Zacks_Analysts' Blog : Montpelier Estimates Cat Loss - Analyst Blog

Montpelier Re Holdings Ltd. (MRH) expects a third quarter preliminary net loss of $30 million from US catastrophes including Hurricane Irene and the Texas wildfires, $20 million from US regional aggregate covers and $10 million from the July Danish floods.

Montpelier also expects to incur a loss of $10 million from the June 2011 New Zealand earthquake.

The second quarter also suffered due to catastrophe losses, resulting from tornado activity in the United States in April and May. Montpelier’s second quarter operating earnings of 8 cents per share were much lower than the Zacks Consensus Estimate largely due to catastrophe losses, lower investment income and higher operating expenses.

Underwriting loss in second-quarter 2011 totaled $3.8 million, comparing unfavorably with the year-ago quarter's profit of $59.5 million. Combined ratio in the quarter was 102.6%, a substantial deterioration from 59.8% in the year-ago quarter.

Other property and casualty insurers who suffered from bad weather during the third quarter include Assurant Inc. (AIZ), The Chubb Corp. (CB), W. R. Berkley Corp. (WRB), Tower Group Inc. (TWGP), Cincinnati Financial Corp. (CINF) and XL Group (XL). While Assurant forecasts a pre-tax cat loss of $80 million to $85 million, Chubb sees a significantly high catastrophe loss of $400 million to $475 million pre-tax.

Besides, both Berkley and Tower expect an earnings hit of $50–$60 million. Cincinnati declared a preliminary pre-tax catastrophe loss estimate of about $88–$98 million. XL Group expects its preliminary net loss to range between $90 million and $120 million.

The Zacks Consensus Estimate for third quarter 2011 is 42 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are loss of 75 cents and earnings of $2.24 per share, respectively.

We maintain our long-term Neutral recommendation on Montpelier. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Pembroke, Bermuda, Montpelier, through its subsidiaries in the U.S., the U.K. and Switzerland, provides customized and innovative reinsurance and insurance solutions to the global market.