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Share Name | Share Symbol | Market | Type |
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Validus Holdings, Ltd. (delisted) | NYSE:VR | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 67.99 | 0.00 | 01:00:00 |
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:
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 TalbotWesternWorld
Interco TotalGross 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 TalbotWesternWorld
Interco TotalGross 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 TalbotWesternWorld
Interco TotalGross 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 TalbotWesternWorld
Interco TotalGross 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:
Talbot Segment
Highlights for the third quarter include the following:
Western World Segment
Highlights for the third quarter include the following:
AlphaCat Segment
Highlights for the third quarter include the following:
Investments
Highlights of our managed investment portfolio for the third quarter include the following:
Corporate Expenses and Other Items
Highlights for the third quarter include the following:
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, 2017Cumulative 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:
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) 400,000 150,000Common 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 $ 11,349,755Validus 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 8,655Income 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 InformationFor 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, 2017Validus 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 ) 115,590General 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 — — 74,130Net loss attributable tononcontrolling interests
— — — 376,366 — — 376,366 Segmental (loss) income $ (140,841 ) $ (65,008 ) $ (24,762 ) $ (27,624 ) $ 7,448 $ 341Net 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, 2016Validus 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 $ 12Net 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, 2017Validus 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 — — 54,797Net loss attributable tononcontrolling interest
— — — 290,144 — — 290,144 Segmental (loss) income $ (2,185 ) $ (44,638 ) $ (37,662 ) $ (14,968 ) $ 43,824 $ 839Net 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, 2016Validus 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 7,550Net 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 0.09Net 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
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