Montpelier Re Reports Second Quarter 2013 Financial Results

Montpelier Re Holdings Ltd. (NYSE: MRH), (“Montpelier” or the “Company”), a leading provider of short-tail reinsurance and other specialty lines, today reported its financial results for the quarter ended June 30, 2013.

Fully converted book value per common share was $27.03, a decrease of 1.3% from March 31, 2013 and an increase of 4.3% from December 31, 2012, after taking into account common share dividends declared during the period.

Operating income for the quarter was $0.93 per share ($50 million), representing a quarterly return on common equity of 3.4%. The net loss to the Company’s common shareholders was $0.52 per common share ($27 million). The net impact of realized and unrealized losses from investments and foreign exchange, which is included in the net loss, was $77 million for the quarter.

The loss ratio for the quarter was 34%, which includes $26 million of net losses from known catastrophe events in the quarter, offset by $48 million of favorable prior year loss reserve movements. The combined ratio was 69% for the quarter.

Net investment income was $17 million and the total return on the investment portfolio was -1.8% for the quarter, –1.1% year-to-date.

Christopher Harris, President and Chief Executive Officer, commented, “In a quarter marked by several industry catastrophe loss events and increasingly competitive market conditions, our insurance teams turned in another strong operating performance. Both our Bermuda and London platforms produced solid profitability and executed well in the important mid-year renewal cycle. We are well positioned to continue executing our focused underwriting and capital management strategy in the second half of 2013.”

During the second quarter of 2013, the Company repurchased a total of 3,033,773 shares at an average price of $25.35 per share ($77 million). During the third quarter of 2013 to date, the Company has repurchased an additional 285,452 shares, at an average price of $25.72 ($7 million).

As of June 30, 2013, the Company’s total shareholders’ equity was $1,670 million, and its total capital was $2,069 million.

Please refer to Montpelier’s June 30, 2013 Financial Supplement for more detailed financial information, which is posted on the Company’s website at www.montpelierre.bm.

Montpelier, through its operating subsidiaries, is a premier provider of global property and casualty reinsurance and insurance products. Additional information can be found in Montpelier's public filings with the Securities and Exchange Commission.

Earnings Conference Call:

The Company will conduct a conference call, including a question and answer period, on Friday, July 26, 2013 at 8:00 a.m. Eastern Time.

The presentation will be available via a live audio webcast accessible on the Company's website at www.montpelierre.bm or by dialing 1-888-317-6016 (US toll free), 1-412-317-6016 (international) or 1-855-669-9657 (Canada toll free). A telephone replay of the conference call will be available through August 8, 2013 by dialing 1-877-344-7529 (toll-free) or 1-412-317-0088 (international) and entering the passcode 10030451.

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the United States federal securities laws, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, that are not historical facts, including statements about our beliefs and expectations. These statements are based upon current plans, estimates and projections. Forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and various risk factors, many of which are outside the Company's control. See “ Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission, for specific important factors that could cause actual results to differ materially from those contained in forward- looking statements. In particular, statements using words such as “may,” “should,” “estimate,” “expect,” “anticipate,” “intend,” “believe,” “predict,” “potential,” or words of similar meaning generally involve forward-looking statements.

Important events and uncertainties that could cause our actual results, future dividends on, or repurchases of, our common shares or preferred shares to differ include, but are not limited to: market conditions affecting the prices of our common shares or preferred shares; the possibility of severe or unanticipated losses from natural or man-made catastrophes, including those that may result from changes in climate conditions, including, but not limited to, global temperatures and expected sea levels; the effectiveness of our loss limitation methods; our dependence on principal employees; our ability to effectively execute the business plans of the Company, its subsidiaries and any new ventures that it may enter into; the cyclical nature of the insurance and reinsurance business; the levels of new and renewal business achieved; opportunities to increase writings in our core property and specialty insurance and reinsurance lines of business and in specific areas of the casualty reinsurance market and our ability to capitalize on those opportunities; the sensitivity of our business to financial strength ratings established by independent rating agencies; the inherent uncertainty of our risk management process, which is subject to, among other things, industry loss estimates and estimates generated by modelling techniques; the accuracy of written premium estimates reported by cedants and brokers on pro-rata contracts and certain excess-of-loss contracts where a deposit or minimum premium is not specified in the contract; the inherent uncertainties of establishing reserves for loss and loss adjustment expenses, unanticipated adjustments to premium estimates; changes in the availability, cost or quality of reinsurance or retrocessional coverage; changes in general economic and financial market conditions; changes in and the impact of governmental legislation or regulation, including changes in tax laws in the jurisdictions where we conduct business; the amount and timing of reinsurance recoverables and reimbursements we actually receive from our reinsurers; the overall level of competition, and the related demand and supply dynamics in our markets relating to growing capital levels in our industry; declining demand due to increased retentions by cedants and other factors; the impact of terrorist activities on the economy; rating agency policies and practices; unexpected developments concerning the small number of insurance and reinsurance brokers upon whom we rely for a large portion of revenues; our dependence as a holding company upon dividends or distributions from our operating subsidiaries; and the impact of foreign currency and interest rate fluctuations.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.

MONTPELIER RE HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars, except share and per share amounts)
unaudited
                   
  June 30,   December 31,
      2013       2012
Assets
 
Fixed maturity investments, at fair value $ 2,506.2 $ 2,738.6
Equity securities, at fair value 116.1 40.9
Other investments 80.1 138.5
Cash, restricted cash and cash equivalents   554.3         401.4  
 
Total Investments and Cash 3,256.7 3,319.4
 
Reinsurance recoverable on unpaid losses 80.3 102.7
Reinsurance recoverable on paid losses 26.8 6.7
Insurance and reinsurance premiums receivable 341.3 222.9
Unearned reinsurance premiums ceded 48.9 22.2
Deferred insurance and reinsurance acquisition costs 60.2 48.4
Accrued investment income 14.7 15.2
Unsettled sales of investments 79.9 48.9
Other assets   26.9         23.7  
 
Total Assets   $ 3,935.7       $ 3,810.1  
Liabilities
 
Loss and loss adjustment expense reserves $ 1,003.7 $ 1,112.4
Debt 399.1 399.1
Unearned insurance and reinsurance premiums 413.9 270.1
Insurance and reinsurance balances payable 89.9 54.0
Liability for investment securities sold short 110.9 138.8
Unsettled purchases of investments 206.9 148.7
Accounts payable, accrued expenses and other liabilities   42.0         57.6  
 
Total Liabilities   2,266.4         2,180.7  
 
Shareholders’ Equity
 
Non-cumulative preferred shares 150.0 150.0
Common shares and additional paid-in capital 942.3 1,056.1
Common shares held in treasury, at cost (18.2 ) (23.1 )
Retained earnings 502.4 449.7
Accumulated other comprehensive loss   (6.5 )       (3.3 )
 
Total Shareholders’ Equity available to the Company 1,570.0 1,629.4
 
Non-controlling interest   99.3         -  
 
Total Shareholders’ Equity   1,669.3         1,629.4  
 
Total Liabilities and Shareholders’ Equity   $ 3,935.7       $ 3,810.1  
 
Common and common equivalent shares outstanding:
 
Common shares outstanding (000s) 51,020 sh 55,270 sh
Common and common equivalent shares outstanding (000s)     52,541         56,596  
 
MONTPELIER RE HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions of U.S. dollars, except per share amounts)
unaudited
                               
     

Three Months Ended
  Six Months Ended
June 30, June 30,
          2013     2012     2013     2012
   
Underwriting revenues
 
Gross insurance and reinsurance premiums written $ 242.7 $ 253.5 $ 503.9 $ 513.2
Ceded reinsurance premiums   (44.9 )     (42.7 )   (80.1 )     (82.4 )
Net insurance and reinsurance premiums written $ 197.8     $ 210.8   $ 423.8     $ 430.8  
 
Gross insurance and reinsurance premiums earned $ 171.0 $ 176.1 $ 351.6 $ 360.2
Earned reinsurance premiums ceded   (32.1 )     (29.7 )   (53.0 )     (53.3 )
Net insurance and reinsurance premiums earned 138.9 146.4 298.6 306.9
 
Underwriting expenses
 
Loss and loss adjustment expenses - current year (94.5 ) (73.9 ) (163.5 ) (146.6 )
Loss and loss adjustment expenses - prior year 47.7 16.7 66.1 45.4
Insurance and reinsurance acquisition costs (22.6 ) (23.6 ) (44.7 ) (48.4 )
Operating expenses (19.5 ) (20.8 ) (39.9 ) (40.9 )
Incentive compensation expenses (6.9 ) (10.2 ) (13.4 ) (15.8 )
                   
Underwriting income   43.1       34.6     103.2       100.6  
 
Net investment income 16.7 17.2 33.1 34.8
Other revenue - 0.2 - 0.7
Net realized and unrealized investment gains (losses) (61.2 ) 13.3 (61.9 ) 45.7
Net foreign exchange gains (losses) (5.3 ) 2.9 15.8 0.3
Net income (expense) from derivative instruments (12.2 ) 2.1 (7.6 ) 3.6
Interest and other financing expenses (4.7 ) (4.8 ) (9.4 ) (9.8 )
Income tax provision 0.4 - 0.2 -
                   
Net income (loss) (23.2 ) 65.5 73.4 175.9
 
Net income attributable to non-controlling interest (0.7 ) - (1.9 ) -
                   
Net income (loss) available to the Company (23.9 ) 65.5 71.5 175.9
 
Dividends declared on non-cumulative preferred shares (3.4 ) (3.4 ) (6.7 ) (6.7 )
                     
Net income (loss) available to the Company's common shareholders   $ (27.3 )   $ 62.1     $ 64.8     $ 169.2  
 
Net income (loss) $ (23.2 ) $ 65.5 $ 73.4 $ 175.9
 
Net change in foreign currency translation   0.3       (1.6 )     (3.2 )     (1.2 )
 
Comprehensive income (loss) (22.9 ) 63.9 70.2 174.7
 
Net income attributable to non-controlling interest (0.7 ) - (1.9 ) -
                     
Comprehensive income (loss) available to the Company   $ (23.6 )   $ 63.9     $ 68.3     $ 174.7  
 
Basic and diluted earnings (loss) per common share   $ (0.52 )   $ 1.06     $ 1.19     $ 2.82  
 
Insurance ratios:
 
Loss and loss adjustment expense ratio:
Current year 68.0 % 50.6 % 54.7 % 47.7 %
Prior year   -34.3 %     -11.4 %   -22.1 %     -14.8 %
Loss and loss adjustment expense ratio 33.7 % 39.2 % 32.6 % 32.9 %
Acquisition costs ratio 16.3 % 16.1 % 15.0 % 15.8 %
Operating expense ratio 14.0 % 14.2 % 13.4 % 13.4 %
Incentive compensation expense ratio   5.0 %     7.0 %     4.5 %     5.1 %
Combined ratio     69.0 %     76.5 %     65.5 %     67.2 %
 
MONTPELIER RE HOLDINGS LTD.
RECONCILIATION OF NET INCOME (LOSS) AVAILABLE TO THE COMPANY'S COMMON SHAREHOLDERS
TO OPERATING INCOME AVAILABLE TO THE COMPANY'S COMMON SHAREHOLDERS 1
(in millions of U.S. dollars)
unaudited
                               
Three Months Ended Six Months Ended
June 30, June 30,
        2013   2012   2013   2012
 
Net income (loss) available to the Company's common shareholders $ (27.3 ) $ 62.1 $ 64.8 $ 169.2
 
Add (subtract):
Net realized investment gains (6.9 ) (7.4 ) (16.0 ) (35.6 )
Net unrealized investment losses (gains) 68.1 (5.9 ) 77.9 (10.1 )
Net losses (gains) from investment-related derivative instruments 2 7.9 (0.8 ) 1.1 (2.5 )
Net foreign exchange losses (gains) 5.3 (2.9 ) (15.8 ) (0.3 )
Net losses (gains) from foreign exchange-related derivative instruments 2 2.5 (1.5 ) 3.6 (1.4 )
                   
Operating income available to the Company's common shareholders $ 49.6     $ 43.6     $ 115.6     $ 119.3  
 
Operating income per common share   $ 0.93     $ 0.74     $ 2.12     $ 1.99  
 
MONTPELIER RE HOLDINGS LTD.
BOOK VALUE AND FULLY CONVERTED BOOK VALUE PER COMMON SHARE 1
unaudited
                             
June 30, March 31, Dec. 31, June 30,
          2013     2013     2012     2012
Book value per share numerators (in millions of U.S. dollars):
 
Shareholders' Equity available to the Company $ 1,570.0 $ 1,676.3 $ 1,629.4 $ 1,624.7
 
less: Non-cumulative preferred shares   (150.0 )     (150.0 )     (150.0 )     (150.0 )
 
[A] Fully converted book value per common share numerator $ 1,420.0     $ 1,526.3     $ 1,479.4     $ 1,474.7  
 
Book value per share denominators (in thousands of common shares):
 
[B] Common shares outstanding 51,020 sh 54,028 sh 55,270 sh 56,562 sh
 
Restricted share units outstanding   1,521       1,486       1,326       1,588  
 
[C] Fully converted book value per common share denominator   52,541   sh   55,514   sh   56,596   sh   58,150   sh
 
Book value per common share [A] / [B] $ 27.83 $ 28.25 $ 26.77 $ 26.07
Fully converted book value per common share [A] / [C] 27.03 27.49 26.14 25.36
 
Change in fully converted book value per common share: 3
 
From March 31, 2013 -1.3 %
From December 31, 2012 4.3 %
  From June 30, 2012     8.4 %                  
 

(1)

 
These measures constitute "non-GAAP financial measures" as defined in Regulation G and as further described herein.

(2)

 
Represents the portion of our net income or expense from derivative instruments that constitute investment and foreign exchange gains and losses.

(3)

 

Computed as the change in fully converted book value per common share after taking into account common dividends declared of $0.115, $0.23 and $0.45 during the three, six and twelve month periods ended June 30, 2013, respectively.

 

Copyright Business Wire 2010

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