Validus Holdings Ltd’s third-quarter net income tumbled by three-quarters as the company was hit by more than $60 million in aviation, war and energy claims.

The Bermuda-based insurer and reinsurer reported net income of $39.7 million for the July through September period, compared to $183.4 million for last year’s third quarter.

Operating earnings of $77.3 million, or 82 cents per share, fell short of the $1.15 per share forecast by analysts tracked by Yahoo Finance.

Ed Noonan, chairman and chief executive officer of Validus, conceded that results could be “lumpy” in the risk business when pursuing higher returns over the long term.

“Validus’ results for the quarter were impacted by $61.4 million of losses concentrated in the classes of aviation, war and energy,” Mr Noonan said.

“Despite these losses, the company still generated $92.1 million in underwriting income, $77.3 million in net operating income and an 8.3 percent annualised operating return on average equity.

“Validus takes on volatile business as we get paid more for assuming the risk. By definition this means that our results will sometimes be lumpy, but I’d rather have a lumpy high return on equity than a lower consistent one.

“Our thoughtful underwriting of these classes of business is what has allowed Validus to create strong growth in book value since the company’s formation.”

Combined ratio — the percentage of premium dollars paid out on claims and expenses — for the third quarter was 81.4 percent which included $55.6 million of favourable loss reserve development on prior accident years, benefiting the loss ratio by 11.2 percentage points.

This compared to a combined ratio for the three months ended September 30, 2013 of 68.6 percent which included $65.1 million of favourable loss reserve development.

The company wrote slightly more business, as gross premiums written for the quarter were $359 million compared to $356.8 million for the three months ended September 30, 2013.

Net investment income for the quarter was $25.3 million compared to $20 million for the three months ended September 30, 2013, an increase of $5.3 million, or 26.2 percent.

Net realised gains on investments for quarter were $4.6 million compared to net realised losses of $6.3 million for the same quarter in 2013.