Montpelier Re Q4 Net Drops; FY Net up Slightly; Book Value Increased

Bermuda-based Montpelier Re Holdings Ltd. led off its earnings report with the good news. The Company reported a fully converted book value per share of $17.88 as at December 31, 2007, an increase of 5.4 percent and 17.6 percent for the quarter and year inclusive of dividends.

Other key figures in the report were mixed. Comprehensive income for the fourth quarter was $87.9 million, compared to $139.8 million in the same period last year. Comprehensive income for the year was $314 million, or $3.29 per share, compared to $361.5 million in 2006. Net income for the quarter declined, but rose to $315.8 million for 2007 from $302.9 million in 2006.

Operating income, which excludes foreign exchange, investment gains and losses and income tax, was $87.5 million, or $0.93 per diluted common share, for the quarter, compared to $110.5 million in Q4, 2006. Operating income for the full year was $280.1 million, or $2.93 per diluted common share, compared to 285.7 million in 2006 The comprehensive return on average shareholders’ equity for the quarter and year were 5.4 percent and 19.9 percent, respectively.

Montpelier Re said its “loss ratio for the quarter was 20.8 percent, which includes $10.0 million, or 6.8 points, of losses incurred as a result of the California wildfires in October. This was offset in part by net favorable prior year reserve development of $4.1 million, or 2.8 points. The combined ratio for the quarter was 52.9 percent and for the year was 61.3 percent compared to 60.3 percent in 2006.

“The total return on the consolidated investment portfolio was 1.2 percent for the fourth quarter and 5.7 percent for the full year. The Company has minimal subprime exposure. Additional disclosure on our mortgage-backed and asset-backed security holdings are provided in our fourth quarter financial supplement.”

Chairman and CEO Anthony Taylor commented: “This was a robust finish to another strong year resulting in a 5.4 percent increase in book value per share for the quarter and 17.6 percent for the year. Since the beginning of 2006, we have grown book value per share by over 55 percent, inclusive of dividends.

“Notwithstanding the $12 million of expenses related to the roll-out of our new Lloyd’s, European and US platforms, the combined ratio for the year was a very strong 61.3 percent, reflecting what turned out to be a relatively light catastrophe year. From a strategic perspective, we have successfully established our expanded operating platforms, which will make their initial contribution to the top line in 2008, although it will take a little longer before they contribute positively to earnings. We are already starting to reap the benefits of the flexibility afforded to our operations from having multiple licenses and locations and expect to leverage that increased flexibility further in the upcoming quarters.”

“On another note, several large individual risk losses have occurred within the first 50 days of 2008 which in the aggregate will produce a sizeable industry loss to the commercial property insurance market. Based on current information, we expect to incur total net losses of $30-$40 million from some of these events.”

CFO Kernan Oberting added: “We continue to actively manage capital, repurchasing 3,327,628 common shares during the fourth quarter at an average price of $16.98. During 2007, we publicly repurchased 3,776,989 common shares for $63.7 million and privately repurchased 939,039 common shares and 7,172,375 warrants from White Mountains Insurance Group, Ltd. for $65 million. Through these transactions, we retired approximately 11 percent of our fully converted common shares. Year-to-date 2008, we have repurchased an additional 2,067,011 common shares at an average price of $16.93 per share in the open market.”

Full details of the earnings statements including supplemental financial information, as well as a link to the earnings conference call are available on the Group’s web site at: www.montpelierre.bm.