Montpelier Re Holdings Ltd. (MRH)

MRH 
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Montpelier Re Holdings Ltd. (MRH)

Q1 2010 Earnings Conference Call

April 28, 2010 8:00 AM ET

Executives

Jonathan Kim – SVP, General Counsel and Secretary

Chris Harris – President and CEO

David Sinnott – EVP and Chief Underwriting Officer

Mike Paquette – EVP and CFO

Analysts

Jay Gelb – Barclays Capital

Keith Alexander – JP Morgan

Amit Kumar – McQuarrie

Dan Johnson – Citadel Investment Group

Dean Evans – KBW

Ian Gutterman – Adage Capital

John Deysher – Pinnacle

Keith Alexander – JPMorgan

Presentation

Operator

Greetings ladies and gentlemen, and welcome to the Montpelier Group’s First Quarter 2010 conference Earnings Conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded It is now my pleasure to introduce your host, Mr. Jonathan Kim, General Counsel and Secretary of Montpelier Re. Thank you, Mr. Kim, you may begin your presentation sir.

Jonathan Kim

Thank you and good morning. Welcome to Montpelier Re's first quarter 2010 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 for one month.

Our speakers today are our Christopher Harris, President and CEO; David Sinnott, Chief Underwriting Officer; and Mike Paquette, Chief Financial Officer. Also with us are Jason Pratt, Chief Investment Officer and Bill Pollett, Treasurer. Chris and David with 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.

Please note that during our discussions 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. Chris?

Chris Harris

Good morning, ladies and gentlemen. In a quarter marked by high levels of catastrophe activity, we produced net income of $10 million and growth in book value of 1.5%. Property catastrophe reinsurance is a core expertise for Montpelier and we expect earnings volatility in a quarter such as this. However the positive quarterly result highlights the balance of our global catastrophe portfolio and the growing importance of our other segment.

Contributions from the other specialty and individual risk segments along with solid investment results dampen the impact of the Chile loss and led to an overall profit for the quarter. Our Chilean net loss of $94 million was within our previously estimated range. The loss is concentrated with a small number of cedants within our direct, excessive loss property catastrophe portfolio. These Cat excel treaties constitute 80% plus of our expected loss.

We also anticipate some loss from our cold spot retro portfolio, by cold spot I am referring to retro participation which protects regions outside of the US, Europe and Japan. We do not participate on any Chilean proportional treaties. The only other loss item of note in the quarter was $7 million individual risk loss unrelated to Chile. Excluding the impact of reinstatements we grew net written premium by 5% for the quarter.

We continued to find good opportunities to deploy catastrophe capacity with preferred clients at attractive terms. US wins remains our peak PML risk and we maintained essentially a flat PML versus the prior year. Outside of property catastrophe, growth was driven primarily by the individual risk segments. In particular, direct and facultative property, Lloyd's marine and MUSIC E&S all grew off relatively modest basis.

On the capital management front, we started 2010 with capital at the high end of what we required to support our underwriting plans for the year and we indicated that we considered share repurchases a compelling option. After repurchasing a $171 million or 10% of year end outstanding shares, during the quarter at a discounts of fully converted book value per share, our balance sheet remains strong on all key measures and our capital is near to our target level as we prepare to enter the 2010 US hurricane season.

With that I will turn it over to David, to discuss the underwriting outlook.   

David Sinnott

Thank you Chris and good morning ladies and gentlemen. As Chris noted in his remarks, the first quarter of 2010 was marked by wide spread activity from natural catastrophes. Although the Chilean earthquake loss is significant from Montpelier Re. It is in line with our expectation for events for this scale and emanates from a relatively small and predictable area of the portfolio. Being largely an earnings event, we do not expect this loss to alter trading conditions for the better, but rather see the current rates softening persisting for the balance of the year.  

Still we remain broadly encouraged by existing price levels in most business lines and pleased with the progress in our new initiatives. Briefly recapping business production for the quarter, net premiums written were aided by new business generation in the specialty treaty in individual risk units. The growth in the later arena being driven primarily by the marine team at Syndicate 5151 and MUSIC. This growth more than offset the negative pricing pressure we continued to experience in all lines.  

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