Montpelier Re Holdings Ltd. (MRH) expects preliminary net loss to approximate $70 million, net of reinstatement premium, attributable to the earthquake in New Zealand in February 2011. The company also expects to incur a loss of $15 million from the January floods and Cyclone Yasi in Australia.
The company has forecast total insured market losses of roughly $12 billion resulting from the New Zealand earthquake.
During 2010, Montpelier incurred $135.9 million in net losses associated with earthquakes in Chile and New Zealand. The combined ratio in 2010 deteriorated substantially to 82% from 62.2% in 2009.
Montpelier reported fourth quarter 2010 operating income of 81 cents per share, surpassing the Zacks Consensus Estimate of 74 cents. The outperformance mainly resulted from higher premiums.
The Zacks Consensus Estimate for first-quarter 2011 is 65 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $2.51 per share and $2.45 per share.
We expect the current pricing environment in the primary insurance market and the stressed economy to restrict top-line growth. Additionally, there exists execution risk with the newer platforms and we expect investment yields to remain under pressure in the near term.
We maintain our long-term Underperform recommendation on Montpelier. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward 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. It competes with RenaissanceRe Holdings Ltd. (RNR).
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