Montpelier Re Holdings Ltd. (MRH) reported first quarter 2012 operating income of $1.23 per share, breezed past the Zacks Consensus of 65 cents and thus, reversed the loss of $1.90 incurred in the prior-year quarter. Operating income of $75.7 million, compared favorably with the loss of $118.9 million in first quarter 2011.
Including net realized investment gains of $28.2 million, net unrealized investment gains of $4.2 million, net gains from investment-related derivative instruments of $1.7 million, net foreign exchange losses of $2.6 million and net losses from foreign exchange-related derivative instruments of $0.1 million, the company reported a net income of $107.1 million or $1.74 per share, compared with the loss of $104.3 million or $1.67 per share in the first quarter of 2011.
Operational Update
Net insurance and reinsurance premiums earned declined 3.4% year over year to $160.5 million in the quarter.
Montpelier booked underwriting profit of $66.0 million in the quarter, reversing the loss of $131 million in the year-ago quarter.
Net investment income in the quarter came in at $17.6 million, inching up from $17.5 million in the year ago-quarter.
The loss ratio in the quarter was 27.4% compared with 149.5% in the year-ago quarter. Reported quarter loss ratio includes $29 million of favorable prior-year loss reserve movements.
The combined ratio in the quarter was 58.9%, a huge improvement from 178.8% reported in the year-ago quarter.
Financial Update
Montpelier exited the quarter with cash and cash equivalents of $521.8 million, up 11% from 2011-end.
At quarter end, the debt level slightly increased to $327.9 million from $327.8 million at end 2011.
Book value per share as of March 31, 2012, was $24.30, 7.5% higher than $22.71 as of December 31, 2011.
Montpelier spent $37 million to buyback 1.95 million shares in the first quarter of 2012. To date, in the second quarter, the company already spent $20 million to repurchase 1.03 million shares.
Our Take
We believe that vending MUSIC, acquisition of a property catastrophe reinsurance portfolio, expansion of capital partnership relationships and acquisition of renewal rights of Torus will help the company to remain focused on underwriting operations, augment capital flexibility, and strengthen its competitive position going forward.
We maintain a Neutral recommendation on Montpelier. The quantitative Zacks #2 Rank (short-term Buy rating) for the company indicates a slight boost on the stock over the near term.
Headquartered in Pembroke, Bermuda, Montpelier, through its subsidiaries in the U.S., the UK and Switzerland, provides customized and innovative reinsurance and insurance solutions to the global market. RenaissanceRe Holdings Ltd. (RNR), a close competitor of Montpelier, is scheduled to release its first quarter results on May 2 after the bell.
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RENAISSANCERE (RNR): Free Stock Analysis Report
