As filed with the Securities and Exchange Commission on May 13, 2009

Registration Number 333-159148

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

VALIDUS HOLDINGS, LTD.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

19 Par-La-Ville Road, Hamilton, HM 11 Bermuda

(441) 278-9000

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive offices)

C. Jerome Dill

Executive Vice President & General Counsel

Validus Holdings, Ltd.

19 Par-La-Ville Road, Hamilton, HM 11 Bermuda

(441) 278-9000

(Name, address, including zip code, and telephone number, including area code,

of agent for service)

 

Copies to:

Approximate date of commencement of proposed sale of securities to the public:  As soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box  o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering  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.

(Do not check if a smaller reporting company)

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  o

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

Offer to Exchange

Each Outstanding Common Share

of

IPC HOLDINGS, LTD.

for

1.2037 Validus Holdings, Ltd. Voting Common Shares

by

VALIDUS HOLDINGS, LTD.

 

Validus Holdings, Ltd., which we refer to as “Validus” or “we,” “us” or “our,” is offering, upon the terms and subject to the conditions set forth in this prospectus/offer to exchange and in the accompanying letter of transmittal, to exchange 1.2037 voting common shares, par value $0.175 per share, of Validus, which we refer to as “Validus common shares,” for each outstanding common share of IPC Holdings, Ltd., which we refer to as “IPC,” par value $0.01 per share, which we refer to as “IPC common shares,” you validly tender and do not properly withdraw before the expiration time of the exchange offer described below. In addition, you will receive cash in lieu of any fractional Validus common share to which you may be entitled.

 

THE EXCHANGE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME (6:00 P.M. ATLANTIC TIME), ON FRIDAY, JUNE 26, 2009, OR THE “EXPIRATION TIME OF THE EXCHANGE OFFER,” UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION TIME OF THE EXCHANGE OFFER, BUT NOT DURING ANY SUBSEQUENT OFFERING PERIOD.

 

Validus common shares trade on the New York Stock Exchange under the symbol “VR.” IPC common shares trade on the NASDAQ Global Select Market under the symbol “IPCR” and on the Bermuda Stock Exchange under the symbol “IPCR BH.”

 

FOR A DISCUSSION OF RISKS AND OTHER FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER, PLEASE CAREFULLY READ THE SECTION OF THIS PROSPECTUS/OFFER TO EXCHANGE ENTITLED “RISK FACTORS.”

 

Validus’ obligation to accept IPC common shares for exchange, and to exchange any IPC common shares, for Validus common shares is subject to conditions, including a condition that 90% of the then-outstanding number of IPC common shares on a fully-diluted basis (excluding any IPC common shares beneficially owned by Validus, its subsidiaries or IPC) have been validly tendered into the exchange offer and not withdrawn and a condition that the Agreement and Plan of Amalgamation, dated as of March 1, 2009, as amended, among Max Capital Group Ltd., which we refer to as “Max,” IPC and IPC Limited, which we refer to as the “Max amalgamation agreement,” has been terminated. The conditions to the exchange offer are described in the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer.”

 

On March 31, 2009, Validus announced that it had delivered an offer, which we refer to as the “Validus amalgamation offer,” to IPC for the amalgamation of Validus and IPC whereby each issued and outstanding IPC common share would be exchanged for 1.2037 Validus common shares. Validus is making the exchange offer as an alternative to the Validus amalgamation offer in order to acquire all of the issued and outstanding IPC common shares.

 

Validus has not authorized any person to provide any information or to make any representation in connection with the exchange offer other than the information contained or incorporated by reference in this prospectus/offer to exchange, and if any person provides any of this information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Validus.

 

VALIDUS IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY TO VALIDUS. As described in this prospectus/offer to exchange, Validus intends to solicit proxies through separate proxy solicitation material in connection with various matters which are described in the section of this prospectus/offer to exchange entitled “Solicitation of Proxies.” Any such proxy solicitation will be made only pursuant to separate proxy materials complying with the requirements of the rules and regulations of the Securities and Exchange Commission.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus/offer to exchange. Any representation to the contrary is a criminal offense.

 

The dealer manager for the exchange offer is:

 

The date of this prospectus/offer to exchange is May 13, 2009

 

TABLE OF CONTENTS

 

 

THIS PROSPECTUS/OFFER TO EXCHANGE INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT VALIDUS AND IPC FROM DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION THAT HAVE NOT BEEN INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS/OFFER TO EXCHANGE.

 

THIS INFORMATION IS AVAILABLE AT THE INTERNET WEBSITE THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS AT http://www.sec.gov, AS WELL AS FROM OTHER SOURCES. PLEASE SEE THE SECTION OF THIS PROSPECTUS/OFFER TO EXCHANGE ENTITLED “WHERE YOU CAN FIND MORE INFORMATION.” YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM VALIDUS, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO VALIDUS’ INFORMATION AGENT AT ITS ADDRESS OR TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS/OFFER TO EXCHANGE. IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE YOUR REQUEST NO LATER THAN JUNE 19, 2009, OR FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION TIME OF THE EXCHANGE OFFER, WHICHEVER IS LATER.

The exchange offer does not constitute a solicitation of proxies. Any solicitation of proxies by Validus will be made only pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As described in this prospectus/offer to exchange, Validus intends to solicit proxies through separate proxy solicitation materials in connection with various matters which are described in the section of this prospectus/offer to exchange entitled “Solicitation of Proxies.” Each shareholder is urged to read any proxy statement regarding the business to be conducted at the applicable meeting, if and when it becomes available, because it will contain important information. Any such proxy statement has been, or will be, filed with the Securities and Exchange Commission. When completed, each definitive proxy statement of Validus and an accompanying proxy card of Validus will be made available to applicable shareholders and such shareholders will be able to obtain a free copy of any proxy statement, as well as other filings containing information about the parties (including information regarding the participants in any proxy solicitation (which may include Validus’ officers and directors and other persons) and a description of their direct and indirect interests, by security holdings or otherwise), from the Securities and Exchange Commission’s web site at http://www.sec.gov. Each such proxy statement (when available) and these other documents may also be obtained for free from Validus’ web site at http://www.validusre.bm.

 

Below are some of the questions that you as a holder of IPC common shares may have regarding the exchange offer and answers to those questions. The answers to these questions do not contain all the information relevant to your decision whether to tender your IPC common shares, and Validus urges you to read carefully the remainder of this prospectus/offer to exchange and the letter of transmittal.

 

Who is offering to buy my IPC common shares?

 

The exchange offer is made by Validus Holdings, Ltd., a Bermuda exempted company. Validus is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd., which we refer to as “Validus Re,” and Talbot Holdings Ltd., which we refer to as “Talbot.” Validus Re is a Bermuda-based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s insurance market through Syndicate 1183.

 

What classes and amounts of IPC securities is Validus seeking for exchange in the exchange offer?

 

Validus seeks to acquire all of the issued and outstanding IPC common shares.

 

What will I receive for my IPC common shares in the exchange offer?

 

Validus is offering, upon the terms and subject to the conditions set forth in this prospectus/offer to exchange and in the accompanying letter of transmittal, to exchange 1.2037 Validus common shares for each outstanding IPC common share you validly tender and do not properly withdraw before the expiration time of the exchange offer. Because no fractional Validus common shares will be issued, to the extent that you would be entitled to receive fractional Validus common shares, you will receive cash in lieu of the fractional share interest to which you would otherwise be entitled.

 

Based upon closing prices of IPC common shares and Validus common shares as of March 30, 2009, the last trading day prior to the announcement by Validus of its offer to IPC for the amalgamation of Validus and IPC, which we refer to as “the Validus amalgamation offer,” the Validus amalgamation offer had a value of $29.98 per IPC common share, or approximately $1.68 billion in the aggregate, which represented an 18% premium to the trading value of IPC common shares as of such date and a 24% premium over $24.26, which was the average closing price of IPC common shares between March 2, 2009, the day IPC and Max announced the proposed amalgamation of IPC and Max, which we refer to as the “proposed Max amalgamation,” and March 30, 2009, the last trading day before Validus announced the Validus amalgamation offer. The price of Validus common shares fluctuates and may be higher or lower than in these examples at the time IPC common shares are exchanged pursuant to the exchange offer. On May 11, 2009, the last practicable date prior to the filing of this prospectus/offer to exchange, the closing price of a Validus common share was $22.58. Based on the closing price of Validus common shares on May 11, 2009, the exchange offer has a value of $27.18 per IPC common share. Shareholders are encouraged to obtain current market quotations for Validus common shares and IPC common shares prior to making any decision with respect to the exchange offer.

 

Please also see the section of this prospectus/offer to exchange entitled “Risk Factors” for a discussion, among other things, of the effect of fluctuations in the market price of Validus common shares.

 

How does the exchange offer relate to the Validus amalgamation offer?

 

On March 31, 2009, Validus announced that it had delivered the Validus amalgamation offer to IPC, pursuant to which each issued and outstanding IPC common share would be exchanged for 1.2037 Validus common shares.

 

In connection with the delivery of the Validus amalgamation offer to IPC, Validus delivered a signed amalgamation agreement that would be binding on Validus upon countersignature by IPC, which we refer to as the “Validus amalgamation agreement.” IPC announced on April 7, 2009 that its board of directors had determined that the Validus amalgamation offer does not constitute a superior proposal to the Max amalgamation agreement and reaffirmed its support of the proposed Max amalgamation Validus is making the exchange offer as an alternative method for Validus to acquire all of the issued and outstanding IPC common shares.

We are still hopeful that IPC’s board of directors will recognize that the Validus amalgamation offer is a “superior proposal” (as defined in the Max amalgamation agreement) and IPC’s board of directors will approve the Validus amalgamation agreement after the Max amalgamation agreement is terminated.

 

What is the purpose of the exchange offer?

 

The exchange offer is one part of our plan to acquire all of the issued and outstanding IPC common shares. We intend to, promptly after completion of the exchange offer, seek to acquire, which we refer to as the “second-step acquisition,” all shares of those shareholders who choose not to tender their IPC common shares pursuant to the exchange offer, in accordance with either Section 102 or Section 103 of The Companies Act of 1981 of Bermuda, as amended, which we refer to as the “Companies Act.” The purpose of the second-step acquisition is for Validus to acquire all outstanding IPC common shares that are not acquired in the exchange offer on the same terms as in the exchange offer.

 

Section 102 of the Companies Act permits a person acquiring shares of a Bermuda company under a “scheme” or “contract” that has been approved by at least 90% in value of the shares subject to the “scheme” or “contract” to seek to acquire the shares of any shareholders dissenting from such “scheme” or “contract.” The exchange offer will constitute a “scheme” or “contract” pursuant to Section 102 of the Companies Act. As a result, if Validus acquires at least 90% in value of the IPC common shares subject to the exchange offer (other than IPC common shares held by Validus, its subsidiaries or IPC), Validus will have the right, subject to compliance with the requirements of Section 102 of the Companies Act, to acquire each remaining IPC common share, subject to the rights of dissenting shareholders as set forth in Section 102, which include the right to petition the Supreme Court of Bermuda for an order as the court sees fit.

 

Section 103 of the Companies Act permits the holder of at least 95% of any class of shares in a Bermuda company to give notice to the remaining shareholders of such class of such holder’s intention to acquire the outstanding shares of the company on the terms set out in the holder’s notice. The acquisition of remaining shares will be on the terms set forth in the holder’s notice unless a remaining shareholder applies to the Supreme Court of Bermuda for an appraisal of its shares. Therefore, if Validus acquires at least 95% of the outstanding IPC common shares, Validus will have the right, pursuant to Section 103, to acquire each remaining IPC common share on the same terms as in the exchange offer, or at the appraised value as determined by the court.

 

After the second-step acquisition, former remaining IPC shareholders will no longer have any ownership interest in IPC and will be shareholders of Validus and Validus will own all of the issued and outstanding IPC common shares. Validus intends, promptly following the second-step acquisition, to amalgamate IPC with a newly-formed, wholly-owned subsidiary of Validus in accordance with Section 107 of the Companies Act. Please see the sections of this prospectus/offer to exchange entitled “The Exchange Offer — Purpose and Structure of the Exchange Offer”; “The Exchange Offer — Statutory Requirements; Second-Step Acquisition”; “The Exchange Offer — Short-Form Amalgamation”; and “The Exchange Offer — Plans for IPC.”

 

Why is Validus proposing the exchange offer?

 

The Validus common shares to be issued to IPC shareholders in exchange for IPC common shares in the exchange offer and second-step acquisition will provide IPC shareholders with an immediate premium for their shares and will allow IPC shareholders to participate in the growth and opportunities of the combined company. Validus believes that the acquisition of IPC represents a compelling combination and excellent strategic fit that will enable the combined company to capitalize on opportunities in the global reinsurance market. Successful completion of the exchange offer would allow IPC shareholders to benefit from the superior growth potential of a combined company that would be a leading carrier in Bermuda’s short-tail reinsurance and insurance markets, with a strong balance sheet and quality diversification in profitable business lines.

Why is the exchange offer better than the proposed Max amalgamation?

 

Validus believes that the combination of Validus and IPC offers a number of benefits to holders of IPC common shares, including the following:

 

The exchange offer provides a premium to IPC shareholders.

 

 

The Validus common shares to be issued to IPC shareholders in exchange for IPC common shares under the exchange offer represent what we believe is an attractive investment.

 

 

A Validus/IPC combination will have a strong balance sheet and minimal exposure to risky asset classes.

 

 

 

Validus offers IPC a highly experienced, first class management team.

 

 

The exchange offer and second-step acquisition provide IPC shareholders with an opportunity for stable, profitable diversification into attractive business lines and further growth.

 

 

Have you discussed the exchange offer with the board of IPC?

 

No, we have not. On March 31, 2009, Validus delivered the Validus amalgamation offer to IPC, which included the Validus amalgamation agreement signed by Validus. Because of a prohibition in the Max amalgamation agreement that prevents IPC from even discussing the Validus amalgamation offer with Validus, with no provision allowing IPC’s directors to enter into such discussions in order to comply with any fiduciary or other duties that they may have, we have made the exchange offer without discussing it with IPC. IPC announced on April 7, 2009 that its board of directors unanimously determined that the Validus amalgamation offer does not constitute a superior proposal to the Max amalgamation agreement and reaffirmed its support of the proposed Max amalgamation. IPC has not sought any information from Validus or to have any discussions with Validus.

 

When do you expect the exchange offer to be completed?

 

We believe that we would be able to complete the exchange offer in June 2009, promptly following termination of the Max amalgamation agreement (and subject to the satisfaction or waiver of the other conditions to the exchange offer), based on the following. The expiration time of the exchange offer will be June 26, 2009, unless extended. As a result, if the conditions of the exchange offer are satisfied or waived at the expiration time of the exchange offer, Validus would be able to acquire all of the IPC common shares that are validly tendered pursuant to the exchange offer.

 

Will you increase the consideration being offered in the exchange offer?

 

Validus believes that the exchange ratio described in the exchange offer represents full and fair value for IPC common shares. However, Validus, in its sole discretion, may choose to increase the number of Validus common shares to be exchanged for each issued and outstanding IPC common share in the exchange offer or otherwise increase the consideration it is offering for IPC common shares. Validus is under no obligation to increase the amount of consideration it is offering for IPC common shares and does not currently intend to do so. In the event that Validus were to choose to increase the consideration, Validus would extend the exchange offer, if required, in compliance with applicable U.S. securities laws.

 

What happens if Validus increases the consideration to be paid in the exchange offer when I have already tendered my shares?

 

All tendering IPC shareholders will receive the highest consideration received by any shareholder pursuant to the exchange offer. Accordingly, if we were to increase the consideration to be paid in the exchange offer and you have already tendered your IPC common shares, you would receive that increased consideration if your IPC common shares are accepted for exchange.

 

What are the conditions of the exchange offer?

 

The exchange offer is conditioned upon, among other things, the following:

 

 

 

The exchange offer is subject to additional conditions referred to in the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer,” including that IPC shareholders shall not have approved the Max amalgamation agreement and that there shall have been no business combination consummated between IPC and Max. The exchange offer is not conditioned on the receipt of regulatory approvals or the elimination of the Max termination fee.

 

What actions do you propose to take with respect to the proposed Max amalgamation?

 

Validus has filed preliminary proxy materials with the SEC to solicit proxies from IPC shareholders (and, when permitted, to distribute definitive proxy materials and proxy cards to IPC shareholders) to vote at the IPC annual general meeting against the proposed Max amalgamation.

 

The exchange offer does not constitute a solicitation of proxies in connection with such matters. Any such solicitation will be made only pursuant to separate proxy materials complying with the requirements of the rules and regulations of the SEC.

 

In addition, Validus has filed legal proceedings in the Supreme Court of Bermuda against IPC, IPC Limited and Max, which we refer to as the “Bermuda claim.” The Bermuda claim challenges the validity of the Max termination fee and provisions which restrict the ability of IPC to discuss competing proposals with third parties, which we refer to as the “no talk provisions,” in the Max amalgamation agreement. Validus is seeking, among other things, an injunction to restrain payment of the Max termination fee and to restrain operation of the no-talk provisions on the bases that (1) because of its excessive size, the termination fee amounts to an unlawful penalty under Bermuda law and is accordingly unenforceable, and (2) entry into the Max amalgamation agreement, in circumstances where such agreement contained the Max termination fee and the no talk provisions, constituted a

breach of the IPC directors’ fiduciary or other duties. Please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Certain Legal Matters; Regulatory Approvals.”

 

How does the exchange offer relate to the Validus amalgamation offer and the Validus scheme of arrangement?

 

The exchange offer is one of the parts of our plan to acquire all of the issued and outstanding IPC common shares.

 

Validus is also soliciting proxies from IPC shareholders to vote against the proposed Max amalgamation. If the proposed Max amalgamation is voted down by IPC shareholders, IPC’s board of directors will be able to terminate the Max amalgamation agreement and execute the Validus amalgamation agreement. If IPC’s board of directors were to enter into the Validus amalgamation agreement following the termination of the Max amalgamation agreement, Validus believes the amalgamation contemplated by the Validus amalgamation offer could be completed in mid-to-late July.

 

Additionally, Validus intends to petition the Supreme Court of Bermuda to approve a “scheme of arrangement” under Part VII of the Companies Act, which we refer to as “the Validus scheme of arrangement,” pursuant to which Validus would acquire all of the issued and outstanding IPC common shares on the same economic terms as in the exchange offer and the Validus amalgamation offer. In order to implement the Validus scheme of arrangement, the IPC shareholders must approve the Validus scheme of arrangement at a meeting ordered by the Supreme Court of Bermuda, which we refer to as the “court-ordered IPC meeting,” IPC must separately approve the Validus scheme of arrangement and the Validus scheme of arrangement must be sanctioned by the Supreme Court of Bermuda. The Validus scheme of arrangement must be approved by a majority in number of the holders of IPC common shares voting at the court-ordered IPC meeting, whether in person or by proxy, representing 75% or more in value of the IPC common shares voting at the court-ordered IPC meeting, whether in person or by proxy. If the IPC shareholders approve the Validus scheme of arrangement at the court-ordered IPC meeting, the separate approval of IPC to the Validus scheme of arrangement can be provided by either (i) the IPC board of directors voluntarily complying with the will of the IPC shareholders as expressed at the court-ordered IPC meeting, or (ii) the shareholders of IPC approving resolutions at a special general meeting of IPC, which we refer to as the “IPC special general meeting,” including resolutions for IPC to approve and to be bound by the Validus scheme of arrangement and to terminate the Max amalgamation agreement. Following IPC shareholder approval at both the court-ordered IPC meeting and the IPC special general meeting, the satisfaction or, where relevant, waiver of the other conditions to the effectiveness of the Validus scheme of arrangement and the granting of a court order from the Supreme Court of Bermuda sanctioning the Validus scheme of arrangement, a copy of the court order sanctioning the Validus scheme of arrangement will be delivered to the Bermuda Registrar of Companies, at which time the Validus scheme of arrangement will be effective. Validus believes that, under the Validus scheme of arrangement, it would be able to close the contemplated acquisition as early as mid-July based on the assumptions that: (1) the Supreme Court of Bermuda will be able to accommodate the preferred hearings schedule and meeting dates and other procedural matters; (2) IPC shareholders holding at least one-tenth of the issued IPC common shares have requisitioned the IPC special general meeting to be held in late June or early July; and (3) the IPC directors, following the rejection of the Max amalgamation agreement, or the IPC shareholders, convene the IPC special general meeting, allowing it to be held in mid-July.

 

The Validus amalgamation offer, the Validus scheme of arrangement and the exchange offer are alternative methods for Validus to acquire all of the issued and outstanding IPC common shares on the same economic terms. Ultimately, only one of these transaction structures can be pursued to completion. Validus intends to seek to acquire IPC common shares by whatever method Validus determines is most effective and efficient. The expiration time of the exchange offer will be June 26, 2009, unless extended. As a result, if the conditions of the exchange offer are satisfied or waived at the expiration time of the exchange offer, Validus would be able to acquire all of the IPC common shares that are validly tendered pursuant to the exchange offer.

 

The exchange offer does not constitute a solicitation of proxies in connection with any such matter. Any such solicitation will be made only pursuant to separate proxy materials complying with the requirements of the rules and regulations of the SEC. Such materials will contain, among other things, a summary of all material terms of the

transactions to which such proxy statements relate. Validus advises shareholders to read any such proxy statements applicable to them because they contain important information. Please see the section of this prospectus/offer to exchange entitled “Solicitation of Proxies.”

 

Will IPC’s board of directors make a recommendation concerning the exchange offer?

 

We do not know whether IPC’s board of directors will make a recommendation. Under SEC rules, IPC’s board of directors will be required to make a recommendation or state that it is neutral or is unable to take a position with respect to the exchange offer, and file with the SEC a solicitation/recommendation statement on Schedule 14D-9 describing its position, if any, and related matters, no later than ten business days from the date Validus files this prospectus/offer to exchange. IPC is also required to send to you a copy of its schedule 14D-9 which you should review carefully upon its receipt. The Max amalgamation agreement provides that any disclosure made by IPC’s board of directors pursuant to Rule 14d-9 that does not expressly reaffirm its recommendation to IPC shareholders to approve the Max amalgamation agreement will be deemed to be a change in IPC’s board recommendation and that, consequently, Max may have the right to terminate the Max amalgamation agreement and collect the Max termination fee from IPC.

 

Do I need to grant proxies to Validus in connection with any of the potential proxy solicitations described above if I wish to accept the exchange offer? Do I have to vote against the proposed Max amalgamation?

 

No. Your ability to tender your IPC common shares in the exchange offer is not conditioned on IPC shareholders granting proxies to Validus in connection with any of its potential proxy solicitations discussed above. However, a tendering shareholder will irrevocably appoint designees of Validus as such shareholder’s agents, attorneys-in-fact and proxies, effective as of and only to the extent that Validus accepts such tendered IPC common shares for exchange. Until such time as Validus accepts such tendered IPC common shares for exchange, IPC shareholders will be able to vote on any alternative proposal.

 

You may validly tender your IPC common shares in the exchange offer, regardless of whether or how you vote on the proposed Max amalgamation. However, assuming a quorum is present at the annual general meeting of IPC shareholders, at which meeting IPC shareholders will vote upon the proposed Max amalgamation, a majority of votes cast at the annual general meeting must vote against the proposed Max amalgamation and a successful vote against the proposed Max amalgamation would help permit this to occur, as the exchange offer is conditioned on the termination of the Max amalgamation agreement (and such a vote would give IPC the right, but not the obligation, to terminate the Max amalgamation agreement).

 

Do I have to vote at any meeting to approve the exchange offer or the second-step acquisition?

 

No. The minimum tender condition will be satisfied only if Validus (or a wholly-owned subsidiary of Validus) acquires 90% of the then-outstanding number of IPC common shares on a fully-diluted basis (excluding any IPC common shares beneficially owned by Validus, its subsidiaries or IPC). Once the exchange offer is completed, Bermuda law does not require any additional shareholder vote or the approval of IPC’s board of directors for us to complete the second-step acquisition pursuant to Section 102 or Section 103 of the Companies Act.

 

What will the composition of the board of directors of Validus be following the exchange offer and the second-step acquisition?

 

Upon completion of the exchange offer and the second-step acquisition, Validus’ board of directors would consist of the directors serving on the board of directors of Validus before the completion of the exchange offer and the second-step acquisition; however, Validus has publicly expressed to the IPC directors that if they desire to participate in the leadership of Validus after completion of the exchange offer and the second-step acquisition, Validus would consider that.

 

Will I be taxed on the Validus common shares I receive?

 

The exchange offer, second-step acquisition and short-form amalgamation are intended to constitute a single integrated transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Internal

Revenue Code of 1986, as amended, which we refer to as the “Code.” Subject to the passive foreign investment company rules discussed herein, if the integrated transaction qualifies as a reorganization within the meaning of Section 368(a) of the Code, in general no gain or loss will be recognized by U.S. holders upon the exchange of IPC common shares for Validus common shares (except with respect to any cash received in lieu of a fractional share). For more information, please see the section of this prospectus/offer to exchange under the caption “Material U.S. Federal Income Tax Consequences.”

 

Tax matters are complicated and the tax consequences of the transaction to you will depend upon the facts of your particular circumstances. Because individual circumstances may differ, Validus urges you to consult with your own tax advisor as to the specific tax consequences of the exchange offer, second-step acquisition and short-form amalgamation to you, including the applicability of U.S. federal, state, local, non-U.S. and other tax laws.

 

Will I have to pay any fee or commission to exchange IPC common shares?

 

If you are the record owner of your IPC common shares and you tender your IPC common shares in the exchange offer, you will not have to pay any brokerage fees, commissions or similar expenses. If you own your IPC common shares through a broker, dealer, commercial bank, trust company or other nominee and your broker, dealer, commercial bank, trust company or other nominee tenders your IPC common shares on your behalf, your broker, dealer, commercial bank, trust company or other nominee may charge a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

 

Is Validus’ financial condition relevant to my decision to tender IPC common shares in the exchange offer?

 

Yes. Validus’ financial condition is relevant to your decision to tender your IPC common shares because the consideration you will receive if your IPC common shares are exchanged in the exchange offer will consist of Validus common shares. You should therefore consider Validus’ financial condition before you decide to become one of Validus’ shareholders through the exchange offer. You also should consider the likely effect that Validus’ acquisition of IPC will have on Validus’ financial condition. This prospectus/offer to exchange contains financial information regarding Validus and IPC, as well as pro forma financial information (which does not reflect any of our expected synergies) for the acquisition of all of the issued and outstanding IPC common shares by Validus, all of which we encourage you to review.

 

Does Validus have the financial resources to complete the exchange offer and the second-step acquisition?

 

The exchange offer consideration does not include cash, and no cash will be paid to IPC shareholders whose IPC common shares are accepted for exchange in the exchange offer other than cash paid in lieu of any fractional Validus common shares to which any such IPC shareholder may be entitled. The exchange offer is not subject to a financing condition.

 

Validus expects to have sufficient cash on hand to complete the transactions contemplated by the exchange offer and the second-step acquisition, including any cash that may be required to be paid in respect of dissenter’s or appraisal rights and to pay fees, expenses and other related amounts.

 

The estimated amount of cash required is based on Validus’ due diligence review of IPC’s publicly available information to date and is subject to change. For a further discussion of the risks relating to Validus’ limited due diligence review, please see the section of this prospectus/offer to exchange entitled “Risk Factors — Risk Factors Relating to the Exchange Offer and the Second-Step Acquisition.”

 

What percentage of Validus common shares will former holders of IPC common shares own after the exchange offer?

 

Based on Validus’ and IPC’s respective capitalizations as of March 31, 2009 and the exchange ratio of 1.2037, Validus estimates that if all IPC common shares are exchanged pursuant to the exchange offer and/or the second-step acquisition, former IPC shareholders would own, in the aggregate, approximately 43% of the issued and outstanding Validus common shares and non-voting common shares, par value $0.175 per share, of Validus, which

we refer to as “Validus non-voting common shares,” on a fully-diluted basis. For a detailed discussion of the assumptions on which this estimate is based, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Ownership of Validus After the Exchange Offer.”

 

When does the exchange offer expire?

 

The exchange offer is scheduled to expire at 5:00 p.m., New York City time (6:00 p.m., Atlantic Time), on June 26, 2009, which is the expiration time of the exchange offer, unless further extended by Validus. When we make reference to the “expiration time of the exchange offer” anywhere in this prospectus/offer to exchange, this is the time to which we are referring, including when applicable, any extension period that may apply. For more information, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Extension, Termination and Amendment.”

 

Can the exchange offer be extended and, if so, under what circumstances?

 

Validus may, in its sole discretion, extend the exchange offer at any time or from time to time until the expiration time of the exchange offer. For instance, the exchange offer may be extended if any of the conditions specified in “The Exchange Offer — Conditions of the Exchange Offer” are not satisfied prior to the scheduled expiration time of the exchange offer.

 

Validus may also elect to provide a “subsequent offering period” for the exchange offer. A subsequent offering period would not be an extension of the exchange offer. Rather, a subsequent offering period would be an additional period of time, beginning after Validus has accepted for exchange all shares tendered during the exchange offer, during which shareholders who did not tender their shares in the exchange offer may tender their shares and receive the same consideration provided in the exchange offer. Validus does not currently intend to include a subsequent offering period, although it reserves the right to do so.

 

The exchange offer is conditioned upon, among other things, the termination of the Max amalgamation agreement, the approval by our shareholders of the issuance of Validus common shares to be issued in exchange for IPC common shares in the exchange offer and the second-step acquisition, tender without withdrawal of at least 90% of the then-outstanding number of IPC common shares on a fully-diluted basis (excluding any IPC common shares beneficially owned by Validus, its subsidiaries or IPC), no material adverse effect having occurred with respect to IPC and its subsidiaries, IPC and its subsidiaries continuing to operate in the ordinary course of business consistent with past practice and the registration statement of which this prospectus/offer to exchange is a part becoming effective. The expiration time of the exchange offer may also be subject to multiple extensions and any decision to extend the exchange offer, and if so, for how long, will be made at such time. Any decision to extend the exchange offer will be made public by an announcement regarding such extension as described in the section of this prospectus/offer to exchange entitled “The Exchange Offer — Extension, Termination and Amendment.”

 

How do I tender my IPC common shares?

 

To tender your IPC common shares into the exchange offer, you must deliver the certificates representing your IPC common shares, together with a completed letter of transmittal and any other documents required by the letter of transmittal, to BNY Mellon Shareowner Services, the exchange agent for the exchange offer, not later than the expiration time of the exchange offer. The letter of transmittal is enclosed with this prospectus/offer to exchange.

 

If your IPC common shares are held in street name (i.e., through a broker, dealer, commercial bank, trust company or other nominee), your IPC common shares can be tendered by your nominee by book-entry transfer through The Depository Trust Company.

 

If you are unable to deliver any required document or instrument to the exchange agent by the expiration time of the exchange offer, you may have a limited amount of additional time by having a broker, a bank or other fiduciary that is an eligible guarantor institution guarantee that the missing items will be received by the exchange agent by using the enclosed notice of guaranteed delivery. For the tender to be valid, however, the exchange agent must receive the missing items within three NASDAQ Global Select Market trading days after the date of execution

of such notice of guaranteed delivery. In all cases, an exchange of tendered shares will be made only after timely receipt by the exchange agent of certificates for such shares (or of a confirmation of a book-entry transfer of such shares) and a properly completed and duly executed letter of transmittal and any other required documents.

 

For a complete discussion on the procedures for tendering your IPC common shares, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Procedure for Tendering.”

 

Until what time can I withdraw tendered IPC common shares?

 

You may withdraw previously tendered IPC common shares any time prior to the expiration time of the exchange offer, and, if Validus has not accepted your IPC common shares for exchange by the expiration time of the exchange offer, at any time following 60 days of commencement of the exchange offer. IPC common shares tendered during the subsequent offering period, if one is provided, may not be withdrawn. For a complete discussion on the procedures for withdrawing your IPC common shares, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Withdrawal Rights.”

 

How do I withdraw previously tendered IPC common shares?

 

To withdraw previously tendered IPC common shares, you must deliver a written or facsimile notice of withdrawal with the required information to the exchange agent while you still have the right to withdraw. If you tendered shares by giving instructions to a broker, dealer, commercial bank, trust company or other nominee, you must instruct the broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of your IPC common shares. For a complete discussion on the procedures for withdrawing your IPC common shares, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Withdrawal Rights.”

 

When and how will I receive the exchange offer consideration in exchange for my tendered IPC common shares?

 

Validus will exchange all validly tendered and not properly withdrawn IPC common shares promptly after the expiration time of the exchange offer, subject to the terms thereof and the satisfaction or waiver of the conditions to the exchange offer, as set forth in “The Exchange Offer — Conditions of the Exchange Offer.” Validus will deliver the consideration for your validly tendered and not properly withdrawn IPC common shares by depositing the consideration therefor with the exchange agent, which will act as your agent for the purpose of receiving the exchange offer consideration from Validus and transmitting such consideration to you. In all cases, an exchange of tendered IPC common shares will be made only after timely receipt by the exchange agent of certificates for such shares (or of a confirmation of a book-entry transfer of such shares as described in “The Exchange Offer — Procedure for Tendering”) and a properly completed and duly executed letter of transmittal and any other required documents.

 

Will IPC continue as a public company following the exchange offer?

 

If the second-step acquisition occurs, IPC will become a wholly-owned subsidiary of Validus and will no longer be publicly owned. Even if the second-step acquisition does not occur, if Validus exchanges all IPC common shares which have been tendered, there may be so few remaining shareholders and publicly-held shares that such shares will no longer be eligible to be traded through the NASDAQ Global Select Market, the Bermuda Stock Exchange or any other securities market, there may not be a public trading market for such shares, and IPC may cease making filings with the SEC or otherwise cease being required to comply with applicable law and SEC rules relating to publicly-held companies. Please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Plans for IPC” and “The Exchange Offer — Effect of the Exchange Offer on the Market for IPC Common Shares; NASDAQ and Bermuda Stock Exchange Listing; Registration Under the Exchange Act; Margin Regulations.”

 

Are dissenters’ or appraisal rights available in either the exchange offer and/or the second-step acquisition?

 

No dissenters’ or appraisal rights are available in connection with the exchange offer. However, if the second-step acquisition is subsequently consummated between Validus and IPC, IPC shareholders who have not tendered

their IPC common shares in the exchange offer will have certain rights under Section 102 and Section 103 of the Companies Act to dissent from the second-step acquisition and, in the case of Section 103, to demand appraisal. Please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Appraisal/Dissenters’ Rights.”

 

What is the market value of my IPC common shares as of a recent date?

 

On March 30, 2009, the last trading day before Validus made the Validus amalgamation offer, the closing price of an IPC common share was $25.41. On May 11, 2009, the last practicable date prior to the filing of this prospectus/offer to exchange, the closing price of an IPC common share was $25.38. IPC shareholders are encouraged to obtain a recent quotation for IPC common shares before deciding whether or not to tender such shares.

 

Why does the cover page state that the exchange offer is subject to change and that the registration statement filed with the SEC is not yet effective? Does this mean that the exchange offer has not commenced?

 

No. Completion of this preliminary prospectus/offer to exchange and effectiveness of the registration statement are not necessary for the exchange offer to commence. We cannot, however, accept for exchange any shares tendered in the exchange offer or exchange any IPC common shares until the registration statement is declared effective by the SEC and the other conditions to the exchange offer have been satisfied or waived. The exchange offer commenced when we first mailed this preliminary prospectus/offer to exchange and the related letter of transmittal to IPC shareholders and this first mailing occurred as of the date of this prospectus/offer to exchange.

 

Where can I find more information on Validus and IPC?

 

You can find more information about Validus and IPC from various sources described in the section of this prospectus/offer to exchange entitled “Where You Can Find More Information.”

 

Who can I talk to if I have questions about the exchange offer?

 

You can call the information agent or the dealer manager for the exchange offer.

 

The information agent for the exchange offer is:

 

 

199 Water Street, 26th Floor

New York, New York 10038

Banks and Brokerage Firms, Please Call: (212) 440-9800

All Others Call Toll-Free: at (800) 213-0317

Email: validusIPC@georgeson.com

 

The dealer manager for the exchange offer is:

 

 

Greenhill & Co., LLC

300 Park Avenue

New York, New York 10022

Call Toll-Free: (888) 504-7336

 

SUMMARY OF THE EXCHANGE OFFER

 

The Companies (See page 37)

 

The Exchange Offer (See pages 62 and 77)

 

Reasons for the Exchange Offer (See page 58)

 

Conditions of the Exchange Offer (See page 82)

	•	IPC shareholders shall have validly tendered and not withdrawn prior to the expiration time of the exchange offer at least that number of IPC common shares that shall constitute 90% of the then-outstanding number of IPC common shares on a fully-diluted basis (excluding any IPC common shares beneficially owned by Validus, its subsidiaries or IPC).

	•	The Max amalgamation agreement shall have been validly terminated on terms reasonably satisfactory to Validus, and Validus shall reasonably believe that IPC could not have any liability, and Max shall not have asserted any claim of liability or breach against IPC in connection with the Max amalgamation agreement other than with respect to the possible payment of the Max termination fee.
	•	The registration statement of which this prospectus/offer to exchange is a part shall have become effective under the Securities Act, no stop order suspending the effectiveness of the registration statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC, and Validus shall have received all necessary state securities law or “blue sky” authorizations.
	•	The shareholders of Validus shall have approved the issuance of the Validus common shares pursuant to the exchange offer and the second-step acquisition as required under the rules of the NYSE. All of the Validus officers, directors and those shareholders which Validus refers to as its “qualified sponsors” (please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer”), in each case, who beneficially own Validus voting common shares have indicated that they intend to vote their shares in favor of such approvals. As of April 30, 2009, these persons and entities beneficially owned 42.4% of the voting interests relating to the Validus common shares.
	•	The Validus common shares to be issued to IPC shareholders in exchange for IPC common shares in the exchange offer and the second-step acquisition shall have been authorized for listing on the NYSE, subject to official notice of issuance.
	•	There shall be no threatened or pending litigation, suit, claim, action, proceeding or investigation before any governmental authority that, in the judgment of Validus, is reasonably likely to, directly or indirectly, restrain or prohibit (or which alleges a violation of law in connection with) the exchange offer or is reasonably likely to prohibit or limit the full rights of ownership of IPC common shares by Validus or any of its affiliates.

	•	Since December 31, 2008, there shall not have been any material adverse effect on IPC and its subsidiaries, taken as a whole. A more than 50% decline in IPC’s book value or a 20% or more decline in IPC’s book value relative to Validus’ book value shall be deemed to have a material adverse effect on IPC.
	•	Each of IPC and its subsidiaries shall have carried on their respective businesses in the ordinary course consistent with past practice at all times on or after the date of this prospectus/offer to exchange and prior to the expiration time of the exchange offer.
	•	All amendments or waivers under Validus’ credit facilities as determined by Validus to be necessary to consummate the exchange offer, the second-step acquisition and the other transactions contemplated by this prospectus/offer to exchange shall be in full force and effect.

 

Ownership of Validus After the Exchange Offer (See page 70)

 

Comparative Market Price and Dividend Information (See page 30)

										Implied Value Per IPC
		Validus Common Shares				IPC Common Shares				Common Share in the
		Closing Price				Closing Price				Exchange Offer
March 30, 2009		$	24.91			$	25.41			$	29.98
May 11, 2009		$	22.58			$	25.38			$	27.18

 

Interest of Executive Officers and Directors of Validus in the Exchange Offer (See page 89)

 

Appraisal/Dissenter’s Rights (See page 78)

 

Material U.S. Federal Income Tax Consequences (See page 70)

 

Accounting Treatment (See page 90)

 

Regulatory Approval and Status (See page 87)

Listing of Validus Common Shares to be Issued Pursuant to the Exchange Offer and the Second-Step Acquisition (See page 82)

Comparison of Shareholders’ Rights (See page 92)

Expiration Time of the Exchange Offer (See page 63)

Extension, Termination and Amendment (See page 63)

	•	to extend, for any reason, the period of time during which the exchange offer is open;
	•	to delay acceptance for exchange of, or exchange of, any IPC common shares in order to comply in whole or in part with applicable law;
	•	to amend or terminate the exchange offer without accepting for exchange, or exchanging, any IPC common shares if any of the individually subheaded conditions referred to in the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer” have not been satisfied or if any event specified in the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer” under the subheading “Other Conditions” has occurred;
	•	to amend or terminate the exchange offer without accepting for exchange, or exchanging, any IPC common shares if Validus or any of its affiliates enters into a definitive agreement or announces an agreement in principle with IPC providing for an amalgamation, scheme of arrangement or other business combination or transaction with or involving IPC or any of its subsidiaries, or the purchase or exchange of securities or assets of IPC or any of its subsidiaries, or the Supreme Court of Bermuda sanctions a scheme of arrangement between IPC and its shareholders whereby Validus or any of its subsidiaries acquires securities of IPC, or Validus and IPC reach any other agreement or understanding, in either case, pursuant to which it is agreed or provided that the exchange offer will be terminated; and
	•	to amend the exchange offer or waive any conditions to the exchange offer;

 

Procedure for Tendering Shares (See page 66)

 

Withdrawal Rights (See page 69)

 

Exchange of IPC Common Shares; Delivery of Validus Common Shares (See page 65)

 

Risk Factors (See page 33)

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VALIDUS

		Three Months Ended								Year Ended				Year Ended				Year Ended				Period Ended
		March 31,								December 31,				December 31,				December 31,				December 31,
		2009				2008				2008				2007				2006				2005
		(Dollars in thousands, except share and per share amounts)
Revenues
Gross premiums written		$	609,892			$	521,594			$	1,362,484			$	988,637			$	540,789			$	—
Reinsurance premiums ceded			(72,512	)			(84,900	)			(124,160	)			(70,210	)			(63,696	)			—
Net premiums written			537,380				436,694				1,238,324				918,427				477,093				—
Change in unearned premiums			(218,621	)			(144,830	)			18,194				(60,348	)			(170,579	)			—
Net premiums earned			318,759				291,864				1,256,518				858,079				306,514				—
Net investment income			26,772				36,043				139,528				112,324				58,021				2,032
Realized gain on repurchase of debentures			—				—				8,752				—				—				—
Net realized gains (losses) on investments			(23,421	)			7,744				(1,591	)			1,608				(1,102	)			39
Net unrealized gains on investments(2)			22,153				(14,977	)			(79,707	)			12,364				—				—
Other income			757				935				5,264				3,301				—				—
Foreign exchange gains (losses)			(4,200	)			8,179				(49,397	)			6,696				2,157				—
Total revenues			340,820				329,788				1,279,367				994,372				365,590				2,071
Expenses
Losses and loss expenses			131,834				140,024				772,154				283,993				91,323				—
Policy acquisition costs			61,449				56,701				234,951				134,277				36,072				—
General and administrative expenses(1)			38,079				37,107				123,948				100,765				38,354				2,367
Share compensation expenses			7,354				6,535				27,097				16,189				7,878				290
Finance expenses			7,723				21,517				57,318				51,754				8,789				—
Fair value of warrants issued			—				—				—				2,893				77				49,122
Total expenses			246,439				261,884				1,215,468				589,871				182,493				51,779
Net income before taxes			94,381				67,904				63,899				404,501				183,097				(49,708	)
Taxes			526				(1,429	)			(10,788	)			(1,505	)			—				—
Net income (loss)			94,907				66,475				53,111				402,996				183,097				(49,708	)
Comprehensive income (loss)
Unrealized gains arising during the period(2)			—				—								—				(332	)			144
Foreign currency translation adjustments			(196	)			67				(7,809	)			(49	)			—				—
Adjustment for reclassification of losses realized in income			—				—								—				1,102				(39	)
Comprehensive income (loss)		$	94,711			$	66,542			$	45,302			$	402,947			$	183,867			$	(49,603	)
Earnings per share(3)
Weighted average number of common shares and common share equivalents outstanding
Basic			75,744,577				74,209,371				74,677,903				65,068,093				58,477,130				58,423,174
Diluted			79,102,643				78,329,727				75,819,413				67,786,673				58,874,567				58,423,174
Basic earnings per share		$	1.23			$	0.87			$	0.62			$	6.19			$	3.13			$	(0.85	)
Diluted earnings per share		$	1.20			$	0.85			$	0.61			$	5.95			$	3.11			$	(0.85	)
Cash dividends per share		$	0.20			$	0.20			$	0.80			$	—			$	—			$	—
Selected financial ratios
Losses and loss expenses ratio(4)			41.4	%			48.0	%			61.5	%			33.1	%			29.8	%			—
Policy acquisition cost ratio(5)			19.3	%			19.4	%			18.7	%			15.6	%			11.8	%			—
General and administrative expense ratio(6)			14.3	%			15.0	%			12.0	%			13.3.	%			15.1	%			—
Expense ratio(7)			33.6	%			34.4	%			30.7	%			28.9	%			26.9	%			—
Combined ratio(8)			75.0	%			82.4	%			92.2	%			62.0	%			56.7	%			—
Annualized return on average equity(9)			19.2	%			13.5	%			2.7	%			26.9	%			17.0	%			NM

		As of				As of				As of				As of				As of
		March 31,				March 31,				December 31,				December 31,				December 31,
		2009				2008				2008				2007				2006
		(Dollars in thousands, except share and per share amounts)
Summary Balance Sheet Data:
Investments at fair value		$	2,926,859			$	2,893,595			$	2,831,537			$	2,662,021			$	1,376,387
Cash and cash equivalents			535,798				347,347				449,848				444,698				63,643
Total assets			4,762,798				4,535,638				4,322,480				4,144,224				1,646,423
Reserve for losses and loss expenses			1,318,732				977,236				1,305,303				926,117				77,363
Unearned premiums			795,233				750,257				539,450				557,344				178,824
Junior subordinated deferrable debentures			304,300				350,000				304,300				350,000				150,000
Total liabilities			2,739,812				2,544,980				2,383,746				2,209,424				453,900
Total shareholders’ equity			2,022,986				1,990,658				1,938,734				1,934,800				1,192,523
Book value per common share(10)			26.68				26.82				25.64				26.08				20.39
Diluted book value per common share(11)			24.65				24.43				23.78				24.00				19.73

NM		— Not meaningful

(1)		General and administrative expenses for the years ended December 31, 2007 and 2006 include $4,000,000 and $1,000,000 respectively, related to our advisory agreement with Aquiline Capital Partners, LLC, which, together with its related companies, we refer to as “Aquiline.” Our advisory agreement with Aquiline terminated upon completion of our initial public offering, in connection with which Validus recorded general and administrative expense of $3,000,000 in the year ended December 31, 2007.
(2)		Validus adopted FAS 157 and FAS 159 as of January 1, 2007 and elected the fair value option on all securities previously accounted for as available-for-sale. Unrealized gains and losses on available-for-sale investments at December 31, 2006 of $875,000, previously included in accumulated other comprehensive income, were treated as a cumulative-effect adjustment as of January 1, 2007. The cumulative-effect adjustment transferred the balance of unrealized gains and losses from accumulated other comprehensive income to retained earnings and had no impact on the results of operations for the annual or interim periods beginning January 1, 2007. Validus’ investments were accounted for as trading for the annual or interim periods beginning January 1, 2007 and as such all unrealized gains and losses are included in net income.
(3)		FAS 123(R) requires that any unrecognized stock-based compensation expense that will be recorded in future periods be included as proceeds for purposes of treasury stock repurchases, which is applied against the unvested restricted shares balance. On March 1, 2007 we effected a 1.75 for 1 reverse stock split of our outstanding common shares. The stock split does not affect our financial statements other than to the extent it decreases the number of outstanding shares and correspondingly increases per share information for all periods presented. The share consolidation has been reflected retroactively in these financial statements.
(4)		The losses and loss expense ratio is calculated by dividing losses and loss expenses by net premiums earned.
(5)		The policy acquisition cost ratio is calculated by dividing policy acquisition costs by net premiums earned.
(6)		The general and administrative expense ratio is calculated by dividing the sum of general and administrative expenses and share compensation expenses by net premiums earned. The general and administrative expense ratio for the year ended December 31, 2007 is calculated by dividing the total of general and administrative expenses plus share compensation expenses less the $3,000,000 termination fee payable to Aquiline by net premiums earned.
(7)		The expense ratio is calculated by combining the policy acquisition cost ratio and the general and administrative expense ratio.

(8)		The combined ratio is calculated by combining the losses and loss expense ratio, the policy acquisition cost ratio and the general and administrative expense ratio.

(9)		Annualized return on average equity is calculated by dividing the net income for the period by the average shareholders’ equity during the period. Annual average shareholders’ equity is the average of the beginning, ending and intervening quarter-end shareholders’ equity balances.
(10)		Book value per common share is defined as total shareholders’ equity divided by the number of common shares outstanding as at the end of the period, giving no effect to dilutive securities.
(11)		Diluted book value per common share is calculated based on total shareholders’ equity plus the assumed proceeds from the exercise of outstanding options and warrants, divided by the sum of common shares, unvested restricted shares, options and warrants outstanding (assuming their exercise). Diluted book value per common share is a Non-GAAP financial measure as described under Item 7, “Management’s Discussion and Analysis of Financial condition and Results of Operations — Financial Measures,” in the Validus Form 10-K.

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF IPC

		Three months ended March 31,								Year Ended December 31,
		2009				2008				2008				2007				2006				2005				2004
		(Dollars in thousands, except share and per share amounts)
Statement of Income (Loss) Data:
Gross premiums written		$	234,610			$	197,875			$	403,395			$	404,096			$	429,851			$	472,387			$	378,409
Net premiums earned			98,708				89,697				387,367				391,385				397,132				452,522				354,882
Net investment income			21,866				23,874				94,105				121,842				109,659				71,757				51,220
Net (losses) gains on investments			(35,572	)			(6,020	)			(168,208	)			67,555				12,085				(10,556	)			5,946
Other income			7				26				65				1,086				3,557				5,234				4,296
Net loss and loss adjustment expenses incurred			39,109				5,324				155,632				124,923				58,505				1,072,662				215,608
Net acquisition costs			9,838				8,674				36,429				39,856				37,542				39,249				37,682
General and administrative expenses			24,281				7,079				26,314				30,510				34,436				27,466				23,151
Interest expense			383				—				2,659				—				—				—				—
Net foreign exchange loss (gain)			3,146				(303	)			1,848				1,167				(2,635	)			2,979				1,290
Net income (loss)		$	8,252			$	86,803			$	90,447			$	385,412			$	394,585			$	(623,399	)		$	138,613
Preferred dividend			—				4,234				14,939				17,128				17,176				2,664				—
Net income (loss), available to common shareholders		$	8,252			$	82,569			$	75,508			$	368,284			$	377,409			$	(626,063	)		$	138,613
Net income (loss) per common share(1)		$	0.15			$	1.31			$	1.45			$	5.53			$	5.54			$	(12.30	)		$	2.87
Weighted average shares outstanding(1)			55,916,256				66,182,883				59,301,939				69,728,229				71,212,287				50,901,296				48,376,865
Cash dividend per common share		$	0.22			$	0.22			$	0.88			$	0.80			$	0.64			$	0.88			$	0.88
Other Data:
Loss and loss adjustment expense ratio(2)			39.6	%			5.8	%			40.2	%			31.9	%			14.7	%			237.0	%			60.8	%
Expense ratio(2)			34.6	%			17.1	%			16.2	%			18.0	%			18.1	%			14.8	%			17.1	%
Combined ratio(2)			74.2	%			22.9	%			56.4	%			49.9	%			32.8	%			251.8	%			77.9	%
Return on average equity(3)			1.8	%			15.5	%			4.2	%			20.1	%			24.0	%			(38.0	)%			8.6	%
Balance Sheet Data (at end of period):
Total cash and investments		$	2,189,966			$	2,475,860			$	2,235,187			$	2,473,244			$	2,485,525			$	2,560,146			$	1,901,094
Reinsurance premiums receivable			199,241				161,474				108,033				91,393				113,811				180,798				85,086
Total assets			2,453,085				2,712,037				2,388,688				2,627,691				2,645,429				2,778,281				2,028,290
Reserve for losses and loss adjustment expenses			354,467				355,276				355,893				395,245				548,627				1,072,056				274,463
Unearned premiums			219,641				181,889				85,473				75,980				80,043				66,311				68,465
Total liabilities			603,611				563,904				537,741				501,946				654,474				1,161,881				359,851
Total shareholders’ equity		$	1,849,474			$	2,148,133			$	1,850,947			$	2,125,745			$	1,990,955			$	1,616,400			$	1,668,439
Diluted book value per common share(4)		$	NA			$	NA			$	32.85	(5)		$	32.42			$	27.94			$	22.26			$	34.44

(1)		Net income per common share is calculated upon the weighted average number of common shares outstanding during the relevant year. The weighted average number of shares includes common shares and the dilutive effect of employee stock options and stock grants, using the treasury stock method and convertible preferred shares. The net loss per common share for the year ended December 31, 2005 is calculated on the weighted average number of shares outstanding during the year, excluding the anti-dilutive effect of employee stock options, stock grants and convertible preferred shares. The net income per common share for the year ended December 31, 2008 is calculated on the weighted average number of shares outstanding during the year, excluding the anti-dilutive effect of stock-based compensation and convertible preferred shares.
(2)		The loss and loss adjustment expense ratio is calculated by dividing the net losses and loss expenses incurred by the net premiums earned. The expense ratio is calculated by dividing the sum of acquisition costs and general and administrative expenses by net premiums earned. The combined ratio is the sum of the loss and loss expense ratio and the expense ratio.
(3)		Return on average equity is calculated as the annual net income (loss), available to common shareholders divided by the average of the common shareholders’ equity, which is total shareholders’ equity, excluding convertible preferred shares, on the first and last day of the respective year.
(4)		Diluted book value per common share is calculated as shareholders’ equity divided by the number of common shares outstanding on the balance sheet date, after considering the dilutive effects of stock-based compensation, calculated using the treasury stock method. At December 31, 2008 the average weighted number of shares outstanding, including the dilutive effect of employee stock-based compensation and convertible preferred shares (which were converted on November 15, 2008) using the treasury stock method was 59,301,939.
(5)		IPC reported diluted book value per common share as $33.07 in the IPC 10-K and amended it to $32.85 in an amendment to the IPC/Max S-4 filed with the SEC on April 13, 2009.

 

SELECTED UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

		Three Months Ended				Year Ended
		March 31, 2009				December 31, 2008
		(Dollars in thousands, except
		share and per share amounts)
Revenues
Gross premiums written		$	844,237			$	1,765,628
Reinsurance premiums ceded			(75,401)				(130,031	)
Net premiums written			768,836				1,635,597
Change in unearned premiums			(351,369)				8,288
Net premiums earned			417,467				1,643,885
Net investment income			47,935				230,258
Realized gain on repurchase of debentures			—				8,752
Net realized losses on investments			(58,993)				(169,799	)
Net unrealized losses on investments			22,153				(79,707	)
Other income			764				5,329
Foreign exchange losses			(7,346)				(51,245	)
Total revenues			421,980				1,587,473
Expenses
Losses and loss expenses			170,943				927,786
Policy acquisition costs			71,287				271,380
General and administrative expenses			44,871				144,637
Share compensation expenses			9,843				32,722
Finance expenses			8,106				59,977
Total expenses			305,050				1,436,502
Net income before taxes			116,930				150,971
Taxes			526				(10,788	)
Net income			117,456				140,183

		Three Months Ended				Year Ended
		March 31, 2009				December 31, 2008
		(Dollars in thousands, except
		share and per share amounts)
Comprehensive income (loss)
Foreign currency translation adjustments			(196	)			(7,809	)
Movement in accumulated pension benefit obligation			—				5
Comprehensive income			117,260			$	132,379
Earnings per share
Weighted average number of common shares and common share equivalents outstanding
Basic			143,090,173				142,023,499
Diluted			147,113,928				143,830,698
Basic earnings per share		$	0.81			$	0.94
Diluted earnings per share		$	0.79			$	0.93
Selected financial ratios
Losses and loss expenses ratio(1)			40.9	%			56.4	%
Policy acquisition cost ratio(2)			17.1	%			16.5	%
General and administrative expense ratio(3)			13.1	%			10.8	%
Expense ratio(4)			30.2	%			27.3	%
Combined ratio(5)			71.1	%			83.7	%

		As of
		March 31, 2009
		(Dollars in thousands, except
		share and per share amounts)
Summary Balance Sheet Data:
Investments at fair value			4,994,755
Cash and cash equivalents			582,868
Total assets			7,140,524
Reserve for losses and loss expenses			1,673,199
Unearned premiums			1,014,675
Junior Subordinated Deferrable Debentures			304,300
Total liabilities			3,343,064
Total shareholders’ equity			3,797,460
Book value per common share(6)			26.52
Diluted book value per common share(7)			25.27

NM		— Not meaningful

(1)		The losses and loss expense ratio is calculated by dividing losses and loss expenses by net premiums earned.
(2)		The policy acquisition cost ratio is calculated by dividing policy acquisition costs by net premiums earned.
(3)		The general and administrative expense ratio is calculated by dividing the sum of general and administrative expenses and share compensation expenses by net premiums earned.
(4)		The expense ratio is calculated by combining the policy acquisition cost ratio and the general and administrative expense ratio.

(5)		The combined ratio is calculated by combining the losses and loss expense ratio, the policy acquisition cost ratio and the general and administrative expense ratio.
(6)		Book value per common share is defined as total shareholders’ equity divided by the number of common shares outstanding as at the end of the period, giving no effect to dilutive securities.
(7)		Diluted book value per common share is calculated based on total shareholders’ equity plus the assumed proceeds from the exercise of outstanding options and warrants, divided by the sum of common shares, unvested restricted shares, options and warrants out-standing (assuming their exercise). Diluted book value per common share is a Non-GAAP financial measure as described under Item 7, “Management’s Discussion and Analysis of Financial condition and Results of Operations — Financial Measures,” in the Validus 10-K.

 

COMPARATIVE PER SHARE DATA

										Validus
		Historical				Historical				Pro forma				Equivalent
		Validus				IPC				combined				Per IPC Share(2)
		(For the year ended December 31, 2008)
Basic earnings per common share		$	0.62			$	1.45			$	0.94			$	1.13
Diluted earnings per common share(1)		$	0.61			$	1.45			$	0.93			$	1.12
Cash dividends declared per common share		$	0.80			$	0.88			$	0.80			$	0.96
Book value per common share (at period end)		$	25.64			$	33.00			$	25.88			$	31.15
Diluted book value per common share		$	23.78			$	32.85	(3)		$	24.69			$	29.72

										Validus
		Historical				Historical				Pro forma				Equivalent
		Validus				IPC				combined				Per IPC Share(2)
		(For the three months ended March 31, 2009)
Basic earnings per common share		$	1.23			$	0.15			$	0.81			$	0.97
Diluted earnings per common share(1)		$	1.20			$	0.15			$	0.79			$	0.95
Cash dividends declared per common share		$	0.20			$	0.22			$	0.20			$	0.24
Book value per common share (at period end)		$	26.68			$	33.06			$	26.52			$	31.92
Diluted book value per common share		$	24.65			$	32.73			$	25.27			$	30.42

(1)		Anti-dilution provisions apply to 2008 and 2009. There is no effect of stock-based compensation and preference shares because they are anti-dilutive.
(2)		Equivalent per share amounts are calculated by multiplying Validus pro forma per share amounts by the exchange offer exchange ratio of 1.2037.
(3)		IPC reported diluted book value per common share as $33.07 in its Annual Report on Form 10-K for the year ended December 31, 2008 and amended it to $32.85 in an amendment to the IPC/Max S-4 filed with the SEC on April 13, 2009.

 

COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION

		Validus												IPC
		High				Low				Dividend				High				Low				Dividend
Year ended
December 31, 2009
First Quarter		$	26.30			$	21.25			$	0.20			$	30.25			$	20.89			$	0.22
Second Quarter (through May 11, 2009)		$	24.09			$	22.40				N/A			$	27.65			$	24.55				N/A
December 31, 2008
First Quarter		$	26.22			$	23.00			$	0.20			$	28.25			$	24.82			$	0.22
Second Quarter		$	23.72			$	20.11			$	0.20			$	30.38			$	26.55			$	0.22
Third Quarter		$	24.70			$	20.00			$	0.20			$	33.00			$	26.58			$	0.22
Fourth Quarter		$	26.16			$	14.84			$	0.20			$	29.90			$	19.52			$	0.22
Year ended December 31, 2007
First Quarter			N/A				N/A				N/A			$	31.53			$	27.82			$	0.20
Second Quarter			N/A				N/A				N/A			$	32.53			$	28.57			$	0.20
Third Quarter		$	25.28			$	21.11				N/A			$	33.01			$	24.01			$	0.20
Fourth Quarter		$	26.59			$	24.73				N/A			$	30.13			$	26.87			$	0.20

		Validus common								Equivalent Validus Per
		share close				IPC common share close				Share Amount
March 30, 2009		$	24.91			$	25.41			$	29.98
May 11, 2009		$	22.58			$	25.38			$	27.18

 

RATIO OF EARNINGS TO FIXED CHARGES

		Pro Forma Combined(1)								Validus
		Three Months Ended				Year Ended				Three Months Ended				Year Ended												Period Ended
		March 31,				December 31,				March 31,				December 31,												December 31,
		2009				2008				2009				2008				2007				2006				2005(2)
Ratio of Earnings to Fixed Charges			15.2				3.5				13.0				2.1				8.7				21.7				NM
Ratio of Earnings to Fixed Charges Excluding FAL Costs(3)			15.8				5.5				13.6				3.1				15.7				21.7				NM

(1)		The Pro Forma Combined reflects the acquisition and related adjustments using the pro forma financial information presented pursuant to Article 11 of Regulation S-X. For a discussion of the assumptions and adjustments made in preparation of the pro forma financial information presented in this prospectus/offer to exchange, see the section of this prospectus/offer to exchange entitled “Unaudited Condensed Consolidated Pro Forma Financial Information.”
(2)		Validus commenced underwriting activities on January 1, 2006. There were no earnings from underwriting activities during the period ended December 31, 2005.
(3)		FAL Costs represent both fixed and variable costs paid for financing the Company’s operations at Lloyd’s. The ratio of earnings to fixed charges excluding FAL Costs demonstrates the degree to which the ratio changes if FAL Costs are treated as variable rather than fixed costs.

NM:		Not meaningful

 

In addition to the risk factors set forth below, you should read and consider other risk factors specific to each of the Validus and IPC businesses that will also affect Validus after consummation of the exchange offer and the second-step acquisition, described in Part I, Item 1A of each company’s annual report on Form 10-K for the year ended December 31, 2008 and other documents that have been filed with the SEC and all of which are incorporated by reference into this prospectus/offer to exchange. If any of the risks described below or in the reports incorporated by reference into this prospectus/offer to exchange actually occurs, the respective businesses, financial results, financial conditions, operating results or share prices of Validus or IPC could be materially adversely affected.

 

Risk Factors Relating to the Exchange Offer and the Second-Step Acquisition

 

The value of the Validus common shares that the IPC shareholders receive in the exchange offer will vary as a result of the fixed exchange ratio and possible fluctuations in the price of Validus common shares.

 

Upon consummation of the exchange offer, each IPC common share validly tendered into the exchange offer and accepted by Validus for exchange will be converted into the right to receive Validus common shares equal to the exchange ratio and cash in lieu of fractional shares. Because the exchange ratio is fixed at 1.2037 Validus common shares for each IPC common share, the market value of the Validus common shares issued in exchange for IPC common shares in the exchange offer will depend upon the market price of a Validus common share at the date the exchange offer is consummated. If the price of Validus common shares declines, IPC shareholders could receive less value for their shares upon the consummation of the exchange offer than the value calculated pursuant to the exchange ratio on the date the exchange offer was announced. Share price changes may result from a variety of factors that are beyond the companies’ control, including general market conditions, changes in business prospects, catastrophic events, both natural and man-made, and regulatory considerations. In addition, the ongoing business of Validus may be adversely affected by actions taken by Validus in connection with the exchange offer, including as a result of (i) the attention of management of Validus having been diverted to the exchange offer instead of being directed solely to Validus’ own operations and pursuit of other opportunities that could have been beneficial to Validus and the combined entity and (ii) payment by Validus of certain costs relating to the exchange offer, including certain legal, accounting and financial and capital markets advisory fees.

 

Because the exchange offer and the second-step acquisition will not be completed until certain conditions have been satisfied or, where relevant, waived (please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer”), a period of time, which may be significant, may pass between the commencement of the exchange offer and the time that Validus accepts IPC common shares for exchange. Therefore, at the time when you tender your IPC common shares pursuant to the exchange offer, you will not know the exact market value of the Validus common shares that will be issued if Validus accepts such shares for exchange. However, tendered IPC common shares may be withdrawn at any time prior to the expiration time of the exchange offer and for 60 days following commencement of the exchange offer. Please see the section of this prospectus/offer to exchange entitled “Comparative Market Price and Dividend Information” for the historical high and low closing prices of Validus common shares and IPC common shares, as well as cash dividends per share of Validus common shares and IPC common shares respectively for each quarter of the period 2007 through 2009.

 

Furthermore, in connection with the exchange offer and the second-step acquisition, Validus estimates that it will need to issue approximately 67,338,947 Validus common shares. The increase in the number of Validus common shares may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, Validus common shares.

 

IPC shareholders are urged to obtain market quotations for Validus and IPC common shares when they consider whether to tender their IPC common shares pursuant to the exchange offer.

 

The exchange offer may adversely affect the liquidity and value of non-tendered IPC common shares.

 

In the event that not all IPC common shares are tendered in the exchange offer and we accept for exchange those shares tendered into the exchange offer, the number of shareholders and the number of IPC common shares

held by individual holders will be greatly reduced. As a result, Validus’ acceptance of shares for exchange in the exchange offer could adversely affect the liquidity and could also adversely affect the market value of the remaining IPC common shares held by the public. Subject to the rules of the NASDAQ Global Select Market and the Bermuda Stock Exchange, Validus may delist the IPC common shares on the NASDAQ Global Select Market and Bermuda Stock Exchange, respectively. As a result of such delisting, each issued and outstanding IPC common share not tendered pursuant to the exchange offer may become illiquid and may be of reduced value. Please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Plans for IPC.”

 

The exchange offer remains subject to conditions that Validus cannot control.

 

The exchange offer is subject to conditions, including tender without withdrawal of at least 90% of the then-outstanding number of IPC common shares on a fully-diluted basis (excluding any IPC common shares beneficially owned by Validus, its subsidiaries or IPC), the termination of the Max amalgamation agreement, the approval by our shareholders of the issuance of Validus common shares to be issued in exchange for IPC common shares in the exchange offer and the second-step acquisition, no material adverse effect having occurred with respect to IPC and its subsidiaries, IPC and its subsidiaries continuing to operate in the ordinary course of business consistent with past practice, the registration statement of which this prospectus/offer to exchange is a part becoming effective and consent of the lenders under our credit agreements. There are no assurances that all of the conditions to the exchange offer will be satisfied. In addition, the IPC board of directors may seek to take actions that will delay, or frustrate, the satisfaction of one or more conditions. If the conditions to the exchange offer are not met, then Validus may allow the exchange offer to expire, or could amend or extend the exchange offer.

 

Please see the section of this prospectus/offer to exchange entitled “The Exchange Offer — Conditions of the Exchange Offer” for a discussion of the conditions to the exchange offer.

 

The exchange offer is conditioned on termination of the Max amalgamation agreement, which could under certain circumstances result in the payment of the Max termination fee.

 

While Validus believes the provision of the Max amalgamation agreement providing for the payment of the Max termination fee is invalid and is seeking a ruling of the Supreme Court of Bermuda to that effect, if the IPC shareholders vote against the proposed Max amalgamation, a court may determine that IPC is required, or IPC may otherwise be bound, to pay all, or a portion, of the Max termination fee, including in the circumstance where IPC subsequently agrees to enter into an agreement with a third party in respect of another business combination.

 

The acquisition of IPC may fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, resulting in your recognition of taxable gain or loss in respect of your IPC common shares.

 

The exchange offer, second-step acquisition and short-form amalgamation are intended to constitute a single integrated transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Code. No legal opinion from U.S. legal counsel or ruling from the U.S. Internal Revenue Service (the “IRS”) has been requested, or is expected to be obtained, regarding the U.S. federal income tax consequences of the exchange offer, second-step acquisition and short-form amalgamation. No assurance can be given that the IRS will not assert, or that a court would not sustain, that the acquisition of IPC does not qualify as a reorganization. If the acquisition of IPC fails to qualify as a reorganization, you generally would recognize gain or loss equal to the difference, if any, between (i) the sum of the fair market value of the Validus common shares received in the exchange offer and second-step acquisition and any cash received in lieu of a fractional share and (ii) your adjusted tax basis in IPC common shares surrendered in exchange therefor. For more information, please see the section of this prospectus/offer to exchange under the caption “The Exchange Offer — Material U.S. Federal Income Tax Consequences.” U.S. holders of IPC common shares should consult their own tax advisors as to the tax consequences to them of the exchange offer, second-step acquisition and short-form amalgamation, including any U.S. federal, state, local, non-U.S. or other tax consequences, and any tax return filing or other reporting requirements.

Risk Factors Relating to IPC’s Businesses

 

You should read and consider other risk factors specific to IPC’s businesses that will also affect Validus after the acquisition contemplated by this prospectus/offer to exchange, described in Part I, Item 1A of IPC’s annual report on Form 10-K for the year ended December 31, 2008 and other documents that have been filed by IPC with the SEC and which are incorporated by reference into this document.

 

Risk Factors Relating to Validus’ Businesses

 

You should read and consider other risk factors specific to Validus’ businesses that will also affect Validus after the acquisition contemplated by this prospectus/offer to exchange, described in Part I, Item 1A of Validus’ annual report on Form 10-K for the year ended December 31, 2008 and other documents that have been filed by Validus with the SEC and which are incorporated by reference into this prospectus/offer to exchange.

 

Risk Factors Relating to Validus Following the Exchange Offer

 

Validus may experience difficulties integrating IPC’s businesses, which could cause Validus to fail to realize the anticipated benefits of the acquisition.

 

If the acquisition is consummated, achieving the anticipated benefits of the acquisition will depend in part upon whether the two companies integrate their businesses in an efficient and effective manner. The companies may not be able to accomplish this integration process smoothly or successfully. The integration of certain operations following the acquisition will take time and will require the dedication of significant management resources, which may temporarily distract management’s attention from the routine business of the combined entity.

 

Additionally, because of the notice and procedural requirements contemplated by Section 102 and Section 103 of the Companies Act, there may be a period of time after shares have been exchanged in the exchange offer during which Validus will not own all of the outstanding IPC common shares, IPC common shares may continue to be subject to limitations on voting set forth in the IPC bye-laws, and Validus may not be able to immediately exercise operational control over IPC, including the right to appoint directors and executive officers of IPC and to manage the day-to-day operations of IPC.

 

Any delay or inability of management to successfully integrate the operations of the two companies could compromise the combined entity’s potential to achieve the long-term strategic benefits of the acquisition and could have a material adverse effect on the business, financial condition, operating results and market value of Validus common shares after the acquisition.

 

Validus has only conducted a review of IPC’s publicly available information and has not had access to IPC’s non-public information. Therefore, Validus may be subject to unknown liabilities of IPC which may have a material adverse effect on Validus’ profitability, financial condition and results of operations

 

To date, Validus has only conducted a due diligence review of IPC’s publicly available information. The consummation of the exchange offer may constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, or result in the acceleration or other change of any right or obligation (including, without limitation, any payment obligation) under agreements of IPC that are not publicly available. As a result, after the consummation of the exchange offer, Validus may be subject to unknown liabilities of IPC, which may have a material adverse effect on Validus’ profitability, financial condition and results of operations.

 

In addition, the exchange offer may also permit a counter-party to an agreement with IPC to terminate that agreement because completion of the exchange offer or the second-step acquisition would cause a default or violate an anti-assignment, change of control or similar clause. If this happens, Validus may have to seek to replace that agreement with a new agreement. Validus cannot assure you that it will be able to replace a terminated agreement on comparable terms or at all. Depending on the importance of a terminated agreement to IPC’s business, failure to replace that agreement on similar terms or at all may increase the costs to Validus of operating IPC’s business or prevent Validus from operating part or all of IPC’s business.

In respect of all information relating to IPC presented in, incorporated by reference into or omitted from, this prospectus/offer to exchange, Validus has relied upon publicly available information, including information publicly filed by IPC with the SEC. Although Validus has no knowledge that would indicate that any statements contained herein regarding IPC’s condition, including its financial or operating condition (based upon such publicly filed reports and documents) are inaccurate, incomplete or untrue, Validus was not involved in the preparation of such information and statements. For example, Validus has made adjustments and assumptions in preparing the pro forma financial information presented in this prospectus/offer to exchange that have necessarily involved Validus’ estimates with respect to IPC’s financial information. Any financial, operating or other information regarding IPC that may be detrimental to Validus following Validus’ acquisition of IPC that has not been publicly disclosed by IPC, or errors in Validus’ estimates due to the lack of access to IPC, may have a material adverse effect on Validus’ financial condition or the benefits Validus expects to achieve through the consummation of the exchange offer.

 

The acquisition may result in ratings downgrades of one or more of Validus’ insurance or reinsurance subsidiaries (including the newly acquired IPC insurance and reinsurance operating companies) which may adversely affect Validus’ business, financial condition and operating results, as well as the market price of Validus common shares.

 

Ratings with respect to claims paying ability and financial strength are important factors in maintaining customer confidence in Validus and its ability to market insurance and reinsurance products and compete with other insurance and reinsurance companies. Rating organizations regularly analyze the financial performance and condition of insurers and reinsurers and will likely reevaluate the ratings of Validus and its reinsurance subsidiaries following the consummation of the second-step acquisition, if applicable. While each of Standard & Poor’s and A.M. Best have not taken any action with respect to Validus’ ratings following the announcement of the Validus amalgamation offer, Moody’s has changed the outlook to negative with respect to the A3 insurance financial strength rating of Validus’ reinsurance subsidiary, Validus Reinsurance, Ltd., and the Baa2 long-term issuer rating of Validus. Additionally, although A.M. Best has assigned the reinsurance subsidiaries of IPC (including IPCRe Limited and IPCRe Europe Limited) the financial strength rating of “A” (Excellent) and issuer credit ratings of “a” and IPC the issuer credit rating of “bbb”, A.M. Best has also indicated that each of these IPC ratings is under review with negative implications in connection with the proposed Max amalgamation. A.M. Best and the other ratings agencies would most likely provide similar scrutiny and analysis to the proposed acquisition of IPC common shares by Validus. Following the acquisition, any ratings downgrades, or the potential for ratings downgrades, of Validus or its subsidiaries (including the newly acquired IPC operating companies) could adversely affect Validus’ ability to market and distribute products and services and successfully compete in the marketplace, which could have a material adverse effect on its business, financial condition and operating results, as well as the market price for Validus common shares.

 

The occurrence of severe catastrophic events after the completion of the exchange offer and the second-step acquisition could cause Validus’ net income to be more volatile than if the exchange offer and the second-step acquisition did not take place.

 

For the year ended December 31, 2008, Validus’ gross premiums written on property catastrophe business were $328.2 million or 24.1% of total gross premiums written. For the year ended December 31, 2008, 93% of IPC’s gross premiums written covered property catastrophe reinsurance risks. For the year ended December 31, 2008, after giving effect to the exchange offer and the second-step acquisition as if it had been consummated on December 31, 2008, gross premiums written on property catastrophe business would have been $661.9 or 37.5% of total gross premiums of Validus on a pro forma basis. Because Validus after the exchange offer and the second-step acquisition will, among other things, have larger aggregate exposures to natural and man-made disasters than it does today, Validus’ aggregate loss experience could have a significant influence on Validus’ net income. Please see the section of this prospectus/offer to exchange entitled “Unaudited Condensed Consolidated Pro Forma Financial Information.”

 

Validus is a Bermuda exempted company, with its principal executive offices located at 19 Par-La-Ville Road, Hamilton HM11, Bermuda. The telephone number of Validus is (441) 278-9000. Validus is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Re and Talbot. Validus Re is a Bermuda-based reinsurer focused on short-tail lines of reinsurance. Talbot is the Bermuda parent of the specialty insurance group primarily operating within the Lloyd’s Insurance market through Syndicate 1183. At December 31, 2008, Validus had total shareholders’ equity of $1.939 billion and total assets of $4.322 billion. Validus common shares are traded on the NYSE under the symbol “VR” and, as of May 11, 2009, the last practicable date prior to the filing of this prospectus/offer to exchange, Validus had a market capitalization of approximately $1.7 billion. Validus has approximately 280 employees.

 

As of the date of the filing of this prospectus/offer to exchange with the SEC, Validus was the registered holder of 100 IPC common shares, or less than 1% of the amount outstanding.

 

The following description of IPC is taken from the IPC/Max S-4. Please see the section of this prospectus/offer to exchange entitled “Note on IPC Information.”

 

IPC provides property catastrophe reinsurance and, to a limited extent, property-per-risk excess, aviation (including satellite) and other short-tail reinsurance on a worldwide basis. During 2008, approximately 93% of its gross premiums written, excluding reinstatement premiums, covered property catastrophe reinsurance risks. Property catastrophe reinsurance covers against unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires, industrial explosions, freezes, riots, floods and other man-made or natural disasters. The substantial majority of the reinsurance written by IPCRe has been, and continues to be, written on an excess of loss basis for primary insurers rather than reinsurers, and is subject to aggregate limits on exposure to losses. During 2008, IPC had approximately 258 clients from whom it received either annual/deposit or adjustment premiums, including many of the leading insurance companies around the world. In 2008, approximately 36% of those clients were based in the United States, and approximately 53% of gross premiums written, excluding reinstatement premiums, related primarily to U.S. risks. IPC’s non-U.S. clients and its non-U.S. covered risks are located principally in Europe, Japan, Australia and New Zealand. During 2008, no single ceding insurer accounted for more than 3.7% of its gross premiums written, excluding reinstatement premiums. At December 31, 2008, IPC had total shareholders’ equity of $1.851 billion and total assets of $2.389 billion.

 

In response to a severe imbalance between the global supply of and demand for property catastrophe reinsurance that developed during the period from 1989 through 1993, IPC and IPCRe were formed as Bermuda companies and commenced operations in June 1993 through the sponsorship of American International Group, Inc. (“AIG”). On August 15, 2006, AIG sold its entire shareholding in an underwritten public offering. As from August 15, 2006, to IPC’s knowledge, AIG no longer has any direct ownership interest in IPC.

 

IPC common shares are quoted on the NASDAQ Global Select Market under the ticker symbol “IPCR” and the Bermuda Stock Exchange under the symbol “IPCR BH.” IPCRe Europe Limited, a subsidiary of IPCRe incorporated in Ireland, underwrites select reinsurance business. Currently, IPCRe Europe Limited retrocedes 90% of the business it under-writes to IPCRe.

 

Internet Address: IPC’s Internet address is www.ipcre.bm and the investor relations section of its website is located at www.ipcre.bm/financials/quarterly-index.html. IPC makes available free of charge, through the investor relations section of its website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

 

In order to consummate the acquisition of IPC, Validus is simultaneously pursuing the following alternative transaction structures:

 

(1) the Validus amalgamation offer;

 

(2) the Validus scheme of arrangement; and

 

(3) the exchange offer.

 

The Validus amalgamation offer, the Validus scheme of arrangement and the exchange offer are alternative methods for Validus to acquire all of the issued and outstanding IPC common shares on the same economic terms. Ultimately, only one of these transaction structures can be pursued to completion. Validus intends to seek to acquire all IPC common shares by whichever method Validus determines is most effective and efficient.

 

On March 31, 2009, Validus announced that it had delivered to IPC an offer to consummate the acquisition of IPC on the terms and subject to the conditions set forth in the Validus amalgamation offer. In connection with the Validus amalgamation offer, Validus also delivered a copy of the Validus amalgamation agreement signed by Validus so that, upon a termination of the Max amalgamation agreement, IPC would be able to sign the Validus amalgamation agreement with the certainty of an agreed transaction. IPC announced on April 7, 2009 that its board of directors had determined that the Validus amalgamation offer does not constitute a superior proposal to the proposed Max amalgamation and reaffirmed its support of the proposed Max amalgamation. Additionally, Max has not released IPC from the prohibition in the Max amalgamation agreement that prevents IPC from even discussing the Validus amalgamation offer with Validus. Therefore, in order to consummate the acquisition of IPC without the cooperation of the IPC board of directors, Validus is pursuing a three-part plan.

 

First, Validus is soliciting proxies from IPC shareholders to vote against the proposed Max amalgamation. If the proposed Max amalgamation is voted down by IPC shareholders, IPC’s board of directors will be able to terminate the Max amalgamation agreement and execute the Validus amalgamation agreement. If IPC’s board of directors were to enter into the Validus amalgamation agreement following the termination of the Max amalgamation agreement, Validus believes the amalgamation contemplated by the Validus amalgamation offer could be completed in mid-to-late July.

 

Second, Validus is pursuing the Validus scheme of arrangement. In order to implement the Validus scheme of arrangement, the IPC shareholders must approve the Validus scheme of arrangement at the court-ordered IPC meeting, IPC must separately approve the Validus scheme of arrangement and the Validus scheme of arrangement must be sanctioned by the Supreme Court of Bermuda. The Validus scheme of arrangement must be approved by a majority in number of the holders of IPC common shares voting at the court-ordered IPC meeting, whether in person or by proxy, representing 75% or more in value of the IPC common shares voting at the court-ordered IPC meeting, whether in person or by proxy. If the IPC shareholders approve the Validus scheme of arrangement at the court-ordered IPC meeting, the separate approval of IPC to the Validus scheme of arrangement can be provided by either (i) the IPC board of directors voluntarily complying with the will of the IPC shareholders as expressed at the court-ordered IPC meeting, or (ii) the shareholders of IPC approving resolutions at the IPC special general meeting, including resolutions for IPC to approve and to be bound by the Validus scheme of arrangement and to terminate the Max amalgamation agreement. Following IPC shareholder approval at both the court-ordered IPC meeting and the IPC special general meeting, the satisfaction or, where relevant, waiver of the other conditions to the effectiveness of the Validus scheme of arrangement and the granting of a court order from the Supreme Court of Bermuda sanctioning the Validus scheme of arrangement, a copy of the court order sanctioning the Validus scheme of arrangement will be delivered to the Bermuda Registrar of Companies, at which time the Validus scheme of arrangement will be effective. Validus believes that, under the Validus scheme of arrangement, it would be able to close the contemplated acquisition as early as mid-July based on the assumptions that: (1) the Supreme Court of Bermuda will be able to accommodate the preferred hearings schedule and meeting dates and other procedural matters; (2) IPC shareholders holding at least one-tenth of the issued IPC common shares have requisitioned the IPC special general meeting to be held in late June or early July; and (3) the IPC directors, following the rejection of the

Max amalgamation agreement, or the IPC shareholders, convene the IPC special general meeting, allowing it to be held in mid-July.

 

Third, Validus has commenced the exchange offer. The exchange offer is subject to the terms and conditions described in this prospectus/offer to exchange. Under Bermuda law, if Validus acquires at least 90% of the IPC common shares which it is seeking to acquire in the exchange offer, Validus will have the right to acquire the remaining IPC common shares on the same terms in the second-step acquisition. The expiration time of the exchange offer will be June 26, 2009, unless extended. As a result, if the conditions of the exchange offer are satisfied or waived at the expiration time of the exchange offer, Validus would be able to acquire all of the IPC common shares that are validly tendered pursuant to the exchange offer.

 

Based on Validus’ and IPC’s respective capitalizations as of March 31, 2009 and the exchange ratio of 1.2037, Validus estimates that if all IPC common shares are exchanged pursuant to the exchange offer and/or the second-step acquisition, former IPC shareholders would own, in the aggregate, approximately 43% of the issued and outstanding Validus common shares and Validus non-voting common shares on a fully-diluted basis.

 

For more details relating to the structure of the exchange offer, please see the section of this prospectus/offer to exchange entitled “The Exchange Offer.”

 

On March 2, 2009, IPC and Max announced that they had entered into the Max amalgamation agreement. The IPC/Max S-4 provides a summary of the events leading to Max and IPC entering into the Max amalgamation agreement.

 

In the morning of March 31, 2009, Edward J. Noonan, the Chief Executive Officer and Chairman of the Board of Validus, placed a telephone call to James P. Bryce, the Chief Executive Officer and President of IPC. Mr. Noonan spoke with Mr. Bryce and explained that Validus intended to make an offer to exchange each outstanding IPC common share for 1.2037 Validus common shares, subject to the termination of the Max amalgamation agreement.

 

Following this telephone call, in the morning of March 31, 2009, Validus delivered a proposal letter containing the Validus amalgamation offer to IPC’s board of directors in care of Mr. Bryce and issued a press release announcing the Validus amalgamation offer. The letter reads as follows:

 

March 31, 2009

 

The Board of Directors of IPC Holdings, Ltd.
c/o James P. Bryce, President and Chief Executive Officer
American International Bldg.
29 Richmond Road
Pembroke, HM 08
Bermuda

 

 

Dear Sirs:

 

On behalf of Validus, I am writing to submit a binding offer¹ pursuant to which Validus and IPC would amalgamate in a share-for-share exchange valuing IPC shares at an 18.0% premium to yesterday’s closing market price. We believe that an amalgamation of Validus and IPC would represent a compelling combination and excellent strategic fit and create superior value for our respective shareholders.

 

 

¹ Throughout this letter we refer to our “binding offer” because, as of the date of this letter, we had indicated to IPC that our offer could not be withdrawn prior to April 15, 2009. As of the date of this prospectus/offer to exchange, we have not withdrawn our offer, but have reserved the right to do so.

We unquestionably would have preferred to work cooperatively with you to complete a negotiated transaction. However, it was necessary to communicate our binding offer to you by letter because of the provisions of the Agreement and Plan of Amalgamation between IPC and Max Capital Group Ltd. (“Max”), dated as of March 1, 2009, as amended on March 5, 2009 (the “Max Plan of Amalgamation”). We have reviewed the Max Plan of Amalgamation and see that it contemplates your receipt of acquisition proposals. Given the importance of our binding offer to our respective shareholders, we have decided to make this letter public.

 

Our binding offer involves a share-for-share exchange valuing IPC shares at an 18.0% premium to yesterday’s closing market price. Consistent with that, we are prepared to amalgamate with IPC at a fixed exchange ratio of 1.2037 Validus shares per IPC share.

 

Our board of directors has unanimously approved the submission of our binding offer and delivery of the enclosed signed amalgamation agreement, so that, upon termination of the Max Plan of Amalgamation, you will be able to sign the enclosed agreement with the certainty of an agreed transaction. Our offer is structured as a tax-free share-for-share transaction and does not require any external financing. It is not conditioned on due diligence. The only conditions to our offer are those contained in the enclosed executed amalgamation agreement.

 

Our binding offer is clearly superior to the Max transaction for your shareholders and is a Superior Proposal as defined in section 5.5(f) of the Max Plan of Amalgamation for the reasons set forth below.

 

Superior Current Value.  Our proposed transaction will provide superior current value for your shareholders. Our fixed exchange ratio of 1.2037 represents a value of $29.98 per IPC share, which is a premium of 18.0% to the closing price of IPC’s common shares on March 30, 2009.

 

Superior Trading Characteristics.  Validus’ common shares have superior trading characteristics to those of Max as noted in the table below.