Montpelier Reports Fourth Quarter And Full Year 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 fourth quarter and year ended December 31, 2013.

Fully converted book value per common share was $29.42, an increase of 5.3% for the fourth quarter and an increase of 14.3% for the full year, each computed after taking into account common share dividends declared.

Operating income for the quarter was $90 million, or $1.78 per common share, representing a quarterly return on common equity of 6.2%. Net income was $73 million, or $1.44 per common share. Net income for the quarter includes $2 million of realized and unrealized investment gains, $11 million of net foreign exchange losses and an $8 million one-time expense relating to the initial public offering of the Company’s newly-formed collateralized property reinsurance affiliate, Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH).

Net premiums written and earned in the quarter were largely consistent with those of a year ago, when adjusting for reinstatement premiums recorded from windstorm Sandy in the fourth quarter of 2012. The loss ratio for the quarter was 2%, which includes $42 million of favorable prior year loss reserve movements. The combined ratio was 39% for the quarter.

Net investment income was $14 million and the total return on the investment portfolio was 0.50% for the quarter.

Christopher Harris, President and Chief Executive Officer, said, “The fourth quarter marked a strong end to a successful year for Montpelier. Solid underwriting execution across each of our operating segments combined to deliver strong profitability, with an 18.8% operating ROE for the year. Additionally, the initial public offering of Blue Capital Reinsurance Holdings Ltd. last November further strengthened our collateralized reinsurance presence.”

Mr. Harris continued, “Despite competitive market conditions during the January renewals, we continued to succeed in achieving preferred signings and in expanding our product mix. With our strong balance sheet and specialist underwriting approach, we believe we are positioned to perform well across market cycles.”

During the fourth quarter of 2013, the Company repurchased a total of 827,558 common shares at an average price of $27.57 per share. During the first quarter of 2014, the Company has thus far repurchased an additional 1,246,700 shares, at an average price per share of $28.07.

As of December 31, 2013, the Company’s total shareholders’ equity was $1,642 million, and its total capital was $2,041 million.

Please refer to Montpelier’s December 31, 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, February 7, 2014 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 February 21, 2014 by dialing 1-877-344-7529 (toll-free) or 1-412-317-0088 (international) and entering the passcode 10038594.

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, including our dependency on the loss information we receive from cedants and brokers; 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 amounts)
unaudited
                 
  December 31,   December 31,
     

 

2013
      2012
Assets
 
Fixed maturity investments, at fair value $ 2,430.8 $ 2,738.6
Equity securities, at fair value 117.3 40.9
Other investments 78.8 138.5
Cash, restricted cash and cash equivalents   682.9         401.4  
 
Total Investments and Cash 3,309.8 3,319.4
 
Reinsurance recoverable on unpaid losses 63.6 102.7
Reinsurance recoverable on paid losses 3.6 6.7
Insurance and reinsurance premiums receivable 203.4 222.9
Unearned reinsurance premiums ceded 22.6 22.2
Deferred insurance and reinsurance acquisition costs 51.5 48.4
Accrued investment income 15.0 15.2
Unsettled sales of investments 58.8 48.9
Other assets   30.2         23.7  
 
Total Assets   $ 3,758.5       $ 3,810.1  
Liabilities
 
Loss and loss adjustment expense reserves $ 881.6 $ 1,112.4
Debt 399.2 399.1
Unearned insurance and reinsurance premiums 276.7 270.1
Insurance and reinsurance balances payable 43.3 54.0
Liability for investment securities sold short 155.6 138.8
Unsettled purchases of investments 58.8 148.7
Accounts payable, accrued expenses and other liabilities   56.3         57.6  
 
Total Liabilities   1,871.5         2,180.7  
 
Shareholders’ Equity
 
Non-cumulative preferred shares 150.0 150.0
Common shares and additional paid-in capital 900.6 1,056.1
Common shares held in treasury, at cost (18.9 ) (23.1 )
Retained earnings 612.8 449.7
Accumulated other comprehensive loss   (2.4 )       (3.3 )
 
Total Shareholders’ Equity available to the Company 1,642.1 1,629.4
 
Non-controlling interests   244.9         -  
 
Total Shareholders’ Equity   1,887.0         1,629.4  
 
Total Liabilities and Shareholders’ Equity   $ 3,758.5       $ 3,810.1  
 
Common and common equivalent shares outstanding:
 
Common shares outstanding (000s) 49,274 sh 55,270 sh
Common and common equivalent shares outstanding (000s)     50,722         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     Year Ended
December 31, December 31,
          2013       2012         2013       2012
       
Underwriting revenues
 
Gross insurance and reinsurance premiums written $ 87.6 $ 94.4 $ 706.0 $ 735.3
Ceded reinsurance premiums   (9.8 )       (11.0 )   (102.9 )       (119.6 )
Net insurance and reinsurance premiums written $ 77.8       $ 83.4   $ 603.1       $ 615.7  
 
Gross insurance and reinsurance premiums earned $ 174.1 $ 193.0 $ 702.4 $ 736.3
Earned reinsurance premiums ceded   (26.1 )       (36.4 )   (102.8 )       (119.8 )
Net insurance and reinsurance premiums earned 148.0 156.6 599.6 616.5
 
Underwriting expenses
 
Loss and loss adjustment expenses - current year (44.6 ) (154.2 ) (270.9 ) (373.8 )
Loss and loss adjustment expenses - prior year 42.3 26.3 144.4 87.4
Insurance and reinsurance acquisition costs (21.3 ) (24.7 ) (90.5 ) (96.6 )
Operating expenses (19.3 ) (19.6 ) (79.8 ) (79.4 )
Incentive compensation expenses (15.3 ) (9.4 ) (39.4 ) (36.8 )
                       
Underwriting income (loss)   89.8         (25.0 )   263.4         117.3  
 
Net investment income 14.2 16.8 64.0 67.1
Other revenue (expense) (0.2 ) - (0.2 ) 0.8
Net realized and unrealized investment gains (losses) 8.1 3.5 (49.2 ) 82.4
Net foreign currency losses (9.4 ) (2.3 ) (15.9 ) (12.8 )
Net income (loss) from derivative instruments (11.0 ) (1.1 ) (25.3 ) 3.2
Interest and other financing expenses (4.7 ) (5.9 ) (18.8 ) (20.4 )
Non-recurring, non-operating expenses (7.5 ) (9.7 ) (7.5 ) (9.7 )
Income tax benefit (provision) - 0.4 0.1 (0.3 )
                       
Net income (loss) 79.3 (23.3 ) 210.6 227.6
 
Net income attributable to non-controlling interest (2.6 ) - (6.1 ) -
                       
Net income (loss) available to the Company 76.7 (23.3 ) 204.5 227.6
 
Dividends declared on non-cumulative preferred shares (3.3 ) (3.3 ) (13.3 ) (13.3 )
                         
Net income (loss) available to the Company's common shareholders   $ 73.4       $ (26.6 )   $ 191.2       $ 214.3  
 
Net income (loss) $ 79.3 $ (23.3 ) $ 210.6 $ 227.6
 
Net change in foreign currency translation   1.0         0.3       0.9         0.8  
 
Comprehensive income (loss) 80.3 (23.0 ) 211.5 228.4
 
Net income attributable to non-controlling interest (2.6 ) - (6.1 ) -
                         
Comprehensive income (loss) available to the Company   $ 77.7       $ (23.0 )   $ 205.4       $ 228.4  
 
Basic and diluted earnings (loss) per common share   $ 1.44       $ (0.48 )   $ 3.61       $ 3.67  
 
Insurance ratios:
 
Loss and loss adjustment expense ratio:
Current year 30.2 % 98.5 % 45.2 % 60.6 %
Prior year   -28.6 %       -16.8 %   -24.1 %       -14.2 %
Loss and loss adjustment expense ratio 1.6 % 81.7 % 21.1 % 46.4 %
Acquisition costs ratio 14.4 % 15.8 % 15.1 % 15.7 %
Operating expense ratio 13.0 % 12.5 % 13.3 % 12.9 %
Incentive compensation expense ratio   10.4 %       6.0 %     6.6 %       6.0 %
Combined ratio     39.4 %       116.0 %     56.1 %       81.0 %
 
 
MONTPELIER RE HOLDINGS LTD.
RECONCILIATION OF NET INCOME 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     Year Ended
December 31, December 31,
     

 

2013
   

 

2012
   

 

2013
   

 

2012
       
Net income (loss) available to the Company's common shareholders $ 73.4 $ (26.6 ) $ 191.2 $ 214.3
 
Add (subtract):
Net realized investment losses (gains) (4.4 ) (6.2 ) 1.7 (56.7 )
Net unrealized investment losses (gains) (3.7 ) 2.7 47.5 (25.7 )
Net losses from investment-related derivative instruments 2 6.5 0.4 11.2 -
Net foreign currency losses 9.4 2.3 15.9 12.8
Net losses (gains) from foreign currency-related derivative instruments 2 1.7 0.8 2.5 (3.5 )
Expenses associated with the BCRH IPO 3 7.5 - 7.5 -
Loss on early extinguishment of debt - 9.7 - 9.7
                       
Operating income (loss) available to the Company's common shareholders     $ 90.4       $ (16.9 ) $ 277.5     $ 150.9  
 
Operating income (loss) per common share     $ 1.78       $ (0.31 )     $ 5.24     $ 2.58  
MONTPELIER RE HOLDINGS LTD.
BOOK VALUE AND FULLY CONVERTED BOOK VALUE PER COMMON SHARE 1
unaudited  
          Dec. 31,   Sept. 30,   Dec. 31,
                  2013       2013       2012
Book value per share numerators (in millions of U.S. dollars):
 
Shareholders' Equity available to the Company $ 1,642.1 $ 1,593.6 $ 1,629.4
 
less: Non-cumulative preferred shares   (150.0)       (150.0)       (150.0)
 
[A] Fully converted book value per common share numerator $ 1,492.1     $ 1,443.6     $ 1,479.4
 
Book value per share denominators (in thousands of common shares):
 
[B] Common shares outstanding sh 49,274 sh 49,785 sh 55,270 sh
 
Restricted share units outstanding   1,448       1,671       1,326
 
[C] Fully converted book value per common share denominator sh   50,722   sh   51,456   sh   56,596 sh
 
Book value per common share [A] / [B] $ 30.28 $ 29.00 $ 26.77
Fully converted book value per common share [A] / [C] 29.42 28.06 26.14
 

Change in fully converted book value per common share: 4
 
From September 30, 2013 5.3%
    From December 31, 2012           14.3%                
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 loss from derivative instruments that constitute investment and foreign currency gains and losses.
3 Represents the underwriting discount and structuring fees associated with the Initial Public Offering of Blue Capital Reinsurance Holding Ltd. that were borne by Montpelier Re Holdings Ltd.
4 Computed as the change in fully converted book value per common share after taking into account common dividends declared of $0.125 and $0.470 during the three and twelve month periods ended December 31, 2013, respectively.

Copyright Business Wire 2010

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