Montpelier Re Holdings Ltd. (MRH) reported fourth quarter 2010 operating income of 81 cents per share, surpassing the Zacks Consensus Estimate of 74 cents. Results, however, came in 28% lower than $1.12 earned in the prior-year period. Operating income was $54 million, down 43% from $94.1 million in the year-ago quarter.
The outperformance may primarily be attributable to higher premiums.
Including net realized investment losses of $3.6 million, net unrealized investment losses of $13.1 million and net foreign exchange gains of $5 million, the company reported net income of $42.2 million or 63 cents, lower than $104.7 million or $1.25 per share.
For full year 2010, the company reported operating earnings of $2.30, beating the Zacks Consensus Estimate of $2.24 but was 27% lower than $3.13 earned in 2009. Operating earnings were $164 million, down 39% from 2009.
Including net realized investment gains of $25.7 million, net unrealized investment gains of $18.0 million and net foreign exchange gains of $4.3 million, the company reported net income of $212 million or $2.97 per share, lower than $463.5 million or $5.36 per share.
Operational Update
Underwriting income in fourth quarter 2010 totaled $42.1 million, down 47% year over year. Full year underwriting income grossed $112.3 million, down 48% from 2009.
Net investment income in the quarter came in 22% lower from the year-ago quarter. Full year net investment income was $74.1 million, down 9% year over year.
The loss ratio in fourth quarter was 38.6% compared with 11.4% in the year-ago quarter. Results include an 11-point increase in net losses from the New Zealand earthquake and benefited from 15 basis points of favorable prior-year loss reserve movements. Full year 2010 loss ratio was 48.3% compared with 24.2% in 2009.
Combined ratio in the quarter was 74.1%, a substantial deterioration from 48.7% in the year-ago quarter.
Financial Update
Montpelier ended 2010 with cash and cash equivalents of $232.3 million, up 15% from $202 million at 2009 end.
The debt level slightly declined to $327.7 million at 2010 end from $328.6 million at 2009 end.
Book value per share as of December 31, 2010 was $25.23, 17% higher than $21.61 as of December 31, 2009.
During the fourth quarter of 2010, Montpelier bought back 4.04 million shares at an average price of $18.95. In 2010, the company bought back 16 million shares at an average price of $18.22.
The company has already bought back another 2.2 million shares so far in 2011 at an average price of $20.10.
Peer Comparison
RenaissanceRe Holdings Ltd. (RNR), which competes with Montpelier, reported its fourth-quarter income from continuing operations of $3.47 per share, way ahead of the Zacks Consensus Estimate of $2.05.
The impressive results in the quarter were attributable to robust underwriting results, despite softening market conditions in many lines and a number of significant catastrophic events, besides the rise in expenses and decline in investment income. The fiscal 2010 operating earnings of the company were $9.32 per share, exceeding the Zacks Consensus Estimate of $8.05.
The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the stock over the near term.
MONTPELIER RE (MRH): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
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