We are upgrading
Montpelier Re Holdings Ltd.
) to Outperform from Neutral on the back of solid first quarter
Operating earnings in the first quarter breezed past the Zacks
Consensus and also reversed the year-ago loss. A substantial
decline in loss and loss adjustment expenses boosted the
profitability in the quarter.
In order to return more value to its shareholders, the company's
Board approved a dividend hike of 5%. Its dividend yield is
presently 2.04%. The company also buys back shares to enhance
In the first quarter, the company spent $37 million to buyback
1.95 million shares with 1.03 million shares already repurchased
for $20 million in the second quarter. Also, the company is left
with $107.7 million in its share buyback authorization as of March
Further, the company benefits from tax exemptions in Bermuda as
no income taxes are levied there. Also, Bermuda Minister of Finance
has assured exemption of Bermuda-imposed income, withholdings and
capital gains and taxes until 2035 on all Bermuda-based
Besides, the company scores strongly with the credit rating
On the flip side, Montpelier has substantial exposure to losses
resulting from natural and man-made disasters and other
catastrophic events. Many of its insurance and reinsurance policies
cover unpredictable natural and other disasters such as hurricanes,
windstorms, earthquakes, floods, fires, explosions and
Nevertheless, the entire industry benefited from lower cat loss
in the first quarter. However, exposure to cat activities will
always remain a concern as natural disasters can affect the results
Montpelieris experiencing a weakness in its commercial property
book. Its ability to sustain the level of price improvement as seen
earlier in 2009 is increasingly becoming challenging owing to the
stressed economic conditions.
The Zacks Consensus Estimate for second quarter 2012 and full
year 2012 are 65 cents and $2.96 per share, respectively. The
quantitative Zacks #2 Rank (short term Buy rating) for the company
indicates slight boost on the stock over the near term.
Flagstone Reinsurance Holdings SA
RenaissanceRe Holdings Ltd
Validus Holdings, Ltd.
FLAGSTONE REINS (FSR): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
VALIDUS HOLDING (VR): Free Stock Analysis
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