Validus $126 Million Q3 Net Loss; 9-Month Net Income $16 Million

Bermuda-based Validus Holdings Limited reported a net loss for the quarter ended September 30, 2008 of $126.3 million, or $1.71 per diluted common share, compared with net income of $136.5 million, or $1.90 per diluted common share, for the quarter ended September 30, 2007.

Net income for the nine months ended September 30, 2008 was $16.1 million, or $0.14 per diluted share, compared with $264.0 million, or $4.11 per diluted share, for the corresponding period in 2007.

Validus also posted a net operating loss for the third quarter of 2008 of $53.1 million, or 73 cents per diluted share, compared with net operating income of $127.9 million, or $1.78 per diluted common share, for the quarter ended September 30, 2007. Operating income for the nine months ended September 30, 2008 was $124.1 million, or $1.53 per diluted share, compared with $256.8 million, or $4.00 per diluted common share, for the nine months ended September 30, 2007. Net operating income, a non-GAAP financial measure, is defined as net income excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items.

The bulletin noted that the “operating results of Talbot have been included in the consolidated financial statements from the acquisition date of July 2, 2007. Further, the 2008 Validus data gives effect to the initial public offering which was consummated on July 30, 2007.”

Chairman and CEO Ed Noonan commented: “As a result of the global financial crisis and large storm losses of the third quarter, we see 2009 as a very strong year for the short tail classes which are Validus’ focus. The strength of our risk management and flexible global operating platform uniquely position Validus to capitalize on the improving market. Despite reporting our first ever quarterly loss, Validus has grown diluted book value per share plus accumulated dividends 8.1 percent over the past twelve months. Our performance versus peer companies continues to be top quartile.”

Validus also listed the following third quarter highlights:
— Gross premiums written increased by 9.8 percent to $269.2 million from $245.3 million, due primarily to reinstatement premiums of $19.7 million recorded following Hurricanes Ike and Gustav;
— Net premiums earned increased by 14.8 percent to $339.3 million from $295.5 million, due primarily to reinstatement premiums recorded following Hurricanes Ike and Gustav;
— Combined ratio of 122.3 percent which included $26.1 million of favorable prior year loss reserve development, benefiting the loss ratio by 7.7 percentage points, and losses of $205.5 million on Hurricanes Ike and Gustav, adding 60.6 percentage points to the loss ratio;
— Net loss of $126.3 million reflected a decrease of $262.8 million from net income of $136.5, reflecting losses net of reinstatement premium of $185.9 million on Hurricanes Ike and Gustav, increased losses on the investment portfolio of $37.0 million, and an increase in foreign exchange losses of $50.8 million; and
— Annualized return on average equity of (25.4) percent and annualized net operating return on average equity of (10.7) percent;

Highlights for the nine months ended Sept. 30 included the following:
— Gross premiums written increased by 46.8 percent to $1.2 billion from $797.6 million, due to the addition of Talbot which added $556.3 million of gross premiums written and offset by reduced gross premiums written in the Validus Re segment;
— Net premiums earned increased by 74.1 percent to $940.5 million from $540.0 million, due primarily to the addition of Talbot which added $451.3 million of net premiums earned;
— Combined ratio of 93.1 percent which included $50.0 million of favorable prior year loss reserve development, benefiting the loss ratio by 5.3 percentage points, and losses of $205.5 million on Hurricanes Ike and Gustav, adding 21.9 percentage points to the loss ratio;
— Investment income increased by 45.5 percent to $108.9 million from $74.8 million primarily due to higher investment balances resulting from funds from operations and the addition of Talbot;
— Net income of $16.1 million reflected a decrease of $247.9 million, reflecting losses of $185.9 million on Hurricanes Ike and Gustav, increased losses on the investment portfolio of $84.9 million, and an increase in foreign exchange losses of $45.1 million; and
— Annualized return on average equity of 1.1 percent and annualized net operating return on average equity of 8.4 percent;

The complete report and details on accessing the earnings conference call, held Friday, Nov. 7, may be obtained on the Company’s web site at: www.validusre.bm.

Source: Validus Holdings

Topics Profit Loss Hurricane