Validus Holdings, Ltd.
) reported second-quarter 2014 net operating income of $1.39 per
share, missing the Zacks Consensus Estimate by 4.1%. However,
earnings increased 35% year over year, driven by strong
underwriting results, conservative reserving practices and better
diversification between insurance and reinsurance.
Adjusting for non-recurring items, Validus reported net income of
$153.4 million or $1.61 per share compared with $30.7 million or 28
cents in the year-ago quarter.
Behind the Headlines
Net premiums earned for the reported quarter declined 14.9% year
Net investment income was $21.3 million, down 18.8% year over
year. Annualized effective yield was 1.19%, down 10 basis
points due to the sale of bank loans for investing in high-grade
structured products fund.
Underwriting income increased 24.2% year over year due to a decline
in the loss expenses and policy acquisition costs.
Combined ratio for the second quarter improved by 990 basis points
(bps) to 68.6% due to solid performance in all the segments.
General and administrative expenses increased 31.3% year over year.
Gross premiums were $310 million, down 12.2% year over year due to
lower premiums at property lines and marine lines of business.
The combined ratio improved by 2370 bps year over year due to a
better loss ratio, driven by favorable loss reserve development.
Gross premiums earned inched up 0.8% year over year, led by
increase in marine premiums and specialty premiums in the reported
The combined ratio deteriorated 340 bps due to deterioration in the
Gross premiums including realized and unrealized gains on the PaCre
investments were $43.8 million, down 6.4% year over year in the
The combined ratio improved by 1350 bps year over year in the
The ownership of Validus in various AlphaCat entities had a
favorable impact on net operating income available, which came in
at $0.9 million.
Validus exited the quarter with cash and cash equivalents of $1.16
billion, up 10.4% as of Dec 31, 2013.
Total assets of Validus increased 6.0% to $10.4 billion from
Total shareholders' equity came in at nearly $4.3 billion as of Jun
30, 2014, up about 2% from the 2013 year-end.
Book value per share increased 6.4% to $38.55 per share as of Jun
Return on equity was 14.3%, up from 11.9% year over year.
Performance of Other Broker Insurers
While Aon plc (
) and Blue Capital Reinsurance Holdings Ltd. (
) outperformed the Zacks Consensus Estimate, Brown & Brown Inc.
) missed the same.
Validus Holdings, Ltd. currently has a Zacks Rank #3 (Hold).
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