Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR)
today reported a net (loss) attributable to Validus common
shareholders of $(250.4) million, or $(3.17) per diluted common
share, for the three months ended September 30, 2017, compared
to net income available to Validus common shareholders of $89.8
million, or $1.11 per diluted common share, for the three months
ended September 30, 2016.
Net operating (loss) attributable to Validus common shareholders
was $(254.5) million, or $(3.22) per diluted common share, for the
three months ended September 30, 2017, compared to net
operating income available to Validus common shareholders of $83.0
million, or $1.02 per diluted common share, for the three months
ended September 30, 2016.
Book value per common share at September 30, 2017 was
$44.51, compared to $47.93 at June 30, 2017. Book value per
diluted common share at September 30, 2017 was $43.13,
compared to $46.45 at June 30, 2017, reflecting a quarterly
decrease of (6.3)%, inclusive of common dividends.
Commenting on the results for the three months ended
September 30, 2017, Validus’ Chairman and CEO Ed Noonan
stated:
“We incurred a $254.5 million operating loss in the quarter
which is equal to $3.22 per diluted share, or a 6.3% decline in
diluted book value per share inclusive of dividends. While results
of operations were negative, I am gratified with this outcome which
is the result of world class underwriting, risk, financial and
operational management throughout our global businesses. Despite
significant natural catastrophes we close the quarter with a very
strong balance sheet and a belief that the quarter’s results across
the industry have enhanced our competitive position.”
(Loss) income (attributable) available to Validus common
shareholders by segment for the three months ended
September 30, 2017 and September 30, 2016 was as
follows:
Three Months Ended September
30,
(Expressed in
millions of U.S. dollars, except per share
information)
2017 2016 Validus Re - Underwriting
(loss) income $ (140.8 ) $ 67.1 Talbot - Underwriting (loss) income
(65.0 ) 7.3 Western World - Underwriting (loss) (24.8 ) (2.7 )
Validus’ share of AlphaCat (loss) income (27.6 ) 11.2
Total segmental (loss) income (258.2 )
82.9 Total managed investment return (a) 39.9 50.3 Corporate
expenses (31.0 ) (40.7 ) Other items and eliminations (1.1 ) (2.7 )
Net (loss) income (attributable) available to Validus common
shareholders $ (250.4 ) $
89.8 Net (loss) income per diluted share
(attributable) available to Validus common shareholders
$ (3.17 ) $ 1.11 Net
operating (loss) income (attributable) available to Validus common
shareholders (b) $ (254.5 )
$ 83.0 Net operating (loss) income per
diluted share (attributable) available to Validus common
shareholders(b) $ (3.22 ) $
1.02 (a) Total managed investment
return includes returns generated on managed assets governed by the
Company’s investment policy statement (“IPS”) and excludes returns
on non-managed assets held in support of consolidated AlphaCat
variable interest entities which are not governed by the Company’s
IPS. (b) Net operating (loss) income (attributable) available to
Validus common shareholders is presented after tax and is
considered a non-GAAP financial measure. A reconciliation of net
(loss) income (attributable) available to Validus common
shareholders, the most comparable GAAP measure, to net operating
(loss) income (attributable) available to Validus common
shareholders is presented at the end of this release.
This earnings release should be read in conjunction with the
Company’s third quarter 2017 investor financial supplement that has
been posted to the Investors section of the Company’s website
located at www.validusholdings.com.
Third Quarter 2017
Results
In accordance with U.S. GAAP, the results of AlphaCat, inclusive
of results attributable to AlphaCat’s third party investors and
noncontrolling interests, have been included in the Company’s
consolidated results of operations. The breakdown of results by
segment is presented on page 15 of this release.
Highlights for the third quarter are as follows:
- Gross premiums written for the three
months ended September 30, 2017 were $523.9 million compared
to $372.4 million for the three months ended September 30,
2016, an increase of $151.4 million, or 40.7%. The increase was
primarily driven by increases in the Western World, Validus Re and
AlphaCat segments.
- Reinsurance premiums ceded for the
three months ended September 30, 2017 were $116.9 million
compared to $45.0 million for the three months ended
September 30, 2016, an increase of $71.9 million or 159.7%.
The increase was primarily driven by an increase in the Western
World, Validus Re and Talbot segments.
- Net premiums earned for the three
months ended September 30, 2017 were $723.2 million compared
to $563.8 million for the three months ended September 30,
2016, an increase of $159.4 million, or 28.3%. The increase was
primarily driven by an increase in the Western World, Validus Re
and AlphaCat segments and was partially offset by a decrease in the
Talbot segment.
- The loss ratio for the three months
ended September 30, 2017 and September 30, 2016 was
173.5% and 45.8%, respectively, and included the following:
- Notable losses of $926.2 million, or
128.1 percentage points of the loss ratio during the three months
ended September 30, 2017 compared to $1.0 million, or 0.2
percentage points of the loss ratio during the three months ended
September 30, 2016.
- Excluding the AlphaCat segment, which
includes results attributable to AlphaCat’s third party investors
and noncontrolling interests, notable losses for the three months
ended September 30, 2017 were $365.1 million, or 58.7
percentage points of the loss ratio. Including Validus’ share of
AlphaCat net losses and loss expenses of $35.7 million, Validus’
share of net losses and loss expenses from third quarter 2017
notable loss events was $400.8 million;
- Non-notable losses of $nil during the
three months ended September 30, 2017 compared to $21.6
million, or 3.8 percentage points of the loss ratio during the
three months ended September 30, 2016; and
- Favorable loss reserve development on
prior accident years of $75.1 million during the three months ended
September 30, 2017, which benefited the loss ratio by 10.4
percentage points compared to favorable development of $52.9
million during the three months ended September 30, 2016,
which benefited the loss ratio by 9.4 percentage points. The
favorable development of $75.1 million for the three months ended
September 30, 2017 was driven by favorable development on
attritional and event losses of $58.9 million and $16.2 million,
respectively.
- The combined ratio for the three months
ended September 30, 2017 and 2016 was 200.5% and 82.4%,
respectively, an increase of 118.1 percentage points. Excluding the
AlphaCat segment, which includes results attributable to AlphaCat’s
third party investors and noncontrolling interests, the combined
ratio for the three months ended September 30, 2017 was
138.8%, including a loss ratio of 110.0%.
- Managed net investment income from our
managed investment portfolio for the three months ended
September 30, 2017 was $37.1 million compared to $41.1 million
for the three months ended September 30, 2016, a decrease of
$4.0 million, or 9.7%.
- The annualized return on average equity
was (27.3)% for the three months ended September 30, 2017,
compared to 9.7% for the three months ended September 30,
2016. The annualized net operating return on average equity was
(27.7)% for the three months ended September 30, 2017,
compared to 8.9% for the three months ended September 30,
2016.
Notable and Non-Notable
Losses
The Company defines a notable loss event as an event whereby
consolidated net losses and loss expenses aggregate to a threshold
greater than or equal to $30.0 million. The Company defines a
non-notable loss event as an event whereby consolidated net losses
and loss expenses aggregate to a threshold greater than or equal to
$15.0 million but less than $30.0 million.
During the three months ended September 30, 2017 the
Company incurred losses and loss expenses from notable loss events
Hurricane Harvey, Hurricane Irma, and Hurricane Maria as described
below:
Hurricane Harvey (Dollars in thousands)
Validus Re Talbot
WesternWorld
Interco Total
Gross losses and loss expenses
excluding the Alphacatsegment
$ 277,643 $ 61,426 $
100,725 $ (475 ) $
439,319 Less: Reinsurance recoveries (170,018 ) (27,047 )
(95,725 ) 475 (292,315 )
Net losses and loss expenses
excluding the AlphaCat segment $ 107,625 $
34,379 $ 5,000 $ — $
147,004 Validus’ share of AlphaCat net losses and loss
expenses — — — — 7,298
Validus’ share of net losses and loss expenses
107,625 34,379 5,000 — 154,302
Less: Net impact on premiums earned (a) (18,602 ) 789 9,872
— (7,941 )
Net loss attributable to Validus
$ 89,023 $ 35,168
$ 14,872 $ — $
146,361 Hurricane Irma (Dollars in
thousands) Validus Re Talbot
WesternWorld
Interco Total
Gross losses and loss expenses
excluding the Alphacatsegment
$ 334,583 $ 74,301 $
12,200 $ (1,168 ) $
419,916 Less: Reinsurance recoveries (206,637 ) (42,304 )
(7,200 ) 1,168 (254,973 )
Net losses and loss expenses
excluding the AlphaCat segment $ 127,946 $
31,997 $ 5,000 $ — $
164,943 Validus’ share of AlphaCat net losses and loss
expenses — — — — 20,992
Validus’ share of net losses and loss expenses
127,946 31,997 5,000 — 185,935
Less: Net impact on premiums earned (a) (27,309 ) 4,623 —
— (22,686 )
Net loss attributable to Validus
$ 100,637 $ 36,620
$ 5,000 $ — $
163,249 Hurricane Maria (Dollars in
thousands) Validus Re Talbot
WesternWorld
Interco Total
Gross losses and loss expenses
excluding the Alphacatsegment
$ 114,178 $ 29,713 $ —
$ (838 ) $ 143,053 Less:
Reinsurance recoveries (76,392 ) (14,308 ) — 838
(89,862 )
Net losses and loss expenses excluding the AlphaCat
segment $ 37,786 $ 15,405 $
— $ — $ 53,191 Validus’ share of
AlphaCat net losses and loss expenses — — — —
7,360
Validus’ share of net losses and loss
expenses 37,786 15,405 — —
60,551 Less: Net impact on premiums earned (a) (4,254 )
1,389 — — (2,865 )
Net loss attributable to
Validus $ 33,532 $ 16,794
$ — $ — $
57,686 Total Notable Loss Events
(Dollars in thousands) Validus Re Talbot
WesternWorld
Interco Total
Gross losses and loss expenses
excluding the Alphacatsegment
$ 726,404 $ 165,440 $
112,925 $ (2,481 ) $
1,002,288 Less: Reinsurance recoveries (453,047 ) (83,659 )
(102,925 ) 2,481 (637,150 )
Net losses and loss expenses
excluding the AlphaCat segment $ 273,357 $
81,781 $ 10,000 $ — $
365,138 Validus’ share of AlphaCat net losses and loss
expenses — — — — 35,650
Validus’ share of net losses and loss expenses
273,357 81,781 10,000 — 400,788
Less: Net impact on premiums earned (a) (50,165 ) 6,801
9,872 — (33,492 )
Net loss attributable to
Validus $ 223,192 $ 88,582
$ 19,872 $ —
$ 367,296
(a) Net impact on premiums earned includes reinstatement
premiums assumed and ceded and the net impact of accelerating
unearned premiums assumed and ceded.
During the three months ended September 30, 2016, the
Company incurred net losses and loss expenses from notable and
non-notable loss events of $1.0 million and $21.6 million,
respectively. Net of reinstatement premiums, the net loss
attributable to the Company from the notable and non-notable loss
events was $1.0 million and $20.4 million, respectively.
The Company’s loss ratio, excluding the impact of losses and
loss expenses incurred from notable and non-notable loss events and
the change in prior accident years, for the three months ended
September 30, 2017 and 2016 was 55.8% and 51.2%,
respectively.
Validus Re Segment
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2017 were $153.9 million compared
to $94.7 million for the three months ended September 30,
2016, an increase of $59.1 million, or 62.4%. Gross premiums
written for the three months ended September 30, 2017 included
$117.7 million of property premiums, $1.2 million of marine
premiums and $35.0 million of specialty premiums, compared to $53.8
million of property premiums, $(4.5) million of marine premiums and
$45.5 million of specialty premiums for the three months ended
September 30, 2016. Excluding the impact of reinstatement
premiums from third quarter 2017 notable loss events which impacted
the property and marine lines by $59.1 million and $6.7 million,
respectively, gross premiums written for the three months ended
September 30, 2017 were $88.1 million, a decrease of $6.6
million, or 7.0% compared to the three months ended
September 30, 2016. The decrease was primarily driven by a
decrease in the specialty lines of $10.5 million due to the timing
of renewals on certain programs and adjustments to existing
business and was partially offset by an increase in the property
lines of $4.8 million.
- Reinsurance premiums ceded for the
three months ended September 30, 2017 were $41.0 million
compared to $16.0 million for the three months ended
September 30, 2016, an increase of $25.0 million or 156.7%.
The increase was primarily driven by an increase in the property
lines of $15.1 million as a result of new retrocession coverage
purchased following third quarter 2017 notable loss events and an
increase in the specialty lines of $12.1 million relating to a new
casualty and mortgage quota share retrocession program.
- Net premiums earned for the three
months ended September 30, 2017 were $267.0 million compared
to $228.5 million for the three months ended September 30,
2016, an increase of $38.6 million or 16.9%. Excluding the net
impact of reinstatement premiums and the acceleration of net
unearned premiums ceded from third quarter 2017 notable loss events
of $50.2 million, net premiums earned were $216.9 million, a
decrease of $11.6 million, or 5.1% compared to the three months
ended September 30, 2016.
- The loss ratio for the three months
ended September 30, 2017 and September 30, 2016 was
130.1% and 43.1%, respectively, and included the following:
- Notable losses of $273.4 million, or
102.4 percentage points of the loss ratio during the three months
ended September 30, 2017 compared to $nil during the three
months ended September 30, 2016;
- Non-notable losses of $nil during the
three months ended September 30, 2017 compared to $10.4
million, or 4.5 percentage points of the loss ratio during the
three months ended September 30, 2016; and
- Favorable loss reserve development on
prior accident years of $48.1 million during the three months ended
September 30, 2017, which benefited the loss ratio by 18.0
percentage points compared to favorable development of $33.0
million during the three months ended September 30, 2016,
which benefited the loss ratio by 14.5 percentage points. The
favorable development of $48.1 million for the three months ended
September 30, 2017 included favorable development on
attritional and event losses of $30.5 million and $17.6 million,
respectively.
- General and administrative expenses for
the three months ended September 30, 2017 were $12.4 million
compared to $17.5 million for the three months ended
September 30, 2016, a decrease of $5.1 million or 29.0%. The
decrease was driven by a reduction in the bonus accrual during the
three months ended September 30, 2017.
- The combined ratio for the three months
ended September 30, 2017 and 2016 was 152.8% and 70.7%,
respectively, an increase of 82.1 percentage points.
- Underwriting (loss) for the three
months ended September 30, 2017 was $(140.8) million compared
to income of $67.1 million for the three months ended
September 30, 2016, a decrease of $207.9 million.
Talbot Segment
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2017 were $192.9 million compared
to $189.7 million for the three months ended September 30,
2016, an increase of $3.2 million, or 1.7%. Gross premiums written
for the three months ended September 30, 2017 included $68.8
million of property premiums, $39.2 million of marine premiums and
$84.9 million of specialty premiums compared to $64.3 million of
property premiums, $48.1 million of marine premiums and $77.3
million of specialty premiums for the three months ended
September 30, 2016. Excluding the impact of reinstatement
premiums from third quarter 2017 notable loss events of $3.0
million, gross premiums written for the three months ended
September 30, 2017 were $189.9 million, an increase of $0.2
million, or 0.1% compared to the three months ended
September 30, 2016.
- Reinsurance premiums ceded for the
three months ended September 30, 2017 were $36.5 million
compared to $22.9 million for the three months ended
September 30, 2016, an increase of $13.6 million or 59.4%.
Excluding the impact of reinstatement premiums ceded from third
quarter 2017 notable loss events of $9.8 million, reinsurance
premiums ceded for the three months ended September 30, 2017
were $26.7 million, an increase of $3.8 million, or 16.5% compared
to the three months ended September 30, 2016. The increase was
primarily driven by new reinsurance coverage purchased following
third quarter 2017 notable loss events.
- Net premiums earned for the three
months ended September 30, 2017 were $179.6 million compared
to $199.1 million for the three months ended September 30,
2016, a decrease of $19.4 million or 9.8%. Excluding the impact of
net reinstatement premiums ceded from third quarter 2017 notable
loss events of $6.8 million, net premiums earned were $186.4
million, a decrease of $12.6 million, or 6.4% compared to the three
months ended September 30, 2016.
- The loss ratio for the three months
ended September 30, 2017 and September 30, 2016 was 99.3%
and 55.2%, respectively, and included the following:
- Notable losses of $81.8 million, or
45.5 percentage points of the loss ratio during the three months
ended September 30, 2017 compared to $nil during the three
months ended September 30, 2016;
- Non-notable losses of $nil during the
three months ended September 30, 2017 compared to $11.3
million, or 5.7 percentage points of the loss ratio during the
three months ended September 30, 2016;
- Losses of $10.8 million, or 6.0
percentage points of the loss ratio, arising from the Mexico City
Earthquake occurring during the three months ended
September 30, 2017, and
- Favorable loss reserve development on
prior accident years of $23.6 million during the three months ended
September 30, 2017, which benefited the loss ratio by 13.1
percentage points compared to favorable development of $18.7
million during the three months ended September 30, 2016,
which benefited the loss ratio by 9.4 percentage points. The
favorable development of $23.6 million for the three months ended
September 30, 2017 was primarily due to favorable development
on attritional losses.
- General and administrative expenses for
the three months ended September 30, 2017 were $23.1 million
compared to $32.3 million for the three months ended
September 30, 2016, a decrease of $9.3 million or 28.7%. The
decrease was driven by a reduction in the bonus accrual during the
three months ended September 30, 2017.
- The combined ratio for the three months
ended September 30, 2017 and 2016 was 136.6% and 96.4%,
respectively, an increase of 40.2 percentage points.
- Underwriting (loss) for the three
months ended September 30, 2017 was $(65.0) million compared
to income of $7.3 million for the three months ended
September 30, 2016, a decrease of $72.3 million.
Western World Segment
Highlights for the third quarter include the following:
- Gross premiums written for the three
months ended September 30, 2017 were $156.5 million compared
to $85.3 million for the three months ended September 30,
2016, an increase of $71.3 million, or 83.6%. Gross premiums
written for the three months ended September 30, 2017 included
$36.4 million of property premiums, $68.4 million of liability
premiums and $51.8 million of specialty premiums, compared to $23.8
million of property premiums, $61.5 million of liability premiums
and $nil specialty premiums for the three months ended
September 30, 2016. The increase in the property and liability
lines of $12.6 million and $6.9 million, respectively, was
primarily due to the continued build out of product offerings in
the short-tail property lines. Also contributing to the increase in
the liability lines was an increase in the programs and contract
liability lines which was partially offset by decreases resulting
from the discontinuation of other underperforming general liability
lines. The increase in the specialty lines of $51.8 million was due
to new agriculture business written through Crop Risk Services
(“CRS”).
- Reinsurance premiums ceded for the
three months ended September 30, 2017 were $43.2 million
compared to $6.2 million for the three months ended
September 30, 2016, an increase of $37.0 million. The increase
was primarily driven by an increase in ceded agriculture premiums
relating to new business written through CRS, reinstatement
premiums ceded from third quarter 2017 notable loss events and new
reinsurance coverage purchased following third quarter 2017 notable
loss events.
- The loss ratio for the three months
ended September 30, 2017 and September 30, 2016 was 90.2%
and 64.6%, respectively, and included the following:
- Specialty losses of $84.8 million
during the three months ended September 30, 2017 arising from
new crop business written through CRS which is booked at an 85.9%
loss ratio;
- Notable losses of $10.0 million, or 5.7
percentage points of the loss ratio during the three months ended
September 30, 2017 compared to $nil during the three months
ended September 30, 2016;
- Other U.S.-based weather losses of $1.3
million, or 0.7 percentage points of the loss ratio during the
three months ended September 30, 2017, compared to $3.0
million, or 4.3 percentage points of the loss ratio during the
three months ended September 30, 2016;
- Favorable loss reserve development on
prior accident years of $0.1 million during the three months ended
September 30, 2017 compared to favorable development of $0.9
million during the three months ended September 30, 2016.
- General and administrative expenses for
the three months ended September 30, 2017 were $21.6 million
compared to $10.2 million for the three months ended
September 30, 2016, an increase of $11.4 million, or 111.9%.
General and administrative expenses for the three months ended
September 30, 2017 included $12.0 million of CRS expenses, of
which $1.7 million related to the amortization of intangible assets
acquired and was partially offset by a reduction in the bonus
accrual during the three months ended September 30, 2017.
- The combined ratio for the three months
ended September 30, 2017 and 2016 was 114.5% and 104.1%,
respectively, an increase of 10.4 percentage points.
- Underwriting (loss) for the three
months ended September 30, 2017 was $(24.8) million compared
to $(2.7) million for the three months ended September 30,
2016, an increase of $22.1 million.
AlphaCat Segment
Highlights for the third quarter include the following:
- AlphaCat’s assets under management were
$2.9 billion as at October 1, 2017 compared to $3.1 billion as
at July 1, 2017, of which third party assets under management
were $2.7 billion as at October 1, 2017 compared to $2.9
billion as at July 1, 2017. During the three months ended
October 1, 2017, a total of $176.5 million was raised from
third parties. During the three months ended October 1, 2017,
$90.5 million was returned to investors, of which $83.2 million was
returned to third party investors.
- Fee revenues earned for the three
months ended September 30, 2017 were $5.6 million, of which
$5.1 million were earned from third parties, compared to $8.4
million for the three months ended September 30, 2016, of
which $7.0 million were earned from third parties. The decrease in
fee revenues earned from third parties of $1.9 million was driven
by a decrease in performance fees as a result of the third quarter
2017 notable loss events and was partially offset by an increase in
management fees as a result of an increase in assets under
management over the last twelve months.
- Total expenses for the three months
ended September 30, 2017 were $3.1 million compared to $3.3
million for the three months ended September 30, 2016, a
decrease of $0.2 million, or 5.1%. The decrease was driven by a
reduction in the bonus accrual during the three months ended
September 30, 2017.
- Income before investment (loss) income
from AlphaCat Funds and Sidecars, comprising fee revenues less
total expenses, for the three months ended September 30, 2017
was $2.5 million compared to $5.1 million for the three months
ended September 30, 2016, a decrease of $2.7 million.
- Validus’ share of investment (losses)
from AlphaCat Funds and Sidecars for the three months ended
September 30, 2017 was $(30.1) million compared to income of
$6.0 million for the three months ended September 30, 2016, a
decrease of $36.1 million. The decrease was driven by the third
quarter 2017 notable loss events.
- Validus’ share of AlphaCat (losses) for
the three months ended September 30, 2017 was $(27.6) million
compared to income of $11.2 million for the three months ended
September 30, 2016, a decrease of $38.8 million.
Investments
Highlights of our managed investment portfolio for the third
quarter include the following:
- Managed net investment income from our
managed investment portfolio for the three months ended
September 30, 2017 was $37.1 million compared to $41.1 million
for the three months ended September 30, 2016, a decrease of
$4.0 million, or 9.7%. The decrease was primarily due to an
outsized gain in one of the Company’s fixed income funds during the
three months ended September 30, 2016.
- Annualized effective yield for the
three months ended September 30, 2017 was 2.23%, compared to
2.58% for the three months ended September 30, 2016, a
decrease of 35 basis points.
- Net realized gains on managed
investments for the three months ended September 30, 2017 were $0.9
million compared to $4.1 million for the three months ended
September 30, 2016, an unfavorable movement of $3.2 million or
77.9%.
- The change in net unrealized gains on
managed investments for the three months ended September 30, 2017
was $0.9 million compared to $4.7 million for the three months
ended September 30, 2016, an unfavorable movement of $3.7 million,
or 79.8%.
Corporate Expenses and Other
Items
Highlights for the third quarter include the following:
- General and administrative expenses for
the three months ended September 30, 2017 were $9.5 million
compared to $18.2 million for the three months ended
September 30, 2016, a decrease of $8.7 million or 47.6%. The
decrease was driven by a reduction in the bonus accrual during the
three months ended September 30, 2017.
- Share compensation expenses for the
three months ended September 30, 2017 were $4.0 million
compared to $4.0 million for the three months ended
September 30, 2016.
- Finance expenses, excluding the
Company's share of AlphaCat finance expenses from consolidated
VIEs, for the three months ended September 30, 2017 were $14.4
million compared to $14.3 million for the three months ended
September 30, 2016, an increase of $0.1 million or 0.9%.
- Dividends paid on preferred shares
during the three months ended September 30, 2017 were $5.6
million compared to $2.3 million during the three months ended
September 30, 2016, an increase of $3.4 million, or 149.9% due
to $250.0 million of new preferred shares issued during the second
quarter of 2017.
- Foreign exchange losses for the three
months ended September 30, 2017 were $1.5 million compared to
$1.1 million for the three months ended September 30, 2016, an
increase of $0.4 million, or 40.1%.
Shareholders’ Equity and
Capitalization
As at September 30, 2017, total shareholders’ equity was
$4.0 billion including $78.9 million of noncontrolling interest and
$400.0 million of preferred shares. Shareholders’ equity available
to Validus common shareholders was $3.5 billion as at
September 30, 2017. Book value per common share was $44.51 at
September 30, 2017 based on 79,457,253 common shares, compared
to $47.93 at June 30, 2017 based on 79,518,581 common shares.
Book value per diluted common share was $43.13 at
September 30, 2017 based on 82,001,606 diluted common shares,
compared to $46.45 at June 30, 2017 based on 82,075,276
diluted common shares, a decrease of (6.3)%, inclusive of dividends
for the three months ended September 30, 2017. Book value per
diluted common share is a non-GAAP financial measure. A
reconciliation of book value per common share, the most comparable
GAAP measure, to book value per diluted common share is presented
at the end of this release.
Total capitalization available to Validus at September 30,
2017 was $4.7 billion, including $538.9 million of junior
subordinated deferrable debentures and $245.5 million of senior
notes. Total capitalization at September 30, 2017 was $5.9
billion, including $1.1 billion of redeemable noncontrolling
interest and $78.9 million of noncontrolling interest related to
AlphaCat.
Share Repurchases
The Company repurchased 83,859 common shares during the three
months ended September 30, 2017. A summary of the common share
repurchases made to date under the Company’s previously announced
share repurchase programs is as follows:
Share Repurchase Activity(Expressed in
thousands of U.S. dollars except for share and per share
information) As at June 30, 2017
Quarter ended
(cumulative) July August September
September 30, 2017 Aggregate purchase price (a) $ 2,718,402
$ 2,737 $ 1,610 $ — $ 4,347 Shares repurchased 80,776,802 52,721
31,138 — 83,859 Average share price (a) $ 33.65 $ 51.91 $ 51.71 $ —
$ 51.84
Share Repurchase Activity
(Expressed in thousands of U.S. dollars
except for share and per share information)
As at September 30, 2017 As at October 25,
2017
Cumulative to Datethrough
October 25, 2017
Aggregate purchase price (a) $ 2,722,749 $ — $ 2,722,749 Shares
repurchased 80,860,661 — 80,860,661 Average share price (a) $ 33.67
$ — $ 33.67
(a) Share transactions are on a trade date basis through
October 25, 2017 and are inclusive of
commissions. Average share price is rounded to two decimal
places.
Year to Date 2017
Results
Highlights for the year to date include the following:
- Gross premiums written for the nine
months ended September 30, 2017 were $2,507.6 million compared
to $2,309.3 million for the nine months ended September 30,
2016, an increase of $198.4 million, or 8.6%.
- Reinsurance premiums ceded for the nine
months ended September 30, 2017 were $373.2 million compared
to $249.1 million for the nine months ended September 30,
2016, an increase of $124.1 million, or 49.8%.
- Net premiums earned for the nine months
ended September 30, 2017 were $1,929.6 million compared to
$1,708.8 million for the nine months ended September 30, 2016,
an increase of $220.8 million, or 12.9%.
- The loss ratio for the nine months
ended September 30, 2017 and September 30, 2016 was 94.3%
and 46.2%, respectively and included the following:
- Notable losses of $926.2 million, or
48.0 percentage points of the loss ratio during the nine months
ended September 30, 2017 compared to $37.9 million, or 2.2
percentage points of the loss ratio during the nine months ended
September 30, 2016.
- Excluding the AlphaCat segment, which
includes results attributable to AlphaCat’s third party investors
and noncontrolling interests, notable losses for the nine months
ended September 30, 2017 were $365.1 million, or 21.5
percentage points of the loss ratio. Including Validus’ share of
AlphaCat net losses and loss expenses of $35.7 million, Validus’
share of net losses and loss expenses from 2017 notable loss events
was $400.8 million;
- Non-notable losses of $27.3 million, or
1.4 percentage points of the loss ratio during the nine months
ended September 30, 2017 compared to $69.9 million, or 4.1
percentage points of the loss ratio during the nine months ended
September 30, 2016; and
- Favorable loss reserve development on
prior accident years of $179.6 million during the nine months ended
September 30, 2017, which benefited the loss ratio by 9.3
percentage points compared to favorable development of $169.4
million during the nine months ended September 30, 2016, which
benefited the loss ratio by 9.9 percentage points.
- The combined ratio for the nine months
ended September 30, 2017 and 2016 was 126.9% and 82.5%,
respectively, an increase of 44.4 percentage points. Excluding the
AlphaCat segment, which includes results attributable to AlphaCat’s
third party investors and noncontrolling interests, the combined
ratio for the nine months ended September 30, 2017 was 107.7%,
including a loss ratio of 73.5%.
- Managed net investment income from our
managed investment portfolio for the nine months ended
September 30, 2017 was $111.3 million compared to $105.8
million for the nine months ended September 30, 2016, an
increase of $5.5 million, or 5.2%.
- Income from investment affiliates for
the nine months ended September 30, 2017 was $15.7 million
compared to a (loss) of $4.2 million for the nine months ended
September 30, 2016, an increase of $19.9 million.
- The change in net unrealized gains on
managed investments for the nine months ended September 30,
2017 was $31.2 million compared to $81.8 million for the nine
months ended September 30, 2016, an unfavorable movement of
$50.6 million, or 61.8%.
- Net (loss) attributable to Validus
common shareholders for the nine months ended September 30,
2017 was $(54.8) million compared to net income available to
Validus common shareholders of $351.6 million for the nine months
ended September 30, 2016, a decrease of $406.4 million.
- Net operating (loss) attributable to
Validus common shareholders for the nine months ended
September 30, 2017 was $(89.2) million compared to net
operating income available to Validus common shareholders of $262.4
million for the nine months ended September 30, 2016, a
decrease of $351.6 million.
- Annualized return on average equity was
(2.0)% and annualized net operating return on average equity was
(3.2)% for the nine months ended September 30, 2017 compared
to 12.7% and 9.5%, respectively, for the nine months ended
September 30, 2016.
Conference Call
The Company will host a conference call for analysts and
investors on October 27, 2017 at 10:00 AM (Eastern) to discuss
the third quarter 2017 financial results and related matters. The
conference call may be accessed by dialing 1-844-579-6824 (U.S.
callers) or 1-763-488-9145 (international callers) and entering the
passcode 6786 6099. 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 November 10, 2017, by dialing
1-855-859-2056 (U.S. callers) or 1-404-537-3406 (international
callers) and entering the passcode 6786 6099.
This conference call will also be available through a live audio
webcast accessible through the Investors section of the Company’s
website located at www.validusholdings.com. A replay of the webcast
will be available at the Investors section of the Company’s website
through November 10, 2017. In addition, a financial supplement
relating to the Company’s financial results for the three and nine
months ended September 30, 2017 is available in the Investors
section of the Company’s website.
About Validus Holdings,
Ltd.
Validus Holdings, Ltd. (“Validus”) 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”).
Validus Re is a global reinsurance group focused primarily on
treaty reinsurance. Talbot is a specialty (re)insurance group
primarily operating within the Lloyd’s insurance market through
Syndicate 1183. Western World is a U.S. specialty lines insurance
group focused on excess and surplus lines. AlphaCat is a Bermuda
based investment adviser managing capital for third parties and
Validus in insurance linked securities and other property
catastrophe and specialty reinsurance investments.
Validus Holdings, Ltd.
Consolidated Balance Sheets
As at
September 30, 2017 and December 31, 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
September 30, 2017 December 31,
2016 Assets Fixed maturity investments trading, at
fair value (amortized cost: 2017—$5,421,546; 2016—$5,584,599) $
5,419,966 $ 5,543,030 Short-term investments trading, at fair value
(amortized cost: 2017—$2,992,939; 2016—$2,796,358) 2,993,246
2,796,170 Other investments, at fair value (cost: 2017—$439,991;
2016—$380,130) 471,300 405,712 Investments in investment
affiliates, equity method (cost: 2017—$60,228; 2016—$84,840) 92,079
100,431 Cash and cash equivalents 965,630 419,976 Restricted cash
89,403 70,956 Total investments and cash 10,031,624
9,336,275 Premiums receivable 1,569,374 725,390 Deferred
acquisition costs 258,078 209,227 Prepaid reinsurance premiums
207,618 77,996 Securities lending collateral 2,115 9,779 Loss
reserves recoverable 1,335,016 430,421 Paid losses recoverable
77,730 35,247 Income taxes recoverable 9,704 4,870 Deferred tax
asset 52,228 43,529 Receivable for investments sold 37,493 3,901
Intangible assets 173,398 115,592 Goodwill 227,701 196,758 Accrued
investment income 27,976 26,488 Other assets 591,185 134,282
Total assets $ 14,601,240 $ 11,349,755
Liabilities Reserve for losses and loss expenses $
4,935,637 $ 2,995,195 Unearned premiums 1,526,465 1,076,049
Reinsurance balances payable 527,881 54,781 Securities lending
payable 2,581 10,245 Deferred tax liability 4,198 3,331 Payable for
investments purchased 84,431 29,447 Accounts payable and accrued
expenses 478,892 587,648 Notes payable to AlphaCat investors
1,107,618 278,202 Senior notes payable 245,513 245,362 Debentures
payable 538,910 537,226
Total liabilities $
9,452,126 $ 5,817,486
Commitments and contingent
liabilities Redeemable noncontrolling interests
1,133,880 1,528,001
Shareholders’ equity Preferred shares
(Issued and Outstanding: 2017—16,000; 2016—6,000) 400,000 150,000
Common shares (Issued: 2017—161,956,886;
2016—161,279,976; Outstanding: 2017—79,457,253;
2016— 79,132,252)
28,342 28,224 Treasury shares (2017—82,499,633; 2016—82,147,724)
(14,437 ) (14,376 ) Additional paid-in capital 812,266 821,023
Accumulated other comprehensive loss (18,430 ) (23,216 ) Retained
earnings 2,728,546 2,876,636
Total shareholders’
equity available to Validus 3,936,287 3,838,291 Noncontrolling
interests 78,947 165,977
Total shareholders’
equity $ 4,015,234 $ 4,004,268
Total
liabilities, noncontrolling interests and shareholders’ equity
$ 14,601,240 $ 11,349,755
Validus Holdings, Ltd.
Consolidated Statements of (Loss)
Income
For the three and
nine months ended September 30, 2017 and 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended September 30, Nine Months Ended
September 30, 2017 2016
2017 2016
Revenues Gross premiums written $ 523,856 $ 372,418 $
2,507,615 $ 2,309,251 Reinsurance premiums ceded (116,860 ) (45,006
) (373,188 ) (249,070 ) Net premiums written 406,996 327,412
2,134,427 2,060,181 Change in unearned premiums 316,212
236,363 (204,816 ) (351,415 ) Net premiums earned 723,208
563,775 1,929,611 1,708,766 Net investment income 44,458 43,514
128,913 112,232 Net realized gains on investments 906 4,397 2,016
6,537 Change in net unrealized (losses) gains on investments (5,197
) 5,459 24,472 84,331 Income (loss) from investment affiliates
1,011 453 15,665 (4,249 ) Other insurance related income and other
income (loss) 3,571 (610 ) 6,240 1,627 Foreign exchange (losses)
gains (1,404 ) (766 ) (7,164 ) 11,765
Total revenues
766,553 616,222 2,099,753 1,921,009
Expenses Losses and loss expenses 1,254,602 258,394
1,820,336 789,971 Policy acquisition costs 115,590 113,434 344,486
328,593 General and administrative expenses 70,342 82,443 254,615
258,339 Share compensation expenses 9,443 10,501 30,080 32,465
Finance expenses 14,523 14,521 42,675 43,890 Transaction expenses —
— 4,427 —
Total expenses
1,464,500 479,293 2,496,619 1,453,258
(Loss) income before taxes, (loss) from
operating affiliate and loss (income)
attributable to AlphaCat investors
(697,947 ) 136,929 (396,866 ) 467,751 Tax benefit (expense) 2,632
(1,830 ) 7,168 (1,418 ) (Loss) from operating affiliate — — — (23 )
Loss (income) attributable to AlphaCat investors 74,130
(5,564 ) 54,797 (16,278 )
Net (loss) income $
(621,185 ) $ 129,535 $ (334,901 ) $ 450,032 Net loss (income)
attributable to noncontrolling interests 376,366 (37,439 )
290,144 (96,163 )
Net (loss) income (attributable)
available to Validus (244,819 ) 92,096 (44,757 ) 353,869
Dividends on preferred shares (5,627 ) (2,252 ) (10,033 ) (2,252 )
Net (loss) income (attributable)
available to Validus common shareholders
$ (250,446 ) $ 89,844 $ (54,790 ) $ 351,617
Selected ratios: Ratio of net to gross premiums written 77.7
% 87.9 % 85.1 % 89.2 %
Losses and loss expense ratio
(a) 173.5 % 45.8 % 94.3 % 46.2 % Policy acquisition
cost ratio 16.0 % 20.1 % 17.9 % 19.2 % General and administrative
expense ratio (b) 11.0 % 16.5 % 14.7 % 17.1 %
Expense ratio
27.0 % 36.6 % 32.6 % 36.3 %
Combined ratio (a) 200.5
% 82.4 % 126.9 % 82.5 % (a) Excluding the AlphaCat
segment, which includes results attributable to AlphaCat’s third
party investors and noncontrolling interests, the loss and combined
ratios for the three months ended September 30, 2017 were 110.0%
and 138.8%, respectively and 73.5% and 107.7% for the nine months
ended September 30, 2017, respectively. (b) The general and
administrative expense ratio includes share compensation expenses.
Validus Holdings, Ltd.
Segment Information
For the three and
nine months ended September 30, 2017 and 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
Validus Re Segment Three Months Ended September
30, Nine Months Ended September 30, 2017
2016 2017 2016
Underwriting revenues Gross premiums written $ 153,890 $
94,741 $ 1,071,409 $ 1,072,219 Reinsurance premiums ceded (40,988 )
(15,967 ) (161,188 ) (111,658 ) Net premiums written 112,902 78,774
910,221 960,561 Change in unearned premiums 154,145 149,705
(184,155 ) (241,129 )
Net premiums earned 267,047
228,479 726,066 719,432 Other insurance related income (loss) 68
58 204 (107 )
Total underwriting
revenues 267,115 228,537 726,270 719,325
Underwriting deductions Losses and loss expenses
347,484 98,425 538,323 313,432 Policy acquisition costs 45,422
42,837 133,836 127,660 General and administrative expenses 12,444
17,528 48,550 52,579 Share compensation expenses 2,606 2,695
7,746 8,371
Total underwriting
deductions 407,956 161,485 728,455 502,042
Underwriting (loss) income $ (140,841
) $ 67,052 $ (2,185
) $ 217,283 Talbot Segment
Three Months Ended September 30,
Nine Months Ended September 30, 2017
2016 2017 2016 Underwriting
revenues Gross premiums written $ 192,883 $ 189,674 $ 702,535 $
752,058 Reinsurance premiums ceded (36,462 ) (22,877 ) (154,263 )
(137,496 ) Net premiums written 156,421 166,797 548,272 614,562
Change in unearned premiums 23,191 32,258 18,279
(7,166 )
Net premiums earned 179,612 199,055 566,551
607,396 Other insurance related income 692 99 1,512
389
Total underwriting revenues 180,304
199,154 568,063 607,785
Underwriting
deductions Losses and loss expenses 178,440 109,860 378,241
319,271 Policy acquisition costs 41,493 46,488 129,074 134,444
General and administrative expenses 23,069 32,333 97,094 109,929
Share compensation expenses 2,310 3,163 8,292
9,955
Total underwriting deductions 245,312
191,844 612,701 573,599
Underwriting (loss)
income $ (65,008 ) $ 7,310
$ (44,638 ) $ 34,186
Western World Segment Three Months
Ended September 30, Nine Months Ended
September 30, 2017 2016 2017
2016 Underwriting revenues Gross
premiums written $ 156,517 $ 85,260 $ 459,628 $ 236,190 Reinsurance
premiums ceded (43,207 ) (6,202 ) (72,005 ) (15,347 ) Net premiums
written 113,310 79,058 387,623 220,843 Change in unearned premiums
61,603 (8,260 ) 15,256 (22,890 )
Net premiums
earned 174,913 70,798 402,879 197,953 Other insurance related
income 662 219 1,566 696
Total
underwriting revenues 175,575 71,017 404,445
198,649
Underwriting deductions Losses and
loss expenses 157,709 45,748 329,642 129,623 Policy acquisition
costs 20,721 17,094 60,187 46,704 General and administrative
expenses 21,553 10,171 50,623 33,704 Share compensation expenses
354 702 1,655 1,825
Total
underwriting deductions 200,337 73,715 442,107
211,856
Underwriting (loss) $
(24,762 ) $ (2,698 ) $
(37,662 ) $ (13,207 )
Validus Holdings, Ltd.
Segment Information
For the three and
nine months ended September 30, 2017 and 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
AlphaCat Segment Three Months Ended September
30, Nine Months Ended September 30, 2017
2016 2017 2016 Fee
revenues Third party $ 5,095 $ 7,025 $ 15,288 $ 14,843 Related
party 457 1,373 1,732 2,592
Total
fee revenues 5,552 8,398 17,020 17,435
Expenses General and administrative expenses 2,929
3,324 10,322 7,557 Share compensation expenses 183 (107 ) 348 167
Finance expenses 32 31 107 914 Tax (benefit) expense (65 ) — 69 —
Foreign exchange losses 7 5 7 17
Total expenses 3,086 3,253 10,853 8,655
Income before investment (loss) income
from AlphaCat Funds and Sidecars
2,466 5,145 6,167 8,780
Investment
(loss) income from AlphaCat Funds and Sidecars (a)
AlphaCat Sidecars 201 (72 ) 68 593 AlphaCat ILS Funds - Lower Risk
(b) (7,553 ) 2,321 (4,063 ) 6,903 AlphaCat ILS Funds - Higher Risk
(b) (21,816 ) 2,479 (16,849 ) 5,607 BetaCat ILS Funds (922 ) 1,303
(291 ) 2,979 PaCRe — — — (23 )
Validus’ share of investment (loss)
income from AlphaCat Funds and Sidecars
(30,090 ) 6,031 (21,135 ) 16,059
Validus’ share of
AlphaCat (loss) income $ (27,624 )
$ 11,176 $ (14,968 )
$ 24,839 (a) The investment
(loss) income from the AlphaCat funds and sidecars is based on
equity accounting. (b) Lower risk AlphaCat ILS funds have a maximum
permitted portfolio expected loss of less than 7%, whereas higher
risk AlphaCat ILS funds have a maximum permitted portfolio expected
loss of greater than 7%. Expected loss represents the average
annual loss over the set of simulation scenarios divided by the
total limit.
Corporate and
Investments Three Months Ended September 30, Nine
Months Ended September 30, 2017
2016 2017 2016 Managed
investments Managed net investment income (a) $ 37,091 $ 41,071
$ 111,346 $ 105,843 Net realized gains on managed investments (a)
903 4,080 280 5,514 Change in net unrealized gains on managed
investments (a) 941 4,652 31,232 81,782 Income (loss) from
investment affiliates 1,011 453 15,665 (4,249
)
Total managed investment return $ 39,946
$ 50,256 $ 158,523
$ 188,890 Corporate expenses
General and administrative expenses $ 9,539 $ 18,221 $ 45,563 $
52,276 Share compensation expenses 3,990 4,048 12,039 12,147
Finance expenses (a) 14,449 14,317 42,462 42,637 Dividends on
preferred shares 5,627 2,252 10,033 2,252 Tax (benefit) expense (a)
(2,567 ) 1,830 (7,237 ) 1,418
Total Corporate
expenses $ 31,038 $ 40,668
$ 102,860 $ 110,730
Other items Foreign exchange (losses) gains
(a) (1,495 ) (1,067 ) (7,715 ) 11,628 Other income (loss) 35 (1,529
) 303 (773 ) Transaction expenses — — (4,427 ) —
Total other items $ (1,460 )
$ (2,596 ) $ (11,839 )
$ 10,855 Total Corporate and
Investments $ 7,448 $ 6,992
$ 43,824 $ 89,015
(a) These items exclude the components which are
included in Validus’ share of AlphaCat and amounts which are
consolidated from variable interest entities.
Validus Holdings, Ltd.
Segment Information
For the three
months ended September 30, 2017
(Expressed in thousands of U.S. dollars, except share and per share
information)
The following tables reconcile the results of our operating
segments along with our corporate and investments function to the
Consolidated results of the Company for the periods indicated:
Three Months Ended September 30, 2017
Validus ReSegment
TalbotSegment
WesternWorldSegment
AlphaCatSegment
andConsolidatedVIEs
CorporateandInvestments
Eliminations Total
Underwriting revenues Gross premiums written $ 153,890 $
192,883 $ 156,517 $ 27,213 $ — $ (6,647 ) $ 523,856 Reinsurance
premiums ceded (40,988 ) (36,462 ) (43,207 ) (2,850 ) —
6,647 (116,860 ) Net premiums written 112,902 156,421
113,310 24,363 — — 406,996 Change in unearned premiums 154,145
23,191 61,603 77,273 — —
316,212
Net premiums earned 267,047 179,612 174,913
101,636 — — 723,208 Other insurance related income 68 692
662 6,083 — (3,969 ) 3,536
Total underwriting revenues 267,115 180,304
175,575 107,719 — (3,969 ) 726,744
Underwriting deductions Losses and loss expenses 347,484
178,440 157,709 570,969 — — 1,254,602 Policy acquisition costs
45,422 41,493 20,721 8,314 — (360 ) 115,590
General and administrativeexpenses
12,444 23,069 21,553 7,687 9,539 (3,950 ) 70,342 Share compensation
expenses 2,606 2,310 354 183 3,990
— 9,443
Total underwriting deductions
407,956 245,312 200,337 587,153 13,529
(4,310 ) 1,449,977
Underwriting (loss) income
$ (140,841 ) $ (65,008 ) $ (24,762 ) $ (479,434 ) $ (13,529 ) $ 341
$ (723,233 ) Net investment return (a) — — — 1,232 39,946 — 41,178
Other items (b) — — — 82 (18,969 ) — (18,887 )
Loss attributable to AlphaCatinvestors
— — — 74,130 — — 74,130
Net loss attributable tononcontrolling
interests
— — — 376,366 — — 376,366
Segmental (loss) income $ (140,841 ) $ (65,008 ) $ (24,762 )
$ (27,624 ) $ 7,448 $ 341
Net loss attributable to
Validuscommon shareholders
$ (250,446 ) (a) Net investment return includes net
investment income, net realized and change in net unrealized gains
(losses) on investments and income (loss) from investment
affiliates. (b) Other items includes finance expenses, transaction
expenses, dividends on preferred shares, tax benefit (expense),
foreign exchange gains (losses), income (loss) from operating
affiliate and other income (loss).
Validus Holdings, Ltd.
Segment Information
For the three
months ended September 30, 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended September 30, 2016
Validus ReSegment
TalbotSegment
WesternWorldSegment
AlphaCatSegment
andConsolidatedVIEs
CorporateandInvestments
Eliminations Total
Underwriting revenues Gross premiums written $ 94,741 $
189,674 $ 85,260 $ 4,413 $ — $ (1,670 ) $ 372,418 Reinsurance
premiums ceded (15,967 ) (22,877 ) (6,202 ) (1,630 ) — 1,670
(45,006 ) Net premiums written 78,774 166,797 79,058 2,783 —
— 327,412 Change in unearned premiums 149,705 32,258
(8,260 ) 62,660 — — 236,363
Net
premiums earned 228,479 199,055 70,798 65,443 — — 563,775 Other
insurance related income 58 99 219 8,656
— (8,113 ) 919
Total underwriting
revenues 228,537 199,154 71,017 74,099
— (8,113 ) 564,694
Underwriting
deductions Losses and loss expenses 98,425 109,860 45,748 4,361
— — 258,394 Policy acquisition costs 42,837 46,488 17,094 7,075 —
(60 ) 113,434 General and administrative expenses 17,528 32,333
10,171 12,255 18,221 (8,065 ) 82,443 Share compensation expenses
2,695 3,163 702 (107 ) 4,048 —
10,501
Total underwriting deductions 161,485
191,844 73,715 23,584 22,269 (8,125 )
464,772
Underwriting income (loss) $ 67,052 $ 7,310 $
(2,698 ) $ 50,515 $ (22,269 ) $ 12 $ 99,922 Net investment return
(a) — — — 3,567 50,256 — 53,823 Other items (b) — — — 97 (20,995 )
— (20,898 )
(Income) attributable to
AlphaCatinvestors
— — — (5,564 ) — — (5,564 )
Net (income) attributable tononcontrolling
interest
— — — (37,439 ) — — (37,439 )
Segmental income (loss) $ 67,052 $ 7,310 $
(2,698 ) $ 11,176 $ 6,992 $ 12
Net income available to
Validuscommon shareholders
$ 89,844 (a) Net investment return includes
net investment income, net realized and change in net unrealized
gains (losses) on investments and income (loss) from investment
affiliates. (b) Other items includes finance expenses, transaction
expenses, dividends on preferred shares, tax benefit (expense),
foreign exchange gains (losses), income (loss) from operating
affiliate and other income (loss).
Validus Holdings, Ltd.
Segment Information
For the nine
months ended September 30, 2017
(Expressed in thousands of U.S. dollars,
except share and per share information)
Nine Months Ended September 30, 2017
Validus ReSegment
TalbotSegment
WesternWorldSegment
AlphaCatSegment
andConsolidatedVIEs
CorporateandInvestments
Eliminations Total
Underwriting revenues Gross premiums written $ 1,071,409 $
702,535 $ 459,628 $ 297,821 $ — $ (23,778 ) $ 2,507,615 Reinsurance
premiums ceded (161,188 ) (154,263 ) (72,005 ) (9,510 ) —
23,778 (373,188 ) Net premiums written 910,221 548,272
387,623 288,311 — — 2,134,427 Change in unearned premiums (184,155
) 18,279 15,256 (54,196 ) — — (204,816
)
Net premiums earned 726,066 566,551 402,879 234,115 — —
1,929,611 Other insurance related income 204 1,512
1,566 17,118 — (14,463 ) 5,937
Total
underwriting revenues 726,270 568,063 404,445
251,233 — (14,463 ) 1,935,548
Underwriting deductions Losses and loss expenses 538,323
378,241 329,642 574,130 — — 1,820,336 Policy acquisition costs
133,836 129,074 60,187 22,380 — (991 ) 344,486 General and
administrative expenses 48,550 97,094 50,623 27,096 45,563 (14,311
) 254,615 Share compensation expenses 7,746 8,292
1,655 348 12,039 — 30,080
Total underwriting deductions 728,455 612,701
442,107 623,954 57,602 (15,302 ) 2,449,517
Underwriting (loss) income $ (2,185 ) $ (44,638 ) $
(37,662 ) $ (372,721 ) $ (57,602 ) $ 839 $ (513,969 ) Net
investment return (a) — — — 12,543 158,523 — 171,066 Other items
(b) — — — 269 (57,097 ) — (56,828 )
Loss attributable to AlphaCatinvestors
— — — 54,797 — — 54,797
Net loss attributable tononcontrolling
interest
— — — 290,144 — — 290,144
Segmental (loss) income $ (2,185 ) $ (44,638 ) $ (37,662 ) $
(14,968 ) $ 43,824 $ 839
Net loss attributable to
Validuscommon shareholders
$ (54,790 ) (a) Net investment return includes net
investment income, net realized and change in net unrealized gains
(losses) on investments and income (loss) from investment
affiliates. (b) Other items includes finance expenses, transaction
expenses, dividends on preferred shares, tax benefit (expense),
foreign exchange gains (losses), income (loss) from operating
affiliate and other income (loss).
Validus Holdings, Ltd.
Segment Information
For the nine
months ended September 30, 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
Nine Months Ended September 30, 2016
Validus ReSegment
TalbotSegment
WesternWorldSegment
AlphaCatSegment
andConsolidatedVIEs
CorporateandInvestments
Eliminations Total
Underwriting revenues Gross premiums written $ 1,072,219 $
752,058 $ 236,190 $ 270,666 $ — $ (21,882 ) $ 2,309,251 Reinsurance
premiums ceded (111,658 ) (137,496 ) (15,347 ) (6,451 ) —
21,882 (249,070 ) Net premiums written 960,561 614,562
220,843 264,215 — — 2,060,181 Change in unearned premiums (241,129
) (7,166 ) (22,890 ) (80,230 ) — — (351,415 )
Net
premiums earned 719,432 607,396 197,953 183,985 — — 1,708,766
Other insurance related (loss) income (107 ) 389 696
17,722 — (16,300 ) 2,400
Total underwriting
revenues 719,325 607,785 198,649 201,707
— (16,300 ) 1,711,166
Underwriting
deductions Losses and loss expenses 313,432 319,271 129,623
27,645 — — 789,971 Policy acquisition costs 127,660 134,444 46,704
19,762 — 23 328,593 General and administrative expenses 52,579
109,929 33,704 26,272 52,276 (16,421 ) 258,339 Share compensation
expenses 8,371 9,955 1,825 167 12,147
— 32,465
Total underwriting deductions
502,042 573,599 211,856 73,846 64,423
(16,398 ) 1,409,368
Underwriting income (loss)
$ 217,283 $ 34,186 $ (13,207 ) $ 127,861 $ (64,423 ) $ 98 $ 301,798
Net investment return (a) — — — 10,558 188,890 (597 ) 198,851 Other
items (b) — — — (1,139 ) (35,452 ) — (36,591 )
(Income) attributable to
AlphaCatinvestors
— — — (16,278 ) — — (16,278 )
Net (income) attributableto noncontrolling
interest
— — — (96,163 ) — — (96,163 )
Segmental income (loss) $ 217,283 $ 34,186 $
(13,207 ) $ 24,839 $ 89,015 $ (499 )
Net income available to
Validuscommon shareholders
$ 351,617 (a) Net investment return includes
net investment income, net realized and change in net unrealized
gains (losses) on investments and income (loss) from investment
affiliates. (b) Other items includes finance expenses, transaction
expenses, dividends on preferred shares, tax benefit (expense),
foreign exchange gains (losses), income (loss) from operating
affiliate and other income (loss).
Non-GAAP Financial Measures
In presenting the Company’s results, management has included and
discussed certain non-GAAP financial measures. The Company believes
that these non-GAAP measures, which may be defined and calculated
differently by other companies, better explain and enhance the
understanding of the Company’s results of operations. However,
these measures should not be viewed as a substitute for those
determined in accordance with U.S. GAAP.
In addition to presenting book value per common share determined
in accordance with U.S. GAAP, the Company believes that the
following non-GAAP book value financial measures are key financial
indicators for evaluating performance and measuring overall growth:
book value per diluted common share, book value per diluted common
share plus accumulated dividends and tangible book value per
diluted common share. A reconciliation of book value per common
share, a GAAP financial measure, to the non-GAAP book value
financial measures has been included below.
In addition to presenting net (loss) income (attributable)
available to Validus common shareholders determined in accordance
with U.S. GAAP, the Company believes that showing net
operating (loss) income (attributable) available to Validus common
shareholders, a non-GAAP financial measure, 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 in a
manner similar to how management analyzes the Company’s underlying
business performance.
Net operating (loss) income (attributable) available to Validus
common shareholders, a non-GAAP financial measure, is calculated by
the addition or subtraction of certain Consolidated Statement of
(Loss) Income line items from net (loss) income (attributable)
available to Validus common shareholders, the most directly
comparable GAAP financial measure, and measures the performance of
the Company’s operations without the influence of gains or losses
on investments and foreign currencies and other items as noted in
the reconciliation below. The Company excludes these items from its
calculation of net operating (loss) income (attributable) available
to Validus common shareholders because the amount of these gains
and losses is heavily influenced by, and fluctuates in part,
according to availability of investment market opportunities and
other factors. The Company believes these amounts are largely
independent of its core underwriting activities and including them
distorts the analysis of trends in its operations. The Company
believes the reporting of net operating (loss) income
(attributable) available to Validus common shareholders enhances
the understanding of results by highlighting the underlying
profitability of the Company’s core (re)insurance operations. This
profitability is influenced significantly by earned premium growth,
adequacy of the Company’s pricing, as well as 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.
Return on average equity, a GAAP financial measure, and net
operating return on average equity, a non-GAAP financial measure,
represents the returns generated on common shareholders’ equity
during the year and are presented below.
Validus Holdings, Ltd.
Non-GAAP Financial Measures
Reconciliation
Book Value per Common Share, Book Value
per Diluted Common Share and Tangible Book Value per Diluted Common
Share
As at
September 30, 2017 and December 31, 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
September 30, 2017 Equity Amount
Common Shares Per Share Amount
(a) Book value per common share (b) $ 3,536,287 79,457,253 $
44.51 Non-GAAP Adjustments: Assumed exercise of outstanding stock
options (c)(d) 614 26,136 Unvested restricted shares —
2,518,217 Book value per diluted common share (e) 3,536,901
82,001,606 $ 43.13 Goodwill (227,701 ) — Intangible assets (173,398
) — Tangible book value per diluted common share (e) $
3,135,802 82,001,606 $ 38.24 Book value per diluted common
share (e) $ 43.13 Accumulated dividends 12.70 Book value per
diluted common share plus accumulated dividends (e) $ 55.83
December 31, 2016 Equity Amount Common Shares
Per Share Amount (a) Book value per common
share (b) $ 3,688,291 79,132,252 $ 46.61 Non-GAAP Adjustments:
Assumed exercise of outstanding stock options (c)(d) 614 26,136
Unvested restricted shares — 2,868,610 Book value per
diluted common share (e) 3,688,905 82,026,998 $ 44.97 Goodwill
(196,758 ) — Intangible assets (115,592 ) — Tangible book
value per diluted common share (e) $ 3,376,555 82,026,998 $ 41.16
Book value per diluted common share (e) $ 44.97 Accumulated
dividends 11.56 Book value per diluted common share plus
accumulated dividends (e) $ 56.53 (a) Per share
amounts are calculated by dividing the equity amount by the common
shares. (b) The equity amount used in the calculation of book value
per common share represents total shareholders’ equity available to
Validus excluding the liquidation value of the preferred shares.
(c) Using the “as-if-converted” method, assuming all proceeds
received upon exercise of stock options will be retained by the
Company and the resulting common shares from exercise remain
outstanding. (d) At September 30, 2017, the weighted average
exercise price for those stock options that had an exercise price
lower than book value per share was $23.48 (December 31, 2016:
$23.48). (e) Non-GAAP financial measure.
Validus Holdings, Ltd.
Non-GAAP Financial Measures
Reconciliation
Net Operating (Loss) Income (attributable)
available to Validus Common Shareholders, Net Operating (Loss)
Income per Diluted Share (attributable) available to Validus Common
Shareholders andAnnualized Net Operating Return on Average
Equity
For the three and
nine months ended September 30, 2017 and 2016
(Expressed in thousands of U.S. dollars,
except share and per share information)
Three Months Ended September 30, Nine Months Ended
September 30, 2017 2016 2017
2016 Net (loss) income (attributable)
available to Validus common shareholders $ (250,446 ) $ 89,844 $
(54,790 ) $ 351,617 Non-GAAP Adjustments: Net realized gains on
investments (906 ) (4,397 ) (2,016 ) (6,537 ) Change in net
unrealized losses (gains) on investments 5,197 (5,459 ) (24,472 )
(84,331 ) (Income) loss from investment affiliates (1,011 ) (453 )
(15,665 ) 4,249 Foreign exchange losses (gains) 1,404 766 7,164
(11,765 ) Other (income) loss (35 ) 1,529 (303 ) 773 Transaction
expenses — — 4,427 — Net (loss) income attributable to
noncontrolling interests (8,194 ) 767 (5,364 ) 869 Tax (benefit)
expense (a) (468 ) 443 1,860 7,550
Net operating (loss) income (attributable)
available to Validus common shareholders (b)
$ (254,459 ) $ 83,040 $ (89,159 ) $ 262,425
(Loss) earnings per diluted share (attributable) available to
Validus common shareholders $ (3.17 ) $ 1.11 $ (0.69 ) $ 4.24
Non-GAAP Adjustments: Net realized gains on investments (0.01 )
(0.06 ) (0.03 ) (0.08 ) Change in net unrealized losses (gains) on
investments 0.06 (0.07 ) (0.31 ) (1.02 ) (Income) loss from
investment affiliates (0.01 ) (0.01 ) (0.20 ) 0.05 Foreign exchange
losses (gains) 0.02 0.01 0.09 (0.14 ) Other (income) loss — 0.02 —
0.01 Transaction expenses — — 0.06 — Net (loss) income attributable
to noncontrolling interests (0.10 ) 0.01 (0.07 ) 0.01 Tax (benefit)
expense (a) (0.01 ) 0.01 0.02 0.09
Net operating (loss) income per diluted
share (attributable) available to Validus common
shareholders (b)
$ (3.22 ) $ 1.02 $ (1.13 ) $ 3.16 Average
shareholders’ equity available to Validus common shareholders (c) $
3,673,859 $ 3,716,938 $ 3,699,471 $ 3,699,319 Annualized
return on average equity (c)
(27.3
%)
9.7
%
(2.0
%)
12.7
%
Annualized net operating return on average equity (b)(c)
(27.7
%)
8.9
%
(3.2
%)
9.5
%
(a) Represents the tax expense or benefit associated
with the specific country to which the pre-tax adjustment relates
to. The tax impact is estimated by applying the statutory rates of
applicable jurisdictions, after consideration of other relevant
factors including the ability to utilize tax losses carried
forward. (b) Non-GAAP financial measure. (c) Average shareholders’
equity for the three months ended is the average of the beginning
and ending quarter end shareholders’ equity balances, excluding the
liquidation value of the preferred shares. Average shareholders’
equity for the nine months ended is the average of the beginning,
ending and intervening quarter end shareholders’ equity balances,
excluding the liquidation value of the preferred shares.
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171026006482/en/
Investors:Validus Holdings,
Ltd.Investor.Relations@validusholdings.com+1-441-278-9000orMedia:Brunswick
GroupMustafa Riffat / Charlotte Connerton+1-212-333-3810
Validus Holdings, Ltd. (delisted) (NYSE:VR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Validus Holdings, Ltd. (delisted) (NYSE:VR)
Historical Stock Chart
From Apr 2023 to Apr 2024
