We are retaining our Neutral recommendation on
Montpelier Re Holdings Ltd.
), taking into account the improved pricing conditions and
additional capital deployment in property catastrophe lines.
We believe the company is well positioned to deliver solid
numbers, given its heightened exposure in the property catastrophe
lines of business coupled with its increased focus on underwriting
operations, capital flexibility, and competitive position.
On the positive side, the company has the advantage of cashing
in on all its activities in the Bermuda region, as no income taxes
are levied there. Montpelier also scores well with the rating
agencies. Recently, A.M. Best Co. raised the issuer credit rating
("ICR") on the company to 'bbb' from 'bbb-'. Also, Fitch Ratings
reiterated its Insurer Financial Strength ("IFS") at 'A-' on the
company's main insurance operating subsidiary with a positive
Additionally, Montpelier is proactive in returning more value to
its shareholders. It recently paid a dividend of 10.5 cents per
share. The company also bears the same stance when it comes to
In the second quarter, the company spent $48 million to buyback
2.4 million shares. It had already spent $12 million to repurchase
approximately 0.6 million shares in the third quarter and is left
with $59.4 million under its authorization as of June 30, 2012.
However, these positives are neutralized by a few concerns, the
most prominent being the company's significant exposure to
catastrophic events which considerably hinder its earnings.
The company competes closely with
Berkshire Hathaway Inc.
RenaissanceRe Holdings Ltd.
). Montpelier currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating.
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
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