Montpelier Misses Q2 Earnings on Weak Underwriting Results

Montpelier Re Holdings Ltd. (MRH) reported operating earnings of 76 cents per share in the second quarter, missing the Zacks Consensus Estimate by 22%. Operating earnings also declined 18% year over year.

The quarter experienced lower underwriting income largely due to the underperformance.

However, the quarter witnessed solid contribution from Lloyd’s and Collateralized Re segments, as well as benefit of prior-period development.

Including net realized investment losses of $5.5 million, net unrealized investment gains of $14.3 million, net losses from investment-related derivative instruments of $8.2 million, net foreign currency losses of $8.8 million, net losses from foreign exchange-related derivative instruments of $1.9 million, Montpelier Re reported net income of 78 cents per share, rebounding from the year-ago loss of 52 cents.

Quarterly Operational Update

Montpelier Re’s net premiums written was flat year over year as higher premiums at Lloyd’s and Collateralized Reinsurance segments were offset by lower premiums at Montpelier Bermuda.

Net investment income came in at $12 million, down 25.7% year over year.

Underwriting income of $37.8 million was down 12.3% over the prior-year period.

Loss ratio was 40.8% in the second quarter, up 710 basis points (bps) from 33.7% in the year-ago quarter. Combined ratio deteriorated 770 basis points year over year to 76.7%.

Financial Update

Montpelier Re exited the quarter with cash and investments of $3.4 billion, up 6.2% from the end of 2013.

At the end of the quarter, debt was $399.2 million, flat with the 2013-end level.

Book value per share as of Jun 30, 2014 came in at $31.74, up 2.8% year over year.

Share Repurchase Update

Montpelier Re spent $70.3 million to buy back 0.9 million common shares in the second quarter. Following the quarter end, the company has already repurchase 0.3 million shares to date.

Dividend Update

On Jul 15, Montpelier Re paid 12.50 cents per share in quarterly dividend to shareholders of record as of Jun 30.

Zacks Rank

Montpelier Re currently carries a Zacks Rank #3 (Hold).

Performance of Other Property and Casualty Insurers

While ACE Limited (ACE) outperformed the Zacks Consensus Estimate on solid underwriting performances coupled with improved investment results, RLI Corporation’s (RLI) earnings were in line. However, The Travelers Companies Inc. (TRV) missed the Zacks Consensus Estimate on higher-than-expected catastrophe losses.

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Read the Full Research Report on ACE
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