We are upgrading
Montpelier Re Holdings Ltd.
(
MRH
) by a notch to Neutral from Underperform on the back of better
performance in the fourth quarter.
In spite of Montpelier's operating loss being narrower than the
Zacks Consensus loss, the quarter suffered largely due to
catastrophe losses, resulting from the Thailand floods.
Nevertheless, favorable prior-year loss reserve movements were a
partial offset.
In an effort to increase focus on its short tail reinsurance
underwriting, Montpelier divested Montpelier U.S. Insurance Company
("MUSIC"). Also, the divestiture will help the company deploy
capital for its Bermuda and London platforms and is expected to be
accretive to book value growth over the long term. However,
Montpelier retained, reinsured or otherwise indemnified Selective
for all business written by MUSIC with an effective date on or
prior to December 31, 2011.
Also, Montpelier remains focused on enhancing its shareholders'
value through dividend hike, which is supported by its strong
balance sheet and ability to generate healthy cash flow. The
company's annualized dividend yield of 2.21% is higher than that of
its nearest peer Flagstone Reinsurance Holdings SA with the
latter's annualized dividend yield being 2.19%.
On the flip side, Montpelier has substantial exposure to losses
resulting from natural and man-made disasters and other
catastrophic events. During fiscal 2011, Montpelier incurred $409.0
million in net losses stemming from catastrophes, including the
earthquakes in New Zealand and Japan, and the Thailand floods. The
net loss increased more than three-fold year over year. The company
has also been experiencing vulnerability in its commercial property
book.
Also, Montpelier has been experiencing a weakness in its
commercial property book.
Over the last 30 days, only one out of the five firms covering
the stock revised the estimate upward for the first quarter and
fiscal 2012. The Zacks Consensus Estimate for first quarter 2012 is
64 cents per share and $2.19 for fiscal 2011.
The quantitative Zacks #2 Rank (short-term Buy rating) for the
company indicates slight upward pressure on the stock over the near
term.
Headquartered in Pembroke, Bermuda, Montpelier, through its
subsidiaries in the U.S., the U.K. and Switzerland, provides
customized and innovative reinsurance and insurance solutions to
the global market. The company competes with
RenaissanceRe Holdings Ltd.
(
RNR
),
Flagstone Reinsurance Holdings SA
(
FSR
) and
Validus Holdings Ltd.
(
VR
).
FLAGSTONE REINS (
FSR
): Free Stock Analysis Report
MONTPELIER RE (
MRH
): Free Stock Analysis Report
RENAISSANCERE (
RNR
): Free Stock Analysis Report
VALIDUS HOLDING (
VR
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research