Validus Profit Hit By Australian Floods
Bermuda-based Validus Holdings, Ltd. yesterday [Feb. 10] reported net income of $102.7 million, or $0.92 per diluted common share for the three months ended December 31, 2010, compared with net income of $165.8 million, or $1.23 per diluted common share, for the three months ended December 31, 2009. Net income for the year ended December 31, 2010 was $402.6 million, or $3.34 per diluted common share compared with $897.4 million, or $9.24 per diluted common share, for the year ended December 31, 2009.
Validus, which operates from offices on Par-La-Ville Road, said its fourth-quarter profit fell 38 percent as the global re/insurer dealt with claims from flooding in Australia, a terrorist attack and other events.
Validus Holdings, Ltd. is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”). Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.
Net operating income for the three months ended December 31, 2010 was $156.4 million, or $1.40 per diluted share, compared with net operating income of $176.9 million, or $1.31 per diluted common share, for the three months ended December 31, 2009. Net operating income for the year ended December 31, 2010 was $322.8 million, or $2.68 per diluted common share, compared with net operating income of $533.3 million, or $5.49 per diluted common share, for the year ended December 31, 2009.
Net operating income, a non-GAAP financial measure, is defined as net income excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items. Reconciliations of this measure to net income, the most directly comparable GAAP measure, are presented at the end of this release.
In relation to the fourth quarter and the year ended December 31, 2010 results, Ed Noonan, Chairman and Chief Executive Officer of Validus commented: “Our fourth quarter net income of $102.7 million brings our full year 2010 net income to $402.6 million. The worldwide reinsurance market absorbed multiple significant loss events in 2010, including earthquakes in Chile and New Zealand, flooding and severe weather in Australia, and Deepwater Horizon, among others. With all of this, Validus increased book value per share plus dividends by 14.1% during 2010. After five full years of operations, Validus has grown diluted book value per share plus dividends at a compounded annual rate of 15.9% and generated cumulative net income of $1.94 billion. We have grown our Company into a global leader in short-tail lines of insurance and reinsurance while rewarding shareholders with $1.19 billion of dividends and share repurchases.”
January 2011 Reinsurance Renewals – Validus Re segment
During the January renewal season, the Validus Re segment underwrote $525.3 million in gross premiums written, a decrease of 8.5% from the prior year period. This renewal data does not include Talbot’s operations as its business is distributed relatively evenly throughout the year.
Below is a table outlining the Validus Re segment’s January 2011 reinsurance renewals.
|
January 2011 Gross Premiums Written – Validus Re segment (unaudited)
|
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|
U.S.
Property |
International
Property |
Marine | Specialty | Total | |||||||||||||||||
| (U.S. $ millions) | |||||||||||||||||||||
| 2011 | $ | 188.0 | $ | 129.9 | $ | 157.5 | $ | 49.9 | $ | 525.3 | |||||||||||
| 2010 | 213.3 | 160.4 | 146.3 | 54.3 | 574.3 | ||||||||||||||||
|
% (Decrease) Increase
|
(11.9 | )% | (19.0 | )% | 7.7 | % | (8.1 | )% | (8.5 | )% | |||||||||||
Chairman and Chief Executive Officer Ed Noonan commented on 2011 business conditions: “As we approached the January 2011 renewal season, we expected competitive market conditions. Our approach was to deploy our significant capacity where pricing warranted it, and to seek out clients where our ability to generate customized solutions brought additional value we could get paid for. In the U.S., we grew our Cat XOL premium and decreased proportional business. We decreased our International Property business as market conditions dictated. In the aftermath of 2010’s Deepwater Horizon loss, we saw additional opportunities and rate increases in Marine. Within Specialty, we grew our terrorism business among other sub-classes.”
Fourth quarter 2010 results
Highlights for the fourth quarter include the following:
Gross premiums written for the three months ended December 31, 2010 were $258.7 million compared to $255.3 million for the three months ended December 31, 2009, an increase of $3.4 million, or 1.3%.
- Net premiums earned for the three months ended December 31, 2010 were $432.8 million compared to $427.9 million for the three months ended December 31, 2009, an increase of $4.9 million, or 1.1%.
- Underwriting income for the three months ended December 31, 2010 was $139.7 million compared to $153.6 million for the three months ended December 31, 2009, a decrease of $13.9 million, or 9.1%.
- Combined ratio of 67.7% for the three months ended December 31, 2010, which included $30.6 million of favorable prior year loss reserve development, benefiting the loss ratio by 7.1 percentage points, compared to a combined ratio of 64.1% for the three months ended December 31, 2009, which included $48.7 million of favorable prior year loss reserve development, benefiting the loss ratio by 11.4 percentage points.
- Net operating income for the three months ended December 31, 2010 of $156.4 million compared to net operating income of $176.9 million for the three months ended December 31, 2009, a decrease of $20.6 million, or 11.6%, reflecting decreased underwriting and investment income.
- Net income for the three months ended December 31, 2010 was $102.7 million compared to net income of $165.8 million for the three months ended December 31, 2009, a decrease of $63.1 million, or 38.1%, reflecting a decrease in net operating income and an increase in net realized and unrealized losses on investments.
- Annualized return on average equity of 11.3% and annualized net operating return on average equity of 17.2%.
Full year 2010 results
Highlights for the year ended December 31, 2010 include the following:
- Net operating income for the year ended December 31, 2010 of $322.8 million compared to net operating income of $533.3 million for the year ended December 31, 2009, a decrease of $210.5 million, or 39.5%, reflecting decreased underwriting income.
- Net income for the year ended December 31, 2010 was $402.6 million compared to net income of $897.4 million for the year ended December 31, 2009, a decrease of $494.8 million, or 55.1%, due to the significant non-recurring gain on bargain purchase, net of expenses of $287.1 million relating to the IPC Acquisition in 2009.
- Gross premiums written for the year ended December 31, 2010 were $1,990.6 million compared to $1,621.2 million for the year ended December 31, 2009, an increase of $369.3 million, or 22.8%.
- Net premiums earned for the year ended December 31, 2010 were $1,761.1 million, compared to $1,449.6 million for the year ended December 31, 2009, an increase of $311.5 million, or 21.5%.
- Combined ratio of 86.2% for the year ended December 31, 2010, which included $156.6 million of favorable prior year loss reserve development, benefiting the loss ratio by 8.9 percentage points, compared to a combined ratio of 68.9% for the year ended December 31, 2009, which included $102.1 million of favorable prior year loss reserve development, benefiting the loss ratio by 7.0 percentage points.
Notable Loss Events
For the three months ended December 31, 2010, the Company incurred $51.8 million from the notable loss events described below, which represented 12.0 percentage points of the fourth quarter loss ratio, excluding reserve for potential development on 2010 notable loss events. Net of ($1.6) million of reinstatement premiums, the effect of these events on net income was $53.4 million. For the three months ended December 31, 2009, the Company incurred $5.7 million from notable loss events, which represented 1.3 percentage point of the loss ratio. The Company’s loss ratio, excluding prior year development and notable loss events, for the three months ended December 31, 2010 and 2009 were 32.3% and 41.2%, respectively.
|
Fourth Quarter 2010 Notable Loss Events (1)
|
Three months ended December 31, 2010 | |||||||||||||||||||
| Validus Re | Talbot | Total | ||||||||||||||||||
| (Dollars in thousands) | Description |
Losses and
Loss Expenses (2) |
% of NPE |
Losses and
Loss Expenses (2) |
% of NPE |
Losses and
Loss Expenses (2) |
% of NPE | |||||||||||||
| Queensland floods | Flood | $ | 10,000 | 4.0 | % | $ | 15,000 | 8.0 | % | $ | 25,000 | 5.8 | % | |||||||
| Political violence | Terror attack | 12,500 | 5.1 | % | - | - | 12,500 | 2.9 | % | |||||||||||
| Satellite loss | Failure | 5,804 | 2.4 | % | 2,982 | 1.6 | % | 8,786 | 2.0 | % | ||||||||||
| Financial institution | Investment house failure | - | - | 5,487 | 3.0 | % | 5,487 | 1.3 | % | |||||||||||
| Total | $ | 28,304 | 11.5 | % | $ | 23,469 | 12.6 | % | $ | 51,773 | 12.0 | % | ||||||||
| Fourth Quarter 2009 Notable Loss Events | Three months ended December 31, 2009 | |||||||||||||||||||
| Validus Re | Talbot | Total | ||||||||||||||||||
| (Dollars in thousands) | Description |
Losses and
Loss Expenses (2) |
% of NPE |
Losses and
Loss Expenses (2) |
% of NPE |
Losses and
Loss Expenses (2) |
% of NPE | |||||||||||||
| Dublin floods | Flood | $ | 5,732 | 2.2 | % | $ |
-
|
- | $ | 5,732 | 1.3 | % | ||||||||
| Total | $ | 5,732 | 2.2 | % | $ | - | - | $ | 5,732 | 1.3 | % | |||||||||
(1) These 2010 notable loss event amounts are based on management’s estimates following a review of the Company’s potential exposure and discussions with certain clients and brokers. Given the magnitude and recent occurrence of these events, and other uncertainties inherent in loss estimation, uncertainty remains regarding losses from these events and the Company’s actual ultimate net losses from these events may vary materially from these estimates.
(2) Net of reinsurance but not net of reinstatement premiums. Reinstatement premiums were $(1.6) million and $0.3 million for the three months ended December 31, 2010 and 2009, respectively.
Validus Re Segment Results
Gross premiums written for the three months ended December 31, 2010 were $34.0 million compared to $33.7 million for the three months ended December 31, 2009, an increase of $0.3 million, or 0.9%. Gross premiums written for the three months ended December 31, 2010 included $17.3 million of property premiums, $4.2 million of marine premiums and $12.5 million of specialty premiums compared to $21.2 million of property premiums, ($1.1) million of marine premiums and $13.6 million of specialty premiums in the three months ended December 31, 2009.
Net premiums earned for the three months ended December 31, 2010 were $246.3 million compared to $257.6 million for the three months ended December 31, 2009, a decrease of $11.3 million, or 4.4%.
The combined ratio for the three months ended December 31, 2010 was 42.1% compared to 40.2% for the three months ended December 31, 2009, an increase of 1.9 percentage points.
The loss ratio for the three months ended December 31, 2010 was 20.2% compared to 17.1% for the three months ended December 31, 2009, an increase of 3.1 percentage points, due primarily to notable loss events in the three months ended December 31, 2010, which added 11.5 percentage points to the loss ratio. The loss ratio for the three months ended December 31, 2010 included favorable prior year loss reserve development of $22.1 million, benefiting the loss ratio by 9.0 percentage points. The loss ratio for the three months ended December 31, 2009 included favorable prior year loss reserve development of $28.9 million, benefiting the loss ratio by 11.2%.
Gross premiums written for the year ended December 31, 2010 were $1,101.2 million compared to $768.1 million for the year ended December 31, 2009, an increase of $333.2 million, or 43.4%. Gross premiums written for the year ended December 31, 2010 included $790.6 million of property premiums, $227.1 million of marine premiums and $83.5 million of specialty premiums compared to $526.4 million of property premiums, $152.9 million of marine premiums and $88.8 million of specialty premiums in the year ended December 31, 2009.
Net premiums earned for the year ended December 31, 2010 were $1,051.2 million compared to $795.6 million for the year ended December 31, 2009, an increase of $255.7 million, or 32.1%.
The combined ratio for the year ended December 31, 2010 was 77.5% compared to 48.7% for the year ended December 31, 2009, an increase of 28.8 percentage points.
The loss ratio for the year ended December 31, 2010 was 57.2% compared to 23.5% for the year ended December 31, 2009, an increase of 33.7 percentage points. The loss ratio for the year ended December 31, 2010 included losses from notable loss events, which represented 40.7 percentage points of the loss ratio. The loss ratio for the year ended December 31, 2010 included favorable prior year loss reserve development of $70.6 million, benefiting the loss ratio by 6.7 percentage points. The loss ratio for the year ended December 31, 2009 included favorable prior year loss reserve development of $53.0 million, benefiting the loss ratio by 6.7%.
Talbot Segment Results
Gross premiums written for the three months ended December 31, 2010 were $238.1 million compared to $229.5 million for the three months ended December 31, 2009, an increase of $8.6 million, or 3.7%. Gross premiums written for the three months ended December 31, 2010 included $58.2 million of property premiums, $68.4 million of marine premiums and $111.5 million of specialty premiums compared to $50.9 million of property premiums, $62.7 million of marine premiums and $115.9 million of specialty premiums in the three months ended December 31, 2009.
Net premiums earned for the three months ended December 31, 2010 were $186.5 million compared to $170.3 million for the three months ended December 31, 2009, an increase of $16.2 million, or 9.5%.
The combined ratio for the three months ended December 31, 2010 was 94.1% compared to 93.2% for the three months ended December 31, 2009, an increase of 0.9 percentage points.
The loss ratio for the three months ended December 31, 2010 was 56.5% compared to 52.2% for the three months ended December 31, 2009, an increase of 4.3 percentage points. For the three months ended December 31, 2010, Talbot incurred $23.5 million of losses attributable to notable loss events, which represented 12.6 percentage points of the loss ratio. The loss ratio for the three months ended December 31, 2010 included favorable prior year loss reserve development of $8.5 million, benefiting the loss ratio by 4.6 percentage points. The loss ratio for the three months ended December 31, 2009 included favorable prior year loss reserve development of $19.8 million, benefiting the loss ratio by 11.7 percentage points.
Gross premiums written for the year ended December 31, 2010 were $981.1 million compared to $919.9 million for the year ended December 31, 2009, an increase of $61.2 million, or 6.6%. Gross premiums written for the year ended December 31, 2010 included $314.8 million of property premiums, $315.1 million of marine premiums and $351.2 million of specialty premiums compared to $269.6 million of property premiums, $307.4 million of marine premiums and $342.9 million of specialty premiums for the year ended December 31, 2009.
Net premiums earned for the year ended December 31, 2010 were $709.9 million compared to $654.0 million for the year ended December 31, 2009, an increase of $55.9 million, or 8.5%.
The combined ratio for the year ended December 31, 2010 was 91.7% compared to 88.7% for the year ended December 31, 2009, an increase of 3.0 percentage points.
The loss ratio for the year ended December 31, 2010 was 54.4% compared to 51.5% for the year ended December 31, 2009, an increase of 2.9 percentage points. The year ended December 31, 2010 included losses from notable loss events which represented 15.3 percentage points of the loss ratio. The loss ratio for the year ended December 31, 2010, included favorable prior year loss reserve development of $86.0 million, benefiting the loss ratio by 12.1 percentage points. The loss ratio for the year ended December 31, 2009 included favorable prior year loss reserve development of $49.1 million, benefiting the loss ratio by 7.5 percentage points.
Corporate Segment Results
Corporate segment results included executive and board expenses, internal and external audit expenses, interest and costs incurred in connection with the Company’s senior notes and junior subordinated deferrable debentures and other costs relating to the Company as a whole. General and administrative expenses for the three months ended December 31, 2010 were $11.5 million compared to $9.7 million for the three months ended December 31, 2009, an increase of $1.8 million, or 18.9%. Share compensation expenses for the three months ended December 31, 2010 were $3.8 million compared to $4.2 million for the three months ended December 31, 2009, a decrease of $0.4 million, or 10.3%. General and administrative expenses for the year ended December 31, 2010 were $49.6 million compared to $23.5 million for the year ended December 31, 2009, an increase of $26.1 million, or 111.1%. Share compensation expenses for the year ended December 31, 2010 were $14.8 million compared to $12.3 million for the year ended December 31, 2009, an increase of $2.5 million, or 20.5%. During the first quarter of 2010, to better align the Company’s operating and reporting structure with its current strategy, there was a change in the segment structure. This change was to allocate all ‘non-core underwriting’ expenses, predominantly general and administration and stock compensation expenses to the Corporate segment which contributed to the increase.
Investments
Net investment income for the three months ended December 31, 2010 was $31.0 million compared to $35.5 million for the three months ended December 31, 2009, a decrease of $4.5 million, or 12.8%. Net investment income for the year ended December 31, 2010 was $134.1 million compared to $118.8 million for the year ended December 31, 2009, an increase of $15.3 million, or 12.9%. Net investment income increased due primarily to a larger fixed maturity portfolio as a result of the IPC Acquisition.
Net realized losses on investments for the three months ended December 31, 2010 were ($14.4) million compared to net realized gains of $9.1 million for the three months ended December 31, 2009, a decrease of $23.5 million, or 258.2%. Net realized gains on investments for the year ended December 31, 2010 were $32.5 million compared to net realized losses of ($11.5) million for the year ended December 31, 2009, an increase of $44.0 million, or 381.5%.
Net unrealized losses on investments for the three months ended December 31, 2010 were ($42.7) million compared to net unrealized losses of ($25.0) million for the three months ended December 31, 2009, a decrease of $17.6 million, or 70.5%. Net unrealized gains on investments for the year ended December 31, 2010 were $46.0 million compared to $84.8 million for the year ended December 31, 2009, a decrease of $38.8 million, or 45.8%.
Finance Expenses
Finance expenses for the three months ended December 31, 2010 were $13.8 million compared to $14.4 million for the three months ended December 31, 2009, a decrease of $0.6 million, or 4.3%. Finance expenses for the year ended December 31, 2010 were $55.9 million compared to $44.1 million for the year ended December 31, 2009, an increase of $11.7 million, or 26.6%. This increase primarily related to the interest on the senior notes issued at the beginning of 2010. Finance expenses included interest on the Company’s senior notes and junior subordinated deferrable debentures.
Shareholders’ Equity and Capitalization
As at December 31, 2010, shareholders’ equity was $3.5 billion. Diluted book value per common share was $32.98 at December 31, 2010, compared to $32.02 at September 30, 2010. Diluted book value per common share is a non-GAAP financial measure. A reconciliation of this measure to shareholders’ equity is presented at the end of this release.
Total capitalization at December 31, 2010 was $4.0 billion, including $289.8 million of junior subordinated deferrable debentures and $246.9 million of senior notes.
Share Repurchases
A summary of the share repurchases made to date under the Company’s previously announced share repurchase program is as follows:
| Share Repurchase Activity by Quarter | ||||||||||||||||||
| Effect of share repurchases: |
As at December 31,
2009 (cumulative) |
March 31, 2010 | June 30, 2010 | September 30, 2010 |
December 31, 2010
|
|||||||||||||
| Aggregate purchase price (1) |
$
|
84,243 | $ | 128,278 | $ | 316,084 | $ | 62,443 |
$
|
350,122 | ||||||||
| Shares repurchased | 3,156,871 |
4,826,600
|
12,615,123
|
2,471,673
|
11,766,618
|
|||||||||||||
| Average price (1) |
$
|
26.69 | $ | 26.58 | $ | 25.06 | $ | 25.26 |
$
|
29.76 | ||||||||
|
Estimated net accretive (dilutive)
impact on: |
||||||||||||||||||
| Diluted BV per common share (2) | $ | 0.10 | $ | 0.66 | $ | 1.00 |
$
|
1.41 | ||||||||||
| Diluted EPS – Quarter (3) | $ | - | $ | 0.07 | $ | 0.30 |
$
|
0.15 | ||||||||||
| Share Repurchase Activity Post Year End | ||||||||||||||||||
| Effect of share repurchases: |
As at December 31,
2010 (cumulative) |
January 31, 2011 |
February 9,
2011 |
As at February 9,
2011 |
Cumulative to Date
Effect |
|||||||||||||
| Aggregate purchase price (1) |
$
|
941,170 | $ | 6,000 | $ | - | $ | 6,000 |
$
|
947,170 | ||||||||
| Shares repurchased | 34,836,885 | 195,100 | - |
195,100
|
35,031,985
|
|||||||||||||
| Average price (1) |
$
|
27.02 | $ | 30.75 | $ | - | $ | 30.75 |
$
|
27.04 | ||||||||
| (1) Share transactions are on a trade date basis through February 9, 2011 and are inclusive of commissions. Average share price is rounded to two decimal places. |
| (2) As the average price per share repurchased during the periods 2009 and 2010 was lower than the book value per common share, the repurchase of shares increased the ending book value per share. |
| (3) The estimated impact on diluted earnings per share was calculated by comparing reported results versus i) net income per share plus an estimate of lost net investment income on the cumulative share repurchases divided by ii) weighted average diluted shares outstanding excluding the weighted average impact of cumulative share repurchases. The impact of cumulative share repurchases was accretive to diluted earnings per share. |
|
Validus Holdings, Ltd.
Consolidated Balance Sheets As at December 31, 2010 and December 31, 2009 |
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|
(Expressed in thousands of U.S. dollars, except share and per share information)
|
||||||||
| December 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
| Assets | ||||||||
| Fixed maturities, at fair value (amortized cost: 2010 – $4,772,037; 2009 – $4,870,395) | $ | 4,823,867 | $ | 4,869,378 | ||||
| Short-term investments, at fair value (amortized cost: 2010 – $273,444; 2009 – $482,632) | 273,514 | 481,766 | ||||||
| Other investments, at fair value (amortized cost: 2010 – $18,392; 2009 – $35,941) | 21,478 | 37,615 | ||||||
| Cash and cash equivalents | 620,740 | 387,585 | ||||||
| Total investments and cash | 5,739,599 | 5,776,344 | ||||||
| Premiums receivable | 568,761 | 551,616 | ||||||
| Deferred acquisition costs | 123,897 | 112,329 | ||||||
| Prepaid reinsurance premiums | 71,417 | 73,164 | ||||||
| Securities lending collateral | 22,328 | 90,350 | ||||||
| Loss reserves recoverable | 283,134 | 181,765 | ||||||
| Paid losses recoverable | 27,996 | 14,782 | ||||||
| Income taxes recoverable | 1,142 | 2,043 | ||||||
| Intangible assets | 118,893 | 123,055 | ||||||
| Goodwill | 20,393 | 20,393 | ||||||
| Accrued investment income | 33,726 | 38,077 | ||||||
| Other assets | 49,592 | 35,222 | ||||||
| Total assets | $ | 7,060,878 | $ | 7,019,140 | ||||
| Liabilities | ||||||||
| Reserve for losses and loss expenses | $ | 2,035,973 | $ | 1,622,134 | ||||
| Unearned premiums | 728,516 | 724,104 | ||||||
| Reinsurance balances payable | 63,667 | 65,414 | ||||||
| Securities lending payable | 23,093 | 90,106 | ||||||
| Deferred income taxes | 24,908 | 24,508 | ||||||
| Net payable for investments purchased | 43,896 | 44,145 | ||||||
| Accounts payable and accrued expenses | 99,320 | 127,809 | ||||||
| Senior notes payable | 246,874 | - | ||||||
| Debentures payable | 289,800 | 289,800 | ||||||
| Total liabilities | 3,556,047 | 2,988,020 | ||||||
| Commitments and contingent liabilities | ||||||||
| Shareholders’ equity | ||||||||
| Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2010 – 132,838,111; | ||||||||
| 2009 – 131,616,349; Outstanding: 2010 – 98,001,226; 2009 – 128,459,478) | 23,247 | 23,033 | ||||||
| Treasury shares (2010 – 34,836,885; 2009 – 3,156,871) | (6,096 | ) | (553 | ) | ||||
| Additional paid-in-capital | 1,860,960 | 2,675,680 | ||||||
| Accumulated other comprehensive (loss) | (5,455 | ) | (4,851 | ) | ||||
| Retained earnings | 1,632,175 | 1,337,811 | ||||||
| Total shareholders’ equity | 3,504,831 | 4,031,120 | ||||||
| Total liabilities and shareholders’ equity | $ | 7,060,878 | $ | 7,019,140 | ||||
|
Validus Holdings, Ltd.
Consolidated Statements of Operations For the three months and year ended December 31, 2010 and 2009 |
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|
(Expressed in thousands of U.S. dollars, except share and per share information)
|
|||||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||
| 2010 | 2009 (1) | 2010 | 2009 (1) | ||||||||||||||||
| Underwriting income | |||||||||||||||||||
| Gross premiums written | $ | 258,731 | $ | 255,289 | $ | 1,990,566 | $ | 1,621,241 | |||||||||||
| Reinsurance premiums ceded | (35,376 | ) | (30,393 | ) | (229,482 | ) | (232,883 | ) | |||||||||||
| Net premiums written | 223,355 | 224,896 | 1,761,084 | 1,388,358 | |||||||||||||||
| Change in unearned premiums | 209,456 | 203,005 | 39 | 61,219 | |||||||||||||||
| Net premiums earned | 432,811 | 427,901 | 1,761,123 | 1,449,577 | |||||||||||||||
| Underwriting deductions | |||||||||||||||||||
| Losses and loss expenses | 155,225 | 133,020 | 987,586 | 523,757 | |||||||||||||||
| Policy acquisition costs | 75,523 | 72,843 | 292,899 | 262,966 | |||||||||||||||
| General and administrative expenses | 54,511 | 60,253 | 209,290 | 185,568 | |||||||||||||||
| Share compensation expenses | 7,871 | 8,189 | 28,911 | 27,037 | |||||||||||||||
| Total underwriting deductions | 293,130 | 274,305 | 1,518,686 | 999,328 | |||||||||||||||
| Underwriting income | $ | 139,681 | $ | 153,596 | $ | 242,437 | $ | 450,249 | |||||||||||
| Net investment income | 30,962 | 35,506 | 134,103 | 118,773 | |||||||||||||||
| Other income | 552 | 1,759 | 5,219 | 4,634 | |||||||||||||||
| Finance expenses | (13,786 | ) | (14,398 | ) | (55,870 | ) | (44,130 | ) | |||||||||||
| Operating income before taxes | 157,409 | 176,463 | 325,889 | 529,526 | |||||||||||||||
| Tax (expense) benefit | (1,058 | ) | 458 | (3,126 | ) | 3,759 | |||||||||||||
| Net operating income | $ | 156,351 | 176,921 | 322,763 | 533,285 | ||||||||||||||
| Gain on bargain purchase, net of expenses | - | - | - | 287,099 | |||||||||||||||
| Realized gain on repurchase of debentures | - | 4,444 | - | 4,444 | |||||||||||||||
| Net realized (losses) gains on investments | (14,399 | ) | 9,099 | 32,498 | (11,543 | ) | |||||||||||||
| Net unrealized (losses) gains on investments | (42,689 | ) | (25,043 | ) | 45,952 | 84,796 | |||||||||||||
| Foreign exchange gains (losses) | 3,424 | 338 | 1,351 | (674 | ) | ||||||||||||||
| Net income | $ | 102,687 | $ | 165,759 | $ | 402,564 | $ | 897,407 | |||||||||||
| Selected ratios: | |||||||||||||||||||
| Net premiums written / Gross premiums written | 86.3 | % | 88.1 | % | 88.5 | % | 85.6 | % | |||||||||||
| Losses and loss expenses | 35.9 | % | 31.1 | % | 56.1 | % | 36.1 | % | |||||||||||
| Policy acquisition costs | 17.4 | % | 17.0 | % | 16.6 | % | 18.1 | % | |||||||||||
| General and administrative expenses (2) | 14.4 | % | 16.0 | % | 13.5 | % | 14.7 | % | |||||||||||
| Expense ratio | 31.8 | % | 33.0 | % | 30.1 | % | 32.8 | % | |||||||||||
| Combined ratio | 67.7 | % | 64.1 | % | 86.2 | % | 68.9 | % | |||||||||||
|
(1)
|
Operating results of IPC have been included from the September 2009 date of acquisition.
|
|
|
(2)
|
The general and administrative expenses ratio includes share compensation expenses.
|
|
|
Validus Holdings, Ltd.
Consolidated Segment Underwriting Income For the three months and year ended December 31, 2010 and 2009 |
||||||||||||||||||
|
(Expressed in thousands of U.S. dollars, except share and per share information)
|
||||||||||||||||||
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||
| 2010 | 2009 (1) | 2010 | 2009 (1) | |||||||||||||||
|
Validus Re
|
||||||||||||||||||
| Gross premiums written | $ | 33,986 | $ | 33,694 | $ | 1,101,239 | $ | 768,084 | ||||||||||
| Reinsurance premiums ceded | (399 | ) | (652 | ) | (63,147 | ) | (95,446 | ) | ||||||||||
| Net premiums written | 33,587 | 33,042 | 1,038,092 | 672,638 | ||||||||||||||
| Change in unearned premiums | 212,737 | 224,596 | 13,108 | 122,912 | ||||||||||||||
| Net premiums earned | 246,324 | 257,638 | 1,051,200 | 795,550 | ||||||||||||||
| Losses and loss expenses | 49,799 | 44,134 | 601,610 | 186,704 | ||||||||||||||
| Policy acquisition costs | 39,299 | 37,088 | 160,599 | 127,433 | ||||||||||||||
| General and administrative expenses | 12,659 | 19,782 | 45,617 | 65,710 | ||||||||||||||
| Share compensation expenses | 1,934 | 2,590 | 7,181 | 7,576 | ||||||||||||||
| Total underwriting deductions | 103,691 | 103,594 | 815,007 | 387,423 | ||||||||||||||
| Underwriting income | 142,633 | 154,044 | 236,193 | 408,127 | ||||||||||||||
|
Talbot
|
||||||||||||||||||
| Gross premiums written | $ | 238,100 | $ | 229,548 | $ | 981,073 | $ | 919,906 | ||||||||||
| Reinsurance premiums ceded | (48,332 | ) | (37,694 | ) | (258,081 | ) | (204,186 | ) | ||||||||||
| Net premiums written | 189,768 | 191,854 | 722,992 | 715,720 | ||||||||||||||
| Change in unearned premiums | (3,281 | ) | (21,591 | ) | (13,069 | ) | (61,693 | ) | ||||||||||
| Net premiums earned | 186,487 | 170,263 | 709,923 | 654,027 | ||||||||||||||
| Losses and loss expenses | 105,426 | 88,886 | 385,976 | 337,053 | ||||||||||||||
| Policy acquisition costs | 37,726 | 37,555 | 143,769 | 139,932 | ||||||||||||||
| General and administrative expenses | 30,334 | 30,787 | 114,043 | 96,352 | ||||||||||||||
| Share compensation expenses | 2,142 | 1,367 | 6,923 | 7,171 | ||||||||||||||
| Total underwriting deductions | 175,628 | 158,595 | 650,711 | 580,508 | ||||||||||||||
| Underwriting income | 10,859 | 11,668 | 59,212 | 73,519 | ||||||||||||||
|
Corporate & Eliminations
|
||||||||||||||||||
| Gross premiums written | $ | (13,355 | ) | $ | (7,953 | ) | $ | (91,746 | ) | $ | (66,749 | ) | ||||||
| Reinsurance premiums ceded | 13,355 | 7,953 | 91,746 | 66,749 | ||||||||||||||
| Net premiums written | - | - | - | - | ||||||||||||||
| Change in unearned premiums | - | - | - | - | ||||||||||||||
| Net premiums earned | - | - | - | - | ||||||||||||||
| Losses and loss expenses | - | - | - | - | ||||||||||||||
| Policy acquisition costs | (1,502 | ) | (1,800 | ) | (11,469 | ) | (4,399 | ) | ||||||||||
| General and administrative expenses | 11,518 | 9,684 | 49,630 | 23,506 | ||||||||||||||
| Share compensation expenses | 3,795 | 4,232 | 14,807 | 12,290 | ||||||||||||||
| Total underwriting deductions | 13,811 | 12,116 | 52,968 | 31,397 | ||||||||||||||
| Underwriting (loss) | (13,811 | ) | (12,116 | ) | (52,968 | ) | (31,397 | ) | ||||||||||
| Total underwriting income | $ | 139,681 | $ | 153,596 | $ | 242,437 | $ | 450,249 | ||||||||||
(1) Operating results of IPC have been included from the September 2009 date of acquisition.
|
Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity For the three months and year ended December 31, 2010 and 2009 |
||||||||||||||||
|
(Expressed in thousands of U.S. dollars, except share and per share information)
|
||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net income | $ | 102,687 | $ | 165,759 | $ | 402,564 | $ | 897,407 | ||||||||
| Adjustments for: | ||||||||||||||||
| Gain on bargain purchase, net of expenses | - | - | - | (287,099 | ) | |||||||||||
| Realized (gain) on repurchase of debentures | - | (4,444 | ) | - | (4,444 | ) | ||||||||||
| Net realized losses (gains) on investments | 14,399 | (9,099 | ) | (32,498 | ) | 11,543 | ||||||||||
| Net unrealized losses (gains) on investments | 42,689 | 25,043 | (45,952 | ) | (84,796 | ) | ||||||||||
| Foreign exchange (gains) losses | (3,424 | ) | (338 | ) | (1,351 | ) | 674 | |||||||||
| Net operating income | 156,351 | 176,921 | 322,763 | 533,285 | ||||||||||||
| less: Dividends and distributions | ||||||||||||||||
| declared on outstanding warrants | (1,746 | ) | (1,590 | ) | (6,991 | ) | (6,507 | ) | ||||||||
| Net operating income, adjusted | $ | 154,605 | $ | 175,331 | $ | 315,772 | $ | 526,778 | ||||||||
| Net income per share – diluted | $ | 0.92 | $ | 1.23 | $ | 3.34 | $ | 9.24 | ||||||||
| Adjustments for: | ||||||||||||||||
| Gain on bargain purchase, net of expenses | - | - | - | (2.95 | ) | |||||||||||
| Realized (gain) on repurchase of debentures | - | (0.03 | ) | - | (0.05 | ) | ||||||||||
| Net realized losses (gains) on investments | 0.13 | (0.07 | ) | (0.27 | ) | 0.12 | ||||||||||
| Net unrealized losses (gains) on investments | 0.38 | 0.18 | (0.38 | ) | (0.88 | ) | ||||||||||
| Foreign exchange (gains) losses | (0.03 | ) | - | (0.01 | ) | 0.01 | ||||||||||
| Net operating income per share – diluted | $ | 1.40 | $ | 1.31 | $ | 2.68 | $ | 5.49 | ||||||||
| Weighted average number of common shares | ||||||||||||||||
| and common share equivalents | 111,316,736 | 134,794,120 | 120,630,945 | 97,168,409 | ||||||||||||
| Average shareholders’ equity | $ | 3,633,058 | $ | 3,998,656 | $ | 3,731,945 | $ | 2,822,200 | ||||||||
| Annualized net operating return on average equity | 17.2 | % | 17.7 | % | 8.6 | % | 18.9 | % | ||||||||
|
Validus Holdings, Ltd.
Non-GAAP Financial Measure Reconciliation Diluted Book Value Per Common Share As at December 31, 2010 and December 31, 2009 |
||||||||||||
|
(Expressed in thousands of U.S. dollars, except share and per share information)
|
||||||||||||
| As at December 31, 2010 | ||||||||||||
| Equity Amount | Shares | Exercise Price |
Book Value Per
Share |
|||||||||
| Book value per common share | ||||||||||||
| Total shareholders’ equity | $ | 3,504,831 | 98,001,226 | $ | 35.76 | |||||||
| Diluted book value per common share | ||||||||||||
| Total shareholders’ equity | 3,504,831 | 98,001,226 | ||||||||||
| Assumed exercise of outstanding warrants | 139,272 | 7,934,860 | $ | 17.55 | ||||||||
| Assumed exercise of outstanding stock options | 54,997 | 2,723,684 | $ | 20.19 | ||||||||
| Unvested restricted shares | - | 3,496,096 | ||||||||||
| Diluted book value per common share | $ | 3,699,100 | 112,155,866 | $ | 32.98 | |||||||
| As at December 31, 2009 | ||||||||||||
| Equity Amount | Shares | Exercise Price |
Book Value Per
Share |
|||||||||
| Book value per common share | ||||||||||||
| Total shareholders’ equity | $ | 4,031,120 | 128,459,478 | $ | 31.38 | |||||||
| Diluted book value per common share | ||||||||||||
| Total shareholders’ equity | 4,031,120 | 128,459,478 | ||||||||||
| Assumed exercise of outstanding warrants | 139,576 | 7,952,138 | $ | 17.55 | ||||||||
| Assumed exercise of outstanding stock options | 65,159 | 3,278,015 | $ | 19.88 | ||||||||
| Unvested restricted shares | - | 3,020,651 | ||||||||||
| Diluted book value per common share | $ | 4,235,855 | 142,710,282 | $ | 29.68 | |||||||
