On April 01, 2014, we issued an updated research report on Montpelier Re Holdings Ltd. (MRH). The company reported strong earnings results in the last quarter.
This Bermuda-based property and casualty insurer delivered robust fourth-quarter 2013 earnings, which outpaced the Zacks Consensus Estimate by a whopping 87% and also surged from the year-ago quarter figure. In-fact, Montpelier Re has delivered positive earnings surprises in each of the last four quarters, with an average beat of nearly 53.2%.
Montpelier Re has expanded its underwriting reach beyond Bermuda and now operates in the U.S. and the U.K. The company benefits from tax exemptions in Bermuda as no income taxes are levied there. In addition, the Bermuda Ministry of Finance has assured the exemption of Bermuda-imposed income, withholding and capital gains taxes until 2035 on all Bermuda-based subsidiaries.
Gross insurance and reinsurance premiums written continue to exhibit an increasing trend. Favorable performances at Montpelier Bermuda and Montpelier at Lloyd’s continue to drive the upside. Although, the premiums written witnessed little decline in 2013, we believe Montpelier Re will bounce back to growth trajectory riding on the strength of its product and geographic diversification, underwriting disciplines and better pricing.
In an effort to increase focus on its short tail reinsurance underwriting, Montpelier Re has divested Montpelier U.S. Insurance Company (MUSIC). In addition, the divestiture will help the company deploy capital for its Bermuda and London platforms and is expected to be accretive to book value growth over the long term.
To enhance shareholder value, the company engages in share buybacks as well as increasing dividends. Montpelier Re has grown its dividend at a 5-year compound annual growth rate (CAGR) of 11% and also made substantial share buybacks in 2013. Moreover, Monpelier Re scores strongly with the credit rating agencies.
Earnings Estimates at Monpelier Re are also trending high. The Zacks Consensus Estimate for 2014 went up 1.3% to $3.05 per share in the past one-month time frame.
Zacks Rank
Montpelier Re presently carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the property and casualty insurance industry are Alleghany Corp. (Y), AmTust Financial Services, Inc. (AFSI) and ACE Limited (ACE). All these stocks sport a Zacks Rank #1 (Strong Buy).
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