Montpelier Barely Misses

Montpelier Re Holdings Ltd. (MRH - Analyst Report) reported third-quarter earnings of 71 cents per share. Results were almost in line with the Zacks Consensus Estimate of 72 cents. The company had experienced a loss of 65 cents a share in the year-ago quarter. Quarterly results were driven by strong performances of its newer underwriting platforms – Syndicate 5151 and MUSIC –which helped offset lower premium writings in the Bermuda segment.
 
However, including realized and unrealized gains on investments and foreign exchange, net income came in at $148 million or $1.68 per share, significantly up from a net loss of $142.2 million or $1.69 a share a year ago. Year-ago results were significantly impacted by losses from the hurricanes Gustav and Ike.
 
Net written premiums increased 16% from the prior-year period to $106.3 million, driven by rate strengthening in property catastrophe reinsurance and increased opportunities in Lloyds’ and the U.S. operations.
 
Net investment income was $20.2 million, slightly down from $21.4 million. Realized and unrealized gains on investments and foreign exchange were $87 million for the quarter. The investment portfolio returned 4% in the quarter. The company benefited from strong returns in both its equity and fixed income portfolios.
 
Combined ratio was 66.3% for the quarter and was boosted by favorable releases of $19.4 million from prior years’ loss reserves. While there was an absence of any major natural catastrophe losses, the current accident quarter includes approximately $22 million of loss from various smaller catastrophic events, primarily in the US. Combined ratio in the prior-year period was 149.6%, which was attributable to the losses from hurricanes Gustav and Ike.
 
Capital position remains strong and Montpelier has resumed its share repurchase activity. Reported book value per share was up 9.2% sequentially to $19.78. Tangible book value per share also increased 9.2% from the prior quarter to $19.73. The company repurchased 1.2 million shares at an average price of $16.26 in September. Further, in October, the company bought back 1.5 million shares at $17.11 each.
 
Montpelier has expanded its underwriting reach beyond Bermuda. The company continues to benefit from its transition from a Bermuda “monoline” property catastrophe reinsurer to a diversified global reinsurer. Also, the resumption of the share repurchase activity bode well.