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com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 23, 2009

Commission file number 001-33606

VALIDUS HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

BERMUDA 98-0501001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

19 Par-La-Ville Road, Hamilton, HM 11 Bermuda

(Address of principal executive offices)

Registrant’s telephone number, including area code: (441) 278-9000

Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01 Regulation FD Disclosure.

Beginning on February 24, 2009, Validus Holdings, Ltd. will present the information attached to this report as Exhibit 99.1 to various
investors. The presentation attached to this Current Report on Form 8-K as Exhibit 99.1 is incorporated herein by reference.
The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1, shall not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. The following exhibits are filed herewith:

Exhibit No. Description

99.1 Investor Presentation

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.

Date: February 23, 2009 By: /s/ Joseph E. (Jeff) Consolino

Name: Joseph E. (Jeff) Consolino
Title: Executive Vice President & Chief Financial
Officer

M er r i l l Ly n c h I ns ur ance I nves t or Co n f e r e n c e Fe br ua r y 24, 2009

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Ca u t i o n a r y No t e Re g a r d i n g F o r wa r d - L o o k i n g S t a t e m e n t s Al l f o r wa r d - l o o k i n g s t a t e m e n t s a d d r e s s m a t t e r s t h a t i n v o l v e r i s k s a n d u n c e r t a i n t i e s . Ac c o r d i n g l y , t h e r e a r e o r wi l l b e i m p o r t a n t f a c t o r s t h a t c o u l d c a u s e a c t u a l r e s u l t s t o d i f f e r m a t e r i a l l y f r o m t h o s e i n d i c a t e d i n s u c h s t a t e m e n t s a n d , t h e r e f o r e , y o u s h o u l d n o t p l a c e u n d u e r e l i a n c e o n a n y s u c h s t a t e m e n t s . T h i s p r e s e n t a t i o n m a y i n c l u d e f o r wa r d - l o o k i n g s t a t e m e n t s , b o t h wi t h r e s p e c t t o u s a n d o u r i n d u s t r y , t h a t r e f l e c t o u r c u r r e n t v i e ws wi t h r e s p e c t t o f u t u r e e v e n t s a n d f i n a n c i a l p e r f o r m a n c e . S t a t e m e n t s t h a t i n c l u d e t h e wo r d s “ e x p e c t , ” “ i n t e n d , ” “ p l a n , ” “ b e l i e v e , ” “ p r o j e c t , ” “ a n t i c i p a t e , ” “ wi l l , ” “ m a y ” a n d
s i m i l a r s t a t e m e n t s o f a f u t u r e o r f o r wa r d - l o o k i n g n a t u r e i d e n t i f y f o r wa r d - l o o k i n g s t a t e m e n t s . W e b e l i e v e t h a t t h e s e f a c t o r s i n c l u d e , b u t a r e n o t l i m i t e d t o , t h e f o l l o wi n g : 1 ) u n p r e d i c t a b i l i t y a n d s e v e r i t y o f c a t a s t r o p h i c e v e n t s ; 2 ) r a t i n g a g e n c y a c t i o n s ; 3 ) a d e q u a c y o f o u r r i s k m a n a g e m e n t a n d l o s s l i m i t a t i o n m e t h o d s ; 4 ) c y c l i c a l i t y o f d e m a n d a n d p r i c i n g i n t h e i n s u r a n c e a n d r e i n s u r a n c e m a r k e t s ; 5 ) o u r l i m i t e d o p e r a t i n g h i s t o r y ; 6 ) o u r a b i l i t y t o s u c c e s s f u l l y i m p l e m e n t o u r b u s i n e s s s t r a t e g y d u r i n g “ s o f t ” a s we l l a s “ h a r d ” m a r k e t s ; 7 ) a d e q u a c y o f o u r l o s s r e s e r v e s ; 8 ) c o n t i n u e d a v a i l a b i l i t y o f c a p i t a l a n d f i n a n c i n g ; 9 ) r e t e n t i o n o f k e y p e r s o n n e l ; 1 0 )
c o m p e t i t i o n ; 1 1 ) p o t e n t i a l l o s s o f b u s i n e s s f r o m o n e o r m o r e m a j o r i n s u r a n c e o r r e i n s u r a n c e b r o k e r s ; 1 2 ) o u r a b i l i t y t o i m p l e m e n t , s u c c e s s f u l l y a n d o n a t i m e l y b a s i s , c o m p l e x i n f r a s t r u c t u r e , d i s t r i b u t i o n c a p a b i l i t i e s , s y s t e m s , p r o c e d u r e s a n d i n t e r n a l c o n t r o l s , a n d t o d e v e l o p a c c u r a t e a c t u a r i a l d a t a t o s u p p o r t t h e b u s i n e s s a n d r e g u l a t o r y a n d r e p o r t i n g r e q u i r e m e n t s ; 1 3 ) g e n e r a l e c o n o m i c a n d m a r k e t c o n d i t i o n s ( i n c l u d i n g i n f l a t i o n , v o l a t i l i t y i n t h e c r e d i t a n d c a p i t a l m a r k e t s , i n t e r e s t r a t e s a n d f o r e i g n c u r r e n c y e x c h a n g e r a t e s ) ; 1 4 ) t h e i n t e g r a t i o n o f o t h e r b u s i n e s s e s we m a y a c q u i r e o r n e w b u s i n e s s v e n t u r e s we m a y s t a r t ; 1 5 ) t h e e f f e c t o n o u r i n v e s t m e n t
p o r t f o l i o o f c h a n g i n g f i n a n c i a l m a r k e t c o n d i t i o n s i n c l u d i n g i n f l a t i o n , i n t e r e s t r a t e s , l i q u i d i t y a n d o t h e r f a c t o r s ; 1 6 ) a c t s o f t e r r o r i s m o r o u t b r e a k o f wa r ; a n d 1 7 ) a v a i l a b i l i t y o f r e i n s u r a n c e a n d r e t r o c e s s i o n a l c o v e r a g e , a s we l l a s m a n a g e m e n t ’ s r e s p o n s e t o a n y o f t h e a f o r e m e n t i o n e d f a c t o r s . T h e f o r e g o i n g r e v i e w o f i m p o r t a n t f a c t o r s s h o u l d n o t b e c o n s t r u e d a s e x h a u s t i v e a n d s h o u l d b e r e a d i n c o n j u n c t i o n wi t h t h e o t h e r c a u t i o n a r y s t a t e m e n t s t h a t a r e i n c l u d e d h e r e i n o r e l s e wh e r e , i n c l u d i n g t h e Ri s k F a c t o r s i n c l u d e d i n o u r m o s t r e c e n t r e p o r t s o n F o r m 1 0 - K a n d F o r m 1 0 - Q a n d o t h e r d o c u m e n t s o n f i l e wi t h t h e S e c u r i t i e s a n d E x c h a n g e Co m m i s s i o n . An y f o r wa r d -
l o o k i n g s t a t e m e n t s m a d e i n t h i s r e l e a s e a r e q u a l i f i e d b y t h e s e c a u t i o n a r y s t a t e m e n t s , a n d t h e r e c a n b e n o a s s u r a n c e t h a t t h e a c t u a l r e s u l t s o r d e v e l o p m e n t s a n t i c i p a t e d b y u s wi l l b e r e a l i z e d o r , e v e n i f s u b s t a n t i a l l y r e a l i z e d , t h a t t h e y wi l l h a v e t h e e x p e c t e d c o n s e q u e n c e s t o , o r e f f e c t s o n , u s o r o u r b u s i n e s s o r o p e r a t i o n s . Al l f o r wa r d - l o o k i n g s t a t e m e n t s c o n t a i n e d h e r e i n s p e a k o n l y a s o f t h e d a t e o f t h i s p r e s e n t a t i o n a n d we u n d e r t a k e n o o b l i g a t i o n t o u p d a t e p u b l i c l y o r r e v i s e a n y f o r wa r d - l o o k i n g s t a t e m e n t , wh e t h e r a s a r e s u l t o f n e w i n f o r m a t i o n , f u t u r e d e v e l o p m e n t s o r o t h e r wi s e . T h i s p r e s e n t a t i o n a l s o c o n t a i n s u n a u d i t e d p r o f o r m a c o n s o l i d a t e d f i n a n c i a l d a t a
i n t e n d e d t o p r o v i d e i n f o r m a t i o n a b o u t h o w t h e a c q u i s i t i o n o f T a l b o t m i g h t h a v e i m p a c t e d t h e f i n a n c i a l s t a t e m e n t s o f t h e Co m p a n y i f i t h a d b e e n c o n s u m m a t e d a t a n e a r l i e r t i m e . T h e u n a u d i t e d p r o f o r m a c o n s o l i d a t e d f i n a n c i a l d a t a d o e s n o t n e c e s s a r i l y r e f l e c t t h e f i n a n c i a l p o s i t i o n o r r e s u l t s o f o p e r a t i o n s t h a t wo u l d h a v e a c t u a l l y r e s u l t e d h a d t h e a c q u i s i t i o n o c c u r r e d a s o f t h e d a t e s i n d i c a t e d , n o r s h o u l d t h e y b e t a k e n a s n e c e s s a r i l y i n d i c a t i v e o f t h e f u t u r e f i n a n c i a l p o s i t i o n o r r e s u l t s o f o p e r a t i o n s o f t h e Co m p a n y . S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 1
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No t e o n No n - GAAP F i n a n c i a l M e a s u r e s I n p r e s e n t i n g t h e Co m p a n y ’ s r e s u l t s h e r e i n , m a n a g e m e n t h a s i n c l u d e d a n d d i s c u s s e d u n d e r wr i t i n g i n c o m e ( l o s s ) a n d d i l u t e d b o o k v a l u e p e r s h a r e t h a t a r e n o t c a l c u l a t e d u n d e r s t a n d a r d s o r r u l e s t h a t c o m p r i s e U. S . GAAP . S u c h m e a s u r e s a r e r e f e r r e d t o a s n o n - GAAP . No n - GAAP m e a s u r e s m a y be def i ned or cal cul at ed di f f er ent l y by ot her com pani es . W e bel i eve t hat t hes es m eas ur es ar e i m por t ant t o i nves t or s and ot her i nt er es t ed par t i es . T h e s e m e a s u r e s s h o u l d n o t b e v i e we d as a s ubs t i t ut e f or t hos e det er m i ned i n accor dance wi t h U. S . GAAP . T h e u n d e r wr i t i n g r e s u l t s o f an i ns ur ance or r ei ns ur ance com pany ar e of t en m eas ur ed by
r e f e r e n c e t o i t s u n d e r wr i t i n g i n c o m e b e c a u s e u n d e r wr i t i n g i n c o m e i n d i c a t e s t h e p e r f o r m a n c e o f t h e c o m p a n y ’ s c o r e u n d e r wr i t i n g f u n c t i o n . Un d e r wr i t i n g i n c o m e i s r e c o n c i l e d t o n e t i n c o m e b y t h e a d d i t i o n o r s u b t r a c t i o n o f n e t i n v e s t m e n t i n c o m e ( l o s s ) , f i n a n c i n g e x p e n s e s , f a i r v a l u e o f wa r r a n t s i s s u e d , n e t r e a l i z e d g a i n s ( l os s es ) on i nves t m ent s and f or ei gn exchange gai ns ( l os s es ) . Di l u t e d b o o k v a l u e p e r s h a r e i s c a l c u l a t e d b a s e d o n t o t a l s har ehol der s ’ equi t y pl us t he as s um ed pr oceeds f r om t he exer ci s e of o u t s t a n d i n g o p t i o n s a n d wa r r a n t s , d i v i d e d b y t h e s um of s har es , o p t i o n s , wa r r a n t s a n d s h a r e equi val ent s out s t andi ng ( as s um i ng t hei r exer ci s e) . A
r e c o n c i l i a t i o n o f t h e n o n GAAP m e a s u r e s d e t a i l e d h e r e i n t o t h e m o s t c o m p a r a b l e GAAP m e a s u r e c a n b e f o u n d a t t h e e n d o f t h i s p r e s e n t a t i o n . S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 2
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Se l e c t e d M ar ket I nf or m at i on Ex c h a n g e / Ti c k e r : NYS E / “ VR” Sha r e Pr i c e ( De c e m b e r 31, 2008) : $26. 16 Pr i m a r y Sha r e s Ou t s t a n d i n g : 75, 624, 697 Pr i m a r y M ar ket Ca p i t a l i z a t i o n : $1. 98bn An n u a l Di v i d e n d / Yi e l d : $0. 80 per s har e ( 3. 1% ) An a l y s t Co v e r a g e : • Jay Co h e n , M er r i l l Ly n c h • M at t Ca r l e t t i , Fox- Pi t t Ke l t o n Co c h r a n Ca r o n i a W al l er • De a n Ev a n s , Ke e f e , Br u y e t t e & W oods • J ul i a Fe r gus on, Do wl i n g & Pa r t ne r s • M at t He i m e r m a n n , J PM or ga n • Br i a n M er edi t h, UBS • Ch r i s Ne c z y p o r , Go l d m a n Sa c hs St r i c t l y Pr i va t e and Co n f i d e n t i a l 3
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Ch a n g e i n 2 0 0 8 Di l u t e d BV/ S h a r e p l u s Di v i d e n d s — P / C I n d u s t r y — - — - — - — - 0 80. 0% 70. 0% 60. 0% 50. 0% 40. 0% 30. 0% 20. 0% 10. 0% . 10. 0% 20. 0% 0% XL — 6 7 . 0 % HI G — 5 0 . 3 % CNA — 4 2 . 8 % M TG — 4 0 . 1 % S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l AL L — 3 4 . 8 % HM N — 2 7 . 9 % W T M — 2 5 . 5 % CI NF — 2 3 . 5 % OB — 2 2 . 4 % UT R - 2 0 . 7 % AF G — 1 7 . 9 % F S R — 1 7 . 4 % I NDM — 1 6 . 5 % M KL — 1 6 . 2 % S o u r c e : S NL F i n a n c i a l a n d c o m p a n y r e p o r t s ORI — 1 5 . 9 % T HG — 1 5 . 4 % P GR — 1 4 . 2 % S T F C — 1 4 . 2 % M CY — 1 3 . 0 % S I GI — 1 2 . 4 % M XGL — 1 0 . 8 % Ra n g e : F r o m + 1 5 . 0 % ( F M R) t o - 6 7 . 0 % ( XL ) , Av e r a g e of - 9. 6% UF CS — 10. 6% ACE — 9. 2% M RH — 9. 2% AXS — 7. 8% 4 F NF - 7. 0% 4
Un i v e r s e : 55 publ i c l i s t e d P& C c om pa ni e s r e por t i ng t hr ough Fe br ua r y 18 ACGL — 6 . 8 % , F AC - 6 . 8 % BW I NB — 6 . 6 % 2 0 0 9 L — 6. 1% M I G — 5 . 4 % I TI C — 4 . 2 % W RB — 3 . 5 % RNR — 3 . 3 % T RH — 3 . 2 % P RE — 3 . 2 % Re s u l t s : 1 6 c o m p a n i e s ( 2 9 . 1 % ) r e p o r t e d p o s i t i v e c h a n g e i n 2 0 0 8 d i l u t e d BV/ s h a r e pl us di vi dends E NH - - 2 . 8 % RL I — 2 . 8 % AGI I — 2 . 1 % P T P 0 . 8 % I P CC 1 . 3 % CB 2 . 3 % Ch a n g e i n 2 0 0 8 Di l u t e d BV/ S h a r e p l u s Di v i d e n d s — VR 2 . 4 % Z NT 3 . 1 % AF S I 3 . 2 % NAT L 3 . 2 % NAVG 4 . 2 % I P CR 4 . 7 % T RV 5 . 0 % DGI CA 5 . 7 % AHL 6 . 0 % AW H 1 0 . 0 % ACAP 1 2 . 3 % S UR 1 4 . 8 % F M R 1 5 . 0 % P / C I n d u s t r y
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Gr o wt h i n Di l u t e d Bo o k Va l u e Pe r Sha r e De c e m b e r 31, De c e m b e r 31, De c e m b e r 31, De c e m b e r 31, 2008 2007 2006 2005 Bo o k val ue per com m on s har e $ 25. 64 $ 26. 08 $ 20. 39 $ 17. 11 Di l u t e d book val ue per com m on s har e $ 23. 78 $ 24. 00 $ 19. 73 $ 16. 93 Di l u t e d book val ue per com m on s har e pl us accum ul at ed di vi dends $ 24. 58 $ 24. 00 $ 19. 73 $ 16. 93 Gr o wt h i n: Di l u t e d book val ue per com m on s har e pl us accum ul at ed di vi dends 2. 4% 21. 7% 16. 5% 13. 2% com pounded g r o wt h i n di l ut ed book val ue pl us accum ul at ed di vi dends s i nce com pany f or m at i on St r i c t l y Pr i va t e and Co n f i d e n t i a l 5
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VR Ou t p e r f o r m a n c e I s Du e To : ySt r ong r i sk m anagem ent y Co m p a n y f ounded on E RM bas ed pl an yM aj or i nves t m ent i n r i sk m anagem ent yM anagem ent and boar d over s ee i nves t m ent por t f ol i o y Di v e r s i f i e d pr em i um and ear ni ngs bas e yPr ope r t y cat i s ~ 25% of GP W y Bu s i n e s s m i x i s evenl y s pl i t b e t we e n i ns ur ance and r ei ns ur ance yPr oduc t or i ent at i on i s s hor t t ai l , dem and dr i ven y Co n s e r v a t i v e i nves t m ent por t f ol i o yFor m e d i n t he wa k e of Hu r r i c a n e s KRW , t he “cor r el at i on event ” y De c i s i o n t o accept l o we r pot ent i al r et ur ns t o pr ot ect capi t al bas e y Bu s i n e s s m odel i s t o m ake m oney u n d e r wr i t i n g St r i c t l y Pr i va t e and Co n f i d e n t i a l 6
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Le g a c y St r a t e gi e s I m pedi ng I ndus t r y Pe r f or m a nc e i n 2008 y Ex c e s s i v e asset l ever age yM agni f i ed asset vol at i l i t y i n s har ehol der s ’ equi t y y Ov e r l y aggr es s i ve i nves t m ent s t r at egi es y W hen di d i ns ur er s becom e hedge f unds ? yI m pr udent pur s ui t of yi el d yPoor capi t al m anagem ent yM anagem ent ’ s m os t bas i c r es pons i bi l i t y y Ou r vi ew i s t o f ul l y depl oy capi t al i n u n d e r wr i t i n g and r et ur n exces s capi t al t o s har ehol der s y Hi g h acci dent year com bi ned r at i os m as ked by r es er ve r el eases y No one i s t al ki ng about t he di s m al cur r ent acci dent year l os s r at i os yM any com pani es s uddenl y f i ndi ng m or e r es er ve r edundanci es St r i c t l y Pr i va t e and Co n f i d e n t i a l 7
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St r a t e gi e s Pos i t i oni ng VR f o r 2009 yShor t - t a i l f ocus i n di ver s i f i ed cl asses of bus i nes s y ROE m o d e l pr edi cat ed on hi gh m ar gi n pr oduct s ySt r ong cl i ent penet r at i on y Ab i l i t y t o scal e pl at f or m ySt r ong bal ance s heet St r i c t l y Pr i va t e and Co n f i d e n t i a l 8
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Di v e r s i f i e d Gl o b a l Bu s i n e s s Foc us e d on S h o r t - Ta i l Spe c i a l t y Va l i d u s Re GP W Ta l b o t GP W Bl o o d s t o c k Co n t i n g e n c y 2% 3% Pr ope r t y 21% Spe c i a l t y 11% W ar 18% M ar i ne 17% Pr ope r t y Ca t XOL 4 8 % Fi na nc i a l I ns t i t ut i ons 6% Ot h e r Pr ope r t y 24% Ac c i d e n t & He a l t h 3% Av i a t i o n & Ot h e r 6% M ar i ne 41% De c e m b e r 31, 2008 GP W To t a l : De c e m b e r 31, 2008 GP W To t a l : $687. 8 m i l l i on $709. 0 m i l l i on $1. 36 bi l l i on 2008 GP W Ba l a n c e d by Cl a s s : 46% Pr ope r t y, 29% M ar i ne, 25% Spe c i a l t y No t e : $1. 36bb uncons ol i dat ed GP W r ef l ect s $34. 3m m i nt er s egm ent el i m i nat i ons ; $687. 8m m and $709. 0m m s egm ent GP W do not . St r i c t l y Pr i va t e and Co n f i d e n t i a l 9
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Di v e r s i f i e d Gl o b a l Bu s i n e s s Foc us e d on S h o r t - Ta i l Spe c i a l t y VR i s bal anced b e t we e n i ns ur ance and r ei ns ur ance 100% 90% 15. 7% 80% 43. 2% 40. 8% 35. 6% 70% . 5% 0. 0% 58. 4% 57. 2% % 2 6 % 69. 9 67. 7 6 60% 78. 3% 50% 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% Re i n s u r a n c e ( % ) I ns ur ance ( % ) 40% 84. 3% 30% 56. 8% 59. 2% 64. 4% 20% 37. 5% 40. 0% 41. 6% 42. 8% 30. 1% 32. 3% 10% 21. 7% 0% 0. 0% 0. 0% 0. 0% 0. 0% 0. 0% 0. 0% F S R I P CR M RH P T P P RE T RH RE RNR ORH AHL M XGL E NH VR AXS ACGL AW H L RE No t e : Ba s e d on 2007 GP W except ACGL wh i c h i s NP W , VR wh i c h i s 2008 GP W . Sour c e : S EC f i l i n g s and ot her publ i c di s cl os ur es . St r i c t l y Pr i va t e and Co n f i d e n t i a l 10
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Di v e r s i f i e d Gl o b a l Bu s i n e s s Foc us e d on S h o r t - Ta i l Spe c i a l t y VR i s f ocus ed on s hor t - t ai l l i nes of bus i nes s . . . 100% 0. 0% 0. 0% 0. 0% 5. 8% 8. 9% 90% 80% 34. 0% 34. 9% 41. 6% 44. 3% 46. 3% 46. 9% 48. 9% 70% 57. 0% 8. 8% 5 % % 67. 9 69. 3 72. 2% 60% 50% Lo n g t ai l ( % ) 100. 0% 100. 0% 100. 0% . 2% % 4 1 Shor t t a i l ( % ) 9 91. 40% 30% 66. 0% 65. 1% 58. 4% 55. 7% 3. 7% 3. 1% . 1% 5 5 1 5 20% 43. 0% 41. 2% 32. 1% 30. 7% 27. 8% 10% 0% F S R I P CR L RE VR M RH RNR AXS AHL RE P T P E NH T RH P RE ORH AW H ACGL M XGL No t e : Ba s e d on 2007 GP W except ACGL wh i c h i s NP W , VR wh i c h i s 2008 GP W . Sour c e : S EC f i l i n g s and ot her publ i c di s cl os ur es . St r i c t l y Pr i va t e and Co n f i d e n t i a l 11
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Di v e r s i f i e d Gl o b a l Bu s i n e s s F o c u s e d o n S h o r t - T a i l S p e c i a l t y . . . b u t i s n o t a “ m o n o l i n e ” CAT r e i n s u r e r . 1 0 0 . 0 % 0 . 0 % 0 . 0 % 1 0 . 8 % 0 . 0 % 8. 9% 5. 8% 90. 0% % 28. 7 34. 0% 34. 9% 80. 0% 44. 3% 41. 6% 46. 3% 46. 9% 48. 9% 70. 0% 39. 8% 58. 8% 57. 0% % 9% % 3 67. 72. 2 69. 60. 0% 11. 7% 70. 7% 88. 2% 50. 0% . 2% 9 8 40. 0% 30. 4% 52. 0% 71. 3% 33. 7% 37. 4% 42. 8% 30. 0% 25. 9% 54. 3% 51. 3% 51. 1% . 0% % 1 20. 0% 4 19. 6% 23. 8 31. 1% 10. 0% 23. 5% 23. 3% 19. 4% 18. 3% 15. 6% 15. 4% 13. 1% 11. 8% 8. 3% 7. 0% . 0% 0. 0% . 0% . 0% 2 1 0 I P CR F S R RNR M RH VR P T P E NH RE AHL ORH AXS L RE M XGL ACGL P RE AW H T RH P r o p e r t y CAT Re i n s , % of t ot al Ot h e r Shor t Ta i l , % of t ot al
L o n g T a i l , % o f t o t a l No t e : Ba s e d o n 2 0 0 7 GP W e x c e p t ACGL wh i c h i s NP W , VR wh i c h i s 2 0 0 8 GP W . S o u r c e : S E C f i l i n g s a n d o t h e r p u b l i c di s c l os ur e s . St r i c t l y Pr i va t e a nd Co n f i d e n t i a l 1 2
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Ta l b o t 2 0 0 8 M a r k e t Sha r e by Ll o y d ’ s Cl a s s o f Bu s i n e s s Ya c h t 1 0 % W a r 1 0 % Av i a t i o n XOL 1 0 % Te r r o r i s m 9% Li v e s t o c k & bl oods t ock 9% Co n t i n g e n c y 8% Ba n k e r s bond & cr i m e 8% Pol i t i c a l r i sk 7% M ar i ne hul l 7% M ar i ne l i abi l i t y 5% Spa c e 4% En e r g y of f s hor e 4% Fi ne ar t & s peci e 3% Ca r g o 3% Pr ope r t y di r ect & f ac 2% M ar i ne XOL 2 % A& H 2 % Pr ope r t y r i sk XS 1 % Pr ope r t y cat XOL 1 % Pr of e s s i ona l i ndem ni t y 1% Pe r s ona l acci dent XOL 1 % Nu c l e a r 1% Fi na nc i a l guar ant ee 1% En e r g y ons hor e 1% D& O 1 % Ai r l i n e / GA L i a b i l i t y 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% No t e : M ar ket s har e expr es s ed as a % of gr os s pr em i um f or t he ni ne m ont hs ended
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Hi g h Re t u r n o n E q u i t y M o d e l VR Co m p o n e n t s o f Op e r a t i n g ROAE — 2 0 0 7 P r o F o r m a 2 0 0 7 p r o f o r m a r e t u r n o n A. ROAE F r o m Un d e r wr i t i n g 2 0 0 7 P F NP E / Av g . U/ W ROE I n c o m e a v e r a g e e q u i t y ( ROAE ) o f 2 4 . 4 % NP E E q u i t y M a r g i n Co n t r i b u t i o n Co n t r i b u t i o n Va l i d u s Re $ 5 5 9 , 0 2 9 0 . 3 3 4 9 . 7 % 1 6 . 4 % $ 2 7 7 , 7 4 3 • 2 1 . 0 % f r o m u n d e r wr i t i n g T a l b o t 5 8 3 , 8 8 4 0 . 3 4 1 8 . 7 % 6. 4% 105, 456 Co r p o r a t e — ( 1 . 5 % ) ( 2 6 , 1 1 9 ) • 7 . 8 % f r o m i n v e s t m e n t i n c o m e T o t a l u n d e r wr i t i n g $ 1 , 1 4 2 , 9 1 3 0 . 6 7 3 1 . 2 % 2 1 . 0 % $ 3 5 7 , 0 8 0 B. ROAE F r o m I n v e s t m e n t s • ( 4 . 4 ) % c o s t o f d e b t , t a x a n d Av e r a g e I n v e s t m e n t s 2 0 0 7 P F NI I ROE I n c o m e o t h e r I n v e s t m e n t s / E q u i t y / Av g . I n v . Co n t r i b u t i o n Co n t r i b u t i o n Ne t i nves t m ent
i n c o m e $ 2 , 7 0 0 , 8 8 5 1 . 5 9 4 . 8 9 % 7 . 8 % $ 1 3 2 , 2 0 5 C. F i n a n c i n g , T a x a n d Ot h e r Hy b r i d De b t W t d . Av g . ROE I n c o m e De b t / Av g . E q u i t y I n t e r e s t Ra t e Co n t r i b u t i o n Co n t r i b u t i o n Hy b r i d e x p e n s e s 3 5 0 , 0 0 0 0 . 2 1 8 . 7 % ( 1 . 8 % ) ( 3 0 , 5 6 4 ) Ot h e r f i n a n c e e x p e n s e s ( 0 . 3 % ) ( 5 , 2 4 6 ) F AL f i n a n c e e x p e n s e s ( 2 . 5 % ) ( 4 1 , 8 3 6 ) Ot h e r i n c o m e 0 . 3 % 5 , 4 6 6 T a x e s ( 0 . 2 % ) ( 2 , 7 0 3 ) To t a l ( 4. 4% ) $ ( 7 4 , 8 8 2 ) Co n s o l i d a t e d Op e r a t i n g ROAE ( A+ B+ C) ROE I n c o m e Co n t r i b u t i o n Co n t r i b u t i o n A. ROAE F r o m Un d e r wr i t i n g 2 1 . 0 % $ 3 5 7 , 0 8 0 B. ROAE F r o m I n v e s t m e n t s 7 . 8 % 1 3 2 , 2 0 5 C. F i n a n c i n g , T a x a n d Ot h e r ( 4 . 4 % ) ( 7 4 , 8 8 2 ) T o t a l Op e r a t i n g ROAE ( A+ B+ C) 2 4 . 4 % $ 4 1 4 , 4 0 3 No t e : 2 0 0 7 p r o f o r m a n e t i n c o m e a s pe r For m 8- K
d a t e d Au g u s t 7 , 2 0 0 8 . Av e r a g e s h a r e h o l d e r s ’ e q u i t y f o r t h e p e r i o d i s $ 1 , 6 9 7 . 8 m m a n d a v e r a g e c a s h a n d i n v e s t m e n t s f o r t h e p e r i o d i s $ 2 , 7 0 0 . 9 m m , i n e a c h c a s e c o m p u t e d o n a q u a r t e r l y a v e r a g e a n d p r o f o r m a a s i f t h e I P O a n d T a l b o t a c q u i s i t i o n we r e c o m p l e t e d o n De c e m b e r 3 1 , 2 0 0 6 . S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 1 4
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Cu r r e n t M a r k e t Dy n a m i c s y Re i n s u r a n c e i n d u s t r y c a p i t a l h a s b e e n m a t e r i a l l y d e p l e t e d y Hu r r i c a n e I k e i s t h e t h i r d m o s t c o s t l y h u r r i c a n e o n r e c o r d y F i n a n c i a l m a r k e t t u r m o i l r e d u c i n g i n v e s t m e n t v a l u e s a n d t h e r e f o r e c a p i t a l y Li m i t e d a c c e s s t o r e p l a c e m e n t c a p i t a l a n d n e w c a p a c i t y y Di s r u p t e d capi t al m ar ket s pr event r el oadi ng by i ncum bent s y He d g e f und st r esses l i m i t i ng col l at er al i zed capaci t y and s i decar act i vi t y y Ca t bond m ar ket i s i nact i ve yFur t he r chal l enges i n new com pany f or m at i ons y De m a n d f or r ei ns ur ance i s i ncr eas i ng yPr i m a r y com pani es al so f aci ng capi t al depl et i on wi t h cons t r i ct ed capi t al al t er nat i ves y Ne e d t o m anage r i sk l eaves r ei ns ur ance as one
o f t h e f e w c a p i t a l s u r r o g a t e s a v a i l a b l e y Hi g h l y p u b l i c i s s u e s wi t h l a r g e c o m p a n y b a l a n c e s h e e t s l e a d i n g b u y e r s t o r e t h i n k c o u n t e r p a r t y r i s k y Ra t e c h a n g e s wi l l b e m a n i f e s t e d f i r s t i n c a p i t a l - i n t e n s i v e , d e m a n d - d r i v e n p r o d u c t s y Ca t a s t r o p h e a n d e n e r g y l i n e s S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 1 5
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Gr o s s Pr e m i um W r i t t en at J anuar y 1 — Va l i d u s Re Se gm e nt 400. 0 $362. 0 $366. 7 350. 0 $291. 0 300. 0 250. 0 $217. 4 200. 0 150. 0 100. 0 50. 0 — 2006 2007 2008 2009 US I n t e r n a t i o n a l 26. 0% g r o wt h i n Va l i d u s Pr ope r t y Pr ope r t y M ar i ne Spe c i a l t y To t a l Re s egm ent gr os s pr em i um s wr i t t e n at Jan 1, 2009 $ 138. 2 $ 82. 9 $ 105. 8 $ 39. 8 $ 366. 7 J anuar y 1, 2009 Jan 1, 2008 111. 2 71. 9 73. 2 34. 7 291. 0 % Ch a n g e 24. 3% 15. 3% 44. 5% 14. 7% 26. 0% No t e : Al l am ount s i n ( $ US m i l l i o n s ) ot her t han per cent ages St r i c t l y Pr i va t e and Co n f i d e n t i a l 16
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Ab i l i t y t o Sc a l e Pl a t f or m Va l i d u s Ho l d i n g s Fl e xi bl e and Ef f i c i e n t Op e r a t i n g Pl a t f or m ySi nga por e r epr es ent at i ve of f i ce Ta l b o t Va l i d u s Re Ho l d i n g s yM i am i of f i ce t ar get i ng La t i n Am e r i c a y On s h o r e En e r g y Va l i d u s Ta l b o t Re a s e g u r o s Un d e r wr i t i n g y Av i a t i o n Te c h n i c a l Un d . Ri s k Li n e s Se r vi c e s M GA ( “ VURS I ” ) Si nga por e Re p . Of f i c e No t e : Ce r t a i n s ubs i di ar i es have been excl uded f or t he pur pos es of pr es ent at i on. For a com pl et e or gani zat i onal char t see t he com pany’ s m os t r ecent An n u a l Re p o r t on For m 10- K St r i c t l y Pr i va t e and Co n f i d e n t i a l 17
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I n v e s t m e n t P o r t f o l i o a t De c e m b e r 3 1 , 2 0 0 8 • Co n s e r v a t i v e i n v e s t m e n t s t r a t e g y No n - U. S . Go v t . S t a t e a n d L o c a l a n d Ag e n c y Go v t . , Ca t Bo n d s • E m p h a s i z e t h e p r e s e r v a t i o n o f ABS 2 . 9 % 0 . 8 % 4 . 2 % i n v e s t e d a s s e t s CM BS • P r o v i d e s uf f i c i e nt l i qui di t y f or t he 5. 9% pr om pt pa ym e nt of c l a i m s Shor t Te r m , Ca s h • No expos ur e t o al t er nat i ve asset No n - Ag e n c y and Eq u i v a l e n t s cl asses, equi t i es , der i vat i ves RM BS 7 . 0 % 25. 2% • Co m p r e h e n s i v e por t f ol i o di s cl os ur e Ag e n c y RM BS 1 3 . 2 % • Av e r a g e por t f ol i o r at i ng of AAA U. S . Go v t . and Ag e n c y 23. 4% • M i ni m um aver age cr edi t qual i t y of AA- U. S . Co r p o r a t e 13. 5% • Shor t dur at i on ( 1. 8 year s as of De c 31, 2008) No n - U. S . Co r p o r a t e s
3 . 8 % • I n v e s t m e n t y i e l d : 3 . 7 5 % ( 1 ) No t e ( 1 ) : An n u a l i z e d ef f ect i ve i nves t m ent yi el d f or t he quar t er i s cal cul at ed by di vi di ng net i nves t m ent i ncom e by t he aver age bal ance of t he as s et s m anaged by our por t f ol i o m anager s a n d o u r o t h e r i n v e s t m e n t s . S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 1 8
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Lo s s Re s e r v e s at De c e m b e r 31, 2008 Va l i d u s Gr o s s Re s e r v e M i x As of De c e m b e r 31, 2008 Ob s e r v a t i o n s • Gr o s s r es er ves f or l os s es and l os s expens es of $1. 30 bi l l i on • I BNR r e p r e s e n t s 45. 8% of r es er ves • No expos ur es pr e- dat i ng 2002 • Ta l b o t has a hi s t or y of f avor abl e I BNR Re s e r v e s , Ca s e Re s e r v e s , 45. 8% r es er ve devel opm ent : 54. 2% • $105. 2m m s i nce acqui s i t i on • $54. 7m m dur i ng 2008 • Fa vor a bl e r es er ve devel opm ent i n Q4 0 8 of $19. 7m m • Ta l b o t r es er ve r el ease of $13. 6m m • Va l i d u s r es er ve r el ease of $6. 1m m St r i c t l y Pr i va t e and Co n f i d e n t i a l 19
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Va l i d u s Sum m a r y ySupe r i or f i nanci al per f or m ance y Ve r y hi gh ROE i n 2007 y Pr ot e c t e d book val ue i n 2008 yW el l pos i t i oned f or 2009 ySt r ong bal ance s heet yShor t - t a i l f ocus y Ra t e i ncr eas es i n dem and dr i ven pr oduct s y Ex p a n s i o n of gl obal oper at i ng pl at f or m St r i c t l y Pr i va t e and Co n f i d e n t i a l 20
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Un d e r wr i t i n g I n c o m e Re c o n c i l i a t i o n — F o u r t h Qu a r t e r T h r e e m o n t h s e n d e d De c e m b e r 3 1 , 2 0 0 8 T h r e e m o n t h s e n d e d De c e m b e r 3 1 , 2 0 0 7 Co r p o r a t e Co r p o r a t e & & Va l i d u s Re T a l b o t E l i m i n a t i o n T o t a l Va l i d u s Re T a l b o t E l i m i n a t i o n T o t a l Gr o s s p r e m i u m s wr i t t e n $ 4 3 , 8 7 3 $ 1 5 2 , 6 6 2 ( $ ) ( 4 , 7 9 9 ) $ 1 9 1 , 7 3 6 Gr o s s p r e m i u m s wr i t t e n $ 4 7 , 4 9 9 $ 1 4 3 , 4 9 7 $ — $ 1 9 0 , 9 9 6 Re i n s u r a n c e p r e m i u m s c e d e d ( 1 , 6 9 6 ) ( 5 , 8 2 5 ) 4 , 7 9 9 ( 2 , 7 2 2 ) Re i n s u r a n c e p r e m i u m s c e d e d ( 3 , 8 1 3 ) ( 7 5 3 ) — ( 4 , 5 6 6 ) ) Ne t p r e m i u m s wr i t t e n 4 2 , 1 7 7 1 4 6 , 8 3 7 — 1 8 9 , 0 1 4 Ne t p r e m i u m s wr i t t e n 4 3 , 6 8 6 1 4 2 , 7 4 4 — 1 8 6 , 4 3 0 Ch a n g e i n u n e a r n e d p r e m i u m s 1 2 2 , 1 9 1 4 , 8 2 6 — 1 2 7 , 0 1 7 Ch a n g e i n u n e a r n e d p r e m i u m s 1 1 8 , 8 2 8 1 2 , 7 7 3 —
1 3 1 , 6 0 1 Ne t p r e m i u m s e a r n e d 1 6 4 , 3 6 8 1 5 1 , 6 6 3 — 3 1 6 , 0 3 1 Ne t p r e m i u m s e a r n e d 1 6 2 , 5 1 4 1 5 5 , 5 1 7 — 3 1 8 , 0 3 1 L o s s e s a n d l o s s e x p e n s e 9 5 , 9 7 2 9 5 , 6 0 4 — 1 9 1 , 5 7 6 L o s s e s a n d l o s s e x p e n s e 4 8 , 2 4 4 5 9 , 3 2 3 — 1 0 7 , 5 6 7 P o l i c y a c q u i s i t i o n c o s t s 2 8 , 0 1 1 3 3 , 5 6 0 ( 1 6 4 ) 6 1 , 4 0 7 P o l i c y a c q u i s i t i o n c o s t s 2 2 , 1 0 7 3 1 , 1 7 0 — 5 3 , 2 7 7 Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e s 7 , 3 0 1 1 2 , 8 8 2 2 , 6 2 6 2 2 , 8 0 9 Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e s 7 , 8 5 8 2 3 , 6 2 8 2 , 1 9 0 3 3 , 6 7 6 S t o c k c o m p e n s a t i o n e x p e n s e s 2 , 1 9 7 1 , 4 3 6 3 , 6 4 6 7 , 2 7 9 S t o c k c o m p e n s a t i o n e x p e n s e s 1 , 1 8 9 9 7 8 3 , 9 6 8 6 , 1 3 5 Un d e r wr i t i n g i n c o m e $ 3 0 , 8 8 7 $ 8 , 1 8 1 $ ( 6 , 1 0 8 ) $ 3 2 , 9 6 0 Un d e r wr i t i n g i n c o m e $ 8 3 , 1 1 6 $ 4 0 , 4 1 8 $ ( 6 , 1 5 8 ) $ 1 1 7 , 3 7 6 Ne t i n v e s t m e n t i n c o m e
2 5 , 2 5 8 7 , 0 7 5 ( 1 , 6 6 2 ) 3 0 , 6 7 1 Ne t i n v e s t m e n t i n c o m e 2 5 , 0 3 9 1 2 , 4 4 6 4 0 3 7 , 5 2 5 Ot h e r i n c o m e 1 6 4 1 , 5 9 8 ( 1 6 4 ) 1 , 5 9 8 Ot h e r i n c o m e — 1 , 9 7 1 — 1 , 9 7 1 F i n a n c e e x p e n s e s ( 2 2 4 ) ( 1 , 5 3 0 ) ( 6 , 7 6 8 ) ( 8 , 5 2 2 ) F i n a n c e e x p e n s e s ( 2 3 6 ) ( 1 7 , 2 2 8 ) ( 7 , 9 5 9 ) ( 2 5 , 4 2 3 ) ) Op e r a t i n g i n c o m e b e f o r e t a x e s 5 6 , 0 8 5 1 5 , 3 2 4 ( 1 4 , 7 0 2 ) 5 6 , 7 0 7 Op e r a t i n g i n c o m e b e f o r e t a x e s 1 0 7 , 9 1 9 3 7 , 6 0 7 ( 1 4 , 0 7 7 ) 1 3 1 , 4 4 9 T a x e s 1 0 5 , 7 8 6 — 5 , 7 9 6 T a x e s 1 4 ( 3 6 ) — ( 2 2 ) Ne t o p e r a t i n g i n c o m e $ 5 6 , 0 7 5 $ 9 , 5 3 8 $ ( 1 4 , 7 0 2 ) $ 5 0 , 9 1 1 Ne t o p e r a t i n g i n c o m e $ 1 0 7 , 9 0 5 $ 3 7 , 6 4 3 $ ( 1 4 , 0 7 7 ) $ 1 3 1 , 4 7 1 Ne t r e a l i z e d g a i n s o n i n v e s t m e n t s 3 , 9 9 3 2 , 7 6 4 — 6 , 7 5 7 Ne t r e a l i z e d ( l o s s e s ) g a i n s o n i n v e s t m e n t s ( 4 9 3 ) 1 , 2 7 7 — 7 8 4 Ne t u n r e a l i z e d
( l o s s e s ) g a i n s o n i n v e s t m e n t s ( 2 6 , 0 9 7 ) 1 8 , 9 9 8 — ( 7 , 0 9 9 ) Ne t u n r e a l i z e d g a i n s o n i n v e s t m e n t s 7 , 2 2 1 2 , 0 0 8 — 9 , 2 2 9 F o r e i g n e x c h a n g e l o s s e s ( 1 , 0 5 4 ) ( 1 2 , 5 0 0 ) — ( 1 3 , 5 5 4 ) F o r e i g n e x c h a n g e l o s s e s ( 2 6 9 ) ( 2 , 2 4 6 ) — ( 2 , 5 1 5 ) Ne t i n c o m e $ 3 2 , 9 1 7 $ 1 8 , 8 0 0 $ ( 1 4 , 7 0 2 ) $ 3 7 , 0 1 5 Ne t i n c o m e $ 1 1 4 , 3 6 4 $ 3 8 , 6 8 2 $ ( 1 4 , 0 7 7 ) $ 1 3 8 , 9 6 9 L o s s a n d l o s s e x p e n s e r a t i o 2 9 . 7 % 3 8 . 1 % 3 3 . 8 % L o s s a n d l o s s e x p e n s e r a t i o 5 8 . 4 % 6 3 . 0 % 6 0 . 6 % P o l i c y a c q u i s i t i o n c o s t r a t i o 1 3 . 6 % 2 0 . 1 % 1 6 . 8 % P o l i c y a c q u i s i t i o n c o s t r a t i o 1 7 . 0 % 2 2 . 1 % 1 9 . 4 % Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e r a t i o 5 . 6 % 1 5 . 8 % 1 2 . 5 % Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e r a t i o 5 . 8 % 9 . 4 % 9 . 5 % E x p e n s e r a t i o 2 2 . 8 % 3 1 . 5 % 2 8 . 9 %
Co m b i n e d r a t i o 4 8 . 9 % 7 4 . 0 % 6 3 . 1 % Co m b i n e d r a t i o 8 1 . 2 % 9 4 . 5 % 8 9 . 5 % No t e : Al l a m o u n t s i n ( $ US t h o u s a n d s ) o t h e r t h a n p e r c e n t a g e s S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 2 3
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Un d e r wr i t i n g I n c o m e Re c o n c i l i a t i o n — F u l l Ye a r Ye a r e n d e d De c e m b e r 3 1 , 2 0 0 8 Co r p o r a t e T h r e e m o n t h s e n d e d De c e m b e r 3 1 , 2 0 0 7 & Co r p o r a t e Va l i d u s Re T a l b o t E l i m i n a t i o n T o t a l & Va l i d u s Re T a l b o t E l i m i n a t i o n T o t a l Gr o s s p r e m i u m s wr i t t e n $ 6 8 7 , 7 7 1 $ 7 0 8 , 9 9 6 $ ( 3 4 , 2 8 3 ) $ 1 , 3 6 2 , 4 8 4 Re i n s u r a n c e p r e m i u m s c e d e d ( 6 2 , 9 3 3 ) ( 9 5 , 5 1 0 ) 3 4 , 2 8 3 ( 1 2 4 , 1 6 0 ) Gr o s s p r e m i u m s wr i t t e n $ 7 0 2 , 0 9 8 $ 2 8 6 , 5 3 9 $ - $ 9 8 8 , 6 3 7 Ne t p r e m i u m s wr i t t e n 6 2 4 , 8 3 8 6 1 3 , 4 8 6 — 1 , 2 3 8 , 3 2 4 Re i n s u r a n c e p r e m i u m s c e d e d ( 6 8 , 8 4 2 ) ( 1 , 3 6 8 ) — ( 7 0 , 2 1 0 ) Ch a n g e i n u n e a r n e d p r e m i u m s 2 8 , 6 9 3 ( 1 0 , 4 9 9 ) — 1 8 , 1 9 4 Ne t p r e m i u m s wr i t t e n 6 3 3 , 2 5 6 2 8 5 , 1 7 1 — 9 1 8 , 4 2 7 Ne t p r e m i u m s e a r n e d 6 5 3 , 5 3 1 6 0 2 , 9 8 7 — 1 , 2 5 6 , 5 1 8
Ch a n g e i n u n e a r n e d p r e m i u m s ( 7 4 , 2 2 7 ) 1 3 , 8 7 9 — ( 6 0 , 3 4 8 ) L o s s e s a n d l o s s e x p e n s e 4 2 0 , 6 4 5 3 5 1 , 5 0 9 — 7 7 2 , 1 5 4 Ne t p r e m i u m s e a r n e d 5 5 9 , 0 2 9 2 9 9 , 0 5 0 — 8 5 8 , 0 7 9 P o l i c y a c q u i s i t i o n c o s t s 1 0 0 , 2 4 3 1 3 5 , 0 1 7 ( 3 0 9 ) 2 3 4 , 9 5 1 L o s s e s a n d l o s s e x p e n s e 1 7 5 , 5 3 8 1 0 8 , 4 5 5 — 2 8 3 , 9 9 3 Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e s 3 4 , 6 0 7 7 1 , 4 4 3 1 7 , 8 9 8 1 2 3 , 9 4 8 P o l i c y a c q u i s i t i o n c o s t s 7 0 , 3 2 3 6 3 , 9 5 4 — 1 3 4 , 2 7 7 S t o c k c o m p e n s a t i o n e x p e n s e s 6 , 8 2 9 4 , 7 0 2 1 5 , 5 6 6 2 7 , 0 9 7 Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e s 3 1 , 4 1 2 4 8 , 8 8 6 1 7 , 4 6 7 9 7 , 7 6 5 S t o c k c o m p e n s a t i o n e x p e n s e s 4 , 0 1 3 1 , 7 0 9 1 0 , 4 6 7 1 6 , 1 8 9 Un d e r wr i t i n g i n c o m e $ 9 1 , 2 0 7 $ 4 0 , 3 1 6 $ ( 3 3 , 1 5 5 ) $ 9 8 , 3 6 8 Un d e r wr i t i n g i n c o m e ( l o s s ) $ 2 7 7 , 7 4 3 $ 7 6 , 0 4 6 $ ( 2 7 , 9 3 4 ) $
3 2 5 , 8 5 5 Ne t i n v e s t m e n t i n c o m e 1 0 1 , 9 9 4 4 1 , 5 2 0 ( 3 , 9 8 6 ) 1 3 9 , 5 2 8 Ot h e r i n c o m e 3 0 9 5 , 2 6 4 ( 3 0 9 ) 5 , 2 6 4 Ne t i n v e s t m e n t i n c o m e 8 5 , 9 8 1 2 5 , 8 0 5 5 3 8 1 1 2 , 3 2 4 F i n a n c e e x p e n s e s ( 8 7 9 ) ( 2 7 , 3 5 1 ) ( 2 9 , 0 8 8 ) ( 5 7 , 3 1 8 ) Ot h e r i n c o m e — 3 , 3 0 1 — 3 , 3 0 1 F i n a n c e e x p e n s e s ( 1 , 3 7 8 ) ( 2 6 , 0 8 6 ) ( 2 4 , 2 9 0 ) ( 5 1 , 7 5 4 ) Op e r a t i n g i n c o m e b e f o r e t a x e s 1 9 2 , 6 3 1 5 9 , 7 4 9 ( 6 6 , 5 3 8 ) 1 8 5 , 8 4 2 T a x e s 8 8 1 0 , 7 0 0 — 1 0 , 7 8 8 Op e r a t i n g i n c o m e ( l o s s ) b e f o r e t a x e s 3 6 2 , 3 4 6 7 9 , 0 6 6 ( 5 1 , 6 8 6 ) 3 8 9 , 7 2 6 T a x e s 6 1 1 , 4 4 4 — 1 , 5 0 5 Ne t o p e r a t i n g i n c o m e $ 1 9 2 , 5 4 3 $ 4 9 , 0 4 9 $ ( 6 6 , 5 3 8 ) $ 1 7 5 , 0 5 4 Ne t o p e r a t i n g i n c o m e $ 3 6 2 , 2 8 5 $ 7 7 , 6 2 2 $ ( 5 1 , 6 8 6 ) $ 3 8 8 , 2 2 1 Re a l i z e d g a i n o n r e p u r c h a s e o f d e b e n t u r e s — - 8 , 7 5 2 8 , 7 5 2 Ne t r e a l i z e d g a i n s o n
i n v e s t m e n t s 4 4 3 1 , 1 6 5 — 1 , 6 0 8 Ne t r e a l i z e d ( l o s s e s ) g a i n s o n i n v e s t m e n t s ( 9 , 7 1 8 ) 8 , 1 2 7 — ( 1 , 5 9 1 ) Ne t u n r e a l i z e d g a i n s o n i n v e s t m e n t s 8 , 5 5 6 3 , 8 0 8 — 1 2 , 3 6 4 Ne t u n r e a l i z e d ( l o s s e s ) g a i n s o n i n v e s t m e n t s ( 8 4 , 7 1 4 ) 5 , 0 0 7 — ( 7 9 , 7 0 7 ) F o r e i g n e x c h a n g e g a i n s 7 , 4 9 5 ( 7 9 9 ) — 6 , 6 9 6 F o r e i g n e x c h a n g e l o s s e s ( 1 6 , 7 0 1 ) ( 3 2 , 6 9 6 ) — ( 4 9 , 3 9 7 ) F a i r v a l u e o f wa r r a n t s — - ( 2 , 8 9 3 ) ( 2 , 8 9 3 ) Aq u i l i n e t e r m i n a t i o n f e e — - ( 3 , 0 0 0 ) ( 3 , 0 0 0 ) Ne t i n c o m e $ 8 1 , 4 1 0 $ 2 9 , 4 8 7 $ ( 5 7 , 7 8 6 ) $ 5 3 , 1 1 1 Ne t i n c o m e $ 3 7 8 , 7 7 9 $ 8 1 , 7 9 6 $ ( 5 7 , 5 7 9 ) $ 4 0 2 , 9 9 6 L o s s a n d l o s s e x p e n s e r a t i o 6 4 . 4 % 5 8 . 3 % 6 1 . 5 % P o l i c y a c q u i s i t i o n c o s t r a t i o 1 5 . 3 % 2 2 . 4 % 1 8 . 7 % L o s s a n d l o s s e x p e n s e r a t i o 3 1 . 4 % 3 6 . 3 % 3 3 . 1 %
Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e r a t i o 6 . 3 % 1 2 . 6 % 1 2 . 0 % P o l i c y a c q u i s i t i o n c o s t r a t i o 1 2 . 6 % 2 1 . 4 % 1 5 . 6 % E x p e n s e r a t i o 2 1 . 6 % 3 5 . 0 % 3 0 . 7 % Ge n e r a l a n d a d m i n i s t r a t i v e e x p e n s e r a t i o 6 . 3 % 1 6 . 9 % 1 3 . 3 % Co m b i n e d r a t i o 8 6 . 0 % 9 3 . 3 % 9 2 . 2 % Co m b i n e d r a t i o 5 0 . 3 % 7 4 . 6 % 6 2 . 0 % No t e : Al l a m o u n t s i n ( $ US t h o u s a n d s ) o t h e r t h a n p e r c e n t a g e s S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 2 4
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Di l u t e d Bo o k Va l u e P e r S h a r e Re c o n c i l i a t i o n At De c e m b e r 31, 2 0 0 8 E x e r c i s e Bo o k v a l u e E q u i t y a m o u n t S h a r e s P r i c e p e r s h a r e Bo o k v a l u e p e r c o m m o n s h a r e T o t a l s h a r e h o l d e r s ’ e q u i t y $ 1 , 9 3 8 , 7 3 4 7 5 , 6 2 4 , 6 9 7 $ 2 5 . 6 4 Di l u t e d b o o k v a l u e p e r c o m m o n s h a r e T o t a l s h a r e h o l d e r s ’ e q u i t y $ 1 , 9 3 8 , 7 3 4 7 5 , 6 2 4 , 6 9 7 As s u m e d e x e r c i s e o f o u t s t a n d i n g wa r r a n t s 1 5 2 , 3 1 6 8 , 6 8 0 , 1 4 9 $ 1 7 . 5 5 As s u m e d e x e r c i s e o f o u t s t a n d i n g o p t i o n s 5 1 , 0 4 3 2 , 7 9 9 , 9 3 8 $ 1 8 . 2 3 Un v e s t e d r e s t r i c t e d s h a r e s — 2 , 9 8 6 , 6 1 9 Di l u t e d b o o k val ue per com m on $ 2, 142, 093 90, 091, 403 $ 23. 78 s har e At De c e m b e r 31, 2007 Ex e r c i s e Bo o k val ue Eq u i t y am ount Sha r e s Pr i c e per s har e Bo o k val ue per com m on s har e To t a l s har ehol der s ’
equi t y $ 1, 934, 800 7 4 , 1 9 9 , 8 3 6 $ 2 6 . 0 8 Di l u t e d b o o k v a l u e per c o m m o n s h a r e T o t a l s h a r e h o l d e r s ’ e q u i t y $ 1 , 9 3 4 , 8 0 0 7 4 , 1 9 9 , 8 3 6 As s u m e d e x e r c i s e o f o u t s t a n d i n g wa r r a n t s 1 5 2 , 8 6 9 8 , 7 1 1 , 7 2 9 $ 1 7 . 5 5 As s u m e d e x e r c i s e of out s t andi ng opt i ons 4 9 , 1 9 6 2 , 7 6 1 , 1 7 6 $ 1 7 . 8 2 Un v e s t e d r e s t r i c t e d s h a r e s — 3 , 3 6 7 , 9 6 1 Di l u t e d b o o k v a l u e p e r c o m m o n $ 2 , 1 3 6 , 8 6 5 8 9 , 0 4 0 , 7 0 2 $ 2 4 . 0 0 s h a r e No t e : Al l a m o u n t s i n ( $ US t h o u s a n d s ) o t h e r t h a n p e r c e n t a g e s a n d p e r s h a r e a m o u n t s S t r i c t l y P r i v a t e a n d Co n f i d e n t i a l 25