 million for the three months ended December 31, 2016, an
increase of $111.1 million, or 20.6%. The increase was primarily
driven by an increase in the Insurance and Reinsurance segments.
-
Loss ratio for the three months
ended December 31, 2017 and 2016 was 73.7% and 50.9%, respectively,
and included the following:
-
Notable losses of $120.8 million, or 18.5 percentage points of the
loss ratio during the three months ended December 31, 2017
compared to $52.3 million, or 9.7 percentage points of the loss
ratio during the three months ended December 31, 2016. Notable
losses during the three months ended December 31, 2017 included
$78.0 million, or 12.0 percentage points of the loss ratio, of
losses attributable to AlphaCat investors and noncontrolling
interests, compared to $15.3 million, or 2.8 percentage points of
the loss ratio during the three months ended December 31, 2016;
-
Non-notable losses of $9.7 million, or 1.5 percentage points of
the loss ratio during the three months ended December 31, 2017
compared to $0.3 million during the three months ended
December 31, 2016;
-
Favorable loss reserve development on prior accident years of
$42.9 million during the three months ended December 31, 2017,
which benefited the loss ratio by 6.6 percentage points compared
to favorable development of $46.8 million during the three months
ended December 31, 2016, which benefited the loss ratio by 8.7
percentage points. The favorable development of $42.9 million
during the three months ended December 31, 2017 was primarily
driven by favorable development on attritional losses; and
-
Attritional losses of $392.3 million, or 60.3 percentage points of
the loss ratio during the three months ended December 31, 2017
compared to $269.3 million, or 49.8 percentage points of the loss
ratio during the three months ended December 31, 2016. The
increase was primarily driven by the addition of Crop Risk
Services, Inc. ("CRS") and a higher frequency of mid-size losses
which did not meet the non-notable loss threshold.
-
Combined ratio for the three
months ended December 31, 2017 and 2016 was 109.7% and 89.6%,
respectively, an increase of 20.1 percentage points.
-
Total managed investment return
from our managed investment portfolio for the three months ended
December 31, 2017 was $30.3 million compared to $(20.5) million for
the three months ended December 31, 2016, an increase of $50.7
million, or 247.8%.
-
Annualized return on average equity
for the three months ended December 31, 2017 of (1.0)%, compared
to 0.8% for the three months ended December 31, 2016.
-
Annualized net operating return on average
equity for the three months ended December 31, 2017 of
0.5%, compared to 6.3% for the three months ended December 31, 2016.
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.
Notable Loss Events
During the three months ended December 31, 2017, the Company incurred
losses and loss expenses from fourth quarter 2017 notable loss events as
described below:
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|
|
|
|
|
|
|
|
Northern California Wildfires
|
(Dollars in thousands)
|
|
|
|
Reinsurance segment
|
|
Insurance
segment
|
|
Asset Management segment
|
|
Total
|
Net losses and loss expenses
|
|
|
|
$
|
4,762
|
|
|
$
|
10,250
|
|
$
|
72,742
|
|
|
$
|
87,754
|
|
Less: Net losses and loss expenses attributable to AlphaCat third
party investors and noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
(67,592
|
)
|
|
(67,592
|
)
|
Validus' share of net losses and loss expenses
|
|
|
|
4,762
|
|
|
10,250
|
|
5,150
|
|
|
20,162
|
|
Less: Net impact on premiums earned (a)
|
|
|
|
(8,024
|
)
|
|
-
|
|
-
|
|
|
(8,024
|
)
|
Net loss attributable to Validus
|
|
|
|
$
|
(3,262
|
)
|
|
$
|
10,250
|
|
$
|
5,150
|
|
|
$
|
12,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern California Wildfires
|
(Dollars in thousands)
|
|
|
|
Reinsurance segment
|
|
Insurance
segment
|
|
Asset Management segment
|
|
Total
|
Net losses and loss expenses
|
|
|
|
$
|
19,108
|
|
|
$
|
4,387
|
|
$
|
15,000
|
|
|
$
|
38,495
|
|
Less: Net losses and loss expenses attributable to AlphaCat third
party investors and noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
(13,837
|
)
|
|
(13,837
|
)
|
Validus' share of net losses and loss expenses
|
|
|
|
19,108
|
|
|
4,387
|
|
1,163
|
|
|
24,658
|
|
Less: Net impact on premiums earned (a)
|
|
|
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
Net loss attributable to Validus
|
|
|
|
$
|
19,108
|
|
|
$
|
4,387
|
|
$
|
1,163
|
|
|
$
|
24,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Notable Loss Events
|
(Dollars in thousands)
|
|
|
|
Reinsurance segment
|
|
Insurance
segment
|
|
Asset Management segment
|
|
Total
|
Net losses and loss expenses
|
|
|
|
$
|
23,870
|
|
|
$
|
14,637
|
|
$
|
87,742
|
|
|
$
|
126,249
|
|
Less: Net losses and loss expenses attributable to AlphaCat third
party investors and noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
(81,429
|
)
|
|
(81,429
|
)
|
Validus' share of net losses and loss expenses
|
|
|
|
23,870
|
|
|
14,637
|
|
6,313
|
|
|
44,820
|
|
Less: Net impact on premiums earned (a)
|
|
|
|
(8,024
|
)
|
|
-
|
|
-
|
|
|
(8,024
|
)
|
Net loss attributable to Validus
|
|
|
|
$
|
15,846
|
|
|
$
|
14,637
|
|
$
|
6,313
|
|
|
$
|
36,796
|
|
(a)
|
|
Net impact on premiums earned includes reinstatement premiums
assumed and the net impact of accelerating unearned premiums assumed
and ceded.
|
|
|
|
Partially offsetting the losses and loss expenses noted above was net
favorable development on third quarter 2017 notable loss events of $5.4
million, which benefited the loss ratio by 0.9 percentage points. During
the three months ended December 31, 2016, the Company incurred losses
and loss expenses from notable loss events of $52.3 million, or 9.7
percentage points of the loss ratio. Net of losses attributable to
AlphaCat investors and noncontrolling interests of $15.3 million and
reinstatement premiums of $0.7 million, the net loss attributable to the
Company was $36.3 million.
Non-notable Loss Events
There were no non-notable loss events occurring during the three months
ended December 31, 2017. However, as a result of loss events occurring
in the fourth quarter, the Company reallocated retrocession recoveries
between all 2017 loss events. As such, the Company increased its net
loss estimate on the third quarter 2017 Mexico City Earthquake which
caused this event to exceed the $15.0 million threshold and become a
non-notable loss event. Net losses and loss expenses incurred from the
Mexico City Earthquake non-notable loss event were $9.7 million, or 1.5
percentage points of the loss ratio during the three months ended
December 31, 2017 and $13.5 million, or 1.9 percentage points of the
loss ratio during the three months ended September 30, 2017.
Reinsurance Segment
Highlights for the fourth quarter 2017 were as follows:
-
Gross premiums written for the
three months ended December 31, 2017 were $52.0 million compared to
$41.8 million for the three months ended December 31, 2016, an
increase of $10.1 million, or 24.3% and included the following:
-
Property premiums of $18.1 million during the three months ended
December 31, 2017, compared to $8.5 million during the three
months ended December 31, 2016, an increase of $9.6 million, or
113.8%, primarily driven by premium adjustments on existing
business;
-
Specialty - short-tail premiums of $13.0 million during the three
months ended December 31, 2017, compared to $(8.8) million during
the three months ended December 31, 2016, an increase of $21.8
million, or 248.3%. The increase was primarily driven by favorable
premium adjustments on Agriculture business; and
-
Specialty - other premiums of $20.8 million during the three
months ended December 31, 2017, compared to $42.1 million during
the three months ended December 31, 2016, a decrease of $21.3
million, or 50.5%. The decrease was primarily driven by the timing
of renewals in the casualty class of business.
-
Reinsurance premiums ceded for the
three months ended December 31, 2017 were $40.7 million compared to
$7.8 million for the three months ended December 31, 2016, an increase
of $32.9 million. The increase was primarily driven by an increase in
the property lines of $33.5 million as a result of new retrocession
cover purchased from Tailwind Re.
-
Net premiums earned for the
three months ended December 31, 2017 were $250.6 million compared to
$234.2 million for the three months ended December 31, 2016, an
increase of $16.4 million, or 7.0%. The increase was primarily driven
by ongoing growth in the specialty - other lines of business over the
last two years.
-
Loss ratio for the three months
ended December 31, 2017 and 2016 was 54.2% and 39.9%, respectively,
and included the following:
-
Notable losses of $14.7 million, or 5.9 percentage points of the
loss ratio during the three months ended December 31, 2017,
compared to $18.6 million, or 7.9 percentage points of the loss
ratio during the three months ended December 31, 2016. Notable
losses during the during the three months ended December 31, 2017
included losses from fourth quarter 2017 notable loss events of
$23.9 million, or 9.5 percentage points of the loss ratio,
partially offset by favorable development on third quarter 2017
notable loss events of $9.2 million or 3.6 percentage points of
the loss ratio;
-
Non-notable losses of $9.4 million, or 3.7 percentage points of
the loss ratio during the three months ended December 31, 2017,
compared to $nil during the three months ended December 31, 2016.
The non-notable losses incurred during the three months ended
December 31, 2017 related to adverse development on the third
quarter 2017 Mexico City Earthquake loss event due to reallocation
of retrocession recoveries;
-
Favorable loss reserve development on prior accident years of
$21.2 million during the three months ended December 31, 2017,
which benefited the loss ratio by 8.5 percentage points compared
to favorable development of $34.9 million during the three months
ended December 31, 2016, which benefited the loss ratio by 14.9
percentage points. The favorable development of $21.2 million
during the three months ended December 31, 2017 was primarily
driven by favorable development on attritional losses; and
-
Attritional losses of $132.9 million, or 53.1 percentage points of
the loss ratio during the three months ended December 31, 2017
compared to $109.8 million, or 46.9 percentage points of the loss
ratio during the three months ended December 31, 2016. The
increase was primarily due to a single mid-size loss which did not
meet the non-notable loss threshold.
-
General and administrative expenses
for the three months ended December 31, 2017 were $23.6 million
compared to $21.2 million for the three months ended December 31,
2016, an increase of $2.4 million or 11.1%. The increase in general
and administrative expenses was primarily driven by a higher
allocation of costs to the segment during the three months ended
December 31, 2017.
-
Combined ratio for the three
months ended December 31, 2017 and 2016 was 87.8% and 73.8%,
respectively, an increase of 14.0 percentage points.
-
Underwriting income for the
three months ended December 31, 2017 was $30.7 million compared to
$61.3 million for the three months ended December 31, 2016, a decrease
of $30.5 million or 49.8%.
Insurance Segment
Highlights for the fourth quarter 2017 were as follows:
-
Gross premiums written for the
three months ended December 31, 2017 were $377.0 million compared to
$297.9 million for the three months ended December 31, 2016, an
increase of $79.1 million, or 26.6% and included the following:
-
Property premiums of $105.0 million during the three months ended
December 31, 2017, compared to $96.2 million during the three
months ended December 31, 2016, an increase of $8.8 million, or
9.1%. The increase was primarily driven by the continued build out
of product offerings in the U.S. short-tail property lines;
-
Specialty - short-tail premiums of $155.2 million during the three
months ended December 31, 2017, compared to $86.6 million during
the three months ended December 31, 2016, an increase of $68.7
million, or 79.3%. The increase was primarily driven by new
agriculture business written through CRS; and
-
Specialty - other premiums of $116.8 million during the three
months ended December 31, 2017, compared to $115.1 million during
the three months ended December 31, 2016, an increase of $1.7
million, or 1.4%.
-
Reinsurance premiums ceded for the
three months ended December 31, 2017 were $56.4 million compared to
$32.9 million for the three months ended December 31, 2016, an
increase of $23.5 million, or 71.6%, primarily driven by increases in
the property and specialty - short-tail lines of $12.9 million and
$8.6 million, respectively. The increase in the property lines was
primarily driven by the growth in gross premiums written as noted
above and new reinsurance cover purchased from Tailwind Re. The
increase in the specialty - short-tail lines was due to an increase in
ceded agriculture premiums relating to new business written through
CRS.
-
Net premiums earned for the
three months ended December 31, 2017 were $333.0 million compared to
$240.1 million for the three months ended December 31, 2016, an
increase of $92.9 million, or 38.7%. The increase was primarily driven
by an increase the specialty - short-tail lines of $85.7 million due
to agriculture net premiums earned relating to new business written
through CRS.
-
Loss ratio for the three months
ended December 31, 2017 and 2016 was 73.5% and 68.5%, respectively,
and included the following:
-
Notable losses of $20.9 million, or 6.3 percentage points of the
loss ratio during the three months ended December 31, 2017
compared to $17.7 million, or 7.4 percentage points of the loss
ratio during the three months ended December 31, 2016. Notable
losses during the during the three months ended December 31, 2017
included losses from fourth quarter 2017 notable loss events of
$14.6 million, or 4.4 percentage points of the loss ratio, and
losses from third quarter 2017 notable loss events of $6.3
million, or 1.9 percentage points of the loss ratio;
-
Non-notable losses of $(2.3) million, which benefited the loss
ratio by 0.7 percentage points during the three months ended
December 31, 2017 compared to $0.2 million during the three months
ended December 31, 2016. The reduction in non-notable losses
incurred during the three months ended December 31, 2017 related
to favorable development on the third quarter 2017 Mexico City
Earthquake loss event;
-
Favorable loss reserve development on prior accident years of
$19.7 million during the three months ended December 31, 2017,
which benefited the loss ratio by 5.9 percentage points compared
to favorable development of $10.8 million during the three months
ended December 31, 2016, which benefited the loss ratio by 4.5
percentage points. The favorable development of $19.7 million
during the three months ended December 31, 2017 was primarily
driven by favorable development on attritional losses; and
-
Attritional losses of $246.0 million, or 73.8 percentage points of
the loss ratio during the three months ended December 31, 2017
compared to $157.3 million, or 65.5 percentage points of the loss
ratio during the three months ended December 31, 2016. The
increase was primarily driven by the addition of CRS and a higher
frequency of mid-size losses which did not meet the non-notable
loss threshold.
-
Policy acquisition cost ratio for
the three months ended December 31, 2017 was 18.1% compared to 24.3%
for the three months ended December 31, 2016, a decrease of 6.2
percentage points. The decrease was primarily driven by new
agriculture business written during the three months ended
December 31, 2017 which carries lower acquisition costs.
-
General and administrative expenses
for the three months ended December 31, 2017 were $64.9 million
compared to $33.1 million for the three months ended December 31,
2016, an increase of $31.9 million or 96.4%. General and
administrative expenses for the three months ended December 31, 2017
included $11.8 million of CRS expenses, of which $1.8 million related
to the amortization of intangible assets acquired. The remaining
increase in general and administrative expenses was primarily driven
by a higher allocation of costs to the segment during the three months
ended December 31, 2017 and a reduction in the performance bonus
accrual during the three months ended December 31, 2016.
-
Combined ratio for the three
months ended December 31, 2017 and 2016 was 112.2% and 108.1%,
respectively, an increase of 4.1 percentage points.
-
Underwriting (loss) for the
three months ended December 31, 2017 was $(36.8) million compared to
$(19.1) million for the three months ended December 31, 2016, an
increase of $17.6 million or 92.1%.
Asset Management Segment
Highlights for the fourth quarter 2017 were as follows:
-
Assets under management were
$3.4 billion as at January 1, 2018, compared to $2.9 billion as at
October 1, 2017, of which third party assets under management were
$3.2 billion as at January 1, 2018, compared to $2.7 billion as at
October 1, 2017. During the three months ended January 1, 2018, a
total of $1,045.3 million of capital was raised, of which $1,029.1
million was raised from third parties. During the three months ended
January 1, 2018, $402.4 million was returned to investors, of which
$401.4 million was returned to third party investors.
-
Fee revenues earned for the three
months ended December 31, 2017 were $5.5 million compared to $4.7
million during the three months ended December 31, 2016, an increase
of $0.8 million or 17.4%. Third party fee revenues earned during the
three months ended December 31, 2017 were $5.1 million compared to
$3.9 million during the three months ended December 31, 2016, an
increase of $1.1 million or 28.8%. The increase in third party fee
revenues was primarily driven by an increase in management fees as a
result of an increase in assets under management over the last twelve
months.
-
Total expenses for the three
months ended December 31, 2017 were $2.6 million compared to $2.9
million during the three months ended December 31, 2016, a decrease of
$0.3 million, or 10.1%.
-
Validus' share of investment (loss) from
AlphaCat Funds and Sidecars for the three months ended
December 31, 2017 was $(4.0) million compared to income of $4.5
million during the three months ended December 31, 2016, a decrease of
$8.5 million. The decrease was driven by the fourth quarter 2017
notable loss events.
-
Asset Management segment (loss)
for the three months ended December 31, 2017 was $(1.1) million
compared to income of $6.3 million during the three months ended
December 31, 2016, a decrease of $7.4 million.
Managed investments
Highlights for the fourth quarter 2017 were as follows:
-
Managed net investment income for
the three months ended December 31, 2017 was $41.6 million compared to
$35.9 million for the three months ended December 31, 2016, an
increase of $5.7 million, or 16.0%. The increase was primarily driven
by increased returns on the Company's portfolio of managed fixed
maturities and other investments.
-
Annualized effective yield on managed
investments for the three months ended December 31, 2017
was 2.44%, compared to 2.25% for the three months ended December 31,
2016, an increase of 19 basis points.
-
Net realized gains on managed investments
for the three months ended December 31, 2017 were $7.2 million
compared to $9.2 million for the three months ended December 31, 2016.
-
Change in net unrealized (losses) on managed
investments for the three months ended December 31, 2017
was $(24.9) million compared to $(67.7) million for the three months
ended December 31, 2016. Changes in unrealized (losses) on managed
investments during the three months ended December 31, 2017 were
primarily driven by the impact of interest rate increases on the
Company's managed fixed maturity portfolio.
-
Income from investment affiliates
for the three months ended December 31, 2017 was $6.3 million compared
to $2.2 million for the three months ended December 31, 2016, an
increase of $4.2 million, or 192.9%. The income from investment
affiliates represents equity earnings on investments in funds managed
by Aquiline Capital Partners LLC.
Corporate expenses and other items
Highlights for the fourth quarter 2017 were as follows:
-
General and administrative expenses
for the three months ended December 31, 2017 were $5.6 million
compared to $20.0 million for the three months ended December 31,
2016, a decrease of $14.4 million, or 72.1%. The decrease was
primarily driven by a lower bonus accrual and a higher allocation of
costs to reporting segments during the three months ended December 31,
2017.
-
Share compensation expenses for
the three months ended December 31, 2017 were $4.1 million compared to
$3.9 million for the three months ended December 31, 2016, an increase
of $0.3 million, or 7.5%.
-
Finance expenses for the
three months ended December 31, 2017 were $15.7 million compared to
$14.5 million for the three months ended December 31, 2016, an
increase of $1.2 million, or 8.2%. The increase was primarily driven
by interest expenses relating to short-term borrowings which were
repaid in full during the three months ended December 31, 2017.
-
Dividends paid on preferred shares
for the three months ended December 31, 2017 were $5.8 million
compared to $2.2 million for the three months ended December 31, 2016,
an increase of $3.6 million, or 164.5% due to $250.0 million of new
preferred shares issued during the second quarter of 2017.
-
Tax (benefit) for the three
months ended December 31, 2017 was $(0.4) million compared to $(21.2)
million for the three months ended December 31, 2016. The tax benefit
during the three months ended December 31, 2017 mainly related to
operating losses in the Insurance segment and was partially offset by
the re-measurement of net deferred taxes following U.S. Tax Reform.
The tax benefit during the three months ended December 31, 2016
related to a partial release of a valuation allowance which had been
applied against a deferred tax asset related to net operating losses
acquired as part of the Company's acquisition of Flagstone. The
release was due to the Company believing it is more-likely-than-not
that it will have sufficient future taxable income to realize a
portion of that deferred tax asset over three years beginning in 2017
and in accordance with U.S. GAAP, the Company was required to record a
tax benefit of $18.4 million during the fourth quarter of 2016.
-
Foreign exchange (losses) for
the three months ended December 31, 2017 were $(0.8) million compared
to $(0.9) million for the three months ended December 31, 2016.
Shareholders' Equity and Capitalization
As at December 31, 2017, total shareholders' equity was $3.9 billion
including $16.7 million of noncontrolling interests and $400.0 million
of preferred shares. Shareholders' equity available to Validus common
shareholders was $3.5 billion as at December 31, 2017. Total
capitalization available to Validus at December 31, 2017 was $4.7
billion, including $539.2 million of junior subordinated deferrable
debentures and $245.6 million of senior notes. Total capitalization at
December 31, 2017 was $5.7 billion, including $1.0 billion of redeemable
noncontrolling interests and $16.7 million of noncontrolling interests
related to AlphaCat.
Book value per common share was $44.06 at December 31, 2017 based on
79,319,550 common shares outstanding, compared to $44.51 at
September 30, 2017 based on 79,457,253 common shares outstanding. Book
value per diluted common share was $42.71 at December 31, 2017 based on
81,823,409 diluted common shares outstanding, compared to $43.13 at
September 30, 2017 based on 82,001,606 diluted common shares
outstanding, a decrease of 0.1%, inclusive of dividends for the three
months ended December 31, 2017. Book value per diluted common share is a
non-GAAP financial measure. A reconciliation of book value per common
share, the most comparable GAAP measure, to book value per diluted
common share is presented at the end of this release.
Share Repurchases
The Company repurchased 175,308 common shares during the three months
ended December 31, 2017. A summary of the common share repurchases made
to date under the Company's previously announced share repurchase
programs is as follows:
|
|
|
|
Total shares repurchased under publicly announced repurchase
program
|
(Dollars in thousands, except share and per share amounts)
|
|
|
|
Total number of shares repurchased
|
|
Aggregate Purchase Price (a)
|
|
Average Price per Share (a)
|
|
Approximate dollar value of shares
that may yet be purchased under the Program
|
Cumulative inception-to-date to December 31, 2016
|
|
|
|
80,508,849
|
|
$
|
2,704,406
|
|
$
|
33.59
|
|
$
|
319,995
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative for the nine months ended September 30, 2017
|
|
|
|
351,812
|
|
18,343
|
|
$
|
52.14
|
|
$
|
301,652
|
|
|
|
|
|
|
|
|
|
|
|
October 1 - 31, 2017
|
|
|
|
-
|
|
-
|
|
-
|
|
$
|
301,652
|
November 1 - 30, 2017
|
|
|
|
-
|
|
-
|
|
-
|
|
$
|
301,652
|
December 1 - 31, 2017
|
|
|
|
175,308
|
|
8,226
|
|
$
|
46.92
|
|
$
|
293,426
|
Cumulative for the three months ended December 31, 2017
|
|
|
|
175,308
|
|
8,226
|
|
$
|
46.92
|
|
|
Cumulative for the year ended December 31, 2017
|
|
|
|
527,120
|
|
26,569
|
|
$
|
50.40
|
|
|
Cumulative inception-to-date to December 31, 2017
|
|
|
|
81,035,969
|
|
$
|
2,730,975
|
|
$
|
33.70
|
|
$
|
293,426
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases made subsequent to year-end:
|
|
|
|
|
|
|
|
|
|
|
January 1 - 31, 2018
|
|
|
|
-
|
|
-
|
|
-
|
|
$
|
293,426
|
(a)
|
|
Share transactions are on a trade date basis through January 31,
2018 and are inclusive of commissions. Average share price is
rounded to two decimal places.
|
|
|
|
Year to Date 2017 Results
Highlights for the year to date 2017 were as follows:
-
Gross premiums written for the
year ended December 31, 2017 were $2,950.9 million compared to
$2,648.7 million for the year ended December 31, 2016, an increase of
$302.2 million, or 11.4%.
-
Reinsurance premiums ceded for
the year ended December 31, 2017 were $469.6 million compared to
$289.7 million for the year ended December 31, 2016, an increase of
$179.9 million, or 62.1%.
-
Net premiums earned for the
year ended December 31, 2017 were $2,581.1 million compared to
$2,249.2 million for the year ended December 31, 2016, an increase of
$331.9 million, or 14.8%.
-
Loss ratio for the year ended
December 31, 2017 and 2016 was 89.1% and 47.4%, respectively, and
included the following:
-
Notable losses of $1,046.9 million, or 40.6 percentage points of
the loss ratio during the year ended December 31, 2017 compared to
$90.2 million, or 4.0 percentage points of the loss ratio during
the year ended December 31, 2016. Notable losses during the year
ended December 31, 2017 included $603.4 million, or 23.4
percentage points of the loss ratio, of losses attributable to
AlphaCat investors and noncontrolling interests, compared to $21.7
million, or 1.0 percentage point of the loss ratio during the year
ended December 31, 2016;
-
Non-notable losses of $50.6 million, or 2.0 percentage points of
the loss ratio during the year ended December 31, 2017 compared to
$70.2 million, or 3.1 percentage points of the loss ratio during
the year ended December 31, 2016;
-
Favorable loss reserve development on prior accident years of
$222.5 million during the year ended December 31, 2017, which
benefited the loss ratio by 8.6 percentage points compared to
favorable development of $216.2 million during the year ended
December 31, 2016, which benefited the loss ratio by 9.6
percentage points; and
-
Attritional losses of $1,425.2 million or 55.1 percentage points
of the loss ratio during the year ended December 31, 2017 compared
to $1,120.8 million, or 49.9 percentage points of the loss ratio
during the year ended December 31, 2016.
-
Combined ratio for the year ended
December 31, 2017 and 2016 was 122.6% and 84.2%, respectively, an
increase of 38.4 percentage points.
-
Total managed investment return
from our managed investment portfolio for the year ended December 31,
2017 was $188.8 million compared to $168.4 million for the year ended
December 31, 2016, an increase of $20.4 million, or 12.1%.
-
Annualized return on average equity
for the year ended December 31, 2017 of (1.7)%, compared to 9.7%
for the year ended December 31, 2016.
-
Annualized net operating return on average
equity for the year ended December 31, 2017 of (2.3)%,
compared to 8.7% for the year ended December 31, 2016.
About Validus Holdings, Ltd.
Validus Holdings, Ltd. is a leading global provider of reinsurance,
insurance, and asset management services, delivering its premier
solutions through four diversified yet complementary operating
companies: Validus Reinsurance, Ltd., a global reinsurance group focused
primarily on treaty reinsurance; Talbot Underwriting Ltd., a specialty
(re)insurance group operating within the Lloyd's market through
Syndicate 1183; Western World Insurance Group, Inc., a U.S. specialty
lines organization; and AlphaCat Managers, Ltd., a Bermuda-based
investment advisor managing capital for third parties and Validus
through insurance-linked securities and other property catastrophe and
specialty reinsurance investments.
Research and analytics are at the core of Validus' operations and
provide its team of expert practitioners with the knowledge and insight
required to effectively model and interpret risk - an approach that
consistently benefits clients and ensures their needs are met. Validus
maintains a worldwide presence with more than 1,000 employees in 19
offices across all major regions and is listed on the New York Stock
Exchange under the ticker symbol VR.
More information about the Validus group of companies can be found at
validusholdings.com.
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Consolidated Balance Sheets
|
As at December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
Assets
|
|
|
|
|
|
|
Fixed maturity investments trading, at fair value (amortized cost:
2017-$5,876,261; 2016-$5,584,599)
|
|
|
|
$
|
5,858,348
|
|
|
$
|
5,543,030
|
|
Short-term investments trading, at fair value (amortized cost:
2017-$3,381,714; 2016-$2,796,358)
|
|
|
|
3,381,757
|
|
|
2,796,170
|
|
Other investments, at fair value (cost: 2017-$330,416; 2016-$380,130)
|
|
|
|
355,218
|
|
|
405,712
|
|
Investments in investment affiliates, equity method (cost:
2017-$61,944; 2016-$84,840)
|
|
|
|
100,137
|
|
|
100,431
|
|
Cash and cash equivalents
|
|
|
|
754,990
|
|
|
419,976
|
|
Restricted cash
|
|
|
|
394,663
|
|
|
70,956
|
|
Total investments and cash
|
|
|
|
10,845,113
|
|
|
9,336,275
|
|
Premiums receivable
|
|
|
|
939,487
|
|
|
725,390
|
|
Deferred acquisition costs
|
|
|
|
213,816
|
|
|
209,227
|
|
Prepaid reinsurance premiums
|
|
|
|
132,938
|
|
|
77,996
|
|
Securities lending collateral
|
|
|
|
2,717
|
|
|
9,779
|
|
Loss reserves recoverable
|
|
|
|
1,233,997
|
|
|
430,421
|
|
Paid losses recoverable
|
|
|
|
46,873
|
|
|
35,247
|
|
Income taxes recoverable
|
|
|
|
9,044
|
|
|
4,870
|
|
Deferred tax asset
|
|
|
|
52,467
|
|
|
43,529
|
|
Receivable for investments sold
|
|
|
|
12,182
|
|
|
3,901
|
|
Intangible assets
|
|
|
|
171,411
|
|
|
115,592
|
|
Goodwill
|
|
|
|
229,573
|
|
|
196,758
|
|
Accrued investment income
|
|
|
|
29,096
|
|
|
26,488
|
|
Other assets
|
|
|
|
508,165
|
|
|
134,282
|
|
Total assets
|
|
|
|
$
|
14,426,879
|
|
|
$
|
11,349,755
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Reserve for losses and loss expenses
|
|
|
|
$
|
4,831,390
|
|
|
$
|
2,995,195
|
|
Unearned premiums
|
|
|
|
1,147,186
|
|
|
1,076,049
|
|
Reinsurance balances payable
|
|
|
|
331,645
|
|
|
54,781
|
|
Securities lending payable
|
|
|
|
2,717
|
|
|
10,245
|
|
Deferred tax liability
|
|
|
|
4,600
|
|
|
3,331
|
|
Payable for investments purchased
|
|
|
|
74,496
|
|
|
29,447
|
|
Accounts payable and accrued expenses
|
|
|
|
1,225,875
|
|
|
587,648
|
|
Notes payable to AlphaCat investors
|
|
|
|
1,108,364
|
|
|
278,202
|
|
Senior notes payable
|
|
|
|
245,564
|
|
|
245,362
|
|
Debentures payable
|
|
|
|
539,158
|
|
|
537,226
|
|
Total liabilities
|
|
|
|
9,510,995
|
|
|
5,817,486
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
|
1,004,094
|
|
|
1,528,001
|
|
Shareholders' equity
|
|
|
|
|
|
|
Preferred shares (Issued and Outstanding: 2017-16,000; 2016-6,000)
|
|
|
|
400,000
|
|
|
150,000
|
|
Common shares (Issued: 2017-161,994,491; 2016-161,279,976;
Outstanding: 2017-79,319,550; 2016-79,132,252)
|
|
|
|
28,349
|
|
|
28,224
|
|
Treasury shares (2017-82,674,941; 2016-82,147,724)
|
|
|
|
(14,468
|
)
|
|
(14,376
|
)
|
Additional paid-in capital
|
|
|
|
814,641
|
|
|
821,023
|
|
Accumulated other comprehensive loss
|
|
|
|
(22,192
|
)
|
|
(23,216
|
)
|
Retained earnings
|
|
|
|
2,688,742
|
|
|
2,876,636
|
|
Total shareholders' equity available to Validus
|
|
|
|
3,895,072
|
|
|
3,838,291
|
|
Noncontrolling interests
|
|
|
|
16,718
|
|
|
165,977
|
|
Total shareholders' equity
|
|
|
|
3,911,790
|
|
|
4,004,268
|
|
Total liabilities, noncontrolling interests and shareholders'
equity
|
|
|
|
$
|
14,426,879
|
|
|
$
|
11,349,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Consolidated Statements of (Loss) Income
|
For the three months and years ended
December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
443,323
|
|
|
$
|
339,454
|
|
|
$
|
2,950,938
|
|
|
$
|
2,648,705
|
|
Reinsurance premiums ceded
|
|
|
|
(96,445
|
)
|
|
(40,635
|
)
|
|
(469,633
|
)
|
|
(289,705
|
)
|
Net premiums written
|
|
|
|
346,878
|
|
|
298,819
|
|
|
2,481,305
|
|
|
2,359,000
|
|
Change in unearned premiums
|
|
|
|
304,599
|
|
|
241,580
|
|
|
99,783
|
|
|
(109,835
|
)
|
Net premiums earned
|
|
|
|
651,477
|
|
|
540,399
|
|
|
2,581,088
|
|
|
2,249,165
|
|
Net investment income
|
|
|
|
48,960
|
|
|
38,153
|
|
|
177,873
|
|
|
150,385
|
|
Net realized gains on investments
|
|
|
|
5,607
|
|
|
9,220
|
|
|
7,623
|
|
|
15,757
|
|
Change in net unrealized (losses) gains on investments
|
|
|
|
(21,257
|
)
|
|
(67,460
|
)
|
|
3,215
|
|
|
16,871
|
|
Income (loss) from investment affiliates
|
|
|
|
6,345
|
|
|
2,166
|
|
|
22,010
|
|
|
(2,083
|
)
|
Other insurance related income and other income (loss)
|
|
|
|
6,939
|
|
|
568
|
|
|
13,179
|
|
|
2,195
|
|
Foreign exchange (losses) gains
|
|
|
|
(283
|
)
|
|
(901
|
)
|
|
(7,447
|
)
|
|
10,864
|
|
Total revenues
|
|
|
|
697,788
|
|
|
522,145
|
|
|
2,797,541
|
|
|
2,443,154
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
479,842
|
|
|
275,126
|
|
|
2,300,178
|
|
|
1,065,097
|
|
Policy acquisition costs
|
|
|
|
127,067
|
|
|
120,889
|
|
|
471,553
|
|
|
449,482
|
|
General and administrative expenses
|
|
|
|
97,522
|
|
|
77,955
|
|
|
352,137
|
|
|
336,294
|
|
Share compensation expenses
|
|
|
|
10,031
|
|
|
10,442
|
|
|
40,111
|
|
|
42,907
|
|
Finance expenses
|
|
|
|
15,871
|
|
|
14,630
|
|
|
58,546
|
|
|
58,520
|
|
Transaction expenses
|
|
|
|
-
|
|
|
-
|
|
|
4,427
|
|
|
-
|
|
Total expenses
|
|
|
|
730,333
|
|
|
499,042
|
|
|
3,226,952
|
|
|
1,952,300
|
|
(Loss) income before taxes, (loss) from operating affiliate and
(income) loss attributable to AlphaCat investors
|
|
|
|
(32,545
|
)
|
|
23,103
|
|
|
(429,411
|
)
|
|
490,854
|
|
Tax benefit
|
|
|
|
412
|
|
|
21,147
|
|
|
7,580
|
|
|
19,729
|
|
Loss from operating affiliate
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(23
|
)
|
(Income) loss attributable to AlphaCat investors
|
|
|
|
(37,868
|
)
|
|
(7,080
|
)
|
|
16,929
|
|
|
(23,358
|
)
|
Net (loss) income
|
|
|
|
(70,001
|
)
|
|
37,170
|
|
|
(404,902
|
)
|
|
487,202
|
|
Net loss (income) attributable to noncontrolling interests
|
|
|
|
67,136
|
|
|
(27,200
|
)
|
|
357,280
|
|
|
(123,363
|
)
|
Net (loss) income (attributable) available to Validus
|
|
|
|
(2,865
|
)
|
|
9,970
|
|
|
(47,622
|
)
|
|
363,839
|
|
Dividends on preferred shares
|
|
|
|
(5,828
|
)
|
|
(2,203
|
)
|
|
(15,861
|
)
|
|
(4,455
|
)
|
Net (loss) income (attributable) available to Validus common
shareholders
|
|
|
|
$
|
(8,693
|
)
|
|
$
|
7,767
|
|
|
$
|
(63,483
|
)
|
|
$
|
359,384
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected ratios:
|
|
|
|
|
|
|
|
|
|
|
Ratio of net to gross premiums written
|
|
|
|
78.2
|
%
|
|
88.0
|
%
|
|
84.1
|
%
|
|
89.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expense ratio
|
|
|
|
73.7
|
%
|
|
50.9
|
%
|
|
89.1
|
%
|
|
47.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Policy acquisition cost ratio
|
|
|
|
19.5
|
%
|
|
22.4
|
%
|
|
18.3
|
%
|
|
20.0
|
%
|
General and administrative expense ratio
|
|
|
|
16.5
|
%
|
|
16.3
|
%
|
|
15.2
|
%
|
|
16.8
|
%
|
Expense ratio
|
|
|
|
36.0
|
%
|
|
38.7
|
%
|
|
33.5
|
%
|
|
36.8
|
%
|
Combined ratio
|
|
|
|
109.7
|
%
|
|
89.6
|
%
|
|
122.6
|
%
|
|
84.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the three months and years ended
December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
Reinsurance Segment
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
51,960
|
|
|
$
|
41,813
|
|
|
$
|
1,195,207
|
|
|
$
|
1,184,912
|
|
Reinsurance premiums ceded
|
|
|
|
(40,716
|
)
|
|
(7,773
|
)
|
|
(209,289
|
)
|
|
(121,331
|
)
|
Net premiums written
|
|
|
|
11,244
|
|
|
34,040
|
|
|
985,918
|
|
|
1,063,581
|
|
Change in unearned premiums
|
|
|
|
239,320
|
|
|
200,129
|
|
|
37,086
|
|
|
(67,432
|
)
|
Net premiums earned
|
|
|
|
250,564
|
|
|
234,169
|
|
|
1,023,004
|
|
|
996,149
|
|
Other insurance related income
|
|
|
|
15
|
|
|
9
|
|
|
67
|
|
|
25
|
|
Total underwriting revenues
|
|
|
|
250,579
|
|
|
234,178
|
|
|
1,023,071
|
|
|
996,174
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
135,804
|
|
|
93,503
|
|
|
692,719
|
|
|
415,505
|
|
Policy acquisition costs
|
|
|
|
58,107
|
|
|
55,352
|
|
|
199,430
|
|
|
189,797
|
|
General and administrative expenses
|
|
|
|
23,604
|
|
|
21,248
|
|
|
80,177
|
|
|
85,000
|
|
Share compensation expenses
|
|
|
|
2,331
|
|
|
2,811
|
|
|
10,762
|
|
|
11,668
|
|
Total underwriting deductions
|
|
|
|
219,846
|
|
|
172,914
|
|
|
983,088
|
|
|
701,970
|
|
Underwriting income
|
|
|
|
$
|
30,733
|
|
|
$
|
61,264
|
|
|
$
|
39,983
|
|
|
$
|
294,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Segment
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
377,014
|
|
|
$
|
297,905
|
|
|
$
|
1,453,133
|
|
|
$
|
1,194,137
|
|
Reinsurance premiums ceded
|
|
|
|
(56,378
|
)
|
|
(32,862
|
)
|
|
(261,055
|
)
|
|
(162,669
|
)
|
Net premiums written
|
|
|
|
320,636
|
|
|
265,043
|
|
|
1,192,078
|
|
|
1,031,468
|
|
Change in unearned premiums
|
|
|
|
12,393
|
|
|
(24,900
|
)
|
|
64,007
|
|
|
(28,524
|
)
|
Net premiums earned
|
|
|
|
333,029
|
|
|
240,143
|
|
|
1,256,085
|
|
|
1,002,944
|
|
Other insurance related income
|
|
|
|
3,957
|
|
|
284
|
|
|
7,035
|
|
|
1,367
|
|
Total underwriting revenues
|
|
|
|
336,986
|
|
|
240,427
|
|
|
1,263,120
|
|
|
1,004,311
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
244,908
|
|
|
164,417
|
|
|
934,199
|
|
|
604,741
|
|
Policy acquisition costs
|
|
|
|
60,403
|
|
|
58,394
|
|
|
241,186
|
|
|
232,780
|
|
General and administrative expenses
|
|
|
|
64,945
|
|
|
33,069
|
|
|
207,186
|
|
|
165,529
|
|
Share compensation expenses
|
|
|
|
3,512
|
|
|
3,693
|
|
|
12,774
|
|
|
14,987
|
|
Total underwriting deductions
|
|
|
|
373,768
|
|
|
259,573
|
|
|
1,395,345
|
|
|
1,018,037
|
|
Underwriting (loss)
|
|
|
|
$
|
(36,782
|
)
|
|
$
|
(19,146
|
)
|
|
$
|
(132,225
|
)
|
|
$
|
(13,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the three months and years ended
December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
Asset Management Segment
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Fee revenues
|
|
|
|
|
|
|
|
|
|
|
Third party
|
|
|
|
$
|
5,061
|
|
|
$
|
3,928
|
|
$
|
20,349
|
|
|
$
|
18,771
|
|
Related party
|
|
|
|
418
|
|
|
737
|
|
2,150
|
|
|
3,329
|
|
Total fee revenues
|
|
|
|
5,479
|
|
|
4,665
|
|
22,499
|
|
|
22,100
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
2,582
|
|
|
2,676
|
|
12,904
|
|
|
10,233
|
|
Share compensation expenses
|
|
|
|
41
|
|
|
82
|
|
389
|
|
|
249
|
|
Finance expenses
|
|
|
|
30
|
|
|
33
|
|
137
|
|
|
947
|
|
Tax (benefit) expense
|
|
|
|
(61
|
)
|
|
90
|
|
8
|
|
|
90
|
|
Foreign exchange losses
|
|
|
|
-
|
|
|
2
|
|
7
|
|
|
19
|
|
Total expenses
|
|
|
|
2,592
|
|
|
2,883
|
|
13,445
|
|
|
11,538
|
|
Income before investment (loss) income from AlphaCat Funds and
Sidecars
|
|
|
|
2,887
|
|
|
1,782
|
|
9,054
|
|
|
10,562
|
|
Investment (loss) income from AlphaCat Funds and Sidecars
(a)
|
|
|
|
|
|
|
|
|
|
|
AlphaCat Sidecars
|
|
|
|
11
|
|
|
14
|
|
79
|
|
|
607
|
|
AlphaCat ILS Funds - Lower Risk (b)
|
|
|
|
961
|
|
|
1,998
|
|
(3,102
|
)
|
|
8,901
|
|
AlphaCat ILS Funds - Higher Risk (b)
|
|
|
|
(5,813
|
)
|
|
1,864
|
|
(22,662
|
)
|
|
7,471
|
|
BetaCat ILS Funds
|
|
|
|
827
|
|
|
644
|
|
536
|
|
|
3,623
|
|
PaCRe
|
|
|
|
-
|
|
|
-
|
|
-
|
|
|
(23
|
)
|
Validus' share of investment (loss) income from AlphaCat Funds
and Sidecars
|
|
|
|
(4,014
|
)
|
|
4,520
|
|
(25,149
|
)
|
|
20,579
|
|
Asset Management segment (loss) income
|
|
|
|
$
|
(1,127
|
)
|
|
$
|
6,302
|
|
$
|
(16,095
|
)
|
|
$
|
31,141
|
|
(a)
|
|
The investment income (loss) from 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 December 31,
|
|
Years Ended December 31,
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Managed investments
|
|
|
|
|
|
|
|
|
|
|
|
Managed net investment income (a)
|
|
|
|
|
$
|
41,609
|
|
|
$
|
35,875
|
|
|
$
|
152,955
|
|
|
$
|
141,718
|
|
Net realized gains on managed investments (a)
|
|
|
|
|
7,157
|
|
|
9,166
|
|
|
7,437
|
|
|
14,680
|
|
Change in net unrealized (losses) gains on managed investments (a)
|
|
|
|
|
(24,861
|
)
|
|
(67,676
|
)
|
|
6,371
|
|
|
14,106
|
|
Income (loss) from investment affiliates
|
|
|
|
|
6,345
|
|
|
2,166
|
|
|
22,010
|
|
|
(2,083
|
)
|
Total managed investment return
|
|
|
|
|
$
|
30,250
|
|
|
$
|
(20,469
|
)
|
|
$
|
188,773
|
|
|
$
|
168,421
|
|
Corporate expenses
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
$
|
5,582
|
|
|
$
|
19,973
|
|
|
$
|
48,598
|
|
|
$
|
72,249
|
|
Share compensation expenses
|
|
|
|
|
4,147
|
|
|
3,856
|
|
|
16,186
|
|
|
16,003
|
|
Finance expenses (a)
|
|
|
|
|
15,732
|
|
|
14,546
|
|
|
58,194
|
|
|
57,183
|
|
Dividends on preferred shares
|
|
|
|
|
5,828
|
|
|
2,203
|
|
|
15,861
|
|
|
4,455
|
|
Tax (benefit) (a)
|
|
|
|
|
(351
|
)
|
|
(21,237
|
)
|
|
(7,588
|
)
|
|
(19,819
|
)
|
Total Corporate expenses
|
|
|
|
|
$
|
30,938
|
|
|
$
|
19,341
|
|
|
$
|
131,251
|
|
|
$
|
130,071
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange (losses) gains (a)
|
|
|
|
|
(829
|
)
|
|
(850
|
)
|
|
(8,544
|
)
|
|
10,778
|
|
Other income (loss)
|
|
|
|
|
-
|
|
|
7
|
|
|
303
|
|
|
(766
|
)
|
Transaction expenses
|
|
|
|
|
-
|
|
|
-
|
|
|
(4,427
|
)
|
|
-
|
|
Total other items
|
|
|
|
|
$
|
(829
|
)
|
|
$
|
(843
|
)
|
|
$
|
(12,668
|
)
|
|
$
|
10,012
|
|
Total Corporate and Investments
|
|
|
|
|
$
|
(1,517
|
)
|
|
$
|
(40,653
|
)
|
|
$
|
44,854
|
|
|
$
|
48,362
|
|
(a)
|
|
These items exclude the components which are included in the Asset
Management segment income (loss) and amounts which are consolidated
from variable interest entities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the three months ended December 31,
2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per share
information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2017
|
|
|
|
|
Reinsurance Segment
|
|
Insurance Segment
|
|
Asset Management Segment and Consolidated
VIEs
|
|
Corporate & Investments
|
|
Eliminations
|
|
Total
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
51,960
|
|
|
$
|
377,014
|
|
|
$
|
14,998
|
|
|
$
|
-
|
|
|
$
|
(649
|
)
|
|
$
|
443,323
|
|
Reinsurance premiums ceded
|
|
|
|
(40,716
|
)
|
|
(56,378
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
649
|
|
|
|
(96,445
|
)
|
Net premiums written
|
|
|
|
11,244
|
|
|
320,636
|
|
|
|
14,998
|
|
|
|
-
|
|
|
|
-
|
|
|
|
346,878
|
|
Change in unearned premiums
|
|
|
|
239,320
|
|
|
12,393
|
|
|
|
52,886
|
|
|
|
-
|
|
|
|
-
|
|
|
|
304,599
|
|
Net premiums earned
|
|
|
|
250,564
|
|
|
333,029
|
|
|
|
67,884
|
|
|
|
-
|
|
|
|
-
|
|
|
|
651,477
|
|
Other insurance related income
|
|
|
|
15
|
|
|
3,957
|
|
|
|
6,778
|
|
|
|
-
|
|
|
|
(3,811
|
)
|
|
|
6,939
|
|
Total underwriting revenues
|
|
|
|
250,579
|
|
|
336,986
|
|
|
|
74,662
|
|
|
|
-
|
|
|
|
(3,811
|
)
|
|
|
658,416
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
135,804
|
|
|
244,908
|
|
|
|
99,130
|
|
|
|
-
|
|
|
|
-
|
|
|
|
479,842
|
|
Policy acquisition costs
|
|
|
|
58,107
|
|
|
60,403
|
|
|
|
8,557
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,067
|
|
General and administrative expenses
|
|
|
|
23,604
|
|
|
64,945
|
|
|
|
7,202
|
|
|
|
5,582
|
|
|
|
(3,811
|
)
|
|
|
97,522
|
|
Share compensation expenses
|
|
|
|
2,331
|
|
|
3,512
|
|
|
|
41
|
|
|
|
4,147
|
|
|
|
-
|
|
|
|
10,031
|
|
Total underwriting deductions
|
|
|
|
219,846
|
|
|
373,768
|
|
|
|
114,930
|
|
|
|
9,729
|
|
|
|
(3,811
|
)
|
|
|
714,462
|
|
Underwriting income (loss)
|
|
|
|
$
|
30,733
|
|
|
$
|
(36,782
|
)
|
|
$
|
(40,268
|
)
|
|
$
|
(9,729
|
)
|
|
$
|
-
|
|
|
$
|
(56,046
|
)
|
Net investment return (a)
|
|
|
|
-
|
|
|
-
|
|
|
|
9,405
|
|
|
|
30,250
|
|
|
|
-
|
|
|
|
39,655
|
|
Other items (b)
|
|
|
|
-
|
|
|
-
|
|
|
|
468
|
|
|
|
(22,038
|
)
|
|
|
-
|
|
|
|
(21,570
|
)
|
(Income) attributable to AlphaCat investors
|
|
|
|
-
|
|
|
-
|
|
|
|
(37,868
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(37,868
|
)
|
Net loss attributable to noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
|
|
67,136
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67,136
|
|
Net income (loss) available (attributable) to Validus common
shareholders
|
|
|
|
$
|
30,733
|
|
|
$
|
(36,782
|
)
|
|
$
|
(1,127
|
)
|
|
$
|
(1,517
|
)
|
|
$
|
-
|
|
|
$
|
(8,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2016
|
|
|
|
|
|
|
Reinsurance Segment
|
|
Insurance Segment
|
|
Asset Management Segment and Consolidated
VIEs
|
|
Corporate & Investments
|
|
Eliminations
|
|
Total
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
41,813
|
|
|
$
|
297,905
|
|
|
$
|
(264
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
339,454
|
|
Reinsurance premiums ceded
|
|
|
|
(7,773
|
)
|
|
(32,862
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,635
|
)
|
Net premiums written
|
|
|
|
34,040
|
|
|
265,043
|
|
|
|
(264
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
298,819
|
|
Change in unearned premiums
|
|
|
|
200,129
|
|
|
(24,900
|
)
|
|
|
66,351
|
|
|
|
-
|
|
|
|
-
|
|
|
|
241,580
|
|
Net premiums earned
|
|
|
|
234,169
|
|
|
240,143
|
|
|
|
66,087
|
|
|
|
-
|
|
|
|
-
|
|
|
|
540,399
|
|
Other insurance related income
|
|
|
|
9
|
|
|
284
|
|
|
|
4,664
|
|
|
|
-
|
|
|
|
(4,396
|
)
|
|
|
561
|
|
Total underwriting revenues
|
|
|
|
234,178
|
|
|
240,427
|
|
|
|
70,751
|
|
|
|
-
|
|
|
|
(4,396
|
)
|
|
|
540,960
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
93,503
|
|
|
164,417
|
|
|
|
17,206
|
|
|
|
-
|
|
|
|
-
|
|
|
|
275,126
|
|
Policy acquisition costs
|
|
|
|
55,352
|
|
|
58,394
|
|
|
|
7,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,889
|
|
General and administrative expenses
|
|
|
|
21,248
|
|
|
33,069
|
|
|
|
8,061
|
|
|
|
19,973
|
|
|
|
(4,396
|
)
|
|
|
77,955
|
|
Share compensation expenses
|
|
|
|
2,811
|
|
|
3,693
|
|
|
|
82
|
|
|
|
3,856
|
|
|
|
-
|
|
|
|
10,442
|
|
Total underwriting deductions
|
|
|
|
172,914
|
|
|
259,573
|
|
|
|
32,492
|
|
|
|
23,829
|
|
|
|
(4,396
|
)
|
|
|
484,412
|
|
Underwriting income (loss)
|
|
|
|
$
|
61,264
|
|
|
$
|
(19,146
|
)
|
|
$
|
38,259
|
|
|
$
|
(23,829
|
)
|
|
$
|
-
|
|
|
$
|
56,548
|
|
Net investment return (a)
|
|
|
|
-
|
|
|
-
|
|
|
|
2,548
|
|
|
|
(20,469
|
)
|
|
|
-
|
|
|
|
(17,921
|
)
|
Other items (b)
|
|
|
|
-
|
|
|
-
|
|
|
|
(225
|
)
|
|
|
3,645
|
|
|
|
-
|
|
|
|
3,420
|
|
(Income) attributable to AlphaCat investors
|
|
|
|
-
|
|
|
-
|
|
|
|
(7,080
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,080
|
)
|
Net (income) attributable to noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
|
|
(27,200
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(27,200
|
)
|
Net income (loss) available (attributable) to Validus common
shareholders
|
|
|
|
$
|
61,264
|
|
|
$
|
(19,146
|
)
|
|
$
|
6,302
|
|
|
$
|
(40,653
|
)
|
|
$
|
-
|
|
|
$
|
7,767
|
|
(a)
|
|
Net investment return includes net investment income, net realized
and change in net unrealized gains (losses) on investments and
income (loss) from investment affiliates.
|
(b)
|
|
Other items includes finance expenses, transaction expenses,
dividends on preferred shares, tax benefit (expense), foreign
exchange gains (losses), income (loss) from operating affiliate and
other income (loss).
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Segment Information
|
For the years ended December 31, 2017 and
2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
Reinsurance Segment
|
|
Insurance Segment
|
|
Asset Management Segment and Consolidated
VIEs
|
|
Corporate & Investments
|
|
Eliminations
|
|
Total
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
1,195,207
|
|
|
$
|
1,453,133
|
|
|
$
|
312,819
|
|
|
$
|
-
|
|
|
$
|
(10,221
|
)
|
|
$
|
2,950,938
|
|
Reinsurance premiums ceded
|
|
|
|
(209,289
|
)
|
|
(261,055
|
)
|
|
(9,510
|
)
|
|
-
|
|
|
10,221
|
|
|
(469,633
|
)
|
Net premiums written
|
|
|
|
985,918
|
|
|
1,192,078
|
|
|
303,309
|
|
|
-
|
|
|
-
|
|
|
2,481,305
|
|
Change in unearned premiums
|
|
|
|
37,086
|
|
|
64,007
|
|
|
(1,310
|
)
|
|
-
|
|
|
-
|
|
|
99,783
|
|
Net premiums earned
|
|
|
|
1,023,004
|
|
|
1,256,085
|
|
|
301,999
|
|
|
-
|
|
|
-
|
|
|
2,581,088
|
|
Other insurance related income
|
|
|
|
67
|
|
|
7,035
|
|
|
23,896
|
|
|
-
|
|
|
(18,122
|
)
|
|
12,876
|
|
Total underwriting revenues
|
|
|
|
1,023,071
|
|
|
1,263,120
|
|
|
325,895
|
|
|
-
|
|
|
(18,122
|
)
|
|
2,593,964
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
692,719
|
|
|
934,199
|
|
|
673,260
|
|
|
-
|
|
|
-
|
|
|
2,300,178
|
|
Policy acquisition costs
|
|
|
|
199,430
|
|
|
241,186
|
|
|
30,937
|
|
|
-
|
|
|
-
|
|
|
471,553
|
|
General and administrative expenses
|
|
|
|
80,177
|
|
|
207,186
|
|
|
34,298
|
|
|
48,598
|
|
|
(18,122
|
)
|
|
352,137
|
|
Share compensation expenses
|
|
|
|
10,762
|
|
|
12,774
|
|
|
389
|
|
|
16,186
|
|
|
-
|
|
|
40,111
|
|
Total underwriting deductions
|
|
|
|
983,088
|
|
|
1,395,345
|
|
|
738,884
|
|
|
64,784
|
|
|
(18,122
|
)
|
|
3,163,979
|
|
Underwriting income (loss)
|
|
|
|
$
|
39,983
|
|
|
$
|
(132,225
|
)
|
|
$
|
(412,989
|
)
|
|
$
|
(64,784
|
)
|
|
$
|
-
|
|
|
$
|
(570,015
|
)
|
Net investment return (a)
|
|
|
|
-
|
|
|
-
|
|
|
21,948
|
|
|
188,773
|
|
|
-
|
|
|
210,721
|
|
Other items (b)
|
|
|
|
-
|
|
|
-
|
|
|
737
|
|
|
(79,135
|
)
|
|
-
|
|
|
(78,398
|
)
|
Loss attributable to AlphaCat investors
|
|
|
|
-
|
|
|
-
|
|
|
16,929
|
|
|
-
|
|
|
-
|
|
|
16,929
|
|
Net loss attributable to noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
|
357,280
|
|
|
-
|
|
|
-
|
|
|
357,280
|
|
Net income (loss) available (attributable) to Validus common
shareholders
|
|
|
|
$
|
39,983
|
|
|
$
|
(132,225
|
)
|
|
$
|
(16,095
|
)
|
|
$
|
44,854
|
|
|
$
|
-
|
|
|
$
|
(63,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
Reinsurance Segment
|
|
Insurance Segment
|
|
Asset Management Segment and Consolidated
VIEs
|
|
Corporate & Investments
|
|
Eliminations
|
|
Total
|
Underwriting revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written
|
|
|
|
$
|
1,184,912
|
|
|
$
|
1,194,137
|
|
|
$
|
270,402
|
|
|
$
|
-
|
|
|
$
|
(746
|
)
|
|
$
|
2,648,705
|
|
Reinsurance premiums ceded
|
|
|
|
(121,331
|
)
|
|
(162,669
|
)
|
|
(6,451
|
)
|
|
-
|
|
|
746
|
|
|
(289,705
|
)
|
Net premiums written
|
|
|
|
1,063,581
|
|
|
1,031,468
|
|
|
263,951
|
|
|
-
|
|
|
-
|
|
|
2,359,000
|
|
Change in unearned premiums
|
|
|
|
(67,432
|
)
|
|
(28,524
|
)
|
|
(13,879
|
)
|
|
-
|
|
|
-
|
|
|
(109,835
|
)
|
Net premiums earned
|
|
|
|
996,149
|
|
|
1,002,944
|
|
|
250,072
|
|
|
-
|
|
|
-
|
|
|
2,249,165
|
|
Other insurance related income
|
|
|
|
25
|
|
|
1,367
|
|
|
22,386
|
|
|
-
|
|
|
(20,817
|
)
|
|
2,961
|
|
Total underwriting revenues
|
|
|
|
996,174
|
|
|
1,004,311
|
|
|
272,458
|
|
|
-
|
|
|
(20,817
|
)
|
|
2,252,126
|
|
Underwriting deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses
|
|
|
|
415,505
|
|
|
604,741
|
|
|
44,851
|
|
|
-
|
|
|
-
|
|
|
1,065,097
|
|
Policy acquisition costs
|
|
|
|
189,797
|
|
|
232,780
|
|
|
26,905
|
|
|
-
|
|
|
-
|
|
|
449,482
|
|
General and administrative expenses
|
|
|
|
85,000
|
|
|
165,529
|
|
|
34,333
|
|
|
72,249
|
|
|
(20,817
|
)
|
|
336,294
|
|
Share compensation expenses
|
|
|
|
11,668
|
|
|
14,987
|
|
|
249
|
|
|
16,003
|
|
|
-
|
|
|
42,907
|
|
Total underwriting deductions
|
|
|
|
701,970
|
|
|
1,018,037
|
|
|
106,338
|
|
|
88,252
|
|
|
(20,817
|
)
|
|
1,893,780
|
|
Underwriting income (loss)
|
|
|
|
$
|
294,204
|
|
|
$
|
(13,726
|
)
|
|
$
|
166,120
|
|
|
$
|
(88,252
|
)
|
|
$
|
-
|
|
|
$
|
358,346
|
|
Net investment return (a)
|
|
|
|
-
|
|
|
-
|
|
|
13,106
|
|
|
168,421
|
|
|
(597
|
)
|
|
180,930
|
|
Other items (b)
|
|
|
|
-
|
|
|
-
|
|
|
(1,364
|
)
|
|
(31,807
|
)
|
|
-
|
|
|
(33,171
|
)
|
(Income) attributable to AlphaCat investors
|
|
|
|
-
|
|
|
-
|
|
|
(23,358
|
)
|
|
-
|
|
|
-
|
|
|
(23,358
|
)
|
Net (income) attributable to noncontrolling interests
|
|
|
|
-
|
|
|
-
|
|
|
(123,363
|
)
|
|
-
|
|
|
-
|
|
|
(123,363
|
)
|
Net income (loss) available (attributable) to Validus common
shareholders
|
|
|
|
$
|
294,204
|
|
|
$
|
(13,726
|
)
|
|
$
|
31,141
|
|
|
$
|
48,362
|
|
|
$
|
(597
|
)
|
|
$
|
359,384
|
|
(a)
|
|
Net investment return includes net investment income, net realized
and change in net unrealized gains (losses) on investments and
income (loss) from investment affiliates.
|
(b)
|
|
Other items includes finance expenses, transaction expenses,
dividends on preferred shares, tax benefit (expense), foreign
exchange gains (losses), income (loss) from operating affiliate and
other income (loss).
|
|
|
|
Non-GAAP Financial Measures
In presenting the Company's results, management has included and
discussed certain non-GAAP financial measures. The Company believes that
these non-GAAP measures, which may be defined and calculated differently
by other companies, better explain and enhance the understanding of the
Company's results of operations. However, these measures should not be
viewed as a substitute for those determined in accordance with U.S. GAAP.
In addition to presenting book value per common share determined in
accordance with U.S. GAAP, the Company believes that the following
non-GAAP book value financial measures are key financial indicators for
evaluating performance and measuring overall growth: book value per
diluted common share, book value per diluted common share plus
accumulated dividends and tangible book value per diluted common share.
A reconciliation of book value per common share, a GAAP financial
measure, to the non-GAAP book value financial measures has been included
below.
In addition to presenting net (loss) income (attributable) available to
Validus common shareholders determined in accordance with U.S. GAAP, the
Company believes that showing net operating income (loss) available
(attributable) to Validus common shareholders, a non-GAAP financial
measure, provides investors with a valuable measure of profitability and
enables investors, analysts, rating agencies and other users of its
financial information to more easily analyze the Company's results in a
manner similar to how management analyzes the Company's underlying
business performance.
Net operating income (loss) available (attributable) to Validus common
shareholders, a non-GAAP financial measure, is calculated by the
addition or subtraction of certain Consolidated Statement of (Loss)
Income line items from net (loss) income (attributable) available to
Validus common shareholders, the most directly comparable GAAP financial
measure, and measures the performance of the Company's operations
without the influence of gains or losses on investments and foreign
currencies and other items as noted in the reconciliation below. The
Company excludes these items from its calculation of net operating
income (loss) available (attributable) to Validus common shareholders
because the amount of these gains and losses is heavily influenced by,
and fluctuates in part, according to availability of investment market
opportunities and other factors. The Company believes these amounts are
largely independent of its core underwriting activities and including
them distorts the analysis of trends in its operations. The Company
believes the reporting of net operating income (loss) available
(attributable) to Validus common shareholders enhances the understanding
of results by highlighting the underlying profitability of the Company's
core (re)insurance operations. This profitability is influenced
significantly by earned premium growth, adequacy of the Company's
pricing, as well as loss frequency and severity. Over time it 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.
Return on average equity, a GAAP financial measure, and net operating
return on average equity, a non-GAAP financial measure, represents the
returns generated on common shareholders' equity during the year and are
presented below.
|
|
|
|
|
Validus Holdings, Ltd.
|
Non-GAAP Financial Measures Reconciliation
|
Book Value per Common Share, Book Value per Diluted Common Share
and Tangible Book Value per Diluted Common Share
|
As at December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
Equity Amount
|
|
Common Shares
|
|
Per Share Amount (a)
|
Book value per common share (b)
|
|
|
|
$
|
3,495,072
|
|
|
79,319,550
|
|
$
|
44.06
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
Assumed exercise of outstanding stock options (c)(d)
|
|
|
|
-
|
|
|
-
|
|
|
Unvested restricted shares
|
|
|
|
-
|
|
|
2,503,859
|
|
|
Book value per diluted common share (e)
|
|
|
|
3,495,072
|
|
|
81,823,409
|
|
$
|
42.71
|
Goodwill
|
|
|
|
(229,573
|
)
|
|
-
|
|
|
Intangible assets
|
|
|
|
(171,411
|
)
|
|
-
|
|
|
Tangible book value per diluted common share (e)
|
|
|
|
$
|
3,094,088
|
|
|
81,823,409
|
|
$
|
37.81
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share (e)
|
|
|
|
|
|
|
|
$
|
42.71
|
Accumulated dividends
|
|
|
|
|
|
|
|
13.08
|
Book value per diluted common share plus accumulated dividends (e)
|
|
|
|
|
|
|
|
$
|
55.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
Equity Amount
|
|
Common Shares
|
|
Per Share Amount (a)
|
Book value per common share (b)
|
|
|
|
$
|
3,688,291
|
|
|
79,132,252
|
|
$
|
46.61
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
Assumed exercise of outstanding stock options (c)(d)
|
|
|
|
614
|
|
|
26,136
|
|
|
Unvested restricted shares
|
|
|
|
-
|
|
|
2,868,610
|
|
|
Book value per diluted common share (e)
|
|
|
|
3,688,905
|
|
|
82,026,998
|
|
$
|
44.97
|
Goodwill
|
|
|
|
(196,758
|
)
|
|
-
|
|
|
Intangible assets
|
|
|
|
(115,592
|
)
|
|
-
|
|
|
Tangible book value per diluted common share (e)
|
|
|
|
$
|
3,376,555
|
|
|
82,026,998
|
|
$
|
41.16
|
|
|
|
|
|
|
|
|
|
Book value per diluted common share (e)
|
|
|
|
|
|
|
|
$
|
44.97
|
Accumulated dividends
|
|
|
|
|
|
|
|
11.56
|
Book value per diluted common share plus accumulated dividends (e)
|
|
|
|
|
|
|
|
$
|
56.53
|
(a)
|
|
Per share amounts are calculated by dividing the equity amount by
the common shares.
|
(b)
|
|
The equity amount used in the calculation of book value per common
share represents total shareholders' equity available to Validus
excluding the liquidation value of the preferred shares.
|
(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.
|
(d)
|
|
At December 31, 2017, the weighted average exercise price for those
stock options that had an exercise price lower than book value per
share was $nil (December 31, 2016: $23.48).
|
(e)
|
|
Non-GAAP financial measure.
|
|
|
|
|
|
|
|
|
|
|
Validus Holdings, Ltd.
|
Non-GAAP Financial Measures Reconciliation
|
Net Operating Income (Loss) available (attributable) to Validus
Common Shareholders, Net Operating Income (Loss) per Diluted Share
available (attributable) to Validus Common Shareholders and
Annualized Net Operating Return on Average Equity
|
For the three months and years ended
December 31, 2017 and 2016
|
(Expressed in thousands of U.S. dollars, except share and per
share information)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net (loss) income (attributable) available to Validus common
shareholders
|
|
|
|
$
|
(8,693
|
)
|
|
$
|
7,767
|
|
|
$
|
(63,483
|
)
|
|
$
|
359,384
|
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) on investments
|
|
|
|
(5,607
|
)
|
|
(9,220
|
)
|
|
(7,623
|
)
|
|
(15,757
|
)
|
Change in net unrealized losses (gains) on investments
|
|
|
|
21,257
|
|
|
67,460
|
|
|
(3,215
|
)
|
|
(16,871
|
)
|
(Income) loss from investment affiliates
|
|
|
|
(6,345
|
)
|
|
(2,166
|
)
|
|
(22,010
|
)
|
|
2,083
|
|
Foreign exchange losses (gains)
|
|
|
|
283
|
|
|
901
|
|
|
7,447
|
|
|
(10,864
|
)
|
Other (income) loss
|
|
|
|
-
|
|
|
(7
|
)
|
|
(303
|
)
|
|
766
|
|
Transaction expenses
|
|
|
|
-
|
|
|
-
|
|
|
4,427
|
|
|
-
|
|
Net income (loss) attributable to noncontrolling interests
|
|
|
|
4,597
|
|
|
(412
|
)
|
|
(767
|
)
|
|
457
|
|
Tax (benefit) expense (a)
|
|
|
|
(1,339
|
)
|
|
(5,863
|
)
|
|
521
|
|
|
1,687
|
|
Net operating income (loss) available (attributable) to Validus
common shareholders (b)
|
|
|
|
$
|
4,153
|
|
|
$
|
58,460
|
|
|
$
|
(85,006
|
)
|
|
$
|
320,885
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of diluted common shares outstanding
|
|
|
|
78,966,938
|
|
|
80,621,967
|
|
|
79,091,376
|
|
|
82,359,460
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per diluted share (attributable) available to
Validus common shareholders
|
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.80
|
)
|
|
$
|
4.36
|
|
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) on investments
|
|
|
|
(0.07
|
)
|
|
(0.11
|
)
|
|
(0.10
|
)
|
|
(0.19
|
)
|
Change in net unrealized losses (gains) on investments
|
|
|
|
0.27
|
|
|
0.84
|
|
|
(0.04
|
)
|
|
(0.20
|
)
|
(Income) loss from investment affiliates
|
|
|
|
(0.08
|
)
|
|
(0.03
|
)
|
|
(0.28
|
)
|
|
0.03
|
|
Foreign exchange losses (gains)
|
|
|
|
-
|
|
|
0.01
|
|
|
0.09
|
|
|
(0.14
|
)
|
Other (income) loss
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
Transaction expenses
|
|
|
|
-
|
|
|
-
|
|
|
0.06
|
|
|
-
|
|
Net income (loss) attributable to noncontrolling interests
|
|
|
|
0.06
|
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
0.01
|
|
Tax (benefit) expense (a)
|
|
|
|
(0.02
|
)
|
|
(0.07
|
)
|
|
0.01
|
|
|
0.02
|
|
Net operating income (loss) per diluted share available
(attributable) to
Validus common shareholders (b)
|
|
|
|
$
|
0.05
|
|
|
$
|
0.73
|
|
|
$
|
(1.07
|
)
|
|
$
|
3.90
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders' equity available to Validus common
shareholders (c)
|
|
|
|
$
|
3,515,680
|
|
|
$
|
3,702,956
|
|
|
$
|
3,658,591
|
|
|
$
|
3,697,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized return on average equity
|
|
|
|
(1.0
|
%)
|
|
0.8
|
%
|
|
(1.7
|
%)
|
|
9.7
|
%
|
Annualized net operating return on average equity (b)
|
|
|
|
0.5
|
%
|
|
6.3
|
%
|
|
(2.3
|
%)
|
|
8.7
|
%
|
(a)
|
|
Represents the tax expense or benefit associated with the specific
country to which the pre-tax adjustment relates to. The tax impact
is estimated by applying the statutory rates of applicable
jurisdictions, after consideration of other relevant factors
including the ability to utilize tax losses carried forward.
|
(b)
|
|
Non-GAAP financial measure.
|
(c)
|
|
Average shareholders' equity for the three months ended is the
average of the beginning and ending quarter end shareholders' equity
balances, excluding the liquidation value of the preferred shares.
|
|
|
|
Cautionary Note Regarding Forward-Looking Statements
Certain statements herein may include projections, goals, assumptions
and statements that may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, and
Validus may make related oral, forward-looking statements on or
following the date hereof. These projections, goals, assumptions and
statements are not historical facts but instead represent only Validus'
belief regarding future events, many of which, by their nature, are
inherently uncertain and outside Validus' control. These projections,
goals, assumptions and statements include statements preceded by,
followed by or including words such as "will," "believe," "anticipate,"
"expect," "intend," "plan," "focused on achieving," "view," "target,"
"goal," or "estimate." Accordingly, there are or will be important
factors that could cause Validus' actual results and financial condition
to differ, possibly materially, from the results and financial condition
indicated in these projections, goals, assumptions and 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; 17) availability of reinsurance and retrocessional coverage; 18)
the inability to complete the proposed transaction with AIG (the
"proposed transaction") because, among other reasons, conditions to the
closing of the proposed transaction may not be satisfied or waived; 19)
uncertainty as to the timing of completion of the proposed transaction;
20) the inability to complete the proposed transaction due to the
failure to obtain Validus shareholder approval for the proposed
transaction or the failure to satisfy other conditions to completion of
the proposed transaction, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of the
transaction; 21) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; 22) risks related to disruption of management's attention
from Validus' ongoing business operations due to the proposed
transaction; 23) the effect of the announcement of the proposed
transaction on Validus' relationships with its clients, operating
results and business generally; and 24) the outcome of any legal
proceedings to the extent initiated against Validus or others following
the announcement of the proposed transaction, as well as Validus'
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 Validus on file with or furnished to the
Securities and Exchange Commission ("SEC"). Any forward-looking
statements made in this material 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, Validus undertakes no obligation to update publicly or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, Validus will file with the
SEC a proxy statement on Schedule 14A and may file or furnish other
documents with the SEC regarding the proposed transaction. This material
is not a substitute for the proxy statement or any other document which
Validus may file with the SEC. INVESTORS IN AND SECURITY HOLDERS OF
VALIDUS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS THAT ARE FILED OR FURNISHED OR WILL BE FILED OR WILL BE
FURNISHED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND
RELATED MATTERS. Investors and security holders may obtain free copies
of the proxy statement (when available) and other documents filed with
or furnished to the SEC by Validus through the web site maintained by
the SEC at www.sec.gov
or by contacting the investor relations department of Validus.
Participants in the Solicitation
Validus and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Validus' shareholders
in connection with the proposed transaction. Information regarding
Validus' directors and executive officers, including a description of
their direct interests, by security holdings or otherwise, is contained
in Validus' annual proxy statement filed with the SEC on March 16, 2017.
A more complete description will be available in the proxy statement on
Schedule 14A. You may obtain free copies of these documents as described
in the preceding paragraph filed, with or furnished to the SEC. All such
documents, when filed or furnished, are available free of charge at the
SEC's website (www.sec.gov)
or by directing a request to the investor relations department of
Validus.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180201006495/en/
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