Annualized Return on Average Equity of
19.1%
Book Value Per Diluted Common Share of
$41.27 at March 31, 2015
Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE:VR)
today reported net income available to Validus of $173.4 million,
or $1.98 per diluted common share, for the three months ended
March 31, 2015, compared to $162.4 million, or $1.66 per
diluted common share, for the three months ended March 31,
2014.
Net operating income available to Validus was $132.8 million, or
$1.52 per diluted common share, for the three months ended
March 31, 2015, compared to $140.3 million, or $1.43 per
diluted common share, for the three months ended March 31,
2014.
Book value per diluted common share stands at $41.27, reflecting
quarterly growth of 4.9% inclusive of dividends.
Commenting on the financial results for the three months ended
March 31, 2015, Validus' Chairman and CEO Ed Noonan
stated:
“I am very pleased with the company’s strong performance during
the first quarter of 2015. Validus earned $173.4 million in
net income, equal to a 19.1% annualized return on average equity,
and had 4.9% growth in book value per diluted common share
inclusive of dividends.
As an underwriting company first and foremost, I applaud our
underwriters for having the discipline to reduce exposure where the
pricing was insufficient for the risk. Validus’ goal is to
remain a preferred partner for our customers and intermediaries
over the long haul, and that starts with maintaining the integrity
of our underwriting. In challenging market conditions, that’s
what disciplined underwriting companies do.”
Net income and net operating income available to Validus, net
earnings and net operating earnings per diluted common share
available to Validus, by segment for the three months ended
March 31, 2015 were as follows:
Net Income Available
to Validus
Net Operating Income
Available to Validus
(Expressed in millions of U.S. dollars, except per share
information) Validus Re $ 112.2 $ 92.9 Talbot 69.6 61.3
PaCRe, Ltd. 4.0 0.1 Other AlphaCat Companies
3.8
5.3
AlphaCat subtotal 7.8 5.4 Western World 13.3 3.8 Corporate &
Eliminations (29.5 ) (30.6 )
Total $ 173.4
$ 132.8 Net earnings per diluted
common share available to Validus $ 1.98 Net
operating earnings per diluted common share available to
Validus $ 1.52
Net operating income (loss), a non-GAAP financial measure, is
defined as net income (loss) excluding net realized and change in
net unrealized gains (losses) on investments, income (loss) from
investment affiliate, foreign exchange gains (losses), other income
(loss) and non-recurring items. Net operating income (loss)
available (attributable) to Validus is defined as above, but
excludes income (loss) available (attributable) to noncontrolling
interest. Reconciliations of these measures to net income (loss)
and net income (loss) available (attributable) to Validus, the most
directly comparable GAAP measures, are presented at the end of this
release.
First Quarter 2015
Results
Highlights for the first quarter are as follows:
- Gross premiums written for the three
months ended March 31, 2015 were $1,119.5 million compared to
$1,012.0 million for the three months ended March 31, 2014, an
increase of $107.5 million, or 10.6%.
- Net premiums earned for the three
months ended March 31, 2015 were $577.8 million compared to
$483.0 million for the three months ended March 31, 2014, an
increase of $94.8 million, or 19.6%.
- Underwriting income for the three
months ended March 31, 2015 was $144.1 million compared to
$153.0 million for the three months ended March 31, 2014, a
decrease of $8.9 million, or 5.8%.
- Combined ratio for the three months
ended March 31, 2015 was 75.1% which included $83.6 million of
favorable loss reserve development on prior accident years,
benefiting the loss ratio by 14.5 percentage points compared to a
combined ratio for the three months ended March 31, 2014 of
68.3% which included $39.4 million of favorable loss reserve
development on prior accident years, benefiting the loss ratio by
8.2 percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses.
- Net operating income available to
Validus for the three months ended March 31, 2015 was $132.8
million compared to $140.3 million for the three months ended
March 31, 2014, a decrease of $7.5 million, or 5.3%.
- Net income available to Validus for the
three months ended March 31, 2015 was $173.4 million compared
to $162.4 million for the three months ended March 31, 2014,
an increase of $11.0 million, or 6.8%.
- Annualized return on average equity of
19.1% and annualized net operating return on average equity of
14.6% for the three months ended March 31, 2015 compared to
17.7% and 15.3%, respectively, for the three months ended
March 31, 2014.
Notable and Non-Notable Loss
Events
During the three months ended March 31, 2015 and 2014, the
Company did not incur any notable loss events, defined as
consolidated losses which aggregate to a threshold greater than or
equal to $30.0 million. During the three months ended
March 31, 2015, the Company incurred a non-notable loss event,
defined as consolidated losses which aggregate to a threshold
greater than $15.0 million, but less than $30.0 million. The event,
Windstorm Niklas, resulted in an estimated loss to the Company of
$15.0 million, or 2.6 percentage points of the loss ratio. The
Company's loss ratio, excluding prior year development, notable
loss events, and non-notable loss events for the three months ended
March 31, 2015 and 2014 was 53.6% and 41.9%, respectively.
Validus Re Segment - First Quarter 2015
Results
Highlights for the first quarter include the following:
- Gross premiums written for the three
months ended March 31, 2015 were $711.2 million compared to
$666.2 million for the three months ended March 31, 2014, an
increase of $45.0 million, or 6.8%. Gross premiums written for the
three months ended March 31, 2015 included $219.3 million of
property premiums, $133.4 million of marine premiums and $358.5
million of specialty premiums, compared to $261.7 million of
property premiums, $153.0 million of marine premiums and $251.5
million of specialty premiums for the three months ended
March 31, 2014. The increase in gross premiums written in the
specialty lines is primarily due to increased agricultural business
written during the quarter.
- Net premiums earned for the three
months ended March 31, 2015 were $253.1 million compared to
$238.4 million for the three months ended March 31, 2014, an
increase of $14.7 million, or 6.2%.
- The combined ratio for the three months
ended March 31, 2015 was 70.1% compared to 53.6% for the three
months ended March 31, 2014, an increase of 16.5 percentage
points.
- The loss ratio for the three months
ended March 31, 2015 was 44.7% compared to 28.6% for the three
months ended March 31, 2014, an increase of 16.1 percentage points.
The loss ratio for the three months ended March 31, 2015
included favorable loss reserve development on prior accident years
of $24.7 million, benefiting the loss ratio by 9.8 percentage
points. The favorable loss reserve development was primarily due to
lower than expected development on attritional losses. The loss
ratio for the three months ended March 31, 2014 included favorable
loss reserve development on prior accident years of $10.0 million,
benefiting the loss ratio by 4.2 percentage points.
- General and administrative expenses for
the three months ended March 31, 2015 were $19.5 million compared
to $18.2 million for the three months ended March 31, 2014, an
increase of $1.3 million, or 7.2%.
- Net operating income available to
Validus Re for the three months ended March 31, 2015 was $92.9
million compared to $127.1 million, for the three months ended
March 31, 2014, a decrease of $34.2 million, or 26.9%.
- Net income available to Validus Re for
the three months ended March 31, 2015 was $112.2 million
compared to $146.4 million, for the three months ended
March 31, 2014, a decrease of $34.2 million, or 23.4%.
Talbot Segment - First Quarter 2015
Results
Highlights for the first quarter include the following:
- Gross premiums written for the three
months ended March 31, 2015 were $270.1 million compared to
$290.7 million for the three months ended March 31, 2014, a
decrease of $20.6 million, or 7.1%. Gross premiums written for the
three months ended March 31, 2015 included $71.7 million of
property premiums, $110.4 million of marine premiums and $88.0
million of specialty premiums compared to $78.1 million of property
premiums, $119.6 million of marine premiums and $93.0 million of
specialty premiums for the three months ended March 31, 2014.
The decrease in gross premiums written for the property and marine
lines is primarily due to general rate declines and participation
reductions on certain lines.
- Net premiums earned for the three
months ended March 31, 2015 were $222.6 million compared to
$213.9 million for the three months ended March 31, 2014, an
increase of $8.7 million, or 4.1%.
- The combined ratio for the three months
ended March 31, 2015 was 74.9% compared to 86.5% for the three
months ended March 31, 2014, a decrease of 11.6 percentage
points.
- The loss ratio for the three months
ended March 31, 2015 was 35.1% compared to 47.9% for the three
months ended March 31, 2014, a decrease of 12.8 percentage
points. The loss ratio for the three months ended March 31,
2015 included favorable loss reserve development on prior accident
years of $51.7 million, benefiting the loss ratio by 23.2
percentage points. The favorable loss reserve development was
primarily due to lower than expected development on attritional
losses. The loss ratio for the three months ended March 31,
2014 included favorable loss reserve development on prior accident
years of $21.5 million, benefiting the loss ratio by 10.0
percentage points.
- General and administrative expenses for
the three months ended March 31, 2015 were $36.5 million
compared to $35.1 million for the three months ended March 31,
2014, an increase of $1.3 million, or 3.8%.
- Net operating income available to
Talbot for the three months ended March 31, 2015 was $61.3
million compared to $33.7 million, for the three months ended
March 31, 2014, an increase of $27.6 million, or 82.1%.
- Net income available to Talbot for the
three months ended March 31, 2015 was $69.6 million compared
to $36.2 million, for the three months ended March 31, 2014,
an increase of $33.4 million, or 92.5%.
AlphaCat Segment - First Quarter 2015
Results(1)
Highlights for the first quarter include the following:
- AlphaCat's assets under management were
$1,879.6 million as at April 1, 2015, compared to $1,880.7 million
as at January 1, 2015. During the three months ended March 31,
2015, a total of $119.3 million of capital was raised, of which
$91.0 million was raised from third parties. During the three
months ended March 31, 2015, $169.6 million was returned to
investors, of which $145.4 million was returned to third party
investors.
- Management fees earned from third
parties for the three months ended March 31, 2015 were $4.5
million, compared to $5.8 million for the three months ended
March 31, 2014, a decrease of $1.3 million.
- The AlphaCat sidecars and ILS funds
contributed $5.1 million of income for the three months ended
March 31, 2015, compared to $6.7 million for the three months
ended March 31, 2014, a decrease of $1.6 million.
- Total expenses for the three months
ended March 31, 2015 were $7.0 million, compared to $3.0
million for the three months ended March 31, 2014, an increase
of $4.0 million. The increase in total expenses is primarily due to
placement fees paid in the current quarter.
- PaCRe contributed $0.1 million of net
operating income for the three months ended March 31, 2015 and
2014.
- Validus' share of AlphaCat net
operating income for the three months ended March 31, 2015 was
$2.7 million, compared to $9.6 million for the three months ended
March 31, 2014, a decrease of $6.9 million.
- Validus' share of PaCRe's net
unrealized investment gains for the three months ended
March 31, 2015 were $3.9 million, compared to $4.7 million for
the three months ended March 31, 2014, a decrease of $0.8
million.
- For the three months ended
March 31, 2014, there was an accounting gain of $1.4 million
on the deconsolidation of one of the ILS funds.
- Validus' share of AlphaCat net income
for the three months ended March 31, 2015 was $6.6 million,
compared to $15.7 million for the three months ended March 31,
2014, a decrease of $9.1 million.
(1) Please refer to pages 33 and 34 of the Investor
Financial Supplement for further details on the AlphaCat
segment.
Western World Segment - First Quarter
2015 Results
Highlights for the first quarter include the following:
- Gross premiums written for the three
months ended March 31, 2015 were $56.9 million. Gross premiums
written for the three months ended March 31, 2015 included
$9.4 million of property premiums and $47.6 million of liability
premiums.
- Net premiums earned for the three
months ended March 31, 2015 were $67.9 million.
- The combined ratio for the three months
ended March 31, 2015 was 97.1%.
- The loss ratio for the three months
ended March 31, 2015 was 74.4%. The loss ratio for the three
months ended March 31, 2015 included favorable loss reserve
development on prior accident years of $6.3 million, benefiting the
loss ratio by 9.3 percentage points. $3.2 million or 4.7 percentage
points of the favorable loss reserve development arose from the
amortization of the risk premium adjustment booked at
acquisition.
- Policy acquisition costs for the three
months ended March 31, 2015 were $4.3 million. Amortization of
the fair value adjustment booked at acquisition favorably impacted
policy acquisition costs by approximately $10.4 million or 15.3
percentage points.
- General and administrative expenses for
the three months ended March 31, 2015 were $10.6 million.
- Net operating income available to
Western World for the three months ended March 31, 2015 was
$3.8 million.
- Net income available to Western World
for the three months ended March 31, 2015 was $13.3
million.
The acquisition of Western World closed on October 2, 2014 and
the segment was included in the Company results for the first time
in Q4 2014. As such, there are no comparatives for Q1 2014.
Corporate Results
Corporate results include executive and board expenses, internal
and external audit expenses, interest and costs incurred in
connection with the Company's senior notes and junior subordinated
deferrable debentures and other costs relating to the Company as a
whole.
General and administrative expenses for the three months ended
March 31, 2015, net of operating segment eliminations, were $14.4
million compared to $17.0 million for the three months ended March
31, 2014, a decrease of $2.6 million or 15.2%. Share compensation
expenses for the three months ended March 31, 2015, net of
operating segment eliminations were $2.9 million compared to $2.4
million for the three months ended March 31, 2014, an increase of
$0.5 million or 22.2%.
Investments
Net investment income for the three months ended March 31,
2015 was $31.0 million compared to $23.4 million for the three
months ended March 31, 2014, an increase of $7.7 million, or
32.8%.
Net realized gains on investments for the three months ended
March 31, 2015 were $4.2 million compared to $3.7 million for
the three months ended March 31, 2014, an increase of $0.4
million, or 11.5%.
The change in net unrealized gains on investments for the three
months ended March 31, 2015 was $72.2 million compared to
$55.7 million for the three months ended March 31, 2014, an
increase of $16.5 million, or 29.6%. The change in net unrealized
gains on investments for the three months ended March 31, 2015
was driven by $39.0 million in unrealized gains relating to PaCRe.
The amount of PaCRe's net unrealized gains attributable to
noncontrolling interest was ($35.1) million for the three months
ended March 31, 2015, leaving a net impact to the Company of
$3.9 million.
The change in net unrealized gains on investments for the three
months ended March 31, 2014 was driven by $46.7 million in
unrealized gains relating to PaCRe. The amount of PaCRe's net
unrealized gains attributable to noncontrolling interest was
($42.0) million for the three months ended March 31, 2014,
leaving a net impact to the Company of $4.7 million.
Shareholders' Equity and
Capitalization
As at March 31, 2015, total shareholders' equity was $4.2
billion including $494.5 million of noncontrolling interest.
Shareholders' equity available to Validus was $3.7 billion as at
March 31, 2015. Book value per diluted common share was $41.27
at March 31, 2015, compared to $39.66 at December 31,
2014. Book value per diluted common share is a non-GAAP financial
measure. A reconciliation of this measure to book value per common
share is presented at the end of this release.
Total capitalization at March 31, 2015 was $5.1 billion,
including $537.6 million of junior subordinated deferrable
debentures, $247.3 million of senior notes and $98.8 million of
redeemable noncontrolling interest. Total capitalization available
to Validus at March 31, 2015 was $4.5 billion, excluding
$494.5 million of noncontrolling interest and $98.8 million of
redeemable noncontrolling interest.
Share Repurchases
For the three months ended March 31, 2015, the number of
shares repurchased by the Company was 1.4 million. A summary of the
share repurchases made to date under the Company’s previously
announced share repurchase program is as follows:
Share Repurchase Activity(Expressed in thousands
of U.S. dollars except for share and per share information)
As at December 31,2014
Quarter ended Effect of share
repurchases: (cumulative) January February
March March 31, 2015 Aggregate purchase price (a) $
2,231,301 $ 43,100 $ 14,448 $ 560 $ 58,108 Shares repurchased
70,045,504 1,072,462 344,522 13,505 1,430,489 Average price (a) $
31.86 $ 40.19 $ 41.94 $ 41.47 $ 40.62
Estimated cumulative net accretive (dilutive) impact
on: Book value per diluted common share (b) 4.06 Earnings per
diluted share - Quarter (c) 0.83
Share Repurchase
Activity
(Expressed in thousands of U.S. dollars
except for share and per share information)
Effect of share repurchases: As at March 31, 2015
April As at April 29, 2015
Cumulative to Date
Effect
Aggregate purchase price (a) $ 2,289,409 $ — $ — $ 2,289,409 Shares
repurchased 71,475,993 — — 71,475,993 Average price (a) $ 32.03
$ — $ — $ 32.03
(a) Share transactions are on a trade date basis through
April 29, 2015 and are inclusive of commissions. Average share
price is rounded to two decimal places.
(b) As the average price per share repurchased during certain
periods between 2009 and 2015 was lower than the book value per
common share, the repurchase of shares increased the Company's
period ending book value per share.
(c) The estimated impact on earnings per diluted share was
calculated by comparing reported results versus i) net income per
share plus an estimate of lost net investment income on the
cumulative share repurchases divided by ii) weighted average
diluted shares outstanding excluding the weighted average impact of
cumulative share repurchases. The impact of cumulative share
repurchases was accretive to earnings per diluted share.
Conference Call
The Company will host a conference call for analysts and
investors on May 1, 2015 at 10:00 AM (Eastern) to discuss the first
quarter 2015 financial results and related matters. The conference
call may be accessed by dialing 1-888-771-4371 (toll-free U.S.) or
1-847-585-4405 (international) and entering the passcode 3904 0614.
Those who intend to participate in the conference call should
register at least ten minutes in advance to ensure access to the
call. A telephone replay of the conference call will be available
through May 15, 2015, by dialing 1-888-843-7419 (toll-free U.S.) or
1-630-652-3042 (international) and entering the passcode 3904
0614.
This conference call will also be available through a live audio
webcast accessible through the Investor Relations section of the
Company's website located at www.validusholdings.com. A replay of the webcast
will be available at the Investor Relations section of the
Company's website through May 15, 2015. In addition, a financial
supplement relating to the Company's financial results for the
three months ended March 31, 2015 is available in the Investor
Relations section of the Company's website.
About Validus Holdings,
Ltd.
Validus Holdings, Ltd. is a holding company for reinsurance and
insurance operating companies and investment advisors including
Validus Reinsurance, Ltd. (“Validus Re”), Talbot Holdings Ltd.
(“Talbot”), Western World Insurance Group, Inc. (“Western World”)
and AlphaCat Managers, Ltd. (“AlphaCat”).
The results of Western World are consolidated from the October
2, 2014 date of acquisition.
Validus Re is a Bermuda based reinsurer focused on short-tail
lines of reinsurance. Talbot is the Bermuda parent of the specialty
insurance group primarily operating within the Lloyd's insurance
market through Syndicate 1183. Western World is a U.S.
specialty lines insurance company focused on excess and surplus
lines. AlphaCat is a Bermuda based investment adviser managing
capital for third parties and the Group in insurance linked
securities and other property catastrophe reinsurance
investments.
Validus Holdings, Ltd.Consolidated Balance
SheetsAs at March 31, 2015 and
December 31, 2014(Expressed in thousands of U.S.
dollars, except share and per share information)
March 31, 2015 December 31, 2014
Assets Fixed maturities, at fair value (amortized cost:
2015—$5,458,443; 2014—$5,534,494) $
5,484,479
$ 5,532,731 Short-term investments, at fair value (amortized cost:
2015—$1,183,410; 2014—$1,051,222) 1,183,342 1,051,074 Other
investments, at fair value (cost: 2015—$908,405; 2014—$879,176)
881,995 813,011 Cash and cash equivalents 471,129 577,240
Restricted cash 186,423 173,003 Total investments and
cash 8,207,368 8,147,059 Investments in affiliates 263,332 261,483
Premiums receivable 1,114,102 707,647 Deferred acquisition costs
240,835 161,295 Prepaid reinsurance premiums 192,694 81,983
Securities lending collateral 5,337 470 Loss reserves recoverable
375,882 377,466 Paid losses recoverable 27,034 38,078 Income taxes
recoverable 10,597 — Deferred tax asset 30,847 23,821 Receivable
for investments sold 24,803 18,318 Intangible assets 125,508
126,924 Goodwill 195,897 195,897 Accrued investment income 23,230
24,865 Other assets 216,984 164,633
Total assets $ 11,054,450 $ 10,329,939
Liabilities Reserve for losses and loss expenses $ 3,199,362
$ 3,234,394 Unearned premiums 1,452,179 990,564 Reinsurance
balances payable 101,426 127,128 Securities lending payable 5,803
936 Deferred tax liability 13,265 5,541 Payable for investments
purchased 123,556 68,574 Accounts payable and accrued expenses
177,944 318,245 Notes payable to operating affiliates 919,684
671,465 Senior notes payable 247,333 247,306 Debentures payable
537,561 539,277
Total
liabilities 6,778,113 6,203,430
Commitments and contingent liabilities Redeemable
noncontrolling interest 98,777 79,956
Shareholders'
equity Common shares, 571,428,571 authorized, par value $0.175
(Issued: 2015—156,749,783; 2014—155,554,224; Outstanding:
2015—83,634,915; 2014—83,869,845) 27,431 27,222 Treasury shares
(2015—73,114,868; 2014—71,684,379) (12,795 ) (12,545 ) Additional
paid-in-capital 1,162,485 1,207,493 Accumulated other comprehensive
(loss) (12,641 ) (8,556 ) Retained earnings 2,518,629
2,374,344
Total shareholders' equity available to
Validus 3,683,109 3,587,958
Noncontrolling interest 494,451 458,595
Total shareholders' equity 4,177,560
4,046,553
Total liabilities, noncontrolling
interests and shareholders' equity $ 11,054,450 $
10,329,939
Validus Holdings, Ltd.Consolidated Statements of
OperationsFor the three months ended
March 31, 2015 and 2014(Expressed in thousands of
U.S. dollars, except share and per share information)
Three Months Ended March 31, 2015
2014 Underwriting income Gross premiums written $
1,119,498 $ 1,011,991 Reinsurance premiums ceded (190,840 )
(194,908 ) Net premiums written 928,658 817,083 Change in
unearned premiums (350,904 ) (334,126 )
Net
premiums earned 577,754 482,957
Underwriting deductions Losses and loss expenses
240,929 162,671 Policy acquisition costs 98,636 85,649 General and
administrative expenses 85,028 74,445 Share compensation expenses
9,054 7,147
Total underwriting
deductions 433,647 329,912
Underwriting income $
144,107 $
153,045
Net investment income 31,021 23,362 Other insurance related income
4,832 8,037 Finance expenses (19,852 ) (15,900 )
Operating income before taxes, income from operating affiliates
and (income) attributable to operating affiliate investors $
160,108 $
168,544 Tax (expense) benefit (2,565 ) 40
Income from operating affiliates 2,453 4,927 (Income) attributable
to operating affiliate investors (23,206 ) (31,710 )
Net operating income $
136,790 $
141,801
Net realized gains on investments 4,169 3,740 Change in net
unrealized gains on investments 72,204 55,693 Income from
investment affiliate 2,776 5,348 Foreign exchange (losses) (3,551 )
(6,478 ) Other income — 5,793
Net
income $
212,388 $
205,897 Net (income)
attributable to noncontrolling interest (38,977 ) (43,509 )
Net income available to Validus $
173,411 $
162,388 Selected
ratios: Net premiums written / Gross premiums written 83.0 %
80.7 % Losses and loss expenses 41.7 % 33.7 % Policy
acquisition costs 17.1 % 17.7 % General and administrative expenses
(a) 16.3 % 16.9 % Expense ratio 33.4 %
34.6 % Combined ratio 75.1 % 68.3 %
(a) The general and administrative expense ratio includes share
compensation expenses.
Validus Holdings, Ltd.Consolidated Segment Operating
Income (Loss)For the three months ended
March 31, 2015 and 2014(Expressed in thousands of
U.S. dollars, except share and per share information)
Three Months Ended March 31, 2015 Three
Months Ended March 31, 2014 Validus Re
AlphaCat Talbot Western World
Corporate
and
Eliminations
Total Validus Re (b) AlphaCat
Talbot
Corporate
and Eliminations (b)
Total Underwriting income Gross premiums
written 711,212 102,564 270,077 56,947 (21,302 ) 1,119,498 666,163
84,347 290,695 (29,214 ) 1,011,991 Reinsurance premiums ceded
(113,296 ) (4,538 ) (91,075 ) (3,233 ) 21,302 (190,840 )
(129,817 ) (3,700 ) (90,605 ) 29,214 (194,908 ) Net premiums
written 597,916 98,026 179,002 53,714 — 928,658 536,346 80,647
200,090 — 817,083 Change in unearned premiums (344,828 ) (63,831 )
43,587 14,168 — (350,904 ) (297,960 ) (49,964
) 13,798 — (334,126 )
Net premiums earned
253,088 34,195 222,589
67,882 — 577,754
238,386 30,683 213,888
— 482,957 Underwriting
deductions Losses and loss expenses 113,128 (844 ) 78,128
50,517 — 240,929 68,155 (7,860 ) 102,376 — 162,671 Policy
acquisition costs 42,094 3,660 49,104 4,279 (501 ) 98,636 39,245
2,980 44,928 (1,504 ) 85,649 General and administrative expenses
19,509 4,002 36,494 10,627 14,396 85,028 18,195 4,128 35,149 16,973
74,445 Share compensation expenses 2,578 149 2,957
477 2,893 9,054 2,208 (10 )
2,582 2,367 7,147
Total underwriting
deductions 177,309 6,967
166,683 65,900 16,788
433,647 127,803 (762 )
185,035 17,836 329,912
Underwriting income (loss) 75,779
27,228 55,906 1,982 (16,788 )
144,107 110,583 31,445 28,853
(17,836 ) 153,045 Net investment income
18,776 1,585 6,305 5,303 (948 ) 31,021 18,765 880 4,686 (969 )
23,362 Other insurance related
income (loss)
315 5,771 54 263 (1,571 ) 4,832 977 9,497 17 (2,454 ) 8,037 Finance
expenses (3,871 ) (4,516 ) (87 ) — (11,378 ) (19,852 )
(3,839 ) (683 ) (26 ) (11,352 ) (15,900 )
Operating income
(loss) before taxes, income from operating affiliates and (income)
attributable to operating affiliate investors 90,999
30,068 62,178 7,548 (30,685 )
160,108 126,486 41,139 33,530
(32,611 ) 168,544 Tax benefit (expense) 1,880
— (883 ) (3,723 ) 161 (2,565 ) 578 — 130 (668 ) 40 Income from
operating affiliates — 2,453 — — — 2,453 — 4,927 — — 4,927 (Income)
attributable to operating affiliate investors — (23,206 ) —
— — (23,206 ) — (31,710 ) — —
(31,710 )
Net operating income (loss) (a)
92,879 9,315 61,295 3,825
(30,524 ) 136,790 127,064 14,356
33,660 (33,279 ) 141,801 Net operating
(income) attributable to noncontrolling interest — (3,954 )
— — — (3,954 ) — (1,504 ) — —
(1,504 )
Net operating income (loss) available
(attributable) to Validus 92,879 5,361
61,295 3,825 (30,524
) 132,836 127,064 12,852
33,660 (33,279 ) 140,297
Net income (loss) available (attributable)
to Validus 112,175 7,767
69,592 13,306 (29,429 )
173,411 146,373 17,982
36,156 (38,123 ) 162,388
Notes:
(a) Net operating income (loss), a non-GAAP financial measure,
is defined as net income (loss) excluding net realized and change
in unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliate and non-recurring items. This measure focuses on the
underlying fundamentals of our operations without the influence of
gains (losses) from the sale of investments, translation of
non-U.S.$ currencies and non-recurring items. Gains (losses) from
the sale of investments are driven by the timing of the disposition
of investments, not by our operating performance. Gains (losses)
arising from translation of non-U.S.$ denominated balances are
unrelated to our underlying business. Net operating income (loss)
available (attributable) to Validus is defined as above and
includes income (loss) from noncontrolling interests.
(b) During the first quarter of 2015, certain intercompany
reinsurance transactions were presented on a net basis for
segmental reporting purposes. As a result, gross premiums written
and reinsurance premiums ceded for the Validus Re segment and
Corporate & Eliminations were reduced by $12,823 for the three
months ended March 31, 2014 for comparative purposes. There was no
impact to total gross premiums written and reinsurance premiums
ceded on a consolidated basis.
Validus Holdings, Ltd.Non-GAAP Financial Measures
ReconciliationNet Operating Income available to Validus, Net
Operating Income per share available to Validus and Annualized Net
Operating Return on Average EquityFor the
three months ended March 31, 2015 and
2014(Expressed in thousands of U.S. dollars, except
share and per share information)
Three Months Ended March 31, March
31, 2015 2014 Net income
available to Validus $ 173,411 $ 162,388 Adjustments for: Net
realized (gains) on investments (4,169 ) (3,740 ) Change in net
unrealized (gains) on investments (72,204 ) (55,693 ) (Income) from
investment affiliate (2,776 ) (5,348 ) Foreign exchange losses
3,551 6,478 Other (income) — (5,793 ) Net income attributable to
noncontrolling interest 35,023 42,005
Net
operating income available to Validus 132,836 140,297 Less:
Dividends and distributions declared on outstanding warrants
(1,405 ) (1,552 )
Net operating income available to
Validus, adjusted $ 131,431 $ 138,745
Net income per share available to Validus - diluted $ 1.98 $
1.66 Adjustments for: Net realized (gains) on investments (0.05 )
(0.04 ) Change in net unrealized (gains) on investments (0.82 )
(0.57 ) (Income) from investment affiliate (0.03 ) (0.06 ) Foreign
exchange losses 0.04 0.07 Other (income) — (0.06 ) Net income
attributable to noncontrolling interest 0.40
0.43
Net operating income per share available to Validus
- diluted $ 1.52 $ 1.43
Weighted
average number of common shares and common share equivalents
87,583,129 97,799,519
Average shareholders' equity
available to Validus $ 3,635,534 $ 3,676,579
Annualized net operating return on average equity
14.6 % 15.3 %
Validus Holdings, Ltd.Non-GAAP Financial Measures
ReconciliationBook Value per Common Share, Book Value per Diluted
Common Share and Book Value per Diluted Common Share plus
Accumulated DividendsAs at March 31,
2015 and December 31, 2014(Expressed in thousands of
U.S. dollars, except share and per share information)
As at March 31, 2015
Equity
Amount
Shares Exercise Price
Book Value
Per Share
Book value per common share Total shareholders'
equity available to Validus $ 3,683,109 83,634,915 $ 44.04
Tangible book value per common share 40.19
Book
value per diluted common share Total shareholders' equity
available to Validus 3,683,109 83,634,915 Assumed exercise of
outstanding warrants 76,975 4,375,538 $ 17.59 Assumed exercise of
outstanding stock options 3,749 142,892 $ 26.24 Unvested restricted
shares — 3,044,329
Book value per
diluted common share $ 3,763,833 91,197,674
$ 41.27 Adjustment for accumulated dividends 9.20
Book
value per diluted common share plus accumulated dividends $
50.47
Tangible book value per diluted common share
37.75
As at December 31, 2014
Equity
Amount
Shares Exercise Price
Book Value
Per Share
Book value per common share Total shareholders' equity
available to Validus $ 3,587,958 83,869,845 $ 42.78
Tangible book value per common share 38.93
Book
value per diluted common share Total shareholders' equity
available to Validus 3,587,958 83,869,845 Assumed exercise of
outstanding warrants 90,950 5,174,114 $ 17.58 Assumed exercise of
outstanding stock options 20,581 1,160,057 $ 17.74 Unvested
restricted shares — 3,068,564
Book
value per diluted common share $ 3,699,489
93,272,580 $ 39.66 Adjustment for accumulated dividends 8.88
Book value per diluted common share plus accumulated
dividends $ 48.54
Tangible book value per diluted
common share 36.20
Cautionary Note Regarding Forward-Looking Statements
This press release may include forward-looking statements, both
with respect to the Company and its industry, that reflect our
current views with respect to future events and financial
performance. Statements that include the words "expect", "intend",
"plan", "believe", "project", "anticipate", "will", "may" and
similar statements of a future or forward-looking nature identify
forward-looking statements. All forward-looking statements address
matters that involve risks and uncertainties, many of which are
beyond the Company's control. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in such statements and, therefore,
you should not place undue reliance on any such statements. We
believe that these factors include, but are not limited to, the
following: 1) unpredictability and severity of catastrophic events;
2) rating agency actions; 3) adequacy of Validus' risk management
and loss limitation methods; 4) cyclicality of demand and pricing
in the insurance and reinsurance markets; 5) statutory or
regulatory developments including tax policy, reinsurance and other
regulatory matters; 6) Validus' ability to implement its business
strategy during "soft" as well as "hard" markets; 7) adequacy of
Validus' loss reserves; 8) continued availability of capital and
financing; 9) retention of key personnel; 10) competition; 11)
potential loss of business from one or more major insurance or
reinsurance brokers; 12) Validus' ability to implement,
successfully and on a timely basis, complex infrastructure,
distribution capabilities, systems, procedures and internal
controls, and to develop accurate actuarial data to support the
business and regulatory and reporting requirements; 13) general
economic and market conditions (including inflation, volatility in
the credit and capital markets, interest rates and foreign currency
exchange rates); 14) the integration of businesses Validus may
acquire or new business ventures Validus may start; 15) the effect
on Validus' investment portfolios of changing financial market
conditions including inflation, interest rates, liquidity and other
factors; 16) acts of terrorism or outbreak of war; and 17)
availability of reinsurance and retrocessional coverage, as well as
management's response to any of the aforementioned factors.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in Validus' most recent reports
on Form 10-K and Form 10-Q and other documents of the Company on
file with or furnished to the U.S. Securities and Exchange
Commission (“SEC”). Any forward-looking statements made in this
press release are qualified by these cautionary statements, and
there can be no assurance that the actual results or developments
anticipated by Validus will be realized or, even if substantially
realized, that they will have the expected consequences to, or
effects on, Validus or its business or operations. Except as
required by law, the Company undertakes no obligation to update
publicly or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise.
Non-GAAP Financial Measures
In presenting the Company's results, management has included and
discussed certain schedules containing net operating income (loss),
net operating income (loss) available (attributable) to Validus,
net operating income (loss) per share, underwriting income (loss),
annualized net operating return on average equity, book value per
diluted common share and book value per diluted common share plus
accumulated dividends that are not calculated under standards or
rules that comprise U.S. GAAP. Such measures are referred to as
non-GAAP. Non-GAAP measures may be defined or calculated
differently by other companies. These measures should not be viewed
as a substitute for those determined in accordance with U.S. GAAP.
A reconciliation of net operating income (loss) to net income
(loss), the most comparable U.S. GAAP financial measure, is
presented in the section above entitled “Net Operating Income
available to Validus, Net Operating Income per share available to
Validus and Annualized Net Operating Return on Average Equity”. A
reconciliation of underwriting income and operating income to net
income, the most comparable U.S. GAAP financial measure, is
presented in the “Consolidated Statements of Operations” above.
Underwriting income indicates the performance of the Company's
core underwriting function, excluding revenues and expenses such as
net investment income (loss), other insurance related income
(loss), finance expenses, net realized and change in unrealized
gains (losses) on investments, foreign exchange gains
(losses), other income (loss) and transaction expenses. The Company
believes the reporting of underwriting income enhances the
understanding of our results by highlighting the underlying
profitability of the Company's core insurance and reinsurance
business. Underwriting profitability is influenced significantly by
earned premium growth, adequacy of the Company's pricing and loss
frequency and severity.
Underwriting profitability over time is also influenced by the
Company's underwriting discipline, which seeks to manage exposure
to loss through favorable risk selection and diversification, its
management of claims, its use of reinsurance and its ability to
manage its expense ratio, which it accomplishes through its
management of acquisition costs and other underwriting expenses.
The Company believes that underwriting income provides investors
with a valuable measure of profitability derived from underwriting
activities.
Annualized net operating return on average equity is presented
in the section above entitled “Net Operating Income available to
Validus, Net Operating Income per share available to Validus and
Annualized Net Operating Return on Average Equity.” A
reconciliation of book value per diluted common share and book
value per diluted common share plus accumulated dividends to book
value per common share, the most comparable U.S. GAAP financial
measure, is presented in the section above entitled “Book Value per
Common Share, Book Value per Diluted Common Share and Book Value
per Diluted Common Share plus Accumulated Dividends.” Net operating
income (loss) is calculated based on net income (loss) excluding
net realized gains (losses) on investments, change in net
unrealized gains (losses) on investments, foreign exchange gains
(losses), other income (loss), income (loss) from investment
affiliates and non-recurring items. Realized gains (losses) from
the sale of investments are driven by the timing of the disposition
of investments, not by our operating performance. Gains (losses)
arising from translation of non-US$ denominated balances are
unrelated to our underlying business. Net operating income (loss)
available (attributable) to Validus is defined as net operating
income (loss) as defined above, but excluding income (loss)
available (attributable) to noncontrolling interest.
Investors: :Validus Holdings,
Ltd.Investor.Relations@validusholdings.com+1-441-278-9000orMediaBrunswick
GroupRadina Russell / Josh Gerth+1-212-333-3810
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