Montpelier Estimates Cat Loss

Montpelier Re Holdings Ltd. (MRH - Analyst Report) guided second quarter catastrophe losses from severe flood, hail, tornado and wind events in the United States to $35 million, pre-tax and net of reinsurance recoveries and reinstatement premiums.

However, Montpelier dos not anticipate any losses from the New Zealand earthquake that occurred in June.

Montpelier suffered largely due to huge catastrophe losses coupled with significant increase in expenses as well as lower investment income in the first quarter, inducing it to report an operating loss of $1.90 per share.

In the first quarter, the company incurred catastrophe losses, net of reinsurance and reinstatement premiums of $200 million in the quarter, resulting from the Tohoku earthquake in Japan ($130 million), New Zealand earthquake ($65 million) and Australian Floods ($5 million).

Underwriting loss in first quarter 2011 totaled $131.0 million, wider from the year-ago quarterly loss of $37.2 million. Combined ratio in the quarter was 178.8%, a substantial deterioration from 123.5% in the year-ago quarter.

The Zacks Consensus Estimate for second-quarter 2011 is 72 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, loss of 4 cents per share and profit of $2.38 per share.

We expect Montpelier to continue to benefit from its transition from a Bermuda “monoline” property catastrophe reinsurer to a diversified global reinsurer, positive ratings from the credit rating agency as well as share buybacks.

We maintain our long-term Neutral recommendation on Montpelier. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Pembroke, Bermuda, Montpelier, through its subsidiaries in the U.S., the U.K. and Switzerland, provides customized and innovative reinsurance and insurance solutions to the global market. It competes with RenaissanceRe Holdings Ltd. (RNR - Analyst Report), Flagstone Reinsurance Holdings SA (FSR - Snapshot Report) and Validus Holdings Ltd. (VR - Snapshot Report).

Read the full analyst report on RNR

Read the full analyst report on MRH

Read the full analyst report on VR

Read the full analyst report on FSR