Montpelier Re Reports Record Net Income Of $407.1 Million For 2003 Diluted EPS Of $6.05 For The Year

The change in net unrealized gains on investments was $11.7 million for the quarter and $18.2 million for the year. Comprehensive income was $111.6 million, or $1.63 diluted comprehensive income per share, for the quarter and $425.3 million, or $6.32 diluted comprehensive income per share, for the year.

Book value per share at December 31, 2003, on a fully converted basis (1), was $24.92, which incorporates the accrual of a $0.34 dividend per share for the fourth quarter. The book value of $24.92 represents an increase of $1.20 or 5.1% in the fourth quarter of 2003 and an increase of $5.53 or 28.5% in the twelve months to December 31, 2003. Total return to shareholders (2), incorporating both the increase in fully converted book value per share and dividends paid or payable, was 6.5% for the quarter and 30.3% for the year.

Anthony Taylor, President and CEO, commented: "I am delighted to be reporting another remarkable set of results. To achieve a total return to shareholders of thirty percent in only our second year of operations is a testament to our focused business plan, our talented team of underwriters, the strength of our modeling techniques and the high standards of service that we offer to our clients. We believe these results support our key philosophy, namely that underwriting discipline, above all, is the key to achieving favorable results over the long term."

Mr. Taylor added: "The January renewal season has been very encouraging. Despite enjoying two of the best underwriting years on record, we have seen a remarkably small reduction in unit price across the spread of our portfolio, and rate levels for 2004 continue to offer the prospect of very good returns. Montpelier is increasingly recognized as a key player in the reinsurance market and this has manifested itself in both increased showings of business on all classes in the January 2004 renewal season and an increase in our average line size."

Tom Kemp, Chief Financial Officer, noted: "Throughout all four quarters of 2003, Montpelier has produced extremely consistent, high quality results in terms of both combined ratio and return on equity. We are particularly pleased with the results in our non-catastrophe property and other specialty classes which have performed exceptionally well throughout the year. Our property catastrophe portfolio has also produced very good results, despite a considerable level of loss activity in the industry, most notably in the second half of the year."

Tom Kemp added: "We were pleased to announce the commencement of a regular dividend program during the fourth quarter. The dividend of $0.34 per share per quarter represents a significant cash yield for our shareholders, and also reflects our confidence in our ability to generate strong earnings and cash flows in the future."

Gross premiums written and net premiums earned were in line with expectations, except for reinstatement premium which was lower than expected in the fourth quarter due to favorable loss experience, maintaining the trend seen throughout 2003.

In 2003, the total investment return including realized and unrealized gains was 4.0%. Equities comprised 5.5% of total investments and cash, including the holding in Aspen Insurance Holdings Ltd. which successfully completed its Initial Public Offering in the fourth quarter.

The loss ratio for the fourth quarter was 27.9% and the loss ratio for the year was 23.3%. In the fourth quarter, 2002 accident year net reserves totaling $13.2 million were released, which reduced the loss ratio in the quarter by 7.2%.

General and administrative expenses were $17.2 million for the quarter and $50.0 million for the year. Performance related compensation totaled $8.7 million and $16.9 million for the fourth quarter and year, respectively and was higher than anticipated due to the strong financial performance of the company in 2003.

The combined ratio was 55.4% and 50.3% for the quarter and year, respectively. The combined ratio includes all expenses of the company, including corporate overhead and performance related compensation.

(1) Fully converted book value per share is a non-GAAP measure based on total shareholders' equity plus the assumed proceeds from the exercise of outstanding options and warrants of $168.1 million, divided by the sum of shares, options and warrants outstanding (assuming their exercise) of 73,261,757 shares at December 31, 2003. Fully converted book value per share is set forth in the tables below. The Company believes that fully converted book value per share more accurately reflects the value attributable to a common share.

(2) Total return to shareholders is a non-GAAP measure. It is the percentage increase in fully converted book value per share excluding the impact of dividends accrued. It is calculated as the December 31, 2003 fully converted book value per share of $24.92 plus the accrued dividend of $0.34, divided by the December 31, 2002 fully converted book value per share of $19.39. The Company believes that this measure most accurately reflects the return made by its shareholders as it takes into account the effect of all dilutive securities and the effect of dividends.

Earnings Conference Call:

Montpelier Re executives will conduct a conference call, including a question and answer period, on Friday, February 13th at 9:00 a.m. Eastern Time. The presentation will be available via a live audio webcast accessible through the Company's investor section of its website at www.montpelierre.bm. A telephone replay of the conference call will be available through February 20th, 2004 by dialing 888-286-8010 (toll-free) or 617-801-6888 (international) and entering the pass code: 56182101.

Montpelier Re Holdings Ltd., through its operating subsidiary, Montpelier Reinsurance Ltd., is a premier provider of global property and casualty reinsurance and insurance products. Montpelier Reinsurance Ltd. is rated "A" (Excellent) by A.M. Best Company, "A-" (Strong) by Standard & Poor's and "A3" (Good) by Moody's Investors Service.

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