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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2011 (September 23, 2011)
VALIDUS HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
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Bermuda
(State or other jurisdiction
of incorporation) |
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001-33606
(Commission
File Number) |
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98-0501001
(I.R.S. Employer
Identification No.) |
29 Richmond Road, Pembroke, HM 08 Bermuda
(Address of principal executive offices)
Registrant's
telephone number, including area code: (441) 278-9000
Not Applicable
(Former name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
- ý
- Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
- o
- Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
- o
- Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
- o
- Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 8.01 Other Events.
Revised Validus Merger Offer
Validus
Holdings, Ltd. ("Validus") has delivered a letter containing an increased offer to the board of directors (the "Transatlantic Board") of Transatlantic Holdings, Inc.
("Transatlantic") pursuant to which Validus would acquire Transatlantic through an exchange offer and a second-step merger transaction for 1.5564 voting common shares, par value $0.175 per
share of Validus (the "Validus Shares"), for each outstanding share of common stock, par value $1.00 per share, of Transatlantic (the "Transatlantic Shares") and Transatlantic would pay a special
dividend of $11.00 in cash per Transatlantic Share (which may be increased by the amount of the Special Excess Dividend (as defined below)) immediately prior to the expiration time of the exchange
offer (the "Validus Merger Offer"). The Validus Merger Offer could be structured to be tax-free to Transatlantic stockholders with respect to the Validus Shares to be issued thereunder.
The special dividend of $11.00 in cash and any Special Excess Dividend in the Validus Merger Offer will generally be taxable to U.S. stockholders of Transatlantic and may be subject to withholding
taxes for non-U.S. stockholders of Transatlantic, although many such non-U.S. stockholders may be eligible for a reduced rate of withholding tax, or an elimination of
withholding tax, under an applicable tax
treaty. Because individual circumstances may differ, Validus urges Transatlantic stockholders to consult with their own tax advisors as to the specific tax consequences of the Validus Merger Offer and
the Special Excess Dividend, including the applicability of U.S., federal, state, local, non-U.S. and other tax laws.
Validus
expects that the cash special dividend would be financed by new indebtedness incurred by Transatlantic. Validus has obtained a highly confident letter from J.P. Morgan Securities LLC in
connection with the arrangement of financing for the full amount of the $11.00 per share cash special dividend.
Validus
has notified Transatlantic that it would permit Transatlantic, pursuant to the terms of the Validus Merger Offer and Validus Exchange Offer (as defined below), to pay up to a $2.00 per share
cash special dividend (less applicable taxes and without interest); the aggregate amount available to pay this cash special dividend to all Transatlantic stockholders would be reduced on a
dollar-for-dollar basis for any funds used by Transatlantic for share repurchases made after October 31, 2011 (such dividend, the "Special Excess Dividend"). Therefore,
if Transatlantic continues share repurchases from selling stockholders it will result in a lower Special Excess Dividend payable to all Transatlantic stockholders in a transaction with Validus.
Validus cannot be assured of the timing or amounts of any ongoing Transatlantic share repurchases and therefore cannot ensure that the full amount of the Special Excess Dividend would be made
available to all Transatlantic stockholders. Any Special Excess Dividend will be funded from available cash on hand at Transatlantic.
The
Transatlantic Board has failed to accept the Validus Merger Offer.
Amendment to Validus Exchange Offer
On
November 3, 2011, Validus announced that it had amended the terms of the exchange offer that it commenced on July 25, 2011 (the "Validus Exchange Offer") to include offer
consideration of 1.5564 Validus Shares and $11.00 in cash (less applicable withholding taxes and without interest) per Transatlantic Share and to permit Transatlantic to pay up to a $2.00 per share
Special Excess Dividend (less applicable taxes and without interest) prior to the expiration time of the Validus Exchange Offer. A copy of the press release announcing, among other matters, the
amendment to the Validus Exchange Offer is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference in its entirety.
The
Validus Exchange Offer and second-step merger pursuant to which Validus will acquire any Transatlantic Shares outstanding following consummation of the Validus Exchange Offer will be a
taxable transaction for U.S. federal income tax purposes. U.S. holders of Transatlantic Shares generally will recognize gain or loss equal to the difference, if any, between (i) the sum of the
cash and fair market value of the Validus Shares received by such U.S. holder in the Validus Exchange Offer and
2
second-step
merger (including cash received in lieu of fractional shares) and (ii) such U.S. holder's adjusted tax basis in the Transatlantic Shares surrendered in exchange
therefor. Any gain or loss recognized upon the Validus Exchange Offer or second-step merger generally will be treated as capital gain or loss. Any Special Excess Dividend received by
Transatlantic stockholders will generally be taxable to U.S. stockholders of Transatlantic and may be subject to withholding taxes for non-U.S. stockholders of Transatlantic, although many
such non-U.S. stockholders may be eligible for a reduced rate of withholding tax, or an elimination of withholding tax, under an applicable tax treaty. Because individual circumstances may
differ, Validus urges Transatlantic stockholders to consult with their own tax advisors as to the specific tax consequences of the Validus Exchange Offer and the Special Excess Dividend, including the
applicability of U.S., federal, state, local, non-U.S. and other tax laws.
Validus Share Repurchase Program
On
November 3, 2011, Validus announced that the board of directors of Validus (the "Validus Board") has approved, through open market purchases or otherwise, an increase in Validus' existing
share repurchase authorization to a total of $1 billion, contingent upon the consummation of the acquisition of Transatlantic by Validus.
Updates to Transaction Background Since September 23, 2011
On
September 23, 2011, Transatlantic and Validus entered into a confidentiality agreement (the "Confidentiality Agreement") pursuant to which they exchanged non-public information.
Pursuant to the Confidentiality Agreement, Validus agreed, during a period that expired at 11:59 p.m., Eastern time, on October 31, 2011 (the "Restricted Period"), not to take or enter
into an agreement
with any third party regarding certain actions, including acquiring any additional Transatlantic Shares, mailing Validus' consent solicitation statement regarding the removal and replacement of the
Transatlantic Board to Transatlantic stockholders or collecting consent cards in connection therewith or seeking to call a special meeting of Transatlantic's stockholders pursuant to Transatlantic's
bylaws. Validus and Transatlantic also agreed to take no action with respect to their pending litigation in the Chancery Court of Delaware and United States District Court for the State of Delaware
during the Restricted Period.
Also
on September 23, 2011, Validus issued a press release announcing that it had entered into the Confidentiality Agreement and extended the Validus Exchange Offer to 5:00 p.m., Eastern
time, on October 31, 2011, unless further extended by Validus.
On
September 24, 2011 and September 25, 2011, Edward Noonan, Chief Executive Officer and Chairman of the board of directors of Validus, and Michael Sapnar, Executive Vice President and
Chief Operating Officer of Transatlantic, and representatives of Greenhill & Co., LLC ("Greenhill"), Validus' financial advisor, and Goldman, Sachs & Co. ("Goldman
Sachs") and Moelis & Company LLC ("Moelis"), Transatlantic's financial advisors, engaged in discussions regarding the processes under which Transatlantic and Validus would exchange
non-public information.
Beginning
on September 26, 2011 and continuing through November 2, 2011, representatives of Transatlantic and Validus and their respective advisors engaged in mutual due diligence,
including through electronic data rooms, conference calls and in-person meetings. This diligence process, performed in consultation with an internationally recognized actuarial firm,
generally confirmed Validus' prior view of Transatlantic's business, operations and reserve levels.
On
October 5, 2011, representatives of Transatlantic and Validus and their respective advisors met to discuss structuring the Validus Exchange Offer and the second-step merger to
permit Validus Shares issuable to Transatlantic stockholders to be received on a tax-free basis.
On
October 16, 2011, Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"), Validus' outside legal counsel, delivered a draft of an agreement and plan of merger to Gibson
Dunn & Crutcher LLP ("Gibson Dunn"), Transatlantic's outside legal counsel, which contemplated that Validus would acquire
3
all
issued and outstanding Transatlantic Shares pursuant to an amended Validus Exchange Offer and second-step merger.
On
October 25, 2011, the Validus Board met to receive an update on the due diligence on Transatlantic that had been conducted by Validus' management and its advisors and discuss a possible
revision to the terms of the transaction proposal initially publicly announced by Validus on July 12, 2011 (the "Initial Validus Proposal"). During this meeting, the Validus Board discussed
with Validus' management the parameters of a potential increase in the cash component of the Initial Validus Proposal.
On
October 26, 2011, based on instruction from Validus' management, Greenhill advised Goldman Sachs and Moelis that, based in part on Validus' findings in due diligence, Validus was considering
a potential increase in the size of the special dividend contemplated by the Initial Validus Proposal by $3.00 in cash per share, for a total of $11.00 per share, while maintaining the exchange ratio
at 1.5564 Validus Shares per Transatlantic Share. Greenhill noted that this transaction would be consummated on the basis of the two-step merger agreement that had been delivered by
Skadden, Arps to Gibson Dunn on October 16, 2011. Greenhill advised Goldman Sachs and Moelis of its view that agreement by Validus and Transatlantic on such a transaction could be reached prior
to the expiration of the Restricted Period under the Confidentiality Agreement.
On
October 27, 2011, Greenhill, Goldman Sachs and Moelis engaged in discussions regarding transaction related diligence matters raised by Transatlantic. Mr. Noonan and Mr. Sapnar
also had a telephone conversation which covered these additional diligence matters.
On
October 28, 2011, Mr. Noonan and Joseph E. (Jeff) Consolino, President and Chief Financial Officer of Validus, met with Mr. Sapnar and Steven Skalicky, Executive Vice President
and Chief Financial Officer of Transatlantic, to discuss transaction related diligence matters. Later that evening, representatives of Greenhill, Goldman Sachs and Moelis engaged in further discussion
regarding these matters.
On
October 29, 2011 and October 30, 2011, Mr. Noonan and Mr. Sapnar and representatives of Greenhill, Goldman Sachs and Moelis continued their discussions.
On
October 31, 2011, Goldman Sachs and Moelis contacted Greenhill to report the Transatlantic Board's views regarding the potential increase to the Initial Validus Proposal that had been
discussed the previous week, including the potential parameters of an acceptable increased offer. Later that day, following discussions with Transatlantic management, Greenhill called Goldman Sachs
and Moelis to discuss the possibility of Validus permitting Transatlantic to pay a $2.00 per share dividend out of Transatlantic's cash on hand in addition to the $11.00 per share special dividend
previously proposed by Validus and to review governance issues. Mr. Noonan and Mr. Sapnar engaged in telephone discussions regarding a potential transaction following this call.
At
11:59 p.m., Eastern time, on October 31, 2011, the Restricted Period under the Confidentiality Agreement expired.
On
November 1, 2011, Validus announced in a press release that it had extended the expiration time of the Validus Exchange Offer to 5:00 p.m., Eastern time, on Friday,
November 25, 2011, and that Validus and Transatlantic continued to exchange information and remained in discussions regarding a possible transaction. Validus thereafter filed Amendment
No. 19 to Validus' Schedule TO relating to the Validus Exchange Offer to reflect the extension of the expiration time of the Validus Exchange Offer.
Also
on November 1, 2011, Goldman Sachs and Moelis reported to Greenhill that the Transatlantic Board was unable to act on the increased offer from Validus and had failed to accept the
increased offer.
On
November 2, 2011, Mr. Noonan called Mr. Sapnar to discuss Validus' increased offer. Mr. Sapnar advised that the Transatlantic Board had failed to accept the increased
offer.
Also
on November 2, 2011, Validus delivered to the Transatlantic Board a letter containing the Validus Merger Offer. The Validus Merger Offer increased the amount of the one-time special
dividend
4
contemplated
to be paid as part of the Initial Validus Proposal to $11.00 in cash per Transatlantic Share and provided that this amount may be increased by the up to $2.00 per share Special Excess
Dividend. The letter reads as follows:
November 2,
2011
Board
of Directors of Transatlantic Holdings, Inc.
c/o Richard S. Press, Chairman
c/o Robert F. Orlich, Chief Executive Officer
c/o Michael Sapnar, President
80 Pine Street
New York, New York 10005
- Re:
- Compelling
Increased Offer to Acquire Transatlantic Holdings, Inc.
Dear
Sirs,
We
are disappointed that you have failed to accept our increased offer which as of November 2, 2011 would have delivered total value of $55.35 per Transatlantic share based on
Validus' closing share price on November 2, 2011, including an increase in the cash component of our offer of $3.00 per share and the ability for Transatlantic to pay up to an additional $2.00
per share. As a result, we have resumed our Consent Solicitation and Exchange Offer.
Background
It
has been almost four months since Validus first announced its cash-and-stock offer to acquire Transatlantic on July 12th.
We
had hoped that it would be possible to pursue a consensual transaction between Validus and Transatlantic after Transatlantic terminated its merger agreement with Allied World on
September 16th following overwhelming Transatlantic stockholder opposition to that transaction. Following that time, Validus and Transatlantic entered into a confidentiality agreement on
September 23rd, clearing the way for a mutual exchange of non-public information and negotiations to allow both Validus and Transatlantic to better understand each other's business
and value, and Validus suspended its Consent Solicitation until November 1st so that the parties could focus their energies on reaching a consensual transaction.
Due Diligence and Increased Offer
We
and our advisors have spent the past six weeks reviewing the information that Transatlantic was willing to share with us in an effort to better understand your business, operations
and reserve adequacy and to determine whether we could provide greater value to your stockholders. This diligence process, performed in consultation with an internationally recognized actuarial firm,
generally confirmed Validus' prior view of Transatlantic's business, operations and reserve levels.
Based
on the additional work that we have done, Validus has determined that it will increase its offer. Our increased offer provides that Transatlantic stockholders would receive
(1) 1.5564 Validus voting common shares pursuant to an exchange offer and merger, (2) $11.00 per share in cash pursuant to a pre-closing dividend from Transatlantic
immediately prior to closing of the Exchange Offer and (3) up to an additional $2.00 cash per share in a pre-closing dividend. Our increased offer could be structured with
Transatlantic's cooperation to be tax-free to Transatlantic stockholders with respect to the Validus shares they receive in the Exchange Offer and the Merger. As we have communicated to
you and your advisors, we believe that the transaction can be consummated prior to year-end.
The
aggregate amount available to pay the additional $2.00 cash pre-closing dividend to all Transatlantic stockholders would be reduced on a
dollar-for-dollar basis for any funds used by Transatlantic for share repurchases made after October 31st. Therefore, if Transatlantic continues
5
share
repurchases from selling stockholders it will result in a lower pre-closing cash dividend payable to all Transatlantic stockholders in a transaction with Validus.
We
believe that our increased offer (including the full amount of the additional cash dividend of $2.00 per share), which represented a 6.0%† premium to Transatlantic's
closing share price on November 2nd, presents a compelling proposition for your stockholders and provides full and fair value for Transatlantic shares. In addition, this increased offer
represented as of November 2nd:
- •
- a 25.8% premium to Transatlantic's closing share price on June 10th, the last trading day prior to the announcement
of Transatlantic's merger agreement with Allied World;‡ and
- •
- a 12.9% premium to Transatlantic's closing share price on July 12th, the last trading day prior to Validus'
announcement of its intention to acquire Transatlantic.§
When
we asked our financial advisors at Greenhill to initially share our view with respect to a potential increase to our initial offer, we did so with the sincere hope that it would be
possible to work with Transatlantic on an accelerated basis to achieve a consensual transaction by the October 31st deadline set by our confidentiality agreement. Given the work that has
been done on both sides over the past six
weeks, Validus was extremely disappointed that the Transatlantic board has failed to accept our increased offer.
We
believe that our increased offer is a far better value-enhancing alternative for Transatlantic stockholders than waiting for Transatlantic to pursue a theoretical transaction, a third
party-sponsored run-off, a minority investment from a third party or pursuing a "go it alone" approach for the following reasons:
- •
- We believe an alternative transaction will be subject to greater execution, financing and regulatory delay and risks than
a transaction with Validus.
- •
- Validus commenced its Exchange Offer to acquire Transatlantic on July 25th and its registration statement
was declared effective by the Securities and Exchange Commission on August 22nd. The exchange offer can be used as the first step in a two-step transaction that can be consummated
prior to year-end.
- •
- Validus has obtained from J.P. Morgan Securities LLC a highly confident letter in connection with the arrangement
of the financing required to pay the $11.00 per Transatlantic share pre-closing cash dividend.
- •
- Validus has obtained, or is well along in the process of obtaining, all insurance, antitrust and other regulatory
approvals required to complete the acquisition of Transatlantic.
Based
on these factors, we believe no other party can provide more transaction certainty or speed of execution to Transatlantic stockholders than Validus.
- •
- Validus does not believe that there is any economic rationale under which a standalone Transatlantic is a better option
for Transatlantic stockholders than a transaction with Validus. A "go it alone" Transatlantic appears to face significant hurdles and negative implications for Transatlantic
stockholders:
- •
- No premium: A "go it alone" approach provides no premium for
Transatlantic's stockholders, no cash for Transatlantic's stockholders and no catalyst for a trading multiple expansion for Transatlantic shares. In contrast, Validus' increased offer that was not
accepted by the Transatlantic board represented as of November 2nd a 25.8% premium to Transatlantic's June 10th unaffected closing share price† and provides
Transatlantic stockholders with a significant equity interest in Validus, whose stock has consistently traded at a higher multiple than Transatlantic.
- •
- Inflexible structure: On a "go it alone" approach,
Transatlantic's capital remains trapped within a tax-inefficient U.S. structure. In contrast, Validus' Bermuda domicile provides flexibility that permits Validus to shift capital as needed
to maximize returns.
6
- •
- No insurance experience: Despite its attempts to obtain
access to U.S. primary insurance business through Putnam Reinsurance Company, a "go it alone" Transatlantic provides its stockholders with no insurance experience or track record as a potential avenue
for growth. Combining with Validus would provide access to a skilled management team that has produced a company with a top tier position at Lloyd's, with over $1 billion of gross premiums
written and top quartile Lloyd's financial performance. Moreover, Talbot will give Transatlantic immediate access to the U.S. excess and surplus market.
- •
- No E.U. passport: A "go it alone" Transatlantic will continue
to lack an E.U. passport—a key deficiency previously identified by Transatlantic's management. Validus would provide Transatlantic with an E.U. passport through Validus Re Europe Limited,
which can be funded as appropriate to support the combined company's expanding business.
- •
- Smaller size: A "go it alone" Transatlantic will remain the
number 10 ranked property and casualty reinsurance company, while a combination with Validus would create a top six property and casualty reinsurance company worldwide, as well as a market
leader in the U.S. and Bermuda.
- •
- No synergies: A "go it alone" Transatlantic cannot create
stockholder value through realizing synergies, as compared to the significant opportunities to expand earnings, return on equity and book value growth through a combination with Validus.
- •
- Inferior capital management opportunities: Although a "go it
alone" Transatlantic can continue to pursue its recently announced share repurchase program, subject to rating agency and other business constraints, it lacks the incremental excess capital that would
be created by a combination with Validus. Moreover, active capital management is, and has been, a core element of Validus' strategy, and Validus has a senior management team skilled in managing
capital for the benefit of all of its shareholders. A combination of Validus and Transatlantic would create approximately $1 billion of pre-synergy, pre-catastrophe
earnings power which, together with excess capital created by the transaction, would be available for expanded share repurchase activity by the combined company. Accordingly, the Validus
Holdings, Ltd. board of directors has approved, through open market purchases or otherwise, an increase in the current Validus share repurchase authorization to an aggregate of
$1 billion, contingent upon the consummation of the acquisition of Transatlantic.**
Conclusion
Validus
firmly believes that Transatlantic stockholders will find our increased offer compelling. Our preference remains to reach a consensual transaction with the Transatlantic board.
However, because the Transatlantic board has failed to accept Validus' compelling increased offer, Validus will take its offer directly to Transatlantic's stockholders through its Exchange Offer and
Consent Solicitation to replace the Transatlantic board.
Sincerely,
/s/
Edward J. Noonan
Edward
J. Noonan
Chairman and Chief Executive Officer
- †
- Based
on Transatlantic ($52.23) closing share price on November 2, 2011, and Validus ($27.21) closing share price on November 2,
2011.
- ‡
- Based
on Transatlantic ($44.01) closing share price on June 10, 2011, and Validus ($27.21) closing share price on November 2, 2011.
7
- §
- Based
on Transatlantic ($49.02) closing share price on July 12, 2011, and Validus ($27.21) closing share price on November 2, 2011.
- **
- Validus
expects the share repurchases to be made from time to time in the open market or in privately negotiated transactions. The timing, form and amount of
the share repurchases under the program will depend on a variety of factors, including market conditions, Validus' capital position relative to internal and rating agency targets, legal requirements
and other factors. The repurchase program may be modified, extended or terminated by the Validus Holdings, Ltd. board of directors at any time.
Additionally,
on November 2, 2011, Validus delivered to Transatlantic a letter demanding that the Transatlantic Board set a record date in connection with Validus' consent solicitation.
Further, on
November 2, 2011, Validus delivered a letter demanding that Transatlantic deliver to Validus, among other things, a list of Transatlantic stockholders as of such date.
On
November 3, 2011, Validus publicly disclosed the terms of the Validus Merger Offer in a press release and announced that it had amended the terms of the Validus Exchange Offer to include
offer consideration of 1.5564 Validus Shares and $11.00 in cash (less applicable withholding taxes and without interest) per Transatlantic Share and to permit Transatlantic to pay up to a $2.00 per
share Special Excess Dividend prior to the expiration time of the Validus Exchange Offer. Validus thereafter filed Amendment No. 20 to Validus' Schedule TO relating to the Validus
Exchange Offer to reflect the revised terms of the Validus Exchange Offer.
Also
on November 3, 2011, Validus announced that the Validus Board has approved, through open market purchases or otherwise, an increase in Validus' existing share repurchase authorization to a
total of $1 billion, contingent upon the consummation of the acquisition of Transatlantic by Validus.
Source and Amount of Funds
Validus
has obtained commitments from J.P. Morgan Securities LLC, as lead arranger, and JPMorgan Chase Bank, N.A. to provide, subject to certain conditions, senior bank financing consisting of
up to $350 million under a proposed new unsecured credit facility (the "Bridge Facility"), for financing a portion of the cash component of the consideration to be paid to Transatlantic
stockholders in connection with the Validus Exchange Offer. These commitments supersede and replace the previously disclosed commitments from J.P. Morgan Securities LLC and JPMorgan Chase
Bank, N.A. to provide up to $200 million of senior bank financing. The documentation governing the credit facility contemplated by these commitments has not been finalized, and
accordingly, the actual terms may differ from the summary below. Validus plans to fund the remaining cash component of the consideration to be paid to Transatlantic stockholders in connection with the
Validus Exchange Offer through borrowing under Validus' existing (i) $340 million Three-Year Unsecured Letter of Credit Facility Agreement, dated as of March 12, 2010,
as amended (the "Existing Three-Year L/C Facility"), among Validus, Validus Reinsurance Ltd. ("Validus Re"), the subsidiary account parties from time to time party thereto, the
lenders from time to time party thereto, Deutsche Bank Securities Inc., as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent and (ii) $60 million
Three-Year Revolving Credit Facility Agreement, dated as of March 12, 2010, as amended, among Talbot Holdings Ltd., as borrower, Validus, the lenders from time to time party
thereto and Lloyds TSB Bank plc, as administrative agent.
Each
loan made under the Bridge Facility will bear interest at an Adjusted LIBOR Rate or Alternate Base Rate (as contemplated by the commitment letter relating to the Bridge Facility) plus, in each
case, the applicable margin described in the chart below. Interest periods on Adjusted LIBOR Rate-based loans may be one, two, three or six months, at Validus' option. In the case of
Adjusted LIBOR Rate-based loans, interest will accrue on the basis of a 360-day year, and will be payable on the last day
8
of
each relevant interest period and, for any interest period longer than 3 months, on each successive date 3 months after the first day of such interest period. Interest will accrue on
Alternate Base Rate-based loans on the basis of a 365/366-day year (or 360-day year if based on the Federal Funds Rate or the Adjusted LIBOR Rate) and shall be
payable quarterly in arrears. Unused loan commitments will be subject to an unused commitment fee, as described in the chart below.
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Category
|
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Index Ratings |
|
Commitment
Fee Rate |
|
Eurodollar
Spread |
|
ABR
Spread |
|
Category 1 |
|
A-/A3 or better |
|
|
0.125 |
% |
|
2.000 |
% |
|
1.000 |
% |
Category 2 |
|
BBB+/Baa1 |
|
|
0.150 |
% |
|
2.250 |
% |
|
1.250 |
% |
Category 3 |
|
BBB/Baa2 |
|
|
0.200 |
% |
|
2.500 |
% |
|
1.500 |
% |
Category 4 |
|
BBB-/Baa3 |
|
|
0.250 |
% |
|
2.750 |
% |
|
1.750 |
% |
Category 5 |
|
BB+/Ba1 or lower |
|
|
0.325 |
% |
|
3.125 |
% |
|
2.125 |
% |
The
Eurodollar Spreads and ABR Spreads set forth in the chart above will increase by an additional 0.25% on the date that is 90 days following the closing date of the Bridge Facility and every
90 days thereafter.
Additionally,
Validus shall pay a duration fee for the ratable benefit of the lenders under the Bridge Facility on the dates set forth below, equal to the Applicable Duration Fee Percentage of the
aggregate principal amount of loans outstanding as of such date:
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|
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Days after the closing date of the Bridge Facility
|
|
90 days |
|
180 days |
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270 days |
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Applicable Duration Fee Percentage |
|
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0.50 |
% |
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0.75 |
% |
|
1.00 |
% |
Borrowing
under the Bridge Facility will be subject to certain conditions. Set forth below is a description of the conditions precedent to borrowing under the Bridge
Facility:
- •
- the negotiation, delivery and execution of definitive documentation with respect to the Bridge Facility consistent with
the Existing Three-Year L/C Facility, and on terms consistent with, and containing only those conditions to borrowing expressly set forth in the commitment letter relating to the Bridge
Facility;
- •
- (i) the Validus Exchange Offer shall have been consummated substantially concurrently with the initial funding of
the Bridge Facility, in accordance with the terms described in the commitment letter relating to the Bridge Facility and in accordance with the terms of the definitive documents relating to the
Validus Exchange Offer; (ii) without the prior written consent of the lead arranger (such consent not to be unreasonably withheld or delayed), there shall have been no amendment, modification,
waiver or consent with respect to the conditions set forth in the documents relating to the Validus Exchange Offer entitled "Section 203 Condition" and "Rights Agreement Condition", in each
case, as such conditions were in effect in the documents relating to the Validus Exchange Offer as of August 19, 2011; and (iii) after giving effect to the consummation of the Validus
Exchange Offer on the closing date of the Bridge Facility, Validus shall own a majority of the then outstanding Transatlantic Shares on a fully diluted basis;
- •
- since December 31, 2010, there not having been any Combined Material Adverse Effect (as defined in the commitment
letter relating to the Bridge Facility), other than any events, developments or occurrences (but not any future updates, developments or other changes in or to any such events, developments or
occurrences) that have been disclosed prior to November 2, 2011 in any filing with the SEC on Form 10-K, Form 10-Q or Form 8-K of
Validus or Transatlantic, as applicable;
- •
- as of the closing date of the Bridge Facility, no default or event of default shall have occurred and be continuing, or
shall occur as a result of the consummation of the Validus Exchange Offer, the second-step merger and the financings thereof or the $2.00 per share Special Excess Dividend permitted to be
paid prior to the expiration time of the Validus Exchange Offer, under
9
(i) the
Existing Three-Year L/C Facility, the $500 million Five-Year Secured Letter of Credit Facility Agreement, dated as of March 12, 2007, as it may be
amended, or, in each case any refinancing or replacement thereof or (ii) any other credit agreement of Validus, Transatlantic or any of their respective subsidiaries, or any refinancing or
replacement thereof (other than, in the case of this clause (ii), any such agreements, refinancing or replacements with an aggregate outstanding principal amount (for all such agreements,
refinancing and replacements) not in excess of $150,000,000);
- •
- accuracy of representations and warranties under the Bridge Facility (subject to materiality thresholds) (excluding any
representation or warranty relating to Transatlantic or any of its subsidiaries or any of their respective businesses);
- •
- no default or event of default shall have occurred and be continuing at the time of, or after giving effect to the making
of, the loans under the Bridge Facility;
- •
- on the closing date of the Bridge Facility, taking into account the Validus Exchange Offer and the second-step
merger, Validus shall have (i) an unsecured long-term obligations rating of at least "Baa3" (with stable (or better) outlook from Moody's Investors Service, Inc. and
(ii) long-term issuer credit rating of at least "BBB-" (with stable (or better) outlook) from Standard & Poor's Financial Services LLC, which ratings and
outlooks shall have been reaffirmed within seven days prior to funding (to the extent the closing date of the Bridge Facility is more than 60 days after the original date of receipt of such
ratings);
- •
- the lenders shall have received (i) audited consolidated financial statements of Validus for the three most recent
fiscal years ended at least 90 days prior to the closing date of the Bridge Facility and (ii) unaudited consolidated financial statements of Validus for each interim quarterly period
ended after the latest fiscal year referred to in clause (i) above and at least 45 days prior to the closing date of the Bridge Facility, and unaudited consolidated financial statements
for the same period of the prior fiscal year;
- •
- the lenders shall have received a pro forma consolidated balance sheet of Validus as at the end of the most recent fiscal
year ended at least 90 days prior to the closing date of the Bridge Facility and a pro forma statement of operations for each of (i) the most recent fiscal year of Validus ended at least
90 days prior to the closing date of the Bridge Facility and (ii) the most recent interim period of Validus ending at least 45 days prior to the closing date of the Bridge
Facility, in each case adjusted to give effect to the consummation of the Validus Exchange Offer, the second-step merger and the financings contemplated in the commitment letter relating
to the Bridge Facility as if such transactions had occurred on such date or on the first day of such period, as applicable. To the extent practicable, such pro forma financial statements shall be
prepared in accordance with Regulation S-X, but it is acknowledged that to the extent Validus is limited as to information relating to Transatlantic and its subsidiaries, such
preparation may not be practicable;
- •
- payment of all fees and expenses then due with respect to the Bridge Facility to the extent invoiced at least one business
day prior to the closing date of the Bridge Facility;
- •
- the administrative agent shall have received such legal opinions, certificates (including a solvency certificate from the
chief financial officer of Validus certifying the solvency of Validus and its subsidiaries on a consolidated basis, after giving effect to the Validus Exchange Offer, the second-step merger and the
borrowings under the Bridge Facility), documents and other instruments and information (including PATRIOT Act and related compliance documentation and information), in each case, as are customary for
transactions of this type as it may reasonably request; and
- •
- receipt by the administrative agent of a customary borrowing request from Validus.
10
Validus
expects that the contemplated Bridge Facility will mature on the earlier of (i) one year after the closing date of the Bridge Facility and (ii) March 12, 2013.
The
loans made under the Bridge Facility may be voluntarily prepaid without premium or penalty, subject to Validus' payment of breakage costs in connection with any Adjusted LIBOR
Rate-based loans.
Subject
to certain exceptions and thresholds, (i) the loans made under the Bridge Facility will be mandatorily prepaid and, (ii) after the execution of the commitment letter relating to
the Bridge
Facility, but prior to the closing date of the Bridge Facility, the commitments of the lenders under the Bridge Facility will be reduced, in each case, on a pro rata basis with (a) 100% of the
net cash proceeds of any issuance of equity by Validus (other than any issuance of equity pursuant to the Validus Exchange Offer), (b) 100% of the net cash proceeds of any incurrence of
indebtedness for borrowed money by Validus or any of its subsidiaries and (c) 100% of the net cash proceeds of any non-ordinary course sale or other disposition of assets by Validus
of any of its subsidiaries.
All
obligations of Validus and its subsidiaries under the Bridge Facility will, from and after the consummation of the second-step merger, be unconditionally guaranteed (the "Guarantee"),
by Transatlantic so long as the provision of such Guarantee at such time is not prohibited by any material contract of Transatlantic or applicable law or regulation and would not result in material
adverse tax consequences as reasonably determined by Validus and the administrative agent. In the event that (and for so long as) the Guarantee is not provided, the Bridge Facility will include the
following additional covenants, in each case, consistent with the terms of the Existing Three-Year L/C Facility: (i) a minimum level of capital surplus at Validus Re equal to at
least $2,451,837,960, (ii) a limitation on direct or indirect investments by Validus and its subsidiaries (other than Transatlantic and its subsidiaries) in Transatlantic and its subsidiaries
and (iii) a covenant to provide quarterly financial statements of Validus Re.
The
representations and warranties contained in and the events of default under the Bridge Facility shall be substantially similar to those of the Existing Three-Year L/C Facility, as
modified to reflect and permit the Validus Exchange Offer, the second-step merger and the other transactions contemplated by the Exchange Offer Documents (as defined below).
Validus Projected Financial Information
Validus'
senior management does not as a matter of practice prepare or disclose public forecasts or projections as to Validus' future performance, earnings or other operating metrics beyond the
current fiscal year, and Validus does not place much emphasis on projections for extended periods due to the unpredictability of the underlying assumptions and estimates.
However,
at the request of Transatlantic's management, certain financial projections prepared by, or as directed by Validus' management have been provided by Validus to Transatlantic in connection
with the Validus Merger Offer. Summaries of the foregoing financial projections (the "Financial Projections") are being provided herein solely because they were provided to Transatlantic to assist
Transatlantic in reviewing the terms of the Validus Merger Offer. The inclusion of these Financial Projections in this Current Report on Form 8-K should not be regarded as an
indication that Validus, Transatlantic, the board of directors of Validus or Transatlantic (or any committee thereof), or any other recipient of this information considered, or now considers, such
Financial Projections to be a reliable prediction of future results, and they should not be relied on as such.
11
The
Financial Projections reflect numerous judgments, estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other
future events, as well as matters specific to Validus' business, all of which are difficult to predict and many of which are beyond Validus' control. The Financial Projections are subjective in many
respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Financial Projections constitute forward-looking
information and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such projections, including the various risks set forth in
this Current Report on Form 8-K and Validus' periodic reports. See the subheading of this Item 8.01 titled "Cautionary Statement Regarding Forward-Looking Statements." There
can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. The Financial Projections cover multiple years and such
information by its nature becomes meaningfully less reliable with each successive year.
The
Financial Projections do not take into account any circumstances or events occurring after the date they were prepared, and they do not give effect to the Validus Merger Offer or the Validus
Exchange Offer or the effect of any failure of the transactions contemplated by the Validus Merger Offer or the
Validus Exchange Offer to occur, and should not be viewed as accurate or continuing as of any other such date or in the event of any such failure.
The
Financial Projections were prepared solely for use in connection with evaluating the Validus Merger Offer and not with a view toward public disclosure or toward complying with generally accepted
accounting principles, the published guidelines of the Securities and Exchange Commission (the "SEC") regarding projections or the guidelines established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective financial information. Neither Validus' registered public accounting firm, nor any other independent accountants, have compiled, examined or
performed any procedures with respect to the Financial Projections included below, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they
assume no responsibility for, and deny any association with, the Financial Projections. The audit report included in the Validus 10-K refers exclusively to Validus' historical financial information.
It does not extend to the Financial Projections and should not be read as such.
Validus
has made publicly available its actual results of operations for the quarter ended September 30, 2011. Readers of this Current Report on Form 8-K are cautioned not to
place undue reliance on the projections set forth below. No one has made or makes any representation to any stockholder regarding the information included in the Financial Projections.
The
inclusion of the Financial Projections herein will not be deemed an admission or representation by Validus that they are viewed by Validus or any other party as material information of Validus.
The Financial Projections are not included in this Current Report on Form 8-K in order to induce any holder of shares of Transatlantic common stock to deliver a written consent to
Validus pursuant to the consent solicitation contemplated by the preliminary consent solicitation statement originally filed by Validus with the SEC on September 14, 2011 or to tender
Transatlantic Shares pursuant to the Validus Exchange Offer. Validus does not intend to update or otherwise revise the Financial Projections to reflect circumstances existing since their preparation,
to reflect the occurrence of unanticipated events even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry
conditions.
The
projections include the effects of capital management over the projection period (either by means of share repurchases or dividends).
12
Validus—Summary Projections
($ in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011E |
|
2012E |
|
2013E |
|
2014E |
|
2015E |
|
2016E |
|
Stockholders' Equity |
|
$ |
3,646,196 |
|
$ |
3,660,569 |
|
$ |
3,660,569 |
|
$ |
3,660,569 |
|
$ |
3,660,569 |
|
$ |
3,660,569 |
|
Total Net Premiums Written |
|
|
1,751,264 |
|
|
1,994,353 |
|
|
2,053,021 |
|
|
2,102,594 |
|
|
2,172,702 |
|
|
2,257,523 |
|
Net Income |
|
|
77,521 |
|
|
440,544 |
|
|
466,341 |
|
|
472,414 |
|
|
474,605 |
|
|
492,627 |
|
Diluted EPS |
|
$ |
0.68 |
|
$ |
4.33 |
|
$ |
5.34 |
|
$ |
6.20 |
|
$ |
7.24 |
|
$ |
8.90 |
|
Loss Ratio |
|
|
67.8 |
% |
|
49.5 |
% |
|
49.7 |
% |
|
50.0 |
% |
|
50.5 |
% |
|
50.6 |
% |
Combined ratio |
|
|
99.8 |
% |
|
80.1 |
% |
|
80.0 |
% |
|
80.2 |
% |
|
80.7 |
% |
|
80.7 |
% |
Selected Historical Consolidated Financial Data of Validus
Set
forth below is certain selected historical consolidated financial data relating to Validus. The financial data has been derived from Validus' financial results for the nine months ended
September 30, 2011, furnished as part of Validus' Current Report on Form 8-K filed with the SEC on October 27, 2011, (the "Validus Q3 Earnings Release"), and Validus'
Annual Report on Form 10-K for the year ended December 31, 2010 (the "Validus 10-K"). Historical results are not necessarily indicative of the results that may be
expected for the remainder of this fiscal year or any other future period. This financial data should be read in conjunction with the financial statements and the related notes and other financial
information contained in the Validus Q3 Earnings Release and the Validus 10-K.
13
The following table sets forth summarized operational data for the periods ended December 31, 2010, 2009, 2008, 2007 and 2006 and September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
Year Ended December 31, |
|
|
|
2011 |
|
2010 |
|
2010 |
|
2009(12) |
|
2008 |
|
2007 |
|
2006 |
|
|
|
(Dollars in thousands, except share and per share amounts)
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written |
|
$ |
1,846,412 |
|
$ |
1,731,835 |
|
$ |
1,990,566 |
|
$ |
1,621,241 |
|
$ |
1,362,484 |
|
$ |
988,637 |
|
$ |
540,789 |
|
Reinsurance premiums ceded |
|
|
(272,752 |
) |
|
(194,106 |
) |
|
(229,482 |
) |
|
(232,883 |
) |
|
(124,160 |
) |
|
(70,210 |
) |
|
(63,696 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written |
|
|
1,573,660 |
|
|
1,537,729 |
|
|
1,761,084 |
|
|
1,388,358 |
|
|
1,238,324 |
|
|
918,427 |
|
|
477,093 |
|
Change in unearned premiums |
|
|
(259,863 |
) |
|
(209,417 |
) |
|
39 |
|
|
61,219 |
|
|
18,194 |
|
|
(60,348 |
) |
|
(170,579 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
|
|
1,313,797 |
|
|
1,328,312 |
|
|
1,761,123 |
|
|
1,449,577 |
|
|
1,256,518 |
|
|
858,079 |
|
|
306,514 |
|
Gain on bargain purchase, net of expenses(13) |
|
|
— |
|
|
— |
|
|
— |
|
|
287,099 |
|
|
— |
|
|
— |
|
|
— |
|
Net investment income |
|
|
84,216 |
|
|
103,141 |
|
|
134,103 |
|
|
118,773 |
|
|
139,528 |
|
|
112,324 |
|
|
58,021 |
|
Realized gain on repurchase of debentures |
|
|
— |
|
|
— |
|
|
— |
|
|
4,444 |
|
|
8,752 |
|
|
— |
|
|
— |
|
Net realized gains (losses) on investments |
|
|
23,177 |
|
|
46,897 |
|
|
32,498 |
|
|
(11,543 |
) |
|
(1,591 |
) |
|
1,608 |
|
|
(1,102 |
) |
Net unrealized (losses) gains on investments |
|
|
(22,150 |
) |
|
88,641 |
|
|
45,952 |
|
|
84,796 |
|
|
(79,707 |
) |
|
12,364 |
|
|
— |
|
Other income |
|
|
2,201 |
|
|
4,667 |
|
|
5,219 |
|
|
4,634 |
|
|
5,264 |
|
|
3,301 |
|
|
— |
|
Foreign exchange (losses) gains |
|
|
(22,390 |
) |
|
(2,073 |
) |
|
1,351 |
|
|
(674 |
) |
|
(49,397 |
) |
|
6,696 |
|
|
2,157 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,378,851 |
|
|
1,569,585 |
|
|
1,980,246 |
|
|
1,937,106 |
|
|
1,279,367 |
|
|
994,372 |
|
|
365,590 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses |
|
|
909,572 |
|
|
832,361 |
|
|
987,586 |
|
|
523,757 |
|
|
772,154 |
|
|
283,993 |
|
|
91,323 |
|
Policy acquisition costs |
|
|
232,931 |
|
|
217,376 |
|
|
292,899 |
|
|
262,966 |
|
|
234,951 |
|
|
134,277 |
|
|
36,072 |
|
General and administrative expenses(1) |
|
|
145,244 |
|
|
154,779 |
|
|
209,290 |
|
|
185,568 |
|
|
123,948 |
|
|
100,765 |
|
|
38,354 |
|
Share compensation expenses |
|
|
27,059 |
|
|
21,040 |
|
|
28,911 |
|
|
27,037 |
|
|
27,097 |
|
|
16,189 |
|
|
7,878 |
|
Finance expenses |
|
|
41,297 |
|
|
42,084 |
|
|
55,870 |
|
|
44,130 |
|
|
57,318 |
|
|
51,754 |
|
|
8,789 |
|
Transaction expenses |
|
|
13,583 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Fair value of warrants issued |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,893 |
|
|
77 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,369,686 |
|
|
1,267,640 |
|
|
1,574,556 |
|
|
1,043,458 |
|
|
1,215,468 |
|
|
589,871 |
|
|
182,493 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before taxes |
|
|
9,165 |
|
|
301,945 |
|
|
405,690 |
|
|
893,648 |
|
|
63,899 |
|
|
404,501 |
|
|
183,097 |
|
Taxes |
|
|
(1,050 |
) |
|
(2,068 |
) |
|
(3,126 |
) |
|
3,759 |
|
|
(10,788 |
) |
|
(1,505 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
8,115 |
|
|
299,877 |
|
|
402,564 |
|
|
897,407 |
|
|
53,111 |
|
|
402,996 |
|
|
183,097 |
|
Net income attributable to non controlling interest |
|
|
(14,110 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available (attributable) to Validus |
|
$ |
(5,995 |
) |
$ |
299,877 |
|
$ |
402,564 |
|
$ |
897,407 |
|
$ |
53,111 |
|
$ |
402,996 |
|
$ |
183,097 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period(2) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(332 |
) |
Foreign currency translation adjustments |
|
|
523 |
|
|
(94 |
) |
|
(604 |
) |
|
3,007 |
|
|
(7,809 |
) |
|
(49 |
) |
|
— |
|
Adjustment for reclassification of losses realized in income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,102 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
$ |
(5,472 |
) |
$ |
299,783 |
|
$ |
401,960 |
|
$ |
900,414 |
|
$ |
45,302 |
|
$ |
402,947 |
|
$ |
183,867 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
Year Ended December 31, |
|
|
|
2011 |
|
2010 |
|
2010 |
|
2009(12) |
|
2008 |
|
2007 |
|
2006 |
|
|
|
(Dollars in thousands, except share and per share amounts)
|
|
Earnings per share(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
98,430,686 |
|
|
119,414,906 |
|
|
116,018,364 |
|
|
93,697,194 |
|
|
74,677,903 |
|
|
65,068,093 |
|
|
58,477,130 |
|
Diluted |
|
|
98,430,686 |
|
|
123,735,683 |
|
|
120,630,945 |
|
|
97,168,409 |
|
|
75,819,413 |
|
|
67,786,673 |
|
|
58,874,567 |
|
Basic (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
2.47 |
|
$ |
3.41 |
|
$ |
9.51 |
|
$ |
0.62 |
|
$ |
6.19 |
|
$ |
3.13 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
2.42 |
|
$ |
3.34 |
|
$ |
9.24 |
|
$ |
0.61 |
|
$ |
5.95 |
|
$ |
3.11 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
|
$ |
0.75 |
|
|
0.66 |
|
$ |
0.88 |
|
$ |
0.80 |
|
$ |
0.80 |
|
$ |
— |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected financial ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses ratio(4) |
|
|
69.2 |
% |
|
62.7 |
% |
|
56.1 |
% |
|
36.1 |
% |
|
61.5 |
% |
|
33.1 |
% |
|
29.8 |
% |
Policy acquisition cost ratio(5) |
|
|
17.7 |
% |
|
16.4 |
% |
|
16.6 |
% |
|
18.1 |
% |
|
18.7 |
% |
|
15.6 |
% |
|
11.8 |
% |
General and administrative expense ratio(6) |
|
|
13.1 |
% |
|
13.2 |
% |
|
13.5 |
% |
|
14.7 |
% |
|
12.0 |
% |
|
13.3. |
% |
|
15.1 |
% |
Expense ratio(7) |
|
|
30.8 |
% |
|
29.6 |
% |
|
30.1 |
% |
|
32.8 |
% |
|
30.7 |
% |
|
28.9 |
% |
|
26.9 |
% |
Combined ratio(8) |
|
|
100.0 |
% |
|
92.3 |
% |
|
86.2 |
% |
|
68.9 |
% |
|
92.2 |
% |
|
62.0 |
% |
|
56.7 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity(9) |
|
|
(0.2 |
)% |
|
10.6 |
% |
|
10.8 |
% |
|
31.8 |
% |
|
2.7 |
% |
|
26.9 |
% |
|
17.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth summarized balance sheet data as of December 31, 2010, 2009, 2008, 2007 and 2006 and September 30,
2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
As of December 31, |
|
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|
|
(Dollars in thousands, except share and per share amounts)
|
|
Summary Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value |
|
$ |
5,341,043 |
|
$ |
5,448,529 |
|
$ |
5,118,859 |
|
$ |
5,388,759 |
|
$ |
2,831,537 |
|
$ |
2,662,021 |
|
$ |
1,376,387 |
|
Cash and cash equivalents |
|
|
855,982 |
|
|
518,770 |
|
|
620,740 |
|
|
387,585 |
|
|
449,848 |
|
|
444,698 |
|
|
63,643 |
|
Total assets |
|
|
8,000,740 |
|
|
7,503,242 |
|
|
7,060,878 |
|
|
7,019,140 |
|
|
4,322,480 |
|
|
4,144,224 |
|
|
1,646,423 |
|
Reserve for losses and loss expenses |
|
|
2,565,912 |
|
|
2,020,845 |
|
|
2,035,973 |
|
|
1,622,134 |
|
|
1,305,303 |
|
|
926,117 |
|
|
77,363 |
|
Unearned premiums |
|
|
1,058,593 |
|
|
955,236 |
|
|
728,516 |
|
|
724,104 |
|
|
539,450 |
|
|
557,344 |
|
|
178,824 |
|
Senior notes payable |
|
|
246,955 |
|
|
246,847 |
|
|
246,874 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Debentures payable |
|
|
289,800 |
|
|
289,800 |
|
|
289,800 |
|
|
289,800 |
|
|
304,300 |
|
|
350,000 |
|
|
150,000 |
|
Total liabilities |
|
|
4,410,648 |
|
|
3,741,957 |
|
|
3,556,047 |
|
|
2,988,020 |
|
|
2,383,746 |
|
|
2,209,424 |
|
|
453,900 |
|
Total shareholders' equity |
|
|
3,590,092 |
|
|
3,761,285 |
|
|
3,504,831 |
|
|
4,031,120 |
|
|
1,938,734 |
|
|
1,934,800 |
|
|
1,192,523 |
|
Book value per common share(10) |
|
|
34.77 |
|
|
34.43 |
|
|
35.76 |
|
|
31.38 |
|
|
25.64 |
|
|
26.08 |
|
|
20.39 |
|
Diluted book value per common share(11) |
|
|
32.23 |
|
|
32.02 |
|
|
32.98 |
|
|
29.68 |
|
|
23.78 |
|
|
24.00 |
|
|
19.73 |
|
- (1)
- General
and administrative expenses for the years ended December 31, 2007 and 2006 include $4,000,000 and $1,000,000 respectively,
related to Validus' advisory agreement with Aquiline Capital Partners, LLC (together with its related companies, "Aquiline"). Validus' advisory agreement with Aquiline terminated upon
completion of Validus' initial public offering, in connection with which Validus recorded general and administrative expense of $3,000,000 in the year ended December 31, 2007.
- (2)
- Validus
adopted ASC 820 and ASC 825 as of January 1, 2007 and elected the fair value option on all securities previously
accounted for as available-for-sale. Unrealized gains and losses on available-for-sale investments at December 31, 2006 of $875,000, previously
included in accumulated other comprehensive income, were treated as a cumulative-effect adjustment as of January 1, 2007. The cumulative-effect adjustment transferred the balance of unrealized
gains and losses from accumulated other comprehensive income to retained earnings and had no impact on the results of operations for the annual or interim periods beginning January 1, 2007.
Validus' investments were accounted for as trading for the annual or interim periods beginning January 1, 2007 and as such all unrealized gains and losses are included in net income.
- (3)
- ASC 718
requires that any unrecognized stock-based compensation expense that will be recorded in future periods be included as
proceeds for purposes of treasury stock repurchases, which is applied against the unvested restricted shares
15
balance.
On March 1, 2007 Validus effected a 1.75 for 1 reverse stock split of our outstanding common shares. The stock split does not affect Validus' financial statements other than to the
extent it decreases the number of outstanding shares and correspondingly increases per share information for all periods presented. The share consolidation has been reflected retroactively in this
financial data.
- (4)
- The
losses and loss expense ratio is calculated by dividing losses and loss expenses by net premiums earned.
- (5)
- The
policy acquisition cost ratio is calculated by dividing policy acquisition costs by net premiums earned.
- (6)
- The
general and administrative expense ratio is calculated by dividing the sum of general and administrative expenses and share compensation
expenses by net premiums earned. The general and administrative expense ratio for the year ended December 31, 2007 is calculated by dividing the total of general and administrative expenses
plus share compensation expenses less the $3,000,000 termination fee payable to Aquiline by net premiums earned.
- (7)
- The
expense ratio is calculated by combining the policy acquisition cost ratio and the general and administrative expense ratio.
- (8)
- The
combined ratio is calculated by combining the losses and loss expense ratio, the policy acquisition cost ratio and the general and
administrative expense ratio.
- (9)
- Annualized
return on average equity is calculated by dividing the net income for the period by the average shareholders' equity during the
period. Annual average shareholders' equity is the average of the beginning, ending and intervening quarter-end shareholders' equity balances.
- (10)
- Book
value per common share is defined as total shareholders' equity available to Validus divided by the number of common shares outstanding
as at the end of the period, giving no effect to dilutive securities.
- (11)
- Diluted
book value per common share is calculated based on total shareholders' equity plus the assumed proceeds from the exercise of
outstanding options and warrants, divided by the sum of common shares, unvested restricted shares, options and warrants outstanding (assuming their exercise). Diluted book value per common share is a
Non-GAAP financial measure as described under Item 7, "Management's Discussion and Analysis of Financial condition and Results of Operations—Financial Measures," in the
Validus Form 10-K.
- (12)
- Operating
results of IPC Holdings, Ltd. have been included from the September 2009 date of acquisition.
- (13)
- The
gain on bargain purchase, net of expenses is from the acquisition of IPC Holdings, Ltd. in September 2009 and is net of
transaction expenses.
Selected Historical Consolidated Financial Data of Transatlantic
The following disclosure is taken from Transatlantic's financial results for the nine months ended September 30, 2011 that were
furnished as part of Transatlantic's Current Report on Form 8-K filed with the SEC on October 26, 2011 (the "Transatlantic Q3 Earnings Release") and Transatlantic's Annual
Report on Form 10-K for the year ended December 31, 2010 (the "Transatlantic 10-K").
Set
forth below is certain selected historical consolidated financial data relating to Transatlantic. The financial data has been derived from the Transatlantic Q3 Earnings Release and
the Transatlantic 10-K. Historical results are not necessarily indicative of the results that may be expected for any future period. This financial data should be read in conjunction with
the financial statements and the related notes and other financial information contained in the Transatlantic Q3 Earnings Release and the Transatlantic 10-K.
16
The
following table sets forth operational data as of September 30, 2011 and 2010, and as of December 31, 2010, 2009, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Years Ended December 31, |
|
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|
|
(Dollars in thousands, except per share amounts and ratios)
|
|
Net premiums written |
|
$ |
2,996,144 |
|
$ |
2,980,918 |
|
$ |
3,881,693 |
|
$ |
3,986,101 |
|
$ |
4,108,092 |
|
$ |
3,952,899 |
|
$ |
3,633,440 |
|
Net premiums earned |
|
$ |
2,857,515 |
|
$ |
2,924,638 |
|
$ |
3,858,620 |
|
$ |
4,039,082 |
|
$ |
4,067,389 |
|
$ |
3,902,669 |
|
$ |
3,604,094 |
|
Net losses and loss adjustment expenses incurred |
|
|
(2,460,499 |
) |
|
(2,070,923 |
) |
|
(2,681,774 |
) |
|
(2,679,171 |
) |
|
(2,907,227 |
) |
|
(2,638,033 |
) |
|
(2,462,666 |
) |
Net commissions |
|
|
(715,397 |
) |
|
(709,879 |
) |
|
(932,820 |
) |
|
(927,918 |
) |
|
(980,626 |
) |
|
(980,121 |
) |
|
(903,666 |
) |
Increase (decrease) in deferred policy acquisition costs |
|
|
41,443 |
|
|
10,364 |
|
|
2,898 |
|
|
(12,406 |
) |
|
6,956 |
|
|
16,901 |
|
|
13,471 |
|
Other underwriting expenses |
|
|
(122,878 |
) |
|
(133,015 |
) |
|
(177,624 |
) |
|
(158,181 |
) |
|
(131,555 |
) |
|
(115,760 |
) |
|
(102,339 |
) |
Underwriting (loss) profit(1) |
|
|
(399,816 |
) |
|
21,185 |
|
|
69,300 |
|
|
261,406 |
|
|
54,937 |
|
|
185,656 |
|
|
148,894 |
|
Net investment income |
|
|
344,296 |
|
|
352,224 |
|
|
473,547 |
|
|
467,402 |
|
|
440,451 |
|
|
469,772 |
|
|
434,540 |
|
Realized net capital gains (losses)(2) |
|
|
67,871 |
|
|
16,955 |
|
|
30,101 |
|
|
(70,641 |
) |
|
(435,541 |
) |
|
9,389 |
|
|
10,862 |
|
(Loss) gain on early extinguishment of debt |
|
|
(1,179 |
) |
|
(115 |
) |
|
(115 |
) |
|
9,869 |
|
|
10,250 |
|
|
— |
|
|
— |
|
Interest on senior notes |
|
|
(50,386 |
) |
|
(51,192 |
) |
|
(68,272 |
) |
|
(43,454 |
) |
|
(43,359 |
) |
|
(43,421 |
) |
|
(43,405 |
) |
Other expenses, net |
|
|
(83,396 |
) |
|
(25,348 |
) |
|
(31,773 |
) |
|
(28,549 |
) |
|
(23,515 |
) |
|
(25,644 |
) |
|
(10,983 |
) |
(Loss) income before income taxes |
|
|
(122,610 |
) |
|
313,709 |
|
|
472,788 |
|
|
596,033 |
|
|
3,223 |
|
|
595,752 |
|
|
539,908 |
|
Income (taxes) benefits |
|
|
80,874 |
|
|
(53,268 |
) |
|
(70,587 |
) |
|
(118,371 |
) |
|
99,031 |
|
|
(108,611 |
) |
|
(111,756 |
) |
Net (loss) income |
|
$ |
(41,736 |
) |
$ |
260,441 |
|
$ |
402,201 |
|
$ |
477,662 |
|
$ |
102,254 |
|
$ |
487,141 |
|
$ |
428,152 |
|
Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
$ |
(0.67 |
) |
$ |
4.04 |
|
$ |
6.28 |
|
$ |
7.20 |
|
$ |
1.54 |
|
$ |
7.37 |
|
$ |
6.49 |
|
| |
Diluted |
|
|
(0.67 |
) |
|
3.99 |
|
|
6.19 |
|
|
7.15 |
|
|
1.53 |
|
|
7.31 |
|
|
6.46 |
|
Cash dividends declared |
|
|
0.65 |
|
|
0.62 |
|
|
0.83 |
|
|
0.79 |
|
|
0.73 |
|
|
0.62 |
|
|
0.53 |
|
Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
62,447 |
|
|
64,520 |
|
|
64,092 |
|
|
66,381 |
|
|
66,270 |
|
|
66,124 |
|
|
65,955 |
|
| |
Diluted |
|
|
62,447 |
|
|
65,284 |
|
|
64,930 |
|
|
66,802 |
|
|
66,722 |
|
|
66,654 |
|
|
66,266 |
|
Ratios:(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
|
86.1 |
% |
|
70.8 |
% |
|
69.5 |
% |
|
66.3 |
% |
|
71.5 |
% |
|
67.6 |
% |
|
68.3 |
% |
| |
Commission ratio |
|
|
23.6 |
|
|
23.9 |
|
|
24.1 |
|
|
23.3 |
|
|
23.9 |
|
|
24.7 |
|
|
24.7 |
|
| |
Other underwriting expense ratio |
|
|
4.3 |
|
|
4.6 |
|
|
4.6 |
|
|
3.9 |
|
|
3.2 |
|
|
2.9 |
|
|
2.9 |
|
Underwriting expense ratio |
|
|
27.9 |
|
|
28.5 |
|
|
28.7 |
|
|
27.2 |
|
|
27.1 |
|
|
27.6 |
|
|
27.6 |
|
Combined ratio |
|
|
114.0 |
% |
|
99.3 |
% |
|
98.2 |
% |
|
93.5 |
% |
|
98.6 |
% |
|
95.2 |
% |
|
95.9 |
% |
- (1)
- Includes
pre-tax net catastrophe (costs) of $(683) million in the first nine months of 2011, $(180) million in the
first nine months of 2010, ($202) million in the full year 2010, $6 million in the full year 2009, ($170) million in the full year 2008, ($55) million in the full year 2007 and ($29) million in
the full year 2006.
- (2)
- Includes
other-than-temporary impairment write-downs charged to earnings of ($3) million in the first nine months of
2011, ($7) million in the first nine months of 2010, ($8) million in the full year 2010, ($83) million in the full year 2009, ($318) million in the full year 2008, ($27) million in the full year 2007
and ($1) million in the full year 2006.
- (3)
- The
loss ratio represents the absolute value of net losses and loss adjustment expenses incurred expressed as a percentage of net premiums
earned. The underwriting expense ratio represents the sum of the commission ratio and the other underwriting expense ratio. The commission ratio represents the absolute value of the sum of net
commission and the (decrease) increase in deferred policy acquisition costs expressed as a percentage of net premiums earned. The other
17
underwriting
expense ratio represents the absolute value of other underwriting expenses expressed as a percentage of net premiums earned. The combined ratio represents the sum of the loss ratio and
the underwriting expense ratio.
The following table sets forth summarized balance sheet data as of September 30, 2011 and 2010, and as of December 31, 2010, 2009,
2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Years Ended December 31, |
|
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|
|
(Dollars in thousands, except per share amounts and ratios)
|
|
Total investments |
|
$ |
13,517,462 |
|
$ |
13,128,869 |
|
$ |
12,972,739 |
|
$ |
12,315,395 |
|
$ |
10,229,557 |
|
$ |
12,500,540 |
|
$ |
11,130,832 |
|
Cash and cash equivalents |
|
|
384,574 |
|
|
223,818 |
|
|
284,491 |
|
|
195,723 |
|
|
288,920 |
|
|
255,432 |
|
|
205,264 |
|
Total assets |
|
|
16,594,820 |
|
|
15,884,026 |
|
|
15,705,354 |
|
|
14,943,659 |
|
|
13,376,938 |
|
|
15,484,327 |
|
|
14,268,464 |
|
Unpaid losses and loss adjustment expenses |
|
|
9,729,925 |
|
|
8,959,011 |
|
|
9,020,610 |
|
|
8,609,105 |
|
|
8,124,482 |
|
|
7,926,261 |
|
|
7,467,949 |
|
Unearned premiums |
|
|
1,396,541 |
|
|
1,247,223 |
|
|
1,212,535 |
|
|
1,187,526 |
|
|
1,220,133 |
|
|
1,226,647 |
|
|
1,144,022 |
|
Senior notes |
|
|
1,005,890 |
|
|
1,030,409 |
|
|
1,030,511 |
|
|
1,033,087 |
|
|
722,243 |
|
|
746,930 |
|
|
746,633 |
|
Total stockholders' equity |
|
|
4,294,893 |
|
|
4,360,854 |
|
|
4,284,459 |
|
|
4,034,380 |
|
|
3,198,220 |
|
|
3,349,042 |
|
|
2,958,270 |
|
Book value per common share(1) |
|
$ |
69.67 |
|
$ |
68.96 |
|
$ |
68.83 |
|
$ |
60.77 |
|
$ |
48.19 |
|
$ |
50.56 |
|
$ |
44.80 |
|
- (1)
- Book
value per common share is stockholders' equity divided by common shares outstanding.
Selected Unaudited Condensed Consolidated Pro Forma Financial Information
The following tables set forth selected unaudited condensed consolidated pro forma financial information for the nine months ended
September 30, 2011 and the year ended December 31, 2010 to show how the acquisition of Transatlantic might have affected the historical financial statements of Validus if it had been
consummated at such times. The selected unaudited condensed consolidated pro forma financial information is for illustrative purposes only an has been prepared using Transatlantic's publicly available
financial statements and disclosures, without the benefit of inspection of Transatlantic's books and records. Therefore, certain pro forma adjustments, such as recording fair value of assets and
liabilities and adjustments for consistency of accounting policy, are not reflected in this unaudited condensed consolidated pro forma financial information. The following selected unaudited condensed
consolidated pro forma financial information does not necessarily reflect the financial position or results of operations that would have actually resulted had the acquisition occurred as of the dates
indicated, nor should they be taken as necessarily indicative of the future financial position or results of operations of Validus or a combined company.
The
following selected unaudited condensed consolidated pro forma financial information is based on the historical financial statements of Validus and Transatlantic and on publicly
available information and certain assumptions that Validus believes are reasonable. The following should be read in connection with information under the subheading "Unaudited Condensed Consolidated
Pro Forma Financial Information" in this Current Report on Form 8-K and other information previously filed or furnished by Validus and Transatlantic with the SEC, including the
Validus Q3 Earnings Release, the Validus 10-K, the Transatlantic Q3 Earnings Release and the Transatlantic 10-K, which are filed with the SEC.
18
The following table sets forth summarized pro forma statement of operations data as of September 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2011 |
|
Year Ended
December 31, 2010 |
|
|
|
(Dollars in thousands, except share and per share amounts)
|
|
Revenues |
|
|
|
|
|
|
|
Gross premiums written |
|
$ |
5,076,464 |
|
$ |
6,118,134 |
|
Reinsurance premiums ceded |
|
|
(506,660 |
) |
|
(475,357 |
) |
| |
|
|
|
|
|
Net premiums written |
|
|
4,569,804 |
|
|
5,642,777 |
|
Change in unearned premiums |
|
|
(398,492 |
) |
|
(23,034 |
) |
| |
|
|
|
|
|
Net premiums earned |
|
|
4,171,312 |
|
|
5,619,743 |
|
Net investment income |
|
|
426,117 |
|
|
601,614 |
|
Net realized gains on investments |
|
|
94,188 |
|
|
70,571 |
|
Net unrealized gains (losses) on investments |
|
|
182,637 |
|
|
(17,557 |
) |
Loss on early extinguishment of debt |
|
|
(1,179 |
) |
|
(115 |
) |
Other income |
|
|
2,201 |
|
|
5,219 |
|
Foreign exchange (losses) gains |
|
|
(22,390 |
) |
|
1,351 |
|
| |
|
|
|
|
|
Total revenues |
|
|
4,852,886 |
|
|
6,280,826 |
|
Expenses |
|
|
|
|
|
|
|
Losses and loss expenses |
|
|
3,370,071 |
|
|
3,669,360 |
|
Policy acquisition costs |
|
|
906,885 |
|
|
1,222,821 |
|
General and administrative expenses |
|
|
261,043 |
|
|
383,387 |
|
Share compensation expenses |
|
|
53,534 |
|
|
64,211 |
|
Finance expenses |
|
|
108,695 |
|
|
146,825 |
|
| |
|
|
|
|
|
Total expenses |
|
|
4,700,228 |
|
|
5,486,604 |
|
| |
|
|
|
|
|
Net income before taxes |
|
|
152,658 |
|
|
794,222 |
|
Income tax benefit (expense) |
|
|
5,786 |
|
|
(52,436 |
) |
| |
|
|
|
|
|
Net income |
|
|
158,444 |
|
|
741,786 |
|
Net income attributable to noncontrolling interest |
|
|
(14,110 |
) |
|
— |
|
| |
|
|
|
|
|
Net income available to Validus |
|
$ |
144,334 |
|
$ |
741,786 |
|
| |
|
|
|
|
|
Comprehensive (loss) income |
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of tax |
|
|
(18,000 |
) |
|
119,957 |
|
Net unrealized appreciation (depreciation) of investments, net of tax |
|
|
— |
|
|
— |
|
Change in retirement plan liability, net of tax |
|
|
(632 |
) |
|
452 |
|
| |
|
|
|
|
|
Comprehensive income |
|
$ |
125,702 |
|
$ |
862,195 |
|
| |
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
Weighted average number of common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
Basic |
|
|
194,374,195 |
|
|
213,255,252 |
|
Diluted |
|
|
198,128,098 |
|
|
219,172,096 |
|
Basic earnings per share |
|
$ |
0.71 |
|
$ |
3.45 |
|
Diluted earnings per share |
|
$ |
0.70 |
|
$ |
3.38 |
|
Selected financial ratios |
|
|
|
|
|
|
|
Losses and loss expenses ratio |
|
|
80.8 |
% |
|
65.2 |
% |
Policy acquisition cost ratio |
|
|
21.7 |
% |
|
21.8 |
% |
General and administrative expense ratio |
|
|
7.6 |
% |
|
8.0 |
% |
Expense ratio |
|
|
29.3 |
% |
|
29.8 |
% |
Combined ratio |
|
|
110.1 |
% |
|
95.0 |
% |
| |
|
|
|
|
|
19
The following table sets forth summarized pro forma balance sheet data as of September 30, 2011:
|
|
|
|
|
|
|
As of September 30, 2011 |
|
|
|
(Dollars in thousands, except share and
per share amounts)
|
|
Summary Balance Sheet Data: |
|
|
|
|
Investments at fair value |
|
$ |
18,759,946 |
|
Cash and cash equivalents |
|
|
1,240,556 |
|
Total assets |
|
|
24,659,932 |
|
Reserve for losses and loss expenses |
|
|
12,784,470 |
|
Unearned premiums |
|
|
2,452,546 |
|
Senior notes payable and credit facility payable |
|
|
1,950,776 |
|
Debentures Payable |
|
|
289,800 |
|
Total liabilities |
|
|
17,890,330 |
|
Total shareholders' equity |
|
|
6,769,602 |
|
Book value per common share |
|
|
33.97 |
|
Diluted book value per common share |
|
|
32.31 |
|
Unaudited Condensed Consolidated Pro Forma Financial Information
The following tables set forth unaudited condensed consolidated pro forma financial information for the nine months ended
September 30, 2011 and the year ended December 31, 2010 to show how the acquisition of Transatlantic might have affected the historical financial statements of Validus if it had been
consummated at such times. The unaudited condensed consolidated pro forma financial information is for illustrative purposes only an has been prepared using Transatlantic's publicly available
financial statements and disclosures, without the benefit of inspection of Transatlantic's books and records. Therefore, certain pro forma adjustments, such as recording fair value of assets and
liabilities and adjustments for consistency of accounting policy, are not reflected in this unaudited condensed consolidated pro forma financial information. The following unaudited condensed
consolidated pro forma financial information does not necessarily reflect the financial position or results of operations that would have actually resulted had the acquisition occurred as of the dates
indicated, nor should they be taken as necessarily indicative of the future financial position or results of operations of Validus or a combined company.
The
following unaudited condensed consolidated pro forma financial information is based on the historical financial statements of Validus and Transatlantic and on publicly available
information and certain assumptions that Validus believes are reasonable. The following should be read in connection with other information previously filed or furnished by Validus and Transatlantic
with the SEC, including the Validus Q3 Earnings Release, the Validus 10-K, the Transatlantic Q3 Earnings Release and the Transatlantic 10-K, which are filed with the SEC.
20
The
following table presents unaudited condensed consolidated pro forma balance sheet data at September 30, 2011 (expressed in thousands of U.S. dollars, except share and per
share data) giving effect to the proposed acquisition of Transatlantic Shares as if it had occurred at September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings, Ltd. |
|
Historical
Transatlantic
Holdings, Inc. |
|
Pro Forma
Purchase
adjustments |
|
Notes |
|
Pro Forma
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, at fair value |
|
$ |
4,777,686 |
|
$ |
12,580,457 |
|
$ |
(98,559 |
) |
3(b), 3(i), 4 |
|
$ |
17,259,584 |
|
Short-term investments, at fair value |
|
|
547,452 |
|
|
138,048 |
|
|
— |
|
|
|
|
685,500 |
|
Other investments, at fair value |
|
|
15,905 |
|
|
798,957 |
|
|
— |
|
|
|
|
814,862 |
|
Cash and cash equivalents |
|
|
855,982 |
|
|
384,574 |
|
|
— |
|
|
|
|
1,240,556 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total investments and cash |
|
|
6,197,025 |
|
|
13,902,036 |
|
|
(98,559 |
) |
|
|
|
20,000,502 |
|
Premiums receivable |
|
|
808,472 |
|
|
748,853 |
|
|
(2,689 |
) |
3(e) |
|
|
1,554,636 |
|
Deferred acquisition costs |
|
|
154,694 |
|
|
277,382 |
|
|
— |
|
|
|
|
432,076 |
|
Prepaid reinsurance premiums |
|
|
141,631 |
|
|
112,598 |
|
|
(2,588 |
) |
3(e) |
|
|
251,641 |
|
Securities lending collateral |
|
|
24,250 |
|
|
— |
|
|
— |
|
|
|
|
24,250 |
|
Loss reserves recoverable |
|
|
386,200 |
|
|
853,033 |
|
|
(11,367 |
) |
3(e) |
|
|
1,227,866 |
|
Paid losses recoverable |
|
|
80,917 |
|
|
— |
|
|
(1,532 |
) |
3(e) |
|
|
79,385 |
|
Accrued investment income |
|
|
27,062 |
|
|
145,461 |
|
|
— |
|
|
|
|
172,523 |
|
Current taxes recoverable |
|
|
3,057 |
|
|
— |
|
|
112,257 |
|
3(h) |
|
|
115,314 |
|
Intangible assets |
|
|
115,773 |
|
|
— |
|
|
— |
|
|
|
|
115,773 |
|
Goodwill |
|
|
20,393 |
|
|
— |
|
|
— |
|
|
|
|
20,393 |
|
Other assets |
|
|
41,266 |
|
|
555,457 |
|
|
68,850 |
|
3(b), 3(h), 3(i) |
|
|
665,573 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
8,000,740 |
|
$ |
16,594,820 |
|
$ |
64,372 |
|
|
|
$ |
24,659,932 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for losses and loss expense |
|
$ |
2,565,912 |
|
$ |
9,729,925 |
|
$ |
488,633 |
|
3(e), 3(h) |
|
$ |
12,784,470 |
|
Unearned premiums |
|
|
1,058,593 |
|
|
1,396,541 |
|
|
(2,588 |
) |
3(e) |
|
|
2,452,546 |
|
Reinsurance balances payable |
|
|
103,997 |
|
|
— |
|
|
(4,221 |
) |
3(e) |
|
|
99,776 |
|
Deferred taxation |
|
|
24,195 |
|
|
— |
|
|
— |
|
|
|
|
24,195 |
|
Securities lending payable |
|
|
25,000 |
|
|
— |
|
|
— |
|
|
|
|
25,000 |
|
Net payable for investments purchased |
|
|
12,549 |
|
|
— |
|
|
— |
|
|
|
|
12,549 |
|
Accounts payable and accrued expenses |
|
|
83,647 |
|
|
167,571 |
|
|
— |
|
|
|
|
251,218 |
|
Senior notes payable and credit facility payable |
|
|
246,955 |
|
|
1,005,890 |
|
|
697,931 |
|
3(g) |
|
|
1,950,776 |
|
Debentures payable |
|
|
289,800 |
|
|
— |
|
|
— |
|
|
|
|
289,800 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
4,410,648 |
|
|
12,299,927 |
|
|
1,179,755 |
|
|
|
|
17,890,330 |
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
23,463 |
|
|
67,852 |
|
|
(51,062 |
) |
3(a), 3(d) |
|
|
40,253 |
|
Treasury shares |
|
|
(6,131 |
) |
|
(285,915 |
) |
|
285,915 |
|
3(d) |
|
|
(6,131 |
) |
Additional paid-in capital |
|
|
1,886,897 |
|
|
335,511 |
|
|
2,258,322 |
|
3(a), 3(d) |
|
|
4,480,730 |
|
Accumulated other comprehensive gain (loss) |
|
|
(4,932 |
) |
|
270,612 |
|
|
(270,612 |
) |
3(d) |
|
|
(4,932 |
) |
Retained earnings |
|
|
1,544,572 |
|
|
3,906,833 |
|
|
(3,337,946 |
) |
3(b), 3(d), 3(f)
3(g), 3(h), 3(i) |
|
|
2,113,459 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity available to Company |
|
|
3,443,869 |
|
|
4,294,893 |
|
|
(1,115,383 |
) |
|
|
|
6,623,379 |
|
Non controlling interest |
|
|
146,223 |
|
|
— |
|
|
— |
|
|
|
|
146,223 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
3,590,092 |
|
|
4,294,893 |
|
|
(1,115,383 |
) |
|
|
|
6,769,602 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
$ |
8,000,740 |
|
$ |
16,594,820 |
|
$ |
64,372 |
|
|
|
$ |
24,659,932 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
99,039,622 |
|
|
61,644,506 |
|
|
95,943,509 |
|
|
|
|
194,983,131 |
|
Common shares and common share equivalents outstanding |
|
|
112,544,943 |
|
|
65,473,117 |
|
|
102,057,999 |
|
|
|
|
214,602,942 |
|
Book value per share |
|
$ |
34.77 |
|
$ |
69.67 |
|
|
|
|
7 |
|
$ |
33.97 |
|
Diluted book value per share |
|
$ |
32.23 |
|
$ |
67.55 |
|
|
|
|
7 |
|
$ |
32.31 |
|
Diluted tangible book value per share |
|
$ |
31.02 |
|
$ |
67.55 |
|
|
|
|
7 |
|
$ |
31.68 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth unaudited condensed consolidated pro forma results of operations for the year ended December 31, 2010
(expressed in thousands of U.S. dollars, except share and per
21
share
data) giving effect to the proposed acquisition of Transatlantic Shares as if it had occurred at January 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings, Ltd. |
|
Historical
Transatlantic
Holdings, Inc. |
|
Pro Forma
Purchase
adjustments |
|
Notes |
|
Pro Forma
Consolidated |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written |
|
$ |
1,990,566 |
|
$ |
4,132,931 |
|
$ |
(5,363 |
) |
3(e) |
|
$ |
6,118,134 |
|
Reinsurance premiums ceded |
|
|
(229,482 |
) |
|
(251,238 |
) |
|
5,363 |
|
3(e) |
|
|
(475,357 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net premiums written |
|
|
1,761,084 |
|
|
3,881,693 |
|
|
— |
|
|
|
|
5,642,777 |
|
Change in unearned premiums |
|
|
39 |
|
|
(23,073 |
) |
|
— |
|
|
|
|
(23,034 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
|
|
1,761,123 |
|
|
3,858,620 |
|
|
— |
|
|
|
|
5,619,743 |
|
Net investment income |
|
|
134,103 |
|
|
473,547 |
|
|
(6,036 |
) |
3(b) |
|
|
601,614 |
|
Net realized gains on investments |
|
|
32,498 |
|
|
38,073 |
|
|
— |
|
|
|
|
70,571 |
|
Net unrealized gains (losses) on investments |
|
|
45,952 |
|
|
— |
|
|
(63,509 |
) |
3(i) |
|
|
(17,557 |
) |
Other-than-temporary impairments charged to earnings |
|
|
— |
|
|
(7,972 |
) |
|
7,972 |
|
3(i) |
|
|
— |
|
Loss on early extinguishment of debt |
|
|
— |
|
|
(115 |
) |
|
— |
|
|
|
|
(115 |
) |
Other income |
|
|
5,219 |
|
|
— |
|
|
— |
|
|
|
|
5,219 |
|
Foreign exchange gains |
|
|
1,351 |
|
|
— |
|
|
— |
|
|
|
|
1,351 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,980,246 |
|
|
4,362,153 |
|
|
(61,573 |
) |
|
|
|
6,280,826 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expense |
|
|
987,586 |
|
|
2,681,774 |
|
|
— |
|
5 |
|
|
3,669,360 |
|
Policy acquisition costs |
|
|
292,899 |
|
|
929,922 |
|
|
— |
|
|
|
|
1,222,821 |
|
General and administrative expenses |
|
|
209,290 |
|
|
209,397 |
|
|
(35,300 |
) |
3(j) |
|
|
383,387 |
|
Share compensation expense |
|
|
28,911 |
|
|
— |
|
|
35,300 |
|
3(j) |
|
|
64,211 |
|
Finance expenses |
|
|
55,870 |
|
|
68,272 |
|
|
22,683 |
|
3(g) |
|
|
146,825 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,574,556 |
|
|
3,889,365 |
|
|
22,683 |
|
|
|
|
5,486,604 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
|
405,690 |
|
|
472,788 |
|
|
(84,256 |
) |
|
|
|
794,222 |
|
Income tax expense (benefit) |
|
|
(3,126 |
) |
|
(70,587 |
) |
|
21,277 |
|
3(b) 3(i) |
|
|
(52,436 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income after taxes |
|
$ |
402,564 |
|
$ |
402,201 |
|
$ |
(62,979 |
) |
|
|
$ |
741,786 |
|
Preferred dividend and warrant dividend |
|
|
6,991 |
|
|
— |
|
|
— |
|
|
|
|
6,991 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
$ |
395,573 |
|
$ |
402,201 |
|
$ |
(62,979 |
) |
|
|
$ |
734,795 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
116,018,364 |
|
|
64,092,000 |
|
|
97,236,888 |
|
|
|
|
213,255,252 |
|
Diluted |
|
|
120,630,945 |
|
|
64,930,000 |
|
|
98,541,151 |
|
|
|
|
219,172,096 |
|
Basic earnings per share |
|
$ |
3.41 |
|
$ |
6.28 |
|
|
|
|
6 |
|
$ |
3.45 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
3.34 |
|
$ |
6.19 |
|
|
|
|
6 |
|
$ |
3.38 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth unaudited condensed consolidated pro forma results of operations for the nine months ended September 30,
2011 (expressed in thousands of U.S. dollars, except share
22
and
per share data) giving effect to the proposed acquisition of Transatlantic Shares as if it had occurred at January 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings, Ltd. |
|
Historical
Transatlantic
Holdings, Inc. |
|
Pro Forma
Purchase
Adjustments |
|
Notes |
|
Pro Forma
Consolidated |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross premiums written |
|
$ |
1,846,412 |
|
$ |
3,233,907 |
|
$ |
(3,855 |
) |
3(e) |
|
$ |
5,076,464 |
|
Reinsurance premiums ceded |
|
|
(272,752 |
) |
|
(237,763 |
) |
|
3,855 |
|
3(e) |
|
|
(506,660 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net premiums written |
|
|
1,573,660 |
|
|
2,996,144 |
|
|
— |
|
|
|
|
4,569,804 |
|
Change in unearned premiums |
|
|
(259,863 |
) |
|
(138,629 |
) |
|
— |
|
|
|
|
(398,492 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
|
|
1,313,797 |
|
|
2,857,515 |
|
|
— |
|
|
|
|
4,171,312 |
|
Net investment income |
|
|
84,216 |
|
|
344,296 |
|
|
(2,395 |
) |
3(b) |
|
|
426,117 |
|
Net realized gains on investments |
|
|
23,177 |
|
|
71,011 |
|
|
— |
|
|
|
|
94,188 |
|
Other-than-temporary impairments charged to earnings |
|
|
— |
|
|
(3,140 |
) |
|
3,140 |
|
3(i) |
|
|
— |
|
Net unrealized (losses) gains on investments |
|
|
(22,150 |
) |
|
— |
|
|
204,787 |
|
3(i) |
|
|
182,637 |
|
Loss on early extinguishment of debt |
|
|
— |
|
|
(1,179 |
) |
|
— |
|
|
|
|
(1,179 |
) |
Other income |
|
|
2,201 |
|
|
— |
|
|
— |
|
|
|
|
2,201 |
|
Foreign exchange losses |
|
|
(22,390 |
) |
|
— |
|
|
— |
|
|
|
|
(22,390 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,378,851 |
|
|
3,268,503 |
|
|
205,532 |
|
|
|
|
4,852,886 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses |
|
|
909,572 |
|
|
2,460,499 |
|
|
— |
|
5 |
|
|
3,370,071 |
|
Policy acquisition costs |
|
|
232,931 |
|
|
673,954 |
|
|
— |
|
|
|
|
906,885 |
|
General and administrative expenses |
|
|
145,244 |
|
|
142,274 |
|
|
(26,475 |
) |
3(b), 3(j) |
|
|
261,043 |
|
Share compensation expenses |
|
|
27,059 |
|
|
— |
|
|
26,475 |
|
3(j) |
|
|
53,534 |
|
Transaction expenses |
|
|
13,583 |
|
|
64,000 |
|
|
(77,583 |
) |
|
|
|
— |
|
Finance expenses |
|
|
41,297 |
|
|
50,386 |
|
|
17,012 |
|
3(g) |
|
|
108,695 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,369,686 |
|
|
3,391,113 |
|
|
(60,571 |
) |
|
|
|
4,700,228 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before taxes |
|
|
9,165 |
|
|
(122,610 |
) |
|
266,103 |
|
|
|
|
152,658 |
|
Tax benefit (expense) |
|
|
(1,050 |
) |
|
80,874 |
|
|
(74,038 |
) |
3(b), 3(i) |
|
|
5,786 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
8,115 |
|
|
(41,736 |
) |
|
192,065 |
|
|
|
|
158,444 |
|
Net income attributable to noncontrolling interest |
|
|
(14,110 |
) |
|
— |
|
|
— |
|
|
|
|
(14,110 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Validus |
|
$ |
(5,995 |
) |
$ |
(41,736 |
) |
$ |
192,065 |
|
|
|
$ |
144,334 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
98,430,686 |
|
|
62,447,000 |
|
|
95,943,509 |
|
|
|
|
194,374,195 |
|
| |
Diluted |
|
|
98,430,686 |
|
|
62,447,000 |
|
|
97,331,818 |
|
|
|
|
198,128,098 |
|
Basic (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
(0.67 |
) |
|
|
|
6 |
|
$ |
0.71 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
(0.67 |
) |
|
|
|
6 |
|
$ |
0.70 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
23
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited)
(Expressed in thousands of U.S. dollars, except share and per share data)
1. Basis of Presentation
The unaudited condensed consolidated pro forma financial information gives effect to the proposed acquisition as if it had occurred at September 30, 2011 for the purposes of the
unaudited condensed
consolidated pro forma balance sheet and at January 1, 2010 for the purposes of the unaudited condensed consolidated pro forma statements of operations for the year ended December 31,
2010 and nine months ended September 30, 2011. Note 3(g) below sets forth the changes to this presentation that would be effected if the Validus Exchange Offer and the second-step merger
were instead consummated pursuant to the terms of the Validus Merger Offer. The unaudited condensed consolidated pro forma financial information has been prepared by Validus' management and is based
on Validus' historical consolidated financial statements and Transatlantic's historical consolidated financial statements. Certain amounts from Transatlantic's historical consolidated financial
statements have been reclassified to conform to the Validus presentation. The unaudited condensed consolidated pro forma financial statements have been prepared using Transatlantic's publicly
available financial statements and disclosures. Therefore, certain pro forma adjustments, such as recording fair value of assets and liabilities and adjustments for consistency of accounting policy,
are not reflected in these unaudited condensed consolidated pro forma financial statements. Additional reclassifications of Transatlantic data to conform to the Validus presentation may also be
required.
This
unaudited condensed consolidated pro forma financial information is prepared in conformity with United States Generally Acceptable Accounting Principles ("US GAAP"). The
unaudited condensed consolidated pro forma balance sheet as of September 30, 2011 and the unaudited condensed consolidated pro forma statements of operations for the year ended
December 31, 2010 and the nine month period ended September 30, 2011 have been prepared using the following information:
- (a)
- Audited
historical consolidated financial statements of Validus as of December 31, 2010 and for the year ended December 31, 2010;
- (b)
- Audited
historical consolidated financial statements of Transatlantic as of December 31, 2010 and for the year ended December 31, 2010;
- (c)
- Unaudited
historical consolidated financial statements of Validus as of September 30, 2011 and for the nine months ended September 30, 2011;
- (d)
- Unaudited
historical consolidated financial statements of Transatlantic as of September 30, 2011 and for the nine months ended September 30,
2011; and
- (e)
- Such
other known supplementary information as considered necessary to reflect the acquisition in the unaudited condensed consolidated pro forma financial
information.
The
pro forma adjustments reflecting the consummation of the Validus Exchange Offer and the second-step merger under the acquisition method of accounting are based on certain
estimates and assumptions. The unaudited condensed consolidated pro forma adjustments may be revised as additional information becomes available. The actual adjustments upon consummation of the
Validus Exchange Offer and the second-step merger and the allocation of the final purchase price will depend on a number of factors, including additional financial information available at
such time, changes in values and changes in Transatlantic's operating results between the date of preparation of this unaudited condensed consolidated pro forma financial information and the effective
date of the Validus Exchange Offer and the second-step merger. Therefore, it is likely that the actual adjustments will
24
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
1. Basis of Presentation (Continued)
differ
from the pro forma adjustments and it is possible the differences may be material. Validus' management believes that its assumptions provide a reasonable basis for presenting all of the
significant effects of the transactions contemplated based on information available to Validus at the time and that the pro forma adjustments give appropriate effect to those assumptions and are
properly applied in the unaudited condensed consolidated pro forma financial information.
The
unaudited condensed consolidated pro forma financial information does not include any financial benefits, revenue enhancements or operating expense efficiencies arising from the
Validus Exchange Offer and the second-step merger.
Estimated
costs of the transaction as well as the benefit of the negative goodwill have been reflected in the unaudited condensed consolidated pro forma balance sheet, but have not been
included on the pro forma income statement due to their non-recurring nature.
The
unaudited condensed consolidated pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the
Validus Exchange Offer and the second-step merger been effected on the dates indicated and if the companies had been managed as one entity. The unaudited condensed consolidated pro forma
financial information should be read in conjunction with the Validus Q3 Earnings Release, the Validus 10-K, the Transatlantic Q3 Earnings Release and the Transatlantic 10-K, as filed
with the SEC.
2. Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs" ("ASU 2011-04"). The objective of ASU 2011-04 is to provide common fair value measurement and disclosure
requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. For many of the requirements, the amendments do not result in a change in the application of the requirements in Topic 820 "Fair
Value Measurements." ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. Validus is currently evaluating the impact of
this guidance, however it is not expected to have a material impact on Validus' consolidated financial statements.
In
June 2011, the FASB issued Accounting Standards Update No. 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"). The objective of ASU
2011-05 is to improve the comparability, consistency and transparency of financial
reporting and to increase the prominence of items reported in other comprehensive income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011.
Validus is currently evaluating the impact of this guidance; however, since this update affects disclosures only, it is not expected to have a material impact on Validus' consolidated financial
statements.
In
September 2011, the FASB issued Accounting Standards Update No. 2011-08, "Testing Goodwill for Impairment" ("ASU 2011-08"). The objective of ASU
2011-08 is to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill
25
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
2. Recent Accounting Pronouncements (Continued)
impairment
test described in Topic 350 "Intangibles—Goodwill and Other." The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning
after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's
financial statements for the most recent annual or interim period have not yet been issued. Validus is currently evaluating the impact of this guidance; however it is not expected to have a material
impact on Validus' consolidated financial statements.
3. Purchase Adjustments
Validus is offering to exchange for each outstanding Transatlantic Share that is validly tendered and not properly withdrawn prior to the expiration time of the Validus Exchange Offer,
1.5564 Validus Shares and $11.00 in cash (less applicable withholding taxes and without interest) and to permit Transatlantic to pay up to a $2.00 per share Special Excess Dividend prior to the
expiration time of the Validus Exchange Offer. The Validus Exchange Offer is made upon the terms and subject to the conditions contained in the Validus S-4 and its accompanying letter of
transmittal, as amended by Amendment No. 20 to Validus' Schedule TO relating to the Validus Exchange Offer. Validus intends, promptly following acceptance for exchange and exchange of
Transatlantic Shares in the Validus Exchange Offer, to effect the second-step merger pursuant to which Validus will acquire all Transatlantic Shares of those Transatlantic stockholders who
choose not to tender their Transatlantic Shares pursuant to the Validus Exchange Offer in accordance with the DGCL.
In
connection with the Validus Exchange Offer, transaction costs currently estimated at $55,035 will be incurred and expensed. As a result of the termination of the agreement and plan of
merger by and among Transatlantic, Allied World Assurance Company Holdings, AG ("Allied World") and Go Sub, LLC, $48,300 of the Allied World termination fee (including $13,300 of expense
reimbursement) has been incurred and expensed. In the event that, prior to September 15, 2012, Transatlantic enters into any definitive agreement in respect of any competing transaction or
recommends or submits a competing transaction to its stockholders for adoption, or a transaction in respect of a competing transaction is consummated and agreed to, Transatlantic will incur and
expense amount in respect of the Allied World termination fee equal to $66,700. The Allied World termination fee is not tax deductible.
As
discussed above, these pro forma purchase adjustments are based on certain estimates and assumptions made as of the date of the unaudited condensed consolidated pro forma financial
information. The actual adjustments will depend on a number of factors, including the review of Transatlantic's books and records, and changes in the estimated fair value of net balance sheet assets
and operating results of Transatlantic between September 30, 2011 and the date of the consummation of the Validus Exchange Offer and second-step merger. Validus expects to make such
adjustments at such time. These adjustments are likely to be different from the adjustments made to prepare the unaudited condensed consolidated pro forma financial information and such differences
may be material.
The
share prices for both Validus and Transatlantic used in determining the preliminary estimated purchase price are based on the closing share prices on November 2, 2011. The
preliminary total purchase price is calculated as follows:
26
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
3. Purchase Adjustments (Continued)
Calculation of Total Purchase Price
|
|
|
|
|
Transatlantic Shares outstanding as of September 30, 2011 |
|
|
61,644,506 |
|
| |
|
|
|
Exchange ratio |
|
|
1.5564 |
|
| |
|
|
|
Total Validus Shares to be issued |
|
|
95,943,509 |
|
Validus closing share price on November 2, 2011 |
|
$ |
27.21 |
|
| |
|
|
|
Total value of Validus Shares to be issued |
|
$ |
2,610,623 |
|
Total cash consideration paid |
|
$ |
697,931 |
|
| |
|
|
|
Total Purchase Price |
|
$ |
3,308,554 |
|
| |
|
|
|
The
allocation of the purchase price is as follows:
Allocation of Purchase Price
|
|
|
|
|
Transatlantic stockholders' equity |
|
$ |
4,294,893 |
|
Allied World termination fee |
|
|
(66,700 |
) |
Less reserve increase, after tax |
|
|
(325,000 |
) |
| |
|
|
|
Transatlantic stockholders' equity, adjusted (B) |
|
$ |
3,903,193 |
|
Total purchase price (A) |
|
$ |
3,308,554 |
|
| |
|
|
|
Negative goodwill (A-B) |
|
$ |
594,639 |
|
| |
|
|
|
- (a)
- In
connection with the exchange offer, 95,943,509 Validus Shares are expected to be issued for all Transatlantic Shares, shares of common stock issued
pursuant to option exercises, and shares of common stock issued following vesting of restricted shares, restricted share units and performance share units resulting in additional share capital of
$16,790 and additional paid-in capital of $2,593,833.
- (b)
- It
is expected that total transaction costs currently estimated at $55,035, the Allied World termination fee of $115,000, and expenses related to bank debt
of $6,107 will be incurred by the consolidated entity. Based on an expected investment return of 2.29% for Validus and 3.70% for Transatlantic per annum, pre-tax investment income of
$6,036 would have been foregone during the year end December 31, 2010 had these payments of $176,142 been made.
Approximately
$29,283 of the estimated $55,035 total transaction costs and $48,300 of the Allied World termination fee have been incurred and expensed in the nine months ended September 30,
2011. The expenses have been eliminated from the unaudited condensed consolidated pro forma results of operations for the nine months ended September 30, 2011. In addition, an adjustment of
$92,452 was made to retained earnings and $6,107 to other assets as deferred financing fees as at September 30, 2011 to reflect the remaining transaction costs, the Allied World termination
fee, and the debt refinancing costs. Based on an expected investment return of 1.87% for Validus and 3.60% for Transatlantic per annum, pre tax investment income of $2,395 would have been foregone
during the nine months ended September 30, 2011 had these remaining payments of $98,559 been made.
27
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
3. Purchase Adjustments (Continued)
- (c)
- Employees
of Transatlantic hold 2,024,855 options to purchase Transatlantic Shares. The weighted average exercise price of these options is $63.00 per
Transatlantic Share. It is expected that no net shares would be issued upon exercise of these options.
On
June 30, 2011, the Compensation Committee of the Transatlantic Board approved the form of retention agreements that will be offered to certain executives of Transatlantic, including Steven
S. Skalicky, Paul A. Bonny, and Javier E. Vijil, each a named executive officer of Transatlantic. Each of the retention agreements has a term beginning on the date of execution and ending on the
earlier of December 31, 2013 or a mutually agreed upon termination date by the executive and Transatlantic. The retention agreements provide for a grant of restricted stock unit awards or
phantom stock awards immediately prior to the Allied World Acquisition (or at a date chosen by the Transatlantic Board in its discretion, if the closing of the Allied World Acquisition does not
occur), pursuant to Transatlantic's 2009 Long Term Equity Incentive Plan (but only in the case of the RSUs), consisting of that number of Transatlantic Shares equal in value to $1,500 for each of
Messrs. Skalicky and Vijil and $2,000 for Mr. Bonny.
Validus
has estimated that these grants will result in approximately 100,000 Transatlantic share units being issued, or 155,640 Validus share units after adjusting for the exchange ratio of 1.5564.
This share issuance has been included in the calculation of pro forma diluted book value per share at September 30, 2011.
- (d)
- Elimination
of Transatlantic ordinary shares of common stock of $67,852, treasury shares of $285,915, additional paid-in capital of $335,511,
accumulated other comprehensive income of $270,612 and retained earnings of $3,906,833.
- (e)
- A
related party balance of $3,855 for the nine months ended September 30, 2011 and $5,363 for the year ended December 31, 2010 representing
reinsurance ceded to Transatlantic by Validus was eliminated from gross premiums written and reinsurance ceded. Corresponding prepaid reinsurance premiums and unearned premiums of $2,588 and premiums
receivable and reinsurance balances payable of $2,689 have been eliminated from the pro forma balance sheet. Loss reserves recoverable and reserves for losses and loss expenses of $11,367 and paid
losses recoverable and reinsurance balances payable of $1,532 have also been eliminated from the pro forma balance sheet.
- (f)
- The
unaudited condensed consolidated pro forma financial statements have been prepared using Transatlantic's publicly available financial statements and
disclosures. Therefore, with the exception of note 3(h) below, the carrying value of assets and liabilities in Transatlantic's financial statements are considered to be a proxy for fair value
of those assets and liabilities, with the difference between the net assets and the total purchase price considered to be negative goodwill. In addition, limited pro forma adjustments, such as
recording fair value of assets and liabilities and adjustments for consistency of accounting policy, are reflected in these unaudited condensed consolidated pro forma financial statements. Pursuant to
Accounting Standards Codification Topic 805, "Business Combinations" ("ASC 805"), a bargain purchase is defined as a business combination in which the total fair value of the identifiable net assets
acquired on the date of acquisition exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, and it requires the acquirer to recognize that excess in
earnings as a gain
28
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
3. Purchase Adjustments (Continued)
attributable
to the acquirer. Negative goodwill of $594,639 has been recorded as a credit to retained earnings as upon completion of the acquisition of Transatlantic shares of common stock negative
goodwill will be treated as a gain in the consolidated statement of operations.
- (g)
- Validus
is offering to exchange for each outstanding Transatlantic Share that is validly tendered and not properly withdrawn prior to the expiration time of
the Validus Exchange Offer, 1.5564 Validus Shares and $11.00 in cash (less applicable withholding taxes and without interest). The terms of the Validus Exchange Offer also permit Transatlantic to pay
a $2.00 per share Special Excess Dividend prior to the expiration time of the Validus Exchange Offer. This cash consideration of $11.00 per share is expected to total $697,931. Based on an expected
interest rate of 3.25% per annum, additional finance expenses of $22,683 would have been incurred during the year end December 31, 2010 had this credit facility been in place. Based on an
expected interest rate of 3.25% per annum, additional finance expenses of $17,012 would have been incurred during the nine months ended September 30, 2011 had this credit facility been in
place. The effect of a change in the expected interest rate of one-eighth percent in preparation of these unaudited condensed consolidated pro forma financial statements would result in a
change to finance expenses of $872 for the year ended December 31, 2010 and $654 for the nine months ended September 30, 2011.
Validus
is domiciled in Bermuda, and as such is not subject to corporate income tax and does not benefit from a tax deduction for the additional finance expenses disclosed above. If the Validus
Transaction Proposal is structured pursuant to the Validus Merger Offer instead of the Validus Exchange Offer and Second-Step Merger, the $697,931 consideration payable to Transatlantic stockholders
would instead be structured as a cash special dividend of $11.00 per Transatlantic Share (which may be increased by the amount of the Special Excess Dividend), paid immediately prior to the expiration
time of the Validus Exchange Offer (which would be amended to reflect the terms of the agreement and plan of merger delivered to the Transatlantic Board). If the $11.00 per Transatlantic Share cash
special dividend were funded through borrowings of Transatlantic at terms comparable to Validus', it would result in an additional pro forma tax benefit of $7,939 for the year ended
December 31, 2010, and revised pro forma consolidated basic earnings per share of $3.48 and revised pro forma diluted earnings per share of $3.42. For the nine months ended September 30,
2011, it would result in an additional pro forma tax benefit of $5,954, and revised pro forma consolidated basic earnings per share of $0.74 and revised pro forma diluted earnings per share of $0.73.
This change would have had no effect on the calculation of book value per share or diluted book value per share.
Validus
has obtained a highly confident letter from J.P. Morgan Securities LLC in connection with the arrangement of the full amount of financing required for the $11.00 per Transatlantic Share
cash special dividend. While the interest rate payable by Transatlantic in connection with this financing could be greater or less than Validus' interest rates with respect to the financing
contemplated in connection with the Validus Exchange Offer, any such difference is not expected to be material.
- (h)
- The
unaudited condensed consolidated pro forma financial statements have been prepared using Transatlantic's publicly available financial statements and
disclosures, without the benefit of inspection of Transatlantic books and records. However, it is expected that an additional reserve of
29
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
3. Purchase Adjustments (Continued)
$500,000
will be required to recognize potential reserve deficiencies at Transatlantic. This adjustment to loss reserves will also result in a current and deferred tax benefit of $175,000, of which
$62,743 is deferred and $112,257 is current. The net charge to the balance sheet of $325,000 has been recorded as a debit to retained earnings.
- (i)
- Transatlantic
reports unrealized gains and losses from fixed maturities available for sale, equities available for sale and other invested assets, as a
separate component of AOCI, net of deferred income taxes, in stockholders' equity. Reclassification of these securities as trading would result in these unrealized gains and losses being reported as
components of the income statement. Additional unrealized losses on investments of $55,537 with a corresponding tax benefit of $19,438 would have been reported on the income statement during the year
ended December 31, 2010 had this reclassification been in place. Additional unrealized gains on investments of $207,927 with a corresponding tax expense of $72,775 would have been reported on
the income statement during the nine months ended September 30, 2011 had this reclassification been in place.
In
addition, other-than-temporary impairments charged to earnings of $7,972 and $3,140 in the year ended December 31, 2010 and nine months ended September 30,
2011 would have been reallocated to unrealized gains and losses following a reclassification of the securities as trading.
- (j)
- The
unaudited condensed consolidated pro forma financial statements have been prepared using Transatlantic's publicly available financial statements and
disclosures. Transatlantic does not separately list share compensation expense on its income statement, however disclosure of the amount recorded for the year ended December 31, 2010 was
recorded in its notes to the financial statements. This amount of $35,300 was therefore reclassified as share compensation expense on the income statement. Similar disclosure was not given for the
nine months ended September 30, 2011, but an estimate of $26,475 was calculated based on the amount recorded for the year ended December 31, 2010, and was reclassified as share
compensation expense on the income statement.
4. Adjustments to Cash and Cash Equivalents
The acquisition of Transatlantic Shares will result in the payment of cash and cash equivalents by Transatlantic of $78,035 and by Validus of $20,524.
The
unaudited condensed consolidated pro forma statements of operations reflect the impact of these reductions in cash and cash equivalents. Actual transaction costs may vary from such
estimates which are based on the best information available at the time the unaudited condensed consolidated pro forma financial information was prepared.
30
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
4. Adjustments to Cash and Cash Equivalents (Continued)
For purposes of presentation in the unaudited condensed consolidated pro forma financial information, the sources and uses of funds of the acquisition are as follows:
Sources of Funds
|
|
|
|
|
Transatlantic cash and cash equivalents |
|
$ |
78,035 |
|
Validus cash and cash equivalents |
|
|
20,524 |
|
Validus credit facility |
|
|
697,931 |
|
| |
|
|
|
Total |
|
$ |
796,490 |
|
| |
|
|
|
Uses of Funds
|
|
|
|
|
Cash consideration |
|
$ |
697,931 |
|
Validus transaction costs |
|
|
14,417 |
|
Transatlantic transaction costs |
|
|
11,335 |
|
Refinancing costs for existing Validus debt |
|
|
6,107 |
|
Allied World termination fee |
|
|
66,700 |
|
| |
|
|
|
Total |
|
$ |
796,490 |
|
| |
|
|
|
5. Selected Ratios
Selected ratios of Validus, Transatlantic and pro forma combined are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2010 |
|
Nine Months Ended
September 30, 2011 |
|
|
|
Validus |
|
Transatlantic |
|
Pro forma
combined |
|
Validus |
|
Transatlantic |
|
Pro forma
combined |
|
Losses and loss expense ratios |
|
|
56.1 |
% |
|
69.5 |
% |
|
65.2 |
% |
|
69.2 |
% |
|
86.1 |
% |
|
80.8 |
% |
Policy acquisition costs ratios |
|
|
16.6 |
|
|
24.1 |
|
|
21.8 |
|
|
17.7 |
|
|
23.6 |
|
|
21.7 |
|
General and administrative cost ratios |
|
|
13.5 |
|
|
5.4 |
|
|
8.0 |
|
|
13.1 |
|
|
5.0 |
|
|
7.6 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio |
|
|
86.2 |
% |
|
99.0 |
% |
|
95.0 |
% |
|
100.0 |
% |
|
114.7 |
% |
|
110.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Earnings per Validus Share
(a) Pro
forma earnings per common share for the year ended December 31, 2010 and the nine months ended September 30, 2011 have been calculated based on the
estimated weighted average number of common shares outstanding on a pro forma basis, as described in 6(b) below. The historical weighted average number of outstanding Validus Shares was 116,018,364
and 120,630,945 basic and diluted, respectively, for the year ended December 31, 2010 and 98,430,686 and 98,430,686 basic and diluted, respectively, for the nine months ended
September 30, 2011.
(b) The
pro forma weighted average number of Validus Shares outstanding for the year ended December 31, 2010 and nine months ended September 30, 2011, after
giving effect to the exchange of shares as if the Validus Exchange Offer had been issued and outstanding for the whole year, is
31
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
6. Earnings per Validus Share (Continued)
213,255,252
and 219,172,096, basic and diluted, and 194,374,195 and 198,128,098, basic and diluted, respectively.
(c) In
the basic earnings per share calculation, dividends and distributions declared on warrants are deducted from net income. In calculating diluted earnings per share, we
consider the application of the treasury stock method and the two-class method and whichever is more dilutive is included into the calculation of diluted earnings per share.
The
following table sets forth the computation of basic and diluted earnings per share for the nine months ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings |
|
Pro Forma
Consolidated |
|
Net (loss) income available to common shareholders |
|
$ |
(11,911 |
) |
$ |
138,418 |
|
| |
|
|
|
|
|
Weighted average shares—basic ordinary shares outstanding |
|
|
98,430,686 |
|
|
194,374,195 |
|
Share equivalents |
|
|
|
|
|
|
|
Warrants |
|
|
— |
|
|
— |
|
Restricted Shares |
|
|
— |
|
|
2,949,689 |
|
Options |
|
|
— |
|
|
804,214 |
|
| |
|
|
|
|
|
Weighted average shares—diluted |
|
|
98,430,686 |
|
|
198,128,098 |
|
Basic (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
0.71 |
|
| |
|
|
|
|
|
Diluted (loss) earnings per share |
|
$ |
(0.12 |
) |
$ |
0.70 |
|
| |
|
|
|
|
|
The
following table sets forth the computation of basic and diluted earnings per share for the year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings |
|
Pro Forma
Consolidated |
|
Net Income |
|
$ |
402,564 |
|
$ |
741,786 |
|
Net income available to common shareholders |
|
$ |
395,573 |
|
$ |
734,795 |
|
| |
|
|
|
|
|
Weighted average shares—basic ordinary shares outstanding |
|
|
116,018,364 |
|
|
213,255,252 |
|
Share equivalents |
|
|
|
|
|
|
|
Warrants |
|
|
2,657,258 |
|
|
2,657,258 |
|
Restricted Shares |
|
|
1,067,042 |
|
|
2,371,305 |
|
Options |
|
|
888,281 |
|
|
888,281 |
|
| |
|
|
|
|
|
Weighted average shares—diluted |
|
|
120,630,945 |
|
|
219,172,096 |
|
Basic earnings per share |
|
$ |
3.41 |
|
$ |
3.45 |
|
| |
|
|
|
|
|
Diluted earnings per share |
|
$ |
3.34 |
|
$ |
3.38 |
|
| |
|
|
|
|
|
32
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
7. Book Value per Share
Validus calculates diluted book value per share using the "as-if-converted" method, where all proceeds received upon exercise of warrants and stock options would
be retained by Validus and the resulting common shares from exercise remain outstanding. In its public records, Transatlantic calculates only book value per share and not diluted book value per share.
Accordingly, for the purposes of the Pro Forma Condensed Consolidated Financial Statements and notes thereto, Transatlantic's diluted book value per share has been calculated based on the
"as-if-converted" method to be consistent with Validus' calculation.
The
following table sets forth the computation of book value and diluted book value per share adjusted for the exchange offer as of September 30, 2011:
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings |
|
Pro Forma
Consolidated |
|
Book value per common share calculation |
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
3,443,869 |
|
$ |
6,623,379 |
|
Shares |
|
|
99,039,622 |
|
|
194,983,131 |
|
Book value per common share |
|
$ |
34.77 |
|
$ |
33.97 |
|
Diluted book value per common share calculation |
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
3,443,869 |
|
$ |
6,623,379 |
|
Proceeds of assumed exercise of outstanding warrants |
|
$ |
137,992 |
|
$ |
137,992 |
|
Proceeds of assumed exercise of outstanding stock options |
|
$ |
45,584 |
|
$ |
173,150 |
|
Unvested restricted shares |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
$ |
3,627,445 |
|
$ |
6,934,521 |
|
Shares |
|
|
99,039,622 |
|
|
194,983,131 |
|
Warrants |
|
|
7,862,262 |
|
|
7,862,262 |
|
Options |
|
|
2,265,849 |
|
|
5,417,333 |
|
Unvested restricted shares |
|
|
3,377,210 |
|
|
6,340,216 |
|
| |
|
|
|
|
|
|
|
|
112,544,943 |
|
|
214,602,942 |
|
Diluted book value per common share |
|
$ |
32.23 |
|
$ |
32.31 |
|
33
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
8. Capitalization
The following table sets forth the computation of debt to total capitalization and debt (excluding debentures payable) to total capitalization at September 30, 2011, adjusted for
the Validus Exchange Offer and Second-Step Merger:
|
|
|
|
|
|
|
|
|
|
Historical
Validus
Holdings |
|
Pro Forma
Consolidated |
|
Total debt |
|
|
|
|
|
|
|
Borrowings drawn under credit facility |
|
$ |
— |
|
$ |
697,931 |
|
Senior notes payable |
|
|
246,955 |
|
|
1,252,845 |
|
Debentures payable |
|
|
289,800 |
|
|
289,800 |
|
| |
|
|
|
|
|
Total debt |
|
$ |
536,755 |
|
$ |
2,240,576 |
|
| |
|
|
|
|
|
Total capitalization |
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
3,443,869 |
|
$ |
6,623,379 |
|
Borrowings drawn under credit facility |
|
|
— |
|
|
697,931 |
|
Senior notes payable |
|
|
246,955 |
|
|
1,252,845 |
|
Debentures payable |
|
|
289,800 |
|
|
289,800 |
|
| |
|
|
|
|
|
Total capitalization |
|
$ |
3,980,624 |
|
$ |
8,863,955 |
|
| |
|
|
|
|
|
Total debt to total capitalization |
|
|
13.5 |
% |
|
25.3 |
% |
Debt (excluding debentures payable) to total capitalization |
|
|
6.2 |
% |
|
22.0 |
% |
34
Validus Holdings, Ltd.
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements (unaudited) (Continued)
(Expressed in thousands of U.S. dollars, except share and per share data)
9. Transatlantic Share Repurchase Program
On September 16, 2011, Transatlantic announced the approval of a $600,000 open market or negotiated share repurchase program, which added $455,000 to Transatlantic's existing
share repurchase authorization. Transatlantic committed to repurchasing $300,000 of Transatlantic Shares through December 31, 2011 and plans to repurchase the remaining $300,000 of
Transatlantic Shares during 2012. During the quarter ended September 30, 2011, Transatlantic repurchased 844,390 of outstanding Transatlantic Shares under its previously announced share
repurchase program for $41,176. From October 1, 2011 through October 31, 2011, an additional 3,033,006 outstanding Transatlantic Shares have been repurchased for $154,049 under the
program. As of November 1, 2011, $404,776 remained under the current share repurchase authorization.
Validus
estimates that the Transatlantic Share repurchases made from October 1, 2011 to October 31, 2011 will result in 4,720,571 fewer Validus Shares issued in the
exchange offer after adjusting for the exchange ratio of 1.5564, resulting in 190,262,560 Validus Shares outstanding and 209,882,371 diluted
Validus Shares outstanding on a pro forma basis. The effect of these share repurchases on book value per share at September 30, 2011 would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transatlantic |
|
Pro forma |
|
|
|
As at
September 30,
2011 |
|
Adjusted for
share
repurchases from
October 1, 2011
to October 31,
2011 |
|
Increase due
to share
repurchases |
|
As at
September 30,
2011 |
|
Adjusted for
share
repurchases from
October 1, 2011
to October 31,
2011 |
|
Increase due
to share
repurchases |
|
Book value per common share |
|
$ |
69.67 |
|
$ |
71.22 |
|
$ |
1.55 |
|
$ |
33.97 |
|
$ |
34.18 |
|
$ |
0.21 |
|
Diluted book value per common share |
|
$ |
67.55 |
|
$ |
68.89 |
|
$ |
1.35 |
|
$ |
32.31 |
|
$ |
32.47 |
|
$ |
0.15 |
|
Diluted tangible book value per common share |
|
$ |
67.55 |
|
$ |
68.89 |
|
$ |
1.35 |
|
$ |
31.68 |
|
$ |
31.82 |
|
$ |
0.14 |
|
35
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges and ratio of earnings to fixed charges excluding Funds at Lloyd's costs ("FAL costs") are
measures of Validus' ability to cover fixed costs with current period earnings. For purposes of computing the following ratios, earnings consist of net income before income tax expense plus fixed
charges to the extent that such charges are included in the determination of earnings. Fixed charges consist of interest, amortization of debt issuance costs and credit facility fees and an imputed
interest portion on operating leases. The following table is derived from unaudited results for the nine months ended September 30, 2011 and audited results for the years ended
December 31, 2010 and 2009. In addition, the table presents the pro forma combined ratio of earnings to fixed charges for the nine months ended September 30, 2011 and year ended
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
Combined
Nine Months
Ended
September 30, 2011 |
|
Pro Forma
Combined
Year Ended
December 31, 2010 |
|
Nine Months
Ended
September 30, 2011 |
|
Year Ended
December 31, 2010 |
|
Year Ended
December 31, 2009 |
|
Ratio of Earnings to Fixed Charges |
|
|
2.27 |
|
|
6.39 |
|
|
0.88 |
|
|
8.18 |
|
|
20.93 |
|
Ratio of Earnings to Fixed Charges Excluding FAL Costs(1) |
|
|
2.27 |
|
|
6.50 |
|
|
0.88 |
|
|
8.61 |
|
|
30.67 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
- (1)
- FAL
costs represent both fixed and variable costs paid for financing the Validus' operations at Lloyd's. The ratio of earnings to fixed
charges excluding FAL costs demonstrates the degree to which the ratio changes if FAL costs are treated as variable rather than fixed costs.
Comparative Per Share Data
The Transatlantic historical per share data is taken from the Allied World/Transatlantic Joint Proxy Statement/Prospectus filed
with the SEC by Transatlantic on August 19, 2011. The pro forma combined data is taken from the subheading of this Item 8.01 titled "Unaudited Condensed Consolidated Pro Forma Financial
Information."
The
historical earnings per share, dividends, and book value of Validus and Transatlantic shown in the table below are derived from their respective audited consolidated financial
statements as of and for the year ended December 31, 2010 and unaudited consolidated financial statements as of and for the nine months ended September 30, 2010. The unaudited pro forma
comparative basic and diluted earnings per share data give effect to the acquisition of Transatlantic using the acquisition method of accounting as if the acquisition had been completed on
January 1, 2010. The unaudited pro forma book value and diluted book value per share information was computed as if the acquisition had been completed on December 31, 2010 and
September 30, 2011.
The
historical earnings per share, dividends, and book value of Validus and Transatlantic shown in the table below are derived from their respective audited consolidated financial
statements as of and for the year ended December 31, 2010 and unaudited consolidated financial statements as of and for the nine months ended September 30, 2011. The unaudited pro forma
comparative basic and diluted earnings per share data give effect to the acquisition using the acquisition method of accounting as if
36
the
acquisition had been completed on January 1, 2010. The unaudited pro forma book value and diluted book value per share information was computed as if the acquisition had been completed on
September 30, 2011. You should read this information in conjunction with the historical financial information of Validus and of Transatlantic included or referenced elsewhere in this Consent
Statement, including Validus' and Transatlantic's financial statements and related notes. The unaudited pro forma data is not necessarily indicative of actual results had the acquisition occurred
during the periods indicated. The unaudited pro forma data is not necessarily indicative of future operations of Validus.
This
pro forma financial information does not give consideration to the impact of possible revenue enhancements, expense efficiencies, synergies, strategy modifications, asset
dispositions or other actions. This pro forma information is subject to risks and uncertainties, including those discussed in the subheading of this Item 8.01 titled "Cautionary Statement
Regarding Forward Looking Statements."
Per
share data for the year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Validus(1) |
|
Historical
Transatlantic |
|
Validus
Pro forma
combined |
|
Equivalent
per share of
Transatlantic
common stock(1)(2) |
|
Equivalent
per share of
Transatlantic
common stock(1)(2) |
|
|
|
(For the year ended December 31, 2010)
|
|
Basic earnings per common share |
|
$ |
3.41 |
|
$ |
6.28 |
|
$ |
3.45 |
|
$ |
5.37 |
|
$ |
5.37 |
|
Diluted earnings per common share |
|
$ |
3.34 |
|
$ |
6.19 |
|
$ |
3.38 |
|
$ |
5.26 |
|
$ |
5.26 |
|
Diluted operating earnings per common share(3) |
|
$ |
2.68 |
|
$ |
5.89 |
|
$ |
3.10 |
|
$ |
4.82 |
|
$ |
4.82 |
|
Cash dividends declared per common share |
|
$ |
0.88 |
|
$ |
0.83 |
|
$ |
0.88 |
|
$ |
1.37 |
|
$ |
1.37 |
|
Book value per common share (at period end) |
|
$ |
35.76 |
|
$ |
68.83 |
|
$ |
33.96 |
|
$ |
52.86 |
(4) |
$ |
63.86 |
(5) |
Diluted book value per common share (at period end) |
|
$ |
32.98 |
|
$ |
66.77 |
|
$ |
32.28 |
|
$ |
50.24 |
(4) |
$ |
61.24 |
(5) |
Per share data for the period ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Validus(1) |
|
Historical
Transatlantic |
|
Validus
Pro forma
combined |
|
Equivalent
per share of
Transatlantic
common stock(1)(2) |
|
Equivalent
per share of
Transatlantic
common stock(1)(2) |
|
|
|
(For the nine months ended September 30, 2011)
|
|
Basic (loss) earnings per common share |
|
$ |
(0.12 |
) |
$ |
(0.67 |
) |
$ |
0.71 |
|
$ |
1.11 |
|
$ |
1.11 |
|
Diluted (loss) earnings per common share |
|
$ |
(0.12 |
) |
$ |
(0.67 |
) |
$ |
0.70 |
|
$ |
1.09 |
|
$ |
1.09 |
|
Diluted operating earnings per common share(3) |
|
$ |
0.23 |
|
$ |
0.24 |
|
$ |
0.09 |
|
$ |
0.14 |
|
$ |
0.14 |
|
Cash dividends declared per common share |
|
$ |
0.75 |
|
$ |
0.65 |
|
$ |
0.75 |
|
$ |
1.17 |
|
$ |
1.17 |
|
Book value per common share (at period end) |
|
$ |
34.77 |
|
$ |
69.67 |
|
$ |
33.97 |
|
$ |
52.87 |
(4) |
$ |
63.87 |
(5) |
Diluted book value per common share (at period end) |
|
$ |
32.23 |
|
$ |
67.55 |
|
$ |
32.31 |
|
$ |
50.29 |
(4) |
$ |
61.29 |
(5) |
- (1)
- Validus'
investments in fixed maturities are classified as trading and carried at fair value, with related net unrealized gains or losses
included in earnings. Transatlantic classifies its fixed maturities as either held to maturity or available for sale. Reclassifying these securities as trading would result in these unrealized gains
and losses being reported as components of the income statements. As a result, historical Transatlantic and equivalent per share of Transatlantic common stock are not comparable.
- (2)
- Equivalent
per share amounts are calculated by multiplying Validus pro forma per share amounts by the exchange offer ratio of 1.5564.
- (3)
- Net
operating income (loss), a non-GAAP financial measure, is defined by Validus as net income (loss) excluding net realized and
unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. This measure focuses on the underlying fundamentals of 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
37
timing
of the disposition of investments, not by operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to underlying business.
- (4)
- For
purposes of calculating equivalent per share of Transatlantic common stock values for book value per common share, the equivalent per
share amount does not include the $11.00 per Transatlantic share cash consideration.
- (5)
- For
purposes of calculating equivalent per share of Transatlantic common stock values for book value per common share, the equivalent per
share amount includes the $11.00 per Transatlantic share cash consideration.
Comparative Market Price and Dividend Information
The following table sets forth the high and low sales prices per share of Validus Shares and Transatlantic Shares for the periods
indicated as reported on the consolidated tape of the NYSE as well as cash dividends per common share, as reported in the Validus 10-K and the Transatlantic 10-K, respectively,
with respect to the years 2009 and 2010, and thereafter as reported in publicly available sources. The Transatlantic dividend information was taken from the Allied World/Transatlantic Joint Proxy
Statement/Prospectus and other publicly available sources.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus |
|
Transatlantic |
|
|
|
High |
|
Low |
|
Dividend |
|
High |
|
Low |
|
Dividend |
|
Year Ended December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter (through November 2, 2011) |
|
$ |
30.87 |
|
$ |
23.87 |
|
|
N/A |
(2) |
$ |
55.00 |
|
$ |
46.81 |
|
|
N/A |
(1) |
Third Quarter |
|
$ |
31.35 |
|
$ |
23.24 |
|
$ |
0.25 |
|
$ |
53.00 |
|
$ |
44.54 |
|
$ |
0.22 |
|
Second Quarter |
|
$ |
34.95 |
|
$ |
29.44 |
|
$ |
0.25 |
|
$ |
51.23 |
|
$ |
43.85 |
|
$ |
0.21 |
|
First Quarter |
|
$ |
33.72 |
|
$ |
28.86 |
|
$ |
0.25 |
|
$ |
52.68 |
|
$ |
46.17 |
|
$ |
0.21 |
|
Year Ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
30.83 |
|
$ |
26.13 |
|
$ |
0.22 |
|
$ |
54.08 |
|
$ |
49.68 |
|
$ |
0.21 |
|
Third Quarter |
|
$ |
26.94 |
|
$ |
24.31 |
|
$ |
0.22 |
|
$ |
51.50 |
|
$ |
46.05 |
|
$ |
0.21 |
|
Second Quarter |
|
$ |
27.64 |
|
$ |
23.14 |
|
$ |
0.22 |
|
$ |
53.39 |
|
$ |
44.08 |
|
$ |
0.21 |
|
First Quarter |
|
$ |
28.25 |
|
$ |
25.62 |
|
$ |
0.22 |
|
$ |
54.25 |
|
$ |
46.67 |
|
$ |
0.20 |
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
27.35 |
|
$ |
24.52 |
|
$ |
0.20 |
|
$ |
56.42 |
|
$ |
49.01 |
|
$ |
0.20 |
|
Third Quarter |
|
$ |
26.42 |
|
$ |
20.95 |
|
$ |
0.20 |
|
$ |
51.36 |
|
$ |
41.48 |
|
$ |
0.20 |
|
Second Quarter |
|
$ |
24.76 |
|
$ |
20.88 |
|
$ |
0.20 |
|
$ |
46.83 |
|
$ |
34.92 |
|
$ |
0.20 |
|
First Quarter |
|
$ |
26.71 |
|
$ |
21.16 |
|
$ |
0.20 |
|
$ |
40.52 |
|
$ |
26.16 |
|
$ |
0.19 |
|
- (1)
- The
Transatlantic Board declared on September 8, 2011 a quarterly cash dividend of $0.22 per Transatlantic Share payable on December 2, 2011
to Transatlantic stockholders of record on November 18, 2011.
- (2)
- The
Validus Board declared on November 2, 2011 a quarterly dividend of $0.25 per Validus common share and $0.25 per Validus common share equivalent
for which each outstanding Validus warrant is exercisable. The dividend is payable on December 30, 2011 to Validus shareholders and warrant holders of record on December 15, 2011.
The following table sets out the trading information for Validus Shares and Transatlantic Shares on July 12, 2011, the last full trading
day before Validus' public announcement of delivery of the Initial Validus Proposal to the Transatlantic Board, and November 2, 2011, the last practicable trading day prior to the filing of
this Form 8-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
Validus
Common
Share close |
|
Transatlantic
Common
Stock close |
|
Equivalent
Validus
Per Share
Amount |
|
July 12, 2011 |
|
$ |
30.81 |
|
$ |
49.02 |
|
$ |
58.95 |
|
November 2, 2011 |
|
$ |
27.21 |
|
$ |
52.23 |
|
$ |
53.35 |
|
38
Equivalent
per share amounts are calculated by multiplying Validus per share amounts by the exchange ratio of 1.5564 and adding $11.00 in cash per Transatlantic Share and
do not contemplate the payment of any Special Excess Dividend.
The
value of the Validus Shares payable in the Validus Transaction Proposal will change as the market price of Validus Shares fluctuates, and may therefore be different from prices set
forth above at the time the consent solicitation or the Validus Transaction Proposal may become effective. Please see the subheading of this Item 8.01 titled "Cautionary Statement Regarding
Forward Looking Statements." Transatlantic stockholders are encouraged to obtain current market quotations for Validus Shares and Transatlantic Shares prior to making any decision with respect
thereto.
Cautionary Statement Regarding Forward-Looking Statements
Statements contained in this Current Report on Form 8-K that are not historical fact are forward-looking statements
both with respect to Validus and its industry, that reflect Validus' current views with respect to future events and financial performance. Statements that include the words "expect," "intend,"
"plan," "believe," "project," "anticipate," "will," "may," "would" and similar statements of a future or forward-looking nature are often used to identify forward-looking statements. All
forward-looking statements address matters that involve risks and uncertainties, many of which are beyond Validus' 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. Validus believes that these factors include, but are
not limited to, the following: 1) uncertainty as to whether Validus will be able to enter into or consummate the proposed transaction on the terms set forth in the Validus Merger Offer;
2) uncertainty as to the actual premium that will be realized by Transatlantic stockholders in connection with the proposed transaction; 3) failure to realize the anticipated benefits
(including combination synergies) of the proposed transaction, including as a result of delay in completing the transaction or integrating the businesses of Validus and Transatlantic;
4) uncertainty as to the long-term value of Validus Shares; 5) unpredictability and severity of catastrophic events; 6) rating agency actions; 7) adequacy of
Validus' or Transatlantic's risk management and loss limitation methods; 8) cyclicality of demand and pricing in the insurance and reinsurance markets; 9) Validus' ability to implement
its business strategy during "soft" as well as "hard" markets; 10) adequacy of Validus' or Transatlantic's loss reserves; 11) continued availability of capital and financing;
12) retention of key personnel; 13) competition in the insurance and reinsurance markets; 14) potential loss of business from one or more major reinsurance or insurance brokers;
15) the credit risk Validus assumes through its dealings with its reinsurance and insurance brokers; 16) Validus' or Transatlantic's 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; 17) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 18) the
integration of businesses Validus may acquire or new business ventures Validus may start; 19) the legal, regulatory and tax regimes under which Validus operates; 20) the effect on
Validus' or Transatlantic's investment portfolios of changing financial market conditions, including inflation, interest rates, liquidity, the recent downgrade of U.S. securities by Standard &
Poor's and the possible effect on the value of securities in Validus' and Transatlantic's investment portfolios, as well as other factors; 21) acts of terrorism or outbreak of war or
hostilities; 22) availability of reinsurance and retrocessional coverage; and 23) the outcome of transaction related litigation, 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' and Transatlantic's most recent reports on Form 10-K and Form 10-Q and other documents of Validus and
Transatlantic on file with the SEC. Any forward-
39
looking
statements made herein are qualified in their entirety 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, operations or financial condition. Except to the extent required
by applicable 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. No rating
agency (A.M. Best, Moody's, or Standard & Poor's) has specifically approved or disapproved or otherwise taken definitive action on the potential transaction.
Additional Information about the Proposed Transaction and Where to Find It:
Validus has commenced the Validus Exchange Offer to acquire all of the outstanding Transatlantic Shares. The information in this
Current Report on Form 8-K should be read in conjunction with the Tender Offer Statement on Schedule TO and the prospectus/offer to exchange included in the Registration
Statement on Form S-4 (including the letter of transmittal and related documents and as amended and supplemented from time to time, the "Exchange Offer Documents") filed by Validus
with the Securities and Exchange Commission. The Registration Statement on Form S-4 has been declared effective by the Securities and Exchange Commission. The Exchange Offer will be
made only through the Exchange Offer Documents. The information in this Current Report on Form 8-K is not a substitute for the definitive consent solicitation statement that Validus
may file with the Securities and Exchange Commission or any other documents which Validus may send to its or Transatlantic's stockholders in connection with the consent solicitation to, among other
things, replace the Transatlantic Board. Investors and security holders are urged to read the Exchange Offer Documents, the definitive consent solicitation statement and all other relevant documents
that Validus has filed or may file with the Securities and Exchange Commission if and when they become available because they contain or will contain important information about the proposed
transaction and the consent solicitation. All such documents, if filed, will be available free of charge at the Securities and Exchange Commission's website (www.sec.gov) or by directing a request to
Innisfree M&A Incorporated at (877) 717-3929 (banks and brokers may call collect at (212) 750-5833).
Participants in the Solicitation:
Validus, its directors and certain of its officers and Validus' nominees to the Transatlantic board of directors may be deemed to be
participants in any solicitation of Transatlantic stockholders in connection with the consent solicitation. Information about the participants in the solicitation is available in the preliminary
consent solicitation statement that Validus filed with the SEC in connection with the consent solicitation. Other information regarding the participants and a description of their direct and indirect
interests, by security holdings or otherwise, is contained in the preliminary consent solicitation statement.
Item 9.01. Financial Statements and Exhibits.
- (d)
- Exhibits.
The following exhibits are filed herewith:
40
EXHIBIT INDEX
|
|
|
| Exhibit |
|
Description |
| Exhibit 99.1 |
|
Press Release, dated November 3, 2011, titled "Validus Announces Amended Exchange Offer and Pursues Consent Soliciation to Replace Transatlantic Board" |
| Exhibit 99.2 |
|
Commitment Letter, dated November 2, 2011, from J.P. Morgan Securities LLC and JPMorgan Chase Bank N.A. |
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date:
November 3, 2011
|
|
|
|
|
|
|
| |
|
VALIDUS HOLDINGS, LTD. |
|
|
(Registrant) |
|
|
By: |
|
/s/ Joseph E. (Jeff) Consolino
|
| |
|
|
|
Name: |
|
Joseph E. (Jeff) Consolino |
| |
|
|
|
Title: |
|
President & Chief Financial Officer |
42
QuickLinks
Validus—Summary Projections
Validus Holdings, Ltd. Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
Sources of Funds
Uses of Funds
EXHIBIT INDEX
SIGNATURES
