0001348259-15-000135.txt : 20150728 0001348259-15-000135.hdr.sgml : 20150728 20150728161150 ACCESSION NUMBER: 0001348259-15-000135 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20150728 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150728 DATE AS OF CHANGE: 20150728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALIDUS HOLDINGS LTD CENTRAL INDEX KEY: 0001348259 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33606 FILM NUMBER: 151009821 BUSINESS ADDRESS: STREET 1: 29 RICHMOND ROAD CITY: PEMBROKE STATE: D0 ZIP: HM08 BUSINESS PHONE: 441-278-9000 MAIL ADDRESS: STREET 1: 29 RICHMOND ROAD CITY: PEMBROKE STATE: D0 ZIP: HM08 8-K 1 a20150630-coverpageearning.htm 8-K 2015.06.30 - Cover Page Earnings Release


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 8-K
___________
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2015

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)

Registrant's telephone number, including area code: (441) 278-9000
Not Applicable
(Former name or former address, if changed since last report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


o    Written communications pursuant to Rule 425 under the securities Act (17 CFR 230.425)


o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
 
 
 
 
 
 
 
 
 
 
 





Item 2.02
 
Results of Operations and Financial Condition.
     
On July 28, 2015, Validus Holdings, Ltd. issued a press release reporting its earnings for the three and six months ended June 30, 2015 (the "Press Release"). A copy of the Press Release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.
 
Financial Statements and Exhibits.

(d)
 
Exhibits. The following exhibits are filed herewith:

Exhibit No.
 
Description
 
 

 
 
 
 
99.1

 
 
Press Release dated July 28, 2015 announcing the earnings of Validus Holdings, Ltd. for the three and six months ended June 30, 2015.







SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 28, 2015

 
VALIDUS HOLDINGS, LTD.
      (Registrant)
  
 
 
By:  
/s/ Jeffrey D. Sangster
 
 
 
 
 
 
Name: 
Jeffrey D. Sangster
 
 
Title: 
Executive Vice President and Chief Financial Officer
 




 EX-99.1 2 a20150630-earningsrelease.htm EXHIBIT 99.1 2015.06.30 - Earnings Release

VALIDUS ANNOUNCES QUARTERLY NET OPERATING INCOME OF $98.3 MILLION, OR $1.13 PER DILUTED COMMON SHARE

YEAR TO DATE ANNUALIZED RETURN ON AVERAGE EQUITY OF 13.0%

BOOK VALUE PER DILUTED COMMON SHARE OF $41.43 AT JUNE 30, 2015
 
Pembroke, Bermuda, July 28, 2015 - Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR) today reported net income available to Validus of $64.0 million, or $0.73 per diluted common share, for the three months ended June 30, 2015, compared to $153.4 million, or $1.61 per diluted common share, for the three months ended June 30, 2014. Net income available to Validus was $237.4 million, or $2.72 per diluted common share, for the six months ended June 30, 2015, compared to $315.8 million, or $3.27 per diluted common share, for the six months ended June 30, 2014.
Net operating income available to Validus was $98.3 million, or $1.13 per diluted common share, for the three months ended June 30, 2015, compared to $132.2 million, or $1.39 per diluted common share, for the three months ended June 30, 2014. Net operating income available to Validus was $231.2 million, or $2.64 per diluted common share, for the six months ended June 30, 2015, compared to $272.5 million, or $2.82 per diluted common share, for the six months ended June 30, 2014.
Book value per diluted common share at June 30, 2015 was $41.43, reflecting quarterly growth of 1.2% inclusive of dividends.
Commenting on the financial results for the three months ended June 30, 2015, Validus' Chairman and CEO Ed Noonan stated:
“During a quarter with meaningful loss activity in our core classes of business, Validus delivered a 10.7% annualized operating return on average equity, a strong result in the current market. 
Our diversified business model with a focus on short tail lines continues to provide a strong platform for a thoughtful expansion into new classes of business and markets.  The foundation of our success is our world class staff and an outstanding set of proprietary analytical tools that benefit both our own results and those of our clients.
Above all, we remain committed to underwriting profitability and will continue to adjust our portfolio to maximize results in the current market conditions.”

Net income and net operating income available to Validus, net earnings and net operating earnings per diluted common share available to Validus, by segment for the three months ended June 30, 2015 were as follows:
 
Net Income Available to Validus
 
Net Operating Income Available to Validus
 
(Expressed in millions of U.S. dollars, except per share information)
Validus Re
$
76.1

 
$
90.3

Talbot
18.6

 
27.3

PaCRe, Ltd.
1.7

 
—

Other AlphaCat Companies
4.3

 
4.9

AlphaCat subtotal
6.0

 
4.9

Western World
(1.7
)
 
9.0

Corporate & Eliminations
(35.0
)
 
(33.2
)
Total
$
64.0

 
$
98.3

Net earnings per diluted common share available to Validus
$
0.73

 
 
Net operating earnings per diluted common share available to Validus
 
 
$
1.13

Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and change in net unrealized gains (losses) on investments, income (loss) from investment affiliate, foreign exchange gains (losses), other income (loss) and non-recurring items. Net operating income (loss) available (attributable) to Validus is defined as above, but excludes income (loss) available (attributable) to noncontrolling interest. Reconciliations of these measures to net income (loss)and net income (loss) available (attributable) to Validus, the most directly comparable GAAP measures, are presented at the end of this release.


Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com



Second Quarter 2015 Results
Highlights for the second quarter are as follows:
•
Gross premiums written for the three months ended June 30, 2015 were $727.0 million compared to $655.7 million for the three months ended June 30, 2014, an increase of $71.3 million, or 10.9%. The increase was primarily due to the contribution from Western World and an increase in AlphaCat gross written premium. This increase was offset by decreases at both Validus Re and Talbot.

•
Net premiums earned for the three months ended June 30, 2015 were $573.6 million compared to $466.0 million for the three months ended June 30, 2014, an increase of $107.6 million, or 23.1%.

•
Underwriting income for the three months ended June 30, 2015 was $110.8 million compared to $146.1 million for the three months ended June 30, 2014, a decrease of $35.3 million, or 24.2%.
 
•
Combined ratio for the three months ended June 30, 2015 was 80.7% which included $70.7 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 12.3 percentage points compared to a combined ratio for the three months ended June 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. The favorable loss reserve development was primarily due to lower than expected development on attritional losses.

•
Net operating income available to Validus for the three months ended June 30, 2015 was $98.3 million compared to $132.2 million for the three months ended June 30, 2014, a decrease of $33.8 million, or 25.6%.

•
Net income available to Validus for the three months ended June 30, 2015 was $64.0 million compared to $153.4 million for the three months ended June 30, 2014, a decrease of $89.4 million, or 58.3%.

•
Annualized return on average equity of 7.0% and annualized net operating return on average equity of 10.7% for the three months ended June 30, 2015 compared to 16.5% and 14.2%, respectively, for the three months ended June 30, 2014.

Notable and Non-Notable Loss Events
During the three months ended June 30, 2015, the Company incurred a notable loss event, defined as consolidated losses which aggregate to a threshold greater than or equal to $30.0 million. The event, Pemex, resulted in an estimated loss to the Company of $48.1 million, or 8.4 percentage points of the loss ratio. During the three months ended June 30, 2014, the Company did not incur any notable loss events.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2015
 
 
 
 
 
(Dollars in thousands)
 
Second Quarter 2015 Notable Loss Event (a)
 
Validus Re
 
Talbot
 
Total
 
Description
 
 
 
Net Losses and Loss Expenses (b)
`
% of NPE (c)
 
Net Losses and Loss Expenses (b)
 
% of NPE (c)
 
Net Losses and Loss Expenses (b)
 
% of NPE (c)
 
Pemex
 
Explosion
 
$
35,189

 
13.3
%
 
$
12,885

 
6.3
%
 
$
48,074

 
8.4
%
 
Total
 
 
 
$
35,189

 
13.3
%
 
$
12,885

 
6.3
%
 
$
48,074

 
8.4
%
 

(a)
The notable loss event amounts were based on management's estimates following a review of the Company's potential exposure and discussions with certain clients and brokers. Given the magnitude of this event, and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from this event and the Company's actual ultimate net losses from this event may vary materially from this estimate. Only those segments that incurred a loss on this event are shown above.
(b)
Net of reinsurance but not net of reinstatement premiums. Total Pemex reinstatement premiums were $(0.4) million for the three months ended June 30, 2015.
(c)
NPE = net premiums earned.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

2

During the three months ended June 30, 2015, the Company did not incur a non-notable loss event, defined as consolidated losses which aggregate to a threshold greater than $15.0 million, but less than $30.0 million. The Company's loss ratio, excluding prior year development, notable loss events, and non-notable loss events for the three months ended June 30, 2015 and 2014 was 52.9% and 45.0%, respectively.
Highlights for the year to date include the following:
•
Gross premiums written for the six months ended June 30, 2015 were $1,846.5 million compared to $1,667.7 million for the six months ended June 30, 2014, an increase of $178.8 million, or 10.7%.

•
Net premiums earned for the six months ended June 30, 2015 were $1,151.3 million compared to $949.0 million for the six months ended June 30, 2014, an increase of $202.4 million, or 21.3%.

•
Underwriting income for the six months ended June 30, 2015 was $254.9 million compared to $299.2 million for the six months ended June 30, 2014, a decrease of $44.3 million, or 14.8%.
 
•
Combined ratio for the six months ended June 30, 2015 was 77.9% which included $154.3 million of favorable loss reserve development on prior accident years, benefiting the loss ratio by 13.4 percentage points compared to a combined ratio for the six months ended June 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.

•
Net operating income available to Validus for the six months ended June 30, 2015 was $231.2 million compared to $272.5 million for the six months ended June 30, 2014, a decrease of $41.3 million, or 15.2%.

•
Net income available to Validus for the six months ended June 30, 2015 was $237.4 million compared to $315.8 million for the six months ended June 30, 2014, a decrease of $78.3 million, or 24.8%.

•
Annualized return on average equity of 13.0% and annualized net operating return on average equity of 12.7% for the six months ended June 30, 2015 compared to 17.0% and 14.7%, respectively, for the six months ended June 30, 2014.

Validus Re Segment - Second Quarter 2015 Results
Highlights for the second quarter include the following:
•
Gross premiums written for the three months ended June 30, 2015 were $296.9 million compared to $301.3 million for the three months ended June 30, 2014, a decrease of $4.4 million, or 1.5%. Gross premiums written for the three months ended June 30, 2015 included $246.1 million of property premiums, $6.5 million of marine premiums and $44.3 million of specialty premiums, compared to $266.8 million of property premiums, $(0.2) million of marine premiums and $34.7 million of specialty premiums for the three months ended June 30, 2014.
•
Net premiums earned for the three months ended June 30, 2015 were $264.6 million compared to $221.7 million for the three months ended June 30, 2014, an increase of $42.8 million, or 19.3%.
•
The combined ratio for the three months ended June 30, 2015 was 71.2% compared to 57.8% for the three months ended June 30, 2014, an increase of 13.4 percentage points.
•
The loss ratio for the three months ended June 30, 2015 was 46.6% compared to 35.0% for the three months ended June 30, 2014, an increase of 11.6 percentage points. The increase was primarily due to losses arising from the Pemex explosion. The loss ratio for the three months ended June 30, 2015 included favorable loss reserve development on prior accident years of $30.9 million, benefiting the loss ratio by 11.7 percentage points. The favorable loss reserve development was primarily due to lower than expected development on attritional losses. The loss ratio for the three months ended June

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

3

30, 2014 included favorable loss reserve development on prior accident years of $26.7 million, benefiting the loss ratio by 12.0 percentage points.
•
General and administrative expenses for the three months ended June 30, 2015 were $18.8 million compared to $17.0 million for the three months ended June 30, 2014, an increase of $1.7 million, or 10.2%.
•
Net operating income available to Validus Re for the three months ended June 30, 2015 was $90.3 million compared to $106.2 million, for the three months ended June 30, 2014, a decrease of $15.9 million, or 15.0%.
 
•
Net income available to Validus Re for the three months ended June 30, 2015 was $76.1 million compared to $124.3 million, for the three months ended June 30, 2014, a decrease of $48.1 million, or 38.7%.

Highlights for the year to date include the following:
•
Gross premiums written for the six months ended June 30, 2015 were $1,008.1 million compared to $967.4 million for the six months ended June 30, 2014, an increase of $40.7 million, or 4.2%. Gross premiums written for the six months ended June 30, 2015 included $465.4 million of property premiums, $139.9 million of marine premiums and $402.7 million of specialty premiums, compared to $528.5 million of property premiums, $152.7 million of marine premiums and $286.2 million of specialty premiums for the six months ended June 30, 2014.

•
Net premiums earned for the six months ended June 30, 2015 were $517.6 million compared to $460.1 million for the six months ended June 30, 2014, an increase of $57.5 million, or 12.5%.
•
The combined ratio for the six months ended June 30, 2015 was 70.7% compared to 55.6% for the six months ended June 30, 2014, an increase of 15.1 percentage points.
•
The loss ratio for the six months ended June 30, 2015 was 45.7% compared to 31.7% for the six months ended June 30, 2014, an increase of 14.0 percentage points. The loss ratio for the six months ended June 30, 2015 included favorable loss reserve development on prior accident years of $55.6 million, benefiting the loss ratio by 10.7 percentage points. The loss ratio for the six months ended June 30, 2014 included favorable loss reserve development on prior accident years of $36.7 million, benefiting the loss ratio by 8.0 percentage points.
•
General and administrative expenses for the six months ended June 30, 2015 were $38.3 million compared to $35.2 million for the six months ended June 30, 2014, an increase of $3.1 million, or 8.7%.
•
Net operating income available to Validus Re for the six months ended June 30, 2015 was $182.7 million compared to $232.8 million, for the six months ended June 30, 2014, a decrease of $50.1 million, or 21.5%.
 
•
Net income available to Validus Re for the six months ended June 30, 2015 was $186.9 million compared to $265.5 million, for the six months ended June 30, 2014, a decrease of $78.6 million, or 29.6%.
Talbot Segment - Second Quarter 2015 Results
Highlights for the second quarter include the following:
•
Gross premiums written for the three months ended June 30, 2015 were $293.0 million compared to $317.9 million for the three months ended June 30, 2014, a decrease of $24.9 million, or 7.8%. Gross premiums written for the three months ended June 30, 2015 included $108.8 million of property premiums, $89.7 million of marine premiums and $94.5 million of specialty premiums compared to $116.0 million of property premiums, $109.4 million of marine premiums and $92.6 million of specialty premiums for the three months ended June 30, 2014.
•
Net premiums earned for the three months ended June 30, 2015 were $205.4 million compared to $211.8 million for the three months ended June 30, 2014, a decrease of $6.4 million, or 3.0%.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

4

•
The combined ratio for the three months ended June 30, 2015 was 88.7% compared to 78.7% for the three months ended June 30, 2014, an increase of 10.0 percentage points.
•
The loss ratio for the three months ended June 30, 2015 was 46.7% compared to 39.7% for the three months ended June 30, 2014, an increase of 7.0 percentage points. The increase was primarily due to losses arising from the Pemex explosion. The loss ratio for the three months ended June 30, 2015 included favorable loss reserve development on prior accident years of $35.6 million, benefiting the loss ratio by 17.3 percentage points. The favorable loss reserve development was primarily due to lower than expected development on attritional losses. The loss ratio for the three months ended June 30, 2014 included favorable loss reserve development on prior accident years of $42.2 million, benefiting the loss ratio by 19.9 percentage points.
•
General and administrative expenses for the three months ended June 30, 2015 were $35.6 million compared to $34.2 million for the three months ended June 30, 2014, an increase of $1.4 million, or 4.0%.
•
Net operating income available to Talbot for the three months ended June 30, 2015 was $27.3 million compared to $48.6 million, for the three months ended June 30, 2014, a decrease of $21.3 million, or 43.8%.
•
Net income available to Talbot for the three months ended June 30, 2015 was $18.6 million compared to $52.7 million, for the three months ended June 30, 2014, a decrease of $34.1 million, or 64.7%.
Highlights for the year to date include the following:
•
Gross premiums written for the six months ended June 30, 2015 were $563.1 million compared to $608.6 million for the six months ended June 30, 2014, a decrease of $45.5 million, or 7.5%. Gross premiums written for the six months ended June 30, 2015 included $180.5 million of property premiums, $200.1 million of marine premiums and $182.6 million of specialty premiums compared to $194.1 million of property premiums, $229.0 million of marine premiums and $185.6 million of specialty premiums for the six months ended June 30, 2014.
•
Net premiums earned for the six months ended June 30, 2015 were $428.0 million compared to $425.7 million for the six months ended June 30, 2014, an increase of $2.3 million, or 0.5%.
•
The combined ratio for the six months ended June 30, 2015 was 81.5% compared to 82.6% for the six months ended June 30, 2014, a decrease of 1.1 percentage points.
•
The loss ratio for the six months ended June 30, 2015 was 40.7% compared to 43.8% for the six months ended June 30, 2014, a decrease of 3.1 percentage points. The loss ratio for the six months ended June 30, 2015 included favorable loss reserve development on prior accident years of $87.3 million, benefiting the loss ratio by 20.4 percentage points. The loss ratio for the six months ended June 30, 2014 included favorable loss reserve development on prior accident years of $63.8 million, benefiting the loss ratio by 15.0 percentage points.
•
General and administrative expenses for the six months ended June 30, 2015 were $72.0 million compared to $69.3 million for the six months ended June 30, 2014, an increase of $2.7 million, or 3.9%.
•
Net operating income available to Talbot for the six months ended June 30, 2015 was $88.6 million compared to $82.3 million for the six months ended June 30, 2014, an increase of $6.4 million, or 7.7%.

•
Net income available to Talbot for the six months ended June 30, 2015 was $88.2 million compared to $88.9 million, for the six months ended June 30, 2014, a decrease of $0.7 million, or 0.8%.


Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

5

AlphaCat Segment - Second Quarter 2015 Results(1) 
Highlights for the second quarter include the following:
•
AlphaCat's assets under management were $2,079.3 million as at July 1, 2015, compared to $1,879.6 million as at April 1, 2015. Third party assets under management were $1,724.3 million as at July 1, 2015, compared to $1,525.0 million as at April 1, 2015. During the three months ended June 30, 2015, a total of $224.0 million of capital was raised, of which $213.9 million was raised from third parties. During the three months ended June 30, 2015, $52.4 million was returned to investors, of which $19.3 million was returned to third party investors.
•
Net operating income available to AlphaCat for the three months ended June 30, 2015 was $4.9 million. Validus' share of AlphaCat net operating income for the three months ended June 30, 2015 was $3.1 million, compared to $9.4 million for the three months ended June 30, 2014, a decrease of $6.2 million.
•
Net income available to AlphaCat for the three months ended June 30, 2015 was $6.0 million. Validus' share of AlphaCat net income for the three months ended June 30, 2015 was $4.9 million, compared to $13.1 million for the three months ended June 30, 2014, a decrease of $8.2 million.
•
Management fees earned from third parties were $4.3 million for the three months ended June 30, 2015 and June 30, 2014.
•
The AlphaCat sidecars and ILS funds contributed $5.6 million of income for the three months ended June 30, 2015, compared to $8.1 million for the three months ended June 30, 2014, a decrease of $2.5 million.
•
Total expenses for the three months ended June 30, 2015 were $5.0 million, compared to $3.1 million for the three months ended June 30, 2014, an increase of $1.9 million. Included within the expenses for the three months ended June 30, 2015 was $2.5 million of finance expenses relating to the raising of third party capital.
•
For the three months ended June 30, 2015, there was an accounting loss of $1.8 million on the deconsolidation of one of the ILS funds.
•
Validus' share of PaCRe's net realized and unrealized investment gains for the three months ended June 30, 2015 were $1.7 million, compared to $3.7 million for the three months ended June 30, 2014, a decrease of $2.0 million.
Highlights for the year to date include the following:
•
Management fees earned from third parties for the six months ended June 30, 2015 were $8.9 million, compared to $10.1 million for the six months ended June 30, 2014, a decrease of $1.2 million.
•
The AlphaCat sidecars and ILS funds contributed $10.7 million of income for the six months ended June 30, 2015, compared to $14.8 million for the six months ended June 30, 2014, a decrease of $4.1 million.
•
Total expenses for the six months ended June 30, 2015 were $12.0 million, compared to $6.1 million for the six months ended June 30, 2014, an increase of $5.9 million.
•
PaCRe contributed $0.1 million of net operating income for the six months ended June 30, 2015, compared to $0.3 million for the six months ended June 30, 2014, a decrease of $0.2 million.
•
For the six months ended June 30, 2015, there was an accounting loss of $1.8 million on the deconsolidation of one of the ILS funds compared to an accounting gain on another of the ILS funds of $1.4 million for the six months ended June 30, 2014.
•
Validus' share of AlphaCat net operating income for the six months ended June 30, 2015 was $5.8 million, compared to $20.4 million for the six months ended June 30, 2014, a decrease of $14.6 million.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

6

•
Validus' share of PaCRe's net realized and unrealized investment gains for the six months ended June 30, 2015 were $5.6 million, compared to $8.4 million for the six months ended June 30, 2014, a decrease of $2.7 million.
•
Validus' share of AlphaCat net income for the six months ended June 30, 2015 was $11.4 million, compared to $28.8 million for the six months ended June 30, 2014, a decrease of $17.3 million.
(1) Please refer to pages 36 to 40 of the Investor Financial Supplement for further details on the AlphaCat segment.
Western World Segment - Second Quarter 2015 Results
The acquisition of Western World closed on October 2, 2014 and the segment was included in the Company results for the first time in Q4 2014. As such, there are no comparatives for the three or six months ended June 30, 2014.
Highlights for the second quarter include the following:
•
Gross premiums written for the three months ended June 30, 2015 were $79.6 million. Gross premiums written for the three months ended June 30, 2015 included $15.9 million of property premiums and $63.7 million of liability premiums.
•
Net premiums earned for the three months ended June 30, 2015 were $65.1 million.
•
The combined ratio for the three months ended June 30, 2015 was 101.1%.
•
The loss ratio for the three months ended June 30, 2015 was 71.8%. The loss ratio for the three months ended June 30, 2015 included favorable loss reserve development on prior accident years of $4.3 million, benefiting the loss ratio by 6.5 percentage points. Of this, $2.9 million or 4.4 percentage points arose from the amortization of the risk premium adjustment booked at acquisition.
•
Policy acquisition costs for the three months ended June 30, 2015 were $9.6 million. Amortization of the fair value adjustment booked at acquisition favorably impacted policy acquisition costs by approximately $6.6 million or 10.1 percentage points.
•
General and administrative expenses for the three months ended June 30, 2015 were $8.9 million.
•
Net operating income available to Western World for the three months ended June 30, 2015 was $9.0 million.
 
•
Net loss attributable to Western World for the three months ended June 30, 2015 was $1.7 million.

Highlights for the year to date include the following:
•
Gross premiums written for the six months ended June 30, 2015 were $136.5 million. Gross premiums written for the six months ended June 30, 2015 included $25.3 million of property premiums and $111.2 million of liability premiums.

•
Net premiums earned for the six months ended June 30, 2015 were $133.0 million.
•
The combined ratio for the six months ended June 30, 2015 was 99.0%.
•
The loss ratio for the six months ended June 30, 2015 was 73.1%. The loss ratio for the six months ended June 30, 2015 included favorable loss reserve development on prior accident years of $10.6 million, benefiting the loss ratio by 8.0 percentage points. Of this, $6.1 million or 4.6 percentage points arose from the amortization of the risk premium adjustment booked at acquisition.
•
Policy acquisition costs for the six months ended June 30, 2015 were $13.9 million. Amortization of the fair value adjustment booked at acquisition favorably impacted policy acquisition costs by approximately $17.0 million or 12.8 percentage points.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

7

•
General and administrative expenses for the six months ended June 30, 2015 were $19.6 million.
•
Net operating income available to Western World for the six months ended June 30, 2015 was $12.9 million.
 
•
Net income available to Western World for the six months ended June 30, 2015 was $11.6 million.

Corporate Results
Corporate results include executive and board expenses, internal and external audit expenses, interest and costs incurred in connection with the Company's senior notes and junior subordinated deferrable debentures and other costs relating to the Company as a whole.
General and administrative expenses for the three months ended June 30, 2015, net of operating segment eliminations, were $16.2 million compared to $18.8 million for the three months ended June 30, 2014, a decrease of $2.7 million or 14.2%. Share compensation expenses for the three months ended June 30, 2015, net of operating segment eliminations were $3.2 million compared to $3.0 million for the three months ended June 30, 2014, an increase of $0.2 million or 6.6%.
General and administrative expenses for the six months ended June 30, 2015, net of operating segment eliminations, were $30.6 million compared to $35.8 million for the six months ended June 30, 2014, a decrease of $5.2 million, or 14.7%. Share compensation expenses for the six months ended June 30, 2015, net of operating segment eliminations, were $6.1 million compared to $5.3 million for the six months ended June 30, 2014, an increase of $0.7 million, or 13.5%.
Investments
Net investment income for the three months ended June 30, 2015 was $33.6 million compared to $21.3 million for the three months ended June 30, 2014, an increase of $12.3 million, or 57.9%.
Net realized gains on investments for the three months ended June 30, 2015 were $2.2 million compared to $7.9 million for the three months ended June 30, 2014, a decrease of $5.6 million, or 71.4%.
The change in net unrealized losses on investments for the three months ended June 30, 2015 was $(17.5) million compared to gains of $45.4 million for the three months ended June 30, 2014, a decrease of $63.0 million, or 138.6%. The change in net unrealized losses on investments for the three months ended June 30, 2015 included $17.1 million in unrealized gains relating to PaCRe. The amount of PaCRe's net unrealized gains attributable to noncontrolling interest was ($15.4) million for the three months ended June 30, 2015, leaving a net impact to the Company of $1.7 million.
The change in net unrealized gains on investments for the three months ended June 30, 2014 was driven by $31.3 million in unrealized gains relating to PaCRe. The amount of PaCRe's net unrealized gains attributable to noncontrolling interest was ($28.1) million for the three months ended June 30, 2014, leaving a net impact to the Company of $3.1 million.
Net investment income for the six months ended June 30, 2015 was $64.6 million compared to $44.6 million for the six months ended June 30, 2014, an increase of $20.0 million, or 44.8%.
Net realized gains on investments for the six months ended June 30, 2015 were $6.4 million compared to $11.6 million for the six months ended June 30, 2014, a decrease of $5.2 million, or 44.7%.
The change in net unrealized gains on investments for the six months ended June 30, 2015 was $54.7 million compared to $101.1 million for the six months ended June 30, 2014, a decrease of $46.4 million, or 45.9%. The change in net unrealized gains on investments for the six months ended June 30, 2015 was driven by $56.1 million in unrealized gains relating to PaCRe. The amount of PaCRe's net unrealized gains attributable to noncontrolling interest was ($50.5) million for the six months ended June 30, 2015, leaving a net impact to the Company of $5.6 million.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

8

The change in net unrealized gains on investments for the six months ended June 30, 2014 was driven by $77.9 million in unrealized gains relating to PaCRe. The amount of PaCRe's net unrealized gains attributable to noncontrolling interest was ($70.1) million for the six months ended June 30, 2014, leaving a net impact to the Company of $7.8 million.
Shareholders' Equity and Capitalization
As at June 30, 2015, total shareholders' equity was $4.2 billion including $510.1 million of noncontrolling interest. Shareholders' equity available to Validus was $3.7 billion as at June 30, 2015. Book value per diluted common share was $41.43 at June 30, 2015, compared to $41.27 at March 31, 2015. Book value per diluted common share is a non-GAAP financial measure. A reconciliation of this measure to book value per common share is presented at the end of this release.
Total capitalization at June 30, 2015 was $5.0 billion, including $538.0 million of junior subordinated deferrable debentures and $247.4 million of senior notes. Total capitalization available to Validus at June 30, 2015 was $4.4 billion, excluding $510.1 million of noncontrolling interest.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

9

Share Repurchases
For the three months ended June 30, 2015, the number of shares repurchased by the Company was 2.0 million. A summary of the share repurchases made to date under the Company’s previously announced share repurchase program is as follows:
 
 
Share Repurchase Activity
(Expressed in thousands of U.S. dollars except for share and per share information)
 
 
As at March 31, 2015
 
 
 
 
 
 
 
Quarter ended
Effect of share repurchases:
 
(cumulative)
 
April
 
May
 
June
 
June 30, 2015
Aggregate purchase price (a)
 
$
2,289,409

 
$
—

 
$
37,296

 
$
47,819

 
$
85,115

Shares repurchased
 
71,475,993

 
—

 
873,120

 
1,095,722

 
1,968,842

Average price (a)
 
$
32.03

 
$
—

 
$
42.72

 
$
43.64

 
$
43.23

 
 
 
 
 
 
 
 
 
 
 
Estimated cumulative net accretive (dilutive) impact on:
 
 
 
 
 
 
 
 
 
 
Book value per diluted common share (b)
 
 
 
 
 
 
 
4.09

 
 
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, 2015
 
As at July 27, 2015
 
Cumulative to Date Effect
Aggregate purchase price (a)
 
$
2,374,524

 
$
19,335

 
$
2,393,859

Shares repurchased
 
73,444,835

 
429,050

 
73,873,885

Average price (a)
 
$
32.33

 
$
45.06

 
$
32.40

(a) Share transactions are on a trade date basis through July 27, 2015 and are inclusive of commissions.  Average share price is rounded to two decimal places.
 
(b) As the average price per share repurchased during certain periods between 2009 and 2015 was lower than the book value per common share, the repurchase of shares increased the Company's period ending book value per share.

Conference Call
The Company will host a conference call for analysts and investors on July 29, 2015 at 10:00 AM (Eastern) to discuss the second quarter 2015 financial results and related matters. The conference call may be accessed by dialing 1-888-771-4371 (toll-free U.S.) or 1-847-585-4405 (international) and entering the passcode 3986 7298. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through August 12, 2015, by dialing 1-888-843-7419 (toll-free U.S.) or 1-630-652-3042 (international) and entering the passcode 3986 7298.
This conference call will also be available through a live audio webcast accessible through the Investor Relations section of the Company's website located at www.validusholdings.com. A replay of the webcast will be available at the Investor Relations section of the Company's website through August 12, 2015. In addition, a financial supplement relating to the Company's financial results for the three and six months ended June 30, 2015 is available in the Investor Relations section of the Company's website.

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

10

About Validus Holdings, Ltd.
Validus Holdings, Ltd. is a holding company for reinsurance and insurance operating companies and investment advisors including Validus Reinsurance, Ltd. (“Validus Re”), Talbot Holdings Ltd. (“Talbot”), Western World Insurance Group, Inc. (“Western World”) and AlphaCat Managers, Ltd. (“AlphaCat”).
The results of Western World are consolidated from the October 2, 2014 date of acquisition.
Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd's insurance market through Syndicate 1183. Western World is a U.S. specialty lines insurance company focused on excess and surplus lines. AlphaCat is a Bermuda based investment adviser managing capital for third parties and the Group in insurance linked securities and other property catastrophe reinsurance investments.

Contacts:
Investors:
Media:
Validus Holdings, Ltd.
Brunswick Group
Investor.Relations@validusholdings.com
Radina Russell / Josh Gerth
+1-441-278-9000
+1-212-333-3810




Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

11



Validus Holdings, Ltd.
Consolidated Balance Sheets
As at June 30, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
 
June 30, 2015
 
 
December 31, 2014
 
 
 
 
 
 
Assets
 
 
 
 
 
Fixed maturities, at fair value (amortized cost: 2015—$5,462,612; 2014—$5,534,494)
$
5,459,304

 
$
5,532,731

Short-term investments, at fair value (amortized cost: 2015—$1,337,914; 2014—$1,051,222)
 
1,338,051

 
 
1,051,074

Other investments, at fair value (cost: 2015—$901,581; 2014—$879,176)
 
893,707

 
 
813,011

Cash and cash equivalents
 
433,710

 
 
577,240

Restricted cash
 
140,019

 
 
173,003

     Total investments and cash
 
8,264,791

 
 
8,147,059

Investments in affiliates
 
374,121

 
 
261,483

Premiums receivable
 
1,276,020

 
 
707,647

Deferred acquisition costs
 
253,225

 
 
161,295

Prepaid reinsurance premiums
 
161,516

 
 
81,983

Securities lending collateral
 
7,021

 
 
470

Loss reserves recoverable
 
376,665

 
 
377,466

Paid losses recoverable
 
40,198

 
 
38,078

Income taxes recoverable
 
13,787

 
 
—

Deferred tax asset
 
23,079

 
 
23,821

Receivable for investments sold
 
29,131

 
 
18,318

Intangible assets
 
124,092

 
 
126,924

Goodwill
 
196,758

 
 
195,897

Accrued investment income
 
23,894

 
 
24,865

Other assets
 
260,998

 
 
164,633

Total assets
$
11,425,296

 
$
10,329,939

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Reserve for losses and loss expenses
$
3,187,177

 
$
3,234,394

Unearned premiums
 
1,519,491

 
 
990,564

Reinsurance balances payable
 
95,705

 
 
127,128

Securities lending payable
 
7,487

 
 
936

Deferred tax liability
 
8,063

 
 
5,541

Payable for investments purchased
 
105,871

 
 
68,574

Accounts payable and accrued expenses
 
167,776

 
 
318,245

Notes payable to operating affiliates
 
1,381,313

 
 
671,465

Senior notes payable
 
247,360

 
 
247,306

Debentures payable
 
538,032

 
 
539,277

Total liabilities
 
7,258,275

 
 
6,203,430

 
 
 
 
 
 
Commitments and contingent liabilities
 
 
 
 
 
Redeemable noncontrolling interest
 
—

 
 
79,956

 
 
 
 
 
 
Shareholders' equity
 
 
 
 
 
Common shares, 571,428,571 authorized, par value $0.175 (Issued: 2015—158,379,505; 2014—155,554,224; Outstanding: 2015—83,295,795; 2014—83,869,845)
 
27,716

 
 
27,222

Treasury shares (2015—75,083,710; 2014—71,684,379)
 
(13,140
)
 
 
(12,545
)
Additional paid-in-capital
 
1,097,527

 
 
1,207,493

Accumulated other comprehensive (loss)
 
(9,066
)
 
 
(8,556
)
Retained earnings
 
2,553,894

 
 
2,374,344

Total shareholders' equity available to Validus
 
3,656,931

 
 
3,587,958

 
 
 
 
 
 
Noncontrolling interest
 
510,090

 
 
458,595

 
 
 
 
 
 
Total shareholders' equity
 
4,167,021

 
 
4,046,553

 
 
 
 
 
 
Total liabilities, noncontrolling interests and shareholders' equity
$
11,425,296

 
$
10,329,939


Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

12




Validus Holdings, Ltd.
Consolidated Statements of Operations
For the three and six months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
 
Underwriting income
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
726,968

 
$
655,674

 
$
1,846,466

 
$
1,667,665

 
Reinsurance premiums ceded
 
(54,896
)
 
 
(50,565
)
 
 
(245,736
)
 
 
(245,473
)
 
Net premiums written
 
672,072

 
 
605,109

 
 
1,600,730

 
 
1,422,192

 
Change in unearned premiums
 
(98,490
)
 
 
(139,106
)
 
 
(449,394
)
 
 
(473,232
)
 
Net premiums earned
 
573,582

 
 
466,003

 
 
1,151,336

 
 
948,960

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting deductions
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss expenses
 
266,146

 
 
158,745

 
 
507,075

 
 
321,416

 
Policy acquisition costs
 
104,425

 
 
78,953

 
 
203,061

 
 
164,602

 
General and administrative expenses
 
82,963

 
 
73,842

 
 
167,991

 
 
148,287

 
Share compensation expenses
 
9,242

 
 
8,341

 
 
18,296

 
 
15,488

 
Total underwriting deductions
 
462,776

 
 
319,881

 
 
896,423

 
 
649,793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting income
$
110,806

 
$
146,122

 
$
254,913

 
$
299,167

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
33,608

 
 
21,286

 
 
64,629

 
 
44,648

 
Other insurance related income
 
3,148

 
 
4,811

 
 
7,980

 
 
12,848

 
Finance expenses
 
(17,735
)
 
 
(16,126
)
 
 
(37,587
)
 
 
(32,026
)
 
Operating income before taxes, income from operating affiliates and (income) attributable to operating affiliate investors
$
129,827

 
$
156,093

 
$
289,935

 
$
324,637

 
Tax (expense)
 
(2,549
)
 
 
(1,391
)
 
 
(5,114
)
 
 
(1,351
)
 
Income from operating affiliates
 
4,104

 
 
4,892

 
 
6,557

 
 
9,819

 
(Income) attributable to operating affiliate investors
 
(30,879
)
 
 
(25,316
)
 
 
(54,085
)
 
 
(57,026
)
 
Net operating income
$
100,503

 
$
134,278

 
$
237,293

 
$
276,079

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized gains on investments
 
2,244

 
 
7,858

 
 
6,413

 
 
11,598

 
Change in net unrealized (losses) gains on investments
 
(17,530
)
 
 
45,427

 
 
54,674

 
 
101,120

 
Income from investment affiliate
 
284

 
 
779

 
 
3,060

 
 
6,127

 
Foreign exchange (losses) gains
 
(3,236
)
 
 
3,158

 
 
(6,787
)
 
 
(3,320
)
 
Other (loss) income
 
(608
)
 
 
424

 
 
(608
)
 
 
6,217

 
Transaction expenses (a)
 
—

 
 
(3,252
)
 
 
—

 
 
(3,252
)
 
Net income
$
81,657

 
$
188,672

 
$
294,045

 
$
394,569

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (income) attributable to noncontrolling interest
 
(17,644
)
 
 
(35,305
)
 
 
(56,621
)
 
 
(78,814
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income available to Validus
$
64,013

 
$
153,367

 
$
237,424

 
$
315,755

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selected ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Net premiums written / Gross premiums written
 
92.4
%
 
 
92.3
%
 
 
86.7
%
 
 
85.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss expenses
 
46.4
%
 
 
34.1
%
 
 
44.0
%
 
 
33.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy acquisition costs
 
18.2
%
 
 
16.9
%
 
 
17.7
%
 
 
17.3
%
 
General and administrative expenses (a)
 
16.1
%
 
 
17.6
%
 
 
16.2
%
 
 
17.3
%
 
Expense ratio
 
34.3
%
 
 
34.5
%
 
 
33.9
%
 
 
34.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
 
80.7
%
 
 
68.6
%
 
 
77.9
%
 
 
68.5
%
 

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


Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

13



Validus Holdings, Ltd.
Consolidated Segment Operating Income (Loss)
For the three months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
Three Months Ended June 30, 2015
 
Three Months Ended June 30, 2014
 
Validus Re
 
AlphaCat
 
Talbot
 
Western World
 
Corporate and Eliminations
 
Total
 
Validus Re (b)
 
AlphaCat
 
Talbot
 
Corporate and Eliminations (b)
 
Total
Underwriting income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
296,895

 
64,117

 
293,046

 
79,554

 
(6,644
)
 
726,968

 
301,273

 
43,790

 
317,944

 
(7,333
)
 
655,674

Reinsurance premiums ceded
(18,853
)
 
—

 
(37,246
)
 
(5,441
)
 
6,644

 
(54,896
)
 
(21,522
)
 
—

 
(36,376
)
 
7,333

 
(50,565
)
Net premiums written
278,042

 
64,117

 
255,800

 
74,113

 
—

 
672,072

 
279,751

 
43,790

 
281,568

 
—

 
605,109

Change in unearned premiums
(13,492
)
 
(25,641
)
 
(50,362
)
 
(8,995
)
 
—

 
(98,490
)
 
(58,023
)
 
(11,330
)
 
(69,753
)
 
—

 
(139,106
)
Net premiums earned
264,550

 
38,476

 
205,438

 
65,118

 
—

 
573,582

 
221,728

 
32,460

 
211,815

 
—

 
466,003

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting deductions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss expenses
123,405

 
—

 
95,970

 
46,771

 
—

 
266,146

 
77,688

 
(3,033
)
 
84,090

 
—

 
158,745

Policy acquisition costs
43,826

 
3,844

 
47,659

 
9,617

 
(521
)
 
104,425

 
31,125

 
3,056

 
45,593

 
(821
)
 
78,953

General and administrative expenses
18,781

 
3,526

 
35,555

 
8,923

 
16,178

 
82,963

 
17,040

 
3,780

 
34,173

 
18,849

 
73,842

Share compensation expenses
2,396

 
150

 
3,024

 
494

 
3,178

 
9,242

 
2,336

 
161

 
2,862

 
2,982

 
8,341

Total underwriting deductions
188,408

 
7,520

 
182,208

 
65,805

 
18,835

 
462,776

 
128,189

 
3,964

 
166,718

 
21,010

 
319,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting income (loss)
76,142

 
30,956

 
23,230

 
(687
)
 
(18,835
)
 
110,806

 
93,539

 
28,496

 
45,097

 
(21,010
)
 
146,122

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
20,080

 
1,754

 
6,406

 
5,723

 
(355
)
 
33,608

 
16,265

 
829

 
4,671

 
(479
)
 
21,286

Other insurance related
income (loss)
434

 
3,755

 
40

 
276

 
(1,357
)
 
3,148

 
545

 
6,005

 
258

 
(1,997
)
 
4,811

Finance expenses
(3,573
)
 
(2,591
)
 
(87
)
 
—

 
(11,484
)
 
(17,735
)
 
(3,670
)
 
(971
)
 
(68
)
 
(11,417
)
 
(16,126
)
Operating income (loss) before taxes, income from operating affiliates and (income) attributable to operating affiliate investors
93,083

 
33,874

 
29,589

 
5,312

 
(32,031
)
 
129,827

 
106,679

 
34,359

 
49,958

 
(34,903
)
 
156,093

Tax (expense) benefit
(2,745
)
 
—

 
(2,262
)
 
3,734

 
(1,276
)
 
(2,549
)
 
(460
)
 
—

 
(1,364
)
 
433

 
(1,391
)
Income from operating affiliates
—

 
4,104

 
—

 
—

 
—

 
4,104

 
—

 
4,892

 
—

 
—

 
4,892

(Income) attributable to operating affiliate investors
—

 
(30,879
)
 
—

 
—

 
—

 
(30,879
)
 
—

 
(25,316
)
 
—

 
—

 
(25,316
)
Net operating income (loss) (a)
90,338

 
7,099

 
27,327

 
9,046

 
(33,307
)
 
100,503

 
106,219

 
13,935

 
48,594

 
(34,470
)
 
134,278

Net operating (income) attributable to noncontrolling interest
—

 
(2,156
)
 
—

 
—

 
—

 
(2,156
)
 
—

 
(2,094
)
 
—

 
—

 
(2,094
)
Net operating income (loss) available (attributable) to Validus
90,338

 
4,943

 
27,327

 
9,046

 
(33,307
)
 
98,347

 
106,219

 
11,841

 
48,594

 
(34,470
)
 
132,184

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available (attributable) to Validus
76,113

 
5,992

 
18,604

 
(1,689
)
 
(35,007
)
 
64,013

 
124,255

 
14,968

 
52,732

 
(38,588
)
 
153,367


Notes:

(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and change in unrealized gains (losses) on investments, foreign exchange gains (losses), other income (loss), income (loss) from investment affiliate and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business. Net operating income (loss) available (attributable) to Validus is defined as above and includes income (loss) from noncontrolling interests.

(b) During the first quarter of 2015, certain intercompany reinsurance transactions were presented on a net basis for segmental reporting purposes. As a result, gross premiums written and reinsurance premiums ceded for the Validus Re segment and Corporate & Eliminations were reduced by $9,013 for the three months ended June 30, 2014 for comparative purposes. There was no impact to total gross premiums written and reinsurance premiums ceded on a consolidated basis.





Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

14




Validus Holdings, Ltd.
Consolidated Segment Operating Income (Loss)
For the six months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
Six Months Ended June 30, 2015
 
Six Months Ended June 30, 2014
 
Validus Re
 
AlphaCat
 
Talbot
 
Western World
 
Corporate and Eliminations
 
Total
 
Validus Re
 
AlphaCat
 
Talbot
 
Corporate and Eliminations (b)
 
Total
Underwriting income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
1,008,107

 
166,681

 
563,123

 
136,501

 
(27,946
)
 
1,846,466

 
967,436

 
128,137

 
608,639

 
(36,547
)
 
1,667,665

Reinsurance premiums ceded
(132,149
)
 
(4,538
)
 
(128,321
)
 
(8,674
)
 
27,946

 
(245,736
)
 
(151,339
)
 
(3,700
)
 
(126,981
)
 
36,547

 
(245,473
)
Net premiums written
875,958

 
162,143

 
434,802

 
127,827

 
—

 
1,600,730

 
816,097

 
124,437

 
481,658

 
—

 
1,422,192

Change in unearned premiums
(358,320
)
 
(89,472
)
 
(6,775
)
 
5,173

 
—

 
(449,394
)
 
(355,983
)
 
(61,294
)
 
(55,955
)
 
—

 
(473,232
)
Net premiums earned
517,638

 
72,671

 
428,027

 
133,000

 
—

 
1,151,336

 
460,114

 
63,143

 
425,703

 
—

 
948,960

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting deductions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss expenses
236,533

 
(844
)
 
174,098

 
97,288

 
—

 
507,075

 
145,843

 
(10,893
)
 
186,466

 
—

 
321,416

Policy acquisition costs
85,920

 
7,504

 
96,763

 
13,896

 
(1,022
)
 
203,061

 
70,370

 
6,036

 
90,521

 
(2,325
)
 
164,602

General and administrative expenses
38,290

 
7,528

 
72,049

 
19,550

 
30,574

 
167,991

 
35,235

 
7,908

 
69,322

 
35,822

 
148,287

Share compensation expenses
4,974

 
299

 
5,981

 
971

 
6,071

 
18,296

 
4,544

 
151

 
5,444

 
5,349

 
15,488

Total underwriting deductions
365,717

 
14,487

 
348,891

 
131,705

 
35,623

 
896,423

 
255,992

 
3,202

 
351,753

 
38,846

 
649,793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting income (loss)
151,921

 
58,184

 
79,136

 
1,295

 
(35,623
)
 
254,913

 
204,122

 
59,941

 
73,950

 
(38,846
)
 
299,167

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
38,332

 
3,339

 
12,711

 
11,026

 
(779
)
 
64,629

 
34,540

 
1,709

 
9,357

 
(958
)
 
44,648

Other insurance related
income (loss)
749

 
9,526

 
94

 
539

 
(2,928
)
 
7,980

 
1,522

 
15,502

 
275

 
(4,451
)
 
12,848

Finance expenses
(7,444
)
 
(7,107
)
 
(174
)
 
—

 
(22,862
)
 
(37,587
)
 
(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
183,558

 
63,942

 
91,767

 
12,860

 
(62,192
)
 
289,935

 
232,675

 
75,498

 
83,488

 
(67,024
)
 
324,637

Tax (expense) benefit
(865
)
 
—

 
(3,145
)
 
11

 
(1,115
)
 
(5,114
)
 
118

 
—

 
(1,234
)
 
(235
)
 
(1,351
)
Income from operating affiliates
—

 
6,557

 
—

 
—

 
—

 
6,557

 
—

 
9,819

 
—

 
—

 
9,819

(Income) attributable to operating affiliate investors
—

 
(54,085
)
 
—

 
—

 
—

 
(54,085
)
 
—

 
(57,026
)
 
—

 
—

 
(57,026
)
Net operating income (loss) (a)
182,693

 
16,414

 
88,622

 
12,871

 
(63,307
)
 
237,293

 
232,793

 
28,291

 
82,254

 
(67,259
)
 
276,079

Net operating (income) attributable to noncontrolling interest
—

 
(6,110
)
 
—

 
—

 
—

 
(6,110
)
 
—

 
(3,598
)
 
—

 
—

 
(3,598
)
Net operating income (loss) available (attributable) to Validus
182,693

 
10,304

 
88,622

 
12,871

 
(63,307
)
 
231,183

 
232,793

 
24,693

 
82,254

 
(67,259
)
 
272,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available (attributable) to Validus
186,879

 
13,759

 
88,196

 
11,617

 
(63,027
)
 
237,424

 
265,484

 
32,950

 
88,888

 
(71,567
)
 
315,755


Notes:
(a) Net operating income (loss), a non-GAAP financial measure, is defined as net income (loss) excluding net realized and change in unrealized gains (losses) on investments, foreign exchange gains (losses), other income (loss), income (loss) from investment affiliate and non-recurring items. This measure focuses on the underlying fundamentals of our operations without the influence of gains (losses) from the sale of investments, translation of non-U.S.$ currencies, and non-recurring items. Gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-U.S.$ denominated balances are unrelated to our underlying business. Net operating income (loss) available (attributable) to Validus is defined as above and includes income (loss) from noncontrolling interests.

(b) During the first quarter of 2015, certain intercompany reinsurance transactions were presented on a net basis for segmental reporting purposes. As a result, gross premiums written and reinsurance premiums ceded for the Validus Re segment and Corporate & Eliminations were reduced by $21,836 for the six months ended June 30, 2014 for comparative purposes. There was no impact to total gross premiums written and reinsurance premiums ceded on a consolidated basis.


Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

15



Validus Holdings, Ltd.
Non-GAAP Financial Measures Reconciliation
Net Operating Income available to Validus, Net Operating Income per share available to Validus and Annualized Net Operating Return on Average Equity
For the three and six months ended June 30, 2015 and 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
 
June 30,
 
 
June 30,
 
 
June 30,
 
 
2015
 
 
2014
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
Net income available to Validus
$
64,013

 
$
153,367

 
$
237,424

 
$
315,755

Adjustments for:
 
 
 
 
 
 
 
 
 
 
 
Net realized (gains) on investments
 
(2,244
)
 
 
(7,858
)
 
 
(6,413
)
 
 
(11,598
)
Change in net unrealized losses (gains) on investments
 
17,530

 
 
(45,427
)
 
 
(54,674
)
 
 
(101,120
)
(Income) from investment affiliate
 
(284
)
 
 
(779
)
 
 
(3,060
)
 
 
(6,127
)
Foreign exchange losses (gains)
 
3,236

 
 
(3,158
)
 
 
6,787

 
 
3,320

Other loss (income)
 
608

 
 
(424
)
 
 
608

 
 
(6,217
)
Transaction expenses (a)
 
—

 
 
3,252

 
 
—

 
 
3,252

Net income attributable to noncontrolling interest
 
15,488

 
 
33,211

 
 
50,511

 
 
75,216

Net operating income available to Validus
 
98,347

 
 
132,184

 
 
231,183

 
 
272,481

Less: Dividends and distributions declared on outstanding warrants
 
(1,081
)
 
 
(1,552
)
 
 
(2,486
)
 
 
(3,104
)
Net operating income available to Validus, adjusted
$
97,266

 
$
130,632

 
$
228,697

 
$
269,377

 
 
 
 
 
 
 
 
 
 
 
 
Net income per share available to Validus - diluted
$
0.73

 
$
1.61

 
$
2.72

 
$
3.27

Adjustments for:
 
 
 
 
 
 
 
 
 
 
 
Net realized (gains) on investments
 
(0.03
)
 
 
(0.08
)
 
 
(0.07
)
 
 
(0.12
)
Change in net unrealized losses (gains) on investments
 
0.20

 
 
(0.48
)
 
 
(0.63
)
 
 
(1.05
)
(Income) from investment affiliate
 
—

 
 
(0.01
)
 
 
(0.04
)
 
 
(0.06
)
Foreign exchange losses (gains)
 
0.04

 
 
(0.03
)
 
 
0.08

 
 
0.04

Other loss (income)
 
0.01

 
 
—

 
 
—

 
 
(0.07
)
Transaction expenses (a)
 
—

 
 
0.03

 
 
—

 
 
0.03

Net income attributable to noncontrolling interest
 
0.18

 
 
0.35

 
 
0.58

 
 
0.78

Net operating income per share available to Validus - diluted
$
1.13

 
$
1.39

 
$
2.64

 
$
2.82

 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares and common share equivalents
 
87,313,154

 
 
95,276,836

 
 
87,448,142

 
 
96,538,178

 
 
 
 
 
 
 
 
 
 
 
 
Average shareholders' equity available to Validus
$
3,670,020

 
$
3,713,085

 
$
3,642,666

 
$
3,710,088

 
 
 
 
 
 
 
 
 
 
 
 
Annualized net operating return on average equity
 
10.7
%
 
 
14.2
%
 
 
12.7
%
 
 
14.7
%



Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

16



Validus Holdings, Ltd.
Non-GAAP Financial Measures Reconciliation
Book Value per Common Share, Book Value per Diluted Common Share and Book Value per Diluted Common Share plus Accumulated Dividends
As at June 30, 2015 and December 31, 2014
(Expressed in thousands of U.S. dollars, except share and per share information)
 
 
As at June 30, 2015
 
 
Equity Amount
 
Shares
 
Exercise Price
 
Book Value Per Share
Book value per common share
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity available to Validus
 
$
3,656,931

 
 
83,295,795

 
 
 
 
$
43.90

 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible book value per common share
 
 
 
 
 
 
 
 
 
 
 
40.05

 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per diluted common share
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity available to Validus
 
 
3,656,931

 
 
83,295,795

 
 
 
 
 
 
Assumed exercise of outstanding warrants
 
 
59,506

 
 
3,377,320

 
$
17.62

 
 
 
Assumed exercise of outstanding stock options
 
 
3,040

 
 
119,377

 
$
25.46

 
 
 
Unvested restricted shares
 
 
—

 
 
2,980,925

 
 
 
 
 
 
Book value per diluted common share
 
$
3,719,477

 
 
89,773,417

 
 
 
 
$
41.43

Adjustment for accumulated dividends
 
 
 
 
 
 
 
 
 
 
 
9.52

Book value per diluted common share plus accumulated dividends
 
 
 
 
 
 
 
 
 
 
$
50.95

 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible book value per diluted common share
 
 
 
 
 
 
 
 
 
 
 
37.86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As at December 31, 2014
 
 
Equity Amount
 
Shares
 
Exercise Price
 
Book Value Per Share
Book value per common share
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity available to Validus
 
$
3,587,958

 
 
83,869,845

 
 
 
 
$
42.78

 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible book value per common share
 
 
 
 
 
 
 
 
 
 
 
38.93

 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per diluted common share
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity available to Validus
 
 
3,587,958

 
 
83,869,845

 
 
 
 
 
 
Assumed exercise of outstanding warrants
 
 
90,950

 
 
5,174,114

 
$
17.58

 
 
 
Assumed exercise of outstanding stock options
 
 
20,581

 
 
1,160,057

 
$
17.74

 
 
 
Unvested restricted shares
 
 
—

 
 
3,068,564

 
 
 
 
 
 
Book value per diluted common share
 
$
3,699,489

 
 
93,272,580

 
 
 
 
$
39.66

Adjustment for accumulated dividends
 
 
 
 
 
 
 
 
 
 
 
8.88

Book value per diluted common share plus accumulated dividends
 
 
 
 
 
 
 
 
 
 
$
48.54

 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible book value per diluted common share
 
 
 
 
 
 
 
 
 
 
 
36.20



Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

17

Cautionary Note Regarding Forward-Looking Statements
This press release may include forward-looking statements, both with respect to the Company and its industry, that reflect our current views with respect to future events and financial performance. Statements that include the words "expect", "intend", "plan", "believe", "project", "anticipate", "will", "may" and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond the Company's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. We believe that these factors include, but are not limited to, the following: 1) unpredictability and severity of catastrophic events; 2) rating agency actions; 3) adequacy of Validus' risk management and loss limitation methods; 4) cyclicality of demand and pricing in the insurance and reinsurance markets; 5) statutory or regulatory developments including tax policy, reinsurance and other regulatory matters; 6) Validus' ability to implement its business strategy during "soft" as well as "hard" markets; 7) adequacy of Validus' loss reserves; 8) continued availability of capital and financing; 9) retention of key personnel; 10) competition; 11) potential loss of business from one or more major insurance or reinsurance brokers; 12) Validus' ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements; 13) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 14) the integration of businesses Validus may acquire or new business ventures Validus may start; 15) the effect on Validus' investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 16) acts of terrorism or outbreak of war; and 17) availability of reinsurance and retrocessional coverage, as well as management's response to any of the aforementioned factors.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Validus' most recent reports on Form 10-K and Form 10-Q and other documents of the Company on file with or furnished to the U.S. Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Validus will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Validus or its business or operations. Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
In presenting the Company's results, management has included and discussed certain schedules containing net operating income (loss), net operating income (loss) available (attributable) to Validus, net operating income (loss) per share, underwriting income (loss), annualized net operating return on average equity, book value per diluted common share and book value per diluted common share plus accumulated dividends that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of net operating income (loss) to net income (loss), the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Net Operating Income available to Validus, Net Operating Income per share available to Validus and Annualized Net Operating Return on Average Equity”. A reconciliation of underwriting income and operating income to net income, the most comparable U.S. GAAP financial measure, is presented in the “Consolidated Statements of Operations” above.
Underwriting income indicates the performance of the Company's core underwriting function, excluding revenues and expenses such as net investment income (loss), other insurance related income (loss), finance expenses, net realized and change in unrealized gains (losses) on investments, foreign exchange gains (losses), other income (loss) and transaction expenses. The Company believes the reporting of underwriting income enhances the understanding of our results by highlighting the underlying profitability of the Company's core insurance and reinsurance business. Underwriting profitability is influenced significantly by earned premium growth, adequacy of the Company's pricing and loss frequency and severity.
Underwriting profitability over time is also influenced by the Company's underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability

Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

18

to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses. The Company believes that underwriting income provides investors with a valuable measure of profitability derived from underwriting activities.
Annualized net operating return on average equity is presented in the section above entitled “Net Operating Income available to Validus, Net Operating Income per share available to Validus and Annualized Net Operating Return on Average Equity.” A reconciliation of book value per diluted common share and book value per diluted common share plus accumulated dividends to book value per common share, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Book Value per Common Share, Book Value per Diluted Common Share and Book Value per Diluted Common Share plus Accumulated Dividends.” Net operating income (loss) is calculated based on net income (loss) excluding net realized gains (losses) on investments, change in net unrealized gains (losses) on investments, foreign exchange gains (losses), other income (loss), income (loss) from investment affiliates and non-recurring items. Realized gains (losses) from the sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non-US$ denominated balances are unrelated to our underlying business. Net operating income (loss) available (attributable) to Validus is defined as net operating income (loss) as defined above, but excluding income (loss) available (attributable) to noncontrolling interest.



Validus Holdings, Ltd. 29 Richmond Road, Pembroke, Bermuda HM08
Tel: +1-441.278.9000 Fax: +1-441.278.9090
www.validusholdings.com

19
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