Overview Risk Factors What we liked Trends Ratios Decision
Incorporated on October 19, 2005 traded on the NYSE Bermuda-based company provides reinsurance, insurance, and insurance linked securities fund management services in the property, marine, and specialty lines markets worldwide. Focus on underwriting profits Primarily use short‐tail lines which have been and remain the best-‐priced classes of risk Short duration, highly liquid, conservative balance sheet Insurance for insurance, insure a portion of another insurers policy in exchange for a premium.
Source: Validus Group Investor Relations Release for Q2 2013 ..Reinsurers and.. Talbot is a specialty insurance group
“Credit quality has improved alongside delinquency rates” “Major banks have been keeping interest rates low” - S&P Net Advantage Financials: Diversified Outlook Industry belh:PPP “Our general strategy is to manage interest rate risk while minimizing exposure to credit risk” - Hatteras Financial Investor Relations Release
Macroeconomic Risk Factors Competition (must stay technologically innovative) Interest Rates Recession Risk (debt ceiling looming)
Source: Validus Group Investor Relations Release for Q2 2013 “The Company actively manages its aggregate exposures by geographic or risk zone (“zones”) to maintain a balanced and diverse portfolio of underlying risks.” - Validus Group 10-K
Source: Validus Group Investor Relations Release for Q2 2013 ROL: A percentage derived by dividing reinsurance premium by reinsurance limit; the inverse is known as the payback or amortization period. For example, a $10 million catastrophe cover with a premium of $2 million would have an ROL of 20 percent and a payback period of 5 years. - See more at: http://www.irmi.com/online/insurance-glossary/terms/r/rate-on-line-rol.aspx#sthash.MteklLjZ.dpuf
Source: Validus Group Investor Relations Release for Q2 2013
Source: Validus Group Investor Relations Release for Q2 2013
Source: Validus Group Investor Relations Release for Q2 2013 “A foundation for future growth as crop insurance is a global class of business” - Validus Group Investor Relations Release Q2 2013
Source: Validus Group Investor Relations Release for Q2 2013
Source: Yahoo Finance technical charts – company VR
Source: Yahoo Finance technical charts – company VR
Source: StockCharts.com Technical Charts – company VR
Indicators VR RNR INDUSTRY EPS(1) 3.41 9.35 - P/B Ratio 1.06 1.29 1.8 P/S Ratio 1.84 3.08 P/E Ratio (2) 7.22 8.66 16.15 Rev. Growth (3) 2.4% -99.80% Op. Margin 20.34% 53.92% Dividend % (4) 3% 1.2% 1.77% ROA 4.63% 7.67% ROE 10.76% 18.09% 8.2% PEG 0.45 1.33 1.37 Numbers obtained from the Bloomberg Terminal and Yahoo Finance on 10/15/13 – Capital IQ TTM Forward projection Quarterly revenue growth five year average dividend yield
Valuation Method Findings Free CF N/A Discounted CF $44.00 TTM P/E Multiple $57.87 CAPM $39.79 Current $38.28
Data source: NASDAQ financial http://www.nasdaq.com/symbol/vr/analyst-researchS&P
Overview Risk Factors What we liked Trends Ratios Decision
We want to buy it !
Why should we buy? Respectable Dividend Rate Fundamentally sound Will continue to grow Buy it at a bargain With the sale of Tower Group
Sources S&P Net Advantage Outlook on Financials: Diversified Nasdaq Financial Data http://www.nasdaq.com/symbol/vr/analyst-researchS&P