Montpelier's third-quarter earnings per share outperformed the
Zacks Consensus Estimate as well as the year-ago figure. The
quarter experienced solid underwriting results. All the segments
delivered strong profits. The quarter also experienced improvement
in investment income. However, premiums written declined year over
year. Montpelier Re continued its trend of outperforming
expectations despite a competitive market, riding on the strength
of underwriting performances. Montpelier remains well positioned
due to its increased exposure in the property catastrophe lines of
business, focus on underwriting operations, augmenting capital
flexibility, and strengthening its competitive position. Moreover,
the company remains focused on enhancing shareholder value.
Montpelier is poised to benefit from tax exemptions in Bermuda. It
also scores strongly with credit rating agencies. We thus retain
our Outperform rating on the stock.
Montpelier Re Holdings Ltd. (MRH) was formed in 2001 by White
Mountains Insurance Group Ltd. and Benfield Holdings Ltd., to take
advantage of the enhanced insurance demand, following the Sep 11
terrorist attack. Headquartered in Pembroke, Bermuda, Montpelier,
through its subsidiaries in the U.S., U.K. and Switzerland,
provides customized and innovative reinsurance and insurance
solutions to the global market. The company went public in Oct
2002. Montpelier started with $1.0 billion in capital. White
Mountains, a property and casualty insurance and reinsurance
company, contributed $200 million, Benfield invested $25 million,
other private equity firms kicked in $625 million, and debt issued
totaled $150 million. Benfield, which merged with Aon Re Global to
form Aon Benfield in Dec 2008, is a premier reinsurance
intermediary and capital advisor.
The company operates through three reportable segments -
Montpelier Bermuda, Montpelier Syndicate 5151, and Montpelier U.S.
Insurance Company (MUSIC).
Montpelier Re (accounted for 61.8% of net premium written in
2012) focuses on writing large, short-tail U.S. and international
catastrophe treaty reinsurance, on both an excess-of-loss and
proportional basis. It specializes in insurance and facultative
reinsurance business as well as specialty lines such as aviation,
personal accident catastrophe, workers' compensation and political
violence/terrorism. Its insurance and reinsurance products include
Property Treaty, Specialty Casualty & Other Classes and
Property Direct and Facultative. Prior to 2007, Montpelier Re was
the company's only operating platform and it continues to be its
primary operating platform.
Syndicate 5151 (37.4%) underwrites a book of property insurance
and reinsurance, engineering, marine hull, cargo and specie and a
limited amount of specialty casualty business with a view of
capturing business that would not normally find its way to Bermuda
underwriters. Syndicate 5151 primarily focuses on non-catastrophe
exposures, while remaining within its core competency of
underwriting short-tailed accounts.
MUSIC (0.4%) - On Dec 31, 2011, Montpelier closed the MUSIC Sale
Selective Insurance Group for $54.9 million. However, Montpelier
retained, reinsured or otherwise indemnified Selective for all
business written by MUSIC, with an effective date on or prior to
Dec 31, 2011. Hence, this segment is not considered as
This segment used to write insurance risks that do not conform
to normal underwriting patterns for standard lines. Generally,
MUSIC targets smaller commercial property and casualty risks that
are not subject to extreme competitive pressures. Since its
inception, MUSIC has ceded 75% of its business to Montpelier
Blue Capital (0.4%), launched in 2012, is an asset management
platform offering a range of catastrophe reinsurance-linked
investment products to institutional and retail investors. Blue
Capital consists of the assets and operations of Blue Water Re Ltd.
("Blue Water Re"), Blue Water Master Fund Ltd. (the "Master Fund ),
Blue Capital Management Ltd. ("BCML ) and Blue Capital Insurance
Managers Ltd. ("BCIML").
As of Sep 30, 2013, the company had total assets of $3.98
billion, down 1.7% year over year and shareholder equity of $1.59
billion, down 4.8% year over year. Debt balance was $399.1 million,
up 21.7% year over year.
Prior to 2007, Montpelier operated from Bermuda. During 2007, it
expanded its underwriting platform to include operations located in
the U.S., U.K. and Switzerland.
Montpelier Re Holdings Ltd. (MRH): Read the Full
MONTPELIER RE (MRH): Free Stock Analysis Report
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