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Montpelier Re Holdings Ltd. (MRH)
Q4 2008 Earnings Call Transcript
February 18, 2009 8:30 am ET
Jonathan B. Kim – Senior Vice President and General Counsel and Secretary
Christopher Lloyd Harris – President and Chief Executive Officer
David S. Sinnott – Executive Vice President and Chief Underwriting Officer
Michael S. Paquette – Executive Vice President and Chief Financial Officer
Matthew Heimermann – JPMorgan
Ian Gutterman – Adage Capital
Previous Statements by MRH
» Montpelier Re Holdings Ltd. Q1 2009 Earnings Call Transcript
» Montpelier Re Holdings Q3 2008 Earnings Call Transcript
» Montpelier Re Holdings Ltd. Q2 2008 Earnings Call Transcript
Thank you. Good morning and welcome to Montpelier Re's fourth quarter and full year 2008 earnings conference call and webcast. A press release setting out our results, together with a detailed financial supplement have been posted to the company's website at www.montpelierre.bm. This call is being webcast live and will be available for replay until March 18, 2009.
Our speakers today are our Chris Harris, President and CEO; David Sinnott, Chief Underwriting Officer; and Mike Paquette, Chief Financial Officer. Chris and David will give their commentary on the quarter, and then Mike will present an overview of the financial results. We will then be pleased to take your questions.
During our discussion this morning, we may make forward-looking statements. Any such statements are based on the company’s current plans, estimates, and expectations. Actual results could differ materially from those projected in any forward-looking statements as a result of certain risk factors disclosed previously and from time-to-time in Montpelier's filings with the U.S. Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.
I would now like to turn the proceedings over to Chris.
Christopher Lloyd Harris
Good morning, ladies and gentlemen. Montpelier just completed its eighth January renewal season. While our underwriting focus has not changed, our operating model has matured. We don’t plan to be all things to all clients.
Our property catastrophe treaty business, where we are a recognized market leader remains our core focus, but we continually work to identify and build complementary opportunistic businesses around that core.
Both our internal and external capital requirements are predominantly driven by peak zone catastrophe exposures. Therefore we have the capacity to write substantial other business outside these areas, but if and only if it meets our pricing target only profit diversified.
In keeping with our maturity, we have delivered a solid underwriting profit for the year, despite a high level of individual risk and natural catastrophe losses for the industry. Our net Ike loss fell within the expected range embedded in our pricing and risk management metrics for a storm of that size.
Mike will provide details on our investment performance, which was a disappointment particularly in the alternative portfolio, but I would like to remind listeners of the other investments, we have made over the last few years to strengthen our franchise.
Investments in underwriting talent, investments in technology to improve our risk selection and investments in New London and U.S. platforms, all of these investments are aimed at allowing us to find and convert more profitable business opportunity. Our extended platform is now operational and units outside of Bermuda produce 20% of the groups’ premium in 2008. We expect that percentage to more than double by 2010.
Some people questioned our decision to expand in the face of what at the time was a declining rate environment. However, we have maintained a patient underwriting strategy, rather than chasing immediate growth and we’ve recruited new talents to the organization, while sticking to our consistent risk management approach.
As a result, we now entered 2009 in a much stronger competitive position with twin tailwinds of improved conditions within our core property catastrophe lines and increased access to other diversifying business. We are very well positioned for 2009 and we expect rates to continue to firm through the year. We expect to deliver net premium growth and higher expected returns with a reduced single event risk profile in most key catastrophe zones.
Our existing capital base is adequate to execute our plan, but we have the flexibility to access $89 million of contingent capital, if underwriting conditions improve as we believe they will.
With that I will turn it over to David, for more details on the underwriting.
Thank you Chris, and good morning. Gross written premiums for the fourth quarter of 2008 came in at $73 million versus $76 million in the prior year, a decline of 5%. Gains in our property catastrophe and property specialty accounts were offset by a decline in the casualty portion of the other specialty business segment, the driver of which was premium adjustments to prior years on certain loss sensitive contracts.
Net premiums written for the full year were nearly flat at $541 million versus $549 million, a decline of 1%. The cumulative impact of price reductions was largely offset by new business generation and a lower amount of ceded reinsurance purchased in 2008 versus the prior year.
To recap the January 1 renewals, we observe positive pricing trends in the majority of our business segments. The premium weighted renewal price index across the whole portfolio in the month of January is 107, which ends a 22-month streak of composite price reductions. The RPI for Property CAT XL, our largest block of business to renew at year-end came in at 108 for January, which splits 110 and 105 between our U.S. and international treaty portfolios respectively.