Validus Announces Second Quarter 2009 Results

Validus Holdings, Ltd. (“Validus” or the “Company”) (NYSE: VR) today reported net income of $137.6 million, or $1.74 per diluted common share for the three months ended June 30, 2009, compared with net income of $75.9 million, or $0.98 per diluted common share, for the three months ended June 30, 2008. Net income for the six months ended June 30, 2009 was $232.5 million, or $2.94 per diluted share, compared with $142.4 million, or $1.83 per diluted share, for the six months ended June 30, 2008.

Net operating income for the three months ended June 30, 2009 was $110.4 million, or $1.40 per diluted share, compared with net operating income of $111.7 million, or $1.45 per diluted common share, for the three months ended June 30, 2008. Net operating income for the six months ended June 30, 2009 was $210.8 million, or $2.67 per diluted share, compared with net operating income of $177.2 million, or $2.28 per diluted common share, for the six months ended June 30, 2008.

Net operating income, a non-GAAP financial measure, is defined as net income excluding net realized and unrealized gains or losses on investments, foreign exchange gains and losses and non-recurring items. Reconciliations of this measure to net income, the most directly comparable GAAP measure, are presented at the end of this release.

Commenting on second quarter results and 2009 business conditions, Validus’ Chairman and Chief Executive Officer Ed Noonan stated: “We are very pleased with our financial, strategic and operational achievements in the quarter. We produced an annualized operating return on average shareholders’ equity of 21.2%, diluted EPS of $1.74 and diluted operating EPS of $1.40. Our diluted book value per common share at June 30, 2009 reached $26.08 and, inclusive of our $0.20 quarterly dividend, we increased diluted book value per common share by 6.6%. We benefited from favorable investment markets, continued strong premium growth and a near absence of notable worldwide catastrophes and other loss events. Subsequent to quarter end, we furthered our efforts to acquire IPC Holdings, Ltd. by agreeing with the board of directors of IPC to sign an Agreement and Plan of Amalgamation with IPC.”

Second quarter 2009 results

Highlights for the second quarter include the following:

• Gross premiums written of $425.0 million compared to $379.9 million for the same quarter last year, an increase of $45.1 million or 11.9%;
• Net premiums earned of $328.2 million compared to $309.3 million for the same quarter last year, an increase of $18.9 million or 6.1%;
• Combined ratio of 71.9% which included $13.2 million of favorable prior year loss reserve development, benefiting the loss ratio by 4.0 percentage points;
• $11.0 million of loss expense attributable to Air France which represented 3.4 percentage points on the loss ratio;
• Net operating income of $110.4 million, a decrease of $1.3 million or 1.1% from net operating income of $111.7 million in the second quarter of 2008, primarily reflecting increased contribution from underwriting income of $2.6 million and lower finance charges of $2.0 million, offset by lower investment income of $9.5 million;
• Net income of $137.6 million, an increase of $61.6 million or 81.2% from net income of $75.9 million in the second quarter of 2008, reflecting a small reduction in operating income, an increase in net unrealized investment gains of $80.2 million, an increase in foreign exchange gains of $7.5 million, offset in part by non-recurring IPC related expenses of $15.9 million;
• Annualized return on average equity of 26.4% and annualized operating return on average equity of 21.2%.

Highlights for the six months ended June 30, 2009 include the following:

• Gross premiums written of $1,034.9 million compared to $901.5 million for the same period last year, an increase of $133.4 million or 14.8%;
• Net premiums earned of $647.0 million compared to $601.2 million for the same period last year, an increase of $45.8 million or 7.6%;
• Combined ratio of 73.5% which included $21.3 million of favorable prior year loss reserve development, benefiting the loss ratio by 3.3 percentage points;
• Net operating income of $210.8 million, an increase of $33.6 million or 19.0% from net operating income of $177.2 million for the six months ended June 30, 2008, primarily reflecting increased contribution from underwriting income of $31.1 million and lower finance charges of $15.8 million, offset by lower investment income of $18.7 million;
• Net income of $232.5 million, an increase of $90.1 million or 63.3% from net income of $142.4 million for the six months ended June 30, 2008, reflecting growth in operating income of $33.6 million, an increase in net unrealized investment gains of $117.4 million, offset in part by a change in net realized losses on investments of $31.4 million and IPC related expenses of $15.9 million;
• Annualized return on average equity of 22.8% and annualized operating return on average equity of 20.7%.

Validus Re Segment Results

Gross premiums written during the second quarter of 2009 were $199.6 million, an increase of $11.8 million or 6.3% from $187.8 million in the second quarter of 2008. Gross premiums written comprised $183.9 million of property premiums, $4.0 million of marine premiums and $11.7 million of specialty premiums compared to $171.3 million of property premiums, $8.7 million of marine premiums and $7.8 million of specialty premiums in the second quarter of 2008.

Net premiums earned for the second quarter of 2009 were $163.7 million compared to $164.1 million for the second quarter of 2008, a decrease of $0.4 million or 0.3%.

The combined ratio for the quarter increased to 52.5% from 52.1% in the second quarter of 2008. The loss ratio of 25.1% included favorable prior year loss reserve development of $3.0 million (representing 1.8 percentage points on the loss ratio). The reduction in the loss ratio from 29.7% in the second quarter of 2008 was due to a lower incidence of significant second quarter property and other loss events in the second quarter of 2009, which added 6.2% to the second quarter 2008 loss ratio.

Gross premiums written during the first six months of 2009 were $609.7 million, an increase of $90.8 million or 17.5% from $518.9 million in the first six months of 2008. Gross premiums written comprised $418.6 million of property premiums, $125.5 million of marine premiums and $65.6 million of specialty premiums compared to $374.4 million of property premiums, $92.8 million of marine premiums and $51.7 million of specialty premiums in the first six months of 2008.

Net premiums earned for the first six months of 2009 were $338.1 million compared to $307.8 million for the first six months of 2008, an increase of $30.3 million or 9.8%.

The combined ratio decreased to 54.9% from 57.0% in the first six months of 2008. The loss ratio of 28.6% included favorable prior year loss reserve development of $4.8 million (representing 1.4 percentage points on the loss ratio).

Talbot Segment Results

Gross premiums written during the second quarter of 2009 were $235.1 million, compared to $197.2 million for the second quarter of 2008, an increase of $37.9 million or 19.2%. Gross premiums written comprised $78.8 million of property premiums, $82.6 million of marine premiums and $73.7 million of specialty premiums compared to $47.4 million of property premiums, $73.1 million of marine premiums and $76.7 million of specialty premiums in the second quarter of 2008.

Net premiums earned for the second quarter of 2009 were $164.5 million compared to $145.2 million for the second quarter of 2008, an increase of $19.3 million or 13.3%.

The combined ratio increased to 87.5% from 86.4% in the second quarter of 2008. The loss ratio of 50.9% included favorable prior year loss reserve development of $10.3 million (representing 6.2 percentage points on the loss ratio).

Gross premiums written during the first six months of 2009 were $463.0 million, compared to $399.0 million for the first six months of 2008, an increase of $64.0 million or 16.0%. Gross premiums written comprised $139.5 million of property premiums, $175.0 million of marine premiums and $148.5 million of specialty premiums compared to $87.8 million of property premiums, $164.1 million of marine premiums and $147.1 million of specialty premiums the first six months of 2008.

Net premiums earned for the first six months of 2009 were $308.8 million compared to $293.4 million for the first six months of 2008, an increase of $15.4 million or 5.3%.

The combined ratio decreased to 89.3% from 90.3% in the first six months of 2008. The loss ratio of 51.8% included favorable prior year loss reserve development of $16.5 million (representing 5.3 percentage points on the loss ratio).

Corporate Segment Results

Corporate results are comprised of executive and board expenses, internal and external audit expenses, interest and costs incurred in connection with the Company’s junior subordinated deferrable debentures and other costs relating to the Company as a whole. General and administrative expenses for the three months ended June 30, 2009 were $5.1 million compared to $4.2 million for the three months ended June 30, 2008. Additionally, there were $15.9 million of non-recurring costs relating to the IPC transaction in the quarter. Share compensation expenses for the three months ended June 30, 2009 were $2.0 million compared to $4.5 million for the three months ended June 30, 2008. The decrease of $2.5 million was due to the vesting of a tranche of restricted stock to senior executives during the first quarter of 2009.

General and administrative expenses for the six months ended June 30, 2009 were $9.2 million compared to $11.0 million for the six months ended June 30, 2008. Share compensation expenses for the six months ended June 30, 2009 were $5.3 million compared to $8.9 million for the six months ended June 30, 2008.

Investments

Investment income was $27.0 million in the second quarter of 2009 compared to $36.4 million in the second quarter of 2008. Investment income was $53.7 million in the first six months of 2009 compared to $72.5 million in the first six months of 2008. Net investment income decreased as a result of reduced market yields and higher average cash balances. Net realized losses on investments in the quarter were $2.7 million, compared to $2.4 million of net realized losses in the second quarter of 2008. Net realized losses on investments in the six months ended June 30, 2009 were $26.1 million, compared to $5.3 million of net realized gains in the six months ended June 30, 2008.

The Company recorded $37.2 million of net unrealized gains in the three months ended June 30, 2009 and $59.4 million in the six months ended June 30, 2009. The Company recorded $43.0 million of net unrealized losses in the three months ended June 30, 2008 and $58.0 million in the six months ended June 30, 2008. The net unrealized gains in the three months ended June 30, 2009 resulted primarily from unrealized gains in non-agency RMBS and corporate bonds sectors, partially offset by unrealized losses in US government and government agency securities. At June 30, 2009, the unrealized gain on investments was $20.6 million, which represented 0.6% of total investments and cash.

Finance Expenses

Finance expenses for the three months ended June 30, 2009 were $10.8 million, decreasing from $12.8 million in the three months ended June 30, 2008. Finance expenses consisted principally of interest on the Company’s junior subordinated deferrable debentures and third-party capital costs for Talbot. The decrease primarily related to the termination of third-party capital for Talbot commencing with the 2008 year of account.

Finance expenses for the six months ended June 30, 2009 were $18.5 million, decreasing from $34.3 million in the six months ended June 30, 2008. Finance expenses consisted principally of interest on the Company’s junior subordinated deferrable debentures and third-party capital costs for Talbot. The decrease primarily related to the termination of third-party capital for Talbot commencing with the 2008 year of account.

Shareholders’ Equity and Capitalization

At June 30, 2009, shareholders’ equity was $2.2 billion. Diluted book value per common share was $26.08 compared to $24.65 at March 31, 2009. Diluted book value per common share is a non-GAAP financial measure. A reconciliation of this measure to shareholders’ equity is presented at the end of this release.

Total capitalization at June 30, 2009 was $2.5 billion, including $304.3 million of junior subordinated deferrable debentures.

Recent Developments

On July 9, 2009, the Company announced that the boards of directors of both the Company and IPC Holdings, Ltd. ("IPC") had approved a definitive amalgamation agreement under the terms of which, IPC shareholders will receive $7.50 in cash and 0.9727 Validus voting common shares for each IPC common share.

Completion of the transaction, which is expected to take place in the third quarter of 2009, is subject to customary closing conditions, including the Company and IPC shareholder approvals. Aquiline Capital Partners LLC, Vestar Capital Partners, and New Mountain Capital, LLC, which collectively owned approximately 38% of Validus' outstanding voting common shares as of April 30, 2009, have agreed to vote in favor of the issuance of Validus shares in connection with the transaction. Upon closing of the transaction, the Company’s current shareholders will own approximately 62% of the combined company on a fully diluted basis, with IPC shareholders owning approximately 38%.

In connection with the signing of the Amalgamation Agreement, the Company has withdrawn and terminated its previously announced Exchange Offer for all of the outstanding common shares of IPC and has instructed BNY Mellon Shareowner Services to promptly return all IPC common shares previously tendered to the Company. Additionally, the Company has terminated its solicitation efforts in connection with its other previously announced alternative steps to complete a transaction with IPC, including a scheme of arrangement and calling of a special meeting of IPC shareholders.

Conference Call

The Company will host a conference call for analysts and investors on July 30, 2009 at 9:00 AM (Eastern) to discuss the second quarter 2009 financial results and related matters. The conference call can be accessed via telephone by dialing 1-800-860-2442 (toll-free U.S.) or 1-412-858-4600 (international). Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through August 13, 2009 by dialing 1-877-344-7529 and entering the pass code 431703#.

This conference call will also be available through a live audio webcast accessible through the Investor Information section of the Company’s website located at www.validusre.bm. In addition, a financial supplement relating to our financial results for the three and six months ended June 30, 2009 is available in the Investor Information section of the Company’s website.

About Validus Holdings, Ltd.

Validus Holdings, Ltd. is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”). Validus Re is a Bermuda based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.

Validus Re is rated “A-” (“Excellent”) by A.M. Best. For more information about Validus, visit our website at www.validusre.bm.

Validus Holdings, Ltd. Consolidated Balance Sheets As at June 30, 2009 and December 31, 2008 (expressed in thousands of U.S. dollars, except share amounts)
		June 30, 2009				December 31, 2008
Assets
Fixed maturities, at fair value		$	2,816,536			$	2,454,501
Short-term investments, at fair value			323,940				377,036
Cash and cash equivalents			390,090				449,848
Total investments and cash			3,530,566				3,281,385
Premiums receivable			679,189				408,259
Deferred acquisition costs			145,615				108,156
Prepaid reinsurance premiums			87,798				22,459
Securities lending collateral			166,496				98,954
Loss reserves recoverable			169,666				208,796
Paid losses recoverable			36,624				1,388
Net receivable for investments sold			-				490
Income taxes recoverable			1,876				1,365
Intangible assets			125,136				127,217
Goodwill			20,393				20,393
Accrued investment income			19,636				20,433
Other assets			25,455				23,185
Total assets		$	5,008,450			$	4,322,480
Liabilities
Reserve for losses and loss expenses		$	1,311,935			$	1,305,303
Unearned premiums			856,138				539,450
Reinsurance balances payable			101,004				33,042
Securities lending payable			168,923				105,688
Deferred income taxes			22,163				21,779
Net payable for investments purchased			16,346				-
Accounts payable and accrued expenses			75,672				74,184
Debentures payable			304,300				304,300
Total liabilities			2,856,481				2,383,746
Commitments and contingent liabilities
Shareholders’ equity
Common shares		$	13,327			$	13,235
Additional paid-in capital			1,424,378				1,412,635
Accumulated other comprehensive (loss)			(4,061	)			(7,858	)
Retained earnings			718,325				520,722
Total shareholders’ equity			2,151,969				1,938,734
Total liabilities and shareholders’ equity		$	5,008,450			$	4,322,480

Validus Holdings, Ltd. Consolidated Statements of Operations and Comprehensive Income For the three and six months ended June 30, 2009 and 2008 (expressed in thousands of U.S. dollars, except share amounts)
			Three months ended								Six months ended
			June 30, 2009				June 30, 2008				June 30, 2009				June 30, 2008
Revenues
Gross premiums written			$	425,032			$	379,919			$	1,034,924			$	901,513
Reinsurance premiums ceded				(62,291	)			(1,399	)			(134,803	)			(86,299	)
Net premiums written				362,741				378,520				900,121				815,214
Change in unearned premiums				(34,541	)			(69,222	)			(253,162	)			(214,052	)
Net premiums earned				328,200				309,298				646,959				601,162
Net investment income				26,963				36,435				53,735				72,478
Realized gain on repurchase of debentures				-				8,752				-				8,752
Net realized (losses) gains on investments				(2,650	)			(2,425	)			(26,071	)			5,319
Net unrealized gains (losses) on investments				37,249				(42,982	)			59,402				(57,959	)
Other income				1,017				1,462				1,774				2,397
Foreign exchange gains				8,432				911				4,232				9,090
Total revenues				399,211				311,451				740,031				641,239
Expenses
Losses and loss expenses				124,751				122,089				256,585				262,113
Policy acquisition costs				64,438				56,419				125,887				113,120
General and administrative expenses				41,200				33,912				79,279				71,019
Share compensation expenses				5,632				7,271				12,986				13,806
Finance expenses				10,752				12,762				18,475				34,279
Transaction expenses (a)				15,851				-				15,851				-
Total expenses				262,624				232,453				509,063				494,337
Net income before taxes				136,587				78,998				230,968				146,902
Income tax benefit (expense)				976				(3,077	)			1,502				(4,506	)
Net income			$	137,563			$	75,921				232,470			$	142,396
Comprehensive income
Foreign currency translation adjustments				3,993				10				3,797				77
Comprehensive income			$	141,556			$	75,931				236,267			$	142,473
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic				76,138,038				74,233,425				75,941,308				74,221,398
Diluted				78,942,065				77,257,545				79,022,355				77,793,636
Basic earnings per share			$	1.79			$	1.00			$	3.02			$	1.87
Diluted earnings per share			$	1.74			$	0.98			$	2.94			$	1.83
Cash dividends declared per share			$	0.20			$	0.20			$	0.40			$	0.40

(a)

The transaction expenses relates to costs incurred in relation to the agreement and plan of amalgamation with IPC Holdings, Ltd.

Validus Holdings, Ltd. Consolidated Statements of Operations For the three months ended June 30, 2009 (expressed in thousands of U.S. dollars, except share amounts)
			Validus Re				Talbot				Corporate & Elimination				Total
Gross premiums written			$	199,560			$	235,113			$	(9,641	)		$	425,032
Reinsurance premiums ceded				(43,070	)			(28,862	)			9,641				(62,291	)
Net premiums written				156,490				206,251				-				362,741
Change in unearned premiums				7,207				(41,748	)			-				(34,541	)
Net premiums earned				163,697				164,503				-				328,200
Losses and loss expenses				41,121				83,630				-				124,751
Policy acquisition costs				29,120				36,114				(796	)			64,438
General and administrative expenses				14,149				21,927				5,124				41,200
Share compensation expense				1,548				2,098				1,986				5,632
Underwriting income			$	77,759			$	20,734			$	(6,314	)		$	92,179
Net investment income				20,783				7,693				(1,513	)			26,963
Other income				902				911				(796	)			1,017
Finance expenses				(477	)			(3,339	)			(6,936	)			(10,752	)
Operating income before taxes				98,967				25,999				(15,559	)			109,407
Income tax (expense) benefit				(28	)			1,004				-				976
Net operating income			$	98,939			$	27,003			$	(15,559	)		$	110,383
Net realized (losses) on investments				(2,140	)			(510	)			-				(2,650	)
Net unrealized gains on investments				35,793				1,456				-				37,249
Foreign exchange gains				1,827				6,549				56				8,432
Transaction expenses (a)				-				-				(15,851	)			(15,851	)
Net income			$	134,419			$	34,498			$	(31,354	)		$	137,563
Losses and loss expense ratio				25.1	%			50.8	%							38.0	%
Policy acquisition cost ratio				17.8	%			22.0	%							19.6	%
General and administrative expense ratio				9.6	%			14.6	%							14.3	%
Expense ratio				27.4	%			36.6	%							33.9	%
Combined ratio				52.5	%			87.4	%							71.9	%

(a)

The transaction expenses relates to costs incurred in relation to the agreement and plan of amalgamation with IPC Holdings, Ltd.

Validus Holdings, Ltd. Consolidated Statements of Operations For the three months ended June 30, 2008 (expressed in thousands of U.S. dollars, except share amounts)
		Three months ended June 30 2008
		Validus Re				Talbot				Corporate & Elimination				Total
Gross premiums written		$	187,820			$	197,235			$	(5,136	)		$	379,919
Reinsurance premiums ceded			(1,208	)			(5,327	)			5,136				(1,399	)
Net premiums written			186,612				191,908				-				378,520
Change in unearned premiums			(22,500	)			(46,722	)			-				(69,222	)
Net premiums earned			164,112				145,186				-				309,298
Losses and loss expense			48,677				73,412				-				122,089
Policy acquisition costs			25,309				31,134				(24	)			56,419
General and administrative expenses			9,955				19,787				4,170				33,912
Stock compensation expenses			1,597				1,126				4,548				7,271
Underwriting income		$	78,574			$	19,727			$	(8,694	)		$	89,607
Net investment income			25,725				11,726				(1,016	)			36,435
Other income			24				1,462				(24	)			1,462
Finance expenses			(88	)			(5,400	)			(7,274	)			(12,762	)
Operating income before taxes			104,235				27,515				(17,008	)			114,742
Income tax expense			(20	)			(3,057	)			-				(3,077	)
Net operating income		$	104,215			$	24,458			$	(17,008	)		$	111,665
Realized gain on repurchase of debentures			-				-				8,752				8,752
Net realized (losses) gains on investments			(3,260	)			835				-				(2,425	)
Net unrealized losses on investments			(24,059	)			(18,923	)			-				(42,982	)
Foreign exchange (loss) gains			(403	)			1,314				-				911
Net income		$	76,493			$	7,684			$	(8,256	)		$	75,921
Loss and loss expense ratio			29.7	%			50.6	%							39.5	%
Policy acquisition cost ratio			15.4	%			21.4	%							18.2	%
General and administrative expense ratio			7.0	%			14.4	%							13.3	%
Expense ratio			22.4	%			35.8	%							31.5	%
Combined ratio			52.1	%			86.4	%							71.0	%

Validus Holdings, Ltd. Consolidated Statements of Operations For the six months ended June 30, 2009 (expressed in thousands of U.S. dollars, except share amounts)
			Six months ended June 30, 2009
			Validus Re				Talbot				Corporate & Elimination				Total
Gross premiums written			$	609,686			$	463,033			$	(37,795	)		$	1,034,924
Reinsurance premiums ceded				(56,359	)			(116,239	)			37,795				(134,803	)
Net premiums written				553,327				346,794				-				900,121
Change in unearned premiums				(215,183	)			(37,979	)			-				(253,162	)
Net premiums earned				338,144				308,815				-				646,959
Losses and loss expenses				96,583				160,002				-				256,585
Policy acquisition costs				57,697				69,271				(1,081	)			125,887
General and administrative expenses				27,941				42,141				9,197				79,279
Share compensation expense				3,220				4,433				5,333				12,986
Underwriting income			$	152,703			$	32,968			$	(13,449	)		$	172,222
Net investment income				41,569				15,187				(3,021	)			53,735
Other income				1,187				1,668				(1,081	)			1,774
Finance expenses				(840	)			(3,762	)			(13,873	)			(18,475	)
Operating income before taxes				194,619				46,061				(31,424	)			209,256
Income tax (expense) benefit				(66	)			1,568				-				1,502
Net operating income			$	194,553			$	47,629			$	(31,424	)		$	210,758
Net realized (losses) on investments				(19,679	)			(6,392	)			-				(26,071	)
Net unrealized gains on investments				54,800				4,602				-				59,402
Foreign exchange (losses) gains				(1,380	)			5,556				56				4,232
Transaction expenses (a)				-				-				(15,851	)			(15,851	)
Net income			$	228,294			$	51,395			$	(47,219	)1,034		$	232,470
Losses and loss expense ratio				28.6	%			51.8	%							39.7	%
Policy acquisition cost ratio				17.1	%			22.4	%							19.5	%
General and administrative expense ratio				9.2	%			15.1	%							14.3	%
Expense ratio				26.3	%			37.5	%							33.8	%
Combined ratio				54.9	%			89.3	%							73.5	%

(a)

The transaction expenses relates to costs incurred in relation to the agreement and plan of amalgamation with IPC Holdings, Ltd.

Validus Holdings, Ltd. Consolidated Statements of Operations For the six months ended June 30, 2008 (expressed in thousands of U.S. dollars, except share amounts)
		Six months ended June 30, 2008
		Validus Re				Talbot				Corporate & Elimination				Total
Gross premiums written		$	518,869			$	399,028			$	(16,384	)		$	901,513
Reinsurance premiums ceded			(24,951	)			(77,732	)			16,384				(86,299	)
Net premiums written			493,918				321,296				-				815,214
Change in unearned premiums			(186,151	)			(27,901	)			-				(214,052	)
Net premiums earned			307,767				293,395				-				601,162
Losses and loss expense			107,591				154,522				-				262,113
Policy acquisition costs			45,712				67,432				(24	)			113,120
General and administrative expenses			19,334				40,710				10,975				71,019
Stock compensation expenses			2,823				2,102				8,881				13,806
Underwriting income		$	132,307			$	28,629			$	(19,832	)		$	141,104
Net investment income			50,752				22,708				(982	)			72,478
Other income			24				2,397				(24	)			2,397
Finance expenses			(442	)			(18,620	)			(15,217	)			(34,279	)
Operating income before taxes			182,641				35,114				(36,055	)			181,700
Income tax expense			(48	)			(4,458	)			-				(4,506	)
Net operating income		$	182,593			$	30,656			$	(36,055	)		$	177,194
Realized gain on repurchase of debentures	-			-				8,752					8,752
Net realized (losses) gains on investments			(1,183	)			6,502				-				5,319
Net unrealized losses on investments			(42,671	)			(15,288	)			-				(57,959	)
Foreign exchange gains			7,272				1,818				-				9,090
Net income		$	146,011			$	23,688			$	(27,303	)		$	142,396
Loss and loss expense ratio			35.0	%			52.7	%							43.6	%
Policy acquisition cost ratio			14.9	%			23.0	%							18.8	%
General and administrative expense ratio			7.1	%			14.6	%							14.1	%
Expense ratio			22.0	%			37.6	%							32.9	%
Combined ratio			57.0	%			90.3	%							76.5	%

Validus Holdings, Ltd. Non-GAAP Financial Measure Reconciliation Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity For the three and six months ended June 30, 2009 and 2008 (expressed in thousands of U.S. dollars, except share amounts)
		Three months ended								Six months ended
		June 30, 2009				June 30, 2008				June 30, 2009				June 30, 2008
Net income		$	137,563			$	75,921			$	232,470			$	142,396
Adjustment for realize gain on repurchase of debentures			-				(8,752	)			-				(8,752	)
Adjustment for net realized (gains) on investments			2,650				2,425				26,071				(5,319	)
Adjustment for net unrealized losses (gains) on investments			(37,249	)			42,982				(59,402	)			57,959
Adjustment for foreign exchange (gains)			(8,432	)			(911	)			(4,232	)			(9,090	)
Adjustment for transaction expenses			15,851				-				15,851				-
Net operating income		$	110,383				111,665			$	210,758			$	177,194
Net income		$	137,563			$	75,921			$	232,470			$	142,396
Less: Dividends and distributions declared on outstanding warrants			-				-				-				-
Net income available to common shareholders		$	137,563			$	75,921			$	232,470			$	142,396
Net income per share - diluted		$	1.74			$	0.98			$	2.94			$	1.83
Adjustment for realize gain on repurchase of debentures			-				(0.11	)			-				(0.11	)
Adjustment for net realized losses (gains) on investments			0.03				0.03				0.33				(0.07	)
Adjustment for net unrealized (gains) losses on investments			(0.47	)			0.56				(0.75	)			0.75
Adjustment for foreign exchange losses (gains)			(0.10	)			(0.01	)			(0.05	)			(0.12	)
Adjustment for transaction expenses			0.20				-				0.20				-
Net operating income per share - diluted		$	1.40			$	1.45			$	2.67			$	2.28
Weighted average number of common shares and common share equivalents - diluted			78,942,065				77,257,545				79,022,355				77,793,636
Net operating income		$	110,383			$	111,665			$	210,758			$	177,194
Average shareholders’ equity			2,087,478				2,023,720				2,037,896				1,994,080
Annualized net operating return on average equity			21.2	%			22.1	%			20.7	%			17.8	%

Validus Holdings, Ltd. Non-GAAP Financial Measure Reconciliation Diluted Book Value Per Common Share As at June 30, 2009 and December 31, 2008 (expressed in thousands of U.S. dollars, except share amounts)
		At June 30, 2009
		Equity amount			Shares		Exercise Price			Book value per share
Book value per common share
Total shareholders’ equity		$	2,151,969		76,151,473					$	28.26
Diluted book value per common share
Total shareholders’ equity		$	2,151,969		76,151,473
Assumed exercise of outstanding warrants			139,576		7,952,138		$	17.55
Assumed exercise of outstanding stock options			50,904		2,793,402		$	18.22
Unvested restricted shares					2,928,813
Diluted book value per common share		$	2,342,449		89,825,826					$	26.08
		At December 31, 2008
		Equity amount			Shares		Exercise Price			Book value per share
Book value per common share
Total shareholders’ equity		$	1,938,734		75,624,697					$	25.64
Diluted book value per common share
Total shareholders’ equity		$	1,938,734		75,624,697
Assumed exercise of outstanding warrants			152,316		8,680,149		$	17.55
Assumed exercise of outstanding stock options			51,043		2,799,938		$	18.23
Unvested restricted shares			-		2,986,619
Diluted book value per common share		$	2,142,093		90,091,403					$	23.78

Validus Holdings, Ltd. Pro Forma Combined – Validus Holdings, Ltd. and IPC Holdings Ltd. Pro Forma Combined Balanced Sheet As at June 30, 2009 (expressed in thousands of U.S. dollars, except share and per share information)
		Historical Validus Holdings Ltd.				Historical IPC Holdings Ltd.				IPC Holdings Ltd. accounting adjustments				Pro Forma Consolidated
Assets
Fixed maturities, at fair value		$	2,816,536			$	1,706,461			$	-			$	4,522,997
Short-term investments, at fair value			323,940				-				-				323,940
Equity investments, at fair value			-				329,986				-				329,986
Cash and cash equivalents			390,090				272,049				(502,727	)			159,412
Total investments and cash			3,530,566				2,308,496				(502,727				5,336,335
Premiums receivable			679,189				244,737				(133	)			923,793
Deferred acquisition costs			145,615				26,634				-				172,249
Prepaid reinsurance premiums			87,798				4,851				(133	)			92,516
Securities lending collateral			166,496				-				-				166,496
Loss reserves recoverable			169,666				3,168				-				172,834
Paid losses recoverable			36,624				-				-				36,624
Income taxes recoverable			1,876				-				-				1,876
Intangible assets			125,136				-				-				125,136
Goodwill			20,393				-				-				20,393
Accrued investment income			19,636				20,761				-				40,397
Other assets			25,455				4,021				-				29,476
Total assets		$	5,008,450			$	2,612,668			$	(502,993	)		$	7,118,125
Liabilities
Reserve for losses and loss expense			1,311,935				320,322				-				1,632,257
Unearned premiums		$	856,138			$	248,797			$	(133	)		$	1,104,802
Reinsurance balances payable			101,004				4,828				(133	)			105,699
Securities lending payable			168,923				-				-				168,923
Deferred taxation			22,163				-				-				22,163
Net payable for investments purchased			16,346				-				-				16,346
Accounts payable and accrued expenses			75,672				24,503				-				100,175
Debentures payable			304,300				-				-				304,300
Total liabilities		$	2,856,481			$	598,450			$	(266	)		$	3,454,665
Shareholders' equity
Ordinary shares			13,327				562				9,062				22,951
Additional paid-in capital			1,424,378				1,093,965				170,059				2,688,402
Accumulated other comprehensive (loss) income			(4,061	)			(173	)			173				(4,061	)
Retained earnings (deficit)			718,325				919,864				(682,021	)			956,168
Total shareholders' equity			2,151,969				2,014,218				(502,727	)			3,663,460
Total liabilities and shareholders' equity		$	5,008,450			$	2,612,668			$	(502,993	)		$	7,118,125
Book value per share
Common shares outstanding			76,151,473				56,078,931				54,552,393				130,703,866
Common shares and common share equivalents outstanding			89,825,826				57,046,895				55,493,931				145,319,757
Book value per common share		$	28.26			$	35.92							$	28.03
Diluted book value per common share		$	26.08			$	35.62							$	26.64
Diluted tangible book value per common share		$	24.46			$	35.62							$	25.64

Validus Holdings, Ltd. Pro Forma Combined – Validus Holdings, Ltd. and IPC Holdings Ltd. Pro Forma Combined Income Statement For the six months ended June 30, 2009 (expressed in thousands of U.S. dollars, except share and per share information)
		Historical Validus Holdings Ltd.				Historical IPC Holdings Ltd.				Pro Forma Purchase adjustments				Pro Forma Consolidated
Revenues
Gross premiums written		$	1,034,924			$	362,159			$	(265	)		$	1,396,818
Reinsurance premiums ceded			(134,803	)			(6,615	)			265				(141,153	)
Net premiums written			900,121				355,544				-				1,255,665
Change in unearned premiums			(253,162	)			(160,638	)			-				(413,800	)
Net premiums earned			646,959				194,906				-				841,865
Net investment income			53,735				43,145				(7,893	)			88,987
Net realized (losses) gains on investments			(26,071	)			1,162				-				(24,909	)
Net unrealized gains on investments			59,402				40,651				-				100,053
Other income			1,774				26				-				1,800
Foreign exchange gains (losses)			4,232				(1,467	)			-				2,765
Total revenues			740,031				278,423				(7,893	)			1,010,561
Expenses
Losses and loss expenses			256,585				30,692				-				287,277
Policy acquisition costs			125,887				19,744				-				145,631
General and administrative expenses			95,130				40,513				(36,302	)			99,341
Share compensation expenses			12,986				4,964				-				17,950
Finance expenses			18,475				383				-				18,858
Total expenses			509,063				96,296				(36,302	)			569,057
Income before taxes			230,968				182,127				28,409				441,504
Income tax benefit			1,502				-				-				1,502
Net income		$	232,470			$	182,127			$	28,409			$	443,006
Preferred dividend and warrant dividend			3,326				-				-				3,326
Net income available to common shareholders		$	229,144			$	182,127			$	28,409			$	439,680
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			75,941,308				55,943,928				54,552,393				130,493,701
Diluted			79,022,355				55,954,235				54,997,854				134,020,209
Basic earnings per common share		$	3.02			$	3.26							$	3.37
Diluted earnings per common share		$	2.94			$	3.25							$	3.31

Validus Holdings, Ltd. Pro Forma Combined – Validus Holdings, Ltd. and IPC Holdings Ltd. Pro Forma Combined Income Statement For the three months ended June 30, 2009 (expressed in thousands of U.S. dollars, except share and per share information)
		Historical Validus Holdings Ltd.				Historical IPC Holdings Ltd.				Pro Forma Purchase adjustments				Pro Forma Consolidated
Revenues
Gross premiums written		$	425,032			$	127,549			$	-			$	552,581
Reinsurance premiums ceded			(62,291	)			(3,461	)			-				(65,752	)
Net premiums written			362,741				124,088				-				486,829
Change in unearned premiums			(34,541	)			(27,890	)			-				(62,431	)
Net premiums earned			328,200				96,198				-				424,398
Net investment income			26,963				21,279				(3,702	)			44,540
Net realized (losses) gains on investments			(2,650	)			5,080				-				2,430
Net unrealized gains on investments			37,249				72,305				-				109,554
Other income			1,017				19				-				1,036
Foreign exchange gains			8,432				1,679				-				10,111
Total revenues			399,211				196,560				(3,702	)			592,069
Expenses
Losses and loss expenses			124,751				(8,417	)			-				116,334
Policy acquisition costs			64,438				9,906				-				74,344
General and administrative expenses			57,051				18,721				(24,664	)			51,108
Share compensation expenses			5,632				2,475				-				8,107
Finance expenses			10,752				-				-				10,752
Total expenses			262,624				22,685				(24,664	)			260,645
Income before taxes			136,587				173,875				20,962				331,424
Income tax benefit			976				-				-				976
Net income		$	137,563			$	173,875			$	20,962			$	332,400
Preferred dividend and warrant dividend			1,590				-				-				1,590
Net income available to common shareholders		$	135,973			$	173,875			$	20,962			$	330,810
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			76,138,038				55,984,116				54,679,419				130,817,457
Diluted			78,942,065				55,990,946				55,036,063				133,978,128
Basic earnings per common share		$	1.79				3.11								2.53
Diluted earnings per common share		$	1.74				3.11								2.48

Validus Holdings, Ltd. Pro Forma Combined – Validus Holdings, Ltd. and IPC Holdings Ltd. Pro Forma Combined Income Statement For the three months ended March 31, 2009 (expressed in thousands of U.S. dollars, except share and per share information)
		Historical Validus Holdings Ltd.				Historical IPC Holdings Ltd.				Pro Forma Purchase adjustments				Pro Forma Consolidated
Revenues
Gross premiums written		$	609,892			$	234,610			$	(265	)		$	844,237
Reinsurance premiums ceded			(72,512	)			(3,154	)			265				(75,401	)
Net premiums written			537,380				231,456				-				768,836
Change in unearned premiums			(218,621	)			(132,748	)			-				(351,369	)
Net premiums earned			318,759				98,708				-				417,467
Net investment income			26,772				21,866				(4,191	)			44,447
Net realized (losses) on investments			(23,421	)			(3,918	)			-				(27,339	)
Net unrealized gains (losses) on investments			22,153				(31,654	)			-				(9,501	)
Other income			757				7				-				764
Foreign exchange (losses)			(4,200	)			(3,146	)			-				(7,346	)
Total revenues			340,820				81,863				(4,191	)			418,492
Expenses
Losses and loss expenses			131,834				39,109				-				170,943
Policy acquisition costs			61,449				9,838				-				71,287
General and administrative expenses			38,079				21,792				(11,638	)			48,233
Share compensation expenses			7,354				2,489				-				9,843
Finance expenses			7,723				383				-				8,106
Total expenses			246,439				73,611				(11,638	)			308,412
Income before taxes			94,381				8,252				7,447				110,080
Income tax benefit			526				-				-				526
Net income		$	94,907			$	8,252			$	7,447			$	110,606
Preferred dividend and warrant dividend			1,736				-				-				1,736
Net income available to common shareholders		$	93,171			$	8,252			$	7,447			$	108,870
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			75,744,577				55,903,740				54,425,368				130,169,945
Diluted			79,102,643				55,916,256				54,959,647				134,062,290
Basic earnings per common share		$	1.23			$	0.15							$	0.84
Diluted earnings per common share		$	1.20			$	0.15							$	0.83

Validus Holdings, Ltd. Pro Forma Combined – Validus Holdings, Ltd. and IPC Holdings Ltd. Pro Forma Combined Income Statement For the year ended December 31, 2008 (expressed in thousands of U.S. dollars, except share and per share information)
		Historical Validus Holdings Ltd.				Historical IPC Holdings Ltd.				Pro Forma Purchase adjustments				Pro Forma Consolidated
Revenues
Gross premiums written		$	1,362,484			$	403,395			$	(251	)		$	1,765,628
Reinsurance premiums ceded			(124,160	)			(6,122	)			251				(130,031	)
Net premiums written			1,238,324				397,273				-				1,635,597
Change in unearned premiums			18,194				(9,906	)			-				8,288
Net premiums earned			1,256,518				387,367				-				1,643,885
Net investment income			139,528				94,105				(20,203	)			213,430
Realized gain on repurchase of debentures			8,752				-				-				8,752
Net realized (losses) gains on investments			(1,591	)			49,290				-				47,699
Net unrealized (losses) on investments			(79,707	)			(217,498	)			-				(297,205	)
Other income			5,264				65				-				5,329
Foreign exchange (losses)			(49,397	)			(1,848	)							(51,245	)
Total revenues			1,279,367				311,481				(20,203	)			1,570,645
Expenses
Losses and loss expenses			772,154				155,632				-				927,786
Policy acquisition costs			234,951				36,429				-				271,380
General and administrative expenses			123,948				20,689				-				144,637
Share compensation expenses			27,097				5,625				-				32,722
Finance expenses			57,318				2,659				-				59,977
Total expenses			1,215,468				221,034				-				1,436,502
Income before taxes			63,899				90,447				(20,203	)			134,143
Income tax expense			(10,788	)			-				-				(10,788	)
Net income		$	53,111			$	90,447			$	(20,203	)		$	123,355
Preferred dividend and warrant dividend			6,947				14,939				(14,939	)			6,947
Net income available to common shareholders		$	46,164			$	75,508			$	(5,264	)		$	116,408
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			74,677,903				52,124,034				54,426,286				129,104,189
Diluted			75,819,413				59,301,939				54,960,566				130,779,979
Basic earnings per common share		$	0.62			$	1.45							$	0.90
Diluted earnings per common share		$	0.61			$	1.45							$	0.89

Cautionary Note Regarding Forward-Looking Statements

This press release may include forward-looking statements, both with respect to the Company and its industry, that reflect its current views with respect to future events and financial performance. Statements that include the words "expect," "intend," "plan," "confident," "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, many of which are beyond the Company’s control. 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. The parties believe that these factors include, but are not limited to, the following: 1) Validus and IPC may be unable to complete the proposed amalgamation because, among other reasons, conditions to the closing of the proposed amalgamation may not be satisfied or waived; 2) uncertainty as to the actual premium that will be realized by IPC shareholders in connection with the proposed amalgamation; 3) uncertainty as to the long-term value of Validus common shares; 4) unpredictability and severity of catastrophic events; 5) rating agency actions; 6) adequacy of Validus' or IPC's risk management and loss limitation methods; 7) cyclicality of demand and pricing in the insurance and reinsurance markets; 8) Validus' limited operating history; 9) Validus' ability to implement its business strategy during "soft" as well as "hard" markets; 10) adequacy of Validus' or IPC's loss reserves; 11) continued availability of capital and financing; 12) retention of key personnel; 13) competition; 14) potential loss of business from one or more major insurance or reinsurance brokers; 15) Validus' or IPC's 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; 16) general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates); 17) the integration of Talbot or other businesses Validus may acquire or new business ventures Validus may start; 18) the effect on Validus' or IPC's investment portfolios of changing financial market conditions including inflation, interest rates, liquidity and other factors; 19) acts of terrorism or outbreak of war; 20) availability of reinsurance and retrocessional coverage; 21) failure to realize the anticipated benefits of the proposed amalgamation, including as a result of failure or delay in integrating the businesses of Validus and IPC; and 22) the outcome of any legal proceedings to the extent initiated against Validus, IPC and others following the announcement of the proposed amalgamation, 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 Validus' most recent reports on Form 10-K and Form 10-Q and the risk factors included in IPC's most recent reports on Form 10-K and Form 10-Q and other documents of Validus and IPC on file with the Securities and Exchange Commission ("SEC"). Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Validus will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Validus or its business or operations. Except as required by law, the parties undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

In presenting the Company’s results, management has included and discussed certain schedules containing net operating income (loss), net operating income per share underwriting income, annualized net operating 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. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of net operating income to net income, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented in the “Consolidated Statement of Operations” above. Annualized net operating return on average equity is presented in the section above entitled “Net Operating Income, Net Operating Income per share and Annualized Net Operating Return on Average Equity”. A reconciliation of diluted book value per share to book value per share, the most comparable U.S. GAAP financial measure, is presented in the section above entitled “Diluted Book Value Per Share”. Net operating income is calculated based on net income (loss) excluding net realized gains (losses), net unrealized gains (losses) on investments, gains (losses) arising from translation of non-US$ denominated balances and non-recurring items. Realized 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-US$ denominated balances are unrelated to our underlying business.

Additional information about the proposed amalgamation and where to find it:

The issuance of Validus shares to IPC shareholders in the amalgamation will be submitted to shareholders of Validus for their consideration. The proposed amalgamation will be submitted to shareholders of IPC for their consideration. On July 16, 2009, Validus filed a Registration Statement on Form S-4 that contains a preliminary joint proxy statement/prospectus for the proposed amalgamation. These materials are not yet final and will be amended or supplemented. Validus and IPC shareholders are urged to read the preliminary joint proxy statement/prospectus and, when filed, the definitive version thereof, and any other relevant documents filed with the SEC because they contain and will contain important information. This press release is not a substitute for the joint proxy statement/prospectus or any other documents which Validus or IPC may file with the SEC and send to their respective shareholders in connection with the proposed amalgamation.

The preliminary joint proxy statement/prospectus filed on July 16, 2009 is, and the definitive version of the joint proxy statement/prospectus and other relevant materials, when filed, will be, available free of charge at the SEC’s website ( www.sec.gov ) or by directing a request to Validus through Jon Levenson, Senior Vice President, at +1-441-278-9000, or IPC through John Weale, Interim President and Chief Executive Officer, at +1-441-298-5100.

This press release does not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. No offering of securities shall be made except by means of a proxy statement/prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Participants in the Solicitation:

Validus and IPC and their directors and executive officers are deemed to be participants in any solicitation of Validus and IPC shareholders in connection with the proposed amalgamation. Information about Validus’ directors and executive officers is available in Validus’ definitive proxy statement, dated March 25, 2009, for its 2009 annual general meeting of shareholders. Information about IPC’s directors and executive officers is available in IPC’s Amendment No. 1 to Form 10-K, dated April 30, 2009, for the fiscal year ended December 31, 2008.