UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

VALIDUS HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

BERMUDA		98-0501001
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

19 Par-La-Ville Road, Hamilton, Bermuda HM 11
(Address of principal executive offices and zip code)

(441) 278-9000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

		Large accelerated filer þ		Accelerated filer o
		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of August 7, 2009, there were 76,462,412 outstanding Common Shares, $0.175 par value per share, of the registrant.

 

 

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as at June 30, 2009 (unaudited) and December 31, 2008			3
Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2009 and 2008 (unaudited)			4
Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2009 and 2008 (unaudited)			5
Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37
Item 3. Quantitative and Qualitative Disclosures About Market Risk			85
Item 4. Controls and Procedures			87
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			88
Item 1A. Risk Factors			88
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			91
Item 3. Defaults Upon Senior Securities			91
Item 4. Submission of Matters to a Vote of Security Holders			91
Item 5. Other Information			93
Item 6. Exhibits			93
Signatures			94
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Validus Holdings, Ltd.

Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars, except share and per share information)

		June 30,				December 31,
		2009				2008
		(Unaudited)
Assets
Fixed maturities, at fair value (amortized cost: 2009 - $2,836,299; 2008 - $2,553,018)		$	2,816,536			$	2,454,501
Short-term investments, at fair value (amortized cost: 2009 - $324,773; 2008 - $379,537)			323,940				377,036
Cash and cash equivalents			390,090				449,848
Total investments and cash			3,530,566				3,281,385
Premiums receivable			679,189				408,259
Deferred acquisition costs			145,615				108,156
Prepaid reinsurance premiums			87,798				22,459
Securities lending collateral			166,496				98,954
Loss reserves recoverable			169,666				208,796
Paid losses recoverable			36,624				1,388
Net receivable for investments sold			—				490
Income taxes recoverable			1,876				1,365
Intangible assets			125,136				127,217
Goodwill			20,393				20,393
Accrued investment income			19,636				20,433
Other assets			25,455				23,185
Total assets		$	5,008,450			$	4,322,480
Liabilities
Reserve for losses and loss expenses		$	1,311,935			$	1,305,303
Unearned premiums			856,138				539,450
Reinsurance balances payable			101,004				33,042
Securities lending payable			168,923				105,688
Deferred income taxes			22,163				21,779
Net payable for investments purchased			16,346				—
Accounts payable and accrued expenses			75,672				74,184
Debentures payable			304,300				304,300
Total liabilities			2,856,481				2,383,746
Commitments and contingent liabilities
Shareholders’ equity
Common shares, 571,428,571 authorized, par value $0.175 Issued and outstanding (2009 - 76,151,473; 2008 - 75,624,697)			13,327				13,235
Additional paid-in capital			1,424,378				1,412,635
Accumulated other comprehensive (loss)			(4,061	)			(7,858	)
Retained earnings			718,325				520,722
Total shareholders’ equity			2,151,969				1,938,734
Total liabilities and shareholders’ equity		$	5,008,450			$	4,322,480

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Validus Holdings, Ltd.

Consolidated Statements of Operations and Comprehensive Income

(Expressed in thousands of U.S. dollars, except share and per share information)

		Three months				Three months				Six months				Six months
		ended				ended				ended				ended
		June 30, 2009				June 30, 2008				June 30, 2009				June 30, 2008
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues
Gross premiums written		$	425,032			$	379,919			$	1,034,924			$	901,513
Reinsurance premiums ceded			(62,291	)			(1,399	)			(134,803	)			(86,299	)
Net premiums written			362,741				378,520				900,121				815,214
Change in unearned premiums			(34,541	)			(69,222	)			(253,162	)			(214,052	)
Net premiums earned			328,200				309,298				646,959				601,162
Net investment income			26,963				36,435				53,735				72,478
Realized gain on repurchase of debentures			—				8,752				—				8,752
Net realized (losses) gains on investments			(2,650	)			(2,425	)			(26,071	)			5,319
Net unrealized gains (losses) on investments			37,249				(42,982	)			59,402				(57,959	)
Other income			1,017				1,462				1,774				2,397
Foreign exchange gains			8,432				911				4,232				9,090
Total revenues			399,211				311,451				740,031				641,239
Expenses
Losses and loss expenses			124,751				122,089				256,585				262,113
Policy acquisition costs			64,438				56,419				125,887				113,120
General and administrative expenses			41,200				33,912				79,279				71,019
Share compensation expenses			5,632				7,271				12,986				13,806
Finance expenses			10,752				12,762				18,475				34,279
Transaction expenses			15,851				—				15,851				—
Total expenses			262,624				232,453				509,063				494,337
Net income before taxes			136,587				78,998				230,968				146,902
Income tax benefit (expense)			976				(3,077	)			1,502				(4,506	)
Net income		$	137,563			$	75,921			$	232,470			$	142,396
Comprehensive income
Foreign currency translation adjustments			3,993				10				3,797				77
Comprehensive income		$	141,556			$	75,931			$	236,267			$	142,473
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			76,138,038				74,233,425				75,941,308				74,221,398
Diluted			78,942,065				77,257,545				79,022,355				77,793,636
Basic earnings per share		$	1.79			$	1.00			$	3.02			$	1.87
Diluted earnings per share		$	1.74			$	0.98			$	2.94			$	1.83
Cash dividends declared per share		$	0.20			$	0.20			$	0.40			$	0.40

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Validus Holdings, Ltd.

Consolidated Statements of Shareholders’ Equity

(Expressed in thousands of U.S. dollars, except share and per share information)

		June 30, 2009				June 30, 2008
		(Unaudited)				(Unaudited)
Common shares
Balance — Beginning of period		$	13,235			$	12,985
Issue of common shares			92				8
Balance — End of period		$	13,327			$	12,993
Additional paid-in capital
Balance — Beginning of period		$	1,412,635			$	1,384,604
Issue of common shares, net of expenses			(1,243	)			503
Share compensation expense			12,986				13,806
Balance — End of period		$	1,424,378			$	1,398,913
Accumulated other comprehensive (loss) income
Balance — Beginning of period		$	(7,858	)		$	(49	)
Currency translation adjustments			3,797				77
Balance — End of period		$	(4,061	)		$	28
Retaining earnings (deficit)
Balance — Beginning of period		$	520,722			$	537,260
Dividends			(34,867	)			(34,809	)
Net income			232,470				142,396
Balance — End of period		$	718,325			$	644,847
Total shareholders’ equity		$	2,151,969			$	2,056,781

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Validus Holdings, Ltd.

Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars, except share and per share information)

		June 30, 2009				June 30, 2008
		(Unaudited)				(Unaudited)
Cash flows provided by (used in) operating activities
Net income for the period		$	232,470			$	142,396
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Share compensation expense			12,986				13,806
Realized gain on repurchase of debentures			—				(8,752	)
Net realized losses (gains) on sales of investments			26,071				(5,319	)
Net unrealized (gains) losses on investments			(59,402	)			57,959
Amortization of intangible assets			2,081				2,081
Foreign exchange (gains) on cash and cash equivalents included in net income			(9,593	)			(6,254	)
Amortization of premium on fixed maturities			4,123				1,753
Change in:
Premiums receivable			(264,194	)			(208,431	)
Deferred acquisition costs			(37,460	)			(40,715	)
Prepaid reinsurance premiums			(63,532	)			(22,867	)
Loss reserves recoverable			42,977				1,480
Paid losses recoverable			(34,083	)			5,122
Income taxes recoverable			(522	)			482
Accrued investment income			680				(4,520	)
Other assets			258				(700	)
Reserve for losses and loss expenses			(18,001	)			104,284
Unearned premiums			316,689				236,193
Reinsurance balances payable			66,957				29,501
Deferred income taxes			(2,504	)			3,489
Accounts payable and accrued expenses			(6,190	)			(53,581	)
Net cash provided by operating activities			209,811				247,407
Cash flows provided by (used in) investing activities
Proceeds on sales of investments			1,509,773				1,109,536
Proceeds on the maturities of investments			311,221				100,787
Purchases of fixed maturities			(2,122,514	)			(1,460,975	)
Sales of short-term investments, net			53,781				109,580
(Increase) in securities lending collateral			(63,235	)			(35,644	)
Net cash (used in) investing activities			(310,974	)			(176,716	)
Cash flows provided by (used in) financing activities
Repurchase of debentures			—				(36,948	)
Issue of common shares, net of expenses			(1,182	)			511
Dividends paid			(33,973	)			(33,642	)
Increase in securities lending payable			63,235				35,644
Net cash provided by (used in) financing activities			28,080				(34,435	)
Effect of foreign currency rate changes on cash and cash equivalents			13,325				6,306
Net (decrease) increase in cash			(59,758	)			42,562
Cash and cash equivalents — Beginning of period			449,848				444,698
Cash and cash equivalents — End of period		$	390,090			$	487,260
Taxes paid during the period		$	1,199			$	410
Interest paid during the period		$	13,344			$	14,625

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

1. Basis of preparation and consolidation

     These unaudited consolidated financial statements include Validus Holdings, Ltd. and its wholly owned subsidiaries (together, the “Company”) and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. This Quarterly Report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the U.S. Securities and Exchange Commission (the “SEC”).

     In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented. Certain amounts in prior periods have been reclassified to conform to current period presentation. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The major estimates reflected in the Company’s consolidated financial statements include the reserve for losses and loss expenses, premium estimates for business written on a line slip or proportional basis, the valuation of goodwill and intangible assets, reinsurance recoverable balances including the provision for unrecoverable reinsurance recoverable balances and investment valuation. Actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results for a full year. The terms “FAS” and “FASB” used in these notes refer to Statements of Financial Accounting Standards issued by the United States Financial Accounting Standards Board.

2. Recent accounting pronouncements

     In December 2007, the FASB issued Statements No. 141(R), “Business Combinations” (“FAS 141(R)”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“FAS 160”) which are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 has amended FAS 141(R)’s guidance on the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies.

     Significant changes arising from FAS 141 (R) and FSP FAS 141(R)-1 which impact current and future acquisitions include the determination of the purchase price and treatment of transaction expenses, restructuring charges and negative goodwill as follows;

•		Purchase Price — Under FAS 141(R), the purchase price is determined as of the acquisition date, which is the date that the acquirer obtains control. Previously, the date the business combination was announced was used as the effective date in determining the purchase price;
•		Transaction Expenses — Under FAS 141(R), all costs associated with purchase transactions must be expensed as incurred. Previously, all such costs could be capitalized and included as part of transaction purchase price, adding to the amount of goodwill recognized;
•		Restructuring Costs — Under FAS 141(R), expected restructuring costs are not recorded at the closing date, but rather after the transaction. The only costs to be included as a liability at the closing date are

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

		those for which an acquirer is obligated at the time of the closing. Previously, restructuring costs that were planned to occur after the closing of the transaction were recognized and recorded at the closing date as a liability;
•		Negative Goodwill/Bargain Purchases — Under FAS 141(R), where total fair value of net assets acquired exceeds consideration paid (creating “negative goodwill”), the acquirer will record a gain as a result of the bargain purchase, to be recognized through the income statement at the close of the transaction. Previously, negative goodwill was recognized as a pro rata reduction of the assets assumed to allow the net assets acquired to equal the consideration paid; and
•		Noncontrolling Interests —Under FAS 141(R), in a partial or step acquisition where control is obtained, 100% of goodwill and identifiable net assets are recognized at fair value and the noncontrolling (sometimes called minority interest) interest is also recorded at fair value. Previously, in a partial acquisition only the controlling interest’s share of goodwill was recognized, the controlling interest’s share of identifiable net assets was recognized at fair value and the noncontrolling interest’s share of identifiable net assets was recognized at carrying value. Under FAS 160, a noncontrolling interest is now recognized in the equity section, presented separately from the controlling interest’s equity. Previously, noncontrolling interest in general was recorded in the mezzanine section.

     As a result of the adoption of FAS 141(R) and FSP FAS 141(R)-1 the Company has expensed as incurred the transaction costs related to the definitive amalgamation agreement with IPC Holdings, Ltd. (“IPC”), as described in Note 11. The adoption of FAS 141(R) and FSP FAS 141(R)-1 materially impacts the consolidated financial statement recognition and measurement of current and future acquisitions.

     In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions may be participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing basic earnings per share (“EPS”) pursuant to the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of FSP EITF 03-6-1 has not had a material impact on the Company’s consolidated financial statements.

     In January 2009, the FASB issued FASB Staff Position EITF 99-20-1 “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets” (“FSP EITF 99-20-1”). FSP EITF 99-20-1 amends certain recognition aspects of other-than-temporary impairments (“OTTI”). FSP EITF 99-20-1 is effective prospectively for interim and annual periods ending after December 15, 2008. Retrospective application of FSP EITF 99-20-1 to a prior interim or annual period is prohibited. As the Company’s investment portfolio is classified as trading, the adoption of the FSP EITF 99-20-1 has not had a material impact on the Company’s consolidated financial statements.

     In April 2009, the FASB issued FASB Staff Positions FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”) and FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, Fair Value Measurements, specifically; (1) estimating the fair value of an asset or liability (financial and nonfinancial) when the volume and level of activity for the asset or liability have significantly decreased; and (2) identifying transactions that are not orderly. The primary change to the OTTI model for debt securities, as a result of FSP FAS 115-2 and FAS 124-2, is the change in focus from an entity’s intent and ability to hold a security until recovery. Instead, an OTTI is triggered if; (1) an entity has the intent to sell the security; (2) it is more likely than not that it will be required to sell the security before recovery; or (3) it does not expect to recover the entire amortized cost basis of the security. Both FSPs are effective for interim and annual

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

periods ending after June 15, 2009. The adoption of FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2 have not had a material impact on the Company’s consolidated financial statements.

     In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 expands the fair value disclosures required for all financial instruments within the scope of Statement 107 to interim periods for publicly traded entities. The FSP also requires entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim basis and to highlight any changes of the methods and significant assumptions from prior periods. FSP FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009. As FSP FAS 107-1 and APB 28-1 only expands certain disclosures requirements it has not had a material impact on the Company’s consolidated financial statements.

     In May 2009, the FASB issued Statements No. 165, “Subsequent Events” (“FAS 165”), which provides guidance on management’s assessment of subsequent events. FAS 165 clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued or are available to be issued. FAS 165 is effective prospectively for interim and annual periods ending after June 15, 2009. The adoption of FAS 165 has not had a material impact on management’s existing processes for assessing subsequent events, and consequently the Company’s consolidated financial statements.

     In June 2009, the FASB issued Statements No. 166, “Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140” (“FAS 166”) which amends the derecognition guidance in FAS 140. FAS 166 addresses practices that have developed since the issuance of FAS 140 that are not consistent with the original intent and key requirements and concerns that derecognized financial assets and related obligations should continue to be reported in the transferors’ financial statements. FAS 166 is effective for financial asset transfers in the interim and annual periods beginning after November 15, 2009. Early adoption is prohibited. The adoption of FAS 166 is not expected to have a material impact on the Company’s consolidated financial statements.

     In June 2009, the FASB issued Statements No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”) which amends the consolidation guidance that applies to Variable Interest Entities (“VIEs”). FAS 167 amends the guidance for the identification of VIEs and their primary beneficiaries and the financial statement disclosures required. FAS 167 is effective for interim and annual periods beginning after November 15, 2009. Early adoption is prohibited. The adoption of FAS 167 is not expected to have a material impact on the Company’s consolidated financial statements.

     In June 2009, the FASB issued Statements No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“FAS 168”) which prescribes the use of the FASB Accounting Standards Codification (the “Codification”) as the authoritative source of U.S. GAAP. Once the Codification is in effect, all of its content will carry the same level of authority, effectively superseding FAS 162 to include only two levels of U.S. GAAP: authoritative and nonauthoritative. FAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of FAS 168 will not have a material impact on the Company’s consolidated financial statements.

3. Investments

     During the first quarter of 2007, the Company adopted FAS 157 and FAS 159. Prior to January 1, 2007, the Company’s investments in fixed maturities were classified as available-for-sale and carried at fair value, with related net unrealized gains or losses excluded from earnings and included in shareholders’ equity as a component of accumulated other comprehensive income. The Company believes that accounting for its investment portfolio as trading more closely reflects its investment guidelines. Beginning on January 1, 2007, the Company’s investments in fixed maturities were classified as trading and carried at fair value, with related net unrealized gains or losses included in earnings.

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

     During the third quarter of 2008, the Company adopted FSP FAS 157-3. Consistent with this statement, certain market conditions allow for fair value measurements that incorporate unobservable inputs where active market transaction based measurements are unavailable. Effective for interim and annual periods ending after June 15, 2009, FSP FAS 157-3 has been superseded by FSP 157-4.

(a) Classification within the fair value hierarchy under FAS 157

     Under FAS 157, a company must determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy in FAS 157 prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

     Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Level 3 inputs are unobservable inputs for the asset or liability.

     Level 1 primarily consists of financial instruments whose value is based on quoted market prices or alternative indices but for which the Company typically obtained independent external valuation information including U.S. and U.K. Treasuries, overnight repos and commercial paper. Level 2 includes financial instruments that are valued through independent external sources using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Sustainably all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The Company performs internal procedures on the valuations received from independent external sources. Financial instruments in this category include U.S. Treasuries, sovereign debt, corporate debt and U.S. agency and non-agency mortgage and asset-backed securities. Level 3 includes financial instruments that are valued using market approach and income approach valuation techniques. These models incorporate both observable and unobservable inputs. Financial instruments in this category include certain residential mortgage-backed securities.

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

     At June 30, 2009, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

		Level 1				Level 2				Level 3				Total
U.S. Government and Government Agency		$	—			$	994,086			$	—			$	994,086
Non-U.S. Government and Government Agency			—				139,766				—				139,766
States, municipalities, political subdivision			—				8,543				—				8,543
Agency residential mortgage-backed securities			—				542,352				—				542,352
Non-Agency residential mortgage-backed Securities			—				80,804				100,952				181,756
U.S. corporate			—				619,633				—				619,633
Non-U.S. corporate			—				169,017				—				169,017
Catastrophe bonds			—				18,776				—				18,776
Asset-backed securities			—				76,238				—				76,238
Commercial mortgage-backed securities			—				66,369				—				66,369
Total fixed maturities			—				2,715,584				100,952				2,816,536
Total short-term investments			318,872				5,068				—				323,940
Total		$	318,872			$	2,720,652			$	100,952			$	3,140,476

     At December 31, 2008, the Company’s investments were allocated between Levels 1, 2 and 3 as follows:

		Level 1				Level 2				Level 3				Total
U.S. Government and Government Agency		$	—			$	768,344			$	—			$	768,344
Non-U.S. Government and Government Agency			—				96,073				—				96,073
States, municipalities, political subdivision			—				15,516				—				15,516
Agency residential mortgage-backed securities			—				433,736				—				433,736
Non-Agency residential mortgage-backed securities			—				119,813				111,318				231,131
U.S. corporate			—				443,847				—				443,847
Non-U.S. corporate			—				125,700				—				125,700
Catastrophe bonds			—				10,872				—				10,872
Asset-backed securities			—				137,023				—				137,023
Commercial mortgage-backed securities			—				192,259				—				192,259
Total fixed maturities			—				2,343,183				111,318				2,454,501
Total short-term investments			365,357				11,679				—				377,036
Total		$	365,357			$	2,354,862			$	111,318			$	2,831,537

     At June 30, 2009, Level 3 investments totaled $100,952, representing 3.2% of total investments measured at fair value on a recurring basis. At December 31, 2008, Level 3 investments totaled $111,318, representing 3.9% of total investments measured at fair value on a recurring basis.

     The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs as at June 30, 2009 and December 31, 2008:

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

		Six months ended				Year ended
		June 30, 2009				December 31, 2008
Level 3 investments — Beginning of period		$	111,318			$	—
Payments and purchases			—				—
Sales and maturities			(822	)			(59	)
Realized losses			(1,284	)			—
Unrealized losses			(1,495	)			(14,603	)
Amortization			(6,765	)			(4,048	)
Transfers in			—				130,028
Level 3 investments — End of period		$	100,952			$	111,318

     Net investment income was derived from the following sources:

		Three months ended								Six months ended
		June 30,				June 30,				June 30,				June 30,
		2009				2008				2009				2008
Fixed maturities and short-term investments		$	26,396			$	34,519			$	52,914			$	66,210
Cash and cash equivalents			1,120				2,378				1,881				7,216
Securities lending income			173				455				512				890
Total gross investment income			27,689				37,352				55,307				74,316
Investment expenses			(726	)			(917	)			(1,572	)			(1,838	)
Net investment income		$	26,963			$	36,435			$	53,735			$	72,478

     The following represents an analysis of net realized (losses) gains and the change in unrealized gains (losses) on investments:

		Three months ended								Six months ended
		June 30,				June 30,				June 30,				June 30,
		2009				2008				2009				2008
Fixed maturities, short-term investments and cash equivalents
Gross realized gains		$	3,928			$	2,957			$	13,381			$	11,313
Gross realized losses			(6,578	)			(5,382	)			(39,452	)			(5,994	)
Net realized (losses) gains on investments			(2,650	)			(2,425	)			(26,071	)			5,319
Change in unrealized gains (losses) of securities lending			3,214				317				4,306				(895	)
Change in unrealized gains (losses) of investments			34,035				(43,299	)			55,096				(57,064	)
Total net realized (losses) gains and change in unrealized gains (losses) of investments		$	34,599			$	(45,407	)		$	33,331			$	(52,640	)

     The amortized cost, gross unrealized gains and losses and estimated fair value of investments at June 30, 2009 were as follows:

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

						Gross				Gross				Estimated fair
		Amortized Cost				unrealized gains				unrealized losses				value
U.S. Government and Government Agency		$	978,409			$	16,256			$	(579	)		$	994,086
Non-U.S. Government and Government Agency			143,249				5,609				(9,092	)			139,766
States, municipalities, political subdivision			8,500				43				—				8,543
Agency residential mortgage-backed securities			529,386				13,535				(569	)			542,352
Non-Agency residential mortgage-backed securities			231,737				—				(49,981	)			181,756
U.S. corporate			610,405				12,722				(3,494	)			619,633
Non-U.S. corporate			173,440				2,416				(6,839	)			169,017
Catastrophe bonds			19,009				84				(317	)			18,776
Asset-backed securities			76,254				981				(997	)			76,238
Commercial mortgage-backed securities			65,910				494				(35	)			66,369
Total fixed maturities			2,836,299				52,140				(71,903	)			2,816,536
Total short-term investments			324,773				57				(890	)			323,940
Total		$	3,161,072			$	52,197			$	(72,793	)		$	3,140,476

     The amortized cost, gross unrealized gains and losses and estimated fair value of investments at December 31, 2008 were as follows:

						Gross				Gross				Estimated fair
		Amortized Cost				unrealized gains				unrealized losses				value
U.S. Government and Government Agency		$	732,155			$	36,189			$	—			$	768,344
Non-U.S. Government and Government Agency			115,389				4,403				(23,719	)			96,073
States, municipalities, political subdivision			14,954				562				—				15,516
Agency residential mortgage-backed securities			425,533				8,358				(155	)			433,736
Non-Agency residential mortgage-backed securities			299,346				6				(68,221	)			231,131
U.S. corporate			454,810				2,126				(13,089	)			443,847
Non-U.S. corporate			140,807				1,696				(16,803	)			125,700
Catastrophe bonds			11,012				2				(142	)			10,872
Asset-backed securities			141,209				—				(4,186	)			137,023
Commercial mortgage-backed securities			217,803				—				(25,544	)			192,259
Total fixed maturities			2,553,018				53,342				(151,859	)			2,454,501
Total short-term investments			379,537				55				(2,556	)			377,036
Total		$	2,932,555			$	53,397			$	(154,415	)		$	2,831,537

     The following table sets forth certain information regarding the investment ratings of the Company’s fixed maturities portfolio as at June 30, 2009 and December 31, 2008. Investment ratings are the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. For

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating.

		June 30, 2009								December 31, 2008
		Estimated fair								Estimated fair
		value				% of total				value				% of total
AAA		$	1,971,837				70.0	%		$	1,941,349				79.1	%
AA			130,921				4.7	%			146,923				6.0	%
A			578,209				20.5	%			338,966				13.8	%
BBB			20,252				0.7	%			12,427				0.5	%
Investment grade			2,701,219				95.9	%			2,439,665				99.4	%
BB			30,668				1.1	%			7,416				0.3	%
B			61,383				2.2	%			7,420				0.3	%
CCC			23,266				0.8	%			—				—
Non-Investment grade			115,317				4.1	%			14,836				0.6	%
Total		$	2,816,536				100.0	%		$	2,454,501				100.0	%

     The amortized cost and estimated fair value amounts for fixed maturity securities held at June 30, 2009 and December 31, 2008 are shown by contractual maturity. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

		June 30, 2009								December 31, 2008
		Amortized				Estimated				Amortized				Estimated
		cost				fair value				cost				fair value
Due in one year or less		$	275,126			$	276,070			$	277,137			$	279,727
Due after one year through five years			1,633,788				1,649,817				1,143,494				1,134,275
Due after five years through ten years			21,715				21,437				17,451				17,493
Due after ten years			2,383				2,497				31,045				28,858
			1,933,012				1,949,821				1,469,127				1,460,353
Asset-backed and mortgage-backed Securities			903,287				866,715				1,083,891				994,148
Total		$	2,836,299			$	2,816,536			$	2,553,018			$	2,454,501

     The Company has a five year, $500,000 secured letter of credit facility provided by a syndicate of commercial banks. At June 30, 2009, approximately $276,955 (December 31, 2008: $199,186) of letters of credit were issued and outstanding under this facility for which $358,157 of investments were pledged as collateral (December 31, 2008: $258,573). In 2007, the Company entered into a $100,000 standby letter of credit facility which provides Funds at Lloyd’s. At June 30, 2009, $100,000 (December 31, 2008: $100,000) of letters of credit were issued and outstanding under this facility for which $127,731 of investments were pledged as collateral (December 31, 2008: $144,149). In addition, $26,773,829 of investments are held in trust at June 30, 2009 (December 31, 2008: $1,100,235). Of those, $1,093,233 are held in trust for the benefit of Talbot’s cedants and policyholders, and to facilitate the accreditation as an alien insurer/reinsurer by certain regulators (December 31, 2008: $1,032,267).

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

(d) Securities lending

     The Company participates in a securities lending program whereby certain securities from its portfolio are loaned to third parties for short periods of time through a lending agent. The Company retains all economic interest in the securities it lends and receives a fee from the borrower for the temporary use of the securities. Collateral in the form of cash, government securities and letters of credit is required at a rate of 102% of the market value of the loaned securities and is held by a third party. As at June 30, 2009, the Company had $165,565 (December 31, 2008: $103,266) in securities on loan. During the six months ended June 30, 2009, the Company recorded a $4,306 unrealized gain on this collateral on its Statements of Operations (June 30, 2008: unrealized loss $895).

     Securities lending collateral reinvested is primarily comprised of corporate floating rate securities with an average reset period of 15.5 days (December 31, 2008: 26.7 days). As at June 30, 2009, the securities lending collateral reinvested by the Company in connection with its securities lending program was allocated between Levels 1, 2 and 3 as follows:

		Level 1				Level 2				Level 3				Total
Corporate		$	—			$	24,328			$	—			$	24,328
Asset-backed securities			—				13,466				—				13,466
Short-term investments			75,194				53,508				—				128,702
Total		$	75,194			$	91,302			$	—			$	166,496
As at December 31, 2008, the securities lending collateral reinvested by the Company in connection with its securities lending program was allocated between Levels 1, 2 and 3 as follows:
		Level 1				Level 2				Level 3				Total
Corporate		$	—			$	57,574			$	—			$	57,574
Asset-backed securities			—				18,228				—				18,228
Short-term investments			7,390				15,762				—				23,152
Total		$	7,390			$	91,564			$	—			$	98,954

     The following table sets forth certain information regarding the investment ratings of the Company’s securities lending collateral reinvested as at June 30, 2009 and December 31, 2008. Investment ratings are the lower of Moody’s or Standard & Poor’s rating for each investment security, presented in Standard & Poor’s equivalent rating. For investments where Moody’s and Standard & Poor’s ratings are not available, Fitch ratings are used and presented in Standard & Poor’s equivalent rating.

		June 30, 2009								December 31, 2008
		Estimated fair								Estimated fair
		value				% of total				value				% of total
AAA		$	66,942				40.2	%		$	45,137				45.7	%
AA			17,392				10.4	%			37,608				37.9	%
A			6,820				4.1	%			8,729				8.8	%
NR			148				0.1	%			90				0.1	%
			91,302				54.8	%			91,564				92.5	%
NR- Cash (1)			75,194				45.2	%			7,390				7.5	%
Total		$	166,496				100.0	%		$	98,954				100.0	%

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

     The amortized cost and estimated fair value amounts for securities lending collateral reinvested held at June 30, 2009 and December 31, 2008 are shown by contractual maturity below. Actual maturity may differ from contractual maturity because certain borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

		June 30, 2009								December 31, 2008
		Amortized				Estimated				Amortized				Estimated fair
		cost				fair value				cost				value
Due in one year or less		$	129,180			$	128,702			$	24,390			$	23,152
Due after one year through five years			39,743				37,794				81,298				75,802
Total		$	168,923			$	166,496			$	105,688			$	98,954

4. Reinsurance

     The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits, and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

a) Credit risk

     The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by Standard & Poor’s or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. 99.6% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) at June 30, 2009 were from reinsurers rated A- or better and included $57,224 of IBNR recoverable (December 31, 2008: $71,580). Reinsurance recoverables by reinsurer are as follows:

		June 30, 2009								December 31, 2008
		Reinsurance								Reinsurance
		recoverable				% of Total				recoverable				% of Total
Top 10 reinsurers		$	188,303				91.3	%		$	198,403				94.4	%
Other reinsurers balances > $1 million			12,177				5.9	%			8,987				4.3	%
Other reinsurers balances < $1 million			5,810				2.8	%			2,794				1.3	%
Total		$	206,290				100.0	%		$	210,184				100.0	%

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

				June 30, 2009
				Reinsurance
Top 10 Reinsurers		Rating		recoverable				% of Total
Fully collateralized reinsurers		NR		$	74,131				39.4	%
Hannover Re		AA-			33,860				18.0	%
Lloyd’s syndicates		A+			28,427				15.1	%
Allianz		AA			12,891				6.9	%
Munich Re		AA-			12,135				6.4	%
Swiss Re		A+			10,968				5.8	%
Aspen		A			6,311				3.4	%
Transatlantic Re		A+			3,435				1.8	%
Platinum Underwriters		A			3,415				1.8	%
Axa		AA			2,730				1.4	%
Total				$	188,303				100.0	%

				December 31, 2008
				Reinsurance
Top 10 Reinsurers		Rating		recoverable				% of Total
Fully collateralized reinsurers		NR		$	83,511				41.9	%
Hannover Re		AA-			32,855				16.6	%
Lloyd’s syndicates		A+			25,533				12.9	%
Allianz		AA			14,988				7.6	%
Swiss Re		AA-			13,207				6.7	%
Munich Re		AA-			12,813				6.5	%
Aspen		A			6,040				3.0	%
Platinum Underwriters		A			3,270				1.6	%
Transatlantic Re		A+			3,096				1.6	%
Axa		AA			3,090				1.6	%
Total				$	198,403				100.0	%

     At June 30, 2009 and December 31, 2008, the provision for uncollectible reinsurance relating to losses recoverable was $3,085, and $3,228, respectively. To estimate the provision for uncollectible reinsurance recoverable, the reinsurance recoverable must first be allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment must be applied. As part of this process, ceded IBNR is allocated by reinsurer. Of the $206,290 reinsurance recoverable at June 30, 2009, $74,131 was fully collateralized (December 31, 2008: $83,511).

     The Company uses a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer and default factors used to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.

b) Collateralized quota share retrocession treaties

     On December 22, 2007, Validus Re entered into a collateralized retrocessional reinsurance agreement with an unaffiliated third party whereby the Company cedes certain business underwritten in the marine offshore energy lines. For the three months ended June 30, 2009 and 2008 Validus Re ceded $209 and $2,828 of premiums written through this agreement respectively. The earned portions of premiums ceded for the three months ended June 30, 2009 and 2008 were $209 and $3,721 respectively. For the six months ended June 30, 2009 and 2008 Validus Re

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

ceded $1,099 and $14,560 of premiums written through this agreement respectively. The earned portions of premiums ceded for the six months ended June 30, 2009 and 2008 were $1,280 and $6,485 respectively.

5. Share capital

a) Authorized and issued

     The Company’s authorized share capital is 571,428,571 voting and non-voting shares with a par value of $0.175 each. The holders of common voting shares are entitled to receive dividends and are allocated one vote per share, provided that, if the controlled shares of any shareholder or group of related shareholders constitute more than 9.09 percent of the outstanding common shares of the Company, their voting power will be reduced to 9.09 percent.

     The following table is a summary of the common shares issued and outstanding:

		Common shares
Common shares outstanding, December 31, 2008			75,624,697
Restricted share awards vested			246,585
Employee seller shares vested			42,349
Options exercised			—
Warrants exercised			237,842
Common shares outstanding, June 30, 2009			76,151,473

		Common shares
Common shares outstanding, December 31, 2007			74,199,836
Restricted share awards vested			777,953
Employee seller shares vested			515,103
Options exercised			112,825
Warrants exercised			18,980
Common shares outstanding, December 31, 2008			75,624,697

b) Warrants

     During the three and six months ended June 30, 2009, 728,010 warrants were exercised which resulted in the net share issuance of 237,842 common shares. During the three months ended June 30, 2008, 13,068 warrants were exercised which resulted in the net share issuance of 13,067 common shares. During the six months ended June 30, 2008, 31,580 warrants were exercised which resulted in the net share issuance of 18,980 common shares.

c) Deferred share units

     Under the terms of the Company’s Director Stock Compensation Plan, non-management directors may elect to receive their director fees in deferred share units rather than cash. The number of share units distributed in case of election under the plan is equal to the amount of the annual retainer fee otherwise payable to the director on such payment date divided by 100% of the fair market value of a share on such payment date. Additional deferred share units are issued in lieu of dividends that accrue on these deferred share units. The total outstanding deferred share units at June 30, 2009 were 4,508 (December 31, 2008: 4,430).

d) Dividends

     On May 4, 2009, the Company announced a quarterly cash dividend of $0.20 (2008: $0.20) per common share and $0.20 per common share equivalent for which each outstanding warrant is then exercisable, payable on June 30, 2009 to holders of record on June 15, 2009.

6. Stock plans

a) Long-term incentive plan

     The Company’s Long Term Incentive Plan (“LTIP”) provides for grants to employees of any option, stock appreciation right (“SAR”), restricted share, restricted share unit, performance share, performance unit, dividend equivalent or other share-based award. The total number of shares reserved for issuance under the LTIP is 13,126,896 shares. The LTIP is administered by the Compensation Committee of the Board of

Validus Holdings, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
(Expressed in thousands of U.S. dollars, except share and per share information)

Directors. No SARs, performance shares, performance units or dividend equivalents have been granted to date. Grant prices are established at the estimated fair market value of the Company’s common shares at the date of grant.

b) LTIP options

     Options granted under the LTIP may be exercised for voting common shares upon vesting. Options have a life of 10 years and vest ratably over five years from the date of grant. No options were granted since the year ended December 31, 2008. Grant prices are established at the estimated fair value of the Company’s common shares at the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used for all grants to date:

		Weighted average risk				Weighted average				Expected life				Expected
Year		free interest rate				dividend yield				(years)				volatility
2007 and prior years			4.5	%			0.00	%			7				30	%
2008			3.5	%			3.20	%			7				30	%

     Expected volatility is based on stock price volatility of comparable publicly-traded companies. The Company uses the simplified method outlined in the SEC Staff Accounting Bulletin 110 to estimate expected lives for options granted during the period as historical exercise data is not available and the options met the requirement as set out in the bulletin.

     Share compensation expenses of $918 were recorded for the three months ended June 30, 2009 (2008: $1,068). Share compensation expenses of $1,975 were recorded for the six months ended June 30, 2009 (2008: $2,091). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period. Activity with respect to the options for the six months ended June 30, 2009 was as follows:

						Weighted				Weighted average
						average grant				grant date
		Options				date fair value				exercise price
Options outstanding, December 31, 2008			2,799,938			$	7.57			$	18.23
Options granted			—				—				—
Options exercised			—				—				—
Options forfeited			(6,536	)			10.30				20.39
Options outstanding, June 30, 2009			2,793,402			$	7.56			$	18.22
Options exercisable at June 30, 2009			1,531,092			$	7.52			$	17.92

     Activity with respect to options for the year ended December 31, 2008 was as follows:

						Weighted				Weighted average
						average grant				grant date
		Options				date fair value				exercise price
Options outstanding, December 31, 2007			2,761,176			$	7.61			$	17.82
Options granted			164,166				6.73				24.73
Options exercised			(112,825	)			7.38				17.57
Options forfeited			(12,579	)			8.56				18.69
Options outstanding, December 31, 2008			2,799,938			$	7.57			$	18.23
Options exercisable at December 31, 2008			1,396,353			$	7.46			$	17.63

     At June 30, 2009, there were $6,857 (December 31, 2008: $9,139) of total unrecognized share compensation expenses that are expected to be recognized over a weighted-average period of 1.8 years (December 31, 2008: 2.2 years).

Validus Holdings, Ltd.

Notes to Consolidated Financial Statements (Unaudited)

(Expressed in thousands of U.S. dollars, except share and per share information)

c) LTIP restricted shares

     Restricted shares granted under the LTIP vest either ratably or at the end of the required service period and contain certain restrictions for the vesting period, relating to, among other things, forfeiture in the event of termination of employment and transferability. Share compensation expenses of $4,074 were recorded for the three months ended June 30, 2009 (2008: $3,625). Share compensation expenses of $8,386 were recorded for the six months ended June 30, 2009 (2008: $6,567). The expenses represent the proportionate accrual of the fair value of each grant based on the remaining vesting period. Activity with respect to unvested restricted shares for the six months ended June 30, 2009 was as follows:

						Weighted
						average grant
		Restricted shares				date fair value
Restricted shares outstanding, December 31, 2008			2,307,402			$	22.73
Restricted shares granted			280,073				24.70
Restricted shares vested			(291,328	)			22.00
Restricted shares forfeited			(3,989	)			21.29
Restricted shares outstanding, June 30, 2009			2,292,158			$	23.06