Validus Q1 profits tumble on lower underwriting income

Bermuda-based Validus Holdings recorded a sharp drop in net income on lower underwriting income and a deteriorating combined ratio.

Net income declined 43.3 percent year-on-year to $94.6 million in the first quarter of 2017, driven by all four of its major segments.

Underwriting income for Validus Re fell to $71.8 million in the first quarter from $98.3 million in the first quarter of 2016.

Underwriting income at Talbot fell to $4.9 million from $20.3 million over the period.

Western World loss deepened to a loss of $9.1 million compared to a negative $4.7 million in the first quarter of 2016.

And Validus’ share of AlphaCat income went to $6.1 million in the first quarter of 2017 from $8.8 million in the first three months of 2016.

At the same time Validus said that there had been no notable loss events for it over the three months ended March 31, 2017.

Net operating income for the first quarter was $76.8 million, again down substantially on the $121.5 million the company reported for the first three months of 2016.

The combined ratio for the three months ended March 31, 2017 increased 8.1 percentage points to 83.2 percent compared to the same period a year ago.

Reinsurance premiums ceded for the first quarter of 2017 were at $200.1 million, up 19.2 percent compared to the same period a year ago. The increase was primarily driven by increases in the Validus Re, Talbot and AlphaCat segments.

The loss ratio for the three months ended March 31, 2017 was 46.9 percent, which included $61.2 million of favourable loss reserve development on prior accident years, benefiting the loss ratio by 10.6 percentage points.

At the same time, gross written premiums for the first quarter of 2017 came to $1.19 billion, a 1.5 percent increase on the $1.17 billion Validus reported in the same period of 2016. The company said that the growth was primarily driven by an increase in its Western World segment and was offset by decreases in its Validus Re and Talbot segments.

“This was another good quarter for the Validus Group,” said Validus' chairman and CEO Ed Noonan. “We had $94.6 million in net income, and an annualised return on average equity of 10.2 percent in the quarter. Our combined ratio of 83.2 percent reflects our continued commitment to underwriting profits, and most importantly we grew our book value per diluted common share (including dividends) by 2.9 percent during the quarter.”

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