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Montpelier Re Holdings (MRH)

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We are downgrading our recommendation on Montpelier Re Holdings (MRH) to Underperform given its exposure to catastrophe losses coupled with the current pricing environment in the primary insurance market and a sluggish economy that is expected to restrict top-line growth.

Montpelier is also experiencing weakness in its commercial property book. Its ability to sustain the level of price improvements seen earlier in 2009 is becoming more challenging as a result of the sluggish economic conditions. Looking forward, Montpelier expects continued lower net written attributable to the lower percentage of property CAT premium renewing in the forthcoming quarters and timing differences associated with ceded reinsurance premiums.

The quantitative Zacks Rank for Montpelier is currently a 5 (Strong Sell). Our six-month target price is $16.00.

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