Montpelier Q3 Earnings Beat, Down Y/Y on Less Underwriting

Zacks

Montpelier Re Holdings Ltd. (MRH) reported operating earnings of 86 cents per share in the third quarter, beating the Zacks Consensus Estimate by a couple of cents. However, operating earnings declined 38% year over year due to lower underwriting profit.

The quarter, nonetheless, witnessed solid contribution from Lloyd’s and Collateralized Re segments.

Including net realized investment gains of $19.1 million, net unrealized investment losses of $36.7 million, net losses from investment-related derivative instruments of $3.9 million, net foreign currency gains of $89.9 million and net gains from foreign exchange-related derivative instruments of $6.5 million, Montpelier Re reported net income of 75 cents per share, down 26% year over year.

Quarterly Operational Update

Montpelier Re’s net premiums improved 13% year over year as higher premiums at Lloyd’s and Collateralized Reinsurance segments were partially offset by lower premiums at Montpelier Bermuda.

Net investment income came in at $12 million, down 29% year over year.

Underwriting income of $42.9 million was down 39% from the prior-year period.

Loss ratio was 38%, up 2,040 basis points (bps) from 17.5% in the year-ago quarter. Combined ratio deteriorated 2,010 bps year over year to 74%.

Financial Update

Montpelier Re exited the quarter with cash and investments of $3.3 billion, up 1.6% from the end of 2013.

At the end of the quarter, debt was $403.2 million, up 1% from the 2013-end level.

Book value per share as of Sep 30, 2014 came in at $32.27, up 1.7% year over year.

Share Repurchase Update

Montpelier Re spent $70.3 million to buy back 1.8 million common shares in the third quarter. Following the quarter end, the company has already repurchased 0.9 million shares to date.

Zacks Rank

Montpelier Re currently carries a Zacks Rank #2 (Buy).

Performance by Other P&C Insurers

The bottom line at RLI Corporation (RLI), The Travelers Companies Inc. (TRV) and ACE Limited (ACE) has outperformed each of their Zacks Consensus Estimate in the third quarter.

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