EX-99.1 2 y78545exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
(VALIDUS RE LOGO)
  Validus Holdings, Ltd.
Bermuda Commercial Bank Building
19 Par-la-Ville Road
Hamilton, HM 11
Bermuda
 
    
July 29, 2009
  Mailing Address:
Suite 1790
48 Par-la-Ville Road
Hamilton, HM 11
Bermuda
 
    
 
  Telephone: (441) 278-9000
Facsimile: (441) 278-9090
Website: www.validusre.bm
ADDITIONAL DISCLOSURE ON THE VALIDUS HOLDINGS, LTD. (“VALIDUS”)
CONSOLIDATED INVESTMENT PORTFOLIO (THE “PORTFOLIO”)
As of June 30, 2009, the Portfolio had a fair market value of $3,530.6 million. Validus is providing the following additional disclosure on the composition of its Portfolio in response to the continued volatility in the global credit markets.
Validus Mortgage-Backed And Asset-Backed Securities Portfolio
Market Values (in USD MM) as of June 30, 2009
                                                                         
    RATING
    Gov’t   AAA   AA   A   BBB   BB   B   Other   Total
Mortgage-Backed Securities
                                                                        
Residential Mortgage-Backed GNMA
     100.3       —       —       —       —       —       —       —       100.3  
FNMA
     254.2       —       —       —       —       —       —       —       254.2  
Freddie Mac
     187.9       —       —       —       —       —       —       —       187.9  
 
                                                                        
Total Agency RMBS
     542.4       —       —       —       —       —       —       —       542.4  
Non-Agency RMBS
     —       51.0       8.3       22.8       17.7       1.2       57.4       23.3       181.7  
 
                                                                        
Total Residential Mortgage-Backed
     542.4       51.0       8.3       22.8       17.7       1.2       57.4       23.3       724.1  
Commercial Mortgage-Backed
     —       66.4       —       —       —       —       —       —       66.4  
 
                                                                        
Total Mortgage-Backed Securities
     542.4       117.4       8.3       22.8       17.7       1.2       57.4       23.3       790.5  
Asset-Backed Securities
                                                                        
Sub Prime
     —       2.8       —       1.3       —       —       —       —       4.1  
Credit Cards
     —       9.3       —       —       —       —       —       —       9.3  
Autos
     —       52.0       0.4       —       0.9       —       —       —       53.3  
Stranded Cost & UK ABS
     —       9.5       —       —       —       —       —       —       9.5  
 
                                                                        
Total Asset-Backed Securities
     —       73.6       0.4       1.3       0.9       —       —       —       76.2  
 
                                                                        
Total Asset-Backed and Mortgage-
                                                                        
Backed Securities
                                                                     866.7  
 
                                                                        
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.

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Residential Mortgage Backed Securities (“RMBS”) (20.5% of total cash and investments*)
GSE (Government Sponsored Enterprise) RMBS (15.4%)

The Portfolio contains $542.4 million in GSE residential mortgage-backed securities.
Validus’ GSE RMBS allocation has a weighted-average effective duration of 2.3 years; a weighted-average life of 3.9 years; a fair market price of 104.12 and corresponding yield of 3.6%; a book yield of 4.6% and an unrealized gain of approximately $13.0 million.
Non-Agency RMBS — Prime (2.5%)
The Portfolio’s $86.9 million prime non-Agency RMBS allocation includes $40.2 million of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 55.6% of Validus’ prime non-Agency allocation consists of securities whose loans were originated in 2005 and prior; 19.5% of the prime RMBS allocation was issued in 2006. The allocation has a weighted average current credit enhancement of 8.3%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 738 and a loan-to-value ratio of 66.3%.
Validus’ overall prime non-agency allocation has a weighted-average effective duration of 2.6 years; a weighted-average life of 4.0 years; a fair market price of 77.76 and corresponding yield of 13.7%; an equivalent weighted-average book yield of 5.5%; and an unrealized loss of approximately $27.5 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Prime non-Agency RMBS by Vintage Year & Rating
                                                 
Vintage   AAA   AA   A   BBB   BB and below   Total
2007
     10.0       —       5.0       0.6       6.1       21.7  
2006
     0.6       —       10.2       —       6.1       16.9  
2005
     16.6       3.2       5.8       0.8       5.2       31.6  
2004 and prior
     13.0       —       3.1       0.6       —       16.7  
 
                                                
Total
     40.2       3.2       24.1       2.0       17.4       86.9  
 
                                                
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
Non-Agency RMBS — Alt-A (2.7%)
6.3% of the Portfolio’s $94.7 million Alt-A non-Agency RMBS allocation consists of AAA rated securities. All of these securities were originally rated AAA at the time of purchase. 49.1% of Validus’ Alt-A non-Agency allocation consists of securities whose loans were originated in 2006 and prior. The allocation has a weighted average current credit enhancement of 24.1%, which will increase as the securities pay down. The allocation has a weighted-average FICO score of 711 and a loan-to-value ratio of 77.6%.
Validus’ overall Alt-A non-agency allocation has a weighted-average effective duration of 2.5 years; a weighted-average life of 4.4 years; a fair market price of 79.65 and corresponding yield of 5.6%; an equivalent weighted-average book yield of 3.5%; and an unrealized loss of approximately $22.7 million.
The Company determined that markets for certain of its non-agency RMBS (“identified non-agency RMBS securities”), primarily Alt-A, were illiquid at June 30, 2009. As a result, the identified non-agency RMBS securities were deemed to be Level 3 securities as defined by Financial Accounting Standard 157 (“FAS 157”). The Company applied the guidance in FSP FAS 157-4 to determine the fair market value of the identified non-agency RMBS securities using a discounted cash flow model.
The following table shows fair market values by vintage year and rating:
 
*   Total cash and investments at 6/30/09 (MMs) = $3,530.6

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Fair Market Values (in USD MM) of Alt-A non-Agency RMBS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     1.9       4.0       —       —       42.3       48.2  
2006
     —       —       —       —       20.9       20.9  
2005
     4.1       —       1.6       4.0       13.3       23.0  
2004 and prior
     —       1.1       1.5       —       —       2.6  
 
                                    
Total
     6.0       5.1       3.1       4.0       76.5       94.7  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
ABS (2.2% of total cash and investments *)
Auto & Credit Card ABS — Non Sub-Prime (2.1%)
The Portfolio’s $72.1 million allocation to ABS includes $70.8 million of AAA rated securities. The ABS portfolio excluding Sub-Prime consists of auto, credit card, stranded cost and UK ABS. 57.4% of Validus’ auto- and credit card-backed allocation consists of securities whose loans were originated in 2006 and prior.
Validus’ ABS allocation, excluding Sub-Prime, has a weighted-average effective duration of 0.5 years; a weighted-average life of 0.6 years; a fair market price of 101.31 and corresponding yield of 2.4%; a book yield of 4.7% and an unrealized gain of approximately $0.9 million.
Home Equity ABS — Sub-Prime (0.1%)
The Portfolio’s $4.1 million sub-prime home equity ABS allocation includes $2.8 million of AAA rated securities. 67.3% of Validus’ sub-prime allocation consists of securities issued in 2006 and prior. The allocation has a weighted-average current credit enhancement of 37.3%. The credit enhancement will continue to increase as the securities pay down. The securities have a weighted-average FICO score of 619 and a loan-to-value ratio of 78.6%.
Validus’ overall home equity ABS allocation has a weighted-average effective duration of 0.9 years; a weighted-average life of 1.0 years; a fair market price of 84.69 and corresponding yield of 30.9%; a book yield of 0.5%; and an unrealized loss of approximately $0.9 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of Sub prime HEL ABS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     1.3       —       —       —       —       1.3  
2006
     1.0       —       1.3       —       —       2.3  
2005
     —       —       —       —       —       -  
2004 and prior
     0.5       —       —       —       —       0.5  
 
                                    
Total
     2.8       —       1.3       —       —       4.1  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
CMBS (1.9% of total cash and investments *)
The Portfolio’s $66.4 million CMBS allocation consists entirely of AAA rated securities. The Portfolio is well-diversified with seasoned deals that have collateral with transparent histories. 89.2% of Validus’ CMBS allocation consists of securities issued in 2004 and prior. The allocation has a weighted average current credit enhancement of 29.5% and defeasance adjusted credit enhancement of 48.5%, both of which will increase as the securities pay down. The average loan-to-value ratio is 69.5% and the debt service coverage ratio in excess of 1.61.
 
*   Total cash and investments at 6/30/09 (MMs) = $3,530.6
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Validus’ overall CMBS allocation has a weighted-average effective duration of 0.9 years; a weighted-average life of 1.0 years; a fair market price of 101.25 and corresponding yield of 4.6%; a book yield of 5.2%; and an unrealized gain of approximately $0.5 million.
The following table shows fair market values by vintage year and rating:
Fair Market Values (in USD MM) of CMBS by Vintage Year & Rating
                                                 
Vintage   AAA     AA     A     BBB     BB and below     Total  
2007
     7.1       —       —       —       —       7.1  
2006
     —       —       —       —       —       —  
2005
     —       —       —       —       —       —  
2004 and prior
     59.3       —       —       —       —       59.3  
 
                                    
Total
     66.4       —       —       —       —       66.4  
 
                                    
Note: Lower of Moody’s or Standard & Poor’s rating, presented in Standard & Poor’s equivalent rating.
The following table shows fair market values by vintage year and rating:
 
*   Total cash and investments at 6/30/09 (MMs) = $3,530.6
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As of June 30, 2009, the Portfolio’s allocation to Corporate and Financial issuers was $788.7 million and $226.1 million, respectively. The following table presents the ten largest Corporate and ten largest Financial issuers as of June 30, 2009:
Corporate Issuers
                 
            % of Total
    Fair Value   Cash and
ISSUER   ($MM)   Investments
 
VERIZON
   $ 50.2       1.4 %
AT&T INC
     41.2       1.2 %
WELLS FARGO
     31.8       0.9 %
JP MORGAN CHASE & CO
     23.8       0.7 %
BANK OF AMERICA
     23.4       0.7 %
GENERAL ELECTRIC
     23.3       0.7 %
HEWLETT-PACKARD
     22.8       0.6 %
PEPSICO INC
     19.7       0.6 %
ORACLE
     18.5       0.5 %
ROCHE HOLDINGS
     15.9       0.5 %
 
Sub-total
   $ 270.6       7.8 %
 
Financial Issuers
                 
            % of Total
    Fair Value   Cash and
ISSUER   ($MM)   Investments
 
WELLS FARGO
   $ 31.8       0.9 %
JP MORGAN CHASE & CO
     23.8       0.7 %
BANK OF AMERICA
     23.4       0.7 %
GENERAL ELECTRIC
     23.3       0.7 %
CITIGROUP
     15.3       0.4 %
HSBC HOLDINGS
     11.5       0.3 %
GOLDMAN SACHS GROUP INC
     9.7       0.3 %
BANCO SANTANDER SA
     8.8       0.2 %
MORGAN STANLEY
     8.7       0.2 %
NORTHERN TRUST
     8.1       0.2 %
 
Sub-total
   $ 164.4       4.6 %
 
 
1   Issuers exclude government-backed, government-sponsored enterprises and cash and cash equivalents.
 
2   Credit exposures represent only direct exposure to fixed maturities and short-term investments of the parent issuer and its major subsidiaries.
These exposures exclude asset and mortgage backed securities that were issued, sponsored or serviced by the parent.

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