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Validus Holdings, Ltd.
Investor Presentation – Fourth Quarter 2016
2
This presentation may include forward‐looking statements, both with respect to us and our 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. 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 Holdings, Ltd.’s (“Validus” or the “Company”) 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 our most recent reports on Form 10‐K and Form 10‐Q
and other documents on file with the Securities and Exchange Commission. Any forward‐looking statements made in this presentation are
qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be
realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We
undertake no obligation to update publicly or revise any forward‐looking statement, whether as a result of new information, future
developments or otherwise.
Cautionary Note Regarding Forward‐looking Statements
3
• Since its founding in 2005, Validus has expanded its platform to include a U.S.
specialty insurer, Lloyd’s syndicate, third party reinsurance asset manager and global
reinsurer
• The diversified portfolio as measured by gross premium written is comprised of 43%
insurance and 57% reinsurance for the year ended December 31, 2016
• Business plan since formation has been to focus on short‐tail lines with strategic
diversification into select longer‐tail classes
• Maintained a focus on underwriting profits in conjunction with a strong balance sheet
• Profitable in all 11 years of operation, 2006 through 2016
• Delivered outstanding financial results since 2007 IPO as measured by growth in book
value per diluted common share plus accumulated dividends
• Active capital management, returning $3.88 billion to investors through repurchases
and dividends from Validus’ 2007 IPO through February 22, 2017
Validus – Key Accomplishments
4
Validus – Four Diversified Yet Complementary Businesses
• U.S. specialty property
and casualty
underwriter
• Focused on U.S. Excess and
Surplus Lines
• Pioneer in the binding
authority business
• 12% of 2016 GPW
• Investment adviser
• Focused on managing
capital for third parties and
Validus in ILS and other
property catastrophe and
specialty reinsurance
investments
• AUM of $2.7 billion(1) as of
January 1, 2017
• 10% of 2016 GPW
• Lloyd’s of London
Syndicate
• Focused on short‐tail
specialty lines in the
Lloyd’s of London market
• Market leader in War &
Terror, Energy and Marine
Classes
• 37% of 2016 GPW
• Global reinsurer
• Focused primarily on
treaty reinsurance,
including property cat
• Specializing in Property
CAT XOL, Marine, and
Specialty, including
Agriculture
• 41% of 2016 GPW
Validus Research – Provides Analytical Support Across All Platforms
1) Assets under management (AUM) of $2.7 billion includes $2.5 billion of third party investment and $0.2 billion of related party investment.
5
Validus Research ‐ Depth of Resources
• Research
– Validus Group’s thought leader in catastrophe risk quantification and model development
– Post‐Doctoral expertise in physical and data sciences including seismology, atmospheric
sciences, hydrology, structural engineering, and statistics
– Responsibility for the Validus View of Risk – derived from independent research/validation
with the agility to reflect latest science and experience in a responsive way
• Catastrophe Modeling
– Rigorous analyses/investigations of insurance/reinsurance transactions with a heavy focus
on exposure data quality
– Over 60 years of combined catastrophe modeling experience applying and evolving
industry best practice
• Software Engineering
– Continuous evolution of our core underwriting, portfolio and risk management systems,
including the Validus Capital Allocation and Pricing System (VCAPS)
0
1,000
2,000
3,000
4,000
5,000
6,000
Total shareholders' equity available to Validus AlphaCat AUM
Validus Market Footprint of $6.4 Billion USD:
Shareholders’ Equity Available to Validus + AlphaCat AUM
6
Acquisition
of Talbot
07/02/2007
Validus IPO
07/30/2007
Founding of
AlphaCat
07/29/2008
Acquisition
of IPC
09/04/2009
Launch of
AlphaCat
Sidecars
05/23/2011
Launch of
AlphaCat
Advantage
Fund
01/01/2013
Acquisition
of Longhorn
Re
04/25/2013
Launch of
AlphaCat
Opportunities
Fund
01/01/ 2016
Acquisition of
Western
World
10/02/2014
Acquisition
of Flagstone
11/30/2012
Launch of
BetaCat Fund
10/01/2014
New York
Waterloo
Parsippany
Hamilton
Miami
Santiago
London
Dubai
Singapore
Boston
Sydney
Scottsdale
Labuan
Zurich
Atlanta
Validus Global Operating Platform
7
Global operations with offices in Bermuda, United States, United Kingdom, Australia,
Canada, Chile, Malaysia, Singapore, Switzerland and United Arab Emirates
8
11.6% Compound Annual Growth in Diluted BVPS Plus Accumulated
Dividends from Company Formation Through December 31, 2016
Growth in Book Value Per Diluted Share Plus Accumulated Dividends
16.93
19.73
24.00 23.78
29.68
32.98 32.28
35.22 36.23
39.65
42.33
44.97
0.80
1.60
2.48 3.48
4.48
7.68
8.88
10.16
11.56
16.93
19.73
24.00 24.58
31.28
35.46 35.76
39.70
43.91
48.53
52.49
56.53
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Diluted BVPS Cumulative Dividends Diluted BVPS plus Accumulated Dividends
9
1) Source: SNL Financial.
2) VR starting point is Pro Forma diluted BVPS at September 30, 2007 of $20.89 as disclosed in the VR IPO Prospectus.
3) Book value per diluted share calculation includes impact of quarterly and special dividends.
From VR IPO Through December 31, 2016
Compound Growth in Book Value per Diluted Share Versus Peers
14.4% 14.1%
12.5%
11.0% 10.8% 10.8% 10.7%
8.6%
5.9%
0.0%
5.0%
10.0%
15.0%
20.0%
AWH ACGL RNR VR AXS RE ENH AHL AGII
10
Validus Common Shareholders’ Equity vs. Selected Peers
1) Source: SNL Financial.
Peer Comparison – Q4 2016 Common Shareholders’ Equity in $US Billions
8.1
6.4
5.1
4.9
4.5
3.7 3.6
2.8
1.8
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
RE ACGL AXS ENH RNR VR AWH AHL AGII
11
1) Source: SNL Financial.
2) Peer group includes: AWH, ACGL, AGII, AHL, AXS, ENH, RE and RNR.
3) Starting point of chart is January 1, 2007.
From VR IPO Through December 31, 2016
Validus Stock Total Return Versus Peers and S&P 500
‐50.0%
‐25.0%
0.0%
25.0%
50.0%
75.0%
100.0%
125.0%
150.0%
175.0%
200.0%
225.0%
250.0%
275.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Validus Peers S&P 500
12
2016 Gross Premium Written of $2.6 Billion
1) $2.6 billion consolidated gross premiums written net of $26.7 million of intersegment eliminations.
By Operating SegmentBy Class of Business
Validus Re
41%
Talbot
37%
Western
World
12%
AlphaCat
10%
Validus Mix of Business
Specialty
35%
Property Cat
XOL
22%
Other
Property
20%
Marine
14%
Liability
9%
13
Business Mix Development from 2010 to Today
1) Business mix based on gross premiums written net of intersegment eliminations.
Mix Shift = More Specialty, Less Cat XOL and Marine
23.4% 23.2% 20.7%
16.8% 18.0% 18.8% 20.0%
28.1% 27.8%
27.6%
25.9% 21.2% 16.4% 13.0%
0.6% 0.7%
0.6%
5.6%
5.4%
6.9% 9.8%
26.4% 26.8% 30.0%
23.8%
24.4%
18.4% 13.7%
21.5% 21.4% 21.1%
27.8%
28.7%
30.6%
34.7%
2.3%
8.8% 8.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016
Other Property Property Cat XOL AlphaCat Marine Specialty Liability
14
Insurance Underwriting Income – Validus vs. Bermuda Peers
1) Source: SEC filings and other public disclosures.
2) Validus insurance underwriting income includes Western World and Talbot’s direct insurance and facultative reinsurance.
3) AGII is excluded as they do not disclose underwriting income as insurance / reinsurance.
4) RNR is excluded as they are deemed to be all reinsurance.
Insurance Underwriting Income in $US Millions: 2012 ‐ 2016
396.1
307.8
239.0 189.1
73.0
30.1
(557.5)
‐600.0
‐500.0
‐400.0
‐300.0
‐200.0
‐100.0
0.0
100.0
200.0
300.0
400.0
VR AXS ACGL AWH AHL ENH RE
15
Underwriting Income – Validus vs. Bermuda Peers
1) Source: SEC filings and other public disclosures.
2) AGII is excluded as they do not disclose underwriting income as insurance / reinsurance.
3) RNR is deemed to be all reinsurance.
Underwriting Income in $US Millions: 2012 ‐ 2016
3,836.6
2,487.7
1,735.7 1,722.4
1,426.2
1,279.4
991.7
719.3
(557.5)
396.1
239.0
307.8
30.1
73.0
189.1
‐500.0
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
RE RNR VR ACGL AXS ENH AHL AWH
Reinsurance Income Insurance Income
16
Validus – Growth and Diversification
Gross Premiums Written in $US Millions – 2006 to 2016
1) 2014 Gross Premiums Written for Western World cover the time period from the acquisition by Validus on October 2, 2014 through
December 31, 2014.
2) The table above excludes inter‐segment eliminations.
540.8
702.1 687.8 768.1
1,089.4 1,114.5 1,132.0
1,226.7
1,118.5 1,126.8 1,111.1
286.5
709.0
919.9
981.1 1,014.1
1,078.6
1,091.9
1,101.8 1,018.8 970.7
11.8
75.7 21.6
131.1
126.8 176.1 270.4
65.2
278.5 323.2
$‐
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
$3,000.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Validus Re Talbot AlphaCat Western World
17
Validus ‐ Adapting to Market Demand
1) 2006 was the first full year of operations for Validus.
Growth and Diversification in VR’s Business Since Inception
Reinsurance
100%
2006 GPW(1)
$540.8 million
2016 GPW
$2,648.7 million
• Significant growth in GPW through
acquisitions of:
– 2007 – Talbot
– 2009 – 2012: IPCRe, Flagstone,
Longhorn Re
– 2014 – Western World
• Improved portfolio balance in
insurance through Talbot and Western
World acquisitions
• AlphaCat established in 2008 to
capitalize on the insurance linked
securities market
• Access to multiple sources of capital
to respond to business opportunities
as presented
Reinsurance
57%
Insurance
43%
18
Validus Business Mix – Reinsurance and Insurance
1) 2006 was the first full year of operations for Validus.
2) The above table includes inter‐segment eliminations.
Gross Premiums Written in $US Millions
540.8
725.1 778.6
861.4
1,192.4 1,311.3 1,258.8
1,504.6
1,340.9 1,393.4
1,501.1
‐
263.5
583.9
759.8
798.1
813.4 907.6
896.5
1,017.9
1,164.1
1,147.6
540.8
988.6
1,362.5
1,621.2
1,990.6
2,124.7 2,166.4
2,401.1 2,358.9
2,557.5
2,648.7
‐
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Insurance Reinsurance
19
Gross premiums written of
$339.5 million
(Increase of 170.6% at Validus Re
and 22.3% at Western World)
0.8% ROAE and
6.9% net operating ROAE
1) Validus diluted book value per share, operating income, operating EPS and operating ROAE are non‐GAAP financial measures. Please refer to notes
on non‐GAAP and other financial and exposure measures found in the Appendix hereto.
2) ROAE and net operating ROAE calculations are annualized.
89.6% combined ratio
(77.6% at Validus Re, 100.9% at
Talbot and 109.2% at Western
World)
Net income available
to Validus common
shareholders of
$7.8 million and
diluted EPS of $0.10
Book value per
diluted share of $44.97
0.4% growth (including
dividends) in Q4 2016
Q4 2016 Financial Results
Net operating income
available to Validus common
shareholders of
$64.3 million and
diluted operating EPS
of $0.80
20
Validus Reinsurance Highlights
Gross Premium Written ‐ $1.1 Billion
for the year ended Dec 31, 2016
Validus Re Overview
1) Validus Re financial reporting based on reporting of the Validus Re segment which does not include AlphaCat.
2) Other Specialty class includes Aerospace & Aviation, Agriculture, Composite, Contingency, Crisis Management, Financial, Life and A&H, Technical Lines,
Terrorism, Trade Credit, and Workers' Compensation. Other Property class includes Per Risk XOL and Proportional.
Net Underwriting Income in $US Millions
• Validus Re formed in October 2005 as the first operating
subsidiary of Validus Holdings, Ltd.
• Headquartered in Bermuda with overseas offices in Asia,
Continental Europe and Latin America
• Global provider focused primarily on treaty reinsurance
including
– Property catastrophe
– Marine and energy
– Other specialty lines
• A.M. Best rating of A (Stable); S&P Rating of A (Stable)
277.7
91.5
413.2
240.4
15.5
227.8
443.4
387.0
280.6 267.6
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Property
Cat XOL
31%
Other
Property
11%
Agriculture
22%
Other
Specialty
18%
Marine
10%
Casualty
8%
21
Validus Reinsurance – Business Mix Development
GPW mix by product line
51.4% 53.0% 52.8% 49.9%
44.6%
37.0%
31.1%
20.1% 17.6% 15.3%
10.0%
10.5%
11.2%
11.5%
0.3% 0.5%
0.4% 14.4%
13.3% 23.9%
21.9%
7.4% 8.1%
8.7%
10.0%
14.5%
13.8%
18.3%
20.8% 20.9% 22.7%
15.6% 17.1% 13.5%
9.5%
0.6%
7.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016
Property ‐ Cat XOL Other Property Agriculture Other specialty Marine Casualty
22
AlphaCat Highlights
AlphaCat Overview
Assets Under Management
Expressed in $US Millions
1) AlphaCat financial information based on reporting of the AlphaCat segment.
2) AlphaCat began operations in 2008, and became a stand alone segment in 2012.
Q4 2016 Performance
• Generated management fee revenue of $4.7
million
• Validus’ share of AlphaCat income of $6.3
million
• Investment adviser managing capital for third
parties and Validus in ILS and other property
catastrophe and specialty reinsurance
investments
• AlphaCat brand was established in 2008
• In 2011, AlphaCat opened access to external
investors
• As of January 1, 2017, AlphaCat had $2.7 billion
in assets under management
1,533.8
2,059.5
2,498.6
346.9
326.6
242.7
$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
$3,000.0
1‐Jan‐15 1‐Jan‐16 1‐Jan‐17
Third Party Related Party
23
Talbot Highlights
Gross Premium Written ‐ $970.7 Million
for the year ended Dec 31, 2016
Talbot Overview
Net Underwriting Income in $US Millions
• Founded in 2001 and acquired by Validus in 2007
• Significant competitive position
• Focus is on short‐tail business with meaningful market
position in targeted classes
• By design, Talbot is underweight in Casualty, Casualty
Treaty and Property Treaty classes
• Strategically placed offices in international hubs – New
York, Miami, Santiago, Dubai, Labuan, Sydney and
Singapore
1) Talbot financial information based on reporting of the Talbot segment.
2) Energy is Downstream Energy and Power. Other includes Accident & Health and Contingency lines.
Marine
27%
Property
23%
Political Lines
20%
Energy
9%
Aviation
9%
Fin. Lines
5%
Other
7%
79.3
45.6
78.7 72.0
10.7
85.3
169.3
108.1
136.4
32.7
$0.0
$50.0
$100.0
$150.0
$200.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
24
Talbot ‐ Lloyd’s Market Share By Class of Business
1) Source: Lloyd’s Franchise Board.
2) Percentages are calculated based on 2016 year of account gross premium written.
3) Talbot’s overall market share in Lloyd’s is 2.3% (2.4% in 2015).
Key Classes of Business Underweight Classes of Business
0.1%
0.1%
0.1%
0.2%
0.2%
0.3%
0.4%
0.5%
0.5%
0.6%
0.6%
0.7%
0.7%
0.8%
0.8%
0.8%
0.9%
1.2%
1.6%
1.6%
1.8%
1.9%
2.0%
2.1%
2.3%
2.3%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
Professional Indemnity (US)
Directors & Officers (US)
Cyber
Overseas Motor
Property Risk XS
Legal Expenses
Property D&F (non‐US binder)
NM General Liability (non‐US direct)
Livestock & Bloodstock
Property D&F (US binder)
Personal Accident XL
NM General Liability (US direct)
Professional Indemnity (non‐US)
Property Cat XL (Non‐US)
Employers Liability/ WCA (US)
Directors & Officers (non‐US)
Property Cat XL (US)
Medical Expenses
Yacht
Difference in Conditions
Accident & Health (direct)
Specie
Power Generation
Marine XL
Energy Onshore Liability
Total
2.3%
2.3%
3.0%
3.2%
3.4%
3.5%
3.6%
3.9%
4.0%
4.0%
4.1%
4.3%
4.4%
5.4%
5.5%
5.6%
6.1%
6.1%
6.9%
8.0%
11.9%
13.8%
0% 2% 4% 6% 8% 10% 12% 14% 16%
Total
Cargo
Nuclear
Property D&F (US open market)
Property D&F (non‐US open market)
General Aviation
Marine Liability
Pecuniary
Space
Marine Hull
Financial Institutions (non‐US)
Energy Offshore Property
Airline
Political Risks, Credit & Financial Guarantee
Energy Offshore Liability
Engineering
Financial Institutions (US)
Aviation Products/ Airport Liabilities
BBB/ Crime
Terrorism
Aviation XL
Energy Onshore Property
25
Western World Highlights
Gross Premium Written ‐ $323.2 Million
for the year ended Dec 31, 2016
Western World Overview
1) Western World financial information based on reporting of the Western World segment.
• Founded in 1964 and acquired by Validus in 2014
• Focused on US small enterprise business ‐ E&S
and admitted
• Contract Binding has been the historical focus ‐
primarily commercial general liability
• Western World Integrated Platform (“WWIP”) is
a technological competitive advantage
• Validus ownership provides the resources for
expansion into short‐tail classes of business
– Property: Contract and Brokerage
– Flood
– Homeowners’ non‐admitted
• Meaningful strategic changes have already been
made:
– Expanded relationships with national
wholesalers, e.g. Scottsdale office to service
Western states
– Discontinued lines: Brokerage GL, Commercial
Auto and select Programs
Contract GL
49%
Property
28%
Program GL
11%
Professional
7%
Auto
4%
Brokerage GL
1%
26
Western World – Class of Business Detail
1) Western World financial information based on reporting of the Western World segment.
Contract
Division
Program
Division
Brokerage Professional /
Casualty (discontinued Q1 2016)
Brokerage
Property
2016 GPW in
$US MM
$198 $74 $27 $24
% of Total 61% 23% 8% 8%
Description
• General & Professional Liability
and Property Coverage on
small‐to‐medium size
commercial risks offered in 50
states
• Distributed through exclusive
general agents with binding
authority
• General, Professional,
Liability, Property and
Commercial Auto plans
• Distributed through
affinity group program
administrators
• Single‐class relationships,
generally with 50‐state
binding authority
• Underwrites larger, more
complex accounts
• Distributed through select
wholesale brokers
• Business accepted from 50
states
• Commercial E&S Property
Insurance
• “Middle Market,”
Catastrophe exposed
business
• Distributed through select
wholesale brokers
• Business accepted from
50 states
Coverages
• General & Professional Liability
• Property (package and
monoline)
• General Liability &
Professional
• Commercial Auto & APD
• Property
• Flood
• Professional Liability (Claims
made)
• ISO special, broad and
basic causes of loss
• Single Peril (Earthquake,
Flood, Wind)
• Difference in Conditions
(DIC) for Earthquake and
Flood
Business
Classes
• Manufacturers and Contractors
• Owners, Landlords and Tenants
• Professional Services / Misc.
Malpractice
• Spectator Events
• Hospitality & Habitational
• Contracted Services
• Outdoor / Recreation &
Amusement
• Professional Services
• Residential Flood
• Errors & Omissions
• Management Liability
• Financial Institutions
• Hotel / Motel
• Habitational
• Retail
• Restaurants
• Offices
271) A full explanation and disclaimer is contained in the notes on non‐GAAP and other financial and exposure measures found in the Appendix hereto.2) 1:100 year PML as a % of capital and shareholders’ equity is based on United States Hurricane PML.
3) Validus Re net maximum zonal aggregate includes Validus share of AlphaCat limits, excludes Western World and the limits supported by the Funds
at Lloyd’s provided by Validus Re.
Transparent Risk Disclosure – January 1, 2017 Portfolio
Peak Zone PML
Estimated Exposures to Peak Zone Property Catastrophe Losses
(Expressed in thousands of U.S. Dollars)
Probable Maximum Losses by Zone and Peril
Consolidated (Validus Re, Talbot and Western World) Estimated Net Loss
Zones Perils
20 year return
period
50 year return
period
100 year return
period
250 year return
period
Validus Re Net
Maximum Zonal
Aggregate
United States Hurricane 270,984 458,487 713,318 1,011,620 1,912,290
California Earthquake 72,099 224,160 286,832 393,169 1,675,329
Europe Windstorm 85,226 195,632 246,674 431,449 1,262,636
Japan Earthquake 56,515 117,040 202,194 256,951 748,965
Japan Typhoon 60,229 123,010 210,015 256,207 704,006
1:100 year PML equal to 15.4% of quarter end capital, 19.3% of shareholders’ equity available to Validus
28
Net Probable Maximum Loss (1:100) by Zone and Peril Compared to Total Capitalization
Substantial Capital Margin Above Risk Appetites
1) A full explanation and disclaimer is contained in the notes on non‐GAAP and other financial and exposure measures found in the Appendix hereto.
2) Consolidated (Validus Re, Talbot and Western World) estimated net loss 1:100 year PML as a % of total capitalization and shareholder’s equity
available to common shareholders.
3) Total capitalization equals total shareholder's equity less noncontrolling interests plus Senior Notes and Junior Subordinated Deferrable
Debentures.
4) All data points are as at January 1st.
1:100 PML Internal Risk Appetite
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2012 2013 2014 2015 2016 2017
United States Hurricane California Earthquake Europe Windstorm Japan Earthquake Japan Typhoon
29
1) A full explanation and disclaimer is contained in the notes on non‐GAAP and other financial and exposure measures found in the Appendix hereto.
Realistic Disaster Scenarios
Consolidated (Validus Re and Talbot) Estimated Exposures to Specified Loss Scenarios ‐ As of July 1, 2016
(Expressed in millions of U.S. Dollars, except share and per share information)
Type Catastrophe Scenarios Description
Estimated
Consolidated (Validus
Re and Talbot)
Net Loss
% of latest 12 Months
Consolidated Net
Premiums Earned
Marine Loss of major complex Total loss to all platforms and bridge links of a major oil complex $ 197.5 8.8%
Marine
Major cruise vessel
incident US‐owned cruise vessel sunk or severely damaged 131.7 5.9%
Marine Marine collision Fully laden tanker collides with a cruise vessel in US waters 91.1 4.1%
Political Risks South East Asia
Chinese economy has a "hard landing" with sharp fall in growth rates; regional
contagion 118.9 5.3%
Political Risks Russia
The Russian corporate sector struggles to deal with the effects of crashing
commodity and stock prices 56.5 2.5%
Political Risks Turkey Severe economic crisis in Turkey due to political upheaval 54.7 2.4%
Political Risks Nigeria
Severe economic, political and social crisis in Nigeria leads to widespread civil
unrest 42.3 1.9%
Political Risks Middle East US and Iran escalate into military confrontation; regional contagion 27.6 1.2%
Aviation Aviation collision Collision of two aircraft over a major city 94.1 4.2%
Satellite Solar flare
Large single or sequence of proton flares results in loss to all satellites in
synchronous orbit 45.2 2.0%
Satellite Generic defect Undetected defect in a number of operational satellites causing major loss 23.7 1.1%
Terrorism Rockefeller Center Midtown Manhattan suffers a 2‐tonne conventional bomb blast 68.4 3.0%
Terrorism Exchange Place Lower Manhattan suffers a 2‐tonne conventional bomb blast 40.8 1.8%
Liability Professional lines Failure or collapse of a major corporation 37.2 1.7%
Liability Professional lines UK pensions mis‐selling 16.3 0.7%
Cyber
Major data security
breach
Simultaneous cyber‐attacks on organizations within one industrial sector; loss of
customer data 26.8 1.2%
30
Validus – Active Capital Management
Expressed in millions of U.S. Dollars
1) Inception to date capital management includes $4.5 million of dividends on preferred shares.
2) Inception to date and YTD 2016 capital management actions of $3.88 billion is through February 22, 2017.
Capital Management Inception to
Date of $3.88 Billion(1)
• On Feb 3, 2015 Validus reset the
common share repurchase
authorization to $750.0 million
• Remaining authorization of $320.0
million
• 2016 quarterly dividend of $0.35
per share increased to $0.38 in
2017
• 2016 capital management of $332.8
million
― Common share repurchases in
2016 of $212.7 million
― Common share dividends of
$115.6 million
― Preferred share dividends of $4.5
million
Capital Management
2,704.4
944.8
230.8
Share Repurchases
Common Share Dividends
Special Dividend
31
Managed Investment Portfolio at December 31, 2016
• Total managed investments, cash and
cash equivalents and restricted cash of
$6.55 billion
– Emphasis on the preservation of
invested assets
– Provision of sufficient liquidity for
prompt payment of claims
– Comprehensive portfolio disclosure
• Average portfolio rating of AA‐
• Duration of 2.26 years
• Q4 2016 annualized investment yield:
2.25% (Q4 2015: 1.90%)
1) Validus has $9.34 billion total investments, cash and cash equivalents and restricted cash inclusive of investments supporting AlphaCat
collateralized business.
23.4%
12.3%
10.4%
8.7%
8.0%
6.3%
6.3%
6.2%
5.1%
4.2%
3.7%
3.5%
1.5%
0.2%
0.2%
0% 5% 10% 15% 20% 25% 30%
U.S. corporate
U.S. Govt. and Agency
Agency RMBS
Bank loans
ABS
Cash
Non‐U.S. corporate
Other
CMBS
State and local
Non‐U.S. Govt. and Agency
Short term
Investment affiliates
Non‐Agency RMBS
Restricted cash
32
Validus Invested Asset Strategy and Performance
• In 2014, Validus set out to increase portfolio yield without increasing tail risk. Validus’ Chief
Investment Officer worked with our risk and financial modeling teams to establish a new
portfolio allocation
• Our managed portfolio is conservatively positioned and asset allocation is continually evaluated
to balance capital preservation and liquidity needs with reasonable return expectations
1.78%
1.83%
2.02%
1.91% 1.90%
1.79%
2.34%
2.58%
2.25%
1.51%
1.62%
1.80%
1.89% 1.92% 1.91%
1.99%
2.15% 2.24%
1.20%
1.40%
1.60%
1.80%
2.00%
2.20%
2.40%
2.60%
2.80%
Dec‐31‐14 Mar‐31‐15 Jun‐30‐15 Sep‐30‐15 Dec‐31‐15 Mar‐31‐16 Jun‐30‐16 Sep‐30‐16 Dec‐31‐16
Quarter Annualized Yield Rolling 4‐Quarter Annualized Yield
33
Validus Loss Reserves at December 31, 2016
• Gross reserves for losses and loss
expenses of $3.00 billion
• $2.56 billion net of reinsurance
• Q4 2016 notable losses included
Hurricane Matthew of $27.4 million and
New Zealand Earthquake of $22.3 million
• No non‐notable losses in Q4 2016
• Favorable reserve development during Q4
2016:
– Validus Re: $28.9 million
– AlphaCat: $1.1 million
– Talbot: $16.1 million
– Western World: $0.6 million
Net Favorable Reserve Development
Expressed in $US Millions
Validus Gross Reserve Mix
1) Q4 notable losses relate to Validus’ share of net losses and loss expenses less reinstatement premiums.
2) Notable loss events are loss events which aggregate to over $30.0 million on a consolidated basis. Non‐notable loss events are loss events which
aggregate to over $15.0 million but less than $30.0 million on a consolidated basis.
Case
Reserves
41%
IBNR
Reserves
59%
208.4
246.3
71.4 56.3 32.6 41.5
50.8
59.8
(17.7)
6.5
20.3 5.3
‐$50.0
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
2014 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
Non‐event Event
34
Development of Prior Period Loss Reserves by Accident Year
Development of Prior Period Loss Reserves in $US Millions – 2012 to 2016
96.7
47.2 44.8 37.8
3.2
49.3
(10.4) (8.5) (5.6) (1.9)
29.0
89.9
67.5
30.1
20.3
‐
95.9
83.3
58.3
19.4
‐ 72.1
91.1
41.2
‐ 94.4
43.3
‐
90.7
175.0
222.6
259.2
306.1
216.2
‐$15.0
$35.0
$85.0
$135.0
$185.0
$235.0
$285.0
$335.0
2012 2013 2014 2015 2016
Before 2010 2010 2011 2012 2013 2014 2015
35
• Global insurance and reinsurance business
• Size and scale to compete effectively in targeted markets
• Four distinct yet complementary operating segments
• Focused on short‐tail lines with strategic diversification into select longer‐tail
classes
• Profitable in all 11 years of operation
• Short duration, highly liquid, conservative balance sheet
• Transparent risk disclosure
Conclusion – Continue to be Well Positioned for 2017 and Beyond
APPENDIX ONE
Investor Presentation
37
Gross premiums written of
$2,648.7 million
(Increases of 53.5% at
AlphaCat and 16.1% at
Western World)
9.7% ROAE and
8.6% net operating ROAE
1) Validus diluted book value per share, operating income, operating EPS and operating ROAE are non‐GAAP financial measures. Please refer to notes
on non‐GAAP and other financial and exposure measures found in the Appendix hereto.
84.2% combined ratio
(71.6% at Validus Re, 95.9% at
Talbot and 107.6% at Western
World)
Net income available to
Validus of
$359.4 million and
diluted EPS of $4.36
Book value
per diluted share of $44.97
9.5% growth (including
dividends) in 2016
Full Year 2016 Financial Results
Net operating income
available to Validus of
$319.2 million and
diluted operating EPS
of $3.88
38
Selected Market Information at December 31, 2016
Exchange/Ticker:
Share Price:
Primary Shares Outstanding:
Primary Market Capitalization:
Annual Dividend/Yield:
NYSE / “VR”
$55.01
79,132,252
$4.35 billion
$1.40 per share (2.54%)
1) Validus increased its quarterly common share dividend to $0.35 from $0.32 on February 2, 2016.
39
Talbot Composite Rate Index – The Benefits of Cycle Management
1) Rate index reflects the whole account rate change, as adjusted for changes in exposure, inflation, attachment point and terms and conditions.
2) All data points are as of December 31st.
100%
126%
187%
208% 206% 204%
217%
207%
197%
209% 209%
215%
221% 220%
211%
198%
186%
75%
100%
125%
150%
175%
200%
225%
250%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
40
Abbreviated Balance Sheets
1) A full explanation and disclaimer is contained in the note on non‐GAAP financial and other measures found in the Appendix hereto.
2) Capital as at December 31, 2016 includes $150.0 million of 5.875% Non‐Cumulative Preferred Shares, Series A.
(Expressed in thousands of U.S. Dollars)
December 31, 2016 December 31, 2015 December 31, 2014
Assets
Fixed maturities $ 5,543,030 $ 5,510,331 $ 5,545,231
Short‐term investments 2,796,170 1,941,635 1,501,212
Investment in investment affiliates, equity method 100,431 87,673 63,506
Other investments 405,712 336,856 334,685
Cash and cash equivalents 419,976 723,109 550,401
Restricted cash 70,956 73,270 173,003
Total investments and cash 9,336,275 8,672,874 8,168,038
Goodwill and Intangible assets 312,350 318,016 322,821
Other assets 1,701,130 1,612,595 1,204,542
Total assets $ 11,349,755 $ 10,515,812 $ 10,112,564
Liabilities
Reserve for losses and loss expenses $ 2,995,195 $ 2,996,567 $ 3,243,147
Unearned premiums 1,076,049 966,210 989,229
Other liabilities 685,452 789,362 599,300
Notes payable to AlphaCat investors 278,202 75,493 ‐
Senior notes payable 245,362 245,161 244,960
Debentures payable 537,226 537,668 539,277
Total liabilities $ 5,817,486 $ 5,610,461 $ 5,615,913
Redeemable noncontrolling interest $ 1,528,001 $ 1,111,714 $ 617,791
Shareholders' equity
Capital $ 961,655 $ 1,004,919 $ 1,213,614
Retained earnings 2,876,636 2,634,056 2,372,972
Total shareholders' equity available to Validus 3,838,291 3,638,975 3,586,586
Noncontrolling interest 165,977 154,662 292,274
Total shareholders' equity 4,004,268 3,793,637 3,878,860
Total liabilities, noncontrolling interests and shareholders' equity $ 11,349,755 $ 10,515,812 $ 10,112,564
Debt to total capitalization 3.9% 4.3% 4.6%
Debt and hybrids to total capitalzation 12.4% 13.8% 14.9%
Investments and cash to equity 233.2% 228.6% 210.6%
41
Net Operating Income Available to Validus Reconciliation
Validus Holdings, Ltd.
Non‐GAAP Financial Measure Reconciliation
Net Operating Income available to Validus Common Shareholders, Net Operating Income per share available to Validus Common Shareholders and Annualized Net Operating Return on Average Equity
(Expressed in thousands of U.S. Dollars, except share and per share information)
Three Months Ended Year Ended
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Net income available to Validus common shareholders $ 7,767 $ 69,042 $ 359,384 $ 374,893
Adjustments for:
Net realized (gains) losses on investments (9,220) 2,928 (15,757) (2,298)
Change in net unrealized losses (gains) on investments 67,460 34,862 (16,871) 32,395
(Income) loss from investment affiliates (2,166) 1,261 2,083 (4,281)
Foreign exchange losses (gains) 901 (797) (10,864) 8,731
Other (income) loss (7) (1,576) 766 1,002
Net (loss) income attributable to noncontrolling interest (412) (325) 457 (693)
Net operating income available to Validus common shareholders 64,323 105,395 319,198 409,749
Net investment income (38,153) (31,612) (150,385) (127,824)
Finance expenses 14,630 16,581 58,520 74,742
Dividends on preferred shares 2,203 ‐ 4,455 ‐
Tax (benefit) expense (21,147) (756) (19,729) 6,376
Loss from operating affiliate ‐ 1,708 23 3,949
Income attributable to AlphaCat investors 7,080 974 23,358 2,412
Net operating income attributable to noncontrolling interest 27,612 26,321 122,906 93,657
Underwriting income $ 56,548 $ 118,611 $ 358,346 $ 463,061
Net operating income available to Validus common shareholders 64,323 105,395 319,198 409,749
Less: Dividends on outstanding warrants ‐ ‐ ‐ (3,566)
Net operating income allocated to Validus, adjusted $ 64,323 $ 105,395 $ 319,198 $ 406,183
Net income per share available to Validus common shareholders ‐ diluted $ 0.10 $ 0.81 $ 4.36 $ 4.34
Adjustments for:
Net realized (gains) losses on investments (0.11) 0.03 (0.19) (0.03)
Change in net unrealized losses (gains) on investments 0.84 0.42 (0.20) 0.38
(Income) loss from investment affiliates (0.03) 0.01 0.03 (0.05)
Foreign exchange losses (gains) 0.01 (0.01) (0.14) 0.10
Other (income) loss ‐ (0.02) 0.01 0.01
Net income (loss) income attributable to noncontrolling interest (0.01) ‐ 0.01 (0.01)
Net operating income per share available to Validus common shareholders ‐ diluted $ 0.80 $ 1.24 $ 3.88 $ 4.74
Weighted average number of common shares and common share equivalents 80,621,967 85,181,258 82,359,460 86,426,760
Average shareholders' equity available to Validus common shareholders 3,702,956 3,641,970 3,697,114 3,641,920
Annualized return on average equity 0.8% 7.6% 9.7% 10.3%
Annualized net operating return on average equity 6.9% 11.6% 8.6% 11.3%
421) Weighted average exercise price for those stock options that have an exercise price lower than book value per share.
2) Total shareholders’ equity available to Validus common shareholders excludes the liquidation value of the preferred shares of $150 million.
3) 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.
Diluted Book Value Per Share Reconciliation
(Expressed in thousands of U.S. Dollars, except share and per share information)
December 31, 2016
Equity amount Shares Exercise Price (1)
Book value per
share
Total shareholders' equity available to Validus common shareholders (2)
Book value per common share
Total shareholders' equity available to Validus common shareholders $ 3,688,291 79,132,252 $ 46.61
Tangible book value per common share $ 42.66
Book value per diluted common share
Total shareholders' equity available to Validus common shareholders $ 3,688,291 79,132,252
Assumed exercise of outstanding stock options (3) 614 26,136 $ 23.48
Unvested restricted shares ‐ 2,868,610
Book value per diluted common share $ 3,688,905 82,026,998 $ 44.97
Adjustment for accumulated dividends 11.56
Diluted book value per common share plus accumulated dividends $ 56.53
Tangible book value per diluted common share $ 41.16
43
In presenting the Company’s results herein, management has included and discussed certain schedules containing underwriting income (loss), net operating income (loss)
available (attributable) to Validus, annualized return on average equity and diluted book value per common share that are not calculated under standards or rules that
comprise U.S. GAAP. Such measures are referred to as non‐GAAP. Non‐GAAP measures may be defined or calculated differently by other companies. We believe that these
measures are important to investors and other interested parties. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP.
The AlphaCat segment information is presented as an asset manager view and therefore is considered non‐GAAP.
Underwriting income indicates the performance of the Company's core underwriting segments, excluding revenues and expenses such as net investment income (loss),
finance expenses, net realized and change in unrealized gains (losses) on investments, foreign exchange gains (losses), other income (loss) and transaction expenses. The
Company believes the reporting of underwriting income enhances the understanding of our results by highlighting the underlying profitability of the Company's core
insurance and reinsurance business. Underwriting profitability is influenced significantly by earned premium growth, adequacy of the Company's pricing and loss frequency
and severity.
Net operating income (loss), a non‐GAAP financial measure, is defined as net income (loss) excluding net realized and change in net unrealized gains (losses) on investments,
income (loss) from investment affiliate, foreign exchange gains (losses), other income (loss) and non‐recurring items. This measure focuses on the underlying fundamentals
of our operations without the influence of gains (losses) from the sale of investments, translation of non‐U.S.$ currencies and non‐recurring items. Gains (losses) from the
sale of investments are driven by the timing of the disposition of investments, not by our operating performance. Gains (losses) arising from translation of non‐U.S.$
denominated balances are unrelated to our underlying business. Net operating income (loss) available (attributable) to Validus common shareholders is defined as above,
but excludes operating income (loss) available (attributable) to noncontrolling interest and dividends on preference shares.
Diluted book value per share is calculated based on total shareholders’ equity available to Validus common shareholders plus the assumed proceeds from the exercise of
outstanding stock options, divided by the sum of unvested restricted shares, stock options and share equivalents outstanding (assuming their exercise).
Reconciliations to the most comparable GAAP measure for net operating income and diluted book value per share can be found on pages 41 and 42, respectively.
Net loss estimates and zonal aggregates are before income tax, net of reinstatement premiums, and net of reinsurance and retrocessional recoveries. The estimates set
forth herein are based on an Occurrence basis on assumptions that are inherently subject to significant uncertainties and contingencies. These uncertainties and
contingencies can affect actual losses and could cause actual losses to differ materially from those expressed above. In particular, modeled loss estimates do not necessarily
accurately predict actual losses, and may significantly mis‐estimate actual losses. Such estimates, therefore, should not be considered as a representation of actual losses.
Notes on Non‐GAAP and Other Financial and Exposure Measures
44
The Company has developed the estimates of losses expected from certain catastrophes for its portfolio of property, marine, workers’ compensation, and personal accident
contracts using commercially available catastrophe models such as RMS, AIR and EQECAT, which are applied and adjusted by the Company. These estimates include
assumptions regarding the location, size and magnitude of an event, the frequency of events, the construction type and damageability of property in a zone, policy terms
and conditions and the cost of rebuilding property in a zone, among other assumptions. These assumptions will evolve following any actual event. Accordingly, if the
estimates and assumptions that are entered into the risk model are incorrect, or if the risk model proves to be an inaccurate forecasting tool, the losses the Company might
incur from an actual catastrophe could be materially higher than its expectation of losses generated from modeled catastrophe scenarios. In addition, many risks such as
second‐event covers, aggregate excess of loss, or attritional loss components cannot be fully evaluated using the vendor models. Further, there can be no assurance that
such third party models are free of defects in the modeling logic or in the software code. Commencing in January 2012, the Company incorporated RMS version 11 as part
of its vendor models.
The Company has presented the Company Realistic Disaster Scenarios for non‐natural catastrophe events. Twice yearly, Lloyds' syndicates, including the Company's Talbot
Syndicate 1183, are required to provide details of their potential exposures to specific disaster scenarios. Lloyds' makes its updated Realistic Disaster Scenarios (RDS)
guidance available to the market annually. The RDS scenario specification document for 2012 can be accessed at the RDS part of the Lloyd's public website:
http://www.lloyds.com/The‐Market/Tools‐and‐Resources/Research/Exposure‐Management/Realistic‐Disaster‐Scenarios
The Consolidated Net Premiums Earned used in the calculation represents the net premiums earned for the year ended December 31, 2016.
Modeling catastrophe threat scenarios is a complex exercise involving numerous variables and is inherently subject to significant uncertainties and contingencies. These
uncertainties and contingencies can affect actual losses and could cause actual losses incurred by the Company to differ materially from those expressed above. Should an
event occur, the modeled outcomes may prove inadequate, possibly materially so. This may occur for a number of reasons including, legal requirements, model deficiency,
non‐modeled risks or data inaccuracies.
A modeled outcome of net loss from a single event also relies in significant part on the reinsurance and retrocession arrangements in place, or expected to be in place at the
time of the analysis, and may change during the year. Modeled outcomes assume that the reinsurance and retrocession in place responds as expected with minimal
reinsurance failure or dispute. Reinsurance is purchased to match the original exposure as far as possible, but it is possible for there to be a mismatch or gap in cover which
could result in higher than modeled losses to the Company. In addition, many parts of the reinsurance program are purchased with limited reinstatements and, therefore,
the number of claims or events which may be recovered from second or subsequent events is limited. It should also be noted that renewal dates of the reinsurance program
do not necessarily coincide with those of the inwards business written. Where original business is not protected by risks attaching reinsurance or retrocession programs, the
programs could expire resulting in an increase in the possible net loss retained by the Company.
Investors should not rely on the information set forth in this presentation when considering an investment in the Company. The information contained in this presentation
has not been audited nor has it been subject to independent verification. The estimates set forth herein speak only as of the date of this presentation and the Company
undertakes no obligation to update or revise such information to reflect the occurrence of future events. The events presented reflect a specific set of prescribed
calculations and do not necessarily reflect all events that may impact the Company.
Notes on Non‐GAAP and Other Financial and Exposure Measures –
Continued
Street Address: 29 Richmond Road
Pembroke, Bermuda
Mailing Address: Suite 1790 48 Par‐la‐Ville Road
Hamilton, Bermuda HM 11
Telephone: +1‐441‐278‐9000
Email: investor.relations@validusholdings.com
For more information on our company, products and
management team please visit our website at:
www.validusholdings.com