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VALIDUS HOLDINGS LTD Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 17, 2012 05:36PM
VALIDUS HOLDINGS LTD (VR) filed Annual Report for the period ended 2011-12-31. Validus Holdings Ltd. has a market cap of $3.13 billion; its shares were traded at around $31.54 with a P/E ratio of 197.4 and P/S ratio of 1.6. The dividend yield of Validus Holdings Ltd. stocks is 3.2%.
Highlight of Business Operations:The risks covered in financial institutions are primarily fraud related and are principally written on an excess of loss basis. Talbot's financial institutions account is concentrated on non-U.S. based clients, with 40.2% of gross premiums written in 2011 generated in Europe, 10.5% from the U.S. and 49.3% from other geographical regions. In addition, Talbot seeks to write regional accounts rather than global financial institutions with exposure in multiple jurisdictions and has only limited participation in exposures to publicly listed U.S. companies. As of December 31, 2011, the Company had gross reserves related to the financial institutions business of $176.7 million, comprised of $69.5 million, or 39.4% of incurred but not reported ("IBNR") and $107.2 million, or 60.6% of case reserves. For comparison, as at December 31, 2010 the Company had gross reserves related to the financial institutions business of $171.5 million, comprising $83.0 million, or 48.4% of IBNR and $88.5 million, or 51.6% of case reserves. As of December 31, 2011, Talbot had minimal exposure to U.S. directors' and officers' risks.
Substantially all of the fixed maturity investments held at December 31, 2011 were publicly traded. At December 31, 2011, the average duration of the Company's fixed maturity portfolio was 1.63 years (December 31, 2010: 2.27 years). Management emphasizes capital preservation for the portfolio and maintains a significant allocation of short-term investments. At December 31, 2011, the average rating of the portfolio was AA- (December 31, 2010: AA+). At December 31, 2011, the total fixed maturity portfolio was $4,894.1 million (December 31, 2010: $4,823.9 million), of which $882.9 million (December 31, 2010: $2,946.5 million) were rated AAA.
Controller Notification. Under the Insurance Act each shareholder or prospective shareholder will be responsible for notifying the BMA in writing of his becoming a controller, directly or indirectly, of 10%, 20%, 33% or 50% of the Company and/or any of the Company's Bermuda insurance subsidiaries within 45 days of becoming such a controller. The BMA may serve a notice of objection on any controller of the Company or any of the Company's Bermuda insurance subsidiaries if it appears to the BMA that the person is no longer fit and proper to be such a controller. The Company's Bermuda insurance subsidiaries are also required to notify the BMA in writing in the event of any person becoming or ceasing to be a controller or officer, a controller or officer being a managing director, chief executive, director, secretary, chief executive or senior executive or other person in accordance with whose directions or instructions the directors of the Bermuda insurance subsidiaries are accustomed to act, including any person who holds, or is entitled to exercise, 10% or more of the voting shares or voting power or is able to exercise a significant influence over the management of any of the Bermuda insurance subsidiaries.
We market our insurance and reinsurance on a worldwide basis primarily through brokers, and we depend on a small number of brokers for a large portion of our revenues. For the year ended December 31, 2011, our business was primarily sourced from the following brokers: Marsh Inc./Guy Carpenter & Co. 25.9%, Aon Benfield Group Ltd. 17.0% and Willis Group Holdings Ltd. 23.8%. These three brokers provided a total of 66.7% of our gross premiums written for the year ended December 31, 2011. Loss of all or a substantial portion of the business provided by one or more of these brokers could adversely affect our business.
process. Locally required capital levels may be invested in home currencies in order to satisfy regulatory requirements and to support local insurance operations. The principal currencies creating foreign exchange risk are the British pound sterling and the Euro. As of December 31, 2011, $797.0 million, or 10.5% of our total assets and $890.5 million, or 21.4% of our total liabilities were held in foreign currencies. As of December 31, 2011, $88.8 million, or 2.1% of our total net liabilities held in foreign currencies was non-monetary items which do not require revaluation at each reporting date. We look to manage our foreign currency exposure through the use of currency derivatives as well as matching of our major foreign denominated assets and liabilities. However, there is no guarantee that we will effectively mitigate our exposure to foreign exchange losses. Please refer to Part II, Item 7A "
Stocks Discussed: VR,