Ipc Corporation Ltd · SGX:AZA
Ipc — Merger or Acquisition (June 2009)
35 slides from Ipc's merger presentation, Jun 10, 2009
Slide 1: Further Improved Superior Proposal for IPC Shareholders
Investor Presentation Further Improved Superior Proposal for IPC Shareholders June 2009
Slide 2: Cautionary Note Regarding Forward-Looking Statements
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. State
Slide 3: Non-GAAP Financial Measures and Proposed Acquisition
Non-GAAP Financial Measures and Proposed Acquisition 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
Slide 4: Validus Increases Offer for IPC Holdings
On June 8, 2009, Validus announced that it has delivered an increased offer to the Board of Directors of IPC IPC shareholders will receive $3.75 in cash and 1.1234 Validus voting common shares for each IPC common share The increased offer provides IPC shareholders with total consideration of $30.97
Slide 5: 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 - 24.9% premium to unaffected share price1 and 14.8% premium bas
Slide 6: 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 7: 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 8: 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 9: 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 10: A Validus / IPC Combination Has a Clear Strategic Rationale
A Validus / IPC Combination Has a Clear Strategic Rationale 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 m
Slide 11: 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 12: 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 $24.23 and $26.97 as of 6/8/09, respectively 1 A merger under Bermuda law is effected via a plan of amalgamation. Alternatively, deal may be structured as an
Slide 13: Superior Financial Proposal - Improved Superior Value
Superior Financial Proposal - Improved Superior Value IPC Share Price vs. Validus Offer Price 1 Source: FactSet; Pricing through June 8, 2009 1 Calculated as VR share price multiplied by 1.1234x exchange ratio plus $3.75 in cash 2 Excludes weekends and holidays $ Premium to IPC Share Price 1,2 Media
Slide 14: 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 15: Superior Pro Forma Financial Strength
Superior Pro Forma Financial Strength Validus / IPC Pro Forma Max / IPC Pro Forma Stockholders' Equity $3.58 Billion $2.80 Billion Total Debt / Capitalization 0.0% 7.1% Total Debt + Hybrids / Capitalization 7.8% 7.1% Alt. Inv + Equities / Stockholders' Equity 8.2% 31.9% Reserve Additions Req'd Upon
Slide 16: The Validus Offer Creates a Larger, Better-Capitalized Company
The Validus Offer Creates a Larger, Better-Capitalized Company A Pro Forma Comparison of 3/31/09 Shareholders' Equity Source: SNL; pro forma for Max / IPC is as per Max / IPC Form DEF14A filed 6/4/09 "...greater size and scale enhances valuation and ratings profile" - Max / IPC Presentation dated Ma
Slide 17: Validus' Balance Sheet Has Lower Embedded Risk
Validus' Balance Sheet Has Lower Embedded Risk Peer Comparison: Total Investment Leverage 1 and Alternatives Leverage 2 Source: Public filings as of 3/31/09 and SNL 1 Defined as cash and total invested assets / common shareholders' equity 2 Alternatives includes hedge / investment fund, private equi
Slide 18: Validus Has a Stronger, More Conservative Portfolio with Less Market Risk
Pro Forma Max / IPC Pro Forma Validus / IPC Validus Has a Stronger, More Conservative Portfolio with Less Market Risk $3.5 billion $5.7 billion $2.2 billion $5.0 billion $7.2 billion Source: Validus, Max and IPC Form 10-Qs for quarter ended March 31, 2008; pro forma for Max /IPC is as per Max / IPC
Slide 19: Validus Has a History of Growing Book Value Faster than Max
Validus Has a History of Growing Book Value Faster than Max Source: SEC filings and other public disclosures, SNL Financial 1 2005-Q109 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, 2008 and 2
Slide 20: 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 21: Roadmap to Expedited Completion: Three Part Plan
Roadmap to Expedited Completion: Three Part Plan 1 On May 29, 2009, the Supreme Court of Bermuda dismissed Validus' initial application to convene a meeting of IPC shareholders to consider the Validus scheme of arrangement but indicated that it had jurisdiction to approve such an application. There
Slide 22: 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 6/8/2009 3 Pro forma shareholders' equity as of 3/31/2009 plus debentures payable A combination with Validus creates greater current value and long-term prospects for IP
Slide 23: Appendix
VALIDUS Appendix
Slide 24: Appendix Index
Appendix Index Page Validus' Management Team is Deep and Experienced 24 Validus Offers IPC Quality Diversification 25 Talbot Demonstrates History of Smart / Strategic Acquisitions 26 Commercial Lines Pricing Trends 27 Guy Carpenter World Property Cat Reinsurance Rates 28 IPC Has Greater Earnings Pow
Slide 25: Validus' Management Team is Deep and Experienced
Validus' Management Team is Deep and Experienced
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 34: Reconciliation of Validus Operating Income
Reconciliation of Validus Operating Income (expressed in thousands of U.S. dollars, except share amounts)
Slide 35: Reconciliation of Validus Book Value
Reconciliation of Validus Book Value (expressed in thousands of U.S. dollars, except share amounts)