Yet again, Montpelier Re Holdings Ltd. (MRH) has delivered a healthy positive surprise, with its first-quarter 2014 earnings surpassing the Zacks Consensus Estimate by 48%. Operating earnings of $1.48 per share also improved 25% year over year.
The quarter experienced solid underwriting results that contributed to the results. Lower share count attributable to continued buybacks also boosted the bottom line.
Including net realized investment losses of $0.1 million, net unrealized investment gains of $22.8 million, net losses from investment-related derivative instruments of $0.5 million, net foreign currency losses of $1.8 million, net losses from foreign exchange-related derivative instruments of $3.7 million, Montpelier Re reported net income of $1.84 per share, up 11% year over year.
Quarterly Operational Update
Montpelier Re’s net premiums written improved 5% year over year on the back of higher premiums written in Montpelier at Lloyd’s and Collateralized Reinsurance segments.
Net investment income came in at $12.9 million, down 21.3% year over year.
Underwriting income of $77.8 million in the quarter was up 29% over the prior-year period.
Loss ratio was 17.5% in the first quarter, improving significantly from 31.7%. Combined ratio also improved remarkably by 1200 basis points to 50.4%.
Financial Update
Montpelier Re exited the quarter with cash and investments of $3.63 million, up 12.4% 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 March 31, 2014 came in at $31.01, up 12.8% year over year.
Share Repurchase Update
Montpelier Re spent $70.3 million to buy back 2.5 million common shares in the first quarter. Following the end of the reported quarter, to date, the company has already spent nearly $17 million to repurchase 0.571 million shares.
Dividend Update
On April 15, 2014, Montpelier Re paid 12.50 cents per share in quarterly dividend to the shareholders of record as of March 31, 2014.
Our Take
Montpelier Re has consistently maintained its trend of outperforming expectations despite a competitive market, riding on the strength of underwriting performances. This property and casualty insurer delivered its tenth straight quarter of positive earnings surprise.
Montpelier Re 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 in the future.
Moreover, Montpelier Re enjoys the benefit of tax exemptions in Bermuda.
The stock currently carries a Zacks Rank #1 (Strong Buy).
Performance of Other Property and Casualty Insurers
RLI Corporation (RLI) posted first-quarter 2014 operating earnings of 57 cents per share, exceeding the Zacks Consensus Estimate by 5.6% and the year-ago quarter’s earnings by 9.6%.
The Travelers Companies Inc.’s (TRV) first-quarter net income of $2.95 per share outperformed the Zacks Consensus Estimate by 38% and improved 28% year over year.
W.R. Berkley Corp. (WRB) reported first-quarter 2014 core operating earnings of $1.00 per share, handily beating the Zacks Consensus Estimate of 79 cents. Earnings also surged 35.1% year over year.
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