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Montpelier Re Announces Comprehensive Income of $51.5 Million for the Second Quarter of 2007
Hamilton, Bermuda: July 24, 2007--Montpelier Re Holdings Ltd. (NYSE: MRH; BSX: MRH.BH the "Company") reported a fully converted book value per share of $16.04 as at June 30, 2007, an increase of 0.2% for the quarter inclusive of dividends. During the quarter the Company repurchased 939,039 common shares and 7,172,375.5 warrants with an exercise price of $16.667 per warrant, for a total purchase price of $65 million from White Mountains, which resulted in a $0.52 decrease in fully converted book value per share.
Comprehensive income for the quarter ended June 30, 2007 was $51.5
million, or $0.54 per diluted common share. Operating income, which
excludes foreign exchange and investment gains and losses, was $54.0
million, or $0.56 per diluted common share. Operating return on equity
was 3.5% for the quarter and 7.5% year to date, not annualized.
Gross premiums written were $188.2 million, a decrease of $108
million or 36% compared to the second quarter of 2006. The decrease
includes the previously announced cessation of Blue Ocean's
underwriting which amounted to $61.8 million in the second quarter of
2006 compared to $12.5 million this quarter, and the impact of recent
changes to Florida legislation. In addition, as previously announced,
the Company allocated more capital to the January 1st, 2007 renewals
than in 2006 which resulted in a heavier weighting of premiums being
written in the first quarter of 2007 than in 2006.
The loss ratio for the quarter was 38.8 percent, which includes
$30.5 million, or 19.4 points, of losses incurred due to the UK and
Australian floods. This was offset in part by $19.6 million, or 15.2
points, of favorable prior period reserve development. The combined
ratio was 70.0% compared to 72.9% in the second quarter of 2006.
Anthony Taylor, Chairman and CEO, commented: "This was a very
productive quarter. We announced the approval of our new Lloyd's
Syndicate 5151 and the addition of Stan Kott as CEO of our US
operations. We continue to make steady progress in building out our
Lloyd's and US platforms, which we believe will contribute significant
shareholder value over the long term. On the capital front, we
repurchased the remaining shares and founders' warrants from White
Mountains which resulted in an immediate hit of $0.52 to book value
per share but which we think will provide an attractive return to our
shareholders over time. Financially, results were solid with a
quarterly operating return on equity of 3.5% despite the impact of the
UK and Australian floods."
Please refer to the June 30, 2007 Financial Supplement, which is
posted on the Company's website at www.montpelierre.bm, for more
detailed financial information.
(1) Fully converted book value per share at June 30, 2007 is based
on total shareholders' equity at June 30, 2007 divided by common
shares outstanding of 103,067,067 less 7,920,000 common shares subject
to the share issuance agreement, plus common shares issuable upon
conversion of outstanding share equivalents of 920,473 at June 30,
2007. Fully converted book value per share at March 31, 2007 is based
on total shareholders' equity at March 31, 2007 divided by common
shares outstanding of 111,778,122 less 15,694,800 common shares
subject to the share issuance agreement, plus common shares issuable
upon conversion of outstanding share equivalents of 928,675 at March
31, 2007. Warrants outstanding at March 31, 2007 are not included in
the fully converted book value per share calculation as the exercise
price was greater than the book value per share.
(2) The return for the quarter represents the change in fully
converted book value per share from $16.08 at March 31, 2007 to $16.04
at June 30, 2007, after giving effect to the dividend of $0.075 per
common share and per warrant, excluding 7,920,000 common shares
subject to the share issuance agreement. For these purposes fully
converted book value per share assumes that the warrants outstanding
at March 31, 2007 would not be exercised if the book value per share
is less than the strike price.
Earnings Conference Call:
Montpelier Re executives will conduct a conference call, including
a question and answer period, on Wednesday, July 25 at 9.30 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 877-407-0782 (toll free) or 1-201-689-8567 (international). A
telephone replay of the conference call will be available through
August 25, 2007 by dialing 877-660-6853 (toll-free) or 1-201-612-7415
(international) and entering the account # 286 and the conference ID #
245177.
Montpelier Re Holdings Ltd., through its operating subsidiary
Montpelier Reinsurance Ltd., 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.
Application of the Safe Harbor of the Private Securities
Litigation Reform Act of 1995:
This press release contains, and Montpelier Re may from time to
time make, written or oral "forward-looking statements" within the
meaning of the U.S. federal securities laws, which are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
uncertainties and other factors, many of which are outside
Montpelier's control, that could cause actual results to differ
materially from such statements. In particular, statements using words
such as "may," "should," "estimate," "expect," "anticipate," "intend,"
"believe," "predict," "potential," or words of similar import
generally involve forward-looking statements.
Important events and uncertainties that could cause the actual
results, future dividends or future common share repurchases to differ
include, but are not necessarily limited to: market conditions
affecting our common share price; the possibility of severe or
unanticipated losses from natural or man-made catastrophes; the
effectiveness of our loss limitation methods; our dependence on
principal employees; our ability to execute the business plan for
Montpelier Syndicate 5151 effectively, including the integration of
those operations into our existing operations; increases in our
general and administrative expenses due to new business ventures,
which expenses may not be recoverable through additional profits; the
cyclical nature of the reinsurance business; the levels of new and
renewal business achieved; opportunities to increase writings in our
core property and specialty reinsurance and insurance lines of
business and in specific areas of the casualty reinsurance market; the
sensitivity of our business to financial strength ratings established
by independent rating agencies; the estimates reported by cedants and
brokers on pro-rata contracts and certain excess of loss contracts
where the deposit premium is not specified in the contract; the
inherent uncertainties of establishing reserves for loss and loss
adjustment expenses, particularly on longer-tail classes of business
such as casualty; our reliance on industry loss estimates and those
generated by modeling techniques; unanticipated adjustments to premium
estimates; changes in the availability, cost or quality of reinsurance
or retrocessional coverage; changes in general economic conditions;
changes in governmental regulation or tax laws in the jurisdictions
where we conduct business; our ability to assimilate effectively the
additional regulatory issues created by our entry into new markets;
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 the reinsurance industry;
declining demand due to increased retentions by cedants and other
factors; the impact of terrorist activities on the economy; and rating
agency policies and practices. These and other events that could cause
actual results to differ are discussed in detail in "Risk Factors"
contained in our annual report on Form 10-K for the year ended
December 31, 2006 and Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2007 which we have filed with the Securities
and Exchange Commission.
Montpelier undertakes 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
(millions, except share and per share amounts)
As at As at
June 30, December
2007 31, 2006
------------ -----------
Assets (Unaudited)
Investments and cash:
Fixed maturity investments, at fair value $ 2,274.9 $2,507.4
Common equity securities, at fair value 211.9 203.2
Other investments, at fair value 30.9 27.1
Cash and cash equivalents 355.4 348.6
---------- --------
Total investments and cash 2,873.1 3,086.3
Securities lending collateral 171.9 315.7
Reinsurance recoverable on unpaid losses 162.7 197.3
Reinsurance recoverable on paid losses 12.0 7.8
Premiums receivable 271.1 171.7
Unearned premium ceded 72.2 44.5
Deferred acquisition costs 41.6 30.3
Accrued investment income 22.0 22.6
Unsettled sales of investments 2.1 0.1
Other assets 21.7 22.5
---------- --------
Total Assets $ 3,650.4 $3,898.8
========== ========
Liabilities
Loss and loss adjustment expense reserves $ 958.3 $1,089.2
Debt 427.4 427.3
Securities lending payable 171.9 315.7
Unearned premium 331.0 219.2
Reinsurance balances payable 74.5 77.2
Unsettled purchases of investments 40.7 -
Accounts payable, accrued expenses and other
liabilities 27.3 38.9
---------- --------
Total Liabilities 2,031.1 2,167.5
---------- --------
Minority Interest
Minority Interest - Blue Ocean preferred
shares 18.5 61.6
Minority Interest - Blue Ocean common shares 60.2 176.8
---------- --------
Total Minority Interest 78.7 238.4
---------- --------
Common Shareholders' Equity
Common shares and additional paid-in capital 1,758.1 1,819.4
Accumulated other comprehensive income 4.2 49.6
Retained deficit (221.7) (376.1)
---------- --------
Total Common Shareholders' Equity 1,540.6 1,492.9
---------- --------
Total Liabilities, Minority Interest and
Common Shareholders' Equity $ 3,650.4 $3,898.8
========== ========
Common shares outstanding (000's) 1 103,067 sh 111,776 sh
Common and common equivalent shares outstanding
(000's) (1) 103,987 112,249
Book value per share:
Basic book value per share $ 16.19 $ 15.54
========== ========
Fully converted book value per share $ 16.04 $ 15.46
========== ========
(1) Includes shares subject to issuance agreement of 7,920,000 and
15,694,800 at June 30, 2007 and December 31, 2006, respectively.
These shares are not included in the calculation of book value per
share amounts.
MONTPELIER RE HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(millions, except per share amounts)
Three Months Six Months Ended
Ended June 30, June 30,
(Unaudited) (Unaudited)
2007 2006 2007 2006
------- ------- ---------- --------
Underwriting revenues
Gross premiums written $ 188.2 $ 296.2 $ 449.2 $ 521.2
Earned reinsurance premiums ceded (21.6) (24.3) (93.3) (103.5)
------- ------- ---------- --------
Net premiums written 166.6 271.9 355.9 417.6
Gross premiums earned 162.7 192.4 337.4 389.6
Reinsurance premiums earned (33.6) (41.1) (65.6) (106.9)
------ ------ ------ -------
Net premiums earned 129.1 151.3 271.8 282.7
Underwriting expenses
Loss and loss adjustment expenses 50.2 65.4 109.8 116.3
Acquisition costs 19.8 29.9 38.3 63.8
General and administrative
expenses 20.4 15.0 35.8 29.7
------- ------- ---------- --------
Underwriting income 38.7 41.0 87.9 72.9
------- ------- ---------- --------
Net investment income 34.4 30.4 67.5 59.2
Interest and other financing
expenses 8.2 7.0 16.7 14.1
Other revenue 1.2 2.7 3.3 2.9
Other non-underwriting expenses 2.9 3.1 5.8 7.9
Minority interest expense - Blue
Ocean 9.2 10.5 21.9 13.4
------- ------- ---------- --------
Operating income (1) 54.0 53.5 114.3 99.6
------- ------- ---------- --------
Net realized and unrealized gains
(losses) (2) (5.2) (2.5) 10.1 (9.3)
Net foreign exchange gains
(losses) 1.9 6.6 (0.4) 7.1
------- ------- ---------- --------
Net income $ 50.7 $ 57.6 $ 124.0 $ 97.4
------- ------- ---------- --------
Other comprehensive income items
(2) 0.8 5.6 0.1 14.3
------- ------- ---------- --------
Comprehensive income $ 51.5 $ 63.2 $ 124.1 $ 111.7
======= ======= ========== ========
Earnings per share:
Basic earnings per share $ 0.53 $ 0.62 $ 1.29 $ 1.07
Diluted earnings per share $ 0.53 $ 0.62 $ 1.29 $ 1.07
Diluted operating earnings per
share (1) $ 0.56 $ 0.58 $ 1.18 $ 1.09
Diluted comprehensive earnings
per share $ 0.54 $ 0.69 $ 1.29 $ 1.23
Insurance ratios:
Loss and loss adjustment expense
ratio:
Current year 54.0% 32.3% 50.6% 40.9%
Prior year -15.2% 10.9% -10.2% 0.3%
------- ------- ---------- --------
Loss and loss adjustment expense
ratio 38.8% 43.2% 40.4% 41.2%
Expense ratio 31.2% 29.7% 27.3% 33.1%
------- ------- ---------- --------
Combined ratio 70.0% 72.9% 67.7% 74.3%
------- ------- ---------- --------
(1 )Excludes net realized and unrealized gains (losses) and foreign
exchange gains (losses).
(2) Effective January 1, 2007, the Company elected to adopt FAS 157
and FAS 159. As a result of this election, all changes in unrealized
gains (losses) associated with our fixed maturity and equity
investments are included in net income for the three and six months
ended June 30, 2007. For all prior periods, certain of these changes
are included in other comprehensive income.