Montpelier Re Reports Net Income of $112.5M for Q2

July 25, 2003

Bermuda-based Montpelier Re Holdings Ltd. reported net income of $112.5 million, or $1.66 diluted earnings per share, for the three months to June 30, 2003 and net income of $216.3 million, or $3.24 diluted earnings per share, for the first six months of 2003. Net unrealized gains on investments and hedging transactions were $4.2 million for the quarter and $3.4 million for the year to date. Comprehensive income was $116.7 million for the quarter, or $1.72 diluted comprehensive income per share, and $219.7 million or $3.29 diluted comprehensive income per share.

Book value per share at June 30, 2003, on a fully converted basis (1), was $22.42, an increase of $1.61 or 7.7 percent in the second quarter of 2003 and an increase of $3.03 or 15.6 percent in the six months to June 30, 2003. In the 12 months to June 30, 2003, fully converted book value per share increased by 28.0 percent from $17.51 to $22.42.

Anthony Taylor, president and CEO, noted, “Montpelier has followed a strong first quarter in 2003 with an even stronger second quarter. Our overall book of business continued to grow, we were able to develop our portfolio of risks to an even greater degree, and we have diversified further by taking advantage of opportunities in areas in which we have competitive strengths.”

“Montpelier is starting to come into its stride. The first 18 months of operations have produced exceptional returns, but throughout that period, we have been continually refining our business model. We have built on our wide range of relationships in the U.S., London and International markets with the objective of creating a platform which will enable us to maintain above average performance in future years. Our aim remains to produce favorable results over the long term and we look ahead with a great deal of optimism.”

Gross premiums written and net premiums earned were broadly in line with expectations, with the notable exception of reinstatement premiums which have been negligible in 2003 so far, reflecting the low level of loss activity. The company purchased a modest amount of retrocessional protection in the quarter.

In the lines of business written by Montpelier, at the levels at which Montpelier participates, loss experience was very light both in the second quarter and in the year to date. The loss ratio was 17.3 percent for the quarter and 21.7 percent for the six months to June 30, 2003. The company released $14.3 million of 2002 accident year reserves due to positive loss development in the second quarter of 2003, reducing the loss ratio in the quarter by approximately 8 percent.

General and administrative expenses for the quarter include an accrual of $1.0 million for costs relating to the secondary offering by shareholders of 8.05 million common shares of the Company commenced in late June. Montpelier did not receive any of the proceeds from the sale by shareholders of the common shares in the offering.

In the three months to June 30, 2003, total capital grew by $117.6 million to $1.62 billion.

(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 dilutive options and warrants of $168.1 million, divided by the sum of shares, options and warrants outstanding (assuming their exercise) of 73,261,760 shares at June 30, 2003. The company believes this to be the best single measure of the return made by its shareholders as it takes into account the effect of all dilutive securities.

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