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Richard S. Press, Chairman, on behalf of the Board of DirectorsVALIDUS MISSTATEMENTS AND CLAIMS: CORRECTING THE RECORD 1. Claim: "…we see this as essentially a book for book value exchange at parity to each party"(6)
- Fact: Validus never conducted due diligence of non-public information. One cannot realistically arrive at a book value to book value transaction by arbitrarily adjusting downward Transatlantic's book value.
- Fact: Four external parties, including two independent actuarial firms, evaluated Transatlantic's reserves over the last 12 months. All of these parties were comfortable with the adequacy of our reserves.
- Fact: Validus never conducted due diligence of non-public information.
- Fact: Moody's states that the combination would be "credit negative" for Transatlantic. ( 8)
- Fact: Higher ratings are better than lower ratings.
- Fact: This claim is based on the assumption of including Validus' junior subordinated debentures as 100% equity. The Validus S-4 discloses a pro forma total debt to capitalization ratio of 23.4%, which we believe to be more reflective of rating agencies' views.(10)
- Fact: Validus' claim is based solely on one event and on a flawed comparison of Transatlantic's Japanese loss to its Florida PML .
- Fact: Transatlantic has consistently outperformed Validus when measuring after-tax cat losses as a percentage of cumulative property catastrophe premiums written, even when comparing Transatlantic's net losses to net premiums to Validus' net losses to gross premiums . Between January 1, 2008-June 30, 2011 after-tax cat losses prior to any reinstatement premiums as a percentage of gross property catastrophe premiums written were 52% for Validus. For Transatlantic, for the same period, the ratio of after-tax cat losses prior to any reinstatement premiums as a percentage of net property catastrophe premiums written was only 44%.(12)
- Fact: Transatlantic has been writing cat business for 25 years compared with less than six years for Validus.
- Fact: Validus' Lloyd's syndicate's (Talbot's) premium appears to be more than 50% reinsurance, which would bring the parent company business mix to about an 80/20 split of reinsurance to insurance.(14)
- Fact: Talbot is subject to Lloyd's restrictions and requirements and is not an effective substitute for U.S. primary insurance operations for Transatlantic.
- Fact: Validus Re Europe has only $6 million of capital and Transatlantic Re writes more than $1 billion of European premium.
- Fact: No line of business comprises more than 16% of Transatlantic's premium and 50% of its premium is written outside the U.S. We do not need to merge with Validus to achieve diversification. If anybody needs a deal to "diversify," it is Validus.
- Fact: Transatlantic wrote more than $200 million of premium in 2010 from Bermuda-based cedants.
- Fact: Lloyd's as a composite represents $215 million of Transatlantic's premium and is one of our top 5 reinsurance clients.
- Fact: Transatlantic writes nearly as much property cat premium as Validus – you do not need a substantial Bermuda-based operation to write cat business.
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