Montpelier Re Holdings Ltd. (MRH) reported fourth quarter earnings of $1.12 per share, well ahead of the Zacks Consensus Estimate of 70 cents. The company had earned 67 cents in the year-ago quarter.
The performance was driven by strong underwriting results and lower catastrophic activity. The company also experienced solid performances in its newer underwriting platforms — Syndicate 5151 and MUSIC — which helped offset lower premium earned in the Bermuda segment.
However, including realized and unrealized gains on investments and foreign exchange, Montpelier reported a net income of $104.7 million or $1.25 per share compared to a loss of $47.7 million or 57 cents in the year-ago quarter.
For full year 2009, the company reported a net income of $463.5 million or $5.36 per share compared to a loss of $145.5 million or $1.69 in 2008. Year-ago results were significantly impacted by losses from hurricanes Gustav and Ike.
During the quarter, Montpelier’s net premiums earned increased 15% from the prior-year period to $158.4 million. Property specialty and individual risk lines were stronger, which helped offset lower premiums earned in property catastrophe lines.
Underwriting income increased to $79.4 million from $49.3 million in the year-ago quarter, reflecting a decrease in loss and loss adjustment expenses. Combined ratio improved to 48.7% from 63.4% in the prior-year quarter.
Net investment income was $21.3 million, up 15% year-over-year. The company experienced a low-yield environment. Consolidated net investment return was 1.1% for the quarter compared to a negative return of 3.5% in the year-ago period. Realized and unrealized gains on investments, foreign exchange and the gain on early extinguishment of debt were $11 million for the quarter.
Capital position remains strong and Montpelier continues to buyback shares. Reported book value per share was up 6.9% sequentially and 32.6% year-over-year to $21.14.
During the fourth quarter, Montpelier repurchased 5.4 million shares at $17.24 each. For full year 2009, the company repurchased 6.6 million shares at an average price of $17.07 each. In January 2010, the company bought back another 1.4 million shares at $17.33 each.
Montpelier continues to benefit from its transition from a Bermuda “monoline” property catastrophe reinsurer to a diversified global reinsurer. Its strong financial position and claims paying ability are reflected in its ratings. The share buyback activity also inspires our confidence in the stock. However, we believe the stressed economic conditions will restrict significant top line growth in the near term.
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