Validus reports high profit increase in Q3 while GWP declines at Validus Re and Talbot

Validus Holdings has reported a net income increase in the third quarter of 2016, despite a sharp decline in gross written premiums (GWP), reducing its exposure to classes of business resulting in the greatest pressure on pricing.

Validus Re and Talbot both saw decreases in their overall GWP, however, this was partially offset by growth in its Western World sector.

Validus revealed a net income of $89.8 million for the third quarter ending September 20, 2016, a 34.6 percent increase from $66.7 million for the same period in 2015.

The combined ratio for the third quarter was 82.4 percent, a decrease of 1.9 percentage points year-over-year.

The re/insurer’s GWP for the third quarter were $372.4 million, a decrease of 7.5 percent from $30.1 million year-over-year.

Particularly, GWP for Validus Re for the three-month period were 94.7 million, a decline of 8.3 percent from $103.3 million for the same period last year.

The decrease in the property lines of $11.6 million was primarily driven by a decrease in incepting business of $5.3 million, along with adjustments to existing business of $6.3 million, primarily in the catastrophe and per risk excess of loss classes.

The decrease in the marine lines of $17.9 million was primarily due to the timing of renewals of certain proportional programmes which incepted during the third quarter of 2015, as well as adjustments to existing business.

Partially offsetting the decreases was an increase in the specialty lines of $21 million, primarily as a result of increased casualty business written during the period of $7.5 million and continued growth in the composite lines of $4 million, along with timing differences on the renewal of certain contracts and decreased premium adjustments year on year.

Talbot's gross premiums written for the three months ended September 30, 2016 were $189.7 million compared to $226 million for the three months ended September 30, 2015, a decrease of $36.4 million, or 16.1 percent.

The decrease in the property and marine lines of $8.4 million and $18.7 million, respectively, were primarily driven by foreign exchange and reductions in its participation and non-renewals on various programmes due to the current rate environment, notably in the downstream and upstream energy classes. The decrease in gross premiums written in the specialty lines of $9.2 million was primarily due to the timing of renewals of political risk contracts.

In the Western World segment, gross premiums written for the three months ended September 30, 2016 were $85.3 million compared to $70.9 million for the three months ended September 30, 2015, an increase of $14.4 million, or 20.3 percent.

Ed Noonan, chairman and CEO of Validus, said: "Validus delivered favourable results for the third quarter of 2016, with a combined ratio of 82.4 percent and strong investment returns driving book value growth of 2.5 percent inclusive of common dividends.

“Given current market conditions we continue to reduce exposure in areas under the most competitive pressure - notably marine and energy and certain property classes - while continuing to expand our profile in US insurance and the management of third party capital."