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Montpelier Re Holdings Ltd. (MRH - Analyst Report) reported first-quarter 2013 operating income of $1.18 per share, better than the Zacks Consensus Estimate of 89 cents. However, earnings were 4.1% lower than $1.23 per share in the year-ago quarter.

Including net realized investment gains of $9.1 million, net unrealized investment losses of $9.8 million, net gains from investment-related derivative instruments of $6.8 million, net foreign exchange gains of $21.1 million and net losses from foreign exchange-related derivative instruments of $1.1 million, Montpelier reported net income of $92.1 million or $1.65 per share in the first quarter. It compared unfavorably with net income of $107.1 million or $1.74 per share in the prior-year quarter.

Quarterly Operational Update

Montpelier’s gross premiums written increased 0.6% year over year. Net insurance and reinsurance premiums earned inched down 0.5% year over year to $159.7 million.

Underwriting income declined 8.9% year over year to $60.1 million.

Net investment income of Montpelier came in at $16.4 million, down 6.8% from $17.6 million in the year-ago quarter.

The loss ratio was 32% in the reported quarter. Combined ratio deteriorated 350 basis points from the year-ago quarter to 62.4%.

Financial Update

Montpelier exited the first quarter of 2013 with cash and cash equivalents of $3.2 million, down 2.4% from the end of 2012.

At the end of the first quarter, total debt was $399.1 million, flat with the 2012 end level.

Book value per share as of Mar 31, 2013, came in at $27.49, up 13.1% year over year.

Share Repurchase and Dividend Update

Montpelier spent $37 million to buyback 1.494 million common shares in the first quarter. Following the end of the first quarter to date, the company has already spent $15 million to repurchase 0.6 million shares.

Performance of Other Property and Casualty Insurers

RLI Corporation (RLI - Analyst Report) reported first-quarter 2013 operating earnings of $1.04 per share. The result lagged the Zacks Consensus Estimate of $1.06 by 1.89% but surpassed the year-ago level of 96 cents by 8.3%. The year-over-year improvement came on the back of better underwriting results at Casualty and Surety.

Everest Re Group Ltd. (RE - Analyst Report) reported the first-quarter operating earnings of $5.88 per share, substantially beating the Zacks Consensus Estimate of $4.32 per share. Earnings were also up 31.3% year over year.

Aspen Insurance Holdings Limited’s (AHL - Snapshot Report) first-quarter 2013 operating earnings per share of $1.06 per share were a penny ahead of the Zacks Consensus Estimate and 20.5% above the year-ago quarter earnings of 88 cents a share.

Our Take

Montpelier is well positioned to deliver robust numbers going forward, given its increased exposure in the property catastrophe lines of business. In addition, focusing on underwriting operations, augmenting capital flexibility and strengthening its competitive position augur well going forward. It also expanded underwriting partnerships. Moreover, the company benefits from tax exemptions in Bermuda.

Montpelier currently carries a Zacks Rank #1 (Strong Buy).

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