10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 __________________________________________________

Form 10-Q

__________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

Commission file number 001-33606

__________________________________________________

VALIDUS HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

__________________________________________________

BERMUDA	98-0501001
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

29 Richmond Road, Pembroke, Bermuda HM 08

(Address of principal executive offices and zip code)

(441) 278-9000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of August 5, 2014 there were 91,018,718 outstanding Common Shares, $0.175 par value per share, of the registrant.

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as at June 30, 2014 (unaudited) and December 31, 2013	2
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)	3
Consolidated Statements of Shareholders' Equity for the Six Months Ended June 30, 2014 and 2013 (unaudited)	4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	52
Item 3. Quantitative and Qualitative Disclosures About Market Risk	120
Item 4. Controls and Procedures	121
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	122
Item 1A. Risk Factors	122
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	122
Item 3. Defaults Upon Senior Securities	123
Item 4. Mine Safety Disclosure	123
Item 5. Other Information	123
Item 6. Exhibits	124
Signatures	125

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Validus Holdings, Ltd.

Consolidated Balance Sheets

As at June 30, 2014 (unaudited) and December 31, 2013

(Expressed in thousands of U.S. dollars, except share and per share information)

	June 30, 2014			December 31, 2013
	(unaudited)
Assets
Fixed maturities, at fair value (amortized cost: 2014—$5,115,945; 2013—$5,522,853)	$	5,154,629		$	5,542,258
Short-term investments, at fair value (amortized cost: 2014—$816,651; 2013—$751,734)	816,820			751,778
Other investments, at fair value (cost: 2014—$717,908; 2013—$637,728)	783,423			618,316
Cash and cash equivalents	1,166,410			1,056,346
Total investments and cash	7,921,282			7,968,698
Investments in affiliates	213,619			141,243
Premiums receivable	1,215,454			697,233
Deferred acquisition costs	210,642			134,269
Prepaid reinsurance premiums	178,291			103,251
Securities lending collateral	1,321			3,392
Loss reserves recoverable	338,734			370,154
Paid losses recoverable	59,682			80,080
Intangible assets	104,327			106,407
Goodwill	20,393			20,393
Accrued investment income	18,008			18,876
Other assets	156,651			202,436
Total assets	$	10,438,404		$	9,846,432
Liabilities
Reserve for losses and loss expenses	$	2,867,307		$	3,030,399
Unearned premiums	1,372,768			824,496
Reinsurance balances payable	162,114			154,874
Securities lending payable	1,787			3,858
Deferred income taxes	20,522			19,086
Net payable for investments purchased	44,713			19,383
Accounts payable and accrued expenses	138,906			278,187
Notes payable to operating affiliates	622,950			439,272
Senior notes payable	247,252			247,198
Debentures payable	541,350			541,416
Total liabilities	$	6,019,669		$	5,558,169
Commitments and contingent liabilities
Redeemable noncontrolling interest	66,282			86,512
Shareholders’ equity
Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2014—155,205,796; 2013—154,488,497; Outstanding: 2014—91,394,939; 2013—96,044,312)	$	27,161		$	27,036
Treasury shares (2014—63,810,857; 2013—58,444,185)	(11,167		)	(10,228		)
Additional paid-in-capital	1,492,472			1,677,894
Accumulated other comprehensive income (loss)	2,460			(617		)
Retained earnings	2,266,180			2,010,009
Total shareholders’ equity available to Validus	3,777,106			3,704,094
Noncontrolling interest	575,347			497,657
Total shareholders’ equity	$	4,352,453		$	4,201,751
Total liabilities, noncontrolling interests and shareholders’ equity	$	10,438,404		$	9,846,432

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

2

Validus Holdings, Ltd.

Consolidated Statements of Comprehensive Income

For the Three and Six Months EndedJune 30, 2014 and 2013 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues
Gross premiums written	$	655,674		$	702,313		$	1,667,665		$	1,807,073
Reinsurance premiums ceded	(50,565		)	(121,396		)	(245,473		)	(308,612		)
Net premiums written	605,109			580,917			1,422,192			1,498,461
Change in unearned premiums	(139,106		)	(33,459		)	(473,232		)	(419,942		)
Net premiums earned	466,003			547,458			948,960			1,078,519
Net investment income	21,286			26,210			44,648			51,859
Net realized gains on investments	7,858			3,409			11,598			5,130
Change in net unrealized gains (losses) on investments	45,427			(141,348		)	101,120			(148,585		)
Income from investment affiliate	779			1,753			6,127			3,230
Other income	5,235			4,418			19,065			7,103
Foreign exchange gains (losses)	3,158			(8,223		)	(3,320		)	(1,301		)
Total revenues	549,746			433,677			1,128,198			995,955
Expenses
Losses and loss expenses	158,745			265,044			321,416			409,815
Policy acquisition costs	78,953			87,152			164,602			180,763
General and administrative expenses	73,842			70,967			148,287			151,246
Share compensation expenses	8,341			6,638			15,488			8,956
Finance expenses	16,126			17,566			32,026			31,935
Transaction expenses	3,252			—			3,252			—
Total expenses	339,259			447,367			685,071			782,715
Income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	210,487			(13,690		)	443,127			213,240
Tax (expense) benefit	(1,391		)	(93		)	(1,351		)	225
Income from operating affiliates	4,892			3,793			9,819			7,316
(Income) attributable to operating affiliate investors	(25,316		)	(20,264		)	(57,026		)	(30,341		)
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
Net (income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	$	153,367		$	30,722		$	315,755		$	253,965
Other comprehensive income (loss)
Foreign currency translation adjustments	2,615			186			3,077			(9,599		)
Other comprehensive income (loss)	$	2,615		$	186		$	3,077		$	(9,599	)
Comprehensive income available to Validus	$	155,982		$	30,908		$	318,832		$	244,366
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic	90,952,523			103,133,188			92,202,261			105,259,813
Diluted	95,276,836			104,734,643			96,538,178			107,393,822
Basic earnings per share available to common shareholders	$	1.67		$	0.28		$	3.39		$	2.26
Earnings per diluted share available to common shareholders	$	1.61		$	0.28		$	3.27		$	2.21
Cash dividends declared per share	$	0.30		$	0.30		$	0.60		$	2.60

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

3

Validus Holdings, Ltd.

Consolidated Statements of Shareholders’ Equity

For the Six Months EndedJune 30, 2014 and 2013 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	June 30, 2014			June 30, 2013
	(unaudited)			(unaudited)
Common shares
Balance - Beginning of period	$	27,036		$	26,722
Common shares issued, net	125			267
Balance - End of period	$	27,161		$	26,989
Treasury shares
Balance - Beginning of period	$	(10,228	)	$	(7,836	)
Repurchase of common shares	(939		)	(1,699		)
Balance - End of period	$	(11,167	)	$	(9,535	)
Additional paid-in capital
Balance - Beginning of period	$	1,677,894		$	2,160,478
Common shares redeemed, net	(4,510		)	(488		)
Repurchase of common shares	(196,400		)	(355,485		)
Share compensation expenses	15,488			8,956
Balance - End of period	$	1,492,472		$	1,813,461
Accumulated other comprehensive income (loss)
Balance - Beginning of period	$	(617	)	$	(2,953	)
Amounts reclassified to retained earnings	—			4,290
Other comprehensive income (loss)	3,077			(9,599		)
Balance - End of period	$	2,460		$	(8,262	)
Retained earnings
Balance - Beginning of period	$	2,010,009		$	1,844,416
Dividends	(59,584		)	(298,888		)
Net income	394,569			190,440
Net (income) loss attributable to noncontrolling interest	(78,814		)	63,525
Amounts reclassified from accumulated other comprehensive income (loss)	—			(4,290		)
Balance - End of period	$	2,266,180		$	1,795,203
Total shareholders’ equity available to Validus	$	3,777,106		$	3,617,856
Noncontrolling interest	$	575,347		$	427,755
Total shareholders’ equity	$	4,352,453		$	4,045,611

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

4

Validus Holdings, Ltd.

Consolidated Statements of Cash Flows

For the Six Months EndedJune 30, 2014 and 2013 (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	June 30, 2014			June 30, 2013
	(unaudited)			(unaudited)
Cash flows provided by (used in) operating activities
Net income	$	394,569		$	190,440
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Share compensation expenses	15,488			8,956
Gain on sale of subsidiary	(709		)	—
Gain on deconsolidation of subsidiary	(1,372		)	—
Amortization of discount on senior notes	54			54
Income from investment affiliate	(6,127		)	(3,230		)
Net realized gains on investments	(11,598		)	(5,130		)
Change in net unrealized (gains) losses on investments	(101,120		)	148,585
Amortization of intangible assets	2,080			2,080
Income from operating affiliates	(9,819		)	(7,316		)
Foreign exchange (gains) losses included in net income	(11,629		)	30,868
Amortization of premium on fixed maturities	8,116			10,163
Change in:
Premiums receivable	(514,339		)	(558,107		)
Deferred acquisition costs	(76,373		)	(60,035		)
Prepaid reinsurance premiums	(75,040		)	(125,293		)
Loss reserves recoverable	32,983			20,000
Paid losses recoverable	20,322			23,840
Income taxes recoverable	—			(852		)
Accrued investment income	864			1,903
Other assets	31,388			22,009
Reserve for losses and loss expenses	(172,189		)	(216,535		)
Unearned premiums	548,272			545,235
Reinsurance balances payable	5,979			186,906
Deferred income taxes	1,539			2,081
Accounts payable and accrued expenses	(63,896		)	(23,517		)
Net cash provided by operating activities	17,443			193,105
Cash flows provided by (used in) investing activities
Proceeds on sales of investments	1,979,658			2,686,285
Proceeds on maturities of investments	384,259			316,860
Purchases of fixed maturities	(1,929,428		)	(3,318,638		)
(Purchases) sales of short-term investments, net	(92,572		)	500,191
Purchases of other investments	(75,198		)	(23,674		)
Decrease (increase) in securities lending collateral	2,071			(1,675		)
Redemption of investment in operating affiliates	57,025			79,307
Purchase of investment in investment affiliate	—			(6,904		)
Proceeds on sale of subsidiary	16,459			—
Net cash provided by investing activities	342,274			231,752
Cash flows provided by (used in) financing activities
Net (repayment of) proceeds on issuance of notes payable to operating affiliates	(44,423		)	262,037
Redemption of common shares, net	(4,385		)	(221		)
Purchases of common shares under share repurchase program	(197,339		)	(357,184		)
Dividends paid	(61,036		)	(297,539		)
(Decrease) increase in securities lending payable	(2,071		)	1,675
Investment in third party redeemable noncontrolling interest	46,504			49,790
Investment in third party noncontrolling interest	—			58,500
Net cash used in financing activities	(262,750		)	(282,942		)
Effect of foreign currency rate changes on cash and cash equivalents	13,097			(44,233		)
Net increase in cash	110,064			97,682
Cash and cash equivalents - beginning of period	$	1,056,346		$	1,219,379
Cash and cash equivalents - end of period	$	1,166,410		$	1,317,061
Taxes paid (recovered) during the period	$	877		$	(1,326	)
Interest paid during the period	$	27,224		$	24,955

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

5

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

1. Basis of preparation and consolidation

These unaudited Consolidated Financial Statements (the "Consolidated Financial Statements") include Validus Holdings, Ltd. and its wholly and majority owned subsidiaries (together the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these Consolidated Financial Statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. To facilitate comparison of information, certain amounts in prior periods have been reclassified to conform to current period presentation. The consolidated statement of cash flows for the six months endedJune 30, 2013 includes a reclassification of $19,400 that increased net cash flows used in financing activities and net cash flows provided by operating activities to revise the presentation of subscriptions received in advance from third party investors. For the three and six months endedJune 30, 2013, $20,264 and $30,341 respectively, have been reclassified into income attributable to operating affiliate investors from finance expenses to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated. The results of operations for any interim period are not necessarily indicative of the results for a full year.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the amounts included in the Consolidated Financial Statements reflect its best estimates and assumptions, actual results could differ materially from those estimates. The Company’s principal estimates include:

•reserve for losses and loss expenses;

•premium estimates for business written on a line slip or proportional basis;

•the valuation of goodwill and intangible assets;

•reinsurance recoverable balances including the provision for uncollectible amounts; and

•investment valuation of financial assets.

The term “ASC” used in these notes refers to Accounting Standard Codification issued by the U.S. Financial Accounting Standards Board (“FASB”).

2. Recent accounting pronouncements

Adoption of New Accounting Standards

Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity

In March 2013, the FASB issued Accounting Standard Update No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (ASU 2013-05). The objective of this Update is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary within a foreign entity. The amendments became effective for the Company on January 1, 2014. Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

6

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Financial Services - Investment Companies - Amendments to the Scope, Measurement, and Disclosure Requirements

In June 2013, the FASB issued Accounting Standard Update No. 2013-08, “Financial Services - Investment Companies - Amendments to the Scope, Measurement, and Disclosure Requirements” (ASU 2013-08). The amendments in this Update change the assessment of whether an entity is an investment company by developing a new two-tiered approach for that assessment, which requires an entity to possess certain fundamental characteristics while allowing judgment in assessing other typical characteristics. The new approach requires an entity to assess all of the characteristics of an investment company and consider its purpose and determine whether it is an investment company. The amendments became effective for the Company on January 1, 2014. The Company performed an assessment and has concluded that the AlphaCat ILS funds meet the characteristics outlined in this Update and therefore will continue to be treated as investment companies.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB issued Accounting Standard Update No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11). This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward is not available to settle any additional income taxes that would result from the disallowance of a tax position at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments became effective for the Company on January 1, 2014. Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Accounting Standards Not Yet Adopted

In May 2014, the FASB issued Accounting Standard Update No. 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09). The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Earlier adoption is not permitted. The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

In June 2014, the FASB issued Accounting Standard Update No. 2014-12, “Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (ASU 2014-12). The amendments in this Update apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target (for example, an initial public offering or a profitability target) could be achieved and still be eligible to vest in the award if and when the performance target is achieved. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Earlier adoption is permitted. The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

7

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

3. Investments

(a) Fixed maturity, short-term and other investments

The Company's investments in fixed maturities, short-term investments and other investments are classified as trading and carried at fair value, with related changes in net unrealized gains or losses included in earnings.

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at June 30, 2014 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,030,570		$	3,028		$	(1,821	)	$	1,031,777
Non-U.S. government and government agency	440,408			7,689			(1,027		)	447,070
U.S. states, municipalities and political subdivisions	48,732			760			(52		)	49,440
Agency residential mortgage-backed securities	307,246			8,459			(600		)	315,105
Non-agency residential mortgage-backed securities	18,001			295			(515		)	17,781
U.S. corporate	1,303,436			10,869			(1,796		)	1,312,509
Non-U.S. corporate	685,884			8,442			(738		)	693,588
Bank loans	517,697			3,692			(664		)	520,725
Catastrophe bonds	37,500			573			(10		)	38,063
Asset-backed securities	605,079			1,868			(205		)	606,742
Commercial mortgage-backed securities	121,392			469			(32		)	121,829
Total fixed maturities	5,115,945			46,144			(7,460		)	5,154,629
Total short-term investments (a) (b)	816,651			170			(1		)	816,820
Other investments
Fund of hedge funds	2,820			115			(921		)	2,014
Hedge funds (a)	566,519			136,390			(79,013		)	623,896
Private equity investments	10,965			4,520			—			15,485
Investment funds	131,406			284			—			131,690
Mutual funds	6,198			4,140			—			10,338
Total other investments	717,908			145,449			(79,934		)	783,423
Total investments including noncontrolling interests	$	6,650,504		$	191,763		$	(87,395	)	$	6,754,872
Noncontrolling interest (a)	$	(521,862	)	$	(118,540	)	$	71,112		$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—		$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	6,120,337		$	73,223		$	(16,283	)	$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

8

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2013 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,368,826		$	2,589		$	(6,736	)	$	1,364,679
Non-U.S. government and government agency	454,578			6,511			(2,021		)	459,068
U.S. states, municipalities and political subdivisions	42,978			459			(317		)	43,120
Agency residential mortgage-backed securities	305,450			8,310			(2,261		)	311,499
Non-agency residential mortgage-backed securities	16,530			143			(914		)	15,759
U.S. corporate	1,328,960			9,208			(5,684		)	1,332,484
Non-U.S. corporate	711,581			5,917			(3,173		)	714,325
Bank loans	712,859			5,659			(1,402		)	717,116
Catastrophe bonds	72,000			2,551			—			74,551
Asset-backed securities	509,091			1,409			(843		)	509,657
Total fixed maturities	5,522,853			42,756			(23,351		)	5,542,258
Total short-term investments (b)	751,734			45			(1		)	751,778
Other investments
Fund of hedge funds	3,141			83			(921		)	2,303
Hedge funds (a)	584,518			71,641			(95,076		)	561,083
Private equity investments	12,333			1,410			(258		)	13,485
Investment funds	31,537			92			—			31,629
Mutual funds	6,199			3,617			—			9,816
Total other investments	637,728			76,843			(96,255		)	618,316
Total investments including noncontrolling interests	$	6,912,315		$	119,644		$	(119,607	)	$	6,912,352
Noncontrolling interest (a)	(512,121		)	(62,850		)	85,569			(489,402		)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—		$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	6,381,829		$	56,794		$	(34,038	)	$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

As of June 30, 2014, the Company changed the methodology of assigning investment ratings to its fixed maturities portfolio. In prior periods, investment ratings were the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. As of June 30, 2014, investment ratings are the median of Moody’s, Standard & Poor’s and Fitch, presented in Standard & Poor’s equivalent rating. For investments where only two ratings are available, the lower of the two ratings shall apply, presented in Standard & Poor’s equivalent rating. For investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating. The December 31, 2013 comparative data was restated as a result, to conform to current period presentation.

9

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at June 30, 2014 and December 31, 2013.

	June 30, 2014				December 31, 2013
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	2,366,249	45.9	%	$	2,510,781	45.3	%
AA	719,122		13.9	%	696,998		12.6	%
A	1,196,059		23.2	%	1,233,716		22.3	%
BBB	307,522		6.0	%	323,085		5.8	%
Total investment-grade fixed maturities	4,588,952		89.0	%	4,764,580		86.0	%
BB	256,714		5.0	%	354,992		6.4	%
B	282,032		5.5	%	383,639		6.9	%
CCC	10,406		0.2	%	2,453		—	%
CC	2,385		—	%	2,496		0.1	%
C	157		—	%	235		—	%
D/NR	13,983		0.3	%	33,863		0.6	%
Total non-investment grade fixed maturities	565,677		11.0	%	777,678		14.0	%
Total fixed maturities	$	5,154,629	100.0	%	$	5,542,258	100.0	%

The amortized cost and estimated fair value amounts for fixed maturities held at June 30, 2014 and December 31, 2013 are shown below by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	June 30, 2014				December 31, 2013
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	399,741	$	402,887	$	688,855	$	692,768
Due after one year through five years	3,296,209		3,320,485		3,603,459		3,613,847
Due after five years through ten years	357,818		359,382		396,389		395,633
Due after ten years	10,459		10,418		3,079		3,095
	4,064,227		4,093,172		4,691,782		4,705,343
Asset-backed and mortgage-backed securities	1,051,718		1,061,457		831,071		836,915
Total fixed maturities	$	5,115,945	$	5,154,629	$	5,522,853	$	5,542,258

(b) Net investment income

Net investment income was derived from the following sources:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities and short-term investments	$	22,207		$	26,151		$	45,504		$	53,682
Cash and cash equivalents	996			1,629			2,953			2,162
Securities lending income	2			—			4			—
Total gross investment income	23,205			27,780			48,461			55,844
Investment expenses	(1,919		)	(1,570		)	(3,813		)	(3,985		)
Total net investment income	$	21,286		$	26,210		$	44,648		$	51,859

10

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(c) Net realized gains and change in net unrealized gains (losses) on investments

The following represents an analysis of net realized gains and the change in net unrealized gains (losses) on investments:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities, short-term and other investments
Gross realized gains (a)	$	9,813		$	7,152		$	15,109		$	17,872
Gross realized (losses)	(1,955		)	(3,743		)	(3,511		)	(12,742		)
Net realized gains on investments	7,858			3,409			11,598			5,130
Change in net unrealized gains (losses) on investments (a)	45,427			(141,348		)	101,120			(148,585		)
Total net realized gains and change in net unrealized gains (losses) on investments including noncontrolling interest	53,285			(137,939		)	112,718			(143,455		)
Noncontrolling interest (a)	(33,207		)	63,694			(75,209		)	68,345
Total net realized gains and change in net unrealized gains (losses) on investments excluding noncontrolling interest	$	20,078		$	(74,245	)	$	37,509		$	(75,110	)

(a) Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

(d) Pledged investments

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details on the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	June 30, 2014
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		305,330		478,430
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		35,415
Talbot FAL facility	25,000		25,000		30,990
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		30,040
IPC bi-lateral facility	40,000		19,572		96,188
$375,000 Flagstone bi-lateral facility	375,000		292,067		477,122
Total	$	1,605,000	$	689,865	$	1,148,185

	December 31, 2013
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		358,567		507,620
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		130,256
Talbot FAL facility	25,000		25,000		30,801
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		24,806
IPC bi-lateral facility	40,000		20,177		98,465
$375,000 Flagstone bi-lateral facility	375,000		305,686		454,458
Total	$	1,599,800	$	751,250	$	1,246,406

11

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

In addition, $2,906,871 of cash and cash equivalents and investments were pledged during the normal course of business as at June 30, 2014 (December 31, 2013: $2,947,475). Of those, $2,901,739 were held in trust (December 31, 2013: $2,942,508). Pledged assets are generally for the benefit of the Company's cedants and policyholders, to support AlphaCat's fully collateralized reinsurance transactions and to facilitate the accreditation of Talbot as an alien insurer/reinsurer by certain regulators.

4. Fair value measurements

(a) Classification within the fair value hierarchy

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants. Under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The three levels of the fair value hierarchy are described below:

Level 1 - Fair values are measured based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 - Fair values are measured based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

Level 3 - Fair values are measured based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's own judgments about assumptions where there is little, if any, market activity for that asset or liability that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (for example, from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. These circumstances could cause an instrument to be reclassified between levels within the fair value hierarchy.

There have been no material changes in the Company's valuation techniques during the period, or periods, represented by these Consolidated Financial Statements. The following methods and assumptions were used in estimating the fair value of each class of financial instrument recorded in the Consolidated Balance Sheets.

12

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

At June 30, 2014, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,031,777	$	—		$	1,031,777
Non-U.S. government and government agency	—			447,070		—			447,070
U.S. states, municipalities and political subdivisions	—			49,440		—			49,440
Agency residential mortgage-backed securities	—			315,105		—			315,105
Non-agency residential mortgage-backed securities	—			17,781		—			17,781
U.S. corporate	—			1,312,509		—			1,312,509
Non-U.S. corporate	—			693,588		—			693,588
Bank loans	—			520,725		—			520,725
Catastrophe bonds	—			33,062		5,001			38,063
Asset-backed securities	—			606,742		—			606,742
Commercial mortgage-backed securities	—			121,829		—			121,829
Total fixed maturities	—			5,149,628		5,001			5,154,629
Total short-term investments (a) (b)	801,944			14,876		—			816,820
Other investments
Fund of hedge funds	—			—		2,014			2,014
Hedge funds (a)	—			—		623,896			623,896
Private equity investments	—			—		15,485			15,485
Investment funds	—			31,690		100,000			131,690
Mutual funds	—			10,338		—			10,338
Total other investments	—			42,028		741,395			783,423
Total investments including noncontrolling interests	$	801,944		$	5,206,532	$	746,396		$	6,754,872
Noncontrolling interest (a)	$	(22,500	)	$	—	$	(546,790	)	$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—	$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	771,139		$	5,206,532	$	199,606		$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

13

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

At December 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,364,679	$	—		$	1,364,679
Non-U.S. government and government agency	—			459,068		—			459,068
U.S. states, municipalities and political subdivisions	—			43,120		—			43,120
Agency residential mortgage-backed securities	—			311,499		—			311,499
Non-agency residential mortgage-backed securities	—			15,759		—			15,759
U.S. corporate	—			1,332,484		—			1,332,484
Non-U.S. corporate	—			714,325		—			714,325
Bank loans	—			717,116		—			717,116
Catastrophe bonds	—			74,551		—			74,551
Asset-backed securities	—			509,657		—			509,657
Total fixed maturities	—			5,542,258		—			5,542,258
Total short-term investments (b)	747,215			4,563		—			751,778
Other investments
Fund of hedge funds	—			—		2,303			2,303
Hedge funds (a)	—			—		561,083			561,083
Private equity investments	—			—		13,485			13,485
Investment fund	—			31,629		—			31,629
Mutual funds	—			9,816		—			9,816
Total other investments	—			41,445		576,871			618,316
Total investments including noncontrolling interests	$	747,215		$	5,588,266	$	576,871		$	6,912,352
Noncontrolling interest (a)	$	—		$	—	$	(489,402	)	$	(489,402	)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—	$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	728,850		$	5,588,266	$	87,469		$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

At June 30, 2014, Level 3 investments excluding the noncontrolling interests totaled $199,606 (December 31, 2013: $87,469), representing 3.2% (December 31, 2013: 1.4%) of total investments, excluding noncontrolling interests, measured at fair value on a recurring basis.

(b) Level 1 assets measured at fair value

Short term investments

Short term investments categorized as Level 1 consist primarily of highly liquid securities, all with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments are generally determined using amortized cost which approximates fair value. The Company has determined that certain of its short-term investments, held in highly liquid money market-type funds, should be included in Level 1 as their fair values are based on quoted market prices in active markets.

14

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(c) Level 2 assets measured at fair value

Fixed maturity investments

Fixed maturity investments included in Level 2 include U.S. government and government agency, non-U.S. government and government agency, U.S. states, municipalities and political subdivisions, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, U.S. corporate, non-U.S. corporate, bank loans, catastrophe bonds, asset-backed securities and commercial mortgage-backed securities.

In general, valuation of the Company's fixed maturity investment portfolios is provided by pricing services, such as index providers and pricing vendors, as well as broker quotations. The pricing vendors provide valuations for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index.

In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets.

The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company's fixed maturity investments are detailed below by asset class.

U.S. government and government agency

U.S. government and government agency securities consist primarily of debt securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. Fixed maturity investments included in U.S. government and government agency securities are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data.

Non-U.S. government and government agency

Non-U.S. government and government agency securities consist of debt securities issued by non-U.S. governments and their agencies along with supranational organizations (also known as sovereign debt securities). Securities held in these sectors are primarily priced by pricing services who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

U.S. states, municipalities and political subdivisions

The Company's U.S. states, municipalities and political subdivisions portfolio contains debt securities issued by U.S. domiciled state and municipal entities. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government agency securities described above.

Agency residential mortgage-backed securities

The Company's agency residential mortgage-backed investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced ("TBA") market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes.

15

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Non-agency residential mortgage-backed securities

The Company's non-agency mortgage-backed investments include non-agency prime residential mortgage-backed fixed maturity investments. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. Securities held in these sectors are primarily priced by pricing services using an option adjusted spread model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable.

U.S. corporate

Corporate debt securities consist primarily of investment-grade debt of a wide variety of U.S. corporate issuers and industries. The Company's corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate.

Non-U.S. corporate

Non-U.S. corporate debt securities consist primarily of investment-grade debt of a wide variety of non-U.S. corporate issuers and industries. The Company's non-U.S. corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Bank loans

The Company's bank loan investments consist primarily of below-investment-grade debt of a wide variety of corporate issuers and industries. The Company's bank loans are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Catastrophe bonds

Catastrophe bonds are based on broker or underwriter bid indications. To the extent that these indications are based on significant unobservable inputs, the relevant bonds will be classified as a Level 3 asset.

Asset-backed securities

Asset backed securities include mostly investment-grade debt securities backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and collateralized loan obligations originated by a variety of financial institutions. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Commercial mortgage-backed securities

Commercial mortgage backed securities are investment-grade debt primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the

16

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Short term investments

Short term investments consist primarily of highly liquid securities, all with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments is generally determined using amortized cost which approximates fair value. The Company has determined that, other than highly liquid money market-type funds, the remaining securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value.

Investment funds

Investment funds classified as Level 2 assets consists of one pooled investment which is invested in fixed income securities with high credit ratings. The investment fund is only open to Lloyd’ Trust Fund participants. The fair value of units in the investment fund is based on the net asset value of the fund as reported by Lloyd’s Treasury & Investment Management.

Mutual funds

Mutual funds consist of two investment funds which are invested in various quoted investments. The fair value of units in the mutual funds is based on the net asset value of the fund as reported by the fund manager.

(d) Level 3 assets measured at fair value

Level 3 includes financial instruments that are valued using market approach and income approach valuation techniques. These models incorporate both observable and unobservable inputs. The Company's hedge funds, a fund of hedge funds, private equity investments, an investment fund and certain catastrophe bonds are the only financial instruments in this category as at June 30, 2014. For each respective hedge fund investment, the Company obtains and reviews the valuation methodology used by the fund administrators and investment managers to ensure that the hedge fund investments are following fair value principles consistent with U.S. GAAP in determining the net asset value (“NAV”).

Within the hedge fund industry, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager and regular evaluation of fund performance against applicable benchmarks.

Fund of hedge funds

The fund of hedge funds includes a side pocket. While a redemption request has been submitted, the timing of receipt of proceeds on the side pocket is unknown. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As a result, the fund administrator's May 31, 2014 NAV was used as a basis for fair value measurement in the Company's June 30, 2014 balance sheet. The fund manager has provided an estimate of the fund NAV at June 30, 2014 based on the estimated performance provided from the underlying funds. To determine the reasonableness of the estimated NAV, the Company compares the one-month delayed fund administrator's NAV to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. As this valuation technique incorporates both observable and significant unobservable inputs, the fund of hedge funds is classified as a Level 3 asset.

Hedge funds

The hedge funds were valued at $623,896 at June 30, 2014 (December 31, 2013: $561,083). The hedge funds consist of an investment in four Paulson & Co. managed funds (the "Paulson hedge funds") and one hedge fund assumed from the Flagstone Acquisition (the "Flagstone hedge fund").

The Paulson hedge funds' administrator provides monthly reported NAVs with a one-month delay in its valuation. As a result, the funds' administrator's May 31, 2014 NAV was used as a partial basis for fair value measurement in the Company's June 30, 2014 balance sheet. The fund manager provides an estimate of the NAV at June 30, 2014 based on estimated performance. The Company adjusts fair value to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. To determine the reasonableness of the estimated NAV, the Company assesses the variance between the fund manager's estimated NAV and the

17

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

fund administrator's NAV. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. Historically, the Company's valuation estimates have not materially differed from the subsequent NAVs.

The Flagstone hedge fund's administrator provides quarterly NAVs with a three-month delay in valuation. As a result, the March 31, 2014 NAV was used as a basis for fair value measurement in the Company's June 30, 2014 balance sheet.

As these valuation techniques incorporate both observable and significant unobservable inputs, both the Paulson hedge funds and the Flagstone hedge fund are classified as Level 3 assets. The Paulson hedge funds are subject to quarterly liquidity.

Private equity investments

Private equity investments consist of investments in three private equity funds assumed from the Flagstone Acquisition. The private equity funds' respective fund administrators provide quarterly or semi-annual NAVs with a three-month or six-month delay in valuation as well as audited NAVs as at December 31. As a result, the March 31, 2014 or December 31, 2013 NAV was used as a basis for the fair value measurement in the Company's June 30, 2014 balance sheet. As this valuation technique incorporates both observable and significant unobservable inputs, the private equity investments are classified as Level 3 assets.

Investment funds

Investment funds classified as Level 3 assets consists of one structured securities fund that invests across asset backed securities, residential mortgage backed securities and commercial mortgage backed securities. The fair value of units in the investment fund is based on the NAV of the fund as reported by the independent fund administrator. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As this valuation technique incorporates both observable and significant unobservable inputs, the investment fund investment is classified as a Level 3 asset.

The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Level 3 investments - Beginning of period	$	629,321		$	523,693		$	576,871		$	556,234
Purchases	100,000			65,056			100,000			65,515
Sales	(21,744		)	(13,498		)	(25,333		)	(44,831		)
Settlements	(1,500		)	—			(1,500		)	—
Net realized gains	5,634			300			5,644			340
Change in net unrealized gains (losses)	34,685			(70,393		)	84,011			(72,100		)
Transfers into Level 3	—			—			6,703			—
Level 3 investments - End of period	$	746,396		$	505,158		$	746,396		$	505,158
Noncontrolling interest (a)	(546,790		)	(422,893		)	(546,790		)	(422,893		)
Level 3 investments excluding noncontrolling interest	$	199,606		$	82,265		$	199,606		$	82,265

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

There have not been any transfers into or out of Levels 1, 2 and 3 during the three months ended June 30, 2014 or 2013. During the six months ended June 30, 2014 there was a transfer of investments from Level 2 into Level 3 of the fair value hierarchy. This transfer was due to a reassessment of the extent of unobservable inputs used in establishing the fair value of certain catastrophe bonds. There were no transfers into or out of Level 3 during the six months ended June 30, 2013.

18

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

5. Investments in affiliates

The following table presents the Company's investments in affiliates as at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Investment affiliate	$	40,627	$	34,500
Operating affiliates	172,992		106,743
Investments in affiliates	$	213,619	$	141,243

(a) Investment affiliate

Aquiline Financial Services Fund II L.P.

On December 20, 2011, the Company entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which the Company has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015.

The Partnership provides quarterly capital account statements with a three-month delay in its valuation. As a result, the Partnership's March 31, 2014 capital account statement was used as the basis for calculating the Company's share of Partnership income for the period.

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Investment affiliate, beginning of period	$	39,848	$	18,036	$	34,500	$	15,218
Capital contributions	—		5,563		—		6,904
Income from investment affiliate	779		1,753		6,127		3,230
Investment affiliate, end of period	$	40,627	$	25,352	$	40,627	$	25,352

The following table presents the Company's investment in the Partnership as at June 30, 2014:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	40,627

The following table presents the Company's investment in the Partnership as at December 31, 2013:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	34,500

19

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(b) Operating affiliates

AlphaCat Re 2011 Ltd.

On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011 Ltd. ("AlphaCat Re 2011"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. AlphaCat Re 2011 was a market facing entity and the Company's investment in AlphaCat Re 2011 has been treated as an equity method investment.

AlphaCat Re 2011 is now considered "off-risk" as the risk periods for all reinsurance contracts written have expired. As a result, partial returns of investment have been made to the investors of AlphaCat Re 2011.The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat Re 2012 Ltd.

On May 29, 2012, the Company joined with other investors in capitalizing AlphaCat Re 2012 Ltd. ("AlphaCat Re 2012"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. AlphaCat Re 2012 was a market facing entity and the Company's investment in AlphaCat Re 2012 has been treated as an equity method investment.

AlphaCat Re 2012 is now considered "off-risk" as the risk periods for all reinsurance contracts written have expired. As a result, partial returns of investment have been made to the investors of AlphaCat Re 2012.The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat 2013, Ltd.

On December 17, 2012, the Company joined with other investors in capitalizing AlphaCat 2013, Ltd. ("AlphaCat 2013"), an entity formed for the purpose of investing in collateralized reinsurance and retrocession on a worldwide basis. AlphaCat 2013 deployed its capital through transactions entered into by AlphaCat Reinsurance Ltd. (“AlphaCat Re”) and the Company's investment in AlphaCat 2013 has been treated as an equity method investment.

AlphaCat 2013 is now considered "off-risk" as the risk periods for all risk-linked instruments have expired. As a result, partial returns of investment have been made to the investors of AlphaCat 2013. The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat 2014, Ltd.

On December 20, 2013, the Company joined with other investors in capitalizing AlphaCat 2014, Ltd. (“AlphaCat 2014”), an entity formed for the purpose of investing in collateralized reinsurance and retrocessional contracts for the January 1, 2014 renewal season. AlphaCat 2014 deploys its capital through transactions entered into by AlphaCat Re and the Company's investment in AlphaCat 2014 has been treated as an equity method investment.

AlphaCat ILS funds

The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and insurance linked securities ("ILS") contracts. AlphaCat ILS funds all deploy their capital through the AlphaCat Master Fund Ltd. (the “Master Fund”) and AlphaCat Re. All three funds are variable interest entities, with one being consolidated by the Company as the primary beneficiary and one being accounted for as an equity method investment because the Company holds an equity interest of 8.6% and has significant influence. The third fund had been consolidated by the Company as the primary beneficiary from its formation through to December 31, 2013. However, on January 1, 2014 the fund received $35,000 in additional third party subscriptions, resulting in a reduction of the Company’s equity interest below 50%. Since the Company retains significant influence, this fund has been deconsolidated and accounted for as an equity method investment from January 1, 2014. The fair value of the retained interest, based on the fair value of the underlying instruments in Master Fund and AlphaCat Re, amounted to $113,455 at January 1, 2014. The deconsolidation resulted in a gain of $1,372 which is included in the Consolidated Statements of Comprehensive Income as other income for the six months ended June 30, 2014. The Company's maximum exposure to any of the funds is the amount of capital invested at any given time.

20

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

AlphaCat Master Fund Ltd. and AlphaCat Reinsurance Ltd.

The Company utilizes Master Fund and AlphaCat Re for the purpose of investing in capital market products and writing collateralized reinsurance, respectively, on behalf of certain entities within the AlphaCat operating segment. Master Fund and AlphaCat Re are market facing entities which enter into transactions on behalf of AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds. The Company owns all of the voting equity interest in Master Fund and AlphaCat Re and, as a result, their financial statements are included in the Consolidated Financial Statements of the Company.

The following tables present a reconciliation of the beginning and ending investment in operating affiliates for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at March 31, 2014	$	4,177		$	1,277	$	15,678		$	23,593	$	137,034	$	181,759
Return of investment	—			—		(13,659		)	—		—		(13,659		)
(Loss) income from operating affiliates	(5		)	927		561			1,421		1,988		4,892
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Three Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	20,149	$	110,412
Return of investment	(5,678		)	(23,407		)	—		—		(29,085		)
(Loss) income from operating affiliates	(73		)	1,253			2,436		177		3,793
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

	Six Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at December 31, 2013	$	9,809		$	1,313	$	51,744		$	21,982	$	21,895	$	106,743
Return of investment	(5,825		)	—		(51,200		)	—		—		(57,025		)
Fair value of retained interest on deconsolidation of AlphaCat ILS fund	—			—		—			—		113,455		113,455
Income from operating affiliates	188			891		2,036			3,032		3,672		9,819
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Six Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	20,000	$	157,111
Return of investment	(52,114		)	(27,193		)	—		—		(79,307		)
Income from operating affiliates	376			3,078			3,536		326		7,316
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

21

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds in the Consolidated Financial Statements as at June 30, 2014:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	4,172	43.7	%	22.3	%	$	4,172
AlphaCat Re 2012	2,204		49.0	%	37.9	%	2,204
AlphaCat 2013	2,580		40.9	%	19.7	%	2,580
AlphaCat 2014	22,000		42.3	%	19.6	%	25,014
AlphaCat ILS funds	133,455		n/a		(a)		139,022
Total	$	164,411					$	172,992

(a) Equity ownership in the two funds were 8.6% and 49.0% respectively as at June 30, 2014.

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS fund in the Consolidated Financial Statements as at December 31, 2013:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	9,882	43.7	%	22.3	%	$	9,809
AlphaCat Re 2012	654		49.0	%	37.9	%	1,313
AlphaCat 2013	45,000		40.9	%	19.7	%	51,744
AlphaCat 2014	22,000		42.3	%	19.6	%	21,982
AlphaCat ILS fund	20,000		n/a		9.1	%	21,895
Total	$	97,536					$	106,743

(c) Notes payable and (income) attributable to operating affiliates

Notes are issued during the course of a year by Master Fund and AlphaCat Re to AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds (collectively the “feeder funds”) in order to fund the purchase of capital market products and to write collateralized reinsurance on their behalf. The underlying capital market products and collateralized reinsurance typically have at least a twelve month duration; however, they do not have a stated maturity date. Since repayment is dependent on the settlement of the underlying transactions, the notes are subsequently redeemed as the underlying transactions are settled. The Company’s investments in the feeder funds, together with investments made by third parties, are provided as consideration for these notes to Master Fund and AlphaCat Re, which are consolidated in the Company’s Consolidated Financial Statements. The effective economic interest in Master Fund and AlphaCat Re that results from these transactions is represented on the Consolidated Balance Sheet as notes payable to operating affiliates. The subsequent income or loss generated by the relevant capital market products or collateralized reinsurance is transferred to the operating affiliates as (income) loss attributable to operating affiliate investors in the Company’s Consolidated Statements of Comprehensive Income. The notes do not have any principal amount, since the final amount payable is dependent on the income or loss. To the extent that the (income) loss attributable to operating affiliate investors has not been returned to investors, it is included in accounts payable and accrued expenses in the Consolidated Balance Sheets.

22

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following tables present a reconciliation of the beginning and ending notes payable to operating affiliates for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014			AlphaCat ILS funds			Total
As at March 31, 2014	$	48,163		$	149,816		$	363,394		$	561,373
Issuance of notes payable to operating affiliates	—			8,207			249,094			257,301
Redemption of notes payable to operating affiliates	(48,163		)	—			(148,800		)	(196,963		)
Foreign exchange (gain) loss	—			(31		)	1,270			1,239
As at June 30, 2014	$	—		$	157,992		$	464,958		$	622,950

	Three Months Ended June 30, 2013
	AlphaCat 2013		AlphaCat ILS funds		Total
As at March 31, 2013	$	161,439	$	129,149	$	290,588
Issuance of notes payable to operating affiliates	60,576		79,468		140,044
Foreign exchange loss	120		341		461
As at June 30, 2013	$	222,135	$	208,958	$	431,093

	Six Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds			Total
As at December 31, 2013	$	223,809		$	—	$	215,463		$	439,272
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund	—			—		178,837			178,837
Issuance of notes payable to operating affiliates	—			157,914		433,831			591,745
Redemption of notes payable to operating affiliates	(223,512		)	—		(364,566		)	(588,078		)
Foreign exchange (gain) loss	(297		)	78		1,393			1,174
As at June 30, 2014	$	—		$	157,992	$	464,958		$	622,950

	Six Months Ended June 30, 2013
	AlphaCat 2013			AlphaCat ILS funds			Total
As at December 31, 2012	$	—		$	—		$	—
Issuance of notes payable to operating affiliates	223,082			211,311			434,393
Foreign exchange gain	(947		)	(2,353		)	(3,300		)
As at June 30, 2013	$	222,135		$	208,958		$	431,093

The portion of notes payable to operating affiliates that were due to the Company, as an investor in the affiliates, and third party investors as at June 30, 2014 amounted to $156,084 and $466,866, respectively (December 31, 2013: $63,654 and $375,618).

23

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table presents the (income) attributable to operating affiliate investors for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
AlphaCat 2013	$	(3,644	)	$	(17,142	)	$	(14,120	)	$	(25,283	)
AlphaCat 2014	(10,892		)	—			(21,681		)	—
AlphaCat ILS funds	(10,780		)	(3,122		)	(21,225		)	(5,058		)
(Income) attributable to operating affiliate investors	$	(25,316	)	$	(20,264	)	$	(57,026	)	$	(30,341	)

The portion of income attributable to operating affiliate investors that was due to the Company, as an investor in the affiliates, and third party investors for the three months ended June 30, 2014 amounted to $5,087 and $20,229, respectively (2013: $3,762 and $16,502). The portion of income attributable to operating affiliate investors that was due to the Company, as an investor in the affiliates, and third party investors for the six months ended June 30, 2014 amounted to $11,559 and $45,467, respectively (2013: $5,609 and $24,732).

6. Noncontrolling interest

On April 2, 2012, the Company joined with other investors in capitalizing PaCRe Ltd. ("PaCRe"), a Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance. The Company has an equity interest of 10% and the remaining 90% interest is held by third party investors. The Company has a majority voting equity interest in PaCRe and as a result, the financial statements of PaCRe are included in the Consolidated Financial Statements of the Company. The portion of PaCRe’s earnings attributable to third party investors is recorded in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest. PaCRe's shareholder rights do not include redemption features within the control of the third party shareholders. The third party equity is recorded in the Company’s Consolidated Balance Sheets as noncontrolling interest.

The portion of earnings from the one consolidated AlphaCat ILS fund attributable to third party investors is recorded in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest. The AlphaCat ILS funds have rights that enable shareholders, subject to certain limitations, to redeem their shares. The third party equity is therefore recorded in the Company’s Consolidated Balance Sheets as redeemable noncontrolling interest. When and if a redemption notice is received, the fair value of the redemption is reclassified to a liability.

24

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following tables present a reconciliation of the beginning and ending balances of redeemable noncontrolling interest and noncontrolling interest for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	Redeemable noncontrolling interest		Noncontrolling interest		Total
As at March 31, 2014	$	8,390	$	540,934	$	549,324
Issuance of shares	57,000		—		57,000
Income attributable to noncontrolling interest	892		34,413		35,305
As at June 30, 2014	$	66,282	$	575,347	$	641,629

	Three Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at March 31, 2013	$	56,277	$	431,144		$	487,421
Issuance of shares	13,500		58,500			72,000
Income (loss) attributable to noncontrolling interest	913		(61,889		)	(60,976		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

	Six Months Ended June 30, 2014
	Redeemable noncontrolling interest			Noncontrolling interest		Total
As at December 31, 2013	$	86,512		$	497,657	$	584,169
Issuance of shares	57,000			—		57,000
Income attributable to noncontrolling interest	1,124			77,690		78,814
Adjustment to noncontrolling interest as a result of deconsolidation	(78,354		)	—		(78,354		)
As at June 30, 2014	$	66,282		$	575,347	$	641,629

	Six Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at December 31, 2012	$	—	$	434,280		$	434,280
Issuance of shares	69,190		58,500			127,690
Income (loss) attributable to noncontrolling interest	1,500		(65,025		)	(63,525		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

25

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

7. Derivative instruments

The Company enters into derivative instruments for risk management purposes, specifically to hedge unmatched foreign currency exposures and interest rate exposures. As at June 30, 2014, the Company held foreign currency forward contracts to mitigate the risk of fluctuations in the U.S. dollar against a number of foreign currencies. As at June 30, 2014, the Company held two interest rate swaps to fix the payment of interest on the Company's 2006 and 2007 Junior Subordinated Deferrable Debentures, as well as three interest rate swaps and one cross-currency interest rate swap to fix the payment of interest and mitigate the foreign exchange rate impact on Flagstone's 2006 and 2007 Junior Subordinated Deferrable Debentures.

The following table summarizes information on the classification and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheets at June 30, 2014 and December 31, 2013:

	As at June 30, 2014						As at December 31, 2013
Derivatives designated as hedging instruments:	Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)		Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)
Foreign currency forward contracts	$	102,217	$	1,122	$	251	$	163,576	$	1,167	$	2,313
Interest rate swap contracts	$	552,263	$	26	$	877	$	552,263	$	28	$	911

(a) Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

(a) Classification within the fair value hierarchy

As described in Note 4: "Fair value measurements" under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The assumptions used within the valuation of the Company's derivative instruments are observable in the marketplace, can be derived from observable data or are supported by observable levels at which other similar transactions are executed in the marketplace. Accordingly, these derivatives were classified within Level 2 of the fair value hierarchy.

(b) Derivative instruments designated as a fair value hedge

The Company designates its foreign currency derivative instruments as fair value hedges and formally and contemporaneously documents all relationships between the derivative instruments and hedged items and links the derivative instruments to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items.

The following table provides the total impact on earnings, recognized in income within foreign exchange gains (losses), relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Foreign currency forward contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of gain (loss) recognized in income on derivative	$	1,535		$	(1,707	)	$	4,838		$	(445	)
Amount of (loss) gain on hedged item recognized in income attributable to risk being hedged	$	(1,535	)	$	1,707		$	(4,838	)	$	445
Amount of gain (loss) recognized in income on derivative (ineffective portion)	$	—		$	—		$	—		$	—

26

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(c) Derivative instruments designated as a cash flow hedge

The Company designates its interest rate derivative instruments as cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the derivative instruments to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items. The Company currently applies the long haul method when assessing the hedge's effectiveness.

The following table provides the total impact on other comprehensive income (loss) and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Interest rate swap contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of effective portion recognized in other comprehensive income	$	3,252		$	2,962		$	6,460		$	4,570
Amount of effective portion subsequently reclassified to earnings	$	(3,252	)	$	(2,962	)	$	(6,460	)	$	(4,570	)
Amount of ineffective portion excluded from effectiveness testing	$	—		$	—		$	—		$	—

The above balances relate to interest payments and have therefore been classified as finance expenses in the Consolidated Statements of Comprehensive Income.

(d) Balance sheet offsetting

There was no balance sheet offsetting activity as at June 30, 2014 or December 31, 2013.

The Company currently provides cash collateral as security for interest rate swap contracts. The Company does not provide cash collateral or financial instruments as security for foreign currency forward contracts. Our derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements, which establish terms that apply to all transactions. On a periodic basis, the amounts receivable from or payable to the counterparties are settled in cash.

The Company has not elected to settle multiple transactions with an individual counterparty on a net basis.

27

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

8. Reserve for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case reserves from broker, insured and ceding company reported data. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses, from which incurred but not reported losses can be calculated. The period of time from the occurrence of a loss to the reporting of a loss to the Company and to the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed this estimate.

The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Reserve for losses and loss expenses, beginning of period	$	2,925,059		$	3,357,691		$	3,030,399		$	3,517,573
Losses and loss expenses recoverable	(348,407		)	(429,252		)	(370,154		)	(439,967		)
Net reserves for losses and loss expenses, beginning of period	2,576,652			2,928,439			2,660,245			3,077,606
Net reserves disposed	—			(18,591		)	—			(18,591		)
Increase (decrease) in net reserves for losses and loss expenses in respect of losses occurring in:
Current year	231,401			306,033			433,487			516,602
Prior years	(72,656		)	(40,989		)	(112,071		)	(106,787		)
Total incurred losses and loss expenses	158,745			265,044			321,416			409,815
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	(16,741		)	(30,996		)	(24,708		)	(35,834		)
Prior years	(199,236		)	(261,677		)	(449,351		)	(516,951		)
Total net paid losses	(215,977		)	(292,673		)	(474,059		)	(552,785		)
Foreign exchange	9,153			(17,462		)	20,971			(51,288		)
Net reserve for losses and loss expenses, end of period	2,528,573			2,864,757			2,528,573			2,864,757
Losses and loss expenses recoverable	338,734			418,693			338,734			418,693
Reserve for losses and loss expenses, end of period	$	2,867,307		$	3,283,450		$	2,867,307		$	3,283,450

Incurred losses and loss expenses comprise:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Gross losses and loss expenses	$	182,780		$	295,539		$	364,755		$	457,950
Reinsurance recoverable	(24,035		)	(30,495		)	(43,339		)	(48,135		)
Net incurred losses and loss expenses	$	158,745		$	265,044		$	321,416		$	409,815

28

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

9. Reinsurance

The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

Credit risk

The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better as rated by Standard & Poor's or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At June 30, 2014, 98.4% (December 31, 2013: 96.7%) of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses and $169,853 of total IBNR recoverable (December 31, 2013: $196,840)) were fully collateralized or from reinsurers rated A- or better.

Reinsurance recoverables by reinsurer as at June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	301,568	75.7	%	$	340,253	75.6	%
Other reinsurers’ balances > $1 million	88,219		22.1	%	100,784		22.4	%
Other reinsurers’ balances < $1 million	8,629		2.2	%	9,197		2.0	%
Total	$	398,416	100.0	%	$	450,234	100.0	%

	June 30, 2014
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	75,413	18.9	%
Everest Re	A+	49,678		12.5	%
Hannover Re	AA-	40,584		10.2	%
Fully Collateralized	NR	35,350		8.9	%
Third Point Reinsurance Ltd	A-	34,249		8.6	%
Swiss Re	AA-	19,247		4.8	%
Munich Re	AA-	13,144		3.3	%
Transatlantic Re	A+	12,735		3.2	%
XL Re	A+	11,592		2.9	%
Berkshire Hathaway Homestate	AA+	9,576		2.4	%
Total		$	301,568	75.7	%

NR: Not rated

29

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	December 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	73,398	16.3	%
National Indemnity	AA+	51,037		11.3	%
Everest Re	A+	48,055		10.7	%
Hannover Re	AA-	41,483		9.2	%
Fully Collateralized	NR	36,683		8.1	%
Third Point Reinsurance Ltd	A-	30,428		6.8	%
Swiss Re	AA-	20,022		4.5	%
Transatlantic Re	A+	14,114		3.1	%
XL Re	A+	12,673		2.8	%
Munich Re	AA-	12,360		2.8	%
Total		$	340,253	75.6	%

NR: Not rated

At June 30, 2014 and December 31, 2013, the provision for uncollectible reinsurance relating to reinsurance recoverables was $5,308 and $5,794, respectively. To estimate the provision for uncollectible reinsurance, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied, especially in relation to ceded IBNR. The Company then uses default factors to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined in part using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

10. Share capital

(a) Authorized and issued

The Company’s authorized share capital is 571,428,571 common shares with a par value of $0.175 per share. The holders of common shares are entitled to receive dividends. Holders of common shares are allocated one vote per share, provided that, if the controlled shares of any shareholder or group of related shareholders constitute more than 9.09 percent of the outstanding common shares of the Company, their voting power will be reduced to 9.09 percent.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures and Senior Notes. On February 5, 2014, the Board of Directors of the Company approved an increase in the Company's common share purchase authorization to $500,000. This amount is in addition to the $1,774,436 of common shares repurchased by the Company through February 5, 2014 under its previously authorized share repurchase programs.

The Company has repurchased 62,171,982 common shares for an aggregate purchase price of $1,917,688 from the inception of its share repurchase program to June 30, 2014. The Company had $356,748 remaining under its authorized share repurchase program as of June 30, 2014.

The Company expects the purchases under its share repurchase program 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, the Company’s 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 Board of Directors at any time.

30

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2013	154,488,497
Restricted share awards vested, net of shares withheld	585,535
Restricted share units vested, net of shares withheld	10,265
Options exercised	95,019
Direct issuance of common stock	713
Performance share awards vested, net of shares withheld	25,767
Common shares issued, June 30, 2014	155,205,796
Treasury shares, June 30, 2014	(63,810,857	)
Common shares outstanding, June 30, 2014	91,394,939

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	734,910
Restricted share units vested, net of shares withheld	14,381
Options exercised	235,091
Warrants exercised	508,193
Direct issuance of common stock	183
Performance share awards vested, net of shares withheld	31,897
Deferred share units vested, net of shares withheld	2,935
Common shares issued, June 30, 2013	154,225,781
Treasury shares, June 30, 2013	(54,488,320	)
Common shares outstanding, June 30, 2013	99,737,461

(b) Warrants

During the six months ended June 30, 2014, no warrants were exercised. During the six months ended June 30, 2013, 950,644 warrants were exercised which resulted in the issuance of 508,193 common shares. Holders of the outstanding warrants are entitled to exercise the warrants in whole or in part at any time until the expiration date. The total outstanding warrants at June 30, 2014 were 5,174,114 (December 31, 2013: 5,296,056). No further warrants are anticipated to be issued.

(c) Deferred share units

Under the terms of the Company’s Director Stock Compensation Plan, non-management directors may elect to receive their director fees in deferred share units rather than cash. The number of share units distributed in case of election under the plan is equal to the amount of the annual retainer fee otherwise payable to the director on such payment date divided by 100% of the fair market value of a share on such payment date. Additional deferred share units are issued in lieu of dividends that accrue on these deferred share units.  There were no outstanding deferred share units at June 30, 2014 (December 31, 2013: $nil).

As of February 16, 2013, John Hendrickson became an employee director. As a result, his 5,039 deferred share units vested and 2,935 common shares were issued to him, net of shares withheld for taxes.

31

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(d) Dividends

On April 30, 2014, the Company announced a quarterly cash dividend of $0.30 (2013: $0.30) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on June 30, 2014 to holders of record on June 13, 2014.

On February 5, 2014, the Company announced a quarterly cash dividend of $0.30 (2013: $0.30) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on March 31, 2014 to holders of record on March 14, 2014.

On February 6, 2013, the Company announced a special dividend in the amount of $2.00 per common share and $2.00 per common share equivalent for which each outstanding warrant is exercisable (the "2013 Special Dividend"). The 2013 Special Dividend was paid on February 26, 2013 to shareholders and warrant holders of record as of February 19, 2013.

11. Stock plans

(a) Long Term Incentive Plan and Short Term Incentive Plan

The Company’s Amended and Restated 2005 Long Term Incentive Plan (“LTIP”) provides for grants to employees of options, stock appreciation rights (“SARs”), restricted shares, restricted share units, performance shares, dividend equivalents or other share-based awards. In addition, the Company may issue restricted share awards or restricted share units in connection with awards issued under its annual Short Term Incentive Plan (“STIP”). The total number of shares reserved for issuance under the LTIP and STIP are 13,126,896 shares of which 1,024,970 shares are remaining. The LTIP and STIP are administered by the Compensation Committee of the Board of Directors. No SARs have been granted to date. Grant prices are established at the fair market value of the Company’s common shares at the date of grant.

i. Options

Options may be exercised for voting common shares upon vesting. Options have a life of 10 years and vest either pro rata or at the end of the required service period from the date of grant. Fair value of the option awards at the date of grant is determined using the Black-Scholes option-pricing model.

Expected volatility is based on stock price volatility of comparable publicly-traded companies. The Company used the simplified method consistent with U.S. GAAP authoritative guidance on stock compensation expenses to estimate expected lives for options granted during the period as historical exercise data was not available and the options met the requirement as set out in the guidance.

The Company has not granted any stock options since September 4, 2009.

There were no share compensation expenses in respect of options recognized for the three and six months ended June 30, 2014 and 2013.

A modification event was triggered as a result of the 2013 Special Dividend. In accordance with the terms of the LTIP under which the options were issued, an adjustment was required to protect the holders of such stock options from changes in the value of the stock options following the declaration of the 2013 Special Dividend. The modification of the options included a decrease in the exercise price of each stock option and an increase in the number of shares underlying each stock option. The fair value of the options before and after the modification was unchanged.

Activity with respect to options for the six months ended June 30, 2014 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2013	1,572,713		$	6.66	$	18.88
Options exercised	(95,019	)	4.41		24.99
Options outstanding, June 30, 2014	1,477,694		$	6.81	$	18.48

32

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Activity with respect to options for the six months ended June 30, 2013was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (modified)	1,833,414		6.76		19.02
Options exercised	(235,091	)	4.86		24.78
Options cancelled (modified)	(1,733,139	)	6.76		20.12
Options outstanding, June 30, 2013	1,689,131		$	6.76	$	18.89

At June 30, 2014 and 2013, there were no unrecognized share compensation expenses in respect of options.

ii. Restricted share awards

Restricted shares granted under the LTIP and STIP vest either pro rata or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $7,920 (2013: $5,933) and $14,921 (2013: $9,994), respectively. The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share awards for the six months ended June 30, 2014 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2013	2,684,745		$	33.74
Restricted share awards granted	920,496		37.32
Restricted share awards vested	(753,071	)	31.61
Restricted share awards forfeited	(24,632	)	34.53
Restricted share awards outstanding, June 30, 2014	2,827,538		$	35.46

Activity with respect to unvested restricted share awards for the six months ended June 30, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	1,491,967		36.10
Restricted share awards vested	(890,600	)	27.99
Restricted share awards forfeited	(107,221	)	28.15
Restricted share awards outstanding, June 30, 2013	2,664,693		$	33.54

At June 30, 2014, there were $87,129 (December 31, 2013: $69,219) of total unrecognized share compensation expenses in respect of restricted share awards that are expected to be recognized over a weighted-average period of 3.2 years (December 31, 2013: 3.2 years).

iii. Restricted share units

Restricted share units under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $167 (2013: $130) and $333 (2013: $251), respectively. The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

33

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Activity with respect to unvested restricted share units for the six months ended June 30, 2014 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2013	66,518		$	33.74
Restricted share units granted	8,132		37.33
Restricted share units vested	(18,325	)	30.71
Restricted share units issued in lieu of cash dividends	1,029		33.74
Restricted share units outstanding, June 30, 2014	57,354		$	35.22

Activity with respect to unvested restricted share units for the six months ended June 30, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units granted	36,635		36.11
Restricted share units vested	(21,814	)	28.17
Restricted share units issued in lieu of cash dividends	3,380		29.74
Restricted share units outstanding, June 30, 2013	65,439		$	33.74

At June 30, 2014, there were $1,652 (December 31, 2013: $1,678) of total unrecognized share compensation expenses in respect of restricted share units that are expected to be recognized over a weighted-average period of 3.2 years (December 31, 2013: 3.4 years).

iv. Performance share awards

The performance share awards contain a performance based component. The performance component relates to the compounded growth in the Dividend Adjusted Diluted Book Value per Share (“DBVPS”) over a three year period relative to the Company's peer group. For performance share awards granted during the period, the grant date Diluted Book Value per Share is based on the DBVPS at the end of the most recent financial reporting year. The Dividend Adjusted Performance Period End DBVPS will be the DBVPS three years after the grant date DBVPS. The fair value estimate earns over the requisite attribution period and the estimate will be reassessed at the end of each performance period which will reflect any adjustments in the consolidated statements of comprehensive income in the period in which they are determined.

The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $254 (2013: $575) and $234 (2013: ($1,289)), respectively. The negative expense is due to a reversal of expenses on unvested performance share awards based on a review of current and projected performance criteria.

Activity with respect to unvested performance share awards for the six months ended June 30, 2014 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2013	101,820		$	33.56
Performance share awards granted	52,639		37.33
Performance share awards vested	(32,746	)	32.62
Performance share awards conversion adjustment	(15,344	)	31.38
Performance share awards outstanding, June 30, 2014	106,369		$	36.03

34

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Activity with respect to unvested performance share awards for the six months ended June 30, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards granted	38,386		36.11
Performance share awards vested	(39,094	)	28.70
Performance share awards forfeited	(18,701	)	31.05
Performance share awards conversion adjustment	(99,616	)	$	33.05
Performance share awards outstanding, June 30, 2013	101,820		$	33.56

At June 30, 2014, there were $2,823 (December 31, 2013: $1,642) of total unrecognized share compensation expenses in respect of performance share awards that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2013: 2.0 years).

(b) Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Restricted share awards	7,920		5,933		14,921		9,994
Restricted share units	167		130		333		251
Performance share awards	254		575		234		(1,289		)
Total	$	8,341	$	6,638	$	15,488	$	8,956

35

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

12. Debt and financing arrangements

(a) Financing structure

The financing structure at June 30, 2014 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,800		137,800		137,800
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,550		541,350		541,350
2010 Senior Notes due 2040	250,000		250,000		247,252
Total debentures and senior notes payable	851,550		791,350		788,602
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		305,330		—
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		—
IPC bi-lateral facility	40,000		19,572		—
$375,000 Flagstone bi-lateral facility	375,000		292,067		—
Total credit and other facilities	1,605,000		689,865		—
Total debt and financing arrangements	$	2,456,550	$	1,481,215	$	788,602

The financing structure at December 31, 2013 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,866		137,866		137,866
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,616		541,416		541,416
2010 Senior Notes due 2040	250,000		250,000		247,198
Total debentures and senior notes payable	851,616		791,416		788,614
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		358,567		—
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		—
IPC bi-lateral facility	40,000		20,177		—
$375,000 Flagstone bi-lateral facility	375,000		305,686		—
Total credit and other facilities	1,599,800		751,250		—
Total debt and financing arrangements	$	2,451,416	$	1,542,666	$	788,614

(a) Indicates utilization of commitment amount, not necessarily drawn borrowings.

36

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(b) Senior notes and junior subordinated deferrable debentures

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at the issuance date for each placement.

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	9.069	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	3.540	%	(a)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	8.480	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	3.000	%	(a)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	3.100	%	(a)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(b)	Semi-annually in arrears

(a) Variable interest rate is the three-month LIBOR, reset quarterly, plus spread as noted in the table.

(b) Fixed interest rate.

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at June 30, 2014:

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	5.831	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	6.463	%	(b)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	5.180	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	5.900	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	5.983	%	(b)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(a)	Semi-annually in arrears

(a) Fixed interest rate.

(b) Interest rate has been fixed as a result of interest rate swap contracts entered into by the Company.

37

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Senior Notes

The Senior Notes due 2040 (the “2010 Senior Notes”) were part of a registered public offering. The 2010 Senior Notes mature on January 26, 2040.  The Company may redeem the notes, in whole at any time, or in part from time to time, at the Company's option on not less than 30 nor more than 60 days’ notice, at a make-whole redemption price as described in “Description of the Notes - Optional Redemption” in the 2010 Senior Notes prospectus supplement.  In addition, the Company may redeem the notes, in whole, but not in part, at any time upon the occurrence of certain tax events as described in “Description of the Notes - Redemption for Tax Purposes’ in the prospectus supplement.

Debt issuance costs were deferred as an asset and are amortized over the life of the 2010 Senior Notes. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

The 2010 Senior Notes are unsecured and unsubordinated obligations of the Company and rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness. The 2010 Senior Notes will be effectively junior to all of the Company’s future secured debt, to the extent of the value of the collateral securing such debt, and will rank senior to all our existing and future subordinated debt. The 2010 Senior Notes are structurally subordinated to all obligations of the Company’s subsidiaries.

Future payments of principal of $250,000 on the 2010 Senior Notes are all expected to be after 2019.

Junior subordinated deferrable debentures

The Company participated in private placements of junior subordinated deferrable interest debentures due 2036 and 2037 (respectively, the “2006 Junior Subordinated Deferrable Debentures” and “2007 Junior Subordinated Deferrable Debentures”).

Debt issuance costs for the 2006 and 2007 Junior Subordinated Deferrable Debentures were deferred as an asset and were amortized to income over the five year optional redemption periods. They are redeemable at the Company's option at par. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

As part of the acquisition of Flagstone, the Company assumed junior subordinated deferrable debentures due 2036 and 2037 (respectively, the “Flagstone 2006 Junior Subordinated Deferrable Debentures” and “Flagstone 2007 Junior Subordinated Deferrable Debentures”). These debentures are redeemable quarterly at par. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

Future payments of principal of $541,350 on the debentures discussed above are all expected to be after 2019.

(c) Credit facilities

i. $400,000 syndicated unsecured letter of credit facility and $525,000 syndicated secured letter of credit facility

On March 9, 2012, the Company entered into a $400,000four-year unsecured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit and revolving credit availability for the Company (the “Four Year Unsecured Facility”) (the full $400,000 of which is available for letters of credit and/or revolving loans). The Four Year Unsecured Facility was provided by a syndicate of commercial banks. Letters of credit under the Four Year Unsecured Facility are available to support obligations in connection with the insurance business of the Company and its subsidiaries. Loans under the Four Year Unsecured Facility are available for the general corporate and working capital purposes of the Company. The Company may request that existing lenders under the Four Year Unsecured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Unsecured Facility do not exceed $500,000.

Also on March 9, 2012, the Company entered into a $525,000four-year secured credit facility, with the same parties, which provides for letter of credit availability for the Company (the “Four Year Secured Facility” and together with the Four Year Unsecured Facility, the “Credit Facilities”). The Four Year Secured Facility was also provided by a syndicate of commercial banks. Letters of credit under the Four Year Secured Facility will be available to support obligations in connection with the insurance business of the Company. The Company may request that existing lenders under the Four Year Secured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Secured Facility do not exceed $700,000. The obligations of the Company under the Four Year Secured Facility are secured by cash and securities deposited into cash collateral accounts from time to time with The Bank of New York Mellon.

38

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

As of June 30, 2014, there were $305,330 in outstanding letters of credit under the Four Year Secured Facility (December 31, 2013: $358,567) and $nil outstanding under the Four Year Unsecured Facility.

The Credit Facilities contain covenants that include, among other things (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,600,000 and, commencing with the end of the fiscal quarter ending March 31, 2012, to be increased quarterly by an amount equal to 50.0% of the Company’s consolidated net income (if positive) for such quarter plus 50.0% of the aggregate increases in the consolidated shareholders’ equity of the Company during such fiscal quarter by reason of the issuance and sale of common equity interests of the Company, including upon any conversion of debt securities of the Company into such equity interests, (ii) the requirement that the Company maintain at all times a consolidated total debt to consolidated total capital ratio not greater than 0.35:1.00, and (iii) the requirement that Validus Reinsurance, Ltd. and any other material insurance subsidiaries maintain a financial strength rating by A.M. Best of not less than “B++” (Fair).  In addition, the Credit Facilities contain customary negative covenants applicable to the Company, including limitations on the ability to pay dividends and other payments in respect of equity interests at any time that the Company is otherwise in default with respect to certain provisions under the respective Credit Facilities, limitations on the ability to incur liens, sell assets, merge or consolidate with others, enter into transactions with affiliates, and limitations on the ability of its subsidiaries to incur indebtedness. The Credit Facilities also contain customary affirmative covenants, representations and warranties and events of default for credit facilities of its type. As of June 30, 2014, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Credit Facilities.

On March 9, 2012, upon entering into the Credit Facilities, the Company terminated its (a) three-year bi-lateral $60,000 unsecured revolving credit facility, dated March 12, 2010, (b) $340,000three-year unsecured credit facility, dated March 12, 2010 and (c) $500,000five-year secured credit facility, dated March 12, 2007. No early termination penalties were incurred.

ii. $25,000 Talbot FAL facility

Talbot holds a standby Letter of Credit facility (the “Talbot FAL facility”) to provide Funds at Lloyd’s to support the 2012, 2013, 2014 and 2015 underwriting years of account. As of June 30, 2014 the Company had $25,000 (December 31, 2013: $25,000) in outstanding letters of credit under the Talbot FAL facility.

The Talbot FAL facility contains affirmative covenants that include requirements for consolidated net worth and debt to capital ratios in line with those in place for the Credit Facilities and discussed above. The Talbot FAL facility also contains restrictions on the Company's ability to incur debt at our subsidiaries, incur liens, sell assets and merge or consolidate with others. Other than in respect of existing and future preferred and hybrid securities, the payment of dividends and other payments in respect of equity interests are not permitted at any time that we are in default with respect to certain provisions under the Talbot FAL facility. As of June 30, 2014 and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Talbot FAL facility.

iii. $40,000 IPC bi-lateral facility

The Company assumed an existing evergreen letter of credit facility through the acquisition of IPC (the "IPC bi-lateral facility"). As of June 30, 2014, there were $19,572 outstanding letters of credit issued under the IPC bi-lateral facility (December 31, 2013: $20,177). As of June 30, 2014 and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the IPC bi-lateral facility.

iv. $200,000 secured bi-lateral letter of credit facility

The Company holds an uncommitted secured bi-lateral letter of credit facility with Citibank Europe plc (the “Secured bi-lateral letter of credit facility”). As of June 30, 2014, $17,602 (December 31, 2013: $16,726) of letters of credit were outstanding under the Secured bi-lateral letter of credit facility. The Secured bi-lateral letter of credit facility has no fixed termination date and as of June 30, 2014, the Company is in compliance with all terms and covenants thereof.

v. $10,000 PaCRe senior secured letter of credit facility

On May 11, 2012, PaCRe and its subsidiary, PaCRe Investments, Ltd. entered into a secured evergreen credit and letter of credit facility with JPMorgan Chase Bank, N.A. This facility provides for revolving borrowings by PaCRe and for letters of credit issued by PaCRe to be used to support its reinsurance obligations in aggregate amount of $10,000. As of June 30, 2014, $294 (December 31, 2013: $294) of letters of credit were outstanding under this facility. As of June 30, 2014, and throughout the reporting periods presented, PaCRe was in compliance with all covenants and restrictions thereof.

39

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

vi. $30,000 AlphaCat Re secured letter of credit facility

On January 2, 2013, AlphaCat Re entered into a secured evergreen letter of credit facility with Comerica Bank. This facility provides for letters of credit issued by AlphaCat Re to be used to support its reinsurance obligations in the aggregate amount of $24,800. During the period ended March 31, 2014 the size of the facility was increased to $30,000 from $24,800. As of June 30, 2014, $30,000 (December 31, 2013: $24,800) of letters of credit were outstanding under this facility. As of June 30, 2014, and throughout the reporting periods presented, AlphaCat Re was in compliance with all covenants and restrictions thereof.

vii. $375,000 Flagstone bi-lateral facility

As part of the Flagstone Acquisition, the Company assumed an evergreen Letters of Credit Master Agreement between Citibank Europe Plc and Flagstone Reassurance Suisse, S.A. (the “Flagstone Bi-Lateral Facility”). At June 30, 2014, the Flagstone Bi-Lateral Facility had $292,067 (December 31, 2013: $305,686) letters of credit issued and outstanding. As of June 30, 2014, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Flagstone Bi-Lateral Facility.

(d) Finance expenses

Finance expenses consist of interest on the junior subordinated deferrable debentures and senior notes, the amortization of debt offering costs, credit facilities fees, bank charges, AlphaCat financing fees and Talbot FAL costs as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
2006 Junior Subordinated Deferrable Debentures	$	2,211	$	2,211	$	4,398	$	4,398
2007 Junior Subordinated Deferrable Debentures	1,835		1,835		3,644		3,644
Flagstone 2006 Junior Subordinated Deferrable Debentures	2,244		2,231		4,467		3,703
Flagstone 2007 Junior Subordinated Deferrable Debentures	1,778		1,547		3,528		2,619
2010 Senior Notes due 2040	5,597		5,597		11,194		11,194
Credit facilities	1,371		2,799		2,930		3,753
Bank charges	102		100		215		233
AlphaCat ILS funds fees (a)	969		1,214		1,646		2,328
Talbot FAL Facility	19		32		4		63
Total finance expenses	$	16,126	$	17,566	$	32,026	$	31,935

(a) Includes finance expenses incurred by AlphaCat Managers, Ltd. in relation to fund raising for the AlphaCat ILS funds, AlphaCat 2014 and AlphaCat 2013.

13. Accumulated other comprehensive income (loss)

The changes in accumulated other comprehensive income ("AOCI"), by component for the three and six months endedJune 30, 2014 and 2013 is as follows:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance - Beginning of period	$	(155	)	$	(12,738	)	$	(617	)	$	(2,953	)
Amounts reclassified to retained earnings	—			4,290			—			4,290
Other comprehensive income (loss)	2,615			186			3,077			(9,599		)
Balance - End of period	$	2,460		$	(8,262	)	$	2,460		$	(8,262	)

40

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

14. Commitments and contingencies

(a) Concentrations of credit risk

The Company’s investments are managed following prudent standards of diversification. The Company attempts to limit its credit exposure by purchasing high quality fixed income investments to maintain an average portfolio, excluding bank loans, credit quality of AA- or higher, with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, the Company limits its exposure to any single issuer to 3% of its investment portfolio or less, excluding government and agency securities. With the exception of the Company's bank loan portfolio, which represents 7.7% of the Company's total investments as at June 30, 2014, the minimum credit rating of any security purchased is Baa3/BBB-. In the case where currently held investments are downgraded below Baa3/BBB-, the Company tolerates a holding of up to 2% of its investment portfolio in aggregate market value, or 10% with written authorization. Excluding bank loans, 1.0% of the portfolio had a split rating below Baa3/BBB- as at June 30, 2014. The Company did not have an aggregate exposure to any single issuer of more than 0.9% of its investment portfolio, other than with respect to government and agency securities as at June 30, 2014.

(b) Funds at Lloyd's

The amounts provided under the Talbot FAL Facility would become a liability of the Company in the event of Syndicate 1183 declaring a loss at a level which would call on this arrangement.

Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment and reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

The amounts of cash, investments and letters of credit provided for each year of account as follows:

	2014 Underwriting Year		2013 Underwriting Year
Talbot FAL facility	$	25,000	$	25,000
Group funds	450,000		403,700
Total	$	475,000	$	428,700

The amounts which are provided as FAL are not available for distribution to the Company for the payment of dividends. Talbot’s corporate member may also be required to maintain funds under the control of Lloyd’s in excess of its capital requirement and such funds also may not be available for distribution to the Company for the payment of dividends. See Note 3 (d) for investments pledged as collateral.

(c) Lloyd's Central Fund

Whenever a member of Lloyd's is unable to pay its debts to policyholders, such debts may be payable by the Lloyd's Central Fund. If Lloyd's determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd's members up to 3% of a member's underwriting capacity in any one year. The Company does not believe that any assessment is likely in the foreseeable future and has not provided any allowance for such an assessment. However, based on the Company's 2014 estimated premium income at Lloyd's of £625,000, at the June 30, 2014 exchange rate of £1 equals $1.7110 and assuming the maximum 3% assessment, the Company would be assessed approximately $32,081.

(d) Aquiline Commitment

As discussed in Note 5"Investments in affiliates," the Company entered into an Assignment and Assumption Agreement with Aquiline Capital Partners LLC, pursuant to which it assumed a total capital commitment of $50,000 which will expire on July 2, 2015. The Company's remaining commitment at June 30, 2014 was $17,890 (December 31, 2013: $17,890).

41

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

(e) Western World Insurance Group acquisition

On June 23, 2014, the Company entered into a stock purchase agreement to acquire all of the issued and outstanding capital stock of Western World Insurance Group, Inc ("Western World") for an aggregate purchase price of $690,000 in cash, subject to possible pre-closing adjustments. Western World is a specialty excess and surplus lines insurance company. The closing of the transaction is subject to certain customary conditions, including receipt of required regulatory and antitrust approvals and the absence of a material adverse effect on the business of Western World.

15. Related party transactions

The transactions listed below are classified as related party transactions as each counter party has either a direct or indirect shareholding in the Company.

Aquiline Capital Partners, LLC and its related companies ("Aquiline"), which own 3,446,643 shares in the Company, hold warrants to purchase 2,756,088 shares, and have two employees on the Company's Board of Directors who do not receive compensation from the Company and are shareholders of Group Ark Insurance Holdings Ltd. ("Group Ark"). Christopher E. Watson, a director of the Company, serves as a director of Group Ark. Pursuant to reinsurance agreements with a subsidiary of Group Ark, the Company recognized gross premiums written during the three and six months ended June 30, 2014 of $1,694 (2013: $1,053) and $3,067 (2013: $2,848) respectively, with $1,436 included in premiums receivable at June 30, 2014 (December 31, 2013: $238). The Company recognized reinsurance premiums ceded during the three and six months ended June 30, 2014 and 2013 of $nil and had reinsurance balances payable of $5 at June 30, 2014 (December 31, 2013: $4). The Company recorded $2,482 of loss reserves recoverable at June 30, 2014 (December 31, 2013: $3,698). Earned premium adjustments of $642 (2013: $710) and $2,083 (2013: $1,429) respectively, were recorded during the three and six months ended June 30, 2014.

On November 24, 2009, the Company entered into an Investment Management Agreement with Conning, Inc. ("Conning") to manage a portion of the Company's investment portfolio. Aquiline acquired Conning on June 16, 2009. Jeffrey W. Greenberg, a director of the Company, serves as a director of Conning Holdings Corp., the parent company of Conning. Investment management fees earned by Conning for the three and six months ended June 30, 2014 were $170 (2013: $40) and $226 (2013: $231) respectively, with $339 included in accounts payable and accrued expenses at June 30, 2014 (December 31, 2013: $283).

On December 20, 2011, the Company entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which the Company has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). Messrs. Greenberg and Watson, directors of the Company, serve as managing principal and senior principal, respectively, of Aquiline Capital Partners LLC. For the three months ended June 30, 2014, the Company incurred $nil (2013: $nil) in partnership fees and made capital contributions of $nil (2013: $5,563). For the six months ended June 30, 2014, the Company incurred $nil (2013: $120) in partnership fees and made $nil (2013: $6,904) of capital contributions. There were no amounts included in accounts payable and accrued expenses at June 30, 2014 or December 31, 2013.

Certain shareholders of the Company and their affiliates, as well as employers of entities associated with directors or officers have purchased insurance and/or reinsurance from the Company in the ordinary course of business. The Company believes these transactions were settled for arm's length consideration.

42

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

16. Earnings per share

The following table sets forth the computation of basic and earnings per diluted share for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Basic earnings per share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	(1,552		)	(1,646		)	(3,104		)	(16,110		)
Income available to common shareholders	$	151,815		$	29,076		$	312,651		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Basic earnings per share available to common shareholders	$	1.67		$	0.28		$	3.39		$	2.26
Earnings per diluted share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	—			(1,646		)	—			(16,110		)
Income available to common shareholders	$	153,367		$	29,076		$	315,755		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Share equivalents:
Warrants	2,729,226			—			2,722,618			—
Stock options	745,800			857,179			748,085			1,244,368
Unvested restricted shares	849,287			744,276			865,214			889,641
Weighted average number of diluted common shares outstanding	95,276,836			104,734,643			96,538,178			107,393,822
Earnings per diluted share available to common shareholders	$	1.61		$	0.28		$	3.27		$	2.21

Share equivalents that would result in the issuance of common shares of 689,169 (2013: 1,163,413) and 350,833 (2013: 633,910) were outstanding for the three and six months endedJune 30, 2014, respectively, but were not included in the computation of earnings per diluted share because the effect would be antidilutive.

43

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

17. Segment information

The Company conducts its operations worldwide through three operating segments, which have been determined under U.S. GAAP segment reporting to be Validus Re, AlphaCat and Talbot. The Company’s operating segments are strategic business units that offer different products and services. They are managed and have capital allocated separately because each segment requires different strategies.

Validus Re Segment

The Validus Re segment is focused on short-tail lines of reinsurance. The primary lines in which the segment conducts business are property, marine and specialty which includes agriculture, aerospace and aviation, financial lines of business, nuclear, terrorism, life, accident & health, workers’ compensation, crisis management, contingency, motor, technical lines, composite and trade credit.

AlphaCat Segment

The AlphaCat segment manages strategic relationships that leverage the Company’s underwriting and investment expertise and earns management, performance and underwriting fees primarily from the Company’s operating affiliates, AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013 and AlphaCat 2014, as well as PaCRe and the AlphaCat ILS funds.

Talbot Segment

The Talbot segment focuses on a wide range of marine and energy, war, political violence, commercial property, financial institutions, contingency, accident & health and aviation classes of business on an insurance or facultative reinsurance basis and principally property, aerospace and marine classes of business on a treaty reinsurance basis.

Corporate and eliminations

The Company has a corporate function ("corporate"), which includes the activities of the parent company, and which carries out certain functions for the group. Corporate includes ‘non-core’ underwriting expenses, predominantly general and administrative and stock compensation expenses. Corporate also denotes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. For internal reporting purposes, corporate is reflected separately, however corporate is not considered an operating segment under these circumstances. Other reconciling items include, but are not limited to, the elimination of inter segment revenues and expenses and unusual items that are not allocated to segments.

44

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	310,286		$	43,790		$	317,944		$	(16,346	)	$	655,674
Reinsurance premiums ceded	(30,535		)	—			(36,376		)	16,346			(50,565		)
Net premiums written	279,751			43,790			281,568			—			605,109
Change in unearned premiums	(58,023		)	(11,330		)	(69,753		)	—			(139,106		)
Net premiums earned	221,728			32,460			211,815			—			466,003
Underwriting deductions
Losses and loss expenses	77,688			(3,033		)	84,090			—			158,745
Policy acquisition costs	31,125			3,056			45,593			(821		)	78,953
General and administrative expenses	17,040			3,780			34,173			18,849			73,842
Share compensation expenses	2,336			161			2,862			2,982			8,341
Total underwriting deductions	128,189			3,964			166,718			21,010			319,881
Underwriting income (loss)	$	93,539		$	28,496		$	45,097		$	(21,010	)	$	146,122
Net investment income	16,758			829			4,671			(972		)	21,286
Other income (loss)	969			6,005			258			(1,997		)	5,235
Finance expenses	(3,670		)	(971		)	(68		)	(11,417		)	(16,126		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	107,596			34,359			49,958			(35,396		)	156,517
Tax (expense) benefit	(460		)	—			(1,364		)	433			(1,391		)
Income from operating affiliates	—			4,892			—			—			4,892
(Income) attributable to operating affiliate investors	—			(25,316		)	—			—			(25,316		)
Net operating income (loss)	$	107,136		$	13,935		$	48,594		$	(34,963	)	$	134,702
Net realized gains on investments	1,324			6,442			92			—			7,858
Change in net unrealized gains (losses) on investments	13,530			30,087			2,679			(869		)	45,427
Income from investment affiliate	779			—			—			—			779
Foreign exchange gains (losses)	2,848			(191		)	1,367			(866		)	3,158
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	125,617		$	50,273		$	52,732		$	(39,950	)	$	188,672
Net (income) attributable to noncontrolling interest	—			(35,305		)	—			—			(35,305		)
Net income (loss) available (attributable) to Validus	$	125,617		$	14,968		$	52,732		$	(39,950	)	$	153,367
Selected ratios (a):
Net premiums written / Gross premiums written	90.2		%	100.0		%	88.6		%				92.3		%
Losses and loss expenses	35.0		%	(9.3		)%	39.7		%				34.1		%
Policy acquisition costs	14.1		%	9.4		%	21.5		%				16.9		%
General and administrative expenses (c)	8.7		%	12.1		%	17.5		%				17.6		%
Expense ratio	22.8		%	21.5		%	39.0		%				34.5		%
Combined ratio	57.8		%	12.2		%	78.7		%				68.6		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

45

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Three Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	353,384		$	46,760		$	315,518		$	(13,349	)	$	702,313
Reinsurance premiums ceded	(87,558		)	—			(47,187		)	13,349			(121,396		)
Net premiums written	265,826			46,760			268,331			—			580,917
Change in unearned premiums	38,925			(11,770		)	(60,614		)	—			(33,459		)
Net premiums earned	304,751			34,990			207,717			—			547,458
Underwriting deductions
Losses and loss expenses	183,646			1,313			80,085			—			265,044
Policy acquisition costs	42,789			3,586			41,667			(890		)	87,152
General and administrative expenses	20,423			3,992			32,192			14,360			70,967
Share compensation expenses	1,529			85			2,357			2,667			6,638
Total underwriting deductions	248,387			8,976			156,301			16,137			429,801
Underwriting income (loss)	$	56,364		$	26,014		$	51,416		$	(16,137	)	$	117,657
Net investment income	22,949			973			4,383			(2,095		)	26,210
Other (loss) income	(361		)	7,015			491			(2,727		)	4,418
Finance expenses	(5,241		)	(2,945		)	(75		)	(9,305		)	(17,566		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	73,711			31,057			56,215			(30,264		)	130,719
Tax (expense) benefit	(145		)	—			383			(331		)	(93		)
Income from operating affiliates	—			3,793			—			—			3,793
(Income) attributable to operating affiliate investors	—			(20,264		)	—			—			(20,264		)
Net operating income (loss)	$	73,566		$	14,586		$	56,598		$	(30,595	)	$	114,155
Net realized gains on investments	2,754			—			655			—			3,409
Change in net unrealized losses on investments	(57,834		)	(70,386		)	(13,128		)	—			(141,348		)
Income from investment affiliate	1,753			—			—			—			1,753
Foreign exchange (losses) gains	(5,882		)	136			(2,197		)	(280		)	(8,223		)
Net income (loss)	$	14,357		$	(55,664	)	$	41,928		$	(30,875	)	$	(30,254	)
Net loss attributable to noncontrolling interest	—			60,976			—			—			60,976
Net income (loss) available (attributable) to Validus	$	14,357		$	5,312		$	41,928		$	(30,875	)	$	30,722
Selected ratios (a):
Net premiums written / Gross premiums written	75.2		%	100.0		%	85.0		%				82.7		%
Losses and loss expenses	60.3		%	3.8		%	38.6		%				48.4		%
Policy acquisition costs	14.0		%	10.2		%	20.1		%				15.9		%
General and administrative expenses (b)	7.2		%	11.7		%	16.6		%				14.2		%
Expense ratio	21.2		%	21.9		%	36.7		%				30.1		%
Combined ratio	81.5		%	25.7		%	75.3		%				78.5		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

46

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Six Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	989,272		$	128,137		$	608,639		$	(58,383	)	$	1,667,665
Reinsurance premiums ceded	(173,175		)	(3,700		)	(126,981		)	58,383			(245,473		)
Net premiums written	816,097			124,437			481,658			—			1,422,192
Change in unearned premiums	(355,983		)	(61,294		)	(55,955		)	—			(473,232		)
Net premiums earned	460,114			63,143			425,703			—			948,960
Underwriting deductions
Losses and loss expenses	145,843			(10,893		)	186,466			—			321,416
Policy acquisition costs	70,370			6,036			90,521			(2,325		)	164,602
General and administrative expenses	35,235			7,908			69,322			35,822			148,287
Share compensation expenses	4,544			151			5,444			5,349			15,488
Total underwriting deductions	255,992			3,202			351,753			38,846			649,793
Underwriting income (loss)	$	204,122		$	59,941		$	73,950		$	(38,846	)	$	299,167
Net investment income	35,523			1,709			9,357			(1,941		)	44,648
Other income (loss)	7,739			15,502			275			(4,451		)	19,065
Finance expenses	(7,509		)	(1,654		)	(94		)	(22,769		)	(32,026		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	239,875			75,498			83,488			(68,007		)	330,854
Tax benefit (expense)	118			—			(1,234		)	(235		)	(1,351		)
Income from operating affiliates	—			9,819			—			—			9,819
(Income) attributable to operating affiliate investors	—			(57,026		)	—			—			(57,026		)
Net operating income (loss)	$	239,993		$	28,291		$	82,254		$	(68,242	)	$	282,296
Net realized gains on investments	3,770			7,667			161			—			11,598
Change in net unrealized gains (losses) on investments	25,428			75,959			5,256			(5,523		)	101,120
Income from investment affiliate	6,127			—			—			—			6,127
Foreign exchange (losses) gains	(3,328		)	(153		)	1,217			(1,056		)	(3,320		)
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	271,990		$	111,764		$	88,888		$	(78,073	)	$	394,569
Net (income) attributable to noncontrolling interest	—			(78,814		)	—			—			(78,814		)
Net income (loss) available (attributable) to Validus	$	271,990		$	32,950		$	88,888		$	(78,073	)	$	315,755
Selected ratios (a):
Net premiums written / Gross premiums written	82.5		%	97.1		%	79.1		%				85.3		%
Losses and loss expenses	31.7		%	(17.3		)%	43.8		%				33.9		%
Policy acquisition costs	15.3		%	9.6		%	21.2		%				17.3		%
General and administrative expenses (c)	8.6		%	12.8		%	17.6		%				17.3		%
Expense ratio	23.9		%	22.4		%	38.8		%				34.6		%
Combined ratio	55.6		%	5.1		%	82.6		%				68.5		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

47

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

Six Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	1,101,347		$	143,276		$	609,048		$	(46,598	)	$	1,807,073
Reinsurance premiums ceded	(213,286		)	—			(141,924		)	46,598			(308,612		)
Net premiums written	888,061			143,276			467,124			—			1,498,461
Change in unearned premiums	(280,176		)	(80,669		)	(59,097		)	—			(419,942		)
Net premiums earned	607,885			62,607			408,027			—			1,078,519
Underwriting deductions
Losses and loss expenses	257,048			1,313			151,454			—			409,815
Policy acquisition costs	94,533			6,224			82,193			(2,187		)	180,763
General and administrative expenses	49,864			8,029			63,104			30,249			151,246
Share compensation expenses	2,942			162			3,762			2,090			8,956
Total underwriting deductions	404,387			15,728			300,513			30,152			750,780
Underwriting income (loss)	$	203,498		$	46,879		$	107,514		$	(30,152	)	$	327,739
Net investment income	46,142			1,854			9,101			(5,238		)	51,859
Other income (loss)	13,129			13,648			491			(20,165		)	7,103
Finance expenses	(8,493		)	(4,193		)	(149		)	(19,100		)	(31,935		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	254,276			58,188			116,957			(74,655		)	354,766
Tax benefit (expense)	1,612			—			(671		)	(716		)	225
Income from operating affiliates	—			7,316			—			—			7,316
(Income) attributable to operating affiliate investors	—			(30,341		)	—			—			(30,341		)
Net operating income (loss)	$	255,888		$	35,163		$	116,286		$	(75,371	)	$	331,966
Net realized gains on investments	4,347			—			783			—			5,130
Change in net unrealized losses on investments	(60,027		)	(75,174		)	(13,384		)	—			(148,585		)
Income from investment affiliate	3,230			—			—			—			3,230
Foreign exchange gains (losses)	5,280			(1,051		)	(6,115		)	585			(1,301		)
Net income (loss)	$	208,718		$	(41,062	)	$	97,570		$	(74,786	)	$	190,440
Net loss attributable to noncontrolling interest	—			63,525			—			—			63,525
Net income (loss) available (attributable) to Validus	$	208,718		$	22,463		$	97,570		$	(74,786	)	$	253,965
Selected ratios (a):
Net premiums written / Gross premiums written	80.6		%	100.0		%	76.7		%				82.9		%
Losses and loss expenses	42.3		%	2.1		%	37.1		%				38.0		%
Policy acquisition costs	15.6		%	9.9		%	20.1		%				16.8		%
General and administrative expenses (b)	8.7		%	13.1		%	16.4		%				14.9		%
Expense ratio	24.3		%	23.0		%	36.5		%				31.7		%
Combined ratio	66.6		%	25.1		%	73.6		%				69.7		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

48

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

The Company’s exposures are generally diversified across geographic zones. The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re			AlphaCat			Talbot		Eliminations			Total		%
United States	$	176,625		$	20,256		$	42,151	$	(4,123	)	$	234,909	35.8	%
Worldwide excluding United States (a)	8,622			(266		)	38,434		(1,028		)	45,762		7.0	%
Australia and New Zealand	6,599			—			1,423		29			8,051		1.2	%
Europe	13,704			1,392			7,498		(1,029		)	21,565		3.3	%
Latin America and Caribbean	2,490			—			30,132		(547		)	32,075		4.9	%
Japan	40,221			586			1,592		(658		)	41,741		6.4	%
Canada	421			(1		)	2,750		(38		)	3,132		0.5	%
Rest of the world (b)	(1,156		)	—			25,153		(756		)	23,241		3.5	%
Sub-total, non United States	70,901			1,711			106,982		(4,027		)	175,567		26.8	%
Worldwide including United States (a)	40,241			21,823			28,883		(4,159		)	86,788		13.2	%
Other location non-specific (c)	22,519			—			139,928		(4,037		)	158,410		24.2	%
Total	$	310,286		$	43,790		$	317,944	$	(16,346	)	$	655,674	100.0	%

	Three Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	194,631		$	30,900	$	35,516	$	(1,630	)	$	259,417	36.9	%
Worldwide excluding United States (a)	2,201			112		35,353		(419		)	37,247		5.2	%
Australia and New Zealand	5,572			—		2,020		(1		)	7,591		1.1	%
Europe	19,864			173		13,434		(58		)	33,413		4.8	%
Latin America and Caribbean	(8,435		)	—		44,036		(741		)	34,860		5.0	%
Japan	43,839			653		3,538		(796		)	47,234		6.7	%
Canada	392			—		3,335		(71		)	3,656		0.5	%
Rest of the world (b)	4,491			—		22,322		(467		)	26,346		3.8	%
Sub-total, non United States	67,924			938		124,038		(2,553		)	190,347		27.1	%
Worldwide including United States (a)	50,470			14,922		26,596		(4,860		)	87,128		12.4	%
Other location non-specific (c)	40,359			—		129,368		(4,306		)	165,421		23.6	%
Total	$	353,384		$	46,760	$	315,518	$	(13,349	)	$	702,313	100.0	%

49

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

	Six Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	423,409	$	28,954	$	68,462	$	(9,788	)	$	511,037	30.6	%
Worldwide excluding United States (a)	70,156		7,412		75,616		(5,768		)	147,416		8.9	%
Australia and New Zealand	19,415		1,019		4,303		(252		)	24,485		1.5	%
Europe	51,600		2,693		26,289		(3,846		)	76,736		4.6	%
Latin America and Caribbean	9,424		—		61,371		(3,599		)	67,196		4.0	%
Japan	40,380		586		2,130		(711		)	42,385		2.5	%
Canada	3,320		215		5,895		(561		)	8,869		0.5	%
Rest of the world (b)	52,694		—		43,557		(2,554		)	93,697		5.6	%
Sub-total, non United States	246,989		11,925		219,161		(17,291		)	460,784		27.6	%
Worldwide including United States (a)	145,432		87,258		52,536		(10,805		)	274,421		16.5	%
Other location non-specific (c)	173,442		—		268,480		(20,499		)	421,423		25.3	%
Total	$	989,272	$	128,137	$	608,639	$	(58,383	)	$	1,667,665	100.0	%

	Six Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	431,127		$	48,389	$	56,057	$	(8,494	)	$	527,079	29.1	%
Worldwide excluding United States (a)	52,509			14,801		74,811		(4,927		)	137,194		7.6	%
Australia and New Zealand	30,598			2,183		5,025		(231		)	37,575		2.1	%
Europe	60,734			2,137		31,745		(2,906		)	91,710		5.1	%
Latin America and Caribbean	(17		)	—		86,036		(3,959		)	82,060		4.5	%
Japan	44,576			653		4,192		(846		)	48,575		2.7	%
Canada	3,034			318		6,041		(596		)	8,797		0.5	%
Rest of the world (b)	23,570			—		40,636		(1,870		)	62,336		3.4	%
Sub-total, non United States	215,004			20,092		248,486		(15,335		)	468,247		25.9	%
Worldwide including United States (a)	151,010			74,795		45,752		(8,549		)	263,008		14.6	%
Other location non-specific (c)	304,206			—		258,753		(14,220		)	548,739		30.4	%
Total	$	1,101,347		$	143,276	$	609,048	$	(46,598	)	$	1,807,073	100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The other locations non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable, such as marine and aerospace risks, since these exposures can span multiple geographic areas and, in some instances, are not fixed locations.

50

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

18. Subsequent events

Quarterly Dividend

On July 29, 2014, the Company announced a quarterly cash dividend of $0.30 per each common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on September 30, 2014 to holders of record on September 15, 2014.

51

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the Company's consolidated results of operations for the three and six months ended June 30, 2014 and 2013 and the Company's consolidated financial condition, liquidity and capital resources as at June 30, 2014 and December 31, 2013. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this filing and the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2013, the discussions of critical accounting policies and the qualitative and quantitative disclosure about market risk, as well as management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

For a variety of reasons, the Company's historical financial results may not accurately indicate future performance. See "Cautionary Note Regarding Forward-Looking Statements." The Risk Factors set forth in Part I Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 present a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein.

Executive Overview

The Company conducts its operations worldwide through three operating segments which have been determined under U.S. GAAP segment reporting to be Validus Re, AlphaCat and Talbot. Validus Re is a Bermuda-based reinsurance segment focused on short tail lines of reinsurance. AlphaCat is a Bermuda-based investment adviser, managing capital from third parties and the Company in insurance linked securities and other investments in the property catastrophe reinsurance space. Talbot is a specialty insurance segment, primarily operating within the Lloyd's insurance market through Syndicate 1183.

The Company’s strategy is to concentrate primarily on short-tail risks, which has been an area where management believes prices and terms provide an attractive risk-adjusted return and the management team has proven expertise. The Company’s profitability in any given period is based upon premium and investment revenues, less net losses and loss expenses, acquisition expenses and operating expenses. Financial results in the insurance and reinsurance industry are influenced by the frequency and/or severity of claims and losses, including as a result of catastrophic events, changes in interest rates, financial markets and general economic conditions, the supply of insurance and reinsurance capacity and changes in legal, regulatory and judicial environments.

On November 30, 2012, the Company acquired all of the outstanding shares of Flagstone Reinsurance Holdings, S.A. ("Flagstone"). As part of this acquisition, the Company acquired Flagstone Reassurance Suisse, S.A. and renamed it Validus Reinsurance (Switzerland) Ltd. ("Validus Re Swiss"). Validus Re Swiss is based in Zurich, Switzerland and forms part of the Validus Re segment.

On April 25, 2013, the Company acquired Longhorn Re, Ltd. (renamed Validus Re Americas, Ltd.), a single contract Bermuda-domiciled crop reinsurer.

On December 20, 2013, the Company joined with other investors in capitalizing AlphaCat 2014, a special purpose vehicle formed for the purpose of investing in collateralized reinsurance and retrocessional contracts. The Company has an equity interest and voting rights in AlphaCat 2014 which are below 50%, therefore the investment in AlphaCat 2014 is included as an equity method investment in the Consolidated Financial Statements of the Company.

On June 23, 2014, the Company entered into a stock purchase agreement to acquire all of the issued and outstanding capital stock of Western World Insurance Group, Inc ("Western World") for an aggregate purchase price of $690.0 million in cash, subject to possible pre-closing adjustments. Western World is a specialty excess and surplus lines insurance company. The closing of the transaction is subject to certain customary conditions, including receipt of required regulatory and antitrust approvals and the absence of a material adverse effect on the business of Western World.

52

Business Outlook and Trends

We underwrite global property insurance and reinsurance and have large aggregate exposures to natural and man-made disasters. The occurrence of claims from catastrophic events results in substantial volatility, and can have material adverse effects on the Company’s financial condition and results and its ability to write new business. This volatility affects results for the period in which the loss occurs because U.S. accounting principles do not permit reinsurers to reserve for such catastrophic events until they occur. Catastrophic events of significant magnitude historically have been relatively infrequent, although management believes the property catastrophe reinsurance market has experienced a higher level of worldwide catastrophic losses in terms of both frequency and severity in the period from 1992 to the present. We also expect that increases in the values and concentrations of insured property will increase the severity of such occurrences in the future. The Company seeks to reflect these types of trends when pricing contracts.

Property and other reinsurance premiums have historically risen in the aftermath of significant catastrophic losses. As loss reserves are established, industry surplus is depleted and the industry’s capacity to write new business diminishes. At the same time, management believes that there is a heightened awareness of exposure to natural catastrophes on the part of cedants, rating agencies and catastrophe modeling firms, resulting in an increase in the demand for reinsurance protection. The global property and casualty insurance and reinsurance industry has historically been highly cyclical. Since 2007, increased capital provided by new entrants or by the commitment of capital by existing insurers and reinsurers increased the supply of insurance and reinsurance which resulted in a softening of rates on most lines. During 2010 and 2011, there was an increased level of catastrophe activity, principally the Chilean earthquake, Deepwater Horizon, Tohoku and Christchurch earthquake events, but the Company continues to see increased competition and decreased premium rates in most classes of business.

During the January 2013 renewal season, the Validus Re and AlphaCat segments underwrote $655.7 million in gross premiums written, an increase of 12.7% from the prior year period. This increase was driven primarily by an increase in gross premiums written in the specialty lines. This renewal data does not include Talbot’s operations as its business is distributed relatively evenly throughout the year. During the mid-year 2013 renewal period, the Validus Re segment experienced rate softening across U.S. and international property lines. The Talbot segment experienced relatively flat rate price movements in the year ended December 31, 2013 with increases being generated by the onshore energy, marine treaty and marine liability accounts offset by decreases generated by aviation accounts and the remainder of the treaty portfolio.

During the January 2014 renewal season, the Validus Re and AlphaCat segments underwrote $575.2 million in gross premiums written, a decrease of 3.2% from the prior period, excluding the impact of the agriculture business of $61.4 million and $150.6 million for 2014 and 2013, respectively. This decrease was primarily driven by a challenging rate environment in the Company's U.S. property catastrophe business, which experienced a reduction in rates of approximately 12.5%. During the mid-year 2014 renewal period, the Validus Re segment experienced rate softening across U.S. and international property lines of 10-15%. In particular, although limits placed from the Florida market increased, the availability of capacity resulted in overall pricing reductions within this range for Florida property catastrophe business. The Talbot segment experienced a whole account rate decrease of 4.1% through June 30, 2014.

Financial Measures

The Company believes that the primary financial indicator for evaluating performance and measuring the overall growth in value generated for shareholders is book value per diluted common share. Book value per diluted common share plus accumulated dividends, together with other important financial indicators, is shown below:

	As at, or for the
	Three Months Ended June 30,		Six Months Ended June 30,		Year Ended December 31,
	2014	2013	2014	2013	2013
Book value per diluted common share plus accumulated dividends	$46.83	$41.27	$46.83	$41.27	$43.91
Book value per diluted common share	38.55	34.19	38.55	34.19	36.23
Underwriting income	146,122	117,657	299,167	327,739	604,908
Net operating income attributable to Validus	132,608	111,448	278,698	327,066	578,672
Annualized return on average equity	16.5%	3.3%	17.0%	13.2%	14.0%

53

Book value per diluted common share plus accumulated dividends is considered by management to be the primary indicator of financial performance, as we believe growth in book value on a diluted basis, plus the dividends that have accumulated, ultimately translates into the return that a shareholder will receive. Book value per diluted common share plus accumulated dividendsincreased by $2.92, or 6.6%, from $43.91 at December 31, 2013 to $46.83 at June 30, 2014. Book value per diluted common share plus accumulated dividendsincreased by $1.27, or 2.8%, from $45.56 at March 31, 2014 to $46.83 at June 30, 2014. Cash dividends per common share are an integral part of the value created for shareholders. The Company paid quarterly cash dividends of $0.30 per common share and common share equivalent during the three and six months ended June 30, 2014. On July 29, 2014, the Company announced a quarterly cash dividend of $0.30 per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on September 30, 2014 to holders of record on September 15, 2014. Book value per diluted common share plus accumulated dividends 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 and options and warrants outstanding (assuming their exercise), plus accumulated dividends. Book value per diluted common share plus accumulated dividends is a non-GAAP financial measure, as described in more detail in the section entitled “Non-GAAP Financial Measures.”

Book value per diluted common share is considered by management to be a measure of returns to common shareholders, as we believe growth in book value on a diluted basis ultimately translates into growth in stock price. Book value per diluted common share after dividends paid, increased by $2.32, or 6.4%, from $36.23 at December 31, 2013 to $38.55 at June 30, 2014. Book value per diluted common share after dividends paid, increased by $0.97, or 2.6%, from $37.58 at March 31, 2014 to $38.55 at June 30, 2014. Book value per diluted common share is a non-GAAP financial measure, as described in more detail in the section entitled “Non-GAAP Financial Measures.”

Underwriting income measures the performance of the Company’s core underwriting function, excluding revenues and expenses such as net investment income (loss), other income, finance expenses, net realized and change in net unrealized gains (losses) on investments, foreign exchange gains (losses) and non-recurring items. The Company believes the reporting of underwriting income enhances the understanding of results by highlighting the underlying profitability of the Company’s core insurance and reinsurance operations. Underwriting income for the three months ended June 30, 2014 and 2013 was $146.1 million and $117.7 million, respectively, and for the six months ended June 30, 2014 and 2013 was $299.2 million and $327.7 million, respectively. Underwriting income is a non-GAAP financial measure, as described in more detail in the section entitled “Non-GAAP Financial Measures."

Net operating income available to Validus is defined as net income excluding net realized and change in net unrealized gains (losses) on investments, income (loss) from investment affiliate, foreign exchange gains (losses), non-recurring items and operating income (loss) (attributable) to noncontrolling interest. This measure focuses on the underlying fundamentals of the Company's operations without the influence of gains (losses) from the sale of investments, translation of non-U.S. dollar currencies and non-recurring items. Net operating income available to Validus for the three months ended June 30, 2014 and 2013 was $132.6 million and $111.4 million, respectively, and for the six months ended June 30, 2014 and 2013 was $278.7 million and $327.1 million, respectively. Net operating income is a non-GAAP financial measure, as described in more detail in the section entitled “Non-GAAP Financial Measures.”

Annualized return on average equity represents the return generated on common shareholders’ capital during the period. Return on average equity is calculated by dividing the net income available to Validus for the period by the average shareholders’ equity available to Validus during the period. Average shareholders’ equity is the average of the beginning, ending and intervening quarter end shareholders’ equity balances. The Company’s objective is to generate superior returns on capital that appropriately reward shareholders for the risks assumed. The annualized return on average equity for the three months ended June 30, 2014 and 2013 was 16.5% and 3.3%, respectively, and for the six months ended June 30, 2014 and 2013 was 17.0% and 13.2%, respectively.

54

Second Quarter 2014 Summarized Consolidated Results of Operations

• Gross premiums written for the three months endedJune 30, 2014 were $655.7 million compared to $702.3 million for the three months endedJune 30, 2013, a decrease of $46.6 million, or 6.6%.

• Net premiums earned for the three months endedJune 30, 2014 were $466.0 million compared to $547.5 million for the three months endedJune 30, 2013, a decrease of $81.5 million, or 14.9%.

• Underwriting income for the three months endedJune 30, 2014 was $146.1 million compared to $117.7 million for the three months endedJune 30, 2013, an increase of $28.5 million, or 24.2%.

• Combined ratio for the three months endedJune 30, 2014 of 68.6% which included $72.7 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 15.6 percentage points compared to a combined ratio for the three months endedJune 30, 2013 of 78.5% which included $41.0 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 7.5 percentage points. The favorable loss reserve development was primarily due to lower than expected development on non-event losses. Included in the loss reserve development for the quarter is adverse movement on Validus’ estimate of losses from Costa Concordia, which increased by $15.9 million.

• Loss ratio for the three months endedJune 30, 2014 of 34.1% compared to 48.4% for the three months endedJune 30, 2013a decrease of 14.3 percentage points.

• Loss ratios by line of business are as follows:

	Three Months Ended June 30, 2014		Three Months Ended June 30, 2013		Percentage Point Change
Property	9.8	%	32.6	%	(22.8	)
Marine	59.0	%	70.9	%	(11.9	)
Specialty	46.1	%	55.2	%	(9.1	)
All lines	34.1	%	48.4	%	(14.3	)

• Losses and loss expenses from notable loss events for the three months endedJune 30, 2014 and June 30, 2013 were $nil and $77.6 million, respectively. The prior year quarter notable loss event was the European floods.

• Net investment income for the three months endedJune 30, 2014 was $21.3 million compared to $26.2 million for the three months endedJune 30, 2013, a decrease of $4.9 million, or 18.8%.

• Net operating income available to Validus for the three months endedJune 30, 2014 was $132.6 million compared to $111.4 million for the three months endedJune 30, 2013, an increase of $21.2 million, or 19.0%.

• Net income available to Validus for the three months endedJune 30, 2014 was $153.4 million, or $1.61 per diluted common share compared to $30.7 million or $0.28 per diluted common share for the three months endedJune 30, 2013.

• Transaction expenses for the three months ended June 30, 2014 were $3.3 million compared to $nil for the three months ended June 30, 2013, an increase of $3.3 million. The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

55

Overview of the Results of Operations for the Three Months Ended June 30, 2014 compared to the Three Months Ended June 30, 2013.

The change in net operating income available to Validus for the three months endedJune 30, 2014 compared to the three months endedJune 30, 2013 is described in the following table:

	Increase (decrease) to net operating income available to Validus over the three months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	(81,455	)
Notable losses (a)	77,587
Incurred current year losses, excluding notable losses	(2,955		)
Prior period loss development	31,667
Other underwriting deductions (b)	3,621
Underwriting income (c)	28,465
(Income) attributable to operating affiliate investors	(5,052		)
Other operating expenses and income, net (d)	(2,866		)
Net operating income (c)	20,547
Net operating (income) loss attributable to noncontrolling interest	613
Net operating income available to Validus (c)	$	21,160

(a) There were no notable loss events for the three months ended June 30, 2014. The notable loss event for the three months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting income and operating income that is not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(d) Other operating expenses and income, net, consists of net investment income, other income, finance expenses, taxes and income (loss) from operating affiliates.

Net operating income available to Validus for the three months ended June 30, 2014 was $132.6 million compared to $111.4 million for the three months ended June 30, 2013, an increase of $21.2 million or 19.0%. The primary factors driving the increase in net operating income available to Validus were:

• A decrease in losses and loss expenses of $106.3 million primarily due to the absence of notable loss events and an increase in favorable prior period loss development of $31.7 million, offset by,

• A decrease in net premiums earned of $81.5 million, primarily within the Validus Re segment and due to a reduction in gross premiums written, the timing of the purchase of retrocessional coverage and the effect of the tail of the Flagstone run-off business.

Segment Reporting

Management has determined that the Company operates in three reportable segments - Validus Re, AlphaCat and Talbot.

56

Second Quarter 2014 Results of Operations - Validus Re Segment

The following table presents results of operations for the three months endedJune 30, 2014 and 2013, respectively:

	Three Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	310,286		$	353,384
Reinsurance premiums ceded	(30,535		)	(87,558		)
Net premiums written	279,751			265,826
Change in unearned premiums	(58,023		)	38,925
Net premiums earned	221,728			304,751
Underwriting deductions
Losses and loss expenses	77,688			183,646
Policy acquisition costs	31,125			42,789
General and administrative expenses	17,040			20,423
Share compensation expenses	2,336			1,529
Total underwriting deductions	128,189			248,387
Underwriting income (a)	93,539			56,364
Net investment income	16,758			22,949
Other income (loss)	969			(361		)
Finance expenses	(3,670		)	(5,241		)
Operating income before taxes	107,596			73,711
Tax expense	(460		)	(145		)
Net operating income (a)	$	107,136		$	73,566
Selected ratios:
Net premiums written / Gross premiums written	90.2		%	75.2		%
Losses and loss expenses	35.0		%	60.3		%
Policy acquisition costs	14.1		%	14.0		%
General and administrative expenses (b)	8.7		%	7.2		%
Expense ratio	22.8		%	21.2		%
Combined ratio	57.8		%	81.5		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

The change in net operating income for the three months endedJune 30, 2014 compared to the three months endedJune 30, 2013, respectively, is described in the following table:

57

	Increase (decrease) to net operating income over the three months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	(83,023	)
Notable losses (a)	69,895
Incurred current year losses, excluding notable losses	12,410
Prior period loss development	23,653
Other underwriting deductions (b)	14,240
Underwriting income (d)	37,175
Other operating income and expenses, net (c)	(3,605		)
Net operating income (d)	$	33,570

(a) There were no notable loss events for the three months ended June 30, 2014. The notable loss event for the three months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses and taxes.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Property	$	275,826		$	304,899	$	(29,073	)
Marine	(216		)	10,764		(10,980		)
Specialty	34,676			37,721		(3,045		)
Total	$	310,286		$	353,384	$	(43,098	)

The decrease in gross premiums written in the property lines of $29.1 million was primarily due to a reduction in catastrophe excess of loss treaties of $33.2 million, as a result of current market conditions and a number of non-renewals due to unfavorable pricing, as well as a decrease in reinstatement premiums of $6.7 million, primarily related to the European Floods in the second quarter of 2013. These decreases were partially offset by a $6.4 million increase in proportional treaties due to new business written. The decrease in gross premiums written of $11.0 million in the marine lines was primarily due to premium adjustments and a decrease in reinstatement premiums related to Costa Concordia.

	Business Mix - Ratio of Gross Premiums Written by Line of Business to Total Gross Premiums Written
	Three Months Ended June 30, 2014					Three Months Ended June 30, 2013
(Dollars in thousands)	Gross Premiums Written			Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)
Property	$	275,826		88.9	%	$	304,899	86.3	%
Marine	(216		)	(0.1	)%	10,764		3.0	%
Specialty	34,676			11.2	%	37,721		10.7	%
Total	$	310,286		100.0	%	$	353,384	100.0	%

58

The changes in mix of business are consistent with the changes in gross premiums written discussed above.

Reinsurance Premiums Ceded

	Reinsurance Premiums Ceded
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	28,521	$	84,987	$	(56,466	)
Marine	567		2,193		(1,626		)
Specialty	1,447		378		1,069
Total	$	30,535	$	87,558	$	(57,023	)

Reinsurance premiums ceded in the property lines decreased by $56.5 million, due to the timing of purchasing retrocessional coverage occurring earlier in 2014 than 2013.

Net Premiums Written

	Net Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Property	$	247,305		$	219,912	$	27,393
Marine	(783		)	8,571		(9,354		)
Specialty	33,229			37,343		(4,114		)
Total	$	279,751		$	265,826	$	13,925

The increase in Validus Re net premiums written was driven by factors highlighted above in respect of gross premiums written and reinsurance premiums ceded.

	Net Retention - Ratio of Net Premiums Written to Gross Premiums Written
	Three Months Ended June 30, 2014					Three Months Ended June 30, 2013
(Dollars in thousands)	Net Premiums Written			% of Gross Premiums Written		Net Premiums Written		% of Gross Premiums Written
Property	$	247,305		89.7	%	$	219,912	72.1	%
Marine	(783		)	NM		8,571		79.6	%
Specialty	33,229			95.8	%	37,343		99.0	%
Total	$	279,751		90.2	%	$	265,826	75.2	%

The property ratio increased by 17.6 percentage points, reflecting the timing of the purchase of property retrocessional coverage and specifically the relative decrease in non-proportional coverage purchased during the quarter.

Net Premiums Earned

59

	Net Premiums Earned
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	115,985	$	176,640	$	(60,655	)
Marine	38,838		52,378		(13,540		)
Specialty	66,905		75,733		(8,828		)
Total	$	221,728	$	304,751	$	(83,023	)

The decreases in property and marine lines net premiums earned were as a result of lower gross premiums written over the past year and the tail of the Flagstone run-off, as premiums were earned in the three months ended June 30, 2013 with no comparative amount for the three months ended June 30, 2014. Also contributing to the property lines decrease was the impact of retrocessional coverage purchased in the first quarter of 2014 and in the second quarter of the prior year, as both were being expensed during the three months ended June 30, 2014.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - All Lines
	Three Months Ended June 30,
	2014		2013
All lines—current period—notable losses	0.0	%	22.9	%
All lines—change in prior accident years	(12.0	)%	(1.0)	%
All lines—current period excluding items above	47.0	%	38.4	%
All lines—loss ratio	35.0	%	60.3	%

	Losses and Loss Expenses - All Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
All lines—current period—notable losses	$	—		$	69,895		$	(69,895	)
All lines—change in prior accident years	(26,668		)	(3,015		)	(23,653		)
All lines—current period excluding items above	104,356			116,766			(12,410		)
All lines - losses and loss expenses	$	77,688		$	183,646		$	(105,958	)

Notable Losses

There were no notable loss events for the three months ended June 30, 2014. In comparison, notable losses incurred in the three months ended June 30, 2013 of $69.9 million were from a single notable loss event, the European Floods, which represented 22.9 percentage points of the loss ratio. Net of $6.8 million of reinstatement premiums, the effect of this event on net operating income was a $63.0 million reduction.

Losses and Loss Expenses by Line of Business

60

	Losses and Loss Expense Ratio - Property Lines
	Three Months Ended June 30,
	2014		2013
Property—current period—notable losses	0.0	%	39.6	%
Property—change in prior accident years	(27.7)	%	(27.8)	%
Property—current period excluding items above	32.5	%	28.4	%
Property—loss ratio	4.8	%	40.2	%

	Losses and Loss Expenses - Property Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Property - current period—notable losses	$	—		$	69,895		$	(69,895	)
Property - change in prior accident years	(32,103		)	(49,026		)	16,923
Property—current period excluding items above	37,631			50,089			(12,458		)
Property - losses and loss expenses	$	5,528		$	70,958		$	(65,430	)

The property lines experienced favorable loss reserve development on notable losses in both the current quarter and the prior year quarter. This included $10.0 million related to the European Floods in the current quarter and $10.7 million related to the Chilean earthquake in the prior year quarter. The $16.9 million lower favorable development in the current quarter primarily relates to lower than expected emergence of attritional losses in the prior year quarter.

	Losses and Loss Expense Ratio - Marine Lines
	Three Months Ended June 30,
	2014		2013
Marine—current period—notable losses	0.0	%	0.0	%
Marine—change in prior accident years	28.7	%	89.6	%
Marine—current period excluding items above	53.7	%	36.7	%
Marine—loss ratio	82.4	%	126.3	%

	Losses and Loss Expenses - Marine Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Marine - current period—notable losses	$	—	$	—	$	—
Marine—change in prior accident years	11,143		46,928		(35,785		)
Marine—current period excluding items above	20,875		19,222		1,653
Marine - losses and loss expenses	$	32,018	$	66,150	$	(34,132	)

The marine lines experienced $35.8 million lower adverse loss reserve development during three months ended June 30, 2014, primarily due to a $12.9 million increase in the ultimate loss estimate on Costa Concordia in the current quarter, compared to an increase of $32.6 million on the same event during the prior year quarter. In addition, there was unfavorable development on Deepwater Horizon in the prior year quarter. The current quarter loss ratio, excluding the impact of notable losses, increased by 17.0 percentage points as a result of an increase in non-notable losses during the current quarter.

61

	Losses and Loss Expense Ratio - Specialty Lines
	Three Months Ended June 30,
	2014		2013
Specialty—current period—notable losses	0.0	%	0.0	%
Specialty—change in prior accident years	(8.5	)%	(1.2	)%
Specialty—current period excluding items above	68.5	%	62.7	%
Specialty—loss ratio	60.0	%	61.5	%

	Losses and Loss Expenses - Specialty Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Specialty - current period—notable losses	$	—		$	—		$	—
Specialty—change in prior accident years	(5,708		)	(917		)	(4,791		)
Specialty—current period excluding items above	45,850			47,455			(1,605		)
Specialty - losses and loss expenses	$	40,142		$	46,538		$	(6,396	)

The specialty lines experienced $4.8 million higher favorable loss reserve development, primarily related to lower than expected emergence of attritional losses.

Policy Acquisition Costs

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	17,863	15.4	%	$	25,875	14.6	%
Marine	6,295		16.2	%	9,150		17.5	%
Specialty	6,967		10.4	%	7,764		10.3	%
Total	$	31,125	14.1	%	$	42,789	14.0	%

The acquisition cost ratios for the three months ended June 30, 2014 and 2013 were comparable.

General and Administrative and Share Compensation Expenses

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	$	17,040	7.7	%	$	20,423	6.7	%
Share compensation expenses	2,336		1.0	%	1,529		0.5	%
Total	$	19,376	8.7	%	$	21,952	7.2	%

The decrease in general and administrative expenses of $3.4 million or 16.6% was due to a reduction in office and infrastructure costs, related to entities that are no longer in use as a result of efficiencies achieved through rationalization of historical Flagstone entities. This was partially offset by an increase in staff costs related to underwriting operations in Dublin, Ireland and Zurich, Switzerland compared to the three months ended June 30, 2013.

Selected Underwriting Ratios

62

The underwriting results of an insurance or reinsurance company are often measured by reference to its combined ratio, which is the sum of the loss and loss expense ratio and the expense ratio. The loss and loss expense ratio is calculated by dividing losses and loss expenses incurred (including estimates for incurred but not reported losses) by net premiums earned. The expense ratio is calculated by dividing acquisition costs combined with general and administrative expenses by net premiums earned. The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the three months ended June 30, 2014 and 2013.

	Three Months Ended June 30,
	2014		2013
Loss and loss expense ratio	35.0	%	60.3	%
Policy acquisition cost ratio	14.1	%	14.0	%
General and administrative expense ratio (a)	8.7	%	7.2	%
Expense ratio	22.8	%	21.2	%
Combined ratio	57.8	%	81.5	%

(a) Includes general and administrative expenses and share compensation expenses.

The decrease in the combined ratio for the three months ended June 30, 2014 of 23.7 percentage points compared to the three months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

Net Investment Income

	Net Investment Income
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Fixed maturities and short-term investments	$	17,121		$	22,401		$	(5,280	)
Other investments	493			492			1
Cash and cash equivalents	660			1,286			(626		)
Securities lending income	2			—			2
Total gross investment income	18,276			24,179			(5,903		)
Investment expenses	(1,518		)	(1,230		)	(288		)
Total	$	16,758		$	22,949		$	(6,191	)

The decrease in net investment income for the three months ended June 30, 2014 was $6.2 million or 27.0% was primarily due to a reduction in asset base together with a reduction in yield, primarily due to the disposition of bank loans to fund new investments during the quarter.

Other Income

	Other Income
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013			Change
Other income	$	969	$	(361	)	$	1,330

Other income for the three months ended June 30, 2014 primarily arose from the profit on the sale of a Flagstone subsidiary.

Finance Expenses

63

	Finance Expenses
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Finance expenses	$	3,670	$	5,241	$	(1,571	)

Finance expenses for the three months ended June 30, 2014 and 2013 were comparable.

64

Second Quarter 2014 Results of Operations - AlphaCat Segment

The following table presents results of operations for the three months endedJune 30, 2014 and 2013, respectively:

	Three Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	43,790		$	46,760
Reinsurance premiums ceded	—			—
Net premiums written	43,790			46,760
Change in unearned premiums	(11,330		)	(11,770		)
Net premiums earned	32,460			34,990
Underwriting deductions
Losses and loss expenses	(3,033		)	1,313
Policy acquisition costs	3,056			3,586
General and administrative expenses	3,780			3,992
Share compensation expenses	161			85
Total underwriting deductions	3,964			8,976
Underwriting income (a)	28,496			26,014
Net investment income	829			973
Other income	6,005			7,015
Finance expenses	(971		)	(2,945		)
Operating income before income from operating affiliates and (income) attributable to operating affiliate investors	34,359			31,057
Income from operating affiliates	4,892			3,793
(Income) attributable to operating affiliate investors	(25,316		)	(20,264		)
Net operating income (a)	13,935			14,586
Net operating (income) attributable to noncontrolling interest	(2,094		)	(2,707		)
Net operating income available to Validus (a)	$	11,841		$	11,879
Selected ratios:
Net premiums written / Gross premiums written	100.0		%	100.0		%
Losses and loss expenses	(9.3		)%	3.8		%
Policy acquisition costs	9.4		%	10.2		%
General and administrative expenses (b)	12.1		%	11.7		%
Expense ratio	21.5		%	21.9		%
Combined ratio	12.2		%	25.7		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

65

The change in net operating income for the three months endedJune 30, 2014 compared to the three months endedJune 30, 2013, respectively, is described in the following table:

	Increase (decrease) to net operating income available to Validus over the three months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	(2,530	)
Notable losses (a)	975
Incurred current year losses, excluding notable losses	(377		)
Prior period loss development	3,748
Other underwriting deductions (b)	666
Underwriting income (d)	2,482
(Income) attributable to operating affiliate investors	(5,052		)
Other operating income and expenses, net (c)	1,919
Net operating income (d)	(651		)
Net operating income attributable to noncontrolling interest	613
Net operating income available to Validus (d)	$	(38	)

(a) There were no notable loss events for the three months ended June 30, 2014. The notable loss event for the three months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses, taxes and income (loss) from operating affiliates.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	43,790	$	46,760	$	(2,970	)
Total	$	43,790	$	46,760	$	(2,970	)

The decrease in gross premiums written in the property lines of $3.0 million was as a result of AlphaCat 2014 having a smaller capital base than AlphaCat 2013. Partially offsetting this was an increase in the capital base of the AlphaCat ILS funds for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Business written into the AlphaCat ILS funds typically has a lower rate on line than business written into AlphaCat 2014 or AlphaCat 2013. As a result, the impact on gross premiums written from a change in capital base between AlphaCat 2014 and AlphaCat 2013 will be proportionately higher than from a change in the capital base of the AlphaCat ILS funds.

Reinsurance Premiums Ceded

AlphaCat reinsurance premiums ceded were $nil for the three months ended June 30, 2014 and 2013.

66

Net Premiums Written

	Net Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	43,790	$	46,760	$	(2,970	)
Total	$	43,790	$	46,760	$	(2,970	)

The decrease in AlphaCat net premiums written was driven by factors highlighted above in respect of gross premiums written. The ratio of net premiums written to gross premiums written was 100.0% for the three months ended June 30, 2014 and 2013.

Net Premiums Earned

	Net Premiums Earned
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	32,460	$	34,990	$	(2,530	)
Total	$	32,460	$	34,990	$	(2,530	)

The decrease in net premiums earned in property lines was consistent with the pattern of net premiums written.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - Property Lines
	Three Months Ended June 30,
	2014		2013
Property - current period - notable losses	0.0	%	2.8	%
Property - change in prior accident years	(11.5	)%	0.0	%
Property - current period excluding items above	2.2	%	1.0	%
Property—loss ratio	(9.3	)%	3.8	%

	Losses and Loss Expenses - Property Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Property - current period—notable losses	$	—		$	975	$	(975	)
Property - change in prior accident years	(3,748		)	—		(3,748		)
Property - current period excluding items above	715			338		377
Property - losses and loss expenses	$	(3,033	)	$	1,313	$	(4,346	)

The property lines experienced $3.7 million higher favorable loss reserve development compared to the three months ended June 30, 2013, due to a partial release of reserves originally established in the third quarter of 2013 on an aggregate excess of loss contract.

Notable Losses

There were no notable loss events for the three months ended June 30, 2014. In comparison, notable losses incurred in the three months ended June 30, 2013 of $1.0 million were from a single notable loss event, the European Floods, which represented 2.8 percentage points of the loss ratio.

67

Policy Acquisition Costs

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	3,056	9.4	%	$	3,586	10.2	%
Total	$	3,056	9.4	%	$	3,586	10.2	%

The acquisition cost ratios for the three months ended June 30, 2014 and 2013 were comparable.

General and Administrative and Share Compensation Expenses

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	$	3,780	11.6	%	$	3,992	11.5	%
Share compensation expenses	161		0.5	%	85		0.2	%
Total	$	3,941	12.1	%	$	4,077	11.7	%

The general and administrative expenses for the three months ended June 30, 2014 and 2013 were comparable.

Selected Underwriting Ratios

The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the three months ended June 30, 2014 and 2013.

	Three Months Ended June 30,
	2014		2013
Loss and loss expense ratio	(9.3	)%	3.8	%
Policy acquisition cost ratio	9.4	%	10.2	%
General and administrative expense ratio (a)	12.1	%	11.7	%
Expense ratio	21.5	%	21.9	%
Combined ratio	12.2	%	25.7	%

(a) Includes general and administrative expenses and share compensation expenses.

The decrease in the combined ratio for the three months ended June 30, 2014 of 13.5 percentage points compared to the three months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

68

Net Investment Income

	Net Investment Income
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Fixed maturities and short-term investments	$	810	$	964	$	(154	)
Cash and cash equivalents	19		9		10
Total net investment income	$	829	$	973	$	(144	)

Net investment income for the three months ended June 30, 2014 and 2013 was comparable.

Other Income

	Other Income
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Other income	$	6,005	$	7,015	$	(1,010	)

Other income for the three months ended June 30, 2014 and 2013 was comparable.

Finance Expenses

	Finance Expenses
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Finance expenses	$	971	$	2,945	$	(1,974	)

The decrease in finance expenses of $2.0 million or 67.0% included the impact of lower costs incurred in structuring AlphaCat 2014 compared to AlphaCat 2013.

Income From Operating Affiliates

	Income from Operating Affiliates
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
AlphaCat Re 2011	$	(5	)	$	(73	)	$	68
AlphaCat Re 2012	927			1,253			(326		)
AlphaCat 2013	561			2,436			(1,875		)
AlphaCat 2014	1,421			—			1,421
AlphaCat ILS funds	1,988			177			1,811
Total	$	4,892		$	3,793		$	1,099

For details of voting and equity ownership interests of the above entities, refer to Note 5 to the Consolidated Financial Statements in Part I. The increase in income from operating affiliates for the three months ended June 30, 2014 was due to additional income as a result of the deconsolidation of one of the AlphaCat ILS funds in the first quarter of 2014.

69

(Income) Attributable To Operating Affiliate Investors

	(Income) Attributable to Operating Affiliate Investors
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
(Income) attributable to operating affiliate investors	$	(25,316	)	$	(20,264	)	$	(5,052	)

Income attributable to operating affiliate investors for the three months ended June 30, 2014 was $25.3 million compared to $20.3 million for the three months ended June 30, 2013, reflecting the increased transfer of economics as a result of the deconsolidation of one of the AlphaCat ILS funds in the first quarter of 2014. This balance represents the transfer of investors' economic interest in the non-consolidated affiliated entities and includes both the Company's and third-party investors' share.

Net Operating (Income) Attributable to Noncontrolling Interest

	Net Operating (Income) Loss Attributable to Noncontrolling Interest
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Net operating (income) attributable to noncontrolling interest	$	(2,094	)	$	(2,707	)	$	613

For the three months ended June 30, 2014, the net operating income attributable to noncontrolling interest was $2.1 million, which comprised $1.2 million relating to 90% of the net operating income in PaCRe for the current quarter and $0.9 million of net operating income relating to the consolidated AlphaCat ILS fund.

70

Second Quarter 2014 Results of Operations - Talbot Segment

The following table presents results of operations for the three months endedJune 30, 2014 and 2013, respectively:

	Three Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	317,944		$	315,518
Reinsurance premiums ceded	(36,376		)	(47,187		)
Net premiums written	281,568			268,331
Change in unearned premiums	(69,753		)	(60,614		)
Net premiums earned	211,815			207,717
Underwriting deductions
Losses and loss expenses	84,090			80,085
Policy acquisition costs	45,593			41,667
General and administrative expenses	34,173			32,192
Share compensation expenses	2,862			2,357
Total underwriting deductions	166,718			156,301
Underwriting income (a)	45,097			51,416
Net investment income	4,671			4,383
Other income	258			491
Finance expenses	(68		)	(75		)
Operating income before taxes	49,958			56,215
Tax (expense) benefit	(1,364		)	383
Net operating income (a)	$	48,594		$	56,598
Selected ratios:
Net premiums written / Gross premiums written	88.6		%	85.0		%
Losses and loss expenses	39.7		%	38.6		%
Policy acquisition costs	21.5		%	20.1		%
General and administrative expenses (b)	17.5		%	16.6		%
Expense ratio	39.0		%	36.7		%
Combined ratio	78.7		%	75.3		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

71

The change in net operating income for the three months endedJune 30, 2014 compared to the three months endedJune 30, 2013, respectively, is described in the following table:

	Increase (decrease) to net operating income over the three months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	4,098
Notable losses (a)	6,717
Incurred current year losses, excluding notable losses	(14,988		)
Prior period loss development	4,266
Other underwriting deductions (b)	(6,412		)
Underwriting income (d)	(6,319		)
Other operating income and expenses, net (c)	(1,685		)
Net operating income (d)	$	(8,004	)

(a) There were no notable loss events for the three months ended June 30, 2014. The notable loss event for the three months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses and taxes.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	115,954	$	124,199	$	(8,245	)
Marine	109,440		105,530		3,910
Specialty	92,550		85,789		6,761
Total	$	317,944	$	315,518	$	2,426

The decrease in gross premiums written in the property lines of $8.2 million was primarily due to a $4.4 million reduction in onshore energy lines as a result of a number of non-renewals as well as timing of renewals and a $3.1 million reduction in property treaty lines due to unfavorable movement in reinstatement premiums. The increase in gross premiums written in the marine lines of $3.9 million was due primarily to an increase in cargo lines of $4.1 million, due to the timing of renewals. The increase in gross premiums written in the specialty lines of $6.8 million was due primarily to an increase in aviation lines of $5.4 million which was as a result of a difference in the timing of premium adjustments, as well as new business written in political risk lines of $2.8 million.

72

	Business Mix - Ratio of Gross Premiums Written by Line of Business to Total Gross Premiums Written
	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)
Property	$	115,954	36.5	%	$	124,199	39.4	%
Marine	109,440		34.4	%	105,530		33.4	%
Specialty	92,550		29.1	%	85,789		27.2	%
Total	$	317,944	100.0	%	$	315,518	100.0	%

The changes in mix of business were consistent with the changes in gross premiums written discussed above.

Reinsurance Premiums Ceded

	Reinsurance Premiums Ceded
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	30,448	$	38,629	$	(8,181	)
Marine	3,503		6,146		(2,643		)
Specialty	2,425		2,412		13
Total	$	36,376	$	47,187	$	(10,811	)

The decrease in reinsurance premiums ceded in the property lines of $8.2 million was due primarily to decreases in property treaty lines of $4.9 million due to lower quota share premiums as a result of underlying Latin American business now being written directly through Validus Re Swiss and a reduction of $3.3 million in energy onshore quota share premium, reflecting a decrease in inwards premiums.

Net Premiums Written

	Net Premiums Written
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	85,506	$	85,570	$	(64	)
Marine	105,937		99,384		6,553
Specialty	90,125		83,377		6,748
Total	$	281,568	$	268,331	$	13,237

The increase in Talbot net premiums written was driven by the factors highlighted above in respect of gross premiums written and reinsurance premiums ceded.

	Net Retention - Ratio of Net Premiums Written to Gross Premiums Written
	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Net Premiums Written		% of Gross Premiums Written		Net Premiums Written		% of Gross Premiums Written
Property	$	85,506	73.7	%	$	85,570	68.9	%
Marine	105,937		96.8	%	99,384		94.2	%
Specialty	90,125		97.4	%	83,377		97.2	%
Total	$	281,568	88.6	%	$	268,331	85.0	%

The property ratio increased by 4.8 percentage points due to the reduction in quota share business ceded to Validus Re as this business is now written directly through Validus Re Swiss.

73

Net Premiums Earned

	Net Premiums Earned
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	50,697	$	49,457	$	1,240
Marine	86,947		86,963		(16		)
Specialty	74,171		71,297		2,874
Total	$	211,815	$	207,717	$	4,098

The changes in net premiums earned were consistent with the pattern of net premiums written influencing the earned premiums for the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - All Lines
	Three Months Ended June 30,
	2014		2013
All lines—current period—notable losses	0.0	%	3.2	%
All lines—change in prior accident years	(19.9)	%	(18.3)	%
All lines—current period excluding items above	59.6	%	53.7	%
All lines—loss ratio	39.7	%	38.6	%

	Losses and Loss Expenses - All Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
All lines—current period—notable losses	$	—		$	6,717		$	(6,717	)
All lines—change in prior accident years	(42,240		)	(37,974		)	(4,266		)
All lines—current period excluding items above	126,330			111,342			14,988
All lines - losses and loss expenses	$	84,090		$	80,085		$	4,005

Notable Losses

There were no notable loss events for the three months ended June 30, 2014. In comparison, notable losses incurred in the three months ended June 30, 2013 of $6.7 million were from a single notable loss event, the European Floods, which represented 3.2 percentage points of the loss ratio. Net of $0.3 million of reinstatement premiums, the effect of this event on net operating income was a $6.4 million reduction.

74

Losses and Loss Expenses by Line of Business

	Losses and Loss Expense Ratio - Property Lines
	Three Months Ended June 30,
	2014		2013
Property—current period—notable losses	0.0	%	9.5	%
Property—change in prior accident years	(33.5)	%	(47.7)	%
Property—current period excluding items above	66.9	%	64.1	%
Property—loss ratio	33.4	%	25.9	%

	Losses and Loss Expenses - Property Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Property - current period—notable losses	$	—		$	4,717		$	(4,717	)
Property - change in prior accident years	(16,953		)	(23,575		)	6,622
Property—current period excluding items above	33,901			31,667			2,234
Property - losses and loss expenses	$	16,948		$	12,809		$	4,139

The property lines experienced $6.6 million lower favorable loss reserve development in the current quarter, primarily as a result of favorable development on the Tohoku earthquake and Hurricane Irene in the prior year quarter. Both periods had lower than expected development on attritional and large losses, although the current quarter was more favorable than the prior year quarter.

	Losses and Loss Expense Ratio - Marine Lines
	Three Months Ended June 30,
	2014		2013
Marine—current period—notable losses	0.0	%	2.3	%
Marine—change in prior accident years	(13.7	)%	(3.8	)%
Marine—current period excluding items above	62.3	%	39.0	%
Marine—loss ratio	48.6	%	37.5	%

	Losses and Loss Expenses - Marine Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Marine - current period—notable losses	$	—		$	2,000		$	(2,000	)
Marine—change in prior accident years	(11,949		)	(3,297		)	(8,652		)
Marine—current period excluding items above	54,197			33,888			20,309
Marine - losses and loss expenses	$	42,248		$	32,591		$	9,657

The marine lines experienced $8.7 million higher favorable loss reserve development in the current quarter, primarily due to adverse development of $8.5 million on Costa Concordia in the prior year quarter. In addition, there was favorable development on known large losses this quarter compared to favorable development on attritional losses in the prior year quarter. The current quarter loss ratio, excluding the impact of notable losses, increased by 23.3 percentage points primarily due to a ferry and other non-notable losses.

75

	Losses and Loss Expense Ratio - Specialty Lines
	Three Months Ended June 30,
	2014		2013
Specialty—current period—notable losses	0.0	%	0.0	%
Specialty—change in prior accident years	(18.0	)%	(15.6)	%
Specialty—current period excluding items above	51.6	%	64.2	%
Specialty—loss ratio	33.6	%	48.6	%

	Losses and Loss Expenses - Specialty Lines
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Specialty - current period—notable losses	$	—		$	—		$	—
Specialty—change in prior accident years	(13,338		)	(11,102		)	(2,236		)
Specialty—current period excluding items above	38,232			45,787			(7,555		)
Specialty - losses and loss expenses	$	24,894		$	34,685		$	(9,791	)

The specialty lines experienced favorable attritional loss reserve development and lower than expected emergence of large losses in both the current quarter and the prior year quarter. The current quarter loss ratio, excluding the impact of notable losses, decreased by 12.6 percentage points primarily due to higher attritional losses in the prior year quarter compared to the current quarter.

Policy Acquisition Costs

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	6,827	13.5	%	$	4,903	9.9	%
Marine	20,732		23.8	%	19,808		22.8	%
Specialty	18,034		24.3	%	16,956		23.8	%
Total	$	45,593	21.5	%	$	41,667	20.1	%

The increase in the property acquisition cost ratio was due to lower ceded acquisition costs on quota share premiums as a result of underlying business being written directly through Validus Re Swiss for the three months ended June 30, 2014.

General and Administrative and Share Compensation Expenses

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	34,173		16.1	%	32,192		15.5	%
Share compensation expenses	2,862		1.4	%	2,357		1.1	%
Total	$	37,035	17.5	%	$	34,549	16.6	%

General and administrative expenses have increased by $2.0 million due to salary increases, an increase in overall headcount and a strengthening of the British pound against the U.S. dollar compared to the prior year quarter.

76

Selected Underwriting Ratios

The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the three months ended June 30, 2014 and 2013.

	Three Months Ended June 30,
	2014		2013
Loss and loss expense ratio	39.7	%	38.6	%
Policy acquisition cost ratio	21.5	%	20.1	%
General and administrative expense ratio (a)	17.5	%	16.6	%
Expense ratio	39.0	%	36.7	%
Combined ratio	78.7	%	75.3	%

(a) Includes general and administrative expenses and share compensation expenses.

The increase in the combined ratio for the three months ended June 30, 2014 of 3.4 percentage points compared to the three months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

Net Investment Income

	Investment Income
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Fixed maturities and short-term investments	$	4,755		$	4,389		$	366
Cash and cash equivalents	317			334			(17		)
Total gross investment income	5,072			4,723			349
Investment expenses	(401		)	(340		)	(61		)
Total	$	4,671		$	4,383		$	288

Net investment income for the three months ended June 30, 2014 and 2013 was comparable.

77

Second Quarter Non-Segment Discussion

Corporate Expenses

Corporate general and administrative expenses for the three months ended June 30, 2014, net of eliminations related to the operating segments, were $18.8 million compared to $14.4 million for the three months ended June 30, 2013, an increase of $4.5 million or 31.3%. General and administrative expenses have increased due to the increase in headcount. Corporate general and administrative expenses are comprised of executive and board expenses, internal and external audit expenses and other costs relating to the Company as a whole.

Corporate share compensation expenses for the three months ended June 30, 2014, net of operating segment eliminations were $3.0 million compared to $2.7 million for the three months ended June 30, 2013, an increase of $0.3 million or 11.8%.

Corporate finance expenses for the three months ended June 30, 2014, net of eliminations related to the operating segments, were $11.4 million compared to $9.3 million for the three months ended June 30, 2013, an increase of $2.1 million or 22.7%.

Transaction expenses for the three months ended June 30, 2014 were $3.3 million compared to $nil for the three months ended June 30, 2013, an increase of $3.3 million. The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

Second Quarter Non-Operating Income and Expenses

The following non-operating income and expense items are discussed on a consolidated basis, since management does not include these items when assessing the results of its operating segments.

Net Realized and Change in Net Unrealized Gains (Losses) on Investments

	Net Realized and Change in Net Unrealized (Losses) Gains on Investments
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013			Change
Net realized gains on investments	$	7,858	$	3,409		$	4,449
Change in net unrealized gains (losses) on investments	45,427		(141,348		)	186,775
Net realized gains and change in net unrealized gains (losses) on investments	$	53,285	$	(137,939	)	$	191,224

The movement in the net realized gains and change in net realized and unrealized gains (losses) on investments of $191.2 million was due to a favorable movement in net realized and unrealized gains on fixed maturity and short term investments of $80.1 million and a favorable movement in net realized and unrealized gains on other investments of $111.1 million.

The favorable movement on fixed maturity and short term investments was primarily as a result of a shift in the yield curve and a tightening of corporate bond spreads. The favorable movement on other investments was primarily due to improved performance of the Paulson hedge funds held by PaCRe.

Income From Investment Affiliate

	Income From Investment Affiliate
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Income from investment affiliate	$	779	$	1,753	$	(974	)

The income from investment affiliate relates to the income earned from the Company's investment in the Aquiline Financial Services Fund II L.P. which is recorded on a three-month lag and therefore reflects the underlying performance of that fund for the previous quarter.

78

Foreign Exchange (Losses) Gains

The Company's reporting currency is the U.S. dollar. As a significant portion of the Company's operations are transacted in currencies other than the U.S. dollar, fluctuations in foreign exchange rates may affect period-to-period comparisons. The Company's largest foreign currency fluctuation exposures are to the following currencies, with the movement in each currency against the U.S. dollar shown in the table below:

U.S. dollar strengthened (weakened) against:	Three Months Ended June 30, 2014		Three Months Ended June 30, 2013
British Pound sterling	(2.6	)%	(0.2	)%
Euro	0.6	%	(1.9	)%
Canadian dollar	(3.5	)%	3.3	%
Swiss franc	0.3	%	(0.8	)%
Australian dollar	(1.7	)%	13.3	%
New Zealand dollar	(1.1	)%	7.5	%
Singapore dollar	(1.0	)%	2.1	%
Japanese yen	(1.7	)%	5.6	%

	Foreign Exchange
	Three Months Ended June 30,
(Dollars in thousands)	2014		2013			Change
Foreign exchange gain (losses)	$	3,158	$	(8,223	)	$	11,381

Foreign exchange gains for the three months ended June 30, 2014 were $3.2 million compared to foreign exchange losses of $8.2 million for the three months ended June 30, 2013, an increase of $11.4 million, or 138.4%, due to the U.S. dollar weakening against currencies, particularly the Singapore and Australian dollars, where the Company held net assets, compared to it strengthening in 2013.

Net (Income) Loss Attributable to Noncontrolling Interest

	Net (Income) Loss Attributable to Noncontrolling Interest
	Three Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Net (income) loss attributable to noncontrolling interest	$	(35,305	)	$	60,976	$	(96,281	)

For the three months ended June 30, 2014, net income attributable to noncontrolling interest was $35.3 million, which was comprised of operating income of $2.1 million, as discussed in the AlphaCat Segment Results of Operations, and a non-operating gain of $33.2 million, primarily on the investment portfolio within PaCRe.

For the three months ended June 30, 2013, net loss attributable to noncontrolling interest was $61.0 million, which was comprised of operating income of $2.7 million, as discussed in the AlphaCat Segment Results of Operations, and a non-operating loss of $63.7 million, primarily on the investment portfolio within PaCRe.

79

Year to Date 2014 Summarized Consolidated Results of Operations

• Gross premiums written for the six months endedJune 30, 2014 were $1,667.7 million compared to $1,807.1 million for the six months endedJune 30, 2013, a decrease of $139.4 million, or 7.7%.

• Net premiums earned for the six months endedJune 30, 2014 were $949.0 million compared to $1,078.5 million for the six months endedJune 30, 2013, a decrease of $129.6 million, or 12.0%.

• Underwriting income for the six months endedJune 30, 2014 was $299.2 million compared to $327.7 million for the six months endedJune 30, 2013, a decrease of $28.6 million, or 8.7%.

• Combined ratio for the six months endedJune 30, 2014 of 68.5% which included $112.1 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 11.8 percentage points compared to a combined ratio for the six months endedJune 30, 2013 of 69.7% which included $106.8 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 9.9 percentage points.

• Loss ratio for the six months endedJune 30, 2014 of 33.9% compared to 38.0% for the six months endedJune 30, 2013, a decrease of 4.1 percentage points.

• Loss ratios by line of business are as follows:

	Six Months Ended June 30, 2014		Six Months Ended June 30, 2013		Percentage Point Change
Property	12.1	%	19.2	%	(7.1	)
Marine	49.3	%	52.6	%	(3.3	)
Specialty	50.7	%	58.0	%	(7.3	)
All lines	33.9	%	38.0	%	(4.1	)

• Losses and loss expenses from notable loss events for the six months endedJune 30, 2014 and June 30, 2013 were $nil and $77.6 million, respectively. The prior year notable loss event was the European floods.

• Net investment income for the six months endedJune 30, 2014 was $44.6 million compared to $51.9 million for the six months endedJune 30, 2013, a decrease of $7.2 million, or 13.9%.

• Net operating income available to Validus for the six months endedJune 30, 2014 was $278.7 million compared to $327.1 million for the six months endedJune 30, 2013, a decrease of $48.4 million, or 14.8%.

• Net income available to Validus for the six months endedJune 30, 2014 was $315.8 million, or $3.27 per diluted common share compared to $254.0 million or $2.21 per diluted common share for the six months endedJune 30, 2013.

• Transaction expenses for the six months ended June 30, 2014 were $3.3 million compared to $nil for the six months ended June 30, 2013, an increase of $3.3 million. The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

• Investment yield for the six months endedJune 30, 2014 was 1.24% compared to 1.41% for the six months endedJune 30, 2013.

• Annualized return on average equity and annualized net operating return on average equity for the six months endedJune 30, 2014 were 17.0% and 15.0%, respectively, compared to 13.2% and 17.0% for the six months endedJune 30, 2013.

• Total investments and cash as at June 30, 2014 was $7.9 billion compared to $8.0 billion at December 31, 2013.

80

Overview of the Results of Operations for the Six Months Ended June 30, 2014 compared to the Six Months Ended June 30, 2013.

The change in net operating income available to Validus for the six months endedJune 30, 2014 compared to the six months endedJune 30, 2013 is described in the following table:

	Increase (decrease) to net operating income available to Validus over the six months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	(129,559	)
Notable losses (a)	77,587
Incurred current year losses, excluding notable losses	5,528
Prior period loss development	5,284
Other underwriting deductions (b)	12,588
Underwriting income (c)	(28,572		)
(Income) attributable to operating affiliate investors	(26,685		)
Other operating expenses and income, net (d)	5,587
Net operating income (c)	(49,670		)
Net operating (income) loss attributable to noncontrolling interest	1,302
Net operating income available to Validus (c)	$	(48,368	)

(a) There were no notable loss events for the six months ended June 30, 2014. The notable loss event for the six months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting income and operating income that is not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(d) Other operating expenses and income, net, consists of net investment income, other income, finance expenses, taxes and income (loss) from operating affiliates.

Net operating income available to Validus for the six months ended June 30, 2014 was $278.7 million compared to $327.1 million for the six months ended June 30, 2013, a decrease of $48.4 million or 14.8%. The primary factors driving the decrease in net operating income were:

Decrease in underwriting income of $28.6 million primarily due to:

• A decrease in net premiums earned of $129.6 million, primarily due to a reduction in gross premiums written; offset by;

• A reduction in notable losses of $77.6 million, and

• A decrease in policy acquisition costs of $16.2 million.

Also contributing to the decrease was a higher level of operating income payable to operating affiliate investors of $26.7 million.

81

Year To Date 2014 Results of Operations - Validus Re Segment

The following table presents results of operations for the six months endedJune 30, 2014 and 2013, respectively:

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	989,272		$	1,101,347
Reinsurance premiums ceded	(173,175		)	(213,286		)
Net premiums written	816,097			888,061
Change in unearned premiums	(355,983		)	(280,176		)
Net premiums earned	460,114			607,885
Underwriting deductions
Losses and loss expenses	145,843			257,048
Policy acquisition costs	70,370			94,533
General and administrative expenses	35,235			49,864
Share compensation expenses	4,544			2,942
Total underwriting deductions	255,992			404,387
Underwriting income (a)	204,122			203,498
Net investment income	35,523			46,142
Other income	7,739			13,129
Finance expenses	(7,509		)	(8,493		)
Operating income before taxes	239,875			254,276
Tax benefit	118			1,612
Net operating income (a)	$	239,993		$	255,888
Selected ratios:
Net premiums written / Gross premiums written	82.5		%	80.6		%
Losses and loss expenses	31.7		%	42.3		%
Policy acquisition costs	15.3		%	15.6		%
General and administrative expenses (b)	8.6		%	8.7		%
Expense ratio	23.9		%	24.3		%
Combined ratio	55.6		%	66.6		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

The change in net operating income for the six months endedJune 30, 2014 compared to the six months endedJune 30, 2013, respectively, is described in the following table:

82

	Increase (decrease) to net operating income over the six months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	(147,771	)
Notable losses (a)	69,895
Incurred current year losses, excluding notable losses	36,411
Prior period loss development	4,899
Other underwriting deductions (b)	37,190
Underwriting income (d)	624
Other operating income and expenses, net (c)	(16,519		)
Net operating income (d)	$	(15,895	)

(a) There were no notable loss events for the six months ended June 30, 2014. The notable loss event for the six months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses and taxes.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	546,428	$	630,923	$	(84,495	)
Marine	152,746		172,196		(19,450		)
Specialty	290,098		298,228		(8,130		)
Total	$	989,272	$	1,101,347	$	(112,075	)

The decrease in gross premiums written in the property lines of $84.5 million was primarily due to a reduction in catastrophe excess of loss treaties of $82.2 million. This was as a result of current market conditions, the impact of a program that was withdrawn and a number of non-renewals due to both unfavorable pricing and the proposed inclusion of terror exposure on some programs without an appropriate premium for the additional risk. The decrease in gross premiums written of $19.5 million in the marine lines was primarily due to non-renewals and some business historically written in marine lines being renewed in specialty lines. The decrease in gross premiums written of $8.1 million in the specialty lines was due to a $37.7 million reduction in agricultural business as a result of reduced participation in a number of quota share agreements, offset by new composite business of $17.5 million, as well as business written by the new trade credit team totaling $16.3 million.

83

	Business Mix - Ratio of Gross Premiums Written by Line of Business to Total Gross Premiums Written
	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)
Property	$	546,428	55.3	%	$	630,923	57.3	%
Marine	152,746		15.4	%	172,196		15.6	%
Specialty	290,098		29.3	%	298,228		27.1	%
Total	$	989,272	100.0	%	$	1,101,347	100.0	%

The changes in mix of business were consistent with the changes in gross premiums written discussed above.

Reinsurance Premiums Ceded

	Reinsurance Premiums Ceded
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	150,391	$	169,045	$	(18,654	)
Marine	13,932		5,165		8,767
Specialty	8,852		39,076		(30,224		)
Total	$	173,175	$	213,286	$	(40,111	)

Reinsurance premiums ceded in the property lines decreased by $18.7 million, due to significant restructuring of retrocessional coverage purchased, reflecting more favorable market conditions in the current six months. The increase in reinsurance premiums in the marine lines of $8.8 million was primarily due to additional quota share coverage purchased in the first quarter as a result of price reductions and broader coverage and terms available in the market. The decrease in reinsurance premiums ceded in the specialty lines of $30.2 million was due primarily to the non-renewal of proportional coverage that was purchased in the first quarter of 2013 related to the agriculture business.

Net Premiums Written

	Net Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	396,037	$	461,878	$	(65,841	)
Marine	138,814		167,031		(28,217		)
Specialty	281,246		259,152		22,094
Total	$	816,097	$	888,061	$	(71,964	)

The changes in Validus Re net premiums written were driven by factors highlighted above in respect of gross premiums written and reinsurance premiums ceded.

84

	Net Retention - Ratio of Net Premiums Written to Gross Premiums Written
	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Net Premiums Written		% of Gross Premiums Written		Net Premiums Written		% of Gross Premiums Written
Property	$	396,037	72.5	%	$	461,878	73.2	%
Marine	138,814		90.9	%	167,031		97.0	%
Specialty	281,246		96.9	%	259,152		86.9	%
Total	$	816,097	82.5	%	$	888,061	80.6	%

The marine ratio has decreased by 6.1 percentage points due to an increase in ceded premiums as a result of the factors mentioned above. The specialty ratio has increased by 10.0 percentage points due to the decrease in reinsurance coverage purchased for the agriculture business.

Net Premiums Earned

	Net Premiums Earned
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	239,647	$	361,122	$	(121,475	)
Marine	81,695		108,979		(27,284		)
Specialty	138,772		137,784		988
Total	$	460,114	$	607,885	$	(147,771	)

The decreases in property and marine lines net premiums earned were as a result of lower gross premiums written and the tail of the Flagstone run-off as premiums were earned in the first six months of 2013 with no comparative amounts for the six months ended June 30, 2014. Also contributing to the property lines decrease was the impact of retrocessional coverage purchased in the first quarter of 2014 and in the second quarter of the prior year, as both were being expensed during the first six months of 2014.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - All Lines
	Six Months Ended June 30,
	2014		2013
All lines—current period—notable losses	0.0	%	11.5	%
All lines—change in prior accident years	(8.0	)%	(5.2	)%
All lines—current period excluding items above	39.7	%	36.0	%
All lines—loss ratio	31.7	%	42.3	%

	Losses and Loss Expenses - All Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
All lines—current period—notable losses	$	—		$	69,895		$	(69,895	)
All lines—change in prior accident years	(36,696		)	(31,797		)	(4,899		)
All lines—current period excluding items above	182,539			218,950			(36,411		)
All lines - losses and loss expenses	$	145,843		$	257,048		$	(111,205	)

85

Notable Losses

There were no notable loss events for the six months ended June 30, 2014. In comparison, notable losses incurred in the six months ended June 30, 2013 of $69.9 million were from a single notable loss event, the European Floods, which represented 11.5 percentage points of the loss ratio. Net of $6.8 million of reinstatement premiums, the effect of this event on net operating income was a $63.0 million reduction.

Losses and Loss Expenses by Line of Business

	Losses and Loss Expense Ratio - Property Lines
	Six Months Ended June 30,
	2014		2013
Property—current period—notable losses	0.0	%	19.4	%
Property—change in prior accident years	(14.3	)%	(22.6	)%
Property—current period excluding items above	22.7	%	23.2	%
Property—loss ratio	8.4	%	20.0	%

	Losses and Loss Expenses - Property Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Property - current period—notable losses	$	—		$	69,895		$	(69,895	)
Property - change in prior accident years	(34,214		)	(81,591		)	47,377
Property—current period excluding items above	54,327			83,777			(29,450		)
Property - losses and loss expenses	$	20,113		$	72,081		$	(51,968	)

The property lines experienced $47.4 million lower favorable loss reserve development, due to unfavorable emergence of non-notable loss events and lower favorable development on other attritional losses during the current six months compared to the prior year six months. In addition, there was favorable development on a number of notable losses in the prior year six months, primarily the Chilean earthquake, Hurricane Isaac and Cat 67.

	Losses and Loss Expense Ratio - Marine Lines
	Six Months Ended June 30,
	2014		2013
Marine—current period—notable losses	0.0	%	0.0	%
Marine—change in prior accident years	(2.9	)%	43.8	%
Marine—current period excluding items above	45.9	%	36.8	%
Marine—loss ratio	43.0	%	80.6	%

	Losses and Loss Expenses - Marine Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Marine - current period—notable losses	$	—		$	—	$	—
Marine—change in prior accident years	(2,370		)	47,756		(50,126		)
Marine—current period excluding items above	37,494			40,046		(2,552		)
Marine - losses and loss expenses	$	35,124		$	87,802	$	(52,678	)

86

The marine lines experienced $2.4 million favorable loss reserve development during the six months ended June 30, 2014 due to favorable development on the Gryphon Alpha mooring failure, partially offset by adverse development on Costa Concordia. This is compared to unfavorable loss reserve development of $47.8 million during the six months ended June 30, 2013, due primarily to adverse development on both Costa Concordia and Deepwater Horizon.

	Losses and Loss Expense Ratio - Specialty Lines
	Six Months Ended June 30,
	2014		2013
Specialty—current period—notable losses	0.0	%	0.0	%
Specialty—change in prior accident years	(0.1	)%	1.5	%
Specialty—current period excluding items above	65.4	%	69.0	%
Specialty—loss ratio	65.3	%	70.5	%

	Losses and Loss Expenses - Specialty Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Specialty - current period—notable losses	$	—		$	—	$	—
Specialty—change in prior accident years	(112		)	2,038		(2,150		)
Specialty—current period excluding items above	90,718			95,127		(4,409		)
Specialty - losses and loss expenses	$	90,606		$	97,165	$	(6,559	)

The loss ratios for the current six months were comparable with the prior year six months.

Policy Acquisition Costs

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	39,797	16.6	%	$	54,407	15.1	%
Marine	13,859		17.0	%	20,754		19.0	%
Specialty	16,714		12.0	%	19,372		14.1	%
Total	$	70,370	15.3	%	$	94,533	15.6	%

The acquisition cost ratio for the property lines increased by 1.5 percentage points primarily due to the impact of the restructured retrocessional coverage discussed above. The acquisition cost ratio for the marine lines decreased 2.0 percentage points due to the quota share business, previously ceded by Talbot, now being written directly by Validus Re Swiss. The acquisition cost ratio for the specialty lines has decreased by 2.1 percentage points due to changes on some of the renewed agricultural policies.

87

General and Administrative and Share Compensation Expenses

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	$	35,235	7.6	%	$	49,864	8.2	%
Share compensation expenses	4,544		1.0	%	2,942		0.5	%
Total	$	39,779	8.6	%	$	52,806	8.7	%

The decrease in general and administrative expenses of $14.6 million or 29.3% was primarily due to a reduction in office and infrastructure costs related to entities that are no longer in use as a result of efficiencies achieved through rationalization of historical Flagstone entities. This was partially offset by an increase in staff costs related to underwriting operations in Dublin, Ireland and Zurich, Switzerland compared to the six months ended June 30, 2013.

Selected Underwriting Ratios

The underwriting results of an insurance or reinsurance company are often measured by reference to its combined ratio, which is the sum of the loss and loss expense ratio and the expense ratio. The loss and loss expense ratio is calculated by dividing losses and loss expenses incurred (including estimates for incurred but not reported losses) by net premiums earned. The expense ratio is calculated by dividing acquisition costs combined with general and administrative expenses by net premiums earned. The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the six months ended June 30, 2014 and 2013.

	Six Months Ended June 30,
	2014		2013
Loss and loss expense ratio	31.7	%	42.3	%
Policy acquisition cost ratio	15.3	%	15.6	%
General and administrative expense ratio (a)	8.6	%	8.7	%
Expense ratio	23.9	%	24.3	%
Combined ratio	55.6	%	66.6	%

(a) Includes general and administrative expenses and share compensation expenses.

The decrease in the combined ratio for the six months ended June 30, 2014 of 11.0 percentage points compared to the six months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

Net Investment Income

	Net Investment Income
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Fixed maturities and short-term investments	$	35,333		$	44,117		$	(8,784	)
Other investments	983			4,261			(3,278		)
Cash and cash equivalents	2,263			1,085			1,178
Securities lending income	4			—			4
Total gross investment income	38,583			49,463			(10,880		)
Investment expenses	(3,060		)	(3,321		)	261
Total	$	35,523		$	46,142		$	(10,619	)

88

The decrease in net investment income for the six months ended June 30, 2014 was $10.6 million or 23.0% primarily due to a decrease in the yield as a result of the disposition of bank loans to fund certain new investments in June 2014. Also contributing to the decrease was a special dividend received on other investments in 2013 with no comparative amount in the current period.

Other Income

	Other Income
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Other income	$	7,739	$	13,129	$	(5,390	)

Other income for the six months ended June 30, 2014 primarily arose from the run off of legacy Flagstone balances.

Finance Expenses

	Finance Expenses
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Finance expenses	$	7,509	$	8,493	$	(984	)

Finance expenses for the six months ended June 30, 2014 and 2013 were comparable.

89

Year to Date 2014 Results of Operations - AlphaCat Segment

The following table presents results of operations for the six months endedJune 30, 2014 and 2013, respectively:

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	128,137		$	143,276
Reinsurance premiums ceded	(3,700		)	—
Net premiums written	124,437			143,276
Change in unearned premiums	(61,294		)	(80,669		)
Net premiums earned	63,143			62,607
Underwriting deductions
Losses and loss expenses	(10,893		)	1,313
Policy acquisition costs	6,036			6,224
General and administrative expenses	7,908			8,029
Share compensation expenses	151			162
Total underwriting deductions	3,202			15,728
Underwriting income (a)	59,941			46,879
Net investment income	1,709			1,854
Other income	15,502			13,648
Finance expenses	(1,654		)	(4,193		)
Operating income before income from operating affiliates and (income) attributable to operating affiliate investors	75,498			58,188
Income from operating affiliates	9,819			7,316
(Income) attributable to operating affiliate investors	(57,026		)	(30,341		)
Net operating income (a)	28,291			35,163
Net operating (income) attributable to noncontrolling interest	(3,598		)	(4,900		)
Net operating income available to Validus (a)	$	24,693		$	30,263
Selected ratios:
Net premiums written / Gross premiums written	97.1		%	100.0		%
Losses and loss expenses	(17.3		)%	2.1		%
Policy acquisition costs	9.6		%	9.9		%
General and administrative expenses (b)	12.8		%	13.1		%
Expense ratio	22.4		%	23.0		%
Combined ratio	5.1		%	25.1		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

90

The change in net operating income for the six months endedJune 30, 2014 compared to the six months endedJune 30, 2013, respectively, is described in the following table:

	Increase (decrease) to net operating income available to Validus over the six months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	536
Notable losses (a)	975
Incurred current year losses, excluding notable losses	(377		)
Prior period loss development	11,608
Other underwriting deductions (b)	320
Underwriting income (d)	13,062
(Income) attributable to operating affiliate investors	(26,685		)
Other operating income and expenses, net (c)	6,751
Net operating income (d)	(6,872		)
Net operating income attributable to noncontrolling interest	1,302
Net operating income available to Validus (d)	$	(5,570	)

(a) There were no notable loss events for the six months ended June 30, 2014. The notable loss event for the six months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses, taxes and income (loss) from operating affiliates.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	128,137	$	143,276	$	(15,139	)
Total	$	128,137	$	143,276	$	(15,139	)

The decrease in gross premiums written in the property lines of $15.1 million was as a result of AlphaCat 2014 having a smaller capital base than AlphaCat 2013. Partially offsetting this was an increase in the capital base of the AlphaCat ILS funds for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Business written into the AlphaCat ILS funds typically has a lower rate on line than business written into AlphaCat 2014 or AlphaCat 2013. As a result, the impact on gross premiums written from a change in capital base between AlphaCat 2014 and AlphaCat 2013 will be proportionately higher than from a change in the capital base of the AlphaCat ILS funds.

Reinsurance Premiums Ceded

AlphaCat reinsurance premiums ceded for the six months ended June 30, 2014 were $3.7 million compared to $nil for the six months ended June 30, 2013. The reinsurance was purchased due to the availability of attractively priced coverage.

91

Net Premiums Written

	Net Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	124,437	$	143,276	$	(18,839	)
Total	$	124,437	$	143,276	$	(18,839	)

The decrease in AlphaCat net premiums written was driven by factors highlighted above in respect of gross premiums written and reinsurance premiums ceded. The ratios of net premiums written to gross premiums written were 97.1% and 100.0% for the six months ended June 30, 2014 and 2013, respectively.

Net Premiums Earned

	Net Premiums Earned
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	63,143	$	62,607	$	536
Total	$	63,143	$	62,607	$	536

The increase in net premiums earned in property lines was due to higher mid-year renewals in 2013 compared to 2012.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - Property Lines
	Six Months Ended June 30,
	2014		2013
Property - current period - notable losses	0.0	%	1.6	%
Property - change in prior accident years	(18.4	)%	0.0	%
Property - current period excluding items above	1.1	%	0.5	%
Property—loss ratio	(17.3	)%	2.1	%

	Losses and Loss Expenses - Property Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Property - current period—notable losses	$	—		$	975	$	(975	)
Property - change in prior accident years	(11,608		)	—		(11,608		)
Property - current period excluding items above	715			338		377
Property - losses and loss expenses	$	(10,893	)	$	1,313	$	(12,206	)

The property lines experienced $11.6 million higher favorable loss reserve development compared to the six months ended June 30, 2013, due to the partial release of reserves originally established in the third quarter of 2013 on an aggregate excess of loss contract.

92

Notable Losses

There were no notable loss events for the six months ended June 30, 2014. In comparison, notable losses incurred in the six months ended June 30, 2013 of $1.0 million were from a single notable loss event, the European Floods, which represented 1.6 percentage points of the loss ratio.

Policy Acquisition Costs

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	6,036	9.6	%	$	6,224	9.9	%
Total	$	6,036	9.6	%	$	6,224	9.9	%

The acquisition cost ratios for the six months ended June 30, 2014 and 2013 were comparable.

General and Administrative and Share Compensation Expenses

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	$	7,908	12.5	%	$	8,029	12.8	%
Share compensation expenses	151		0.3	%	162		0.3	%
Total	$	8,059	12.8	%	$	8,191	13.1	%

The general and administrative expenses for the six months ended June 30, 2014 and 2013 were comparable.

Selected Underwriting Ratios

The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the six months ended June 30, 2014 and 2013.

	Six Months Ended June 30,
	2014		2013
Loss and loss expense ratio	(17.3	)%	2.1	%
Policy acquisition cost ratio	9.6	%	9.9	%
General and administrative expense ratio (a)	12.8	%	13.1	%
Expense ratio	22.4	%	23.0	%
Combined ratio	5.1	%	25.1	%

(a) Includes general and administrative expenses and share compensation expenses.

The decrease in the combined ratio for the six months ended June 30, 2014 of 20.0 percentage points compared to the six months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

93

Net Investment Income

	Net Investment Income
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Fixed maturities and short-term investments	$	1,675	$	1,838	$	(163	)
Cash and cash equivalents	34		16		18
Total net investment income	$	1,709	$	1,854	$	(145	)

Net investment income for the six months ended June 30, 2014 and 2013 was comparable.

Other Income

	Other Income
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Other income	$	15,502	$	13,648	$	1,854

The increase in other income of $1.9 million or 13.6% was primarily due to the gain on the deconsolidation of one of the AlphaCat ILS funds during the first quarter of 2014.

Finance Expenses

	Finance Expenses
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Finance expenses	$	1,654	$	4,193	$	(2,539	)

The decrease in finance expenses of $2.5 million or 60.6% included the impact of lower costs incurred in structuring AlphaCat 2014 compared to AlphaCat 2013.

Income From Operating Affiliates

	Income from Operating Affiliates
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
AlphaCat Re 2011	$	188	$	376	$	(188	)
AlphaCat Re 2012	891		3,078		(2,187		)
AlphaCat 2013	2,036		3,536		(1,500		)
AlphaCat 2014	3,032		—		3,032
AlphaCat ILS funds	3,672		326		3,346
Total	$	9,819	$	7,316	$	2,503

For details of voting and equity ownership interests of the above entities, refer to Note 5 to the Consolidated Financial Statements in Part I. The increase in income from operating affiliates for the six months ended June 30, 2014 was due to the deconsolidation of one of the AlphaCat ILS funds in the first quarter of 2014.

94

(Income) Attributable To Operating Affiliate Investors

	(Income) Attributable to Operating Affiliate Investors
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
(Income) attributable to operating affiliate investors	$	(57,026	)	$	(30,341	)	$	(26,685	)

Income attributable to operating affiliate investors was $26.7 million higher, reflecting the increased transfer of economics as a result of the deconsolidation of one of the AlphaCat ILS funds in the first quarter of 2014. This balance represents the transfer of investors' economic interest in the non-consolidated affiliated entities and includes both the Company's and third-party investors' share.

Net Operating (Income) Attributable to Noncontrolling Interest

	Net Operating (Income) Loss Attributable to Noncontrolling Interest
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Net operating (income) attributable to noncontrolling interest	$	(3,598	)	$	(4,900	)	$	1,302

For the six months ended June 30, 2014, the net operating income attributable to noncontrolling interest was $3.6 million, which comprised $2.5 million relating to 90% of the net operating income in PaCRe for the quarter and $1.1 million of net operating income relating to the consolidated AlphaCat ILS funds.

95

Year To Date 2014 Results of Operations - Talbot Segment

The following table presents results of operations for the six months endedJune 30, 2014 and 2013, respectively:

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013
Underwriting income
Gross premiums written	$	608,639		$	609,048
Reinsurance premiums ceded	(126,981		)	(141,924		)
Net premiums written	481,658			467,124
Change in unearned premiums	(55,955		)	(59,097		)
Net premiums earned	425,703			408,027
Underwriting deductions
Losses and loss expenses	186,466			151,454
Policy acquisition costs	90,521			82,193
General and administrative expenses	69,322			63,104
Share compensation expenses	5,444			3,762
Total underwriting deductions	351,753			300,513
Underwriting income (a)	73,950			107,514
Net investment income	9,357			9,101
Other income	275			491
Finance expenses	(94		)	(149		)
Operating income before taxes	83,488			116,957
Tax expense	(1,234		)	(671		)
Net operating income (a)	$	82,254		$	116,286
Selected ratios:
Net premiums written / Gross premiums written	79.1		%	76.7		%
Losses and loss expenses	43.8		%	37.1		%
Policy acquisition costs	21.2		%	20.1		%
General and administrative expenses (b)	17.6		%	16.4		%
Expense ratio	38.8		%	36.5		%
Combined ratio	82.6		%	73.6		%

(a) Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.”

(b) The general and administrative expense ratio includes share compensation expenses.

96

The change in net operating income for the six months endedJune 30, 2014 compared to the six months endedJune 30, 2013, respectively, is described in the following table:

	Increase (decrease) to net operating income over the six months ended June 30
(Dollars in thousands)	2014 compared to 2013
Net premiums earned	$	17,676
Notable losses (a)	6,717
Incurred current year losses, excluding notable losses	(30,506		)
Prior period loss development	(11,223		)
Other underwriting deductions (b)	(16,228		)
Underwriting income (d)	(33,564		)
Other operating income and expenses, net (c)	(468		)
Net operating income (d)	$	(34,032	)

(a) There were no notable loss events for the six months ended June 30, 2014. The notable loss event for the six months ended June 30, 2013 was the European Floods.

(b) Other underwriting deductions consist of policy acquisition costs, general & administrative expenses and share compensation expenses.

(c) Other operating income and expenses, net, consists of net investment income, other income, finance expenses and taxes.

(d) Non-GAAP Financial Measures. In presenting the Company’s results, management has included and discussed underwriting and operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Further discussion of these measures is presented in the section entitled “Non-GAAP Financial Measures.

Gross Premiums Written

	Gross Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	194,057	$	202,174	$	(8,117	)
Marine	229,011		230,256		(1,245		)
Specialty	185,571		176,618		8,953
Total	$	608,639	$	609,048	$	(409	)

The decrease in gross premiums written in the property lines was due to $14.0 million of Latin American business now written by Validus Re Swiss. This business was previously written by Talbot and ceded to Validus Re. This decrease was partially offset by an increase in direct property lines due to new business and premium adjustments of $7.9 million. The increase in gross premiums written in the specialty lines of $9.0 million was partially due to an increase on political risk lines of $3.5 million. In particular, the political risk lines increase was in part due to the expanding crisis management book and the employment of two new underwriters. The aviation treaty lines have also seen an increase of $5.0 million.

97

	Business Mix - Ratio of Gross Premiums Written by Line of Business to Total Gross Premiums Written
	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Gross Premiums Written		Gross Premiums Written (%)		Gross Premiums Written		Gross Premiums Written (%)
Property	$	194,057	31.9	%	$	202,174	33.2	%
Marine	229,011		37.6	%	230,256		37.8	%
Specialty	185,571		30.5	%	176,618		29.0	%
Total	$	608,639	100.0	%	$	609,048	100.0	%

The changes in mix of business were consistent with the changes in gross premiums written discussed above.

Reinsurance Premiums Ceded

	Reinsurance Premiums Ceded
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	74,097	$	87,038	$	(12,941	)
Marine	21,976		21,502		474
Specialty	30,908		33,384		(2,476		)
Total	$	126,981	$	141,924	$	(14,943	)

The decrease in reinsurance premiums ceded in the property lines of $12.9 million was due primarily to decreases in property treaty lines of $14.0 million due to lower quota share premiums as a result of underlying Latin American business now being written directly through Validus Re Swiss and a reduction of $7.4 million in energy onshore premiums due to lower quota share premiums and changes in program price and structure. These were offset by an increase of $5.6 million in direct property and construction lines primarily due to increases in existing coverage.

Net Premiums Written

	Net Premiums Written
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	119,960	$	115,136	$	4,824
Marine	207,035		208,754		(1,719		)
Specialty	154,663		143,234		11,429
Total	$	481,658	$	467,124	$	14,534

The changes in Talbot net premiums written were driven by the factors highlighted above in respect of gross premiums written and reinsurance premiums ceded.

98

	Net Retention - Ratio of Net Premiums Written to Gross Premiums Written
	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Net Premiums Written		% of Gross Premiums Written		Net Premiums Written		% of Gross Premiums Written
Property	$	119,960	61.8	%	$	115,136	56.9	%
Marine	207,035		90.4	%	208,754		90.7	%
Specialty	154,663		83.3	%	143,234		81.1	%
Total	$	481,658	79.1	%	$	467,124	76.7	%

The property ratio increased by 4.9 percentage points due to the reduction in quota share premiums ceded to Validus Re as this business is now written directly through Validus Re Swiss.

Net Premiums Earned

	Net Premiums Earned
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Property	$	101,636	$	93,005	$	8,631
Marine	176,019		171,941		4,078
Specialty	148,048		143,081		4,967
Total	$	425,703	$	408,027	$	17,676

The increase in property lines net premiums earned was consistent with the pattern of net premiums written influencing the earned premiums for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. The increase in the marine lines net premiums earned was due primarily to the timing of premiums written during the current six months compared to the prior year six months. The increase in the specialty lines net premiums earned was due primarily to expansion of the political risk lines.

Losses and Loss Expenses

	Losses and Loss Expense Ratio - All Lines
	Six Months Ended June 30,
	2014		2013
All lines—current period—notable losses	0.0	%	1.6	%
All lines—change in prior accident years	(15.0	)%	(18.4	)%
All lines—current period excluding items above	58.8	%	53.9	%
All lines—loss ratio	43.8	%	37.1	%

	Losses and Loss Expenses - All Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
All lines—current period—notable losses	$	—		$	6,717		$	(6,717	)
All lines—change in prior accident years	(63,767		)	(74,990		)	11,223
All lines—current period excluding items above	250,233			219,727			30,506
All lines - losses and loss expenses	$	186,466		$	151,454		$	35,012

99

Notable Losses

There were no notable loss events for the six months ended June 30, 2014. In comparison, notable losses incurred in the six months ended June 30, 2013 of $6.7 million were from a single notable loss event, the European Floods, which represented 1.6 percentage points of the loss ratio. Net of $0.3 million of reinstatement premiums, the effect of this event on net operating income was a $6.4 million reduction.

Losses and Loss Expenses by Line of Business

	Losses and Loss Expense Ratio - Property Lines
	Six Months Ended June 30,
	2014		2013
Property—current period—notable losses	0.0	%	5.1	%
Property—change in prior accident years	(30.1)	%	(35.6)	%
Property—current period excluding items above	69.0	%	58.0	%
Property—loss ratio	38.9	%	27.5	%

	Losses and Loss Expenses - Property Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Property - current period—notable losses	$	—		$	4,717		$	(4,717	)
Property - change in prior accident years	(30,620		)	(33,103		)	2,483
Property—current period excluding items above	70,185			53,978			16,207
Property - losses and loss expenses	$	39,565		$	25,592		$	13,973

The property lines experienced favorable loss reserve development in both periods, due to a combination of favorable development on notable losses, primarily the Tohoku earthquake, and lower than expected development on both large and attritional losses. The current six months loss ratio, excluding the impact of notable losses, was higher by 11.0 percentage points, representing a higher level of attritional claims experienced compared to the prior year six months, including a construction fire loss of $8.3 million.

	Losses and Loss Expense Ratio - Marine Lines
	Six Months Ended June 30,
	2014		2013
Marine—current period—notable losses	0.0	%	1.2	%
Marine—change in prior accident years	(3.5)	%	(12.7)	%
Marine—current period excluding items above	55.8	%	46.4	%
Marine—loss ratio	52.3	%	34.9	%

100

	Losses and Loss Expenses - Marine Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Marine - current period—notable losses	$	—		$	2,000		$	(2,000	)
Marine—change in prior accident years	(6,269		)	(21,815		)	15,546
Marine—current period excluding items above	98,261			79,866			18,395
Marine - losses and loss expenses	$	91,992		$	60,051		$	31,941

The marine lines experienced $15.5 million lower favorable loss reserve development compared to the prior year six months. The favorable development on known large losses in the current six months was lower than the favorable development on attritional claims during the prior year six months.

The current six months loss ratio, excluding the impact of notable losses, was higher by 9.4 percentage points, representing a higher level of attritional claims experienced compared to the prior year six months, primarily due to a ferry loss.

	Losses and Loss Expense Ratio - Specialty Lines
	Six Months Ended June 30,
	2014		2013
Specialty—current period—notable losses	0.0	%	0.0	%
Specialty—change in prior accident years	(18.2)	%	(14.0)	%
Specialty—current period excluding items above	55.3	%	60.0	%
Specialty—loss ratio	37.1	%	46.0	%

	Losses and Loss Expenses - Specialty Lines
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Specialty - current period—notable losses	$	—		$	—		$	—
Specialty—change in prior accident years	(26,878		)	(20,072		)	(6,806		)
Specialty—current period excluding items above	81,787			85,883			(4,096		)
Specialty - losses and loss expenses	$	54,909		$	65,811		$	(10,902	)

The specialty lines experienced $6.8 million higher favorable loss reserve development, primarily related to lower than expected development on attritional claims and lower emergence of events during the current six months.

Policy Acquisition Costs

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
Property	$	13,098	12.9	%	$	9,927	10.7	%
Marine	42,722		24.3	%	37,903		22.0	%
Specialty	34,701		23.4	%	34,363		24.0	%
Total	$	90,521	21.2	%	$	82,193	20.1	%

The property acquisition cost ratio increased by 2.2 percentage points due to lower ceded acquisition costs on quota share premiums as a result of underlying business being written directly through Validus Re Swiss. The increase in the marine acquisition cost ratio was due to profit commission adjustments that reduced costs for the six months ended June 30, 2013.

101

General and Administrative and Share Compensation Expenses

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
(Dollars in thousands)	Expenses		% of Net Premiums Earned		Expenses		% of Net Premiums Earned
General and administrative expenses	$	69,322	16.3	%	$	63,104	15.5	%
Share compensation expenses	5,444		1.3	%	3,762		0.9	%
Total	$	74,766	17.6	%	$	66,866	16.4	%

General and administrative expenses increased by $6.2 million due to salary increases, an increase in overall headcount and a strengthening of the British pound against the U.S. dollar compared to the prior year six months.

Selected Underwriting Ratios

The following table presents the loss and loss expense ratio, policy acquisition cost ratio, general and administrative expense ratio, expense ratio and combined ratio for the six months ended June 30, 2014 and 2013.

	Six Months Ended June 30,
	2014		2013
Loss and loss expense ratio	43.8	%	37.1	%
Policy acquisition cost ratio	21.2	%	20.1	%
General and administrative expense ratio (a)	17.6	%	16.4	%
Expense ratio	38.8	%	36.5	%
Combined ratio	82.6	%	73.6	%

(a) Includes general and administrative expenses and share compensation expenses.

The increase in the combined ratio for the six months ended June 30, 2014 of 9.0 percentage points compared to the six months ended June 30, 2013 was due to the movement in the underlying ratios as discussed above.

Net Investment Income

	Investment Income
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Fixed maturities and short-term investments	$	9,454		$	8,704		$	750
Cash and cash equivalents	656			1,061			(405		)
Total gross investment income	10,110			9,765			345
Investment expenses	(753		)	(664		)	(89		)
Total	$	9,357		$	9,101		$	256

Net investment income for the six months ended June 30, 2014 and 2013 was comparable.

102

Year To Date Non-Segment Discussion

Corporate Expenses

Corporate general and administrative expenses for the six months ended June 30, 2014, net of eliminations related to the operating segments, were $35.8 million compared to $30.2 million for the six months ended June 30, 2013, an increase of $5.6 million or 18.4%. General and administrative expenses increased due to an increase in headcount. Corporate general and administrative expenses are comprised of executive and board expenses, internal and external audit expenses and other costs relating to the Company as a whole.

Corporate share compensation expenses for the six months ended June 30, 2014, net of operating segment eliminations were $5.3 million compared to $2.1 million for the six months ended June 30, 2013, an increase of $3.3 million or 155.9%. The increase of $3.3 million was primarily due to a higher level of awards being issued during 2013 compared to earlier years.

Corporate finance expenses for the six months ended June 30, 2014, net of eliminations related to the operating segments, were $22.8 million compared to $19.1 million for the six months ended June 30, 2013, an increase of $3.7 million or 19.2%.

Transaction expenses for the six months ended June 30, 2014 were $3.3 million compared to $nil for the six months ended June 30, 2013. The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World and are primarily comprised of legal, financial advisory and audit related services.

Year to Date Non-Operating Income and Expenses

The following non-operating income and expense items are discussed on a consolidated basis, since management does not include these items when assessing the results of its operating segments.

Net Realized and Change in Net Unrealized Gains (Losses) on Investments

	Net Realized and Change in Net Unrealized (Losses) Gains on Investments
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013			Change
Net realized gains on investments	$	11,598	$	5,130		$	6,468
Change in net unrealized gains (losses) on investments	101,120		(148,585		)	249,705
Net realized gains and change in net unrealized gains (losses) on investments	$	112,718	$	(143,455	)	$	256,173

The movement in the change in net realized gains and unrealized gains (losses) on investments of $256.2 million was due to a favorable movement in net realized and unrealized gains on fixed maturity and short term investments of $94.5 million and a favorable movement in net realized and unrealized gains on other investments of $161.6 million.

The favorable movement on fixed maturity and short term investments was primarily as a result of a shift in the yield curve and a tightening of corporate bond spreads. The favorable movement on other investments was primarily due to improved performance of the Paulson hedge funds held by PaCRe.

Income From Investment Affiliate

	Income From Investment Affiliate
	Six Months Ended June 30,
(Dollars in thousands)	2014		2013		Change
Income from investment affiliate	$	6,127	$	3,230	$	2,897

Income from investment affiliate for the six months ended June 30, 2014 was $2.9 million higher than the six months ended June 30, 2013. The income from investment affiliate relates to the income earned from the Company's investment in the Aquiline Financial Services Fund II L.P. which is recorded on a three-month lag and therefore reflects the underlying performance of that fund for the six months ended March 31, 2014 and 2013, respectively.

103

Foreign Exchange (Losses) Gains

The Company's reporting currency is the U.S. dollar. As a significant portion of the Company's operations are transacted in currencies other than the U.S. dollar, fluctuations in foreign exchange rates may affect period-to-period comparisons. The Company's largest foreign currency fluctuation exposures are to the following currencies, with the movement in each currency against the U.S. dollar shown in the table below:

U.S. dollar strengthened (weakened) against:	Six Months Ended June 30, 2014		Six Months Ended June 30, 2013
British Pound sterling	(3.2	)%	6.7	%
Euro	0.4	%	1.3	%
Canadian dollar	0.4	%	5.7	%
Swiss franc	(0.7	)%	3.2	%
Australian dollar	(5.5	)%	13.3	%
New Zealand dollar	(6.2	)%	6.4	%
Singapore dollar	(1.3	)%	3.8	%
Japanese yen	(3.6	)%	14.5	%

	Foreign Exchange
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Foreign exchange losses	$	(3,320	)	$	(1,301	)	$	(2,019	)

Foreign exchange losses for the six months ended June 30, 2014 were $3.3 million compared to $1.3 million for the six months ended June 30, 2013, an unfavorable movement of $2.0 million, or 155.2%, due to the U.S. dollar weakening against currencies, particularly the New Zealand and Australian dollars, where we held net assets, compared to it strengthening in 2013.

The Company currently hedges foreign currency exposure by substantively balancing assets (primarily cash, investments and premium receivables) with liabilities (primarily case reserves and event IBNR) for certain major non-U.S. dollar currencies, or by entering into forward foreign currency contracts. Consequently, the Company aims to have a limited exposure to foreign exchange fluctuations.

Net (Income) Loss Attributable to Noncontrolling Interest

	Net (Income) Loss Attributable to Noncontrolling Interest
	Six Months Ended June 30,
(Dollars in thousands)	2014			2013		Change
Net (income) loss attributable to noncontrolling interest	$	(78,814	)	$	63,525	$	(142,339	)

For the six months ended June 30, 2014, net income attributable to noncontrolling interest was $78.8 million, which was comprised of operating income of $3.6 million, as discussed in the AlphaCat Segment Results of Operations, and a non-operating gain of $75.2 million, primarily on the investment portfolio within PaCRe.

For the six months ended June 30, 2013, net loss attributable to noncontrolling interest was $63.5 million, which was comprised of operating income of $4.9 million, as discussed in the AlphaCat Segment Results of Operations, and a non-operating loss of $68.4 million, primarily on the investment portfolio within PaCRe.

104

Other Non-GAAP Financial Measures

The operating results of an insurance or reinsurance company are also often measured by reference to its net operating income, which is a non-GAAP financial measure. Net operating income, as set out in the table below, is reconciled to net income (the most directly comparable GAAP financial measure) by the addition or subtraction of certain Consolidated Statement of Comprehensive Income (Loss) line items, as illustrated below.

(Dollars in thousands)	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Net operating income	134,702			114,155			282,296			331,966
Net realized gains on investments	7,858			3,409			11,598			5,130
Change in net unrealized gains (losses) on investments	45,427			(141,348		)	101,120			(148,585		)
Income from investment affiliate	779			1,753			6,127			3,230
Transaction expenses	(3,252		)	—			(3,252		)	—
Foreign exchange gains (losses)	3,158			(8,223		)	(3,320		)	(1,301		)
Net income	$	188,672		$	(30,254	)	$	394,569		$	190,440

Operating income indicates the performance of the Company’s core underwriting function, excluding revenues and expenses such as the reconciling items in the table above. The Company believes the reporting of operating income enhances the understanding of results by highlighting the underlying profitability of the Company’s core insurance and reinsurance business. This profitability is influenced significantly by earned premium growth, adequacy of the Company’s pricing and loss frequency and severity. Over time it is also influenced by the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses.

The Company excludes the U.S. GAAP measures noted above, in particular net realized and unrealized gains and losses on investments, from its calculation of operating income because the amount of these gains and losses is heavily influenced by, and fluctuates in part, according to availability of investment market opportunities. The Company believes these amounts are largely independent of its core underwriting activities and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing operating income provides investors with a valuable measure of profitability and enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company’s results of operations in a manner similar to how management analyzes the Company’s underlying business performance.

Operating income should not be viewed as a substitute for U.S. GAAP net income as there are inherent material limitations associated with the use of operating income as compared to using net income, which is the most directly comparable U.S. GAAP financial measure. The most significant limitation is the ability of users of the financial information to make comparable assessments of operating income with other companies, particularly as operating income may be defined or calculated differently by other companies. Therefore, the Company provides prominence in this filing to the use of the most comparable U.S. GAAP financial measure, net income, which includes the reconciling items in the table above. The Company compensates for these limitations by providing both clear and transparent disclosure of net income and reconciliation of operating income to net income.

The Company also uses underwriting income as a primary measure of underwriting results in its analysis of historical financial information and when performing its budgeting and forecasting processes. Analysts, investors and rating agencies who follow the Company request this non-GAAP financial information on a regular basis. In addition, underwriting income is one of the factors considered by the compensation committee of our Board of Directors in determining the total annual incentive compensation.

In presenting the Company's results, management has also included and discussed certain schedules containing book value per diluted common share and book value per diluted common share plus accumulated dividends that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP and may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP.

105

The following tables present reconciliations of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, at June 30, 2014 and December 31, 2013.

(Dollars in thousands, except share and per share amounts)	As at June 30, 2014
	Equity Amount		Shares	Exercise Price		Book Value Per Share
Book value per common share
Total shareholders' equity available to Validus	$	3,777,106	91,394,939			$	41.33
Book value per diluted common share
Total shareholders' equity available to Validus	3,777,106		91,394,939
Assumed exercise of outstanding warrants	90,950		5,174,114	$	17.58
Assumed exercise of outstanding stock options	27,313		1,477,694	$	18.48
Unvested restricted shares	—		2,991,261
Book value per diluted common share	$	3,895,369	101,038,008			$	38.55
Adjustment for accumulated dividends						$	8.28
Book value per diluted common share plus accumulated dividends						$	46.83

(Dollars in thousands, except share and per share amounts)	As at December 31, 2013
	Equity Amount		Shares	Exercise Price		Book Value Per Share
Book value per common share
Total shareholders' equity available to Validus	$	3,704,094	96,044,312			$	38.57
Book value per diluted common share
Total shareholders' equity available to Validus	3,704,094		96,044,312
Assumed exercise of outstanding warrants	98,513		5,296,056	$	18.60
Assumed exercise of outstanding stock options	29,688		1,572,713	$	18.88
Unvested restricted shares	—		2,853,083
Book value per diluted common share	$	3,832,295	105,766,164			$	36.23
Adjustment for accumulated dividends						$	7.68
Book value per diluted common share plus accumulated dividends						$	43.91

Liquidity and Capital Resources

Investments

At June 30, 2014, the Company held investments totaling $6,754.9 million, compared to $6,912.4 million at December 31, 2013, a decrease of $157.5 million, or 2.3%, primarily as a result of share repurchase activity. A significant portion of (re)insurance contracts written by the Company provide short-tail reinsurance coverage for losses resulting mainly from natural and man-made catastrophes, which could result in payment of a substantial amount of losses at short notice. Accordingly, the Company’s investment portfolio is primarily structured to provide liquidity, which means the investment portfolio contains a significant amount of relatively short-term fixed maturity investments, such as government and government agency securities, corporate debt securities, bank loans and mortgage-backed and asset-backed securities. At June 30, 2014, the average duration of the Company’s fixed maturity and short term investment portfolio was 1.67 years (December 31, 2013: 1.60 years). This duration is reviewed regularly based on changes in the duration of the Company's liabilities and in general market conditions.

106

The Company’s investment portfolio is also structured to preserve capital. With the exception of the Company's bank loan portfolio and catastrophe bonds, the Company’s investment guidelines require that fixed income investments are rated BBB- or higher at the time of purchase. At June 30, 2014, the Company’s total investment portfolio including cash had an average credit quality rating of AA- ( December 31, 2013 : AA-) and an effective yield of 1.24% (December 31, 2013 : 1.29%) for the six months then ended. The estimated fair value of investment grade fixed maturities, as at June 30, 2014 was $4,589.0 million, or 89.0% of the fixed maturity portfolio, compared to $4,764.6 million as at December 31, 2013, or 86.0%, a decrease of $175.6 million, or 3.7%. The estimated fair value of non-investment grade fixed maturities, excluding bank loans, as at June 30, 2014 was $55.7 million compared to $92.8 million as at December 31, 2013, a decrease of $37.2 million, or 40.0%.

The Company also has an allocation to other investments, primarily hedge funds. At June 30, 2014, these other investments, excluding noncontrolling interests, totaled $236.6 million, or 3.8%, of total investments, excluding noncontrolling interest (December 31, 2013 : $128.9 million or 2.0%). For further details related to the investment portfolio, including the extent of investments with fair values measured using unobservable inputs, see Notes 3 and 4 to the Consolidated Financial Statements in Part I, Item 1.

The value of the Company’s fixed maturity portfolio will fluctuate with, among other factors, changes in the interest rate environment and in overall economic conditions. Additionally, the structure of the investment portfolio exposes the Company to other risks, including insolvency or reduced credit quality of corporate debt securities, and prepayment, default and structural risks on asset-backed securities, mortgage-backed securities and bank loans.

The estimated fair value of investments at June 30, 2014 and December 31, 2013 was as follows:

	June 30, 2014					December 31, 2013
(Dollars in thousands)	Estimated Fair Value			% of Total Investments		Estimated Fair Value			% of Total Investments
U.S. government and government agency	$	1,031,777		16.7	%	$	1,364,679		21.1	%
Non-U.S. government and government agency	447,070			7.2	%	459,068			7.2	%
U.S. states, municipalities and political subdivision	49,440			0.8	%	43,120			0.7	%
Agency residential mortgage-backed securities	315,105			5.1	%	311,499			4.9	%
Non-agency residential mortgage-backed securities	17,781			0.3	%	15,759			0.2	%
U.S. corporate	1,312,509			21.2	%	1,332,484			20.8	%
Non-U.S. corporate	693,588			11.2	%	714,325			11.2	%
Bank loans	520,725			8.4	%	717,116			11.2	%
Catastrophe bonds	38,063			0.6	%	74,551			1.2	%
Asset-backed securities	606,742			9.8	%	509,657			8.0	%
Commercial mortgage-backed securities	121,829			2.1	%	—			—	%
Total fixed maturities	5,154,629			83.4	%	5,542,258			86.5	%
Total short-term investments (a) (b)	816,820			13.2	%	751,778			11.7	%
Total other investments	783,423			12.7	%	618,316			9.7	%
Total investments	6,754,872			109.3	%	6,912,352			107.9	%
Noncontrolling interest (a)	(569,290		)	(9.2	)%	(489,402		)	(7.6	)%
Redeemable noncontrolling interest (b)	(8,305		)	(0.1	)%	(18,365		)	(0.3	)%
Total investments excluding noncontrolling interest	$	6,177,277		100.0	%	$	6,404,585		100.0	%

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

107

As part of the ongoing risk management process, the Company monitors the aggregation of country or jurisdiction risk exposure. Jurisdiction risk exposure is the risk that events within a jurisdiction, such as currency crises, regulatory changes and other political events, will adversely affect the ability of obligors within the jurisdiction to honor their obligations. The following table provides a breakdown of the fair value of jurisdiction risk exposures outside the United States within the Company’s fixed maturity portfolio:

	June 30, 2014				December 31, 2013
(Dollars in thousands)	Fair Value		% of Total		Fair Value		% of Total
United Kingdom	$	126,563	11.1	%	$	153,248	13.1	%
Supranational	65,697		5.8	%	74,834		6.4	%
Germany	60,908		5.3	%	59,274		5.1	%
France	34,379		3.0	%	29,395		2.5	%
Province of Ontario	27,696		2.4	%	24,340		2.1	%
Netherlands	24,806		2.2	%	24,097		2.1	%
Norway	22,829		2.0	%	22,430		1.9	%
Other (individual jurisdictions below $20,000)	84,192		7.4	%	71,450		5.9	%
Total Non-U.S. Government Securities	447,070		39.2	%	459,068		39.1	%
European Non-U.S. Corporate Securities	235,095		20.6	%	248,613		21.2	%
United Kingdom Non-U.S. Corporate Securities	179,420		15.7	%	165,845		14.1	%
Other Non-U.S. Corporate Securities	279,073		24.5	%	299,867		25.6	%
Total Non-U.S. Fixed Income Portfolio	$	1,140,658	100.0	%	$	1,173,393	100.0	%

The Company manages its corporate debt securities by limiting its exposure to any single issuer, excluding government and agency securities, to 3% or less of its total investments and cash. At June 30, 2014, the Company did not have an aggregate exposure to any single issuer of more than 0.9%, other than with respect to government and government agency securities. The top ten exposures to fixed income corporate issuers at June 30, 2014 are as follows:

(Dollars in thousands)	June 30, 2014
Issuer (a)	Fair Value (b)	S&P Rating (c)	% of Total Cash and Investments
JPMorgan Chase & Co	72,917	A	0.9	%
Bank of New York Mellon Corp	51,231	A+	0.6	%
Anheuser-Busch Inbev SA	44,046	A	0.6	%
Bank of America Corp	43,533	A-	0.5	%
BP PLC	42,216	A	0.5	%
Wells Fargo & Company	39,861	A+	0.5	%
General Electric Co	36,899	A+	0.5	%
Apple Inc	34,799	AA+	0.4	%
Goldman Sachs Group Inc	34,442	A-	0.4	%
HSBC Holdings Plc	32,981	A+	0.4	%
Total	432,925		5.3	%

(a) Issuers exclude government-backed government-sponsored enterprises and cash and cash equivalents.

(b) Credit exposures represent only direct exposure to fixed maturities and short-term investments of the parent issuer and its major subsidiaries. These exposures exclude asset and mortgage backed securities that were issued, sponsored or serviced by the parent.

(c) Investment ratings are the median of Moody's, Standard & Poor's and Fitch, presented in Standard & Poor's equivalent rating. For investments where three ratings are unavailable, the lower of the ratings shall apply, presented in Standard & Poor's equivalent rating.

108

The tables below show the Company’s investments in affiliates, accounted for under the equity method:

	June 30, 2014
(Dollars in thousands)	Investment at cost		Voting ownership		Equity ownership		Carrying value
AlphaCat Re 2011	$	4,172	43.7	%	22.3	%	$	4,172
AlphaCat Re 2012	2,204		49.0	%	37.9	%	2,204
AlphaCat 2013	2,580		40.9	%	19.7	%	2,580
AlphaCat 2014	22,000		42.3	%	19.6	%	25,014
AlphaCat ILS funds	133,455		n/a		(a)		139,022
Aquiline Financial Services Fund II L.P.	32,110		n/a		6.7	%	40,627
Total	$	196,521					$	213,619

(a) Equity ownership in the two funds were 8.6% and 49.0%, respectively as at June 30, 2014.

	December 31, 2013
(Dollars in thousands)	Investment at cost		Voting ownership		Equity ownership		Carrying value
AlphaCat Re 2011	$	9,882	43.7	%	22.3	%	$	9,809
AlphaCat Re 2012	654		49.0	%	37.9	%	1,313
AlphaCat 2013	45,000		40.9	%	19.7	%	51,744
AlphaCat 2014	22,000		42.3	%	19.6	%	21,982
AlphaCat ILS fund	20,000		n/a		9.1	%	21,895
Aquiline Financial Services Fund II L.P.	32,110		n/a		6.7	%	34,500
Total	$	129,646					$	141,243

During the first six months of 2014, the Company received partial returns of investment from AlphaCat Re 2011 and AlphaCat 2013 of $5.8 million and $51.2 million, respectively. The Company expects to receive further returns of investment during the year from AlphaCat Re 2011, AlphaCat Re 2012 and AlphaCat 2013.

Reserves for Losses and Loss Expenses

At June 30, 2014, gross and net reserves for losses and loss expenses were estimated using the methodology as outlined in the Critical Accounting Policies and Estimates section below. The following tables indicate the breakdown of gross and net reserves for losses and loss expenses between lines of business and between case reserves and IBNR.

	As at June 30, 2014
(Dollars in thousands)	Gross Case Reserves		Gross IBNR		Total Gross Reserve for Losses and Loss Expenses
Property	$	728,200	$	532,445	$	1,260,645
Marine	467,499		430,824		898,323
Specialty	242,122		466,217		708,339
Total	$	1,437,821	$	1,429,486	$	2,867,307

	As at June 30, 2014
(Dollars in thousands)	Net Case Reserves		Net IBNR		Total Net Reserve for Losses and Loss Expenses
Property	$	628,824	$	457,240	$	1,086,064
Marine	427,651		398,823		826,474
Specialty	212,465		403,570		616,035
Total	$	1,268,940	$	1,259,633	$	2,528,573

The following table sets forth a reconciliation of gross and net reserves for losses and loss expenses by segment for the three months ended June 30, 2014.

	Three Months Ended June 30, 2014
(Dollars in thousands)	Validus Re Segment			AlphaCat Segment			Talbot Segment			Eliminations			Total
Reserve for losses and loss expenses, beginning of period	$	1,628,907		$	9,731		$	1,358,977		$	(72,556	)	$	2,925,059
Losses and loss expenses recoverable	(99,563		)	—			(321,400		)	72,556			(348,407		)
Net reserves for losses and loss expenses, beginning of period	1,529,344			9,731			1,037,577			—			2,576,652
Increase (decrease) in net reserves for losses and loss expenses in respect of losses occurring in:
Current year	104,356			715			126,330			—			231,401
Prior years	(26,668		)	(3,748		)	(42,240		)	—			(72,656		)
Total incurred losses and loss expenses	77,688			(3,033		)	84,090			—			158,745
Net paid losses	(143,067		)	(513		)	(72,397		)	—			(215,977		)
Foreign exchange	2,029			9			7,115			—			9,153
Net reserve for losses and loss expenses, end of period	1,465,994			6,194			1,056,385			—			2,528,573
Losses and loss expenses recoverable	89,952			—			328,492			(79,710		)	338,734
Reserve for losses and loss expenses, end of period	$	1,555,946		$	6,194		$	1,384,877		$	(79,710	)	$	2,867,307

The amount of recorded reserves represents management's best estimate of expected losses and loss expenses on premiums earned. For the three months ended June 30, 2014, favorable loss reserve development on prior accident years was $72.7 million of

109

which $26.7 million related to the Validus Re segment, $3.7 million related to the AlphaCat segment and $42.2 million related to the Talbot segment.

110

The following table sets forth a reconciliation of gross and net reserves for losses and loss expenses by segment for the six months ended June 30, 2014.

	Six Months Ended June 30, 2014
(Dollars in thousands)	Validus Re Segment			AlphaCat Segment			Talbot Segment			Eliminations			Total
Reserve for losses and loss expenses, beginning of period	$	1,723,465		$	17,612		$	1,362,574		$	(73,252	)	$	3,030,399
Losses and loss expenses recoverable	(105,601		)	—			(337,805		)	73,252			(370,154		)
Net reserves for losses and loss expenses, beginning of period	1,617,864			17,612			1,024,769			—			2,660,245
Increase (decrease) in net reserves for losses and loss expenses in respect of losses occurring in:
Current year	182,539			715			250,233			—			433,487
Prior years	(36,696		)	(11,608		)	(63,767		)	—			(112,071		)
Total incurred losses and loss expenses	145,843			(10,893		)	186,466			—			321,416
Net paid losses	(311,164		)	(513		)	(162,382		)	—			(474,059		)
Foreign exchange	13,451			(12		)	7,532			—			20,971
Net reserve for losses and loss expenses, end of period	1,465,994			6,194			1,056,385			—			2,528,573
Losses and loss expenses recoverable	89,952			—			328,492			(79,710		)	338,734
Reserve for losses and loss expenses, end of period	$	1,555,946		$	6,194		$	1,384,877		$	(79,710	)	$	2,867,307

The amount of recorded reserves represents management's best estimate of expected losses and loss expenses on premiums earned. For the six months ended June 30, 2014, favorable loss reserve development on prior accident years was $112.1 million of which $36.7 million related to the Validus Re segment, $11.6 million related to the AlphaCat segment and $63.8 million related to the Talbot segment.

The management of insurance and reinsurance companies use significant judgment in the estimation of reserves for losses and loss expenses. Given the magnitude of some notable loss events and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding the estimation for these events. The Company's actual ultimate net loss may vary materially from these estimates. Ultimate losses for notable loss events are estimated through detailed review of contracts which are identified by the Company as potentially exposed to the specific notable loss event. However, there can be no assurance that the ultimate loss amount estimated for a specific contract will be accurate, or that all contracts with exposure to a specific notable loss event will be identified in a timely manner. Potential losses in excess of the estimated ultimate loss assigned to a contract on the basis of a specific review, or loss amounts from contracts not specifically included in the detailed review may be reserved for in the reserve for potential development on notable loss events. Any reserve for potential development on notable loss events (or “RDE”) is included as part of the Company's overall reserve as defined and disclosed in the Critical Accounting Policies and Estimates section.

For disclosure purposes, only those notable loss events which had an initial ultimate loss estimate above $30.0 million are disclosed separately and included in the reserves for notable loss roll forward table. To the extent that there are complexity and volatility factors relating to notable loss events in the aggregate, additions to the RDE may be established for a specific accident year. The Company increased the threshold for disclosure for notable losses effective January 1, 2013 from $15.0 million to $30.0 million.

The reserves for notable loss events table below does not disclose 2010 or 2011 notable loss events. Deepwater Horizon, a 2010 event, had closing reserves at June 30, 2014, of $66.1 million, excluding reserves assumed as part of the Flagstone acquisition.

111

RESERVES FOR NOTABLE LOSS EVENTS - USD (000's)
2012 NOTABLE LOSS EVENTS			Year Ended December 31, 2012							Year Ended December 31, 2013							Six Months Ended June 30, 2014
			Development					Closing		Development					Closing		Development					Closing
	Initial		(Favorable) /			Allocations		Estimate (c)		(Favorable) /			Allocations		Estimate (c)		(Favorable) /			Allocations		Estimate (c)
Notable Loss	Estimate (a)		Unfavorable (b)			of RDE		December 31, 2012		Unfavorable (b)			of RDE		December 31, 2013		Unfavorable (b)			of RDE		June 30, 2014
Hurricane Sandy	$	361,036	$	—		—		$	361,036	$	(2,009	)	—		$	359,027	(645		)	—		$	358,382
Costa Concordia	76,197		(2,061		)	—		74,136		39,567			—		113,703		15,866			—		129,569
Cat 67	22,713		5,377			—		28,090		(8,817		)	—		19,273		(999		)	—		18,274
U.S. Drought	22,021		—			—		22,021		4,619			—		26,640		100			—		26,740
Hurricane Isaac	15,209		67			—		15,276		(9,374		)	—		5,902		(20		)	—		5,882
Total 2012 Notable Loss Events	$	497,176	$	3,383		$	—	$	500,559	$	23,986		$	—	$	524,545	$	14,302		$	—	$	538,847
			Year Ended December 31, 2012							Year Ended December 31, 2013							Six Months Ended June 30, 2014
								Closing							Closing							Closing
						Paid Loss (Recovery)		Reserve (d)					Paid Loss (Recovery)		Reserve (d)					Paid Loss (Recovery)		Reserve (d)
Notable Loss								December 31, 2012							December 31, 2013							June 30, 2014
Hurricane Sandy						$	38,515	$	322,521				$	134,978	$	185,534				$	27,317	$	157,572
Costa Concordia						13,040		61,096					36,456		64,207					21,002		59,071
Cat 67						13,432		14,658					2,332		3,509					166		2,344
U.S. Drought						12,346		9,675					14,294		—					7		93
Hurricane Isaac						313		14,963					3,727		1,862					367		1,475
Total 2012 Notable Loss Events						$	77,646	$	422,913				$	191,787	$	255,112				$	48,859	$	220,555
2013 NOTABLE LOSS EVENTS										Year Ended December 31, 2013							Six Months Ended June 30, 2014
										Development					Closing		Development					Closing
			Initial							(Favorable) /			Allocations		Estimate (c)		(Favorable) /			Allocations		Estimate (c)
Notable Loss			Estimate (a)							Unfavorable (b)			of RDE		December 31, 2013		Unfavorable (b)			of RDE		June 30, 2014
European Floods			$	77,587						$	(16,762	)	—		$	60,825	$	(22,111	)	—		$	38,714
Total 2013 Notable Loss Events			$	77,587						$	(16,762	)	$	—	$	60,825	$	(22,111	)	$	—	$	38,714
										Year Ended December 31, 2013							Six Months Ended June 30, 2014
															Closing							Closing
													Paid Loss (Recovery)		Reserve (d)					Paid Loss (Recovery)		Reserve (d)
Notable Loss															December 31, 2013							June 30, 2014
European Floods													$	8,006	$	52,819				$	8,209	$	22,499
Total 2013 Notable Loss Events													$	8,006	$	52,819				$	8,209	$	22,499

(a) Includes paid losses, case reserves and IBNR reserves.

(b) Development other than allocation of RDE.

(c) Excludes impact of movements in foreign exchange rates.

(d) Closing Reserve for the period equals Closing Estimate for the period less cumulative Paid Losses.

112

Sources of Liquidity

Holding Company Liquidity

Validus Holdings, Ltd. is a holding company and conducts no operations of its own. The Company relies primarily on cash dividends and other permitted payments from operating subsidiaries within the Validus Re, AlphaCat and Talbot segments to pay dividends, finance expenses and other holding company expenses. There are restrictions on the payment of dividends from most operating subsidiaries, primarily due to regulatory requirements in the jurisdictions in which the operating subsidiaries are domiciled. The Company believes the dividend/distribution capacity of the Company’s subsidiaries will provide the Company with sufficient liquidity for the foreseeable future. The Company continues to generate substantial cash from operating activities and remains in a strong financial position, with resources available for reinvestment in existing businesses, strategic acquisitions and managing capital structure to meet short and long-term objectives.

The following table details the capital resources of the Company's more significant subsidiaries on an unconsolidated basis.

	Capital at
(Dollars in thousands)	June 30, 2014
Validus Reinsurance, Ltd. (consolidated)	4,052,093
Noncontrolling interest in PacRe, Ltd.	575,347
Redeemable noncontrolling interest in AlphaCat ILS fund	66,282
Talbot Holdings, Ltd. (consolidated)	764,472
Other subsidiaries, net	73,965
Other, net (a)	(324,822		)
Total consolidated capitalization	5,207,337
Senior notes payable	(247,252		)
Debentures payable	(541,350		)
Redeemable noncontrolling interest in AlphaCat ILS fund	(66,282		)
Total shareholders' equity	$	4,352,453

(a) Other, net includes balances arising from transactions between Validus Holdings, Ltd. and its subsidiaries.

Sources and Uses of Cash

The Company has written certain (re)insurance business that has loss experience generally characterized as having low frequency and high severity. This results in volatility in both results and operational cash flows. The potential for large claims or a series of claims under one or more reinsurance contracts means that substantial and unpredictable payments may be required within relatively short periods of time. As a result, cash flows from operating activities may fluctuate, perhaps significantly, between individual quarters and years. Management believes the Company’s unused credit facility amounts and highly liquid investment portfolio are sufficient to support any potential operating cash flow deficiencies.

In addition to relying on premiums received and investment income from the investment portfolio, the Company intends to meet these cash flow demands by carrying a substantial amount of short and medium term investments that would mature, or possibly be sold, prior to the settlement of expected liabilities. The Company cannot provide assurance, however, that it will successfully match the structure of its investments with its liabilities due to uncertainty related to the timing and severity of loss events.

113

There are three main sources of cash flows for the Company: operating activities, investing activities and financing activities. The movement in net cash provided by or used in operating, investing and financing activities and the effect of foreign currency rate changes on cash and cash equivalents for the six months ended June 30, 2014 and 2013 is provided in the following table.

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013			Change
Net cash provided by operating activities	$	17,443		$	193,105		$	(175,662	)
Net cash provided by investing activities	342,274			231,752			110,522
Net cash (used in) financing activities	(262,750		)	(282,942		)	20,192
Effect of foreign currency rate changes on cash and cash equivalents	13,097			(44,233		)	57,330
Net increase in cash	$	110,064		$	97,682		$	12,382

Operating Activities

Cash flow from operating activities is derived primarily from the receipt of premiums less the payment of losses and loss expenses related to underwriting activities.

Net cash used in operating activities during the six months ended June 30, 2014 was $17.4 million compared to $193.1 million for six months ended June 30, 2013, an unfavorable movement of $175.7 million. This unfavorable movement reflects the lower level of business written in the current year, together with the timing of certain retrocessional coverage payments and returns on investments made to third party investors in affiliates.

We anticipate that cash flows from operations will continue to be sufficient to cover cash outflows under the Company's contractual commitments as well as most loss scenarios through the foreseeable future.

Investing Activities

Cash flow from investing activities is derived primarily from the receipt of net proceeds on the Company’s investment portfolio. As at June 30, 2014, the Company’s portfolio was composed of fixed income investments, short-term and other investments amounting to $6,754.9 million or 85.3% of total cash and investments.

Net cash provided by investing activities during the six months ended June 30, 2014 was $342.3 million compared to $231.8 million for the six months ended June 30, 2013, a favorable movement of $110.5 million. This favorable movement was due to a reduction of $1,389.2 million in fixed maturity securities purchases, offset by a net increase of $592.8 million in the purchase of short-term investments and a reduction in proceeds on the sale of investments of $706.6 million.

Financing Activities

Cash flow from financing activities is derived primarily from the issuance and purchase of shares in the Company and its subsidiaries, and the issuance and repayment of notes to operating affiliates.

Net cash used in financing activities during the six months ended June 30, 2014 was $262.8 million compared to $282.9 million during the six months ended June 30, 2013, a favorable movement of $20.2 million. This favorable movement was driven primarily by a decrease in dividends paid of $236.5 million as a result of the special dividend that was paid in the first quarter of 2013, with no comparative dividend in the current year, as well as a decrease of $159.8 million in the repurchase of common shares under the share repurchase program. These were offset by a $306.5 million movement in the net issuance and repayment of notes payable to operating affiliates and a lower level of third party investment in noncontrolling interests in the current year.

114

Capital Resources

The following table details the Company's capital position as at June 30, 2014 and December 31, 2013.

Capitalization (Dollars in thousands)	June 30, 2014			December 31, 2013
Senior Notes (a)	$	247,252		$	247,198
Junior Subordinated Deferrable Debentures (JSDs) (b)	289,800			289,800
Flagstone Junior Subordinated Deferrable Debentures (JSDs) (c)	251,550			251,616
Total debt	788,602			788,614
Redeemable noncontrolling interest	66,282			86,512
Ordinary shares, capital and surplus available to Validus	3,774,646			3,704,711
Accumulated other comprehensive income (loss)	2,460			(617		)
Noncontrolling interest	575,347			497,657
Total shareholders' equity (d)	4,352,453			4,201,751
Total capitalization (d) (f)	5,207,337			5,076,877
Total capitalization available to Validus (e) (f)	$	4,565,708		$	4,492,708
Debt to total capitalization	15.1		%	15.5		%
Debt (excluding JSDs) to total capitalization	4.7		%	4.9		%

Notes

(a) On January 21, 2010, the Company offered and sold $250.0 million of Senior Notes due 2040 (the “2010 Senior Notes”) in a registered public offering. The 2010 Senior Notes mature on January 26, 2040, and are redeemable at the Company’s option in whole any time or in part from time to time at a make-whole redemption price. The net proceeds of $244.0 million from the sale of the 2010 Senior Notes, after the deduction of commissions paid to the underwriters in the transaction and other expenses, was used by the Company for general corporate purposes, which included the repurchase of our outstanding capital stock and dividends to our shareholders.

(b) $150.0 million of Junior Subordinated Deferrable Debentures (the "2006 Junior Subordinated Deferrable Debentures") were issued on June 15, 2006, mature on June 15, 2036 and have been redeemable at the Company's option at par since June 15, 2011. $200.0 million of Junior Subordinated Deferrable Debentures ("2007 Junior Subordinated Deferrable Debentures") were issued on June 21, 2007, mature on June 15, 2037 and have been redeemable at the Company's option at par since June 15, 2012. During 2008 and 2009, the Company repurchased $60.2 million principal amount of its 2007 Junior Subordinated Deferrable Debentures due 2037 from an unaffiliated financial institution.

(c) As part of the acquisition of Flagstone Reinsurance Holdings, S.A., the Company assumed $137.2 million of junior subordinated deferrable interest debentures due 2036 (the “Flagstone 2006 Junior Subordinated Deferrable Debentures”). The Flagstone 2006 Junior Subordinated Deferrable Debentures mature on September 15, 2036 and have been redeemable at the Company's option at par since September 15, 2011. In addition, the Company assumed $113.7 million of junior subordinated deferrable interest debentures due 2037 (the “Flagstone 2007 Junior Subordinated Deferrable Debentures”). $88.8 million of the Flagstone 2007 Junior Subordinated Deferrable Debentures mature on July 30, 2037 and have been redeemable at the Company's option at par since July 30, 2012. $25.0 million of the Flagstone 2007 Junior Subordinated Deferrable Debentures mature on September 15, 2037 and have been redeemable at the Company's option at par since September 15, 2012.

(d) Total capitalization equals total shareholders' equity plus redeemable noncontrolling interest, Senior Notes and Junior Subordinated Deferrable Debentures.

(e) Total capitalization available to Validus equals total shareholder's equity less noncontrolling interest plus Senior Notes and Junior Subordinated Deferrable Debentures.

(f) The Company does not include notes payable to operating affiliate investors within total capitalization, since these are issued to some of the Company's operating affiliates specifically for the purpose of purchasing capital market products and writing collateralized reinsurance.

115

Shareholders' Equity

Shareholders' equity available to Validus at June 30, 2014 was $3,777.1 million.

On July 29, 2014, the Company announced a quarterly cash dividend of $0.30 per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, which is payable on September 30, 2014 to shareholders and warrant holders of record on September 15, 2014. The timing and amount of any future cash dividends, however, will be at the discretion of the Board and will depend upon results of operations and cash flows, the Company's financial position and capital requirements, general business conditions, legal, tax, regulatory, rating agency and contractual constraints or restrictions and any other factors that the Board deems relevant.

On February 6, 2013, the Company approved a special dividend in the amount of $2.00 per common share and common share equivalent. The dividend was paid on February 26, 2013 to shareholders and warrant holders of record on February 19, 2013. On the same date the Board also approved an increase in the Company's regular quarterly dividend to $0.30 from $0.25 per common share and common share equivalent for which each outstanding warrant is exercisable.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures and Senior Notes. On February 5 and October 31, 2013, the Board of Directors of the Company approved increases in its common share repurchase authorization to $500.0 million and $500.0 million, respectively. On February 5, 2014, the Board of Directors of the Company approved a further increase to the Company's common share repurchase authorization to $500.0 million. This amount is in addition to the $1,774.4 million of common shares repurchased by the Company through February 5, 2014 under its previously authorized share repurchase programs.

The Company expects the purchases under its share repurchase program 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, the Company's 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 Board of Directors at any time.

Debt and Financing Arrangements

The following table details the Company's borrowings and credit facilities as at June 30, 2014.

(Dollars in thousands)	Maturity Date / Term	Commitments		Issued and Outstanding (a)
2006 Junior Subordinated Deferrable Debentures	June 15, 2036	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	June 15, 2037	200,000		139,800
2010 Senior Notes due 2040	January 26, 2040	250,000		250,000
$400,000 syndicated unsecured letter of credit facility	March 9, 2016	400,000		—
$525,000 syndicated secured letter of credit facility	March 9, 2016	525,000		305,330
$200,000 secured bi-lateral letter of credit facility	Evergreen	200,000		17,602
Talbot FAL Facility	December 31, 2015	25,000		25,000
PaCRe senior secured letter of credit facility	Evergreen	10,000		294
AlphaCat Re secured letter of credit facility	Evergreen	30,000		30,000
IPC Bi-Lateral Facility	Evergreen	40,000		19,572
$375,000 Flagstone bi-lateral facility	Evergreen	375,000		292,067
Flagstone 2006 Junior Subordinated Deferrable Debentures	September 15, 2036	137,800		137,800
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 15, 2037	113,750		113,750
Total		$	2,456,550	$	1,481,215

(a) Indicates utilization of commitment amount, not necessarily drawn borrowings.

Please refer to Note 12 to the Consolidated Financial Statements (Part I, Item 1) for further discussion of the Company’s debt and financing arrangements.

116

Ratings

The following table summarizes the financial strength ratings of the Company and its principal reinsurance and insurance subsidiaries from internationally recognized rating agencies as of August 7, 2014:

	A.M. Best (a)	S&P (b)	Moody’s (c)	Fitch (d)
Validus Holdings, Ltd.
Issuer credit rating	bbb	BBB+	Baa2	A-
Senior debt	bbb	BBB+	Baa2	BBB-
Subordinated debt	bbb-	BBB	Baa3	—
Preferred stock	bb+	BBB-	Ba1	—
Outlook on ratings	Stable	Stable	Positive	Stable
Validus Reinsurance, Ltd.
Financial strength rating	A	A	A3	A
Outlook on ratings	Stable	Stable	Positive	Stable
Lloyd's of London
Financial strength rating applicable to all Lloyd's syndicates	A	A+	—	AA-
Outlook on ratings	Positive	Positive	—	Stable
Talbot Syndicate 1183
Financial strength rating	A	—	—	—
Outlook on ratings	Positive	—	—	—
Validus Reinsurance (Switzerland), Ltd.
Financial strength rating	A	A-	—	—
Outlook on ratings	Stable	Stable	—	—

(a) The A.M. Best ratings were most recently affirmed on February 25, 2014 for Validus Holdings, Ltd, Validus Reinsurance, Ltd and Validus Reinsurance (Switzerland), Ltd. The A.M. Best rating for Lloyd's was most recently affirmed on July 19, 2013. The A.M. Best rating for Talbot Syndicate 1183 was assigned on June 18, 2014.

(b) The S&P ratings were most recently affirmed on August 23, 2012 for Validus Holdings, Ltd and Validus Reinsurance, Ltd. The S&P rating for Validus Reinsurance (Switzerland), Ltd. was issued on December 11, 2013. The S&P rating for Lloyd's was most recently affirmed on August 28, 2012.

(c) The Moody’s ratings were most recently affirmed on June 25, 2014 for Validus Holdings, Ltd and Validus Reinsurance, Ltd.

(d) The Fitch ratings were most recently affirmed on February 5, 2014 for Validus Holdings, Ltd. and Validus Reinsurance, Ltd. The Fitch rating for Lloyds was upgraded on June 10, 2014.

Recent accounting pronouncements

Please refer to Note 2 to the Consolidated Financial Statements (Part I, Item 1) for discussion of relevant recent accounting pronouncements.

117

Critical Accounting Policies and Estimates

There are certain accounting policies that the Company considers to be critical due to the judgment and uncertainty inherent in the application of those policies. In calculating financial statement estimates, the use of different assumptions could produce materially different estimates. The Company believes the following critical accounting policies affect significant estimates used in the preparation of the Company's Consolidated Financial Statements:

• Reserve for losses and loss expenses;

• Premium estimates for business written on a line slip or proportional basis;

• The valuation of goodwill and intangible assets;

• Reinsurance premiums ceded and reinsurance recoverable balances including the provision for uncollectible amounts; and

• Investment valuation of financial assets.

Critical accounting policies and estimates are discussed further in Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. Any prospectus, prospectus supplement, the Company’s Annual Report to shareholders, any proxy statement, any other Form 10-K, Form 10-Q or Form 8-K of the Company or any other written or oral statements made by or on behalf of the Company may include forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to the Company in general, and to the insurance and reinsurance sectors in particular. Statements that include the words “expect”, “intend”, “plan”, “believe”, “project”, “anticipate”, “will”, “may”, and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the PSLRA or otherwise. All forward-looking statements address matters that involve risks and uncertainties. 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 statement.

We believe that these factors include, but are not limited to, the following:

• unpredictability and severity of catastrophic events;

• our ability to obtain and maintain ratings, which may affect our ability to raise additional equity or debt financings, , as well as other factors described herein;

• adequacy of the Company’s risk management and loss limitation methods;

• cyclicality of demand and pricing in the insurance and reinsurance markets;

• the Company’s ability to implement its business strategy during “soft” as well as “hard” markets;

• adequacy of the Company’s loss reserves;

• continued availability of capital and financing;

• the Company’s ability to identify, hire and retain, on a timely and unimpeded basis and on anticipated economic and other terms, experienced and capable senior management, as well as underwriters, claims professionals and support staff;

• acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and (re)insureds;

• competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;

• potential loss of business from one or more major insurance or reinsurance brokers;

• the Company’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;

118

• general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates) and conditions specific to the insurance and reinsurance markets in which we operate;

• the integration of businesses we may acquire or new business ventures, including overseas offices, we may start and the risk associated with implementing our business strategies and initiatives with respect to the new business ventures;

• accuracy of those estimates and judgments used in the preparation of our financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, taxes, contingencies, litigation and any determination to use the deposit method of accounting, which, for a relatively new insurance and reinsurance company like our company, are even more difficult to make than those made in a mature company because of limited historical information;

• the effect on the Company’s investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and other factors;

• acts of terrorism, political unrest, outbreak of war and other hostilities or other non-forecasted and unpredictable events;

• availability and cost of reinsurance and retrocession coverage;

• the failure of reinsurers, retrocessionaires, producers or others to meet their obligations to us;

• the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;

• changes in domestic or foreign laws or regulations, or their interpretations;

• changes in accounting principles or the application of such principles by regulators;

• statutory or regulatory or rating agency developments, including as to tax policy and reinsurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers; and

• the other factors set forth under Part I Item 1A "Risk Factors" and under Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as well as the risk and other factors set forth in the Company's other filings with the SEC, as well as management's response to any of the aforementioned factors.

In addition, other general factors could affect our results, including: (a) developments in the world’s financial and capital markets and our access to such markets; (b) changes in regulations or tax laws applicable to us, and (c) the effects of business disruption or economic contraction due to terrorism or other hostilities.

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 or elsewhere. Any forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

119

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are principally exposed to five types of market risk:

• interest rate risk;

• foreign currency risk;

• credit risk;

• liquidity risk; and

• inflation risk.

Interest Rate Risk: The Company’s fixed maturity portfolio is exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise and credit spreads widen, the market value of the Company’s fixed maturity portfolio falls and the Company has the risk that cash outflows will have to be funded by selling assets, which will be trading at depreciated values. As interest rates decline and credit spreads tighten, the market value of the Company’s fixed income portfolio increases and the Company has reinvestment risk, as funds reinvested may earn less than is necessary to match anticipated liabilities. We manage interest rate risk by selecting investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of the insurance and reinsurance liabilities the Company assumes.

As at June 30, 2014 and December 31, 2013, the impact on the Company's fixed maturity and short-term investments from an immediate 100 basis point increase in market interest rates (based on U.S. treasury yield) would have been an estimated decrease in market value of 1.7% and 1.6%, or approximately $103.7 million and $106.0 million, respectively. As at June 30, 2014 and December 31, 2013, the impact on the Company's fixed maturity portfolio from an immediate 100 basis point decrease in market interest rates would have been an estimated increase in market value of 1.6% and 1.5% or approximately $102.2 million and $98.1 million, respectively.

As at June 30, 2014, the Company held $1,061.5 million (December 31, 2013: $836.9 million), or 20.6% (December 31, 2013: 15.1%), of the Company's fixed maturity portfolio in asset-backed and mortgage-backed securities. These assets are exposed to prepayment risk, which occurs when holders of underlying loans increase the frequency with which they prepay the outstanding principal before the maturity date and refinance at a lower interest rate cost. The adverse impact of prepayment is more evident in a declining interest rate environment. As a result, the Company would be exposed to reinvestment risk, as cash flows received by the Company could be accelerated and would be reinvested at the prevailing interest rates.

Foreign Currency Risk: Certain of the Company's (re)insurance contracts provide that ultimate losses may be payable in foreign currencies depending on the country of original loss. Foreign currency exchange rate risk exists to the extent that there is an increase in the exchange rate of the foreign currency in which losses are ultimately owed. Therefore, we attempt to manage our foreign currency risk by seeking to match our liabilities under these contracts with cash and investments that are denominated in such currencies. As of June 30, 2014, $931.4 million, or 8.9% of our total assets and $896.3 million, or 14.9% of our total liabilities were denominated in foreign currencies. As of June 30, 2014, approximately $115.5 million, or 1.9% of our total liabilities denominated in foreign currencies were non-monetary items which do not require revaluation at each reporting date. As of December 31, 2013, $877.4 million, or 9.0% of our total assets and $912.8 million, or 16.7% of our total liabilities were denominated in foreign currencies. As of December 31, 2013, $133.4 million, or 2.4% of our total liabilities denominated in foreign currencies were non-monetary items which do not require revaluation at each reporting date. When necessary, we may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts. Foreign currency forward contracts do not eliminate fluctuations in the value of our assets and liabilities denominated in foreign currencies but rather allow us to establish a rate of exchange for a future point in time. For further information on the accounting treatment of our foreign currency derivatives, refer to Note 7 of Part I, Item 1 - Consolidated Financial Statements. To the extent foreign currency exposure is not hedged or otherwise matched, the Company may experience exchange losses, which in turn would adversely affect the results of operations and financial condition.

120

Credit Risk: The Company exposed to credit risk from the possibility that counterparties may default on their obligations. The Company’s primary credit risks reside in investment in U.S. and non-U.S. corporate bonds and amounts recoverable from reinsurers. The Company limits credit exposure by purchasing high quality fixed income investments to maintain an average portfolio credit quality of AA- or higher with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, the Company has limited the exposure to any single issuer to 3.0% or less of total investments, excluding treasury and agency securities. With the exception of the bank loan portfolio, the Company’s investment guidelines require that investments be rated BBB- or higher at the time of purchase. Where investments are downgraded below BBB-/Baa3, the Company permits its investment managers to hold up to 2.0% in aggregate market value, or up to 10.0% with written authorization of the Company. At June 30, 2014, 1.0% of the portfolio, excluding bank loans, was below BBB-/Baa3 and there was no aggregate exposure to any single issuer of more than 0.9% of total investments, other than with respect to government and agency securities.

The amount of the maximum exposure to credit risk is indicated by the carrying value of the Company's financial assets. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by S & P or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At June 30, 2014, 98.4% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) were from reinsurers rated A- or above, (December 31, 2013: 96.7%, rated A-) or from reinsurers posting full collateral.

Liquidity risk: Certain of the Company's investments may become illiquid. Disruptions in the credit markets may materially affect the liquidity of the Company's investments, including non-agency residential mortgage-backed securities and bank loans which represent 6.8% (December 31, 2013: 9.2%) of total cash and investments at June 30, 2014. If the Company requires significant amounts of cash on short notice in excess of normal cash requirements (which could include claims on a major catastrophic event) in a period of market illiquidity, the investments may be difficult to sell in a timely manner and may have to be disposed of for less than what may otherwise have been possible under other conditions. At June 30, 2014, the Company had $1,270.2 million of unrestricted, liquid assets, defined as unpledged cash and cash equivalents, short term investments and government and government agency securities. Details of the Company's debt and financing arrangements at June 30, 2014 are provided below.

(Dollars in thousands)	Maturity Date / Term	In Use / Outstanding
2006 Junior Subordinated Deferrable Debentures	June 15, 2036	$	150,000
2007 Junior Subordinated Deferrable Debentures	June 15, 2037	139,800
2010 Senior Notes due 2040	January 26, 2040	250,000
$400,000 syndicated unsecured letter of credit facility	March 9, 2016	—
$525,000 syndicated secured letter of credit facility	March 9, 2016	305,330
$200,000 secured bi-lateral letter of credit facility	Evergreen	17,602
Talbot FAL facility	December 31, 2015	25,000
PaCRe senior secured letter of credit facility	Evergreen	294
AlphaCat Re secured letter of credit facility	Evergreen	30,000
IPC Bi-Lateral Facility	Evergreen	19,572
$375,000 Flagstone bi-lateral facility	Evergreen	292,067
Flagstone 2006 Junior Subordinated Deferrable Debentures	September 15, 2036	137,800
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 15, 2037	113,750
Total		$	1,481,215

Inflation Risk: We do not believe that inflation has had or will have a material effect on the Company's combined results of operations, except insofar as (a) inflation may affect interest rates, and (b) losses and loss expenses may be affected by inflation.

121

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance that all material information relating to the Company required to be filed in this report has been recorded, processed, summarized and reported when required and the information is accumulated and communicated, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting identified in connection with the Company’s evaluation required pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the normal course of business, the Company and its subsidiaries are subject to litigation and arbitration. Legal proceedings such as claims litigation are common in the insurance and reinsurance industry in general. The Company and its subsidiaries may be subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on reinsurance treaties or contracts or insurance policies.

Litigation typically can include, but is not limited to, allegations of underwriting errors or misconduct, employment claims, regulatory activity, shareholder disputes or disputes arising from business ventures. These events are difficult, if not impossible, to predict with certainty. It is Company policy to dispute all allegations against the Company and/or its subsidiaries that management believes are without merit.

As at June 30, 2014, the Company was not a party to, or involved in any litigation or arbitration that it believes could have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

ITEM 1A. RISK FACTORS

Please refer to the discussion of Risk factors in Part 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company has repurchased approximately 62.5 million common shares for an aggregate purchase price of $1,931.5 million from the inception of the share repurchase program to August 5, 2014.

The Company expects the purchases under its share repurchase program 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, the Company’s capital position relative to internal and rating agency targets, legal requirements and other factors.

On February 5, 2014, the Board of Directors of the Company approved an increase to the Company's common share repurchase authorization to $500.0 million. This amount is in addition to the $1,774.4 million of common shares repurchased by the Company through February 5, 2014 under its previously authorized share repurchase programs.

The repurchase program may be modified, extended or terminated by the Board of Directors at any time. The remaining amount available under the current share repurchase authorization is $343.0 million as of August 5, 2014.

122

Share repurchases include repurchases by the Company of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares which have vested. We repurchase these shares at their fair market value, as determined by reference to the closing price of our common shares on the day the restricted shares vested.

	Share Repurchase Activity (Expressed in thousands of U.S. dollars except for share and per share information)
	As at March 31, 2014								Quarter ended
Effect of share repurchases:	(cumulative)		April		May		June		June 30, 2014
Aggregate purchase price (a)	$	1,917,688	$	—	$	—	$	—	$	—
Shares repurchased	62,171,982		$	—	$	—	$	—	$	—
Average price (a)	$	30.84	$	—	$	—	$	—	$	—
Estimated cumulative net accretive (dilutive) impact on:
Diluted BV per common share (b)									$	2.93
Diluted EPS - Quarter (c)									$	0.61

	Share Repurchase Activity (Expressed in thousands of U.S. dollars except for share and per share information)
Effect of share repurchases:	As at June 30, 2014 (cumulative)		July		August		As at August 5, 2014		Cumulative to Date Effect
Aggregate purchase price (a)	$	1,917,688	$	6,887	$	6,902	$	13,789	$	1,931,477
Shares repurchased	62,171,982		187,661		188,560		376,221		62,548,203
Average price (a)	$	30.84	$	36.70	$	36.60	$	36.65	$	30.88

(a) Share transactions are on a trade date basis through August 5, 2014 and are inclusive of commissions.  Average share price is rounded to two decimal places.

(b) As the average price per share repurchased during the periods from 2009 at the inception of the share repurchase program through to 2013 was lower than the book value per common share, the repurchase of shares increased the ending book value per share.

(c) The estimated impact on earnings per diluted share was calculated by comparing reported results versus i) net income per share plus an estimate of lost net investment income on the cumulative share repurchases divided by ii) weighted average diluted shares outstanding excluding the weighted average impact of cumulative share repurchases. The impact of cumulative share repurchases was accretive to earnings per diluted share.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.OTHER INFORMATION

None.

123

ITEM 6. EXHIBITS

Exhibit	Description
Exhibit 10.1*	Amendment No. 1 to Employment Agreement between Validus America, Inc. and Romel Salam dated as of May 20, 2014.
Exhibit 31.1*	Certification of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Exhibit 31.2*	Certification of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
Exhibit 32*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
Exhibit 101.1 INS*	XBRL Instance Document
Exhibit 101.SCH*	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

*Filed herewith

124

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		VALIDUS HOLDINGS, LTD.
		(Registrant)
Date:	August 7, 2014	/s/ Edward J. Noonan
		Edward J. Noonan
		Chief Executive Officer
Date:	August 7, 2014	/s/ Jeffrey D. Sangster
		Jeffrey D. Sangster
		Executive Vice President and Chief Financial Officer

125

EX-10.1

Exhibit 10.1

AMENDMENT TO

EMPLOYMENT AGREEMENT

This AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) effective as of the dates further set forth herein is entered into between Validus America, Inc. (the “Company”) and Romel Salam (the “Executive”).

WITNESSETH:

WHEREAS, the Company and the Executive are parties to an Employment Agreement dated as of 2 April 2013(the “Agreement”);

WHEREAS the Company and the Executive wish to amend certain provisions of the Agreement;

 NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and the Executive hereby agree to amend the Agreement as follows:

1. The Agreement is hereby amended effective as of 1 June 2014 by deleting subsection (d) of Section 4.03.

2. The Agreement is hereby amended effective as of 1 April 2014 by amending and restating Section 4.01 as follows:

Section 4.01    Base Salary.During the Employment Period, the Executive’s base salary will be $550,000.00 per annum (the “Base Salary”). The Base Salary will be payable annually in arrears in twenty four (24) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive’s Base Salary may be increased.

Except as specifically amended above the Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on May 20, 2014.

VALIDUS AMERICA, INC.

/s/ Robert F. Kuzloski

By: _______________________________

Printed Name: Robert F. Kuzloski

Title: Director

ROMEL SALAM

/s/ Romel Salam

By: _______________________________

Printed Name: Romel Salam

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

VALIDUS HOLDINGS, LTD.

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Chapter 98, Title 15 U.S.C. SS. 7241)

I, Edward J. Noonan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Validus Holdings, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 7, 2014

/s/ EDWARD J. NOONAN

Edward J. Noonan

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

VALIDUS HOLDINGS, LTD.

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(Chapter 98, Title 15 U.S.C. SS. 7241)

I, Jeffrey D. Sangster, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Validus Holdings, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 7, 2014

/s/ JEFFREY D. SANGSTER

Jeffrey D. Sangster

 Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION ACCOMPANYING FORM 10-Q REPORT

OF

VALIDUS HOLDINGS, LTD. PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

(Chapter 63, Title 18 U.S.C. SS.SS. 1350(a) and (b))

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. ss.ss. 1350(a) and (b)), each of the undersigned hereby certifies that the Quarterly Report on Form 10-Q for the three and six months ended June 30, 2014 of Validus Holdings, Ltd. (the "Company") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 7, 2014

/s/ EDWARD J. NOONAN

Edward J. Noonan

Chief Executive Officer

Validus Holdings, Ltd.

Dated: August 7, 2014

/s/ JEFFREY D. SANGSTER

Jeffrey D. Sangster

 Executive Vice President and Chief Financial Officer

Validus Holdings, Ltd.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Validus Holdings, Ltd. and will be retained by Validus Holdings, Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Segment information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Summary of results of operating segments and corporate

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	310,286		$	43,790		$	317,944		$	(16,346	)	$	655,674
Reinsurance premiums ceded	(30,535		)	—			(36,376		)	16,346			(50,565		)
Net premiums written	279,751			43,790			281,568			—			605,109
Change in unearned premiums	(58,023		)	(11,330		)	(69,753		)	—			(139,106		)
Net premiums earned	221,728			32,460			211,815			—			466,003
Underwriting deductions
Losses and loss expenses	77,688			(3,033		)	84,090			—			158,745
Policy acquisition costs	31,125			3,056			45,593			(821		)	78,953
General and administrative expenses	17,040			3,780			34,173			18,849			73,842
Share compensation expenses	2,336			161			2,862			2,982			8,341
Total underwriting deductions	128,189			3,964			166,718			21,010			319,881
Underwriting income (loss)	$	93,539		$	28,496		$	45,097		$	(21,010	)	$	146,122
Net investment income	16,758			829			4,671			(972		)	21,286
Other income (loss)	969			6,005			258			(1,997		)	5,235
Finance expenses	(3,670		)	(971		)	(68		)	(11,417		)	(16,126		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	107,596			34,359			49,958			(35,396		)	156,517
Tax (expense) benefit	(460		)	—			(1,364		)	433			(1,391		)
Income from operating affiliates	—			4,892			—			—			4,892
(Income) attributable to operating affiliate investors	—			(25,316		)	—			—			(25,316		)
Net operating income (loss)	$	107,136		$	13,935		$	48,594		$	(34,963	)	$	134,702
Net realized gains on investments	1,324			6,442			92			—			7,858
Change in net unrealized gains (losses) on investments	13,530			30,087			2,679			(869		)	45,427
Income from investment affiliate	779			—			—			—			779
Foreign exchange gains (losses)	2,848			(191		)	1,367			(866		)	3,158
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	125,617		$	50,273		$	52,732		$	(39,950	)	$	188,672
Net (income) attributable to noncontrolling interest	—			(35,305		)	—			—			(35,305		)
Net income (loss) available (attributable) to Validus	$	125,617		$	14,968		$	52,732		$	(39,950	)	$	153,367
Selected ratios (a):
Net premiums written / Gross premiums written	90.2		%	100.0		%	88.6		%				92.3		%
Losses and loss expenses	35.0		%	(9.3		)%	39.7		%				34.1		%
Policy acquisition costs	14.1		%	9.4		%	21.5		%				16.9		%
General and administrative expenses (c)	8.7		%	12.1		%	17.5		%				17.6		%
Expense ratio	22.8		%	21.5		%	39.0		%				34.5		%
Combined ratio	57.8		%	12.2		%	78.7		%				68.6		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

Three Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	353,384		$	46,760		$	315,518		$	(13,349	)	$	702,313
Reinsurance premiums ceded	(87,558		)	—			(47,187		)	13,349			(121,396		)
Net premiums written	265,826			46,760			268,331			—			580,917
Change in unearned premiums	38,925			(11,770		)	(60,614		)	—			(33,459		)
Net premiums earned	304,751			34,990			207,717			—			547,458
Underwriting deductions
Losses and loss expenses	183,646			1,313			80,085			—			265,044
Policy acquisition costs	42,789			3,586			41,667			(890		)	87,152
General and administrative expenses	20,423			3,992			32,192			14,360			70,967
Share compensation expenses	1,529			85			2,357			2,667			6,638
Total underwriting deductions	248,387			8,976			156,301			16,137			429,801
Underwriting income (loss)	$	56,364		$	26,014		$	51,416		$	(16,137	)	$	117,657
Net investment income	22,949			973			4,383			(2,095		)	26,210
Other (loss) income	(361		)	7,015			491			(2,727		)	4,418
Finance expenses	(5,241		)	(2,945		)	(75		)	(9,305		)	(17,566		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	73,711			31,057			56,215			(30,264		)	130,719
Tax (expense) benefit	(145		)	—			383			(331		)	(93		)
Income from operating affiliates	—			3,793			—			—			3,793
(Income) attributable to operating affiliate investors	—			(20,264		)	—			—			(20,264		)
Net operating income (loss)	$	73,566		$	14,586		$	56,598		$	(30,595	)	$	114,155
Net realized gains on investments	2,754			—			655			—			3,409
Change in net unrealized losses on investments	(57,834		)	(70,386		)	(13,128		)	—			(141,348		)
Income from investment affiliate	1,753			—			—			—			1,753
Foreign exchange (losses) gains	(5,882		)	136			(2,197		)	(280		)	(8,223		)
Net income (loss)	$	14,357		$	(55,664	)	$	41,928		$	(30,875	)	$	(30,254	)
Net loss attributable to noncontrolling interest	—			60,976			—			—			60,976
Net income (loss) available (attributable) to Validus	$	14,357		$	5,312		$	41,928		$	(30,875	)	$	30,722
Selected ratios (a):
Net premiums written / Gross premiums written	75.2		%	100.0		%	85.0		%				82.7		%
Losses and loss expenses	60.3		%	3.8		%	38.6		%				48.4		%
Policy acquisition costs	14.0		%	10.2		%	20.1		%				15.9		%
General and administrative expenses (b)	7.2		%	11.7		%	16.6		%				14.2		%
Expense ratio	21.2		%	21.9		%	36.7		%				30.1		%
Combined ratio	81.5		%	25.7		%	75.3		%				78.5		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Six Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	989,272		$	128,137		$	608,639		$	(58,383	)	$	1,667,665
Reinsurance premiums ceded	(173,175		)	(3,700		)	(126,981		)	58,383			(245,473		)
Net premiums written	816,097			124,437			481,658			—			1,422,192
Change in unearned premiums	(355,983		)	(61,294		)	(55,955		)	—			(473,232		)
Net premiums earned	460,114			63,143			425,703			—			948,960
Underwriting deductions
Losses and loss expenses	145,843			(10,893		)	186,466			—			321,416
Policy acquisition costs	70,370			6,036			90,521			(2,325		)	164,602
General and administrative expenses	35,235			7,908			69,322			35,822			148,287
Share compensation expenses	4,544			151			5,444			5,349			15,488
Total underwriting deductions	255,992			3,202			351,753			38,846			649,793
Underwriting income (loss)	$	204,122		$	59,941		$	73,950		$	(38,846	)	$	299,167
Net investment income	35,523			1,709			9,357			(1,941		)	44,648
Other income (loss)	7,739			15,502			275			(4,451		)	19,065
Finance expenses	(7,509		)	(1,654		)	(94		)	(22,769		)	(32,026		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	239,875			75,498			83,488			(68,007		)	330,854
Tax benefit (expense)	118			—			(1,234		)	(235		)	(1,351		)
Income from operating affiliates	—			9,819			—			—			9,819
(Income) attributable to operating affiliate investors	—			(57,026		)	—			—			(57,026		)
Net operating income (loss)	$	239,993		$	28,291		$	82,254		$	(68,242	)	$	282,296
Net realized gains on investments	3,770			7,667			161			—			11,598
Change in net unrealized gains (losses) on investments	25,428			75,959			5,256			(5,523		)	101,120
Income from investment affiliate	6,127			—			—			—			6,127
Foreign exchange (losses) gains	(3,328		)	(153		)	1,217			(1,056		)	(3,320		)
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	271,990		$	111,764		$	88,888		$	(78,073	)	$	394,569
Net (income) attributable to noncontrolling interest	—			(78,814		)	—			—			(78,814		)
Net income (loss) available (attributable) to Validus	$	271,990		$	32,950		$	88,888		$	(78,073	)	$	315,755
Selected ratios (a):
Net premiums written / Gross premiums written	82.5		%	97.1		%	79.1		%				85.3		%
Losses and loss expenses	31.7		%	(17.3		)%	43.8		%				33.9		%
Policy acquisition costs	15.3		%	9.6		%	21.2		%				17.3		%
General and administrative expenses (c)	8.6		%	12.8		%	17.6		%				17.3		%
Expense ratio	23.9		%	22.4		%	38.8		%				34.6		%
Combined ratio	55.6		%	5.1		%	82.6		%				68.5		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

Six Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	1,101,347		$	143,276		$	609,048		$	(46,598	)	$	1,807,073
Reinsurance premiums ceded	(213,286		)	—			(141,924		)	46,598			(308,612		)
Net premiums written	888,061			143,276			467,124			—			1,498,461
Change in unearned premiums	(280,176		)	(80,669		)	(59,097		)	—			(419,942		)
Net premiums earned	607,885			62,607			408,027			—			1,078,519
Underwriting deductions
Losses and loss expenses	257,048			1,313			151,454			—			409,815
Policy acquisition costs	94,533			6,224			82,193			(2,187		)	180,763
General and administrative expenses	49,864			8,029			63,104			30,249			151,246
Share compensation expenses	2,942			162			3,762			2,090			8,956
Total underwriting deductions	404,387			15,728			300,513			30,152			750,780
Underwriting income (loss)	$	203,498		$	46,879		$	107,514		$	(30,152	)	$	327,739
Net investment income	46,142			1,854			9,101			(5,238		)	51,859
Other income (loss)	13,129			13,648			491			(20,165		)	7,103
Finance expenses	(8,493		)	(4,193		)	(149		)	(19,100		)	(31,935		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	254,276			58,188			116,957			(74,655		)	354,766
Tax benefit (expense)	1,612			—			(671		)	(716		)	225
Income from operating affiliates	—			7,316			—			—			7,316
(Income) attributable to operating affiliate investors	—			(30,341		)	—			—			(30,341		)
Net operating income (loss)	$	255,888		$	35,163		$	116,286		$	(75,371	)	$	331,966
Net realized gains on investments	4,347			—			783			—			5,130
Change in net unrealized losses on investments	(60,027		)	(75,174		)	(13,384		)	—			(148,585		)
Income from investment affiliate	3,230			—			—			—			3,230
Foreign exchange gains (losses)	5,280			(1,051		)	(6,115		)	585			(1,301		)
Net income (loss)	$	208,718		$	(41,062	)	$	97,570		$	(74,786	)	$	190,440
Net loss attributable to noncontrolling interest	—			63,525			—			—			63,525
Net income (loss) available (attributable) to Validus	$	208,718		$	22,463		$	97,570		$	(74,786	)	$	253,965
Selected ratios (a):
Net premiums written / Gross premiums written	80.6		%	100.0		%	76.7		%				82.9		%
Losses and loss expenses	42.3		%	2.1		%	37.1		%				38.0		%
Policy acquisition costs	15.6		%	9.9		%	20.1		%				16.8		%
General and administrative expenses (b)	8.7		%	13.1		%	16.4		%				14.9		%
Expense ratio	24.3		%	23.0		%	36.5		%				31.7		%
Combined ratio	66.6		%	25.1		%	73.6		%				69.7		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Gross premiums written allocated to the territory of coverage exposure

The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re			AlphaCat			Talbot		Eliminations			Total		%
United States	$	176,625		$	20,256		$	42,151	$	(4,123	)	$	234,909	35.8	%
Worldwide excluding United States (a)	8,622			(266		)	38,434		(1,028		)	45,762		7.0	%
Australia and New Zealand	6,599			—			1,423		29			8,051		1.2	%
Europe	13,704			1,392			7,498		(1,029		)	21,565		3.3	%
Latin America and Caribbean	2,490			—			30,132		(547		)	32,075		4.9	%
Japan	40,221			586			1,592		(658		)	41,741		6.4	%
Canada	421			(1		)	2,750		(38		)	3,132		0.5	%
Rest of the world (b)	(1,156		)	—			25,153		(756		)	23,241		3.5	%
Sub-total, non United States	70,901			1,711			106,982		(4,027		)	175,567		26.8	%
Worldwide including United States (a)	40,241			21,823			28,883		(4,159		)	86,788		13.2	%
Other location non-specific (c)	22,519			—			139,928		(4,037		)	158,410		24.2	%
Total	$	310,286		$	43,790		$	317,944	$	(16,346	)	$	655,674	100.0	%

	Three Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	194,631		$	30,900	$	35,516	$	(1,630	)	$	259,417	36.9	%
Worldwide excluding United States (a)	2,201			112		35,353		(419		)	37,247		5.2	%
Australia and New Zealand	5,572			—		2,020		(1		)	7,591		1.1	%
Europe	19,864			173		13,434		(58		)	33,413		4.8	%
Latin America and Caribbean	(8,435		)	—		44,036		(741		)	34,860		5.0	%
Japan	43,839			653		3,538		(796		)	47,234		6.7	%
Canada	392			—		3,335		(71		)	3,656		0.5	%
Rest of the world (b)	4,491			—		22,322		(467		)	26,346		3.8	%
Sub-total, non United States	67,924			938		124,038		(2,553		)	190,347		27.1	%
Worldwide including United States (a)	50,470			14,922		26,596		(4,860		)	87,128		12.4	%
Other location non-specific (c)	40,359			—		129,368		(4,306		)	165,421		23.6	%
Total	$	353,384		$	46,760	$	315,518	$	(13,349	)	$	702,313	100.0	%

	Six Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	423,409	$	28,954	$	68,462	$	(9,788	)	$	511,037	30.6	%
Worldwide excluding United States (a)	70,156		7,412		75,616		(5,768		)	147,416		8.9	%
Australia and New Zealand	19,415		1,019		4,303		(252		)	24,485		1.5	%
Europe	51,600		2,693		26,289		(3,846		)	76,736		4.6	%
Latin America and Caribbean	9,424		—		61,371		(3,599		)	67,196		4.0	%
Japan	40,380		586		2,130		(711		)	42,385		2.5	%
Canada	3,320		215		5,895		(561		)	8,869		0.5	%
Rest of the world (b)	52,694		—		43,557		(2,554		)	93,697		5.6	%
Sub-total, non United States	246,989		11,925		219,161		(17,291		)	460,784		27.6	%
Worldwide including United States (a)	145,432		87,258		52,536		(10,805		)	274,421		16.5	%
Other location non-specific (c)	173,442		—		268,480		(20,499		)	421,423		25.3	%
Total	$	989,272	$	128,137	$	608,639	$	(58,383	)	$	1,667,665	100.0	%

	Six Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	431,127		$	48,389	$	56,057	$	(8,494	)	$	527,079	29.1	%
Worldwide excluding United States (a)	52,509			14,801		74,811		(4,927		)	137,194		7.6	%
Australia and New Zealand	30,598			2,183		5,025		(231		)	37,575		2.1	%
Europe	60,734			2,137		31,745		(2,906		)	91,710		5.1	%
Latin America and Caribbean	(17		)	—		86,036		(3,959		)	82,060		4.5	%
Japan	44,576			653		4,192		(846		)	48,575		2.7	%
Canada	3,034			318		6,041		(596		)	8,797		0.5	%
Rest of the world (b)	23,570			—		40,636		(1,870		)	62,336		3.4	%
Sub-total, non United States	215,004			20,092		248,486		(15,335		)	468,247		25.9	%
Worldwide including United States (a)	151,010			74,795		45,752		(8,549		)	263,008		14.6	%
Other location non-specific (c)	304,206			—		258,753		(14,220		)	548,739		30.4	%
Total	$	1,101,347		$	143,276	$	609,048	$	(46,598	)	$	1,807,073	100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The other locations non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable, such as marine and aerospace risks, since these exposures can span multiple geographic areas and, in some instances, are not fixed locations.

XML

Investments in affiliates (Operating affiliates rollforward) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013	Jun. 30, 2014		Jun. 30, 2013
Activity in non-consolidated affiliate balances for the period:
Income from operating affiliates	$ 4,892		$ 3,793	$ 9,819		$ 7,316
Operating affiliates
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	181,759		110,412	106,743		157,111
Return of investment	(13,659)		(29,085)	(57,025)		(79,307)
Fair value of retained interest on deconsolidation of AlphaCat ILS fund				113,455
Income from operating affiliates	4,892		3,793	9,819		7,316
Balance, end of period	172,992		85,120	172,992		85,120
Operating affiliates | AlphaCat Re 2011
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	4,177		16,805	9,809		62,792
Return of investment	0		(5,678)	(5,825)		(52,114)
Income from operating affiliates	(5)		(73)	188		376
Balance, end of period	4,172		11,054	4,172		11,054
Operating affiliates | AlphaCat Re 2012
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	1,277		27,358	1,313		29,319
Return of investment	0		(23,407)	0		(27,193)
Income from operating affiliates	927		1,253	891		3,078
Balance, end of period	2,204		5,204	2,204		5,204
Operating affiliates | AlphaCat 2013
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	15,678		46,100	51,744		45,000
Return of investment	(13,659)		0	(51,200)		0
Income from operating affiliates	561		2,436	2,036		3,536
Balance, end of period	2,580		48,536	2,580		48,536
Operating affiliates | AlphaCat 2014
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	23,593			21,982
Return of investment	0			0
Income from operating affiliates	1,421			3,032
Balance, end of period	25,014			25,014
Operating affiliates | AlphaCat ILS Funds
Activity in non-consolidated affiliate balances for the period:
Balance, beginning of period	137,034		20,149	21,895		20,000
Return of investment	0		0	0		0
Fair value of retained interest on deconsolidation of AlphaCat ILS fund				113,455
Income from operating affiliates	1,988		177	3,672		326
Balance, end of period	$ 139,022	[1]	$ 20,326	$ 139,022	[1]	$ 20,326

[1] Equity ownership in the two funds were 8.6% and 49.0% respectively as at June 30, 2014.

XML

Fair value measurements (Fair value hierarchy) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013		Jun. 30, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	$ 5,154,629		$ 5,542,258
Short-term investments, at fair value	816,820	[1],[2]	751,778	[3]
Other investments, at fair value	783,423		618,316
Total	6,754,872		6,912,352
Noncontrolling interest	(569,290)	[2]	(489,402)	[2]
Redeemable noncontrolling interest share of VIE investments	(8,305)	[1]	(18,365)	[3]
Total investments excluding noncontrolling interest	6,177,277		6,404,585
U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,031,777		1,364,679
Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	447,070		459,068
U.S. states, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	49,440		43,120
Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	315,105		311,499
Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	17,781		15,759
U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,312,509		1,332,484
Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	693,588		714,325
Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	520,725		717,116
Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	38,063		74,551
Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	606,742		509,657
Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	121,829
Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	2,014		2,303
Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	623,896	[2]	561,083	[2]
Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	15,485		13,485
Investment funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	131,690		31,629
Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	10,338		9,816
PaCRe funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	10.00%		10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%		90.00%
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,154,629		5,542,258
Short-term investments, at fair value	816,820	[1],[2]	751,778	[3]
Other investments, at fair value	783,423		618,316
Total	6,754,872		6,912,352
Noncontrolling interest	(569,290)	[2]	(489,402)	[2]
Redeemable noncontrolling interest share of VIE investments	(8,305)	[1]	(18,365)	[3]
Total investments excluding noncontrolling interest	6,177,277		6,404,585
Fair Value, Measurements, Recurring [Member] | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,031,777		1,364,679
Fair Value, Measurements, Recurring [Member] | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	447,070		459,068
Fair Value, Measurements, Recurring [Member] | U.S. states, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	49,440		43,120
Fair Value, Measurements, Recurring [Member] | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	315,105		311,499
Fair Value, Measurements, Recurring [Member] | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	17,781		15,759
Fair Value, Measurements, Recurring [Member] | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,312,509		1,332,484
Fair Value, Measurements, Recurring [Member] | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	693,588		714,325
Fair Value, Measurements, Recurring [Member] | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	520,725		717,116
Fair Value, Measurements, Recurring [Member] | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	38,063		74,551
Fair Value, Measurements, Recurring [Member] | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	606,742		509,657
Fair Value, Measurements, Recurring [Member] | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	121,829
Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	2,014		2,303
Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	623,896	[2]	561,083	[2]
Fair Value, Measurements, Recurring [Member] | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	15,485		13,485
Fair Value, Measurements, Recurring [Member] | Investment funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	131,690		31,629
Fair Value, Measurements, Recurring [Member] | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	10,338		9,816
Fair Value, Measurements, Recurring [Member] | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Short-term investments, at fair value	801,944	[1],[2]	747,215	[3]
Other investments, at fair value	0		0
Total	801,944		747,215
Noncontrolling interest	(22,500)	[2]	0	[2]
Redeemable noncontrolling interest share of VIE investments	(8,305)	[1]	(18,365)	[3]
Total investments excluding noncontrolling interest	771,139		728,850
Fair Value, Measurements, Recurring [Member] | Level 1 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | U.S. states, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0
Fair Value, Measurements, Recurring [Member] | Level 1 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0	[2]	0	[2]
Fair Value, Measurements, Recurring [Member] | Level 1 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Investment funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 1 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,149,628		5,542,258
Short-term investments, at fair value	14,876	[1],[2]	4,563	[3]
Other investments, at fair value	42,028		41,445
Total	5,206,532		5,588,266
Noncontrolling interest	0	[2]	0	[2]
Redeemable noncontrolling interest share of VIE investments	0	[1]	0	[3]
Total investments excluding noncontrolling interest	5,206,532		5,588,266
Fair Value, Measurements, Recurring [Member] | Level 2 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,031,777		1,364,679
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	447,070		459,068
Fair Value, Measurements, Recurring [Member] | Level 2 | U.S. states, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	49,440		43,120
Fair Value, Measurements, Recurring [Member] | Level 2 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	315,105		311,499
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	17,781		15,759
Fair Value, Measurements, Recurring [Member] | Level 2 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	1,312,509		1,332,484
Fair Value, Measurements, Recurring [Member] | Level 2 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	693,588		714,325
Fair Value, Measurements, Recurring [Member] | Level 2 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	520,725		717,116
Fair Value, Measurements, Recurring [Member] | Level 2 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	33,062		74,551
Fair Value, Measurements, Recurring [Member] | Level 2 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	606,742		509,657
Fair Value, Measurements, Recurring [Member] | Level 2 | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	121,829
Fair Value, Measurements, Recurring [Member] | Level 2 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0	[2]	0	[2]
Fair Value, Measurements, Recurring [Member] | Level 2 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 2 | Investment funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	31,690		31,629
Fair Value, Measurements, Recurring [Member] | Level 2 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	10,338		9,816
Fair Value, Measurements, Recurring [Member] | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,001		0
Short-term investments, at fair value	0	[1],[2]	0	[3]
Other investments, at fair value	741,395		576,871
Total	746,396		576,871
Noncontrolling interest	(546,790)	[2],[4]	(489,402)	[2]	(422,893)	[4]
Redeemable noncontrolling interest share of VIE investments	0	[1]	0	[3]
Total investments excluding noncontrolling interest	199,606		87,469
Percentage Of Fair Value Assets Measured On Recurring Basis	3.20%		1.40%
Fair Value, Measurements, Recurring [Member] | Level 3 | U.S. government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-US government and government agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | U.S. states, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Non-U.S. corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Bank loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Catastrophe bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	5,001		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities, at fair value	0
Fair Value, Measurements, Recurring [Member] | Level 3 | Fund of hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	2,014		2,303
Fair Value, Measurements, Recurring [Member] | Level 3 | Hedge funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	623,896	[2]	561,083	[2]
Fair Value, Measurements, Recurring [Member] | Level 3 | Private equity investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	15,485		13,485
Fair Value, Measurements, Recurring [Member] | Level 3 | Investment funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	100,000		0
Fair Value, Measurements, Recurring [Member] | Level 3 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other investments, at fair value	$ 0		$ 0

[1] Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

[2] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

[3] Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

[4] Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

XML

Debt and financing arrangements (Summary of notes and debentures) (Details) (USD $) In Thousands, unless otherwise specified											6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 2006 Junior Subordinated Deferrable Debentures	Dec. 31, 2013 2006 Junior Subordinated Deferrable Debentures	Jun. 30, 2014 Flagstone 2006 Junior Subordinated Deferrable Interest Notes	Dec. 31, 2013 Flagstone 2006 Junior Subordinated Deferrable Interest Notes	Jun. 30, 2014 2007 Junior Subordinated Deferrable Debentures	Dec. 31, 2013 2007 Junior Subordinated Deferrable Debentures	Jun. 30, 2014 2010 Senior Notes Due 2040	Dec. 31, 2013 2010 Senior Notes Due 2040	Jun. 30, 2014 Debt Information At Issuance [Member] 2006 Junior Subordinated Deferrable Debentures		Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2006 Junior Subordinated Deferrable Interest Notes	Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2006 Junior Subordinated Deferrable Interest Notes London Interbank Offered Rate (LIBOR) [Member]		Jun. 30, 2014 Debt Information At Issuance [Member] 2007 Junior Subordinated Deferrable Debentures		Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2007 Due July 30 2037	Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2007 Due July 30 2037 London Interbank Offered Rate (LIBOR) [Member]		Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2007 Debt Due September 15 2037	Jun. 30, 2014 Debt Information At Issuance [Member] Flagstone 2007 Debt Due September 15 2037 London Interbank Offered Rate (LIBOR) [Member]		Jun. 30, 2014 Debt Information At Issuance [Member] 2010 Senior Notes Due 2040		Jun. 30, 2014 Debt Outstanding [Member] 2006 Junior Subordinated Deferrable Debentures		Jun. 30, 2014 Debt Outstanding [Member] Flagstone 2006 Junior Subordinated Deferrable Interest Notes		Jun. 30, 2014 Debt Outstanding [Member] 2007 Junior Subordinated Deferrable Debentures		Jun. 30, 2014 Debt Outstanding [Member] Flagstone 2007 Due July 30 2037		Jun. 30, 2014 Debt Outstanding [Member] Flagstone 2007 Debt Due September 15 2037		Jun. 30, 2014 Debt Outstanding [Member] 2010 Senior Notes Due 2040
Debt Instrument [Line Items]
Debt Instrument, Issuance Date											Jun. 15, 2006		Aug. 23, 2006			Jun. 21, 2007		Jun. 08, 2007			Sep. 20, 2007			Jan. 26, 2010		Jun. 15, 2006		Aug. 23, 2006		Jun. 21, 2007		Jun. 08, 2007		Sep. 20, 2007		Jan. 26, 2010
Debt instrument, commitment	$ 851,550	$ 851,616	$ 150,000	$ 150,000	$ 137,800	$ 137,866	$ 200,000	$ 200,000	$ 250,000	$ 250,000	$ 150,000		$ 137,800			$ 200,000		$ 88,750			$ 25,000			$ 250,000		$ 150,000		$ 137,800		$ 200,000		$ 88,750		$ 25,000		$ 250,000
Debt Instrument, Maturity Date											Jun. 15, 2036		Sep. 15, 2036			Jun. 15, 2037		Jul. 30, 2037			Sep. 15, 2037			Jan. 26, 2040		Jun. 15, 2036		Sep. 15, 2036		Jun. 15, 2037		Jul. 30, 2037		Sep. 15, 2037		Jan. 26, 2040
Debt Instrument, Interest Rate, Stated Percentage											9.069%	[1]				8.48%	[1]							8.875%	[1]											8.875%	[1]
Debt Instrument, Basis Spread on Variable Rate														3.54%	[2]				3.00%	[2]		3.10%	[2]
Debt Instrument, Interest Rate, Effective Percentage																										5.831%	[3]	6.463%	[3]	5.18%	[3]	5.90%	[3]	5.983%	[3]
Debt Instrument, Frequency of Periodic Payment											Quarterly		Quarterly			Quarterly		Quarterly			Quarterly			Semi-annually in arrears		Quarterly		Quarterly		Quarterly		Quarterly		Quarterly		Semi-annually in arrears

[1] Fixed interest rate.

[2] Variable interest rate is the three-month LIBOR, reset quarterly, plus spread as noted in the table.

[3] Interest rate has been fixed as a result of interest rate swap contracts entered into by the Company.

XML

Investments in affiliates (Operating affiliates details) (Details) (Operating affiliates, USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Investment:
Investment at cost	$ 164,411			$ 97,536
Carrying value	172,992		181,759	106,743	85,120	110,412	157,111
AlphaCat Re 2011
Investment:
Investment at cost	4,172			9,882
Voting ownership %	43.70%			43.70%
Equity ownership %	22.30%			22.30%
Carrying value	4,172		4,177	9,809	11,054	16,805	62,792
AlphaCat Re 2012
Investment:
Investment at cost	2,204			654
Voting ownership %	49.00%			49.00%
Equity ownership %	37.90%			37.90%
Carrying value	2,204		1,277	1,313	5,204	27,358	29,319
AlphaCat 2013
Investment:
Investment at cost	2,580			45,000
Voting ownership %	40.90%			40.90%
Equity ownership %	19.70%			19.70%
Carrying value	2,580		15,678	51,744	48,536	46,100	45,000
AlphaCat 2014
Investment:
Investment at cost	22,000			22,000
Voting ownership %	42.30%			42.30%
Equity ownership %	19.60%			19.60%
Carrying value	25,014		23,593	21,982
AlphaCat ILS Funds
Investment:
Investment at cost	133,455	[1]		20,000
Equity ownership %				9.10%
Carrying value	$ 139,022	[1]	$ 137,034	$ 21,895	$ 20,326	$ 20,149	$ 20,000

[1] Equity ownership in the two funds were 8.6% and 49.0% respectively as at June 30, 2014.

XML

Related party transactions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Related Party Transaction [Line Items]
Reinsurance Payable	$ 162,114		$ 162,114		$ 154,874
Aquiline Capital Partners LLC
Related Party Transaction [Line Items]
Shares owned by related party	3,446,643		3,446,643
Warrants to purchase shares	2,756,088		2,756,088
Related Parties Number Of Employees			2
Group Ark Insurance Holdings Ltd
Related Party Transaction [Line Items]
Gross premiums written	1,694	1,053	3,067	2,848
Premiums receivable	1,436		1,436		238
Reinsurance premiums ceded	0	0	0	0
Related Party Transaction Reinsurance Balances Payable	5		5		4
Loss reserves recoverable	2,482		2,482		3,698
Earned premium adjustments	642	710	2,083	1,429
Conning Inc
Related Party Transaction [Line Items]
Investment management fees	170	40	226	231
Accounts payable and accrued expenses	339		339		283
Aquiline Capital Partners II GP Offshore Ltd
Related Party Transaction [Line Items]
Accounts payable and accrued expenses	0		0
Percentage of Assignor's interest assumed			100.00%
Total capital commitment			50,000
Partnership fees incurred	0	0	0	120
Capital contributions	$ 0	$ 5,563	$ 0	$ 6,904

XML

Investments (Investments pledged as collateral) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	$ 1,605,000	$ 1,599,800
Letters of credit issued and outstanding	689,865	751,250
Investments pledged as collateral	1,148,185	1,246,406
$400,000 syndicated unsecured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	400,000	400,000
Letters of credit issued and outstanding	0	0
Investments pledged as collateral	0	0
$525,000 syndicated secured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	525,000	525,000
Letters of credit issued and outstanding	305,330	358,567
Investments pledged as collateral	478,430	507,620
$200,000 secured bi-lateral letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	200,000	200,000
Letters of credit issued and outstanding	17,602	16,726
Investments pledged as collateral	35,415	130,256
Talbot FAL Facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	25,000	25,000
Letters of credit issued and outstanding	25,000	25,000
Investments pledged as collateral	30,990	30,801
PaCRe Senior secured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	10,000	10,000
Letters of credit issued and outstanding	294	294
Investments pledged as collateral	0	0
AlphaCat Re secured letter of credit facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	30,000	24,800
Letters of credit issued and outstanding	30,000	24,800
Investments pledged as collateral	30,040	24,806
IPC bi-lateral facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	40,000	40,000
Letters of credit issued and outstanding	19,572	20,177
Investments pledged as collateral	96,188	98,465
$375,000 Flagstone bi-lateral facility
Financial Instruments Owned and Pledged as Collateral [Line Items]
Credit facility, commitment	375,000	375,000
Letters of credit issued and outstanding	292,067	305,686
Investments pledged as collateral	$ 477,122	$ 454,458

XML

Share capital (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Summary of common shares issued and outstanding

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2013	154,488,497
Restricted share awards vested, net of shares withheld	585,535
Restricted share units vested, net of shares withheld	10,265
Options exercised	95,019
Direct issuance of common stock	713
Performance share awards vested, net of shares withheld	25,767
Common shares issued, June 30, 2014	155,205,796
Treasury shares, June 30, 2014	(63,810,857	)
Common shares outstanding, June 30, 2014	91,394,939

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	734,910
Restricted share units vested, net of shares withheld	14,381
Options exercised	235,091
Warrants exercised	508,193
Direct issuance of common stock	183
Performance share awards vested, net of shares withheld	31,897
Deferred share units vested, net of shares withheld	2,935
Common shares issued, June 30, 2013	154,225,781
Treasury shares, June 30, 2013	(54,488,320	)
Common shares outstanding, June 30, 2013	99,737,461

XML

Earnings per share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic earnings per share
Net income	$ 188,672	$ (30,254)	$ 394,569	$ 190,440
(Income) loss attributable to noncontrolling interest	(35,305)	60,976	(78,814)	63,525
Net income available to Validus	153,367	30,722	315,755	253,965
less: Dividends and distributions declared on outstanding warrants	(1,552)	(1,646)	(3,104)	(16,110)
Income available to common shareholders	151,815	29,076	312,651	237,855
Weighted average number of common shares outstanding	90,952,523	103,133,188	92,202,261	105,259,813
Basic earnings per share available to common shareholders	$ 1.67	$ 0.28	$ 3.39	$ 2.26
Earnings per diluted share
Net income	188,672	(30,254)	394,569	190,440
(Income) loss attributable to noncontrolling interest	(35,305)	60,976	(78,814)	63,525
Net income available to Validus	153,367	30,722	315,755	253,965
less: Dividends and distributions declared on outstanding warrants	0	(1,646)	0	(16,110)
Income available to common shareholders	$ 153,367	$ 29,076	$ 315,755	$ 237,855
Weighted average number of common shares outstanding	90,952,523	103,133,188	92,202,261	105,259,813
Weighted average number of diluted common shares outstanding	95,276,836	104,734,643	96,538,178	107,393,822
Earnings per diluted share available to common shareholders	$ 1.61	$ 0.28	$ 3.27	$ 2.21
Other details:
Anti-dilutive securities excluded from the calculation of diluted earnings per share	689,169	1,163,413	350,833	633,910
Warrants
Earnings per diluted share
Weighted average number of diluted common shares outstanding, aggregate	2,729,226	0	2,722,618	0
Stock options
Earnings per diluted share
Weighted average number of diluted common shares outstanding, aggregate	745,800	857,179	748,085	1,244,368
Unvested restricted shares
Earnings per diluted share
Weighted average number of diluted common shares outstanding, aggregate	849,287	744,276	865,214	889,641

XML

Accumulated other comprehensive (loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Balance, beginning of period			$ (617)
Other comprehensive income (loss)	2,615	186	3,077	(9,599)
Balance, end of period	2,460		2,460
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Translation Adjustment [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Balance, beginning of period	(155)	(12,738)	(617)	(2,953)
Amounts reclassified to retained earnings	0	4,290	0	4,290
Other comprehensive income (loss)	2,615	186	3,077	(9,599)
Balance, end of period	$ 2,460	$ (8,262)	$ 2,460	$ (8,262)

XML

Investments in affiliates (Income attributable to operating affiliates) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Schedule of Equity Method Investments [Line Items]
(Income) attributable to operating affiliate investors	$ (25,316)	$ (20,264)	$ (57,026)	$ (30,341)
Variable interest entity, not primary beneficiary | AlphaCat 2013
Schedule of Equity Method Investments [Line Items]
(Income) attributable to operating affiliate investors	(3,644)	(17,142)	(14,120)	(25,283)
Variable interest entity, not primary beneficiary | AlphaCat 2014
Schedule of Equity Method Investments [Line Items]
(Income) attributable to operating affiliate investors	(10,892)	0	(21,681)	0
Variable interest entity, not primary beneficiary | AlphaCat ILS Funds
Schedule of Equity Method Investments [Line Items]
(Income) attributable to operating affiliate investors	$ (10,780)	$ (3,122)	$ (21,225)	$ (5,058)

XML

Commitments and contingencies (Aquiline commitment) (Details) (Aquiline Capital Partners II GP Offshore Ltd, USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Aquiline Capital Partners II GP Offshore Ltd
Related Party Transaction [Line Items]
Total capital commitment	$ 50,000
Remaining capital commitment	$ 17,890	$ 17,890

XML

Segment information (Segment geographic) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	$ 655,674		$ 702,313		$ 1,667,665		$ 1,807,073
Percent of gross premiums written	100.00%		100.00%		100.00%		100.00%
United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	234,909		259,417		511,037		527,079
Percent of gross premiums written	35.80%		36.90%		30.60%		29.10%
Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	45,762	[1]	37,247	[1]	147,416	[1]	137,194	[1]
Percent of gross premiums written	7.00%	[1]	5.20%	[1]	8.90%	[1]	7.60%	[1]
Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	8,051		7,591		24,485		37,575
Percent of gross premiums written	1.20%		1.10%		1.50%		2.10%
Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	21,565		33,413		76,736		91,710
Percent of gross premiums written	3.30%		4.80%		4.60%		5.10%
Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	32,075		34,860		67,196		82,060
Percent of gross premiums written	4.90%		5.00%		4.00%		4.50%
Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	41,741		47,234		42,385		48,575
Percent of gross premiums written	6.40%		6.70%		2.50%		2.70%
Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	3,132		3,656		8,869		8,797
Percent of gross premiums written	0.50%		0.50%		0.50%		0.50%
Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	23,241	[2]	26,346	[2]	93,697	[2]	62,336	[2]
Percent of gross premiums written	3.50%	[2]	3.80%	[2]	5.60%	[2]	3.40%	[2]
Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	175,567		190,347		460,784		468,247
Percent of gross premiums written	26.80%		27.10%		27.60%		25.90%
Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	86,788	[1]	87,128	[1]	274,421	[1]	263,008	[1]
Percent of gross premiums written	13.20%	[1]	12.40%	[1]	16.50%	[1]	14.60%	[1]
Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	158,410	[3]	165,421	[3]	421,423	[3]	548,739	[3]
Percent of gross premiums written	24.20%	[3]	23.60%	[3]	25.30%	[3]	30.40%	[3]
Operating Segments [Member] | Validus Re Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	310,286		353,384		989,272		1,101,347
Operating Segments [Member] | Validus Re Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	176,625		194,631		423,409		431,127
Operating Segments [Member] | Validus Re Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	8,622	[1]	2,201	[1]	70,156	[1]	52,509	[1]
Operating Segments [Member] | Validus Re Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	6,599		5,572		19,415		30,598
Operating Segments [Member] | Validus Re Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	13,704		19,864		51,600		60,734
Operating Segments [Member] | Validus Re Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	2,490		(8,435)		9,424		(17)
Operating Segments [Member] | Validus Re Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	40,221		43,839		40,380		44,576
Operating Segments [Member] | Validus Re Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	421		392		3,320		3,034
Operating Segments [Member] | Validus Re Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(1,156)	[2]	4,491	[2]	52,694	[2]	23,570	[2]
Operating Segments [Member] | Validus Re Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	70,901		67,924		246,989		215,004
Operating Segments [Member] | Validus Re Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	40,241	[1]	50,470	[1]	145,432	[1]	151,010	[1]
Operating Segments [Member] | Validus Re Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	22,519	[3]	40,359	[3]	173,442	[3]	304,206	[3]
Operating Segments [Member] | AlphaCat Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	43,790		46,760		128,137		143,276
Operating Segments [Member] | AlphaCat Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	20,256		30,900		28,954		48,389
Operating Segments [Member] | AlphaCat Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(266)	[1]	112	[1]	7,412	[1]	14,801	[1]
Operating Segments [Member] | AlphaCat Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0		0		1,019		2,183
Operating Segments [Member] | AlphaCat Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,392		173		2,693		2,137
Operating Segments [Member] | AlphaCat Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0		0		0		0
Operating Segments [Member] | AlphaCat Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	586		653		586		653
Operating Segments [Member] | AlphaCat Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(1)		0		215		318
Operating Segments [Member] | AlphaCat Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0	[2]	0	[2]	0	[2]	0	[2]
Operating Segments [Member] | AlphaCat Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,711		938		11,925		20,092
Operating Segments [Member] | AlphaCat Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	21,823	[1]	14,922	[1]	87,258	[1]	74,795	[1]
Operating Segments [Member] | AlphaCat Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	0	[3]	0	[3]	0	[3]	0	[3]
Operating Segments [Member] | Talbot Segment
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	317,944		315,518		608,639		609,048
Operating Segments [Member] | Talbot Segment | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	42,151		35,516		68,462		56,057
Operating Segments [Member] | Talbot Segment | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	38,434	[1]	35,353	[1]	75,616	[1]	74,811	[1]
Operating Segments [Member] | Talbot Segment | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,423		2,020		4,303		5,025
Operating Segments [Member] | Talbot Segment | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	7,498		13,434		26,289		31,745
Operating Segments [Member] | Talbot Segment | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	30,132		44,036		61,371		86,036
Operating Segments [Member] | Talbot Segment | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	1,592		3,538		2,130		4,192
Operating Segments [Member] | Talbot Segment | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	2,750		3,335		5,895		6,041
Operating Segments [Member] | Talbot Segment | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	25,153	[2]	22,322	[2]	43,557	[2]	40,636	[2]
Operating Segments [Member] | Talbot Segment | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	106,982		124,038		219,161		248,486
Operating Segments [Member] | Talbot Segment | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	28,883	[1]	26,596	[1]	52,536	[1]	45,752	[1]
Operating Segments [Member] | Talbot Segment | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	139,928	[3]	129,368	[3]	268,480	[3]	258,753	[3]
Corporate And Eliminations [Member]
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(16,346)		(13,349)		(58,383)		(46,598)
Corporate And Eliminations [Member] | United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(4,123)		(1,630)		(9,788)		(8,494)
Corporate And Eliminations [Member] | Worldwide excluding United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(1,028)	[1]	(419)	[1]	(5,768)	[1]	(4,927)	[1]
Corporate And Eliminations [Member] | Australia and New Zealand
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	29		(1)		(252)		(231)
Corporate And Eliminations [Member] | Europe
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(1,029)		(58)		(3,846)		(2,906)
Corporate And Eliminations [Member] | Latin America and Caribbean
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(547)		(741)		(3,599)		(3,959)
Corporate And Eliminations [Member] | Japan
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(658)		(796)		(711)		(846)
Corporate And Eliminations [Member] | Canada
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(38)		(71)		(561)		(596)
Corporate And Eliminations [Member] | Rest of the world
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(756)	[2]	(467)	[2]	(2,554)	[2]	(1,870)	[2]
Corporate And Eliminations [Member] | Sub-total, non United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(4,027)		(2,553)		(17,291)		(15,335)
Corporate And Eliminations [Member] | Worldwide including United States
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	(4,159)	[1]	(4,860)	[1]	(10,805)	[1]	(8,549)	[1]
Corporate And Eliminations [Member] | Other location non-specific
Gross premiums written allocated to the territory of coverage exposure
Gross premiums written	$ (4,037)	[3]	$ (4,306)	[3]	$ (20,499)	[3]	$ (14,220)	[3]

[1] Represents risks in two or more geographic zones.

[2] Represents risks in one geographic zone.

[3] The other locations non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable, such as marine and aerospace risks, since these exposures can span multiple geographic areas and, in some instances, are not fixed locations.

XML

Commitments and contingencies (Western World commitment) (Details) (Western World Insurance Group, Inc, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Jun. 23, 2014
Western World Insurance Group, Inc
Business Acquisition [Line Items]
Date of acquisition agreement	Jun. 23, 2014
Aggregate purchase price	$ 690,000

XML

Debt and financing arrangements (Components of finance expenses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Debt Instrument [Line Items]
Financing Interest Expense	$ 16,126		$ 17,566		$ 32,026		$ 31,935
Credit facilities
Debt Instrument [Line Items]
Financing Interest Expense	1,371		2,799		2,930		3,753
Bank charges
Debt Instrument [Line Items]
Financing Interest Expense	102		100		215		233
AlphaCat ILS fund fees
Debt Instrument [Line Items]
Financing Interest Expense	969	[1]	1,214	[1]	1,646	[1]	2,328	[1]
Talbot FAL facility
Debt Instrument [Line Items]
Financing Interest Expense	19		32		4		63
2006 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Financing Interest Expense	2,211		2,211		4,398		4,398
2007 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Financing Interest Expense	1,835		1,835		3,644		3,644
Flagstone 2006 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Financing Interest Expense	2,244		2,231		4,467		3,703
Flagstone 2007 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Financing Interest Expense	1,778		1,547		3,528		2,619
2010 Senior Notes Due 2040
Debt Instrument [Line Items]
Financing Interest Expense	$ 5,597		$ 5,597		$ 11,194		$ 11,194

[1] Includes finance expenses incurred by AlphaCat Managers, Ltd. in relation to fund raising for the AlphaCat ILS funds, AlphaCat 2014 and AlphaCat 2013.

XML

Significant accounting policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of preparation

These unaudited Consolidated Financial Statements (the "Consolidated Financial Statements") include Validus Holdings, Ltd. and its wholly and majority owned subsidiaries (together the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these Consolidated Financial Statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. To facilitate comparison of information, certain amounts in prior periods have been reclassified to conform to current period presentation. The consolidated statement of cash flows for the six months endedJune 30, 2013 includes a reclassification of $19,400 that increased net cash flows used in financing activities and net cash flows provided by operating activities to revise the presentation of subscriptions received in advance from third party investors. For the three and six months endedJune 30, 2013, $20,264 and $30,341 respectively, have been reclassified into income attributable to operating affiliate investors from finance expenses to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the amounts included in the Consolidated Financial Statements reflect its best estimates and assumptions, actual results could differ materially from those estimates. The Company’s principal estimates include:

•reserve for losses and loss expenses;

•premium estimates for business written on a line slip or proportional basis;

•the valuation of goodwill and intangible assets;

•reinsurance recoverable balances including the provision for uncollectible amounts; and

•investment valuation of financial assets.

Reserves for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case reserves from broker, insured and ceding company reported data. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses, from which incurred but not reported losses can be calculated. The period of time from the occurrence of a loss to the reporting of a loss to the Company and to the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed this estimate.

Reinsurance

To estimate the provision for uncollectible reinsurance, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied, especially in relation to ceded IBNR. The Company then uses default factors to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined in part using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

XML

Fair value measurements (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014		Dec. 31, 2013
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	$ 783,423		$ 618,316
Mutual funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	10,338		9,816
Other Investments Number Of Funds	2
Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	623,896	[1]	561,083	[1]
Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	2,014		2,303
Investment Time Lag Reporting	1 month
Investments assumed in Flagstone acquisition
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Investment Time Lag Reporting	3 months
Other Investments Number Of Funds	1
PaCRe funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	10.00%		10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%		90.00%
Investment Time Lag Reporting	1 month
Other Investments Number Of Funds	4
Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	131,690		31,629
Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	15,485		13,485
Other Investments Number Of Funds	3
Fair Value, Measurements, Recurring [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	783,423		618,316
Fair Value, Measurements, Recurring [Member] | Mutual funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	10,338		9,816
Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	623,896	[1]	561,083	[1]
Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	2,014		2,303
Fair Value, Measurements, Recurring [Member] | Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	131,690		31,629
Fair Value, Measurements, Recurring [Member] | Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	15,485		13,485
Minimum [Member] | Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Investment Time Lag Reporting	3 months
Maximum | Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Investment Time Lag Reporting	6 months
Fair Value, Inputs, Level 2 [Member] | Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other Investments Number Of Funds	1
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	42,028		41,445
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Mutual funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	10,338		9,816
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	0	[1]	0	[1]
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	0		0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	31,690		31,629
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	0		0
Fair Value, Inputs, Level 3 [Member] | Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Investment Time Lag Reporting	1
Other Investments Number Of Funds	1
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	741,395		576,871
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Mutual funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	623,896	[1]	561,083	[1]
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Fund of hedge funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	2,014		2,303
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Investment funds
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	100,000		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Private equity investments
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Other investments, at fair value	$ 15,485		$ 13,485

[1] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

XML

Investments (Fixed maturities by investment rating) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fixed Maturities
Estimated fair value	$ 5,154,629	$ 5,542,258
Percentage of total	100.00%	100.00%
Investment Grade
Fixed Maturities
Estimated fair value	4,588,952	4,764,580
Percentage of total	89.00%	86.00%
AAA
Fixed Maturities
Estimated fair value	2,366,249	2,510,781
Percentage of total	45.90%	45.30%
AA
Fixed Maturities
Estimated fair value	719,122	696,998
Percentage of total	13.90%	12.60%
A
Fixed Maturities
Estimated fair value	1,196,059	1,233,716
Percentage of total	23.20%	22.30%
BBB
Fixed Maturities
Estimated fair value	307,522	323,085
Percentage of total	6.00%	5.80%
Non Investment Grade
Fixed Maturities
Estimated fair value	565,677	777,678
Percentage of total	11.00%	14.00%
BB
Fixed Maturities
Estimated fair value	256,714	354,992
Percentage of total	5.00%	6.40%
B
Fixed Maturities
Estimated fair value	282,032	383,639
Percentage of total	5.50%	6.90%
CCC
Fixed Maturities
Estimated fair value	10,406	2,453
Percentage of total	0.20%	0.00%
CC
Fixed Maturities
Estimated fair value	2,385	2,496
Percentage of total	0.00%	0.10%
C
Fixed Maturities
Estimated fair value	157	235
Percentage of total	0.00%	0.00%
D/NR
Fixed Maturities
Estimated fair value	$ 13,983	$ 33,863
Percentage of total	0.30%	0.60%

XML

Commitments and contingencies (Lloyd's syndicate) (Details) In Thousands, unless otherwise specified			6 Months Ended
	Jun. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)	Jun. 30, 2014 Lloyd's Syndicate 1183 USD ($)	Jun. 30, 2014 Lloyd's Syndicate 1183 GBP (£)	Jun. 30, 2014 20114 Underwriting year Lloyd's Syndicate 1183 USD ($)	Jun. 30, 2014 2013 Underwriting year Lloyd's Syndicate 1183 USD ($)
Components Of Required Capital [Abstract]
Credit facility, commitment	$ 1,605,000	$ 1,599,800			$ 25,000	$ 25,000
Required Capital Group Funds					450,000	403,700
Cash, investments and letters of credit amount					475,000	428,700
Funds at Lloyd's and Lloyd's Central Fund
Maximum premium levies assessable, percent			3.00%	3.00%
Estimated underwriting capacity				625,000
Exchange rate			£1 equals $1.7110	£1 equals $1.7110
Maximum premium levies assessable, amount			$ 32,081

XML

Commitments and contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Components of required capital

The amounts of cash, investments and letters of credit provided for each year of account as follows:

	2014 Underwriting Year		2013 Underwriting Year
Talbot FAL facility	$	25,000	$	25,000
Group funds	450,000		403,700
Total	$	475,000	$	428,700

XML

Investments in affiliates (Investment affiliate rollforward) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Schedule of Equity Method Investments [Line Items]
Income from investment affiliate	$ 779	$ 1,753	$ 6,127	$ 3,230
Investment affiliate | Aquiline Financial Services Fund II LP
Schedule of Equity Method Investments [Line Items]
Balance, beginning of period	39,848	18,036	34,500	15,218
Capital contributions	0	5,563	0	6,904
Income from investment affiliate	779	1,753	6,127	3,230
Balance, end of period	$ 40,627	$ 25,352	$ 40,627	$ 25,352

XML

Stock plans (Components of share compensation expenses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Total share compensation expenses
Share compensation expenses	$ 8,341	$ 6,638	$ 15,488	$ 8,956
Restricted share awards
Total share compensation expenses
Share compensation expenses	7,920	5,933	14,921	9,994
Restricted share units
Total share compensation expenses
Share compensation expenses	167	130	333	251
Performance shares
Total share compensation expenses
Share compensation expenses	$ 254	$ 575	$ 234	$ (1,289)

XML

Derivative instruments (Amount included in statement of operations) (Details) (Designated as hedging instruments, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Fair value hedge | Foreign exchange contracts | Foreign exchange gains (losses)
Derivatives designated as fair value hedges and related hedged item
Amount of gain (loss) recognized in income on derivative	$ 1,535	$ (1,707)	$ 4,838	$ (445)
Amount of (loss) gain on hedged item recognized in income attributable to risk being hedged	(1,535)	1,707	(4,838)	445
Amount of gain (loss) recognized in income on derivative (ineffective portion)	0	0	0	0
Cash flow hedge | Interest rate swap contracts
Derivative instruments designated as a cash flow hedge
Amount of ineffective portion excluded from effectiveness testing	0	0	0	0
Cash flow hedge | Interest rate swap contracts | Other comprehensive income
Derivative instruments designated as a cash flow hedge
Amount of effective portion recognized in other comprehensive income	3,252	2,962	6,460	4,570
Cash flow hedge | Interest rate swap contracts | Finance expenses
Derivative instruments designated as a cash flow hedge
Amount of effective portion subsequently reclassified to earnings	$ (3,252)	$ (2,962)	$ (6,460)	$ (4,570)

XML

Investments (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Trading Securities and Other Trading Assets [Line Items]
Cash, cash equivalents and investments pledged as collateral	$ 2,906,871	$ 2,947,475
Investments held in trust	$ 2,901,739	$ 2,942,508
AlphaCat ILS Funds
Schedule of Trading Securities and Other Trading Assets [Line Items]
Other Investments Number Of Funds	1	2

XML

Investments

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Investments

Investments

(a) Fixed maturity, short-term and other investments

The Company's investments in fixed maturities, short-term investments and other investments are classified as trading and carried at fair value, with related changes in net unrealized gains or losses included in earnings.

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at June 30, 2014 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,030,570		$	3,028		$	(1,821	)	$	1,031,777
Non-U.S. government and government agency	440,408			7,689			(1,027		)	447,070
U.S. states, municipalities and political subdivisions	48,732			760			(52		)	49,440
Agency residential mortgage-backed securities	307,246			8,459			(600		)	315,105
Non-agency residential mortgage-backed securities	18,001			295			(515		)	17,781
U.S. corporate	1,303,436			10,869			(1,796		)	1,312,509
Non-U.S. corporate	685,884			8,442			(738		)	693,588
Bank loans	517,697			3,692			(664		)	520,725
Catastrophe bonds	37,500			573			(10		)	38,063
Asset-backed securities	605,079			1,868			(205		)	606,742
Commercial mortgage-backed securities	121,392			469			(32		)	121,829
Total fixed maturities	5,115,945			46,144			(7,460		)	5,154,629
Total short-term investments (a) (b)	816,651			170			(1		)	816,820
Other investments
Fund of hedge funds	2,820			115			(921		)	2,014
Hedge funds (a)	566,519			136,390			(79,013		)	623,896
Private equity investments	10,965			4,520			—			15,485
Investment funds	131,406			284			—			131,690
Mutual funds	6,198			4,140			—			10,338
Total other investments	717,908			145,449			(79,934		)	783,423
Total investments including noncontrolling interests	$	6,650,504		$	191,763		$	(87,395	)	$	6,754,872
Noncontrolling interest (a)	$	(521,862	)	$	(118,540	)	$	71,112		$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—		$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	6,120,337		$	73,223		$	(16,283	)	$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2013 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,368,826		$	2,589		$	(6,736	)	$	1,364,679
Non-U.S. government and government agency	454,578			6,511			(2,021		)	459,068
U.S. states, municipalities and political subdivisions	42,978			459			(317		)	43,120
Agency residential mortgage-backed securities	305,450			8,310			(2,261		)	311,499
Non-agency residential mortgage-backed securities	16,530			143			(914		)	15,759
U.S. corporate	1,328,960			9,208			(5,684		)	1,332,484
Non-U.S. corporate	711,581			5,917			(3,173		)	714,325
Bank loans	712,859			5,659			(1,402		)	717,116
Catastrophe bonds	72,000			2,551			—			74,551
Asset-backed securities	509,091			1,409			(843		)	509,657
Total fixed maturities	5,522,853			42,756			(23,351		)	5,542,258
Total short-term investments (b)	751,734			45			(1		)	751,778
Other investments
Fund of hedge funds	3,141			83			(921		)	2,303
Hedge funds (a)	584,518			71,641			(95,076		)	561,083
Private equity investments	12,333			1,410			(258		)	13,485
Investment funds	31,537			92			—			31,629
Mutual funds	6,199			3,617			—			9,816
Total other investments	637,728			76,843			(96,255		)	618,316
Total investments including noncontrolling interests	$	6,912,315		$	119,644		$	(119,607	)	$	6,912,352
Noncontrolling interest (a)	(512,121		)	(62,850		)	85,569			(489,402		)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—		$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	6,381,829		$	56,794		$	(34,038	)	$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

As of June 30, 2014, the Company changed the methodology of assigning investment ratings to its fixed maturities portfolio. In prior periods, investment ratings were the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. As of June 30, 2014, investment ratings are the median of Moody’s, Standard & Poor’s and Fitch, presented in Standard & Poor’s equivalent rating. For investments where only two ratings are available, the lower of the two ratings shall apply, presented in Standard & Poor’s equivalent rating. For investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating. The December 31, 2013 comparative data was restated as a result, to conform to current period presentation.

The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at June 30, 2014 and December 31, 2013.

	June 30, 2014				December 31, 2013
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	2,366,249	45.9	%	$	2,510,781	45.3	%
AA	719,122		13.9	%	696,998		12.6	%
A	1,196,059		23.2	%	1,233,716		22.3	%
BBB	307,522		6.0	%	323,085		5.8	%
Total investment-grade fixed maturities	4,588,952		89.0	%	4,764,580		86.0	%
BB	256,714		5.0	%	354,992		6.4	%
B	282,032		5.5	%	383,639		6.9	%
CCC	10,406		0.2	%	2,453		—	%
CC	2,385		—	%	2,496		0.1	%
C	157		—	%	235		—	%
D/NR	13,983		0.3	%	33,863		0.6	%
Total non-investment grade fixed maturities	565,677		11.0	%	777,678		14.0	%
Total fixed maturities	$	5,154,629	100.0	%	$	5,542,258	100.0	%

The amortized cost and estimated fair value amounts for fixed maturities held at June 30, 2014 and December 31, 2013 are shown below by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	June 30, 2014				December 31, 2013
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	399,741	$	402,887	$	688,855	$	692,768
Due after one year through five years	3,296,209		3,320,485		3,603,459		3,613,847
Due after five years through ten years	357,818		359,382		396,389		395,633
Due after ten years	10,459		10,418		3,079		3,095
	4,064,227		4,093,172		4,691,782		4,705,343
Asset-backed and mortgage-backed securities	1,051,718		1,061,457		831,071		836,915
Total fixed maturities	$	5,115,945	$	5,154,629	$	5,522,853	$	5,542,258

(b) Net investment income

Net investment income was derived from the following sources:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities and short-term investments	$	22,207		$	26,151		$	45,504		$	53,682
Cash and cash equivalents	996			1,629			2,953			2,162
Securities lending income	2			—			4			—
Total gross investment income	23,205			27,780			48,461			55,844
Investment expenses	(1,919		)	(1,570		)	(3,813		)	(3,985		)
Total net investment income	$	21,286		$	26,210		$	44,648		$	51,859

(c) Net realized gains and change in net unrealized gains (losses) on investments

The following represents an analysis of net realized gains and the change in net unrealized gains (losses) on investments:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities, short-term and other investments
Gross realized gains (a)	$	9,813		$	7,152		$	15,109		$	17,872
Gross realized (losses)	(1,955		)	(3,743		)	(3,511		)	(12,742		)
Net realized gains on investments	7,858			3,409			11,598			5,130
Change in net unrealized gains (losses) on investments (a)	45,427			(141,348		)	101,120			(148,585		)
Total net realized gains and change in net unrealized gains (losses) on investments including noncontrolling interest	53,285			(137,939		)	112,718			(143,455		)
Noncontrolling interest (a)	(33,207		)	63,694			(75,209		)	68,345
Total net realized gains and change in net unrealized gains (losses) on investments excluding noncontrolling interest	$	20,078		$	(74,245	)	$	37,509		$	(75,110	)

(a) Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

(d) Pledged investments

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details on the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	June 30, 2014
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		305,330		478,430
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		35,415
Talbot FAL facility	25,000		25,000		30,990
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		30,040
IPC bi-lateral facility	40,000		19,572		96,188
$375,000 Flagstone bi-lateral facility	375,000		292,067		477,122
Total	$	1,605,000	$	689,865	$	1,148,185

	December 31, 2013
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		358,567		507,620
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		130,256
Talbot FAL facility	25,000		25,000		30,801
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		24,806
IPC bi-lateral facility	40,000		20,177		98,465
$375,000 Flagstone bi-lateral facility	375,000		305,686		454,458
Total	$	1,599,800	$	751,250	$	1,246,406

In addition, $2,906,871 of cash and cash equivalents and investments were pledged during the normal course of business as at June 30, 2014 (December 31, 2013: $2,947,475). Of those, $2,901,739 were held in trust (December 31, 2013: $2,942,508). Pledged assets are generally for the benefit of the Company's cedants and policyholders, to support AlphaCat's fully collateralized reinsurance transactions and to facilitate the accreditation of Talbot as an alien insurer/reinsurer by certain regulators.

XML

Reserve for losses and loss expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reserve for paid losses and unpaid loss expenses
Reserve for losses and loss expenses, beginning of period	$ 2,925,059	$ 3,357,691	$ 3,030,399	$ 3,517,573
Losses and loss expenses recoverable, beginning of period	(348,407)	(429,252)	(370,154)	(439,967)
Net reserves for losses and loss expenses, beginning of period	2,576,652	2,928,439	2,660,245	3,077,606
Net reserves disposed	0	(18,591)	0	(18,591)
Increase (decrease) in net losses and loss expenses incurred in respect of losses occurring in:
Current year	231,401	306,033	433,487	516,602
Prior years	(72,656)	(40,989)	(112,071)	(106,787)
Total incurred losses and loss expenses	158,745	265,044	321,416	409,815
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	(16,741)	(30,996)	(24,708)	(35,834)
Prior years	(199,236)	(261,677)	(449,351)	(516,951)
Total net paid losses	(215,977)	(292,673)	(474,059)	(552,785)
Foreign exchange	9,153	(17,462)	20,971	(51,288)
Net reserve for losses and loss expenses, end of period	2,528,573	2,864,757	2,528,573	2,864,757
Losses and loss expenses recoverable, end of period	338,734	418,693	338,734	418,693
Reserve for losses and loss expenses, end of period	2,867,307	3,283,450	2,867,307	3,283,450
Components of incurred losses and loss expenses
Gross losses and loss expenses	182,780	295,539	364,755	457,950
Reinsurance recoverable	(24,035)	(30,495)	(43,339)	(48,135)
Net incurred losses and loss expenses	$ 158,745	$ 265,044	$ 321,416	$ 409,815

XML

Investments (Maturity profile of fixed maturity investments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Maturity profile
Amortized cost or cost	$ 5,115,945	$ 5,522,853
Estimated fair value	5,154,629	5,542,258
Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost or cost	4,064,227	4,691,782
Estimated fair value	4,093,172	4,705,343
Due in one year or less | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost or cost	399,741	688,855
Estimated fair value	402,887	692,768
Due after one year through five years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost or cost	3,296,209	3,603,459
Estimated fair value	3,320,485	3,613,847
Due after five years through ten years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost or cost	357,818	396,389
Estimated fair value	359,382	395,633
Due after ten years | Fixed maturities trading securities allocated to contractual maturity
Maturity profile
Amortized cost or cost	10,459	3,079
Estimated fair value	10,418	3,095
Asset backed and mortgaged backed securities | No single maturity date
Maturity profile
Amortized cost or cost	1,051,718	831,071
Estimated fair value	$ 1,061,457	$ 836,915

XML

Noncontrolling interest (Tables)

6 Months Ended

Jun. 30, 2014

Noncontrolling Interest [Abstract]

Noncontrolling interest

The following tables present a reconciliation of the beginning and ending balances of redeemable noncontrolling interest and noncontrolling interest for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	Redeemable noncontrolling interest		Noncontrolling interest		Total
As at March 31, 2014	$	8,390	$	540,934	$	549,324
Issuance of shares	57,000		—		57,000
Income attributable to noncontrolling interest	892		34,413		35,305
As at June 30, 2014	$	66,282	$	575,347	$	641,629

	Three Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at March 31, 2013	$	56,277	$	431,144		$	487,421
Issuance of shares	13,500		58,500			72,000
Income (loss) attributable to noncontrolling interest	913		(61,889		)	(60,976		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

	Six Months Ended June 30, 2014
	Redeemable noncontrolling interest			Noncontrolling interest		Total
As at December 31, 2013	$	86,512		$	497,657	$	584,169
Issuance of shares	57,000			—		57,000
Income attributable to noncontrolling interest	1,124			77,690		78,814
Adjustment to noncontrolling interest as a result of deconsolidation	(78,354		)	—		(78,354		)
As at June 30, 2014	$	66,282		$	575,347	$	641,629

	Six Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at December 31, 2012	$	—	$	434,280		$	434,280
Issuance of shares	69,190		58,500			127,690
Income (loss) attributable to noncontrolling interest	1,500		(65,025		)	(63,525		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

XML

Investments in affiliates (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of Equity Method Investments [Line Items]

Schedule of equity method investments

The following table presents the Company's investments in affiliates as at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Investment affiliate	$	40,627	$	34,500
Operating affiliates	172,992		106,743
Investments in affiliates	$	213,619	$	141,243

Summary of notes payable to operating affiliates

The following tables present a reconciliation of the beginning and ending notes payable to operating affiliates for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014			AlphaCat ILS funds			Total
As at March 31, 2014	$	48,163		$	149,816		$	363,394		$	561,373
Issuance of notes payable to operating affiliates	—			8,207			249,094			257,301
Redemption of notes payable to operating affiliates	(48,163		)	—			(148,800		)	(196,963		)
Foreign exchange (gain) loss	—			(31		)	1,270			1,239
As at June 30, 2014	$	—		$	157,992		$	464,958		$	622,950

	Three Months Ended June 30, 2013
	AlphaCat 2013		AlphaCat ILS funds		Total
As at March 31, 2013	$	161,439	$	129,149	$	290,588
Issuance of notes payable to operating affiliates	60,576		79,468		140,044
Foreign exchange loss	120		341		461
As at June 30, 2013	$	222,135	$	208,958	$	431,093

	Six Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds			Total
As at December 31, 2013	$	223,809		$	—	$	215,463		$	439,272
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund	—			—		178,837			178,837
Issuance of notes payable to operating affiliates	—			157,914		433,831			591,745
Redemption of notes payable to operating affiliates	(223,512		)	—		(364,566		)	(588,078		)
Foreign exchange (gain) loss	(297		)	78		1,393			1,174
As at June 30, 2014	$	—		$	157,992	$	464,958		$	622,950

	Six Months Ended June 30, 2013
	AlphaCat 2013			AlphaCat ILS funds			Total
As at December 31, 2012	$	—		$	—		$	—
Issuance of notes payable to operating affiliates	223,082			211,311			434,393
Foreign exchange gain	(947		)	(2,353		)	(3,300		)
As at June 30, 2013	$	222,135		$	208,958		$	431,093

Schedule of (income) attributable to operating affiliate investors

The following table presents the (income) attributable to operating affiliate investors for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
AlphaCat 2013	$	(3,644	)	$	(17,142	)	$	(14,120	)	$	(25,283	)
AlphaCat 2014	(10,892		)	—			(21,681		)	—
AlphaCat ILS funds	(10,780		)	(3,122		)	(21,225		)	(5,058		)
(Income) attributable to operating affiliate investors	$	(25,316	)	$	(20,264	)	$	(57,026	)	$	(30,341	)

Investment affiliate

Schedule of Equity Method Investments [Line Items]

Reconciliation of the beginning and ending non-consolidated affiliate balance

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Investment affiliate, beginning of period	$	39,848	$	18,036	$	34,500	$	15,218
Capital contributions	—		5,563		—		6,904
Income from investment affiliate	779		1,753		6,127		3,230
Investment affiliate, end of period	$	40,627	$	25,352	$	40,627	$	25,352

Schedule of equity method investments

The following table presents the Company's investment in the Partnership as at June 30, 2014:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	40,627

The following table presents the Company's investment in the Partnership as at December 31, 2013:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	34,500

Operating affiliates

Schedule of Equity Method Investments [Line Items]

Reconciliation of the beginning and ending non-consolidated affiliate balance

The following tables present a reconciliation of the beginning and ending investment in operating affiliates for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at March 31, 2014	$	4,177		$	1,277	$	15,678		$	23,593	$	137,034	$	181,759
Return of investment	—			—		(13,659		)	—		—		(13,659		)
(Loss) income from operating affiliates	(5		)	927		561			1,421		1,988		4,892
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Three Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	20,149	$	110,412
Return of investment	(5,678		)	(23,407		)	—		—		(29,085		)
(Loss) income from operating affiliates	(73		)	1,253			2,436		177		3,793
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

	Six Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at December 31, 2013	$	9,809		$	1,313	$	51,744		$	21,982	$	21,895	$	106,743
Return of investment	(5,825		)	—		(51,200		)	—		—		(57,025		)
Fair value of retained interest on deconsolidation of AlphaCat ILS fund	—			—		—			—		113,455		113,455
Income from operating affiliates	188			891		2,036			3,032		3,672		9,819
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Six Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	20,000	$	157,111
Return of investment	(52,114		)	(27,193		)	—		—		(79,307		)
Income from operating affiliates	376			3,078			3,536		326		7,316
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

Schedule of equity method investments

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds in the Consolidated Financial Statements as at June 30, 2014:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	4,172	43.7	%	22.3	%	$	4,172
AlphaCat Re 2012	2,204		49.0	%	37.9	%	2,204
AlphaCat 2013	2,580		40.9	%	19.7	%	2,580
AlphaCat 2014	22,000		42.3	%	19.6	%	25,014
AlphaCat ILS funds	133,455		n/a		(a)		139,022
Total	$	164,411					$	172,992

(a) Equity ownership in the two funds were 8.6% and 49.0% respectively as at June 30, 2014.

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS fund in the Consolidated Financial Statements as at December 31, 2013:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	9,882	43.7	%	22.3	%	$	9,809
AlphaCat Re 2012	654		49.0	%	37.9	%	1,313
AlphaCat 2013	45,000		40.9	%	19.7	%	51,744
AlphaCat 2014	22,000		42.3	%	19.6	%	21,982
AlphaCat ILS fund	20,000		n/a		9.1	%	21,895
Total	$	97,536					$	106,743

XML

Investments in affiliates (Notes payable and (income) attributable to operating affiliates) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Schedule of Equity Method Investments [Line Items]
Variable Funding Notes, Typical Minimum Duration			12 months
Notes payable to operating affiliates, beginning of period			$ 439,272
Notes payable to operating affiliates, end of period	622,950		622,950
Variable interest entity, not primary beneficiary
Schedule of Equity Method Investments [Line Items]
Notes payable to operating affiliates, beginning of period	561,373	290,588	439,272	0
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund			178,837
Issuance of notes payable to operating affiliates	257,301	140,044	591,745	434,393
Redemption of notes payable to operating affiliates	(196,963)		(588,078)
Foreign exchange gain (loss)	1,239	461	1,174	(3,300)
Notes payable to operating affiliates, end of period	622,950	431,093	622,950	431,093
Variable interest entity, not primary beneficiary | AlphaCat 2013
Schedule of Equity Method Investments [Line Items]
Notes payable to operating affiliates, beginning of period	48,163	161,439	223,809	0
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund			0
Issuance of notes payable to operating affiliates	0	60,576	0	223,082
Redemption of notes payable to operating affiliates	(48,163)		(223,512)
Foreign exchange gain (loss)	0	120	(297)	(947)
Notes payable to operating affiliates, end of period	0	222,135	0	222,135
Variable interest entity, not primary beneficiary | AlphaCat 2014
Schedule of Equity Method Investments [Line Items]
Notes payable to operating affiliates, beginning of period	149,816		0
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund			0
Issuance of notes payable to operating affiliates	8,207		157,914
Redemption of notes payable to operating affiliates	0		0
Foreign exchange gain (loss)	(31)		78
Notes payable to operating affiliates, end of period	157,992		157,992
Variable interest entity, not primary beneficiary | AlphaCat ILS Funds
Schedule of Equity Method Investments [Line Items]
Notes payable to operating affiliates, beginning of period	363,394	129,149	215,463	0
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund			178,837
Issuance of notes payable to operating affiliates	249,094	79,468	433,831	211,311
Redemption of notes payable to operating affiliates	(148,800)		(364,566)
Foreign exchange gain (loss)	1,270	341	1,393	(2,353)
Notes payable to operating affiliates, end of period	$ 464,958	$ 208,958	$ 464,958	$ 208,958

XML

Investments (Components of net investment income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net investment income
Total gross investment income	$ 23,205	$ 27,780	$ 48,461	$ 55,844
Investment expenses	(1,919)	(1,570)	(3,813)	(3,985)
Net investment income	21,286	26,210	44,648	51,859
Fixed maturities and short term investments
Net investment income
Total gross investment income	22,207	26,151	45,504	53,682
Cash and cash equivalents
Net investment income
Total gross investment income	996	1,629	2,953	2,162
Securities lending income
Net investment income
Total gross investment income	$ 2	$ 0	$ 4	$ 0

XML

Derivative instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Location and fair value amount of derivative instruments reported on the balance sheet

The following table summarizes information on the classification and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheets at June 30, 2014 and December 31, 2013:

	As at June 30, 2014						As at December 31, 2013
Derivatives designated as hedging instruments:	Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)		Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)
Foreign currency forward contracts	$	102,217	$	1,122	$	251	$	163,576	$	1,167	$	2,313
Interest rate swap contracts	$	552,263	$	26	$	877	$	552,263	$	28	$	911

(a) Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

Derivative instruments designated as a fair value hedge

Derivative Instruments, Gain (Loss) [Line Items]

Location and amount of gains and losses related to derivative instruments reported on in the income statement

The following table provides the total impact on earnings, recognized in income within foreign exchange gains (losses), relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Foreign currency forward contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of gain (loss) recognized in income on derivative	$	1,535		$	(1,707	)	$	4,838		$	(445	)
Amount of (loss) gain on hedged item recognized in income attributable to risk being hedged	$	(1,535	)	$	1,707		$	(4,838	)	$	445
Amount of gain (loss) recognized in income on derivative (ineffective portion)	$	—		$	—		$	—		$	—

Derivative instruments designated as a cash flow hedge

Derivative Instruments, Gain (Loss) [Line Items]

Location and amount of gains and losses related to derivative instruments reported on in the income statement

The following table provides the total impact on other comprehensive income (loss) and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Interest rate swap contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of effective portion recognized in other comprehensive income	$	3,252		$	2,962		$	6,460		$	4,570
Amount of effective portion subsequently reclassified to earnings	$	(3,252	)	$	(2,962	)	$	(6,460	)	$	(4,570	)
Amount of ineffective portion excluded from effectiveness testing	$	—		$	—		$	—		$	—

XML

Reserve for losses and loss expenses (Tables)

6 Months Ended

Jun. 30, 2014

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss expenses

The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Reserve for losses and loss expenses, beginning of period	$	2,925,059		$	3,357,691		$	3,030,399		$	3,517,573
Losses and loss expenses recoverable	(348,407		)	(429,252		)	(370,154		)	(439,967		)
Net reserves for losses and loss expenses, beginning of period	2,576,652			2,928,439			2,660,245			3,077,606
Net reserves disposed	—			(18,591		)	—			(18,591		)
Increase (decrease) in net reserves for losses and loss expenses in respect of losses occurring in:
Current year	231,401			306,033			433,487			516,602
Prior years	(72,656		)	(40,989		)	(112,071		)	(106,787		)
Total incurred losses and loss expenses	158,745			265,044			321,416			409,815
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	(16,741		)	(30,996		)	(24,708		)	(35,834		)
Prior years	(199,236		)	(261,677		)	(449,351		)	(516,951		)
Total net paid losses	(215,977		)	(292,673		)	(474,059		)	(552,785		)
Foreign exchange	9,153			(17,462		)	20,971			(51,288		)
Net reserve for losses and loss expenses, end of period	2,528,573			2,864,757			2,528,573			2,864,757
Losses and loss expenses recoverable	338,734			418,693			338,734			418,693
Reserve for losses and loss expenses, end of period	$	2,867,307		$	3,283,450		$	2,867,307		$	3,283,450

Incurred losses and loss expenses comprise:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Gross losses and loss expenses	$	182,780		$	295,539		$	364,755		$	457,950
Reinsurance recoverable	(24,035		)	(30,495		)	(43,339		)	(48,135		)
Net incurred losses and loss expenses	$	158,745		$	265,044		$	321,416		$	409,815

XML

Recent accounting pronouncements

6 Months Ended

Jun. 30, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent accounting pronouncements

Recent accounting pronouncements

Adoption of New Accounting Standards

Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity

In March 2013, the FASB issued Accounting Standard Update No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (ASU 2013-05). The objective of this Update is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30, Foreign Currency Matters-Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary within a foreign entity. The amendments became effective for the Company on January 1, 2014. Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Financial Services - Investment Companies - Amendments to the Scope, Measurement, and Disclosure Requirements

In June 2013, the FASB issued Accounting Standard Update No. 2013-08, “Financial Services - Investment Companies - Amendments to the Scope, Measurement, and Disclosure Requirements” (ASU 2013-08). The amendments in this Update change the assessment of whether an entity is an investment company by developing a new two-tiered approach for that assessment, which requires an entity to possess certain fundamental characteristics while allowing judgment in assessing other typical characteristics. The new approach requires an entity to assess all of the characteristics of an investment company and consider its purpose and determine whether it is an investment company. The amendments became effective for the Company on January 1, 2014. The Company performed an assessment and has concluded that the AlphaCat ILS funds meet the characteristics outlined in this Update and therefore will continue to be treated as investment companies.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the FASB issued Accounting Standard Update No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11). This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward is not available to settle any additional income taxes that would result from the disallowance of a tax position at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments became effective for the Company on January 1, 2014. Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Accounting Standards Not Yet Adopted

In May 2014, the FASB issued Accounting Standard Update No. 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09). The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Earlier adoption is not permitted. The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

In June 2014, the FASB issued Accounting Standard Update No. 2014-12, “Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (ASU 2014-12). The amendments in this Update apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target (for example, an initial public offering or a profitability target) could be achieved and still be eligible to vest in the award if and when the performance target is achieved. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Earlier adoption is permitted. The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

XML

Reinsurance (Tables)

6 Months Ended

Jun. 30, 2014

Reinsurance Disclosures [Abstract]

Reinsurance recoverables by reinsurer

Reinsurance recoverables by reinsurer as at June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	301,568	75.7	%	$	340,253	75.6	%
Other reinsurers’ balances > $1 million	88,219		22.1	%	100,784		22.4	%
Other reinsurers’ balances < $1 million	8,629		2.2	%	9,197		2.0	%
Total	$	398,416	100.0	%	$	450,234	100.0	%

	June 30, 2014
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	75,413	18.9	%
Everest Re	A+	49,678		12.5	%
Hannover Re	AA-	40,584		10.2	%
Fully Collateralized	NR	35,350		8.9	%
Third Point Reinsurance Ltd	A-	34,249		8.6	%
Swiss Re	AA-	19,247		4.8	%
Munich Re	AA-	13,144		3.3	%
Transatlantic Re	A+	12,735		3.2	%
XL Re	A+	11,592		2.9	%
Berkshire Hathaway Homestate	AA+	9,576		2.4	%
Total		$	301,568	75.7	%

NR: Not rated

	December 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	73,398	16.3	%
National Indemnity	AA+	51,037		11.3	%
Everest Re	A+	48,055		10.7	%
Hannover Re	AA-	41,483		9.2	%
Fully Collateralized	NR	36,683		8.1	%
Third Point Reinsurance Ltd	A-	30,428		6.8	%
Swiss Re	AA-	20,022		4.5	%
Transatlantic Re	A+	14,114		3.1	%
XL Re	A+	12,673		2.8	%
Munich Re	AA-	12,360		2.8	%
Total		$	340,253	75.6	%

NR: Not rated

XML

Subsequent events (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended						0 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Common shares	Mar. 31, 2014 Common shares	Jun. 30, 2013 Common shares	Mar. 31, 2013 Common shares	Jun. 30, 2014 Common share equivalents	Mar. 31, 2014 Common share equivalents	Jul. 29, 2014 Subsequent Event Common shares	Jul. 29, 2014 Subsequent Event Common share equivalents
Subsequent Event [Line Items]
Cash dividends declared per share	$ 0.3	$ 0.3	$ 0.6	$ 2.6	$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ 0.3	$ 0.3

XML

Basis of preparation and consolidation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Reclassification From Financing To Operating Cash Flows [Member]
Reclassification Adjustment		$ 19,400
Reclassification From Finance Expenses Into Income Attributable To Operating Affiliate Investors [Member]
Reclassification Adjustment	$ 20,264	$ 30,341

XML

Investments in affiliates (Investment affiliate details) (Details) (Investment affiliate, Aquiline Financial Services Fund II LP, USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Investment affiliate | Aquiline Financial Services Fund II LP
Schedule of Equity Method Investments [Line Items]
Investment at cost	$ 32,110		$ 32,110
Voting ownership %	0.00%		0.00%
Equity ownership %	6.70%		6.70%
Carrying value	$ 40,627	$ 39,848	$ 34,500	$ 25,352	$ 18,036	$ 15,218

XML

Debt and financing arrangements (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Senior Notes and Junior Debentures
Long-term Debt	$ 541,350	$ 541,416
Credit Facilities
Credit facility, commitment	1,605,000	1,599,800
Credit facility, issued and outstanding	689,865	751,250
Credit Facilities
Credit Facilities
Minimum level of consolidated net worth	2,600,000
Percent of consolidated net income quarterly increase under covenant	50.00%
Percent of any net proceeds from issuance of common shares	50.00%
Ratio consolidated total debt to net worth under covenant	0.35:1.00
Four-year syndicated unsecured credit facility
Credit Facilities
Credit facility, commitment	400,000	400,000
Credit facility, issued and outstanding	0	0
Letter of credit facility period	4 years
Aggregate commitments, maximum	500,000
Line of credit facility initiation date	Mar. 09, 2012
Four-year syndicated secured credit facility
Credit Facilities
Credit facility, commitment	525,000	525,000
Credit facility, issued and outstanding	305,330	358,567
Letter of credit facility period	4 years
Aggregate commitments, maximum	700,000
Line of credit facility initiation date	Mar. 09, 2012
Bilateral unsecured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	60,000
Letter of credit facility period	3 years
Three year unsecured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	340,000
Letter of credit facility period	3 years
Five year secured letter of credit facility | Terminated Credit Facilities [Member]
Credit Facilities
Credit facility, commitment	500,000
Letter of credit facility period	5 years
Talbot FAL Facility
Credit Facilities
Credit facility, commitment	25,000	25,000
Credit facility, issued and outstanding	25,000	25,000
IPC bi-lateral facility
Credit Facilities
Credit facility, commitment	40,000	40,000
Credit facility, issued and outstanding	19,572	20,177
$200,000 secured bi-lateral letter of credit facility
Credit Facilities
Credit facility, commitment	200,000	200,000
Credit facility, issued and outstanding	17,602	16,726
PaCRe Senior secured letter of credit facility
Credit Facilities
Credit facility, commitment	10,000	10,000
Credit facility, issued and outstanding	294	294
AlphaCat Re secured letter of credit facility
Credit Facilities
Credit facility, commitment	30,000	24,800
Credit facility, issued and outstanding	30,000	24,800
$375,000 Flagstone bi-lateral facility
Credit Facilities
Credit facility, commitment	375,000	375,000
Credit facility, issued and outstanding	292,067	305,686
2010 Senior Notes Due 2040
Senior Notes and Junior Debentures
Long-term Debt	250,000
2010 Senior Notes Due 2040 | Maximum
Senior Notes and Junior Debentures
Debt Instrument Redemption Required Notice Period	60 days
2010 Senior Notes Due 2040 | Minimum
Senior Notes and Junior Debentures
Debt Instrument Redemption Required Notice Period	30 days
Junior subordinated deeferrable debentures
Senior Notes and Junior Debentures
Long-term Debt	$ 541,350
Debt Instrument Redemption Period Duration	5 years

XML

Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Assets
Fixed maturities, at fair value (amortized cost: 2014—$5,115,945; 2013—$5,522,853)	$ 5,154,629		$ 5,542,258
Short-term investments, at fair value (amortized cost: 2014—$816,651; 2013—$751,734)	816,820	[1],[2]	751,778	[3]
Other investments, at fair value (cost: 2014—$717,908; 2013—$637,728)	783,423		618,316
Cash and cash equivalents	1,166,410		1,056,346
Total investments and cash	7,921,282		7,968,698
Investments in affiliates	213,619		141,243
Premiums receivable	1,215,454		697,233
Deferred acquisition costs	210,642		134,269
Prepaid reinsurance premiums	178,291		103,251
Securities lending collateral	1,321		3,392
Loss reserves recoverable	338,734		370,154
Paid losses recoverable	59,682		80,080
Intangible assets	104,327		106,407
Goodwill	20,393		20,393
Accrued investment income	18,008		18,876
Other assets	156,651		202,436
Total assets	10,438,404		9,846,432
Liabilities
Reserve for losses and loss expenses	2,867,307		3,030,399
Unearned premiums	1,372,768		824,496
Reinsurance balances payable	162,114		154,874
Securities lending payable	1,787		3,858
Deferred income taxes	20,522		19,086
Net payable for investments purchased	44,713		19,383
Accounts payable and accrued expenses	138,906		278,187
Notes payable to operating affiliates	622,950		439,272
Senior notes payable	247,252		247,198
Debentures payable	541,350		541,416
Total liabilities	6,019,669		5,558,169
Commitments and contingent liabilities
Redeemable noncontrolling interest	66,282		86,512
Shareholders' equity
Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2014—155,205,796; 2013—154,488,497; Outstanding: 2014—91,394,939; 2013—96,044,312)	27,161		27,036
Treasury shares (2014—63,810,857; 2013—58,444,185)	(11,167)		(10,228)
Additional paid-in-capital	1,492,472		1,677,894
Accumulated other comprehensive income (loss)	2,460		(617)
Retained earnings	2,266,180		2,010,009
Total shareholders' equity available to Validus	3,777,106		3,704,094
Noncontrolling interest	575,347		497,657
Total shareholders' equity	4,352,453		4,201,751
Total liabilities, noncontrolling interests and shareholders’ equity	$ 10,438,404		$ 9,846,432

[1] Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

[2] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

[3] Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

XML

Investments (Realized and unrealized gains) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014 PaCRe funds	Dec. 31, 2013 PaCRe funds
Fixed maturities, short-term and other investments and cash equivalents
Gross realized gains	$ 9,813	[1]	$ 7,152	[1]	$ 15,109	[1]	$ 17,872	[1]
Gross realized (losses)	(1,955)		(3,743)		(3,511)		(12,742)
Net realized gains on investments	7,858		3,409		11,598		5,130
Change in net unrealized gains (losses) on investments	45,427	[1]	(141,348)	[1]	101,120	[1]	(148,585)	[1]
Total net realized gains and change in net unrealized gains (losses) on investments including noncontrolling interest	53,285		(137,939)		112,718		(143,455)
Noncontrolling interest	(33,207)	[1]	63,694	[1]	(75,209)	[1]	68,345	[1]
Total net realized gains and change in net unrealized gains (losses) on investments excluding noncontrolling interest	$ 20,078		$ (74,245)		$ 37,509		$ (75,110)
Noncontrolling Interest, Ownership Percentage by Parent									10.00%	10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners									90.00%	90.00%

[1] Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013
Cash flows provided by (used in) operating activities
Net income	$ 394,569		$ 190,440
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Share compensation expenses	15,488		8,956
Gain on sale of subsidiary	(709)		0
Gain on deconsolidation of subsidiary	(1,372)		0
Amortization of discount on senior notes	54		54
Income from investment affiliate	(6,127)		(3,230)
Net realized gains on investments	(11,598)		(5,130)
Change in net unrealized (gains) losses on investments	(101,120)	[1]	148,585	[1]
Amortization of intangible assets	2,080		2,080
Income from operating affiliates	(9,819)		(7,316)
Foreign exchange (gains) losses included in net income	(11,629)		30,868
Amortization of premium on fixed maturities	8,116		10,163
Change in:
Premiums receivable	(514,339)		(558,107)
Deferred acquisition costs	(76,373)		(60,035)
Prepaid reinsurance premiums	(75,040)		(125,293)
Loss reserves recoverable	32,983		20,000
Paid losses recoverable	20,322		23,840
Income taxes recoverable	0		(852)
Accrued investment income	864		1,903
Other assets	31,388		22,009
Reserve for losses and loss expenses	(172,189)		(216,535)
Unearned premiums	548,272		545,235
Reinsurance balances payable	5,979		186,906
Deferred income taxes	1,539		2,081
Accounts payable and accrued expenses	(63,896)		(23,517)
Net cash provided by operating activities	17,443		193,105
Cash flows provided by (used in) investing activities
Proceeds on sales of investments	1,979,658		2,686,285
Proceeds on maturities of investments	384,259		316,860
Purchases of fixed maturities	(1,929,428)		(3,318,638)
(Purchases) sales of short-term investments, net	(92,572)		500,191
Purchases of other investments	(75,198)		(23,674)
Decrease (increase) in securities lending collateral	2,071		(1,675)
Redemption of investment in operating affiliates	57,025		79,307
Purchase of investment in investment affiliate	0		(6,904)
Proceeds sale of subsidiary	16,459		0
Net cash provided by investing activities	342,274		231,752
Cash flows provided by (used in) financing activities
Net (repayment of) proceeds on issuance of notes payable to operating affiliates	(44,423)		262,037
Redemption of common shares, net	(4,385)		(221)
Purchases of common shares under share repurchase program	(197,339)		(357,184)
Dividends paid	(61,036)		(297,539)
(Decrease) increase in securities lending payable	(2,071)		1,675
Investment in third party redeemable noncontrolling interest	46,504		49,790
Investment in third party noncontrolling interest	0		58,500
Net cash used in financing activities	(262,750)		(282,942)
Effect of foreign currency rate changes on cash and cash equivalents	13,097		(44,233)
Net increase in cash	110,064		97,682
Cash and cash equivalents - beginning of period	1,056,346		1,219,379
Cash and cash equivalents - end of period	1,166,410		1,317,061
Taxes paid (recovered) during the period	877		(1,326)
Interest paid during the period	$ 27,224		$ 24,955

[1] Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

XML

Noncontrolling interest (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended						3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 PaCRe funds funds	Dec. 31, 2013 PaCRe funds	Jun. 30, 2014 AlphaCat ILS Funds funds	Dec. 31, 2013 AlphaCat ILS Funds funds	Jun. 30, 2014 Redeemable noncontrolling interest	Jun. 30, 2013 Redeemable noncontrolling interest	Jun. 30, 2014 Redeemable noncontrolling interest	Jun. 30, 2013 Redeemable noncontrolling interest	Jun. 30, 2014 Noncontrolling interest	Jun. 30, 2013 Noncontrolling interest	Jun. 30, 2014 Noncontrolling interest	Jun. 30, 2013 Noncontrolling interest
Noncontrolling Interest [Line Items]
Other Investments Number Of Funds					4		1	2
Noncontrolling Interest, Ownership Percentage by Parent					10.00%	10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners					90.00%	90.00%
Redeemable noncontrolling interest and noncontrolling interest, rollforward:
Redeemable noncontrolling interest and noncontrolling interest, beginning of period	$ 549,324	$ 487,421	$ 584,169	$ 434,280					$ 8,390	$ 56,277	$ 86,512	$ 0	$ 540,934	$ 431,144	$ 497,657	$ 434,280
Issuance of shares	57,000	72,000	57,000	127,690					57,000	13,500	57,000	69,190	0	58,500	0	58,500
Income (loss) attributable to noncontrolling interest	35,305	(60,976)	78,814	(63,525)					892	913	1,124	1,500	34,413	(61,889)	77,690	(65,025)
Adjustment to noncontrolling interest as a result of deconsolidation			(78,354)								(78,354)				0
Redeemable noncontrolling interest and noncontrolling interest, end of period	$ 641,629	$ 498,445	$ 641,629	$ 498,445					$ 66,282	$ 70,690	$ 66,282	$ 70,690	$ 575,347	$ 427,755	$ 575,347	$ 427,755

XML

Debt and financing arrangements (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Schedule of financing structure

The financing structure at June 30, 2014 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,800		137,800		137,800
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,550		541,350		541,350
2010 Senior Notes due 2040	250,000		250,000		247,252
Total debentures and senior notes payable	851,550		791,350		788,602
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		305,330		—
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		—
IPC bi-lateral facility	40,000		19,572		—
$375,000 Flagstone bi-lateral facility	375,000		292,067		—
Total credit and other facilities	1,605,000		689,865		—
Total debt and financing arrangements	$	2,456,550	$	1,481,215	$	788,602

The financing structure at December 31, 2013 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,866		137,866		137,866
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,616		541,416		541,416
2010 Senior Notes due 2040	250,000		250,000		247,198
Total debentures and senior notes payable	851,616		791,416		788,614
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		358,567		—
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		—
IPC bi-lateral facility	40,000		20,177		—
$375,000 Flagstone bi-lateral facility	375,000		305,686		—
Total credit and other facilities	1,599,800		751,250		—
Total debt and financing arrangements	$	2,451,416	$	1,542,666	$	788,614

(a) Indicates utilization of commitment amount, not necessarily drawn borrowings.

Debt Instrument [Line Items]

Components of finance expenses

Finance expenses consist of interest on the junior subordinated deferrable debentures and senior notes, the amortization of debt offering costs, credit facilities fees, bank charges, AlphaCat financing fees and Talbot FAL costs as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
2006 Junior Subordinated Deferrable Debentures	$	2,211	$	2,211	$	4,398	$	4,398
2007 Junior Subordinated Deferrable Debentures	1,835		1,835		3,644		3,644
Flagstone 2006 Junior Subordinated Deferrable Debentures	2,244		2,231		4,467		3,703
Flagstone 2007 Junior Subordinated Deferrable Debentures	1,778		1,547		3,528		2,619
2010 Senior Notes due 2040	5,597		5,597		11,194		11,194
Credit facilities	1,371		2,799		2,930		3,753
Bank charges	102		100		215		233
AlphaCat ILS funds fees (a)	969		1,214		1,646		2,328
Talbot FAL Facility	19		32		4		63
Total finance expenses	$	16,126	$	17,566	$	32,026	$	31,935

(a) Includes finance expenses incurred by AlphaCat Managers, Ltd. in relation to fund raising for the AlphaCat ILS funds, AlphaCat 2014 and AlphaCat 2013.

Debt Information At Issuance [Member]

Debt Instrument [Line Items]

Schedule of Long-term Debt Instruments [Table Text Block]

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at the issuance date for each placement.

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	9.069	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	3.540	%	(a)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	8.480	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	3.000	%	(a)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	3.100	%	(a)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(b)	Semi-annually in arrears

(a) Variable interest rate is the three-month LIBOR, reset quarterly, plus spread as noted in the table.

(b) Fixed interest rate.

Debt Outstanding [Member]

Debt Instrument [Line Items]

Schedule of Long-term Debt Instruments [Table Text Block]

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at June 30, 2014:

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	5.831	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	6.463	%	(b)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	5.180	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	5.900	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	5.983	%	(b)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(a)	Semi-annually in arrears

(a) Fixed interest rate.

(b) Interest rate has been fixed as a result of interest rate swap contracts entered into by the Company.

XML

Stock plans (Options activity) (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Options activities:
Options outstanding, beginning balance (in shares)	1,572,713	1,823,947
Options regranted (modified) (in shares)		1,833,414
Options exercised (in shares)	(95,019)	(235,091)
Options cancelled (modified) (in shares)		(1,733,139)
Options outstanding, ending balance (in shares)	1,477,694	1,689,131
Weighted Average Grant Date Fair Value
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 6.66	$ 6.52
Weighted average grant date fair value, options regranted (modified) (in dollars per share)		$ 6.76
Weighted average grant date fair value, options exercised (in dollars per share)	$ 4.41	$ 4.86
Weighted average grant date fair value, options cancelled (modified) (in dollars per share)		$ 6.76
Weighted average grant date fair value, ending balance (in dollars per share)	$ 6.81	$ 6.76
Weighted Average Grant Date Exercise Price
Weighted average grant date exercise price, beginning balance (in dollars per share)	$ 18.88	$ 20.69
Weighted average grant date exercise price, options regranted (modified) (in dollars per share)		$ 19.02
Weighted average grant date exercise price, options exercised (in dollars per share)	$ 24.99	$ 24.78
Weighted average grant date exercise price, options cancelled (modified) (in dollars per share)		$ 20.12
Weighted average grant date exercise price, ending balance (in dollars per share)	$ 18.48	$ 18.89

XML

Earnings per share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings per share

Earnings per share

The following table sets forth the computation of basic and earnings per diluted share for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Basic earnings per share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	(1,552		)	(1,646		)	(3,104		)	(16,110		)
Income available to common shareholders	$	151,815		$	29,076		$	312,651		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Basic earnings per share available to common shareholders	$	1.67		$	0.28		$	3.39		$	2.26
Earnings per diluted share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	—			(1,646		)	—			(16,110		)
Income available to common shareholders	$	153,367		$	29,076		$	315,755		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Share equivalents:
Warrants	2,729,226			—			2,722,618			—
Stock options	745,800			857,179			748,085			1,244,368
Unvested restricted shares	849,287			744,276			865,214			889,641
Weighted average number of diluted common shares outstanding	95,276,836			104,734,643			96,538,178			107,393,822
Earnings per diluted share available to common shareholders	$	1.61		$	0.28		$	3.27		$	2.21

Share equivalents that would result in the issuance of common shares of 689,169 (2013: 1,163,413) and 350,833 (2013: 633,910) were outstanding for the three and six months endedJune 30, 2014, respectively, but were not included in the computation of earnings per diluted share because the effect would be antidilutive.

XML

Accumulated other comprehensive (loss) (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of changes in accumulated other comprehensive income

The changes in accumulated other comprehensive income ("AOCI"), by component for the three and six months endedJune 30, 2014 and 2013 is as follows:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance - Beginning of period	$	(155	)	$	(12,738	)	$	(617	)	$	(2,953	)
Amounts reclassified to retained earnings	—			4,290			—			4,290
Other comprehensive income (loss)	2,615			186			3,077			(9,599		)
Balance - End of period	$	2,460		$	(8,262	)	$	2,460		$	(8,262	)

XML

Subsequent events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent events

Subsequent events

Quarterly Dividend

On July 29, 2014, the Company announced a quarterly cash dividend of $0.30 per each common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable, payable on September 30, 2014 to holders of record on September 15, 2014.

XML

Stock plans (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Stock plans (other details)
Number of shares reserved for issuance under the LTIP and STIP	13,126,896		13,126,896
Remaining number of shares reserved for issuance	1,024,970		1,024,970
Share compensation expenses	$ 8,341	$ 6,638	$ 15,488	$ 8,956
Options
Stock plans (other details)
Life of options			10 years
Share compensation expenses	0	0	0	0
Unrecognized share compensation expenses	0	0	0	0
Restricted share awards
Stock plans (other details)
Share compensation expenses	7,920	5,933	14,921	9,994
Unrecognized share compensation expenses	87,129		87,129		69,219
Weighted average period of recognizing share based compensation expenses			3 years 2 months 12 days	3 years 2 months 12 days
Restricted share units
Stock plans (other details)
Share compensation expenses	167	130	333	251
Unrecognized share compensation expenses	1,652		1,652		1,678
Weighted average period of recognizing share based compensation expenses			3 years 2 months 12 days	3 years 4 months 24 days
Performance shares
Stock plans (other details)
Share compensation expenses	254	575	234	(1,289)
Unrecognized share compensation expenses	$ 2,823		$ 2,823		$ 1,642
Weighted average period of recognizing share based compensation expenses			2 years 6 months 7 days	2 years 0 months 4 days
Performance share awards performance period			3 years

XML

Basis of preparation and consolidation

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation and consolidation

Basis of preparation and consolidation

These unaudited Consolidated Financial Statements (the "Consolidated Financial Statements") include Validus Holdings, Ltd. and its wholly and majority owned subsidiaries (together the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 in Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission (the "SEC").

In the opinion of management, these Consolidated Financial Statements reflect all adjustments (including normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. To facilitate comparison of information, certain amounts in prior periods have been reclassified to conform to current period presentation. The consolidated statement of cash flows for the six months endedJune 30, 2013 includes a reclassification of $19,400 that increased net cash flows used in financing activities and net cash flows provided by operating activities to revise the presentation of subscriptions received in advance from third party investors. For the three and six months endedJune 30, 2013, $20,264 and $30,341 respectively, have been reclassified into income attributable to operating affiliate investors from finance expenses to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated. The results of operations for any interim period are not necessarily indicative of the results for a full year.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While management believes that the amounts included in the Consolidated Financial Statements reflect its best estimates and assumptions, actual results could differ materially from those estimates. The Company’s principal estimates include:

•reserve for losses and loss expenses;

•premium estimates for business written on a line slip or proportional basis;

•the valuation of goodwill and intangible assets;

•reinsurance recoverable balances including the provision for uncollectible amounts; and

•investment valuation of financial assets.

The term “ASC” used in these notes refers to Accounting Standard Codification issued by the U.S. Financial Accounting Standards Board (“FASB”).

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Assets
Fixed maturities, at amortized cost or cost	$ 5,115,945		$ 5,522,853
Short-term investments, at amortized cost or cost	816,651	[1],[2]	751,734	[3]
Other investments, at amortized cost or cost	$ 717,908		$ 637,728
Shareholders' equity
Common shares, shares authorized	571,428,571		571,428,571
Common shares, par value	$ 0.175		$ 0.175
Common shares, shares issued	155,205,796		154,488,497
Common shares, shares outstanding	91,394,939		96,044,312
Treasury stock, common shares	63,810,857		58,444,185

[1] Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

[2] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

[3] Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

XML

Stock plans

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock plans

Stock plans

(a) Long Term Incentive Plan and Short Term Incentive Plan

The Company’s Amended and Restated 2005 Long Term Incentive Plan (“LTIP”) provides for grants to employees of options, stock appreciation rights (“SARs”), restricted shares, restricted share units, performance shares, dividend equivalents or other share-based awards. In addition, the Company may issue restricted share awards or restricted share units in connection with awards issued under its annual Short Term Incentive Plan (“STIP”). The total number of shares reserved for issuance under the LTIP and STIP are 13,126,896 shares of which 1,024,970 shares are remaining. The LTIP and STIP are administered by the Compensation Committee of the Board of Directors. No SARs have been granted to date. Grant prices are established at the fair market value of the Company’s common shares at the date of grant.

i. Options

Options may be exercised for voting common shares upon vesting. Options have a life of 10 years and vest either pro rata or at the end of the required service period from the date of grant. Fair value of the option awards at the date of grant is determined using the Black-Scholes option-pricing model.

Expected volatility is based on stock price volatility of comparable publicly-traded companies. The Company used the simplified method consistent with U.S. GAAP authoritative guidance on stock compensation expenses to estimate expected lives for options granted during the period as historical exercise data was not available and the options met the requirement as set out in the guidance.

The Company has not granted any stock options since September 4, 2009.

There were no share compensation expenses in respect of options recognized for the three and six months ended June 30, 2014 and 2013.

A modification event was triggered as a result of the 2013 Special Dividend. In accordance with the terms of the LTIP under which the options were issued, an adjustment was required to protect the holders of such stock options from changes in the value of the stock options following the declaration of the 2013 Special Dividend. The modification of the options included a decrease in the exercise price of each stock option and an increase in the number of shares underlying each stock option. The fair value of the options before and after the modification was unchanged.

Activity with respect to options for the six months ended June 30, 2014 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2013	1,572,713		$	6.66	$	18.88
Options exercised	(95,019	)	4.41		24.99
Options outstanding, June 30, 2014	1,477,694		$	6.81	$	18.48

Activity with respect to options for the six months ended June 30, 2013was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (modified)	1,833,414		6.76		19.02
Options exercised	(235,091	)	4.86		24.78
Options cancelled (modified)	(1,733,139	)	6.76		20.12
Options outstanding, June 30, 2013	1,689,131		$	6.76	$	18.89

At June 30, 2014 and 2013, there were no unrecognized share compensation expenses in respect of options.

ii. Restricted share awards

Restricted shares granted under the LTIP and STIP vest either pro rata or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $7,920 (2013: $5,933) and $14,921 (2013: $9,994), respectively. The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share awards for the six months ended June 30, 2014 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2013	2,684,745		$	33.74
Restricted share awards granted	920,496		37.32
Restricted share awards vested	(753,071	)	31.61
Restricted share awards forfeited	(24,632	)	34.53
Restricted share awards outstanding, June 30, 2014	2,827,538		$	35.46

Activity with respect to unvested restricted share awards for the six months ended June 30, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	1,491,967		36.10
Restricted share awards vested	(890,600	)	27.99
Restricted share awards forfeited	(107,221	)	28.15
Restricted share awards outstanding, June 30, 2013	2,664,693		$	33.54

At June 30, 2014, there were $87,129 (December 31, 2013: $69,219) of total unrecognized share compensation expenses in respect of restricted share awards that are expected to be recognized over a weighted-average period of 3.2 years (December 31, 2013: 3.2 years).

iii. Restricted share units

Restricted share units under the LTIP and STIP vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $167 (2013: $130) and $333 (2013: $251), respectively. The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period.

Activity with respect to unvested restricted share units for the six months ended June 30, 2014 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2013	66,518		$	33.74
Restricted share units granted	8,132		37.33
Restricted share units vested	(18,325	)	30.71
Restricted share units issued in lieu of cash dividends	1,029		33.74
Restricted share units outstanding, June 30, 2014	57,354		$	35.22

Activity with respect to unvested restricted share units for the six months ended June 30, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units granted	36,635		36.11
Restricted share units vested	(21,814	)	28.17
Restricted share units issued in lieu of cash dividends	3,380		29.74
Restricted share units outstanding, June 30, 2013	65,439		$	33.74

At June 30, 2014, there were $1,652 (December 31, 2013: $1,678) of total unrecognized share compensation expenses in respect of restricted share units that are expected to be recognized over a weighted-average period of 3.2 years (December 31, 2013: 3.4 years).

iv. Performance share awards

The performance share awards contain a performance based component. The performance component relates to the compounded growth in the Dividend Adjusted Diluted Book Value per Share (“DBVPS”) over a three year period relative to the Company's peer group. For performance share awards granted during the period, the grant date Diluted Book Value per Share is based on the DBVPS at the end of the most recent financial reporting year. The Dividend Adjusted Performance Period End DBVPS will be the DBVPS three years after the grant date DBVPS. The fair value estimate earns over the requisite attribution period and the estimate will be reassessed at the end of each performance period which will reflect any adjustments in the consolidated statements of comprehensive income in the period in which they are determined.

The Company recognized share compensation expenses during the three and six months ended June 30, 2014 of $254 (2013: $575) and $234 (2013: ($1,289)), respectively. The negative expense is due to a reversal of expenses on unvested performance share awards based on a review of current and projected performance criteria.

Activity with respect to unvested performance share awards for the six months ended June 30, 2014 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2013	101,820		$	33.56
Performance share awards granted	52,639		37.33
Performance share awards vested	(32,746	)	32.62
Performance share awards conversion adjustment	(15,344	)	31.38
Performance share awards outstanding, June 30, 2014	106,369		$	36.03

Activity with respect to unvested performance share awards for the six months ended June 30, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards granted	38,386		36.11
Performance share awards vested	(39,094	)	28.70
Performance share awards forfeited	(18,701	)	31.05
Performance share awards conversion adjustment	(99,616	)	$	33.05
Performance share awards outstanding, June 30, 2013	101,820		$	33.56

At June 30, 2014, there were $2,823 (December 31, 2013: $1,642) of total unrecognized share compensation expenses in respect of performance share awards that are expected to be recognized over a weighted-average period of 2.5 years (December 31, 2013: 2.0 years).

(b) Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Restricted share awards	7,920		5,933		14,921		9,994
Restricted share units	167		130		333		251
Performance share awards	254		575		234		(1,289		)
Total	$	8,341	$	6,638	$	15,488	$	8,956

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 05, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	VALIDUS HOLDINGS LTD
Entity Central Index Key	0001348259
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		91,018,718

XML

Debt and financing arrangements

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Debt and financing arrangements

Debt and financing arrangements

(a) Financing structure

The financing structure at June 30, 2014 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,800		137,800		137,800
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,550		541,350		541,350
2010 Senior Notes due 2040	250,000		250,000		247,252
Total debentures and senior notes payable	851,550		791,350		788,602
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		305,330		—
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		—
IPC bi-lateral facility	40,000		19,572		—
$375,000 Flagstone bi-lateral facility	375,000		292,067		—
Total credit and other facilities	1,605,000		689,865		—
Total debt and financing arrangements	$	2,456,550	$	1,481,215	$	788,602

The financing structure at December 31, 2013 was:

	Commitment		Issued and outstanding (a)		Drawn
2006 Junior Subordinated Deferrable Debentures	$	150,000	$	150,000	$	150,000
2007 Junior Subordinated Deferrable Debentures	200,000		139,800		139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures	137,866		137,866		137,866
Flagstone 2007 Junior Subordinated Deferrable Debentures	113,750		113,750		113,750
Total debentures payable	601,616		541,416		541,416
2010 Senior Notes due 2040	250,000		250,000		247,198
Total debentures and senior notes payable	851,616		791,416		788,614
$400,000 syndicated unsecured letter of credit facility	400,000		—		—
$525,000 syndicated secured letter of credit facility	525,000		358,567		—
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		—
Talbot FAL facility	25,000		25,000		—
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		—
IPC bi-lateral facility	40,000		20,177		—
$375,000 Flagstone bi-lateral facility	375,000		305,686		—
Total credit and other facilities	1,599,800		751,250		—
Total debt and financing arrangements	$	2,451,416	$	1,542,666	$	788,614

(a) Indicates utilization of commitment amount, not necessarily drawn borrowings.

(b) Senior notes and junior subordinated deferrable debentures

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at the issuance date for each placement.

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	9.069	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	3.540	%	(a)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	8.480	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	3.000	%	(a)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	3.100	%	(a)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(b)	Semi-annually in arrears

(a) Variable interest rate is the three-month LIBOR, reset quarterly, plus spread as noted in the table.

(b) Fixed interest rate.

The following table summarizes the key terms of the Company's senior notes and junior subordinated deferrable debentures as at June 30, 2014:

Description	Issuance date	Commitment		Maturity date	Fixed/Spread			Interest payments due
2006 Junior Subordinated Deferrable Debentures	June 15, 2006	$	150,000	June 15, 2036	5.831	%	(b)	Quarterly
Flagstone 2006 Junior Subordinated Deferrable Debentures	August 23, 2006	$	137,800	September 15, 2036	6.463	%	(b)	Quarterly
2007 Junior Subordinated Deferrable Debentures	June 21, 2007	$	200,000	June 15, 2037	5.180	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	June 8, 2007	$	88,750	July 30, 2037	5.900	%	(b)	Quarterly
Flagstone 2007 Junior Subordinated Deferrable Debentures	September 20, 2007	$	25,000	September 15, 2037	5.983	%	(b)	Quarterly
2010 Senior Notes due 2040	January 26, 2010	$	250,000	January 26, 2040	8.875	%	(a)	Semi-annually in arrears

(a) Fixed interest rate.

(b) Interest rate has been fixed as a result of interest rate swap contracts entered into by the Company.

Senior Notes

The Senior Notes due 2040 (the “2010 Senior Notes”) were part of a registered public offering. The 2010 Senior Notes mature on January 26, 2040.  The Company may redeem the notes, in whole at any time, or in part from time to time, at the Company's option on not less than 30 nor more than 60 days’ notice, at a make-whole redemption price as described in “Description of the Notes - Optional Redemption” in the 2010 Senior Notes prospectus supplement.  In addition, the Company may redeem the notes, in whole, but not in part, at any time upon the occurrence of certain tax events as described in “Description of the Notes - Redemption for Tax Purposes’ in the prospectus supplement.

Debt issuance costs were deferred as an asset and are amortized over the life of the 2010 Senior Notes. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

The 2010 Senior Notes are unsecured and unsubordinated obligations of the Company and rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness. The 2010 Senior Notes will be effectively junior to all of the Company’s future secured debt, to the extent of the value of the collateral securing such debt, and will rank senior to all our existing and future subordinated debt. The 2010 Senior Notes are structurally subordinated to all obligations of the Company’s subsidiaries.

Future payments of principal of $250,000 on the 2010 Senior Notes are all expected to be after 2019.

Junior subordinated deferrable debentures

The Company participated in private placements of junior subordinated deferrable interest debentures due 2036 and 2037 (respectively, the “2006 Junior Subordinated Deferrable Debentures” and “2007 Junior Subordinated Deferrable Debentures”).

Debt issuance costs for the 2006 and 2007 Junior Subordinated Deferrable Debentures were deferred as an asset and were amortized to income over the five year optional redemption periods. They are redeemable at the Company's option at par. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

As part of the acquisition of Flagstone, the Company assumed junior subordinated deferrable debentures due 2036 and 2037 (respectively, the “Flagstone 2006 Junior Subordinated Deferrable Debentures” and “Flagstone 2007 Junior Subordinated Deferrable Debentures”). These debentures are redeemable quarterly at par. There were no redemptions made during the three and six months ended June 30, 2014 and 2013.

Future payments of principal of $541,350 on the debentures discussed above are all expected to be after 2019.

(c) Credit facilities

i. $400,000 syndicated unsecured letter of credit facility and $525,000 syndicated secured letter of credit facility

On March 9, 2012, the Company entered into a $400,000four-year unsecured credit facility with Deutsche Bank Securities Inc., as syndication agent, JPMorgan Chase Bank, N.A. as administrative agent, Lloyds Securities Inc. and Suntrust Bank, as co-documentation agents and the lenders party thereto, which provides for letter of credit and revolving credit availability for the Company (the “Four Year Unsecured Facility”) (the full $400,000 of which is available for letters of credit and/or revolving loans). The Four Year Unsecured Facility was provided by a syndicate of commercial banks. Letters of credit under the Four Year Unsecured Facility are available to support obligations in connection with the insurance business of the Company and its subsidiaries. Loans under the Four Year Unsecured Facility are available for the general corporate and working capital purposes of the Company. The Company may request that existing lenders under the Four Year Unsecured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Unsecured Facility do not exceed $500,000.

Also on March 9, 2012, the Company entered into a $525,000four-year secured credit facility, with the same parties, which provides for letter of credit availability for the Company (the “Four Year Secured Facility” and together with the Four Year Unsecured Facility, the “Credit Facilities”). The Four Year Secured Facility was also provided by a syndicate of commercial banks. Letters of credit under the Four Year Secured Facility will be available to support obligations in connection with the insurance business of the Company. The Company may request that existing lenders under the Four Year Secured Facility or prospective additional lenders agree to make available additional commitments from time to time so long as the aggregate commitments under the Four Year Secured Facility do not exceed $700,000. The obligations of the Company under the Four Year Secured Facility are secured by cash and securities deposited into cash collateral accounts from time to time with The Bank of New York Mellon.

As of June 30, 2014, there were $305,330 in outstanding letters of credit under the Four Year Secured Facility (December 31, 2013: $358,567) and $nil outstanding under the Four Year Unsecured Facility.

The Credit Facilities contain covenants that include, among other things (i) the requirement that the Company initially maintain a minimum level of consolidated net worth of at least $2,600,000 and, commencing with the end of the fiscal quarter ending March 31, 2012, to be increased quarterly by an amount equal to 50.0% of the Company’s consolidated net income (if positive) for such quarter plus 50.0% of the aggregate increases in the consolidated shareholders’ equity of the Company during such fiscal quarter by reason of the issuance and sale of common equity interests of the Company, including upon any conversion of debt securities of the Company into such equity interests, (ii) the requirement that the Company maintain at all times a consolidated total debt to consolidated total capital ratio not greater than 0.35:1.00, and (iii) the requirement that Validus Reinsurance, Ltd. and any other material insurance subsidiaries maintain a financial strength rating by A.M. Best of not less than “B++” (Fair).  In addition, the Credit Facilities contain customary negative covenants applicable to the Company, including limitations on the ability to pay dividends and other payments in respect of equity interests at any time that the Company is otherwise in default with respect to certain provisions under the respective Credit Facilities, limitations on the ability to incur liens, sell assets, merge or consolidate with others, enter into transactions with affiliates, and limitations on the ability of its subsidiaries to incur indebtedness. The Credit Facilities also contain customary affirmative covenants, representations and warranties and events of default for credit facilities of its type. As of June 30, 2014, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Credit Facilities.

On March 9, 2012, upon entering into the Credit Facilities, the Company terminated its (a) three-year bi-lateral $60,000 unsecured revolving credit facility, dated March 12, 2010, (b) $340,000three-year unsecured credit facility, dated March 12, 2010 and (c) $500,000five-year secured credit facility, dated March 12, 2007. No early termination penalties were incurred.

ii. $25,000 Talbot FAL facility

Talbot holds a standby Letter of Credit facility (the “Talbot FAL facility”) to provide Funds at Lloyd’s to support the 2012, 2013, 2014 and 2015 underwriting years of account. As of June 30, 2014 the Company had $25,000 (December 31, 2013: $25,000) in outstanding letters of credit under the Talbot FAL facility.

The Talbot FAL facility contains affirmative covenants that include requirements for consolidated net worth and debt to capital ratios in line with those in place for the Credit Facilities and discussed above. The Talbot FAL facility also contains restrictions on the Company's ability to incur debt at our subsidiaries, incur liens, sell assets and merge or consolidate with others. Other than in respect of existing and future preferred and hybrid securities, the payment of dividends and other payments in respect of equity interests are not permitted at any time that we are in default with respect to certain provisions under the Talbot FAL facility. As of June 30, 2014 and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Talbot FAL facility.

iii. $40,000 IPC bi-lateral facility

The Company assumed an existing evergreen letter of credit facility through the acquisition of IPC (the "IPC bi-lateral facility"). As of June 30, 2014, there were $19,572 outstanding letters of credit issued under the IPC bi-lateral facility (December 31, 2013: $20,177). As of June 30, 2014 and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the IPC bi-lateral facility.

iv. $200,000 secured bi-lateral letter of credit facility

The Company holds an uncommitted secured bi-lateral letter of credit facility with Citibank Europe plc (the “Secured bi-lateral letter of credit facility”). As of June 30, 2014, $17,602 (December 31, 2013: $16,726) of letters of credit were outstanding under the Secured bi-lateral letter of credit facility. The Secured bi-lateral letter of credit facility has no fixed termination date and as of June 30, 2014, the Company is in compliance with all terms and covenants thereof.

v. $10,000 PaCRe senior secured letter of credit facility

On May 11, 2012, PaCRe and its subsidiary, PaCRe Investments, Ltd. entered into a secured evergreen credit and letter of credit facility with JPMorgan Chase Bank, N.A. This facility provides for revolving borrowings by PaCRe and for letters of credit issued by PaCRe to be used to support its reinsurance obligations in aggregate amount of $10,000. As of June 30, 2014, $294 (December 31, 2013: $294) of letters of credit were outstanding under this facility. As of June 30, 2014, and throughout the reporting periods presented, PaCRe was in compliance with all covenants and restrictions thereof.

vi. $30,000 AlphaCat Re secured letter of credit facility

On January 2, 2013, AlphaCat Re entered into a secured evergreen letter of credit facility with Comerica Bank. This facility provides for letters of credit issued by AlphaCat Re to be used to support its reinsurance obligations in the aggregate amount of $24,800. During the period ended March 31, 2014 the size of the facility was increased to $30,000 from $24,800. As of June 30, 2014, $30,000 (December 31, 2013: $24,800) of letters of credit were outstanding under this facility. As of June 30, 2014, and throughout the reporting periods presented, AlphaCat Re was in compliance with all covenants and restrictions thereof.

vii. $375,000 Flagstone bi-lateral facility

As part of the Flagstone Acquisition, the Company assumed an evergreen Letters of Credit Master Agreement between Citibank Europe Plc and Flagstone Reassurance Suisse, S.A. (the “Flagstone Bi-Lateral Facility”). At June 30, 2014, the Flagstone Bi-Lateral Facility had $292,067 (December 31, 2013: $305,686) letters of credit issued and outstanding. As of June 30, 2014, and throughout the reporting periods presented, the Company was in compliance with all covenants and restrictions under the Flagstone Bi-Lateral Facility.

(d) Finance expenses

Finance expenses consist of interest on the junior subordinated deferrable debentures and senior notes, the amortization of debt offering costs, credit facilities fees, bank charges, AlphaCat financing fees and Talbot FAL costs as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
2006 Junior Subordinated Deferrable Debentures	$	2,211	$	2,211	$	4,398	$	4,398
2007 Junior Subordinated Deferrable Debentures	1,835		1,835		3,644		3,644
Flagstone 2006 Junior Subordinated Deferrable Debentures	2,244		2,231		4,467		3,703
Flagstone 2007 Junior Subordinated Deferrable Debentures	1,778		1,547		3,528		2,619
2010 Senior Notes due 2040	5,597		5,597		11,194		11,194
Credit facilities	1,371		2,799		2,930		3,753
Bank charges	102		100		215		233
AlphaCat ILS funds fees (a)	969		1,214		1,646		2,328
Talbot FAL Facility	19		32		4		63
Total finance expenses	$	16,126	$	17,566	$	32,026	$	31,935

(a) Includes finance expenses incurred by AlphaCat Managers, Ltd. in relation to fund raising for the AlphaCat ILS funds, AlphaCat 2014 and AlphaCat 2013.

XML

Segment information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Dec. 31, 2013
Underwriting income
Gross premiums written	$ 655,674		$ 702,313		$ 1,667,665		$ 1,807,073
Reinsurance premiums ceded	(50,565)		(121,396)		(245,473)		(308,612)
Net premiums written	605,109		580,917		1,422,192		1,498,461
Change in unearned premiums	(139,106)		(33,459)		(473,232)		(419,942)
Net premiums earned	466,003		547,458		948,960		1,078,519
Underwriting deductions
Losses and loss expenses	158,745		265,044		321,416		409,815
Policy acquisition costs	78,953		87,152		164,602		180,763
General and administrative expenses	73,842		70,967		148,287		151,246
Share compensation expenses	8,341		6,638		15,488		8,956
Total underwriting deductions	319,881		429,801		649,793		750,780
Underwriting income (loss)	146,122		117,657		299,167		327,739
Net investment income	21,286		26,210		44,648		51,859
Other income	5,235		4,418		19,065		7,103
Finance expenses	(16,126)		(17,566)		(32,026)		(31,935)
Operating income (loss) before taxes and income from operating affiliates	156,517		130,719		330,854		354,766
Tax (expense) benefit	(1,391)		(93)		(1,351)		225
Income from operating affilates	4,892		3,793		9,819		7,316
(Income) attributable to operating affiliate investors	(25,316)		(20,264)		(57,026)		(30,341)
Net operating income (loss)	134,702		114,155		282,296		331,966
Net realized gains on investments	7,858		3,409		11,598		5,130
Change in net unrealized losses on investments	45,427	[1]	(141,348)	[1]	101,120	[1]	(148,585)	[1]
Income from investment affiliate	779		1,753		6,127		3,230
Foreign exchange (losses) gains	3,158		(8,223)		(3,320)		(1,301)
Transaction expenses	(3,252)	[2]	0		(3,252)	[2]	0
Net income (loss)	188,672		(30,254)		394,569		190,440
Net (income) loss attributable to noncontrolling interest	(35,305)		60,976		(78,814)		63,525
Net income (loss) available (attributable) to Validus	153,367		30,722		315,755		253,965
Selected ratios:
Net Premium To Gross Premium Ratio	92.30%	[3]	82.70%	[3]	85.30%	[3]	82.90%	[3]
Losses and loss expenses	34.10%	[3]	48.40%	[3]	33.90%	[3]	38.00%	[3]
Policy acquisition costs	16.90%	[3]	15.90%	[3]	17.30%	[3]	16.80%	[3]
General and Administrative Expense Ratio	17.60%	[3],[4]	14.20%	[3],[4]	17.30%	[3],[4]	14.90%	[3],[4]
Underwriting Expense Ratio	34.50%	[3]	30.10%	[3]	34.60%	[3]	31.70%	[3]
Combined ratio	68.60%	[3]	78.50%	[3]	68.50%	[3]	69.70%	[3]
Total assets	10,438,404		10,588,379		10,438,404		10,588,379		9,846,432
Operating Segments [Member] | Validus Re Segment
Underwriting income
Gross premiums written	310,286		353,384		989,272		1,101,347
Reinsurance premiums ceded	(30,535)		(87,558)		(173,175)		(213,286)
Net premiums written	279,751		265,826		816,097		888,061
Change in unearned premiums	(58,023)		38,925		(355,983)		(280,176)
Net premiums earned	221,728		304,751		460,114		607,885
Underwriting deductions
Losses and loss expenses	77,688		183,646		145,843		257,048
Policy acquisition costs	31,125		42,789		70,370		94,533
General and administrative expenses	17,040		20,423		35,235		49,864
Share compensation expenses	2,336		1,529		4,544		2,942
Total underwriting deductions	128,189		248,387		255,992		404,387
Underwriting income (loss)	93,539		56,364		204,122		203,498
Net investment income	16,758		22,949		35,523		46,142
Other income	969		(361)		7,739		13,129
Finance expenses	(3,670)		(5,241)		(7,509)		(8,493)
Operating income (loss) before taxes and income from operating affiliates	107,596		73,711		239,875		254,276
Tax (expense) benefit	(460)		(145)		118		1,612
Income from operating affilates	0		0		0		0
(Income) attributable to operating affiliate investors	0		0		0		0
Net operating income (loss)	107,136		73,566		239,993		255,888
Net realized gains on investments	1,324		2,754		3,770		4,347
Change in net unrealized losses on investments	13,530		(57,834)		25,428		(60,027)
Income from investment affiliate	779		1,753		6,127		3,230
Foreign exchange (losses) gains	2,848		(5,882)		(3,328)		5,280
Net income (loss)	125,617		14,357		271,990		208,718
Net (income) loss attributable to noncontrolling interest	0		0		0		0
Net income (loss) available (attributable) to Validus	125,617		14,357		271,990		208,718
Selected ratios:
Net Premium To Gross Premium Ratio	90.20%	[3]	75.20%	[3]	82.50%	[3]	80.60%	[3]
Losses and loss expenses	35.00%	[3]	60.30%	[3]	31.70%	[3]	42.30%	[3]
Policy acquisition costs	14.10%	[3]	14.00%	[3]	15.30%	[3]	15.60%	[3]
General and Administrative Expense Ratio	8.70%	[3],[4]	7.20%	[3],[4]	8.60%	[3],[4]	8.70%	[3],[4]
Underwriting Expense Ratio	22.80%	[3]	21.20%	[3]	23.90%	[3]	24.30%	[3]
Combined ratio	57.80%	[3]	81.50%	[3]	55.60%	[3]	66.60%	[3]
Total assets	5,626,310		6,107,318		5,626,310		6,107,318
Operating Segments [Member] | AlphaCat Segment
Underwriting income
Gross premiums written	43,790		46,760		128,137		143,276
Reinsurance premiums ceded	0		0		(3,700)		0
Net premiums written	43,790		46,760		124,437		143,276
Change in unearned premiums	(11,330)		(11,770)		(61,294)		(80,669)
Net premiums earned	32,460		34,990		63,143		62,607
Underwriting deductions
Losses and loss expenses	(3,033)		1,313		(10,893)		1,313
Policy acquisition costs	3,056		3,586		6,036		6,224
General and administrative expenses	3,780		3,992		7,908		8,029
Share compensation expenses	161		85		151		162
Total underwriting deductions	3,964		8,976		3,202		15,728
Underwriting income (loss)	28,496		26,014		59,941		46,879
Net investment income	829		973		1,709		1,854
Other income	6,005		7,015		15,502		13,648
Finance expenses	(971)		(2,945)		(1,654)		(4,193)
Operating income (loss) before taxes and income from operating affiliates	34,359		31,057		75,498		58,188
Tax (expense) benefit	0		0		0		0
Income from operating affilates	4,892		3,793		9,819		7,316
(Income) attributable to operating affiliate investors	(25,316)		(20,264)		(57,026)		(30,341)
Net operating income (loss)	13,935		14,586		28,291		35,163
Net realized gains on investments	6,442		0		7,667		0
Change in net unrealized losses on investments	30,087		(70,386)		75,959		(75,174)
Income from investment affiliate	0		0		0		0
Foreign exchange (losses) gains	(191)		136		(153)		(1,051)
Net income (loss)	50,273		(55,664)		111,764		(41,062)
Net (income) loss attributable to noncontrolling interest	(35,305)		60,976		(78,814)		63,525
Net income (loss) available (attributable) to Validus	14,968		5,312		32,950		22,463
Selected ratios:
Net Premium To Gross Premium Ratio	100.00%	[3]	100.00%	[3]	97.10%	[3]	100.00%	[3]
Losses and loss expenses	(9.30%)	[3]	3.80%	[3]	(17.30%)	[3]	2.10%	[3]
Policy acquisition costs	9.40%	[3]	10.20%	[3]	9.60%	[3]	9.90%	[3]
General and Administrative Expense Ratio	12.10%	[3],[4]	11.70%	[3],[4]	12.80%	[3],[4]	13.10%	[3],[4]
Underwriting Expense Ratio	21.50%	[3]	21.90%	[3]	22.40%	[3]	23.00%	[3]
Combined ratio	12.20%	[3]	25.70%	[3]	5.10%	[3]	25.10%	[3]
Total assets	1,651,256		1,379,452		1,651,256		1,379,452
Operating Segments [Member] | Talbot Segment
Underwriting income
Gross premiums written	317,944		315,518		608,639		609,048
Reinsurance premiums ceded	(36,376)		(47,187)		(126,981)		(141,924)
Net premiums written	281,568		268,331		481,658		467,124
Change in unearned premiums	(69,753)		(60,614)		(55,955)		(59,097)
Net premiums earned	211,815		207,717		425,703		408,027
Underwriting deductions
Losses and loss expenses	84,090		80,085		186,466		151,454
Policy acquisition costs	45,593		41,667		90,521		82,193
General and administrative expenses	34,173		32,192		69,322		63,104
Share compensation expenses	2,862		2,357		5,444		3,762
Total underwriting deductions	166,718		156,301		351,753		300,513
Underwriting income (loss)	45,097		51,416		73,950		107,514
Net investment income	4,671		4,383		9,357		9,101
Other income	258		491		275		491
Finance expenses	(68)		(75)		(94)		(149)
Operating income (loss) before taxes and income from operating affiliates	49,958		56,215		83,488		116,957
Tax (expense) benefit	(1,364)		383		(1,234)		(671)
Income from operating affilates	0		0		0		0
(Income) attributable to operating affiliate investors	0		0		0		0
Net operating income (loss)	48,594		56,598		82,254		116,286
Net realized gains on investments	92		655		161		783
Change in net unrealized losses on investments	2,679		(13,128)		5,256		(13,384)
Income from investment affiliate	0		0		0		0
Foreign exchange (losses) gains	1,367		(2,197)		1,217		(6,115)
Net income (loss)	52,732		41,928		88,888		97,570
Net (income) loss attributable to noncontrolling interest	0		0		0		0
Net income (loss) available (attributable) to Validus	52,732		41,928		88,888		97,570
Selected ratios:
Net Premium To Gross Premium Ratio	88.60%	[3]	85.00%	[3]	79.10%	[3]	76.70%	[3]
Losses and loss expenses	39.70%	[3]	38.60%	[3]	43.80%	[3]	37.10%	[3]
Policy acquisition costs	21.50%	[3]	20.10%	[3]	21.20%	[3]	20.10%	[3]
General and Administrative Expense Ratio	17.50%	[3],[4]	16.60%	[3],[4]	17.60%	[3],[4]	16.40%	[3],[4]
Underwriting Expense Ratio	39.00%	[3]	36.70%	[3]	38.80%	[3]	36.50%	[3]
Combined ratio	78.70%	[3]	75.30%	[3]	82.60%	[3]	73.60%	[3]
Total assets	3,004,148		2,897,998		3,004,148		2,897,998
Corporate And Eliminations [Member]
Underwriting income
Gross premiums written	(16,346)		(13,349)		(58,383)		(46,598)
Reinsurance premiums ceded	16,346		13,349		58,383		46,598
Net premiums written	0		0		0		0
Change in unearned premiums	0		0		0		0
Net premiums earned	0		0		0		0
Underwriting deductions
Losses and loss expenses	0		0		0		0
Policy acquisition costs	(821)		(890)		(2,325)		(2,187)
General and administrative expenses	18,849		14,360		35,822		30,249
Share compensation expenses	2,982		2,667		5,349		2,090
Total underwriting deductions	21,010		16,137		38,846		30,152
Underwriting income (loss)	(21,010)		(16,137)		(38,846)		(30,152)
Net investment income	(972)		(2,095)		(1,941)		(5,238)
Other income	(1,997)		(2,727)		(4,451)		(20,165)
Finance expenses	(11,417)		(9,305)		(22,769)		(19,100)
Operating income (loss) before taxes and income from operating affiliates	(35,396)		(30,264)		(68,007)		(74,655)
Tax (expense) benefit	433		(331)		(235)		(716)
Income from operating affilates	0		0		0		0
(Income) attributable to operating affiliate investors	0		0		0		0
Net operating income (loss)	(34,963)		(30,595)		(68,242)		(75,371)
Net realized gains on investments	0		0		0		0
Change in net unrealized losses on investments	(869)		0		(5,523)		0
Income from investment affiliate	0		0		0		0
Foreign exchange (losses) gains	(866)		(280)		(1,056)		585
Transaction expenses	(3,252)	[2]			(3,252)	[2]
Net income (loss)	(39,950)		(30,875)		(78,073)		(74,786)
Net (income) loss attributable to noncontrolling interest	0		0		0		0
Net income (loss) available (attributable) to Validus	(39,950)		(30,875)		(78,073)		(74,786)
Selected ratios:
Total assets	$ 156,690		$ 203,611		$ 156,690		$ 203,611

[1] Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

[2] The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

[3] Ratios are based on net premiums earned.

[4] The general and administrative expense ratio includes share compensation expenses.

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Revenues
Gross premiums written	$ 655,674		$ 702,313		$ 1,667,665		$ 1,807,073
Reinsurance premiums ceded	(50,565)		(121,396)		(245,473)		(308,612)
Net premiums written	605,109		580,917		1,422,192		1,498,461
Change in unearned premiums	(139,106)		(33,459)		(473,232)		(419,942)
Net premiums earned	466,003		547,458		948,960		1,078,519
Net investment income	21,286		26,210		44,648		51,859
Net realized gains on investments	7,858		3,409		11,598		5,130
Change in net unrealized gains (losses) on investments	45,427	[1]	(141,348)	[1]	101,120	[1]	(148,585)	[1]
Income from investment affiliate	779		1,753		6,127		3,230
Other income	5,235		4,418		19,065		7,103
Foreign exchange gains (losses)	3,158		(8,223)		(3,320)		(1,301)
Total revenues	549,746		433,677		1,128,198		995,955
Expenses
Losses and loss expenses	158,745		265,044		321,416		409,815
Policy acquisition costs	78,953		87,152		164,602		180,763
General and administrative expenses	73,842		70,967		148,287		151,246
Share compensation expenses	8,341		6,638		15,488		8,956
Finance expenses	16,126		17,566		32,026		31,935
Transaction expenses	3,252	[2]	0		3,252	[2]	0
Total expenses	339,259		447,367		685,071		782,715
Income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	210,487		(13,690)		443,127		213,240
Tax (expense) benefit	(1,391)		(93)		(1,351)		225
Income from operating affiliates	4,892		3,793		9,819		7,316
(Income) attributable to operating affiliate investors	(25,316)		(20,264)		(57,026)		(30,341)
Net income (loss)	188,672		(30,254)		394,569		190,440
Net (income) loss attributable to noncontrolling interest	(35,305)		60,976		(78,814)		63,525
Net income available to Validus	153,367		30,722		315,755		253,965
Other comprehensive income (loss)
Foreign currency translation adjustments	2,615		186		3,077		(9,599)
Other comprehensive income (loss)	2,615		186		3,077		(9,599)
Comprehensive income available to Validus	$ 155,982		$ 30,908		$ 318,832		$ 244,366
Weighted average number of common shares and common share equivalents outstanding
Basic	90,952,523		103,133,188		92,202,261		105,259,813
Diluted	95,276,836		104,734,643		96,538,178		107,393,822
Basic earnings per share available to common shareholders	$ 1.67		$ 0.28		$ 3.39		$ 2.26
Earnings per diluted share available to common shareholders	$ 1.61		$ 0.28		$ 3.27		$ 2.21
Cash dividends declared per share	$ 0.3		$ 0.3		$ 0.6		$ 2.6

[1] Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

[2] The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

XML

Noncontrolling interest

6 Months Ended

Jun. 30, 2014

Noncontrolling Interest [Abstract]

Noncontrolling interest

Noncontrolling interest

On April 2, 2012, the Company joined with other investors in capitalizing PaCRe Ltd. ("PaCRe"), a Class 4 Bermuda reinsurer formed for the purpose of writing high excess property catastrophe reinsurance. The Company has an equity interest of 10% and the remaining 90% interest is held by third party investors. The Company has a majority voting equity interest in PaCRe and as a result, the financial statements of PaCRe are included in the Consolidated Financial Statements of the Company. The portion of PaCRe’s earnings attributable to third party investors is recorded in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest. PaCRe's shareholder rights do not include redemption features within the control of the third party shareholders. The third party equity is recorded in the Company’s Consolidated Balance Sheets as noncontrolling interest.

The portion of earnings from the one consolidated AlphaCat ILS fund attributable to third party investors is recorded in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest. The AlphaCat ILS funds have rights that enable shareholders, subject to certain limitations, to redeem their shares. The third party equity is therefore recorded in the Company’s Consolidated Balance Sheets as redeemable noncontrolling interest. When and if a redemption notice is received, the fair value of the redemption is reclassified to a liability.

The following tables present a reconciliation of the beginning and ending balances of redeemable noncontrolling interest and noncontrolling interest for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	Redeemable noncontrolling interest		Noncontrolling interest		Total
As at March 31, 2014	$	8,390	$	540,934	$	549,324
Issuance of shares	57,000		—		57,000
Income attributable to noncontrolling interest	892		34,413		35,305
As at June 30, 2014	$	66,282	$	575,347	$	641,629

	Three Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at March 31, 2013	$	56,277	$	431,144		$	487,421
Issuance of shares	13,500		58,500			72,000
Income (loss) attributable to noncontrolling interest	913		(61,889		)	(60,976		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

	Six Months Ended June 30, 2014
	Redeemable noncontrolling interest			Noncontrolling interest		Total
As at December 31, 2013	$	86,512		$	497,657	$	584,169
Issuance of shares	57,000			—		57,000
Income attributable to noncontrolling interest	1,124			77,690		78,814
Adjustment to noncontrolling interest as a result of deconsolidation	(78,354		)	—		(78,354		)
As at June 30, 2014	$	66,282		$	575,347	$	641,629

	Six Months Ended June 30, 2013
	Redeemable noncontrolling interest		Noncontrolling interest			Total
As at December 31, 2012	$	—	$	434,280		$	434,280
Issuance of shares	69,190		58,500			127,690
Income (loss) attributable to noncontrolling interest	1,500		(65,025		)	(63,525		)
As at June 30, 2013	$	70,690	$	427,755		$	498,445

XML

Investments in affiliates

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investments in affiliates

Investments in affiliates

The following table presents the Company's investments in affiliates as at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Investment affiliate	$	40,627	$	34,500
Operating affiliates	172,992		106,743
Investments in affiliates	$	213,619	$	141,243

(a) Investment affiliate

Aquiline Financial Services Fund II L.P.

On December 20, 2011, the Company entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which the Company has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). The Transferred Interest is governed by the terms of an Amended and Restated Exempted Limited Partnership Agreement dated as of July 2, 2010 (the "Limited Partnership Agreement"). Pursuant to the terms of the Limited Partnership Agreement, the Commitment will expire on July 2, 2015.

The Partnership provides quarterly capital account statements with a three-month delay in its valuation. As a result, the Partnership's March 31, 2014 capital account statement was used as the basis for calculating the Company's share of Partnership income for the period.

The following table presents a reconciliation of the beginning and ending investment in the Company's investment affiliate balance for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Investment affiliate, beginning of period	$	39,848	$	18,036	$	34,500	$	15,218
Capital contributions	—		5,563		—		6,904
Income from investment affiliate	779		1,753		6,127		3,230
Investment affiliate, end of period	$	40,627	$	25,352	$	40,627	$	25,352

The following table presents the Company's investment in the Partnership as at June 30, 2014:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	40,627

The following table presents the Company's investment in the Partnership as at December 31, 2013:

	Investment in investment affiliate
	Investment at cost		Voting ownership %		Equity Ownership		Carrying Value
Aquiline Financial Services Fund II L.P.	$	32,110	—	%	6.7	%	$	34,500

(b) Operating affiliates

AlphaCat Re 2011 Ltd.

On May 25, 2011, the Company joined with other investors in capitalizing AlphaCat Re 2011 Ltd. ("AlphaCat Re 2011"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance and retrocessional reinsurance. AlphaCat Re 2011 was a market facing entity and the Company's investment in AlphaCat Re 2011 has been treated as an equity method investment.

AlphaCat Re 2011 is now considered "off-risk" as the risk periods for all reinsurance contracts written have expired. As a result, partial returns of investment have been made to the investors of AlphaCat Re 2011.The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat Re 2012 Ltd.

On May 29, 2012, the Company joined with other investors in capitalizing AlphaCat Re 2012 Ltd. ("AlphaCat Re 2012"), a special purpose reinsurer formed for the purpose of writing collateralized reinsurance with a particular focus on windstorm risks for Florida domiciled insurance companies. AlphaCat Re 2012 was a market facing entity and the Company's investment in AlphaCat Re 2012 has been treated as an equity method investment.

AlphaCat Re 2012 is now considered "off-risk" as the risk periods for all reinsurance contracts written have expired. As a result, partial returns of investment have been made to the investors of AlphaCat Re 2012.The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat 2013, Ltd.

On December 17, 2012, the Company joined with other investors in capitalizing AlphaCat 2013, Ltd. ("AlphaCat 2013"), an entity formed for the purpose of investing in collateralized reinsurance and retrocession on a worldwide basis. AlphaCat 2013 deployed its capital through transactions entered into by AlphaCat Reinsurance Ltd. (“AlphaCat Re”) and the Company's investment in AlphaCat 2013 has been treated as an equity method investment.

AlphaCat 2013 is now considered "off-risk" as the risk periods for all risk-linked instruments have expired. As a result, partial returns of investment have been made to the investors of AlphaCat 2013. The Company's portion of the returns made during the three and six months endedJune 30, 2014 and 2013 are included in the tables below.

AlphaCat 2014, Ltd.

On December 20, 2013, the Company joined with other investors in capitalizing AlphaCat 2014, Ltd. (“AlphaCat 2014”), an entity formed for the purpose of investing in collateralized reinsurance and retrocessional contracts for the January 1, 2014 renewal season. AlphaCat 2014 deploys its capital through transactions entered into by AlphaCat Re and the Company's investment in AlphaCat 2014 has been treated as an equity method investment.

AlphaCat ILS funds

The AlphaCat ILS funds invest in instruments with returns linked to property catastrophe reinsurance, retrocession and insurance linked securities ("ILS") contracts. AlphaCat ILS funds all deploy their capital through the AlphaCat Master Fund Ltd. (the “Master Fund”) and AlphaCat Re. All three funds are variable interest entities, with one being consolidated by the Company as the primary beneficiary and one being accounted for as an equity method investment because the Company holds an equity interest of 8.6% and has significant influence. The third fund had been consolidated by the Company as the primary beneficiary from its formation through to December 31, 2013. However, on January 1, 2014 the fund received $35,000 in additional third party subscriptions, resulting in a reduction of the Company’s equity interest below 50%. Since the Company retains significant influence, this fund has been deconsolidated and accounted for as an equity method investment from January 1, 2014. The fair value of the retained interest, based on the fair value of the underlying instruments in Master Fund and AlphaCat Re, amounted to $113,455 at January 1, 2014. The deconsolidation resulted in a gain of $1,372 which is included in the Consolidated Statements of Comprehensive Income as other income for the six months ended June 30, 2014. The Company's maximum exposure to any of the funds is the amount of capital invested at any given time.

AlphaCat Master Fund Ltd. and AlphaCat Reinsurance Ltd.

The Company utilizes Master Fund and AlphaCat Re for the purpose of investing in capital market products and writing collateralized reinsurance, respectively, on behalf of certain entities within the AlphaCat operating segment. Master Fund and AlphaCat Re are market facing entities which enter into transactions on behalf of AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds. The Company owns all of the voting equity interest in Master Fund and AlphaCat Re and, as a result, their financial statements are included in the Consolidated Financial Statements of the Company.

The following tables present a reconciliation of the beginning and ending investment in operating affiliates for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at March 31, 2014	$	4,177		$	1,277	$	15,678		$	23,593	$	137,034	$	181,759
Return of investment	—			—		(13,659		)	—		—		(13,659		)
(Loss) income from operating affiliates	(5		)	927		561			1,421		1,988		4,892
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Three Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at March 31, 2013	$	16,805		$	27,358		$	46,100	$	20,149	$	110,412
Return of investment	(5,678		)	(23,407		)	—		—		(29,085		)
(Loss) income from operating affiliates	(73		)	1,253			2,436		177		3,793
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

	Six Months Ended June 30, 2014
	AlphaCat Re 2011			AlphaCat Re 2012		AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds		Total
As at December 31, 2013	$	9,809		$	1,313	$	51,744		$	21,982	$	21,895	$	106,743
Return of investment	(5,825		)	—		(51,200		)	—		—		(57,025		)
Fair value of retained interest on deconsolidation of AlphaCat ILS fund	—			—		—			—		113,455		113,455
Income from operating affiliates	188			891		2,036			3,032		3,672		9,819
As at June 30, 2014	$	4,172		$	2,204	$	2,580		$	25,014	$	139,022	$	172,992

	Six Months Ended June 30, 2013
	AlphaCat Re 2011			AlphaCat Re 2012			AlphaCat 2013		AlphaCat ILS fund		Total
As at December 31, 2012	$	62,792		$	29,319		$	45,000	$	20,000	$	157,111
Return of investment	(52,114		)	(27,193		)	—		—		(79,307		)
Income from operating affiliates	376			3,078			3,536		326		7,316
As at June 30, 2013	$	11,054		$	5,204		$	48,536	$	20,326	$	85,120

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds in the Consolidated Financial Statements as at June 30, 2014:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	4,172	43.7	%	22.3	%	$	4,172
AlphaCat Re 2012	2,204		49.0	%	37.9	%	2,204
AlphaCat 2013	2,580		40.9	%	19.7	%	2,580
AlphaCat 2014	22,000		42.3	%	19.6	%	25,014
AlphaCat ILS funds	133,455		n/a		(a)		139,022
Total	$	164,411					$	172,992

(a) Equity ownership in the two funds were 8.6% and 49.0% respectively as at June 30, 2014.

The following table presents the Company's investments in AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS fund in the Consolidated Financial Statements as at December 31, 2013:

	Investment in operating affiliates
	Cost		Voting ownership %		Equity ownership %		Carrying value
AlphaCat Re 2011	$	9,882	43.7	%	22.3	%	$	9,809
AlphaCat Re 2012	654		49.0	%	37.9	%	1,313
AlphaCat 2013	45,000		40.9	%	19.7	%	51,744
AlphaCat 2014	22,000		42.3	%	19.6	%	21,982
AlphaCat ILS fund	20,000		n/a		9.1	%	21,895
Total	$	97,536					$	106,743

(c) Notes payable and (income) attributable to operating affiliates

Notes are issued during the course of a year by Master Fund and AlphaCat Re to AlphaCat 2013, AlphaCat 2014 and the AlphaCat ILS funds (collectively the “feeder funds”) in order to fund the purchase of capital market products and to write collateralized reinsurance on their behalf. The underlying capital market products and collateralized reinsurance typically have at least a twelve month duration; however, they do not have a stated maturity date. Since repayment is dependent on the settlement of the underlying transactions, the notes are subsequently redeemed as the underlying transactions are settled. The Company’s investments in the feeder funds, together with investments made by third parties, are provided as consideration for these notes to Master Fund and AlphaCat Re, which are consolidated in the Company’s Consolidated Financial Statements. The effective economic interest in Master Fund and AlphaCat Re that results from these transactions is represented on the Consolidated Balance Sheet as notes payable to operating affiliates. The subsequent income or loss generated by the relevant capital market products or collateralized reinsurance is transferred to the operating affiliates as (income) loss attributable to operating affiliate investors in the Company’s Consolidated Statements of Comprehensive Income. The notes do not have any principal amount, since the final amount payable is dependent on the income or loss. To the extent that the (income) loss attributable to operating affiliate investors has not been returned to investors, it is included in accounts payable and accrued expenses in the Consolidated Balance Sheets.

The following tables present a reconciliation of the beginning and ending notes payable to operating affiliates for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014			AlphaCat ILS funds			Total
As at March 31, 2014	$	48,163		$	149,816		$	363,394		$	561,373
Issuance of notes payable to operating affiliates	—			8,207			249,094			257,301
Redemption of notes payable to operating affiliates	(48,163		)	—			(148,800		)	(196,963		)
Foreign exchange (gain) loss	—			(31		)	1,270			1,239
As at June 30, 2014	$	—		$	157,992		$	464,958		$	622,950

	Three Months Ended June 30, 2013
	AlphaCat 2013		AlphaCat ILS funds		Total
As at March 31, 2013	$	161,439	$	129,149	$	290,588
Issuance of notes payable to operating affiliates	60,576		79,468		140,044
Foreign exchange loss	120		341		461
As at June 30, 2013	$	222,135	$	208,958	$	431,093

	Six Months Ended June 30, 2014
	AlphaCat 2013			AlphaCat 2014		AlphaCat ILS funds			Total
As at December 31, 2013	$	223,809		$	—	$	215,463		$	439,272
Notes payable to operating affiliates recognized on deconsolidation of AlphaCat ILS fund	—			—		178,837			178,837
Issuance of notes payable to operating affiliates	—			157,914		433,831			591,745
Redemption of notes payable to operating affiliates	(223,512		)	—		(364,566		)	(588,078		)
Foreign exchange (gain) loss	(297		)	78		1,393			1,174
As at June 30, 2014	$	—		$	157,992	$	464,958		$	622,950

	Six Months Ended June 30, 2013
	AlphaCat 2013			AlphaCat ILS funds			Total
As at December 31, 2012	$	—		$	—		$	—
Issuance of notes payable to operating affiliates	223,082			211,311			434,393
Foreign exchange gain	(947		)	(2,353		)	(3,300		)
As at June 30, 2013	$	222,135		$	208,958		$	431,093

The portion of notes payable to operating affiliates that were due to the Company, as an investor in the affiliates, and third party investors as at June 30, 2014 amounted to $156,084 and $466,866, respectively (December 31, 2013: $63,654 and $375,618).

The following table presents the (income) attributable to operating affiliate investors for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
AlphaCat 2013	$	(3,644	)	$	(17,142	)	$	(14,120	)	$	(25,283	)
AlphaCat 2014	(10,892		)	—			(21,681		)	—
AlphaCat ILS funds	(10,780		)	(3,122		)	(21,225		)	(5,058		)
(Income) attributable to operating affiliate investors	$	(25,316	)	$	(20,264	)	$	(57,026	)	$	(30,341	)

The portion of income attributable to operating affiliate investors that was due to the Company, as an investor in the affiliates, and third party investors for the three months ended June 30, 2014 amounted to $5,087 and $20,229, respectively (2013: $3,762 and $16,502). The portion of income attributable to operating affiliate investors that was due to the Company, as an investor in the affiliates, and third party investors for the six months ended June 30, 2014 amounted to $11,559 and $45,467, respectively (2013: $5,609 and $24,732).

XML

Segment information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment information

Segment information

The Company conducts its operations worldwide through three operating segments, which have been determined under U.S. GAAP segment reporting to be Validus Re, AlphaCat and Talbot. The Company’s operating segments are strategic business units that offer different products and services. They are managed and have capital allocated separately because each segment requires different strategies.

Validus Re Segment

The Validus Re segment is focused on short-tail lines of reinsurance. The primary lines in which the segment conducts business are property, marine and specialty which includes agriculture, aerospace and aviation, financial lines of business, nuclear, terrorism, life, accident & health, workers’ compensation, crisis management, contingency, motor, technical lines, composite and trade credit.

AlphaCat Segment

The AlphaCat segment manages strategic relationships that leverage the Company’s underwriting and investment expertise and earns management, performance and underwriting fees primarily from the Company’s operating affiliates, AlphaCat Re 2011, AlphaCat Re 2012, AlphaCat 2013 and AlphaCat 2014, as well as PaCRe and the AlphaCat ILS funds.

Talbot Segment

The Talbot segment focuses on a wide range of marine and energy, war, political violence, commercial property, financial institutions, contingency, accident & health and aviation classes of business on an insurance or facultative reinsurance basis and principally property, aerospace and marine classes of business on a treaty reinsurance basis.

Corporate and eliminations

The Company has a corporate function ("corporate"), which includes the activities of the parent company, and which carries out certain functions for the group. Corporate includes ‘non-core’ underwriting expenses, predominantly general and administrative and stock compensation expenses. Corporate also denotes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. For internal reporting purposes, corporate is reflected separately, however corporate is not considered an operating segment under these circumstances. Other reconciling items include, but are not limited to, the elimination of inter segment revenues and expenses and unusual items that are not allocated to segments.

The following tables summarize the results of our operating segments and "Corporate":

Three Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	310,286		$	43,790		$	317,944		$	(16,346	)	$	655,674
Reinsurance premiums ceded	(30,535		)	—			(36,376		)	16,346			(50,565		)
Net premiums written	279,751			43,790			281,568			—			605,109
Change in unearned premiums	(58,023		)	(11,330		)	(69,753		)	—			(139,106		)
Net premiums earned	221,728			32,460			211,815			—			466,003
Underwriting deductions
Losses and loss expenses	77,688			(3,033		)	84,090			—			158,745
Policy acquisition costs	31,125			3,056			45,593			(821		)	78,953
General and administrative expenses	17,040			3,780			34,173			18,849			73,842
Share compensation expenses	2,336			161			2,862			2,982			8,341
Total underwriting deductions	128,189			3,964			166,718			21,010			319,881
Underwriting income (loss)	$	93,539		$	28,496		$	45,097		$	(21,010	)	$	146,122
Net investment income	16,758			829			4,671			(972		)	21,286
Other income (loss)	969			6,005			258			(1,997		)	5,235
Finance expenses	(3,670		)	(971		)	(68		)	(11,417		)	(16,126		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	107,596			34,359			49,958			(35,396		)	156,517
Tax (expense) benefit	(460		)	—			(1,364		)	433			(1,391		)
Income from operating affiliates	—			4,892			—			—			4,892
(Income) attributable to operating affiliate investors	—			(25,316		)	—			—			(25,316		)
Net operating income (loss)	$	107,136		$	13,935		$	48,594		$	(34,963	)	$	134,702
Net realized gains on investments	1,324			6,442			92			—			7,858
Change in net unrealized gains (losses) on investments	13,530			30,087			2,679			(869		)	45,427
Income from investment affiliate	779			—			—			—			779
Foreign exchange gains (losses)	2,848			(191		)	1,367			(866		)	3,158
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	125,617		$	50,273		$	52,732		$	(39,950	)	$	188,672
Net (income) attributable to noncontrolling interest	—			(35,305		)	—			—			(35,305		)
Net income (loss) available (attributable) to Validus	$	125,617		$	14,968		$	52,732		$	(39,950	)	$	153,367
Selected ratios (a):
Net premiums written / Gross premiums written	90.2		%	100.0		%	88.6		%				92.3		%
Losses and loss expenses	35.0		%	(9.3		)%	39.7		%				34.1		%
Policy acquisition costs	14.1		%	9.4		%	21.5		%				16.9		%
General and administrative expenses (c)	8.7		%	12.1		%	17.5		%				17.6		%
Expense ratio	22.8		%	21.5		%	39.0		%				34.5		%
Combined ratio	57.8		%	12.2		%	78.7		%				68.6		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

Three Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	353,384		$	46,760		$	315,518		$	(13,349	)	$	702,313
Reinsurance premiums ceded	(87,558		)	—			(47,187		)	13,349			(121,396		)
Net premiums written	265,826			46,760			268,331			—			580,917
Change in unearned premiums	38,925			(11,770		)	(60,614		)	—			(33,459		)
Net premiums earned	304,751			34,990			207,717			—			547,458
Underwriting deductions
Losses and loss expenses	183,646			1,313			80,085			—			265,044
Policy acquisition costs	42,789			3,586			41,667			(890		)	87,152
General and administrative expenses	20,423			3,992			32,192			14,360			70,967
Share compensation expenses	1,529			85			2,357			2,667			6,638
Total underwriting deductions	248,387			8,976			156,301			16,137			429,801
Underwriting income (loss)	$	56,364		$	26,014		$	51,416		$	(16,137	)	$	117,657
Net investment income	22,949			973			4,383			(2,095		)	26,210
Other (loss) income	(361		)	7,015			491			(2,727		)	4,418
Finance expenses	(5,241		)	(2,945		)	(75		)	(9,305		)	(17,566		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	73,711			31,057			56,215			(30,264		)	130,719
Tax (expense) benefit	(145		)	—			383			(331		)	(93		)
Income from operating affiliates	—			3,793			—			—			3,793
(Income) attributable to operating affiliate investors	—			(20,264		)	—			—			(20,264		)
Net operating income (loss)	$	73,566		$	14,586		$	56,598		$	(30,595	)	$	114,155
Net realized gains on investments	2,754			—			655			—			3,409
Change in net unrealized losses on investments	(57,834		)	(70,386		)	(13,128		)	—			(141,348		)
Income from investment affiliate	1,753			—			—			—			1,753
Foreign exchange (losses) gains	(5,882		)	136			(2,197		)	(280		)	(8,223		)
Net income (loss)	$	14,357		$	(55,664	)	$	41,928		$	(30,875	)	$	(30,254	)
Net loss attributable to noncontrolling interest	—			60,976			—			—			60,976
Net income (loss) available (attributable) to Validus	$	14,357		$	5,312		$	41,928		$	(30,875	)	$	30,722
Selected ratios (a):
Net premiums written / Gross premiums written	75.2		%	100.0		%	85.0		%				82.7		%
Losses and loss expenses	60.3		%	3.8		%	38.6		%				48.4		%
Policy acquisition costs	14.0		%	10.2		%	20.1		%				15.9		%
General and administrative expenses (b)	7.2		%	11.7		%	16.6		%				14.2		%
Expense ratio	21.2		%	21.9		%	36.7		%				30.1		%
Combined ratio	81.5		%	25.7		%	75.3		%				78.5		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

Six Months Ended June 30, 2014	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	989,272		$	128,137		$	608,639		$	(58,383	)	$	1,667,665
Reinsurance premiums ceded	(173,175		)	(3,700		)	(126,981		)	58,383			(245,473		)
Net premiums written	816,097			124,437			481,658			—			1,422,192
Change in unearned premiums	(355,983		)	(61,294		)	(55,955		)	—			(473,232		)
Net premiums earned	460,114			63,143			425,703			—			948,960
Underwriting deductions
Losses and loss expenses	145,843			(10,893		)	186,466			—			321,416
Policy acquisition costs	70,370			6,036			90,521			(2,325		)	164,602
General and administrative expenses	35,235			7,908			69,322			35,822			148,287
Share compensation expenses	4,544			151			5,444			5,349			15,488
Total underwriting deductions	255,992			3,202			351,753			38,846			649,793
Underwriting income (loss)	$	204,122		$	59,941		$	73,950		$	(38,846	)	$	299,167
Net investment income	35,523			1,709			9,357			(1,941		)	44,648
Other income (loss)	7,739			15,502			275			(4,451		)	19,065
Finance expenses	(7,509		)	(1,654		)	(94		)	(22,769		)	(32,026		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	239,875			75,498			83,488			(68,007		)	330,854
Tax benefit (expense)	118			—			(1,234		)	(235		)	(1,351		)
Income from operating affiliates	—			9,819			—			—			9,819
(Income) attributable to operating affiliate investors	—			(57,026		)	—			—			(57,026		)
Net operating income (loss)	$	239,993		$	28,291		$	82,254		$	(68,242	)	$	282,296
Net realized gains on investments	3,770			7,667			161			—			11,598
Change in net unrealized gains (losses) on investments	25,428			75,959			5,256			(5,523		)	101,120
Income from investment affiliate	6,127			—			—			—			6,127
Foreign exchange (losses) gains	(3,328		)	(153		)	1,217			(1,056		)	(3,320		)
Transaction expenses (b)	—			—			—			(3,252		)	(3,252		)
Net income (loss)	$	271,990		$	111,764		$	88,888		$	(78,073	)	$	394,569
Net (income) attributable to noncontrolling interest	—			(78,814		)	—			—			(78,814		)
Net income (loss) available (attributable) to Validus	$	271,990		$	32,950		$	88,888		$	(78,073	)	$	315,755
Selected ratios (a):
Net premiums written / Gross premiums written	82.5		%	97.1		%	79.1		%				85.3		%
Losses and loss expenses	31.7		%	(17.3		)%	43.8		%				33.9		%
Policy acquisition costs	15.3		%	9.6		%	21.2		%				17.3		%
General and administrative expenses (c)	8.6		%	12.8		%	17.6		%				17.3		%
Expense ratio	23.9		%	22.4		%	38.8		%				34.6		%
Combined ratio	55.6		%	5.1		%	82.6		%				68.5		%
Total assets	$	5,626,310		$	1,651,256		$	3,004,148		$	156,690		$	10,438,404

(a) Ratios are based on net premiums earned.

(b) The transaction expenses relate to costs incurred in connection with the proposed acquisition of Western World Insurance Group, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

(c) The general and administrative expense ratio includes share compensation expenses.

Six Months Ended June 30, 2013	Validus Re Segment			AlphaCat Segment			Talbot Segment			Corporate & Eliminations			Total
Underwriting income
Gross premiums written	$	1,101,347		$	143,276		$	609,048		$	(46,598	)	$	1,807,073
Reinsurance premiums ceded	(213,286		)	—			(141,924		)	46,598			(308,612		)
Net premiums written	888,061			143,276			467,124			—			1,498,461
Change in unearned premiums	(280,176		)	(80,669		)	(59,097		)	—			(419,942		)
Net premiums earned	607,885			62,607			408,027			—			1,078,519
Underwriting deductions
Losses and loss expenses	257,048			1,313			151,454			—			409,815
Policy acquisition costs	94,533			6,224			82,193			(2,187		)	180,763
General and administrative expenses	49,864			8,029			63,104			30,249			151,246
Share compensation expenses	2,942			162			3,762			2,090			8,956
Total underwriting deductions	404,387			15,728			300,513			30,152			750,780
Underwriting income (loss)	$	203,498		$	46,879		$	107,514		$	(30,152	)	$	327,739
Net investment income	46,142			1,854			9,101			(5,238		)	51,859
Other income (loss)	13,129			13,648			491			(20,165		)	7,103
Finance expenses	(8,493		)	(4,193		)	(149		)	(19,100		)	(31,935		)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors	254,276			58,188			116,957			(74,655		)	354,766
Tax benefit (expense)	1,612			—			(671		)	(716		)	225
Income from operating affiliates	—			7,316			—			—			7,316
(Income) attributable to operating affiliate investors	—			(30,341		)	—			—			(30,341		)
Net operating income (loss)	$	255,888		$	35,163		$	116,286		$	(75,371	)	$	331,966
Net realized gains on investments	4,347			—			783			—			5,130
Change in net unrealized losses on investments	(60,027		)	(75,174		)	(13,384		)	—			(148,585		)
Income from investment affiliate	3,230			—			—			—			3,230
Foreign exchange gains (losses)	5,280			(1,051		)	(6,115		)	585			(1,301		)
Net income (loss)	$	208,718		$	(41,062	)	$	97,570		$	(74,786	)	$	190,440
Net loss attributable to noncontrolling interest	—			63,525			—			—			63,525
Net income (loss) available (attributable) to Validus	$	208,718		$	22,463		$	97,570		$	(74,786	)	$	253,965
Selected ratios (a):
Net premiums written / Gross premiums written	80.6		%	100.0		%	76.7		%				82.9		%
Losses and loss expenses	42.3		%	2.1		%	37.1		%				38.0		%
Policy acquisition costs	15.6		%	9.9		%	20.1		%				16.8		%
General and administrative expenses (b)	8.7		%	13.1		%	16.4		%				14.9		%
Expense ratio	24.3		%	23.0		%	36.5		%				31.7		%
Combined ratio	66.6		%	25.1		%	73.6		%				69.7		%
Total assets	$	6,107,318		$	1,379,452		$	2,897,998		$	203,611		$	10,588,379

(a) Ratios are based on net premiums earned.

(b) The general and administrative expense ratio includes share compensation expenses.

The Company’s exposures are generally diversified across geographic zones. The following tables set forth the gross premiums written allocated to the territory of coverage exposure for the periods indicated:

	Three Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re			AlphaCat			Talbot		Eliminations			Total		%
United States	$	176,625		$	20,256		$	42,151	$	(4,123	)	$	234,909	35.8	%
Worldwide excluding United States (a)	8,622			(266		)	38,434		(1,028		)	45,762		7.0	%
Australia and New Zealand	6,599			—			1,423		29			8,051		1.2	%
Europe	13,704			1,392			7,498		(1,029		)	21,565		3.3	%
Latin America and Caribbean	2,490			—			30,132		(547		)	32,075		4.9	%
Japan	40,221			586			1,592		(658		)	41,741		6.4	%
Canada	421			(1		)	2,750		(38		)	3,132		0.5	%
Rest of the world (b)	(1,156		)	—			25,153		(756		)	23,241		3.5	%
Sub-total, non United States	70,901			1,711			106,982		(4,027		)	175,567		26.8	%
Worldwide including United States (a)	40,241			21,823			28,883		(4,159		)	86,788		13.2	%
Other location non-specific (c)	22,519			—			139,928		(4,037		)	158,410		24.2	%
Total	$	310,286		$	43,790		$	317,944	$	(16,346	)	$	655,674	100.0	%

	Three Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	194,631		$	30,900	$	35,516	$	(1,630	)	$	259,417	36.9	%
Worldwide excluding United States (a)	2,201			112		35,353		(419		)	37,247		5.2	%
Australia and New Zealand	5,572			—		2,020		(1		)	7,591		1.1	%
Europe	19,864			173		13,434		(58		)	33,413		4.8	%
Latin America and Caribbean	(8,435		)	—		44,036		(741		)	34,860		5.0	%
Japan	43,839			653		3,538		(796		)	47,234		6.7	%
Canada	392			—		3,335		(71		)	3,656		0.5	%
Rest of the world (b)	4,491			—		22,322		(467		)	26,346		3.8	%
Sub-total, non United States	67,924			938		124,038		(2,553		)	190,347		27.1	%
Worldwide including United States (a)	50,470			14,922		26,596		(4,860		)	87,128		12.4	%
Other location non-specific (c)	40,359			—		129,368		(4,306		)	165,421		23.6	%
Total	$	353,384		$	46,760	$	315,518	$	(13,349	)	$	702,313	100.0	%

	Six Months Ended June 30, 2014
	Gross Premiums Written
	Validus Re		AlphaCat		Talbot		Eliminations			Total		%
United States	$	423,409	$	28,954	$	68,462	$	(9,788	)	$	511,037	30.6	%
Worldwide excluding United States (a)	70,156		7,412		75,616		(5,768		)	147,416		8.9	%
Australia and New Zealand	19,415		1,019		4,303		(252		)	24,485		1.5	%
Europe	51,600		2,693		26,289		(3,846		)	76,736		4.6	%
Latin America and Caribbean	9,424		—		61,371		(3,599		)	67,196		4.0	%
Japan	40,380		586		2,130		(711		)	42,385		2.5	%
Canada	3,320		215		5,895		(561		)	8,869		0.5	%
Rest of the world (b)	52,694		—		43,557		(2,554		)	93,697		5.6	%
Sub-total, non United States	246,989		11,925		219,161		(17,291		)	460,784		27.6	%
Worldwide including United States (a)	145,432		87,258		52,536		(10,805		)	274,421		16.5	%
Other location non-specific (c)	173,442		—		268,480		(20,499		)	421,423		25.3	%
Total	$	989,272	$	128,137	$	608,639	$	(58,383	)	$	1,667,665	100.0	%

	Six Months Ended June 30, 2013
	Gross Premiums Written
	Validus Re			AlphaCat		Talbot		Eliminations			Total		%
United States	$	431,127		$	48,389	$	56,057	$	(8,494	)	$	527,079	29.1	%
Worldwide excluding United States (a)	52,509			14,801		74,811		(4,927		)	137,194		7.6	%
Australia and New Zealand	30,598			2,183		5,025		(231		)	37,575		2.1	%
Europe	60,734			2,137		31,745		(2,906		)	91,710		5.1	%
Latin America and Caribbean	(17		)	—		86,036		(3,959		)	82,060		4.5	%
Japan	44,576			653		4,192		(846		)	48,575		2.7	%
Canada	3,034			318		6,041		(596		)	8,797		0.5	%
Rest of the world (b)	23,570			—		40,636		(1,870		)	62,336		3.4	%
Sub-total, non United States	215,004			20,092		248,486		(15,335		)	468,247		25.9	%
Worldwide including United States (a)	151,010			74,795		45,752		(8,549		)	263,008		14.6	%
Other location non-specific (c)	304,206			—		258,753		(14,220		)	548,739		30.4	%
Total	$	1,101,347		$	143,276	$	609,048	$	(46,598	)	$	1,807,073	100.0	%

(a) Represents risks in two or more geographic zones.

(b) Represents risks in one geographic zone.

(c) The other locations non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable, such as marine and aerospace risks, since these exposures can span multiple geographic areas and, in some instances, are not fixed locations.

XML

Accumulated other comprehensive (loss)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated other comprehensive (loss)

Accumulated other comprehensive income (loss)

The changes in accumulated other comprehensive income ("AOCI"), by component for the three and six months endedJune 30, 2014 and 2013 is as follows:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance - Beginning of period	$	(155	)	$	(12,738	)	$	(617	)	$	(2,953	)
Amounts reclassified to retained earnings	—			4,290			—			4,290
Other comprehensive income (loss)	2,615			186			3,077			(9,599		)
Balance - End of period	$	2,460		$	(8,262	)	$	2,460		$	(8,262	)

XML

Reinsurance

6 Months Ended

Jun. 30, 2014

Reinsurance Disclosures [Abstract]

Reinsurance

Reinsurance

The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

Credit risk

The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better as rated by Standard & Poor's or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At June 30, 2014, 98.4% (December 31, 2013: 96.7%) of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses and $169,853 of total IBNR recoverable (December 31, 2013: $196,840)) were fully collateralized or from reinsurers rated A- or better.

Reinsurance recoverables by reinsurer as at June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014				December 31, 2013
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	301,568	75.7	%	$	340,253	75.6	%
Other reinsurers’ balances > $1 million	88,219		22.1	%	100,784		22.4	%
Other reinsurers’ balances < $1 million	8,629		2.2	%	9,197		2.0	%
Total	$	398,416	100.0	%	$	450,234	100.0	%

	June 30, 2014
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	75,413	18.9	%
Everest Re	A+	49,678		12.5	%
Hannover Re	AA-	40,584		10.2	%
Fully Collateralized	NR	35,350		8.9	%
Third Point Reinsurance Ltd	A-	34,249		8.6	%
Swiss Re	AA-	19,247		4.8	%
Munich Re	AA-	13,144		3.3	%
Transatlantic Re	A+	12,735		3.2	%
XL Re	A+	11,592		2.9	%
Berkshire Hathaway Homestate	AA+	9,576		2.4	%
Total		$	301,568	75.7	%

NR: Not rated

	December 31, 2013
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Lloyd's Syndicates	A+	$	73,398	16.3	%
National Indemnity	AA+	51,037		11.3	%
Everest Re	A+	48,055		10.7	%
Hannover Re	AA-	41,483		9.2	%
Fully Collateralized	NR	36,683		8.1	%
Third Point Reinsurance Ltd	A-	30,428		6.8	%
Swiss Re	AA-	20,022		4.5	%
Transatlantic Re	A+	14,114		3.1	%
XL Re	A+	12,673		2.8	%
Munich Re	AA-	12,360		2.8	%
Total		$	340,253	75.6	%

NR: Not rated

At June 30, 2014 and December 31, 2013, the provision for uncollectible reinsurance relating to reinsurance recoverables was $5,308 and $5,794, respectively. To estimate the provision for uncollectible reinsurance, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied, especially in relation to ceded IBNR. The Company then uses default factors to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined in part using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

XML

Derivative instruments (Amount and balance sheet location) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Designated as hedging instruments | Foreign exchange contracts
Summary of amount of derivatives designated as hedging instruments
Net Notional Exposure	$ 102,217		$ 163,576
Designated as hedging instruments | Foreign exchange contracts | Other assets
Summary of amount of derivatives designated as hedging instruments
Asset Derivative at Fair Value	1,122	[1]	1,167	[1]
Designated as hedging instruments | Foreign exchange contracts | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Liability Derivative at Fair Value	251	[1]	2,313	[1]
Designated as hedging instruments | Interest rate swap contracts
Summary of amount of derivatives designated as hedging instruments
Net Notional Exposure	552,263		552,263
Designated as hedging instruments | Interest rate swap contracts | Other assets
Summary of amount of derivatives designated as hedging instruments
Asset Derivative at Fair Value	26	[1]	28	[1]
Designated as hedging instruments | Interest rate swap contracts | Accounts payable and accrued expenses
Summary of amount of derivatives designated as hedging instruments
Liability Derivative at Fair Value	$ 877	[1]	$ 911	[1]
Junior Subordinated Deferrable Debentures | Interest rate swap contracts
Derivatives, Fair Value [Line Items]
Derivative, Number of Instruments Held	2
Flagstone Junior Subordinated Deferrable Debentures | Interest rate swap contracts
Derivatives, Fair Value [Line Items]
Derivative, Number of Instruments Held	3
Flagstone Junior Subordinated Deferrable Debentures | Cross-currency interest rate swap
Derivatives, Fair Value [Line Items]
Derivative, Number of Instruments Held	1

[1] Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

XML

Derivative instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative instruments

Derivative instruments

The Company enters into derivative instruments for risk management purposes, specifically to hedge unmatched foreign currency exposures and interest rate exposures. As at June 30, 2014, the Company held foreign currency forward contracts to mitigate the risk of fluctuations in the U.S. dollar against a number of foreign currencies. As at June 30, 2014, the Company held two interest rate swaps to fix the payment of interest on the Company's 2006 and 2007 Junior Subordinated Deferrable Debentures, as well as three interest rate swaps and one cross-currency interest rate swap to fix the payment of interest and mitigate the foreign exchange rate impact on Flagstone's 2006 and 2007 Junior Subordinated Deferrable Debentures.

The following table summarizes information on the classification and amount of the fair value of derivatives designated as hedging instruments on the consolidated balance sheets at June 30, 2014 and December 31, 2013:

	As at June 30, 2014						As at December 31, 2013
Derivatives designated as hedging instruments:	Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)		Net Notional Exposure		Asset Derivative at Fair Value (a)		Liability Derivative at Fair Value (a)
Foreign currency forward contracts	$	102,217	$	1,122	$	251	$	163,576	$	1,167	$	2,313
Interest rate swap contracts	$	552,263	$	26	$	877	$	552,263	$	28	$	911

(a) Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

(a) Classification within the fair value hierarchy

As described in Note 4: "Fair value measurements" under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The assumptions used within the valuation of the Company's derivative instruments are observable in the marketplace, can be derived from observable data or are supported by observable levels at which other similar transactions are executed in the marketplace. Accordingly, these derivatives were classified within Level 2 of the fair value hierarchy.

(b) Derivative instruments designated as a fair value hedge

The Company designates its foreign currency derivative instruments as fair value hedges and formally and contemporaneously documents all relationships between the derivative instruments and hedged items and links the derivative instruments to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items.

The following table provides the total impact on earnings, recognized in income within foreign exchange gains (losses), relating to the derivative instruments formally designated as fair value hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Foreign currency forward contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of gain (loss) recognized in income on derivative	$	1,535		$	(1,707	)	$	4,838		$	(445	)
Amount of (loss) gain on hedged item recognized in income attributable to risk being hedged	$	(1,535	)	$	1,707		$	(4,838	)	$	445
Amount of gain (loss) recognized in income on derivative (ineffective portion)	$	—		$	—		$	—		$	—

(c) Derivative instruments designated as a cash flow hedge

The Company designates its interest rate derivative instruments as cash flow hedges and formally and contemporaneously documents all relationships between the hedging instruments and hedged items and links the derivative instruments to specific assets and liabilities. The Company assesses the effectiveness of the hedges, both at inception and on an on-going basis and determines whether the hedges are highly effective in offsetting changes in fair value of the linked hedged items. The Company currently applies the long haul method when assessing the hedge's effectiveness.

The following table provides the total impact on other comprehensive income (loss) and earnings relating to the derivative instruments formally designated as cash flow hedges along with the impact of the related hedged items for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
Interest rate swap contracts	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Amount of effective portion recognized in other comprehensive income	$	3,252		$	2,962		$	6,460		$	4,570
Amount of effective portion subsequently reclassified to earnings	$	(3,252	)	$	(2,962	)	$	(6,460	)	$	(4,570	)
Amount of ineffective portion excluded from effectiveness testing	$	—		$	—		$	—		$	—

The above balances relate to interest payments and have therefore been classified as finance expenses in the Consolidated Statements of Comprehensive Income.

(d) Balance sheet offsetting

There was no balance sheet offsetting activity as at June 30, 2014 or December 31, 2013.

The Company currently provides cash collateral as security for interest rate swap contracts. The Company does not provide cash collateral or financial instruments as security for foreign currency forward contracts. Our derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements, which establish terms that apply to all transactions. On a periodic basis, the amounts receivable from or payable to the counterparties are settled in cash.

The Company has not elected to settle multiple transactions with an individual counterparty on a net basis.

XML

Reserve for losses and loss expenses

6 Months Ended

Jun. 30, 2014

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss expenses

Reserve for losses and loss expenses

Reserves for losses and loss expenses are based in part upon the estimation of case reserves from broker, insured and ceding company reported data. The Company also uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses, from which incurred but not reported losses can be calculated. The period of time from the occurrence of a loss to the reporting of a loss to the Company and to the settlement of the Company's liability may be several months or years. During this period, additional facts and trends may be revealed. As these factors become apparent, reserves will be adjusted, sometimes requiring an increase or decrease in the overall reserves of the Company, and at other times requiring a reallocation of incurred but not reported reserves to specific case reserves. These estimates are reviewed and adjusted regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. While management believes that it has made a reasonable estimate of ultimate losses, there can be no assurances that ultimate losses and loss expenses will not exceed this estimate.

The following table represents an analysis of paid and unpaid losses and loss expenses incurred and a reconciliation of the beginning and ending unpaid losses and loss expenses for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Reserve for losses and loss expenses, beginning of period	$	2,925,059		$	3,357,691		$	3,030,399		$	3,517,573
Losses and loss expenses recoverable	(348,407		)	(429,252		)	(370,154		)	(439,967		)
Net reserves for losses and loss expenses, beginning of period	2,576,652			2,928,439			2,660,245			3,077,606
Net reserves disposed	—			(18,591		)	—			(18,591		)
Increase (decrease) in net reserves for losses and loss expenses in respect of losses occurring in:
Current year	231,401			306,033			433,487			516,602
Prior years	(72,656		)	(40,989		)	(112,071		)	(106,787		)
Total incurred losses and loss expenses	158,745			265,044			321,416			409,815
Less net losses and loss expenses paid in respect of losses occurring in:
Current year	(16,741		)	(30,996		)	(24,708		)	(35,834		)
Prior years	(199,236		)	(261,677		)	(449,351		)	(516,951		)
Total net paid losses	(215,977		)	(292,673		)	(474,059		)	(552,785		)
Foreign exchange	9,153			(17,462		)	20,971			(51,288		)
Net reserve for losses and loss expenses, end of period	2,528,573			2,864,757			2,528,573			2,864,757
Losses and loss expenses recoverable	338,734			418,693			338,734			418,693
Reserve for losses and loss expenses, end of period	$	2,867,307		$	3,283,450		$	2,867,307		$	3,283,450

Incurred losses and loss expenses comprise:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Gross losses and loss expenses	$	182,780		$	295,539		$	364,755		$	457,950
Reinsurance recoverable	(24,035		)	(30,495		)	(43,339		)	(48,135		)
Net incurred losses and loss expenses	$	158,745		$	265,044		$	321,416		$	409,815

XML

Share capital

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Share capital

Share capital

(a) Authorized and issued

The Company’s authorized share capital is 571,428,571 common shares with a par value of $0.175 per share. The holders of common shares are entitled to receive dividends. Holders of common shares are allocated one vote per share, provided that, if the controlled shares of any shareholder or group of related shareholders constitute more than 9.09 percent of the outstanding common shares of the Company, their voting power will be reduced to 9.09 percent.

The Company may from time to time repurchase its securities, including common shares, Junior Subordinated Deferrable Debentures and Senior Notes. On February 5, 2014, the Board of Directors of the Company approved an increase in the Company's common share purchase authorization to $500,000. This amount is in addition to the $1,774,436 of common shares repurchased by the Company through February 5, 2014 under its previously authorized share repurchase programs.

The Company has repurchased 62,171,982 common shares for an aggregate purchase price of $1,917,688 from the inception of its share repurchase program to June 30, 2014. The Company had $356,748 remaining under its authorized share repurchase program as of June 30, 2014.

The Company expects the purchases under its share repurchase program 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, the Company’s 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 Board of Directors at any time.

The following table is a summary of the common shares issued and outstanding:

	Common Shares
Common shares issued, December 31, 2013	154,488,497
Restricted share awards vested, net of shares withheld	585,535
Restricted share units vested, net of shares withheld	10,265
Options exercised	95,019
Direct issuance of common stock	713
Performance share awards vested, net of shares withheld	25,767
Common shares issued, June 30, 2014	155,205,796
Treasury shares, June 30, 2014	(63,810,857	)
Common shares outstanding, June 30, 2014	91,394,939

	Common Shares
Common shares issued, December 31, 2012	152,698,191
Restricted share awards vested, net of shares withheld	734,910
Restricted share units vested, net of shares withheld	14,381
Options exercised	235,091
Warrants exercised	508,193
Direct issuance of common stock	183
Performance share awards vested, net of shares withheld	31,897
Deferred share units vested, net of shares withheld	2,935
Common shares issued, June 30, 2013	154,225,781
Treasury shares, June 30, 2013	(54,488,320	)
Common shares outstanding, June 30, 2013	99,737,461

(b) Warrants

During the six months ended June 30, 2014, no warrants were exercised. During the six months ended June 30, 2013, 950,644 warrants were exercised which resulted in the issuance of 508,193 common shares. Holders of the outstanding warrants are entitled to exercise the warrants in whole or in part at any time until the expiration date. The total outstanding warrants at June 30, 2014 were 5,174,114 (December 31, 2013: 5,296,056). No further warrants are anticipated to be issued.

(c) Deferred share units

Under the terms of the Company’s Director Stock Compensation Plan, non-management directors may elect to receive their director fees in deferred share units rather than cash. The number of share units distributed in case of election under the plan is equal to the amount of the annual retainer fee otherwise payable to the director on such payment date divided by 100% of the fair market value of a share on such payment date. Additional deferred share units are issued in lieu of dividends that accrue on these deferred share units.  There were no outstanding deferred share units at June 30, 2014 (December 31, 2013: $nil).

As of February 16, 2013, John Hendrickson became an employee director. As a result, his 5,039 deferred share units vested and 2,935 common shares were issued to him, net of shares withheld for taxes.

(d) Dividends

On April 30, 2014, the Company announced a quarterly cash dividend of $0.30 (2013: $0.30) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on June 30, 2014 to holders of record on June 13, 2014.

On February 5, 2014, the Company announced a quarterly cash dividend of $0.30 (2013: $0.30) per common share and $0.30 per common share equivalent for which each outstanding warrant is exercisable. This dividend was paid on March 31, 2014 to holders of record on March 14, 2014.

On February 6, 2013, the Company announced a special dividend in the amount of $2.00 per common share and $2.00 per common share equivalent for which each outstanding warrant is exercisable (the "2013 Special Dividend"). The 2013 Special Dividend was paid on February 26, 2013 to shareholders and warrant holders of record as of February 19, 2013.

XML

Share capital (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended		6 Months Ended			3 Months Ended								6 Months Ended					6 Months Ended
	Feb. 05, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Common shares	Mar. 31, 2014 Common shares	Jun. 30, 2013 Common shares	Mar. 31, 2013 Common shares	Mar. 31, 2013 Common shares Special dividend declared	Jun. 30, 2014 Common share equivalents	Mar. 31, 2014 Common share equivalents	Mar. 31, 2013 Common share equivalents Special dividend declared	Jun. 30, 2014 Performance shares	Jun. 30, 2013 Performance shares	Jun. 30, 2014 Warrants	Jun. 30, 2013 Warrants	Dec. 31, 2013 Warrants	Jun. 30, 2013 Deferred share units	Jun. 30, 2014 Restricted share awards	Jun. 30, 2013 Restricted share awards	Jun. 30, 2014 Restricted share units	Jun. 30, 2013 Restricted share units	Jun. 30, 2014 Employee director Deferred share units
Share Capital (Narrative)
Common shares, shares authorized		571,428,571		571,428,571		571,428,571
Common shares, par value		$ 0.175		$ 0.175		$ 0.175
Common stock voting rights				one vote per share
Restriction on percentage of voting power				9.09%
Share repurchases
Stock Repurchase Program, Authorized Amount	$ 500,000
Share repurchase program, cumulative shares repurchased				62,171,982
Shares repurchased, cumulative	1,774,436			1,917,688
Remaining share repurchase authorization amount				$ 356,748
Number of warrants exercised during period																	0	950,644
Class of Warrant or Right, Outstanding																	5,174,114		5,296,056
Deferred share units, adjustment factor				100.00%
Total outstanding deferred share units		0		0		0
Vested (in shares)															32,746	39,094					753,071	890,600	18,325	21,814	5,039
Cash dividends declared per share		$ 0.3	$ 0.3	$ 0.6	$ 2.6		$ 0.30	$ 0.30	$ 0.30	$ 0.30	$ 2.00	$ 0.30	$ 0.30	$ 2
Summary of common shares issued and outstanding
Common shares issued, beginning balance				154,488,497	152,698,191
Vested, net of shares withheld															25,767	31,897					585,535	734,910	10,265	14,381
Options exercised (in shares)				95,019	235,091
Warrants exercised					508,193
Direct issuance of common stock				713	183
Deferred share units vested, net of shares withheld																				2,935					2,935
Common shares issued, ending balance		155,205,796	154,225,781	155,205,796	154,225,781
Shares repurchased, ending balance		(63,810,857)	(54,488,320)	(63,810,857)	(54,488,320)
Common shares outstanding, ending balance		91,394,939	99,737,461	91,394,939	99,737,461	96,044,312

XML

Stock plans (Other awards activity) (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Restricted share awards
Activities
Beginning balance (in shares)	2,684,745	2,170,547
Granted (in shares)	920,496	1,491,967
Vested (in shares)	(753,071)	(890,600)
Forfeited (in shares)	(24,632)	(107,221)
Ending balance (in shares)	2,827,538	2,664,693
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 33.74	$ 29.24
Weighted average grant date fair value, granted (in dollars per share)	$ 37.32	$ 36.10
Weighted average grant date fair value, vested (in dollars per share)	$ 31.61	$ 27.99
Weighted average grant date fair value, forfeited (in dollars per share)	$ 34.53	$ 28.15
Weighted average grant date fair value, ending balance (in dollars per share)	$ 35.46	$ 33.54
Restricted share units
Activities
Beginning balance (in shares)	66,518	47,238
Granted (in shares)	8,132	36,635
Vested (in shares)	(18,325)	(21,814)
Issued in lieu of cash dividends (in shares)	1,029	3,380
Ending balance (in shares)	57,354	65,439
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 33.74	$ 29.61
Weighted average grant date fair value, granted (in dollars per share)	$ 37.33	$ 36.11
Weighted average grant date fair value, vested (in dollars per share)	$ 30.71	$ 28.17
Weighted average grant date fair value, issued in lieu of cash dividends (in dollars per share)	$ 33.74	$ 29.74
Weighted average grant date fair value, ending balance (in dollars per share)	$ 35.22	$ 33.74
Performance shares
Activities
Beginning balance (in shares)	101,820	220,845
Granted (in shares)	52,639	38,386
Vested (in shares)	(32,746)	(39,094)
Forfeited (in shares)		(18,701)
Conversion adjustment (in shares)	(15,344)	(99,616)
Ending balance (in shares)	106,369	101,820
Weighted average grant date fair value
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 33.56	$ 31.81
Weighted average grant date fair value, granted (in dollars per share)	$ 37.33	$ 36.11
Weighted average grant date fair value, vested (in dollars per share)	$ 32.62	$ 28.70
Weighted average grant date fair value, forfeited (in dollars per share)		$ 31.05
Weighted average grant date fair value, conversion adjustment (in dollars per share)	$ 31.38	$ 33.05
Weighted average grant date fair value, ending balance (in dollars per share)	$ 36.03	$ 33.56

XML

Reinsurance (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Ceded Credit Risk [Line Items]
Reinsurance recoverable	$ 398,416	$ 450,234
Percentage of reinsurance recoverables	100.00%	100.00%
Reinsurance (Textuals) [Abstract]
Incurred but not reported recoverable	169,853	196,840
Provision for uncollectible reinsurance relating to losses recoverable	5,308	5,794
A- or better
Ceded Credit Risk [Line Items]
Percentage of reinsurance recoverables	98.40%	96.70%
Top 10 reinsurers
Ceded Credit Risk [Line Items]
Reinsurance recoverable	301,568	340,253
Percentage of reinsurance recoverables	75.70%	75.60%
Top 10 reinsurers | Lloyd's Syndicates | A plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable	75,413	73,398
Percentage of reinsurance recoverables	18.90%	16.30%
Top 10 reinsurers | Everest Re | A plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable	49,678	48,055
Percentage of reinsurance recoverables	12.50%	10.70%
Top 10 reinsurers | Hannover Re | AA-
Ceded Credit Risk [Line Items]
Reinsurance recoverable	40,584	41,483
Percentage of reinsurance recoverables	10.20%	9.20%
Top 10 reinsurers | Fully Collateralized | Nr [Member]
Ceded Credit Risk [Line Items]
Reinsurance recoverable	35,350	36,683
Percentage of reinsurance recoverables	8.90%	8.10%
Top 10 reinsurers | Third Point Reinsurance Ltd | A-
Ceded Credit Risk [Line Items]
Reinsurance recoverable	34,249	30,428
Percentage of reinsurance recoverables	8.60%	6.80%
Top 10 reinsurers | Swiss Re | AA-
Ceded Credit Risk [Line Items]
Reinsurance recoverable	19,247	20,022
Percentage of reinsurance recoverables	4.80%	4.50%
Top 10 reinsurers | Munich Re | AA-
Ceded Credit Risk [Line Items]
Reinsurance recoverable	13,144	12,360
Percentage of reinsurance recoverables	3.30%	2.80%
Top 10 reinsurers | Transatlantic Re | A plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable	12,735	14,114
Percentage of reinsurance recoverables	3.20%	3.10%
Top 10 reinsurers | XL Re | A plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable	11,592	12,673
Percentage of reinsurance recoverables	2.90%	2.80%
Top 10 reinsurers | Berkshire Hathaway Homestate | AA plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable	9,576
Percentage of reinsurance recoverables	2.40%
Top 10 reinsurers | National Indemnity | AA plus
Ceded Credit Risk [Line Items]
Reinsurance recoverable		51,037
Percentage of reinsurance recoverables		11.30%
Other reinsurers' balances greater than $1 million
Ceded Credit Risk [Line Items]
Reinsurance recoverable	88,219	100,784
Percentage of reinsurance recoverables	22.10%	22.40%
Other reinsurers' balances less than $1 million
Ceded Credit Risk [Line Items]
Reinsurance recoverable	$ 8,629	$ 9,197
Percentage of reinsurance recoverables	2.20%	2.00%

XML

Stock plans (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Options, activity during the period

Activity with respect to options for the six months ended June 30, 2014 was as follows:

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2013	1,572,713		$	6.66	$	18.88
Options exercised	(95,019	)	4.41		24.99
Options outstanding, June 30, 2014	1,477,694		$	6.81	$	18.48

Activity with respect to options for the six months ended June 30, 2013was as follows: 

	Options		Weighted Average Grant Date Fair Value		Weighted Average Grant Date Exercise Price
Options outstanding, December 31, 2012	1,823,947		$	6.52	$	20.69
Options regranted (modified)	1,833,414		6.76		19.02
Options exercised	(235,091	)	4.86		24.78
Options cancelled (modified)	(1,733,139	)	6.76		20.12
Options outstanding, June 30, 2013	1,689,131		$	6.76	$	18.89

Restricted shares awards, activity during the period

Activity with respect to unvested restricted share awards for the six months ended June 30, 2014 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2013	2,684,745		$	33.74
Restricted share awards granted	920,496		37.32
Restricted share awards vested	(753,071	)	31.61
Restricted share awards forfeited	(24,632	)	34.53
Restricted share awards outstanding, June 30, 2014	2,827,538		$	35.46

Activity with respect to unvested restricted share awards for the six months ended June 30, 2013 was as follows:

	Restricted Share Awards		Weighted Average Grant Date Fair Value
Restricted share awards outstanding, December 31, 2012	2,170,547		$	29.24
Restricted share awards granted	1,491,967		36.10
Restricted share awards vested	(890,600	)	27.99
Restricted share awards forfeited	(107,221	)	28.15
Restricted share awards outstanding, June 30, 2013	2,664,693		$	33.54

Restricted share units, activity during the period

Activity with respect to unvested restricted share units for the six months ended June 30, 2014 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2013	66,518		$	33.74
Restricted share units granted	8,132		37.33
Restricted share units vested	(18,325	)	30.71
Restricted share units issued in lieu of cash dividends	1,029		33.74
Restricted share units outstanding, June 30, 2014	57,354		$	35.22

Activity with respect to unvested restricted share units for the six months ended June 30, 2013 was as follows:

	Restricted Share Units		Weighted Average Grant Date Fair Value
Restricted share units outstanding, December 31, 2012	47,238		$	29.61
Restricted share units granted	36,635		36.11
Restricted share units vested	(21,814	)	28.17
Restricted share units issued in lieu of cash dividends	3,380		29.74
Restricted share units outstanding, June 30, 2013	65,439		$	33.74

Performance share awards, activity during the period

Activity with respect to unvested performance share awards for the six months ended June 30, 2014 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2013	101,820		$	33.56
Performance share awards granted	52,639		37.33
Performance share awards vested	(32,746	)	32.62
Performance share awards conversion adjustment	(15,344	)	31.38
Performance share awards outstanding, June 30, 2014	106,369		$	36.03

Activity with respect to unvested performance share awards for the six months ended June 30, 2013 was as follows:

	Performance Share Awards		Weighted Average Grant Date Fair Value
Performance share awards outstanding, December 31, 2012	220,845		$	31.81
Performance share awards granted	38,386		36.11
Performance share awards vested	(39,094	)	28.70
Performance share awards forfeited	(18,701	)	31.05
Performance share awards conversion adjustment	(99,616	)	$	33.05
Performance share awards outstanding, June 30, 2013	101,820		$	33.56

Total share compensation expenses

The breakdown of share compensation expenses by award type was as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Restricted share awards	7,920		5,933		14,921		9,994
Restricted share units	167		130		333		251
Performance share awards	254		575		234		(1,289		)
Total	$	8,341	$	6,638	$	15,488	$	8,956

XML

Investments in affiliates (Summary of investments in affiliates) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
Investments in affiliates	$ 213,619	$ 141,243
Investment affiliate
Schedule of Equity Method Investments [Line Items]
Investments in affiliates	40,627	34,500
Operating affiliates
Schedule of Equity Method Investments [Line Items]
Investments in affiliates	$ 172,992	$ 106,743

XML

Related party transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

The transactions listed below are classified as related party transactions as each counter party has either a direct or indirect shareholding in the Company.

Aquiline Capital Partners, LLC and its related companies ("Aquiline"), which own 3,446,643 shares in the Company, hold warrants to purchase 2,756,088 shares, and have two employees on the Company's Board of Directors who do not receive compensation from the Company and are shareholders of Group Ark Insurance Holdings Ltd. ("Group Ark"). Christopher E. Watson, a director of the Company, serves as a director of Group Ark. Pursuant to reinsurance agreements with a subsidiary of Group Ark, the Company recognized gross premiums written during the three and six months ended June 30, 2014 of $1,694 (2013: $1,053) and $3,067 (2013: $2,848) respectively, with $1,436 included in premiums receivable at June 30, 2014 (December 31, 2013: $238). The Company recognized reinsurance premiums ceded during the three and six months ended June 30, 2014 and 2013 of $nil and had reinsurance balances payable of $5 at June 30, 2014 (December 31, 2013: $4). The Company recorded $2,482 of loss reserves recoverable at June 30, 2014 (December 31, 2013: $3,698). Earned premium adjustments of $642 (2013: $710) and $2,083 (2013: $1,429) respectively, were recorded during the three and six months ended June 30, 2014.

On November 24, 2009, the Company entered into an Investment Management Agreement with Conning, Inc. ("Conning") to manage a portion of the Company's investment portfolio. Aquiline acquired Conning on June 16, 2009. Jeffrey W. Greenberg, a director of the Company, serves as a director of Conning Holdings Corp., the parent company of Conning. Investment management fees earned by Conning for the three and six months ended June 30, 2014 were $170 (2013: $40) and $226 (2013: $231) respectively, with $339 included in accounts payable and accrued expenses at June 30, 2014 (December 31, 2013: $283).

On December 20, 2011, the Company entered into an Assignment and Assumption Agreement (the "Agreement") with Aquiline Capital Partners LLC, a Delaware limited liability company (the "Assignor") and Aquiline Capital Partners II GP (Offshore) Ltd., a Cayman Islands company limited by shares (the "General Partner") pursuant to which the Company has assumed 100% of the Assignor's interest in Aquiline Financial Services Fund II L.P. (the "Partnership") representing a total capital commitment of $50,000 (the "Commitment"), as a limited partner in the Partnership (the "Transferred Interest"). Messrs. Greenberg and Watson, directors of the Company, serve as managing principal and senior principal, respectively, of Aquiline Capital Partners LLC. For the three months ended June 30, 2014, the Company incurred $nil (2013: $nil) in partnership fees and made capital contributions of $nil (2013: $5,563). For the six months ended June 30, 2014, the Company incurred $nil (2013: $120) in partnership fees and made $nil (2013: $6,904) of capital contributions. There were no amounts included in accounts payable and accrued expenses at June 30, 2014 or December 31, 2013.

Certain shareholders of the Company and their affiliates, as well as employers of entities associated with directors or officers have purchased insurance and/or reinsurance from the Company in the ordinary course of business. The Company believes these transactions were settled for arm's length consideration.

XML

Investments (Tables)

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at June 30, 2014 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,030,570		$	3,028		$	(1,821	)	$	1,031,777
Non-U.S. government and government agency	440,408			7,689			(1,027		)	447,070
U.S. states, municipalities and political subdivisions	48,732			760			(52		)	49,440
Agency residential mortgage-backed securities	307,246			8,459			(600		)	315,105
Non-agency residential mortgage-backed securities	18,001			295			(515		)	17,781
U.S. corporate	1,303,436			10,869			(1,796		)	1,312,509
Non-U.S. corporate	685,884			8,442			(738		)	693,588
Bank loans	517,697			3,692			(664		)	520,725
Catastrophe bonds	37,500			573			(10		)	38,063
Asset-backed securities	605,079			1,868			(205		)	606,742
Commercial mortgage-backed securities	121,392			469			(32		)	121,829
Total fixed maturities	5,115,945			46,144			(7,460		)	5,154,629
Total short-term investments (a) (b)	816,651			170			(1		)	816,820
Other investments
Fund of hedge funds	2,820			115			(921		)	2,014
Hedge funds (a)	566,519			136,390			(79,013		)	623,896
Private equity investments	10,965			4,520			—			15,485
Investment funds	131,406			284			—			131,690
Mutual funds	6,198			4,140			—			10,338
Total other investments	717,908			145,449			(79,934		)	783,423
Total investments including noncontrolling interests	$	6,650,504		$	191,763		$	(87,395	)	$	6,754,872
Noncontrolling interest (a)	$	(521,862	)	$	(118,540	)	$	71,112		$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—		$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	6,120,337		$	73,223		$	(16,283	)	$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

The amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments at December 31, 2013 were as follows:

	Amortized Cost or Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
U.S. government and government agency	$	1,368,826		$	2,589		$	(6,736	)	$	1,364,679
Non-U.S. government and government agency	454,578			6,511			(2,021		)	459,068
U.S. states, municipalities and political subdivisions	42,978			459			(317		)	43,120
Agency residential mortgage-backed securities	305,450			8,310			(2,261		)	311,499
Non-agency residential mortgage-backed securities	16,530			143			(914		)	15,759
U.S. corporate	1,328,960			9,208			(5,684		)	1,332,484
Non-U.S. corporate	711,581			5,917			(3,173		)	714,325
Bank loans	712,859			5,659			(1,402		)	717,116
Catastrophe bonds	72,000			2,551			—			74,551
Asset-backed securities	509,091			1,409			(843		)	509,657
Total fixed maturities	5,522,853			42,756			(23,351		)	5,542,258
Total short-term investments (b)	751,734			45			(1		)	751,778
Other investments
Fund of hedge funds	3,141			83			(921		)	2,303
Hedge funds (a)	584,518			71,641			(95,076		)	561,083
Private equity investments	12,333			1,410			(258		)	13,485
Investment funds	31,537			92			—			31,629
Mutual funds	6,199			3,617			—			9,816
Total other investments	637,728			76,843			(96,255		)	618,316
Total investments including noncontrolling interests	$	6,912,315		$	119,644		$	(119,607	)	$	6,912,352
Noncontrolling interest (a)	(512,121		)	(62,850		)	85,569			(489,402		)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—		$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	6,381,829		$	56,794		$	(34,038	)	$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

Investment ratings on fixed maturities

The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at June 30, 2014 and December 31, 2013.

	June 30, 2014				December 31, 2013
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
AAA	$	2,366,249	45.9	%	$	2,510,781	45.3	%
AA	719,122		13.9	%	696,998		12.6	%
A	1,196,059		23.2	%	1,233,716		22.3	%
BBB	307,522		6.0	%	323,085		5.8	%
Total investment-grade fixed maturities	4,588,952		89.0	%	4,764,580		86.0	%
BB	256,714		5.0	%	354,992		6.4	%
B	282,032		5.5	%	383,639		6.9	%
CCC	10,406		0.2	%	2,453		—	%
CC	2,385		—	%	2,496		0.1	%
C	157		—	%	235		—	%
D/NR	13,983		0.3	%	33,863		0.6	%
Total non-investment grade fixed maturities	565,677		11.0	%	777,678		14.0	%
Total fixed maturities	$	5,154,629	100.0	%	$	5,542,258	100.0	%

Fixed maturities investments by contractual maturity

The amortized cost and estimated fair value amounts for fixed maturities held at June 30, 2014 and December 31, 2013 are shown below by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

	June 30, 2014				December 31, 2013
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	399,741	$	402,887	$	688,855	$	692,768
Due after one year through five years	3,296,209		3,320,485		3,603,459		3,613,847
Due after five years through ten years	357,818		359,382		396,389		395,633
Due after ten years	10,459		10,418		3,079		3,095
	4,064,227		4,093,172		4,691,782		4,705,343
Asset-backed and mortgage-backed securities	1,051,718		1,061,457		831,071		836,915
Total fixed maturities	$	5,115,945	$	5,154,629	$	5,522,853	$	5,542,258

Net investment income

Net investment income was derived from the following sources:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities and short-term investments	$	22,207		$	26,151		$	45,504		$	53,682
Cash and cash equivalents	996			1,629			2,953			2,162
Securities lending income	2			—			4			—
Total gross investment income	23,205			27,780			48,461			55,844
Investment expenses	(1,919		)	(1,570		)	(3,813		)	(3,985		)
Total net investment income	$	21,286		$	26,210		$	44,648		$	51,859

Analysis of net realized gains and the change in net unrealized gains (losses) on investments

The following represents an analysis of net realized gains and the change in net unrealized gains (losses) on investments:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Fixed maturities, short-term and other investments
Gross realized gains (a)	$	9,813		$	7,152		$	15,109		$	17,872
Gross realized (losses)	(1,955		)	(3,743		)	(3,511		)	(12,742		)
Net realized gains on investments	7,858			3,409			11,598			5,130
Change in net unrealized gains (losses) on investments (a)	45,427			(141,348		)	101,120			(148,585		)
Total net realized gains and change in net unrealized gains (losses) on investments including noncontrolling interest	53,285			(137,939		)	112,718			(143,455		)
Noncontrolling interest (a)	(33,207		)	63,694			(75,209		)	68,345
Total net realized gains and change in net unrealized gains (losses) on investments excluding noncontrolling interest	$	20,078		$	(74,245	)	$	37,509		$	(75,110	)

(a) Includes change in net unrealized gains (losses) and realized gains on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and is included in the Consolidated Statements of Comprehensive Income as net (income) loss attributable to noncontrolling interest.

Investments pledged as collateral under credit facilities

The following tables outline investments pledged as collateral under the Company's credit facilities. For further details on the credit facilities, please refer to Note 12: “Debt and financing arrangements.”

	June 30, 2014
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		305,330		478,430
$200,000 secured bi-lateral letter of credit facility	200,000		17,602		35,415
Talbot FAL facility	25,000		25,000		30,990
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	30,000		30,000		30,040
IPC bi-lateral facility	40,000		19,572		96,188
$375,000 Flagstone bi-lateral facility	375,000		292,067		477,122
Total	$	1,605,000	$	689,865	$	1,148,185

	December 31, 2013
Description	Commitment		Issued and Outstanding		Investments and cash pledged as collateral
$400,000 syndicated unsecured letter of credit facility	$	400,000	$	—	$	—
$525,000 syndicated secured letter of credit facility	525,000		358,567		507,620
$200,000 secured bi-lateral letter of credit facility	200,000		16,726		130,256
Talbot FAL facility	25,000		25,000		30,801
PaCRe senior secured letter of credit facility	10,000		294		—
AlphaCat Re secured letter of credit facility	24,800		24,800		24,806
IPC bi-lateral facility	40,000		20,177		98,465
$375,000 Flagstone bi-lateral facility	375,000		305,686		454,458
Total	$	1,599,800	$	751,250	$	1,246,406

XML

Fair value measurements (Level 3 rollforward) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Dec. 31, 2013
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Noncontrolling interest	$ (569,290)	[1]			$ (569,290)	[1]			$ (489,402)	[1]
Fair Value, Measurements, Recurring [Member]
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Noncontrolling interest	(569,290)	[1]			(569,290)	[1]			(489,402)	[1]
Level 3 | Fair Value, Measurements, Recurring [Member]
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Level 3 investments - beginning of period	629,321		523,693		576,871		556,234
Purchases	100,000		65,056		100,000		65,515
Sales	(21,744)		(13,498)		(25,333)		(44,831)
Settlements	(1,500)		0		(1,500)		0
Realized gains	5,634		300		5,644		340
Unrealized losses	34,685		(70,393)		84,011		(72,100)
Transfers	0		0		6,703		0
Level 3 investments - end of period	746,396		505,158		746,396		505,158
Noncontrolling interest	(546,790)	[1],[2]	(422,893)	[2]	(546,790)	[1],[2]	(422,893)	[2]	(489,402)	[1]
Investments excluding noncontrolling interest level three rollforward	$ 199,606		$ 82,265		$ 199,606		$ 82,265
PaCRe funds
Reconciliation of beginning and ending balances for all investments measured at fair value on recurring basis
Noncontrolling Interest, Ownership Percentage by Parent	10.00%				10.00%				10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%				90.00%				90.00%

[1] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

[2] Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

XML

Investments (Gross unrealized gains and losses on fixed maturities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	$ 5,115,945		$ 5,522,853
Short-term investments, at amortized cost or cost	816,651	[1],[2]	751,734	[3]
Other investments, at amortized cost or cost	717,908		637,728
Total investments including noncontrolling interests	6,650,504		6,912,315
Noncontrolling interest, amortized cost or cost	(521,862)	[2]	(512,121)	[2]
Redeemable noncontrolling interest, amortized cost or cost	(8,305)	[1]	(18,365)	[3]
Total investments excluding non-controlling interests, amortized cost or cost	6,120,337		6,381,829
Fixed maturities, gross unrealized gains	46,144		42,756
Short term investments, gross unrealized gains	170	[1],[2]	45	[3]
Other investments, gross unrealized gains	145,449		76,843
Gross unrealized gains	191,763		119,644
Noncontrolling interest share of unrealized gains other investments	(118,540)	[2]	(62,850)	[2]
Total investments excluding non-controlling interest, unrealized gains	73,223		56,794
Fixed maturities, gross unrealized losses	(7,460)		(23,351)
Short term investments, gross unrealized losses	(1)	[1],[2]	(1)	[3]
Other investments, gross unrealized losses	(79,934)		(96,255)
Gross unrealized losses	(87,395)		(119,607)
Noncontrolling interest share of unrealized losses	71,112	[2]	85,569	[2]
Total investments excluding non-controlling interest, unrealized losses	(16,283)		(34,038)
Total fixed maturities	5,154,629		5,542,258
Total short-term investments	816,820	[1],[2]	751,778	[3]
Total other investments	783,423		618,316
Total	6,754,872		6,912,352
Noncontrolling interest	(569,290)	[2]	(489,402)	[2]
Redeemable noncontrolling interest	(8,305)	[1]	(18,365)	[3]
Total investments excluding noncontrolling interest	6,177,277		6,404,585
U.S. government and government agency
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	1,030,570		1,368,826
Fixed maturities, gross unrealized gains	3,028		2,589
Fixed maturities, gross unrealized losses	(1,821)		(6,736)
Total fixed maturities	1,031,777		1,364,679
Non-U.S. government and government agency
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	440,408		454,578
Fixed maturities, gross unrealized gains	7,689		6,511
Fixed maturities, gross unrealized losses	(1,027)		(2,021)
Total fixed maturities	447,070		459,068
U.S. states, municipalities and political subdivisions
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	48,732		42,978
Fixed maturities, gross unrealized gains	760		459
Fixed maturities, gross unrealized losses	(52)		(317)
Total fixed maturities	49,440		43,120
Agency residential mortgage-backed securities
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	307,246		305,450
Fixed maturities, gross unrealized gains	8,459		8,310
Fixed maturities, gross unrealized losses	(600)		(2,261)
Total fixed maturities	315,105		311,499
Non-agency residential mortgage-backed securities
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	18,001		16,530
Fixed maturities, gross unrealized gains	295		143
Fixed maturities, gross unrealized losses	(515)		(914)
Total fixed maturities	17,781		15,759
U.S. corporate
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	1,303,436		1,328,960
Fixed maturities, gross unrealized gains	10,869		9,208
Fixed maturities, gross unrealized losses	(1,796)		(5,684)
Total fixed maturities	1,312,509		1,332,484
Non-U.S. corporate
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	685,884		711,581
Fixed maturities, gross unrealized gains	8,442		5,917
Fixed maturities, gross unrealized losses	(738)		(3,173)
Total fixed maturities	693,588		714,325
Bank loans
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	517,697		712,859
Fixed maturities, gross unrealized gains	3,692		5,659
Fixed maturities, gross unrealized losses	(664)		(1,402)
Total fixed maturities	520,725		717,116
Catastrophe bonds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	37,500		72,000
Fixed maturities, gross unrealized gains	573		2,551
Fixed maturities, gross unrealized losses	(10)		0
Total fixed maturities	38,063		74,551
Asset-backed securities
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	605,079		509,091
Fixed maturities, gross unrealized gains	1,868		1,409
Fixed maturities, gross unrealized losses	(205)		(843)
Total fixed maturities	606,742		509,657
Commercial mortgage-backed securities
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Fixed maturities, at amortized cost or cost	121,392
Fixed maturities, gross unrealized gains	469
Fixed maturities, gross unrealized losses	(32)
Total fixed maturities	121,829
Fund of hedge funds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost or cost	2,820		3,141
Other investments, gross unrealized gains	115		83
Other investments, gross unrealized losses	(921)		(921)
Total other investments	2,014		2,303
Hedge funds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost or cost	566,519	[2]	584,518	[2]
Other investments, gross unrealized gains	136,390	[2]	71,641	[2]
Other investments, gross unrealized losses	(79,013)	[2]	(95,076)	[2]
Total other investments	623,896	[2]	561,083	[2]
Private equity investments
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost or cost	10,965		12,333
Other investments, gross unrealized gains	4,520		1,410
Other investments, gross unrealized losses	0		(258)
Total other investments	15,485		13,485
Investment funds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost or cost	131,406		31,537
Other investments, gross unrealized gains	284		92
Other investments, gross unrealized losses	0		0
Total other investments	131,690		31,629
Mutual funds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Other investments, at amortized cost or cost	6,198		6,199
Other investments, gross unrealized gains	4,140		3,617
Other investments, gross unrealized losses	0		0
Total other investments	$ 10,338		$ 9,816
PaCRe funds
Amortized cost (or cost), gross unrealized gains and (losses) and estimated fair value of investments
Noncontrolling Interest, Ownership Percentage by Parent	10.00%		10.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	90.00%		90.00%

[1] Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

[2] Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

[3] Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

XML

Consolidated Statements of Shareholders' Equity (Unaudited) (USD $) In Thousands	Total	Common shares	Treasury shares	Additional paid-in capital	Accumulated other comprehensive (loss)	Retained earnings
Balance - Beginning of period at Dec. 31, 2012		$ 26,722	$ (7,836)	$ 2,160,478	$ (2,953)	$ 1,844,416
Common shares issued (redeemed), net		267		(488)
Repurchase of common shares			(1,699)	(355,485)
Share compensation expenses				8,956
Other comprehensive income (loss)	(9,599)				(9,599)
Dividends						(298,888)
Net income	190,440					190,440
Net (income) loss attributable to noncontrolling interest	63,525					63,525
Amounts reclassified to retained earnings					4,290	(4,290)
Total shareholders' equity at Jun. 30, 2013	4,045,611
Noncontrolling interest at Jun. 30, 2013	427,755
Balance - End of period at Jun. 30, 2013	3,617,856	26,989	(9,535)	1,813,461	(8,262)	1,795,203
Balance - Beginning of period at Dec. 31, 2013	3,704,094	27,036	(10,228)	1,677,894	(617)	2,010,009
Common shares issued (redeemed), net		125		(4,510)
Repurchase of common shares			(939)	(196,400)
Share compensation expenses				15,488
Other comprehensive income (loss)	3,077				3,077
Dividends						(59,584)
Net income	394,569					394,569
Net (income) loss attributable to noncontrolling interest	(78,814)					(78,814)
Amounts reclassified to retained earnings					0	0
Total shareholders' equity at Jun. 30, 2014	4,352,453
Noncontrolling interest at Jun. 30, 2014	575,347
Balance - End of period at Jun. 30, 2014	$ 3,777,106	$ 27,161	$ (11,167)	$ 1,492,472	$ 2,460	$ 2,266,180

XML

Fair value measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurements

(a) Classification within the fair value hierarchy

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants. Under U.S. GAAP, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The three levels of the fair value hierarchy are described below:

Level 1 - Fair values are measured based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 - Fair values are measured based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

Level 3 - Fair values are measured based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's own judgments about assumptions where there is little, if any, market activity for that asset or liability that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (for example, from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. These circumstances could cause an instrument to be reclassified between levels within the fair value hierarchy.

There have been no material changes in the Company's valuation techniques during the period, or periods, represented by these Consolidated Financial Statements. The following methods and assumptions were used in estimating the fair value of each class of financial instrument recorded in the Consolidated Balance Sheets.

At June 30, 2014, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,031,777	$	—		$	1,031,777
Non-U.S. government and government agency	—			447,070		—			447,070
U.S. states, municipalities and political subdivisions	—			49,440		—			49,440
Agency residential mortgage-backed securities	—			315,105		—			315,105
Non-agency residential mortgage-backed securities	—			17,781		—			17,781
U.S. corporate	—			1,312,509		—			1,312,509
Non-U.S. corporate	—			693,588		—			693,588
Bank loans	—			520,725		—			520,725
Catastrophe bonds	—			33,062		5,001			38,063
Asset-backed securities	—			606,742		—			606,742
Commercial mortgage-backed securities	—			121,829		—			121,829
Total fixed maturities	—			5,149,628		5,001			5,154,629
Total short-term investments (a) (b)	801,944			14,876		—			816,820
Other investments
Fund of hedge funds	—			—		2,014			2,014
Hedge funds (a)	—			—		623,896			623,896
Private equity investments	—			—		15,485			15,485
Investment funds	—			31,690		100,000			131,690
Mutual funds	—			10,338		—			10,338
Total other investments	—			42,028		741,395			783,423
Total investments including noncontrolling interests	$	801,944		$	5,206,532	$	746,396		$	6,754,872
Noncontrolling interest (a)	$	(22,500	)	$	—	$	(546,790	)	$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—	$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	771,139		$	5,206,532	$	199,606		$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

At December 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,364,679	$	—		$	1,364,679
Non-U.S. government and government agency	—			459,068		—			459,068
U.S. states, municipalities and political subdivisions	—			43,120		—			43,120
Agency residential mortgage-backed securities	—			311,499		—			311,499
Non-agency residential mortgage-backed securities	—			15,759		—			15,759
U.S. corporate	—			1,332,484		—			1,332,484
Non-U.S. corporate	—			714,325		—			714,325
Bank loans	—			717,116		—			717,116
Catastrophe bonds	—			74,551		—			74,551
Asset-backed securities	—			509,657		—			509,657
Total fixed maturities	—			5,542,258		—			5,542,258
Total short-term investments (b)	747,215			4,563		—			751,778
Other investments
Fund of hedge funds	—			—		2,303			2,303
Hedge funds (a)	—			—		561,083			561,083
Private equity investments	—			—		13,485			13,485
Investment fund	—			31,629		—			31,629
Mutual funds	—			9,816		—			9,816
Total other investments	—			41,445		576,871			618,316
Total investments including noncontrolling interests	$	747,215		$	5,588,266	$	576,871		$	6,912,352
Noncontrolling interest (a)	$	—		$	—	$	(489,402	)	$	(489,402	)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—	$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	728,850		$	5,588,266	$	87,469		$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

At June 30, 2014, Level 3 investments excluding the noncontrolling interests totaled $199,606 (December 31, 2013: $87,469), representing 3.2% (December 31, 2013: 1.4%) of total investments, excluding noncontrolling interests, measured at fair value on a recurring basis.

(b) Level 1 assets measured at fair value

Short term investments

Short term investments categorized as Level 1 consist primarily of highly liquid securities, all with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments are generally determined using amortized cost which approximates fair value. The Company has determined that certain of its short-term investments, held in highly liquid money market-type funds, should be included in Level 1 as their fair values are based on quoted market prices in active markets.

(c) Level 2 assets measured at fair value

Fixed maturity investments

Fixed maturity investments included in Level 2 include U.S. government and government agency, non-U.S. government and government agency, U.S. states, municipalities and political subdivisions, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, U.S. corporate, non-U.S. corporate, bank loans, catastrophe bonds, asset-backed securities and commercial mortgage-backed securities.

In general, valuation of the Company's fixed maturity investment portfolios is provided by pricing services, such as index providers and pricing vendors, as well as broker quotations. The pricing vendors provide valuations for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index.

In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets.

The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company's fixed maturity investments are detailed below by asset class.

U.S. government and government agency

U.S. government and government agency securities consist primarily of debt securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. Fixed maturity investments included in U.S. government and government agency securities are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data.

Non-U.S. government and government agency

Non-U.S. government and government agency securities consist of debt securities issued by non-U.S. governments and their agencies along with supranational organizations (also known as sovereign debt securities). Securities held in these sectors are primarily priced by pricing services who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

U.S. states, municipalities and political subdivisions

The Company's U.S. states, municipalities and political subdivisions portfolio contains debt securities issued by U.S. domiciled state and municipal entities. These securities are generally priced by independent pricing services using the techniques described for U.S. government and government agency securities described above.

Agency residential mortgage-backed securities

The Company's agency residential mortgage-backed investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced ("TBA") market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes.

Non-agency residential mortgage-backed securities

The Company's non-agency mortgage-backed investments include non-agency prime residential mortgage-backed fixed maturity investments. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. Securities held in these sectors are primarily priced by pricing services using an option adjusted spread model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable.

U.S. corporate

Corporate debt securities consist primarily of investment-grade debt of a wide variety of U.S. corporate issuers and industries. The Company's corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate.

Non-U.S. corporate

Non-U.S. corporate debt securities consist primarily of investment-grade debt of a wide variety of non-U.S. corporate issuers and industries. The Company's non-U.S. corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Bank loans

The Company's bank loan investments consist primarily of below-investment-grade debt of a wide variety of corporate issuers and industries. The Company's bank loans are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk.

Catastrophe bonds

Catastrophe bonds are based on broker or underwriter bid indications. To the extent that these indications are based on significant unobservable inputs, the relevant bonds will be classified as a Level 3 asset.

Asset-backed securities

Asset backed securities include mostly investment-grade debt securities backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and collateralized loan obligations originated by a variety of financial institutions. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Commercial mortgage-backed securities

Commercial mortgage backed securities are investment-grade debt primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector.

Short term investments

Short term investments consist primarily of highly liquid securities, all with maturities less than one year from the date of purchase. The fair value of the Company's portfolio of short term investments is generally determined using amortized cost which approximates fair value. The Company has determined that, other than highly liquid money market-type funds, the remaining securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value.

Investment funds

Investment funds classified as Level 2 assets consists of one pooled investment which is invested in fixed income securities with high credit ratings. The investment fund is only open to Lloyd’ Trust Fund participants. The fair value of units in the investment fund is based on the net asset value of the fund as reported by Lloyd’s Treasury & Investment Management.

Mutual funds

Mutual funds consist of two investment funds which are invested in various quoted investments. The fair value of units in the mutual funds is based on the net asset value of the fund as reported by the fund manager.

(d) Level 3 assets measured at fair value

Level 3 includes financial instruments that are valued using market approach and income approach valuation techniques. These models incorporate both observable and unobservable inputs. The Company's hedge funds, a fund of hedge funds, private equity investments, an investment fund and certain catastrophe bonds are the only financial instruments in this category as at June 30, 2014. For each respective hedge fund investment, the Company obtains and reviews the valuation methodology used by the fund administrators and investment managers to ensure that the hedge fund investments are following fair value principles consistent with U.S. GAAP in determining the net asset value (“NAV”).

Within the hedge fund industry, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager and regular evaluation of fund performance against applicable benchmarks.

Fund of hedge funds

The fund of hedge funds includes a side pocket. While a redemption request has been submitted, the timing of receipt of proceeds on the side pocket is unknown. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As a result, the fund administrator's May 31, 2014 NAV was used as a basis for fair value measurement in the Company's June 30, 2014 balance sheet. The fund manager has provided an estimate of the fund NAV at June 30, 2014 based on the estimated performance provided from the underlying funds. To determine the reasonableness of the estimated NAV, the Company compares the one-month delayed fund administrator's NAV to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. As this valuation technique incorporates both observable and significant unobservable inputs, the fund of hedge funds is classified as a Level 3 asset.

Hedge funds

The hedge funds were valued at $623,896 at June 30, 2014 (December 31, 2013: $561,083). The hedge funds consist of an investment in four Paulson & Co. managed funds (the "Paulson hedge funds") and one hedge fund assumed from the Flagstone Acquisition (the "Flagstone hedge fund").

The Paulson hedge funds' administrator provides monthly reported NAVs with a one-month delay in its valuation. As a result, the funds' administrator's May 31, 2014 NAV was used as a partial basis for fair value measurement in the Company's June 30, 2014 balance sheet. The fund manager provides an estimate of the NAV at June 30, 2014 based on estimated performance. The Company adjusts fair value to the fund manager's estimated NAV that incorporates relevant valuation sources on a timely basis. To determine the reasonableness of the estimated NAV, the Company assesses the variance between the fund manager's estimated NAV and the fund administrator's NAV. Material variances are recorded in the current reporting period while immaterial variances are recorded in the following reporting period. Historically, the Company's valuation estimates have not materially differed from the subsequent NAVs.

The Flagstone hedge fund's administrator provides quarterly NAVs with a three-month delay in valuation. As a result, the March 31, 2014 NAV was used as a basis for fair value measurement in the Company's June 30, 2014 balance sheet.

As these valuation techniques incorporate both observable and significant unobservable inputs, both the Paulson hedge funds and the Flagstone hedge fund are classified as Level 3 assets. The Paulson hedge funds are subject to quarterly liquidity.

Private equity investments

Private equity investments consist of investments in three private equity funds assumed from the Flagstone Acquisition. The private equity funds' respective fund administrators provide quarterly or semi-annual NAVs with a three-month or six-month delay in valuation as well as audited NAVs as at December 31. As a result, the March 31, 2014 or December 31, 2013 NAV was used as a basis for the fair value measurement in the Company's June 30, 2014 balance sheet. As this valuation technique incorporates both observable and significant unobservable inputs, the private equity investments are classified as Level 3 assets.

Investment funds

Investment funds classified as Level 3 assets consists of one structured securities fund that invests across asset backed securities, residential mortgage backed securities and commercial mortgage backed securities. The fair value of units in the investment fund is based on the NAV of the fund as reported by the independent fund administrator. The fund's administrator provides a monthly reported NAV with a one-month delay in its valuation. As this valuation technique incorporates both observable and significant unobservable inputs, the investment fund investment is classified as a Level 3 asset.

The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Level 3 investments - Beginning of period	$	629,321		$	523,693		$	576,871		$	556,234
Purchases	100,000			65,056			100,000			65,515
Sales	(21,744		)	(13,498		)	(25,333		)	(44,831		)
Settlements	(1,500		)	—			(1,500		)	—
Net realized gains	5,634			300			5,644			340
Change in net unrealized gains (losses)	34,685			(70,393		)	84,011			(72,100		)
Transfers into Level 3	—			—			6,703			—
Level 3 investments - End of period	$	746,396		$	505,158		$	746,396		$	505,158
Noncontrolling interest (a)	(546,790		)	(422,893		)	(546,790		)	(422,893		)
Level 3 investments excluding noncontrolling interest	$	199,606		$	82,265		$	199,606		$	82,265

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

There have not been any transfers into or out of Levels 1, 2 and 3 during the three months ended June 30, 2014 or 2013. During the six months ended June 30, 2014 there was a transfer of investments from Level 2 into Level 3 of the fair value hierarchy. This transfer was due to a reassessment of the extent of unobservable inputs used in establishing the fair value of certain catastrophe bonds. There were no transfers into or out of Level 3 during the six months ended June 30, 2013.

XML

Investments in affiliates (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended				0 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended			6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 AlphaCat ILS Funds funds	Jan. 31, 2014 AlphaCat ILS Funds	Dec. 20, 2011 Aquiline Financial Services Fund II LP	Jun. 30, 2014 Aquiline Financial Services Fund II LP	Jun. 30, 2014 Operating affiliates	Jun. 30, 2013 Operating affiliates	Jun. 30, 2014 Operating affiliates	Jun. 30, 2013 Operating affiliates	Dec. 31, 2013 Operating affiliates	Jun. 30, 2014 Operating affiliates AlphaCat ILS Funds	Dec. 31, 2013 Operating affiliates AlphaCat ILS Funds	Jun. 30, 2014 As investor in third party economic interests	Jun. 30, 2013 As investor in third party economic interests	Jun. 30, 2014 As investor in third party economic interests	Jun. 30, 2013 As investor in third party economic interests	Dec. 31, 2013 As investor in third party economic interests	Jun. 30, 2014 Equity Method Investments [Member] AlphaCat ILS Funds funds	Dec. 31, 2013 Equity Method Investments [Member] AlphaCat ILS Funds funds	Jun. 30, 2014 Equity Method Investments [Member] Operating affiliates AlphaCat ILS Funds	Jun. 30, 2014 Variable Interest Entity, Primary Beneficiary [Member] AlphaCat ILS Funds funds	Jun. 30, 2014 Variable Interest Entity, Primary Beneficiary [Member] Operating affiliates AlphaCat ILS Funds
Schedule of Equity Method Investments [Line Items]
Percentage of Assignor's interest assumed					100.00%
Total capital commitment					$ 50,000
Investment Time Lag Reporting						3 months
Other Investments Number Of Funds			3																2	1		1
Third party subscriptions				35,000
Threshold Minimum Consolidation Requirement Percentage			50.00%
Fair value of retained interest on deconsolidation of AlphaCat ILS fund									113,455			113,455
Deconsolidation, Gain (Loss), Amount	1,372	0
Equity ownership %													9.10%								8.60%		49.00%
Variable Funding Notes, Typical Minimum Duration	12 months
Notes Payable Of Operating Affiliates Portion Due to Company							156,084		156,084		63,654			466,866		466,866		375,618
Income Attributable To Operating Affiliates Portion Due to Company							$ 5,087	$ 3,762	$ 11,559	$ 5,609				$ 20,229	$ 16,502	$ 45,467	$ 24,732

XML

Segment information narrative (Details)	6 Months Ended
	Jun. 30, 2014 segments
Segment Reporting [Abstract]
Number of operating segments	3

XML

Debt and financing arrangements (Schedule of finance structure) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Debt instrument, commitment	$ 851,550	$ 851,616
Debt instrument, outstanding	791,350	791,416
Debt instrument, drawn	788,602	788,614
Credit facility, commitment	1,605,000	1,599,800
Credit facility, issued and outstanding	689,865	751,250
Total debt and financing arrangements, commitment	2,456,550	2,451,416
Total debt and financing arrangements, outstanding	1,481,215	1,542,666
$400,000 syndicated unsecured letter of credit facility
Debt Instrument [Line Items]
Credit facility, commitment	400,000	400,000
Credit facility, issued and outstanding	0	0
$525,000 syndicated secured letter of credit facility
Debt Instrument [Line Items]
Credit facility, commitment	525,000	525,000
Credit facility, issued and outstanding	305,330	358,567
$200,000 secured bi-lateral letter of credit facility
Debt Instrument [Line Items]
Credit facility, commitment	200,000	200,000
Credit facility, issued and outstanding	17,602	16,726
Talbot FAL facility
Debt Instrument [Line Items]
Credit facility, commitment	25,000	25,000
Credit facility, issued and outstanding	25,000	25,000
PaCRe Senior secured letter of credit facility
Debt Instrument [Line Items]
Credit facility, commitment	10,000	10,000
Credit facility, issued and outstanding	294	294
AlphaCat Re secured letter of credit facility
Debt Instrument [Line Items]
Credit facility, commitment	30,000	24,800
Credit facility, issued and outstanding	30,000	24,800
IPC bi-lateral facility
Debt Instrument [Line Items]
Credit facility, commitment	40,000	40,000
Credit facility, issued and outstanding	19,572	20,177
$375,000 Flagstone bi-lateral facility
Debt Instrument [Line Items]
Credit facility, commitment	375,000	375,000
Credit facility, issued and outstanding	292,067	305,686
Total debentures payable
Debt Instrument [Line Items]
Debt instrument, commitment	601,550	601,616
Debt instrument, outstanding	541,350	541,416
Debt instrument, drawn	541,350	541,416
2006 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Debt instrument, commitment	150,000	150,000
Debt instrument, outstanding	150,000	150,000
Debt instrument, drawn	150,000	150,000
2007 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Debt instrument, commitment	200,000	200,000
Debt instrument, outstanding	139,800	139,800
Debt instrument, drawn	139,800	139,800
Flagstone 2006 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Debt instrument, commitment	137,800	137,866
Debt instrument, outstanding	137,800	137,866
Debt instrument, drawn	137,800	137,866
Flagstone 2007 Junior Subordinated Deferrable Debentures
Debt Instrument [Line Items]
Debt instrument, commitment	113,750	113,750
Debt instrument, outstanding	113,750	113,750
Debt instrument, drawn	113,750	113,750
2010 Senior Notes Due 2040
Debt Instrument [Line Items]
Debt instrument, commitment	250,000	250,000
Debt instrument, outstanding	250,000	250,000
Debt instrument, drawn	$ 247,252	$ 247,198

XML

Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair value hierarchy - allocation of investments

At June 30, 2014, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,031,777	$	—		$	1,031,777
Non-U.S. government and government agency	—			447,070		—			447,070
U.S. states, municipalities and political subdivisions	—			49,440		—			49,440
Agency residential mortgage-backed securities	—			315,105		—			315,105
Non-agency residential mortgage-backed securities	—			17,781		—			17,781
U.S. corporate	—			1,312,509		—			1,312,509
Non-U.S. corporate	—			693,588		—			693,588
Bank loans	—			520,725		—			520,725
Catastrophe bonds	—			33,062		5,001			38,063
Asset-backed securities	—			606,742		—			606,742
Commercial mortgage-backed securities	—			121,829		—			121,829
Total fixed maturities	—			5,149,628		5,001			5,154,629
Total short-term investments (a) (b)	801,944			14,876		—			816,820
Other investments
Fund of hedge funds	—			—		2,014			2,014
Hedge funds (a)	—			—		623,896			623,896
Private equity investments	—			—		15,485			15,485
Investment funds	—			31,690		100,000			131,690
Mutual funds	—			10,338		—			10,338
Total other investments	—			42,028		741,395			783,423
Total investments including noncontrolling interests	$	801,944		$	5,206,532	$	746,396		$	6,754,872
Noncontrolling interest (a)	$	(22,500	)	$	—	$	(546,790	)	$	(569,290	)
Redeemable noncontrolling interest (b)	$	(8,305	)	$	—	$	—		$	(8,305	)
Total investments excluding noncontrolling interests	$	771,139		$	5,206,532	$	199,606		$	6,177,277

(a) Included in the short-term investments and the hedge funds balances are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by one AlphaCat ILS fund which is consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

At December 31, 2013, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

	Level 1			Level 2		Level 3			Total
U.S. government and government agency	$	—		$	1,364,679	$	—		$	1,364,679
Non-U.S. government and government agency	—			459,068		—			459,068
U.S. states, municipalities and political subdivisions	—			43,120		—			43,120
Agency residential mortgage-backed securities	—			311,499		—			311,499
Non-agency residential mortgage-backed securities	—			15,759		—			15,759
U.S. corporate	—			1,332,484		—			1,332,484
Non-U.S. corporate	—			714,325		—			714,325
Bank loans	—			717,116		—			717,116
Catastrophe bonds	—			74,551		—			74,551
Asset-backed securities	—			509,657		—			509,657
Total fixed maturities	—			5,542,258		—			5,542,258
Total short-term investments (b)	747,215			4,563		—			751,778
Other investments
Fund of hedge funds	—			—		2,303			2,303
Hedge funds (a)	—			—		561,083			561,083
Private equity investments	—			—		13,485			13,485
Investment fund	—			31,629		—			31,629
Mutual funds	—			9,816		—			9,816
Total other investments	—			41,445		576,871			618,316
Total investments including noncontrolling interests	$	747,215		$	5,588,266	$	576,871		$	6,912,352
Noncontrolling interest (a)	$	—		$	—	$	(489,402	)	$	(489,402	)
Redeemable noncontrolling interest (b)	$	(18,365	)	$	—	$	—		$	(18,365	)
Total investments excluding noncontrolling interests	$	728,850		$	5,588,266	$	87,469		$	6,404,585

(a) Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

(b) Included in the short-term investments balance are investments held by two AlphaCat ILS funds which are consolidated by the Company but in which the Company has an equity interest of less than 100%. The remaining interests are held by third party investors and included in the Consolidated Balance Sheets as redeemable noncontrolling interest.

Reconciliation of beginning and ending balances for all Level 3 investments measured at fair value on recurring basis

The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Level 3 investments - Beginning of period	$	629,321		$	523,693		$	576,871		$	556,234
Purchases	100,000			65,056			100,000			65,515
Sales	(21,744		)	(13,498		)	(25,333		)	(44,831		)
Settlements	(1,500		)	—			(1,500		)	—
Net realized gains	5,634			300			5,644			340
Change in net unrealized gains (losses)	34,685			(70,393		)	84,011			(72,100		)
Transfers into Level 3	—			—			6,703			—
Level 3 investments - End of period	$	746,396		$	505,158		$	746,396		$	505,158
Noncontrolling interest (a)	(546,790		)	(422,893		)	(546,790		)	(422,893		)
Level 3 investments excluding noncontrolling interest	$	199,606		$	82,265		$	199,606		$	82,265

(a) Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors and included in the Consolidated Balance Sheets as noncontrolling interest.

XML

Commitments and contingencies (Investment portfolio) (Details) (Concentrations of credit risk)	6 Months Ended
	Jun. 30, 2014
Investment portfolio excluding government and agency securities
Concentrations Of Credit Risk [Abstract]
Maximum aggregate exposure to single issuer, allowed	3.00%
Aggregate exposure to single issuer, actual	0.90%
Bank loan portfolio
Concentrations Of Credit Risk [Abstract]
Total investment portfolio, fair value	7.70%
Investment portfolio excluding bank loans
Concentrations Of Credit Risk [Abstract]
Minimum credit rating of any security purchased	Baa3/BBB-
Allowable percentage holding in downgraded investments	2.00%
Holding in aggregate market value permitted with written pre-authorization	10.00%
Percent of investment portfolio with a credit rating below the minimum required credit rating of Baa3/BBB-	1.00%

XML

Earnings per share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following table sets forth the computation of basic and earnings per diluted share for the three and six months endedJune 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Basic earnings per share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	(1,552		)	(1,646		)	(3,104		)	(16,110		)
Income available to common shareholders	$	151,815		$	29,076		$	312,651		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Basic earnings per share available to common shareholders	$	1.67		$	0.28		$	3.39		$	2.26
Earnings per diluted share
Net income (loss)	$	188,672		$	(30,254	)	$	394,569		$	190,440
(Income) loss attributable to noncontrolling interest	(35,305		)	60,976			(78,814		)	63,525
Net income available to Validus	153,367			30,722			315,755			253,965
Less: Dividends and distributions declared on outstanding warrants	—			(1,646		)	—			(16,110		)
Income available to common shareholders	$	153,367		$	29,076		$	315,755		$	237,855
Weighted average number of common shares outstanding	90,952,523			103,133,188			92,202,261			105,259,813
Share equivalents:
Warrants	2,729,226			—			2,722,618			—
Stock options	745,800			857,179			748,085			1,244,368
Unvested restricted shares	849,287			744,276			865,214			889,641
Weighted average number of diluted common shares outstanding	95,276,836			104,734,643			96,538,178			107,393,822
Earnings per diluted share available to common shareholders	$	1.61		$	0.28		$	3.27		$	2.21

XML

Commitments and contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

(a) Concentrations of credit risk

The Company’s investments are managed following prudent standards of diversification. The Company attempts to limit its credit exposure by purchasing high quality fixed income investments to maintain an average portfolio, excluding bank loans, credit quality of AA- or higher, with mortgage and commercial mortgage-backed issues having an aggregate weighted average credit quality of AAA. In addition, the Company limits its exposure to any single issuer to 3% of its investment portfolio or less, excluding government and agency securities. With the exception of the Company's bank loan portfolio, which represents 7.7% of the Company's total investments as at June 30, 2014, the minimum credit rating of any security purchased is Baa3/BBB-. In the case where currently held investments are downgraded below Baa3/BBB-, the Company tolerates a holding of up to 2% of its investment portfolio in aggregate market value, or 10% with written authorization. Excluding bank loans, 1.0% of the portfolio had a split rating below Baa3/BBB- as at June 30, 2014. The Company did not have an aggregate exposure to any single issuer of more than 0.9% of its investment portfolio, other than with respect to government and agency securities as at June 30, 2014.

(b) Funds at Lloyd's

The amounts provided under the Talbot FAL Facility would become a liability of the Company in the event of Syndicate 1183 declaring a loss at a level which would call on this arrangement.

Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment and reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies. Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

The amounts of cash, investments and letters of credit provided for each year of account as follows:

	2014 Underwriting Year		2013 Underwriting Year
Talbot FAL facility	$	25,000	$	25,000
Group funds	450,000		403,700
Total	$	475,000	$	428,700

The amounts which are provided as FAL are not available for distribution to the Company for the payment of dividends. Talbot’s corporate member may also be required to maintain funds under the control of Lloyd’s in excess of its capital requirement and such funds also may not be available for distribution to the Company for the payment of dividends. See Note 3 (d) for investments pledged as collateral.

(c) Lloyd's Central Fund

Whenever a member of Lloyd's is unable to pay its debts to policyholders, such debts may be payable by the Lloyd's Central Fund. If Lloyd's determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd's members up to 3% of a member's underwriting capacity in any one year. The Company does not believe that any assessment is likely in the foreseeable future and has not provided any allowance for such an assessment. However, based on the Company's 2014 estimated premium income at Lloyd's of £625,000, at the June 30, 2014 exchange rate of £1 equals $1.7110 and assuming the maximum 3% assessment, the Company would be assessed approximately $32,081.

(d) Aquiline Commitment

As discussed in Note 5"Investments in affiliates," the Company entered into an Assignment and Assumption Agreement with Aquiline Capital Partners LLC, pursuant to which it assumed a total capital commitment of $50,000 which will expire on July 2, 2015. The Company's remaining commitment at June 30, 2014 was $17,890 (December 31, 2013: $17,890).

(e) Western World Insurance Group acquisition

On June 23, 2014, the Company entered into a stock purchase agreement to acquire all of the issued and outstanding capital stock of Western World Insurance Group, Inc ("Western World") for an aggregate purchase price of $690,000 in cash, subject to possible pre-closing adjustments. Western World is a specialty excess and surplus lines insurance company. The closing of the transaction is subject to certain customary conditions, including receipt of required regulatory and antitrust approvals and the absence of a material adverse effect on the business of Western World.