Slide 1: Investor Presentation First Quarter 2009
Investor Presentation First Quarter 2009
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation may include forward-looking statements, both with respect to us and our industry, that reflect our current views with respect to future events and financial performance. Statements that include the words "expect," "intend," "plan
Slide 3: Note on Non-GAAP Financial Measures
Note on Non-GAAP Financial Measures In presenting the Company's results herein, management has included and discussed underwriting income, operating income, and diluted book value per share that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non
Slide 4: Validus Overview
Validus Overview Focus on short-tail (re)insurance Outstanding first quarter financial performance Superior increases in book value Poised for profitable growth Transparent risk disclosure
Slide 5: Selected Market Information
Primary Shares Outstanding: 75,828,922 Share Price (March 31, 2009): $23.68 Primary Market Capitalization: Annual Dividend/Yield : $0.80 per share (3.4%) Exchange / Ticker: NYSE / "VR" Analyst Coverage: Matt Carletti, Fox-Pitt Kelton Cochran Caronia Waller Jay Cohen, Merrill Lynch Dean Evans, Keefe,
Slide 6: Validus is Diversified in Short-Tail Specialty Classes
Validus is Diversified in Short-Tail Specialty Classes Validus Re GPW LTM GPW Through March 31, 2009: $766.8 million LTM GPW of $1.45 billion Balanced by Class: 47% Property, 30% Marine, 23% Specialty Note: $1.45bb consolidated GPW reflects $51.2mm intersegment eliminations; $766.8mm and $735.1mm se
Slide 7: Balanced Between Insurance and Reinsurance
Balanced Between Insurance and Reinsurance Based on 2008 GPW except ACGL which is NPW. Source: SEC filings and other public disclosures.
Slide 8: Focused on Short-Tail Specialty Classes
Focused on Short-Tail Specialty Classes Based on 2008 GPW except ACGL which is NPW. Source: SEC filings and other public disclosures.
Slide 9: Property Cat Reinsurance is Important But Not Dominant
Property Cat Reinsurance is Important But Not Dominant Based on 2008 GPW except ACGL which is NPW. Source: SEC filings and other public disclosures.
Slide 10: Talbot 2008 Market Share by Lloyd's Class of Business
Talbot 2008 Market Share by Lloyd's Class of Business Note: Market share expressed as a % of gross premium for 2008. Source: Lloyd's
Slide 11: Current Market Dynamics
Current Market Dynamics Reinsurance industry capital and capacity has been materially depleted U.S. Statutory surplus was down 11%, or ~$60 billion in 20081 Limited access to replacement capital and new capacity Disrupted capital markets and depressed valuations mean reloading by incumbents is diffi
Slide 12: Validus Reported Excellent First Quarter 2009 Results
Validus Reported Excellent First Quarter 2009 Results 1Reconciliations of VR diluted book value per share, operating income and operating ROAE, non-GAAP financial measures, to book value per share, net income and ROAE are presented in the appendix Source: SNL Financial 16.9% growth in gross premiums
Slide 13: Validus Holdings, Ltd. - Quarterly Overview
Validus Holdings, Ltd. - Quarterly Overview Gross premiums written increased by 16.9% 23.9% increase in Validus Re segment 12.9% in Talbot segment Net underwriting income increased by 55.4% 9.2% growth in net premiums earned Combined ratio improved by 7.4 percentage points Net investment income decr
Slide 14: Validus Re - Quarterly Segment Results
Validus Re - Quarterly Segment Results Gross premiums written increased by 23.9% ($79.1 million) $42.3 million increase in property $37.5 million increase in marine Rate increases of 10 to 15% globally at Jan 1 Property Late renewals for US cat - market well behaved and disciplined Virtually no new
Slide 15: Talbot - Quarterly Segment Results
Talbot - Quarterly Segment Results Gross premiums written increased by 12.9% ($26.1 million) 25.2% on a constant currency basis ($50.8 million) Rate increases in 16 of 18 classes Contributions from new ventures to gross premiums written: $9.3 million from Validus Reaseguros $9.0 million from Onshore
Slide 16: Investment Portfolio at March 31, 2009
Investment Portfolio at March 31, 2009 Conservative investment strategy Emphasize the preservation of invested assets Provide sufficient liquidity for the prompt payment of claims No exposure to alternative asset classes, equities, derivatives Comprehensive portfolio disclosure Average portfolio rat
Slide 17: Loss Reserves at March 31, 2009
Loss Reserves at March 31, 2009 Validus Gross Reserve Mix As of March 31, 2009 Gross reserves for losses and loss expenses of $1.32 billion IBNR represents 43.6% of reserves No exposures pre-dating 2002 Talbot has a history of favorable reserve development: $113.3mm since acquisition $54.7mm during
Slide 18: Growth in Diluted Book Value Per Share
Growth in Diluted Book Value Per Share Growth in diluted book value per share plus accumulated dividends 13.6% compounded annual growth through March 31, 2009
Slide 19: Change in 2008 Diluted BV/Share plus Dividends - P/C Industry
Change in 2008 Diluted BV/Share plus Dividends - P/C Industry Universe: 55 public listed P&C companies reporting through February 18, 2009 Results: 16 companies (29.1%) reported positive change in 2008 diluted BV/share plus dividends Range: From +15.0% (FMR) to -67.0% (XL), Average of -9.6% Source:
Slide 20: First Quarter 2009 Change in Diluted Book Value Per Share
First Quarter 2009 Change in Diluted Book Value Per Share Note (1): Diluted book value per share calculation includes impact of quarterly dividends Note(2): Reconciliations of VR diluted book value per share are presented in the appendix Source: SNL Financial and company reports
Slide 21: Catastrophe Reinsurance Market Update
Catastrophe Reinsurance Market Update Significant Pricing Gains in Property Lines since 2001 10-15% rate increases at January 1, 2009 Rate pressures building through the year Capacity shortages appearing Expect June 1 renewals to show 15-20% rate increases Legislation pending for reduction in TICL l
Slide 22: Ability to Scale Platform
Ability to Scale Platform Note: Certain subsidiaries have been excluded for the purposes of presentation. For a complete organizational chart see the company's most recent Annual Report on Form 10-K Singapore representative office Miami office targeting Latin America Onshore Energy Aviation Flexible
Slide 23: Transparent Risk Disclosure - April 1, 2009 Portfolio
Transparent Risk Disclosure - April 1, 2009 Portfolio 1:100 year PML equal to 21.2% of March 31, 2009 capital, 24.4% of shareholders' equity Net loss estimates are before income tax, net of reinstatement premiums, and net of reinsurance and retrocessional recoveries. The estimates set forth above ar
Slide 24: Realistic Disaster Scenarios - January 1, 2009 Portfolio
Realistic Disaster Scenarios - January 1, 2009 Portfolio
Slide 25: Appendix First Quarter 2009
Investor Presentation - Appendix First Quarter 2009
Slide 26: Net Operating Income Reconciliation
Net Operating Income Reconciliation
Slide 27: Diluted Book Value Per Share Reconciliation
Diluted Book Value Per Share Reconciliation Filed by Validus Holdings, Ltd. pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange of 1934, as amended Subject Company: IPC Holdings, Ltd. (Commission File No.: 000-2766
Slide 28: Improved Superior Proposal for IPC Shareholders May 2009
Investor Presentation Improved Superior Proposal for IPC Shareholders May 2009
Slide 29: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation may include forward-looking statements, both with respect to us and our industry, that reflect our current views with respect to future events and financial performance. Statements that include the words "expect," "intend," "plan
Slide 30: Validus Increases Offer for IPC Holdings
Validus Increases Offer for IPC Holdings On May 18, 2009, Validus announced that it has delivered an increased offer to the Board of Directors of IPC IPC shareholders will receive $3.00 in cash and 1.1234 Validus voting common shares for each IPC common share The increased offer provides IPC shareho
Slide 31: Executive Summary
Executive Summary Validus has reported excellent earnings, growth and profitability in the first quarter, outperforming its Bermuda peer group Validus is committed to its Improved Superior Proposal to acquire IPC Superior Current Value - 21.9% premium to unaffected share price1 and 13.2% premium bas
Slide 32: Validus Reported Excellent First Quarter 2009 Results
Validus Reported Excellent First Quarter 2009 Results 16.9% growth in gross premiums written (23.9% at Validus Re and 12.9% at Talbot) 75% combined ratio (57.1% at Validus Re and 91.5% at Talbot) Net operating income of $100.4 million and diluted operating EPS of $1.27 Net income of $94.9 million an
Slide 33: Validus is Diversified in Short-Tail Specialty Classes
Validus is Diversified in Short-Tail Specialty Classes Validus Re GPW 2008 GPW Total: $687.8 million 2008 GPW of $1.36 billion Balanced by Class: 46% Property, 29% Marine, 25% Specialty Note: $1.36bn consolidated GPW reflects $34.3mm intersegment eliminations; $687.8mm and $709.0mm segment GPW do no
Slide 34: Focused on Short-Tail; Majority Non-Cat
Focused on Short-Tail; Majority Non-Cat Note: Based on 2008 GPW except ACGL which is NPW Source: SEC filings and other public disclosures
Slide 35: A Superior Proposal for IPC Shareholders
A Superior Proposal for IPC Shareholders Creates a leading Bermuda carrier in the short-tail reinsurance and insurance market with a global underwriting platform Superior long-term growth and return prospects Quality diversification in profitable lines Superior value proposition for IPC shareholders
Slide 36: Strategic Advantages for a Combined Validus/IPC
Strategic Advantages for a Combined Validus/IPC Reinsurance industry capital and capacity has been materially depleted U.S. Statutory surplus was down 11%, or ~$60 billion in 20081 Limited access to replacement capital and new capacity Disrupted capital markets and depressed valuations mean reloadin
Slide 37: The Validus Business Model Offers Higher Quality Diversification
The Validus Business Model Offers Higher Quality Diversification Professional Liability ($201 mm) Property ($151 mm)4 Excess Liability ($134 mm) Aviation ($85 mm) Agriculture ($80 mm) Rate Trend3 Rate Trend3 Property ($317 mm) Marine ($287 mm) War and Terrorism ($154 mm) Marine and Energy Reinsuranc
Slide 38: Overview of the Validus Improved Superior Proposal
Overview of the Validus Improved Superior Proposal Note: Last reported closing prices of VR and IPCR were $24.91 and $25.41 as of 3/30/09 and $24.16 and $26.63 as of 5/15/09, respectively 1A merger under Bermuda law is effected via a plan of amalgamation. Alternatively, deal may be structured as an
Slide 39: Superior Financial Proposal - Improved Superior Value
Superior Financial Proposal - Improved Superior Value IPC Share Price vs. Validus Offer Price 1 Source: FactSet; Pricing through May 15, 2009 1 Calculated as VR share price multiplied by 1.1234x exchange ratio plus $3.00 in cash 2 Excludes weekends and holidays $ Premium to IPC Share Price 2 Median
Slide 40: Superior Financial Proposal - Higher Quality Currency
Superior Financial Proposal - Higher Quality Currency Validus Max Superior Liquidity Trading Dollar Volumes 1 3 month - $11.3 million 6 month - $9.7 million Trading Dollar Volumes 1 3 month - $6.7 million 6 month - $7.6 million Reduced Volatility Annualized Daily Volatility 2 61.0 Annualized Daily V
Slide 41: Superior Pro Forma Financial Strength
Superior Pro Forma Financial Strength Validus / IPC Pro Forma Max / IPC Pro Forma Stockholders' Equity $3.53 Billion $2.97 Billion Total Debt / Capitalization 1.9% 9.6% Total Debt + Hybrids / Capitalization 9.7% 9.6% Alt. Inv + Equities / Stockholders' Equity 10.3% 37.6% Reserve Additions Req'd Upon
Slide 42: The Validus Offer Creates a Larger, Better-Capitalized Entity
The Validus Offer Creates a Larger, Better-Capitalized Entity A Pro Forma Comparison of 12/31/08 Shareholders' Equity Source: Public filings; pro forma for Max /IPC is as per Max / IPC Form DEFM14A filed 5/7/09 Validus / IPC Results in 19% More Shareholders' Equity Than Max / IPC $ in Billions
Slide 43: Validus' Balance Sheet Has Lower Embedded Risk
Validus' Balance Sheet Has Lower Embedded Risk Peer Comparison: Total Investment Leverage 1 and Alternatives Leverage Source: Public filings 1 Defined as cash and total invested assets / common shareholders' equity 2 Alternatives includes investment funds, hedge funds, limited partnerships, private
Slide 44: Validus Has a Stronger, More Conservative Portfolio
Pro Forma Max / IPC Pro Forma Validus / IPC Validus Has a Stronger, More Conservative Portfolio with Less Market Risk $3.3 billion $5.5 billion $2.2 billion $5.4 billion $7.6 billion Source: Validus, Max and IPC Form 10-Ks for fiscal years ended December 31, 2008; pro forma for Max /IPC is as per Ma
Slide 45: Superior Growth in Validus Shareholder Value
Superior Growth in Validus Shareholder Value Source: Public Filings, SNL Financial 1 2005-2008 CAGR of Diluted BVPS, including accumulated dividends 2 Max's 2005 and 2006 Diluted BVPS figures are calculated using the treasury stock method and 2007 and 2008 figures are from Public Filings 3-Year CAGR
Slide 46: Validus Has a Superior Record of Underwriting Performance
Validus Has a Superior Record of Underwriting Performance Historically, Max's Results Have Been Driven by Alternative Investments and Lack of Underwriting Profit Comprehensive Income Per Share Contribution 2006 2007 2008 VR: $3.12 VR: $5.94 VR: $0.51 MXGL: $3.01 MXGL: $4.77 MXGL: $(3.54) Validus Max
Slide 47: Roadmap to Expedited Completion: Three Part Plan
Roadmap to Expedited Completion: Three Part Plan 1 Second shareholder meeting can be called by IPC shareholders with at least 10% of the vote Validus offer has a clear path to completion and does not require the cooperation of the IPC Board One: Soliciting IPC Shareholders to Vote "Against" the Infe
Slide 48: A Superior Proposal for IPC Shareholders
A Superior Proposal for IPC Shareholders 1 Calculated using closing prices as of 3/30/2009 2 Calculated using closing prices as of 5/15/2009 3 Pro forma shareholders' equity as of 12/31/2008 plus bank loan payable and debentures payable A combination with Validus creates greater current value and lo
Slide 49: Appendix
VALIDUS Appendix
Slide 50: Appendix Index
Appendix Index Page Validus' Management Team is Deep and Experienced 23 Validus Offers IPC Quality Diversification 24 Talbot Demonstrates History of Smart / Strategic Acquisitions 25 Commercial Lines Pricing Trends 26 Guy Carpenter World Property Cat Reinsurance Rates 27 Catastrophe Risk Offers High
Slide 51: Validus' Management Team is Deep and Experienced
Validus' Management Team is Deep and Experienced
Slide 52: Validus Offers IPC Quality Diversification
Validus Offers IPC Quality Diversification Significantly less catastrophe weighting than IPC stand-alone Higher participation in profitable lines than Max can offer Each of Validus and Max offer ~$1 billion of property and casualty gross premiums excluding Validus property cat Major lines for Validu
Slide 53: Talbot Demonstrates History of Smart / Strategic Acquisitions
Implied Multiple Talbot Data Talbot Demonstrates History of Smart / Strategic Acquisitions In July 2007 Validus acquired Talbot, a leading Lloyd's Syndicate for $382 million Purchase price was 1.6x stated equity and 3.1x earnings $105 million of reserve releases since closing By moving first, Validu
Slide 54: Commercial Lines Pricing Trends
Commercial Lines Pricing Trends Source: Council of Agents and Brokers (CIAB), Advisen, Market Scout and Tillinghast 1 Reported monthly; monthly average used Rate Changes by Survey - Year-over-Year % Change 1 1
Slide 55: Guy Carpenter World Property Cat Reinsurance Rates
Guy Carpenter World Property Cat Reinsurance Rates Source: Guy Carpenter Rate on Line Indexed to 1990 Value of 100%
Slide 56: Catastrophe Risk Offers Highly Attractive Risk-Adjusted Returns
Catastrophe Risk Offers Highly Attractive Risk-Adjusted Returns Validus is in the business of evaluating risk: We write a well-priced world-wide book of property catastrophe reinsurance business Our diversified earnings stream from other short-tail lines allows Validus to retain exposure equal to 34
Slide 57: IPC Has Greater Earnings Power With Validus
IPC Has Greater Earnings Power With Validus More effective use of IPC aggregate Shift business away from nationwide accounts IPC generated $221.9 million in GPW from $1.25 billion of U.S. aggregate in 2008 Validus generated $431.3 million of GPW from $1.44 billion of U.S. aggregate in 2008 Addition
Slide 58: Diversified Global Business Focused on Short-Tail Specialty
Diversified Global Business Focused on Short-Tail Specialty Source: 2008 Form 10-Ks. Based on 2008 actual gross premiums written (other than ACGL which is based on net premiums written). Life business is considered long-tail for purposes of this analysis Validus focuses on short-tail lines where pri
Slide 59: Outlook for Validus
Outlook for Validus Analysts support Validus' approach to risk management because it offers quality diversification in segments with favorable pricing trends "As a writer of short-tail reinsurance and specialty insurance, we see Validus as being very well positioned for the changes we expect to see
Slide 60: Outlook for Max
Outlook for Max Max has a much riskier asset portfolio with less favorable premium price trends "In October, we announced a reduction in our alternative portfolio from a target of 20% of invested assets to a range of 10 to 15%. We also indicated it would be rebalanced to reflect more market neutral
Slide 61: Non-GAAP Financial Measures
Non-GAAP Financial Measures In presenting Validus' results, management has included and discussed certain schedules containing net operating income (loss), annualized net operating return on average equity and diluted book value per common share that are not calculated under standards or rules that
Slide 62: Reconciliation of Validus Operating Income
Reconciliation of Validus Operating Income (expressed in thousands of U.S. dollars, except share amounts)
Slide 63: Reconciliation of Validus Book Value
Reconciliation of Validus Book Value (expressed in thousands of U.S. dollars, except share amounts) Filed by Validus Holdings, Ltd. pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange of 1934, as amended Subject Co
Slide 64: Presentation: Improved Superior Proposal for IPC Shareholders May 2009
Presentation Improved Superior Proposal for IPC Shareholders May 2009
Slide 65: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation may include forward-looking statements, both with respect to us and our industry, that reflect our current views with respect to future events and financial performance. Statements that include the words "expect," "intend," "plan
Slide 66: Table of Contents
Table of Contents Executive Summary Industry Overview and Parties Involved The Validus Superior Proposal IPC's Flawed "Strategic Process" and Related Issues Appendix 3 8 13 30 41
Slide 67: Validus Increases Offer for IPC Holdings
Validus Increases Offer for IPC Holdings On May 18, 2009, Validus announced that it has delivered an increased offer to the Board of Directors of IPC IPC shareholders will receive $3.00 in cash and 1.1234 Validus voting common shares for each IPC common share The increased offer provides IPC shareho
Slide 68: Executive Summary
Executive Summary Validus is committed to its Superior Proposal to acquire IPC Compelling Strategic Rationale - creates a leading short-tail reinsurance platform Superior Current Value - 21.9% premium to 3/30/2009 share prices1 and 13.2% premium to 5/15/2009 share prices2 Superior Long-Term Value -
Slide 69: Timeline
Timeline 3/31/2009: Validus Announces Superior Proposal at 18% Premium 1 12/5/2008 : Max Submits Preliminary Proposal to IPC 3/27/2009: IPC and Max File Preliminary Proxy 3/2/2009: Announcement of At-Market IPC / Max Amalgamation 2/27/2009: IPC Files Form 10-K 6/26/2009: Validus Exchange Offer Close
Slide 70: Grading the Transactions: Key Considerations
Grading the Transactions: Key Considerations Validus / IPC Pro Forma Max / IPC Pro Forma Premium For IPC Shareholders ? ? Strategic Rationale ? ? Attractiveness of the Pro Forma Currency ? ? Business Model and Business Prospects ? ? Earnings Potential ? ? Balance Sheet Strength ? ? Historical Track
Slide 71: Table of Contents
Table of Contents Executive Summary Industry Overview and Parties Involved The Validus Superior Proposal IPC's Flawed "Strategic Process" and Related Issues Appendix 3 8 13 30 41
Slide 72: Reinsurance Overview
Reinsurance Overview Reinsurer Reinsurer Primary Carrier "Cedant" Risks Risks Risks Insurance Contracts Retrocession Reinsurance Contracts Reinsurance is a mechanism used by insurance companies to spread the risks assumed from policyholders Reinsurance enlarges the primary carrier's underwriting cap
Slide 73: Validus Holdings, Ltd. Business Summary
Validus Holdings, Ltd. Business Summary LTM Share Price Performance Financial Summary 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. ("Talb
Slide 74: IPC Holdings, Ltd. Business Summary
IPC Holdings, Ltd. Business Summary LTM Share Price Performance Financial Summary 2008 Gross Premiums Written IPC Holdings, Ltd., through its wholly-owned subsidiary IPCRe Limited, provides property catastrophe reinsurance and, to a limited extent, aviation, property-per-risk excess and other short-
Slide 75: Max Capital Group Ltd. Business Summary
Max Capital Group Ltd. Business Summary LTM Share Price Performance Financial Summary Operating from offices in Bermuda, Ireland, the U.S. and at Lloyd's, Max Capital Group Ltd. is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, pu
Slide 76: Table of Contents
Table of Contents Executive Summary Industry Overview and Parties Involved The Validus Superior Proposal IPC's Flawed "Strategic Process" and Related Issues Appendix 3 8 13 30 41
Slide 77: Overview of the Improved Validus Superior Proposal
Overview of the Improved Validus Superior Proposal Note: Closing prices of VR and IPCR were $24.91 and $25.41 as of 3/30/09 and $24.16 and $26.63 as of 5/15/09, respectively 1A merger under Bermuda law is effected via a plan of amalgamation. Alternatively, deal may be structured as an exchange offer
Slide 78: Superior Financial Proposal - Superior Value
Source: FactSet; Pricing through 5/18/2009 1 Calculated as VR share price multiplied by 1.2037x exchange ratio until 5/18/2009, when calculated as VR share price multiplied by 1.1234x exchange ratio plus $3.00 in cash 2 Excludes weekends and holidays Superior Financial Proposal - Superior Value IPC
Slide 79: A Superior Proposal for IPC Shareholders
A Superior Proposal for IPC Shareholders Superior value proposition for IPC shareholders 21.9% premium to 3/30/2009 share price1 and 13.2% premium to 5/15/2009 prices2 Maintaining a meaningful premium since announcement Validus stock is an attractive investment with ample liquidity, low volatility,
Slide 80: Superior Proposal - High Quality Investment
Superior Proposal - High Quality Investment Validus Max 1 Measured prior to 3/2/09 announcement of Max / IPC transaction. Source: Bloomberg 2 During the 260 business day (approximately one year) period prior to the announcement of the Max Amalgamation. Source: Bloomberg 3 Total shareholder return ba
Slide 81: Superior Pro Forma Financial Strength
Superior Pro Forma Financial Strength Validus / IPC Pro Forma Max / IPC Pro Forma Stockholders' Equity $3.53 Billion $2.97 Billion Total Debt / Capitalization 1.9% 9.6% Total Debt + Hybrids / Capitalization 9.7% 9.6% Alt. Inv + Equities / Stockholders' Equity 10.3% 37.6% Reserve Additions Req'd Upon
Slide 82: The Validus Offer Creates a Larger, Better-Capitalized Entity
The Validus Offer Creates a Larger, Better-Capitalized Entity Source: Public filings; pro forma for Max /IPC is as per Max / IPC Form DEFM14A filed 5/7/09 A Pro Forma Comparison of 12/31/08 Shareholders' Equity Validus / IPC Results in 19% More Shareholders' Equity Than Max / IPC $ in Billions
Slide 83: Strategic Advantages for a Combined Validus/IPC
Strategic Advantages for a Combined Validus/IPC Reinsurance industry capital and capacity has been materially depleted U.S. Statutory surplus was down 11%, or ~$60 billion in 20081 Limited access to replacement capital and new capacity Disrupted capital markets and depressed valuations mean reloadin
Slide 84: Validus is Diversified in Short-Tail Specialty Classes
Validus is Diversified in Short-Tail Specialty Classes Validus Re Gross Premiums Written (GPW) 2008 GPW Total: $687.8 million 2008 GPW of $1.36 billion Balanced by Class: 46% Property, 29% Marine, 25% Specialty Note: $1.36bn consolidated GPW reflects $34.3mm intersegment eliminations; $687.8mm and $
Slide 85: The Validus Business Model Offers Higher Quality Diversification
The Validus Business Model Offers Higher Quality Diversification Professional Liability ($201 mm) Property ($151 mm)4 Excess Liability ($134 mm) Aviation ($85 mm) Agriculture ($80 mm) Rate Trend3 Rate Trend3 Property ($317 mm) Marine ($287 mm) War and Terrorism ($154 mm) Marine and Energy Reinsuranc
Slide 86: Focused on Short-Tail; Majority Non-Cat
Focused on Short-Tail; Majority Non-Cat Note: Based on 2008 GPW except ACGL which is NPW Source: SEC filings and other public disclosures A combination of Validus and IPC creates a well-diversified company without outsized cat exposure
Slide 87: Validus' Balance Sheet Has Lower Embedded Risk
Validus' Balance Sheet Has Lower Embedded Risk Peer Comparison: Total Investment Leverage 1 and Alternatives Leverage Source: Public filings as of 12/31/09 1 Defined as cash and total invested assets / common shareholders' equity 2 Alternatives includes investment funds, hedge funds, limited partner
Slide 88: Validus Has a Stronger, More Conservative Portfolio
Pro Forma Max / IPC Pro Forma Validus / IPC Validus Has a Stronger, More Conservative Portfolio with Less Market Risk $3.3 billion $5.5 billion $2.2 billion $5.4 billion $7.6 billion The IPC / Max transaction would increase IPC shareholders' exposure to alternative investments from 8.6% to 30.7% of
Slide 89: Superior Growth in Validus Shareholder Value
Superior Growth in Validus Shareholder Value Source: Public Filings, SNL Financial 1 2005-2008 CAGR of Diluted BVPS, including accumulated dividends 2 Max's 2005 and 2006 Diluted BVPS figures are calculated using the treasury stock method and 2007 and 2008 figures are from Public Filings 3-Year CAGR
Slide 90: Validus Has a Superior Record of Underwriting Performance
Validus Has a Superior Record of Underwriting Performance Historically, Max's Results Have Been Driven by Alternative Investments and Lack of Underwriting Profit Comprehensive Income Per Share Contribution 2006 2007 2008 VR: $3.12 VR: $5.94 VR: $0.51 MXGL: $3.01 MXGL: $4.77 MXGL: $(3.54) Validus Max
Slide 91: IPC Has Greater Earnings Power With Validus
IPC Has Greater Earnings Power With Validus More effective use of IPC aggregate Shift business away from nationwide accounts IPC generated $221.9 million in GPW from $1.25 billion of U.S. aggregate in 2008 Validus generated $431.3 million of GPW from $1.44 billion of U.S. aggregate in 2008 Addition
Slide 92: A Superior Proposal for IPC Shareholders
A Superior Proposal for IPC Shareholders A combination with Validus creates greater current value and long-term prospects for IPC shareholders Superior value proposition for IPC shareholders 21.9% premium to 3/30/2009 share price1 and 13.2% premium to 5/15/2009 prices2 Maintaining a meaningful premi
Slide 93: Table of Contents
Table of Contents Executive Summary Industry Overview and Parties Involved The Validus Superior Proposal IPC's Flawed "Strategic Process" and Related Issues Appendix 3 8 13 30 41
Slide 94: Flawed "Strategic Process" Conducted by IPC
Flawed "Strategic Process" Conducted by IPC The "strategic process" followed by IPC limited its ability to realize full value for IPC shareholders In its "strategic process," IPC specifically excluded a number of parties (including Validus) which might have offered superior value to IPC shareholders
Slide 95: The IPC / Max Amalgamation Agreement is a Takeover of IPC by Max
The IPC / Max Amalgamation Agreement is a Takeover of IPC by Max Though the IPC Board has asserted it has entered into a merger of equals, it is clear that the proposed Max amalgamation is really a takeover of IPC by Max Combined company would be named "Max Capital Ltd." Existing Max management will
Slide 96: Precedent Transaction Analysis
Precedent Transaction Analysis Comparison of Price / Book Multiples for Selected Bermuda Reinsurance Transactions 1 1 Purchase price based on VR close price on 5/15/09, the last trading day prior to the announcement of the Validus improved offer, 1.1234x exchange ratio and $3.00 in cash, 55.943mm IP
Slide 97: The Max Amalgamation Agreement Reflects Poor Corporate Governance
The Max Amalgamation Agreement Reflects Poor Corporate Governance We believe that the flawed strategic process that provided no consideration combined with the various protection provisions in the Max Amalgamation Agreement amounts to an abdication by IPC's Board of its fiduciary duties Despite cond
Slide 98: The IPC / Max Termination Fee Exceeds Precedents
Global Transactions - $500 million to $3.0 billion The IPC / Max Termination Fee Exceeds Precedents 1 $50 million fee divided by $959 million transaction value for Max Capital as per Bloomberg as of 5/7/09 Source: Thomson Median Termination Fee as a % of Equity Value The Max / IPC termination fee is
Slide 99: IPC's Board and Max Management Have an Incentive to Defend Max Transaction
IPC's Board and Max Management Have an Incentive to Defend Max Transaction; Limited Alignment with IPC Shareholders Director Beneficial Share Ownership Joining Max Board? Kenneth Hammond 891 YES James P. Bryce 324,524 NO Mark Bridges 891 YES Michael Cascio 891 YES Peter C. Christie 891 YES L. Anthon
Slide 100: Validus' Management Team is More Accountable to Shareholders
Validus' Management Team is More Accountable to Shareholders 2008 Comprehensive Income 2008 ROAE Bonus Compensation for CEO CD&A Rationale 1 Validus' management must earn their cash bonuses Max Validus $(200.4 million) (12.2%) $1,700,000 $45.3 million 2.7% $0 Source: Public filings and SNL Financial
Slide 101: Potential "Downsides" of a No-Vote for Max/IPC?
"If the vote is against the agreement with Max it does not mean we have a deal with Validus" - - Ken Hammond IPC Board would be ignoring the will of shareholders if, upon a no-vote on Max / IPC, it rejected Validus The Board would be choosing no premium, no diversification and operating as a standal
Slide 102: Roadmap to Expedited Completion: Three Part Plan
Roadmap to Expedited Completion: Three Part Plan 1 Second shareholder meeting can be called by IPC shareholders with at least 10% of the vote Validus offer has a clear path to completion and does not require the cooperation of the IPC Board One: Soliciting IPC Shareholders to Vote "Against" the Infe
Slide 103: Summary
Summary Validus is committed to its Superior Proposal to acquire IPC Validus offers a superior value proposition for IPC shareholders A Validus / IPC combination creates a combined company with a strong balance sheet and a currency with superior investment characteristics IPC's "strategic process" w
Slide 104: Table of Contents
Table of Contents Executive Summary Industry Overview and Parties Involved The Validus Superior Proposal IPC "Strategic Process" and Related Issues Appendix 3 8 13 30 41
Slide 105: Comparable Company Analysis
Comparable Company Analysis Source: SNL 1 As of 3/31/09
Slide 106: Precedent Transactions Analysis
Precedent Transactions Analysis 1 Source: SNL and company filings 1 Criteria: All property and casualty insurance transactions with the target based in Bermuda in the last five years with a transaction value greater than $100 million 2 Purchase price based on VR close price on 5/15/09 of $24.16, 1.1