Underwriting Risk Services Ltd, which is an underwriting agency writing primarily yachts, marinas and fine art business on behalf of the Talbot syndicate and others.
made catastrophes, which means that the Company could become liable for a significant amount of losses on short notice. Accordingly, the Company has structured its investment portfolio to preserve capital and maintain a high level of liquidity, which means that the large majority of the Company’s investment portfolio consists of short-term fixed maturity investments. The Company’s fixed income investments are classified as trading. Under U.S. GAAP, these securities are carried at fair value, and unrealized gains and losses are included in net income in the Company’s consolidated statements of operations and comprehensive income.
2. The Company uses reinsurance industry information in order to perform consistency checks on the data provided by ceding companies and to identify trends in loss reporting and settlement activity. The Company incorporates such information in establishing reinsurance reserves.
Management has determined that the Company operates in two reportable segments. The two segments are its significant operating subsidiaries, Validus Re and Talbot.
Increased gross premiums written of $6.1 million and $3.8 million, respectively, for the new accident and health and bloodstock and livestock classes offset by reduced war and financial institutions gross premiums written of $11.5 million and $4.5 million, respectively.
Corporate. Corporate general and administrative expenses for the three months ended December 31, 2007 were $2.2 million compared to $1.5 million for the three months ended December 31, 2006. Corporate general and administrative expenses are comprised of executive and board expenses, internal and external audit expenses and other cost relating to the Company as a whole.
$17.2 million of FAL finance expense resulting from the consolidation of Talbot effective the fourth quarter of 2007.
The earliest year of account includes the run-off of prior (closed) years of account
Talbot. Talbot net premiums written for the year ended December 31, 2007 were $597.9 million compared to $529.7 million for the year ended December 31, 2006, an increase of $68.1 million or 12.9%. Details of net premiums written by line of business are provided below:
The following table sets forth a reconciliation of gross and net reserves for losses and loss expenses by segment for the year ended December 31, 2007:
Planned increases in headcount and associated costs of $7.7 million arising from the commencement of the accident & health and bloodstock & livestock accounts;
Talbot. Talbot share compensation expense for the year ended December 31, 2007 was $1.7 million. Share compensation expense as a percent of net premiums earned for the year ended December 31, 2007 was 0.6%.
Investment management fees incurred relate to BlackRock Financial Management, Inc. (“BlackRock”) and Goldman Sachs Asset Management L.P. and its affiliates (“GSAM”). Merrill Lynch & Co, Inc. (“Merrill Lynch”) and Goldman Sachs are major shareholders of the Company. BlackRock is considered a related party due to its merger in February 2006 with Merrill Lynch Investment Managers. Investment management fees earned by BlackRock for the year ended December 31, 2007 and December 31, 2006 were $1.4 million and $0.9 million, respectively. Investment management fees earned by GSAM for the year ended December 31, 2007 and December 31, 2006 were $0.9 million and $0.7 million, respectively. Management believes that the fees charged were consistent with those that would have been charged by unrelated third parties.
$26.1 million of FAL finance expense resulting from the consolidation of Talbot effective the third quarter of 2007.
Validus Holdings, Ltd. is a holding company and conducts no operations of its own. The Company relies primarily on cash dividends and other permitted payments from Validus Re and Talbot to pay finance expenses and other holding company expenses. There are restrictions on the payment of dividends from Validus Re and Talbot to the Company. The Bermuda Companies Act 1981 limits the Company’s ability to pay dividends to shareholders. On February 20, 2008 the Company announced a quarterly cash dividend of $0.20 per share payable on March 17, 2008 to holders of record on March 3, 2008. The timing and amount of any future cash dividends, however, will be at the discretion of our Board of Directors and will depend upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory, rating agency and contractual constraints or restrictions and any other factors that our Board of Directors deems relevant.
The 9.069% Junior Subordinated Deferrable Debentures and the 8.480% Junior Subordinated Deferrable Debentures mature on June 15, 2036 and June 15, 2037, respectively.
our ability to identify, hire and retain, on a timely and unimpeded basis and on anticipated economic and other terms, experienced and capable senior management, as well as underwriters, claims professionals and support staff;